Wednesday, July 29, 2009

Index shows home prices increase from April to May

The Associated Press

A widely watched index shows home prices posted their first monthly increase since the summer of 2006, indicating prices are finally stabilizing.

The Standard & Poor's/Case-Shiller home price index of 20 major cities released Tuesday rose 0.5 percent from April, but was still 17.1 percent below May a year ago.

The 10-city index rose 0.4 percent from April, but was off 16.8 percent from May last year. It was the fourth consecutive month both indexes didn't post record annual decline. Home prices are now at levels not seen since mid-2003.

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SAP posts better-than-expected net profit


FRANKFURT — SAP, the German professional software giant, posted a better than expected second quarter profit on Wednesday, and said it would maintain tight cost controls for the remainder of the year.

SAP said net profit rose by 3.7 percent from the same period a year earlier to 423 million euros (600 million dollars), exceeding an average analyst forecast compiled by Dow Jones Newswires of 385 million euros.

Software revenues, a benchmark of core operations, fell however by 40 percent to 543 million euros, a company statement said.

"Despite the challenging economic conditions, the strength of our business model combined with a strong cost discipline has proven itself once again by enabling us to report another quarter of strong operating margin growth," finance director Werner Brandt was quoted as saying.

"For the remainder of the year, we expect to maintain tight cost controls in all areas of the company."

SAP chief executive Leo Apotheker added: "While the operating environment remains difficult, we are beginning to have improved visibility into the second half of the year." link....

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Sanofi reports profits rise, seeks big cost cuts

PARIS — French pharmaceutical group Sanofi Aventis announced on Wednesday a two-billion-euro (2.84 billion dollars) cost cutting programme and higher earnings targets for this year.

It said second-quarter net profit rose by 4.9 percent from the figure 12 months earlier to 1.06 billion euros but on an adjusted basis, excluding the effect of exceptional items, earnings rose by 29.4 percent to 2.27 billion euros.

This was well above the average forecast by analysts as polled by Dow Jones Newswires for 2.08 billion euros.

Sales in the three months to June rose by 11.2 percent to 7.44 billion euros, beating forecasts for 7.29 billion euros.

Citing this "good performance," Sanofi said it was increasing its earnings growth forecast on an unadjusted basis to 10 percent for 2009 from its previous estimate of around seven percent.

Sanofi said the cost-cutting programme would target savings of two billion euros over the period 2008 to 2013, with eight research centres -- mainly in France and Britain -- set to close.

The company has previously announced plans to cut 1,300 jobs through voluntary departures but would not comment on the prospect of further losses resulting from the new cost-cutting programme.

The savings will come equally from research, production, support functions and sales, it said. link....

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ArcelorMittal posts $0.8 bn loss in Q2

ArcelorMittal logoArcelorMittal reported on Wednesday a net loss of 0.8 billion for the second quarter of this year due to heavy inventory write-downs and workforce reduction programmes.

"The loss in the second quarter of 2009 resulted from exceptional charges amounting to $1.2 billion primarily related to write-downs of inventory ($0.9 billion) and provisions for workforce reductions ($0.3 billion)," L N Mittal-promoted company said.

The company had a profit of $5.8 billion in the same quarter of the last fiscal.

ArcelorMittal saw its sales plunging by nearly 60 per cent to $15.2 billion in the reporting quarter compared to the period a year ago due to fall in steel demand and prices.

"The main reason for the decline continues to be the extreme weakness in demand for steel products in 2009 as a result of the global economic crisis, along with a steep fall in prices," it added.

However, the company is hopeful of a demand revival in the second half of the year and is mulling the rollback of 50 per cent production cuts at some of its facilities.

"In recent weeks, we have started to see some initial signs of recovery, as a result of which we are now planning to re-start production at some facilities. Provided there are no further unexpected economic deteriorations, we should see continued gradual improvement throughout the second half of the year," Mittal said.

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Cadbury's Sales, Net Profit Jump

LONDON -- Confectioner Cadbury PLC beat expectations Wednesday for first-half sales and said its net profit rose sharply, helped by the disposal of its Australia Beverages business to Asahi Breweries of Japan.

The U.K.-based maker of Cadbury chocolate and Trident gum said net profit for the first half rose to £313 million from £113 million a year earlier.

Sales rose 13% to £2.77 billion. Stripping out disposals, acquisitions and the effect of the weak pound, sales were up 4% -- ahead of analysts' expectations of a 3.3% rise.

Chocolate, which accounted for 45% of company revenue in the first half, and bagged candies had been expected to benefit from people enjoying themselves at home rather going out during the recession, Cadbury said.

The company's net was helped by a £234 million pound contribution resulting from the demerger of its Americas Beverages business in May 2008 and the disposal of its Australia Beverages business to Asahi Breweries of Japan in April.

Cadbury increased its margin target for the full year, as a strong performance in emerging markets and its chocolate division more than offset slow sales in North America and Europe.

"A strong chocolate performance and good growth in emerging markets more than offset a slow start in North America and continued softness in Europe," said Chief Executive Todd Stitzer.

Mr. Stitzer said sales for the year would still be at the lower end of the group's 4% to 6% long-term goal range. Its full-year margin, however, is now expected to increase between 0.8 and one percentage point, up from a previous forecast of a 0.7 to 0.8 percentage-point increase.

Food industry consultant James Amoroso described the figures as an "excellent set of results." He welcomed the raising of the margin guidance and said there is scope for the targets to be beaten. link....

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Euro-Zone Banks Tighten Credit Standards

FRANKFURT -- Banks in the euro zone further tightened their credit standards in the second quarter, and companies and households may face slightly tougher requirements in the current quarter, the European Central Bank said Wednesday.

The second quarter was the eighth-straight quarter that banks tightened their lending standards, but the degree of tightening slowed significantly, the ECB's July Bank Lending Survey showed.The restraint comes despite generous liquidity provisions from the ECB to the region's financial institutions, and governments' efforts to ease the credit crunch.

Banks tightened credit requirements because of a generally weak economic outlook and lingering concerns about certain industries, the ECB said.

The central bank's poll showed that 21% of the banks surveyed tightened standards applied to the approval of loans or credit lines to companies in the second quarter, compared with 43% in the preceding period. None of the banks eased rules. A total of 118 banks from across the euro zone participated in the poll.

"Particularly supply-side factors, such as banks' access to market financing and banks' liquidity position" prompted a change in dynamics, the survey said.

The survey showed that 22% of banks tightened their mortgage standards to households, compared with 28% in the first quarter.

"Banks' cost of funds and balance sheet constraints contributed to a slight further tightening of credit standards for loans to households," the ECB said.

Corporate-loan demand eased further because of "a strong decrease in the financing needs for fixed investment and by a further considerable fall in demand stemming from mergers and acquisitions, and corporate restructuring," link....

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Toshiba 1Q Loss Widens As Chip Ops Continue To Suffer

Toshiba Corp. (6502.TO) said Wednesday that its group net loss ballooned in its fiscal first quarter as restructuring costs and red ink at its chip operations continued to weigh heavily.

