U.S. Posted Budget Surplus of $59.1 Billion in April

By Meera Louis - May 11, 2012 1:28 AM GMT+0700

The U.S. government posted a budget surplus in April, the first in more than three years, as tax revenue climbed and spending dropped.

Receipts topped outlays by $59.1 billion compared with a deficit of $40.4 billion in April 2011, the Treasury Department said today. Economists projected a $35 billion surplus, according to the median estimate in a Bloomberg News survey. It was the first surplus since September 2008 and the biggest since April 2008.

“The total federal budget deficit is slowly shrinking,” said Steven Wood, president of Insight Economics LLC in Danville, California. “However, this improvement has been halting, due largely to erratic economic and employment growth.”

President Barack Obama, in his campaign to win a second term, is trying to make the case that while the recovery has been uneven, the U.S. is making progress. The administration has said won’t accept any of the dozen spending bills House Republicans are working on unless they agree to abide by a budget deal reached last year.

The dispute may lead to a government shutdown shortly before the November elections unless lawmakers agree on legislation to keep agencies operating in the 2013 fiscal year, which starts Oct. 1.

Obama Budget

Republicans rejected President Barack Obama’s $3.8 trillion election-year budget plan, saying it didn’t go far enough to reduce the deficit or boost economic growth.

Estimates of the April budget outcome ranged from roughly in balance to a surplus of $60 billion in a Bloomberg survey of 23 economists. April has been a surplus month in 44 of the past 58 fiscal years, the Treasury Department said.

The non-partisan Congressional Budget Office estimated this week the April surplus would reach $58 billion. The CBO said in a report dated May 7 that the results were influenced by shifts in the timing of certain payments.

Receipts increased 10 percent from the same month last year to $318.8 billion, today’s Treasury Department report showed. Over the same period, spending dropped 21 percent to $259.7 billion.

Obama’s proposed budget would initially boost the U.S. economy though later in this decade it would become a drag on growth, the CBO said April 20.

Between 2018 and 2022, the administration’s plan would cut growth by 0.5 percent to 2.2 percent, according to the analysis.

To contact the reporters on this story: Meera Louis in Washington at mlouis1@bloomberg.net

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

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Romney Apologizes After Report He Bullied Fellow Student

By Lisa Lerer - May 11, 2012 6:13 AM GMT+0700

Mitt Romney apologized today for high school pranks that may have pushed the boundaries into bullying, including an incident in which he led a group of boys in pushing down a screaming fellow student who frequently was taunted about his suspected homosexuality.

“Back in high school, I did some dumb things, and if anybody was hurt by that or offended, obviously I apologize,” the presumptive Republican presidential nominee said in an interview on Fox News Radio. “I don’t recall the incident myself,” he said in a later interview on Fox TV.

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Mitt Romney with his family after his father was elected Governor of Michigan, November 7,1962. Photograph: AP Photo

An article published by the Washington Post today disclosed the incident, saying the student, John Lauber, was often teased because others presumed he was gay. It attributed accounts of the group -- including Romney shoving Lauber and cutting his long blond hair -- to five fellow students at the all-boys private Cranbrook School in Michigan. One former student described the attack as “vicious” and another called it “senseless.”

The Post reported that another student, Gary Hummel, a closeted gay at the time, said his efforts to speak in class were punctuated by shouts of “Atta girl” from Romney.

Romney, 65, said he didn’t remember either incident.

“I had no idea what that individual’s sexual orientation might be,” he said of Lauber. “That was the furthest thing from our minds back in the 1960s,” he said earlier.

Adopting Children

Romney, in his later interview, expressed support for the right of gay couples to adopt children. “I also know many gay couples are able to adopt children,” he said. “That is fine.”

The account comes amid a national conversation about gay rights, after President Barack Obama announced his support for same-sex marriage in an interview with ABC News yesterday. Romney opposes gay marriage and says domestic partnership rights should be determined by individual states.

The Post story lit up social networking sites, including Twitter, and is being spotlighted by a website called the New Civil Rights Movement that is popular with gays. The words “Romney” and “bully” were both included in about 13 Twitter messages per minute today, according to TweetCharts.com, a website that tracks traffic.

In an effort to tamp down the reaction, Romney aides set up the Fox radio interview so he could respond to the allegations. As the candidate did so, campaign aides sought to get former high school friends to publicly share their more positive recollections of Romney, according a staffer.

Not Mean Spirited

Andrea Saul, a spokeswoman for the campaign, told the Post that “anyone who knows Mitt Romney knows that he doesn’t have a mean-spirited bone in his body.”

The Post also quoted fellow students, including a former girlfriend, who described Romney as an industrious leader at Cranbrook, where children from the state’s wealthiest families ate in a chandeliered dining room and studied in reading rooms decorated with frescoes and marble friezes. Romney attended the school while his father, George, headed American Motors Co. and he served as governor of the state.

Romney said marrying his wife, Ann, whom he met while at Cranbrook, and going on a Mormon mission in France changed him into a “very different person.”

Romney, who graduated from high school in 1965, questioned how much of a candidate’s background is fair game, given that the incidents in question happened close to 50 years ago. He said he prefers the campaign focus on bigger issues facing the country, including the economy, energy and Iran’s nuclear development.

High School Talk

“There’s going to be some that want to talk about high school,” the former Massachusetts governor said in the Fox News interview. “Well, if you really think that’s important, be my guest.”

Campaigning in Omaha, Nebraska, today, he made no reference to the report or gay marriage as he delivered a 10-minute version of his standard stump speech.

“The problem with the president is his policies are a fallback to the liberal ideas of the past,” Romney told voters at a riverfront restaurant. “These old liberals thought that you could spend and spend and borrow without consequences.”

The federal debt, he said, “is unacceptable.”

“It’s bad economics; it’s bad policy. I think it’s immoral,” he said.

Continuing an effort by his campaign to woo women voters, Romney praised the work of female business owners and his wife, who spent her life raising the couple’s five children.

“I appreciate the contributions of all mothers of all ages and all stages. So thank you to the mothers of this country,” he said to applause.

Earlier in the day, about 500 supporters paid at least $250 --- and $2,500 for a photo with Romney -- to attend a campaign fundraiser at an Omaha hotel.

To contact the reporter on this story: Lisa Lerer in Washington at llerer@bloomberg.net

To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net

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S&P 500 Rises From 2-Month Low on Greece Government Talks

By Rita Nazareth - May 11, 2012 4:02 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) rose, rebounding from the lowest level in two months, as Greece attempted to form a new government and a decline in American jobless claims helped allay concern of a labor market setback.

