... European exporters and weakness in the European equities markets. In his testimony before the European Parliament, ... secondary effects of wage increases, particularly in Germany. He warned of downside risks but said ...
Thursday, 27 March 2008
Durable Goods Orders Fell 1.7% In February
TransGlobe Energy Corporation Announces Filing of 2007 Year-End Disclosure Documents
... production operations in the Arab Republic of Egypt, the Republic of Yemen and in Alberta, ... TransGlobes common shares trade on the Toronto Stock Exchange under the symbol TGL and on the ...
Egypts Helwan Cement 2007 net rises 23 percent
... 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 ...
Wednesday, 26 March 2008
Iraq forces and militants clash in oil city
... 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 ...
Iraq, Five Years In
... the fifth anniversary of the invasion of Iraq, and some sort of assessment seems almost ... Their banks are doing brisk business, their stock market is active and investment in business is ...
Too much for two pillars to bear
... just one big commercial bank - The Australian National Commonwealth Bank of the West Pacific. ... was wildly exaggerated at the time, NABs forex mini-disaster is the answer. Its just too ...
Depa to list on Dubai International Financial Exchange and London Stock Exchange
... in Qatar, the Four Seasons Hotel in Egypt, the Four Seasons Hotel in Mumbai, India ... global depositary receipts (GDRs) on the London Stock Exchange plc (the Prospectus). Copies of the Prospectus ...
Clinical contract news in brief
... and it also snapped up D-Target, a Swiss CRO that specialises in clinical research and ... chairman Peter Fellner. "However the recent difficult stock market conditions and the reduced availability of debt ...
Its a long road to recovery: experts
... may be in another lost decade. The stock market is trading right where it was nine ... or stocks in Brazil, Russia, India and China. Baby boomers concerned about retirement income could ... slump after bubbles in its housing and stock markets. For one thing, although inflation has been ...
Hoarding by banks stokes fears on credit crisis
... stoking fears that the recent respite in equity markets may not signal the end of the ... cent to close at 1,266. In Asia, Japans Nikkei 225 closed up 2.1 per cent ...
Emerging Markets Report: Pakistans political stability critical for the local market
... 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 ...
Iraq, Five Years In
... Their banks are doing brisk business, their stock market is active and investment in business is ... of functional in the same way that Pakistan and Nigeria and other violent but viable ...
Tuesday, 25 March 2008
Finance: a profile of young star Nikhil Kaushik
... 28, works for BTS Investment Advisors, a Swiss private equity firm. Unlike small shareholders, these ... that is not traded on a public stock exchange. Conversely, many companies and individual entrepreneurs in ...
Roller Drive provides energy efficient conveying.
... Established in 1959 and listed on the Swiss Stock Exchange SWX, the Interroll Group currently employs 1100 ... a strategic holding company located in SantAntonino, Switzerland, the Group operates with three global business ...
The Isms That Bedevil Bush
... is to remain always a child." With Iraq entering its sixth year, the dollar sinking ... a Nobel Prize for proving, when the stock market bubble, caused by the Feds easy money ...
Conspiracy behind BP raids?
... offices of British oil giant BP in Moscow on Wednesday were conducted by secret service ... a looming "redistribution" of oil assets in Russia, newspapers said on Thursday. "Market sources do ... fell nearly 10 percent on the Russian stock exchange after news of the raids on Wednesday. ...
Shatt al-Arab water surplus in return for writing off the debt
... 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 ...
Capital Markets Up-Date
... Proposed Changes To The ASX Listing Rules The Australian Stock Exchange (ASX) has been reviewing its Listing Rules (LR) and has released three consultation papers ...
Super financial regulator should be a top priority
... year for one regulator to replace the Australian Prudential Regulatory Authority and Australian Securities and ... of interest. The recent troubles in the equities market, coupled with rumour-mongering and short-selling by hedge ...
Monday, 24 March 2008
Company Upgrade: Introduces NACEL Energy to our Small Cap Radar
... world renowned independent research firm, based in Johannesburg, South Africa. Along with walking investors through ... of 1933 and Sections 21E of the Securities Exchange Act of 1934, and are subject to ...
Company Upgrade: Introduces Victory Energy to our Small Cap Portfolio
... world renowned independent research firm, based in Johannesburg, South Africa. Along with walking investors through ... of 1933 and Sections 21E of the Securities Exchange Act of 1934, and are subject to ...
Govt committed to develop nuke energy: PM
Commodity Online NEW DELHI: Prime Minister Manmohan Singh on Monday said his government is committed to develop nuclear energy as a clean source of electricity.
Stocks Gain As JPMorgan Ups Bear Bid
Wall Street extended its big advance Monday as investors grew upbeat over a revised agreement that will give Bear Stearns Cos. shareholders five times the payout than was outlined in a deal a week ago. Investors were also pleased by a stronger-than-expected housing report.
Stocks Cap Volatile Week With Big Gains
Wall Street capped a volatile week with a big advance Thursday, rebounding from a steep sell-off as investors sought bargains and cheered a milder-than-expected drop in a regional manufacturing report.
PM to lay foundation stone for 1500 MW project
Commodity Online NEW DELHI: Prime Minister Manmohan Singh will lay the foundation stone for the 1500 mw Pragati Phase III gas based power plant ,to come up at an estimated cost of Rs 4,500 crore in West Delhi.
16 funds that star in bear markets
These stock funds weathered the 2000-02 downturn, and their resilience is shining through again. A screen helped find winning funds with bear-tested managers.
Saturday, 22 March 2008
US Treasury says Feds Bear actions help all investors
WASHINGTON (Reuters) - The Federal Reserves actions to lend billions of dollars to prop up and sell off ailing brokerage Bear Stearns will help all Americans by stabilizing capital markets, a senior U.S. Treasury official said.
