Pfizer Inc., the world’s biggest drugmaker, said fourth-quarter profit missed analyst estimates and forecast lower than expected earnings for 2010 after the company completed its purchase of rival Wyeth.
Net income rose to $767 million, or 10 cents a share, from $266 million, or 4 cents, a year earlier, when results were hurt by a $2.3 billion legal settlement related to the marketing of the Bextra pain killer, the New York-based drugmaker said today in a statement. Earnings excluding one-time items were 49 cents a share, falling short of the 51-cents average estimate of 14 analysts surveyed by Bloomberg.
Pfizer forecast 2010 profit excluding certain items of $2.10 to $2.20, below the average estimate of 17 analysts surveyed by Bloomberg. Pfizer completed its $68 billion acquisition of Wyeth in October to help replace the $12 billion in revenue that will be lost when its top-selling Lipitor cholesterol pill faces generic competition in 2011. Pfizer is cutting costs by firing about 19,000 workers and closing manufacturing plants and six research centers.
“New product flow will be fairly limited for Pfizer in 2010,” said Deutsche Bank analyst Barbara Ryan in a Jan. 21 research report. “The noisy quarter should confound analysis of operating performance.”
Pfizer also said it expects 2012 earnings excluding certain items of $2.25 to $2.35.
Revenue increased 34 percent to $16.5 billion from the addition of Wyeth’s products added since the acquisition closed Oct. 15. Foreign exchange boosted earnings by $469 million, or 4 percentage points, during the quarter, Pfizer said.
Pfizer rose 45 cents, or 2.4 percent, to $19.24 yesterday in New York Stock Exchange composite trading after gaining 29 percent over the past 12 months.
To contact the reporter responsible for this story: Shannon Pettypiece at spettypiece@bloomberg.net.
Wednesday, February 3, 2010
London Luxury-Home Prices Increase Most Since 2008 (Update1)
Luxury-home prices in central London rose last month at the fastest annual pace since April 2008 as a growing number of buyers chased fewer properties on the market, Knight Frank LLP said.
Values of houses and apartments costing more than 1 million pounds ($1.6 million) climbed 11.5 percent from a year earlier, the London-based property broker said in a statement today. The 1.1 percent gain from December was the 10th straight monthly advance and the smallest since August. Prices remain 12 percent lower than the market’s peak in March 2008.
“There still seems to be considerable life left in the recovery in pricing,” Liam Bailey, head of residential research at Knight Frank in London, said in the statement. “While buyers are back in force, vendors are few and far between.”
Some potential sellers are waiting to put houses on the market until they see how the outcome of the U.K. general election, which must be held by June, affects regulation of the financial industry and taxation of banker bonuses, Bailey said. There is also concern that the withdrawal of the government’s economic stimulus package and cuts in public spending will impact the housing market.
Most of Knight Frank’s offices in central London have 15 percent to 20 percent fewer properties for sale than normal for this time of year, the broker said. At the same time, the number of potential buyers in January was 15 percent higher than the five-year average.
Property Shortage
A shortage of properties can create a domino effect, as potential sellers wait until they have more choice of places to buy themselves, Bailey said.
“Slim pickings are the fuel that has been driving this market bounce,” Bailey said. Some venders are starting to price their homes close to or even above peak levels again, which is a risky strategy “for anything other than perfect properties.”
“The market has not been truly tested by a well-stocked larder,” he said.
The pound’s weakness in the past two years has supported demand for British real estate by making it more affordable for overseas buyers. That has helped encourage property funds to raise more money to buy luxury homes.
The Prime London Capital Fund, the only open-ended property fund investing in prime central London residential real estate, has more than tripled funds under management to about 40 million pounds, it said in an e-mailed statement Jan. 26. That followed an investment by Lee Hing Development Ltd., a Hong Kong-based property investment company, and its chairman.
‘Incredibly Resilient’
“Prime London property has been incredibly resilient over the last couple of difficult years and has acted as a good protector of wealth,” said Stephen Yorke, chief executive officer of D&G Investment Management Ltd., the fund’s manager.
London Central Portfolio Ltd. has raised 4.5 million pounds in equity for its London Central Residential Recovery Fund, the only closed-end fund investing in the market. Hugh Best, its manager, said he expects to achieve his target of 10 million pounds by next month’s deadline, helped by South African investors. The fund will be able to invest as much as 23 million pounds, including debt financing.
“There is a feeling that London has weathered the economic storm, although some jobs may have been lost to Geneva,” Bailey said in the statement. “Buyers, both domestic and foreign, are still more than willing to commit to purchases.”
Consumer confidence rose in January as the U.K. emerged from the longest recession on record, Nationwide Building Society said today.
Previous Boom
Prices of luxury properties in central London surged 82 percent during the last boom, between January 2005 and March 2008, according to Knight Frank’s data.
The broker compiles its luxury index from estimated values of properties in the Mayfair, St. John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and South Bank neighborhoods of London.
January prices rose the most in Kensington, Knightsbridge and Notting Hill, the district where Conservative opposition leader David Cameron lives.
Residential development land prices in districts favored by bankers, such as Kensington and Chelsea, rose 7 percent in the fourth quarter of last year, more than anywhere else in the U.K., the broker said in a separate report yesterday. Urban land prices are still 51 percent below the peak in 2007.
To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.
Values of houses and apartments costing more than 1 million pounds ($1.6 million) climbed 11.5 percent from a year earlier, the London-based property broker said in a statement today. The 1.1 percent gain from December was the 10th straight monthly advance and the smallest since August. Prices remain 12 percent lower than the market’s peak in March 2008.
“There still seems to be considerable life left in the recovery in pricing,” Liam Bailey, head of residential research at Knight Frank in London, said in the statement. “While buyers are back in force, vendors are few and far between.”
Some potential sellers are waiting to put houses on the market until they see how the outcome of the U.K. general election, which must be held by June, affects regulation of the financial industry and taxation of banker bonuses, Bailey said. There is also concern that the withdrawal of the government’s economic stimulus package and cuts in public spending will impact the housing market.
Most of Knight Frank’s offices in central London have 15 percent to 20 percent fewer properties for sale than normal for this time of year, the broker said. At the same time, the number of potential buyers in January was 15 percent higher than the five-year average.
Property Shortage
A shortage of properties can create a domino effect, as potential sellers wait until they have more choice of places to buy themselves, Bailey said.
“Slim pickings are the fuel that has been driving this market bounce,” Bailey said. Some venders are starting to price their homes close to or even above peak levels again, which is a risky strategy “for anything other than perfect properties.”
“The market has not been truly tested by a well-stocked larder,” he said.
The pound’s weakness in the past two years has supported demand for British real estate by making it more affordable for overseas buyers. That has helped encourage property funds to raise more money to buy luxury homes.
The Prime London Capital Fund, the only open-ended property fund investing in prime central London residential real estate, has more than tripled funds under management to about 40 million pounds, it said in an e-mailed statement Jan. 26. That followed an investment by Lee Hing Development Ltd., a Hong Kong-based property investment company, and its chairman.
‘Incredibly Resilient’
“Prime London property has been incredibly resilient over the last couple of difficult years and has acted as a good protector of wealth,” said Stephen Yorke, chief executive officer of D&G Investment Management Ltd., the fund’s manager.
London Central Portfolio Ltd. has raised 4.5 million pounds in equity for its London Central Residential Recovery Fund, the only closed-end fund investing in the market. Hugh Best, its manager, said he expects to achieve his target of 10 million pounds by next month’s deadline, helped by South African investors. The fund will be able to invest as much as 23 million pounds, including debt financing.
“There is a feeling that London has weathered the economic storm, although some jobs may have been lost to Geneva,” Bailey said in the statement. “Buyers, both domestic and foreign, are still more than willing to commit to purchases.”
Consumer confidence rose in January as the U.K. emerged from the longest recession on record, Nationwide Building Society said today.
Previous Boom
Prices of luxury properties in central London surged 82 percent during the last boom, between January 2005 and March 2008, according to Knight Frank’s data.
The broker compiles its luxury index from estimated values of properties in the Mayfair, St. John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and South Bank neighborhoods of London.
January prices rose the most in Kensington, Knightsbridge and Notting Hill, the district where Conservative opposition leader David Cameron lives.
Residential development land prices in districts favored by bankers, such as Kensington and Chelsea, rose 7 percent in the fourth quarter of last year, more than anywhere else in the U.K., the broker said in a separate report yesterday. Urban land prices are still 51 percent below the peak in 2007.
To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.
Corporate Bond Risk Falls on Greek Deficit Plan: Credit Markets
The cost of insuring against a corporate bond default tumbled on speculation Greece’s deficit crisis, which helped push credit spreads to the widest in a month, is closer to being resolved.
European Union Monetary Affairs Commissioner Joaquin Almunia said today the European Union endorses Greece’s three- year plan to cut the region’s widest budget deficit by more than three quarters. Greek Prime Minister George Papandreou promised more action to bring the country’s finances under control, including a freeze on state workers’ pay and an increase in fuel tax.
“The market is taking its cue from what happens in the sovereign world,” said Nick Burns, a credit strategist at Deutsche Bank AG in London. “Positive sentiment on sovereign CDS seems to have a positive effect on the corporate world as well.”
Credit-default swaps, derivatives used to hedge against losses and speculate on credit quality, tumbled in Europe. Contracts on the high-yield Markit iTraxx Crossover Index dropped 14 basis points to 434, according to JPMorgan Chase & Co. prices at 11:45 a.m. in London, after climbing for the past three weeks. The extra yield investors demand to hold company bonds rather than the safest government debt fell 1 basis point to 165, Bank of America Merrill Lynch indexes show.
Global corporate bond spreads had widened on concern Greece’s economic crisis would infect the rest of Europe. The gap climbed to as much as 166 on Feb. 1, the most since Jan. 7, after Moody’s Investors Service said Greece and Portugal face a “slow death” from deteriorating public finances, Merrill Lynch indexes show.
Greek Bond Risk
“We are endorsing the Greek program,” Almunia told reporters. “We are giving confidence and supporting the Greek authorities.”
Credit-default swaps on Greek government bonds also fell today, signalling an improvement in perceptions of credit quality, and extended their decline after Almunia spoke in Brussels. The swaps dropped 13.5 basis points to 373.5, after rising to a record 422 on Jan. 28, according to CMA DataVision prices. Greek 10-year government bonds rose for the third time in four days, narrowing the premium investors demand to hold the debt over benchmark German bunds by 15 basis points to 3.39 percentage points.
Greece had the EU’s widest deficit at 12.7 percent of gross domestic product last year and struggled to convince investors it can bring the shortfall within the bloc’s 3 percent limit.
The Brussels-based commission, the EU executive, said today it will demand monthly updates from Greece on its progress in completing the budget-cutting plan. Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers.
Energy Company Debt
Elsewhere in credit markets, energy companies are increasing bond sales at the fastest rate since October as investors snap up the notes of companies with rising profits while the overall pace of debt issuance slows.
Williams Partners LP, the Tulsa, Oklahoma partnership created from the merger of Williams Cos. affiliates, issued $3.5 billion of bonds yesterday, adding to the $5.3 billion sold last month by energy producers, according to data compiled by Bloomberg. Denbury Resources Inc. in Plano, Texas, and Crosstex Energy Inc. of Dallas are marketing a total of $1.7 billion in notes. Sales by industrial companies fell 7 percent last month.
Moody’s raised more ratings on energy companies than it cut by a 1.38-to-1 margin in the fourth quarter as rising oil and natural gas prices boosted earnings. The ratio for all U.S. companies was 0.68.
‘Respectable’ Data
The flurry of sales is a “combination of the corporate debt markets being open and the financial numbers that they show being respectable,” said Jason Brady, a managing director who helps invest $54 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico.
The extra yield investors demand to hold energy bonds instead of Treasuries was unchanged at 175 basis points, or 1.75 percentage points, on average. A basis point is 0.01 percentage point.
The cost to protect bonds of North American companies from default fell for a second consecutive day yesterday even as Moody’s said the U.S.’s top Aaa bond rating may come under pressure amid mounting debt.
High-Yield Debt
High-yield bonds are a better investment than U.S. stocks, according to Rex Macey, the chief investment officer of Wilmington Trust Corp., which is a member of the creditor committee in the three biggest active U.S. bankruptcies. Stocks will provide returns of less than 10 percent through 2016, he said yesterday in a presentation in New York.
Prices of loans to companies in Europe with speculative- grade credit ratings fell for the first time in 12 weeks amid concern that Greece’s budget deficit crisis may spread to corporate borrowers.
Investment-grade energy company bonds have returned 29.6 percent on average since the beginning of last year, compared with 21.9 percent for all corporate bonds, according to Bank of America Merrill Lynch indexes.
“We are in the midst of a very hot debt market,” Steven Malcolm, the chief executive officer at Williams Cos., said in an interview on Jan. 19. That was the day the company said it was selling most of its pipeline assets to the partnerships and Moody’s said it would review Williams Partners’ Ba2 rating for an upgrade.
Williams Partners sold $750 million of five-year debt to yield 145 basis points more than Treasuries, $1.5 billion of 10- year notes at a spread of 162.5 basis points, and $1.25 billion of 30-year bonds at a spread of about 180 basis points, Bloomberg data show. Proceeds will fund the cash portion of the purchase, the company said.
Petroleo Brasileiro
The offering was the biggest for an energy company in the U.S. bond market since Petroleo Brasileiro SA, Brazil’s state- controlled oil producer, sold $4 billion of notes on Oct. 23 to repay a bridge loan, Bloomberg data show.
Denbury, a Gulf Coast exploration and production company, said in a regulatory filing it will sell $1 billion of debt due in 2020 to pay for its purchase of Encore Acquisition Co. Crosstex, an energy supplier. It’s marketing $700 million of eight-year bonds to repay debt, the company said in a statement distributed by Business Wire.
More energy companies may borrow this year to pay for takeovers, said Ken Duffel, an analyst at bond research firm KDP Investment Advisors Inc. in Montpelier, Vermont. West Texas Intermediate crude oil prices have more than doubled since falling to $33.98 on Feb. 12. The price rose $0.53 to $77.76 today.
“A lot of last year’s issuance was to extend maturities,” he said. “The issuance we’re seeing this year will be more to fund acquisitions and growth.”
North American Swaps
Credit-default swaps on North American companies fell 2.5 basis points yesterday to a mid-price of 92.5 basis points on the Markit CDX North America Investment-Grade Index Series 13, according to Barclays Capital. The benchmark is linked to 125 companies.
Derivatives are contracts with values derived from assets or events, including stocks, bonds, commodities, currencies, interest rates or the weather.
The perceived risk of companies declined even as Moody’s said the U.S. must take additional measures to reduce budget deficits projected for the next decade. The ratios of government debt to the U.S. gross domestic product and revenue have increased “sharply” during the credit crisis and recession. The U.S. keeps its Aaa rating because of a “high degree of economic and institutional strength,” the New York-based rating company said in a statement.
Rating Pressure
“If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven A. Hess, senior credit officer at Moody’s in New York.
The average bid for so-called leveraged loans in Europe fell to 96.16 percent of face value from 96.33 for the week of Jan. 21, when it reached the highest since November 2007, according to Standard & Poor’s Leveraged Commentary & Data.
“High-yield loan and bond markets have been under pressure in the past two weeks, driven more by macro events such as Greece and equity markets,” said John Seal, a London-based partner at New Amsterdam Capital Management LLP, which oversees about 1.6 billion euros of assets.
High-yield debt is rated below Baa3 by Moody’s and BBB- by S&P.
Cable & Wireless Plc is marketing $500 million of high- yield bonds due in 2017 to investors as the U.K.’s second- biggest fixed-line phone utility prepares to split into two publicly listed companies. Their shares will start trading by the end of March, Cable & Wireless said in an e-mailed statement yesterday.
Emerging Markets
In emerging markets, Coca-Cola Femsa SAB, the largest soft- drink company in Latin America, sold $500 million of 10-year bonds after boosting the offering 25 percent. Coca-Cola Femsa, based in Mexico City, sold the bonds at a spread of 105 basis points above Treasuries.
The company, controlled by Monterrey-based Fomento Economico Mexicano SAB, is seeking to expand soft-drink operations beyond Latin America, Fomento Chief Executive Officer Jose Antonio Fernandez said in an interview last month. It may try to buy Coca-Cola’s bottler in the Philippines, JPMorgan Chase said in a report Jan. 20.
To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Paul Armstrong in London at parmstrong10@bloomberg.net
European Union Monetary Affairs Commissioner Joaquin Almunia said today the European Union endorses Greece’s three- year plan to cut the region’s widest budget deficit by more than three quarters. Greek Prime Minister George Papandreou promised more action to bring the country’s finances under control, including a freeze on state workers’ pay and an increase in fuel tax.
“The market is taking its cue from what happens in the sovereign world,” said Nick Burns, a credit strategist at Deutsche Bank AG in London. “Positive sentiment on sovereign CDS seems to have a positive effect on the corporate world as well.”
Credit-default swaps, derivatives used to hedge against losses and speculate on credit quality, tumbled in Europe. Contracts on the high-yield Markit iTraxx Crossover Index dropped 14 basis points to 434, according to JPMorgan Chase & Co. prices at 11:45 a.m. in London, after climbing for the past three weeks. The extra yield investors demand to hold company bonds rather than the safest government debt fell 1 basis point to 165, Bank of America Merrill Lynch indexes show.
Global corporate bond spreads had widened on concern Greece’s economic crisis would infect the rest of Europe. The gap climbed to as much as 166 on Feb. 1, the most since Jan. 7, after Moody’s Investors Service said Greece and Portugal face a “slow death” from deteriorating public finances, Merrill Lynch indexes show.
Greek Bond Risk
“We are endorsing the Greek program,” Almunia told reporters. “We are giving confidence and supporting the Greek authorities.”
Credit-default swaps on Greek government bonds also fell today, signalling an improvement in perceptions of credit quality, and extended their decline after Almunia spoke in Brussels. The swaps dropped 13.5 basis points to 373.5, after rising to a record 422 on Jan. 28, according to CMA DataVision prices. Greek 10-year government bonds rose for the third time in four days, narrowing the premium investors demand to hold the debt over benchmark German bunds by 15 basis points to 3.39 percentage points.
Greece had the EU’s widest deficit at 12.7 percent of gross domestic product last year and struggled to convince investors it can bring the shortfall within the bloc’s 3 percent limit.
The Brussels-based commission, the EU executive, said today it will demand monthly updates from Greece on its progress in completing the budget-cutting plan. Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers.
Energy Company Debt
Elsewhere in credit markets, energy companies are increasing bond sales at the fastest rate since October as investors snap up the notes of companies with rising profits while the overall pace of debt issuance slows.
Williams Partners LP, the Tulsa, Oklahoma partnership created from the merger of Williams Cos. affiliates, issued $3.5 billion of bonds yesterday, adding to the $5.3 billion sold last month by energy producers, according to data compiled by Bloomberg. Denbury Resources Inc. in Plano, Texas, and Crosstex Energy Inc. of Dallas are marketing a total of $1.7 billion in notes. Sales by industrial companies fell 7 percent last month.
Moody’s raised more ratings on energy companies than it cut by a 1.38-to-1 margin in the fourth quarter as rising oil and natural gas prices boosted earnings. The ratio for all U.S. companies was 0.68.
‘Respectable’ Data
The flurry of sales is a “combination of the corporate debt markets being open and the financial numbers that they show being respectable,” said Jason Brady, a managing director who helps invest $54 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico.
