Asian Stocks, Won Gain on Signs of U.S. Recovery, Gloucester Takeover Bid

By Shiyin Chen and Jonathan Burgos - Dec 23, 2011 2:16 PM GMT+0700

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Dec. 23 (Bloomberg) -- Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong, talks about the outlook for the Korean won, euro, U.S. dollar, the yen and yuan. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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Dec. 23 (Bloomberg) -- Norman Chan, head of investment at Calibre Asset Management in Hong Kong, talks about the outlook for global stocks. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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Dec. 23 (Bloomberg) -- Michael Cuggino, president of Pacific Heights Asset Management LLC, talks about the outlook for the U.S. economy, the nation's stock and bond markets, and his investment strategy. Cuggino speaks with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)

Asian equities (MXAPJ) and South Korea’s won rose, set for weekly gains, while U.S. stock-index futures rallied and the dollar fell on signs the world’s largest economy is recovering. Mining shares climbed as China’s Yanzhou Coal (1171) Mining Co. agreed to buy Gloucester Coal Ltd.

The MSCI Asia Pacific Excluding Japan Index advanced 1.3 percent at 3:09 p.m. in Hong Kong, the highest since Dec. 13. The Shanghai Composite Index gained 0.9 percent on speculation the government will ease monetary policy and relax property curbs. Standard & Poor’s 500 Index futures increased 0.6 percent and those on the Stoxx Europe 600 Index added 1 percent. The won was up 0.5 percent and the Dollar Index slid 0.2 percent. Oil were headed for the biggest weekly rally in almost two months.

Reports today are forecast to show U.S. personal spending, durable-goods orders and new home sales rose in November, after data showed a drop in jobless claims yesterday. Moody’s Investors Service said the outlook for South Korea’s ratings remains stable after the death of Kim Jong Il, while lowering Slovenia’s credit grade, citing the potential need for the government to support banks amid Europe’s debt crisis.

“It’s encouraging that the U.S. economy is improving,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. Melbourne. “Asset prices can probably go further despite this fairly benign economic environment.”

Japan’s financial markets are closed for a holiday today. More than four shares advanced for every one that declined in MSCI’s Asia Pacific excluding Japan index, which has climbed 2.3 percent this week. The measure has dropped 17 percent this year, compared with a 0.3 percent retreat in the S&P 500 and a 13 percent loss in the Stoxx Europe 600 Index.

Stocks Rally

Australia’s S&P/ASX 200 Index rose 1.2 percent as Gloucester Coal (GCL) surged 22 percent after China’s Yanzhou Coal agreed to buy the Sydney-based company for A$2.1 billion ($2.13 billion) in cash and shares. Yanzhou Coal jumped 6.9 percent in Hong Kong. South Korea’s Kospi index increased 1.1 percent, taking its rally since Dec. 19 to 5.1 percent as concerns over political succession in North Korea eased.

Gemdale Corp. (600383) and Poly Real Estate Group Co. (600048) rallied more than 1.2 percent, helping the Shanghai Composite to its first gain this week. The Beijing government said it won’t impose property price caps and the Xinkuai newspaper reported a city in Guangdong province may allow home price restrictions to expire.

S&P 500 futures expiring in March signal the U.S. stock gauge may climb for a fourth day. Durable goods orders probably rose 2.2 percent in November, while personal spending may have increased 0.3 percent, according to the median forecasts of economists surveyed by Bloomberg. New home sales may have climbed to 315,000 last month from 307,000, the surveys show.

Signs of Strength

New unemployment claims fell by 4,000 to 364,000 in the week ended Dec. 17, the lowest level since April 2008, Labor Department figures showed yesterday.

“We’re seeing some signs of strengthening,” Michael Cuggino, president of Pacific Heights Asset Management LLC, said in a Bloomberg Television interview from San Francisco. “I’m cautiously optimistic.”

The yen headed for weekly declines against all 16 major peers. The currency traded at 78.05 against the dollar today and weakened 0.2 percent to 102.17 per euro. The euro climbed 0.3 percent to $1.3092.

The won rose to 1,150.20 against the dollar, taking its gain for the week to 0.7 percent.

“Investment sentiment is improving after U.S. data sent some signals that the world’s largest economy is holding out well,” said Hwang Sun Min, a currency dealer in Seoul at Kookmin Bank, Korea’s largest lender. “Moody’s confirmation of sovereign ratings is also helping push the won higher.”

Stability Restored

The Bank of Korea and Finance Ministry said today in a joint statement after a meeting in Seoul that they will try to reduce the won’s volatility and expand trade financing for exporters so that they can cope with the global economic slowdown. Financial markets have restored stability after Kim Jong Il’s death, according to the statement.

New Zealand’s dollar swung between gains and losses after an earthquake struck near Christchurch. The currency fell to as low as 77.23 U.S. cents before trading at 77.47 cents. It has gained 1.8 percent this week.

Oil futures in New York rose as much as 0.6 percent to $100.12 a barrel. Futures have jumped 6.7 percent this week, set for the largest increase since the five days ended Oct. 28. Copper in London gained 0.8 percent to $7,599.75 a metric ton, climbing for a fourth day, the longest increase since October. The metal is poised for a 3.5 percent rise this week, the first increase in three weeks.

The cost of protecting Australian corporate bonds from default declined, with the Markit iTraxx Australia index falling two basis points to 182 basis points, according to Australia & New Zealand Banking Group Ltd. The gauge had risen 81 basis points this year as of yesterday, CMA prices show.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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Newborn’s Death Spurs Race to Find Source of Contamination in Baby Formula

By Stephanie Armour and Michelle Fay Cortez - Dec 23, 2011 12:01 PM GMT+0700

A rush is on to determine if infant formula triggered a bacterial infection that killed one newborn and sickened another baby who were both treated at Missouri hospitals.

Regulators are testing samples of powdered formula, along with the water used to prepare the products and the clothes the children wore, according to the U.S. Food and Drug Administration. Mead Johnson Nutrition Co. (MJN) plunged 10 percent yesterday after Wal-Mart Stores Inc. (WMT) pulled its Enfamil Newborn formula from shelves after it was determined the infant who died was given that brand.

The other formula wasn’t identified by health officials. Both babies tested positive for Cronobacter, an environmental bacteria that can cause serious illness or death. If the formula itself is to blame, it would probably spur a national recall, said Siobhan DeLancey, an FDA spokeswoman.

“We are trying to figure out whether it came from the food,” DeLancey said by telephone. “We take these into local labs and test them. We expect first results back next week.”

U.S. health officials probe about four to six such cases a year, she said.

Neither Wal-Mart, based in Bentonville, Arkansas, nor Mead Johnson, in Glenview, Illinois, provided the number of cans removed from shelves. The number is in the thousands, and about half of Wal-Mart’s stores carry the formula, said Chris Perille, a spokesman for Mead Johnson.

Refunds

Customers can return the withdrawn formula for a refund or exchange, said Dianna Gee, a spokeswoman for Wal-Mart, the world’s biggest retailer. The company had 3,856 stores in the U.S. as of Nov. 30, according to its website.

The Missouri Department of Public Health and Senior Services on Dec. 19 issued a health alert on two babies infected with the bacteria within the last month, according to the agency’s website. The department didn’t say if the second infant, who lived out-of-state but was treated in Missouri, used the Mead Johnson product.

That question is “a big, fat unknown,” DeLancey said.

Cronobacter is part of a family of a family of microorganisms called Enterobacter sakazakii that has a fatality rate of 40 percent to 80 percent in infants, according to Marler Clark, a Seattle-based law firm that focuses on foodborne illness litigation.

Purchase at Wal-Mart

The dead child’s family “purchased the formula at a Wal- Mart store, and ‘out of an abundance of caution’ Wal-Mart decided to voluntarily ‘pull & hold’ the same size cans (12.5 oz.) of Enfamil Newborn from the same batch code until the investigation is completed,” Perille said in an e-mail.

