BusinesStyle

Stock futures point to higher start

2009-07-01T15:44:00.000+04:00

(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

2009-07-01T15:33:00.000+04:00

(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

2009-07-01T14:16:00.000+04:00

(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

2009-07-01T14:05:00.000+04:00

(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

2009-07-01T13:54:00.000+04:00

(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

2009-07-01T10:57:00.000+04:00

(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

2009-07-01T10:45:00.000+04:00

(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

2009-07-01T07:39:00.000+04:00

(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

2009-07-01T07:27:00.000+04:00

(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

2009-07-01T06:28:00.000+04:00

(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

2009-07-01T06:16:00.000+04:00

(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

2009-07-01T06:05:00.000+04:00

(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

2009-07-01T05:53:00.000+04:00

(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

2009-07-01T04:11:00.000+04:00

(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

2009-07-01T01:52:00.000+04:00

(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

2009-07-01T01:40:00.000+04:00

(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

2009-07-01T01:28:00.000+04:00

(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

2009-06-30T23:38:00.000+04:00

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

Crisis far from over: World Bank chief

2009-06-30T23:26:00.000+04:00

(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

2009-06-30T22:13:00.000+04:00

(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

2009-06-30T22:01:00.000+04:00

(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

2009-06-30T21:49:00.000+04:00

(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

2009-06-30T20:37:00.000+04:00

(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

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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

2009-06-30T20:26:00.000+04:00

(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

2009-06-30T20:15:00.000+04:00

(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

2009-06-30T15:45:00.000+04:00

(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

2009-06-30T14:33:00.000+04:00

(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

2009-06-30T14:21:00.000+04:00

(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

2009-06-30T14:09:00.000+04:00

(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

2009-06-30T12:31:00.000+04:00

(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

2009-06-30T11:55:00.000+04:00

(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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General Motors to seek approval to sell itself

2009-06-30T11:43:00.000+04:00

(BANKRUPTCY, COURT, COMPANY, WOULD, PERCENT, CHRYSLER)

By Emily Chasan
NEW YORK (Reuters) - General Motors Corp is heading to bankruptcy court on Tuesday to seek approval to sell its assets to a "New GM" in a plan to reinvigorate the automaker under U.S. government ownership.
GM is seeking approval for the sale from U.S. bankruptcy Judge Robert Gerber just 30 days after filing for Chapter 11. Under the deal, brokered by the Obama administration`s autos task force, the company would sell its assets under Section 363 of the bankruptcy code to a "New GM" and continue to operate its best assets, like Chevrolet and Cadillac, while gaining access to billions in funding from the U.S. Treasury.
GM`s old assets would remain behind in bankruptcy court to be liquidated.
The deal faces several objections from bondholders and those concerned about the fate of its dealers, but no competing bidders have emerged as an alternative to the U.S. government`s $60 billion financing for GM, including a proposed equity investment of $50 billion that would give the U.S. Treasury a 60 percent ownership stake.
If the sale goes through it would mark the second big win this month for the Obama administration`s autos task force, which successfully brokered 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.
"I think it is going even perhaps more smoothly than Chrysler, which is kind of interesting considering how much bigger GM is than Chrysler," said Stephen Lubben, a bankruptcy professor at Seton Hall Law School in New Jersey.
"Chrysler cleared the path for it and they`re using pretty much the same strategy," he added.
GM said in court documents that the sale would avoid a "systemic failure" for the U.S. auto industry and that it is the only way to provide "a genuine opportunity for the business to survive and thrive in an economically viable entity."
The company has shut 13 of its U.S. assembly plants for up to 11 weeks as part of a bid to cut production and run down inventory while it seeks approval of the sale in bankruptcy court.
The company plans to shed dealer contracts and has deals to sell brands like Hummer and Saturn that will not be carried over to the new company. It also plans to shed the Pontiac brand and GM said on Monday that it would cut operational ties with a Northern California auto plant it had operated in a joint venture with Toyota Motor Corp.
UPHILL BATTLE FOR CHALLENGERS
While dozens of objections have been filed in the bankruptcy case, some have already been resolved or withdrawn, and challengers to the deal could face an uphill battle since the same court has already approved the Chrysler sale.
"I think Judge Gonzalez kind of made life easier for Judge Gerber here," Lubben said, citing the New York bankruptcy judge who approved Chrysler`s sale and the several higher courts that backed his decision.
"People basically know the Second Circuit has already largely blessed this structure," he added.
GM has said more than 50 percent of its bondholders support the deal and also argued that the sale would maximize recovery for its stakeholders. Under the plan, the U.S. government would take a 60 percent stake in the newly formed company, the United Auto Workers union would have a 17.5 percent stake, the Canadian government would own about 12 percent, and GM bondholders are expected to get about 10 percent. Continued...
Original article

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Japan props up Elpida with $1.7 billion in aid

2009-06-30T11:30:00.000+04:00

(JAPAN, MAKER, ELPIDA, MEMORY, BILLION, LOANS)

By Mayumi Negishi
TOKYO (Reuters) - Japan pledged to prop up loss-making chip maker Elpida Memory Inc (6665.T) with up to $1.7 billion in public and private capital and loans, the country`s first capital injection in a company since the financial crisis.
The 160 billion yen ($1.7 billion) aid package includes a possible 20 billion yen capital injection from Taiwan Memory Company, which was set up by Taiwan to save its own chip sector and had chosen Elpida as a technology partner.
Elpida and other makers of dynamic random-access memory (DRAM) chips, used mainly in PCs, have tumbled into the red due to falling prices and weak consumer demand, compounded by the global recession.
Elpida, the world`s fourth-biggest maker of DRAM chips, becomes the first Japanese company to get aid under a scheme that makes public funds available to businesses hit by the global financial crisis.
"This shows that the government is determined to support the sector, that they are determined not to let Elpida fail," Hajime Kurabayashi, a strategist at Okasan Securities said on Tuesday.
Elpida is Japan`s last hope in PC memory chips in an industry dominated by South Korea`s Samsung Electronics Co Ltd (005930.KS) and Hynix Semiconductor Inc (000660.KS).
"Elpida is Japan`s only DRAM maker, and it has been hit by extremely severe conditions amid the global economic slump, despite its superior technology," Trade Minister Toshihiro Nikai told reporters.
Elpida`s shares gained 3 percent, having risen more than 60 percent over the past three months, helped by media reports on the government aid. The benchmark Nikkei average .N225 has added about 20 percent over the same period.
Elpida is scheduled to issue 30 billion yen in preferred securities to the state-owned Development Bank of Japan in August, which will also extend 10 billion yen in loans, Japan`s trade ministry said.
Private banks will also provide 100 billion yen in loans, the ministry said.
($1=96.06 Yen)
(Reporting by Mayumi Negishi and Taiga Uranaka; Editing by Edwina Gibbs and Anshuman Daga)
Original article

