... Chinas biggest molybdenum producer to launch IPO next ... it will launch A-share listing on the Shanghai Stock Exchange on Apr.17. Articles published on Metals Place ...
Thursday, March 27, 2008
Chinas biggest molybdenum producer to launch IPO next month
Forex - Dollar steady in afternoon trade ahead of US GDP, other economic data
... Forex - Dollar steady in afternoon trade ahead ... yen may weaken against the dollar after Japanese officials aired some concerns about the outlook ... for the worlds second-largest economy. Bank of Japan (BoJ) policy board member Miyako Suda earlier ...
European govt bonds track US Treasuries off lows after weak US data
... reversal of strong gains seen recently on equity markets, as risk appetite fell and market players ... Sept euribor future (Liffe) 95.86 dn 0.02 GERMANY June bund future (Eurex) 116.04 dn 0.21 ...
Big Hurt In Emerging Markets
... end of 2007, the value of its stock market went from $60 billion to $1 trillion. ... Africa, 22% to Israel and 19% to Egypt, Morocco and Jordan. It seems that the ...
Wednesday, March 26, 2008
Bhutto ally new prime minister
... YORK (MarketWatch) -- The swearing in of Pakistans new prime minister Tuesday is a step ... 31%. The market capitalization of the Karachi Stock Exchange is about $75 billion, while Pakistans GDP ... indicates the enormous potential of the local stock market, Dzierwa said. Local retail investors dominate Pakistans ...
Tuesday, March 25, 2008
Markets Get Support
... the capital market in East African region. Stock markets are seen as enhancing the operations of ... some where else where there are instruments. Equity market is more developed than the debt market ... 120 million people after South Africa and Nigeria. ...
Swiss stocks - Factors to watch on March 25
... news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Reuters ...
Real estate loans increased to 50 million dinars
... 25 March 2008 (Telegraph) -- Iraqs rising prosperity is to be symbolically marked ... week with the inauguration of a new stock exchange system in Baghdad. Baghdad, 24 March 2008 ...
Morning business news - March 25
... EAST - While the turmoil on the stock markets have been providing all the drama in ... to key emerging markets such as China, Russia, India, South Africa, Brazil and Mexico now ...
Norways Aker Yards ASA sells 70% stake in three shipyards to Russian investor
... its business area Merchant Vessels to the Russian state-controlled investor FLC West in a EUR291.9m ... The company is listed on the Oslo Stock Exchange and traded under the ticker AKY. One ...
Salaries of employees and retirees will be increased soon
... week with the inauguration of a new stock exchange system in Baghdad. 24 March 2008 (Iraq ... Cairo International Industrial Exhibition, organized by the Egyptian Ministry of Trade and Industry from (18 ...
Bond Expert: Tuesday Outlook
... are generally up about 3 percent. The Australian equity market is up 3.7 percent and in Japan ... with minimal losses. A portion of the stock markets elation yesterday and the bond markets ebbing ...
Sasol unveils S Africas biggest empowerment deal
... Sasol unveils S Africas biggest empowerment deal JOHANNESBURG - Fuels and petrochemicals group Sasol will ... to a 1.75 percent rise in the JSE Securities Exchange Top-40 index. Some previous BEE deals have ...
Monday, March 24, 2008
Centre IOL asked to submit report on LPG shortage
Commodity Online NEW DELHI: The Delhi Court today urged the Ministry of Petroleum and Indian Oil Corporation to submit a report over the alleged availability of LPG cylinders in black market.
GSHL signs deals for iron ore coalmining leases
Commodity Online NEW DELHI: Global Steel Holdings Ltd (GSHL) has signed a deal for leasing iron ore and coal reserves in Brazil, Columbia and Mozambique
Saturday, March 22, 2008
Congo seeks contract changes in mines review
KINSHASA (Reuters) - Congos mines review panel recommended steps on Thursday to overhaul the vast central African countrys minerals sector after years of war and neglect, including renegotiating several major mining contracts.
A few more weeks of market winter?
A patient investor is not going to miss out by sitting in cash until the market bottoms. Still, some hot stocks -- notably metals, agriculture and overseas companies -- can be found if youre daring.
WaMu: Skip customers; save the execs
As mortgage holders face foreclosure and shareholders take a bath, troubled Washington Mutual takes action -- to protect executive bonuses. It could be a trend.
Wednesday, March 12, 2008
Wachovia says housing downturn nowhere near over
(Reuters) - Wachovia Corp (WB.N: Quote, Profile, Research), which offers adjustable-rate mortgages that let borrowers decide how much to pay each month, believes the U.S. housing downturn is far from over, Chief Risk Officer Don Truslow said.
"It feels like we have a ways to go," Truslow said on a Deutsche Bank Securities Inc conference call. Referring to the nine innings of a baseball game, Truslow said he was "unsure" whether the downturn was in the third, fourth or fifth inning, but "we haven't reached the seventh-inning stretch."
Charlotte, North Carolina-based Wachovia, the fourth-largest U.S. bank, on February 28 said it expected first-half loan losses to exceed 0.75 percent of loans on an annualized basis in 2008, higher than it had forecast two weeks earlier.
Liberty CEO says he was point man in IAC talks
(Reuters) - Liberty Media Chief Executive Greg Maffei said on Wednesday that he was the point man in talks with IAC/InterActiveCorp over disengaging the two companies despite a long-standing relationship between Liberty Chairman John Malone and IAC CEO Barry Diller.
"John Malone considered Barry Diller a friend" after a business partnership of nearly 12 years, Maffei told a Delaware court, where IAC and controlling shareholder Liberty are battling over a proposal to spin off four of IAC's businesses.
"While (Malone) was not entirely happy and increasingly unhappy with the performance at IAC ... because of the friendship, I don't think (he) was willing to tackle some of the issues," Maffei said. "I have been in effect the point person. I don't believe it's a personal matter."
Liberty's board put him in that role despite concerns of a potential conflict between Maffei and Diller. The two had clashed over IAC's purchase of online travel site Expedia several years before.
IAC and Liberty sued each other in January after Diller proposed a spinoff plan that would dilute Liberty's majority voting control over the businesses as separate entities.
The plan followed more than a year of inconclusive talks on a possible swap that would give IAC's HSN shopping network to Liberty in return for Liberty's stake in IAC.
Diller, a former television and film executive, built IAC with Malone's backing over more than a decade. While Liberty owns about 30 percent of IAC shares, it holds 62 percent voting control through a second class of super-voting stock.
Societe Generale Says Another Employee Held by Police
(Bloomberg) -- Societe Generale SA, the French bank stung by a record trading loss of 4.9 billion euros ($7.6 billion), said a second employee has been taken into police custody as part of the investigation into unauthorized trades.
The headquarters of France's second-biggest bank in La Defense, just outside Paris, were searched by police today, who took some documents, Societe Generale spokeswoman Laura Schalk said in an interview.
The latest development deepens a probe that began after the bank said in January that 31-year-old trader Jerome Kerviel amassed 50 billion euros in trades backed by fake hedges and false documents. Unwinding his bets resulted in the biggest trading loss in banking history and forced Societe Generale to replenish depleted capital.
``It's normal for the investigation to widen, and we will see where this brings us, given that many people said Kerviel could not have acted alone,'' said Arnaud Scarpaci, who helps manage about $235 million at Agilis Gestion SA in Paris. ``At an image level, it's not the best for the company.''
Societe Generale failed to follow up on 75 warnings on bets by Kerviel, independent board members concluded in a report last month. While the board has twice turned down Chairman Daniel Bouton's offer to resign, the document highlighted the shortcomings of Societe Generale's management supervision that allowed Kerviel to forge documents and emails undetected for more than two years.
Unidentified Broker
The Societe Generale employee taken into custody today is the second broker to be questioned in the Kerviel case. Moussa Bakir, a 32-year-old broker at Newedge, was questioned and released last month. Kerviel passed trades through Societe Generale's Fimat unit, which merged in January with Credit Agricole SA's futures brokerage to form Newedge.
The police are questioning the second broker, Isabelle Montagne, a spokeswoman for Paris prosecutors, said today in a telephone interview. She declined to name the broker. She said the broker was taken into custody mid-morning and would be held for 24 hours. The detention could be extended to up to 48 hours.
Kerviel, who admitted to exceeding his trading limits and faking documents to show his bets were covered by hedges, has been interrogated six times since he was incarcerated on Feb. 8. He has been charged with hacking into the bank's computers, falsifying documents and breach of trust.
The latest development comes just two days before a hearing at the Paris appeals court to consider his release.
Drake Management May Shut Down Largest Hedge Fund After Losses
(Bloomberg) -- Drake Management LLC, the New York- based firm started by former BlackRock Inc. money managers, may shut its largest hedge fund after a 25 percent decline last year, according to a letter to investors.
Winding down the $3 billion Global Opportunities Fund is one option being considered by Drake ``in an attempt to maintain and maximize value for investors during this period of severe market downturn and contraction of liquidity,'' the letter said.
