European stocks posted their third straight weekly advance, with the Dow Jones Stoxx 600 Index completing its biggest annual increase in a decade as the global economy recovered from its worst recession since World War II.
Basic-resources companies and banks, the worst-performing industry groups in 2008, led gains in the measure, surging 100 percent and 46 percent in 2009, respectively. Kazakhmys Plc, Kazakhstan’s biggest copper producer, soared 475 percent, as the price of the metal more than doubled. Natixis SA, the investment-banking unit of France’s second-largest lender by branches, climbed 184 percent.
The Stoxx 600 rose 28 percent to close the year at 253.16, having posted a 0.5 percent gain in the holiday-shortened week as China raised its economic growth forecast. The measure rebounded 60 percent from the 2009 low in March amid record-low interest rates in the U.S. and Europe and as governments committed about $12 trillion worldwide to revive credit markets and stimulate growth. The S&P 500 gained 23 percent in 2009.
“There was the conviction that governments weren’t going to abandon the economy,” said Emmanuel Soupre, who helps manage about $15.6 billion at Neuflize OBC in Paris. “What lifted the market was the idea that we no longer spoke of a depression, but only a recession. When we saw depressive forces countered by government and central bank support, that helped the market to take off.”
15-Month High
The Stoxx 600 reached a 15-month high on Dec. 29, trimming its drop over the past decade to 33 percent. Its best month last year was April, with the gauge soaring 13 percent as U.S. banks including Citigroup Inc. and Goldman Sachs Group Inc. reported earnings that exceeded analysts’ estimates. The measure climbed 5.9 percent in December. The S&P fell 24 percent in the last decade.
The VStoxx Index, which gauges the cost of using options to protect against declines in the Euro Stoxx 50, a measure for the countries sharing the euro, sank 45 percent in 2009 for the first annual drop since 2004.
National benchmark indexes rose in all of the 18 western European markets except Iceland in 2009. The north Atlantic island is the western nation hardest hit by the global credit crisis, and needed to turn to the International Monetary Fund for a $2.1 billion loan to avert a default.
Norway’s OBX was the best performer, gaining 70 percent as higher oil prices lifted oilfield-services companies including Seadrill Ltd. and Petroleum Geo-Services ASA, which both more than doubled.
Lehman Collapse
The U.K.’s FTSE 100 climbed 22 percent, and on Dec. 29 became the first equity market among the biggest developed economies to recover its loss following Lehman Brothers Holdings Inc.’s bankruptcy in September 2008. The U.K. joined Hong Kong, Norway, Portugal, Singapore, Spain and Sweden as the only nations among 23 developed markets that have recouped all of their post-Lehman losses.
“We erased the Lehman period and returned to the level prior to the collapse,” said Guillaume Duchesne, Luxembourg- based equity strategist at Fortis Private Banking, which oversees about $117 billion. “Investors played the stabilization of the economy.”
France’s CAC 40 advanced 22 percent in 2009, as PSA Peugeot Citroen, Europe’s second-largest carmaker, and Renault SA, France’s second-biggest, each surged 95 percent. French car sales increased for a seventh consecutive month in November as government rebates for scrapping old vehicles when new ones are purchased, combined with environmental bonus-and-penalty payments, spurred demand for more fuel-efficient cars and slowed sales of luxury vehicles.
Infineon Technologies
Germany’s DAX rallied 24 percent, with Infineon Technologies AG surging 352 percent. Europe’s second-biggest semiconductor maker entered the benchmark gauge after returning to profit following 10 consecutive quarters of losses.
The Stoxx 600 posted its biggest annual retreat on record in 2008, falling 46 percent, as credit losses and writedowns at the world’s largest financial firms surpassed $1 trillion and the U.S., Europe and Japan entered simultaneous recessions. Basic-resources shares and banks in the measure each lost 64 percent as investors sold off shares linked to economic growth and those most hurt by the credit crisis.
Kazakhmys jumped 475 percent in 2009, while Boliden AB, Europe’s second-biggest zinc producer, soared 428 percent as the best-performing mining shares in the Stoxx 600.
Copper more than doubled in 2009 with the help of record first-half imports into China, the world’s largest consumer. Prices are up almost fourfold from the end of 1999 in London.
Natixis
Natixis surged 184 percent for the best performance among bank stocks. The French lender this month said it will be profitable in the fourth quarter.
All 19 industry groups in the Stoxx 600 rose in 2009.
This past week, the measure capped its longest stretch of weekly gains since August as China raised its 2008 growth estimate to 9.6 percent from 9 percent and said quarterly figures for 2009 will also increase.
An index of home prices in 20 U.S. cities rose in October for a fifth consecutive month, putting the housing market and economy farther down the path to recovery, according to a report on Dec. 29. A separate report on the same day from the New York- based Conference Board showed confidence among U.S. consumers rose in December for a second month as pessimism over the outlook for jobs diminished.
Companies in the U.S. expanded in December at the fastest pace in almost four years, according to The Institute for Supply Management-Chicago Inc. on Dec. 30.
Mining Shares
Antofagasta Plc, the copper producer controlled by Chile’s Luksic family, and Lonmin Plc, the world’s third-largest platinum producer, led basic-resources shares higher as metals rose. They gained 6 and 4.2 percent, respectively, this past week.
Q-Cells SE surged 14 percent, the best performer in the Stoxx 600 this past week, after Handelsblatt newspaper cited the German solar-cell maker’s chief executive officer as saying the company expects to be profitable in 2010.
Basilea Pharmaceutica Ltd. tumbled 17 percent, the biggest weekly retreat since February. The U.S. Food and Drug Administration rejected its experimental ceftobiprole antibiotic because clinical trial data were “unreliable.” The FDA requested two new studies on the drug, Basilea said.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net
Friday, January 1, 2010
India’s Exports Increase for First Time in 14 Months (Update1)
India’s exports rose for the first time in 14 months as recovery in the global economy boosted year-end holiday demand for the South Asian nation’s products.
Overseas shipments increased 18.2 percent to $13.2 billion in November from a year earlier after sliding an average 21 percent per month since October 2008, according to a trade ministry statement. Imports fell 2.6 percent to $22.8 billion in November, resulting in the trade deficit narrowing to $9.6 billion from $12.3 billion a year ago.
Record-low interest rates and more than $2 trillion in government stimulus worldwide are reviving demand for clothes made by Gokaldas Exports Ltd. and Hyundai Motor Co. cars. South Korea’s exports rose 33.7 percent in December, the fastest pace in 17 months, as Asian economies from China to Singapore recover from the worst global recession since the 1930s.
“We are seeing a rebound in overseas sales mainly due to improved conditions in the U.S. and Europe and festival demand ahead of Christmas,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy in New Delhi.
A return to export growth may boost production at companies in India and bolster the revival in Asia’s third-biggest economy, which expanded 7.9 percent in the three months to Sept. 30 from a year earlier, the quickest pace in six quarters.
Gems, Cars
Some sectors have started showing signs of improvement. Overseas sales of Indian gems and jewelry jumped 54.8 percent to $21.4 billion in November compared with $13.8 billion in the same month a year ago, according to the Gem & Jewellery Export Promotion Council. Vehicle exports rose 25 percent in November from a year earlier, the Society of Indian Automobile Manufacturers said Dec. 8.
November’s increase in exports shouldn’t be seen as the beginning of a positive trend, as shipments rose mainly due to a low base in the same month last year, Bhanumurthy said. The difficulties for exporters and the Indian economy are not yet over, he said.
“The surge in inflation will result in increasing input costs for exporters, forcing them to raise prices and making it difficult for them to remain competitive in overseas markets,” Bhanumurthy said.
India’s benchmark wholesale-price index climbed 4.78 percent in November from a year earlier, more than tripling from a 1.34 percent gain in October, the government said Dec. 14. A stronger rupee is also affecting exporters’ earnings, according to the Federation of Indian Export Organisations.
Stronger Currency
The Indian currency strengthened 4.8 percent in 2009 to 46.5275 per dollar at the 5 p.m. close in Mumbai yesterday, according to data compiled by Bloomberg. That was the third-best performance among Asian currencies after Indonesia’s rupiah and the South Korean won.
The rupee gained as foreign funds raised their holdings of the nation’s stocks to a record as the benchmark Sensitive Index rallied the most in 18 years. Indian stock market is closed today due to a holiday.
The low-base effect on November’s export growth mean “there is no need to go hoopla over these numbers,” Trade Secretary Rahul Khullar said Dec. 15. Shipments dropped almost 20 percent in November 2008 from a year earlier.
Overseas sales declined 22.3 percent to $104.24 billion in the eight months to November from a year earlier. Imports fell 27.3 percent to $170.4 billion.
Global Recovery
Non-oil imports dropped 5.9 percent to $16.5 billion in November from a year ago, while oil imports rose 7.3 percent to $6.38 billion in the same month, the government report showed.
The U.S. returned to growth in the third quarter after a yearlong contraction and France, Germany and Japan have exited recession. The U.S. economy, India’s second-biggest export market, expanded 2.2 percent in the July-September quarter.
India is boosting its efforts to increase overseas sales by developing trade agreements with other countries. The South Asian nation in August signed a free-trade accord with South Korea and the 10-member Association of Southeast Asian Nations as it attempts to reduce dependence on the U.S. and Europe, which account for about 40 percent of the nation’s exports.
India in August also announced tax refunds for exporters to explore new markets in Africa and Latin America.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
Overseas shipments increased 18.2 percent to $13.2 billion in November from a year earlier after sliding an average 21 percent per month since October 2008, according to a trade ministry statement. Imports fell 2.6 percent to $22.8 billion in November, resulting in the trade deficit narrowing to $9.6 billion from $12.3 billion a year ago.
Record-low interest rates and more than $2 trillion in government stimulus worldwide are reviving demand for clothes made by Gokaldas Exports Ltd. and Hyundai Motor Co. cars. South Korea’s exports rose 33.7 percent in December, the fastest pace in 17 months, as Asian economies from China to Singapore recover from the worst global recession since the 1930s.
“We are seeing a rebound in overseas sales mainly due to improved conditions in the U.S. and Europe and festival demand ahead of Christmas,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy in New Delhi.
A return to export growth may boost production at companies in India and bolster the revival in Asia’s third-biggest economy, which expanded 7.9 percent in the three months to Sept. 30 from a year earlier, the quickest pace in six quarters.
Gems, Cars
Some sectors have started showing signs of improvement. Overseas sales of Indian gems and jewelry jumped 54.8 percent to $21.4 billion in November compared with $13.8 billion in the same month a year ago, according to the Gem & Jewellery Export Promotion Council. Vehicle exports rose 25 percent in November from a year earlier, the Society of Indian Automobile Manufacturers said Dec. 8.
November’s increase in exports shouldn’t be seen as the beginning of a positive trend, as shipments rose mainly due to a low base in the same month last year, Bhanumurthy said. The difficulties for exporters and the Indian economy are not yet over, he said.
“The surge in inflation will result in increasing input costs for exporters, forcing them to raise prices and making it difficult for them to remain competitive in overseas markets,” Bhanumurthy said.
India’s benchmark wholesale-price index climbed 4.78 percent in November from a year earlier, more than tripling from a 1.34 percent gain in October, the government said Dec. 14. A stronger rupee is also affecting exporters’ earnings, according to the Federation of Indian Export Organisations.
Stronger Currency
The Indian currency strengthened 4.8 percent in 2009 to 46.5275 per dollar at the 5 p.m. close in Mumbai yesterday, according to data compiled by Bloomberg. That was the third-best performance among Asian currencies after Indonesia’s rupiah and the South Korean won.
The rupee gained as foreign funds raised their holdings of the nation’s stocks to a record as the benchmark Sensitive Index rallied the most in 18 years. Indian stock market is closed today due to a holiday.
The low-base effect on November’s export growth mean “there is no need to go hoopla over these numbers,” Trade Secretary Rahul Khullar said Dec. 15. Shipments dropped almost 20 percent in November 2008 from a year earlier.
Overseas sales declined 22.3 percent to $104.24 billion in the eight months to November from a year earlier. Imports fell 27.3 percent to $170.4 billion.
Global Recovery
Non-oil imports dropped 5.9 percent to $16.5 billion in November from a year ago, while oil imports rose 7.3 percent to $6.38 billion in the same month, the government report showed.
The U.S. returned to growth in the third quarter after a yearlong contraction and France, Germany and Japan have exited recession. The U.S. economy, India’s second-biggest export market, expanded 2.2 percent in the July-September quarter.
India is boosting its efforts to increase overseas sales by developing trade agreements with other countries. The South Asian nation in August signed a free-trade accord with South Korea and the 10-member Association of Southeast Asian Nations as it attempts to reduce dependence on the U.S. and Europe, which account for about 40 percent of the nation’s exports.
India in August also announced tax refunds for exporters to explore new markets in Africa and Latin America.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
India’s Exports Rose in November for First Time in 14 Months
India’s exports rose for the first time in 14 months as recovery in the global economy boosted year-end holiday demand for the South Asian nation’s products.
Overseas shipments increased 18.2 percent to $13.2 billion in November from a year earlier after sliding an average 21 percent per month since October 2008, according to data provided by the trade ministry. Imports fell 2.6 percent to $22.8 billion.
Record-low interest rates and more than $2 trillion in government stimulus worldwide are reviving demand for clothes made by Gokaldas Exports Ltd. and Hyundai Motor Co. cars. South Korea’s exports rose 33.7 percent in December, the fastest pace in 17 months, as Asian economies from China to Singapore recover from the worst global recession since the 1930s.
“We are seeing a rebound in overseas sales mainly due to improved conditions in the U.S. and Europe and festival demand ahead of Christmas,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy in New Delhi.
A return to export growth may boost production at companies in India and bolster the revival in Asia’s third-biggest economy, which expanded 7.9 percent in the three months to Sept. 30 from a year earlier, the quickest pace in six quarters.
Some sectors have started showing signs of improvement. Overseas sales of Indian gems and jewelry jumped 54.8 percent to $21.4 billion in November compared with $13.8 billion in the same month a year ago, according to the Gem & Jewellery Export Promotion Council. Vehicle exports rose 25 percent in November from a year earlier, the Society of Indian Automobile Manufacturers said Dec. 8.
Low Base
November’s increase in exports shouldn’t be seen as the beginning of a positive trend, as shipments rose mainly due to a low base in the same month last year, Bhanumurthy said. The difficulties for exporters and the Indian economy are not yet over, he said.
“The surge in inflation will result in increasing input costs for exporters, forcing them to raise prices and making it difficult for them to remain competitive in overseas markets,” Bhanumurthy said.
India’s benchmark wholesale-price index climbed 4.78 percent in November from a year earlier, more than tripling from a 1.34 percent gain in October, the government said Dec. 14. A stronger rupee is also affecting exporters’ earnings, according to the Federation of Indian Export Organisations.
The Indian currency strengthened 4.8 percent in 2009 to 46.5275 per dollar at the 5 p.m. close in Mumbai yesterday, according to data compiled by Bloomberg. That was the third-best performance among Asian currencies after Indonesia’s rupiah and the South Korean won.
Foreign Investment
The rupee gained as foreign funds raised their holdings of the nation’s stocks to a record as the benchmark Sensitive Index rallied the most in 18 years. Indian stock market is closed today due to a holiday.
The low-base effect on November’s export growth mean “there is no need to go hoopla over these numbers,” Trade Secretary Rahul Khullar said Dec. 15. Shipments dropped almost 20 percent in November 2008 from a year earlier.
The U.S. returned to growth in the third quarter after a yearlong contraction and France, Germany and Japan have exited recession. The U.S. economy, India’s second-biggest export market, expanded 2.2 percent in the July-September quarter.
India is boosting its efforts to increase overseas sales by developing trade agreements with other countries. The South Asian nation in August signed a free-trade accord with South Korea and the 10-member Association of Southeast Asian Nations as it attempts to reduce dependence on the U.S. and Europe, which account for about 40 percent of the nation’s exports.
India in August also announced tax refunds for exporters to explore new markets in Africa and Latin America.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
Overseas shipments increased 18.2 percent to $13.2 billion in November from a year earlier after sliding an average 21 percent per month since October 2008, according to data provided by the trade ministry. Imports fell 2.6 percent to $22.8 billion.
Record-low interest rates and more than $2 trillion in government stimulus worldwide are reviving demand for clothes made by Gokaldas Exports Ltd. and Hyundai Motor Co. cars. South Korea’s exports rose 33.7 percent in December, the fastest pace in 17 months, as Asian economies from China to Singapore recover from the worst global recession since the 1930s.
“We are seeing a rebound in overseas sales mainly due to improved conditions in the U.S. and Europe and festival demand ahead of Christmas,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy in New Delhi.
A return to export growth may boost production at companies in India and bolster the revival in Asia’s third-biggest economy, which expanded 7.9 percent in the three months to Sept. 30 from a year earlier, the quickest pace in six quarters.
Some sectors have started showing signs of improvement. Overseas sales of Indian gems and jewelry jumped 54.8 percent to $21.4 billion in November compared with $13.8 billion in the same month a year ago, according to the Gem & Jewellery Export Promotion Council. Vehicle exports rose 25 percent in November from a year earlier, the Society of Indian Automobile Manufacturers said Dec. 8.
Low Base
November’s increase in exports shouldn’t be seen as the beginning of a positive trend, as shipments rose mainly due to a low base in the same month last year, Bhanumurthy said. The difficulties for exporters and the Indian economy are not yet over, he said.
“The surge in inflation will result in increasing input costs for exporters, forcing them to raise prices and making it difficult for them to remain competitive in overseas markets,” Bhanumurthy said.
India’s benchmark wholesale-price index climbed 4.78 percent in November from a year earlier, more than tripling from a 1.34 percent gain in October, the government said Dec. 14. A stronger rupee is also affecting exporters’ earnings, according to the Federation of Indian Export Organisations.
The Indian currency strengthened 4.8 percent in 2009 to 46.5275 per dollar at the 5 p.m. close in Mumbai yesterday, according to data compiled by Bloomberg. That was the third-best performance among Asian currencies after Indonesia’s rupiah and the South Korean won.
Foreign Investment
The rupee gained as foreign funds raised their holdings of the nation’s stocks to a record as the benchmark Sensitive Index rallied the most in 18 years. Indian stock market is closed today due to a holiday.
