Greece Pushes Bondholders Into Record Debt Swap

By Maria Petrakis and Rebecca Christie - Mar 9, 2012 9:09 PM GMT+0700

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Greece Forces Losses on Bondholders

Greece pushed through the biggest sovereign restructuring in history after cajoling private investors to forgive more than 100 billion euros ($132 billion) of debt, opening the way for a second bailout.

Euro-region finance ministers agreed on a conference call that the swap meant Greece had met the terms to proceed with a 130 billion-euro rescue package designed to prevent a collapse of the Greek economy. Ministers freed up 35.5 billion euros in public sweeteners and interest now, with a decision on the balance to be made at a March 12 meeting in Brussels.

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Evangelos Venizelos, Greece's finance minister, at a news conference in Athens on March 9, 2012. Photographer: Kostas Tsironis/Bloomberg

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March 9 (Bloomberg) -- Bloomberg's Erik Schatzker, Sara Eisen, Stephanie Ruhle and Scarlet Fu report that investors with 95.7 percent of Greece's privately held bonds will participate in the biggest sovereign debt restructuring in history after the government said it will trigger an option forcing them to take part. They speak on Bloomberg Television's "Inside Track." (Source: Bloomberg)

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March 9 (Bloomberg) -- Pawan Malik, managing director of Navigant Capital, talks about demand for European sovereign debt after Greece received approval to activate collective action clauses. He speaks with Owen Thomas and Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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March 9 (Bloomberg) -- Former Greek Finance Minister Stefanos Manos talks about the nation's debt swap agreement and its impact on southern European bonds. He speaks from Athens with Owen Thomas and Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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March 9 (Bloomberg) -- Niall Ferguson, a history professor at Harvard University and a Bloomberg Television contributing editor, talks about his interview with International Monetary Fund Managing Director Christine Lagarde Thursday night at the Women in the World conference in New York. Ferguson also talks about the outlook for Europe's debt crisis. He speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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Greek Finance Minister Evangelos Venizelos arrives for a news conference in Athens, on March 9, 2012. Photographer: Thanassis Stavrakis/AP

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“The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program,” Josef Ackermann, chairman of the Institute of International Finance who is also chief executive officer of Deutsche Bank AG, said in an e-mailed statement. Photographer: Chris Ratcliffe/Bloomberg

“It would be a big mistake to think we are out of the woods,” German Finance Minister Wolfgang Schaeuble told reporters in Berlin after the call today. “We have a chance of making it. And we have to seize that opportunity.”

Stocks rose while the euro fell after the government in Athens said it will trigger an option forcing some investors to take part in the exchange. Officials from the International Swaps and Derivatives Association called a meeting today to consider a “potential credit event” relating to Greece.

Participation Rate

Investors with 95.7 percent of Greece’s privately held bonds will participate in the swap after so-called collective action clauses are triggered, the Finance Ministry said. Bondholders tendered 152 billion euros of Greek-law bonds, or 85.8 percent, and 20 billion euros of foreign-law debt. Greece extended its offer to holders of non-Greek law bonds to March 23, after which sweeteners will no longer be available.

The result was “very strong and positive,” said Josef Ackermann, chairman of the Washington-based Institute of International Finance, which led negotiations with the Greek government on behalf of private bondholders. “These are important steps towards resolving the Greek debt crisis, addressing the overall fiscal and sovereign debt problems in the euro area, and restoring financial stability.”

Even with steps taken toward the goal of the exchange, to reduce the 206 billion euros of privately held Greek debt by 53.5 percent, Greece faces hurdles ahead. Europe’s most indebted nation will be saddled with a debt level of 120.5 percent of gross domestic product by 2020 under current targets. The Greek government must continue to meet the terms laid down by its international creditors to receive aid payments at three-monthly intervals. Elections due in April or May might still upend adherence to the measures demanded.

CDS Contracts

With Greece now in a fifth year of recession, Prime Minister Lucas Papademos’s government had said that it was ready to force holders of Greek-law bonds into the swap. The use of collective action clauses may trigger $3 billion of insurance payouts under rules governing credit-default swap contracts.

Greek Finance Minister Evangelos Venizelos said that participation “surpassed expectations” and he would recommend to Cabinet the authority to activate collective action clauses.

“This is a dangerous precedent that has been set,” John Wraith, fixed-income strategist at Bank of America Merrill Lynch, said in an interview on Bloomberg Television’s “Countdown” with Linzie Janis and Owen Thomas. For Greece, “yes, it is probably necessary, but it is just another hurdle crossed rather than some sort of solution.”

The euro weakened for the first time in three days, dropping 0.9 percent to $1.3156 as of 2:45 p.m. in Berlin. The Stoxx Europe 600 Index gained 0.6 percent to 265.61.

‘Mild Negative’

“There was a small possibility that for whatever reason, the participation would be so high that the CACs may not need to get triggered,” Pawan Malik, managing director of Navigant Capital, said in a Bloomberg Television interview. “For the markets this may be a mild negative today.”

The writedown is a key element in European leaders’ efforts to turn the tide against the crisis that first emerged in Greece in late 2009, then forced Ireland and Portugal to follow Greece in requiring bailouts.

Germany and France, Europe’s two biggest economies that have steered the euro-area’s response to the crisis, welcomed the debt-swap take-up. The swap was a “great success” and “good news,” and “hits all the objectives we set ourselves,” French Finance Minister Francois Baroin said on RTL Radio.

Merkel ‘Pleased’

Chancellor Angela Merkel is “pleased” about the “high level of participation of private creditors,” Steffen Seibert, her chief spokesman, said in Berlin. It is “an encouraging result that will help put Greece on a path to stability. What’s important now is for Greece to seize the opportunity offered by this debt swap, meaning it implements the agreed programs.”

Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas SA and Commerzbank AG (CBK), had said they would agree to the offer before it closed yesterday at 10 p.m. Athens time.

In the exchange, investors will receive new bonds with a face value of 31.5 percent of the old ones together with notes from the European Financial Stability Facility. The new debt is governed by English law and comes with warrants that will provide extra income in years when Greek economic growth exceeds thresholds. The net present value loss for investors is more than 70 percent.

“Despite all the justified happiness about this issue we have to note that Greece is only buying time,” Michael Kemmer, general manager of the BdB Association of German banks, said in an interview with Deutschlandfunk radio. “This is an important step -- the private sector showed solidarity. That’s good, but the work has only just begun.”

To contact the reporter on this story: Maria Petrakis at mpetrakis@bloomberg.net

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

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Effect of Oil Price on Income Wanes in U.S.

By Moming Zhou and Shobhana Chandra - Mar 9, 2012 9:26 PM GMT+0700

Oil at $110 a barrel is taking only half as big a bite out of Americans’ pocketbooks as it did in 1981, the last time Iranian shipments were disrupted.

