Stock futures point to higher start

(REUTERS, PERCENT, CENTS, ECONOMISTS, SURVEY, SALES)

(Reuters) - Stock futures pointed to a higher start on Wall Street on Wednesday, with futures for the S&P 500 up 0.7 percent, for Dow Jones up 0.5 percent and the Nasdaq 100 futures gaining 0.6 percent.
In Europe, stocks were higher, led by oils and banks, with the FTSEurofirst 300 index up 1.1 percent at 859.84 points at 0900 GMT.
Constellation Brands is reporting first quarter numbers, with analysts expecting the company to report earnings per share of 0.32 cents compared to 0.34 cents a year ago.
General Mills is reporting fourth quarter results with analysts expecting earnings per share of 0.80 cents compared to 0.73 cents a year ago.
Automatic Data Processing (ADP) releases its June employment report at 8:15 a.m. EDT. Economists in a Reuters survey expect 393,000 jobs were lost in June, down from a May job loss figure of 532,000.
At 10 a.m. EDT, the Institute for Supply Management releases its June manufacturing index. Economists in a Reuters survey expect a reading of 44.5 compared with 42.8 in May.
National Association of Realtors issues Pending Home Sales for May at 10 a.m. EDT. Economists in a Reuters survey expect a reading of 6.7 percent, unchanged from the prior month.
Commerce Department releases May construction spending at 10 a.m. EDT. Economists in a Reuters survey forecast a decline of 0.5 percent compared with a 0.8 percent rise the prior month.
U.S. automakers release June auto sales. Economists in a Reuters survey expect annualized sales of 3.33 million cars and 4.00 million trucks. In May, car sales stood at 3.35 million, and truck sales were 4.03 million.
Shares of Pfizer Inc (PFE.N) dropped 1.5 percent to $14.77 after the bell on Tuesday after the company said it was scrapping a late stage trial of its drug Sutent for treatment of a form of colorectal cancer.
Shares of AMAG Pharmaceuticals (AMAG.O) jumped 5 percent to $57.11 after the bell on Tuesday following news that the company`s iron deficiency drug was approved by the U.S. Food & Drug Administration.
U.S. stocks fell on Tuesday as an unexpected drop in consumer confidence cooled recent optimism about an economic recovery, but Wall Street still closed out its best quarter in a decade.
The Dow Jones industrial average .DJI slipped 0.97 percent, the Standard & Poor`s 500 Index .SPX dropped 0.85 percent and the Nasdaq Composite Index .IXIC shed 0.49 percent.
(Reporting by Joanne FrearsonEditing by Hans Peters)
Original article

Microsoft`s Bing search wins share from Google

(MICROSOFT, MARKET, SHARE, FIRST, PERCENT, STATCOUNTER)

LONDON/SEATTLE (Reuters) - Microsoft Corp`s new Bing search engine gained U.S. market share in its first month in operation but still trails dominant rival Google Inc, according to data released on Wednesday.
Bing, launched on June 3 but available to some users a few days earlier, took 8.23 percent of U.S. Web searches in June, up from 7.81 percent for Microsoft search just prior to its rollout and 7.21 percent in April, said Internet data firm StatCounter.
Google lost share slightly, dipping to 78.48 percent from 78.72 percent before Bing. Yahoo Inc, the perennial No. 2 in the market, rose to 11.04 percent from 10.99 percent.
Bing`s share peaked in the first week of June at 9.21 percent, falling away in the middle two weeks before coming back at 8.45 percent in the last week of June.
The results may give heart to Microsoft, which is investing heavily in its loss-making online services business and is refusing to cede the market to Google.
"At first sight, a 1 percent increase in market share does not appear to be a huge return on the investment Microsoft has made in Bing but the underlying trend appears positive," StatCounter Chief Executive Adohan Cullen said in a statement.
The world`s largest software company may yet strike an online search partnership with Yahoo to make itself a credible competitor, but talk of such a deal has quietened down.
StatCounter, based in Dublin, says its data are based on 4 billion pageloads per month monitored through a network of websites. Other data research firms such as comScore are not expected to release figures on Bing`s share until mid-July.
(Reporting by Bill Rigby and Georgina Prodhan; editing by Simon Jessop)
Original article

Auto sales seen showing signs of stability

(SALES, INDUSTRY, PERCENT, DECLINE, MOTOR, MILLION)

By David Bailey
DETROIT (Reuters) - Major automakers are expected to report the highest sales rate of 2009 when they post results for June, as deep discounts limit industry-wide results to a 30-percent decline.
In the context of the U.S. auto industry, where sales have been slumping for four years, that would constitute good news and support the view sales are near bottom after a punishing decline to nearly 30-year lows, analysts and executives said.
All of the largest automakers are expected to post deep U.S. light vehicle sales declines for June to round out what has been the weakest market since the early 1980s.
"We continue to believe that U.S. auto sales have bottomed this cycle and are heartened by seemingly strengthening retail sales even ahead of any impact from `cash for clunkers` ... " J.P. Morgan analyst Himanshu Patel said in a note to clients.
Ford Motor Co expects to report sales declines in the 10 percent to 20 percent range in June, which would be the best result of the top six selling automakers in the United States, following on a recent trend of outperforming sales for Ford.
Analysts and Ford see the industry as likely posting a sales decline in the 25 percent to 30 percent range for June from a year earlier. On an annualized basis, the rate could top 10 million units, the strongest total since December.
Edmunds expects Chrysler sales to drop 29.1 percent, General Motors Corp 28.9 percent, Honda Motor Co Ltd 31.4 percent, Toyota Motor Corp 28.7 percent and Nissan Motor Co Ltd 24.2 percent.
GM`s bankruptcy filing on June 1, inventory sell-offs from Chrysler dealerships that were losing franchises early in June, and the completion of the sale of Chrysler assets to a group led by Italy`s Fiat SpA all may have distorted the results for the month to some extent, analysts said.
"June industry sales of light vehicles appear to have improved somewhat further versus last month`s levels, benefiting from some recovery in consumer confidence but also from the large discounts offered by Chrysler and terminated GM brands in order to liquidate inventories," Barclays Capital analyst Brian Johnson said in a note to clients on Monday.
10 MILLION MARK?
U.S. auto sales may have pierced the 10 million vehicle mark in June on the annualized basis economists follow as an early snapshot of the appetite for big ticket items.
A result at or above 10 million units would be the strongest since the 10.3 million unit rate in December, but still one of the weakest since the early 1980s.
"We`re still a long way from 16 million unit sales, but things are moving in the right direction," Jesse Toprak, executive director of industry analysis for Edmunds.com, said of sales rates seen in 2007.
A Reuters poll of analysts found a median expectation for U.S. auto sales of 9.81 million vehicles on an annualized basis, which would be down slightly from the 9.9 million unit rate in May and far below the 13.7 million rate in June 2008.
However, on Monday, Ford U.S. sales analyst George Pipas said a 10 million unit rate was possible. Barclays and J.P. Morgan both have forecast a 10.1 million unit rate.  Continued...
Original article

Fiat CEO says Chrysler cash burn slows: report

(CHRYSLER, COMPANY, EXECUTIVE, MARCHIONNE, ROMEO, DODGE)

MILAN (Reuters) - U.S. automaker Chrysler Group LLC has stemmed the pace at which it uses cash after emerging from bankruptcy last month as a slimmer company, Chief Executive Sergio Marchionne said in an interview with Bloomberg published on Wednesday.
Chrysler went through $9.6 billion in cash in 2008. The Detroit car maker reorganized around what it considered its best assets and $6 billion in fresh financing from the U.S. and Canadian governments.
"We are still burning cash, but it`s slowed down by far," the agency quoted Marchionne, also the chief executive of Italy`s Fiat SpA, as saying.
"The question is how quickly we can stop the bleeding. That is priority No. 1."
He declined to say how quickly the company is using cash.
Marchionne is cutting inventory and adding new platforms and engine technology to redefine the product portfolio.
Fiat acquired 20 percent of the new Chrysler formed from the bankruptcy. The combined company is the world`s sixth-largest carmaker, with annual sales of 4.5 million vehicles.
Marchionne said he wanted to disclose Chrysler`s financial information even though the automaker was not publicly listed, Bloomberg said.
He said he was working with the U.S. Treasury to decide what information Chrysler might report and when.
ALFA ROMEO AND DODGE
By the end of the month, Marchionne wants to decide how the new company will manage its Dodge and Alfa Romeo brands, which he sees as American and European counterparts.
One solution might be to sell Alfa Romeo models under the Dodge brand in the United States and Dodge cars as Alfa Romeos in Europe, Marchionne said.
Chrysler should be able to take control of its European dealer network by September, Marchionne added.
Marchionne said he was not searching for another partner in Europe or Asia, even though his offer for General Motors Corp`s came up short.
He said on Friday he would not sweeten his bid to top frontrunner Magna International Inc`s offer to buy the company, even though he is still interested in the German brand.
The executive said a plan to spin off or list the Italian company`s car-making operations has been put on hold since its bid for Opel is not moving forward.  Continued...
Original article

