U.S. stock-index futures were little changed after the Standard & Poor’s 500 Index yesterday closed at a nine-month low.
Yahoo! Inc. gained 2.1 percent after its board authorized buying back as much as $3 billion of the company’s shares. Dendreon Corp. slumped 16 percent in Germany after the Centers for Medicare and Medicaid Services asked for information about the effects on patients of one of its medicines.
Futures on the S&P 500 expiring in September lost 0.1 percent to 1,025.5 as of 6:42 a.m. in New York, after earlier tumbling as much as 1 percent. Dow Jones Industrial Average futures declined 0.1 percent to 9,709 and Nasdaq-100 Index futures retreated 0.3 percent to 1,733.25.
“For now, the combination of reasonable valuations, imminent earnings recovery, and low interest rates means that it is too early to turn cautious,” Robert Buckland, an equity strategist at Citigroup Inc. in London, wrote in a report sent to clients today.
The S&P 500 has tumbled 15 percent from this year’s high on April 23 on concern a sovereign-debt crisis in Europe and China’s moves to tame inflation will dent global growth. The gauge is 7.6 percent lower this year and has fallen for seven of the past eight days, trimming its valuation to about 15 times the reported earnings of its companies, near the cheapest level in a year, according to Bloomberg data.
China Manufacturing
China’s manufacturing growth slowed more than economists forecast in June, adding to signs that the world’s fastest- growing major economy is cooling. The government’s Purchasing Managers’ Index fell to 52.1 in June from 53.9 in May. The median forecast in a Bloomberg News survey of 12 economists was 53.2. An HSBC Holdings Plc manufacturing index slid to a 14- month low.
“I’m beginning to underweight equities,” said Trevor Greetham, London-based head of asset allocation at Fidelity International, which has $216 billion under management. “I’m moving away from a position of being overweight of the growth sensitive assets which we moved into in the spring of 2009,” he said in a Bloomberg Television interview.
U.S. Economy
In the U.S., economic reports today and tomorrow may add to evidence that growth is slowing. The Institute for Supply Management’s factory index fell to 59 last month from 59.7 in May, according to the median estimate of 79 economists surveyed by Bloomberg News before a report due at 10 a.m. New York time. Figures from the Commerce Department at the same time will show construction spending fell 0.8 percent in May after a gain of 2.7 percent the prior month, according to the median estimate. Another report may show the number of contracts to buy previously owned homes dropped in May.
A release on initial jobless claims might give clues about the strength of the labor market before tomorrow’s non-farm payrolls report for June. First-time filings for unemployment benefits dropped to 455,000 last week from 457,000, according to the median estimate in the Bloomberg survey. Employment fell by 125,000 in June, the first drop this year, economists said.
“We’ve seen the growth lead indicators peaking and this means things can’t get any better in terms of growth rates,” said Fidelity’s Greetham. “We want the central banks to print money to get us into the next upswing.”
Dendreon, Yahoo
Dendreon slumped 16 percent to $27.31 in German trading. The Centers for Medicare and Medicaid Services is requesting public comments on the effects of Dendreon’s Provenge on patients with prostate cancer.
“We believe the worst case scenario contemplated here - an official CMS ruling not to reimburse for Provenge - is simply not supported by the facts,” Robert Baird analyst Raymond Christopher wrote in a note to clients today. The broker has an “outperform” recommendation on the shares.
Yahoo gained 2.1 percent to $14.13 in German trading after the internet media company’s board authorized the repurchase of as much as $3 billion of the company’s shares over the next three years.
Smith & Wesson Holding Corp. climbed 6.4 percent to $4.35 in German trading. The handgun manufacturer reported fourth- quarter adjusted earnings of 8 cents a share, beating analysts’ estimates of 4 cents a share.
Arena Pharmaceuticals Inc. soared 30 percent to $3.99 in pre-market New York trading after Eisai Co. said it will sell the hunger-curbing lorcaserin drug from Arena in the U.S. if the obesity treatment is approved.
Constellation Energy Group Inc. will probably move as Barclays Capital downgraded the shares to “equal weight” from “overweight.”
Thursday, July 1, 2010
ECB Lends 111 Billion Euros to Smooth Loan Expiry (Update1)
The European Central Bank said it will lend banks 111.2 billion euros ($136.5 billion) for six days to help them cope with the expiry of its landmark 12-month loan today.
The Frankfurt-based ECB said 78 banks asked for the six-day funds at the benchmark interest rate of 1 percent. Banks today need to repay 442 billion euros in 12-month loans, the biggest amount ever awarded by the ECB. Banks asked for 131.9 billion euros in three-month loans yesterday, less than economists expected.
Today’s allotment “is a reasonably big number,” said Laurent Bilke, an economist at Nomura International in London. “Together with yesterday’s operation, the funding needs come in on the high side of estimates. However, the banks that are overly reliant on the ECB are on the periphery of Europe, it’s not stress across the board.”
European banking stocks fell, led by Bank of Ireland Plc and Austria’s Raiffeisen International Bank Holding AG. The Bloomberg Europe Banks and Financial Services Index was down 2.2 percent as of 10:38 a.m. in London. The euro was little changed at $1.2290.
Europe’s sovereign debt crisis made financial institutions wary of lending to each other, complicating the ECB’s withdrawal of non-standard stimulus measures used to fight last year’s financial crisis. While the ECB no longer offers banks 12-month loans, the debt crisis has forced it to reintroduce unlimited lending in its three- and six-month refinancing operations and to start buying the bonds of big-deficit governments.
The Frankfurt-based ECB said 78 banks asked for the six-day funds at the benchmark interest rate of 1 percent. Banks today need to repay 442 billion euros in 12-month loans, the biggest amount ever awarded by the ECB. Banks asked for 131.9 billion euros in three-month loans yesterday, less than economists expected.
Today’s allotment “is a reasonably big number,” said Laurent Bilke, an economist at Nomura International in London. “Together with yesterday’s operation, the funding needs come in on the high side of estimates. However, the banks that are overly reliant on the ECB are on the periphery of Europe, it’s not stress across the board.”
European banking stocks fell, led by Bank of Ireland Plc and Austria’s Raiffeisen International Bank Holding AG. The Bloomberg Europe Banks and Financial Services Index was down 2.2 percent as of 10:38 a.m. in London. The euro was little changed at $1.2290.
Europe’s sovereign debt crisis made financial institutions wary of lending to each other, complicating the ECB’s withdrawal of non-standard stimulus measures used to fight last year’s financial crisis. While the ECB no longer offers banks 12-month loans, the debt crisis has forced it to reintroduce unlimited lending in its three- and six-month refinancing operations and to start buying the bonds of big-deficit governments.
Russian Bank $2.5 Billion Bond Sales Most Since 2008 (Update1)
Russian companies, led by OAO Sberbank and Vnesheconombank, are borrowing as much as $2.5 billion in the international bond market for the first time in two years. The sales reflect growing confidence in the economy, as growth accelerates in the second half of the year.
“The overall story in Russia is that loan books are growing quicker than maybe expected,” said Robert Whichello, co-head of the global syndicate business in London at BNP Paribas SA, France’s biggest bank. “We’ve got a period of relative calm and issuers are looking to take advantage of that.”
Sberbank, Russia’s biggest lender with about $248 billion of assets, sold $1 billion of five-year debt yesterday. Vnesheconombank, the government’s development bank, plans to issue the same amount in 10-year notes, according to a banker with knowledge of the transaction. OAO TransCreditBank, the lending unit of Russia’s rail monopoly, may sell up to $500 million of five-year debt, the company’s president said. The total is the most for a week since June 2008, according to data compiled by Bloomberg.
Banks are taking advantage of yields near one-month lows to revive corporate sales from Russia, where the government returned to international markets in April for the first time since defaulting on $40 billion of debt in 1998. Rising bank deposits and credit are fueling an economic expansion that Goldman Sachs Group Inc. says may reach 7 percent this year after the gross domestic product contracted in 2009 by the most since the Soviet Union’s 1991 collapse.
Yields Fall
Emerging nations including Russia may lure investors who want to shift away from holdings in indebted European countries, Whichello said. Greece, Portugal and Spain had their credit ratings downgraded this year on concern they will struggle to fund their budget deficits.
Yields on Russian corporate bonds dropped to 6.73 percent yesterday from this year’s high of 7.35 percent on May 25, according to JPMorgan Chase & Co.’s Corporate EMBI Russia Index.
Sberbank’s 5.499 percent notes were priced to yield 369 basis points, or 3.69 percentage points, more than similar- maturity U.S. Treasuries, Bloomberg data show.
Russia’s economy expanded 2.9 percent in the first quarter from a year earlier. President Dmitry Medvedev said at the annual St. Petersburg International Economic Forum last month that the economy is recovering with “minimal” sovereign debt, growing foreign exchange reserves and slowing inflation.
Default Swaps
Credit-default swaps linked to Russian debt fell 2 basis points to 196 yesterday. The five-year contracts that investors use to hedge against losses on corporate debt or speculate on creditworthiness pay the buyer face value if a borrower reneges on its debt.
The extra yield investors demand to hold Russian sovereign debt rather than U.S. Treasuries dropped one basis point to 282 at 10:19 a.m. in London, according to the JPMorgan EMBI+ Index. The yield on Russia’s dollar bonds due in 2020 rose one basis point to 5.47 percent.
The ruble weakened less than 0.1 percent against the dollar to 31.260, after dropping 1.2 percent last month. Investors increased bets that the ruble will weaken further, with non- deliverable forwards showing the currency at 31.4662 per dollar in three months compared with an NDF of 31.4270 yesterday. The contracts are a guide to expectations of currency movements as they allow foreign investors and companies to fix the exchange rate at a particular level in the future.
New Benchmark
Russian companies issued about $1.5 billion of international bonds in the two months after the government’s $5.5 billion debt sale in April that Finance Minister Alexei Kudrin said would help create a new benchmark 12 years after the government’s default. Company debt sales were limited by concern Europe’s debt crisis will worsen and erode demand for riskier assets.
A spokesman for Moscow-based Sberbank couldn’t be reached, a Vnesheconombank official in Moscow wasn’t unavailable and a TransCreditBank spokesman in Moscow also couldn’t be reached for comment after office hours.
Barclays Capital, Citigroup Inc., HSBC Holdings Plc and Societe Generale SA are managing Vnesheconombank’s sale of loan participation notes, according to a banker involved in the transaction. Sberbank hired DZ Bank AG, JPMorgan and Royal Bank of Scotland Group Plc for its sale, two people with knowledge of the transaction said.
“The overall story in Russia is that loan books are growing quicker than maybe expected,” said Robert Whichello, co-head of the global syndicate business in London at BNP Paribas SA, France’s biggest bank. “We’ve got a period of relative calm and issuers are looking to take advantage of that.”
Sberbank, Russia’s biggest lender with about $248 billion of assets, sold $1 billion of five-year debt yesterday. Vnesheconombank, the government’s development bank, plans to issue the same amount in 10-year notes, according to a banker with knowledge of the transaction. OAO TransCreditBank, the lending unit of Russia’s rail monopoly, may sell up to $500 million of five-year debt, the company’s president said. The total is the most for a week since June 2008, according to data compiled by Bloomberg.
Banks are taking advantage of yields near one-month lows to revive corporate sales from Russia, where the government returned to international markets in April for the first time since defaulting on $40 billion of debt in 1998. Rising bank deposits and credit are fueling an economic expansion that Goldman Sachs Group Inc. says may reach 7 percent this year after the gross domestic product contracted in 2009 by the most since the Soviet Union’s 1991 collapse.
Yields Fall
Emerging nations including Russia may lure investors who want to shift away from holdings in indebted European countries, Whichello said. Greece, Portugal and Spain had their credit ratings downgraded this year on concern they will struggle to fund their budget deficits.
Yields on Russian corporate bonds dropped to 6.73 percent yesterday from this year’s high of 7.35 percent on May 25, according to JPMorgan Chase & Co.’s Corporate EMBI Russia Index.
Sberbank’s 5.499 percent notes were priced to yield 369 basis points, or 3.69 percentage points, more than similar- maturity U.S. Treasuries, Bloomberg data show.
Russia’s economy expanded 2.9 percent in the first quarter from a year earlier. President Dmitry Medvedev said at the annual St. Petersburg International Economic Forum last month that the economy is recovering with “minimal” sovereign debt, growing foreign exchange reserves and slowing inflation.
Default Swaps
Credit-default swaps linked to Russian debt fell 2 basis points to 196 yesterday. The five-year contracts that investors use to hedge against losses on corporate debt or speculate on creditworthiness pay the buyer face value if a borrower reneges on its debt.
