Contact Shares Fall as Low Power Prices Cut Outlook

By Tracy Withers

June 8 (Bloomberg) -- Contact Energy Ltd., New Zealand’s largest publicly traded energy company, slumped in Wellington trading after it said full-year earnings may fall more than previously expected.

Profit before interest, tax, depreciation and changes in the value of financial instruments may fall as much as 22 percent in the year ending June 30, Chief Executive Officer David Baldwin said in a statement to the stock exchange. Underlying profit may fall 33 percent, he said. The stock dropped 2.2 percent after earlier falling as much as 2.8 percent, the most since May 11.

Contact, half-owned by Sydney-based Origin Energy Ltd., said in January that underlying profit may fall 23 percent after output from its dams fell and gas costs rose. Since then, hydro lake levels have stayed high and an output cut at Rio Tinto Group’s Tiwai Point aluminum smelter has forced generators to spill water from their dams.

“The extremes we have seen in hydrology are reflected in low wholesale electricity prices,” Baldwin said.

The stock fell 13 cents to NZ$5.67 at the 5 p.m. market close in Wellington.

During May, the inflows into South Island hydro lakes were among the highest recorded and storage nationally was 1.36 times the historical mean, Contact said.

Average wholesale power prices during May were NZ$4 a megawatt-hour in the nation’s South Island from NZ$307 a year earlier, it said. North Island average prices fell to NZ$59 a megawatt-hour from NZ$272 in May last year.

Low prices have limited the requirement for thermal generation, reducing production from the company’s gas-fired plants, Baldwin said.

Contact, based in Wellington, reported underlying earnings of NZ$232.8 million ($145 million) in the year ended June 30, 2008, on earnings before interest, tax, depreciation and financial adjustments of NZ$567.2 million.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

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Gazprom Says Ukraine Paid for Gas Supplies, Averting New Spat

By Stephen Bierman

June 8 (Bloomberg) -- OAO Gazprom said Ukraine paid for imports of natural gas in May, averting a new phase in a dispute that led to a January halt in fuel shipments to Europe.

Ukraine paid for last month’s deliveries in full, Sergei Kupriyanov, a spokesman for Moscow-based Gazprom, said by telephone today.

Ukrainian President Viktor Yushchenko pledged 3.8 billion hryvnias ($500 million) on June 5 to ensure that NAK Naftogaz Ukrainy met a payment deadline two days later. Valentyn Zemlyanskyi, a Naftogaz spokesman, said the funds had been paid on that day.

Russia’s political leadership cast doubt on the ability of Ukraine, which has turned to the International Monetary Fund for a $16.4 billion loan, to pay for gas this year, threatening accords reached in January to resolve a dispute that affected 20 European countries.

Gazprom cut gas deliveries to neighboring Ukraine on Jan. 1 after talks with Naftogaz on a supply contract for 2009 collapsed the previous evening. Transit of gas from Russia via Ukraine, which transports about 80 percent of Gazprom’s exports to Europe, halted amid the conflict. Russian Prime Minister Vladimir Putin and Yulia Timoshenko, his Ukrainian counterpart, reached agreements on Jan. 19 that got flows going again.

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

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Asian Jet Fuel Trades at Discount to Gasoil as Demand Tumbles

By Ann Koh

June 8 (Bloomberg) -- Jet fuel in Asia traded at the biggest discount to gasoil in a year because of reduced demand from airlines, a sign that refiners may cut output of the transport fuel.

Spot jet fuel’s difference to gasoil, known as the regrade, fell to minus $2.05 a barrel in Singapore on June 3, the most since June 30, 2008, according to data compiled Bloomberg. Jet fuel has been at a discount all this month. The spread was at minus $1.80 on June 5.

“There’s not much incentive to be producing jet fuel,” Victor Shum, a senior principal at energy consultant Purvin & Gertz Inc., said in Singapore. “The economy is bad, planes aren’t full.”

Airlines lost as much as $8.5 billion in 2008 as the global recession curbed travel, according to the International Air Transport Association, whose 230 members account for 93 percent of scheduled international air traffic. The reduced demand for air travel pushed Cathay Pacific Airways Ltd. into the red last year and prompted Qantas Airways Ltd. to forecast a record loss.

Benchmark Asian gasoil, also known as high-sulfur gasoil, closed at $75.15 a barrel while jet fuel was at $73.35 a barrel in Singapore on June 5, according to Bloomberg data.

To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net

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Oil to ‘Spike’ Without New Investments, Shell Says

By Christian Schmollinger

June 8 (Bloomberg) -- Crude oil is set to “spike” without new investments and a price surge is in the making, Royal Dutch Shell Plc Chief Executive Officer Jeroen van der Veer said.

The global energy industry is facing “severe challenges” and the world needs unconventional energy supplies to meet rising demand, he said at the Asia Oil and Gas Conference in Kuala Lumpur today.

Oil’s decline to about $32 a barrel in December from a record $147.27 reached in July prompted explorers to delay or halt projects, a move that will cut supplies and push prices higher as the global economy recovers. Crude has since rebounded, gaining 52 percent this year on signs of economic growth and record production cuts by the Organization of Petroleum Exporting Countries.

“The economy will turn, demand will come back and the overcapacity of supply will disappear,” van der Veer said.

Oil and natural gas won’t be able to meet all the additional demand that’s required, van der Veer said.

Shell, Europe’s largest oil and gas company, forecasts that renewable sources will account for 30 percent of new energy demand, he said.

Crude oil fell as much as 97 cents, or 1.4 percent, to $67.47 a barrel on the New York Mercantile Exchange.

IEA Warning

The International Energy Agency, a Paris-based adviser to energy-consuming nations, predicts that fossil fuels will make up 67 percent of energy use until 2030, according to Nobuo Tanaka, executive director of the group.

It’s essential to avoid an energy crunch in the next two decades and the main problem is a lack of investment, he said at a conference in St. Petersburg on June 5.

As explorers postpone developments, the number of drilling rigs operating worldwide fell for an eighth month in May, Gordon Kwan, the Hong Kong-based head of regional energy research at Mirae Asset Securities, said in an e-mail today.

“The fewer number of active drilling rigs could spell lower oil production ahead, supportive for global prices if demand growth resumes upon economic recovery,” Kwan said.

Analysts have raised their oil-price forecasts on optimism the recovery in the economy will lead to increased demand for energy.

Arjun Murti, the Goldman Sachs Group Inc. analyst who predicted a surge in crude oil prices, last week raised his fourth-quarter estimate for U.S. benchmark grade to $70 a barrel from $60.