Oil rises above $70 on bullish API report

(BARREL, REPORT, CRUDE, RECOVERY, MILLION, ECONOMIC)

By Fayen Wong
PERTH (Reuters) - Oil climbed back above $70 a barrel on Wednesday as an industry inventory report showing a larger-than-expected fall in U.S. crude stocks buoyed hopes of a demand recovery and encouraged buying.
The American Petroleum Institute said that domestic crude stocks fell 6.8 million barrels to 349.7 million barrels last week, against analysts forecast for a much smaller drawdown of just 2 million barrels.
This helped turn crude around from a 2 percent overnight loss, after a drop in U.S. consumer confidence added to concerns about a potential economic rebound.
U.S. crude for August delivery rose 59 cents to $70.48 a barrel by 0636 GMT (2:36 a.m. EDT). The contract settled down $1.60 at $69.89 a barrel on Tuesday, after earlier rising to an eight-month high of $73.38.
London Brent crude rose 62 cents to $69.92 a barrel.
"The U.S. consumer confidence report was a negative for the oil price but in late news, reports by the American Petroleum Institute that crude stocks fell by 6.8 million barrels helped to lift sentiment," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
The API report is regarded as a precursor to more authoritative numbers issued by the U.S. Energy Information Administration at 10:30 a.m. EDT on Wednesday.
Data from South Korea and from China, the world`s No.2 energy consumer, also offered some encouragement.
China`s official purchasing managers` index (PMI) for June rose to 53.2 from 53.1 in May, showing that the country`s economic recovery is on more solid ground, while South Korea`s export numbers were much better than forecast.
Oil prices, which have tumbled from a record high of over $147 struck in July last year, have rallied in recent months on a weak dollar and hopes of a global economic recovery to chalk up a 42 percent gain in the last quarter -- the highest quarterly gain since 1990.
But some analysts have questioned the sustainability of the current prices as near term demand remains weak and the global economic outlook was still murky, a view backed up by Japanese business sentiment that improved less than expected in June.
U.S. unemployment and housing data, due later on Wednesday, will give the next clues on how the world`s economies are faring.
(Reporting by Fayen Wong; Editing by Michael Urquhart)
Original article

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Asia shares struggle as data shows going tough

(STOCK, AFTER, EXPECTED, INDEX, QUARTER, PERCENT)

By Charlotte Cooper
TOKYO (Reuters) - Asian stock markets struggled to gain ground on Wednesday as economic data showed the process of turnaround to recovery was likely to be a slow grind, and the dollar capitalized on that more cautious sentiment.
Oil held above $70 a barrel after industry inventory data showed a bigger-than-expected fall in crude stocks, which helped pare some of the previous day`s losses after data unsettled investors about a potential U.S. economic rebound.
In Japan, business confidence pulled back from a record low hit three months ago, but the improvement was smaller than market players had expected and still a negative reading.
That followed an unexpectedly steep slide in U.S. consumer confidence in June, which dented optimism on Wall Street about prospects for recovery and weighed on shares in Asia.
Australia`s benchmark index .AXJO got the new quarter off to a weak start, falling 2 percent as growth-sensitive stocks such as shopping mall owner Westfield Group (WDC.AX) lost ground.
The broader MSCI index of Asia-Pacific shares excluding Japan .MIAPJ0000PUS eased 0.4 percent, holding below June`s 2009 peak, while Tokyo`s Nikkei share average .N225 was flat, with Orix Corp (8591.T) and All Nippon Airways (9202.T) sliding on news of possible public share offerings. .T
Japanese construction machinery makers such as Komatsu (6301.T) edged higher on news that China`s official purchasing manager index (PMI) gained.
But analysts noted big Japanese firms in the Bank of Japan`s tankan survey planned to cut capital spending, a key driver of the economy, by 9.4 percent in the year to next March, more than the market expected.
"Basically, the tankan showed that things aren`t all that good in the near term but seemed encouraging for the longer term, making its overall impact neutral," said Kenichi Hirano, operating officer at Tachibana Securities.
"I`d have liked to see slightly better capital spending, but given the current situation it`s only natural that it should fall -- after all, with production down, the last thing manufacturers can do right now is spend."
In Seoul, shares rose 0.8 percent helped by a slower than expected fall in South Korean exports, while component-maker LG Innotek (011070.KS) rallied on the first day of trading after it completed a merger with LG Micron Ltd.
The U.S. Conference Board`s index of consumer attitudes fell in June to 49.3 from a downwardly revised 54.8 in May, deflating stocks on the last day of the quarter.
The Dow Jones industrial average .DJI slipped 0.97 percent, the Standard & Poor`s 500 Index .SPX dropped 0.85 percent and the Nasdaq .IXIC eased 0.49 percent.
Nevertheless, Wall Street still closed out its best quarter in a decade, with the S&P 500 jumping 15.2 percent in the three months to end-June, the blue-chip Dow advancing 11 percent and the Nasdaq climbing by more than a fifth. .N
JOBS DATA IN FOCUS  Continued...
Original article

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BofA`s asset management unit gets lukewarm bids: report

(AMERICA, MANAGEMENT, CITING, PEOPLE, BILLION, GROUP)

(Reuters) - Bank of America Corp`s (BAC.N) primary investment management unit is drawing lower than expected bids after its likeliest suitor, BlackRock Inc (BLK.N), inked a blockbuster deal to buy Barclays Global Investor (BARC.L), the Financial Times reported, citing people close to the matter.
Bank of America has been trying to sell its Boston-based Columbia Management unit since earlier this year, but the bank has so far not announced a deal for the unit.
The company is hoping to get at least $3 billion from a sale of Columbia Management, but bids so far have come in closer to $2 billion, the paper said, citing the people.
BlackRock was a leading candidate to buy the business, but its hands have become full since agreeing to buy BGI for $13.5 billion last month.
But buy-out firms remain interested in First Republic, a private bank that Bank of America has been trying to sell.
A group led by former bank executive Gerry Ford -- which includes private equity firms Carlyle Group CYL.UL, Blackstone Group LP (BX.N), Oak Hill Capital Partners and TPG -- appears to have the highest degree of interest in the business, FT said, citing people close to the matter.
If sold, First Republic could be priced at about its tangible book value -- ranging from $600 million to $800 million depending on how its assets were marked and the degree to which Bank of America agreed to share losses, the paper said.
(Reporting by Tenzin Pema in Bangalore; Editing by Lincoln Feast)
Original article

Fed`s Yellen: slow recovery to start in late 2009

(YELLEN, INFLATION, SEVERAL, YEARS, ECONOMY, MARKET)

By Ros Krasny
SAN FRANCISCO (Reuters) - The recession is likely to end later in 2009, ushering in a "frustratingly slow" recovery marked by continued high unemployment, a top Federal Reserve official said on Tuesday.
Janet Yellen, president of the San Francisco Fed, looked for inflation to stay low for several years, and hinted that the central bank should be in no hurry to raise interest rates even once growth turns positive.
"I am not optimistic that the economy will spring back to normal anytime soon," Yellen told the Commonwealth Club of California in San Francisco.
The U.S. jobless rate is likely to rise from its current level, and it could take several years to return to full employment, Yellen said -- a period that could intensify downward pressure on wages and prices.
In her first extended remarks on the economy since early May, Yellen said that undesirably low inflation was the biggest issue on the medium-term horizon.
"I`ll put my cards on the table right away. I think the predominant risk is that inflation will be too low, not too high, over the next several years," she said.
"I expect core inflation will dip to about 1 percent over the next year and remain below 2 percent for several years."
Further, "if the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation." Still, Yellen said the risk of a "devastating spiral" of deflation was unlikely.
Yellen is a voting member of the Federal Open Market Committee in 2009.
The FOMC lowered its benchmark lending rate to a range of zero to 0.25 percent in December in an attempt to shore up the economy.
Financial markets assess a reasonable chance the Fed will start to raise rates by late 2009 or early 2010, but seem to be at odds with Yellen`s focus on deflation.
The Fed "certainly has the means to unwind the stimulus when the time is right," she said, adding that many of the bank`s special credit programs are tapering off as market conditions improve.
Even so, "I`m more concerned that we will be tempted to tighten policy too soon, thereby aborting recovery," Yellen said, citing the notorious blunders of the Fed committed in the 1930s.
"I do not believe that there is a real threat of high inflation in the current situation."
She said financial markets continued to show more confidence after a time when the Fed`s programs succeeded "in averting a full-blown meltdown."  Continued...
Original article

