Rubber Advances as Demand May Increase Amid Recovery Optimism

By Jae Hur

Aug. 6 (Bloomberg) -- Rubber climbed, reversing earlier losses, on speculation that demand for the commodity used to make tires may increase from auto makers amid renewed optimism of a global economic recovery.

Futures in Tokyo rebounded as a rally in Asian stocks boosted confidence that the worst of the global recession has passed and demand for commodities will rebound. They earlier lost as much as 5.6 percent from a nine-month high set on Aug. 4 on investor speculation that the price rally was excessive.

“Rubber got a boost from gains in stocks and higher prices of platinum” which is used to make auto emissions-control parts, Takaki Shigemoto, an analyst at Okachi & Co., said by telephone today from Tokyo.

January-delivery rubber closed up 0.7 percent at 195.8 yen a kilogram ($2,058 a ton) on the Tokyo Commodity Exchange after trading as low as 191.6 yen. On Aug. 4, the contract touched 202.9 yen, the highest since Nov. 5.

The decline of more than 10 yen from this week’s high “was too fast and too much,” while some investors were still reluctant to buy above 200.0 yen, Shigemoto said.

The 14-day relative strength index for rubber futures, a gauge of momentum, has climbed above 70 since July 31, a level some investors use as an indicator that prices may decline.

Rubber gained 21 percent in July, the most since December 2006, and have jumped 44 percent this year as global equities rallied and exporters, including Thailand, curbed shipments.

The MSCI Asia Pacific Index gained 0.8 percent to 112.79 as of 3:50 p.m. in Tokyo. It has climbed 61 percent from a five- year low on March 9. Platinum was little changed at $1,286 an ounce after gaining 9.5 percent in the previous five days.

U.S. Car Sales

U.S. sales for Toyota Motor Corp., the world’s largest automaker, fell 34 percent January through July after a 15 percent drop last year as the industry struggled with its worst drop in three decades. Last month, aided by a government incentive program, Toyota sales fell 11 percent, its smallest slide in 2009.

Honda Motor Co., Japan’s second-biggest carmaker, will raise global output as emerging markets lead a recovery in auto demand. The company will build about 90,000 vehicles more than initially planned this year in response to higher-than-forecast sales in China, Thailand, India, Indonesia and Brazil, Chief Financial Officer Yoichi Hojo said yesterday.

Sales in China are increasing on government stimulus spending and a recovery in the economy, Hojo said. In the first six months of the year, the company’s sales in the country rose 12 percent, capped by a 54 percent jump in June.

Rubber shippers in Thailand, the world’s top exporter, cut offers for the RSS-3 grade for September shipment to $1.96 a kilogram today from $1.98 yesterday and $2.02 on Aug. 4, said Okachi’s Shigemoto.

January-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 0.3 percent to close at 18,765 yuan ($2,747) a ton.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Soybean Futures Plunge on Expectations U.S. Inventories to Rise

By Luzi Ann Javier

Aug. 6 (Bloomberg) -- Soybean futures plunged on expectations shipments from the U.S., the world’s biggest grower and exporter, will slow, swelling domestic stockpiles.

Inventories in the U.S. will rise to 259 million bushels in the 2009-2010, up from an estimated 95 million bushels this year, Allendale Corp., a U.S. commodity research firm, said in a note e-mailed today. That compares with the 250 million bushels forecast by the U.S. Department of Agriculture in July.

Expectations of slower U.S. shipments and higher stockpiles “is very bearish,” Ben Barber, a futures adviser at Bell Commodities Ltd., said by phone from Melbourne today. “It takes away some of the fundamentals.”

Soybeans for November delivery, after the U.S. harvest, fell 2 percent to $10.2375 a bushel in after-hours electronic trading on the Chicago Board of Trade at 12:51 p.m. Singapore time, after dropping as much as 2.5 percent earlier.

Soybean-meal for December delivery lost as much as 3 percent to $309.10 per 2,000 pounds, before trading at $310.50.

U.S. exporters sold 1.92 million tons of soybeans to China, of which 1.8 million tons are for delivery in the marketing year beginning September.

Corn futures fell for a third day on speculation producers are rushing to lock in prices ahead of the harvest beginning September as they expect expanding U.S. output will extend price declines.

Harvests in the U.S. will increase 3.7 percent to 12.554 billion bushels, the second-highest on record, as yields rise, Informa Economics said yesterday in a report.

“If you’re a producer of corn, you’d be looking at that and saying ‘let’s better lock in there’,” Barber said.

Corn for December delivery lost as much as 2.1 percent to $3.495 a bushel and last traded at $3.5125 at 12:56 p.m. Singapore time. Wheat for December delivery lost 1.1 percent to $5.5075 a bushel.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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HSBC Securities Raises Gold Forecast on Haven Demand

By Glenys Sim

Aug. 6 (Bloomberg) -- Gold may average $925 an ounce this year on increased demand for haven investments as the global economy faces “formidable structural challenges,” according to HSBC Securities.

The forecast is 5.7 percent higher than an earlier target of $875 an ounce, the bank said in a report yesterday. HSBC raised its 2010 estimate for the metal by 8.6 percent to $950 an ounce and its 2011 target by 14 percent to $825.

“Gold prices will be subject to a myriad of competing forces, including strong investor demand, potentially volatile commodity prices, weak jewelry demand, sluggish mine output, and heavy scrap sales,” New York-based analyst James Steel wrote in the report. “The interplay between these forces will likely keep gold in a wide and volatile trading range.”

Gold for immediate delivery has averaged $919.88 an ounce this year and traded at $963.95 at 10:11 a.m. in Singapore. The metal has re-established its inverse relationship with the dollar, which will be another price driver, according to Steel.

Bullion has advanced 9.3 percent this year as the U.S. Dollar Index, which tracks the value of the greenback against the currencies of six major trading partners, slid 4.6 percent in the same period. Gold tends to move opposite to the dollar as investors seek a store of value and as it becomes cheaper for holders of other currencies.

HSBC Securities kept its silver forecast unchanged at $12.50 an ounce this year, $14 an ounce in 2010 and $13.50 an ounce in 2011. Silver has averaged $13.2705 an ounce this year.

Platinum Forecast

The company raised its platinum target by 6.8 percent to $1,175 an ounce this year and kept its 2010 and 2011 estimates at $1,500 an ounce and $1,475 an ounce, respectively. The metal, used mainly in catalytic converters, is up 38 percent this year, averaging $1,116.89 an ounce so far.