The cost of a barrel of crude in the U.S., adjusted for total disposable income, was $107.92 in January of this year, compared with a peak of $213.44 in the same month in 1981, according to data compiled by Bloomberg (.OILINCM) and the Energy and Commerce Departments. Oil consumption was 4.8 percent of income in 2010, compared with 9.7 percent in 1981, the data showed.

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Retail gasoline rose to $3.793 a gallon in the week ended March 5, the highest level at this time of the year in records going back to 1990, according to the Energy Department. Photographer: Andrew Harrer/Bloomberg

Chart: Uploaded by 27849 at GMT:2012-03-06T21:30:16

Audio Download: Brookshire’s Bern Says Oil Has a $20 ‘Risk Premium’

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Barack Obama, US president, said “higher gas prices are like a tax straight out of your paycheck.” Photographer: Ron Sachs/Pool via Bloomberg

For all the concern over the fallout from sanctions against Iran and the prospect of gasoline topping $4 a gallon in a U.S. election year, the distress caused by rising oil prices is being mitigated by improved household purchasing power, a strengthening economy and America’s growing energy independence.

“The threshold to withstand the run-up in energy prices is higher than most people think,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, in a phone interview March 6. “We can tolerate fuel at $4. Job growth is stronger and incomes are looking very decent. The economy is on firmer footing.”

Gross domestic product grew at a 3 percent annual rate in the fourth quarter of 2011, the most since the second quarter of 2010, while unemployment held at a three-year low of 8.3 percent in February, raising the likelihood consumers will boost spending.

Oil futures for April delivery slid 15 cents to $106.43 a barrel at 9:01 a.m. on the New York Mercantile Exchange, bringing the gain this year to 7.7 percent. They exceeded $110 on March 1 for the first time since May 4.

Hostage Crisis

When adjusted prices reached an all-time high 31 years ago, Iran had stopped crude shipments following the seizure of the U.S. embassy in Tehran and the standoff over the fate of 52 American hostages. To fight accelerating inflation, Federal Reserve Chairman Paul Volcker allowed the federal funds rate to rise to 22 percent in July 1981, helping push the economy back into a recession which started that month and lasted 16 months.

Oil is rising again as Iran threatens to close the Strait of Hormuz, the transit point for about 20 percent of global crude cargoes, following the European Union’s Jan. 23 pledge of an oil embargo starting July 1 to pressure the Islamic republic to not build a nuclear weapon.

While a surge in energy prices may slow growth, concern that it may push the U.S. into a recession is premature, according to Neal Soss, chief economist at Credit Suisse in New York.

Less Usage

“Higher gas prices don’t help, but before you get really nervous you need to see them go much higher,” he said on March 7 in a phone interview. “The economy will continue to grow through the year.”

Declining fuel use compared with past decades may also be helping Americans cope with increased prices at the pump. Household consumption of energy as a share of total spending was 5.6 percent this year, down from 8.9 percent in 1980, according to Riccadonna of Deutsche Bank.

The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the Energy Department. That’s the highest level since 1992.

Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal.

Gasoline Prices

Retail gasoline rose to $3.793 a gallon in the week ended March 5, the highest level at this time of the year in records going back to 1990, according to the Energy Department. Futures on the Nymex have advanced 23 percent this year, settling at $3.314 a gallon yesterday. Prices may average $4 a gallon this summer and as much as $5 in some East Coast areas, Stephen Schork, president of the Schork Group, an energy-consulting firm in Villanova, Pennsylvania, said in an interview.

Confidence as measured by the Bloomberg Consumer Comfort Index (COMFCOMF) was minus 36.7 in the week ended March 4, the highest since April 2008, up from minus 38.8 in the prior period, according to figures released yesterday. Auto sales in February accelerated to a 15.03 million annual rate, the fastest in four years, from 14.13 million in January, according to Ward’s Automotive Group.

The U.S. has added more than 200,000 jobs for three consecutive months. A report today showed payrolls rose by 227,000 in February, exceeding the median forecast of economists surveyed by Bloomberg News and following a 284,000 gain the prior month.

Fuel Bills

A modest increase in the hours worked and payroll growth at the recent pace would mean nominal disposable income grows by almost $500 billion this year, according to Soss of Credit Suisse.

While employment and the economy have dominated the presidential election campaign, exit polls show fuel bills are an increasing concern for voters. In Ohio’s March 6 presidential primary, 93 percent of Republican primary voters said gasoline prices were “a factor” in their vote, with 74 percent saying they were “an important factor.”

“Higher gas prices are like a tax straight out of your paycheck,” President Barack Obama told an audience at a Daimler Trucks North America plant in Mount Holly, North Carolina March 7. “You and I both know there are no quick fixes to this.”

Former House Speaker Newt Gingrich of Georgia promised in a Feb. 22 Republican presidential debate that as president he would pursue an energy program including drilling in the Arctic National Wildlife Refuge so “every American can look forward to $2.50 per gallon gasoline.” Fellow candidate Mitt Romney said Obama “has tried to slow the growth of oil and gas production in this country, and coal production” in a March 1 speech in Fargo, North Dakota.

Oil Cheaper Today

Bloomberg’s numbers use the Energy Department’s monthly average price that refineries pay for imported oil, adjusted to reflect data on disposable income from the Commerce Department’s Bureau of Economic Analysis.

Even taking into account population growth, oil is cheaper today than it was three decades ago. Adjusted for per capita disposable income, prices peaked at $156 in January 1981.

“The income factor does play a role” in absorbing rising oil prices, said Sander Cohan, a principle at Energy Security Analysis Inc. in Wakefield, Massachusetts. “The reaction to higher energy prices is always a move toward efficiency.”

Unadjusted nominal import prices started to rise in 1979 to peak at $39 a barrel in February 1981, more than doubling from the $14.9 level of December 1978.

Income Factor

The Iranian Revolution, which began in late 1978, resulted in a drop in Iran’s oil production of 3.9 million barrels per day from 1978 to 1981, according to the Energy Department. That’s about 6.4 percent of 1981’s world oil production, standing at 60.6 million barrels a day, department data showed.

Production dropped further during the Iran-Iraq War, which started in 1980. By the following year output from the Organization of Petroleum Exporting Countries declined to 22.8 million barrels per day, 7 million barrels below its level for 1978, according to the department.

This year’s rise in global oil costs “is likely to push up inflation temporarily while reducing consumers’ purchasing power,” Fed Chairman Ben S. Bernanke said in semi-annual testimony to Congress on March 1. He also said policy makers expect inflation will remain “subdued.”

Gasoline’s gains are pinching Americans’ pockets just as the economy is gaining momentum, according to Neil Dutta, an economist at Bank of America Corp. in New York. The increase in fuel costs may trim as much as half a percentage point from U.S. economic growth, he said.