Drake, which had blocked most redemptions from the fund in December, is reviewing other options, including allowing investors to get their money back over the next 18 months or to move their assets to a new fund. Drake, which managed $13 billion as recently as the end of the year, is considering similar steps for its two other hedge funds.
Hedge funds with more than $5.4 billion have been forced to liquidate or sell assets since Feb. 15 as contagion from the U.S. subprime slump spreads for a seventh month. Others include Peloton Partners LLP's $1.8 billion ABS Fund, Tequesta Capital Advisor's mortgage fund and Focus Capital Investors LLC, which invested in midsize Swiss companies.
Monday, March 10, 2008
Goldman says can't rule out Fed emergency rate cut
(Reuters) - An emergency interest rate cut from the Federal Reserve is possible ahead of its March 18th policy meeting, according to a Goldman Sachs research note on Monday.
Goldman said its view on Fed policy changed on Friday.
The government reported on Friday that a second straight month of job losses and the Fed announced new steps to inject liquidity into the financial system as credit availability remains tight.
Oil Rises to Record $107 as Returns Outpace Financial Markets
(Bloomberg) -- Crude oil rose to a record $107 a barrel in New York as investors purchased futures because the returns have outpaced those of financial markets.
Oil in New York has surged 77 percent over the past year as the S&P 500 and Dow averages dropped. Hedge-fund managers and other large speculators increased net-long positions, or bets on higher oil prices, in the week ended March 4, a Commodity Futures Trading Commission report showed.
``We're witnessing an ongoing flow of fund buying, which isn't particularly motivated by the particulars of the petroleum market,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``Prices have rallied to such an extent where sellers have backed off. Any time prices go lower the buyers come right back into the market.''
Crude oil for April delivery rose $1.36, or 1.3 percent, to $106.51 a barrel at 10:55 a.m. on the New York Mercantile Exchange. Futures surged to $107 a barrel today, the highest since trading began in 1983.
Thursday, March 6, 2008
Billionaire dreamlist: helipad and private beach
(Reuters Life!) - Credit crunch? What credit crunch?
More billionaire house hunters than ever are scouring the globe in search of the perfect hideaway.
So how about a Parisian mansion with its own ballroom, a forest-fringed estate in Andalusia complete with helipad or maybe a villa in Anguilla with a "feather-topped beach lapped by deep turquoise waters."
Reveling in the purple prose so beloved by estate agents, the glossy magazine Country Life has picked five of the top properties on the market that even the super-rich dream about.
For $95 million, why not snap up Hillandale, an English country-style estate just 50 miles from Manhattan.
Just four minute's drive from the billionaire's playground of Monaco you could put in a bid for the Domain, a Cote d'Azur mansion with its own stud farm, paddocks and dressage arena.
The credit crunch may have hit big spenders in London's City financial district who once happily invested their huge bonuses in property. But the billionaires are not feeling the chill.
Gold's glitter lures buyers
(Reuters) - Gold's near vertical climb to historic highs approaching the key $1,000 mark shows no sign of abating as bullish forces such as a sinking dollar and record high oil are not seen fading anytime soon.
Fears that expensive oil will stoke inflation combined with worries over potential stock market losses and the U.S. on the brink of possible economic recession will propel gold higher still, analysts say.
"Don't be surprised to see gold trade up to $1,100 (an ounce) or even $1,200 before year-end 2008," said Jeffrey Nichols, managing director of American Precious Metals Advisors.
"And, with the right confluence of economic and geopolitical developments, we could see gold spike to $1,500 or even $2,000 in the next few years," he said.
Gold hit a record high of $991.90 an ounce on Thursday and was at $986.90/987.40 at 1144 GMT. It has jumped 20 percent this year, 56 percent in the past 12 months, doubled in about 2 years and surged from a low of around $250 in August 1999.
It was previously fixed at a record high of $850 in January 1980 as high inflation linked to strong oil, Soviet intervention in Afghanistan and the impact of the Iranian revolution prompted investors to heavily buy gold. After adjusting for inflation, the 1980 high was $2,119.30 at 2007 prices.
The market has ridden waves of investor buying, which lifted prices nearly 50 percent in the past six months, ignoring a handful of negative factors, with most players betting on even higher prices this year and next.
Money-Market Rate for Euros Climbs to Seven-Week High
(Bloomberg) -- The cost of borrowing euros for three months rose to the highest level in seven weeks as the coordinated effort by central banks to revive lending falters.
The euro interbank offered rate, or Euribor, for the loans climbed 3 basis points to 4.43 percent today, the highest since Jan. 17, the European Banking Federation said. It was the biggest gain since Jan. 25.
The increase in money-market rates adds to evidence a concerted plan by central banks to promote lending and limit the fallout from the U.S. housing slump isn't working. Banks' asset writedowns and credit losses exceeded $181 billion since the beginning of 2007, data compiled by Bloomberg show. Total writedowns may top $600 billion, UBS said last week.
``This will continue to be the story for all 2008,'' said Nathalie Fillet, a senior interest-rate strategist at BNP Paribas SA in London. ``It's less a pure liquidity squeeze like at the end of last year than a reflection that the global credit crisis will last a while.''
Borrowing costs fell earlier this year after policy makers from the U.S., U.K., euro region, Switzerland and Canada announced plans on Dec. 12 to counter the credit shortage. The ECB injected a record $500 billion into the banking system on Dec. 18. The Federal Reserve provided $160 billion in short-term loans since mid-December in six auctions through the Term Auction Facility.
OIS Spread
The difference between the rate banks charge for one-month dollar loans in London relative to the overnight indexed swap rate, the so-called Libor OIS spread used by the Fed as the minimum bid level at its auctions, suggested a decline in the availability of funds. The spread increased to 54 basis points today, from 30 basis points in the week ended Feb. 22. It averaged 6 basis points in the first half of 2007 and 41 basis points since then.
Overnight indexed swaps are derivatives in which one party agrees to pay a fixed rate in exchange for receiving the average of a floating central bank rate over the life of the swap. For swaps based in U.S. dollars, the floating rate is the daily effective federal funds rate.
The difference, or spread, between the three-month money- market rate and the European Central Bank's benchmark rate was 43 basis points. It averaged 25 basis points in the first half of 2007.
``The leverage crunch is unlikely to disappear over the next few weeks,'' Stuart Thomson, a money manager who helps oversee $46 billion in bonds at Glasgow, Scotland-based Resolution Investment Management Ltd., said in an e-mailed note today.
Carlyle Fund Gets Default Notice After Margin Calls
(Bloomberg) -- Carlyle Group's publicly traded mortgage bond fund failed to meet margin calls and said it received a notice of default.
Carlyle Capital Corp. missed four of seven margin calls yesterday totaling more than $37 million, the Guernsey, U.K.- based fund said today in a statement. The fund expects to get at least one more notice of default related to the margin calls.
The collapse of the subprime mortgage market has prompted investors to flee all but the safest forms of debt, leading to the failure of hedge funds including Peloton Partners LLP. The Carlyle fund raised $300 million in July and used loans to buy about $22 billion of AAA rated so-called agency mortgage securities issued by Fannie Mae and Freddie Mac.
``The credit crisis is spilling over to the next asset class, agency bonds,'' said Philip Gisdakis, senior credit strategist at UniCredit SpA in Munich. ``There's never just one cockroach. If you see one highly leveraged hedge fund going bust, then there's another on the way.''
Peloton, the London-based hedge-fund firm run by former Goldman Sachs Group Inc. partners, announced plans last week to liquidate its ABS Fund after ``severe'' losses on mortgage-backed debt and demands from banks to repay loans. Thornburg Mortgage Inc. in Santa Fe, New Mexico, plummeted 62 percent in New York trading this week after the home lender received a default notice on a $320 million loan.
Widening Spreads
Carlyle Capital, run by John Stomber, fell 1.7 percent in Amsterdam trading today to $11.80. The fund originally sold shares at $19 each. Emma Thorpe, a London-based spokeswoman for U.S. private-equity firm Carlyle Group, declined to comment.
The agency mortgage-bond market has about $4.5 trillion of securities, according to estimates from UniCredit. The spread between 30-year agency mortgage bonds and 10-year U.S. Treasuries widened to more than 200 basis points yesterday, the highest since 1986, according to Bloomberg data cited by UniCredit today.
At the same time, money-market rates for euros and pounds climbed to the highest since mid-January, signaling the global squeeze on short-term bank lending may be returning. The three- month London interbank offered rate, or Libor, for euros advanced 1 basis point to 4.4 percent yesterday, the highest since Jan. 18, according to the British Bankers' Association.
``Market conditions are the worst anyone in this industry can remember,'' said Alain Grisay, chief executive officer of London-based F&C Asset Management Plc, on a conference call with reporters today. ``I don't think anyone has a recollection of a total disappearance in liquidity. I just cannot remember a time when for six months there are billion of dollars worth of assets out there for which there is just no market.''
Tuesday, March 4, 2008
MGIC Plans Stock Sale to Bolster Mortgage Insurance
(Bloomberg) -- MGIC Investment Corp., the largest U.S. mortgage insurer, said it will sell shares to increase capital.
