Asia Currencies to Extend Slide on Growth, Citigroup Says

By Kyoungwha Kim and David Yong - May 21, 2012 3:09 PM GMT+0700

Asian currencies are poised to keep falling after the biggest decline in eight months as the region’s economy slumps more than investors expect, spurring more interest-rate cuts, according to Citigroup Inc.

Volatility will increase as Europe’s debt crisis hurts demand for Asian exports and prompts global money managers to favor the dollar’s safety over riskier assets, said Nadir Mahmud, the head of Asia-Pacific markets at Citigroup in Singapore, which ranked second in worldwide currency trading volume after Deutsche Bank AG in a Euromoney Institutional Investor Plc (ERM) survey. He has spent 26 years in the industry and oversees a team of more than 1,500 staff in 17 countries.

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India’s rupee , the region’s worst-performing currency this month with a 3.8 percent decline, touched a record low of 54.91 per dollar on May 18. Photographer: Prashanth Vishwanathan/Bloomberg

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May 21 (Bloomberg) -- Christopher Gothard, head of foreign exchange at Brown Brothers Harriman (Hong Kong) Ltd., talks about Europe's debt crisis, China's economic growth and the outlook for the global currency market. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

“The slowdown in Asia which we’ll see in the very near term will catch the markets off guard,” Mahmud said in a May 16 interview. “What you will see is an up move in the dollar and a down move in interest rates which most people are not expecting.”

The Bloomberg-JPMorgan Asia Dollar Index lost 1.8 percent so far in May and is headed for the steepest monthly drop since September. The MSCI Asia-Pacific Index of shares tumbled 10 percent, set for the worst drop since October 2008. The Dollar Index (DXY), which measures the U.S. currency against those of six major trader partners, advanced 3 percent.

India’s rupee, the region’s worst-performing currency this month with a 3.5 percent decline, touched a record low of 54.91 per dollar on May 18. South Korea’s won slid 3.3 percent. The rupee’s one-month implied volatility, a measure of exchange-rate swings used to price options, jumped 350 basis points, or 3.5 percentage points, this month to 13 percent. International investors pulled $6.2 billion from the stock markets of India, Indonesia, South Korea, Taiwan and Thailand this month, according to exchange data.

‘Some Turbulence’

“You might see some turbulence in local foreign-exchange markets, bond markets and equity markets,” Mahmud said. “In the short term, in a risk-averse environment, the dollar still looks like the king.”

Mahmud said increased volatility will help the bank achieve “double-digit” growth in Asian trading this year. Asian foreign-exchange trading at the New York-based lender, including trades on its electronic Citi FXVelocity system, grew in the past year to $4.3 trillion from $2.5 trillion, boosting its market share to 17 percent, the Euromoney survey showed. The actual volume was “significantly higher,” Mahmud said.

Citigroup’s securities and banking operations, which includes Mahmud’s division, reported a 17 percent increase in first-quarter revenue to $1.2 billion from a year earlier, boosting net income by 46 percent to $307 million.

Economic Slowdown

China’s exports, factory output and inflows of foreign direct investment fell short of economists’ estimates in April, according to government data released this month. Overseas shipments from South Korea, Malaysia and the Philippines shrank, separate reports showed. Central banks of Korea and Indonesia left interest rates unchanged in May.

Policy makers in Asia will probably shift focus to reviving growth from containing inflation, injecting funds into the region’s economies, said Mahmud.

“The policy reaction in the U.S. has been very aggressive,” he said. In Asia, “there are certain central banks that are behind the curve, but slowing economic growth may force them to react,” he said.

‘Fundamentals Positive’

Asian currencies will rebound in the longer term as current-account balances and government finances improve, Mahmud said. China had a current-account surplus of $24.7 billion in the first quarter and a similar measure in Korea climbed to a four-month high of $3 billion in March.

“The fundamentals of Asia are positive,” Mahmud said. “Most countries run current-account surpluses and they don’t have huge public debt issues like in Europe. Asia may possibly have some hiccups near term but in the long run, the outlook continues to be very positive.”

Barclays Capital also predicts Asian emerging currencies will weaken over the next month, strategists Olivier DesBarres and Nick Verdi wrote in May 17 research note. The bank cut its forecast on the rupee to 56 from 52 for one month.

“Asian currencies will be forced to weaken against a broadly stronger dollar,” said Sacha Tihanyi, a senior strategist in Hong Kong at Scotiabank, a unit of Bank of Nova Scotia. “When Europe goes through financial strain, it bleeds into the real economy and eventually hits Asian economic growth.”

An economic recovery in China may be delayed without strong policy support, according to Mahmud. The world’s second-largest economy is forecast to expand 8.3 percent this year, the slowest pace since 2001, according to the median forecast of analysts in a Bloomberg survey.

“We haven’t seen a bottom yet” in China’s growth rate, Mahmud said. “You might see a quarter or two of even slower growth than you’ve got now.”

To contact Bloomberg News staff for this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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JPMorgan Risk Overseer Said to Have Trading Losses Record

By Lisa Abramowicz - May 21, 2012 5:50 AM GMT+0700

Irvin Goldman, who oversaw risks in the JPMorgan Chase & Co. (JPM) unit that suffered more than $2 billion in trading losses, was fired by another Wall Street firm in 2007 for money-losing bets that prompted a regulatory probe, three people with direct knowledge of the matter said.

JPMorgan appointed Goldman in February this year as the top risk official in its chief investment office while the unit was managing trades that later spiraled into what Chief Executive Officer Jamie Dimon called “egregious,” self-inflicted mistakes. The bank knew when it picked Goldman that his earlier work at Cantor Fitzgerald LP led to regulatory sanctions against Cantor, according to a person briefed on the situation.

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JPMorgan’s oversight of risk in its chief investment office has become a key issue as U.S. authorities examine the incident. Photographer: Peter Foley/Bloomberg

Audio Download: Richard Torrenzano Sees Fallout From JPMorgan Chase May 18

JPMorgan’s oversight of risk in its chief investment office has become a key issue as U.S. authorities examine the incident and lawmakers debate how to prevent banks from making wagers that might endanger depositors. Goldman was given the risk- oversight job after his brother-in-law, Barry Zubrow, 59, stepped down in January as JPMorgan’s top risk official, according to a person briefed on the matter. Less than a week after the loss became public, the bank stripped Goldman of those duties, appointing Chetan Bhargiri to succeed him.

The Cantor case culminated in 2010 when the enforcement arm of NYSE Arca Inc. fined Cantor $250,000 after finding it failed to supervise Goldman, 51, who was buying and selling the same stocks in personal accounts that he traded in a proprietary account at the New York-based brokerage. His stock investments, one of which plunged in December of 2006, presented a conflict of interest that could have affected his investment decisions, NYSE Arca found, according to a settlement document on its website.

