China Telecom to Become Nation’s Second Carrier to Offer Apple’s IPhone

By Bloomberg News - Feb 21, 2012 3:59 PM GMT+0700

China Telecom Corp. (728) will become the nation’s second wireless operator to offer Apple Inc. (AAPL)’s iPhone 4S, two months after “staggering” demand prompted the U.S. company to suspend sales at its own stores.

From March 9, users who commit to a two-year contract can get a free 16-gigabyte handset with a service plan costing 389 yuan ($62) a month, the state-owned parent of China Telecom, the nation’s third-largest wireless carrier, said in a statement today. A three-year plan cuts the monthly minimum to 289 yuan. China Telecom shares rose the most in six months.

For Apple, adding China Telecom as a distributor in the world’s largest mobile-phone market almost doubles the number of potential iPhone buyers who can get a subsidized handset from a service operator. That may alleviate some of the supply bottleneck that led to Apple’s main Beijing store being pelted with eggs when it didn’t open for the first day of iPhone 4S sales in January.

“This is definitely going to give a plus to Apple shipments,” said Sandy Shen, a Shanghai-based analyst at research company Gartner Inc. “On the other hand, China Telecom is still the country’s smallest mobile operator, so the extent to which it can help Apple may be limited.”

China Telecom shares gained 4.1 percent to close at HK$4.60 in Hong Kong trading, the largest gain since Aug. 25.

China Unicom

China Unicom (Hong Kong) Ltd. (762), the nation’s first carrier to offer the iPhone with a service contract in October 2009, began selling the 4S in January. China Unicom had 43 million subscribers to its high-speed, third-generation network at the end of January. China Telecom had 38.7 million 3G subscribers at the end of last month.

Apple was the fifth-largest smartphone vendor in China in the fourth quarter, with shipments of 2.08 million handsets, or 7.5 percent of the total, according to Gartner data. Samsung Electronics Co. was the market leader with 24 percent, followed by Nokia Oyj (NOK1V), Huawei Technologies Co. and ZTE Corp. (000063), according to Gartner.

China Telecom will make an “appropriate increase in marketing initiatives” in connection with iPhone sales, the company said in a filing to the Hong Kong stock exchange today. Expenses to market the phone will mean “short-term pressure on its profitability,” it said, without providing figures.

Earnings Estimates

“The iPhone will be positive for China Telecom’s subscriber growth, but it will be negative for earnings growth in the first year,” Lisa Soh, a Hong Kong-based analyst at Macquarie Group Ltd., said in a phone interview today. “Earnings estimates will have to come down because of higher subsidies for the iPhone.”

Soh said she hadn’t updated her earnings estimates yet to account for iPhone sales. China Telecom’s earnings growth could be cut roughly in half to about 5 percent, said Jim Tang, an analyst at Shenyin Wanguo Securities Co. in Shanghai. Higher iPhone subsidies will force the company to cut subsidies for cheaper models that have been the main driver of user growth, Tang said.

Cupertino, California-based Apple had underestimated the “staggering” demand for the iPhone 4S when it started sales in China, Chief Executive Officer Tim Cook said last month.

“We thought we were betting bold,” Cook said on a Jan. 24 conference call. “We didn’t bet high enough.”

Pelted With Eggs

Apple’s oldest store in China was pelted with eggs from a crowd of customers on Jan. 13 when the shop, in Beijing’s Sanlitun district, failed to open on the first day of sales for the iPhone 4S. After police sealed off the area to remove more than 500 people, Apple said it would suspend sales of iPhones at all its stores.

IPhones are available in China through Apple’s online store, resellers and China Unicom.

“IPhone 4S has been an incredible hit with customers around the world,” Carolyn Wu, a Beijing-based spokeswoman for Apple, said by phone. The company “can’t wait to get it into the hands of even more customers in China,” she said.

China Mobile Ltd. (941), the world’s largest carrier by customers, is now the only Chinese wireless company not offering the iPhone with a service contract. The iPhone doesn’t support the provider’s third-generation network, based on a China- developed technology.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

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

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S&P 500 Rises Above Highest Close Since 2008 as Greece Wins Second Bailout

By Stephen Kirkland and Lynn Thomasson - Feb 21, 2012 9:35 PM GMT+0700

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Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde and European Union Economic and Monetary Affairs Commissioner Olli Rehn talk about the second bailout program for Greece, which received 130 billion euros ($173 billion) in additional aid. This report also contains comments from Luxembourg Prime Minister and Eurogroup Chairman Jean-Claude Juncker, French Finance Minister Francois Baroin and Belgian Finance Minister Steven Vanackere. (Source: Bloomberg/Europe by Satellite)

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Feb. 21 (Bloomberg) -- Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. David Tweed reports from Brussels on Bloomberg Television's "Countdown" with Linzie Janis and Owen Thomas. (Source: Bloomberg)

U.S. equities rose, sending the Standard & Poor’s 500 Index (SPX) above its highest close since 2008, after Greece won a second bailout. European stocks declined from a six-month high and the euro weakened against the dollar amid concern that the region’s debt crisis will persist.

The Standard & Poor’s 500 Index futures 0.3 percent to 1,364.85 at 9:33 a.m. in New York after U.S. markets were closed yesterday for a holiday. The Stoxx Europe 600 Index lost 0.6 percent. The euro was little changed at $1.3245, reversing a 0.4 percent advance. Spanish bonds rose as the government met its maximum target at a bill auction. The 10-year U.S. Treasury yield jumped four basis points to 2.04 percent. Copper increased and oil traded near a nine-month high.

European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicated.

“You can’t really go out and say that we’ve solved the whole euro-zone debt crisis and this won’t come back to bother us again,” Manpreet Gill, a senior investment strategist at Standard Chartered Plc, said in a Bloomberg Television interview from Singapore. “These issues will still simmer over time.”

Five shares fell for every one that advanced in the Stoxx 600. Segro Plc, the U.K.’s largest publicly traded owner of industrial properties, sank 2.6 percent after saying net asset value declined 9.8 percent.

Highest Since April

The S&P 500 climbed to the highest level since April on Feb. 17. The two-year Treasury yield was little changed at 0.30 percent before the government sells $35 billion of the securities, the first of three auctions this week totaling $99 billion.

Home Depot Inc. rose after the world’s largest home- improvement retailer reported fourth-quarter profit that exceeded analysts’ estimates as warmer weather helped spur an increase in spending. Wal-Mart Stores Inc. slipped after the biggest retailer reported quarterly earnings that trailed analysts’ estimates as an emphasis on low prices hurt margins.

The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, fell 0.3 percent. The Australian dollar weakened against its 16 major counterparts, losing 0.7 percent versus the U.S. currency, after minutes of the nation’s most-recent central bank policy meeting showed there is scope for monetary easing.

Spanish Bonds

The yield on the Spanish two-year note declined four basis points to 2.78 percent as the government sold 2.5 billion euros of three- and six-month bills. The yield on the 10-year Italian bond dropped five basis points, driving the extra yield investors demand to hold the securities instead of bunds four basis points lower.

Copper advanced 2.7 percent to $3.8180 a pound in New York. Gold climbed 1.2 percent to $1,746.70 an ounce and silver advanced 1.8 percent.

The MSCI Emerging Markets Index (MXEF) lost 0.3 percent. Russia’s Micex Index (MICEX) slid 1.2 percent as Ural crude. The Turkish lira slipped 0.5 percent after the central bank cut its highest lending rates. India’s Sensex (SENSEX) rose 0.8 percent after trading resumed following yesterday’s holiday.