“Although still weak, global auto and industrial demand appear to be stabilizing,” wrote Steel. “This, plus production cutbacks, should help tighten platinum group metal balances.”

Jewelry consumption was likely to decline as the economic slowdown reduced demand for luxury goods, Steel said. China demand should “largely offset” losses elsewhere, he said.

Palladium forecasts were left unchanged at $225 an ounce for 2009, $315 an ounce for 2010 and $325 an ounce for 2011.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Jim Rogers Says U.S. Commodity Curbs to Drive Markets Overseas

By Claire Leow

Aug. 6 (Bloomberg) -- U.S. proposals to place curbs on commodities trading will drive business overseas, particularly to Asia, said Jim Rogers, chairman of Rogers Holdings.

“It is remarkable because America is shooting itself in the foot again,” he said in an interview in Singapore today. “It’s going to drive the business away and the rest of the world is going to welcome it with open arms.”

U.S. Treasury Secretary Timothy Geithner is urging Congress to rein in the $592 trillion derivatives market with new U.S. laws that are “difficult to evade.” Opaque financial products contributed to almost $1.5 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg.

“The end result is going to be Singapore, or Hong Kong, or Shanghai or who-knows-where” will be “quite happy to take that business,” he added.

As the U.S. contemplates tighter regulation, China’s interest in commodities is accelerating, Rogers said. The world’s most populous country already accounts for about one- third of global copper usage. It also accounts for about one- sixth of wheat demand and one-fifth of soybeans, according to the U.S. Department of Agriculture.

“The three commodity exchanges in China are booming,” he said. “Dalian trades more soybean contracts than Chicago does already, and that’s with a blocked currency, a closed market. Can you imagine what’s going to happen if and when they open that market up to foreigners? It’s going to explode.”

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

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Oil Set for New High in 2009, Barclays Says: Technical Analysis

By Grant Smith

Aug. 6 (Bloomberg) -- Crude oil is set to rise above $74 a barrel in New York, passing this year’s high, after prices formed an “inside bar” pattern, according to technical analysts at Barclays Capital.

The highest and lowest prices on Aug. 4 were within the trading range of the previous day, a formation on a candlestick chart known as an “inside bar” that usually indicates the continuation of a price trend, Barclays analyst MacNeil Curry said in a telephone interview from New York yesterday. A narrowing gap between monthly contracts of Brent crude and a “positive macro backdrop” lend support, he said.

Crude futures for September delivery, which traded as high as $72.10 a barrel yesterday on the New York Mercantile Exchange, rose to a 2009 high of $74.66 a barrel on June 11. The Brent contract in London increased to its highest this year, $74.89, on Aug. 4.

“The path of least resistance is higher,” Curry said. “It’s a conglomeration of things: the inside bar, Brent is making new highs, the spreads are trying to consolidate, and the macro backdrop is positive for assets correlated with global growth.”

The upper and lower levels on Aug. 4 for the September crude contract in New York were $70.16 and $71.95, whereas the highs and lows on the previous day $69.09 and $72.20.

“The inside bar is when the bar subsequent to a big move is within the previous day’s range,” said Curry. “This usually suggests the continuation of the previous trend, which in this case is an uptrend.”

The difference between Brent contracts to be settled in a year’s time and those settling a month from now shrank to $6.22 a barrel yesterday, compared with $11.69 a barrel on March 30. The narrowing of the discount between short- and long-term crude often indicates that an oversupply in the near-term is abating.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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Asian Stocks Gain on Growth Speculation; China Shares Decline

By Shani Raja

Aug. 6 (Bloomberg) -- Asian stocks rose for the first time in three days as Alumina Ltd. posted a smaller-than-estimated underlying loss and Australian employers unexpectedly added jobs, boosting confidence the global economy is recovering.

Alumina, partner in the world’s biggest producer of the material used to make aluminum, surged 9.8 percent in Sydney. Nippon Telegraph & Telephone Corp., Japan’s biggest phone operator, climbed 2.5 percent after saying profit at its fixed- line units rose. Chinese stocks declined, led by Citic Securities Co.’s 3.8 percent drop in Shanghai, on concern the nation’s central bank may rein in lending.

The MSCI Asia Pacific Index gained 0.8 percent to 112.81 as of 5:38 p.m. in Tokyo, with five stocks advancing for every four that declined. The measure had fallen 1 percent in the previous two days. The gauge has climbed 60 percent from a five-year low on March 9 on speculation the global economy is recovering.

“The market is ostensibly in a bit of a sweet spot,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The momentum in economic fundamentals is improving in terms of global growth. We’ll need to see continued upgrades to earnings estimates to ensure the market continues its momentum higher.”

Hong Kong’s Hang Seng Index gained 2 percent, while Japan’s Nikkei 225 Stock Average rose 1.3 percent. Elpida Memory Inc. climbed 7.2 percent in Tokyo after JPMorgan Chase & Co. upgraded the stock. Australia’s S&P/ASX 200 Index added 1.5 percent as builder Leighton Holdings Ltd. gained 3.4 percent after predicting a rebound in Asian demand for resources.

Nikon, Cathay Pacific

Among stocks that fell today, Nikon Corp., which makes equipment used to produce semiconductors, tumbled 10 percent in Tokyo after forecasting a record loss. Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, dropped 3.6 percent after its chief executive said the global recession might require “fundamental changes” to its business model.

Futures on the Standard & Poor’s 500 Index rose 0.3 percent. The gauge dropped 0.3 percent yesterday after data from ADP Employer Services showed American businesses cut more workers from pay rolls last month than economists estimated. The Institute for Supply Management’s index of non-manufacturing businesses also declined in July.

Alumina rose 9.8 percent to A$1.795. The company reported an underlying loss of A$15 million ($12.6 million) in the six months ended June 30, beating the A$22 million median estimate of three analysts compiled by Bloomberg.

“It appears that the worst is over,” said Ben Potter, an analyst at IG Markets in Melbourne. “The headline numbers were certainly stronger than expected.”

Metals Prices

BHP Billiton Ltd., the world’s biggest mining company, gained 1.7 percent to A$38.79 after a gauge of six metals in London climbed 3.3 percent yesterday to a level not seen since Sept. 30. Aluminum prices jumped 4 percent, while copper added 2.5 percent. Rio Tinto Group, the world’s third-largest mining company, rose 1.9 percent to A$61.90.

NTT climbed 2.5 percent to 4,070 yen. The company said yesterday operating profits at its fixed-line units NTT East Corp. and NTT West Corp. grew at least 76 percent in the three months to June 30. The results of these subsidiaries tend to influence NTT’s share price, Hitoshi Hayakawa, an analyst at Credit Suisse Group AG, wrote in a report yesterday.