The batch consumed by the infant who died tested negative when it was made and packaged, and the results were reconfirmed after the news, he said.

“Outbreaks of this particular bacteria are typically linked to powdered infant formula, but it is unclear at this point where along the chain the contamination occurred or if the formula is the cause altogether,” Edward Aaron, an analyst with RBC Capital Markets in Denver, wrote in a research note today.

Finding a common source may be daunting, in part because memories of what was purchased can be faulty, said Bill Marler, a food-safety lawyer in Seattle. “They’re trying to ask people who are going through a trauma what they bought,” he said.

Wal-Mart learned of the death Dec. 18, Gee said. The company immediately removed the product from the Lebanon store and the next day notified more than 3,000 stores in 49 states.

Wal-Mart has had “nearly 100 percent compliance” from its stores, she said.

‘Products Could Return’

“Since we knew there was an active investigation by the Missouri Department of Health, we decided it was best to pull the product until the investigation is complete,” Gee wrote in an e-mail. “The products could be returned at a later date.”

While it’s premature for parents to change what they feed their infants, it’s important to remind them to prepare formula properly, said Lorry Rubin, chief of pediatric infectious diseases at Cohen Children’s Medical Center of New York.

Glassware and bottles should be cleaned and sterilized, and the water should be boiled and cooled before it is added to powered formula, he said. Any extra prepared formula should be immediately refrigerated and used within 24 hours, he said.

Bacteria from the Cronobacter family are known to have contaminated infant formula, he said in a telephone interview. The strains are similar to the bacteria humans carry in their gut and typically don’t cause significant concern, he said.

“The powder formula isn’t necessarily a sterile product, but taking precautions, even if there is a small amount of bacteria in there, it shouldn’t be enough to harm the baby,” Rubin said. “If you re-warm it or make improperly, the bacteria can multiply and you have a higher risk of getting ill.”

Detective Work

Public-health officials will have to determine if the fingerprint of the bacteria is the same in both children, which would indicate a common source of contagion, said Dave Theno, chief executive officer of Gray Dog Partners Inc., a food-safety consultant in Del Mar, California.

“The questions are: Are they made in the same plant, are they made by the same manufacturer?” Theno said in an interview.

The Enfa brands, which include Enfamil, accounted for 79 percent of Mead Johnson’s $3.14 billion in 2010 revenue and were the world’s lead brand franchise in pediatric nutrition based on retail sales, the company said in a February filing. About 12 percent of Mead Johnson’s sales come from Wal-Mart, according to data compiled by Bloomberg.

Several cases of foodborne illness from infant formula are reported each year to the Centers for Disease Control and Prevention, Lola Scott Russell, a spokeswoman, said in an e- mail.

Last year, Abbott Laboratories recalled Similac-brand powder infant formulas distributed in the U.S., Puerto Rico, Guam and some Caribbean nations because of possible insect contamination.

To contact the reporters on this story: Stephanie Armour in Washington at sarmour@bloomberg.net; Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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Boehner Signs On to U.S. Payroll Tax Deal

By Steven Sloan and Laura Litvan - Dec 23, 2011 12:01 PM GMT+0700

Deserted by many of his fellow Republicans, U.S. House Speaker John Boehner surrendered to attacks from President Barack Obama and congressional Democrats and agreed to a two-month extension of a payroll tax cut that he derided hours earlier.

The decision kicks the fight over extending the tax cut for 160 million U.S. workers into early next year without resolving deep divides over how to cover the cost through 2012.

Democrats are focused on imposing a new tax on income exceeding $1 million while Republicans want to cut the federal work force and freeze pay for government workers. Republicans also want to attach policies to a payroll tax cut extension -- opposed by Democrats -- such as a rewrite of the unemployment system or weaker rules for industrial emissions.

The deal that Boehner and Senate Majority Leader Harry Reid, a Nevada Democrat, agreed to yesterday includes language that calls on Obama to accelerate approval of the Keystone XL Canadian oil pipeline. Both chambers plan to pass the tax cut deal today by unanimous consent, which means most lawmakers won’t have to return to Washington over the holiday recess.

Boehner could be in a weaker position entering the 2012 negotiations after presiding over the tumult of recent days, in which Senate Republicans opposed Boehner’s stance and some House Republicans had begun to defect as well. The talks next year will unfold in the months ahead of a presidential election, making Boehner’s task more difficult.

No Time for Celebration

“I don’t think it’s a time for celebration,” the Ohio Republican told reporters yesterday. “Our economy is struggling. We’ve got a lot of work ahead of us in the coming year.”

After days of relentless attacks from Democrats and negative headlines in the press, some Republicans were pleased to see Boehner cut his losses.

“The great danger would have been if we continued,” said Representative Tom Cole of Oklahoma. “We made our points. We’ve gotten some modifications.”

The pressure for Boehner to cut a deal was building for days. Republican Senators Olympia Snowe of Maine, Scott Brown of Massachusetts, John McCain of Arizona and Bob Corker of Tennessee, criticized Boehner’s move to reject the bipartisan two-month extension after it passed the Senate on Dec. 17, just two weeks before the tax cut was set to expire.

Isolation in Opposition

Boehner became more isolated in his opposition to the Senate-passed bipartisan bill after the top Republican in the Senate, Mitch McConnell of Kentucky, issued a statement before lunchtime yesterday urging the House to pass the short-term measure.

McConnell said the House should pass a bill that averts “any disruption in the payroll tax holiday or other expiring provisions and allows Congress to work on a solution for the longer extensions.”

That statement “sealed the deal” in ending the standoff, said Brian Gardner, the senior vice president for Washington research at KBW Inc.

Boehner held a conference call with Republicans yesterday. On a similar conference call following the Dec. 17 Senate passage of the two-month extension, rank-and-file Republicans pressed Boehner to oppose the measure. They did so on Dec. 20 as the House rejected the Senate bill 229-193.

Different Tone

House Republicans who participated in yesterday’s call said the tone was much different than after the Senate vote.

“It wasn’t truly a conference call,” Representative Jack Kingston, a Georgia Republican, said. “It wasn’t a solicitation of opinion.”

Though most House Republicans still want a yearlong deal, Kingston said that it was time for the party to move forward.

“This takes the whole thing off the front page and that’s a good thing,” he said.

Some House Republicans said yesterday they don’t think Boehner’s agreement to pass the two-month extension puts him in immediate danger of losing the support of the Republican majority he leads.

Representative Sean Duffy, a freshman Republican from Wisconsin, said Boehner was trying to reflect the views of his colleagues. Duffy said he is pleased that a tax increase will be avoided in January and doesn’t think the saga would hurt Republicans in the 2012 election.

“I think the American public will look at the economy and job growth and the lack thereof,” Duffy said. “I don’t think this is an indicator of what will happen next year.

Provisions Extended

Without congressional action, the payroll tax for employees would rise in January to 6.2 percent from the current 4.2 percent. The tax funds Social Security. The deal also averts an end to emergency unemployment benefits set to expire on Dec. 31 and assures doctors their Medicare reimbursement rates won’t be reduced starting in January.

Michael Feroli, JPMorgan Chase & Co. (JPM)’s New York-based chief U.S. economist, said economic growth would be reduced by 0.5 percentage points in the first quarter and 1.5 percentage points in the second quarter of 2012 if the payroll tax cut and expanded unemployment benefits weren’t continued. If they are extended for the year, he expects growth of 2.5 percent in the first half of the year, he said in a Dec. 16 note to clients.

House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, will introduce the legislation in the House today that will implement the agreement.

Unanimous Consent

The measure will be brought up in the House under unanimous consent to avoid requiring lawmakers to return and could be cleared in the Senate later in the day using the same process.

The legislation includes one difference from the version passed by the Senate. A yearlong payroll tax cut extension would apply to the first $110,100 in wages. To prevent someone from shifting all their income into the first two months of the year, the Senate bill limited the tax break to the first $18,350 a worker earns.