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: Mark Gilbert at magilbert@bloomberg.net

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Greek Rescue Leaves Europe Default Risk Alive

By Simon Kennedy and James G. Neuger - Feb 21, 2012 7:51 PM GMT+0700

Europe is still struggling to avoid the threat of default as investors warned Greece will soon risk violating the terms of its second bailout in three years.

Seven months of negotiations ended in the pre-dawn hours in Brussels with Greece winning 130 billion euros ($172 billion) in aid it needs to avoid a March bankruptcy. Any respite may prove temporary after it signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.

Even with investors and central bankers chipping in to relieve the debt burden, economists from Citigroup Inc. to Commerzbank AG concluded Greece may again fail to deliver amid a fifth year of recession, looming elections and social unrest. The upshot could be the removal of aid and renewed debate over the merits of fresh assistance before year-end as policy makers shift toward doing more to inoculate the rest of Europe from contagion.

“The bailout bandage is on, but it won’t take much to unravel,” said David Miller, partner at Cheviot Asset Management in London. “The euro zone has done its best to ensure that Greece will deliver on promises, but there is considerable scope for backtracking on deficit reduction.”

Financial markets signaled doubt the accord will fix Greece’s travails permanently or spell an end to the two-year debt crisis. The euro surrendered initial gains against the dollar and European stocks fell from a six-month high.

Bankruptcy Risks

By supporting Greece, Europe’s high command chose the financial and political cost of awarding fresh money over the risk of a bankruptcy that could splinter the 13-year-old euro area. At least 386 billion euros has now been committed to save Greece, Ireland and Portugal with investors predicting the government in Lisbon at least will need more support.

To tackle future fiscal emergencies and limit contagion, officials held out the prospect of boosting their firewall to 750 billion euros from a planned limit of 500 billion euros when a permanent aid fund is paired with the temporary facility starting in July. They also cajoled investors into providing more debt relief in an exchange meant to tide Greece past a March bond repayment.

In return for the new cash, Greece signed up to cuts in pensions, the minimum wage, health-care and defense spending, as well as layoffs of state employees and asset sales. It must implement that austerity with unemployment already topping 20 percent, meaning more retrenchment might end up only compounding the debt stress.

Dangers ‘Substantial’

“The danger of Greece saving itself into economic depression and having to default and exit the common currency zone remains substantial,” said Christian Schulz, an economist at Berenberg Bank in London. Jennifer McKeown of Capital Economics Ltd. repeated her forecast that Greece will quit the euro by the end of the year.

The odds that Greece will remain encumbered by debt were exposed by an analysis by European Union and International Monetary Fund experts that highlights what could go wrong with a country unable to grow out of its fiscal travails by devaluing its currency. In a worst-case scenario, the debt may rebound to 160 percent of GDP by 2020 rather than nearing the 120 percent the IMF deems “sustainable.”

“Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,” said the report by the so-called troika, which also includes the European Central Bank.

‘Fully Fledged’ Default

The study exposes the difficulties Greece faces in delivering its promises amid a crisis-torn economy, said Guillaume Menuet, an economist at Citigroup in London. The country may miss its deficit goals as soon as June and have to prepare for a “fully fledged, coordinated default” by year- end, he said.

Joerg Kraemer, chief economist at Commerzbank in Frankfurt, calculates the debt ratio will rise to 127 percent if annual growth is 0.5 percentage points lower than assumed.

“Greece will find it difficult to shoulder even the reduced debt in the long run if it does not implement far- reaching reforms,” said Kraemer. “For the second half of the year, there is a significant probability that a frustrated EU stops payments to Greece.”

If 2010’s 110 billion-euro bailout is anything to go by, Greece will struggle to reach its targets. Privatizations supposed to reach 19 billion euros by 2015 have so far yielded about a tenth of that amount and Barclays Capital estimates that, even with promised fiscal cuts, just 16,000 state jobs were shed in the three years through the third quarter of 2011 compared with 466,000 in the private sector.

Outside Scrutiny

In a bid to prevent renewed failure even if it means eroding Greek sovereignty, European governments will tighten their scrutiny. A special account will be established that gives priority to keeping Greece solvent before releasing money for the country’s budget. A European Commission task force will also be embedded in Athens.

The biggest near-term risk may be elections which could be held as soon as April. In a poll released today, nearly every Greek questioned by GPO for Mega TV said the budget measures promised by the current government were too harsh.

“The new Greek government could refuse to follow through on its commitment,” said David Mackie, chief European economist at JPMorgan Chase & Co., who noted Europe’s leverage over Greece will recede once investors complete a debt exchange and the first aid payments are received.

Debt-Swap Relief

Other hurdles remain. Unless 90 percent of investors sign up to the bond swap, Greece may need to enforce it, creating legal difficulties. Finland and Germany are among the nations whose lawmakers must back the new loans as voters attack the bailouts. German Finance Minister Wolfgang Schaeuble said the IMF plans to add 13 billion euros to the bailout, less than the third it contributed to the first program.

The euro area has nevertheless “bought time” for countries such as Portugal to prove they are more creditworthy than Greece and to erect stronger defenses in the form of a larger bailout fund, said Carsten Brzeski, an economist at ING Groep in Brussels.

“The often-cited Greek can has again been kicked down the road,” he said. “The good thing is that the can is still on the road, but it requires a huge amount of stamina and patience to keep it there.”

To contact the reporters on this story: Simon Kennedy in London at skennedy4@bloomberg.net; James G. Neuger in Brussels at jneuger@bloomberg.net

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

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European Stocks Decline After Greek Bailout Agreement

By Tom Stoukas - Feb 21, 2012 8:53 PM GMT+0700

European stocks fell from a six- month high amid speculation a Greek bailout deal won’t be sufficient to solve the nation’s debt crisis.

TNT Express NV slid 2.2 percent after reporting a fourth- quarter loss. Segro Plc dropped 2.3 percent after writing down the value of peripheral assets by more than analysts expected. National Bank of Greece SA (ETE), the country’s largest lender, plunged 8.8 percent.

The Stoxx Europe 600 Index (SXXP) lost 0.5 percent to 266.71 at 1:52 p.m. in London. The gauge has still rallied 24 percent since Sept. 22 amid speculation that the European sovereign-debt crisis will be contained and as U.S. economic data exceeded forecasts. The measure rose for a fourth day yesterday, climbing to the highest level since July 26.

“Further hurdles remain,” Jonathan Sudaria, a trader at London Capital Group, wrote in e-mailed comments. “Concerns still linger over whether the incoming government in Athens would have any incentive or wish to enforce the austerity measures after they have received the bailout package.”

National benchmark indexes dropped in all of the western European markets, led by Greece’s ASE, which sank 2.3 percent. France’s CAC 40 dropped 0.5 percent and Germany’s DAX (DAX) slid 0.7 percent. The U.K.’s FTSE 100 Index declined 0.3 percent.

Debt Relief

European finance ministers approved a 130 billion-euro ($173 billion) bailout package for Greece early today by tapping into European Central Bank profits and convincing investors to provide more debt relief to the Mediterranean country. The deal includes a 53.5 percent writedown for investors in the nation’s debt, according to Luxembourg’s Jean-Claude Juncker, who chaired the talks. Finance ministers haggled into the night in Brussels over the terms of new loans and a possible contribution by central banks.

The odds that Greece will remain encumbered by debt were illustrated by an analysis by European and International Monetary Fund officials that highlighted what could go wrong with a country unable to grow out of its fiscal woes by devaluing its currency. In a worst-case scenario Greece’s debt might balloon to 160 percent of gross domestic product in 2020, it concluded.

