FOREX AND ANALYSIS

Pakistan, India to carry forward talks’

2011-04-01T22:14:00.000-07:00

ISLAMABAD:
Pakistan and India have decided to carry forward the dialogue process and all issues, including the core issue of Kashmir, were discussed with the Indian leadership in Mohali.

Briefing the Senate about his recent India visit, Prime Minister Yousaf Raza Gilani said the cricket match provided an opportunity for bringing closer both the nations and their leaderships.

He said the outcome of this meeting was very positive and both the sides agreed to move forward for resolving various issues, working for peace.

Referring to the recent hike in fuel prices, Gilani said that they were linked with international market and the Oil and Gas Regulatory Authority set the oil prices.

He said that the government had so far given a subsidy of Rs35 billion on petroleum products this year. He said that the government had tried its best to cushion the people against the sharp increase in oil prices in the international market.

Gilani stressed the need for devising a consensus on a national strategy to overcome the menace of terrorism.

The prime minister appreciated the Senate for making useful legislation on various issues, especially a bill regarding bringing transparency in the election process. He said only transparent and free election could ensure a sustainable democratic system.

Referring to various issues confronting Balochsitan, the prime minister said that the government was focusing on the development of this province with an objective to remove the sense of deprivation.

He said government was aware of the deteriorating law and order situation in the province and it was taking all possible measures to bring peace.

Later, the house passed a resolution condemning attacks on Maulana Fazlur Rehman.

The Senate unanimously passed two bills, including the arbitration (international investment disputes) bill of 2010 and the code of criminal procedure (amendment) bill of 2010.

Earlier, the opposition parties staged a token walk-out from the House to register their protest against increase in the prices of petroleum products. link....

Forex trader news: Sterling rises against euro

2011-04-01T22:09:00.000-07:00

The pound has risen against the euro this morning (March 30th), forex traders may be keen to note.

According to Reuters, the single currency has shed 0.4 per cent against sterling after the former struck a five-month high of 88.365 pence on Tuesday.

Concerns over the eurozone's debt crisis are being blamed for the currency's drop, however there are still expectations that UK interest rates will rise later than those in Europe.

A London-based spot trader said: "There was some selling in the euro earlier in the session but this pair isn't the most aggressive of movers and in the current market I can't see it travelling too far."

However, the euro is still up by 2.3 per cent on the year despite today's fall.

This comes after sterling increased by 0.1 per cent against the dollar, following on from its little change revealed against the US currency revealed this morning.
link.....

Canada Dollar Gains to Strongest Since 2007 on Recovery Outlook

2011-04-01T22:04:00.000-07:00

Canada's dollar rose to a three-year high versus its U.S. counterpart and approached the strongest level since 1950 as speculation the global economic recovery is quickening fueled investor appetite for higher-yielding assets.

The currency had the biggest weekly gain since November as U.S. employers added more jobs in March than forecast and Chinese manufacturing accelerated. Oil and gold gained, and the Canadian dollar strengthened the most versus the yen during a week since 2009. Canada’s employers added jobs for a sixth month, a report next week may show.

“Risk has been the theme of this week,” Brian Dolan, chief strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “Oil prices are holding firm, gold prices are holding firm.”

The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 1.8 percent, the most since the five days ended Nov. 5, to 96.32 cents per U.S. dollar yesterday in Toronto, from 98.05 cents on March 25. It touched 96.26 cents, the strongest level since Nov. 15, 2007. One Canadian dollar buys $1.0382.

The loonie’s strongest level since it was allowed to float in 1950, 90.58 cents, was reached on Nov. 7, 2007, as the collapse of the U.S. subprime-mortgage market disrupted financial markets and weakened the greenback. link......

'We have crossed $1 billion in India'

2010-02-20T04:47:00.000-08:00

After seven years, the world’s third-largest PC manufacturer Dell managed to break HP’s stranglehold in the Indian notebook market. Dell India Country General Manager Sameer Garde and Executive Director & General Manager (Consumer Division) Mahesh Bhalla tell Shivani Shinde the reasons behind the success, and the way forward. Edited excerpts:

Asia has performed well for Dell during the fourth quarter (October-December). How did India perform?
Garde: India’s contribution to Dell revenue is 2 per cent. We have crossed the $1-billion revenue mark in India. On a year-on-year basis, India revenue grew 52 per cent. In terms of units, we grew 82 per cent in India. Sequentially, revenue grew 8 per cent. For us, both SMEs and consumer segment grew over 100 per cent.

What do you attribute this growth to?
Garde: We have done a lot of things in the past five to six quarters that have led to this growth. These include building the brand and doing phenomenal amount of advertisement. We will also increase our product lines despite contraction of the market.

Do you think you will be able to hold on to this position?
Garde: We will continue to add new products, focus on customers, and continue to be competitive. We will also focus on our channel (distribution) strategy. We will continue to expand our desktop and notebooks range, drive more solutions for our clients in the large and the public sector domain.

In a way, Dell’s strategy to move to the indirect marketing has worked?
Bhalla: Going into retail and increasing the number of points of sale is one of the reasons for the success. But the essence has been listening to the customer. We have had a multi-channel strategy that has allowed us to reach newer markets and customers. Earlier, Dell was available online and through telephone only. But today, Dell is available across thousands of retail outlets as well as in large retail formats like Croma. Within these outlets, we also have Dell shop-in-shops managed by the company. With 35 Dell exclusive shops, we plan to expand this in future. We have also powered our sales persons as experts and help people buying online.

Do you think desktop market growth will be slower compared to the portable products?
Bhalla: There is variation across segments. In the consumer segment, the majority of growth is coming from the portable section (notebook and netbooks). But that does not mean that the desktop is not growing. We have see the all-in-one-category becoming interesting. Customers are choosing it as it gives simplicity — you need one power cord to connect. You get a much smaller form factor. Besides, PC penetration is still low in India. There is a lot of headroom to grow, as well as the various form factors to grow.
link.....

Castrol net jumps 45% to Rs 381cr

2010-02-20T04:45:00.000-08:00

MUMBAI: Castrol India has reported a 45% jump in profit after tax for the year ended December 31, 2009 at Rs 381.1 crore against Rs 262.3 crore in
the previous year. Net sales for the fiscal rose 5.1% to Rs 2,318.2 crore from Rs 2,205.7 crore, a company release said.

In the fourth quarter, the company clocked a PAT of Rs 80.8 crore, up 72% over the year-ago figure of Rs 47 crore. Net sales for the quarter was up 14% at Rs 609.5 crore.

Naveen Kshatriya, regional V-P, Asia & Pacific, BP Castrol Lubricants, told ET NOW, this newspaper’s business news channel, the company has done well in the last quarter of the fiscal due to the combination of a couple of things. “First, there is an uptrend in the economy and that’s reflecting in our volumes. Second, we have been very diligent in terms of execution of our strategy, focusing on specific areas and investing heavily in brands... I mean in terms of introducing new products or uplifting the quality of our products,” Mr Kshatriya said.

Ravi Kriplani, COO & automotive director, Castrol India, told ET NOW that the company has seen its volumes bounce back in the fourth quarter. “It’s a combination of better volumes, better margin management and better cost,” he said.

The board of directors of the company has announced a bonus issue in the ratio of 1:1 and recommended a final dividend of Rs 5 per share and a special dividend of Rs 10 per share for FY09. This dividend is in addition to an interim dividend of Rs 10 per share for the full-year 2009.

Mr Kshatriya said the bonus issue was in recognition of the company’s centenary year. “This will improve the liquidity in the market and will enable investors to participate in our business a bit more,” he said.

Mr Kshatriya said the company commands around 21% share of the Indian automotive lubricant market. “But if you look at the areas where we focus on... in the new generation truck oils, in motor cycle oils, in the premium passenger car oils, we have actually shown a growth in market share,” he added. “We will continue to improve our shares in the strategically important areas, Mr Kshatriya said. link...

Sensex static as traders wait for budget

2010-02-20T04:43:00.000-08:00

MUMBAI: Indian stock markets were caught up in volatile trading this week with a key index see-sawing between red and green terrains but managing to
end Friday with meagre gains.

Global cues were depressing too. Bourses across the world traded on an uncertain note after the US Federal Reserve's decision to increase lending rates to banks was sensed as a possible move to initiate tightening of the easy credit policy.

Investors at Indian markets also speculated on the stance the government is going to take on removal of stimulus measures, given the fact that most of the economic recovery was fuelled by government spending and subsidies to various sectors.

The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) moved up only 39.04 points or 0.24 per cent to end Friday at 16,191.63 points, from its previous weekly close at 16,152.59 points.

The broader S&P CNX Nifty of the National Stock Exchange (NSE) too followed a similar trajectory and closed the week at 4,844.9 points, gaining 18.15 points or 0.37 percent.

Broader market indices ended the week in the red with the BSE midcap index closing 1.19 per cent down and the BSE smallcap index a similar 1.19 per cent lower. link...

Rangarajan pitches for partial roll-back of stimulus

2010-02-20T04:39:00.000-08:00

NEW DELHI: In what may be a broad prescription for the government's economic policy road map ahead of the Budget for 2010-11, the Prime Minister's Economic Advisory Council (PMEAC) on Friday pitched for a partial roll-back of stimulus measures to usher in fiscal correction by scaling up excise duties and service tax and “adjusting” Central expenditure without hurting capital spending on infrastructure.

Briefing the media here after releasing the ‘Review of the Economy 2009-10' which projected a GDP (gross domestic product) growth of over 7.2 per cent this fiscal, 8.2 per cent in 2010-11 and 9 per cent in 2011-12, PMEAC Chairman C. Rangarajan said that since the expenditure stimulus was directed at augmenting consumption and not investment, the corrective measures must also focus on adjusting expenditure. “There is a case for adjustment of duties...adjustments are possible both on the revenue side and the expenditure side in order to bring down fiscal deficit,” he said.

Noting that government finances have come under severe strain and the fiscal imbalance “is now a matter of concern”, the PMEAC said: [The] Government cannot continue with the kind of large revenue and fiscal deficits recorded in the last two years and will have to initiate fiscal consolidation in the coming fiscal year (2010-11) itself …in the forthcoming budget to ensure fiscal sustainability, enable greater flexibility in monetary policy calibration, contain interest payments and to avoid upward pressure on interest rates.” link.....

Lending rates not to move up till May-June: SBI chief

2010-02-20T04:32:00.000-08:00

MUMBAI: State Bank Chairman O P Bhatt on Saturday said that lending rates in the banking system are unlikely to rise at least in the next 3-4 months as hiking rates in a low-demand scenario could hurt banks' margins.

"That (increasing lending rates) may not happen till May-June till the liquidity surplus goes away from the system," O P Bhatt told reporters on the sidelines of an event here.

Bhatt hinted that the State Bank is also unlikely to increase the interest rates for its depositors in the near future.

After the RBI hiked the portion of deposits banks need to park with it for zero interest last month, at least two banks--HDFC Bank and IDBI Bank--had upped their deposit rates-- a trend that could be followed by other banks in the coming days.

SBI has a liquidity surplus of around Rs 75,000-crore and its maintenance cost had adversely impacted the third quarter numbers the bank.

On base rates, Bhatt said banks have sent a "collective feed back" to RBI, where they have cited some implementation issues, particularly in the priority sector and staff loan segments. link.....

Europe cannot afford to rescue Greece

2010-02-15T06:54:00.000-08:00

To bail out Greece or not? The question is grabbing headlines daily. Supporters of a bail-out argue that if Greece collapses, others would follow. Financial markets have already identified the next candidates. As such, European economic and monetary union is at risk. Only financial aid and “solidarity” with highly indebted members can rescue the euro.

It is certainly true that this is a decisive moment for Emu – but for the opposite reason. Greece will continue to receive support from several European Union funds. But financial aid from other EU countries or institutions that amounted, directly or indirectly, to a bail-out would violate EU treaties and undermine the foundations of Emu. Such principles do not allow for compromise. Once Greece was helped, the dam would be broken. A bail-out for the country that broke the rules would make it impossible to deny aid to others.

It seems that quite a number of observers have forgotten what Emu is, and what it is not. The monetary union is based on two pillars. One is the stability of the euro, guaranteed by an independent central bank with a clear mandate to maintain price stability. The other is fiscal solidity, which has to be delivered by individual member states. Member countries are still sovereign. Emu does not represent a state; it is an institutional arrangement unique in history.

In the 1990s, many economists – I was among them – warned that starting monetary union without having established a political union was putting the cart before the horse. Now the question is whether monetary union can survive without such a political union. The current crisis must be handled in such a way as to produce a positive answer. The viability of the whole framework – nothing less – is at stake.

By joining Emu, a country accepts its rules. Greece, moreover, also knew that adopting a stable currency that was not controlled by its own central bank implied a total break with the past. Devaluation of the national currency and an inflationary monetary policy were no longer options. A single monetary policy is implemented by the European Central Bank and it is the responsibility of each country to adjust its economic policies so that this one size fits all.

Participation in Emu brings huge advantages. The benefits of joining a stable economic area are greatest for countries that were unable to deliver such conditions before. Thanks to the euro, Greece has enjoyed long-term interest rates at a record low. But instead of delivering on its commitment at the time of entry to reduce public debt levels, the country has wasted potential savings in a spending frenzy. The crisis with which it is now confronted is not the result of an “external shock” such as an earthquake, but the result of bad policies pursued over many years. Bailing out Greece would reward such behaviour and create moral hazard of a dimension hardly seen before.
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Bharti Faces Hurdle on Zain Nigeria in $10.7 Billion Purchase

2010-02-15T06:51:00.000-08:00

Bharti Airtel Ltd.’s plan to buy most of the African assets of Kuwait’s Zain for $10.7 billion may face challenges even before it begins its due diligence.

India’s largest wireless company’s plan can’t include Zain’s Celtel Nigeria B.V. unit until an ownership dispute with Econet Wireless Holdings Ltd. on that business is resolved, Econet Chief Executive Officer Strive Masiyiwa said.

“Zain Nigeria is not for sale,” Masiyiwa said in an interview in Johannesburg today.

For Bharti, troubles in Nigeria, Africa’s most-populous nation and the continent’s fastest-growing telecommunications market, may be an indication of what it might be up against in the 15 countries where it’s seeking to take over Zain’s operations. Kuwait’s Mobile Telecommunications Co., or Zain, and Bharti said in statements today that they will hold exclusive talks until March 25 on the assets.

“If there are 15 companies in which you are taking a stake, then there are going to be 15 different complexities,” said Jigar Shah, senior vice president of Kim Eng Securities Pvt. in Mumbai. “It’s doubtful that a company like Bharti hasn’t foreseen this.”

Bharti fell as much as 9.6 percent in Mumbai trading, the most since Oct. 6. Zain shares were suspended from trading in Kuwait. They last traded on Feb. 11 when they advanced 3.9 percent to 1,080 Kuwaiti dinars. The stock has soared 23 percent in the last week, giving the company a market value of 4.64 billion Kuwaiti dinars ($16 billion). link....

Top banks cut small business lending by $8 billion

2009-10-20T18:44:00.000-07:00

President Obama is trying -- again -- to help small business get the cash they desperately need.

The President will visit a small business in Maryland on Wednesday to present a series of initiatives aimed at increasing bank lending to small businesses, according to a White House official.

The programs the President will unveil include an increase in the maximum amount businesses can borrow through the Small Business Administration's primary loan program, which currently stands at $2 million. In addition, the Treasury Department will expand access for smaller banks to the Troubled Asset Relief Program (TARP), a move aimed at spurring more local lending by community banks.

The TARP program was set up to recapitalize banks so that they would bolster their lending to consumers and small businesses. In March, as the administration and the SBA took steps to stimulate small business lending, Treasury Secretary Tim Geithner ordered the top TARP recipients to begin sending the Treasury monthly reports on their small business lending activity.

"We need every bank in the country to do everything in their power to provide the credit that small businesses need to operate, expand and add jobs," Geithner said as he announced the new requirements. "Given the role many banks played in causing this crisis, you bear a special responsibility for helping America get out of it." link.....

Students Rely on Federal Loans to Pay Rising Tuition

2009-10-20T18:43:00.000-07:00

According to reports issued Tuesday by the College Board, the volume of private student loans -- those not made or guaranteed by the government -- fell by 52% in the 2008-09 school year as recession-battered lenders tightened credit standards or abandoned what had been one of the fastest-growing sectors of the financial-aid market.

Associated Press

Students in a chemistry class last month at California State University East Bay in Hayward, Calif.The New York-based college-admissions nonprofit said students and their families took out an estimated $11 billion in private student loans for the 2008-09 school year, down from $22.8 billion in 2007-08. All loan figures were given in constant, or inflation-adjusted, 2008-09 numbers.

The private loans, which generally have higher interest rates and more stringent terms than those made or guaranteed by the federal government, are often the last recourse for students who have maximized borrowing under federal programs.

As credit markets came to a near-halt last year, the government took steps to boost student lending in government programs, but the increase wasn't enough to offset the drop in private credit. According to the College Board, federal-loan volume rose 15% to about $84 billion in 2008-09, and overall lending fell to $95.9 billion in 2008-09 from $96.7 billion.

"I think what we are seeing here reflects the enormous credit tightening that occurred in the economy," said Terry Hartle, senior vice president of the American Council on Education, a college trade group.

Mark Kantrowitz, publisher of FinAid.org, a Web site that tracks financial-aid issues, said in an email that, amid the credit crunch, lenders have been unable to interest investors in buying securities backed by student loans, making it tough to raise lending capital.

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Galleon staff eye exits, investors debate

2009-10-20T18:42:00.000-07:00

Dozens of employees at Galleon Group are hunting for new jobs as investors debate how to react after the hedge fund's founder was arrested and charged with running one of the biggest insider trading schemes.

For years, Galleon prided itself on hiring only the best in the technology and healthcare industry -- top-notch analysts and portfolio managers boasting Ivy League degrees and stints at Goldman Sachs Group Inc (GS.N) and Needham & Company.

On paper, many looked similar to Galleon's founder Raj Rajaratnam. Now, they couldn't look more different.

As the 52-year-old, billionaire hedge fund manager hunkers down to keep his fund, which managed $3.4 billion at the end of September, from sinking, they are scrambling to leave the embattled firm.

"We have been flooded with calls from very nervous individuals at the firm who are trying to secure alternative employment," said one recruiter, who asked to remain anonymous due to the sensitivity of the matter.

At Galleon's New York headquarters, Rajaratnam came to work on Tuesday trying to project an air of normalcy, one day after telling investors and employees that he is innocent and vowed to fight the charges, said a woman, who works at the fund.

Recruiters around the United States who have spoken with Galleon employees, reported a nervous staff with some worrying whether their stint at the hedge fund would now frighten potential employers.

"People are afraid of being stigmatized by being associated with Raj," said another recruiter, who specializes in placing people at hedge funds and also did not want to be named.

At the same time investors ranging from college endowments like Colgate University to state pension funds like the Virginia Retirement System are debating whether to pull out or keep their money with Galleon.

Colgate, which has invested with Galleon since 2005, is actively monitoring the situation, said university spokesman Anthony Adornato. link....

Sun Microsystems to Cut 3,000 Jobs

2009-10-20T18:41:00.000-07:00

Sun Microsystems Inc. said it plans to lay off about 3,000 employees, or about 10% of its work force, because of delays in the closing of its purchase by Oracle Corp.

The hardware and software maker has been reducing its work force over the years because of declining revenues, and additional job cuts have been widely expected to happen after Oracle buys the company.

That deal, announced in April, was originally expected to close over the summer. But a review by European regulators has been holding up the transactions.

Meanwhile, Sun's business is in limbo. Oracle Chief Executive Larry Ellison said recently that Sun was losing $100 million a month.

Sun, which disclosed plans for the reductions in a filing with the Securities and Exchange Commission, said the positions will be eliminated over the next 12 months. But a Sun spokeswoman said the cuts are already under way, and that the timing described in the filing is in part a result of local laws that require advance notice of terminations. She declined to say how many positions have already been eliminated.

