By Adam Haigh
Sept. 22 (Bloomberg) -- European stocks fell as higher oil prices weighed on retailers and carmakers, overshadowing plans by the U.S. government to buy $700 billion of bank assets. U.S. futures pared losses after Mitsubishi UFJ Financial Group Inc. said it will buy as much as 20 percent of Morgan Stanley.
Carrefour SA, the world's second-largest retailer, slid 3 percent and General Motors Corp. dropped 3.7 percent in Europe as crude climbed for a fourth day. Morgan Stanley soared 9 percent in early New York trading.
Europe's Dow Jones Stoxx 600 Index slipped 0.2 percent to 277.67 as of 1:46 p.m. in London, following its steepest advance on record Sept. 19. Futures on the Standard & Poor's 500 Index fell 0.1 percent after the measure's biggest two-day gain since the aftermath of the 1987 crash. The MSCI Asia Pacific Index added 2.5 percent.
``After such a strong rebound, it's normal that we're taking the time to digest what happened,'' Salah Seddik, a fund manager at Richelieu Finance in Paris, which oversees about $6.2 billion, said in a Bloomberg Television interview. ``The main worries are the return of investors' confidence and the capacity to refinance.''
Ryanair Holdings Plc retreated 3.6 percent as oil rallied and Compass Group Plc, the largest catering company, lost 2.4 percent after Credit Suisse Group AG lowered its recommendation on the shares. Commodity producers including BHP Billiton Ltd. and BG Group Plc limited losses in the Stoxx 600 on higher metals and crude prices.
Short-Selling Ban
The MSCI World Index climbed 0.7 percent, extending its three-day gain to 8.7 percent after the U.S. government announced plans to halt the credit-market seizure and American, British, German, French, Dutch, Belgian, Australian and Taiwanese regulators cracked down on short selling.
The measure for 23 developed countries retreated 7.2 percent in the first three days of trading last week after Lehman Brothers Holdings Inc. and American International Group Inc. collapsed and Merrill Lynch & Co. was forced to sell itself to Bank of America Corp.
Paulson's rescue plan would allow the government to buy a variety of mortgage-related securities to relieve a freeze in credit markets. Democrats, who control both houses of the U.S. Congress, pledged not to slow down its passage or tie it to an economic stimulus plan.
The Federal Reserve yesterday approved bids by Goldman Sachs Group Inc. and Morgan Stanley to become banks, ending the ascendancy of the securities firms 75 years after Congress separated them from deposit-taking lenders.
`Floor'
For Barclays Global Investors' Russ Koesterich, Paulson's move to shift the burden of subprime-mortgage related losses to taxpayers ``put a floor under the equity markets.'' James Swanson, who oversees about $200 billion at MFS Investment Management in Boston, says the S&P 500 may rise 15 percent after the Treasury immunized investors from ``the brunt of the economic cycle.''
BaFin, the German financial regulator, banned short positions in companies including Deutsche Bank AG and Commerzbank AG for the rest of the year. France's Autorite des Marches Financiers and Belgium's Banking, Finance and Insurance Commission imposed a three-month ban for Fortis, Dexia SA, Credit Agricole SA and other firms.
The dollar dropped against the yen for the first time in three days on concern Paulson's plan to allow the government to buy a variety of mortgage-related securities to relieve a freeze in credit markets will widen the country's budget deficit. U.S. Treasuries rose on speculation the Fed will cut interest rates to support the rescue plan.
Carrefour, GM
Carrefour declined 3 percent to 33.08 euros. GM, the biggest U.S. carmaker, retreated 3.7 percent to $12.60 in Germany. Ryanair, Europe's largest discount airline, dropped 3.6 percent to 2.62 euros.
Crude for October delivery climbed as much as $3.25, or 3.1 percent, to $107.80 a barrel in electronic trading on the New York Mercantile Exchange.
Earnings for companies in the Stoxx 600 are forecast to fall 3.3 percent this year, compared with a 2.1 decline predicted at the end of August, according to Bloomberg data. Profits at European travel and leisure companies may slide more than 11 percent this year and in 2009, according to the estimates.
Morgan Stanley soared 9 percent to $29.70 in pre-market trading in New York. Mitsubishi said it is undergoing due diligence and will decide on a price after this.
Metal Prices
Compass lost 2.4 percent to 338.75 pence after Credit Suisse downgraded the shares to ``neutral'' from ``outperform,'' citing a slowdown in European consumer spending.
BHP, the world's biggest mining company, rallied 2.9 percent to 1,489 pence. BG gained 1.6 percent to 1,143 pence. Copper, lead, nickel, and tin prices rose on the London Metal Exchange.
Mitsubishi UFJ, Japan's biggest bank, advanced 4.2 percent to 898 yen, the highest since Aug. 6.
Goldman lost 1 percent to $128.50 and Morgan Stanley added 2 percent to $27.75 in New York pre-market trading. The announcement paves the way for the two New York-based firms, both of which will now be regulated by the Fed, to build their deposit base, potentially through acquisitions.
Wolseley Plc, the biggest distributor of plumbing and heating equipment, soared 9.8 percent to 454.5 pence after saying it is ``confident'' it won't break banking covenants and doesn't need to sell shares to raise cash or renegotiate loan terms.
Cap Gemini, Microsoft
A Rightmove Plc survey showed U.K. house prices declined for a fourth month in September as the global credit crisis intensified, locking out homebuyers and forcing the sale of the country's biggest mortgage lender.
Cap Gemini SA advanced 1.1 percent to 35.57 euros after Deutsche Bank raised its recommendation on shares of Europe's biggest computer-services company to ``buy'' from ``hold.''
Microsoft Corp., the biggest software maker, rallied 4.7 percent to $26.33 in early New York trading after saying it plans to buy back as much as $40 billion in stock and raised its dividend.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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Monday, September 22, 2008
U.S. Stocks Find `Floor' With Paulson, Short-Sale Ban
By Chris Nagi
Sept. 22 (Bloomberg) -- The biggest declines in the U.S. stock market in seven years may slow after the government said it would bail out the nation's banks and crack down on speculators battering financial companies.
Shifting the burden of subprime-mortgage related losses to taxpayers ``put a floor under the equity markets,'' said Russ Koesterich, who helps manage $2 trillion at Barclays Global Investors. James Swanson, who oversees about $200 billion at MFS Investment Management in Boston, says the Standard & Poor's 500 Index may rise 15 percent after the Treasury immunized investors from ``the brunt of the economic cycle.''
Treasury Secretary Henry Paulson's plan to spend as much as $700 billion on soured mortgage securities buoyed stocks and the S&P 500 ended the week almost unchanged after suffering the steepest plunge since the Sept. 11 terrorist attacks. Any gains may be limited because the U.S. economy is slowing and profits at companies in the index are forecast to fall 5 percent this quarter, according to analyst estimates compiled by Bloomberg.
``The short reaction to all this is it's an unambiguous positive for stocks,'' said Koesterich, Barclays's head of investment strategy in San Francisco. ``The bad news is we're likely to see continued volatility given the slow growth in the economy, and investors should not look forward to a '90s style rebound.''
Profit Declines
A decline in third-quarter profits would make this streak of decreases the longest since the period ended in 2002, the year the benchmark index for American equities completed a 49 percent plunge from its March 2000 record. The S&P 500 has lost 20 percent since its all-time high reached in October 2007.
U.S. stocks dropped, with the S&P 500 falling 0.9 percent to 1,243.43 at 9:40 a.m. in New York. The index ended last week at 1,255.08, up 0.3 percent from the Sept. 12 close.
The rout that began when New York-based Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. was sold to Charlotte, North Carolina-based Bank of America Corp. and the U.S. took control of American International Group Inc. ended with the biggest two-day jump in the S&P 500 in 21 years.
Paulson is seeking power from Congress to buy $700 billion in toxic assets from financial firms. The government also proposed setting up a fund to guarantee as much as $400 billion of money-market mutual funds.
`I'm Hopeful'
``This puts an end to the seemingly never-ending write- offs,'' said Bill Stone, the chief investment strategist at PNC Wealth Management in Philadelphia who oversees $66 billion. He predicts investors will sell Treasury bonds to raise cash for equity investments. ``I'm hopeful we've put in the lows.''
Price swings in S&P 500 stocks fell from a six-year high following Paulson's proposal and the Securities and Exchange Commission's ban on trades that profit when bank stocks fall.
The Chicago Board Options Exchange Volatility Index rose as much as 64 percent last week as the collapse of Lehman, once the fourth-largest U.S. investment bank, and New York-based AIG, the biggest U.S. insurer, spurred concern speculators manipulated financial shares to benefit from bearish bets.
The SEC barred so-called short selling on about 800 financial companies on Sept. 18, stiffened rules aimed at abusive trading and will require hedge funds to provide sworn statements about their biggest holdings. Investors profit from short sales by borrowing stock and selling it in the hopes of buying the shares later after the price falls.