Elpida, Japan’s largest maker of computer-memory chips, gained 7.2 percent to 1,195 yen after JPMorgan Chase & Co. upgraded the stock to “overweight” from “neutral” on signs that earnings will “break even” in the December quarter.

Rising Valuations

Thirty-four percent of the 386 companies in the MSCI Asia Pacific Index that have reported quarterly results so far have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.

Better-than-expected earnings and economic reports worldwide have driven stocks higher since March, lifting the average valuation of the MSCI Asia Pacific Index’s companies to a four-month high of 25 times estimated profit on July 28.

“The market is at the near-term ceiling,” said Mitsushige Akino, who oversees the equivalent of $632 million at Ichiyoshi Investment Management Co. “People are optimistic but don’t have enough catalysts to make them even more optimistic.”

In Sydney, Leighton, Australia’s biggest construction company, gained 3.4 percent to A$30 after Chief Executive Officer Wal King said the past 18 months represented only a “bump” in the minerals-demand cycle.

The number of Australians employed rose 32,200 from June, the country’s statistics bureau said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg was for a decline of 18,000. The jobless rate held at 5.8 percent.

Fine Tuning

Citic Securities, China’s largest brokerage by market value, slumped 3.8 percent to 35.01 yuan after the People’s Bank of China said it will fine-tune monetary policy and ensure “appropriate” lending growth. Haitong Securities Co. sank 2.6 percent to 18.23 yuan.

The Shanghai Composite Index lost 2.1 percent, posting its first back-to-back drop in three weeks. The gauge has gained every month this year as record bank lending and government stimulus spending spur a rebound in the economy. Companies in the measure are valued at an average 36 times estimated profit, twice the level of stocks in the MSCI Emerging Market Index.

“The ‘fine-tune tone’ is spooking investors who are worried that the central bank will follow up with tightening measures, such as hiking the reserve ratio,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “With the market at a high-flying level, investors are very sensitive to any news related to liquidity.”

Record Loss

Nikon sank 10 percent to 1,690 yen. The company said its net loss will probably be 28 billion yen ($295 million) in the year ending March 2010, compared with a May projection of 17 billion yen. The deficit would be the largest for the company, according to financial records stretching back to 1992.

Cathay Pacific fell 3.6 percent to HK$11.74. The carrier said it was considering ripping out some premium-class seats and installing more economy seating as the recession forces companies to slash their travel budgets.

“We’re going to have to make fundamental changes to our business” if premium and cargo demand doesn’t return, Tony Tyler, the airline’s chief executive officer, said in a Bloomberg TV interview today.

To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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German Stocks Gain as Hannover Re, Henkel Advance; BASF Drops

By Julie Cruz

Aug. 6 (Bloomberg) -- German stocks rebounded from two days of losses after earnings at Hannover Re doubled and analysts raised their recommendations for Henkel AG.

Hannover Re jumped 4.3 percent as Germany’s second-biggest reinsurer reported second-quarter profit of 202.9 million euros ($292.3 million), beating analysts’ estimates. Henkel rose 3.8 percent after it was upgraded to “hold” at Societe Generale SA and Jefferies Group Inc. BASF SE declined 1 percent as UBS AG cut its recommendation on the shares.

The benchmark DAX Index added 0.5 percent to 5,380.53 as of 11:08 a.m. in Frankfurt, a second advance this week. The broader HDAX Index also climbed 0.5 percent. German companies that have reported quarterly earnings so far beat projections by an average of 13 percent, while net income declined 64 percent, according to Bloomberg data.

Hannover Re rallied 4.3 percent to 29.17 euros. The reinsurer expects to beat its own profit forecast of about 600 million euros or at least 5 euros per share in 2009 if capital markets remain unchanged at current levels, Chief Financial Officer Roland Vogel said in a telephone interview today.

Henkel, the German maker of Loctite glues and Persil detergent, climbed 3.8 percent to 27.34 euros. “We have decided to upgrade Henkel from sell to hold following the release of a solid set of sales and earnings figures in the second quarter,” Emmanuel Bruley des Varannes, an analyst at Societe Generale, wrote in a report today.

Jefferies lifted its recommendation from “underperform,” while Goldman Sachs Group Inc. raised its share-price estimate to 25.80 euros from 24.60 euros.

Steelmakers

ThyssenKrupp AG, Germany’s largest steelmaker, climbed 2 percent to 23.13 euros. Bank of America Corp. lifted its price projection to 30 euros a share from 26 euros. Smaller competitor Salzgitter AG climbed 1.4 percent to 72.09 euros.

Siemens AG, Europe’s largest engineering company, increased 1.4 percent to 57.36 euros. Deutsche Bank AG raised its price estimate on the stock to 70 euros from 60 euros.

BASF declined 1 percent to 35.26 euros. The world’s biggest chemical company was cut to “neutral” from “buy” at UBS. Volkswagen AG, Europe’s largest carmaker, tumbled 4.7 percent to 223.44 euros.

The European Central Bank will leave interest rates at a record low as it tries to get credit flowing again to strengthen an economy that may return to growth this quarter, economists said. ECB officials meeting in Frankfurt today will keep the benchmark rate at 1 percent, according to all 52 economists in a Bloomberg News survey.

The following stocks also rose or fell in German markets. Symbols are in parentheses after company names.

Fuchs Petrolub AG (FPE3 GY) jumped 7.2 percent to 47.69 euros, the biggest intraday advance since May. WestLB AG raised its share-price estimate for Germany’s largest maker of lubricants 19 percent to 50 euros, citing “very strong” second-quarter results.

ProSiebenSat.1 Media AG (PSM GY) dropped for the first time in seven days, losing 4.1 percent to 5.15 euros. Germany’s biggest private broadcaster said second-quarter net income dropped to 45.5 million euros from 59.5 million euros. The company said it can’t make a forecast for 2009 though it does expect to beat its goal of 100 million euros in cost savings.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net.

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Swiss Stocks Rise as Zurich Financial, Petroplus Holdings Gain

By Adria Cimino

Aug. 6 (Bloomberg) -- The Swiss Market Index advanced for the first time in three days, led by Zurich Financial Services AG, after the company said it’s confident about achieving mid- term profit goals.

Zurich Financial, Switzerland’s largest insurer, led bank and insurance shares higher. Petroplus Holdings AG, Europe’s biggest independent refiner by capacity, surged 7.6 percent after earnings beat analysts’ projections.

