Watson Wyatt shares slide, deal concerns cited

(WATSON, WYATT, COULD, HEWITT, INTEGRATION, EARNINGS, MERGER)

NEW YORK (Reuters) - Shares of consulting company Watson Wyatt Worldwide (WW.N) tumbled 8 percent on Monday as analysts cited concerns about its $3.5 billion merger with Towers Perrin Forster & Crosby.
The deal, announced late Sunday, will create the biggest human resources consultancy in the world, according to analysts at Stifel Nicolaus.
It will be a more powerful rival to businesses such as Hewitt Associates (HEW.N) and Mercer, a subsidiary of Marsh & McLennan Companies (MMC.N), during a time when clients have curbed discretionary spending.
The deal will take three years for Tower Perrin to add to Watson Wyatt`s earnings on a GAAP basis, and two years on an adjusted earnings per-share basis, Roger Millay, Watson Wyatt`s chief financial officer said on a conference call.
A three-year path to become accretive could imply a difficult integration, while there could be a net exodus of talent, said an analyst at Citigroup in a research note.
Integration and deal costs are likely to lower earnings per share and cash flow, thereby making the valuation less interesting, Citi said, while the integration could also offer its rivals some competitive opportunities in the interim. Citi lowered its price target on the deal by a dollar to $46 a share.
Watson Wyatt`s shares slid 8 percent to $37.95 in early trading.
Stifel Nicolaus also said that near term disruption from the merger might help competitors, although it said that longer term, "we expect the combined entity to be a more formidable competitor".
The pair don`t expect regulatory issues with combining the two firms, one executive said on the conference call on Monday.
Citi`s analyst said that the deal could give Hewitt the opportunity to either pick up assets that may need to be sold for anticompetitive reasons or because talent is dissatisfied with elements of the merger.
"We would look for a net exodus of talent and relationships from Towers Watson to others in the industry like Hewitt and Mercer," Citi said.
Original article

Court rejects appeal on Cablevision network DVR

(APPEAL, COURT, CABLEVISION, DVR, WOULD, CABLE, SERVICE)

WASHINGTON (Reuters) - The U.S. Supreme Court said on Monday it rejected an appeal by film studios and television networks of a ruling allowing a new digital video recorder service by New York cable operator Cablevision Systems Corp.
The justices refused to review a ruling by a U.S. Court of Appeals in New York that Cablevision`s proposed new service would not directly infringe the copyrights of the media companies that produce movies and television programs.
Cablevision announced in 2006 plans to offer a network-based DVR system, called Remote Storage Digital Video Recorder, or RS-DVR, which would allow subscribers to store TV programs on the cable operator`s computer servers and then play them back at will.
With a standard DVR, shows are recorded and stored on a hard drive in the set-top box, allowing users to play back programing and fast-forward past ads. The new service would let Cablevision save money on capital spending for DVR boxes and on installation costs.
A number of film studios and major television networks, including Time Warner Inc, News Corp, CBS Corp and Walt Disney Co, sued in seeking to block the new service for violating copyright laws. They won before a federal judge, but lost before the appeals court.
Other cable companies including Comcast Corp and Time Warner Cable Inc have said they would launch similar systems over time if Cablevision`s is upheld as legal.
The U.S. Justice Department late last month said the appeals court reasonably and narrowly resolved the issues presented by the case and it urged the high court to deny the appeal.
The Supreme Court rejected the appeal by the media companies without any comment.
(Reporting by James Vicini, Editing by Derek Caney)
Original article

Enterprise Partners to buy Teppco for $3.3 billion

(TEPPCO, ENTERPRISE, PARTNERSHIP, THEIR, PERCENT, UNITS, WOULD)

