Fresh evidence of slowing economic growth and rising inflation in the US unnerved global investors on Friday and drove the dollar to a record low against the euro.
After initial weakness, US equities stabilised and Treasury yields reversed an early fall and were relatively unchanged in late trade. US gross domestic product grew 1.3 per cent in the first quarter of the year, its lowest for four years and much weaker than expected.
Saturday, April 28, 2007
Oil Surges to Highest in Almost 8 Months on Saudi Terror Plot
April 27 (Bloomberg) -- Crude oil surged to the highest in almost eight months in New York and gasoline jumped after Saudi Arabian authorities said they had arrested more than 170 people suspected of plotting to attack the country's oil fields.
The suspects included Saudis and non-Saudis who planned to use aircraft in assaults on the country's oil fields and military, Interior Ministry spokesman General Mansur al-Turki said in a interview aired on Dubai-based Al-Arabiya television. The desert kingdom is the Organization of Petroleum Exporting Countries' biggest producer and the world's top oil exporter.
``The reaction to the Saudi Arabian headlines was very muted at first but once it became clear how big a bullet we dodged, the market took off,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``There's no telling how high prices would have gone if this plot had succeeded. It's impossible to know what else is planned.''
Crude oil for June delivery surged $1.40, or 2.2 percent, to settle at $66.46 a barrel at 2:52 p.m. on the New York Mercantile Exchange. It was the highest close since Sept. 7. The June contract rose 3.7 percent this week. Oil is down 6.4 percent from a year ago. The futures contracts for July through December are higher than the front-month contract.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Gasoline for May delivery in New York jumped 7.1 cents, or 3.1 percent, to $2.3613 a gallon, the highest close since Aug. 3.
``This shows that the Saudis have a persistent problem,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``It appears that they thwarted an attack but the bad news is they will have to remain vigilant for a long time.''
Abqaiq Attack
Since May 2003, at least 100 civilians have been killed in terrorist attacks in Saudi Arabia. On Feb. 24 last year, Saudi Arabian forces foiled a suicide attack at the Abqaiq oil- processing center, which handles two-thirds of the supply from the country.
``There were 172 involved in the activities discovered by the police,'' General al-Turki said in a telephone interview from Riyadh. ``They are suspected terrorists. Some of these cells have been planning to target oil refineries and oil installations.'' The detainees belonged to seven separate cell networks, he said.
One of the cells and some of its members were learning to fly airplanes for terrorist attacks, al Turki said. Saudis were among the suicide hijackers who flew airliners in the Sept. 11, 2001, attacks in the U.S.
Prices surged to a record $78.40 a barrel in New York on July 14 on speculation the conflict between Israel and Hezbollah would spread in the Middle East, source of almost a third of the world's oil.
Disruption Concern
Crude oil prices are also higher because of concern that shipments from Iran, Nigeria and Iraq may be disrupted. Attacks in Nigeria and Iraq have cut exports. A dispute over Iran's nuclear program has raised the prospect of a decline in shipments from the country, the fourth-biggest oil exporter.
Nigerian Energy Minister Edmund Daukoru said today he doesn't know exactly when oil production in the country's western Niger River delta, halted for more than a year, will resume. Nigeria is seeking to restore production of about 477,000 barrels a day in output that was shut down last year because of militant attacks in the Niger River delta.
Brent crude oil for June settlement increased 76 cents, or 1.1 percent, to close at $68.41 a barrel on the London-based ICE Futures exchange.
West Texas Discount
West Texas Intermediate crude oil, or WTI, has traded at a record discount this month against Brent, produced in the North Sea, because of rising inventories at Cushing, Oklahoma. The spread between Brent and WTI was the narrowest today since March 29.
Stockpiles at Cushing, the delivery point for Nymex futures, slipped 4.2 percent to 26.8 million barrels in the week ended April 20, the Energy Department reported on April 25. Inventories rose to 28 million the prior week, the highest since at least April 2004, when the department began reporting on supplies there.
The closure of Valero Energy Corp.'s McKee refinery near Sunray, Texas, after a fire in February left excess crude oil at Cushing. The plant is processing 85,000 barrels of oil a day and will reach 150,000 by the end of June, the company said. The refinery will return to its normal capacity of 170,000 barrels of oil a day by the end of this year.
Crude oil may rise next week, according to a Bloomberg News survey. Fourteen of 33 analysts surveyed, or 42 percent, said oil prices will rise. Eleven, or 33 percent, said prices will decline and eight forecast that oil will be little changed.
The suspects included Saudis and non-Saudis who planned to use aircraft in assaults on the country's oil fields and military, Interior Ministry spokesman General Mansur al-Turki said in a interview aired on Dubai-based Al-Arabiya television. The desert kingdom is the Organization of Petroleum Exporting Countries' biggest producer and the world's top oil exporter.
``The reaction to the Saudi Arabian headlines was very muted at first but once it became clear how big a bullet we dodged, the market took off,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``There's no telling how high prices would have gone if this plot had succeeded. It's impossible to know what else is planned.''
Crude oil for June delivery surged $1.40, or 2.2 percent, to settle at $66.46 a barrel at 2:52 p.m. on the New York Mercantile Exchange. It was the highest close since Sept. 7. The June contract rose 3.7 percent this week. Oil is down 6.4 percent from a year ago. The futures contracts for July through December are higher than the front-month contract.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Gasoline for May delivery in New York jumped 7.1 cents, or 3.1 percent, to $2.3613 a gallon, the highest close since Aug. 3.
``This shows that the Saudis have a persistent problem,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``It appears that they thwarted an attack but the bad news is they will have to remain vigilant for a long time.''
Abqaiq Attack
Since May 2003, at least 100 civilians have been killed in terrorist attacks in Saudi Arabia. On Feb. 24 last year, Saudi Arabian forces foiled a suicide attack at the Abqaiq oil- processing center, which handles two-thirds of the supply from the country.
``There were 172 involved in the activities discovered by the police,'' General al-Turki said in a telephone interview from Riyadh. ``They are suspected terrorists. Some of these cells have been planning to target oil refineries and oil installations.'' The detainees belonged to seven separate cell networks, he said.
One of the cells and some of its members were learning to fly airplanes for terrorist attacks, al Turki said. Saudis were among the suicide hijackers who flew airliners in the Sept. 11, 2001, attacks in the U.S.
Prices surged to a record $78.40 a barrel in New York on July 14 on speculation the conflict between Israel and Hezbollah would spread in the Middle East, source of almost a third of the world's oil.
Disruption Concern
Crude oil prices are also higher because of concern that shipments from Iran, Nigeria and Iraq may be disrupted. Attacks in Nigeria and Iraq have cut exports. A dispute over Iran's nuclear program has raised the prospect of a decline in shipments from the country, the fourth-biggest oil exporter.
Nigerian Energy Minister Edmund Daukoru said today he doesn't know exactly when oil production in the country's western Niger River delta, halted for more than a year, will resume. Nigeria is seeking to restore production of about 477,000 barrels a day in output that was shut down last year because of militant attacks in the Niger River delta.
Brent crude oil for June settlement increased 76 cents, or 1.1 percent, to close at $68.41 a barrel on the London-based ICE Futures exchange.
West Texas Discount
West Texas Intermediate crude oil, or WTI, has traded at a record discount this month against Brent, produced in the North Sea, because of rising inventories at Cushing, Oklahoma. The spread between Brent and WTI was the narrowest today since March 29.
Stockpiles at Cushing, the delivery point for Nymex futures, slipped 4.2 percent to 26.8 million barrels in the week ended April 20, the Energy Department reported on April 25. Inventories rose to 28 million the prior week, the highest since at least April 2004, when the department began reporting on supplies there.
The closure of Valero Energy Corp.'s McKee refinery near Sunray, Texas, after a fire in February left excess crude oil at Cushing. The plant is processing 85,000 barrels of oil a day and will reach 150,000 by the end of June, the company said. The refinery will return to its normal capacity of 170,000 barrels of oil a day by the end of this year.
Crude oil may rise next week, according to a Bloomberg News survey. Fourteen of 33 analysts surveyed, or 42 percent, said oil prices will rise. Eleven, or 33 percent, said prices will decline and eight forecast that oil will be little changed.
Wednesday, April 25, 2007
Royal Bank-Led Group Bids $98.5 Billion for ABN Amro
April 25 (Bloomberg) -- Royal Bank of Scotland Group Plc, Santander Central Hispano SA and Fortis offered 72.2 billion euros ($98.5 billion) to buy ABN Amro Holding NV, sparking the biggest takeover battle in the financial-services industry.
The Royal Bank-led group offered 39 euros a share, with 70 percent in cash and 30 percent in stock, the companies said in a statement today. The group said its approach is 13 percent higher than the all-stock bid ABN Amro accepted from Barclays Plc two days ago. Barclays's bid was worth 67 billion euros at the time.
The fight for control of Amsterdam-based ABN Amro, which has branches in 53 countries, centers on its LaSalle unit in Chicago. ABN Amro and Barclays elbowed Royal Bank Chief Executive Officer Fred Goodwin aside by agreeing to sell LaSalle to Bank of America Corp. for $21 billion. Goodwin said today that LaSalle will be a ``major piece'' of any bid.
``This is obviously the much more attractive offer,'' said Thomas Radinger, a fund manager at Pioneer Investments in Munich. He helps oversee $69 billion and holds ABN Amro shares. ``Barclays may be able to cough up one or two euros more but that would be very hard to justify to shareholders.''
ABN Amro said in a statement it has invited the group to meet in Amsterdam today and is ``open'' to talks. Bank of America said in a separate statement that it expects its legal contract to buy the U.S. unit ``to be fulfilled under its current terms.''
The purchase would be the third-biggest ever behind America Online Inc.'s $186 billion acquisition of Time Warner Inc. in 2000 and Vodafone AirTouch Plc's $185 billion merger with Mannesmann AG in 1999.
`Counter-Punch'
Shares of ABN Amro, the biggest Dutch bank, rose 3.5 percent in Amsterdam as of 4:10 p.m., valuing it at 69.2 billion euros. The stock has surged 33 percent since it announced takeover talks a month ago. Barclays shares rose 2.3 percent to 729 pence in London and those of Royal Bank slipped 1.8 percent to 1,977 pence.
The joint offer values ABN Amro at about 15.3 times 2006 earnings. Barclays said its offer was worth 14.2 times earnings. JPMorgan Chase & Co. analyst Kian Abouhossein in London downgraded ABN Amro to ``neutral,'' saying shareholders should take profit now amid legal uncertainty over the LaSalle sale.
``It's a good counter-punch from RBS,'' said Sandy Chen, an analyst at Panmure Gordon in London who has a ``buy'' rating on Royal Bank. ``The offer of 70 percent cash looks good compared with the 100 percent shares offer of Barclays. It increases the risk of value dilution for Barclays shareholders should they wish to counter-bid.''
`Straightforward Proposals'
Edinburgh-based Royal Bank, the second-biggest U.K. bank after HSBC Holdings Plc, and its partners will break up the 183 year-old ABN Amro if their bid beats the offer from Barclays, the U.K.'s No. 3 bank.
``The banks are of the clear view that their proposals are superior for ABN Amro's shareholders and are straightforward from a shareholder, regulatory and execution perspective,'' the Royal Bank-led group said today. It called its offer a ``price indication'' and said ABN Amro has agreed to discuss it further.
ABN Amro and Barclays disclosed their negotiations on March 19. The Royal Bank-led group said April 13 that it asked for ``exploratory talks.'' Two days ago, ABN Amro agreed to Barclays's offer of 3.225 new shares for each share of ABN Amro, amounting to 36.25 euros a share as of April 20. The offer also includes Barclays's final dividend for 2007.
ABN Amro spokesman Piers Townsend, Barclays spokesman Alistair Smith and Fortis spokeswoman Liliane Tackaert declined to comment today.
`Compelling Offer'
TCI Fund Management LLP called today's approach ``compelling.'' The London-based hedge fund, which owns almost 3 percent of ABN Amro, has asked shareholders to pressure ABN Amro's board at its annual meeting tomorrow to break up the bank. In an interview, founder Chris Hohn urged ABN Amro to accept Royal Bank's bid and scrap the LaSalle sale.
Royal Bank's Goodwin has a history of winning fights, having beaten Edinburgh-based rival Bank of Scotland in 2000 for National Westminster Bank Plc. NatWest shareholders accepted Royal Bank's hostile 23.6 billion-pound ($46.8 billion) offer after a five-month battle.
``With Royal Bank now involved, it's going into a longer timescale,'' said Julian Chillingworth, who helps manage $21 billion at London-based Rathbone Brothers Plc and holds Barclays shares. ``We don't expect it to be resolved soon.''
`Deconstruction'
When the accord with Barclays was announced April 23, ABN Amro CEO Rijkman Groenink said the three banks were ``out for deconstruction'' of ABN Amro.
Royal Bank would probably hold on to ABN Amro's Asian, North American and corporate-banking business, Stephen Andrews, an analyst at UBS AG in London, wrote in a note April 16. The LaSalle unit would fit with Royal Bank's Citizens U.S. unit.
Under ABN Amro's agreement to sell LaSalle to Charlotte, North Carolina-based Bank of America, a counter-bidder has 14 days to submit a higher offer in cash. Bank of America then has five days to match the bid.
Goodwin said at a press conference in Edinburgh today he will stick by Santander and Fortis in the joint bid and is interested in ABN Amro's units in Asia as well as in the U.S.
LaSalle ``is one of the key issues,'' Goodwin said, adding that he asked ABN Amro for guidance on terminating its agreement to sell the Midwestern bank. He declined to answer how the group will finance the transaction, saying: ``We are very confident our proposals are readily affordable. We've got the cash.''
`Battle Looms'
``It's turning into a battle,'' said Pieter Wind, head of securities at ING Private Banking in Amsterdam, which oversees $14.9 billion, including ABN Amro shares.
Buying ABN Amro would help Santander Chairman Emilio Botin expand into Italy and double the Spanish lender's market share in Brazil, where it's the second-biggest foreign-owned bank behind ABN Amro, according to Andrews.
Both Santander, Spain's largest bank, and ABN Amro hold stakes in Capitalia SpA, Italy's No. 4 lender. The Dutch bank bought Italy's Banca Antonveneta at the beginning of last year.
Fortis, Belgium's biggest financial-services company, which is based in Brussels and the Dutch city of Utrecht, would be able to create a regional banking network with the Dutch businesses of ABN Amro. Fortis, run by Jean-Paul Votron, may keep ABN Amro's asset-management arm, Andrews wrote.
``We continue to follow developments with close attention,'' Tobias Oudejans, a spokesman for the Dutch central bank, said in an interview today. The central bank said April 18 a joint offer would be more complicated and risky than a takeover by a single bank.
Dutch shareholder association VEB said in a statement that the group's demands, including due diligence and keeping LaSalle within ABN Amro, are ``reasonable'' and it will ask the Dutch bank to comply with them.
`Predator to Prey'
Barclays may switch ``from predator to prey'' if it fails to win ABN Amro, said Howard Wheeldon, senior strategist for BGC Partners, a London-based brokerage firm.
Merrill Lynch & Co. is advising the Royal Bank of Scotland group. ABN Amro is being advised by Lehman Brothers Holdings Inc., Morgan Stanley, N.M. Rothschild & Sons Ltd., UBS and its own investment bank. Morgan Stanley and UBS each provided a fairness opinion to the management board. Goldman Sachs Group Inc. gave a fairness opinion to ABN Amro's supervisory board.
Barclays was advised by Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, JPMorgan Cazenove and Lazard Ltd., as well as Barclays Capital.
``ABN Amro has let slip the dogs of war and getting them back in the cage is going to be extremely difficult,'' Bear Stearns Cos. analyst Christopher Wheeler said in an interview.
The Royal Bank-led group offered 39 euros a share, with 70 percent in cash and 30 percent in stock, the companies said in a statement today. The group said its approach is 13 percent higher than the all-stock bid ABN Amro accepted from Barclays Plc two days ago. Barclays's bid was worth 67 billion euros at the time.
The fight for control of Amsterdam-based ABN Amro, which has branches in 53 countries, centers on its LaSalle unit in Chicago. ABN Amro and Barclays elbowed Royal Bank Chief Executive Officer Fred Goodwin aside by agreeing to sell LaSalle to Bank of America Corp. for $21 billion. Goodwin said today that LaSalle will be a ``major piece'' of any bid.
``This is obviously the much more attractive offer,'' said Thomas Radinger, a fund manager at Pioneer Investments in Munich. He helps oversee $69 billion and holds ABN Amro shares. ``Barclays may be able to cough up one or two euros more but that would be very hard to justify to shareholders.''
ABN Amro said in a statement it has invited the group to meet in Amsterdam today and is ``open'' to talks. Bank of America said in a separate statement that it expects its legal contract to buy the U.S. unit ``to be fulfilled under its current terms.''
The purchase would be the third-biggest ever behind America Online Inc.'s $186 billion acquisition of Time Warner Inc. in 2000 and Vodafone AirTouch Plc's $185 billion merger with Mannesmann AG in 1999.
`Counter-Punch'
Shares of ABN Amro, the biggest Dutch bank, rose 3.5 percent in Amsterdam as of 4:10 p.m., valuing it at 69.2 billion euros. The stock has surged 33 percent since it announced takeover talks a month ago. Barclays shares rose 2.3 percent to 729 pence in London and those of Royal Bank slipped 1.8 percent to 1,977 pence.
The joint offer values ABN Amro at about 15.3 times 2006 earnings. Barclays said its offer was worth 14.2 times earnings. JPMorgan Chase & Co. analyst Kian Abouhossein in London downgraded ABN Amro to ``neutral,'' saying shareholders should take profit now amid legal uncertainty over the LaSalle sale.
``It's a good counter-punch from RBS,'' said Sandy Chen, an analyst at Panmure Gordon in London who has a ``buy'' rating on Royal Bank. ``The offer of 70 percent cash looks good compared with the 100 percent shares offer of Barclays. It increases the risk of value dilution for Barclays shareholders should they wish to counter-bid.''
`Straightforward Proposals'
Edinburgh-based Royal Bank, the second-biggest U.K. bank after HSBC Holdings Plc, and its partners will break up the 183 year-old ABN Amro if their bid beats the offer from Barclays, the U.K.'s No. 3 bank.
``The banks are of the clear view that their proposals are superior for ABN Amro's shareholders and are straightforward from a shareholder, regulatory and execution perspective,'' the Royal Bank-led group said today. It called its offer a ``price indication'' and said ABN Amro has agreed to discuss it further.
ABN Amro and Barclays disclosed their negotiations on March 19. The Royal Bank-led group said April 13 that it asked for ``exploratory talks.'' Two days ago, ABN Amro agreed to Barclays's offer of 3.225 new shares for each share of ABN Amro, amounting to 36.25 euros a share as of April 20. The offer also includes Barclays's final dividend for 2007.
ABN Amro spokesman Piers Townsend, Barclays spokesman Alistair Smith and Fortis spokeswoman Liliane Tackaert declined to comment today.
`Compelling Offer'
TCI Fund Management LLP called today's approach ``compelling.'' The London-based hedge fund, which owns almost 3 percent of ABN Amro, has asked shareholders to pressure ABN Amro's board at its annual meeting tomorrow to break up the bank. In an interview, founder Chris Hohn urged ABN Amro to accept Royal Bank's bid and scrap the LaSalle sale.
Royal Bank's Goodwin has a history of winning fights, having beaten Edinburgh-based rival Bank of Scotland in 2000 for National Westminster Bank Plc. NatWest shareholders accepted Royal Bank's hostile 23.6 billion-pound ($46.8 billion) offer after a five-month battle.
``With Royal Bank now involved, it's going into a longer timescale,'' said Julian Chillingworth, who helps manage $21 billion at London-based Rathbone Brothers Plc and holds Barclays shares. ``We don't expect it to be resolved soon.''
`Deconstruction'
When the accord with Barclays was announced April 23, ABN Amro CEO Rijkman Groenink said the three banks were ``out for deconstruction'' of ABN Amro.
Royal Bank would probably hold on to ABN Amro's Asian, North American and corporate-banking business, Stephen Andrews, an analyst at UBS AG in London, wrote in a note April 16. The LaSalle unit would fit with Royal Bank's Citizens U.S. unit.
Under ABN Amro's agreement to sell LaSalle to Charlotte, North Carolina-based Bank of America, a counter-bidder has 14 days to submit a higher offer in cash. Bank of America then has five days to match the bid.
Goodwin said at a press conference in Edinburgh today he will stick by Santander and Fortis in the joint bid and is interested in ABN Amro's units in Asia as well as in the U.S.
LaSalle ``is one of the key issues,'' Goodwin said, adding that he asked ABN Amro for guidance on terminating its agreement to sell the Midwestern bank. He declined to answer how the group will finance the transaction, saying: ``We are very confident our proposals are readily affordable. We've got the cash.''
`Battle Looms'
``It's turning into a battle,'' said Pieter Wind, head of securities at ING Private Banking in Amsterdam, which oversees $14.9 billion, including ABN Amro shares.
Buying ABN Amro would help Santander Chairman Emilio Botin expand into Italy and double the Spanish lender's market share in Brazil, where it's the second-biggest foreign-owned bank behind ABN Amro, according to Andrews.
Both Santander, Spain's largest bank, and ABN Amro hold stakes in Capitalia SpA, Italy's No. 4 lender. The Dutch bank bought Italy's Banca Antonveneta at the beginning of last year.
Fortis, Belgium's biggest financial-services company, which is based in Brussels and the Dutch city of Utrecht, would be able to create a regional banking network with the Dutch businesses of ABN Amro. Fortis, run by Jean-Paul Votron, may keep ABN Amro's asset-management arm, Andrews wrote.
``We continue to follow developments with close attention,'' Tobias Oudejans, a spokesman for the Dutch central bank, said in an interview today. The central bank said April 18 a joint offer would be more complicated and risky than a takeover by a single bank.