Oil spikes to 8-month high on brief Brent bid frenzy

2009-06-30T11:18:00.000+04:00

(PRICES, BARREL, BRENT, MARKET, TRADERS, ASIAN)

By Fayen Wong
PERTH (Reuters) - Oil prices jumped more than 2 percent to an eight-month high above $73 a barrel on Tuesday, as a sudden spike in Brent buying pinned on fund positioning ushered out the market`s best quarterly gain since 1990.
While the rally drew support from fresh attacks on oil facilities in Nigeria as well as improving risk sentiment aided by rising equity markets, traders said those factors were secondary to the sudden big Brent bid orders that triggered the frenzy, overwhelming liquidity during the thin Asian day.
Trading volume in both Brent and U.S. crude oil futures surged to more than 10 times the norm for the Asian time zone as prices leapt more than $1.50 in under half an hour around 0200 GMT (10 p.m. EDT), the sort of move typically only seen in the event of hurricanes or other major disruptions.
"It feels like short-covering because of stop orders left overnight," said a trader with a global investment bank.
Both prices and volumes cooled slightly by midday, with U.S. crude for August delivery up $1.29 at $72.78 a barrel by 0405 GMT, off its earlier eight-month high of $73.38. August trade was 12,400 lots versus a few thousand lots normally.
The main focus was on London ICE Brent crude, with volume in the front-month August contract surging to more than 17,000 lots versus the less than 1,000 lots normally, and prices spiking to a peak of $73.50 a barrel. Traders said bids for 500 or 600 lot clips spooked a market accustomed to 10-20 lot bids.
By 0407 GMT, Brent was up $1.66 to $72.65 a barrel.
Trading activity in U.S. gasoline and heating oil, which expire at the end of the day, was minimal.
Most traders were quick to point the finger at one or several big funds, either closing out loss-making positions, dressing up returns by boosting prices at the end of the quarter or perhaps taking a position in anticipation of a Q3 influx of new funds.
"This could be end of quarter movement, and traders are trying to push prices higher and then selling before closing their books," said Mark Pervan, senior commodities analyst at ANZ Bank. "I haven`t seen any new catalyst on the news front."
Others were more blunt about the unexplained surge in volume, which seemed to be counter-productive given the fact that any sizeable bid would drive up prices due to thin Asian liquidity.
"The only reason to do that size at that time of day is to try to move the market or because you are an idiot," said one.
Some analysts pointed to Nigeria, where the main militant group said on Monday its fighters had attacked an oil facility belonging to Royal Dutch Shell (RDSa.L) days after President Umaru Yar`Adua proposed an amnesty.
Driven by hopes of a global economic recovery, oil prices are on track to post a near 50 percent jump in the second quarter, the highest quarterly percentage gain since 1990.
Oil has rallied on hopes for an improving economic outlook and a growing appetite for risk among investors, a factor given further impetus by Asian and U.S. stock market gains. Continued...
Original article

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AIG shareholders to elect new directors at meeting

2009-06-30T11:06:00.000+04:00

(BOARD, DIRECTORS, MEETING, STREET, SINCE, GOVERNMENT)

By Lilla Zuill
NEW YORK (Reuters) - American International Group Inc, 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.
The nominees will help rebuild a board decimated in the past year by seven resignations, one retirement and three other directors not standing for re-election.
The meeting, to be held on Wall Street, will be the first public opportunity for shareholders to vent frustration since the insurer`s financial implosion last year.
Shareholders were all but wiped out as AIG recorded $99 billion in losses last year, largely stemming from a financial product unit`s foray into risky derivatives. Shares have plummeted to just above $1 following the dilutive effect of the government`s move to take majority ownership.
AIG had delayed its annual meeting, usually held in May, to allow time to reshuffle directors. The board that emerges will feature many new faces.
Apart from George Miles and Morris Offit, who have served as directors since 2005, the 11-member board will have been entirely elected within the last year.
Joining the board since 2008 were Suzanne Nora Johnson, a former Goldman Sachs vice-chairman; Dennis Dammerman, former General Electric Co finance chief, and Ed Liddy, chief executive and chairman, although he plans to stand down as soon as successors are found.
The rest of the board will be comprised of nominees: Harvey Golub, Laurette Koellner, Christopher Lynch, Arthur Martinez, Robert S. (Steve) Miller and Douglas Steenland.
GOVERNMENT MUSCLE
The new board reflects the muscle wielded by federal authorities since taxpayers ponied up billions of dollars to keep AIG afloat. Trustees appointed to have oversight of the government`s 80 percent stake in AIG wanted to shake up the board to raise corporate governance standards, they said last month.
At least seven of the new directors were recommended by either the U.S. Treasury or the trustees.
In a May statement, Liddy said "adding these individuals to the AIG Board will help AIG achieve its goals of maximizing the value of AIG`s core businesses and repaying U.S. taxpayers."
Dammerman, tapped by government officials to join AIG`s board last November, is leading the search for a new chairman and CEO.
AIG is to hold the shareholder meeting at its 72 Wall Street building, adjacent to 70 Pine Street headquarters. It recently agreed to sell both buildings, although it still occupies them for now.
Alongside prime real estate sales, AIG has been trying to find buyers for many of its businesses around the world. It needs to raise enough to pay off some $83 billion in federal loans. Continued...
Original article

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Enterprise Partners to buy Teppco for $3.3 billion

2009-06-30T05:49:00.000+04:00

(ENTERPRISE, PRODUCTS, TEPPCO, PIPELINE, NATURAL, WOULD)