NEW YORK (Reuters) - Enterprise Products Partners LP (EPD.N) said on Monday that Teppco Partners LP (TPP.N) had accepted its sweetened $3.3 billion bid in a deal that would form the largest U.S. publicly traded energy partnership.
The deal, which would create a giant in the midstream energy sector, comes as values for the tax-friendly master limited partnerships rebound from a selloff that saw many of them lose more than half their value last year.
Under an exchange of units, Enterprise will pay the equivalent of $31.36 per unit of Teppco, a premium of 9.3 percent over Friday`s closing price.
In April, Teppco had rejected a proposed $2.75 billion takeover offer from Enterprise.
The combined company would hold 48,000 miles of oil and natural gas pipelines; more than 200 million barrels of oil, oil products and natural gas liquids storage; and 27 billion cubic feet of natural gas storage.
The merged company would generate cost savings of at least $20 million and be accretive in 2010, Enterprise Chief Executive Michael A. Creel said in a statement.
Master limited partnerships are a favored structure in the energy industry for many fee-based assets, such as pipelines and storage tanks. The partnerships do not pay corporate taxes and distribute nearly all their profits to their unit holders.
Unit holders of Teppco will receive 1.24 Enterprise common units for each of their units.
Teppco units were up 2.5 percent at $29.40 in light trading before the market opened, while Enterprise dipped 1.1 percent to $25.00.
At Friday`s close, Teppco`s unit price had jumped nearly 47 percent so far this year to $28.69, but it remained well below its 2008 peak of nearly $39.
(Reporting by Matt Daily; Editing by Lisa Von Ahn)
Original article

Recovery frail but stimulus exit must be timely

(CENTRAL, BIS, BANKS, RECOVERY, ANNUAL, STILL, AFTER)

By Krista Hughes and Natsuko Waki
BASEL, Switzerland (Reuters) - Unprecedented attempts to stimulate economic growth may fail to bring a sustained recovery, yet withdrawing them too late could be even more risky, leading central bankers said on Monday.
Regional currencies would gain in importance, they also said after two days of talks. But the U.S. dollar still had no serious rival in playing a lead role in foreign reserves and trade settlement, according to the monetary policy chiefs from the world`s major industrial and emerging economies.
The Bank for International Settlements warned that although authorities had tried to arrest sharp declines in economic output, it was still an open question whether the stimulus would lead to a sustained recovery.
Still, waiting too long to withdraw support could fuel inflation and create new imbalances, the BIS, which acts as a forum for the world`s central banks, said in its annual report.
"It may be too early to take exit strategies now; we don`t think it`s too early to talk about them," BIS general manager Jaime Caruana told Reuters Television after the bank`s annual meeting.
Although it was risky to wait too long, "experience suggests that the bigger risk is exiting too late and too slowly or, in the case of fiscal policy, not exiting at all," he said after the meeting at the BIS headquarters in the Swiss city of Basel.
As the financial crisis has deepened, central banks around the world have slashed interest rates and poured extra liquidity into markets, some by buying assets directly.
Governments have rushed to help banks and promised extra public spending this year worth about 2 percent of economic output of the Group of 20 nations, according to the International Monetary Fund.
Central bank chiefs attending the meeting, including European Central Bank President Jean-Claude Trichet, U.S. Federal Reserve Chairman Ben Bernanke and Bank of Japan Governor Masaahi Shirakawa, believe that eventually ending the very expansionary policies will be a major challenge.
Mexico`s Guillermo Ortiz told Reuters that it may be premature to detail exit strategies as yet. Amando Tetangco of the Philippines said central banks could refrain from raising interest rates, warning that exit strategies should avoid disorderly adjustment.
ONLY TEMPORARY HELP
The BIS said governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks, instead focusing on guarantees and capital -- also exposing taxpayers to potentially large losses.
Past experience showed that the key to recovery was to force the banking system to take losses, dispose of non-performing assets, eliminate excess capacity and build their capital base.
"These conditions are not being met. A significant risk is therefore that the current stimulus will lead only to a temporary pickup in growth, followed by protracted stagnation," the BIS said in the annual report.
"The lack of progress threatens to prolong the crisis and delay the recovery because a dysfunctional financial system reduces the ability of monetary and fiscal actions to stimulate the economy."  Continued...
Original article