Dutch shareholder association VEB said in a statement that the group's demands, including due diligence and keeping LaSalle within ABN Amro, are ``reasonable'' and it will ask the Dutch bank to comply with them.
`Predator to Prey'
Barclays may switch ``from predator to prey'' if it fails to win ABN Amro, said Howard Wheeldon, senior strategist for BGC Partners, a London-based brokerage firm.
Merrill Lynch & Co. is advising the Royal Bank of Scotland group. ABN Amro is being advised by Lehman Brothers Holdings Inc., Morgan Stanley, N.M. Rothschild & Sons Ltd., UBS and its own investment bank. Morgan Stanley and UBS each provided a fairness opinion to the management board. Goldman Sachs Group Inc. gave a fairness opinion to ABN Amro's supervisory board.
Barclays was advised by Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, JPMorgan Cazenove and Lazard Ltd., as well as Barclays Capital.
``ABN Amro has let slip the dogs of war and getting them back in the cage is going to be extremely difficult,'' Bear Stearns Cos. analyst Christopher Wheeler said in an interview.
Monday, April 23, 2007
ABN Amro and Barclays Agree to Merge
ABN Amro and Barclays PLC announced Monday they have agreed to merge in one of the largest cross-border combinations in European banking history.
Barclays offered $49.25 for each ABN share, slightly lower than Friday's closing price of $49.38, the banks said. As part of the deal, ABN announced it is selling its U.S. unit LaSalle Bank to Bank of America Corp. for $21 billion in cash.
News reports put the value of the merger at around $95 billion.
"The proposed merger of ABN Amro and Barclays will create a strong and competitive combination for its clients with superior products and extensive distribution," the banks said in a statement. "The merged group is expected to generate significant and sustained future incremental earnings growth for shareholders."
The banks said the merger would create a single bank, headquartered in Amsterdam, with 47 million customers worldwide.
For each share, ABN Amro shareholders will be offered 3.225 ordinary shares in the new group, to be called Barclays PLC.
The group said it expected to save $4.8 billion annually in synergies by 2010
Barclays' John Varley will be the chief executive officer, and Bob Diamond will be president. The new board will initially consist of 10 members from Barclays and nine members from ABN AMRO. Arthur Martinez, chairman of ABN Amro's supervisory board, was will be nominated as chairman.
No role was mentioned in the new group for Rijkman Groenink, ABN Amro's chief for the last seven years, a period when major shareholders judged the bank's holdings to have underperformed.
The merger was expected to be completed during the fourth quarter of this year, the banks said.
Barclays offered $49.25 for each ABN share, slightly lower than Friday's closing price of $49.38, the banks said. As part of the deal, ABN announced it is selling its U.S. unit LaSalle Bank to Bank of America Corp. for $21 billion in cash.
News reports put the value of the merger at around $95 billion.
"The proposed merger of ABN Amro and Barclays will create a strong and competitive combination for its clients with superior products and extensive distribution," the banks said in a statement. "The merged group is expected to generate significant and sustained future incremental earnings growth for shareholders."
The banks said the merger would create a single bank, headquartered in Amsterdam, with 47 million customers worldwide.
For each share, ABN Amro shareholders will be offered 3.225 ordinary shares in the new group, to be called Barclays PLC.
The group said it expected to save $4.8 billion annually in synergies by 2010
Barclays' John Varley will be the chief executive officer, and Bob Diamond will be president. The new board will initially consist of 10 members from Barclays and nine members from ABN AMRO. Arthur Martinez, chairman of ABN Amro's supervisory board, was will be nominated as chairman.
No role was mentioned in the new group for Rijkman Groenink, ABN Amro's chief for the last seven years, a period when major shareholders judged the bank's holdings to have underperformed.
The merger was expected to be completed during the fourth quarter of this year, the banks said.
Friday, April 20, 2007
Starhill REIT to buy more 'iconic' properties, go global
Tan Sri Francis Yeoh, managing director of YTL Corp Bhd, said the Louis Vuittonstore in Starhill Gallery here rakes in about US$4,500 (RM13,830) sales per sqft a year, beating the most successful retail stores in the top area in NewYork. Comparatively, he said the newly-opened Apple outlet on Fifth Avenue ismaking US$4,032 sales per sq ft per year, while Tiffany & Co is doing US$2,666."So we beat them today. Yet our rental in KL is only RM40 per sq ft and thesales have already beaten New York. In Hong Kong, the rental is RM600 per sq ft.So we can see the yield potential per unitholder would have," he added.
STARHILL Real Estate Investment Trust (REIT) will buy more "iconic" propertiesthis year to grow the trust, but at the same time it is exporting the brand andexpertise in managing luxurious malls to boost earnings, its major owner said."We are going global with Starhill Gallery now. Locally, any property that'siconic will be owned by Starhill REIT," said Tan Sri Francis Yeoh, managingdirector of YTL Corp Bhd.Starhill REIT is managed by Pintar Project Sdn Bhd, a subsidiary of YTL Corp.He said the group still has about RM2 billion to RM3 billion worth of "iconic"properties in the likes of Ritz-Carlton Residences that can be sold into thetrust in future.The group this week signed with Middle East property developer ETA Star PropertyDevelopers LLC to launch the Starhill Gallery concept in Dubai. YTL is not investing capital in the project. Instead, it will earn from a RM5.2million licensing fee, as well as an annual brand management fee under a 4 percent gross profit-sharing arrangement of the new mall. Yeoh said the group is now checking the regulatory guidelines here so that thisstream of management income can flow into the trust. "Asia is very brand-centric, more than many Western capitals. For us to developthis in Middle East and Asia, we are focusing on all the right areas," Yeoh toldreporters after an annual meeting with Starhill REIT unitholders in Kuala Lumpuryesterday.He said the Louis Vuitton store in Starhill Gallery here rakes in about US$4,500(RM13,830) sales per sq ft a year, beating the most successful retail stores inthe top area in New York. Comparatively, he said the newly-opened Apple outlet on Fifth Avenue is makingUS$4,032 sales per sq ft per year, while Tiffany & Co is doing US$2,666. "So we beat them today. Yet our rental in KL is only RM40 per sq ft and thesales have already beaten New York. In Hong Kong, the rental is RM600 per sq ft.So we can see the yield potential per unitholder would have," he added. YTL is also evaluating requests to replicate the success model of StarhillGallery in other major cities, including London, Shanghai, Moscow, Jakarta, Omanand Abu Dhabi. "Getting yield without the expenses is awesome. If I can have 10 more similarprojects that's incredible. That's what Four Seasons and Ritz Carlton are allabout. They don't own the assets but just manage for a fee," Yeoh said.Still, he said YTL's model is more flexible. "We can either own the property or just manage it. In other cities, we can alsotake a stake in an existing mall and turn it into a Starhill," he said.
STARHILL Real Estate Investment Trust (REIT) will buy more "iconic" propertiesthis year to grow the trust, but at the same time it is exporting the brand andexpertise in managing luxurious malls to boost earnings, its major owner said."We are going global with Starhill Gallery now. Locally, any property that'siconic will be owned by Starhill REIT," said Tan Sri Francis Yeoh, managingdirector of YTL Corp Bhd.Starhill REIT is managed by Pintar Project Sdn Bhd, a subsidiary of YTL Corp.He said the group still has about RM2 billion to RM3 billion worth of "iconic"properties in the likes of Ritz-Carlton Residences that can be sold into thetrust in future.The group this week signed with Middle East property developer ETA Star PropertyDevelopers LLC to launch the Starhill Gallery concept in Dubai. YTL is not investing capital in the project. Instead, it will earn from a RM5.2million licensing fee, as well as an annual brand management fee under a 4 percent gross profit-sharing arrangement of the new mall. Yeoh said the group is now checking the regulatory guidelines here so that thisstream of management income can flow into the trust. "Asia is very brand-centric, more than many Western capitals. For us to developthis in Middle East and Asia, we are focusing on all the right areas," Yeoh toldreporters after an annual meeting with Starhill REIT unitholders in Kuala Lumpuryesterday.He said the Louis Vuitton store in Starhill Gallery here rakes in about US$4,500(RM13,830) sales per sq ft a year, beating the most successful retail stores inthe top area in New York. Comparatively, he said the newly-opened Apple outlet on Fifth Avenue is makingUS$4,032 sales per sq ft per year, while Tiffany & Co is doing US$2,666. "So we beat them today. Yet our rental in KL is only RM40 per sq ft and thesales have already beaten New York. In Hong Kong, the rental is RM600 per sq ft.So we can see the yield potential per unitholder would have," he added. YTL is also evaluating requests to replicate the success model of StarhillGallery in other major cities, including London, Shanghai, Moscow, Jakarta, Omanand Abu Dhabi. "Getting yield without the expenses is awesome. If I can have 10 more similarprojects that's incredible. That's what Four Seasons and Ritz Carlton are allabout. They don't own the assets but just manage for a fee," Yeoh said.Still, he said YTL's model is more flexible. "We can either own the property or just manage it. In other cities, we can alsotake a stake in an existing mall and turn it into a Starhill," he said.
Wednesday, April 18, 2007
China Stocks Drop Most in 7 Weeks on Rate Concern
April 19 (Bloomberg) -- China's stocks fell, set for their biggest fall in seven weeks, on speculation delayed economic reports to be released today will lead to higher interest rates. China Vanke Co. declined.
``The market is concerned that the GDP and other economic figures will be stronger than expected and prompt the government to raise interest rates,'' said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``That's providing a good excuse to sell shares in a market that has risen so much.''
The benchmark CSI 300 Index, which tracks yuan- denominated A shares listed on China's two exchanges, dropped 89.90, or 2.7 percent, to 3214.60 as of 11:30 a.m. local-time break, set for the biggest decline since March 1. The gauge had risen 62 percent this year as of yesterday.
The 14-day relative strength measure for the 300 index, a moving average based on whether the gauge rose or fell, was at 88 yesterday. A reading above 70 signals to some analysts the index is poised to fall.
China has postponed the announcement of its first-quarter gross domestic product until 3 p.m. in Beijing today from 10 a.m., according to the State Council. That may indicate it is preparing to report faster-than-expected growth, economists said.
Higher interest rates curb corporate earnings by raising borrowing costs.
China Vanke, the nation's biggest property developer, slid 0.98 yuan, or 5.2 percent, to 17.78. Citic Securities Co., China's biggest publicly traded brokerage, dropped 1.57 yuan, or 3.2 percent, to 47.90.
Sinopec, China Merchants
China Petroleum & Chemical Corp., Asia's biggest oil refiner, also known as Sinopec, declined 0.48 yuan, or 4.2 percent, to 10.92. China Merchants Bank Co., the nation's third-biggest publicly traded lender, lost 0.39 yuan, or 2 percent, to 19.13.
China's gross domestic product expanded 10.4 percent from a year earlier, according to the median estimate of 24 economists surveyed by Bloomberg News. The economy grew 10.7 percent in 2006, the fastest growth since 1995.
China's consumer price index, a key indicator for inflation, accelerated to 3.3 percent last month, the China Securities Journal reported on April 10, citing unidentified people. The median estimate in a survey by Bloomberg News is 2.7 percent. Consumer prices rose 2.7 percent in February from a year earlier after gaining 2.2 percent in January.
`Torrid Figures'
``This reinforces our suspicion that the first-quarter figures will be torrid,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. If today's inflation number is higher than expected, ``the bank could raise interest rates as soon as tonight,'' he said.
The yield on the benchmark seven-year government bond yesterday rose 9 basis points, or 0.09 percentage point, to close at 3.35 percent, a two-month high, according to China interbank bond market.
China's central bank on April 5 ordered banks to set aside more money as reserves for the sixth time in less than a year to slow inflation as economic growth shows no sign of moderating. It also raised interest rates last month to an eight-year high.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, slid 2.4 percent to 3526. The Shenzhen Composite Index, which covers the smaller one, retreated 2.9 percent to 980.52.
Elsewhere, ZTE Corp., China's biggest publicly traded phone-equipment maker, added 0.05 yuan, or 0.1 percent, to 48.15. The company increased profit for the first time in four quarters as the company won more contracts from carriers outside its home market. Fourth-quarter net income rose 1.4 percent to 357 million yuan ($46.2 million) from 352 million yuan a year earlier.
``The market is concerned that the GDP and other economic figures will be stronger than expected and prompt the government to raise interest rates,'' said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``That's providing a good excuse to sell shares in a market that has risen so much.''
The benchmark CSI 300 Index, which tracks yuan- denominated A shares listed on China's two exchanges, dropped 89.90, or 2.7 percent, to 3214.60 as of 11:30 a.m. local-time break, set for the biggest decline since March 1. The gauge had risen 62 percent this year as of yesterday.
The 14-day relative strength measure for the 300 index, a moving average based on whether the gauge rose or fell, was at 88 yesterday. A reading above 70 signals to some analysts the index is poised to fall.
China has postponed the announcement of its first-quarter gross domestic product until 3 p.m. in Beijing today from 10 a.m., according to the State Council. That may indicate it is preparing to report faster-than-expected growth, economists said.
Higher interest rates curb corporate earnings by raising borrowing costs.
China Vanke, the nation's biggest property developer, slid 0.98 yuan, or 5.2 percent, to 17.78. Citic Securities Co., China's biggest publicly traded brokerage, dropped 1.57 yuan, or 3.2 percent, to 47.90.
Sinopec, China Merchants
China Petroleum & Chemical Corp., Asia's biggest oil refiner, also known as Sinopec, declined 0.48 yuan, or 4.2 percent, to 10.92. China Merchants Bank Co., the nation's third-biggest publicly traded lender, lost 0.39 yuan, or 2 percent, to 19.13.
China's gross domestic product expanded 10.4 percent from a year earlier, according to the median estimate of 24 economists surveyed by Bloomberg News. The economy grew 10.7 percent in 2006, the fastest growth since 1995.
China's consumer price index, a key indicator for inflation, accelerated to 3.3 percent last month, the China Securities Journal reported on April 10, citing unidentified people. The median estimate in a survey by Bloomberg News is 2.7 percent. Consumer prices rose 2.7 percent in February from a year earlier after gaining 2.2 percent in January.
`Torrid Figures'
``This reinforces our suspicion that the first-quarter figures will be torrid,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. If today's inflation number is higher than expected, ``the bank could raise interest rates as soon as tonight,'' he said.
The yield on the benchmark seven-year government bond yesterday rose 9 basis points, or 0.09 percentage point, to close at 3.35 percent, a two-month high, according to China interbank bond market.
China's central bank on April 5 ordered banks to set aside more money as reserves for the sixth time in less than a year to slow inflation as economic growth shows no sign of moderating. It also raised interest rates last month to an eight-year high.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, slid 2.4 percent to 3526. The Shenzhen Composite Index, which covers the smaller one, retreated 2.9 percent to 980.52.
Elsewhere, ZTE Corp., China's biggest publicly traded phone-equipment maker, added 0.05 yuan, or 0.1 percent, to 48.15. The company increased profit for the first time in four quarters as the company won more contracts from carriers outside its home market. Fourth-quarter net income rose 1.4 percent to 357 million yuan ($46.2 million) from 352 million yuan a year earlier.
Japanese Stocks Fall; Exporters Decline After Dollar Weakens
April 19 (Bloomberg) -- Japanese shares fell as the dollar weakened for a third day against the yen, eroding the value of dollar-denominated sales at exporters including Canon Inc.
Oji Paper Co. and Nippon Paper Group Inc. dropped after the Nikkei newspaper reported the companies may miss their earnings estimates because of higher prices for materials.
The Nikkei 225 Stock Average slid 179.47, or 1 percent, to 17,487.86 as of 9:33 a.m. in Tokyo. The broader Topix index declined 15.05, or 0.9 percent, to 1715.66.
The yen recently traded at 118.28 against the dollar, compared with 119.74 yen on April 16. A weaker U.S. currency means Japanese exporters get less for their dollar-denominated sales while their products become less competitive.
Canon, the world's biggest digital camera maker, dropped 110 yen, or 1.7 percent, to 6,540. Sony Corp. the world's No. 1 maker of video-game players, declined 80 yen, or 1.2 percent, to 6,480.
Canon made about one third of its sales in North America in the last business year and the U.S. was the largest overseas market for Sony in the fiscal year ended March 2006.
Toyota, the world's second-largest automaker, lost 70 yen, or 1 percent, to 7,260. Toyota had more than one third of its sales in North America.
Oji Paper, Japan's largest paper producer, slid 17 yen, or 2.7 percent, to 620. Nippon Paper, the nation's second biggest,
Oji Paper's pretax profit appears to have declined 9 percent to about 64.5 billion yen ($545 million), about 3.5 billion yen less than a prior estimate, the Nikkei reported. Nippon Paper's profit may have dropped 7 percent to about 46 billion yen, or about 1 billion short of a previous projection, the newspaper said.
In Japan, at least 102 companies in the 1730-member Topix index are scheduled to report earnings in the following two weeks.
Oji Paper Co. and Nippon Paper Group Inc. dropped after the Nikkei newspaper reported the companies may miss their earnings estimates because of higher prices for materials.
The Nikkei 225 Stock Average slid 179.47, or 1 percent, to 17,487.86 as of 9:33 a.m. in Tokyo. The broader Topix index declined 15.05, or 0.9 percent, to 1715.66.
The yen recently traded at 118.28 against the dollar, compared with 119.74 yen on April 16. A weaker U.S. currency means Japanese exporters get less for their dollar-denominated sales while their products become less competitive.
Canon, the world's biggest digital camera maker, dropped 110 yen, or 1.7 percent, to 6,540. Sony Corp. the world's No. 1 maker of video-game players, declined 80 yen, or 1.2 percent, to 6,480.
Canon made about one third of its sales in North America in the last business year and the U.S. was the largest overseas market for Sony in the fiscal year ended March 2006.
Toyota, the world's second-largest automaker, lost 70 yen, or 1 percent, to 7,260. Toyota had more than one third of its sales in North America.
Oji Paper, Japan's largest paper producer, slid 17 yen, or 2.7 percent, to 620. Nippon Paper, the nation's second biggest,
Oji Paper's pretax profit appears to have declined 9 percent to about 64.5 billion yen ($545 million), about 3.5 billion yen less than a prior estimate, the Nikkei reported. Nippon Paper's profit may have dropped 7 percent to about 46 billion yen, or about 1 billion short of a previous projection, the newspaper said.
In Japan, at least 102 companies in the 1730-member Topix index are scheduled to report earnings in the following two weeks.
YTL Corporation underweight-target price RM9.15
YTL Corp Launches Starhill Gallery in Dubai
"Although Dubai is known for its super mega shopping malls, we are confidentthat Starhill Gallery will create a mark for itself with its distinctivedesign, architecture and the unique shopping experience it will offer. I am gladthat ETA Star has chosen Starhill Gallery as a differentiator against the othermalls in Dubai," said Tan Sri (Dr) Francis Yeoh, Managing Director of YTL Corp.
YTL Corp Launches Starhill Gallery in Dubai Kuala Lumpur, 17 April 2007 YTL Corporation Berhad (YTL Corp) announced today the signing of an agreement tolaunch the celebrated Starhill Gallery concept in the Middle East. The agreementwas signed by Pintar Projek Sdn Bhd (Pintar Projek), a subsidiary of YTL Corp,and ETA Star Property Developers LLC (ETA Star), a leading property developer inthe United Arab Emirates (UAE). Pintar Projek is also the manager of StarhillReal Estate Investment Trust (Starhill REIT), which owns Starhill Gallery inMalaysia.Dubai's Starhill Gallery will be part of the US$410 million (RM1.4 billion)Starhill Towers & Gallery complex being developed by ETA Star. With a totalbuilt up area of approximately 1.6 million square feet, the Starhill Towers &Gallery will comprise state-of-the-art freehold offices, a 5-star hotel andDubai's own Starhill Gallery, all housed within a twin-tower waterfrontdevelopment in Dubai's Business Bay, in the vicinity of The Burj Dubai, whichwill be the tallest building in the world (now under construction). StarhillGallery Dubai will take up to 250,000 sq. ft.Starhill Gallery Dubai will be the first development outside Malaysia to carrythe unique, world-renowned Starhill brand conceptualised by YTL Corp, which hasredefined the specialised luxury retail niche market and unequivocally affirmedKuala Lumpur's place on the luxury retail map. There is much interest fromglobal real estate investors to house a Starhill Gallery in other key capitalcities around the world including London, Shanghai and Moscow, which arepresently being evaluated.A treasure trove of rich experiences, Malaysia's Starhill Gallery houses theworld's leading luxury brands in four unique, themed zones: Feast Village (foriconic restaurants), the Indulge Zone (for exclusive brands such as LouisVuitton), the Adorn Zone (for the world's most luxurious watch and jewellerybrands, including Jaeger-LeCoultre and Van Cleef & Arpels) and the Pamper Zone(for exclusive beauty and wellness related boutiques and spas, housed in a50,000 sq.ft. dedicated urban retreat). Pintar Projek expects to see positive contributions arising from licensing feesof approximately RM5.2 million (US$1.5 million), as well as an annual brandmanagement fee under a 4% gross profit-sharing arrangement for use of theStarhill Gallery brand for the new mall. There are no capital expenditurerequirements for YTL Corp. Pintar Projek will provide brand management servicesto ETA Star to ensure the integrity of the Starhill Gallery brand, whichincludes sharing expertise on architects and consultants to be engaged at thedesign and construction stage and product and service lines and tenant mix forthe mall thereafter, in line with Starhill Gallery in Kuala Lumpur.Tan Sri Dato' (Dr) Francis Yeoh Sock Ping, Managing Director of YTL Corp andChief Executive Officer of Pintar Projek, said, "We are proud to be associatedwith ETA Star, who has an impeccable record of developing billion-dollar premiumproperties in prime locations. "Although Dubai is known for its super mega shopping malls, we are confidentthat Starhill Gallery will create a mark for itself with its distinctive design,architecture and the unique shopping experience it will offer. I am glad thatETA Star has chosen Starhill Gallery as a differentiator against the other mallsin Dubai."Abid A. Junaid, Executive Director, ETA Star, said, "We are pleased to be theproperty developer for a project that houses the unique Starhill Gallery luxurymall owned by the Malaysian conglomerate YTL Corporation. The mall will be agallery of luxurious experiences in fashion, food, beauty and art and consistsof several dedicated zones."Commenting on the wider implications of this venture for the YTL Corp group, TanSri Dato' (Dr) Francis Yeoh also said, "I am looking forward to increasedopportunities in the Middle East and North Africa (MENA), especially in theareas of water, cement, power, retail and property."Construction of the Starhill Towers & Gallery is set to commence in the thirdquarter of 2007 and the project is scheduled for completion in the secondquarter of 2010. ETA Star has successfully launched projects close to 10 million sq ft in variousmaster development communities like Dubai Marina, Jumeriah Lake Towers, DubaiInternational Financial Centre, Business Bay and International Media ProductionZone. ETA Star's portfolio includes pioneering projects such as 23 Marina, AlManara, Liberty House, Gold Crest Executive, The Palm Jumeriah Residence and Spaand Grandeur Residences, The Summit, Pearl Residence, The Belvedere and GoldCrest Views-2. ETA Star is also carrying out similar projects in Oman, Qatar,Pakistan and India.