By Steve James and Joshua Schneyer
NEW YORK (Reuters) - Enterprise Products Partners LP (EPD.N) said on Monday that Teppco Partners LP (TPP.N) had accepted a sweetened $3.3 billion takeover bid in a deal that will form the largest publicly-traded U.S. pipeline network.
The transaction, which requires the approval of Teppco unit-holders as well as regulatory clearance, is expected to close sometime in the fourth quarter, Enterprise said.
The announcement of the deal, which will form a 48,000-mile network of pipelines transporting crude, refined products and natural gas, sent Teppco units up 5 percent to close at $30.12 on the New York Stock Exchange. Enterprise Products slipped 1.3 percent to $24.96.
Both companies are master limited partnerships run by general partners owned by the same entity, Enterprise GP Holdings LP (EPE.N). Enterprise Products is controlled by Dan Duncan, Houston`s richest man, and a partnership controlled by Duncan bought a significant stake in Teppco in 2005.
Analysts said the merger is a step toward Duncan consolidating control over existing North American oil and gas pipeline networks.
"This reflects the growing importance of the oil and gas transportation industry," said Antoine Halff, vice president of research for the Newedge Group. "Oil and gas transport are increasingly linked to each other.
"Not just because some consumers are switching from oil to gas, but also because the oil industry itself has become a very large natural gas and natural gas liquids consumer."
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.
Unit holders of Teppco will receive 1.24 Enterprise common units for each of their units.
"It will become the largest partnership and with that it increases its scale of opportunities and will have a lower cost of capital," said analyst Ralph Pellechia with Fitch Ratings.
"The new partnership would transport a full range of products including oil. It will gain storage capacity, which has been profitable because of a contango in oil markets," he said. "Even when storage isn`t as profitable, the partnership will own pipelines to transport the crude."
William Eddleman, of Argus Research in Houston, said there was a 90-percent chance of the deal going through. "The only thing that might stand in the way ... is if the Department of Justice decides to look at it for antitrust issues.
"It really becomes a huge consortium. It would probably be bigger than Kinder Morgan (KMP.N) and the market would be made up of two giants," he said.
He noted Enterprise is primarily a natural gas and natgas liquids pipeline and storage company so this would expand it into the oil business and into refined chemicals too.
"It creates a giant with extensive penetration into the Northeast, Midwest and other regions," he said. Continued...
Original article

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EU says making progress on gas loan to Ukraine

2009-06-30T04:36:00.000+04:00

(UKRAINE, RUSSIA, EUROPE, EUROPEAN, SUPPLIES, RUSSIAN, POSSIBLE)

Delivering gas to Europe
A map of Russian gas suppliers to Europe via Ukraine
Russia resumes gas supplies to Ukraine
Russia Ukraine sign gas deal
BRUSSELS, June 29 (RIA Novosti) - The European Commission said Monday that progress has been made on the issue of giving Ukraine an international loan to pay Russia for natural gas.
The statement was issued after high-level talks involving representatives of gas companies Gazprom and Naftogaz, the World Bank, the IMF, the EBRD and the EU.
"The participants made good progress in identifying the key issues of concern and elements for possible solutions including possible financing arrangements," the representatives said in a joint statement.
The ex-Soviet state is seeking a syndicated loan of over $4 billion from European banks to pay it debts to Russian energy giant Gazprom until November 2009.
European Commission President Jose Manuel Barroso said in early June it would be difficult for the EU to help Ukraine keep up with its payments.
Russia, which supplies around one fifth of Europe`s gas, briefly shut down supplies via Ukraine`s pipeline system at the start of the year during a dispute with Kiev over unpaid debt.
The conflict was resolved in January, when Russian Prime Minister Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko, agreed deals on deliveries to and gas transit through Ukraine for 2009.
Ukraine transits around 80% of Russia`s Europe-bound gas.

Original article

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Gazprom to buy 0.5 bcm of Azerbaijani gas annually from 2010

2009-06-30T04:24:00.000+04:00

(AZERBAIJANI, GAZPROM, AZERBAIJAN, RUSSIAN, VOLUME, BILLION, SUPPLIES)

BAKU, June 29 (RIA Novosti) - Gazprom will buy 500 million cubic meters of natural gas from Azerbaijan annually from January 1, 2010, CEO Alexei Miller said on Monday.
The Russian energy giant, which has not so far bought Azerbaijani gas, signed an agreement with the State Oil Company of Azerbaijan Republic (SOCAR) earlier in the day.
"Gazprom will buy Azerbaijani gas from January 1, 2010. Initially we will buy 500 million cubic meters of Azerbaijani gas," Miller said, without disclosing either the price or the pricing formula.
"The agreement signed today fixes a basic price that is commercially attractive to our Azerbaijani partners," the Russian businessman said.
The agreed volume of deliveries from SOCAR is less than one tenth of one percent of the 549.7 billion cubic meters of gas Gazprom itself produced last year.
Azerbaijan plans eventually to increase gas supplies to Russia, Azerbaijani President Ilham Aliyev said.
"We plan in the future to increase supplies as the volume of Azerbaijani natural gas production goes up," Aliyev said on Monday after talks with Russian President Dmitry Medvedev in Baku.
According to the Gazprom CEO, Azerbaijani gas to be pumped via a pipeline running between the two countries will be used in south Russian territories. He also pledged that similar volumes of gas would be reserved for European consumers.
Miller added that Gazprom was listed as a potential buyer of gas from the Shakh Deniz field with some privileges reserved for the company.
"We are confident that Gazprom has very good negotiating positions regarding long-term cooperation in the purchase of Azerbaijani gas," he said.
Speaking in early June at an oil conference in Azerbaijan`s capital, Baku, U.S. Deputy Assistant Secretary of State for European Affairs Matthew Bryza said that in 2012-2015 Azerbaijan would supply Europe with 12 billion cu m of gas from its Shakh Deniz field alone, raising supplies to 15 billion by 2015, and increasing them further by 2015-2020.

Original article

AIG shareholders to elect new directors at meeting

2009-06-30T04:12:00.000+04:00

(AIG, BOARD, NEW, DIRECTORS, MEETING, SINCE, BILLION)

By Lilla Zuill
NEW YORK (Reuters) - 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.
The nominees will help rebuild a board decimated in the past year by seven resignations, one retirement and three other directors not standing for re-election.
The meeting, to be held on Wall Street, will be the first public opportunity for shareholders to vent frustration since the insurer`s financial implosion last year.
Shareholders were all but wiped out as AIG recorded $99 billion in losses last year, largely stemming from a financial product unit`s foray into risky derivatives. Shares have plummeted to just above $1 following the dilutive effect of the government`s move to take majority ownership.
AIG had delayed its annual meeting, usually held in May, to allow time to reshuffle directors. The board that emerges will feature many new faces.
Apart from George Miles and Morris Offit, who have served as directors since 2005, the 11-member board will have been entirely elected within the last year.
Joining the board since 2008 were Suzanne Nora Johnson, a former Goldman Sachs (GS.N) vice-chairman; Dennis Dammerman, former General Electric Co (GE.N) finance chief, and Ed Liddy, chief executive and chairman, although he plans to stand down as soon as successors are found.
The rest of the board will be comprised of nominees: Harvey Golub, Laurette Koellner, Christopher Lynch, Arthur Martinez, Robert S. (Steve) Miller and Douglas Steenland.
GOVERNMENT MUSCLE
The new board reflects the muscle wielded by federal authorities since taxpayers ponied up billions of dollars to keep AIG afloat. Trustees appointed to have oversight of the government`s 80 percent stake in AIG wanted to shake up the board to raise corporate governance standards, they said last month.
At least seven of the new directors were recommended by either the U.S. Treasury or the trustees.
In a May statement, Liddy said "adding these individuals to the AIG Board will help AIG achieve its goals of maximizing the value of AIG`s core businesses and repaying U.S. taxpayers."
Dammerman, tapped by government officials to join AIG`s board last November, is leading the search for a new chairman and CEO.
AIG is to hold the shareholder meeting at its 72 Wall Street building, adjacent to 70 Pine Street headquarters. It recently agreed to sell both buildings, although it still occupies them for now.
Alongside prime real estate sales, AIG has been trying to find buyers for many of its businesses around the world. It needs to raise enough to pay off some $83 billion in federal loans. Continued...
Original article