Republicans changed the bill to apply the tax cut to the full $110,100 in wages, according to information provided by Camp’s office. That makes it easier for payroll processors to continue the tax cut if it is extended beyond February.

Workers who earn more than $18,350 during the first two months of the year will pay an additional 2 percentage point tax when they file their returns in 2013.

The bill is HR 3630.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Steven Sloan in Washington at ssloan7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Netflix CEO Hastings’ Stock Options Cut by 50%

By Rob Golum - Dec 23, 2011 4:14 AM GMT+0700

Netflix Inc. (NFLX), the online and mail- order video service predicting losses for next year, cut the annual stock-option allowance for Chief Executive Officer Reed Hastings by half to $1.5 million.

Hastings will receive a salary of $500,000 for 2012, unchanged from this year, according to a regulatory filing today. His annual stock option allowance for 2011 was $3 million, according to a filing a year ago.

Netflix shares have dropped 75 percent from their all-time closing high of $298.73 set on July 13 as the company battled a subscriber revolt over price increases and other changes to its mail-order and streaming services. In October, Netflix projected losses in 2012 as it expands to the U.K.

Annual pay for Leslie Kilgore, chief marketing officer, will be cut to $575,000 from $802,000 in 2011, according to the filings. Kilgore’s option grant was increased to $1.33 million from $1.1 million. The 2012 salary for Neil Hunt, chief product officer, will be unchanged at $1 million and the option allowance will increase to $1.5 million from $900,000.

“We don’t comment on board decisions or executive compensation,” said Steve Swasey, a Netflix spokesman.

Netflix, based in Los Gatos, California, rose 4 percent to $73.84 at the close in New York. The shares have lost 58 percent this year.

Ted Sarandos, chief content officer, will receive $1 million in salary and $1.8 million in option allowances, compared with $903,362 and $1.4 million, respectively, last year, according to the filings.

To contact the reporter on this story: Rob Golum in Los Angeles at rgolum@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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Akamai Technologies Rises on $268 Million Purchase of Cloud Rival Cotendo

By Alex Sherman - Dec 23, 2011 5:28 AM GMT+0700

Akamai Technologies Inc. (AKAM), operator of a server network that lets businesses speed data delivery, rose the most in more than 19 months after agreeing to buy startup competitor Cotendo Inc. for about $268 million in cash.

Akamai jumped 19 percent to $31.63 today in Nasdaq trading, its biggest one-day gain since April 29, 2010.

The acquisition will let Cambridge, Massachusetts-based Akamai expand its acceleration technologies for the Web-based cloud computing system used by customers such as phone companies and social networks. The deal also helps Akamai “maintain its leadership position and high margins” by eliminating a competitor, according to a research note from Gray Powell, an analyst at Wells Fargo & Co. in New York.

Akamai is paying about nine times Cotendo’s anticipated 2011 revenue of $30 million, according to Powell. The ratio makes the deal “expensive but worth it,” he said. The purchase price is less than the $300 million some investors had expected three weeks ago, said Powell, who rates the stock “outperform.”

Investors in Cotendo, founded in 2008, include venture- capital firms Sequoia Capital and Benchmark Capital, as well as Juniper Networks Inc. (JNPR), according to the startup’s website. Sunnyvale, California-based Cotendo has about 100 employees, half of them in Israel, where the company has a technology center, according to a statement today.

The purchase is Akamai’s second largest after the $2.19 billion acquisition of InterVU Inc. in 2000, according to data compiled by Bloomberg. Akamai has a market value of $5.68 billion and about 2,300 employees. It has declined 33 percent this year.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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Yahoo May Sell Most of Its Alibaba Stake

By Tom Giles and Douglas MacMillan - Dec 23, 2011 5:05 AM GMT+0700

Yahoo! Inc. is considering cutting its 40 percent stake in Alibaba Group Holding Ltd. to about 15 percent, two people briefed on the matter said.

The Yahoo board was scheduled to meet today to consider the transaction, said the people, who asked to remain anonymous because the deliberations are private. The deal, which may let Alibaba repurchase the stake in a tax-free manner, values the Asian assets at about $14 a Yahoo share, or more than $17 billion, one of the people said. Yahoo also would sell all of its stake in Yahoo Japan Corp. (4689) in the deal, this person said.

Alibaba stepped up efforts to buy back the stake after the September ouster of Yahoo Chief Executive Officer Carol Bartz, who had opposed a sale. Yahoo, buffeted by user attrition and search-market share losses to Google Inc., is also considering proposals by private-equity firms seeking to buy minority stakes.

“Yahoo is probably more determined to find a solution to this,” said Paul Wuh, head of Internet research at Samsung Securities Co. (016360) in Hong Kong. “They obviously changed their CEO, which makes it a bit easier now.”

Yahoo acquired its stake in Alibaba, based in Hangzhou, eastern China, for about $1 billion in 2005. Alibaba Group is China’s biggest e-commerce company.

Tax-Free Structure

Dana Lengkeek, a spokeswoman for Sunnyvale, California- based Yahoo, and Alibaba spokesman John Spelich both declined to comment.

Yahoo shares were little changed at $16 at the close in New York. Yesterday, the stock gained 5.8 percent after the New York Times reported that the company is considering reducing its stake in Alibaba in a tax-free deal valued at about $17 billion. Alibaba’s publicly traded unit Alibaba.com Ltd. (1688) fell 0.5 percent to HK$7.76 in Hong Kong trading today.

The transaction has a complicated structure and may take several weeks to complete, a person with knowledge of the matter said. Alibaba and Softbank Corp. (9984), the co-owner of Yahoo Japan, are seeking to repurchase stakes held by Yahoo without triggering taxes associated with the gains on the investments.

To help do that, Alibaba and Softbank each would create a standalone entity, investing cash and operating assets in each, another person said. Yahoo would then exchange all of its stake in Yahoo Japan and most of its stake in Alibaba for those new entities, this person said. Yahoo would retain 15 percent of Alibaba, this person said.

‘Putting Pressure’

“Both Alibaba and Softbank are putting pressure on the company to find a solution,” said Samsung’s Wuh.

Fumihiro Ito, a spokesman for Tokyo-based Softbank, declined to comment.

Yahoo has also considered offers for a minority stake from bidders including TPG Capital and a group led by Silver Lake, people familiar with the matter have said. Silver Lake’s bid valued Yahoo at about $16.60 a share, these people said. TPG Capital’s offer was higher, they said.

Yahoo investors, including Di Zhou, a Santa Fe, New Mexico- based analyst at Thornburg Investment Management, have said they would prefer that the company be sold in its entirety, at a higher price.

In September, Temasek Holdings Pte, Silver Lake and DST Global were among investors that acquired closely held Alibaba Group shares in a transaction that valued the Chinese Internet company at $32 billion, people familiar with the deal said at the time.

Alibaba Group is considering a loan of about $4 billion from a group of banks including Credit Suisse Group AG, DBS Bank Ltd. (DBS) and Deutsche Bank AG, a person familiar with the matter said this month.

To contact the reporters on this story: Tom Giles in San Francisco at tgiles5@bloomberg.net; Douglas Macmillan in New York at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Eastman Kodak, Flextronics, Praxair: U.S. Equity Preview

By Nikolaj Gammeltoft - Dec 23, 2011 6:00 AM GMT+0700

Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses and prices are as of 5:30 p.m. New York time.

Standard & Poor’s 500 Index futures expiring in March rose 0.2 percent to 1,251.60.

Christopher & Banks Corp. (CBK) : The Plymouth, Minnesota-based women’s clothing retailer reported a third- quarter loss of 45 cents a share excluding some items, beating the average of two analyst estimates in a Bloomberg survey of a loss of 50 cents a share.

Eastman Kodak Co. (EK) : The unprofitable 131-year-old imaging company said its board elected Laura Quatela as a second president beginning next year to serve alongside Philip Faraci.