The low-base effect on November’s export growth mean “there is no need to go hoopla over these numbers,” Trade Secretary Rahul Khullar said Dec. 15. Shipments dropped almost 20 percent in November 2008 from a year earlier.
The U.S. returned to growth in the third quarter after a yearlong contraction and France, Germany and Japan have exited recession. The U.S. economy, India’s second-biggest export market, expanded 2.2 percent in the July-September quarter.
India is boosting its efforts to increase overseas sales by developing trade agreements with other countries. The South Asian nation in August signed a free-trade accord with South Korea and the 10-member Association of Southeast Asian Nations as it attempts to reduce dependence on the U.S. and Europe, which account for about 40 percent of the nation’s exports.
India in August also announced tax refunds for exporters to explore new markets in Africa and Latin America.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
Citigroup, Marshall & Ilsley End 2009 as Biggest S&P 500 Losers
Citigroup Inc., Marshall & Ilsley Corp. and Huntington Bancshares Inc. ended 2009 with the biggest drops in the Standard & Poor’s 500 Index, weighed down by defaulting property loans that may add to their declines this year.
Marshall & Ilsley tumbled 60 percent, the index’s biggest drop, according to data compiled by Bloomberg. Huntington Bancsharesfell 52 percent, Citigroup dropped 51 percent and Zions Bancorporationdeclined 48 percent. Banks accounted for seven of the 10 worst performers in the index.
“The problem is primarily capital, dilution and credit,” said Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “There are still questions that remain with respect to the solvency of many banks, and those undoubtedly are the ones in which investors have the greatest concerns.”
U.S. banks are struggling to stem losses on commercial real estate loans as the worst recession in 60 years makes it difficult for business owners to pay off debts. Regulators closed 140 lenders last year, the most since 1992, and analysts predict 1,000 banks may fail in the next few years.
Marshall & Ilsley, Wisconsin’s biggest bank, is buckling under housing and construction loan defaults in Florida and Arizona, among states with high 2009 foreclosure rates. The Milwaukee-based lender has reported four straight quarterly losses, and said it set aside as much as $578.7 million to cover bad loans in the third quarter.
Commercial Real Estate
“The worst of Arizona and Florida problems are now behind them,” Tony Davis, an analyst with Stifel Nicolaus & Co., said Dec. 30. “Having taken $160 million in charge-offs in their correspondent banking division, the heavy lifting in that portfolio probably has also been completed.”
At Salt Lake City-based Zions, about $1.1 billion, or 59 percent, of $1.8 billion in total non-accrual loans in the third quarter were in commercial real estate, the lender said in October.
“We feel a whole lot more comfortable heading into 2010 than we did heading into 2009,” spokesman James Abbott said in a Dec. 30 interview. Zions Chief Executive Officer Harris Simmons bought $2 million in shares in the past four months, Abbott said.
Huntington Bancshares of Columbus, Ohio, has cut its portfolio of troubled commercial real estate loans to a “manageable number,” Stephen Steinour, chief executive officer of the Columbus, Ohio-based bank, said Nov. 18.
Huntington Capital
Huntington raised $1.6 billion in capital and “addressed our credit quality issue aggressively,” spokeswoman Maureen Brown said in a Dec. 31 e-mail. “Our efforts have produced three consecutive quarters of improved pretax, pre-provision income giving us confidence that we are positioning the company for better performance once this credit cycle ends.”
Marshall & Ilsley spokeswoman Sara Schmitz didn’t return a telephone call seeking a comment.
“Regional banks have an above average amount of risk to commercial real estate, and that’s clearly where the markets have some concerns,” Oppenheimer & Co. analyst Terry McEvoy said in a Dec. 30 interview.
Citigroup, which had a $27.7 billion loss for 2008, in December joined Wells Fargo & Co. and Bank of America Corp. in raising cash to escape limits tied to “extraordinary financial assistance” from the government.
Citigroup Shares
The New York-based bank sold $17 billion in shares at $3.15 each, less than the $3.25 the U.S. paid to acquire a one-third stake in September, prompting the Treasury to delay selling its shares for at least 90 days. Citigroup ended a loss-sharing agreement with the government.
Citigroup spokeswoman Danielle Romero-Apsilos, declined to comment.
Banks sold preferred shares to the government and common shares to investors to cover commercial and residential real estate losses and ensure capital levels exceeded regulatory thresholds.
“At the end of the day these banks were undercapitalized and it was the dilutive effect of stock issuance that weighed on the equity prices the most,” said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees about $900 million.
Marshall & Ilsley, which accepted $1.72 billion from the U.S. Troubled Asset Relief Program last year, doubled the number of shares outstanding in 2009, McEvoy said. Citigroup’s outstanding shares doubled in July and again in September as $58 billion of preferred shares held by the U.S. were converted into common stock.
Banks Slump
Bank stocks slumped as the S&P 500 rose 23.5 percent for 2009. The index climbed more than 63 percent from an almost 13- year low on March 9, when Berkshire Hathaway Inc.’s Warren Buffett said the economy had “fallen off a cliff.” Among the winners: XL Capital Ltd., the Bermuda-based insurer and reinsurer that posted an almost 400 percent gain as it returned to profitability.
Other U.S. banks benefited from government support through TARP. The KBW Bank Index of 24 national and regional lenders climbed almost 130 percent after touching a low on March 6. Dallas-based Comerica Inc. climbed about 49 percent last year, and New York-based JPMorgan Chase & Co. rose 32 percent -- the year’s two best performers in the bank index.
“You saw a divergent performance in 2009 and I tend to think that’s what we’ll get in 2010 as well,” Fitzpatrick said. “It’s just a matter of how bad credit gets and whether unemployment stabilizes.”
Performance returns include companies tracked by the S&P 500 at year-end. Among 29 firms removed in 2009 was CIT Group Inc., the commercial lender whose stock was wiped out when the firm went bankrupt, and MBIA Inc., the mortgage insurer removed two weeks before the end of the year.
To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net
Marshall & Ilsley tumbled 60 percent, the index’s biggest drop, according to data compiled by Bloomberg. Huntington Bancsharesfell 52 percent, Citigroup dropped 51 percent and Zions Bancorporationdeclined 48 percent. Banks accounted for seven of the 10 worst performers in the index.
“The problem is primarily capital, dilution and credit,” said Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “There are still questions that remain with respect to the solvency of many banks, and those undoubtedly are the ones in which investors have the greatest concerns.”
U.S. banks are struggling to stem losses on commercial real estate loans as the worst recession in 60 years makes it difficult for business owners to pay off debts. Regulators closed 140 lenders last year, the most since 1992, and analysts predict 1,000 banks may fail in the next few years.
Marshall & Ilsley, Wisconsin’s biggest bank, is buckling under housing and construction loan defaults in Florida and Arizona, among states with high 2009 foreclosure rates. The Milwaukee-based lender has reported four straight quarterly losses, and said it set aside as much as $578.7 million to cover bad loans in the third quarter.
Commercial Real Estate
“The worst of Arizona and Florida problems are now behind them,” Tony Davis, an analyst with Stifel Nicolaus & Co., said Dec. 30. “Having taken $160 million in charge-offs in their correspondent banking division, the heavy lifting in that portfolio probably has also been completed.”
At Salt Lake City-based Zions, about $1.1 billion, or 59 percent, of $1.8 billion in total non-accrual loans in the third quarter were in commercial real estate, the lender said in October.
“We feel a whole lot more comfortable heading into 2010 than we did heading into 2009,” spokesman James Abbott said in a Dec. 30 interview. Zions Chief Executive Officer Harris Simmons bought $2 million in shares in the past four months, Abbott said.
Huntington Bancshares of Columbus, Ohio, has cut its portfolio of troubled commercial real estate loans to a “manageable number,” Stephen Steinour, chief executive officer of the Columbus, Ohio-based bank, said Nov. 18.
Huntington Capital
Huntington raised $1.6 billion in capital and “addressed our credit quality issue aggressively,” spokeswoman Maureen Brown said in a Dec. 31 e-mail. “Our efforts have produced three consecutive quarters of improved pretax, pre-provision income giving us confidence that we are positioning the company for better performance once this credit cycle ends.”
Marshall & Ilsley spokeswoman Sara Schmitz didn’t return a telephone call seeking a comment.
“Regional banks have an above average amount of risk to commercial real estate, and that’s clearly where the markets have some concerns,” Oppenheimer & Co. analyst Terry McEvoy said in a Dec. 30 interview.
Citigroup, which had a $27.7 billion loss for 2008, in December joined Wells Fargo & Co. and Bank of America Corp. in raising cash to escape limits tied to “extraordinary financial assistance” from the government.
Citigroup Shares
The New York-based bank sold $17 billion in shares at $3.15 each, less than the $3.25 the U.S. paid to acquire a one-third stake in September, prompting the Treasury to delay selling its shares for at least 90 days. Citigroup ended a loss-sharing agreement with the government.
Citigroup spokeswoman Danielle Romero-Apsilos, declined to comment.
Banks sold preferred shares to the government and common shares to investors to cover commercial and residential real estate losses and ensure capital levels exceeded regulatory thresholds.
“At the end of the day these banks were undercapitalized and it was the dilutive effect of stock issuance that weighed on the equity prices the most,” said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees about $900 million.
Marshall & Ilsley, which accepted $1.72 billion from the U.S. Troubled Asset Relief Program last year, doubled the number of shares outstanding in 2009, McEvoy said. Citigroup’s outstanding shares doubled in July and again in September as $58 billion of preferred shares held by the U.S. were converted into common stock.
Banks Slump
Bank stocks slumped as the S&P 500 rose 23.5 percent for 2009. The index climbed more than 63 percent from an almost 13- year low on March 9, when Berkshire Hathaway Inc.’s Warren Buffett said the economy had “fallen off a cliff.” Among the winners: XL Capital Ltd., the Bermuda-based insurer and reinsurer that posted an almost 400 percent gain as it returned to profitability.
Other U.S. banks benefited from government support through TARP. The KBW Bank Index of 24 national and regional lenders climbed almost 130 percent after touching a low on March 6. Dallas-based Comerica Inc. climbed about 49 percent last year, and New York-based JPMorgan Chase & Co. rose 32 percent -- the year’s two best performers in the bank index.
“You saw a divergent performance in 2009 and I tend to think that’s what we’ll get in 2010 as well,” Fitzpatrick said. “It’s just a matter of how bad credit gets and whether unemployment stabilizes.”
Performance returns include companies tracked by the S&P 500 at year-end. Among 29 firms removed in 2009 was CIT Group Inc., the commercial lender whose stock was wiped out when the firm went bankrupt, and MBIA Inc., the mortgage insurer removed two weeks before the end of the year.
To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net
U.S. Stocks Drop as Crisis Causes S&P 500’s First Decade Loss
U.S. stocks fell this week, limiting an advance that sent the Standard & Poor’s 500 Index to its biggest annual increase in six years. The 2009 rally failed to rescue investors from the worst return for any decade.
Ford Motor Co. dropped 1.3 percent for the week, bringing its decade loss to 80 percent after the credit crisis threatened to push the carmaker into bankruptcy last year. Apple Computer Inc., the iPhone maker that beat analysts’ profit estimates for 19 straight quarters, climbed 0.8 percent, extending a 720 percent advance over the last 10 years.
This year’s rally wasn’t enough to restore money lost in two bear markets after the Internet bubble collapsed in 2000 and more than $1.7 trillion in global bank losses sent the index to a 38 decline in 2008. The S&P 500 posted an average decrease of 0.9 percent a year since 1999 including dividends, the first negative return for a decade since data began in 1927, according to S&P analyst Howard Silverblatt.
“This dispelled two myths,” said Robert Arnott, founder of Research Affiliates LLC, which oversees $47 billion in Newport Beach, California. “The notion that investment gains are easy, and the notion that stocks will win for the patient investor, no matter what we pay.”
The S&P 500 slipped 1 percent to 1,115.10 this week, paring its 2009 gain to 23 percent, the biggest advance since it climbed 26 percent in 2003. The Dow Jones Industrial Average fell 0.9 percent to 10,428.05, lowering the yearly increase to 19 percent.
Market Recovery
Equities rebounded in March after investors paid an average 11.9 times earnings for S&P 500 companies, a 23-year low, according to data compiled by Yale University’s Robert Shiller. He adjusts valuations for inflation and uses a decade of profit to smooth out short-term fluctuations.
Since reaching a record 1,565.15 in October 2007, the S&P 500 has fallen 29 percent, erasing about $5.3 trillion of stock market value. The index’s 65 percent gain since March 9 cut the loss in half after the U.S. government lent, spent or guaranteed more than $11 trillion to end the recession, according to data compiled by Bloomberg.
The price of the benchmark index for U.S. equities slid 24 percent over the last 10 years, a smaller loss than the 42 percent retreat suffered during the 1930s. Dividends brought the annualized return during the decade of the Great Depression to 1 percent, according to S&P data.
Relative Value
Investors who put $10,000 in stocks on Dec. 31, 1999, have $9,090 now, while the same amount in 10-year Treasury notes would have grown to about $18,000 following a 6.1 percent annualized return, according to data compiled by Bloomberg. A $10,000 investment in the Reuters/Jefferies CRB Index of 19 raw materials increased 3.3 percent a year to $13,803. Gold futures rose 14 percent a year, turning $10,000 into $37,852.
The average annualized return for U.S. equity mutual funds was 1.7 percent during the decade. Only one fund out of 3,833 gained in 2008: Forester Value Fund rose 0.4 percent that year, according to Chicago-based Morningstar Inc.
Hedge funds’ annualized return was about 6.3 percent since Dec. 31, 1999, according to Hedge Fund Research’s HFRI Fund Weighted Composite Index. The measure rose 19 percent in 2009 through Dec. 15.
“Those who benefited in the decade were short-term investors who were able to take advantage of the volatility in the stock market,” said Komal Sri-Kumar, who helps manage $118 billion as chief global strategist at TCW Group Inc. in Los Angeles. “That isn’t the signal authorities should give players in the market. You want them to think of it as a place where you can save for your retirement.”
JDS Uniphase
JDS Uniphase Corp. fell the most among companies still in the S&P 500, plunging 99 percent. The ranking doesn’t include Lehman Brothers Holdings Inc., Bear Stearns Cos., Houston-based Enron Corp., Clinton, Mississippi-based WorldCom Inc. and 207 other stocks removed from the index since Dec. 31, 1999, according to data compiled by Silverblatt.
JDS, the maker of computer-networking equipment based in Milpitas, California, fell every year except 2003 after declines in the value of companies it bought caused a $56.1 billion loss in 2001. Phone and computer companies were the worst-performing industries in the S&P 500, losing 64 percent and 54 percent since the end of 1999. Cupertino, California-based Apple was an exception, surging to $210.73 from $25.70.
Citigroup, AIG Plunge
Banks and brokerages had the third-biggest drop of the 2000s, led by a 91 percent slump in Citigroup Inc. and a 98 percent tumble in American International Group Inc., both based in New York. Lenders were dragged down by $1.7 trillion of global bank losses and writedowns tied to property loans during the credit crisis that began with mortgage defaults and accelerated with the collapse of New York-based Lehman Brothers in 2008.
Ford also fell every year except in 2003 when the U.S. economy recovered from the first recession of the decade. The Dearborn, Michigan-based auto maker plunged as the American car industry lost market share, culminating with the government taking a 61 percent stake last year in Detroit-based General Motors Co., the biggest U.S. automaker.
Investors may experience more subpar returns, said John Bogle, who founded the Vanguard Group mutual fund company. Those counting on a recovery such as the rally that lifted stocks 18 percent a year in the 1980s will be disappointed, said Bogle, who created the $92 billion Vanguard 500 Index Fund in 1976.
“The 1990s was the golden decade for stocks, the 2000s was the tin decade and the next 10 years will be the bronze decade,” Bogle said. “Stocks will rise 7 to 9 percent over the next 10 years, below the historical norm but better than the last 10.”
Record Deficit
The U.S. budget deficit reached a record of $1.4 trillion in 2009, pushed up by the cost of bank bailouts and benefits after 7.2 million jobs were lost since the recession started two years ago. The U.S. government’s total debt is now more than $12 trillion, according to the U.S. Treasury.
“We need to legitimize the recovery and move beyond the artificial government supports for the economy,” said John Lynch, who helps manage $155.5 billion as chief market analyst at Evergreen Investments in Charlotte, North Carolina. “We have to learn our lessons from the dot-com, credit and housing bubbles.”
‘Decade of Delusion’
Stocks rallied in 2009 after Federal Reserve Chairman Ben S. Bernanke held interest rates near zero and launched the biggest expansion of the central bank’s power in its 96-year history. Bernanke pumped money into the economy through the purchase of mortgage-backed debt and U.S. Treasuries and the government pledged more than $200 billion to bail out New York- based securities firm Bear Stearns Cos. and AIG.
Congress authorized the $700 billion Troubled Asset Relief Program to buy toxic assets from lenders including Citigroup and New York-based banks Goldman Sachs Group Inc. and JPMorgan Chase & Co. as the crisis escalated. The Treasury invested more than $200 billion of the money in financial institutions.
“It’s been a decade of delusion,” said Richard Tedlow, professor of business administration of Harvard Business School in Cambridge, Massachusetts. “In many ways, we’re worse off than the 1930s, we’ve created problems of moral hazard and we’re faced with an astounding public debt.”
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.
Ford Motor Co. dropped 1.3 percent for the week, bringing its decade loss to 80 percent after the credit crisis threatened to push the carmaker into bankruptcy last year. Apple Computer Inc., the iPhone maker that beat analysts’ profit estimates for 19 straight quarters, climbed 0.8 percent, extending a 720 percent advance over the last 10 years.
This year’s rally wasn’t enough to restore money lost in two bear markets after the Internet bubble collapsed in 2000 and more than $1.7 trillion in global bank losses sent the index to a 38 decline in 2008. The S&P 500 posted an average decrease of 0.9 percent a year since 1999 including dividends, the first negative return for a decade since data began in 1927, according to S&P analyst Howard Silverblatt.
“This dispelled two myths,” said Robert Arnott, founder of Research Affiliates LLC, which oversees $47 billion in Newport Beach, California. “The notion that investment gains are easy, and the notion that stocks will win for the patient investor, no matter what we pay.”
The S&P 500 slipped 1 percent to 1,115.10 this week, paring its 2009 gain to 23 percent, the biggest advance since it climbed 26 percent in 2003. The Dow Jones Industrial Average fell 0.9 percent to 10,428.05, lowering the yearly increase to 19 percent.
