Verizon Fixed-Line Sale Would Free Vodafone

By Jonathan Browning and Cornelius Rahn - Jan 6, 2012 5:53 PM GMT+0700

A disposal of Verizon Communications Inc. (VZ)’s fixed-line operations would clear the way for the company to merge its wireless and enterprise units with partner Vodafone Group Plc (VOD), analysts at Goldman Sachs Group Inc. (GS) said.

An agreement on a frequency purchase and marketing cooperation that Verizon’s mobile-phone unit reached in December with U.S. cable operators led by Comcast Corp. (CMCSA) would make separating its divisions easier, the analysts, including Tim Boddy in London, wrote in a research report.

“The remaining wireless and enterprise businesses would have faster growth and a clear fit with Vodafone’s assets and strategy, making it a more attractive merger partner,” the analysts said in the report yesterday.

Vodafone, which is based in Newbury, England, owns 45 percent of New York-based Verizon’s wireless business, the U.S.’s largest mobile-phone operator. The companies are tightening a partnership after Verizon agreed last year to the first payout from the joint venture since 2005, providing the U.K. operator with a one-time dividend of 2.8 billion pounds ($4.34 billion).

The companies will focus on joint purchasing and service agreements for their business customers in the short term, the Goldman Sachs analysts said. Verizon Chief Financial Officer Fran Shammo said in November that the two carriers were moving from a financial partnership to a strategic relationship.

Peter Thonis, a spokesman for Verizon Communications, didn’t immediately return calls seeking comment outside business hours. Simon Gordon, a spokesman for Vodafone, declined to comment.

Stock Rises

Vodafone rose (VOD) as much as 2.1 percent to 181.1 pence and was up 1.9 percent at 10:50 a.m. in London. The stock has gained 2.9 percent in the past 12 months.

Under the alliance reached with with cable operators, Basking Ridge, New Jersey-based Verizon Wireless and the companies agreed to market and sell each other’s services, and Verizon Wireless also bought mobile-phone frequencies for $3.6 billion.

Verizon will offer cable-TV products in its retail stores and receive a percentage of revenue for every cable customer it signs up, while the cable companies will receive fees for each wireless customer they attract.

The U.S. Justice Department is investigating the deal over concerns it may reduce competition.

No More ‘Threat’

“Given that it no longer faces the threat of integrated cable competitors, Verizon could potentially spin off its remaining Consumer Wireline assets,” along with “large” pension and benefit liabilities, the Goldman analysts said.

Vodafone may generate a total return of 55 percent over the next two years, with 38 percent coming from a share-price increase and 17 percent from dividends, Goldman Sachs said. At the same time, free cash flow may rise to more than 10 billion pounds for the 2014 fiscal year from 7 billion pounds for the 2012 period.

Vodafone’s stock generated a return of 10 percent (BETELES) last year, making it the third-best performer in the 21-company Bloomberg Europe 500 Telecom Services Index. Shares including Deutsche Telekom AG (DTE), Royal KPN NV (KPN) and Telefonica SA (TEF) recorded losses in 2011.

To contact the reporters on this story: Jonathan Browning in London at jbrowning9@bloomberg.net; Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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Woodford Sues Olympus Over Dismissal, Giving Up Proxy Battle for Control

By Chris Cooper - Jan 6, 2012 4:52 PM GMT+0700

Olympus Corp. (7733)’s former Chief Executive Officer Michael Woodford said he’s suing the Japanese camera maker over his dismissal as he abandoned plans to wage a proxy battle for control of the company.

Woodford, 51, filed a case in the U.K. last week seeking damages for the remainder of his four-year contract and additional costs, and may also file a case in Japan, the British national told reporters today in Tokyo. He declined to specify the amount he is seeking.

The announcement comes after Woodford gave up efforts to regain control of Tokyo-based Olympus, which fired him after he questioned $1.5 billion in takeover costs at the company that have become the center of criminal investigations. The former CEO, who was dismissed Oct. 14, cited a lack of support from Japanese shareholders (7733).

“None of the major Japanese institutional shareholders have offered one word of support to me,” Woodford said in a statement earlier today. They “have in effect allowed the tainted and contaminated board (7733) to continue in office.”

Olympus rose 2.1 percent to 1,053 yen as of the 3 p.m. close of trading on the Tokyo Stock Exchange today. The shares (7733) have lost 58 percent since Woodford was fired.

‘Avoid Turmoil’

“Olympus can avoid turmoil thanks to the withdrawal of Woodford,” said Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. in Tokyo. “The next focus is whether or not Tokyo Stock Exchange will delist Olympus.”

The company’s plans won’t be affected by Woodford withdrawing his bid for control, Tsuyoshi Kitada, a spokesman for Olympus, said by phone. It may still hold an emergency shareholder meeting as early as March depending on the results of its panel reviewing management at the company, he said.

Olympus can’t confirm whether Woodford has filed a lawsuit, Kitada said.

Olympus’s biggest shareholder, Sumitomo Mitsui Financial Group Inc. (8316), said it would maintain support for the company after Japanese prosecutors raided Olympus’s offices following admissions that it hid investment losses for more than a decade. Southeastern Asset Management Inc., the company’s biggest overseas stockholder, and Harris Associates LP have said the entire board and all executives involved in the fraud must go.

Reform ‘Must Proceed’

“Though Mr. Woodford is no longer a factor, reform must still proceed,” David Herro, chief investment officer at Chicago-based Harris, Olympus’s ninth-largest shareholder, said in an e-mail. “As the third-party committee implied, the entire board is responsible and must all be replaced.”

Allowing the current board to remain is damaging to the company, Woodford said in his statement.

Olympus has lost (7733) about $5 billion of market capitalization since firing Woodford and restated more than five years of earnings last month to avoid being automatically delisted from the Tokyo Stock Exchange after admitting to a 13-year cover-up.

The company inflated fees to advisers on the 2008 acquisition of Gyrus Group Plc and overpaid in purchasing three Japanese companies with the intention of increasing goodwill, an independent panel investigating the fraud said last month.

The panel set up to investigate the fraud said in its report it found a culture of “yes men” and a board that failed in its duty to stop a “rotten” core of executives from duping auditors, regulators and investors.

Olympus admitted in November that former Chairman Tsuyoshi Kikukawa, Hisashi Mori, who was fired as executive vice president, and Hideo Yamada, a former company auditor, colluded to hide losses from securities investments in the 1990s. Olympus’s main bank and business partners hold stakes in the company, which is common among Japanese companies.

“The fact that such a situation can exist despite the explicit findings of the third-party committee is depressing and totally disorientating to those looking in on Japan from the outside,” Woodford said. “This issue of the weaknesses created by the cross-shareholding system is the most important single factor Japan needs to address to be successful in confronting the obvious challenges it faces.”

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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Samsung Quarterly Profit Rises as Galaxy Phones Lure Consumers From Apple

By Jun Yang - Jan 6, 2012 6:09 PM GMT+0700

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Jan. 6 (Bloomberg) -- Samsung Electronics Co., Asia’s largest consumer-electronics company, reported a record quarterly profit on surging sales of Galaxy phones and proceeds from selling its hard-disk drive business. Nicole Itano reports on Bloomberg Television's "Countdown" with Mark Barton and Linzie Janis. (Source: Bloomberg)

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Jan. 6 (Bloomberg) -- Charles Kim, a New York-based director of Mirae Asset Securities Co., talks about the outlook for Samsung Electronics Co. after the company reported fourth-quarter profit that beat analysts’ estimates. Kim speaks with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)

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A visitor tries out a Samsung Electronics Co. Galaxy Note smartphone at the company's flagship store in Seoul. Photographer: SeongJoon Cho/Bloomberg

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Pedestrians walks past the Samsung Electronics Co. flagship store in Seoul. Samsung’s full-year profit sales rose 6.5 percent to a record 164.7 trillion won, while operating profit declined 6.7 percent to 16.2 trillion won. Photographer: SeongJoon Cho/Bloomberg

Samsung Electronics Co. (005930), Asia’s largest consumer-electronics company, reported a record quarterly profit on surging sales of Galaxy phones and a one- time gain from selling its hard-disk drive business.

