May 18, 2012

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European shares stage relief rally, euro weak

May 10, 2012 By Leave a Comment
Market prices are reflected in a glass window at the Tokyo Stock Exchange in Tokyo

(Reuters) - European shares and the euro staged fragile recoveries on Thursday after Spain moved to clean up its banks and Europe's bailout fund approved a key payment to Greece, but disappointing Chinese trade data kept markets on edge. The political outlook in Greece, which has sent investors scurrying for safe haven assets, was unchanged as last-ditch efforts to form a government were expected to fail and new elections were the more likely outcome. "Political uncertainty (in Greece) will remain a live issue, and that, combined with weak economic prospects in the euro area, should keep market concerns elevated," Barclays Capital said in a note to clients. The FTSE Eurofirst .FTEU3 index of top European shares opened 0.4 percent higher at 1,018.02 point with stronger gains posted in Spanish .IBEX and Italian .FTMIB markets. The MSCI's world equity index .MIWD00000PUS stood just 0.1 percent higher at 315.6 point after six straight days of falls. The euro was near a 3-1/2-month low against the dollar, up 0.15 percent at around $1.2954, after worries about the costs of rescuing Spain's banks and fear Greece may be forced out of the euro pushed it to a low of $1.2910 on Wednesday. Decisions from the Bank of England (BoE) and the Norwegian central bank later will be watched for any sign inflation concerns are rising. (Richard Hubbard) … [Read more...]

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Spain wants banks to find an extra $45 billion: sources

May 9, 2012 By Leave a Comment
File photo of president of Spanish bank Bankia Rato during a news conference in Madrid

(Reuters) - Spain will demand banks set aside another 35 billion euros ($45 billion) against loans to builders, financial sources said, as it battles to rebuild confidence in a sector where huge losses have raised fears the country may need an international bailout. Lenders are already writing off 54 billion euros on soured property assets dating from a 2008 real estate crash and the requirement to find more money to cover loans that are currently sound, but could sour as the economy deteriorates, will pile further pressure on banks as they battle to find extra capital. The move is set to be announced after Friday's weekly cabinet meeting and will form part of a wider banking reform which will include an injection of public cash into troubled lender Bankia. The government will demand banks raise provisions to a level equivalent to 30 percent of loans to housebuilders, one of the sources told Reuters late on Tuesday, up from a current 7 percent. The Economy Ministry declined to comment. Spain's banks have 298 billion euros in loans to building developers on their books, equivalent to around 30 percent of the country's gross domestic product. Around half of them are already in arrears and as the economy deteriorates more will fall into default. Analyst estimates as to how much more banks need to set aside against loan defaults rise to as much as 100 billion euros. Banks, even strong international lenders like Santander and BBVA, are already posting big falls in profit as they write off losses on bad property investments and increase capital to protect against sovereign default under European guidelines. Banks are eating into profits, selling assets and buying back debt in order to find the capital without an injection of state funds. Extra provisions could weigh still more on profits in the sector, analysts said on Wednesday. The conservative government had said for months it would not put more public money into rescuing the banks, but is expected to pump up to 10 billion euros into the country's fourth largest lender Bankia on Friday. The government is also expected to announce on Friday plans for banks to siphon real estate assets into separate holding companies. (Writing by Sonya Dowsett and Nigel Davies; Editing by Michael Roddy and Mark Potter) … [Read more...]

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Fed’s Dudley urges more global policy coordination

May 8, 2012 By Leave a Comment
Dudley makes remarks at the Bretton Woods Committee International Council conference in Washington

