Europe Stocks Climb as Greek Lawmakers Said to Agree on Bailout

By Adria Cimino - Feb 9, 2012 8:45 PM GMT+0700

Stocks in Europe (SXXP) rose for the first time in four days as Greece was said to reach a deal on an austerity package and as the European Central Bank held its benchmark interest rate at a record low.

Daimler AG (DAI), the maker of Mercedes-Benz cars, jumped to the highest in six months after reporting a 39 percent increase in quarterly profit. Hugo Boss AG (BOS) climbed as fourth-quarter operating income beat estimates. Credit Suisse Group AG (CSGN) fell 2.4 percent after posting an unexpected loss.

The Stoxx Europe (SXXP) 600 Index advanced 0.5 percent to 264.4 at 1:43 p.m. in London, extending gains after a Greek government official said the prime minister’s office will announce an austerity deal shortly. The benchmark measure has rallied 23 percent from last year’s low and 8.1 percent this year as investors speculated that Greece will accept the spending cuts needed to obtain further aid.

“We’ve seen a bit more confidence creeping into the markets,” Justin Urquhart Stewart, who helps oversee about $3 billion at 7 Investment Management in London, said in a Bloomberg Television interview. “We are seeing shafts of light in the leaden sky coming through in the euro zone.”

ECB (EURR002W) policy makers meeting in Frankfurt left the benchmark interest rate at a record low of 1 percent, as predicted by 55 of 57 economists in a Bloomberg News survey. President Mario Draghi said at a press conference that surveys confirm tentative signs of stabilization in the euro-area economy.

U.K. Asset Purchase

Bank of England officials pumped another 50 billion pounds ($79 billion) into the U.K. economy to protect a nascent recovery from the threat posed by Europe’s debt crisis.The Monetary Policy Committee raised the target for bond purchases to 325 billion pounds, more than a quarter of current outstanding gilts.

Greece’s government is set to announce a deal on austerity measures required for a 130 billion-euro ($173 billion) financing package. An announcement from Prime Minister Lucas Papademos’s office is expected shortly, a government official who declined to be identified said today by telephone.

Greece faces a 14.5 billion-euro bond payment on March 20 and is struggling to obtain financing to avert a collapse of the economy that could spark a new round of contagion in the euro area.

The number of Americans filing first-time claims for unemployment insurance payments unexpectedly declined last week, a report today showed, indicating the labor market recovery is gaining traction.

Earnings Surprises

Of the 112 Stoxx 600 companies that have reported quarterly earnings since Jan. 9, 56 missed analysts’ estimates, compared with 51 that beat projections, according to data compiled by Bloomberg.

“Figures aren’t that bad,” Stewart said. “Companies are honest about write-offs and this is logical.”

Daimler (DAI) jumped 4.9 percent to 46.81 euros, its highest since Aug. 3. The company reported a 39 percent increase in fourth-quarter profit, boosted by demand for the revamped M- Class sport-utility vehicle. Earnings before interest and taxes rose to 2.18 billion euros, exceeding the 2.17 billion-euro average estimate of 12 analysts surveyed by Bloomberg.

A gauge of automakers rose 3.8 percent, for the biggest gain among the 19 industry groups in the Stoxx 600.

Hugo Boss

Preference shares of Hugo Boss rose 1.1 percent to 77.62 euros. The German luxury clothier controlled by buyout firm Permira Advisers said earnings before interest, taxes, depreciation, amortization and one-time items increased to 97 million euros from 77 million euros in the year-earlier period. That beat the 86.4 million-euro average estimate of eight analysts.

Arkema (AKE) rose 5.2 percent to 68.22 euros. The chemical maker was raised to “overweight” from “equal weight” at Morgan Stanley.

KBC Groep NV (KBC) advanced 7.2 percent to 17.90 euros. Belgium’s biggest bank and insurer by market value plans further repayments of state aid this year. KBC said it’s making “considerable progress” with the planned sale of Kredyt Bank SA.

DNB ASA (DNB) rallied 9.7 percent to 70.40 kroner. The Nordic region’s second-largest bank reported a fourth-quarter profit that dropped less than analysts estimated. Net income fell to 4.09 billion kroner from 5.35 billion kroner a year earlier, surpassing the 3.57 billion-krone average estimate of 12 analysts surveyed by Bloomberg.

Declining Costs

Danske Bank A/S (DANSKE) added 4.1 percent to 88.50 kroner. Denmark’s biggest lender reported declining costs relative to income and after it boosted its capital buffer. The bank’s cost- to-income ratio fell to 54.4 percent in the fourth quarter, versus 59.3 percent a year earlier, the bank said.

Credit Suisse declined 2.4 percent to 24.62 Swiss francs. Switzerland’s second-biggest lender said it had a loss in the fourth quarter for the first time since 2008, hurt by “adverse markets” and costs to reorganize the investment bank.

The net loss amounted to 637 million francs ($698 million). That was wider than the 446 million-franc mean profit estimate of nine analysts.

ING Groep NV tumbled 2.6 percent to 7.07 euros. The biggest Dutch financial-services company posted a fourth-quarter profit that missed forecasts after reporting a hedging loss and taking a charge on its U.S. insurance business.

GDF Suez SA (GSZ) lost 4.8 percent to 20.30 euros. The operator of Europe’s biggest natural-gas network reported a 13 percent drop in full-year net profit after mild weather and a regulated rate freeze in France crimped earnings.

Dental Implant

Nobel Biocare Holding AG (NOBN) tumbled 14 percent to 10.79 francs, for the worst performance on the Stoxx 600. The world’s second-biggest dental implant maker reported an increase in fourth-quarter profit as demand improved, driven by North America. Net income rose to 13.3 million euros from 5.2 million euros a year earlier. The earnings missed the average estimate of 18.1 million euros from eight analysts.

Orkla ASA (ORK) retreated 4.5 percent to 45.4 kroner. The Norwegian company that is selling assets to focus on consumer brands reported lower-than-estimated candy and cookie sales at the end of 2011. The company said operating profit at its brands unit fell 4 percent to 876 million kroner ($153 million).

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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BOE Adds 50 Billion Pounds to Stimulus on Euro ‘Concerns’

By Jennifer Ryan and Scott Hamilton - Feb 9, 2012 7:45 PM GMT+0700

Bank of England officials pumped another 50 billion pounds ($79 billion) into the U.K. economy to protect a nascent recovery from the threat posed by Europe’s debt crisis.

The nine-member Monetary Policy Committee raised the target for bond purchases to 325 billion pounds, more than a quarter of current outstanding gilts, according to a statement in London today. The increase was forecast by 34 of 50 economists in a Bloomberg News survey. Fifteen economists forecast a 75 billion- pound increase and one no change. The MPC also held its benchmark interest rate at a record-low 0.5 percent.

The stimulus expansion suggests policy makers remain concerned that Europe’s failure to stem its debt turmoil poses a risk to Britain and may pull inflation below their 2 percent goal. While they noted an improvement in some business surveys last month, they said the growth outlook remains weak and that they had “concerns” about debt in some euro-area nations.

“They’re worried about risks to growth and they remain confident that inflation will fall below their target,” said Philip Rush, an economist at Nomura International Plc in London. “They need to explain why they’re still easing when the general environment seems to have improved so much.”

The pound rose after the announcement, and traded at $1.5867 as of 12:25 p.m. in London, up 0.3 percent from yesterday. Bonds fell, pushing the yield on the 10-year gilt up 3 basis points to 2.209 percent. The yield fell to 1.917 percent on Jan. 18, the lowest since Bloomberg began compiling the data in 1989.

Euro Concerns

“Some recent business surveys have painted a more positive picture and asset prices have risen,” the central bank said. “But the pace of expansion in the U.K.’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries.”