Operating profit (005930) increased 73 percent to 5.2 trillion won ($4.5 billion) in the three months that ended in December, the Suwon, South Korea-based company said in a statement today. That beat the 4.6 trillion-won average of 29 analyst estimates compiled by Bloomberg. Sales rose 12 percent to 47 trillion won.

Mobile-phone sales surpassed a record 300 million units last year as Galaxy smartphones helped win consumers amid competition with Apple Inc.’s iPhone. Samsung, which sold its hard-disk drive business to Seagate Technology Plc, is introducing more mobile devices to offset slumping profits at the chip and flat-screen panel businesses.

“The mobile business is generating a huge chunk of profit now,” James Song, a Seoul-based analyst at Daewoo Securities Co., said by telephone. “It may be getting harder for Apple to catch up because they only have a limited number of models.”

Samsung shares fell 1.4 percent to 1,040,000 won at the 3 p.m. close of trading in Seoul, while the benchmark Kospi index declined 1.1 percent. The stock gained 11 percent in 2011.

Seagate Deal

While smartphone sales helped propel Samsung’s revenue to a record last year, fourth-quarter operating profit was inflated by proceeds from the Seagate deal, James Chung, a Seoul-based spokesman for the Suwon, South Korea-based company, said by telephone after the announcement.

Samsung said in April it agreed to sell its mechanical- drive business to Dublin-based Seagate for $1.38 billion in cash and stock. Samsung said last month the sale was completed.

Operating profit may be 200 billion won higher or lower than today’s preliminary estimate when audited results are announced later this month, Samsung said. The company didn’t provide net income figures or a breakdown of divisional earnings.

Samsung’s full-year profit sales rose 6.5 percent to a record 164.7 trillion won, while operating profit declined 6.7 percent to 16.2 trillion won.

Operating profit at the telecommunications unit jumped 81 percent to 2.6 trillion won, according to the median of six analyst estimates surveyed by Bloomberg News. Sales at the world’s second-largest handset vendor may have gained 36 percent to 16.45 trillion won.

Galaxy Sales

Samsung overtook Apple in the third quarter to become the world’s largest smartphone seller after shipping 27.8 million units, market researcher Strategy Analytics said in October. Samsung’s smartphone sales more than tripled during the three- month period from a year ago, and its market share more than doubled, it said.

Samsung probably sold about 32 million smartphones in the fourth quarter, according to an estimate from Dongbu Securities Co., helped by the Galaxy range of devices. Galaxy S II sales, which began in May, surpassed 10 million units quicker than any other Samsung mobile device, the company said in a December statement, without providing a total sales figure for the model.

“They’ll probably roll out more low-end smartphones this year after focusing on high-end models last year,” said Kim Hyung Sik, a Seoul-based analyst at Taurus Investment Securities Co. “By the end of the year, they’ll climb to the top in overall handsets.”

Chip Prices

Samsung sold more than 300 million handsets in 2011, according to the statement.

In October, Samsung and software partner Google Inc. (GOOG) unveiled the Galaxy Nexus, powered by the latest Android operating system that features facial-recognition functions. A month earlier, Samsung introduced the Galaxy Note equipped with a 5.3-inch screen and a stylus.

Profit at the semiconductor division probably fell 11 percent to 1.6 trillion won on sales of 9.65 trillion won, according to the survey.

The price of the benchmark DDR3 2-gigabit DRAM (DRAM84) slumped by 51 percent last year amid slowing personal-computer sales, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors. Chip prices have fallen to as low as a ball of rice, according to Tokyo-based Elpida Memory Inc.

DRAM prices probably will remain at current levels through the first half of this year, with PC demand not picking up quickly, Shin Hyun Joon, a Seoul-based analyst at Dongbu Securities, said in a Dec. 21 report.

TV Shipments

Samsung is faring better than its rivals because of its diversification into specialty chips for mobile devices, Kim said. Shipments of smartphone DRAM probably more than doubled last year from 2010, according to a forecast by researcher IHS iSuppli in October.

Samsung’s display division likely had an operating profit of 6.5 billion won, compared with 100 billion won a year earlier, according to the survey. Sales probably rose to 7.95 trillion won from 7.2 trillion won.

The average selling price of Samsung’s flat-screen panels dropped 21 percent in 2011 amid stagnating TV sales, according to an estimate from Dongbu Securities.

Global LCD TV shipments probably were 206 million units last year, falling short of an earlier projection of 211 million units, according to research company DisplaySearch.

Samsung bought Sony Corp.’s stake in their LCD-making venture, which was formed in 2004, for 1.08 trillion won in cash, the South Korean company said in December. Sony predicted an eighth consecutive year of losses from TVs.

Samsung’s TV-making unit likely had an operating profit of 170.5 billion won, compared with a loss of 170 billion won a year ago, helped by high-end models featuring 3-D functionality and Web-based services, according to the survey. Sales are estimated to have risen to 16.1 trillion won from 15.97 trillion won.

Samsung almost met its annual target to sell 45 million flat-screen TVs, Yoon Boo Keun, head of the consumer-electronics business, said in November.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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Hungary’s Orban Embraces Central Bank Chief

By Zoltan Simon and Edith Balazs - Jan 6, 2012 7:48 PM GMT+0700

Hungary’s Premier Viktor Orban retreated in his confrontation with central bank chief Andras Simor, seeking to revive talks for an international bailout after a market rout this week. Stocks, bonds and the currency gained today.

“The President can count on the government’s support, including our backing for him personally,” Orban said after meeting Simor in Budapest. The government wants an IMF agreement “as soon as possible” and will do “everything” to support the central bank to stabilize the economy, Orban said.

The International Monetary Fund and the European Union broke off talks last month on Hungary’s bid for a bailout after Orban refused to withdraw a new central bank regulation the institutions said may undermine monetary-policy independence and Simor’s authority. The forint fell to a record against the euro yesterday as investors speculated an IMF deal may be delayed.

“It’s clear Orban is retreating, the question is whether it’s enough,” Peter Duronelly, who helps oversee $1.5 billion mostly in Hungarian government bonds as chief investment officer at Budapest Fund Management, said by phone today. “If EU leaders expect a total capitulation from Orban, then an agreement won’t be so simple or fast.”

The forint strengthened 0.5 percent against the euro to trade at 317.38 at 11:31 a.m. in Budapest from as low as 324.24 yesterday before Hungary’s chief negotiator, Tamas Fellegi, pledged to compromise with the IMF and the EU on a bailout.

Bonds Gain

The yield on the benchmark 10-year government bond declined to 9.917 percent, falling 48 basis points, the most in six weeks. The yield rose to as high as 11.34 percent yesterday, according to generic prices compiled by Bloomberg. Standard & Poor’s followed Moody’s Investors Service on Dec. 21 in cutting Hungary’s debt to junk, 15 years after the former communist country was awarded an investment-grade rating.

The cost of insuring Hungarian bonds using credit-default swaps fell to 695 basis points today from 735 points, according to data provider CMA, which is owned by CME Group Inc. (CME) and compiles prices quoted by dealers. The benchmark BUX stock index rose 1 percent to 16,379.77 at 12:47 p.m.

Talks for Hungary’s second bailout in four years broke down following the central bank law that takes away Simor’s right to name deputies, expands the rate-setting Monetary Council and adds a new vice president. A separate law makes it possible to demote the central bank president if the institution is combined with the financial regulator.