Part of the money raised will be used to boost sales, the Milwaukee-based company said late yesterday in a statement. MGIC plans to decide on the size of the stock offering by ``mid to late March,'' and the company may consider other ways of raising capital, it said.
MGIC needs to raise capital to avoid a downgrade of its claims-paying ability after a record fourth-quarter loss of $1.47 billion, Fitch Ratings said Feb. 25. The insurer said Feb. 13 it hired an adviser to help raise money.
Mortgage insurers, which reimburse lenders when borrowers don't repay their debt, are facing a surge in claims amid the worst housing slump in 25 years.
Dollar Falls Against Yen on Bets Fed Will Lower Rate 0.75-Point
(Bloomberg) -- The dollar fell for a sixth straight day against the yen and traded near a record low versus the euro as traders increased bets that the Federal Reserve will lower interest rates by 0.75 percentage point this month.
The U.S. Dollar Index, which compares the currency with those of six trading partners, dropped as futures showed a 74 percent likelihood the Fed will reduce rates to 2.25 percent. Last week, traders saw no chance of a cut that steep. Canada's currency fell after the Bank of Canada cut rates today to help offset a slump in exports to the U.S.
``The dollar will remain under pressure,'' said Omer Esiner, an analyst at currency-trading company Ruesch International Inc. in Washington. ``The U.S. economy is looking weak.''
The dollar fell to 103.08 yen at 9:10 a.m. in New York, from 103.49 yen yesterday, when it fell to 102.62 yen, the lowest since Jan. 28, 2005. The U.S. currency traded at $1.5202 per euro, from $1.5204 yesterday, when it touched $1.5275, the weakest level since the European currency's 1999 debut.
``Don't fight the dollar weakness,'' a team of strategists at Zurich-based UBS AG, led by Mansoor Mohi-uddin, wrote in a research report published today. This week's U.S. data ``will likely increasingly suggest a recession,'' they wrote.
The U.S. Dollar Index traded on ICE Futures in New York was at 73.584 after declining to a record low of 73.354 yesterday. The slump in the U.S. currency helped push the price of oil to a record of $103.95 yesterday and gold to an all-time high of $989.54 an ounce.
`Grossly Misaligned'
The yen advanced to 156.71 per euro from 157.35.
UBS Wealth Management Research, a unit of UBS, wrote in a separate report that the world's foreign-exchange markets are ``grossly misaligned'' and Asian currencies may ``appreciate sharply.''
The Singapore dollar reached S$1.3897 against the U.S. currency, a decade-high, before trading at S$1.3904, from S$1.3910 yesterday. The Taiwan dollar advanced 0.6 percent to NT$30.922 per dollar.
The Australian dollar, also known as the Aussie, fell as the central bank governor said there is evidence consumer spending is moderating. The central bank raised the main rate to 7.25 percent today, the highest in 12 years. The Aussie was at 93.29 U.S. cents, from 93.96 cents yesterday and 94.98 on Feb. 28, the highest since March 1984.
``The Australian dollar is likely to be sold hard in the near-term,'' Hans-Guenter Redeker, head of currency strategy in London at BNP Paribas SA, one of the world's 10 biggest currency traders, wrote in a note to clients. A support level at 92.75 cents per dollar ``looks set to be broken,'' he said.
Canadian Rates
The Canadian dollar fell to 99.36 Canadian cents per U.S. dollar, from 99 cents yesterday, after the central bank cut Canada's benchmark rate by a half-point to 3.5 percent and said further ``stimulus'' will likely be required.
Japan's currency also climbed 1.3 percent to 95.97 against the Aussie and 1 percent to 82.68 per New Zealand dollar as widening credit-market losses prompted investors to reduce so- called carry trades
Japan's benchmark rate of 0.5 percent, the lowest among industrialized nations, compares with 8.25 percent in New Zealand and 4 percent in Europe. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the difference between the two. The risk is that currency moves erase those profits.
Monday, February 25, 2008
Recovery may take longer than usual: Greenspan
(Reuters) - Economic growth has stalled and recovery may take longer than usual, former Federal Reserve chairman Alan Greenspan said on Monday.
"As of right now, U.S. economic growth is at zero," Greenspan said at an investment conference in Jeddah, Saudi Arabia's second-largest city. "We are at stall speed."
"Recovery might take longer to emerge than it usually does," he added.
The longer growth stays at zero, the more likely the world's largest economy would start to contract, he said, adding that globalization of trade could ease some shocks.
"Growing globalization of trade and the economy would facilitate the absorption of shocks in the U.S.," he said.
In updated economic forecasts released last week, the U.S. central bank lowered its outlook for 2008 growth by a half percentage point to between 1.3 percent and 2 percent, citing the prolonged housing slump and bottlenecks in credit markets.
Visa sets possible record $18.8 billion IPO
(Reuters) - Visa Inc, the world's largest credit-card network, on Monday said it may raise up to $18.8 billion in its eagerly awaited public sale of shares, which could make it the largest initial public offering ever.
The company filed with the U.S. Securities and Exchange Commission to sell 406 million Class A shares at $37 to $42 each, resulting in proceeds of $15 billion to $17.1 billion. It said it might sell another 40.6 million shares to meet demand, boosting the potential size of the IPO to $18.8 billion.
A successful IPO would surpass the $10.6 billion offering in 2000 by AT&T Wireless Group.
San Francisco-based Visa plans to list its shares on the New York Stock Exchange under the symbol "V."
The timing of Visa's offering is risky, as worries that the U.S. economy might be entering a recession have chilled investor demand for stocks and IPOs.
But shares of smaller rival MasterCard Inc (MA.N: Quote, Profile, Research) have more than quintupled since that card network went public in a $2.4 billion IPO in May 2006.
"MasterCard has been an explosive stock, and investors may hope Visa will be the same," said Steve Roukis, a managing director at Matrix Asset Advisors Inc in New York, which invests $1.7 billion.
Visa intends to set aside $3 billion of net proceeds to cover a wide variety of antitrust and other litigation.
Ambac Rises on $3 Billion Rescue to Avert Downgrade
(Bloomberg) -- Ambac Financial Group Inc. rose to the highest in two weeks on investor expectations the bond insurer may be rescued from crippling credit-rating downgrades by getting $3 billion in new capital.
Ambac, the second-biggest bond insurer after MBIA Inc., may announce an agreement this week, according to a person with knowledge of the discussions who declined to be named because the details aren't complete. The New York-based company plans to raise $2.5 billion by selling stock at a discount to existing shareholders and $500 million from issuing debt, the Wall Street Journal reported today, citing people familiar with the matter.
``Maybe we'll see light at the end of the tunnel soon,'' said Geraud Charpin, head of European credit strategy at UBS in London. ``That would be good news for banks.''
Citigroup Inc. and seven other banks are working with Ambac to prevent rating cuts that would throw doubt on the credit quality of the $553 billion of municipal and asset-backed securities it guarantees. Banks stand to lose as much as $70 billion from any downgrades to Ambac, MBIA Inc. and FGIC Corp., Oppenheimer & Co. analysts estimated. Ambac rose as much as 6 percent before the official start of trading in New York.
The stock was 69 cents higher at $11.40 at 7:35 a.m., the highest since Feb. 11. Ambac jumped 16 percent in New York Stock Exchange trading on Feb. 22 after CNBC Television said banks and Ambac were preparing a deal.
Ambac spokeswoman Vandana Sharma didn't return a voicemail and e-mail seeking comment before office hours today.
Bank Talks
Rating companies are demanding bond insurers add more capital or face downgrades because of losses on subprime- mortgage securities they guaranteed. Moody's Investors Service indicated it will decide whether to cut Ambac and Armonk, New York-based MBIA by the end of the month. A downgrade of all the firms would cast doubt on $2.4 trillion of securities they back.
New York Insurance Superintendent Eric Dinallo last month arranged a meeting with banks to help avoid a downgrade of the bond insurers. Dinallo told a congressional hearing this month that the companies may be forced to separate their municipal insurance business from their asset-backed guarantees.
``Ambac was among the neediest cases, so if they can pull it off, there's hope for the others,'' said Jim Reid, credit strategist at Deutsche Bank AG in London.
CDO Losses
Banks face losses from any rating cuts because they bought bond insurance to hedge the risks of collateralized debt obligations and other asset-backed securities that are now tumbling in value. CDOs package pools of securities then split them into pieces with different ratings.
UBS AG, Royal Bank of Scotland Group Plc, Wachovia Corp., Barclays Plc, Societe Generale SA, BNP Paribas SA and Dresdner Bank AG were also involved in the group discussing a rescue, said the person.
Dresdner, the German banking arm of Allianz SE, will contribute a ``small'' investment of ``two-digit million euros,'' Stefan Jentzsch, head of the Dresdner Kleinwort investment-banking unit, said at a press conference in Frankfurt today.
``We have long been waiting for banks to pay up,'' Philip Gisdakis, a Munich-based credit analyst at UniCredit SpA, Italy's biggest bank, wrote in a note to investors today. A ``solution without their participation would lead to large losses for them.''