Congress eyes market impact of speculators: Vilsack

(VILSACK, TRADING, MONDAY, PRICES, THERE, ABOUT, MARKET)

CHICAGO (Reuters) - Congress is eyeing ways to make sure speculative trading helps commodity markets rather than distorting pricing signals, U.S. Agriculture Secretary Tom Vilsack said in a Reuters Television interview Monday.
"There are concerns," Vilsack said, noting he has spoken about the issue with Tom Harkin, chairman of the Senate Agriculture Committee, about the issue.
"I suspect that there will probably be an effort to make sure when there is trading that takes place on the market, that it`s trading that actually assists the market, doesn`t hurt the market, creates a robust trading scheme so that we get a good pricing signal," Vilsack said.
Grain futures markets are bracing for more government regulation after a U.S. Senate probe blamed index funds for overinflating wheat prices last year.
Vilsack was slated to tour the Chicago Board of Trade on Monday with executives from parent company CME Group Inc, the world`s largest derivatives exchange, which has said speculators were not responsible for price volatility.
Food prices soared to record levels last year, causing riots and hoarding in some countries.
While prices have come down from the spike, they remain at historically high levels, especially in developing countries.
Vilsack was also slated to speak to about the Obama administration`s approach to global food security on Monday.
The Obama administration has said it will ask Congress to double agricultural development aid to $1 billion by 2010.
"It is part of national security, it is part of foreign policy, it`s part of our trade policy. It`s part of our economic recovery efforts," Vilsack said.
The United Nations` World Food Program has pleaded with rich nations to maintain food aid as more than a billion people are chronically hungry at a time when global food aid is at a 20-year low.
Original article

Credit card industry to remain lucrative: study

(ANALYSTS, FINANCIAL, BANKS, CREDIT, INDUSTRY, INTERCHANGE, EXPRESS)

(Reuters) - The credit card industry will continue to provide one of the most lucrative returns of the asset classes within banks` portfolios even after new U.S. credit card rules are put in place, analysts at Keefe, Bruyette and Woods said.
Congress is mulling regulations on interchange rates -- fees retailers and merchants have to pay to banks that issue credit cards. The legislation would give merchants and retailers more power to negotiate interchange fees with banks.
Analysts Sanjay Sakhrani and Steven Kwok said they expect the industry to be "somewhat smaller" and "less profitable" after the new card laws, but added that lack of growth opportunities in the industry post cycle could drive M&A once banks are better capitalized.
The analysts said Visa Inc (V.N) and MasterCard (MA.N), which do not charge interchange fees, are least directly exposed to the regulations, followed by American Express Co (AXP.N) and Discover Financial Services (DFS.N).
Capital One Financial Corp (COF.N) is relatively more exposed given its reliance on fee income, but will adjust and may even be able to find growth opportunities in the prime segment, they added.
Stocks of credit card issuing companies have risen about 150 percent in the second quarter and have outperformed the industry, despite challenges, KBW analysts` noted.
The brokerage raised Discover Financial Services to "outperform" from "market perform," saying it was a stock to own both based on value and near-term prospects, and increased its price targets on American Express and Capital One Financial.
(Reporting by Archana Shankar in Bangalore; Editing by Aradhana Aravindan)
Original article

Central banks seek rankings for financial products

(OF, BIS, FINANCIAL, THEIR, BANKS, GOVERNMENT, PRODUCTS)