No Admission

Cantor settled the case without admitting or denying wrongdoing. The NYSE document identified Goldman only by his former title as CEO of debt capital markets, and Goldman wasn’t directly accused by the watchdog of misconduct. People with knowledge of his dismissal spoke on condition of anonymity because the reasons for his departure were private.

Kristin Lemkau, a spokeswoman for JPMorgan, declined to comment on Goldman’s actions at Cantor. He didn’t immediately respond to messages seeking comment.

To contact the reporter on this story: Lisa Abramowicz in New York at labramowicz@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Alan Goldstein at agoldstein5@bloomberg.net

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Schaeuble Seeks Crisis Resolution With France’s Moscovici

By Patrick Donahue - May 21, 2012 4:13 PM GMT+0700

German and French leaders meet this week to map out a revised plan for the euro as the Group of Eight exposed disagreement on a rescue strategy, Greece lurched toward a possible exit and Spain’s budget deficit widened.

German Finance Minister Wolfgang Schaeuble will for the first time discuss the 17-nation currency with his newly installed French counterpart, Pierre Moscovici, in Berlin today as European Union leaders prepare for a summit meeting in Brussels on May 23. After three shorter meetings in the last week, Chancellor Angela Merkel and French President Francois Hollande will seek to balance France’s desire to jump-start growth with Germany’s preference for spending cuts.

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Wolfgang Schaeuble, Germany's finance minister, said today that the downgrade warning should spur European leaders to ratchet up efforts to resolve the region's debt crisis. Photographer: Michele Tantussi/Bloomberg

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Chancellor Angela Merkel told reporters she was “very glad” that President Francois Hollande came to Berlin the day of his inauguration. Photographer: Michele Tantussi/Bloomberg

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German Chancellor Angela Merkel and French President Francois Hollande. Photographer: Michele Tantussi/Bloomberg

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German Finance Minister Wolfgang Schaeuble. Photographer: Jock Fistick/Bloomberg

“We’re all very pleased that France wants to offer new initiatives with its newly elected president,” Schaeuble told the Bild am Sonntag newspaper in an interview yesterday. “The German government is ready to talk about anything,” Schaeuble said, though he ruled out measures that would raise debt.

G-8 leaders on May 19 urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the EU’s bailout deal. The country is preparing for June 17 elections, following an inconclusive May 6 ballot. Spain revised its 2011 deficit upward -- even as its borrowing costs approached levels that prompted bailouts in Greece, Ireland and Portugal.

Two More Years

The euro has lost 3.5 percent against the U.S. dollar this month and almost $4 trillion has been wiped from equity markets amid concerns over Greece. Schaeuble said May 18 the turmoil could last another two years. Yields on Spanish 10-year bonds climbed to close at 6.27 percent last week. That figure slid to 6.26 percent at 10:56 a.m. Madrid time, while the euro traded down 0.01 percent to $1.2769 in Frankfurt.

President Barack Obama joined G-8 leaders including Hollande and Britain’s Prime Minister David Cameron in embracing a renewed focus on growth, underlining the isolation of Merkel, who maintained resistance to new spending. At the president’s Camp David retreat in Maryland, G-8 leaders said in their final statement that “the right measures are not the same for each of us.”

As EU leaders prepare for their informal dinner, French Prime Minister Jean-Marc Ayrault told Liberation that no potential solutions involving Greece should be rejected. Leaders shouldn’t rule out measures such as state borrowing from the European Central Bank, he said.

Greek Polls

Two weeks after elections in Greece yielded political deadlock and forced the once-taboo notion of leaving the monetary union into political discussion, euro leaders grappled with the possible fallout of such a scenario. Caretaker Prime Minister Panagiotis Pikrammenos will oversee a government that will prepare for a new election.

Opinion polls over the weekend gave a split message on the outcome, with two pointing to victory for New Democracy, which backs the international bailout program, and two favoring Syriza, which opposes it.

Syriza party leader Alexis Tsipras said yesterday in a speech in Athens that his faction’s opposition to the terms of Greece’s financial-aid program doesn’t mean the country would have to abandon the euro if the party forms a government.

Luxembourg Prime Minister Jean-Claude Juncker, who heads a group of European finance ministers, said a majority of his peers have doubts about Greece’s membership of the euro, Der Spiegel reported, without saying where it got the information.

Tsipras, who travels to Paris and Berlin beginning today, denounced such talk, saying it would involve “huge costs.”

‘Clear Message’

“We now have to send a very clear message to people in Greece,” Cameron said yesterday as he attended a NATO summit in Chicago. “You can either vote to stay in the euro, with all the commitments you’ve made, or, if you vote another way, you’re effectively voting to leave.”

European Central Bank Executive Board member Joerg Asmussen, speaking in Berlin today, said that policy makers should stick to “plan A,” keeping Greece in the euro. He said he didn’t want to speculate on a “plan B.”

“What’s the alternative? My preference is that Greece stay in the euro,” Asmussen said today.

The sensitivities surrounding an exit were illustrated May 19, when Merkel’s office dismissed a claim by the Greek government that the chancellor had called for a referendum to decide on the country’s membership in the monetary union.

Greek party leaders united in condemning any interference by the German chancellor on such an issue, with New Democracy leader Antonis Samaras, who heads the largest party, calling her reported comments “unfortunate.”

In Spain, the growth-versus-austerity debate took on a new dimension with the country’s revision of its 2011 deficit, undermining Prime Minister Mariano Rajoy’s battle to stave off a bailout and maintain access to capital markets.

‘Serious Risk’

Rajoy, who on May 16 asked for EU help to access capital markets even as he said the country faced a “serious risk” of being shut out, is struggling to convince investors he can cut the deficit during a recession while shielding public finances from banks’ real-estate losses.

The deficit amounted to 8.9 percent last year, 0.4 percentage point more than previously estimated, Spain’s Budget Ministry announced at 10 p.m. local time Friday. That’s down from 9.3 percent in 2010, following government austerity measures including cuts to public workers’ wages, a freeze on pensions and a tax increase.

Spanish Economy Minister Luis de Guindos rejected EU pressure this week to take an International Monetary Fund credit line to help shore up the nation’s lenders, the Madrid-based ABC newspaper reported. A ministry spokesman in Madrid declined to comment on the report in ABC, which cited people present at a meeting of EU finance ministers.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Asia Stocks Rise After China Premier Says Growth Is Focus

Asian stocks rose, with the regional index rebounding from its biggest drop in six months, after Premier Wen Jiabao said China will focus more on bolstering economic growth.