Sun, based in Santa Clara, Calif., said in the filing that it expects the layoffs will result in charges ranging from $75 million to $125 million over the next several quarters.

Oracle recently unveiled products that combine its software with hardware from Sun. But the company can only provide limited insight into its plans for Sun until the deal closes.

"Much of what Sun does could have significantly better operating incomes than it does," said Safra Catz, Oracle's Co-President, last week at an event for financial analysts. "We expect there to be some very, very quick changes right out of the box." link....

Bartz Makes Headway Getting Yahoo on Track

2009-10-20T18:40:00.000-07:00

The Sunnyvale, Calif., company's third-quarter profit surged, helped by Ms. Bartz's cost-cutting and an investment gain. Revenue fell 12% to $1.58 billion from a year ago, but executives indicated that spending on Internet ads was stabilizing, particularly from large marketers.

"There were a couple of encouraging things," Tim Morse, Yahoo's finance chief, said on a conference call. "The ad dollars are starting to flow a little bit better." Mr. Morse disclosed in an interview that Yahoo hired former General Electric Co. executive Andrew Siegel as its new head of mergers and acquisitions, tasked with continuing to evaluate which businesses the company should sell, as well as scout potential targets.

Rival Google Inc. announced last week that revenue grew 7% in its third quarter as executives announced confidently that the worst of the recession had passed.

Ms. Bartz didn't participate in Tuesday's conference call because of an unspecified illness that was described as "nothing serious" by Mr. Morse. In the quarter, Yahoo's profit more than tripled to $186.1 million, or 13 cents a share, up from $54.3 million, or four cents a share, a year ago. Those results included a $98 million gain on the sale of Yahoo's investment in Chinese Internet company Alibaba.com.

The improved profit comes as Ms. Bartz cut costs throughout the company. Virtually all categories of expenses—including sales and marketing and product development—fell in the quarter from the year-earlier period. Mr. Morse said the company reduced its bandwidth and equipment costs and hired more slowly than it had planned.

Yahoo shares rose more than 5% in after-hours trading to their highest level in more than a year. The stock finished the 4 p.m. trading session down five cents to $17.17 on the Nasdaq Stock Market.

"This is a big relief for investors," said Doug Anmuth, an analyst at Barclays Capital. He praised Ms. Bartz's internal "blocking and tackling," echoing other analysts and investors who say the CEO has proven adept at bringing some discipline to the company through moves such as building a new Yahoo home page on one technology platform and removing layers of management. link....

Stocks slide, but Dow holds 10,000

2009-10-20T18:39:00.000-07:00

Stocks dipped Tuesday as a stronger dollar and some disappointment about DuPont and Coca-Cola's results gave investors a reason to retreat from the recent rally.

A weaker-than-expected housing market report added to the downward pressure.

The Dow Jones industrial average (INDU) lost 50 points, or 0.5%, according to early tallies, after ending the previous session at the highest finish since Oct. 3, 2008.

The S&P 500 (SPX) index lost 7 points, or 0.6%, after ending Monday's session at the highest point since Oct. 2, 2008. The Nasdaq composite (COMP) fell 13 points, or 0.6%, after ending the previous session at the highest point since Sept. 26, 2008.

After the close, Yahoo (YHOO, Fortune 500) reported higher quarterly earnings that beat forecasts on weaker revenue that also beat forecasts.

Also after the close, Sun Microsystems (SUN, Fortune 500) said it was cutting 3,000 jobs related to its purchase by Oracle (ORCL, Fortune 500).

Tuesday brought quarterly results from five Dow components: DuPont, Pfizer, Coca-Cola, Caterpillar and United Technologies. Apple and Texas Instruments were among the names who reported after the closing bell Monday.

Stocks gained Monday, with the Dow reclaiming 10,000 in response to a weak dollar, higher commodity prices and some earnings optimism. But the path higher over the last week has been choppy as investors have sifted through a mix of profit reports. That choppiness put pressure on stocks Tuesday. link....

Oil Drops on Falling Equities, Concern China to Tighten Lending

2009-08-25T02:34:00.000-07:00

Crude oil dropped from a 10-month high as concerns that China may tighten lending and more U.S. loans may default raised doubts about the strength of the world’s recovery from recession.

Oil fell in tandem with equities on signs Chinese banks may curb new loans and after SunTrust Banks Inc. said that U.S. lenders face more credit losses and commercial real estate may falter through 2010.

“Equity and oil markets have been very closely correlated in the last six months,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “There are concerns on some U.S. banks. Probably it would affect investment flows into the oil market.”

Crude oil for October delivery dropped as much as 96 cents, or 1.3 percent, to $73.41 a barrel on the New York Mercantile Exchange. It was at $73.91 at 2:51 p.m. in Singapore. Yesterday, the contract rose 48 cents to settle at $74.37, the highest since Oct. 15. Futures have gained 66 percent in 2009.

“Banks are still showing signs of weakness, the economy is staying afloat from federal spending, and there is high unemployment,” said Mike Sander, an investment adviser with Sander Capital in Seattle. “I would still shoot for a price range this week between $68 and $75.”

China Construction Bank Corp., the nation’s second-largest bank, said excess cash in the banking system has led to asset bubbles, underscoring concern that the nation’s lenders will rein in credit. Chinese banks handed out $1.1 trillion in new loans in the first half of this year, the most on record.

Stocks Decline

Oil futures in New York and the U.S. Standard & Poor’s 500 Index had a correlation of 0.7 over the last six months. A correlation of 1 means the two moved in lockstep. Oil and the Shanghai Composite Index had a correlation of 0.996 over the last month.

Most Asian stocks declined, with the MSCI Asia Pacific losing 0.3 percent to 113.09 as of 2:39 p.m. in Tokyo. The index rallied 2.5 percent yesterday, the steepest advance since May 19. link.....

Japan stocks fall on yen, pre-election caution

2009-08-25T02:33:00.000-07:00

TOKYO -- Japanese stocks cooled off Tuesday, as exporters fell on a stronger yen and investors sold to take profits ahead of this weekend's parliamentary elections.

The benchmark Nikkei 225 stock average fell 83.69 points, or 0.8 percent, to 10,497.36 after soaring 3.4 percent on Monday. The broader Topix index declined 0.5 percent to 965.11.Analysts and recent polls predict that Japan's ruling party will lose its long-running grip on power in lower house elections Sunday. Japan's finance minister - and a senior party member - echoed the political realities facing the Liberal Democrats.

"A huge wave of the (opposition Democratic Party of Japan) is sweeping over Tokyo," Kaoru Yosano said Tuesday. "It looks like they could control the parliament under a one-party dictatorship."

Sentiment also waned on sharp declines in China, where the country's main index sank 2.6 percent as players turned cautious after recent gains and looked for more signs of economic recovery.The dollar slipped into the upper 93-yen territory at one point Tuesday, sending exporters including electronics makers lower. Exporters frown at a climbing yen because it makes their products more expensive in overseas markets and reduces the value of overseas profits when repatriated to Japan. link....

PRECIOUS-Gold inches up as dollar steadies vs euro

2009-08-25T02:31:00.000-07:00

Gold prices edged higher on Tuesday
after falling the previous day on the strength of the dollar,
with investors keeping a close eye on currency markets for
bullion's near-term direction.

The dollar has been the main driver for gold in recent weeks:
a firmer dollar typically hurts the precious metal, as it makes
dollar-priced gold more expensive for non-dollar holders and
dampens interest in bullion as an alternative asset.

A weaker greenback supports gold if investors are selling the
U.S. currency to buy other assets including gold. If dollar
selling is due to U.S.-related concerns, gold can also benefit
from its status as a hedge against risk.

"The dollar's still the main driver behind gold's movement,"
said Adrian Koh, an analyst at Phillip Futures in Singapore.

"Gold's very much still in a sideways consolidation pattern
between $920-$980," he said, adding that he expected the market
to remain in that range until a clearer picture of the U.S.
economy emerged.

Spot gold XAU= rose 0.3 percent to $944.60 an ounce as of
0531 GMT, compared with New York's notional close of $941.40. It
hit a one-week high of $957.65 on Friday and has since hovered
below that level.

In the currency market, the yen was broadly firmer as
investors took a pause from a recent rush to stocks and
higher-yielding currencies, with focus shifting to U.S. data.
[USD/]

The dollar was nearly flat against the euro EUR= after
inching up against the single currency on Monday.

U.S. gold futures for December delivery GCZ9 were up 0.3
percent at $946.10 an ounce, compared with $943.70 an ounce on
the COMEX division of the New York Mercantile Exchange.

Traders are looking to consumer confidence, durable goods
orders and housing data due this week to gauge the state of the
U.S. economy.

Koh said traders were looking for housing data for further
signs that the housing market may have stabilised.

Reflecting a lack of market direction, no new investment was
made in the world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust GLD, which said its holdings were steady at
1,066.41 tonnes as of Aug. 24. [GOL/SPDR] link....

McCann Sues Bank of America Seeking to Void Non-Compete Clause

2009-08-25T02:30:00.000-07:00

Former Merrill Lynch & Co. brokerage head Robert McCann sued Bank of America Corp. to force the company to release him from exit terms that keep him from taking another job.

Bank of America fired him without cause after rejecting his resignation, making the Charlotte, North Carolina-based company unable to enforce a non-compete clause, McCann said in a suit filed yesterday in New York State Supreme Court.

McCann, 51, announced plans to leave Bank of America in January, less than a week after the company completed its $18.5 billion acquisition of Merrill Lynch. He said in the suit that he left for “good reason” after his role was “severely diminished” and he didn’t get a bonus following the sale. After initially saying McCann’s resignation would be effective in July, the bank fired him in February, according to the suit.

UBS AG, Switzerland’s largest bank, was close to hiring McCann as head of its wealth management unit in the Americas, the Financial Times said this month. The newspaper also reported McCann’s suit yesterday.

Bank of America spokesman Scott Silvestri declined to comment on the suit. UBS spokesman Mark Arena didn’t return a call for comment.

McCann said in his lawsuit that Bank of America was required to buy his Merrill Lynch shares for more than $18 million after firing him and hasn’t done so.

He was named in 2003 to head the brokerage unit that Bank of America Chief Executive Officer Ken Lewis last year called Merrill Lynch’s “crown jewel.” Dan Sontag replaced McCann in January, and Sallie Krawcheck, who previously led Citigroup Inc.’s Smith Barney brokerage, took over for Sontag this month.

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S Korea Shares End Down On Pft-Taking On Weak US, China Mkts

2009-08-25T02:29:00.000-07:00

South Korean shares closed lower Tuesday as overnight weak finish on Wall Street and sharp declines in China stocks led investors to take profits.

The Korea Composite Stock Price Index, or Kospi, lost 10.84 points, or 0.7%, to 1601.38.

"It was natural to see investors locking in profits after (local) blue chips and the main index rose sharply in the short period" since late last week, said Oh Hyun-seok, an analyst at Samsung Securities.

Most blue-chip bank, technology and auto stocks retreated after showing a strong performance again in the previous day.

"But the sentiment was not that bad despite the sharp declines in China markets. Bullish sentiment seems to have taken control of the market. There seem to be more people waiting to enter the market on dips than people waiting to take profits," added Oh.

Foreigners and local retail investors were net buyers of shares worth KRW194.4 billion and KRW244.1 billion, respectively. But domestic institutions offloaded a net KRW400.8 billion worth of stocks on still-high demand for fund redemption, said analysts.

Market analysts also expect U.S. financial markets to react positively to news that U.S. President Barack Obama will reappoint Ben Bernanke for a second four-year term as Chairman of the Federal Reserve.

Bernanke's reappointment will remove the risk of any change in the current policy stance and potential miscommunication with a new chairman, said Bae Sung-young, an analyst at Hyundai Securities.

The Kospi is expected to remain on an uptrend although its rising pace may slow down after recent steep gains in the broader index and blue chips, added Bae.

The local stock market will also likely to continue to be swayed by China markets, said Oh.

Investors will watch closely for cues from housing and consumer-related data due to be released this week.

Among banks, KB Financial Group retreated 2.9% to KRW54,400, and Woori Finance Holdings dropped 0.3% to KRW14,500.

Samsung Electronics fell 1% to KRW775,000, and Hyundai Motor dropped 0.9% to KRW106,500 - both after hitting historic peaks Monday.

LG Display rose 2.6% to KRW36,250 partly on news that it has signed a non-binding memorandum of understanding with the Guangzhou government in China to set up an advanced panel manufacturing plant that could cost more than US$3 billion, said analysts. link....

LG Display Plans to Build LCD Factory in China

2009-08-25T02:28:00.000-07:00

LG Display Co. plans to build the biggest and most advanced liquid-crystal display factory in China as the South Korean company seeks to meet surging demand for flat-screen televisions in the country.

The world’s second-biggest LCD maker signed a preliminary agreement on Aug. 21 with the city of Guangzhou, China, LG Display said in a regulatory filing today. The deal is subject to approval by the South Korean government and Seoul-based LG Display’s board, it said, without providing financial details.

The factory, estimated by Maeil Business Newspaper to cost as much as 5 trillion won ($4 billion), would be three generations ahead of China’s most advanced LCD plant. The investment faces the challenge of winning South Korea’s approval because the government has the option of blocking the transfer of technologies deemed as strategic.

“If the plan is realized, it will be an important landmark for the industry in China and may prompt other LCD makers to follow suit,” said Shi Hong, an electronics analyst at Industrial Securities in Shanghai. “For LG, there are commercial advantages in setting up LCD production facilities in China as many of its customers are based there.”

LG Display, based in Seoul, rose 2.6 percent to close at 36,250 won as Korea’s benchmark Kospi stock index dropped 0.7 percent. The stock has gained 73 percent this year, leading a rally by shares of the four largest LCD producers, as demand in China helped drive up panel prices.

Samsung Interested

Samsung Electronics Co., the world’s largest LCD maker, has some interest in building a factory in China, Chang Won Kie, president of the Suwon, South Korea-based company’s LCD business said today. Sharp Corp., Japan’s largest maker of LCD TVs, said in June it’s in talks with a partner in China to start producing LCDs in the country. link.....

FOREX-Euro slides, dollar, yen gain as stocks struggle

2009-08-25T02:27:00.000-07:00

The euro fell on Tuesday while the yen and the dollar rose as a retreat in European shares from a 10-month high the previous day curbed demand for currencies considered to be high-risk.

European shares fell 0.5 percent .FTEU3, pulling away from their highest level since October hit on Monday, and Chinese shares shed 2.6 percent, prompting traders to sell the euro and sterling.

"Today is a risk-off day as equities are coming off and the dollar is trading a bit stronger," said Carl Hammer, currency strategist at SEB in Stockholm.

But he said the broad trend for elevated risk demand remained intact.

By 0749 GMT, the euro EUR= traded 0.2 percent lower at $1.4269, having slipped to the day's low of $1.4254 according to Reuters data, in early European trade.

Traders said Asian names were seen selling the euro against the dollar.

Investors awaited speeches from Swiss National Bank officials later in the day to see if they would reiterate their position to combat excessive strength in the Swiss franc. Swiss authorities have been intervening in the currency market since March.

The dollar index .DXY was little changed but the U.S. currency fell as low as 93.80 yen in early trade, as the yen was the main beneficiary of the pullback in risk demand.

In early European trade, the pair traded at 94.12 yen, down 0.4 percent on the day.

The dollar showed little reaction to news that U.S. President Barack Obama would reappoint Federal Reserve Chairman Ben Bernanke for a second term on Tuesday. [ID:nN24151253]

"I don't think there will be any major impact, but it should be positive for markets such as the stock and bond markets in the sense that an element of uncertainty has been removed," said Takahide Nagasaki, chief FX strategist at Daiwa Securities SMBC in Tokyo. link.....

Uncertainty over GM sale of Opel

2009-08-25T02:26:00.000-07:00

The race to control Opel has been between two firms

US carmaker General Motors could be set to reverse its decision to sell its struggling European car firm Opel, according to media reports.

Last week, the German government said it would lend Opel 4.5bn euros ($6.4bn; £3.9bn) if its favoured suitor, Magna, was chosen to take it over.

The bid from the Canadian car parts maker is backed by Russia's Sherbank.

But reports in the UK and US say GM is trying to raise rescue funds for Opel from the US and European governments.

At the weekend, GM postponed making a decision on who should buy the Opel division, which includes Vauxhall in the UK.

As well as Magna, Belgian financial group RHJ has also been a suitor of Opel.

'Decisions'

Magna has publicly promised to cut fewer jobs in Germany, where 25,000 people are currently employed in the division.

GM, once the world's largest carmaker, struck an outline deal with Magna in May, days ahead of seeking bankruptcy protection.

In July, GM emerged from Chapter 11 bankruptcy with a number of new US government-appointed board members.

The carmaker has not commented on the fate of Opel, but the German government has called on the US government, which owns more than 60% of GM, to try to speed up the Opel sale process.

On Monday, the White House said that President Barack Obama's "view is that decisions made about the day-to-day operations at General Motors should be made by the folks at General Motors".

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Clunkers: Dealers get ready for the 'hangover'

2009-08-25T02:24:00.000-07:00

After the mad rush of car sales sparked by Cash for Clunkers, dealers will now find they have plenty of downtime to count their money.

The popular program, which ended Monday, will leave many showrooms without cars to sell or customers looking to buy them.

"We're definitely going to have a hangover," said Edward Tonkin, vice president of the Ron Tonkin Family of dealerships in Portland, Oregon and vice chairman of the National Automobile Dealers Association.

As of Monday morning, dealers had submitted 625,000 Clunkers applications to the government seeking a total of $2.58 billion, according to the Department of Transportation.

The Department of Transportation said Monday that it would give dealers extra time to file their rebate applications after its Web site for handling the submissions was overwhelmed.

The department said the deadline for dealers would be extended beyond 12 noon Tuesday to make up for time that was lost while the system was down.

After the heady rush of Clunkers sales, the return to normal -- especially in a market where "normal" means deeply depressed -- may be difficult to deal with.

"I think you're going to be able to shoot a cannon through here and not hurt anybody," Tonkin said.

In the short run, dealers will see sales drop precipitously, said Jeremy Anwyl, CEO of the auto Web site Edmunds.com. link....

Obama to nominate Ben Bernanke for second Federal Reserve term

2009-08-25T02:21:00.000-07:00

Bernanke has brought the US economy 'back from the brink', Obama will say. Photograph: Larry Downing/Reuters

US Federal Reserve chairman Ben Bernanke will be nominated for a second term by Barack Obama later today.

The move was welcomed by analysts who said it would provide stability at a critical time for the economy, ending any lingering concerns about who will lead America's central bank.

Obama will interrupt his holiday in Martha's Vineyard, Massachusetts, to make the announcement with Bernanke at his side at 9am local time (2pm BST).

"Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall," the US president will say. "Taken together, all of these steps have brought our economy back from the brink. They are steps that are working."

Bernanke's appointment to a new four-year term must be confirmed by the Senate, which is controlled by Obama's Democrats. An expert on the Great Depression, he has lowered US interest rates to near zero and pumped hundreds of billions of dollars into the economy to lift it out of its deepest downturn since the 1930s. The recession now appears close to an end, but economic recovery is fragile, with unemployment and home foreclosures still rising.

"It's very smart; it will be encouraging for the market," said Jim Awad of Zephyr Management in New York. "He's viewed very positively – he saved us from depression and the economy is recovering. The White House has been shrewd in reappointing him to retain confidence in the recovery of the economy and financial markets."

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Sun Country sets time limit for holding flyers on board

2009-08-24T01:50:00.002-07:00

Days after 154 of its passengers were stuck on a New York tarmac for about six hours, Sun Country Airlines said Sunday that it is changing its policy on extended delays and establishing a deadline for when people and planes will be returned to the terminal.

Sun Country CEO Stan Gadek said he believes his company is the first to establish such a deadline — in this case, a maximum of four hours.