Unless 90 percent of investors sign up to the bond swap, Greece may need to use force to secure the debt relief, entering legal difficulties. Finland and Germany are among the nations whose lawmakers must back the new loans and the International Monetary Fund must also decide how much it is willing to contribute to the package.

TNT Sinks

TNT Express fell 2.2 percent to 9.96 euros after the express-delivery service in takeover talks with United Parcel Service Inc. reported a fourth-quarter loss as reorganization costs and losses in emerging markets mounted. Post NL, which owns almost 30 percent of TNT according to data compiled by Bloomberg, also dropped 2.2 percent to 4.85 euros.

Segro (SGRO), the U.K.’s largest publicly traded owner of industrial properties, declined 2.3 percent to 231.2 pence. Net asset value adjusted for share options slid 9.8 percent to 340 pence a share in the second half of 2011, the Slough, England- based company said. The average analyst estimate was 354 pence, according to a report from JPMorgan Chase & Co.

National Bank of Greece led declines in financial shares, falling 8.9 percent to 2.7 euros, after three days of gains. Intesa Sanpaolo SpA dropped 2.3 percent to 1.53 euros in Milan. Deutsche Bank AG (DBK), Germany’s largest lender, fell 2 percent to 33.89 euros. Royal Bank of Scotland Group Plc slid 1.7 percent to 28.01 pence.

Wienerberger AG (WIE) fell 2.2 percent to 9.28 euros in Vienna after the world’s biggest brickmaker’s 2011 net income missed analyst estimates.

Tullow, Colruyt

Tullow Oil Plc (TLW) dropped 4 percent to 1,537 pence, the largest decline in a month, after announcing results for an exploration well in Sierra Leone.

“While the pay encountered liquids, further appraisal is required to assess the commerciality,” Goodbody Stockbrokers said.

Colruyt SA (COLR), Belgium’s biggest discount food retailer, sank 3.3 percent to 28.79 euros after it was cut to “conviction sell” from “neutral” at Goldman Sachs Group Inc.

Telefonica SA (TEF), Spain’s largest phone company, fell 1.1 percent to 13.11 euros after the brokerage downgraded the shares to “sell” from “neutral.”

Petropavlovsk Plc (POG), a miner of gold in Russia, rose 4.3 percent to 726.5 pence after Nomura Holdings Inc. upgraded the stock to “neutral” from “reduce.”

Croda International Plc (CRDA) gained 3.7 percent to 2,106 pence after reporting a 26 percent jump in pretax profit last year to 242.2 million pounds ($384 million), exceeding the average 239 million pounds estimated by analysts.

Banca Monte dei Paschi di Siena SpA (BMPS), Italy’s third-biggest bank, surged 7.5 percent to 38.8 euro cents ahead of the sale of a stake by its biggest investor.

Software AG (SOW) rose 1.4 percent 28.59 after its shares were raised to “buy” from “hold” at Deutsche Bank.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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

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U.S. Stock-Index Futures Pare Rise on Greece

By Rita Nazareth - Feb 21, 2012 8:19 PM GMT+0700

U.S. stock-index futures advanced, paring earlier gains, on concern that Greece’s debt crisis will persist even after a second international bailout.

Home Depot Inc. (HD), the largest home-improvement retailer, climbed 3.5 percent as profit beat analysts’ estimates. Wynn Resorts Ltd. (WYNN) rallied 5.7 percent after buying out its largest shareholder’s stake at a 31 percent discount and asking him to quit the board after a bribery probe. Wal-Mart Stores Inc. (WMT), the biggest retailer, fell 2.5 percent as low prices hurt margins.

Standard & Poor’s 500 Index futures expiring in March added 0.1 percent to 1,361.10 at 8:17 a.m. in New York, paring an advance of as much as 0.7 percent. Dow Jones Industrial Average futures rose 30 points, or 0.2 percent, to 12,959. The U.S. stock market was closed yesterday for a holiday.

“We saw strong gains last week as the bailout was anticipated,” said Louis de Fels, a Paris-based money manager at Raymond James Asset Management International, which oversees $35 billion worldwide. “Now we will need more good economic news to push stocks higher. We could have a short-term correction, but we’re confident about U.S. stocks for the year.”

The S&P 500 advanced 1.4 percent last week, putting it 0.2 percent away from erasing its losses since its 2011 high in April, amid optimism policy makers would save Greece from default and reports on U.S. manufacturing, housing and jobless claims that bolstered confidence.

Greece Bailout

European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicated.

Home Depot gained 3.5 percent to $48.35. The company attracted customers who spent more as U.S. unemployment sank to a three-year low in January and builders began work on more houses. Warmer weather helped sales at stores open at least a year advance 5.7 percent, the biggest gain since a 7.7 percent increase in the first quarter of 2004. That topped the average estimate for a 3 percent gain by five analysts.

Wynn Resorts added 5.7 percent to $119.10. Former Nevada Governor Robert Miller and Louis Freeh, the ex-director of the Federal Bureau of Investigation, investigated claims that Kazuo Okada violated U.S. anti-corruption laws and uncovered cash payments and gifts valued at about $110,000 to gambling regulators.

Wal-Mart

Wal-Mart Stores lost 2.5 percent to $60.90. Chief Executive Officer Mike Duke is working to contain Wal-Mart’s costs and last quarter started pulling the company’s greeters from store lobbies to help with customer-service tasks. The retailer is seeking to keep prices low as its low-income shoppers suffer from persistent unemployment.

The S&P 500 is approaching the cheapest level ever compared with bonds as Federal Reserve Chairman Ben S. Bernanke’s zero- percent interest rates drive investors and companies from cash.

Profits that doubled since 2009 pushed the index’s so- called earnings yield to 7.1 percent, close to the highest on record when compared with the 10-year Treasury rate, according to data compiled by Bloomberg since 1962. American companies have boosted capital spending 35 percent over six quarters, the most since 2006.

“Conditions are almost ideal for equity investors relative to all other investments,” Keith Wirtz, who oversees $14.6 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, said in a Feb. 14 telephone interview. “The Fed’s keeping rates low for the foreseeable future to try to stimulate the environment for employee hiring and business activity. What does that mean for capital markets? Savers are not being rewarded.”

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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European Stocks Drop After Greece as Euro Weakens, U.S. Futures Pare Gains

By Stephen Kirkland and Lynn Thomasson - Feb 21, 2012 8:46 PM GMT+0700

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Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi talks with reporters in Brussels about the agreement reached on a second bailout for Greece. (Source: Bloomberg)

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Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde and European Union Economic and Monetary Affairs Commissioner Olli Rehn talk about the second bailout program for Greece, which received 130 billion euros ($173 billion) in additional aid. This report also contains comments from Luxembourg Prime Minister and Eurogroup Chairman Jean-Claude Juncker, French Finance Minister Francois Baroin and Belgian Finance Minister Steven Vanackere. (Source: Bloomberg/Europe by Satellite)

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Feb. 21 (Bloomberg) -- Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. David Tweed reports from Brussels on Bloomberg Television's "Countdown" with Linzie Janis and Owen Thomas. (Source: Bloomberg)

European stocks declined from a six- month high and the euro weakened against the dollar on concern that Greece’s debt crisis will persist even after a second bailout. U.S. equity futures pared gains while Treasuries fell.

The Stoxx Europe 600 Index lost 0.6 percent at 8:45 a.m. in New York. Standard & Poor’s 500 Index (SPX) futures added 0.2 percent, after gaining as much as 0.7 percent. The euro depreciated 0.2 percent to $1.3212, reversing a 0.4 percent advance. Spanish bonds rose as the government met its maximum target at a bill auction. The 10-year U.S. Treasury yield jumped two basis points to 2.03 percent. Copper increased for a second day.