“The gas price story is damping growth prospects,” he said. “The economy is in a better place than last year, but it isn’t materially better. The increase in energy prices is a significant headwind.”

-- With assistance from Mike Dorning, Roger Runningen, Craig Torres and Carlos Torres in Washington and Edward Klump in Houston. Editors: Philip Revzin, Justin Carrigan

To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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Stocks Advance With Dollar as Treasuries Retreat on U.S. Employment Growth

By Rita Nazareth and Allison Bennett - Mar 9, 2012 9:37 PM GMT+0700

Stocks and the dollar gained, while Treasuries retreated, after stronger-than-forecast growth in U.S. payrolls bolstered optimism in the world’s largest economy. The euro weakened as Greece said it triggered an option compelling investors to take part in its debt swap.

The Standard & Poor’s 500 Index increased 0.1 percent at 9:35 a.m. in New York. The euro depreciated 1.1 percent to $1.3127. The yield on the 10-year Treasury rose one basis point to 2.03 percent. Italy’s 10-year bond yield increased three basis points to 4.83 percent, erasing earlier declines. Copper rose 0.2 percent, while oil was little changed.

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Traders work at the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg

U.S. payrolls increased by 227,000, following a revised 284,000 gain in January that was bigger than first estimated, the Labor Department said. The median projection of economists in a Bloomberg News survey called for a 210,000 rise. The Greek government said it reached its target in the biggest sovereign restructuring in history, with a 95.7 percent participation rate among investors after it received approval to activate collective action clauses.

“We can sit back because the U.S. is not going into a recession even though Europe is in a recession,” Stephen Wood, the New York-based chief market strategist for Russell Investments, said in a telephone interview. His firm oversees $137.6 billion. “These jobs numbers are not fantastic, but they are consistent with that slow, non-recessionary economic growth forecast.”

Bull Market Anniversary

Today is the three-year anniversary of the bull market in U.S. stocks that followed the global financial crisis. The S&P 500 has rallied 102 percent from its 12-year low on March 9, 2009, while the MSCI All-Country World Index jumped 91 percent.

The dollar strengthened against 11 of 16 major peers, rising more than 1 percent versus the currencies of Norway, Sweden and Denmark. Today’s jobs data fueled speculation that the American economy is improving enough that the Federal Reserve will not see a need to undertake a third round of bound purchases known as quantitative easing, or QE3.

“It’s good news for the U.S. economy, arguably good enough news that prospects of QE3 start to become much more remote,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York. “The knee-jerk dollar strength was across the board but for risk-on currencies I expect them to regain a little bit of footing.”

European Stocks

Three shares rose for every two that declined in the Stoxx 600 (SXXP). London Stock Exchange Group Plc rallied 7.4 percent, the most since June, after agreeing to buy a majority stake in LCH.Clearnet Group Ltd. for 463 million euros ($612 million). Lagardere SCA, France’s largest publisher, tumbled 7 percent after its 2012 outlook prompted analysts to cut profit targets.

The euro depreciated 0.3 percent against the yen and fell 0.3 percent versus the pound. The Dollar Index climbed 0.9 percent, with the U.S. currency appreciating 0.3 percent against the yen.

Greek government bonds due in February 2023 to be issued after the nation’s debt swap is completed were bid at a price of 25.25 cents on the euro, according to Commerzbank AG data on Bloomberg. The securities were offered at 26 cents, according to Jefferies Group Inc. The 2 percent bond had a bid yield of 19.84 percent and an offer rate of 19.42 percent, the data showed.

The MSCI Emerging Markets Index (MXEF) advanced 0.7 percent, paring this week’s drop to 1.8 percent. The Shanghai Composite (SHCOMP) and the Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong both advanced 0.8 percent after a report showed consumer prices rose at the slowest pace in almost two years. The BUX Index (BUX) jumped 1 percent in Budapest. The BSE India Sensitive Index (SENSEX) rose 2.1 percent as trading resumed after yesterday’s holiday.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

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

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Private Investors Said to Agree to Swap 85% of Greek Debt

By Maria Petrakis - Mar 9, 2012 1:50 PM GMT+0700

The Greek government said it reached its target in the biggest sovereign restructuring in history, with a 95.7 percent participation rate among investors after it received approval to activate collective action clauses.

Bondholders tendered 152 billion euros ($201 billion) of Greek-law bonds, or 85.8 percent of the total, after the government offered to swap their holdings for new securities under the debt exchange. Twenty billion euros of foreign-law bonds were also tendered, according to an e-mailed statement from the Greek Finance Ministry.

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The Acropolis in Athens. Photographer: Petros Giannakouris/AP

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March 9 (Bloomberg) -- John Wraith, a fixed-income strategist at Bank of America Merrill Lynch, talks about the restructuring of Greece's sovereign debt. He speaks with Owen Thomas and Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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March 9 (Bloomberg) -- The Greek government said it reached its target in the biggest sovereign restructuring in history, with a 95.7 percent participation rate among investors after it received approval to activate collective action clauses. Nicole Itano reports on Bloomberg Television's "Countdown" with Linzie Janis and Owen Thomas. (Source: Bloomberg)

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Pedestrians pass the headquarters of Greece's central bank in Athens, Greece. Photographer: Kostas Tsironis/Bloomberg

The euro was down 0.3 percent at $1.3239 after the release at 8:40 a.m. in Athens. Asian stocks rose for a second day.

“I wish to express my appreciation to all of our creditors who have supported our ambitious program of reform and adjustment and who have shared the sacrifices of the Greek people in this historic endeavor,” Finance Minister Evangelos Venizelos said in the statement. He is due to hold a press conference at 1 p.m. Athens time.

With Greece again the focus of the euro-area debt crisis now in its third year, the goal of the exchange was to reduce the 206 billion euros of privately held Greek debt by 53.5 percent. Together with a 130 billion-euro second Greek aid package, the writedown is a key element in European leaders’ efforts to turn the tide against the crisis that has roiled Europe, forcing Ireland and Portugal to follow Greece in requiring bailouts.

Forced Into Swap

While Prime Minister Lucas Papademos’s government had said it would prefer a voluntary deal, it indicated a readiness to use collective action clauses to force holders of Greek-law bonds into the swap if the private sector involvement fell short and it got approval from investors to change the bonds’ terms. The government said it wanted participation above 90 percent and was seeking a minimum level of 75 percent.

The International Swaps and Derivatives Association said the determinations committee will meet at 1 p.m. London time to consider a “potential credit event” relating to Greece. European finance ministers will hold a conference call at the same time to discuss the swap result.

“The market had already priced this in,” Pawan Malik, managing director of Navigant Capital, said in an interview on Bloomberg Television’s “Countdown” with Owen Thomas and Linzie Janis. “There was a small possibility that for whatever reason, the participation would be so high that the CACs may not need to get triggered,” he said. “For the markets this may be a mild negative today.”