The SMI, a gauge of the biggest and most actively traded Swiss companies, increased 1.2 percent to 5,981.81 at 10:01 a.m. in Zurich, gaining for a second day this week. The broader Swiss Performance Index added 1.1 percent to 5,144.23.

The SMI has climbed 14 percent since July 10 as U.S. companies from Goldman Sachs Group Inc., Johnson & Johnson and Apple Inc. reported earnings that exceeded analysts’ estimates.

Zurich Financial rallied 2.6 percent to 221.5 francs, gaining for a seventh day. The company beat a 16 percent target for business operating profit return on equity in the first half, Chief Financial Officer Dieter Wemmer said on a conference call today. Zurich Financial reported a 29 percent decline in second-quarter profit because of lower general insurance earnings and investment losses.

“The result looks solid, proofing Zurich Financial Services franchise in a challenging market,” Stefan Schuermann, an analyst at Vontobel Holding AG, wrote.

Credit Suisse Group AG, the largest Swiss bank by market value, climbed 2.6 percent to 53.75 francs. UBS AG, the biggest by assets, advanced 2.1 percent to 15.81 francs.

Swiss Reinsurance Co. climbed 2.6 percent to 43.6 francs, gaining for a third day this week. UBS AG raised its recommendation for the world’s second-largest reinsurer to “neutral” from “sell.”

Petroplus surged 7.6 percent to 19.37 francs, for the biggest gain in two months. Petroplus net income declined to $205 million in the second quarter from $638.6 million a year earlier, beating the $161.5 million median estimate of eight analysts surveyed by Bloomberg.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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U.K.’s FTSE 100 Index Advances; Aviva and Unilever Shares Gain

By Alexis Xydias

Aug. 6 (Bloomberg) -- U.K. stocks rose, led by Aviva Plc after Britain’s second-biggest insurer by market value reported a first-half profit. Unilever advanced after posting an unexpected increase in sales by volume.

The FTSE 100 Index added 48.92, or 1.1 percent, to 4,696.05 as of 8:34 a.m. in London. The FTSE All-Share Index climbed 1 percent and Ireland’s ISEQ Index increased 2.3 percent.

The FTSE 100 has rebounded 34 percent since March 3 amid speculation a global recession is easing and as companies beat analysts’ earnings estimates. Investors will hear today from the Bank of England on whether signs of an economic recovery are strong enough to allow the central bank to stop its bond- purchase program that has pumped money into markets.

“We believe we are through the worst of the global economic recession courtesy of unprecedented levels of government support and central bank liquidity provision,” Bank of America Corp. strategists Gary Baker and Patrik Schowitz wrote in a report today. “This provides economic and corporate earnings catalysts to allow markets to take advantage of still undemanding valuation levels.”

Aviva surged 7.5 percent to 383.1 pence. The insurer swung to a profit as margins on the sale of life insurance policies increased. Net income in the first half was 675 million pounds ($1.1 billion) while operating profit, measured on a market- consistent embedded value basis, rose to 1.69 billion pounds, beating the 1.23 billion-pound median estimate of five analysts surveyed by Bloomberg.

Unilever jumped 5.4 percent to 1,628 pence. Second-quarter sales by volume in western Europe unexpectedly rose 1 percent, the company said today, as it cut prices by 2 percent to keep cash-strapped consumers in countries including Germany and Spain.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

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European, Asian Stocks Advance; KBC, Aviva, Unilever Lead Gains

By Daniela Silberstein

Aug. 6 (Bloomberg) -- Stocks in Europe and Asia rose, led by financial shares as KBC Group NV reported a surprise profit, Aviva Plc posted results that beat estimates and an industry group predicted U.K. house prices will increase this year.

KBC, a recipient of Belgian bank-rescue funds, surged 17 percent while Aviva, the U.K.’s second-biggest insurer by market value, gained 6.2 percent. Unilever, the world’s second-largest consumer-goods maker, added 5.6 percent in Amsterdam after beating analysts’ estimates for western European sales growth.

The MSCI World Index advanced for the fifth time in six days, climbing 0.4 percent at 10:24 a.m. in London. The gauge of 23 developed countries has climbed 55 percent since March 9 as companies from GlaxoSmithKline Plc to Goldman Sachs Group Inc. reported better-than-estimated earnings.

“The earnings season was pretty impressive and it’s firing this rally were seeing,” Marc-Alexander Kniess, a senior portfolio manager at DWS Investment GmbH in Frankfurt, which has $288 billion under management, told Bloomberg Television. “Interest rates are at low levels so therefore liquidity is there and that should help spark economic recovery.”

Europe’s Dow Jones Stoxx 600 Index added 0.8 percent today before interest-rate decisions from the Bank of England and the European Central Bank. The regional measure is valued at 39.9 times the profits of its companies, the highest level since September 2003, weekly data compiled by Bloomberg show.

The MSCI Asia Pacific Index rose 0.7 percent as employers in Australia unexpectedly added jobs and Nippon Telegraph & Telephone Corp. said earnings at its fixed-line units increased.

U.S. Futures

Standard & Poor’s 500 Index futures fluctuated between gains and losses before a weekly report on initial jobless claims. The benchmark gauge for U.S. equities yesterday fell from a nine-month high after data on job losses and service industries were worse than economists estimated.

The Bank of England will announce the Monetary Policy Committee’s monthly decision at 12 p.m. today in London. The bank will keep the benchmark rate at a record low of 0.5 percent, according to all 60 economists in a Bloomberg News survey. Governor Mervyn King may need to spell out the central bank’s next policy step after completing the latest phase of its bond-purchase program, economists say.

U.K. house prices will increase in 2009, the Royal Institution of Chartered Surveyors said, reversing an earlier prediction for a drop of as much as 15 percent. The average price of a home will be “slightly higher” in the fourth quarter of 2009 than it was in the same period last year, RICS said in a statement in London today.

ECB Decision

The European Central Bank will keep its key rate at a record low as it tries to get credit flowing again to strengthen an economy that may return to growth this quarter, economists said. The ECB announces its rate decision at 1:45 p.m. in Frankfurt and President Jean-Claude Trichet holds a press conference 45 minutes later.

KBC surged 17 percent to 19.04 euros. The recipient of 7 billion euros ($10.1 billion) in Belgian bank-rescue funds reported a surprise profit as narrowing credit spreads boosted the value of its collateralized debt obligations.

Aviva increased 6.2 percent to 378.2 pence. The U.K.’s second-biggest insurer by market value swung to a first-half profit as margins on the sale of life insurance policies increased. Net income was 675 million pounds ($1.1 billion), compared with a year-earlier loss of 97 million pounds. Operating profit, measured on a market-consistent embedded value basis, rose to 1.69 billion pounds, exceeding analyst estimates.