By Huw Jones and Krista Hughes
BASEL (Reuters) - Financial products should be treated like medicines and sold to consumers only when they are certified safe to prevent a repeat of last year`s financial meltdown, the world`s central bankers said on Monday.
The Bank for International Settlements (BIS), which acts as a forum for central banks, said government efforts to revive the global economy might have only a temporary impact because banks are not being pushed hard enough to fix their underlying problems.
Banks` lending and other practices, including the approval of risky mortgages in the United States, led the global economy into the worst recession in decades. Governments have poured trillions of dollars into rescuing the financial system and easing a recession that has cut through company workforces.
A rise in Japanese industrial output and a pick-up in euro zone economic confidence showed the unprecedented government spending is having an effect.
But policymakers said it was too early to conclude a recovery was taking root and officials in the United States, Europe and China said the need for further stimulus measures should not be ruled out.
"I think that we are not out of the woods yet," said Guillermo Ortiz, Mexico`s central bank governor and the BIS board chairman. "One important question is whether these green shoots actually take root.
Global recovery hopes have pushed world stocks more than 20 percent higher in the second quarter. But the rally has stalled recently on worries that markets may have been too aggressive in their bets on the strength and timing of the nascent upturn.
U.S. stocks are expected to open flat to higher following mixed signals from Asia and Europe. Tokyo shares fell 1 percent, but European stocks were up 0.9 percent by 1200 GMT. <MKTS/GLOB>
RISK OF "PROTRACTED STAGNATION"
The BIS was alarmed by how a collapse in the value of opaque and complex securitized products propelled the world`s financial system into crisis. It said in its annual report all financial products should be registered like medicines.
The safest instruments would be available to everyone, a second tier only to people with authorization, like prescription drugs, and a third tier to a limited number of pre-screened individuals and institutions, like experimental drugs are.
A final tier would be securities deemed illegal.
"Such a registration and certification system creates transparency and enhances safety ... This will mean that issuers bear increased responsibility for the risk assessment of their products," the BIS said.
The BIS also said that while governments have moved quickly to support their economies, they have not done enough to remove problem assets from banks` balance sheets.
"A significant risk is therefore that the current stimulus will lead only to a temporary pickup in growth, followed by protracted stagnation," it said.  Continued...
Original article

Anglo may look for Brazil partner, not defense move

(ANGLO, PROJECT, WOULD, ABOUT, BILLION, MINAS-RIO, PARTNER)

By Eric Onstad and Quentin Webb
LONDON (Reuters) - Miner Anglo American (AAL.L) is considering finding a partner for its huge iron ore project in Brazil, including from China, but the move is not a defense against an unwanted merger approach from rival Xstrata (XTA.L), sources familiar with the situation said on Monday.
Weekend newspaper reports said Anglo, which last week rebuffed a "merger-of-equals" proposal from Anglo-Swiss Xstrata, was plotting a defense strategy by seeking to sell part of its Minas-Rio project.
"Anglo believes it would be a logical step to secure a co-investor for a project of this size," a source close to Anglo told Reuters. "Anglo may have been pursuing this for some time."
Anglo said it declined to comment on media speculation.
No names were mentioned as possible partners, but the source said steel companies, Chinese investors and sovereign wealth funds were all possibilities.
Another source familiar with the situation said no detailed discussions were currently ongoing regarding a possible partner.
Both sources declined to be named.
Anglo concluded a deal last year to pay $5.5 billion for Minas-Rio and 69 percent of Amapa, another Brazilian iron ore project.
Minas-Rio will cost around $3.5 billion to build, but Anglo has previously said that financing was not a problem since it has about $9 billion in cash and loan facilities.
WARY ABOUT CHINALCO?
Newspaper reports citied various possible partners, including China`s Chinalco, Japanese trading house Sojitz (2768.T), Gulf Industrial Investment Company, a Bahrain iron oxide pellet producer, and Dubai Natural Resources World, owned by the Emirate of Dubai.
Analyst Michael Rawlinson at Liberum Capital said Anglo would be wary about a link-up with Chinalco after Rio Tinto canceled a $19.5 billion deal with the firm.
"We would expect the board to be cautious on a tie-up at group level with Chinalco given what happened at Rio. We are skeptical on a tie-up with Dubai at MMX since this would not address the project`s logistical complexities," he said in a note.
Rawlinson said Anglo was reportedly holding talks with Brazil`s Vale (VALE5.SA)(VALE.N), the world`s biggest iron ore producer, about assisting on logistical aspects of the project.
Anglo plans to launch the first phase of production at Minas-Rio, which is a high-quality iron ore deposit with an average of 68 percent iron content, in the second quarter of 2012.  Continued...
Original article

