Asian Stocks Fall on Valuation Concern; Feng Hsin, Cnooc Drop

By Patrick Rial

June 8 (Bloomberg) -- Asian stocks fell, led by materials producers and energy companies, on concern a three-month rally had made shares expensive relative to earnings prospects.

Feng Hsin Iron & Steel Co., which last week rose to a more than eight-month high, lost 6.5 percent in Taipei. Cnooc Ltd., China’s largest offshore oil producer, sank 2.7 percent as oil prices retreated for a second day. Daido Steel Co. slumped 3.5 percent in Tokyo on a Goldman Sachs Group Inc. downgrade.

“Valuations are not cheap,” said Pauline Dan, chief investment officer at Samsung Investment Trust Management in Hong Kong, which oversees $67.6 billion in assets. “Investors who have been pricing in a quick recovery are wondering whether the ‘green shoots’ we’ve seen will turn into big trees.”

The MSCI Asia Pacific Index fell 0.8 percent at 102.54 as of 4:53 p.m. in Tokyo, with five stocks declining for every four that rose. The measure has climbed 45 percent from a more than five-year low on March 9 on optimism global growth is recovering. The rally drove valuations to an eight-month high.

Japan’s Nikkei 225 Stock Average climbed 1 percent as a weaker yen boosted the earnings outlook for Canon Inc., which gets 28 percent of its revenue in the Americas. Komatsu Ltd., the world’s No. 2 maker of earthmovers, surged 6 percent after two brokerages recommended buying the stock.

South Korea’s Samsung Engineering Co. climbed 4.5 percent after Mirae Asset Securities Co. raised its share-price target. Taiwan’s Taiex Index sank 2.1 percent. Australia’s stock market is closed for a holiday.

Rising Valuations

Futures on the Standard & Poor’s 500 Index lost 0.9 percent. The gauge fell 0.3 percent on June 5 as concern higher borrowing costs will threaten the economic recovery overshadowed the better-than-estimated employment report.

The stock rally since March has lifted the average valuation of companies on MSCI’s Asian index to 1.5 times the book value of assets, the highest level since Sept. 29.

Taiwan’s Taiex Index, which rallied 15 percent last month, had the biggest drop in Asia today. Feng Hsin sank 6.5 percent to NT$49.20. Cathay Financial Holding Co., Taiwan’s largest listed financial-services company, slid 5 percent to NT$48.95, paring its gain in the past month to 7.8 percent.

“Taiwan shares are overvalued after rising so much in May, so there are foreign investors selling ,” said Kevin Yang, who manages $150 million as chief investment officer of Paradigm Asset Management Co. in Taipei.

Best Performers

Cnooc lost 2.7 percent to HK$10.88. Oil futures in New York dropped 1.7 percent in after-hours trading, adding to a 0.5 percent decline on June 5.

PetroChina Co., China’s largest oil producer, sank 2.1 percent to HK$9.19. The drop followed three weeks of gains that took its relative strength index, a gauge of how rapidly prices have risen or fallen, above the 70 threshold some traders use as a sell signal.

Raw materials producers and energy shares are the best performing of the MSCI Asia Pacific Index’s 10 industry groups in the past month on optimism stronger economic growth will fuel demand for oil and metals.

Daido Steel Co. slumped 3.5 percent to 447 yen after being cut to “neutral” from “buy” at Goldman Sachs. The stock closed last week at its highest level since Oct. 1.

Canon, the world’s largest camera maker, rose 3.4 percent to 3,360 yen on optimism a decline in the yen will boost the value of overseas sales. Mazda Motor Corp., which exports about 80 percent of its production, surged 6.1 percent to 294 yen.

Weaker Yen

The yen traded at 98.64 per dollar after weakening to as low as 98.89 on June 5, a level not seen in a month, after U.S. payrolls data boosted demand for the country’s assets. The U.S. Labor Department said on June 5 payrolls fell by 345,000 in May, compared with an average estimate for a decrease of 520,000 jobs in a Bloomberg survey of economists.

“The recent trend has been for the markets to rise on economic recovery hopes, but today’s move is more based on the substantial move by the yen,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co. in Tokyo, which oversees the equivalent of $96 billion.

Stocks rose today even as a government report showed Japan’s current-account surplus narrowed in April as the global recession cut demand for exports. Japan’s former Economic and Fiscal Policy Minister Hiroko Ota said in a June 4 interview that the world’s second-largest economy is likely to stumble again later this year after a temporary rebound.

Komatsu, which gets more than a fifth of its sales in the Americas, jumped 6 percent to 1,560 yen. Morgan Stanley started coverage of the company with an “overweight” recommendation and Nomura Holdings Inc. upgraded the stock to “buy” from “neutral.”

Brokerage Upgrades

Nomura, Japan’s largest brokerage, gained 4.9 percent to 800 yen as it was raised to “overweight” from “equal weight” at Morgan Stanley.

Samsung Engineering, South Korea’s biggest engineering company, climbed 4.5 percent to 86,700 won.

Mirae Asset Securities lifted its target for Samsung Engineering’s share price to 117,000 won from 91,000 won and maintained its “buy” recommendation in a report today. Samsung Engineering submitted the lowest bids for four overseas projects, which should lead to orders, the brokerage said.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

Read more...

Stocks in Europe, Asia Drop; Air France, Vivendi Shares Fall

By Sarah Jones

June 8 (Bloomberg) -- Stocks fell in Europe and Asia amid speculation that share prices have outpaced the prospects for earnings growth after a three-month rally. U.S. futures slid.

Air France-KLM Group dropped for a fourth straight day after the industry’s main trade group said airline losses worldwide may total $9 billion in 2009, nearly double a previous forecast. Vivendi SA slipped 2.5 percent after UBS AG recommended selling the company’s shares.

Europe’s Dow Jones Stoxx 600 Index slipped 1.4 percent at 8:09 a.m. in London. The measure, which has rebounded 32 percent since March 9 on growing speculation that the worst of the first global recession since World War II is over, is valued at 24.9 times the earnings of its companies. That’s the most expensive level since 2004, weekly data compiled by Bloomberg show.

“We are expecting the market to come off a little bit after those strong rallies we saw as the end of last week.” said Joshua Raymond, a London-based market strategist at City Index.

The MSCI Asia Pacific Index fell 0.5 percent, led by commodity producers. Companies in the gauge currently trade at an average 1.5 times the book value of assets, the highest level since Sept. 29.

Futures on the Standard & Poor’s 500 Index slipped 0.7 percent, indicating the benchmark gauge for U.S. equities may retreat after three straight weeks of gains.

Airline Sales

Air France, Europe’s biggest airline, declined 2 percent to 10.63 euros. The International Air Transport Association said that sales may fall 15 percent this year to $448 billion from $528 billion in 2008.

“This is the most difficult situation that the industry has faced,” IATA Chief Executive Officer Giovanni Bisignani said. “Our future depends on a drastic reshaping by partners, governments and industry.”