And in a sign that market conditions remain tough for chip makers, the company left its forecast for the full fiscal year ending in March unchanged, projecting a net loss of Y50 billion.

For the April-June period, the Japanese electronics conglomerate reported a Y57.80 billion net loss. The result was much worse than the Y11.61 billion loss the company racked up in the same period a year earlier. The result was also larger than a consensus projection for a Y38.4 billion loss compiled by data provider Thomson Reuters from a survey of 14 analysts.

The company's revenue during the three months fell to Y1.340 trillion from Y1.618 trillion and it posted a Y37.59 billion operating loss, compared with a Y22.88 billion loss a year ago.

Mired in huge losses at its chip operations, Toshiba is in the middle of major restructuring steps that include cutting temporary jobs and improving chip production efficiency. The company raised about Y500 billion last month to improve its balance sheet and during the April-June period it spent Y10.2 billion on its restructuring, mainly at its chip operations.

For the April-June quarter, Toshiba's semiconductor operations lost Y36.2 billion on an operating basis, wider than a Y30.2 billion loss a year ago but much smaller than the enormous Y103 billion loss it posted in the January-March quarter. The company said it aims for its chip segment to turn a profit in the second quarter, but it declined to say how much it will make or lose in that segment this fiscal year.

Prices of NAND flash memory chips have started to increase due to improving demand and as suppliers cut production earlier this year due to a glut of chips.

Toshiba is the world's second-largest producer of NAND flash memory chips, which are widely used in music players and digital cameras, by revenue after Samsung Electronics Co. of South Korea.

Analysts say it remains unclear whether Toshiba will be able to turn around its earnings in the remaining three quarters of this fiscal year.

Although Toshiba's first quarter group operating loss was more or less in line with expectations, its net loss is larger than expected, said Tokai Tokyo Research Center analyst Haruo Sato.

He added that restructuring costs are weighing on the company's net earnings as Toshiba tries to return to profit on an operating basis for the current fiscal year.

But Toshiba is not the only Japanese electronics maker actively engaged in drastic measures to turn itself around. On Tuesday, rival Hitachi Ltd. (6501.TO) said that it will shake up its structure by turning five of its listed subsidiaries into wholly-owned units in a bid to shift its focus to its infrastructure business.

Reflecting the uncertain outlook for the chip market, NEC Electronics Corp. (6723.TO), the chip-making unit of NEC Corp. (6701.TO), said Wednesday that it suffered much wider net loss in the April-June period from a year earlier. But it left unrevised its full year outlook, citing signs of recovery in demand for electronic devices used in consumer appliances and cars. link....

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Honda, Nissan Earnings Beat Estimates on Government Incentives

Honda Motor Co. and Nissan Motor Co., Japan’s second- and third-largest carmakers, posted earnings that beat estimates as costs fell and governments offered drivers incentives to buy new autos.

Honda raised its forecast after net income in the first quarter dropped 96 percent to 7.5 billion yen ($79 million) compared with a 40 billion yen loss forecast by analysts. Nissan posted a 16.5 billion yen loss, less than an expected 58.5 billion loss.

The U.S., Germany, Japan and China are giving consumers credits, tax breaks and subsidies to get consumers to trade in old cars for newer fuel-efficient model. The policies are stemming the plunge in auto demand that helped push General Motors Corp. and Chrysler LLC into bankruptcy.

“It will be a very bad year, but it’s getting better,” said Edwin Merner, who helps manage about $3 billion at Atlantis Investment Research in Tokyo. “The general consensus is that things will start to look a lot better from October.”

Honda raised its full-year forecast 38 percent to 55 billion yen for the year ending March. Nissan kept its full-year forecast unchanged at a loss of 170 billion yen.

Honda rose 1.1 percent to 2,770 yen at the 3 p.m. close of trading on the Tokyo Stock Exchange. The automaker has gained 45 percent this year. Nissan rose 0.8 percent to 631 yen, bringing its gains for the year to 97 percent.

‘Cash for Clunkers’

Honda President Takanobu Ito, 55, expects sales to recover in the second half of the year and is raising funds in anticipation of an increased demand for car loans. A “cash-for- clunkers” program in the U.S., which gives consumers as much as $4,500 for trading in an old car, may spark 250,000 new car sales, lawmakers have said.

Japan has implemented tax cuts and subsidies on some fuel- efficient cars to spur auto sales. Consumers can apply for a 250,000 yen subsidy if they scrap a car more than 13 years old to buy a new one and 100,000 yen for a new car purchase without scrapping an old one.

Nissan Chief Executive Officer Carlos Ghosn, 55, is slashing 20,000 jobs this year as the company expects global vehicle sales to slide 9.7 percent to 3.08 million vehicles. The value of Nissan’s overseas sales last quarter was also hurt by the yen’s 7 percent gain against the dollar.

“2009 continues to be a tough year,” said Ghosn in a statement. “We remain cautious in our outlook.”

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RPT-GLOBAL MARKETS-Asian shares slide, Shanghai leads

Asian shares tumbled from multi-month peaks on Wednesday, in a sell-off led by the Shanghai market, as investors booked in profits ahead of more company earnings.

Japanese shares gained, but stock indices in Australia and Hong Kong fell after strong run-ups in the past two weeks. The MSCI Asia-Pacific index excluding Japan .MIAPJ0000PUS fell 2.6 percent, flagging after a climb this week to a 10-month high.

In Europe, stock eased after Chinese stocks fell as investors worried banks there may start to restrict lending, and S&P futures SPc1 signalled a soft start on Wall Street.

Shares in China State Construction Engineering Corp (601668.SS), whose $7.3 billion IPO last week was the world's largest in a year, jumped 70 percent at its debut, besting expectations -- but also stirring concerns about asset price bubbles. [ID:nSHA211352]

It was the second big listing in Shanghai since China resumed IPOs last month, and followed on the heels of Sichuan Expressway's (601107.SS)(0107.HK) runaway success on Monday.

"Such strong debuts of new listings will become a great boost for forthcoming IPOs, though worries have also strengthened of overall high valuations of the market," said Qian Qimin, deputy head of research at Shenyin & Wanguo Securities in Shanghai.

BBMG Corp (2009.HK), one of China's largest building materials manufacturers, also jumped 60 percent at its debut in Hong Kong. [ID:nHKG179565].

But the Hang Seng index .HSI shed 3 percent after ending at its highest in nearly 11 months on Tuesday, and the Shanghai Composite Index .SSEC closed down 5 percent, its biggest daily loss in 8 months.

In Tokyo, the Nikkei average .N225 edged up 0.3 percent to its highest close in seven weeks, a day after snapping its longest string of consecutive gains since 1988.

"It's natural that the market takes a breather due to investor fatigue after a nine-day winning streak and caution before earnings reports," said Fumiyuki Nakanishi, manager at SMBC Friend Securities.

