Asia Stocks Rise a 2nd Day on U.S. Housing Data

By Jonathan Burgos and Yoshiaki Nohara - Dec 21, 2011 7:33 AM GMT+0700

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Dec. 20 (Bloomberg) -- Andrew Milligan, head of global strategy at Standard Life Investments, discusses investment themes for 2012 and the global economic outlook. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

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Dec 20 (Bloomberg) -- Scott Wren, senior equity strategist at Wells Fargo Advisors, discusses the outlook for the global economy and equity markets. Wren speaks with Lisa Murphy and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Asian stocks (MXAP) rose for a second day, with a benchmark index poised for the biggest gain in two weeks, after U.S. housing starts increased more than economists forecast, boosting the earnings outlook for Asia’s exporters.

Honda Motor Co., Japan’s second-largest carmaker by market value that gets about 44 percent of its sales from North America, advanced 2.2 percent in Tokyo. James Hardie Industries SE (JHX), a maker of building materials that counts the U.S. as its biggest market, climbed 2.6 percent in Sydney. BHP Billiton Ltd. (BHP), Australia’s No. 1 oil producer and the world’s largest miner, jumped 2.9 percent after crude and copper prices rose.

“The U.S. is showing it’s fairly robust in terms of not being dragged down to the extent of European economies, but there remain significant structural impediments,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “There will be significant gains today. The question is, given we are coming into a holiday period, how sustainable those gains are going to be over the next week or so.”

The MSCI Asia Pacific Index advanced 1.1 percent, to 112.17 as of 9:29 a.m. in Tokyo, with more than nine shares rising for each that fell. The gauge dropped to a three-week low on Dec. 19 after North Korean leader Kim Jong Il died and Fitch Ratings said it may cut the credit ratings of European nations.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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

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AT&T Has Few Weapons for Verizon Fight After T-Mobile Bid: Tech

By Scott Moritz - Dec 21, 2011 4:09 AM GMT+0700

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Dec. 20 (Bloomberg) -- Kevin Smithen, an analyst at Macquarie Securities USA Inc., talks about AT&T Inc.'s decision to end its $39 billion bid to acquire Deutsche Telekom AG's T-Mobile USA. He speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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Dec. 20 (Bloomberg) -- Rene Obermann, chief executive officer of Deutsche Telekom AG, discusses the outlook for T-Mobile USA following the collapse of the $39 billion sale of the U.S. unit to AT&T Inc. Obermann speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

The collapse of AT&T Inc. (T)’s $39 billion bid for T-Mobile USA leaves the second-largest U.S. mobile carrier with few attractive strategic options as it seeks to challenge market leader Verizon Wireless.

To accommodate data-usage growth, AT&T argued it needed the airwaves the T-Mobile USA purchase would have brought. With that option now unavailable, AT&T can either seek to buy spectrum from another company, wait for the government to auction more frequencies or try to squeeze more capacity out of its current airwaves. Each option is time-consuming, expensive and risky, said Colby Synesael, a Cowen & Co. analyst in New York.

“Without this deal, it is going to be difficult for AT&T,” Synesael said. “There’s no clear solution.”

Already criticized for dropped calls and network coverage, AT&T will face more constrained capacity than Verizon Wireless, Synesael said. That may hurt customer growth at a time when carriers are seeking to sign up lucrative smartphone and tablet subscribers who will generate revenue for years to come. Earlier this year, AT&T lost U.S. exclusivity to the Apple Inc. iPhone.

While AT&T focused on winning regulatory approval for the takeover, rivals negotiated their own airwave deals. That means several spectrum assets that would have still been available for AT&T to purchase earlier this year are now off the market.

AT&T abandoned the T-Mobile deal yesterday after a nine- month campaign that underestimated opposition from regulators. The Justice Department sued to block the deal in August, saying it would reduce competition. The purchase of T-Mobile from parent Deutsche Telekom AG (DTE) would have vaulted Dallas-based AT&T past Verizon Wireless as the biggest U.S. mobile carrier.

Wireless Airwaves

Spectrum is a term used for airwaves, licensed by the government, that carry wireless voice and data signals. Governments often sell unused or repurposed frequencies to the highest bidder, and companies also trade them.

Still, AT&T can’t rely on the U.S. government auctioning new wireless spectrum soon. While lawmakers are working on legislation that would allow carriers to bid on airwaves currently held by television broadcasters, no timing for such a sale has been set.

That leaves AT&T seeking spectrum holders willing to sell. However, any such attempts became more difficult in the past few weeks because purchases by rivals reduced the amount available.

Rivals’ Moves

On Dec. 1, wholesale wireless-service provider and spectrum-owner Clearwire Corp. (CLWR) secured its ties with partner Sprint Nextel Corp. (S) through a financing and network-sharing agreement. Sprint, the No. 3 carrier, reserved rights to bid Clearwire’s spectrum if other offers were made.

That move was followed by Verizon Wireless’s $3.6 billion deal to acquire airwaves held mostly by Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC), something Synesael called “a real coup.” Verizon Wireless, co-owned by Verizon Communications Inc. (VZ) and Vodafone Group Plc, and the cable companies will also market and sell each other’s services under the agreement.

The deal, combined with one struck with Cox Communications Inc., means Verizon Wireless will have “the highest-quality and deepest 4G spectrum position among the major U.S. carriers,” John Hodulik, a UBS AG analyst, said in a research note. It will have 56 percent more 4G spectrum than AT&T in the top 10 markets and 46 percent more in the top 100, giving it a “meaningful competitive advantage,” Hodulik said. AT&T has 100.7 million subscribers, trailing Verizon Wireless’s 107.7 million.

AT&T may now seek to buy Dish Network Corp. (DISH), a satellite-TV provider that owns spectrum, Stifel Nicolaus & Co. said today. Dish said this month it isn’t interested in selling its airwaves and that it may partner with T-Mobile if AT&T’s bid fails.

Spending Through It

AT&T, down 32 percent since a 2007 high, added 1.3 percent to $29.12 at the close in New York. It has lost almost 1 percent this year, while Verizon Communications has risen 9.6 percent.

Among AT&T’s other “very limited options” is an attempt to squeeze more performance out of its network, said Jennifer Fritzsche, an analyst at Wells Fargo & Co. (WFC) in Chicago. That investment would require building more cell-phone towers and adding more network equipment on the existing airwaves. That increases the number of antennas so more people are served through the same spectrum.

“With the lack of more spectrum, they can split cell sites and spend their way through it,” Fritzsche said.

That would require AT&T to boost spending at a time when it also has to compensate Deutsche Telekom for the deal’s demise. Deutsche Telekom has said it values the breakup package at as much as $7 billion, including lower charges for its customers to terminate calls on AT&T’s network. AT&T said yesterday it took a $4 billion pretax charge for the deal’s failure.

The solution of adding network gear would also be a shorter-term solution and not solve the longer-term spectrum crunch, Fritzsche said.

Risk to Investors

Citing the potential for increased spending, Fitch Ratings issued a report last week pointing to the possible risks to investors.

“AT&T’s need to enhance its capacity could lead to a rise in capital spending and/or the acquisition of spectrum through other transactions,” the credit-rating company said.

AT&T had more than $70 billion of debt at the end of the third quarter and capital expenditures rose to $14.7 billion in the first nine months of the year, from $13.7 billion in the same period a year earlier.

While the T-Mobile acquisition would have also represented a large investment, the deal would have included benefits such as additional customers and revenue, a network and possible cost savings from combined operations and job cuts.

Kevin Smithen, a Macquarie Capital USA Inc. analyst who downgraded AT&T to “sell” from “hold” last week on concern that the company has lost ground, said Verizon Wireless now has a spectrum advantage as customers move to faster networks.

“AT&T is running out of options,” Smithen said in a note.