Listed on the Main Board of Bursa Malaysia Securities Berhad since 1985, YTLCorp is an integrated infrastructure developer with core activities includingpower generation and transmission, owning and managing water and seweragefacilities, property and hotel development, cement manufacturing, constructioncontracting and e-commerce initiatives. In line with its strategy of acquiring regulated assets operating underlong-term concessions, the Group owns a 33.5% stake in ElectraNet in Australia,a 100% stake in Wessex Water in the United Kingdom and a 35% stake in P.T. JawaPower in Indonesia in 2004. YTL Corp also has cement manufacturing, propertydevelopment and hotel interests in Singapore, Indonesia and Thailand.
ABOUT STARHILL REIT Listed on 16 December 2005 on the Main Board of Bursa Malaysia SecuritiesBerhad, Starhill REIT's principal investment strategy is to invest in adiversified portfolio of income-producing real estate, used primarily forretail, office and hospitality purposes, with particular focus on retail andhotel properties. Starhill REIT currently owns three prime properties situatedin Kuala Lumpur's Golden Triangle, namely, Starhill Gallery and the adjoining JWMarriott Hotel Kuala Lumpur, and 137 parcels and 2 accessory parcels of retail,office, storage and other spaces within Lot 10 Shopping Centre. Pintar Projek, Starhill REIT's manager, was incorporated in 1994 and is a70%-owned subsidiary of YTL Land Sdn Bhd, which in turn is wholly-ownedsubsidiary of YTL Corp.
"Although Dubai is known for its super mega shopping malls, we are confidentthat Starhill Gallery will create a mark for itself with its distinctivedesign, architecture and the unique shopping experience it will offer. I am gladthat ETA Star has chosen Starhill Gallery as a differentiator against the othermalls in Dubai," said Tan Sri (Dr) Francis Yeoh, Managing Director of YTL Corp.
YTL Corp Launches Starhill Gallery in Dubai Kuala Lumpur, 17 April 2007 YTL Corporation Berhad (YTL Corp) announced today the signing of an agreement tolaunch the celebrated Starhill Gallery concept in the Middle East. The agreementwas signed by Pintar Projek Sdn Bhd (Pintar Projek), a subsidiary of YTL Corp,and ETA Star Property Developers LLC (ETA Star), a leading property developer inthe United Arab Emirates (UAE). Pintar Projek is also the manager of StarhillReal Estate Investment Trust (Starhill REIT), which owns Starhill Gallery inMalaysia.Dubai's Starhill Gallery will be part of the US$410 million (RM1.4 billion)Starhill Towers & Gallery complex being developed by ETA Star. With a totalbuilt up area of approximately 1.6 million square feet, the Starhill Towers &Gallery will comprise state-of-the-art freehold offices, a 5-star hotel andDubai's own Starhill Gallery, all housed within a twin-tower waterfrontdevelopment in Dubai's Business Bay, in the vicinity of The Burj Dubai, whichwill be the tallest building in the world (now under construction). StarhillGallery Dubai will take up to 250,000 sq. ft.Starhill Gallery Dubai will be the first development outside Malaysia to carrythe unique, world-renowned Starhill brand conceptualised by YTL Corp, which hasredefined the specialised luxury retail niche market and unequivocally affirmedKuala Lumpur's place on the luxury retail map. There is much interest fromglobal real estate investors to house a Starhill Gallery in other key capitalcities around the world including London, Shanghai and Moscow, which arepresently being evaluated.A treasure trove of rich experiences, Malaysia's Starhill Gallery houses theworld's leading luxury brands in four unique, themed zones: Feast Village (foriconic restaurants), the Indulge Zone (for exclusive brands such as LouisVuitton), the Adorn Zone (for the world's most luxurious watch and jewellerybrands, including Jaeger-LeCoultre and Van Cleef & Arpels) and the Pamper Zone(for exclusive beauty and wellness related boutiques and spas, housed in a50,000 sq.ft. dedicated urban retreat). Pintar Projek expects to see positive contributions arising from licensing feesof approximately RM5.2 million (US$1.5 million), as well as an annual brandmanagement fee under a 4% gross profit-sharing arrangement for use of theStarhill Gallery brand for the new mall. There are no capital expenditurerequirements for YTL Corp. Pintar Projek will provide brand management servicesto ETA Star to ensure the integrity of the Starhill Gallery brand, whichincludes sharing expertise on architects and consultants to be engaged at thedesign and construction stage and product and service lines and tenant mix forthe mall thereafter, in line with Starhill Gallery in Kuala Lumpur.Tan Sri Dato' (Dr) Francis Yeoh Sock Ping, Managing Director of YTL Corp andChief Executive Officer of Pintar Projek, said, "We are proud to be associatedwith ETA Star, who has an impeccable record of developing billion-dollar premiumproperties in prime locations. "Although Dubai is known for its super mega shopping malls, we are confidentthat Starhill Gallery will create a mark for itself with its distinctive design,architecture and the unique shopping experience it will offer. I am glad thatETA Star has chosen Starhill Gallery as a differentiator against the other mallsin Dubai."Abid A. Junaid, Executive Director, ETA Star, said, "We are pleased to be theproperty developer for a project that houses the unique Starhill Gallery luxurymall owned by the Malaysian conglomerate YTL Corporation. The mall will be agallery of luxurious experiences in fashion, food, beauty and art and consistsof several dedicated zones."Commenting on the wider implications of this venture for the YTL Corp group, TanSri Dato' (Dr) Francis Yeoh also said, "I am looking forward to increasedopportunities in the Middle East and North Africa (MENA), especially in theareas of water, cement, power, retail and property."Construction of the Starhill Towers & Gallery is set to commence in the thirdquarter of 2007 and the project is scheduled for completion in the secondquarter of 2010. ETA Star has successfully launched projects close to 10 million sq ft in variousmaster development communities like Dubai Marina, Jumeriah Lake Towers, DubaiInternational Financial Centre, Business Bay and International Media ProductionZone. ETA Star's portfolio includes pioneering projects such as 23 Marina, AlManara, Liberty House, Gold Crest Executive, The Palm Jumeriah Residence and Spaand Grandeur Residences, The Summit, Pearl Residence, The Belvedere and GoldCrest Views-2. ETA Star is also carrying out similar projects in Oman, Qatar,Pakistan and India.
Listed on the Main Board of Bursa Malaysia Securities Berhad since 1985, YTLCorp is an integrated infrastructure developer with core activities includingpower generation and transmission, owning and managing water and seweragefacilities, property and hotel development, cement manufacturing, constructioncontracting and e-commerce initiatives. In line with its strategy of acquiring regulated assets operating underlong-term concessions, the Group owns a 33.5% stake in ElectraNet in Australia,a 100% stake in Wessex Water in the United Kingdom and a 35% stake in P.T. JawaPower in Indonesia in 2004. YTL Corp also has cement manufacturing, propertydevelopment and hotel interests in Singapore, Indonesia and Thailand.
ABOUT STARHILL REIT Listed on 16 December 2005 on the Main Board of Bursa Malaysia SecuritiesBerhad, Starhill REIT's principal investment strategy is to invest in adiversified portfolio of income-producing real estate, used primarily forretail, office and hospitality purposes, with particular focus on retail andhotel properties. Starhill REIT currently owns three prime properties situatedin Kuala Lumpur's Golden Triangle, namely, Starhill Gallery and the adjoining JWMarriott Hotel Kuala Lumpur, and 137 parcels and 2 accessory parcels of retail,office, storage and other spaces within Lot 10 Shopping Centre. Pintar Projek, Starhill REIT's manager, was incorporated in 1994 and is a70%-owned subsidiary of YTL Land Sdn Bhd, which in turn is wholly-ownedsubsidiary of YTL Corp.
Dutch bank chief warns over ABN break-up
The Dutch Central Bank (DNB) on Wednesday threatened to stir further controversy over the destiny of ABN Amro when it warned that an offer by a consortium proposing the bank’s break-up would “increase risks and complications.”
The strongly-worded statement came in the wake of an earlier outburst by Nout Wellink, central bank governor, who said an attack on ABN by an activist UK hedge fund demanding a break-up was “a bridge too far”.
The strongly-worded statement came in the wake of an earlier outburst by Nout Wellink, central bank governor, who said an attack on ABN by an activist UK hedge fund demanding a break-up was “a bridge too far”.
Monday, April 16, 2007
ABN Amro Net Income Rises 31%, Helped by Sale of Unit
April 16 (Bloomberg) -- ABN Amro Holding NV, the target of the largest takeover battle in the banking industry, said first- quarter profit increased 31 percent, helped by a gain from the sale of its U.S. mortgage business.
Net income rose to 1.31 billion euros ($1.78 billion), or 71 cents a share, from 1 billion euros, or 53 cents, a year earlier, the company said in a statement today. Earnings were boosted by a 97 million-euro gain from the sale of its U.S. mortgage unit and a seven-fold jump in income at the European division.
Amsterdam-based ABN Amro published earnings 10 days early as Barclays Plc and a group led by Royal Bank of Scotland Group Plc compete to buy the company, the largest Dutch bank. Chief Executive Officer Rijkman Groenink said earnings are ahead of the company's full-year goal of 2.30 euros per share.
``ABN Amro wants to send two messages by reporting earnings early,'' said Dirk Peeters, an analyst at KBC Securities in Brussels, in a telephone interview. ``First, 2007 will be a year of delivery. Second, any bid should reflect the good results.'' Peeters recommends investors ``accumulate'' the shares.
Royal Bank of Scotland said April 13 it may offer to buy ABN Amro with Santander Central Hispano SA and Fortis. The Dutch bank, which last month started exclusive talks with Barclays, said the three companies have asked it for ``exploratory talks'' and for access to the same information given to Barclays.
Shares Rise
Shares of ABN Amro rose 2.12 euros, or 6.3 percent, to 35.77 euros at 14:17 p.m. in Amsterdam, valuing the company at about 68 billion euros. The stock, which trailed European competitors for most of the past five years, has gained 31 percent since March 16, the last trading day before Barclays, the No. 3 U.K. bank, first announced its approach.
``We believe there is a chance of more joint bids coming to the market,'' London-based analysts at Keefe, Bruyette & Woods Ltd. including Jean-Pierre Lambert wrote in a note today. ``An optimal consortium could generate an offer price of more than 45 euros per share,'' they said. KBW raised its price target on ABN shares to 39 euros from 37 euros and has an ``outperform'' recommendation on the stock.
A purchase of ABN Amro would give the buyer access to some 4,600 branches in 53 countries, with the Netherlands, Italy, the U.S. Midwest and Brazil being ABN's Amro's largest markets. The bank generated half its revenue from interest income last year, a quarter from commissions and most of the remainder from trading and investment banking.
Hedge Fund Pressure
TCI Fund Management LLP, the London-based hedge fund that called for a breakup of ABN Amro before the negotiations with Barclays emerged, said in an April 13 statement that it welcomes the approach from the Royal Bank group.
``It is our expectation that this approach will be considered friendly'' and ABN Amro should provide the new suitors with the same information that it gave Barclays, said TCI Managing Partner Christopher Hohn.
ABN Amro has struggled to control burgeoning expenses tied to last year's acquisition of Italy's Banca Antonveneta SpA and provisions for risky loans. In the past year, Groenink shed ABN Amro's futures business, the Bouwfonds property management units and the bank's U.S. mortgage servicing operations. The company also scaled back its investment banking activities last year.
Operating expenses rose 6 percent last quarter to 3.99 billion euros, compared with a 10 percent increase in operating income, to 5.99 billion euros, the bank said. Loan impairment provisions rose 27 percent to 417 million euros.
Royal Roots
Profit at the Dutch unit fell 4.8 percent to 299 million euros. At the Europe division, excluding Antonveneta, earnings increased to 131 million euros from 18 million euros. Profit at the Latin American unit rose 34 percent to 177 million euros.
The extra yield, or spread, investors demand to buy ABN Amro's 1 billion-euro 4.31 percent perpetual bonds instead of government debt fell 2 basis points to 98 basis points as of 1:29 p.m. in London. The spread on the bonds fell from 115 basis points on March 16, according to RBC Capital Markets prices
ABN Amro also said today that is ``exploring all possible options'' to resolve ``ongoing criminal investigations relating to its dollar clearing activities, OFAC compliance procedures and other Bank Secrecy Act compliance matters.''
ABN Amro has roots stretching back to a trading company set up by King Willem I in 1824. The present bank was created by the 1991 merger of Algemene Bank Nederland NV (ABN) and Amsterdam- Rotterdam Bank NV (Amro).
Net income rose to 1.31 billion euros ($1.78 billion), or 71 cents a share, from 1 billion euros, or 53 cents, a year earlier, the company said in a statement today. Earnings were boosted by a 97 million-euro gain from the sale of its U.S. mortgage unit and a seven-fold jump in income at the European division.
Amsterdam-based ABN Amro published earnings 10 days early as Barclays Plc and a group led by Royal Bank of Scotland Group Plc compete to buy the company, the largest Dutch bank. Chief Executive Officer Rijkman Groenink said earnings are ahead of the company's full-year goal of 2.30 euros per share.
``ABN Amro wants to send two messages by reporting earnings early,'' said Dirk Peeters, an analyst at KBC Securities in Brussels, in a telephone interview. ``First, 2007 will be a year of delivery. Second, any bid should reflect the good results.'' Peeters recommends investors ``accumulate'' the shares.
Royal Bank of Scotland said April 13 it may offer to buy ABN Amro with Santander Central Hispano SA and Fortis. The Dutch bank, which last month started exclusive talks with Barclays, said the three companies have asked it for ``exploratory talks'' and for access to the same information given to Barclays.
Shares Rise
Shares of ABN Amro rose 2.12 euros, or 6.3 percent, to 35.77 euros at 14:17 p.m. in Amsterdam, valuing the company at about 68 billion euros. The stock, which trailed European competitors for most of the past five years, has gained 31 percent since March 16, the last trading day before Barclays, the No. 3 U.K. bank, first announced its approach.
``We believe there is a chance of more joint bids coming to the market,'' London-based analysts at Keefe, Bruyette & Woods Ltd. including Jean-Pierre Lambert wrote in a note today. ``An optimal consortium could generate an offer price of more than 45 euros per share,'' they said. KBW raised its price target on ABN shares to 39 euros from 37 euros and has an ``outperform'' recommendation on the stock.
A purchase of ABN Amro would give the buyer access to some 4,600 branches in 53 countries, with the Netherlands, Italy, the U.S. Midwest and Brazil being ABN's Amro's largest markets. The bank generated half its revenue from interest income last year, a quarter from commissions and most of the remainder from trading and investment banking.
Hedge Fund Pressure
TCI Fund Management LLP, the London-based hedge fund that called for a breakup of ABN Amro before the negotiations with Barclays emerged, said in an April 13 statement that it welcomes the approach from the Royal Bank group.
``It is our expectation that this approach will be considered friendly'' and ABN Amro should provide the new suitors with the same information that it gave Barclays, said TCI Managing Partner Christopher Hohn.
ABN Amro has struggled to control burgeoning expenses tied to last year's acquisition of Italy's Banca Antonveneta SpA and provisions for risky loans. In the past year, Groenink shed ABN Amro's futures business, the Bouwfonds property management units and the bank's U.S. mortgage servicing operations. The company also scaled back its investment banking activities last year.
Operating expenses rose 6 percent last quarter to 3.99 billion euros, compared with a 10 percent increase in operating income, to 5.99 billion euros, the bank said. Loan impairment provisions rose 27 percent to 417 million euros.
Royal Roots
Profit at the Dutch unit fell 4.8 percent to 299 million euros. At the Europe division, excluding Antonveneta, earnings increased to 131 million euros from 18 million euros. Profit at the Latin American unit rose 34 percent to 177 million euros.
The extra yield, or spread, investors demand to buy ABN Amro's 1 billion-euro 4.31 percent perpetual bonds instead of government debt fell 2 basis points to 98 basis points as of 1:29 p.m. in London. The spread on the bonds fell from 115 basis points on March 16, according to RBC Capital Markets prices
ABN Amro also said today that is ``exploring all possible options'' to resolve ``ongoing criminal investigations relating to its dollar clearing activities, OFAC compliance procedures and other Bank Secrecy Act compliance matters.''
ABN Amro has roots stretching back to a trading company set up by King Willem I in 1824. The present bank was created by the 1991 merger of Algemene Bank Nederland NV (ABN) and Amsterdam- Rotterdam Bank NV (Amro).
Saturday, April 14, 2007
U.S. Stocks Advance, Led by Merck, Drugmakers; SLM Shares Climb
April 13 (Bloomberg) -- The U.S. stock market posted its first back-to-back weekly gains since January on earnings that topped analysts' estimates and speculation takeovers will accelerate.
Merck & Co. led a rally in health-care shares, enabling the Standard & Poor's 500 Index to recoup all its losses from the Feb. 27 global equities rout, after the drugmaker's first-quarter profit beat projections. SLM Corp., known as Sallie Mae, jumped the most since at least 1983 on a report buyout firms may purchase the biggest U.S. provider of student loans for more than $20 billion.
Health-care and financial shares together made up three- quarters of the S&P 500's gain. First-quarter earnings among S&P 500 companies probably rose 3.1 percent, according to data compiled by Bloomberg.
``Earnings estimates on Wall Street are probably underestimating actual results,'' said Michael Vogelzang, who helps manage $2.4 billion in assets as chief investment officer at Boston Advisors in Boston. Meanwhile, ``if the market gets sloppy, we know private equity will go crazy buying stocks.''
The S&P 500 increased 5.05, or 0.4 percent, to 1452.85. The Dow Jones Industrial Average climbed 59.17, or 0.5 percent, to 12,612.13, leaving it 21 points shy of wiping out its Feb. 27 losses. The Nasdaq Composite Index added 11.62, or 0.5 percent, to 2491.94, helped by a surge in Cisco Systems Inc. shares.
Stocks yesterday resumed their April rally as takeover speculation and higher oil prices buoyed health-care and energy companies. For the week, the S&P 500 gained 0.6 percent, the Dow rose 0.4 percent and the Nasdaq advanced 0.8 percent.
Flagging Confidence
Benchmark indexes dipped briefly today after a private report showed a bigger-than-forecast drop in consumer confidence.
American consumers lost confidence in April for the third month in a row as they paid more for food and fuel. The Reuters/University of Michigan's preliminary index of sentiment declined to 85.3 in April from 88.4 a month earlier. Economists forecast a reading of 87.5.
Separately, a government report showed prices paid to U.S. producers rose more than forecast in March, led by a jump in energy costs. Prices rose 1 percent after a 1.3 percent gain in February. Economists surveyed by Bloomberg expected a 0.7 percent increase. So-called core prices, which exclude fuel and food, were unchanged, the Labor Department said.
Treasuries fell after the report, while the dollar strengthened against the yen. Oil prices fell because of surging inventories in Oklahoma.
Inflation
In minutes released this week from policy makers' last meeting, the Federal Reserve said faster inflation may necessitate an increase in borrowing costs.
More than seven stocks rose for every four that declined on the New York Stock Exchange. Some 1.4 billion shares changed hands on the Big Board, 11 percent less than this year's average.
Merck jumped $3.85 to $50.21. The 8.3 percent surge represents the biggest advance since February 2005 and gave Merck the best performance in the Dow average.
The drugmaker said first-quarter earnings increased to 78 cents a share, or 34 percent more than forecast, because of higher sales across its product lines. Separately, Merck won dismissal of federal securities lawsuits claiming the company defrauded investors before withdrawing its Vioxx painkiller from the market in September 2004.
Pfizer Inc., which is scheduled to report earnings on April 20, added 21 cents to $26.67. Schering-Plough Corp., which reports the day before, soared 97 cents to $27.94.
Bristol-Myers
Bristol-Myers Squibb Co. jumped 77 cents to $28.32. The company's Baraclude drug suppresses the hepatitis B virus in patients who resume treatment with the medicine after stopping therapy, according to a study.
Health-care shares as a group climbed 1.3 percent, bringing their advance in April to 5 percent.
``These dinosaur names like Pfizer and Merck and Schering- Plough have turned in a great month,'' said Walter ``Bucky'' Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. ``There's the potential for these companies to start making strategic acquisitions. That could put some growth back into these companies'' too.
The Nasdaq erased its losses after Cisco, the world's biggest maker of computer-networking equipment, said orders continue to pick up as customers upgrade their networks. Chief Development Officer Charlie Giancarlo said the company is also benefiting from growth in emerging markets and Europe. Cisco shares added 71 cents to $26.68.