Spokespeople for Citigroup, UBS, Wachovia and BNP declined to comment on the rescue plans. Spokespeople for RBS, Barclays and Societe Generale didn't immediately return e-mails or calls seeking comment.
FGIC Split
FGIC, which lost its top rating at Moody's last week, asked to be split into two separate businesses, one that insures municipal bonds and another for asset-backed securities. That would help protect municipal bonds from losses on the asset- backed debt.
Channel Reinsurance Ltd., a reinsurer for MBIA, had its top Aaa credit rating cut by Moody's on Feb. 22 because of a slump in the value of residential mortgage securities.
The rating was cut three levels to Aa3 with a negative outlook, Moody's said in a statement. Channel Re provides more than half the reinsurance bought by MBIA, according to MBIA filings. MBIA said last week all bond insurers must eventually divide their businesses.
Thursday, February 21, 2008
SocGen in record loss, may take new writedowns
(Reuters) - Societe Generale (SOGN.PA: Quote, Profile, Research) confirmed a record fourth-quarter loss of 3.35 billion euros ($4.93 billion) after absorbing a huge rogue trading scandal that has made France's second-biggest listed bank a potential takeover target.
The loss coincided with an internal report acknowledging that better systems might have prevented the costly stock market gambles it blames on junior trader Jerome Kerviel.
SocGen, like many of the world's top banks, has also been hit by losses related to a global credit crunch and the bank warned it may make further writedowns in the future.
Executive Chairman Daniel Bouton told Reuters the 144-year-old firm was determined to ride out the storm as an independent bank, despite reports of a potential bid from long-time suitor and arch-rival BNP Paribas (BNPP.PA: Quote, Profile, Research).
"I am completely determined to continue with our strategy because, even taking into account our very bad year in 2007 due to the financial crisis and this fraud, it's this strategy which creates and will create the most value for shareholders," Bouton said in an interview. "This is my opinion, and it's one that's backed by the board."
SocGen's fourth-quarter net loss compared with a 1.18 billion euro profit a year earlier and a fourth-quarter profit of 1.0 billion euros unveiled by rival BNP Paribas, although BNP Paribas' results were down from the year before.
SocGen cut its 2007 dividend to 0.90 euro from 5.20 euros.
Oil seen heading higher after topping $100
(Reuters) - Rampant oil prices are likely to continue to rise for a while yet as supply worries and investor demand for commodities outweigh concerns of economic slowdown.
Crude hit a record high of $101.32 on Wednesday and was trading at $98.64 at 9:45 a.m. EST on Thursday.
The price has climbed from below $50 at the start of 2007 and below $20 in early 2002.
"From here, we think that the next stage may well be a period of consolidation in the high $90s, and that could include increasingly frequent moves above $100," said Paul Horsnell of Barclays Capital.
Prices have risen in part because of expectations that the Organization of the Petroleum Exporting Countries, rather than increase oil output, will maintain or even cut supply at a meeting on March 5.
OPEC argues that factors beyond its control, such as speculation, are boosting prices. One OPEC minister made clear on Thursday that oil's push into triple digits would not bounce the group into changing supplies.
"We will not just react to $100 oil," Qatar's oil minister, Abdullah al-Attiyah, told Reuters by telephone. "OPEC will move when it sees physical demand for its oil."
Dresdner Rescues $19 Billion SIV, Follows Citigroup
(Bloomberg) -- Dresdner Bank AG, Germany's third- largest bank, agreed to rescue its $18.8 billion structured investment vehicle, joining Citigroup Inc. and HSBC Holdings Plc in bailing out funds crippled by the collapse of the subprime mortgage market.
Dresdner, a unit of Munich-based Allianz SE, will provide a credit line to enable the K2 fund to repay all of its senior debt, spokesman Ulrich Porwollik in Frankfurt said in a telephone interview. Dresdner will cut the size of the fund, which has been reduced from $31.2 billion since July, according to an e-mailed statement.
The bank is the last of the world's biggest financial institutions to put capital at risk salvaging a SIV from the seven-month freeze in credit markets. Banks including Citigroup, HSBC, Bank of Montreal and WestLB AG have disclosed plans to support their SIVs with $140 billion of assets.
``This is a potential threat to Dresdner Bank,'' said Thilo Mueller, managing director of MB Fund Advisory in Frankfurt. ``There is little liquidity for some of these assets and with comparative assets continuing to fall, you need to book further writedowns.''
SIVs, which use short-term borrowing to buy higher-yielding assets, have shrunk by $100 billion from $400 billion since August, according to Moody's Investors Service.
Exit Plan
``Allianz plans to exit K2 and the SIV business in general,'' Chief Financial Officer Helmut Perlet said today in an interview. ``The SIV business has no future.''
The fund, which Allianz expects will be wound down by year- end, is unlikely to cause a ``major negative hit'' if the assets are taken on to Dresdner's books because the company has the ``financial strength to sit out parts of the valuation declines,'' Perlet said.
Allianz's banking division, which is mostly Dresdner, wrote down more than 1.3 billion euros ($1.9 billion) on structured investment products, contributing to a 52 percent decline in fourth-quarter profit announced today. Europe's biggest insurer earned 665 million euros, missing the 729 million-euro median estimate of 12 analysts surveyed by Bloomberg.
Allianz, which has fallen 19 percent this year, rose 1.91 euros, or 1.61 percent, to 120.27 euros at 4:25 p.m. in Frankfurt trading.
No Subprime
K2, named after the world's second-highest mountain in the Himalayas, was started in 1999 by Paul Clarke and Alan Harley, who previously helped manage Europe's first SIVs at Citigroup.
The fund has no ``direct exposure'' to securities backed by subprime or midprime debt, the mortgages made to U.S. homeowners with poor or limited credit histories. K2 also doesn't contain collateralized debt obligations based on asset-backed notes, the statement said. CDOs are securities packaged from mortgage bonds and other assets.
One of the SIV's three portfolios has entered a ``restricted operating period,'' a rule designed to protect senior investors that prevents it making payments to lower- ranking bondholders. The credit line from Dresdner may enable K2 to end the restriction, K2 said in a separate statement today.
``Such an outcome, however, cannot be assured,'' the statement said. K2 didn't disclose the size of the portfolio.
SIV Defaults
The SIV bailouts avert the risk of forced sales of assets by the funds. Concern that fire sales by SIVs would further roil credit markets prompted U.S. Treasury Secretary Henry Paulson to begin talks on setting up an $80 billion rescue fund last year. Citigroup and JPMorgan Chase & Co. in New York and Charlotte, North Carolina-based Bank of America Corp. abandoned the so- called SuperSIV after banks began rescuing their own funds, led by London-based HSBC.
More than $20 billion of SIVs have defaulted after being forced to start winding down since August, including funds set up by New York-based Ceres Capital Partners LLC and Cheyne Capital Management (UK) LLP in London.
Whistlejacket Capital Ltd., set up by Standard Chartered Plc, may default today after the company's receiver, Deloitte & Touche LLP, froze debts last week. The London-based bank abandoned a rescue plan for SIV yesterday, prompting Moody's to downgrade Whistlejacket's senior debt rating by three steps to B2, five levels below investment grade.
``It's a positive signal that Dresdner is willing to step in and support its SIV, but the story is far from resolved as we saw with Standard Chartered's Whistlejacket SIV,'' said Henry Tabe, an analyst at Moody's in London. Moody's rates K2's senior debt at Aaa.
Philadelphia Fed February Factory Index Falls to -24
(Bloomberg) -- Manufacturing in the Philadelphia region unexpectedly contracted the most since February 2001, the eve of the last recession, as measures of new orders and shipments reflected weakening demand.
The Federal Reserve Bank of Philadelphia's general economic index declined to a minus 24 from minus 20.9 in January, the bank said today. Readings less than zero signal contraction. The Philadelphia Fed's general economic index averaged 5.1 in 2007.
A two-year housing slump, exacerbated by tighter credit conditions, is spilling over to other industries, pushing the economy to the brink of recession. The Fed, after cutting interest rates at the fastest pace since 1990 last month, has said it is ready to move in a ``timely'' manner to avert a downturn.
``The Philadelphia Fed survey is sending clear signals that the U.S. economy is heading for a recession,'' said Lena Komileva, chief economist at Tullett Prebon in London, who forecast a minus 25 reading. ``The speed and magnitude of the recent decline in the series signals a very sharp deterioration.''
Economists had forecast the Philadelphia manufacturing index would rise to minus 10.0, according to the median of 54 estimates in a Bloomberg News survey. Projections ranged from 0 to minus 25.0.
New Orders
The Philadelphia Fed's measure of new orders rose to minus 10.9 from minus 15.2 the prior month, and a measure of shipments fell to minus 12.2 from minus 2.3 the prior month.
A gauge of unfilled orders dropped to minus 10.9 from minus 6.2, while the index of inventories declined to minus 13 from minus 11.7 the prior month.
