Economic Calendar

Tuesday, May 1, 2012

China Manufacturing Growth Accelerates, PMI Shows

By Bloomberg News - May 1, 2012 8:16 AM GMT+0700

China’s manufacturing expanded for a fifth month in April, reducing the case for policy makers to open the taps on credit in the world’s second-largest economy.

The Purchasing Managers’ Index rose to 53.3 from 53.1 in March, China’s statistics bureau and logistics federation said in a statement today. That’s the highest reading in a year and compares with the 53.6 median forecast in a Bloomberg News survey of 27 economists. A figure above 50 indicates expansion.

Today’s data signal China may be strengthening from the slowest pace of growth in almost three years, reached last quarter. At issue for Premier Wen Jiabao is whether to extend a two-month pause in lowering banks’ required reserve ratios, as he seeks to rein in property and consumer prices without sending the economy into a so-called hard landing.

“Policy easing has already been under way and growth is picking up,” Wang Tao, a Hong Kong-based economist with UBS AG, said before the release. “Further policy relaxation is not necessary as implementation of the current policy targets should be sufficient to help growth rebound this quarter.”

A separate PMI compiled by HSBC Holdings Plc and Markit Economics showed last week that manufacturing may have contracted for a sixth month in April, according to preliminary results. The final reading of the survey, which has a different sample and methodology, is due tomorrow.

Property Crackdown

The federation’s manufacturing index is based on responses from managers at more than 820 companies in 28 industries, while HSBC’s covers more than 420 companies.

China’s gross domestic product expanded 8.1 percent in the first three months of 2012 from a year earlier in the fifth straight quarterly deceleration as authorities cracked down on property speculation and exports were hurt by Europe’s debt crisis.

The pace will slow to 7.5 percent to 8.5 percent this year and next, as a euro-area recession curbs exports, Moody’s Investors Service said in a report on April 26.

The fundamentals of the economy remain sound with growth “within a reasonable range,” the State Council said after a meeting chaired by Wen on April 13. The government also said domestic expansion faces “downward pressures” and that leaders would “maintain an appropriate level of investment.”

Wen has said the government will preemptively adjust and fine-tune policy in a “timely and appropriate” manner. China has lowered banks’ required-reserve ratio twice since November to boost liquidity and spur loan growth.

Economic Improvement

At the same time, authorities have refrained from cutting interest rates amid inflation concerns, and have paused since mid-February in lowering banks’ reserve requirements. Policy makers cut the reserve ratio for lenders twice since late November.

Signs of economic improvement include an acceleration in industrial output and surge in new lending in March. Production growth in the second quarter will be “slightly higher” than in the first three months of 2012, Zhu Hongren, a Ministry of Industry and Information Technology spokesman, said April 25.

Profits at industrial companies rose in March from a year earlier, rebounding from the first January-February decline since 2009, a statistics bureau report showed on April 27.

Beijing Automotive Group Co. Chairman Xu Heyi said April 23 that he sees “clear signs of recovery” in vehicle demand, which will keep advancing during the rest of the year. The first quarter will probably be the year’s lowest point, said Xu, leader of the state-owned automaker.

--Zheng Lifei. With assistance from Ailing Tan in Singpoare, Chua Baizhen, Penny Peng and Regina Tan in Beijing. Editors: Scott Lanman, Nerys Avery

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at

To contact the editor responsible for this story: Paul Panckhurst at


Euro Trades Near 2-Week Low Versus Yen Before Spanish Bond Sales

By Monami Yui and Kristine Aquino - May 1, 2012 8:11 AM GMT+0700

The euro was 0.3 percent from a two- week low against the yen before Spain sells notes this week amid concern Europe’s debt crisis is hurting economic growth.

Demand for the 17-nation currency was limited after Luxembourg Prime Minister Jean-Claude Juncker said he’s stepping down as head of the group of euro-area finance ministers due to Franco-German interference in managing Europe’s fiscal woes. Australia’s dollar fell versus most major peers before the Reserve Bank sets interest rates at a policy meeting today. The dollar was below 80 yen for a second day.

“I would anticipate political instability, retracing steps around fiscal austerity and weaker economic numbers all point to downside risk for the euro,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “I wouldn’t be surprised if it does underperform.”

The euro traded at 105.76 yen at 10:02 a.m. in Tokyo from the New York close yesterday, when it touched 105.47, the weakest since April 17. The common currency was little changed at $1.3239. The dollar fetched 79.89 yen from 79.82 yesterday, when it slid to as low as 79.74, the least since Feb. 22.

The so-called Aussie was at $1.0422, 0.1 percent lower than the close yesterday, when it declined 0.4 percent. The currency fetched 83.22 yen from 83.25.

Spain will auction three- and five-year notes on May 3. Yields on the nation’s 10-year bonds climbed above 6 percent last month, stoking speculation the euro area’s fourth-largest economy would follow Greece, Ireland and Portugal in seeking a bailout. Spain’s economy entered its second recession since 2009, a government report showed yesterday.

Franco-German Interference

France and Germany “act as if they are the only members of the group,” Juncker said yesterday at a podium discussion in Hamburg. He also said he’d “fully support” a potential candidacy of German Finance Minister Wolfgang Schaeuble to succeed him at the helm of the Eurogroup. A decision on replacing Juncker has been postponed until after the second round of France’s presidential election on May 6.

The euro has weakened 6.1 percent over the past year, the worst performance of the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The yen jumped 6.1 percent, the biggest gain, and the dollar rose 5.9 percent.