Regulation Goes Global
Regulators in the U.K., Germany, France and Belgium echoed the SEC's move with similar bans. Australia restricted short selling unless they included hedging positions placed before today. Taiwan prohibited short selling of 150 stocks.
Goldman Sachs Group Inc. and Morgan Stanley, Wall Street's last independent brokerages, surged 20 percent after the SEC announced the policy, rebounding from record declines earlier in the week. Companies covered by the ban rose 12 percent, three times the S&P 500's advance, according to data compiled by Bloomberg.
``The main problem lately has been a psychological one as much as a fundamental one,'' said John Wilson, Memphis-based co- director of equity strategy at Morgan Keegan, which manages $120 billion. ``We got over the last few days the kind of catalysts we needed. The real question is, Where does this euphoria take us?''
The S&P 500 traded 26 percent below its October record before rebounding. Analysts at Societe Generale wrote Sept. 16 that the gauge must fall to 1,080, or 14 percent below its level now, to match the average retreat of past bear markets.
National Debt Grows
Barclays's Koesterich says U.S. returns will be limited because the government may have to spend almost $1 trillion to buy subprime-infected mortgage loans and take over AIG, Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, the nation's biggest providers of home-loan financing.
The plan, along with the money-market guarantees, would raise the ceiling on the national debt and cost as much as the combined annual budgets of the U.S. Departments of Defense, Education and Health and Human Services.
``We really do have a growing fiscal problem,'' he said. ``We had it before this event started, this has only exacerbated it. It's particularly problematic because we're dealing with this during a time of heightened inflation.''
Consumer prices in the U.S. are forecast to rise 4.5 percent this year, according to the median estimate of 76 economists surveyed by Bloomberg before last week's measures were announced. That would be the fastest since 1990, the midpoint of the U.S. savings and loan crisis that cost taxpayers $124 billion, according to the Federal Deposit Insurance Corp.
Cheap Valuations
The S&P 500 retreated 6.6 percent in 1990, the first annual drop since 1981.
U.S. economic growth may slip to 1.7 percent this year and 1.5 percent in 2009, the slowest since the last recession in 2001 and its aftermath in 2002, according to the median forecast of 80 economists compiled by Bloomberg.
Cheap valuations relative to other investments will keep stocks from falling further, says MFS's Swanson. Profits at S&P 500 companies may climb 64 percent in the next 12 months to $84.72 a share, pushing its ``earnings yield'' to 6.7 percent of the index's price, according to estimates compiled by Bloomberg. That's 76 percent above interest payments on 10-year U.S. Treasuries, the biggest advantage in more than 20 years.
``We've pretty much gotten valuations to the point where all this liquidity around the world is going to go to the equity market,'' said Swanson, chief investment strategist at MFS. ``We've nationalized a big chunk of the American economy. We've decided we don't want to bear the brunt of economic cycle.''
To contact the reporter on this story: Chris Nagi in New York at chrisnagi@bloomberg.net.
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Barrick Gold, Penn West May Advance; Celestica May Decline
By John Kipphoff
Sept. 22 (Bloomberg) -- Barrick Gold Corp. and Agrium Inc. may rise, based on bids on the Toronto Stock Exchange, after prices of bullion, corn and crude oil gained, leading a rally in commodities.
Penn West Energy Trust may also gain, bids indicated, on oil's gain and on a report in the Globe and Mail that the opposition Liberal Party will promise to repeal a tax on income trusts as part of its platform for the Oct. 14 federal election. Celestica Inc. may fall on a downgrade from CIBC World Markets.
The Standard & Poor's/TSX Composite Index gained 7 percent to 12,912.99 on Sept. 19 in Toronto, after the U.S. government proposed a rescue plan to buy illiquid assets from banks and banned short selling of financial shares. Canadian authorities followed suit late Friday, also prohibiting bets against financial companies. Friday's advance was the S&P/TSX biggest since Oct. 21, 1987, two days after the ``Black Monday'' crash.
Barrick Gold, the largest bullion producer in the world, may rise C$1.46 to C$37.96, bids already submitted in Toronto showed.
Agrium, North America's third-largest fertilizer maker, may gain 88 cents to C$89.88, bids indicated.
Penn West, Canada's second-largest energy trust by market value, may add 60 cents to C$27.50, bids suggested.
Gold, copper and price for other metals increased as the U.S. dollar declined, increasing the allure of dollar- denominated commmodities as a hedge against further declines in the currency.
Crude oil rose for a fourth day on speculation a proposed $700 billion U.S. government rescue plan for the finance industry may shore up demand.
Celestica may fall 27 cents to C$7.60, based on bids. The maker of electronic parts was cut to ``sector perform'' from ``sector outperform'' at CIBC World Markets.
U.S. stock futures gained as Microsoft Corp., Hewlett- Packard Co. and Nike Inc. announced plans to buy back shares, overshadowing the biggest four-day gain in oil prices since 2000.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
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Sept. 22 (Bloomberg) -- Barrick Gold Corp. and Agrium Inc. may rise, based on bids on the Toronto Stock Exchange, after prices of bullion, corn and crude oil gained, leading a rally in commodities.
Penn West Energy Trust may also gain, bids indicated, on oil's gain and on a report in the Globe and Mail that the opposition Liberal Party will promise to repeal a tax on income trusts as part of its platform for the Oct. 14 federal election. Celestica Inc. may fall on a downgrade from CIBC World Markets.
The Standard & Poor's/TSX Composite Index gained 7 percent to 12,912.99 on Sept. 19 in Toronto, after the U.S. government proposed a rescue plan to buy illiquid assets from banks and banned short selling of financial shares. Canadian authorities followed suit late Friday, also prohibiting bets against financial companies. Friday's advance was the S&P/TSX biggest since Oct. 21, 1987, two days after the ``Black Monday'' crash.
Barrick Gold, the largest bullion producer in the world, may rise C$1.46 to C$37.96, bids already submitted in Toronto showed.
Agrium, North America's third-largest fertilizer maker, may gain 88 cents to C$89.88, bids indicated.
Penn West, Canada's second-largest energy trust by market value, may add 60 cents to C$27.50, bids suggested.
Gold, copper and price for other metals increased as the U.S. dollar declined, increasing the allure of dollar- denominated commmodities as a hedge against further declines in the currency.
Crude oil rose for a fourth day on speculation a proposed $700 billion U.S. government rescue plan for the finance industry may shore up demand.
Celestica may fall 27 cents to C$7.60, based on bids. The maker of electronic parts was cut to ``sector perform'' from ``sector outperform'' at CIBC World Markets.
U.S. stock futures gained as Microsoft Corp., Hewlett- Packard Co. and Nike Inc. announced plans to buy back shares, overshadowing the biggest four-day gain in oil prices since 2000.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
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Eletrobras, Cosan, Telmex Internacional: Latin Equity Preview
By William Freebairn and Alexander Ragir
Sept. 22 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index rose 10 percent on Sept. 19 to 3,500.27. Markets in Chile were closed Sept. 18 and 19 for holidays.
Brazil
Cosan SA Industria & Comercio (CSAN3 BS): The world's biggest sugarcane producer plans to sell 880 million reais ($488.9 million) of voting shares, the company said in a filing to Brazil's market regulator CVM late Sept. 19. Cosan rose 9.2 percent to 16.22 reais.
Centrais Eletricas Brasileiras SA (ELET6 BS): Brazil's state-controlled power holding company asked the World Bank for a $500 million loan to prepare the company to list so-called Level 2 American depositary receipts, Chief Executive Jose Antonio Muniz Lopes told O Estado de S. Paulo. Eletrobras rose 13 percent to 23.30 reais.
Petroleo Brasileiro SA (PETR4 BS): Brazil may let its citizens use money from individual worker-compensation funds to buy stock in Petrobras as part of a plan to raise cash for new offshore oil development, the Folha de S. Paulo newspaper said. Also crude oil rose for a fourth day on speculation a proposed $700 billion U.S. government rescue plan for the finance industry may shore up demand. Petrobras rose 8.6 percent to 34.98 reais.
Randon Participacoes SA (RAPT4 BS): Brazil's biggest auto- parts maker may rise after saying last week revenue increased 19 percent in August from a year earlier, Banco Fator Corretora said. Growth is related to investments that have reduced production bottlenecks, analysts Jacqueline Lison and Marcello Gunther wrote in a research note e-mailed Sept. 19. Randon rose 6.3 percent to 12.49 reais.
Colombia
Banco Popular SA (POPULA CB): The Colombian bank will pay a dividend of 84 centavos a share in the first week of every month from October to March, Popular said in a filing with regulators Sept. 19. Popular was unchanged at 260 pesos when it last traded Sept. 17.
