Teva Says Jeremy Levin Named Next CEO

By Naomi Kresge - Jan 2, 2012 8:28 PM GMT+0700

Teva Pharmaceutical Industries Ltd. (TEVA) named Jeremy Levin of Bristol-Myers Squibb Co. (BMY) to replace Shlomo Yanai as chief executive officer as the world’s biggest generic- drug maker seeks to diversify its portfolio of innovative medicines.

Levin, 58, a Cambridge University-educated physician who worked at Bristol-Myers as senior vice president for strategy, will take over as president and CEO in May, the Petach Tikva, Israel-based company said in a statement. Yanai, 59, will retire from the company, it said.

Yanai is stepping down after Teva’s shares (TEVA) plunged the most since 2006 last year amid mounting competition for its No. 1 drug, a branded multiple sclerosis medicine called Copaxone. Yanai, a former Israeli army general with no previous pharmaceutical experience, spent $6.5 billion last year to buy U.S. biotech Cephalon Inc., then told investors in December that Teva may not able to meet its long-term target of $31 billion in sales by 2015.

“Investors will like the idea that Shlomo’s replacement is from the industry and someone with knowledge and experience, especially from the innovative side of the business,” Natali Gotlieb, a Tel Aviv-based analyst for Israel Brokerage & Investments Ltd., said by phone today. Teva needs to integrate Cephalon’s portfolio of new medicines, said Gotlieb, who has a “buy” rating on the Israeli company’s shares.

Shares Rise

Teva rose 3.3 percent to 160.60 shekels at 1:30 p.m. in Tel Aviv, the biggest intraday increase in two months. The company’s more actively traded American depositary receipts lost 21 percent in 2011 including reinvested dividends, compared with (TEVA) an 11 percent return for the Bloomberg EMEA Pharmaceuticals Index. The U.S. stock market is closed today for the New Year’s holiday.

Teva started looking for Yanai’s replacement during the course of last year, Chairman Phillip Frost said at a news conference in Tel Aviv today. He declined to be more specific.

Yanai wasn’t asked to retire, said Denise Bradley, a Teva spokeswoman. “Shlomo came to the board with his decision, and the board accepted it, appreciating his considerable contributions to Teva but recognizing his desire to move on,” Bradley said by e-mail.

“The time has come to start a new path,” Yanai said at the news conference. “I intend to use all my knowledge, ability and experience for the good of Israel’s industry, economy and society.”

Conference Call

Teva plans a conference call for analysts at 8:30 a.m. New York time tomorrow.

Teva announced Dec. 21 it would buy back as much as $3 billion of its shares to return money to investors. The $31 billion sales goal for 2015 is “aspirational,” Yanai said then.

Analysts suggested the share buyback might herald a pullback from a streak of acquisitions that in recent years included Germany’s Ratiopharm GmbH and Barr Pharmaceuticals Inc. of the U.S.

Sales of Copaxone, Teva’s biggest drug, probably will peak this year at $3.8 billion, though a generic competitor will take a while to reach the market, Teva said. The injected MS drug accounted for 24 percent of Teva’s $4.34 billion of revenue in the third quarter and is facing competition from Novartis AG’s Gilenya, the first oral drug for MS.

Cambridge, Oxford

Before joining Bristol-Myers Squibb, the South African-born Levin was global head of business development and strategic alliances at Novartis from 2003 to 2007. He has worked as a practicing physician and has a medical degree from Cambridge and a doctorate from Oxford University in molecular biology, according to the statement. Levin has is a citizen of both the U.S. and the U.K.

This is the first time the CEO of Teva, Israel’s biggest company, will not be an Israeli.

“There are very few figures in Israel with the required experience to run a company the size of Teva,” Jonathan Kreizman, a Tel Aviv-based analyst at Clal Finance Brokerage Ltd., said by phone today. “Bringing a veteran from the pharma industry is a smart move.”

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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Samsung, Hyundai Brace for Weakness in ’12 Economy From Europe Debt Crisis

By Jun Yang and Rose Kim - Jan 2, 2012 12:20 PM GMT+0700

Samsung Electronics Co. and Hyundai Motor Co. (005380), South Korea’s largest companies, told employees to brace for intense competition in a weak global economy as the government called for contingency planning.

“South Korea’s economy is facing increased uncertainties this year, and the global economy may rapidly deteriorate if the European debt crisis worsens,” Finance Minister Bahk Jae Wan said in a New Year statement released today. “Contingency plans to prevent contagion from Europe’s crisis should be strengthened.”

Exports from Asia’s fourth-largest economy may grow 6.7 percent in 2012 from 19.6 percent in 2011, according to government forecasts. Security risks from a leadership change in North Korea are adding to uncertainties for the South as European leaders struggle to hold their monetary union together in the face of credit downgrades and a looming recession.

“The global economy’s low-growth trend will continue and uncertainty surrounding the business environment won’t be easily removed,” Samsung Chairman Lee Kun Hee said, according to a summary of a speech to employees today that was distributed by the company. “We should make our corporate culture more open, flexible and innovative.”

The maker of televisions, computer chips and mobile phones and affiliated Samsung Group companies had combined sales in 2010 equivalent to one-fifth of South Korea’s gross domestic product.

President’s Goals

President Lee Myung Bak today said he would focus in the coming year on reducing inflation and bringing down unemployment by investing over 10 trillion won ($8.6 billion) in creating jobs. The government’s goal is to get inflation down to the low 3-percent range, he said. Consumer prices rose 4.2 percent in December.

“The auto industry in 2012 is expected to show slow growth and intense competition between companies,” Chung Mong Koo, chairman of Hyundai and its affiliate, Kia Motors Corp. (000270), said today in a New Year speech to workers in Seoul.

The carmakers will focus on improving quality and the image of their brands as they seek to increase global sales by 6.1 percent this year to a combined 7 million vehicles.

“Compared to the last two years, the growth target is conservative,” said Park In Woo, an analyst at LIG Investment & Securities Co. “This may come from the grim economic outlook, but more so, Hyundai is planning to take this year to focus on internal management such as quality control.”

Production Disruptions

Demand for Hyundai’s Sonata sedan and Kia’s Sportage sports utility vehicle helped the companies boost (005380) global sales in 2011 as Japanese rivals were hampered by a strong yen and suffered from production disruptions after the March quake and record flooding in Thailand.

Hyundai shares fell 1.4 percent to 210,000 won at 1:36 p.m. in Seoul while Kia declined 0.8 percent. Samsung rose 1.4 percent to 1,073,000 won and the benchmark Kospi index slipped 0.4 percent.

Samsung Electronics, the flagship unit of the Samsung Group, had record net income of 16.2 trillion won ($14 billion) in 2010. Profit may have fallen to fall to 13.8 trillion won in 2011, according to the average of 38 estimates (005930) from analysts compiled by Bloomberg. Preliminary earnings from the company, based in Suwon south of Seoul, will be released on Jan. 6.