McDonald's, GE
In other earnings news, McDonald's Corp. gained $1.01 to $47.64. First-quarter profit at the world's largest restaurant company beat analysts' estimates after March sales in Europe jumped the most in at least 13 years. Preliminary net income rose to 62 cents a share, 5 cents more than the average analyst estimate in a Bloomberg survey.
General Electric Co. increased 20 cents to $35.38 after first-quarter net income climbed 8 percent on commercial loans and international sales of power-plant and aviation equipment. Profit from continuing operations was 44 cents a share last quarter, matching the average analyst estimate.
SLM, known as Sallie Mae, jumped $6.01, or 15 percent, to $46.76. Blackstone Group may be a bidder for the company, the New York Times reported, citing unidentified people who had been briefed on the discussions. Blackstone spokeswoman Sophia Harrison in London declined to comment. SLM spokesman Tom Joyce refused to confirm or deny the report.
``There's insatiable demand with literally billions of dollars sitting on the sidelines to buy underperforming, inexpensive companies,'' said Vogelzang.
Apple Drops
Apple Inc. fell $1.95 to $90.24 after delaying the release of its new Macintosh operating system to ensure the iPhone makes its debut in June. The update to its Mac operating system will be pushed back to October, Apple said in a statement.
Intel Corp., the world's biggest semiconductor company and a supplier to Apple, slipped 4 cents to $20.46.
The delay is likely to lead to lower Macintosh sales in the next two quarters as the software, called Leopard, misses the important back-to-school season, Sanford C. Bernstein & Co. analyst Toni Sacconaghi wrote in a note to clients. Sacconaghi is the top-ranked computer analyst in Institutional Investor magazine's annual survey.
The Russell 2000 Index, a benchmark for companies with a median market value of $671 million, advanced 0.5 percent to 819.38. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 0.4 percent to 14,736.44. Based on its gain, the value of stocks increased by $67.6 billion.
Merck & Co. led a rally in health-care shares, enabling the Standard & Poor's 500 Index to recoup all its losses from the Feb. 27 global equities rout, after the drugmaker's first-quarter profit beat projections. SLM Corp., known as Sallie Mae, jumped the most since at least 1983 on a report buyout firms may purchase the biggest U.S. provider of student loans for more than $20 billion.
Health-care and financial shares together made up three- quarters of the S&P 500's gain. First-quarter earnings among S&P 500 companies probably rose 3.1 percent, according to data compiled by Bloomberg.
``Earnings estimates on Wall Street are probably underestimating actual results,'' said Michael Vogelzang, who helps manage $2.4 billion in assets as chief investment officer at Boston Advisors in Boston. Meanwhile, ``if the market gets sloppy, we know private equity will go crazy buying stocks.''
The S&P 500 increased 5.05, or 0.4 percent, to 1452.85. The Dow Jones Industrial Average climbed 59.17, or 0.5 percent, to 12,612.13, leaving it 21 points shy of wiping out its Feb. 27 losses. The Nasdaq Composite Index added 11.62, or 0.5 percent, to 2491.94, helped by a surge in Cisco Systems Inc. shares.
Stocks yesterday resumed their April rally as takeover speculation and higher oil prices buoyed health-care and energy companies. For the week, the S&P 500 gained 0.6 percent, the Dow rose 0.4 percent and the Nasdaq advanced 0.8 percent.
Flagging Confidence
Benchmark indexes dipped briefly today after a private report showed a bigger-than-forecast drop in consumer confidence.
American consumers lost confidence in April for the third month in a row as they paid more for food and fuel. The Reuters/University of Michigan's preliminary index of sentiment declined to 85.3 in April from 88.4 a month earlier. Economists forecast a reading of 87.5.
Separately, a government report showed prices paid to U.S. producers rose more than forecast in March, led by a jump in energy costs. Prices rose 1 percent after a 1.3 percent gain in February. Economists surveyed by Bloomberg expected a 0.7 percent increase. So-called core prices, which exclude fuel and food, were unchanged, the Labor Department said.
Treasuries fell after the report, while the dollar strengthened against the yen. Oil prices fell because of surging inventories in Oklahoma.
Inflation
In minutes released this week from policy makers' last meeting, the Federal Reserve said faster inflation may necessitate an increase in borrowing costs.
More than seven stocks rose for every four that declined on the New York Stock Exchange. Some 1.4 billion shares changed hands on the Big Board, 11 percent less than this year's average.
Merck jumped $3.85 to $50.21. The 8.3 percent surge represents the biggest advance since February 2005 and gave Merck the best performance in the Dow average.
The drugmaker said first-quarter earnings increased to 78 cents a share, or 34 percent more than forecast, because of higher sales across its product lines. Separately, Merck won dismissal of federal securities lawsuits claiming the company defrauded investors before withdrawing its Vioxx painkiller from the market in September 2004.
Pfizer Inc., which is scheduled to report earnings on April 20, added 21 cents to $26.67. Schering-Plough Corp., which reports the day before, soared 97 cents to $27.94.
Bristol-Myers
Bristol-Myers Squibb Co. jumped 77 cents to $28.32. The company's Baraclude drug suppresses the hepatitis B virus in patients who resume treatment with the medicine after stopping therapy, according to a study.
Health-care shares as a group climbed 1.3 percent, bringing their advance in April to 5 percent.
``These dinosaur names like Pfizer and Merck and Schering- Plough have turned in a great month,'' said Walter ``Bucky'' Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. ``There's the potential for these companies to start making strategic acquisitions. That could put some growth back into these companies'' too.
The Nasdaq erased its losses after Cisco, the world's biggest maker of computer-networking equipment, said orders continue to pick up as customers upgrade their networks. Chief Development Officer Charlie Giancarlo said the company is also benefiting from growth in emerging markets and Europe. Cisco shares added 71 cents to $26.68.
McDonald's, GE
In other earnings news, McDonald's Corp. gained $1.01 to $47.64. First-quarter profit at the world's largest restaurant company beat analysts' estimates after March sales in Europe jumped the most in at least 13 years. Preliminary net income rose to 62 cents a share, 5 cents more than the average analyst estimate in a Bloomberg survey.
General Electric Co. increased 20 cents to $35.38 after first-quarter net income climbed 8 percent on commercial loans and international sales of power-plant and aviation equipment. Profit from continuing operations was 44 cents a share last quarter, matching the average analyst estimate.
SLM, known as Sallie Mae, jumped $6.01, or 15 percent, to $46.76. Blackstone Group may be a bidder for the company, the New York Times reported, citing unidentified people who had been briefed on the discussions. Blackstone spokeswoman Sophia Harrison in London declined to comment. SLM spokesman Tom Joyce refused to confirm or deny the report.
``There's insatiable demand with literally billions of dollars sitting on the sidelines to buy underperforming, inexpensive companies,'' said Vogelzang.
Apple Drops
Apple Inc. fell $1.95 to $90.24 after delaying the release of its new Macintosh operating system to ensure the iPhone makes its debut in June. The update to its Mac operating system will be pushed back to October, Apple said in a statement.
Intel Corp., the world's biggest semiconductor company and a supplier to Apple, slipped 4 cents to $20.46.
The delay is likely to lead to lower Macintosh sales in the next two quarters as the software, called Leopard, misses the important back-to-school season, Sanford C. Bernstein & Co. analyst Toni Sacconaghi wrote in a note to clients. Sacconaghi is the top-ranked computer analyst in Institutional Investor magazine's annual survey.
The Russell 2000 Index, a benchmark for companies with a median market value of $671 million, advanced 0.5 percent to 819.38. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 0.4 percent to 14,736.44. Based on its gain, the value of stocks increased by $67.6 billion.
Thursday, April 12, 2007
Japanese Stocks Climb on Record Weak Yen
. April 13 (Bloomberg) -- Japanese stocks advanced after the yen fell to a record low against the euro, boosting the value of overseas sales for companies such as Canon Inc.
Mitsubishi Corp. paced gains by trading companies after the price of crude oil jumped.
``The yen fell to the cheapest ever against the euro and that should have a positive impact on company earnings,'' said Soichiro Monji, who helps oversee about $47 billion at Daiwa SB Investments Ltd. in Tokyo. ``The rising price of oil will spark some interest in trading companies and oil producers.''
The Nikkei 225 Stock Average climbed 105.56, or 0.6 percent, to 17,645.98 as of 9:10 a.m. in Tokyo. The broader Topix index rose 5.18, or 0.3 percent, to 1731.36.
Nikkei futures expiring in June added 0.7 percent to 17,650 in Osaka and gained 0.7 percent to 17,655 in Singapore.
Property developers climbed after the Nikkei newspaper said Morgan Stanley will buy 13 hotels in Japan from All Nippon Airways Co. for about 280 billion yen ($2.35 billion), boosting confidence that real estate prices will rise.
Sony Corp. surged after the Nikkei said the company's group operating profit, or sales minus the cost of goods sold and administrative expenses, will increase six times for this fiscal year from the year just ended.
Retailers slipped after Seven & I Holdings Co. profit missed the company's forecast and Fast Retailing Co. lowered its net income forecast for this year.
The settlement price for Japan's Nikkei 225 options contracts for April delivery will be determined today. The settlement price, also known as the ``special quotation,'' of Nikkei 225 options is calculated after all stocks in the index begin trading.
Mitsubishi Corp. paced gains by trading companies after the price of crude oil jumped.
``The yen fell to the cheapest ever against the euro and that should have a positive impact on company earnings,'' said Soichiro Monji, who helps oversee about $47 billion at Daiwa SB Investments Ltd. in Tokyo. ``The rising price of oil will spark some interest in trading companies and oil producers.''
The Nikkei 225 Stock Average climbed 105.56, or 0.6 percent, to 17,645.98 as of 9:10 a.m. in Tokyo. The broader Topix index rose 5.18, or 0.3 percent, to 1731.36.
Nikkei futures expiring in June added 0.7 percent to 17,650 in Osaka and gained 0.7 percent to 17,655 in Singapore.
Property developers climbed after the Nikkei newspaper said Morgan Stanley will buy 13 hotels in Japan from All Nippon Airways Co. for about 280 billion yen ($2.35 billion), boosting confidence that real estate prices will rise.
Sony Corp. surged after the Nikkei said the company's group operating profit, or sales minus the cost of goods sold and administrative expenses, will increase six times for this fiscal year from the year just ended.
Retailers slipped after Seven & I Holdings Co. profit missed the company's forecast and Fast Retailing Co. lowered its net income forecast for this year.
The settlement price for Japan's Nikkei 225 options contracts for April delivery will be determined today. The settlement price, also known as the ``special quotation,'' of Nikkei 225 options is calculated after all stocks in the index begin trading.
U.S. Stocks Rise on Takeover Speculation, Oil; Dollar Tumbles
April 12 (Bloomberg) -- Health-care and energy companies helped the U.S. stock market resume its April rally, buoyed by takeover speculation and higher oil prices. The dollar dropped to a two-year low against the euro.
Pfizer Inc., Merck & Co. and Microsoft Corp. led the Dow Jones Industrial Average to its ninth gain in 10 days. MedImmune Inc. pushed an index of drugmakers and health insurers to their highest in six years after the maker of the FluMist spray vaccine hired advisers to explore a sale.
The industry's earnings are projected to rise the second most among 10 groups this year as the economic expansion slows. The Federal Reserve, in minutes released yesterday from policy makers' last meeting, noted ``increased uncertainty'' in the outlook for U.S. growth.
``Things like pharmaceuticals are a play on a slowing economy,'' said Robert Schaeffer, who helps manage about $2.5 billion at Becker Capital Management in Portland, Oregon. ``Traditionally, their earnings have been relatively stable. They have the wind at their back with the baby boomers moving out of middle age.''
The Dow average added 68.34, or 0.6 percent, to 12,552.96. The Standard & Poor's 500 Index rose 8.93, or 0.6 percent, to 1447.80. The Nasdaq Composite Index increased 21.01, or 0.9 percent, to 2480.32.
For the month, the Dow has gained 1.6 percent, the S&P 500 has advanced 1.9 percent and the Nasdaq has climbed 2.4 percent.
Crude Oil Rises
Crude oil rose 3 percent in New York, the biggest gain in two weeks, after the International Energy Agency said OPEC reduced supplies to a two-year low to cut world stockpiles.
March oil output by the Organization of Petroleum Exporting Countries, source of 41 percent of world supply, fell 165,000 barrels to 30.1 million barrels a day, the lowest since January 2005, according to the IEA, adviser to fuel consuming nations. U.S. oil demand my rise after Valero Energy Corp. returns its McKee, Texas, plant to half capacity this month.
``OPEC is in a very solid position and they know it,'' said Peyton Feltus, president of Randolph Risk Management in Dallas. As refinery production rises ``and as OPEC holds their line on cuts, you will see an accelerated drawdown on crude'' inventories.
Oil for May delivery advanced $1.84 to $63.85 a barrel on the New York Mercantile Exchange, the biggest rise since March 29. Futures have jumped 26 percent since the low closing price for the year on Jan. 18.
Euro and ECB
The dollar dropped to the lowest since Jan. 2005 after the European Central Bank suggested borrowing costs will be Higher over the next few months to tame inflation after keeping its benchmark interest rates at 3.75 percent today.
The European currency also reached a record high against the yen after remarks by ECB President Jean-Claude Trichet led traders to speculate that rate increases are likely in the months ahead. The Japanese currency gained against the dollar and pared its losses versus the euro on bets the yen's weakness will be discussed at tomorrow's Group of Seven meeting in Washington.
`Trichet said interest rates were accommodative, so that means he still has a job to do,'' said Dustin Reid, a senior currency strategist in Chicago at ABN Amro Bank NV.
The euro rose 0.31 percent to $1.3473 in New York after touching $1.3503, the highest since January 2005. The European currency traded at 160.43 yen, compared with 160.36 yesterday, after rising to 160.87, the strongest since the European currency's 1999 debut. The yen rose 0.27 percent to 119.07 versus the dollar.
Treasury Bond Auction
Treasuries erased earlier gains and were little changed after demand was weak in an auction of 10-year inflation- protected securities.
The sale drew the lowest percentage of bids from investors since at least 2003 when the government began releasing data, leaving Wall Street dealers with most of the securities. Ten-year inflation-protected securities last week were the most expensive relative to regular 10-year notes since August.
``People were expecting it to go decently because of its smaller size,'' said Jeremy Fletcher, part of a group that manages $7.5 billion worth of bonds, including $1.8 billion of TIPS, at American Century Investments in Mountain View, California. ``Apparently nobody came in and demanded a big portion'' of the notes.
The yield on the benchmark 10-year note was little changed at 4.73 percent, according to bond broker Cantor Fitzgerald LP. The price of the 4 5/8 percent securities due in February 2017 fell 1/32, or 31 cents per $1,000 face amount, to 99 1/8.
Pfizer Inc., Merck & Co. and Microsoft Corp. led the Dow Jones Industrial Average to its ninth gain in 10 days. MedImmune Inc. pushed an index of drugmakers and health insurers to their highest in six years after the maker of the FluMist spray vaccine hired advisers to explore a sale.
The industry's earnings are projected to rise the second most among 10 groups this year as the economic expansion slows. The Federal Reserve, in minutes released yesterday from policy makers' last meeting, noted ``increased uncertainty'' in the outlook for U.S. growth.
``Things like pharmaceuticals are a play on a slowing economy,'' said Robert Schaeffer, who helps manage about $2.5 billion at Becker Capital Management in Portland, Oregon. ``Traditionally, their earnings have been relatively stable. They have the wind at their back with the baby boomers moving out of middle age.''
The Dow average added 68.34, or 0.6 percent, to 12,552.96. The Standard & Poor's 500 Index rose 8.93, or 0.6 percent, to 1447.80. The Nasdaq Composite Index increased 21.01, or 0.9 percent, to 2480.32.
For the month, the Dow has gained 1.6 percent, the S&P 500 has advanced 1.9 percent and the Nasdaq has climbed 2.4 percent.
Crude Oil Rises
Crude oil rose 3 percent in New York, the biggest gain in two weeks, after the International Energy Agency said OPEC reduced supplies to a two-year low to cut world stockpiles.
March oil output by the Organization of Petroleum Exporting Countries, source of 41 percent of world supply, fell 165,000 barrels to 30.1 million barrels a day, the lowest since January 2005, according to the IEA, adviser to fuel consuming nations. U.S. oil demand my rise after Valero Energy Corp. returns its McKee, Texas, plant to half capacity this month.
``OPEC is in a very solid position and they know it,'' said Peyton Feltus, president of Randolph Risk Management in Dallas. As refinery production rises ``and as OPEC holds their line on cuts, you will see an accelerated drawdown on crude'' inventories.
Oil for May delivery advanced $1.84 to $63.85 a barrel on the New York Mercantile Exchange, the biggest rise since March 29. Futures have jumped 26 percent since the low closing price for the year on Jan. 18.
Euro and ECB
The dollar dropped to the lowest since Jan. 2005 after the European Central Bank suggested borrowing costs will be Higher over the next few months to tame inflation after keeping its benchmark interest rates at 3.75 percent today.
The European currency also reached a record high against the yen after remarks by ECB President Jean-Claude Trichet led traders to speculate that rate increases are likely in the months ahead. The Japanese currency gained against the dollar and pared its losses versus the euro on bets the yen's weakness will be discussed at tomorrow's Group of Seven meeting in Washington.
`Trichet said interest rates were accommodative, so that means he still has a job to do,'' said Dustin Reid, a senior currency strategist in Chicago at ABN Amro Bank NV.
The euro rose 0.31 percent to $1.3473 in New York after touching $1.3503, the highest since January 2005. The European currency traded at 160.43 yen, compared with 160.36 yesterday, after rising to 160.87, the strongest since the European currency's 1999 debut. The yen rose 0.27 percent to 119.07 versus the dollar.
Treasury Bond Auction
Treasuries erased earlier gains and were little changed after demand was weak in an auction of 10-year inflation- protected securities.
The sale drew the lowest percentage of bids from investors since at least 2003 when the government began releasing data, leaving Wall Street dealers with most of the securities. Ten-year inflation-protected securities last week were the most expensive relative to regular 10-year notes since August.
``People were expecting it to go decently because of its smaller size,'' said Jeremy Fletcher, part of a group that manages $7.5 billion worth of bonds, including $1.8 billion of TIPS, at American Century Investments in Mountain View, California. ``Apparently nobody came in and demanded a big portion'' of the notes.
The yield on the benchmark 10-year note was little changed at 4.73 percent, according to bond broker Cantor Fitzgerald LP. The price of the 4 5/8 percent securities due in February 2017 fell 1/32, or 31 cents per $1,000 face amount, to 99 1/8.
Wednesday, April 11, 2007
U.S. Stocks Fall, Led by Banks; Citigroup Retreats on Charges
April 11 (Bloomberg) -- U.S. stocks fell, snapping an eight- day advance in the Dow Jones Industrial Average, after Citigroup Inc. said it will take a $1.38 billion pretax charge.
The biggest U.S. bank will take the charge in the first quarter, along with additional charges of about $200 million in subsequent quarters this year, to cover the costs of cutting 5 percent of its workforce. Financial shares were the biggest drag among 10 industries on the Standard & Poor's 500 Index, which declined for the first time in seven days.
Stocks also dropped after the International Monetary Fund cut its forecast for U.S. economic growth this year by almost a full percentage point because of a weaker housing market than foreseen seven months ago.
The Dow average lost 24.30, or 0.2 percent, to 12,549.55 as of 10:12 a.m. in New York. The S&P 500 slipped 2.46, or 0.2 percent, to 1445.93. The Nasdaq Composite Index dropped 4.14, or 0.2 percent, to 2473.47.
Shares of Alcoa Inc. climbed after the first member of the Dow average to report quarterly earnings posted results that beat analysts' estimates.
Earnings at S&P 500 companies likely grew 3.3 percent in the January through March period, according to analyst estimates compiled by Bloomberg. At the start of the quarter, analysts expected profit to increase by at least 7 percent.
``Alcoa is a bright spot, but the worry about inflation will be an overriding concern today as we look at the minutes,'' said Kevin Caron, market strategist at Ryan Beck & Co., which has $20 billion assets under management in Florham Park, New Jersey.
Fed Minutes
Federal Reserve policy makers are scheduled to release at 2 p.m. New York time the minutes from their last policy meeting. On March 21, stocks posted their biggest rally in eight months after the central bank indicated it's no longer biased toward higher interest rates. Policy makers dropped a reference to ``additional firming'' in their statement, though they said inflation remains the ``predominant policy concern.''
``The bottom line is that the Fed is going to watch inflation,'' said Jim Bianco, head of research at Bianco Research LLC in Chicago. ``As long as the inflation rate moderates, they're going to be on hold.''
Most Americans expect a recession within a year and disapprove of President George W. Bush's handling of the economy even though unemployment is at a five-year low, a new Bloomberg/Los Angeles Times poll found.
Six in 10 who were surveyed predicted a recession, similar to the 64 percent who anticipated the economy would contract in a December 2000 poll by the Los Angeles Times three months before the last decline.
Reduced Forecast
The world's largest economy will expand 2.2 percent in 2007, compared with a September estimate of 2.9 percent, the IMF said in its twice-annual World Economic Outlook released today. The U.S. economy grew 3.3 percent in 2006.
More than 11 stocks declined for every six that advanced on the New York Stock Exchange. Some 196 million shares changed hands on the Big Board, 4.2 percent more than the same time a week ago.
Citigroup retreated 44 cents to $51.96, contributing the most to the S&P 500's loss. The bank will cut about 17,000 jobs by shutting offices and shifting some of its 337,000 full- and part-time workers to lower-cost locations. The company, whose expenses increased twice as fast as revenue last year, seeks to lower annual costs by $4.6 billion in the next three years.
Financial shares slid 0.3 percent as a group.