Oil rises over $69 after Nigerian attack report

(CRUDE, US, PERCENT, MONDAY, BARREL, PRESIDENT, DEMAND)

LONDON (Reuters) - Oil rose above $69 a barrel on Monday after Nigeria`s main militant group said it attacked an oil platform belonging to Royal Dutch Shell (RDSa.L) despite an amnesty offer from President Umaru Yar`Adua.
The Movement for the Emancipation of the Niger Delta (MEND) said in an emailed statement it had struck the Shell Forcados platform in the Delta state. There was no immediate independent confirmation.
The report followed an announcement on Friday by four Nigeria militant factions to accept in principle an amnesty offer from the country`s president, raising hopes Africa`s top oil producer would halt a battle with rebels.
U.S. crude for August delivery was up 10 cents at $69.26 a barrel by 0750 GMT (3:50 a.m. EDT). The contract fell $1.07 to settle at $69.16 a barrel on Friday.
London Brent crude was up 12 cents at $69.04.
Pipeline bombings, attacks on oil and gas installations and kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two-thirds of its installed oil output capacity of 3 million barrels per day.
DEMAND WEAK, STOCKS HIGH
Algerian Energy and Mines Minister Chakib Khelil said on Monday oil demand was still weak due to the weakness of the U.S. and European economies and world oil stocks remained high.
Khelil told reporters ahead of a meeting of gas producers an increase in OPEC oil production was hard to envisage, despite rising crude prices.
Asian stock markets slipped on Monday with Japan`s Nikkei average down 1 percent but European equities inched higher in early trade after slipping in the previous two sessions, with firmer pharmaceutical and mining stocks outpacing weaker financial shares. .T .EU
U.S. consumer confidence data on Tuesday leads a heavy calendar of economic data this week, including China`s Purchasing Managers Index on Wednesday and a U.S. jobs report and manufacturing data on Thursday.
The U.S. data will help determine whether an oil market rally, which has lifted prices more than 50 percent this year on hopes of economic recovery, has any legs.
In the first big number for the week, industrial output from the world`s No. 3 energy consumer Japan jumped 5.9 percent in May, the third straight month of increase after a big slump, although doubts remained whether it can sustain the momentum without a clear rebound in the United States and other key export markets.
Japanese oil demand has been hit by the economic slump over the last year. On Monday, Idemitsu Kosan Co (5019.T), Japan`s third-largest refiner, said it planned to refine 2.1 million kilolitres of crude oil in July, down 26 percent from a year earlier.
A top White House adviser said on Sunday President Barack Obama could discuss a second stimulus package to boost the economy if needed, but at the moment no more new money looked necessary.
Crude oil speculators on the New York Mercantile Exchange hiked their net long positions in the week to June 23, according to data from the Commodity Futures Trading Commission released on Friday.
(Reporting by Christopher Johnson in London and Fayen Wong in Perth; editing by Keiron Henderson)
Original article

Asia stocks mixed, dollar regains footing

(PERCENT, DOLLAR, AFTER, SHARES, CURRENCY, CENTRAL, JAPAN)