Government’s Plea

The central bank law, which came into effect on Jan. 1, is “fully compatible” with EU rules, Economy Minister Gyorgy Matolcsy said in a letter sent to European Central Bank President Mario Draghi yesterday. The Cabinet will continue to respect the Magyar Nemzeti Bank’s independence, Matolcsy wrote.

Orban shunned the IMF since taking office in 2010 to prevent interference in what he called his “unorthodox” measures. The steps included the effective nationalization of $13 billion of private pension-fund assets and extraordinary industry taxes to tame the budget deficit and forcing lenders to swallow exchange-rate losses on foreign-currency mortgages. The EU has criticized all those policies.

Orban’s government has also reduced the power of independent institutions and asserted its influence since winning elections, bucking objections from the EU, the IMF, the U.S. and the United Nations.

Orban’s Rules

Ruling-party lawmakers ousted the chief justice of the Supreme Court, narrowed the jurisdiction of the Constitutional Court, wrote a new constitution, replaced an independent Fiscal Council with one dominated by the premier’s allies, created a media regulator led by ruling-party appointees and chose a party member to lead the State Audit Office.

“What’s important to monitor is what conditions international organizations will impose and what the government’s reaction will be,” Levente Papa, a Budapest-based strategist at OTP Bank Nyrt., Hungary’s largest lender, said in an e-mail.

The Cabinet is ready to start negotiations on a standby loan agreement with the IMF and the European Union and wants a deal “quickly,” Fellegi, Hungary’s chief negotiator, told reporters in Budapest yesterday. The government seeks a precautionary loan to tap only if market conditions require it.

It’s in Hungary’s interest to obtain an IMF loan “as soon as possible,” Orban said after meeting Simor today. Hungary sees a “good chance” for swift talks with the IMF, Orban said.

Stability Sought

The government will consult with the central bank on a daily basis and will work together to ensure economic stability, Orban said today. The central bank, in a statement, said it will use “available tools” to ensure economic stability.

“The government seemingly now realizes that an IMF deal would bring benefits in terms of cheaper borrowing and financing costs,” Tim Ash, a London-based economist at Royal Bank of Scotland Group Plc, said in an e-mail today before Orban’s briefing. “It is still weighing this up against the likely political costs, and hence is trying still to ensure that it can sell cutting the deal with the Fund as a victory.”

While the start of talks with the IMF may bolster the forint, the move may “well be misplaced and reversed once the government’s foot dragging then restarts,” Peter Attard Montalto, a London-based economist at Nomura International Plc., said in a report yesterday.

‘First Base’

“We are still on first base,” Montalto said. “Investors are still underestimating the time it will take and the distance Orban will have to move on the policy front.”

Hungary defaulting remains a “real possibility” as Orban may balk at unwinding some of his economic policies in exchange for a bailout, according to Christian Schultz, a London-based economist at Berenberg Bank. It would take “a lot of short- sightedness” from Orban to let Hungary’s economy fail, he said.

“If Hungary does agree to a program with the” EU and the IMF, “it would not need to default,” Schultz said. “However, the conditions attached may not be politically palatable for Orban, making bankruptcy a real possibility.”

The government is “hardly on the brink of default” and still has “some space” until the second half of the year to strike a deal with the IMF, Ash said today.

After a stint as premier in 1998-2002, Orban rode a wave of discontent against the previous Socialist governments that implemented austerity measures starting in 2006 and needed a bailout in 2008.

The previous Socialist administration of Prime Minister Ferenc Gyurcsany angered Hungarians when it admitted to lying about the state of the economy to win the 2006 election, sparking demonstrations that included clashes between protesters and police in the country’s worst street violence in 50 years.

Orban swept to power in 2010, grabbing a two-thirds majority in parliament that allows him to unilaterally change the constitution. He pledged to end austerity, a promise he broke. He has been forced to raise some taxes, including the value-added tax, delay a personal flat tax plan, cut social spending and eliminate early retirement.

To contact the reporters on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net; Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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U.S. Stock Futures Rise as Payrolls Top Forecasts, Jobless Rate Drops

By Nikolaj Gammeltoft - Jan 6, 2012 8:50 PM GMT+0700

U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will extend its weekly gain, as better-than-forecast jobs growth and a drop in the unemployment rate bolstered optimism in the world’s largest economy.

General Electric Co. (GE) and Caterpillar Inc. (CAT) climbed at least 0.8 percent, pacing gains among the largest companies. Schlumberger Ltd. (SLB) and ConocoPhillips (COP) gained more than 0.6 percent. Alcoa Inc. (AA), which is due to start the earnings season on Jan. 9, slipped 2.4 percent after saying it will close 12 percent of its global smelting capacity.

S&P 500 futures (SPH2) expiring in March gained 0.4 percent to 1,278.7 at 8:45 a.m. in New York. The benchmark measure has climbed 1.9 percent so far this week. Dow Jones Industrial Average futures expiring the same month added 52 points, or 0.4 percent, to 12,383.

“The jobs numbers are unambiguously good,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. “Equities should react positively to this,” he said. “We’re seeing a sequential improvement in the U.S. economy.”

Equity futures extended gains as U.S. employers added more workers to payrolls than forecast in December. The 200,000 increase followed a revised 100,000 gain in November that was smaller than initially estimated, Labor Department figures showed in Washington. The median projection in a Bloomberg News survey called for a December gain of 155,000. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009, while hours worked and earnings climbed.

Profit Forecasts

Most U.S. stocks rose yesterday as banks rallied and payrolls climbed, offsetting reduced profit forecasts at companies including Target Corp. and J.C. Penney Co.

Alcoa (SPX) is scheduled to mark the unofficial start of the fourth-quarter earnings season on Jan. 9. Profit at S&P 500 companies rose 6.2 percent during the September-December period (SPX), according to analyst estimates compiled by Bloomberg, which would mark the slowest growth since the third quarter of 2009.

U.S. stock mutual funds that invest in domestic equities had their second-worst redemptions last year as record market swings sent investors to the perceived safety of bond funds.

Investors pulled an estimated $132 billion from mutual funds that invest in U.S. stocks, the fifth straight year of withdrawals for domestic funds, according to preliminary data from the Investment Company Institute, a Washington-based trade group whose numbers go back to 1984.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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European Stocks Extend Gains as U.S. Economy Adds More Jobs Than Forecast

By Adam Haigh - Jan 6, 2012 6:31 PM GMT+0700

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Jan. 6 (Bloomberg) -- Barry Knapp, head of U.S. equity strategy at Barclays Capital, discusses the outlook for global stocks and his recommendation of technology, energy and health-care stocks. He speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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Jan. 6 (Bloomberg) -- Marino Valensise, chief investment officer at Baring Asset Management Ltd., discusses the outlook for the European and U.S. economies and his investment strategy. He speaks with Mark Barton on Bloomberg Television’s “On the Move.” (Source: Bloomberg)

European (SXXP) stocks advanced, with the Stoxx Europe 600 Index extending its third weekly gain, before a report on American payrolls that may show the recovery in the world’s largest economy is intact. U.S. index futures fluctuated and Asian shares fell.

Vodafone Group Plc (VOD), the world’s largest mobile-phone operator, climbed 1.9 percent after Goldman Sachs Group Inc. advised buying the shares. Mitchells & Butlers Plc (MAB), the Birmingham, England-based pub owner, jumped 4.5 percent after Morgan Stanley recommended the stock. Clariant AG (CLN) rallied 2.6 percent as UBS AG added the stock to its list of key calls.

The benchmark Stoxx 600 (SXXP) rose 0.3 percent to 248.14 at 11:29 a.m. in London, paring gains of as much as 0.6 percent after data showed that German factory orders declined in November. The gauge has advanced 1.5 percent this week as investors turned their attention to better-than-estimated U.S. economic data. The March contract on the Standard & Poor’s 500 Index slid less than 0.1 percent today and the MSCI Asia Pacific Index retreated 0.9 percent.