Separately, Air France said it first noticed flaws with the Airbus A330 speed sensors involved in last week’s deadly crash more than a year ago.

Vivendi decreased 2.5 percent to 18.12 euros after UBS downgraded the owner of the world’s largest music company to “sell” from “neutral” on concern that competition will erode profit at the company’s SFR mobile-phone unit.

Lloyds Banking Group Plc slid 2.3 percent to 64.7 pence after the lender said it received bids for 87 percent of the stock in a share offer. It will offer the remaining shares to investors for at least 38.43 pence each.

Separately, Deutsche Bank AG raised its recommendation on Lloyds to “buy” from “sell.” Deutsche Bank, which last had a “buy” recommendation on Lloyds in July 2008 according to Bloomberg data, increased its price estimate on the shares to 100 pence from 35 pence.

Barclays, BlackRock

Barclays Plc slipped 2.9 percent to 276.75 pence. The U.K.’s third-largest bank said it’s in talks with bidders including BlackRock Inc. for its asset management division. The lender said it received “other proposals” for iShares and the broader Barclays Global Investors business.

The Daily Telegraph reported earlier that Barclays would say today that a $13 billion sale of its BGI unit to BlackRock is almost complete. The newspaper did not say where it got the information. A sale would trigger a potential $585 million windfall for BGI workers and leave Barclays with a 20 percent stake in BlackRock, the newspaper said. A completed deal may be announced June 10, the Telegraph also said.

H. Lundbeck A/S sank 15 percent to 101.75 kroner after the Danish drugmaker and Takeda Pharmaceutical Co. said they will delay submission in the U.S. of an experimental anti-depressant drug by 18 to 24 months until they have established the safest dose.

Arcandor AG dropped 33 percent to 1.26 euros after the German retailer’s spokesman Gerd Koslowski said the company may be forced to file for insolvency today and its survival depends on government aid.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

Read more...

Palm Pre Supplies Are Scarce in First Weekend of Comeback Bid

By Amy Thomson

June 8 (Bloomberg) -- U.S. shoppers clamored for tight supplies of Palm Inc.’s Pre in its debut weekend, marking an early victory in the phone’s bid to challenge the iPhone.

Sprint Nextel Corp., the Pre’s exclusive wireless carrier, ran out of inventory at some stores, putting customers on waiting lists. Less than 100,000 phones may have sold over the weekend, mostly to current Sprint customers, said Jonathan Atkin, an RBC Capital Markets analyst in San Francisco.

While that’s a fraction of the latest iPhone’s sales in its debut weekend, the Pre is helping restore Palm’s reputation as a mobile-phone innovator. The touch-screen device also may slow the exodus of customers at Sprint, which has lost more than 4 million contract subscribers in the past year.

“They’ll probably sell as many as get produced for the foreseeable future,” said Atkin, who expects Sprint’s shares to perform in line with industry peers and doesn’t own the stock. “What they didn’t have last year was anything truly competitive on the device front.”

Leslie Letts, a spokeswoman for Sunnyvale, California-based Palm, declined to comment on the sales. Sprint isn’t disclosing the numbers, said Mark Elliott, a spokesman for the Overland Park, Kansas-based company.

The Pre supplements its touch screen with a slide-out keyboard, giving it a feature the iPhone lacks. The Pre’s operating system is designed to make switching between applications easier. The device also can combine calendars, contacts and messages from different accounts.

Same Price

Like the iPhone, it synchronizes with Apple’s iTunes music store. The Pre’s $199 price, after a two-year contract and mail- in rebate, also matches the iPhone’s.

Sprint has exclusive rights to the Pre through at least the end of the year. Larger rivals Verizon Wireless and AT&T Inc. have said they’re interested in carrying the phone.

Chicago-area Sprint stores received 30 to 50 of the devices, said Jennifer Fritzsche, an analyst at Wachovia Securities Inc. Some locations expect to get new shipments by June 10, she said. One Best Buy Co. store in New York said it only received three Pre phones.

Apple sold 1 million iPhone 3Gs in the device’s first three days of release in 2008, 10 times the number Atkin estimated for the Pre.

“There’s not quite the base of Palm fanatics as there is Apple fanatics,” he said. The iPhone also debuted in 21 countries. The two weekends are “not quite comparable,” he said.

‘About Time’

Beverly Durham, a 51-year-old insurance claims adjuster from Pasadena, California, lined up outside a neighborhood store before 8 a.m. on June 6, the day of the phone’s release.

“I’ve been a Sprint customer forever,” she said. “It’s about time Sprint came out with a new phone.”

Sprint’s store on Mission Street in San Francisco sold 60 Pre phones within two hours before running out, manager Daniel Chan said. The outlet started a waiting list and will get the next consignment in a few days, he said. About half the people who bought the Pre were iPhone owners, he said.

Misha Vladimirskiy, a 30-year-old photographer from San Francisco, is on that waiting list. He was told he should get his Pre in five days.

“I don’t mind waiting,” said Vladimirskiy, whose last three phones were from Palm.

Estimates Vary

Palm may sell about 150,000 Pre phones over the weekend, said Lawrence Harris, an analyst at CL King & Associates in New York. He has a neutral rating on the stock.

Michael Walkley, an analyst at Piper Jaffray & Co. in Minneapolis, put the number at almost 200,000. He advises buying Palm’s shares. Paul Coster, an analyst at JPMorgan Chase & Co. in New York, estimated weekend sales of more than 50,000.

Palm aims to win back customers for smart phones, a market the company helped create, after losing ground to Apple and Research In Motion Ltd. Palm is expected to post its third straight year of losses and declining sales, according to a Bloomberg survey of analysts.

In 2007, Palm hired former Apple executive Jon Rubinstein, who worked on the iPod, to create the Pre. Venture capital firm Elevation Partners invested $425 million in Palm, buying about a third of the company, and helped guide the development of the new phone.

“So far, it is fantastic,” said Chris Lee, a 28-year-old architect from New York who bought the Pre the first day. “There are some similar features to the iPhone,” said Lee, who gave up his iPhone 3G after eight months of service with AT&T. “But it feels more fresh.”

Palm’s Stock

Palm shares have quadrupled this year on anticipation that the Pre will be a hit. The stock fell 64 cents to $13 in Nasdaq Stock Market trading on June 5. Sprint rose 8 cents to $5.11 on the New York Stock Exchange. Apple climbed 93 cents to $144.67 on the Nasdaq.

Sprint and Palm aren’t alone in releasing new products. The Pre’s debut coincides with Apple’s annual developers’ conference. Cupertino, California-based Apple plans to unveil a new operating system for the iPhone this week.

Apple Chief Executive Officer Steve Jobs has demonstrated a new version of the iPhone the past two years at the conference. Steve Dowling, a company spokesman, declined to comment.