Market Recovery
Equities rebounded in March after investors paid an average 11.9 times earnings for S&P 500 companies, a 23-year low, according to data compiled by Yale University’s Robert Shiller. He adjusts valuations for inflation and uses a decade of profit to smooth out short-term fluctuations.
Since reaching a record 1,565.15 in October 2007, the S&P 500 has fallen 29 percent, erasing about $5.3 trillion of stock market value. The index’s 65 percent gain since March 9 cut the loss in half after the U.S. government lent, spent or guaranteed more than $11 trillion to end the recession, according to data compiled by Bloomberg.
The price of the benchmark index for U.S. equities slid 24 percent over the last 10 years, a smaller loss than the 42 percent retreat suffered during the 1930s. Dividends brought the annualized return during the decade of the Great Depression to 1 percent, according to S&P data.
Relative Value
Investors who put $10,000 in stocks on Dec. 31, 1999, have $9,090 now, while the same amount in 10-year Treasury notes would have grown to about $18,000 following a 6.1 percent annualized return, according to data compiled by Bloomberg. A $10,000 investment in the Reuters/Jefferies CRB Index of 19 raw materials increased 3.3 percent a year to $13,803. Gold futures rose 14 percent a year, turning $10,000 into $37,852.
The average annualized return for U.S. equity mutual funds was 1.7 percent during the decade. Only one fund out of 3,833 gained in 2008: Forester Value Fund rose 0.4 percent that year, according to Chicago-based Morningstar Inc.
Hedge funds’ annualized return was about 6.3 percent since Dec. 31, 1999, according to Hedge Fund Research’s HFRI Fund Weighted Composite Index. The measure rose 19 percent in 2009 through Dec. 15.
“Those who benefited in the decade were short-term investors who were able to take advantage of the volatility in the stock market,” said Komal Sri-Kumar, who helps manage $118 billion as chief global strategist at TCW Group Inc. in Los Angeles. “That isn’t the signal authorities should give players in the market. You want them to think of it as a place where you can save for your retirement.”
JDS Uniphase
JDS Uniphase Corp. fell the most among companies still in the S&P 500, plunging 99 percent. The ranking doesn’t include Lehman Brothers Holdings Inc., Bear Stearns Cos., Houston-based Enron Corp., Clinton, Mississippi-based WorldCom Inc. and 207 other stocks removed from the index since Dec. 31, 1999, according to data compiled by Silverblatt.
JDS, the maker of computer-networking equipment based in Milpitas, California, fell every year except 2003 after declines in the value of companies it bought caused a $56.1 billion loss in 2001. Phone and computer companies were the worst-performing industries in the S&P 500, losing 64 percent and 54 percent since the end of 1999. Cupertino, California-based Apple was an exception, surging to $210.73 from $25.70.
Citigroup, AIG Plunge
Banks and brokerages had the third-biggest drop of the 2000s, led by a 91 percent slump in Citigroup Inc. and a 98 percent tumble in American International Group Inc., both based in New York. Lenders were dragged down by $1.7 trillion of global bank losses and writedowns tied to property loans during the credit crisis that began with mortgage defaults and accelerated with the collapse of New York-based Lehman Brothers in 2008.
Ford also fell every year except in 2003 when the U.S. economy recovered from the first recession of the decade. The Dearborn, Michigan-based auto maker plunged as the American car industry lost market share, culminating with the government taking a 61 percent stake last year in Detroit-based General Motors Co., the biggest U.S. automaker.
Investors may experience more subpar returns, said John Bogle, who founded the Vanguard Group mutual fund company. Those counting on a recovery such as the rally that lifted stocks 18 percent a year in the 1980s will be disappointed, said Bogle, who created the $92 billion Vanguard 500 Index Fund in 1976.
“The 1990s was the golden decade for stocks, the 2000s was the tin decade and the next 10 years will be the bronze decade,” Bogle said. “Stocks will rise 7 to 9 percent over the next 10 years, below the historical norm but better than the last 10.”
Record Deficit
The U.S. budget deficit reached a record of $1.4 trillion in 2009, pushed up by the cost of bank bailouts and benefits after 7.2 million jobs were lost since the recession started two years ago. The U.S. government’s total debt is now more than $12 trillion, according to the U.S. Treasury.
“We need to legitimize the recovery and move beyond the artificial government supports for the economy,” said John Lynch, who helps manage $155.5 billion as chief market analyst at Evergreen Investments in Charlotte, North Carolina. “We have to learn our lessons from the dot-com, credit and housing bubbles.”
‘Decade of Delusion’
Stocks rallied in 2009 after Federal Reserve Chairman Ben S. Bernanke held interest rates near zero and launched the biggest expansion of the central bank’s power in its 96-year history. Bernanke pumped money into the economy through the purchase of mortgage-backed debt and U.S. Treasuries and the government pledged more than $200 billion to bail out New York- based securities firm Bear Stearns Cos. and AIG.
Congress authorized the $700 billion Troubled Asset Relief Program to buy toxic assets from lenders including Citigroup and New York-based banks Goldman Sachs Group Inc. and JPMorgan Chase & Co. as the crisis escalated. The Treasury invested more than $200 billion of the money in financial institutions.
“It’s been a decade of delusion,” said Richard Tedlow, professor of business administration of Harvard Business School in Cambridge, Massachusetts. “In many ways, we’re worse off than the 1930s, we’ve created problems of moral hazard and we’re faced with an astounding public debt.”
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.
Goldman Sachs Helps YRC Avert Bankruptcy Following Hoffa’s Plea
Goldman Sachs Group Inc. helped YRC Worldwide Inc. complete a debt swap to avert bankruptcy after the Teamsters union said the bank was trying to profit from a failure of the largest U.S. trucker by sales.
A group consisting of Goldman Sachs, Deutsche Bank AG, Aristeia Capital LLC, Silverback Asset Management and a Smith Management LLC unit, “got us over the goal line by going into the market, buying bonds and tendering them,” YRC Chief Executive Officer Bill Zollars said yesterday.
YRC extended the deadline for the bond exchange six times in December as it sought to overcome resistance from bondholders owning derivatives that would pay out if the company defaulted. YRC, which has posted $1.7 billion in losses in the past five quarters, needed to complete the exchange by Dec. 31 to avoid a bank payment that would have left the trucker in an “unsustainable” position, the Overland Park, Kansas-based company said in a regulatory filing two weeks ago.
International Brotherhood of Teamsters President James Hoffa said in letters last month to regulators and lawmakers that Goldman Sachs and Deutsche Bank were among banks that “have a history of making markets in these types of derivative financial products.”
Goldman Sachs spokesman Michael DuVally said Dec. 17 that the bank was “actively exploring ways to help” YRC.
Bondholders with 70 percent of YRC’s $150 million of 8.5 percent notes due in April offered to tender, meeting the required threshold, the company said yesterday in a statement. That’s an increase over the 59 percent that participated by Dec. 29. Holders of 88 percent of all of the company’s outstanding bonds, with a face value of $470 million, participated in the exchange, the company said.
Profit From Failure
YRC’s $150 million of 8.5 percent notes rose 4.8 cents to 65.1 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
“The most difficult bondholders to deal with were investors with credit-default swaps that paid off if the company went bankrupt,” Zollars, 62, said in a telephone interview. “It doesn’t seem right that individual investors would make money against companies surviving, particularly in this economy.”
No so-called less-than-truckload company -- one that hauls goods for more than one customer in the same trailer -- has survived bankruptcy in the last 30 years, according to the Teamsters, the union that says it represents about 30,000 YRC employees.
“We never want to test that theory,” Zollars said. “We’re completely focused on not having to go into bankruptcy and one of the biggest ways to do that is to take nearly $500 million of debt off the balance sheet.”
Teamsters Campaign
The Teamsters urged hedge funds and banks it believed owned the debt to vote for the exchange or sell their securities. In the last two days, efforts to build support paid off, Zollars said.
“We worked closely with YRC’s advisers and other bondholders over the holidays to rally support for the exchange,” Nicholas Pappas, the co-head of flow credit trading in the Americas at Deutsche Bank, said in a statement. “We are thrilled with the outcome and support their long-term success.”
Goldman Sachs’s DuVally said yesterday “we’re pleased to have played a constructive role in the process.”
Labor ‘Breakthrough’
The “risk of public rebuke,” along with “even more legislative threats” to the market for credit-default swaps resulting from the bankruptcy of a large employer of organized labor, helped the exchange pass, CreditSights Inc. analyst Sam Goodyear in New York wrote in a report yesterday.
Hoffa said the YRC debt exchange marked “our first time doing a campaign like this where we really had to get into high finance.”
“It’s a new breakthrough for labor unions working on Wall Street to make something happen,” Hoffa said yesterday. “It’s very positive for a major company.”
Officials at Silverback and Smith declined to comment. Aristeia didn’t return calls.
UBS AG told the union it tendered its bonds, according to a Teamsters statement. Cyrus Hadidi, a partner at JMB Capital Partners in Los Angeles, also named by the Teamsters as holding a position, said his company is “fully supportive” of YRC’s restructuring efforts and has tendered all its bonds.
Interest Payment Due
YRC had to complete the exchange to avoid a $19 million interest payment. The company can now defer this payment and will have increased access to its bank lines, YRC said. It will defer additional lender interest and fees of $20 million to $25 million per quarter during 2010 depending on usage of its credit agreement and an asset-backed securitization facility.
The trucking company has a $950 million revolving credit line with a group of banks led by JPMorgan Chase & Co., as well as a $111.5 million term loan, according to data compiled by Bloomberg. YRC has $1.6 billion of loans and bonds, Bloomberg data show. The company took on debt when Yellow Corp. acquired Roadway Corp. in 2003 for $1.07 billion and then bought USF Corp. in 2005 for $1.37 billion.
Credit-default swaps are financial instruments based on bonds and loans that are used to hedge against losses or to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net
A group consisting of Goldman Sachs, Deutsche Bank AG, Aristeia Capital LLC, Silverback Asset Management and a Smith Management LLC unit, “got us over the goal line by going into the market, buying bonds and tendering them,” YRC Chief Executive Officer Bill Zollars said yesterday.
YRC extended the deadline for the bond exchange six times in December as it sought to overcome resistance from bondholders owning derivatives that would pay out if the company defaulted. YRC, which has posted $1.7 billion in losses in the past five quarters, needed to complete the exchange by Dec. 31 to avoid a bank payment that would have left the trucker in an “unsustainable” position, the Overland Park, Kansas-based company said in a regulatory filing two weeks ago.
International Brotherhood of Teamsters President James Hoffa said in letters last month to regulators and lawmakers that Goldman Sachs and Deutsche Bank were among banks that “have a history of making markets in these types of derivative financial products.”
Goldman Sachs spokesman Michael DuVally said Dec. 17 that the bank was “actively exploring ways to help” YRC.
Bondholders with 70 percent of YRC’s $150 million of 8.5 percent notes due in April offered to tender, meeting the required threshold, the company said yesterday in a statement. That’s an increase over the 59 percent that participated by Dec. 29. Holders of 88 percent of all of the company’s outstanding bonds, with a face value of $470 million, participated in the exchange, the company said.
Profit From Failure
YRC’s $150 million of 8.5 percent notes rose 4.8 cents to 65.1 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
“The most difficult bondholders to deal with were investors with credit-default swaps that paid off if the company went bankrupt,” Zollars, 62, said in a telephone interview. “It doesn’t seem right that individual investors would make money against companies surviving, particularly in this economy.”
No so-called less-than-truckload company -- one that hauls goods for more than one customer in the same trailer -- has survived bankruptcy in the last 30 years, according to the Teamsters, the union that says it represents about 30,000 YRC employees.
“We never want to test that theory,” Zollars said. “We’re completely focused on not having to go into bankruptcy and one of the biggest ways to do that is to take nearly $500 million of debt off the balance sheet.”
Teamsters Campaign
The Teamsters urged hedge funds and banks it believed owned the debt to vote for the exchange or sell their securities. In the last two days, efforts to build support paid off, Zollars said.
“We worked closely with YRC’s advisers and other bondholders over the holidays to rally support for the exchange,” Nicholas Pappas, the co-head of flow credit trading in the Americas at Deutsche Bank, said in a statement. “We are thrilled with the outcome and support their long-term success.”
Goldman Sachs’s DuVally said yesterday “we’re pleased to have played a constructive role in the process.”
Labor ‘Breakthrough’
The “risk of public rebuke,” along with “even more legislative threats” to the market for credit-default swaps resulting from the bankruptcy of a large employer of organized labor, helped the exchange pass, CreditSights Inc. analyst Sam Goodyear in New York wrote in a report yesterday.
Hoffa said the YRC debt exchange marked “our first time doing a campaign like this where we really had to get into high finance.”
“It’s a new breakthrough for labor unions working on Wall Street to make something happen,” Hoffa said yesterday. “It’s very positive for a major company.”
Officials at Silverback and Smith declined to comment. Aristeia didn’t return calls.
UBS AG told the union it tendered its bonds, according to a Teamsters statement. Cyrus Hadidi, a partner at JMB Capital Partners in Los Angeles, also named by the Teamsters as holding a position, said his company is “fully supportive” of YRC’s restructuring efforts and has tendered all its bonds.
Interest Payment Due
YRC had to complete the exchange to avoid a $19 million interest payment. The company can now defer this payment and will have increased access to its bank lines, YRC said. It will defer additional lender interest and fees of $20 million to $25 million per quarter during 2010 depending on usage of its credit agreement and an asset-backed securitization facility.
The trucking company has a $950 million revolving credit line with a group of banks led by JPMorgan Chase & Co., as well as a $111.5 million term loan, according to data compiled by Bloomberg. YRC has $1.6 billion of loans and bonds, Bloomberg data show. The company took on debt when Yellow Corp. acquired Roadway Corp. in 2003 for $1.07 billion and then bought USF Corp. in 2005 for $1.37 billion.
Credit-default swaps are financial instruments based on bonds and loans that are used to hedge against losses or to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net
Dollar’s First Monthly Gain Since June Trims 2009 Loss to 4.2%
The dollar posted its first monthly gain since June versus the currencies of major U.S. trading partners as the Federal Reserve moved closer to withdrawing stimulus measures that helped cause the greenback to fall 4.2 percent for the year.
The dollar advanced to a three-month high against the yen and rallied versus the euro after the Fed said at the conclusion of its Dec. 16 meeting that job losses are “abating.” The greenback pared its annual decrease against the Australian dollar and Norwegian krone as a surge in Treasury yields made the U.S. currency less attractive as a funding vehicle for the purchase of higher-yielding assets.
“We are seeing the dollar recover probably into the first quarter of next year,” said Thanos Papasavvas, who helps manage more than $5 billion in London, in an interview on Bloomberg Radio. “We would expect the unemployment rate to start to stabilize.”
The trade-weighted Dollar Index, which the ICE futures exchange uses to track the greenback against currencies including the euro, yen and pound, increased 4 percent in December to 77.860 yesterday. It was the first monthly advance in six months and the biggest gain since January 2009.
The index finished the decade down 24 percent as U.S. dominance of the global economy diminished and emerging markets grew. The introduction of the euro in January 1999 created an alternative to the dollar as a global reserve currency.
Foreign Reserves
The U.S. currency’s share of foreign reserves held by global central banks dropped to 61.6 percent during the quarter ended Sept. 30, the lowest on record, from 71 percent a decade ago, the International Monetary Fund reported on Dec. 30. The euro’s share rose to 27.7 percent, from 17.9 percent.
“You might get periodic episodes of a little bit of dollar strength,” said Tom Fitzpatrick, chief technical analyst at Citigroup Inc. in New York, in an interview on Bloomberg Radio, “But we really don’t feel any of the underlying parameters for dollar weakness has changed that much.”
The dollar appreciated 4.8 percent to $1.4321 per euro on Dec. 31, from $1.5005 at the end of November, paring its loss in 2009 to 2.5 percent. The U.S. currency advanced 7.7 percent to 93.02 yen, from 86.41, and gained 2.6 percent for the year. It touched 93.15 yesterday, the highest level since Sept. 7. The euro increased 2.7 percent to 133.20 yen in December and advanced 5.1 percent in 2009.
Barclays’s View
Barclays Plc, the world’s third-largest currency trader, raised its three-month forecast for the dollar against the euro on Dec. 10 to $1.45 from $1.52 and its six-month outlook to $1.40 from $1.45.
The median forecast of 43 economists surveyed by Bloomberg News is for the dollar to trade at $1.51 by the end of March and $1.49 by June 30. The dollar will trade at 90 yen by the end of March and 93 in six months, according to economists.
The yen was the only major currency to fall against the dollar for the year, weakening on speculation the Fed will phase out stimulus measures while the Bank of Japan steps up efforts to fight deflation.
The yield premium on 10-year Treasury notes over similar- maturity Japanese bonds rose yesterday to the highest level in more than two years, making U.S. assets more attractive than Japan’s securities.
The Brazilian real, South African rand, the Australian and New Zealand dollars and the Norwegian krone were the best performers against the greenback in 2009 among major currencies, rising at least 20 percent as signs of global recovery spurred investors to sell dollars and buy higher-yielding assets.
2009 Returns
Buying the five currencies with funds borrowed in the dollar and yen would have returned 34 percent in 2009, according to Bloomberg data. The same trade would have lost 26 percent in 2008.
The Aussie and krone fell in December against the dollar after the U.S. Labor Department reported the fewest monthly job losses since before the recession, fueling speculation the Fed will remove stimulus measures and prepare investors for higher interest rates in 2010.
The Fed held the target rate for overnight lending between banks at zero to 0.25 percent on Dec. 16 while saying “economic activity has continued to pick up.”
Futures trading in Chicago showed yesterday a 62 percent chance that the Fed will raise its target lending rate by at least a quarter-percentage point by its June meeting, up from 31 percent odds a week ago.
U.S. employers eliminated 1,000 jobs in December after cutting 11,000 in the previous month, according to the median forecast of 58 economists in a Bloomberg News survey. The report from the Labor Department is due on Jan. 8.
“The surge in growth can continue for a while,” said David Tien, senior quantitative researcher at Fischer Francis Trees & Watts in New York, which has $27 billion in assets. “The key question is against which currency the dollar’s gain can be the most pronounced. We think it’s the yen.”