An elite investment that cuts taxes
Exchange-traded notes look like mutual funds and ETFs, but theyre a form of the derivatives that big-money investors use for things like sheltering income. That advantage makes them worth a look.
Catering to the bailout nation
Heres where building bubbles on top of bubbles has brought us. Instead of letting the market work and creative destruction run its course, too many people want a handout.
Wednesday, 12 March 2008
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, 10 March 2008
Blackstone says tough conditions hit results
(Reuters) - Private equity and real estate company Blackstone Group LP (BX.N: Quote, Profile, Research) posted lower-than-expected quarterly results on Monday, citing tough market conditions and a write-down of bond insurer FGIC, and said it did not know when business would improve.
Under a measure known as economic net income (ENI), Blackstone earned a fourth-quarter profit of $128.2 million, or 8 cents a share, compared with a pro forma adjusted figure of $894.9 million, or 72 cents, a year ago.
Analysts polled by Reuters had expected it to report 16 cents a share.
"Lack of available financing in the U.S. and Europe for large leveraged transactions limited our transaction fees," Blackstone's Chairman and Chief Executive Stephen Schwarzman said in a statement. "Difficult market conditions in the U.S. and Europe continue in 2008 and there is little visibility on when these conditions might improve."
The company cited decreases in the value of Blackstone's portfolio investment in Financial Guaranty Insurance Company, which was hit by turmoil in the credit markets, and lower net appreciation of portfolio investments in other sectors as compared with the prior year.
ENI is net income excluding income taxes, noncash charges related to vesting of equity-based compensation and amortization of intangible assets. Blackstone prefers to focus on ENI because of the huge payouts associated with its more than $4 billion initial public offering in June.
On a generally accepted accounting principles basis, Blackstone posted a net loss of $170 million. That compares with net income of $1.18 billion a year earlier.
Carlyle Capital Says Lenders May Force Further Sales
(Bloomberg) -- Carlyle Group's mortgage-bond fund said creditors may liquidate as much as $16 billion of securities unless the two sides reach agreement on debt repayments.
The fund has asked lenders to refrain from further sales after they liquidated collateral securing $5 billion of debt, Carlyle Capital Corp. said in a statement today. It is meeting lenders to discuss more than $400 million of margin calls and is ``evaluating all options,'' the Guernsey, Channel Islands-based fund said.
Carlyle Capital used loans to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, which the firm says have an ``implied guarantee'' from the U.S. government. Even the safest mortgage bonds have slumped following the collapse of the subprime-mortgage market, leading to the failure of hedge funds led by Peloton Partners LLP.
``This particular Carlyle entity wasn't prepared,'' said Philip Keevil, a senior partner in London at Compass Advisers LLP and former head of European mergers at Salomon Smith Barney Inc. ``They hadn't started selling ahead of time and now they're having trouble liquidating their positions.''
Started by David Rubenstein 21 years ago, Carlyle expanded its mortgage investments last year, selling $300 million of shares in Carlyle Capital.
``Due to recent turmoil in the market for mortgage-backed securities, the company's lenders have significantly reduced the amount they are willing to lend against the company's portfolio of U.S. government agency AAA-rated residential mortgage-backed securities,'' Carlyle Capital said today.
Hedge Funds Reel From Margin Calls Even on Treasuries
(Bloomberg) -- The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.
Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate or sell holdings because their lenders -- staggered by almost $190 billion of asset writedowns and credit losses caused by the collapse of the subprime-mortgage market -- raised borrowing rates by as much as 10-fold with new claims for extra collateral.
While lenders are most unsettled by credit consisting of real estate and consumer debt, bankers are now attempting to raise the rates they charge on Treasuries, considered the world's safest securities, because of the price fluctuations in the bond market.
``If you have leverage, you're stuffed,'' said Alex Allen, chief investment officer of London-based Eddington Capital Management Ltd., which has $195 million invested in hedge funds for clients. He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won't get their money back.
The lending crackdown is the worst to hit the $1.9 trillion hedge-fund industry since Russia's debt default in 1998 roiled global credit markets and required the U.S. Federal Reserve to pressure the securities industry to arrange a $3.6 billion bailout of Greenwich, Connecticut-based Long-Term Capital Management LP. Today, hedge funds are being forced to sell assets to meet banks' margin calls, resulting in the dissolution of the funds.
``There has to be more in the next weeks,'' Allen said. ``There are people who have been hanging on by their fingernails who can't hold on much, much longer.''
`Mercy of Counterparties'
Ivan Ross, founder of Westport, Connecticut-based hedge fund Tequesta Capital Advisors, received a call from his bankers on Feb. 22 demanding he put up more money or risk losing his loans. Ross was unable to meet the margin call as the market for mortgage- backed debt seized up, preventing him from selling securities to raise the cash. Four days later, lenders liquidated his $150 million fund.
``Because it's impossible in this environment to move among dealers, you're at the mercy of counterparties,'' said the 45-year- old Ross, who has managed hedge funds for 13 years, including a stint handling mortgage-backed debt for billionaire George Soros. ``To the extent they want to shut you down, they can.''
The demise of Tequesta revealed the deathtrap for hedge funds caught in the credit maelstrom of banks selling mortgage-backed bonds as fast as they can while demanding more collateral from clients who use the securities to back loans.
Carlyle Fund
On Feb. 24, London-based Peloton Partners LLP gave up a ``night and day'' effort to stave off demands from banks, including Goldman Sachs Group Inc. and UBS AG, for as much as 25 percent collateral for securities that once required 10 percent, according to investors in the fund. Peloton, run by former Goldman partners Ron Beller and Geoff Grant, liquidated the $1.8 billion ABS Fund, its largest.
The same day, about 5,000 miles (7,770 kilometers) away in Santa Fe, New Mexico, JPMorgan Chase & Co. told Thornburg Mortgage Inc. that it had defaulted on a $320 million loan because it couldn't meet a $28 million margin call, according to U.S. regulatory filings.