Verizon Wireless, the largest U.S. wireless carrier, is introducing new phones as well, including new BlackBerrys and a model based on Google Inc.’s Android software.

Smart Phones

Smart phones represent a pocket of growth in the wireless industry. The devices made up 23 percent of U.S. phone sales last quarter, up from 17 percent a year earlier, according to research firm NPD Group Inc. in Port Washington, New York.

Smart phones also bring in more revenue for carriers, since customers pay extra for Web access, software applications and messaging.

Sprint requires Pre buyers to sign up for the Simply Everything plan, which includes unlimited data and messaging for at least $69.99 a month. AT&T charges iPhone users the same amount without messaging, according to the company’s Web site. In addition to Sprint stores, Best Buy, RadioShack Corp. and some Wal-Mart Stores Inc. are carrying the Pre.

“For Palm, what’s at stake is its reputation,” said Andy Castonguay, a research director at Yankee Group in Boston. “This is, I think, without exaggeration, a fundamental step forward if the company is going to continue to be relevant.”

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

Read more...

KKR to Sell Private-Equity IPOs Through Fidelity Investments

By Jason Kelly

June 8 (Bloomberg) -- KKR & Co. agreed to sell shares of its private-equity companies through Fidelity Investments as the firms prepare for an increase in initial public offerings.

Fidelity, the world’s biggest mutual-fund company, will exclusively distribute offerings backed by New York-based KKR to individual investors, the companies said today in a statement. Fidelity, based in Boston, has 12 million brokerage clients.

A slump in IPOs has made it hard for private-equity firms to sell their investments. Companies in the U.S. raised $29.6 billion through IPOs in 2008, down 45 percent from 2007, according to data compiled by Bloomberg.

“When the IPO market returns, our distribution network is going to be very interested in getting back involved,” said Mark Haggerty, president of Fidelity Capital Markets, the company’s institutional trading division.

KKR, founded by Henry Kravis and George Roberts in 1976, is seeking business beyond leveraged buyouts as deal-making remains hindered by the global recession and banks’ unwillingness to lend. The firm’s capital-markets unit, headed by former Citigroup Inc. managing director Craig Farr, has underwritten debt and equity offerings for holdings including software maker SunGard Data Systems Inc..

“This allows us as an underwriter to have a terrific retail distribution,” Farr said in an interview. “It’s a continued evolution of this business.”

KKR has about 50 private companies generating more than $200 billion in annual revenue, including Energy Future Holdings Corp., the Texas power producer formerly known as TXU Corp., and discount retailer Dollar General Corp.

Distribution Network

KKR had $47.3 billion under management as of March, according to an investor presentation released last month. Fidelity also can set up programs to sell securities directly to employees of KKR-owned companies, according to the statement.

Haggerty oversees Fidelity’s prime-brokerage unit, which loans stocks and clears trades for hedge funds, along with the retail unit. Fidelity is broadening those businesses as fees from its main business of managing client’s assets fell last year with the decline in U.S. stocks.

To contact the reporters on this story: Jason Kelly in New York at Jkelly14@bloomberg.net

Read more...

Fink Aspires to Be No. 1 Fund Manager With Barclays Unit Offer

By Sree Vidya Bhaktavatsalam and Jon Menon

June 8 (Bloomberg) -- BlackRock Inc., the bond boutique co- founded in a one-room office by Laurence Fink in 1988, is a step closer to becoming the world’s biggest money manager after emerging as the leading bidder for Barclays Plc’s fund unit.

Fink has moved ahead of contenders for Barclays Global Investors including Bank of New York Mellon Corp., three people familiar with the talks said late last week. London-based Barclays, the U.K.’s third-largest bank, is seeking more than $12 billion for BGI, and may keep a 20 percent stake in the unit, one of the people said.

Barclays Global, which oversees $1.5 trillion, would be Fink’s biggest acquisition, building on his 2006 takeover of Merrill Lynch & Co.’s asset-management business. That deal pushed the New York-based company deeper into actively managed stock funds. BGI would add passive investments where rivals such as Pacific Investment Management Co. aren’t as competitive.

“This could be a transformational deal,” Burton Greenwald, a mutual-fund consultant based in Philadelphia, said in an interview.

The talks between Barclays and BlackRock aren’t exclusive, according to the people, who asked not to be identified because the auction is private. An agreement could be announced this week. BlackRock is in discussions with Mideast investors to provide equity financing for the deal, one of the people said.

Barclays agreed in April to sell iShares, BGI’s exchange- traded fund business, to London-based CVC Capital Partners Ltd. for $4.4 billion. The bank has until June 18 to find a better deal for iShares, the world’s largest manager of exchange-traded funds, or all of San Francisco-based Barclays Global.

Alistair Smith, a spokesman for Barclays in London, and Bobbie Collins, a spokeswoman for BlackRock, declined to comment.

Barclays Seeks Capital

Barclays, which shunned U.K. government funds, is seeking to raise cash after $18.6 billion of credit losses and writedowns. The bank’s capital adequacy ratios lag behind those of London-based Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc of Edinburgh, which accepted state control in return for taxpayer assistance.

A purchase of BGI, the world largest money manager, would give BlackRock, currently No. 3, about $2.81 trillion in assets and more customers outside the U.S. It would surpass State Street Corp., which managed $1.44 trillion as of Dec. 31, and Fidelity Investments, with $1.25 trillion. Both companies are based in Boston.

BGI is Europe’s biggest hedge-fund manager, the largest independent manager of pension-fund assets in Canada and Japan’s largest discretionary investment manager, according to the company.

Pimco Challenge

Fink, 56, is in a position to gain funds at a time when customer redemptions and market declines have slashed assets under management at money-management firms. First-quarter net income fell 65 percent to $84 million, mirroring declines at other firms.

BGI’s ETF business would help BlackRock compete with Pimco, its biggest rival in managing fixed-income. The Newport Beach, California-based firm, co-founded by Bill Gross, is in the early stage of building a roster of ETFs.

“We could see BlackRock open a number of ETFs in the fixed-income space that they specialize in,” consultant Greenwald said.

Valuation Expertise

BlackRock has a division called BlackRock Solutions that advises clients such as banks, pension funds and governments on risk-management. BlackRock has been hired by the U.S. government to help evaluate distressed portfolios since the onset of the credit crisis in 2007, including those previously managed by insurer American International Group Inc. and Bear Stearns Cos.

The company has also applied to be one of at least five assets managers of the U.S. government’s Public-Private Investment Program, which aims to buy mortgage-related assets from banks to help revive lending stabilize the financial markets.

The BGI transaction would be the largest acquisition of an asset-management firm, eclipsing the previous record set by Fink’s $8.5 billion purchase of New York-based Merrill Lynch’s fund unit. Merrill Lynch ended up with 49.8 percent of BlackRock following the 2006 transaction, a stake now owned by Bank of America Corp., based in Charlotte, North Carolina, after its acquisition of Merrill Lynch in January.