China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, rose 1.8 percent in Hong Kong. BHP Billiton Ltd. (BHP) climbed 2 percent in Sydney after RBC Capital Markets said the world’s largest mining company may start a new share buyback. Nintendo Co., a manufacturer of game consoles that gets a third of its sales in Europe, fell 1.4 percent in Tokyo. OCI Co., a chemicals maker, slumped 4.4 percent in Seoul after delaying expansion plans because of Europe’s debt crisis.

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May 21 (Bloomberg) -- Savanth Sebastian, an equities economist at Commonwealth Securities Ltd. in Sydney, talks about the implications of the European sovereign debt crisis for global financial markets, the U.S. economic outlook and investment strategy. Sebastian speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 21 (Bloomberg) -- Charles Kim, a New York-based director at Mirae Asset Securities Co., talks about the outlook for South Korean stocks, Samsung Electronics Co.'s financial performance and his investment strategy. Kim speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

The MSCI Asia Pacific Index (MXAP) rose 0.2 percent to 112.81 as of 5:30 p.m. in Tokyo, with about five stocks rising for every four that declined. The gauge fell 2.5 percent on May 18, the most since Nov. 10, wiping out this year’s gains as Europe’s crisis worsened and U.S. economic data missed estimates.

Wen’s pledge on Chinese growth “will be a support for the market when we see clear signs of it,” said Shintaro Takeuchi, portfolio investment group manager at Tokio Marine & Nichido Fire Insurance Co. that manages $109 billion in assets. “Stocks are becoming cheaper and fewer people are selling them, but they’re not cheap enough to buy either.”

Gains were limited before German and French leaders meet today to discuss the euro after the Group of Eight nations exposed disagreement on a rescue strategy.

Yearly Drop

The Asian gauge dropped 1.1 percent this year through last week compared with a 3 percent gain by the Standard & Poor’s 500 Index (SPXL1) and a 2.3 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.5 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10 times for the Stoxx 600.

Japan’s Nikkei 225 Stock Average climbed 0.3 percent today before the Bank of Japan begins a two-day meeting tomorrow. The broader Topix Index slid 0.1 percent after a drop last week that capped the longest streak of weekly losses since the Sept. 11 terrorist attacks in 2001.

Australia’s S&P/ASX 200 Index increased 0.7 percent, its first increase in five days, while South Korea’s Kospi Index rose 0.9 percent.

Hong Kong’s Hang Seng Index (HSI) declined 0.2 percent. The Hang Seng China Enterprises Index (HSCEI) of Hong Kong-listed Chinese companies advanced 0.1 percent, after last week falling as much as 21 percent from its high for the year on Feb. 29. China’s Shanghai Composite Index gained 0.1 percent.

Wen said China will focus more on bolstering economic growth, indicating policies may be loosened further as inflation moderates.

China Investment

“We should continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth,” Wen said during a tour of Wuhan, the capital of China’s Hubei province, from Friday to Sunday.

China’s foreign-exchange regulator has approved $26 billion in quotas for 138 qualified investors looking to buy into its domestic securities as of May 16, according to a statement posted on the State Administration of Foreign Exchange yesterday.

China Overseas Land rose 1.8 percent to HK$15.06 in Hong Kong. CSR Corp. (1766), a Chinese train maker, jumped 6.8 percent to HK$5.79, leading its peers higher after the 21st Century Business Herald reported the railway ministry has gotten a credit line of more than 2 trillion yuan ($316 billion), signaling transport projects may resume.

U.S. Futures Rise

Fanuc Corp. (6954), a maker of industrial robots that gets almost half its revenue from Asia outside Japan, rose 1.5 percent to 13,050 yen in Tokyo. The company will expand its production capacity for equipment to control machine tools by 30 percent, the Nikkei newspaper reported, without saying where it got the information.

Futures on the Standard & Poor’s 500 Index gained 0.9 percent today after the index slid 0.7 percent in New York on May 18.

Leaders of G-8 nations who met at Camp David over the weekend pushed for Greece to stay in the euro area and supported boosting growth, even as Germany said Europe can’t spend its way out of the debt crisis. They concurred at U.S. President Barack Obama’s retreat outside Washington “that the right measures are not the same for each of us.”

German Finance Minister Wolfgang Schaeuble will for the first time discuss the 17-nation currency at a meeting with his newly installed French counterpart, Pierre Moscovici, in Berlin today as European Union leaders prepare for a summit meeting in Brussels on May 23.

BHP Buyback

Nintendo slid 1.4 percent to 9,230 yen in Osaka, while HSBC Holdings Plc (5), Europe’s largest bank by market value, declined 1 percent to HK$63.10 in Hong Kong.

BHP rose 2 percent to A$32.10 in Sydney, the second-biggest contributor to the MSCI Asia Pacific Index’s advance. The company may start a new share buyback after last week trimming an $80 billion spending plan over five years, RBC Capital Markets said in a report dated May 18.

Regional lender Hokuhoku Financial Group Inc. (8377) jumped 6.1 percent to 122 yen in Tokyo after saying it will buy back as much as 2.15 percent of its outstanding stock.

Renesas Electronics Corp. (6723), a maker of microcontrollers used in cars, slumped 10 percent to 269 yen, its lowest close on record, after Goldman Sachs Group Inc. lowered its rating on the stock, citing a slow earnings recovery.

OCI slumped 4.4 percent to 194,000 won after the Seoul- based solar-cell company announced it is scrapping plans to build two polysilicon factories at home because Europe’s worsening fiscal crisis is affecting the volatility of the solar-power industry.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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

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Nasdaq CEO Blames Software Design for Delayed Facebook Trading

By Nina Mehta - May 21, 2012 7:14 AM GMT+0700

Nasdaq OMX Group Inc. (NDAQ), under scrutiny after shares of Facebook Inc. were plagued by delays and mishandled orders on its first day of trading, blamed “poor design” in the software it uses for driving auctions in initial public offerings.

Computer systems used to establish the opening price were overwhelmed by order cancellations and updates during the “biggest IPO cross in the history of mankind," Nasdaq Chief Executive Officer Robert Greifeld said yesterday in a conference call with reporters. Nasdaq’s systems fell into a “loop” that prevented the second-largest U.S. stock venue operator from opening the shares on schedule following the $16 billion deal, he said.