BNP Paribas, Commerzbank

Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas SA and Commerzbank AG (CBK), had said they would agree to the offer before it closed yesterday at 10 p.m. Athens time.

In the exchange, investors will receive new bonds with a face value of 31.5 percent of the old ones together with notes from the European Financial Stability Facility. The new debt is governed by English law and comes with warrants that will provide extra income in years when Greek economic growth exceeds thresholds. The net present value loss for investors is more than 70 percent.

The swap is meant to help reduce Greece’s debt to 120.5 percent of gross domestic product by 2020. Greece is now in its fifth year of a recession.

To contact the reporter on this story: Maria Petrakis at mpetrakis@bloomberg.net

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

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Payrolls in U.S. Climb 227,000; Jobless Rate Holds at 8.3%

By Alex Kowalski - Mar 9, 2012 9:36 PM GMT+0700

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U.S. Payrolls Climb, Unemployment Rate at 8.3%

Employers in the U.S. boosted payrolls more than forecast in February, capping the best six month streak of job growth since 2006. The unemployment rate held at 8.3 percent.

The 227,000 increase in payrolls followed a revised 284,000 gain in January that was bigger than first estimated, Labor Department figures showed today in Washington. The median projection of economists in a Bloomberg News survey called for a 210,000 rise in February employment.

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A Chrysler Group LLC employee works on an SUV at the company's assembly plant in Belvidere, Illinois, U.S., on Feb. 2, 2012. Photographer: Daniel Acker/Bloomberg

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March 9 (Bloomberg) -- Joseph Grano, chairman and chief executive officer of Centurion Holdings LLC, discusses the U.S. economy, labor market and presidential election. Grano, speaking with Betty Liu on Bloomberg Television's "In the Loop," also talks about tax policy. (Source: Bloomberg)

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March 9 (Bloomberg) -- Lewis Alexander, chief U.S. economist at Nomura Holdings Inc., talks about the February U.S. employment report released today. Payrolls increased by 227,000, following a revised 284,000 gain in January that was bigger than first estimated, Labor Department figures showed. The unemployment rate held at 8.3 percent. Alexander speaks with Stephanie Ruhle on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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March 9 (Bloomberg) -- Employers in the U.S. boosted payrolls by 227,000 in February, more than forecast, following a revised 284,000 gain in January that was bigger than first estimated, Labor Department figures showed today in Washington. The unemployment rate held at 8.3 percent. Peter Cook and Michael McKee report on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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Employees from NYC Business Solutions, look over resumes at the New York Career Fair in New York. Photographer: Scott Eells/Bloomberg

More jobs are helping fuel the wage gains that drive consumer spending, which accounts for about 70 percent of the economy. The latest pickup in employment may not be convincing enough for Federal Reserve Chairman Ben S. Bernanke, who last week said the labor market remains “far from normal,” a sign policy makers continue to see merit in keeping interest rates low for several years.

“The labor market has found its legs in the last few months, and it looks like there’s enough of a broad base that the momentum can be sustained,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who projected a 225,000 gain in payrolls. “This leaves the Fed in a bit of limbo as it’s not strong enough to convince them that we’re about to accelerate to much stronger rates of economic growth.”

Trade Deficit Widens

A separate report today from the Commerce Department showed the trade deficit widened in January to the largest since October 2008 as imports rose to a record.

The gap increased 4.3 percent to $52.6 billion from a revised $50.4 billion in December. The median estimate of economists surveyed by Bloomberg News called for a deficit of $49 billion in January. Exports of capital goods, as well as cars and automobile parts, climbed to a record.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,368.31 at 9:31 a.m. in New York. The yield on the benchmark 10-year Treasury note climbed to 2.03 percent from 2.01 percent late yesterday.

Payroll estimates from 94 economists in the Bloomberg survey ranged from increases of 125,000 to 275,000 after an initially estimated 243,000 gain the prior month. Revisions added a total of 61,000 jobs to payrolls in December and January.

Some 1.2 million jobs were created in the last six months, the most since the same period ended May 2006.

‘Hiring Going On’

“There is hiring going on,” Richard Fearon, chief financial officer at Eaton Corp. (ETN) said at a March 6 industrial conference in New York. The Cleveland-based maker of circuit breakers and truck transmissions will “definitely need more manpower to serve” growing demand for tractor-trailers and for the equipment used in construction and hydraulics, he said.

The unemployment rate, derived from a separate survey of households, was forecast to hold at 8.3 percent, according to the survey median. The jobless rate held steady even as the survey showed the labor force grew. Employment climbed by 428,000 in February, while the labor force rose 476,000.

The participation rate, which indicates the share of working-age people in the labor force, rose to 63.9 percent from 63.7 percent.

Private payrolls, which exclude government agencies, rose 233,000 in February after a revised gain of 285,000 the prior month. They were projected to climb by 225,000. Manufacturing payrolls increased by 31,000 after a revised 52,000 gain.

‘Modest and Uneven’

Even with the “positive developments” in the job market, Bernanke told lawmakers last week the “modest and uneven” expansion needs the support of monetary policy. The central bank said in January that economic conditions are likely to warrant low interest rates at least through late 2014.

Policy makers meeting on March 13 are likely to repeat that view while refraining from any additional easing measures, say economists, including Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida.

The Commerce Department last week reported the economy grew at a 3 percent annual pace in the fourth quarter after a 1.8 percent gain in the prior three months.

“The unemployment rate remains elevated, long-term unemployment is still near record levels and the number of persons working part time for economic reasons is very high,” Bernanke said during a Feb. 29 testimony to Congress. Fed policy makers judge “that sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives” for stable prices and maximum employment, he said.

Retailing, Services

Employment at service-providers increased 203,000. Retail trade payrolls fell 7,400 in February. Professional and business service payrolls increase 82,000 last month, including a 45,200 pickup in temporary hiring.

Education and health services employment jumped 71,000, the most since September 2006, according the Labor Department.

Construction companies reduced payrolls by 13,000 workers last month, the biggest drop since January 2011.

Government payrolls decreased by 6,000 in February, reflecting cutbacks at the federal and state levels.

Average hourly earnings rose 0.1 percent to $23.31, today’s report showed. The average work week for all workers held at 34.5 hours.

The so-called underemployment rate, which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking, decreased to a three-year low of 14.9 percent from 15.1 percent.

The report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more fell as a percentage of all jobless, to 42.6 percent from 42.9 percent.

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

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

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U.S. Stocks Advance as Employment Growth Tops Forecasts

By Rita Nazareth - Mar 9, 2012 9:42 PM GMT+0700

U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third straight day, after government data showing the economy added more jobs than forecast last month bolstered optimism in the economy.