Fink joined with Ralph Schlosstein, a friend and managing director at Lehman Brothers, in 1988 to start the firm that would become BlackRock. It began life as Financial Management Group within private-equity firm Blackstone Group LP. Blackstone, based in New York, provided an office, a telephone line and a $5 million line of credit in return for a 40 percent stake in the company.

BlackRock parted company with Blackstone in 1994 after PNC Financial Services Group Inc. of Pittsburgh bought Fink’s group for $240 million. BlackRock went public on Oct. 1, 1999, at $14 a share.

BlackRock has since climbed almost 12-fold to $163.74 as of June 5, including a 22 percent gain in 2009. The company is the largest publicly traded asset manager in the U.S.

To contact the reporters on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net; Jon Menon in London at jmenon1@bloomberg.net.

Read more...

Earnings Diluted 4% by Record U.S. Share Sales, Dividend Cuts

By Elizabeth Stanton, Michael Tsang and Eric Martin

June 8 (Bloomberg) -- American common equity is increasing for the first time in five years, threatening to dilute corporate profits as companies sell a record amount of stock and cut dividends the most since 1938.

Wells Fargo & Co., ProLogis and more than 150 other companies raised $82.2 billion this quarter, beating the record pace at the height of the technology bubble in 2000, according to data compiled by Bloomberg. The combination of adding shares and restricting dividends will reduce annual equity returns as much as 4.1 percent, the data show.

“The math is inescapable,” said Alan Gayle, the Richmond, Virginia-based director of asset allocation at Ridgeworth Investments, which manages $60 billion. “You’ve got weak earnings, the share price goes down and then, ‘What? They want to raise equity?’ Clearly that isn’t a good thing.”

Companies are taking advantage of the biggest rally in equities since the 1930s to sell shares even after earnings fell seven consecutive quarters during the worst recession in half a century. Banks ordered to raise capital by the government account for 23 percent of underwritten sales, data compiled by Bloomberg show.

The flood is trimming earnings available to shareholders, a warning sign to Lyxor Asset Management SA, Research Affiliates LLC and James Investment Research that returns may not be high enough to justify buying stock.

Offerings since March 31 will increase outstanding shares in the S&P 500 by 3.4 percent on an annualized basis, adjusting for the market values of companies selling stock, data from Bloomberg and S&P show. The rise is based on S&P’s calculation of shares added or removed from the index through sales, buybacks and takeovers, known as the divisor.

Bigger Pool

Record mergers, acquisitions and repurchases reduced the divisor the past four years. Now, the increase is penalizing existing shareowners by spreading earnings and dividends across a larger pool of stock. The annualized increase in the S&P 500’s share count would cut estimated per-share profit this year by 3.3 percent to $57.23, data compiled by Bloomberg show.

The 46 percent decline in S&P 500 corporate earnings since its peak in the second quarter of 2007 is forcing companies to conserve cash by shrinking dividends, data compiled by Bloomberg show. Combined payouts will fall 23 percent to $21.97 per share for companies in the benchmark index this year, the most since the 36 percent drop in 1938, S&P estimates.

Cutting the dividend yield by 0.8 percentage point from last year to 2.34 percent and the dilution from share sales would cut the S&P 500’s total return by 4.1 percent, data compiled by Bloomberg show.

Impaired Returns

While a reduction of that size represents less than a third of the average yearly increase in the index from 1982 through 2007, it’s a bigger drag in markets battered by the worst losses in 70 years, when the S&P 500 tumbled 38 percent last year. U.S. equities have returned 6 percent on average since 1900, inflation-adjusted data compiled by the London Business School and Zurich-based Credit Suisse Group AG show.

“If anyone said to me a 5 percent reduction on your annualized return doesn’t matter, I’d say try explaining that to your client, especially considering the way the numbers have been over the past two or three years,” said Brian Shepardson, who helps manage $2 billion at Xenia, Ohio-based James Investment Research.

Existing shareholders are better off accepting a smaller slice of future earnings because some companies would have failed without new money, said Mark Hantho, the New York-based head of equity capital markets at Deutsche Bank AG.

Bank Losses

U.S. financial companies accounted for almost two-thirds of about $1.5 trillion in global asset writedowns and credit losses that drove shares of banks, brokers and insurers in the S&P 500 down as much as 84 percent since their 2007 peak.

Seventy-nine financial companies sold $60.7 billion of shares this quarter, reducing the claim existing shareholders have on earnings by more than 20 percent, data compiled by Bloomberg show.

“Most people are not talking about dilution, only the balance sheet,” Hantho said. “The fact that they’re putting money to work in solving the problem is creating a lift in the equity as a result of fixing the balance sheet. Even though it’s at the expense of dilution, it’s better than the alternative.”

San Francisco-based Wells Fargo and New York-based Morgan Stanley were among the banks required to sell stock after the Federal Reserve determined in a report on May 7 that 10 of the country’s 19 largest banks needed to raise a combined $74.6 billion.

Raising Cash

Wells Fargo’s $8.63 billion secondary sale on May 8 increased its share count by about 10 percent. The fourth- largest U.S. bank by assets got more than the $6 billion it had estimated, selling shares at an 11 percent discount to the previous day’s closing price.

Banks not among those told to raise capital, including New York-based Goldman Sachs Group Inc. and JPMorgan Chase & Co. and U.S. Bancorp in Minneapolis have sold more than $20 billion, mostly to repay government funds they were ordered to accept after New York-based Lehman Brothers Holdings Inc. collapsed in September.

“The financial ones do make me angry because in some cases, particularly JPMorgan, they were forced to take the damn money to begin with, they didn’t need it, and now they’re forced to dilute the shareholders,” said James Barrow, president of Barrow Hanley Mewhinney & Strauss in Dallas, which manages $40 billion, including JPMorgan shares.

Previous Record

Stock sales picked up as the S&P 500 rallied 39 percent from a 12-year low in March and surpassed the record $65.6 billion from the first quarter of 2000, just as the gauge started a 49 percent plunge. The 153 companies that have sold equity since March increased their outstanding shares by an average of 23 percent, according to data compiled by Bloomberg.

Florence Barjou, strategist at Societe Generale SA’s Lyxor Asset Management in Paris, says the record share sales are coming at the worst possible time.

The U.S. will shrink by the most since 1946 this year, according to a Bloomberg survey of 61 economists. The jobless rate rose to 9.4 percent in May, a government report showed June 5. Corporate earnings are forecast to decline for two more quarters after dropping the last seven, the longest streak since the Great Depression, analysts’ estimates compiled by Bloomberg show.

“Investors have been discounting a very rapid return to growth, so maybe the market is getting a bit complacent,” said Lyxor Asset’s Barjou, who helps oversees about $100 billion.

Shareholders say the decision by executives to sell shares now means prices may already be too high.