Putnam Chairman Charles "Ed" Haldeman stepping down

(PUTNAM, HALDEMAN, COMPANY, PRESIDENT, BILLION, REYNOLDS)

NEW YORK (Reuters) - Putnam Investments said Charles "Ed" Haldeman Jr. will step down on Tuesday as chairman of the Boston investment company, ending a turbulent seven-year run at the firm.
Haldeman, 60, who joined Putnam in 2002 and ran it as president and chief executive from 2003 until last year, is the prime candidate for the chief executive post at government-backed mortgage company Freddie Mac (FRE.N), the Wall Street Journal reported, citing people familiar with the situation.
Officials at Freddie Mac could not be reached for comment.
Haldeman was credited with restoring the firm`s standing with regulators after a series of trading scandals that forced out his predecessor, Lawrence Lasser.
But Haldeman wasn`t able to restore the performance of Putnam`s mutual funds, which also suffered from outflows. That contributed to the decision of past owner Marsh & McLennan Cos (MMC.N) to sell the business to Canada`s Power Financial for $3.9 billion in 2007.
Power Financial named Robert Reynolds, now 57, to lead the business last year, and he has turned its performance around with a series of management changes.
A spokesman said neither Haldeman nor Reynolds were available for interviews on Tuesday.
In a statement, Haldeman said "Bob Reynolds is doing a great job as CEO. This is a good time for me to advance to the next stage of my career. I`ll always be grateful for the opportunity to have worked with so many dedicated and talented professionals."
Haldeman is also stepping down as president of the Putnam Funds and as a trustee. Reynolds will replace Haldeman as president of the funds board, but Haldeman won`t be replaced as chairman of the fund company.
At the end of May, Putnam had $102 billion in assets under management, versus an all-time high of more than $400 billion earlier this decade, the company said.
(Reporting by Ross Kerber; Additional reporting by Martinne Geller; Editing by Phil Berlowitz, Gary Hill)
Original article

GM CEO makes case for bankruptcy asset sale

(BANKRUPTCY, COURT, ASSETS, AUTOMAKER, HENDERSON, BILLION)

By Emily Chasan and Caroline Humer
NEW YORK (Reuters) - General Motors Corp`s chief executive told a U.S. bankruptcy court on Tuesday that the sale of GM`s main assets to government-backed "New GM" must win court approval in order for the automaker to survive.
Fritz Henderson told the court that if the sale is not approved by July 10 and GM loses access to government funding, the company would be forced to liquidate. He testified on the first day of a hearing at which the automaker is seeking court approval for the sale just 30 days after filing for Chapter 11.
"Business is doing better" at GM, Henderson said, as customers, suppliers, workers and others anticipate the completion of a successful deal. He added that the automaker had originally hoped to repay its loans to the government and restructure outside of bankruptcy.
Henderson said during questioning that while sales in June were not as bad as expected, they were still down. "We do not expect to make money in June of 2009," he said.
Part of the reason business is better is the success of Chrysler`s asset sale out of bankruptcy, Henderson said.
"The 363 transaction with Chrysler did go relatively quickly. It provided some buyers assurance that this can go relatively quickly," he said.
GM competitor Chrysler filed for bankruptcy on April 30 and completed a sale of its main assets a few weeks ago.
Henderson also discussed the departure of former GM CEO Rick Wagoner, saying that Wagoner told him that he had been asked to step down by Steve Rattner, head of the Obama administration`s autos task force.
The GM sale hearing, before Judge Robert Gerber, is expected to continue for at least two days, as the company faces objections and questions from its creditors committee, a group of dissenting bondholders, those with liability and asbestos claims against the company, as well as unions and dealerships.
If the deal is approved, GM will be able to sell its best assets, including Chevrolet and Cadillac, under Section 363 of the bankruptcy code to a "New GM" while the U.S. Treasury would provide billions of dollars in financing.
Evercore managing director J. Stephen Worth said during testimony that his firm valued "New GM" at $38 billion to $48 billion in an analysis the financial firm prepared for the GM board of directors. That is substantially larger than the market capitalization of Ford which is near $18.3 billion. Ford is the only U.S. automaker to have avoided bankruptcy,
GM`s old assets would remain behind in bankruptcy court to be liquidated. Testimony also addressed whether "Old GM" will have enough cash to cover the liabilities it will retain, such as the $530 million in environmental claims.
During the hearing, Albert Koch, an AlixPartners executive who will be CEO of "Old GM", said he estimates the company needs $1.25 billion to wind down. He does not expect to present a liquidation plan until early 2010.
LIKELY WIN FOR U.S. AUTOS TASK FORCE
A successful sale would mark the second big victory for the Obama administration`s autos task force, which earlier this month also helped broker the sale of Chrysler LLC to a group led by Italy`s Fiat SpA. The U.S. Supreme Court cleared the way for that deal to go through on June 9.  Continued...
Original article

Fed`s Bullard says must shield Fed independence

(BULLARD, COULD, INDEPENDENCE, THINK, YIELDS, GOING)

By Alister Bull
PHILADELPHIA (Reuters) - St. Louis Federal Reserve Bank President James Bullard said on Tuesday that public anger over the U.S. financial crisis and subsequent bailouts could cause big problems if this escalated into a political challenge to the independence of the U.S. central bank.
"If that leads to some sort of erosion, or even the appearance of an erosion, of the independence of the Fed, I think that could be very counterproductive in this environment," he said after giving a talk about monetary policy to a Global Interdependence Center event.
The atmosphere between the Fed and the U.S. Congress has become very tense in the wake of last year`s crisis. Lawmakers are angry over the taxpayer-backed rescues of investment bank Bear Stearns and insurer American International Group, which led to a public outcry that could hurt them in the polls.
Fed Chairman Ben Bernanke also endured a hostile congressional grilling last week over the Fed`s role in Bank of America`s purchase of Merrill Lynch, and lawmakers have demanded Fed emails and questioned its accountability.
All of this is taking place against the background of a record U.S. budget deficit, and an unprecedentedly aggressive Fed purchase program of U.S. government debt.
"We`ve got very large fiscal deficits. We`ve got the appearance...that the Fed is monetizing the deficit, pushing up yields. Anything that is going to erode the independence of the Fed is going to feed that expectation and drive yields higher.
"So I think we are really in a delicate situation here as regards the independence of the Fed, and that is an important consideration going forward," he said in response to a question from the audience.
Bullard said that he did not believe the Congress really wanted to clip the Fed`s wings, but warned it would be easy for foreign investors to get the wrong message, and conclude that the Fed was going to finance the deficit by printing money.
"The Congress has thought over the last 100 years about how much independence to give the central bank. And when they really think about it, at the end of the day, they want the level of independence that we have. And so I think that will be the end outcome of this," he told reporters.
"I don`t think anyone involved intends to monetize the debt, but that is what it looks like to outsiders," he said.
EXIT STRATEGY
In earlier remarks, Bullard said that the Fed`s very accommodative monetary policy will remain in place for an extended period and a premature exit from this strategy could thwart U.S. economic recovery.
But Bullard said having a plan to shrink the monetary base after the Fed massively expanded it was important to control inflation expectations. And he said selling Fed-held assets was probably the most likely way it would choose to go.
"Without an exit strategy, expectations of high inflation may develop," Bullard said at the event, which was held at the Federal Reserve Bank of Philadelphia.
"If expectations of inflation feed into today`s long-term yields, those yields will rise today and hamper recovery prospects," he said in prepared remarks.  Continued...
Original article

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Ten or more face possible Madoff charges: source

(MADOFF, SOURCE, FRAUD, INVESTMENT, OTHER, THEIR)

By Grant McCool
NEW YORK (Reuters) - U.S. investigators say 10 or more people associated with imprisoned swindler Bernard Madoff could face criminal charges in the coming months, a law enforcement source said on Tuesday.
The source, who asked not be identified because of the continuing investigation into the multibillion-dollar Madoff fraud, said the FBI was "closer to the beginning than the end" of the probe.
Disgraced financier Madoff, 71, was handed a 150-year prison sentence Monday. He was arrested in December and pleaded guilty in March to orchestrating Wall Street`s biggest investment fraud of as much as $65 billion.
He has not named accomplices in his classic "cash in, cash out" Ponzi scheme. The only other person charged criminally so far is his outside accountant, David Friehling.
"There will probably be more people charged," the law enforcement source said. "It is likely to be 10 or more, but it is going to be a lengthy process that could take months or more."
Madoff was prosecuted by the Office of the U.S. Attorney in Manhattan, which declined comment on its continuing investigation.
In pre-sentencing court papers, prosecutors said Madoff organized and led the fraud and had numerous clerical employees working in the business.
"It would not have been possible to execute his scheme without their assistance," prosecutors said.
Federal investigators have declined to identify who is the focus of their inquiries, but they are skeptical of claims by some people who worked at the Madoff firm that they had no knowledge of a fraud spanning decades, the law enforcement source said.
JUGGERNAUT
White-collar crime experts have said from the start that Madoff`s scheme appeared to be too complex to carry out alone.
"What will happen from now is the juggernaut of the federal government and many other agencies are going to roll forward and scoop up as many people as they can and prosecute them," said Anthony Sabino, professor of law and business at St. John`s University in New York.
Bernard L. Madoff Investment Securities LLC had about 200 employees in a brokerage unit and an investment advisory business. The court-appointed trustee winding down the firm said the criminal activity took place in the investment arm.
Madoff`s wife of 45 years, Ruth, their sons Mark and Andrew and his brother Peter and niece, Shana, all face civil lawsuits. Peter, Mark and Andrew Madoff were executives in the brokerage, but their lawyers have said they were not aware of the fraud.
Other long-time employees identified in lawsuits or other court documents include former financial manager Frank DiPascali, a 33-year veteran, JoAnn Crupi and Annette Bongiorno, who worked there for 25 years and 40 years, respectively.  Continued...
Original article

