Societe Generale Shares Rise on Takeover Report

(Bloomberg) -- Societe Generale SA, France's second-biggest bank, rose the most in five years in Paris trading on speculation that BNP Paribas SA is considering a takeover.

BNP, the country's largest bank, is holding preliminary internal discussions about a possible bid after Societe Generale's announcement last week of 4.9 billion euros ($7.2 billion) of losses from unauthorized bets, the Wall Street Journal reported. BNP said it does not comment on market rumors.

Traders speculated that President Nicolas Sarkozy's government is seeking a French partner for the bank to ward off any potential foreign bids. Prime Minister Francois Fillon told Parliament today that the government will ensure that Societe Generale remains in French hands.

``There's rumor of a bid by BNP on Societe Generale for 92 euros,'' said Constantin Salagaras, a trader at Aurel Leven Securities in Paris. ``The market is speculating on the will of Sarkozy to create a national champion.''

Societe Generale rose 10 percent to 78.45 euros in Paris, marking its biggest gain since Dec. 16, 2002 and valuing the bank at 36.3 billion euros. Societe Generale shares, down 21 percent since the start of the year, yesterday had a lower market value than Credit Agricole SA before rebounding today.

``Societe Generale is a great French bank and Societe Generale will remain a great French bank,'' Fillon told lawmakers in Paris today.

Trading Losses

Societe Generale's employee Jerome Kerviel, 31, was charged yesterday with falsifying documents, computer hacking and breach of trust by French judges.

Kerviel's unauthorized bets led to the biggest trading losses in banking history. Societe Generale said Kerviel amassed 50 billion euros in positions in European stock index futures, an amount that exceeded the company's market value.

``A takeover of Societe Generale is not impossible,'' Guillaume Tiberghien, an analyst at Credit Suisse, said in a report to clients. ``Any potential bidder would have to assess Societe Generale's risk control, assess the risk that the equity derivatives business might be damaged for the long term, assess the political and regulatory consequences of recent events for the entire banking sector.''

 

Read more at Bloomberg

Bank of America Affirms Plan to Acquire Countrywide

(Bloomberg) -- Bank of America Corp. said its purchase of Countrywide Financial Corp. is proceeding and the bank doesn't need more capital after last week's preferred stock sale raised almost $13 billion.

``Everything is a `go' to complete this transaction,'' Bank of America Chief Executive Officer Kenneth Lewis said at an investor conference today, referring to Countrywide. The Calabasas, California-based mortgage company rose as much as 8.6 percent today in New York Stock Exchange composite trading.

Chief Executive Officer Angelo Mozilo agreed Jan. 11 to sell Countrywide, the biggest U.S. mortgage lender, for about $4 billion in stock to Bank of America, the nation's second- biggest bank by assets. Investors have speculated the bid might be revised if Countrywide didn't fulfill Mozilo's October vow to restore profit by year-end.

Countrywide posted a fourth-quarter net loss of $422 million, or 79 cents a share, compared with a profit of $621.6 million, or $1.01 a share, in the year-earlier period, the company said in a statement today. The loss was more than twice the 28 cents predicted in a Bloomberg survey of analysts.

The home lender rose 20 cents to $6.15 in 12:03 p.m. composite trading on the New York Stock Exchange as investors concluded Bank of America won't renege on the purchase. Bank of America, based in Charlotte, North Carolina, added 67 cents, or 1.6 percent, to $41.87.

Bank of America could have raised 2 1/2 times as much as it sought in last week's share offerings, Lewis told the New York investor conference today. The sale came with some of the highest yields in 15 years.

 

Read more at Bloomberg

U.S. Stocks Rise After Earnings, Durable Goods Top Forecasts

(Bloomberg) -- U.S. stocks rose for a second day, led by telephone companies and utilities, on better-than- forecast durable goods orders and earnings that topped estimates at two dozen members of the Standard & Poor's 500 Index.

Dow Chemical Co., American Electric Power Co. and Valero Energy Corp. led gains among the 30 companies in the S&P 500 that reported results since markets closed yesterday. Boeing Co. and Caterpillar Inc. climbed after the Commerce Department said orders for U.S. durable goods rose the most since July.

The S&P 500 added 1, or 0.1 percent, to 1,354.97 at 1:06 p.m. in New York. The benchmark for U.S. equities is still down 7.6 percent in 2008 on concern the collapse of the subprime mortgage market will drag the economy into recession. The Dow Jones Industrial Average rose 25.04, or 0.2 percent, to 12,408.93. The Nasdaq Composite Index decreased 6.52, or 0.3 percent, to 2,343.39, dragged down by a 2.1 percent drop in Google Inc.