“What we find is that secondary-equity offerings frequently signal a view in management suites that prices are rich,” said Robert Arnott, chairman and founder of Research Affiliates, which oversees $32 billion in Newport Beach, California. “Does that mean this is an interim top? Who knows, but it would be unsurprising.”

To contact the reporters for this story: Elizabeth Stanton in New York at estanton@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.

Read more...

Yen Weakens Against Euro as Stock Gains Boost Demand for Yield

By Theresa Barraclough and Oliver Biggadike

June 5 (Bloomberg) -- The yen declined, heading for a third weekly loss against the euro, as Asian stocks advanced on speculation the worst of the financial crisis is over, spurring demand for higher-yielding currencies.

The euro strengthened for a fourth day versus the British pound after European Central Bank President Jean-Claude Trichet said yesterday the region’s economic performance will improve this year. The yen weakened against 11 of the 16 major currencies before a U.S. report today that may show employers cut fewer jobs last month, damping demand for the relative safety of the Japanese currency. The Australian and New Zealand dollars gained as commodity prices rose.

“What Trichet was saying fueled risk appetite in the markets,” said Kathy Lien, director of currency research at GFT Forex, an online currency-trading firm in New York. “I continue to expect the underperformance of the yen against all of the higher-yielding currencies.”

The yen fell to 137.32 per euro as of 1:42 p.m. in Tokyo, from 136.97 yesterday in New York, heading for a 1.8 percent drop this week. Japan’s currency slid to 96.76 per dollar from 96.58, set for a 1.5 percent weekly loss. The euro traded at $1.4191 from $1.4183. It climbed to $1.4338 June 3, the strongest this year. The euro rose to 88.06 pence from 87.67.

Australia’s dollar climbed 0.5 percent to 77.79 yen and gained 0.3 percent to 80.41 U.S. cents. New Zealand’s dollar climbed 0.4 percent to 61.50 yen. Australia benchmark interest rate is 3 percent and New Zealand’s is 2.5 percent, compared with 0.1 percent in Japan, luring investors to the South Pacific nation’s higher-yielding assets.

‘Weaker Yen’

The Nikkei 225 Stock Average rose 0.6 percent and the MSCI Asia Pacific Index of regional shares gained 0.4 percent. The Reuters/Jefferies CRB index of 19 commodities surged 2.6 percent yesterday, approaching a six-month high reached June 2.

“The market is already expecting some turnaround in the business cycle,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. “A rise in crude and other commodities suggests a flow of money into risk assets, leading to a weaker yen.”

The yen may decline to 150 per euro by year-end, Kato said.

The dollar gained for a third day versus the yen before today’s U.S. payrolls report. U.S. employers cut 520,000 jobs in May, down from 539,000 positions the prior month, according to a Bloomberg survey of economists before the Labor Department releases the figure.

The jobless rate in the world’s largest economy still rose to a 25-year high of 9.2 percent last month, another U.S. report will show, according to a separate Bloomberg survey.

‘Better Day’

“We are looking at a better day in the market” for higher-yielding currencies, said Tony Morriss , a senior markets strategist at Australia & New Zealand Banking Group Ltd. in Sydney. Even a bad jobless rate in the U.S. won’t wipe out the overall optimism of the global economy, he said.

The euro rose versus 11 of the 16 most-traded currencies today after the ECB kept its benchmark rate at an all-time low of 1 percent yesterday, after cutting it at its previous meeting.

“The current rates are appropriate,” ECB President Trichet said in Frankfurt. “For the remainder of the year economic activity will decline with much less negative rates.”

The central bank plans to start buying covered bonds next month to hold down borrowing costs and complete the 60 billion euro ($85.1 billion) program in June 2010, Trichet said.

Dollar Index

The euro gained 6 percent against the dollar since the ECB last met on May 7 as economic reports added to evidence the most acute phase of the recession passed, damping demand for the U.S. currency as a refuge.

The Dollar Index was little changed today after falling yesterday on speculation nations are considering alternatives to the world’s main reserve currency.

Russian President Dmitry Medvedev reiterated concern about the dollar’s role as the world’s reserve currency and said an alternative may help to create a new global financial architecture, in an interview with Kommersant newspaper published today.

The dollar “is not in a spectacular position, let’s be frank, and its prospects cause various questions as do the prospects for the global currency system,” Medvedev, who today hosts an international economic forum in St. Petersburg, said, according to Moscow-based Kommersant.

The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, was at 79.422 from 79.357 yesterday, when it declined 0.2 percent.

‘Bad to Worse’

The British pound may weaken to less than $1.60 per dollar and below 155 yen as increasing concern about the future of Prime Minister Gordon Brown’s cabinet spurs investors away from the currency, according to Calyon.

“The U.K. political situation is rapidly moving from bad to worse, which is acting as a major drag on the British pound,” Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong, wrote in a research report today.

Work and Pensions Secretary James Purnell yesterday resigned, the fifth minister to quite the U.K. Cabinet in a week, and called on Brown to follow suit.

The pound weakened 0.3 percent to $1.6122 and fell 0.2 percent to 155.98 yen.

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net; Oliver Biggadike in New York at obiggadike@bloomberg.net.

Read more...

U.S. Corn Crop May Fall 6.6% as Rain Delays Sowing, Study Shows

By Jeff Wilson

June 5 (Bloomberg) -- U.S. farmers may produce 6.6 percent less corn than last year after rain-delayed planting reduced acreage and yields, according to study by the University of Illinois.

Corn output will total 11.307 billion bushels, assuming normal weather for the rest of the season, down from 12.1 billion last year, the study shows. The forecast harvest would be the lowest in three years according to the estimate which compares yields and planting dates in Iowa, Illinois and Indiana to national production since 1960.

Planting of the U.S. corn crop, the world’s largest, was about 93 percent complete as of May 31, down from a five-year average for the period of 97 percent, the U.S. Department of Agriculture said this week. It is forecasting the crop at 12.09 billion bushels.

“Standard errors of the forecasts at this point in the growing season could easily exceed 15 bushels per acre,” according to the report by Urbana, Illinois-based agricultural economists Darrel Good and Scott Irwin. “The size of the 2009 crop will also depend on the magnitude of acreage harvested for grain.”

Planting delays will reduce corn acreage by about 1.7 million acres from the 85 million farmers said they intended to plant in a March survey by the department, Good and Irwin said in their report yesterday.

They estimate about 30 percent of the U.S. crop was planted after May 20, the fourth slowest in the past 20 years. That will also cut the national average yield to 148.6 bushels per acre, down from the trend average of 154.9 bushels over the past 20 years.

Ideal growing weather and an extended frost-free growing season could boost production to 12.272 billion bushels, the pair said. Production could slump to 9.95 billion should hot, dry weather develop when plants are reproducing or filling kernels with sugars and starch in July and August.