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AIG gets new directors at subdued annual meeting

(GOVERNMENT, DIRECTORS, MEETING, BOARD, INVESTORS, LIDDY)

By Lilla Zuill and Paritosh Bansal
NEW YORK (Reuters) - American International Group Inc (AIG.N) got a new slate of government-backed directors at a subdued annual meeting on Tuesday, effectively revamping its board after the insurer`s $180 billion taxpayer bailout.
The meeting attracted far fewer investors than in years past and wrapped up in less than an hour, with the outcome of company proposals all but assured by the fact that trustees appointed to oversee the government`s nearly 80 percent stake in AIG can swing any vote.
Only a handful of investors used the meeting as a forum to air grievances, even though it was the first public opportunity to address AIG management and directors since the company`s implosion last September.
Less than 200 investors attended the meeting, held in AIG`s soon to be sold 72 Wall Street building, which was circled by security personnel. This was in sharp contrast to overflow crowds in years past.
Shareholders have seen the value of their stock all but wiped out. The shares, which traded as high as $100 at the beginning of the decade, have languished below $2 nearly all year. In morning trading they were down 18 cents at $1.15.
"I am sorry for what`s happened to you," Chief Executive Edward Liddy told a shareholder who said she and her husband had bought AIG shares in their retirement plan and had lost a lot of money. "The story that you recount has happened to so many folks," Liddy said.
AIG delayed its annual meeting, usually held in May, to give it more time to shuffle its board, which has been almost entirely reconstituted over the last year.
"They were like rats leaving a sinking ship -- goodbye and good riddance," shareholder Kenneth Steiner of Great Neck, New York, said at the meeting, referring to departed directors.
At least seven of the new directors were recommended by either the U.S. Treasury Department or the trustees overseeing the government`s stake in AIG.
Steiner also took aim at PricewaterhouseCoopers, AIG`s outside auditor. He called PwC "incompetent at best" for not alerting shareholders sooner to a lack of internal controls. AIG disclosed that it paid the accounting firm $131 million in 2008.
Liddy defended PwC, which was reappointed as auditor for the coming year. He said PwC cited AIG for a material weakness in controls in early 2008, effectively forcing AIG to disclose that large losses could be lurking in a derivatives portfolio.
AIG usually hands out thick, glossy, photo-filled annual reports at the meeting, but not this year. Instead, it distributed bare-bones copies of its 10-K filing with the U.S. Securities and Exchange Committee, printed on cheap newsprint. A spokesman cited financial constraints.
NEW LEADERSHIP
Liddy said he was confident the board would soon name a new chairman and CEO. He plans to relinquish his spot on the board once candidates for CEO and chairman are lined up to succeed him.
Liddy, responding to investors who asked if they should hold onto their shares, said he could give no assurance that the government would ever relinquish its stake in the insurer.  Continued...
Original article

SEC may tighten executive pay rules: sources

(COMPANIES, STOCK, OPTIONS, EXECUTIVES, VALUE, COMPENSATION)

By Rachelle Younglai and Jonathan Stempel
WASHINGTON/NEW YORK (Reuters) - U.S. securities regulators are considering changing how companies are required to disclose stock options awarded to executives, people familiar with the Securities and Exchange Commission`s thinking told Reuters on Tuesday.
At an SEC meeting on Wednesday, the commissioners also will propose giving investors a greater voice in setting executive pay at companies that were given taxpayer funds under the U.S. government`s Troubled Asset Relief Program.
Among the possible changes is a revision to how companies value equity awards in the "summary compensation table" for top executives that they file with the commission each year.
The SEC is considering requiring companies to include the estimated value for stock options granted during the year, the people said. The sources requested anonymity because the proposal is still being crafted and may change.
The table now includes the value of option grants that vested, or became eligible to be exercised, during the year. Many compensation experts consider this an imperfect way to value options, and believe options should be valued as of the date they are granted.
A change in how companies report the value of stock options could profoundly affect the reporting of executive pay.
Citigroup Inc (C.N), for example, reported $10.8 million of compensation for Chief Executive Vikram Pandit in 2008, according to a proxy filing. Had the bank valued Pandit`s stock and option grants as of the date they were granted, his reported compensation would have been $38.2 million.
Pandit was awarded much of his 2008 compensation on January 22 of that year, when Citigroup shares closed at $24.42. The stock closed Tuesday at $2.97, and Pandit`s awards are now either under water or show paper losses.
OBAMA PUSHES CHANGE
The Obama administration has sought to rein in excessive executive pay amid outrage from lawmakers and the public that some executives, including some at insurer American International Group Inc (AIG.N), were copping big pay packages even as the government propped up their companies.
The administration has urged Congress to give the SEC authority to require publicly traded companies to give shareholders a nonbinding vote on pay for top executives.
It also wants the SEC to have power to insure that corporate pay committees are sufficiently independent from management.
The SEC may propose requiring companies to disclose more information about compensation consultants who also perform other work for the company, the sources said.
For example, if a consultant provided compensation advice and other services, the company would be required to disclose their fees and the other work being performed.
Governance activists charge that consulting firms face conflicts of interest because of their dual role in advising companies on human resources as well as executive pay.  Continued...
Original article

Wal-Mart supports employer mandated health coverage

(PRESIDENT, OBAMA, HEALTH, MANDATE, COVERAGE, EMPLOYEES)

SAN FRANCISCO (Reuters) - Wal-Mart Stores Inc (WMT.N), the world`s largest retailer, said on Tuesday that it supports President Barack Obama`s push to require large employers to offer health insurance to workers.
"We are for an employer mandate which is fair and broad in its coverage," stated a letter addressed to Obama and signed by Mike Duke, the chief executive of Wal-Mart; Andy Stern, the president of Service Employees International Union and John Podesta, the CEO of the Center for American Progress.
Wal-Mart, the nation`s largest private employer, also said separately that the mandate should cover as many businesses as possible, and cover part-time and full-time employees.
"Any alternative to an employer mandate should not create barriers or disincentives to hiring workers with disabilities, entry level employees, or people from low income families." said Leslie Dach, Wal-Mart`s executive vice president of corporate affairs and government relations, in a statement.
Wal-Mart has drawn criticism from labor groups, who have accused it of mistreating employees and not offering adequate health care coverage. Former CEO Lee Scott worked to counter those critics before he retired from his role as CEO earlier this year.
Meanwhile, Obama has stepped up his push for health care reform. The president has left much of the details of health reform to Congress, but he has told U.S. lawmakers he is open to requiring larger companies to provide coverage for employees while exempting smaller businesses.
(Reporting by Nicole Maestri; Editing by Tim Dobbyn)
Original article

Geely, others still eye Volvo cars takeover: source

(HOLDING, GEELY, VOLVO, PERSON, VISIT, PROCESS)

By Quentin Webb
LONDON (Reuters) - China`s Beijing Automotive Industry Holding Corp (BAIC), rival Geely, and at least one "Western industrial group" remain interested in Ford Motor Co`s Volvo car unit, a person close to the situation said on Tuesday.
Geely, which has already visited Volvo in Sweden, plans to make a fresh visit soon, the person added. A second person close to the situation said Geely representatives were likely to visit this week.
Ford (F.N) is also hopeful that a consortium of Scandinavian investors may come together to lodge a proposal, the first person said.
John Gardiner, a spokesman for Ford Europe, declined to comment in detail on the sale process. But he said: "We`re still in discussion with a number of parties concerning the future of Volvo. No final decision has been made at this stage and the process will take some time to unfold."
Ford put the money-losing Volvo cars unit up for sale in December, as it looked to cut costs and raise cash amid industrywide record-low vehicle sales. Bankers say the complexity of disentangling Volvo cars from its parent means the process is likely to take a long time.
On May 7, the Hong Kong-listed Geely Automobile Holdings (0175.HK) said it had not submitted, and had no plans to submit, any bid concerning a takeover of Volvo.
However, it is not clear whether that denial would rule out a bid from mainland-based parent company Zhejiang Geely Holding Group, whose owner, Li Shu Fu, is chairman of both firms.
Earlier this month a BAIC spokesman said he was not briefed on the company`s interest in any foreign auto brands, after the Wall Street Journal said it was interested in Volvo and BAIC executives were set to visit Volvo headquarters in Gothenburg.
BAIC and Geely could not immediately be reached by Reuters for comment.
(Reporting by Quentin Webb; Additional reporting by Sven Nordenstam in Stockholm; Editing by Douwe Miedema and Richard Chang)
Original article