“To the best of my knowledge, I think we are” the first to set such a deadline, Gadek said Sunday. “I don’t know if other airlines will follow ... but I think it’s high time that airlines stand up and commit. It’s a common-sense thing. The flight delay on Friday was unacceptable. We do not want a repeat of what happened on Friday.”

Gadek also said four hours is a maximum, and that the airline could return passengers to the gate sooner than that it appears that the delay — such as the one that occurred at New York’s John F. Kennedy International Airport on Friday — will last longer than four hours.

“It will be done case by case,” said Gadek, who also said he supports passengers’ rights legislation now before Congress.
Gadek’s announcement drew the immediate support of Sen. Amy Klobuchar, D-Minn., who has been pushing airlines to establish a three-hour deadline for tarmac delays.

“I would rather have three hours instead of four, but I appreciate that he is taking responsibility for what happened on the flight Friday,” Klobuchar said Sunday night.

Gadek said he pushed for the four-hour limit because there are so many three-hour delays at JFK and New York airports that to go under that could mean even longer flight times because of the constant boarding and unboarding. link.....

Goldman 'trading huddles' offer tips to top clients

2009-08-24T01:50:00.001-07:00

Goldman Sachs Group Inc (GS.N) holds a weekly meeting of its research analysts where they offer trading ideas that are given to top clients, the Wall Street Journal reported on its website on Sunday.

But the paper cited Steven Strongin, Goldman's stock research chief, as saying these meetings did not give anyone an unfair advantage and the tips did not contradict research notes that carry predictions over a longer term.

Goldman's analysts talk about short-term developments around specific stocks during the meeting, called a "trading huddle," which is also attended by some of the firm's own traders, the Journal reported.

The practice started some two years ago, and since then the Wall Street firm has given ideas on hundreds of stocks, the Journal reported, citing internal Goldman documents.

Goldman could not be reached immediately for comment on Sunday night.

The company told the Journal that its own traders were not allowed to use the information until it had been given to clients.

The Journal also cited Goldman spokesman Edward Canaday as saying that a comment that could lead to changes such as those in earnings estimate, ratings or price target must be sent out to all clients. But Canaday told the Journal that it was rare for comments to reach such levels. link......

Senator seeks broad SEC market review

2009-08-24T01:49:00.000-07:00

A Democrat senator is expected on Monday to ask the Securities and Exchange Commission to review the stock market's structures, Dow Jones Newswires reported, reviving a debate over the market impact of computer-based trading.

Ted Kaufman, a long-time advisor to Vice President Joe Biden, said regulatory moves in the past decade have had the unintended consequence of making the stock market too fragmented, according to a letter to be sent to SEC Chairman Mary Schapiro that was reviewed by the news agency.

There are now potential conflicts of interest on Wall Street trading desks trying to serve both retail clients and high-frequency trading firms, the Delaware senator said.

In response, the regulator should undertake a 'zero-based review' of the market, the letter was quoted as saying. Zero-based reviews examine all parts of a structure.

Kaufman and the SEC could not immediately be reached for comment by Reuters outside regular U.S. business hours. link.....

European Opposition Mounts Against Google’s Selling Digitized Books

2009-08-24T01:47:00.000-07:00

The Bodleian Library at Oxford University, above, is working with Google to digitize its books.

BERLIN — Opposition is mounting in Europe to a proposed class-action settlement giving Google the right to commercialize digital copies of millions of books.

The settlement would permit Americans to buy online access to millions of books by European authors whose works were scanned by Google at American libraries.

While some big European publishers, like the Oxford University Press and Bertelsmann (which owns Random House) and Georg von Holtzbrinck (the owner of Macmillan), support the agreement, there is widespread opposition among French publishers. The German government, supported by national collection societies in Germany, Austria, Switzerland and Spain, plans to argue against it and encourage writers to pull out of the agreement.

A United States District Court has set a Sept. 4 deadline for submissions on the settlement and plans to hold a hearing Oct. 7.

Akash Sachdeva, an intellectual property lawyer with the law firm Allen & Overy in London, said that last-minute objections from Europe were unlikely to stop the settlement from going forward.

“I would imagine the court is going to say that because you have a significant amount of big players around the world who have opted into this, then it is worth proceeding with,” he said.

Google, which has been digitizing books since 2004 to make them available online, says the proposed settlement will benefit publishers, authors and consumers, making a vast reservoir of work available for easy access.

Around the world, 25,000 publishers, libraries and individuals are working with Google to digitize their archives and catalogues, including Oxford’s prestigious Bodleian Library and the Bavarian State Library. Even the French National Library, an outspoken opponent of the project, said last week that it was talking to Google about a deal to help digitize its archives.

“We believe that we are helping the industry tremendously by creating a way for authors and publishers to be found,” said Santiago de la Mora, Google’s head of printing partnerships in London. “Search is critical. If you are not found, the rest cannot follow.” link....

OIL FUTURES: Crude Up On Econ Growth Optimism, Asian Equities

2009-08-24T01:46:00.000-07:00

Crude oil futures in Asia continued to consolidate on Friday's gains alongside regional stock markets on renewed optimism about the global economic recovery.

Light, sweet crude futures for October delivery traded at $74.17 a barrel at 0623 GMT, up 28 cents in the Globex electronic session. October Brent crude on London's ICE Futures exchange rose 37 cents to $74.56 a barrel.

A threat by Nigeria's main militant group to resume attacks on oil installations is also lending support to crude, but given high global oil stockpiles, the issue may not be as big as in recent years, analysts said.

Nymex crude settled at a 10-month high Friday after bettter-than-expected U.S. housing sales data fueled expectations of a faster economic recovery in the world's largest energy consumer.

"That sentiment is still resonating and people are reviving up their outlook for economic growth," said Ben Westmore, commodities economist at National Australia Bank.

Crude is likely to trade around these levels until U.S. inventories data Wednesday, with strong resistance at $75 a barrel, analysts said.

"The crude market's proximity to a shelf of summer highs that have been established around the $75.00-$75.25 area is worthy of attention, since a close above this level could easily ignite another flurry of fund buying interest," wrote Jim Ritterbusch, president of trading advisory firm Ritterbusch & Associates.

The next U.S. inventory data is of particular importance to traders because of the "unusual" drop that fueled a rally last week, said Yusuke Seta at Newedge Japan. "But there's still a glut in the market. Crude oil (stocks) might show a build of about a million barrels this week," Seta said.

Despite weak fundamentals, oil will continue to be buoyed by stock markets, Seta said, adding that "as long as stock indices don't crash, oil prices will be supported."

Nymex reformulated gasoline blendstock for September, the benchmark gasoline contract, rose 219 points to 201.75 cents a gallon, while September heating oil traded at 191.77 cents, 128 points higher.

ICE gasoil for September changed hands at $608.25 a metric ton, up $6.50 from Friday's settlement. link.....

Sinopec says to spend $17.6 bln in 2 yrs to lift output

2009-08-24T01:45:00.000-07:00

China's Sinopec Corp (0386.HK), the world's No.2 oil refiner, said on Monday that it plans total capital expenditure of 120 billion yuan ($17.57 billion) over the next two years to boost refining and production.

Vice-President Lei Dianwu made the remarks at a results news conference in Hong Kong.

Sinopec, second to Exxon Mobil (XOM.N) in terms of capacity, posted a record quarterly profit on Sunday that widely exceeded expectations on the back of higher fuel prices and falling crude oil prices, underscoring the turnaround in fortunes for China's once-struggling refiners. [ID:nHKG84686].

Beijing's fuel price reform grants refiners a guaranteed profit margin only if crude stays below $80 per barrel.

Shares of Sinopec rose nearly 5 percent in the morning session, but gains were pared to close at HK$6.97, up 0.72 percent. link....

Japan’s Nikkei Jumps Most Since May on U.S. Homes, Commodities

2009-08-24T01:44:00.000-07:00

Japanese stocks rose, lifting the Nikkei 225 Stock Average to its biggest jump in more than three months, after sales of existing homes in the U.S. surged the most on record, the yen weakened and commodities gained.

Canon Inc., the world’s biggest digital-camera maker, added 6.3 percent. Honda Motor Co., which gets more than half its sales in North America, climbed 3.2 percent. Mitsubishi Corp., a trading company that gets more than a third of its sales from commodities, advanced 3.9 percent.

“The housing report confirmed the U.S. is clearly on a path to recovery,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $91 billion. “The fundamentals of the global economy and corporate earnings are improving, supporting the resilience of the market.”

The Nikkei 225 Stock Average climbed 342.85, or 3.4 percent, to 10,581.05 in Tokyo, the steepest climb since May 7. The broader Topix index added 22.93, or 2.4 percent, to 970.27, with all of its 33 industry groups advancing.

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Asian stocks jump on Bernanke comments, home sales

2009-08-24T01:43:00.000-07:00

HONG KONG — Asian stock markets jumped Monday as upbeat comments from the Federal Reserve's chairman and signs the U.S. housing industry was healing strengthened confidence in a global recovery.

Tokyo shares led the way with a 3 percent gain as the region, taking cues after Wall Street closed Friday at its highest levels since November, staged a broad-based rebound from last week's heavy selling. Oil prices rose above $74 a barrel and the dollar climbed against the yen.

Investors poured into stocks after Fed Chairman Ben Bernanke said the prospects for a near-term recovery in the world's largest economy appeared to be good. Also boosting confidence was a better-than-expected rise in U.S. home sales last month that helped relieve some of the fears about American consumers that have held stock markets down lately.

There was evidence of economic renewal in Asia as well. Thailand's economy emerged from recession in the second quarter thanks to increased government spending and manufacturing resuming growth after steep declines.

"The numbers coming through continue to show economies are in better shape," said Song Seng Wun, economist at CIMB-GK research in Singapore. "But we could see more up and down in the markets as investors keep looking over their shoulder and asking themselves how much optimism is justified."

Japan's Nikkei 225 stock average gained 342.85 points, or 3.4 percent, to 10,581.05.

In China, the main Shanghai index was up for a third straight day, gaining 0.8 percent to 2,983.22, after its sharp falls last week helped trigger selling around the world. Hong Kong's Hang Seng added 1.6 percent to 20,536.64. link.....

Yen Falls as Recovering Global Economy Boosts Demand for Yield

2009-08-24T01:39:00.000-07:00

The yen weakened for a third day against the euro as improving economic data and central bank comments that the global recession is abating spurred investors to buy higher-yielding assets.

The Japanese currency declined the most versus the South Korean won and Australian dollar as stocks extended a rally after Federal Reserve Chairman Ben S. Bernanke said last week chances for near-term growth “appear good.” The euro rose against 12 of the 16 most-traded currencies before a report that economists said will show European industrial orders fell at a slower pace.

“We’ll see a continuation of the risk rally and that’s consistent with yen weakness,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London, the biggest foreign exchange trader. “The economic data has been sufficiently strong to persuade even the more bearish in the market.”

The yen weakened to 135.72 per euro as of 8:43 a.m. in London from 135.21 in New York on Aug. 21. It earlier declined to 136.09 per euro, the weakest level since Aug. 14. The Japanese currency also dropped to 94.89 per dollar from 94.38. The dollar appreciated to $1.4301 per euro from $1.4326.

The MSCI World Index of shares rose 0.7 percent, its fifth straight gain, as every stock market in Europe opened higher, sending the region’s Dow Jones STOXX Index up 0.6 percent. The Standard & Poor’s 500 Index gained 2.2 percent last week, touching a 10-month high, as a report showed sales of existing U.S. homes climbed.

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Toyota Boosts North American Capacity for Four-Cylinder Engines

2009-08-22T06:30:00.000-07:00

ERLANGER, Kentucky — Toyota on Friday said it will add capacity at its engine plant in Huntsville, Alabama, to boost North American production of four-cylinder engines, a further sign of increasing demand by consumers for more fuel-efficient powertrains.

The plan is for Toyota Motor Manufacturing Alabama to produce 216,000 four-cylinder engines per year for the Toyota Camry and RAV4. The automaker said production on the four-cylinder engines will begin by summer 2011. The move will boost employment by 240 people, with new investment totaling $147 million, Toyota said.

Inside Line says: The recession must be petering out if Toyota is slowly adding jobs and investment to these parts.

Toyota is looking to produce 216,000 four-cylinder engines a year for the Camry sedan (pictured) and RAV4 (below). (Photo by Kurt Niebuhr)

Geithner: 2008 bailout not aimed at Goldman -WSJ

2009-08-22T06:29:00.000-07:00

U.S. Treasury Secretary Timothy Geithner on Friday denied that emergency government action taken last year to shore up the U.S banking system was tailored to the interests of Goldman Sachs (GS.N) or any other firm.

"We have been forced to do just extraordinary things and, frankly, offensive things to help save the economy," Geithner said in an interview with The Wall Street Journal and Digg, an online site where users share and rate articles.

"I am completely confident that none of those decisions ... had anything to do with the specific interest of any individual firm, much less Goldman Sachs," he said.

The U.S. Congress, acting on the urgent advice of then Treasury Secretary Henry Paulson, a former Goldman Sachs chief executive, last year put up $700 billion to prevent the banking system from collapsing amid a global credit crisis

The Treasury, under Paulson, and the Federal Reserve also crafted a massive bailout of insurer American International Group (AIG.N), that enabled it to pay counterparties, including Goldman, billions of dollars that might otherwise have been lost.

Geithner, who was president of the Federal Reserve Bank of New York during the crisis and therefore close to all of decisions that were taken, said government had a duty to act in the face of such a grave threat in order to prevent an even worse outcome.

"The basic imperative...in a crisis like this (is) to protect people who are innocent of the mistakes that brought us to this place," he said in the interview. link....

Bank of America Adds a Director

2009-08-22T06:27:00.000-07:00

Bank of America, which has lost 10 directors through resignations or retirement since April, elected a former Morgan Stanley executive, Robert Scully, to its board, which now has 14 members. Mr. Sully, 59, part of Morgan Stanley’s office of the chairman until he retired in January, oversaw asset management, merchant banking and the Discover credit card business, the bank said. link.....

West Will Languish; Asia Will Lead

2009-08-22T06:25:00.000-07:00

AFTER THE RECENT JUDDER IN THE ASIAN MARKETS, WHO BETTER to ask about the region's prospects than Christopher Wood? The Hong Kong-based strategist for CLSA Asia-Pacific Markets, a unit of Crédit Agricole, pens the widely followed newsletter Greed & Fear.

He was early to spot the problems in the U.S. mortgage market and their global financial implications, writing about them back in 2005.

Even earlier, he espied the troubles brewing in Thailand, before the 1997 Asian crisis.

Darrin Vanselow for Barron's

"When I say you want to be overweight Asia and emerging markets, I'm talking predominantly about investing in domestic themes such as financial services, real estate and infrastructure." --Christopher Wood

Midway through last week, the MSCI AC Asia ex-Japan index had risen by 79% in U.S. dollar terms since the October 27 bottom, while the Standard & Poor's 500 is up just 17% over the same period. Wood acknowledges a modest correction may be in order, but believes prospects are good for a long-term bull market in Asia. To learn why, keep reading.

Barron's: You sure got this crisis right. Where are we now?

Wood: This financial crisis in the Western world will lead to a long period of anemic growth. The data that is making people more optimistic on the U.S. right now is tending to be production-oriented data like the ISM [a survey of manufacturers] or car sales. But there is very little sign to me that U.S. consumer demand is recovering or that real releveraging is taking place.

In fact, all the evidence both in the U.S. and Euroland is that the consumer is going into long-term retrenchment. Even when the banks in America and Europe become healthier in coming quarters and years, I believe demand for credit will be much less than it was in the last five, ten years. So, we are going into a long-term period of deleveraging. We'll continue to see deflation backdrops in the Western world. The best case is a long period of subpar, anemic growth. link.....

American revamps bag fee policy

2009-08-22T06:24:00.000-07:00

American Airlines Inc. is raising baggage fees for certain international fliers.

A new policy of checking in one bag for free and paying $50 to check in a second piece of luggage impacts certain travelers who are flying to particular locations in Europe, India and the United States.

Fort Worth, Texas-based AMR Corp. (NYSE: AMR) said the new policy impacts certain types of economy-class tickets purchased on or after Sept. 14. The changes will affect passengers on transatlantic flights from or through India, Belgium, France, Germany, Ireland, Spain and Switzerland.

American Airlines Inc., a subsidiary of AMR Corp., said certain members of the American AAdvantage program and oneWorld Alliance Emerald, Sapphire or Ruby members will not have to pay for a second bag.

Active U.S. military also are exempt, as well a passengers booked in first and business class cabins. link....

Stocks Still Follow Crude, But For How Long?

2009-08-22T06:23:00.002-07:00

As crude oil on Friday hit a high for the year above $74 a barrel, energy shares rallied, fueling the broader U.S. stock market toward weekly gains. But if oil's price gains continue, what has been viewed as a bullish signal could easily turn bearish for U.S. equity investors.

Positive U.S. and European economic data, along with weakness in the dollar, helped in supporting oil's surge, with the front-month futures contract lately up $1.13 at $74.04 a barrel, after earlier hitting $74.72 -- its highest level so far this year. .

Crude futures have had "trouble staying above $73" and hence had been trading in a range of $65 to $73 a barrel, said Kevin Kruszenski, director of equity trading, KeyBanc Capital Markets Inc.

"So today it's a focus, since we're at a very important level," he said.

While crude's climb on Friday had it rallying to its highest point yet for the year, a barrel of oil remains roughly half of where it stood at its height last summer, when crude-oil futures on July 11 hit an intraday high of $146.65, with the Dow industrials shed 129 points that day.

"A year or so ago, higher (oil) prices were bad for the stock market, now the inverse is true. It's seen as a sign of economic recovery," Kruszenski noted.

Rising energy costs would be seen in a less favorable light should the price of crude climb back over $100 a barrel, Kruszenski said. That said, it's unlikely that that would happen anytime soon, he added.

"It's too early in the economic recovery. I don't think there is enough business or consumer activity," said Kruszenski.

Other analysts had differing views on the tipping point at which rising crude prices would fall out of favor with equities investors.

In the view of Mike Zarembski, senior commodities analyst at OptionsXpress, crude at $80 to $85 a barrel would take the steam out of an economic rally.

On Wall Street, energy shares fronted the broad market's advance to close out the week, with shares including Nabors Industries Ltd. (NBR) and Cameron International Corp. (CAM) both up nearly 5%.

The Dow Jones Industrial Average (DJI) added 146.31 points, or 1.5%, to 9, 496.36, while the S&P 500 Index (SPX) climbed 16.86 points, or 1.7%, to 1, 024.23. The Nasdaq Composite Index (RIXF) also rose, up 27.29 points, or 1.4%, to 2,016.3.

link....

Survey: Fla. home loan delinquency highest in nation

2009-08-22T06:23:00.001-07:00

Nearly 23 percent of residential loans in Florida were delinquent or in foreclosure in the second quarter, according to a survey by the Mortgage Bankers Association.

Florida has the highest rate in the nation, followed by Nevada, Arizona and Michigan.

“Florida continues to establish itself as the worst state in the union for mortgage performance, closely followed only by Nevada,” MBA chief economist Jay Brinkmann said in a news release.

At the end of the second quarter, nearly 12 percent of Florida residential loans were in the process of foreclosure, up from 10.6 percent in the previous quarter. An additional 10.8 percent were delinquent by at least 30 days, up slightly from 10.7 percent in the first quarter.

They survey noted that delinquency rates for subprime loans were declining, while the problems in prime loans were increasing. Federal Housing Administration-backed loans also suffered from higher delinquency rates.

“It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves,” Brinkmann said. “In addition, in some areas where a number of borrowers have mortgages that are larger than the current value of their homes, any life events such a divorce or loss of a job are likely to translate into foreclosures until prices in those areas recover, not just flatten.”

Nationwide, 8.9 percent of residential loans were delinquent and an additional 4.3 percent were in the process of foreclosure at the end of the second quarter. link....