The U.S. government is scheduled to release updated U.S. and world supply and demand estimates for corn, soybeans, wheat, cotton and rice on June 10 at 8:30 a.m. in Washington.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

Read more...

Soybeans in Chicago Rise to Nine-Month High on Weather Concerns

By Luzi Ann Javier

June 5 (Bloomberg) -- Soybean futures rose to a nine-month high in Chicago, extending yesterday’s gains, on concern adverse weather will delay planting in the U.S., curbing yields in the world’s largest grower and exporter.

Severe storms and flash flooding are forecast for the plains, AccuWeather.com said in a report yesterday. There will be severe weather in Nebraska “over the next few days” and “parts of Iowa, Kansas, Missouri and northeastern Colorado will occasionally be at risk,” the report said. Iowa is the biggest soybean and corn producing state in the U.S. Soybeans closed 4.1 percent higher yesterday and corn rose 3.7 percent.

“A lot of this has to do with weather concerns and I think this is driving the whole complex a lot higher,” Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney, said by phone today, referring to oilseeds and grains.

July-delivery soybeans rallied as much as 0.5 percent to $12.365 a bushel, the highest since Sept. 4. The most-active contract traded at $12.3575 at 9:22 a.m. Singapore time.

Global production of soybeans is forecast to drop 3.6 percent to 211.9 million metric tons in the 2008-2009 marketing year as drought curbs output in South America, the U.N.’s Food and Agriculture Organization said in a report yesterday.

“Prices of oilseeds and products should remain firm and possibly strengthen further during the remainder of the current season,” the FAO report said. “Market tightness, and thus firmness in prices, could also spread into next season,” it said, citing the “very low level of carry-in stocks.”

Oilseed Production

Total oilseed output is estimated to rise 0.7 percent to 405.9 million tons in 2008-2009, from a year earlier, it said.

July-delivery corn was little changed at $4.4825 a bushel at 9:54 a.m. Singapore time. Wheat for July delivery in Chicago traded little changed at $6.3475 a bushel after ending 2.9 percent higher yesterday.

Prices of wheat and corn are likely to increase as wet weather makes fields too muddy for farm machinery, delaying planting and raising the risk of lower yields, Commodity Broking’s Barratt said.

“With wheat, it’s going to be pretty tough going, in terms of putting in the next crop,” Barratt said. “There’s still quite significant tightness in the corn market” that will help drive prices higher, he said.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

Read more...

Gold Drops as Gain in the Dollar Reduces Demand for Safe Haven

By Jason Scott

June 5 (Bloomberg) -- Gold declined in Asian trading as a gain in the dollar pared demand for the metal as an alternative investment. Silver rose.

Bullion fell as much as 0.3 percent on a recovery in the U.S. currency. The precious metal typically moves in the opposite direction to the dollar.

“Gold is driven by dollar sentiment at the moment,” said Charles Dowsett, director of commodity derivatives at ABN Amro Holding NV in Sydney, said by phone today. “The price is coming off today as the dollar is a little bit stronger.”

The Dollar Index, a six-currency gauge of the greenback’s value, rose as much as 0.2 percent and was trading at 79.389 at 10:48 a.m. in Singapore. The index fell 0.2 percent yesterday.

Gold for immediate delivery declined 0.3 percent to $977.40 an ounce at 10:42 a.m. in Singapore after trading between $976.62 and $983.14. Silver for immediate delivery rose as much as 0.5 percent and was trading up 0.1 percent to $15.9050 an ounce after surging 3.5 percent yesterday.

Silver has outpaced gold this year. An ounce of gold now buys about 61.44 ounces of silver, according to data compiled by Bloomberg. That’s down from a high of 84.4 on Oct. 10, which was the most since March 1995.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,132.5 metric tons as of yesterday, according to the company’s Web site.

Gold for August delivery, the most-active contract on the Comex division of the New York Mercantile Exchange, declined 0.3 percent to $979.50, after falling as much as 0.4 percent.

“Some medium- to longer-term investment has come in on longer-term inflation fears,” ABN Amro’s Dowsett said. “As governments print more money to spend on stimulus packages, the view is eventually that will push inflation.”

Among other precious metals for immediate delivery, platinum fell 1.3 percent to $1,278.25 an ounce. Palladium, up 4.7 percent yesterday, fell 0.9 percent to $252.75 an ounce.

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net

Read more...

Oil Rises, Heads for Third Weekly Gain, After Goldman Forecast

By Christian Schmollinger and Ben Sharples

June 5 (Bloomberg) -- Crude oil rose in New York, poised for a third weekly gain, after Goldman Sachs Group Inc. said prices may reach $85 a barrel by the end of the year as demand recovers and supplies shrink.

Oil surged to a seven-month high yesterday and gasoline climbed after the bank increased its year-end forecast from $65. The dollar’s drop over the past six weeks has boosted crude prices as investors buy commodities as an inflation hedge.

“It’s the funds that are pushing the market higher,” said Jonathan Kornafel, a director for Asia at options trader Hudson Capital Energy in Singapore. “When everyone reads the same report and comes to the same conclusion, then you’re going to have the market moving in one direction. The general trend is for the dollar to get weaker and for crude to get stronger.”

Crude oil for July delivery rose as much as 71 cents, or 1 percent, to $69.52 a barrel on the New York Mercantile Exchange. It was at $69.40 a barrel at 11:20 a.m. Singapore time. Yesterday, the contract rose $2.69 to $68.81, the highest settlement since Nov. 4 and the biggest gain since May 18. Prices are up 4.6 percent this week.

The U.S. Dollar Index, which values the greenback against a basket of international currencies, has dropped 5.5 percent since May 7, while crude has gained 22 percent.

“It really has been driven by pretty strong inflows from funds and that’s been encouraged by quite significant weakness in the dollar,” said Toby Hassall, an analyst at Commodity Warrants Australia Pty in Sydney. “Given the momentum crude seems to have at the moment, $85 as a high for 2009 doesn’t seem unreasonable.”

Goldman Forecast

Oil posted its biggest monthly gain in a decade in May on speculation a global economic recovery will trigger a rebound in demand. This increase is a “prologue” to a price recovery in the second half of the year as the global economy stabilizes and crude inventories decline, Goldman said.

“As the financial crisis eases, an energy shortage lies ahead,” Goldman analysts Jeffrey Currie in London and David Greely in New York wrote in a research report e-mailed yesterday. The bank set a 12-month price target of $90 a barrel, up from $70, and forecast $95 for the end of 2010.

Goldman’s New York-based energy equities research team, led by analyst Arjun Murti, in March 2005 predicted a “super spike” in prices. In May last year, Murti said oil may rise to between $150 and $200 a barrel within two years. The team revised its forecast after prices then slumped from a record $147.27 in July.

Gasoline Jump

Gasoline for July delivery rose 2.09 cents to $1.9830 a gallon at 11:27 a.m. Singapore time. Yesterday, it gained 6.05 cents, or 3.2 percent, to end the session at $1.9621, the highest settlement since Oct. 9.