"But foreign investors appear to have a bullish view on the outlook for the stock markets and that's providing support to blue-chip stocks and a solid floor for the Nikkei." link.....

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Santander Profit Declines on Loan Provisioning Costs

Banco Santander SA, Spain’s biggest bank, said second-quarter profit fell 4 percent, a smaller decline than analysts estimated, as higher profit from the U.K. cushioned the impact of a jump in loan-loss provisions.

Net income fell to 2.42 billion euros ($3.42 billion) from 2.52 billion euros a year earlier, the Santander, Spain-based bank said in a filing to regulators today. Earnings exceeded the 2.15 billion-euro median estimate of 11 analysts surveyed by Bloomberg. Profit from Britain rose by 50 percent.

Santander said it’s sticking with a target to match last year’s profit of 8.88 billion euros in 2009, as it integrates purchases in the U.K. and Brazil. Banco Bilbao Vizcaya Argentaria SA, Spain’s No. 2 bank, posted a 34 percent jump in net income yesterday. Both are positioned to ride out recessions buffeting their main markets, said Andrea Williams at Royal London Asset Management, which oversees about $63 billion.

“The results look good at first glance -- absolutely resilient,” said Williams. “My only worry would be whether they may be deferring some pain for the future.”

Santander rose 9 cents, or 0.9 percent, to 10.07 euros by 10:45 a.m. in Madrid trading, bringing this year’s gain to 49 percent. The Bloomberg index of 63 European financial companies advanced 28 percent over the same period, and BBVA 24 percent.

Santander has a market value of 82 billion euros, the largest in Europe after London-based HSBC Holdings Plc.

Growing Loan Losses

The 152-year-old lender, headed by Chairman Emilio Botin since 1986, dodged most credit-related losses from the U.S. subprime mortgage market collapse and purchased damaged lenders such as Alliance & Leicester in the U.K.

The bank hasn’t been able to sidestep the impact of slumping economies. Bad loans as a proportion of total loans climbed to 2.82 percent from 1.43 percent a year ago and 2.49 percent at the end of March.

Non-performing loans on Santander’s books leapt to 21.8 billion euros from 9.7 billion euros a year ago. Costs from provisioning bad loans climbed to 2.42 billion euros in the second quarter from 1.6 billion euros a year ago.

“We’re pretty confident that they’ll be very resilient,” said Stuart Fraser, who oversees 2 billion pounds ($3.3 billion) as head of European equities at Aegon Asset Management in Edinburgh. “As we look forward to 2010 and a more stable economic situation, then one bank that can look to benefit is Santander.”

Santander’s core capital ratio, a gauge of its ability to absorb losses, rose to 7.5 percent from 7.3 percent in March.

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Asian Shrs End Lower On China Sell Off;Shanghai Stks Dn 5.0%

SINGAPORE (Dow Jones)--Chinese shares staged a sharp decline Wednesday despite successful debuts for two China-linked stocks, prompting investors elsewhere to dump some shares and currencies perceived as risky.

The benchmark Shanghai Composite Index ended down 5.0% at 3,266.43, having fallen as much as 7.7% earlier in the day on disappointing Chinese corporate profits and falling commodity prices. The loss erased most of the gains made over the previous five sessions, and marked the Shanghai index's biggest percentage drop since Nov. 18, when it tumbled 6.3%. Daily volume hit a record 302.81 billion yuan ($44.3 billion).

As the drop in Shanghai become more pronounced in the afternoon, other Asian markets including Hong Kong and Mumbai fell, with the Hang Seng Index ending down 2.4%. The Sensex was 1.3% lower. U.S. stock futures turned lower, with the Dow Jones Industrial Average futures recently down 20 points in screen trade.

In currency trading, the Australian dollar fell sharply and the yen, viewed as a safe haven, rose against major currencies.

Earlier, Japan's Nikkei ended up 0.3%, South Korea's Kospi slipped 0.1%, Australia's S&P/ASX 200 gave up 0.6% and Taiwan's Taiex slid 0.8%. Singapore's Straits Times Index was down 0.8%.

Francis Lun, general manager at Fulbright Securities, said the Chinese markets tumbled from "an unattainable level because of hot money, and there are fears the central government will act to cool the markets."

Chinese policy makers in recent weeks have flagged inflationary worries and possible asset bubbles since lending exploded. New yuan loans in the first half of the year totaled 7.4 trillion yuan ($1.08 trillion), equivalent to about half of the country's gross domestic product in the period. The loan growth has spurred calls by economists for the central bank to fine-tune its policies. Still, the People's Bank of China has signaled no reversal of its moderately loose monetary-policy stance, which is aimed at spurring growth in the world's third-biggest economy.

"The (Shanghai) market does need to correct after five consecutive sessions of gains, and it will likely continue to fall in coming days," said Wu Dazhong at Shenyin Wanguo Securities. "I expect the market to resume its upward trend after corrections if the PBOC keeps its appropriately easy monetary policy."

Leading the declines in Shanghai, China Cosco Holdings tumbled 8.4%, while Jiangxi Copper lost 9% after saying it expects first-half net profit to drop between 57% and 64% from a year earlier. Both had hit their daily limit of a 10% decline. In Hong Kong, China Cosco fell 6.7% while Jiangxi lost 8.5%. link.....

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BEFORE THE BELL:US Futures Down Before Orders Data, Beige Book

U.S. stock futures slipped on Wednesday ahead of the release of a Federal Reserve report on the state of the economy.

S&P 500 futures fell 3.4 points to 972.30 and Nasdaq 100 futures slipped 3.25 points to 1,598.20. Futures on the Dow Jones Industrial Average lost 31 points.

U.S. stocks finished mostly lower on Tuesday after a dip in consumer confidence, as the Dow Jones Industrial Average dropped 11 points and the S&P 500 fell 2 points, while the Nasdaq Composite rose 7 points.

Economic rebound hopes that have driven stock markets since second-quarter earnings season began will be tested as data on durable goods orders for June will be released at 8:30 a.m. Eastern and the Federal Reserve's Beige Book of anecdotal evidence on the economy will be released at 2 p.m.

"We expect a bit better tone than seen in the past couple of Beige Book reports indicating some progress toward economic recovery. Specifically, the summary should reference widespread indications of a slower pace of decline and some signs of tentative stability in economic conditions," said David Greenlaw, an economist at Morgan Stanley, in a note to clients.

New York Fed President William Dudley also is speaking on the factors driving growth and inflation, with his speech due to start at 8:30 a.m. EDT.

There's another heavy day of reports in the U.S. as well, with ConocoPhillips (COP), General Dynamics (GD) and Time Warner (TWX) among the companies due to release figures on second-quarter performance.

Health-care firms WellCare Health Plans (WCG) and McKesson (MCK) may rise on better-than-hoped 2009 outlooks, and Conseco (CNO) may climb after the insurer forecast a second-quarter profit.

A number of insurers will report results after the closing bell.

The big move in international stock markets came out of Shanghai, where the Shanghai Composite ended 5% lower in late afternoon selling.