The extra yield investors demand to hold energy bonds instead of Treasuries was unchanged at 175 basis points, or 1.75 percentage points, on average. A basis point is 0.01 percentage point.
The cost to protect bonds of North American companies from default fell for a second consecutive day yesterday even as Moody’s said the U.S.’s top Aaa bond rating may come under pressure amid mounting debt.
High-Yield Debt
High-yield bonds are a better investment than U.S. stocks, according to Rex Macey, the chief investment officer of Wilmington Trust Corp., which is a member of the creditor committee in the three biggest active U.S. bankruptcies. Stocks will provide returns of less than 10 percent through 2016, he said yesterday in a presentation in New York.
Prices of loans to companies in Europe with speculative- grade credit ratings fell for the first time in 12 weeks amid concern that Greece’s budget deficit crisis may spread to corporate borrowers.
Investment-grade energy company bonds have returned 29.6 percent on average since the beginning of last year, compared with 21.9 percent for all corporate bonds, according to Bank of America Merrill Lynch indexes.
“We are in the midst of a very hot debt market,” Steven Malcolm, the chief executive officer at Williams Cos., said in an interview on Jan. 19. That was the day the company said it was selling most of its pipeline assets to the partnerships and Moody’s said it would review Williams Partners’ Ba2 rating for an upgrade.
Williams Partners sold $750 million of five-year debt to yield 145 basis points more than Treasuries, $1.5 billion of 10- year notes at a spread of 162.5 basis points, and $1.25 billion of 30-year bonds at a spread of about 180 basis points, Bloomberg data show. Proceeds will fund the cash portion of the purchase, the company said.
Petroleo Brasileiro
The offering was the biggest for an energy company in the U.S. bond market since Petroleo Brasileiro SA, Brazil’s state- controlled oil producer, sold $4 billion of notes on Oct. 23 to repay a bridge loan, Bloomberg data show.
Denbury, a Gulf Coast exploration and production company, said in a regulatory filing it will sell $1 billion of debt due in 2020 to pay for its purchase of Encore Acquisition Co. Crosstex, an energy supplier. It’s marketing $700 million of eight-year bonds to repay debt, the company said in a statement distributed by Business Wire.
More energy companies may borrow this year to pay for takeovers, said Ken Duffel, an analyst at bond research firm KDP Investment Advisors Inc. in Montpelier, Vermont. West Texas Intermediate crude oil prices have more than doubled since falling to $33.98 on Feb. 12. The price rose $0.53 to $77.76 today.
“A lot of last year’s issuance was to extend maturities,” he said. “The issuance we’re seeing this year will be more to fund acquisitions and growth.”
North American Swaps
Credit-default swaps on North American companies fell 2.5 basis points yesterday to a mid-price of 92.5 basis points on the Markit CDX North America Investment-Grade Index Series 13, according to Barclays Capital. The benchmark is linked to 125 companies.
Derivatives are contracts with values derived from assets or events, including stocks, bonds, commodities, currencies, interest rates or the weather.
The perceived risk of companies declined even as Moody’s said the U.S. must take additional measures to reduce budget deficits projected for the next decade. The ratios of government debt to the U.S. gross domestic product and revenue have increased “sharply” during the credit crisis and recession. The U.S. keeps its Aaa rating because of a “high degree of economic and institutional strength,” the New York-based rating company said in a statement.
Rating Pressure
“If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven A. Hess, senior credit officer at Moody’s in New York.
The average bid for so-called leveraged loans in Europe fell to 96.16 percent of face value from 96.33 for the week of Jan. 21, when it reached the highest since November 2007, according to Standard & Poor’s Leveraged Commentary & Data.
“High-yield loan and bond markets have been under pressure in the past two weeks, driven more by macro events such as Greece and equity markets,” said John Seal, a London-based partner at New Amsterdam Capital Management LLP, which oversees about 1.6 billion euros of assets.
High-yield debt is rated below Baa3 by Moody’s and BBB- by S&P.
Cable & Wireless Plc is marketing $500 million of high- yield bonds due in 2017 to investors as the U.K.’s second- biggest fixed-line phone utility prepares to split into two publicly listed companies. Their shares will start trading by the end of March, Cable & Wireless said in an e-mailed statement yesterday.
Emerging Markets
In emerging markets, Coca-Cola Femsa SAB, the largest soft- drink company in Latin America, sold $500 million of 10-year bonds after boosting the offering 25 percent. Coca-Cola Femsa, based in Mexico City, sold the bonds at a spread of 105 basis points above Treasuries.
The company, controlled by Monterrey-based Fomento Economico Mexicano SAB, is seeking to expand soft-drink operations beyond Latin America, Fomento Chief Executive Officer Jose Antonio Fernandez said in an interview last month. It may try to buy Coca-Cola’s bottler in the Philippines, JPMorgan Chase said in a report Jan. 20.
To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Paul Armstrong in London at parmstrong10@bloomberg.net
Stocks Rise as U.S. Earnings Beat Forecasts; Copper, Oil Gain
Stocks advanced, pushing the MSCI Emerging Markets Index to its biggest gain in two months, on speculation U.S. earnings reports suggest the global recovery is gathering pace. Copper and oil climbed for a third day.
The MSCI World Index of 23 developed nations’ stocks rose 0.3 percent at 11:55 a.m. in London and the emerging markets index added 1.8 percent, its steepest advance since Dec. 1. Futures on the Standard & Poor’s 500 Index gained 0.2 percent. Copper advanced 1.3 percent and crude oil 0.6 percent. The dollar declined against 15 of the 16 most-traded currencies.
A nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009, and about 81 percent of earnings since Jan. 11 beat the average of Wall Street estimates, according to data compiled by Bloomberg. Service industries in the U.S. probably expanded in January at the fastest pace in more than a year, economists said before a report today.
“While investors have been a bit cautious over the course of the past two weeks, they should continue to focus on the corporate profitability picture that is rebounding fast,” said Henk Potts at Barclays Stockbrokers Ltd. in London, which oversees about $218 billion. “Monetary tightening may drive the market into a bumpier road in the second half, but it should not be a matter of concern for at least the first half.”
European Gains
Europe’s Dow Jones Stoxx 600 Index gained 0.2 percent. Scania AB surged 9 percent in Stockholm after the Swedish truckmaker posted results that beat analysts’ estimates. Rival MAN AG jumped 3.6 percent in Frankfurt. Standard Life Plc, Scotland’s biggest insurer, added 4 percent after saying 2009 revenue fell less than analysts predicted. Gains were limited as Electrolux AB, the world’s second-biggest appliance maker, plunged 14 percent in Stockholm, the biggest drop in three years, after earnings missed estimates.
The MSCI Asia Pacific Index advanced 1.1 percent, posting its first back-to-back advance in three weeks. Esprit, the biggest Hong Kong-listed clothier, gained 7.9 percent after posting better-than-estimated profit. China’s Shanghai Composite Index climbed 2.4 percent and India’s Sensex Index advanced 2 percent, with both gauges headed for the steepest gains in six weeks, led by information technology and industrial shares.
Commodity producers led gains in Europe, with Russia’s Micex Index climbing 1.1 percent and Kazakhmys Plc, Kazakhstan’s largest copper producer, increasing 2.1 percent after it was given a new “buy” rating by UBS AG.
Greek Securities Rally
Greek stocks and bonds rose. Greece’s plan to cut the European Union’s biggest budget deficit won European Commission backing after the government announced more measures to reduce the shortfall and try to quell investor concern that the nation may need a bailout.
“We are endorsing the Greek program; we are giving confidence and supporting the Greek authorities,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “The implementation of this program is not easy.”
The benchmark ASE Index advanced 1.6 percent as National Bank of Greece SA added 4.2 percent and Alpha Bank SA climbed 4.5 percent. Greece’s two-year note jumped, with the yield falling 27 basis points to 6.24 percent. Credit-default swaps on Greek government bonds fell 7 basis points to 380, according to CMA DataVision, meaning it costs $380,000 a year to insure against losses on the debt for five years.
U.S. Futures
The gain in U.S. futures indicated the S&P 500 may add to yesterday’s 1.3 percent advance and extend its biggest two-day rally since October. The measure has surged 63 percent since March as governments and central banks around the world sought to encourage growth by maintaining low interest rates and committing more than $12 trillion to stimulate the economy.
Time Warner Inc. increased its cash dividend to 85 cents a share from 75 cents, and boosted its share repurchase program by $2 billion to $3 billion as it reported fourth-quarter profit that topped analysts’ estimates.
The Institute for Supply Management’s index of non- manufacturing companies, which make up almost 90 percent of the U.S. economy, rose to 51 from 49.8 in December, according to the median estimate of 75 economists surveyed by Bloomberg News. The report is due at 10 a.m. in New York. Readings above 50 signal growth.
A separate report at 8:15 a.m. may show companies last month shed the fewest workers in two years. Figures from ADP Employer Services may show private employers cut 30,000 jobs in January, according to the median estimate of economists.
El-Erian
U.S. joblessness threatens to undermine stocks, according to Mohamed A. El-Erian, Chief Executive Officer of Pacific Investment Management Co. “I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” El-Erian wrote in a Bloomberg News column. “If the gap isn’t bridged by the validation of the more optimistic expectations, investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes.”
Crude oil for March delivery in New York rose 48 cents to $77.71 a barrel, extending yesterday’s 3.8 percent jump. Copper for delivery in three months added $85 to $6,900 a metric ton on the London Metal Exchange, leading gains in metals. Gold for immediate delivery rose 0.4 percent to $1,119.05 an ounce.
Improving economic data is “very good news for assets that are sensitive to growth, such as commodities and equities,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London.
The dollar weakened 0.3 percent against the euro and added 0.2 percent compared with the yen. The South Korean won strengthened 0.3 percent versus the dollar and 0.5 percent compared with the yen.
Commodity producing nations led exchange-rate gains, with the Russian ruble gaining 0.7 percent to a two-week high against the dollar and South Africa’s rand strengthening 0.8 percent.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
The MSCI World Index of 23 developed nations’ stocks rose 0.3 percent at 11:55 a.m. in London and the emerging markets index added 1.8 percent, its steepest advance since Dec. 1. Futures on the Standard & Poor’s 500 Index gained 0.2 percent. Copper advanced 1.3 percent and crude oil 0.6 percent. The dollar declined against 15 of the 16 most-traded currencies.
A nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009, and about 81 percent of earnings since Jan. 11 beat the average of Wall Street estimates, according to data compiled by Bloomberg. Service industries in the U.S. probably expanded in January at the fastest pace in more than a year, economists said before a report today.
“While investors have been a bit cautious over the course of the past two weeks, they should continue to focus on the corporate profitability picture that is rebounding fast,” said Henk Potts at Barclays Stockbrokers Ltd. in London, which oversees about $218 billion. “Monetary tightening may drive the market into a bumpier road in the second half, but it should not be a matter of concern for at least the first half.”
European Gains
Europe’s Dow Jones Stoxx 600 Index gained 0.2 percent. Scania AB surged 9 percent in Stockholm after the Swedish truckmaker posted results that beat analysts’ estimates. Rival MAN AG jumped 3.6 percent in Frankfurt. Standard Life Plc, Scotland’s biggest insurer, added 4 percent after saying 2009 revenue fell less than analysts predicted. Gains were limited as Electrolux AB, the world’s second-biggest appliance maker, plunged 14 percent in Stockholm, the biggest drop in three years, after earnings missed estimates.
The MSCI Asia Pacific Index advanced 1.1 percent, posting its first back-to-back advance in three weeks. Esprit, the biggest Hong Kong-listed clothier, gained 7.9 percent after posting better-than-estimated profit. China’s Shanghai Composite Index climbed 2.4 percent and India’s Sensex Index advanced 2 percent, with both gauges headed for the steepest gains in six weeks, led by information technology and industrial shares.
Commodity producers led gains in Europe, with Russia’s Micex Index climbing 1.1 percent and Kazakhmys Plc, Kazakhstan’s largest copper producer, increasing 2.1 percent after it was given a new “buy” rating by UBS AG.
Greek Securities Rally
Greek stocks and bonds rose. Greece’s plan to cut the European Union’s biggest budget deficit won European Commission backing after the government announced more measures to reduce the shortfall and try to quell investor concern that the nation may need a bailout.
“We are endorsing the Greek program; we are giving confidence and supporting the Greek authorities,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “The implementation of this program is not easy.”
The benchmark ASE Index advanced 1.6 percent as National Bank of Greece SA added 4.2 percent and Alpha Bank SA climbed 4.5 percent. Greece’s two-year note jumped, with the yield falling 27 basis points to 6.24 percent. Credit-default swaps on Greek government bonds fell 7 basis points to 380, according to CMA DataVision, meaning it costs $380,000 a year to insure against losses on the debt for five years.
U.S. Futures
The gain in U.S. futures indicated the S&P 500 may add to yesterday’s 1.3 percent advance and extend its biggest two-day rally since October. The measure has surged 63 percent since March as governments and central banks around the world sought to encourage growth by maintaining low interest rates and committing more than $12 trillion to stimulate the economy.
Time Warner Inc. increased its cash dividend to 85 cents a share from 75 cents, and boosted its share repurchase program by $2 billion to $3 billion as it reported fourth-quarter profit that topped analysts’ estimates.
The Institute for Supply Management’s index of non- manufacturing companies, which make up almost 90 percent of the U.S. economy, rose to 51 from 49.8 in December, according to the median estimate of 75 economists surveyed by Bloomberg News. The report is due at 10 a.m. in New York. Readings above 50 signal growth.
A separate report at 8:15 a.m. may show companies last month shed the fewest workers in two years. Figures from ADP Employer Services may show private employers cut 30,000 jobs in January, according to the median estimate of economists.
El-Erian
U.S. joblessness threatens to undermine stocks, according to Mohamed A. El-Erian, Chief Executive Officer of Pacific Investment Management Co. “I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” El-Erian wrote in a Bloomberg News column. “If the gap isn’t bridged by the validation of the more optimistic expectations, investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes.”
Crude oil for March delivery in New York rose 48 cents to $77.71 a barrel, extending yesterday’s 3.8 percent jump. Copper for delivery in three months added $85 to $6,900 a metric ton on the London Metal Exchange, leading gains in metals. Gold for immediate delivery rose 0.4 percent to $1,119.05 an ounce.
Improving economic data is “very good news for assets that are sensitive to growth, such as commodities and equities,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London.
The dollar weakened 0.3 percent against the euro and added 0.2 percent compared with the yen. The South Korean won strengthened 0.3 percent versus the dollar and 0.5 percent compared with the yen.
Commodity producing nations led exchange-rate gains, with the Russian ruble gaining 0.7 percent to a two-week high against the dollar and South Africa’s rand strengthening 0.8 percent.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
Italy Said to Discuss Telecom Italia-Telefonica Deal (Update2)
The Italian government is in talks with Telecom Italia Spa about the phone company’s strategic options, including a possible takeover by Spain’s Telefonica SA, said a person familiar with the situation.
The discussions, involving the Italian treasury, are at an early stage, said the person, who declined to be identified because the talks are private. The future ownership of Telecom Italia’s fixed-line network, which the government wants to keep in local hands for national security reasons, is among the issues under discussion, the person said.
Telecom Italia surged the most in almost a year in Milan yesterday after la Repubblica reported that the Italian government supports an “inevitable” merger. A combination would let Telecom Italia cut debt of about 35 billion euros ($49 billion) and give Telefonica, which already owns a stake in the Italian company, a larger presence in Europe and Latin America.
“Sooner or later there is going to be a deal,” said Carlo Luoni, a fund manager at 8A+ Sgr SpA in Varese, Italy. “With Telefonica, there would be the opportunity to make investments that Telecom Italia can’t afford now because of its debt burden.”
Other bidders for Telecom Italia could also emerge, said the person. Telefonica joined a group of Italian investors in 2007 to acquire a controlling stake in Telecom Italia for 4.1 billion euros, beating Mexican billionaire Carlos Slim. Telefonica is the largest shareholder of Telco SpA, an entity controlling Telecom Italia with a 22.4 percent stake.
Minister Meeting
Spokesmen for the Italian treasury and Telefonica declined to comment, as did a spokeswoman for Telecom Italia. The company is a “strategic asset for our country,” Industry Minister Claudio Scajola told reporters today in Rome. Scajola is meeting with Telecom Italia executives tomorrow.
Telecom Italia, which climbed 6 percent yesterday, its biggest gain since Feb. 26, 2009, slid 2.6 percent to 1.12 euros as of 12:03 p.m. in Milan. Telefonica gained 0.8 percent to 17.57 euros in Madrid.
Repubblica said yesterday that Prime Minister Silvio Berlusconi will “give the go-ahead to a share-based offer” the Madrid-based company plans to make in a “short time.” The prime minister’s office denies the report “in the most categorical manner,” it said in an e-mailed statement.
Berlusconi’s office said it had had no contacts or meetings with Telecom Italia on a merger with Telefonica, and “has set no conditions” on a deal.
‘Act Freely’
Scajola also said today that Telecom Italia can make its own decisions on the future of the company.
“Telecom is a private company,” he said. “In Italy we have a free market, ours is a liberal government which allows companies to act freely.”
It’s customary in Italy for companies that are considered strategic to seek government approval for cross-border transactions.
“A full merger between the two companies would have immense industrial value and generate significant synergies,” Marco Fossati, whose family company Findim Group SA owns about 5 percent of Telecom Italia and is its second-biggest shareholder after Telco, said in an interview last week. “I believe so much in the integration that I would be willing to take Telefonica shares in a deal.”
To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net
The discussions, involving the Italian treasury, are at an early stage, said the person, who declined to be identified because the talks are private. The future ownership of Telecom Italia’s fixed-line network, which the government wants to keep in local hands for national security reasons, is among the issues under discussion, the person said.
Telecom Italia surged the most in almost a year in Milan yesterday after la Repubblica reported that the Italian government supports an “inevitable” merger. A combination would let Telecom Italia cut debt of about 35 billion euros ($49 billion) and give Telefonica, which already owns a stake in the Italian company, a larger presence in Europe and Latin America.
“Sooner or later there is going to be a deal,” said Carlo Luoni, a fund manager at 8A+ Sgr SpA in Varese, Italy. “With Telefonica, there would be the opportunity to make investments that Telecom Italia can’t afford now because of its debt burden.”
Other bidders for Telecom Italia could also emerge, said the person. Telefonica joined a group of Italian investors in 2007 to acquire a controlling stake in Telecom Italia for 4.1 billion euros, beating Mexican billionaire Carlos Slim. Telefonica is the largest shareholder of Telco SpA, an entity controlling Telecom Italia with a 22.4 percent stake.
Minister Meeting
Spokesmen for the Italian treasury and Telefonica declined to comment, as did a spokeswoman for Telecom Italia. The company is a “strategic asset for our country,” Industry Minister Claudio Scajola told reporters today in Rome. Scajola is meeting with Telecom Italia executives tomorrow.
Telecom Italia, which climbed 6 percent yesterday, its biggest gain since Feb. 26, 2009, slid 2.6 percent to 1.12 euros as of 12:03 p.m. in Milan. Telefonica gained 0.8 percent to 17.57 euros in Madrid.
Repubblica said yesterday that Prime Minister Silvio Berlusconi will “give the go-ahead to a share-based offer” the Madrid-based company plans to make in a “short time.” The prime minister’s office denies the report “in the most categorical manner,” it said in an e-mailed statement.