Flextronics International Ltd. (FLEX) : The supplier of cameras and battery chargers for Apple Inc. (AAPL US) said it its board authorized a plan to buy back an additional $200 million of its outstanding shares. The company has repurchased about $182 million under a previous $200 million program announced on July 21.

Praxair Inc. (PX) : The producer of industrial gases acquired Houston-based Texas Welders Supply Co. for an undisclosed amount.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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

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U.S. Clearing Deutsche Boerse-NYSE Takeover Moves Final Approval to Europe

By Nandini Sukumar, Nina Mehta and Sara Forden - Dec 23, 2011 3:36 AM GMT+0700

NYSE Euronext’s (NYX) acquisition by Deutsche Boerse AG was cleared by the U.S. Department of Justice, putting the transaction in the hands of European antitrust authorities who have resisted approval.

U.S. regulators, who in May blocked Nasdaq OMX Group Inc. (NDAQ) from pursuing a hostile bid for the New York Stock Exchange owner, agreed today to allow the purchase by Frankfurt-based Deutsche Boerse as long as the company sells its 31.5 percent stake in another U.S. equity market, Direct Edge Holdings LLC.

Scrutiny of the proposed acquisition has been greater in Europe where the merger would unite the region’s two biggest derivatives exchanges, NYSE’s Liffe and Deutsche Boerse’s Eurex. In the U.S., trading in interest-rate, agricultural and commodity futures is dominated by one company, CME Group Inc., after it merged with the Chicago Board of Trade in 2007 and the New York Mercantile Exchange in 2008.

“It wasn’t the main stumbling block for the NYSE-Deutsche Boerse deal,” Justin Schack, managing director for market structure analysis at New York-based Rosenblatt Securities Inc., said in a phone interview. “I don’t think anyone expected the DOJ to reject this deal. The decision that matters will come from the EU competition commission.”

Declining Value

Deutsche Boerse agreed to acquire NYSE Euronext on Feb. 15, creating the world’s biggest stock exchange operator, for stock worth $9.53 billion. The value of the acquisition has fallen to less than $7 billion as stocks around the world tumbled. Germany’s DAX Index is down 20 percent since the merger discussions were first reported Feb. 9.

The takeover would put more than 90 percent of the European exchange-traded derivatives market and about 30 percent of the region’s stock trading in the hands of one company. Deutsche Boerse’s Eurex is the region’s biggest derivatives exchange, while Liffe is the second-largest. Deutsche Boerse is acquiring the half of Eurex it doesn’t already own. Eurex is owner of New York-based International Securities Exchange, which has a 31.5 percent stake in Direct Edge. Brokers own the rest.

NYSE Euronext and Deutsche Boerse have struggled to convince regulators their combination won’t stifle competition. European Union regulators told NYSE Euronext and Deutsche Boerse yesterday that concessions they offered to allay antitrust concerns in their merger don’t go far enough, two people familiar with the discussions said.

Proposed Remedies

In Europe, the companies have offered capping fees on derivatives trading and clearing for three years, selling NYSE’s Liffe single-stock derivatives business, and the licensing of the Eurex trading system to a third party, said the people, who declined to be named because the talks are private. Regulators haven’t drafted a decision yet, they said.

“The markets that the DOJ is examining in its own jurisdiction, namely in the area of U.S. equities, are different to those where the commission has raised concerns, namely European financial derivatives,” Ryan Heath, a spokesman for the European Commission in Brussels, said today. “We have had regular and constructive dialogue with the DOJ throughout our respective procedures.”

The sale of the stake in Jersey City, New Jersey-based Direct Edge, the fourth-largest stock exchange operator in the U.S., and related restrictions will resolve the U.S. government’s concerns about the merger’s effects on the products and services of equities exchanges, the Justice Department said today in a statement.

Direct Edge

“Without the divestiture and other restrictions obtained by the Justice Department, a combined NYSE and Deutsche Boerse entity could influence the actions of Direct Edge, and thereby lessen the zeal of an aggressive and innovative exchange competitor,” said Sharis A. Pozen, acting assistant attorney general in charge of the department’s antitrust division.

The merging companies are also barred from suggesting or naming any board members of Direct Edge or having any executives work for Direct Edge or any related companies, according to the statement. The companies can’t be involved with private Direct Edge meetings, the department said.

NYSE Euronext and Direct Edge together accounted for almost 37 percent of U.S. equities trading last month, based on data compiled by Barclays Plc and Direct Edge. Total U.S. options volume for NYSE’s two equity derivatives markets and the International Securities Exchange was 43.4 percent, according to data compiled by Chicago-based OCC, which clears the contracts.

‘I’m Surprised’

“I’m surprised there’s a regulatory requirement for a sale given the market shares involved,” Jamie Selway, head of liquidity management at New York-based Investment Technology Group Inc., said in a phone interview. “They said the equities market share was of sufficient size to require divestiture when they didn’t similarly conclude that for options.”

Before deciding whether to approve or block a deal, the European Commission must consult competition agencies from the European Union’s 27 nations. Commissioners from each EU country must also vote on a decision. Companies can then appeal a merger ban at the EU courts.

The European Commission closes for holidays on Dec. 23 and returns on Jan. 2.

Antitrust negotiators in Brussels told Deutsche Boerse and NYSE at a meeting on Dec. 6 that their Nov. 17 offer to divest some European single-equity derivatives units didn’t persuade customers and rivals that the merger would preserve competition, according to people familiar with the discussions.

That meeting followed two days of talks with regulators in October where the exchanges also failed to alleviate antitrust concerns. Regulators have told the companies that their merger would monopolize derivatives trading in the region.

To contact the reporters on this story: Nandini Sukumar in London at nsukumar@bloomberg.net; Nina Mehta in New York at nmehta24@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net

To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

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DeMark Says S&P 500 Climbing to Oct. 27 Peak Is ‘Critical’

By Ksenia Galouchko and Adam Johnson - Dec 23, 2011 5:29 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) is likely to extend gains should it advance 2.4 percent to its Oct. 27 closing level and then close higher on three or four straight days, according to Tom DeMark, the creator of indicators to show turning points in securities.

The benchmark gauge for U.S. equities closed at 1,284.59 on Oct. 27 and advanced 0.8 percent to 1,254 today. DeMark of Market Studies predicted on Dec. 5 that the S&P 500 would advance to between 1,330 and 1,345 this month before the rally reverses. The latest forecast will expire by the end of the first week of January if it doesn’t come true, Market Studies’s Roderick E. Bentley said in an e-mail.

The Oct. 27 close is “very critical,” DeMark, the founder of Market Studies, said today in an interview on Bloomberg Television’s “Street Smart” with Lisa Murphy and Adam Johnson. “The market still looks like it will go higher.”

The S&P 500 rallied a third straight day today as better- than-estimated jobless claims, consumer confidence and leading indicators bolstered optimism in the world’s largest economy. The index for American equities has advanced 4 percent during the streak.

The S&P 500’s advance from its 2011 low on Oct. 3 faltered after the gauge closed above the 200-day threshold on Oct. 27, Oct 28 and Nov. 8. The index also traded above the level on an intraday basis for three days starting Dec. 5, only to retreat amid concern that European leaders may not be able to contain the region’s credit crisis.

DeMark’s prediction in September that the S&P 500’s decline would stop at 1,076 proved prescient when the index bottomed at 1,074.77 on Oct. 4.

‘Upside Direction’

“Usually, when a market makes a top like it did back in the first week of December, it does correct 5-6 percent and rallies again,” DeMark said today. “Typically, that peak is taken out. Our models are still telling us that the upside direction is to follow the market.”

DeMark, who has spent more than 40 years developing indicators with names like “sequential” and “countdown,” said on Oct. 25 that a rally by the S&P 500 above 1,254 would “trap” bulls. The index peaked three days later, then dropped 9.8 percent through Nov. 25.