Thornburg, the home lender that lost 93 percent of its market value in the past year, was near collapse March 7 after it failed to meet $610 million of margin calls. Chief Executive Officer Larry Goldstone said in a statement the company fell victim to a ``panic that has gripped the mortgage financing industry.''
Repo Agreements
Carlyle Capital Corp., the debt-investment fund started by private-equity firm Carlyle Group of Washington, was suspended from trading in Amsterdam on March 7 after it couldn't meet margin calls, and its banks seized and sold assets.
``Banks are reducing exposure anywhere they can and the shortest way to do that is to cut leverage,'' said John Godden, chief executive officer of London-based hedge-fund consultant IGS AIS LLP.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
The managers that trade fixed-income securities generally borrow money through repurchase agreements, or repos. In a repo, the security itself is used as collateral, just as a homeowner puts up the house as collateral for a mortgage.
Thursday, 06 March 2008
ECB holds rates, seen forecasting lower growth
(Reuters) - The European Central Bank kept euro zone interest rates unchanged at 4.0 percent on Thursday, and will publish updated economic forecasts which analysts will scrutinize for guidance on future monetary policy.
ECB President Jean-Claude Trichet is due to comment on the competing threats of high euro zone inflation and slower growth at 1330 GMT when he holds his monthly news conference and delivers a quarterly update to the bank's economic projections.
All 72 economists polled by Reuters last week expected the ECB to keep rates on hold this month for a ninth month in a row <ECB/INT>, and the euro was little moved versus the dollar <EUR=>, despite hitting a record high of $1.5349 earlier in the day.
Economists expect ECB staff to forecast lower growth but higher inflation for this year and possibly for 2009, highlighting the Governing Council's dilemma as food and energy prices climb. It is not helped by the strong euro, which holds back inflation but also hampers growth.
Annual inflation in the 15-nation region hit a record high of 3.2 percent in January and February, dampening expectations that the ECB would soon follow other major central banks and loosen monetary policy.
Many economists believe the inflation projections will be revised up. BNP Paribas economist Ken Wattret said he expected the 2009 forecast to be raised to 1.9 or 2.0 percent from the current midpoint forecast of 1.8 percent.
A worsening inflation outlook would make it difficult for the ECB to justify lower interest rates, and mixed economic data and high uncertainty will color the discussion.
Wal-Mart's February Sales Rise; Gap, AnnTaylor Fall
(Bloomberg) -- Wal-Mart Stores Inc.'s February sales gained more than it expected as cash-strapped consumers seeking food and basic clothing cut spending at Limited Brands Inc., AnnTaylor Stores Corp. and Gap Inc.
Wal-Mart, the world's largest retailer, said today in a statement that sales at stores open at least a year rose 2.6 percent last month, beating its estimate for a gain of 2 percent or less.
Shoppers headed to discounters and warehouse clubs to stock up on food and necessities, shunning lightweight jackets and sweaters at department stores and mall-based retailers. A decline in jobs, gasoline costing more than $3 a gallon and the continued erosion of the housing market have caused consumers to limit spending.
``We are seeing the consumer trading down,'' Fred Crawford, managing director at AlixPartners LLP, a Southfield, Michigan-based consulting firm, said in a Bloomberg Radio interview. ``You've got a large swing set in Middle America. In good times, they buy up into department store categories, and in tougher times, they buy down into mass categories.''
U.S. retailers' same-store sales may have risen 0.5 percent to 1 percent last month, according to the International Council of Shopping Centers. The New York-based trade organization reports monthly results later today.
Companies in the U.S. unexpectedly lost 23,000 jobs in February, the first decline in almost five years, according to a private report based on payroll data from ADP Employer Services released yesterday. The University of Michigan/Reuters index of consumer confidence fell last month to its lowest level since 1992.
Retail Shares
Wal-Mart climbed 55 cents, or 1.1 percent, to $50.10 at 8:19 a.m. in trading before the New York Stock Exchange opened. Gap fell 4.7 percent.
The 31-member Standard & Poor's 500 Retailing Index has dropped 5.2 percent this year before today, compared with a 9.2 percent decline for the S&P 500 Index.
Limited Brands, the owner of the Victoria's Secret lingerie chain, said February same-store sales dropped 9 percent, better than analyst estimates for a 10.9 percent drop.
Staples Inc., the world's largest office-supplies retailer, reduced its full-year profit and sales forecast March 4 as customers at its North American retail stores reduced purchases of copiers and desks.
``The core economy, the part that's really relevant to Staples and Staples' customers, is declining,'' Staples Chief Financial Officer John Mahoney said in a telephone interview. ``From the perspective of our customers and our business, this is a recession now.''
February Sales
February tends to be the least important sales month in the first quarter for many retailers, comprising about 30 percent of discounters' quarterly revenue, according to Christine Augustine, a retail analyst at Bear Stearns Cos.
With ``sluggish'' traffic, most retailers may be ``playing defense'' by managing inventory and cutting costs, she wrote in a Feb. 29 research note.
``Aside from Valentine's Day and President's Day, and the demand for consumables and other necessities, we think consumers had few reasons to shop in February, particularly given the tough economic backdrop,'' Augustine wrote.
AnnTaylor, the clothing retailer that caters to women ages 25 to 55, said February same-store sales dropped 1.7 percent, less than the average analyst forecast for a 3.1 percent decrease. Gap, the largest U.S. clothing retailer, said sales fell 6 percent, almost twice the 3.1 percent decline estimated by analysts.
Ambac to Sell Half the Company, Bet May Not Pay Off
(Bloomberg) -- Ambac Financial Group Inc., the bond insurer seeking capital to salvage its AAA credit rating, will sell half the company in a bet some investors say won't pay off.
Ambac said yesterday it plans to issue $1 billion of common stock, more than doubling the number of shares outstanding. The New York-based company will also offer $500 million of units that convert to shares in 2011.