Berlusconi’s office said it had had no contacts or meetings with Telecom Italia on a merger with Telefonica, and “has set no conditions” on a deal.
‘Act Freely’
Scajola also said today that Telecom Italia can make its own decisions on the future of the company.
“Telecom is a private company,” he said. “In Italy we have a free market, ours is a liberal government which allows companies to act freely.”
It’s customary in Italy for companies that are considered strategic to seek government approval for cross-border transactions.
“A full merger between the two companies would have immense industrial value and generate significant synergies,” Marco Fossati, whose family company Findim Group SA owns about 5 percent of Telecom Italia and is its second-biggest shareholder after Telco, said in an interview last week. “I believe so much in the integration that I would be willing to take Telefonica shares in a deal.”
To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net
Emerging Stocks Gain Most in Two Months as Commodities Climb
Emerging-market stocks rose the most in two months, boosted by higher commodity prices and improved confidence in the global economic recovery after an increase in U.S. pending home sales.
The MSCI Emerging Markets Index jumped 1.8 percent to 957.11 at 11:16 a.m. in London, the steepest climb since Dec. 1. China’s Shanghai Composite Index added 2.4 percent and India’s Sensex Index advanced 2.1 percent for the biggest gains in six weeks. The Micex Index of stocks in Russia, the world’s largest energy exporter, jumped 1.2 percent.
Oil prices extended yesterday’s gain to a four-month high at $77.23 a barrel, boosting revenue for energy exporting economies. Materials and industrial companies led the rally in Asia after the U.S. National Association of Realtors said yesterday pending home sales rose 1 percent, adding to signs of growth in the world’s biggest economy.
“Investors are looking for reasons to flip their positions to positive and global growth prospects are providing that,” Michael Ganske, head of emerging-market research at Commerzbank AG in London, said in a phone interview. “Across the board markets are very strong. It’s very much connected to global growth and of course stronger commodities are always a reason for emerging-market progression.”
Cnooc Ltd., China’s biggest offshore oil producer, surged 10 percent for the steepest gain in more than a year after saying it plans to increase crude and gas output by as much as 28 percent. OAO Severstal, Russia’s largest steelmaker, climbed as much as 4.6 percent to a two-week high on plans to start deliveries for the East Siberia-Pacific Ocean pipeline in March. Kazakhmys Plc, Kazakhstan’s No. 1 copper producer, added 2.4 percent after it was given a new “buy” rating by UBS AG.
Ruble, Rand
OAO Uralkali, Russia’s second-largest potash producer, increased 5.2 percent, its biggest gain since Jan. 11, after it was raised to “buy” from “sell” at Citigroup Inc., which cited a recent increase in export prices for the fertilizer.
The ruble jumped to a two-week high against the dollar and euro, rising 0.8 percent to 29.88 per dollar. South Africa’s rand also climbed to its strongest level in two weeks, advancing as much as 0.7 percent to 7.4208 per dollar, as prices increased for gold and platinum, the nation’s biggest export earners.
The extra yield investors demand to own emerging-market dollar bonds instead of U.S. Treasuries dropped 5 basis points to a four-day low of 3.03 percentage points, after yesterday rising to a seven-week high, according to JPMorgan Chase & Co.’s EMBI+ Index.
Faber, El-Erian
Yields on Russian corporate bonds, which have more than halved in the past year, don’t compensate investors for the risks of the securities, investor Marc Faber, who publishes the Gloom, Boom and Doom report, said in an interview on Bloomberg Television from Moscow. The yields have dropped to 6.7 percent from 14.1 percent a year ago, according to JPMorgan’s CEMBI indexes.
The S&P 500, which fell the most in 11 months in January, may continue to decline amid persistent U.S. joblessness and economic growth that trails analysts’ forecasts, Mohamed A. El- Erian, the chief executive officer of Pacific Investment Management Co, wrote in a Bloomberg News column.
Investors have wrongly priced in an “orderly” withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, wrote El-Erain, whose firm runs the world’s biggest mutual fund.
Copper rallied as much as 1.7 percent to $6,933 a metric ton in London and nickel, lead, zinc and aluminum prices also gained. The MSCI World Index jumped 0.2 percent, extending the 36 percent rise over the past 12 months, and futures on the Standard & Poor’s 500 Index advanced 0.2 percent.
Romania’s central bank cut its benchmark interest rate by half a point for the second time this year, lowering borrowing costs to 7 percent, after the nation’s credit rating outlook was raised and optimism mounted that its International Monetary Fund bailout loan will be resumed. Credit-default swaps on Romanian government bonds fell 3.5 basis points to a one-week low of 242.5 basis points, according to CMA Datavision in London. The leu fell 0.2 percent to 4.0959 per euro.
Editors: Gavin Serkin, Claudia Maedler
To contact the reporter on this story: Laura Cochrane in London at lcochrane3@bloomberg.net
The MSCI Emerging Markets Index jumped 1.8 percent to 957.11 at 11:16 a.m. in London, the steepest climb since Dec. 1. China’s Shanghai Composite Index added 2.4 percent and India’s Sensex Index advanced 2.1 percent for the biggest gains in six weeks. The Micex Index of stocks in Russia, the world’s largest energy exporter, jumped 1.2 percent.
Oil prices extended yesterday’s gain to a four-month high at $77.23 a barrel, boosting revenue for energy exporting economies. Materials and industrial companies led the rally in Asia after the U.S. National Association of Realtors said yesterday pending home sales rose 1 percent, adding to signs of growth in the world’s biggest economy.
“Investors are looking for reasons to flip their positions to positive and global growth prospects are providing that,” Michael Ganske, head of emerging-market research at Commerzbank AG in London, said in a phone interview. “Across the board markets are very strong. It’s very much connected to global growth and of course stronger commodities are always a reason for emerging-market progression.”
Cnooc Ltd., China’s biggest offshore oil producer, surged 10 percent for the steepest gain in more than a year after saying it plans to increase crude and gas output by as much as 28 percent. OAO Severstal, Russia’s largest steelmaker, climbed as much as 4.6 percent to a two-week high on plans to start deliveries for the East Siberia-Pacific Ocean pipeline in March. Kazakhmys Plc, Kazakhstan’s No. 1 copper producer, added 2.4 percent after it was given a new “buy” rating by UBS AG.
Ruble, Rand
OAO Uralkali, Russia’s second-largest potash producer, increased 5.2 percent, its biggest gain since Jan. 11, after it was raised to “buy” from “sell” at Citigroup Inc., which cited a recent increase in export prices for the fertilizer.
The ruble jumped to a two-week high against the dollar and euro, rising 0.8 percent to 29.88 per dollar. South Africa’s rand also climbed to its strongest level in two weeks, advancing as much as 0.7 percent to 7.4208 per dollar, as prices increased for gold and platinum, the nation’s biggest export earners.
The extra yield investors demand to own emerging-market dollar bonds instead of U.S. Treasuries dropped 5 basis points to a four-day low of 3.03 percentage points, after yesterday rising to a seven-week high, according to JPMorgan Chase & Co.’s EMBI+ Index.
Faber, El-Erian
Yields on Russian corporate bonds, which have more than halved in the past year, don’t compensate investors for the risks of the securities, investor Marc Faber, who publishes the Gloom, Boom and Doom report, said in an interview on Bloomberg Television from Moscow. The yields have dropped to 6.7 percent from 14.1 percent a year ago, according to JPMorgan’s CEMBI indexes.
The S&P 500, which fell the most in 11 months in January, may continue to decline amid persistent U.S. joblessness and economic growth that trails analysts’ forecasts, Mohamed A. El- Erian, the chief executive officer of Pacific Investment Management Co, wrote in a Bloomberg News column.
Investors have wrongly priced in an “orderly” withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, wrote El-Erain, whose firm runs the world’s biggest mutual fund.
Copper rallied as much as 1.7 percent to $6,933 a metric ton in London and nickel, lead, zinc and aluminum prices also gained. The MSCI World Index jumped 0.2 percent, extending the 36 percent rise over the past 12 months, and futures on the Standard & Poor’s 500 Index advanced 0.2 percent.
Romania’s central bank cut its benchmark interest rate by half a point for the second time this year, lowering borrowing costs to 7 percent, after the nation’s credit rating outlook was raised and optimism mounted that its International Monetary Fund bailout loan will be resumed. Credit-default swaps on Romanian government bonds fell 3.5 basis points to a one-week low of 242.5 basis points, according to CMA Datavision in London. The leu fell 0.2 percent to 4.0959 per euro.
Editors: Gavin Serkin, Claudia Maedler
To contact the reporter on this story: Laura Cochrane in London at lcochrane3@bloomberg.net
EU to Boost Sugar Exports, Defying Australia, Brazil (Update1)
The European Union approved exports of an additional 500,000 metric tons of sugar above an annual limit permitted by a World Trade Organization decision, defying calls from Brazil, Thailand and Australia to respect the quota.
Brazil said today it doesn’t rule out responding with a WTO complaint. The proposal to lift exports in the 2009-10 season drew no objections from EU officials by today’s deadline, said Johan Reyniers, a spokesman for the Brussels-based European Commission, the 27-nation bloc’s executive arm.
Brazil, Thailand and Australia, the top sugar exporters, this week asked the EU to scrap the plan because its shipments of the sweetener would exceed the quota. The WTO in 2005 limited EU exports of subsidized sugar to 1.37 million tons following a complaint by the three countries.
“The quantities authorized for export are not benefiting from any subsidy, directly or indirectly,” Reyniers said by phone. “Therefore they are not to be counted as part of the exports that the EU is allowed under WTO law.”
The EU has said it would raise exports as a “temporary measure” in response to a doubling in sugar prices over the last year and the bloc’s record harvest.
“We don’t rule out any course of action at this point,” Roberto Azevedo, Brazil’s ambassador to the WTO, said by phone from Geneva. “If the EU is claiming that they are no longer subsiding sugar production the EU, we have a problem.”
The commission argues that current world prices mean the EU can export more sugar without violating WTO subsidy commitments. White, or refined, sugar for May delivery trades at about $741 a ton in London, above the EU reference price of 404.40 euros ($566.52) that is the basis for negotiations with importers and the sale of so-called intervention stocks.
Prices Double
“On the question of sugar, the French position is the EU position,” Bruno Le Maire, France’s agriculture minister, told journalists in Paris today. The country is the EU’s largest sugar producer.
Sugar prices doubled in 2009 after output was hurt by rains that were too heavy in Brazil and too light in India, the world’s biggest producers. Global demand will outpace supply by 13.5 million tons this season, according to broker Czarnikow Group Ltd.
“Australia, Brazil and Thailand disagree that the trade distortions produced by the European Union’s sugar regime were eliminated by circumstantially high international prices,” the countries said in a joint statement on Feb. 1.
To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net
Brazil said today it doesn’t rule out responding with a WTO complaint. The proposal to lift exports in the 2009-10 season drew no objections from EU officials by today’s deadline, said Johan Reyniers, a spokesman for the Brussels-based European Commission, the 27-nation bloc’s executive arm.
Brazil, Thailand and Australia, the top sugar exporters, this week asked the EU to scrap the plan because its shipments of the sweetener would exceed the quota. The WTO in 2005 limited EU exports of subsidized sugar to 1.37 million tons following a complaint by the three countries.
“The quantities authorized for export are not benefiting from any subsidy, directly or indirectly,” Reyniers said by phone. “Therefore they are not to be counted as part of the exports that the EU is allowed under WTO law.”
The EU has said it would raise exports as a “temporary measure” in response to a doubling in sugar prices over the last year and the bloc’s record harvest.
“We don’t rule out any course of action at this point,” Roberto Azevedo, Brazil’s ambassador to the WTO, said by phone from Geneva. “If the EU is claiming that they are no longer subsiding sugar production the EU, we have a problem.”
The commission argues that current world prices mean the EU can export more sugar without violating WTO subsidy commitments. White, or refined, sugar for May delivery trades at about $741 a ton in London, above the EU reference price of 404.40 euros ($566.52) that is the basis for negotiations with importers and the sale of so-called intervention stocks.
Prices Double
“On the question of sugar, the French position is the EU position,” Bruno Le Maire, France’s agriculture minister, told journalists in Paris today. The country is the EU’s largest sugar producer.
Sugar prices doubled in 2009 after output was hurt by rains that were too heavy in Brazil and too light in India, the world’s biggest producers. Global demand will outpace supply by 13.5 million tons this season, according to broker Czarnikow Group Ltd.
“Australia, Brazil and Thailand disagree that the trade distortions produced by the European Union’s sugar regime were eliminated by circumstantially high international prices,” the countries said in a joint statement on Feb. 1.
To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net
EU Backs Greek Deficit Plan as Papandreou Makes Deeper Cuts
Greece’s plan to cut the European Union’s biggest budget deficit won European Commission backing after the government announced more measures to reduce the shortfall and try to quell investor concern that the nation may need a bailout.
“We are endorsing the Greek program; we are giving confidence and supporting the Greek authorities,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “The implementation of this program is not easy.”
The Brussels-based commission, the EU executive, said it will demand monthly updates from Greece on its progress in completing the plan to reduce a deficit of 12.7 percent of gross domestic product to within the EU’s 3 percent limit in 2012. Greek Prime Minister George Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers.
The risk premium on Greek bonds rose to an 11-year high last week on concern over the government’s ability to sell the 53 billion euros ($74 billion) of bonds needed this year to finance its deficit and debt. Spanish and Portuguese bonds have also suffered as other high-deficit EU nations came under investor scrutiny, fueling speculation about the possibility of an EU bailout to protect the monetary union.
‘Speculative Game’
“Greece is in the center of a speculative game aimed at the euro,” Papandreou said in a televised speech in Athens late yesterday. “It is our national duty to stop the attempts to push our country to the edge of the cliff.”
Greek bonds gained today, with the premium investors demand to buy 10-year Greek securities over comparable German debt, the EU benchmark, sliding 21 basis points to 333. That was down from a peak of 396 on Jan. 28.
Papandreou yesterday urged Greeks to support the new measures and said the country couldn’t afford strikes and blockades that may derail the attempt to get the economy back on track. After the announcement of the broader wage freeze, unions urged workers to attend a previously announced strike of civil servants on Feb. 10.
Greece’s original deficit plan pledges to cut spending and raise revenue by about 10 billion euros this year to trim the shortfall by 4 percent of GDP. The government said it would meet that goal through cuts in bonuses to civil servants, a crackdown on tax evasion and state-asset sales. The additional measures announced yesterday would reduce spending by 0.3 percent to 0.4 percent of GDP, economists at HSBC Holdings Plc estimate.
Monitoring Greece
In its statement today, the commission demanded more details on the new measures within a month.
“The commission will be in charge of monitoring the implementation of the program through a very intense surveillance,” commission President Jose Barroso said yesterday. “The successful correction of its very excessive deficit is not only important for Greece, but for the euro area and the EU as a whole.”
The additional spending cuts and higher taxes may put a further drag on an economy set to contract 0.3 percent in 2010.
“Unless the wage-freeze measure is accompanied by initiatives that would boost exports and investments in the economy, the contraction in 2010 should be greater than expected, thus negatively affecting tax revenues,” economists at Marfin Analysis in Athens said in a note to investors today.
Worst Performers
The nation’s government bonds were the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent on concern about its deteriorating finances, Bloomberg/EFFAS indexes show.
Greece’s financial woes have prompted some economists to question the future unity of the euro region and whether a single monetary policy can be applied simultaneously to 16 disparate economies. The euro has declined 7.1 percent against the dollar since the start on December.
Economist Nouriel Roubini said in an interview today that the EU, the European Central Bank or the International Monetary Fund will probably offer financial aid to Greece to help the country avoid default and limit the damage to monetary union.
“I expect there is going to be eventually some financial support,” Roubini told Bloomberg Television in Moscow. That support will come “either directly from the European Union or the ECB or, as I suggest, Greece should be going to the IMF to get an IMF package,” he said.
Greek Debt
The jump in Greece’s debt, which is set to surpass Italy as the region’s largest at more than 120 percent of GDP this year, has prompted investors to increase insurance against a possible default.
Credit-default swaps on Greek government bonds reached a record high level of 422 basis points on Jan. 28. They fell 7 basis points today to 380, according to CMA DataVision prices. That means it costs $380,000 a year to insure against losses on the debt for five years.
That perceived risk would decline further if the EU publicly offered to aid Greece and defend monetary union, said Nobel prize-winning economist Joseph Stiglitz.
“If it made that announcement, then the speculators would know there’s no more hope and they would just go away,” Stiglitz, a Columbia University professor, said in an interview yesterday in Athens. “It would cost nobody.”
Persuading Investors
Portugal and Spain have also been struggling to convince investors that they can cut their deficits and finance rising debt. In announcing on Jan. 26 its own budget plan to bring the deficit back within the EU limit in 2013, Portugal said that its shortfall was 9.3 percent of GDP last year, higher than the commission’s November forecast of 8 percent.
Spain, where the collapse of a real-estate boom deepened the recession and helped flip a budget surplus of 1.9 percent in 2007 into a deficit of 9.5 percent last year, also presented a budget plan calling for spending cuts and higher taxes. Cutting back on stimulus spending may make it harder for the government to reduce the EU’s highest jobless rate at almost 20 percent.
The yield premium investors demand to hold Portuguese bonds instead of bunds increased 4 basis points today to 131 basis points, the highest since April. Spain’s spread with Germany fell 2 basis points to 83.7, down from a nine-month high of 98 on Jan. 28.
To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Meera Louis in Brussels at mlouis1@bloomberg.net.
“We are endorsing the Greek program; we are giving confidence and supporting the Greek authorities,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “The implementation of this program is not easy.”
The Brussels-based commission, the EU executive, said it will demand monthly updates from Greece on its progress in completing the plan to reduce a deficit of 12.7 percent of gross domestic product to within the EU’s 3 percent limit in 2012. Greek Prime Minister George Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers.
The risk premium on Greek bonds rose to an 11-year high last week on concern over the government’s ability to sell the 53 billion euros ($74 billion) of bonds needed this year to finance its deficit and debt. Spanish and Portuguese bonds have also suffered as other high-deficit EU nations came under investor scrutiny, fueling speculation about the possibility of an EU bailout to protect the monetary union.
‘Speculative Game’
“Greece is in the center of a speculative game aimed at the euro,” Papandreou said in a televised speech in Athens late yesterday. “It is our national duty to stop the attempts to push our country to the edge of the cliff.”
Greek bonds gained today, with the premium investors demand to buy 10-year Greek securities over comparable German debt, the EU benchmark, sliding 21 basis points to 333. That was down from a peak of 396 on Jan. 28.
Papandreou yesterday urged Greeks to support the new measures and said the country couldn’t afford strikes and blockades that may derail the attempt to get the economy back on track. After the announcement of the broader wage freeze, unions urged workers to attend a previously announced strike of civil servants on Feb. 10.
Greece’s original deficit plan pledges to cut spending and raise revenue by about 10 billion euros this year to trim the shortfall by 4 percent of GDP. The government said it would meet that goal through cuts in bonuses to civil servants, a crackdown on tax evasion and state-asset sales. The additional measures announced yesterday would reduce spending by 0.3 percent to 0.4 percent of GDP, economists at HSBC Holdings Plc estimate.
Monitoring Greece
In its statement today, the commission demanded more details on the new measures within a month.