The Reserve Bank of Australia will reduce its overnight cash rate target by 0.25 percentage point from 4.25 percent today, according to 27 of 29 economists surveyed by Bloomberg News. The other two predict a half-percentage-point reduction.


The dollar was near a two-month low against the Japanese currency before reports forecast to show U.S. manufacturing growth eased, fanning speculation that the Federal Reserve is ready to add to monetary stimulus if the recovery falters.

The Institute for Supply Management Inc.’s factory index was 53 in April from 53.4 in March, according to a Bloomberg poll before today’s data. The Tempe, Arizona-based ISM group’s gauge of service industries, was 55.3 last month from 56 in March, economists forecast ahead of the data on May 3.

U.S. gross domestic product grew in the first quarter at a 2.2 percent annualized rate, Commerce Department figures showed last week. That lagged behind the 2.5 percent median estimate in a separate Bloomberg poll.

The Fed bought $2.3 trillion of bonds in two rounds of so called quantitative easing from December 2008 to June 2011 to stimulate the economy through lower borrowing costs.

“The weaker numbers out of the U.S. over the last week, and the general weakness in the U.S. dollar which appears to have followed, is certainly contributing to some of the yen strength,” RBS’s Gibbs said.

To contact the reporters on this story: Monami Yui in Tokyo at; Kristine Aquino in Singapore at

To contact the editor responsible for this story: Rocky Swift at


Father of Treasury Floaters Says Now Worst Time for Sales

By Liz Capo McCormick and Meera Louis - May 1, 2012 2:47 AM GMT+0700

Almost two decades after advising the U.S. to sell floating-rate notes to lower debt expenses, Campbell Harvey says starting to issue the securities now would be a costly mistake for American taxpayers.

“In an environment with historically low interest rates, the Treasury should avoid floating-rate debt as it introduces risk,” Harvey, a finance professor at Duke University’s Fuqua School of Business in Durham, North Carolina, said in a telephone interview April 17. “If interest rates go up, it puts the government at risk because they will need to come up with a lot of extra revenue to pay the interest bill.”

The U.S. Department of the Treasury. Photographer: Andrew Harrer/Bloomberg

U.S. Treasury Undersecretary for Domestic Finance Mary Miller said in a Feb. 1 press briefing that the U.S. may detail plans for floaters on May 2 when it discloses quarterly funding needs. Photographer: Andrew Harrer/Bloomberg

The U.S. may detail plans for floaters on May 2 when it discloses quarterly funding needs, Mary Miller, the Treasury Department’s undersecretary for domestic finance said in a Feb. 1 press briefing. The Treasury Borrowing Advisory Committee, the bond dealers and investors who meet quarterly with the agency, unanimously endorsed them in February, more than 19 years after Harvey told a Congressional committee that bonds with rates set periodically based on a short-term benchmark would reduce costs.

Floaters would increase the link between the government’s interest payments and movements in short-term rates, which have been near zero since 2008. The Treasury has sought to lock in borrowing costs for longer and cut the amount of outstanding short-term bills, which ballooned to $2.1 trillion during the financial crisis that began almost five years ago.

More Bills

While the administration of President Barack Obama forecasts the budget deficit will exceed $1 trillion for the fourth year, interest expense was 3 percent of the economy in fiscal 2011 compared with 4.1 percent in 1999, when the U.S. ran budget surpluses.

Floating-rate notes, which would be the first new U.S. government debt securities since Treasury Inflation-Protected Securities were introduced in 1997, may increase the supply of the safest short-term investments in the face of record demand by money market funds and investors.

The securities may appeal to investors wary that four years of Federal Reserve monetary stimulus will spark inflation and cause the central bank to lift short-term rates even though policy makers have promised to keep borrowing costs near zero through 2014.

Bond Rates

The floaters will probably have a maturity of one- to three-years initially, according to Bank of America Corp. The coupon would reset periodically based on a short-term benchmark, such as the federal funds effective rate, or the Depository Trust & Clearing Corp.’s Treasury overnight repurchase agreement index. Payments to investors would be similar to those of U.S. Treasury bills, while also increasing along with rates.

Spending programs to pull the economy out of the worst financial crisis since the Great Depression more than doubled the amount of marketable securities outstanding to $10.34 trillion from $4.34 trillion in mid-2007.

Treasury bills, securities due in a year or less, peaked at more than $2 trillion outstanding in August 2009 amid government spending on bailouts, which started under the George W. Bush administration in 2008 and continued under Obama. The programs include the $700 billion Troubled Asset Relief Program and investments in mortgage finance companies Fannie Mae and Freddie Mac. At the end of last year, the total had fallen to $1.52 trillion, still 46 percent higher than the average of $1.04 trillion since 1996.

Less Reliance

The benchmark 10-year note yield was little changed at 1.92 percent at 3:42 p.m. New York time, compared to 3.43 percent a year ago. Three-month Treasury bill rates were 0.09 percent, while the six-month bill rate was 0.14 percent.

“The Treasury is interested in limiting their reliance on bills and having to roll over so much in short-term debt,” said Alex Roever, JPMorgan Chase & Co.’s head of short-term fixed- income strategy in New York during a telephone interview on April 23. Floaters “could become sort of a bill substitute while continuing to give the Treasury access to lower rates in the front-end,” he said.

A decision may be announced in two days, when the department details sales of notes and bonds, an official who briefed reporters on condition of not being named said on Feb. 1. They are also considering allowing negative yields at Treasury bill auctions, as recommended by TBAC.