The three-day rally in the S&P 500 has trimmed this year’s decline to 0.3 percent. The index is still down 8 percent from this year’s high in April, joining a global rout in equities, as concern about Europe’s debt crisis overshadowed better-than- estimated American economic data.

“The model we use has not spoken unfortunately, but it is still directing us to the upside,” DeMark said today.

DeMark, an adviser to Steven A. Cohen’s SAC Capital Advisors LP, provided consulting to hedge funds including George Soros’s Soros Fund Management LLC and Leon Cooperman’s Omega Advisors Inc. Advisors Inc.

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net; Adam Johnson in New York at ajohnson65@bloomberg.net

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

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Asia Stocks Rise on U.S. Optimism

By Jonathan Burgos - Dec 23, 2011 7:49 AM GMT+0700

Asian stocks (MXAP) rose, with a regional index heading for its first gain in three weeks, as a drop in U.S. jobless claims and an increase in consumer confidence added to signs the world’s biggest economy is weathering Europe’s debt crisis.

Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, advanced 1.7 percent in Seoul. James Hardie Industries SE (JHX), a supplier of building materials the counts the U.S. as its largest market, climbed 3.1 percent in Sydney. Gloucester Coal Ltd. surged 25 percent after Yanzhou Coal Mining Co. offered to buy the Sydney-based company for A$700 million ($709 million) and merge it with Yanzhou’s Australian unit.

The MSCI Asia Pacific Excluding Japan Index (MXAPJ) gained 0.4 percent to 394.26 as 8:47 a.m. in Hong Kong, heading for a 1.4 percent advance this week. About five shares gained for each that fell in the gauge. Japanese markets are closed today for a holiday.

The regional gauge had fallen in the past two weeks as signs of slowing growth in China and concern that Europe’s debt crisis is worsening overshadowed improving U.S. data. Greece’s creditors are resisting pressure from the International Monetary Fund to accept bigger losses on holdings of the indebted nation’s government bonds, three people with direct knowledge of the discussions said.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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U.S. OKs Nuclear Reactor Design to Allow Licenses

By Jim Polson and Eric Martin - Dec 23, 2011 1:00 AM GMT+0700

The U.S. Nuclear Regulatory Commission approved Toshiba Corp. (6502)’s AP1000 reactor design, clearing the way for the agency to issue its first new reactor construction license in more than 30 years.

The five-member agency voted unanimously in favor of certifying the design, Scott Burnell, a commission spokesman, said in an e-mail today. Southern Co. (SO) and Scana Corp. (SCG) are seeking permission to use the reactor design to expand nuclear power output at existing sites in Georgia and South Carolina.

No dates were set for decisions on issuing construction and operating licenses for Southern and Scana, Burnell said in an interview. The agency hasn’t given permission to build a new U.S. reactor since the partial meltdown at Three Mile Island in Pennsylvania in 1979.

Southern expects its license “any time now,” Steve Higginbottom, a spokesman for the Atlanta-based company, said after the vote. It has estimated the project’s total cost at $14 billion. Licenses will create 3,000 jobs at each site, Westinghouse Electric, a unit of Tokyo-based Toshiba, said today in a statement.

Scana anticipates licensing of its two planned reactors later this year or early in 2012, the Cayce, South Carolina- based company said today in an e-mailed statement. It estimated the cost at $9.1 billion in February 2011. The first new reactor is scheduled to begin operation around the beginning of 2016, according to the company website.

‘Holiday Gift’

“Today, the NRC has presented its holiday gift to the nuclear industry,” said Representative Edward Markey, a Massachusetts Democrat, who had urged the commission to reject the acceleration of construction.

Receipt of a license within 60 days will enable Scana to maintain its current work schedule to add new reactors at its V.C. Summer site, Alan Torres, general manager for nuclear plant construction at Cayce, South Carolina-based Scana, said in a Dec. 20 telephone interview.

The schedule for the Westinghouse certification was “fairly well maintained,” Russell Bell, director of new plant licensing for the Nuclear Energy Institute, a U.S. trade group, said today in an interview. The commission has studied potential rule revisions following the March nuclear-plant meltdowns in Fukushima, Japan.

“The commission made the determination that this design in particular addressed a number of those issues that arose in Japan and new requirements that we learned from Fukushima can be imposed later,” he said.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Eric Martin in Washington at emartin21@bloomberg.net

To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net; Steve Geimann at sgeimann@bloomberg.net

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Stocks in U.S., Europe Rise as Treasuries Gain

By Nick Baker and Rita Nazareth - Dec 23, 2011 4:11 AM GMT+0700

U.S. stocks (SENSEX) rose, extending the Standard & Poor’s 500 Index’s third weekly gain in December, as European equities rallied after American jobless claims and consumer confidence were better than expected. The dollar fluctuated against the euro and 10-year Treasuries advanced.

The S&P 500 (SPXL1) added 0.8 percent to 1,254 at 4 p.m. New York time as the Dow Jones Industrial Average rallied 61.91 points, or 0.5 percent, to 12,169.65. The Stoxx Europe 600 Index advanced 1.1 percent. The euro climbed less than 0.1 percent to $1.3049 after rising 0.6 percent. Yields on 10-year Treasuries dropped one basis point to 1.95 percent. Oil futures rose 0.9 percent, a fourth straight increase.

Equities juumped after the number of Americans applying for unemployment benefits decreased to 364,000, the fewest since April 2008, while the Thomson Reuters/University of Michigan index of consumer sentiment topped the median economist forecast and climbed to a six-month high. The dollar and Treasuries rose after U.S. gross domestic product expanded at a 1.8 percent rate in the third quarter, slower than the 2 percent median growth projection in a Bloomberg survey.

“We’re definitely muddling through in the U.S.,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. “It may not be a bullish case, but the jobs situation is less grim than it was. You still have to be wary that a significant recession in Europe could pull the rest of the world into a global recession, including the U.S.”

Weekly Gain

The S&P 500 has rallied 2.8 percent this week after reports showed U.S. housing starts topped economists’ projections and German business confidence unexpectedly grew. The gauge has trimmed this year’s decline to 0.2 percent. It is still down 8 percent from this year’s high in April, joining a global rout in equities, as concern about Europe’s debt crisis overshadowed better-than-estimated American economic data.

Financial (S5FINL) shares rose the most in the S&P 500 among 10 industries today as Morgan Stanley, Citigroup Inc. and Bank of America Corp. jumped more than 4.5 percent. General Electric Co. and Sears Holdings Corp. added at least 2 percent, pacing gains among companies most-tied to economic growth. Akamai Technologies Inc. (AKAM) surged 19 percent after agreeing to buy Cotendo to expand Internet-based and mobile services.

Treasury Yields

Treasury 30-year bonds rose for the first time in three days after yields had the biggest back-to-back daily gains since October. Bonds remained higher after data showed the U.S. economy grew less in the third quarter than previously estimated. The Federal Reserve made its final 2011 purchase of Treasuries in an eight-month program to lower borrowing costs.

Yields on the 30-year bonds fell two basis points, or 0.02 percentage point, to 2.99 percent.

The yen fell against most of its major peers as stock markets climbed amid reduced demand for haven assets and signs U.S. employment is strengthening.

Crude oil rose to $99.53, after climbing above $100 a barrel for the first time in a week. Gold fell 0.2 percent to $1,610.60 an ounce on the Comex in New York.

Hungary (BUX)’s benchmark BUX Index of stocks slid 0.8 percent. S&P downgraded the country to BB+ from BBB- yesterday, removing its investment-grade ranking. The International Monetary Fund and the European Union suspended talks over an aid package to Hungary last week on concern that the government’s plans for a central bank law may curb monetary-policy independence.

The BSE India Sensitive Index of stocks rose 0.8 percent, rebounding from a decline. South Korea’s won depreciated versus all 16 of its most-traded peers monitored by Bloomberg.