“This year is a big uncertainty for Samsung,” Park Hyun, a Seoul-based analyst at Tong Yang Securities Inc. said. “Potential demand may be there, but whether it will materialize totally depends on the macroeconomic situation.”

Finance Minister Bahk said that while the European debt crisis may reach its peak in the first half of the year, the global economy could rapidly deteriorate if the situation worsens. The government will work to support households, companies and financial markets, he said.

South Korea’s economy may expand 3.7 percent in 2012, from 3.8 percent last year, according to the central bank.

To contact the reporters on this story: Rose Kim in Seoul at rkim76@bloomberg.net; Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net; Michael Tighe at mtighe4@bloomberg.net

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Santorum Surges, Poised for Iowa Surprise

By John McCormick and Tim Higgins - Jan 2, 2012 12:00 PM GMT+0700

His rivals crisscross Iowa (BEESIA) in campaign buses wired for satellite television with their faces painted on the sides. They have spent millions on advertising. Rick Santorum has trudged along in a pickup truck driven by a lone supporter. He has a minimal presence on television.

And he may be positioned to deliver the biggest surprise of the Republican presidential race.

The former U.S. senator from Pennsylvania, now in third place in the most closely watched Iowa poll, has spent more time in the state than any opponent, traveling to all 99 counties over more than 100 days. He’s trying to validate the campaign axiom of the Iowa caucuses: organize, organize, organize and get hot at the end.

“This is an election that will be very close,” Santorum told a group gathered yesterday in a crowded coffee shop in Sioux City, Iowa. “Our support is rallying and rising here, but there’s two more days and there’s a lot of work to be done.”

In a year when social conservatives have bounced among candidates, Santorum’s timing in Iowa could be spot on if he can manage to consolidate their votes in the way former Arkansas Governor Mike Huckabee managed to do in 2008.

U.S. Representative Michele Bachmann of Minnesota, Texas Governor Rick Perry and former U.S. House Speaker Newt Gingrich of Georgia have also tried to court social conservatives as they present themselves as an alternative to former Massachusetts Governor Mitt Romney. None has managed to do so.

Iowa Poll Results

A Des Moines Register Iowa Poll released Dec. 31 showed Santorum backed by 15 percent of likely Republican caucus-goers, after a surge in the final two days of sampling. Ahead of him were Romney, at 24 percent, and U.S. Representative Ron Paul of Texas at 22 percent.

Late last month, Santorum won the personal endorsement of Bob Vander Plaats, a former candidate for Iowa governor and the president of the Family Leader, a coalition of social conservatives in the state.

How much that endorsement has helped him is hard to know, especially since it appears social conservatives may play a smaller role in this year’s Iowa caucuses than four years ago.

In 2008, exit polls showed 60 percent of those who attended the Republican caucuses described themselves as born-again or evangelicals. The Register’s Iowa Poll shows that proportion could be closer to one-in-three on Jan. 3.

Modest Crowds

Santorum, 53, has attracted modest crowds at his events in recent days. At a weekend stop at a library, reporters and photographers outnumbered the roughly 50 people who had come to hear Santorum in Indianola, Iowa. Smaller crowds could be the result of how much time Santorum has already spent in the state. He told the Indianola audience that it was his fourth or fifth visit to the city so far in the campaign.

Joseph Vorwald, 56, a group home worker who lives there, said it was the third time he’d seen Santorum in person.

“His message rings with people,” Vorwald said. “I think social conservatives will come to him because he’s walked the walk and fought partial-birth abortion.”

Reah Adamson, 62, an insurance company worker who lives in Carlisle, Iowa, said she plans to back Santorum. She said that’s easier to do now that he’s showing polling movement.

“If you’re going to caucus for someone, you want to support someone who has a chance,” she said.

Adamson, who came out to see Santorum this weekend before finally deciding to back him, said she is not concerned about his electability in a general election.

“I don’t think it’s going to matter that much,” she said. “I think any of the candidates are electable.”

Final Hours

As he races through the final hours before the caucuses, Santorum is telling voters to trust their own judgment and not listen to others.

“You recommend to the nation who you believe, not what the pollsters believe, not what the pundits believe, but who you believe having researched and questioned these candidates more than any other group of America will,” he said in Sioux City yesterday. “You suggest who you think the best person is to lead this country.”

Santorum also is making what could be construed as a criticism of Romney, who Republicans have yet to rally around because some fear he’s not conservative enough.

“Don’t settle for less than what this country needs,” he said in Indianola on Dec. 31, adding that it might not be a real victory if the person who wins the nomination “may not do what’s necessary to make the changes that we need.”

As Santorum has edged higher in polls, he has drawn challenges from his rivals, especially Perry.

‘Real Differences’

During a Dec. 31 stop at a restaurant and sports bar in Boone, Iowa, Perry said there were “real differences” between the two men on fiscal issues.

He specifically cited Santorum’s repeated votes to raise the federal debt ceiling while in the Senate and his use of earmarks for projects in Pennsylvania, which Perry said presented a “fleecing” of taxpayers.

In a Dec. 29 Fox News interview, Santorum defended his use of earmarks while in Congress.

“I’m proud of the money that I did set aside for things that were priorities in my state,” he said.

Unlike Romney and Paul, who have flooded Iowa’s airwaves with commercials, Santorum has spent relatively little on advertising.

“I know all the campaigns say they need your help,” he said in Indianola. “They’re lying. I need your help. I’m not the one running two or three or five million dollars worth of television.”

Fundraising Pickup

In a brief Dec. 31 interview, Santorum said his fundraising has picked up a “little bit” since his polling uptick.

“We’re able to start running ads in New Hampshire and South Carolina and hopefully things will pick up as, you know, we see what happens on Tuesday and obviously that will be the real determinant,” he said.

Asked if a third-place finish in Iowa would be good enough to make him a more significant factor in the nomination race, he said: “I think it will be a great thing.”

In Sioux City yesterday, Santorum took a swipe at Paul, saying he and Obama share a similar foreign policy. Paul has called for a dramatic reduction of U.S. military forces outside the country’s borders.

“I predict that if President Obama has four years where he’s not looking to re-election, his foreign policy will not be any different than Ron Paul’s foreign policy,” he said.

Conservative Views

Doris Ung, 55, said that after initially thinking about supporting Gingrich, she’s now behind Santorum because of his conservative views and position on foreign policy.

“I always had a sense that I might go that direction but I had to be convinced,” said Ung, who lives in Sioux City.

She said she saw him speak at her church and was impressed with his drive to fight partial birth abortions.

“I feel like he has the ability to continue pushing through,” she said.

Santorum is also appealing to the self interest of Iowans who want to keep their first-in-the-nation caucus tradition alive in subsequent elections by suggesting that the candidate who spends the most time on the ground should be rewarded.