Putin says Russia will continue cheap energy supplies to Belarus

2009-06-30T04:00:00.000+04:00

(PRICE, BELARUS, PUTIN, 1000, RUSSIAN, AVERAGE, CUBIC)

NOVO-OGARYOVO, June 28 (RIA Novosti) - Russia will continue for the near future to sell oil and gas to Belarus at subsidized rates to support the country`s economy, Prime Minister Vladimir Putin said on Sunday.
"For the near future we intend to continue this, while bearing in mind the tendency toward switching to world price levels for hydrocarbons," Putin told leaders of factions in the State Duma, the lower house of parliament.
Putin`s pledge comes amid a dispute with Belarus over payments for Russian natural gas, which was massively discounted until 2007.
Gazprom announced on Friday it had sent Belarus a letter demanding it pay $244 million in gas debts, and warning that supplies could be cut if the sum is not cleared.
The debt has arisen due to differences between contract and average prices. In the first quarter Belarus paid $210 per 1,000 cubic meters, but by the end of the year this figure should have dropped to under $100. In line with verbal agreements the price should average out at $150 per 1,000 cubic meters.
Belarusian First Deputy Prime Minister Vladimir Semashko said on Friday that the government expects Russian gas prices to reach $166 per 1,000 cubic meters on January 1, 2010 if oil prices remain around the $70 per barrel mark this year. The rate is still well below the average rate Russia charges European Union countries for its gas.
The countries have in the past also clashed over Russian oil sales to Belarus, which had also been heavily discounted until the end of 2006. After Russia raised the oil price for Minsk, while keeping it below international prices, Belarus imposed a tariff on oil pipeline transit via its territory, triggering a temporary cut-off in early 2007.

Original article

Russian budget revenue to account for 16% of GDP in 2009 - Putin

2009-06-30T03:48:00.000+04:00

(BUDGET, GDP, RUSSIA, 2009, REVENUE, PUTIN, WHICH)

NOVO-OGARYOVO, June 28 (RIA Novosti) - Federal budget revenue will account for about 16% of national GDP in 2009, and the same figure is expected in 2010-2012, Russian Prime Minister Vladimir Putin said on Sunday.
At a meeting with the heads of State Duma factions, Putin said that some estimates put this figure at 15.7%-16.5% of GDP.
"This is a normal and stable level of revenue, which we count on," he said, adding that budget revenue made up 23-24% of GDP in the pre-crisis years.
Russia has been hard hit by the global financial crisis, which has forced the government to review spending amid declining revenues, while maintaining social commitments.
The premier said that the budget deficit should not exceed 2-3% of GDP in the future.
In 2009, Russia is expected to post a budget deficit for the first time in recent years. Russia`s Finance Ministry expects the budget deficit to reach 7.5%-9% of GDP in 2009, and up to 10% of GDP in 2010 taking into account spending from the National Welfare Fund.
Putin said the yearly price of oil could average $50-55 per barrel in 2009, compared with the price of $41 projected in the federal budget.
The global financial crisis has forced Russia, which receives a large part of its revenue from oil exports, to gradually devalue the ruble amid capital flight and a fall in global oil prices, which declined from their peak of $147 per barrel in July 2008 to around $40 per barrel in early 2009, before climbing back in recent weeks to about $70.
Putin also said that Russia would continue its ban on imports of agricultural equipment this year and next year.
"We will not yield to pressure to open up our market for imported agricultural equipment," Putin said.

Original article

Total, Shell shortlisted for Yamal LNG project - Gazprom

2009-06-30T03:36:00.000+04:00

(GAZPROM, YAMAL, PROJECT, NOVATEK, SHELL, MEDVEDEV, LNG)

MOSCOW, June 26 (RIA Novosti) - Total and Shell have made it onto the shortlist of participants in the Yamal liquefied gas project in northwest Siberia, a Gazprom deputy CEO said on Friday.
The Russian energy giant chose the Yamal Peninsula as a region of strategic interest in January 2002. The development of the Yamal fields, according to estimates, could produce annually up to 310-360 billion cubic meters (bcm) of natural gas by 2030.
"We have agreed to have Total and Shell shortlisted for the Yamal LNG [project]," Alexander Medvedev said, adding that Japan`s Mitsui and Mitsubishi were expected to obtain minority stakes in the project.
The two Japanese companies hold 12.5% and 10%, respectively, in the Sakhalin II oil and gas project being developed by Gazprom in the Russian Far East. Royal Dutch Shell controls a 27.5% stake.
The Gazprom official said if an investment decision is taken, the LNG plant would process resources from the Tambeiskaya group of fields, including the South Tambeiskoye field owned by Novatek, Russia`s largest independent gas producer.
"We have agreed to hold talks with Novatek to consider their proposals on developing the field, and we will work together," Medvedev said. Gazprom controls about 20% in Novatek.
Gazprom, which saw a 57% plunge year-on-year in gas exports to Europe in January-April, said earlier in June it was set to "increase the pace of producing and supplying liquefied natural gas."

Original article

Gazprom says could cut gas supplies to Belarus over unpaid debts

2009-06-30T03:11:00.000+04:00

(BELARUS, PRICE, RUSSIAN, FIRST, AVERAGE, GAZPROM, SEMASHKO)

MOSCOW, June 26 (RIA Novosti) - Gazprom has sent Belarus a letter demanding it pay $244 million in gas debts, and warning that supplies could be cut if the sum is not cleared, the Russian energy giant`s CEO said on Friday.
"Belarus` debt totals $244 million, and we have sent a letter demanding that the debt be paid," Alexei Miller said.
Belarusian First Deputy Prime Minister Vladimir Semashko said Friday in parliament that his country would keep paying for Russian gas at the average annual price, and will start to repay the debt to Gazprom.
The debt has arisen due to differences between contract and average prices, in the first quarter Belarus paid $210 per 1,000 cubic meters, but by the end of the year this figure should have dropped to under $100. In line with verbal agreements the price should average out at $150 per 1,000 cubic meters.
"From August we will start repaying the debt and by November we should be paying in full the actual price," he said.
Semashko said Belarusian gas company Beltransgaz on March 20 handed Gazprom an addendum to the contract stipulating that Belarus pay the average annual price. "But the addendum has not been signed yet," he said.
He also said the Belarusian government expects Russian gas prices to reach $166 per 1,000 cubic meters on January 1, 2010 if oil prices remain around the $70 per barrel mark this year.
Semashko said Belarus has failed to pump 2 billion cu m of gas into storage facilities in the first half of this year, but added that Gazprom is not expected to take any action against Belarus for this.
"Incomplete gas samples are not a specific problem for Belarus. In the first quarter of this year the European Union failed to receive about 30% of the expected volume of Russian gas, and Ukraine 40%," he said.