The employment index gained to 2.5 from minus 1.5 a month earlier, the Philadelphia Fed said. An index of prices paid dropped to 46.6 from 49.8, while a gauge of prices received weakened to 24.3 from 32.
The report provides one of the month's earliest clues to the state of manufacturing nationwide. Similar data from the New York Fed released last week showed manufacturing contracted in the New York region in February for the first time in almost three years.
The Philadelphia Fed region, which comprises eastern Pennsylvania, southern New Jersey and Delaware, is more vulnerable to the auto slump and less exposed to financial services and trade than the New York region, economists said.
Nationwide Measure
Nationwide, manufacturing grew in January after contracting in December by the most in almost five years, according to a Feb. 1 survey from the Institute for Supply Management. The ISM survey on manufacturing in February is due out March 3.
The index measuring the manufacturing outlook for six months from now fell to minus 16.9 from 5.2, today's report showed.
The Fed's January rate cuts came as rising subprime defaults led to a global tightening of credit standards and declines in equity prices. Investors are betting on a half-point rate reduction, to 2.5 percent, at the March 18 Fed meeting.
The U.S. economy will probably grow at a 0.5 percent pace in the first quarter and a 1 percent rate in the following three months, according to the median forecast in a Bloomberg survey of economists taken the first week of February. Economists surveyed said a recession this year was an even bet.
Wednesday, February 20, 2008
KKR Financial Delays Repayments, Starts Negotiations
(Bloomberg) -- KKR Financial Holdings LLC, Kohlberg Kravis Roberts & Co.'s only publicly traded fixed-income fund, delayed repaying debt a second time in six months after failing to find buyers for commercial paper backed by mortgages.
Lenders to the fund agreed to the delay as KKR Financial seeks to restructure, the San Francisco-based company said yesterday in a regulatory filing. KKR Financial, whose stock has fallen 50 percent in the past year, didn't say how much debt is affected.
The announcement rekindled concerns that the decline in the market for short-term asset-backed debt, which totaled $1.2 trillion in August, will accelerate after a rebound early last month. Assets fell to $796 billion in the week ended Feb. 13, the third weekly drop. Standard & Poor's downgraded ratings on notes issued by KKR Pacific Funding Trust last week, citing uncertain pricing on the AAA rated securities that support them.
``The picture is getting worse and worse,'' said Felix Freund, who helps manage the equivalent of $14.7 billion of fixed-income securities at Frankfurt-based Union Investment GmbH. KKR Financial's second repayment extension ``shows there is still a lot of levered investments in the credit market that we can't see.''
About half the debt will be due by March 3 instead of Feb. 15, with the rest owed on March 25, according to the filing.
The talks come less than six months after the fund received a $230 million cash infusion from investors following losses on residential mortgages in the wake of the U.S. subprime crisis. The fund, led by Chief Executive Officer Saturnino Fanlo, raised a further $270 million in a rights offering with some of New York-based KKR's own partners buying shares in it, which had $19 billion of assets at the end of December.
Repricing `Driver'
The deferral drove investors to seek the security of government debt, sending 10-year Japanese bonds to the biggest gain in two weeks while perceived corporate risk in Asia and Europe soared. Contracts on Europe's Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 26.5 basis points to 611.5 today, according to Deutsche Bank AG. A basis point is 0.01 percentage point.
``The driver behind the current repricing is KKR Financial Holdings delaying repayment of CP for the second time,'' analysts led by Mark Harmer, head of credit research at ING Groep NV, said in a note to clients today.
KKR Financial fell 30 cents, or 2.1 percent, to $14.23 at 11:44 a.m. in New York Stock Exchange composite trading. Zoe Watt, a spokeswoman for KKR in London, declined to comment.
IPO
Kohlberg Kravis Roberts, the New York-based investment firm run by Henry Kravis and George Roberts, raised $800 million in KKR Financial's initial public offering in June 2005, selling the shares for $24 apiece. The fund raised money by selling commercial paper to invest in mortgages. It sold almost half of its mortgage loans in August as prices on bonds linked to U.S. home loans started to drop, leaving it with about $5.3 billion of mortgages.
Both Kravis and Roberts sit on KKR Financial's six-member investment committee, alongside KKR Partner Scott Nuttall, KKR Financial's Fanlo and Chief Operating Officer David Netjes.
Kravis and Roberts started the firm with Jerome Kohlberg, their colleague from Bear Stearns Cos., in 1976. Kohlberg left in 1987 and started his own buyout group, Kohlberg & Co. LLC. The private-equity business owns more than 42 companies with more than $180 billion of annual revenue and about 800,000 workers around the world. The firm's investments range from Alliance Boots Ltd. in the U.K. to Texas power producer TXU Corp., now known as Energy Future Holdings Corp.
U.S. Stocks Climb, Erasing Earlier Drop; Hewlett-Packard Gains
(Bloomberg) -- U.S. stocks rose, led by technology and bank shares, after Hewlett-Packard Co.'s profit topped estimates and investor William Ackman proposed a restructuring of bond insurers in an effort to minimize credit losses.
Hewlett-Packard, the biggest maker of personal computers, climbed the most in two years and helped the Dow Jones Industrial Average erase a 109-point drop. Wells Fargo & Co. and Citigroup Inc. led financial shares to their steepest gain in a week on Ackman's plan. TJX Cos., owner of the T.J. Maxx and Marshalls discount chains, led a rally in retailers after posting profit that topped analysts' estimates.
The Standard & Poor's 500 Index gained 2.41 points, or 0.2 percent, to 1,351.19 at 12:57 p.m. in New York. The Dow Jones Industrial Average rose 12.45, or 0.1 percent, to 12,349.67. The Nasdaq Composite Index increased 6.9, or 0.3 percent, to 2,313.1. About four stocks rose for every three that fell on the New York Stock Exchange.
Stocks dropped earlier in the day on concern competition will reduce profits among wireless networks and faster inflation will keep the Federal Reserve from cutting interest rates.
Hewlett-Packard rose $3.33 to $47.28 First-quarter net income increased 38 percent to $2.13 billion, or 80 cents a share, from $1.55 billion, or 55 cents, a year ago. Excluding expenses for acquisitions, profit was 86 cents a share, five cents more than the average analyst estimate in a Bloomberg survey. The company also raised its annual sales forecast on increasing demand overseas.
Tech Rally
Technology companies in the S&P 500 added 1.3 percent as a group, the steepest advance among 10 industries.
Wells Fargo, the biggest bank on the West coast, climbed 67 cents to $30.53. Citigroup added 39 cents to $25.71.
Ackman distributed a plan to restructure bond insurers that may prevent dividends from being paid to the parent companies and minimize losses for holders of asset-backed securities.
Tuesday, February 19, 2008
Credit Suisse Writedowns to Cut Profit by $1 Billion
(Bloomberg) -- Credit Suisse Group discovered pricing errors on bonds that will cut first-quarter profit by about $1 billion, prompting the biggest share decline in more than five years.
Switzerland's second-largest bank took $2.85 billion of writedowns on asset-backed securities after an internal review found ``mismarkings'' by a group of traders and credit markets worsened. The Zurich-based bank said in a statement today that it's assessing whether 2007 earnings were also affected.
The announcement comes two days after Qatar said it was buying shares in Credit Suisse and a week after the company reported net writedowns of 2 billion Swiss francs ($1.8 billion) for 2007, a fraction of those disclosed by bigger Swiss competitor UBS AG. Chief Executive Officer Brady Dougan said on Feb. 12 that he was ``more optimistic than many'' about prospects for a debt market recovery.
``I'm speechless,'' said Georg Kanders, an analyst at WestLB in Dusseldorf with a ``buy'' rating on Credit Suisse. ``To announce this just a week after reporting earnings is a major blow. This will again put the whole sector under pressure.''
Credit Suisse fell as much as 10 percent, and was down 4.40 francs, or 7.7 percent, to 52.35 francs by 1:15 p.m. in Swiss trading, cutting the company's market value to 60.8 billion francs. UBS AG, the biggest Swiss bank, dropped 0.8 percent.
`Loss of Confidence'
Credit-default swaps on Credit Suisse's subordinated debt rose to a record, according to Deutsche Bank AG. Credit-default swaps, used to speculate on a company's ability to repay debt, rise as perceptions of credit quality worsen.
Credit Suisse blamed the writedowns on ``significant adverse first quarter 2008 market developments'' and pricing errors ``by a small number of traders'' in the structured credit trading business. The company estimated that it remained profitable so far in the first quarter.
The announcement may raise questions about oversight at the bank less than a month after Societe Generale SA reported the worst trading loss in banking history following unauthorized bets by trader Jerome Kerviel.
``The big question mark is about the bank's control systems,'' said Stefan Raetzer, who helps manage about $28 billion at Allianz Global Investors in Frankfurt. ``The writedown isn't as much of a problem here as the loss of confidence.''
Credit Suisse spokesman Marc Dosch said a ``small number'' of traders had been suspended, declining to provide their names or location. The internal review will be finished before the publication of the annual report, scheduled for March 18, he said. The company will hold a conference call for reporters and analysts at 3 p.m. Zurich time today.