Greek Finance Minister Evangelos Venizelos headed to Brussels today as politicians in Athens try to reach agreement on austerity measures needed to secure a 130 billion-euro ($172 billion) bailout. Failure to agree could mean Greece defaults on a bond payment due in March and sparks contagion across the euro area, which buys almost half of British exports and where U.K. banks are exposed to more than $1 trillion of borrowings.

Chancellor of the Exchequer George Osborne said on Jan. 25 that Britain had “substantial economic problems” and “dealing with those problems is made more difficult by the situation in the euro zone.”

Investors Primed

The central bank will start the bond purchases on Feb. 13 and hold three 1.5 billion-pound auctions a week for three months. It will buy bonds in three maturities -- three to seven years; seven to 15 years; and longer than 15 years.

Policy makers had primed investors to expect another round of quantitative easing after they completed 75 billion pounds of bond purchases this month. King said Jan. 24 the central bank has “scope” to add to stimulus, while Adam Posen said last week there was a case for another 75 billion pounds.

The MPC’s decisions were based on new growth and inflation forecasts, which the central bank will publish on Feb. 15. Its November projections showed inflation slowing to 1.7 percent by the end of 2012. Annual consumer-price gains eased to 4.2 percent in December.

Cautious Companies

Britain’s economy shrank 0.2 percent in the fourth quarter, its first contraction in a year. The National Institute of Economic and Social Research, whose clients include the U.K. Treasury and the Bank of England, said the economy is back in recession and will shrink 0.1 percent this year.

Diageo Plc Chief Executive Officer Paul Walsh said today the London-based distiller is “cautious as to the consumer and economic trends we will face in 2012.” The maker of Guinness stout and Smirnoff vodka has sought to further its expansion outside Europe, where consumers are spending less amid the sovereign-debt crisis.

“A gradual strengthening of output growth later this year should be supported by a gentle recovery in household real incomes as inflation falls, together with the continued stimulus from monetary policy,” the central bank said. “But the drag from tight credit conditions and the fiscal consolidation together present a headwind. The correspondingly weak outlook for near-term output growth means that a significant margin of economic slack is likely to persist.”

Positive Signs

Nevertheless, there are signs the U.K. economy is strengthening. A Feb. 3 survey showed services output grew the most in 10 months in January. Separate gauges last week indicated manufacturing returned to growth and construction continued to expand. Manufacturing production rose more than economists forecast in December, figures published today showed.

In the U.S., the world’s largest economy, the unemployment rate declined to 8.3 percent last month, the lowest since February 2009. Europe’s Stoxx 600 Index had its best January in 14 years and is up about 7.8 percent this year. London’s FTSE 100 Index has gained 5.6 percent since the start of the year.

“We could be nearing the end in terms of quantitative easing,” Peter Dixon, an economist at Commerzbank AG in London, said in a telephone interview. “Markets, at least for the moment, are stabilizing, and if the uncertainty which prevailed in the fourth quarter continues to lift, then I think the case for additional QE becomes more difficult. But to a large extent, it all hinges on the euro zone.”

The European Central Bank held its benchmark rate at 1 percent today, as forecast by 55 of 57 economists in another survey. The other two expected a cut to 0.75 percent. ECB President Mario Draghi will hold a press conference at 2:30 p.m. in Frankfurt.

To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net; Scott Hamilton in London at shamilton8@bloomberg.net

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

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China’s Unexpected Holiday Inflation Pickup May Limit Easing Room: Economy

By Bloomberg News - Feb 9, 2012 5:16 PM GMT+0700

Play Video

Feb. 9 (Bloomberg) -- Andy Xie, former Morgan Stanley chief Asia-Pacific economist, talks about the outlook for China's economy and central bank monetary policy. Xie also discusses Europe's debt crisis. He speaks in Hong Kong with Susan Li, John Dawson, Zeb Eckert and Mia Saini on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Play Video

Feb. 9 (Bloomberg) -- Joy Yang, chief economist for greater China at Mirae Asset Securities (HK) Ltd., talks about China's economy and central bank monetary policy. China’s inflation unexpectedly rebounded in January as a weeklong holiday boosted spending and food-price gains accelerated. Yang speaks with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

China’s inflation unexpectedly accelerated in January on the boost to spending from a weeklong holiday, limiting room for monetary easing as Europe’s debt crisis damps exports and the property market cools.

Consumer prices rose 4.5 percent from a year earlier, the National Bureau of Statistics said on its website today. That was more than all 33 forecasts in a Bloomberg News survey of economists and a median of 4 percent.

Inflation quickening for the first time in six months adds pressure on officials to refrain from any immediate additional cut in banks’ reserve requirements. The government may wait to see data free from holiday distortions as UBS AG predicts price gains may cool to below 4 percent this month and Bank of America Corp. estimates about 3.3 percent.

“This cuts into the room for monetary policy easing for now,” said Yao Wei, a Hong Kong-based economist with Societe Generale AG. “However, inflation should resume its decline in February and beyond.”

The MSCI Asia Pacific Index rose 0.1 percent as of 6:38 p.m. in Tokyo. The benchmark Shanghai Composite Index (SHCOMP) rose less than 0.1 percent.

Separately, Commerce Minister Chen Deming said China’s exports probably declined in January after a slowdown in foreign trade in the second half of last year. The data are due tomorrow, with analysts forecasting a 1.4 percent decline in overseas shipments from a year earlier. Hong Kong’s Hang Seng Index fell as much as 0.4 percent following the comments, which came after the Chinese stock markets closed.

Food Prices

The New Year holiday, which ran from Jan. 22 to Jan. 28, boosts prices and retail sales while curbing trade and industrial production. Food prices gained 10.5 percent from a year earlier, up from 9.1 percent in December, today’s report showed.

January’s prices rose 1.5 percent from December, the biggest month-to-month advance in four years. The timing of this year’s holiday boosted January inflation because price gains accelerated ahead of the holiday, compared with last year’s early-February timing, said Zhang Zhiwei, a Hong Kong-based economist at Nomura Holdings Inc.

China’s rate of inflation will “steadily decline” as the effects of the New Year holiday and other “temporary factors” fade, the National Development and Reform Commission, the country’s top economic-planning agency, said in a statement on its website today. Meat and vegetable prices “surged” last month because of the holiday and bad weather, the commission said.

‘Strong’ Demand

Still, the pickup may be more than just seasonal, said Cui Li, a Hong Kong-based economist at Royal Bank of Scotland Group Plc. A seasonally adjusted index from RBS shows January had the fastest gains since November 2010, indicating that “strong consumer demand” is testing “tight supply conditions,” Cui, a former research official at the Hong Kong Monetary Authority, said in a note today.

Starbucks Inc. and McDonald’s Corp. have raised prices on wage and commodity costs, and officials plan to boost minimum pay rates nationwide by more than 13 percent annually from 2011 to 2015, according to a government plan released this week.

The government raised retail fuel charges yesterday, a move designed to spur production by refiners including China Petroleum & Chemical Corp. and PetroChina Co. (857), which were running losses from refining last year.

Easing Delay

“Monetary easing may hold off for one month as the government awaits signs of normalization of the inflation dynamics distorted by the holiday,” said Ding Shuang, a Hong Kong-based economist with Citigroup Inc. He estimates inflation may cool to 4 percent or lower this month.

Producer-price (CHEFTYOY) inflation eased to 0.7 percent in January from a year earlier after a 1.7 percent increase in December, a separate report from the statistics bureau showed today. That’s the smallest increase since gains resumed in December 2009 after the global financial crisis. Those data, too, may be distorted by the timing of the holiday.

“It’s comforting that PPI is still decelerating which means upstream pressure is coming down,” Wang Tao, a Hong Kong- based economist with UBS, said in a Bloomberg Television interview. She said January’s CPI will probably be the highest in 2012.