By Eric Burroughs
HONG KONG (Reuters) - Asian stock markets were mixed on Monday as many investors stuck to the sidelines as the second quarter winds down, while the dollar recovered from a slide on worries about the push by major emerging countries for a reserve currency alternative.
A drop in oil prices pulled down energy-related shares, with Japan`s Nippon Oil (5001.T) losing nearly 2 percent. Crude oil lost 51 cents a barrel to $68.65 on easing tensions in major exporter Nigeria.
Asian shares outside Japan have surged 32 percent in the second quarter, which would be the best quarterly gain in 16 years, as investors embraced the region on hopes it would emerge more quickly from the deepest global recession in decades.
World stocks have mostly shuffled sideways in the past few weeks as investors have questioned how quickly the global economy will return to growth, giving a boost to battered government bonds.
Asian manufacturers had cranked up production to increase inventories after having slashed them too sharply at the end of last year, but doubts remain about whether consumer and business demand will improve enough to make growth sustainable.
Japanese economic figures highlighted this trend. Industrial output jumped a hefty 5.9 percent in May for a third straight month of growth, but forecasts showed that factories expected the recovery to taper off in coming months.
"It is a sign of the unusual nature of the current cycle that the strongest rise in output on record can still be viewed as a moderate disappointment," said Richard Jerram, chief Japan economist at Macquarie Securities in Tokyo.
The MSCI index of Asia-Pacific shares outside Japan slipped 0.3 percent in light trade after having posted a 2.3 percent rise last week. The drop tracked a 0.2 percent dip in the U.S. S&P 500 .SPX on Friday.
The MSCI benchmark for Asia is up about 31 percent so far this year, outpacing the 7.4 percent increase in world stocks and the 1.7 percent rise in the S&P 500.
Japan`s Nikkei average .N225 edged up 0.4 percent, with shares of Nippon Electric Glass (5214.T) climbing 1 percent after the maker of LCD glass lifted its estimated earnings for the April-June quarter to double the top of its previous forecast range.
The dollar inched higher after being hit on Friday when China`s central bank renewed calls for a super-sovereign currency to reduce the U.S. dollar`s global domination, saying it was a serious defect in the international system for one currency to tower over all others.
On the sidelines of a meeting of central bankers over the weekend, China and Brazil said they were discussing a currency arrangement to allow exports and importers to settle deals in local currencies, thereby avoiding the dollar.
The dollar index, a gauge of its performance against six major currencies, rose 0.3 percent to 80.151 .DXY, near a two-week low struck on Friday. The euro retreated 0.3 percent to $1.4025, while the dollar was up 0.2 percent at 95.50 yen.
Government bonds pushed higher, helped in part by the rally in U.S. Treasuries last week after a record $104 billion of debt was sold without causing trouble for dealers.
Foreign central banks were believed to have been hefty buyers at each of the three auctions via indirect bids.  Continued...
Original article

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Madoff can expect de facto life term at sentencing

(MADOFF, COURT, NOT, WILL, SENTENCE, HEARING, JUDGE)

By Grant McCool
NEW YORK (Reuters) - Admitted thief Bernard Madoff will leave his jail cell and be taken under guard to court on Monday morning to hear his punishment for running Wall Street`s biggest and most brazen investment scheme.
A U.S. judge is expected to sentence Madoff, 71, to an effective life term in prison during an emotional court hearing starting at 10 a.m. EDT (1400 GMT) in which some of his defrauded investors will describe the shock of losing their life savings.
The swindler, who pleaded guilty to a slew of crimes in the same Manhattan federal court in March, will "speak to the shame he has felt and to the pain he has caused," said his lawyer, Ira Lee Sorkin, who has suggested a 12-year prison sentence.
"Given the enormous amount of funds he has stolen and the number of victims, the sentence is going to be very, very high," said Paul Radvany, a law professor at Fordham University in New York and a former federal prosecutor.
The 100 or so letters sent to the judge from customers and what 10 will say at the hearing could have "a great impact" at the sentencing, Radvany said.
Investigators do not know how much was stolen, according to court papers. About $13 billion has been traced to more than 1,300 customer accounts. The trustee winding down the Madoff firm has so far collected $1.2 billion to return to investors.
Prosecutors also say $170 billion flowed through the principal Madoff account over decades and that weeks before his December arrest, the firm`s statements showed a total of $65 billion.
The hearing will be held in a ceremonial courtroom that accommodates 250 people. Two other rooms in the courthouse in lower Manhattan are being provided for defrauded investors and spectators to watch on closed-circuit TV.
FAMILY WILL NOT ATTEND
Madoff`s wife Ruth and other family members are not expected to be there. They have not attended any court appearances since his arrest last December.
Madoff`s brother, Peter, and his sons, Mark and Andrew, held executive positions in the brokerage unit of the firm. Their lawyers say they were not aware of or involved in the crooked asset management side.
The judge has allowed Madoff to wear his own clothes at the hearing, instead of the loose-fitting navy blue shirt and pants issued by the jail where he has been held since March 12.
Legal observers expect U.S. District Judge Denny Chin to sentence Madoff to one of the stiffest punishments for a white collar criminal.
"Madoff organized and led this fraud," the prosecutors said in court papers on Friday arguing for a life sentence. "Numerous clerical employees and others assisted."
Madoff has said all along he did it on his own and has not named accomplices. Only his outside accountant has been charged.  Continued...
Original article