“The commission will be in charge of monitoring the implementation of the program through a very intense surveillance,” commission President Jose Barroso said yesterday. “The successful correction of its very excessive deficit is not only important for Greece, but for the euro area and the EU as a whole.”
The additional spending cuts and higher taxes may put a further drag on an economy set to contract 0.3 percent in 2010.
“Unless the wage-freeze measure is accompanied by initiatives that would boost exports and investments in the economy, the contraction in 2010 should be greater than expected, thus negatively affecting tax revenues,” economists at Marfin Analysis in Athens said in a note to investors today.
Worst Performers
The nation’s government bonds were the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent on concern about its deteriorating finances, Bloomberg/EFFAS indexes show.
Greece’s financial woes have prompted some economists to question the future unity of the euro region and whether a single monetary policy can be applied simultaneously to 16 disparate economies. The euro has declined 7.1 percent against the dollar since the start on December.
Economist Nouriel Roubini said in an interview today that the EU, the European Central Bank or the International Monetary Fund will probably offer financial aid to Greece to help the country avoid default and limit the damage to monetary union.
“I expect there is going to be eventually some financial support,” Roubini told Bloomberg Television in Moscow. That support will come “either directly from the European Union or the ECB or, as I suggest, Greece should be going to the IMF to get an IMF package,” he said.
Greek Debt
The jump in Greece’s debt, which is set to surpass Italy as the region’s largest at more than 120 percent of GDP this year, has prompted investors to increase insurance against a possible default.
Credit-default swaps on Greek government bonds reached a record high level of 422 basis points on Jan. 28. They fell 7 basis points today to 380, according to CMA DataVision prices. That means it costs $380,000 a year to insure against losses on the debt for five years.
That perceived risk would decline further if the EU publicly offered to aid Greece and defend monetary union, said Nobel prize-winning economist Joseph Stiglitz.
“If it made that announcement, then the speculators would know there’s no more hope and they would just go away,” Stiglitz, a Columbia University professor, said in an interview yesterday in Athens. “It would cost nobody.”
Persuading Investors
Portugal and Spain have also been struggling to convince investors that they can cut their deficits and finance rising debt. In announcing on Jan. 26 its own budget plan to bring the deficit back within the EU limit in 2013, Portugal said that its shortfall was 9.3 percent of GDP last year, higher than the commission’s November forecast of 8 percent.
Spain, where the collapse of a real-estate boom deepened the recession and helped flip a budget surplus of 1.9 percent in 2007 into a deficit of 9.5 percent last year, also presented a budget plan calling for spending cuts and higher taxes. Cutting back on stimulus spending may make it harder for the government to reduce the EU’s highest jobless rate at almost 20 percent.
The yield premium investors demand to hold Portuguese bonds instead of bunds increased 4 basis points today to 131 basis points, the highest since April. Spain’s spread with Germany fell 2 basis points to 83.7, down from a nine-month high of 98 on Jan. 28.
To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Meera Louis in Brussels at mlouis1@bloomberg.net.
Santander Faces Scrutiny After BBVA Property ‘Shock’ (Update1)
Banco Santander SA, the biggest Spanish bank, faces increased investor scrutiny over lending to property developers after Banco Bilbao Vizcaya Argentaria SA said its doubtful loans in Spain almost doubled.
“It’s all to do with real estate and developers, and I don’t think Santander is any different,” said Helmut Hipper, a fund manager at Union Investment in Frankfurt, which oversees about 93 billion euros ($130 billion). “There was the perception that there was outstanding quality in BBVA’s loan book, but now it’s back to reality.”
BBVA fell the most in 10 months on Jan. 27 after fourth- quarter profit was almost wiped out as it made writedowns in the U.S. and reassessed its Spanish property holdings. Bad loans as a proportion of lending in Spain and Portugal leapt to 5.1 percent in December from 2.6 percent a year earlier, as the bank reclassified 1.82 billion euros of property and consumer loans as doubtful in the fourth quarter. Santander Chief Executive Officer Alfredo Saenz said in October he expects a default rate of 3.3 percent on Spanish loans by year-end.
Investors will compare Santander’s provisioning to BBVA’s when it reports earnings tomorrow, said Andrea Williams, who helps manage about 1.2 billion pounds ($1.91 billion) at Royal London Asset Management in London and described the plunge in profit at BBVA as a “shock.”
‘Out in the Open’
“The big question is whether they’re being realistic,” Williams said of Santander. “My message would be to get it all out in the open.”
Rising earnings in Brazil and Britain, as well as the sale of shares in its Brazilian unit, probably underpinned fourth- quarter profit at Santander, analysts said. The bank, based in the northern Spanish town of the same name, may say net income rose 9.2 percent to 2.12 billion euros, based on the median estimate of 10 analysts in a Bloomberg survey.
“They could do some cleaning up without wiping out profit for the quarter,” said Arturo de Frias, an analyst at Evolution Securities in London. “I’m not against kitchen-sinking, but not at the expense of all your earnings.”
Santander has fallen 8 percent in Madrid trading this year, compared with a 12 percent drop at BBVA, which is based in Bilbao, Spain. Santander shares were down 2.1 percent to 10.40 euros as of 12:23 p.m.
A spokesman for Santander, who asked not to be identified in line with company policy, declined to comment on its provisioning plans.
‘Less True Now’
Santander and BBVA dodged the worst of the global financial crisis after avoiding toxic assets such as U.S. mortgage securities backed by subprime loans. Santander’s chairman, 75- year-old Emilio Botin, told investors in June the bank would aim to match 2008 profit of 8.88 billion euros last year. Santander earned 6.74 billion euros through September.
Spanish banks benefited from rules implemented by the central bank in 1999 that forced them to set aside more reserves in anticipation of future loan losses. The flip side is that they’re now seeing a delayed impact from bad loans as Spain remains mired in a slump that may cause the economy to contract for a second full year in 2010.
“The problem is that under Spain’s famous provisioning system, you can get this acceleration of provisions at a late stage in the cycle if the downturn goes on long enough, like this one,” said John Raymond, an analyst at CreditSights Inc. in London. “They sold this idea that they were better provisioned than everyone else, but that’s less true now than it was before.”
Bank of Spain
The Bank of Spain said in November it was examining the way banks manage more than 90 billion euros of assets to ensure they aren’t postponing losses on bad debts.
Santander may be recognizing fewer bad loans from developers than BBVA, which said last week it considered 17 percent of the 17.7 billion euros it lent to them as doubtful, said Tania Gold, an analyst at UniCredit SpA in London, in a report. About 8 percent of Santander’s loans to developers were classified as bad in September, she said.
BBVA raised the reserves set aside to cover possible losses on Spanish real estate taken on in exchange for bad loans to 32 percent last quarter from 17 percent a year earlier. Banco Espanol de Credito SA, a Santander retail unit run by Ana Patricia Botin, the daughter of Emilio Botin, reported on Jan. 15 that it had reserves amounting to 23 percent of its 1.3 billion euros of real estate.
BBVA said non-performing assets in Spain and Portugal climbed to 3.77 billion euros in December from 1.99 billion euros in September. Profit in the fourth quarter dropped 94 percent to 31 million euros.
To contact the reporter for this story: Charles Penty in Madrid at cpenty@bloomberg.net
“It’s all to do with real estate and developers, and I don’t think Santander is any different,” said Helmut Hipper, a fund manager at Union Investment in Frankfurt, which oversees about 93 billion euros ($130 billion). “There was the perception that there was outstanding quality in BBVA’s loan book, but now it’s back to reality.”
BBVA fell the most in 10 months on Jan. 27 after fourth- quarter profit was almost wiped out as it made writedowns in the U.S. and reassessed its Spanish property holdings. Bad loans as a proportion of lending in Spain and Portugal leapt to 5.1 percent in December from 2.6 percent a year earlier, as the bank reclassified 1.82 billion euros of property and consumer loans as doubtful in the fourth quarter. Santander Chief Executive Officer Alfredo Saenz said in October he expects a default rate of 3.3 percent on Spanish loans by year-end.
Investors will compare Santander’s provisioning to BBVA’s when it reports earnings tomorrow, said Andrea Williams, who helps manage about 1.2 billion pounds ($1.91 billion) at Royal London Asset Management in London and described the plunge in profit at BBVA as a “shock.”
‘Out in the Open’
“The big question is whether they’re being realistic,” Williams said of Santander. “My message would be to get it all out in the open.”
Rising earnings in Brazil and Britain, as well as the sale of shares in its Brazilian unit, probably underpinned fourth- quarter profit at Santander, analysts said. The bank, based in the northern Spanish town of the same name, may say net income rose 9.2 percent to 2.12 billion euros, based on the median estimate of 10 analysts in a Bloomberg survey.
“They could do some cleaning up without wiping out profit for the quarter,” said Arturo de Frias, an analyst at Evolution Securities in London. “I’m not against kitchen-sinking, but not at the expense of all your earnings.”
Santander has fallen 8 percent in Madrid trading this year, compared with a 12 percent drop at BBVA, which is based in Bilbao, Spain. Santander shares were down 2.1 percent to 10.40 euros as of 12:23 p.m.
A spokesman for Santander, who asked not to be identified in line with company policy, declined to comment on its provisioning plans.
‘Less True Now’
Santander and BBVA dodged the worst of the global financial crisis after avoiding toxic assets such as U.S. mortgage securities backed by subprime loans. Santander’s chairman, 75- year-old Emilio Botin, told investors in June the bank would aim to match 2008 profit of 8.88 billion euros last year. Santander earned 6.74 billion euros through September.
Spanish banks benefited from rules implemented by the central bank in 1999 that forced them to set aside more reserves in anticipation of future loan losses. The flip side is that they’re now seeing a delayed impact from bad loans as Spain remains mired in a slump that may cause the economy to contract for a second full year in 2010.
“The problem is that under Spain’s famous provisioning system, you can get this acceleration of provisions at a late stage in the cycle if the downturn goes on long enough, like this one,” said John Raymond, an analyst at CreditSights Inc. in London. “They sold this idea that they were better provisioned than everyone else, but that’s less true now than it was before.”
Bank of Spain
The Bank of Spain said in November it was examining the way banks manage more than 90 billion euros of assets to ensure they aren’t postponing losses on bad debts.
Santander may be recognizing fewer bad loans from developers than BBVA, which said last week it considered 17 percent of the 17.7 billion euros it lent to them as doubtful, said Tania Gold, an analyst at UniCredit SpA in London, in a report. About 8 percent of Santander’s loans to developers were classified as bad in September, she said.
BBVA raised the reserves set aside to cover possible losses on Spanish real estate taken on in exchange for bad loans to 32 percent last quarter from 17 percent a year earlier. Banco Espanol de Credito SA, a Santander retail unit run by Ana Patricia Botin, the daughter of Emilio Botin, reported on Jan. 15 that it had reserves amounting to 23 percent of its 1.3 billion euros of real estate.
BBVA said non-performing assets in Spain and Portugal climbed to 3.77 billion euros in December from 1.99 billion euros in September. Profit in the fourth quarter dropped 94 percent to 31 million euros.
To contact the reporter for this story: Charles Penty in Madrid at cpenty@bloomberg.net
Toyota Electronics Said to Be a Focus of U.S. Probe (Update1)
Electronic throttle systems are under review by U.S. safety officials as a possible cause of sudden acceleration in Toyota Motor Corp. vehicles, as alleged in at least seven lawsuits.
The government is also considering civil penalties against Toyota, the world’s largest automaker, for its handling of recalls affecting millions of its cars and trucks, according to an official at the Transportation Department, who asked not to be identified while a review of Toyota’s actions continues.
The National Highway Traffic Safety Administration is trying to determine if electromagnetic interference may be causing the throttle system to malfunction, said the official at the Transportation Department, which oversees NHTSA. Toyota said it has ruled out electronics as a cause. The company’s credibility would be further damaged if it is proved wrong, said Rebecca Lindland, an analyst at IHS Global Insight.
“Consumers would view that very negatively,” Lindland, based in Lexington, Massachusetts, said in a phone interview yesterday. “That group of diehard Toyota loyalists is being chipped away at as each new recall comes out.”
Separately, the Toyota City, Japan-based carmaker has been ordered by Japan’s government to investigate brake-related problems with the latest version of its Prius hybrid car, the nation’s transportation ministry said today.
Shares Decline
The ministry said it has received 14 complaints related to Prius brakes. It has also asked other carmakers to look into similar reports and such requests are “routine,” said Masaya Ota, an official in the ministry’s recall division.
Toyota fell 5.7 percent to close at 3,400 yen in Tokyo trading today, the biggest decline in Japan’s Nikkei 225 Stock Average, which gained 0.3 percent. It was the most actively traded stock in Japan.
Toyota began shipping steel plates to U.S. dealers on Feb. 1 as a fix for sticky gas pedals that have caused the carmaker to recall about 2.57 million vehicles in the U.S. and Canada.
“We know what the problem is,” Jim Lentz, Toyota’s president of U.S. sales, said in an interview on Bloomberg Television on Feb. 1. “We have the fix.”
Recalled Models
The U.S. recall for pedals that stick applies to model years 2009-2010 RAV4, 2010 Highlander and 2008-2010 Sequoia sport-utility vehicles, 2009-2010 Corolla and 2005-2010 Avalon sedans, some 2007-2010 Camry sedans, 2009-2010 Matrix hatchbacks, and 2007-2010 Tundra pickups, according to Toyota.
Toyota also has recalled and plans to fix about 5.6 million Toyota- and Lexus-brand cars and trucks in the U.S. and Canada because of floor mats that might trap gas pedals and cause vehicles to speed out of control. Some vehicles are affected by both types of recalls.
The investigation of the Prius in Japan could undermine sales in Toyota’s home market, where it hasn’t recalled any vehicles due to the sudden-acceleration issue. The model was Japan’s best-selling vehicle in 2009.
“The Prius is Toyota’s flagship model, its key to the future,” said Ashvin Chotai, managing director of London-based Intelligence Automotive Asia Ltd., a consulting company. “If that model gets tainted, that would suggest Toyota’s crisis has moved on to the next level.”
In the U.S., the NHTSA hadn’t found evidence as of Feb. 1 that anything other than sticky or trapped accelerators caused unintended acceleration, the Transportation Department official said.
Civil Penalties
Mike Michels, Toyota’s U.S. vice president for corporate communications based in Torrance, California, said in an e- mailed statement yesterday that he had “no information” on a continuing investigation by NHTSA of the automaker’s electronic throttle control system.
NHTSA can impose civil penalties of up to $16.4 million per recall, the Transportation Department official said.
The largest civil penalty NHTSA has issued that wasn’t related to emissions violations was $1 million paid by General Motors Corp. to settle charges it failed to conduct a timely recall to correct a windshield-wiper defect, the official said. The defect was in 581,344 Trailblazers, Bravadas, Envoys and Isuzu Ascenders for the 2002 and 2003 model years.
At least 15 lawsuits seeking class action status have been filed against Toyota on the acceleration issue, and seven of them claim an electronic throttle system called ETCS-i is at fault instead of the pedals.
Electronic Signals
In cars with the ETCS-i system, the engine’s throttle is controlled by electronic signals, which are sent from a sensor that detects how far the gas pedal is depressed. The signals are transmitted to a computer module that controls how much the throttle opens.
Lawyers claiming an electronic defect contend that floor mats or stuck pedals don’t explain the sudden-acceleration incidents that triggered their lawsuits.
Edgar Heiskell, an attorney from Charleston, West Virginia, who represents the family of a Michigan woman who died when her 2005 Toyota Camry hit a tree at almost 80 miles an hour (129 kilometers per hour), said her car didn’t have a floor mat. She stood on the brake, attempting to stop the car after it accelerated from a speed of 25 miles per hour, he said.
The suit was filed in November. Heiskell also has filed a West Virginia suit against Toyota seeking class-action status.
‘Sitting Dead Still’
In a Texas lawsuit filed on Jan. 29, plaintiff Alfred Pena said his 2008 Toyota Avalon unexpectedly accelerated at a stop sign on Jan. 14, causing a collision. He wasn’t injured, said Robert Hilliard, an attorney representing Pena. Pena’s wife, Sylvia, had a previous episode of unintended acceleration that didn’t result in an accident, Hilliard said.
Sylvia Pena “was sitting dead still,” and the car accelerated as she released the brake before she touched the gas pedal, Hilliard, of Corpus Christi, Texas, said in an interview.
“My belief is that fixed Toyotas with new pedals will still inadvertently accelerate,” Hilliard said.
NHTSA tested throttle electronics last year in response to a petition from a 2007 Lexus ES 350 owner who had experienced sudden acceleration of his vehicle. The agency denied the petition in October after subjecting the same model of car to “multiple electrical signals” and “magnetic fields.”
Toyota said at the time that the October decision marked the fifth in which the agency had rejected similar requests to investigate company vehicles for defects including electronics related to unintended acceleration.
‘Exhaustive Testing’
“In terms of electronics of the vehicle, we’ve done exhaustive testing and we’ve found no issues with the electronics,” Toyota’s Lentz said on a conference call with reporters Feb. 1.
Toyota, as required by law, stopped selling eight vehicles recalled in the U.S. last week. The company said it will begin fixing accelerator pedals, which were supplied by Elkhart, Indiana-based CTS Corp., this week, with some dealerships preparing to do repairs around the clock.
The Transportation Department and its auto safety agency have been called to testify at two congressional hearings on the handling of the Toyota recalls.
“While Toyota is taking responsible action now, it unfortunately took an enormous effort to get to this point,” Transportation Secretary Ray LaHood said yesterday in an e- mailed statement. The department is “continuing to review possible defects.”
House Hearings
A House Oversight and Government Reform Committee panel will hold a hearing on the recalls on Feb. 10, followed by the House Energy and Commerce Committee on Feb. 25.
Representative Bart Stupak, a Michigan Democrat who serves on both committees scheduled to question Toyota, said in a letter to Lentz that his public statements on Feb. 1 were “different than the representations” Toyota officials made to the Energy and Commerce Committee’s staff last week.
Asked whether Toyota “could be certain that floor mat entrapment and sticking accelerator pedals fully explained” the causes of unintended acceleration, company officials said the “causes of unintended acceleration are ‘very, very hard’ to identify,” Stupak said in a letter today to Lentz.
Toyota executives at the meeting also said sticking pedals are “unlikely to be responsible” for reports of drivers losing control as cars accelerated past 60 miles per hour, Stupak said in the letter. He asked Lentz to “clarify” the differing accounts.
To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net
The government is also considering civil penalties against Toyota, the world’s largest automaker, for its handling of recalls affecting millions of its cars and trucks, according to an official at the Transportation Department, who asked not to be identified while a review of Toyota’s actions continues.
The National Highway Traffic Safety Administration is trying to determine if electromagnetic interference may be causing the throttle system to malfunction, said the official at the Transportation Department, which oversees NHTSA. Toyota said it has ruled out electronics as a cause. The company’s credibility would be further damaged if it is proved wrong, said Rebecca Lindland, an analyst at IHS Global Insight.
“Consumers would view that very negatively,” Lindland, based in Lexington, Massachusetts, said in a phone interview yesterday. “That group of diehard Toyota loyalists is being chipped away at as each new recall comes out.”
Separately, the Toyota City, Japan-based carmaker has been ordered by Japan’s government to investigate brake-related problems with the latest version of its Prius hybrid car, the nation’s transportation ministry said today.
Shares Decline
The ministry said it has received 14 complaints related to Prius brakes. It has also asked other carmakers to look into similar reports and such requests are “routine,” said Masaya Ota, an official in the ministry’s recall division.