Chrysler's Press may exit this year

2009-08-22T06:22:00.000-07:00

About a half-dozen dealers contacted by the Free Press said no one from Chrysler had told them when or if Press was leaving. One person familiar with Chrysler's new structure said Press' new role was meant to be temporary.

Fiat and Chrysler CEO Sergio Marchionne has implemented a flatter organization since Chrysler's June 10 bankruptcy exit. Where Chrysler operated before the bankruptcy with a chairman and two vice chairmen, Marchionne has implemented a structure based on four presidents for the company's Chrysler, Jeep, Dodge and Mopar replacement parts brands.

Fiat owns 20% of Chrysler. The UAW's retiree health care trust owns 67.7%, while the U.S. and Canadian governments own 12.3%.

Cerberus Capital Management, controlling investors in pre-bankruptcy Chrysler, lured Press away from Toyota Motor Corp., where he spent 37 years, eventually becoming Toyota's highest-ranking American.

In Auburn Hills, Press embraced the challenge of reviving Chrysler, which was caught with too many trucks and SUVs just as gas prices soared and consumers moved toward smaller vehicles. Press tried to reduce Chrysler's dependence on sales to rental companies and increase the percentage of sales to consumers, but it was an uphill struggle as the U.S. economy imploded.

Eventually Chrysler asked Congress and the Bush administration for financial assistance, which led to the government-backed bankruptcy sale. Press' main role in that process was to terminate 789, or 25%, of its U.S. dealerships. While the company said the move was necessary to strengthen the surviving 2,400 dealers, it infuriated some dealers.

More recently, Chrysler has contacted some of the dealers it terminated and asked whetherthey would like to compete for one of 140 new locations in what the company said are more attractive markets. link....

GM delays decision on Opel future

2009-08-22T06:21:00.000-07:00

The race to control Opel is between two firms

The board of US carmaker General Motors has postponed making a decision on who should buy its Opel division, which includes Vauxhall in the UK.

The Detroit-based firm said directors had met on Friday to discuss the options but "no decision was taken".

An assessment on whether to start exclusive talks to buy German-based Opel had been expected at the weekend.

The race to control Opel is between the Canadian component manufacturer Magna and Belgian financial group RHJ.

The BBC understands that a number of stumbling blocks have emerged to delay the final decision.

The German government - which has openly preferred the bid from Magna and has offered it bridging finance of 4.5bn euros ($6.4bn, £3.9bn) - is thought to have added further conditions to that support.

Magna has publicly promised to cut fewer jobs in Germany, where 25,000 people are currently employed in the division.

Buy-back option

Germany's economy minister said he regretted the failure to make a decision.

Karl-Theodor zu Guttenberg was also quoted as telling the online edition of the Hamburger Abendblatt newspaper that "there is still room for an agreement".

UK Business Secretary Lord Mandelson has been critical of German Chancellor Angela Merkel for politicising the bidding contest ahead of federal elections in the country, at the end of September.

Earlier this week Lord Mandelson said GM needed to look for an "industrial outcome based on the long term viability" of Opel.

Lord Mandelson has also said he would stand by the UK carmaking industry - in particular Vauxhall, which employs more than 5,000 people directly in its plants in Ellesmere Port, Cheshire, and Luton, Bedfordshire.

link.....

U.S. Indicts Two in Switzerland on Tax Charges

2009-08-22T06:20:00.001-07:00

The Justice Department indicted a Swiss private banking executive and a Swiss lawyer on Thursday, accusing them of selling tax evasion services to wealthy clients. The move opens a new front in Washington’s challenge to Switzerland’s tradition of bank secrecy.
The indictment, filed in United States District Court in Fort Lauderdale, Fla., charged Hansruedi Schumacher, a director at NZB Neue Zürcher Bank of Zurich, and Matthias W. Rickenbach, a Swiss lawyer, with one count each of conspiring to defraud the United States. It was filed a day after the giant Swiss bank UBS said that it had agreed to disclose 4,450 American client names and account details, and it indicated that American authorities were starting to pursue smaller players who might have helped Americans hide money. Smaller Swiss banks have expressed confidence that they could continue to work with American clients and find new ways to protect their privacy.

“These conspiracy charges show that Justice is widening the net beyond UBS to include other banks, and that it is also going beyond individual account holders to the professionals who assist them,” said Lee Sheppard, a tax lawyer in New York and a writer for Tax Analysts, a trade publication.

Mr. Schumacher is a former top private banker for UBS who left around 2002 to establish and oversee NZB’s private banking operations. He worked at NZB until at least last month, the indictment said. Mr. Rickenbach is a partner of the Rickenbach & Partner law firm, with offices in Zurich and Geneva.

A Justice Department statement said that the two men “helped their clients obtain offshore credit cards and created sham loan documents.” It said they “falsified bank documents to generate the appearance that assets of their U.S. clients belonged to Swiss citizens, and they falsified documents to disguise their United States clients’ repatriation of offshore funds as inheritances from foreign citizens.” link...

GETTING PERSONAL:Birkenfeld Gets First Jail Term In UBS Case

2009-08-22T06:19:00.000-07:00

Former UBS AG (UBS) banker Bradley Birkenfeld appears to be headed to jail. For a long time.

A Florida judge has sentenced Birkenfeld to 40 months incarceration, the Department of Justice said Friday, in the first sentencing of the UBS tax case.

While the terms struck some as harsh, given that Birkenfeld helped the government peer into the hidden world of offshore accounts, others say it is fitting justice.

Forty months "doesn't seem that bad to me," says George Clarke, a member of the white-collar and internal investigations and tax practice at law firm Miller & Chevalier. After all, Clarke adds, Birkenfeld "helped taxpayers evade a substantial amount of tax."

It wasn't immediately clear whether the former banker will be able to appeal in the case.

Because Birkenfeld was a key collaborator with the government, there were expectations in some quarters that he would get off more lightly.

Considering that the former banker "blew open the entire UBS operation for the IRS, his sentence seems harsh," says Kenneth Rubinstein, a senior partner at law firm Rubinstein & Rubinstein in New York.

Cases like UBS' can generally be made only through the help of informants or whistleblowers, "and one can only wonder if future potential cooperators will think twice," because of the Birkenfeld sentence, says Scott D. Michel, an attorney at Caplin & Drysdale in Washington, D.C.

The sentence, adds Michel, "is extraordinary" in its harshness.

Birkenfeld worked as a private banker in Geneva for UBS. While there, he helped a U.S. billionaire real estate developer evade $7.2 million in taxes by helping conceal $200 million of assets in Switzerland and Liechtenstein.

Birkenfeld routinely traveled to the U.S. to help other wealthy Americans conceal assets offshore, enabling them to evade taxes on income generated by money in their accounts. He admitted that he and others advised U.S. clients to put cash and valuables in Swiss safety deposit boxes, and buy jewels, artwork and other luxury items while overseas with Swiss account money.

Others are likely to go to jail in the UBS case.

An IRS voluntary disclosure program offering leniency has drawn hordes of people with accounts who know that, if they don't report them and the IRS targets them, they could go to jail.

The guidelines on prison time for tax evasion are harsh: Six months to a year for those who cheat the government out of just $5,000, for example. It is usually worse when an offshore account is involved: Punishment in such cases is often bumped up two notches on federal sentencing guidelines.

The government will more likely go after the big game, those who cheated it out of the large sums that suggest a concerted effort at evasion.

According to baseline sentencing guidelines, someone who evaded between $200,000 and $400,000 could get a prison term of between 27 and 33 months as a first-time offender, and use of an offshore account could lengthen that time.

Though federal sentencing guidelines aren't mandatory in these cases, most judges will follow them. Exceptions can be made if the government urges leniency for someone who has cooperated in investigating others, or the case presents other special circumstances. link.....

U.S. Helps Spanish Company to Buy Texas Bank

2009-08-22T06:17:00.000-07:00

Guaranty Bank, a deeply troubled Texas lender, was sold on Friday to Banco Bilbao Vizcaya Argentaria of Spain in one of the largest government-assisted deals offered to a foreign firm.

Cody Duty/American-Statesman

The federal government agreed to absorb most of the losses on $11 billion of Guaranty Bank assets in the sale agreement

Federal regulators seized Guaranty Bank and simultaneously brokered the sale of its branches as well as most of the deposits and assets to BBVA Compass, the Spanish bank’s American subsidiary. The government, however, agreed to absorb most of the losses on $9.7 billion, or more than 80 percent, of the Guaranty assets included in the deal.

The failure is the fourth-largest since the financial crisis began, and the Federal Deposit Insurance Corporation projects that it will cost its deposit insurance fund about $3 billion.

Regulators also arranged for the sales of three smaller banks in Alabama and Georgia on Friday, bringing the total number of bank failures so far this year to 81. That compares with only 25 bank failures in all of 2008.

News that BBVA had submitted the winning bid leaked out earlier this week, but regulators waited until late Friday to orchestrate the takeover. That may be another sign that confidence in the financial system is being restored, since in contrast to past leaks, regulators did not immediately seize the bank over fears of rumors stoking a bank run.

Stockholders in Guaranty Bank will be wiped out, but the deal ensures that its depositors will not suffer losses. Although BBVA did not take control of the failed bank’s $344 million of brokered deposits, the F.D.I.C. said that it would reimburse brokers directly for those funds.

The government also agreed to shoulder the bulk of the losses on all of Guaranty’s loans — a deal sweetener that the government has rarely extended to overseas buyers.

BBVA agreed to buy $12 billion of the $13 billion assets left at Guaranty Bank, which it will ultimately sell to private investors. The F.D.I.C. agreed to take on the remaining $1 billion of assets, as well as cover losses on the $9.7 billion pool of risky loans that BBVA bought. The agreement calls for the government to take on about 80 percent of the first $2.3 billion of losses, and 95 percent of the losses above that threshold.

Loss-sharing agreements have become a standard part of the F.D.I.C.’s toolkit for resolving troubled banks, but rarely have they covered such a big portion of a failed bank’s assets.

And seldom are they offered to foreign buyers. Indeed, it appears the last time that an overseas bank received federal assistance in a failed bank deal was when the Bank of Ireland scooped up four New Hampshire banks in September 1991. link....

Affordability Leads to Home Sales Spike in South

2009-08-22T06:16:00.000-07:00

The last time the South saw such a marked increase in resales was September 2005. Affordable prices made home buying attractive, as did low mortgage rates. Also, first-time buyers rushed to grab a tax credit that expires in November.

And, while foreclosures are expected to be an obstacle into next year, they are making up a smaller percentage of sales in several markets.

In the South, the median sales price of resold homes fell 7 percent to $164,500 -- not exactly a reason to party. But prices have been steadily climbing since January, when the median was $143,300.

Nationally, July sales of existing homes also rose 5.6 percent compared to the same month last year. Median sales prices fell 15 percent to $178,400.

Continuing a months-long trend, home sales once again rose on an annual basis in Washington D.C. and the Florida metro areas of Miami, Orlando and Tampa, according to The Associated Press-Re/Max Housing Report released Friday.

But in July, other markets joined in, with cities such as Little Rock, Ark., and San Antonio, Texas, posting sales increases. In all, eight of the 19 metro areas covered by the AP-Re/Max report showed year-over-year sales gains.

Meanwhile, prices were flat or up in seven Southern cities, with Little Rock leading the way with a 3 percent jump to $144,000, according to the AP-Re/Max report. Miami, by contrast, had a 44 percent decrease to $150,100.

The report analyzed sales transactions in the metropolitan statistical areas recorded by all real estate agents, regardless of company affiliation.

Lawrence Yun, chief economist for the Realtors group, described the Orlando market as recovering. In that central Florida city, ''demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint,'' Yun said.

Sales in Orlando rose an eye-popping 64 percent compared with July 2008, with prices dipping 36 percent to $130,000, the AP-Re/Max report showed.

''Assuming that interest rates stay low and that builders don't flood the market with product as things improve, then we're on the road to recovery,'' said Steve Moreira, chief executive of Magic Property and Investments. link.....

Unemployment Dips in D.C., Va.

2009-08-22T06:15:00.000-07:00

Unemployment fell in the District and Virginia in July as students found jobs or left the workforce, while it increased slightly in Maryland due to a surge in job seekers, new government data show.

In the District, unemployment edged down from a seasonally adjusted rate of 10.9 percent to 10.6 percent, the Labor Department reported.

More than 13,000 jobs were added to District payrolls last month, a larger number than for most states. City officials said the increase was largely due to the summer youth employment program. The District still leads the region in unemployment with a rate that remains significantly higher than it was a year ago, when it stood at 7 percent.

A growing number of economic forecasters are saying the worst recession of the post-World War II era is close to ending or has already ended. And the manufacturing sector has lately begun to show signs of stabilizing. But the labor market is likely to be weak well after the recession ends. The national unemployment rate edged down in July to 9.4 percent, from 9.5 percent, due in part to people leaving the workforce and not being counted as unemployed. The Labor Department data released Friday showed unemployment rose in 26 states. Jobs remain scarce, with six unemployed people for every opening and a record one out of every three unemployed people being out of work for 27 weeks or longer.

Across the nation, Michigan still has the highest unemployment rate at 15 percent. The Labor Department will release unemployment data for the Washington metropolitan region as a whole on Sept. 1. link.....

Car Buyers Make ‘Mad Dash’ to Dealers as Clunkers Program Ends

2009-08-22T06:14:00.000-07:00

Bernie Saric has watched the U.S. government’s “cash for clunkers” program burn through more than $2 billion in car-purchase assistance. As the program enters its last weekend, she said she decided to grab her share.

Saric, who works for an auto-parts maker, plans to trade in her 1996 Ford Explorer this morning for a 2010 Ford Edge, two days before the program expires Aug. 24.

“I definitely felt the pressure to make a decision and say, ‘If I felt good about a car I test-drive, I have to go for it,’ ” said Saric, of Howell, Michigan, who declined to give her age. “It’s like a mad dash to get a deal done now.”

The clunkers plan, which offers auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles, has recorded more than 489,000 dealer transactions valued at $2.04 billion in rebates, according to Transportation Department data released yesterday.

Last-minute shoppers looking to capitalize on the trade-in program may have few cars or dealerships to choose from. AutoNation Inc. and Group 1 Automotive Inc., two of the country’s largest car dealership groups, said yesterday they will opt out of “cash for clunkers.” Some independent dealers have done so, too, citing cumbersome bureaucracy.

Bryan Mason, 40, of San Francisco, founder of an Internet start-up company, said he had planned to buy a new car to replace his red 2000 Jeep Cherokee with 133,000 miles during the next couple of weeks.

Filling Out Paperwork

“When I heard the program was ending on the news last night, I was here this morning when the doors opened,” Mason said yesterday, while filling out paperwork to buy a 2009 Honda Fit from a dealership in Oakland, California. He said it was the only place that had the car in the color he wanted.

“I’ve had my eye on it,” he said. “I am here today because I wanted to make sure all my paperwork is processed in time.” link....

Economy Is 'Leveling Out,' Bernanke Says

2009-08-22T06:08:00.000-07:00

Chairman Ben S. Bernanke rendered his most positive assessment of the economy yet in a speech Friday and gave credit in part to his own institution's handling of the worst economic crisis in decades.

The U.S. and global economy "appear to be leveling out," Bernanke told an audience of some of the world's leading economists and central bankers, and "prospects for a return to growth in the near term appear good." He warned, however, that the recovery is "likely to be relatively slow at first," with unemployment declining only gradually.

The idea that the economy is starting to improve was bolstered Friday by a report that sales of existing homes soared 7.2 percent in July to the highest level in two years. Bernanke's comments and the housing news sent Standard & Poor's 500-stock index up 1.9 percent to a new high this year.

But the meat of Bernanke's speech was not about the stabilizing economy, but rather an extensive defense of the Fed's handling of the financial crisis and recession. It is part of a broader effort to shore up confidence in the central bank, which has come under fire in Congress and in public opinion polls for its role in various bailouts.

And it comes as speculation heats up over whether President Obama will reappoint the chairman when his term expires Jan. 31.

"History is full of examples in which the policy responses to financial crises have been slow and inadequate," Bernanke said at the annual symposium sponsored by the Kansas City Fed. By contrast, in the current crisis "policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation." link.....

Clothing makers beat estimates, but outlooks mixed

2009-08-19T18:41:00.002-07:00

Phillips-Van Heusen Corp (PVH.N), Gymboree Corp (GYMB.O) and Hot Topic Inc (HOTT.O) posted better-than-expected quarterly results on Wednesday but gave disappointing outlooks, sending shares of the clothing manufacturer and retailers down in after-hours trade.

But shares of Limited Brands Inc (LTD.N) rose 1 percent after the operator of the Victoria's Secret and Bath & Body Works chains forecast a full-year profit range that was better than analysts were expecting.

At Limited Brands, adjusted earnings of 19 cents in the second quarter beat the 16 cents expected, on average, by Wall Street. Net income fell 27 percent to $74.3 million.

Earlier on Wednesday, Perry Ellis International (PERY.O), known for its men's clothes, reported a narrower-than-expected loss and forecast full-year profit above Wall Street estimates, sending shares up 17 percent to $10.45.

Phillips-Van Heusen, a manufacturer that owns the Calvin Klein brand, said its adjusted profit was 60 cents per share, above the 44 cents analysts expected, according to Reuters Estimates. The company cited cost cuts, tightened inventory and strength in its wholesale and retail sportswear businesses.

The company raised its earnings forecast for the full year to a range of $2.30 to $2.40 per share from a prior view of $2.05 to $2.30 per share.

Still, the new range did not reflect an equal gain from the strong second-quarter performance, suggesting that the company was being somewhat conservative in its projections, said Wedbush Morgan analyst Jeff Mintz.

The company's shares fell 1 percent to $34.85 after hours.

At Hot Topic, which sells rock n' roll-inspired apparel, accessories and music, a quarterly net loss per share was a penny better than expectations, while a third-quarter earnings outlook fell just below Wall Street's view. Shares fell 2.2 percent after hours.

Wall Street Strategies analyst Brian Sozzi wrote that Hot Topic faced difficult comparisons with the prior year on margins and same-store sales in light of last year's launch of clothes tied to the successful "Twilight" series. link.....

Wells Fargo is sued over home equity lines of credit

2009-08-19T18:41:00.001-07:00

A federal lawsuit filed against Wells Fargo & Co.'s banking unit Tuesday accuses the company of slashing borrowers' home equity lines of credit based on flawed automated software that exaggerated how much the value of their properties had fallen.

The suit says federal law requires a lender planning to reduce a line of credit to reappraise the underlying property or to have "another sound basis for reducing or suspending the credit line."

Instead, the Wells Fargo banking unit employed "unreliable computer models" that generated "artificially deflated" home values, according to the complaint brought by homeowner Michael Hickman of Westmont, Ill.

The suit, filed in U.S. District Court in Chicago, asks the court to certify it as a class action representing all borrowers nationwide whose situations are similar to Hickman's.

"In this economy, what Wells Fargo and other lenders are doing to everyday customers like Michael Hickman is simply unconscionable," plaintiff attorney Jay Edelson of Chicago said in a news release announcing the lawsuit.

Edelson's firm has similar suits pending against Citigroup Inc. and JPMorgan Chase & Co., including Washington Mutual Bank, which was acquired by JPMorgan last year.

Wells Fargo said it had not fully reviewed the lawsuit.

A statement released by Des Moines-based Wells Fargo Home Mortgage said: "We are confident in our fair and responsible lending practices, including how we determine home equity credit limits available to customers depending on the amount of equity in their home. Our controls are based on contractual and regulatory guidelines and include a fair appeals process."

The lawsuit "appears to mischaracterize credit controls designed to sustain homeownership," Wells Fargo said.

Home equity lines of credit are a type of second mortgage that can enable homeowners to draw against a property's increased value to pay for home improvements, college expenses, vacations or anything they wish. They typically carry lower interest rates than credit cards, and the interest may be tax deductible, making them an especially attractive alternative. link.....