Hannover Re, Zurich

Hannover Re climbed 5.8 percent to 29.59 euros. Germany’s second-biggest reinsurer said second-quarter net income doubled, beating estimates as investment income increased.

Zurich Financial Services AG added 2.1 percent to 220.5 Swiss francs. Switzerland’s largest insurer is confident about achieving its mid-term profit goals after beating a 16 percent target for business operating profit return on equity in the first half, Chief Financial Officer Dieter Wemmer said. The company reported a 29 percent decline in second-quarter profit because of lower general insurance earnings and investment losses.

Jyske Bank A/S gained 4.7 percent to 202 kroner. Denmark’s second-largest lender was raised to “buy” from “accumulate” at Svenska Handelsbanken AB, which said loan losses at the Danish bank have peaked and that it expects “strong” net interest income in the third quarter.

Unilever Rises

Unilever, the world’s second-largest consumer goods maker, climbed 5.6 percent to 19.87 euros in Amsterdam. The maker of Blue Band margarines and Knorr soups said that its quantity of goods sold in western Europe rose 1 percent, compared with the median 2 percent decline estimated by nine analysts in a Bloomberg News survey.

Petroplus Holdings AG rallied 8.1 percent to 19.47 francs. The largest independent oil refiner in Europe said second- quarter profit fell 68 percent to $205 million. That beat the $161.5 million median estimate of eight analysts surveyed by Bloomberg.

Veolia Environnement SA, the world’s biggest water company, fell 5.4 percent to 23.04 euros after posting a larger-than- estimated profit decline because of a slowdown in its waste treatment business.

Per-share earnings have slumped 39 percent at companies on the Stoxx 600 while more than half of profits have topped analysts’ projections, according to data compiled by Bloomberg. Of the 221 companies to have reported results since July 8, 112 have beaten estimates, the data show.

Alumina, NTT

Alumina Ltd., partner in the world’s biggest producer of the material used to make aluminum, surged 9.8 percent to A$1.80 in Sydney. The company reported an underlying loss of A$15 million ($12.6 million) in the six months ended June 30, beating the A$22 million median estimate of three analysts compiled by Bloomberg.

NTT, Japan’s biggest phone operator, climbed 2.5 percent to 4,070 yen. The company said yesterday that operating profits at its fixed-line units NTT East Corp. and NTT West Corp. grew at least 76 percent in the three months to June 30.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.

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Berkshire May Post ‘Blockbuster’ Results by Buffett’s Measure

By Erik Holm

Aug. 6 (Bloomberg) -- Berkshire Hathaway Inc., with a stock portfolio valued at more than $60 billion, may report its best quarter in at least two years using the metric preferred by the firm’s billionaire chairman, Warren Buffett.

About $11 billion in gains in Berkshire’s stocks and a recovery of derivative bets tied to equity markets caused book value, a measure of assets minus liabilities, to reverse after two quarters of declines, according to analysts and investors including Glenn Tongue at T2 Partners LLC. Berkshire is set to report second-quarter results tomorrow.

“It’s going to be a blockbuster,” said Tongue, whose New York-based firm’s largest holding is Berkshire shares. “It may well be the greatest dollar gain in book value in any quarter in the history of the company. Warren Buffett showed extraordinary discipline in the first quarter when all others were losing their heads.”

Buffett, one of the world’s most celebrated stock pickers, this year confessed to investing mistakes that hurt returns over the prior 12 months. Berkshire’s book value per share, the measure highlighted by Buffett in the first sentence of his annual letter to shareholders, has declined in four of the past five quarters, and 2008 marked only the second time since Buffett took over in 1965 that it dropped for a full year.

In his “owner’s manual” for Berkshire shareholders, Buffett says he considers the figure to be an objective substitute for the best measure of the Omaha, Nebraska-based firm’s success: a metric he calls intrinsic value.

Intrinsic Value

“Intrinsic value is an estimate rather than a precise figure,” Buffett wrote in the manual on Berkshire’s Web site. “The percentage change in book value in any given year is likely to be reasonably close to that year’s change in intrinsic value.”

The value of shares Berkshire reported holding as of March 31 increased 23 percent in the second quarter. Berkshire is the largest shareholder in American Express Co., whose stock rose 71 percent in the three months ending June 30. Buffett’s firm is also the biggest investor in Wells Fargo & Co., which jumped 70 percent, Goldman Sachs Group Inc., which rose 39 percent, and Burlington Northern Santa Fe Corp., up by 22 percent.

Buffett, 78, didn’t respond to a request for comment left with assistant Carrie Kizer. He doesn’t provide a number for intrinsic value in his annual reports or other communications with shareholders.

Berkshire’s book-value decline of 9.6 percent last year beat the 37 percent plunge of the Standard & Poor’s 500 Index, and the firm has outperformed the total return of the index in 38 of the 44 years Buffett has led the company, according to Berkshire’s own calculations. Under Buffett, Berkshire’s book value per share grew 362,319 percent through the end of last year, compared with 4,276 percent for the S&P, the firm said.

Markets Recover

The declines last year and in this year’s first quarter were fueled by drops in Berkshire’s own equity portfolio, and charges on derivatives tied to corporate defaults and stock indexes on three continents.

Since then, markets have reversed, helping both the equity derivatives and Berkshire’s own stock holdings. The gains in the existing stock portfolio, including warrants to buy shares of Goldman Sachs, and the reversal of losses for the equity contracts may have increased book value by 10 percent before results from operating units are factored in, Tongue said.

‘Remarkable Turnaround’

“Some of the stocks had a remarkable turnaround,” said Janet Tavakoli, author of “Dear Mr. Buffett” and founder of Chicago-based advisory firm Tavakoli Structured Finance. “Combine that with the equity puts going up, and this will be a very interesting quarter.”

Berkshire’s own stock rose 3.8 percent in New York Stock Exchange composite trading in the quarter. It reached $100,000 on Aug. 3, the highest since January. Berkshire’s record closing price is $149,200 on Dec. 10, 2007.

Berkshire’s equity puts -- the derivative contracts tied to stock markets -- were sold to undisclosed buyers for $4.9 billion, according to Buffett’s most recent letter to shareholders. Under the agreements, Berkshire must pay out if, on specific dates starting in 2019, four market indexes are below the point where they were when he made the deals. In the meantime, Berkshire can invest the cash and keep any profits.