Alcoa
Alcoa rose 38 cents, or 1.1 percent, to $35.28 for the best performance in the Dow average. The company yesterday said profit was 79 cents a share, excluding restructuring costs and a loss of 2 cents from discontinued businesses. Analysts surveyed by Bloomberg had an average estimate of 78 cents.
Alcoa ``has strategic and financial appeal as an acquisition candidate,'' JPMorgan analysts including Michael F. Gambardella wrote in a note to clients. The company has set the stage for strong second-quarter results, said the analysts as they raised their profit estimate for next year to $2.40 a share from $2.15. Banc of America Securities LLC raised the price it expects Alcoa shares to reach to $36 from $34.
Gold producers rallied, sending the Amex Gold Bugs Index to a 1 percent advance. Gold Fields Ltd., a South African company and the world's fourth-largest gold producer, may receive a bid from investors led by U.S. financier Edward Pastorini to tap the rising price of bullion.
Gold Fields American depositary receipts, each representing one share, gained $1.16, or 6 percent, to $20.44. ADRs of Anglo American Plc, two of which represent one share of the world's second-largest mining company, added 8 cents to $27.48. Harmony Gold Mining Co. ADRs, each representing one share, increased 15 cents to $15.93.
Takeovers?
Manor Care Inc. jumped $4.37 to $60.12. Its 7.8 percent rally was the steepest in the S&P 500. The operator of nursing homes and hospice services said it hired JPMorgan to take advantage ``of currently attractive conditions in the financial markets.'' JPMorgan will advise Manor Care on its business and financial strategy.
Nasdaq Stock Market Inc. added 12 cents to $29.75. The world's largest all-electronic exchange may acquire the Philadelphia Stock Exchange to expand in options trading after losing the race to create the first trans-Atlantic equity market, an official at the Philadelphia exchange said.
The closely held Philadelphia exchange also has approached other markets and is considering an initial public offering, said the official, who declined to be identified before a decision is made.
Chico's FAS Inc. climbed $1.17 to $26.32. The clothing retailer said March sales rose 22 percent from a year ago. Same- store sales gained 5.2 percent.
American Medical Systems Holdings Inc. sank $2.73, or 13 percent, to $18.70. The maker of devices used in urological treatments cut its 2007 earnings forecasts amid inventory shortfalls for several products.
BorgWarner Inc. slid $1.97 to $74.92. Deutsche Bank AG cut its rating on shares of the world's biggest maker of automatic- transmission parts to ``hold'' from ``buy,'' based on the stock's price relative to earnings.
The biggest U.S. bank will take the charge in the first quarter, along with additional charges of about $200 million in subsequent quarters this year, to cover the costs of cutting 5 percent of its workforce. Financial shares were the biggest drag among 10 industries on the Standard & Poor's 500 Index, which declined for the first time in seven days.
Stocks also dropped after the International Monetary Fund cut its forecast for U.S. economic growth this year by almost a full percentage point because of a weaker housing market than foreseen seven months ago.
The Dow average lost 24.30, or 0.2 percent, to 12,549.55 as of 10:12 a.m. in New York. The S&P 500 slipped 2.46, or 0.2 percent, to 1445.93. The Nasdaq Composite Index dropped 4.14, or 0.2 percent, to 2473.47.
Shares of Alcoa Inc. climbed after the first member of the Dow average to report quarterly earnings posted results that beat analysts' estimates.
Earnings at S&P 500 companies likely grew 3.3 percent in the January through March period, according to analyst estimates compiled by Bloomberg. At the start of the quarter, analysts expected profit to increase by at least 7 percent.
``Alcoa is a bright spot, but the worry about inflation will be an overriding concern today as we look at the minutes,'' said Kevin Caron, market strategist at Ryan Beck & Co., which has $20 billion assets under management in Florham Park, New Jersey.
Fed Minutes
Federal Reserve policy makers are scheduled to release at 2 p.m. New York time the minutes from their last policy meeting. On March 21, stocks posted their biggest rally in eight months after the central bank indicated it's no longer biased toward higher interest rates. Policy makers dropped a reference to ``additional firming'' in their statement, though they said inflation remains the ``predominant policy concern.''
``The bottom line is that the Fed is going to watch inflation,'' said Jim Bianco, head of research at Bianco Research LLC in Chicago. ``As long as the inflation rate moderates, they're going to be on hold.''
Most Americans expect a recession within a year and disapprove of President George W. Bush's handling of the economy even though unemployment is at a five-year low, a new Bloomberg/Los Angeles Times poll found.
Six in 10 who were surveyed predicted a recession, similar to the 64 percent who anticipated the economy would contract in a December 2000 poll by the Los Angeles Times three months before the last decline.
Reduced Forecast
The world's largest economy will expand 2.2 percent in 2007, compared with a September estimate of 2.9 percent, the IMF said in its twice-annual World Economic Outlook released today. The U.S. economy grew 3.3 percent in 2006.
More than 11 stocks declined for every six that advanced on the New York Stock Exchange. Some 196 million shares changed hands on the Big Board, 4.2 percent more than the same time a week ago.
Citigroup retreated 44 cents to $51.96, contributing the most to the S&P 500's loss. The bank will cut about 17,000 jobs by shutting offices and shifting some of its 337,000 full- and part-time workers to lower-cost locations. The company, whose expenses increased twice as fast as revenue last year, seeks to lower annual costs by $4.6 billion in the next three years.
Financial shares slid 0.3 percent as a group.
Alcoa
Alcoa rose 38 cents, or 1.1 percent, to $35.28 for the best performance in the Dow average. The company yesterday said profit was 79 cents a share, excluding restructuring costs and a loss of 2 cents from discontinued businesses. Analysts surveyed by Bloomberg had an average estimate of 78 cents.
Alcoa ``has strategic and financial appeal as an acquisition candidate,'' JPMorgan analysts including Michael F. Gambardella wrote in a note to clients. The company has set the stage for strong second-quarter results, said the analysts as they raised their profit estimate for next year to $2.40 a share from $2.15. Banc of America Securities LLC raised the price it expects Alcoa shares to reach to $36 from $34.
Gold producers rallied, sending the Amex Gold Bugs Index to a 1 percent advance. Gold Fields Ltd., a South African company and the world's fourth-largest gold producer, may receive a bid from investors led by U.S. financier Edward Pastorini to tap the rising price of bullion.
Gold Fields American depositary receipts, each representing one share, gained $1.16, or 6 percent, to $20.44. ADRs of Anglo American Plc, two of which represent one share of the world's second-largest mining company, added 8 cents to $27.48. Harmony Gold Mining Co. ADRs, each representing one share, increased 15 cents to $15.93.
Takeovers?
Manor Care Inc. jumped $4.37 to $60.12. Its 7.8 percent rally was the steepest in the S&P 500. The operator of nursing homes and hospice services said it hired JPMorgan to take advantage ``of currently attractive conditions in the financial markets.'' JPMorgan will advise Manor Care on its business and financial strategy.
Nasdaq Stock Market Inc. added 12 cents to $29.75. The world's largest all-electronic exchange may acquire the Philadelphia Stock Exchange to expand in options trading after losing the race to create the first trans-Atlantic equity market, an official at the Philadelphia exchange said.
The closely held Philadelphia exchange also has approached other markets and is considering an initial public offering, said the official, who declined to be identified before a decision is made.
Chico's FAS Inc. climbed $1.17 to $26.32. The clothing retailer said March sales rose 22 percent from a year ago. Same- store sales gained 5.2 percent.
American Medical Systems Holdings Inc. sank $2.73, or 13 percent, to $18.70. The maker of devices used in urological treatments cut its 2007 earnings forecasts amid inventory shortfalls for several products.
BorgWarner Inc. slid $1.97 to $74.92. Deutsche Bank AG cut its rating on shares of the world's biggest maker of automatic- transmission parts to ``hold'' from ``buy,'' based on the stock's price relative to earnings.
Tuesday, April 10, 2007
U.S. Stocks Advance, Led by Energy Shares on Oil-Price Increase
April 10 (Bloomberg) -- U.S. stocks gained after the first increase in oil prices in five days improved the earnings outlook for energy companies and analysts said Applied Materials Inc.'s revenue may beat forecasts.
Exxon Mobil Corp. and Chevron Corp. helped lift the Standard & Poor's 500 Index to its sixth straight advance. Applied Materials, the largest manufacturer of chip-making equipment, climbed to a six-week high. Mylan Laboratories Inc. was the best performer in the S&P 500 after saying fiscal 2007 earnings exceeded its projection.
Earnings at S&P 500 companies likely grew 3.3 percent in the January through March period, according to analyst estimates compiled by Bloomberg.
``It's all about earnings right now,'' said Charles Smith, who oversees $1.1 billion as chief investment officer at Fort Pitt Capital Group Inc. in Pittsburgh. ``Valuations are still reasonable. A 4 or 5 percent year-over-year growth rate is something people can live with.''
The S&P 500 added 2.90, or 0.2 percent, to 1447.51 as of 10:04 a.m. in New York. The Dow Jones Industrial Average increased 11.70, or 0.1 percent, to 12,580.84. The Nasdaq Composite Index gained 6.14, or 0.3 percent, to 2475.32.
Alcoa Inc., the world's biggest aluminum maker, will kick off the corporate earnings season when it releases first-quarter results after the close of U.S. exchanges today.
Crude oil was pulled higher by gasoline on speculation that a government report tomorrow will show that U.S. gasoline stockpiles fell for a ninth week. Oil futures rose 0.4 percent to $61.75 a barrel in electronic trading in New York.
Energy shares advanced 0.5 percent for the steepest rise among 10 industry groups. Exxon, the world's biggest oil company, increased 25 cents to $77.05. Chevron added 43 cents to $75.92.
Exxon Mobil Corp. and Chevron Corp. helped lift the Standard & Poor's 500 Index to its sixth straight advance. Applied Materials, the largest manufacturer of chip-making equipment, climbed to a six-week high. Mylan Laboratories Inc. was the best performer in the S&P 500 after saying fiscal 2007 earnings exceeded its projection.
Earnings at S&P 500 companies likely grew 3.3 percent in the January through March period, according to analyst estimates compiled by Bloomberg.
``It's all about earnings right now,'' said Charles Smith, who oversees $1.1 billion as chief investment officer at Fort Pitt Capital Group Inc. in Pittsburgh. ``Valuations are still reasonable. A 4 or 5 percent year-over-year growth rate is something people can live with.''
The S&P 500 added 2.90, or 0.2 percent, to 1447.51 as of 10:04 a.m. in New York. The Dow Jones Industrial Average increased 11.70, or 0.1 percent, to 12,580.84. The Nasdaq Composite Index gained 6.14, or 0.3 percent, to 2475.32.
Alcoa Inc., the world's biggest aluminum maker, will kick off the corporate earnings season when it releases first-quarter results after the close of U.S. exchanges today.
Crude oil was pulled higher by gasoline on speculation that a government report tomorrow will show that U.S. gasoline stockpiles fell for a ninth week. Oil futures rose 0.4 percent to $61.75 a barrel in electronic trading in New York.
Energy shares advanced 0.5 percent for the steepest rise among 10 industry groups. Exxon, the world's biggest oil company, increased 25 cents to $77.05. Chevron added 43 cents to $75.92.
Monday, April 9, 2007
China's surprise Mac'07 trade surplus decline 38% to $6.87 bil
April 10 (Bloomberg) -- China's trade surplus unexpectedly narrowed in March as exports rose at the slowest pace in five years.
The gap was 38 percent smaller than a year earlier at $6.87 billion, the customs bureau said on its Web site. That's the least in 13 months and less than half the $20 billion median estimate of 18 economists surveyed by Bloomberg News.
Chinese businesses rushed to sell products overseas in January and February, concerned at protectionist sentiment abroad and government moves to slow exports, said Wang Qing, an economist at Bank of America Corp. in Hong Kong. ``It's more important to look at the first quarter as a whole, which is a really large trade surplus,'' said Wang.
China wants to curb the trade surplus, which rose to a record $177.5 billion last year, by easing import restrictions and reducing export incentives. The gap has stoked trade frictions that include two complaints by the U.S. to the World Trade Organization, due to be filed today.
Exports gained 6.9 percent to $83.4 billion in March and imports climbed 14.5 percent to $76.6 billion. For the first three months, the surplus was $46.44 billion, nearly double the gap a year earlier.
U.S. lawmakers charge that China keeps its currency undervalued, protects piracy and subsidizes products sold overseas. The Commerce Department last month levied duties on coated-paper imports from China and the government is to file two complaints aimed at stopping piracy of movies, music, software and books.
U.S. Trade
China's trade surplus with the U.S. fell to $9.5 billion in March from $12.3 billion in February, the customs bureau said, while that with Europe declined to $6.4 billion from $11.8 billion.
One of the U.S. complaints is that China's laws are too lenient on pirates of movie or music disks. The other is that foreign book and movie sales are restricted.
China's commerce ministry has called the coated-paper tariffs ``unacceptable'' and said it reserved the right to take ``necessary'' action. The U.S. trade deficit with China jumped to a record $232.5 billion last year.
The gap was 38 percent smaller than a year earlier at $6.87 billion, the customs bureau said on its Web site. That's the least in 13 months and less than half the $20 billion median estimate of 18 economists surveyed by Bloomberg News.
Chinese businesses rushed to sell products overseas in January and February, concerned at protectionist sentiment abroad and government moves to slow exports, said Wang Qing, an economist at Bank of America Corp. in Hong Kong. ``It's more important to look at the first quarter as a whole, which is a really large trade surplus,'' said Wang.
China wants to curb the trade surplus, which rose to a record $177.5 billion last year, by easing import restrictions and reducing export incentives. The gap has stoked trade frictions that include two complaints by the U.S. to the World Trade Organization, due to be filed today.
Exports gained 6.9 percent to $83.4 billion in March and imports climbed 14.5 percent to $76.6 billion. For the first three months, the surplus was $46.44 billion, nearly double the gap a year earlier.
U.S. lawmakers charge that China keeps its currency undervalued, protects piracy and subsidizes products sold overseas. The Commerce Department last month levied duties on coated-paper imports from China and the government is to file two complaints aimed at stopping piracy of movies, music, software and books.
U.S. Trade
China's trade surplus with the U.S. fell to $9.5 billion in March from $12.3 billion in February, the customs bureau said, while that with Europe declined to $6.4 billion from $11.8 billion.
One of the U.S. complaints is that China's laws are too lenient on pirates of movie or music disks. The other is that foreign book and movie sales are restricted.
China's commerce ministry has called the coated-paper tariffs ``unacceptable'' and said it reserved the right to take ``necessary'' action. The U.S. trade deficit with China jumped to a record $232.5 billion last year.
Barclays, ABN Amro Know Most, Pay the Least for Takeover Advice (Neutral)
April 10 (Bloomberg) -- Ask Barclays Plc and ABN Amro Holding NV how much takeover advice is worth and they'll prove it's a lot less than what companies in any other industry pay banks for arranging acquisitions.
Bankers hired for the proposed merger of Barclays and ABN Amro may share about $100 million for what would be the biggest marriage in financial services based on comparable fees from previous deals. That's about one-third less than advisers charged last year for AT&T Inc.'s $73 billion purchase of BellSouth Corp., estimates compiled by New York-based Freeman & Co. show.
``Financial institutions understand particularly well the fee world because they live in it,'' said Frederick Lane, a founding partner and chairman of Boston-based investment bank Lane, Berry & Co. and a former co-head of mergers at Donaldson, Lufkin & Jenrette Inc., which Credit Suisse Group bought in 2000. ``They know what they should be paying.''
Companies like Amsterdam-based ABN Amro and London-based Barclays can reduce their bill because they typically have in- house bankers. Financial-services acquisitions are often larger, less frequently hostile and arranged by executives who have worked with each other on behalf of clients.
Banks also are more active issuers of stocks and bonds, meaning advisers are willing to accept lower payment for the chance of winning multiple fee-generating assignments.
Skimpy Fees
``Banks know the fee scales and they know how much the other guys will discount,'' said Philip Keevil, a senior partner at investment bank Compass Advisers LLP in London and a former head of Citigroup Inc.'s European mergers group. The fees ``are notoriously lower than within industrial companies.''
Barclays, the U.K.'s third-biggest bank, may offer 76 billion euros ($100 billion) for ABN Amro, the largest Dutch bank, analysts at Keefe, Bruyette & Woods Ltd. estimate, exceeding Travelers Group Inc.'s $70 billion purchase of Citicorp. Any offer from Barclays may be trumped, the Keefe Bruyette analysts wrote in a March 30 note to clients, speculating that Royal Bank of Scotland Group Plc and Spain's Santander Central Hispano SA may make a joint bid.
The nine advisory firms on Barclays's potential tie-up with ABN Amro could share as little as 0.1 percent of the deal value, according to estimates from Freeman, based on past transactions including New York-based JPMorgan Chase & Co.'s $58 billion purchase of Chicago-based Bank One Corp. in 2004.
`Market in Tehran'
``The service banks give their clients is one of the rare services where there's no technical reason offered for why the price is A not B,'' said Sylvain de Forges, head of financial operations at Paris-based Veolia Environnement SA, the world's biggest water supplier, which has made more than 10 acquisitions in the past year. ``At least lawyers and accountants provide an estimate of the hours worked.''
Barclays spokesman Robin Tozer and ABN Amro spokesman Piers Townsend declined to comment.
Similar-sized healthcare and consumer mergers, including Procter & Gamble Co.'s $55 billion friendly takeover of Gillette Co. in 2005, generated fees of almost 0.2 percent, Freeman said. Fees aren't disclosed for most mergers and acquisitions in the U.S. and Europe.
Fees that the banks would split from ABN Amro-Barclays may be in line with sums of about $60 million squeezed from the $59 billion acquisition of Bank One by JPMorgan and $50 million from Bank of America Corp.'s $49 billion purchase of FleetBoston Financial Corp., according to Freeman. By contrast, advisers raked in $90 million from Procter & Gamble's takeover of Gillette and $141.9 million for the AT&T-BellSouth deal.
No Deterrent
Senior managers at the banks usually ``know each other so well that deals are negotiated among the principals from the beginning,'' said Compass's Keevil, helping explain why the fees may be lower.
The string of bankers in the ABN Amro bid highlights how fees are no deterrent to banks vying for deal credit amid record takeovers. About $1.07 trillion of acquisitions were announced in the first quarter, almost 10 percent more than a year earlier, according to data compiled by Bloomberg.
Fees from advising on mergers and acquisitions accounted for little more than 5 percent, or about $6.4 billion, of the combined revenue last year at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc., the four biggest New York-based securities firms. By comparison, fixed-income and equities trading generated about half of the firms' revenue and underwriting accounted for almost 9 percent.
Seeking Credit
At least 80 bankers are involved in the Barclays and ABN Amro deal, said one executive with knowledge of the talks who declined to be identified. Morgan Stanley, UBS AG, Lehman and N.M. Rothschild & Sons Ltd. have been hired by ABN Amro. Barclays has retained Citigroup, Deutsche Bank AG, Credit Suisse, JPMorgan Cazenove Ltd. and Lazard Ltd. The list excludes Goldman and Merrill, which have previously advised Barclays's Edinburgh-based rival Royal Bank of Scotland.
The most senior bankers working on the potential Barclays- ABN Amro transaction include Citigroup's Hamid Biglari, 48, who runs the New York-based bank's financial institutions advisory group, and Piero Novelli, 41, UBS's co-head of global takeovers. Novelli and Biglari declined to comment.
Banks count on assignments such as Barclays-ABN Amro to secure a place high in the so-called league tables, which give credit to every adviser no matter how much it gets paid or how small its role.
The merger, which would be equivalent to more than 10 percent of the takeovers in Europe in the past 12 months, would propel Citigroup past Goldman to the global No. 2 slot this year behind Morgan Stanley, and Credit Suisse would move up to fourth, Bloomberg data show.
`Bragging Rights'
``It may not be the same profit margin as many other deals, but it's not bad business if you can get it,'' said Scott Moeller, a professor specializing in M&A at City University's Cass Business School and a former adviser at Morgan Stanley and Deutsche Bank. ``There are the bragging rights from working on that particular deal given how large it is.''
The banks can use the league-table credit to win other assignments, said Teck Tjuan Yap, a managing director at Freeman in New York. Share sales in Europe typically command fees of 2.3 percent and fees from debt offerings average about 1.6 percent for high-yield bonds, according to Bloomberg data.
Citigroup, Deutsche Bank, ING Groep NV, JPMorgan and ABN Amro advised buyout firms, including Thomas H. Lee Partners LP in Boston and Kohlberg Kravis Roberts & Co. in New York, on their 8.9 billion-euro leveraged takeover of Dutch media company VNU Group BV last year. They also arranged the financing package, which included a $5.17 billion term loan in euros and dollars, a $688 million revolving credit and $2.4 billion of bonds.
Hohn's Hedge Fund
After Citigroup and Goldman advised Telefonica SA on its acquisition of U.K. mobile-phone operator O2 Plc in October 2005, they also helped arrange an 18.5 billion-pound ($37 billion) loan, the biggest in five years, to pay for the purchase.
Advisers including Citigroup may have been hired by Barclays and ABN Amro to help deal with shareholders such as London-based TCI Fund Management LLP. The London-based hedge fund, which owns more than 1 percent of ABN Amro, sparked the debate about the future of the bank in February by calling for it to be broken up.
Citigroup's Biglari advised NYSE Group Inc. CEO John Thain last year on his successful bid for Euronext, Europe's second- largest stock exchange. TCI, led by Chris Hohn, had favored an alternative approach by Deutsche Boerse AG.
Boards retain external advisers to ``demonstrate to shareholders that they have looked at the deal with an independent view,'' said Moeller of Cass Business School.
Companies including General Electric Co. tend to ``pay less to outside advisers because they have internal teams, who can play the role of investment banks,'' he said.