Brazil Petrobras Total July Gas, Oil Prod +3.2% Vs Year Ago

2009-08-19T18:40:00.000-07:00

With offshore oil platforms returning to production following maintenance, Brazilian energy giant Petrobras (PBR) posted a 3.2% rise in total natural gas and oil production in July against the same month a year ago, the company said Tuesday.

Gas and oil production from both domestic and overseas sites rose 3.2% from July of 2008 to 2.498 million barrels of oil-equivalent, or BOE, per day, the company said.

The company's total domestic oil and gas output in July was 2.254 million BOE, up 2.7% from July of 2008.

Petrobras' domestic production of crude oil in July was 1.938 million BOE, up 3.8% from the same month a year ago.

Overseas, Petrobras enjoyed an 8.5% year-on-year rise in total natural gas and oil output to 243,707 BOE per day, the company said. The increase was due to two new wells in Nigeria.

On the domestic front, Petrobras said production was favored by increased output at the Marlim and Marlim Leste offshore sites in the Campos Basin following completion of routine maintenance at platforms there. link.....

OIL FUTURES:Crude Settles +3.7% As Equities Rise

2009-08-19T18:39:00.000-07:00

Crude oil futures prices rose 3.7% Tuesday, led by a rebound in U.S. equities prices.

Light, sweet crude oil for September delivery on the New York Mercantile Exchange settled $2.44 higher at $69.19 a barrel. The rise was the biggest since July 31. ICE North Sea Brent crude oil for October delivery settled up 2.6%, or $1.83, at $72.37 a barrel.

The recovery in share prices provided the spark for the turnaround in crude, which had fallen 5.3% over the previous two days to its lowest settlement since July 29.

"The two-day downswing resulted in some oversold conditions and risk-taking is coming back in the market in the form of higher commodity and equity prices," said Adam Klopfenstein, senior market strategist at Lind-Waldock.

September crude, which expires at Thursday's settlement, traded to a high of $69.58 a barrel, coming just short of settling above its 10-day moving average, which would be a clear technical sign pointing to still further gains.

"Closes above the 10-day moving average crossing at $69.75 are needed to confirm that a short-term top has been posted," said Tony Rosado, a broker at GA Global Markets.

The October contract, which will become the spot contract Friday, is attracting more trading volume, and settled at $71.09 a barrel, up 3.3%, or $2.28.

Following Tuesday's settlement, the American Petroleum Institute reported a surprise steep 6.134 million-barrel drop in crude oil stocks, while a rise was expected. September crude jumped 89 cents from the settlement, to $70.08 a barrel, the highest intra-day level since Friday.

The API also said gasoline stocks fell 847,000 barrels and distillate stocks rose by 1.529 million barrels. Refiners lifted operations relative to capacity by 0.9 percentage point, the API said.

The market will look for confirmation of the API data when the Energy Department's Energy Information Administration releases its weekly data at 10:30 a.m. EDT on Wednesday.

With September crude near its expiry, October crude challenge resistsance near $72.25 a barrel if the EIA confirms the decline in crude, Rosado said.

Analysts surveyed by Dow Jones Newswires expect that data for the week ended Aug. 14 will show crude stocks rose by 1.5 million barrels, amid a slim 0.2 percentage-point rise in refinery operations relative to capacity. Gasoline stocks are expected to show a drop of 800,000 barrels, while distillate stocks (heating oil/diesel) are expected to rise by 500,000 barrels.

September RBOB gasoline futures traded to a high of $2.0150 a gallon, and settled at $2.0002 a gallon, up 4.87 cents, or 2.5%, the biggest single-day gain since Aug. 3 and its highest level since Aug. 12. The contract ended just below its 10-day moving average of $2.0076 a gallon, which would have confirmed that a near-term floor had been put in place, Rosado said. link......?

Limited Tops Analysts’ Estimates After Trimming Expenses

2009-08-19T18:38:00.000-07:00

Limited Brands Inc., the owner of the Victoria’s Secret chain, reported second-quarter profit that topped estimates after trimming expenses and drawing customers with discounts.

Excluding an after-tax gain, profit was 19 cents a share, the Columbus, Ohio-based company said today in a statement distributed by PR Newswire. Analysts projected profit of 16 cents, the average of estimates compiled by Bloomberg.

Limited increased promotions across all its brands during the quarter to attract traffic and clear inventory. Sales at stores open at least a year dropped 9 percent in the three months ended Aug. 1.

Limited added 61 cents, or 4.4 percent, to $14.58 today in New York Stock Exchange composite trading. The shares have gained 45 percent this year.

Total second-quarter revenue fell 9.5 percent to $2.07 billion from a year earlier. Net income declined to $74.3 million, or 23 cents a share, from $102 million, or 30 cents. The company trimmed $55.9 million in general, administrative and store operating expenses.

Limited forecast a loss of 7 cents to 12 cents a share in the third quarter, compared with the 11-cent loss analysts estimated. The retailer said full-year earnings may total 75 cents to 90 cents a share.

Limited operates 3,009 specialty stores including Bath & Body Works, C.O. Bigelow, La Senza and White Barn Candle Co. link.....

Departing Housing Agency Chief Hired by Financial Services Firm

2009-08-19T18:37:00.000-07:00

The departing head of the federal agency that runs Fannie Mae and Freddie Mac will join a financial services firm focused on distressed investments next month.

James B. Lockhart III, director of the Federal Housing Finance Agency, will become vice chairman of WL Ross & Co., a New York company that buys billions of dollars in distressed companies and securities with hopes they can boost their value and sell them off.

WL Ross, run by billionaire Wilbur L. Ross Jr., is an affiliate of the massive financial services firm Invesco. WL Ross has made big bets on the mortgage market with its acquisitions of American Home Mortgage Servicing and other financial firms.

"With his extensive government experience, deep knowledge of the U.S. mortgage markets and strong background in public/private finance, Jim is ideally qualified to help expand the financial services portfolio of the funds we manage," Wilbur Ross said in a statement Wednesday.

As head of the FHFA and its predecessor agency the past three years, Lockhart has been at the center of prominent financial, legislative, legal and lobbying battles. He announced his resignation earlier this month.

He pushed Fannie Mae and Freddie Mac to fix their accounting systems after massive frauds earlier this decade. He fought with the firms' once-powerful corps of lobbyists as they tried to block Congress from granting his agency tougher powers. He finally won that battle last summer when Congress beefed up the FHFA's regulatory authority and decided to move under his agency's supervision the Federal Home Loan Banks, regional institutions that also play a role in funneling money to the mortgage market. link......

PetSmart profit narrowly tops Street; cuts FY view

2009-08-19T18:36:00.002-07:00

Pet products retailer PetSmart Inc (PETM.O) posted second quarter profit that narrowly beat expectations but cut its full-year earnings view, sending shares down 10 percent after the bell.

In a conference call with analysts, a company official said that comparable sales for the second half of the year would most likely trail earlier expectations. Gross margins are also expected to more challenged than previously thought.

For the full year, the Phoenix, Arizona-based company now sees earnings of $1.37 to $1.45 a share, down from its earlier forecast of $1.42 to $1.52 a share.

Analysts on average were expecting the company, which offers boarding, grooming and training services for pets, to earn $1.52 for the full year.

Same store sales are now guided to grow in the low single digits in the period.

For the second quarter, the company posted a net profit of $39 million, or 31 cents a share, compared with $37.2 million or 30 cents, in the year ago period.

Net sales for the quarter increased 5.4 percent to $1.31 billion, hurt partially by foreign currency losses of $8.6 million. Sales at stores open at least a year rose 0.8 percent.

Analysts on average were expecting the company, which sells pet-care products to earn 29 cents on sales of $1.32 billion

PetSmart shares were trading at $20.21 after the bell Wednesday, after closing at $22.57 on Nasdaq. link.....

Fidelity Assets Rise 8% to $2.8 Trillion

2009-08-19T18:36:00.001-07:00

Fidelity Investments said it expanded its mutual-fund market share in the first half of 2009, stoked by strong investment inflows.

In a presentation in Boston aimed at showing it was doing relatively well in the economic downturn, Fidelity said net investment inflows to its fund family in the half totaled $44.2 billion, which it said was an industry-leading sum. It said revenues were holding up better than the competition's, though it declined to give figures.

The closely held firm is coming off a 2008 performance in which it saw operating profit decline about 18% to $2.36 billion; revenues slid 3.7% to $12.9 billion. It recently shed about 3,000 workers, or about 7% of its former employee base of about 44,000.

Rodger Lawson

President Rodger Lawson, hired two years ago to bolster fund flows and investment performance, said in an interview he believes the company now has the right work-force levels, based on his modest expectations for the economy. "I don't see our head count growing a lot" in the next few years, he said. "That being said, I don't see any more big layoffs."

Mr. Lawson, 62 years old, said it was unlikely he would step down from the post by the end of 2009, although Fidelity has screened "very strong people" as potential future presidents this year as part of succession planning. "I will stay at the company in one role or another as long as Fidelity needs me, even if it's 10 years," he said in an interview. Last month, The Wall Street Journal reported that Mr. Lawson had told a long-time acquaintance he would like to leave by the end of the year.

Assets under management, including mutual funds and other types of investments, grew 9% to $1.36 trillion. Relying on its own calculations and those of an outside consultant, Fidelity said it had expanded its share of all mutual-fund assets to 12.4% from 11.7%.

Fidelity said its assets under administration -- a category that includes other companies' funds it holds in investor accounts -- grew about 8% to $2.8 trillion in the first half.

On the question of U.S. economic recovery, Mr. Lawson said he doesn't see any short-term signs of recovery and anticipates international markets will recover faster. "I think we'll be paying back for the next few years for the largess and the indulgences of the prior few years," he said.

Profit Declines at Eaton Vance

Investment manager Eaton Vance's fiscal third-quarter earnings fell 37% on a charge related to an initial public offering and falling revenue, though assets under management soared from the prior quarter.

link.....

FOCUS: Recent Slump Doesn't Signal End To China Share Rally

2009-08-19T18:35:00.000-07:00

China's most-watched share index has tumbled 16% over the past two weeks but analysts say this doesn't mean the party is over, largely because Beijing probably doesn't want it to be.

The share market should benefit from still-flush liquidity, a likely improvement - albeit at potentially a slower pace - in economic readings, and possible market-supportive moves from Beijing.

And with the 60th anniversary of the Chinese Communist Party's rule on Oct. 1, officials will want the stock market to look good for that big event. So any near-term correction may not be big.

Beyond Oct. 1, the outlook is less clear. But going by history and the current loose monetary policy settings, analysts generally think Beijing will only gradually let the air out of the market's tires.

Investors in the more developed markets tend to use the A-share market as a proxy for sentiment on the health of China's economy. So Monday's 5.8% slump in the Shanghai Composite Index sent jitters around the globe.

But the stock market's ups and downs don't necessarily reflect the domestic investing community's short-term view on China's economy; analysts on the mainland say liquidity and policy cues are the main market drivers for a market that has been due a breather.

"None of the factors that we can blame the markets' recent steep losses on are unknown or unanticipated. The most plausible explanation is therefore a technical correction," said Shenyin and Wanguo Securities analyst Neil Li, who doesn't expect the Shanghai Composite to fall beyond 2500.

The index certainly has been on a tear. It hit this year's high of 3478.01 only on August 4; even taking the recent correction into account, it is up 75% from last year's lowest point of 1664.93. It closed Tuesday at 2910.88. A shares - which are largely tradable only by domestic investors - are trading at a price-to-earnings ratio of around 25 times their estimated 2009 earnings. P/E ratios in China have historically ranged from slightly over 10 times to up to 60 times.

That suggests room to correct further, but perhaps not far, or for long.

Guoyuan Securities strategist Simon Wang, who pegs support around 2600 for the Shanghai index, thinks shares will rebound before Oct. 1. "The widespread belief that Beijing doesn't want the markets to fall before October 1 will become a self-fulfilling prophecy. Improvements in corporate earnings and macro data will be seized upon as an excuse to buy as the celebration approaches. Our clients are waiting to dive in again," he said. link....

MARKET COMMENT: European Shares End Higher

2009-08-19T18:33:00.000-07:00

European shares regained some poise Tuesday, with banks and miners among the best performers, as firms took back a portion of the previous session's sharp losses.

The pan-European Dow Jones Stoxx 600 index rose 1.1% to 226.61.

On Monday it closed down 2%, as investors worried that signs the global economy is improving may not translate into strong gains.

Newfound optimism about the economy was evident Tuesday in Europe, with the German ZEW economic expectations index rising more than expected to 56.1 from 39.5 in July.

Even after Monday's losses, the Stoxx 600 index is showing a gain of around 14% since the start of the year and of more than 9.5% so far this quarter.

"A bit of a sell off was to be expected," said Mike Lenhoff, strategist at brokerage Brewin Dolphin.

"The markets are looking a bit overbought," he added.

On a regional level, the U.K. FTSE 100 index rose 0.9% to 4,685.78, the German DAX index climbed 0.9% to 5,250.74 and the French CAC-40 index gained 0.9% to 3,450.69.

In Asia, the closely-watched Shanghai Composite Index ended higher after moving in and out of the red.

Shares also fell heavily on Wall Street Monday but started in positive territory on Tuesday, after better-than-expected earnings from retailers Home Depot and Target.

However, after mixed U.S. housing data, stock gains were modest.

Banks and miners, which are viewed as closely tied to economic growth, took the brunt of the selling in Europe Monday but recouped some of those losses Tuesday, with the banking sector up 1.9% and miners up 1.8% in the Stoxx 600.

Shares of Europe's biggest bank by market capitalization, HSBC Holdings, climbed 2.8% after it was upgraded by Goldman Sachs to buy from neutral.

The broker said it now believes the bank's HSBC Finance Corp. unit will cease to be a major drag on group earnings from 2010.

Of miners, Rio Tinto shares rose 1.7% after Australia's Amcor said it will pay $2.03 billion for the majority of Rio Tinto's Alcan Packaging business, marking its biggest-ever acquisition. link.....

BBVA Said to Win FDIC Bidding for Guaranty Financial

2009-08-19T18:32:00.000-07:00

Banco Bilbao Vizcaya Argentaria SA won the bidding to take over ailing Texas lender Guaranty Financial Group Inc., people familiar with the matter said, and becoming the second Spanish bank to buy a U.S. lender this year.

The acquisition, arranged by the Federal Deposit Insurance Corp., follows the $1.9 billion purchase by Spain’s Banco Santander SA of Philadelphia-based Sovereign Bancorp Inc. in January. BB&T Inc. last week acquired Alabama’s Colonial BancGroup Inc. in a deal also brokered by the FDIC.

The purchase shows “those companies didn’t make serious acquisition errors years ago,” Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland, and a former bank analyst, said yesterday. “As in the case of BB&T buying Colonial BancGroup, it gives BBVA the opportunity to expand on the cheap.”

Guaranty said last month that it was unable to raise capital as demanded by regulators and will probably fail. The Office of Thrift Supervision has taken over board functions, directed the Austin, Texas-based bank to turn itself over to the Federal Deposit Insurance Corp. and is pursuing transactions likely to wipe out shareholders, Guaranty said in a July 23 filing with the Securities and Exchange Commission.

Bids for the bank, which had about $16 billion in assets and $9 billion in deposits, were due Aug. 18, the people said.

If regulators were to seize Guaranty, it would be the ninth biggest lender to fail in U.S. history, based on its assets and data compiled by the FDIC.

‘Open For Business’

Guaranty remains “open for business. We continue to work with our regulators,” John Wessman, a spokesman, said in an e- mailed statement. The bank provides the same FDIC deposit insurance coverage as other member banks, he said.

BBVA spokesman Ed Bilek and FDIC spokesman Andrew Gray declined to comment.

Blackstone Group LP, Gerald Ford’s Flexpoint, U.S. Bancorp and Carlyle Group were among groups considering bids for Guaranty’s assets, people familiar with the situation said earlier. Guaranty’s biggest shareholders are billionaire Carl Icahn and Omni Hotels owner Robert Rowling, who together control a third of the bank’s shares, according to data compiled by Bloomberg. link.....

Quantcast 'Cash for clunkers' won't be running much longer, government says

2009-08-19T18:31:00.000-07:00

The government will announce a plan as soon as tomorrow for winding down its popular but problem-plagued "cash for clunkers" program.

The announcement by Transportation Secretary Ray LaHood came as a New York dealership group said that hundreds of its members had stopped doing clunker transactions because of delays in getting reimbursed by the federal government.

Dealers worry that the $3-billion program will run out of money before they are reimbursed for discounts given to car buyers on clunker transactions. The National Automobile Dealers Assn. said "it is difficult, if not impossible, to accurately project the 'burn rate' of available funds" for the promotion, which provides discounts of $3,500 or $4,500 to consumers who trade in an older car for a more fuel-efficient new car.

That could leave dealers holding the bag, the group said, because the rules stipulate that the government doesn't have to pay dealers who submit claims for reimbursement after the program runs out of money.

LaHood said at a news conference that a wind-down plan would be announced in the next couple of days.

"I know dealers are frustrated, but they're going to get paid," he said.

As of Wednesday morning, dealers had submitted 435,102 clunker transactions to the Transportation Department and requested $1.8 billion in reimbursements.

In California, which tops the list of states in terms of clunker transactions, most dealerships appear to be sticking with the program. The frenzy of buyer interest that greeted the program when it kicked off July 24 has dropped considerably partly because of shortages of popular cars such as the Toyota Corolla, Honda Civic and Ford Focus.

"The gold rush is over," said Eric Choi, fleet manager at Hollywood Ford. "We're still getting some business from it, but like every other dealer, we're pretty much out of cars."

Fritz Hitchcock, who owns Toyota dealerships in Puente Hills, Santa Barbara and Northridge, said his inventory has plummeted since the program began. His Santa Barbara dealership, for instance, normally has around 120 vehicles on the lot. Wednesday it had 12. link.....

UBS to Give 4,450 Names to U.S.

2009-08-19T18:30:00.000-07:00

Swiss bank UBS AG will hand over some 4,450 names of U.S. account holders as part of a U.S.-Swiss tax-evasion settlement and investigation that could produce a total 10,000 account identities.UBS and the governments of the U.S. and Switzerland agreed on a final settlement last week, but the details weren't made public until Wednesday. UBS isn't expected to pay a monetary fine as part of the settlement.

Separately, the Swiss government said it is exiting its six-billion Swiss franc ($6.46 billion) investment in the bank, made as part of a rescue package the height of the financial crisis. It was lining up investors to buy its 332 million shares late Wednesday, and the sale was expected to be completed soon.

No details on the sale price were given. The government needs to sell the shares at around 13 francs each to break even on its investment, bankers say. The announcement came well after stock markets had closed. UBS shares shed 0.9% to 16.90 francs in Zurich.

As part of the tax settlement, U.S. tax authorities will file a treaty request with the Swiss government to obtain the data on the American UBS clients, IRS Commissioner Doug Shulman said on a conference call with reporters. The Swiss government will then direct UBS to turn over the account data to the IRS, the agency said.

Mr. Shulman said the legal agreement allowed the IRS to obtain substantially all the information it was interested in. link.....

Electric Cars' MPG Conundrum

2009-08-17T21:15:00.000-07:00

General Motors made a lot of noise Aug. 11 with the announcement of a 230-mile-per-gallon city fuel-economy rating for its Chevrolet Volt extended-range electric car. Not to be outdone, Nissan (NSANY) said its Leaf electric car gets an equivalent of 367 MPG.

This one-upsmanship by the two automakers probably just confused any would-be buyers of these cars, which will both hit the market later next year. It also raises serious questions for the government and car companies: How will federal regulators rate the efficiency of the newest-tech cars, and how will the automakers use that data to market them? Neither number is likely to match up the real fuel-economy performance for either car, since Volt buyers will all drive it differently and Leaf drivers won't even use gasoline.