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Ben Levisohn in New York at blevisohn@bloomberg.net
The dollar advanced to a three-month high against the yen and rallied versus the euro after the Fed said at the conclusion of its Dec. 16 meeting that job losses are “abating.” The greenback pared its annual decrease against the Australian dollar and Norwegian krone as a surge in Treasury yields made the U.S. currency less attractive as a funding vehicle for the purchase of higher-yielding assets.
“We are seeing the dollar recover probably into the first quarter of next year,” said Thanos Papasavvas, who helps manage more than $5 billion in London, in an interview on Bloomberg Radio. “We would expect the unemployment rate to start to stabilize.”
The trade-weighted Dollar Index, which the ICE futures exchange uses to track the greenback against currencies including the euro, yen and pound, increased 4 percent in December to 77.860 yesterday. It was the first monthly advance in six months and the biggest gain since January 2009.
The index finished the decade down 24 percent as U.S. dominance of the global economy diminished and emerging markets grew. The introduction of the euro in January 1999 created an alternative to the dollar as a global reserve currency.
Foreign Reserves
The U.S. currency’s share of foreign reserves held by global central banks dropped to 61.6 percent during the quarter ended Sept. 30, the lowest on record, from 71 percent a decade ago, the International Monetary Fund reported on Dec. 30. The euro’s share rose to 27.7 percent, from 17.9 percent.
“You might get periodic episodes of a little bit of dollar strength,” said Tom Fitzpatrick, chief technical analyst at Citigroup Inc. in New York, in an interview on Bloomberg Radio, “But we really don’t feel any of the underlying parameters for dollar weakness has changed that much.”
The dollar appreciated 4.8 percent to $1.4321 per euro on Dec. 31, from $1.5005 at the end of November, paring its loss in 2009 to 2.5 percent. The U.S. currency advanced 7.7 percent to 93.02 yen, from 86.41, and gained 2.6 percent for the year. It touched 93.15 yesterday, the highest level since Sept. 7. The euro increased 2.7 percent to 133.20 yen in December and advanced 5.1 percent in 2009.
Barclays’s View
Barclays Plc, the world’s third-largest currency trader, raised its three-month forecast for the dollar against the euro on Dec. 10 to $1.45 from $1.52 and its six-month outlook to $1.40 from $1.45.
The median forecast of 43 economists surveyed by Bloomberg News is for the dollar to trade at $1.51 by the end of March and $1.49 by June 30. The dollar will trade at 90 yen by the end of March and 93 in six months, according to economists.
The yen was the only major currency to fall against the dollar for the year, weakening on speculation the Fed will phase out stimulus measures while the Bank of Japan steps up efforts to fight deflation.
The yield premium on 10-year Treasury notes over similar- maturity Japanese bonds rose yesterday to the highest level in more than two years, making U.S. assets more attractive than Japan’s securities.
The Brazilian real, South African rand, the Australian and New Zealand dollars and the Norwegian krone were the best performers against the greenback in 2009 among major currencies, rising at least 20 percent as signs of global recovery spurred investors to sell dollars and buy higher-yielding assets.
2009 Returns
Buying the five currencies with funds borrowed in the dollar and yen would have returned 34 percent in 2009, according to Bloomberg data. The same trade would have lost 26 percent in 2008.
The Aussie and krone fell in December against the dollar after the U.S. Labor Department reported the fewest monthly job losses since before the recession, fueling speculation the Fed will remove stimulus measures and prepare investors for higher interest rates in 2010.
The Fed held the target rate for overnight lending between banks at zero to 0.25 percent on Dec. 16 while saying “economic activity has continued to pick up.”
Futures trading in Chicago showed yesterday a 62 percent chance that the Fed will raise its target lending rate by at least a quarter-percentage point by its June meeting, up from 31 percent odds a week ago.
U.S. employers eliminated 1,000 jobs in December after cutting 11,000 in the previous month, according to the median forecast of 58 economists in a Bloomberg News survey. The report from the Labor Department is due on Jan. 8.
“The surge in growth can continue for a while,” said David Tien, senior quantitative researcher at Fischer Francis Trees & Watts in New York, which has $27 billion in assets. “The key question is against which currency the dollar’s gain can be the most pronounced. We think it’s the yen.”
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Ben Levisohn in New York at blevisohn@bloomberg.net
China Manufacturing Growth Increases to 20-Month High (Update2)
China’s manufacturing expanded at the fastest pace in 20 months in December, cementing the recovery in the world’s third-biggest economy.
The Purchasing Managers’ Index climbed to a seasonally adjusted 56.6, the Federation of Logistics and Purchasing said today in an e-mailed statement in Beijing. That compares with 55.2 in November and the median 55.4 estimate in a Bloomberg News survey of seven economists.
The boost to Chinese manufacturing from subsidies for home- appliance purchases and tax rebates for exporters will continue this year as the government extends policies to counter the financial crisis. China’s growth will accelerate to 8.8 percent in 2010, four times faster than the U.S., as the world economy expands 2.4 percent, the United Nations forecast last month.
“Manufacturing will stay at a high level as industrial production quickens and companies receive more orders for new- year holiday sales,” Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai, said before today’s data. “Exports may return to growth in December, aiding manufacturing growth.”
Industrial production grew in November at the fastest pace since March 2008, exports dropped the least in 13 months and imports surged.
Today’s figure compares with a record-low 38.8 in November 2008, when recessions in the U.S., Europe and Japan sent export orders plunging. A reading above 50 indicates an expansion.
A measure of new export orders fell to 52.6 in December from 53.6 in November and a gauge of purchasing prices increased to 66.7 from 63.4, according to the statement.
Production Costs
“Attention should be focused on the drop in the export- order index, which shows there shouldn’t be premature optimism about an improvement in international markets,” Zhang Liqun, a researcher at the State Council Development and Research Center, said in the statement. “The rise in the purchasing price index shows that production costs for companies are increasing.”
China and Asia are leading the world recovery, helping to boost global confidence, which held near a record high in December, according to a Bloomberg survey of users of six continents, first conducted two years ago. China may overtake Japan as the world’s second-biggest economy this year.
Profits are climbing as the economy gathers pace. Beijing Automotive Industry Holding Co., the company which is buying technology from General Motors Corp.’s Saab unit, said Dec. 23 that 11-month net income more than tripled. China Gas Holdings Ltd.’s profit in the six months ended September jumped nearly six-fold.
Foreign Pressure
Premier Wen Jiabao said Dec. 27 that China won’t make the mistake of ending stimulus policies too soon, even as he signaled that the government may cool new lending that reached an unprecedented $1.3 trillion in the first 11 months of last year. Wen also said China will “absolutely not yield” to pressure from foreign countries for currency gains as the nation holds the yuan at about 6.83 per dollar.
Commerce Minister Chen Deming pledged Dec. 24 to maintain export tax rebates in 2010 because of a slow recovery in global demand. Also aiding manufacturers, a program of subsidies for purchases of appliances such as refrigerators and washing machines within rural China will be expanded by raising price caps to make more products eligible.
China’s economic growth in the fourth quarter probably topped the third-quarter’s 8.9 percent, Xu Xianchun, deputy head of the statistics bureau said last month. Gross domestic product probably expanded 8.5 percent in 2009 and may grow 9.4 percent in 2010, according to a Bloomberg News survey of economists.
‘Growth Momentum’
The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, is based on replies to questionnaires sent to purchasing executives at more than 730 companies in 20 industries. It started in January 2005.
“The forward-looking components of the PMI indicate continued expansion in both domestic and external demand,” said Jing Ulrich, Hong Kong-based chairwoman of China equities and commodities at JPMorgan Chase & Co. “We expect China’s strong economic growth momentum to continue in 2010.”
--Li Yanping and Mark Lee. Editors: Paul Panckhurst, Michael Dwyer
To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net Mark Lee in Hong Kong at +852-2977-6909 or wlee37@bloomberg.net
The Purchasing Managers’ Index climbed to a seasonally adjusted 56.6, the Federation of Logistics and Purchasing said today in an e-mailed statement in Beijing. That compares with 55.2 in November and the median 55.4 estimate in a Bloomberg News survey of seven economists.
The boost to Chinese manufacturing from subsidies for home- appliance purchases and tax rebates for exporters will continue this year as the government extends policies to counter the financial crisis. China’s growth will accelerate to 8.8 percent in 2010, four times faster than the U.S., as the world economy expands 2.4 percent, the United Nations forecast last month.
“Manufacturing will stay at a high level as industrial production quickens and companies receive more orders for new- year holiday sales,” Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai, said before today’s data. “Exports may return to growth in December, aiding manufacturing growth.”
Industrial production grew in November at the fastest pace since March 2008, exports dropped the least in 13 months and imports surged.
Today’s figure compares with a record-low 38.8 in November 2008, when recessions in the U.S., Europe and Japan sent export orders plunging. A reading above 50 indicates an expansion.
A measure of new export orders fell to 52.6 in December from 53.6 in November and a gauge of purchasing prices increased to 66.7 from 63.4, according to the statement.
Production Costs
“Attention should be focused on the drop in the export- order index, which shows there shouldn’t be premature optimism about an improvement in international markets,” Zhang Liqun, a researcher at the State Council Development and Research Center, said in the statement. “The rise in the purchasing price index shows that production costs for companies are increasing.”
China and Asia are leading the world recovery, helping to boost global confidence, which held near a record high in December, according to a Bloomberg survey of users of six continents, first conducted two years ago. China may overtake Japan as the world’s second-biggest economy this year.
Profits are climbing as the economy gathers pace. Beijing Automotive Industry Holding Co., the company which is buying technology from General Motors Corp.’s Saab unit, said Dec. 23 that 11-month net income more than tripled. China Gas Holdings Ltd.’s profit in the six months ended September jumped nearly six-fold.
Foreign Pressure
Premier Wen Jiabao said Dec. 27 that China won’t make the mistake of ending stimulus policies too soon, even as he signaled that the government may cool new lending that reached an unprecedented $1.3 trillion in the first 11 months of last year. Wen also said China will “absolutely not yield” to pressure from foreign countries for currency gains as the nation holds the yuan at about 6.83 per dollar.
Commerce Minister Chen Deming pledged Dec. 24 to maintain export tax rebates in 2010 because of a slow recovery in global demand. Also aiding manufacturers, a program of subsidies for purchases of appliances such as refrigerators and washing machines within rural China will be expanded by raising price caps to make more products eligible.
China’s economic growth in the fourth quarter probably topped the third-quarter’s 8.9 percent, Xu Xianchun, deputy head of the statistics bureau said last month. Gross domestic product probably expanded 8.5 percent in 2009 and may grow 9.4 percent in 2010, according to a Bloomberg News survey of economists.
‘Growth Momentum’
The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, is based on replies to questionnaires sent to purchasing executives at more than 730 companies in 20 industries. It started in January 2005.
“The forward-looking components of the PMI indicate continued expansion in both domestic and external demand,” said Jing Ulrich, Hong Kong-based chairwoman of China equities and commodities at JPMorgan Chase & Co. “We expect China’s strong economic growth momentum to continue in 2010.”
--Li Yanping and Mark Lee. Editors: Paul Panckhurst, Michael Dwyer
To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net Mark Lee in Hong Kong at +852-2977-6909 or wlee37@bloomberg.net
South Korea Exports Rise at Fastest Pace in 17 Months (Update2)
South Korea’s exports increased at the fastest pace in 17 months, adding to signs that Asia’s fourth-largest economy is recovering from the global recession.
Overseasshipments gained 33.7 percent in December from a year earlier to $36.2 billion, the Ministry of Knowledge Economy said today. That was more than the median 27.9 percent forecast in a Bloomberg News survey of 10 economists. Imports rose 24 percent to $32.9 billion for a trade surplus of $3.3 billion.
Higher overseas sales suggest a strengthening recovery in South Korea’s $929 billion economy, which grew 3.2 percent in the third quarter. Exports in November 2008 recorded their biggest fall of the year as the financial crisis weakened demand, providing a low-base comparison for the figures released today.
“Exports will post growth for the coming months given the low base from last year and also as demand from overseas rises,” said Kim Jae Eun, an economist at Hyundai Securities Co. in Seoul. “South Korea should benefit from orders from China and emerging nations less affected by the global recession.”
Hyundai Motor Co. and other South Korean carmakers may sell 1.4 million vehicles in the domestic market this year from an estimated 1.37 million in 2009, the Korea Automobile Manufacturers Association said in December. Hyundai Heavy Industries Co., the world’s biggest shipbuilder, aims to win $17.7 billion in new orders in 2010.
Markets Closed
For 2009, the country’s trade surplus reached a record $41 billion as imports dropped 25.8 percent while exports declined 13.8 percent, the ministry said in a statement.
Exports in January will grow at a double-digit pace from a year earlier after the global financial crisis cut January 2009 overseas shipments by 34.5 percent, according to the statement.
South Korea’s financial markets are closed for a public holiday today. The nation’s benchmark Kospi stock index gained 50 percent last year, the most since 2005.
South Korean exports will increase 13.2 percent this year, after a 13.9 percent decline in 2009, the finance ministry said last month. Earlier reports showed industrial production climbed 1.4 percent from October while an index of leading economic indicators and manufacturers’ confidence increased.
Exports to China, the biggest buyer of South Korean goods, surged 74.4 percent in the first 20 days of December, today’s report showed. Shipments to the U.S. rose 8.7 percent and shipments to Europe gained 49.4 percent over the same period.
Shipments of semiconductors and display panel exports more than doubled last month, the government said. Petrochemicals exports gained 61.1 percent.
South Korean President Lee Myung Bak said Dec. 30 the nation’s economy is likely to expand more than 5 percent in 2010, the fastest pace in three years helped by exports and domestic spending. Both the finance ministry and the central bank in December raised economic growth forecasts for 2009 and 2010.
To contact the reporters on this story: Shinhye Kang in Seoul at skang24@bloomberg.net; Seyoon Kim in Seoul at skim7@bloomberg.net
Overseasshipments gained 33.7 percent in December from a year earlier to $36.2 billion, the Ministry of Knowledge Economy said today. That was more than the median 27.9 percent forecast in a Bloomberg News survey of 10 economists. Imports rose 24 percent to $32.9 billion for a trade surplus of $3.3 billion.
Higher overseas sales suggest a strengthening recovery in South Korea’s $929 billion economy, which grew 3.2 percent in the third quarter. Exports in November 2008 recorded their biggest fall of the year as the financial crisis weakened demand, providing a low-base comparison for the figures released today.
“Exports will post growth for the coming months given the low base from last year and also as demand from overseas rises,” said Kim Jae Eun, an economist at Hyundai Securities Co. in Seoul. “South Korea should benefit from orders from China and emerging nations less affected by the global recession.”
Hyundai Motor Co. and other South Korean carmakers may sell 1.4 million vehicles in the domestic market this year from an estimated 1.37 million in 2009, the Korea Automobile Manufacturers Association said in December. Hyundai Heavy Industries Co., the world’s biggest shipbuilder, aims to win $17.7 billion in new orders in 2010.
Markets Closed
For 2009, the country’s trade surplus reached a record $41 billion as imports dropped 25.8 percent while exports declined 13.8 percent, the ministry said in a statement.
Exports in January will grow at a double-digit pace from a year earlier after the global financial crisis cut January 2009 overseas shipments by 34.5 percent, according to the statement.
South Korea’s financial markets are closed for a public holiday today. The nation’s benchmark Kospi stock index gained 50 percent last year, the most since 2005.
South Korean exports will increase 13.2 percent this year, after a 13.9 percent decline in 2009, the finance ministry said last month. Earlier reports showed industrial production climbed 1.4 percent from October while an index of leading economic indicators and manufacturers’ confidence increased.
Exports to China, the biggest buyer of South Korean goods, surged 74.4 percent in the first 20 days of December, today’s report showed. Shipments to the U.S. rose 8.7 percent and shipments to Europe gained 49.4 percent over the same period.
Shipments of semiconductors and display panel exports more than doubled last month, the government said. Petrochemicals exports gained 61.1 percent.
South Korean President Lee Myung Bak said Dec. 30 the nation’s economy is likely to expand more than 5 percent in 2010, the fastest pace in three years helped by exports and domestic spending. Both the finance ministry and the central bank in December raised economic growth forecasts for 2009 and 2010.
To contact the reporters on this story: Shinhye Kang in Seoul at skang24@bloomberg.net; Seyoon Kim in Seoul at skim7@bloomberg.net
Hatoyama Says He’ll Focus on Japan Economy as Popularity Slumps
Prime Minister Yukio Hatoyama, whose approval rating fell by a third since a landslide election victory in August, said his focus for 2010 will be to create jobs and fight deflation to revive Japan’s stuttering economy.
“Our honeymoon period is over,” Hatoyama said in a New Year statement released today. “I’d welcome severe criticism.”
Hatoyama’s tenure has been dogged by deteriorating ties with the U.S., whose troops help defend Japan, and cabinet bickering over spending priorities for a government laden with the world’s largest public debt. His personal reputation was tarnished last month when two former aides were charged with falsifying his campaign finances and he was forced to pay about 600 million yen ($6.5 million) in gift taxes.
Japan unveiled a record $1 trillion budget on Dec. 25 designed to lift the spending power of households and switch the economic focus from public works spending. The extra yield on 30-year government bonds compared with two-year notes is trading at close to a four-year high, reflecting concern the administration may struggle to contain a debt load that is approaching 200 percent of gross domestic product.
“I’ll devote myself to enacting an extra budget and next fiscal year’s budget speedily,” Hatoyama said. “Economic recovery, securing jobs and defeating deflation are the people’s urgent hopes.”
Japan’s jobless rate rose for the first time in four months in November to 5.2 percent and consumer prices fell for a ninth month. A government report on Dec. 28 showed that monthly wages slumped for the 18th straight time. Finance Minister Hirohisa Fujii, 77, was admitted to hospital on the same day suffering from high blood pressure.
Approval Rating
Hatoyama’s cabinet had an approval rating of 50 percent in a Nikkei newspaper survey published Dec. 28, down from 75 percent in September. The Dec. 25-27 Nikkei Inc. and TV Tokyo Corp. poll canvassed 1,597 households.
Further complicating matters is a lingering dispute with President Barack Obama over where to move the U.S. Futenma Air Base on Okinawa, home to more than half the 47,000 American military personnel stationed in Japan. Secretary of State Hillary Clinton summoned Japan’s ambassador Ichiro Fujisaki on Dec. 21 to reiterate that the U.S. expects Hatoyama to honor a 2006 agreement on the base signed by the previous government.