Possible Counteroffer
Hiring multiple advisers shrinks the pool of potential rival bidders for ABN Amro. Citigroup, the biggest U.S. bank, joined the list advising Barclays on March 28, squashing speculation that the company would make a counteroffer.
Freeman said its estimate for fees from a merger of Barclays and ABN Amro -- $90 million to $110 million -- may be low. It doesn't account for additional earnings that might be caused by the emergence of competing offers or regulatory obstacles.
Fees in the U.S. are ``notably higher,'' said Jay Ritter, a professor of finance at the University of Florida in Gainesville. ``The legal liability for U.S. investment bankers and the chance of getting sued is much higher and that gets built into the fees.''
Bankers hired for the proposed merger of Barclays and ABN Amro may share about $100 million for what would be the biggest marriage in financial services based on comparable fees from previous deals. That's about one-third less than advisers charged last year for AT&T Inc.'s $73 billion purchase of BellSouth Corp., estimates compiled by New York-based Freeman & Co. show.
``Financial institutions understand particularly well the fee world because they live in it,'' said Frederick Lane, a founding partner and chairman of Boston-based investment bank Lane, Berry & Co. and a former co-head of mergers at Donaldson, Lufkin & Jenrette Inc., which Credit Suisse Group bought in 2000. ``They know what they should be paying.''
Companies like Amsterdam-based ABN Amro and London-based Barclays can reduce their bill because they typically have in- house bankers. Financial-services acquisitions are often larger, less frequently hostile and arranged by executives who have worked with each other on behalf of clients.
Banks also are more active issuers of stocks and bonds, meaning advisers are willing to accept lower payment for the chance of winning multiple fee-generating assignments.
Skimpy Fees
``Banks know the fee scales and they know how much the other guys will discount,'' said Philip Keevil, a senior partner at investment bank Compass Advisers LLP in London and a former head of Citigroup Inc.'s European mergers group. The fees ``are notoriously lower than within industrial companies.''
Barclays, the U.K.'s third-biggest bank, may offer 76 billion euros ($100 billion) for ABN Amro, the largest Dutch bank, analysts at Keefe, Bruyette & Woods Ltd. estimate, exceeding Travelers Group Inc.'s $70 billion purchase of Citicorp. Any offer from Barclays may be trumped, the Keefe Bruyette analysts wrote in a March 30 note to clients, speculating that Royal Bank of Scotland Group Plc and Spain's Santander Central Hispano SA may make a joint bid.
The nine advisory firms on Barclays's potential tie-up with ABN Amro could share as little as 0.1 percent of the deal value, according to estimates from Freeman, based on past transactions including New York-based JPMorgan Chase & Co.'s $58 billion purchase of Chicago-based Bank One Corp. in 2004.
`Market in Tehran'
``The service banks give their clients is one of the rare services where there's no technical reason offered for why the price is A not B,'' said Sylvain de Forges, head of financial operations at Paris-based Veolia Environnement SA, the world's biggest water supplier, which has made more than 10 acquisitions in the past year. ``At least lawyers and accountants provide an estimate of the hours worked.''
Barclays spokesman Robin Tozer and ABN Amro spokesman Piers Townsend declined to comment.
Similar-sized healthcare and consumer mergers, including Procter & Gamble Co.'s $55 billion friendly takeover of Gillette Co. in 2005, generated fees of almost 0.2 percent, Freeman said. Fees aren't disclosed for most mergers and acquisitions in the U.S. and Europe.
Fees that the banks would split from ABN Amro-Barclays may be in line with sums of about $60 million squeezed from the $59 billion acquisition of Bank One by JPMorgan and $50 million from Bank of America Corp.'s $49 billion purchase of FleetBoston Financial Corp., according to Freeman. By contrast, advisers raked in $90 million from Procter & Gamble's takeover of Gillette and $141.9 million for the AT&T-BellSouth deal.
No Deterrent
Senior managers at the banks usually ``know each other so well that deals are negotiated among the principals from the beginning,'' said Compass's Keevil, helping explain why the fees may be lower.
The string of bankers in the ABN Amro bid highlights how fees are no deterrent to banks vying for deal credit amid record takeovers. About $1.07 trillion of acquisitions were announced in the first quarter, almost 10 percent more than a year earlier, according to data compiled by Bloomberg.
Fees from advising on mergers and acquisitions accounted for little more than 5 percent, or about $6.4 billion, of the combined revenue last year at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc., the four biggest New York-based securities firms. By comparison, fixed-income and equities trading generated about half of the firms' revenue and underwriting accounted for almost 9 percent.
Seeking Credit
At least 80 bankers are involved in the Barclays and ABN Amro deal, said one executive with knowledge of the talks who declined to be identified. Morgan Stanley, UBS AG, Lehman and N.M. Rothschild & Sons Ltd. have been hired by ABN Amro. Barclays has retained Citigroup, Deutsche Bank AG, Credit Suisse, JPMorgan Cazenove Ltd. and Lazard Ltd. The list excludes Goldman and Merrill, which have previously advised Barclays's Edinburgh-based rival Royal Bank of Scotland.
The most senior bankers working on the potential Barclays- ABN Amro transaction include Citigroup's Hamid Biglari, 48, who runs the New York-based bank's financial institutions advisory group, and Piero Novelli, 41, UBS's co-head of global takeovers. Novelli and Biglari declined to comment.
Banks count on assignments such as Barclays-ABN Amro to secure a place high in the so-called league tables, which give credit to every adviser no matter how much it gets paid or how small its role.
The merger, which would be equivalent to more than 10 percent of the takeovers in Europe in the past 12 months, would propel Citigroup past Goldman to the global No. 2 slot this year behind Morgan Stanley, and Credit Suisse would move up to fourth, Bloomberg data show.
`Bragging Rights'
``It may not be the same profit margin as many other deals, but it's not bad business if you can get it,'' said Scott Moeller, a professor specializing in M&A at City University's Cass Business School and a former adviser at Morgan Stanley and Deutsche Bank. ``There are the bragging rights from working on that particular deal given how large it is.''
The banks can use the league-table credit to win other assignments, said Teck Tjuan Yap, a managing director at Freeman in New York. Share sales in Europe typically command fees of 2.3 percent and fees from debt offerings average about 1.6 percent for high-yield bonds, according to Bloomberg data.
Citigroup, Deutsche Bank, ING Groep NV, JPMorgan and ABN Amro advised buyout firms, including Thomas H. Lee Partners LP in Boston and Kohlberg Kravis Roberts & Co. in New York, on their 8.9 billion-euro leveraged takeover of Dutch media company VNU Group BV last year. They also arranged the financing package, which included a $5.17 billion term loan in euros and dollars, a $688 million revolving credit and $2.4 billion of bonds.
Hohn's Hedge Fund
After Citigroup and Goldman advised Telefonica SA on its acquisition of U.K. mobile-phone operator O2 Plc in October 2005, they also helped arrange an 18.5 billion-pound ($37 billion) loan, the biggest in five years, to pay for the purchase.
Advisers including Citigroup may have been hired by Barclays and ABN Amro to help deal with shareholders such as London-based TCI Fund Management LLP. The London-based hedge fund, which owns more than 1 percent of ABN Amro, sparked the debate about the future of the bank in February by calling for it to be broken up.
Citigroup's Biglari advised NYSE Group Inc. CEO John Thain last year on his successful bid for Euronext, Europe's second- largest stock exchange. TCI, led by Chris Hohn, had favored an alternative approach by Deutsche Boerse AG.
Boards retain external advisers to ``demonstrate to shareholders that they have looked at the deal with an independent view,'' said Moeller of Cass Business School.
Companies including General Electric Co. tend to ``pay less to outside advisers because they have internal teams, who can play the role of investment banks,'' he said.
Possible Counteroffer
Hiring multiple advisers shrinks the pool of potential rival bidders for ABN Amro. Citigroup, the biggest U.S. bank, joined the list advising Barclays on March 28, squashing speculation that the company would make a counteroffer.
Freeman said its estimate for fees from a merger of Barclays and ABN Amro -- $90 million to $110 million -- may be low. It doesn't account for additional earnings that might be caused by the emergence of competing offers or regulatory obstacles.
Fees in the U.S. are ``notably higher,'' said Jay Ritter, a professor of finance at the University of Florida in Gainesville. ``The legal liability for U.S. investment bankers and the chance of getting sued is much higher and that gets built into the fees.''
Dollar Falls on Concern Trade Tensions With China Will Escalate
April 10 (Bloomberg) -- The dollar fell on speculation China will retaliate after the U.S. government said it plans to file copyright piracy complaints to the World Trade Organization.
The U.S. currency snapped three days of gains against the yen and two versus the euro on concern trade friction between the two nations will escalate, slowing economic growth in both countries. Heightened tension also may prompt China to reduce purchases of U.S. assets with its more than $1 trillion of foreign ex change reserves.
``The protectionist attitude of the U.S. is a downside risk for global growth and will hurt the dollar,'' said George Kapasakis a senior foreign-exchange trader at Mizuho Corporate Bank Ltd. in Sydney.
The dollar declined to 118.86 yen at 11:25 a.m. in Tokyo from 119.32 late in New York yesterday. It also dropped to $1.3409 per euro from $1.3354. Dollar will drop to $1.36 in a month, said Kapasakis.
Tension between the U.S. and China is growing after Trade Representative Susan Schwab said complaints will be filed today at the WTO aimed at stopping what the U.S. said is piracy of copyrighted movies, music, software and books. The U.S. trade deficit widened to $763.6 billion in 2006, a fifth record year, on American purchases of Chinese goods.
``The U.S. seems to be adopting protectionism,'' said Masashi Kurabe, currency manager at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo. ``It's a negative for the dollar,'' which will drop to $1.3400 per euro and 118.70 yen today, he said.
Losses Accelerated
Losses in the dollar accelerated after the euro rose above $1.3370 and the yen gained beyond 119.00, triggering pre-set orders to buy both currencies, said Lee Wai Tuck, currency strategist at Forecast Singapore Ltd. Investors often place automatic instructions in case bets go wrong.
Traders also sold the dollar after the currency failed to break through a key level of 119.40 yen for a third day, said Masaki Fukui, a senior economist and currency analyst at Mizuho Corporate Bank Ltd. in Tokyo.
``Traders recognized there is a heavy cap on the top of the dollar-yen,'' said Fukui, who expects the dollar to move between 118 and 120.50 yen this week.
Neutral Stance
The dollar also weakened on speculation minutes from a March Federal Reserve meeting and speeches by central bankers will signal the U.S. economy is falling into stagflation, a state where growth slows and prices rise.
The currency dropped 0.5 percent versus the euro on March 21, when the Fed left interest rates at 5.25 percent and deleted a reference to ``additional firming'' in a statement. The Fed also said housing was moderating and prices were elevated. The minutes of that meeting are due tomorrow.
Over the next two days, Fed Chairman Ben S. Bernanke, Governor Frederic Mishkin and regional Fed presidents Richard Fisher, Charles Plosser, Jeffrey Lacker and Michael Moskow are all scheduled to give speeches. Fisher, Plosser and Lacker are non-voting members.
``Inflation expectations remain high, while the economy is slowing, so it's difficult to be optimistic about the dollar,'' said Koji Fukaya, senior currency strategist in Tokyo at Deutsche Securities. ``The Fed has just moved to a neutral stance, so we can't expect policy makers to make hawkish remarks.''
The dollar may fall to 118.70 yen and $1.34 versus the euro this week, Fukaya said.
Merger Flows
The dollar also fell against the euro and the yen as merger activity pushed it lower versus the Australian dollar, which rose to a 17-year high of 82.32 U.S. cents.
Rinker Group Ltd., Australia's biggest building materials maker, recommended investors accept a takeover offer by Cemex SA after the Mexican company increased its bid by 22 percent. The deal values Rinker at A$17.4 billion ($14.2 billion).
Demand for the Australian dollar also may be stoked by potential international takeovers of Australian companies including Qantas Airways Ltd. and Coles Group Ltd.
``The M&A stories coming out of Australia are pushing the Aussie higher versus the U.S. dollar,'' said Koichi Yoshikawa, head of currency trading at BNP Paribas in Tokyo. ``These flows are weighing on the U.S. dollar versus other currencies.''
The U.S. currency snapped three days of gains against the yen and two versus the euro on concern trade friction between the two nations will escalate, slowing economic growth in both countries. Heightened tension also may prompt China to reduce purchases of U.S. assets with its more than $1 trillion of foreign ex change reserves.
``The protectionist attitude of the U.S. is a downside risk for global growth and will hurt the dollar,'' said George Kapasakis a senior foreign-exchange trader at Mizuho Corporate Bank Ltd. in Sydney.
The dollar declined to 118.86 yen at 11:25 a.m. in Tokyo from 119.32 late in New York yesterday. It also dropped to $1.3409 per euro from $1.3354. Dollar will drop to $1.36 in a month, said Kapasakis.
Tension between the U.S. and China is growing after Trade Representative Susan Schwab said complaints will be filed today at the WTO aimed at stopping what the U.S. said is piracy of copyrighted movies, music, software and books. The U.S. trade deficit widened to $763.6 billion in 2006, a fifth record year, on American purchases of Chinese goods.
``The U.S. seems to be adopting protectionism,'' said Masashi Kurabe, currency manager at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo. ``It's a negative for the dollar,'' which will drop to $1.3400 per euro and 118.70 yen today, he said.
Losses Accelerated
Losses in the dollar accelerated after the euro rose above $1.3370 and the yen gained beyond 119.00, triggering pre-set orders to buy both currencies, said Lee Wai Tuck, currency strategist at Forecast Singapore Ltd. Investors often place automatic instructions in case bets go wrong.
Traders also sold the dollar after the currency failed to break through a key level of 119.40 yen for a third day, said Masaki Fukui, a senior economist and currency analyst at Mizuho Corporate Bank Ltd. in Tokyo.
``Traders recognized there is a heavy cap on the top of the dollar-yen,'' said Fukui, who expects the dollar to move between 118 and 120.50 yen this week.
Neutral Stance
The dollar also weakened on speculation minutes from a March Federal Reserve meeting and speeches by central bankers will signal the U.S. economy is falling into stagflation, a state where growth slows and prices rise.
The currency dropped 0.5 percent versus the euro on March 21, when the Fed left interest rates at 5.25 percent and deleted a reference to ``additional firming'' in a statement. The Fed also said housing was moderating and prices were elevated. The minutes of that meeting are due tomorrow.
Over the next two days, Fed Chairman Ben S. Bernanke, Governor Frederic Mishkin and regional Fed presidents Richard Fisher, Charles Plosser, Jeffrey Lacker and Michael Moskow are all scheduled to give speeches. Fisher, Plosser and Lacker are non-voting members.
``Inflation expectations remain high, while the economy is slowing, so it's difficult to be optimistic about the dollar,'' said Koji Fukaya, senior currency strategist in Tokyo at Deutsche Securities. ``The Fed has just moved to a neutral stance, so we can't expect policy makers to make hawkish remarks.''
The dollar may fall to 118.70 yen and $1.34 versus the euro this week, Fukaya said.
Merger Flows
The dollar also fell against the euro and the yen as merger activity pushed it lower versus the Australian dollar, which rose to a 17-year high of 82.32 U.S. cents.
Rinker Group Ltd., Australia's biggest building materials maker, recommended investors accept a takeover offer by Cemex SA after the Mexican company increased its bid by 22 percent. The deal values Rinker at A$17.4 billion ($14.2 billion).
Demand for the Australian dollar also may be stoked by potential international takeovers of Australian companies including Qantas Airways Ltd. and Coles Group Ltd.
``The M&A stories coming out of Australia are pushing the Aussie higher versus the U.S. dollar,'' said Koichi Yoshikawa, head of currency trading at BNP Paribas in Tokyo. ``These flows are weighing on the U.S. dollar versus other currencies.''
Friday, April 6, 2007
Job Growth Quickens, Unemployment Drops
April 6 (Bloomberg) -- American employers added more workers than forecast in March and the jobless rate matched a five-year low, giving the economy a spark as it struggles to overcome slumps in housing and manufacturing.
The 180,000 increase in employment, the most in three months, followed a 113,000 gain in February that was larger than previously estimated, the Labor Department reported today in Washington. The jobless rate fell to 4.4 percent, a level last seen in October, defying predictions it would climb.
Plentiful jobs and bigger paychecks are giving more people the means to spend, preventing the housing recession from spreading to the rest of the economy. The report takes some of the pressure off Federal Reserve Chairman Ben S. Bernanke to cut interest rates. Bonds tumbled and the dollar jumped.
``The expansion is going to keep rolling,'' said Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston. ``The Fed isn't going to move rates any time this year.''
Separately, the Commerce Department reported that sales at U.S. wholesalers outpaced inventories in February, which may lay the groundwork for a manufacturing rebound in coming months.
The 1.2 percent increase in sales followed a 0.9 percent decline a month earlier. Stockpiles of unsold goods rose 0.5 percent. Wholesalers make up about a quarter of all business inventories.
Builders, Retailers
Builders increased hiring as the cold weather experienced in February eased. Retailers also added to payrolls, while factories continued to lose jobs.
Economists projected payrolls would rise by 130,000 following a previously reported 97,000 February increase, according to the median of 75 forecasts in a Bloomberg News survey. They also anticipated an increase in the unemployment rate to 4.6 percent.
Revisions for the prior two months showed employers added 32,000 more jobs than earlier estimated.
Workers' average hourly earnings rose 6 cents, or 0.3 percent, after a 0.4 percent increase the previous month. Economists expected a 0.3 percent increase in hourly wages. Earnings were up 4 percent from March last year.
``This points to continued strong income growth for consumers and also suggests the somewhat softer GDP numbers we've seen have not generated any softness in the labor Market,'' said Dean Maki, chief U.S. economist at Barclays Capital in New York.
Hiring for Services
Service industries, which include banking, insurance, restaurants and retailers, gained 137,000 workers last month after a 180,000 gain in February. The increase was led by a 36,000 gain in retail employment that was the biggest since July 2005.
Builders added 56,000 jobs after shedding 61,000 the prior month. The snap back is probably due to the return of more seasonable temperatures after cold weather played a role in the February drop, the Labor Department said.
Manufacturers' payrolls fell 16,000 after dropping 11,000 a month earlier. Economists expected manufacturers to eliminate 12,000 positions. The manufacturing workweek rose to 41.1 hours and overtime increased to 4.3 hours from 4.2 hours.
Working Week
Average weekly hours worked by production workers increased to 33.9 from 33.8. Economists in the Bloomberg survey had forecast hours would rise to 33.8 from 33.7.
Average weekly earnings rose to $583.76 last month from $580.01 in February.
``We continue to see modest growth and stability in the labor market,'' Steve Pogorzelski president of Monster International Worldwide, said in an interview on April 4. ``Employers continue to report they're concerned about turnover, driven by opportunities to make more money'' in other jobs.
The report is in line with others in recent weeks that suggested the labor market was holding up.
ADP Employer Services said companies added 106,000 jobs last month after a 65,000 gain in February. The ADP data are based only on a count of private payrolls that exclude government workers.
A Conference Board survey released last week showed the share of Americans who said jobs are plentiful rose last month to the highest since August 2001. First-time claims for unemployment benefits also showed companies are holding on to workers.
Searching for Talent
``It's hard to find enough people to grow the way we want,'' said John Milligan, chief operating officer of Foster City, California-based Gilead Sciences Inc., the world's second- biggest seller of HIV drugs behind GlaxoSmithKline Plc, in an interview last month.
Other businesses are trying to trim costs by reducing staff. Milpitas, California-based Solectron Corp., the world's second-largest maker of electronics for other companies, said last week it may cut as many as 1,500 jobs as it consolidates facilities in North America and Europe.
Fed policy makers were counting on jobs and wages to keep consumers and the economy afloat.
``The continuing increases in employment, together with some pickup in real wages, have helped sustain consumer spending,'' Fed Chairman Bernanke said during Congressional testimony last week. ``Growth in consumer spending should continue to support the economic expansion in coming quarters.''
Bernanke also said interest-rate policy was still aimed at combating inflation, which central bankers considered a bigger risk to the economy. Still, ``uncertainties have risen, and therefore a little more flexibility might be desirable.''
The 180,000 increase in employment, the most in three months, followed a 113,000 gain in February that was larger than previously estimated, the Labor Department reported today in Washington. The jobless rate fell to 4.4 percent, a level last seen in October, defying predictions it would climb.
Plentiful jobs and bigger paychecks are giving more people the means to spend, preventing the housing recession from spreading to the rest of the economy. The report takes some of the pressure off Federal Reserve Chairman Ben S. Bernanke to cut interest rates. Bonds tumbled and the dollar jumped.
``The expansion is going to keep rolling,'' said Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston. ``The Fed isn't going to move rates any time this year.''
Separately, the Commerce Department reported that sales at U.S. wholesalers outpaced inventories in February, which may lay the groundwork for a manufacturing rebound in coming months.
The 1.2 percent increase in sales followed a 0.9 percent decline a month earlier. Stockpiles of unsold goods rose 0.5 percent. Wholesalers make up about a quarter of all business inventories.
Builders, Retailers
Builders increased hiring as the cold weather experienced in February eased. Retailers also added to payrolls, while factories continued to lose jobs.
Economists projected payrolls would rise by 130,000 following a previously reported 97,000 February increase, according to the median of 75 forecasts in a Bloomberg News survey. They also anticipated an increase in the unemployment rate to 4.6 percent.
Revisions for the prior two months showed employers added 32,000 more jobs than earlier estimated.
Workers' average hourly earnings rose 6 cents, or 0.3 percent, after a 0.4 percent increase the previous month. Economists expected a 0.3 percent increase in hourly wages. Earnings were up 4 percent from March last year.
``This points to continued strong income growth for consumers and also suggests the somewhat softer GDP numbers we've seen have not generated any softness in the labor Market,'' said Dean Maki, chief U.S. economist at Barclays Capital in New York.