The extra yield investors demand to hold Russian sovereign debt rather than U.S. Treasuries dropped one basis point to 282 at 10:19 a.m. in London, according to the JPMorgan EMBI+ Index. The yield on Russia’s dollar bonds due in 2020 rose one basis point to 5.47 percent.
The ruble weakened less than 0.1 percent against the dollar to 31.260, after dropping 1.2 percent last month. Investors increased bets that the ruble will weaken further, with non- deliverable forwards showing the currency at 31.4662 per dollar in three months compared with an NDF of 31.4270 yesterday. The contracts are a guide to expectations of currency movements as they allow foreign investors and companies to fix the exchange rate at a particular level in the future.
New Benchmark
Russian companies issued about $1.5 billion of international bonds in the two months after the government’s $5.5 billion debt sale in April that Finance Minister Alexei Kudrin said would help create a new benchmark 12 years after the government’s default. Company debt sales were limited by concern Europe’s debt crisis will worsen and erode demand for riskier assets.
A spokesman for Moscow-based Sberbank couldn’t be reached, a Vnesheconombank official in Moscow wasn’t unavailable and a TransCreditBank spokesman in Moscow also couldn’t be reached for comment after office hours.
Barclays Capital, Citigroup Inc., HSBC Holdings Plc and Societe Generale SA are managing Vnesheconombank’s sale of loan participation notes, according to a banker involved in the transaction. Sberbank hired DZ Bank AG, JPMorgan and Royal Bank of Scotland Group Plc for its sale, two people with knowledge of the transaction said.
Tate Exits 132-Year-Old Business With Refinery Sale (Update2)
Tate & Lyle Plc, once the world’s biggest sugar processor, is selling its refineries in the European Union to American Sugar Refining Inc. as the U.K. company dismantles a 132-year-old industry to focus on more profitable businesses.
In a transaction echoing the sale of Britain’s iconic Cadbury chocolate brand to Kraft Foods Inc., Tate said today that it will receive 211 million pounds ($315 million) for the sites. The British company will be left with Splenda, the world’s second-largest low-calorie sweetener, and a global additives and ingredients business.
The retreat from an industrial empire founded by Henry Tate, benefactor of London’s Tate Gallery, comes nine months after Javed Ahmed, 50, took over as chief executive officer. Ahmed said the company’s priority is to expand in food ingredients used in Kraft and Kellogg Co. products and which accounted for 66 percent of earnings last year.
The sale of Cadbury Plc, founded in 1824, to Northfield, Illinois-based Kraft in January led to a campaign to “Keep Cadbury British” by the Mail on Sunday newspaper and saw the then U.K. Business Secretary Peter Mandelson describe the company as an iconic brand.
The sale of Tate’s sugar business, which includes its Golden Syrup brand first tinned in 1885, is a “different proposition,” said Investec Securities analyst Martin Deboo by phone from London.
‘Broken Economic Model’
Unlike Cadbury, Tate had a “façade of an iconic brand concealing a broken economic model,” he said. Tate is “essentially a corn refining business in North America.”
Shares in Tate rose 14.7 pence, or 3.3 percent, to 464.4 pence at 9:41 a.m. in London, giving the company a market value of 2.1 billion pounds.
Tate has been selling businesses and closing plants since the European Union cut sugar-production quotas, moving its focus to higher-margin products, including food ingredients and sucralose sweeteners. Tate sold its Canadian sugar unit to American Sugar Refining in 2007 for 132 million pounds and then in 2008 its international sugar business to Bunge Ltd.
Tate, which started refining sugar at its London site in 1878, is selling its refineries in Portugal and the U.K. and its Golden Syrup factory in London.
The sale price excludes pension assets and liabilities in the U.K., and will result in a book loss of about 55 million pounds, Tate said in its statement today.
‘Sweet Deal’
“The transaction is expected to be neutral to the group’s adjusted earnings per share on total operations in the 2011 financial year,” it said.
“It’s a very sweet deal,” said Investec’s Deboo. “We’d have been happy to see them exit it on a dilutive basis,” probably by closing the business and selling the land, he said. “Instead they’re selling it as a going concern for considerably more than we expected.”
Tate now plans to sell its remaining sugar operations, including its Vietnamese unit and its molasses assets, Ahmed said. The company’s “clear priority” is to grow its specialty food ingredients business, “supported by cash generated from bulk ingredients,” he said.
In a transaction echoing the sale of Britain’s iconic Cadbury chocolate brand to Kraft Foods Inc., Tate said today that it will receive 211 million pounds ($315 million) for the sites. The British company will be left with Splenda, the world’s second-largest low-calorie sweetener, and a global additives and ingredients business.
The retreat from an industrial empire founded by Henry Tate, benefactor of London’s Tate Gallery, comes nine months after Javed Ahmed, 50, took over as chief executive officer. Ahmed said the company’s priority is to expand in food ingredients used in Kraft and Kellogg Co. products and which accounted for 66 percent of earnings last year.
The sale of Cadbury Plc, founded in 1824, to Northfield, Illinois-based Kraft in January led to a campaign to “Keep Cadbury British” by the Mail on Sunday newspaper and saw the then U.K. Business Secretary Peter Mandelson describe the company as an iconic brand.
The sale of Tate’s sugar business, which includes its Golden Syrup brand first tinned in 1885, is a “different proposition,” said Investec Securities analyst Martin Deboo by phone from London.
‘Broken Economic Model’
Unlike Cadbury, Tate had a “façade of an iconic brand concealing a broken economic model,” he said. Tate is “essentially a corn refining business in North America.”
Shares in Tate rose 14.7 pence, or 3.3 percent, to 464.4 pence at 9:41 a.m. in London, giving the company a market value of 2.1 billion pounds.
Tate has been selling businesses and closing plants since the European Union cut sugar-production quotas, moving its focus to higher-margin products, including food ingredients and sucralose sweeteners. Tate sold its Canadian sugar unit to American Sugar Refining in 2007 for 132 million pounds and then in 2008 its international sugar business to Bunge Ltd.
Tate, which started refining sugar at its London site in 1878, is selling its refineries in Portugal and the U.K. and its Golden Syrup factory in London.
The sale price excludes pension assets and liabilities in the U.K., and will result in a book loss of about 55 million pounds, Tate said in its statement today.
‘Sweet Deal’
“The transaction is expected to be neutral to the group’s adjusted earnings per share on total operations in the 2011 financial year,” it said.
“It’s a very sweet deal,” said Investec’s Deboo. “We’d have been happy to see them exit it on a dilutive basis,” probably by closing the business and selling the land, he said. “Instead they’re selling it as a going concern for considerably more than we expected.”
Tate now plans to sell its remaining sugar operations, including its Vietnamese unit and its molasses assets, Ahmed said. The company’s “clear priority” is to grow its specialty food ingredients business, “supported by cash generated from bulk ingredients,” he said.
Kleinwort Benson to Hire Bankers as New Owner Takes Control
Kleinwort Benson, the U.K. private bank that traces its roots to 1786, plans to hire bankers in the next 12 to 24 months as it expands its funds management and financial advisory units.
The decision follows the completion today of Kleinwort Benson’s sale to Brussels-based RHJ International SA, the publicly traded investment company started by Timothy Collins, founder of private equity firm Ripplewood Holdings LLC.
“We want to grow in all of these areas,” said Robert Taylor, 50, Kleinwort Benson’s chief executive officer said in an interview in London today. “We definitely want to hire, particularly in the front-end of relationship management, asset management and the advisory side.”
RHJ bought Kleinwort Benson from Commerzbank AG for 225 million pounds ($334 million) in October as it seeks growth in financial services and to decrease its reliance on the automotive-components industry. London-based Kleinwort Benson, which also has offices in the Channel Islands, will have more than 10 billion euros ($12.3 billion) of assets under management after RHJ also decided to buy KBC Groep NV’s funds business in Ireland last month.
The bank has not yet decided how many bankers to hire as it’s reviewing its business plan, Taylor said. In September 2008, Commerzbank announced it was cutting more than 1,000 jobs at Dresdner Kleinwort in London after buying the firm’s Dresdner Bank AG parent. In February 2009, Dresdner Kleinwort said it would cut as many as 150 jobs from its equity research and cash equities units.
‘Ambitious Plans’
The firm may end up competing with companies including NM Rothschild & Sons Ltd. and Lazard Ltd., Taylor said, adding that “we have ambitious plans.” The bank may expand into some non- European emerging markets in the next three years to five years, he said.
The Kleinwort transaction marks RHJ Chief Executive Officer Leonhard Fischer’s return to Kleinwort Benson. He led the company for 2 ½ years while it was owned by Dresdner Bank and then quit in 2002 over what Dresdner called “differences of opinion” about how to run the company. Kleinwort said in a statement today that Fischer will become chairman of Kleinwort Benson Private Bank Ltd.
“We are looking to expand our business prudently but aggressively,” Taylor said. “We’d like to see what’s in the marketplace,” he said, referring to potential acquisitions.
The decision follows the completion today of Kleinwort Benson’s sale to Brussels-based RHJ International SA, the publicly traded investment company started by Timothy Collins, founder of private equity firm Ripplewood Holdings LLC.
“We want to grow in all of these areas,” said Robert Taylor, 50, Kleinwort Benson’s chief executive officer said in an interview in London today. “We definitely want to hire, particularly in the front-end of relationship management, asset management and the advisory side.”
RHJ bought Kleinwort Benson from Commerzbank AG for 225 million pounds ($334 million) in October as it seeks growth in financial services and to decrease its reliance on the automotive-components industry. London-based Kleinwort Benson, which also has offices in the Channel Islands, will have more than 10 billion euros ($12.3 billion) of assets under management after RHJ also decided to buy KBC Groep NV’s funds business in Ireland last month.
The bank has not yet decided how many bankers to hire as it’s reviewing its business plan, Taylor said. In September 2008, Commerzbank announced it was cutting more than 1,000 jobs at Dresdner Kleinwort in London after buying the firm’s Dresdner Bank AG parent. In February 2009, Dresdner Kleinwort said it would cut as many as 150 jobs from its equity research and cash equities units.
‘Ambitious Plans’
The firm may end up competing with companies including NM Rothschild & Sons Ltd. and Lazard Ltd., Taylor said, adding that “we have ambitious plans.” The bank may expand into some non- European emerging markets in the next three years to five years, he said.
The Kleinwort transaction marks RHJ Chief Executive Officer Leonhard Fischer’s return to Kleinwort Benson. He led the company for 2 ½ years while it was owned by Dresdner Bank and then quit in 2002 over what Dresdner called “differences of opinion” about how to run the company. Kleinwort said in a statement today that Fischer will become chairman of Kleinwort Benson Private Bank Ltd.
“We are looking to expand our business prudently but aggressively,” Taylor said. “We’d like to see what’s in the marketplace,” he said, referring to potential acquisitions.
Morgan Stanley May Hire 500 Private Bankers in Lending Push
Morgan Stanley, owner of the world’s largest brokerage, hired 100 bankers and may quintuple their numbers by the end of 2011 to offer more products such as jumbo mortgages and structured loans to Morgan Stanley Smith Barney clients, a person with knowledge of the strategy said.
The firm is building a private bank to squeeze more revenue from clients and encourage them to hold deposits at the company. Morgan Stanley’s wealth management group had $191 million of interest income in the first quarter, a fraction of the $1.1 billion at Bank of America Corp.’s Merrill Lynch unit.
“There is always this hidden opportunity of cross-sell,” said Steve Stelmach, an analyst at FBR Capital Markets in Arlington, Virginia. “Merrill Lynch has been successful in offering mortgage products to their retail customers, so the precedent is there.”
Morgan Stanley joins Bank of America and Wells Fargo & Co. in encouraging customers to do more business with the banks as the weak economy and new regulations make it harder to earn money from loans and investment banking. Bankers have pushed cross-selling for decades, often with little to show for it, to expand their business without having to sign up new customers.
The unit, Morgan Stanley Private Bank N.A., registered with the Federal Reserve in April. The private bank is headed by Cece Stewart, 52, whom Morgan Stanley hired in 2008 from Wachovia Corp., where she had risen to executive vice president from branch manager over three decades. The firm started hiring the private bankers last year.
Boosting Loan Balances
The private bank plans to as much as triple its loan balances to between $50 billion and $60 billion by the end of 2014, said the person, who declined to be named because the plans haven’t been made public. The bank now has about $19 billion in loans largely from its previous lending efforts, which mostly focused on agency mortgages, the person said.