The four indexes -- the S&P, the U.K.’s FTSE 100 Index, the Dow Jones Euro Stoxx 50 Index and Japan’s Nikkei 225 Stock Average -- would all have to fall to zero for Berkshire to be liable for the entire amount at risk. That figure was $35.5 billion as of March 31 and can move with currency valuations.

Derivative Liabilities

The $10.2 billion in liabilities on the derivatives, which pushed down book value in past quarters, will shrink after the indexes recovered in the second quarter, said Guy Spier, principal at New York-based hedge fund Aquamarine Funds LLC, which owns Berkshire shares. The liabilities are accounting losses, not cash that Berkshire has paid out.

“We’re going to have a huge reversal in the index puts -- just massive,” said Spier. “We can expect to see some substantial non-cash results.”

The S&P rose 15 percent in the quarter, while the Nikkei jumped 23 percent. The FTSE increased by 8.2 percent and the companies in the European Dow rose 16 percent.

Quarter   Book value   Change from
                      prior quarter

1q09      $102.8       -5.9%
4q08      $109.3       -9.1%
3q08      $120.2        1.8%
2q08      $118.0       -1.2%
1q08      $119.4       -1.1%
4q07      $120.7        0.7%
3q07      $119.9        4.0%
2q07      $115.3        4.9%
1q07      $109.9        1.4%

To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.

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SEC May Delay Short-Sale Curbs by Reopening Comments on Rules

By Jesse Westbrook

Aug. 6 (Bloomberg) -- The U.S. Securities and Exchange Commission may seek additional feedback on whether to limit short-selling, people familiar with the issue said, prolonging a debate between hedge funds and banks whose shares slid in the financial crisis.

The SEC is considering re-opening the comment period on proposals that include reviving the so-called uptick rule, said the people, who declined to be identified before a public announcement. The SEC in April proposed five options to regulate bearish bets against stocks and gave investors and companies until June 19 to comment.

Lawmakers including House Financial Services Chairman Barney Frank pressured the SEC to impose restrictions on short- selling after the Standard & Poor’s 500 Index fell 38 percent last year. The agency responded by imposing temporary curbs.

“It’s very difficult to find a solution because there are very good arguments on all sides,” said Sean O’Malley, a former attorney in the SEC’s division of trading and markets, now a partner at Goodwin Procter LLP in New York. “Whatever the SEC comes up with has to actually work. It can’t just be a response to a populist outcry.”

SEC Chairman Mary Schapiro told cable channel CNBC in an interview yesterday that she intends to have short-selling rules in place by the end of the year. She said the agency hasn’t determined what measures it may impose.

SEC spokesman John Nester declined to comment on re-opening the comment period on the uptick rule. The SEC received more than 5,000 comments, according to its Web site.

Economic Data

“The SEC might re-open the comment period if it felt that it had not received sufficient comment or economic data in response to its questions,” said K. Susan Grafton, a former SEC attorney now at Gibson Dunn & Crutcher LLP in Washington. The agency may be weighing “another approach that it did not feel had been sufficiently” covered in its proposal, she said.

In a short sale, traders ask brokers to lend them stock and then sell it. They aim to profit by repurchasing the shares at a lower price, repaying the loan and pocketing the difference. Traders lose money if the share price rises.

The practice drew criticism from Morgan Stanley Chief Executive Officer John Mack and former Lehman Brothers Holdings Inc. CEO Richard Fuld, who accused short-sellers of attacking their companies.

Hedge fund managers, including James Chanos, founder of New York-based Kynikos Associates Ltd., countered that bank share prices fell because they had borrowed too much money and held mortgage securities whose values plunged when credit markets dried up. Financial companies worldwide have reported $1.55 trillion of writedowns and losses since 2007.

Uptick Rule

The SEC’s proposals include a measure that resembles the uptick rule, which barred short-selling until a stock brings a price at least one penny higher than the preceding trade. The SEC scrapped the almost 70-year-old provision in July 2007 after agency studies determined it wasn’t relevant in markets dominated by fast-paced trading.

An alternative the SEC is considering would allow short- sales only at prices exceeding the best bid. A bid represents the price investors are willing to pay for a stock.

The agency is also considering multiple circuit breakers, which impose restrictions on bets against individual stocks that have fallen by a certain percentage.

Schapiro, in issuing the proposals in April, said the SEC wasn’t aware of any “empirical evidence” showing the elimination of the uptick rule contributed to last year’s stock- price volatility. Still, “many members of the public have come to associate short-selling with that volatility and with a loss of investor confidence,” she said.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

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SEC May Delay Short-Sale Curbs by Reopening Comments on Rules

By Jesse Westbrook

Aug. 6 (Bloomberg) -- The U.S. Securities and Exchange Commission may seek additional feedback on whether to limit short-selling, people familiar with the issue said, prolonging a debate between hedge funds and banks whose shares slid in the financial crisis.

The SEC is considering re-opening the comment period on proposals that include reviving the so-called uptick rule, said the people, who declined to be identified before a public announcement. The SEC in April proposed five options to regulate bearish bets against stocks and gave investors and companies until June 19 to comment.

Lawmakers including House Financial Services Chairman Barney Frank pressured the SEC to impose restrictions on short- selling after the Standard & Poor’s 500 Index fell 38 percent last year. The agency responded by imposing temporary curbs.

“It’s very difficult to find a solution because there are very good arguments on all sides,” said Sean O’Malley, a former attorney in the SEC’s division of trading and markets, now a partner at Goodwin Procter LLP in New York. “Whatever the SEC comes up with has to actually work. It can’t just be a response to a populist outcry.”

SEC Chairman Mary Schapiro told cable channel CNBC in an interview yesterday that she intends to have short-selling rules in place by the end of the year. She said the agency hasn’t determined what measures it may impose.

SEC spokesman John Nester declined to comment on re-opening the comment period on the uptick rule. The SEC received more than 5,000 comments, according to its Web site.

Economic Data

“The SEC might re-open the comment period if it felt that it had not received sufficient comment or economic data in response to its questions,” said K. Susan Grafton, a former SEC attorney now at Gibson Dunn & Crutcher LLP in Washington. The agency may be weighing “another approach that it did not feel had been sufficiently” covered in its proposal, she said.

In a short sale, traders ask brokers to lend them stock and then sell it. They aim to profit by repurchasing the shares at a lower price, repaying the loan and pocketing the difference. Traders lose money if the share price rises.

The practice drew criticism from Morgan Stanley Chief Executive Officer John Mack and former Lehman Brothers Holdings Inc. CEO Richard Fuld, who accused short-sellers of attacking their companies.