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The Facebook Inc. logo is displayed with price valuations on monitors during trading at the Nasdaq MarketSite in New York, U.S. Photographer: Scott Eells/Bloomberg

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May 21 (Bloomberg) -- Jonathan Slone, chief executive officer of CLSA Asia-Pacific Markets, talks about the outlook for financial markets and the sovereign debt crisis in Greece. Slone also discusses Facebook Inc.'s initial public offering and JPMorgan Chase & Co.'s trading loss with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 18 (Bloomberg) -- Lise Buyer, principal at Class V Group LLC, talks about Facebook Inc.'s first day of trading and the outlook for the social-networking company. Buyer speaks with Cory Johnson on Bloomberg Television's "Facebook the Public Network." (Source: Bloomberg)

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May 18 (Bloomberg) -- Mark Zuckerberg, co-founder and chief executive officer of Facebook Inc., David Kirkpatrick, author of "The Facebook Effect," and Brian Wieser, an analyst at Pivotal Research Group LLC, offer their views on Facebook's trading debut and the outlook for the social-networking site. This report also contains comments from Robert McCooey, senior vice president of new listings and capital markets at Nasdaq OMX Group Inc.; Scott Rostan, chief executive officer of Training the Street; John Chachas, managing partner at Methuselah Capital Advisors LP, and Nick Thompson, a senior editor at New Yorker magazine and a Bloomberg contributing editor. (Source: Bloomberg)

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Nasdaq OMX Group Inc. Chief Executive Officer Robert Greifeld. Photographer: Scott Eells/Bloomberg

While the errors were resolved and Facebook completed its offering, the day was another setback for equity exchanges trying to erase the memory of the botched IPO in March by Bats Global Markets Inc., another bourse owner. Nasdaq’s issues contributed to disappointment among investors as Facebook (FB)’s stock closed up 0.6 percent after rising 18 percent earlier.

“It’s amazing that both Bats and Nasdaq unfortunately failed in an inglorious way,” William Karsh, the former chief operating officer at Direct Edge Holdings LLC, an exchange operator that competes with Nasdaq, said in a telephone interview yesterday. “It proves that technology isn’t infallible. There are so many moving parts that things can go wrong. That’s the lesson we learn.”

The U.S. Securities and Exchange Commission said it will review the trading. Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment.

‘Not Our Finest’

“This was not our finest hour,” Greifeld said, one day after Nasdaq’s board convened to discuss the offering. Asked if his job is secure, he said, “I certainly hope so.”

Nasdaq will use an “accommodation pool” to pay back investors that should have received executions in the opening auction, based on the decisions of a third-party reviewer, Greifeld said. It may total $13 million, he said.

Problems surfaced on May 18 at 11:11 a.m. New York time after Morgan Stanley (MS), one of the underwriters that sold 421 million shares the night before, completed its role setting the price for the trade in Nasdaq’s opening auction, Greifeld said. Nasdaq’s software for IPOs allows investors to cancel or update details of orders until the auction runs. Trade requests received during the 5 milliseconds it took to operate the auction disturbed the process, leading to an imbalance of buys and sells and sending the program into a loop.

Manual Intervention

Nasdaq officials manually intervened to allow the auction to occur at 11:30 a.m. The IPO software “didn’t work” even after thousands of hours of testing for “a hundred scenarios” aimed at anticipating problems, Greifeld said. “We’re not happy with our performance,” he said on the call yesterday.

Volume during the auction amounted to 75.7 million shares, or almost 1 percent of trading during the entire day on all U.S. exchanges, according to data compiled by Bloomberg.

“We saw on a real-time basis, obviously with the pressure of the world upon us, that this was happening,” Greifeld said. “We then manually intercepted this cross,” he said. “That manual intervention said we had to ignore the cancels that came in between the raindrops as we were processing the trade.”

Nasdaq wound up with 5,000 shares of Facebook because of its intervention, Greifeld said. A broker was used to sell the stock that had been placed in the exchange’s so-called error account for $10 million. Greifeld said he would ask the SEC for permission to add the money to the $3 million available from the exchange, according to its rules, to repay investors that should have received trades.

Some Dispute

Orders totaling 30 million shares were submitted into the opening auction between 11:11 a.m. and 11:30 a.m., Greifeld said. About half of them may involve “some level of dispute,” he said. Greifeld said he didn’t think the delay in starting trading affected the price of Facebook shares.

Adding to the day’s confusion, Nasdaq reported an issue after trading began with confirming transactions from the opening auction with the brokerages that placed them. The exchange said in a statement posted to its website at 11:59 a.m. New York time that it was having a problem delivering the messages. An update at about 1:57 p.m. said they had been sent.

“When you have a complex market system that gets overwhelmed, it fails in bizarre ways,” James Angel, a finance professor at Georgetown University in Washington, said in a phone interview on May 18. “If you don’t know whether you got filled, you don’t know your position. If you’re buying you might buy more shares and then suddenly you’ve got twice as many shares as you wanted. It makes it hard to do your risk management and hard for brokers to know how much credit to extend to customers.”

$42 at Auction

Facebook advanced 23 cents to $38.23 after surging as high as $45. It fell as low as the IPO price of $38, which valued the company at $104.2 billion. More than 43 million shares were executed at that level, the second-most changing hands at any price except for $42, the opening auction price, data compiled by Bloomberg show.

Underwriters purchased shares to keep them from falling below $38, people with knowledge of the matter said. The bankers supported the stock amid Nasdaq’s difficulties delivering trade execution messages, said one of the people, who asked not to be identified because the transactions are private.

Facebook was originally scheduled to open at 11 a.m. At about 11:07 a.m., a Nasdaq official told market participants on a conference call that the exchange was delaying the opening. Aside from assurances that an update was coming, the phone line went silent until just before the first trade at about 11:30 a.m., according to two people who were on the call and asked not to be identified because the discussions were private.

Ignoring Requests

Buy and sell requests that should have been filled in the opening auction, based on the exchange’s rules, weren’t, while cancellations for other trade requests were ignored, they said. Their employers plan to appeal some of the results they received for orders sent to Nasdaq.

Nasdaq began experiencing problems with its bid and offer quotes after the opening auction trade. By 11:31 a.m., the exchange’s highest bid, or price at which market participants were willing to purchase shares, was $42.99, and its lowest offer to sell was $42.50, according to data compiled by Bloomberg. The quotes produced a so-called crossed market, where sellers appear to be asking less than buyers are willing to pay.

Other markets continued trading, usually with a difference of a few cents between their best bid and lowest offer. Nasdaq’s quotes were marked as manual and not electronically accessible, which allowed brokers and other exchanges to ignore the venue’s prices. Its offer price later dropped to $38.01 and remained at that level, almost $4 below the highest bid, until 1:49 p.m., according to data compiled by Bloomberg.

‘Don’t Like’

“Clearly investors would hit the ‘don’t like’ button,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview.