Mexico
Promotora y Operadora de Infraestructura SAB (PINFRA* MM): The Mexican construction company and operator of toll highways said it bought 1.7 million of its own shares. Mexico City-based Pinfra did not disclose the price it paid, in an e-mail statement to the Mexican Stock Exchange Sept. 19. Pinfra fell 0.7 percent to 19.80 pesos.
Telmex Internacional SAB (TELINTL MM): The Latin American cable television and long-distance company received a ``buy'' rating in new coverage from analysts at IXE Grupo Financiero and Banif Securities. Changes to Brazilian law may permit Telmex Internacional to take control of cable company Net Servicos de Comunicacao SA, boosting net income by 18 percent, analysts Manuel Jimenez of IXE and Alex Pardellas of Banif wrote in a joint report e-mailed Sept. 19. Telmex Internacional rose 5.4 percent to 6.66 pesos.
To contact the reporter on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net.
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Sept. 22 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.
The MSCI Latin America Index rose 10 percent on Sept. 19 to 3,500.27. Markets in Chile were closed Sept. 18 and 19 for holidays.
Brazil
Cosan SA Industria & Comercio (CSAN3 BS): The world's biggest sugarcane producer plans to sell 880 million reais ($488.9 million) of voting shares, the company said in a filing to Brazil's market regulator CVM late Sept. 19. Cosan rose 9.2 percent to 16.22 reais.
Centrais Eletricas Brasileiras SA (ELET6 BS): Brazil's state-controlled power holding company asked the World Bank for a $500 million loan to prepare the company to list so-called Level 2 American depositary receipts, Chief Executive Jose Antonio Muniz Lopes told O Estado de S. Paulo. Eletrobras rose 13 percent to 23.30 reais.
Petroleo Brasileiro SA (PETR4 BS): Brazil may let its citizens use money from individual worker-compensation funds to buy stock in Petrobras as part of a plan to raise cash for new offshore oil development, the Folha de S. Paulo newspaper said. Also crude oil rose for a fourth day on speculation a proposed $700 billion U.S. government rescue plan for the finance industry may shore up demand. Petrobras rose 8.6 percent to 34.98 reais.
Randon Participacoes SA (RAPT4 BS): Brazil's biggest auto- parts maker may rise after saying last week revenue increased 19 percent in August from a year earlier, Banco Fator Corretora said. Growth is related to investments that have reduced production bottlenecks, analysts Jacqueline Lison and Marcello Gunther wrote in a research note e-mailed Sept. 19. Randon rose 6.3 percent to 12.49 reais.
Colombia
Banco Popular SA (POPULA CB): The Colombian bank will pay a dividend of 84 centavos a share in the first week of every month from October to March, Popular said in a filing with regulators Sept. 19. Popular was unchanged at 260 pesos when it last traded Sept. 17.
Mexico
Promotora y Operadora de Infraestructura SAB (PINFRA* MM): The Mexican construction company and operator of toll highways said it bought 1.7 million of its own shares. Mexico City-based Pinfra did not disclose the price it paid, in an e-mail statement to the Mexican Stock Exchange Sept. 19. Pinfra fell 0.7 percent to 19.80 pesos.
Telmex Internacional SAB (TELINTL MM): The Latin American cable television and long-distance company received a ``buy'' rating in new coverage from analysts at IXE Grupo Financiero and Banif Securities. Changes to Brazilian law may permit Telmex Internacional to take control of cable company Net Servicos de Comunicacao SA, boosting net income by 18 percent, analysts Manuel Jimenez of IXE and Alex Pardellas of Banif wrote in a joint report e-mailed Sept. 19. Telmex Internacional rose 5.4 percent to 6.66 pesos.
To contact the reporter on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net.
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Ambac, Goldman Sachs, MBIA, Morgan Stanley: U.S. Equity Preview
By Elizabeth Campbell and Whitney Kisling
Sept. 22 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 8:30 a.m. in New York, unless otherwise specified.
Gold producers gained as the precious metal increased 2.8 percent to $888.70 in New York. Harmony Gold Mining Co. (HMY US) rose 4.8 percent to $9.83. Randgold Resources Ltd. (GOLD US) jumped 3.8 percent to $41.50. Gold Fields Ltd. (GFI US) gained 5.4 percent to $9.02. Goldcorp Inc. (GG US) added 2.5 percent to $33. BHP Billiton Ltd. (BHP US) rose 1.8 percent to $63.90.
Ambac Financial Group Inc. (ABK US) fell 9.6 percent to $3.50. The firm said it may delay the start of Connie Lee, a new municipal bond insurer, after Moody's Investors Service said it's considering cutting the company's financial-strength rating by several grades.
MBIA Inc. (MBI US), its competitor, fell 8.4 percent to $11.80.
Gardner Denver Inc. (GDI US) fell 3.9 percent to $39. The maker of Oberdorfer pumps and Champion air compressors said its efforts to reduce overhead costs and streamline operations will hurt earnings in the third and fourth quarters.
Goldman Sachs Group Inc. (GS US) retreated 2.2 percent to $127. Goldman Sachs and Morgan Stanley (MS US), Wall Street's last remaining independent securities firms, got Federal Reserve approval to become banks after concluding there is no future in remaining investment banks now that investors have determined the model is broken.
Lloyds TSB Group Plc (LYG US) fell 6.3 percent to $21.10. The bank that bought U.K. mortgage lender HBOS Plc last week was cut to ``underweight'' from ``neutral'' and had its price estimate cut to 180 pence from 480 pence at JPMorgan Chase & Co. The bank may need to raise 16 billion pounds, the analysts led by Carla Antunes da Silva wrote.
Morgan Stanley (MS US) rose 9.2 percent to $29.70. Mitsubishi UFJ Financial Group Inc. (MTU US) agreed to buy up to 20 percent of the company that converted into a bank from a securities firm yesterday. Mitsubishi UFJ American depositary receipts rose 7.2 percent to $8.36 on Sept. 19.
Pioneer Natural Resources Co. (PXD US) rose 2.6 percent to $53.87 in extended trading Sept. 19. The oil and gas producer and Amphenol Corp. (APH US), a maker of fiber-optic cables, will be added to the Standard & Poor's 500 Index, S&P said. Amphenol rose 3.7 percent to $46.57 in late trading Sept. 19.
Sovereign Bancorp Inc. (SOV US) fell 6.6 percent to $9.55. The second-largest U.S. savings and loan was cut to ``underperform'' from ``market perform'' by Friedman, Billings, Ramsey & Co. analyst James Abbott.
To contact the reporters on this story: Elizabeth Campbell in New York ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
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Sept. 22 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 8:30 a.m. in New York, unless otherwise specified.
Gold producers gained as the precious metal increased 2.8 percent to $888.70 in New York. Harmony Gold Mining Co. (HMY US) rose 4.8 percent to $9.83. Randgold Resources Ltd. (GOLD US) jumped 3.8 percent to $41.50. Gold Fields Ltd. (GFI US) gained 5.4 percent to $9.02. Goldcorp Inc. (GG US) added 2.5 percent to $33. BHP Billiton Ltd. (BHP US) rose 1.8 percent to $63.90.
Ambac Financial Group Inc. (ABK US) fell 9.6 percent to $3.50. The firm said it may delay the start of Connie Lee, a new municipal bond insurer, after Moody's Investors Service said it's considering cutting the company's financial-strength rating by several grades.
MBIA Inc. (MBI US), its competitor, fell 8.4 percent to $11.80.
Gardner Denver Inc. (GDI US) fell 3.9 percent to $39. The maker of Oberdorfer pumps and Champion air compressors said its efforts to reduce overhead costs and streamline operations will hurt earnings in the third and fourth quarters.
Goldman Sachs Group Inc. (GS US) retreated 2.2 percent to $127. Goldman Sachs and Morgan Stanley (MS US), Wall Street's last remaining independent securities firms, got Federal Reserve approval to become banks after concluding there is no future in remaining investment banks now that investors have determined the model is broken.
Lloyds TSB Group Plc (LYG US) fell 6.3 percent to $21.10. The bank that bought U.K. mortgage lender HBOS Plc last week was cut to ``underweight'' from ``neutral'' and had its price estimate cut to 180 pence from 480 pence at JPMorgan Chase & Co. The bank may need to raise 16 billion pounds, the analysts led by Carla Antunes da Silva wrote.
Morgan Stanley (MS US) rose 9.2 percent to $29.70. Mitsubishi UFJ Financial Group Inc. (MTU US) agreed to buy up to 20 percent of the company that converted into a bank from a securities firm yesterday. Mitsubishi UFJ American depositary receipts rose 7.2 percent to $8.36 on Sept. 19.
Pioneer Natural Resources Co. (PXD US) rose 2.6 percent to $53.87 in extended trading Sept. 19. The oil and gas producer and Amphenol Corp. (APH US), a maker of fiber-optic cables, will be added to the Standard & Poor's 500 Index, S&P said. Amphenol rose 3.7 percent to $46.57 in late trading Sept. 19.