``When you see a durable goods number like this and then earnings outside of the financial sector doing quite well, people are beginning to realize that perhaps the contagion effect may be somewhat limited,'' said Damon Barglow, who helps oversee $1.9 billion at Eastern Investment Advisors in Boston, in an interview with Bloomberg Radio.

Durable Goods

Index futures doubled their advances after the 5.2 percent gain in durable goods orders last month highlighted how growing overseas demand may spur manufacturing as the U.S. economy slows. The Federal Reserve is to expected to cut interest rates tomorrow in an effort to spur growth.

The S&P 500 has gained 3.5 percent from its 16-month low on January 22 after falling as much as 15 percent from its Oct. 31 record.

Fourth quarter earnings advanced 20 percent on average for the 155 non-financial companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Analysts expect the entire index to post an 18 percent average decline in profit.

Dow Chemical rose 43 cents to $38.02. The maker of 3,200 products ranging from synthetic latex to pesticides posted profit excluding some restructuring costs and other items of 84 cents, topping the 80-cent average estimate of 14 analysts surveyed by Bloomberg.

Valero, American Electric

Valero Energy Corp. climbed $5.22 to $60.12. The largest U.S. refiner posted fourth-quarter profit of $1.02 a share, topping the 59-cent average analysts' estimates compiled by Bloomberg. Earnings were buttressed by a cut in Valero's tax rate and increased use of low-grade crude oil.

Sunoco Inc., the largest oil refiner in the U.S. East, added $2.20 to $63.35. Tesoro Corp., the largest refiner in the U.S. West, gained $2.90 to $41.29. ConocoPhillips, the nation's second-biggest refiner, increased $1.18 to $77.59.

American Electric Power Co. gained 59 cents to $42.82. The biggest U.S. producer of electricity from coal said fourth- quarter profit rose 28 percent on higher power sales and a gain from the sale of a stake in a power plant. Sales rose 10 percent to $3.3 billion on higher utility rates and colder weather that increased use of electricity for heating.

Boeing, the world's second-biggest commercial airplane maker, climbed $2.34, or 3 percent, to $79.94. Caterpillar, the largest maker of bulldozers and excavators, added 72 cents to $68.93.

The dollar strengthened and yields on Treasury notes rose after the durable-goods report. Economists had forecast orders would increase 1.6 percent in December, according to the median of 64 estimates in a Bloomberg News survey.

Eli Lilly & Co. rallied 94 cents to $52.34. Excluding certain items, Lilly earned 90 cents a share, a penny higher than the average estimate of 17 analysts surveyed by Bloomberg.

 

Read more at Bloomberg

Durable goods orders jump, house prices slump

(Reuters) - Stronger-than-expected orders for U.S.-made durable goods in December suggested the economy retained some life and might not need a heavy dose of interest-rate cuts, even though house prices fell a record amount in November.

New orders for long-lasting goods rose 5.2 percent last month, a Commerce Department report showed on Tuesday, well above the 1.5 percent increase forecast by economists in a Reuters poll.

The surprise surge in durable goods orders helped offset a report that showed home prices in 10 major metropolitan areas fell a record 8.4 percent in the year through November.

U.S. Treasuries fell after the durables report, which contradicted weakness in other areas of the economy and undermined the argument for more aggressive interest rate cuts by the Federal Reserve. Stocks rose.

A consumer sentiment survey, meanwhile, showed confidence fell in January but by slightly less than economists had expected. The Conference Board's index of consumer sentiment fell to 87.9 from an upwardly revised 90.6 in December.

"Consumers are on the edge but haven't packed it in yet. They are worried about the up-and-down stock market, falling house value and high gasoline prices. But they still have jobs," said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania.

 

Read more at Reuters

IMF to world economy: no one escapes U.S. slowdown

(Reuters) - When the U.S. coughs, the whole world still catches cold.

"No one is exempt from a global slowdown. That is why you call it global," International Monetary Fund chief economist Simon Johnson said on Tuesday as he updated the IMF's World Economic Outlook.

"It will be very hard for even the most effective counter-cyclical policy to keep any country from having some slowdown in these circumstances," he said.

The IMF has trimmed its estimate for world growth this year to 4.1 percent from its prior outlook of 4.4 percent, with still-resilient emerging economies seen growing at a rate of 6.9 percent from 7.8 percent last year. Even growth in China will moderate from a thumping 11.4 percent in 2007 to 10 percent.

"There are obviously linkages. I think that reports of decoupling have been greatly exaggerated. It is a question of what kind of linkages," Johnson told a media briefing.