“If that’s what you want for future Iowa caucuses, then come out and show what Iowa is all about,” he said in Indianola.

To contact the reporters on this story: John McCormick in Indianola, Iowa, at jmccormick16@bloomberg.net Tim Higgins in Sioux City, Iowa, at Thiggins21@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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China, India Manufacturing Grows as Europe Struggles

By Patrick Henry - Jan 2, 2012 6:43 PM GMT+0700

Manufacturing expanded in India and China in December, indicating Asia’s fastest-growing major economies have so far withstood the fallout from Europe’s sovereign debt crisis.

India’s manufacturing grew at the fastest pace in six months, stoking inflationary pressure, and a Chinese manufacturing gauge rose by more than economists expected, suggesting that a slowdown in the world’s second-biggest economy may be stabilizing. In the euro area, output fell for a fifth month though the rate of decline eased slightly from November.

“The figures from today show we’re absolutely not seeing a hard landing,” said Andreas Rees, an economist at UniCredit Markets & Investment Banking in Munich. “There’s no massive uncertainty shock around the globe that’s weighing heavily on investment activity.”

Ripples from Europe’s debt turmoil have dented confidence among companies and consumers and hit global demand. The Organization for Economic Cooperation and Development said Nov. 30 that trade in goods stalled in most major economies in the third quarter and it cut its growth forecast.

In the U.S., the world’s largest economy, manufacturing probably increased last month. The Institute for Supply Management’s factory index (NAPMPMI) climbed to a six-month high of 53.4 in December, economists surveyed by Bloomberg projected before a report tomorrow. Readings above 50 indicate expansion.

Euro Anniversary

American manufacturers also saw orders increase near the end of 2011. Bookings (TMNOCHNG) for factory goods climbed 2 percent in November, according to economists surveyed before a Jan. 4 report from the Commerce Department.

Spending on construction projects (CNSTTMOM) advanced 0.4 percent in November amid signs of improvement in the housing market, economists said ahead of figures from the Commerce Department tomorrow. That would be the fourth straight monthly gain, matching the longest streak since late 2010.

In the euro area, where leaders return to work this week seeking to rescue the single currency from fragmentation, a contraction in the manufacturing sector eased from November as an indicator of output in Germany, the region’s largest economy, reached a two-month high.

A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region rose to 46.9 from 46.4 in November, London-based Markit Economics said today. That’s in line with an initial estimate published on Dec. 15. A reading below 50 indicates contraction.

‘Another Recession’

“Euro-zone manufacturing is clearly undergoing another recession,” Chris Williamson, chief economist at Markit, said in today’s report. “Despite the rate of decline easing slightly in December, production appears to have been collapsing across the single-currency area at a quarterly rate of approximately 1.5% in the final quarter of 2011.”

Williamson said new orders are falling at a “far faster rate” than manufacturers have been cutting output. Companies “have been reliant on orders placed earlier in the year to sustain current production levels,” he said. “This is particularly evident in Germany, and suggests that operating capacity will be slashed in coming months unless demand revives.”

Indian manufacturing surged even as global demand slowed. The Purchasing Managers’ Index rose to 54.2 in December from 51 in November, HSBC Holdings Plc and Markit said in an e-mailed statement. Domestic demand helped the PMI in India to bounce back, they said, adding that growth will be constrained by higher borrowing costs and global economic weakness.

‘No Room’

Production growth increased inflationary pressure, leaving “no room” for India’s central bank “to ease its tight monetary policy stance in the near term,” Leif Eskesen, a Singapore-based economist at HSBC, said in the statement.

In China, the purchasing managers’ index rose to 50.3 from 49 in November, the Beijing-based logistics federation said. The reading exceeded all forecasts in a Bloomberg News survey of 15 analysts where the median estimate was 49.1.

Two reports yesterday highlighted the toll that faltering global growth may take on Asia. In the Chinese data, an index of export orders indicated a third month of contraction, while South Korea forecast that its own overseas shipments will grow in 2012 at only about a third of last year’s pace.

“Europe’s debt woes, the austerity measures the European countries are taking and the sluggish U.S. recovery mean demand for Asian goods this year is likely to be weak, posing a downside risk,” said Yao Wei, a Hong Kong-based economist for Societe Generale SA.

To contact the reporter on this story: Patrick Henry in Brussels at phenry8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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China Export Orders Show Threat From Europe

By Bloomberg News - Jan 2, 2012 3:28 PM GMT+0700

Chinese and Indian manufacturing gauges rose in December, suggesting that Asia’s fastest-growing major economies are so far withstanding the fallout from Europe’s sovereign-debt crisis.

In China, a purchasing managers’ index was at 50.3 from 49 in November, the Beijing-based logistics federation said in a statement yesterday. An Indian PMI rose to 54.2 from 51, HSBC Holdings Plc and Markit Economics said today.

Two reports yesterday highlighted the toll that faltering global growth may yet take on Asia. In the Chinese data, an index of export orders indicated a third month of contraction, while South Korea forecast that its own overseas shipments will grow in 2012 at only about a third of last year’s pace.

“Europe’s debt woes, the austerity measures the European countries are taking and the sluggish U.S. recovery mean demand for Asian goods this year is likely to be weak,” said Yao Wei, a Hong Kong-based economist for Societe Generale SA.

The “festival effects” of western and Chinese New Year celebrations helped to boost China’s PMI reading, said the logistics federation, which releases the data with the statistics bureau. China has also unwound some tightening measures to spur growth, cutting banks’ reserve requirements (CHRRDEP) in November for the first time since 2008.

Seasonal Factors

Yao said that seasonal demand ahead of the weeklong Lunar New Year holiday that begins Jan. 23 may largely have accounted for yesterday’s better-than-expected reading, “reminding us again not to underestimate the consumption power of Chinese households.”

In the Indian data, measures of output, employment, orders, and export orders all rose, HSBC said.

A Chinese manufacturing index released by HSBC and Markit on Dec. 30 indicated that manufacturing contracted for a second month. At the same time, HSBC said that “the pace of China’s slowdown is starting to stabilize.”

Across Asia, Indonesia reported today that inflation slowed for a fourth straight month in December. Purchasing managers’ indexes from the euro region, Germany, France, Italy and Spain will give the latest readings of the strength of manufacturing in Europe.

The MSCI Asia Pacific excluding Japan Index slipped 0.4 percent as of 3:08 p.m. in Singapore on global growth concerns.

‘Contingency Plans’

In South Korea, Samsung Electronics Co. and Hyundai Motor Co., the nation’s largest companies, told employees to brace for intense competition in a weak global economy as the government called for contingency planning.

“South Korea’s economy is facing increased uncertainties this year, and the global economy may rapidly deteriorate if the European debt crisis worsens,” Finance Minister Bahk Jae Wan said in a New Year statement released today. “Contingency plans to prevent contagion from Europe’s crisis should be strengthened.”