Hong Kong stocks also dropped, while fortunes were brighter in Europe, where automakers and chemicals firms led a 0.9% advance for the Dow Jones Stoxx 600.

The dollar rose against both the yen and the euro, while oil futures slumped $1.54 to $65.69 a barrel ahead of weekly energy inventory data.

Yields on 10-year Treasury bonds fell 3 basis points to 3.66%. Yields move in the opposite direction to prices. link......

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Time Warner Profit Drops 34% on Tumbling Ads at AOL, Magazines

Time Warner Inc., owner of the Warner Bros. film studio, said second-quarter profit fell 34 percent on declining advertising sales at its AOL and publishing divisions.

Net income dropped to $519 million, or 43 cents a share, from $792 million, or 66 cents, a year earlier, the New York- based company said today in a statement distributed by Business Wire. Excluding some items, earnings of 45 cents a share exceeded the 37 cent average of analysts’ estimates in a Bloomberg survey.

The recession continued to hurt ad sales at AOL and Time Warner’s magazines, offsetting rising revenue at the cable networks, which include CNN and TBS. Chief Executive Officer Jeffrey Bewkes plans to spin off AOL this year, unwinding a failed 2001 merger and removing a drag on the company’s profit.

Time Warner fell 59 cents to $27.01 yesterday in New York Stock Exchange composite trading. The shares have increased 21 percent this year.

Time Warner said in a regulatory filing this week that it bought back Google Inc.’s 5 percent stake in AOL on July 8 for $283 million, a fraction of the $1 billion Google paid in 2005.

Warner Bros. unit received court approval July 1 to buy most of the assets of Midway Games Inc., the bankrupt creator of the “Mortal Kombat” video-game series. Time Warner offered $33 million for most of the U.S. assets, including development studios in Chicago and Seattle.

Viacom Inc., the owner of the MTV cable-TV network and the Paramount Pictures film studio, reported yesterday that second- quarter profit dropped 32 percent, and said there are signs the U.S. advertising market is improving. Viacom, based in New York, said its cable networks have sold most of their advanced advertising spots at acceptable prices. link.....

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Microsoft, Yahoo Said to Be Near Agreement for Web-Search Ads

Microsoft Corp. and Yahoo! Inc. are getting closer to signing an Internet-search partnership to challenge market leader Google Inc., a person familiar with the matter said.

An agreement may be announced as soon as today, said the person, who declined to be identified because the talks are private. The partnership would involve the companies sharing revenue from Web-search ads, the person said.

Microsoft, the world’s largest software maker, is seeking more users for its Bing Internet search engine, which has about an eighth of Google Inc.’s market share in the U.S., according to research firm ComScore Inc. Yahoo, which has posted three straight quarters of sales declines, may be able to save at least $500 million by working with Microsoft, Yahoo Chief Executive Officer Carol Bartz said in June.

Google had about 65 percent of the U.S. Web-search market in June, according to Reston, Virginia-based ComScore. Yahoo and Microsoft had 28 percent combined.

Adam Sohn, a spokesman for Redmond, Washington-based Microsoft, declined to comment. Kim Rubey, a spokeswoman for Sunnyvale, California-based Yahoo, also wouldn’t comment.

Microsoft rose 36 cents to $23.47 yesterday in Nasdaq Stock Market trading. The shares have jumped 21 percent in 2009. Yahoo, up 41 percent this year, added 22 cents to $17.22.

Abandoned Bid

Bartz confirmed in May that the companies were holding discussions. Microsoft CEO Steve Ballmer has said repeatedly since last year that Microsoft would be interested in a partnership with Yahoo. Microsoft abandoned a $47.5 billion takeover bid for all of Yahoo last year.

An agreement between the companies may attract regulatory scrutiny in the U.S. and Europe, said Colin Gillis, an analyst with Brigantine Advisors in New York. He recommends selling Yahoo shares.

“We would be more supportive of an agreement if not for our regulatory concerns,” Gillis said. “Yahoo search is in a decline that may not reverse.”

Revenue from Web-search ads on Yahoo’s pages declined 15 percent in the second quarter, the company said last week. Total revenue fell 13 percent to $1.57 billion. Sales in Microsoft’s online unit also declined for the quarter ended June 30, falling 13 percent to $731 million. link...

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Tuesday, July 28, 2009

CFTC report blames speculators for oil price swings

The U.S. Commodity Futures Trading Commission (CFTC) is planning to issue a report next month that suggests that wild swings in oil prices were significantly driven by speculators, the Wall Street Journal reported on its website on Tuesday.

A 2008 report by the main U.S. futures-market regulator that attributed oil-price swings primarily on supply and demand was based on "deeply flawed data," Bart Chilton, one of four CFTC commissioners, told the paper in an interview on Monday.

The CFTC did not reveal preliminary figures from the report to the paper and declined to discuss the previous data.

Reuters attempts to contact the agency outside regular U.S. business hours were unsuccessful.

The CFTC will hold the first of three hearings on Tuesday to consider whether to limit holdings of energy and agricultural contracts and whether some traders should be allowed to exceed so-called position limits. link....

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Australia Dollar Reaches 2009 High; Stevens Sees Faster Rebound

The Australian dollar rose to its highest this year after central bank Governor Glenn Stevens said the nation’s economic downturn may not be “one of the more serious” of the post-World War II era.

The currency touched its strongest since Sept. 29 as interbank futures showed a 60 percent chance the Reserve Bank of Australia will start raising borrowing costs by December. The New Zealand dollar headed for its fifth monthly gain, the longest winning streak since 2004, as the RBA Governor’s speech added to optimism the worst of the global recession is over.

“Stevens’ comments are very Aussie-positive,” said Sharada Selvanathan, a currency strategist at BNP Paribas SA in Hong Kong. “The markets may start to assume that the Reserve Bank of Australia could be the first” to start increasing interest rates.

Australia’s dollar rose 1 percent to 83.12 U.S. cents as of 5:05 p.m. in Sydney after earlier touching 83.17 cents. The currency bought 79.04 yen from 78.31 yen yesterday and earlier reached 79.08 yen, the highest since June 15.

New Zealand’s dollar added 0.8 percent to 66.17 U.S. cents from 65.67 cents in New York yesterday. It bought 62.97 yen, the most since June 30, from 62.50 yen yesterday.

“We can much more easily imagine upside risks to the outlook” than six months ago, Governor Stevens said in a speech on “Challenges for Economic Policy” in Sydney today. Traders bet the central bank will increase its benchmark by 1.13 percentage points within a year, according to a Credit Suisse index based on swaps trading. That’s up from yesterday’s wagers for a 0.98 percentage point advance.

Jobless, Monetary Policy

“I’ve never seen written down or heard in discussion some rule of thumb that says we wait until unemployment is peaking before we lift the cash rate,” the RBA governor said in remarks after the speech.

“Stevens was quite hawkish,” said Selvanathan. “This is an environment where investors are willing to take on risks,” she said, which may drive the currency toward 84.70 cents.

Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. link....

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U.S. Markets Wrap: Stocks Increase as Treasuries, Dollar Fall

U.S. stocks rose, adding to the Dow Jones Industrial Average’s best two-week rally since 2000, as the biggest jump in new-home sales in eight years overshadowed disappointing results from Aetna Inc. and RadioShack Corp.

Centex Corp. rallied 9.1 percent to lead a gauge of homebuilders in the Standard & Poor’s 500 Index to an almost three-month high, and Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. also climbed. Aetna and RadioShack lost at least 2.7 percent each.

The S&P 500 added 0.3 percent to 982.18 at 4:10 p.m. in New York, the highest level since Nov. 4. The Dow Jones Industrial Average increased 15.27 points, or 0.2 percent, to 9,108.51. The Russell 2000 Index added 0.4 percent to 550.88, the highest close since Oct. 14.

“When you’ve got a good rally, people want to jump in,” said Jonathan Vyorst, senior vice president at New York-based Paradigm Capital Management Inc., which oversees about $1.5 billion. “The potential for mediocre earnings is out there. But if there are a couple good surprises, the market will likely take off.”

The Dow average surged 12 percent in the two weeks before today after companies including Caterpillar Inc. and 3M Co. reported earnings that beat estimates and a gain in existing home sales added to signs the recession is easing. The S&P 500 ended July 24 at its most expensive valuation since September, trading for 16.23 times profit from the past year.

The Commerce Department reported U.S. new-home sales climbed the most in eight years in June, in a sign the deepest housing slump since the Great Depression is starting to stabilize.

Treasury Auctions

Treasuries fell, pushing the yield on the 10-year note to the highest in over a month, as the U.S. began selling a record $115 billion in notes. The U.S. sold $6 billion in 20-year Treasury Inflation Protected Securities at a yield of 2.387 percent, higher than forecast. The Treasury will sell 2-, 5-, and 7-year notes over three days starting tomorrow.

The yield on the benchmark 10-year note rose six basis points, or 0.06 percentage point, to 3.72 percent at 2:55 p.m. in New York, according to BGCantor Market Data. It touched 3.76 percent, the most since June 22. The 3.125 percent security maturing in May 2019 fell 15/32, or $4.69 per $1,000 face amount, to 95 5/32.

The dollar traded near the lowest level this year against the currencies of six major U.S. trading partners on speculation the global economy is shaking off the worst recession since World War II, sapping safety demand. link.....

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Cash-for-clunkers auto eligibility list changed

Transportation Secretary Ray LaHood in Washington on Monday at an event promoting the "cash-for-clunkers" car buyer incentive program.

As it prepared for its "cash-for-clunkers" program, the government rejiggered gas mileage figures on about 100 older vehicles last week in a way that changed whether they would be eligible for up to $4,500 in sales inducements.

The Environmental Protection Agency says the changes resulted from a double-check of its fuel-efficiency ratings on more than 30,000 1984 and newer vehicles in advance of the official start of the clunkers program Monday.

OFFICIAL WORD: Government website on 'cash-for-clunkers'
SEND US YOUR PHOTO: We're searching for America's worst clunker

About half the 100 suddenly did not qualify because their combined mileage rating was revised upward; others unexpectedly got in.

"As a result of the review, roughly an equal number of vehicles became eligible as those found to be not eligible," said the EPA in a statement. "Eligibility for about 100 vehicles was affected."
FIND MORE STORIES IN: Edmunds.com

Car-shopping website Edmunds.com said Monday that it discovered the switcheroo because potential buyers were complaining on its discussion boards.

Some said it made them ineligible at the last minute for car deals they already had on deck.

"We had everything lined up. We had a couple car dealers that had verified our car qualified, and we were ready to purchase a new car this weekend," wrote one potential buyer, identified on the site as John1152. "But it will not happen now because at the last second the EPA updated the information at their web page for a 1993 Toyota Camry wagon ... from 18 mpg to 19 mpg."

Karl Brauer, editor in chief of Edmunds.com, said, "It's unfortunate that consumers who had been researching and planning to trade in their vehicle ... are now left in the dust."

To qualify for the $1 billion program aimed at spurring auto sales and driving gas guzzlers off the road, the clunker must have an EPA city-highway "combined" rating of 18 miles per gallon or lower. link....

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Asia Stocks At 10 - Month High

Asian stocks hit a 10-month high for a seventh day on Tuesday as investors were lifted by improving corporate earnings, though the non-stop pace of the rally caused some to wonder if it was overdone.

The Australian dollar shot to its highest level since last September after the governor of the Reserve Bank of Australia said the central bank does not have to wait for unemployment to peak before raising rates, adding to speculation the next move will be up.

Major European stock markets opened firmer as investors rode the wave of positive sentiment. U.S. stock futures were down 0.2 percent after the S&P 500 closed on Monday at its highest level since November 4.

An abundance of easy money and low bank deposit rates in Asia have been pushing retail investors to shift money from bank accounts to equities, scrambling for higher returns despite increasingly expensive price tags.

"These strong liquidity conditions are pushing Asian equities to stretched valuation levels, in our view. We think a strong recovery in global final demand is now priced in," Henry Hon and Daniel McCormack, strategists with Macquarie in Hong Kong, said in a research note.

They recommended slowly cutting exposure to riskier stocks as prices rise further.

Japan's Nikkei share average edged down just 1.4 points to 10,087.26 after posting a nine-day rising streak, the longest winning run since 1988.

"High-tech shares that had already rallied are pausing for now, and clues to further gains in the overall market will depend on the degree to which investors snap up laggard banking shares," said Takahiko Murai, general manager of equities at Nozomi Securities in Tokyo.

Valuations have been recovering from depressed levels in Japan. However, on a price-to-book basis, the Nikkei is trading at around 1.3 times compared with the five-year average of 1.8 times, suggesting there may still be pockets of value.

The MSCI index of Asia Pacific stocks outside Japan rose 1.3 percent, racking up a 10-month high.

Gains have sharply outpaced global equity markets, with the regional index up 71 percent since March 9, when share markets began a bullish recovery, compared with a 45 percent gain in the MSCI all-country world index.

Hong Kong's Hang Seng index was trading 1 percent higher in a choppy session, with index heavyweight China Mobile up 3.6 percent.

Investors in mainland China awaited the trading debut on Wednesday of China State Construction Engineering Corp, which with proceeds of $7.3 billion, will be the biggest IPO this year.

The IPO market in China has heated up to the point of increasing fears of a stock market bubble -- only months after the worst of the financial crisis has passed.

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Deutsche Bank Profit Rises on Trading Gains; Loan Losses Climb

Deutsche Bank AG, Germany’s biggest bank, said second-quarter profit rose 68 percent as increased revenue from trading bonds and stocks offset a surge in loan- loss provisions.

Deutsche Bank fell as much as 7.2 percent in Frankfurt trading as the company set aside 1 billion euros ($1.4 billion) for risky loans, more than the 634 million-euro estimate of analysts surveyed by Bloomberg. Net income rose to 1.09 billion euros, the Frankfurt-based bank said in a statement today.