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Emotions run high as Madoff sentencing nears

Stocks eye job data in July 4th week

By Ellis Mnyandu
NEW YORK (Reuters) - For investors, June`s job data could determine in this short July 4th holiday week if the stock market`s recent rally is reignited or sputters out like a wet firecracker.
The monthly nonfarm payrolls report will come out on Thursday, instead of the usual Friday. U.S. markets will be closed on Friday, July 3, for the long Fourth of July, or Independence Day, holiday weekend.
Investors will pick apart the job figures and reams of other economic data released during the four-day week to see if recent signs of stabilization point to a sustainable economic recovery. Consumer confidence, the Institute for Supply Management`s June index on U.S. manufacturing activity, and domestic car sales are among the major indicators on tap.
Although the U.S. economy has been mired in a recession since December 2007, investors` optimism has increased since early March amid growing signs that the extent of the economic slump is moderating.
That optimism has provided a crucial underpinning to stocks since the Standard & Poor`s 500 Index .SPX hit a 12-year closing low on March 9. This spring, the S&P 500 climbed as much as 40 percent from that low; at Friday`s close, it was still up 35.8 percent.
While unpleasant surprises may trigger a long-awaited correction, analysts said evidence of further economic stabilization would make the bulls grow bolder and help stocks break out of their recent consolidation range.
"It is going to depend a lot on where the surprise is," Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois, said, referring to the nonfarm payrolls data.
"In the last report, people looked at the fact that the decline in payrolls was not nearly as large as expected, but the unemployment rate jumped tremendously. At the end of the day, that jump trumped things."
JOBLESS RATE NEAR 10 PERCENT
U.S. nonfarm payrolls are forecast to lose 355,000 jobs in June versus May`s slide of 345,000, according to economists polled by Reuters.
The U.S. unemployment rate is projected to rise to 9.6 percent in June from 9.4 percent in May.
"We think that a spike in the rate of unemployment could actually be a positive, as it may signal that discouraged workers are coming in from the sidelines and starting to look for work again," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
"There may be something else that plays out next week, a sort of portfolio window dressing effect. There`s still a ton of cash sitting on the sidelines right now."
For the past week, the three major U.S. stock indexes were mixed. The blue-chip Dow Jones industrial average .DJI slipped 1.2 percent, while the S&P 500 dipped 0.3 percent, and the Nasdaq .IXIC gained 0.6 percent.
Holiday-shortened weeks tend to be volatile.  Continued...
Original article