European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicated.

“You can’t really go out and say that we’ve solved the whole euro-zone debt crisis and this won’t come back to bother us again,” Manpreet Gill, a senior investment strategist at Standard Chartered Plc, said in a Bloomberg Television interview from Singapore. “These issues will still simmer over time.”

Five shares fell for every one that advanced in the Stoxx 600. Segro Plc, the U.K.’s largest publicly traded owner of industrial properties, sank 2.3 percent after saying net asset value declined 9.8 percent.

Highest Since April

The S&P 500 climbed to the highest level since April on Feb. 17. The two-year Treasury yield was little changed at 0.30 percent before the government sells $35 billion of the securities, the first of three auctions this week totaling $99 billion.

The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, fell 0.2 percent. The Australian dollar weakened against its 16 major counterparts, losing 0.8 percent versus its U.S. currency after minutes of the nation’s central bank’s most recent policy meeting showed there is scope for monetary easing.

The yield on the Spanish two-year note declined three basis points as the government sold 2.5 billion euros of three- and six-month bills. The yield on the 10-year Italian bond dropped four basis points, driving the extra yield investors demand to hold the securities instead of bunds three basis points lower.

Copper advanced 2 percent after rising 0.7 percent yesterday. Gold climbed 0.6 percent to $1,745.71 an ounce and silver advanced 0.7 percent.

The MSCI Emerging Markets Index (MXEF) lost 0.3 percent. Russia’s Micex Index (MICEX) slid 1.2 percent as Ural crude, the country’s main export blend, declined. The Turkish lira slipped 0.6 percent after the central bank cut its highest lending rates. India’s Sensex (SENSEX) rose 0.8 percent after trading resumed following yesterday’s holiday.

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: Mark Gilbert at magilbert@bloomberg.net

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RBA Says Rates Appropriate With Scope to Ease

By Michael Heath - Feb 21, 2012 1:11 PM GMT+0700

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Feb. 21 (Bloomberg) -- David de Garis, a senior economist at National Australia Bank Ltd., talks about the nation's economy and central bank monetary policy. The Reserve Bank of Australia kept its benchmark interest rate unchanged this month as risks in Europe abated and said it has scope to ease policy if demand were to "weaken materially," minutes of its Feb. 7 meeting showed. De Garis also discusses China's economy and central bank policy. He speaks from Melbourne with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)

Australia’s central bank said it has scope to ease monetary policy if needed, after keeping the benchmark interest rate unchanged this month as risks in Europe abated, minutes of its Feb. 7 meeting showed.

Policy makers “judged that if demand conditions were to weaken materially, the inflation outlook would provide scope for a further easing in monetary policy,” the minutes released today by the Sydney-based Reserve Bank of Australia showed. “While the financial situation in Europe remained fragile, the likelihood of an extremely bad outcome seemed to have diminished somewhat.”

Australia’s dollar fell after the minutes showed the RBA is maintaining “an easing bias,” according to Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. The central bank unexpectedly held rates at 4.25 percent this month after two quarter-percentage-point reductions late last year helped the economy weather Europe’s sovereign-debt crisis, which showed signs of easing today as debt-stricken Greece won a second bailout.

Governor Glenn Stevens and his board noted in today’s minutes that last quarter’s rate cuts “had been passed through to most lending rates in the economy, which were now around average levels.”

Since the meeting, Australia’s four biggest banks raised their standard variable mortgage rates independently from the RBA, drawing criticism from the government. The central bank said that competition for deposits, recent covered bond sales, and the cost of swapping funds raised offshore into Australian dollars had added to the price lenders paid to raise money.

‘Narrowed the Difference’

“Collectively, these developments had increased banks’ overall cost of funding relative to the cash rate and had narrowed the difference between banks’ lending rates and funding costs,” policy makers said in the minutes.

Commonwealth Bank of Australia increased the interest on a variable-rate home loan by 10 basis points to 7.41 percent last week, followed by National Australia Bank Ltd., which added 9 basis points to 7.31 percent. Westpac Banking Corp. boosted the cost by 10 basis points to 7.46 percent on Feb. 10, after Australia & New Zealand Banking Group Ltd. added 6 basis points to 7.36 percent. ANZ Bank and Westpac cited higher debt premiums and competition for deposits.

Funding costs for banks haven’t fallen as much as the 50 basis points in cuts to the central bank rate, Stevens said in Sydney today, responding to questions after a panel discussion at the ASIC Summer School 2012. Banks have responded to that fact, he said.

Aussie Falls

Australia’s currency fell 0.2 percent to $1.0735 as of 4:57 p.m. in Sydney from yesterday, when it rose 0.5 percent. The so- called Aussie trimmed declines after euro-area officials reached agreement on providing Greece with a second rescue package.

Elsewhere in the Asia-Pacific region, Hong Kong may say today its unemployment rate was unchanged at 3.3 percent in January, according to the median of 12 estimates in a Bloomberg News survey.

In Europe, Switzerland’s trade surplus probably widened in January, while a consumer confidence index may show Danish consumers became more pessimistic this month, surveys predict. Turkey’s central bank will probably keep its benchmark rate unchanged at 5.75 percent, all nine economists surveyed by Bloomberg said.

Euro-area consumer confidence was probably little changed this month with an index reading at minus 20.1 compared with minus 20.7 in January, according to a Bloomberg survey ahead of a release by the European Commission in Brussels today.

Rate Pause

The Federal Reserve Bank of Chicago’s National Activity Index probably rose to 0.22 in January from 0.17 in December, according to the median of five estimates by Bloomberg.

This month’s rate pause in Australia spurred the currency, which reached a six-month high of $1.0845 following the decision and has appreciated about 5 percent this year. The improvement in the global and domestic economies prompted investors to pare bets on a rate cut next month to 32 percent, according to a Credit Suisse Group AG index.

“With growth expected to be close to trend and inflation consistent with the target, the board considered that this setting was appropriate for the overall macroeconomic outlook,” the RBA said in today’s minutes.

Australia’s central bank aims to keep inflation between 2 percent and 3 percent on average and policy makers noted that recent data confirmed that core inflation is now in the mid- point of the target range.

On Hold

Today’s minutes suggest the central bank is “on hold for some time,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s biggest interdealer broker. “Even if you’re pessimistic, it’s going to take time for that to be reflected in the data given its current momentum.”

Still, the currency’s strength is hurting Toyota Motor Corp.’s Australian division, the country’s largest car exporter, which announced last month it would cut more than a 10th of the employees at its assembly plant after a 21 percent decline in 2011 production. General Motors Co.’s local unit has also announced job cuts.

Australia recorded its worst annual jobs growth in 19 years in 2011 as Europe’s escalating debt crisis damaged confidence. The jobs market has shown signs of revival this year as employers added the most workers in 14 months in January and the unemployment rate unexpectedly declined to 5.1 percent.

Longer Hours

“Members observed that it appeared that additional demand for labor had been met largely through existing employees working longer hours over the past year, rather than through an increase in hiring,” the minutes showed.

Australia’s economy is being driven by China, the nation’s biggest trading partner, which is buying up iron ore, coal and natural gas as millions of people in the world’s most populous nation move to urban centers. Resource projects in Australia valued at A$456 billion ($490 billion) are spurring companies such as BHP Billiton Ltd. to increase hiring and helping cushion a slump in manufacturing and services.

“Growth in China had moderated as intended, but on most indicators had remained quite robust through the second half of 2011,” policy makers said in the minutes.