Chief Executive Officer Josef Ackermann said in a letter to shareholders he remains “cautious” on the economic outlook, and the bank predicted a further increase in private and corporate insolvencies. A fourfold gain in income from debt sales and an improvement in equity trading in the second quarter countered a slump in profit at the consumer banking unit and wider-than-estimated loss in asset management.

“Deutsche Bank had to significantly increase loan-loss provisions because of the worsening economy, and it won’t get better anytime soon,” said Lutz Roehmeyer, who helps manage about $15.5 billion at Landesbank Berlin Investment in Berlin, including Deutsche Bank shares. “The investment bank generated a lot of revenue thanks to the boom in corporate bond sales, but retail banking, asset and wealth management and transaction banking really lost out.”

Deutsche Bank fell 2.68 euros, or 5.2 percent, to 49.35 euros by 9:39 a.m. in Frankfurt, reducing the gain this year to 77 percent. The bank is the sixth-biggest gainer on the index of 63 European financial companies this year.

Debt and Equity

The investment bank, run by Anshu Jain and Michael Cohrs, posted pretax profit of 828 million euros after a loss a year earlier. Analysts estimated earnings of 1.08 billion euros.

The company’s global markets business, run by Jain, had debt trading income of 2.6 billion euros on credit, interest- rate and currency sales, below analysts’ estimates. Equity trading generated 903 million euros in revenue, the most in six quarters and more than analysts predicted.

Credit Suisse Group AG of Zurich and New York-based Goldman Sachs Group Inc. and JPMorgan Chase & Co. also generated higher trading income in the past quarter.

“The bond business is definitely a revenue driver at the moment, and we’ve seen that banks are earning a lot from that,” said Daniel Hupfer, who helps manage about $42 billion, including Deutsche Bank shares, at M.M. Warburg in Hamburg.

The asset and wealth management business reported a pretax loss of 85 million euros, a bigger deficit than analysts estimated, compared with a year-earlier profit. Earnings at the consumer bank fell 83 percent to 55 million euros.

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Canon Profit Tumbles 86%, Company Cuts Sales Forecast

Canon Inc., the world’s biggest maker of multifunction printers, said second-quarter profit declined 86 percent and cut its annual sales target, citing “sluggish” demand for office equipment.

Net income dropped to 15.6 billion yen ($164 million) from 107.8 billion yen a year earlier, the Tokyo-based company said today. That missed the 18 billion yen median of three analyst estimates compiled by Bloomberg News.

Canon will introduce new models of products including digital cameras and inkjet printers to help revive “stagnant” demand, the company said today. It’s aiming to double planned cost reductions to weather the economic slowdown it expects to last for most of this year as unemployment increases in developed markets.

“We will continue cutting costs to achieve a reduction of 220 billion yen this fiscal year, which is double our target at the start of the year,” Masahiro Osawa, senior managing director in charge of Canon’s accounting, told reporters in Tokyo.

Operating profit, or sales minus the cost of goods sold and administrative expenses, slumped 72 percent to 44.9 billion yen as revenue dropped 28 percent to 793.8 billion yen in the quarter.

Canon slipped 0.3 percent to close at 3,370 yen in Tokyo trading before the earnings announcement, narrowing its gain this year to 22 percent. That compares with a 14 percent advance by Japan’s benchmark Nikkei 225 Stock Average in 2009.

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Hitachi Offers to Buy Out Units for 282.2 Billion Yen

Hitachi Ltd., Japan’s third-largest manufacturer, offered to buy out five publicly traded subsidiaries and affiliates for 282.2 billion yen ($3 billion) to help speed up business decisions and reduce overlapping costs.

The company will acquire outstanding shares of Hitachi Maxell Ltd., Hitachi Software Engineering Co., Hitachi Information Systems Ltd., Hitachi Plant Technologies Ltd. and Hitachi Systems & Services Ltd., according to statements to the Tokyo Stock Exchange today.

President Takashi Kawamura aims to lower costs by 500 billion yen this fiscal year by cutting jobs, separating some operations and merging its unprofitable chip unit with another semiconductor maker. Hitachi, recovering from a record annual loss, plans to reduce more than 100 units by March 31.

“Investors have no idea what the company wants to focus on. By buying out the units, Hitachi’s made it even more ambiguous,” said Seiichiro Iwamoto, who helps manage $977 million of Japanese stocks at Mizuho Asset Management Co. in Tokyo, which owns Hitachi shares. “I’m doubtful the company will gain from what they spend to buy those affiliates.”

Hitachi fell 3.6 percent to close at 293 yen on the Tokyo Stock Exchange. The stock has lost 15 percent this year, while the benchmark Nikkei 225 Stock Average has climbed 14 percent.

Shares Rise

The Nikkei newspaper reported yesterday Hitachi may spend 300 billion yen for the buyouts, sending shares of the five units up by their daily limits in Tokyo trading. The stocks all rose again today.

Hitachi, based in Tokyo, in March spent 26.7 billion yen increasing its stakes in Hitachi Koki Co. and Hitachi Kokusai Electric Inc. Hitachi Mobile Co. and Hitachi Electronics Engineering Co. were bought out and de-listed.

Hitachi today reported an 82.7 billion yen net loss in the three months ended June 30, compared with a 31.6 billion yen profit a year earlier. The operating loss, or sales minus the cost of goods sold and administrative expenses, was 50.6 billion yen, compared with 77.7 billion yen profit a year earlier, as revenue fell 26 percent.

The maker of products ranging from nuclear reactors, household appliances to hard-disk drives kept its May forecast for annual loss to narrow to 270 billion yen this fiscal year.

‘One-Stop Service’

The buyouts of Hitachi Information Systems, Hitachi Software and Hitachi Systems & Services would allow the parent to offer “one-stop service” comprising of data centers, consulting, as well as information-technology software and hardware, the company said. Buying Hitachi Maxell would help speed up the development of lithium-ion batteries for industrial use, the parent said.

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Austria to decide on Lufthansa/AUA extension this week

Austria's takeover commission said on Tuesday it would meet this week to decide on whether Lufthansa (LHAG.DE) can have more time to clear up conditions on its planned takeover of Austrian Airlines (AUAV.VI).

Lufthansa has asked the Vienna-based takeover commission to extend the deadline to Aug. 31 from July 31 so that it can continue to work out deal conditions with the European Commission.

The takeover commission's senate will meet this week to decide on Lufthansa's request, spokesman Stefan Arnold said.

"The choice depends primarily on the interests of the minority shareholders as well as the parties involved in the deal and taking into account the combined interests of all sides," he said in a statement. link....

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BP Says ‘Little Evidence’ of Recovery After Net Falls

July 28 (Bloomberg) -- BP Plc, Europe’s biggest oil company, said profit fell 53 percent on lower energy prices and there is “little evidence” of a recovery in demand.