Dougan
The loss is the biggest setback for Dougan, 48, since he took over as CEO from Oswald Gruebel in May after heading the investment bank for three years. Gruebel returned the bank to stable earnings after a decade of management turnover, bungled acquisitions and the first criminal conviction of a bank in Japan. Credit Suisse's writedowns follow about $19 billion in debt and loan markdowns at UBS.
``It unfortunately just reinforces the reputation that the large Swiss banks have generated over the last year for financial ineptitude,'' Peter Thorne, a London-based analyst at Helvea Ltd., said in a note to clients. ``Whilst we had received some assurance that the Credit Suisse balance sheet is not as laden with problem securities as UBS, this disclosure just raises the prospect that they may be simply bad at knowing what problems they do have.''
Banks "quietly" borrow $50 billion from Fed: report
(Reuters) - Banks in the United States have been quietly borrowing "massive amounts" from the U.S. Federal Reserve in recent weeks, using a new measure the Fed introduced two months ago to help ease the credit crunch, according to a report on the web site of The Financial Times.
The newspaper said the use of the Fed's Term Auction Facility (TAF), which allows banks to borrow at relatively attractive rates against a wide range of their assets, saw borrowing of nearly $50 billion of one-month funds from the Fed by mid-February.
Fed's Stern says rate cuts should protect economy
(Reuters) - The Federal Reserve's interest rate cuts are appropriate to restore stability in financial markets and prevent damage to the broader economy, Minneapolis Fed President Gary Stern said on Tuesday.
"Against the backdrop of the financial shocks that have beset the economy and their implications for the outlook, the reduction in the funds rate target appears wholly appropriate," he said in remarks prepared for delivery to the Financial Planning Association of Minnesota.
The Fed is responsible for restoring financial stability and protecting the broad economy from damage, Stern said.
"Policy is now better positioned to attain these objectives than formerly," he added.
Stern said the current situation is reminiscent of the early 1990s, when the economy faced "headwinds" after the 1990-91 recession, particularly tighter credit and a real estate bust.
Monday, February 18, 2008
Northern Rock a lingering risk to Brown's future
(Reuters) - Nationalizing ailing Northern Rock bank may be the best option left to British Prime Minister Gordon Brown, but lingering doubts over its future risk chipping away at public confidence in the run up to the next election.
Hopes for a fast Northern Rock turnaround are hostage to financial markets stabilizing, a buoyant housing market returning and approval for nationalization from the European Union that does not result in a breakup and big job losses.
Brown has staked his credibility on protecting Britain from the fallout of the global credit crisis. But with the economy and the housing market slowing, he will be in the firing line if things get worse and the public looks for someone to blame.
And if those with Northern Rock mortgages get houses repossessed in a downturn, the chances are high that newspapers hostile to the ruling Labour government will use their headlines to attack Brown's policies.
So just as the Iraq war and a scandal over political party funding dogged former Prime Minister Tony Blair until he finally threw in the towel last year, so Northern Rock risks becoming a millstone for Brown.
"It was interesting that Brown was saying the test for the government is economic stability as there are no guarantees it would pass that test given the turmoil could still pass through to the economy," said Philip Shaw, chief economist at banking group Investec.
Qatar Buys Credit Suisse Shares, Prime Minister Says
(Bloomberg) -- Qatar is buying shares in Credit Suisse Group and plans to spend as much as $15 billion on European and U.S. bank stocks over the next year, the Gulf state's prime minister said in an interview.
``We have a relation with Credit Suisse and we bought some of the stock from the market, actually, but I cannot say what percentage because still we are in the process,'' Sheikh Hamad bin Jasim bin Jaber al-Thani, who is also chief executive officer of the Qatar Investment Authority, said in an interview late yesterday in Doha.
Persian Gulf sovereign wealth funds, whose coffers are swelling from near-record oil prices, and counterparts in Asia have been snapping up stakes in banks battered by U.S. subprime mortgage losses. Citigroup Inc. received $14.5 billion from investors including Singapore and Kuwait since mid-December.
``Subprime losses are clearly not confined to U.S. banks and European banks are seeking funding,'' Giyas Gokkent, head of research at National Bank of Abu Dhabi PJSC, said in a phone interview today. ``Gulf funds have surpluses to spend and are looking for long-term appreciation. If investments help develop their domestic financial markets too, so much the better.''
Bruno Daher, Credit Suisse's Dubai-based co-CEO for the Middle East, declined to comment when contacted on his mobile phone today, as did Zurich-based spokesman Marc Dosch. Credit Suisse jumped 1.60 Swiss francs, or 2.9 percent, to 56.60 francs ($51.33) at 1:13 p.m. in Swiss trading.
Buying Stakes
Credit Suisse said on Feb. 12 that fourth-quarter profit fell 72 percent after 1.3 billion francs of writedowns on debt and leveraged loans. The stock has fallen 31 percent since Oct. 10. Brady Dougan, CEO of Switzerland's second-biggest bank, scaled back risky investments before the debt-market slump that forced UBS AG, Switzerland's biggest bank, to report $14 billion in writedowns.
In the past six months, sovereign wealth funds made investments in Citigroup, Merrill Lynch & Co., Morgan Stanley and UBS, which is seeking shareholder approval to raise 13 billion Swiss francs from Singapore and an unidentified Middle Eastern investor through a sale of bonds convertible into shares.
Qatar's decision to buy Credit Suisse stock in the open market ``makes all the difference'' to investor confidence in the bank, according to Christof Reichmuth, CEO of Luzern-based Private Bank Reichmuth & Co.
`Sign of Strength'
``They are not selling equity or mandatory convertible bonds to boost their capital like UBS did,'' he said. ``Even though 2008 won't be a great year for Credit Suisse either, this should be read as a sign of strength rather than weakness.''
Wall Street banks have raised at least $59 billion, mostly from investors in the Middle East and Asia. Citigroup was propped up in November by a $7.5 billion investment from the Abu Dhabi Investment Authority, the world's richest sovereign fund, after losing almost half its market value.
State-managed funds in countries including Kuwait, Abu Dhabi and South Korea have ballooned to $3.2 trillion in assets. Fueled by record oil prices and rising currency reserves, sovereign fund assets may gain fourfold to $12 trillion by 2015, equal to the capitalization of the Standard & Poor's 500 Index, according to Morgan Stanley estimates.
First European Bank
Credit Suisse in March 2006 became the first European bank to get a license for the Qatar Financial Centre, a self-regulated business park designed to attract lenders to the Gulf state as part of a plan to diversify the economy away from oil and gas. The Swiss bank ``has had a long-standing relationship with Qatar,'' Joachim Straehle, head of private banking for Asia, the Middle East and Russia, said at the time.
When the Qatar Investment Authority sought to buy U.K. supermarket chain J Sainsbury Plc last year, Credit Suisse was among three European banks that agreed to underwrite $19 billion of loans to help pay for the buyout. Qatar in November abandoned the bid, citing ``deterioration'' in credit markets and demands by J Sainsbury's pension fund.
The Qatar Investment Authority is the largest shareholder in J Sainsbury, with a 25 percent stake, data compiled by Bloomberg show. The authority is the second-biggest investor in French publisher Lagardere SCA, and owns shares in Middle Eastern banks including Beirut-based BLC Bank SAL and Jordan's Housing Bank for Trade & Finance. It also bought a $205 million stake in Industrial & Commercial Bank of China Ltd. before the Beijing- based lender's 2006 initial share sale, according to a prospectus published at the time. The authority doesn't disclose holdings beyond regulatory requirements.
The Kuwait Investment Authority, which manages an estimated $250 billion for the Gulf state, is keen to buy into European financial companies ``if we are invited,'' Managing Director Bader al-Saad said last month.
Friday, February 15, 2008
U.S. January Import Prices Rise More Than Forecast
(Bloomberg) -- Prices of goods imported into the U.S. rose more than forecast in January, pushing the increase for the last 12 months to a record, led by rising costs for energy products and food.
The 1.7 percent increase in the import price index followed a revised 0.2 percent decrease the prior month, the Labor Department reported today in Washington. Prices excluding petroleum rose 0.6 percent.
Higher import costs, sustained over several months, may increase the chances U.S. companies will try to follow their foreign competitors in increasing prices. Still, Federal Reserve policy makers remain focused on risks to growth and are prepared to lower interest rates further, Chairman Ben S. Bernanke told U.S. lawmakers yesterday.
``Growth is still the biggest worry, but inflation concerns are alive,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``The Fed will be cutting interest rates.''
Import prices were forecast to rise 0.5 percent, according to the median estimate of 52 economists in a Bloomberg News survey, after being previously reported as unchanged in December. Forecasts ranged from a gain of 2 percent to a drop of 1 percent.
Treasury Yields
Treasury securities, which rose earlier today, stayed higher after the figures. Ten-year note yields were at 3.76 percent at 8:38 a.m. in New York, from 3.82 percent late yesterday.