Investors had anticipated Ambac would be bailed out by banks, which would backstop a capital raising of as much as $3 billion, enough to overcome record losses on subprime-mortgage debt. Instead, the company announced it would raise half that amount in a transaction that would dilute existing shareholders, sending Ambac down 19 percent in New York Stock Exchange trading.
``The new offering is highly diluting to existing shareholders,'' Jim Ryan, an insurance analyst at Morningstar Inc. said in an interview with Bloomberg Television. ``The market was looking for a backstop, to say the least.''
The sale of common stock, managed by Credit Suisse Group, Citigroup Inc., Bank of America Corp. and UBS AG, is scheduled for tonight, according to data compiled by Bloomberg.
Ambac fell 26 cents to $8.44 in early New York Stock Exchange composite trading. The shares have tumbled 90 percent in the past year, reducing the company's market value to $884 million.
Abandoned Plan
By proposing a sale of common shares, Ambac is reverting to a plan it abandoned in mid-January. The company announced a $1 billion sale Jan. 16, sparking a 70 percent plunge in its stock, and canceled the offering Jan. 18.
Ambac cut its dividend to 1 cent from 21 cents a share and said it will suspend writing guarantees on debt, including mortgage-backed bonds. The combined plans will probably bolster capital enough for an AAA rating, Moody's and S&P said yesterday.
Stock investors were ``expecting something different in terms of some type of a more orchestrated event that looked less like a conventional offering of common stock and more like a carefully crafted infusion from business partners,'' said Colin Glinsman, who oversees about $25 billion as chief investment officer at Oppenheimer Capital in New York.
Credit-default swaps tied to Ambac's AAA rated insurance unit rose 38 basis points to 513 basis points from 475 basis points before the announcement, according to CMA Datavision in London. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
CDO Losses
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
Ambac, its larger competitor MBIA Inc., and the rest of the industry stumbled after expanding beyond municipal insurance to guarantees on collateralized debt obligations that have since tumbled in value. Bond insurers with AAA ratings have guaranteed $2.4 trillion of debt.
The loss of Ambac's top rating would cast doubt on $556 billion of municipal and asset-backed securities insured by the company, forcing some investors to sell the debt and others to reduce their holdings.
Ambac, which pioneered municipal bond insurance in 1971, and the rest of the industry are reeling from their expansion into CDOs, which package pools of securities then split them into pieces with different ratings.
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, 04 March 2008
Copper May Rise on Dollar Slide; Lead Gains to Four-Month High
(Bloomberg) -- Copper may advance in London on speculation declines in the dollar will accelerate investor demand for the metal used in plumbing and power plants.
The U.S. currency reversed gains and fell against the euro and declined for a sixth day against the yen. Copper has climbed 29 percent this year as an index of the dollar against six currencies including the euro and the pound has dropped 4.1 percent.
``The dollar is helping to support commodity prices,'' said Leon Westgate, a metals analyst at Standard Bank Ltd. in London. ``The main driver is money flow.''
Copper for delivery in three months gained $10 to $8,585 a metric ton as of 12:48 p.m. on the London Metal Exchange. Prices yesterday rose to $8,661, the highest since May 2006 when copper gained to a record $8,880 a ton.
The higher prices have curbed demand in China, the world's biggest user, said Eric Yan, head of China trade at Triland Metals Ltd. in London.
``If copper goes up to $10,000, Chinese demand will be dramatically reduced,'' he said. ``Chinese demand is quite weak and I don't think it will recover very soon.''
Nickel rose $400 to $33,600 a ton. Prices have climbed 15 percent since a strike began Feb. 28 at a Colombian mine owned by BHP Billiton Ltd. The workers are still on strike, Illtud Harri, a spokesman for BHP in London, said in an e-mail today.
Global nickel inventories in warehouses monitored by the London Metal Exchange dropped 120 tons to 47,592 tons, the exchange said today in its daily warehouse report. Supplies are little changed this year.
Read more at Bloomberg
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.
Monday, 25 February 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.
Citigroup May Post First-Quarter Loss, Whitney Says
(Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, may post its second-straight quarterly loss because of writedowns on home-equity loans and junk-grade corporate loans, Oppenheimer & Co.'s Meredith Whitney said.
The bank may post a loss of $1.6 billion, or 28 cents a share, for the first quarter, compared with a profit of about $5 billion, or $1.01, a year earlier, Whitney wrote today in a note to clients. The prediction compares with the 63-cents per share average of 12 analyst estimates surveyed by Bloomberg.
The rate of loan losses is ``grossly underestimated by consensus estimates'' at Citigroup and other U.S. banks, Whitney wrote. ``Core fundamentals are rapidly deteriorating.'' She cut her per-share estimate for 2008 earnings by more than 70 percent to 75 cents. The New York-based company's shares could fall more than 36 percent to less than $16, she wrote. They've declined about 15 percent this year.
Citigroup posted a $9.8 billion loss for the fourth quarter, the widest in its 196-year history, after writing down subprime mortgage-linked collateralized debt obligations whose value plummeted last year as investors shunned securities linked to the least creditworthy borrowers. Vikram Pandit stepped in as chief executive officer in December, after Charles O. ``Chuck'' Prince was forced to resign.
Whitney was among the first analysts to gauge the depth of Citigroup's losses, writing in a note last October that the bank may have to cut dividend payments to shareholders for the first time since the 1990s. In January, the bank slashed its dividend by 41 percent, reversing a pledge made by its executive- committee chairman, former U.S. Treasury Secretary Robert Rubin, to preserve the shareholder payout.
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, 21 February 2008
Allianz cuts jobs, structured finance at Dresdner
(Reuters) - Europe's biggest insurer, Allianz , is axing hundreds of jobs at its Dresdner Kleinwort investment bank and slashing its complex structured finance business, after suffering big fourth-quarter writedowns.