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

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

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Baidu Removed From U.S. Piracy List

By Eric Martin - Dec 21, 2011 6:25 AM GMT+0700

Baidu Inc.’s settlement with record companies this year was rewarded by the U.S. government’s decision to remove it from a list of “notorious markets” that help sustain piracy and counterfeiting of intellectual property.

Baidu, China’s biggest Internet search engine, agreed in July with Universal Music Group, Warner Music Group Corp. (WMG) and Sony Corp. (6758) to pay owners of copyrighted material on a social- music platform, a deal cited by the U.S. Trade Representative yesterday in its report. The Ladies Market in Hong Kong, where customs officials acted to remove infringing goods, and the Savelovskiy Market in Moscow, where managers have stepped in to stop such sales, were also dropped from the list.

Alibaba Group Holding Ltd.’s Taobao, China’s biggest online retailer, remained among more than 30 online and physical markets worldwide identified in the report for helping the illegal sale of material protected by copyright or patents. Others include the Pirate Bay file-sharing website in Sweden and the Silk Street Market in Beijing, according to the report.

“The notorious markets highlighted in this review negatively impact legitimate businesses and industries of all sizes that rely on intellectual property to protect their goods and services,” U.S. Trade Representative Ron Kirk said yesterday in a statement. “We hope that this review will continue to yield the kind of concrete action from highlighted markets that led to the removal of several markets from the list this year.”

The trade office said in the report that the markets were identified according to information submitted in response to a September request for comments.

‘Rogue Websites’

The U.S. urged regulators overseeing the listed markets to step up efforts to combat violations.

The list “demonstrates the need for Congress to take action against rogue websites that are causing so much damage to American workers and businesses,” Michael O’Leary, senior executive vice president for global policy and external affairs at the Motion Picture Association of America, said in an e- mailed statement.

Bills under consideration in the U.S. Congress would target non-U.S. websites that distribute pirated digital content and counterfeit goods. The measures would let the Justice Department seek court orders forcing U.S.-based Internet-service providers, search engines, payment services and advertising networks to block or stop business with such sites.

The legislation is backed by the U.S. movie and music industries, which want stronger protection against piracy, and opposed by Internet executives, including Google Inc. co-founder Sergey Brin, who say the bills would threaten the technology industry and lead to online censorship.

‘Unauthorized Content’

Pirate Bay, the largest file-sharing site using BitTorrent software, “continues to facilitate the download of unauthorized content,” according to the report.

The site, based in Sweden, has said users contribute content to share with others and that there is no copyrighted material on the network.

Pirate Bay’s four founders were sentenced to one year in prison each in April 2009 by a Swedish court. Three of the men had their jail sentences reduced on appeal in November 2010.

While Taobao has made “significant efforts” to address pirated and counterfeit goods, “much remains to be done,” according to the report.

Phone calls placed to the Chinese embassy in Washington seeking comment on the report weren’t answered.

To contact the reporter on this story: Eric Martin in Washington at emartin21@bloomberg.net

To contact the editor responsible for this story: Steve Geimann at sgeimann@bloomberg.net

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HTC Patent Tweak Seen as Too Little in Phone War

By Tim Culpan - Dec 21, 2011 7:20 AM GMT+0700

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Dec. 20 (Bloomberg) -- Greg Harper, president and founder of Harpervision Associates Inc., talks about Apple Inc. winning a patent-infringement case against HTC Corp. in its efforts to prove that devices running Google Inc.'s Android operating system copy the iPhone. Harper, speaking with Scarlet Fu on Bloomberg Television's "InsideTrack," also discusses the challenges facing Research In Motion Ltd. (Source: Bloomberg)

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Dec. 20 (Bloomberg) –- Christopher Nicholson, director and lead equity analyst at Oraca Ltd., discusses Apple Inc.'s patent ruling against HTC Corp. and the implications for the U.S. smartphone market. He speaks with Owen Thomas on Bloomberg Television’s “On the Move.” (Source: Bloomberg)

HTC Corp. (2498) Asia’s second-biggest maker of smartphones, can tweak the technology in its handsets to avoid a U.S. trade agency ban. Dealing with the threat from Apple Inc. (AAPL)’s and Samsung Electronics Co. (005930)’s new devices may prove tougher.

The U.S. International Trade Commission said on Dec. 19 that beginning in April it would ban the sale of HTC phones that infringed an Apple patent on so-called data-detection, such as touching a phone number or an address in an e-mail to dial or find the address on a map. HTC responded by saying it will remove the offending features from its phones.

Keeping the handsets on the market solves HTC’s immediate challenge after becoming the top selling vendor in the U.S. Samsung’s Galaxy Nexus and Apple’s faster, ‘Siri’-enabled iPhone hit the market within the last quarter, posing a new threat to HTC’s place in the $262 billion global mobile-phone market. The Taoyuan, Taiwan-based company is forecast to post its slowest annual sales-growth and first profit decline since the 2009 economic crisis.

“Things were going great at HTC two years ago, their products were so successful and they were the hottest company in mobile phones,” said Will Stofega, an analyst at researcher IDC in Framingham, Massachusetts. “They didn’t keep the momentum going, and now we’re seeing products that haven’t wowed audiences as much.”

HTC’s revenue will climb 11 percent next year and profit will drop 6.7 percent, according to analysts’ estimates compiled by Bloomberg, marking its worst financial performance since the 2009 global economic crisis. HTC’s revenue climbed 50-fold from 2000 to 2010, according to Bloomberg data.

Sales Guidance

Stiff competition prompted HTC to cut its sales guidance for this quarter by 20 percent, last month. That announcement, on Nov. 23, prompted the stock to drop by its daily 7 percent limit in Taipei for two consecutive days, worsening the year-to- date loss to 45 percent.

At least six brokers downgraded HTC since the revised guidance, with more analysts now recommending investors sell HTC than buy for the first time in at least two years.

HTC Chief Financial Officer Winston Yung didn’t immediately return calls yesterday.

The ITC, the agency empowered to block imports of products that infringe the patents, found in Apple’s favor for one of four patents the Cupertino, California-based company alleged HTC breached. Apple’s so-called ‘647 patent covered a feature in which the phone recognizes a telephone number so it can be stored in directories or called without dialing.

Ripping Off IPhone

The result, while less than Apple sought, marks its first victory in patent cases and strengthens the argument that Google’s Android “ripped off the iPhone,” as the company’s late founder, Steve Jobs, once claimed. The ruling is the first definitive decision in the dozens of patent cases that began to proliferate last year as smartphone makers battle over a market that Strategy Analytics Inc. said increased 44 percent last quarter from a year earlier to 117 million phones worldwide.

Apple also has civil patent infringement cases against HTC and Samsung. Both Asian rivals have also filed their own retaliatory actions to the ITC and in U.S courts. The Android operating system has led the global market since last year, climbing to 48 percent of all smart phones in the second quarter of this year and ahead of 19 percent for Apple’s iOS platform, according to U.K. researcher Canalys.

Siri

Founded in 1997, HTC used its partnership with Google (GOOG) to help transform itself from a contract manufacturer of Compaq Computer Corp.’s iPaq personal digital assistant to the biggest U.S. smartphone seller for the first time last quarter. The company is chaired by Taiwan’s richest woman, Cher Wang.

Since HTC became the leader in the U.S., Apple and Samsung have replied with newer and more functional devices. Apple sold a record 4 million units of the iPhone 4S in the product’s first weekend beginning Oct. 14. The model features ‘Siri,’ a software that allows users to ask questions or issue commands by voice.

In October, Samsung unveiled the new Galaxy Nexus that runs Google’s latest Ice Cream Sandwich software, featuring face- detection technology.