U.S. demands UBS "comply in full" in tax evasion case

(DEPARTMENT, SWISS, COURT, UNITED, INTEREST, GOVERNMENT)

By Tom Brown
MIAMI (Reuters) - The U.S. Justice Department said on Tuesday it was pressing ahead with its five-month-old lawsuit against UBS AG to force the Swiss bank to identify thousands of U.S. clients with secret UBS accounts.
Despite recent media speculation about a possible settlement of the case, the department said in a brief filed with a Florida court that it was seeking to enforce tax compliance with the full weight of U.S. law.
"The United States has a strong national interest in making sure that all U.S. taxpayers comply with the tax laws, including disclosing their offshore accounts, and paying all the taxes they owe," the department said in the brief.
The U.S. government sued UBS in February in the U.S. Southern District Court of Florida, seeking the names of 52,000 Americans suspected of using the bank to hide nearly $15 billion in assets and evade U.S. taxes.
"The United States has proven its case for enforcement. The Court should order UBS to comply in full," the department said in its filing.
In response, a spokesman for UBS said enforcement of the U.S. summons would require the bank to violate Swiss law and was inconsistent with U.S.-Swiss treaty frameworks.
A court hearing on the U.S. government case against UBS has been scheduled for July 13.
Attorneys and analysts have been skeptical about media reports that the United States would drop the case against UBS without major Swiss concessions, given the international momentum against tax havens and the coming deadlines for errant U.S. taxpayers to come forward voluntarily.
"Based on our representation of many UBS cases, it is clear in our minds that the government is going to pursue vigorously its objectives of transparency and limiting tax haven abuse," attorney William Sharp, who represents U.S. clients of UBS, told Reuters by phone.
BANK "HELPED AMERICANS BREAK U.S. LAWS"
UBS and the Swiss government have argued that any exchange of confidential banking information should be handled through existing legal treaties rather than in the courts.
But in its court filing on Tuesday, the U.S. Justice Department appeared unrelenting in its bid to use legal tools to pry open Switzerland`s jealousy guarded tradition of bank secrecy.
"Although Swiss interests in bank secrecy may also be important, the Court must consider those interests in the context of UBS`s conduct, where for at least seven years the bank actively helped tens of thousands of Americans break U.S. laws, and evade hundreds of millions of dollars in U.S. taxes," the department said.
"The vital national interest of the United States in fighting attempts by U.S. taxpayers to avoid and evade their tax obligations outweighs the general Swiss interest in maintaining the secrecy of its banking relationships -- especially for those foreign lawbreakers," it added.
A source familiar with the matter told Reuters on Tuesday that American clients of UBS will not be able to access secret accounts starting on Wednesday unless they transfer the money onshore or close the account.  Continued...
Original article

Fed`s Bullard says policy to stay loose for awhile

(BULLARD, COULD, INDEPENDENCE, THINK, YIELDS, GOING)

By Alister Bull
PHILADELPHIA (Reuters) - St. Louis Federal Reserve Bank President James Bullard said on Tuesday that public anger over the U.S. financial crisis and subsequent bailouts could cause big problems if this escalated into a political challenge to the independence of the U.S. central bank.
"If that leads to some sort of erosion, or even the appearance of an erosion, of the independence of the Fed, I think that could be very counterproductive in this environment," he said after giving a talk about monetary policy to a Global Interdependence Center event.
The atmosphere between the Fed and the U.S. Congress has become very tense in the wake of last year`s crisis. Lawmakers are angry over the taxpayer-backed rescues of investment bank Bear Stearns and insurer American International Group, which led to a public outcry that could hurt them in the polls.
Fed Chairman Ben Bernanke also endured a hostile congressional grilling last week over the Fed`s role in Bank of America`s purchase of Merrill Lynch, and lawmakers have demanded Fed emails and questioned its accountability.
All of this is taking place against the background of a record U.S. budget deficit, and an unprecedentedly aggressive Fed purchase program of U.S. government debt.
"We`ve got very large fiscal deficits. We`ve got the appearance...that the Fed is monetizing the deficit, pushing up yields. Anything that is going to erode the independence of the Fed is going to feed that expectation and drive yields higher.
"So I think we are really in a delicate situation here as regards the independence of the Fed, and that is an important consideration going forward," he said in response to a question from the audience.
Bullard said that he did not believe the Congress really wanted to clip the Fed`s wings, but warned it would be easy for foreign investors to get the wrong message, and conclude that the Fed was going to finance the deficit by printing money.
"The Congress has thought over the last 100 years about how much independence to give the central bank. And when they really think about it, at the end of the day, they want the level of independence that we have. And so I think that will be the end outcome of this," he told reporters.
"I don`t think anyone involved intends to monetize the debt, but that is what it looks like to outsiders," he said.
EXIT STRATEGY
In earlier remarks, Bullard said that the Fed`s very accommodative monetary policy will remain in place for an extended period and a premature exit from this strategy could thwart U.S. economic recovery.
But Bullard said having a plan to shrink the monetary base after the Fed massively expanded it was important to control inflation expectations. And he said selling Fed-held assets was probably the most likely way it would choose to go.
"Without an exit strategy, expectations of high inflation may develop," Bullard said at the event, which was held at the Federal Reserve Bank of Philadelphia.
"If expectations of inflation feed into today`s long-term yields, those yields will rise today and hamper recovery prospects," he said in prepared remarks.  Continued...
Original article

Crisis far from over: World Bank chief

(WORLD, ZOELLICK, MARKETS, DEVELOPING, COUNTRIES, THERE)

By Lesley Wroughton
WASHINGTON (Reuters) - World Bank President Robert Zoellick said on Tuesday that financial markets are showing signs of stabilization, but warned that the global crisis was far from over in developing countries.
Speaking to reporters ahead of a meeting of finance ministers from Latin America, Zoellick said developing countries were only now feeling the full force of the global economic and financial crisis, which could quickly return to advanced economies where it began.
He said demand for World Bank financing was high and growing as credit markets remained shut to many developing market clients.
"There seems some opportunities for improvement on the financial market side, but there is still great uncertainty about the scope and timing of recovery," Zoellick told reporters on a conference call
"There are risks that could threaten the turnaround and I have emphasized the world needs to recognize that dangers will come in waves," he said. Zoellick was speaking ahead of a meeting of finance ministers from Latin America in Chile on July 2.
"A number of developing countries remain under significant stress," he added.
Zoellick said the strength of the recovery and the potential for setbacks depends a lot on how policy-makers cope with risks, including in banking systems, protectionism and financing of rollover debt of private-sector companies.
The World Bank estimated in March that well over $1 trillion in emerging market corporate debt and $2-3 trillion in total emerging market debt will mature in 2009, the majority of which reflects claims of major global banks extended across borders or through affiliates in emerging markets.
Zoellick said developing countries faced a total financing shortfall in the range of $350 billion to $635 billion, of which $178 is in Latin America.
He said demand for financing from the World Bank was increasing in part because developed countries have guaranteed so much debt that it is crowding out "good developing country" debt.
"Even if they can go to the markets and go sometimes to their domestic markets, it will crowd out their private sector," Zoellick said, "So, I remain quite cautious about the overall state of the recovery. I don`t think we`re remotely through this.
"We remain in a situation where we have to be very alert to dangers because there are significant risks out there, and we are finding that the demand for our resources from all of our different instruments ... remains high and growing," he added.
Zoellick said he would discuss with Latin American finance ministers ways to bolster the World Bank`s capital base. This could include possible early replenishment of money for the Bank`s facility that provides low-cost loans and grants to 78 of the world`s poorest countries, 39 of which are in Africa.
(Reporting by Lesley Wroughton; Editing by Dan Grebler)
Original article

Bank of America accused of anti-consumer practices

(CONSUMER, AMERICA, THEIR, WORKERS, CUSTOMERS, COMPLAINED)