Second-quarter net income fell to $4.39 billion, or 23.16 cents a share, from $9.36 billion, or 49.23 cents, in the year- earlier period, London-based BP said today in a statement. Excluding one-time items and inventory changes, earnings beat analyst estimates.

Almost two years into a turnaround led by Chief Executive Officer Tony Hayward, BP said estimated cost cuts would exceed an earlier target as it increased production to more than 4 million barrels a day. The recovery will be “long and drawn out” as demand stabilizes following “significant falls’ in the first half of 2009, Hayward said.

The results “are ahead of expectations, but it’s on lower taxation,” said Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking who has a “buy” rating on the stock.

BP will be followed by results for Royal Dutch Shell Plc, its larger rival, as well as Total SA of France and Spain’s Repsol YPF, later this week.

Shell may say July 30 that adjusted earnings fell 69 percent to $2.42 billion, a survey of 17 analysts showed. Exxon Mobil Corp., the largest U.S. oil company, releases results the same day and is expected to post adjusted earnings per share of 98 cents, according to the average of 16 estimates.

Adjusted earnings at BP were $2.94 billion, beating the $2.82 billion median estimate of 17 analysts compiled by Bloomberg.

‘Good Progress’

BP plans to cut costs by an additional $1 billion this year after surpassing a full-year target of $2 billion.

“Despite the current climate, we are making good progress in growing our upstream, turning around our downstream and driving cost-efficiency across the group,” Hayward said in a statement.

BP was little changed at 518.25 pence as of 8:56 a.m. in London. The stock is down 1.5 percent this year, compared with an 11 percent decline for Shell.

Of the 43 analysts tracked by Bloomberg who cover BP, 29 recommend buying the shares, 10 advise holding the stock and four say “sell.

U.S. oil futures averaged $59.79 a barrel in the second quarter, 52 percent lower than a year earlier, while gas futures slumped 67 percent.

Reiterates Investment

BP reiterated a plan to invest under $20 billion in projects this year. Losses from inventory holdings narrowed to $1.25 billion from $2.61 billion a year earlier because of lower taxes.

The explorer has restored its Texas City refinery operations to full capability. The overall refining availability rose 5.3 percentage points to 93.6 percent in the quarter, the highest level since the first quarter of 2005.

Refining margins, the profit from turning crude into fuels such as gasoline and diesel, slipped about 40 percent in the second quarter from a year earlier, according to BP’s Web site. The company’s Global Indicator Margin, a broad measure of refining profitability, slid to $4.98 a barrel from $8.25.

The biggest drop in fuel demand in almost three decades has prompted oil companies to shelve new refining projects. BP and Irving Oil Corp. canceled plans last week to build a second refinery in St. John in the Canadian province of New Brunswick.

BP became the largest oil and gas producer in the Gulf of Mexico after boosting output from the Thunder Horse platform and bringing online the Dorado and King South fields.

BP reversed two years of falling output in 2008, when total production rose to 3.8 million barrels of oil equivalent a day. Total oil and gas production in the second quarter increased 4.6 percent to 4.005 million barrels of oil equivalent a day from a year earlier.

“BP stands out among the majors with the Thunder Horse ramp-up and lower exposure to gas seasonality,” Mark Bloomfield, a London-based analyst at Citigroup Inc., said before the earnings were released.

First LNG

BP reinforced its Asian liquefied natural gas business when the first LNG cargo left its Tangguh plant in Indonesia on July 6. It aims to increase crude and gas production through 2020 from existing reserves.

On June 30, BP and China National Petroleum Corp. were awarded an oil-field development contract by Iraq in the nation’s first international tender for more than 30 years.

In October 2007, Hayward pledged to close an operational gap with rivals and regain investor confidence after a fatal explosion at a U.S. refinery and delays in starting projects.

BP named Ericsson AB Chief Executive Officer Carl-Henric Svanberg on June 25 as a replacement for its chairman Peter Sutherland. He will join BP’s board as a non-executive director on Sept. 1 and take over as chairman at the end of the year.

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Monday, July 27, 2009

Oil rises near $69 as equities rally

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Oil rose for a third session on Monday to hit the highest in more than three weeks near $69 a barrel as stock markets gained on hopes of an economic recovery that would boost fuel demand.

European stocks firmed slightly following gains in Asia, where equities rose for the ninth day in 10 as investors focused on better corporate earnings and moving money into riskier, higher yielding assets.

U.S. crude, which has risen in eight of the last nine trading days, climbed 50 cents to $68.55 by 0952 GMT. Prices hit an intraday high of $68.99, the highest since July 2. Brent crude rose 61 cents to $70.93.

"As we are still in the earnings season and have to face some key inputs on the U.S. economy this week, the oil markets are still likely to be lead by equities," said Olivier Jakob, oil analyst at Petromatrix.

Oil and other commodities have tracked equities markets in recent months as analysts seek signs of the economic outlook after the downturn cut world energy demand for the first time in a quarter century.

This week's earnings include Exxon Mobil, Honda Motor (7267.T), Motorola, Deutsche Bank (DBKGn.DE) and BP (BP.L). Data this week includes June U.S. new homes sales later on Monday and U.S. second-quarter gross domestic product figures on Friday.

"The U.S. GDP number could be the key exogenous input of the week," Jakob said.

A faster rebound in Asian economies, led by China, would offer further support for oil prices in coming months, some analysts said.

"The central factor in determining the speed of adjustment in oil products will be the pace of recovery in Asia," Barclays Capital said in a note.

"The sensitivity of oil demand to economic growth is greater in Asia than in other regions, and the tendency for economic growth to surprise consensus estimates on the upside also appears to be greater in Asia."

World oil consumption will rise for the first time in two years in 2010 as a recovery in the global economy boosts demand, according to a Reuters poll of top oil-tracking analysts and organizations.

But the expected increase of 1.1 percent worldwide is unlikely to drain away all the excess supplies, despite the slow growth in production outside the Organization of the Petroleum Exporting Countries.

Oil demand will rise by 900,000 barrels per day (bpd) to 84.9 million bpd in 2010, the poll of nine forecasters found. World demand has fallen by 2.5 percent since hitting 86.2 million bpd in 2007, as the dual impact of high prices and the economic crisis cut consumption. link......

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Citigroup completes $58 billion stock swap

NEW YORK -- Citigroup Inc. has completed its $58 billion stock offering, a move that strengthens the struggling bank's balance sheet and makes way for the U.S. government to take ownership of a 34 percent stake.

Citi ( C - news - people ) said late Sunday that nearly all public holders of its preferred and trust preferred securities agreed to swap their shares for about 5.83 billion shares of common stock. The New York-based bank on Thursday had completed a $12.5 billion exchange that swapped preferred securities held by private debt holders for interim securities and warrants that will eventually be converted into common stock.The government carried out a separate exchange Thursday, swapping $12.5 billion of its preferred shares in the bank for securities and warrants as well, and will again exchange another $12.5 billion shortly.