“We would like to strengthen the Japan-U.S. alliance,” Hatoyama said in his New Year address, adding that he also wants to ease the burden on the people of Okinawa.
Hatoyama repeated an apology he made on Dec. 24 after prosecutors charged two of his former assistants with falsifying the source of 400 million yen of campaign funds. The next day he paid taxes he owed after receiving cash gifts from his mother, Kyodo News reported.
To contact the reporters on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net
“Our honeymoon period is over,” Hatoyama said in a New Year statement released today. “I’d welcome severe criticism.”
Hatoyama’s tenure has been dogged by deteriorating ties with the U.S., whose troops help defend Japan, and cabinet bickering over spending priorities for a government laden with the world’s largest public debt. His personal reputation was tarnished last month when two former aides were charged with falsifying his campaign finances and he was forced to pay about 600 million yen ($6.5 million) in gift taxes.
Japan unveiled a record $1 trillion budget on Dec. 25 designed to lift the spending power of households and switch the economic focus from public works spending. The extra yield on 30-year government bonds compared with two-year notes is trading at close to a four-year high, reflecting concern the administration may struggle to contain a debt load that is approaching 200 percent of gross domestic product.
“I’ll devote myself to enacting an extra budget and next fiscal year’s budget speedily,” Hatoyama said. “Economic recovery, securing jobs and defeating deflation are the people’s urgent hopes.”
Japan’s jobless rate rose for the first time in four months in November to 5.2 percent and consumer prices fell for a ninth month. A government report on Dec. 28 showed that monthly wages slumped for the 18th straight time. Finance Minister Hirohisa Fujii, 77, was admitted to hospital on the same day suffering from high blood pressure.
Approval Rating
Hatoyama’s cabinet had an approval rating of 50 percent in a Nikkei newspaper survey published Dec. 28, down from 75 percent in September. The Dec. 25-27 Nikkei Inc. and TV Tokyo Corp. poll canvassed 1,597 households.
Further complicating matters is a lingering dispute with President Barack Obama over where to move the U.S. Futenma Air Base on Okinawa, home to more than half the 47,000 American military personnel stationed in Japan. Secretary of State Hillary Clinton summoned Japan’s ambassador Ichiro Fujisaki on Dec. 21 to reiterate that the U.S. expects Hatoyama to honor a 2006 agreement on the base signed by the previous government.
“We would like to strengthen the Japan-U.S. alliance,” Hatoyama said in his New Year address, adding that he also wants to ease the burden on the people of Okinawa.
Hatoyama repeated an apology he made on Dec. 24 after prosecutors charged two of his former assistants with falsifying the source of 400 million yen of campaign funds. The next day he paid taxes he owed after receiving cash gifts from his mother, Kyodo News reported.
To contact the reporters on this story: Sachiko Sakamaki in Tokyo at Ssakamaki1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net
‘Avatar’ Tops Record Week as Hollywood Closes 2009 (Update1)
The U.S. box office will set a weekly record of almost $500 million in the final days of 2009 on sales from “Avatar,” “Sherlock Holmes” and “Alvin and the Chipmunks: The Squeakquel,” according to Hollywood.com.
Ticket sales from Dec. 25 through today will top the $396.2 million made July 18-24 last year when the “The Dark Knight” was released, said Paul Dergarabedian, president of Hollywood.com’s box office division. “Avatar,” James Cameron’s 3-D science-fiction adventure film, is the top seller this week, taking in about $18 million a day, Dergarabedian said.
President Barack Obama and his family saw “Avatar” while vacationing in Hawaii. The Obamas went to a private showing in 3-D this morning at a movie theater near their vacation home. The first family and some friends had one of the 10 theaters set aside for their private use, while the rest remained open.
The results mark the close of a record year in which North American box-office sales topped $10 billion for the first time. Midweek sales of about $60 million a day equaled a typical non- holiday weekend, Dergarabedian said. Attendance in 2009 was the highest in five years with 1.42 billion tickets sold, he said.
“Avatar,” released by News Corp.’s Twentieth Century Fox, is the fifth-fastest movie to top the $250 million mark, according Box Office Guru, a researcher based in New York.
To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net;
Ticket sales from Dec. 25 through today will top the $396.2 million made July 18-24 last year when the “The Dark Knight” was released, said Paul Dergarabedian, president of Hollywood.com’s box office division. “Avatar,” James Cameron’s 3-D science-fiction adventure film, is the top seller this week, taking in about $18 million a day, Dergarabedian said.
President Barack Obama and his family saw “Avatar” while vacationing in Hawaii. The Obamas went to a private showing in 3-D this morning at a movie theater near their vacation home. The first family and some friends had one of the 10 theaters set aside for their private use, while the rest remained open.
The results mark the close of a record year in which North American box-office sales topped $10 billion for the first time. Midweek sales of about $60 million a day equaled a typical non- holiday weekend, Dergarabedian said. Attendance in 2009 was the highest in five years with 1.42 billion tickets sold, he said.
“Avatar,” released by News Corp.’s Twentieth Century Fox, is the fifth-fastest movie to top the $250 million mark, according Box Office Guru, a researcher based in New York.
To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net;
Fed Discusses Limited Bond Sales to Withdraw Stimulus (Update1)
Federal Reserve officials are considering a proposal to schedule limited sales of bonds from the central bank’s $2.2 trillion balance sheet as part of a range of tools for withdrawing record monetary stimulus.
The Federal Open Market Committee discussed asset sales at its November meeting, with some members in favor and others warning that it would cause “sharp increases” in longer-term interest rates, according to minutes of the meeting released Nov. 24. A middle route now being studied would allow small amounts of bonds to be unloaded at announced times.
“The attitude toward asset sales is changing in terms of more in favor and more open minded, and doing it very gradually,” said former Fed Governor Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington. Devising a plan for pulling back stimulus “is under way intensively on the Federal Open Market Committee,” he said.
Chairman Ben S. Bernanke is trying to wind down emergency stimulus programs that helped avert a second Great Depression, while alleviating concerns that inflation will accelerate as the economy picks up. U.S. Treasury securities posted their worst performance since the 1970s after the Obama administration borrowed record sums to help drive the rebound from recession. Yields on 10-year notes are close to their highest level since June, rising to 3.84 percent at 4:45 p.m. in New York.
Loss of Control
Without first reducing or locking up the $1 trillion Bernanke pumped into financial markets, policy makers may raise their target for the benchmark interest rate only to watch it trade below that level. The Fed cut the main rate, the federal funds rate, to between zero and 0.25 percent in December 2008 and kept it there at the last FOMC gathering on Dec. 15-16.
“Here is the worry: What if they try to tighten and they lose control of the federal funds rate?” said Mark Spindel, chief investment officer of Potomac River Capital LLC in Washington, which specializes in inflation-linked bonds. “The challenge they have is to articulate how they are going to tighten and make sure all these tools work together.”
The Fed has expanded reserves through emergency programs purchasing $1.7 trillion in bonds. As of Dec. 30, the central bank held $776.5 billion of U.S. Treasury securities, $160 billion of bonds issued by federal agencies and $908 billion of agency mortgage bonds guaranteed by companies such as Fannie Mae and Freddie Mac.
Best Performance
Mortgage-backed securities returned 4.8 percentage points more than Treasuries this year, their best performance in at least 20 years, according to Barclays Capital index data. The Fed’s program to buy $1.25 trillion of the securities ends as soon as March.
The Fed is developing tools that can help take reserves off the market. This week, the Fed proposed selling term deposits to banks, which would remove reserves from the day-to-day trading market, locking them up for as long as six months.
The New York Fed began this month testing reverse repurchase agreements as another way to pull cash out of banks. In a reverse repo, the Fed contracts to sell and repurchase securities over a set period, draining cash from the banking system.
By making small, publicly announced sales of bonds, the central bank would permanently drain excess reserves while limiting investor concerns about an increase in the supply of such securities, economists said.
Hit Target
The federal funds market underscores how the Fed may need to use several tools to hit its interest-rate target. While the Fed promises to pay banks 0.25 percent to keep excess funds on deposit at the central bank, the so-called effective rate, or market rate, has averaged 0.12 basis points this month.
Fannie Mae and other government-sponsored enterprises that are ineligible to deposit money at the Fed “have pulled down” the fed funds rate by selling funds in the market, New York Fed researchers said in a paper this month.
Fed officials must be cautious in how they manage reserves and raise interest rates, economists said. Even small amounts of bond sales could nudge up the cost of home loans.
Freddie Mac, the McLean, Virginia-based mortgage company, said that the average 30-year fixed rate rose to 5.14 percent for the week ended today, the highest since August. A rise in short-term rates would boost the cost on floating-rate loans for consumers and businesses.
“If they get this wrong, volatility is going to be through the roof,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. LLC in New York. “Investors are over- discounting the difficulty that is coming our way when the Fed begins the process of raising interest rates.”
Path of Decline
The Fed will increase the benchmark rate in the third quarter of 2010, according to the median forecast of economists surveyed by Bloomberg News this month. Vice Chairman Donald Kohn is among officials who have said the recovery needs to be self- sustaining, with the unemployment rate declining, before the Fed tightens. The rate will probably stay at 10 percent in December, according to the median estimate in a separate Bloomberg survey of economists before a Labor Department report on Jan. 8. Unemployment soared to a 26-year high of 10.2 percent in October.
Fed officials are considering the sequence for using their various tools for withdrawing monetary stimulus. They may start by raising the interest on reserves rate and draining reserves, followed by asset sales, Meyer said in a Dec. 15 research note.
A second possible sequence would be first draining off excess reserves, then raising the interest on reserves rate later, followed by asset sales, he said.
“They are going to have to sell assets” to maintain control over the benchmark lending rate, said Brian Yelvington, director of fixed income strategy at bond broker Knight Libertas LLC in Greenwich, Connecticut. “The volatility of the effective federal funds rate around the target is probably going to be a lot greater than it has been in the past.”
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net.
The Federal Open Market Committee discussed asset sales at its November meeting, with some members in favor and others warning that it would cause “sharp increases” in longer-term interest rates, according to minutes of the meeting released Nov. 24. A middle route now being studied would allow small amounts of bonds to be unloaded at announced times.
“The attitude toward asset sales is changing in terms of more in favor and more open minded, and doing it very gradually,” said former Fed Governor Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington. Devising a plan for pulling back stimulus “is under way intensively on the Federal Open Market Committee,” he said.
Chairman Ben S. Bernanke is trying to wind down emergency stimulus programs that helped avert a second Great Depression, while alleviating concerns that inflation will accelerate as the economy picks up. U.S. Treasury securities posted their worst performance since the 1970s after the Obama administration borrowed record sums to help drive the rebound from recession. Yields on 10-year notes are close to their highest level since June, rising to 3.84 percent at 4:45 p.m. in New York.
Loss of Control
Without first reducing or locking up the $1 trillion Bernanke pumped into financial markets, policy makers may raise their target for the benchmark interest rate only to watch it trade below that level. The Fed cut the main rate, the federal funds rate, to between zero and 0.25 percent in December 2008 and kept it there at the last FOMC gathering on Dec. 15-16.
“Here is the worry: What if they try to tighten and they lose control of the federal funds rate?” said Mark Spindel, chief investment officer of Potomac River Capital LLC in Washington, which specializes in inflation-linked bonds. “The challenge they have is to articulate how they are going to tighten and make sure all these tools work together.”
The Fed has expanded reserves through emergency programs purchasing $1.7 trillion in bonds. As of Dec. 30, the central bank held $776.5 billion of U.S. Treasury securities, $160 billion of bonds issued by federal agencies and $908 billion of agency mortgage bonds guaranteed by companies such as Fannie Mae and Freddie Mac.
Best Performance
Mortgage-backed securities returned 4.8 percentage points more than Treasuries this year, their best performance in at least 20 years, according to Barclays Capital index data. The Fed’s program to buy $1.25 trillion of the securities ends as soon as March.
The Fed is developing tools that can help take reserves off the market. This week, the Fed proposed selling term deposits to banks, which would remove reserves from the day-to-day trading market, locking them up for as long as six months.
The New York Fed began this month testing reverse repurchase agreements as another way to pull cash out of banks. In a reverse repo, the Fed contracts to sell and repurchase securities over a set period, draining cash from the banking system.
By making small, publicly announced sales of bonds, the central bank would permanently drain excess reserves while limiting investor concerns about an increase in the supply of such securities, economists said.
Hit Target
The federal funds market underscores how the Fed may need to use several tools to hit its interest-rate target. While the Fed promises to pay banks 0.25 percent to keep excess funds on deposit at the central bank, the so-called effective rate, or market rate, has averaged 0.12 basis points this month.
Fannie Mae and other government-sponsored enterprises that are ineligible to deposit money at the Fed “have pulled down” the fed funds rate by selling funds in the market, New York Fed researchers said in a paper this month.
Fed officials must be cautious in how they manage reserves and raise interest rates, economists said. Even small amounts of bond sales could nudge up the cost of home loans.
Freddie Mac, the McLean, Virginia-based mortgage company, said that the average 30-year fixed rate rose to 5.14 percent for the week ended today, the highest since August. A rise in short-term rates would boost the cost on floating-rate loans for consumers and businesses.
“If they get this wrong, volatility is going to be through the roof,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. LLC in New York. “Investors are over- discounting the difficulty that is coming our way when the Fed begins the process of raising interest rates.”
Path of Decline
The Fed will increase the benchmark rate in the third quarter of 2010, according to the median forecast of economists surveyed by Bloomberg News this month. Vice Chairman Donald Kohn is among officials who have said the recovery needs to be self- sustaining, with the unemployment rate declining, before the Fed tightens. The rate will probably stay at 10 percent in December, according to the median estimate in a separate Bloomberg survey of economists before a Labor Department report on Jan. 8. Unemployment soared to a 26-year high of 10.2 percent in October.
Fed officials are considering the sequence for using their various tools for withdrawing monetary stimulus. They may start by raising the interest on reserves rate and draining reserves, followed by asset sales, Meyer said in a Dec. 15 research note.
A second possible sequence would be first draining off excess reserves, then raising the interest on reserves rate later, followed by asset sales, he said.
“They are going to have to sell assets” to maintain control over the benchmark lending rate, said Brian Yelvington, director of fixed income strategy at bond broker Knight Libertas LLC in Greenwich, Connecticut. “The volatility of the effective federal funds rate around the target is probably going to be a lot greater than it has been in the past.”
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net.
U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says
Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.
“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.
The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.
The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted.
Lax regulation of Fannie Mae and Freddie Mac led to the mortgage companies taking on too many risky loans, Wallison said.
“It turns out it was impossible to regulate them,” he said. “They were too powerful.” He said no one knows how much will be needed to keep the companies solvent.
From 1990 to 1999, Wallison served on the board of directors of MGIC Investment Corp., the largest U.S. mortgage insurer, including a stint on the audit committee, according to Bloomberg data and company filings.
The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.
“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”
To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net.
“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.
The U.S. seized the two mortgage financiers in 2008 as the government struggled to prevent a meltdown of the financial system. The debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks grew an average of $184 billion annually from 1998 to 2008, helping fuel a bubble that drove home prices up by 107 percent between 2000 and mid-2006, according to the S&P/Case- Shiller home-price index.
The Treasury said on Dec. 24 it would provide an unlimited amount of assistance to the companies as needed for the next three years to alleviate market concern that the government lifeline for Fannie Mae and Freddie Mac, the largest source of money for U.S. home loans, could lapse or be exhausted.
Lax regulation of Fannie Mae and Freddie Mac led to the mortgage companies taking on too many risky loans, Wallison said.
“It turns out it was impossible to regulate them,” he said. “They were too powerful.” He said no one knows how much will be needed to keep the companies solvent.
From 1990 to 1999, Wallison served on the board of directors of MGIC Investment Corp., the largest U.S. mortgage insurer, including a stint on the audit committee, according to Bloomberg data and company filings.
The continued government support of Fannie Mae and Freddie Mac makes buying their debt a good investment, Wallison said.
“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”
To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net.
Commodities Post Biggest Annual Gain in Four Decades on China
Commodities posted the biggest annual gain in four decades, led by a doubling in copper, sugar and lead prices, as Chinese demand compensated for the longest slump in the global economy since World War II.
In 2009, the S&P GSCI Index of 24 raw materials rose 50 percent, the most since at least 1971, and commodities drew record investment of $60 billion this year, Barclays Capital estimated. This year, the MSCI World Index of stocks in 23 developed nations climbed 27 percent, and U.S. Treasuries fell 3.5 percent, according to Bank of America Merrill Lynch indexes.
China, the biggest consumer of commodities such as copper and iron ore, expanded 8.5 percent this year, according to the median estimate of economists surveyed by Bloomberg. The nation imported record amounts of both raw materials this year, making up for slack demand in the U.S. and Europe.
“If you look at the theoretical or global portfolio of assets that are out there, the percentage of commodities allocation is tiny, less than 1 percent,” said Kevin Norrish, a commodity analyst at Barclays Capital in London. “If you look at what investors think that they should have, clearly that would suggest there’s a lot of potential for growth.”
This year, the Reuters/Jefferies CRB Index of 19 raw materials advanced 23 percent, the most since 1979.
Lead Surges
China’s central bank will maintain a “moderately loose” monetary policy because 2010 will be a crucial year for strengthening the recovery, Governor Zhou Xiaochuan said today.
Among industrial metals traded in London, lead posted the biggest gain. Since the end of 1999, the metal more than quadrupled, leading gains among 36 exchange-traded raw materials in the U.S., Europe and Asia. Copper also doubled this year, leading gains in the CRB gauge. The metal climbed almost fourfold in the decade.
Lead for delivery in three months rose $21, or 0.9 percent, to $2,432 a metric ton today on the London Metal Exchange. Copper gained 0.6 percent to $7,375 a ton.
In 2009, gold futures in New York rose 24 percent, the ninth straight annual gain. The dollar’s slump spurred demand for precious metals as an alternative investment.
Crude oil advanced 78 percent this year. The Organization of Petroleum Exporting Countries, accounting for 40 percent of global supply, reduced output in response to the worldwide economic slump.