Original article

Gas contracts with Ukraine will not be changed - Gazprom CEO

2009-06-30T02:59:00.000+04:00

([FINANCIAL], UKRAINE, RUSSIAN, SUPPLIES, RUSSIA, GAZPROM, UKRAINIAN)

A map of Russian gas suppliers to Europe via Ukraine
MOSCOW, June 26 (RIA Novosti) - Gas contracts with Ukraine will not be revised, despite the Ukrainian president`s demands, the head of Russian energy giant Gazprom said at an annual meeting of shareholders on Friday.
Ukraine`s Viktor Yushchenko has called for a review of 10-year gas supply and transit contracts signed with Russia at the turn of 2009.
"The contracts should be implemented and are not subject to change," Miller said, adding that he "understood" the problems facing his Ukrainian partners.
Russian authorities have repeatedly voiced concerns that Ukraine will not have enough money to pay for gas supplies, which would cause difficulties for Russia and European gas consumers. The next payment is due on July 7.
Yushchenko said last Friday that Naftogaz was $2 billion short of being able to pump natural gas into its underground storage systems to prepare for winter. The ex-Soviet state is seeking a syndicated loan of over $4 billion from European banks to pay it debts to Gazprom until November 2009.
Ukrainian Prime Minister Yulia Tymoshenko said on Thursday Ukraine had pumped 1.1 billion cubic meters in June and pledged to pay $250 million for gas supplies in June on time.
Kiev paid some $500 million for 2.38 bcm of Russian natural gas in May, according to Naftogaz.
The Gazprom CEO urged Ukraine to come up with a comprehensive solution to the payments issue.
"The Naftogaz [financial] situation is considered serious. We hope international financial organizations will make the correct decision and that together with Russia they will be able to arrange Russian gas purchases for Ukraine," Miller said.
He also expressed hope that there would not be another gas crisis with Ukraine and pledged Gazprom would do "everything possible" to prevent it.
Russia, which supplies around one fifth of Europe`s gas, briefly shut down supplies via Ukraine`s pipeline system at the start of the year over Kiev`s unpaid debt.
The conflict was resolved in January, when the Russian and Ukrainian premiers agreed on $1.7 as a fee for transiting 1,000 cubic meters of natural gas per 100 km for 2009.

Original article

Russian firm pledges to deliver frigates to India on schedule

2009-06-30T02:47:00.000+04:00

(FRIGATES, SHIPYARD, RUSSIA, THREE, KRIVAK, OFFICIAL, CLASS)

The 4th International Maritime Defense Show in St. Petersburg
ST. PETERSBURG, June 26 (RIA Novosti) - Russia will fulfill its obligations on schedule to supply three Project 11356 frigates to India by 2012, a shipbuilding industry official said on Friday.
Russia is building three Project 11356 Krivak IV class guided missile frigates for the Indian Navy at the Yantar shipyard in Russia`s Baltic exclave of Kaliningrad as part of a $1.6 billion contract signed in July, 2006.
"The contract`s deadline is 2012. We are not expecting any delays at this point," general director of the Yantar shipyard Igor Orlov said at the 4th International Maritime Defense Show in St. Petersburg.
The official said the hulls of all three vessels had been laid down at the shipyard.
"The first ship will be floated out this year, the second, probably, in spring 2010, and the third - a bit later," he said, adding that the Indian government had provided sufficient and timely project financing.
A delegation of Indian military officials, led by India`s deputy chief of the naval staff, Vice Adm. Raman P Suthan, visited the Yantar shipyard in October last year and said it was satisfied with the pace and the construction quality.
Russia previously built in 2004 three Krivak class frigates - INS Talwar, INS Trishul and INS Tabar - for India, but they all were delivered late.
All of the new frigates will be armed with eight BrahMos supersonic anti-ship cruise missile systems and not the Club-N/3M54TE missile system, which was installed on previous frigates.
The Krivak class frigate has deadweight of 4,000 metric tons and a speed of 30 knots, and is capable of accomplishing a wide range of maritime missions, primarily hunting down and destroying large surface ships and submarines.

Original article

Russia to take part in Indian diesel submarine tender

2009-06-30T02:34:00.000+04:00

(SUBMARINE, CLASS, RUSSIA, AZIZOV, ST, 636, DIESEL)

The 4th International Maritime Defense Show in St. Petersburg
Russian naval task force completes exercise in the Atlantic
Nuclear submarine accident caused by fire-safety system
ST. PETERSBURG, June 26 (RIA Novosti) - Russia will participate in an expected tender to supply diesel-electric submarines to the Indian navy, the Russian state arms exporter said on Friday.
"We will offer India an export version of the Lada class diesel submarine - the Amur class vessel. We will take part in the Indian tender when it is announced with these submarines or vessels of another class," said Oleg Azizov, head of Rosoboronexport`s delegation at the International Maritime Defense Show 2009 in St. Petersburg.
"We have a bilateral cooperation agreement [in the military-technical sphere] until 2020, which includes the possibility of supplying submarines to this country," Azizov added.
The Project-677, or Lada class, diesel submarine, whose export version is known as the Amur 1650, features a new anti-sonar coating for its hull, an extended cruising range, and advanced anti-ship and anti-submarine weaponry, including the Club-S integrated cruise missile systems.
Azizov also said Vietnam and Egypt were studying the possibility of buying Russian Project 636 Kilo class diesel submarines.
"Vietnam is still studying various possibilities for the development of its submarine fleet. If they choose Project 636 submarines, offered by Russia, we will start talks on the issue," the official said, adding that the same approach applied to Egypt.
The Project 636 Kilo class submarine is thought to be one of the most silent submarine classes in the world. It has been specifically designed for anti-shipping and anti-submarine operations in relatively shallow waters.
Russia has built Kilo class submarines for India, China and Iran.
Azizov earlier said Russia could sell up to 40 fourth-generation diesel-electric submarines to foreign customers by 2015.