Crude may rise to $65 a barrel by the end of next year from an estimated $50 this year, Michael Spencer, the Hong Kong-based chief economist for Asia at Deutsche Bank AG, said in Kuala Lumpur today.

To contact the reporter on this story: Christian Schmollinger in Kuala Lumpur at christian.s@bloomberg.net

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Oil Falls After Gains in Dollar Erodes Appeal of Commodities

By Gavin Evans

June 8 (Bloomberg) -- Crude oil fell for a second day after the dollar traded near the strongest in a month against the yen, reducing the investment appeal of commodities.

Oil declined as the U.S. currency gained the most versus the yen in more than three months on June 5. The relative strength index for crude rose to 68.81 last week from 51.12 at the end of April, indicating prices may be poised to fall.

“The dollar’s rally has pretty significant implications or consequences for the commodity sector overall,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. Inventories remain high and “it’s not surprising to see oil off a little today,” he said.

Crude oil for July delivery fell as much as $1.09, or 1.6 percent, to $67.35 a barrel on the New York Mercantile Exchange. It was at $67.43 at 2:34 p.m. in Singapore.

The contract dropped 0.5 percent to $68.44 a barrel on June 5 as the dollar gained after a stronger-than-forecast U.S. jobs report. Futures touched $70.32 earlier that session, a six-month high, after the Labor Department’s May report showed the fewest job losses in eight months in the world’s largest oil-consuming nation.

Oil’s pull-back from $70 may reflect some “technical resistance” following a very strong rally in the past two months, Hassall said.

“There’s a difference between a real recovery and a reduced rate of decline,” he said. A price of $60 to $70 a barrel probably reflects the improvement seen so far in the global economic outlook, he said.

Relative strength indexes show how rapidly prices have advanced or dropped during a specified time period. Readings above 70 indicate a price may be poised to fall, and readings below 30 indicate it may be poised to rise.

Brent, Dollar

Brent crude for July delivery declined as much as $1.04, or 1.5 percent, to $67.30 a barrel on London’s ICE Futures Europe exchange. The contract was trading at $67.41 at 2:35 p.m. in Singapore.

Oil also fell as output increased, adding to stockpiles. Daily production from the Kirkuk region of Iraq, OPEC’s third- largest producer, climbed 16 percent to 670,000 barrels on new wells and improved security, news agency Aswat al-Iraq reported yesterday.

New York oil futures have gained 38 percent the past two months and 52 percent so far this year as rising equity markets lifted investor confidence and the falling U.S. dollar boosted interest in oil, metals and other commodities.

Shell Comments

Crude is poised for a “spike” amid a lack of new investments, Jeroen van der Veer, chief executive officer of Royal Dutch Shell Plc, said today.

The global energy industry is facing “severe challenges” and the world needs unconventional energy supplies to meet rising demand, Shell’s van der Veer said at the Asia Oil and Gas Conference in Kuala Lumpur.

“The economy will turn, demand will come back and the overcapacity of supply will disappear” van der Veer said.

The dollar traded at 98.41 yen as of 12:22 p.m. in Tokyo from 98.64 on June 5 in New York where it climbed to 98.89, the highest level since May 8. The dollar was at $1.3987 versus the euro from $1.3968.

Oil prices also gained the past month as U.S. stockpiles declined and the nation’s refiners lifted operating rates to a six-month high before the summer holiday driving season. Holiday motoring coincides with the North Atlantic hurricane season June through November, when tanker traffic and sometimes output in the Gulf of Mexico is disrupted.

A low-pressure system in the southwestern Caribbean is unlikely to develop into a tropical cyclone, the U.S. National Hurricane Center said on its Web site.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net

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China Stainless Steel Production Boosts Nickel, Macquarie Says

By Bloomberg News

June 8 (Bloomberg) -- China’s increased nickel imports, boosted by expanding stainless steel output and a price gap between the domestic and overseas markets, have driven a rally in London prices, Macquarie Group Ltd. said.

China’s largest stainless steel producers operated at “historically high” capacity usage rates of more than 95 percent in May, while imports surged in the second quarter as domestic nickel traded at a premium to the London Metal Exchange, Macquarie analysts led by Jim Lennon said in a report.

Nickel gained 20 percent over the past two weeks to more than $6 a pound on the LME, the report said. China’s refined nickel imports rose 16 percent in the first four months compared with a year earlier to 53,535 metric tons, according to customs data cited in the report. The metal is used to rustproof steel.

The price rally has prompted the restart of nickel pig iron production in China, especially in the northern and western parts of the country, the report said. The pig iron, processed from low-grade ore, is a cheaper alternative to refined metal.

“We hear that around 15 to 20 nickel pig iron producers have brought back production capacity since mid-May with most of them producing pig iron with 10 percent plus of nickel content using electric arc furnaces,” said the report e-mailed June 6.

Stainless steel output from China, the world’s largest producer, may stay level with last year’s 6.9 million tons, after declining in 2008, Xu Aidong, analyst at Beijing Antaike Information Development Co., said on May 20.

Nickel for delivery in three-months on the LME fell 3.1 percent to $14,150 a ton ($6.42 a pound) at 3:43 p.m. Singapore time.

--Feiwen Rong, Richard Dobson. Editors: Wendy Pugh, Indranil Ghosh

To contact Bloomberg News staff for this story: Feiwen Rong in Shanghai at +86-21-6104-7051 or frong2@bloomberg.net

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USDA May Cut Corn, Soy, Wheat Inventory Estimates, Survey Shows

By Jeff Wilson

June 8 (Bloomberg) -- U.S. corn and wheat inventories before the 2010 harvests will be smaller than the government estimated in May as wet weather cut planted acreage and trimmed yields, analysts said. Soybean supplies on Aug. 31 may fall to the smallest in five years on record export demand.

The U.S. Department of Agriculture this week likely will cut its estimate of corn reserves on Aug. 31, 2010, to 1.052 billion bushels, down 8.1 percent from a May forecast and the lowest in five years, according to the average estimate of 18 analysts in a Bloomberg News survey. The analysts said 1.608 billion bushels would be on hand before this year’s harvest.

“A markedly below-average planting pace since early May has increasingly suggested bullish supply risks around both acreage and yield,” Lewis Hagedorn, a commodity strategist for JPMorgan Chase and Co. in Chicago, said in a June 4 report.