By Jonathan Stempel
NEW YORK (Reuters) - Consumer and labor groups demanded Bank of America Corp and other lenders reform their sales practices so that workers under pressure to meet sales quotas do not saddle customers with costly and unnecessary products.
The whistleblowing campaign was announced Tuesday as the U.S. Treasury Department unveiled legislation to create a Consumer Financial Protection Agency, as part of the Obama administration financial regulation overhaul.
People, who said they were former Bank of America employees, alleged that their supervisors drove them to burden consumers with needless debt and fees, to fatten the bank`s earnings and the paychecks of senior executives, and threatened to retaliate if they complained. Some complained their salaries had been too low and that they had to hit quotas to earn needed bonuses.
"This is the kind of information that really needs to get out," said Representative Keith Ellison, a Minnesota Democrat who sits on the House Financial Services Committee. "Without a strong whistleblower law, we simply are not doing the things we need to do in order to manage risk properly."
He suggested that lending standards could be compromised by "the urgency to sell, sell, sell, sell, sell."
Groups conducting the campaign include the Service Employees International Union, which is trying to organize Bank of America workers; the National Association of Consumer Advocates, and the U.S. Public Interest Research Group.
Bank of America spokeswoman Anne Pace rejected the allegations, saying the SEIU misrepresented the largest U.S. bank`s relationship with its customers and associates.
She said the Charlotte, North Carolina-based bank is "pro-associate and believes that managers are well-equipped to respond to associates` needs," and is committed to ensuring that customer fees are "transparent and predictable."
Christopher Feener, who said he used to work in the bank`s credit card unit, was among the former workers who spoke out.
He complained that the bank regularly violated the Fair Debt Collection Practices Act, and sometimes pushed workers to falsely threaten legal action against customers. He said his team was sometimes pushed to call customers` neighbors about delinquent accounts, "to embarrass the customer and actually encourage the neighbor to bring over a message."
Shares of Bank of America rose 5 cents to $13.24 in early afternoon trading on the New York Stock Exchange.
(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)
Original article

Soros predicts "stop-go" economy and higher rates

(SOROS, RATES, MARKETS, BUBBLE, REGULATORS, GOVERNMENT)

By Joseph A. Giannone and Jennifer Ablan
NEW YORK (Reuters) - Billionaire investor George Soros on Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.
Soros, one of the world`s most successful hedge fund managers who was speaking at a breakfast hosted by the Wall Street Journal, said borrowing costs are the major headwinds for the economy.
"As markets revive, fear of inflation will drive up interest rates, which will choke off recovery," he said.
Rising U.S. Treasury yields have driven mortgage rates back up, threatening a recovery in the housing market and a refinancing boom that has helped preserve the still-fragile health of recession-weary households and the banks that lend to them.
The rise in bond yields and mortgage rates may also act to check the huge recent rally in global stock markets of the past three months, with the Federal Reserve trying to end an 18-month recession and yet not spur inflation.
Soros went back into retirement earlier this year after leading his self-named firm through the 2008 crisis. He made about $1.1 billion last year, according to Institutional Investor`s Alpha Magazine.
SOROS ON `SUPER BUBBLE`
Soros, who made his fortune targeting currencies in tightly controlled markets, said international financial markets need global regulation, even while being critical of regulators and calling for minimal government intervention.
"The idea of self-correcting markets is a misconception," he said. What governments need to do, he said, is recognize they cannot prevent bubbles but instead try to control them from getting bigger.
"You cannot prevent bubbles from forming but prevent them from self-reinforcement," Soros said.
Soros, who has retired from active fund management, acknowledged that getting regulation right is not easy as he argued both for and against stricter supervision.
"The regulators will always be wrong," he said. "They should interfere as little as possible."
Regulators, he said, typically try to control money supply and then let free markets take care of everything else, but that is a fallacy.
By the same token, Soros said that efforts by regulators and governments to stop bubbles bursting for more than 25 years gave rise to the most recent "super bubble."
Soros cautioned that the U.S. government may be making some serious missteps in dealing with the current credit crunch and recession. Massive stimulus spending and bank bailouts have pumped up the U.S. government`s own balance sheet.  Continued...
Original article

Cisco may take on Microsoft`s Office

(CISCO, MICROSOFT, OFFICE, SERVICE, BUSINESS, ONLINE)

BOSTON (Reuters) - Cisco Systems Inc is considering offering Web-based alternatives to Microsoft Corp`s popular Office software as the networking giant expands on the Internet.
Cisco Senior Vice President Doug Dennerline said on Tuesday his company may develop a service that would allow business users to create documents they could draft and share through its WebEx meeting and collaboration service.
Internet-based alternatives to Microsoft Office cropped up about five years ago, but corporate users have yet to embrace them. If the approach does take off, it could become big business: Microsoft`s Office division rang up sales of $60 billion in the software company`s most recent fiscal year.
Google Inc sells Google Apps, an Internet-based alternative to Microsoft Office that includes a spreadsheet, word processor and presentation software.
Dennerline, who manages Cisco`s online collaboration products, said he is interested in getting into that area.
"That is an interesting space. We are certainly thinking about that," he said on Tuesday during an online news conference. He did not elaborate.
WebEx services currently includes online meetings, email and instant messaging.
He also said Cisco is not interested in competing with Salesforce.com Inc in selling online applications that companies use to manage sales and marketing activities.
Analysts have long speculated that Cisco planned into that business.
(Reporting by Jim Finkle; editing by Andre Grenon)
Original article

Gloomy U.S. consumers clip housing recovery hopes

(CONFIDENCE, SHOWED, MONTH, REPORT, PRICES, INDEX)

By Emily Kaiser
WASHINGTON (Reuters) - U.S. consumer confidence took an unexpectedly steep slide in June, figures released on Tuesday showed, suggesting the 18-month-long recession had yet to loosen its grip on the economy.
A separate report on April house prices in major cities offered some encouraging signs that the worst of the housing slump may be over, but that was not enough to lift investors` spirits, while another crop of economic data showed business activity in New York City and the Midwest remained weak and retail chains slogged through a rough June.
Billionaire investor George Soros added to the cautionary tone, saying fears of inflation would drive up borrowing costs and choke off growth once financial markets recover.
Major stock market indexes turned lower after the Conference Board`s consumer confidence index showed households felt gloomier about their current situation, and less optimistic about the eventual economic recovery.
Kevin Kruszenski, head of listed trading at Keybanc Capital Markets in Cleveland, said the confidence data "kind of took the wind out of things a little bit."
The confidence index fell to 49.3 in June from 54.8 in May. Economists polled by Reuters had expected a healthier reading of 55.0 for this month.
Standard & Poor`s/Case Shiller home price indexes showed prices of single-family homes declined in April from the prior month, but the pace of the slide moderated.
There were a few glimmers of hope as 13 of the 20 metropolitan areas tracked showed some improvement. The laggards included Las Vegas, Phoenix and Miami, which were among the cities that saw the biggest run-up in house prices in the middle part of this decade.
"While one month`s data cannot determine if a turnaround has begun, it seems that some stabilization may be appearing in some of the regions," said David Blitzer, chairman of the index committee at S&P. "We are entering the seasonally strong period in the housing market, so it will take some time to determine if a recovery is really here."
Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said less-bad news was certainly a relief to investors, but their patience may soon start to wear thin.
"To get the markets moving to the next level you`re going to have to see prices stop falling and begin to rise here at some point in the not-so-distant future," he said.
In New York, the National Association of Purchasing Management-New York`s monthly measure of business activity showed conditions worsened in June, although the purchasing and supply managers surveyed felt a bit better about the six-month outlook.
The index of current business conditions tumbled to 44.8 in June from 61.3 in May, while the six-month outlook index rose to 58.3 this month from 56.1 a month earlier.
A similar report on activity in the U.S. Midwest in June showed some improvement from a month earlier, but still pointed to a weak economy.
Readings on the health of retailers were mixed. A report from the International Council of Shopping Centers and Goldman Sachs showed that chain store sales rose modestly last week from a year earlier, but a separate report from Redbook Research showed a sharp decline.  Continued...
Original article

Related articles:
U.S. consumer mood improves, but price worries emerge
Asian shares, oil rally on hopes for China

AIG says risk declining, new CEO likely soon

(GOVERNMENT, STAKE, WHICH, MEETING, LIDDY, COMPANY)