The IPO price valued the company at 107 times trailing 12- month earnings, more than all Standard & Poor’s 500 Index stocks except Amazon.com Inc. and Equity Residential. The valuation also made Facebook, co-founded in 2004 by a then-teenage Mark Zuckerberg, the largest company to go public in the U.S.

Customers of London-based Fidessa Group Plc, which helps asset managers track transactions, weren’t receiving confirmation of Facebook trades, according to an e-mailed statement. Michael Cianfrocca, a spokesman for Charles Schwab Corp. in San Francisco, wrote in an e-mail: “There are currently industrywide delays in reporting trade executions. These issues do not appear to be unique to Schwab.”

TD Ameritrade

Uncertainty about whether orders received executions in the opening auction affected some clients of online broker TD Ameritrade Holding Corp., according to Steve Quirk, senior vice president of the trader group at the Omaha, Nebraska-based company. Facebook accounted for 22 percent of equities volume at the firm, he said by e-mail.

Clearing broker Pershing LLC told clients yesterday it worked through the weekend to address processing delays for purchases and sales of Facebook shares. The unit of Bank of New York Mellon Corp. expects to deliver trade information to customers’ account by around 7 a.m. on May 21, the broker said in the message.

Nasdaq shares fell 4.4 percent, the most since October, to $21.99 on May 18 following the problems with the IPO. NYSE Euronext (NYX), its larger rival, rose 0.3 percent to $24.61.

Facebook shares traded 582.5 million times on May 18, or about 6.6 percent of total volume on U.S. exchanges, according to data compiled by Bloomberg.

“I don’t think you’ll see a long-term downturn of volume on Nasdaq,” Karsh said. “Nasdaq will pick up a couple percentage points because it’s the primary listing venue for Facebook.”

To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net

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

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Facebook’s Zuckerberg Announces Marriage, Updates Status on Page

By Andy Sharp - May 20, 2012 11:40 AM GMT+0700

Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg announced his marriage to Priscilla Chan on his Facebook page yesterday. The couple wed in a ceremony in the backyard of his home in Palo Alto, California, the Associated Press reported.

Zuckerberg, 28, wed his long-standing girlfriend Chan, 27, before fewer than 100 guests, who had arrived expecting only to celebrate Chan’s graduation from medical school, AP said.

The two updated their Facebook pages with a wedding photo, and changed their relationship statuses to “married.” The ceremony came after Facebook raised $16 billion in the largest initial public offering on record for a technology company.

Facebook shares rose 0.6 percent to $38.23 as of 4 p.m. in New York on May 18 after earlier trading at the IPO price of $38, which valued the company at $104.2 billion. Zuckerberg’s net worth rose $100 million to $19.4 billion, ranking him 26th on the Bloomberg Billionaires Index, ahead of Google Inc. (GOOG)’s Sergey Brin and Larry Page.

The Facebook photograph shows Zuckerberg in a suit rather than his trademark hoodie, and Chan in a white wedding dress. The pair met at Harvard University, where Zuckerberg founded the social-networking site in 2004, and have been together for nine years, AP reported, citing a guest authorized by the couple to speak.

Zuckerberg, who was named Time magazine’s Person of the Year in 2010, designed the ring featuring “a very simple ruby,” AP said, citing the same source.

To contact the reporter on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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U.S. Said to Start Probe of $2 Billion JPMorgan Loss

By Patricia Hurtado and Seth Stern - May 16, 2012 2:15 AM GMT+0700

The U.S. Justice Department and the Federal Bureau of Investigation in New York have begun a criminal probe of JPMorgan Chase & Co. (JPM)’s $2 billion trading loss, a person familiar with the matter said.

The U.S. is looking into whether criminal wrongdoing occurred in relation to the losses the bank reported last week, said the person, who declined to be identified because the matter isn’t public. The inquiry is in its most preliminary stage, the person said.

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JPMorgan Chase building in New York.Photographer: Justin Lane/EPA

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May 15 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner, Sheila Bair, former chairman of the Federal Deposit Insurance Corporation, and Richard Bove, an analyst at Rochdale Securities, offer their views on JPMorgan Chase & Co.'s $2 billion trading loss and Chief Executive Officer Jamie Dimon. This report also contains comments from U.S. Republican Senators Bob Corker of Tennessee and Rob Portman of Ohio; Amar Bhide, a professor at Tufts University; Sarat Sethi, a principal and portfolio manager at Douglas C. Lane & Associates; Paul Miller, an analyst at FBR Capital Markets Corp.; Simon Johnson, a professor at the Massachusetts Institute of Technology, and Lisa Lindsley, director of capital strategies at the American Federation of State, County and Municipal Employees. (Source: Bloomberg)

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May 15 (Bloomberg) -- Erik Schatzker report on JPMorgan's shareholder meeting. He speaks on Bloomberg Television's "Money Moves." (Source: Bloomberg)

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Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co. Photographer: Tim Boyle/Bloomberg

The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, which regulates derivatives trading, also are examining New York-based JPMorgan’s trading activities, according to people familiar with those probes.

JPMorgan Chief Executive Officer Jamie Dimon said on May 10 that the bank made “egregious” mistakes and that the losses of about $2 billion tied to synthetic credit securities were “self-inflicted.”

Chief Investment Office

The trading occurred in a portfolio of credit investments at a unit of the bank called the Chief Investment Office, which makes trades to balance the bank’s assets and liabilities. The unit made trades in credit default swaps.

The losses, which could increase by $1 billion or more, originated out of a London unit of JPMorgan’s Chief Investment Office, which is generally responsible for managing the bank’s interest rate, foreign currency and other economic risks.

The company was trying to reposition a portfolio of corporate credit derivatives and used a trading strategy that was “flawed, complex, poorly conceived, poorly vetted and poorly executed,” Dimon told shareholders today at the bank’s annual meeting in Tampa, Florida.

At the end of an investigation, the U.S. may consider filing mail, wire and securities fraud charges, which give prosecutors “enormous” discretion, said Ellen Podgor, a professor at Stetson University College of Law in St. Petersburg, Florida.

‘Don’t Need Much’

“You don’t need much if the government decides it would like to proceed,” Podgor said in a telephone interview.

Larry Hamermesh, a former lawyer with the SEC who is now a professor at Widener University School of Law, said an investigation into whether criminal wrongdoing occurred may take some time.

“Just because things fail doesn’t mean that there’s a crime,” Hamermesh said in a telephone interview.

He said the U.S. may want to scrutinize the trader who took the position and supervisors who “bear the responsibility for what was said to investors.”

“These cases are not easy to win and criminal liability under securities law depends on a show of intention to mislead,” Hamermesh said. “If it’s simply a screw-up that’s not going to get the government to home base with a jury.”