Travelers taking to U.S. roads during the Northern Hemisphere summer typically cause a spike in gasoline demand. Motor fuel consumption last week jumped 2.2 percent from a year ago because of more driving during the Memorial Day holiday, MasterCard Inc. said on June 2.

A government report on June 3 showed that U.S. crude-oil inventories unexpectedly rose last week as fuel consumption dropped.

Crude-oil supplies climbed 2.9 million barrels to 366 million in the week ended May 29, according to the Energy Department. A 1.5 million-barrel decline was forecast in a Bloomberg News survey. The gain occurred as imports jumped 9.9 percent and refineries increased operating rates to the highest in six months. Fuel demand fell 900,000 barrels to 17.7 million barrels a day last week, the lowest since May 1999.

‘Weak Fundamentals’

“Fundamentals are still weak in the oil market, with crude inventories in the U.S. at 19 year highs and the International Energy Agency last month revising down their forecast of world oil demand,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, wrote in a research report e-mailed yesterday.

Brent crude for July delivery rose as much as 59 cents, or 0.9 percent, to $69.30 a barrel on London’s ICE Futures Europe exchange. It was at $69.16 a barrel at 11:31 a.m. Singapore time. Futures rose 4.3 percent to end yesterday’s session at $68.71 a barrel, the highest settlement since Oct. 21.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne bsharples@bloomberg.net

Read more...

Japan Stocks Rise, Extend Weekly Gain, on Oil; Shippers Fall

By Jason Clenfield and Toshiro Hasegawa

June 5 (Bloomberg) -- Japanese stocks rose, extending a weekly gain, after oil surged to a seven-month high and the weaker yen lifted the earnings prospects of electronics makers.

Inpex Corp., Japan’s No. 1 oil driller, climbed 6.6 percent after Goldman Sachs Group Inc. lifted its target price and said crude may reach $85 a barrel. Nikon Corp., a camera maker that gets 81 percent of its sales overseas, jumped 4.1 percent after the yen reached the lowest in a week. Mazda Motor Corp. climbed 8 percent as Nikko Citigroup Ltd. raised the automaker’s target price. Mitsui O.S.K. Lines Ltd., the world’s largest merchant fleet operator, lost 2.7 percent after shipping rates fell.

“The rise in commodity prices helps to support confidence in the economy’s outlook,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo.

The Nikkei 225 Stock Average rose 59.28, or 0.6 percent, to 9,728.24 at 12:36 p.m. in Tokyo. The broader Topix climbed 3.26, or 0.4 percent, to 914.25. For the week, the Nikkei is poised for a 2.1 percent advance, while the Topix is headed for a 1.9 percent gain, the second weekly advance for both gauges.

The Bank of Japan may upgrade its economic assessment of the country for a second straight month at the conclusion of a policy meeting beginning June 15, the Mainichi newspaper said, without saying where it got the information.

$85 a Barrel

Inpex rose 6.6 percent to 843,000 yen after crude oil rose 4 percent to its highest settlement since Nov. 4. Goldman Sachs said prices may reach $85 a barrel by the end of the year as world demand recovers and supplies shrink. Goldman Sachs also raised Inpex’s share-price target by 17 percent.

Japan Petroleum Exploration Co. the country’s second- biggest energy explorer, rose 10 percent to 5,500 yen, after Nikko Citigroup Ltd. raised its rating on the company to “buy” from “hold” on May 1. AOC Holdings Inc., a mining and refining company, soared 11 percent to 985 yen, also benefiting from an upgrade to “outperform” by Mitsubishi UFJ Financial Group Inc. analyst Reiji Ogino.

Mitsubishi Corp., a trading house that gets more than half its profit from commodities, added 2.4 percent to 1,908 yen, while rival Mitsui & Co. gained 3.5 percent to 1,305 yen.

The yen declined yesterday versus 15 of the 16 most-traded currencies on speculation domestic investors are sending funds overseas to buy higher-yielding assets. The Japanese currency depreciated to as much as 96.97 versus the dollar late yesterday, the weakest since May 29. The currency recently traded at 96.76.

Nikon surged 4.1 percent to 1,521 yen. Mazda, which exports about 80 percent of its production, climbed 8 percent to 271 yen after Nikko Citigroup Ltd. raised the automaker’s target price by 36 percent to 350 yen, citing better earnings prospects in the second half of the business year.

Baltic Slips

Canon Inc., the world’s largest maker of digital cameras, rose 1.6 percent to 3,170 yen after Nikkei English News said the company has revived a plan to build a domestic factory because of recovering demand. The plant will start operations in April 2010, the report said.

Shippers fell after the Baltic Dry Index, a measure of shipping costs for commodities, ended its longest winning streak in almost three years on speculation that Chinese demand for raw materials may be easing.

Mitsui O.S.K. declined 2.7 percent to 662 yen, while Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line, dropped 3.9 percent to 423 yen. A gauge of stocks tracking shipping lines was the biggest decliner among the Topix’s 33 industry groups.

To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

Read more...

Asian Stocks Head for Third Weekly Gain; BHP, Rio Tinto Surge

By Shani Raja

June 5 (Bloomberg) -- Asian stocks gained, with the MSCI Asia Pacific Index set for its third weekly advance, after Rio Tinto Group scrapped an investment by China in favor of a $15.2 billion share sale as commodity prices rebound.

Rio surged 9.9 percent in Sydney after saying it will sell shares and form a $5.8 billion venture with BHP Billiton Ltd. instead of pursuing Aluminum Corp. of China’s investment. BHP, the world’s biggest mining company, climbed 8.1 percent. Inpex Corp., Japan’s largest oil explorer, jumped 5.6 percent after oil prices rose to a seven-month high. Mazda Motor Corp. climbed 8.4 percent as Nikko Citigroup Ltd. raised its stock forecast.

“Investors are looking for a reason to stay positive and the Rio and BHP news provides that,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The bull market for resources stocks continues today.”

The MSCI Asia Pacific Index added 0.3 percent to 103.49 as of 1:07 p.m. in Tokyo. The gauge has climbed 1.4 percent this week as a Chinese purchasing manager’s index and better-than- expected Australian gross domestic product figures fueled optimism that the global economy is recovering. The measure climbed 47 percent from a more than five-year low on March 9.

Japan’s Nikkei 225 Stock Average gained 0.5 percent as a weaker yen boosted the earnings prospects for companies reliant on overseas sales. Australia’s S&P/ASX 200 Index rose 1.1 percent. New Zealand’s NZX 50 Index added 0.5 percent.

Futures on the U.S. Standard & Poor’s 500 Index added 0.1 percent. The gauge climbed 1.2 percent after analysts recommended buying bank shares. Keycorp surged 20 percent after RBC Capital Markets named the bank a “top pick,” while Goldman Sachs Group Inc. rose 5.2 percent as Sanford C. Bernstein & Co. raised the shares to “outperform.”