“We continue to foresee marginal additional upside for U.S. corn exports” because of smaller South American crops and improved Asian livestock feed demand, said Hagedorn, who predicts inventories on Aug. 31, 2010, at 892 million bushels, a 13-year low.

Corn futures for July delivery fell 4.5 cents, or 1 percent, to $4.44 a bushel on June 5 on the Chicago Board of Trade. The most-active contract surged 8.1 percent in May on speculation that planting delays will reduce the size of the U.S. crop.

The department is scheduled to release its monthly supply and demand updates for corn, soybeans, wheat and cotton on June 10 at 8:30 a.m. in Washington.

Planting Progress

About 93 percent of the corn crop was planted as of May 31, the USDA said last week. That compares with the previous five- year average of 97 percent.

Corn supplies on hand before this year’s harvest may be bigger than the government estimated in May because demand for the grain for use in livestock feed slowed as producers reduced herds after losses, Hagedorn said. The analysts said inventories would be 1.608 billion bushels, up from 1.6 billion forecast by the USDA in May.

Soybean supplies on Aug. 31 may total 113 million bushels, the analysts said, down from 130 million estimated by the USDA in May and down from 205 million a year earlier. Reserves would be the lowest since 2004 and represent a record-low percentage of expected annual use, said Rich Feltes, the director of commodity research for MF Global Ltd. in Chicago.

‘Upside’ Rallies Predicted

“Job No. 1 is to ration old-crop beans,” Feltes said in a note to clients on June 5. Rallies “are not over on the upside,” Feltes said.

Soybean supplies before the 2010 harvest are likely to total 221 million bushels, down from 230 million forecast last month by the USDA, according to the analysts.

U.S. wheat production in the year starting June 1 may be smaller than the government forecast last month as rains damaged winter crops in the southern Midwest and in the Mississippi River Delta region and hampered planting of spring wheat across the northern Great Plains, the analysts said.

The average estimate of 13 analysts surveyed is for a crop of 2.02 billion bushels, compared with 2.026 billion forecast by the USDA in May. A crop of that size would be 19 percent smaller than the estimated 2.5 billion bushels produced in the recent season and the smallest in three years.

The USDA’s forecast on June 10 will be the second this year based on a field survey. The U.S. is the biggest exporter of wheat and the third-largest producer behind China and India. The winter-wheat crop accounted for 75 percent of last year’s total harvest.

Wheat reserves on May 31, 2010, will fall to 611 million bushels, according to the analysts. That would be down 4.1 percent from 637 million forecast by the USDA in May, reflecting a smaller harvest. The USDA last month said inventories at the end of May this year would total 669 million bushels.

===============================================================

U.S. Reserve Inventories in Millions of Bushels

2009 2008

CORN SOYBEAN WHEAT CORN SOYBEAN WHEAT USDA May Estimate 1,600 130 669 1,145 230 637 ================================================================

ADM Investor Srvs 1,625 110 666 975 120 635 Alaron Trading 1,560 110 655 1,080 205 590 Allendale 1,610 99 662 1,015 243 605 Brock Associates 1,640 133 676 1,340 337 777 Brugler Marketing 1,590 120 692 750 280 549 Cadent Financial 1,560 112 665 1,036 212 622 Citigroup 1,500 110 684 1,093 200 655 Country Hedging 1,615 102 671 954 225 572 Kropf & Love 1,600 120 669 1,067 220 617 Fortis Clearing 1,600 115 669 1,145 200 647 JPMorgan Chase 1,633 106 669 892 208 535 Linn Group 1,675 116 676 731 156 532 Midwest Market 1,550 110 690 1,100 230 630 Newedge 1,650 110 671 1,120 170 598 N.American Risk Mgt 1,600 130 669 1,145 210 615 Northstar Commodity 1,625 105 669 1,045 205 620 Prudential Bache 1,600 115 669 990 180 600 Risk Management 1,704 117 674 1,458 376 602

Average 1,608 113 672 1,052 221 611

2009 U.S. Wheat Production in Millions of Bushels

Total All Winter Hard Soft White

USDA 2008 2,500 1,868 1,035 614 219 USDA May 2009 Forecast 2,026 1,502 871 422 208

Alaron Trading Corp. n/a 1,490 855 418 207 Allendale 1,993 1,492 864 417 211 Brugler Marketing 1,990 1,525 890 420 215 Cadent Financial, EFG Gr 2,000 1,495 864 422 205 Citigroup 2,055 1,531 891 421 219 Country Hedging Inc. 2,058 1,520 890 420 210 Kropf & Love 2,006 1,482 851 422 208 Fortis Clearing 2,035 1,490 890 415 185 Newedge 2,043 1,491 860 422 209 N.American Risk Mgt 2,004 1,480 865 410 205 Northstar Commodities 2,005 1,515 870 430 215 Prudential Securities 1,999 1,499 860 431 209 R.J. O’Brien 2,048 1,507 885 402 202

Average 2,020 1,502 873 419 208

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

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Palm Oil May Extend Drop on Speculation Indian Imports to Slow

By Claire Leow

June 8 (Bloomberg) -- Palm oil futures in Malaysia, little changed today, may extend a recent decline on concern that orders from India, the second largest buyer, will slow after the country accumulated record stockpiles.

“With reserves in India at the current level, export numbers in the second half of 2009 may see significant weakening,” said an ECM Libra Investment Research report today.

August-delivery palm oil on the Malaysia Derivatives Exchange dropped as much as 0.8 percent to 2,500 ringgit ($712) a metric ton in Kuala Lumpur. The contract traded at 2,518 ringgit at 11:53 a.m. local time.

Export data from independent cargo surveyor Societe Generale de Surveillance on June 1 showed exports of palm oil to India from Malaysia, the second-largest producer, dropped 26 percent in May from a month earlier, after a 94 percent surge in April, signaling stockpiling has peaked, analysts said.

The next set of export data is out on Wednesday.

The price has surged 49 percent this year as soybean crops declined in Brazil and Argentina and soybean stockpiles in the U.S. are forecast to reach a five-year low. Palm oil competes with soybean oil for applications in food and biofuels.

India may slow the pace of imports after domestic stockpiles surged, Govindlal G. Patel, director of Dipak Enterprise, said on June 2. The country’s cooking oil reserves probably climbed 55 percent to 1.7 million tons in the seven months ended May, exceeding normal levels of 1.1 million tons, he said.

To contact the reporter for this story: Claire Leow in Singapore at cleow@bloomberg.net

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Raw Sugar May Gain, Refined Will Be Little Changed, Survey Says

By M. Shankar and Shruti Date Singh

June 8 (Bloomberg) -- Raw-sugar futures may advance while refined-sugar contracts may be little changed, according to a Bloomberg News survey.