Joseph Evangelisti, a spokesman for the bank, declined to comment on the criminal probe. Ellen Davis, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment. Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch in Brooklyn, New York, where JPMorgan has some of its operations, also declined to comment.

The probe was reported earlier by the Wall Street Journal.

To contact the reporters on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net; Seth Stern in Washington at sstern14@bloomberg.net

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

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Dow Falls to Four-Month Low as Greece Overshadows Economy

By Rita Nazareth - May 16, 2012 4:37 AM GMT+0700

The Dow Jones Industrial Average (INDU) fell to an almost four-month low as Greece’s failure to form a new government offset better-than-estimated American economic data.

Commodity (SPXL1) shares tumbled as the Dollar Index extended its longest rally ever, reducing the appeal of raw materials. Avon Products Inc. (AVP) slumped 11 percent as Coty Inc. withdrew its $10.7 billion offer for the biggest door-to-door cosmetics seller. Home Depot Inc. (HD), the largest U.S. home-improvement retailer, slid 2.4 percent as it forecast slowing sales gains. Lennar Corp. (LEN) and D.R. Horton Inc. (DHI) jumped at least 2.5 percent as homebuilder confidence climbed to the highest level since 2007.

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Traders work at the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

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May 15 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. The Dow Jones Industrial Average fell to an almost four-month low as Greece’s failure to form a new government offset better-than-estimated American economic data. (Source: Bloomberg)

The Standard & Poor’s 500 Index fell 0.6 percent to 1,330.66 at 4 p.m. New York time, dropping 2 percent in three days. The Dow lost 63.35 points, or 0.5 percent, to 12,632, the lowest since Jan. 19. About 7.3 billion shares changed hands on U.S. exchanges, or 9 percent above the three-month average.

“It’s fear of European drama,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $160 billion. “It seems obvious that leaving the euro would be a disaster for Greece and very costly to its economy. Yet they seem to be on a path where that could happen. We’ve had some good U.S. economic data, but people are afraid to hold equities. It’s extremely frustrating.”

Stocks fell for a third day and the euro tumbled to a four- month low amid concern Greece will leave the shared currency. The European country will hold new elections after President Karolos Papoulias failed to broker a governing coalition following an inconclusive May 6 vote. The impasse offset American reports showing that manufacturing in the New York region and homebuilder confidence grew more than forecast.

Safety Demand

Investors’ demand for safety pushed up the Dollar Index (DXY), a gauge of the currency against six major peers, for the 12th straight day. The dollar gain helped send copper, gold and oil lower. Gauges of energy and raw material shares in the S&P 500 slumped at least 1.4 percent. Freeport-McMoRan Copper & Gold Inc. (FCX) dropped 4.8 percent to $32.65. Alcoa Inc. (AA) slid 2.4 percent to $8.71.

Pacific Investment Management Co., which manages the world’s largest bond fund, doesn’t see the European currency union surviving in its present form. The most probable outcome is that the 17-nation euro area will evolve into a smaller union centered on France, Germany, Italy and Spain, and underpinned by much stronger coordination and financing, he said.

“The status quo is no longer an option for Europe over the three to five year horizon,” Pimco Chief Executive Officer Mohamed El-Erian wrote in a report outlining the Newport Beach, California-based company’s medium-term economic outlook.

Avon Tumbles

Avon tumbled 11 percent, the most in the S&P 500, to $18.71. Coty, the maker of perfumes by Beyonce Knowles and Heidi Klum, said attempts to speak to Avon board members, including Chairman Andrea Jung and Chief Executive Officer Sheri McCoy, failed after it received a two-sentence e-mail requesting a deadline extension. Coty had given yesterday as a cutoff date for a response when it made its $24.75-a-share bid last week.

Home Depot retreated 2.4 percent to $48.67 after forecasting sales this year will slow from the first quarter because warm weather pulled forward purchases of plants and gardening equipment.

A measure of homebuilders in S&P indexes rallied 2.2 percent on signals of an improving outlook for construction. Lennar increased 2.8 percent to $29.16. D.R. Horton advanced 2.5 percent to $17.33.

JPMorgan Dividend

JPMorgan Chase & Co. (JPM) rebounded from the biggest two-day drop since 2009, climbing 1.3 percent to $36.24. Chief Executive Officer Jamie Dimon, responding to shareholders at the annual meeting after disclosing a $2 billion trading loss last week, said he sees no reason the bank’s dividend would be affected.

Groupon Inc. (GRPN) rose 3.7 percent to $12.17, after soaring as much as 27 percent earlier. The largest daily-deal website reported first-quarter profit that topped estimates, helped by lower marketing costs and expanded international sales.

TJX Cos. rose the most in the S&P 500, climbing 6.9 percent to $42.45. The owner of the T.J. Maxx (TJX) and Marshalls retail chains reported first-quarter profit that beat analysts’ estimates, driven by demand in Europe. Sales rose 11 percent to $5.8 billion from $5.22 billion a year earlier, matching analysts’ estimates.

Facebook Inc. (FB) boosted the price range on its initial public offering to seek as much as $12.8 billion, signaling that Chief Executive Officer Mark Zuckerberg expects demand for the social network to withstand recent market turmoil.

New Range

The new range is $34 to $38 a share, a regulatory filing today shows, indicating a market value of as much as $104.2 billion. That would make Facebook, co-founded in 2004 by Zuckerberg, worth more than Citigroup Inc. (C) and McDonald’s Corp.

Facebook, which has spent more than a week pitching the IPO to investors across the U.S., raised the range even after the S&P 500 yesterday slumped to the lowest level since February. That may spell disappointment for investors if the slump persists, said Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp.

“They get more money upfront if they can make it go, but if the enthusiasm is weak out of the gate, it makes it that much more difficult for the company going forward,” said McCain, who helps oversee more than $20 billion for the Cleveland-based bank. “You would think they would be a little more cautious.”

The S&P 500 took longer than usual to fall 5 percent from its peak this year, a sign that any further retreat in U.S. stocks will be “contained,” according to Sam Stovall of S&P.

28 Days

The benchmark gauge reached the threshold yesterday after spending 28 days without losing 5 percent from its April high. Since 1950 (SPX), it has taken an average 19 days to fall 5 percent, based on a study by Stovall, S&P’s New York-based chief equity strategist.

Among those that took 28 days or longer to occur, only 25 percent eventually turned into corrections, or retreats of more than 10 percent, the data show. Stovall said in an e-mail that he views losses of less than 5 percent as “noise” and those of between 5 percent and 10 percent as pullbacks.