The RBA this month lowered its forecasts for growth and inflation. It sees average growth of 3.5 percent in 2012, down from its Nov. 4 estimate of 4 percent. Consumer prices will rise 3 percent in the year through to the fourth quarter, less than a previous prediction of 3.25 percent, the central bank said, while underlying inflation is predicted to be unchanged at 2.75 percent.

“Global economic and financial market developments had been somewhat more positive over the past month or so,” policy makers said in today’s minutes. “Whereas the situation had been looking quite negative in early December, recent actions by the European Central Bank and euro-area governments had boosted confidence.”

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

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

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Apple, Hewlett-Packard, Transocean, Wynn: U.S. Equity Preview

By Katia Porzecanski and Yi Tian - Feb 21, 2012 12:25 AM GMT+0700

Shares of the following companies may have unusual moves in U.S. trading tomorrow. U.S. markets are closed today for the Presidents’ Day holiday.

Apple Inc. (AAPL) : HTC Corp. lost a patent-infringement claim against the world’s largest technology company at the U.S. International Trade Commission, the first of the Taiwanese handset maker’s cases targeting the iPhone.

Codexis Inc. (CDXS) : Alan Shaw resigned as president and chief executive officer of the company, which makes enzymes used in producing drugs. He will continue to serve as an adviser to the board. The board appointed Peter Strumph, business head of pharmaceuticals, as interim CEO.

Corcept Therapeutics Inc. (CORT) : The specialty drug company that hasn’t generated revenue since 2009 won approval for its leading product candidate, a treatment that uses the active ingredient of the abortion pill RU-486 to treat Cushing’s Syndrome.

Corning Inc. (GLW) : The largest maker of glass for flat- panel television sets is poised to rebound to $20 in two to three years as it cuts excess capacity and focuses on the growing smartphone and tablet markets, Barron’s reported in its “The Trader” column, citing Alan Lancz of Alan B. Lancz & Associates.

Experian Plc (EXPGY) : Experian’s U.S.-traded shares are poised to rise 20 percent or more during the next year as the credit-report provider’s expansion in Latin America boosts earnings, Barron’s reported.

Hewlett-Packard Co. (HPQ) : The outlook for the world’s largest personal computer maker is still unclear as Chief Executive Officer Meg Whitman tries to turn it around by changing the corporate culture and boosting research and development expenditure, Barron’s reported.

Transocean Ltd. (RIG) : The world’s biggest operator of offshore drilling rigs said it won’t recommend a dividend payment at its 2012 annual shareholder meeting.

Wynn Resorts Ltd. (WYNN) : Japanese billionaire Kazuo Okada’s Universal Entertainment Corp. (6425 JP) said it will take legal action after Wynn Resorts, a casino operator, forcibly redeemed Universal’s stake at a 31 percent discount and accused Okada of improper payments.

To contact the reporters on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net; Yi Tian in New York at ytian8@bloomberg.net

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

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Euro Advances to 3-Month High Versus Yen on Greek Bailout; Aussie Declines

By Anchalee Worrachate and Candice Zachariahs - Feb 21, 2012 3:23 PM GMT+0700

The euro climbed to a three-month high against the yen after euro-area finance ministers agreed to award Greece a second bailout package to stave off a default next month.

The 17-nation currency was little changed against the dollar after erasing an intra-day advance as Luxembourg Prime Minister Jean-Claude Juncker said the deal includes a 53.5 percent writedown for investors in Greek bonds, greater than a previous arrangement. The Australian dollar weakened after the Reserve Bank said in minutes of its Feb. 7 meeting that there is scope to ease monetary policy.

“The deal is helping to support the euro in the near term as the outright default appears to have been avoided and short- term uncertainty is removed,” said Chris Walker, a currency strategist at UBS AG in London. “But we remain cautious because several outstanding issues remain unresolved.”

The euro rose 0.2 percent to 105.69 yen at 8:22 a.m. London time, after touching 106.01 yen, the most since Nov. 14. Europe’s common currency traded at $1.3247 after reaching $1.3293 earlier, the strongest level since Feb. 9. The dollar gained 0.2 percent to 79.80 yen.

The so-called Aussie dollar slid 0.4 percent to $1.0711.

To contact the reporters on this story: Anchalee Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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Europe Picks Greek Aid Over Default

By James G. Neuger and Jonathan Stearns - Feb 21, 2012 2:57 PM GMT+0700

Play Video

Feb. 21 (Bloomberg) -- Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. David Tweed reports from Brussels on Bloomberg Television's "Countdown" with Linzie Janis and Owen Thomas. (Source: Bloomberg)

Play Video

Feb. 21 (Bloomberg) -- Carsten Brzeski, an economist at ING Group, talks about the agreement to award Greece 130 billion euros ($173 billion) in aid. He speaks from Brussels with Caroline Hyde on Bloomberg Television's "First Look." (Source: Bloomberg)

Play Video

Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi talks with reporters in Brussels about the agreement reached on a second bailout for Greece. (Source: Bloomberg)

Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default.

Finance ministers awarded 130 billion euros ($173 billion) in aid, engineered a central-bank profits transfer and coaxed investors into providing more debt relief in an exchange meant to tide Greece past a March bond repayment. The euro was little changed at 7:50 a.m. in London after earlier strengthening by as much as 0.4 percent against the dollar, as analysis by the International Monetary Fund and European officials suggested Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario.

Bondholders’ response to the swap, Greece’s tolerance of more austerity and a gantlet of parliamentary approvals in northern European countries gripped by an anti-bailout mindset loom as risks to the latest salvage operation.

“Everybody understood that this was the moment of truth,” Belgian Finance Minister Steven Vanackere told reporters early today after 13 1/2 hours of talks in Brussels.

The assistance brings to at least 386 billion euros the sums spent or committed to save Greece, Ireland and Portugal from bankruptcy, and to insulate Europe from a ruinous financial cascade that might endanger the 13-year-old monetary union.

The euro traded at $1.3236, down 0.1 percent on the day, after trading as high as $1.3293 earlier. In Asia, stocks pared losses and Treasuries retreated. The MSCI Asia Pacific Index of equities was down 0.4 percent as of 2:33 p.m. in Tokyo, after dropping as much as 0.7 percent earlier in the day. Yields on benchmark 10-year U.S. notes rose 3 basis points to 2.04 percent.

Fiscal Emergencies

European officials also held out the prospect of boosting the backstop for future fiscal emergencies to 750 billion euros from a planned limit of 500 billion euros when a permanent aid fund is paired with the temporary fund starting in July.

Luxembourg Prime Minister Jean-Claude Juncker, chairman of the overnight talks, predicted that a March 1-2 summit will deliver a “significant reinforcement of the euro-area firewall.” Germany, Europe’s dominant economy, has eased its opposition to raising the aid ceiling.

Euro leaders point to declining bond yields in Italy and Spain as evidence that investors are less fearful that the turmoil originating in Greece, representing 2.4 percent of the continental economy, will spill across borders.

Greece met a key condition for aid by spelling out 325 million euros in additional spending cuts, the latest of the unpopular measures that have provoked street protests in Athens.

‘Accident-Prone’

Still, the odds that Greece will remain encumbered by debt were illustrated by an analysis by European and IMF experts that highlighted what could go wrong with a country unable to grow out of its fiscal woes by devaluing its currency. “Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,” the analysis said.

Finance chiefs’ starting point yesterday was the baseline European-IMF estimate, which put Greek debt at 129 percent of GDP in 2020. By lowering Greece’s bailout loan rates and extracting more from private investors and the central banks, they whittled that figure to 120.5 percent, a level deemed “sustainable” by the IMF.

‘Keep Coming Back’

“Does this alleviate the risk of imminent default?” said Callum Henderson, global head of foreign-exchange research in Singapore at Standard Chartered Plc. “Yes, but not further out. Further out, the concerns of a default will keep coming back.”