“There is a recovery” in the U.S., said Marino Valensise, who oversees 51 billion euros ($65 billion) as chief investment officer at Baring Asset Management Ltd. in London. “There are very good signs coming from the private sector. Unemployment may be going lower from here.” He spoke in a Bloomberg Television interview with Mark Barton.

The Stoxx 600 has rallied 15 percent from last year’s lowest level Sept. 22 as U.S. economic data showed the recovery is gathering pace and optimism grew that euro-area policy makers will contain the region’s debt crisis. Markets are closed in Greece, Finland, Sweden and Norway today for a holiday.

U.S. Jobs

The U.S. economy probably generated 155,000 jobs in December, compared with 120,000 the previous month, based on estimates before a Labor Department report at 8:30 a.m. Washington time today. The unemployment rate (USURTOT) rose after dropping in November to the lowest level in more than two years, the report may also show.

Euro-area consumer confidence (EUCCEMU) fell to the lowest in more than two years and unemployment remained at a 13-year high, data released today showed.

An index (EUESEMU) of executive and consumer sentiment in the 17- nation euro area fell to 93.3 in December from a revised 93.8 in the previous month, the European (SXXP) Commission in Brussels said today. That’s in line with the median of 19 economists’ estimates in a Bloomberg survey. The unemployment rate held at 10.3 percent in November, a separate report showed.

German Support

European Central Bank Governing Council member Klaas Knot said Germany should support raising the European emergency fund to help end the debt crisis.

“The most important obstacle lies in Germany, not in the Netherlands,” Knot said in an interview on Dutch public television last night. “I think that more money is needed and we will use the time to convince our German colleagues.”

Stocks earlier pared gains as German factory orders dropped the most in almost three years in November as the euro region’s economy edged toward a recession and global demand weakened.

Vodafone climbed 1.9 percent to 180.6 pence after Goldman Sachs upgraded the shares to “buy” from “neutral,” saying a merger between the British company and Verizon Communications Inc. may be “attractive.”

Mitchells & Butlers advanced 4.5 percent to 240.2 pence. The operator of Harvester and Toby Carvery chains was upgraded to “overweight” from “equal weight” at Morgan Stanley.

Clariant, EasyJet

Clariant rose 2.6 percent to 10.45 francs after UBS said analysts in the market have cut the company’s earnings forecasts “too far.”

EasyJet Plc rose 2.2 percent to 391.9 pence after reporting a 13 percent increase in passenger numbers in December, compared with the same month in the previous year.

ITV increased 2.2 percent to 71 pence after Morgan Stanley upgraded the U.K.’s largest commercial broadcaster to “overweight” from “equal weight,” saying the media industry is in “structurally better shape with the long digital de- rating of the early 2000s now largely over.”

UniCredit (UCG) SpA tumbled 12 percent to 3.96 euros, extending its decline in the four days through today to 39 percent. Italy’s biggest bank plans a rights offer at a price discount of 43 percent to the Jan. 3 closing price, excluding the value of rights.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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

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Unemployment Falls to 8.5% as U.S. Adds 200K Jobs

By Timothy R. Homan - Jan 6, 2012 9:07 PM GMT+0700
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A recruiter with Health First gives a job seeker her business card during a career fair in New York. Photographer: Daniel Acker/Bloomberg News

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Jan. 6 (Bloomberg) -- U.S. employers added more workers to payrolls than forecast in December and the jobless rate declined to an almost three-year low, showing that the labor market gained momentum heading into 2012. The 200,000 increase last month followed a revised 100,000 gain in November that was smaller than initially estimated, Labor Department figures showed in Washington. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009, while hours worked and earnings climbed. Betty Liu, Megan Hughes and Michael McKee report on Bloomberg Television's "In the Loop." (Source: Bloomberg)

U.S. employers added more workers to payrolls than forecast in December and the jobless rate declined to an almost three-year low, showing that the labor market gained momentum heading into 2012.

The 200,000 increase followed a revised 100,000 rise in November that was smaller than first estimated, Labor Department figures showed in Washington. The median projection in a Bloomberg News survey called for a December gain of 155,000. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009, while hours worked and earnings climbed.

Sustained payroll gains are needed to chip away at joblessness and support household spending, which accounts for about 70 percent of the world’s largest economy. The labor market figures follow recent data showing increased manufacturing and a rebound in consumer sentiment that show the U.S. is weathering Europe’s debt crisis.

“You got the trifecta -- more people working, wages up and the average work week up,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who accurately forecast the December payrolls gain. “You can’t really argue that that isn’t a sign of significant improvement in the job market.”

Stock-index futures held gains after the report, with the contract on the Standard & Poor’s 500 Index expiring in March climbing 0.2 percent to 1,275.5 at 9:05 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.97 percent from 2 percent late yesterday.

Last Year

Employers added 1.64 million workers in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.

“The tide is beginning to come back in,” James Glassman, senior economist at JP Morgan Chase & Co. in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “We’ve got a long way to go. This is all positive, though, that we’re actually moving forward, and that’s an important trend.”

Bloomberg survey estimates of 86 economists for December ranged from increases of 80,000 to 220,000. Regular monthly revisions to prior reports subtracted a total of 8,000 jobs to payrolls in October and November.

Jobless Rate

The unemployment rate, derived from a separate survey of households, was forecast to climb to 8.7 percent, according to the survey median. The decrease in the jobless rate from a revised 8.7 percent in November reflected a decline in unemployment combined with a gain in Americans saying they were employed. The labor force was little changed.

Annual benchmark revisions to the household survey showed the unemployment rate averaged 8.9 percent in 2011, down from 9.6 percent and 9.3 percent in the previous two years. It still marked the worst three-year period since 1939 to 1941.

The labor participation rate held at 64 percent in December, today’s report showed.

Private hiring, which excludes government agencies, rose 212,000 after a revised gain of 120,000 in November. It was projected to climb by 178,000, the survey showed.

Factory Jobs

Factory payrolls (USMMMNCH) increased by 23,000, the strongest since July, after a 1,000 gain in the previous month. Manufacturing job growth last year was the strongest since 1997.

Employment at service-providers increased 152,000, with a 50,200 advance in the transportation industry that includes companies such as FedEx Corp. (FDX) and United Parcel Service Inc. (UPS) Last month’s gain in transportation jobs was the biggest since September 1997. In December 2010, a 50,100 gain in the industry’s payrolls was almost entirely reversed a month later.

Retail trade payrolls climbed 27,900 in December as companies kept hiring for the holiday shopping season.

Construction companies added 17,000 workers last month. Government payrolls decreased by 12,000 in December, reflecting cuts at the local government level.

Average hourly earnings rose 0.2 percent to $23.24, today’s report showed. The average work week for all workers increased to 34.4 hours.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.2 percent from 15.6 percent.

Long-Term Unemployed

The report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more fell as a percentage of all jobless, to 42.5 percent from 43.1 percent.

“Sales are robust, merchandise margins are strong, operating margins are growing,” Alexander Smith, chief executive officer of Fort Worth, Texas-based Pier 1 Imports Inc., said on a Dec. 15 conference call with analysts. “There’s going to be a little more hiring in the first part of the year without a doubt.”

Other companies also saw increased demand last month during the holiday shopping season. Same-store sales at U.S. retailers excluding Wal-Mart Stores Inc. rose 3.5 percent in December from a year earlier, according to figures yesterday from the International Council of Shopping Centers.

In the final three months of 2011, “clear signs emerged that U.S. consumers are more confident and that other underpinnings of our economy are either stable or slowly improving,” Don Johnson, vice president of U.S. sales for General Motors Co. (GM), said on a Jan. 4 conference call.

Faster job gains than those generated in 2011 may be needed to reduce unemployment. That’s one reason policy makers remain concerned.