The Treasury lowered its net borrowing estimate for the current quarter today, reflecting lower government spending and higher issuances of state and local government securities. The estimate for April through June was revised to $182 billion, $19 billion less than projected in January. U.S. officials also see net borrowing of $265 billion in the quarter starting July 1.

Corporate Floaters

There’s plenty of precedent for floaters from corporate bonds. About $123 billion, or 12 percent, of the $1.01 trillion company bonds issued in 2011 paid variable interest, according to the Securities Industry & Financial Markets Association. Government agencies including Fannie Mae and Freddie Mac also sell them.

A Barclays Capital index of U.S. floating-rate debt with maturities of two- to three-years is up 2.8 percent this year. Bank of America Merrill Lynch‘s U.S. Corporate and Government Master Index has gained 1.4 percent in the same period.

The supply of inflation-linked notes, or TIPS, has surged since the government began offering them 15 years ago to lower U.S. borrowing expenses and allow retirement savings to keep pace with inflation. There were $769 billion of outstanding notes at the end of March, according to Treasury data. TIPS returned 14.1 percent last year, compared to 9.8 percent for Treasuries that weren’t indexed to consumer prices, Bank of America Merrill Lynch indexes show.

Harvey’s Testimony

Harvey, 53, recommended during House Ways and Means Committee hearings on President Bill Clinton’s Plan for Public Investment and Deficit Reduction proposed in 1993 that the Treasury supplement its bond offerings with adjustable-coupon debt to help reduce interest costs in the years ahead. At the time, Treasury 10-year notes yielded about 6 percent and the Fed’s target rate for overnight loans between banks was 3 percent.

The University of Chicago-trained economist, who has taught at Duke since 1986, is also a research associate at the National Bureau of Economic Research, the body which determines when recessions begin and end.

If the Treasury had converted half its outstanding debt in 1993 into floating-rate notes or bonds, the interest expense savings would have amounted to about $2 trillion given the fall in rates since, according to estimates by Harvey.

Yields on 10-year notes fell to a record 1.67 percent in September. The government can still lock in near-record low longer-term rates with fixed coupons. The Fed has kept its target rate at an all-time low range of zero to 0.25 percent since 2008.

‘Enormous’ Demand

“Longer-term debt is pretty expensive right now for investors, with long-term yields so low, so the Treasury would probably pay less in the long run by issuing longer-term debt rather than floaters,” said Bruce Tuckman, director of financial markets research at the Center for Financial Stability in New York in an interview on April 18.

“There is an enormous global demand for super-safe, short- term assets,” Tuckman said. “Floaters are quite safe in terms of interest-rate risk. But, relative to short-term debt, floaters are a bet on long-term U.S. credit, which could damp their appeal to investors who place a great premium on safety.”

Demand is increasing amid regulatory requirements that banks hold safer assets and investors flee Europe’s financial turmoil. Money has plowed into Treasuries at a record pace.

Investors bid $4.50 for every dollar of four-week Treasury bills offered at auction in the first quarter, compared to a bid-to-cover ratio of 2.7 during the first quarter of 2007.

Longer Maturities

“This might be an opportunity to issue debt with a fixed term but with a floating rate that might answer some of the demand we see in the market for high quality short-term-like instruments,” Treasury’s Miller said Feb. 1. We believe “there will be some benefit to our interest expense. It may also help us reach our objective of fixing out the term of our debt,” she said, referring to the Treasury’s goal of extending the average maturity of their debt holdings.

Treasury Secretary Timothy F. Geithner has pushed the average maturity of U.S. debt to 62.8 months from 49.4 months during the financial crisis in first quarter of 2009, to lock in relatively low rates by selling more long-term securities.

Matthew Anderson, a spokesman for the Treasury in Washington, declined to comment April 27 beyond what the Treasury Department has already publicly said regarding the potential floating-rate note program.

Money Market Appeal

“The Treasury can, with floaters, lock in debt at a short- term rate without having to come back in the market as often as they have to do for bills,” said Priya Misra, head of U.S. rates strategy at Bank of America in New York, in an April 10 interview. Rising rates “are a risk to the Treasury relative to them issuing long-term coupon bonds, but not relative to them issuing Treasury bills,” she said.

Misra favors initial monthly auctions of about $10 billion in floaters, which may displace some bills. The Treasury sells bills with maturities of four, 13, 26 and 52 weeks.

Floaters will appeal to the $2.6 trillion U.S. money market mutual fund industry, TBAC said in a Feb. 1 presentation to the Treasury. Boston-based Fidelity Investments, the largest manager of money-market mutual funds, and Federated Investors Inc., of Pittsburgh, the third-biggest, supported the new debt during a public comment period that ended earlier this month.

Fidelity Interested

“An appropriately structured Treasury floating-rate note program would be attractive for our money market funds,” said Kevin Gaffney, a fund manager at Fidelity, which has $1.5 trillion under management, including $437 billion in money markets as of Dec. 31, in a telephone interview on April 24. “The debt would also provide an incremental yield pick-up over Treasury bills.”

Fidelity recommended Treasury use the shortest possible period to reset the securities’ interest rate, and a final maturity of one to two years for the floaters. That would enable money funds to be “significant purchasers” and meet government liquidity requirements, according to their public comment.

While Fed policy makers say their benchmark rate will remain “exceptionally low” at least through late 2014, a pick- up in the U.S. recovery could trigger an earlier rise. This is the risk Duke’s Harvey and others say didn’t exist in the higher-rate environment of 1993.