HTC’s relative success in the ITC ruling -- Apple had alleged four patents were infringed, with ITC agreeing on only one --spurred the stock up its daily 7 percent limit in Taipei yesterday. Still, analysts say the company needs to change if it’s to gain on Apple and Samsung.

“They need to improve their products and the design which hasn’t changed in two years,” said Roxy Wong, who rates HTC “reduce” at Mirae Asset Securities Co. (037620) in Hong Kong. “I’d turn more positive if they became more competitive in their price-performance and design.”

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net.

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Oracle Sales, Profit Miss Estimates

By Aaron Ricadela - Dec 21, 2011 7:43 AM GMT+0700
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The Oracle Corp. campus stands in Redwood City, California. Photographer: David Paul Morris/Bloomberg

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Dec. 20 (Bloomberg) -- Richard Williams, an analyst at Cross Research, talks about Oracle Corp.'s fiscal second-quarter profit that missed analysts' estimates as customers held off on purchasing database and applications software. Williams speaks with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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Dec. 20 (Bloomberg) -- Pat Walravens, an analyst at JMP Securities LLC, talks about Oracle Corp.'s fiscal second-quarter results and the outlook for the company. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Oracle Corp. (ORCL), the world’s second- largest software maker, reported quarterly sales and profit that missed analysts’ estimates as customers held off on buying databases, applications software and computer systems.

Profit before some costs in the fiscal second quarter, which ended Nov. 30, was 54 cents a share on revenue, excluding certain items, of $8.81 billion, the company said in a statement today. On average, analysts had projected profit of 57 cents on sales of $9.23 billion, according to data compiled by Bloomberg. Oracle’s shares fell as much as 11 percent in late trading.

Oracle and other business-software companies are taking longer to close deals as companies gird for slow economic growth in the U.S. and the possibility of a recession in Europe next year, said Rick Sherlund, an analyst at Nomura Holdings Inc. New software licenses, an indicator of future revenue, rose less than Sherlund projected, and sales of hardware acquired through the Sun Microsystems deal fell more than expected.

“There’s nothing I can find in here that’s a silver lining,” said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon, who has an “outperform” rating on Oracle shares. “Every metric in here is below where consensus was. I don’t know how to sugar-coat it.”

Although sales of higher-priced hardware are accelerating, Barnicle said margins in the quarter were still below his estimate.

Third-Quarter Forecast

Sales excluding certain items in the current quarter, which ends in February, will increase 1 percent to 5 percent from a year earlier, co-president Safra Catz said on a conference call today. On average, analysts were predicting sales growth of 7.4 percent to $9.46 billion. Profit before some costs will be 55 cents to 58 cents a share, compared with analysts’ average 59- cent estimate.

Shares of Redwood City, California-based Oracle tumbled as low as $26.10 in extended trading. Before the report, they had gained 1.9 percent to $29.17 at the close in New York. The stock has declined 6.8 percent this year. The company also said it will buy back as much as $5 billion in stock.

In the second quarter, new software license sales rose 2 percent to $2.05 billion, compared with the $2.28 billion Sherlund estimated in a Dec. 15 research note.

Sales of hardware obtained in last year’s $7.4 billion acquisition of Sun Microsystems declined to $953 million, missing the $1.06 billion in revenue estimated by Sherlund.

Net income in the second quarter rose 17 percent to $2.19 billion, or 43 cents a share, Oracle said in the statement.

‘More Normal Quarter’

In the third quarter, software license sales will be unchanged to 10 percent higher, and hardware sales will decline 5 percent to 15 percent, Catz said.

“They’re spending more time with their customers talking about the economy,” Sherlund said in an interview. “As we go into next year, things will probably be a bit slower.” Sherlund is based in New York and has a “buy” rating on the shares.

Customers are adding more layers of management approval for technology purchases, which is slowing down the closing of contracts, Catz said today. In response, Oracle has added new “deal management” procedures to monitor signings and make sure the necessary approvals are in place.

“We’ll have a much more normal next quarter,” she said.

The effect of the declining value of the euro against the dollar is also hurting sales. Excluding the effect of currency fluctuations, revenue this quarter would increase 3 percent to 7 percent, Catz said.

Recession ‘Fears’

Jason Maynard, an analyst at Wells Fargo Securities, said in a Dec. 19 report that corporate spending on hardware and software may fall 8 percent in the first quarter, a steeper drop than the average 7.3 percent average decline during the quarter in the past 10 years.

“The fears of a global recession are permeating the IT decision-making process,” said Maynard, who is based in Santa Monica, California, and has an “outperform” rating on Oracle shares.

To help blunt the impact of a possible slowdown in software sales growth, Oracle Chief Executive Officer Larry Ellison has snapped up more than 70 companies in a $40 billion buying spree to add programs that help large corporations manage human resources and operations. The company has been using the acquisitions to build up its cloud business, meant to appeal to customers that are seeking to save money by letting them access computing power over the Internet.

Public Cloud

On Oct. 24, Oracle said it would buy online customer- service software company RightNow Technologies Inc. for $1.5 billion. Earlier that month, the company unveiled its Public Cloud service, which will run its database software and more than 100 new applications called Fusion in its data centers for customers.

Oracle, the largest database-software maker, is using the Sun acquisition to develop computer servers -- including high- end Exadata and Exalogic machines -- that run its database and applications. Still, its lower-priced systems using Intel Corp. chips are losing ground to competitors.

The company’s share of the worldwide server market declined to 6 percent in the third quarter, from 6.5 percent a year earlier, while Dell Inc. gained, market researcher IDC said.

Ellison told analysts on today’s call that Oracle’s hardware business could expand by the fiscal fourth quarter, which ends in May. Sales of Exadata, Exalogic and other high-end systems could reach $1 billion annually by the end of the fiscal year.

“Then we plan to double those sales again next fiscal year,” he said.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

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

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Obama Approval Rating Shows Signs of Rebound

By Julianna Goldman - Dec 21, 2011 3:54 AM GMT+0700
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President Barack Obama greets supporters after speaking at the University of Colorado Denver campus on October 26, 2011. Photographer: John Moore/Getty Images

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Dec. 20 (Bloomberg) -- President Barack Obama speaks at the White House after the U.S. House of Representatives rejected a two-month extension of an expiring payroll tax cut. In a 229-193 vote, the House requested formal negotiations on a payroll tax cut extension with the Senate, where Democratic leaders say they won’t discuss a year-long agreement until the short-term deal is completed. (Source: Bloomberg)

President Barack Obama’s approval ratings are showing signs of rebounding following some recent positive economic data and after months of aggressively promoting his jobs plan and criticizing his Republican opposition.

Forty-nine percent of Americans approve of how Obama is handling his job, according to an ABC News/Washington Post poll and another conducted for CNN. The rate was the highest in both surveys since a short-lived bump the president got following the killing of al-Qaeda leader Osama bin Laden in May.

While the public still disapproved of the president’s handling of the economy in the ABC/Post poll, 56 percent to 41 percent, the margin narrowed from a 23-point spread last month. The president bested congressional Republicans when it comes to whom Americans trust to handle the economy and create jobs -- an increase for Obama over last month, when the results were divided equally.

Obama may be benefiting from improvements in the U.S. economy and the seesaw battle among the Republican candidates seeking their party’s presidential nomination.

“It shows a slight glimmer of hope,” Matt Dowd, a Bloomberg News contributor and a former chief campaign strategist for Obama’s White House predecessor, George W. Bush, wrote in an e-mail. “But the question is whether it’s a real change in his prospects or a temporary bump up because of circus atmosphere of Republican nomination process.”

White House press secretary Jay Carney, in response to a question about the CNN survey, sought to downplay the approval numbers, saying “polls go up and down.” The president’s message may be resonating with the American public, he said.

Obama “is committed to working with Congress and doing the things he can do outside of Congress to grow the economy and help it create jobs,” Carney told reporters. “In his last several months, that focus has been pretty clear.”