President Lee Myung Bak said today he would focus in the coming year on reducing inflation and bringing down unemployment by investing more than 10 trillion won ($8.6 billion) in creating jobs. The government’s goal is to get inflation down to the low 3-percent range, he said. Consumer prices rose 4.2 percent in December.

The nation’s exports may gain 6.7 percent this year, down from 19.6 percent in 2011, the government said yesterday. In December, the increase was 12.5 percent, a report showed.

Export Orders

“The momentum for global growth is weakening,” South Korea’s Ministry of Knowledge Economy said in a statement. “Export and import growth will slow down on increased uncertainty in the global economy.”

In the Chinese PMI data, an index of export orders was at 48.6 from 45.6 in November, still below 50, the dividing line between contraction and expansion. A measure of output jumped to 53.4 from 50.9.

President Hu Jintao said Dec. 31 in his New Year address that China aims for steady and “relatively fast” growth in 2012 amid an increasingly unstable global recovery. Besides pressure on exports, a crackdown on property speculation may limit the expansion by damping construction and officials are also grappling with banks’ bad-loan risks.

The rebound in the PMI “does not signal that the economy has turned around,” said Zhang Zhiwei, a Hong Kong-based economist at Nomura Holdings Inc. who previously worked for the International Monetary Fund. “Growth momentum will continue to wane this quarter, as the European crisis will hurt China’s exports and a cooling property market will drag down domestic demand.”

Cutting Reserve Requirements

Standard Chartered Bank said yesterday that the central bank may cut lenders’ reserve requirements before financial markets reopen on Jan. 4. Besides spurring growth, policy makers may want to ensure that there is enough cash in the system ahead of the holiday.

The Shanghai Composite Index (SHCOMP) tumbled 22 percent last year, the most since 2008, on concern that monetary tightening and efforts to rein in property prices in big cities will limit growth. The index’s 33 percent drop since 2009 makes it the worst performer among the world’s 15 biggest markets.

Over the year, shares of Jiangxi Copper Co. (600362), China’s biggest producer of the metal, slid 51 percent.

Bank of America Merrill Lynch estimates that the Chinese economy grew 8.7 percent in the three months through December from a year earlier, the slowest pace since the second quarter of 2009.

‘Weak’ Momentum

In yesterday’s statement, the logistics federation said the economy’s slowdown is stabilizing even as growth momentum remains “relatively weak.”

December’s rebound in the manufacturing index shows that China “won’t see a big slowdown in 2012,” Zhang Liqun, a senior researcher at the Development Research Center of the State Council, said in the statement. In November, the gauge had pointed to the first contraction in manufacturing since February 2009.

Nomura estimates that China’s economy, the biggest contributor to global growth, will expand 7.9 percent in 2012, the least in 13 years. Inflation is moderating after reaching a three-year high of 6.5 percent in July.

“The urgency of containing inflation isn’t as high as that in the beginning of 2011,” Zhou Xiaochuan, the governor of the central bank, was cited as saying in an interview published by Caixin Century magazine on its website on Dec. 31.

The logistics federation’s manufacturing index is based on a survey of purchasing managers in more than 820 companies in 20 industries. The HSBC PMI covers about 430 businesses.

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net; Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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Japan Population Drops Most Since World War II

By Aya Takada - Jan 2, 2012 10:31 AM GMT+0700

Japan’s population dropped in 2011 for a fifth year, falling by the most since World War II, after a record earthquake and tsunami killed thousands, according to the health ministry.

The country’s population fell by 204,000 to 126.24 million people last year, the biggest decline since at least 1947, the earliest year for which government data is available, the ministry said in a statement yesterday.

The number of deaths rose 5.3 percent from 2010 to 1.26 million people, according to the statement. The magnitude-9.0 earthquake and tsunami that rocked Japan’s northeast coast on March 11 killed 15,844 people and left 3,451 missing, according to a Dec. 30 statement from the National Police Agency.

To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net

To contact the editor responsible for this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

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India PMI Expands at Fastest Pace in 6 Months

By Unni Krishnan - Jan 2, 2012 4:10 PM GMT+0700

India’s manufacturing grew at the fastest pace in six months, stoking inflationary pressure and reducing scope for the central bank to cut interest rates.

The Purchasing Managers’ Index rose to 54.2 in December from 51 in November, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. A number above 50 indicates expansion.

“Manufacturing activity rebounded on the back of increases in output and new orders,” Leif Eskesen, a Singapore-based economist at HSBC, said in the statement. “However, inflationary pressures remain firm leaving no room for the RBI to ease its tight monetary policy stance in the near term.”

Manufacturing in India and China recovered in December, indicating Asia’s fastest-growing major economies have so far withstood the fallout from Europe’s debt crisis. Domestic demand helped the PMI in India to bounce back, HSBC and Markit Economics said, adding that growth will be constrained by higher borrowing costs and the global economic weakness.

The yield on the 8.79 percent notes due November 2021 fell 14 basis points, or 0.14 percentage point, to 8.43 percent as of 2:06 p.m. in Mumbai. The BSE India Sensitive Index, which lost a quarter of its value in 2011, was little changed at 15,460.68.

Rupee Drops

India’s rupee, Asia’s worst-performing currency last year, weakened 0.4 percent to 53.27 against the U.S. dollar.

India’s central bank last month kept rates unchanged for the first time in eight meetings as Europe’s debt woes threatens to curb exports. The Reserve Bank of India’s repurchase rate is 8.5 percent after 13 increases since mid-March 2010.

In the Indian PMI data, measures of output, employment, orders, and export orders all rose, HSBC said.

In China, the PMI was at 50.3 in December from 49 in November, the Beijing-based logistics federation said in a statement yesterday.

India’s inflation readings in December were “not encouraging,” according to the statement from HSBC and Markit Economics. Input price increases remained “well above historical levels” and the index of output prices rose to 56.2 from 55.4 in November, the statement showed.

India’s central bank may reverse its rate increases to boost growth as inflation is showing signs of easing, the British Broadcasting Corp. reported citing Governor Duvvuri Subbarao.

Different Approach

The central bank’s approach to managing inflation and growth will be different in 2012, the BBC quoted Subbarao in an interview posted on its website today.

India’s exports in November rose at the slowest pace in two years, gaining 4 percent to $22.3 billion, according to a statement from the commerce ministry today. Imports rose 25 percent to $35.9 billion, causing a trade deficit of $13.6 billion in the month.

India’s economic growth slowed to 6.9 percent in the quarter ended Sept. 30, the weakest pace in more than two years.

India’s inflation slowed to a one-year low of 9.11 percent in November from 9.73 percent in October. That is still higher than the levels in Brazil, Russia and China, which including India, make up the so-called BRIC nations. Consumer prices rose 6.6 percent in Brazil and 4.2 percent in China in November and 6.1 percent in Russia last month.

Subbarao said the fall in the rupee, which dropped about 16 percent in 2011, may add to inflation, according to the interview with the BBC.