Raw-sugar futures in New York more than doubled this year, trailing only copper’s advance in the CRB index. Cane harvests in Brazil and India, the biggest producers, were hurt by adverse weather.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net; Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
In 2009, the S&P GSCI Index of 24 raw materials rose 50 percent, the most since at least 1971, and commodities drew record investment of $60 billion this year, Barclays Capital estimated. This year, the MSCI World Index of stocks in 23 developed nations climbed 27 percent, and U.S. Treasuries fell 3.5 percent, according to Bank of America Merrill Lynch indexes.
China, the biggest consumer of commodities such as copper and iron ore, expanded 8.5 percent this year, according to the median estimate of economists surveyed by Bloomberg. The nation imported record amounts of both raw materials this year, making up for slack demand in the U.S. and Europe.
“If you look at the theoretical or global portfolio of assets that are out there, the percentage of commodities allocation is tiny, less than 1 percent,” said Kevin Norrish, a commodity analyst at Barclays Capital in London. “If you look at what investors think that they should have, clearly that would suggest there’s a lot of potential for growth.”
This year, the Reuters/Jefferies CRB Index of 19 raw materials advanced 23 percent, the most since 1979.
Lead Surges
China’s central bank will maintain a “moderately loose” monetary policy because 2010 will be a crucial year for strengthening the recovery, Governor Zhou Xiaochuan said today.
Among industrial metals traded in London, lead posted the biggest gain. Since the end of 1999, the metal more than quadrupled, leading gains among 36 exchange-traded raw materials in the U.S., Europe and Asia. Copper also doubled this year, leading gains in the CRB gauge. The metal climbed almost fourfold in the decade.
Lead for delivery in three months rose $21, or 0.9 percent, to $2,432 a metric ton today on the London Metal Exchange. Copper gained 0.6 percent to $7,375 a ton.
In 2009, gold futures in New York rose 24 percent, the ninth straight annual gain. The dollar’s slump spurred demand for precious metals as an alternative investment.
Crude oil advanced 78 percent this year. The Organization of Petroleum Exporting Countries, accounting for 40 percent of global supply, reduced output in response to the worldwide economic slump.
Raw-sugar futures in New York more than doubled this year, trailing only copper’s advance in the CRB index. Cane harvests in Brazil and India, the biggest producers, were hurt by adverse weather.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net; Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
New York AG Cuomo’s Office to Be Probed by State (Update1)
A division of New York Attorney General Andrew Cuomo’s office that generates revenue for the state will be audited by New York’s comptroller to ensure it’s being managed properly.
The “routine” audit by Comptroller Thomas DiNapoli is part of a wider review of 12 accounts of various revenue- producing state agencies, the comptroller’s spokesman, Dennis Tompkins, said today in a phone interview.
“We’ll do a risk assessment and make sure the accounts are being managed properly,” Tompkins said. “There’s no motive other than protecting taxpayer dollars. This is the first such audit we’ve conducted in a number of years.”
Separately, DiNapoli today announced a report showing New York ended 2009 with $883.7 million of available cash, after borrowing from its short-term investment pool to absorb a record $600 million deficit in its general fund.
“New York State is ringing in the new year in a tenuous financial position,” DiNapoli said in a statement about the report, which didn’t mention the audits or Cuomo. “For the first time in recent history, the state’s general fund is estimated to end the calendar year in the negative.”
Cuomo spokesman Richard Bamberger didn’t return calls for comment.
To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net
The “routine” audit by Comptroller Thomas DiNapoli is part of a wider review of 12 accounts of various revenue- producing state agencies, the comptroller’s spokesman, Dennis Tompkins, said today in a phone interview.
“We’ll do a risk assessment and make sure the accounts are being managed properly,” Tompkins said. “There’s no motive other than protecting taxpayer dollars. This is the first such audit we’ve conducted in a number of years.”
Separately, DiNapoli today announced a report showing New York ended 2009 with $883.7 million of available cash, after borrowing from its short-term investment pool to absorb a record $600 million deficit in its general fund.
“New York State is ringing in the new year in a tenuous financial position,” DiNapoli said in a statement about the report, which didn’t mention the audits or Cuomo. “For the first time in recent history, the state’s general fund is estimated to end the calendar year in the negative.”
Cuomo spokesman Richard Bamberger didn’t return calls for comment.
To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net
New York AG Cuomo’s Office to Be Probed by State (Update1)
A division of New York Attorney General Andrew Cuomo’s office that generates revenue for the state will be audited by New York’s comptroller to ensure it’s being managed properly.
The “routine” audit by Comptroller Thomas DiNapoli is part of a wider review of 12 accounts of various revenue- producing state agencies, the comptroller’s spokesman, Dennis Tompkins, said today in a phone interview.
“We’ll do a risk assessment and make sure the accounts are being managed properly,” Tompkins said. “There’s no motive other than protecting taxpayer dollars. This is the first such audit we’ve conducted in a number of years.”
Separately, DiNapoli today announced a report showing New York ended 2009 with $883.7 million of available cash, after borrowing from its short-term investment pool to absorb a record $600 million deficit in its general fund.
“New York State is ringing in the new year in a tenuous financial position,” DiNapoli said in a statement about the report, which didn’t mention the audits or Cuomo. “For the first time in recent history, the state’s general fund is estimated to end the calendar year in the negative.”
Cuomo spokesman Richard Bamberger didn’t return calls for comment.
To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net
The “routine” audit by Comptroller Thomas DiNapoli is part of a wider review of 12 accounts of various revenue- producing state agencies, the comptroller’s spokesman, Dennis Tompkins, said today in a phone interview.
“We’ll do a risk assessment and make sure the accounts are being managed properly,” Tompkins said. “There’s no motive other than protecting taxpayer dollars. This is the first such audit we’ve conducted in a number of years.”
Separately, DiNapoli today announced a report showing New York ended 2009 with $883.7 million of available cash, after borrowing from its short-term investment pool to absorb a record $600 million deficit in its general fund.
“New York State is ringing in the new year in a tenuous financial position,” DiNapoli said in a statement about the report, which didn’t mention the audits or Cuomo. “For the first time in recent history, the state’s general fund is estimated to end the calendar year in the negative.”
Cuomo spokesman Richard Bamberger didn’t return calls for comment.
To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net
North Korea Calls for End to Hostile U.S. Relations (Update1)
North Korea issued a New Year’s message calling for an end to its “hostile relationship” with the U.S. and said it was committed to making the Korean peninsula nuclear-free.
The country’s “consistent stand” is to establish a “lasting peace” on the peninsula, the state-run Korean Central News Agency reported, citing a joint editorial in three official newspapers.
The government will “strive to develop relations of good neighborliness and friendship” with other countries, it said.
Kim Jong Il’s regime said last month it reached a “common understanding” with the U.S. on the need to resume six-party nuclear disarmament talks after a three-day visit to Pyongyang by President Barack Obama’s envoy.
Kim Jong-Il’s government last year pulled out of the six- party process that also involves China, Japan, Russia and South Korea, tested a second nuclear device and declared it has almost succeeded in highly enriching uranium.
To contact the reporters on this story: Ed Johnson in Sydney at ejohnson28@bloomberg.net
The country’s “consistent stand” is to establish a “lasting peace” on the peninsula, the state-run Korean Central News Agency reported, citing a joint editorial in three official newspapers.
The government will “strive to develop relations of good neighborliness and friendship” with other countries, it said.
Kim Jong Il’s regime said last month it reached a “common understanding” with the U.S. on the need to resume six-party nuclear disarmament talks after a three-day visit to Pyongyang by President Barack Obama’s envoy.
Kim Jong-Il’s government last year pulled out of the six- party process that also involves China, Japan, Russia and South Korea, tested a second nuclear device and declared it has almost succeeded in highly enriching uranium.
To contact the reporters on this story: Ed Johnson in Sydney at ejohnson28@bloomberg.net
New York Borrows Internally to Cover Record General Fund Gap
New York state ended 2009 with $883.7 million of available cash, after borrowing from its short-term investment pool to absorb a record $600 million deficit in its general fund, according to a report by Comptroller Thomas DiNapoli.
The state expects in January to repay the investment pool and provide $750 million of payments to schools and local governments delayed this month by Governor David Paterson, budget director Robert Megna said.
The investment pool, which holds cash and securities for various accounts such as lottery winnings and state university tuition payments, serves as a kind of line of credit, available when the main account, the general fund, runs out of cash. Borrowing from the investment fund must be repaid by the end of New York’s fiscal year on March 31, according to the state’s annual information statement.
“Had we not delayed payments, we would have run out of money,” Paterson said at a news conference in Albany today.
A cash report by DiNapoli showed the state’s cash balance at the start of business today was $506.4 million, after payments yesterday of about $3.79 billion. The opening balance was less than the $750 million of payments Paterson temporarily withheld.
Paterson said the state’s ending balance was $283 million after subtracting the $600 million general fund deficit from the ending cash balance. In fact, the general fund is a component of the investment pool, according to the comptroller’s office. The general fund deficit is included in the ending cash balance of $883.7 million, and shouldn’t be subtracted from it, said Matt Anderson, a Division of Budget spokesman.
Biggest Revenue Month
State revenue next month exceeds spending by $5.84 billion, according to Division of Budget projections in October. January is the biggest month of the year for tax collections, estimated at $8.88 billion. Wall Street bonus payments are harder to predict this year because many banks plan to pay employees in stock rather than cash, Paterson and Megna said.
To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net.
The state expects in January to repay the investment pool and provide $750 million of payments to schools and local governments delayed this month by Governor David Paterson, budget director Robert Megna said.
The investment pool, which holds cash and securities for various accounts such as lottery winnings and state university tuition payments, serves as a kind of line of credit, available when the main account, the general fund, runs out of cash. Borrowing from the investment fund must be repaid by the end of New York’s fiscal year on March 31, according to the state’s annual information statement.
“Had we not delayed payments, we would have run out of money,” Paterson said at a news conference in Albany today.
A cash report by DiNapoli showed the state’s cash balance at the start of business today was $506.4 million, after payments yesterday of about $3.79 billion. The opening balance was less than the $750 million of payments Paterson temporarily withheld.
Paterson said the state’s ending balance was $283 million after subtracting the $600 million general fund deficit from the ending cash balance. In fact, the general fund is a component of the investment pool, according to the comptroller’s office. The general fund deficit is included in the ending cash balance of $883.7 million, and shouldn’t be subtracted from it, said Matt Anderson, a Division of Budget spokesman.
Biggest Revenue Month
State revenue next month exceeds spending by $5.84 billion, according to Division of Budget projections in October. January is the biggest month of the year for tax collections, estimated at $8.88 billion. Wall Street bonus payments are harder to predict this year because many banks plan to pay employees in stock rather than cash, Paterson and Megna said.
To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net.
Citigroup, Marshall & Ilsley Post Biggest S&P Drops (Update4)
Citigroup Inc. and Marshall & Ilsley Corp. were among the worst performing stocks in the Standard & Poor’s 500 Index this year, dragged down by defaults on commercial and residential property loans that may extend declines into 2010.
Marshall & Ilsley tumbled 60 percent, the index’s biggest drop, according to data compiled by Bloomberg. Huntington Bancshares Inc.fell 52 percent, Citigroup dropped 51 percent and Zions Bancorporationdeclined 48 percent. Banks accounted for seven of the 10 worst performers in the S&P index.
“The problem is primarily capital, dilution and credit,” said Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “There are still questions that remain with respect to the solvency of many banks, and those undoubtedly are the ones in which investors have the greatest concerns.”
U.S. banks are struggling to stem losses on commercial real estate loans as the worst recession in 60 years makes it difficult for business owners to pay off debts. Regulators have closed 140 lenders this year, the most since 1992, and analysts predict 1,000 banks may fail in the next few years.
Marshall & Ilsley, Wisconsin’s biggest bank, is buckling under housing and construction loan defaults in Florida and Arizona, among states with high foreclosure rates this year. The lender has reported four straight quarterly losses, and said it set aside as much as $578.7 million to cover bad loans in the third quarter. The company’s shares rose 2 cents to $5.45 in New York trading today.
Commercial Real Estate
“The worst of Arizona and Florida problems are now behind them,” Tony Davis, an analyst with Stifel Nicolaus & Co., said in a Dec. 30 interview. “Having taken $160 million in charge- offs in their correspondent banking division, the heavy lifting in that portfolio probably has also been completed.”
At Salt Lake City-based Zions, about $1.1 billion, or 59 percent, of $1.8 billion in total non-accrual loans in the third quarter were in commercial real estate, the lender said in October. Zions shares rose 3 cents to $12.83.
“We feel a whole lot more comfortable heading into 2010 than we did heading into 2009,” Zions spokesman James Abbott said in an interview Dec. 30. Zions Chief Executive Officer Harris Simmons bought $2 million in shares in the past four months, Abbott said.
Huntington Bancshares of Columbus, Ohio, cut its portfolio of troubled commercial real estate loans to a “manageable number,” Stephen Steinour, chief executive officer of the Columbus, Ohio-based bank, said Nov. 18. The company’s shares dropped 3 cents to $3.65 today.
Huntington Capital
Huntington raised $1.6 billion in capital and “addressed our credit quality issue aggressively,” spokeswoman Maureen Brown said in an e-mail. “Our efforts have produced three consecutive quarters of improved pretax, pre-provision income giving us confidence that we are positioning the company for better performance once this credit cycle ends.”
A call to Marshall & Ilsley spokeswoman Sara Schmitz wasn’t returned.
“Regional banks have an above average amount of risk to commercial real estate, and that’s clearly where the markets have some concerns,” Oppenheimer & Co. analyst Terry McEvoy said in a Dec. 30 interview.
Citigroup, which had a $27.7 billion loss for 2008, this month joined Wells Fargo & Co. and Bank of America Corp. in raising cash to escape limits tied to “extraordinary financial assistance” from the government.
Citigroup Shares
The New York-based bank sold $17 billion in shares at $3.15 each, less than the $3.25 the U.S. paid to acquire a one-third stake in September, prompting the Treasury to delay selling its shares for at least 90 days. Citigroup ended a loss-sharing agreement with the government.
Citigroup spokeswoman Danielle Romero-Apsilos, declined to comment.
Banks sold preferred shares to the government and common shares to investors to cover commercial and residential real estate losses and ensure capital levels exceeded regulatory thresholds.
“At the end of the day these banks were undercapitalized and it was the dilutive effect of stock issuance that weighed on the equity prices the most,” said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees about $900 million.
Marshall & Ilsley, which accepted $1.72 billion from the U.S. Troubled Asset Relief Program last year, doubled the number of shares outstanding this year, McEvoy said. Citigroup’s outstanding shares doubled in July and again in September as $58 billion of preferred shares held by the U.S. were converted into common stock.
Banks Slump
Bank stocks slumped as the S&P 500 rose 23.5 percent for the year. The index climbed more than 63 percent from an almost 13-year low on March 9, when Berkshire Hathaway Inc.’s Warren Buffett said the economy had “fallen off a cliff.” Among the winners: XL Capital Ltd., the Bermuda-based insurer and reinsurer that posted an almost 400 percent gain as it returned to profitability.
Other U.S. banks benefited by gaining access to government support through TARP. The KBW Bank Index of 24 national and regional lenders climbed almost 130 percent since touching a low on March 6. Dallas-based Comerica Inc. climbed about 49 percent this year, and New York-based JPMorgan Chase & Co. rose 32 percent -- the two best performers in the index.
“You saw a divergent performance in 2009 and I tend to think that’s what we’ll get in 2010 as well,” Fitzpatrick said. “It’s just a matter of how bad credit gets and whether unemployment stabilizes.”
Performance returns include companies tracked by the S&P 500 at the end of the year. Among 29 firms removed in 2009 was CIT Group Inc., the commercial lender whose stock was wiped out when the firm went bankrupt, and MBIA Inc., the mortgage insurer removed two weeks before the end of the year.
To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net
Marshall & Ilsley tumbled 60 percent, the index’s biggest drop, according to data compiled by Bloomberg. Huntington Bancshares Inc.fell 52 percent, Citigroup dropped 51 percent and Zions Bancorporationdeclined 48 percent. Banks accounted for seven of the 10 worst performers in the S&P index.
“The problem is primarily capital, dilution and credit,” said Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland. “There are still questions that remain with respect to the solvency of many banks, and those undoubtedly are the ones in which investors have the greatest concerns.”
U.S. banks are struggling to stem losses on commercial real estate loans as the worst recession in 60 years makes it difficult for business owners to pay off debts. Regulators have closed 140 lenders this year, the most since 1992, and analysts predict 1,000 banks may fail in the next few years.
Marshall & Ilsley, Wisconsin’s biggest bank, is buckling under housing and construction loan defaults in Florida and Arizona, among states with high foreclosure rates this year. The lender has reported four straight quarterly losses, and said it set aside as much as $578.7 million to cover bad loans in the third quarter. The company’s shares rose 2 cents to $5.45 in New York trading today.
Commercial Real Estate
“The worst of Arizona and Florida problems are now behind them,” Tony Davis, an analyst with Stifel Nicolaus & Co., said in a Dec. 30 interview. “Having taken $160 million in charge- offs in their correspondent banking division, the heavy lifting in that portfolio probably has also been completed.”
At Salt Lake City-based Zions, about $1.1 billion, or 59 percent, of $1.8 billion in total non-accrual loans in the third quarter were in commercial real estate, the lender said in October. Zions shares rose 3 cents to $12.83.
“We feel a whole lot more comfortable heading into 2010 than we did heading into 2009,” Zions spokesman James Abbott said in an interview Dec. 30. Zions Chief Executive Officer Harris Simmons bought $2 million in shares in the past four months, Abbott said.
Huntington Bancshares of Columbus, Ohio, cut its portfolio of troubled commercial real estate loans to a “manageable number,” Stephen Steinour, chief executive officer of the Columbus, Ohio-based bank, said Nov. 18. The company’s shares dropped 3 cents to $3.65 today.
Huntington Capital
Huntington raised $1.6 billion in capital and “addressed our credit quality issue aggressively,” spokeswoman Maureen Brown said in an e-mail. “Our efforts have produced three consecutive quarters of improved pretax, pre-provision income giving us confidence that we are positioning the company for better performance once this credit cycle ends.”
A call to Marshall & Ilsley spokeswoman Sara Schmitz wasn’t returned.
“Regional banks have an above average amount of risk to commercial real estate, and that’s clearly where the markets have some concerns,” Oppenheimer & Co. analyst Terry McEvoy said in a Dec. 30 interview.
Citigroup, which had a $27.7 billion loss for 2008, this month joined Wells Fargo & Co. and Bank of America Corp. in raising cash to escape limits tied to “extraordinary financial assistance” from the government.