Toyota fell 5.7 percent to close at 3,400 yen in Tokyo trading today, the biggest decline in Japan’s Nikkei 225 Stock Average, which gained 0.3 percent. It was the most actively traded stock in Japan.
Toyota began shipping steel plates to U.S. dealers on Feb. 1 as a fix for sticky gas pedals that have caused the carmaker to recall about 2.57 million vehicles in the U.S. and Canada.
“We know what the problem is,” Jim Lentz, Toyota’s president of U.S. sales, said in an interview on Bloomberg Television on Feb. 1. “We have the fix.”
Recalled Models
The U.S. recall for pedals that stick applies to model years 2009-2010 RAV4, 2010 Highlander and 2008-2010 Sequoia sport-utility vehicles, 2009-2010 Corolla and 2005-2010 Avalon sedans, some 2007-2010 Camry sedans, 2009-2010 Matrix hatchbacks, and 2007-2010 Tundra pickups, according to Toyota.
Toyota also has recalled and plans to fix about 5.6 million Toyota- and Lexus-brand cars and trucks in the U.S. and Canada because of floor mats that might trap gas pedals and cause vehicles to speed out of control. Some vehicles are affected by both types of recalls.
The investigation of the Prius in Japan could undermine sales in Toyota’s home market, where it hasn’t recalled any vehicles due to the sudden-acceleration issue. The model was Japan’s best-selling vehicle in 2009.
“The Prius is Toyota’s flagship model, its key to the future,” said Ashvin Chotai, managing director of London-based Intelligence Automotive Asia Ltd., a consulting company. “If that model gets tainted, that would suggest Toyota’s crisis has moved on to the next level.”
In the U.S., the NHTSA hadn’t found evidence as of Feb. 1 that anything other than sticky or trapped accelerators caused unintended acceleration, the Transportation Department official said.
Civil Penalties
Mike Michels, Toyota’s U.S. vice president for corporate communications based in Torrance, California, said in an e- mailed statement yesterday that he had “no information” on a continuing investigation by NHTSA of the automaker’s electronic throttle control system.
NHTSA can impose civil penalties of up to $16.4 million per recall, the Transportation Department official said.
The largest civil penalty NHTSA has issued that wasn’t related to emissions violations was $1 million paid by General Motors Corp. to settle charges it failed to conduct a timely recall to correct a windshield-wiper defect, the official said. The defect was in 581,344 Trailblazers, Bravadas, Envoys and Isuzu Ascenders for the 2002 and 2003 model years.
At least 15 lawsuits seeking class action status have been filed against Toyota on the acceleration issue, and seven of them claim an electronic throttle system called ETCS-i is at fault instead of the pedals.
Electronic Signals
In cars with the ETCS-i system, the engine’s throttle is controlled by electronic signals, which are sent from a sensor that detects how far the gas pedal is depressed. The signals are transmitted to a computer module that controls how much the throttle opens.
Lawyers claiming an electronic defect contend that floor mats or stuck pedals don’t explain the sudden-acceleration incidents that triggered their lawsuits.
Edgar Heiskell, an attorney from Charleston, West Virginia, who represents the family of a Michigan woman who died when her 2005 Toyota Camry hit a tree at almost 80 miles an hour (129 kilometers per hour), said her car didn’t have a floor mat. She stood on the brake, attempting to stop the car after it accelerated from a speed of 25 miles per hour, he said.
The suit was filed in November. Heiskell also has filed a West Virginia suit against Toyota seeking class-action status.
‘Sitting Dead Still’
In a Texas lawsuit filed on Jan. 29, plaintiff Alfred Pena said his 2008 Toyota Avalon unexpectedly accelerated at a stop sign on Jan. 14, causing a collision. He wasn’t injured, said Robert Hilliard, an attorney representing Pena. Pena’s wife, Sylvia, had a previous episode of unintended acceleration that didn’t result in an accident, Hilliard said.
Sylvia Pena “was sitting dead still,” and the car accelerated as she released the brake before she touched the gas pedal, Hilliard, of Corpus Christi, Texas, said in an interview.
“My belief is that fixed Toyotas with new pedals will still inadvertently accelerate,” Hilliard said.
NHTSA tested throttle electronics last year in response to a petition from a 2007 Lexus ES 350 owner who had experienced sudden acceleration of his vehicle. The agency denied the petition in October after subjecting the same model of car to “multiple electrical signals” and “magnetic fields.”
Toyota said at the time that the October decision marked the fifth in which the agency had rejected similar requests to investigate company vehicles for defects including electronics related to unintended acceleration.
‘Exhaustive Testing’
“In terms of electronics of the vehicle, we’ve done exhaustive testing and we’ve found no issues with the electronics,” Toyota’s Lentz said on a conference call with reporters Feb. 1.
Toyota, as required by law, stopped selling eight vehicles recalled in the U.S. last week. The company said it will begin fixing accelerator pedals, which were supplied by Elkhart, Indiana-based CTS Corp., this week, with some dealerships preparing to do repairs around the clock.
The Transportation Department and its auto safety agency have been called to testify at two congressional hearings on the handling of the Toyota recalls.
“While Toyota is taking responsible action now, it unfortunately took an enormous effort to get to this point,” Transportation Secretary Ray LaHood said yesterday in an e- mailed statement. The department is “continuing to review possible defects.”
House Hearings
A House Oversight and Government Reform Committee panel will hold a hearing on the recalls on Feb. 10, followed by the House Energy and Commerce Committee on Feb. 25.
Representative Bart Stupak, a Michigan Democrat who serves on both committees scheduled to question Toyota, said in a letter to Lentz that his public statements on Feb. 1 were “different than the representations” Toyota officials made to the Energy and Commerce Committee’s staff last week.
Asked whether Toyota “could be certain that floor mat entrapment and sticking accelerator pedals fully explained” the causes of unintended acceleration, company officials said the “causes of unintended acceleration are ‘very, very hard’ to identify,” Stupak said in a letter today to Lentz.
Toyota executives at the meeting also said sticking pedals are “unlikely to be responsible” for reports of drivers losing control as cars accelerated past 60 miles per hour, Stupak said in the letter. He asked Lentz to “clarify” the differing accounts.
To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net
Time Warner Fourth-Quarter Profit Exceeds Analysts’ Estimates
Time Warner Inc., owner of the Warner Bros. film studio and the HBO cable channel, reported fourth- quarter profit that topped analysts’ estimates and increased its dividend and stock repurchase program.
Net income of $627 million, or 53 cents a share, compared with a loss of $16 billion, or $13.41, a year earlier, the New York-based company said today in a statement distributed by Business Wire. Excluding items such as costs to cut jobs at Time Inc., profit rose to 55 cents, beating the 52-cent average of analysts’ estimates compiled by Bloomberg.
Chief Executive Officer Jeffrey Bewkes completed the spinoff of AOL Inc. in December, shedding the Internet unit that had been a drag on profit since the companies’ 2001 merger. Bewkes, 57, also trimmed jobs and costs at the magazine and film units to help counter a slump in advertising and DVD revenue.
Time Warner raised its quarterly dividend to 21.25 cents a share from 18.75 cents, and boosted its share buyback by $2 billion.
Investors have pressed for cash returns since the company received $9.25 billion last March from the spinoff of Time Warner Cable Inc.
Time Warner rose 46 cents to $28.51 yesterday in New York Stock Exchange composite trading. The shares climbed 40 percent last year, compared with a 23 percent gain for the Standard & Poor’s 500 Index.
Warner Bros. was the top-grossing studio in the U.S. and Canada last year, pulling in $2.11 billion in box-office sales, according to Box Office Mojo. The studio released “The Blind Side” and “Sherlock Holmes” in the fourth quarter.
In an attempt to add to its film and TV library, Time Warner was among first-round bidders for the Metro-Goldwyn-Mayer Inc. film studio, a person familiar with the matter said last month. MGM, maker of the “James Bond” movies, put itself up for sale in November as it struggles with $3.7 billion in debt.
In December, Time Inc. joined News Corp., Hearst Corp. and other publishers to form a joint venture to sell magazines and newspapers through a virtual store. The publications are facing an industrywide decline in advertising sales that was heightened by the U.S. recession.
To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net
Net income of $627 million, or 53 cents a share, compared with a loss of $16 billion, or $13.41, a year earlier, the New York-based company said today in a statement distributed by Business Wire. Excluding items such as costs to cut jobs at Time Inc., profit rose to 55 cents, beating the 52-cent average of analysts’ estimates compiled by Bloomberg.
Chief Executive Officer Jeffrey Bewkes completed the spinoff of AOL Inc. in December, shedding the Internet unit that had been a drag on profit since the companies’ 2001 merger. Bewkes, 57, also trimmed jobs and costs at the magazine and film units to help counter a slump in advertising and DVD revenue.
Time Warner raised its quarterly dividend to 21.25 cents a share from 18.75 cents, and boosted its share buyback by $2 billion.
Investors have pressed for cash returns since the company received $9.25 billion last March from the spinoff of Time Warner Cable Inc.
Time Warner rose 46 cents to $28.51 yesterday in New York Stock Exchange composite trading. The shares climbed 40 percent last year, compared with a 23 percent gain for the Standard & Poor’s 500 Index.
Warner Bros. was the top-grossing studio in the U.S. and Canada last year, pulling in $2.11 billion in box-office sales, according to Box Office Mojo. The studio released “The Blind Side” and “Sherlock Holmes” in the fourth quarter.
In an attempt to add to its film and TV library, Time Warner was among first-round bidders for the Metro-Goldwyn-Mayer Inc. film studio, a person familiar with the matter said last month. MGM, maker of the “James Bond” movies, put itself up for sale in November as it struggles with $3.7 billion in debt.
In December, Time Inc. joined News Corp., Hearst Corp. and other publishers to form a joint venture to sell magazines and newspapers through a virtual store. The publications are facing an industrywide decline in advertising sales that was heightened by the U.S. recession.
To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net
Stocks Rise as U.S. Earnings Beat Forecasts; Copper, Oil Gain
Stocks advanced, pushing the MSCI Emerging Markets Index to its biggest gain in two months, on speculation U.S. earnings reports suggest the global recovery is gathering pace. Copper and oil climbed for a third day.
The MSCI World Index of 23 developed nations’ stocks rose 0.3 percent at 11:01 a.m. in London and the emerging markets index added 1.9 percent, its steepest advance since Dec. 1. Futures on the Standard & Poor’s 500 Index were little changed. Copper advanced 1.7 percent and crude oil 0.8 percent. The dollar declined against 14 of the 16 most-traded currencies.
A nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009, and about 81 percent of earnings since Jan. 11 beat the average of Wall Street estimates, according to data compiled by Bloomberg. Service industries in the U.S. probably expanded in January at the fastest pace in more than a year, economists said before a report today.
“While investors have been a bit cautious over the course of the past two weeks, they should continue to focus on the corporate profitability picture that is rebounding fast,” said Henk Potts at Barclays Stockbrokers Ltd. in London, which oversees about $218 billion. “Monetary tightening may drive the market into a bumpier road in the second half, but it should not be a matter of concern for at least the first half.”
European Gains
Europe’s Dow Jones Stoxx 600 Index gained 0.2 percent. Scania AB surged 9 percent in Stockholm after the Swedish truckmaker posted results that beat analysts’ estimates. Rival MAN AG jumped 3 percent in Frankfurt. Standard Life Plc, Scotland’s biggest insurer, added 4 percent after saying 2009 revenue fell less than analysts predicted. Gains were limited as Electrolux AB, the world’s second-biggest appliance maker, plunged 13 percent in Stockholm, the biggest drop in three years, after earnings missed estimates.
The MSCI Asia Pacific Index advanced 1.2 percent, posting its first back-to-back advance in three weeks. Esprit, the biggest Hong Kong-listed clothier, gained 7.9 percent after posting better-than-estimated profit. China’s Shanghai Composite Index climbed 2.4 percent and India’s Sensex Index advanced 2 percent, with both gauges headed for the steepest gains in six weeks, led by information technology and industrial shares.
Commodity producers led gains in Europe, with Russia’s Micex Index climbing 1 percent and Kazakhmys Plc, Kazakhstan’s largest copper producer, increasing 2.4 percent after it was given a new “buy” rating by UBS AG. Time Warner Inc. increased its cash dividend to 85 cents a share from 75 cents, and boosted its share repurchase program by $2 billion to $3 billion.
Greek Securities Rally
Greek stocks and bonds rose after European Commission President Jose Barroso said the commission endorses the nation’s deficit-reduction program. “The markets are there; they are putting pressure and that cannot be ignored,” Almunia told reporters in Brussels.
The benchmark ASE Index advanced 1.6 percent as National Bank of Greece SA added 4.2 percent and Alpha Bank SA climbed 4.5 percent. Greece’s two-year note jumped, with the yield falling 27 basis points to 6.24 percent. Credit-default swaps on Greek government bonds fell 7 basis points to 380, according to CMA DataVision, meaning it costs $380,000 a year to insure against losses on the debt for five years.
The gain in U.S. futures indicated the S&P 500 may add to yesterday’s 1.3 percent advance and extend its biggest two-day rally since October. The measure has surged 63 percent since March as governments and central banks around the world sought to encourage growth by maintaining low interest rates and committing more than $12 trillion to stimulate the economy.
Service Industries
The Institute for Supply Management’s index of non- manufacturing companies, which make up almost 90 percent of the U.S. economy, rose to 51 from 49.8 in December, according to the median estimate of 75 economists surveyed by Bloomberg News. The report is due at 10 a.m. in New York. Readings above 50 signal growth.
A separate report at 8:15 a.m. may show companies last month shed the fewest workers in two years. Figures from ADP Employer Services may show private employers cut 30,000 jobs in January, according to the median estimate of economists.
U.S. joblessness threatens to undermine stocks, according to Mohamed A. El-Erian, Chief Executive Officer of Pacific Investment Management Co. “I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” El-Erian wrote in a Bloomberg News column. “If the gap isn’t bridged by the validation of the more optimistic expectations, investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes.”
Oil, Copper Advance
Crude oil for March delivery in New York rose 53 cents to $77.76 a barrel, extending yesterday’s 3.8 percent jump. Copper for delivery in three months added $81 to $6,896 a metric ton on the London Metal Exchange, leading gains in metals. Gold for immediate delivery rose 0.7 percent to $1,122.63 an ounce.
Improving economic data is “very good news for assets that are sensitive to growth, such as commodities and equities,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London.
The dollar weakened 0.3 percent against the euro and added 0.1 percent compared with the yen. The South Korean won advanced against all 16, strengthening 0.9 percent versus the dollar and 1 percent compared with the yen.
Commodity producing nations led exchange-rate gains, with the Russian ruble gaining 0.7 percent to a two-week high against the dollar and South Africa’s rand strengthening 0.8 percent.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
The MSCI World Index of 23 developed nations’ stocks rose 0.3 percent at 11:01 a.m. in London and the emerging markets index added 1.9 percent, its steepest advance since Dec. 1. Futures on the Standard & Poor’s 500 Index were little changed. Copper advanced 1.7 percent and crude oil 0.8 percent. The dollar declined against 14 of the 16 most-traded currencies.
A nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009, and about 81 percent of earnings since Jan. 11 beat the average of Wall Street estimates, according to data compiled by Bloomberg. Service industries in the U.S. probably expanded in January at the fastest pace in more than a year, economists said before a report today.
“While investors have been a bit cautious over the course of the past two weeks, they should continue to focus on the corporate profitability picture that is rebounding fast,” said Henk Potts at Barclays Stockbrokers Ltd. in London, which oversees about $218 billion. “Monetary tightening may drive the market into a bumpier road in the second half, but it should not be a matter of concern for at least the first half.”
European Gains
Europe’s Dow Jones Stoxx 600 Index gained 0.2 percent. Scania AB surged 9 percent in Stockholm after the Swedish truckmaker posted results that beat analysts’ estimates. Rival MAN AG jumped 3 percent in Frankfurt. Standard Life Plc, Scotland’s biggest insurer, added 4 percent after saying 2009 revenue fell less than analysts predicted. Gains were limited as Electrolux AB, the world’s second-biggest appliance maker, plunged 13 percent in Stockholm, the biggest drop in three years, after earnings missed estimates.
The MSCI Asia Pacific Index advanced 1.2 percent, posting its first back-to-back advance in three weeks. Esprit, the biggest Hong Kong-listed clothier, gained 7.9 percent after posting better-than-estimated profit. China’s Shanghai Composite Index climbed 2.4 percent and India’s Sensex Index advanced 2 percent, with both gauges headed for the steepest gains in six weeks, led by information technology and industrial shares.
Commodity producers led gains in Europe, with Russia’s Micex Index climbing 1 percent and Kazakhmys Plc, Kazakhstan’s largest copper producer, increasing 2.4 percent after it was given a new “buy” rating by UBS AG. Time Warner Inc. increased its cash dividend to 85 cents a share from 75 cents, and boosted its share repurchase program by $2 billion to $3 billion.
Greek Securities Rally
Greek stocks and bonds rose after European Commission President Jose Barroso said the commission endorses the nation’s deficit-reduction program. “The markets are there; they are putting pressure and that cannot be ignored,” Almunia told reporters in Brussels.
The benchmark ASE Index advanced 1.6 percent as National Bank of Greece SA added 4.2 percent and Alpha Bank SA climbed 4.5 percent. Greece’s two-year note jumped, with the yield falling 27 basis points to 6.24 percent. Credit-default swaps on Greek government bonds fell 7 basis points to 380, according to CMA DataVision, meaning it costs $380,000 a year to insure against losses on the debt for five years.
The gain in U.S. futures indicated the S&P 500 may add to yesterday’s 1.3 percent advance and extend its biggest two-day rally since October. The measure has surged 63 percent since March as governments and central banks around the world sought to encourage growth by maintaining low interest rates and committing more than $12 trillion to stimulate the economy.
Service Industries
The Institute for Supply Management’s index of non- manufacturing companies, which make up almost 90 percent of the U.S. economy, rose to 51 from 49.8 in December, according to the median estimate of 75 economists surveyed by Bloomberg News. The report is due at 10 a.m. in New York. Readings above 50 signal growth.
A separate report at 8:15 a.m. may show companies last month shed the fewest workers in two years. Figures from ADP Employer Services may show private employers cut 30,000 jobs in January, according to the median estimate of economists.
U.S. joblessness threatens to undermine stocks, according to Mohamed A. El-Erian, Chief Executive Officer of Pacific Investment Management Co. “I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” El-Erian wrote in a Bloomberg News column. “If the gap isn’t bridged by the validation of the more optimistic expectations, investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes.”
Oil, Copper Advance
Crude oil for March delivery in New York rose 53 cents to $77.76 a barrel, extending yesterday’s 3.8 percent jump. Copper for delivery in three months added $81 to $6,896 a metric ton on the London Metal Exchange, leading gains in metals. Gold for immediate delivery rose 0.7 percent to $1,122.63 an ounce.
Improving economic data is “very good news for assets that are sensitive to growth, such as commodities and equities,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London.
The dollar weakened 0.3 percent against the euro and added 0.1 percent compared with the yen. The South Korean won advanced against all 16, strengthening 0.9 percent versus the dollar and 1 percent compared with the yen.
Commodity producing nations led exchange-rate gains, with the Russian ruble gaining 0.7 percent to a two-week high against the dollar and South Africa’s rand strengthening 0.8 percent.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
EU Agrees to Additional Sugar Exports, Defying Brazil, Thailand
The European Union approved exports of an additional 500,000 metric tons of sugar above an annual limit permitted by a World Trade Organization decision, defying calls from Brazil, Thailand and Australia to stick to the quota.