(Reuters) - The U.S. Federal Reserve's new inflation target is an example of the kind of steps policymakers globally should take to bolster cross-border coordination and stabilize the economy, an influential Fed official said on Tuesday. William Dudley, president of the New York Federal Reserve Bank, did not address U.S. monetary policy beyond saying that the 2 percent inflation target, announced in January, shows the Fed will only take action such as purchasing bonds as long as it is consistent with its policy goals. Still, macroeconomic policies are often too narrow in their focus and can ignore effects beyond national borders, such as on the trade balances of foreign countries, Dudley said in remarks prepared for delivery to a Swiss National Bank-International Monetary Fund conference in Zurich. He pointed to the inflation target as a positive step toward transparency that can help policymakers outside the United States anticipate the economic and financial fallout in such an interconnected world. "In doing so, the Fed is also continuing to underscore that actions such as our purchase of U.S. government securities are driven exclusively by our monetary policy goals, and that these policy actions will not continue beyond the moment they become inconsistent with our dual mandate objectives," Dudley said. "In general, policymakers should strive to ensure that we have both fiscal and monetary policy frameworks that are transparent and viewed as credible and durable." Dudley is a close ally of Fed Chairman Ben Bernanke and, as head of the Fed's New York regional bank, has a permanent vote on policy actions. He said better cross-border coordination, in general, is warranted. "(T)he issue for policymakers is whether the policies we put in place will allow adjustments to occur in a way that is consistent with a stable global economy, high levels of employment, and low inflation," Dudley said. "In macroeconomic terms, the prospects for achieving a more cooperative solution can be enhanced by policy transparency so that the policy goals and reaction function of each authority can be well understood by others." As steward of the world's largest economy, the Fed's policy actions typically have larger impacts relative to the actions of other central banks. The Fed's ultra-low interest rates since late 2008 have kept pressure on the U.S. dollar, the world's reserve currency, often hurting non-U.S. exporters. The Fed expects to keep rates "exceptionally low" through late 2014. In another effort to battle the recession, the Fed's purchases of some $2.3 trillion in long-term securities in the last few years have helped keep U.S. Treasury yields low. The Group of 20, for instance, has long discussed better coordination in dealing with global trade imbalances. However, national central banks still largely conduct policy independently. (Reporting by Jonathan Spicer in New York; Editing by Leslie Adler) … [Read more...]

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Business: Nokia’s woes might call for Microsoft aid

May 6, 2012 By Leave a Comment
Corporate logo is displayed in Helsinki

(Reuters) - Addressing Nokia Oyj employees in January 2011, Chief Executive Stephen Elop - at that point only four months into the job - dramatized the company's predicament by comparing it to standing on a burning platform. Nearly a year and a half on, and with Nokia's Lumia mobile phone range failing so far to revive sales, its position still looks frail. Its shares have lost 90 percent in five years and its debt is rated junk by two of the three major ratings agencies. Might Microsoft Corp, Elop's former employer and whose software Lumia is based on, have to step in to help Nokia out, seeing the Finnish company as a valuable point of entry into the cellphone market? Analysts have attributed Nokia's decline in large part to its late response to Apple Inc, whose iPhone redefined the smartphone market in 2007, and some see a marriage with Microsoft as possibly a last chance to turn the group around. For Microsoft the relationship is important, because Nokia was its first major break into the smartphone market after a decade of heavy investment. During that period other cellphone makers either chose to use their own software - as did Apple - or favored Google Inc's Android. "If Nokia ends up in financial difficulties I believe the helping hand would be there," said Sami Sarkamies, an analyst at Nordea. Nokia and Microsoft declined to comment. MORE SUPPORT Microsoft is already paying Nokia $1 billion a year to use its software on Lumia smartphones. And investment bankers familiar with the technology sector said the support could extend well beyond that amount, if Nokia's problems intensify. "I don't see Microsoft owning Nokia, but it would definitely provide financing to the tune of a couple of billion dollars," said one veteran technology banker. Any Microsoft support for Nokia would be more likely to take the form of an inter-company loan, or an equity stake, rather than a full takeover, a second banker said. Even though Microsoft has nearly $60 billion of cash on its balance sheet, the company has traditionally steered clear of the hardware business, because it does not want to compete with the manufacturers that use its software. Yet other priorities may override that consideration. At the same time, some bankers said they thought Nokia, which has a market value of 9.3 billion euros ($12.2 billion), was an unlikely target for other cellphone manufacturers because of its deep integration with Microsoft. "I don't see it as a target for private equity either. It is still too expensive and too volatile," said a third banker. "You would have to be prepared to catch a falling knife." With a full takeover of Nokia seeming unlikely, some bankers and analysts were equally skeptical about asset spin offs as a way for the company to raise some much-needed liquidity. OTHER ASSETS Nokia is in talks to sell its British luxury subsidiary Vertu, which makes some of the world's most expensive mobile phones, a source … [Read more...]