Allianz confirmed on Thursday it made a record net profit of nearly 8 billion euros ($11.79 billion) in 2007, despite the writedowns that pushed Dresdner into the red and halved the insurer's profit in the final three months of the year.
Allianz finance head Helmut Perlet said the market situation at the end of last month pointed to possible further writedowns of 300-400 million euros at Dresdner for the first quarter after about 1.5 billion euros of subprime writedowns in 2007.
Allianz unit Dresdner Bank, which in turn owns Dresdner Kleinwort, said it was shedding 450 jobs, most already axed, and cutting back on activity in structured investment vehicles (SIV) and other structured debt products, which spread the U.S. subprime loans crisis across the global banking system.
"Dresdner Bank will reduce its engagement in the SIV business, as the model of interest arbitrage faces a tough future," Allianz Chief Executive Michael Diekmann said.
Dresdner Bank said it would support its SIV, called K2, to ensure repayment of its senior debt, and had cut its size to $18.8 billion now from $31.2 billion in July.
Allianz said it was not clear whether, or to what extent, it might have to take K2 onto Dresdner's books, but it did not believe that supporting K2 would have a big impact on the group.
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.
Microsoft to Change Technology Practices in Bid to Appease EU
(Bloomberg) -- Microsoft Corp., the world's biggest software maker, announced a series of changes in its technology and in how much information it gives developers about its products, in a bid to satisfy European regulators.
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, 20 February 2008
Ackman Proposes Bond Insurer Split, Policyholder Veto
(Bloomberg) -- Hedge fund manager William 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.
Ackman, the managing partner of Pershing Square Capital Management LP in New York, calls for a corporate structure in which dividends would flow to the so-called structured finance unit from the municipal insurer, according to his proposal, sent yesterday to regulators, lawmakers and banks.
Ackman, who is betting against MBIA Inc. and Ambac Financial Group Inc., the two largest bond insurers, stands to benefit from his plan. He has short positions that would gain in value if the holding companies were to default on their debts.
The proposal ``offers the best prospect for protecting the most policyholders and ensuring a viable ongoing municipal bond insurance market,'' New York law firm Edwards Angell Palmer & Dodge LLP, which performed an analysis for Pershing, said in a memo included with the presentation. Copies were obtained by Bloomberg News and confirmed by Ackman.
Ackman's plan has two separate boards of directors, one for the municipal insurer and the other for the structured finance unit. Each board would include policyholders. The municipal insurer would pay dividends to its structured-finance parent only when the board was satisfied the unit could remain AAA rated. The structured finance insurer would send dividends to the holding company only after its board determined the money wasn't needed to cover claims.
Tuesday, 19 February 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.
Medtronic quarterly net falls
(Reuters) - Medical device maker Medtronic Inc (MDT.N: Quote, Profile, Research) on Tuesday said quarterly earnings fell on charges related to the acquisition of Kyphon.
Fiscal third-quarter net earnings were $77 million, or 7 cents a share, compared with $710 million, or 61 cents a share, a year earlier.
Monday, 18 February 2008
Home movie DVD battle won, hard sell begins
(Reuters) - Consumers will be the winners, through better quality home movies and lower prices, when Toshiba Corp finally calls time on its DVD technology, ending a long-running battle to set the format for next-generation discs.
Viewers seeking sharper movies on high-definition DVDs will no longer have to choose between rival incompatible formats. A single format should help accelerate the shift to the new technology in the $24 billion home DVD market.
But, while they will get better audio quality and higher resolution pictures -- and they will likely wait for DVD player prices to halve -- consumers will probably have to upgrade their television sets to make the most of them.
Sony Corp's Blu-ray technology is close to winning the format war for home movie DVDs after a source at Toshiba said it was planning to exit its HD DVD business after Hollywood studios and big retailers such as Wal-Mart Stores Inc backed Blu-ray.
"This has been a long overdue end to the format war that has frustrated and confused consumers, and will allow vendors to focus resources on the Blu-ray technology," said Claudio Checchia, an analyst with research firm IDC.
"I would expect a more aggressive push towards Blu-ray in the second half, resulting in more movie content, more stand-alone DVD players, and prices for these players falling to attractive levels by Christmas."
Checchia said the cheapest Blu-ray player on the market was Sony's PlayStation 3 video game console, costing about $400.
Euro zone growth may be weaker than hoped: Noyer
(Reuters) - European Central Bank (ECB) Governing Council member Christian Noyer said in an interview released on Sunday euro zone growth might be weaker than hoped as a result of market turmoil but he saw no "big setback."
In an interview with the Financial Times newspaper, Noyer said French banks' exposure to the U.S. subprime market was lower than others' and the European Union economy should resist financial turmoil better than that of the United States.
"Growth may be weaker than we hoped but I don't see a big setback," Noyer said when asked about the impact of the subprime crisis on the European economy.
ECB President Jean-Claude Trichet warned after the last rate meeting on February 7 that the euro zone economy might grow slower than potential in 2008.
In December ECB economists forecast 2008 growth of around 2 percent, but a number of ECB policymakers have suggested this might need to be revised down when fresh projections are published in March.
"If we are a little bit below potential, but still close to the average we've had for a number of years... I don't think that makes (structural) reforms impossible," Noyer said in a transcript of the interview released ahead of publication in Monday's edition.
Bond Insurer Split May Trigger Lawsuits, Analysts Say
(Bloomberg) -- Regulators' plans to break up bond insurers into ``good'' businesses covering municipal debt and ``bad'' businesses liable to subprime-related losses may trigger ``years of litigation,'' Bank of America Corp. analysts said.
New York Insurance Department Superintendent Eric Dinallo and New York Governor Eliot Spitzer said last week that insurers may need to be divided if they can't raise enough capital to compensate for losses on subprime-mortgage guarantees. FGIC Corp., the fourth-largest of the so-called monoline insurers, asked to be split on Feb. 15 after Moody's Investors Service cut the Stamford, Connecticut-based company's top Aaa ranking.