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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European Stocks Climb; German Manufacturing Beats Estimates, Siemens Rises

By Adria Cimino - Jan 2, 2012 7:39 PM GMT+0700

European (SXXP) stocks gained on their first trading day this year, following the Stoxx Europe 600 Index’s first annual loss since 2008, as a measure of German manufacturing beat estimates and a gauge of chemical makers rose. Asian shares retreated.

Siemens AG (SIE) increased 2.1 percent for the biggest contribution to the Stoxx 600’s advance (SXXP).

The Stoxx 600 rose 0.7 percent to 246.21 at 12:36 p.m. in London. The U.S. and U.K. markets are closed today for the New Year’s holiday. Futures on the Standard & Poor’s 500 Index didn’t trade, while the MSCI Asia Pacific excluding Japan Index slipped 0.3 percent.

“On the first day of the year, a lot of investors, having cleaned their portfolios, have liquidity to invest,” said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, which oversees about $84 million. “Germany can be seen as a safe haven because it has stronger growth than other countries. People are investing in industries with a lot of visibility, such as utilities.”

A measure of German manufacturing climbed to 48.4 in December, beating the median economist estimate (PMITMGE) for a reading of 48.1. The purchasing managers’ index (PMITMGE) compiled by Markit Economics had a reading of 47.9 in November.

European (SXXP) stocks climbed in the last week of 2011 as reports from the U.S. showed the recovery in the world’s largest economy is gathering pace and as optimism grew that euro-area policy makers will contain the debt crisis. The second straight week of gains helped trim last year’s loss to 11 percent (SXXP).

The index entered a bear market (SXXP) in August and had its worst third quarter since 2002, dropping 17 percent (SXXP), as U.S. leaders wrangled over cutting the deficit and euro-area policy makers remained divided on their response to the debt crisis.

Euro-Area Debt

Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. National leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin on Jan. 9 to work out the details.

In her New Year’s address, Merkel said she expects turbulence in 2012 as she does “everything” to save the euro and end the debt crisis. Greek Prime Minister Lucas Papademos said in his New Year’s message that the country faces a difficult year and must continue efforts to stay in the euro.

In the U.S., the S&P 500 (SPX) was virtually unchanged last year. The benchmark gauge lost 0.04 points to 1,257.6 in 2011, its smallest annual change since 1947.

National benchmark indexes advanced in 14 of the 15 western European markets that opened today. Germany’s DAX Index added 2.2 percent. France’s CAC 40 Index gained 1 percent.

U.S. Payrolls Report

A report this week will probably show that hiring in the U.S. accelerated in December for a second month, a sign that the country’s improving labor market will bolster consumer spending in early 2012, economists said. Payrolls climbed by 150,000 workers after rising 120,000 in November, according to the median forecast of 62 economists in a Bloomberg News survey before the Labor Department release on Jan. 6.

Another report (NAPMPMI) this week may show manufacturing picked up in the U.S., economists said.

Siemens, Henkel Climb

Siemens, Europe’s largest engineering company (SIE), added 2.1 percent to 75.51 euros. A gauge of chemical makers (SXXP) increased 1.2 percent, with the preferred shares of Henkel AG, the maker of industrial adhesives and Persil washing powder, increasing 1.7 percent to 45.36 euros.

ThyssenKrupp, Germany’s biggest steelmaker (TKA), jumped 3.6 percent to 18.36 euros.

RWE AG (RWE), Germany’s second-largest utility (RWE), advanced 3 percent to 27.98 euros. The company is among stocks on Cheuvreux’s German selected list for 2012. Suedzucker AG (SZU) gained 0.7 percent to 24.83 euros. The sugar refiner also appeared on Cheuvreux’s list.

Sunways AG (SWW) surged 23 percent to 1.89 euros, its largest advance since September. China’s LDK Solar Co. said it intends to take over the company. Sunways said LDK will buy a 33 percent stake and has offered to purchase the remaining equity for 1.90 euro per share. Q-Cells SE rallied 5.2 percent to 54.5 euro cents.

Wacker Chemie AG (WCH), the second-biggest maker of solar-grade silicon, jumped 4.5 percent to 64.95 euros.

SolarWorld AG (SWV) climbed 1.4 percent to 3.30 euros as Chief Executive Officer Frank Asbeck told Euro am Sonntag that the company will meet its full-year target of more than 1 billion euros in sales. Asbeck described fourth-quarter sales as “pleasantly good.”

Automakers Rise

Carmakers rose 1.8 percent for the biggest gain among the 19 industry groups in the Stoxx 600 (SXXP). Daimler AG (DAI) increased 1.9 percent to 34.58 euros. The carmaker said that it has delivered more than two million Mercedes sport-utility vehicles since their launch. The company wants to produce a record 988,110 Mercedes-Benz brand vehicles in Germany in 2012, Automotive News Europe reported yesterday, citing internal company documents.

Veolia Environnement SA (VIE) added 2.7 percent to 8.70 euros. The company has drawn interest for its U.K. water business from bidders including Allianz SE and Canada’s Borealis pension fund, the Sunday Times reported, without citing anyone.

Enel SpA climbed 1.5 percent to 3.19 euros. Terna SpA jumped 4.6 percent to 2.72 euros. Mediobanca SpA said that Italy’s new regulatory framework for electricity transport and distribution tariffs is overall positive.

Nutreco, Icade, Storebrand

Nutreco NV (NUO) advanced 1.7 percent to 51.72 euros. The world’s biggest maker of fish feed had its shares upgraded to “selected list” (NUO) from “outperform” at Cheuvreux.

Icade SA slipped 1.9 percent to 59.65 euros. Groupama SA, the French insurer hurt by Greek sovereign-debt losses and declining stock holdings, said its board agreed to merge its stake in Silic SA with Caisse des Depots et Consignations’ Icade unit.

Storebrand ASA (STB) fell 3.6 percent to 29.97 kroner. Norwegian insurance companies received 6,000 claims after storm Dagmar swept over Norway during the Christmas holiday.

YIT Oyj (YTY1V) advanced 2.9 percent to 12.74 euros. The company won an order to make foundations and provide maintenance for 90 wind-power plants in Finland from TuuliWatti Oy.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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Iran Makes Nuclear Fuel Rod, Offers to Restart Talks

By Ayesha Daya - Jan 2, 2012 6:49 PM GMT+0700

Iran produced its first nuclear fuel rod, state-run news agencies reported, as the country offered to restart international talks over its atomic program.

The domestically made rod was inserted into the core of Tehran’s atomic research reactor after performance tests, the Iranian Students News Agency reported, citing the country’s atomic energy agency. The Tehran reactor produces radioisotopes for cancer treatment, according to Mehr news agency. Nuclear fuel rods contain pellets of enriched uranium that provide fuel for nuclear power plants.