Sovereign Bancorp Inc. (SOV US) fell 6.6 percent to $9.55. The second-largest U.S. savings and loan was cut to ``underperform'' from ``market perform'' by Friedman, Billings, Ramsey & Co. analyst James Abbott.
To contact the reporters on this story: Elizabeth Campbell in New York ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.
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U.S. Stock Futures Advance on Microsoft, HP, Nike Buyback Plans
By Sarah Jones and Elizabeth Stanton
Sept. 22 (Bloomberg) -- U.S. stock futures gained as Microsoft Corp., Hewlett-Packard Co. and Nike Inc. announced plans to buy back shares, overshadowing the biggest four-day gain in oil prices since 2000.
Microsoft rallied 5 percent, Hewlett-Packard gained 1.6 percent and Nike added almost 3 percent after the three companies said they plan to repurchase a total of as much as $53 billion in stock. Morgan Stanley rallied 15 percent after Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by assets, said it will purchase as much as 20 percent of the securities firm.
Futures indicated the Standard & Poor's 500 Index may gain for a third day after the government's plan to purge banks of toxic assets and crack down on speculators who bet against shares of financial companies sent the benchmark for American equities to its biggest two-day advance since the aftermath of the 1987 crash.
S&P 500 futures expiring in December added 2.6, or 0.2 percent, to 1,248.6 at 9:15 a.m. in New York after falling as much as 1.8 percent. Dow Jones Industrial Average futures rose 16 to 11,375, and Nasdaq-100 Index futures increased 9.75, or 0.6 percent, to 1,749.25.
Europe's Dow Jones Stoxx 600 Index lost 0.1 percent, following its steepest advance on record Sept. 19. The MSCI Asia Pacific Index added 2.5 percent, bringing its two-day rally to 8.2 percent.
For Barclays Global Investors' Russ Koesterich, Treasury Secretary Henry Paulson's move to shift the burden of subprime- mortgage related losses to taxpayers ``put a floor under the equity markets.'' James Swanson, who oversees about $200 billion at MFS Investment Management in Boston, says the S&P 500 may rise 15 percent after the Treasury immunized investors from ``the brunt of the economic cycle.''
Two-Day Rally
The S&P 500 climbed 8.5 percent in the last two days of trading after a rout that began when Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. was sold to Bank of America Corp. and the U.S. took control of American International Group Inc.
The Federal Reserve yesterday approved bids by Goldman Sachs Group Inc. and Morgan Stanley to become banks, ending the ascendancy of the securities firms 75 years after Congress separated them from deposit-taking lenders.
More than $500 billion in losses at banks stemming from the first nationwide drop in home prices since the 1930s has pushed the S&P 500 15 percent lower in 2008. U.S. economic growth may slip to 1.7 percent this year and 1.5 percent in 2009, the slowest since the last recession in 2001 and its aftermath in 2002, according to the median of 80 economist forecasts compiled by Bloomberg.
Bailout Widened
The Bush administration widened the scope of its plan to include assets other than mortgage-related securities. The change to potentially allow purchases of instruments such as car loans and credit-card debt may force an increase in the size of the package as the legislation proceeds through Congress.
Morgan Stanley rallied $4.10 to $31.31. Mitsubishi UFJ will buy 10 percent to 20 percent of the securities firm and decide on a price after conducting due diligence, the Japanese bank said in a statement.
Goldman added 3.8 percent to $134.79. The announcement that the two firms will become banks paves the way for Goldman and Morgan Stanley, both of which will now be regulated by the Fed, to build their deposit base, potentially through acquisitions. That will allow them to rely more heavily on deposits from retail customers instead of using borrowed money -- the leverage that led to the undoing of Lehman and Bear Stearns Cos.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.
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Sept. 22 (Bloomberg) -- U.S. stock futures gained as Microsoft Corp., Hewlett-Packard Co. and Nike Inc. announced plans to buy back shares, overshadowing the biggest four-day gain in oil prices since 2000.
Microsoft rallied 5 percent, Hewlett-Packard gained 1.6 percent and Nike added almost 3 percent after the three companies said they plan to repurchase a total of as much as $53 billion in stock. Morgan Stanley rallied 15 percent after Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by assets, said it will purchase as much as 20 percent of the securities firm.
Futures indicated the Standard & Poor's 500 Index may gain for a third day after the government's plan to purge banks of toxic assets and crack down on speculators who bet against shares of financial companies sent the benchmark for American equities to its biggest two-day advance since the aftermath of the 1987 crash.
S&P 500 futures expiring in December added 2.6, or 0.2 percent, to 1,248.6 at 9:15 a.m. in New York after falling as much as 1.8 percent. Dow Jones Industrial Average futures rose 16 to 11,375, and Nasdaq-100 Index futures increased 9.75, or 0.6 percent, to 1,749.25.
Europe's Dow Jones Stoxx 600 Index lost 0.1 percent, following its steepest advance on record Sept. 19. The MSCI Asia Pacific Index added 2.5 percent, bringing its two-day rally to 8.2 percent.
For Barclays Global Investors' Russ Koesterich, Treasury Secretary Henry Paulson's move to shift the burden of subprime- mortgage related losses to taxpayers ``put a floor under the equity markets.'' James Swanson, who oversees about $200 billion at MFS Investment Management in Boston, says the S&P 500 may rise 15 percent after the Treasury immunized investors from ``the brunt of the economic cycle.''
Two-Day Rally
The S&P 500 climbed 8.5 percent in the last two days of trading after a rout that began when Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. was sold to Bank of America Corp. and the U.S. took control of American International Group Inc.
The Federal Reserve yesterday approved bids by Goldman Sachs Group Inc. and Morgan Stanley to become banks, ending the ascendancy of the securities firms 75 years after Congress separated them from deposit-taking lenders.
More than $500 billion in losses at banks stemming from the first nationwide drop in home prices since the 1930s has pushed the S&P 500 15 percent lower in 2008. U.S. economic growth may slip to 1.7 percent this year and 1.5 percent in 2009, the slowest since the last recession in 2001 and its aftermath in 2002, according to the median of 80 economist forecasts compiled by Bloomberg.
Bailout Widened
The Bush administration widened the scope of its plan to include assets other than mortgage-related securities. The change to potentially allow purchases of instruments such as car loans and credit-card debt may force an increase in the size of the package as the legislation proceeds through Congress.
Morgan Stanley rallied $4.10 to $31.31. Mitsubishi UFJ will buy 10 percent to 20 percent of the securities firm and decide on a price after conducting due diligence, the Japanese bank said in a statement.
Goldman added 3.8 percent to $134.79. The announcement that the two firms will become banks paves the way for Goldman and Morgan Stanley, both of which will now be regulated by the Fed, to build their deposit base, potentially through acquisitions. That will allow them to rely more heavily on deposits from retail customers instead of using borrowed money -- the leverage that led to the undoing of Lehman and Bear Stearns Cos.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.
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Nikkei up 1.4 pct on hopes for U.S. rescue plan
*Nikkei rises 1.4 percent to one-week closing high
*Gains limited as investors wait to see US rescue plan impact
*Energy shares climb after oil prices up sharply (Adds stocks and comments)
By Taiga Uranaka
TOKYO, Sept 22 (Reuters) - The Nikkei average climbed 1.4 percent to a one-week closing high on Monday, buoyed by financial shares on hopes for the $700 billion bank bailout proposed by Washington over the weekend to tackle the financial crisis.
Nomura Holdings (8604.T: Quote, Profile, Research, Stock Buzz) shot up more than 9 percent on news that it has bid for both the Asian and European operations of Lehman Brothers LEHMQ.PK, while GS Yuasa Corp (6674.T: Quote, Profile, Research, Stock Buzz) plunged after the car battery maker said it had found improper accounting at a subsidiary.
The market pared some earlier gains as investors locked in profits from recent sharp rises before a national holiday in Japan on Tuesday.
Market participants said the steep recovery seen in late March following the near collapse of Bear Stearns is unlikely this time around given the sheer scale of damage and rescue efforts on Wall Street.
"The storm has subsided. Now, we need to see how much damage was done," said Hitoshi Yamamoto, CEO of Fortis Asset Management Japan.
"I think all the measures the U.S. government and the Fed can take have been put on the table, and investors are waiting to see their effectiveness as well as the burden on the U.S. economy," he said.
The Bush administration and Congress ramped up talks on Sunday on an unprecedented $700 billion bank bailout as they battled the clock to prevent further financial market turmoil that risks pushing the economy into a deep and damaging recession. [ID:nN21470189]
The benchmark Nikkei average .N225 ended up 169.73 points at 12,090.59. The Nikkei ended Friday up 3.8 percent, though it shed 2.4 percent for the week.
The broader Topix gained 1.7 percent to 1,168.69.
Masayoshi Okamoto, head of dealing at Jujiya Securities, said the market's recovery might be held in check as investors turn their attention to Japanese corporate earnings, with firms expected to give updates on their full-year outlooks when they report first-half results.