Wells Fargo & Co. (WFC) and U.S. Bancorp rose at least 1.4 percent to pace gains in banks. News Corp., the media company run by Rupert Murdoch, and Monster Beverage Corp. (MNST), an energy- drink maker, rallied more than 4.8 percent as earnings beat estimates. Cisco Systems Inc. (CSCO) sank 10 percent as its forecasts disappointed investors. S&P 500 futures fell 0.5 percent at 5:01 p.m. as JPMorgan Chase & Co. (JPM) slumped 3.8 percent after saying one of its divisions had “significant” mark-to-market losses.

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May 10 (Bloomberg) -- David Gerstenhaber, president and founder of Argonaut Management LP, talks about the equity market and investment strategy. He speaks with Betty Liu, Dominic Chu and Sheila Dharmarajan on Bloomberg Television's "In the Loop." (Source: Bloomberg)

The S&P 500 rose 0.3 percent to 1,357.99 at 4 p.m. New York time. The Dow Jones Industrial Average added 19.98 points, or 0.2 percent, to 12,855.04. The Nasdaq-100 Index (NDX) dropped 0.2 percent to 2,616.24, led by Cisco, which comprises 3.1 percent of the measure. About 6.6 billion shares changed hands on U.S. exchanges, almost in line with the three-month average.

“They are still talking in Greece and that brings some relief,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “The crash off the cliff in terms of an extreme political alliance didn’t play out today. In the U.S., jobless claims didn’t surprise negatively. That was seen as a positive.”

U.S. equities joined a global rally and the euro halted an eight-day slump, its longest since 2008. Greece’s Evangelos Venizelos, the socialist Pasok leader and former finance minister, said his goal is to form a government that keeps the nation in the euro area. Investors also watched economic data as initial claims for jobless benefits fell to a one-month low.

Political Turmoil

Greek political turmoil extended into a fourth day after the inconclusive May 6 elections, with coalition talks deadlocked, raising the possibility that another election will have to be held as early as next month. The standoff has reignited European concerns over Greece’s ability to hold to terms of its two bailouts negotiated since May 2010.

“There’s an attempt to patch things together in Greece,” said Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “They will try to stay in the euro, though I’m not sure they can. Greece is a failed chemistry experiment even if they put something together.”

Banks had the biggest gain in the S&P 500 among 24 groups, adding 1.5 percent, as a measure of European lenders rallied. The KBW Bank Index (BKX) rose 1 percent as 22 of its 24 stocks advanced. Wells Fargo climbed 1.7 percent to $33.19. US Bancorp (USB) increased 1.4 percent to $31.91.

Bernanke on Banks

Federal Reserve Chairman Ben S. Bernanke said the U.S. banking system is stronger and more resilient while still facing challenges on credit quality and liquidity.

“Banks still have more to do to restore their health and adapt to the post-crisis regulatory and economic environment,” Bernanke said today in a speech at the Chicago Fed’s annual conference on banks. As the economic expansion proceeds, “a financially stronger banking system will be well positioned to expand its lending.”

Some corporate reports also helped drive stocks higher today. Per-share profits have topped projections at about 70 percent of S&P 500 companies that reported results since the start of the earnings season.

News Corp. (NWSA) climbed 4.9 percent to $20.32 after revenue growth at its cable networks and film studio helped it exceed analysts’ third-quarter profit estimates. The owner of Fox Broadcasting and Fox News derives at least 70 percent of its annual profit from television, and is working to expand in markets outside the U.S. with investments in pay-TV operators.

International Markets

Monster Beverage surged 9 percent to $71.17. Net sales rose 28 percent to $454.6 million as Chief Executive Officer Rodney Sacks expands into international markets, including Hong Kong and Macau last month.

Big Lots Inc. (BIG) gained 1.4 percent to $36.73. The discount retailer was raised to the equivalent of buy at Barclays Plc. The share-price estimate is $43.

Technology shares had the biggest decline in the S&P 500 among 10 industries, falling 0.8 percent, as 47 out of its 71 stocks retreated. The group comprises 20 percent of the S&P 500.

Cisco, the largest maker of computer-networking equipment, tumbled 10 percent to $16.81. Chief Executive Officer John Chambers said orders from big companies fell in the third quarter, and it’s taking longer to sign large deals with corporate customers. Cisco is also concerned about demand from Europe, India and government agencies, he said.

Rival Juniper Networks Inc. (JNPR) plunged 4.9 percent to $18.07. Salesforce.com Inc. (CRM), the biggest provider of online customer- management software, sank 9.1 percent to $135.44.

Higher Offer

Avon Products Inc. (AVP) dropped 3.3 percent to $20.89. Coty Inc. raised its offer to acquire Avon to about $10.7 billion, or $24.75 a share, and said Warren Buffett’s Berkshire Hathaway Inc. will provide financing as the perfume-maker seeks to draw Avon into negotiations. Avon traded below Coty’s offer, suggesting investors aren’t convinced the bid will succeed.

MEMC Electronic Materials Inc. sank 25 percent to $2.45, the lowest level since November 2001. (WFR) The second-largest U.S. polysilicon maker posted a first-quarter loss 20 times greater than a year earlier as solar sales fell by more than one-third.

Priceline.com Inc. (PCLN) dropped 5.3 percent to $681.11. The biggest U.S. online travel agency by market value forecast second-quarter earnings that trailed analysts’ estimates.

Pessimism about stocks rose to the highest level since October and optimism plunged to an eight-month low, according to a survey from the American Association of Individual Investors.

Bulls vs Bears

The proportion of investors who anticipate a decline in the next six months jumped 13.6 percentage points to 42.1 percent in the past week, according to the Chicago-based company, which has tracked individual investors’ projections since 1987. Bullish sentiment, or expectations that stocks will rise over the next six months, slumped 10 percentage points to 25.4 percent, the data showed.

It’s the fourth time in the past five weeks that bearish sentiment has topped its average of 30 percent, according to the survey. While many technical analysts usually see a surge in pessimism as a contrarian sign that will give way to a rally, AAII Vice President Charles Rotblut said it may not be high enough compared to historical levels.

“A bearish sentiment reading above 50 percent would be a stronger contrarian signal,” he wrote.

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

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

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JPMorgan Loses $2 Billion in Chief Investment Office

By Dawn Kopecki and Michael J. Moore - May 11, 2012 4:59 AM GMT+0700

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the firm lost about $2 billion on synthetic credit securities after an “egregious’” failure in its chief investment office, which the bank says focuses on hedging.