Original article

Watson Wyatt shares slide, deal concerns cited

2009-06-29T21:53:00.000+04:00

(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

2009-06-29T21:41:00.000+04:00

(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

2009-06-29T20:16:00.000+04:00

(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

2009-06-29T20:04:00.000+04:00

(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

2009-06-29T18:51:00.000+04:00

(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

2009-06-29T18:38:00.000+04:00

(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

2009-06-29T18:26:00.000+04:00

(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

2009-06-29T15:23:00.000+04:00

(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

2009-06-29T13:45:00.000+04:00

(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

2009-06-29T09:05:00.000+04:00

(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

Related articles:
U.S. trade gap widens on softening exports

Madoff can expect de facto life term at sentencing

2009-06-29T08:53:00.000+04:00

(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

Related articles:
Vilified symbol of greed Madoff to hear prison term
Emotions run high as Madoff sentencing nears

Stocks eye job data in July 4th week

2009-06-29T07:27:00.000+04:00

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

2009-06-29T07:15:00.000+04:00

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

2009-06-29T02:34:00.000+04:00

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...
Original article

Vilified symbol of greed Madoff to hear prison term

2009-06-28T20:30:00.000+04:00

By Grant McCool
NEW YORK (Reuters) - Bernard Madoff, who became a symbol of greed in the financial crisis for masterminding Wall Street`s biggest investment fraud, faces the rest of his life in prison in one of the stiffest punishments for white-collar crime when he is sentenced on Monday.
The courtroom drama will unfold with the swindler hearing angry defrauded investors speak of their financial ruin. As he makes what could be his final appearance in public, Madoff, 71, will read a statement before a judge hands down a decision.
"Mr. Madoff has been very stone-faced throughout the whole process. He doesn`t seem to have a lot of remorse," said Anthony Sabino, professor of law and business at St. John`s University in New York. "To date, he has refused to implicate anyone else."
More than six months after Madoff`s arrest, U.S. prosecutors remain uncertain how much was involved -- such was the complexity of the financial web he wove around the world to operate his Ponzi scheme.
In a Ponzi scheme early investors are paid with money from new clients.
About 1,341 account holders lost about $13 billion in the classic "cash in, cash out" fraud, according to court papers. They also say $170 billion flowed through Madoff`s principal account over decades and last November, Madoff claimed accounts held nearly $65 billion, when in fact he had never traded any securities, investigators said.
Madoff, a former nonexecutive chairman of the Nasdaq stock market, pleaded guilty in March to 11 charges, including securities fraud, money laundering and perjury that carry a combined maximum sentence of 150 years. The only other person charged so far is his outside accountant.
LIFE TERM SOUGHT
"It is unlikely that he will come back out," Jayne Barnard, a law professor at the College of William & Mary in Williamsburg, Virginia, said, echoing the view of several legal experts on the likely sentence for an audacious scheme.
U.S. prosecutors argued in court papers on Friday that sentencing Judge Denny Chin should make sure Madoff spends the rest of his life in prison because of the "unique scope and duration" of his crimes.
"Madoff`s crimes were the product of a series of decisions made over the course of years, and it was within his power to stop his crimes at any point in time," the government said ahead of the 10 a.m. EDT proceeding in Manhattan federal court.
The arch thief and his wife of 45 years, Ruth Madoff, have been stripped of all their luxury homes and possessions. His wife is being allowed to keep $2.5 million in cash, according to an agreement with prosecutors.
Madoff`s lawyer Ira Lee Sorkin asked the judge to impose a sentence of less than life, suggesting a 12-year term or 15 to 20 years as sufficient.
Victims have sent more than 100 letters to the judge, most demanding the maximum punishment allowed. They describe entire savings lost for several generations of families, mortgages unpaid and elderly people unable to pay for medical coverage.
Madoff`s wife, two sons and his brother, who have all been the target of swindled investors` vitriol and suspicion, were not expected to attend the hearing. Since his arrest by the FBI in December, the gray-haired Madoff has made all of his court appearances alone, except for his lawyers. Continued...
Original article

Tata Motors launches Jaguar, Land Rover in India

2009-06-28T15:13:00.000+04:00

By Janaki Krishnan
MUMBAI (Reuters) - Tata Motors Ltd (TAMO.BO), India`s largest vehicles maker, on Sunday announced the launch in India of Jaguar and Land Rover vehicles, the marquee brands it bought from Ford Motors (F.N) last year.
Saying it was a momentous occasion for the company, chairman Ratan Tata said, "This is in keeping with our desire to extend the penetration of the brands in India."
The automobile firm, which controls about 60 percent of the world`s fifth-biggest truck and bus market, will soon also be rolling out the Nano, billed as the world`s cheapest car.
Jaguar is launching the XF amd XK range of luxury coupes and convertibles in India starting at a price tag of 6.3 million rupees ($130,977) and going up to 9 million rupees.
Land Rover will initially be launching three vehicles including the Range Rover Sport and Land Rover Discovery 3, with prices also starting at 6.3 million rupees but going beyond 9 million.
"The luxury car market in India is very small, but there is a huge opportunity there. It is growing fast and we expect it to grow fast over the next 5 to 10 years," said David Smith, chief executive of Jaguar Land Rover.
"India is an important part of our plans for the future," said Mike Driscoll, managing director of Jaguar.
The luxury car segment in India is less than 1 percent of the total car market there.
On Friday Tata Motors posted its first loss in eight years at $520 million for the year to March 2009, with its Jaguar Land Rover unit reporting a loss of 306 million pounds ($504 million) in the 10 months of the fiscal year to March 2009, as a brutal global recession crippled car sales.
On the issue of loan guarantees for JLR, Tata said, "we are in discussions with the U.K. government on the loan guarantees and hopefully we will find a solution for it ... and our funding plan for JLR will progress."
The company is seeking guarantees for the 340 million pounds loan sanctioned by the European Investment Bank and other loans from U.K.-based commercial banks. It is seeking these funds to develop new and more fuel efficient cars for improving its competitive position.
"Sustaining the downturn is important for us ... and finding a solution (for the loan guarantees) is extremely important to us," Tata said.
He also said that if there was a large financial package from the U.K. government for Jaguar and Land Rover then, "there should be commensurate level of representation from them," which had to be negotiated and worked out.
($1=48.1 rupees)
(Editing by Jerry Norton)
Original article