"The market's rebound could be smaller than expected if many companies cut their outlooks amid the global economic slowdown, and I think such a view was already reflected in today's market," he said.
BANKS UP
Japan's top lender Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) climbed 4.2 percent to 898 yen and No.2 Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) gained 2.9 percent to 460,000 yen.
Nomura jumped 9.6 percent to 1,430 yen after two financial industry sources told Reuters that Japan's largest brokerage has bid for both the Asian and European operations of U.S. investment bank Lehman Brothers LEHMQ.PK. [ID:nT112507]
Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) jumped 5.1 percent to 3,500 yen, becoming the top positive contributor to the Nikkei, followed by industrial robot maker Fanuc Ltd (6954.T: Quote, Profile, Research, Stock Buzz), which rose 3.6 percent to 8,640 yen.
GS Yuasa plunged 19 percent, or by the daily limit of 100 yen, to 427 yen after the car battery maker said it had found improper accounting at a subsidiary, which had booked fictitious transactions.
The firm said it had found some 7.5 billion yen ($70 million) so far in questionable bookings in its accounts receivable.
Inpex Holdings (1605.T: Quote, Profile, Research, Stock Buzz) and other energy-linked stocks surged after U.S. crude oil steadied above $104 a barrel on Monday after surging more than 6 percent on Friday. [O/R]
Oil and gas field developer Inpex shot up 9.7 percent to 1.04 million yen.
Trade was light on the Tokyo exchange's first section, with 2 billion shares changing hands, below last week's daily average of 2.5 billion.
Advancing stocks outpaced declining ones by 846 to 779. (Editing by Chris Gallagher)
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Copper rallies to one-week high as dollar slips
* Copper rises 2 pct on weak dollar, lower stocks
* China Jan-Aug copper imports down 20 pct
* Chalco says confident about Chinese aluminium consumption (Recasts, adds comments, changes dateline, pvs SHANGHAI)
By Agnieszka Flak
LONDON, Sept 22 (Reuters) - Copper rallied to a one-week high on Monday as the dollar fell against the yen and the euro and as stocks fell in Asian warehouses, suggesting a pick-up of demand in China. Copper for delivery in three months MCU3 on the London Metal Exchange was up $140 at $7,180 a tonne by 0925 GMT from Friday's close of $7,060 after hitting a nine-month low of $6,625 earlier that week.
Earlier the metal used widely in the power and construction industries hit $7,215 a tonne, the highest since Sept. 15.
"The dollar has weakened and that has helped to support base metals," said Calyon analyst Robin Bhar.
The dollar fell against the yen and the euro as investors awaited details of a planned $700 billion U.S. bailout of bad mortgage debt. [USD/]
Markets around the world got a boost late last week after news of what is likely the biggest bailout in U.S. history, capping the historic week in which Lehman Brothers (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) filed for bankruptcy protection. [ID:nSP4331]
Bhar also said a 3,100 tonnes fall in LME copper inventories suggested demand from China, the world's largest importer and consumer of the red metal, was starting to pick up.
Stocks have gone out primarily from the Gwangyang and Busan warehouses in Korea.
"These are all places close to China. Metals are clearly being shipped to China as demand is reviving after the summer and the Olympic slowdown," he said.
CHINESE DEMAND
China's copper imports have fallen since the start of the year due to soft demand, rising domestic output and high prices.
China's imports of refined copper fell slightly on the year to 87,168 tonnes in August, and also were down from 88,075 tonnes in July, the General Administration of Customs said on Monday. [ID:nBJB000489]
But China's implied copper demand rose 1.2 percent in August from July, Reuters calculations show, despite fears of a widespread slowdown due to factory closures for the Olympic games. [ID:nSP24116]
The discount for Shanghai's third-month copper futures versus the London benchmark, including China's 17 percent value-added tax, widened to 2,504 yuan from 1,312 yuan on Friday.
The difference flipped into a premium on Sept 9 for the first time since January.
"The positive arbitrage between the Shanghai prices and the LME is being taken advantage of," said Barclays Capital analyst Gayle Berry.
"We saw draws in LME stocks last weekend, and then again today. Whether or not that is an indication of a pick up in consumer buying does remain to be seen yet."
China's top aluminium producer Chalco (2600.HK: Quote, Profile, Research, Stock Buzz) said it planned to maintain its output despite low prices that may force higher-cost smelters in China to cut production [ID:nHKG284857]
Chinese primary aluminium prices have dropped by a 10th this month to about 15,600 yuan per tonne because of growing stocks, weaker demand and the global financial crisis.
Aluminium MAL3 gained $14 to $2,549 from Friday's close of $2,535 and recovering from an eight-month low of $2,490 reached earlier last week.
Lead MPB3 was up $5 at $1,905 and tin MSN3 $400 higher at $17,300.
Australia cut its estimates of annual zinc and nickel output on Monday, citing falling prices and a domestic energy crisis, but kept a bullish outlook for its giant mining industry despite fears of global recession. [ID:nSYD369086]
Nickel MNI3 was trading up $380 at $17,280 and zinc MZN3 at $1,807.50 from Friday's close of $1,758.
(Editing by Christopher Johnson)
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Ruling party picks outspoken Aso to be Japan PM
(For more on Japan's leadership race click [ID:nT114525])
* Japan ruling party picks former foreign minister Aso as PM
* Aso vows resolute fight in looming general election
* Parliament votes Wednesday to confirm ruling party decision (Adds fresh analyst comments and reaction from voters)
By Chisa Fujioka
TOKYO, Sept 22 (Reuters) - Outspoken nationalist Taro Aso, an advocate of spending and tax cuts to boost the economy, won the race on Monday to become Japan's next prime minister and swiftly set his sights on an election expected within months.
Aso, a former foreign minister, clinched the ruling Liberal Democratic Party leadership vote by a landslide to take over from Yasuo Fukuda, who quit this month just as the economy flirts with recession and faces further damage from turmoil on Wall Street.
"As I travelled around the regions, I became even more convinced that the economy was in a recession," Aso, 68, told a news conference after winning the leadership, adding his priority was to revitalise the economy before tackling a huge public debt.
However, Aso may have little time to revive the world's second-biggest economy if, as media and pundits predict, he calls an early poll for parliament's powerful lower house.
"Standing here, I feel that this is Taro Aso's destiny," Aso, the grandson of a premier, told LDP members after winning 351 of 525 valid votes cast by party lawmakers and chapters.
"But the LDP, as the government party, must resolutely fight the (opposition) Democratic Party in the next election, and only when we have won that election will I have fulfilled my destiny.
Aso, set to be voted prime minister on Wednesday by virtue of the ruling bloc's majority in parliament's powerful lower house, will be Japan's third prime minister in a year. Both his predecessors quit in the face of a deadlocked parliament, where the opposition controls the upper house and can stall bills.
"It's going to be a weak government and there is going to be an election and there will probably be a weak government as a result of the election," said Columbia University professor Gerry Curtis. "Japan will not be in a position to play a more dynamic role in world affairs. It will be more and more inward-looking."
The ruling bloc is expected to lose in the next election the two-thirds lower house majority that allows it to override upper house vetoes, and analysts say a clear victory for either side camp may prove elusive, leaving more policy paralysis.
TAPPING RIVALS, EYEING POLLS
One voter predicted that, with many longing for change, the long-ruling LDP could lose its grip on power altogether.
"The Liberal Democratic Party is already finished regardless of who got elected," said 52-year-old advertising producer Youji Nomura. "The LDP is completely corrupt, and I don't think the new prime minister would last even a year, no matter who it is."
Aso, who wants tax cuts for businesses and stock investors, has said Japan's goal of balancing its budget by 2012 could be put off, a stance that has alarmed fiscal reformers in his party but charmed local party machines looking toward the election.
Aso won five times the votes of his nearest rival to clinch the top post on his fourth attempt to lead the party.
Economics Minister Kaoru Yosano, a fiscal conservative, was a distant second with 66 votes and former defence minister Yuriko Koike came in third with 46 votes for her bid to become Japan's first female prime minister.
Japanese media said Aso was considering keeping Yosano in a new cabinet to be formed on Wednesday as well as tapping another rival, former defence minister Shigeru Ishiba, in an effort to unify the party, which is suffering from dismal voter ratings.
Though inclined to view China's rising clout with concern, Aso is likely to stick to Fukuda's diplomatic stance that stresses Japan's tight security alliance with the United States and stable ties with China, which have warmed after years of strains due bitter wartime memories and regional rivalry.
He is likely to stay away from Tokyo's Yasukuni Shrine, seen by Beijing as a symbol of Japan's past military aggression, although analysts say his tendency toward verbal gaffes that offend at home and abroad could prove a problem.
Aso, a dapper dresser and fan of manga comic books popular with young people, regularly tops voter surveys for next prime minister, making him the LDP's natural choice to lead it in a general election that must be held by next September.