To see how unhinged MPG becomes as electricity takes a bigger role under the hood, look at the Chevy Volt. The Volt will always drive using its electric motor and will only employ a small gasoline engine to recharge the vehicle's 400-pound, 16-kilowatt battery. In the city, where the car uses its braking system in stop-and-go traffic to recharge the battery, the Volt will almost never need the gasoline engine. Because the Volt can go 40 miles before needing a charge, the 60% of drivers who cover less than 30 miles a day may never use the gasoline engine. "For some people, the fuel economy could be infinite," says James N. Hall, principal of 2953 Analytics, a Detroit-area consulting firm.
City vs. Highway Mileage

Still, the Volt may use some gasoline in city driving, so the government's methodology gives it a 230 MPG city rating. But out on the highway, a Volt driver may use less braking and may floor the accelerator. And when they run the air conditioner, the battery drains even faster, requiring even more gas-engine recharging. GM insiders say the Volt could get less than 50 MPG under those conditions. At the moment, it looks like the Volt will be assigned a combined city/highway rating of 124 MPG, though the feds haven't certified any of these ratings yet. But how will carmakers get that across in advertising, while alerting shoppers that some of them will do far worse, and some much better? link....

Los Angeles toy importer settles federal safety claims

2009-08-17T21:13:00.000-07:00

A Los Angeles firm agreed to pay $31,500 to settle allegations that it imported and sold toys that were hazardous to young children, the Consumer Product Safety Commission said.

TGH International Trading Inc. brought more than 11,000 toys into the U.S. from March 2005 to June 2006 that contained small parts that presented a choking hazard to children. Many of the hazardous toys were seized at the Port of Long Beach by federal officials before they could reach store shelves, the agency said, and those that did reach stores were recalled.

The Consumer Product Safety Commission said Monday that it wasn't aware of any incidents or injuries involving toys that were distributed.

TGH refused to comment on the settlement. But in agreeing to pay the $31,500 civil penalty, the company denied that it had violated federal law.

This not the company's first run-in with the commission.

In 2003, TGH was cited for delivering about 50,000 hazardous children's toys -- a violation that took place from 1994 to 2002. In the same 2003 notice, the company was cited for delivering about 59,000 baby rattles that posed a choking hazard. link.....

Rosetta Stone Cuts Outlook, Stock Offering

2009-08-17T21:12:00.000-07:00

Rosetta Stone, an Arlington-based language instruction company, cut its earnings outlook and canceled a secondary offering of stock Monday, sending its shares tumbling more than 25 percent.

Citing higher operating costs, Rosetta Stone said it now expected to earn 25 to 27 cents during the third quarter, down from a forecast of 33 to 35 cents a share issued just three weeks ago. For the year, the company expects earnings of $1.14 to $1.18 per share, down from an earlier forecast of $1.22 to $1.26.

Rosetta Stone did not give a reason for putting a stop to the stock offering. It blamed marketing expenses as a major factor for the revision of its earnings forecast. Its shares closed Monday at $20.63, down $7.72, or 27.2 percent.

"In the current quarter, we experimented with a significant amount of Internet and television test marketing programs and we did not expeditiously terminate certain of those programs that were not yielding acceptable results," Brian Helman, Rosetta Stone's chief financial officer, said in a statement.

Known for the bright yellow kiosks it employs to sell products in airports across the country, Rosetta Stone went public in April and has been growing quickly. Its sales nearly doubled to $209.4 million in 2008 from the previous year, and the company has credited a refreshed product lineup for the gains.

But Rosetta Stone has hit some head winds since its IPO, as rising operating costs have cut into profitability. At the end of July, the company posted a second-quarter loss of $7.3 million compared with a profit of $3.4 million a year earlier, despite an 18 percent increase in sales. During the quarter, Rosetta's operating expenses jumped to $60.4 million, from $34.4 million in 2008. link....

Treasury Prices Jump On Safety Buying As Stocks Slide

2009-08-17T21:11:00.000-07:00

Treasury prices climbed Monday as stocks sunk, and after the Federal Reserve's latest purchase of Treasury securities.

Investors, unconvinced that the economic recovery will be a quick one, were sweeping up low-risk government debt as they shed stocks and other risky assets, with intermediate Treasurys gaining the most.

In recent trading, the two-year note was up 3/32 to yield 1.01% and the 10-year note was up 20/32 to yield 3.48%. Bond prices moved inversely to yields. The five-year was up 13/32 to 2.41% and the seven-year was up 16/32 to a 3.08% yield. Trade took yields back to levels that were last seen in late July.

Driving the risk averse behavior Monday, Shanghai stocks dropped 5.8%, their biggest percentage drop so far this year. Lower commodity prices, ongoing worries about tightening in bank loans and weak economic data dampened investor sentiment. China's Shanghai Composite Index posted its biggest percentage drop since November and ended at 2870.63, its first close below 3,000 since the end of June.

U.S. stocks dropped as well, with the Dow Jones Industrial Average down by nearly 2% and the S&P down by about more than 2% in recent trading.

"There's a concern that the stock market has run its course and is due for a correction now," said Rick Klingman, head of Treasurys trade at BNP Paribas in New York. "The Chinese stock market was one of the leaders on the way up; now it's being hit pretty dramatically, and that's making people concerned."

Meanwhile, on Monday, the Fed bought $7.016 billion Treasurys maturing in the next four-to-seven years in its latest operation to buy up to $300 billion Treasurys to help keep consumer borrowing rates low. The buying was the first since the Fed said at its latest policy meeting that it was going to slow the pace of its Treasury purchases and that it would probably run through the $300 billion by October.

In past operations targeting four-to-seven year Treasurys, the Fed bought an average of $7 billion to $7.5 billion. The Fed has now bought $260 billion Treasurys.

Treasury market analysts also pointed to seasonal patterns as another factor supporting bonds. For the last several years, Treasury yields have tended to drop and prices would rise over the summer and into September. In mid-June 2008, the 10-year yield was about 4.27%; by mid-September it had fallen to 3.44%. In mid-June this year, the 10-year yield hit a high of 4% compared to its recent 3.50%.

Treasurys brushed off the day's economic data, which showed conditions for New York manufacturers improved for the first time in more than a year in August. The New York's Fed's manufacturing index shot up to 12.08 this month from -0.55 in July. The indices for new orders, shipments, and employment improved as well, and future indexes conveyed optimism about the six-month outlook. link.....

CIT Posts $1.62 Billion 2Q Loss; Credit Provisions Surge

2009-08-17T21:10:00.000-07:00

The results strike a blow to the very core of the company's small business lending operations, heightening concerns around its ability to survive. The commercial lender, hurt by the liquidity crisis as its customers drew down credit lines in fear that they might disappear, has been working in recent weeks to avoid bankruptcy.

The net loss of $4.30 a share for the quarter ended June 30 compares with red ink of $7.88 a share a year earlier, when the company reported a $8 charge per share from discontinued operations.

For the second quarter, the company not only suffered because it lent at rates that were lower than its cost of funds, but also from poor quality of its loans. CIT's net interest revenue - or the difference between what it earned from the loans it extended and borrowing costs - totaled a negative $19.1 million, compared with a positive $169.8 million a year earlier. In addition, the company put aside $588.5 million to reserve for credit losses, a nearly four-fold increase from $152.2 million a year ago. CIT wrote off 2.81% of loans, up from 2.41% in the prior quarter.

"There is substantial doubt about [CIT's] ability to continue as a going concern," the company said in a regulatory filing Monday evening.

In addition, CIT, which became a bank-holding company in late 2008, has also indicated in filings that its earlier plan to raise more funds via the bank it owns in Utah may no longer be feasible in the near term.

Banking regulators, including the Federal Deposit Insurance Corp., last month issued a "cease and desist" order at CIT's Utah bank, limiting the bank's ability to pay dividends and capping the amount of "brokered deposits" it accepts. CIT Bank had been using such deposits, which are similar to certificates of deposit and sold by brokers, to raise more funds, and the holding company had hoped to transfer more of its assets to the bank, but regulators were concerned about the risk involved. Before the credit crisis began in 2007, CIT got most of its funding from the credit markets by issuing bonds and commercial paper.

Earlier Monday, CIT, which is in the midst of a debt restructuring, said its tender offer for $1 billion in floating-rate notes due Monday was successful, though the 59.8% of notes that were tendered was below the level the company announced recently. link....

Gold rises as risk aversion moderates

2009-08-17T21:08:00.000-07:00

Spot gold prices rose closer to $940 an ounce on Tuesday as investor risk aversion moderated, after doubts about an economic recovery triggered sharp selling of cross-market assets the day before.

The euro held steady after falling against the dollar on Monday, while Asian stocks were up slightly and commodities broadly turned positive after sinking the previous day when growth concerns led investors to trim risk exposure and buy dollars.

Spot gold prices, which hit a two-month high above $970 in early August, fell to a 2-1/2-week low of $929.70 on Monday.

Traders said the price drop drew a wide range of buyers, helping to offset large-lot selling and push up the market.

"There was quite a large volume of selling, from the Middle East, but the market comfortably absorbed it," said Yuichi Ikemizu, Tokyo branch manager at Standard Bank Plc, noting that wide-ranging buying interest helped support the market.

Spot gold rose 0.6 percent to $938.60 an ounce as of 0237 GMT, compared with New York's notional close of $932.80 per ounce.

U.S. gold futures for December delivery rose 0.5 percent to $940.40 an ounce, compared with $935.80 on the COMEX division of the New York Mercantile Exchange.

Asian stocks were up 0.5 percent while Japan's Nikkei average inched up 0.4 percent. .T .MIAPJ0000PUS

U.S. stocks suffered their worst loss in seven weeks on Monday due to doubts about the economy's growth prospects. .N

The euro inched up 0.3 percent against the dollar on Tuesday, after hitting a two-week low against the dollar the previous day. A firmer dollar typically hurts gold, as it makes dollar-priced bullion more expensive for non-dollar holders and dampens interest in the precious metal as an alternative asset.

Traders have said the rally in stocks and broad commodities on expectations for global economic recovery had run ahead of reality and a correction was due.

"Looking at how stocks are right now, there isn't a sense the markets are bracing for a sharp downturn," Ikemizu said.

But if stock declines accelerate on growing doubts about recovery prospects, industrial metals such as platinum, silver and copper may face selling pressure and benefit gold, he said.

Physical demand was also expected to keep support firm for spot gold above $900, he said.

Investor interest in gold, however, remained slack, with holdings at the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, staying at 1,065.49 tons as of August 17, unchanged from the previous business day. link....

Former Broker at Credit Suisse Is Found Guilty

2009-08-17T21:07:00.000-07:00

A former broker at the Credit Suisse Group, Eric Butler, was convicted on Monday of fraudulently selling millions of dollars in subprime securities to corporate clients.

Louis Lanzano/Associated Press

Mr. Butler was found guilty on federal charges on all three counts after two hours of jury deliberations.

A co-defendant, Julian Tzolov, 36, had been a fugitive for three months on a $3 million bond, but was captured by authorities in Spain and returned to New York. He pleaded guilty to conspiracy, wire fraud and securities fraud on July 22. He testified as a prosecution witness during the three-week trial.

Mr. Butler, 37, and Mr. Tzolov were indicted last year, charged with conducting what prosecutors said was an illegal scheme in which they had falsely told clients their products were backed by federally guaranteed student loans and were a safe alternative to bank deposits. The products were actually linked to auction-rate securities.

John Nowak, an assistant United States attorney, told jurors in closing arguments that the two ran a high-stakes bait and switch, promising clients one product and delivering another to get higher commissions. Mr. Butler faces a maximum sentence of 45 years in prison.

Mr. Tzolov is awaiting sentencing.

The two men were employed from November 2003 to September 2007 as managing directors in Credit Suisse’s private banking division.

Mr. Butler’s lawyer, Paul Weinstein, told jurors that his client’s customers were “some of the most sophisticated investors in the world” who knew what they were buying.

David Walker, a spokesman for Credit Suisse, said the bank had informed regulators of the fraud in 2007 and had been cooperating with authorities. link.....

S.E.C. Floats a Short-Selling Proposal

2009-08-17T21:05:00.000-07:00

The commission asked for additional comments on that idea, delaying for at least a month the possibility of commission action.

The proposal would require that short sales be made only at a price higher than the current best price being offered by would-be buyers of the stock. It is similar to the so-called tick-test, which was effective on many stock markets before 2007, but would be more restrictive and could be easier to apply given the current structure of markets. There is now no limit on short-selling, so long as the seller can locate shares to borrow.

Short-sellers trade borrowed shares of a stock, hoping to buy them back later at a lower price and pocket the difference.

The latest proposal is not a completely new idea; the S.E.C. suggested it deep in its earlier proposal, but did not request detailed comment on it. That it is now seeking comment could indicate that at least some members of the commission think the approach could be a good one.

Pressure on the S.E.C. to do something about short-selling grew last year when the stock market nearly collapsed in the wake of the failure of Lehman Brothers. The commission banned short-selling in some financial stocks for a time, and some investors, supported by members of Congress, demanded permanent changes in the rules.

Much of Wall Street has argued that there is no evidence that short-selling caused the plunge last year, and the academic studies available do not support the idea. But the pressure on the commission to do something has been intense. Several stock exchanges suggested a proposal similar to the new one, if the commission felt it had to do something.

The commission asked for comment on whether the latest proposal should become effective for all stocks at all times, or should take effect only after a “circuit breaker” was tripped. Such a circuit breaker could be activated if the stock in question declined by a certain amount — say 10 percent — or for all stocks if a major market average fell by a similarly large percentage. The exchanges said a circuit breaker would be needed.

The old tick-test depended on whether the short sale was executed at a price that was higher than the last different price. Such a rule was relatively easy to impose when virtually all trading in stocks listed on the New York Stock Exchange was done on the exchange.

Now, however, such trades are executed in dozens of locations, and markets can delay reporting trades for up to 90 seconds. As a result, brokerage firms argued, it is virtually impossible to know with certainty what the last trade was, and therefore something based on the old tick-test would be impossible to administer.

The “alternative uptick rule” that the S.E.C. suggested on Monday would be based solely on the current best bid price for a stock — a figure that is kept up to date and is readily accessible. If the best bid for a stock was $20 a share, a short-seller could put in a sell order at $20.01. If someone agreed to buy at that price, the trade could be completed. link....

Lowe's net, forecast fall short as store openings get trimmed

2009-08-17T21:03:00.000-07:00

Lowe's shares surrendered 10% to close at $20.47. In a broadly lower market for equities, shares of larger rival and Dow Jones Industrial Average component Home Depot Inc. /quotes/comstock/13*!hd/quotes/nls/hd (HD 26.37, +0.26, +0.10%) , scheduled to report financial results on Tuesday, dropped 3.8%.

"Nobody thinks it's going to take a turn for worse," said analyst Joe Feldman of Telsey Advisory Group in an interview. "There's just no pick-up yet for spending. Foreclosure rates continued to accelerate and housing prices year over year are still down. Home Depot may give similar cautious outlooks."

'The decision to cut bait on several projects is an acknowledgement of the challenging environment that is likely to persist for some time.'

Lowe's net income dropped to $759 million, or 51 cents a share, for the three months ended July 31, from $938 million, or 63 cents, in the year-earlier second quarter.

Sales fell 4.6% to $13.84 billion from the prior year's $14.51 billion. On a same-store basis, quarterly sales declined 9.5%, missing management's previous projection of a decline of 4% to 8%, the Mooresville, N.C.-based company said.

Most analysts had expected those sales, a key retail performance metric because it excludes results from new and closed locations, to decline between 6% and 7%.

Spending on home-improvement projects "remained weak in the quarter but even in this weak environment we were disappointed with the magnitude of erosion," said Chief Executive Robert Niblock on a conference call, adding that comparable sales for items costing more than $500 dropped 16% while those for items less than $50 were "slightly positive."

"Consumers are only taking on home-improvement projects that they feel are absolutely necessary and are postponing discretionary projects until clarity about the future returns," he added link....

RPT-GLOBAL MARKETS-Asian stocks bounce, focus on China market

2009-08-17T21:02:00.000-07:00

Asian stocks and the Australian dollar edged higher on Tuesday but shares in Shanghai were highly volatile, keeping nerves frayed about whether another bout of profit taking would hit global markets.

The Shanghai composite index .SSEC opened lower but soon turned higher after suffering its biggest single-day drop in nine months on Monday. Fears that China is slowly tightening its easy money policies are haunting investors.

The drop in China's market had a domino effect on other markets, spreading nervousness that rallying asset prices have run ahead of economic fundamentals and weak earnings prospects.

U.S. markets posted their worst loss in seven weeks on Monday, with profit taking also hitting commodities. [.N]

"I think macroeconomic indicators in general suggest that things are improving globally and there's no reason to be so pessimistic, but there's not a lot we can do about market sentiment as long as stocks keep on falling," said Noritsugu Hirakawa, a strategist at Okasan Securities in Tokyo.

Japan's Nikkei share average .N225 edged up 0.3 percent as dealers covered their bets against the market, benefiting a mixture of technology and retail companies.

The MSCI index of Asia Pacific stocks traded outside Japan .MIAPJ0000PUS rose 0.5 percent after tumbling 3.7 percent on Monday, the biggest daily decline since March 30.

The Shanghai index .SSEC was up 0.6 percent by mid-morning, helping to pull Hong Kong's Hang Seng Index .HSI out of the red. Profit taking has pulled the Shanghai index down by around 18 percent in the last two weeks after it jumped more than 90 percent since the start of the year.

But the IPO boom in China gained pace, with shares of China brokerage Everbright Securities Co (601788.SS) rising as much as 42 percent in their debut in Shanghai before slightly paring early gains.

The Australian dollar, which has had a tight relationship with equity markets, rose 0.5 percent to US$0.8250 AUD= after minutes from the Reserve Bank of Australia meeting underscored that policy would be tightened as a recovery took hold.

The U.S. dollar and the yen both retained broad gains on uncertainty over the strength of a global economic recovery. link.....

paidContent - Reader's Digest Files For Ch 11 Bankruptcy For U.S. Arm; Ripplewood Washed Out

2009-08-17T21:00:00.000-07:00

This had been brewing for a while: Reader’s Digest company has filed for a pre-arranged Chapter 11 bankruptcy. The company was acquired for $1.6 billion by a consortium of investors, led by PE firm Ripplewood, in 2006. It hired law firm Kirkland & Ellis earlier this year to look at restructuring options. Founded in 1922, RDA was a public company from 1990 through 2007,before it went provate with the deal; the new owners also assumed $776 million in debt. In January, RDA cut 8 percent of its 3,500-member workforce and ordered furloughs across the board.

Under the terms of the deal:
—has reached an agreement in principle with a majority of its senior secured lenders on the terms of a restructuring plan.
—NYT: 60 percent of the company’s lenders had agreed to the terms of the restructuring, and it expects to speed through bankruptcy, completing proceedings 45 to 90 days after it files
—will reduce its debt from $2.2 billion to $500 million.

—the restructurng of debt will result in a transfer of ownership of the company to the lender group.
—The company will not make a $27 million interest payment due today on its 9 percent Senior Subordinated Notes due 2017. Instead, the company is using the 30-day grace period to continue discussions with its lender group for this bankruptcy.
—Among RDA’s senior lenders are Bank of America, JP Morgan and GE Capital.
—Commitment from some of its lender group to provide $150 million in new money Debtor-in-Possession (DIP) financing, convertible into exit financing upon emergence. These lenders are JPMorgan Chase, GE Capital, Eaton Vance, Ares, Regiment and Bank of America Merrill Lynch.
—Will apply only to the company’s U.S. businesses — its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be affected. RDA’s International operations are expected to have adequate funding based on continuing operations and access to proceeds from the DIP financing.
—All board members who have served since the March 2007 acquisition, with the exception of CEO Mary Berner, have resigned. The two recently appointed directors also continue to serve on the board. link.....