The private bank will also offer deposit products to clients who hold more than $1.6 trillion of assets in the brokerage. Morgan Stanley considered buying a banking franchise before deciding to build its own private bank in the first half of 2009, the person said. That was the same year that Morgan Stanley formed its brokerage, which has more than 18,000 advisers, when it bought a controlling stake in the joint venture with Citigroup Inc.
Citigroup has hired about 15 private bankers since March and will add another 115 over the next several years, spokesman Mark Costiglio said in an interview last month.
Bank of America is trying to persuade its 12 million customers to move funds from rival brokers to Merrill Lynch and wants Merrill Lynch clients to transfer some of the $500 billion they have at other banks, according to a May 10 presentation. Wells Fargo is focused on 3 million customers who keep more than $250,000 for investments at other companies, according to Senior Executive Vice President David Carroll.
‘Aggressive’ Rates
It’s often difficult to gauge how successful efforts to sell clients new products are because banks rarely provide data on their cross-selling efforts, said Stelmach, the FBR analyst.
Morgan Stanley is now offering jumbo mortgages, home-equity lines and securities lending, said Armando Cabo, a private banker who joined from JPMorgan Chase & Co. this year. The bank plans to offer some commercial loans to clients later this year, Cabo said. It’s offering mortgages of up to $5 million and home- equity lines up to $2.5 million, spokesman Jim Wiggins said.
The private bankers will work with financial advisers to arrange lending options for clients, with the advisers remaining the primary contact. Cabo said he’s working with about 80 to 90 advisers.
The firm has been offering “aggressive” interest rates to win clients, said Shawn Rubin, a Morgan Stanley Smith Barney financial adviser in New York. Lending and managing clients’ liabilities will probably be the highest-growth revenue source of his business this year, Rubin said.
Liability Management
“The markets have been very challenging for a while, and clients are sort of used to the markets not doing a whole lot for their net worth,” Rubin said. “So they are really focused on the other avenues of wealth management, whether that’s risk management or liability management.”
Record low home-loan rates may prompt some clients who had loans with other banks, including Citigroup’s private bank, to refinance, providing a chance for Morgan Stanley to gain market share, Rubin said. Rates for 30-year fixed loans declined to 4.69 percent in the week ended June 24, mortgage-finance company Freddie Mac said last week. That’s below the previous record of 4.71 percent, set in the week ended Dec. 3.
Compensation Ratio
Jumbo mortgages are larger than the ones that government- supported Fannie Mae and Freddie Mac can finance, now from $417,000 to $729,750 in high-cost areas. About 10.3 percent of U.S. prime jumbo mortgages which backed securities were at least 60 days late in May, according to Fitch Ratings. That’s up from 10.2 percent in April, marking the 36th straight increase for “serious delinquencies.”
Morgan Stanley’s wealth-management unit had revenue of $3.11 billion in the first quarter, down from $3.14 billion in the fourth. Chief Executive Officer James Gorman, who led the unit before succeeding John Mack in January, said in a letter to shareholders this year that the joint venture will play “an increasingly important role in our growth and profitability.”
The effort is likely to lower the wealth-management unit’s compensation ratio over time, according to two people briefed on the matter. The division’s ratio of compensation costs to revenue was 64 percent in the first quarter, compared with 41 percent in the institutional securities business, which includes the trading and investment banking units.
“We’re making huge investments on the lending front, because Morgan Stanley did not do things like non-conforming mortgages and structured or tailored loans, and we had that through Citi’s private bank,” Charles Johnston, president of Morgan Stanley Smith Barney, said in an interview in April. “There’s a huge opportunity there, and we’ve got that now, we’ve built that.”
The firm is building a private bank to squeeze more revenue from clients and encourage them to hold deposits at the company. Morgan Stanley’s wealth management group had $191 million of interest income in the first quarter, a fraction of the $1.1 billion at Bank of America Corp.’s Merrill Lynch unit.
“There is always this hidden opportunity of cross-sell,” said Steve Stelmach, an analyst at FBR Capital Markets in Arlington, Virginia. “Merrill Lynch has been successful in offering mortgage products to their retail customers, so the precedent is there.”
Morgan Stanley joins Bank of America and Wells Fargo & Co. in encouraging customers to do more business with the banks as the weak economy and new regulations make it harder to earn money from loans and investment banking. Bankers have pushed cross-selling for decades, often with little to show for it, to expand their business without having to sign up new customers.
The unit, Morgan Stanley Private Bank N.A., registered with the Federal Reserve in April. The private bank is headed by Cece Stewart, 52, whom Morgan Stanley hired in 2008 from Wachovia Corp., where she had risen to executive vice president from branch manager over three decades. The firm started hiring the private bankers last year.
Boosting Loan Balances
The private bank plans to as much as triple its loan balances to between $50 billion and $60 billion by the end of 2014, said the person, who declined to be named because the plans haven’t been made public. The bank now has about $19 billion in loans largely from its previous lending efforts, which mostly focused on agency mortgages, the person said.
The private bank will also offer deposit products to clients who hold more than $1.6 trillion of assets in the brokerage. Morgan Stanley considered buying a banking franchise before deciding to build its own private bank in the first half of 2009, the person said. That was the same year that Morgan Stanley formed its brokerage, which has more than 18,000 advisers, when it bought a controlling stake in the joint venture with Citigroup Inc.
Citigroup has hired about 15 private bankers since March and will add another 115 over the next several years, spokesman Mark Costiglio said in an interview last month.
Bank of America is trying to persuade its 12 million customers to move funds from rival brokers to Merrill Lynch and wants Merrill Lynch clients to transfer some of the $500 billion they have at other banks, according to a May 10 presentation. Wells Fargo is focused on 3 million customers who keep more than $250,000 for investments at other companies, according to Senior Executive Vice President David Carroll.
‘Aggressive’ Rates
It’s often difficult to gauge how successful efforts to sell clients new products are because banks rarely provide data on their cross-selling efforts, said Stelmach, the FBR analyst.
Morgan Stanley is now offering jumbo mortgages, home-equity lines and securities lending, said Armando Cabo, a private banker who joined from JPMorgan Chase & Co. this year. The bank plans to offer some commercial loans to clients later this year, Cabo said. It’s offering mortgages of up to $5 million and home- equity lines up to $2.5 million, spokesman Jim Wiggins said.
The private bankers will work with financial advisers to arrange lending options for clients, with the advisers remaining the primary contact. Cabo said he’s working with about 80 to 90 advisers.
The firm has been offering “aggressive” interest rates to win clients, said Shawn Rubin, a Morgan Stanley Smith Barney financial adviser in New York. Lending and managing clients’ liabilities will probably be the highest-growth revenue source of his business this year, Rubin said.
Liability Management
“The markets have been very challenging for a while, and clients are sort of used to the markets not doing a whole lot for their net worth,” Rubin said. “So they are really focused on the other avenues of wealth management, whether that’s risk management or liability management.”
Record low home-loan rates may prompt some clients who had loans with other banks, including Citigroup’s private bank, to refinance, providing a chance for Morgan Stanley to gain market share, Rubin said. Rates for 30-year fixed loans declined to 4.69 percent in the week ended June 24, mortgage-finance company Freddie Mac said last week. That’s below the previous record of 4.71 percent, set in the week ended Dec. 3.
Compensation Ratio
Jumbo mortgages are larger than the ones that government- supported Fannie Mae and Freddie Mac can finance, now from $417,000 to $729,750 in high-cost areas. About 10.3 percent of U.S. prime jumbo mortgages which backed securities were at least 60 days late in May, according to Fitch Ratings. That’s up from 10.2 percent in April, marking the 36th straight increase for “serious delinquencies.”
Morgan Stanley’s wealth-management unit had revenue of $3.11 billion in the first quarter, down from $3.14 billion in the fourth. Chief Executive Officer James Gorman, who led the unit before succeeding John Mack in January, said in a letter to shareholders this year that the joint venture will play “an increasingly important role in our growth and profitability.”
The effort is likely to lower the wealth-management unit’s compensation ratio over time, according to two people briefed on the matter. The division’s ratio of compensation costs to revenue was 64 percent in the first quarter, compared with 41 percent in the institutional securities business, which includes the trading and investment banking units.
“We’re making huge investments on the lending front, because Morgan Stanley did not do things like non-conforming mortgages and structured or tailored loans, and we had that through Citi’s private bank,” Charles Johnston, president of Morgan Stanley Smith Barney, said in an interview in April. “There’s a huge opportunity there, and we’ve got that now, we’ve built that.”
Fortis Offers S$3.2 Billion for Remainder of Parkway (Update4)
Fortis Healthcare Ltd., India’s second-biggest hospital operator, offered about S$3.2 billion ($2.3 billion) for the rest of Singapore’s Parkway Holdings Ltd., topping a partial bid by Malaysia’s sovereign wealth fund.
Fortis said it will pay S$3.80 a share in cash for the 74.73 percent it doesn’t already own in Parkway, Asia’s largest hospital operator. That’s 0.5 percent more than the S$3.78-a- share bid by Khazanah Nasional Bhd., which sought to more than double its stake to 51.5 percent. Parkway shares closed at S$3.57 yesterday and were halted from trading today.
Brothers Malvinder and Shivinder Singh, who run Fortis, are moving to block Khazanah from gaining control of Parkway’s 16 hospitals in Asian countries, where health-care spending is increasing as much as 17 percent annually. The combined entity will have 68 hospitals in eight nations across the region, Parkway Chairman Malvinder Singh said.
It’s possible Khazanah will make a counter offer, said Lim Jit Soon, an equities analyst at Nomura Securities in Singapore. “There are going to be more twists and turns ahead because this is only the second shot,” Lim said in a telephone interview.
Fortis gained 1.2 percent to close at 154.1 rupees in Mumbai trading and has advanced 13 percent this year.
Surviving Entity
Malvinder Singh said he plans to place Fortis under Parkway and keep Parkway listed in Singapore. It’s premature to comment on whether Fortis will remain listed, he said.
Fortis, which trails Apollo Hospitals Enterprise Ltd. among Indian hospital operators, said it expects merging with Parkway will cut costs through coordinated purchases of medical equipment and drugs.
Parkway’s hospitals attract patients from Indonesia and the Middle East, driving revenue from medical tourism, which Fortis says will reach $1.5 billion globally in 2010. The Gulf states, China, Hong Kong, Indonesia and Thailand offer growth potential for the combined company, New Delhi-based Fortis said.
“We’ll see ourselves extremely well-positioned for growth as we move forward,” Malvinder Singh said at a briefing in Singapore.
Fortis is “very comfortable” with the mix of cash, equity and debt funding it has for the Parkway offer, Singh said, without giving more specific details. Macquarie Group Ltd. and Royal Bank of Scotland Group Plc are advising Fortis.
The offer from Fortis values Parkway at about 27 times estimated 2010 earnings per share. Raffles Medical Group Ltd., Parkway’s biggest Singapore-based competitor, trades at 21 times, according to data compiled by Bloomberg.
Superior Offer
Fortis’s offer appears superior to Khazanah’s, said Lynette Tan, who follows small and mid-cap companies at DMG & Partners Securities Pte. in Singapore. Officials at Kuala Lumpur-based Khazanah declined to comment.
“It’s a higher price and secondly it’s a general offer, compared to a partial,” Tan said. “In a general offer, shareholders won’t be left with odd lots which they probably cannot trade for a long time.”
Malvinder, 37, and Shivinder, 34, have a net worth of $3.2 billion, making them the world’s 297th-richest people and India’s 16th-richest, Forbes magazine said in March.
In 2008, the Singh family sold their 35 percent stake in Ranbaxy Laboratories Ltd., India’s biggest drugmaker, to Japan’s Daiichi Sankyo Co. for about $2 billion. Malvinder remained until May 2009 as chief executive officer of the company his grandfather bought in 1952.
“I certainly believe our offer is compelling,” Malvinder Singh said. He declined to comment on a potential bidding war with Khazanah.
“We are giving the flexibility to the shareholders to take the decision that is in their best interest,” Singh said. “If they would like to tender in, we are more than happy to take it. If they would like to stay invested, we’re very happy to have them.”
Fortis said it will pay S$3.80 a share in cash for the 74.73 percent it doesn’t already own in Parkway, Asia’s largest hospital operator. That’s 0.5 percent more than the S$3.78-a- share bid by Khazanah Nasional Bhd., which sought to more than double its stake to 51.5 percent. Parkway shares closed at S$3.57 yesterday and were halted from trading today.