The proposal to lift exports in the 2009-10 season drew no objections from EU officials by today’s deadline, said Johan Reyniers, a spokesman for the Brussels-based European Commission, the 27-nation bloc’s executive arm.
Brazil, Thailand and Australia, the top sugar exporters, this week asked the EU to scrap the plan because its shipments of the sweetener would exceed the quota. The WTO in 2005 limited EU exports of subsidized sugar to 1.37 million tons following a complaint by the three countries.
“We have done a careful legal and economic analysis which shows that the quantities authorized for export are not benefiting from any subsidy, directly or indirectly,” Reyniers said by phone today. “Therefore they are not to be counted as part of the exports that the EU is allowed under WTO law.”
The EU has said it would raise exports as a “temporary measure” in response to surging sugar prices and the bloc’s record 2009 harvest.
The commission argues that current world prices mean the EU can export more sugar without violating WTO subsidy commitments. White, or refined, sugar for May delivery trades at about $741 a ton in London, above the EU reference price of 404.40 euros ($566.52) that is the basis for negotiations with importers and the sale of so-called intervention stocks.
Prices Double
“On the question of sugar, the French position is the EU position,” Bruno Le Maire, France’s agriculture minister, said at a press conference in Paris today. The country is the EU’s largest sugar producer.
Sugar prices doubled in 2009 as output was hurt by rains that were too heavy in Brazil and too light in India, the world’s biggest producers. Global demand will outpace supply by 13.5 million tons this season, according to broker Czarnikow Group Ltd.
The top sugar exporters are ruling out “no course of action” at this stage, Brazil’s mission to the WTO said in a Feb. 1 statement.
“Australia, Brazil and Thailand disagree that the trade distortions produced by the European Union’s sugar regime were eliminated by circumstantially high international prices,” the countries said in the joint statement.
To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net
The proposal to lift exports in the 2009-10 season drew no objections from EU officials by today’s deadline, said Johan Reyniers, a spokesman for the Brussels-based European Commission, the 27-nation bloc’s executive arm.
Brazil, Thailand and Australia, the top sugar exporters, this week asked the EU to scrap the plan because its shipments of the sweetener would exceed the quota. The WTO in 2005 limited EU exports of subsidized sugar to 1.37 million tons following a complaint by the three countries.
“We have done a careful legal and economic analysis which shows that the quantities authorized for export are not benefiting from any subsidy, directly or indirectly,” Reyniers said by phone today. “Therefore they are not to be counted as part of the exports that the EU is allowed under WTO law.”
The EU has said it would raise exports as a “temporary measure” in response to surging sugar prices and the bloc’s record 2009 harvest.
The commission argues that current world prices mean the EU can export more sugar without violating WTO subsidy commitments. White, or refined, sugar for May delivery trades at about $741 a ton in London, above the EU reference price of 404.40 euros ($566.52) that is the basis for negotiations with importers and the sale of so-called intervention stocks.
Prices Double
“On the question of sugar, the French position is the EU position,” Bruno Le Maire, France’s agriculture minister, said at a press conference in Paris today. The country is the EU’s largest sugar producer.
Sugar prices doubled in 2009 as output was hurt by rains that were too heavy in Brazil and too light in India, the world’s biggest producers. Global demand will outpace supply by 13.5 million tons this season, according to broker Czarnikow Group Ltd.
The top sugar exporters are ruling out “no course of action” at this stage, Brazil’s mission to the WTO said in a Feb. 1 statement.
“Australia, Brazil and Thailand disagree that the trade distortions produced by the European Union’s sugar regime were eliminated by circumstantially high international prices,” the countries said in the joint statement.
To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net
EONCap, HL Bank shares decline
EON Capital Bhd, a Malaysian banking group, fell the most in more than five months after the Malaysian banking group rejected a RM4.92 billion takeover offer from billionaire Quek Leng Chan’s Hong Leong Bank Bhd.
The stock dropped 3.7 per cent to RM6.80 at 11:28 a.m. local time in Kuala Lumpur, set for its steepest decline since Aug. 17. Hong Leong shares dropped 0.9 per cent to RM8.13.
EON said it turned down the bid because the offer “undervalued” the company while Hong Leong said it was “disappointed,” calling its offer “fair and attractive.”-- Bloomberg
The stock dropped 3.7 per cent to RM6.80 at 11:28 a.m. local time in Kuala Lumpur, set for its steepest decline since Aug. 17. Hong Leong shares dropped 0.9 per cent to RM8.13.
EON said it turned down the bid because the offer “undervalued” the company while Hong Leong said it was “disappointed,” calling its offer “fair and attractive.”-- Bloomberg
Hitachi targets 10pc Malaysia sales growth
HITACHI Asia (Malaysia) Sdn Bhd, a wholly-owned subsidiary of Japan's Hitachi Ltd, expects to register a ten per cent sales growth for its fiscal year ending March 2011.
Managing Director, Seiji Yoshimura said the company is confident of achieving this target, due mainly to the large deals expected to be secured in the Malaysian power and petroleum sectors.
"Our initial confidence stems from the global economic recovery which has spread at a faster pace among Asean countries, compared to other regions.
"We have tendered for three to six mega projects and remain confident of winning a majority of it, based on previous achievements. The tenders include those from Petronas and Tenaga Nasional Bhd," he said.
However, Yoshimura declined to elaborate on the value of the tenders.
He was speaking to reporters after the Hitachi Young Leaders Initiative (HYLI) Alumni Forum media briefing, here today.
Also present was the Secretary-General of the Ministry of International Trade and Industry, Tan Sri Abdul Rahman Mamat and the Managing Director of Hitachi Asia Ltd, Takayuki Hirota.
Meanwhile, Hirota said the company recognised an overwhelming potential in Malaysia to grow its business.
"We always include Malaysia in our annual expansion plan. We are now also looking at Vietnam to grow our business there.We have only one production company there at present," he explained.
With more than 8000 employees, Hitachi currently operates 12 production and 13 sales companies in Malaysia.
The tenth edition of the HYLI, commemorating also the 100th anniversary of the Hitachi Group, will be held in Singapore with seven participating countries. - BERNAMA
Managing Director, Seiji Yoshimura said the company is confident of achieving this target, due mainly to the large deals expected to be secured in the Malaysian power and petroleum sectors.
"Our initial confidence stems from the global economic recovery which has spread at a faster pace among Asean countries, compared to other regions.
"We have tendered for three to six mega projects and remain confident of winning a majority of it, based on previous achievements. The tenders include those from Petronas and Tenaga Nasional Bhd," he said.
However, Yoshimura declined to elaborate on the value of the tenders.
He was speaking to reporters after the Hitachi Young Leaders Initiative (HYLI) Alumni Forum media briefing, here today.
Also present was the Secretary-General of the Ministry of International Trade and Industry, Tan Sri Abdul Rahman Mamat and the Managing Director of Hitachi Asia Ltd, Takayuki Hirota.
Meanwhile, Hirota said the company recognised an overwhelming potential in Malaysia to grow its business.
"We always include Malaysia in our annual expansion plan. We are now also looking at Vietnam to grow our business there.We have only one production company there at present," he explained.
With more than 8000 employees, Hitachi currently operates 12 production and 13 sales companies in Malaysia.
The tenth edition of the HYLI, commemorating also the 100th anniversary of the Hitachi Group, will be held in Singapore with seven participating countries. - BERNAMA
EON Bank can stand alone, says CEO
EON Bank can stand alone with or without merger or acquisition offers, says Group Chief Executive Officer Michael Lor.
"We are in a strong position today to grow, (regardless of) whether there are offers or not. As far as the management is concerned, it is business as usual for us," he said after unveiling EON Bank Group's wealth management campaign for 2010.
Lor said the bank performance indicators improved steadily over the last 12 months as a result of its transformation programme, aggressive promotions and marketing strategy.
Over the last 12 months, he said, the bank's credit card segment grew in excess of 20 per cent, hire purchase by three per cent, loan loss coverage rose to 86 per cent from 56 per cent and gross non-performing loans improved to two per cent from four per cent.
"Based on these growth numbers, the value of the company has significantly appreciated. That's why the board has taken the stand that the Hong Leong Bank offer has significantly undervalued the EON Group," he said.
Last month, EON Capital Bhd, the holding company of EON Bank Group, received Bank Negara's approval to start merger talks with Hong Leong Bank Bhd.
If the merger had materialised, EON Bank Group would be the fourth largest bank in the country behind Maybank, CIMB and Public Bank.
Hong Leong Bank Bhd had offered to acquire the entire assets and liabilities of EON Capital for RM4.9 billion cash or RM7.10 per EON Cap share.
Hong Leong Bank obtained approval to enter into talks with EON Capital's two major shareholders -- businessman Rin Kei Mei and Sarawak billionaire Tan Sri Tiong Hiew King.
Both owned a combined indirect stake of 31.7 per cent held via Kualapura Sdn Bhd and Lintang Emas Sdn Bhd with 15.4 per cent and RH Development Sdn Bhd with 16.3 per cent. - Bernama
"We are in a strong position today to grow, (regardless of) whether there are offers or not. As far as the management is concerned, it is business as usual for us," he said after unveiling EON Bank Group's wealth management campaign for 2010.
Lor said the bank performance indicators improved steadily over the last 12 months as a result of its transformation programme, aggressive promotions and marketing strategy.
Over the last 12 months, he said, the bank's credit card segment grew in excess of 20 per cent, hire purchase by three per cent, loan loss coverage rose to 86 per cent from 56 per cent and gross non-performing loans improved to two per cent from four per cent.
"Based on these growth numbers, the value of the company has significantly appreciated. That's why the board has taken the stand that the Hong Leong Bank offer has significantly undervalued the EON Group," he said.
Last month, EON Capital Bhd, the holding company of EON Bank Group, received Bank Negara's approval to start merger talks with Hong Leong Bank Bhd.
If the merger had materialised, EON Bank Group would be the fourth largest bank in the country behind Maybank, CIMB and Public Bank.
Hong Leong Bank Bhd had offered to acquire the entire assets and liabilities of EON Capital for RM4.9 billion cash or RM7.10 per EON Cap share.
Hong Leong Bank obtained approval to enter into talks with EON Capital's two major shareholders -- businessman Rin Kei Mei and Sarawak billionaire Tan Sri Tiong Hiew King.
Both owned a combined indirect stake of 31.7 per cent held via Kualapura Sdn Bhd and Lintang Emas Sdn Bhd with 15.4 per cent and RH Development Sdn Bhd with 16.3 per cent. - Bernama
Skali sees 20pc revenue growth
SKALI Group, an e-Business specialist, expects a 20 per cent growth in web hosting revenue with the launch of new web hosting brand EmbunWeb.com today.
Skali President and Co-founder Aimi Rizal Nasharuddin said EmbunWeb was poised to attract more local small and medium entrepreneurs to craft larger presence in the market as well as strengthen marketing strategy.
"EmbunWeb can provide opportunities for entrepreneurs to learn more about information technology and marketing strategies especially among Bumiputera entrepreneurs," he told reporters after the launch ceremony here.
He said the new web hosting product was expected to be the main driver for the growth of the company's core business especially with the rising number of entrepreneurs using the internet as their business platform.
Last year, Skali recorded RM4.6 million in revenue from the web hosting business and experienced about 10 per cent growth.
Presently, web hosting accounted for 20 to 30 per cent of the company's total revenue, Aimi said.
He expected the new web hosting product to register 4,000 domains by year-end.
Besides EmbunWeb, the company planned to launch one or two other products this year, Amli said. - BERNAMA
Skali President and Co-founder Aimi Rizal Nasharuddin said EmbunWeb was poised to attract more local small and medium entrepreneurs to craft larger presence in the market as well as strengthen marketing strategy.
"EmbunWeb can provide opportunities for entrepreneurs to learn more about information technology and marketing strategies especially among Bumiputera entrepreneurs," he told reporters after the launch ceremony here.
He said the new web hosting product was expected to be the main driver for the growth of the company's core business especially with the rising number of entrepreneurs using the internet as their business platform.
Last year, Skali recorded RM4.6 million in revenue from the web hosting business and experienced about 10 per cent growth.
Presently, web hosting accounted for 20 to 30 per cent of the company's total revenue, Aimi said.
He expected the new web hosting product to register 4,000 domains by year-end.
Besides EmbunWeb, the company planned to launch one or two other products this year, Amli said. - BERNAMA
CDRC eases conditions for debt-laden firms
THE Corporate Debt Restructuring Committee (CDRC) has revised the eligibility criteria to allow more firms to seek its assistance to restructure their debt obligations.
In a statement here today, CDRC said the existing eligibility criteria for firms that have aggregate indebtedness of RM100 million or more has been increased to firms with indebtedness of RM30 million or more.
"The revision will also require only two financial creditors instead of three previously," it said.
Its chairman, Datuk Seri Abdul Hamidy Hafiz, said the revision would allow more companies to seek CDRC's help to restructure their debt obligations.
"The revised criteria also provide eligibility to any company listed on Bursa Malaysia that has been classified as a PN17 (Main Market) or GN3 (ACE Market) irrespective of the amount of debt outstanding," he said.
Abdul Hamidy said many banks were now using CDRC's principles and guidelines on the restructuring of debts.
"As a result the banking system in Malaysia is now strong. The non-performing loan ratio has declined to 1.8 per cent as at December last year compared to 2.2 per cent in 2008.
CDRC was set up in July 2009 to help ensure firms facing debt problems has a channel to resolve them. - BERNAMA
In a statement here today, CDRC said the existing eligibility criteria for firms that have aggregate indebtedness of RM100 million or more has been increased to firms with indebtedness of RM30 million or more.
"The revision will also require only two financial creditors instead of three previously," it said.
Its chairman, Datuk Seri Abdul Hamidy Hafiz, said the revision would allow more companies to seek CDRC's help to restructure their debt obligations.
"The revised criteria also provide eligibility to any company listed on Bursa Malaysia that has been classified as a PN17 (Main Market) or GN3 (ACE Market) irrespective of the amount of debt outstanding," he said.
Abdul Hamidy said many banks were now using CDRC's principles and guidelines on the restructuring of debts.
"As a result the banking system in Malaysia is now strong. The non-performing loan ratio has declined to 1.8 per cent as at December last year compared to 2.2 per cent in 2008.
CDRC was set up in July 2009 to help ensure firms facing debt problems has a channel to resolve them. - BERNAMA
Proton Edar aims to sell 165K cars in 2010
PROTON Edar Sdn Bhd, the marketing arm of Proton Holdings Bhd, aims to sell 165,000 proton cars this year from 148,027 units last year, says Chief Executive Officer Mohamad Shukor Ibrahim.
He said the higher sales target stemmed from aggressive marketing strategies to compete with established car companies, introduction of new upper-end sedan model and rising consumer sentiment in view of improved economic outlook.
"We'll unveil new models towards the second half of this year to attract customers and excite the car industry amid the competitve market," he told reporters after the Proton Drive for Holiday Campaign prize-giving ceremony.
Mohamad Shukor said the company sold 14,485 units or 14 per cent increase last month as compared with 10,134 units in the same period last year, driven by strong sales of Proton Saga, Proton Persona and Proton Exora.
He said Proton Edar was confident of consolidating its 257 outlets, including outlets under Edaran Otomobil Nasional Bhd and authorised dealers, to 191 by year-end.
He said the rationalisation would ensure profitability for all dealers and benefits to existing and new customers as a stronger network would improve services.
On challenges in the automotive industry, Mohamad Shukor said the likely increase in the overnight policy rate (OPR) this year would affect sales, adding that the market was currently enjoying lower rate over the last 20 years.
He said the hike in OPR towards the second half of this year was sensitive to the industry as banks would start tightening lending criteria while household finances become fragile following lower disposable income.
"We know the government is very supportive to the local auto industry. The co-relation between the performance of car industry and economic growth is very close," he added. - BERNAMA
He said the higher sales target stemmed from aggressive marketing strategies to compete with established car companies, introduction of new upper-end sedan model and rising consumer sentiment in view of improved economic outlook.
"We'll unveil new models towards the second half of this year to attract customers and excite the car industry amid the competitve market," he told reporters after the Proton Drive for Holiday Campaign prize-giving ceremony.
Mohamad Shukor said the company sold 14,485 units or 14 per cent increase last month as compared with 10,134 units in the same period last year, driven by strong sales of Proton Saga, Proton Persona and Proton Exora.
He said Proton Edar was confident of consolidating its 257 outlets, including outlets under Edaran Otomobil Nasional Bhd and authorised dealers, to 191 by year-end.
He said the rationalisation would ensure profitability for all dealers and benefits to existing and new customers as a stronger network would improve services.
On challenges in the automotive industry, Mohamad Shukor said the likely increase in the overnight policy rate (OPR) this year would affect sales, adding that the market was currently enjoying lower rate over the last 20 years.
He said the hike in OPR towards the second half of this year was sensitive to the industry as banks would start tightening lending criteria while household finances become fragile following lower disposable income.
"We know the government is very supportive to the local auto industry. The co-relation between the performance of car industry and economic growth is very close," he added. - BERNAMA
Panasonic to keep growing Lumix products
PANASONIC Malaysia Sdn Bhd hopes to continue the sales growth of its Lumix products to become the country's top digital camera and camcorder seller.
Managing director Tony Endoh said that sales of the Lumix products increased by 247 per cent from April 2009 to January 2010 compared to the same period previously.
He said that sales for camcorders went up 141 per cent while sales for plasma television sets recorded a 212 per cent increase and those for liquid crystal display (LCD) television sets grew by 223 per cent during the period.
He was speaking the launch of 13 new Lumix cameras and eight camcorders here today.
Saying that Lumix has gained "tremendously" in market share, Endoh said its market share increased from 5.1 per cent in 2008 to 13.6 per cent at the end of 2009, a growth of 267 per cent.
He said that Lumix managed to overtake rivals for the number two position in the digital still camera segment while its market share in the compact camera segment grew from 5.5 per cent in 2008 to 15.1 per cent in 2009, up by 275 per cent.
He also said that the company planned to increase its sales channels with the opening of more Lumix Station outlets, from the current 12 to 16 by next month and to 50 by March next year. - BERNAMA
Managing director Tony Endoh said that sales of the Lumix products increased by 247 per cent from April 2009 to January 2010 compared to the same period previously.
He said that sales for camcorders went up 141 per cent while sales for plasma television sets recorded a 212 per cent increase and those for liquid crystal display (LCD) television sets grew by 223 per cent during the period.
He was speaking the launch of 13 new Lumix cameras and eight camcorders here today.
Saying that Lumix has gained "tremendously" in market share, Endoh said its market share increased from 5.1 per cent in 2008 to 13.6 per cent at the end of 2009, a growth of 267 per cent.
He said that Lumix managed to overtake rivals for the number two position in the digital still camera segment while its market share in the compact camera segment grew from 5.5 per cent in 2008 to 15.1 per cent in 2009, up by 275 per cent.
He also said that the company planned to increase its sales channels with the opening of more Lumix Station outlets, from the current 12 to 16 by next month and to 50 by March next year. - BERNAMA
AmPrivate Equity and YC Foxin tie up
AMPRIVATE Equity Sdn Bhd, the private equity arm of AmInvestment Group Bhd, has entered into an agreement to invest RM7.5 million (RMB 15 million)in YC Foxin (Shanghai) Eco Enviro Tech Co. Ltd (YC Foxin).