The central bank cut lenders’ reserve requirements in December for the first time in three years to boost credit amid moderating overseas sales. The People’s Bank of China this week pledged to ensure loans for first-home buyers as a crackdown on speculation threatens to trigger a slump in the property market.

Machinery Orders

Elsewhere in Asia, Japan’s machinery orders fell at the fastest pace in three months in December, the Cabinet Office said in Tokyo today. Spending may rebound as earthquake reconstruction work kicks in, and today’s report showed companies forecasting a 2.3 percent increase in orders this quarter.

Indonesia’s central bank unexpectedly cut its benchmark interest rate for the first time in three years, to 5.75 percent from 6 percent. Malaysia’s industrial production growth accelerated in December to a 3 percent gain as manufacturing and electricity output increased, the statistics department said today.

In New Zealand, a government report showed the labor market unexpectedly weakened last quarter. Employment rose by 0.1 percent, or 3,000 jobs, from the third quarter, when it gained 0.2 percent, Statistics New Zealand said in Wellington.

Europe Crisis

The Bank of England may pump another 50 billion pounds ($79 billion) into the U.K. economy as he ramps up protection for a nascent recovery from the threat posed by Europe’s debt crisis. The nine-member Monetary Policy Committee will raise the target for bond purchases to 325 billion pounds, more than a quarter of current outstanding gilts, according to 34 of 50 economists in a Bloomberg survey.

The European Central Bank may announce no change in its record-low benchmark interest rate of 1 percent, according to a survey of economists. ECB President Mario Draghi holds a press conference at 2:30 p.m. in Frankfurt.

In the U.S., a Labor Department report may show little change in the number of first-time claims for unemployment benefits. The median estimate in a Bloomberg survey is for 370,000 filings in the week ended Jan. 28, compared with 367,000 the previous week.

China should consider fiscal stimulus if Europe’s crisis sparks a recession there that affects the U.S., Asian Development Bank Managing Director-General Rajat Nag said in Tokyo yesterday.

“Countries, particularly China, have to consider the possibility of coming in with necessary fiscal stimulus if the euro zone crisis becomes more serious and if the effects of that spill over into the U.S.,” he said.

To contact Bloomberg News staff for this story: Li Yanping in Beijing at yli16@bloomberg.net

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

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Monti-Obama Meeting Heralds Italian Push to Win Investor Backing on Debt

By Gregory Viscusi - Feb 9, 2012 7:58 PM GMT+0700

Italian Prime Minister Mario Monti, by combining budget cuts with deregulation, has won praise from French President Nicolas Sarkozy for “spectacular progress” in fighting the debt crisis while racing to stay ahead of domestic critics.

Monti meets with U.S. President Barack Obama today at the start of a two-day visit to New York and Washington to persuade investors that Italy can tame its $2.5 trillion debt. That’s bigger than that of Spain, Portugal, Greece and Ireland combined and about four times larger than Europe’s rescue fund. His success may be vital to reducing Italian borrowing costs and preventing the euro region from breaking up.

“There’s no European more important for Obama to meet right now to understand that European leaders are aware of the problems and are dealing with them,” Philippe Moreau-Defarges, a researcher at Paris-based French Institute of International Affairs. “There’s no European leader right now who understands better how the global economy works.”

Monti, 68, who as a European Union competition commissioner in the 1990s told companies such as Microsoft Corp. what to do, has challenged labor unions on Italy’s rigid firing laws. Since taking over from Silvio Berlusconi in November, he’s also pushed back against Chancellor Angela Merkel and Germany’s insistence on austerity measures as a panacea for the debt crisis.

Winning Praise

At home, Monti’s pushed through 20 billion euros ($26.5 billion) in budget cuts and tax increases while reducing regulations he blames for Italy’s stagnant economy, which expanded at an annual average of 0.4 percent in the decade through 2010 compared with 1.2 percent in the euro area. In Europe, where Berlusconi was once publicly snickered at by Merkel and Sarkozy, Monti has won their praise while working to shift the focus from austerity to growth with the region’s economy poised for a recession.

Monti’s “spectacular progress” in his first 12 weeks in office should serve as an example for other indebted European nations, Sarkozy said on Feb. 6 in Paris after talks with Merkel. Following his White House meeting with Obama, Monti will convene with investors in New York tomorrow to convince them, as he says, that Italy “is no longer the source of euro-zone problems, but part of the solution.”

Aided by the European Central Bank’s unlimited three-year loans to euro-area banks, Italian borrowing costs have plunged since Berlusconi resigned amid a crisis of confidence, sex scandals and criminal trials. The yield on Italy’s 10-year benchmark bond was 5.58 percent at 1:54 p.m. Rome time, almost unchanged from yesterday. When Monti took office Nov. 16 it was 7.37 percent, past the 7 percent level that led Greece, Ireland and Portugal to seek bailouts.

‘The Other Mario’

“The panic has receded,” Ronald Spogli, U.S. ambassador to Italy from 2005 to 2009, said in a phone interview. “It’s been a very positive initial period, but it’s hard to tell if it’s happy circumstances with the arrival of the other Mario,” he said, referring to ECB President Mario Draghi, a Rome native.

To cut Italy’s debt, Monti knows the nation “desperately needs growth,” Spogli said. Monti first sounded the alarm about Europe’s obsession with austerity in comments published before a meeting with Merkel on Jan. 11, when the premier warned cutbacks may trigger anti-European protests in Italy without clear signs of economic progress.

Italy wants to pair Europe’s new “fiscal compact,” which seeks to ensure budget discipline, with a “growth pact,” Monti told the Wall Street Journal in an interview published on Feb. 8. Italy last month submitted a proposal to the EU to give the European Commission more powers to sanction member states that fail to fully open up their markets to competition, a move that will help spur growth, Monti said.

‘Tug of War’

“Italy’s credible commitment to fiscal prudence opens the way for greater emphasis on competition and growth,” Marco Annunziata, a former chief economist at UniCredit SpA who now holds that job at General Electric Co., said in an e-mail. “Monti plays a crucial role in ensuring that the euro-zone approach is a cooperative effort rather than a tug of war.”

Following passage of his austerity bill in December, which overhauled pensions and raised taxes on gasoline and primary residences, Monti’s Cabinet approved legislation on Jan. 20 to boost competition among so-called closed professions such as notaries and pharmacists. A week later, the Cabinet abolished or loosened regulations in a bid to cut red tape and make it easier to do business.

Labor Laws

Monti’s government now faces what may be its toughest task, with Labor Minister Elsa Fornero engaged in talks with unions and executives on easing labor laws. Past efforts to loosen the labor code have led to political violence, including assassinations of economists working on the issue in 2002 and 1999.

Susanna Camusso, head of the CGIL, Italy’s largest union, on Feb. 7 ruled out any increase in job-market flexibility or changes in the labor code’s Article 18, which bans firing without just cause and forces employers to rehire and compensate workers deemed unjustly released. Fornero has pledged to press ahead with the overhaul even without union approval, setting up a possible future showdown.

Monti faces a fair share of critics at home, and time is not on his side. His unelected government of non-politicians is serving out the term of the current legislature, which ends in spring 2013. Monti could be toppled before then as he relies on the political parties in Parliament, which must still approve the competition and deregulation laws to make them permanent.

Critics

“Banks, insurance companies and large companies were all spared by the liberalization decree,” former Interior Minister Roberto Maroni, whose Northern League was part of Berlusconi’s government, said on state-run RAI television on Jan. 24. “We’re open to recognizing good things, but so far haven’t seen any.”

Northern League leader Umberto Bossi has pushed Berlusconi to aid in bringing down Monti. Berlusconi has so far pledged to support his successor.