Hiring for Services
Service industries, which include banking, insurance, restaurants and retailers, gained 137,000 workers last month after a 180,000 gain in February. The increase was led by a 36,000 gain in retail employment that was the biggest since July 2005.
Builders added 56,000 jobs after shedding 61,000 the prior month. The snap back is probably due to the return of more seasonable temperatures after cold weather played a role in the February drop, the Labor Department said.
Manufacturers' payrolls fell 16,000 after dropping 11,000 a month earlier. Economists expected manufacturers to eliminate 12,000 positions. The manufacturing workweek rose to 41.1 hours and overtime increased to 4.3 hours from 4.2 hours.
Working Week
Average weekly hours worked by production workers increased to 33.9 from 33.8. Economists in the Bloomberg survey had forecast hours would rise to 33.8 from 33.7.
Average weekly earnings rose to $583.76 last month from $580.01 in February.
``We continue to see modest growth and stability in the labor market,'' Steve Pogorzelski president of Monster International Worldwide, said in an interview on April 4. ``Employers continue to report they're concerned about turnover, driven by opportunities to make more money'' in other jobs.
The report is in line with others in recent weeks that suggested the labor market was holding up.
ADP Employer Services said companies added 106,000 jobs last month after a 65,000 gain in February. The ADP data are based only on a count of private payrolls that exclude government workers.
A Conference Board survey released last week showed the share of Americans who said jobs are plentiful rose last month to the highest since August 2001. First-time claims for unemployment benefits also showed companies are holding on to workers.
Searching for Talent
``It's hard to find enough people to grow the way we want,'' said John Milligan, chief operating officer of Foster City, California-based Gilead Sciences Inc., the world's second- biggest seller of HIV drugs behind GlaxoSmithKline Plc, in an interview last month.
Other businesses are trying to trim costs by reducing staff. Milpitas, California-based Solectron Corp., the world's second-largest maker of electronics for other companies, said last week it may cut as many as 1,500 jobs as it consolidates facilities in North America and Europe.
Fed policy makers were counting on jobs and wages to keep consumers and the economy afloat.
``The continuing increases in employment, together with some pickup in real wages, have helped sustain consumer spending,'' Fed Chairman Bernanke said during Congressional testimony last week. ``Growth in consumer spending should continue to support the economic expansion in coming quarters.''
Bernanke also said interest-rate policy was still aimed at combating inflation, which central bankers considered a bigger risk to the economy. Still, ``uncertainties have risen, and therefore a little more flexibility might be desirable.''
Dollar Rises From a Two-Year Low as Jobs Report Beats Forecasts
April 6 (Bloomberg) -- The dollar rose from a two-year low against the euro and strengthened versus the yen as a government report showed the U.S. added more jobs than economists forecast.
The U.S. currency advanced against 12 of the 16 most active currency tracked by Bloomberg as the unemployment data led traders to reduce speculation the Federal Reserve will cut borrowing costs in the third quarter. Currency moves were magnified by a lack of volume, traders said.
``It was a very strong number, and after yesterday's move it surprised a lot of people,'' said Camilla Sutton, a currency strategist in Toronto at Scotia Capital Inc. ``It switches things around, and we can see a stronger dollar for a while.''
The dollar rose 0.46 percent to $1.3367 per euro at 10:13 a.m. in New York. It was the biggest gain since March 5. The dollar yesterday fell to $1.3442, the lowest since March 2005. The dollar rose 0.54 percent to 119.36 yen.
U.S. stock markets were closed today for Good Friday, and the Securities Industry and Financial Markets Association recommended bond trading close at 11 a.m. New York time.
The dollar also strengthened against the yen on speculation signs of U.S. economic strength will encourage investors to buy higher-yielding assets financed by borrowing in Japan, a practice known as the carry trade.
``The dollar is going strong, and we'll see people taking on more risk,'' said Brian Taylor, chief currency trader in Buffalo, New York, at Manufacturers & Traders Trust. ``They'll be putting on more carry trades as we speak. It's going to be hard to stop the yen's decline.
Euro-Yen Record
The euro rose 0.09 percent to 159.57 yen, after touching 159.69, an all-time high. The 13-country euro began trading in January 1999.
The implied volatility of a one-month dollar-yen option fell to 8 percent, the lowest since Feb. 26, the day before a global stock market rout led to an unwinding of some carry trades. Low volatility reduces the risk of carry trades by making profits more predictable.
The yield of the 10-year Treasury note rose 7 basis points, or 0.07 percentage point, to 4.76 percent. The difference in yield, or spread, between the Treasury note and the comparable- maturity Japanese security grew 8 basis points to 3.08 percent, the widest since Feb. 12, indicating the U.S. security had become more attractive to investors. The spread between U.S. and German 10-year government debt grew 6 basis points to 0.65 percent, the widest since March 14.
U.S. Job Growth
U.S. employers added 180,000 non-farm jobs in March, following a revised gain of 113,000 the previous month, the Labor Department said today in Washington. The median forecast of 75 economists surveyed by Bloomberg News was for an increase of 130,000 jobs. The jobless rate fell to 4.4 percent from 4.5 percent, compared with an expected rise to 4.6 percent.
Interest rate futures suggest a 35 percent likelihood the Fed will cut its target rate for overnight lending between banks to 5 percent at its Aug. 6-7 meeting, down from 52 percent odds before the jobs report. As recently as March 13, the market was certain of an August rate cut. The Fed has kept its target rate for overnight lending between banks at 5.25 percent since August.
An inflation measure closely tracked by the Federal Reserve gained in February, the Commerce Department reported March 30. The price gauge, tied to spending patterns and excluding food and energy costs, rose 2.4 percent from February 2006 after rising 2.2 percent in January from a year earlier.
St. Louis Federal Reserve Bank President William Poole, speaking in New York on April 2, said he would face a ``high hurdle'' for favoring interest-rate cuts if inflation stays near the current pace. He reiterated that his goal for annual inflation is 1.5 percent, plus or minus 0.5 percentage point.
The U.S. currency advanced against 12 of the 16 most active currency tracked by Bloomberg as the unemployment data led traders to reduce speculation the Federal Reserve will cut borrowing costs in the third quarter. Currency moves were magnified by a lack of volume, traders said.
``It was a very strong number, and after yesterday's move it surprised a lot of people,'' said Camilla Sutton, a currency strategist in Toronto at Scotia Capital Inc. ``It switches things around, and we can see a stronger dollar for a while.''
The dollar rose 0.46 percent to $1.3367 per euro at 10:13 a.m. in New York. It was the biggest gain since March 5. The dollar yesterday fell to $1.3442, the lowest since March 2005. The dollar rose 0.54 percent to 119.36 yen.
U.S. stock markets were closed today for Good Friday, and the Securities Industry and Financial Markets Association recommended bond trading close at 11 a.m. New York time.
The dollar also strengthened against the yen on speculation signs of U.S. economic strength will encourage investors to buy higher-yielding assets financed by borrowing in Japan, a practice known as the carry trade.
``The dollar is going strong, and we'll see people taking on more risk,'' said Brian Taylor, chief currency trader in Buffalo, New York, at Manufacturers & Traders Trust. ``They'll be putting on more carry trades as we speak. It's going to be hard to stop the yen's decline.
Euro-Yen Record
The euro rose 0.09 percent to 159.57 yen, after touching 159.69, an all-time high. The 13-country euro began trading in January 1999.
The implied volatility of a one-month dollar-yen option fell to 8 percent, the lowest since Feb. 26, the day before a global stock market rout led to an unwinding of some carry trades. Low volatility reduces the risk of carry trades by making profits more predictable.
The yield of the 10-year Treasury note rose 7 basis points, or 0.07 percentage point, to 4.76 percent. The difference in yield, or spread, between the Treasury note and the comparable- maturity Japanese security grew 8 basis points to 3.08 percent, the widest since Feb. 12, indicating the U.S. security had become more attractive to investors. The spread between U.S. and German 10-year government debt grew 6 basis points to 0.65 percent, the widest since March 14.
U.S. Job Growth
U.S. employers added 180,000 non-farm jobs in March, following a revised gain of 113,000 the previous month, the Labor Department said today in Washington. The median forecast of 75 economists surveyed by Bloomberg News was for an increase of 130,000 jobs. The jobless rate fell to 4.4 percent from 4.5 percent, compared with an expected rise to 4.6 percent.
Interest rate futures suggest a 35 percent likelihood the Fed will cut its target rate for overnight lending between banks to 5 percent at its Aug. 6-7 meeting, down from 52 percent odds before the jobs report. As recently as March 13, the market was certain of an August rate cut. The Fed has kept its target rate for overnight lending between banks at 5.25 percent since August.
An inflation measure closely tracked by the Federal Reserve gained in February, the Commerce Department reported March 30. The price gauge, tied to spending patterns and excluding food and energy costs, rose 2.4 percent from February 2006 after rising 2.2 percent in January from a year earlier.
St. Louis Federal Reserve Bank President William Poole, speaking in New York on April 2, said he would face a ``high hurdle'' for favoring interest-rate cuts if inflation stays near the current pace. He reiterated that his goal for annual inflation is 1.5 percent, plus or minus 0.5 percentage point.
Thursday, April 5, 2007
BOJ May Keep Rates Steady as Prices Drop, U.S. Growth Slows
April 6 (Bloomberg) -- Japan's central bank will probably keep interest rates unchanged next week after consumer prices fell and recent data signaled U.S. growth is cooling.
Governor Toshihiko Fukui and his policy board will keep the key overnight lending rate at 0.5 percent, the lowest among major economies, according to all 49 economists surveyed by Bloomberg News. The bank doubled the key rate in February.
Confidence of Japan's largest manufacturers slipped from a two-year high on concern that a U.S. slowdown may hurt exports of cars, flat-panel televisions and digital cameras, the central bank's quarterly Tankan business survey showed this week. A decline in consumer prices for the first time in 10 months provided further reason to delay a rate increase.
``The prospect of a U.S.-led global slowdown is a major headwind for Japan,'' said Julian Jessop, chief international economist at Capital Economics in London. The U.S. outlook ``may be decisive in keeping Japanese rates on hold.''
The bank has raised rates twice since July last year and Deputy Governor Toshiro Muto this week said borrowing costs need to be raised gradually in line with the economy's expansion. Giving companies and investors the impression rates will stay very low regardless of the economy's strength could cause the ``misallocation of resources,'' he said.
Service Companies
The Tankan survey showed a mixed picture of Japan's economy. Large manufacturers plan to increase spending by 2.5 percent in the year that began April 1, more than economists expected. Large service companies stayed the most optimistic they've been in 15 years and aim to boost investment 3.1 percent.
``Solid numbers among non-manufacturers signal a rebound in consumption at home and gross domestic product will probably show a brisk expansion in the first quarter,'' said Mamoru Yamazaki, chief Japan economist at RBS Securities Japan Ltd. ``The direction of the U.S. economy is the biggest risk for Japan.''
Yamazaki said he expects the bank to put off a rate increase until the fourth quarter, when the effect of bad subprime loans on the U.S. economy will probably fade.
Japan's largest export market may be losing steam. U.S. factories expanded at a slower pace in March than the previous month, and new home sales fell to the lowest level in almost seven years in February. Subprime borrowers, typically people with limited or poor credit histories, fell behind on their mortgage payments at the highest rate in four years last quarter.
Optimistic About U.S.
Muto said the U.S. economy will probably achieve a soft landing, with growth returning to potential even if it temporarily slows. Subprime loan defaults probably won't hurt the country's overall growth, he said.
``Bank of Japan policy makers aren't pessimistic about the U.S. outlook, but it's unlikely that the economy will achieve a V-shaped recovery and quickly dispel the uncertainty about global growth,'' said Masaaki Kanno, a former central bank official and now chief economist at JPMorgan Securities Japan Co. The bank will probably raise rates in August or September, Kanno said.
The prospect that consumer prices may keep falling in coming months also damped speculation for any early rate increases. Core consumer prices, which exclude fresh food, declined 0.1 percent in February from a year earlier, the first drop since last April.
Governor Fukui said last month that prices will hover near zero in coming months but remain on a rising trend in the long run. Core prices won't stop sliding until around October, when the effect of cheaper oil eventually abates, said Teizo Taya, a former Bank of Japan board member.
Price Outlook
``The central bank is seeking to normalize interest-rate levels, but it can't raise rates by ignoring monthly core price data,'' said Taya, now adviser to Daiwa Institute of Research.
Weak price data may prompt the bank to cut its forecast for inflation for a second time in a year when it releases a semi- annual report on April 27, said Richard Jerram, chief Japan economist at Macquarie Securities Ltd.
The bank said in October core prices would rise 0.5 percent in the year that started this month, revising down its estimate from 0.8 percent in April. The revision followed the government's reshuffle of items in the consumer price index in August.
``The Bank of Japan has no ability to forecast inflation,'' Jerram said. ``If you can't demonstrate any ability to predict what will happen, then you have to question whether it's legitimate to base policy decisions on such uncertainty.''
Some economists said there's a chance the bank will raise rates before Upper House elections in July should evidence of a U.S. rebound emerge, even amid falling prices.
``It's possible the bank will attempt a rate hike in May or June if it can become confident the U.S. economy will regain stability later this year,'' said Hiromichi Shirakawa, a former BOJ official and now chief economist at Credit Suisse in Tokyo.
The central bank will announce its policy decision at the conclusion of a two-day meeting on April 10. It will release its monthly economic assessment at 3 p.m. that day and Governor Fukui will hold a press conference at 3:30 p.m.
Governor Toshihiko Fukui and his policy board will keep the key overnight lending rate at 0.5 percent, the lowest among major economies, according to all 49 economists surveyed by Bloomberg News. The bank doubled the key rate in February.
Confidence of Japan's largest manufacturers slipped from a two-year high on concern that a U.S. slowdown may hurt exports of cars, flat-panel televisions and digital cameras, the central bank's quarterly Tankan business survey showed this week. A decline in consumer prices for the first time in 10 months provided further reason to delay a rate increase.
``The prospect of a U.S.-led global slowdown is a major headwind for Japan,'' said Julian Jessop, chief international economist at Capital Economics in London. The U.S. outlook ``may be decisive in keeping Japanese rates on hold.''
The bank has raised rates twice since July last year and Deputy Governor Toshiro Muto this week said borrowing costs need to be raised gradually in line with the economy's expansion. Giving companies and investors the impression rates will stay very low regardless of the economy's strength could cause the ``misallocation of resources,'' he said.
Service Companies
The Tankan survey showed a mixed picture of Japan's economy. Large manufacturers plan to increase spending by 2.5 percent in the year that began April 1, more than economists expected. Large service companies stayed the most optimistic they've been in 15 years and aim to boost investment 3.1 percent.
``Solid numbers among non-manufacturers signal a rebound in consumption at home and gross domestic product will probably show a brisk expansion in the first quarter,'' said Mamoru Yamazaki, chief Japan economist at RBS Securities Japan Ltd. ``The direction of the U.S. economy is the biggest risk for Japan.''
Yamazaki said he expects the bank to put off a rate increase until the fourth quarter, when the effect of bad subprime loans on the U.S. economy will probably fade.
Japan's largest export market may be losing steam. U.S. factories expanded at a slower pace in March than the previous month, and new home sales fell to the lowest level in almost seven years in February. Subprime borrowers, typically people with limited or poor credit histories, fell behind on their mortgage payments at the highest rate in four years last quarter.
Optimistic About U.S.
Muto said the U.S. economy will probably achieve a soft landing, with growth returning to potential even if it temporarily slows. Subprime loan defaults probably won't hurt the country's overall growth, he said.
``Bank of Japan policy makers aren't pessimistic about the U.S. outlook, but it's unlikely that the economy will achieve a V-shaped recovery and quickly dispel the uncertainty about global growth,'' said Masaaki Kanno, a former central bank official and now chief economist at JPMorgan Securities Japan Co. The bank will probably raise rates in August or September, Kanno said.
The prospect that consumer prices may keep falling in coming months also damped speculation for any early rate increases. Core consumer prices, which exclude fresh food, declined 0.1 percent in February from a year earlier, the first drop since last April.
Governor Fukui said last month that prices will hover near zero in coming months but remain on a rising trend in the long run. Core prices won't stop sliding until around October, when the effect of cheaper oil eventually abates, said Teizo Taya, a former Bank of Japan board member.
Price Outlook
``The central bank is seeking to normalize interest-rate levels, but it can't raise rates by ignoring monthly core price data,'' said Taya, now adviser to Daiwa Institute of Research.
Weak price data may prompt the bank to cut its forecast for inflation for a second time in a year when it releases a semi- annual report on April 27, said Richard Jerram, chief Japan economist at Macquarie Securities Ltd.
The bank said in October core prices would rise 0.5 percent in the year that started this month, revising down its estimate from 0.8 percent in April. The revision followed the government's reshuffle of items in the consumer price index in August.
``The Bank of Japan has no ability to forecast inflation,'' Jerram said. ``If you can't demonstrate any ability to predict what will happen, then you have to question whether it's legitimate to base policy decisions on such uncertainty.''
Some economists said there's a chance the bank will raise rates before Upper House elections in July should evidence of a U.S. rebound emerge, even amid falling prices.
``It's possible the bank will attempt a rate hike in May or June if it can become confident the U.S. economy will regain stability later this year,'' said Hiromichi Shirakawa, a former BOJ official and now chief economist at Credit Suisse in Tokyo.
The central bank will announce its policy decision at the conclusion of a two-day meeting on April 10. It will release its monthly economic assessment at 3 p.m. that day and Governor Fukui will hold a press conference at 3:30 p.m.
Oil slips towards $64 after Iran releases Britons
LONDON (Reuters) - Oil eased towards $64 a barrel on Thursday after Iran's release of 15 British sailors and marines eased worries over crude shipments from the world's fourth-largest exporter.
U.S. crude jumped above $68 last week as some investors took the view that the standoff over Iran's detention of the Britons increased the risk of a disruption to oil shipments.
"There is a little bit of selling coming in. People feel a little bit happier about the continuity of oil supplies," said Rob Laughlin, a broker at Man Financial in London.
U.S. crude for May delivery was down 27 cents at $64.11 a barrel by 1250 GMT. A big drop in U.S. gasoline inventories ahead of peak summer demand in the world's top consumer, reported by the U.S. government on Wednesday, limited the decline in prices.
The capture of 15 British military personnel had pushed U.S. crude to a six-month high of $68.09 last week and prices are still around $3 higher than before they were seized on March 23.
Investors were keenly aware that Iran exports about 2.5 million barrels per day of oil and sits on the Strait of Hormuz, a shipping route for some two-fifths of globally traded oil.
Iranian President Mahmoud Ahmadinejad told a news conference on Wednesday he had decided to forgive and free the captives. They arrived back in England on Thursday.
U.S. gasoline supplies remained supportive for the market. Stockpiles fell by 5 million barrels, data from the U.S. Energy Information Administration showed on Wednesday.
"The gasoline situation tightened considerably and that limited the downside. Stocks are extremely tight," said Gerard Burg, an analyst from National Australia Bank.
The decline included a drop of two million to three million barrels from the previous week, but still alarmed traders in the run-up to the peak summer driving season.
Gasoline stocks have fallen to the lower half of the historical range, partly as a result of refinery outages, which help to explain high levels of U.S. unrefined crude.
Crude oil inventories rose by 4.3 million barrels, much more than expected.
U.S. crude jumped above $68 last week as some investors took the view that the standoff over Iran's detention of the Britons increased the risk of a disruption to oil shipments.
"There is a little bit of selling coming in. People feel a little bit happier about the continuity of oil supplies," said Rob Laughlin, a broker at Man Financial in London.
U.S. crude for May delivery was down 27 cents at $64.11 a barrel by 1250 GMT. A big drop in U.S. gasoline inventories ahead of peak summer demand in the world's top consumer, reported by the U.S. government on Wednesday, limited the decline in prices.
The capture of 15 British military personnel had pushed U.S. crude to a six-month high of $68.09 last week and prices are still around $3 higher than before they were seized on March 23.
Investors were keenly aware that Iran exports about 2.5 million barrels per day of oil and sits on the Strait of Hormuz, a shipping route for some two-fifths of globally traded oil.
Iranian President Mahmoud Ahmadinejad told a news conference on Wednesday he had decided to forgive and free the captives. They arrived back in England on Thursday.
U.S. gasoline supplies remained supportive for the market. Stockpiles fell by 5 million barrels, data from the U.S. Energy Information Administration showed on Wednesday.
"The gasoline situation tightened considerably and that limited the downside. Stocks are extremely tight," said Gerard Burg, an analyst from National Australia Bank.
The decline included a drop of two million to three million barrels from the previous week, but still alarmed traders in the run-up to the peak summer driving season.
Gasoline stocks have fallen to the lower half of the historical range, partly as a result of refinery outages, which help to explain high levels of U.S. unrefined crude.
Crude oil inventories rose by 4.3 million barrels, much more than expected.
Wednesday, April 4, 2007
Yen May Plunge to 125 on Carry Trades-Barclays
April 4 (Bloomberg) -- The yen will slump 5 percent this quarter, the worst start to a fiscal year since 1989, as Japanese invest more of their savings overseas, said Toru Umemoto, chief foreign-exchange strategist at Barclays Capital.
Individuals are disheartened by returns on offer in Japan as the central bank's benchmark interest rate of 0.5 percent is unlikely to rise until the third quarter, said Umemoto, the most accurate yen forecaster last year in surveys by Bloomberg News. The currency will drop to 125 against the dollar, he said, the weakest since December 2002.
The yen was lower against all 16 of the world's most- actively traded currencies over the past month, with the biggest losses versus higher-yielding currencies such as the Australian and New Zealand dollars. Borrowing costs in both countries are 5.75 percentage points and 7 percentage points higher than those in Japan, respectively.