``Despite the regulatory interest in separating the exposures, the essential fact remains that all policy holders, whether municipal or structured finance, entered into contracts backed by the entire entity,'' analysts led by Jeffrey Rosenberg in New York wrote in a note to investors dated Feb. 15. A breakup is ``likely to lead to significant legal challenges holding up the resolution of the monoline issues for years.''
FGIC, owned by Blackstone Group LP and PMI Group Inc., insures about $314 billion of debt, including $220 billion in municipal bonds. The company said last week it applied for a license from New York state insurance regulators to create a standalone municipal company and separate the unit that guarantees subprime-mortgage bonds and related securities that led to rating downgrades.
New York-based Ambac Financial Group Inc., the second- largest bond insurer, may also seek a split, the Wall Street Journal reported today, citing a person familiar with the situation.
Friday, 15 February 2008
New York Fed Manufacturing Index Dropped to -11.7 in February
(Bloomberg) -- Manufacturing in New York unexpectedly contracted this month for the first time in almost three years as new orders and shipments declined.
The Federal Reserve Bank of New York's general economic index fell to minus 11.7, the first negative reading since May 2005, from 9.0 in January, the bank said today. Readings below zero signal contraction. The New York Fed's index averaged 17.2 in 2007.
The worst housing slump in a quarter century and cutbacks at U.S. automakers are weakening manufacturing and helping to push the broader economy toward a recession. Fed Chairman Ben S. Bernanke yesterday told lawmakers that the central bank will act in a ``timely'' manner to help growth, after already cutting the benchmark interest rate 2.25 percentage points since September.
``Prospects for manufacturing are shaky,'' Robert Dye, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, Pennsylvania, said before the report.``We are relying on strong exports but I'm not convinced that will hold up indefinitely. We expect to see capital spending softening.''
Economists forecast the New York manufacturing index would fall to 6.5 in February, according to the median of 49 estimates in a Bloomberg News survey. Projections ranged from minus 1.2 to 11.6.
The New York Fed's measure of new orders fell to minus 11.9 from 0.0 the prior month, and a measure of shipments dropped to minus 4.9 from 15.8 in January.
Inventory Gauge
A gauge of unfilled orders decreased to minus 1.1 from 1.2, while the index of inventories was unchanged in February after a minus 4.9 reading the month before.
The employment index fell to minus 2.1 from a positive 2.4 a month earlier, the New York Fed said. An index of prices paid rose to 47.4 from 40.2, while a gauge of prices received fell to 17.9 from 18.3.
The report provides one of the month's earliest clues to the state of manufacturing nationwide. Similar data for the Philadelphia region will be released Feb. 21. New York's economy is less vulnerable to the auto slump and more exposed to financial services and trade, economists said.
The index measuring the manufacturing outlook for six months from now rose to 22.7 from 19.4, today's report showed.
Thursday, 14 February 2008
U.S. December Trade Gap Narrows More Than Forecast
(Bloomberg) -- The U.S. trade deficit narrowed more than forecast in December as exports reached record levels and Americans spent less on imported autos and goods from China.
The gap between imports and exports shrank 6.9 percent, the biggest decrease in more than a year, to $58.8 billion from $63.1 billion in November, the Commerce Department said today in Washington. The deficit for all of 2007 decreased for the first time in six years.
A weaker dollar and expansion of emerging economies are feeding overseas sales for U.S.-made goods and may forestall a deeper slump at U.S. manufacturers. The narrowing deficit is one of the few remaining bright spots for the economy and will probably lead the government to increase its estimate of fourth- quarter gross domestic product later this month.
``The trade balance is going to continue to be a support for the economy,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``The drop in imports is probably consistent with the view the domestic economy is turning quite soft.''
Economists had forecast the gap would narrow to $61.5 billion, according to the median of 76 projections in a Bloomberg News survey. Estimates of the deficit ranged from $57 billion to $66.5 billion.
The dollar, which had fallen against the euro earlier today, stayed lower after the report. It traded at $1.4609 per euro at 8:37 a.m. in New York, from $1.4573 late yesterday. The U.S. currency was little changed versus the yen, at 108.30 yen per dollar.
2007 Deficit Shrinks
For all of last year, the deficit shrank 6.2 percent to $711.6 billion, the biggest decrease since 1991. Last year was the first time the trade gap narrowed since 2001.
Exports rose 1.5 percent to $144.3 billion in December, setting a record for a 10th straight month and reflecting more demand for U.S. made capital equipment and industrial supplies. For the year, exports rose 12 percent to a record $1.622 trillion.
Imports in December declined 1.1 percent to $203.1 billion, reflecting lower demand for foreign-made autos, consumer goods, food and capital equipment.
Also contributing to the drop in imports was a 14 percent decline in purchases from China, which helped shrink the month's trade gap with the Asian nation 22 percent to $18.8 billion. Petroleum imports rose 4.2 percent to a record $36 billion as the average price rose to $82.76 a barrel, also the highest monthly average ever. Prices increased in late December and early January and may push up the value of imports for the January report. They have since declined.
Fourth-Quarter Growth
Today's report may cause the Commerce Department to revise its estimate of fourth-quarter economic growth higher. The government projected last month that the trade gap narrowed to a $521 billion annual pace in the last three months of 2007. For all of last year, trade contributed 0.55 percentage point to growth, the most since 1991.
The government will release a revised estimate of the expansion for the last three months of 2007 on Feb. 28.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson are scheduled to testify to the Senate Banking Committee later today on the state of the U.S. expansion. Central bank policy makers have forecast the economy will avoid a recession.