Monti’s popularity gained last month even after he pushed through the austerity bill. Confidence in Monti climbed five percentage points to 57 percent from the previous monthly survey, Rome-based IPR Marketing said Feb. 1 in a poll for daily Repubblica. Berlusconi’s rating was 22 percent in the last IPR taken on his government in November.

“Monti is one of the things that’s making some of the real euro skeptics question themselves,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in a telephone interview. “He’s become perhaps the most thoughtful leader in Europe.”

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net.

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

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Chinese Official Met With U.S. Diplomats at Consulate Before Taking Leave

By Bloomberg News - Feb 9, 2012 3:48 PM GMT+0700

A deputy mayor who was the protege of one of China’s most powerful leaders went on leave for overwork after meeting U.S. diplomats, fueling speculation of a political shakeup ahead of the country’s leadership transition this year.

Wang Lijun, the deputy mayor of Chongqing, requested a meeting that took place earlier this week at the U.S. consulate in Chengdu, State Department spokeswoman Victoria Nuland told reporters yesterday. Chinese Vice Foreign Minister Cui Tiankai called Wang’s visit a “very isolated case” that was “resolved relatively smoothly.”

Wang, 52, headed Chongqing’s police force from 2009 until last week, overseeing a crackdown on gangs that raised the profile of his patron Bo Xilai, Chongqing’s Communist Party secretary. Wang’s loss of his police portfolio and subsequent leave indicate that China’s leaders have spurned Bo and his development model, which focused on increased state-led social spending, political analyst Li Cheng said in an e-mail.

“The Chongqing model is over,” Li, a senior fellow at the Washington-based Brookings Institution, said in reference to Bo’s strategy, which also included a resurgence of songs and sayings lionizing socialism and Chairman Mao Zedong. “It means a landscape change in Chinese elite politics.”

Potential Candidate

Bo, who sits on China’s 25-member Politburo, had been seen as a potential candidate for membership in the elite Politburo Standing Committee, which now has nine members, according to Li and other analysts. The Communist Party meets later this year to choose the next generation of top leaders.

“It is a real blow for Bo,” Li said.

On Feb. 2, the Chongqing government said Wang had been relieved of his police duties and put in charge of areas including sanitation, athletics and education. Yesterday, after Wang met with U.S. officials, the Chongqing government said in a statement that he was suffering from “immense mental stress and serious physical discomfort,” and had been put on “vacation- style treatment.”

Chinese state media have so far kept quiet about Wang’s meeting at the U.S. consulate. Posts about Wang and discussions of Bo’s political future were widely available on Sina Corp.’s Weibo microblogging service.

Zhou Yongkang

The official Xinhua News Agency published a story today from a Chongqing paper extolling the city’s progress in reducing crime and corruption since 2009, the year Wang became head of the local police, without mentioning him or Bo. Zhou Yongkang, China’s top law official and a member of the Politburo Standing Committee, was in Chongqing yesterday for a legal conference, the Communist Party’s People’s Daily reported.

Nuland said the U.S. does not comment in issues of refugee status or asylum and said the meeting with Wang had been previously scheduled. She said Wang “left the consulate of his own volition.”

Richard Buangan, a spokesman for the American Embassy in Beijing, said in an e-mail today that the U.S. had no further contact with Wang after he left the consulate and has no information on his whereabouts. Canadian Prime Minister Stephen Harper is scheduled to meet Bo in Chongqing on Feb. 11.

Buangan would not comment on what Wang discussed at the meeting or address reports of increased Chinese police presence outside the consulate during Wang’s stay. He said there was never any threat to the Chengdu consulate, the closest U.S. diplomatic post to Chongqing.

Wang’s meeting won’t have any effect on Vice President Xi Jinping’s visit to the U.S. next week, Cui said at a briefing in Beijing today.

Before taking his position in Chongqing, a South Carolina- sized municipality with a population of about 30 million, Wang served as an official in northeastern China’s Liaoning province. Bo, the son of one of the founders of the People’s Republic of China, was governor there in 2001-2004, according to his official biography.

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Chinese Official Met With U.S. Diplomats at Consulate Before Taking Leave

By Bloomberg News - Feb 9, 2012 3:48 PM GMT+0700

A deputy mayor who was the protege of one of China’s most powerful leaders went on leave for overwork after meeting U.S. diplomats, fueling speculation of a political shakeup ahead of the country’s leadership transition this year.

Wang Lijun, the deputy mayor of Chongqing, requested a meeting that took place earlier this week at the U.S. consulate in Chengdu, State Department spokeswoman Victoria Nuland told reporters yesterday. Chinese Vice Foreign Minister Cui Tiankai called Wang’s visit a “very isolated case” that was “resolved relatively smoothly.”

Wang, 52, headed Chongqing’s police force from 2009 until last week, overseeing a crackdown on gangs that raised the profile of his patron Bo Xilai, Chongqing’s Communist Party secretary. Wang’s loss of his police portfolio and subsequent leave indicate that China’s leaders have spurned Bo and his development model, which focused on increased state-led social spending, political analyst Li Cheng said in an e-mail.

“The Chongqing model is over,” Li, a senior fellow at the Washington-based Brookings Institution, said in reference to Bo’s strategy, which also included a resurgence of songs and sayings lionizing socialism and Chairman Mao Zedong. “It means a landscape change in Chinese elite politics.”

Potential Candidate

Bo, who sits on China’s 25-member Politburo, had been seen as a potential candidate for membership in the elite Politburo Standing Committee, which now has nine members, according to Li and other analysts. The Communist Party meets later this year to choose the next generation of top leaders.

“It is a real blow for Bo,” Li said.

On Feb. 2, the Chongqing government said Wang had been relieved of his police duties and put in charge of areas including sanitation, athletics and education. Yesterday, after Wang met with U.S. officials, the Chongqing government said in a statement that he was suffering from “immense mental stress and serious physical discomfort,” and had been put on “vacation- style treatment.”

Chinese state media have so far kept quiet about Wang’s meeting at the U.S. consulate. Posts about Wang and discussions of Bo’s political future were widely available on Sina Corp.’s Weibo microblogging service.

Zhou Yongkang

The official Xinhua News Agency published a story today from a Chongqing paper extolling the city’s progress in reducing crime and corruption since 2009, the year Wang became head of the local police, without mentioning him or Bo. Zhou Yongkang, China’s top law official and a member of the Politburo Standing Committee, was in Chongqing yesterday for a legal conference, the Communist Party’s People’s Daily reported.

Nuland said the U.S. does not comment in issues of refugee status or asylum and said the meeting with Wang had been previously scheduled. She said Wang “left the consulate of his own volition.”

Richard Buangan, a spokesman for the American Embassy in Beijing, said in an e-mail today that the U.S. had no further contact with Wang after he left the consulate and has no information on his whereabouts. Canadian Prime Minister Stephen Harper is scheduled to meet Bo in Chongqing on Feb. 11.

Buangan would not comment on what Wang discussed at the meeting or address reports of increased Chinese police presence outside the consulate during Wang’s stay. He said there was never any threat to the Chengdu consulate, the closest U.S. diplomatic post to Chongqing.

Wang’s meeting won’t have any effect on Vice President Xi Jinping’s visit to the U.S. next week, Cui said at a briefing in Beijing today.

Before taking his position in Chongqing, a South Carolina- sized municipality with a population of about 30 million, Wang served as an official in northeastern China’s Liaoning province. Bo, the son of one of the founders of the People’s Republic of China, was governor there in 2001-2004, according to his official biography.

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Jobless Claims in U.S. Unexpectedly Fall

By Alex Kowalski - Feb 9, 2012 8:40 PM GMT+0700

The number of Americans filing first- time claims for unemployment insurance payments unexpectedly declined last week, indicating the labor market recovery is gaining traction.

Applications for jobless benefits decreased 15,000 in the week ended Feb. 4 to 358,000, Labor Department figures showed today. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg News survey. The four-week moving average, a less-volatile measure of claims, declined to 366,250, the lowest since April 26, 2008.