Japanese media say an election could be called for as early as Oct. 26 to make the most of any bounce in public support, although Aso has said his priority was to pass an extra budget to support the economy.
The new leader would be seeking a mandate to break a deadlock in parliament, but with both sides facing a tough battle, speculation is rife over a possible rejigging of party allegiances, although an attempt by Fukuda and main opposition Democratic Party leader Ichiro Ozawa to form a "grand coalition" flopped last year. (Additional reporting by Yoko Kubota, Isabel Reynolds, Naoto Okumura and Linda Sieg; Editing by Rodney Joyce)
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FACTBOX: Key issues in South Africa
(Reuters) - Kgalema Motlanthe, the deputy leader of ruling ANC, will be appointed South Africa's caretaker leader following the resignation of Thabo Mbeki, party sources said on Monday.
Following are some of the main issues facing South Africa.
LEADERSHIP
The ANC'S removal of Mbeki exposed deep divisions in the party and raised questions about its future. Party leader Jacob Zuma is expected to become president in an election in 2009. Foreign investors hope he does not bow to pressure from his left-leaning allies in trade unions and the Communist party to steer away from pro-business policies.
ECONOMY
South Africa has enjoyed its longest period of economic expansion over the past nine years, with annual growth averaging 5 percent over the past four years. But growth is expected to slow in 2008 because of cooling consumer demand on higher interest rates, slower world growth and electricity shortages.
Inflation has surged to record levels, driven largely by rising international food and fuel costs, but is likely to ease in 2009. This would enable a new government to begin cutting interest rates from current 5-year highs.
CRIME
South Africa has some of the highest rates of murder and rape in the world. Opposition groups and the media have accused the government of failing to curb crime. The government has said it will boost spending on the criminal justice system to combat crime and to try to make the streets safe before the country hosts the 2010 soccer World Cup.
AIDS
Some 5.5 million people (or about 12 percent of a population of 47 million) have HIV. There are 500,000 new infections every year, including 100,000 children, and each year 400,000 people die from the virus, UNICEF has said. South African officials, including Mbeki, have infuriated AIDS activists by questioning accepted science around the virus.
ENERGY
South Africa, which relies on coal for the lion's share of its power generation, is in the grip of an electricity supply crunch, the result of years of underspending by the government on generation capacity.
The power shortage in Africa's biggest economy led to nationwide power cuts in January. This affected large aluminium smelters and forced gold and platinum mines to shut down operations for five days, pushing the precious metal prices to records and undermining South Africa's economic outlook.
Mines, a cornerstone of the economy, have since then seen production fall after operating with reduced power supplies since state-owned utility Eskom asked users to cut demand by 10 percent each. Eskom generates about 95 percent of South Africa's electricity and has rationed power to big users since the crisis.
South Africa's National Treasury has budgeted 60 billion rand over the next three years to help Eskom pay for its 343-billion rand, five-year expansion program. Eskom plans to raise the rest from government, capital markets and development financiers, such as the World Bank.
POVERTY
Millions of black South Africans still live in grim townships lacking basic services. A government report in July said economic equalities remain after the fall of apartheid although fewer people are still caught in grinding poverty.
The Presidency's Development Indicators 2008 report said the standard of living for a large number of people had improved between 2000 and 2007, with incomes improving across all sectors. But the fruits of economic expansion were not enjoyed by all South Africans, the report said.
BLACK EMPOWERMENT
The government has said it is committed to Black Economic Empowerment (BEE), an affirmative-action program aimed at bringing blacks into the mainstream economy, which is still dominated by whites 14 years after the end of apartheid. Critics say it has made a small minority of black businessmen rich rather than helping poor blacks.
LAND
Disproportionate ownership of land by the white minority has made land reform a leading issue. Mbeki's government vowed to put a third of all arable land in black hands by 2014, but more than 90 percent is still owned by the white minority.
(Reporting by Michael Georgy, James Macharia and Gordon Bell; Editing by Timothy Heritage)
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COLUMN-Socialism U.S.-style and Ronald Reagan: Bernd Debusmann
(Bernd Debusmann is a Reuters columnist. The opinions expressed are his own)
By Bernd Debusmann
WASHINGTON, Sept 22 (Reuters) - "Government is not the solution to our problem; government is the problem...It is my intention to curb the size and influence of the federal establishment."
That statement, in Ronald Reagan's inaugural address on January 20, 1981, was the opening shot in what became known as the Reagan Revolution: small government, low taxes, de-regulation, a belief that the markets know best. The revolution's spirit shone through the 2008 platform of the Republican Party, presented at its convention early in September.
"We do not support government bailouts of private institutions," it said. "Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself. We believe in the free market as the best tool to sustained prosperity and opportunity for all."
The final bell for that philosophy may have tolled on September 16, when the government nationalised the American International Group (AIG), the world's biggest insurance company, as part of a series of interventions to prop up the U.S. financial system and housing market at a cost, so far, of around $1 trillion to cure an American financial plague that is spreading to the rest of the world.
All contrary to the dogma of the Republicans who occupied the White House for 28 of the past 40 years. But in September, pragmatism trumped ideology and the world's leading capitalist country acted much like some of the European countries American free marketeers have often derided as "nanny states."
Irony of history: As the American crisis neared a crescendo, the European Union's economic and monetary affairs commissioner, Joaquin Almunia, warned that Europe should not employ "financial socialism" by bailing out failing companies. "Socialists like me, we are against financial socialism."
At the bottom of the U.S. crisis are deadbeat mortgages masquerading as sophisticated financial instruments, mortgage-backed securities, that were insured, in theory, by so-called credit default swaps. The assumption was that housing prices would continue to rise. Trouble started when the housing bubble burst.
"The paradox is that this whole mess was created by a bunch of zealots who believed in the laissez faire ideology of free markets unbound by proper rules, regulation and supervision," said Nouriel Roubini, an economics professor at New York University and head of RGE Monitor, an economic information service. Roubini sees the United States turning into "the USSRA, the United Socialist State Republic of America."
Those leading the effort to keep the U.S. financial system afloat, above all Treasury Secretary Hank Paulson and Federal Reserve chief Ben Bernanke, have studiously avoided the word "nationalisation." (After all, this is an un-American concept, the sort of thing that happens in places like Venezuela, where Hugo Chavez nationalises companies in the name of his 21st century socialism).
"Socialism, 21st century style," was the headline on a blog by Floyd Norris, the widely-read chief financial reporter of the New York Times. Others were more subdued. "Corporate welfare" was the term used by Columbia University professor Joseph Stiglitz, winner of the 2001 Nobel Prize in economics.
AMNESIA AND "NATION OF WHINERS"
The crisis, the worst since the Great Depression, has inflicted amnesia on some of Reagan's ideological heirs. They include John McCain, the Republican presidential candidate who supported de-regulation and endlessly proclaimed himself "a proud foot soldier in the Reagan revolution" when he courted the party base in the primary contest for the nomination.
McCain's initial reaction to the unfolding crisis was a call for the establishment of a commission to find out what led to the crisis, a classic Washington insider's response. He could have started by asking Phil Gramm, until recently his economic guru and once thought a leading contender for the post of Treasury Secretary if McCain won the election.
Gramm lost his position as economic advisor to the McCain election campaign after describing the United States as "a nation of whiners" suffering from "mental recession" - not the kind of remark likely to win votes from citizens grappling with financial hardship.
Gramm was the driving force behind the two pieces of legislation at the bottom of the crisis -- the repeal, in 1999, of the 1933 Glass-Steagall Act which had created a firewall between commercial and investment banking; and the Commodities Futures Modernization Act of 2000. The way the latter passed was extraordinary: 262 pages of dense language slipped into an 11,000-page omnibus bill on the Friday before the Christmas recess.
"The act freed complex derivatives from any regulation," said Michael Greenberger, who served in the Commodities and Futures Trading commission in the late 1990s. "It set the stage for the present mess and the problem is, no one knows how many of these instruments are still out there or who holds them."
Congress this week is scheduled to discuss an unprecedented $700 billion plan, submitted by the Bush administration, to use taxpayer money to buy up a mountain of bad debt. No one knows whether this will be enough and most Americans doubt that Washington leaders will be able to solve the crisis, according to a Zogby poll taken after the plan was announced.
The survey, of likely voters in November's elections, said 83% wanted those responsible for the practices that led to the crisis to be held criminally responsible.
That's not part of the plan. (You can contact the author at Debusmann@Reuters.com) (Editing by Sean Maguire)
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Legg Mason looking to go private - NY Post
Sept 22 (Reuters) - Asset manager Legg Mason Inc (LM.N: Quote, Profile, Research, Stock Buzz) is looking to go private, The New York Post reported, citing people familiar with the situation.
Legg Mason had been weighing a move that could see one or more private-equity investors, including Kohlberg Kravis Roberts & Co [KKR.UL], buy it and spin off most of its numerous funds, the paper said citing the people.