“This portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed,” the New York-based company said today in a quarterly securities filing. JPMorgan declined 5.5 percent to $38.50 in extended trading at 5:55 p.m. in New York.

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James "Jamie" Dimon, chief executive officer of JPMorgan Chase & Co. Photographer: Scott Eells/Bloomberg

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May 10 (Bloomberg) -- Charles Lieberman, chief investment officer at Advisors Capital Management LLC, talks about JPMorgan Chase & Co.'s loss. Chief Executive Officer Jamie Dimon says the firm lost about $2 billion on synthetic credit securities after an "egregious" failure at its chief investment office. Lieberman speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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May 10 (Bloomberg) -- JPMorgan Chase & Co. said losses tied to the chief investment office are bigger than the company projected. Bloomberg’s Erik Schatzker and Adam Johnson reports on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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May 10 (Bloomberg) -- JPMorgan Chase & Co. said it lost about $2 billion tied to synthetic credit securities after positions taken by its chief investment office were riskier than expected. Bloomberg’s Erik Schatzker and Pimm Fox report on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

The chief investment office has been transformed in recent years under Dimon into a unit that makes bigger and riskier speculative bets with the bank’s money, according to five former employees, Bloomberg News reported April 13. Some bets were so big that JPMorgan probably couldn’t unwind them without losing money or roiling financial markets, the former executives said.

Bloomberg News first reported April 5 that London-based trader Bruno Iksil had amassed positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market.

After the Bloomberg report, Dimon on a conference call said the news coverage was “a complete tempest in a teapot.”

The losses disclosed today were “a little bit to do with the article in the press,” Dimon said, without specifying who in the bank oversaw the trades. “I also think we acted a little bit too defensively” to the reports.

‘Flawed, Complex’

Synthetic credit products are derivatives that generate gains and losses tied to credit performance without the owner buying or selling actual debt. The losses occurred as the company sought to unwind a portfolio of the instruments used to hedge JPMorgan’s credit exposure.

“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored,” Dimon said.

JPMorgan said the losses were partly offset by gains from the sales from its available-for-sale credit portfolio, resulting in a net loss for the firm’s corporate division, which includes the CIO, of about $800 million after taxes. The losses could widen or narrow during the rest of the quarter, Dimon said.

The bank is “repositioning” the synthetic credit portfolio, and the CIO “may hold certain of its current synthetic credit positions for the longer term,” the firm said.

To contact the reporter on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net

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

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Biden Said to Apologize to Obama for Gay Marriage Remarks

By Mike Dorning - May 11, 2012 5:19 AM GMT+0700

Vice President Joe Biden apologized to President Barack Obama for making remarks that prompted the president to disclose his support for same-sex marriage before he planned to, according to an administration official.

Biden delivered the apology to the president yesterday morning, before Obama gave an interview to ABC News in which he said he’s had a change of heart and now supports legal gay marriage, the official said.

Biden’s remarks in a May 6 broadcast of NBC’s “Meet the Press” that he is “absolutely comfortable” with same-sex marriage forced the president to speed up his timetable for revealing his position, administration officials said.

“The president has been the leader on this issue from Day One and the vice president never intended to distract from that,” Kendra Barkoff, Biden’s press secretary, said in an e- mail. The New York Times reported the apology earlier.

In the ABC News interview in which he revealed his change in stance, Obama said Biden “probably got out a little bit over his skis” in making his remarks “out of a generosity of spirit.”

While Obama said he would have preferred to announce his stance “in my own way, in my own terms,” there were no hard feelings.

“All’s well that ends well,” Obama said.

Setting Timing

Administration officials who briefed reporters on the president’s decision to make public his support for same-sex marriage said Obama had changed his stance earlier this year. The president and about a half-dozen aides were still deliberating the time and place for the announcement when Biden made his remarks on “Meet the Press.”

The president’s advisers knew that Biden, though speaking on his own, would effectively be voicing a new policy when the recorded interview aired, according to the officials.

Gay rights advocates stepped up pressure on the White House for Obama to take a stand in favor of same-sex marriage following broadcast of Biden’s statement. Education Secretary Arne Duncan also expressed his support when asked about the issue the day after Biden’s statements aired.

While Obama’s spokesman, Jay Carney, said on May 7 he didn’t have any update on the president’s previous declaration that his view was “evolving,” other members of Obama’s team were working on ways to present the issue.

Interview Set

On May 8, before Obama left Washington for a trip to Albany, New York, to talk about the economy, Obama’s communications office called ABC News to arrange the interview, officials said.

Biden has previously stepped on the administration’s message with public statements.

At a retreat for Democratic House members in February 2009, shortly after taking office, Biden told his audience about an Oval Office conversation on reviving the economy, saying, “if we do everything right, if we do it with absolute certainty, we stand up there and we make really tough decisions, there’s still a 30 percent chance we’re going to get it wrong.”

A week later, Obama was asked about it at a White House news conference.

“You know, I don’t remember exactly what Joe was referring to, not surprisingly,” Obama said to laughter. He said his vice president “may have been suggesting” that “given the magnitude of the challenges that we have, any single thing that we do is going to be part of the solution, not all of the solution.”

In March 2010, an open microphone picked up Biden whispering into Obama’s ear before he signed landmark health- care legislation, “This is a big f----ng deal.”

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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Sukhoi SuperJet Disappears During Indonesia Demo Flight

By Yudith Ho and Andrea Rothman - May 10, 2012 6:01 AM GMT+0700

The search continued for a Russian Sukhoi SuperJet 100 that vanished from radar screens during a brief promotional flight in Indonesia yesterday with 50 people on board, as poor weather complicated the rescue effort.

Indonesia’s National Search & Rescue Agency deployed more than 100 people to track down the aircraft that disappeared in the afternoon in West Java. Helicopters were forced to abort an earlier mission and will resume their search today. Sukhoi representatives said they were heading for Jakarta to support the effort, along with Russia’s Ministry of Industry & Trade.

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Relatives of passengers on the ill-fated Russian Sukhoi Superjet 100 grieve at the arrival area of Halim airport in Jakarta on May 9, 2012. Photographer: Romeo Gacad/AFP/GettyImages

The twin-engine aircraft, which can carry about 100 people, lost contact after descending to 6,000 feet (1,828 meters) on its second flight of the day during a promotional tour of Asian countries. The SuperJet, developed with support and equipment of Western partners, is the spearhead in Russia’s attempt to revive the nation’s aerospace industry and modernise the fleet following the 1991 collapse of the Soviet Union.

“I cannot say that it has crashed,” Daryatmo, head of the Search and Rescue Agency, said at a press briefing at Halim Perdana Kusumah airport. “What we can say at the moment is that it has lost contact.” .