Kumho Asiana to sell Daewoo Engineering

2009-06-28T12:11:00.000+04:00

By Cheon Jong-woo
SEOUL (Reuters) - South Korea`s Kumho Asiana Group said on Sunday it had decided to put Daewoo Engineering & Construction Co (047040.KS) up for a sale to ease investors worries about its liquidity.
Kumho Asiana may consider various ways to unload Daewoo including a sale of a 39 percent stake held by financial investors with management rights, a sale of a 50 percent stake plus one share, or a sale of a 72 percent stake owned by the group and financial investors.
The group has a stake of about 33 percent in Daewoo with financial investors holding 39 percent and the rest free-floating shares. It bought Daewoo for about 6.4 trillion won ($5.01 billion) in 2006.
"The size of the sale will be decided after talks with the main creditor and advisers to minimise the group`s losses from the sale of Daewoo and to reduce buyer`s acquisition burdens," Kumho Asiana said in a statement.
Kumho Asiana plans to consider a tender offer or a sale to a private equity fund of the state-run Korea Development Bank (KDB), its main creditor, the group added.
The group said it had talks with plural investors at home and abroad but failed to reach a final agreement as their proposal may boost the group`s debt.
Kumho Asiana has been haunted by worries about its liquidity after buying two coveted assets -- Daewoo and Korea Express (000120.KS) in the past few years.
The concerns deepened as the global financial crisis delayed its announced plans to raise 4.55 trillion won by selling non-core assets.
The construction and airline-focused group may be liable to pay substantial sums due to a put-back option agreement with investors in its 2006 takeover of Daewoo as its stocks have remained far below a pre-set price for the option.
Kumho Asiana offered an option to buy back Daewoo shares at 32,000 won each by the end of this year, local media said, while shares in Daewoo ended at 12,850 won on Friday. Officials at the group were not available for comments on the option price.
Earlier this month, Kumho said the KDB had agreed to the proposal to attract new financial sponsorship for Daewoo by the end of July -- a move to replace the existing investors in Daewoo, who have the option.
($1=1278.3 won)
(Editing by Jerry Norton)
Original article

Stocks eye jobs, other data in July 4th week

2009-06-28T08:56:00.000+04:00

By Ellis Mnyandu
NEW YORK (Reuters) - For stock investors, June`s job report could be a make-or-break factor next week in determining whether the recent rally has legs or not.
The monthly non-farm payrolls data will come out on Thursday, instead of the usual Friday. U.S. markets will be closed on Friday, July 3rd, 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 this four-day week to assess 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," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois, referring to the non-farm 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. non-farm 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 jump 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."
At Friday`s close, the three major U.S. stock indexes finished the week 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

JPMorgan CEO warns against too many regulators

2009-06-28T02:26:00.000+04:00

CHICAGO (Reuters) - Too many regulators will only increase costs and reduce credit opportunities for consumers, JPMorgan Chase & Co Chief Executive Jamie Dimon warned in a column he wrote in Saturday`s Wall Street Journal.
While praising President Barack Obama`s efforts to reform the U.S. financial system, Dimon said the emphasis should be on strengthening existing regulators over creating new ones.
"Any regulatory overhaul should ensure that governmental oversight of the financial system is efficient," wrote Dimon, who is widely regarded as the top banker to have been least tarnished by the financial crisis. "We should avoid the temptation to have multiple regulators just for the sake of having them.
"Three or four different regulators all looking at (and fighting over) the same issue is not a wise use of taxpayer money," he said. "Companies can`t operate that way. Neither should the government."
Obama last week unveiled a sweeping package of reforms to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.
Dimon said he supports the creation of a single bank regulator, a move he said was long overdue.
Another major Obama goal is to do more to protect consumers by transferring consumer protection dealing with mortgages, credit cards, payday loans and other financial products out of 10 agencies and into a new agency.
Dimon agreed with the need to boost consumer protection but warned regulators must be careful.
"Before creating an entirely new federal bureaucracy, policy makers should first examine ways to strengthen and refocus the authority of existing regulators," he wrote. "Creating duplicative and overlapping functions could increase costs and reduce credit opportunities for the consumers we are trying to protect."
A key catalyst for the financial crisis has been the enormous amount of debt shouldered by Americans during a real estate bubble fueled by subprime mortgages that many borrowers could not afford or understand.
As defaults and foreclosures rose last year, exotic financial instruments backed by shaky mortgages broke down and the capital markets froze for a time amid uncertainty about the condition of banks` balance sheets.
The combined effects helped drag the United States into recession.
Dimon said financial institutions need to clean up their act and earn back the public`s trust.
"Company leadership must foster a culture within their institutions that focuses on integrity, strong execution, quality products, long-term value creation and doing the right thing," he wrote.
"Golden parachutes, special contracts, and unreasonable perks must disappear."
(Reporting by Ben Klayman; Editing by Bill Trott)
Original article

Porsche fumes at VW, Lower Saxony "extortion"

2009-06-27T21:47:00.000+04:00

FRANKFURT (Reuters) - Volkswagen and its key shareholder, the state of Lower Saxony, have confronted Porsche with an ultimatum to accept a tie-up of the two carmakers under VW`s tutelage or else face more severe financial turmoil, Web site Spiegel online reported.
Porsche Chief Executive Wendelin Wiedeking and Chairman Wolfgang Porsche have been urged to agree by the end of June that VW takes a 49 percent stake in Porsche`s sports car business for 3-4 billion euros ($4.2-$5.6 billion), Spiegel magazine reported in its online edition on Saturday, without saying who provided the information.
According to the proposal, the Emirate of Qatar would buy Porsche`s stock options in VW, which would subsequently integrate the Porsche sports car business into its operations.
VW would not comment on the report. Porsche was not immediately available for comment, neither was the Emirate of Qatar.
The new merged carmaker would eventually be 40 percent owned by the Porsche and Piech families, 20 percent owned by Lower Saxony, 15 percent owned by Qatar with another sovereign wealth fund holding a further 5 percent, Spiegel reported.
VW threatened it could insist on redemption in September of a 700 million euro loan it granted to Porsche, should Porsche reject the offer, Spiegel online said.
Porsche racked up 9 billion euros of debt trying to swallow its much bigger peer Volkswagen before the financial crisis turned the tables and threatened to unravel the deal.
Porsche, which owns 51 percent in VW, had abandoned plans to raise its stake to 75 percent but still owns options to buy VW shares.
The tie-up proposal was devised by Christian Wulff, the state premier of Lower Saxony, which holds a blocking minority of 20 percent in VW, as well as Porsche co-owner Ferdinand Piech and by the CEO and CFO of VW, Spiegel online said.
Qatar would only pursue an investment in a merged VW and Porsche if all major shareholders agree on the set-up, the Web site added.
In a separate article, daily Sueddeutsche Zeitung reported on Saturday that Qatar plans to buy Porsche`s stock options in VW and is no longer interested in buying an interest in Porsche alone, citing unspecified sources.
Porsche had said on Friday it was close to reaching a deal with Qatar that could help solve its financial problems.
(Reporting by Ludwig Burger, Hendrik Sackmann and Arno Schuetze)
Original article