``The Fed's policy actions should help to promote a pickup in growth over time,'' Fed Bank of San Francisco President Janet Yellen said in a speech on Feb. 12. ``I consider it most probable that the U.S. economy will experience slow growth, and not outright recession, in coming quarters.''
Fed's Rate Cuts
The Fed's Open Market Committee is scheduled to next vote on interest-rate policy on March 18. Policy makers lowered the benchmark rate by three-quarters of a percentage point in an emergency decision announced Jan. 22 and followed that with a half-point cut at the scheduled Jan. 29-30 meeting.
After eliminating the influence of prices, the trade deficit decreased to $49.3 billion from $53.6 billion. This is the figure the government uses in calculating GDP.
For the year, the trade deficit with China, the second- largest U.S. trading partner after Canada, increased 10 percent to a record $256.3 billion.
The gap with China is a political sticking point for the U.S. and other countries.
Group of Seven policy makers, meeting in Tokyo last weekend, said China should do more to defuse global trade tensions by allowing the yuan to climb against the dollar and other currencies. The G-7 also forecast the U.S. economy may slow further, eroding global growth.
MBIA Says It Can Weather Slump, Doesn't Need Bailout
(Bloomberg) -- MBIA Inc., the world's biggest bond insurer, said it is equipped to survive the slump in prices of mortgage securities and dismissed suggestions that the industry needs a rescue or stronger federal oversight.
``A bailout of highly credit-worthy companies who, at most, are at risk of losing the very highest ratings available, is misplaced,'' MBIA Chief Financial Officer Charles Chaplin said in prepared remarks to be delivered today at a hearing of the House Financial Services subcommittee on capital markets in Washington.
Chaplin and Ambac Financial Group Inc. Chief Executive Officer Michael Callen will make their presentations on Capitol Hill as they try to fend off credit rating downgrades and critics who say the companies may be headed for bankruptcy. One of the most vocal skeptics, hedge fund manager William Ackman, will also deliver remarks today alongside the MBIA and Ambac executives.
MBIA, based in Armonk, New York, and Ambac are among five companies struggling to maintain their top bond insurance credit ratings after a slump in the value of mortgage-linked securities the companies guaranteed. Standard & Poor's, Moody's Investors Service and Fitch Ratings are reviewing MBIA's top rating for a possible downgrade. Fitch already cut its AAA ratings on New York-based Ambac's insurance unit to AA. Ambac is also being scrutinized by Moody's and S&P.
``MBIA is more than adequately capitalized to meet obligations to policyholders,'' Chaplin, 51, said in his testimony.
Rescue Plans
Ambac said in a statement last night that Callen will tell the committee the company's main challenge is to achieve ``ratings stability.''
MBIA rose 61 cents to $12.25 at 9:38 a.m. in New York Stock Exchange composite trading. Ambac climbed 19 cents to $9.56.
MBIA and Ambac tumbled more than 80 percent in the past year in New York trading as they posted record losses of more than $5 billion and concern grew the companies may not get enough capital to sustain their ratings, casting doubt on $2.4 trillion of municipal and structured finance debt.
New York Insurance Department Superintendent Eric Dinallo last month organized banks to begin plans for a rescue of the insurers and said he may consider strengthening his oversight. Dinallo will also appear before the committee today, as will New York Governor Eliot Spitzer, U.S. Securities and Exchange Commission director Erik Sirri and Keith M. Buckley, a group managing director at Fitch.
Buffett's Offer
Dinallo will tell lawmakers he will consider splitting the bond insurers into two businesses, according to prepared testimony. ``One would have the municipal bond policies and any other healthy parts of the business,'' Dinallo said. ``The other would have the structured finance and problem parts of the business.''
Billionaire investor Warren Buffett yesterday offered to take over $800 billion of the municipal debt guaranteed by MBIA, Ambac and FGIC Corp., the fourth-largest bond insurer. Ambac yesterday said it rejected the offer. Two other insurers haven't responded, Buffett told CNBC television this week.
Spitzer told CNBC today that while Buffett's proposal would benefit municipalities, it wouldn't help the ``bad bank'' piece of the bond insurers' business. ``We don't want to create that schism yet if it can be avoided,'' Spitzer said.
Wednesday, 13 February 2008
NY AG probes health insurers over reimbursement
(Reuters) - New York Attorney General Andrew Cuomo said on Wednesday he is conducting an industry- wide probe of health insurers into an alleged scheme to defraud consumers by manipulating reimbursement rates.
At the center of the scheme is Ingenix, the nation's provider of health care billing information, which serves as a conduit for rate data to the largest insurers in the country, Cuomo said in a statement.
Cuomo intends to sue Ingenix, its parent, UnitedHealth Group Inc, and three additional subsidiaries.
Paulson sees slower economy, to rush tax rebates
(Reuters) - Treasury Secretary Henry Paulson on Wednesday stood by his view that the economy will avoid recession this year and grow at a slower pace, and that the Treasury will act quickly to distribute tax rebate payments.
"The U.S. economy is diverse and resilient, and our long-term fundamentals are healthy. I believe our economy will continue to grow, although at a slower pace than we have seen in recent years," Paulson said in prepared testimony to the U.S. House of Representatives Budget Committee.
President George W. Bush on Wednesday is expected to sign into law a $152 billion fiscal stimulus package that will provide tax rebates to some 130 million Americans, with most about $600 for an individual and $1,200 for a couple.
Paulson said the Internal Revenue Service would simultaneously manage the spring tax filing season and preparations for issuing the rebate payments starting in early May.
"Payments will be largely completed this summer, putting cash in the hands of millions of Americans at a time when our economy is experiencing slower growth," he said. "Together, the payments to individuals and the incentives for businesses will help create more than half a million jobs by the end of this year."
Paulson also called on Congress to aid the housing sector by passing legislation that will modernize the Federal Housing Administration and create a new, stronger regulator for Fannie Mae and Freddie Mac, the government-sponsored housing finance enterprises.