Four of eight traders, analysts and brokers surveyed last week forecast that raw sugar traded in New York will gain this week. Three said it will decline. Raw sugar fell 0.3 percent to 15.53 cents a pound last week.

Four of eight said white sugar traded in London will be little changed. One said it will decline and three said it will advance. White sugar fell 1.4 percent last week to $446.90 a metric ton.

Two of eight said the premium of refined sugar over raw would widen. Four said the spread would be unchanged and two said it will narrow.

Bullish on raw sugar: 4       Bearish: 3     Neutral: 1
Bullish on white sugar: 3     Bearish: 1     Neutral: 4
Widening white premium: 2     Narrow:  2    Neutral: 4

To contact the reporters on this story: M. Shankar in London at mshankar@bloomberg.net;

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Rubber Futures Decline as Much as 3.7% as Crude Oil Slides

By Rattaphol Onsanit

June 8 (Bloomberg) -- Natural Rubber declined as much as 3.7 percent in Tokyo as lower crude oil prices boosted appeal for its synthetic rival, made from petroleum byproducts.

Rubber for November delivery fell to as low as 166.1 yen a kilogram ($1,687 a ton) on the Tokyo Commodity Exchange, before trading at 169.1 yen as of 3:25 p.m. local time.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net

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Credit Suisse, Nestle, Novartis, UBS: Swiss Equities Preview

By Naomi Kresge

June 8 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in Zurich. Stock symbols are in parentheses after company names. Share prices are from the last close.

The Swiss Market Index of the biggest and most actively traded companies lost 23.31, or 0.4 percent, to 5,398.9 in Zurich. The broader Swiss Performance Index dropped 0.3 percent to 4,668.

Credit Suisse Group AG (CSGN VX): Koor Industries Ltd., a holding company controlled by Israeli billionaire Nochi Dankner, said it reduced its holding in Switzerland’s second-largest bank to 8.32 million shares, or 0.7 percent. The shares rose 24 centimes, or 0.5 percent, to 50 Swiss francs.

Nestle SA (NESN VX): The world’s largest food company will exercise an option to increase its stake in a joint bottled water distribution venture with Compania Cervecerias Unidas SA, Chile’s biggest beer brewer, the Chilean company said in a statement posted on a regulator’s Web site. The shares dropped 1.12 francs, or 2.8 percent, to 38.78 francs.

Novartis AG (NOVN VX): The company’s Afinitor cancer treatment shrunk tumors in a third of patients with relapsed non-Hodgkin’s lymphoma and Hodgkin’s disease, new data shows. The stock slipped 6 centimes, or 0.1 percent, to 42.76 francs.

UBS AG (UBSN VX): Switzerland’s largest bank is “not out of the woods yet,” and clients are still withdrawing funds, SonntagsZeitung cited board member Bruno Gehrig as saying. The Swiss government will sell its stake in the bank as soon as justifiable, NZZ am Sonntag cited Finance Minister Hans-Rudolf Merz as saying. The shares fell 51 centimes, or 3.3 percent, to 15.01 francs.

To contact the reporters on this story: Naomi Kresge in Zurich at nkresge@bloomberg.net;

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U.K.’s FTSE 100 Declines; Lloyds, BAE Systems Shares Retreat

By Adam Haigh

June 8 (Bloomberg) -- U.K. stocks fell for the first time in three days on speculation a 26 percent rally on the FTSE 100 Index has outpaced expectations for earnings and economic growth.

Lloyds Banking Group Plc slid 2.6 percent after receiving bids for 87 percent of the stock it was selling and offering the remaining shares to investors for at least 38.43 pence each. BAE Systems Plc, Europe’s largest arms company, dropped 2.2 percent after Goldman Sachs Group Inc. advised clients to sell the shares.

The benchmark FTSE 100 Index slid 62.38, or 1.4 percent, to 4,376.18 at 8:22 a.m. in London. The gauge closed at 30 times the value of its companies’ earnings on June 5 after a 26 percent surge from its low on March 3. The FTSE All-Share Index dropped 1.2 percent today and Ireland’s ISEQ Index lost 1.1 percent.

The pound fell for a fourth day against the dollar as Prime Minister Gordon Brown confronted a fresh attempt to oust him after losing ground in European Union parliamentary elections.

Lloyds retreated 2.6 percent to 64.5 pence.

BAE Systems lost 2.2 percent to 332 pence. Goldman Sachs cut its recommendation to “sell’ from “neutral,” saying “the actions of the U.S. and U.K. governments over the last two months confirm their desire to cut defense investment.”

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

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Asian Stocks Fall on Valuation Concern; Feng Hsin, Cnooc Drop

By Patrick Rial

June 8 (Bloomberg) -- Asian stocks fell, led by materials producers and energy companies, on concern a three-month rally had made shares expensive relative to earnings prospects.

Feng Hsin Iron & Steel Co., which last week rose to a more than eight-month high, lost 6.5 percent in Taipei. Cnooc Ltd., China’s largest offshore oil producer, sank 2.7 percent as oil prices retreated for a second day. Daido Steel Co. slumped 3.5 percent in Tokyo on a Goldman Sachs Group Inc. downgrade.

“Valuations are not cheap,” said Pauline Dan, chief investment officer at Samsung Investment Trust Management in Hong Kong, which oversees $67.6 billion in assets. “Investors who have been pricing in a quick recovery are wondering whether the ‘green shoots’ we’ve seen will turn into big trees.”

The MSCI Asia Pacific Index fell 0.8 percent at 102.54 as of 4:53 p.m. in Tokyo, with five stocks declining for every four that rose. The measure has climbed 45 percent from a more than five-year low on March 9 on optimism global growth is recovering. The rally drove valuations to an eight-month high.

Japan’s Nikkei 225 Stock Average climbed 1 percent as a weaker yen boosted the earnings outlook for Canon Inc., which gets 28 percent of its revenue in the Americas. Komatsu Ltd., the world’s No. 2 maker of earthmovers, surged 6 percent after two brokerages recommended buying the stock.

South Korea’s Samsung Engineering Co. climbed 4.5 percent after Mirae Asset Securities Co. raised its share-price target. Taiwan’s Taiex Index sank 2.1 percent. Australia’s stock market is closed for a holiday.