“I don’t get why the Treasury thinks floaters are a good idea with short-term rates at zero percent, as they only have one way to go, and that’s up,” said James Bianco, president of Bianco Research LLC in Chicago in an interview on April 24.

“They should be lessening the cost of financing the United States government for the taxpayers,” Bianco said. “The Treasury should be issuing 100 year or perpetual bonds until the market can’t stand it anymore to lock in these rates.”

To contact the reporters on this story: Liz Capo McCormick in New York at; Meera Louis in Washington at

To contact the editors responsible for this story: Dave Liedtka at;


Analysts See Record S&P 500 as Advance Over for Barclays

By Inyoung Hwang - May 1, 2012 3:11 AM GMT+0700

Analysts predict U.S. shares will rise enough this year to boost the Standard & Poor’s 500 Index to a record, even as Wall Street strategists say the best is already over for American equities.

Individual price forecasts for stocks show the combined projection for the benchmark gauge has climbed to 1,569.74, according to more than 10,000 analyst estimates compiled by Bloomberg. That compares with the October 2007 high of 1,565.15. At the same time, strategists who base their predictions on assessments of the economy say this year’s 12 percent rally represents all the gains investors will see.

Traders work at the New York Stock Exchange in New York, on April 19, 2012. . Photographer: Scott Eells/Bloomberg

April 30 (Bloomberg) -- Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, talks about the outlook for the euro zone, financial markets and investment strategy. Sargen speaks with Betty Liu, Dominic Chu and Joshua Lipton on Bloomberg Television's "In the Loop." (Source: Bloomberg)

April 30 (Bloomberg) -- Joe Dear, chief investment officer of California Public Employees' Retirement System, talks about the investment strategy of the largest U.S. public pension and outlook for returns. He speaks with Bloomberg Television special correspondent Willow Bay at the Milken Institite 2012 Global Conference in Los Angeles. They speak on Bloomberg Television's "InBusiness." (Source: Bloomberg)

Traders work at the New York Stock Exchange (NYSE) in New York, U.S. Stocks rose last week, pushing the S&P 500 up 1.8 percent to 1,403.36. Photographer: Scott Eells/Bloomberg

Lloyd C. Blankfein, chairman and chief executive officer at Goldman Sachs Group Inc., said he is more optimistic about markets than some economists. Source: Bloomberg Television

Bullish forecasts are based on analysts’ expectations that S&P 500 earnings will reach records every year through 2014 as stimulus by the Federal Reserve props up the U.S. economy. More than 70 percent of companies have exceeded estimates with first- quarter results. Bears say Europe’s debt crisis won’t be contained and economic growth will be insufficient to maintain gains that have restored more than $3 trillion to U.S. equities in six months.

“The financial strength of corporate America is stronger than people believe,” Jeffrey Schwarte, a money manager who helps oversee about $258.2 billion in Des Moines, Iowa, at Principal Global Investors, said in a telephone interview on April 25. “We believe earnings ultimately matter.”

Apple, Boeing

Stocks rose last week, pushing the S&P 500 up 1.8 percent to 1,403.36, as earnings topped estimates at Apple Inc. (AAPL), the world’s largest company by market value, and Boeing Co., the biggest aerospace company. Computer and software providers, telecommunications companies and banks and brokerages are topping estimates by more than 10 percent on average, data compiled by Bloomberg show.

The benchmark gauge for American equities has climbed 107 percent since March 2009, pulling within 12 percent of its record high. The measure is up 27 percent after falling to a one-year low Oct. 3 as U.S. unemployment dropped from 9.1 percent to 8.2 percent in seven months. The S&P 500 slipped 0.4 percent to 1,397.91 in New York today.

About 75 percent of the companies in the benchmark measure that reported results since April 10 have exceeded Wall Street earnings projections, beating by an average of 7.1 percent, according to data compiled by Bloomberg. That’s the highest rate in four quarters, the data show. Eight of the 10 groups in the index have delivered income that surpassed projections.

Record Profits

Analysts are signaling that 13 straight quarters of higher- than-expected earnings and record profits through 2014 will help drive the gauge back to its all-time high. Earnings will jump 14 percent to $105.12 a share in 2012, according to analysts’ estimates compiled by Bloomberg.

Record profits have failed to convince strategists that the S&P 500 will advance further. As much as $770 billion was wiped off the values of U.S. equities after the measure peaked on April 2, amid concern over Europe’s debt crisis and slower-than- estimated U.S. jobs growth.

The benchmark index will end this year at 1,384, or 1.4 percent below its close on April 27, according to the average of 11 strategists tracked by Bloomberg. While earnings topped projections, they’ve spurred average post-earnings daily gains of just 1 percent in companies that exceeded estimates. That compares with a five-year average of 1.3 percent, Bloomberg data show.

‘Policy Uncertainty’

“When companies beat, their stocks are basically unchanged relative to the market,” Barry Knapp, the New York-based head of equity strategy at Barclays Plc, said in a telephone interview on April 27. “What drives real secular bull markets is multiple expansion. Massive policy uncertainty exists today in both monetary and public policy. Settling those two issues is a necessary condition to have another bull market.”

Knapp says the S&P 500 will fall to 1,330 at the end of the year. Strategists’ mean forecast for the S&P 500 has been below stock analysts’ projection for the index since at least April 1, 2010, according to data compiled by Bloomberg. The spread reached its widest level since then on April 27.