AmPrivate's investment is to enable YC Foxin to expand significantly its rural wastewater treatment business. The agreement was signed on Feb 2.
The investment marks the first transaction in the water/environment sector for AmPrivate Equity and also its pioneer investment directly into China.
AmPrivate Equity is managed by Malaysian Ventures Management Incorporated Sdn Bhd, a wholly-owned subsidiary of AmInvestment Group Bhd.
YC Foxin Chief Executive Officer Professor Zhang Yong Tai said with so many projects on hand, the investment would help the company roll out its business not only in Shanghai but also nationally.
"China's rapid urbanisation has put more pressure on having a cleaner environment, especially in the water segment.
"Our unique business model of cleaning water at source with low-cost biotech treatment, offers tremendous opportunity with government support," Zhang said in a statement today.
Zhang also said the Chinese government is expected to have spent US$54 billion between 2006 and 2010 to provide safe and reliable drinking water for the people along with an economically efficient stormwater drainage system to prevent flooding as well as the treatment of all wastewater discharged by municipal plants.
Pushpa Rajadurai, Managing Director, Corporate and Institutional Banking, AmBank Group, said she believed the water sector would be an important investment theme for this new decade, due to rising environmental concerns and increasing political willpower to address it.
"Private sector investment in public infrastructure will help to alleviate public funding shortfalls and expedite capacity building and upgrading," she added. -- BERNAMA
AmPrivate's investment is to enable YC Foxin to expand significantly its rural wastewater treatment business. The agreement was signed on Feb 2.
The investment marks the first transaction in the water/environment sector for AmPrivate Equity and also its pioneer investment directly into China.
AmPrivate Equity is managed by Malaysian Ventures Management Incorporated Sdn Bhd, a wholly-owned subsidiary of AmInvestment Group Bhd.
YC Foxin Chief Executive Officer Professor Zhang Yong Tai said with so many projects on hand, the investment would help the company roll out its business not only in Shanghai but also nationally.
"China's rapid urbanisation has put more pressure on having a cleaner environment, especially in the water segment.
"Our unique business model of cleaning water at source with low-cost biotech treatment, offers tremendous opportunity with government support," Zhang said in a statement today.
Zhang also said the Chinese government is expected to have spent US$54 billion between 2006 and 2010 to provide safe and reliable drinking water for the people along with an economically efficient stormwater drainage system to prevent flooding as well as the treatment of all wastewater discharged by municipal plants.
Pushpa Rajadurai, Managing Director, Corporate and Institutional Banking, AmBank Group, said she believed the water sector would be an important investment theme for this new decade, due to rising environmental concerns and increasing political willpower to address it.
"Private sector investment in public infrastructure will help to alleviate public funding shortfalls and expedite capacity building and upgrading," she added. -- BERNAMA
ST Telemedia keen on Malaysia telco sector
Singapore Technologies Telemedia Pte sees potential in Malaysia’s telecommunications market and is “keen to participate in its growth and development,” the company said in a statement to Bloomberg today.
ST Telemedia, a unit of Temasek Holdings Pte, was responding to a report in today’s Star newspaper which said the Singapore telecommunications investment company may buy a 33 per cent stake in mobile-phone operator U Mobile Sdn Bhd, which won a licence in 2006 to offer 3G services in Malaysia.
U Mobile Sdn Bhd is owned by Malaysian billionaire Vincent Tan’s U Television Sdn Bhd, which last September bought back stakes in the subsidiary held by NTT DoCoMo Inc, Japan’s largest mobile-phone operator, and KT Freetel Co, South Korea’s second- largest wireless phone operator. It may sell the stake to ST Telemedia Pte for RM626 million, the paper reported today, citing unidentified people familiar with the situation.
“We are constantly evaluating investment proposals and exploring business opportunities with potential partners to enhance our business growth,” ST Telemedia said in its e-mailed statement, without being specific.
A spokesman for Tan was not immediately able to comment on the report. -- Bloomberg
ST Telemedia, a unit of Temasek Holdings Pte, was responding to a report in today’s Star newspaper which said the Singapore telecommunications investment company may buy a 33 per cent stake in mobile-phone operator U Mobile Sdn Bhd, which won a licence in 2006 to offer 3G services in Malaysia.
U Mobile Sdn Bhd is owned by Malaysian billionaire Vincent Tan’s U Television Sdn Bhd, which last September bought back stakes in the subsidiary held by NTT DoCoMo Inc, Japan’s largest mobile-phone operator, and KT Freetel Co, South Korea’s second- largest wireless phone operator. It may sell the stake to ST Telemedia Pte for RM626 million, the paper reported today, citing unidentified people familiar with the situation.
“We are constantly evaluating investment proposals and exploring business opportunities with potential partners to enhance our business growth,” ST Telemedia said in its e-mailed statement, without being specific.
A spokesman for Tan was not immediately able to comment on the report. -- Bloomberg
Prudential eyes increase in number of agents
PRUDENTIAL Assurance Malaysia Bhd expects to increase the number of agents this year following the opening of its new training academy.
Its chief executive officer Charlie Oropeza said in line with the company's efforts to convert its 11,000-strong agents to become qualified wealth planners, the Prudential Training Academy would offer 55 training programmes this year.
"Prudential is committed to nurture its staff via consistent training programmes to meet the various and unique developemental needs of an individual.
"When you invest in the future, you don't really think too much about cost," he told a media briefing after opening the academy in Kuala Lumpur today.
Oropeza said training and development of people were important.
"If you put a price on it today, you will never invest, as you do not see the return right away," he said.
He said Prudential was also committed to grow its 3,000 Bumiputera agents to tap the growing market as well as demand for the company's wide range of products, especially takaful.
"Currently, Islamic products contributed about 15-20 per cent of the company's revenue," he said.
Oropeza said the academy was formerly a recreational club in Ukay Perdana which has undergone a RM1.8 million facelift to meet its training and team-building needs.
He said Prudential planned to open two more branches in Kajang and Skudai, Johor in the next three months. -- BERNAMA
Its chief executive officer Charlie Oropeza said in line with the company's efforts to convert its 11,000-strong agents to become qualified wealth planners, the Prudential Training Academy would offer 55 training programmes this year.
"Prudential is committed to nurture its staff via consistent training programmes to meet the various and unique developemental needs of an individual.
"When you invest in the future, you don't really think too much about cost," he told a media briefing after opening the academy in Kuala Lumpur today.
Oropeza said training and development of people were important.
"If you put a price on it today, you will never invest, as you do not see the return right away," he said.
He said Prudential was also committed to grow its 3,000 Bumiputera agents to tap the growing market as well as demand for the company's wide range of products, especially takaful.
"Currently, Islamic products contributed about 15-20 per cent of the company's revenue," he said.
Oropeza said the academy was formerly a recreational club in Ukay Perdana which has undergone a RM1.8 million facelift to meet its training and team-building needs.
He said Prudential planned to open two more branches in Kajang and Skudai, Johor in the next three months. -- BERNAMA
Sixty firms taking part in Malaysia Showcase
SIXTY Malaysian companies will exhibit their products at "Malaysia Showcase 2010" in Brunei next month.
Organised by Eventneka Sdn Bhd, the three-day exhibition from March 5 will promote "Malaysia Holidays", Malaysia Food Festival, Malaysian Investment Seminar, Malaysian Education 2010 and Buy Malaysia Products.
Company chairman Datuk Rahmat Ismail said the exhibition was a golden opportunity for Malaysian companies to penetrate the fast-growing Brunei market.
Bruneians have high purchasing power to buy Malaysian products as compared with people in other Asean countries.
"The exhibition is an excellent platform to promote the country's products and services, technological expertise, tourist destinations and investment potential internationally," he said when launching Malaysia Showcase 2010.
Malaysia is the third largest exporter to Brunei after the United States and Singapore.
Total trade between Malaysia and Brunei between January and November 2009, stood at RM1.87 billion in Malaysia's favour.
Malaysia's exports to Brunei totalled RM1.4 billion while imports from the Sultanate amounted to RM339 million.
Rahmat said some 20,000 trade visitors from Indonesia, the Philippines, Sabah and Sarawak are expected to visit the exhibition.
Interested parties can obtain further information on the exhibition by surfing www.eventneka.com.
-- BERNAMA
Organised by Eventneka Sdn Bhd, the three-day exhibition from March 5 will promote "Malaysia Holidays", Malaysia Food Festival, Malaysian Investment Seminar, Malaysian Education 2010 and Buy Malaysia Products.
Company chairman Datuk Rahmat Ismail said the exhibition was a golden opportunity for Malaysian companies to penetrate the fast-growing Brunei market.
Bruneians have high purchasing power to buy Malaysian products as compared with people in other Asean countries.
"The exhibition is an excellent platform to promote the country's products and services, technological expertise, tourist destinations and investment potential internationally," he said when launching Malaysia Showcase 2010.
Malaysia is the third largest exporter to Brunei after the United States and Singapore.
Total trade between Malaysia and Brunei between January and November 2009, stood at RM1.87 billion in Malaysia's favour.
Malaysia's exports to Brunei totalled RM1.4 billion while imports from the Sultanate amounted to RM339 million.
Rahmat said some 20,000 trade visitors from Indonesia, the Philippines, Sabah and Sarawak are expected to visit the exhibition.
Interested parties can obtain further information on the exhibition by surfing www.eventneka.com.
-- BERNAMA
Dell bullish on small business segment
DELL Asia Pacific Sdn Bhd is bullish on the small and medium business (SMB) segment in Malaysia this year as overall information technology (IT) demand is improving.
Its general manager (small and medium business) for South Asia, Khoo Teng Guan, said that Dell was optimistic of growth in the SMB segment, driven by its commitment to provide simplified, reliable and affordable IT solutions.
Speaking at a media briefing in Kuala Lumpur today, Khoo said Dell's SMB segment was growing at a faster rate than the public and consumer sectors, adding that the company now has 2,500 medium-sized business customers in Malaysia.
"Dell's SMB segment in Malaysia has grown from 12 per cent to 15 per cent over the past year," he said, adding that it was important to cater to the SMB segment as it was the backbone of the nation's economy.
With the Malaysian information and communications technology (ICT) industry likely to see positive growth this year, Khoo said that 2010 would be an exciting year for Dell to gain market share in the SMB segment.
According to market research firm International Data Corporation (IDC), the Malaysian ICT industry is expected to cross the RM6 billion mark this year, from RM5.6 billion in 2009.
"Like last year, 2010 is expected to be a year where Dell continues to differentiate itself in the marketplace through efficient, best-value enterprise solutions," Khoo said.
According to him, demand for IT from the SMB segment will continue to grow as the small and medium enterprises will leverage on new technologies for cost efficiency and also the latest Windows 7 platform for further growth.
Khoo said the company also expected the new Vostro V-13, launched at the end of last year, to put Dell in a better position to gain market share in the SMB segment.
The Vostro V-13 combined premium design, mobility, essential productivity and built-in security in a thin and lightweight design at an affordable price, he said, adding that it was customised to meet the needs of small businesses worldwide. -- BERNAMA
Its general manager (small and medium business) for South Asia, Khoo Teng Guan, said that Dell was optimistic of growth in the SMB segment, driven by its commitment to provide simplified, reliable and affordable IT solutions.
Speaking at a media briefing in Kuala Lumpur today, Khoo said Dell's SMB segment was growing at a faster rate than the public and consumer sectors, adding that the company now has 2,500 medium-sized business customers in Malaysia.
"Dell's SMB segment in Malaysia has grown from 12 per cent to 15 per cent over the past year," he said, adding that it was important to cater to the SMB segment as it was the backbone of the nation's economy.
With the Malaysian information and communications technology (ICT) industry likely to see positive growth this year, Khoo said that 2010 would be an exciting year for Dell to gain market share in the SMB segment.
According to market research firm International Data Corporation (IDC), the Malaysian ICT industry is expected to cross the RM6 billion mark this year, from RM5.6 billion in 2009.
"Like last year, 2010 is expected to be a year where Dell continues to differentiate itself in the marketplace through efficient, best-value enterprise solutions," Khoo said.
According to him, demand for IT from the SMB segment will continue to grow as the small and medium enterprises will leverage on new technologies for cost efficiency and also the latest Windows 7 platform for further growth.
Khoo said the company also expected the new Vostro V-13, launched at the end of last year, to put Dell in a better position to gain market share in the SMB segment.
The Vostro V-13 combined premium design, mobility, essential productivity and built-in security in a thin and lightweight design at an affordable price, he said, adding that it was customised to meet the needs of small businesses worldwide. -- BERNAMA
CIMB Investment awarded for Maxis IPO
CIMB Investment Bank has been awarded 'Best Equity Deal/Best IPO' in Malaysia for its role as joint coordinator and joint bookrunner for Maxis Bhd's RM11.2 billion initial public offer (IPO).
The bank also bagged the "Best IPO" award for its joint lead underwriter and bookrunner role in Indonesia's PT Bank Tabungan Negara Persero's 1.89 trillion rupiah IPO, CIMB Group said in a statement.
The awards, presented in Hong Kong at the recent "Triple A Awards 2009", was organised by "The Asset" magazine, a regional financial publication for Asian corporates and global investors.
CIMB Investment Bank also won "The Asset Triple A Best Domestic Investment Bank" award, for the ninth year, and the "The Asset Triple A Best Equity House" award in Malaysia for the seventh year.
-- BERNAMA
The bank also bagged the "Best IPO" award for its joint lead underwriter and bookrunner role in Indonesia's PT Bank Tabungan Negara Persero's 1.89 trillion rupiah IPO, CIMB Group said in a statement.
The awards, presented in Hong Kong at the recent "Triple A Awards 2009", was organised by "The Asset" magazine, a regional financial publication for Asian corporates and global investors.
CIMB Investment Bank also won "The Asset Triple A Best Domestic Investment Bank" award, for the ninth year, and the "The Asset Triple A Best Equity House" award in Malaysia for the seventh year.
-- BERNAMA
Globalisation to resume at slower pace: E&Y
Globalisation that slowed during the financial crisis and the subsequent downturm will resume once again in 2010 as the economy recovers, a report by Ernst & Young shows.
The pace, however, would be slower than in the past decade, said the report released in cooperation with the Economist Intelligence Unit.
According to its Globalisation Index that measures the relative level of global engagement of a country, countries with large domestic markets such as China, India and the United States appeared towards the middle of the table.
Small countries that rely heavily on exports and world trade like Singapore and Ireland were at the top while more closed countries such as Iran and Venezuela at the bottom.
"Many of the same countries that sat at the top of the index in the 1990s continue to do so. Where there has been significant change is with the emerging economies in the bottom half of the index," Ernst & Young said in a statement today.
Ernst & Young chief operating officer John Ferraro explained that although the index questions whether the degree to which a country is globalised correlates with its subsequent economic growth, it clearly showed all the major emerging economies becoming more globalised.
"Also, the contrast between 2010 and 1995 is even more significant for certain smaller countries like South Korea and those from Eastern Europe like Romania. Both have seen major advances in the past 15 years," he added.
The report also showed that the temporary halt to the trend in the last two years did not alter how significant the longer-term implications of globalisation would be for business.
"Companies based in emerging markets are looking to compete more and more with established corporates from developed markets. This competition is playing out not only in the emerging markets themselves but also increasingly in Western markets," Ernst & Young said. -- Bernama
The pace, however, would be slower than in the past decade, said the report released in cooperation with the Economist Intelligence Unit.
According to its Globalisation Index that measures the relative level of global engagement of a country, countries with large domestic markets such as China, India and the United States appeared towards the middle of the table.
Small countries that rely heavily on exports and world trade like Singapore and Ireland were at the top while more closed countries such as Iran and Venezuela at the bottom.
"Many of the same countries that sat at the top of the index in the 1990s continue to do so. Where there has been significant change is with the emerging economies in the bottom half of the index," Ernst & Young said in a statement today.
Ernst & Young chief operating officer John Ferraro explained that although the index questions whether the degree to which a country is globalised correlates with its subsequent economic growth, it clearly showed all the major emerging economies becoming more globalised.
"Also, the contrast between 2010 and 1995 is even more significant for certain smaller countries like South Korea and those from Eastern Europe like Romania. Both have seen major advances in the past 15 years," he added.
The report also showed that the temporary halt to the trend in the last two years did not alter how significant the longer-term implications of globalisation would be for business.
"Companies based in emerging markets are looking to compete more and more with established corporates from developed markets. This competition is playing out not only in the emerging markets themselves but also increasingly in Western markets," Ernst & Young said. -- Bernama
Tap Laos ICT boom, Malaysian firms told
Malaysian firms involved in information and communication technology (ICT) have been urged to take advantage of the boom in the sector in Laos.
The Laos National Authority for Science and Technology acting director-general Phonpasit Phissamay said the time was now ripe for Malaysian ICT companies, to explore the Indochinese nation.
"To date, we have only utilised ICT at offices and such. But this is now changing. We are moving into e-government and much more.
"In 2008, our Internet penetration stood at 21 per cent while in 2009, it increased to 32 per cent. This is a huge hike in the penetration percentage.
"With the government's strong support, we expect this percentage to rise further. Now, people are looking at mobile and 3G systems. The government put in place the national ICT policy in 2007 and invested quite a bit for it.
"We are spending about US$80 million to computerise all government departments to ensure they are online," he said at the Laos ICT Expo 2010 recently.
According to Phonpasit,when Laos held its inaugural ICT exhibition in 1985, it generated very little interest among the people of the landlocked nation.
But now, it is the reverse, since the government took the initiative to publicise the importance of ICT to its 6.23 million population.
"At that time our income level was very low as was the case with English literacy and ICT awareness. That has all now changed.
"There are more Laotian companies in the telecommunication and ICT sectors. Locally, there are about 1,800 companies providing for the ICT sector alone.
"Bigger foreign companies like Dell are setting foot here. Now is the best time for Malaysian firms, well versed in the industry, to start a business here as the market is virtually untapped," explained Phonpasit. -- Bernama
The Laos National Authority for Science and Technology acting director-general Phonpasit Phissamay said the time was now ripe for Malaysian ICT companies, to explore the Indochinese nation.
"To date, we have only utilised ICT at offices and such. But this is now changing. We are moving into e-government and much more.
"In 2008, our Internet penetration stood at 21 per cent while in 2009, it increased to 32 per cent. This is a huge hike in the penetration percentage.
"With the government's strong support, we expect this percentage to rise further. Now, people are looking at mobile and 3G systems. The government put in place the national ICT policy in 2007 and invested quite a bit for it.
"We are spending about US$80 million to computerise all government departments to ensure they are online," he said at the Laos ICT Expo 2010 recently.
According to Phonpasit,when Laos held its inaugural ICT exhibition in 1985, it generated very little interest among the people of the landlocked nation.
But now, it is the reverse, since the government took the initiative to publicise the importance of ICT to its 6.23 million population.
"At that time our income level was very low as was the case with English literacy and ICT awareness. That has all now changed.
"There are more Laotian companies in the telecommunication and ICT sectors. Locally, there are about 1,800 companies providing for the ICT sector alone.
"Bigger foreign companies like Dell are setting foot here. Now is the best time for Malaysian firms, well versed in the industry, to start a business here as the market is virtually untapped," explained Phonpasit. -- Bernama
Mitsubishi UFJ Posts Third Straight Quarterly Profit (Update2)
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, posted a third straight quarterly profit as losses on stock holdings declined and fee income increased.