Brothers Malvinder and Shivinder Singh, who run Fortis, are moving to block Khazanah from gaining control of Parkway’s 16 hospitals in Asian countries, where health-care spending is increasing as much as 17 percent annually. The combined entity will have 68 hospitals in eight nations across the region, Parkway Chairman Malvinder Singh said.
It’s possible Khazanah will make a counter offer, said Lim Jit Soon, an equities analyst at Nomura Securities in Singapore. “There are going to be more twists and turns ahead because this is only the second shot,” Lim said in a telephone interview.
Fortis gained 1.2 percent to close at 154.1 rupees in Mumbai trading and has advanced 13 percent this year.
Surviving Entity
Malvinder Singh said he plans to place Fortis under Parkway and keep Parkway listed in Singapore. It’s premature to comment on whether Fortis will remain listed, he said.
Fortis, which trails Apollo Hospitals Enterprise Ltd. among Indian hospital operators, said it expects merging with Parkway will cut costs through coordinated purchases of medical equipment and drugs.
Parkway’s hospitals attract patients from Indonesia and the Middle East, driving revenue from medical tourism, which Fortis says will reach $1.5 billion globally in 2010. The Gulf states, China, Hong Kong, Indonesia and Thailand offer growth potential for the combined company, New Delhi-based Fortis said.
“We’ll see ourselves extremely well-positioned for growth as we move forward,” Malvinder Singh said at a briefing in Singapore.
Fortis is “very comfortable” with the mix of cash, equity and debt funding it has for the Parkway offer, Singh said, without giving more specific details. Macquarie Group Ltd. and Royal Bank of Scotland Group Plc are advising Fortis.
The offer from Fortis values Parkway at about 27 times estimated 2010 earnings per share. Raffles Medical Group Ltd., Parkway’s biggest Singapore-based competitor, trades at 21 times, according to data compiled by Bloomberg.
Superior Offer
Fortis’s offer appears superior to Khazanah’s, said Lynette Tan, who follows small and mid-cap companies at DMG & Partners Securities Pte. in Singapore. Officials at Kuala Lumpur-based Khazanah declined to comment.
“It’s a higher price and secondly it’s a general offer, compared to a partial,” Tan said. “In a general offer, shareholders won’t be left with odd lots which they probably cannot trade for a long time.”
Malvinder, 37, and Shivinder, 34, have a net worth of $3.2 billion, making them the world’s 297th-richest people and India’s 16th-richest, Forbes magazine said in March.
In 2008, the Singh family sold their 35 percent stake in Ranbaxy Laboratories Ltd., India’s biggest drugmaker, to Japan’s Daiichi Sankyo Co. for about $2 billion. Malvinder remained until May 2009 as chief executive officer of the company his grandfather bought in 1952.
“I certainly believe our offer is compelling,” Malvinder Singh said. He declined to comment on a potential bidding war with Khazanah.
“We are giving the flexibility to the shareholders to take the decision that is in their best interest,” Singh said. “If they would like to tender in, we are more than happy to take it. If they would like to stay invested, we’re very happy to have them.”
Swedish Riksbank Raises Main Rate to Cool Recovery (Update3)
Sweden’s Riksbank in a split decision raised the main lending rate a quarter-point to cool economic growth, while forecasting a slower pace of increases than previously predicted beyond next year.
The world’s oldest central bank raised the seven-day repo rate to 0.5 percent, with two out of six policy makers voting for no change, the bank said on its website today.
A government stimulus and revived demand for the country’s exports has injected momentum into the recovery and pushed up house prices. The Nordic region’s biggest economy grew more than economists expected in the first quarter, unemployment dropped and industrial production expanded more than anticipated. House prices and household borrowing also grew.
“The Swedish economy is developing strongly at the moment,” Riksbank Governor Stefan Ingves said at a press conference in Stockholm after the decision. “We forecast a slightly lower rate path down the road and that’s primarily a consequence of lower growth in Europe.”
The bank sees the main rate averaging 0.9 percent in the last quarter of this year, 2.1 percent in the third quarter of 2011 and 3.1 percent in the same period the year after.
“A probable scenario is that they will raise the rate at least two of the three meetings that remain this year,” said Cecilia Hermansson, chief economist at Swedbank AB in Stockholm.
The Riksbank may increase the rate more slowly than today’s forecast next year “given the budget consolidation that has to be carried out around the world,” Hermansson said.
Raised Forecasts
The krona lost 0.6 percent against the euro to trade at 9.5933 at 1:32 p.m. in Stockholm. Against the dollar, the krona was unchanged at 7.7876.
The Riksbank raised its forecast for economic growth this year to 3.8 percent from 2.2 percent and expects expansion of 3.6 percent next year, slowing to 2.8 percent in 2012.
“The uncertain public finances situation abroad means at the same time that many countries need to tighten their fiscal policy substantially to reduce their budget deficits,” the bank said in the statement. “This tightening is expected to dampen gross domestic product growth in the euro area, which will also hold back GDP growth and inflation in Sweden in the long run.”
The Riksbank predicted consumer prices will increase 1.2 this year, 2 percent in 2011 and 2.4 percent in 2012 compared with an earlier forecast of 2.9 percent. It targets 2 percent inflation. Unemployment will average 8.9 percent this year, 8.5 percent in 2011 and 8.1 percent in 2012, the bank predicted.
Recovery Road
“The economy is on the road to recovery,” the National Institute of Economic Research said on June 23, forecasting 3.7 percent growth this year after last year’s 5.1 percent slump -- the worst since World War II. “The turning point has been passed with the aid of an expansionary economic policy and a rapid upturn in demand for Swedish exports of goods.”
The government will spend 1.2 percent of GDP this year to stimulate growth before elections in September. Measures include a fourth income tax cut since 2006, infrastructure spending and programs to support the unemployed.
Retail sales rose an annual 2.7 percent in May, beating economists’ predictions for a 0.3 percent increase. Unemployment fell to 8.8 percent from 9.5 percent and exports, which account for about half of Swedish output, increased for a sixth month.
“Industrial firms forecast a continued increase in both output and employment for the next few months,” NIER said on June 23 as manufacturing confidence rose to its highest level in three years in June. Swedish companies representing most major industries are enjoying a return to growth, the Riksbank said in a June 17 report showing rising showed production and orders.
Jobs, Homes
Volvo AB, the world’s second-largest truckmaker, hired 400 workers in the first quarter and is likely to add more jobs as volumes increase, Chief Executive Officer Leif Johansson said on April 23 after orders more than doubled in the first quarter from the same three months a year earlier.
Swedish apartment prices rose for a 10th period in the three months through May and household credit growth stayed above an annual 9 percent in May, adding to concerns the property market may be heading into a bubble. The financial watchdog on May 5 proposed introducing a cap on mortgage lending at 85 percent of the value of a property from Oct. 1.
“Household borrowing is still high and against that backdrop there is a value in sending signals that the rate will be higher going forward,” Ingves said.
Deputy Governor Karolina Ekholm entered a reservation against the decision to increase the repo rate “in view of the increased uncertainty prevailing as regards the sovereign debt problems in the euro area,” according to the statement.
Deputy Governor Lars E.O. Svensson argued that the rate should stay at 0.25 percent through the fourth quarter.
The Riksbank is the 14th central bank to raise interest rates since the height of the global financial crisis. Norway’s Norges Bank has raised borrowing costs three times since October to cool the economy.
The European Central Bank kept its benchmark lending rate at a record-low 1 percent on May 6, as President Jean-Claude Trichet called the rate “appropriate.”
The world’s oldest central bank raised the seven-day repo rate to 0.5 percent, with two out of six policy makers voting for no change, the bank said on its website today.
A government stimulus and revived demand for the country’s exports has injected momentum into the recovery and pushed up house prices. The Nordic region’s biggest economy grew more than economists expected in the first quarter, unemployment dropped and industrial production expanded more than anticipated. House prices and household borrowing also grew.
“The Swedish economy is developing strongly at the moment,” Riksbank Governor Stefan Ingves said at a press conference in Stockholm after the decision. “We forecast a slightly lower rate path down the road and that’s primarily a consequence of lower growth in Europe.”
The bank sees the main rate averaging 0.9 percent in the last quarter of this year, 2.1 percent in the third quarter of 2011 and 3.1 percent in the same period the year after.
“A probable scenario is that they will raise the rate at least two of the three meetings that remain this year,” said Cecilia Hermansson, chief economist at Swedbank AB in Stockholm.
The Riksbank may increase the rate more slowly than today’s forecast next year “given the budget consolidation that has to be carried out around the world,” Hermansson said.
Raised Forecasts
The krona lost 0.6 percent against the euro to trade at 9.5933 at 1:32 p.m. in Stockholm. Against the dollar, the krona was unchanged at 7.7876.
The Riksbank raised its forecast for economic growth this year to 3.8 percent from 2.2 percent and expects expansion of 3.6 percent next year, slowing to 2.8 percent in 2012.
“The uncertain public finances situation abroad means at the same time that many countries need to tighten their fiscal policy substantially to reduce their budget deficits,” the bank said in the statement. “This tightening is expected to dampen gross domestic product growth in the euro area, which will also hold back GDP growth and inflation in Sweden in the long run.”
The Riksbank predicted consumer prices will increase 1.2 this year, 2 percent in 2011 and 2.4 percent in 2012 compared with an earlier forecast of 2.9 percent. It targets 2 percent inflation. Unemployment will average 8.9 percent this year, 8.5 percent in 2011 and 8.1 percent in 2012, the bank predicted.
Recovery Road
“The economy is on the road to recovery,” the National Institute of Economic Research said on June 23, forecasting 3.7 percent growth this year after last year’s 5.1 percent slump -- the worst since World War II. “The turning point has been passed with the aid of an expansionary economic policy and a rapid upturn in demand for Swedish exports of goods.”
The government will spend 1.2 percent of GDP this year to stimulate growth before elections in September. Measures include a fourth income tax cut since 2006, infrastructure spending and programs to support the unemployed.
Retail sales rose an annual 2.7 percent in May, beating economists’ predictions for a 0.3 percent increase. Unemployment fell to 8.8 percent from 9.5 percent and exports, which account for about half of Swedish output, increased for a sixth month.
“Industrial firms forecast a continued increase in both output and employment for the next few months,” NIER said on June 23 as manufacturing confidence rose to its highest level in three years in June. Swedish companies representing most major industries are enjoying a return to growth, the Riksbank said in a June 17 report showing rising showed production and orders.
Jobs, Homes
Volvo AB, the world’s second-largest truckmaker, hired 400 workers in the first quarter and is likely to add more jobs as volumes increase, Chief Executive Officer Leif Johansson said on April 23 after orders more than doubled in the first quarter from the same three months a year earlier.
Swedish apartment prices rose for a 10th period in the three months through May and household credit growth stayed above an annual 9 percent in May, adding to concerns the property market may be heading into a bubble. The financial watchdog on May 5 proposed introducing a cap on mortgage lending at 85 percent of the value of a property from Oct. 1.
“Household borrowing is still high and against that backdrop there is a value in sending signals that the rate will be higher going forward,” Ingves said.
Deputy Governor Karolina Ekholm entered a reservation against the decision to increase the repo rate “in view of the increased uncertainty prevailing as regards the sovereign debt problems in the euro area,” according to the statement.
Deputy Governor Lars E.O. Svensson argued that the rate should stay at 0.25 percent through the fourth quarter.
The Riksbank is the 14th central bank to raise interest rates since the height of the global financial crisis. Norway’s Norges Bank has raised borrowing costs three times since October to cool the economy.
The European Central Bank kept its benchmark lending rate at a record-low 1 percent on May 6, as President Jean-Claude Trichet called the rate “appropriate.”
Asian Stocks Fall on China Manufacturing, Moody’s Spain Review
Asian stocks fell, dragging down the MSCI Asia Pacific Index towards its lowest level in three weeks, after Chinese manufacturing growth slowed and Moody’s Investors Service said it may cut Spain’s top credit rating.
Mining companies BHP Billiton Ltd. and Rio Tinto Group, which get at least a fifth of their revenue from China, retreated in Sydney after the Purchasing Managers’ Index, a gauge of Chinese manufacturing, fell more than economists estimated. Nissan Motor Co., which gets 13 percent of its revenue in Europe, lost 3.2 percent in Tokyo after Moody’s said it may lower Spain’s Aaa classification.
“Investors are already finding difficulty traversing the wall of worry,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “A downgrade of Spanish sovereign debt would be another piece of negative news that adds to demand for perceived safe-haven investments.”