Rising Valuations

Futures on the Standard & Poor’s 500 Index lost 0.9 percent. The gauge fell 0.3 percent on June 5 as concern higher borrowing costs will threaten the economic recovery overshadowed the better-than-estimated employment report.

The stock rally since March has lifted the average valuation of companies on MSCI’s Asian index to 1.5 times the book value of assets, the highest level since Sept. 29.

Taiwan’s Taiex Index, which rallied 15 percent last month, had the biggest drop in Asia today. Feng Hsin sank 6.5 percent to NT$49.20. Cathay Financial Holding Co., Taiwan’s largest listed financial-services company, slid 5 percent to NT$48.95, paring its gain in the past month to 7.8 percent.

“Taiwan shares are overvalued after rising so much in May, so there are foreign investors selling ,” said Kevin Yang, who manages $150 million as chief investment officer of Paradigm Asset Management Co. in Taipei.

Best Performers

Cnooc lost 2.7 percent to HK$10.88. Oil futures in New York dropped 1.7 percent in after-hours trading, adding to a 0.5 percent decline on June 5.

PetroChina Co., China’s largest oil producer, sank 2.1 percent to HK$9.19. The drop followed three weeks of gains that took its relative strength index, a gauge of how rapidly prices have risen or fallen, above the 70 threshold some traders use as a sell signal.

Raw materials producers and energy shares are the best performing of the MSCI Asia Pacific Index’s 10 industry groups in the past month on optimism stronger economic growth will fuel demand for oil and metals.

Daido Steel Co. slumped 3.5 percent to 447 yen after being cut to “neutral” from “buy” at Goldman Sachs. The stock closed last week at its highest level since Oct. 1.

Canon, the world’s largest camera maker, rose 3.4 percent to 3,360 yen on optimism a decline in the yen will boost the value of overseas sales. Mazda Motor Corp., which exports about 80 percent of its production, surged 6.1 percent to 294 yen.

Weaker Yen

The yen traded at 98.64 per dollar after weakening to as low as 98.89 on June 5, a level not seen in a month, after U.S. payrolls data boosted demand for the country’s assets. The U.S. Labor Department said on June 5 payrolls fell by 345,000 in May, compared with an average estimate for a decrease of 520,000 jobs in a Bloomberg survey of economists.

“The recent trend has been for the markets to rise on economic recovery hopes, but today’s move is more based on the substantial move by the yen,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co. in Tokyo, which oversees the equivalent of $96 billion.

Stocks rose today even as a government report showed Japan’s current-account surplus narrowed in April as the global recession cut demand for exports. Japan’s former Economic and Fiscal Policy Minister Hiroko Ota said in a June 4 interview that the world’s second-largest economy is likely to stumble again later this year after a temporary rebound.

Komatsu, which gets more than a fifth of its sales in the Americas, jumped 6 percent to 1,560 yen. Morgan Stanley started coverage of the company with an “overweight” recommendation and Nomura Holdings Inc. upgraded the stock to “buy” from “neutral.”

Brokerage Upgrades

Nomura, Japan’s largest brokerage, gained 4.9 percent to 800 yen as it was raised to “overweight” from “equal weight” at Morgan Stanley.

Samsung Engineering, South Korea’s biggest engineering company, climbed 4.5 percent to 86,700 won.

Mirae Asset Securities lifted its target for Samsung Engineering’s share price to 117,000 won from 91,000 won and maintained its “buy” recommendation in a report today. Samsung Engineering submitted the lowest bids for four overseas projects, which should lead to orders, the brokerage said.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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Stocks in Europe, Asia Drop; Air France, Vivendi Shares Fall

By Sarah Jones

June 8 (Bloomberg) -- Stocks fell in Europe and Asia amid speculation that share prices have outpaced the prospects for earnings growth after a three-month rally. U.S. futures slid.

Air France-KLM Group dropped for a fourth straight day after the industry’s main trade group said airline losses worldwide may total $9 billion in 2009, nearly double a previous forecast. Vivendi SA slipped 2.5 percent after UBS AG recommended selling the company’s shares.

Europe’s Dow Jones Stoxx 600 Index slipped 1.4 percent at 8:09 a.m. in London. The measure, which has rebounded 32 percent since March 9 on growing speculation that the worst of the first global recession since World War II is over, is valued at 24.9 times the earnings of its companies. That’s the most expensive level since 2004, weekly data compiled by Bloomberg show.

“We are expecting the market to come off a little bit after those strong rallies we saw as the end of last week.” said Joshua Raymond, a London-based market strategist at City Index.

The MSCI Asia Pacific Index fell 0.5 percent, led by commodity producers. Companies in the gauge currently trade at an average 1.5 times the book value of assets, the highest level since Sept. 29.

Futures on the Standard & Poor’s 500 Index slipped 0.7 percent, indicating the benchmark gauge for U.S. equities may retreat after three straight weeks of gains.

Airline Sales

Air France, Europe’s biggest airline, declined 2 percent to 10.63 euros. The International Air Transport Association said that sales may fall 15 percent this year to $448 billion from $528 billion in 2008.

“This is the most difficult situation that the industry has faced,” IATA Chief Executive Officer Giovanni Bisignani said. “Our future depends on a drastic reshaping by partners, governments and industry.”

Separately, Air France said it first noticed flaws with the Airbus A330 speed sensors involved in last week’s deadly crash more than a year ago.

Vivendi decreased 2.5 percent to 18.12 euros after UBS downgraded the owner of the world’s largest music company to “sell” from “neutral” on concern that competition will erode profit at the company’s SFR mobile-phone unit.

Lloyds Banking Group Plc slid 2.3 percent to 64.7 pence after the lender said it received bids for 87 percent of the stock in a share offer. It will offer the remaining shares to investors for at least 38.43 pence each.

Separately, Deutsche Bank AG raised its recommendation on Lloyds to “buy” from “sell.” Deutsche Bank, which last had a “buy” recommendation on Lloyds in July 2008 according to Bloomberg data, increased its price estimate on the shares to 100 pence from 35 pence.

Barclays, BlackRock

Barclays Plc slipped 2.9 percent to 276.75 pence. The U.K.’s third-largest bank said it’s in talks with bidders including BlackRock Inc. for its asset management division. The lender said it received “other proposals” for iShares and the broader Barclays Global Investors business.

The Daily Telegraph reported earlier that Barclays would say today that a $13 billion sale of its BGI unit to BlackRock is almost complete. The newspaper did not say where it got the information. A sale would trigger a potential $585 million windfall for BGI workers and leave Barclays with a 20 percent stake in BlackRock, the newspaper said. A completed deal may be announced June 10, the Telegraph also said.