To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net

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

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U.S. Reins In $1 Billion Trucker Driving Rules Following Industry Backlash

By Jeff Plungis - Dec 23, 2011 4:59 AM GMT+0700

President Barack Obama’s administration maintained an 11-hour limit on truck drivers’ hours today, scaling back a proposal to give them more rest.

The U.S. Transportation Department’s proposed rule to reduce the daily driving limit to 10 hours was one of seven regulations the Obama administration said would cost companies at least $1 billion. Trucking companies opposed it, saying the shorter hours would force them to rework routes and hire more drivers.

Consumer groups were “keenly” aware of the industry’s lobbying in the year since the Obama administration proposed the 10-hour day, said Henry Jasny, vice president of Washington- based Advocates for Highway and Auto Safety.

“This is a breach of promise of making safety the No. 1 goal of the agency and the Transportation Department,” Jasny said in a telephone interview today. “It’s more than disappointing.”

House Speaker John Boehner, an Ohio Republican, and Majority Leader Eric Cantor, a Virginia Republican, had said the industry already had reduced driver fatalities and couldn’t afford additional personnel.

Advocates for Highway and Auto Safety will continue to pursue a 10-hour rule, and may take the issue to court, Jasny said. The debate over the revision of driving-time regulations that originated in the 1930s dates back to the creation of the FMCSA in 1999.

Costs, Benefits

The final regulation, which takes effect July 1, 2013, has annual costs of about $470 million and benefits of around $630 million, the Transportation Department said in a statement today.

The Federal Motor Carrier Safety Administration failed to “definitively demonstrate” that the proposed 10-hour limit would carry “higher net benefits” than the current 11 hours, according to the rule.

The White House’s Office of Management and Budget met with industry groups at least four times in October and November, according to the agency’s website.

The American Trucking Associations and the International Foodservice Distributors Association came in October. The Food Marketing Institute, the American Bakers Association, the Snack Food Association and McKee Foods Corp. met with OMB in November. The White House met with safety groups and the International Brotherhood of Teamsters once in October. A Nov. 28 meeting on the hours-of-service rules doesn’t list participants.

Less Severe

While the regulation retained other changes opposed by the industry, it also made some less severe than initially proposed. For example, drivers must get at least two weekly rest periods spanning 1 a.m. to 5 a.m., the Transportation Department, which oversees the FMCSA, said. The proposal was for two rest periods of 12 a.m. to 6 a.m.

The inclusion of that new requirement was the biggest objection for industry groups.

The scientific research on the need for two consecutive overnight rest periods isn’t conclusive, said Bill Graves, chief executive officer of the American Trucking Associations. The change is going to ensure that trucks flood onto the roads during morning rush hours, he said, adding that the trucking industry will consider a court challenge.

‘Weaker Legs’

“It was one of the weaker legs they had to stand on,” Graves said. “We’re still wrestling with why we spent such extensive resources of this federal agency on this issue while not pursuing issues we know will have a much more significant impact.”

A mandatory 30-minute rest break came after seven consecutive hours of driving in the proposed rule. The final version pushed that back to eight hours.

The rule reduces a driver’s maximum possible work week by 12 hours to 70 hours, the Transportation Department said.

The changes will cause shipping costs to increase for companies like Target Corp. (TGT) and Best Buy Co., said Kelly Kolb, vice president for government relations at the Retail Industry Leaders Association, an Arlington, Virginia-based trade group.

“Supply chain optimization is the bread and butter of America’s most successful retailers,” Kolb said in an e-mailed statement. “The new hours-of-service rule will upend the advances in efficiency made over the past decade.”

Violations, Fines

Companies and drivers committing “egregious violations” of fatigue rules will face penalties, the Transportation Department said. Companies that allow drivers to exceed the 11- hour driving limit by 3 or more hours could be fined $11,000 per offense. Drivers face penalties of $2,750 for each offense.

“Trucking is a difficult job, and a big rig can be deadly when a driver is tired and overworked,” Transportation Secretary Ray LaHood said in an e-mailed statement.

Regulators weighed industry costs against billions of dollars in health-care savings and reduced accidents in a profession that has more on-the-job deaths than any other in the U.S.

There were 3,675 truck-related fatalities in 2010, up 8.7 percent from 3,380 in 2009, according to preliminary data from the National Highway Traffic Safety Administration. As recently as 2006, there were 5,027 fatalities.

Life Expectancy

The average life expectancy of a truck driver is 61, or 16 years less than the U.S. average, LaHood wrote in a September 2010 blog posting, citing Centers for Disease Control data. Trucking is the most dangerous profession in on-the-job fatalities, and the eighth-most dangerous in deaths per worker, according to the Bureau of Labor Statistics.

A related $2 billion safety requirement to add electronic data recorders to monitor truckers’ hours that is opposed by independent drivers is still under consideration. That regulation isn’t opposed by the biggest trucking companies, which already have bought the equipment.

Safety groups said they were disappointed that the Obama administration didn’t take the driving-time limits down to 10 hours.

“I don’t know what it is going to take for the government to get real about protecting us on our roads,” Daphne Izer, a co-founder of Parents Against Tired Truckers whose son Jeff and three other teenagers were killed in a 1993 crash, said in an e- mailed statement.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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U.S. Jobless Claims Dip, Consumer Views Gain

By Timothy R. Homan and Bob Willis - Dec 23, 2011 5:32 AM GMT+0700

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Dec. 21 (Bloomberg) -- House Speaker John Boehner, Majority Leader Eric Cantor and other House Republicans talk with reporters about the outlook for negotiations over extending a payroll-tax cut due to expire in January. (Source: Bloomberg)

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Dec. 22 (Bloomberg) -- Kathleen Bostjancic, director of macro analysis at the Conference Board, talks about the outlook for U.S. personal income and savings. Bostjancic speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

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Customers shop for electronics items at a Best Buy store on Nov. 25, 2011 San Diego. Photographer: Sandy Huffaker/Getty Images

Fewer Americans than forecast sought jobless benefits and consumer confidence climbed, giving the world’s largest economy a boost heading into 2012.

Unemployment claims fell by 4,000 to 364,000 in the week ended Dec. 17, the lowest level since April 2008, Labor Department figures showed today in Washington. The Bloomberg Consumer Comfort Index improved to minus 45 in the period ended Dec. 18 from a reading of minus 49.9 the prior week, marking the biggest seven-day gain since January.

A decline in firings and the cheapest gasoline prices since February are helping revive retail sales during the busiest shopping season of the year. A stronger consumer, whose spending accounts for 70 percent of the economy, raises the odds the U.S. can ride out the debt crisis in Europe or failure by Congress to extend tax cuts.

“Spending has looked pretty good so far, and continued job and income growth will help maintain that,” said Samuel Coffin, an economist at UBS Securities LLC in New York, who projected claims would fall to 365,000. “At some point, events in Europe are likely to have some effect on activity, but we’re heading into that headwind with a lot of momentum.”

Stocks rose on the improving jobs outlook, sending the Standard & Poor’s 500 Index higher for a third day. The gauge increased 0.8 percent to 1,254 at the close in New York. Treasury securities also advanced, sending the yield on the benchmark 10-year note down to 1.96 percent from 1.97 late yesterday.

Survey Results

The median forecast of 45 economists surveyed by Bloomberg News projected an increase in jobless claims to 380,000. Estimates ranged from 355,000 to 400,000. The number of applications has dropped by 40,000 over the past three weeks.

“This is great news,” Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said in a note to clients. “One unexpectedly low number can easily be a fluke. Two are interesting. Three are telling us something real is happening in the labor market.”

The decrease in claims is consistent with payroll gains of about 200,000 a month, Shepherdson said.

The number of people continuing to receive jobless benefits fell by 79,000 in the week ended Dec. 10 to 3.55 million, the lowest since September 2008.

In data out of Europe, economic growth in the U.K. accelerated more than previously estimated in the third quarter in a surge that the Bank of England says is unlikely to be repeated as Europe’s debt crisis curbs bank lending and dents confidence. Gross domestic product rose 0.6 percent from the previous quarter, faster than the 0.5 percent reported last month, the Office for National Statistics said today in London.