The easing of dismissals is moving in tandem with a drop in the unemployment rate, which fell in January to a three-year low of 8.3 percent. Job creation also accelerated last month, showing the world’s largest economy is making headway in restoring the 8.3 million jobs lost during the 2007-2009 recession.

“The recent positive momentum over the past two months is being sustained,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York, who projected 360,000 claims. “If we stay within this range, then we should see employment growth pick up.”

Estimates for first-time claims ranged from 355,000 to 385,000 in the Bloomberg survey of 48 economists. The Labor Department initially reported the prior week’s applications at 367,000. A Labor Department official today said there was “nothing unusual” among the state-reported data.

Stock-index futures held gains after the figures. The contract on the Standard & Poor’s 500 Index expiring in March rose 0.1 percent to 1,348.5 at 8:34 a.m. in New York. The yield on the benchmark 10-year Treasury note climbed to 2.04 percent from 1.98 percent late yesterday.

Continuing Claims

The number of people continuing to collect jobless benefits rose by 64,000 in the week ended Jan. 28 to 3.52 million. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 18,650 to 3.5 million in the week ended Jan. 21.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 2.8 percent in the week ended Jan. 28 from 2.7 percent, today’s report showed. Twenty-seven states and territories reported a decrease in claims, while 26 had an increase.

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.

Payroll Growth

Payroll growth is pointing to a firmer labor market in the U.S. Employers added 603,000 workers in the last three months, while the unemployment rate fell by 0.4 percentage point to 8.3 percent. In January, payrolls jumped 243,000, the biggest gain since April.

“The economy is growing stronger,” President Barack Obama said Feb. 3 in Arlington, Virginia, after the employment data were released. “The recovery is speeding up, and we’ve got to do everything in our power to keep it going.”

Obama challenged Congress to extend a 2 percentage-point payroll tax cut set to expire at the end of the month so that lawmakers “do not slow down the recovery.” Failure to prolong the cut could reduce economic growth by 0.4 percentage point in 2012 and contribute to increased unemployment and job loss, according to calculations by Mark Zandi, chief economist at Moody’s Analytics Inc.

Federal Reserve

The Federal Reserve is also concerned that unemployment is too high. January’s jobless rate understates weakness in the U.S. labor market, Fed Chairman Ben S. Bernanke said earlier this week.

“It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke said Feb. 7 in response to questions at a hearing before the Senate Budget Committee. “There are also a lot of people who are either out of the labor force because they don’t think they can find work. We still have a long way to go before the labor market can be said to be operating normally.”

Some companies are still slashing headcounts. Supervalu Inc. (SVU), the owner of Save-A-Lot and Albertsons supermarket chains, said Feb. 7 it will eliminate 800 jobs as part of a plan to trim expenses and lower grocery prices.

To contact the reporter on this story: Alexander Kowalski in Washington at akowalski13@bloomberg.net

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

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U.S. Stock Futures Rise on Greece Report

By Rita Nazareth - Feb 9, 2012 8:50 PM GMT+0700

U.S. stock futures rose, a day after the Standard & Poor’s 500 Index rose to a seven-month high, as Greek politicians reached an austerity deal needed to secure a bailout package and American jobless claims fell.

Visa Inc. (V), the biggest payments network, climbed 3.8 percent as profit soared 16 percent. Akamai Technologies Inc. (AKAM), the operator of a server network that lets businesses speed data delivery, surged 16 percent as sales beat estimates. Groupon Inc., the largest daily-deal site, tumbled 11 percent after reporting an unexpected tax-related loss. DirecTV (DTV) slumped 1.4 percent after Macquarie Group Ltd. cut its recommendation for the biggest U.S. satellite-television provider.

S&P 500 futures expiring in March rose 0.2 percent to 1,349.20 at 8:46 a.m. New York time. Dow Jones Industrial Average futures gained 17 points, or 0.1 percent, to 12,860.

Stock-futures reversed losses as European Central Bank President Mario Draghi said Greek party leaders reached an austerity deal. The ECB left the benchmark interest rate at a record low of 1 percent. U.S. jobless claims unexpectedly declined last week, indicating the labor market recovery is gaining traction.

Equities rose yesterday as the MSCI All-Country World Index gained 20 percent from its October low, meeting the definition of a bull market. The S&P 500 yesterday closed 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The index has risen 7.3 percent this year amid better-than-expected economic data and corporate profits.

Bull Market

As global stocks return to a bull market, the losers in the U.S. are companies least tied to economic growth.

For the first time since 1999, S&P 500 utilities, phone companies and providers of consumer staples posted the only monthly losses, slumping at least 1.5 percent with dividends in January, and continued to lag behind this month. It’s a reversal from 2011, when the three defensive industries returned more than 6.3 percent as investors embraced stocks thought to do well during a slowdown.

“Last year, investors tended to hide in things which are stable, paying reasonable dividends,” said Sudhir Nanda, a money manager and head of the quantitative equity group at T. Rowe Price Group Inc. in Baltimore, which oversees $489.5 billion. “This year, people looked at the U.S. and said, ‘Things are not really that bad.’ If the economy is humming, people tend to buy more of the sectors which will profit from growth, industrials, materials and things like that.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

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Credit Suisse Posts First Loss in Three Years

By Elena Logutenkova and Giles Broom - Feb 9, 2012 4:58 PM GMT+0700

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Feb. 9 (Bloomberg) -- Credit Suisse Group AG Chief Executive Officer Brady Dougan says the company is "off to a good start" in the first quarter after the Swiss bank posted a fourth-quarter loss. Mark Barton reports from Zurich on Bloomberg Television's "Countdown" with Owen Thomas and Linzie Janis. (Source: Bloomberg)

Credit Suisse Group AG (CSGN), the second- biggest Swiss bank, said it had a loss in the fourth quarter for the first time since 2008, hurt by “adverse” markets and costs to reorganize the investment bank.

Credit Suisse fell the most in five weeks in Zurich trading after posting a net loss of 637 million Swiss francs ($698 million), compared with an 841 million-franc profit in the year- earlier period. That missed the 446 million-franc average profit estimate of nine analysts surveyed by Bloomberg.

Credit Suisse Chief Executive Officer Brady Dougan said measures taken to accelerate a revamp of the investment bank hurt earnings in the quarter. Dougan, who lowered the company’s profit target and announced two rounds of job cuts last year, is scaling down the securities division as the European sovereign debt crisis and stricter capital requirements crimp earnings. Pretax profit at the private bank slumped 43 percent with “subdued” client activity in the fourth quarter.

“These were very weak results by any standards,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA who has a “neutral” rating on the stock. “Given the decline in profitability in wealth management, it’s clear there are problems across the board.”

Credit Suisse fell as much as 4.9 percent and was down 2.4 percent to 24.62 francs as of 10.55 a.m. in Zurich, paring this year’s gain to 12 percent. The stock was the second-worst performer today on the 43-company Bloomberg Europe Banks and Financial Services Index, which rose 1.2 percent.

Good Start

Dougan said the bank has made a “good start” to 2012.

“The economic conditions, market conditions so far this year are beginning to increase confidence in our clients, both our corporate clients and our individual clients, throughout our business,” Dougan said in an interview with Bloomberg television in Zurich. “We’ve seen clearly better client activity, better activity in general.”

The company will propose a cash distribution to shareholders of 75 centimes a share for 2011, down from 1.30 francs a share for the previous year, the Zurich-based bank said in a statement today.

Credit Suisse said in November it will cut risk-weighted assets by 110 billion francs, including some 99 billion francs at the investment bank’s fixed-income unit, by the end of 2014. About 80 billion francs of risk-weighted asset reductions were planned for this year. The bank now aims to complete the plan for 2012 by the end of the first quarter.