“While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated,” Federal Reserve Chairman Ben S. Bernanke and other members of the Federal Open Market Committee said in a statement at the conclusion of a meeting last month in Washington.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Dollar Heads for Weekly Advance Before Payrolls Report; Forint Advances

By Keith Jenkins and Kristine Aquino - Jan 6, 2012 7:00 PM GMT+0700

The dollar headed for weekly gains versus the yen and the euro before a U.S. report forecast to show employers added the most jobs in three months, adding to signs the world’s largest economy is gaining momentum.

The euro traded about 0.1 percent from the weakest in 11 years against the yen after reports showed confidence in the European economic outlook fell to a two-year low and German factory orders dropped by the most in almost three years. The euro is poised for a fifth weekly loss against the dollar, the longest run since February 2010. Hungary’s forint strengthened for a second day against the euro.

“Signs of strength in the U.S. economic recovery at the time Europe is in recession may at the margin help support the dollar against the euro,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We may see a weaker dollar against higher-yielding currencies such as the Australian, New Zealand and Canadian dollars.”

The dollar was little changed at $1.2798 per euro at 6:54 a.m. in New York, having gained 1.2 percent this week. It earlier rose to $1.2764, the strongest since September 2010. The greenback was unchanged at 77.12 yen, having risen 0.3 percent this week. The euro was little changed at 98.71 yen after sliding to 98.48 yesterday, the least since December 2000.

U.S. Jobs

U.S. employers hired 155,000 workers last month, after adding 120,000 in November, according to a Bloomberg News survey before today’s Labor Department report. That would be the most since September. The jobless rate (USURTOT) rose to 8.7 percent from 8.6 percent, a separate survey showed. U.S. companies added 325,000 workers in December, the most in records going back to 2001, ADP Employer Services said yesterday.

“The news coming from the U.S. has been OK,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency- risk management company. “We’re seeing just generally some U.S. dollar strength, which is mainly reflected in the euro.”

IntercontinentalExchange Inc.’s Dollar Index (DXY), which tracks the greenback against the currencies of six major U.S. trading partners, was little changed today to 80.930 after rising to 81.062, the highest level since Jan. 11, 2011.

The euro headed for a weekly loss against 14 of its 16 major counterparts after the European Commission said its index of executive and consumer sentiment in the euro area declined to 93.3 in December from a revised 93.8 in the previous month.

The unemployment rate held at 10.3 percent in November, a separate report showed. German factory orders (GRIORTMM), adjusted for seasonal swings and inflation, slipped 4.8 percent in November from the prior month, when they increased 5 percent, the Economy Ministry said. That’s the biggest drop since January 2009.

‘Negative Sentiment’

“There’s still negative sentiment surrounding the euro, and it’s likely to weaken further,” Bank of Tokyo-Mitsubishi’s Hardman said. “Today’s data will likely confirm declining business and consumer confidence. The market has almost fully priced in a recession in Europe. The question is how deep and prolonged that will be.”

The euro fell yesterday after France sold 10-year bonds at an average yield of 3.29 percent, compared with 3.18 percent at a sale on Dec. 1. The bid-to-cover ratio, or the number of bids received for each unit of debt sold, fell to 1.64 from 3.05. France’s credit outlook was lowered by Fitch Ratings on Dec. 16.

Spain is scheduled to sell bonds maturing in 2015 and 2016 on Jan. 12. Italy will auction debt the following day.

Merkel, Sarkozy

German Chancellor Angela Merkel will meet French President Nicolas Sarkozy on Jan. 9 in Berlin to talk about increasing fiscal coordination among euro-area states before the European Union leaders’ summit at the end of the month.

Japanese Finance Minister Jun Azumi said today he understands the weakening of the euro against the yen will have a significant impact on companies that export their goods to the region. Japan sold the yen three times last year as its strength threatened to derail an export-led recovery.

The forint pared its weekly decline as Hungary’s Prime Minister Viktor Orban met central bank President Andras Simor amid a dispute about the bank’s independence that threatens the country’s bailout.

Orban met with Simor and Economy Minister Gyorgy Matolcsy, the premier told reporters in Budapest today. Hungary needs a “quick” deal on aid with the International Monetary Fund and the European Union and is ready to discuss the conditions, Tamas Fellegi, the minister assigned to lead the aid talks, told reporters yesterday.

“Early forint action shows that markets are happy with this” meeting, Simon Quijano-Evans, an economist at ING Groep NV (INGA) in London, wrote in a research report today. “It would be great to say that after 18 months of noise, we are seeing light at the end of the tunnel. All the more so since Orban and Simor are apparently meeting now.”

Hungary’s currency gained 0.7 percent to 316.82 per euro, trimming this week’s decline to 0.6 percent.

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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Apple’s Siri Feature Doubles IPhone Data Usage

By Jonathan Browning - Jan 6, 2012 5:54 PM GMT+0700

Apple Inc. (AAPL)’s voice recognition software Siri has prompted owners of the iPhone 4S to use almost twice as much data compared with the handset’s predecessor, placing greater pressure on operators, network firm Arieso said.

“Voice is the ultimate human interface,” Arieso Chief Technology Officer Michael Flanagan said in an interview in London. “As you lower the barriers,” consumers will use their smartphones’ functions even more often, he said. Arieso, based in Atlanta, advises clients such as Vodafone Group Plc (VOD), Telefonica SA (TEF) and Nokia Siemens Networks Oy on how to manage wireless networks.

Apple brought in Siri, dubbed a virtual personal assistant, in its latest iPhone update in October. With a few spoken words, the artificial-intelligence feature helps iPhone users schedule appointments, write text messages and check the local weather. Arieso said it measured more than 1 million subscribers across a single European network in both urban and rural areas, without identifying the operator.

The strain of data-intensive devices may place additional pressure on mobile operators as they build out faster networks. Verizon Wireless, the largest U.S. carrier, said this week the number of iPhones it sold doubled to 4.2 million in the fourth quarter.

Network Load

AT&T Inc (T), which last year lost the exclusive U.S. rights to the iPhone, has been criticized for dropped calls and network coverage among high-use areas such as New York and San Francisco.

A London-based Apple spokesman said he couldn’t immediately comment. The iPhone 4S, the latest update of Apple’s best- selling product, is Apple’s first major release since the death of Steve Jobs, who helped guide the company’s product design and marketing. While the iPhone is the world’s most popular smartphone, Google Inc. (GOOG)’s Android software is more widely used, showing up in devices from Samsung Electronics Co. and HTC Corp.

The iPhone 4S’ regular connections with Apple’s servers to synchronize applications including music lists may also contribute to the data load, Flanagan said.

Operators have sought to limit their data tariffs to prevent heavy use as subscribers record high-definition video and images and browse the Internet and play music on their phones. Vodafone, the world’s largest mobile-phone operator, has shifted toward consumption-based billing to protect its network capacity.

‘Getting Hungrier’

Arieso’s research showed that a minority of users account for half of downloaded data. About one percent of the high-use subscribers downloaded half of the data volumes, according to the company. “The hungry are getting hungrier,” Flanagan said.

An average user of Research In Motion Ltd. (RIMM)’s latest BlackBerry smartphones, the Curve and the Bold Touch, downloads about 20 percent of the data of an iPhone 4S subscriber, according to Arieso. While RIM compresses data, the company’s traditional business users also use fewer applications beyond e- mail, Flanagan said.

The proliferation of voice command software may accelerate as more manufacturers adopt the technology, Flanagan said. “What makes Apple unique is that they have done it first successfully.”

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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Employment Gains in U.S. Probably Accelerated in December for Second Month

By Timothy R. Homan - Jan 6, 2012 12:01 PM GMT+0700

Hiring in the U.S. probably accelerated in December for a second month, pointing to a strengthening labor market heading into 2012, economists said before a report this week.