H. Lundbeck A/S sank 15 percent to 101.75 kroner after the Danish drugmaker and Takeda Pharmaceutical Co. said they will delay submission in the U.S. of an experimental anti-depressant drug by 18 to 24 months until they have established the safest dose.

Arcandor AG dropped 33 percent to 1.26 euros after the German retailer’s spokesman Gerd Koslowski said the company may be forced to file for insolvency today and its survival depends on government aid.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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Palm Pre Supplies Are Scarce in First Weekend of Comeback Bid

By Amy Thomson

June 8 (Bloomberg) -- U.S. shoppers clamored for tight supplies of Palm Inc.’s Pre in its debut weekend, marking an early victory in the phone’s bid to challenge the iPhone.

Sprint Nextel Corp., the Pre’s exclusive wireless carrier, ran out of inventory at some stores, putting customers on waiting lists. Less than 100,000 phones may have sold over the weekend, mostly to current Sprint customers, said Jonathan Atkin, an RBC Capital Markets analyst in San Francisco.

While that’s a fraction of the latest iPhone’s sales in its debut weekend, the Pre is helping restore Palm’s reputation as a mobile-phone innovator. The touch-screen device also may slow the exodus of customers at Sprint, which has lost more than 4 million contract subscribers in the past year.

“They’ll probably sell as many as get produced for the foreseeable future,” said Atkin, who expects Sprint’s shares to perform in line with industry peers and doesn’t own the stock. “What they didn’t have last year was anything truly competitive on the device front.”

Leslie Letts, a spokeswoman for Sunnyvale, California-based Palm, declined to comment on the sales. Sprint isn’t disclosing the numbers, said Mark Elliott, a spokesman for the Overland Park, Kansas-based company.

The Pre supplements its touch screen with a slide-out keyboard, giving it a feature the iPhone lacks. The Pre’s operating system is designed to make switching between applications easier. The device also can combine calendars, contacts and messages from different accounts.

Same Price

Like the iPhone, it synchronizes with Apple’s iTunes music store. The Pre’s $199 price, after a two-year contract and mail- in rebate, also matches the iPhone’s.

Sprint has exclusive rights to the Pre through at least the end of the year. Larger rivals Verizon Wireless and AT&T Inc. have said they’re interested in carrying the phone.

Chicago-area Sprint stores received 30 to 50 of the devices, said Jennifer Fritzsche, an analyst at Wachovia Securities Inc. Some locations expect to get new shipments by June 10, she said. One Best Buy Co. store in New York said it only received three Pre phones.

Apple sold 1 million iPhone 3Gs in the device’s first three days of release in 2008, 10 times the number Atkin estimated for the Pre.

“There’s not quite the base of Palm fanatics as there is Apple fanatics,” he said. The iPhone also debuted in 21 countries. The two weekends are “not quite comparable,” he said.

‘About Time’

Beverly Durham, a 51-year-old insurance claims adjuster from Pasadena, California, lined up outside a neighborhood store before 8 a.m. on June 6, the day of the phone’s release.

“I’ve been a Sprint customer forever,” she said. “It’s about time Sprint came out with a new phone.”

Sprint’s store on Mission Street in San Francisco sold 60 Pre phones within two hours before running out, manager Daniel Chan said. The outlet started a waiting list and will get the next consignment in a few days, he said. About half the people who bought the Pre were iPhone owners, he said.

Misha Vladimirskiy, a 30-year-old photographer from San Francisco, is on that waiting list. He was told he should get his Pre in five days.

“I don’t mind waiting,” said Vladimirskiy, whose last three phones were from Palm.

Estimates Vary

Palm may sell about 150,000 Pre phones over the weekend, said Lawrence Harris, an analyst at CL King & Associates in New York. He has a neutral rating on the stock.

Michael Walkley, an analyst at Piper Jaffray & Co. in Minneapolis, put the number at almost 200,000. He advises buying Palm’s shares. Paul Coster, an analyst at JPMorgan Chase & Co. in New York, estimated weekend sales of more than 50,000.

Palm aims to win back customers for smart phones, a market the company helped create, after losing ground to Apple and Research In Motion Ltd. Palm is expected to post its third straight year of losses and declining sales, according to a Bloomberg survey of analysts.

In 2007, Palm hired former Apple executive Jon Rubinstein, who worked on the iPod, to create the Pre. Venture capital firm Elevation Partners invested $425 million in Palm, buying about a third of the company, and helped guide the development of the new phone.

“So far, it is fantastic,” said Chris Lee, a 28-year-old architect from New York who bought the Pre the first day. “There are some similar features to the iPhone,” said Lee, who gave up his iPhone 3G after eight months of service with AT&T. “But it feels more fresh.”

Palm’s Stock

Palm shares have quadrupled this year on anticipation that the Pre will be a hit. The stock fell 64 cents to $13 in Nasdaq Stock Market trading on June 5. Sprint rose 8 cents to $5.11 on the New York Stock Exchange. Apple climbed 93 cents to $144.67 on the Nasdaq.

Sprint and Palm aren’t alone in releasing new products. The Pre’s debut coincides with Apple’s annual developers’ conference. Cupertino, California-based Apple plans to unveil a new operating system for the iPhone this week.

Apple Chief Executive Officer Steve Jobs has demonstrated a new version of the iPhone the past two years at the conference. Steve Dowling, a company spokesman, declined to comment.

Verizon Wireless, the largest U.S. wireless carrier, is introducing new phones as well, including new BlackBerrys and a model based on Google Inc.’s Android software.

Smart Phones

Smart phones represent a pocket of growth in the wireless industry. The devices made up 23 percent of U.S. phone sales last quarter, up from 17 percent a year earlier, according to research firm NPD Group Inc. in Port Washington, New York.

Smart phones also bring in more revenue for carriers, since customers pay extra for Web access, software applications and messaging.

Sprint requires Pre buyers to sign up for the Simply Everything plan, which includes unlimited data and messaging for at least $69.99 a month. AT&T charges iPhone users the same amount without messaging, according to the company’s Web site. In addition to Sprint stores, Best Buy, RadioShack Corp. and some Wal-Mart Stores Inc. are carrying the Pre.

“For Palm, what’s at stake is its reputation,” said Andy Castonguay, a research director at Yankee Group in Boston. “This is, I think, without exaggeration, a fundamental step forward if the company is going to continue to be relevant.”