Pimco, Goldman Sachs exit Federal Reserve mortgage bond program

2009-08-17T20:59:00.000-07:00

The Federal Reserve Bank of New York plans to get along without the help of bond giant Pimco or Goldman Sachs Group as the central bank continues its massive purchases of mortgage-backed securities.

The New York Fed on Monday said it had "streamlined" its 8-month-old, $1.25-trillion program to buy mortgage bonds from four investment managers to two.

Saying the changes were "not performance related," the bank said it was retaining Wellington Management Co. and BlackRock Inc. Newport Beach-based Pacific Investment Management Co. and Goldman Sachs Asset Management will exit.

The bank said it had "anticipated that it would make adjustments to its use of external investment managers as it gained more experience with the program. . . . The New York Fed is committed to implementing its programs in the most efficient and cost-effective manner possible."

The bank didn't indicate why Wellington and BlackRock won out over Pimco and Goldman, or whether the latter two wanted out for some reason.

A Goldman spokeswoman said the firm had no comment. A Pimco spokesman couldn't be reached.

The mammoth purchase program is aimed at keeping a lid on mortgage rates by providing a constant source of demand for home-loan-backed bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae.

Bloomberg News calculates that Pimco and Goldman each stood to earn $7.8 million in fees per quarter once the Fed's holdings of bonds reached $1 trillion. The Fed has purchased $742 billion of mortgage bonds so far, according to Bloomberg's tally.

Pimco in July surprised Wall Street by dropping out of the running for the Treasury's program of partnering with money managers to buy rotting mortgage bonds from banks. link.....

Collision Probe Encounters More Trouble as Agencies Feud

2009-08-17T20:56:00.000-07:00

A public squabble between federal accident investigators and the national air-traffic controllers union escalated Monday, threatening to complicate the probe of the fatal midair collision between a sightseeing helicopter and a small plane over the Hudson River along Manhattan.

The National Transportation Safety Board, which is in charge of the high-profile investigation, took the unusual step of kicking all controllers off the industry-government group gathering facts about what led to the Aug. 8 crash. Nine people died in the accident.The move was prompted by a Friday news conference and subsequent public statements in which leaders of the controllers' union repeatedly challenged the accuracy of the safety board's chronology of events, which was released last week.

Though the NTSB now seemingly agrees with some of the arguments made by the union representing the controllers -- and changed its account Monday on one important point -- the head of the safety board nonetheless criticized controllers for going public with their complaints.

The dispute focuses on whether a controller at the Teterboro, N.J., airport -- who has been suspended and faces disciplinary action for engaging in a personal conversation at the time of the crash -- had information soon enough to have helped the pilot of the single-engine propeller plane avoid a potential traffic conflict with the sightseeing helicopter.

A supervisor in the Teterboro tower also has been suspended and faces discipline for failing to be at his post when the crash happened.

The safety board reiterated Monday that the controller began the personal call on an official Federal Aviation Administration phone shortly after the plane took off from Teterboro, stayed on it for nearly three minutes, and failed to alert the plane's pilot about a number of aircraft that posed potential hazards in his path.

According to the board's statement Monday, the controller, who hasn't been identified, couldn't see the helicopter on his radar scope until he was in the process of switching the plane's pilot to another frequency used by other controllers. The Teterboro controller continued the phone call until a second before the collision, according to the preliminary timeline. In the interim, a controller from another facility called the Teterboro to warn about a potential collision unless the plane was ordered to change course. The plane's pilot apparently never heard the warning.

On Friday, the safety board said the helicopter was one of the aircraft that initially showed up on the Teterboro controller's radar screen. Under the union's version of events, which the board initially disputed, the Teterboro controller couldn't have alerted the plane's pilot about the helicopter because of the lag in radar coverage.

The board's revised chronology indicates that the helicopter first popped up on Teterboro's radar about 47 seconds prior to the accident. The Teterboro controller made two unsuccessful efforts to reach the plane's pilot. link......

Coming Soon: Banking Crisis of Historic Proportions

2009-08-16T03:53:00.000-07:00

With everyone (well, almost everyone - I am one of the lonely skeptics) convinced that we have stepped back from the "edge of the abyss", the title of this article may be viewed as laughable. When you connect the dots, as I will in this article, you will at least stop laughing, and, maybe, realize that we still have a big problem.

We have a confluence of five factors that have the potential to create damage to banking not seen in 80 years, and that includes the Great Depression. We'll hit these factors one at a time.

First Factor: Banks Are Not Doing Enough Business

Commercial bank credit growth has dropped to 2%, according to Jesse's Cafe Americain (here). The recent history of credit growth is shown in the following graph.

Now, it is a good thing that banks are conserving capital, since they need to increase capital to offset bad loans.

But, if asset valuations deteriorate (and that is quite possible), the banks need to increase earnings to "earn their way" out of their problem. Interest paid by the Fed for reserves on deposit there (by the commercial banks) are not producing nearly the same level of income as new credit issued commercially under our fractional reserve banking system with much higher interest .

If credit issuance does not increase year over year, banks can not improve their financial condition unless the quality of their existing loan portfolio improves.

As discussed in the third factor, below, just the opposite is anticipated for loan portfolios.

So the first factor in this perfect storm is that the banks are not doing enough business.

Second Factor: Banks Are Failing at a Rate Not Anticipated Two Months Ago

In his article, Jesse mentions reports by Bloomberg that 150 banks are in trouble. Some of these will be larger than many of the 77 (mostly community) banks that have gone under FDIC receivership so far in 2009.

Banks mentioned being in trouble by Bloomberg (here) include Wisconsin’s Marshall & Ilsley Corp. (MI), Georgia’s Synovus Financial Corp. (SNV), Michigan’s Flagstar Bancorp (FBC), Chicago-based Corus Bankshares Inc. (CORS), Austin-based Guaranty Financial Group Inc (GFG), and Colonial BancGroup Inc. (CNB) in Montgomery, Alabama.

These six banks became five at the close of business Friday, Aug. 14, as Colonial BancGroup was taken over by the State of Alabama and the FDIC. This was the largest bank failure since IndyMac Bank went under in the summer of 2008.

The following table shows some data regarding the six banks singled out by name in the Bloomberg article.

On July 5, Bill Cassill wrote (here) that he projected 125 bank failures for 2009 and 230 in 2010.

However, as of that date, Bill projected 82 closings by 9/30 and we have already reached 77 on 8/14. We still have half the quarter to go. With the 150 additional banks estimated by the Bloomberg article, and the 77 already closed thus far this year, we could be closer to 230 closings in 2009 than the 125 estimated just six weeks ago. Bill is not alone. I recall hearing other estimates of bank failures for 2009 of the order of 100 for the entire year.

The following graph (and the prediction below it) was provided on July 12 (here) by Colin Peterson.

How is Colin's prediction doing? The following graph shows how bank failure rates have been trending.

Give Colin the handicapper award here. Not only have bank failure rates spiked, the current annualized rate would be in a virtual three-way tie for second highest in history if maintained for another nine months.

link.....

CitiGroup says two exempt from pay review

2009-08-16T03:52:00.000-07:00

Citigroup Inc says two of its traders are exempt from a government review of the bank's top executive pay packages, The New York Times reported on Saturday.

The Times said CitiGroup submitted to the government on Friday documentation on compensation for its 25 senior executives and highest-paid employees.

It cited "people involved in that process" who said CitiGroup told the U.S. Treasury Department that energy trader Andrew J. Hall, with a pay package of $98 million, and a second unidentified trader who was paid more than $30 million, were exempt from review.

A source close to the bank told Reuters on Wednesday that Hall's contract will be exempt from review because it was signed before a cut-off date of February 11, 2009.

But another source familiar with the matter said federal pay czar Kenneth Feinberg, the U.S. official responsible for setting pay for top executives at finance firms that received billions of dollars in government aid, will have flexibility in applying his authority on a case-by-case basis.

Feinberg will take his time and conduct his work in private, a spokesman said on Friday.

"We are not going to provide a running commentary on this process," said Treasury spokesman Andrew Williams.

Compensation plans were expected to be submitted by midnight on Friday, and it may take several weeks to see if they are in order. Feinberg then has 60 days to present his recommendations on compensation for the 25 highest-paid employees at companies that must answer to the government on pay.

Feinberg has been consulting with seven companies that have yet to pay back money borrowed from the government, including Citigroup, American International Group Inc, Bank of America Corp, Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc, a Treasury spokesman has said. link.....

More Decline in Consumer Sentiment

2009-08-16T03:50:00.000-07:00

This post combines the latest results of the Rueters/University of Michigan Survey of Consumers, the Conference Board’s Index of CEO Confidence and the State Street Global Markets Index of Investor Confidence indicators into a combined presentation that will run twice monthly as preliminary data is firmed.

These three indicators should disclose a clear picture of the overall sense of confidence (or lack thereof) on the part of consumers, businesses and investors as the current recessionary period develops.

Friday’s early release of the Reuters/University of Michigan Survey of Consumers for August showed another unexpected decline in consumer sentiment with a reading of 63.2 only an slight increase of 0.32% above the level seen in August 2008.

The Index of Consumer Expectations (an important component of the Conference Board’s Index of Leading Economic Indicators) declined again to 62.1 resting just 7.25% above the result seen in August 2008.

As for the current circumstances, the Current Economic Conditions Index declined to 64 or 9.86% below the result seen in August 2008. link......

Hadassah Says It Never Knew Ex-Finance Chief Had Madoff Affair

2009-08-16T03:48:00.000-07:00

Hadassah, the Women’s Zionist Organization of America Inc., was “shocked” to learn its former finance chief wrote a book that will say she had an extramarital affair with Bernard Madoff, its president said.

Sheryl Weinstein’s book, “Madoff’s Other Secret: Love, Money, Bernie, and Me,” is set for release this month and will recount intimate details of her affair with the convicted con man, according to John Murphy, a spokesman for the publisher, St. Martin’s Press.

“Hadassah was shocked to hear the news reports of Mrs. Weinstein’s personal admissions regarding this relationship,” Hadassah President Nancy Falchuk wrote Aug. 13 in a memorandum to board members. “We knew nothing of her relationship with Mr. Madoff until today, and her departure was unrelated to Mr. Madoff.”

Hadassah invested $40 million with Madoff, eventually withdrawing $130 million. Weinstein, 60, who also put her assets with the money manager, says she lost everything. She denounced Madoff at his June 29 sentencing in Manhattan federal court, where he received a 150-year prison term for running the largest Ponzi scheme in history. She told the judge she met Madoff 21 years ago when she was Hadassah’s chief financial officer. Weinstein held the post from 1984 to 1997. She didn’t return a call or e-mail seeking comment yesterday.

French Donor

Hadassah, which says its mission is to improve the quality of life for all people in Israel and to strengthen Jewish life in the U.S., got $7 million in 1988 from a French donor who said it should remain with Madoff. The group invested another $33 million with Madoff through 1997. Hadassah withdrew $130 million over the two decades it invested with the money manager, according to a person familiar with the matter.

Weinstein’s 224-page book is set to be published Aug. 25. A promotion on the Barnes & Noble Inc. Web site says: “She was a prominent business-woman: smart, connected, successful. After a 20-year intimate relationship with Madoff -- she lost it all. In Madoff’s Other Secret, she tells her story.”

“Filled with personal details, exclusive documents, and photographs, her account will reveal a Madoff nobody knew, and it will shock and surprise readers.” It quotes Weinstein saying: “Nobody knows Bernie Madoff like I did. And nobody knows about me.” link.....

U.S. Economy: Sales Unexpectedly Fall on Job Losses

2009-08-16T03:42:00.000-07:00

Sales at U.S. retailers unexpectedly fell in July, raising the risk that a lack of consumer spending will temper a recovery from the worst recession since the 1930s.

Purchases decreased 0.1 percent, the first drop in three months, as shrinking demand at department stores such as Macy’s Inc. and Wal-Mart Stores Inc. overshadowed a boost from the cash-for-clunkers automobile incentive program, Commerce Department figures showed today in Washington.

A separate government report today showed more Americans than forecast filed claims for unemployment insurance last week, underscoring the threat to spending from the continued deterioration in the job market. Treasury securities jumped and the dollar fell after the reports, and some economists lowered estimates for growth this quarter.

“Until we start seeing job growth, consumers are still going to be very cautious,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, which accurately forecast the drop in purchases excluding automobiles. “It’s premature to talk about the sustainability of a recovery,” he said, until there’s “follow-through on the demand side.”

The gain in Treasuries sent the yield on the benchmark 10- year note down to 3.60 percent at 5:15 p.m. in New York from 3.72 percent late yesterday. The dollar dropped against the Japanese currency to 95.48 yen from 96.07 yesterday. Stocks rose, with the Standard & Poor’s 500 Index increasing 0.7 percent to a 10-month high of 1,012.73.

link......

Beantown showdown: JetBlue and Southwest face off

2009-08-16T02:41:00.000-07:00

NEW YORK -- The cool kids of the airline industry are giving big-city travelers more opportunities to show who they like more.

FILE - In this July 19, 2005 file photo, a JetBlue Airbus flies over a pair of Southwest Airlines' jets from Bob Hope Airport in Burbank, Calif., bound for New York's JFK airport. After years of following similar game plans to lure passengers with fares that are a cut below and customer service that's a cut above, JetBlue and Southwest are going head-to-head in major Northeast markets.

For years, JetBlue and Southwest catered to customers in the same way - with cheap fares and good customer service - but avoided much head-to-head competition in major markets. These days, they are trying to distinguish themselves as they ramp-up competition in places like New York, Washington, Baltimore - and starting this weekend, Boston.

Fliers stand to benefit as these airlines expand in the Northeast. This rivalry not only pits one popular low-cost carrier against another; it puts further pressure on other airlines to stay competitive with them.

It also means JetBlue and Southwest must find ways to differentiate themselves. Southwest is touting its fewer baggage fees and more extensive nationwide presence, while JetBlue is highlighting its live TV service and its own comprehensive route system.

Just over a month after Southwest began flying out of New York's LaGuardia - eight miles from JetBlue's base at John F. Kennedy International - Southwest begins service on Sunday from Boston's Logan International Airport. In September, Southwest starts service between Boston and Baltimore.

A few years back, their flights mostly crossed paths in places like Burbank, Calif., and Orlando, Fla.

link.....

Porsche buy launches VW drive for world domination

2009-08-16T02:39:00.000-07:00

BERLIN — Volkswagen's triumphant bid to take over luxury German carmaker Porsche marks the end of a bitter family power struggle and the start of a drive to become the world's top auto manufacturer.

"VW and Porsche are entering a new era -- the company has the means to become number one," pipping Japan's Toyota by 2018, chief executive Martin Winterkorn said Friday at company headquarters in Wolfsburg, northern Germany.

Volkswagen, already Europe's biggest automaker, and Porsche, maker of the legendary 911 sports car, agreed to a tie-up late Thursday after nearly four years of brinkmanship and infighting.

The full acquisition, which will also entail the Gulf state of Qatar taking a stake in Porsche and which VW estimates will produce three billion euros (four billion dollars) in synergies, should be complete by 2011.

It closes an ugly chapter in the history of Germany's illustrious auto sector that began in late 2005, when two of the industry's biggest names crossed swords in a duel for control of the empire.

In the beginning, it was Porsche that sought to buy VW in a bid to drive down the average carbon dioxide emissions of its fleet before new European anti-pollution legislation comes into effect in 2012.

VW's efficient Polo and Skoda models were to offset Porsche's greenhouse-gas-spewing muscle cars.

Porsche, which already uses VW assembly lines, also aimed to protect its powerful but insular partner against potential foreign investors.

The Stuttgart-based manufacturer tried to acquire 75 percent of the shares in VW but the attempt backfired in May against the backdrop of the financial crisis, which hit the auto market hard and produced a crippling credit crunch. link.....

Fla. failures led to the fall of Colonial

2009-08-16T02:34:00.000-07:00

When regulators seized Colonial BancGroup Friday and its assets were sold to North Carolina-based BB&T, Colonial became the largest bank failure of the year. How did the bank go from being one of Alabama's great success stories to being one of the state's most spectacular failures?
Its records and reports to stockholders show the path that brought about that transformation.

Colonial BancGroup's beginning, the 1981 acquisition of Southland Bancorporation and its $166 million in assets, was far less dramatic than its ending.

Bobby Lowder founded the bank and led it. He served as chairman, CEO and president until stepping down three months ago.

For about 15 years, Colonial bought up one Alabama bank after another before taking its first steps outside its home state.

Lowder and his brothers divided the family business of insurance, real estate, construction and banking.

In the mid-1990s, Colonial moved away from its slow growth in Alabama to a rapid expansion in other states where it saw the possibility of making construction loans to pay for building booms.

In 1996, Colonial broke into the Florida market when it purchased Southern Banking Corp., a $232 million operation. Later that year Colonial went into Georgia, purchasing Commercial Bancorp of Georgia, a bank with $233 million in assets.

Once Colonial went into other states, it formed Colonial BancGroup, a holding company that owned the various Colonial Bank operations.

During the next two years, Colonial continued to gobble up Florida banks, with a few in Alabama and Georgia. Between 1996 and 1998, Colonial acquired 14 Florida banks with combined assets of almost $2.4 billion.

By then, Colonial had established itself in a market that would eventually play a key role in its failure.

After buying TB&T Inc., a $111 million Texas bank in 1998, Colonial took a three-year breather from acquisitions. link.....

OIL FUTURES: Crude Futures Plummet 4% On Shaken Confidence

2009-08-14T23:18:00.000-07:00

Crude oil futures sank more than 4% Friday as confidence in the speed of economic and oil demand recovery was shaken.

Light, sweet crude for September delivery settled $3.01, or 4.3%, lower at $67.51 a barrel on the New York Mercantile Exchange, the lowest finish since July 30. Brent crude on the ICE futures exchange settled $1.07, or 1.5%, lower at $72.41 a barrel.

Oil prices have been caught in a $68-$70 range since the beginning of the month, as traders weighed the prospects for economic recovery against continued weak oil demand. Futures broke out of this range, falling as low as $67.29 a barrel, after U.S. data showed a surprise drop in the latest survey of consumer confidence. These data came in one day after a weaker-than-expected U.S. retail sales report that indicated the worst recession in 50 years is keeping consumers anchored.

"When consumer confidence came in, everything turned south," said Gene McGillian, a broker at Tradition Energy. "Consumer spending represents 70% of GDP, and if people are not spending, this doesn't bode well for energy demand."

Oil prices were pressured further by sliding equities. Crude futures have risen in the past weeks on firmer stocks, which vaulted to new year highs this month after the release of a slew of better-than-expected earnings and economic data. But investor sentiment shifted after the weak consumer confidence reading, pushing the Dow Jones Industrial Average lower.

This latest revival of risk aversion sent investors out of commodities, which are perceived to be relatively risky assets, and into the dollar, which strengthened against the euro on Friday. A stronger dollar sometimes discourages crude purchases made by those using other currencies. The dollar also gained ground as fears of inflation abated. The U.S. Labor Department on Friday said consumer prices were unchanged on the month in August and down 2.1% on year. The euro was recently at $1.4178 from Thursday's $1.4293.

Market participants say there is a potential for prices to fall as quickly as they did in early July, when crude shed almost $10 in nine sessions.

"I see the same downside risk that we had in the first couple weeks in July, when we had a combination of weaker equities and a lack of physical tightness to cushion the decline," said Tim Evans, an analyst with Citi Futures Perspective.

Demand for crude oil remains depressed in U.S., according to the latest Energy Information Administration data. Crude oil inventories have risen for three-straight weeks, while refineries are operating at their lowest level relative to capacity in 25 years amid slack gasoline demand.

"A lot of people were calling for a lower price because fundamentals are weak," said Tony Rosado, broker at GA Global Markets. "The $65 price becomes an attraction now."

Other market participants believe prices should be even lower than $65.