“The duration of this ‘noise’ likely indicates that the ultimate decline will be contained, unless new worries emerge or existing concerns become increasingly intensified in the coming weeks or months,” Stovall wrote yesterday. “The market will eventually bottom in a ‘pullback’ mode.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

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JPMorgan Said to Consider Clawing Back Bonuses After Loss

By Laura Marcinek, Donal Griffin and Dawn Kopecki - May 16, 2012 2:42 AM GMT+0700

JPMorgan Chase & Co. (JPM), the biggest U.S. bank, will consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew after her unit had a $2 billion trading loss, said two senior executives.

The lender can cancel stock awards or demand they be repaid if an employee “engages in conduct that causes material financial or reputational harm,” JPMorgan said in its annual proxy statement. The company will claw back pay if it’s appropriate, said one of the executives, who asked not to be identified because no decisions have been made.

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The JP Morgan Chase & Co headquarters in New York. Photographer: Emmanuel Dunand/AFP/Getty Images

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May 15 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner, Sheila Bair, former chairman of the Federal Deposit Insurance Corporation, and Richard Bove, an analyst at Rochdale Securities, offer their views on JPMorgan Chase & Co.'s $2 billion trading loss and Chief Executive Officer Jamie Dimon. This report also contains comments from U.S. Republican Senators Bob Corker of Tennessee and Rob Portman of Ohio; Amar Bhide, a professor at Tufts University; Sarat Sethi, a principal and portfolio manager at Douglas C. Lane & Associates; Paul Miller, an analyst at FBR Capital Markets Corp.; Simon Johnson, a professor at the Massachusetts Institute of Technology, and Lisa Lindsley, director of capital strategies at the American Federation of State, County and Municipal Employees. (Source: Bloomberg)

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May 15 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner talks about JPMorgan Chase & Co.'s $2 billion trading loss, financial regulation and fiscal debt. He speaks at the Peter G. Peterson Foundation's 2012 Fiscal Summit in Washington. (Source: Bloomberg)

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May 15 (Bloomberg) -- Richard Bove, an analyst at Rochdale Securities, talks about the outlook for JPMorgan Chase & Co. and the firm's $2 billion trading loss. Bove speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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May 14 (Bloomberg) -- Todd Hagerman, an analyst at Sterne Agee & Leach Inc., talks about JPMorgan Chase & Co.'s $2 billion trading loss and the possible impact on the financial industry. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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May 14 (Bloomberg) -- Bloomberg Government economic analysts Nela Richardson and Chris Payne discuss JPMorgan Chase & Co.'s $2 billion trading loss and the regulatory system. (Source: Bloomberg)

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May 15 (Bloomberg) -- Bloomberg's Erik Schatzker reports that JPMorgan CEO Jamie Dimon will face shareholders today at the company's annual meeting in Tampa, Florida. JPMorgan Chase & Co. will consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew after her unit had a $2 billion trading loss, said two senior executives. He speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)

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May 15 (Bloomberg) -- Sarat Sethi, a principal and portfolio manager at Douglas C. Lane & Associates, talks about JPMorgan Chase & Co.'s $2 billion trading loss and the role of Chief Executive Officer Jamie Dimon. Sethi speaks with Stephanie Ruhle, Scarlet Fu, Sara Eisen and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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May 15 (Bloomberg) -- Paul Miller, an analyst at FBR Capital Markets, talks about JPMorgan Chase & Co. and the outlook for the bank following its $2 billion trading loss. Miller speaks with Deirdre Bolton on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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May 15 (Bloomberg) -- JPMorgan Chase & Co., facing investor ire after posting a $2 billion trading loss, may consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew, said two senior executives. (Source: Bloomberg)

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May 15 (Bloomberg) -- Brian Foran, an analyst at Nomura Securities International Inc., talks about the outlook for JPMorgan Chase & Co. and the banking industry. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

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Ina Drew, former chief investment officer of JPMorgan Chase & Co. Source: JPMorgan Chase & Co. via Bloomberg

The incident, which led to Drew’s retirement yesterday, may test JPMorgan’s clawback policy amid mounting investor criticism over Wall Street pay practices and as regulators investigate the trades. Chief Executive Officer Jamie Dimon said the strategy that led to the loss was “poorly executed and poorly monitored” and that it gave ammunition to proponents of stricter bank regulation.

“The political environment is very sensitive right now and this couldn’t have come at a worse time,” said David Knutson, a credit analyst in Chicago with Legal & General Investment Management, which owns JPMorgan debt. “I can see how pressure from regulators could result in JPMorgan attempting to exercise a clawback.”

‘Every Single Dollar’

New York City Comptroller John Liu said that JPMorgan should tell shareholders it will “aggressively claw back every single dollar possible from the executives responsible for the $2 billion loss,” according to a statement today.

“Doing so will send a clear message to senior management that anyone who recklessly gambles with shareholder money is jeopardizing long-term value and will be held accountable,” Liu said in the statement.

JPMorgan’s executive-compensation plan won the approval of 91.5 percent of shareholders today in a non-binding advisory vote at the company’s annual meeting in Tampa, Florida.

Drew, 55, received $14 million in compensation for 2011, including $7.1 million in restricted stock, a $4.7 million cash bonus and $750,000 salary, according to the proxy. Her pay over the past two years averaged $1.2 million a month. After three decades at the company, she was replaced yesterday by Matt Zames, co-head of global fixed income at the investment bank.

‘Gross Negligence’

Stock awards can be canceled or repaid if a member of the operating committee, which included Drew, “improperly or with gross negligence” fails to identify risk, JPMorgan said in the proxy. Committee members also can have 2012 stock awards canceled if Dimon deems their performance was “unsatisfactory for a sustained period of time,” according to the proxy.

Drew didn’t respond to phone and e-mail messages seeking comment. Jennifer Zuccarelli, a bank spokeswoman, declined to comment.

JPMorgan’s stock declined 9.3 percent the day after Dimon disclosed the loss on May 10, the biggest drop since August. The shares slid 3.2 percent yesterday to $35.79 in New York.

The trading loss has hurt JPMorgan’s reputation, Dimon said in a conference call last week. It “puts egg on our face and we deserve any criticism we get,” he said.

More shareholders are voting to reject compensation packages for senior executives as Europe’s sovereign-debt crisis and stagnating economic growth squeeze bank profits. Citigroup Inc. shareholders last month rejected compensation for executives including CEO Vikram Pandit in a non-binding vote after the New York-based firm’s shares plunged 44 percent last year.

Morgan Stanley

Morgan Stanley (MS), owner of the world’s biggest brokerage, instituted clawbacks in 2009 that allow the New York-based bank to take back compensation if an employee’s conduct hurts the firm in the years after it was paid. UBS AG (UBSN) said in 2010 that its net loss a year earlier would trigger a bonus clawback for the first time, depriving bankers of 300 million Swiss francs ($321 million) of deferred pay they were due to receive.