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Yahoo in talks to sell 15-25 percent of Alibaba: source

May 5, 2012 By Leave a Comment
Yahoo headquarters is pictured in Sunnyvale

(Reuters) - Yahoo Inc could be weeks away from selling 15 to 25 percent of Alibaba Group's stock back to China's largest e-commerce company, in a deal designed to eliminate complexities that had scuttled the parties' previous negotiations, a person familiar with the matter said. The two companies have been in talks for a month, the person said, but cautioned that there is no guarantee a deal will be reached. Numerous discussions have been held in recent years about a deal for Alibaba to reclaim some or all of the 40 percent stake in the company that Yahoo acquired in 2005. A $17 billion tax-free asset swap between the two companies fell apart in February. The latest deal would not be tax-free and would be much more straightforward, the person told Reuters on Friday. "The overall complexity of this deal is much simpler. There's no IRS risk, there's no complications with regards to the identification of assets," the person said. In a best case scenario, a deal could be weeks away, the person said. The situation may have become more complicated following Thursday's revelation that Yahoo Chief Executive Scott Thompson's resume falsely stated that he had earned a computer science degree in college. Yahoo, which initially called it an "inadvertent error," has since said its board is reviewing the matter. Activist investor Third Point, which is leading a proxy fight against Yahoo's board of director and which discovered the error in Thompson's resume, has demanded that Yahoo fire Thompson by Monday. Yahoo and Alibaba declined to comment. Yahoo acknowledged that it was in talks with Alibaba, during its first-quarter earnings conference call with analysts last month. During the call, Thompson said the two companies were working on a "simplified" transaction to "monetize" a portion of Yahoo's stake in Alibaba. To fund the deal, Alibaba would raise capital. The valuation that Alibaba receives in the fund-raising will determine how much Yahoo earns in the transaction, the source said. In September, Alibaba was valued at $32 billion when Silver Lake and other firms invested in the company, according to media reports at the time. At that valuation, Yahoo could make $4.8 billion to $8 billion by selling 15 to 25 percent of Alibaba. "Of all the previous ones we've worked on, this one feels like it might actually have a chance of getting done. Or at least it did until a day and a half ago," the person said, referring to the controversy around Thompson's resume. Details of the talks were first reported by the Wall Street Journal on Friday. (Reporting by Alexei Oreskovic; Editing by Richard Chang) … [Read more...]

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Business: European shares lower before U.S. jobs data

May 4, 2012 By Leave a Comment
A woman walks past an electronic stock board outside a brokerage in Tokyo

(Reuters) - European shares opened lower and industrial commodities like oil and copper were weak on Friday on concerns about the health of the world's biggest economy before a reading on the strength of the U.S. jobs market. Weekend elections in France and Greece, which could complicate efforts to resolve the euro zone debt crisis, were also weighing on sentiment, leaving the euro steady against the dollar at around $1.3150 and debt markets little changed. The pan-European FTSE Eurofirst .FTEU3 index of top European shares fell 0.2 percent to 1042.47, a day after the European Central Bank ended hopes of any further monetary policy easing in the near term to help the region's economy. "Securing a longer-term recovery in the global economy needs more that repeated quick fixes from monetary policy. That point was reinforced by the ECB yesterday," said Ian Williams, equity analyst at Peel Hunt. "Investors now face the modest hurdle of the U.S. payrolls numbers before the long weekend allows some time for contemplation," he said. Market expectations for the U.S. jobs report have fallen this week with many now suspecting the economy only added 125,000 to 150,000 jobs in April, below a Reuters consensus forecast of 170,000. A weak read out will stir talk of further monetary easing by the Federal Reserve. (Richard Hubbard; editing by Elizabeth Piper) … [Read more...]