Hedge fund managers, including James Chanos, founder of New York-based Kynikos Associates Ltd., countered that bank share prices fell because they had borrowed too much money and held mortgage securities whose values plunged when credit markets dried up. Financial companies worldwide have reported $1.55 trillion of writedowns and losses since 2007.

Uptick Rule

The SEC’s proposals include a measure that resembles the uptick rule, which barred short-selling until a stock brings a price at least one penny higher than the preceding trade. The SEC scrapped the almost 70-year-old provision in July 2007 after agency studies determined it wasn’t relevant in markets dominated by fast-paced trading.

An alternative the SEC is considering would allow short- sales only at prices exceeding the best bid. A bid represents the price investors are willing to pay for a stock.

The agency is also considering multiple circuit breakers, which impose restrictions on bets against individual stocks that have fallen by a certain percentage.

Schapiro, in issuing the proposals in April, said the SEC wasn’t aware of any “empirical evidence” showing the elimination of the uptick rule contributed to last year’s stock- price volatility. Still, “many members of the public have come to associate short-selling with that volatility and with a loss of investor confidence,” she said.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

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Hyatt Plans $1 Billion IPO as Property Companies Raise Cash

By Nadja Brandt

Aug. 6 (Bloomberg) -- Hyatt Hotels Corp., the lodging company controlled by Chicago’s Pritzker family, plans to raise up to $1.15 billion in an initial share sale to shore up its finances and fund acquisitions at a time of scarce credit.

The offering may be the largest in the U.S. this year, according to data compiled by Bloomberg, and comes two years after Hyatt sold a $1 billion stake to investors including Goldman Sachs Capital Partners and Madrone Capital LLC, a firm that has been affiliated with Wal-Mart Stores Inc. Chairman Rob Walton.

About 50 publicly traded real estate businesses have raised $15.7 billion through equity sales in the first half, according to the National Association of Real Estate Investment Trusts. Hyatt is going public as the global recession has sapped demand for travel, cutting into its revenue and profitability. U.S. hotel occupancies sank 11 percent and room rates slid 8.7 percent through June, according to Smith Travel Research.

“In this environment they don’t fit the criteria for a successful IPO,” said Francis Gaskins, publisher of IPODesktop.com in Marina del Rey, California. “The ones that have been successful have had top-line revenue growth, high gross margins and positive cash flow.”

Hyatt, which runs 413 Hyatt-brand hotels with 119,509 rooms, plans to list the shares on the New York Stock Exchange under the symbol “H,” the Chicago-based company said in a regulatory filing yesterday. The Pritzker family controls Hyatt with an 85 percent stake. Investment funds affiliated with Goldman Sachs Group Inc. own a 7.5 percent stake. Madrone and affiliates have 6.1 percent, according to the filing.

Net Loss

Goldman Sachs will manage the sale with Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc.

Hyatt reported a first-half net loss of $36 million, or 14 cents a share, compared with a profit of $173 million, or 68 cents, in the same period a year-earlier. Consolidated revenue fell 19 percent to $1.64 billion, the company said.

The company amended its five-year $1 billion credit line with Wachovia Bank last month and said $370 million is due in June 2010, with the remaining available credit due in June 2012.

Hyatt said it may use some of the proceeds to make acquisitions and said the lack of available credit has constrained the hotel industry in the past year.

Scarce credit helped drive Host Hotels & Resorts Inc. and DiamondRock Hospitality Corp. to secondary share sales this year as the recession cut revenue and pushed some hotel owners to default on loans.

Raising Cash

“This could be a way for them to raise cash instead of going to the more expensive debt markets,” said Patrick Scholes, senior equity research analyst at FBR Capital Markets & Co. “Banks aren’t exactly lending much money these days. Hyatt is probably looking at the recent successful stock sales” and hoping investors will be as receptive, he said.

Hyatt spokeswoman Farley Kern declined to comment.

A dozen U.S. companies conducted IPOs this year, raising $2.69 billion. The largest was the $828 million sale in February of Mead Johnson Nutrition Co., formerly a unit of Bristol-Myers Squibb Co. and the world’s biggest maker of baby formula.

Lodging IPOs in the past year raised $99.9 million, according to Bloomberg data. Enjoy SA, which owns hotels and casinos in Chile, raised $42.1 million July 8. Mahindra Holidays & Resorts India Ltd. pulled in $57.8 million in June.

A third of the $8.6 billion in securities backed by hotel loans due in 2010 are at risk of defaulting, data compiled Realpoint LLC in Horsham, Pennsylvania, show.

Pritzker Family

Hyatt was founded more than a century ago by the great grandfather of Penny Pritzker, who served as President Barack Obama’s campaign finance chairwoman.

A potential obstacle to a share sale was removed in 2005 when the family settled a lawsuit brought by two of Jay Pritzker’s grandchildren over the handling of their trust for $560 million.

Hyatt, which employs 45,000 people worldwide, said Mark S. Hoplamazian will be chief executive officer and Thomas Pritzker will be executive chairman. The company’s brands include Park Hyatt, Grand Hyatt, Andaz, Hyatt Regency and Hyatt Place.

The Standard & Poor’s 500 Hotel Index climbed 30 percent this year after falling 50 percent in 2008. Its members are Carnival Corp., Marriott International Inc., Starwood Hotels & Reports Worldwide Inc. and Wyndham Worldwide Corp.

“I’m surprised they’d do it this early,” Brian McGill, senior analyst at Janney Montgomery Scott LLC in Philadelphia, said of Hyatt’s timing. “While hotel stocks have performed well these last two or three weeks, investors will be skeptical of the industry’s fundamentals.”

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net.

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Bair Supports Reining in ‘Eye-Popping’ U.S. Banker Compensation

By Alison Vekshin and Erik Schatzker

Aug. 6 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair, citing “eye-popping” salaries at U.S. banks, joined House Democrats and the New York attorney general in seeking tougher compensation standards for lenders.

Bank regulators should use their authority to set pay standards that are “principles-based,” without establishing specific limits, Bair said in an interview in her Washington office yesterday with Bloomberg Television. Guidelines should cover workers such as mortgage brokers along with top executives, she said.

“I’m not sure I buy this, that all these eye-popping salaries are necessary to keep folks for competitive reasons,” Bair said. “We do need to revamp the system to make sure that the incentives are long-term.”

Bair is weighing in on the debate in Washington for more government involvement in shaping pay packages at U.S. firms, which some lawmakers have blamed for encouraging reckless risk- taking that contributed to the financial crisis. Changes would be part of legislation Congress is writing to revamp industry rules to prevent future crises.