Confidence Boost

The drop in firings in the U.S. may be helping boost confidence. The Bloomberg comfort index rose last week to the highest level in five months as all three components -- state of the economy, buying climate and personal finances -- improved.

A monthly expectations gauge climbed to minus 17 for December, a seven-month high.

Sentiment among Democrats advanced 12.1 points to minus 39.2, the highest since mid-June, while sentiment among Republicans rose 2.1 points to minus 43.1.

The improvement in President Barack Obama’s approval rating to 49 percent in an ABC News/Washington Post poll this week may be behind the increase in optimism, Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.

“A slower pace of firing and stabilization in the broader labor market are the likely sources for bolstered consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “While challenges remain, it’s a solid note to close what has been an otherwise discordant 2011.”

The figures are consistent with other findings. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 69.9 in December, a six-month high, from 64.1 at the end of November, the group said today.

Cheaper Gasoline

Lower fuel costs are probably also helping lift confidence. The price of regular unleaded gasoline at the pump decreased to $3.21 a gallon Dec. 20, its lowest since February, according to AAA, the biggest U.S. auto group.

Pier 1 Imports Inc. (PIR) is among retailers seeing a pickup in sales at the start of the holiday shopping season without resorting to bigger price cuts.

“Sales are robust, merchandise margins are strong, operating margins are growing,” Alexander Smith, president and chief executive officer at Pier 1, said on a Dec. 15 conference call. Sales during the Thanksgiving weekend “increased 10 percent from last year and were achieved with modest levels of discount.”

FedEx Corp. (FDX) posted quarterly profit that beat analysts’ estimates, helped by stronger demand for home delivery.

More Shipments

“Consumer confidence remains at very low levels, but we have seen improvement recently,” Mike Glenn, executive vice president for market development at Memphis, Tennessee-based FedEx, said on a Dec. 15 earnings call. For 2012, “we expect U.S. GDP to grow 2.2 percent.”

The economy grew less than previously estimated in the third quarter, reflecting a smaller gain in consumer spending, revised figures from the Commerce Department showed today. Gross domestic product climbed at a 1.8 percent annual rate from July through September, down from the 2 percent estimated last month.

The index of leading economic indicators signals the economy will strengthen.

The New York-based Conference Board’s gauge of the outlook for the next three to six months rose 0.5 percent after a 0.9 percent October increase, the research group said today.

Cuts in government spending and failure by Congress to extend tax reductions represent clouds on the horizon. The U.S. House of Representatives rejected this week carrying over into 2012 an expiring 2 percentage-point payroll tax cut and benefits for the long-term unemployed. Should those measures not be prolonged, GDP growth next year will be cut by about 0.6 percentage point, economists at IHS Global Insight estimate.

To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net; Bob Willis in Washington at bwillis@bloomberg.net

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

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Baby’s Death Spurs Investigation Into Formula

By Michelle Fay Cortez and Stephanie Armour - Dec 23, 2011 5:06 AM GMT+0700

State and U.S. health officials are racing to find the source of contamination after one newborn died and another became ill from bacteria that may be linked to the use of baby formula.

Regulators are testing samples of powdered formula, along with the water used to prepare the products and the clothes the children wore, according to the U.S. Food and Drug Administration. Mead Johnson Nutrition Co. (MJN) plunged 10 percent in New York trading after Wal-Mart Stores Inc. (WMT) pulled its Enfamil Newborn formula from shelves after it was determined the infant who died was given that brand.

The other formula wasn’t identified by health officials. Both infants tested positive for Cronobacter, an environmental bacteria that can cause serious illness or death. If the formula itself is to blame, it would probably spur a national recall, said Siobhan DeLancey, an FDA spokeswoman.

“We are trying to figure out whether it came from the food,” DeLancey said by telephone. “We take these into local labs and test them. We expect first results back next week.”

U.S. health officials probe about four to six such cases a year, she said.

Neither Wal-Mart, based in Bentonville, Arkansas, nor Mead Johnson, in Glenview, Illinois, provided the number of cans pulled from shelves. The number is in the thousands, and about half of Wal-Mart’s stores carry the formula, said Chris Perille, a spokesman for Mead Johnson.

Shares Drop

Mead Johnson fell to $68.76 at 4 p.m. New York time. Wal- Mart fell less than a percent to $59.19.

Customers can return the withdrawn formula for a refund or exchange, said Dianna Gee, a spokeswoman for the world’s biggest retailer. The company had 3,856 stores in the U.S. as of Nov. 30, according to its website.

The Missouri Department of Public Health and Senior Services on Dec. 19 issued a health alert on two babies infected with the bacteria within the last month, according to the agency’s website. The department didn’t say if the second infant, who lived out-of-state but was treated in Missouri, used the Mead Johnson product.

Cronobacter is part of a family of a family of microorganisms called Enterobacter sakazakii that has a fatality rate of 40 percent to 80 percent in infants, according to Marler Clark, a Seattle-based law firm that focuses on foodborne illness litigation.

Purchase at Wal-Mart

The dead child’s family “purchased the formula at a Wal- Mart store, and ‘out of an abundance of caution’ Wal-Mart decided to voluntarily ‘pull & hold’ the same size cans (12.5 oz.) of Enfamil Newborn from the same batch code until the investigation is completed,” said Chris Perille, a spokesman for Mead Johnson, in an e-mailed statement.

The batch consumed by the infant who died tested negative when it was made and packaged, and the results were reconfirmed after the news, he said.

“Outbreaks of this particular bacteria are typically linked to powdered infant formula, but it is unclear at this point where along the chain the contamination occurred or if the formula is the cause altogether,” Edward Aaron, an analyst with RBC Capital Markets in Denver, wrote in a research note today.

Wal-Mart learned of the death Dec. 18, Gee said. The company immediately removed the product from the Lebanon store and the next day notified more than 3,000 stores in 49 states.

Wal-Mart has had “nearly 100 percent compliance” from its stores, she said.

‘Products Could Return’

“Since we knew there was an active investigation by the Missouri Department of Health, we decided it was best to pull the product until the investigation is complete,” Gee wrote in an e-mail. “The products could be returned at a later date.”

While it’s premature for parents to change what they feed their infants, it’s important to remind them to prepare formula properly, said Lorry Rubin, chief of pediatric infectious diseases at Cohen Children’s Medical Center of New York.

Glassware and bottles should be cleaned and sterilized and the water should be boiled and cooled before it is added to powered formula, he said. Any extra prepared formula should be immediately refrigerated and used within 24 hours, he said.

Bacteria from the Cronobacter family are known to have contaminated infant formula, he said in a telephone interview. The strains are similar to the bacteria humans carry in their gut and typically doesn’t cause significant concern, he said.

“The powder formula isn’t necessarily a sterile product, but taking precautions, even if there is a small amount of bacteria in there, it shouldn’t be enough to harm the baby,” Rubin said. “If you re-warm it or make improperly, the bacteria can multiply and you have a higher risk of getting ill.”

Market Share

The Enfa brands, which include Enfamil, accounted for 79 percent of Mead Johnson’s $3.14 billion in 2010 revenue, and were the world’s lead brand franchise in pediatric nutrition based on retail sales, the company said in a February filing. About 12 percent of Mead Johnson’s sales come from Wal-Mart, according to data compiled by Bloomberg.

Several cases of foodborne illness from infant formula are reported each year to the Centers for Disease Control and Prevention, Lola Scott Russell, a spokeswoman, said in an e- mail.

Last year, Abbott Laboratories recalled Similac-brand powder infant formulas distributed in the U.S., Puerto Rico, Guam and some Caribbean nations because of possible insect contamination.