By Lilla Zuill and Paritosh Bansal
NEW YORK (Reuters) - American International Group Inc`s (AIG.N) chief executive said the government may never relinquish its 79.9 percent stake in the insurer, which has been rescued by $180 billion of federal bailouts.
Speaking at AIG`s annual meeting on Tuesday, CEO Edward Liddy nevertheless expressed optimism the insurer will be able to repay government loans as it tries to rebound from punishing losses tied to derivatives.
AIG lost $99 billion last year, largely because of its exposure to credit default swaps, and has been pilloried for bonuses awarded in its financial products unit, the source of much of its losses.
The bailouts have left the government with a 79.9 percent stake in the company, which is trying to sell assets to help repay $83 billion of government loans.
"I can give you no assurances that it will ever change," Liddy, installed as AIG`s chief executive by the government last September, said of the government stake. But he said there was "an excellent chance" the government will be repaid.
Last week, AIG said it planned to give the Federal Reserve Bank of New York stakes in two large life insurance units and eventually spin those units off, reducing debt to the government by about $25 billion.
On Tuesday, the company said it would sell its credit card business in Taiwan to Far Eastern International Bank. Liddy said AIG is trying to decide what to do with its aircraft leasing unit, International Lease Finance Corp.
Liddy said the financial products unit has nearly halved its derivatives exposure, to $1.4 trillion from $2.7 trillion, and by year-end "our risk will have been reduced substantially from its current status."
Shares of AIG, once the world`s largest insurer by market value, have traded below $2 nearly all year. In morning trading they were down 20 cents at $1.13.
RATS FLEEING SINKING SHIP
AIG held its annual meeting in a company building next door to its Wall Street headquarters, both of which it is selling.
It was the first public opportunity for shareholders to vent frustration since AIG`s financial implosion.
Even so, fewer than 200 people attended, a far lower number than a year earlier, and the meeting lasted less than an hour.
All of the company`s proposals were approved, except for one relating to the number of authorized shares; all shareholder proposals were rejected.
AIG had delayed its annual meeting, usually held in May, to give it more time to shuffle its board, which has been almost entirely reconstituted over the last year.  Continued...
Original article

Treasury sets wide scope for new consumer agency

(TREASURY, AGENCY, CONSUMER, PROTECTION, FINANCIAL, PRACTICES)

WASHINGTON (Reuters) - The U.S. Treasury on Tuesday sent Congress proposed legislation to create a new regulatory agency with sweeping powers to write and enforce tough new consumer protection rules for banks and other financial institutions.
The legislative language fleshes out plans for widespread changes to U.S. financial regulations the Obama administration released on June 17.
The proposed Consumer Financial Protection Agency aims to protect Americans from abusive practices widely employed during the recent housing and credit boom, such as deceptive and undocumented mortgage lending, poor loan disclosures, and unfair interest rate increases and "fee traps" on credit cards.
The Treasury`s proposal would consolidate consumer protection power in a single agency, giving the CFPA exclusive supervisory and examination authority for consumer compliance among banking institutions.
These responsibilities are now split among several agencies, including the Federal Reserve, which has taken criticism for failing to impose tougher restrictions on mortgage lenders.
"Consumer protection will have an impendent seat at the table in our regulatory system. By consolidating accountability in one place, we will reduce gaps in federal supervision and enforcement," U.S. Treasury Secretary Timothy Geithner said in a statement.
The new agency will have powers to write rules and enforce them, and can issue subpoenas, hold hearings and seek court orders to halt abusive practices for both banks and non-banks -- including mortgage lenders, which often fell through regulatory gaps in the current structure.
The Treasury said the agency could impose new rules on montage brokers to eliminate conflicts of interest and promote best practices, and ban unfair practices such as "yield spread premiums" -- side payments from lenders to brokers to push consumers into higher priced loans.
(Reporting by David Lawder; Editing by Padraic Cassidy)
Original article

Airlines lost $3 billion in first quarter

(GENEVA, AIRLINES, BILLION, CARRIERS, DETERIORATION, PRICES)

GENEVA (Reuters) - The world`s airlines lost more than $3 billion in the first quarter of 2009, the International Air Transport Association (IATA) said on Tuesday, maintaining its estimate for full-year losses of $9 billion.
In its latest snapshot on the industry, the Geneva-based lobby said weak travel demand and lower freight volumes in the global recession had bled revenues for major carriers, in "a significant deterioration from last year."
"This deterioration was before the recent rise in fuel prices," IATA said, warning the 30 percent increase in oil and jet fuel prices since early May would squeeze airline cash flows further in coming months.
Both oil and jet fuel prices have risen almost $20 a barrel in the past two months, and are now 75 percent higher than their low point at the end of 2008, the Financial Monitor report said.
"Airlines have not yet felt the full impact of this oil price rise," it said.
But it said it was not changing its previous 2009 loss forecast of $9 billion, which follows revised 2008 losses of $10.4 billion.
On Tuesday, U.S. crude traded around $72 per barrel.
IATA, which represents more than 200 airlines, also said carriers trying to fly fewer flights to save costs during the downturn have not managed to cut capacity in line with shrinking air transport demand.
Leading airlines have been seeking mergers and acquisitions to help build scale and shield themselves against continued market weakness until the global economy recovers.
Delta Air Lines (DAL.N) swallowed rival Northwest Airlines last year to create the world`s largest airline, and European carriers have also consolidated with Deutsche Lufthansa (LHAG.DE) agreeing to buy Austrian Airlines and Air France-KLM (AIRF.PA) scooping up Alitalia.
British Airways (BAY.L) is also in merger talks with Iberia (IBLA.MC), and Singapore Airlines (SIAL.SI) has said it is eyeing acquisitions in China and India.
(Reporting by Laura MacInnis; Editing by Stephanie Nebehay and Dan Lalor)
Original article

Stock futures point to a higher start

(REUTERS, HIGHER, PERCENT, SHARES, INDEX, RELEASE)

(Reuters) - Stock futures pointed to a higher start on Wall Street on Tuesday, with futures for the S&P up 0.4 percent, Dow Jones futures up 0.2 percent and Nasdaq 100 futures up 0.1 percent at 5 a.m. EDT.
In Europe, shares rose for a second straight session on Tuesday and were on track to post the biggest quarterly rise since late 1999, with banks advancing and commodity shares tracking higher crude oil and metals prices.
At 5 a.m. EDT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.2 percent at 860.96 points after rising up to 864.27 points and falling to a low of 858.01. The index closed 1.8 percent higher in the previous session.
American International Group Inc (AIG.N), the insurer rescued by a series of federal bailouts, is set to pad out its shrinking board on Tuesday when a new slate of directors stands for election at its annual meeting.
At 8:55 a.m. EDT is the release of the Redbook weekly U.S. Retail Sales figures for June versus May. In the prior period, sales fell 4.4 percent.
New York NAPM releases June index of regional business activity at 9 a.m. EDT. In the previous month, the index read 361.6.
Standard & Poor`s releases its S&P Case/Shiller Home Price Index for April at 9 a.m. EDT. Economists in a Reuters survey expect a fall of 1.8 percent versus a 2.2 percent decrease in the previous month.
The Institute of Supply Management Chicago releases June index of manufacturing activity at 9:45 a.m. EDT. Economists in a Reuters survey forecast a reading of 39.0 in the month compared with 34.9 in May.
At 10 a.m. EDT the Conference Board releases June consumer confidence. Economists in a Reuters survey expect a reading of 55.0 compared with 54.9 in May.
Shares of H&R Block Inc (HRB.N) rose 5 percent after the market close on Monday after the tax preparation company beat expectations for its fourth-quarter results.
U.S. stocks rose on Monday as higher oil prices lifted shares of energy companies and fund managers snapped up this quarter`s winners to burnish their portfolios.
The Dow Jones industrial average .DJI gained 1.08 percent, the Standard & Poor`s 500 Index .SPX was up 0.91 percent and the Nasdaq Composite Index .IXIC was up 0.32 percent.
(Reporting by Joanne Frearson; Editing by Jon Loades-Carter)
Original article

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Magna-Opel deal in doubt

(TUESDAY, COULD, PORSCHE, REPORTED, MAGNA, STAKE)

By Anne Jolis and Christiaan Hetzner
BRUSSELS/FRANKFURT (Reuters) - Efforts to save two leading European carmakers took a twist on Tuesday that could change the ownership of both crisis-hit General Motors Corp`s Opel and German sportscar maker Porsche.
As GM readied for bankruptcy, the Financial Times reported Belgium-based holding company RHJ International, a former bidder for Opel, was back in the running and close to a deal that would strand Canadian-Austrian auto parts group Magna International.
Elsewhere, Qatar made an offer to the Porsche and Piech families that control the Porsche SE automotive holding that could help cut its debt mountain.
Porsche and Volkswagen have been in talks to create an "integrated" automotive group after Porsche`s 9 billion euro ($12.6 billion) debt burden forced it to drop plans for a full takeover of VW. But progress toward creating a combined company stalled after Porsche chief executive Wendelin Wiedeking sought investment from Qatar`s sovereign wealth fund.
RHJ-OPEL DEAL CLOSE?
The FT reported GM was close to a deal with RHJ to sell a stake in Opel, and a memorandum of understanding could be signed within days.
Talks on a stake in Opel between its parent, GM, and Magna -- going on since Magna clinched an agreement just before GM`s bankruptcy filing in May, pipping Fiat to the post at the time -- have hit snags, the paper said.
RHJ was named as a potential Opel buyer in media reports but never confirmed or denied it had made an initial bid let alone a second, improved one. But according to the Financial Times, RHJ has improved an earlier bid and is being taken "very seriously" by GM and a memorandum of understanding could be signed in days.
The FT reported RHJ`s new offer was said to be more sensitive to job losses in Germany, which is providing $2.1 billion of bridge financing to keep the carmaker afloat as GM goes through bankruptcy proceedings.
Another sticking point in negotiations with Magna is access to the Detroit carmaker`s global technology, which Magna wants to secure on behalf of Russian partners, the paper said. Magna has teamed up with GAZ and Sberbank for the bid.
RHJ and Magna declined to comment, as did Fiat whose chief executive Sergio Marchionne has said he wants to focus on Chrysler -- in which it has taken a 20 percent stake -- after the Italian automaker`s bid for Opel failed, and that its existing bid for Opel was the best it can do.
Back in the United States, GM is due to seek approval from a court on Tuesday to sell its assets to a "New GM" in a plan to reinvigorate the automaker under government ownership.
Also on Tuesday, Hyundai Motor Co offered to allow customers to lock in fuel prices for new vehicles in a sales promotion aimed at the economic anxieties of American consumers.
(Reporting by Reuters reporters; Writing by Helen Massy-Beresford; Editing by Dan Lalor)
($1 = 0.7143 euro)
Original article