The U.S. and allies are increasing pressure on Iran to halt what they say may be a covert nuclear weapons program. Sanctions signed into law by President Barack Obama on Dec. 31 aim to deter dealings with the Iranian central bank. The European Union, which is considering a ban on imports of oil from Iran, will be ready by Jan. 30 to take a decision on extending sanctions, Michael Mann, a spokesman for the EU, said today in an e-mailed statement. Iran, the world’s third-largest oil exporter, denies seeking to develop atomic weapons.

“If Iran has indeed produced its first nuclear fuel rod using its own domestic capabilities that would represent progress in its program, as just last year there was significant doubt they had that ability,” Meir Javedanfar, lecturer on Iranian politics at the Herzliya Interdisciplinary Center in Israel, said in a phone interview. “It is possible though that this is part of the psychological warfare launched by Iran against what they see as the tough economic sanctions being placed against it by the U.S.”

New Talks

The country’s top nuclear negotiator, Saeed Jalili, plans to send a letter to European Union foreign policy chief Catherine Ashton, which may be followed by a new round of talks, Mehr reported on Dec. 31, citing Iran’s ambassador to Germany, Alireza Sheikh Attar.

Mann said on Dec. 31 that Ashton hadn’t received a response to a letter sent to Jalili in October. The EU continues to pursue a “twin-track approach” and is “open for meaningful discussions on confidence-building measures, without preconditions from the Iranian side,” Mann said Dec. 31.

Iran began 10 days of naval exercises on Dec. 24 in the Strait of Hormuz, a waterway that carried 17 million barrels of oil a day last year, or a third of the world’s seaborne oil trade according to the U.S. Energy Department.

Naval Exercises

The navy test-fired its long-range Qader surface-to-sea missile for the first time during the military drills, the Islamic Republic News Agency reported today, citing the deputy commander of the navy, Mahmoud Mousavi. The country’s navy plans to test-fire two other missiles today, he said.

Crude futures surged to a three-week high of $101.77 a barrel on Dec. 27 after the Islamic Republic News Agency cited Vice President Mohammad Reza Rahimi as saying the country would bar shipments through the strait if sanctions are imposed on its oil exports. They dropped to $98.83 a barrel on Dec. 30.

Iran produced 3.56 million barrels a day in November, according to data compiled by Bloomberg. Saudi Arabia, holder of the world’s biggest crude reserves, has spare capacity to pump an extra 2.45 million barrels a day and the remaining Gulf Arab members of the Organization of Petroleum Exporting Countries can provide about 200,000 more, the data show.

To contact the reporter on this story: Ayesha Daya in Dubai at adaya1@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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European Stocks Rise on Manufacturing

By Stephen Kirkland and Will Hadfield - Jan 2, 2012 8:11 PM GMT+0700

European (SXXP) stocks rose, following the Stoxx Europe 600 Index’s first annual loss since 2008, after manufacturing in Germany and China beat forecasts. French bonds fell before debt sales this week.

The Stoxx 600 added 0.8 percent at 1:09 p.m. in London, with Germany’s DAX Index (DAX) climbing 2.2 percent. U.S. and U.K. markets are closed today for the New Year’s holiday. The MSCI Asia Pacific excluding Japan Index slipped 0.3 percent. French 10-year bonds fell for a fourth day, pushing yields six basis points higher to 3.20 percent.

Germany’s purchasing managers index gained to 48.4 last month and a manufacturing gauge for China increased to 50.3 percent, according to reports by Markit Economics and the Beijing-based logistics federation. Data later this week may indicate U.S. factory output and payrolls improved, Bloomberg surveys showed. France plans to sell 16.9 billion euros ($21.9 billion) of debt this week.

“On the first day of the year, a lot of investors, having cleaned their portfolios, have liquidity to invest,” said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, which oversees about $84 million. “Germany can be seen as a safe haven because it has stronger growth than other countries. People are investing in industries with a lot of visibility, such as utilities.”

More than nine shares rose for every one that fell in the Stoxx 600. RWE AG, Germany’s second-largest utility (RWE), jumped 3.4 percent. Veolia Environnement SA, the world’s biggest water utility, climbed 3.3 percent after the Sunday Times reported that Allianz SE and Canada’s Borealis pension fund were interested in bidding for its U.K. water business. The newspaper didn’t cite anyone.

Debt Sales

The yield on two-year French notes rose three basis points to 0.83 percent as the nation prepares to sell as much as 8.9 billion euros of bills tomorrow and 8 billion euros of bonds maturing in 2021, 2023, 2035 and 2041 on Jan. 5.

German bonds declined for the first time in five days, pushing 10-year yields up six basis points to 1.89 percent. The country will auction 5 billion euros of bonds due in 2022 on Jan. 4. Italian 10-year bond yields fell 15 basis points to 6.96 percent, narrowing their spread with the benchmark German bunds to 507 basis points from 528 basis points last week.

The euro fell against 11 of 16 major currencies tracked by Bloomberg. It declined 0.1 percent against the yen, after earlier falling to 98.66 yen, the lowest since December 2000.

Some 157 billion euros in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. By the end of that period, leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin Jan. 9 to work out details.

Overcoming Setbacks

“The path to overcoming this won’t be without setbacks, but at the end of this path, Europe will emerge stronger from the crisis than before,” Merkel said in a New Year’s speech broadcast Dec. 31. She said that her government will do “everything” to bring the euro out of the slump.

The dollar was little changed against the euro and the yen. The Institute for Supply Management’s factory index probably climbed to a six-month high of 53.4 in December, economists projected ahead of a Jan. 3 report. Readings above 50 indicate expansion. Payrolls climbed by 150,000 workers after rising 120,000 in November, according to the median forecast of 62 economists before the Labor Department release on Jan. 6.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Will Hadfield in London at whadfield@bloomberg.net

To contact the editor responsible for this story: Stephen Kirkland in London at skirkland@bloomberg.net

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Hyundai, Kia Targeting Sales of 7 Million Vehicles in 2012

By Rose Kim - Jan 2, 2012 7:00 AM GMT+0700

Hyundai Motor Co. (005380) and affiliate Kia Motors Corp. (000270), South Korea’s two largest automakers, aim to increase global sales by 6.1 percent this year by improving quality and the brand image.

The carmakers are targeting combined sales of 7 million vehicles, Chung Mong Koo, chairman of the two companies, said today in a speech to employees in Seoul. The companies sold an estimated 6.6 million units combined last year, exceeding their target of 6.33 million, Chung said.

Hyundai and Kia have boosted (005380) their global sales as Japanese rivals were hampered by a strong yen and suffered from production disruptions after the March quake and record flooding in Thailand.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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Most Asian Stocks Fall, Euro Weakens

By Shiyin Chen - Jan 2, 2012 9:08 AM GMT+0700

Most Asian stocks (MXAPJ) declined on the first trading day of 2012, while the South Korean won and the euro weakened on concern the global economic recovery will be hampered as Europe’s debt crisis enters a new year.