Citigroup Shares
The New York-based bank sold $17 billion in shares at $3.15 each, less than the $3.25 the U.S. paid to acquire a one-third stake in September, prompting the Treasury to delay selling its shares for at least 90 days. Citigroup ended a loss-sharing agreement with the government.
Citigroup spokeswoman Danielle Romero-Apsilos, declined to comment.
Banks sold preferred shares to the government and common shares to investors to cover commercial and residential real estate losses and ensure capital levels exceeded regulatory thresholds.
“At the end of the day these banks were undercapitalized and it was the dilutive effect of stock issuance that weighed on the equity prices the most,” said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees about $900 million.
Marshall & Ilsley, which accepted $1.72 billion from the U.S. Troubled Asset Relief Program last year, doubled the number of shares outstanding this year, McEvoy said. Citigroup’s outstanding shares doubled in July and again in September as $58 billion of preferred shares held by the U.S. were converted into common stock.
Banks Slump
Bank stocks slumped as the S&P 500 rose 23.5 percent for the year. The index climbed more than 63 percent from an almost 13-year low on March 9, when Berkshire Hathaway Inc.’s Warren Buffett said the economy had “fallen off a cliff.” Among the winners: XL Capital Ltd., the Bermuda-based insurer and reinsurer that posted an almost 400 percent gain as it returned to profitability.
Other U.S. banks benefited by gaining access to government support through TARP. The KBW Bank Index of 24 national and regional lenders climbed almost 130 percent since touching a low on March 6. Dallas-based Comerica Inc. climbed about 49 percent this year, and New York-based JPMorgan Chase & Co. rose 32 percent -- the two best performers in the index.
“You saw a divergent performance in 2009 and I tend to think that’s what we’ll get in 2010 as well,” Fitzpatrick said. “It’s just a matter of how bad credit gets and whether unemployment stabilizes.”
Performance returns include companies tracked by the S&P 500 at the end of the year. Among 29 firms removed in 2009 was CIT Group Inc., the commercial lender whose stock was wiped out when the firm went bankrupt, and MBIA Inc., the mortgage insurer removed two weeks before the end of the year.
To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net
Stocks Retreat to Finish Best Year Since 2003; Oil Advances
U.S. stocks fell, trimming the biggest annual gain since 2003, and Treasuries slid as an unexpected drop in jobless claims added to evidence the Federal Reserve may unwind more stimulus programs. Oil touched a six- week high of $80 a barrel.
The Standard & Poor’s 500 Index lost 1 percent at 4 p.m. in New York, paring its 2009 gain to 23 percent. The yield on the benchmark 10-year Treasury note increased five basis points to 3.84 percent as government securities posted the worst year in at least three decades. Crude oil extended its 2009 advance to 78 percent, its biggest annual gain since 1999.
Concern that the Fed will consider raising interest rates was spurred today after initial U.S. jobless claims fell to 432,000, the lowest since July 2008, following a report yesterday from the Institute for Supply Management-Chicago Inc. that showed companies expanded more than forecast.
“Jobless claims numbers show we’re heading in the right direction,” said Joseph Saluzzi, co-head of equity trading at Chatham, New Jersey-based Themis Trading LLC. “It’s also a double-edged sword. The better the economy gets, the more likely the Fed will raise rates.”
Stocks and commodities rallied this year as the Fed kept its benchmark interest rate near zero and governments around the world enacted stimulus programs to halt the first global recession since World War II.
Most Since 2003
The MSCI World Index of 23 developed nations lost 0.3 percent today and gained 27 percent in 2009, the biggest annual gain since 2003. The index plunged 42 percent in 2008, the most in its 40-year history, following the collapse of the subprime- mortgage market in the U.S. and the bankruptcy of Lehman Brothers Holdings Inc.
The S&P GSCI Index of 24 raw materials fell 0.1 percent today, cutting its gain since Dec. 31, 2008, to 50 percent in its best year since at least 1970. The rally came as the Dollar Index, which gauges the currency against six major U.S. trading partners, slumped as much as 8.7 percent this year. The index has rallied from its 2009 low in November, paring its 2009 slide in half.
Treasuries fell, posting the worst performance this year among sovereign debt markets as the U.S. sold record amounts of securities, including $118 billion of notes this week, to help spur a recovery from recession. U.S. debt has fallen 3.5 percent since last December, according to Bank of America Merrill Lynch indexes, the biggest slide since at least 1978.
$7.17 Trillion
President Barack Obama is borrowing unprecedented amounts for programs to revive the economy. U.S. marketable debt increased to a record $7.17 trillion in November, from $5.80 trillion at the end of last year.
Fed officials are considering a proposal to schedule limited sales of bonds from the central bank’s $2.2 trillion balance sheet as part of a range of tools for withdrawing record monetary stimulus.
The MSCI Asia Pacific Index added 0.5 percent today after the governor of China’s central bank, Zhou Xiaochuan, said today he will maintain “moderately loose” monetary policy because 2010 will be “a crucial year in strengthening the stabilization and recovery of the economy and defeating the international financial crisis.”
‘Year of China’
“This year has certainly been the year of China, which single-handedly pushed up commodity prices, held up intra- regional trade and benefited its neighbors,” said Daphne Roth, head of Asian equity research in Singapore at ABN Amro Private Banking, which oversees about $21 billion in the region. “We’re still positive on 2010, as there remains a lot of filtering down of fiscal stimulus.”
The U.K.’s FTSE 100 index rose 0.3 percent today, capping a 22 percent annual increase, the biggest since 1997.
The MSCI Emerging Markets Index added 0.8 percent for a yearly gain of 74 percent, the biggest since records began in 1988. Russia’s RTS Index added 1.2 percent to extend this year’s rally to 129 percent, the biggest worldwide.
Turkey’s ISE National Index climbed 2.2 percent to the highest level in almost 12 months after politicians who attended a meeting with Prime Minister Recep Tayyip Erdogan said the nation is close to signing a loan agreement with the International Monetary Fund.
Separately, the Referans newspaper said Turkey will cut taxes on bond income for domestic investors.
World’s Biggest Companies
Asian companies cemented their position among the world’s biggest by market value. PetroChina Co.’s 37 percent advance this year in Hong Kong makes China’s largest oil company the most valuable, and Industrial & Commercial Bank of China Ltd. is ranked fourth after Exxon Mobil Corp. and Microsoft Corp., following the lender’s 54 percent climb in Shanghai this year. The Shanghai Composite Index rose 80 percent this year.
Copper rose to the highest price in almost 16 months on concern that a miners’ strike may disrupt output in Chile, the world’s biggest producer. Futures for March delivery advanced 0.15 cent to $3.3465 in New York. Earlier, the most-active contract touched $3.379, the highest price since Sept. 2, 2008.
To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net.
The Standard & Poor’s 500 Index lost 1 percent at 4 p.m. in New York, paring its 2009 gain to 23 percent. The yield on the benchmark 10-year Treasury note increased five basis points to 3.84 percent as government securities posted the worst year in at least three decades. Crude oil extended its 2009 advance to 78 percent, its biggest annual gain since 1999.
Concern that the Fed will consider raising interest rates was spurred today after initial U.S. jobless claims fell to 432,000, the lowest since July 2008, following a report yesterday from the Institute for Supply Management-Chicago Inc. that showed companies expanded more than forecast.
“Jobless claims numbers show we’re heading in the right direction,” said Joseph Saluzzi, co-head of equity trading at Chatham, New Jersey-based Themis Trading LLC. “It’s also a double-edged sword. The better the economy gets, the more likely the Fed will raise rates.”
Stocks and commodities rallied this year as the Fed kept its benchmark interest rate near zero and governments around the world enacted stimulus programs to halt the first global recession since World War II.
Most Since 2003
The MSCI World Index of 23 developed nations lost 0.3 percent today and gained 27 percent in 2009, the biggest annual gain since 2003. The index plunged 42 percent in 2008, the most in its 40-year history, following the collapse of the subprime- mortgage market in the U.S. and the bankruptcy of Lehman Brothers Holdings Inc.
The S&P GSCI Index of 24 raw materials fell 0.1 percent today, cutting its gain since Dec. 31, 2008, to 50 percent in its best year since at least 1970. The rally came as the Dollar Index, which gauges the currency against six major U.S. trading partners, slumped as much as 8.7 percent this year. The index has rallied from its 2009 low in November, paring its 2009 slide in half.
Treasuries fell, posting the worst performance this year among sovereign debt markets as the U.S. sold record amounts of securities, including $118 billion of notes this week, to help spur a recovery from recession. U.S. debt has fallen 3.5 percent since last December, according to Bank of America Merrill Lynch indexes, the biggest slide since at least 1978.
$7.17 Trillion
President Barack Obama is borrowing unprecedented amounts for programs to revive the economy. U.S. marketable debt increased to a record $7.17 trillion in November, from $5.80 trillion at the end of last year.
Fed officials are considering a proposal to schedule limited sales of bonds from the central bank’s $2.2 trillion balance sheet as part of a range of tools for withdrawing record monetary stimulus.
The MSCI Asia Pacific Index added 0.5 percent today after the governor of China’s central bank, Zhou Xiaochuan, said today he will maintain “moderately loose” monetary policy because 2010 will be “a crucial year in strengthening the stabilization and recovery of the economy and defeating the international financial crisis.”
‘Year of China’
“This year has certainly been the year of China, which single-handedly pushed up commodity prices, held up intra- regional trade and benefited its neighbors,” said Daphne Roth, head of Asian equity research in Singapore at ABN Amro Private Banking, which oversees about $21 billion in the region. “We’re still positive on 2010, as there remains a lot of filtering down of fiscal stimulus.”
The U.K.’s FTSE 100 index rose 0.3 percent today, capping a 22 percent annual increase, the biggest since 1997.
The MSCI Emerging Markets Index added 0.8 percent for a yearly gain of 74 percent, the biggest since records began in 1988. Russia’s RTS Index added 1.2 percent to extend this year’s rally to 129 percent, the biggest worldwide.
Turkey’s ISE National Index climbed 2.2 percent to the highest level in almost 12 months after politicians who attended a meeting with Prime Minister Recep Tayyip Erdogan said the nation is close to signing a loan agreement with the International Monetary Fund.
Separately, the Referans newspaper said Turkey will cut taxes on bond income for domestic investors.
World’s Biggest Companies
Asian companies cemented their position among the world’s biggest by market value. PetroChina Co.’s 37 percent advance this year in Hong Kong makes China’s largest oil company the most valuable, and Industrial & Commercial Bank of China Ltd. is ranked fourth after Exxon Mobil Corp. and Microsoft Corp., following the lender’s 54 percent climb in Shanghai this year. The Shanghai Composite Index rose 80 percent this year.
Copper rose to the highest price in almost 16 months on concern that a miners’ strike may disrupt output in Chile, the world’s biggest producer. Futures for March delivery advanced 0.15 cent to $3.3465 in New York. Earlier, the most-active contract touched $3.379, the highest price since Sept. 2, 2008.
To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net.
NBC Adds Pilots to Reverse 7 Years of Falling Ratings (Update1)
NBC, last among U.S. television networks in prime-time viewers, plans to increase production of new shows to the most since 2003 to reverse seven straight seasons of declining ratings.
The 18 pilots planned for the season starting in September 2010 compare with 11 that were made before the current season, Angela Bromstad, president of prime-time entertainment, said in a Dec. 21 interview. Pilots are test episodes that compete for slots on network schedules.
More new shows increase the odds of developing hits, said Bromstad, who has overseen prime-time programming for one year. The network, part of the NBC Universal business that General Electric Co. is selling to Comcast Corp., reduced development when “Seinfeld” and “Friends” led ratings in the 1990s, and continued to cut further. That left the New York-based network without enough material, she said.
“In success we became used to making fewer and fewer pilots,” Bromstad said. “We have to take more swings, take more shots creatively, and have more back-up.”
NBC’s prime-time audience is headed for an eighth straight decline after it moved comedian Jay Leno to 10 p.m., replacing more-expensive scripted programs. Through Dec. 27, average viewership declined 1.2 percent from a year earlier. In the 18- 49 age group targeted by advertisers, the audience has dropped 8 percent, according to data from researcher Nielsen Co.
Reprogramming
“With rival broadcast networks riding a relatively high number of new hit shows premiering last fall, NBC appears to have the unenviable task of having to reprogram well over 20 percent of its prime-time schedule for next season,” Tuna Amobi, an analyst with Standard & Poor’s, said in an e-mail.
Leno’s one-hour show takes up five hours of the weeknight schedule, allowing Bromstad to focus on the remaining 10 hours from 8 p.m. to 10 p.m., she said.
“We have so many holes that we have to essentially rebuild the schedule,” Bromstad said. “Not having the additional five hours has certainly relieved some of the pressure.”
NBC will make 10 hour-long dramas and eight 30-minute comedies for the next TV season, Bromstad said. While production will rise, the network is spending less on each pilot and keeping costs steady, she said.
NBC will make 10 hour-long dramas and eight 30-minute comedies for the next TV season, Bromstad said. While production will rise, costs won’t increase from last year, Bromstad said.
GE, based in Fairfield, Connecticut, fell 22 cents to $15.13 at 4:15 p.m. in New York Stock Exchange composite trading. Philadelphia-based Comcast, the largest U.S. cable operator, lost 21 cents to $16.86 on the Nasdaq Stock Market.
‘It Takes Time’
Profit at NBC Universal slid 27 percent through nine months of 2009. Chief Executive Officer Jeffrey Zucker, who signed a three-year employment contract, aims to turn the network around over the next several years.
“We shouldn’t be defensive about this. We shouldn’t do anything but say we haven’t done a good enough job,” Zucker said at a Dec. 7 investor conference in New York. “The problem is you can’t turn it around in a day. It takes time.”
NBC will introduce “Parenthood,” a drama based on Ron Howard’s 1989 movie, on March 1, and comedian Jerry Seinfeld’s “Marriage Ref” on March 14. Both will be promoted during NBC’s coverage of the winter Olympics in Vancouver, Bromstad said.
Bromstad highlighted pilots including “Rex is Not Your Lawyer” from producers Gail Berman and Lloyd Braun. The comedy, starring David Tennant and Jeffrey Tambor, follows a litigator who suffers a break-down and can’t enter a courtroom.
The network is also working on a show called “Prime Suspect,” written by “Without a Trace” creator Hank Steinberg, Bromstad said. NBC is also re-making “The Rockford Files,” as well as concepts from “Star Trek” director J.J. Abrams and producer Jerry Bruckheimer.
NBC plans to bring back “Law & Order” next season, making the show the longest-running drama in TV history, she said.
“I’m a ‘Law & Order’ junkie,” Bromstad said. “I wouldn’t want to be responsible for not having ‘Law & Order’ break the record.”
To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net
The 18 pilots planned for the season starting in September 2010 compare with 11 that were made before the current season, Angela Bromstad, president of prime-time entertainment, said in a Dec. 21 interview. Pilots are test episodes that compete for slots on network schedules.
More new shows increase the odds of developing hits, said Bromstad, who has overseen prime-time programming for one year. The network, part of the NBC Universal business that General Electric Co. is selling to Comcast Corp., reduced development when “Seinfeld” and “Friends” led ratings in the 1990s, and continued to cut further. That left the New York-based network without enough material, she said.
“In success we became used to making fewer and fewer pilots,” Bromstad said. “We have to take more swings, take more shots creatively, and have more back-up.”
NBC’s prime-time audience is headed for an eighth straight decline after it moved comedian Jay Leno to 10 p.m., replacing more-expensive scripted programs. Through Dec. 27, average viewership declined 1.2 percent from a year earlier. In the 18- 49 age group targeted by advertisers, the audience has dropped 8 percent, according to data from researcher Nielsen Co.
Reprogramming
“With rival broadcast networks riding a relatively high number of new hit shows premiering last fall, NBC appears to have the unenviable task of having to reprogram well over 20 percent of its prime-time schedule for next season,” Tuna Amobi, an analyst with Standard & Poor’s, said in an e-mail.
Leno’s one-hour show takes up five hours of the weeknight schedule, allowing Bromstad to focus on the remaining 10 hours from 8 p.m. to 10 p.m., she said.
“We have so many holes that we have to essentially rebuild the schedule,” Bromstad said. “Not having the additional five hours has certainly relieved some of the pressure.”
NBC will make 10 hour-long dramas and eight 30-minute comedies for the next TV season, Bromstad said. While production will rise, the network is spending less on each pilot and keeping costs steady, she said.
NBC will make 10 hour-long dramas and eight 30-minute comedies for the next TV season, Bromstad said. While production will rise, costs won’t increase from last year, Bromstad said.
GE, based in Fairfield, Connecticut, fell 22 cents to $15.13 at 4:15 p.m. in New York Stock Exchange composite trading. Philadelphia-based Comcast, the largest U.S. cable operator, lost 21 cents to $16.86 on the Nasdaq Stock Market.
‘It Takes Time’
Profit at NBC Universal slid 27 percent through nine months of 2009. Chief Executive Officer Jeffrey Zucker, who signed a three-year employment contract, aims to turn the network around over the next several years.
“We shouldn’t be defensive about this. We shouldn’t do anything but say we haven’t done a good enough job,” Zucker said at a Dec. 7 investor conference in New York. “The problem is you can’t turn it around in a day. It takes time.”
NBC will introduce “Parenthood,” a drama based on Ron Howard’s 1989 movie, on March 1, and comedian Jerry Seinfeld’s “Marriage Ref” on March 14. Both will be promoted during NBC’s coverage of the winter Olympics in Vancouver, Bromstad said.
Bromstad highlighted pilots including “Rex is Not Your Lawyer” from producers Gail Berman and Lloyd Braun. The comedy, starring David Tennant and Jeffrey Tambor, follows a litigator who suffers a break-down and can’t enter a courtroom.
The network is also working on a show called “Prime Suspect,” written by “Without a Trace” creator Hank Steinberg, Bromstad said. NBC is also re-making “The Rockford Files,” as well as concepts from “Star Trek” director J.J. Abrams and producer Jerry Bruckheimer.
NBC plans to bring back “Law & Order” next season, making the show the longest-running drama in TV history, she said.
“I’m a ‘Law & Order’ junkie,” Bromstad said. “I wouldn’t want to be responsible for not having ‘Law & Order’ break the record.”