Rio Share Sale

Rio Tinto, the world’s third-largest mining company, surged 9.9 percent to A$73.50. Today’s transactions allow Rio to reduce $38.9 billion in debt without selling stakes in its largest mines to Aluminum Corp., which investors said favored the Chinese company. Chinalco, as Aluminum Corp. is known, is China’s largest producer of the material.

“The Chinalco deal was wrong in a strategic sense,” said Prasad Patkar, who helps manage close to $1 billion at Platypus Asset Management in Sydney. “The market was right in marking the management and board down for trying to jam it down shareholders’ throats.”

Investors will be offered 21 new shares in Rio for every 40 they hold at 1,400 pence each, 49 percent below yesterday’s close in London, the company said. BHP, which agreed to pay Rio $5.8 billion to form an Australian iron ore joint venture, climbed 8.1 percent to A$37.96.

Best Performers

Mining and energy companies are the best performers of the MSCI Asia Pacific Index’s 10 industry group in the past month as prospects of a global recovery fueled optimism that demand for commodities will increase.

The Bank of Japan may upgrade its economic assessment of the country for a second straight month at the conclusion of a policy meeting beginning June 15, the Mainichi newspaper reported. Australia’s statistics office said this week gross domestic product gained 0.4 percent in the first quarter from the previous three months, compared with economist forecasts for a 0.2 percent contraction.

“The better-than-expected economic data is convincing people the worst is over,” said Will Seddon, who helps manage $250 million at White Funds Management Pty. in Sydney. “People who are underweight or short don’t want to get left out of the rally.”

Stock gains since March have driven the average valuation of companies on MSCI’s Asian index to 1.5 times the book value of assets, the highest level since Oct. 1.

Oil Prices

Inpex climbed 5.6 percent to 835,000 yen. Santos Ltd., Australia’s third-largest oil company, gained 3.6 percent to A$14.99.

Crude oil rose after Goldman Sachs said prices may reach $85 a barrel by the end of the year as world demand recovers and supplies shrink. Oil climbed 4.1 percent to $68.81 a barrel in New York, the highest settlement since Nov. 4 after the bank increased its year-end forecast from $65 and withdrew a prediction that prices will dip prior to a rally.

Mazda, which makes 28 percent of its revenue in North America, climbed 8.4 percent to 272 yen. Nikko Citigroup raised its target price to 350 yen from 257 yen, citing expectations for an earnings recovery in the second half of the business year.

Mazda shares also rose after the yen declined yesterday versus 15 of the 16 most-traded currencies on speculation Japanese investors are sending funds overseas to buy higher- yielding assets. The yen traded at 96.56 per dollar in Tokyo, after declining 0.6 percent yesterday to its lowest since May 29.

A weaker yen boosts the value of Japanese companies’ dollar-denominated sales. Sony Corp., which gets 24 percent of its revenue from the U.S., climbed 2.1 percent to 2,695 yen.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.

Read more...

Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Jun 04 09 06:40 GMT |

Australia Prints First Trade Deficit in 9 Months as Officials Continue to Downplay GDP Surprise; Asian Markets Track US Risk Aversion Lower; Euro, Sterling Consolidate ahead of Central Bank Decisions Asian equities are trading weaker across the board entering the final hour of the session as caution from Fed Chairman Bernanke and continued malaise in US employment seeped into Far East investor sentiment. Nikkei225 was off by 0.5% just below 9,700, with downside also driven by poor Q1 capital spending data. In Sydney, S&P/ASX fell over 2% on surprising decline in Australia's Terms of Trade and general weakness in commodities amid broad dollar bounce higher. Hong Kong's Hang Seng led the regional decliners with a 2.4% slide, as China's markets were seen particularly impacted by the shock of uncertain demand conditions evidenced by Aussie trade data. Meanwhile, Korea Kospi also continued to underperform, shedding 2% on the session with Financials leading the slide after prior session's equity offering rumors from the sector. Australia's April Trade Balance was the key economic event in the session as terms of trade unexpectedly fell by A$91M against estimates of a surplus of A$1.7B - the first deficit since July of 2008. Notably, the decline was an indictment of external demand as exports fell 11% m/m while imports contracted 2%. Sobering economic data from Australia was also supplemented by officials continuing to downplay prior session's better than expected Q1 GDP. Finance Minister Tanner noted the economy was still in a serious downturn and further negative quarters of GDP were still possible, suggesting the threat of recession still hung above domestic economy as it struggled with downward pressure from labor market. Treasurer Swan saw business investment drying up while also warning about a future with lower trend growth than the economy has recently experienced. RBA Governor Stevens was also hardly hawkish, offering additional scope for further policy easing if warranted by deteriorating conditions. Specifically, Stevens cautioned about tight household credit lending and rising unemployment weighing on consumption, forecasting downbeat prospects for the 2nd quarter. On the upside, Stevens did reflect on improving residential investment and reawakened activity in mining picking up on deferred projects. In Aussie share-specific developments, Rio Tinto officials were rumored to be in talks with Chinalco Chairman visiting Australia for possible revision of the deal ahead of the May 15th decision deadline. In Tokyo, auto sector news directed attention toward fuel efficiency with both Mitsubishi and Fuji Heavy announcing plans to showcase a plug-in electric vehicle in coming weeks. Meanwhile, hybrids remained at the top of the best-seller list as new model of Prius replaced Honda's insight as Japan's most widely purchased car in May. In other corporate developments in Tokyo, Japanese press speculated that Nippon Steel earnings may reach a bottom in the current quarter, outperforming broader market going forward. Japan's Q1 Capital expenditure figures registered the worst y/y decline on record at -25.3% but did beat estimates of -30.0% expected. Bank of Japan's Shirakawa urged fiscal discipline to contain the rise in yields, warning that central bank's buying of debt is not intended to monetize fiscal debt. In other notable news from the Asia, Fitch was somewhat downbeat on the overall region, suggesting that growth is still dependent on demand for China's exports and "desperately" requires revived US and EU consumer markets. In South Korea, the Finance Ministry provided an outlook on department store sales and current account for May, forecasting the former rising 5.4% v 2.8% prior and Current Account above $4B v prior $4.28B. In currencies, the greenback consolidated gains made over the course of US session, briefly testing the upside of 1.42 against EUR and bouncing from 1.62 handle against Sterling. Commodity currencies were also firmer late in the session as AUD recovered above 0.80 and USD/CAD declined below 1.11 toward session lows of 1.1075. Japanese Yen was slightly weaker in line with more muted risk aversion, falling to 136.50 against EUR and 96.30's against USD - close to intra-day USD/JPY high in US hours. Commodity rebound was slightly more elusive, with crude remaining just above $66 and gold failing to recoup $970 handle. Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Read more...