The terrain in the West Java province reaches 10,000 feet around the peak of the Ciremai volcano. The Sukhoi had taken off from the Halim Perdana airport as part of a tour of Asia that had included previous stints to Myanmar, Pakistan and Kazakhstan. Further appearances were planned in Laos and Vietnam, Olga Kayukova, a spokeswoman for Sukhoi owner United Aircraft Corp., said by telephone.

Proper Condition

The aircraft has an operating range of as much as 4,578 kilometers (2,845 miles) and is a challenger to similar-sized jets from Bombardier Inc. (BBD/B) and Brazil’s Embraer SA. (EMBR3) Sukhoi said the jet used in Jakarta had gone through the “full pre-flight check” and displayed the “proper technical condition.”

The second demonstration flight for the day followed a first tour that had gone “without any technical problems,” Sukhoi said in a statement on its website. Commanding the jet were a “very experienced crew” consisting of Chief Test Pilot Alexander Yablontsev and co-pilot Alexander Kochetkov, it said.

The Sukhoi SuperJet carried 42 passengers and eight crew, Sunaryo, an official from PT Trimarga Rekatama, said at a press conference yesterday in Jakarta. Trimarga Rekatama is Sukhoi’s agent in Indonesia.

Prone to Accidents

The SuperJet was developed in a venture with Finmeccanica SpA (FNC)’s Alenia Aeronautica SpA, which is helping market the plane. Russia’s aviation industry has sought to overcome the image of outdated aircraft prone to accidents. Last year, the country suffered 99 deaths after five jetliner accidents through late September, according to the most recent figures available from researcher Ascend Worldwide Ltd.

Following an accident last year when a plane carrying the Lokomotiv Yaroslavl hockey team failed to gain altitude, then- President Dimitry Medvedev said Russia might turn to foreign aircraft producers to ensure safety of air travel.

The age of Russia’s domestically manufactured single-aisle aircraft fleet is between 25 and 30 years, while the U.S. fleet averages around 13 years, according to figures published late last year by Ascend, a London-based aviation consultant company.

“It’s a setback, but we don’t know anything about the causes yet,” said Richard Aboulafia, vice president of the Teal Group, an aviation forecaster in Fairfax, Virginia. “Russia’s jetliner industry completely lost its competitiveness after the Cold War and shrank to almost nothing.”

Muted Interest

Customers for the SuperJet included Armenia’s Armavia and Russia’s flagship airline OAO Aeroflot, and the eight aircraft in service for two carriers have accumulated more than 3,500 flights. PT Sky Aviation, an Indonesian carrier, has ordered 12, and the Asian tour was an attempt to raise the aircraft’s profile with prospective customers.

While European carriers including Air France-KLM Group and Deutsche Lufthansa (LHA) AG initially said they were studying the plane, neither has so far placed orders. The SuperJet’s main competitors are the CRJ900 built by Bombardier and the E175 and E190 models by Embraer.

Seating five abreast, the plane is powered with engines built by PowerJet, a joint venture between French engine maker Snecma, a unit of Safran SA (SAF), and NPO Saturn. Safran’s Messier- Dowty unit also provides the integrated landing gear system, with B/E Aerospace providing the doors. Italy’s Avio provides the gearbox for the propulsion systems and Safran’s Aircelle unit provides the engine nacelles.

Development and capital costs were about $1 billion, according to Fairfax’s Teal, with another $1 billion for the engines and customer support. The list price is $28 million. The aircraft had 170 orders in total, according to Teal. Sukhoi itself has not disclosed order numbers.

To contact the reporters on this story: Yudith Ho in Singapore at yho35@bloomberg.net; Andrea Rothman in Paris at aerothman@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net

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Greece Euro-Exit Debate Goes Public

By James G. Neuger - May 10, 2012 5:01 AM GMT+0700

From the monetary fortress of the European Central Bank to the pro-European duchy of Luxembourg, policy makers are beginning to air their doubts that Greece can stay in the euro.

Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes.

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The euro fell for the eighth day as it dawned on investors that Greek voters’ revolt against austerity, and not the victory of Socialist Francois Hollande in France, was the more significant of the two national elections in the EU on May 6. Photographer: Simon Dawson/Bloomberg

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May 10 (Bloomberg) -- Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, talks about the global economy and Europe's sovereign debt crisis. He speaks from Connecticut with Susan Li on Bloomberg television's "First Up." (Source: Bloomberg)

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May 10 (Bloomberg) -- Elena Panaritis, a former Greek member of parliament for the socialist Pasok party, talks about the outlook for the nation's debt crisis and possible exit from the euro zone. Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes. Panaritis speaks from Athens with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 9 (Bloomberg) -- Riccardo Barbieri, chief European economist at Mizuho International Plc, talks about European Union fiscal cooperation and the prospects for another round of Greek elections in June. He speaks with Manus Cranny on Bloomberg Televisions's "Last Word." (Source: Bloomberg)

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May 9 (Bloomberg) -- Robert Jukes, global strategist at Collins Stewart Wealth Management, discusses global investment strategy and controls against portfolio risk. He speaks with Linzie Janis and Mark Barton on Bloomberg Televisions's "Countdown." (Source: Bloomberg)

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May 9 (Bloomberg) -- Bank of Italy Director General Fabrizio Saccomanni talks about Greece's bailout terms and the outlook for the Italian economy. He speaks with Bloomberg Television's David Tweed in Florence, Italy. (Source: Bloomberg)

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A German activist, member of the Frankfurter 'Occupy Public Space,' outside the German embassy in Athens protesting 'against the austerity and debt politics in the EU forced by the German government'. Photographer: Simela Pantzartzi/EPA/Landov

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Alexis Tsipras, center, leader of Greece's radical left coalition SYRIZA, leaves Greek President Karolos Papoulias' office in Athens on May 8, 2012. Photograph: Kyodo/Landov

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Wolfgang Schaeuble, Germany's finance minister. Photographer: Jock Fistick/Bloomberg

“If Greece decides not to stay in the euro zone, we cannot force Greece,” German Finance Minister Wolfgang Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels yesterday. “They will decide whether to stay in the euro zone or not.”

After 386 billion euros ($499 billion) in aid pledges for Greece, Ireland and Portugal, 214 billion euros in ECB bond purchases and another trillion euros in low-interest loans for banks, plus 17 high-level crisis summits, Greece’s political chaos thrust Europe into a perilous new phase.