"The price that clears the market in crude oil is probably around $58-$59 dollars a barrel based strictly on the fundamentals," said Jim Ritterbusch, president of Ritterbusch and Associates.

September reformulated gasoline blendstock settled down 8.12 cents, or 4%, at $1.9380 a gallon, breaking below the psychological $2 level for the first time since July 30. September heating oil settled 6.18 cents, or 3.2% lower, at $1.8410 a gallon. link.....

Toyota Leads in Cash for Clunkers

2009-08-14T23:17:00.000-07:00

The biggest single beneficiary of the $3 billion "Cash for Clunkers" government program so far is the Japanese automaker Toyota, according to federal figures released Friday.

Three of the five most popular vehicles purchased under the program are Toyota models: the Corolla (No. 1), the Camry (4) and the Prius (5).

Controversy over the program has focused in part on how much of the U.S. tax money will go toward stimulating business for foreign automakers.

Halfway through the program, Toyota is getting the largest share of the new purchases under the program with 19 percent, according to the figures released Friday by the National Highway Traffic Safety Administration.

Two U.S. automakers follow closely behind Toyota, however, with General Motors at 18 percent and Ford at 15 percent of the new business. And about 54 percent of top 10 models purchased under the program are manufactured in the United States, according to the figures. The Corolla, Camry and the Honda CR-V 4WD are all manufactured domestically.

"I've always been confused by the 'Buy America' thing when there are plenty of Hondas built in Atlanta," said Neil Kopit, director of marketing at Criswell Automotive which owns Chevrolet, Nissan, Honda and Hummer dealerships in Maryland. "There is a profit leaving and going overseas. But who is it enriching before it goes there? The dealers and the salespeople and the mechanics all live and work in the community."

Designed to revive the economy by stimulating auto sales, the Cash for Clunkers program offers the owners of older cars $3,500 or $4,500 if they turn in their vehicles and buy a new, more fuel-efficient ride. link......

Hadassah Says It Never Knew Ex-Finance Chief Had Madoff Affair

2009-08-14T23:16:00.000-07:00

Frontier Win Surprises Even Republic's CEO

2009-08-14T23:13:00.000-07:00

In the end, the auction for Frontier Airlines was not strictly a matter of money. Frontier and Southwest Airlines' (LUV) pilots unions quickly determined this week that melding seniority lists would prove difficult, at best. Southwest officials saw the potential for long-term rancor in their labor force, thanks to a messy integration of some Frontier employees who would be dispirited by the disappearance of their airline and the wave of pink slips that would have accompanied it. The cultural risk to Southwest, the airlines' executives decided, would likely not be worth the reward of marginally better financial performance from the Denver market.

The outcome also surprised Republic Airways (RJET) CEO Bryan Bedford, whose company won the auction for Frontier after Southwest declined to amend a term in its bid that said its pilots would need to reach a deal with Frontier pilots before any sale could close. In an interview on Aug. 14, Bedford said he thought that, strategically, Southwest had firmly decided it needed Frontier. "Honestly, I thought the value of Frontier in the hands of Southwest was more important to them than the value of Frontier in our hands," said Bedford. "I really viewed this as a David-Goliath sort of struggle." Republic sweetened its initial $108.8 million offer by agreeing to cancel a $150 million secured claim in Frontier's bankruptcy, thereby giving unsecured creditors a higher collection on their claims. The deal is expected to close on Sept. 17. link......

UBS Client to Admit Failure to Report Swiss Account to IRS

2009-08-14T23:12:00.000-07:00

A California client of UBS AG agreed to plead guilty to a charge of failing to file a tax report for an offshore bank account holding more than $1 million.

John McCarthy opened a Swiss account in 2003 in the name of COGS Enterprises Ltd., a Hong Kong entity, and failed to file a Foreign Bank and Financial Accounts report, or FBAR, according to a charge filed yesterday in federal court in Los Angeles. McCarthy signed a plea agreement and will make an initial appearance Sept. 14, prosecutors said.

Three other UBS clients have pleaded guilty since the bank gave 250 customer names to the Internal Revenue Service under a Feb. 18 agreement to avoid prosecution for helping Americans evade taxes. UBS, the largest Swiss bank by assets, has settled a U.S. lawsuit seeking the names of Americans suspected of evading taxes through 52,000 secret Swiss accounts.

“The case against Mr. McCarthy is the latest victory in the Justice Department’s crackdown on offshore tax evasion,” John DiCicco, acting assistant attorney general for the Justice Department’s Tax Division, said in a statement.

Steven Toscher, McCarthy’s lawyer, didn’t respond to a message seeking comment yesterday.

While banking with UBS in the Cayman Islands, McCarthy’s bankers told him, “a lot of United States’ clients don’t report their income and just take it off the top,” according to his plea agreement.

Swiss Lawyers

McCarthy skimmed money from his U.S. business into a domestic bank account in 2003, and with the help of UBS representatives and his Swiss lawyers, transferred that money into his COGS account in Switzerland, according to the plea agreement.

McCarthy, a resident of Malibu, California, met with UBS bankers and his Swiss lawyers over the next five years to discuss UBS accounts, the agreement said. His Swiss lawyer advised him to set up a Liechtenstein foundation or a Panamanian or Hong Kong corporation to “create an extra layer of privacy” and help hide his identity, according to the plea agreement. link.....

Stocks Finish the Week Down as Reports Dull Optimism

2009-08-14T23:09:00.000-07:00

Wall Street closed a roller-coaster week in negative territory Friday, as investors locked in profits and concerns rose that a five-month rally had pushed stocks up further than warranted by early signs that the economy is stabilizing.

The losses were broad, dragging down financial and technology shares, but energy stocks lost significant ground as crude oil prices tumbled 4 percent, to $67.51 a barrel, on the New York Mercantile Exchange. Exxon Mobil and ConocoPhillips were down 0.8 percent and 1 percent, respectively.

After a two-day rally lifted the Standard & Poor's 500-stock index to a 10-month high, the index fell 0.9 percent, or 8.64 points, to close at 1004.09. The Dow Jones industrial average, an index of blue-chip stocks, was down 0.8 percent, or 76.79 points, to 9321.40, and the tech-heavy Nasdaq composite index fell 1.2 percent, or 23.83 points, to 1985.52.

That wiped out gains secured just a few days ago and left all of the major indexes in negative territory for the week, breaking a four-week streak of gains. The Dow and S&P were down 0.5 percent and 0.6 percent for the week, respectively. The Nasdaq fell 0.7 percent.

Investors had rallied this week on signs of a stabilizing economy, deriving reassurance from a Federal Reserve move to begin curtailing one of its extensive programs to prop up the economy. But traders have also become concerned that the market rebound might have come too quickly and sprinted ahead of the recovery.

That was reinforced by a report of an unexpected drop in retail sales last month, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

"Many people have been looking for a pullback, and this week that retail sales data was a potential game changer," he said. "If we are in a recovery mode, it's a very gradual recovery."

Also, traders were disappointed by a decline in consumer confidence as measured by the latest Reuters/University of Michigan index released Friday. The index fell to 63.2 in August from 66 in July. Analysts had expected a rise. link.....

Drops in Consumer Confidence, Prices Temper Recovery Hopes

2009-08-14T23:04:00.000-07:00

According to the monthly Reuters/University of Michigan Surveys of Consumers, released Friday, the index of consumer confidence fell from 66 points in July to 63.2 in August. The decline itself is less meaningful than the fact that economists expected consumer confidence to rise in August. This means the experts underestimated the pessimism of American consumers, which helped send the stock market down Friday.

"Consumers are facing three major hurdles," Art Hogan, chief market strategist at Jefferies & Co., said in an interview. "They are paying down their debt, their houses are not worth as much as they were two years ago and they're staring down the barrel of 10 percent unemployment."

As a result, Hogan said he expects the five-month stock market rally to "hit a bumpy patch."

Also on Friday, the Labor Department reported that July consumer prices remained stable compared with June but plunged 2.1 percent from July 2008.

Friday's tough consumer news followed a surprise drop in July retail sales and a record jump in home foreclosures reported earlier this week. At the same time, Hong Kong emerged from a yearlong recession on Friday, joining Germany and France, whose economies grew modestly in the second quarter.

Taken together, the week's economic data suggest that a global recovery will be staggered and sluggish in getting off the ground. Consumers -- the engine of the U.S. economy -- are catching few breaks.

Long-term price drops stoke fears of deflation -- the opposite of inflation and a warning sign of a contracting economy. Plunging prices typically go hand in hand with declining wages, creating the sort of persistent misery seen during the Great Depression. link.....

BB&T buys Colonial bank; 4 other banks fail

2009-08-14T22:54:00.000-07:00

Troubled Colonial BancGroup will be bought by rival BB&T Friday, the government said after state regulators closed the bank whose assets had been frozen by a federal judge.

The Montgomery, Ala., bank, which has 346 branches spread across Florida, Alabama, Georgia, Nevada, and Texas, is the sixth largest bank failure in U.S. history and by far the largest failure of 2009.

With $25 billion in assets and $20 billion in deposits, Colonial is 100 times larger than the typical bank to have failed this year.

BB&T (BBT, Fortune 500) will buy $22 billion of Colonial's assets, as well as its deposits and branches, leaving the remaining assets in the hands of the Federal Deposit Insurance Corp.

BB&T, based in Winston-Salem, N.C., is also a regional banking power, with 1,500 branches across the Southeast. It is also a major mortgage lender.

Most customers of Colonial should not be affected by the closing. The FDIC, the federal agency that has protected bank deposits since the Great Depression, will guarantee account balances up to $250,000.

But home buyers and those who want to refinance their mortgages could end up paying somewhat higher rates, even if they have never heard of Colonial, said Guy Cecala, publisher of trade publication Inside Mortgage Finance.

Cecala said Colonial was a significant player in the sector of the business known as "mortgage warehouse" lending, which provides financing needed by mortgage brokers and non-bank lenders to make home loans.

"The more firms like this that get out, the more dependent we get on large banks, and less competition there is. That's never a good thing," he said. Warehouse lending used to be a huge source of funds for home loans, according to Cecala, but the mortgage defaults and declining home prices of recent years has decimated the business.

"The warehouse lending market is now so fragile and so small, it doesn't help when we lose anybody," he said. "We have only a cup of water where we used to have a bucket of water." link.....

Oil Rises for a Second Day on European, U.S. Economic Optimism

2009-08-13T04:53:00.000-07:00

Crude oil rose for a second day after the euro region’s economy performed better than expected and the U.S. Federal Reserve said the recession is easing, sparking hopes for a rebound in fuel demand.

Oil rose in New York after confidence in the world economy surged to a 22-month high in August and the Fed pledged to keep interest rates low. The dollar weakened against the euro, increasing the appeal of commodities. A report from the Energy Department showed yesterday U.S. crude inventories grew for a third week last week as demand continued to fall.

“Today’s European data coupled with the upbeat statement from the Fed last night suggests the global economic recession is turning around,” said Andrey Kryuchenkov, analyst with VTB Capital in London. “In terms of demand fundamentals oil’s gains should be capped, but for now we’re trading on sentiment.”

Crude oil for September delivery gained as much as $1.56 cents, or 2.2 percent, to $71.72 a barrel on the New York Mercantile Exchange. It was at $71.64 a barrel at 12:02 p.m. in London. Futures have climbed 59 percent this year.

Second-quarter gross domestic product in the euro area fell 0.1 percent from the first quarter, when it plunged 2.5 percent, the most since data for the area were first compiled in 1995, the European Union’s statistics office in Luxembourg said today. Economists had estimated GDP shrank 0.5 percent, the median of 32 forecasts in a Bloomberg survey showed.

The dollar weakened for a third day, trading at $1.4262 against the euro at 12:01 p.m. London time, compared with $1.4188 yesterday.

Optimists Outnumber Pessimists

The Bloomberg Professional Global Confidence Index jumped to 58.12 this month from 39.13 in July. It is the first time the reading exceeded 50, which means optimists outnumber pessimists. A measure of U.S. participants’ confidence in the world’s largest economy rose to 47.3 from 29.5, the survey showed.

Crude may plunge to less than $10 a barrel in the next decade after surging to a record $147 last year, said Robert Prechter, who achieved fame for cautioning on Oct. 5, 1987, that stocks would crash. link.....

JetBlue Offers Month Of Flights for $599

2009-08-13T04:51:00.000-07:00

JetBlue Airways is offering a $599 pass that lets travelers take unlimited flights for a month. The program covers all 56 of JetBlue's destinations from Sept. 8 to Oct. 8 with no blackout dates, the New York-based carrier said. Flights must be booked by Aug. 21, and passes must be bought by phone. SEC Warns Pequot Of Possible Lawsuit

Pequot Capital Management and founder Arthur Samberg were told by the Securities and Exchange Commission they might be sued after an investigation of their trading in Microsoft, a letter sent to investors shows. The SEC, which has been conducting an insider-trading inquiry, sent Samberg and the firm so-called Wells notices warning that the agency's staff plans to recommend civil legal claims, Pequot wrote in an Aug. 10 letter to investors obtained by Bloomberg. The notices typically give subjects of a probe a chance to dissuade the SEC from proceeding. Luxury home builder Toll Brothers said it posted the first annual increase in signed contracts for new homes in four years. Toll said that new-home contracts rose 3 percent from the third fiscal quarter of last year, and rose 44 percent from the second fiscal quarter this year. Demand was so robust that the company was able to scale back incentives it offered to get buyers in the door. Only 9 percent of buyers backed out -- the lowest cancellation rate in three years. link.....

Alibaba.com profit falls less-than-expected, eyes M&A

2009-08-13T04:50:00.000-07:00

China's top e-commerce firm, Alibaba.com (1688.HK), posted a 34.2 percent fall in quarterly net profit on Thursday as margins fell and on higher investment costs, but its earnings beat analysts' expectations. Alibaba.com will also issue a special dividend of HK$0.20 a share to be paid out to shareholders around Sept. 9.

Alibaba's net profit for the second quarter came in at 260.7 million yuan ($38.2 million) versus 396.5 million yuan a year earlier. A poll of five analysts by Reuters Estimates expected the firm's net profit to come in at 224.8 million yuan.

Excluding one time gains, Alibaba.com said its quarterly net profit fell 16.9 percent.

Alibaba, which operates an online site connecting millions of buyers and sellers, said it had a strong cash position to make acquisitions even after the special dividend payout.

"In the last few months we have been exploring investment opportunities and we are relatively close to be making some announcements in the coming months," David Wei, chief executive of Alibaba.com, told reporters in an earnings conference call.

"After the dividend pay out we still have more than 6 billion RMB, which should be sufficient for any investment in the short term," he said.

Wei said the acquisition targets were not global, declining to give more details.

Alibaba posted strong revenue growth of 23.6 percent on the back of record-high quarterly net additions to its premium fee-paying service, Gold Supplier. According to Analysys International, China's B2B e-commerce market was valued at 1.4 billion yuan in the second quarter of 2009. Alibaba.com had 62.2 percent of market share. Alibaba.com's Wei said early this month the company may set up an Indian joint venture with India's Infomedia 18 to help it manage its B2B platform. link....

China backs off 'Green Dam' filter software requirement

2009-08-13T04:48:00.000-07:00

HONG KONG -- China reversed its stance on a controversial plan that would have required all computers sold in the country to be pre-loaded with internet filtering software, opting for a scaled-back version that would apply only to computers in schools, internet cafes and other public venues.

Consumers who want the software can still install it on their own, China's Minister of Industry and Information Technology Li Yizhong was cited by the official Xinhua news agency as saying Thursday.

"Installation is intended to block violent and pornographic content on the Internet to protect children," Li said.

"Any move to politicize the issue or to attack China's Internet management system is irresponsible and not in line with reality," he said.

China said in May it wanted all computers sold within its borders to carry the software, known as Green Dam-Youth Escort, but delayed the requirement indefinitely June 30. At the time it said the delay was to give computers makers more time to comply with the edict.

Li said installation of the software had always been intended as a voluntary option, and added that confusion may be related to the lack of clarity when the regulations were unveiled by the ministry. link...

U.S. stock futures point to higher Wall St open

2009-08-13T04:47:00.000-07:00

U.S. stock index futures pointed to a higher start on Wall Street on Thursday ahead of Wal-Mart Stores Inc (WMT.N) results and U.S. July retail sales data.

* By 0812 GMT, futures for the S&P 500 SPc1, the Dow Jones Industrial average DJc1 and the Nasdaq Composite NDc1 were up 0.6 percent.

* Wal-Mart, the world's largest retailer, is due to report earnings per share of $0.85 in the second quarter, compared with $0.86 a year earlier, according to a Reuters survey of 22 analysts. Wal-Mart shares in Frankfurt (WMT.F) were down 0.2 percent.

* U.S. retail sales for July is due at 1230 GMT. Economist in a Reuters survey expect a 0.7 percent rise compared with a 0.6 percent rise in June, and excluding automobiles sales are seen up 0.1 percent compared with a 0.3 percent decline in the prior month.

* The U.S. Labor Department will release weekly jobless claims at 1230 GMT. Economists in a Reuters survey forecast a total of 545,000 new filings compared with 550,000 in the prior week.

U.S. unemployment levels are likely to stay higher for longer following the country's severe recession and ongoing banking crisis, according to a study by the Federal Reserve Bank of Kansas City released on Wednesday. [ID:nN12134964]

* In Europe, Germany and France enjoyed a surprising return to economic growth in the second quarter of the year, ending their recessions earlier than many policymakers and economists had expected. [ID:nLD331672]

* European shares rose 0.7 percent, with sentiment improving after the U.S. Federal Reserve said the U.S. economy was showing signs of levelling out and after growth data from Germany and France. [.EU]

* The euro rose against the dollar and yen after the GDP data from Germany and France. [FRX/]

* Hedge fund manager John Paulson, who made a fortune betting against financial companies after foreseeing the credit crisis, stocked up on shares of Bank of America (BAC.N) during the second quarter, a regulatory filing showed [ID:nN12401520]. Bank of America shares in Frankfurt (BAC.F) rose 4.8 percent. link....

Urban Outfitters 2Q profit drops 14 percent

2009-08-13T04:46:00.000-07:00

PHILADELPHIA -- Apparel retailer Urban Outfitters Inc. said Thursday that its second-quarter profit fell 14 percent, stung by same-store sales declines at its Anthropologie, Free People and namesake stores and higher expenses.

Net income slipped to $49 million, or 29 cents per share, from $57 million, or 33 cents per share, during the same period a year ago.Analysts polled by Thomson Reuters expected earnings of 26 cents per share. Analysts' estimates normally exclude one-time items.

Selling, general and administrative expenses climbed to $108.7 million from $103.6 million.

For the period ended July 31, sales edged up 1 percent to $458.6 million from $454.3 million.The results narrowly missed Wall Street's estimate of $458.7 million.Sales at stores open at least a year, known as same-store sales, dropped 6 percent during the quarter.

Same-store sales are a key indicator of retailer performance since they measure growth at existing stores rather than newly opened ones.

The apparel retailer reported a 4 percent same-store sales drop-off at Anthropologie and a 16 percent Free People decline. Same-store sales slipped 8 percent at its namesake stores. link.....

Delta, Atlanta deal to lead to big bond: report

2009-08-13T04:44:00.000-07:00

U.S. carrier Delta Air Lines Inc (DAL.N) and the Atlanta airport are close to a lease agreement that would pave the way for an $800 million bond sale, the biggest such offering in the U.S. this year, Bloomberg reported, citing people familiar with the talks.

The world's busiest airport will use the proceeds to pay for a new international terminal, the news agency said. It said the airport is in talks with Atlanta-based Delta and other airlines as their leases expire after 30 years.

A lease accord may come this month, clearing a path for the bonds, the news agency quoted the people as saying.

Delta, the airport's largest tenant, linked the lease negotiations and the debt sale by threatening to move some flights unless the city cut the terminal's price, according to the news agency.

The Atlanta airport and Delta did not immediately respond to calls seeking comment. link.......