‘Disappointing’

The acceleration of the risk-reduction plan and charges for job cuts cost the bank 981 million francs in the fourth quarter. The firm announced 3,500 job cuts last year to help it save about 2 billion francs in annual costs by the end of 2013.

Credit Suisse cut its total bonus pool for 2011 by 41 percent to 3 billion francs, including about 500 million francs that will be awarded in bonds linked to derivatives, which were designed to help the bank cut risk-weighted assets and boost its capital position. These bonds will be expensed in the first quarter, when the bank will also see the effect from risk reduction, Dougan said.

“Our performance for the fourth quarter 2011 was disappointing,” Dougan said in the statement. “It reflects both the adverse market conditions during the period and the impact of the measures we have taken to swiftly adapt our business to the evolving market and regulatory requirements.”

Investment Bank Loss

Credit Suisse’s investment bank reported a pretax loss of 1.31 billion francs, its second consecutive quarterly loss, as revenues slumped 64 percent in the fourth quarter. Revenue from debt trading at 36 million francs in the quarter was hurt by 469 million francs in losses related to businesses the bank is exiting and the reduction in risk-weighted assets, it said. The securities unit’s risk-weighted assets were cut by 35 billion francs in the fourth quarter on a Basel III basis. Revenue from the sales and trading of equities dropped 45 percent to 758 million francs.

“We are worried about operational performance, in particular the ongoing investment bank underperformance even in the historically strong equity franchise,” JPMorgan Chase & Co. analysts led by Kian Abouhossein said in a note. “In addition, we see continued structural headwinds on an inflexible cost base considering no profit generation in the investment bank.”

Private Bank

UBS reported two days ago a 76 percent drop in fourth- quarter profit and a 256 million-franc pretax loss at the investment bank as the debt crisis curbed trading. Deutsche Bank AG (DBK), Germany’s biggest bank, recorded a 76 percent slump in quarterly earnings last week as its investment bank posted a 422 million-euro ($560 million) pretax loss.

Dougan, 52, cut Credit Suisse’s profitability goal last February, blaming stricter capital requirements. The bank now aims for a return on equity of more than 15 percent over the next three to five years, down from a previous goal of more than 18 percent. The return on equity in 2011 was 6 percent.

The private bank saw pretax profit drop to 467 million francs in the fourth quarter. The division added 7.6 billion francs in net new money from clients in the quarter. Earnings in asset management slumped 52 percent to 87 million francs, as clients removed a net 9.6 billion francs in the quarter.

Credit Suisse is seeking to boost the private bank’s pretax profit by 800 million francs by 2014 as sluggish client activity squeezes margins. The bank said in November it will integrate its Clariden Leu unit with the rest of the private-banking division to reduce costs.

Tax Probes

The bank plans to expand the business with ultra-high-net- worth individuals and with clients who book assets in their countries of residence. Hans-Ulrich Meister, who has been heading the private bank since August, is also splitting the European wealth-management business into two units to focus on diverging trends in emerging and mature markets.

Credit Suisse agreed in September to pay 150 million euros to settle proceedings in Germany against employees probed for allegedly helping German clients evade taxes. The bank also set aside 295 million francs for U.S. tax matters in the third quarter.

The firm looked at the level of litigation provisions at the end of the year and didn’t see any reason to book additional charges, Chief Financial Officer David Mathers told reporters on a conference call today.

The bank is a target of a criminal investigation by the U.S. Department of Justice over former cross-border private- banking services to American customers, the company said in July. Eight bankers, including Credit Suisse’s former head of North America offshore banking, were charged with conspiring to help American clients evade taxes through secret bank accounts.

Credit Suisse is doing “everything” it can to resolve the U.S. probe, Dougan said in an interview. While it’s “hard to speculate,” he said the cost to Credit Suisse of resolving the issue “could be” higher than the third-quarter provision.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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Europe Stocks, Euro Gain as Greece Reaches Austerity Agreement for Bailout

By Stephen Kirkland and Lynn Thomasson - Feb 9, 2012 9:03 PM GMT+0700
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A financial trader speaks on a telephone as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

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Feb. 9 (Bloomberg) -- Michael Chiu, a fund manager at ING Investment Management Asia, talks about China's stocks and economy. He also discusses Taiwan stocks. He speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

European stocks rose for the first time in four days and the euro strengthened after European Central Bank President Mario Draghi said Greek party leaders reached a deal on budget measures. U.S. index futures gained after jobless claims unexpectedly fell.

The Stoxx Europe 600 Index added 0.5 percent at 8:44 a.m. in New York. Standard & Poor’s 500 Index futures advanced 0.1 percent. The euro appreciated 0.2 percent to $1.3285. The 10- year Treasury yield rose two basis points. The 10-year gilt yield advanced two basis points after the Bank of England said it will expand asset purchases. Commodities extended this year’s longest rally.

The leaders of Greece’s main political parties have reached an agreement on austerity measures needed to secure a second international rescue program, Draghi said at a press conference in Frankfurt. The region’s finance ministers meet in Brussels today.

Two shares advanced for every one that fell in the Stoxx 600. Daimler AG rallied 4.2 percent to a six-month high, leading gains in automakers, as it reported a 39 percent surge in fourth-quarter profit. Credit Suisse Group AG (CSGN) dropped 3 percent as the second-biggest Swiss bank reported a loss in the fourth quarter for the first time since 2008, hurt by “adverse markets” and costs to reorganize the investment bank.

Global stocks entered a bull market yesterday as the MSCI All-Country World Index extended its gain from its October low to 20 percent. Profits beat projections at 49 percent of the 821 companies in the global benchmark that released quarterly results since Jan. 9, according to data compiled by Bloomberg.

Jobless Claims

The S&P 500 advanced for two straight days, reaching the highest level since July 7 yesterday. Applications for jobless benefits decreased 15,000 in the week ended Feb. 4 to 358,000, Labor Department figures showed today. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg News survey.

The S&P GSCI gauge of 24 commodities climbed 0.6 percent. Aluminum rose 1.4 percent and Brent crude advanced 1 percent to $118.35 a barrel, the eighth consecutive gain and the longest advance for the March futures contract since October 2009.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net;

To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net

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Europe Stocks, Euro Gain as Greece Reaches Austerity Agreement for Bailout

By Stephen Kirkland and Lynn Thomasson - Feb 9, 2012 9:03 PM GMT+0700
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A financial trader speaks on a telephone as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

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Feb. 9 (Bloomberg) -- Michael Chiu, a fund manager at ING Investment Management Asia, talks about China's stocks and economy. He also discusses Taiwan stocks. He speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

European stocks rose for the first time in four days and the euro strengthened after European Central Bank President Mario Draghi said Greek party leaders reached a deal on budget measures. U.S. index futures gained after jobless claims unexpectedly fell.

The Stoxx Europe 600 Index added 0.5 percent at 8:44 a.m. in New York. Standard & Poor’s 500 Index futures advanced 0.1 percent. The euro appreciated 0.2 percent to $1.3285. The 10- year Treasury yield rose two basis points. The 10-year gilt yield advanced two basis points after the Bank of England said it will expand asset purchases. Commodities extended this year’s longest rally.

The leaders of Greece’s main political parties have reached an agreement on austerity measures needed to secure a second international rescue program, Draghi said at a press conference in Frankfurt. The region’s finance ministers meet in Brussels today.

Two shares advanced for every one that fell in the Stoxx 600. Daimler AG rallied 4.2 percent to a six-month high, leading gains in automakers, as it reported a 39 percent surge in fourth-quarter profit. Credit Suisse Group AG (CSGN) dropped 3 percent as the second-biggest Swiss bank reported a loss in the fourth quarter for the first time since 2008, hurt by “adverse markets” and costs to reorganize the investment bank.