More than two shares retreated (MXAP) for every one that rose on the MSCI Asia Pacific excluding Japan Index, which retreated 0.1 percent at 9:17 a.m. in Hong Kong. Financial markets from Japan to Hong Kong and the U.S. are closed for a holiday. The won fell 0.2 percent to 1,154.75 per dollar and the euro retreated 0.1 percent to $1.2943. Silver advanced as much as 0.2 percent to $27.8875 per ounce, set for a third day of gains.

Indexes of stocks and commodities had the worst yearly returns since the financial crisis in 2008. South Korea said yesterday export growth will slow this year and Singapore’s government said its economy grew less than previously forecast in 2011. Data today may confirm European manufacturing shrank for a fifth straight month, as regional leaders return to work from the Christmas holidays seeking to buy time to rescue the single currency from fragmentation.

Taiwan’s Taiex Index (TWSE) slipped 0.4 percent, while South Korea’s Kospi Index gained 0.5 percent. India’s SGX S&P CNX Nifty Index futures climbed 0.3 percent after the government said yesterday it will allow overseas individual investors to directly buy local equities.

South Korea’s export growth will probably slow to 6.7 percent this year from 19.6 percent in 2011, the Ministry of Knowledge Economy said yesterday. Separately, Singapore’s Prime Minister Lee Hsien Loong said the island’s gross domestic product rose 4.8 percent in 2011, compared with the government’s earlier forecast of a 5 percent increase, and said the economy will expand 1 percent to 3 percent in 2012.

Data yesterday showed China’s purchasing managers’ index climbed to 50.3 in December from 49 in November, beating all forecasts in a Bloomberg News survey of 15 economists. A gauge of euro-region manufacturing was 46.9 in December from 46.4 the previous month, according to economists surveyed (PMITMEZ) by Bloomberg News before Markit Economics releases the data today. A reading below 50 indicates contraction.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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Santorum Says He Would Threaten Air Strikes Against Iran

By Kristin Jensen and Eric Engleman - Jan 2, 2012 7:53 AM GMT+0700

Republican presidential hopeful Rick Santorum said he would use air strikes against Iran unless the country dismantled its nuclear program or allowed inspectors to verify that the work isn’t aimed at making a weapon.

“I would be saying to the Iranis, you either open up those facilities, you begin to dismantle them and make them available to inspectors, or we will degrade those facilities through air strikes,” Santorum said on NBC’s “Meet the Press” program today. “Iran will not get a nuclear weapon under my watch.”

Santorum, a former U.S. senator from Pennsylvania, has surged in polls of Republicans days before the Jan. 3 Iowa caucuses. He’s now in third place, according to a Des Moines Register poll released late yesterday.

The Iowa poll showed Mitt Romney, a former Massachusetts governor, with the support of 24 percent of likely Republican caucus-goers. Ron Paul, a Texas congressman, had the backing of 22 percent. Santorum won 15 percent after a surge in the final two days of sampling.

Iran is facing new Western efforts to halt its suspected nuclear weapons program, including U.S. sanctions signed into law yesterday by President Barack Obama and a possible European Union ban on imports of oil from Iran, the world’s third-largest oil exporter. Iran denies seeking to develop atomic weapons.

Santorum expressed similar views about Iran in a Dec. 15 Republican presidential debate in Sioux City, Iowa, saying “we need to make sure that they do not have a nuclear weapon.”

“We should be planning a strike against their facilities and say, if you do not open up those facilities and not close them down, we will close them down for you,” he said.

“You can’t get out and say this is what I’m for and then do nothing,” Santorum said. “You become a paper tiger and people don’t respect our country.”

To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net Eric Engleman in Washington at eengleman1@bloomberg.net;

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Romney Leads, Santorum Surges in Iowa Poll

By John McCormick and Kristin Jensen - Jan 2, 2012 1:42 AM GMT+0700

Republican presidential candidates Mitt Romney, Ron Paul and Rick Santorum led the most closely followed poll in Iowa as rivals in the state’s Jan. 3 caucuses pushed their policies on Sunday talk shows.

The Iowa Poll by the Des Moines Register newspaper, released late yesterday, showed Romney, a former Massachusetts governor, with the support of 24 percent of likely Republican caucus-goers. Paul, a Texas congressman, had the backing of 22 percent. Santorum, a former U.S. senator from Pennsylvania, won 15 percent after a surge in the final two days of sampling.

“It is a wide open race,” said Iowa Governor Terry Branstad, a Republican, during an interview on “Fox News Sunday.” “Any of the candidates potentially could win here.”

Santorum, Paul, Minnesota Representative Michele Bachmann and Texas Governor Rick Perry each argued in television interviews today that the momentum was in their favor. Romney and former House Speaker Newt Gingrich haven’t yet appeared today in interviews, as Romney’s poll numbers rose and Gingrich’s fell.

Romney’s support in the Iowa Poll is up from 16 percent when it was last taken a month ago. Gingrich, who led in the poll a month ago, registered at 12 percent in the latest survey. Perry was backed by 11 percent of likely caucus-goers. And Bachman won 7 percent.

More Time

Santorum, who has spent more time in Iowa than any of the Republican candidates, is seeing the benefits of his labor. If the final two days of the Iowa Poll are considered separately, Santorum rises to second place, with 21 percent, pushing Paul to third, at 18 percent. Romney remains steady at 24 percent.

The Dec. 27-30 survey of 602 likely Republican caucus participants had a margin of error of plus or minus 4 percentage points. The margin of error for the last two days alone jumps to 5.6 percentage points.

The final polling showed “a whole new ballgame for Rick Santorum,” said J. Ann Selzer, president of West Des Moines- based Selzer & Co., which conducted the Register’s poll.

“If he continues on this trajectory, he can win,” she said. “He benefits from Romney holding steady -- not getting stronger with increased time in the state, and from a rather dramatic slide by Ron Paul.”

The swing for Santorum was unusually strong just ahead of Iowa’s first-in-the-nation caucuses, Selzer said.

‘Dramatic’ Swing

“I do not remember as dramatic a swing as these four days of polling reveal,” she said of her work with caucus polls.

Santorum, appearing on NBC’s “Meet the Press” today, said he has long told people his momentum would shift as Iowans spent more time analyzing the candidates.

“My surge is going to come on Jan. 3 after the people of Iowa do what they do,” Santorum said.

Santorum said he would be best equipped to deal with Iran, threatening air strikes unless the country dismantled its nuclear facilities or opened them up to inspectors.

“You can’t go out and say this is what I’m for and then do nothing,” he said. “You become a paper tiger and people don’t respect our country.”

Santorum said he would support certain exceptions to a ban on abortion as long as the resulting laws were more restrictive than the status quo.

“I’ll support laws that move the ball forward,” he said.