While a euro-zone statement spoke of a “significant contribution” from the IMF to the three-year loan package, it was unclear whether the fund would stick to its practice of delivering a third of the aid money.

“Significant means lots of things,” said IMF Managing Director Christine Lagarde, who was French finance minister when the crisis broke. She said an IMF decision in March on its Greek contribution will hinge on Europe’s progress in building a broader firewall.

Greek Prime Minister Lucas Papademos traveled to Brussels to lead the bargaining with the bondholders, represented by Charles Dallara and Jean Lemierre of the Institute of International Finance.

That give-and-take harked back to an earlier nocturnal episode in the crisis, when Dallara in October bowed to pressure from leaders including German Chancellor Angela Merkel to consent to a 50 percent cut in the face value of Greek bondholdings.

‘Unique Circumstances’

The bank representatives leave Brussels with that writeoff up to 53.5 percent. In a statement, they said that “the unprecedented nature of the package underpinning the consensual resolution of debt-restructuring discussions with Greece reflects the exceptional and unique circumstances.”

Governments agreed to earmark their share of profits from the ECB’s crisis-driven purchases of Greek bonds at discounted prices for the Greek package. National central banks’ future profits from holding Greek bonds in their investment portfolios also will be funneled into the program.

ECB President Mario Draghi hailed the “very good agreement,” while declining to comment on the central-bank profits.

“We welcome the commitment of the Greek government to undertake the actions to restore growth and stability,” Draghi said. “We also welcome the commitment of euro member countries to keep on helping Greece to come back on the path of growth and job creation.”

State Assets

Frustrated with Greece’s inability to meet two years of targets for cutting the deficit and selling off state assets, donor countries also insisted on more control over how Greece spends the money.

A special account will be set up that gives priority to keeping Greece solvent before releasing money for the country’s budget. A European Commission task force will also embed in Greece in an “an enhanced and permanent presence on the ground” to improve the workings of the Greek bureaucracy, according to the statement.

“We underestimated the challenge stemming from weak administrative capacity and also weak political unity,” European Union Economic and Monetary Commissioner Olli Rehn said. “Now both of these challenges are being addressed.”

Since Greece’s fiscal woes erupted in late 2009, creditor countries and the government in Athens have sought leverage over each other. Rich countries led by Germany tied aid to ever- stricter conditions, while Greece played on Europe’s fear that a default would destabilize the euro.

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Jonathan Stearns in Brussels at jstearns2@bloomberg.net.

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

Read more...

Europe Picks Greek Aid Over Default

By James G. Neuger and Jonathan Stearns - Feb 21, 2012 2:57 PM GMT+0700

Play Video

Feb. 21 (Bloomberg) -- Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. David Tweed reports from Brussels on Bloomberg Television's "Countdown" with Linzie Janis and Owen Thomas. (Source: Bloomberg)

Play Video

Feb. 21 (Bloomberg) -- Carsten Brzeski, an economist at ING Group, talks about the agreement to award Greece 130 billion euros ($173 billion) in aid. He speaks from Brussels with Caroline Hyde on Bloomberg Television's "First Look." (Source: Bloomberg)

Play Video

Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi talks with reporters in Brussels about the agreement reached on a second bailout for Greece. (Source: Bloomberg)

Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default.

Finance ministers awarded 130 billion euros ($173 billion) in aid, engineered a central-bank profits transfer and coaxed investors into providing more debt relief in an exchange meant to tide Greece past a March bond repayment. The euro was little changed at 7:50 a.m. in London after earlier strengthening by as much as 0.4 percent against the dollar, as analysis by the International Monetary Fund and European officials suggested Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario.

Bondholders’ response to the swap, Greece’s tolerance of more austerity and a gantlet of parliamentary approvals in northern European countries gripped by an anti-bailout mindset loom as risks to the latest salvage operation.

“Everybody understood that this was the moment of truth,” Belgian Finance Minister Steven Vanackere told reporters early today after 13 1/2 hours of talks in Brussels.

The assistance brings to at least 386 billion euros the sums spent or committed to save Greece, Ireland and Portugal from bankruptcy, and to insulate Europe from a ruinous financial cascade that might endanger the 13-year-old monetary union.

The euro traded at $1.3236, down 0.1 percent on the day, after trading as high as $1.3293 earlier. In Asia, stocks pared losses and Treasuries retreated. The MSCI Asia Pacific Index of equities was down 0.4 percent as of 2:33 p.m. in Tokyo, after dropping as much as 0.7 percent earlier in the day. Yields on benchmark 10-year U.S. notes rose 3 basis points to 2.04 percent.

Fiscal Emergencies

European officials also held out the prospect of boosting the backstop for future fiscal emergencies to 750 billion euros from a planned limit of 500 billion euros when a permanent aid fund is paired with the temporary fund starting in July.

Luxembourg Prime Minister Jean-Claude Juncker, chairman of the overnight talks, predicted that a March 1-2 summit will deliver a “significant reinforcement of the euro-area firewall.” Germany, Europe’s dominant economy, has eased its opposition to raising the aid ceiling.

Euro leaders point to declining bond yields in Italy and Spain as evidence that investors are less fearful that the turmoil originating in Greece, representing 2.4 percent of the continental economy, will spill across borders.

Greece met a key condition for aid by spelling out 325 million euros in additional spending cuts, the latest of the unpopular measures that have provoked street protests in Athens.

‘Accident-Prone’

Still, the odds that Greece will remain encumbered by debt were illustrated by an analysis by European and IMF experts that highlighted what could go wrong with a country unable to grow out of its fiscal woes by devaluing its currency. “Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,” the analysis said.

Finance chiefs’ starting point yesterday was the baseline European-IMF estimate, which put Greek debt at 129 percent of GDP in 2020. By lowering Greece’s bailout loan rates and extracting more from private investors and the central banks, they whittled that figure to 120.5 percent, a level deemed “sustainable” by the IMF.

‘Keep Coming Back’

“Does this alleviate the risk of imminent default?” said Callum Henderson, global head of foreign-exchange research in Singapore at Standard Chartered Plc. “Yes, but not further out. Further out, the concerns of a default will keep coming back.”

While a euro-zone statement spoke of a “significant contribution” from the IMF to the three-year loan package, it was unclear whether the fund would stick to its practice of delivering a third of the aid money.

“Significant means lots of things,” said IMF Managing Director Christine Lagarde, who was French finance minister when the crisis broke. She said an IMF decision in March on its Greek contribution will hinge on Europe’s progress in building a broader firewall.

Greek Prime Minister Lucas Papademos traveled to Brussels to lead the bargaining with the bondholders, represented by Charles Dallara and Jean Lemierre of the Institute of International Finance.

That give-and-take harked back to an earlier nocturnal episode in the crisis, when Dallara in October bowed to pressure from leaders including German Chancellor Angela Merkel to consent to a 50 percent cut in the face value of Greek bondholdings.

‘Unique Circumstances’

The bank representatives leave Brussels with that writeoff up to 53.5 percent. In a statement, they said that “the unprecedented nature of the package underpinning the consensual resolution of debt-restructuring discussions with Greece reflects the exceptional and unique circumstances.”

Governments agreed to earmark their share of profits from the ECB’s crisis-driven purchases of Greek bonds at discounted prices for the Greek package. National central banks’ future profits from holding Greek bonds in their investment portfolios also will be funneled into the program.

ECB President Mario Draghi hailed the “very good agreement,” while declining to comment on the central-bank profits.