Citigroup Inc. (C) and Anadarko Petroleum (APC) Corp. added at least 0.7 percent to pace gains among the biggest companies. Starbucks (SBUX) Corp., the world’s biggest coffee-shop operator, rallied 2.2 percent on plans to introduce a new single-cup brewer. Green Mountain Coffee Roasters Inc. (GMCR) tumbled 15 percent. Texas Instruments (TXN) Inc., the largest maker of analog semiconductors, fell 1.5 percent after cutting sales and profit forecasts.

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Traders work at the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg

The S&P 500 added 0.2 percent to 1,369.08 at 9:40 a.m. New York time. The benchmark gauge for American equities increased 1.9 percent in three days. The Dow Jones Industrial Average gained 20.29 points, or 0.2 percent, to 12,928.23 today.

“We can sit back because the U.S. is not going into a recession even though Europe is in a recession,” Stephen Wood, the New York-based chief market strategist for Russell Investments, said in a telephone interview. His firm oversees $137.6 billion. “These jobs numbers are not fantastic, but they are consistent with that slow, non-recessionary economic growth forecast.”

The 227,000 increase in payrolls followed a revised 284,000 gain in January that was bigger than first estimated, Labor Department figures showed today in Washington. The median projection of economists in a Bloomberg News survey called for a 210,000 rise in February employment. The jobless rate held at 8.3 percent.

Rescue Package

Investors also watched developments in Europe’s attempts to tame its debt crisis. Greece pushed through the biggest sovereign restructuring in history after cajoling private investors to forgive more than 100 billion euros ($132 billion) of debt, opening the way for a second rescue package.

“The jobs report was solid, but not spectacular,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, said in a telephone interview. His firm manages $663 billion. “This helps depict the U.S. as the standout Western economy and continuing to slowly, but steadily repair. In Greece, they are going to force the debt exchange through the collective action clauses. This is a positive. The path of least resistance for the S&P 500 this year is up.”

Today is the third anniversary of the 2009 bear-market low for the S&P 500. The benchmark gauge has risen 102 percent since closing at 676.53 on March 9, 2009, on speculation the economy would recover from the worst contraction since the Great Depression. The index is up 8.9 percent in 2012.

Largest Companies

Some of the largest companies gained today. Citigroup advanced 0.7 percent to $34.25. Anadarko Petroleum increased 3.5 percent to $86.55.

Starbucks rallied 2.2 percent to $51.46. The Verismo machine will make espresso-based beverages and brewed coffee. Starbucks said it will advertise and sell the machine and single-cup pods through a “strategic relationship” with closely held Krueger GmbH. Green Mountain tumbled 15 percent to $53.16.

Molycorp Inc. (MCP) rose 8.2 percent to $28.10. After losing two- thirds of its value in 10 months as demand for rare-earth metals imploded, it’s now seeking to boost shareholder returns with its biggest takeover. The owner of the largest rare-earth deposit outside China yesterday agreed to buy Neo Material (NEM) Technologies Inc. for C$1.3 billion ($1.3 billion) in cash and stock.

With Neo Material, Molycorp will gain the ability to produce more types of magnets and increase sales to China, boosting profitability, Byron Capital Markets Ltd. said.

‘Stronger Story’

“It actually makes it a stronger story,” Jonathan Hykawy, a Toronto-based analyst at Byron Capital, said in a telephone interview. “Molycorp effectively has the pieces of the puzzle if this acquisition goes through to basically do the entire magnet industry. That’s a big, big, added slice of added cash flow that Molycorp really isn’t paying all that much for.”

Smith & Wesson Holding Corp. (SWHC) increased 12 percent to $6.36. The handgun manufacturer reported third-quarter earnings excluding some items of 8 cents a share, beating the average analyst estimate of 4 cents.

Texas Instruments lost 1.5 percent to $32.11. First-quarter revenue will be $2.99 billion to $3.11 billion, the Dallas-based company said. Analysts on average had estimated $3.16 billion, according to data compiled by Bloomberg. Net income will be 15 cents to 19 cents a share, compared with projections of 21 cents.

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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Wells Fargo Ends Free Checking in 6 More States

By Dakin Campbell - Mar 9, 2012 3:33 AM GMT+0700

Wells Fargo & Co. (WFC), the bank with the most U.S. branches, ended free checking in six eastern states as it seeks to recover revenue lost under new financial rules.

Customers in New York, New Jersey, Connecticut, Georgia, Delaware and Pennsylvania must pay a $7 monthly fee for a basic checking account if they receive paper statements and $5 if they select electronic statements, Lisa Westermann, a Wells Fargo spokeswoman, said in a phone interview. Customers can get the fee waived if they direct deposit more than $500 in their account each month, or maintain a $1,500 balance.

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Wells Fargo & Co. signage is displayed at a bank branch in New York. Photographer: Scott Eells/Bloomberg

“We’re rolling it out region by region,” Westermann said in an e-mail. “We plan to roll it out through all the regions eventually.”

U.S. banks are asking customers to make up lost revenue after regulators curbed overdraft fees and as a new consumer protection agency comes online. Wells Fargo and rivals Bank of America Corp. and JPMorgan Chase & Co. abandoned plans last year to levy debit-card fees after consumers protested. Massachusetts Secretary of the Commonwealth William Galvin has said banks should be barred from holding state deposits unless they offer customers free basic checking.

Wells Fargo gained 3.4 percent to $31.45 as of 3:22 p.m. in New York. The San Francisco-based company has the biggest market value among U.S. lenders at about $166 billion.

Free Checking Ends

“Free checking essentially went away in 2010,” Westermann said. “As time evolved, we have been introducing fees into other accounts, with a number of waivers for customers.” Most account holders will get the waiver, she said.

The six eastern U.S. states were part of Wachovia Corp.’s branch network and account holders in most states where Wells Fargo already had outlets have already absorbed the fee, Westermann said.

In California, Wells Fargo’s largest market, the former Wachovia checking accounts haven’t been assessed the new fees, Westermann said. Wells Fargo doesn’t offer free checking accounts in the state, she said.

Wells Fargo eliminated free checking in July 2010 for new customers and later began to include existing account holders. The bank purchased Wachovia in 2008 and spent three years merging the lenders. The final Wachovia branches were rebranded in October.

“You’re seeing all banks look at new fee structures,” said Jason Goldberg, a senior bank analyst at Barclays Capital in New York, who has an “overweight/positive” rating on Wells Fargo. “Banks provide services and they expect to be compensated.” Customers can change banks if they’re unhappy with the fees, he said.

Checking-account services cost the industry about $300 annually per person, and most depositors with less than $3,000 aren’t profitable for lenders without fees including overdraft charges, said Bart Narter, a senior banking analyst at consulting firm Celent.