Compared with a year earlier, prices of imported goods increased 13.7 percent, the biggest jump since record-keeping began in 1982. That followed a 10.4 percent year-over-year increase in the prior month. Excluding petroleum, prices rose 3.6 percent in the 12 months to January.
The import-price index is the first of three monthly price gauges from the Labor Department. The government is scheduled to release its measure of consumer prices on Feb. 20 and wholesale prices on Feb. 26. Both reports are forecast to show that excluding fuel costs, price pressures were contained.
Fed officials have trimmed forecasts for growth after the U.S. lost jobs in January and consumer spending slowed because of falling home and stock values and rising energy costs. The central bank will cut rates a further half-point by March 18 after 2.25 percentage points of reductions since September, futures trading shows.
Bernanke Message
``The outlook for the economy has worsened in recent months, and the downside risks to growth have increased,'' Bernanke told the Senate Banking Committee in Washington yesterday. ``To date, inflation expectations appear to have remained reasonably well anchored.''
The price of imported petroleum and petroleum products rose 5.5 percent after a decline of 1.9 percent the prior month. Prices were 67 percent higher than at the same time a year earlier.
Crude oil prices, which reached $100 a barrel on Jan. 2 on the New York Mercantile Exchange, the highest since trading began in 1983, have retreated in recent weeks.
Excluding all fuels, including natural gas, import prices rose 0.7 percent for the month and were up 3.3 percent for the 12-month period.
Food and beverage imports were 3.1 percent more expensive, the biggest gain since March 2005. Costs of imported industrial supplies rose 4 percent and were up 37 percent from a year earlier, the biggest year-over-year increase since March 2000.
Dollar Falls
The dollar, which weakened nearly 8 percent since the beginning of 2007 against a trade-weighted basket of currencies of major U.S. trading partners, also is making imports more expensive.
The cost of imported capital goods fell 0.2 percent, the first decrease in nine months, today's report showed. Prices of imported automobiles, parts and engines were unchanged and costs for imported consumer goods excluding autos rose 0.3 percent.
Some companies are getting hurt even after attempts to recover costs. Kraft Foods Inc., the world's second-largest foodmaker, last month said its fourth-quarter profit fell, in part because price increases on cheese didn't cover dairy expenses that surged 50 percent from the year-earlier quarter.
Others have gained some success. Tiremakers including Bridgestone Corp., the world's biggest, have boosted prices to counter higher costs of rubber and synthetic alternatives made from petroleum.
Thursday, February 14, 2008
Comcast, Pressured by Holders, Sets Buyback, Dividend
(Bloomberg) -- Comcast Corp., the cable-TV operator pressured to boost investor returns, said it will buy back $6.9 billion of its stock over two years and pay its first dividend in almost a decade, sending the shares up the most in five years.
Fourth-quarter net income rose 54 percent to $602 million, or 20 cents a share, from $390 million, or 13 cents, a year earlier, Philadelphia-based Comcast said today in a statement. Profit beat the 17-cent average of 17 analysts' estimates compiled by Bloomberg. Sales gained 14 percent to $8.01 billion.
The buyback and annual dividend of 25 cents followed criticism from investors including Chieftain Capital Management Inc., who said Comcast's acquisitions and capital spending were excessive. Last month, Chieftain called for Comcast to reward shareholders and oust Chief Executive Officer Brian Roberts.
``Investors had been looking for a return of cash,'' Sanford C. Bernstein & Co. analyst Craig Moffett said in an interview on Bloomberg Radio. ``That signals confidence from the management that they really do believe that capital intensity is going to fall. We got that this morning in a big share repurchase.''
Moffett, based in New York, rates the stock ``outperform.''
Comcast rose $1.26, or 7.1 percent, to $19.07 at 9:32 a.m. New York time in Nasdaq Stock Market trading, after gaining as much as 7.2 percent, its biggest rise since October 2002. The stock had declined 35 percent in the past year before today.
The company may increase its dividend ``over time,'' co- Chief Financial Officer Michael Angelakis said on a conference call.
Wednesday, February 13, 2008
Coca-Cola profit rises sharply
(Reuters) - Coca-Cola Co (KO.N: Quote, Profile, Research), the world's largest maker of soft drinks, reported higher-than-expected quarterly profit on Wednesday, helped by higher sales, acquisitions and foreign exchange rates.
Coca-Cola said fourth-quarter net income was $1.21 billion, or 52 cents per share, compared with $678 million, or 29 cents per share, a year ago.
Excluding charges, Coke earned 58 cents per share, topping analysts' average estimate of 55 cents, according to Reuters Estimates.
Net operating revenue rose to $7.33 billion from $5.93 billion a year ago, helped by a 6 percent increase in sales of drink concentrate, the company's main business.
Currency exchange rates boosted revenue 8 percentage points, since the weak dollar versus foreign currencies increases the value of international sales when they are converted to U.S. dollars for inclusion on the company's income statement.
Unit case volume rose 5 percent in the quarter, supported by acquisitions.
Coke, which owns about 35 percent of its bottler Coca-Cola Enterprises Inc (CCE.N: Quote, Profile, Research), saw its year-ago profit impacted by an asset write-down the bottler took related to its North American franchise license.
MGIC Loses $1.47 Billion in Quarter, Seeking Capital
(Bloomberg) -- MGIC Investment Corp., the largest U.S. mortgage insurer, fell the most in a month after posting a record quarterly loss of $1.47 billion and said it hired an adviser to raise capital.
MGIC's fourth-quarter net loss was $18.17 a share, compared with a profit of $122 million, or $1.47, a year earlier, the Milwaukee-based company said in a statement today. Excluding investment losses, the insurer lost $18.09 a share, worse than the $8.13 average loss estimate of seven analysts compiled by Bloomberg.
Claims costs, including additions to reserves, surged sevenfold to $1.35 billion, compared with a Jan. 22 company forecast of as much as $1.3 billion. MGIC set aside money for losses on loans that served as collateral for Wall Street securitizations, whose performance ``deteriorated materially.''
``Higher loss severities and higher delinquencies had a material impact,'' Curt Culver, MGIC's chief executive officer, said in the statement. While the company expects to remain unprofitable this year, Culver said MGIC has adequate capital to meet its claim obligations.
MGIC fell $2.03, or 14 percent, to $12.15 at 10:10 a.m. in New York Stock Exchange composite trading. Earlier in the session the company fell as much as 16 percent.
Foreclosure Rates
U.S. foreclosure rates have risen to their highest since at least World War II, and defaults on privately insured U.S. mortgages rose 37 percent in December from the same month a year earlier, according to the Mortgage Insurance Companies of America trade group. Foreclosure rates rose 75 percent in 2007, according to Irvine, California-based RealtyTrac Inc. Mortgage insurers reimburse lenders when borrowers don't repay their debts.
Borrowers who couldn't make higher monthly payments after introductory rates expired propelled a jump in third-quarter claims, leading MGIC and smaller rivals PMI Group Inc. and Radian Group Inc. to report their first money-losing quarters as publicly traded companies.
Payments on about $460 billion of adjustable-rate mortgages are scheduled to be repriced this year, with an additional $420 billion expected for 2011, according to New York-based analysts at Citigroup Inc.
U.S. Economy: January Retail Sales Unexpectedly Rise
(Bloomberg) -- Retail sales in the U.S. unexpectedly rose in January, easing concern that the world's largest economy has already slipped into a recession.
The 0.3 percent increase was led by spending on autos, clothes and gasoline, the Commerce Department said today in Washington. The figure followed a 0.4 percent decrease the previous month. Purchases excluding automobiles and gasoline were unchanged.
``Today's report will diminish recession anxieties, but it doesn't dispel them altogether,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland, who accurately forecast the sales gain. Federal Reserve Bank of St. Louis President William Poole said yesterday ``the best bet'' is the U.S. will avoid a recession.
Demand from consumers, whose spending accounts for about 70 percent of the economy, will probably wane in coming months, forcing the Fed to lower interest rates further, economists said. Macy's Inc., Target Corp. and Limited Brands Inc. said last week that sales at stores open more than a year declined in January. Macy's cut 2,300 jobs.
Treasury securities dropped after the report, with 10-year note yields rising to 3.70 percent at 10:22 a.m. in New York, from 3.66 percent late yesterday. The Standard & Poor's 500 Index added 0.6 percent to 1,356.24. At the same time, the S&P Retailing Index, which includes Home Depot Inc. and Best Buy Co., retreated 0.4 percent.
Inventories Increase
A separate report showed declining sales at U.S. businesses in December led to the biggest increase in inventories of unsold goods in a year and a half.
The 0.6 percent gain in inventories, the highest since July 2006, followed a 0.4 percent rise in November, the Commerce Department said today in Washington. Sales declined 0.5 percent, the steepest since January 2007, after a 1.4 percent gain the prior month.
Retail sales were projected to fall 0.3 percent after an originally reported 0.4 percent drop the prior month, according to the median estimate in a Bloomberg News survey of economists.