“We welcome the commitment of the Greek government to undertake the actions to restore growth and stability,” Draghi said. “We also welcome the commitment of euro member countries to keep on helping Greece to come back on the path of growth and job creation.”

State Assets

Frustrated with Greece’s inability to meet two years of targets for cutting the deficit and selling off state assets, donor countries also insisted on more control over how Greece spends the money.

A special account will be set up that gives priority to keeping Greece solvent before releasing money for the country’s budget. A European Commission task force will also embed in Greece in an “an enhanced and permanent presence on the ground” to improve the workings of the Greek bureaucracy, according to the statement.

“We underestimated the challenge stemming from weak administrative capacity and also weak political unity,” European Union Economic and Monetary Commissioner Olli Rehn said. “Now both of these challenges are being addressed.”

Since Greece’s fiscal woes erupted in late 2009, creditor countries and the government in Athens have sought leverage over each other. Rich countries led by Germany tied aid to ever- stricter conditions, while Greece played on Europe’s fear that a default would destabilize the euro.

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Jonathan Stearns in Brussels at jstearns2@bloomberg.net.

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

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U.S. Futures Gain With Metals as European Leaders Reach Greek Bailout Deal

By Lynn Thomasson and John Dawson - Feb 21, 2012 3:17 PM GMT+0700

Play Video

Feb. 21 (Bloomberg) -- Euro-area finance ministers reached agreement on a second bailout package for Greece that is vital to staving off a default next month, a European Union official said. David Tweed reports on Bloomberg Television "Asia Edge" with John Dawson. (Source: Bloomberg)

Play Video

Feb. 21 (Bloomberg) -- European Central Bank President Mario Draghi talks with reporters in Brussels about the agreement reached on a second bailout for Greece. (Source: Bloomberg)

U.S. equity futures and metals rose, while Treasuries declined after Greece won a second rescue package. European stocks retreated, led by energy producers.

Standard & Poor’s 500 Index (SPX) futures added 0.3 percent as of 8:07 a.m. in London. The Stoxx Europe 600 Index lost 0.3 percent. Ten-year Treasury yields climbed three basis points to 2.03 percent. The euro was little changed at $1.3241, after strengthening as much 0.4 percent. Copper gained 1 percent and oil traded near a nine-month high.

European finance ministers awarded Greece 130 billion euros ($173 billion) in aid by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. The global economy faces an “uphill struggle” as it seeks to recover from a financial crisis, Chinese Vice President Xi Jinping said yesterday.

“You can’t really go out and say that we’ve solved the whole euro-zone debt crisis and this won’t come back to bother us again,” Manpreet Gill, a senior investment strategist at Standard Chartered Plc, said in a Bloomberg Television interview from Singapore. “These issues will still simmer over time.”

S&P 500 futures expiring in March climbed to 1,364. U.S. markets will reopen today after a public holiday yesterday. The U.S. government is set to sell debt totaling $99 billion this week, starting with a $35 billion auction of two-year securities today.

Consumer Confidence

Data later today may show a measure of euro-area consumer confidence improved to minus 20.1 this month from minus 20.7 in January, according to the median forecast of economists in a Bloomberg survey.

Asian stocks have climbed for the past nine weeks, pushing the MSCI Asia-Pacific gauge to a 12 percent rally this year. Australia’s S&P/ASX 200 Index rose 0.8 percent today and the Shanghai Composite Index advanced 0.8 percent.

Mazda Motor Corp. (7261), the most unprofitable among Japan’s eight biggest carmakers, slumped 9.9 percent. The company is preparing a share sale to raise capital by as much 100 billion yen ($1.25 billion), NHK Television reported, without citing anyone. Mazda said in a filing that no decision has been made.

Korean Air Lines Co. (003490), the nation’s biggest carrier, tumbled 6.4 percent after Deutsche Bank AG told clients to sell the shares, citing a weak cargo market and high fuel prices. Cathay Pacific Airways Ltd. lost 1.9 percent in Hong Kong.

Oil futures for March delivery, which expire today, advanced as much as $2.20 to $105.44 in intra-day trading, the highest since May 5.

Iran’s decision to halt sales of crude oil to French and British buyers to preempt a European Union ban on imports will have “no impact on Britain’s energy security or supplies,” said U.K. Foreign Secretary William Hague. The EU has agreed to stop purchases of Iranian crude from July 1 in an attempt to curb the Persian Gulf country’s nuclear program.

The Australian dollar fell against all 16 major counterparts, losing 0.5 percent to $1.0705. Minutes of the central bank’s Feb. 7 meeting suggested board members are prepared to ease policy if demand were to “weaken materially.”

To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; John Dawson in Hong Kong at jrdawson@bloomberg.net

To contact the editor responsible for this story: James Regan in Hong Kong at jregan19@bloomberg.net.

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Italy’s Economic Overhaul Marked by Three Women Wrestling Over Labor Laws

By Alessandra Migliaccio and Chiara Vasarri - Feb 21, 2012 6:01 AM GMT+0700

In a country that for almost a decade was led by a man who publicly referred to his passion for female conquests, Italy is now relying on three women to help overcome the European debt crisis.

Less than four months after the resignation of Silvio Berlusconi, the former prime minister known for his “Bunga Bunga” parties, new Italian Labor Minister Elsa Fornero is mediating between Emma Marcegaglia, head of the employers’ lobby, and Susanna Camusso, leader of the biggest union.

At stake are changes to labor laws to make it easier to hire and fire, a highly-charged issue in Italy, where previous attempts at an overhaul have been marred by protests, violence and even murder. The reforms aim to bring down a decade-high jobless rate of 8.9 percent and are central to Prime Minister Mario Monti efforts to convince investors he can revive Italy’s economy and trim its 1.9 trillion-euro ($2.5 trillion) debt.

“The country needs to persuade markets that it is making changes and these three women are right on the front lines,” Alberto Mingardi, an economist and head of the pro-free market Bruno Leoni research center in Turin, said in an interview. “If Italy is the key to making or breaking Europe, then this reform needs to be watched carefully.”

Firing Rules

The fact that three women are driving the debate is unusual in a country that ranks 74th of 135 in the World Economic Forum’s 2011 Gender Gap Index, trailing Malawi and Kazakhstan.

Talks between them resumed yesterday, with negotiations focused on the revamp of unemployment benefits and training programs. They will continue on Feb. 23, Marcegaglia said yesterday. The thornier issue of easing firing rules will be left for the final stage in early March.

An academic, a union stalwart and the daughter of a steel magnate, the three come from diverse backgrounds, and it may not be easy to forge a labor agreement. Monti said yesterday that his government would pass the legislation by the end of March even without the backing of unions.

The fact that we are women “doesn’t necessarily change anything” in our relationship, Camusso said in a Feb. 10 e- mailed response to questions. “Our experiences are all very concretely rooted into our respective roles as we represent precise and usually conflicting interests.”

Professor

Fornero, 63, is an economics professor at the University of Turin and a former vice president of the supervisory board at Intesa Sanpaolo SpA’s, Italy’s second-biggest bank. When she accepted the additional portfolio of equal opportunity minister, Fornero succeeded Mara Carfagna.

A lawyer, Carfagna, was better known for posing topless and being a Miss Italy contestant. Berlusconi publicly said that he would marry her immediately if he wasn’t already committed, prompting a public scolding from his now ex-wife Veronica Lario.

Fornero declined to be interviewed for this story, according to her office. At a conference last week, Fornero said it was “no accident” that the heads of the biggest union, the business lobby and labor policy were all women.

Camusso, 56, is the first woman to lead the 6 million- member CGIL union. The chain-smoking leader started her career in 1977 as representative for metalworkers.