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

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KKR to Sell Private-Equity IPOs Through Fidelity Investments

By Jason Kelly

June 8 (Bloomberg) -- KKR & Co. agreed to sell shares of its private-equity companies through Fidelity Investments as the firms prepare for an increase in initial public offerings.

Fidelity, the world’s biggest mutual-fund company, will exclusively distribute offerings backed by New York-based KKR to individual investors, the companies said today in a statement. Fidelity, based in Boston, has 12 million brokerage clients.

A slump in IPOs has made it hard for private-equity firms to sell their investments. Companies in the U.S. raised $29.6 billion through IPOs in 2008, down 45 percent from 2007, according to data compiled by Bloomberg.

“When the IPO market returns, our distribution network is going to be very interested in getting back involved,” said Mark Haggerty, president of Fidelity Capital Markets, the company’s institutional trading division.

KKR, founded by Henry Kravis and George Roberts in 1976, is seeking business beyond leveraged buyouts as deal-making remains hindered by the global recession and banks’ unwillingness to lend. The firm’s capital-markets unit, headed by former Citigroup Inc. managing director Craig Farr, has underwritten debt and equity offerings for holdings including software maker SunGard Data Systems Inc..

“This allows us as an underwriter to have a terrific retail distribution,” Farr said in an interview. “It’s a continued evolution of this business.”

KKR has about 50 private companies generating more than $200 billion in annual revenue, including Energy Future Holdings Corp., the Texas power producer formerly known as TXU Corp., and discount retailer Dollar General Corp.

Distribution Network

KKR had $47.3 billion under management as of March, according to an investor presentation released last month. Fidelity also can set up programs to sell securities directly to employees of KKR-owned companies, according to the statement.

Haggerty oversees Fidelity’s prime-brokerage unit, which loans stocks and clears trades for hedge funds, along with the retail unit. Fidelity is broadening those businesses as fees from its main business of managing client’s assets fell last year with the decline in U.S. stocks.

To contact the reporters on this story: Jason Kelly in New York at Jkelly14@bloomberg.net

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Fink Aspires to Be No. 1 Fund Manager With Barclays Unit Offer

By Sree Vidya Bhaktavatsalam and Jon Menon

June 8 (Bloomberg) -- BlackRock Inc., the bond boutique co- founded in a one-room office by Laurence Fink in 1988, is a step closer to becoming the world’s biggest money manager after emerging as the leading bidder for Barclays Plc’s fund unit.

Fink has moved ahead of contenders for Barclays Global Investors including Bank of New York Mellon Corp., three people familiar with the talks said late last week. London-based Barclays, the U.K.’s third-largest bank, is seeking more than $12 billion for BGI, and may keep a 20 percent stake in the unit, one of the people said.

Barclays Global, which oversees $1.5 trillion, would be Fink’s biggest acquisition, building on his 2006 takeover of Merrill Lynch & Co.’s asset-management business. That deal pushed the New York-based company deeper into actively managed stock funds. BGI would add passive investments where rivals such as Pacific Investment Management Co. aren’t as competitive.

“This could be a transformational deal,” Burton Greenwald, a mutual-fund consultant based in Philadelphia, said in an interview.

The talks between Barclays and BlackRock aren’t exclusive, according to the people, who asked not to be identified because the auction is private. An agreement could be announced this week. BlackRock is in discussions with Mideast investors to provide equity financing for the deal, one of the people said.

Barclays agreed in April to sell iShares, BGI’s exchange- traded fund business, to London-based CVC Capital Partners Ltd. for $4.4 billion. The bank has until June 18 to find a better deal for iShares, the world’s largest manager of exchange-traded funds, or all of San Francisco-based Barclays Global.

Alistair Smith, a spokesman for Barclays in London, and Bobbie Collins, a spokeswoman for BlackRock, declined to comment.

Barclays Seeks Capital

Barclays, which shunned U.K. government funds, is seeking to raise cash after $18.6 billion of credit losses and writedowns. The bank’s capital adequacy ratios lag behind those of London-based Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc of Edinburgh, which accepted state control in return for taxpayer assistance.

A purchase of BGI, the world largest money manager, would give BlackRock, currently No. 3, about $2.81 trillion in assets and more customers outside the U.S. It would surpass State Street Corp., which managed $1.44 trillion as of Dec. 31, and Fidelity Investments, with $1.25 trillion. Both companies are based in Boston.

BGI is Europe’s biggest hedge-fund manager, the largest independent manager of pension-fund assets in Canada and Japan’s largest discretionary investment manager, according to the company.

Pimco Challenge

Fink, 56, is in a position to gain funds at a time when customer redemptions and market declines have slashed assets under management at money-management firms. First-quarter net income fell 65 percent to $84 million, mirroring declines at other firms.

BGI’s ETF business would help BlackRock compete with Pimco, its biggest rival in managing fixed-income. The Newport Beach, California-based firm, co-founded by Bill Gross, is in the early stage of building a roster of ETFs.

“We could see BlackRock open a number of ETFs in the fixed-income space that they specialize in,” consultant Greenwald said.

Valuation Expertise

BlackRock has a division called BlackRock Solutions that advises clients such as banks, pension funds and governments on risk-management. BlackRock has been hired by the U.S. government to help evaluate distressed portfolios since the onset of the credit crisis in 2007, including those previously managed by insurer American International Group Inc. and Bear Stearns Cos.

The company has also applied to be one of at least five assets managers of the U.S. government’s Public-Private Investment Program, which aims to buy mortgage-related assets from banks to help revive lending stabilize the financial markets.

The BGI transaction would be the largest acquisition of an asset-management firm, eclipsing the previous record set by Fink’s $8.5 billion purchase of New York-based Merrill Lynch’s fund unit. Merrill Lynch ended up with 49.8 percent of BlackRock following the 2006 transaction, a stake now owned by Bank of America Corp., based in Charlotte, North Carolina, after its acquisition of Merrill Lynch in January.

Fink joined with Ralph Schlosstein, a friend and managing director at Lehman Brothers, in 1988 to start the firm that would become BlackRock. It began life as Financial Management Group within private-equity firm Blackstone Group LP. Blackstone, based in New York, provided an office, a telephone line and a $5 million line of credit in return for a 40 percent stake in the company.

BlackRock parted company with Blackstone in 1994 after PNC Financial Services Group Inc. of Pittsburgh bought Fink’s group for $240 million. BlackRock went public on Oct. 1, 1999, at $14 a share.

BlackRock has since climbed almost 12-fold to $163.74 as of June 5, including a 22 percent gain in 2009. The company is the largest publicly traded asset manager in the U.S.