Recent data point to an economy that is stabilizing heading into the election year.

Housing Starts

The Commerce Department reported today that builders broke ground last month on more houses than at any time since April 2010. Housing starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News, and building permits, a proxy for future construction, climbed to a more than one-year high.

The nation’s jobs picture also has improved. The unemployment rate in November dropped to 8.6 percent, the lowest since March 2009, from 9 percent the month earlier. Last week, the Labor Department reported that the fewest workers in more than three years filed claims for unemployment benefits last week.

The Labor Department said today that payrolls increased in 29 U.S. states in November, and the jobless rate declined in 43, a sign the labor market is recovering across much of the U.S.

The Standard & Poor’s 500 Index (SPX) climbed 3.1 percent to 1,242.68 at 3:42 p.m. in New York after the report on housing was released. The yield on the 10-year U.S. Treasury note advanced 11 basis points to 1.92 percent.

Pessimism on Economy

The higher approval ratings for Obama were tempered by other numbers. The ABC/Post poll also found heightened public concern about the future of the economy, with 52 percent saying they were pessimistic about the economic outlook over the next 12 months and 44 percent describing themselves as optimistic. In April, an ABC/Post poll had 55 percent as optimistic and 42 percent as pessimistic.

Those who said they were optimistic about their own family’s financial situation declined to 61 percent from 66 percent in April.

Both surveys were done before the current showdown over extending into 2012 a two-percentage-point cut in the employee portion of the payroll tax. The ABC/Post telephone poll of 1,005 adults was conducted Dec. 15-18 and the margin of error is plus or minus 3.5 percentage points. The CNN polling of 1,015 adults was done Dec. 16-18 and has an error margin of 3 percentage points.

The Republican-controlled House voted today to reject a bipartisan Senate plan that would have continued the tax cut for two months with debate on extending it for the rest of the year taking place after Congress returns after the holidays. The lower tax rate of 4.2 percent is scheduled to expire Dec. 31, at which point the tax will rise to 6.2 percent.

Extending the payroll tax cut was a central element of the jobs plan Obama proposed in September, and since then he has sought to portray Republicans in Congress as defending the wealthy at the expense of middle-income Americans.

Middle-Class Message

In the ABC/Post poll, respondents overwhelmingly said they trust Obama over Republicans to protect middle-income Americans, 50 percent to 35 percent. Obama’s advisers say that’s a sign the president’s message is resonating with the public.

“The president has been focused on restoring economic security for middle-class families while Republicans have obstructed those efforts and instead proposed a return to the same policies that led to the economic crisis,” said Ben LaBolt, a spokesman for Obama’s re-election campaign.

Several other recent polls have shown Obama’s approval ratings still hovering in the mid-40s with a higher proportion of those surveyed disapproving of the way he’s handling the job.

The most recent Gallup daily poll put Obama’s approval rating at 43 percent with 50 percent disapproving. A Dec. 7-11 NBC News/Wall Street Journal survey found 46 percent approving of the job Obama is doing and 48 percent disapproving.

To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

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

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London Penthouse Said to Sell for About $157M

By Chris Spillane - Dec 21, 2011 12:33 AM GMT+0700

A penthouse apartment in London’s Knightsbridge neighborhood was purchased for about 100 million pounds ($157 million), a person with knowledge of the transaction said.

The undisclosed buyer paid about 7,000 pounds a square foot for the unfurnished duplex in the Bulgari Hotel and Residences, according to the person, who requested anonymity because the deal was private. A second penthouse unit in the development is on the market for 69 million pounds, the person said.

London’s luxury-home values have accelerated this year as international investors seek a haven for their wealth in the city’s central neighborhoods, such as Belgravia, Knightsbridge and Mayfair. The hotel is setting a “new benchmark” for prime residential real estate as its location, link with luxury retailer Bulgari SpA (BUL) and limited number of units helps boost prices, Giles Hannah, a Christie’s International Real Estate director handling the sale, said in a telephone interview.

“Having the Bulgari brand adds about thousand pounds a square foot,” Hannah said. “You look at the number of apartments at the other developments in London compared with the one I’m looking after, it’s not possible to hand make everything in a larger development. Nothing here has been mass-produced.”

Prime Knightsbridge

Prime Knightsbridge Developments Ltd. owns the Bulgari project, which has 85 hotel rooms and eight apartments. JPMorgan Chase & Co. (JPM)’s International Bank unit is the lender for the project, according to Land Registry documents. Construction work will be completed in the second quarter of 2012, according to the hotel’s website.

The price is nearly double the $88 million that former Citigroup Inc. (C) chairman Sanford Weill’s Manhattan apartment is being purchased for by the daughter of a Russian billionaire. That would make it the most expensive residential transaction ever in the New York borough, according to Jonathan Miller, president of appraiser Miller Samuel Inc.

The 14,000-square-foot (1,300 square meter) Knightsbridge penthouse was sold in April, according to the person familiar with the deal. Prime Knightsbridge referred calls seeking comment to Christie’s, which is handling the sale of the eight apartments. Hannah declined to comment on the price paid.

Bulgari Store

A home in the One Hyde Park condominium complex, which was conceived by Christian and Nick Candy, sold for 7,500 pounds a square foot after the interiors were furnished. Knightsbridge is one of London’s wealthiest neighborhoods and home to luxury retail outlets including the Harrods and Harvey Nichols department stores. LVMH Moet Hennessy Louis Vuitton SA (MC) reached a deal to buy Bulgari, which has a store on Sloane Street in Knightsbridge, last March.

Developers can get as much as 30 percent more a square foot for branded residences, said Gerard Nolan of broker Gerard Nolan & Partners, in an interview. The appeal for buyers is that the hotel manages their assets and ensures quality control of services and staff, said Nolan, who has been involved in the sale of more than 350 hotels in London.

Branded luxury residences are expected to increase as developers take advantage of the premium that some labels can add, Knight Frank LLP said today in a report.

“I can see the model being heavily exploited in the capital cities that are regarded as the most international, as well as the most luxurious vacation hotspots,” Stephan Miles- Brown, the broker’s head of residential development, said in the report.

Prime central-London prices have risen around 40 percent since the market’s last slump in March 2009, Knight Frank said earlier this month. Luxury home prices will rise 5 percent next year, the London-based broker said in October.

To contact the reporter on this story: Chris Spillane in London at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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U.S. Stocks Rise as Housing Data Beat Estimates

By Rita Nazareth - Dec 21, 2011 5:23 AM GMT+0700

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Dec. 20 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks climbed, giving the Standard & Poor’s 500 Index its biggest gain of the month, as better-than-estimated housing starts added to expectations the world’s largest economy will weather Europe’s debt crisis. Michael McKee also speaks. (Source: Bloomberg)

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Dec. 20 (Bloomberg) -- Barry Ritholtz, chief executive officer at FusionIQ, talks about the U.S. financial industry, the gold market and the outlook for stocks and housing. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

U.S. stocks climbed, giving the Standard & Poor’s 500 Index its biggest gain of the month, as better-than-estimated housing starts added to expectations the world’s largest economy will weather Europe’s debt crisis.

Homebuilders PulteGroup Inc. (PHM) and Lennar Corp. (LEN) rose more than 6.3 percent. Caterpillar Inc. (CAT), Chevron Corp. (CVX) and Bank of America Corp. (BAC) rallied at least 3.7 percent, pacing gains among the biggest companies. Jefferies Group Inc. (JEF) surged 23 percent as the investment bank reported profit that beat estimates. Sprint Nextel (S) Corp. jumped 9.3 percent and Juniper Networks Inc. (JNPR) added 8.9 percent as AT&T Inc. pulled its bid for T-Mobile USA.