Gina Martin Adams, the New York-based equity strategist for Wells Fargo & Co., said the S&P 500 will fall to 1,360 as the Fed ends its Operation Twist, a plan to swap $400 billion of short-term debt in its portfolio with long-term securities to lengthen the average maturity of its holdings. The federal budget deficit and slowest post-recession expansion since World War II are holding valuations down, she said.

‘More Downside’

“The market is set up for a little more downside than upside risk, more because of policy reasons than anything,” Adams said in a telephone interview on April 25. “It’s not really an earnings question, but more of a valuation question. Over the last three years in every instance the Fed has finished one of its major programs, stocks have suffered.”

The S&P 500 slid last year to a two-year low of 11.9 times reported profit after the Fed’s second round of quantitative easing ended, Europe’s crisis intensified and American lawmakers debated raising the federal debt limit. While the gauge’s multiple has since rebounded to 14.3, it’s still below the six- decade historical average of 16.4, Bloomberg data show.

Lloyd C. Blankfein, chairman and chief executive officer at Goldman Sachs Group Inc., said he is more optimistic about markets than some economists.

“Gun to my head, I tend to be a little bit more positive than what I’m hearing from other people,” he said during an April 25 interview on Bloomberg Television with Erik Schatzker. “The world is a little bit bifurcated between what economists are saying and what market people are saying.”

Delivery Demand

FedEx Corp. (FDX), a barometer for the economy because it delivers goods from mobile electronics to pharmaceuticals, may reach $123 a share, surpassing the record $120.97 in February 2007, according to Justin Yagerman, an analyst at Deutsche Bank AG. While European demand remains a risk and has hurt Asian exports, the world’s largest cargo airline is cheaper than five years ago. The Memphis, Tennessee-based company closed at $88.27 last week.

“Slowing European demand has been a risk factor, though commentary anecdotally from companies has been that Europe has probably held up better than expected,” New York-based Yagerman said in a telephone interview on April 25. “We take an optimistic view on global growth over the long term. Over the near term, we’re extremely bullish on domestic U.S. growth and a lot of that’s driven by e-commerce and by pricing.”

Macy’s Rallies

Daniela Nedialkova, a London-based analyst for Atlantic Equities LLP, predicts Macy’s Inc. (M) will jump to $51 a share, 9.7 percent above its March 2007 record of $46.51. While annual sales at the department-store operator have slipped 2.1 percent since 2007, the Cincinnati-based company has improved its inventory management systems and product lines in the last five years, she said. Macy’s rallied 5.4 percent last week to $41.19.

“2007 was still very much in the consumer spending boom years,” Nedialkova said in a telephone interview on April 26. “Versus how the company looked in 2007, I think it’s in so much better shape,” she said. “The way I’m modeling sales growth at Macy’s is actually thinking about market-share gains. If the economy actually improved, that would help.”

Gross domestic product in the U.S. will expand 2.3 percent this year, according to the median economist projection, compared with 1.7 percent in 2011 and 3 percent in 2010. Economists forecast the euro area will contract 0.4 percent and China will expand at the slowest pace since 2001.

“The U.S. economy is going to grow faster than people think, so I think we’re going to not have a recession,” Byron Wien, the New York-based vice chairman of the advisory services unit at Blackstone Group LP, the world’s biggest private-equity firm, said in an interview on Bloomberg Television with Tom Keene last week.

The Federal Reserve suggested “growth is going to be better than expected,” Wien said. “Earnings are going to be good.”

To contact the reporter on this story: Inyoung Hwang in New York at

To contact the editor responsible for this story: Michael P. Regan at


S&P 500 Halts Four-Month Rise on Economic Concern

By Rita Nazareth - May 1, 2012 3:51 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) declined, halting a four-month advance, after a report showed that business activity expanded at the slowest pace since November 2009 and Spain’s economy entered into a recession.

Bank of America Corp., Caterpillar Inc. (CAT) and Monsanto Co. (MON) retreated at least 1.7 percent. Humana Inc. (HUM) tumbled 8.1 percent as profit at the provider of U.S.-backed Medicare insurance missed analysts’ projections. NYSE Euronext (NYX) slumped 4.9 percent amid a 44 percent decline in earnings. Barnes & Noble Inc. soared a record 52 percent after Microsoft Corp. (MSFT) said it plans to invest $300 million in a venture with the bookstore chain.

April 30 (Bloomberg) -- Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, talks about the outlook for the euro zone, financial markets and investment strategy. Sargen speaks with Betty Liu, Dominic Chu and Joshua Lipton on Bloomberg Television's "In the Loop." (Source: Bloomberg)

The S&P 500 lost 0.4 percent to 1,397.91 at 4 p.m. New York time, extending its April decline to 0.7 percent. The Dow Jones Industrial Average fell 14.68 points, or 0.1 percent, to 13,213.63 today. The gauge rose less than 0.1 percent in April, gaining for a seventh month in the longest winning streak since 2007. About 6.1 billion shares changed hands on U.S. exchanges today, or 8.9 percent below the three-month average.

“Europe is a chronic situation,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. (BLK) His firm oversees $3.68 trillion as the largest asset manager. “Even under a best-case scenario, where there’s no banking crisis, the reality is: it’s going to be a very slow process. While you’ve got evidence that the U.S. is recovering, the rebound will be uneven.”

Equities fell as the Institute for Supply Management- Chicago Inc. said its barometer slid to 56.2 during the month, lower than the most pessimistic forecast in a Bloomberg News survey. Consumer spending in the U.S. rose in March. Spain entered its second recession since 2009.