The MSCI Asia Pacific Index dropped 1.3 percent to 111.36 as of 7:21 p.m. in Tokyo, extending its biggest quarterly decline in more than a year. The measure is set to close at the lowest level since June 10. The gauge has fallen 14 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
Japan’s Nikkei 225 Stock Average slumped 2 percent, a fifth day of declines. An increase in the Bank of Japan’s Tankan index of sentiment among the country’s largest manufacturers to a two- year high failed to stem the slump in stocks.
South Korea’s Kospi dropped 0.7 percent. The S&P/ASX 200 Index declined 1.5 percent in Sydney and China’s Shanghai Composite Index decreased 1 percent. Markets in Hong Kong are closed today for a public holiday.
Biggest Declines
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge yesterday fell 1 percent as ADP Employer Services said companies in the U.S. added fewer workers in June than forecast.
All 10 industry gauges represented on the MSCI Asia Pacific Index declined. Utilities stocks, perceived to be less sensitive to economic growth cycles, fell the least.
“Investor sentiment is certainly negative and we’ve seen that reiterated in buying of defensive asset classes,” said Chris Weston, head of institutional dealing at IG Markets in Melbourne. “Traders are pricing in a double dip, which is not a healthy stalking ground for equities.”
BHP, which is also Australia’s biggest oil producer, sank 1.4 percent to A$37.11 as crude oil and copper futures in New York retreated. Rio Tinto slumped 2.3 percent to A$65.10. Jiangxi Copper Co., China’s largest producer of the metal, lost 2.6 percent to 23.44 yuan in Shanghai.
Manufacturing Slowdown
China’s manufacturing expanded at a slower pace for a second month in June, adding to signs that growth in the world’s third-largest economy is moderating. The Purchasing Managers’ Index fell to 52.1 from 53.9 in May, the Federation of Logistics and Purchasing said today. That was less than the median 53.2 estimate in a Bloomberg News survey of 12 economists. A reading above 50 indicates expansion.
Gree Electric Appliances Inc., the largest Chinese maker of home air-conditioners, lost 2.3 percent to 18.37 yuan in Shenzhen, southern China. Tokyo-based Hitachi Construction Machinery Co., which counts China as its biggest market, lost 2.6 percent to 1,613 yen.
Speculation global growth will slow has helped drag down the average price of stocks in the MSCI Asia Pacific Index to about 14 times estimated profit, compared with 24 times a year ago. The gauge lost 0.5 percent last week after new-home sales in the U.S. tumbled to a record low.
Nissan, Sony
Stocks also fell today after Moody’s announced its review on Spain. “Deteriorating” growth prospects and challenges in meeting fiscal targets mean Spain’s Aaa classification may be lowered by as much as two grades, Moody’s analysts in New York said yesterday in a statement. The review will be concluded within a three-month period, the ratings company said.
Nissan slipped 3.2 percent to 606 yen. Mazda Motor Corp. plunged 5.2 percent to 199 yen, the fifth-biggest drop on the MSCI Asia Pacific Index. Sony Corp., which gets 21 percent of its revenue from Europe, declined 3.7 percent to 2,296 yen. Sony separately said it’s recalling 535,000 Vaio personal computers because they may overheat due to a temperature-control defect.
Also in Tokyo, Softbank Corp., Japan’s No. 3 mobile-phone company, dropped 4.4 percent to 2,267 yen after the company’s Yahoo Japan Corp. affiliate was ordered to pay more taxes. Softbank was the largest contributor to the Nikkei’s decline. Yahoo Japan slumped 3.2 percent to 34,500 yen.
Shipping stocks declined after the Baltic Dry Index, which measures the cost of transporting commodities, sank 1.7 percent yesterday, extending a 24-day slump to 43 percent.
Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line, retreated 2.5 percent to 357 yen. Cosco Corp. Singapore Ltd., a China-based shipbuilder that also operates bulk carriers, dropped 3.4 percent to S$1.44 in Singapore, while STX Pan Ocean Co., South Korea’s biggest bulk carrier, dipped 1.3 percent to 11,150 won.
Mining companies BHP Billiton Ltd. and Rio Tinto Group, which get at least a fifth of their revenue from China, retreated in Sydney after the Purchasing Managers’ Index, a gauge of Chinese manufacturing, fell more than economists estimated. Nissan Motor Co., which gets 13 percent of its revenue in Europe, lost 3.2 percent in Tokyo after Moody’s said it may lower Spain’s Aaa classification.
“Investors are already finding difficulty traversing the wall of worry,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “A downgrade of Spanish sovereign debt would be another piece of negative news that adds to demand for perceived safe-haven investments.”
The MSCI Asia Pacific Index dropped 1.3 percent to 111.36 as of 7:21 p.m. in Tokyo, extending its biggest quarterly decline in more than a year. The measure is set to close at the lowest level since June 10. The gauge has fallen 14 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
Japan’s Nikkei 225 Stock Average slumped 2 percent, a fifth day of declines. An increase in the Bank of Japan’s Tankan index of sentiment among the country’s largest manufacturers to a two- year high failed to stem the slump in stocks.
South Korea’s Kospi dropped 0.7 percent. The S&P/ASX 200 Index declined 1.5 percent in Sydney and China’s Shanghai Composite Index decreased 1 percent. Markets in Hong Kong are closed today for a public holiday.
Biggest Declines
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge yesterday fell 1 percent as ADP Employer Services said companies in the U.S. added fewer workers in June than forecast.
All 10 industry gauges represented on the MSCI Asia Pacific Index declined. Utilities stocks, perceived to be less sensitive to economic growth cycles, fell the least.
“Investor sentiment is certainly negative and we’ve seen that reiterated in buying of defensive asset classes,” said Chris Weston, head of institutional dealing at IG Markets in Melbourne. “Traders are pricing in a double dip, which is not a healthy stalking ground for equities.”
BHP, which is also Australia’s biggest oil producer, sank 1.4 percent to A$37.11 as crude oil and copper futures in New York retreated. Rio Tinto slumped 2.3 percent to A$65.10. Jiangxi Copper Co., China’s largest producer of the metal, lost 2.6 percent to 23.44 yuan in Shanghai.
Manufacturing Slowdown
China’s manufacturing expanded at a slower pace for a second month in June, adding to signs that growth in the world’s third-largest economy is moderating. The Purchasing Managers’ Index fell to 52.1 from 53.9 in May, the Federation of Logistics and Purchasing said today. That was less than the median 53.2 estimate in a Bloomberg News survey of 12 economists. A reading above 50 indicates expansion.
Gree Electric Appliances Inc., the largest Chinese maker of home air-conditioners, lost 2.3 percent to 18.37 yuan in Shenzhen, southern China. Tokyo-based Hitachi Construction Machinery Co., which counts China as its biggest market, lost 2.6 percent to 1,613 yen.
Speculation global growth will slow has helped drag down the average price of stocks in the MSCI Asia Pacific Index to about 14 times estimated profit, compared with 24 times a year ago. The gauge lost 0.5 percent last week after new-home sales in the U.S. tumbled to a record low.
Nissan, Sony
Stocks also fell today after Moody’s announced its review on Spain. “Deteriorating” growth prospects and challenges in meeting fiscal targets mean Spain’s Aaa classification may be lowered by as much as two grades, Moody’s analysts in New York said yesterday in a statement. The review will be concluded within a three-month period, the ratings company said.
Nissan slipped 3.2 percent to 606 yen. Mazda Motor Corp. plunged 5.2 percent to 199 yen, the fifth-biggest drop on the MSCI Asia Pacific Index. Sony Corp., which gets 21 percent of its revenue from Europe, declined 3.7 percent to 2,296 yen. Sony separately said it’s recalling 535,000 Vaio personal computers because they may overheat due to a temperature-control defect.
Also in Tokyo, Softbank Corp., Japan’s No. 3 mobile-phone company, dropped 4.4 percent to 2,267 yen after the company’s Yahoo Japan Corp. affiliate was ordered to pay more taxes. Softbank was the largest contributor to the Nikkei’s decline. Yahoo Japan slumped 3.2 percent to 34,500 yen.
Shipping stocks declined after the Baltic Dry Index, which measures the cost of transporting commodities, sank 1.7 percent yesterday, extending a 24-day slump to 43 percent.
Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line, retreated 2.5 percent to 357 yen. Cosco Corp. Singapore Ltd., a China-based shipbuilder that also operates bulk carriers, dropped 3.4 percent to S$1.44 in Singapore, while STX Pan Ocean Co., South Korea’s biggest bulk carrier, dipped 1.3 percent to 11,150 won.
Japan’s Tankan Rebound at Risk From Global Slowdown (Update2)
An improvement in Japan’s manufacturing confidence may be threatened by mounting evidence that the global economic recovery is slowing.
The gain in the Bank of Japan’s quarterly Tankan index to a two-year high was insufficient to stem a five-day losing streak in the Nikkei 225 Stock Average. Equities slid worldwide this week, and data today showed Chinese manufacturing growth cooled.
“We can’t be wild with joy,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Japan’s economy has already passed the sweetest spot and will likely go into a plateau next year.”
The Tankan index of sentiment climbed 15 points in June to plus 1, the Bank of Japan said in Tokyo today. The positive number, which exceeded all 22 forecasts in a Bloomberg News survey of economists, means optimists outnumber pessimists. The report contrasted with data this week showing higher unemployment, falling household spending and a drop in paychecks.
The Nikkei slumped 2 percent at the close in Tokyo. The gauge has slid 8 percent over the past two weeks amid concern that global growth will be hampered by government spending cuts worldwide to address swelling public debt concerns.
“People can’t easily believe the facts that fundamentals are improving, because they are worried,” said Masaru Hamasaki, chief strategist in Tokyo at Toyota Asset Management Co., which oversees the equivalent of $15 billion.
Rising Yen
The yen traded at 88.41 per dollar at 10:25 a.m. in London, stronger than the 90.18 forecast for this fiscal year by big manufacturers in today’s survey. It has climbed 6 percent against the dollar in the past three months and 17 percent versus the euro, gains that could erode exporters’ earnings.
Data across the Asia-Pacific region today highlighted the vulnerability of Japan to a weakening of demand from abroad.
China’s manufacturing growth slowed for a second month in June, two purchasing managers’ indexes showed, adding to signs that Japan’s biggest overseas market is cooling. Manufacturing in Australia and Taiwan also eased, and a report later today is forecast to show a moderation in the U.S. as well.
“We can’t expect further stimulus effects globally,” said Susumu Kato, chief economist for Japan in Tokyo at Credit Agricole CIB and CLSA. “It’s looking shaky whether the expansion that began in April 2009 will be extended to 18 to 24 months.”
Capital Spending
The Tankan survey showed that companies plan to increase capital spending as earnings improve following a global trade rebound that spurred the nation’s recovery from its worst postwar recession. Large businesses aim to increase investment 4.4 percent in the year ending March 31, the first gain in three years, and they see profit rising 21.6 percent.
Should companies follow through on the forecasts, increased investment may support the job market.
“Companies are expecting profits to rise with sales,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “So it’s a little different from before, when the profit gains were coming from firings.”
The Tankan’s labor index for big manufacturers showed the highest demand for employees since December 2008. The unemployment rate rose for a third straight month in May, to 5.2 percent, a government report showed this week.
Nikon Corp., a Tokyo-based camera maker, is among firms anticipating rising earnings. It aims to more than double net income to 65 billion yen ($733 million) in the year to March 2013. The company will boost capital spending to 120 billion yen over three business years, up 9 percent from the preceding plan.
‘We Need China’
“The good news is that investment is coming back --this is a really significant difference from the past two years,” Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo, said on Bloomberg Television. Still, he said that’s not enough to sustain the recovery. “We need overseas demand; we need China.”
Sentiment at service companies also improved, with the large non-manufacturer index climbing nine points to minus 5, the highest level since September 2008. The Tankan was conducted from May 26 to June 30 and surveyed 11,411 businesses.
While Bank of Japan Governor Masaaki Shirakawa sees signs the rebound is starting to spur demand at home, the Tankan improvements are unlikely to signal an end to his policy of keeping interest rates at 0.1 percent, as deflation lingers.
New BOJ board member Yoshihisa Morimoto said the economy has yet to achieve a “full-fledged” recovery and the central bank should keep providing ample funds to the financial system.
Cloudy Outlook
“There are still many risk factors to the Japanese economy at home and abroad, and it’s still difficult to get a clear picture of the outlook,” Morimoto said at a news conference in Tokyo after joining the policy board today.