Threats to Spending
The worst housing slump in a quarter century and shrinking access to credit threatens to hurt spending this quarter. The economy lost 17,000 jobs in January, the first drop in more than four years. The Standard & Poor's 500 Index has fallen three consecutive months, the longest losing streak since 2003, eroding households' investment portfolios.
Consumers are increasingly limiting expenses to those they can't avoid. The amount Americans must spend each month on debt service, housing, medical costs, and food and energy bills rose to 66.9 percent of their total spending in December, the highest since records began in 1980, according to Bloomberg figures.
``Food prices have been rising and gasoline prices have been rising and so we got a little boost to overall sales there,'' said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who forecast retail sales would advance 0.2 percent. ``There's evidence here that the slump in the housing market is affecting spending.''
Excluding automobiles, purchases gained 0.3 percent after a 0.3 percent decline in December.
Car Dealers
Sales at automobile dealerships and parts stores rose 0.6 percent after a decline of 1.1 percent in December, the Commerce Department said.
That contrasts with industry figures that showed cars and light trucks sold last month at a 15.2 million annual pace, down 6.7 percent from December. Auto industry sales this year are forecast to drop to the lowest level since 1998.
``There is still a lot of concern about consumers,'' said David Wyss, chief economist at Standard & Poor's in New York, said in an interview with Bloomberg Radio. ``Car sales did really badly during the month. People are going to continue to worry about this and darn well ought to continue to worry.''
Filling station sales rose 2 percent in January after remaining unchanged the prior month, today's report showed. Regular gasoline reached as high as $3.11 a gallon in early January, about 11 cents more than the average for the prior month, according to AAA. Excluding gas, retail sales rose 0.1 percent.
Sales also rose at clothing retailers, which posted a 1.4 percent increase, and grocery and beverage stores, which gained 0.6 percent. Purchases at non-store retailers, which include online and catalog sales, rose 0.5 percent.
Tuesday, February 12, 2008
Adcock boss suspended
(Fin24) - Consumer goods giant Tiger Brands says it will be extending its independent investigation into collusion allegations in its healthcaredivision into all its businesses.
Van Vught said the company was "devastated" at the allegations.
"We will extend this investigation into every single business that we areinvolved in," Tiger Brands' non-executivechairperson Lex van Vught said ina statement.
"We are determined to find and root out any anti-competitive
or collusive practices," he said.
Also, the managing executive of Adcock Ingram Critical Care, Arthur Barnett,has been suspended by the board pending the conclusion of the independentinvestigation.
Van Vught said the company was "devastated" at the allegations.
AIG Credit-Default Swap Losses Won't Be `Material'
(Bloomberg) -- American International Group Inc., the world's largest insurer by assets, said ``over time'' it may recoup losses in assets that declined by $4.88 billion in value in October and November.
Any losses by the unit that issues so-called credit-default swaps won't be material to AIG, the firm said today in a statement. AIG rebounded in New York trading after falling the most in two decades yesterday on disclosure that writedowns from the contracts, sold to protect fixed-income investors, were four times bigger than a previous estimate.
Chief Executive Officer Martin Sullivan, who manages units that originate, insure and invest in subprime mortgages or securities, assured investors in December that writedowns tied to the U.S. housing market were ``manageable.'' The company, based in New York, has said it doesn't expect to sell mortgage- related investments at a loss when markets are weak.
While AIG ``may have illustrated questionable judgment'' in its accounting lapse, it ``does not necessarily increase the probability of real economic impairment'' on assets held to maturity, said Mark Lane, analyst at William Blair & Co. in Chicago, today in a research note. He rates the company ``outperform.''
AIG advanced $1.45, or 3.2 percent, to $46.19 at 12:48 p.m. in New York Stock Exchange composite trading. The company has lost about 33 percent in the past 12 months, trailing the 5.7 percent decline of the Standard & Poor's 500 Index.
`Solid Upside'
``For patient investors willing to ride out near-term volatility, we see solid upside in the stock,'' said Morgan Stanley analyst Nigel Dally in a note to investors today. He rates the company ``overweight.''
The insurer's financial products unit issues contracts that promise to reimburse investors for losses tied to $505.5 billion of securities as of Nov. 25, including corporate debt, European mortgages and collateralized debt obligations, which bundle together loans.
AIG's independent auditor PricewaterhouseCoopers LLP found a ``material weakness'' in the company's accounting for the contracts, AIG said yesterday, and the insurer didn't know what they were worth at the end of 2007.
U.S. Stocks Rise After Buffett Offers to Help Bond Insurers
(Bloomberg) -- U.S. stocks rose for a second day, led by financial shares, on expectations Warren Buffett, the world's No. 1 investor, will help calm credit markets by offering to shore up bond insurers' finances.
Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, climbed after Buffett said he's willing to take on $800 billion in municipal bond obligations in an interview with CNBC. Monsanto Co., the world's biggest seed producer, advanced for a third day on an increased profit forecast.
The Standard & Poor's 500 Index added 13.99 points, or 1 percent, to 1,353.12 at 12:29 p.m. in New York. The Dow Jones Industrial Average advanced 162.99, or 1.3 percent, to 12,403. The Nasdaq Composite Index climbed 15.24, or 0.7 percent, to 2,335.3. More than three stocks rose for every one that fell on the New York Stock Exchange. Shares in Europe and Asia also gained.
``It's another potential solution to some of the credit problems,'' Mark Bronzo, who helps manage $11 billion at Security Global Investors in Irvington, New York, said of Buffett's offer. ``That's why the markets are responding well.''
Concern that bond insurers don't have enough money to pay claims on the $2.4 trillion in assets they guarantee has contributed to a 7.4 percent drop in S&P 500 financial shares in 2008. MBIA Inc., the largest bond insurer, lost 80 percent of its value in the last year before today, and smaller rival Ambac Financial Group Inc. slumped 88 percent, on concern that the companies will lose their AAA credit ratings.
Buffett's Offer
Citigroup added 73 cents to $26.54. Bank of America rallied 66 cents to $42.80. JPMorgan climbed 46 cents to $43.81. Bear Stearns Cos., the fifth-biggest U.S. securities firm, increased 49 cents to $80.25.
Buffett said he offered to take on the municipal-bond liabilities of MBIA, Ambac Financial and FGIC Corp. Buffett's Berkshire Hathaway Inc. would provide so-called reinsurance for the debt, he said in an interview with CNBC television.
One company turned down the offer and the two others haven't responded, Buffett, chairman of Berkshire Hathaway Inc., told CNBC.
MBIA slipped 79 cents to $12.79. Ambac lost 29 cents to $10.19. Buffett's offer doesn't include the insurers' subprime- related obligations.
'Project Lifeline'
Financial shares also climbed on plans to help delinquent homeowners avoid foreclosure. Bank of America, Citigroup and four other U.S. lenders announced a plan to offer a 30-day freeze on home foreclosures while loan modifications are considered. Treasury Secretary Henry Paulson and U.S. Housing and Urban Development Secretary Alphonso Jackson said today at a news conference in Washington that ``Project Lifeline'' would help stabilize communities disrupted by mortgage defaults.
Monsanto rallied $3.27, or 2.9 percent, to $117.30 after raising its 2008 profit forecast on higher demand for weed killer and genetically modified corn and soybeans. Profit in the year ending Aug. 31 will increase to $2.70 to $2.80 a share, 20 cents above the range of a Jan. 3 forecast.
Schlumberger Ltd. advanced $2.57 to $83.06 after Bear Stearns raised its recommendation on the world's largest oilfield-services provider to ``outperform'' from ``peer perform,'' saying the company's offshore drilling and exploration make it ``well positioned for the next phase of the oilfield service business cycle.''
Schering-Plough
Schering-Plough Corp. gained $1.16 to $21.78. The maker of Vytorin and Zetia cholesterol pills reported fourth-quarter profit, excluding some items, of 52 cents a share, beating the 27-cent average estimate of 17 analysts surveyed by Bloomberg.
General Motors Corp., the world's largest automaker, gained after reporting an adjusted fourth-quarter profit, not counting costs and gains the company considers one-time items, of 8 cents a share. On that basis, analysts estimated a loss of 64 cents. GM's net loss in the quarter was $722 million.
The Russell 2000 Index, a benchmark for companies with a median market value of $589 million, gained 9.80, or 1.4 percent, to 709.55, led by GMH Communities Trust. The provider of housing to students and the military surged the most since its initial public offering in 2004 after agreeing to be bought in two transactions for a total of $787 million. GMH added $3.13, or 56 percent, to $8.72.
NxStage Medical Inc. fell the most since its 2005 initial public offering, dropping $3.30, or 26 percent, to $9.45. The maker of portable dialysis systems said it expects a loss of as much as $1.52 a share in 2008, wider than the $1.06 loss estimated by analysts in a Bloomberg survey.
World Wrestling Entertainment
World Wrestling Entertainment Inc. climbed $1.16, or 7.6 percent, to $16.47. The producer of television's ``WWE Friday Night SmackDown'' reported fourth-quarter revenue and profit that was higher than the average analyst estimate as video sales and ticket prices increased.
Subscribe to:
Comments (Atom)