JPMorgan will have to weigh the trading loss against Drew’s tenure at the firm and any profit her unit generated before this year, said Paul Sorbera, president of executive search firm Alliance Consulting in New York.

The bank’s corporate division, under which she reported, earned a peak of $3.7 billion in 2009. The bank doesn’t break out results for the chief investment office. Dimon, upon announcing Drew’s retirement, called her a “great partner” who has made “vast contributions” to the firm, according to a statement yesterday.

“There are so many things she’s entitled to in the organization -- as a long-term employee, as a managing director, as woman in the organization -- they want to take care of her, they want to do the right thing by her,” Sorbera said. “The bank will be in a position where they probably could go one way or the other.”

To contact the reporters on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net; Donal Griffin in New York at dgriffin10@bloomberg.net; Dawn Kopecki in New York at dkopecki@bloomberg.net

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

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Apple Said to Plan Thinner Mac Laptops With Intel Chips

By Adam Satariano, Ian King and Peter Burrows - May 16, 2012 1:44 AM GMT+0700

Apple Inc. (AAPL) is preparing a new lineup of thinner MacBook laptops running on more powerful chips made by Intel Corp. (INTC), people with knowledge of the plans said.

The MacBook Pro machines, to be unveiled at Apple’s annual developers conference starting June 11, also will feature high- definition screens like those on the iPhone and iPad, as well as flash memory to cut startup times and extend battery life, said the people, who asked not to be identified because the plans haven’t been made public.

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The current generation Apple MacBook Pro. Source: Apple Inc.

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May 14 (Bloomberg) -- Apple Inc. is preparing a new lineup of thinner MacBook laptops running on more powerful chips made by Intel Corp., people with knowledge of the plans said. Bloomberg's Adam Satariano reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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A boy tries Apple Inc. MacBook Pro computers. Photographer: Tomohiro Ohsumi/Bloomberg

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Two Apple Inc. MacBook Pro laptop computers, seen on Jan. 25, 2010. The new Apple laptops to be unveiled at Apple's annual developers conference starting June 11, 2012, will run on Intel’s new processors, code-named Ivy Bridge, and will have a slimmed-down body design from the current 0.95-inch thickness, said people with knowledge of the plans. Photographer: Daniel Acker/Bloomberg

Apple’s Mac sales are growing faster than the personal- computer market, benefiting from the popularity of its mobile devices. Since 2007, when the iPhone was introduced, Apple’s Mac sales have more than doubled, reaching $21.8 billion last year. As Apple’s share has grown, competitors such as Hewlett-Packard Co. (HPQ), Dell Inc. (DELL) and Samsung Electronics Co. have followed suit in making thinner, aluminum laptops that start up more quickly.

Apple’s new laptops will run on Intel’s new processors, code-named Ivy Bridge, and will have a slimmed-down body design from the current 0.95-inch (2.4 centimeter) thickness, the people said. Apple’s other lines of computers -- MacBook Air laptops and iMac desktops -- also may receive an overhaul next month to add high-definition screens and Intel’s stronger chip, according to a report today from Ben Reitzes, an analyst at Barclays Capital Inc.

Bill Evans, a spokesman for Cupertino, California-based Apple, declined to comment, while Chuck Mulloy, a spokesman for Intel, referred questions to Apple.

Apple shares rose 0.2 percent to $559.23 at 2:42 p.m. New York time. The stock had gained 38 percent this year through yesterday.

Mountain Lion

At the developer conference, Apple also may announce the debut date of its latest Mac operating system, called Mountain Lion, one person said. The new software, which Apple previewed in February, more closely aligns Mac computers with its mobile devices -- the operating system includes many elements of the iOS mobile software that runs the iPhone and iPad. One feature lets users send a text message to an iPhone from a Mac.

Mountain Lion also expands Apple’s iCloud digital-storage service to let Mac users access and share saved documents across the Internet. It also allows users to create and access reminders and notes, and receive notifications, on all their Apple devices. Another new iCloud feature will make it easier to share photographs, the Wall Street Journal reported yesterday.

The emphasis on the Mac at next month’s conference suggests that Apple will concentrate on the iPhone later in the year. Analysts, including Gene Munster of Piper Jaffray Cos., have predicted Apple will release its next smartphone model by October. The iPhone is Apple’s top-selling product, accounting for 58 percent of its revenue in the most recent quarter.

New Mobile Software

Apple is expected to preview some of the new mobile software features that will be part of that release at the developer conference in San Francisco.

While Mac computers account for just 13 percent of Apple’s sales and are no longer the main sales engine for the company, the machines are gaining market share. Apple controlled 11.6 percent of the PC market in the U.S in the fourth quarter of last year, compared to 6.1 percent in the same period of 2007, according to Gartner Inc.

Apple last redesigned the body of the MacBook Pro in 2008. The devices have more memory and stronger graphical and computing capabilities than MacBook Air laptops. The MacBook Pro now costs $1,200 to $2,500, depending on the size and components.

Apple is looking beyond Intel for chips to power its iPhone and iPad. While Intel provides the semiconductors for Apple’s new laptops, the chipmaker is facing questions from investors about why it hasn’t made better inroads into the market for components that power phones and laptops. Instead of using the Santa Clara, California-based company for chips inside its mobile devices, Apple uses competing components based on the designs from ARM Holdings Plc. (ARM)

Intel’s Goals

At an investor meeting last week, Intel Chief Executive Officer Paul Otellini was asked whether the company was at risk of losing the Mac business altogether if Apple moves its computers to an ARM design. He said Intel’s plan is to improve the performance of its designs to the point where Apple will use its products more widely.

Intel, the world’s largest chipmaker, also is helping boost Apple’s competitors in the PC market, who are seeking to respond to the popularity of Apple’s iPads and laptops by introducing their own new products. Intel has been promoting a new type of thinner laptop, called an Ultrabook, that uses its components. Ultrabooks are less than an inch thick, have days of battery life, start up in seconds and sell for less than $1,000. The features are similar to those of Apple’s MacBook Air.

Intel also has been working closely with Microsoft Corp. (MSFT) on the release of its Windows 8 operating system, which was designed to work on both PCs and mobile devices. The Ivy Bridge processor design is made with an updated manufacturing process, resulting in more powerful chips that use less battery life.

The technology website 9to5Mac.com reported earlier yesterday that Apple is working on a thinner version of the MacBook Pro with a sharper screen.

To contact Bloomberg News staff for this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net; Peter Burrows in San Francisco at pburrows@bloomberg.net

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

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