Prime Minister Naoto Kan, who faces mid-term elections on July 11, last month released plans for boosting economic growth as well as shrinking the budget deficit to contain the world’s biggest public debt. The growth strategy aims to halt the slide in consumer prices next fiscal year and urges the BOJ to “make utmost efforts” to end deflation.
“It will be difficult for the central bank to justify ending the easy monetary policy,” said Soichi Okuda, chief economist at Sumitomo Research Institute in Tokyo. “The government will continue to press the bank” to spur prices.
The gain in the Bank of Japan’s quarterly Tankan index to a two-year high was insufficient to stem a five-day losing streak in the Nikkei 225 Stock Average. Equities slid worldwide this week, and data today showed Chinese manufacturing growth cooled.
“We can’t be wild with joy,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Japan’s economy has already passed the sweetest spot and will likely go into a plateau next year.”
The Tankan index of sentiment climbed 15 points in June to plus 1, the Bank of Japan said in Tokyo today. The positive number, which exceeded all 22 forecasts in a Bloomberg News survey of economists, means optimists outnumber pessimists. The report contrasted with data this week showing higher unemployment, falling household spending and a drop in paychecks.
The Nikkei slumped 2 percent at the close in Tokyo. The gauge has slid 8 percent over the past two weeks amid concern that global growth will be hampered by government spending cuts worldwide to address swelling public debt concerns.
“People can’t easily believe the facts that fundamentals are improving, because they are worried,” said Masaru Hamasaki, chief strategist in Tokyo at Toyota Asset Management Co., which oversees the equivalent of $15 billion.
Rising Yen
The yen traded at 88.41 per dollar at 10:25 a.m. in London, stronger than the 90.18 forecast for this fiscal year by big manufacturers in today’s survey. It has climbed 6 percent against the dollar in the past three months and 17 percent versus the euro, gains that could erode exporters’ earnings.
Data across the Asia-Pacific region today highlighted the vulnerability of Japan to a weakening of demand from abroad.
China’s manufacturing growth slowed for a second month in June, two purchasing managers’ indexes showed, adding to signs that Japan’s biggest overseas market is cooling. Manufacturing in Australia and Taiwan also eased, and a report later today is forecast to show a moderation in the U.S. as well.
“We can’t expect further stimulus effects globally,” said Susumu Kato, chief economist for Japan in Tokyo at Credit Agricole CIB and CLSA. “It’s looking shaky whether the expansion that began in April 2009 will be extended to 18 to 24 months.”
Capital Spending
The Tankan survey showed that companies plan to increase capital spending as earnings improve following a global trade rebound that spurred the nation’s recovery from its worst postwar recession. Large businesses aim to increase investment 4.4 percent in the year ending March 31, the first gain in three years, and they see profit rising 21.6 percent.
Should companies follow through on the forecasts, increased investment may support the job market.
“Companies are expecting profits to rise with sales,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “So it’s a little different from before, when the profit gains were coming from firings.”
The Tankan’s labor index for big manufacturers showed the highest demand for employees since December 2008. The unemployment rate rose for a third straight month in May, to 5.2 percent, a government report showed this week.
Nikon Corp., a Tokyo-based camera maker, is among firms anticipating rising earnings. It aims to more than double net income to 65 billion yen ($733 million) in the year to March 2013. The company will boost capital spending to 120 billion yen over three business years, up 9 percent from the preceding plan.
‘We Need China’
“The good news is that investment is coming back --this is a really significant difference from the past two years,” Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo, said on Bloomberg Television. Still, he said that’s not enough to sustain the recovery. “We need overseas demand; we need China.”
Sentiment at service companies also improved, with the large non-manufacturer index climbing nine points to minus 5, the highest level since September 2008. The Tankan was conducted from May 26 to June 30 and surveyed 11,411 businesses.
While Bank of Japan Governor Masaaki Shirakawa sees signs the rebound is starting to spur demand at home, the Tankan improvements are unlikely to signal an end to his policy of keeping interest rates at 0.1 percent, as deflation lingers.
New BOJ board member Yoshihisa Morimoto said the economy has yet to achieve a “full-fledged” recovery and the central bank should keep providing ample funds to the financial system.
Cloudy Outlook
“There are still many risk factors to the Japanese economy at home and abroad, and it’s still difficult to get a clear picture of the outlook,” Morimoto said at a news conference in Tokyo after joining the policy board today.
Prime Minister Naoto Kan, who faces mid-term elections on July 11, last month released plans for boosting economic growth as well as shrinking the budget deficit to contain the world’s biggest public debt. The growth strategy aims to halt the slide in consumer prices next fiscal year and urges the BOJ to “make utmost efforts” to end deflation.
“It will be difficult for the central bank to justify ending the easy monetary policy,” said Soichi Okuda, chief economist at Sumitomo Research Institute in Tokyo. “The government will continue to press the bank” to spur prices.
Rio, BHP Shares Pare Losses After Report of Tax Deal (Update2)
BHP Billiton Ltd. and Rio Tinto Group pared losses in Sydney trading after a report on the Age and Sydney Morning Herald websites of a breakthrough in talks on a planned mining profits tax that prompted the ousting last week of former Prime Minister Kevin Rudd.
BHP, Rio and Xstrata Plc and the Australian government have agreed to key elements of a compromise including a new trigger rate of the 10-year bond rate plus 7 percent, the Herald said, without saying where it got its information. That would equal about 12 percent, it said, compared with the original proposal of just the bond rate, which is yielding about 5.1 percent.
Australian Prime Minister Julia Gillard yesterday said she’s encouraged by talks over the fate of the proposed levy that’s been the target of a campaign by the industry. The initial plan would have made the country the highest taxed mining nation, according to the Minerals Council of Australia.
“Should the final resources super profit tax be structured as suggested by this article, then this would be a considerable concession for the miners,” Ben Byrne, an analyst at Nomura Australia Ltd., said in an email today.
Rio, which fell as much as 3.8 percent earlier, closed down 2.3 percent at A$65.10 on the Australian stock exchange. BHP trimmed its loss from 2.6 percent to 1.4 percent. Gillard, Deputy Prime Minister Wayne Swan and Resources Minister Martin Ferguson have been holding the talks this week.
Talks Continue
Negotiations are still being conducted, a spokesman for Swan’s office said today, declining to be identified in line with government policy. He would not comment on the report.
BHP spokeswoman Fiona Martin declined to comment and Rio spokesman David Luff wasn’t available when contacted for comment. Xstrata spokesman James Rickards wasn’t available for comment when contacted by phone.
The government may also have agreed to change how existing operations are taxed, the Sydney Morning Herald said. Companies may be able to inject their existing assets into the revised tax regime at market value, the report said.
Under the original proposal, miners would have to pay a 40 percent tax on all profits above the return on investment hurdle, set at the bond rate, on their projects in Australia, the world’s biggest shipper of iron ore and coal. The original proposal would have taken A$85 billion ($71 billion) from the mining industry during the next decade, Morgan Stanley estimated.
No Confirmation
Negotiations are continuing on the 40 percent rate, the Herald reported, citing people with knowledge of the talks. The government is believed to have given ground on this issue, it said.
“Share prices could rise further on news of a compromise since that would remove a level of uncertainty,” Martin Lakos, division director at Macquarie Private Wealth in Sydney, said by phone. “There’s no confirmation yet officially, but it certainly wouldn’t come as a surprise to hear that a compromise on the mining tax has been reached.”
Miners have campaigned for the government to exclude existing projects, reconsider the trigger level and vary the rate for different minerals. Mining companies suspended anti-tax advertising campaigns after Gillard was appointed and she said she wanted to negotiate.
An agreement has been reached on what rate the tax would be, where it kicks in and which projects it should apply to, Channel 10 reported, without saying where it go the information.
BHP, Rio and Xstrata Plc and the Australian government have agreed to key elements of a compromise including a new trigger rate of the 10-year bond rate plus 7 percent, the Herald said, without saying where it got its information. That would equal about 12 percent, it said, compared with the original proposal of just the bond rate, which is yielding about 5.1 percent.
Australian Prime Minister Julia Gillard yesterday said she’s encouraged by talks over the fate of the proposed levy that’s been the target of a campaign by the industry. The initial plan would have made the country the highest taxed mining nation, according to the Minerals Council of Australia.
“Should the final resources super profit tax be structured as suggested by this article, then this would be a considerable concession for the miners,” Ben Byrne, an analyst at Nomura Australia Ltd., said in an email today.
Rio, which fell as much as 3.8 percent earlier, closed down 2.3 percent at A$65.10 on the Australian stock exchange. BHP trimmed its loss from 2.6 percent to 1.4 percent. Gillard, Deputy Prime Minister Wayne Swan and Resources Minister Martin Ferguson have been holding the talks this week.
Talks Continue
Negotiations are still being conducted, a spokesman for Swan’s office said today, declining to be identified in line with government policy. He would not comment on the report.
BHP spokeswoman Fiona Martin declined to comment and Rio spokesman David Luff wasn’t available when contacted for comment. Xstrata spokesman James Rickards wasn’t available for comment when contacted by phone.
The government may also have agreed to change how existing operations are taxed, the Sydney Morning Herald said. Companies may be able to inject their existing assets into the revised tax regime at market value, the report said.
Under the original proposal, miners would have to pay a 40 percent tax on all profits above the return on investment hurdle, set at the bond rate, on their projects in Australia, the world’s biggest shipper of iron ore and coal. The original proposal would have taken A$85 billion ($71 billion) from the mining industry during the next decade, Morgan Stanley estimated.
No Confirmation
Negotiations are continuing on the 40 percent rate, the Herald reported, citing people with knowledge of the talks. The government is believed to have given ground on this issue, it said.
“Share prices could rise further on news of a compromise since that would remove a level of uncertainty,” Martin Lakos, division director at Macquarie Private Wealth in Sydney, said by phone. “There’s no confirmation yet officially, but it certainly wouldn’t come as a surprise to hear that a compromise on the mining tax has been reached.”
Miners have campaigned for the government to exclude existing projects, reconsider the trigger level and vary the rate for different minerals. Mining companies suspended anti-tax advertising campaigns after Gillard was appointed and she said she wanted to negotiate.
An agreement has been reached on what rate the tax would be, where it kicks in and which projects it should apply to, Channel 10 reported, without saying where it go the information.
LG Seeks Sponsorship Deals to Balance Formula One’s Male Appeal
LG Electronics Inc., the world’s third-biggest phone maker, may unveil one or two new global sponsorship deals to attract more female clients and build demand for phones, televisions and home appliances.
The partnerships would come in the next two to three years and could involve music, theater, film, or sports such as tennis, Chief Marketing Officer Dermot Boden said in an interview in London. LG currently sponsors cricket, Formula One auto racing, and U.S. college basketball.
Consumer electronics companies are looking to strengthen brand appeal as Apple Inc. builds buzz for products such as the iPad and iPhone. Nokia Oyj, the world’s largest handset maker, is pushing application-rich smartphones with advertising in venues including the Paris metro. LG is also the world’s second- largest maker of liquid-crystal-display televisions.
“It would be very interesting to see if there are partnerships that would allow us to connect more easily with women, with mothers,” Boden said. “Over the next two to three years, we’ll continue to review our current partnerships, and if need be, look at re-opening them.”
While LG is happy with its current sponsorship arrangements and new deals could come in addition to existing ones, “all good things come to an end,” Boden added.
LG, founded during South Korea’s post-war expansion as GoldStar, has associated itself with prominent sports to develop brand recognition in Europe and North America similar to that enjoyed by Japan’s Sony Corp. Together, those regions accounted for about 45 percent of the Korean company’s revenue in 2009.
Sponsorships
Last year, the Seoul-based company, which doesn’t disclose its marketing budget, signed on as a corporate partner with the U.S. National Collegiate Athletic Association. It’s also has been the shirt sponsor for London’s Fulham Football Club.
LG needs to shift marketing spending towards social media and other online venues, Boden said. The company may increase the proportion of marketing spending for digital platforms from between 10 and 15 percent today to about 25 percent over the next two years, he said.
LG said in January it plans to introduce about 20 smartphone models this year. The company returned to profit in the first quarter, helped by sales of appliances and high-end televisions.
The partnerships would come in the next two to three years and could involve music, theater, film, or sports such as tennis, Chief Marketing Officer Dermot Boden said in an interview in London. LG currently sponsors cricket, Formula One auto racing, and U.S. college basketball.
Consumer electronics companies are looking to strengthen brand appeal as Apple Inc. builds buzz for products such as the iPad and iPhone. Nokia Oyj, the world’s largest handset maker, is pushing application-rich smartphones with advertising in venues including the Paris metro. LG is also the world’s second- largest maker of liquid-crystal-display televisions.