Global stocks entered a bull market yesterday as the MSCI All-Country World Index extended its gain from its October low to 20 percent. Profits beat projections at 49 percent of the 821 companies in the global benchmark that released quarterly results since Jan. 9, according to data compiled by Bloomberg.

Jobless Claims

The S&P 500 advanced for two straight days, reaching the highest level since July 7 yesterday. Applications for jobless benefits decreased 15,000 in the week ended Feb. 4 to 358,000, Labor Department figures showed today. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg News survey.

The S&P GSCI gauge of 24 commodities climbed 0.6 percent. Aluminum rose 1.4 percent and Brent crude advanced 1 percent to $118.35 a barrel, the eighth consecutive gain and the longest advance for the March futures contract since October 2009.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net;

To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net

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Greek Talks Stuck as Euro Ministers Meet

By Eleni Chrepa and Tom Stoukas - Feb 9, 2012 7:08 PM GMT+0700
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Greece's Finance Minister Evangelos Venizelos speaks during a press conferense in Athens, Greece, on Jan. 31, 2012. Photographer: Aris Messinis/AFP/Getty Images

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Feb. 9 (Bloomberg) -- Wolfgang Munchau, president and co-founder of Eurointelligence, talks about the Greek debt negotiations, where talks have stalled over the issue of pension cuts and officials from the European Union and the International Monetary Fund have given Greece 15 more days to identify measures totaling 300 million euros. Munchau speaks from Brussels with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

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Feb. 9 (Bloomberg) -- Ira Jersey, an interest-rate strategist at Credit Suisse in New York, talks about the Greek debt crisis and the European Central Bank and Bank of England monetary policies. Jersey speaks with Sara Eisen on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Greek Finance Minister Evangelos Venizelos headed to Brussels today as politicians in Athens narrowed their differences to the single issue of pension cuts needed to secure a 130 billion euro ($172 billion) bailout.

Talks stumbled over pensions as European Union spokesman Amadeu Altafaj said he couldn’t confirm reports the EU gave Greece 15 more days to identify measures totaling 300 million euros. “No one seems to be aware of such an extension,” he told reporters today in Brussels before today’s emergency finance ministers’ meeting starting at 6 p.m.

“There are issues outstanding that must be resolved,” Venizelos told reporters in Athens today after a meeting with Prime Minister Lucas Papademos and EU and International Monetary Fund officials that ended just before 6 a.m. “As the prime minister said, there is agreement on all the issues bar one.”

The latest hitch came after six days of talks as the political parties battled to complete a package that’s been on the table since July. Greece faces a 14.5 billion-euro bond payment on March 20 and is struggling to secure financing to avert a collapse of the economy that could spark a new round of contagion in the euro area.

European stocks rose for the first time in four days as the Stoxx Europe 600 Index added 0.1 percent at 12:52 p.m. in Berlin. The euro was down 0.1 percent to $1.3251.

Defusing ‘Greek Issue’

“Some key pieces are falling into place,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note today. “Barring any last minute hitch, Europe may soon have defused the Greek issue for a while.”

A Greek deal would reinforce the reduction of contagion risks as investors discriminate between “small countries with serious problems (Greece, Portugal) and much bigger countries with smaller problems (Italy, Spain),” Schmieding said.

Greece’s unemployment rate in November rose to 20.9 percent from 18.2 percent in the previous month, according to an e- mailed statement from the Athens-based Hellenic Statistical Authority today.

Vodafone Group Plc (VOD), the world’s biggest mobile-phone company, is moving cash from Greece into the U.K. “every evening,” mirroring efforts by others companies such as GlaxoSmithKline Plc (SAN) and WPP Plc (WPP) to hedge against the European debt crisis, Chief Financial Officer Andy Halford said on a conference call today.

Agreement

Papademos and the leaders of the three parties supporting the government “agreed on all the points of the program with the exception of one which requires further elaboration and discussion” with the lenders, according to an e-mailed statement from the premier’s office in Athens. “This discussion will occur immediately so that it can be completed in light of the meeting of euro area finance ministers” today.

With Greek leaders not planning any major appearances today, discussions over Greece’s fate will shift to Brussels and Frankfurt. In the Belgian capital, ministers must decide whether Greece has already done enough for governments to give a green light to a bailout package needed to stave off an economic collapse. Venizelos said he hoped they would take a “positive decision.”

In Germany, European Central Bank President Mario Draghi will be grilled on the ECB’s role in any new bailout at a press conference after its monthly interest rate decision. Draghi meets reporters at 2:30 p.m. local time.

Not Much Time

Greece doesn’t have much time left to arrange financing for its bond payment and avoid “outright default,” said Thomas Mayer, chief economist at Deutsche Bank AG.

“If they don’t have the money in the account at the time the payment is due, then they really default,” Mayer said yesterday in a radio interview on “Bloomberg -- The First Word” with Ken Prewitt. “Time is of the essence. I think we have maybe one, maybe two, maybe three more days but that’s it.”

A Greek decision has hung in the balance for almost a week as lenders demand officials sign on to measures ranging from a reduction in the minimum wage and lower pensions, to immediate job cuts for as many as 15,000 state employees.

A government official, who declined to be identified, said Antonis Samaras of the New Democracy party, Pasok party leader George Papandreou and George Karatzaferis of the Laos party all submitted alternative proposals to avoid pension cuts.

Pension Cut Alternatives

The leaders have effectively agreed on all the issues except for that of cuts to pensions, Panos Beglitis, a spokesman for the Pasok socialist party, told reporters after the meeting. He said his party was opposed to cuts in main pensions and that talks revolved around finding alternatives to make up for a 300- million euro shortfall.

The tussle in Athens threatens to hold up a vital element of the plan: a debt swap that will slice 100 billion euros off more than 200 billion euros of privately-held debt. The rescue blueprint includes a loss of more than 70 percent for bondholders in the voluntary debt exchange as well as loans that will probably exceed the 130 billion euros now on the table.

A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due. Parliament may be called to vote on the terms of the writedown on Feb. 12, state-run Athens News Agency reported on Feb. 7, without saying how it got the information.

‘Last Minute Deal’

“History tells us that a deal in Greece will be reached at the last minute,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “A lot of indications show they are heading in that direction even though there are endless delays.”

Karatzaferis, the head of Laos, the smallest of the parties supporting Papademos, may yet hold up an agreement even if the pension issue is resolved. He said he wanted assurances that the measures were legal.

Karatzaferis “expressed serious reservations,” the premier’s office said in its statement after the meeting.

Private creditors plan to meet in Paris today to discuss the deal, which is contingent on the country agreeing to the aid package from European and international officials.

The Institute of International Finance is holding the meeting to go over technical matters so that if an accord between Greece and the troika is reached, the debt swap could be implemented quickly, said two people familiar with the matter who declined to be identified because talks are private.

April Elections

While the prime minister and party chiefs have agreed to make further cuts this year equal to 1.5 percent of gross domestic product, political leaders are worried about the effect on voters of further cuts in wages and pensions ahead of elections due as early as April. Unions, which went on strike this week, have derided the conditions as “blackmail.”

“During these difficult times, we must look at ordinary people, at the pensioner,” New Democracy’s Samaras said. “I don’t have the right not to do it, I don’t have the right not to negotiate hard.”

Greece will pledge permanent spending cuts, including lower pension payments and a 20 percent reduction in the minimum wage, as the economy contracts this year at a faster pace than originally estimated, according to the draft of the agreement discussed at the meeting with party heads, and obtained by Bloomberg News.

Deepen Recession

The troika argues such moves are needed to boost competitiveness. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.

Guarantees from leaders such as Samaras, who is ahead in opinion polls, are key to securing the funds. International lenders want assurances that whoever wins the next election will stick to pledges made now to receive financing.