The S&P 500 rose 3 percent to 1,241.30 at 4 p.m. New York time, as 492 out of 500 stocks gained. The gauge lost 1.2 percent yesterday. The Dow Jones Industrial Average added 337.32 points, or 2.9 percent, to 12,103.58 today. The Russell 2000 Index of small companies rallied 4.2 percent to 738.22.

“The housing report is one more brick in the wall and an important indication of economic strengthening,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. “Things are improving and that’s helping to buttress better the impact of Europe’s crisis.”

Stocks gained (SPX) as builders broke ground in November on more houses than at any time in the past 19 months. Concern about Europe’s debt crisis eased today as German business confidence unexpectedly grew and Spain sold 5.64 billion euros ($7.36 billion) of bills, more than the maximum target.

Average Since 1954

Today’s rally trimmed this year’s drop in the S&P 500 to 1.3 percent. The benchmark measure had tumbled 12 percent from a three-year high in April through yesterday as Europe struggled to tame its debt crisis. It’s trading for 13.1 times reported earnings, compared with the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

“You’re getting a discount to buy equities,” said Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. He spoke in a telephone interview. “I’m hoping we get some separation of the U.S. economic events from some of the European events. Stocks are very reasonably priced.”

The Morgan Stanley (MS) Cyclical Index of companies which tend to benefit the most from economic growth added 3.8 percent. A measure of homebuilders in S&P indexes jumped 6.4 percent as 11 of its 12 stocks gained. PulteGroup climbed 10 percent to $6.17 for the biggest increase in the S&P 500. Lennar advanced 6.3 percent to $19.68. Caterpillar rose 5.1 percent to $91.73. Chevron rose 4 percent to $103.67.

Banks Rebound

The KBW Bank Index (BKX) of 24 stocks climbed 4.1 percent. Bank of America, which yesterday ended at the lowest level since March 2009, gained 3.7 percent to $5.17. JPMorgan Chase & Co. (JPM) added 4.9 percent to $32.21.

Jefferies rallied 23 percent, the most since 2008, to $14.50. The investment bank that’s been fighting speculation about its financial strength rose after fiscal fourth-quarter profit beat estimates on a recovery in fixed-income trading. Jefferies may not have to raise more equity after reducing assets on its balance sheet, Sean Egan of Egan-Jones Ratings Co. said today on CNBC.

Phone shares rose as AT&T (T)’s $39 billion bid to acquire Deutsche Telekom AG’s T-Mobile USA came to an end yesterday. AT&T failed to convince the Justice Department, which sued to block the transaction in August, that it could remedy the market impact of absorbing T-Mobile. AT&T added 1.3 percent to $29.12.

Sprint, Juniper

Sprint Nextel jumped 9.3 percent to $2.36. Verizon Communications Inc. (VZ) gained 1.5 percent to $39.21. Juniper Networks, a maker of networking equipment, surged 8.9 percent to $19.74. Dish Network Corp. (DISH) soared 9.2 percent to $27.46 after Stifel Nicolaus & Co. said AT&T may seek to acquire the second- largest U.S. satellite-TV company to gain wireless spectrum.

Apple Inc. (AAPL) rallied 3.6 percent to $395.95. The Cupertino, California-based company won a patent-infringement ruling that bans some HTC Corp. smartphones from the U.S. starting next year, bolstering efforts to prove that devices running Google Inc.’s Android operating system copy the iPhone.

Oracle Corp. (ORCL) tumbled 10 percent to $26.19 at 5:23 p.m. New York time. The second-largest software maker reported quarterly sales and profit that missed analysts’ estimates as customers held off on purchasing database and applications software. The shares rose 1.9 percent to $29.17 in regular trading.

CVS Caremark Corp. rose 8.9 percent to $39.80. The largest U.S. distributor of prescription drugs boosted (CVS) its quarterly dividend to 16.25 cents a share from 12.5 cents a share.

Red Hat

Red Hat Inc. (RHT) tumbled 8.9 percent, the biggest decline in the S&P 500, to $41.95. The largest seller of the open-source Linux operating system reported third-quarter billings and deferred revenue that missed some analysts’ estimates.

Today’s equity rally brought the S&P 500 above its average price of the past 50 days. Still, the index needs to rise above its 200-day average, a level where the gauge has stalled three times since October, to sustain its rally, Janney Montgomery Scott LLC said.

“A closing breakout above 1,260 is what the markets need,” Dan Wantrobski, the Philadelphia-based director of technical research at Janney, wrote in a report today. “A convincing breakout above this threshold would be bullish for U.S. equities overall.”

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

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

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

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‘Desperate’ AT&T May Seek to Buy Dish After Deal Collapses, Stifel Says

By Alex Sherman - Dec 21, 2011 4:41 AM GMT+0700

AT&T Inc. (T) may seek to acquire Dish Network Corp., the second-largest U.S. satellite-TV company, to gain wireless spectrum after failing to purchase T-Mobile USA and its airwaves, Stifel Nicolaus & Co. said.

The second-largest U.S. mobile carrier is “desperate for spectrum” after regulatory opposition forced it to abandon the $39 billion T-Mobile bid, said Christopher King, a Stifel Nicolaus analyst in Baltimore. AT&T had to give up spectrum as part of a breakup fee from the deal’s collapse.

Dish bought bankrupt companies DBSD North America Inc. and TerreStar Networks Inc. this year for their spectrum licenses. The Englewood, Colorado-based company may be AT&T’s best chance at enhancing its wireless network, and a deal would probably be allowed by regulators, King said. Dish (DISH) rose 9.2 percent, the most since May, to $27.46 at the New York close. The shares have gained 40 percent this year. AT&T rose 1.3 percent to $29.12.

“Dish and AT&T aren’t direct competitors, and at the end of the day, the government wants to see spectrum used,” King said in an interview. “It’s highly unlikely regulators would block two AT&T deals in row.”

Ashley Zandy, an AT&T spokeswoman, and Marc Lumpkin, a Dish spokesman, declined to comment.

Growing Demand

Spectrum is a term used for airwaves, licensed by the government, that carry wireless voice and data signals. Governments often sell unused or repurposed frequencies to the highest bidder, and companies also trade them. Demand is increasing as more people buy smartphones and tablets and use them to watch video and browse the Web.

Verizon Wireless, the No. 1 mobile carrier, is trying to extend its lead over Dallas-based AT&T in so-called fourth- generation spectrum after striking deals with cable companies this month. Including those acquisitions, Verizon will have 56 percent more 4G spectrum than AT&T in the top 10 markets and 46 percent more in the top 100, giving it a “meaningful competitive advantage,” John Hodulik, a UBS AG analyst, said in a research note.

A Dish-AT&T lockup could mirror the partnership between Verizon Wireless and cable companies, King said. Verizon said this month it would buy $3.6 billion of spectrum from Comcast Corp. (CMCSA), Time Warner Cable Inc. and Bright House Networks LLC. Cox Communications Inc. also sold Verizon $315 million of spectrum.

Verizon’s Cable Deals

Comcast, Time Warner Cable (TWC) and Cox, the three largest U.S. cable companies, will market and eventually sell Verizon Wireless service, enabling them to offer customers mobile voice and data in addition to home phone, Internet and TV service.

Verizon Wireless is being investigated by the U.S. Justice Department over whether the proposed deals might constitute a restraint of trade, a person familiar with the matter said.

If AT&T acquired Dish, it could continue to operate its satellite-TV business, gaining about 14 million customers and saving on programming costs, King said. AT&T already pays for cable and broadcast content through its TV service, U-verse.

Adding Dish could give AT&T more leverage in negotiations with cable networks, said Paul Sweeney, an analyst with Bloomberg Industries. AT&T’s video customer additions have slumped in consecutive quarters.