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China willing to reform export credit system: U.S. official

May 3, 2012 By Leave a Comment
A visitor to the Oriental Pearl Tower (R

(Reuters) - China is willing to reform its export-credit financing, a senior U.S. official said on Thursday, a move that can help level the playing field between Chinese exporters and companies in other countries. "We have seen a very important shift in position on the part of Chinese authorities," the official said on the sidelines of the annual U.S.-China economic and diplomatic meetings in Beijing. "They are now talking about sitting down and negotiating a new international agreement on disciplines on export credits," the official said. The United States, the 27 nations of the European Union, Australia, Canada, Japan, South Korea, New Zealand, Norway and Switzerland already have rules on the use of government export credits under the Organization for Economic Cooperation and Development, a rich nations club. China is not party to that pact and U.S. companies have complained that its cheap government-backed financing often makes it difficult to conclude sales. The U.S. official said that an agreement with China would help level the playing field between China and other countries whose exporters are competing on the "quality and their products rather than how much subsidies a government provides." (Reporting by Rachelle Younglai; Editing by Jonathan Hopfner and Ramya Venugopal) … [Read more...]

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Facebook’s IPO show to hit the road on May 7: source

May 2, 2012 By Leave a Comment
The Facebook logo is shown at Facebook headquarters in Palo Alto

(Reuters) - The roadshow for Facebook Inc's initial public offering is scheduled to start on Monday, meaning the company's shares should begin trading on May 18, a source familiar with the process said on Tuesday. Founder and CEO Mark Zuckerberg, who has mostly operated in the background during Facebook's closely watched journey to public markets, will be involved in the roadshow, another source said. Facebook declined to comment. Many on Wall Street had not expected Zuckerberg to turn up on the roadshow after he skipped a March analysts' meeting, ceding the stage to COO Sheryl Sandberg and CFO David Ebersman. His March absence irked some investors who were indignant that the CEO, while wielding near-absolute control over the eight-year-old firm, had snubbed Wall Street. IPO roadshows, in which company management presents its strategy to prospective investors, typically last one to two weeks. If the roadshow goes particularly well, shares sometimes start trading a few days earlier. Facebook is set to raise at least $5 billion in what will likely be the largest Silicon Valley IPO ever. The world's largest social network continues to command keen investor interest although disappointing first-quarter results raised questions about whether it can sustain breakneck growth for the longer term. A source familiar with the offering said last week that a recent acquisition spurt by the company could have added about a week to the IPO timetable as regulators signed off on the deals. This review is close to completion, however, allowing the company to go ahead with the roadshow on May 7, according to the source who spoke with Reuters on Tuesday. The sources did not want to be identified because they are not authorized to speak about the company's IPO. "I have not seen as broad-based interest in an IPO since Google. Investor demand is immense," said Scott Sweet of research firm IPO Boutique. "I expect a roadshow that will rival all roadshows where investors will be turned away at the door." The news on the road show was first reported by tech blog AllThingsDigital and the Wall Street Journal. (Editing by Bernard Orr and Edmund Klamann) … [Read more...]

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GM proposed taking over one-third of Isuzu: source

May 2, 2012 By Leave a Comment
A model poses next to Isuzu vehicles during the 31st Bangkok International Motor Show in Bangkok