To contact the reporters on this story: Stephanie Armour in Washington at sarmour@bloomberg.net; Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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Republicans Agree to End Payroll Tax Deadlock

By Laura Litvan and Steven Sloan - Dec 23, 2011 6:28 AM GMT+0700

House Speaker John Boehner agreed to extend a U.S. payroll-tax cut past its Dec. 31 expiration, backing down under pressure from Senate Republicans and President Barack Obama.

The agreement capped a month of wrangling that led to a revolt by House Republicans over a two-month bipartisan deal passed by the Senate Dec. 17 in an 89-10 vote. Amid polling that showed Republicans losing ground politically during the standoff, Obama and Senate Republicans urged Boehner to bring his caucus to agreement.

Boehner said at a news conference in Washington today his members decided to “do the right thing for the American people even if it’s not exactly what we want.”

Democrats spent the past several days warning that average middle-income workers could lose about $40 from each paycheck, or about $1,000 in a year, if the tax cut expired.

The House and the Senate plan to pass the deal by unanimous consent, according to a statement issued by Boehner, which means most lawmakers won’t have to return to Washington.

Obama congratulated members of Congress for ending the partisan stalemate, saying the agreement meets the test of preventing a tax increase for 160 million workers.

“This is the right thing to do to strengthen our families, grow our economy and create new jobs,” the president said in an e-mailed statement. He also thanked Americans who “raised your voice to remind folks in this town what this debate was all about.”

Conference Committee

Senate Majority Leader Harry Reid agreed to appoint negotiators who will work with House lawmakers on a deal to extend the two-percentage-point payroll tax cut through 2012.

Boehner had become increasingly isolated as Obama continued to insist on a two-month stopgap agreement and Senate Republican leader Mitch McConnell said the speaker should accept the Senate’s short-term plan.

Unless Congress acts, the payroll tax for employees will rise to 6.2 percent from the current 4.2 percent in January. The payroll tax funds Social Security. Emergency unemployment benefits are also set to expire on Dec. 31, and doctors who are reimbursed through Medicare would receive lower payments starting in January.

Michael Feroli, JPMorgan Chase & Co.’s New York-based chief U.S. economist, assumes 0.5 percent growth in the first quarter and 1.5 percent in the second if the payroll tax cut and expanded unemployment benefits aren’t continued. If they are extended for the year, he expects growth of 2.5 percent in the first half of the year, he said in a Dec. 16 note to clients.

‘The Right Things’

“We were here fighting for the right things,” Boehner said tonight. “It might not have been politically the smartest thing in the world.”

Representative Kevin Brady, a Texas Republican on the Ways and Means Committee, said in a statement he was disappointed and had been “willing to fight on.”

“In the end House Republicans felt like they were re- enacting the Alamo, with no reinforcements and our friends shooting at us,” Brady said.

Boehner, an Ohio Republican, telephoned Obama earlier today to again press for a one-year extension.

Obama said earlier a “faction of House Republicans” was blocking the measure and that he was doing all he could to resolve the impasse.

“How can we not get that done?” the president said at an event on the White House grounds. “I mean, has this place become so dysfunctional that even when people agree to things, we can’t do it?”

Weakened Hand

McConnell, of Kentucky, weakened Boehner’s hand by calling on the House Republican leader to pass a short-term bill by year’s end so Congress could return to talks over the tax cut, an oil pipeline and other matters in the Senate measure.

“House Republicans sensibly want greater certainty about the duration of these provisions, while Senate Democrats want more time to negotiate the terms,” McConnell said in a statement. “These goals are not mutually exclusive. We can and should do both.”

Boehner told reporters earlier today that the two-month extension was unworkable because most businesses file their taxes quarterly. Later, he said the agreement will include language to protect small businesses from tax reporting requirements in the Senate measure.

Republican Senators Richard Lugar of Indiana, Olympia Snowe of Maine, Scott Brown of Massachusetts and John McCain of Arizona had called on Boehner to accept the Senate’s two-month bipartisan deal.

CNN Poll

A survey suggests that House Republicans’ public image weakened as Obama’s political position improved.

A CNN poll taken Dec. 16-18 found that, by 50 percent to 31 percent, respondents said they had more confidence in Obama than in congressional Republicans to deal with the major issues facing the country. A March survey gave Obama a 44 percent to 39 percent.

Congressional leaders agree the tax cut should be extended through 2012. Democrats and Republicans differ on how to cover the cost to the Treasury and on what other policy changes they sought to accompany the tax cut.

Senate Democrats wanted to pay part of the cost with a surtax on incomes exceeding $1 million, which Republicans opposed, and House Republicans voted earlier to pay for the bill through such measures as freezing the pay of federal civilian employees.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Steven Sloan in Washington at ssloan7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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U.S. 30-Year Mortgage Rates Fall to Record Low

By Prashant Gopal - Dec 23, 2011 12:11 AM GMT+0700

Mortgage rates for 30-year U.S. loans dropped to the lowest level on record amid signs the housing market may be set for a turnaround.

The average rate for a 30-year fixed loan fell to 3.91 percent in the week ended today, the lowest in data dating to 1971, from 3.94 percent, Freddie Mac said in a statement. The average 15-year rate matched last week’s previous all-time low of 3.21 percent, according to the McLean, Virginia-based mortgage-finance company.

The U.S. housing market, under pressure from tight lending standards and foreclosures that depress values, is showing signs of improvement. Purchases of previously owned homes rose to a 10-month high in November as the inventory of unsold properties shrank to the lowest level in six years, the National Association of Realtors reported yesterday.

“Falling home prices meeting already low interest rates are driving affordability,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York. “Mix that with higher consumer confidence and job growth, and I can see why home sales appear to be lifting off the bottom.”

The U.S. property market still may fall further and not rebound until late 2012 or early 2013, when gains probably won’t match those seen before the housing boom ended in 2006, according to a survey of 109 economists released this week by Seattle-based Zillow Inc.

Unemployment Claims Decline

The number of Americans filing claims for unemployment benefits decreased last week to the lowest level since April 2008, the Labor Department said today. November’s unemployment rate was 8.6 percent, the lowest since March 2009.

Existing-home sales climbed 4 percent in November from the previous month to a 4.42 million annual pace, the highest level since January, according to the Realtors. The number of previously owned houses on the market dropped to 2.58 million last month, the fewest since May 2005, the group said.

U.S. home-loan applications declined in the week ended Dec. 16, according to the Mortgage Bankers Association. The Washington-based group’s index of purchases fell 4.9 percent, while its measure of refinancing dropped 1.6 percent.

To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net

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Best Buy Cancels Some Online Orders

By Chris Burritt - Dec 23, 2011 4:12 AM GMT+0700

Best Buy Co. (BBY), the world’s largest consumer-electronics retailer, canceled some customers’ online orders after it ran out of popular merchandise.

“Overwhelming demand of hot product offerings” on BestBuy.com led to the cancellations, Lisa Hawks, a spokeswoman for the Richfield, Minnesota-based retailer, said today in an e- mail. She declined to disclose the number of orders that won’t be filled or identify the items.

The canceled orders covered the weekend after Thanksgiving, when Best Buy stepped up discounts against Amazon.com Inc. (AMZN) and Wal-Mart Stores Inc. (WMT) Best Buy promoted “aggressively online,” leading to higher traffic and an increase in sales by stores open at least 14 months, Chief Executive Officer Brian Dunn told analysts on Dec. 13.

“I presume it’s not particularly material, but the bad press is enough to scare some people away from ordering online at Best Buy in the future, so it’s not positive,” Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said today by e-mail. He rates the shares “neutral.”

Online revenue in the U.S. climbed 20 percent in the third quarter ended Nov. 26, outpacing overall domestic comparable- store sales growth of 0.9 percent, the company said.

Increased discounts on products such as flat-panel televisions and mobile devices hurt profit in the third quarter, leading to a 29 percent decline in net income.

Best Buy rose 1.5 percent to $23.22 at the close in New York. The shares have tumbled 32 percent this year.

The Associated Press reported earlier on the cancellations.

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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