Lower Ambitions

“AT&T has scaled back its ambitions in terms of its video offerings,” Sweeney said. “So if you can’t build it, perhaps buy it.”

The Federal Communications Commission still must approve Dish’s spectrum acquisitions and give Dish a waiver to offer mobile high-speed Internet service to its customers. The FCC may have concerns with Dish acquiring spectrum licenses to flip them for a profit, King said, although he didn’t think it would be a deal-breaker.

Dish Chief Executive Officer Joseph Clayton said this month that his company wanted to be a wireless competitor in an industry dominated by AT&T and Verizon. Chairman Charlie Ergen said in November that Dish was interested in linking up with a wireless company or building a network on its own to create more competition in the industry.

It’s in Ergen’s best interest to talk about competing with AT&T if he wants to sell, King said.

“This is a perfect opportunity for Charlie to get out,” King said. “He’s talking about building a wireless network or being a competitor to get a better deal from AT&T.”

AT&T has been rumored “for years” to be a potential acquirer of Dish and DirecTV (DTV), the largest U.S. satellite-TV distributor, according to Sweeney. Ergen also tried to merge Dish with DirecTV in 2002. The deal was dropped after U.S. regulators opposed the combination.

Ergen said in November that a merger with DirecTV would be “problematic” if AT&T’s bid for T-Mobile didn’t go through.

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

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

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Fed Bolsters Tools to Avert Collapse of Big Firms

By Cheyenne Hopkins and Phil Mattingly - Dec 21, 2011 7:25 AM GMT+0700
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Federal Reserve building stands in Washington. Photographer: Andrew Harrer/Bloomberg

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Dec. 20 (Bloomberg) -- The Federal Reserve sought to curb the risk of financial turmoil by strengthening its tools for preventing the collapse of large firms and demanding stricter oversight by companies’ boards of directors. The central bank’s proposed standards, aimed at averting a recurrence of turmoil following the collapse of U.S. mortgage finance, target banks with assets totaling $50 billion or more and financial firms deemed “systemically important.” Michael McKee reports on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

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Dec. 20 (Bloomberg) -- Gary Townsend, a founder of Hill-Townsend LLC, talks about the outlook for the Federal Reserve's proposed financial regulations aimed at averting a recurrence of turmoil following the collapse of U.S. mortgage finance. The rules target banks with assets totaling $50 billion or more and financial firms deemed “systemically important." He speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

The Federal Reserve sought to curb the threat of financial turmoil by compelling the biggest banks to follow a tougher standard for risk management and demanding stricter oversight by companies’ boards of directors.

The proposed rules would set triggers for regulatory enforcement for weak firms and require boards of directors to oversee and approve plans for limiting liquidity risk. The Fed delayed releasing rules for supervision of foreign firms and for risk-based capital and leverage requirements.

The draft standards aim at averting a recurrence of instability following the collapse of U.S. mortgage finance, targeting banks with assets totaling $50 billion or more and financial firms deemed “systemically important.” The Dodd- Frank law passed in July 2010 mandates a supervisory crackdown.

“You do see a sense of regulatory forbearance that continues with the Fed in that they understand that to help these banks earn their way back to financial health, you just can’t slap an increased capital requirement overnight,” said Mark T. Williams, executive-in-residence at Boston University and a former bank examiner.

The 24-company KBW Bank Index (BKX), which had dropped 30 percent in 2011 through yesterday, rose 4.1 percent today. The Standard & Poor’s 500 Index increased today by 3 percent to 1,241.30 in New York.

“The proposal would create an integrated set of requirements that seeks to meaningfully reduce the probability of failure of systemically important companies and minimize damage to the financial system and the broader economy in the event such a company fails,” the Fed said today. Comments on the proposal are due by March 31.

Revenue Pinched

“The rules are really going to be quite different for the largest institutions,” Gary Townsend, a founder of Hill- Townsend LLC in Chevy Chase, Maryland, said on Bloomberg Television. “It seems foolish to me to be basing this on size” rather than on business model and complexity, he said.

Under the proposal banks’ boards of directors would be required to review regular reports from senior management on capital adequacy and sign off on plans to fund institutions in times of liquidity stress and economic strain.

The boards would annually need to approve internal liquidity proposals and set levels of risk gauged to companies’ “financial condition and funding capacity on an ongoing basis,” the central bank said.

‘Dramatic Change’

The emphasis on the board of directors is a new regulatory trend and “a dramatic change in the level of care that boards need to take in these regulatory areas,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics in Washington D.C.

The Fed hasn’t specified capital and leverage requirements and industry representatives have an opportunity to comment on the 95 questions contained in the 173-page proposal. The strength of the rules hinge on how the Fed reacts to public comment, former Fed Governor Randall S. Kroszner said.

“The motivation is to try and reduce fragility of the system and reduce interconnectedness,” among firms, Kroszner said.

“But if the rules are not properly implemented or the definitions don’t properly capture the relevant risks, then you could actually increase interconnections rather than decrease it,” Kroszner said. He is currently a professor at the University of Chicago Booth School of Business.

Failure of a Company

The Fed would curb a larger firm’s exposure to a single counterparty “in order to limit the risks that the failure of any individual company could pose to a covered company,” according to the proposal.

The central bank would set a limit of 10 percent for credit risk between a company considered systemically important and a counterparty when each have more than $500 billion in total assets. This is tougher than the Dodd-Frank act, which allowed for a 25 percent limit.

Goldman Sachs Group Inc. (GS), the fifth-biggest U.S. bank by assets, said in a regulatory filing that its credit risk to any single counterparty didn’t exceed 2 percent of the firm’s $949 billion in total assets as of Sept. 30.

The Fed would require “early remediation” for large firms that show weakness in capital, stress test results and risk management. Regulators would be allowed to impose restrictions on a company’s growth, capital distributions, executive compensation and asset sales.

Not Quick Enough

“It’s trying to take some of the judgment out of the hands of regulators, who some believe did not act as quickly as they should have,” said Deborah Bailey, a director at Deloitte & Touche LLP and a former deputy director of supervision at the Fed.

Designing the early remediation procedures was one of the toughest tasks for regulators, a Fed official said today in a conference call with reporters. The central bank sought to design remedial steps that didn’t hasten a firm’s demise, the official said on condition of anonymity.

Regulators already could pursue such supervisory steps toward banks through prompt corrective action, mandated by a law in 1991. Today’s proposal increases that authority to holding companies.

To contact the reporters on this story: Cheyenne Hopkins at Chopkins19@bloomberg.net; Phil Mattingly in Washington at pmattingly@bloomberg.net

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

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Showdown Makes Tax Cut Expiration Likely

By Richard Rubin - Dec 21, 2011 4:15 AM GMT+0700

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Dec. 20 (Bloomberg) -- U.S. House Speaker John Boehner of Ohio speaks at a news conference in Washington about today's House vote to block a two-month extension of an expiring payroll tax cut that had been approved by the Senate. In a 229-193 vote, the House requested formal negotiations with the Senate on an extension. Senate Democrats have said they won't discuss a House Republican-preferred year-long agreement until a short-term extension is completed. (Source: Bloomberg)

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Dec. 20 (Bloomberg) -- U.S. House Majority Leader Eric Cantor of Virginia talks about today's move by the House to block a two-month extension of an expiring payroll tax cut that was approved by the Senate. In a 229-193 vote, the House requested formal negotiations with the Senate. Democratic leaders have said they won’t discuss a year-long agreement until the short-term deal is completed. Cantor speaks with Bloomberg's Peter Cook on Bloomberg Television's "Money Moves with Deirdre Bolton." (Source: Bloomberg)

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Dec. 20 (Bloomberg) -- House Minority Whip Steny Hoyer, a Maryland Democrat, talks about the House's rejection of a two-month extension of an expiring payroll tax cut. Hoyer speaks with Peter Cook on Bloomberg Television's "Money Moves." (Source: Bloomberg)

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U.S. President Barack Obama speaks during the daily briefing at the White House in Washington, D.C., on Dec. 20, 2011. Photographer: Andrew Harrer/Bloomberg

Take-home pay for 160 million Americans will decline in January unless President Barack Obama, House Speaker John Boehner or Senate Democratic leader Harry Reid give ground in their positions on extending a payroll tax cut.