Earnings Season

Today’s decline came after the S&P 500 capped the biggest weekly gain in more than a month. The measure was still up 11 percent in 2012 amid better-than-estimated economic and corporate data. About 74 percent of S&P 500 companies that reported results since April 10 have beaten earnings projections, according to data compiled by Bloomberg.

“The economic doldrums in Europe are casting a shadow over any progress we’re making,” said Jack Ablin, chief investment officer of Harris Private Bank in Chicago, which oversees about $60 billion. “We may not get a negative period for the market, but it may just be a quiet one.”

Technology and industrial shares fell the most among 10 S&P 500 groups. A gauge of homebuilders in S&P indexes slid 1.6 percent after last week surging to the highest since 2008. (S15HOME) Bank of America fell 1.7 percent to $8.11. Caterpillar slipped 1.7 percent to $102.77. Monsanto dropped 2.1 percent to $76.18.

Humana Slumps

Humana lost 8.1 percent, the most since 2009, to $80.68. Net income dropped 21 percent to $248 million, or $1.49 a share, from $315 million, or $1.86, a year earlier. The per-share result missed by 2 cents the $1.51 average of 9 analyst estimates compiled by Bloomberg.

NYSE Euronext slumped 4.9 percent to $25.75. European regulators blocked NYSE Euronext from merging with Deutsche Boerse AG in February, frustrating plans to mitigate a slowdown in stock trading and boost earnings and sales through cooperation on derivatives. Today’s report highlights the challenges that spurred the takeover proposal, exacerbated by a decline in equity volume across American exchanges to some of the worst levels in a decade.

VeriFone Systems Inc. (PAY) slipped 12 percent to $47.64. The largest maker of credit-card terminals was cut to sell from hold by Deutsche Bank AG.

Barnes & Noble

Barnes & Noble (BKS) soared 52 percent, the most in the Russell 2000 Index, to $20.75. The investment will give Microsoft about 18 percent of the newly formed company, which has yet to be named. The companies will develop a Nook e-reader application for Windows 8 and have also settled their patent litigation.

Merck & Co. jumped 2 percent, the biggest gain in the Dow, to $39.24. The company’s patent for the cholesterol drugs Zetia and Vytorin is valid and enforceable, a federal judge ruled April 27 in a case against Mylan Inc. (MYL), which sought to sell generic versions of the drugs before the patent expires.

Takeover news helped lift some companies today, limiting the market’s losses. Sunoco Inc. (SUN) climbed the most in the S&P 500 (SPXL1), adding 20 percent to $49.29. The Philadelphia-based refiner agreed to be acquired for $5.3 billion in shares and cash by Energy Transfer Partners LP, which is adding oil transportation and distribution assets.

Gen-Probe Inc. (GPRO) surged 19 percent to $81.55. Hologic Inc. (HOLX), a maker of diagnostic medical and surgical devices, agreed to buy the company for about $3.7 billion in cash to expand its tests for sexually transmitted diseases.

Exploring Sale

Warner Chilcott Plc (WCRX) rallied 16 percent to $21.81. The maker of dermatology and women’s health drugs said it is exploring a sale of the company and is in talks with potential buyers.

Monster Beverage Corp. (MNST) jumped as much as 28 percent after the Wall Street Journal reported Coca-Cola Co. (KO) is in talks to buy the maker of energy drinks, then erased the gain after Coca- Cola denied the report. Monster lost 0.8 percent to $65. Coca- Cola slid 0.4 percent to $76.32, trimming a loss of as much as 0.9 percent.

Harman International Industries Inc. gained 4.9 percent to $49.58. The maker of car audio systems reported third-quarter profit that exceeded analysts’ estimates and announced a record- high $2 billion contract.

Analysts predict U.S. shares will rise enough this year to boost the S&P 500 to a record, even as Wall Street strategists say the best is already over for American equities.

S&P 500 Projections

Individual price forecasts for stocks show the combined projection for the gauge has risen to 1,569.74, according to analyst estimates compiled by Bloomberg. That compares with the October 2007 high of 1,565.15. At the same time, strategists who base their predictions on assessments of the economy say this year’s rally represents all the gains investors will see.

Bullish forecasts are based on analysts’ expectations that S&P 500 earnings will reach records every year through 2014 as stimulus by the Federal Reserve props up the U.S. economy. Bears say Europe’s debt crisis won’t be contained and economic growth will be insufficient to maintain gains.

Analysts are signaling that 13 straight quarters of higher- than-expected earnings and record profits through 2014 will help drive the gauge back to its all-time high. Earnings will jump 14 percent to $105.12 a share in 2012, according to analysts’ estimates compiled by Bloomberg.

“The financial strength of corporate America is stronger than people believe,” Jeffrey Schwarte, a money manager who helps oversee about $258.2 billion in Des Moines, Iowa, at Principal Global Investors, said in a telephone interview on April 25. “We believe earnings ultimately matter.”

To contact the reporter on this story: {Rita Nazareth} in New York at

To contact the editor responsible for this story: Michael P. Regan at


Occupy Wall Street Plans Global Protests in May Day Resurgence

By Henry Goldman and Esmé E. Deprez - May 1, 2012 12:28 AM GMT+0700

Occupy Wall Street demonstrators, whose anti-greed message spread worldwide during an eight-week encampment in Lower Manhattan last year, plan marches across the globe today calling attention to what they say are abuses of power and wealth.