Samaras’s party has 31 percent support from voters, according to a Public Issue poll published yesterday, compared with 8 percent for the socialist Pasok party, the biggest in the current parliament. The survey of 1,002 Greeks showed a growing number want elections immediately, and waning support both for Papademos and the parties that back him.

Greece’s private-sector union GSEE has called a 48-hour strike on Feb. 10-11, according to an e-mailed statement, sent from the Athens-based union today. ADEDY, the public-sector union, is also participating in the 48-hour strike, union spokeswoman Despina Spanou said by telephone.

To contact the reporters on this story: Eleni Chrepa in Athens at echrepa@bloomberg.net; Tom Stoukas in Athens at astoukas@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Stephen Foxwell at sfoxwell@bloomberg.net

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Facebook’s Saverin Agreed to Sell Stock to Digital Sky Technologies in ’10

By Brian Womack and Ari Levy - Feb 9, 2012 8:26 AM GMT+0700

Eduardo Saverin, the co-founder of Facebook Inc. and former Harvard University classmate of Mark Zuckerberg, agreed to sell some of his stock to Digital Sky Technologies in 2010, according to a new regulatory filing.

Facebook (FB) included an attachment in its updated prospectus today, saying that Digital Sky and the former Facebook executive entered into the so-called Saverin Agreement, which involved the transfer of shares. Digital Sky and a related party owned 8.2 percent of Facebook’s outstanding stock on Feb. 19, 2010.

Facebook, the world’s most popular social-networking service, filed to go public last week, seeking to raise $5 billion in the largest Internet IPO on record. Saverin, played by Andrew Garfield in the Oscar-winning film “The Social Network,” owned about 5 percent of Facebook, according to “The Facebook Effect,” which was published in 2010.

The company is considering a valuation of $75 billion to $100 billion in its IPO, people with knowledge of the matter said last month. Facebook said in its original prospectus last week that Digital Sky affiliates own 5.4 percent of the outstanding shares, signaling that the Russian-based investment firm may have reduced its stake since 2010. Digital Sky has funded a variety of Internet companies in the past two years, including Groupon Inc., Spotify Ltd. and Zynga Inc.

Facebook also disclosed that Zuckerberg paid $100 to stockholders to cede their voting rights. The shareholders that made agreements with Zuckerberg included Digital Sky, Elevation Partners and Greylock Partners.

“This agreement is being entered into in exchange for a payment of U.S. $100 in cash,” Menlo Park, California-based Facebook said in the filing.

To contact the reporters on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Apple Flourishes in Spain Where Pain Rages From European Debt Crisis: Tech

By Manuel Baigorri - Feb 9, 2012 6:01 AM GMT+0700

As Spain enters its second recession in as many years, Apple Inc. (AAPL) is flourishing.

Renovation on a 19th-century, seven-floor building with more than 6,000 square meters (64,600 square feet) of floor space on Madrid’s central Puerta del Sol square is under way to house Apple’s new Spanish flagship store, according to the city mayor’s office. Apple is in talks with the building’s owner to use three floors as an outlet, said a person with knowledge of the matter, asking not to be named because the discussions are confidential.

The lure of Apple’s products and retail stores helped the world’s largest technology company by market value win consumers even in markets where spending power is declining. With almost half of young people out of work and 18 months of falling retail sales, Apple sold more than 800,000 iPhones in Spain in the first nine months of 2011, up 60 percent from a year earlier, according to researcher Gartner Inc.

“The Apple evangelists will buy these products, with or without an economic crisis,” said Victor Conde, a marketing professor at Universidad Nebrija in Madrid. “They may get by without dining out much or going to the theater for a play as long as they’re able to have the latest iPhone.”

Apple’s Spanish expansion is catching up with other European markets. Its current five stores in Spain compare with /italy/">Italy, and eight in Germany.

European Push

Apple, based in Cupertino, California, is planning a flagship store in Amsterdam, said Tanya Ridd, a London-based spokeswoman. It’s also considering its first flagship in Berlin, said two people with knowledge of the matter. Ridd declined to comment on Apple’s German plans.

Underlining its intent to boost sales in markets outside the U.S., Apple on Jan. 31 appointed 48-year-old John Browett from the largest U.K. consumer-electronics retailer, Dixons Retail Plc (DXNS), to lead its 361-store business.

As chief executive officer of Dixons, which is similar to U.S. retailer Best Buy Co., Browett forged a close relationship with Apple, including striking a deal to be able to sell the iPad ahead of rival electronics retailers in the U.K. He also implemented store formats and added service areas similar to the Genius Bar at Apple stores to provide technical support and help with repairs and upgrades.

Out of Apple’s 40 new locations this year, 30 will be abroad, the company said in October. The location of its flagship stores in the best retail spots is critical to their success, said Alfredo Arahuetes, dean of Comillas Pontifical University’s business school in Madrid.

‘Trend-Setter’

“They open stores in landmarks because they want to improve their visibility and access for customers,” Arahuetes said. “That type of store in Madrid will allow Apple to strengthen its position as a trend-setter.”

The downtown building, nicknamed Tio Pepe after a brand of sherry that has for decades advertised on top of the structure, is being developed for use by Apple, according to a Dec. 29 statement by the Madrid mayor’s office.

The office has to give permission for the renovation because the construction is a historic building in the downtown area, said Maria Antonia Landero, a spokeswoman for the office.

After the basic renovation, scheduled to finish in April, work on the interior design will start and Apple and the building’s owner, real estate company Ana Maria Sol SL, are in talks about the details, said the person with knowledge of the matter.

Apple spokesman Paco Lara declined to comment on the company’s plans in Spain, saying “it’s logical to think there will be store openings this year as we had two openings in 2010 and three last year.” Ana Maria Sol also declined to comment.

Buzzing Store

“I’m very excited about the possibility of having an Apple store in the downtown area,” Ignacio Galaso, a 26-year-old intern at Gas Natural SDG SA, said at the Apple outlet in the Parquesur shopping mall 15 kilometers (9.3 miles) south of city center, where he spent 90 euros ($118) on an AirPort Express to strengthen wireless signals at home. “I haven’t bought the new iPhone yet. If I had 600 euros, I would buy it right away.

The Apple store inside the Parquesur shopping mall was buzzing with people on Jan. 31 while the local Burger King and Zara clothing store were almost empty. Roberto Martinez, a 38- year-old interior designer looking for a device to charge his iPhone in his BMW 5-Series car, said he doesn’t like visiting a mall on the city’s outskirts.

“Even as I live close to this shopping mall, it would be better to have one closer to Madrid’s downtown,” he said.

Too Expensive

Apple opened its first Spanish outlet in Barcelona, in the La Maquinista shopping mall, on Sept. 4, 2010. The same month, Spain’s Aaa credit rating was cut by Moody’s Investors Service and the country’s workers disrupted transport and television broadcasts in the first general strike in eight years to protest cuts in government spending.

Apple’s new store might struggle as the “economy in Spain is certainly not ideal,” said Carolina Milanesi, a research vice president at Stamford, Connecticut-based Gartner. “It’s not a question of getting revenue from the store from day one. But Apple always invests in stores for the long term.”

Spain fell back into a recession in the last quarter of 2011, its second since the end of 2009, and may contract 1.5 percent this year as the government accelerates spending cuts, the Bank of Spain estimates. Spain’s unemployment rate rose to 22.9 percent, the highest in 15 years, in the fourth quarter from 21.5 percent in the previous three months.

Jonathan Munoz, a 22-year-old engineering student, is an example of why Apple’s investments in Spain may take time to pay off. Speaking from his iPhone, he said he might sell his iPad as the 260 euros a month he earns by selling pizza three hours a day isn’t enough to pay for his tuition and transport expenses.

“I would love to buy even more Apple products if they were less expensive,” he said. “But I doubt that will be the case in the future.”

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

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

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