Obama insisted today that the only path to continuing the tax break past its Dec. 31 expiration is for the House of Representatives to send him a two-month extension passed by the Senate. At the White House today, he blamed a “faction” of Republicans for blocking the bill by including extraneous issues.

Meanwhile, Boehner and the Republican-controlled House pressed ahead with their plan. The House voted 229-193 to reject the Senate bill and insist on a year-long extension of the tax cut. Boehner, an Ohio Republican, then chose eight House Republican negotiators and demanded the Senate name lawmakers to attend formal talks.

“There’s no reason we can’t do this,” Boehner said at a news conference.

Reid said he would refuse to negotiate on a longer-term extension of the tax cut and other expiring laws, and that he wouldn’t appoint negotiators until the two-month deal was complete. Democrats called on Republicans to relent and pass the Senate bill.

Congressional ‘Tantrum’

“What we are dealing with today is a legislative tantrum,” said Representative Earl Blumenauer, an Oregon Democrat.

Most lawmakers agree that the tax cut should be extended through 2012. They differ on how to cover the cost to the Treasury and on what other policy changes should accompany the extensions. Senate Democrats want to pay part of its cost with a surtax on income exceeding $1 million, which Republicans oppose, and House Republicans have voted to pay for the bill through such measures as freezing federal civilian pay.

Over the past two weeks, those disagreements have ballooned into a high-stakes partisan power struggle. Each party is preparing to blame the other if the tax cut expires and they begin discussing retroactive laws.

The impasse could hurt consumer spending and economic growth. If Congress can’t reach agreement, the 2-percentage- point payroll tax cut would expire Dec. 31 and workers’ paychecks would be reduced. Expanded unemployment benefits also would expire, and doctors would receive smaller Medicare reimbursements starting in January.

Republicans say there is still time to negotiate a deal.

Expiration Nearing

“Our economy is too weak and the American people have been struggling for far too long” for Congress to come up short of an agreement, said Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee. “We have two weeks to find a solution.”

“You have said many times that Congress must do its work before taking vacation,” Boehner wrote in a letter to Obama today. “Because we agree, our negotiators and the House stand ready to work through the holidays. I ask you to call on the Senate to return to appoint negotiators so that we can provide the American people the economic certainty they need.”

A schedule announcement from the office of Majority Leader Eric Cantor said House members would recess, though negotiators and House leaders will be available to consider a conference.

The House negotiators are Representatives Kevin Brady of Texas, Camp, Renee Ellmers of North Carolina, Nan Hayworth of New York, Tom Price of Georgia, Tom Reed of New York, Fred Upton of Michigan and Greg Walden of Oregon.

Democrats maintain that the best way to provide certainty for businesses would be to pass the two-month extension and then work on the longer-term proposal.

‘Unconscionable’

In a statement issued after today’s vote, Reid of Nevada called the House action “unconscionable.”

“As the clock ticks towards a middle-class tax hike, I would implore Speaker Boehner to listen to the sensible Senate Republicans and courageous House Republicans who are calling on him to take the responsible path,” Reid he said.

Failure to enact the legislation would reduce economic growth by 1.5 percentage points in the first half of 2012, according to a forecast by Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. The U.S. economy will grow at an average 1 percent annual pace in the first six months of the year should the tax cut lapse, or by 2.5 percent if it’s extended, Feroli said in a Dec. 16 note to clients.

House Republicans maintain that a two-month extension of the tax cut passed by the Senate 89-10 on Dec. 17 would fail to provide the certainty that businesses need and would cause administrative hassles for payroll providers and employers.

Social Security

A House-passed bill, which includes a year-long extension of the tax cut, cost $202.4 billion in forgone revenue. The payroll tax funds Social Security. The House bill also included spending cuts, such as a pay freeze for civilian federal employees and Medicare premium increases for high-income taxpayers.

The Senate’s $33 billion bill would require Obama to make a decision within 60 days on TransCanada Corp.’s Keystone XL oil pipeline. The bill’s cost is covered by raising the guarantee fees that Fannie Mae, Freddie Mac and the Federal Housing Administration charge to lenders for new mortgages.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

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

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Greenhill Says Two Managing Directors Died in Plane Crash

By Laura Marcinek - Dec 21, 2011 1:24 AM GMT+0700

Greenhill & Co. (GHL) said two of its managing directors, Jeffrey F. Buckalew and Rakesh Chawla, were killed when a small plane crashed on a New Jersey highway today.

Buckalew’s wife Corinne and two children were also aboard, according to a statement today from New York-based Greenhill, which cited media reports that there were no survivors. Buckalew, an experienced pilot, owned the plane, Greenhill said.

“The firm is in deep mourning over the tragic and untimely death of two of its esteemed colleagues and members of Jeff’s family,” Chairman Robert Greenhill and Chief Executive Officer Scott Bok said today in the statement. “Jeff was one of the first employees of Greenhill. He and Rakesh were extraordinary professionals who were highly respected by colleagues and clients alike.”

The plane, headed for Georgia, crashed today on Interstate 287 in Harding, New Jersey, the Associated Press reported. New Jersey police confirmed that three people, and possibly as many as five, died in the crash, according to a statement posted on Twitter.

Buckalew, 45, led Greenhill’s North American advisory activities. He came to Greenhill in 1996 after working at Salomon Brothers, according to the firm. Chawla, 36, was a managing director for the financial services sector. He joined the firm in 2003 from Blackstone Group LP.

Greenhill shares fell 12 cents to $35.12 at 1:16 p.m. in New York trading, erasing earlier gains.

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net; David Scheer at dscheer@bloomberg.net

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Greenhill Pushed Into League Table Obscurity After AT&T Pulls T-Mobile Bid

By Dakin Campbell - Dec 20, 2011 12:00 PM GMT+0700

AT&T Inc. (T)’s failed $39 billion acquisition of Deutsche Telekom AG (DTE)’s T-Mobile USA Inc. is sending Greenhill & Co. (GHL) toward M&A league-table obscurity.

Greenhill plunged to 40th place in the mergers and acquisitions rankings after AT&T scrapped its deal yesterday, from 18th place with the transaction included, according to data compiled by Bloomberg. AT&T’s advisers -- Greenhill, JPMorgan Chase & Co. (JPM) and Evercore Partners Inc. (EVR) -- will lose about $65 million in fees, according to estimates by New York-based researcher Freeman & Co.

“It’s an embarrassment, but they will feel the loss more financially,” said Terry Connelly, dean of the Ageno School of Business at Golden Gate University in San Francisco and a former managing director at Salomon Brothers Inc. “They want to hold onto their star bankers, some of whom worked on this deal, and they have to pay them bonuses. They have a heck of a lot less to pay them with now.”

Greenhill Chief Executive Officer Scott Bok has lost at least three managing directors since early June. Previously, the firm averaged less than one such departure annually since its founding in 1996 by Robert Greenhill. The company has slid 57 percent in New York trading this year, the worst performance (S4FINL) in the 79-company Standard & Poor’s Midcap Financials Index.

Superior Energy

With the scrapping of the AT&T deal, the largest transaction for Greenhill this year was advising Superior Energy Services Inc. (SPN) in its purchase of Complete Production Services Inc. (CPX), according to Bloomberg data. Greenhill has served as an adviser on 25 deals valued at $21.2 billion this year, the data show.