“It would be very interesting to see if there are partnerships that would allow us to connect more easily with women, with mothers,” Boden said. “Over the next two to three years, we’ll continue to review our current partnerships, and if need be, look at re-opening them.”
While LG is happy with its current sponsorship arrangements and new deals could come in addition to existing ones, “all good things come to an end,” Boden added.
LG, founded during South Korea’s post-war expansion as GoldStar, has associated itself with prominent sports to develop brand recognition in Europe and North America similar to that enjoyed by Japan’s Sony Corp. Together, those regions accounted for about 45 percent of the Korean company’s revenue in 2009.
Sponsorships
Last year, the Seoul-based company, which doesn’t disclose its marketing budget, signed on as a corporate partner with the U.S. National Collegiate Athletic Association. It’s also has been the shirt sponsor for London’s Fulham Football Club.
LG needs to shift marketing spending towards social media and other online venues, Boden said. The company may increase the proportion of marketing spending for digital platforms from between 10 and 15 percent today to about 25 percent over the next two years, he said.
LG said in January it plans to introduce about 20 smartphone models this year. The company returned to profit in the first quarter, helped by sales of appliances and high-end televisions.
China Manufacturing Slows for Second Month, PMI Shows (Update3)
China’s manufacturing growth slowed more than economists forecast in June, adding to signs that the world’s fastest-growing major economy is cooling.
The government’s Purchasing Managers’ Index declined for a second month, falling to 52.1 from 53.9 in May. The median forecast in a Bloomberg News survey of 12 economists was 53.2. An HSBC Holdings Plc manufacturing index slid to a 14-month low.
Asian stocks fell for a third day as the reports added to concern that a Chinese slowdown combined with austerity measures in Europe may undermine the global recovery. Zhang Liqun, a researcher for the Chinese cabinet, said the data indicates a “steady moderation” to a more sustainable pace of growth after an 11.9 percent expansion in the first quarter.
“It’s just a slowdown not a meltdown,” said Qu Hongbin, a Hong Kong-based economist at HSBC. Today’s numbers are “more evidence of a slowing Chinese economy from a cyclical peak in the first quarter,” Qu said.
He sees growth of about 9 percent in the second half, underpinned by “massive ongoing investment” and “robust” private consumption.
The MSCI Asia Pacific Index dropped 1.6 percent as of 11:59 a.m. in Hong Kong. The Shanghai Composite Index swung between gains and losses after sliding to a 14-month low yesterday.
‘Uneven and Fragile’
Goldman Sachs Group Inc. said half of the decline in the government index may be seasonal, with the June PMI tending to be lower than May readings.
Signs of a slowdown as the Chinese government clamps down on property speculation and the effects of its stimulus package fade have unsettled investors. Limited demand in advanced economies has left the world reliant on emerging markets, led by China, to drive a recovery that Group of 20 leaders this week described as “uneven and fragile.”
In China, tempering the expansion may aid government efforts to limit price pressures even after wage rises for Honda Motor Co. and Foxconn Technology Group workers. In the government data, a measure of input prices decreased to 51.3 in June from 58.9 in May, the biggest fall in the 11 sub-indexes, as demand weakened and the costs of some commodities fell.
An output index fell to 55.8 from 58.2, the Federation of Logistics and Purchasing said in an e-mailed statement. A measure of new orders slid to 52.1 from 54.8 and an export-order index dropped to 51.7 from 53.8.
Export Weakness
The PMI, released by the logistics federation and the Beijing-based National Bureau of Statistics, covers more than 730 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics.
Economic growth is moderating, a rebound in exports is weakening, and slower domestic demand is leading to a build-up of finished-goods inventories, the federation said in a separate statement on its website. Industrial production is entering a “light season” and the output of heavy energy users such as metal and oil processers contracted last month, it said.
HSBC’s survey, released with Markit Economics, covers more than 400 manufacturing companies and is weighted more toward smaller, privately owned business than the government’s PMI, according to the bank. The HSBC measure declined to 50.4 from 52.7 in May. Output contracted for the first time in 15 months, according to this survey.
On June 29, the New York-based Conference Board corrected its leading economic index for China to show the smallest gain in five months in April.
Baosteel Target
Baosteel Group Corp., China’s second-biggest steelmaker, this week scaled back its growth plans, cutting its target for capacity in 2012 by 38 percent and forecasting a “bumpy, unpredictable and long” global recovery.
In China, policy makers have spent the first half of the year seeking to prevent property-price bubbles and contain inflation, which surpassed the government’s full-year target of 3 percent in May. So far, the winding back of stimulus has not included an interest-rate increase.
The government has told banks to set aside more money as reserves, targeted a 22 percent reduction in new lending from the record $1.4 trillion in 2009, and indicated that the yuan’s peg to the dollar is over.
China’s economy will slow over the second half of this year, which is welcome news “given the slight uptick in inflation recently,” Stephen Roach, Morgan Stanley’s Asia chairman, said in Beijing yesterday. A pace of 8 percent or 9 percent would be “much more sustainable than the overheated growth rate in the first quarter,” he said.
Damping Sentiment
A statistics bureau commentary on today’s government data said small companies’ output contracted for a second month and their new orders declined “sharply.” It also said that businesses have become more cautious about buying raw materials such as metals, timber and items for machinery manufacturing.
China’s export outlook is “grim” as shipments may be hurt by a slowing world recovery, rising trade frictions, Europe’s sovereign debt crisis and cuts to export tax rebates, the bureau said. Separately, the logistics federation said a more flexible yuan may affect exports.
Today’s data may indicate a “steady moderation” to a more stable and sustainable expansion,” Zhang, a researcher at the State Council’s Development and Research Center, said in the government’s PMI statement. “China’s growth is at a critical stage of turning from recovery to stabilizing.”
Property Crackdown
Measures cooling the economy include a government crackdown on property speculation that has included raising down-payment ratios and mortgage rates for multiple home buyers. Clamping down on local-government borrowing to contain risks from last year’s explosion in debt could also limit growth.
Efforts to limit energy consumption and pollution, such as scrapping export rebates on some steel and metal products from July 15, may also be a drag on growth.
“The biggest uncertainty in the outlook later this year may be how determined the government is in meeting its energy and pollution targets and in limiting related industries,” according to Lu Zhengwei, a Shanghai-based economist at Industrial Bank Co.
The government’s Purchasing Managers’ Index declined for a second month, falling to 52.1 from 53.9 in May. The median forecast in a Bloomberg News survey of 12 economists was 53.2. An HSBC Holdings Plc manufacturing index slid to a 14-month low.
Asian stocks fell for a third day as the reports added to concern that a Chinese slowdown combined with austerity measures in Europe may undermine the global recovery. Zhang Liqun, a researcher for the Chinese cabinet, said the data indicates a “steady moderation” to a more sustainable pace of growth after an 11.9 percent expansion in the first quarter.
“It’s just a slowdown not a meltdown,” said Qu Hongbin, a Hong Kong-based economist at HSBC. Today’s numbers are “more evidence of a slowing Chinese economy from a cyclical peak in the first quarter,” Qu said.
He sees growth of about 9 percent in the second half, underpinned by “massive ongoing investment” and “robust” private consumption.
The MSCI Asia Pacific Index dropped 1.6 percent as of 11:59 a.m. in Hong Kong. The Shanghai Composite Index swung between gains and losses after sliding to a 14-month low yesterday.
‘Uneven and Fragile’
Goldman Sachs Group Inc. said half of the decline in the government index may be seasonal, with the June PMI tending to be lower than May readings.
Signs of a slowdown as the Chinese government clamps down on property speculation and the effects of its stimulus package fade have unsettled investors. Limited demand in advanced economies has left the world reliant on emerging markets, led by China, to drive a recovery that Group of 20 leaders this week described as “uneven and fragile.”
In China, tempering the expansion may aid government efforts to limit price pressures even after wage rises for Honda Motor Co. and Foxconn Technology Group workers. In the government data, a measure of input prices decreased to 51.3 in June from 58.9 in May, the biggest fall in the 11 sub-indexes, as demand weakened and the costs of some commodities fell.
An output index fell to 55.8 from 58.2, the Federation of Logistics and Purchasing said in an e-mailed statement. A measure of new orders slid to 52.1 from 54.8 and an export-order index dropped to 51.7 from 53.8.
Export Weakness
The PMI, released by the logistics federation and the Beijing-based National Bureau of Statistics, covers more than 730 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics.
Economic growth is moderating, a rebound in exports is weakening, and slower domestic demand is leading to a build-up of finished-goods inventories, the federation said in a separate statement on its website. Industrial production is entering a “light season” and the output of heavy energy users such as metal and oil processers contracted last month, it said.
HSBC’s survey, released with Markit Economics, covers more than 400 manufacturing companies and is weighted more toward smaller, privately owned business than the government’s PMI, according to the bank. The HSBC measure declined to 50.4 from 52.7 in May. Output contracted for the first time in 15 months, according to this survey.
On June 29, the New York-based Conference Board corrected its leading economic index for China to show the smallest gain in five months in April.
Baosteel Target
Baosteel Group Corp., China’s second-biggest steelmaker, this week scaled back its growth plans, cutting its target for capacity in 2012 by 38 percent and forecasting a “bumpy, unpredictable and long” global recovery.
In China, policy makers have spent the first half of the year seeking to prevent property-price bubbles and contain inflation, which surpassed the government’s full-year target of 3 percent in May. So far, the winding back of stimulus has not included an interest-rate increase.
The government has told banks to set aside more money as reserves, targeted a 22 percent reduction in new lending from the record $1.4 trillion in 2009, and indicated that the yuan’s peg to the dollar is over.
China’s economy will slow over the second half of this year, which is welcome news “given the slight uptick in inflation recently,” Stephen Roach, Morgan Stanley’s Asia chairman, said in Beijing yesterday. A pace of 8 percent or 9 percent would be “much more sustainable than the overheated growth rate in the first quarter,” he said.
Damping Sentiment
A statistics bureau commentary on today’s government data said small companies’ output contracted for a second month and their new orders declined “sharply.” It also said that businesses have become more cautious about buying raw materials such as metals, timber and items for machinery manufacturing.
China’s export outlook is “grim” as shipments may be hurt by a slowing world recovery, rising trade frictions, Europe’s sovereign debt crisis and cuts to export tax rebates, the bureau said. Separately, the logistics federation said a more flexible yuan may affect exports.
Today’s data may indicate a “steady moderation” to a more stable and sustainable expansion,” Zhang, a researcher at the State Council’s Development and Research Center, said in the government’s PMI statement. “China’s growth is at a critical stage of turning from recovery to stabilizing.”
Property Crackdown
Measures cooling the economy include a government crackdown on property speculation that has included raising down-payment ratios and mortgage rates for multiple home buyers. Clamping down on local-government borrowing to contain risks from last year’s explosion in debt could also limit growth.
Efforts to limit energy consumption and pollution, such as scrapping export rebates on some steel and metal products from July 15, may also be a drag on growth.
“The biggest uncertainty in the outlook later this year may be how determined the government is in meeting its energy and pollution targets and in limiting related industries,” according to Lu Zhengwei, a Shanghai-based economist at Industrial Bank Co.
Sugar May Rise 18% in July on Double Bottom: Technical Analysis
Sugar prices may surge 18 percent by the end of this month after hitting a “double bottom” in May and June, said Spencer Patton, the founder and chief investment officer of Steel Vine Investments LLC.
Raw sugar may climb to 19 cents a pound by the end of July after falling below 14 cents on May 7 and June 2, Patton said. A double bottom is a chart pattern showing a drop in price, followed by a rebound and then another decline to the same level, usually indicating support.
“The market was oversold,” Patton said. “The chart points to the market rising higher this month.”
Sugar plunged 57 percent to 13 cents on May 7 from a 29- year high of 30.4 cents on Feb. 1. Buyers delayed purchases on speculation that higher output in Brazil and India, the world’s biggest producers, will erase a supply deficit and drive costs down.
Yesterday, raw sugar for October delivery jumped 0.78 cent, or 5.1 percent, to 16.06 cents a pound on ICE Futures U.S. in New York. The most-active contract climbed 13 percent in June.
“We are gradually seeing buyers return as end-customers see value at these prices,” Patton said.
In 2009, Patton opened Chicago-based Steel Vine, which invests mostly in commodities and equities. He previously worked for KPAC Solutions, a private equity firm.
In technical analysis, traders study charts of price patterns in order to forecast market changes.