Payrolls climbed by 155,000 workers after rising 120,000 the previous month, according to the median forecast of 84 economists surveyed by Bloomberg News. The unemployment rate rose after dropping in November to the lowest level in more than two years, the report may also show.

Sustained payroll gains are needed to chip away at joblessness and support household spending, which accounts for about 70 percent of the world’s largest economy. At the same time, the financial crisis in Europe and political stalemate over ways to pare the U.S. budget deficit may be prompting companies to hold back amid concern the expansion will slow.

“It’s still moderate employment growth at a respectable pace,” said Sean Incremona, a senior economist at 4cast Inc. in New York. “We still do see a lot of uncertainty in the background that will probably be restraining hiring.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Bloomberg survey estimates ranged from increases of 80,000 to 220,000.

The jobless rate climbed to 8.7 percent in December from 8.6 percent the prior month, which was the lowest since March 2009, according to the survey median.

Today’s report will also include benchmark revisions to the household survey, which is used to calculate the monthly unemployment rate. Data for the past five years are under review.

Little Headway

Employers added 1.45 million workers last year through November. The increase shows the economy has made little headway in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.

The projected payroll gain would bring the average for July through December to 136,000, compared with 131,000 in the first six months of the year.

The employment report may also show private employment, which excludes government jobs, climbed 178,000 after a 140,000 gain in November.

“Sales are robust, merchandise margins are strong, operating margins are growing,” Alexander Smith, chief executive officer of Fort Worth, Texas-based Pier 1 Imports Inc. (PIR), said on a Dec. 15 conference call with analysts. “There’s going to be a little more hiring in the first part of the year without a doubt.”

Holiday Spending

Other companies saw increased demand last month during the holiday shopping season. Same-store sales at U.S. retailers excluding Wal-Mart Stores Inc. rose 3.5 percent in December from a year earlier, according to figures yesterday from the International Council of Shopping Centers.

Recent reports showing faster manufacturing, fewer Americans filing jobless claims, less household pessimism and stabilization in housing have helped spur share prices. The Standard & Poor’s 500 Index has gained 7.4 percent since a recent low on Nov. 28.

In the final three months of 2011, “clear signs emerged that U.S. consumers are more confident and that other underpinnings of our economy are either stable or slowly improving,” Don Johnson, vice president of U.S. sales for General Motors Co., said on a Jan. 4 conference call.

Faster job gains than those generated in 2011 may be needed to reduce unemployment. That’s one reason policy makers remain concerned.

“While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated,” Federal Reserve Chairman Ben S. Bernanke and other members of the Federal Open Market Committee said in a statement at the conclusion of a meeting last month in Washington.

Bloomberg Survey

==============================================================
                          Nonfarm  Private     Manu Unemploy
                         Payrolls Payrolls Payrolls     Rate
                           ,000’s   ,000’s   ,000’s        %
==============================================================
Date of Release              01/06    01/06    01/06    01/06
Observation Period            Dec.     Dec.     Dec.     Dec.
--------------------------------------------------------------
Median                         155      178        6     8.7%
Average                        158      177        9     8.7%
High Forecast                  220      230       20     8.8%
Low Forecast                    80      130        5     8.5%
Number of Participants          84       50       16       81
Previous                       120      140        2     8.6%
--------------------------------------------------------------
4CAST Ltd.                     160      175     ---      8.5%
ABN Amro Inc.                  150      170     ---      8.6%
Action Economics               150      170        5     8.7%
Aletti Gestielle               135      155     ---      8.7%
Ameriprise Financial Inc       170      185        5     8.7%
Bank of Tokyo- Mitsubishi      160      180     ---      8.5%
Bantleon Bank AG               140     ---      ---      8.6%
Barclays Capital               140      160     ---      8.6%
Bayerische Landesbank          160     ---      ---      8.6%
BBVA                           155      165     ---      8.6%
BMO Capital Markets            150     ---      ---      8.7%
BNP Paribas                    130     ---      ---      8.6%
BofA Merrill Lynch Research    175      190     ---      8.7%
Briefing.com                   165      200     ---      8.7%
Capital Economics              150     ---      ---      8.7%
CIBC World Markets             135     ---      ---      8.6%
Citi                           150     ---      ---      8.8%
ClearView Economics            130      150        5     8.7%
Commerzbank AG                 160     ---      ---      8.7%
Credit Agricole CIB            150     ---      ---      8.7%
Credit Suisse                  150      170     ---      8.8%
Daiwa Securities America       130      145     ---      8.8%
Danske Bank                    120      130     ---      8.7%
DekaBank                       160     ---      ---      8.7%
Desjardins Group               175     ---      ---      8.8%
Deutsche Bank Securities       155      175     ---      8.6%
Deutsche Postbank AG           150     ---      ---      8.7%
Exane                          150     ---      ---      8.7%
Fact & Opinion Economics       180      200     ---      8.6%
First Trust Advisors           190      225       20     8.6%
FTN Financial                  170      190     ---      ---
Goldman, Sachs & Co.           175     ---      ---      8.7%
Helaba                          80     ---      ---      8.8%
High Frequency Economics       175      150     ---      8.7%
HSBC Markets                   180      200     ---      8.7%
Hugh Johnson Advisors          130      150       10     8.8%
IDEAglobal                     175      190       10     8.6%
IHS Global Insight             150     ---      ---      8.7%
Informa Global Markets         145     ---        15     8.7%
ING Financial Markets          180      190       15     8.7%
Insight Economics              200     ---      ---      8.8%
Intesa-SanPaulo                150     ---      ---      8.7%
J.P. Morgan Chase              185      200        5     8.7%
Janney Montgomery Scott        136      156        5     8.8%
Jefferies & Co.                150      165     ---      8.5%
JH Cohn                        160      175     ---      ---
Landesbank Berlin              125     ---      ---      8.8%
Laurentian Bank Securities     200      220     ---      8.8%
LCA Consultores                170     ---      ---      ---
Maria Fiorini Ramirez          200      225     ---      8.7%
Market Securities              182     ---      ---      8.5%
MET Capital Advisors           140     ---      ---      8.7%
Mizuho Securities              125     ---      ---      8.7%
Moody’s Analytics              160      175        5     8.7%
Morgan Keegan & Co.            153     ---      ---      8.7%
Morgan Stanley & Co.           170     ---      ---      8.6%
National Bank Financial        150     ---      ---      8.7%
Natixis                        200     ---      ---      8.6%
Nomura Securities Intl.        175      190       10     8.6%
Nord/LB                        130      140        5     8.7%
OSK Group/DMG                  155     ---      ---      8.7%
O’Sullivan                     125      145     ---      8.7%
Paragon Research               220     ---      ---      8.8%
Parthenon Group                172     ---      ---      8.7%
Pierpont Securities LLC        135     ---      ---      8.7%
PineBridge Investments         175      195     ---      8.6%
PNC Bank                       200      215     ---      8.7%
Prestige Economics             165      185     ---      8.8%
Raiffeisenbank International   165      190     ---      8.6%
Raymond James                  145      165     ---      8.7%
RBC Capital Markets            120      137     ---      8.8%
RBS Securities Inc.            130     ---      ---      8.7%
Scotia Capital                 180      190     ---      8.7%
SMBC Nikko Securities          200      230     ---      8.8%
Societe Generale               140      160     ---      8.5%
Standard Chartered             210      185     ---      8.7%
State Street Global Markets    179      196       13     8.7%
Stone & McCarthy Research      130      140        6     8.8%
TD Securities                  170      190     ---      8.8%
UBS                            125      150     ---      8.6%
University of Maryland         140      160        5     8.7%
Wells Fargo & Co.              160      180     ---      8.7%
Westpac Banking Co.            150     ---      ---      8.8%
Wrightson ICAP                 170      190     ---      8.7%
==============================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net

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Creator of Hang Seng Stock Index Dies at 86

By Laurence Arnold - Jan 6, 2012 12:17 PM GMT+0700
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Stock dealers place orders in the computerized Hong Kong Stock Exchange on April 2, 1986. Photographer: Dick Fung/AP Photo

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Pedestrians stop at a bank to watch share prices displayed on television as the stock exchange reopened after a four-day suspension in Hong Kong on Oct. 26, 1987. Photographere: Dick Fung/AP Photo

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Stanley Kwan, creator of the Hang Seng Index and author of "The Dragon and the Crown, Hong Kong Memoirs," listens during an interview in Hong Kong, on Nov. 19, 2009. Photographer: Scott Eells/Bloomberg

Stanley Kwan, the banker whose 1969 creation, the Hang Seng Index, became a widely used gauge for the Hong Kong Stock Exchange, has died. He was 86.