The world is witnessing an “important moment in European Union history, a moment of crisis,” EU President Herman Van Rompuy said in Brussels on the 62nd anniversary of the declaration by Robert Schuman, then France’s foreign minister, that launched postwar European integration.

Euro’s Drop

The euro fell for the eighth day as it dawned on investors that Greek voters’ revolt against austerity, and not the victory of Socialist Francois Hollande in France, was the more significant of the two national elections in the EU on May 6.

Bonds of at-risk countries have suffered since the balloting. Spain’s extra 10-year yield over German levels widened to 456 basis points from 415 at the end of last week. Italy’s widened to 408 basis points from 385 over the same timespan. The euro bought $1.2950 at 6:15 p.m. in Brussels, bringing its eight-day loss to 2.4 percent.

“Politically speaking, Greece is already out of the euro zone,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mailed note. “The only question is about the timing and disorderliness of its exit.

The Greek parties running on an austerity-for-rescue platform took one-third of the vote. Top vote getter Antonis Samaras failed to assemble a government, throwing in the towel after a few hours. Second-place finisher Alexis Tsipras of the Syriza party began coalition talks with an ultimatum to would-be partners to renounce support for the bailout.

‘Catastrophic Uncertainty’

The response outside Athens left little room for maneuver. Schaeuble said that fiddling with the bailout terms would unleash ‘‘catastrophic uncertainty’’ in financial markets, and the central bank’s verdict came from his former deputy, Joerg Asmussen.

‘‘Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,’’ Asmussen, who last year moved from the German Finance Ministry to the ECB board, told Handelsblatt in an interview published yesterday.

With polls showing roughly the same proportion of Greeks wanting to stay in monetary union while opposing austerity, the haggling over the future government and possible elections next month put the country before two incompatible options.

‘Very Painful’

‘‘If 80 percent of Greeks want to stay in the euro, then I think they have to support parties that are in favor of this policy of staying in the euro,’’ Luxembourg Foreign Minister Jean Asselborn said at the Brussels conference. Otherwise ‘‘comes the point where Greece unfortunately has squandered the opportunity and that will be very, very painful for the people.’’

European treaties label the euro ‘‘irrevocable’’ and provide no legal procedure for a country to leave or be thrown out. A December 2009 study by the ECB’s legal department deemed an ouster or departure ‘‘so challenging, conceptually, legally and practically, that its likelihood is close to zero.’’

Europe’s crisis managers put the odds at zero until last November, when German Chancellor Angela Merkel and French President Nicolas Sarkozy turned a planned Greek referendum on austerity into an in-or-out vote on Greece’s euro future.

The referendum was dropped and the Greek leader who mooted it, George Papandreou, was out within days. A nonpartisan government led by former ECB Vice President Lucas Papademos took over. Unlike Italy, which got a technocratic government at the same time, Greek politicians gambled on early elections.

Re-Vote

With the coalition talks in Athens at risk of stalemating, another vote may come as soon as next month.

Merkel’s first finance minister, Peer Steinbrueck, questioned whether a new election would yield a functioning government with the mandate to deliver the additional savings demanded by international donors.

Greece may be mired in ‘‘a fragile, virtually paralyzed situation for months,” Steinbrueck, a potential challenger to Merkel in Germany’s 2013 election, said at the Brussels conference.

The next Greek ballot “will be a referendum on continued euro membership,” said John Stopford, co-head of fixed income and currency in London at Investec Asset Management, which oversees about $90 billion. “As last week’s election shows, it’s going to be a close-run thing.”

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

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

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Dow Falls 6th Day in Longest Slump Since August on Greece

By Rita Nazareth - May 10, 2012 4:17 AM GMT+0700

The Dow Jones Industrial Average (INDU) declined for a sixth straight day, the longest losing streak since August, amid concern Greece’s debt crisis is worsening as the nation struggles to form a coalition government.

Equities trimmed losses as Europe’s bailout fund said it will pay the next installment of aid to Greece. General Electric Co. (GE) and JPMorgan Chase & Co. (JPM) slid more than 1.7 percent to pace declines among the largest companies. Macy’s Inc. (M), the owner of its namesake department stores, slumped 3.7 percent as its profit forecast for this year trailed projections. Walt Disney Co. (DIS) advanced 1.6 percent, to an all-time high, after the world’s largest entertainment company said earnings surged 21 percent.

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Stocks pared losses as the European Financial Stability Facility’s Board of Directors confirmed the release of 5.2 billion euros ($6.7 billion) from a first installment of 39.4 billion euros by the end of June. Photographer: Richard Drew/AP Photo

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May 9 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. The Dow Jones Industrial Average declined for a sixth straight day, the longest losing streak since August, amid concern Greece’s debt crisis is worsening as the nation struggles to form a coalition government. (Source: Bloomberg)

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May 9 (Bloomberg) -- Bloomberg’s Betty Liu, Adam Johnson and Matt Miller report on today’s ten most important stocks including Macy's, Metro PCS and Cisco. (Source: Bloomberg)

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May 9 (Bloomberg) -- Bloomberg’s Adam Johnson reports on the seasonality charts of the S&P 500, oil and economic surprise index. (Source: Bloomberg)

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May 9 (Bloomberg) -- James Swanson, chief investment strategist at MFS Investment Management, and Frederick Lane, vice chairman for investment banking at Raymond James Financial, talk about their investment strategies. They speak with Betty Liu and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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May 9 (Bloomberg) -- Dean Curnutt, chief executive officer of Macro Risk Advisors LLC, talks about Federal Reserve policy, market conditions and volatility. He speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

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May 9 (Bloomberg) -- Abhay Deshpande, portfolio manager at First Eagle Investment Management, talks about strategy and stock picks. He speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

The Standard & Poor’s 500 Index fell 0.7 percent to 1,354.58 at 4 p.m. New York time, a two-month low. The Dow slid 97.03 points, or 0.8 percent, to 12,835.06. It had the longest slump since Aug. 2, three days before S&P stripped the U.S. of its AAA credit rating. About 7.8 billion shares changed hands on U.S. exchanges, or 18 percent above the three-month average.

“It’s a tense situation in Greece,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “The elections in Europe opened up the possibility of a new look at bailout packages. That’s tough to analyze and uncertainty as always troubles investors.”

Global stocks fell as Greece’s political turmoil looks set to enter a fourth day with coalition talks deadlocked. The standoff has reignited concerns over its ability to hold to the terms of its two bailouts negotiated since May 2010. With Parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.

5.2 Billion Euros

Equities pared declines as the European Financial Stability Facility’s Board of Directors confirmed the release of 5.2 billion euros ($6.7 billion) from a first installment of 39.4 billion euros by the end of June.