The U.S. House last week approved legislation that would let shareowners hold an annual non-binding vote on pay packages and would give regulators authority to restrict compensation that spurs employees to take more risks. Republicans in Congress oppose government setting pay and some Democratic senators are reluctant to support pay limits.

Lawmakers expressed outrage this year at American International Group Inc.’s decision to pay $165 million in retention bonuses while getting a U.S. rescue package valued at more than $182 billion.

Cuomo Report

New York Attorney General Andrew Cuomo reported last week that nine banks getting U.S. aid paid $32.6 billion in bonuses last year and 4,793 employees got more than $1 million. Cuomo urged industry to set pay that encourages long-term growth, and said if industry fails to act such change “should be discussed as part of the federal regulatory reform effort.”

Goldman Sachs Group Inc. set aside a record $11.4 billion for compensation for the first six months, up 33 percent from a year ago and enough to pay each worker $386,429, the company said last month. The average ratio of compensation to revenue at securities firms this decade is about 48 percent, Sanford C. Bernstein & Co. said in a report.

“I do wish some of these firms would exercise better restraint and common sense on what they’re paying their folks,” Bair said.

Public confidence in the banking system has improved after lawmakers more than doubled the insurance coverage for deposits, Bair said. “We’ve stabilized the situation,” she said.

Bair said she’s concerned about “how bad the economy will get” as more loans become delinquent because people lose their jobs. Unemployment in June was 9.5 percent, and President Barack Obama has said the rate will exceed 10 percent this year.

Bank Failures

Bank failures, which have reached a 17-year-high of 69 in 2009, will “keep up at a pretty good pace” through 2010 and should subside in 2011, Bair said.

The FDIC will probably impose an emergency fee on banks in the fourth quarter, the second special assessment this year to replenish the deposit insurance fund, she said. The FDIC in May said its fund, generated by fees banks pay, fell to $13 billion in the first quarter from $17.3 billion in the previous quarter.

Bair is asking Congress to consider her proposal to create an industry-supported Financial Company Resolution Fund the government would use to unwind a “large or complex” institution and discourage companies from growing too large. Lawmakers are weighing changes to the Obama administration’s plan to revamp rules governing the financial-services industry.

Companies with more risk would pay more into the fund, she said yesterday. The reserve doesn’t have to be “huge,” shouldn’t be capped and could eventually reach hundreds of billions of dollars, Bair said.

To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net; Erik Schatzker in New York at eschatzker@bloomberg.net.

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Allstate, Cisco, General Cable, MBIA, TBS: U.S. Equity Preview

By Lu Wang

Aug. 6 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Allstate Corp. (ALL US): The largest publicly traded U.S. home and auto insurer said operating profit, which excludes some investment results, was 55 cents a share in the second quarter, missing the average analyst estimate by half.

Cisco Systems Inc. (CSCO US): The largest maker of networking equipment said first-quarter sales will fall 15 percent to 17 percent from a year earlier.

General Cable Corp. (BGC US): The biggest U.S. maker of cable for energy and communications companies forecast profit excluding some items of 55 cents a share at most in the third quarter. That missed the 73-cent average estimate in a Bloomberg survey of analysts.

MBIA Inc. (MBI US): The largest bond insurer by total guarantees posted a profit of $894.7 million after recording $1.1 billion in pretax estimated recoveries based on its expectation that it won’t need to pay out certain claims.

TBS International Ltd. (TBSI US): The ocean-transportation services company reported a second-quarter loss of 57 cents a share, more than two times wider than the average analyst estimate.

Thoratec Corp. (THOR US): The maker of a mechanical heart that’s smaller than a D-cell battery said that, excluding some items, it expects to earn at least 76 cents a share this year. That exceeded the average estimate of 75 cents from analysts in a Bloomberg survey.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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U.S. Stock-Index Futures Fluctuate; MBIA Gains as Cisco Drops

By Adam Haigh

Aug. 6 (Bloomberg) -- U.S. stock-index futures drifted between gains and losses before a government report on weekly jobless claims.

MBIA Inc. rallied 16 percent in German trading after the world’s largest bond insurer by total guarantees posted a second-quarter profit of $894.7 million. Cisco Systems Inc. sank 3.5 percent as the biggest maker of networking equipment predicted that revenue will drop as the recession crimps orders.

Futures on the Standard & Poor’s 500 Index expiring in September was unchanged at 1,000.80 as of 9:50 a.m. in London. Dow Jones Industrial Average futures gained 0.1 percent to 9,253. Nasdaq-100 Index futures fell 0.2 percent to 1,611.

“We’re definitely coming out of recession but the recovery will be pretty muted,” Alan Brown, chief investment officer at Schroders Plc in London, told Bloomberg Television. “The real challenges are going to come next year when we see if this economy can really develop momentum of its own.”

The S&P 500 yesterday fell from a nine-month high after reports on job losses and service industries were worse than economists estimated. Since reaching a 12-year low of 676.53 on March 9, the S&P 500 has rebounded 48 percent, the steepest rally over the same number of days since the Great Depression.

Investors should raise holdings in U.S. energy stocks because the global economy is in “a full recovery,” according to JPMorgan Chase & Co. strategist Thomas Lee. He upgraded the sector to “overweight” from “neutral” while advising investors to shift money out of health-care stocks, cutting the group to “underweight” from “neutral.”

Jobless Claims

Americans filing for jobless claims fell to 580,000 for the week through Aug. 1 from 584,000 in the previous week, according to estimates compiled by Bloomberg. The Labor Department report is due at 8:30 a.m. New York time.

MBIA added 16 percent to $6.41. Second-quarter profit, equivalent to $4.30 a share, compared with net income of $1.7 billion, or $7.14, a year earlier.

Cisco retreated 3.5 percent to $21.39 in German trading after saying revenue will fall 15 percent to 17 percent in the fiscal first quarter, which ends in October. That equates to between about $8.6 billion and $8.8 billion, down from $10.4 billion a year earlier.

Companies in the S&P 500 are headed for a record eighth consecutive drop in quarterly profits. Per-share earnings have tumbled 31 percent on average, matching analysts’ estimates compiled by Bloomberg. Analysts predict a 22 percent third- quarter decline before a 62 percent rebound in earnings in the final three months of the year.

While profits are falling, results have surpassed projections by an average of 10 percent in the current season. Per-share earnings have beaten estimates at three-quarters of the 421 companies in the S&P 500 that released second-quarter results since June 17, according to data compiled by Bloomberg.

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

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