Organizers say they hope the coordinated events will mark a spring resurgence of the movement after a quiet winter. Calls for a general strike with no work, no school, no banking and no shopping have sprung up on websites in Toronto, Barcelona, London, Kuala Lumpur and Sydney, among hundreds of cities in North America, Europe and Asia.

Protesters with the Occupy movement block one of the entrances to the Port of Oakland in California. Photographer: David Paul Morris/Bloomberg

April 24 (Bloomberg) -- Protesters block shareholders from entering Wells Fargo & Co.'s annual meeting in San Francisco. About 500 people gathered to protest the bank's lending practices and foreclosures. Myrna Spiegler and Mark Richmond who said they are Wells Fargo shareholders, protester Sarah Lombardo and Maria Zamudio, tenant counselor for Causa Justa, Just Cause, speak with Bloomberg's Mark Chediak and Marc Perrier. (Source: Bloomberg)

Filipino anti-riot police block Occupy protesters heading to camp out near Manila's historic Mendiola Bridge leading to the presidential palace, in the Philippines. Photographer Francis R. Malasig/EPA/Landov

Protesters march to Wall Street during an ACT-UP and Occupy Wall Street demonstration in New York, on April 25, 2012. Photographer: by John Moore/Getty Images

In New York, Occupy Wall Street will join scores of labor organizations observing May 1, traditionally recognized as International Workers’ Day. They plan marches from Union Square to Lower Manhattan and a “pop-up occupation” of Bryant Park on Sixth Avenue, across the street from Bank of America’s Corp.’s 55-story tower.

“We call upon people to refrain from shopping, walk out of class, take the day off of work and other creative forms of resistance disrupting the status quo,” organizers said in an April 26 e-mail.

Occupy groups across the U.S. have protested economic disparity, decrying high foreclosure and unemployment rates that hurt average Americans while bankers and financial executives received bonuses and taxpayer-funded bailouts. In the past six months, similar groups, using social media and other tools, have sprung up in Europe, Asia and Latin America.

Pooling Resources

The Occupy movement in New York has relied on demonstrations and marches around the city since Nov. 15, when police ousted hundreds of protesters from their headquarters in Zuccotti Park near Wall Street, where they had camped since Sept. 17.

Banks have pooled resources and cooperated to gather intelligence after learning of plans to picket 99 institutions and companies, followed by what organizers have described as an 8 p.m. “radical after-party” in an undetermined Financial District location.

“If the banks anticipate outrage from everyday citizens, it’s revealing of their own guilt,” said Shane Patrick, a member of the Occupy Wall Street press team. “If they hadn’t been participating in maneuvers that sent the economy into the ditch, we wouldn’t even be having this conversation.”

Police Prepared

New York police can handle picketers, according to Paul Browne, the department’s chief spokesman.

“We’re experienced at accommodating lawful protests and responding appropriately to anyone who engages in unlawful activity, and we’re prepared to do both,” he said in an interview.

About 2,100 Occupy Wall Street protesters in New York have been arrested since the demonstrations began, said Bill Dobbs, a member of the group’s media-relations team.

In U.S. District Court in Manhattan yesterday, four City Council members accused JPMorgan Chase & Co. (JPM), Brookfield Office Properties Inc., Mayor Michael Bloomberg and Police Commissioner Raymond Kelly, of suppressing free speech and using excessive force against protesters. The mayor is the founder and majority owner of Bloomberg News parent Bloomberg LP.

Organizers describe the May Day events as a coming together of the Occupy movement, with activists also calling for more open immigration laws, expanded labor rights and cheaper financing for higher education. Financial institutions remain a primary target of the protests.

Bigger Banks

“Four years after the financial crisis, not a single of the too-big-to-fail banks is smaller; in fact, they all continue to grow in size and risk,” the group’s press office said in an April 26 e-mail.

Five banks -- JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. (GS) together held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, compared with 43 percent in 2006, according to central bankers at the Federal Reserve.

Occupy Wall Street began planning for May Day in January, meeting in churches and union halls with a decision-making system that avoids a single leader. Instead, participants rely on group “break-out” sessions in which clusters discuss such tasks as crowd-building, logistics and communications.

About 150 attended an April 25 meeting at the Greenwich Village headquarters of the Amalgamated Clothing & Textile Workers Union, making last-minute preparations for how to deploy legal and medical help; site selection for picketing; purchasing, production and distribution of protest signs; and how to talk to reporters.

Blockades Planned

The meeting convened inside the union hall basement, where attendees arranged chairs in a circle as three facilitators asked each of the assembled to identify themselves by first name and gender -- he, she or they. Most appeared under age 30, though gray-haired baby boomers also participated. One of the older attendees pulled a ski mask over his head to protest the presence of a photographer from Tokyo.

Today, beginning at 8 a.m. in Bryant Park, scheduled events include teach-ins, art performances and a staging area for “direct action and civil disobedience,” such as bank blockades.

Tom Morello of the Grammy Award-winning rock band Rage Against the Machine along with 1,000 other guitar-playing musicians will accompany a march to Union Square at 2 p.m., according to the website. That will be followed by a “unity rally” at Union Square at 4 p.m.; a march from there to Wall Street at 5:30 p.m.; and a walk to a staging area for “evening actions,” which organizers at the April 25 meeting said would be the so-called after-party.

Golden Gate

Occupy-related events are planned in 115 cities throughout the U.S., from college towns such as Amherst, Massachusetts, and Ann Arbor, Michigan, to Los Angeles, Houston, Chicago and Philadelphia.