He died Dec. 31 at Scarborough Grace Hospital in Toronto, according to the website of Toronto’s R.S. Kane Funeral Home. The cause was heart failure, the Toronto Star reported.

The Hang Seng Index is “the ultimate capitalist measure of Hong Kong,” Robert Nield, president of the Royal Asiatic Society’s Hong Kong branch, wrote in a foreword to Kwan’s 2008 book, “The Dragon and the Crown: Hong Kong Memoirs.”

As a banker at Hang Seng Bank Ltd. (11) from 1962, Kwan saw his creation mirroring the growth pains of Hong Kong, with the index crashing during the 1974 world oil crisis and the 1983 impasse between China and Britain during handover talks, as well as benefiting from the opening up of the mainland. The index’s 48 members now include Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, and PetroChina Co., Asia’s biggest company by market value.

As Kwan told it in his book, the bank’s chairman, Ho Sin Hang, and general manager, Q. W. Lee, decided late in 1969 “that they needed a measure of the performance of the stock market for their own as well as their customers’ reference.” Kwan said Ho spoke of creating the “Dow Jones Industrial Average (INDU) of Hong Kong.”

Setting Base Day

According to the draft notes for a speech Kwan gave in 2009 in Vancouver, the Hong Kong economy had hit “rock bottom” after riots related to the Cultural Revolution swept the city in 1967. He said some within Hang Seng Bank had questioned the plan for the index as it was “only a small Chinese bank.”

Kwan, who headed the bank’s research department, said he led a staff of seven in consulting government and university statisticians and economists.

For the index’s “base day” -- the normal period of trading that other days would be compared with -- Kwan and his group settled on July 31, 1964. The group chose the initial 33 companies that would be the index’s constituent stocks, as well as guidelines for replacing or adding other companies in the future. The Hang Seng Index (HSI) debuted on Nov. 24, 1969.

No Lasting Fame

“In the end, the system worked well,” Kwan wrote. “By the time I retired in 1984, the number of companies listed on the Hong Kong Stock Exchange had increased to over 250, but the number of constituent stocks remained 33, and these companies still accounted for about 75 percent of total market value (based on the average for the last 12 months) and over 70 percent of total market turnover (based on the aggregate for the last 24 months).”

Kwan, who retired to Canada, said in a December 2010 interview with the Toronto Star that his role in history earned him no lasting fame.

“If I walked into the Hang Seng Bank head office today, no one would know me,” he said.

Stanley Shih Kuang Kwan was born on Jan. 10, 1925, in Hong Kong to a banking family, according to the funeral home. A survivor of the Japanese occupation of Hong Kong during World War II, he served as a wartime interpreter for U.S. troops on mainland China before starting his banking career.

Hired by Hang Seng Bank in part because he spoke both English and Chinese, Kwan was made head of research, according to the 2010 Toronto Star profile.

‘Test of Time’

“The index he created has stood the test of time,” said Andrew Sullivan, principal sales trader at Piper Jaffray Asia Securities Ltd. in Hong Kong. “It has given a good indication of the performance of the Hong Kong market in general and with a number of changes implemented over the years still does.”

After Kwan’s retirement, the index climbed to a high of 16,673.27 on Aug. 7, 1997, before the Asian financial crisis sent it tumbling. The government spent HK$118 billion ($15.2 billion) buying shares in the last two weeks of August 1998, supporting the gauge.

The Hang Seng Index also fell to a 4 1/2-year low in April 2003, when the city was swept by an outbreak of the severe acute respiratory disease, an illness brought over by a Chinese visitor, underscoring the city’s increasing ties with the mainland.

The index rose to a record 31,638.22 points on Oct. 30, 2007, a year before Lehman Brothers Holdings Inc.’s collapse and the global banking crisis drove equities down. As of yesterday, the gauge was 41 percent below its peak.

Kwan’s wife, Wing Kin, predeceased him, according to the funeral home. Survivors include their two daughters.

To contact the reporter on this story: Laurence Arnold in Washington at larnold4@bloomberg.net.

To contact the editor responsible for this story: Charles W. Stevens at cstevens@bloomberg.net

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Euro Drops to 15-Month Low Against Dollar Before Consumer Confidence Data

By Candice Zachariahs and Kristine Aquino - Jan 6, 2012 12:30 PM GMT+0700

The euro fell to a 15-month low versus the dollar on speculation declining consumer confidence and spending will make it harder for European leaders to contain the region’s sovereign-debt crisis.

The 17-nation currency was within 0.1 percent of its weakest level in 11 years against the yen as Spain and Italy prepare to sell debt next week after France’s borrowing costs rose at an auction yesterday. The dollar is set for a weekly gain versus the yen and euro before a U.S. report forecast to show employers added the most jobs in three months in December. The Dollar Index reached a one-year high.

“There’s not a huge amount of reasons to be wanting to own the euro at the moment,” said Chris Weston, an institutional trader at IG Markets in Melbourne. “The fundamentals point to a weaker euro.”

Europe’s common currency fell to $1.2764, its lowest level since September 2010, before trading at $1.2775 as of 2:20 p.m. in Tokyo, 0.1 percent below yesterday’s close in New York. The euro was at 98.66 yen from 98.63 yesterday, when it touched 98.48 yen, its weakest since December 2000. The dollar bought 77.23 yen from 77.12 yesterday and 76.91 on Dec. 30.

IntercontinentalExchange Inc.’s Dollar Index (DXY), which tracks the greenback against the currencies of six major U.S. trading partners, climbed as much as 0.2 percent to 81.062, the highest since January 2011.

European Outlook

The euro has dropped 1.5 percent against the dollar since Dec. 30, set for a fifth straight week of declines, the longest stretch since February 2010.

European consumer confidence dropped to the lowest in more than two years in December, economists predict the Brussels- based European Commission will confirm today. An index of household sentiment (EUCCEMU) in the single-currency area fell to minus 21.2 from minus 20.4 in November, according to the median estimate in a Bloomberg News survey before the report. That’s the lowest since August 2009.

Retail sales (RSSAEMUM) in the region dropped 0.4 percent in November following a 0.1 percent advance the previous month, a separate survey shows before the European Union’s statistics office in Luxembourg releases the data. Purchases decreased 0.9 percent from a year earlier, according to the poll.

The euro slid yesterday after France sold 10-year bonds at an average yield of 3.29 percent, compared with 3.18 percent at a sale on Dec. 1. The bid-to-cover ratio, or the number of bids received for each unit of debt sold, fell to 1.64 from 3.05. France’s credit outlook was lowered by Fitch Ratings on Dec. 16.

Spain is scheduled to sell bonds maturing in 2015 and 2016 on Jan. 12. Italy will auction notes the following day.

Merkel, Sarkozy Meeting

German Chancellor Angela Merkel will meet French President Nicolas Sarkozy on Jan. 9 in Berlin to talk about increasing fiscal coordination among euro area states ahead of the European Union leaders’ summit at the end of the month.