To contact the reporters on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net; Jon Menon in London at jmenon1@bloomberg.net.

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Earnings Diluted 4% by Record U.S. Share Sales, Dividend Cuts

By Elizabeth Stanton, Michael Tsang and Eric Martin

June 8 (Bloomberg) -- American common equity is increasing for the first time in five years, threatening to dilute corporate profits as companies sell a record amount of stock and cut dividends the most since 1938.

Wells Fargo & Co., ProLogis and more than 150 other companies raised $82.2 billion this quarter, beating the record pace at the height of the technology bubble in 2000, according to data compiled by Bloomberg. The combination of adding shares and restricting dividends will reduce annual equity returns as much as 4.1 percent, the data show.

“The math is inescapable,” said Alan Gayle, the Richmond, Virginia-based director of asset allocation at Ridgeworth Investments, which manages $60 billion. “You’ve got weak earnings, the share price goes down and then, ‘What? They want to raise equity?’ Clearly that isn’t a good thing.”

Companies are taking advantage of the biggest rally in equities since the 1930s to sell shares even after earnings fell seven consecutive quarters during the worst recession in half a century. Banks ordered to raise capital by the government account for 23 percent of underwritten sales, data compiled by Bloomberg show.

The flood is trimming earnings available to shareholders, a warning sign to Lyxor Asset Management SA, Research Affiliates LLC and James Investment Research that returns may not be high enough to justify buying stock.

Offerings since March 31 will increase outstanding shares in the S&P 500 by 3.4 percent on an annualized basis, adjusting for the market values of companies selling stock, data from Bloomberg and S&P show. The rise is based on S&P’s calculation of shares added or removed from the index through sales, buybacks and takeovers, known as the divisor.

Bigger Pool

Record mergers, acquisitions and repurchases reduced the divisor the past four years. Now, the increase is penalizing existing shareowners by spreading earnings and dividends across a larger pool of stock. The annualized increase in the S&P 500’s share count would cut estimated per-share profit this year by 3.3 percent to $57.23, data compiled by Bloomberg show.

The 46 percent decline in S&P 500 corporate earnings since its peak in the second quarter of 2007 is forcing companies to conserve cash by shrinking dividends, data compiled by Bloomberg show. Combined payouts will fall 23 percent to $21.97 per share for companies in the benchmark index this year, the most since the 36 percent drop in 1938, S&P estimates.

Cutting the dividend yield by 0.8 percentage point from last year to 2.34 percent and the dilution from share sales would cut the S&P 500’s total return by 4.1 percent, data compiled by Bloomberg show.

Impaired Returns

While a reduction of that size represents less than a third of the average yearly increase in the index from 1982 through 2007, it’s a bigger drag in markets battered by the worst losses in 70 years, when the S&P 500 tumbled 38 percent last year. U.S. equities have returned 6 percent on average since 1900, inflation-adjusted data compiled by the London Business School and Zurich-based Credit Suisse Group AG show.

“If anyone said to me a 5 percent reduction on your annualized return doesn’t matter, I’d say try explaining that to your client, especially considering the way the numbers have been over the past two or three years,” said Brian Shepardson, who helps manage $2 billion at Xenia, Ohio-based James Investment Research.

Existing shareholders are better off accepting a smaller slice of future earnings because some companies would have failed without new money, said Mark Hantho, the New York-based head of equity capital markets at Deutsche Bank AG.

Bank Losses

U.S. financial companies accounted for almost two-thirds of about $1.5 trillion in global asset writedowns and credit losses that drove shares of banks, brokers and insurers in the S&P 500 down as much as 84 percent since their 2007 peak.

Seventy-nine financial companies sold $60.7 billion of shares this quarter, reducing the claim existing shareholders have on earnings by more than 20 percent, data compiled by Bloomberg show.

“Most people are not talking about dilution, only the balance sheet,” Hantho said. “The fact that they’re putting money to work in solving the problem is creating a lift in the equity as a result of fixing the balance sheet. Even though it’s at the expense of dilution, it’s better than the alternative.”

San Francisco-based Wells Fargo and New York-based Morgan Stanley were among the banks required to sell stock after the Federal Reserve determined in a report on May 7 that 10 of the country’s 19 largest banks needed to raise a combined $74.6 billion.

Raising Cash

Wells Fargo’s $8.63 billion secondary sale on May 8 increased its share count by about 10 percent. The fourth- largest U.S. bank by assets got more than the $6 billion it had estimated, selling shares at an 11 percent discount to the previous day’s closing price.

Banks not among those told to raise capital, including New York-based Goldman Sachs Group Inc. and JPMorgan Chase & Co. and U.S. Bancorp in Minneapolis have sold more than $20 billion, mostly to repay government funds they were ordered to accept after New York-based Lehman Brothers Holdings Inc. collapsed in September.

“The financial ones do make me angry because in some cases, particularly JPMorgan, they were forced to take the damn money to begin with, they didn’t need it, and now they’re forced to dilute the shareholders,” said James Barrow, president of Barrow Hanley Mewhinney & Strauss in Dallas, which manages $40 billion, including JPMorgan shares.

Previous Record

Stock sales picked up as the S&P 500 rallied 39 percent from a 12-year low in March and surpassed the record $65.6 billion from the first quarter of 2000, just as the gauge started a 49 percent plunge. The 153 companies that have sold equity since March increased their outstanding shares by an average of 23 percent, according to data compiled by Bloomberg.

Florence Barjou, strategist at Societe Generale SA’s Lyxor Asset Management in Paris, says the record share sales are coming at the worst possible time.

The U.S. will shrink by the most since 1946 this year, according to a Bloomberg survey of 61 economists. The jobless rate rose to 9.4 percent in May, a government report showed June 5. Corporate earnings are forecast to decline for two more quarters after dropping the last seven, the longest streak since the Great Depression, analysts’ estimates compiled by Bloomberg show.

“Investors have been discounting a very rapid return to growth, so maybe the market is getting a bit complacent,” said Lyxor Asset’s Barjou, who helps oversees about $100 billion.

Shareholders say the decision by executives to sell shares now means prices may already be too high.

“What we find is that secondary-equity offerings frequently signal a view in management suites that prices are rich,” said Robert Arnott, chairman and founder of Research Affiliates, which oversees $32 billion in Newport Beach, California. “Does that mean this is an interim top? Who knows, but it would be unsurprising.”

To contact the reporters for this story: Elizabeth Stanton in New York at estanton@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.

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