Some investors also said the market trimmed losses as the S&P 500 traded near 1,350 (SPX), a support level for traders. Peter Jankovskis, at Oakbrook Investments, said that equities could resume their rally with positive developments in Europe. The index has risen 7.7 percent in 2012 amid better-than-estimated corporate profits. About 70 percent of S&P 500 companies that reported results since the start of the earnings season have topped projections, according to data compiled by Bloomberg.

“Corporate earnings have continued to be good,” Jankovskis, who helps manage $2.9 billion, said in a telephone interview from Lisle, Illinois. “There’s reason to be encouraged about American stocks.”

Volatility Jumps

Concern about Europe’s debt crisis helped drive the S&P 500 down 3.1 percent in May. All 10 groups in the benchmark gauge retreated today. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 5.4 percent to 20.08, the highest level since April 10.

The Dow Jones Transportation Average, a proxy for the economy, lost 1.4 percent. FedEx Corp. (FDX), the operator of the world’s biggest cargo airline, slid 2.1 percent to $87.13. GE decreased 1.8 percent to $18.91. The KBW Bank Index (BKX) dropped 1.6 percent. JPMorgan sank 1.8 percent to $40.64.

Moody’s Investors Service will this month start cutting the credit ratings of more than 100 banks, a move that risks pushing up their funding costs and forcing them to curb lending in a threat to economic growth.

BNP Paribas SA, France’s biggest lender, Deutsche Bank AG, Germany’s largest, and New York-based Morgan Stanley are among firms that face having their short- and long-term debt downgraded to their lowest-ever levels by Moody’s, the ratings company said in February.

Macy’s Slumps

Macy’s declined 3.7 percent to $38.05. The company repeated its forecast that profit this year would be $3.25 to $3.30 a share. Analysts estimated $3.39, on average.

Carlyle Group LP (CG) sank 1.1 percent to $21.75, slumping below the $22 offering price in its fifth day of trading, following a discounted IPO with which the firm sought to prove that shares in private-equity managers can rise.

Disney rose 1.6 percent, the most in the Dow, to $45.02. The record weekend opening of “Marvel’s The Avengers,” while not a factor in the second quarter ended March 31, was a focus of yesterday’s conference call with analysts. Disney is working on a sequel, racing to get more “Avengers” merchandise in stores and plotting to get the characters in its parks.

A measure of homebuilders in S&P indexes rallied 2.6 percent. Prices for single-family homes climbed in half of U.S. cities in the first quarter as real estate markets stabilized.

Merger Talks

MetroPCS Communications Inc. (PCS) surged 14 percent, the biggest gain in the S&P 500, to $7.50. Deutsche Telekom AG is discussing a merger of its T-Mobile USA unit with MetroPCS as it reviews options for the customer-losing business, according to people familiar with the matter.

Avon Products Inc. (AVP) gained 9.3 percent to $21.60 after JAB Holdings B.V. announced plans to sell 36 million shares of Reckitt Benckiser Group Plc to fund investments, including its proposed acquisition of Avon.

Dean Foods Co. (DF) rose 11 percent to $14.15. The biggest U.S. dairy processor boosted its full-year forecast, saying it now expects to earn at least $1.10 a share. Analysts, on average, estimated 95 cents.

U.S. stocks are less than expensive regardless of the price-earnings ratio used to value them, said Richard Bernstein, chief executive officer of Richard Bernstein Advisors LLC.

Ratio Comparison

A comparison of the S&P 500’s multiple to earnings from the previous four quarters along with a ratio, compiled by Yale University Professor Robert J. Shiller, that’s based on 10 years of income, put the index’s value at respectively 13.8 times and 22.2 times profit.

“The market looks at worst reasonably valued, at best downright cheap,” Bernstein said in an interview with Robert Huebscher, founder and CEO of the Advisor Perspectives website, that was published yesterday.

Both price-earnings indicators look “better than normal” after taking interest rates into account, he said. The average yield on 10-year Treasury notes has fallen to 2.01 percent this year from 2.76 percent for all of last year, according to data compiled by Bloomberg.

P/E ratios are poised to rise, he said during the April 30 interview, as economic weakness in Europe and slower growth in emerging markets spur demand for U.S. assets.

“People are underestimating the risk outside the U.S. and overestimating the risk inside it,” said Bernstein, based in New York. “Over the next several years, there is going to be a reevaluation of those risks, and we should get higher multiples in the U.S.”

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

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

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Jaguar F-Type Revisits Swinging ‘60s to Challenge Porsche: Cars

By Steve Rothwell - May 9, 2012 7:35 PM GMT+0700

Jaguar is invoking its iconic E-Type roadster to challenge Mercedes-Benz and Porsche with its first two-seat sports car in almost four decades.

The F-Type, due to be unveiled in September and go on sale as soon as next April, will be Jaguar’s smallest auto in more than a half-century as the marque seeks a return to its sporting tradition following decades spent focusing on luxury sedans.

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Jaguar says the F-Type, a production version of its C-X16 concept car, seen here, minus the hybrid engine, is more than just a marketing ploy, and that the model will make money. Photographer: Jason Alden/Bloomberg

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May 9 (Bloomberg) -- The Jaguar C-X16 concept sports car is seen in a promotional video from Jaguar Land Rover Plc. The company's F-Type production roadster, due to be unveiled in September, is based on the C-X16. (Video courtesy of Jaguar Land Rover Plc. Source: Bloomberg)

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May 9 (Bloomberg) -- Bloomberg's Betty Liu and Dominic Chu report that Jaguar is invoking its iconic E-Type roadster to challenge Mercedes-Benz and Porsche with its first two-seat sports car in almost four decades. They speak on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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The E-Type, seen here, introduced at the 1961 Geneva Motor Show, was described by Ferrari founder Enzo Ferrari as “the most beautiful car ever built,” and became synonymous with the London of the “Swinging Sixties.” Source V&A via Bloomberg

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Beijing auto show attendees walk past a large poster for a Jaguar automobile. Photographer: Nelson Ching/Bloomberg

“If the product can do what the original E-Type did for Jaguar, it will be a huge boost,” said Peter Schmidt, managing director of Warwick, England-based Automotive Industry Data. “What they’re doing is laudable, it’s good for the brand and it’s good for the image. But nobody should expect miracles.”

The E-Type, introduced at the 1961 Geneva Motor Show, was described by Ferrari founder Enzo Ferrari as “the most beautiful car ever built,” and became synonymous with the London of the “Swinging Sixties.” Yet it has taken the $2.5 billion purchase of Jaguar by India’s Tata Motors Ltd. (TTMT) in 2008 for a pure-bred sports model to return to favor at the British manufacturer.