Raw sugar may climb to 19 cents a pound by the end of July after falling below 14 cents on May 7 and June 2, Patton said. A double bottom is a chart pattern showing a drop in price, followed by a rebound and then another decline to the same level, usually indicating support.
“The market was oversold,” Patton said. “The chart points to the market rising higher this month.”
Sugar plunged 57 percent to 13 cents on May 7 from a 29- year high of 30.4 cents on Feb. 1. Buyers delayed purchases on speculation that higher output in Brazil and India, the world’s biggest producers, will erase a supply deficit and drive costs down.
Yesterday, raw sugar for October delivery jumped 0.78 cent, or 5.1 percent, to 16.06 cents a pound on ICE Futures U.S. in New York. The most-active contract climbed 13 percent in June.
“We are gradually seeing buyers return as end-customers see value at these prices,” Patton said.
In 2009, Patton opened Chicago-based Steel Vine, which invests mostly in commodities and equities. He previously worked for KPAC Solutions, a private equity firm.
In technical analysis, traders study charts of price patterns in order to forecast market changes.
Peterson’s $1 Billion Bet Shows Return as Deficit Concerns Rise
Wall Street financier Peter G. Peterson got a decent return on his investment last week when Senate Republicans ended the Democrats’ third attempt to push though an extension of unemployment benefits and President Barack Obama failed to persuade his European counterparts at the Group of 20 meeting in Toronto to maintain economic stimulus programs.
“I haven’t seen anything like this kind of concern in the 30 years I’ve been talking and writing about this,” says the 84-year-old fiscal hawk.
Peterson has committed $1 billion of the fortune he made as co-founder of the New York-based private-equity firm Blackstone Group LP to his personal crusade: raising the alarm about the $13 trillion national debt, Bloomberg Businessweek reports in its July 5 issue.
He is paying the bills at a foundation that bears his name, supports a network of like-minded advocacy groups, backs The Fiscal Times, an online newspaper, formed a commission of experts, and organizes conferences with marquee guests such as former President Bill Clinton. The crusade appears to be in sync with the concerns of most voters, with a June 4 Gallup poll showing that the federal debt and terrorism were tied for first place (at 40 percent each) as the biggest threats to Americans’ future well-being.
His influence is raising some hackles, even among those who agree the national debt is a long-term worry.
‘Buy the Debate’
“Everywhere you look, he’s trying to buy the debate,” says Roger Hickey, co-director of the Campaign for America’s Future, a self-described progressive advocacy group in Washington. He calls Peterson-backed organizations, such as the Concord Coalition, nothing more than “front groups” used to help “stampede” lawmakers into cutting Social Security and Medicare.
Some congressional Democrats criticize what they see as Peterson’s single-minded emphasis. House Ways and Means Committee Chairman Sander Levin, a Michigan Democrat, says acting to narrow the deficit must be balanced against the need to “make sure we don’t slip into another recession.”
To his supporters, though, Peterson is the patron saint of fiscal responsibility.
“He has devoted more personal wealth to reducing the deficit than anybody in the history of the world,” says Tennessee Representative Jim Cooper, a fiscally conservative Democrat who voted against the jobless benefits measure.
‘Boring People for Decades’
Peterson’s interest in fiscal rectitude has deep roots: The one-time commerce secretary for President Richard Nixon has devoted four books and countless op-eds and speeches to the subject. “I’ve been boring people with it for decades,” he said in a speech in April. Two years ago, he kicked the campaign into high gear, vowing to devote a substantial portion of his $1.8 billion payout from Blackstone’s 2007 initial public offering to the cause.
As the son of Greek immigrants, he says his goal is to ensure that future generations aren’t deprived of similar opportunities by a national debt his group estimates at $61.9 trillion, or $200,000 per American, including the cost of fully funding Social Security.
He has been careful to emphasize that he understands the “urgent need to create jobs.” At the same time, he says, tough choices lie ahead, including tax increases and cuts in spending that could target entitlement programs. He supports a “well- targeted stimulus” so long as “it is accompanied by meaningful action on the longer-term structural debts and deficits.”
Peterson had disbursed $300 million of the $1 billion pledge by March 31 of last year, according to tax records. His foundation says its next filing will show that those numbers have increased in the current fiscal year.
One of the groups that receives funding from Peterson, AmericaSpeaks, on June 26 organized public meetings on the deficit in 19 sites across the U.S. that its website says drew 3,500 participants.
“I haven’t seen anything like this kind of concern in the 30 years I’ve been talking and writing about this,” says the 84-year-old fiscal hawk.
Peterson has committed $1 billion of the fortune he made as co-founder of the New York-based private-equity firm Blackstone Group LP to his personal crusade: raising the alarm about the $13 trillion national debt, Bloomberg Businessweek reports in its July 5 issue.
He is paying the bills at a foundation that bears his name, supports a network of like-minded advocacy groups, backs The Fiscal Times, an online newspaper, formed a commission of experts, and organizes conferences with marquee guests such as former President Bill Clinton. The crusade appears to be in sync with the concerns of most voters, with a June 4 Gallup poll showing that the federal debt and terrorism were tied for first place (at 40 percent each) as the biggest threats to Americans’ future well-being.
His influence is raising some hackles, even among those who agree the national debt is a long-term worry.
‘Buy the Debate’
“Everywhere you look, he’s trying to buy the debate,” says Roger Hickey, co-director of the Campaign for America’s Future, a self-described progressive advocacy group in Washington. He calls Peterson-backed organizations, such as the Concord Coalition, nothing more than “front groups” used to help “stampede” lawmakers into cutting Social Security and Medicare.
Some congressional Democrats criticize what they see as Peterson’s single-minded emphasis. House Ways and Means Committee Chairman Sander Levin, a Michigan Democrat, says acting to narrow the deficit must be balanced against the need to “make sure we don’t slip into another recession.”
To his supporters, though, Peterson is the patron saint of fiscal responsibility.
“He has devoted more personal wealth to reducing the deficit than anybody in the history of the world,” says Tennessee Representative Jim Cooper, a fiscally conservative Democrat who voted against the jobless benefits measure.
‘Boring People for Decades’
Peterson’s interest in fiscal rectitude has deep roots: The one-time commerce secretary for President Richard Nixon has devoted four books and countless op-eds and speeches to the subject. “I’ve been boring people with it for decades,” he said in a speech in April. Two years ago, he kicked the campaign into high gear, vowing to devote a substantial portion of his $1.8 billion payout from Blackstone’s 2007 initial public offering to the cause.
As the son of Greek immigrants, he says his goal is to ensure that future generations aren’t deprived of similar opportunities by a national debt his group estimates at $61.9 trillion, or $200,000 per American, including the cost of fully funding Social Security.
He has been careful to emphasize that he understands the “urgent need to create jobs.” At the same time, he says, tough choices lie ahead, including tax increases and cuts in spending that could target entitlement programs. He supports a “well- targeted stimulus” so long as “it is accompanied by meaningful action on the longer-term structural debts and deficits.”
Peterson had disbursed $300 million of the $1 billion pledge by March 31 of last year, according to tax records. His foundation says its next filing will show that those numbers have increased in the current fiscal year.
One of the groups that receives funding from Peterson, AmericaSpeaks, on June 26 organized public meetings on the deficit in 19 sites across the U.S. that its website says drew 3,500 participants.
Ford’s Debt Payment Means Dividend May Return as Soon as 2012
Ford Motor Co., which caught up yesterday on preferred stock dividends it missed for 14 months, may resume payouts on the common stock as soon as 2012, according to data compiled by Bloomberg.
The automaker still needs to pay off more of its approximately $27 billion in debt before resuming the dividend, officials and analysts said. Still, quarterly dividends of 5 cents a share could proceed in 2012, a year ahead of earlier projections, according to Bloomberg estimates based on the data.
Ford removed a key legal hurdle to the dividend by paying $255 million in deferred dividends on its Capital Trust II preferred stock, along with a $3.8 billion payment to a trust for union retirees. Now that those dividends are paid in full and restored, Ford is free to reinstate a dividend on its common shares and Class B shares owned by the Ford family. The size of the payments -- made ahead of schedule -- shows the carmaker is confident it can generate cash.
“If you have that kind of cash flow and you’re paying down debt, I could see a dividend maybe a year from now,” Bernie McGinn, president of McGinn Investment Management in Alexandria, Virginia. His firm owns 330,000 Ford common shares.
Ford eliminated its common-stock dividend on Sept. 15, 2006, when it was 5 cents a share. The company made its last payout on the Capital Trust II in January 2009 and missed payments starting in April of that year.
“Our priority is to continue to reduce debt and strengthen our balance sheet, and ultimately restore an investment-grade debt rating,” Mark Truby, a Ford spokesman, said in an e-mail. “As we make progress on these objectives, I’m sure our board will evaluate the stock dividend down the road.”
Ford Debt
Ford borrowed $23 billion in late 2006 after it hired Chief Executive Officer Alan Mulally from Boeing Co. The funds gave the automaker a cash cushion that helped it withstand losses and avoid the bankruptcies that befell General Motors Corp. and Chrysler Group LLC last year.
The preferred stock dividend and union payments reduced Dearborn, Michigan-based Ford’s debt by about $4 billion. Ford common shares rose 20 cents to $10.08, reversing five trading days of declines. Ford generated free cash flow of $4.68 billion in 2009 and $1.02 billion in the first quarter of this year.
The Bloomberg dividend estimates are based on seven criteria, including a company’s guidance, dividend history, regression analysis and put-call parity.
Chief Financial Officer Lewis Booth said in a March interview that the company is unlikely to bring back a common- stock dividend anytime soon.
‘Huge Demands’
“We still have huge demands on our cash,” Booth said at the time. “I wouldn’t want to raise people’s expectations.”
The chances that Ford pays a dividend in the near future could be further diminished by the slower-than-expected recovery in auto sales, said Shelly Lombard, senior high-yield analyst with New York-based Gimme Credit.
“If the recovery stalls, you like a company to have more cash,” Lombard said in an interview. “The industry is still volatile. I don’t think they’re at a point where they should be paying a common-stock dividend.”
The automaker still needs to pay off more of its approximately $27 billion in debt before resuming the dividend, officials and analysts said. Still, quarterly dividends of 5 cents a share could proceed in 2012, a year ahead of earlier projections, according to Bloomberg estimates based on the data.
Ford removed a key legal hurdle to the dividend by paying $255 million in deferred dividends on its Capital Trust II preferred stock, along with a $3.8 billion payment to a trust for union retirees. Now that those dividends are paid in full and restored, Ford is free to reinstate a dividend on its common shares and Class B shares owned by the Ford family. The size of the payments -- made ahead of schedule -- shows the carmaker is confident it can generate cash.
“If you have that kind of cash flow and you’re paying down debt, I could see a dividend maybe a year from now,” Bernie McGinn, president of McGinn Investment Management in Alexandria, Virginia. His firm owns 330,000 Ford common shares.
Ford eliminated its common-stock dividend on Sept. 15, 2006, when it was 5 cents a share. The company made its last payout on the Capital Trust II in January 2009 and missed payments starting in April of that year.
“Our priority is to continue to reduce debt and strengthen our balance sheet, and ultimately restore an investment-grade debt rating,” Mark Truby, a Ford spokesman, said in an e-mail. “As we make progress on these objectives, I’m sure our board will evaluate the stock dividend down the road.”
Ford Debt
Ford borrowed $23 billion in late 2006 after it hired Chief Executive Officer Alan Mulally from Boeing Co. The funds gave the automaker a cash cushion that helped it withstand losses and avoid the bankruptcies that befell General Motors Corp. and Chrysler Group LLC last year.
The preferred stock dividend and union payments reduced Dearborn, Michigan-based Ford’s debt by about $4 billion. Ford common shares rose 20 cents to $10.08, reversing five trading days of declines. Ford generated free cash flow of $4.68 billion in 2009 and $1.02 billion in the first quarter of this year.
The Bloomberg dividend estimates are based on seven criteria, including a company’s guidance, dividend history, regression analysis and put-call parity.
Chief Financial Officer Lewis Booth said in a March interview that the company is unlikely to bring back a common- stock dividend anytime soon.
‘Huge Demands’
“We still have huge demands on our cash,” Booth said at the time. “I wouldn’t want to raise people’s expectations.”
The chances that Ford pays a dividend in the near future could be further diminished by the slower-than-expected recovery in auto sales, said Shelly Lombard, senior high-yield analyst with New York-based Gimme Credit.
“If the recovery stalls, you like a company to have more cash,” Lombard said in an interview. “The industry is still volatile. I don’t think they’re at a point where they should be paying a common-stock dividend.”
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