Her rival, Marcegaglia, 46, is a staunch supporter of reforms aimed at boosting competition as head of Italy’s most influential business lobby and her family’s steel company.

End of Berlusconi

Berlusconi once introduced Marcegaglia as a “good-looking chick” at a conference in Rome in February 2011. She told reporters that she didn’t mind being called attractive as long as the government pushed ahead with economic reforms. When change didn’t come, she voiced her opposition eventually calling for Berlusconi’s resignation.

Monti, 68, whose government of non politicians took over from Berlusconi, 75, in November, has repeatedly said that easing firing rules can no longer be “taboo” and pledged to push through changes.

The sticking point is whether to modify Article 18 of the labor code, the part that bans firing without just cause and forces employers to rehire and compensate workers deemed to be unjustly released. Employers, led by Marcegaglia, say it makes them reluctant to hire because it becomes almost impossible to cut staff during tough economic times, while Camusso refers to the measure as “a norm of civilization.”

Advisers Assassinated

Berlusconi also tried to overhaul the law in 2002, backing down after millions protested across the country.

The demonstration came four days after Marco Biagi, an adviser to the government on labor law, was gunned down outside his home in Bologna. The killing was claimed by the New Red Brigades, which took their name from the terrorist group in the 1970s. The murder of Biagi followed the 1999 slaying of another labor law consultant, Massimo D’Antona, by the same group.

Their killers were apprehended in 2003 and police say they have wiped out the remnants of the Red Brigades. Still, concerns about violence remain after envelopes containing bullets addressed to Fornero, union leaders and Marcegaglia were intercepted by the postal service last month.

Article 18 was implemented 40 years ago, and critics say it has led to a two-tier job market where older workers can’t be fired and employers increasingly resort to temporary contractors when taking on new workers. More young people are excluded from the market, with joblessness among them topping 30 percent, almost four times the main rate.

Romano Prodi, the former Italian prime minister and European Commission president, said that having the three women leading the talks might yield an agreement.

Because women “generally have more common sense,” he said in an interview.

To contact the reporters on this story: Alessandra Migliaccio in Rome at amigliaccio@bloomberg.net Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Jerrold Colten at jcolten@bloomberg.net;

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Greece Moves Toward Second Bailout

By James G. Neuger and Rainer Buergin - Feb 21, 2012 12:30 AM GMT+0700

European governments moved toward a second rescue of Greece, calculating that the 130 billion-euro ($172 billion) cost of a fresh bailout is a price worth paying to prevent a default that could shatter the euro area.

Finance ministers are weighing the terms of new loans to Greece and a possible contribution by central banks at a meeting today in Brussels. They also aim to start a bond exchange with private investors meant to stave off a Greek bankruptcy next month.

Bondholders’ response to the swap, Greece’s ability to prolong two years of austerity and a gantlet of parliamentary approvals in northern European countries gripped by an anti- bailout mindset loom as risks to the latest salvage operation.

“We still have a bit of work to do,” German Finance Minister Wolfgang Schaeuble told reporters as he arrived for the meeting of euro-area finance chiefs. “We’ve set out to wrap up the decision on a new aid program for Greece. I’m confident.”

No time was set for a press conference after the meeting, under way since 3:30 p.m.

Euro leaders point to declining bond yields in Italy and Spain as evidence that investors are less fearful that the turmoil in Greece, representing 2.4 percent of the continental economy, will spill across borders.

The 17-nation euro gained as much as 1 percent to $1.3277 today, bringing its climb against the dollar this year to more than 2 percent. European stocks rose, with the Stoxx Europe 600 Index (SXXP) extending a six-month high.

Summit-Level Pledge

Tonight’s meeting is two years and nine days after Greece’s fiscal woes burst upon the euro zone, prompting a summit-level pledge of “determined and coordinated action, if needed” to safeguard the currency.

Since then, creditor countries and Greece have sought leverage over each other. Rich countries led by Germany have tied aid to ever-stricter conditions, while Greece counts on Europe’s fear that letting it go bust would destabilize, and possibly wreck, the 13-year-old monetary union.

“It is the intention of nobody to have Greece outside the euro area,” Luxembourg Prime Minister Jean-Claude Juncker said as he arrived to chair the meeting. The size of the public aid is “still open.”

Finance ministers will try to make Greece’s aid numbers add up, possibly offering lower interest rates or longer loan maturities to bring Greek debt down to a target of 120 percent of gross domestic product in 2020, two officials said last week.

IMF Estimates

Unchanged terms would leave the debt at 129 percent of GDP by 2020, too high to be “sustainable,” according to European and International Monetary Fund estimates that were shown to the ministers on a Feb. 15 conference call, two officials said.

“We are here today ready to conclude this long process,” Greek Finance Minister Evangelos Venizelos said. “I am optimistic, but in any case we need a clear political approval.”

Up for debate at the meeting, attended by European Central Bank President Mario Draghi, is the role of the politically independent ECB and its national branches in the bailout that follows 110 billion euros awarded in May 2010.

The ECB could funnel profits from crisis-driven purchases of Greek bonds -- estimated at 13 billion euros by Citigroup -- back to national governments and on into the Greek package. National central banks, in turn, could join private investors in taking losses on Greek bonds in their longer-term portfolios.

‘More Tax Money’

Central-bank contributions and bigger-than-planned writeoffs by private bondholders would be two ways of drumming up the extra funds, Austrian Finance Minister Maria Fekter said.

“Governments can’t make more tax money available -- that would overburden the states,” Fekter told reporters. “We in Austria would have problems getting it through parliament.”

Fekter said she is also on guard against the IMF springing a surprise tonight by cutting its share of the Greek loans from its previous practice of delivering one third of the total.

Christine Lagarde, who was French finance minister when the crisis began and took over the IMF last year, declined to say how much the Washington-based fund will steer toward the new package.

“Greece has manifestly made very significant strides and now the work has to go on,” Lagarde said on her way in. “The IMF is here to be part of the work.”

Mid-March Deadline

European governments need to weld together the program tonight to give enough time for the bond exchange -- designed ultimately to write off about 100 billion euros of Greek debt -- to go ahead by a mid-March deadline.

The target is for the swap offer to run from Feb. 22 to March 9, so the exchange takes place in time for Greece to escape the full 14.5 billion euro cost of a March 20 bond redemption, German lawmakers were told last week by government officials.

Frustrated with Greece’s inability to meet two years of targets for cutting the deficit and selling off state assets, donor countries are also insisting on more control over how Greece spends the money.

Germany’s Schaeuble said Greece accepts the idea of paying the international funds into a special account, which would give priority to keeping Greece solvent before releasing money for the country’s budget.

‘Permanent Troika’

The Netherlands, one of four euro states still ranked as AAA borrowers, is pushing for monitors from the “troika” of European Commission, ECB and IMF to set up a full-time observation post in Athens.

“I am myself in favor of a permanent troika in Athens,” Dutch Finance Minister Jan Kees de Jager said before the Brussels meeting. “When you look at the derailments in Greece which have occurred several times now, it is necessary that there is some kind of permanent presence.”

Greece upheld part of its side of the bargain yesterday by spelling out 325 million euros in additional spending cuts, the latest of the unpopular measures that have provoked street protests in Athens.

The Greek economy shrank 7 percent in the fourth quarter from a year earlier as unemployment surged past 20 percent in November. The country’s output is forecast to shrink for the fifth straight year.

“It’s like a puzzle: all the pieces are on the table, we have to put them together,” French Finance Minister Francois Baroin said. “That’s what we’re going to do this afternoon.”

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Rainer Buergin in Brussels at rbuergin1@bloomberg.net.

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

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