Japan’s Finance Minister Jun Azumi said he understands that the weakening of the euro against the yen will have a significant impact on companies that export their goods to the region. He spoke to reporters in Tokyo today.

Japan sold the nation’s currency three times last year as its continued strength threatened to derail an export-driven economic recovery.

The dollar rose against the euro and yen this week before data that may indicate the U.S. added jobs in December, a further sign that the world’s largest economy is recovering.

Dollar Strength

“The news coming from the U.S. has been OK,” said Derek Mumford, a Sydney-based director at Rochford Capital, a currency-risk management firm. “I think we’re seeing just generally some U.S. dollar strength, which is mainly reflected in the euro.”

Companies added 325,000 workers in December, the most in records going back to 2001, according to a private report yesterday from ADP Employer Services.

A government report today will probably show U.S. nonfarm payrolls swelled by 155,000 positions last month, compared with a gain of 120,000 in November, according to a Bloomberg survey. That would be the biggest increase since September. The jobless rate (USURTOT) probably rose to 8.7 percent from 8.6 percent in the same period, a separate poll shows.

The U.S. economy “is certainly still very vulnerable to outside shocks,” Rochford’s Mumford said. “The troubles in Europe won’t be settled in months. There’s no quick fix.”

The U.S. currency is also set to rise versus the majority of its most-traded counterparts this week as Asian stocks declined for a second day, boosting demand for safer assets.

The MSCI Asia Pacific Index (MXAP) slumped 1.4 percent after a 0.9 percent drop yesterday.

To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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Gold Traders Most Bullish in Month After Bear Market Averted: Commodities

By Nicholas Larkin - Jan 6, 2012 1:11 PM GMT+0700
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Gold rallied 4.2 percent in the four days ended Jan. 4, the longest run of gains since October. Photographer: Guenter Schiffmann/Bloomberg

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Jan. 5 (Bloomberg) –- Peter Hickson, a commodities analyst at UBS AG, talks about the outlook for crude oil and gold prices. He speaks from Hong Kong with Caroline Hyde on Bloomberg Television's "First Look." (Source: Bloomberg)

Gold traders are the most bullish in a month as Europe’s deepening debt crisis and increasing tensions over Iran drove the metal to its longest winning streak since October.

Ten of 22 surveyed by Bloomberg expect the metal to gain next week and five were neutral, the highest proportion since Dec. 9. The U.S. Mint sold 45,500 ounces of American Eagle gold coins this month, compared with 65,500 ounces in the whole of December and 41,000 in November, data on its website showed.

Britain and France will press the European Union to stop Iranian crude imports at a Jan. 30 meeting, in response to the country’s nuclear program. Iran is threatening to retaliate by blocking the Strait of Hormuz, a key chokepoint for global oil supplies. Greek Prime Minister Lucas Papademos warned his nation may face economic collapse as soon as March. Investors are holding (.GLDTONS) a near-record amount of gold through exchange-traded products after the metal rose for an 11th consecutive year.

“European sovereign-debt risk and the geopolitical risk of the Iranian situation escalating should support gold,” said Mark O’Byrne, executive director of Dublin-based GoldCore Ltd., a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. “Gold’s safe-haven attributes will continue to be in demand.”

Annual Gain

Bullion rose 10 percent last year, beating the 1.2 percent decline in the Standard & Poor’s GSCI Total Return Index of 24 commodities and the 9.4 percent retreat in the MSCI All-Country World Index of equities. Treasuries returned 9.8 percent last year, a Bank of America Corp. index shows.

The metal, which traded at $1,625.57 an ounce at 6:09 a.m. in London, fell almost 19 percent from its record closing price of $1,900.23 on Sept. 5 through Dec. 29, within 1 percentage point of the common definition of a bear market. Gold rallied 5.1 percent in the past six days, the longest run of gains since August.

Traders also anticipate advances in raw sugar, corn and soybeans next week. Copper may decline, the surveys showed.

Holdings in bullion-backed ETPS reached 2,355.3 metric tons on Jan. 4, within 2 percent of the all-time high set Dec. 13, data compiled by Bloomberg show. The hoard, valued at $121.7 billion, exceeds the reserves of all but four central banks.

Money Managers

Hedge funds and other money managers cut bets (.MMGCNET) on higher prices to 111,919 futures and options in the week ended Dec. 27, the lowest since January 2009, U.S. Commodity Futures Trading Commission data show. The drop preceded the rally in prices. The last time the net-long position was that low, prices climbed about 16 percent in the next four weeks.

The U.S. and its allies are tightening restrictions on Iran, accusing it of a covert plan to build nuclear weapons, a charge Iran’s government denies. About one in six barrels of oil traded worldwide flows through the Strait of Hormuz between Iran and Oman, according to the U.S. Department of Energy.

Brent crude may rally 11 percent to $125 a barrel should the EU ban imports of Iranian oil, according to Societe Generale SA. Some investors buy gold as a hedge against faster inflation, which may quicken if oil prices advance.

Greece’s Papademos is racing to complete a voluntary swap of debt with private bondholders, part of the new rescue plan for the country which also includes 130 billion euros ($167 billion) of public funds. France’s credit outlook was lowered by Fitch Ratings on Dec. 16 on the “heightened risk of contingent liabilities” from the escalating euro-region crisis. Standard & Poor’s is reviewing the ratings of France and Germany.

‘Liquidity Dries Up’

“If the debt crisis blows up it could affect banking liquidity, and if liquidity dries up, all commodities, even gold, will fall,” said Marc Ground, a commodities strategist at Standard Bank Plc in Johannesburg.

A weakening rupee is also driving up prices in India, the biggest consumer, damping demand. Imports may drop 48 percent to 150 tons in the first quarter from a year earlier, Prithviraj Kothari, president of the Bombay Bullion Association, said Jan. 3. Imports fell to 875 tons to 880 tons last year from 958 tons in 2010, he said.

Turkey bought about 41.3 tons of gold for official reserves in November, data from the International Monetary Fund shows. Central banks may buy 600 tons this year, according to Goldman Sachs Group Inc. Combined official holdings stand at 30,744 tons, data from the London-based World Gold Council show.

Buying Gold

The banks were also buying gold in 1980 as prices rose to a then-record $850, only to drop for most of the next 20 years. Bullion tripled from 1999 through the beginning of 2008 as the banks sold more than 4,000 tons. Bullion may reach $2,140 this year, according to 44 analysts, traders and investors surveyed by Bloomberg at the end of 2011.

Nine of 17 traders and analysts surveyed by Bloomberg expect copper to fall next week. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, declined 21 percent last year and was at $7,576.76 a ton.

Raw sugar retreated 27 percent last year and was at 24.19 cents a pound on ICE Futures U.S. in New York. Eleven of 13 people surveyed expect prices to climb next week.

Ten of 20 anticipate higher corn prices, while nine of 21 said soybeans will advance. Corn rose 2.8 percent last year and was at $6.43 a bushel in Chicago. Soybeans were at $12.11 a bushel after sliding 14 percent in 2011.

“We’ve still got significant hurdles to be jumped in the next couple of months,” Peter Hickson, a commodities strategist at UBS AG, said in an interview yesterday on Bloomberg Television’s “First Look.” “Some time toward the end of the first quarter into the second quarter I think people will become more optimistic about the second half of the year.”

Gold survey results: Bullish: 10 Bearish: 7 Hold: 5
Copper survey results: Bullish: 6 Bearish: 9 Hold: 2
Corn survey results: Bullish: 10 Bearish: 5 Hold: 5
Soybean survey results: Bullish: 9 Bearish: 7 Hold: 5
Raw sugar survey results: Bullish: 11 Bearish: 2 Hold: 0
White sugar survey results: Bullish: 10 Bearish: 2 Hold: 1
White sugar premium results: Widen: 4 Narrow: 5 Neutral: 4

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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