(Reuters) - General Motors Co (GM.N) first proposed taking a controlling stake of more than one-third in Isuzu Motors Ltd (7202.T) - an investment worth some $3 billion - but is now seeking a smaller holding after the Japanese truck maker said it wanted to remain independent, a person with direct knowledge of the talks said. GM is seen as eager to tap Isuzu's strength in Southeast Asian markets and its diesel technology, and a deal would in many ways be a foray back to well travelled ground as the two companies were once equity partners for 35 years. The U.S. automaker at one point owned as much as 49 percent in Isuzu before selling the holding down, disappointed with red ink spilled by Isuzu at the time and later strapped for cash of its own. Its last remaining 7.9 percent stake was sold in 2006 for $300 million. Since emerging from its government-funded bankruptcy restructuring in 2009, GM has begun to forge some new alliances in efforts spearheaded by GM Vice Chairman Steve Girsky. In March, GM agreed to pay $423 million for a 7 percent stake in French automaker Peugeot SA (PEUP.PA). Last August, Girsky negotiated a tie-up with Korean conglomerate LG Corp (003550.KS) to develop electric cars together. The current talks are, however, still very much preliminary, said the person who declined to be identified because the discussions are private. The re-emergence of GM as a strategic partner would help Isuzu share the burden of developing hybrid and other technologies as environmental regulations around the world tighten. The two firms also still cooperate in sales in Latin America and South Africa. A stake of 33.4 percent in Japan gives the shareholder veto powers over boardroom decisions and would be worth about $3.2 billion at Isuzu's current share price. The Nikkei business daily has said that GM is seeking a holding of about 10 percent. Isuzu said in a statement on Tuesday it was considering a wide range of partnerships, including but not limited to GM, adding that it had made no decision yet. GM declined to comment. "While we do not comment on rumor and speculation, we routinely speak with other (automakers) on a range of issues," spokesman Klaus-Peter Martin said. Toyota Motor Corp (7203.T) currently owns 5.9 percent of Isuzu in addition to a majority stake in rival truck maker Hino Motors Ltd (7205.T) and it remains unclear how Toyota will respond to GM's overtures to Isuzu. Toyota bought its stake in Isuzu with a view to jointly develop small diesel engines - a forte of Isuzu's - but that project was shelved after the global financial crisis. Toyota recently signed a deal to use BMW AG's (BMWG.DE) diesel engines in Europe. GM last year reclaimed its title as the world's top-selling automaker from Toyota thanks to rapid growth in China, but it is a minor player in fast-growing Southeast Asian markets, where Toyota and other Japanese brands dominate. Isuzu had been discussing a possible tie-up with Volkswagen … [Read more...]

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Fed officials, hawk and dove, agree: no more easing

May 1, 2012 By Leave a Comment
File photo of Richard Fisher, president of Federal Reserve Bank of Dallas

(Reuters) - Two top Federal Reserve officials - one with a dovish, employment-focused bent, and the other a self-avowed inflation hawk - on Monday both said they see no need for the central bank to ease monetary policy any further. But the comments, from San Francisco Fed President John Williams and Dallas Fed President Richard Fisher, do not mean they believe the central bank should quickly move to raise rates, which it has kept near zero for more than three years. The economy grew at a 2.2 percent pace last quarter, down from its 3 percent growth rate in the final three months of the year. Recent economic data, including a gauge of business activity in the Midwest, signal growth may slow further this quarter. "I don't think we are ready to exit yet," Fisher, an inflation hawk, told Reuters at the Milken Institute Global Conference in Los Angeles. Fisher said he would oppose the extension of Operation Twist, the Fed bond-buying program that is set to end in June, but stopped short of calling for outright monetary tightening. "We'll have to see how the year works out," he said. Speaking to the German financial daily Handelsblatt, San Francisco Fed's Williams suggested the Fed might need to push rates still lower if the U.S. unemployment rose substantially and growth slowed. "But I'm today more optimistic about the economy than in January," Williams, a voter this year on the Fed's policy-setting panel, was quoted as saying. "So far there is no need for further monetary measures," he said, pointing to an improvement in U.S. consumption and available income as well as positive signs in the property market. Fed policymakers have been at odds for months over whether continued high unemployment - which registered 8.2 percent in March - and a moderate pace of economic growth should force them to try to push rates down further in hopes of boosting the recovery. Doves like Chicago Fed President Charles Evans have called for further action, while hawks like Richmond Fed President Jeffrey Lacker have opposed it. Last week, the Fed held its policy line, reiterating its expectation that it will need to keep rates low through late 2014. And while Fed Chairman Ben Bernanke held the door open to further easing, he did not suggest it was imminent. 'EAT YOUR VEGETABLES' Fisher's opposition to further easing is rooted less in a conviction that the recovery has strengthened than in his long-held view that lower rates are doing little to boost jobs and may simply be giving Congress an excuse not to tackle the difficult job of reining in deficits and the national debt. "By providing monetary accommodation, we are saying, in essence, 'Congress, you better eat your vegetables, or we are going to serve you a big plate of monetary cookies,'" Fisher said at a panel on job creation at the Global Conference. The Fed's program of bond purchases is pushing down the price of debt, interfering with a pricing mechanism that would otherwise … [Read more...]

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