To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net
Time Warner Cable Wants Cooling-Off Time in Fox Fight (Update1)
Time Warner Cable Inc. said it would agreed to a 30-day cooling-off period in its pricing dispute with News Corp.’s Fox network and urged Fox to do the same.
Time Warner Cable’s move came after U.S. Representative Steve Israel, a New York Democrat, sent a letter requesting a truce so Fox shows will still be available to subscribers. Scott Grogin, a Fox spokesman, declined to comment on the offer and said negotiations with the cable provider are continuing.
The companies are trying to resolve a fee dispute before their retransmission contract ends today. If there is no accord by midnight, Fox stations may go black on Time Warner Cable systems in New York City, Los Angeles, Dallas and Austin, Texas.
The dispute centers on the price Fox wants New York-based Time Warner Cable, the second biggest U.S. cable operator, to pay for network programming including college and National Football League games and shows like “American Idol,” the most-watched U.S. TV program. Fox has drawn the most 18-to-49 age viewers, an audience that advertisers target, since 2004, according to News Corp.
U.S. Federal Communications Commission Chairman Julius Genachowski urged the companies to agree to a temporary extension if they are unable to come to terms, according to an e-mailed statement.
News Corp., based in New York, fell 22 cents to $13.69 at 4 p.m. New York time in Nasdaq Stock Market trading. Time Warner Cable lost 44 cents to $41.39 on the New York Stock Exchange.
To contact the reporters on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net;
Time Warner Cable’s move came after U.S. Representative Steve Israel, a New York Democrat, sent a letter requesting a truce so Fox shows will still be available to subscribers. Scott Grogin, a Fox spokesman, declined to comment on the offer and said negotiations with the cable provider are continuing.
The companies are trying to resolve a fee dispute before their retransmission contract ends today. If there is no accord by midnight, Fox stations may go black on Time Warner Cable systems in New York City, Los Angeles, Dallas and Austin, Texas.
The dispute centers on the price Fox wants New York-based Time Warner Cable, the second biggest U.S. cable operator, to pay for network programming including college and National Football League games and shows like “American Idol,” the most-watched U.S. TV program. Fox has drawn the most 18-to-49 age viewers, an audience that advertisers target, since 2004, according to News Corp.
U.S. Federal Communications Commission Chairman Julius Genachowski urged the companies to agree to a temporary extension if they are unable to come to terms, according to an e-mailed statement.
News Corp., based in New York, fell 22 cents to $13.69 at 4 p.m. New York time in Nasdaq Stock Market trading. Time Warner Cable lost 44 cents to $41.39 on the New York Stock Exchange.
To contact the reporters on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net;
Dollar Rises to Three-Month High as Jobless Claims Drop
The dollar advanced to a three-month high against the yen as a government report showed U.S. initial jobless claims unexpectedly fell last week.
The greenback posted its first monthly gain since June versus the currencies of major U.S. trading partners on speculation the Federal Reserve is moving closer to withdrawing stimulus measures as the economy recovers, pushing Treasury yields higher. The pound extended its annual gain as the U.K.’s home prices rose for an eighth month.
“A U.S. recovery leads to higher yields, which leads to a higher dollar,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “There’s a good labor market recovery coming through.”
The dollar increased 0.6 percent to 92.96 yen at 4:12 p.m. in New York, from 92.44 yesterday. It touched 93.15, the highest level since Sept. 7. The euro advanced 0.4 percent to 133.12 yen, from 132.54. The dollar traded at $1.4318 per euro, compared with $1.4339.
Futures trading in Chicago showed a 62 percent chance that the Fed will increase its zero to 0.25 percent target lending rate by at least a quarter-percentage point by its June meeting, compared with 31 percent odds a month ago.
U.S. initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today. The median forecast of 29 economists in a Bloomberg News survey was for an increase to 460,000 from a previously reported 452,000.
‘Very Good’ Number
“The number was very, very good,” said Hidetoshi Yanagihara, a senior currency trader at Mizuho Corporate Bank Ltd. in New York. “People are jumping on dollars now.”
The dollar increased 4.3 percent versus the euro this month as bets by futures traders that the European currency will decline touched a nine-month high. The greenback fell 2.4 percent in 2009 and declined 30 percent since the end of 1999.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, so-called net shorts, reached 16,448 on Dec. 15, the highest since March, figures from the Washington-based Commodity Futures Trading Commission show. The difference was 14,327 a week later.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies including the euro, yen and pound, has increased 4.1 percent in December. It was little changed at 77.929 today.
Dollar Reserves
Emerging-market central banks have cut the dollar’s share of their foreign reserves for a second straight quarter, supporting the view that the greenback is becoming less attractive, according to Goldman Sachs Group Inc.
The dollar’s share stayed below 60 percent in the three- month period ended Sept. 30, a level that had not been broken for five years until the second quarter, according to Goldman Sachs’s analysis of an International Monetary Fund report released yesterday.
The pound gained 0.6 percent to $1.6169 today as Nationwide Building Society said the average cost of a home increased 0.4 percent this month, more than the 0.3 percent median estimate of 12 analysts in a Bloomberg News survey.
Sterling dropped 1.6 percent in December, paring its annual gain to 11 percent, which was still the biggest since 2006. The pound slid 0.2 percent this decade.
The dollar advanced 7.8 percent versus the yen this month in the biggest monthly gain since February. The yield premium of 10-year Treasury notes over similar-maturity Japanese bonds rose today to the highest level in more than two years, making U.S. debt more appealing than Japan’s securities.
‘Underpin the Dollar’
“A combination of higher U.S. yields and further signs of improvement in the labor situation in the U.S. should continue to underpin the dollar,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “There is a stronger sense that 2009 was not as kind to the Japanese economy as it was to other parts of Asia. We are set to see more policy options being discussed within the BOJ.”
The Bank of Japan said on Dec. 18 it was intolerant of price declines amid signs deflation may undermine the economic recovery. Governor Masaaki Shirakawa said on Dec. 24 his policy board is ready to act to support growth, and some strategists are predicting that will result in a flood of Japanese currency that will weaken the yen.
“There are some expectations that the BOJ may do more on quantitative easing,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “We see dollar-yen going higher.”
The greenback posted a 2.7 percent annual advance versus the yen, paring its decline this decade to 9.2 percent.
To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net
The greenback posted its first monthly gain since June versus the currencies of major U.S. trading partners on speculation the Federal Reserve is moving closer to withdrawing stimulus measures as the economy recovers, pushing Treasury yields higher. The pound extended its annual gain as the U.K.’s home prices rose for an eighth month.
“A U.S. recovery leads to higher yields, which leads to a higher dollar,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “There’s a good labor market recovery coming through.”
The dollar increased 0.6 percent to 92.96 yen at 4:12 p.m. in New York, from 92.44 yesterday. It touched 93.15, the highest level since Sept. 7. The euro advanced 0.4 percent to 133.12 yen, from 132.54. The dollar traded at $1.4318 per euro, compared with $1.4339.
Futures trading in Chicago showed a 62 percent chance that the Fed will increase its zero to 0.25 percent target lending rate by at least a quarter-percentage point by its June meeting, compared with 31 percent odds a month ago.
U.S. initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today. The median forecast of 29 economists in a Bloomberg News survey was for an increase to 460,000 from a previously reported 452,000.
‘Very Good’ Number
“The number was very, very good,” said Hidetoshi Yanagihara, a senior currency trader at Mizuho Corporate Bank Ltd. in New York. “People are jumping on dollars now.”
The dollar increased 4.3 percent versus the euro this month as bets by futures traders that the European currency will decline touched a nine-month high. The greenback fell 2.4 percent in 2009 and declined 30 percent since the end of 1999.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, so-called net shorts, reached 16,448 on Dec. 15, the highest since March, figures from the Washington-based Commodity Futures Trading Commission show. The difference was 14,327 a week later.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies including the euro, yen and pound, has increased 4.1 percent in December. It was little changed at 77.929 today.
Dollar Reserves
Emerging-market central banks have cut the dollar’s share of their foreign reserves for a second straight quarter, supporting the view that the greenback is becoming less attractive, according to Goldman Sachs Group Inc.
The dollar’s share stayed below 60 percent in the three- month period ended Sept. 30, a level that had not been broken for five years until the second quarter, according to Goldman Sachs’s analysis of an International Monetary Fund report released yesterday.
The pound gained 0.6 percent to $1.6169 today as Nationwide Building Society said the average cost of a home increased 0.4 percent this month, more than the 0.3 percent median estimate of 12 analysts in a Bloomberg News survey.
Sterling dropped 1.6 percent in December, paring its annual gain to 11 percent, which was still the biggest since 2006. The pound slid 0.2 percent this decade.
The dollar advanced 7.8 percent versus the yen this month in the biggest monthly gain since February. The yield premium of 10-year Treasury notes over similar-maturity Japanese bonds rose today to the highest level in more than two years, making U.S. debt more appealing than Japan’s securities.
‘Underpin the Dollar’
“A combination of higher U.S. yields and further signs of improvement in the labor situation in the U.S. should continue to underpin the dollar,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “There is a stronger sense that 2009 was not as kind to the Japanese economy as it was to other parts of Asia. We are set to see more policy options being discussed within the BOJ.”
The Bank of Japan said on Dec. 18 it was intolerant of price declines amid signs deflation may undermine the economic recovery. Governor Masaaki Shirakawa said on Dec. 24 his policy board is ready to act to support growth, and some strategists are predicting that will result in a flood of Japanese currency that will weaken the yen.
“There are some expectations that the BOJ may do more on quantitative easing,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “We see dollar-yen going higher.”
The greenback posted a 2.7 percent annual advance versus the yen, paring its decline this decade to 9.2 percent.
To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net
U.S. Jobless Claims Drop to Lowest Level Since 2008 (Update3)
Fewer Americans than anticipated filed claims for unemployment benefits last week, pointing to an improvement in the labor market that will help sustain economic growth next year.
Initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance fell in the prior week to 4.98 million, and those receiving extended benefits jumped.
Companies are retaining staff as sales improve and production picks up. Gains in consumer spending, which accounts for 70 percent of the economy, may encourage more hiring in coming months, helping to bolster the rebound from the worst recession since the 1930s.
“It’s boding well for outright job growth,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York, who forecast claims would drop to 430,000. “It seems that some of the layoffs that took place in the early part of the year were excessive.”
Treasury securities fell after the report, pushing the yield on the benchmark 10-year note up to 3.84 percent, from 3.79 percent late yesterday. The Standard & Poor’s 500 Index dropped 1 percent to 1,115.1 at 4:09 p.m. in New York. The S&P 500 gained 23.5 percent this year, the biggest annual advance since 2003.
Unexpected Drop
Economists forecast claims would rise to 460,000 from a previously reported 452,000, according to the median of 29 projections in a Bloomberg News survey. Estimates ranged from 430,000 to 490,000.
“What we’ve seen is definite stability and just a hint toward things trying to get better,” Jeffrey Joerres, chief executive officer of Manpower Inc., said in a Bloomberg Television interview today. The world’s second-largest provider of temporary workers, is experiencing “slow but steady increases in people who are out on assignment,” he said. “It’s a little in every office, which is a good sign because it’s broad-based.”
A Labor Department spokesman said last week’s figures were “consistent” with recent trends and were not influenced by any unusual factors. Even so, the week of the Christmas holiday is difficult to adjust for seasonal variations, he said.
The four-week moving average of initial claims, a less volatile measure, dropped to 460,250 last week from 465,750 the prior one. Claims are down from a 26-year high of 674,000 in the week ended March 27.
Continuing claims decreased by 57,000 in the week ended Dec. 19, reaching the lowest level since February. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Extended Benefits
Today’s report showed the number of people who’ve use up their traditional benefits and are now collecting extended payments climbed by about 199,000 to 4.82 million in the week ended Dec. 12. Twenty-nine of the states and territories where workers are eligible to receive government extension have begun to report that data, a Labor Department spokesman said. Two states have started reporting data on the latest emergency extension, he said.
President Barack Obama this month signed into law legislation that included a stopgap provision to ensure that unemployment benefits weren’t cut off over the holidays.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.8 percent in the week ended Dec. 19, today’s report showed.
State Breakdown
Twenty-seven states and territories reported a decrease in claims, while 26 reported an increase. These data are reported with a one-week lag.
The government is scheduled to release its December payrolls report on Jan. 8. In November, the economy lost the fewest jobs since the recession began two years ago and the unemployment rate receded to 10 percent from a 26-year high of 10.2 percent the prior month.
Even so, Americans are concerned about their financial future. Fewer consumers in December believed their incomes will increase over the next three to six months, the Conference Board’s confidence report this week showed.
Warren Buffett’sBerkshire Hathaway Inc. is among companies that slashed employment in 2009. The Omaha, Nebraska-based company last week said it cut 21,000 workers from its payroll amid a slump at the firm’s manufacturing and retail units. The company and its subsidiaries now have about 225,000 workers, it said in regulatory filings.
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
Initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance fell in the prior week to 4.98 million, and those receiving extended benefits jumped.
Companies are retaining staff as sales improve and production picks up. Gains in consumer spending, which accounts for 70 percent of the economy, may encourage more hiring in coming months, helping to bolster the rebound from the worst recession since the 1930s.
“It’s boding well for outright job growth,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York, who forecast claims would drop to 430,000. “It seems that some of the layoffs that took place in the early part of the year were excessive.”
Treasury securities fell after the report, pushing the yield on the benchmark 10-year note up to 3.84 percent, from 3.79 percent late yesterday. The Standard & Poor’s 500 Index dropped 1 percent to 1,115.1 at 4:09 p.m. in New York. The S&P 500 gained 23.5 percent this year, the biggest annual advance since 2003.
Unexpected Drop
Economists forecast claims would rise to 460,000 from a previously reported 452,000, according to the median of 29 projections in a Bloomberg News survey. Estimates ranged from 430,000 to 490,000.
“What we’ve seen is definite stability and just a hint toward things trying to get better,” Jeffrey Joerres, chief executive officer of Manpower Inc., said in a Bloomberg Television interview today. The world’s second-largest provider of temporary workers, is experiencing “slow but steady increases in people who are out on assignment,” he said. “It’s a little in every office, which is a good sign because it’s broad-based.”
A Labor Department spokesman said last week’s figures were “consistent” with recent trends and were not influenced by any unusual factors. Even so, the week of the Christmas holiday is difficult to adjust for seasonal variations, he said.
The four-week moving average of initial claims, a less volatile measure, dropped to 460,250 last week from 465,750 the prior one. Claims are down from a 26-year high of 674,000 in the week ended March 27.
Continuing claims decreased by 57,000 in the week ended Dec. 19, reaching the lowest level since February. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Extended Benefits
Today’s report showed the number of people who’ve use up their traditional benefits and are now collecting extended payments climbed by about 199,000 to 4.82 million in the week ended Dec. 12. Twenty-nine of the states and territories where workers are eligible to receive government extension have begun to report that data, a Labor Department spokesman said. Two states have started reporting data on the latest emergency extension, he said.
President Barack Obama this month signed into law legislation that included a stopgap provision to ensure that unemployment benefits weren’t cut off over the holidays.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.8 percent in the week ended Dec. 19, today’s report showed.
State Breakdown
Twenty-seven states and territories reported a decrease in claims, while 26 reported an increase. These data are reported with a one-week lag.
The government is scheduled to release its December payrolls report on Jan. 8. In November, the economy lost the fewest jobs since the recession began two years ago and the unemployment rate receded to 10 percent from a 26-year high of 10.2 percent the prior month.
Even so, Americans are concerned about their financial future. Fewer consumers in December believed their incomes will increase over the next three to six months, the Conference Board’s confidence report this week showed.
Warren Buffett’sBerkshire Hathaway Inc. is among companies that slashed employment in 2009. The Omaha, Nebraska-based company last week said it cut 21,000 workers from its payroll amid a slump at the firm’s manufacturing and retail units. The company and its subsidiaries now have about 225,000 workers, it said in regulatory filings.
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
Time Warner Cable Agrees to Cooling-Off, Urges Fox to Do Same
Time Warner Cable said it agreed to a 30-day cooling-off period in current negotiations with Fox and urged Fox to do the same, after New York Congressman Steve Israel sent a letter requesting such a period, during which Fox programming would stay available to Time Warner Cable subscribers.
Seperately, Federal Communications Commission Chairman Julius Genachowski urged the companies to agree to a temporary extension of carriage if they are unable to come to terms, according to an e-mailed statement.
Seperately, Federal Communications Commission Chairman Julius Genachowski urged the companies to agree to a temporary extension of carriage if they are unable to come to terms, according to an e-mailed statement.
‘Avatar’ Tops Record Week as Hollywood Closes Books on 2009
The U.S. box office will set a weekly record of almost $500 million in the final days of 2009 on sales from “Avatar,” “Sherlock Holmes” and “Alvin and the Chipmunks: The Squeakquel,” according to Hollywood.com.
Ticket sales from Dec. 25 through today will top the $396.2 million made July 18-24 last year when the “The Dark Knight” was released, said Paul Dergarabedian, president of Hollywood.com’s box office division. “Avatar,” James Cameron’s 3-D science-fiction adventure film, is the top seller this week, taking in about $18 million a day, Dergarabedian said.
The results mark the close of a record year in which North American box-office sales topped $10 billion for the first time. Midweek sales of about $60 million a day equaled a typical non- holiday weekend, Dergarabedian said. Attendance in 2009 was the highest in five years with 1.42 billion tickets sold, he said.
“Avatar,” released by News Corp.’s Twentieth Century Fox, is the fifth-fastest movie to top the $250 million mark, according Box Office Guru, a researcher based in New York.
To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net;
Ticket sales from Dec. 25 through today will top the $396.2 million made July 18-24 last year when the “The Dark Knight” was released, said Paul Dergarabedian, president of Hollywood.com’s box office division. “Avatar,” James Cameron’s 3-D science-fiction adventure film, is the top seller this week, taking in about $18 million a day, Dergarabedian said.
The results mark the close of a record year in which North American box-office sales topped $10 billion for the first time. Midweek sales of about $60 million a day equaled a typical non- holiday weekend, Dergarabedian said. Attendance in 2009 was the highest in five years with 1.42 billion tickets sold, he said.
“Avatar,” released by News Corp.’s Twentieth Century Fox, is the fifth-fastest movie to top the $250 million mark, according Box Office Guru, a researcher based in New York.
To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net;
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