In San Francisco, a group calling itself the Golden Gate Bridge Labor Coalition abandoned a plan to close the span while carrying on with a day of picketing to support bridge, ferry and bus workers seeking reduced health-care benefit costs, according to its website. Protesters still plan a rally at 7 a.m. at the toll plaza, without blocking the bridge, the group said in a statement.

Across the bay in Oakland, protesters said they intend morning marches on banks and the Chamber of Commerce, followed by an afternoon rally and a march downtown.

“We’re looking forward to vigorously asserting our constitutional right to protest and giving a loud outcry about Wall Street and greed,” Dobbs said. “We’re hoping this will make a splash. We hope it will bring a lot of more people into the Occupy movement.”

To contact the reporters on this story: Henry Goldman in New York at; Esmé E. Deprez in New York at

To contact the editor responsible for this story: Stephen Merelman at


Titanic II Planned by Billionaire Palmer in Chinese Yard

By David Fickling and Elisabeth Behrmann - Apr 30, 2012 5:38 PM GMT+0700

Australian mining billionaire Clive Palmer plans to build a 21st-century replica of the Titanic and sail it from England to New York accompanied by the Chinese navy by the end of 2016.

He has signed a first-stage agreement with Nanjing-based CSC Jinling Shipyard to build the ship as part of a planned fleet of luxury liners, the Gold Coast, Queensland-based businessman said in an e-mailed statement today.

The Titanic sits under scaffolding in the spring of 1911 in this photo made available to the media by the Library of Congress. Source: Library of Congress (George Grantham Bain Collection) via Bloomberg

April 30 (Bloomberg) -- Australian billionaire Clive Palmer plans to build a 21st century replica of the Titanic and sail it from England to New York accompanied by the Chinese navy by the end of 2016. (Source: Bloomberg)

Audio Download: Oceanograper Ballard Describes Discovering Titanic

Clive Palmer, chairman of Mineralogy Pty. Photographer: Patrick Hamilton/Bloomberg

Palmer, whose investments include golf courses, hotels, coal and iron-ore mining projects, a nickel smelter, a soccer team and a horse stud, said the ship will have the same dimensions as the original Titanic. A move into the cruise market, where ships typically cost at least $500 million to build, is an ambitious step, Greg Johnson, an analyst with Shore Capital Group in London, said by phone.

“You’re starting from scratch with no experience,” Johnson said. “A $500 million punt is quite sizable.”

The Titanic, commissioned by White Star Line, was the largest liner in the world when built at just under 270 meters (about 880 feet) and 53 meters high. It sank on April 15, 1912, after hitting an iceberg east of Newfoundland, costing the lives of more than 1,500 passengers and crew, according to the statement. The Titanic II will, like its predecessor, have 840 rooms on nine decks, Palmer said.

Swimming Pools

“It will be every bit as luxurious as the original Titanic, but of course it will have state-of-the-art 21st century technology and the latest navigation and safety systems,” Palmer said, along with gymnasiums and swimming pools.

Palmer, 58, a former media adviser to Queensland’s late state premier Joh Bjelke-Petersen, is known for ambitious projects in varied fields.

In March he was quoted by the Sydney Morning Herald promising to invest in a blind trust to encourage media diversity in Australia, and saying that Australia’s Greens party was funded by the CIA.

He unveiled the Titanic II plan just over an hour before a separate announcement that he would stand against Australian Treasurer Wayne Swan in his seat of Lilley at a federal election due next year.

Challenge to Build

A person on duty at the managing director’s office of CSC Jinling said by phone that while he wasn’t aware of the deal, it may have been signed by the company’s marketing and sales department. Today is a public holiday in China.

The move into the cruise-ship industry, one of the few areas of heavy manufacturing still dominated by European companies, would be a challenge for a Chinese company, said Hur Sung Duck, an analyst at HI Investment & Securities Co. in Seoul.

“That’s a huge jump for a country that builds mostly bulk ships” used for carrying coal, iron ore and grains, Hur said. “I seriously find it difficult to believe it can be built by that time.”

Italy’s Fincantieri Cantieri Navali Italiani SpA, Norway’s STX Europe AS and Germany’s Meyer Werft GmbH, are the largest players in the cruise ship-building market, according to a 2010 presentation by Samsung Heavy Industries Co.

Mitsubishi Heavy Industries Ltd. (7011) last November completed two ships for Carnival Corp. (CCL), while STX Europe is owned by Changwon, Korea-based STX Corp.

‘Major Player’

“The Chinese ship-building industry with our assistance wants to be a major player in this market,” Palmer said in the statement.

The ship would sail under his company, to be name Blue Star Line in reference to the Titanic’s owner. China’s navy would be invited “to escort Titanic II on its maiden voyage to New York,” Palmer said.

Blue Star Line was registered on April 18 as a wholly-owned subsidiary of Palmer’s Mineralogy Pty., according to its only document filed with Australia’s securities regulator. Palmer and Derek Payne, manager of his Cold Mountain horse stud, are the only officers listed in the three-page filing.

The mining magnate has a fortune of A$5.05 billion ($5.3 billion) and is Australia’s fifth-richest person, according to BRW magazine rankings. He is developing coal and iron-ore mines in Australia, including the $8 billion China First coal project in Queensland state. Last year, he dropped plans to sell shares in his company Resourcehouse Ltd. in Hong Kong after commodity prices fell.

To contact the reporters on this story: Elisabeth Behrmann in Sydney at; David Fickling in Sydney at

To contact the editor responsible for this story: Rebecca Keenan at