Greenhill had been set to beat last year’s 23rd-place ranking. At 40th, the firm ranks below Wells Fargo Co. (WFC) and BMO Capital Markets Corp., among other firms.

Jeffrey Taufield, a spokesman for Greenhill, declined to comment.

The “great weakness” of boutique firms is that without research, they have less leverage with potential clients and are thus more reliant on the league tables to prove their worth, Connelly said. The fall in the rankings makes Greenhill’s job more difficult, he said.

“If you are a naked boutique, as I call the M&A boutiques, you don’t have enough axes to grind with clients,” Connelly said. “The league table standing is more vital for them than it would be for even, say, Lazard, which has other lines of business.”

Global Volume

Greenhill posted net income of $8.56 million in the third quarter, compared with $14.5 million in the same period a year earlier, according to a statement. The firm will have “considerably lower” fixed compensation costs this year because of the departure of managing directors, Bok said in July.

The collapse of the T-Mobile deal pulls global takeover volume down to about $2.19 trillion this year, little changed from all of 2010.

Advisers on the Deutsche Telekom side may fare better, and could still get a percentage of the deal’s reverse $3 billion breakup fee, said Lam Nguyen, a director at Freeman. Deutsche Telekom’s bankers included Morgan Stanley (MS), Credit Suisse Group AG (CSGN), Deutsche Bank AG and Citigroup Inc. (C)

Goldman Sachs (GS), the only bank among the top four advisers that wasn’t involved in the deal, now has 24 percent of the market with $529.8 billion in takeovers, according to data compiled by Bloomberg. JPMorgan’s share fell to 19.6 percent, followed by Morgan Stanley with 19.2 percent and Credit Suisse with 15 percent, the data show.

Express Scripts

T-Mobile is the biggest deal to be scrapped since BHP Billiton Ltd. (BHP)’s $40 billion takeover bid for Potash Corp. of Saskatchewan Inc. was blocked by the Canadian government, according to the data.

Goldman Sachs may further extend its lead over rivals if regulators reject Express Scripts Inc.’s proposed purchase of Medco Health Solutions Inc. (MHS) The $29.1 billion acquisition, which would result in the largest U.S. manager of pharmacy benefits for employers, insurers and union health plans, is under review by the Federal Trade Commission, and states have opened inquiries into the sale out of concern that the combined company will command too much market power.

St. Louis-based Express Scripts plunged 18 percent since July 20, the day before the deal was announced. Medco, based in Franklin Lakes, New Jersey, has dropped 2.5 percent.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net.

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; David Scheer at dscheer@bloomberg.net.

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Stocks Rally as Treasuries, Dollar Retreat on Economic Data

By Claudia Carpenter and Rita Nazareth - Dec 20, 2011 9:41 PM GMT+0700

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Dec. 20 (Bloomberg) -- Builders broke ground in November on the most houses in over a year, led by a three-year high on work in multifamily units. Starts increased 9.3 percent to a 685,000 annual rate, the highest level since April 2010, Commerce Department figures showed today. Building permits, a proxy for future construction, also climbed to a more than one-year high. Michael McKee and Lisa Murphy report on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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Dec. 20 (Bloomberg) -- Binay Chandgothia, Hong Kong-based portfolio manager at Principal Global Investors, talks about the European debt crisis and its implications for global stock markets and banking industry. Chandgothia speaks with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)

Stocks rallied, with the Standard & Poor’s 500 Index rebounding from its lowest level of the month, and Treasuries fell as U.S. housing starts topped economists’ estimates and German business confidence unexpectedly grew.

The Standard & Poor’s 500 Index climbed 2 percent to 1,229.69 at 9:39 a.m. in New York and the Stoxx Europe 600 Index rose 1.3 percent. Spain’s government bonds stayed higher as the nation sold 5.64 billion euros ($7.4 billion) of Treasury bills. The yield on the 10-year U.S. Treasury note advanced six basis points to 1.87 percent, with the dollar weakening versus all 16 of its most-traded peers. Oil gained 3 percent and the GSCI index of 24 commodities climbed for a second day.

U.S. builders broke ground in November on the most houses in over a year, a sign that the market is stabilizing heading into 2012. Federal Reserve Bank of Richmond President Jeffrey Lacker predicted the U.S. economy will grow at least 2 percent next year. German business confidence unexpectedly rose for a second month in December, according to the Ifo institute.

“It looks like our economy is doing pretty good despite the challenges of Europe,” said Michael Strauss, who helps oversee about $27 billion of assets as chief investment strategist at Commonfund in Wilton, Connecticut. “We’re seeing better economic news and the housing report fits right in line with that. The data provides confirmation that the surprise may be that housing is a pretty good contributor to economic activity. It’s another piece of news that’s helping the stock market.”

Housing Starts

The S&P 500 rebounded after yesterday’s 1.2 percent loss. Housing starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the highest level since April 2010, Commerce Department figures showed. Building permits, a proxy for future construction, also climbed to a more than one-year high.

Jefferies Group Inc. (JEF), the investment bank battling speculation about its financial strength, rallied after earnings topped analysts’ estimates.

About five shares advanced for every one that declined in the Stoxx 600. Bayerische Motoren Werke AG and Daimler AG led gains among automakers, rising more than 3 percent.

The German Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 107.2 from 106.6 in November, the Munich-based institute said. Economists had expected a drop to 106, the median forecast of 36 economists in a Bloomberg survey showed.

Fresenius Medical

Health-care shares limited gains in Europe as AstraZeneca Plc, the U.K.’s second-biggest drugmaker, slid 2.3 percent after saying earnings will be at the low end of its forecast following research setbacks. Fresenius Medical Care AG slipped 1.3 percent as the world’s largest provider of kidney dialysis cut its full- year revenue forecast.

Per-share earnings at health-care companies in the Stoxx 600 are forecast to grow 1.7 percent in 2012, compared with an increase of 9.8 percent for the index as a whole, according to analyst estimates compiled by Bloomberg.

The five-year Treasury note yield increased three basis points before the government auctions $35 billion of the securities. The yield on Germany’s 10-year bund rose seven basis points, while similar-maturity Italian yields slid 23 basis points to 6.61 percent.

Spain’s 10-year bond yields were 11 basis points lower at 5.07 percent and two-year note yields were nine basis points lower at 3.28 percent.

The nation sold 5.64 billion euros of three-month and six- month bills, the Bank of Spain said, compared with a maximum target of 4.5 billion euros the Treasury had set for the sale.

Commodities

Oil for January delivery climbed 3 percent to $96.69 a barrel. U.S. crude inventories dropped 2 million barrels last week, according to the median of seven analyst estimates before today’s weekly Energy Department report. The GSCI index jumped 2 percent, as Brent crude, heating oil, cocoa, aluminum and gasoline climbed more than 1.9 percent.

The euro strengthened 0.9 percent to $1.3112. Australia’s dollar climbed 1.5 percent against the greenback after minutes of the central bank’s last meeting showed policy makers saw a continued expansion in the domestic economy even as Europe’s debt crisis weighs on global economic growth.

Sweden’s krona appreciated against the dollar and the euro even as the nation’s central bank lowered its main rate for the first time since 2009 to protect the economy from the debt crisis.

The MSCI Emerging Markets Index (MXEF) rose 0.9 percent. The Kospi Index climbed 0.9 percent in Seoul, rebounding from a 3.4 percent slide yesterday, and the won strengthened 1.5 percent against the dollar. South Korea’s National Pension Service, the nation’s biggest investor, said it bought stocks yesterday after the death of North Korean leader Kim Jong Il spurred some investors to sell on concern the leadership transition may lead to conflict on the peninsula. Moody’s Investors Service and S&P said Kim Jong Il’s death is unlikely to affect South Korea’s credit rating.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

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