Net income was 76.1 billion yen ($842.2 million) in the three months ended Dec. 31, compared with a loss of 134.1 billion yen a year earlier. Third-quarter earnings were calculated by subtracting first-half profit from nine-month figures reported to the Tokyo Stock Exchange today.
Losses on stock holdings fell by 217.6 billion yen as the Topix index, which Citigroup Inc. forecasts will gain about 20 percent this year, rose 5.6 percent in 2009. Mitsubishi UFJ is also benefiting from higher lending income as funding costs in overseas money markets fall and the Japanese government offers credit guarantees for small firms.
“The market is going up so Mitsubishi UFJ may even be able to make a profit on shareholdings, but I don’t see a strategy,” said Edwin Merner, president of Atlantis Investment in Tokyo, which manages about $3 billion in assets. “Mitsubishi UFJ doesn’t have any big problems but I can’t see what they want to do with their business.”
Profit trailed the 80 billion yen median estimate of six analysts surveyed by Bloomberg. Forecasts ranged from 50 billion yen to 90 billion yen. The Tokyo-based bank reiterated its full- year profit forecast of 300 billion yen after earnings for the first nine months reached 217.1 billion yen.
Equity Holdings
The bank’s loss on equities narrowed to 33.4 billion yen from 251 billion yen a year earlier.
Citigroup’s Tsutomu Fujita, the top-ranked strategist in Institutional Investor’s 2009 survey, said in a Jan. 8 report the Topix is likely to rise to 1,100 by year-end. The gauge closed at 915.68 today. Blackstone Group LP’s Byron Wien said last month Japanese stocks may be the best bet among the world’s biggest markets in 2010 as the economy improves.
Mitsubishi UFJ’s fees and commissions, including those from investment trusts, increased 2.8 percent in the quarter from a year earlier to 223.9 billion yen, said. Net interest income jumped 22 percent to 535.9 billion yen.
Bad-loans costs rose 86 percent in the quarter from a year earlier. Mitsubishi UFJ said credit costs at San Francisco-based banking unit UnionBanCal Corp. and Japanese consumer-lender subsidiary Acom Co. pushed up bad-loan expenses for the nine months ended Dec. 31.
Loan Demand
The recovery in the Japanese economy hasn’t resulted in an increase in demand for bank loans as companies continue to use funds “conservatively,” the Bank of Japan said last month. An index of demand for loans plunged to minus 17, the lowest level since July 2004, the central bank said.
Mitsubishi UFJ’s outstanding loans fell to 85.5 trillion yen as of Dec. 31 from 93.3 trillion yen a year earlier.
The bank, which has raised 1.4 trillion yen selling common stock since December 2008 to boost capital, also said it will buy back and cancel 250 billion yen of preferred shares.
The company’s stock, which has declined 1.3 percent during the past 12 months on the Tokyo Stock Exchange, fell 3 yen to 475 yen today before the earnings announcement.
Trading profit at Mitsubishi UFJ declined to 30.9 billion yen in the quarter from 63.8 billion yen a year earlier.
To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net
Net income was 76.1 billion yen ($842.2 million) in the three months ended Dec. 31, compared with a loss of 134.1 billion yen a year earlier. Third-quarter earnings were calculated by subtracting first-half profit from nine-month figures reported to the Tokyo Stock Exchange today.
Losses on stock holdings fell by 217.6 billion yen as the Topix index, which Citigroup Inc. forecasts will gain about 20 percent this year, rose 5.6 percent in 2009. Mitsubishi UFJ is also benefiting from higher lending income as funding costs in overseas money markets fall and the Japanese government offers credit guarantees for small firms.
“The market is going up so Mitsubishi UFJ may even be able to make a profit on shareholdings, but I don’t see a strategy,” said Edwin Merner, president of Atlantis Investment in Tokyo, which manages about $3 billion in assets. “Mitsubishi UFJ doesn’t have any big problems but I can’t see what they want to do with their business.”
Profit trailed the 80 billion yen median estimate of six analysts surveyed by Bloomberg. Forecasts ranged from 50 billion yen to 90 billion yen. The Tokyo-based bank reiterated its full- year profit forecast of 300 billion yen after earnings for the first nine months reached 217.1 billion yen.
Equity Holdings
The bank’s loss on equities narrowed to 33.4 billion yen from 251 billion yen a year earlier.
Citigroup’s Tsutomu Fujita, the top-ranked strategist in Institutional Investor’s 2009 survey, said in a Jan. 8 report the Topix is likely to rise to 1,100 by year-end. The gauge closed at 915.68 today. Blackstone Group LP’s Byron Wien said last month Japanese stocks may be the best bet among the world’s biggest markets in 2010 as the economy improves.
Mitsubishi UFJ’s fees and commissions, including those from investment trusts, increased 2.8 percent in the quarter from a year earlier to 223.9 billion yen, said. Net interest income jumped 22 percent to 535.9 billion yen.
Bad-loans costs rose 86 percent in the quarter from a year earlier. Mitsubishi UFJ said credit costs at San Francisco-based banking unit UnionBanCal Corp. and Japanese consumer-lender subsidiary Acom Co. pushed up bad-loan expenses for the nine months ended Dec. 31.
Loan Demand
The recovery in the Japanese economy hasn’t resulted in an increase in demand for bank loans as companies continue to use funds “conservatively,” the Bank of Japan said last month. An index of demand for loans plunged to minus 17, the lowest level since July 2004, the central bank said.
Mitsubishi UFJ’s outstanding loans fell to 85.5 trillion yen as of Dec. 31 from 93.3 trillion yen a year earlier.
The bank, which has raised 1.4 trillion yen selling common stock since December 2008 to boost capital, also said it will buy back and cancel 250 billion yen of preferred shares.
The company’s stock, which has declined 1.3 percent during the past 12 months on the Tokyo Stock Exchange, fell 3 yen to 475 yen today before the earnings announcement.
Trading profit at Mitsubishi UFJ declined to 30.9 billion yen in the quarter from 63.8 billion yen a year earlier.
To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net
Energy Bonds Hit Three-Month High as Sales Slow: Credit Markets
Energy companies are increasing bond sales at the fastest rate since October as investors snap up the notes of companies with rising profits while the overall pace of debt issuance slows.
Williams Partners LP, the Tulsa, Oklahoma partnership created from the merger of Williams Cos. affiliates, issued $3.5 billion of bonds yesterday, adding to the $5.3 billion sold last month by energy producers, according to data compiled by Bloomberg. Denbury Resources Inc. in Plano, Texas, and Crosstex Energy Inc. of Dallas are marketing a total of $1.7 billion in notes. Sales by industrial companies fell 7 percent last month.
Moody’s Investors Service raised more ratings on energy companies than it cut by a 1.38-to-1 margin in the fourth quarter as rising oil and natural gas prices boosted earnings. The ratio for all U.S. companies was 0.68.
The flurry of sales is a “combination of the corporate debt markets being open and the financial numbers that they show being respectable,” said Jason Brady, a managing director who helps invest $54 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico.
Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of Treasuries narrowed 1 basis point yesterday to 165 basis points, Bank of America Merrill Lynch’s Global Broad Market Corporate Index showed. The spread on energy bonds was unchanged at 175 basis points, or 1.75 percentage points, on average. A basis point is 0.01 percentage point.
The cost to protect bonds of North American companies from default fell for a second consecutive day yesterday even as Moody’s said the U.S.’s top Aaa bond rating may come under pressure amid mounting debt.
High-Yield Debt
High-yield bonds are a better investment than U.S. stocks, according to Rex Macey, the chief investment officer of Wilmington Trust Corp., which is a member of the creditor committee in the three biggest active U.S. bankruptcies. Stocks will provide returns of less than 10 percent through 2016, he said yesterday in a presentation in New York.
Prices of loans to companies in Europe with speculative- grade credit ratings fell for the first time in 12 weeks amid concern that Greece’s budget deficit crisis may spread to corporate borrowers.
‘Hot Debt Market’
Investment-grade energy company bonds have returned 29.6 percent on average since the beginning of last year, compared with 21.9 percent for all corporate bonds, according to Bank of America Merrill Lynch indexes.
“We are in the midst of a very hot debt market,” Steven Malcolm, the chief executive officer at Williams Cos., said in an interview on Jan. 19. That was the day the company said it was selling most of its pipeline assets to the partnerships and Moody’s said it would review Williams Partners’ Ba2 rating for an upgrade.
Williams Partners sold $750 million of five-year debt to yield 145 basis points more than Treasuries, $1.5 billion of 10- year notes at a spread of 162.5 basis points, and $1.25 billion of 30-year bonds at a spread of about 180 basis points, Bloomberg data show. Proceeds will fund the cash portion of the purchase, the company said.
The offering was the biggest for an energy company in the U.S. bond market since Petroleo Brasileiro SA, Brazil’s state- controlled oil producer, sold $4 billion of notes on Oct. 23 to repay a bridge loan, Bloomberg data show.
Denbury, Crosstex
Denbury, a Gulf Coast exploration and production company, said in a regulatory filing it will sell $1 billion of debt due in 2020 to pay for its purchase of Encore Acquisition Co. Crosstex, an energy supplier. It’s marketing $700 million of eight-year bonds to repay debt, the company said in a statement distributed by Business Wire.
More energy companies may borrow this year to pay for takeovers, said Ken Duffel, an analyst at bond research firm KDP Investment Advisors Inc. in Montpelier, Vermont. West Texas Intermediate crude oil prices have more than doubled since falling to $33.98 on Feb. 12. The price rose $0.68 to $77.91 today.
“A lot of last year’s issuance was to extend maturities,” he said. “The issuance we’re seeing this year will be more to fund acquisitions and growth.”
In Europe, the cost of protecting corporate bonds from default declined today, with the high-yield Markit iTraxx Crossover Index of credit-default swaps on 50 companies dropping 8 basis points to 440, according to JPMorgan Chase & Co. prices at 9:36 a.m. in London. Markit’s European index of investment- grade companies declined 2 basis points to 80.
Greece Risk Diminishes
Credit-default swaps tied to Greek government debt fell as the European Commission prepares to recommend neighboring finance ministers endorse the nation’s plan to cut its budget deficit. Contracts on Greece dropped 7 basis points to 380, after rising to a record 422 on Jan. 28, according to CMA DataVision.
Greek Prime Minister George Papandreou promised more action to bring the country’s finances under control in a national televised address late yesterday, including a freeze on state workers’ pay and an increase in fuel tax. Commission President Jose Barroso said the organization he heads will endorse Greece’s program to cut its budget gap.
Greek bonds and stocks rose. The government’s two-year note jumped, with the yield falling 23 basis points to 6.29 percent, while the benchmark ASE Index advanced 2 percent as National Bank of Greece added 4.9 percent and Alpha Bank SA climbed 4.8 percent.
North American Swaps
Credit-default swaps on North American companies fell 2.5 basis points yesterday to a mid-price of 92.5 basis points on the Markit CDX North America Investment-Grade Index Series 13, according to Barclays Capital. The benchmark is linked to 125 companies.
The perceived risk of companies declined even as Moody’s said the U.S. must take additional measures to reduce budget deficits projected for the next decade. The ratios of government debt to the U.S. gross domestic product and revenue have increased “sharply” during the credit crisis and recession. The U.S. keeps its Aaa rating because of a “high degree of economic and institutional strength,” the New York-based rating company said in a statement.
“If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven A. Hess, senior credit officer at Moody’s in New York.
Loan Bids
The average bid for so-called leveraged loans in Europe fell to 96.16 percent of face value from 96.33 for the week of Jan. 21, when it reached the highest since November 2007, according to Standard & Poor’s Leveraged Commentary & Data.
“High-yield loan and bond markets have been under pressure in the past two weeks, driven more by macro events such as Greece and equity markets,” said John Seal, a London-based partner at New Amsterdam Capital Management LLP, which oversees about 1.6 billion euros of assets.
High-yield debt is rated below Baa3 by Moody’s and BBB- by S&P.
Cable & Wireless Plc is marketing $500 million of high- yield bonds due in 2017 to investors as the U.K.’s second- biggest fixed-line phone utility prepares to split into two publicly listed companies. Their shares will start trading by the end of March, Cable & Wireless said in an e-mailed statement yesterday.
In emerging markets, Coca-Cola Femsa SAB, the largest soft- drink company in Latin America, sold $500 million of 10-year bonds after boosting the offering 25 percent. Coca-Cola Femsa, based in Mexico City, sold the bonds at a spread of 105 basis points above Treasuries.
The company, controlled by Monterrey-based Fomento Economico Mexicano SAB, is seeking to expand soft-drink operations beyond Latin America, Fomento Chief Executive Officer Jose Antonio Fernandez said in an interview last month. It may try to buy Coca-Cola’s bottler in the Philippines, JPMorgan Chase said in a report Jan. 20.
To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net
Williams Partners LP, the Tulsa, Oklahoma partnership created from the merger of Williams Cos. affiliates, issued $3.5 billion of bonds yesterday, adding to the $5.3 billion sold last month by energy producers, according to data compiled by Bloomberg. Denbury Resources Inc. in Plano, Texas, and Crosstex Energy Inc. of Dallas are marketing a total of $1.7 billion in notes. Sales by industrial companies fell 7 percent last month.
Moody’s Investors Service raised more ratings on energy companies than it cut by a 1.38-to-1 margin in the fourth quarter as rising oil and natural gas prices boosted earnings. The ratio for all U.S. companies was 0.68.
The flurry of sales is a “combination of the corporate debt markets being open and the financial numbers that they show being respectable,” said Jason Brady, a managing director who helps invest $54 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico.
Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of Treasuries narrowed 1 basis point yesterday to 165 basis points, Bank of America Merrill Lynch’s Global Broad Market Corporate Index showed. The spread on energy bonds was unchanged at 175 basis points, or 1.75 percentage points, on average. A basis point is 0.01 percentage point.
The cost to protect bonds of North American companies from default fell for a second consecutive day yesterday even as Moody’s said the U.S.’s top Aaa bond rating may come under pressure amid mounting debt.
High-Yield Debt
High-yield bonds are a better investment than U.S. stocks, according to Rex Macey, the chief investment officer of Wilmington Trust Corp., which is a member of the creditor committee in the three biggest active U.S. bankruptcies. Stocks will provide returns of less than 10 percent through 2016, he said yesterday in a presentation in New York.
Prices of loans to companies in Europe with speculative- grade credit ratings fell for the first time in 12 weeks amid concern that Greece’s budget deficit crisis may spread to corporate borrowers.
‘Hot Debt Market’
Investment-grade energy company bonds have returned 29.6 percent on average since the beginning of last year, compared with 21.9 percent for all corporate bonds, according to Bank of America Merrill Lynch indexes.
“We are in the midst of a very hot debt market,” Steven Malcolm, the chief executive officer at Williams Cos., said in an interview on Jan. 19. That was the day the company said it was selling most of its pipeline assets to the partnerships and Moody’s said it would review Williams Partners’ Ba2 rating for an upgrade.
Williams Partners sold $750 million of five-year debt to yield 145 basis points more than Treasuries, $1.5 billion of 10- year notes at a spread of 162.5 basis points, and $1.25 billion of 30-year bonds at a spread of about 180 basis points, Bloomberg data show. Proceeds will fund the cash portion of the purchase, the company said.
The offering was the biggest for an energy company in the U.S. bond market since Petroleo Brasileiro SA, Brazil’s state- controlled oil producer, sold $4 billion of notes on Oct. 23 to repay a bridge loan, Bloomberg data show.
Denbury, Crosstex
Denbury, a Gulf Coast exploration and production company, said in a regulatory filing it will sell $1 billion of debt due in 2020 to pay for its purchase of Encore Acquisition Co. Crosstex, an energy supplier. It’s marketing $700 million of eight-year bonds to repay debt, the company said in a statement distributed by Business Wire.
More energy companies may borrow this year to pay for takeovers, said Ken Duffel, an analyst at bond research firm KDP Investment Advisors Inc. in Montpelier, Vermont. West Texas Intermediate crude oil prices have more than doubled since falling to $33.98 on Feb. 12. The price rose $0.68 to $77.91 today.
“A lot of last year’s issuance was to extend maturities,” he said. “The issuance we’re seeing this year will be more to fund acquisitions and growth.”
In Europe, the cost of protecting corporate bonds from default declined today, with the high-yield Markit iTraxx Crossover Index of credit-default swaps on 50 companies dropping 8 basis points to 440, according to JPMorgan Chase & Co. prices at 9:36 a.m. in London. Markit’s European index of investment- grade companies declined 2 basis points to 80.
Greece Risk Diminishes
Credit-default swaps tied to Greek government debt fell as the European Commission prepares to recommend neighboring finance ministers endorse the nation’s plan to cut its budget deficit. Contracts on Greece dropped 7 basis points to 380, after rising to a record 422 on Jan. 28, according to CMA DataVision.
Greek Prime Minister George Papandreou promised more action to bring the country’s finances under control in a national televised address late yesterday, including a freeze on state workers’ pay and an increase in fuel tax. Commission President Jose Barroso said the organization he heads will endorse Greece’s program to cut its budget gap.
Greek bonds and stocks rose. The government’s two-year note jumped, with the yield falling 23 basis points to 6.29 percent, while the benchmark ASE Index advanced 2 percent as National Bank of Greece added 4.9 percent and Alpha Bank SA climbed 4.8 percent.
North American Swaps
Credit-default swaps on North American companies fell 2.5 basis points yesterday to a mid-price of 92.5 basis points on the Markit CDX North America Investment-Grade Index Series 13, according to Barclays Capital. The benchmark is linked to 125 companies.
The perceived risk of companies declined even as Moody’s said the U.S. must take additional measures to reduce budget deficits projected for the next decade. The ratios of government debt to the U.S. gross domestic product and revenue have increased “sharply” during the credit crisis and recession. The U.S. keeps its Aaa rating because of a “high degree of economic and institutional strength,” the New York-based rating company said in a statement.
“If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven A. Hess, senior credit officer at Moody’s in New York.
Loan Bids
The average bid for so-called leveraged loans in Europe fell to 96.16 percent of face value from 96.33 for the week of Jan. 21, when it reached the highest since November 2007, according to Standard & Poor’s Leveraged Commentary & Data.
“High-yield loan and bond markets have been under pressure in the past two weeks, driven more by macro events such as Greece and equity markets,” said John Seal, a London-based partner at New Amsterdam Capital Management LLP, which oversees about 1.6 billion euros of assets.
High-yield debt is rated below Baa3 by Moody’s and BBB- by S&P.
Cable & Wireless Plc is marketing $500 million of high- yield bonds due in 2017 to investors as the U.K.’s second- biggest fixed-line phone utility prepares to split into two publicly listed companies. Their shares will start trading by the end of March, Cable & Wireless said in an e-mailed statement yesterday.
In emerging markets, Coca-Cola Femsa SAB, the largest soft- drink company in Latin America, sold $500 million of 10-year bonds after boosting the offering 25 percent. Coca-Cola Femsa, based in Mexico City, sold the bonds at a spread of 105 basis points above Treasuries.
The company, controlled by Monterrey-based Fomento Economico Mexicano SAB, is seeking to expand soft-drink operations beyond Latin America, Fomento Chief Executive Officer Jose Antonio Fernandez said in an interview last month. It may try to buy Coca-Cola’s bottler in the Philippines, JPMorgan Chase said in a report Jan. 20.
To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net
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