``The yen's downtrend will continue as Japanese, who are fed up with low returns, will continue to export capital,'' Tokyo-based Umemoto said in an interview on April 2. ``Individuals will play the leading role.'' The fastest pace of growth in three years in the quarter ended Dec. 31 gives individuals greater confidence to send money offshore, he said.
Overseas assets held by Japanese households reached 46 trillion yen ($387.2 billion) in 2006, nearly 10 percent of the nation's gross domestic product, but only 3 percent of their total financial holdings, based on Umemoto's own calculations.
Breathing Room
The Japanese currency traded at 118.85 per dollar at 3:04 p.m. in Tokyo from 118.96 late in New York yesterday. The yen is down 0.9 percent this week, the first of the fiscal year that started April 1.
It gained 1 percent last quarter as some investors exited carry trades, where they borrow and sell yen for better returns elsewhere, because of a global slump in stock markets.
``It's likely that there's breathing room for households to shift money from safe but low-return deposits to riskier, higher return assets abroad,'' said Masafumi Yamamoto, a strategist at Nikko Citigroup Ltd. in Tokyo and a former Bank of Japan currency trader. ``The Japanese ratio at 3 percent does not look particularly high.''
Yamamoto is less bearish on the yen than his counterpart at Barclays, predicting the currency will fall to 119 a dollar by June 30. He said Japanese overseas holdings rose 27 percent last year from the previous year, citing data compiled by the Bank of Japan, monthly data from the Investment Trust Association Japan, and Citigroup's own estimates.
Bank Deposits
Japanese mutual funds boosted purchases of assets abroad to about 40 percent of the total from about 8 percent in 2002, according to the Investment Trust Association. The mutual funds now have about $244 billion of assets denominated in foreign currencies, including $98 billion in the U.S. dollar.
The yen weakened 5.9 percent versus the New Zealand dollar and 5.3 percent against Australia's currency in the past month. Australian and New Zealand 10-year government bonds both offer a yield premium, or spread, of 4.20 percentage points over similar-maturity Japanese debt. Securities in Germany give an extra 2.4 points.
The ratio of Japanese household savings parked in banks and post offices accounted for about half of their total financial assets of 1,550 trillion yen, compared with 10 percent in the U.S. and 30 percent in Europe, Barclays' Umemoto said. That will continue to decrease as more funds go overseas, he said.
Credit Suisse, Fortis
Credit Suisse and Fortis Bank were the two most bearish for the yen among 49 contributors to a Bloomberg survey last month, forecasting losses to 125 and 127 against the dollar this quarter. The median estimate was 117.
Japan is seeing a rise in so-called margin trading, where retail investors borrow part of the money necessary to buy currency, seeking to make a profit on price gains.
``The presence of foreign-exchange margin traders is increasing in Tokyo,'' said Kenichiro Yoshida, a senior economist and currency analyst in Tokyo at Mizuho Research Institute, a unit of Japan's second-largest lender by assets. ``Younger generations such as in their 30s are trading currencies even by mobile phone.''
The yen may move between 115 and 122 a dollar this quarter, Yoshida said.
Individual Power
Japanese individuals' foreign currency-denominated assets exceeded 40 trillion yen in 2006, topping such assets held by life insurers, the Nikkei newspaper also reported on March 31, excluding the estimated amount of foreign-currency positions by Japanese foreign-exchange margin traders.
Life insurance companies, commonly known as Seiho in Japanese, used to play a major role in the financial markets of the late 1980s during Japan's asset-inflated bubble economy by purchasing massive amounts of foreign bonds.
``We cannot ignore individual power,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``Japanese individuals account for about 20 percent to 30 percent of foreign-exchange margin trading in the Tokyo time zone. Institutional investors will lag behind households.''
The yen may fall to 122 a dollar by June 30, Muramatsu said
Individuals are disheartened by returns on offer in Japan as the central bank's benchmark interest rate of 0.5 percent is unlikely to rise until the third quarter, said Umemoto, the most accurate yen forecaster last year in surveys by Bloomberg News. The currency will drop to 125 against the dollar, he said, the weakest since December 2002.
The yen was lower against all 16 of the world's most- actively traded currencies over the past month, with the biggest losses versus higher-yielding currencies such as the Australian and New Zealand dollars. Borrowing costs in both countries are 5.75 percentage points and 7 percentage points higher than those in Japan, respectively.
``The yen's downtrend will continue as Japanese, who are fed up with low returns, will continue to export capital,'' Tokyo-based Umemoto said in an interview on April 2. ``Individuals will play the leading role.'' The fastest pace of growth in three years in the quarter ended Dec. 31 gives individuals greater confidence to send money offshore, he said.
Overseas assets held by Japanese households reached 46 trillion yen ($387.2 billion) in 2006, nearly 10 percent of the nation's gross domestic product, but only 3 percent of their total financial holdings, based on Umemoto's own calculations.
Breathing Room
The Japanese currency traded at 118.85 per dollar at 3:04 p.m. in Tokyo from 118.96 late in New York yesterday. The yen is down 0.9 percent this week, the first of the fiscal year that started April 1.
It gained 1 percent last quarter as some investors exited carry trades, where they borrow and sell yen for better returns elsewhere, because of a global slump in stock markets.
``It's likely that there's breathing room for households to shift money from safe but low-return deposits to riskier, higher return assets abroad,'' said Masafumi Yamamoto, a strategist at Nikko Citigroup Ltd. in Tokyo and a former Bank of Japan currency trader. ``The Japanese ratio at 3 percent does not look particularly high.''
Yamamoto is less bearish on the yen than his counterpart at Barclays, predicting the currency will fall to 119 a dollar by June 30. He said Japanese overseas holdings rose 27 percent last year from the previous year, citing data compiled by the Bank of Japan, monthly data from the Investment Trust Association Japan, and Citigroup's own estimates.
Bank Deposits
Japanese mutual funds boosted purchases of assets abroad to about 40 percent of the total from about 8 percent in 2002, according to the Investment Trust Association. The mutual funds now have about $244 billion of assets denominated in foreign currencies, including $98 billion in the U.S. dollar.
The yen weakened 5.9 percent versus the New Zealand dollar and 5.3 percent against Australia's currency in the past month. Australian and New Zealand 10-year government bonds both offer a yield premium, or spread, of 4.20 percentage points over similar-maturity Japanese debt. Securities in Germany give an extra 2.4 points.
The ratio of Japanese household savings parked in banks and post offices accounted for about half of their total financial assets of 1,550 trillion yen, compared with 10 percent in the U.S. and 30 percent in Europe, Barclays' Umemoto said. That will continue to decrease as more funds go overseas, he said.
Credit Suisse, Fortis
Credit Suisse and Fortis Bank were the two most bearish for the yen among 49 contributors to a Bloomberg survey last month, forecasting losses to 125 and 127 against the dollar this quarter. The median estimate was 117.
Japan is seeing a rise in so-called margin trading, where retail investors borrow part of the money necessary to buy currency, seeking to make a profit on price gains.
``The presence of foreign-exchange margin traders is increasing in Tokyo,'' said Kenichiro Yoshida, a senior economist and currency analyst in Tokyo at Mizuho Research Institute, a unit of Japan's second-largest lender by assets. ``Younger generations such as in their 30s are trading currencies even by mobile phone.''
The yen may move between 115 and 122 a dollar this quarter, Yoshida said.
Individual Power
Japanese individuals' foreign currency-denominated assets exceeded 40 trillion yen in 2006, topping such assets held by life insurers, the Nikkei newspaper also reported on March 31, excluding the estimated amount of foreign-currency positions by Japanese foreign-exchange margin traders.
Life insurance companies, commonly known as Seiho in Japanese, used to play a major role in the financial markets of the late 1980s during Japan's asset-inflated bubble economy by purchasing massive amounts of foreign bonds.
``We cannot ignore individual power,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``Japanese individuals account for about 20 percent to 30 percent of foreign-exchange margin trading in the Tokyo time zone. Institutional investors will lag behind households.''
The yen may fall to 122 a dollar by June 30, Muramatsu said
Tuesday, April 3, 2007
Oil falls nearly $2 as Iran diplomacy gathers pace
LONDON (Reuters) - U.S. oil fell nearly $2 on Tuesday after Britain and Iran said they were willing to use diplomacy to end a row over 15 British sailors and marines seized in the Gulf on March 23.
"We're not looking for a confrontation over this and actually the most important thing is to get people back safe and sound. And if they want to resolve this in a diplomatic way the door is open," British Prime Minister Tony Blair told a radio station in Scotland.
Investors interpreted the comments as a favorable response to apparently conciliatory remarks by Iran, the world's fourth-biggest oil exporter, late on Monday.
Ali Larijani, the secretary of Iran's Supreme National Security Council, told Britain's Channel 4 News Iran wanted to resolve the matter through diplomacy and without a trial.
U.S. crude was down $1.83 at $64.11 a barrel by 1446 GMT. which determines the cost of Europe's imports and the selling price of millions of barrels of Middle Eastern and African crude, was down $1.56 at $67.18.
Brent, which is more sensitive to developments in the Middle East because of proximity, commanded a record $3.93 premium to U.S. oil on March 19, according to Reuters data.
"Something will eventually have to give in the current crisis, and when it does, we could be in store for a rather sharp move in either direction," said Edward Meir, an analyst at Man Financial Energy Group in London
Markets have been on edge for months because of a dispute between OPEC member Iran and the U.N. Security Council over Iran's nuclear program. The March 23 detention of the British service personnel propelled U.S. oil above $68 to its highest level in more than six months last week.
Analysts say it would be difficult to replace the roughly 2.5 million bpd of oil exported by Iran.
Iran also borders the strategically important Strait of Hormuz, the entrance to the Gulf from the Arabian Sea and conduit for two-fifths of globally traded oil.
Phil Flynn, an analyst at Alaron Trading, said the "risk premium" associated with Iran was eroding. Prices climbed $6 in the days after the British personnel were seized.
"People think the risk of oil supply from the Middle East being disrupted is diminishing," Flynn said.
U.S. refinery glitches and a drawdown in fuel stocks in the world's top oil consumer ahead of the northern hemisphere's peak summer driving season have also been supporting the market.
Analysts polled by Reuters forecast weekly government inventory data to be released on Wednesday will show declines of 800,000 barrels in gasoline stocks. Crude oil stocks were expected to have risen 1.6 million barrels for the week ending March 30Technical analysts, who study charts to determine price direction, put strong support for U.S. oil at $63.50 and resistance at $66.80
"We're not looking for a confrontation over this and actually the most important thing is to get people back safe and sound. And if they want to resolve this in a diplomatic way the door is open," British Prime Minister Tony Blair told a radio station in Scotland.
Investors interpreted the comments as a favorable response to apparently conciliatory remarks by Iran, the world's fourth-biggest oil exporter, late on Monday.
Ali Larijani, the secretary of Iran's Supreme National Security Council, told Britain's Channel 4 News Iran wanted to resolve the matter through diplomacy and without a trial.
U.S. crude was down $1.83 at $64.11 a barrel by 1446 GMT. which determines the cost of Europe's imports and the selling price of millions of barrels of Middle Eastern and African crude, was down $1.56 at $67.18.
Brent, which is more sensitive to developments in the Middle East because of proximity, commanded a record $3.93 premium to U.S. oil on March 19, according to Reuters data.
"Something will eventually have to give in the current crisis, and when it does, we could be in store for a rather sharp move in either direction," said Edward Meir, an analyst at Man Financial Energy Group in London
Markets have been on edge for months because of a dispute between OPEC member Iran and the U.N. Security Council over Iran's nuclear program. The March 23 detention of the British service personnel propelled U.S. oil above $68 to its highest level in more than six months last week.
Analysts say it would be difficult to replace the roughly 2.5 million bpd of oil exported by Iran.
Iran also borders the strategically important Strait of Hormuz, the entrance to the Gulf from the Arabian Sea and conduit for two-fifths of globally traded oil.
Phil Flynn, an analyst at Alaron Trading, said the "risk premium" associated with Iran was eroding. Prices climbed $6 in the days after the British personnel were seized.
"People think the risk of oil supply from the Middle East being disrupted is diminishing," Flynn said.
U.S. refinery glitches and a drawdown in fuel stocks in the world's top oil consumer ahead of the northern hemisphere's peak summer driving season have also been supporting the market.
Analysts polled by Reuters forecast weekly government inventory data to be released on Wednesday will show declines of 800,000 barrels in gasoline stocks. Crude oil stocks were expected to have risen 1.6 million barrels for the week ending March 30Technical analysts, who study charts to determine price direction, put strong support for U.S. oil at $63.50 and resistance at $66.80
U.S. Stocks Advance on Pending Home Sales, Crude Oil's Decline
April 3 (Bloomberg) -- U.S. stocks rose, pushing the Dow Jones Industrial Average to a fourth day of gains, after pending home sales topped economists' forecasts and oil prices dropped.
Home Depot Inc. and Best Buy Co. led retailers higher. Industrial companies advanced after Caterpillar Inc. said engine sales may increase on a $29 billion free-trade accord between the U.S. and South Korea. Google Inc. helped lift the Nasdaq Composite Index after Goldman, Sachs & Co. recommended buying the shares.
More Americans signed contracts to buy previously owned homes last month, bolstering speculation the housing market is starting to stabilize. Crude's steepest retreat in three weeks reduces inflation, which the Federal Reserve has cited as its main concern, and may spur more consumer spending.
``The market's going to rebound when oil sells off,'' said Andy Brooks, Baltimore-based head equity trader at T. Rowe Price Group Inc., which manages about $335 billion. A drop in oil will ``allow consumer spending to continue.''
The Dow average climbed 98.74, or 0.8 percent, to 12,481.04 as of 10:07 a.m. in New York. The Nasdaq added 23.58, or 1 percent, to 2445.84. The Standard & Poor's 500 Index gained 10.20, or 0.7 percent, to 1434.75.
Housing Data
The index of signed purchase agreements, or pending home resales, rose 0.7 percent to 109.3, after a revised 4.2 percent drop in January, the National Association of Realtors said. Economists surveyed by Bloomberg expected pending sales to drop 0.5 percent.
Stocks yesterday rose on the first trading day of the Dow average's best month, helped by more than $44 billion in takeovers. Asian and European stocks gained today as investors bet acquisitions will lift shares.
``Private equity funds have a tremendous amount of money to put to work,'' said Barbara Marcin, who manages $3 billion at Gamco Investors Inc. in Rye, New York. ``They're willing to buy very large companies, so it looks as though it's going to continue for a while.''
Announced U.S. acquisitions have totaled $641 billion so far in 2007, exceeding the $442.3 billion amount at this point last year, which was a record year for takeovers.
Home Depot, Best Buy
Retailers were the best performers among two dozen industry groups, climbing 1.6 percent. Home Depot, the world's biggest home-improvement retailer, rose 80 cents to $37.59. Best Buy, the largest consumer electronics retailer, added $1.11 to $49.59.
Consumer spending accounts for about two-thirds of the U.S. economy.
Crude oil fell 1.1 percent to $65.19 a barrel in New York, the steepest decline since March 13. U.K. Prime Minister Tony Blair said Britain wants to maintain ``peaceful and calm negotiations'' with Iran to free 15 sailors and marines. Iranian Vice President Parviz Davoudi said he expects the conflict to be resolved ``soon,'' Agence-France Presse reported.
Oil has pulled back after reaching a six-month high last week.
Caterpillar, which gets about a third of its revenue selling engines, gained 54 cents to $67.29. The company said sales of the machines may rise from the free-trade pact, which if ratified by the U.S. Congress, would be the largest for the country since the North American Free Trade Agreement in 1994.
Caterpillar's engine exports to South Korea are currently taxed at 8 percent, a tariff which would be eliminated under the agreement, Jim Dugan, Beijing-based spokesman for the company, said in a phone interview.
United Technologies
Among other industrial shares, United Technologies Corp. climbed 64 cents to $65.36. Credit Suisse Group added the maker of Chubb security and Kidde fire systems to its U.S. focus list. The stock has ``attractive'' odds of rallying, ``along with solid defensive characteristics,'' Credit Suisse's investment policy committee wrote in a report.
Google increased $6.28 to $464.81. Shares of the most popular Internet search engine were recommended by Goldman's Anthony Noto. The company may report revenue growth of 55 percent in 2007, the analyst wrote, exceeding the average 13 percent increase estimated by analysts surveyed by Bloomberg.
Assurant Inc. advanced $1.88 to $55.85. The specialty insurer will replace Realogy Corp. in the S&P 500. The addition may support Assurant's stock price as money managers tracking the S&P 500 purchase the company's shares. Index funds with $1.26 trillion in assets mimic the measure, according to S&P.
Lawson Software
Lawson Software Inc. jumped 52 cents to $8.55. The maker of business-management programs said fiscal third-quarter revenue was as much as $192 million. That tops the average estimate of $186.8 million by analysts in a Bloomberg survey.
More than nine stocks gained for every two that fell on the New York Stock Exchange. Some 250 million shares changed hands on the Big Board, 31 percent more than the same time a week ago.
Bunge Ltd. dropped $6.29 to $77.40. The world's biggest oilseed processor said first-quarter results would be about break-even or below analysts' estimates because of lower agricultural commodity prices.
Fremont General Corp. declined 42 cents to $6.10. The company, ordered to stop offering mortgages to the riskiest borrowers, said Grant Thornton LLP is resigning as its auditor.
Home Depot Inc. and Best Buy Co. led retailers higher. Industrial companies advanced after Caterpillar Inc. said engine sales may increase on a $29 billion free-trade accord between the U.S. and South Korea. Google Inc. helped lift the Nasdaq Composite Index after Goldman, Sachs & Co. recommended buying the shares.
More Americans signed contracts to buy previously owned homes last month, bolstering speculation the housing market is starting to stabilize. Crude's steepest retreat in three weeks reduces inflation, which the Federal Reserve has cited as its main concern, and may spur more consumer spending.
``The market's going to rebound when oil sells off,'' said Andy Brooks, Baltimore-based head equity trader at T. Rowe Price Group Inc., which manages about $335 billion. A drop in oil will ``allow consumer spending to continue.''
The Dow average climbed 98.74, or 0.8 percent, to 12,481.04 as of 10:07 a.m. in New York. The Nasdaq added 23.58, or 1 percent, to 2445.84. The Standard & Poor's 500 Index gained 10.20, or 0.7 percent, to 1434.75.
Housing Data
The index of signed purchase agreements, or pending home resales, rose 0.7 percent to 109.3, after a revised 4.2 percent drop in January, the National Association of Realtors said. Economists surveyed by Bloomberg expected pending sales to drop 0.5 percent.
Stocks yesterday rose on the first trading day of the Dow average's best month, helped by more than $44 billion in takeovers. Asian and European stocks gained today as investors bet acquisitions will lift shares.
``Private equity funds have a tremendous amount of money to put to work,'' said Barbara Marcin, who manages $3 billion at Gamco Investors Inc. in Rye, New York. ``They're willing to buy very large companies, so it looks as though it's going to continue for a while.''
Announced U.S. acquisitions have totaled $641 billion so far in 2007, exceeding the $442.3 billion amount at this point last year, which was a record year for takeovers.
Home Depot, Best Buy
Retailers were the best performers among two dozen industry groups, climbing 1.6 percent. Home Depot, the world's biggest home-improvement retailer, rose 80 cents to $37.59. Best Buy, the largest consumer electronics retailer, added $1.11 to $49.59.
Consumer spending accounts for about two-thirds of the U.S. economy.
Crude oil fell 1.1 percent to $65.19 a barrel in New York, the steepest decline since March 13. U.K. Prime Minister Tony Blair said Britain wants to maintain ``peaceful and calm negotiations'' with Iran to free 15 sailors and marines. Iranian Vice President Parviz Davoudi said he expects the conflict to be resolved ``soon,'' Agence-France Presse reported.
Oil has pulled back after reaching a six-month high last week.
Caterpillar, which gets about a third of its revenue selling engines, gained 54 cents to $67.29. The company said sales of the machines may rise from the free-trade pact, which if ratified by the U.S. Congress, would be the largest for the country since the North American Free Trade Agreement in 1994.
Caterpillar's engine exports to South Korea are currently taxed at 8 percent, a tariff which would be eliminated under the agreement, Jim Dugan, Beijing-based spokesman for the company, said in a phone interview.
United Technologies
Among other industrial shares, United Technologies Corp. climbed 64 cents to $65.36. Credit Suisse Group added the maker of Chubb security and Kidde fire systems to its U.S. focus list. The stock has ``attractive'' odds of rallying, ``along with solid defensive characteristics,'' Credit Suisse's investment policy committee wrote in a report.
Google increased $6.28 to $464.81. Shares of the most popular Internet search engine were recommended by Goldman's Anthony Noto. The company may report revenue growth of 55 percent in 2007, the analyst wrote, exceeding the average 13 percent increase estimated by analysts surveyed by Bloomberg.
Assurant Inc. advanced $1.88 to $55.85. The specialty insurer will replace Realogy Corp. in the S&P 500. The addition may support Assurant's stock price as money managers tracking the S&P 500 purchase the company's shares. Index funds with $1.26 trillion in assets mimic the measure, according to S&P.
Lawson Software
Lawson Software Inc. jumped 52 cents to $8.55. The maker of business-management programs said fiscal third-quarter revenue was as much as $192 million. That tops the average estimate of $186.8 million by analysts in a Bloomberg survey.
More than nine stocks gained for every two that fell on the New York Stock Exchange. Some 250 million shares changed hands on the Big Board, 31 percent more than the same time a week ago.
Bunge Ltd. dropped $6.29 to $77.40. The world's biggest oilseed processor said first-quarter results would be about break-even or below analysts' estimates because of lower agricultural commodity prices.
Fremont General Corp. declined 42 cents to $6.10. The company, ordered to stop offering mortgages to the riskiest borrowers, said Grant Thornton LLP is resigning as its auditor.
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