Tata, which acquired the Jaguar and Land Rover brands from Ford Motor Co. and combined them into a single unit, plans to invest $12 billion over five years to win a bigger slice of an upscale market dominated by German automakers.

Tata Motors fell 1.2 percent to 292.85 rupees in Mumbai trading today. The shares have still advanced 64 percent this year, exceeding gains of 30 percent for Bayerische Motoren Werke AG (BMW), 18 percent at Volkswagen AG (VOW), parent of luxury carmaker Audi, and 13 percent at Daimler AG (DAI), which owns Mercedes-Benz.

‘Twin Job’

Jaguar says the F-Type, a production version of its C-X16 concept car minus the hybrid engine, is more than just a marketing ploy, and that the model will make money.

“We’re too small a company for it not to be a viable business proposition,” spokesman Angus Fitton said. “It’s got to pay for itself and generate profit, but it has got to do a twin job in that it will be a brand-building job as well.”

Jaguar has yet to say how much the F-Type will cost, though the “speculated price” for the first variant, a convertible, is about 55,000 pounds ($89,000), putting it in a niche where there’s little overlap with competitors’ models and helping to reduce the average age of Jaguar’s customer base, Fitton said.

The third generation of Porsche AG’s Boxster roadster went on sale in Germany last month at 48,300 euros ($62,800), while the Carrera Cabriolet, the cheapest convertible version of the Stuttgart-based company’s 911 model, sells for 100,500 euros.

Three Models

The F-Type will also sit between the Mercedes SLK compact roadster, which costs 38,700 euros, and the Daimler brand’s new SL, available in Europe from March 31 and priced from 93,500 euros, as well as the 31,500-euro TT Roadster and 123,200-euro R8 Spyder from VW’s Ingolstadt-based Audi. BMW’s only two-seat convertible is the 36,400-euro Z4.

Jaguar’s current lineup is based on three models, two of them sedans, with the XJ positioned to compete with the BMW 7- Series and Mercedes S-Class and the mid-range XF an alternative to the 5-Series and E-Class from the two German companies.

The third model, the XK, is available as a four-seat convertible for 99,400 euros and was regarded as the closest thing to an E-Type successor when it was introduced in 1996 to replace the XJS, which itself ousted the 1960s icon in 1975.

The F-Type will be made at Jaguar’s Castle Bromwich plant near Birmingham, England. The company, which currently operates from three U.K. sites, said March 21 it had agreed to form a venture with Chery Automobile Co. Ltd. to build cars in China.

The new model will come with a 3-liter supercharged V6 engine tuned to either 335 or 375 horsepower and later with a 5- liter V8, according to Fitton. With a top speed of 155 miles per hour, it will only be produced in a two-seat layout.

Production Plans

While that may help restore Jaguar’s sporting credentials established with the 100-mph SS100 in 1938 and buoyed by seven victories in the Le Mans 24 Hour Race with models including the C-Type and D-Type, the F-Type won’t deliver the volumes needed for the part-sharing and economies of scale required to compete with larger manufacturers, said Garel Rhys, director of Cardiff University’s automotive industry research center.

BMW, the Munich-based luxury-car leader, boosted deliveries 13 percent last year to 1.38 million cars and sport-utility vehicles, while Audi ranked second with 1.3 million autos and Stuttgart-based Mercedes-Benz placed third with 1.26 million.

SUV-Led

Jaguar Land Rover, by contrast, sold 314,433 vehicles in the 12 months ended March 31. While that represented a 29 percent increase from a year earlier, deliveries of Land Rover SUV’s accounted for more than 80 percent of total output.

“You can’t go on like that,” Rhys said. “You need that volume, you really do. There has to be much more carry-over between Jaguars and Land Rovers under the skin of the cars.”

The relatively narrow model range also leaves Jaguar vulnerable to sudden shifts in consumer taste, especially as buyers begin to switch to smaller, more fuel-efficient models, according Andrew Jackson, an analyst at Datamonitor in London.

“Because they only have three vehicles, they’re somewhat exposed once they get to the end of their life cycle,” he said. “The competition could be providing something that might be a bit cheaper, that looks better or might be better fitted.”

Rhys said he reckons Jaguar Land Rover wants to lift deliveries to as many as 650,000 a year by 2016 and predicts it will announce a new model in the next six months aimed at competing with BMW’s best-selling 3-Series in the small- to mid- sized sedan market.

“They do need something like that,” he said. “Unless you have a vehicle with sales of 150,000 a year, you’re really going to be hard-pressed to justify the Jaguar brand long-term.”

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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Greek Leaders Given Bailout Ultimatum

By Maria Petrakis and Natalie Weeks - May 9, 2012 4:00 AM GMT+0700

Alexis Tsipras of Greece’s Syriza party squared off with political leaders before talks on forming a coalition, handing them an ultimatum to renounce support for the European Union-led rescue if they want to enter government.

Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Samaras and Venizelos rejected the request. Samaras said he was being asked “to put my signature to the destruction of Greece.”

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Leader of the Greek conservative party New Democracy Antonis Samaras in Athens. Photographer: Aris Messinis/AFP/Getty Images

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May 8 (Bloomberg) -- German Chancellor Angela Merkel, Barton Biggs, managing partner and co-founder of Traxis Partners LP, and Carl Weinberg, founder and chief economist at High Frequency Economics, offer their views on European elections, Greece's debt crisis and the outlook for the euro zone. John Taylor, founder and chief executive officer of FX Concepts LLC; Charles Dallara, head of the Institute of International Finance; Andrew Bosomworth, a managing director at Pacific Investment Management Co., and David Blanchflower, a professor at Dartmouth College and a Bloomberg Television contributing editor, also speak. (Source: Bloomberg)

“He interprets, with unbelievable arrogance, the election result as a mandate to drag the country into chaos,” Samaras said late yesterday in televised remarks. “I hope Mr Tsipras will have come to his senses by the time we meet.” Tsipras is due to meet with political leaders from about 5 p.m. in Athens.

The stand-off since the inconclusive May 6 election has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010. With Parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.

‘Huge’ Repercussions

The repercussions are “potentially huge,” said Gillian Edgeworth, a London-based economist at UniCredit. “The chances of Spain needing official aid would increase, with implications for spillover to others.”

The risk of Greece leaving the euro by the end of 2013 has risen to as high as 75 percent, Citigroup Inc. said May 7.