World stock markets have swung wildly since problems in the U.S. subprime mortgage market surfaced in August, sparking a global credit crunch that has yet to fully abate. Investors have bet heavily that the United States will tip into recession and drag other economies in its wake.

 

Read more at Reuters

Global Recession Risk Grows as U.S. `Damage' Spreads

(Bloomberg) -- The U.S. economy may already be in recession; other countries might not be far behind.

Japan, Britain, Spain and Singapore, which together represent about 12 percent of the world economy, are vulnerable as fallout from the U.S. worsens their economic weakness. Even emerging markets, including China, are likely to suffer as exports to the U.S. wane.

The result: Global growth may decelerate close to the 3 percent pace economists deem a worldwide recession, from a 4.7 percent rate in 2007. ``Some form'' of global recession ``is inevitable at some point,'' former Federal Reserve Chairman Alan Greenspan said in a speech in Vancouver last week.

The developing slump puts pressure on central bankers in Japan, the U.K. and the euro region to follow the lead of Fed Chairman Ben S. Bernanke, who last week accelerated interest- rate cuts in the U.S. with an emergency move to lower the benchmark rate by three-quarters of a percentage point. Policy makers may follow that with another cut of as much as half a point after a two-day meeting that starts tomorrow, futures trading indicates.

``The odds are shifting toward a more significant global monetary easing,'' says Richard Berner, co-head of global economics for Morgan Stanley in New York.

Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London, says growth in the first half of 2008 may be the ``weakest since 2002 and maybe even 2001,'' during the last global downturn. ``The economy is slowing everywhere,'' he says.

Stocks Fall

Stocks retreated in Europe and Asia today, led by commodity producers and banks, on growing concern the global economy is slowing and companies may report more losses linked to subprime mortgages. U.S. index futures dropped and Treasury notes rose for a second day.

A worldwide recession doesn't require a global contraction in output, which rarely happens; economists at the International Monetary Fund say it would take a slowdown in global growth to 3 percent or less. By that measure, three periods since 1985 qualify: 1990-1993, 1998 and 2001-2002.

The contagion from the U.S., which according to the IMF represents about 21 percent of the global economy, is spreading via multiple channels. Less spending by American consumers and companies reduces demand for imported goods. The meltdown of the U.S. subprime-mortgage market has pushed up credit costs worldwide and forced European and Asian banks to write down billions of dollars in holdings. Tumbling U.S. stock prices are dragging down markets elsewhere.

 

Read more at Bloomberg

Corn, Soybeans, Wheat Fall as Slumping U.S. Economy Cuts Demand

(Bloomberg) -- Corn and soybeans and wheat fell on speculation the U.S. economy will slide into recession, triggering a global slump and damping demand for grains and other commodities.

The Federal Reserve today cut its benchmark interest rate the most in 23 years in an effort to prevent a recession. Even after the move, U.S. equities and commodities fell. Before today, wheat prices had doubled in the past year and corn and soybean futures reached records last week.

``The projected growth in consumption of grains is in question,'' said Darrell Holaday, president of Advanced Market Concepts in Manhattan, Kansas. ``World economies are going to retract. We thought this could happen, but some thought that the rest of the world is insulated from the U.S. economy. It was a nice theory, but today, you can say that's not true.''

Corn futures for March delivery fell 4.5 cents, or 0.9 percent, to $4.9375 a bushel at 10:58 a.m. on the Chicago Board of Trade, the fifth-straight drop since the most-active futures rose to a record $5.1925 on Jan. 15. Corn gained 17 percent in 2007 after rising 81 percent in 2006 on record demand to produce ethanol and feed livestock.

Soybean futures for March delivery fell 15.75 cents, or 1.3 percent, to $12.4825 a bushel in Chicago, after last week falling for the first time in seven weeks. The price on Jan. 14 reached a record $13.415. Futures gained 78 percent last year after U.S. farmers planted the fewest acres in 12 years to sow the most corn since 1944.

Wheat futures for March delivery fell 7.5 cents, or 0.8 percent, to $9.55 a bushel in Chicago. Even with today's decline, the price has doubled in a year. Wheat reached a record $10.095 a bushel on Dec. 17 as global demand outpaced supply.

Hedge-Fund Bets

Since the end of November, hedge funds as of Jan. 16 increased bets by 44 percent that corn futures would rise, data from the Commodity Futures Trading Commission show. Funds that buy commodities in indexes raised bets 14 percent. Open interest has climbed 8.9 percent to almost 1.41 million contracts since the start of the year, the highest in more than nine months.

Funds that track commodity indexes cut bets on higher soybeans to 176,461 contracts as of Jan. 16, down 5.8 percent from a record net long position a week earlier, according to the CFTC report.

 

Read more at Bloomberg