To contact the reporter on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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U.S. Said to Prepare Apple Lawsuit Over E-Book Price-Fixing

By Jeff Bliss and Sara Forden - Mar 9, 2012 12:29 AM GMT+0700

The U.S. Justice Department told Apple Inc. (AAPL) and five publishers that it’s preparing to sue them for allegedly fixing the prices of electronic books, according to a person familiar with the matter.

Some of the companies are in talks with the Justice Department to reach a settlement to avoid a court battle, according to the person, who wasn’t authorized to speak about the discussions publicly and declined to be identified.

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The U.S. Justice Department told Apple Inc. and five publishers that it’s preparing to sue them for allegedly fixing the prices of electronic books, according to a person familiar with the matter. Photographer: Tony Avelar/Bloomberg

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March 8 (Bloomberg) -- Scott Kessler, head of technology equity research at Standard & Poor’s, talks about the outlook for Apple Inc. and the new version of the iPad tablet computer. Kessler speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

The publishers involved in the case are Lagardere SCA (MMB)’s Hachette Book Group, News Corp. (NWSA)’s HarperCollins Publishers, Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, CBS Corp. (CBS)’s Simon & Schuster and Pearson Plc (PSON)’s Penguin Group (USA), the person said.

The Justice Department is looking into how Cupertino, California-based Apple changed the way publishers charged for e- books in early 2010 when it was getting ready to introduce its first iPad, the person said. European antitrust regulators also have said they’re probing whether Apple’s pricing deals with publishers restrict competition. Sharis Pozen, the acting chief of the antitrust division of the Justice Department, told Congress in December the division was probing the possibility of anticompetitive practices in the e-book industry.

30 Percent Cut

Gina Talamona, a Justice Department spokeswoman, Kristin Huguet, an Apple spokeswoman, Adam Rothberg, a spokesman for Simon & Schuster, Sophie Cottrell, a spokeswoman for Lagarde’s Hachette Book Group, Erica Glass, a spokeswomen for Pearson’s Penguin Group USA and Erin Crum, a spokeswoman for HarperCollins, all declined to comment.

The U.S. threats to sue publishers over the pricing practices and the settlement talks were reported earlier in the Wall Street Journal.

When Apple came out with the iPad, it allowed publishers to set book prices as long as Apple got a 30 percent cut and publishers offered their lowest prices through Apple.

This so-called agency model spread throughout the e-book industry. It overtook Amazon.com Inc. (AMZN)’s wholesale model of buying books at a discount from publishers and then having Amazon.com set the price of books being read on its Kindle tablet.

To contact the reporters on this story: Jeff Bliss in Washington at jbliss@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

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Wall Street Bonuses May Surge 20% This Year

By Christine Harper - Mar 9, 2012 1:25 AM GMT+0700

Wall Street bonuses hit bottom and are poised to rebound about 20 percent this year as markets improve, according to Alan Johnson, president and founder of compensation consulting company Johnson Associates Inc.

“The major Wall Street firms have cut enough of their costs that it doesn’t take much in the way of increased revenue to generate significant profits or pay,” Johnson said in a telephone interview today. “A percentage increase off a smaller number still isn’t a huge number.”

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A trader on the floor of the New York Stock Exchange. Photographer: Gino Domenico/Bloomberg

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Wall Street near the New York Stock Exchange. Photographer: Jin Lee/Bloomberg

JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) were among New York-based banks that reduced bonuses last year to help keep costs in line with falling revenue from sales and trading. Incentive pay at the major investment and commercial banks fell 20 percent to more than 40 percent in 2011, Johnson estimated in a presentation to the Wall Street Compensation and Benefits Association this month.

The industry is at a “positive inflection point,” Johnson said in the slide presentation. “Compensation will increase significantly” as firms achieve a return on equity of around 15 percent in the next three years, he said.

Fixed-income traders, whose bonuses were cut last year by an average of 35 percent to 45 percent according to Johnson, are likely to see the biggest percentage gains this year, he said.

Fixed-income “is doing better but it’s gone from very poor to poor,” Johnson said. “But that’s a pretty big change.”

For chief executive officers at large banks, “normal” annual pay is in the range of $13 million to $23 million, Johnson estimated, based on historical data. That should be what they get in 2012, he said, “assuming that performance continues to improve.”

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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Household Worth in U.S Gains as Stocks Rebound

By Shobhana Chandra - Mar 9, 2012 12:50 AM GMT+0700

Play

Foreclosure Aid May Help Property Investors

Household wealth in the U.S. climbed from October through December for the first time in three quarters as an increase in stock prices outstripped a decline in home values.

Net worth for households and non-profit groups increased by $1.19 trillion in the fourth quarter, or 2.1 percent from the previous three months, to $58.5 trillion, the Federal Reserve said today in its flow of funds report from Washington. Housing wealth decreased by the most in more than a year.

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Buildings in San Francisco. Photographer: Chip Chipman/Bloomberg

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Rows of houses stand in Las Vegas, Nevada. Photographer: Jacob Kepler/Bloomberg

The Standard & Poor’s 500 Index (SPX), which rose 11 percent in the final three months of 2011, is again climbing this year as the improving job market builds confidence in the expansion. At the same time, the gain in wealth last quarter was less than half the previous period’s slump, indicating households may continue to repair balance sheets hurt by the recession.

“Consumers are generally repairing their balance sheets,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “The performance of the stock market has been a crutch for households. Consumer spending is constrained by the need to pay down debt.”

Since reaching a five-year low of $50.5 trillion in the first quarter of 2009, net worth has improved by $8 trillion. That still leaves it $8.4 trillion below the record high of $66.8 trillion reached in the quarter ended June 2007, six months before the recession began.

Real-Estate Wealth

The value of household real estate fell by $367.4 billion in the last three months of 2011, the first decrease in three quarters.

Owners’ equity as a share of total household real-estate holdings dropped to 38.4 percent last quarter from 38.9 percent.

The S&P/Case-Shiller national index of home prices decreased 4 percent in the fourth quarter from the same time in 2010, according to figures released Feb. 28. The gauge fell 3.8 percent from the prior three months before seasonal adjustment, and fell 1.7 percent after taking those changes into account.

The value of financial assets, including stocks and pension fund holdings, held by American households increased by $1.46 trillion in the fourth quarter, according to today’s flow of funds data.

The S&P 500 has risen 7.6 percent this year through yesterday amid better-than-estimated economic data and expectations Europe would tame its debt crisis.

Household Debt

Household debt rose at a 0.3 percent annual rate last quarter, the first increase in more than three years, today’s report showed. Mortgage borrowing decreased at a 1.5 percent pace, the 11th consecutive drop. Other forms of consumer credit, including auto and student loans, climbed at a 6.9 percent pace, the biggest gain in at least seven years.