Winning Converts

Bachmann, in interviews on ABC’s “This Week” and “Fox News Sunday,” argued that she’s won “thousands” of converts in recent days with a tour of Iowa’s 99 counties. She, Perry and Santorum all said they have what it takes to appeal to the most socially conservative Republican voters.

“I’m the strongest core conservative in this race,” Bachmann said on “This Week.” Perry argued on Fox that he would appeal to people looking for someone who’s an “outsider” that doesn’t hail from Washington or Wall Street.

The poll shows the fluidity that remains ahead of the caucuses, with 41 percent of survey participants saying they could still change their minds.

“If this is the Super Bowl, then we just saw the pre-game show,” Gingrich spokesman R.C. Hammond said of the poll. “But everyone knows the real action happens after kickoff.”

All of the candidates competing in Iowa will be back in the state on the campaign trail today, with the exception of Paul, who is taking the New Year’s holiday weekend off.

Taking on Obama

During an interview today on CNN’s “State of the Union” program, Paul dismissed rival criticism that he could not be elected in a general election against President Barack Obama.

“I was elected 12 times once people got to know me in my own congressional district,” he said. “I think that might be propaganda more than anything else.”

Suggestions that his libertarian views are out the mainstream are a “gross distortion,” Paul said.

“Why are the crowds getting bigger and bigger?” he said. “I’m pretty mainstream.”

Paul said he has no plans to run as a third-party candidate, if he doesn’t get the Republican nomination.

“We’re doing very, very well,” he said. “On Tuesday, we’re going to find out a lot more about the future of this election.”

Paul predicted he would finish first or second in Iowa.

“We’re pretty optimistic about getting our people out,” he said. “I doubt if I will come in third or fourth.”

Defending Positions

On Fox News, Paul defended his past comments criticizing sexual harassment laws, arguing that people should quit their jobs if something like a joke makes them uncomfortable. Current laws cover any violence in the workplace, he said.

“You have to get a better definition of sexual harassment,” Paul said.

Paul also denied that his campaign, or anyone connected to it, paid Bachmann’s former state chairman to defect to his side.

Romney today picked up the endorsement of the Quad City Times newspaper in eastern Iowa.

The final Iowa Poll before the caucuses has a strong track record for reflecting the likely winner.

In 2008, the last poll before the caucuses showed Mike Huckabee at 32 percent and Romney at 26 percent. The former Arkansas governor finished with 34 percent of the vote and Romney got 25 percent.

On the Democratic side in 2008, the poll showed then Senator Barack Obama at 32 percent. He won with 37.6 percent of the vote, starting him on his way toward the presidency.

To contact the reporters on this story: John McCormick in West Des Moines, Iowa, at jmccormick16@bloomberg.net Kristin Jensen in Washington at kjensen@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Euro Leaders Aim to Buy Time to Save Currency

By Patrick Donahue - Jan 2, 2012 6:00 AM GMT+0700

European leaders return to work from Christmas holidays seeking to buy time for the Spanish and Italian governments to wrest control over their debt and rescue the single currency from fragmentation as the region’s crisis enters a new year.

Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. By the end of that period, leaders have pledged to draft a stricter rulebook for controlling government spending. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin Jan. 9 to work out details.

“The path to overcoming this won’t be without setbacks, but at the end of this path, Europe will emerge stronger from the crisis than before,” Merkel said in a New Year’s speech broadcast Dec. 31. She said that her government will do “everything” to bring the euro out of the slump.

On the 10th anniversary of the introduction of the euro bank notes that replaced national currencies, the euro for the first time had two consecutive annual losses against the U.S. dollar and plunged to a record low against the yen. European leaders are struggling to hold the monetary union together in the face of credit downgrades, emerging splits in the European Union and a looming recession that could compound rising debt.

Italy’s EU53 Billion

The latest crack appeared Dec. 30, when Spain’s new government said 2011’s budget deficit would reach 8 percent of output, 2 percent more than the previous government had projected and more than the 6.9 percent expected by economists surveyed by Bloomberg. Prime Minister Mariano Rajoy responded by unveiling a new package of spending cuts and tax increases.

Still, the key to the euro’s survival may lie with Italy, the group’s third-largest economy and the second most-indebted after Greece. The government in Rome must repay 53 billion euros in debt in the first quarter, about a third of the euro area’s total amount for the period, after Prime Minister Mario Monti passed an emergency budget package aimed at curtailing borrowing costs.

Italy’s 10-year yield ended 2011 near the 7 percent mark that led Greece, Ireland and Portugal to seek bailouts. Spain’s equivalent yield finished the year just above 5 percent.

“If the Italian yields start to rise, you could quickly turn a manageable situation into an insolvent one,” Michael Spence, a professor of economics at New York University and a Nobel laureate, said on Bloomberg Television Dec. 28. “Italy needs time and Europe needs to help buy them some of the time.”

Sarkozy

German Finance Minister Wolfgang Schaeuble echoed that strategy, telling the Bild newspaper yesterday that European rescue funds can only “buy time” before indebted states take “the necessary measures to win back confidence.”

The euro lost 3 percent against the dollar last year, ending at $1.2961, a decline of 13 percent from its 2011 high of $1.4830 on May 2. It lost 3.2 percent in the last quarter.

France’s Sarkozy said that his government will turn from budget fighting to economic growth and unemployment in 2012, which will be “the year of all risks and of all possibilities,” he said Dec. 31 in his fifth New Year’s address, the last he will give before facing a re-election contest in May. Sarkozy will meet with Italy’s Monti in Paris on Jan. 6.

In a New Year’s message given to Greek citizens, Prime Minister Lucas Papademos said his nation will confront a “difficult” 2012 and said that the “next three months will be particularly crucial.”

Greek Debt Swap

Papademos, appointed on Nov. 11 as head of a government backed by three of the five parliamentary parties, is trying to secure loans under a 130 billion-euro bailout for Greece agreed to in October by European Union leaders before elections are held. Measures include negotiating a debt swap with private creditors that will cut 100 billion euros off Greece’s burden.

As Europe’s leaders tinker at a new budget framework and craft the so-called firewall that will prop up ailing states, Bundesbank President Jens Weidmann said that the European Central Bank won’t “step into the breach for fiscal policy.”

“We have to make it clear where our legal, but also our real limits, are,” Weidmann, who is a council member of the Frankfurt-based ECB, told Tagesspiegel newspaper yesterday.

Fiscal and monetary efforts could be hampered by a shrinking economy in the euro area, which would crimp tax revenues and fuel unemployment. The economy of the 17-nation area will shrink by about 0.7 percent this year, said Howard Archer, an economist at IHS Global Insight in London.

“We expect eurozone recession to occur in late-2011 and the first half of 2012 in the face of the ongoing eurozone sovereign debt crisis,” Archer wrote in a Dec. 30 note to clients. “It is vital that eurozone policymakers get a real grip on matters quickly.”

To contact the reporter on this story: Patrick Donahue in Munich at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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