Under the stimulus plan, Fannie and Freddie will be temporarily allowed to invest in larger mortgages, providing more resources for refinancing troubled mortgages in costly coastal housing markets.
Cuomo to Sue UnitedHealth, Probe Reimbursement Policy
(Bloomberg) -- New York Attorney General Andrew Cuomo said he plans to sue UnitedHealth Group Inc. and will issue 16 subpoenas in an industrywide probe of how U.S. insurers compute ``reasonable and customary'' rates to limit payouts.
Cuomo said he plans to sue Minnetonka, Minnesota-based UnitedHealth, the largest U.S. health insurer, over deceptive practices in the reimbursement policy it links to such charges, which he claims seriously shortchange patients and involve a conflict of interest.
``When insurers like United create convoluted and dishonest systems for determining the rate of reimbursement, real people get stuck with excessive bills and are less likely to seek the care they need,'' Cuomo said in a statement today.
Cuomo said he will subpoena UnitedHealth, Aetna Inc., Cigna Corp. and Empire Blue Cross & Blue Shield over their reimbursement practices.
UnitedHealth's Ingenix unit provides data that sets ``reasonable and customary'' rates, which put a ceiling on reimbursement to patients, Cuomo said. When patients go out of network, health insurance companies generally cover only 80 percent of `reasonable and customary' charges.
Cuomo said a six-month investigation showed Ingenix has a ``defective and manipulated'' database that most health insurance companies use to set reimbursement rates for out-of-network expenses. The probe found that two subsidiaries of United ``dramatically under-reimbursed'' patients for out-of-network expenses using information from Ingenix.
United Falls
UnitedHealth fell $2.28, or 4.7 percent, to $45.99 at 12:02 p.m. in New York Stock Exchange composite trading.
``This is obviously going to be a negative for the company,'' said Sheryl Skolnick, an analyst with CRT Capital Group in Stamford, Connecticut, in a telephone interview. ``These things typically take a long time to work their way through. It does make it more difficult for United to argue that they have fixed their challenges.''
UnitedHealth Group Inc., WellPoint Inc., Aetna Inc. and other health insurers fell in New York trading this morning in anticipation of Cuomo's announcement.
Don Nathan, a spokesman for UnitedHealth, had no comment before the announcement.
Ingenix, with $1.3 billion in revenue last year, markets services to detect health-care fraud, identify preferred doctors and hospitals for insurers and help drugmakers run trials of new medicines. The company has said it has contracts with 1,500 health insurers, including rival Aetna Inc., as well as 200,000 doctors, 3,500 hospitals, 140 drug companies and government agencies.
Tuesday, 12 February 2008
Rand regroups, gains nearly 1%
(Fin24) - The rand currency strengthened nearly one percent against the dollar and bonds also firmed, regrouping after a sharp fall over the past two weeks, as emerging market sentiment improved and stocks recovered further.
"The slight correction today is on the back of the euro, the
JSE."
The local currency was trading at R7.71 to the dollar at 17:44 GMT, 0.9% stronger than its previous close in New York, after see-sawing between R7.6775 and R7.82 during the session.
Government bonds tracked the rand's move in relatively light trade, pulling back some of their sizable losses sparked by investor concern over an expected easing in economic growth.
Dealers said trade was largely flow-driven with dollar buying out of London early in the day paring gains before it drifted back on higher stocks and broader emerging market gains as those flows waned.
"Emerging markets are stronger, the dollar is weaker against the euro and local stocks are up on the Dow (Jones index) and we are just picking up that on the currency," ABN AMRO trader Paul Peter said.
"The slight correction today is on the back of the euro, the
JSE."
Platinum sets lifetime high
(Fin24) - Platinum hit a record high for the ninth straight trading day on Tuesday as concerns deepened over output losses in top producer South Africa due to a power crisis, analysts said.
A spokesperson at Eskom said the company was in discussions with the government to ensure sufficient funding to meet its expansion programme.
Gold fell as much as 1% as the dollar gained ground versus the euro after Warren Buffett told CNBC television that he had offered to take over the liabilities of monoline bond insurers. But the metal later pared losses.
Platinum rose to a high of $1 965 an ounce before falling to $1 943/1 950 by 17:50, against $1 933/1 941 in New York late on Monday.
"You know that platinum demand is increasing on the back of emission controls and you know that supplies are going to be squeezed. So it just makes sense to be long in this market," said Johannesburg-based Walter De Wet, analyst at Standard Bank.
"There might be slight over-reaction as everybody is on the bandwagon because of the recent price rise, but there is also some realisation that things are going to get tighter. We believe that the bias is on the upside."
Platinum's rally, which has sent prices up 30% in just three weeks, gained pace after Anglo Platinum, the world's biggest producer, said on Monday the power problem alone would cut output by as much as 120 000 ounces in 2008. It had already cost 30 000 ounces in lost output this year.
Northam Platinum said on Tuesday its production fell 16.5% to 150 755 ounces the July-December period of 2007 from a year earlier and saw its output at the same level in the next six months, provided mines got 90% power.
The market nervously awaits financial results of Impala Platinum, the world's second-biggest producer of the metal, on Thursday for more cues on total production losses.
"It's a chronic problem. It has been a deficit market for many years and it looks like it has returned to a significant deficit market again," said David Holmes, director of metals sales at Dresdner Kleinwort Investment Bank.
Mines across South Africa, which accounts for four-fifths of the world's supply of the metal, ground to a halt for five days at the height of the power crisis last month. Platinum is used in jewellery and auto catalysts to clean exhaust fumes.
Negotiations were under way for South African state-owned power utility Eskom to buy surplus electricity from local producers as part of its bid to solve the nation's energy crisis, Public Enterprises Minister Alec Erwin said on Monday.
A spokesperson at Eskom said the company was in discussions with the government to ensure sufficient funding to meet its expansion programme.
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