The sources also told the paper that obstacles may emerge to frustrate such a deal.
A Legg Mason spokesperson told the paper it was "categorically untrue" the company was in talks surrounding going private. A Kohlberg Kravis Roberts spokesperson declined to comment to the paper.
Legg Mason and Kohlberg Kravis Roberts could not be immediately reached for comment by Reuters. (Reporting by Ajay Kamalakaran in Bangalore; editing by Sue Thomas)
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Gold climbs on weaker dollar, financial outlook
By Jan Harvey
LONDON (Reuters) - Gold climbed in Europe on Monday, reversing earlier losses in Asia, as the dollar weakened and fears spread that a $700 billion U.S. plan to stabilize the financial sector may not succeed.
PGMs also bounced, supported by the weaker dollar and gains in gold, and as traders speculated recent losses in metals may have been overdone.
Spot gold was trading at $872.50/874.50 an ounce at 5:40 a.m. EDT, up from $871.15 an ounce at the nominal New York close on Friday. Gold prices soared nearly 15 percent last week as fears over the outlook for the financial sector exploded.
"The U.S. plan has calmed nerves, but I don't think people believe it will take out all the problems yet," said Standard Bank analyst Walter de Wet. "Details are still sketchy. We need to see when and how the plan the will be implemented."
"The dollar is still fairly weak compared to where it was two weeks ago, so that also supports gold," he added.
Global stocks made their biggest gains in 20 years after the government announced a plan to tackle the worst financial crisis since the Great Depression.
Gold prices slipped in Asia as some of the safe haven buying that propelled the metal higher last week evaporated. But they recovered as caution crept back into the markets.
The precious metal rose as equity markets fell in Europe as investors awaited details of the plan, with uncertainty boosting gold's appeal as a haven from risk.
"While the U.S. Treasury's rescue package may be enough to calm some of the froth in the U.S. and global financial markets, the collapse, or near-collapse, of two major institutions and the domino effect this had on the financial sector may again draw more investor diversification towards gold as a safe-haven asset," said James Moore, an analyst at TheBullionDesk.com.
DOLLAR SLIPS
Weakness in the dollar is supporting gains in gold, which is often bought as an alternative investment to the U.S. currency.
The dollar fell more than 1 percent against the yen and 0.6 percent against the euro as traders worried about the financial crisis.
Investor demand for gold is firm. the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, said its gold holdings rose 24.5 tonnes or 3.7 percent on Sept 19.
The trust's gold holdings have risen nearly 11 percent from a week ago.
Among other precious metals, silver tracked gold higher, rising to $12.83/12.90 an ounce from $12.55 at the nominal New York close on Friday.
Platinum meanwhile rose more than 4 percent, and palladium more than 5 percent, as the weaker dollar supported buying and traders judged the metals' recent slide had been overdone.
Platinum is down 18 percent and palladium down 15 percent from a month ago.
"Some buying into the market is to be expected," said de Wet. "If platinum falls below $1,050, some of the producers start looking at the longer term viability of the PGMs."
"Of course, as the dollar weakens it is supportive," he added.
Citi Investment Research cut its 2008 and 2009 price forecasts for the platinum group metals on Monday -- though it expects them to recover in the short term -- citing lacklustre outlook for car demand and a firmer dollar.
Spot platinum was at $1,190/1,210 an ounce against $1,134.50 at the nominal New York close on Friday, while palladium was at $242.50/250.50, from $231 on Friday.
(Reporting by Jan Harvey; editing by Christopher Johnson)
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HK shares end up 1.6 pct; energy,shipping stocks soar
* Shares volatile on worries over Wall St performance
* CNOOC jumps 6.0 percent on higher oil prices
* Chinese financials extend rally on aid package (Updates to close)
By Parvathy Ullatil
HONG KONG, Sept 22 (Reuters) - Hong Kong shares added 1.6 percent on Monday after surging 9.6 percent in the previous session, as investors cheered government intervention in the U.S. and Chinese markets, but stocks ended below the day's highs.
Energy shares outperformed with Asia's largest oil & gas producer PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz) gaining 5.1 percent, and offshore oil producer CNOOC (0883.HK: Quote, Profile, Research, Stock Buzz) surged 6 percent after crude oil inched up after posting its biggest three-day rally in a decade last week.
Other commodity-linked stocks also enjoyed strong gains with China Cosco (1919.HK: Quote, Profile, Research, Stock Buzz), the nation's largest shipping conglomerate, soaring 11.7 percent and China Shipping Development (1138.HK: Quote, Profile, Research, Stock Buzz) pole-vaulting 15.3 percent following a four-day rally on the global freight index .BADI.
"Sentiment has improved tremendously since last week and we already have some rumours swirling about another round of market boosting, policy easing measures from China fairly soon," said Peter Pak, vice president with BOCI Research.
The benchmark Hang Seng Index .HSI closed up 304.5 points at 19,632.2 in a volatile session which saw the index drop to 19,137.7 soon after opening 2.8 percent higher.
The index posted its biggest one-day jump in nine months on Friday, soaring 9.6 percent.
U.S. stock futures edged lower on Monday, suggesting stocks may cut some of Friday's massive gains as investors remain uncertain on the working of the proposed $700 billion bank bailout and its long-term implications. [ID:nN21510221]
"Even with the $700 billion bailout package, there are worries that the U.S. government may not be able to prevent a likely recession in the economy," said Castor Pang, strategist with Sun Hung Kai Financial.
On Monday, mainboard turnover fell to HK$91.6 billion ($11.7 billion) from HK$124.6 billion on Friday.
The China Enterprises Index .HSCE of top locally listed mainland Chinese firms rose 2.5 percent.
Chinese financials extended Friday's sharp rally after the mainland government said it would rope in sovereign wealth funds to buy shares in listed companies, including its leading banks, and stabilise the mainland markets.
Top lender ICBC (1398.HK: Quote, Profile, Research, Stock Buzz) gained 3.9 percent while smaller rival China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz) climbed 0.6 percent.
China's largest insurer China Life (2628.HK: Quote, Profile, Research, Stock Buzz) advanced 4.5 percent tracking the 7.8 percent surge on the Shanghai bourse .SSEC where it holds substantial investments. Ping An Insurance (2318.HK: Quote, Profile, Research, Stock Buzz) followed suit with a 6.2 percent jump.
China Citic Bank bucked the trend among mainland financial companies to drop 5.6 percent on last week's reports that its parent CITIC Group was in deal discussions with Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz).
Mainland property companies rose sharply on hopes more relaxed economic policies in China would stall sliding property prices in major cities.
China Overseas Land Investment (0688.HK: Quote, Profile, Research, Stock Buzz) rallied 6.7 percent while Guangzhou R&F Properties (2777.HK: Quote, Profile, Research, Stock Buzz) soared 10.3 percent.
Sportswear brand Li Ning <>
"We believe that his (Tan's) resignation may increase some uncertainty. Especially given the current volatile market environment and intensifying post-Olympic competition among sporting brands, this may put further short-term negative pressure on the stock," said Caroline Li, an analyst with Goldman Sachs. (Reporting by Parvathy Ullatil; Editing by Anshuman Daga)
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FTSE falls 0.7% early on banks; commodities support
* FTSE 100 falls 0.7 pct * Banks lead losses * Commodities track firmer crude, metal prices (For a TAKE A LOOK on U.S. bailout plan, click on [ID:nN21839395])
By Dominic Lau
LONDON, Sept 22 (Reuters) - Britain's leading share index fell 0.7 percent early on Monday, led by banks as investors awaited details of a $700 billion U.S. package to rescue the sector, while firmer commodity stocks offered some support.
By 0749 GMT, the FTSE 100 .FTSE was down 38.2 points at 5,274.8, after rallying 8.8 percent on Friday -- its largest ever daily percentage gain, on hopes a U.S. government plan for toxic debt and on a ban on short-selling financial stocks.
However, the UK benchmark was still down 1.9 percent last week after Lehman Brothers (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) filed for bankruptcy protection, insurer AIG (AIG.N: Quote, Profile, Research, Stock Buzz) required a bailout from the U.S. authorities and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) took over Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz).
U.S. government officials and Congress on Sunday ramped up talks on an unprecedented $700 billion bank bailout as they battled the clock to prevent further financial market turmoil that risks hurtling the economy into a deep and damaging recession.
"We still have a long way to go because the package has got to be approved by Congress. It mainly pertains to the U.S. rather than to the UK," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.
"The U.S. authorities are trying very hard to encourage other governments throughout the world to do something similar. We will wait and see how much success they have with that," he said.
Batstone-Carr said concerns were switching to the U.S. fiscal position, with the dollar falling against the yen and the euro, and the market was watching it nervously on how the development unfolded.
Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) slipped 2.6 percent. A person familiar with the matter said the UK bank would bid for parts of Lehman Brothers' European business after buying Lehman's core U.S. broker-dealer business in a $1.75 billion deal last week. A downgrade from JPMorgan to "underweight" from "neutral" also weighed on the stock.
Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) lost 1.6 percent after the Independent on Sunday said that the lender was looking for property agents to oversee the closure of 700 high street branches once its planned takeover of HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) completes. HBOS shares were down 2.9 percent.
JPMorgan kept the UK banking sector "underweight", saying British banks had a capital gap of 38 billion pounds.
Within the UK banking sector, HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) and Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) fell 4.5 and 2 percent, respectively.
Mid-cap Bradford & Bingley (BB.L: Quote, Profile, Research, Stock Buzz) surged 8.1 percent after the Sunday Telegraph said the UK Financial Services Authority has contacted three global banks to discuss a takeover of the troubled buy-to-let lender.
JPMorgan was bearish on the stock, removing its price target and keeping its "underweight" rating. "We do not believe it is a viable standalone entity," the broker said in a note.
London Stock Exchange (LSE.L: Quote, Profile, Research, Stock Buzz) dropped 7.4 percent after the Times said Nasdaq OMX would begin limited trading in UK shares and build up over the next few weeks to challenge LSE's position.
Plumbing and heating materials distributor Wolseley (WOS.L: Quote, Profile, Research, Stock Buzz) gained 3.5 percent after it said it has no plans to raise equity or renegotiate banking covenants, although those options remain should market conditions deteriorate dramatically.
Miners rose along with higher metal prices. BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz), Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz) and Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz) added 1.8 to 3.9 percent.
Energy stocks were also in demand as crude prices CLc1 firmed above $105 a barrel. BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz), BG Group (BG.L: Quote, Profile, Research, Stock Buzz) and Cairn Energy (CNE.L: Quote, Profile, Research, Stock Buzz) advanced between 0.8 and 2.2 percent.
Among mid-caps, Yell Group (YELL.L: Quote, Profile, Research, Stock Buzz) slipped 2.5 percent after the directories company said it was suspending its dividend payments as part of a plan to reduce its debts. Carphone Warehouse (CPW.L: Quote, Profile, Research, Stock Buzz) lost 2.3 percent after the Sunday Times said the group had put forward an offer of below 450 million pounds for the British arm of Italian broadband operator Tiscali (TIS.MI: Quote, Profile, Research, Stock Buzz). (Editing by Paul Bolding)
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European shares turn positive, commodities up
FRANKFURT, Sept 22 (Reuters) - European stocks turned positive by mid-morning on Monday as commodity shares tracked higher metal and crude prices and banks rose on hopes that a U.S. financial sector package would help end a credit crisis.
At 0915 GMT, the FTSEurofirst was up 0.2 percent at 1,153.03 points after an 8.2-percent rise on Friday, its biggest one-day gain on record.
The FTSE 100 .FTSE index was up 0.15 percent, the German DAX GDAXI was 0.2 percent higher and France's CAC 40 .FCHI rose 0.7 percent.
Energy shares were higher after crude prices CLc1 gained $2.26 to $106.81 a barrel. BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) and BG (BG.L: Quote, Profile, Research, Stock Buzz) were up 1.9-2.5 percent.
Miners tracked metal prices higher with copper
(Reporting by Sarah Marsh)
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European Market Update
| Daily Forex Fundamentals | Written by Trade The News | Sep 22 08 10:15 GMT | | |
| Market digests the new era unfolding on Wall Street; USD softer on deficit concerns over financial market bailout ECONOMIC DATA (JP) August Supermarket Sales YoY: -1.0% v 0.9% prior. (HK) August CPI - Composite Index YoY% v 6.3% prior. SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUMIn equities news overnight: Zentiva [ZEN.CZ] Sanofi lifted its bid for Zentiva to CZK1,150/shr from CZK1,050/shr. || Holcim[HOLN.SZ] HOLN.SZ: EuroCement reported 6.52% stake in the company. Holcim noted that it viewed the stake as 'friendly'. || Natixis [KN.FR] French press noted that Natixis' €3.7B capital increase is close to 90% subscribed. Deutsche bank [DBK.GE] Announced capital increase plan for €2B with a 40M share issue to acquire Germany's Postbank [DPB.GE]. Yell Group [YELL.UK] Reported that its Trading was in line with forecast, however it sought to lower its debt, announced the suspension dividend. || Gas Natural [GAS.SP] Completed its sale of 15% stake in its Mexican unit to Inbursa. || Epcos [EPC.GE] TDK purchased an additional 10% stake from main shareholder for a 44% holding and declared its offer for co. as unconditional. It stated that the takeover has been assured at this time. || Salzgitter [SZG.GE] Increased stake in Norddeutsche Affinerie to 17.6%. it cited the current market conditions for raising stake Speakers: Australia's Treasury Sec Swan noted that the country is susceptible to the impact of the global financial crisis and added that the global economy is going through a difficult time, but confidence remains. || (FR) Fin Min stated that there were no plans for any intervention to back financial industry . EU's Almunia stated that risks remain for a potential global economic downturn and saw divergences in Euro economies. Financial crisis continues to unsettle markets. Euro Zone is not unaffected by global economic slowdown and financial market turmoil. || (CH) China's central bank noted in its quarterly household survey that Bankers notice risk of economic slowdown, Export orders fell 2.6% QoQ || Japan's LDP elected Taro Aso as party leader succeeding PM Fukuda. || Japan Fin Min Sugimoto stated that there was no need for Japan to set up fund like the one in U.S. at this time.. he added that Japan has not heard any US request for Japan to get involved in bailout program. Lastly he expected the US measures to have a positive impact on global economy and markets. || GE) Bundesbank noted that its GDP impacted by real economic pressures, shows signs of visable slowdown It also noted that the earnings situation to most likely to worsen for the remaining business year In Currencies: the USD was mildly softer against the majors as dealers evaluated the details emerging on the US Government bailout of its financial system. The $700B initial price tag has question the possibility that the US's AAA debt rating could come under review. EUR/USD trading at 1.4570 and GBP/USD at 1.8430, firmer by 100 pips from opening levels seen in Asia. ||Malaysia Fin Min Najib: There are no plans to adopt Ringgit currency peg. || The Indian Trade Minister stated that the recent INR decline should help India's export markets , bit noted that the current trade gap was worrisome. India still expects to achieve $200B exports during 2008. In Energy: IEA's Ramsay stated that Oil prices at current levels remained too high, but noted that supply has improved a bit since last May. OECD countries' oil demand has softened more than expected, but unable to determined if overall oil demand might fall. Non-opec oil supply remained relatively stable. IEA notd that it is monitoring the US bailout impact over oil demand closely. Stated that China is facing tough times meeting its electricity demands but it's rapidly building power capacity. Lastly Ramsay believed that the appropriate price of oil is between $20 to $100 per barrel || Reportedly Nigeria's militant group MEND announced a cease-fire agreement until further notice. However, over the weekend the goup claimed responsibility for another Shell pipeline attack. In an emailed statement MEND noted that it intended to attack Nigerian's oil infrastructure until oil exports are reduced to 'zero' || Saudi Arabia reportedly lowered its oil supplies by a marginal amount to US refiners and to oil majors since early Sept. In Fixed Income Supply: The German Finance Agency announced that it would increase Q1 Bubill amount to €7.0B, This is a total increase in the amounts of ?2.3B. || Germany confirmed its Q4 gross capital market borrowings at €30B ||Sweden's Riksbank stated that it would amend its collateral requirements for credit in RIX, effective immediately. The changes permitted the central bank increased the permitted share of covered bonds to 75%. || BoE offered $40B in overnight repos. BOE: it Allotted $26.2B overnight with a bid-to-cover ratio of 0.65 times. || ECB called for bids in $40B 1-day repo, allotted the $40B at 3.25% with a bid-to-cover of 2.05x|| SNB allotted $10 in overnight repos at 2.25% with a bid-to-cover of 1.6x. In the papers: WSJ notes that the the Federal Reserve, in an attempt to prevent the crisis on Wall Street from infecting its two premier institutions, took the extraordinary measure on Sunday night of agreeing to convert investment banks Morgan Stanley and Goldman Sachs Group Inc. into traditional bank holding companies. Article noted that with the move, Wall Street as it has long been known -- a coterie of independent brokerage firms that buy and sell securities, advise clients and are less regulated than old-fashioned banks -- will cease to exist. Wall Street's two most prestigious institutions will come under the close supervision of national bank regulators. NOTESMarkets focused on the emerging details in regards to the US financial bailout plan Dealers noting that the their attention is being drawn to the fact that the deficit would likely have to dramatically increase in size. Questions linger at this time ask to the price the US Treasury would pay determined during the auction process. In the end this could still leave banks vulnerable to more write downs and further under capitalization. Furthermore, market players noting that US growth could receive an addition soft spot and force the FED into a round of interest rate cuts. Trade The News Staff Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing. | |
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