The labor market may help to repair household finances. Payrolls rose by 210,000 in February and the jobless rate held at 8.3 percent, according to the median forecast of economists surveyed by Bloomberg News before a Labor Department report tomorrow.

Company balance sheets are faring better than households, today’s report showed. Businesses had a record $2.23 trillion in cash and other liquid assets at the end of the fourth quarter, up from $2.12 trillion in the prior three months.

Total non-financial debt climbed at a 4.9 percent annual pace last quarter, led by a 13 percent increase by the federal government and a 4.6 percent gain among businesses. State and local government borrowing dropped at a 1 percent pace.

To contact the report on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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

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S&P 500 Caps Biggest Two-Day Advance of the Year

By Rita Nazareth - Mar 9, 2012 4:38 AM GMT+0700

U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest two-day advance of the year, as Greece moved closer to completing its debt swap.

Banks (S5BANKX) had the biggest increase in the S&P 500 among 24 groups. Wells Fargo & Co. and JPMorgan Chase & Co. (JPM) rose at least 1.2 percent. Alcoa Inc. (AA) and Caterpillar Inc. (CAT) added more than 1.8 percent to pace gains among the biggest companies. Coach Inc. (COH), the largest U.S. luxury handbag maker, climbed 4.6 percent after saying its business continues to be “strong” in China. McDonald’s (MCD) Corp. lost 3.2 percent as sales trailed estimates.

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Trader Jason Weisberg, left, on the floor of the New York Stock Exchange on March 8, 2012. Photographer: Richard Drew/AP

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March 8 (Bloomberg) -- Bloomberg's Pimm Fox and Deborah Kostroun report on the performance of the U.S. equity market today. U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest two-day advance of the year, as Greece moved closer to completing its debt swap. (Source: Bloomberg)

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March 8 (Bloomberg) -- Laszlo Birinyi, president and founder of Birinyi Associates Inc., talks about the outlook for stocks. Birinyi, speaking with Betty Liu, Dominic Chu and Josh Lipton on Bloomberg Television's "In the Loop," also discusses his view of Apple Inc. (Source: Bloomberg)

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March 8 (Bloomberg) -- Gina Martin Adams, an equity strategist at Wells Fargo Securities LLC, and Mark Lehmann, president of JMP Securities, talk about the outlook for U.S. stocks and investment strategy. They speak with Lisa Murphy and Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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March 8 (Bloomberg) -- Gary Thayer, chief macro strategist at Wells Fargo Advisors LLC, discusses the outlook for U.S. stocks and market volatility. Thayer speaks on Bloomberg Television's "InBusiness with Margaret Brennan." (Source: Bloomberg)

The S&P 500 rose 1 percent to 1,365.91 at 4 p.m. New York time, adding 1.7 percent in two days. The Dow Jones Industrial Average rose 70.61 points, or 0.6 percent, to 12,907.94. The Russell 2000 Index of small companies gained 1.3 percent to 806.34. About 6.1 billion shares changed hands on U.S. exchanges today, or 8.8 percent below the three-month average.

“Greece has no choice and the bondholders have no choice,” said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which oversees $10.5 billion. “They’re both in the mud. The swap will go through. That will cause a moderate sigh of relief in the market. How long it will extend? That’s the big question mark.”

Stocks gained as Greece’s government got about 85 percent of bondholders to tender their holdings of the country’s debt for new securities in the biggest restructuring in history. A final result will be released tomorrow at 8 a.m. in Athens, a government official said. Finance Minister Evangelos Venizelos will hold a press conference at 1 p.m. Athens time.

Turn the Tide

With Greece again the focus of the euro-area debt crisis now in its third year, the goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent. Together with a 130 billion-euro second Greek aid package, the writedown is a key element in European leaders’ efforts to turn the tide against the crisis.

“They’ve bought themselves some time,” Alan Brown, the London-based group chief investment officer at Schroders Plc, said in a telephone interview. His firm oversees $283.9 billion. “Reducing Greek debt is all well and good, but it doesn’t do anything to restore Greece’s competitiveness. This problem is likely to resurface and the question is when.”

Today’s rally in stocks extended the S&P 500’s gain in 2012 to 8.6 percent. The index has risen amid better-than-estimated economic data and expectations Europe would tame its debt crisis. Technology and financial shares had the biggest gains among 10 groups this year, adding at least 13 percent.

Banks Rally

The KBW Bank Index advanced 1.4 percent today as 21 of its 24 stocks climbed. Wells Fargo (WFC) climbed 3.3 percent to $31.40. JPMorgan increased 1.2 percent to $40.44.

Investors also watched economic data as the number of Americans filing claims for jobless benefits rose to 362,000 last week, a level consistent with an improving labor market. The Labor Department will report monthly jobs data tomorrow, which economists forecast will show an increase of 225,000 private jobs and total non-farm payrolls growth of 210,000.

The Morgan Stanley Cyclical Index of companies most-tied to economic growth added 1.8 percent. The Dow Jones Transportation Average rallied 1.4 percent. A measure of homebuilders in S&P indexes increased 3.6 percent. Commodity and industrial shares had the biggest gains in the S&P 500 among 10 groups. Alcoa, the largest U.S. aluminum producer, rallied 2.3 percent to $9.77. Caterpillar, the world’s biggest maker of construction and mining-equipment, rose 1.9 percent to $110.28.

Coach, Monster

Coach advanced 4.6 percent to $76.79. Analysts’ estimates are likely to increase because of a boost in revenue and gross margins, Stifel Nicolaus & Co. said.

Monster Worldwide Inc. (MWW) surged 3.4 percent to $8.61. The online recruiting service that has lost almost 90 percent of its value is poised to extract a record takeover premium for investors. Chief Executive Officer Salvatore Iannuzzi said last week he is weighing options to boost the company’s shares after Monster traded as low as 0.67 times the value of its net assets. competitor, said Matrix Asset Advisors Inc.

“It should wrest a high premium,” said David Katz, chief investment officer at New York-based Matrix Asset Advisors Inc., which oversees about $935 million and owned Monster shares as of February. Acquirers would still be “getting it at a steal.”

McDonald’s lost 3.2 percent, the most in the Dow, to $96.96. The restaurant chain said sales at stores open at least 13 months rose 7.5 percent worldwide last month, trailing analysts’ estimates for the first time since August, as consumers cut spending in Europe.

AIG Slumps

American International Group Inc. (AIG) slumped 3.9 percent to $28.31. The U.S. Treasury Department is selling $6 billion in shares of AIG, the insurer rescued in 2008 after it suffered losses tied to wrong-way bets on the mortgage market.

Exxon Mobil Corp. (XOM) slid 1.2 percent to $84.83. The company expects its natural-gas and oil production to drop 3 percent in 2012. Exxon’s forecast is based on an average price of $111 a barrel for Brent crude, it said in a slide presentation at an investor meeting today.