U.S. consultants Towers Perrin, Watson Wyatt to merge

By Jui Chakravorty Das and Aarthi Sivaraman
NEW YORK (Reuters) - Consulting firms Towers Perrin Forster & Crosby and Watson Wyatt Worldwide (WW.N) said on Sunday they plan to merge in an all-stock deal valued at about $3.5 billion, as they hope to cut costs amid an economic slump that has caused clients to curb discretionary spending.
Under terms of the deal, Watson Wyatt shareholders will receive 50 percent of the shares in the combined company, which will be named Towers Watson & Co.
Towers Perrin shareholders and some designated employees will be entitled to the other 50 percent of the shares, though on a restricted basis.
It was unclear which company would own the other.
Watson Wyatt Chief Executive John Haley will be chairman and CEO of the combined company. Watson`s Chief Financial Officer Roger Millay will hold the same title at the new company.
Towers Perrin`s Chief Executive Mark Mactas will serve as president and chief operating officer of the new company.
It will take three years to achieve savings of $80 million through job cuts and the streamlining of overlapping operations, and the companies expect one-time costs of $80 million from the merger and "significant noncash expenses" for the first two years.
In an interview with Reuters, Watson`s Haley and Towers` Mactas declined to provide much detail on the deal, including the earnings multiples on the transaction or where the new headquarters would be.
Haley said the combined companies` headquarters would not be located at either of the current locations, but it will be in the U.S. Northeast.
Watson Wyatt`s headquarters are in Arlington, Virginia while Towers Perrin makes its headquarters in Stamford, Connecticut.
SYNERGIES
Both chief executives told Reuters that a large chunk of the synergies would come from North America, which accounts for 65 percent of the revenue at Towers Perrin and 45 percent at Watson Wyatt.
"We expect that to come from combining management teams and general administrative expenses," Haley said. He added there would be job cuts, but said he had no further details.
Mactas said savings would also be realized as the companies combined finance, accounting and sales platforms. "We also have a lot of real estate that we lease around the world, and over time we`ll co-locate, we`ll do that in an efficient manner."
The deal could cause a potential conflict of interest if the new company provides executive compensation consultancy to the same clients that provide the company millions of dollars in revenue for employer benefits consultancy services.  Continued...
Original article

GM accepts product liability in bid to clear sale

By Kevin Krolicki
DETROIT (Reuters) - General Motors Corp (GMGMQ.PK) has agreed to accept liability for future product defects as one of several concessions offered in a bid to win court approval for a quick sale from bankruptcy.
In addition, GM said it would change the terms of its proposed asset sale to address objections raised by over 20 suppliers and was working to resolve a question over the future of a joint-venture plant with Toyota Motor Corp (7203.T).
The statements by GM, which came in filings with a New York bankruptcy court on Friday, show how the automaker and Obama administration officials have worked to counter some of the more contentious issues raised by the company`s bankruptcy filing earlier this month.
A group of nine state attorneys general, including Ohio and Connecticut, had objected to the GM reorganization brokered by the Obama administration because it would have robbed consumers of protections against product defects under state laws.
In response, GM said it would continue to pay "lemon law" claims so that consumers would be entitled to a refund or replacement for defective vehicles.
GM also said that the reorganized company, which will be effectively nationalized with a $50 billion investment from the U.S. Treasury, would assume liability for future product defect claims in a change negotiated with government officials.
"The purchaser will expressly assume all product liability claims arising from accidents or other ... incidents arising from the operation of GM vehicles subject to the closing," GM said in its court filing.
`CONSUMER VICTIMS` OBJECT
Under the GM reorganization plan, a new company would be created to buy the automaker`s best assets out of bankruptcy in a deal scheduled to close by August.
The new GM would be 60-percent owned by the U.S. government, 17.5 percent by the United Auto Workers union and 11.7 percent by the governments of Canada and the province of Ontario.
A group representing about 300 Americans with lawsuits against GM for alleged product defects has objected to the reorganization since those injury and wrongful-death claims would have to be paid out from the sale of GM`s mostly worthless assets.
The group, which calls itself the Ad Hoc Committee of Consumer Victims of General Motors, said in a bankruptcy court filing earlier this month the automaker`s insurance would only cover product liability claims of up to $35 million per claim.
It said that amount would not be sufficient to cover the claims of almost any of the lawsuits since many of the cases involved "devastating injuries" from alleged vehicle defects.
In an attempt to address a separate objection, GM said U.S. officials had changed the terms of the reorganization to make it clear that tooling suppliers and others would still have a claim against the new company for work under way.
GM also said it would try to work out a "consensual" agreement with Toyota to address a joint-venture factory it operates with Toyota in California.  Continued...
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