"The successful completion of the exchange offers marks a significant milestone for Citi," said Vikram Pandit, Citgroup CEO, in a statement Sunday. "Citi will have approximately $100 billion of Tangible Common Equity (TCE) and a Tier 1 Common ratio of approximately 9 percent based on our June 30 results. That unquestioned financial strength combined with our strategy to return Citi to its core franchise of institutional and consumer businesses spanning an unmatched global footprint are driving Citi's return to sustained profitability and growth."

Citigroup said in late February it wanted to offer investors the option of exchanging preferred stock into common stock as a way to boost its capital reserves. The government agreed to convert about $25 billion of its $45 billion preferred investment in the bank to common stock, which will give it a 34 percent stake in the bank. link.....

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Stagecoach joins bidders for National Express

LONDON -- Stagecoach Group PLC said Monday it is in exclusive talks with the potential buyers of coach operator National Express PLC over a possible breakup of the struggling company.

Private equity group CVC Capital Partners has joined with a major National Express shareholder, the Cosmen family of Spain, in making a bid to take over the bus and rail company.
Scottish-based Stagecoach, Britain's biggest rail franchise operator, said it was interested in "certain businesses and assets" of National Express if the CVC-Cosmen bid succeeds.

However, it added that it was still considering "all other options," indicating it may make an independent bid for the company.

National Express shares jumped 5.2 percent to 364.5 pence ($6.01) on the London Stock Exchange. Stagecoach shares, meanwhile, fell 1.8 percent to 135 pence.

FirstGroup, the country's biggest transport company, dropped out of the running for National Express, Britain's biggest long-distance coach operator, last week.
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FirstGroup, which had wanted to create a competitive company across Europe and North America, cited warnings from the government that National Express is likely to be forced to lose its three rail franchises.

Earlier this month, National Express was forced to walk away from its loss-making East Coast rail deal after failing to re-negotiate the franchise with the government.

It had originally been contracted to run the line until 2015, but the business lost 20 million pounds in the first half of this year as customer growth stalled amid the recession.

The company, which was also warned it could lose its two other rail franchises in southern England, is laboring under a 1.2 billion pound debt mountain. link....

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China Stock Index Doubles From Low; Sichuan Expressway Jumps

China’s Shanghai Composite Index rose to twice the level of last year’s low as Sichuan Expressway Co. tripled on its first day of trading, underscoring investor demand for equities.

The benchmark gauge added 1.9 percent to 3,435.21, the highest close since June 2008. It reached a low on Nov. 4 of 1,706.7. Toll-road operator Sichuan Expressway’s 204 percent gain is China’s biggest debut rally since March 2008.

Individual investors are rushing to buy stocks as a government stimulus plan and record bank lending spur a rebound in the economy. Almost half a million stock accounts were opened in the week to July 17, data from the nation’s clearing house showed, the most since January 2008.

“We’ve entered an extremely loose monetary policy environment where money is flowing into the system at unprecedented levels,” Xue Lan, Citigroup Inc.’s Hong Kong- based head of China research, said in a Bloomberg Television interview today. Whether “we can continue the current momentum or not is still very dependent on whether the liquidity tap is on,” Xue said.

The Shanghai Composite has gained 89 percent this year, the world’s best performing stock market after slumping 65 percent in 2008. The index, which doubled in 2006 and 2007, remains 2,657.4 points below its peak of October 2007.

Premier Wen Jiabao unveiled his 4 trillion yuan ($585 billion) stimulus package on Nov. 9 as collapsing international demand for the country’s exports threatened to derail growth in the world’s third-largest economy. China also slashed interest rates and reserve requirements in the final four months of 2008, while dropping quotas that limited total lending by banks.

Bank Lending

Banks reacted by tripling loans in the first half of 2009 to 7.37 trillion yuan from a year earlier. Fixed asset- investment rose 33.5 percent to 9.13 trillion in the same period.

Gains in the stock market allowed regulators to lift a nine-month moratorium on initial public offerings in June. They imposed the ban last year to help stem the rout in equities.

Sichuan Expressway surged to 10.90 yuan at the close, more than three times the price of its Hong Kong-listed stock. It earlier jumped as much as 324 percent and was halted from trading twice. The company raised 1.8 billion yuan selling 500 million new shares at 3.60 yuan apiece.

Sichuan Expressway’s debut is the first in Shanghai since China South Locomotive & Rolling Stock Corp. listed in August 2008, and follows three IPOs in Shenzhen.

The value of shares traded on China’s two stock exchanges today exceeded 356 billion yuan, the most since May 30, 2007, the official Xinhua News Agency reported, without saying where it obtained the statistics.

More Than Russia

China State Construction Engineering Corp. starts trading in Shanghai on July 29 after drawing 1.85 trillion yuan of orders. That’s more than the market capitalization of Norway, Russia and at least 48 other advanced and developing nations. The company raised 50.16 billion yuan in the world’s biggest initial public offering in 16 months.

“There is still a lot of hot money that’s coming to the market to chase hot stocks,” said Zhang Ling, who helps oversee about $7.21 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “Still, with lots of IPOs coming to the market, the negative impact of absorbing liquidity will gradually emerge.”

Commodity and financial stocks have been the biggest beneficiaries of stimulus spending this year, as demand for energy, construction materials and housing recovered.

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Saturday, July 25, 2009

Ericsson buys Nortel wireless units for $1 billion


STOCKHOLM — Swedish wireless equipment maker LM Ericsson on Saturday said it had penned a deal to buy a majority of Nortel Networks' North American wireless business for $1.13 billion.
The Stockholm-based group said the purchase is on a cash and debt-free basis and covers the older CDMA and newer LTE wireless businesses of Nortel's Carrier Networks unit.
Nortel on Friday placed its wireless business up for auction behind closed doors in New York City, and international tech industry titans submitted their best offers for the prized division.
The deal is subject to approval by relevant authorities.
Ericsson CEO Carl-Henric Svanberg said in a statement that the acquisition would add 2,500 employees to his company, of which about 400 are focused on LTE research and development.
"Acquiring Nortel's North American CDMA business allows us to serve this important region better as we build relationships for the future migration to LTE," he said.
Under the deal, Ericsson will get CDMA contracts with North American operators such as Verizon, Sprint, U.S. Cellular, Bell Canada and Leap, as well as LTE assets, and certain patents and patent licenses relating to CDMA and LTE.
According to Ericsson, Nortel's North American CDMA operations generated $2 billion last year.
"Going forward, research and development costs are expected to be relatively low in CDMA compared with other technologies," Ericsson said.
CDMA, or code division multiple access, is a rival standard to the dominant cellular standard GSM, or global system for mobile, while LTE, or long-term evolution, is a next-generation wireless network technology that promises to be much faster.
In 2008, Ericsson's North American business generated around $2.7 billion of sales.
The group said that including its recent services agreement with Sprint, Saturday's deal will make North America its largest region, with around 14,000 staff.
Ericsson expects the acquisition to have a positive effect on its earnings within a year after closing, it said. link....

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