Greek stocks sank to their lowest level in about two decades yesterday amid the political instability. The benchmark ASE Stock index fell 3.6 percent to 620.54 at the close in Athens, its lowest since November 1992. The Stoxx Europe 600 Index slid 1.7 percent. The euro fell 0.3 percent to $1.3007.

New Democracy and Pasok, rivals until the country’s crisis made them pro-bailout partners in a national government last year, are two deputies short of the 151 seats needed for a majority in the 300-seat chamber. President Karolos Papoulias handed the mandate to build a coalition to Tsipras yesterday, one day after Samaras, who won the election, abandoned his bid to forge a government.

Tsipras said he aimed to link up with parties in a government that would nationalize banks, place a moratorium on debt payments and cancel the bailout and measures such as labor reforms and pension cuts.

‘Plunder’ Greece

“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country,” Tsipras told reporters. “There will be no 11 billion euros ($14 billion) of additional austerity measures; 150,000 jobs will not be cut.”

Samaras said yesterday that his party is prepared to support a minority government as long as it ensured Greece’s membership in the euro and its national interests.

Venizelos said Pasok’s proposal for a national unity government with the participation of all parties with a pro- European orientation was the only solution. Greece must remain “safely” within the euro while pursuing changes to the bailout accord to boost growth, he said.

International creditors urged Greek leaders to hold to the agreed terms of their EU-International Monetary Fund bailouts.

‘No Alternative’

“Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,” European Central Bank Executive Board member Joerg Asmussen was quoted as saying in an interview with Germany’s Handelsblatt newspaper to be published today.

German Foreign Minister Guido Westerwelle called on “the authorities in Greece to quickly move toward stability so that a government of reason can be formed,” telling reporters in Berlin that the steps to be taken in return for aid “are not up for negotiation.”

New Democracy won the election with 19 percent of the vote, gaining 108 seats; Syriza came second with 17 percent, winning 52 seats; and Pasok placed third with 13 percent, or 41 seats.

Tsipras met yesterday with the leader of Democratic Left, which won 19 seats in Parliament and rejects austerity measures. As well as talks with Samaras and Venizelos, he’s due to see the head of Independent Greeks, Panos Kammenos, who has 33 seats.

If Tsipras fails to build a working majority, the onus on forming a government will pass to Pasok. Each mandate can last for three days. If the process still fails to yield a coalition, the president must try to broker a government of national unity, the constitution says. If that fails, new elections are held.

New Elections

“A Greek return to the polls in mid-June looks increasingly likely,” Malcolm Barr, an economist at JPMorgan Chase & Co in London, said in a note. “There is little doubt that the drop in support for New Democracy, Pasok has raised the probability of an eventual euro exit.”

Either New Democracy and Pasok will form a government with the Democratic Left or Greece will hold new elections within weeks, said Thanos Veremis, the vice president of the Hellenic Foundation for European and Foreign Policy. New elections are the more likely scenario, in which case New Democracy and Pasok would see a return of voter support, he said. Veremis was an unsuccessful candidate on May 6 for Drasi, a pro-bailout party that failed to reach the threshold for entering the parliament.

“The Greeks have to blow their top to let the world know they are unhappy,” Veremis said by phone on May 7. “Once they do that, they tend to go back to the real world.”

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net.

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net

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Ross Says Looming ‘Freak Show’ May Threaten U.S. Economy

By Jason Kelly - May 9, 2012 2:29 AM GMT+0700

The U.S. economy is at risk of slipping back into recession in 2013 because of likely impasses in Washington over taxes and mandatory spending cuts, said Wilbur Ross, the billionaire investor.

“That’s too big a hit for the economy to take,” Ross said today during a discussion at Bloomberg Markets’ Global Financial Elite lunch in New York. “We’re going to have another freak show at the end of the year.”

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Wilbur Ross, chairman and chief executive officer of WL Ross & Co. LLC. Photographer: Scott Eells/Bloomberg

Ross said he’s worried that President Barack Obama and Congress won’t be able to agree on extending tax cuts passed under former President George W. Bush that expire at the end of 2012, or on mandatory spending cuts tied to the extension of the country’s debt-ceiling agreement. He said he’s optimistic about the U.S. economy between now and then, and found a new way to describe the shape of the recovery beyond a “W.”

“It’s more like punctuation,” he said. “Dots, dashes, question marks and an occasional exclamation point.”

W.L. Ross & Co., his namesake firm known for buying distressed assets in industries from steel to financial services, is largely avoiding investments in what he called “the Club Med countries” of Europe, according to Ross.

“It’s way too unsettled, even for our tastes, to be in Spain or countries like that just yet,” he said, adding that he has made deals in countries including Ireland. “You have to be very selective within Europe.”

To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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Panasonic Rises After Report It May Swing to Profit

By Mariko Yasu and Shunichi Ozasa - May 9, 2012 8:15 AM GMT+0700

Panasonic Corp. (6752), Japan’s largest appliance maker, rose the most in two months in Tokyo trading after the Nikkei newspaper said it may post a 50 billion yen ($626 million) profit this fiscal year.

Panasonic advanced as much as 4.9 percent, the biggest intraday gain since March 9, to 605 yen and traded at 601 yen as of 9:58 a.m. Japan’s benchmark Nikkei 225 Stock Average lost 1.3 percent.

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Attendees watch a presentation wearing Panasonic 3D glasses. Photographer: David Paul Morris/Bloomberg

The Osaka-based manufacturer, which has said it may post a record 780 billion-yen loss for the year ended March 31, may return to profit this year because of restructuring, the Nikkei reported, without saying where it got the information. The 50 billion-yen projection compares with the 106 billion-yen average of 18 analyst estimates compiled by Bloomberg.

Operating profit may rise to about 250 billion yen this year from 30 billion yen in the previous 12 months, the Nikkei reported. The projection compares with the 241 billion-yen average of 19 estimates compiled by Bloomberg.

Yuko Hosaka, a spokeswoman for Panasonic, said the company wasn’t the source of the report and that it will disclose its earnings May 11.

Panasonic’s revenue may be unchanged this year at about 8 trillion yen while television sales will probably fall below last year’s approximately 18 million units, the Nikkei said. Solar-cell sales will be buoyed by a government subsidy program, the report said.

Panasonic said in February it may post a 780 billion-yen loss for the year ended March 31, the most since the company was founded in 1918, after natural disasters disrupted production while the surging yen eroded overseas earnings and the global economy slowed.

President Fumio Ohtsubo, set to step down as president next month, has said he’s eliminating jobs, shifting output overseas and closing display factories in an attempt to transform Panasonic into a leader in solar panels and rechargeable batteries.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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