Iraq launches historic oil and gas auction

(AUCTION, FIRMS, LARGEST, CONTRACTS, DEALS, WHICH)

By Missy Ryan
BAGHDAD (Reuters) - Iraq will auction off eight giant oil and gas fields on Tuesday in its first major tender since 2003, giving oil firms a foothold in a country that may hold some of the world`s largest untapped energy reserves.
Private jets flew representatives from leading global firms like Exxon Mobil (XOM.N) and Total (TOTF.PA) into Baghdad, a city still ringed by blast walls and gripped by violence, to place their bids for the 20-year development contracts.
The companies are wading into a morass of controversy surrounding the deals, which some Iraqi lawmakers condemn as illegal and which even some within the state-run oil industry have criticized for selling Iraq`s vast oil wealth short.
Over six years after Saddam Hussein`s ouster was supposed to unleash Iraq`s oil potential, the auction marks the first real center-stage moment for the Oil Ministry, under growing pressure to boost disappointing output around 2.4 million barrels a day.
Iraq has proven oil reserves of 115 billion barrels, the world`s third largest, but the true amount of black gold sitting beneath Iraq`s desolate deserts could be far greater.
The auction, delayed by a day by a sandstorm, will be broadcast live from a hotel in Baghdad`s fortified Green Zone in a process Iraqi oil officials insist will be fully transparent.
Firms from the countries that launched the 2003 invasion, which triggered years of chaos and bloodshed, will be neither favored nor disadvantaged, they say.
Six of Iraq`s largest oilfields, which are already producing, and two natural gas fields, which have barely been tapped, will be auctioned off one at a time over the course of the day, and the auction may stretch into Wednesday if necessary.
For oil firms, the allure may be more about getting a foothold in Iraq`s oil sector than about the amount of money they expect to make in these deals, which are fixed-fee service contracts rather than the production-sharing deals they prefer.
Winning firms must pay Iraq $2.6 billion in signature bonuses and cover Iraq`s 25-percent share of development costs, which it will pay back in oil.
It will take a great deal of money to reverse the decades of war, sanctions and neglect that have left Iraq`s oil sector rusting, out-of-date, and unable to leverage enviable resources.
Oil Minister Hussain al-Shahristani, a nuclear scientist, says the deals will bring Iraq $1.7 trillion over 20 years. He defended the contracts when he was summoned to parliament last week by skeptical lawmakers who insist the deals will be illegitimate unless they are sent to parliament for approval.
The contracts also came in for condemnation from minority Kurds, who have signed their own deals with foreign firms and who are warning they could make it difficult for companies to work around the disputed, oil-producing city of Kirkuk.
Parliament`s failure to pass new energy legislation due to disagreement between Kurds and Arabs, raises more questions for firms coming into Iraq, as do national elections scheduled for January that could bring upheaval to a fledgling democracy.
But oil majors appear willing to confront the risks, and ongoing violence, for a chance to work in a place with such large untapped reserves.  Continued...
Original article

Jury returns $1.67 billion drug verdict against Abbott

(ABBOTT, PATENT, JOHNSON, HUMIRA, REMICADE, SCHERING)

NEW YORK (Reuters) - A U.S. federal jury returned a $1.67 billion verdict against Abbott Laboratories (ABT.N) in a patent suit brought by Johnson & Johnson (JNJ.N) related to arthritis treatments, the drug companies said on Monday.
An Abbott spokesman said the company would appeal the verdict delivered in Marshall, Texas.
The case involves Humira, Abbott`s newer blockbuster drug that blocks tumor necrosis factor, or TNF, and which competes with Johnson & Johnson`s older blockbuster medication Remicade.
The company said in a statement it was pleased with the ruling, which showed its patent was "both valid and infringed." Remicade sales were $1.03 billion in Johnson & Johnson`s first quarter.
Abbott spokesman Scott Stoffel told Reuters: "We`re disappointed at this verdict, and we are confident in the merits of our case and that we will prevail on appeal."
Humira is a fully-human antibody, meaning it does not have any mouse components, Stoffel said. Remicade, on the other hand, is partly made from mouse DNA.
"Only when Humira was nearing its approval in 2002 did J&J amend the patent at issue in this litigation to claim it had discovered fully-human antibodies in 1994," Stoffel said.
"J&J acknowledged at trial that it did not start working on a fully human antibody until 1997 -- two years after Abbott discovered Humira and one year after Abbott filed its patent applications for Humira."
A spokeswoman for the Johnson & Johnson unit involved in the case, Centocor Ortho Biotech Inc, would not comment beyond the brief statement.
Schering-Plough Corp (SGP.N) has the overseas rights to Remicade. Merck & Co Inc (MRK.N) aims to buy Schering-Plough later this year, and to inherit those rights.
Johnson & Johnson, however, is battling Merck before an arbitrator, claiming it will gain overseas market rights to Remicade if Merck completes its acquisition of Schering-Plough.
Both Merck and Schering-Plough were not immediately available to comment on the implications of the jury`s verdict.
(Reporting by Ransdell Pierson and Jonathan Spicer)
Original article

Asia stocks gain as risk taking persists

(QUARTER, PERCENT, PRICES, MARKETS, INDEX, HIGHER)

By Kevin Plumberg
HONG KONG (Reuters) - Asian stocks and the Australian dollar rose on the last day of the second quarter, as investors kept adding to bets global economic activity is rebounding, having driven Chinese shares to the highest in a year.
The U.S. dollar slipped as momentum kept dealers rolling out of trades based on safety after a 7 percent drop on the quarter, keeping commodity prices supported. Oil prices rose above $73 a barrel, to new highs for the year.
Emerging markets have been the big winner so far this year, with the MSCI emerging markets equities index .MSCIEF up 32 percent so far in 2009 compared to a 6 percent rise on the all-country world index.
A tremendous shift by investors out of cash and low-yielding money market instruments into riskier assets, particularly in Asia, has been driving equity valuations and currencies in the region higher.
However, the third quarter could be a time of reckoning if higher raw materials prices snuff out a nascent recovery.
"Just how higher oil prices are a boon to the global economy when consumers are struggling to keep jobs and make payment on negative equity housing loans is a mystery. We are confident that threats to risk appetite and risk assets point clearly toward potential reversal, not extension of gains," said Patrick Bennett, Asia foreign exchange and rates strategist with Societe Generale said in a note.
So far this year, Chinese and Indian stock markets have been the hottest in the region.
The Shanghai composite .SSEC was up 0.3 percent on the day to the highest since June 2008, and has risen 63 percent so far this year.
India`s BSE index .BSESN has gained 52 percent in the first half, with most of it won after a decisive election victory by a Congress-led coalition in May.
Japan`s Nikkei share average .N225 rose 1.9 percent, with firms in the technology sector giving a boost to the index. Valuation of the Nikkei on a price-to-book basis has jumped to around 1.3 times, having spent the first quarter below a multiple of one.
That is still well below the average of the last decade of 1.9 times.
Hong Kong`s Hang Seng index .HSI climbed 1.5 percent, helped by a 5.8 percent jump in shares of refiner Sinopec (0386.HK) after China unexpectedly lifted domestic gasoline and diesel prices to their highest ever.
Oil rose sharply to 8-month highs, though a lack of news suggested dealers were focused on quarter-end activity.
U.S. crude for August delivery rose to an eight-month high of $73.38 a barrel, but later cooled to trade at $72.09, up $1.60 on the day.
London Brent, where trading volume in the front month contract surged much higher than normal, led the rally, gaining $1.93 a barrel to $72.92.  Continued...
Original article

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