Dendreon Corp. (DNDN) tumbled 7 percent to $10.12. The shares had the biggest decline in the Russell 1000 Index. The maker of the prostate cancer drug Provenge slumped after Johnson & Johnson said its rival product, Zytiga, performed better than a placebo in a trial.

Apple Inc. (AAPL) gained 2.1 percent to $541.99. The shares closed almost unchanged yesterday after the company unveiled a new version of its iPad tablet computer. Apple took over from Wells Fargo as the stock most often in the top 10 holdings of the 50 largest mutual funds in the fourth quarter, and widened its lead among the biggest hedge funds, Citigroup Inc. said.

Top 10

Apple, based in Cupertino, California, was a top-10 holding for 18 of the 50 largest U.S. mutual funds in the period, Tobias Levkovich, Citigroup’s chief U.S. equity strategist, wrote in a note yesterday. Wells Fargo, based in San Francisco, and Microsoft Corp. are in the top 10 holdings of 17 of the mutual funds. Apple gained 6.2 percent in the quarter, while the S&P 500 rallied 11 percent. Wells Fargo rose 14 percent and Microsoft added 4.3 percent.

“The 30 most held stocks for hedge funds shifted more heavily” to technology, Levkovich said in the report. “Apple remains the most-held stock for both growth and value hedge funds as well as for growth mutual funds while Wells Fargo remains the most owned for value oriented mutual funds.”

The decreasing number of industry groups in “uptrends” may foreshadow a retreat by the U.S. stock market, according to Craig W. Johnson, a technical market strategist at Piper Jaffray in Minneapolis.

Trending Higher

The amount of industries trending higher increased from October through last month to about 95 percent before slipping last week, Johnson said, citing an indicator watched by analysts who use charts to predict market direction. He said the high proportion signaled the market was due for a retreat.

“This advance is getting tired,” Johnson said in a phone interview yesterday. “As the market gets to higher and higher levels, you start to see less and less participation,” he said. “100 percent of the stocks up, 100 percent of the groups up” all the time isn’t possible.

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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Investors Agree to Swap About 85% of Greek Debt

By Christos Ziotis and Maria Petrakis - Mar 9, 2012 5:22 AM GMT+0700

Private investors agreed to swap about 85 percent of their Greek government bonds for new securities in the biggest sovereign debt restructuring in history, according to a banker briefed on the results.

Preliminary indications showed that as much as 155 billion euros ($205 billion) of the 177 billion euros of Greek-law bonds were offered, said the banker, who declined to be identified. Twelve billion euros of debt not under Greek law was also tendered, as was 7 billion euros of bonds from state-owned companies guaranteed by the government, the banker said.

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Greek police demonstrate on March 7, 2012 against the participation of pension funds in an upcoming debt-swap deal between the Greek state and private bond holders. Photographer: Louisa Gouliamaki/AFP/Getty Images

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March 8 (Bloomberg) -- Nicholas Burns, a former U.S. undersecretary of state, talks about the Greek debt crisis and the outlook for success of the country's debt swap and planned austerity measures. He speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

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March 8 (Bloomberg) -- Michael Woolfolk, managing director at Bank of New York Mellon Corp., Douglas Borthwick, managing director at Faros Trading, and Sophia Kalantzakos, a professor at New York University, talk about private investor participation in Greece's sovereign-debt restructuring. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

With Greece again the focus of the euro-area debt crisis now in its third year, the goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent. Together with a 130 billion-euro second Greek aid package, the writedown is a key element in European leaders’ efforts to turn the tide against the crisis that has roiled Europe, forcing Ireland and Portugal to follow Greece in requiring bailouts.

The euro and stocks gained before the offer’s close at 10 p.m. in Athens as Prime Minister Lucas Papademos told his Cabinet ministers he looked forward to “the maximum possible participation of the private sector,” according to an e-mailed transcript of his comments.

90 Percent?

The offer went very positively and a final result will be released today at 8 a.m. in Athens, a government official said. The number of bonds tendered in the swap is still being tallied, said the official, who declined to be identified.

Finance Minister Evangelos Venizelos will hold a press conference at 1 p.m. Athens time, the Finance Ministry said in an e-mailed statement.

“Unofficially we’ve been hearing that the acceptance rate has crossed 90 percent,” Hans Humes, president of Greylock Capital Management, said in a Bloomberg Television interview. “The deal is done and we’re going to have to see how the market reacts.” Humes is a member of a committee of private bondholders that negotiated the deal with the government.

Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas SA and Commerzbank AG, agreed to the offer.

While Greece would prefer a voluntary deal, the government has said it will use so-called collective action clauses to force holders of Greek-law bonds into the swap if the private sector involvement fell short and it got approval from investors to change the bonds’ terms. The Greek government had said it wanted participation above 90 percent and was seeking a minimum level of 75 percent.

Risk ‘Too High’

“Ideally we get above 90 and it doesn’t need to be done,” said Geoffrey Yu, a currency analyst at UBS AG, said in an interview with Bloomberg Television’s Caroline Hyde yesterday.

Compelling holdouts to take part would likely trigger insurance contracts on the debt known as credit default swaps.

“We don’t see the Greeks failing to get a deal because the risk for everyone involved is just too high,” Tobias Basse, a cross market strategist at Norddeutsche Landesbank, said yesterday in a telephone interview.

The 17-nation euro strengthened the most in two weeks against the dollar before the deadline, gaining 1 percent to $1.3278 as of 8:51 p.m. in Berlin. European stocks rallied the most in a month, with the Stoxx Europe 600 Index advancing 1.6 percent to 264.16 at the close in London.

Time to Prepare

“The markets had a very long time to be prepared for this,” Janet Henry, chief European economist at HSBC Holdings Plc, said in a Bloomberg Television interview. “There’s a lot more optimism in markets relative to where we were at the end of last year.” She cited the “breathing space” provided by the European Central Bank’s liquidity offer for banks.

In the exchange, investors will receive new bonds with a face value of 31.5 percent of the old ones together with notes from the European Financial Stability Facility. The new debt is governed by English law and comes with warrants that will provide extra income in years when Greek economic growth exceeds thresholds. The net present value loss for investors is more than 70 percent.

The swap is meant to help reduce Greece’s debt to 120.5 percent of gross domestic product by 2020, from about 160 percent currently. Greece is now in its fifth year of a recession.

The amount of the country’s bonds that is under other than Greek law totals 29 billion euros, or 14 percent of the amount eligible for the swap, Frankfurt-based KfW said. Those bonds are governed by different rules and aren’t subject to the collective action clauses retroactively added to the Greek-law debt.

To contact the reporter on this story: Christos Ziotis in Athens at cziotis@bloomberg.net Maria Petrakis at mpetrakis@bloomberg.net

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

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