Hummer buyer to open talks with China regulators: report

2009-06-27T21:34:00.000+04:00

CHICAGO (Reuters) - The potential buyer of General Motors Corp`s Hummer division will begin formal talks with Chinese regulators on Monday in an effort to win approval for its acquisition, The Wall Street Journal reported on Saturday.
China`s Sichuan Tengzhong Heavy Industrial Machinery has agreed to buy the Hummer brand from the bankrupt U.S. automaker but state radio in China reported on Thursday that the country`s top economic planning agency was likely to reject the bid.
A GM spokesman was not immediately available to comment on the Journal report.
Tengzhong`s lack of experience and the gas-guzzling nature of Hummer`s sport utility vehicles were cited as reasons for the expected opposition by the National Development and Reform Commission, the report said.
However, GM and Tengzhong have yet to formally present the deal to the Chinese regulators and the parties negotiating the deal have not been told it is in trouble, the Journal said, citing unidentified sources.
The Journal quoted one unidentified GM executive as saying talk that the deal would be blocked was not true and should be considered "pure speculation."
Executives from GM and Tengzhong met this week to firm up their plans and are operating under the assumption that the deal has a reasonable chance of getting approved, according to people familiar with the meeting, the Journal said.
GM said on June 2, the day after filing for bankruptcy, that it had tentatively agreed to sell the Hummer brand to Tengzhong, saying it expected the deal to close in the third quarter. GM officials said at the time that they saw no snag in closing the deal.
Based in the Chinese province of Sichuan, Tengzhong makes special-use vehicles, highway and bridge structural components, construction machinery and energy equipment.
(Reporting by Ben Klayman; Editing by Bill Trott)
Original article

U.S. commercial banks see record Q1 trading revenue

2009-06-27T07:10:00.000+04:00

NEW YORK (Reuters) - U.S. commercial banks reported record trading revenue in the first quarter of 2009, benefiting from wide trading margins and gains from interest rate products, the Office of the Comptroller of the Currency said on Friday.
Banks generated a record $9.8 billion in revenue from trading derivatives and cash instruments, compared with a loss of $9.2 billion in the fourth quarter of 2008, the OCC said.
Interest rate products, including derivatives, generated the strongest revenue, rising to a record $9.1 billion, compared with a $3.4 billion loss in the previous quarter, the OCC said. Credit trading was the only asset class to generate a loss, of $3.2 billion, trimmed from a fourth-quarter loss of $8.9 billion.
Foreign exchange revenue fell to $2.4 billion from $4.1 billion in the fourth quarter, while equity trading generated $1 billion in trading revenue compared to a fourth quarter loss of $1.2 billion, the OCC said.
Trading revenue were boosted as banks wrote down fewer losses from bad loans and recorded the declining value of their debt as a liability. Banks can book the deteriorating value of their own debt as trading revenue.
"While trading performance was strong even without the liability value changes, this source did add materially to first quarter trading performance," the OCC said.
Notional volumes in all derivatives markets increased by $1.6 trillion in the quarter to $202 trillion, as more derivative contracts were recorded by commercial banks that had formerly been investment banks.
The notional volume does not represent the actual amount of risk as it includes a number of trades that offset each other. Eighty-nine percent of derivatives exposures at commercial banks were eradicated from netting positions in the first quarter, the OCC said.
LARGEST BANKS
JPMorgan Chase & Co(JPM.N), Goldman Sachs Group Inc (GS.N), Bank of America Corp (BAC.N), Citigroup (C.N) and HSBC Bank USA, part of HSBC Holdings (HSBA.L), have the largest derivatives exposures of U.S. commercial banks and account for 96 percent of total exposures, the OCC said.
As of March 31, their notional derivative exposures stood at $81.2 trillion, $39.9 trillion, $38.9 trillion, $29.6 trillion and $3.5 trillion, respectively.
Of these banks, Goldman had by far the largest credit exposure relative to its risk-based capital, at 1,048 percent, the OCC said. HSBC, JPMorgan, Citibank and Bank of America`s ratios stood at 475 percent, 323 percent, 216 percent and 169 percent, respectively.
Goldman also got the largest overall boost from derivatives and cash trading revenue, which represented 69 percent of the bank`s gross revenue in the quarter, the OCC said.
Trading revenue for JPMorgan represented 13 percent of its gross revenue and contributed 8 percent of both Citigroup and Bank of America`s gross revenues. HSBC Bank USA`s gross revenue lost 4 percent from trading revenue.
JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley (MS.N) and Citigroup had the largest derivative exposures of all holding companies, at $81.1 trillion, $77.9 trillion, $47.7 trillion, $39.1 trillion and $31.7 trillion, respectively.
(Reporting by Karen Brettell; Editing by Padraic Cassidy)
Original article

Prosecutors ask judge to imprison Madoff for life

2009-06-27T06:09:00.000+04:00

By Grant McCool
NEW YORK (Reuters) - Swindler Bernard Madoff should spend the rest of his life in prison, U.S. prosecutors argued on Friday, citing the "unique scope and duration" of his crimes as the leader of Wall Street`s biggest fraud.
Madoff will be sentenced on Monday after pleading guilty in March to 11 criminal charges including securities fraud, money laundering and perjury in an investment scheme involving tens of billions of dollars.
"Madoff`s crimes were of extraordinary dimensions," the prosecutors` memorandum to a Manhattan federal court judge said. "For example, the fraud loss known to date, which is greater than $13 billion, is more than 32 times the baseline level that would carry a sentence of life under the U.S. sentencing guidelines."
It said about $170 billion flowed into the principal account used by Madoff in his decades-long scheme. It said he bilked thousands of people and caused economic hardship to individuals, charities and for-profit institutions.
"A reasonable sentence in this case would be the guidelines sentence of 150 years, or alternatively, a term of years that both would assure that Madoff will remain in prison for life, and forcefully would promote general deterrence."
The uncovering of the scheme and Madoff`s arrest in December led to calls for stricter oversight of firms.
Madoff`s lawyer Ira Lee Sorkin declined to comment on the memorandum because he said he had not yet read it.
The government argued that the Madoff case bore no comparison to corporate frauds of recent years such as WorldCom Chief Executive Bernie Ebbers and Adelphia`s John and Timothy Rigas. Ebbers is serving 25 years and the Rigases 12 years and 17 years, respectively.
"Madoff`s conduct is unique in its scope and duration," the memorandum to U.S. District Court Judge Denny Chin said.
It also cited a June 25 letter from counsel for the trustee winding down Bernard L. Madoff Investment Securities LLC saying that Madoff had not cooperated.
"Mr. Madoff has not provided meaningful cooperation or assistance to the Trustee since his arrest," the letter signed by lawyer David Sheehan said.
Madoff`s lawyer, in papers submitted to the judge this week, argued a sentence of 12 years would be sufficient. Sorkin also asked the judge not to give in to the "mob vengeance" sought by those Madoff defrauded.
Sorkin cited a recent meeting between the jailed Madoff and the inspector general of the U.S. Securities and Exchange Commission as being helpful to regulators. But prosecutors said on Friday the official "had informed the government that Madoff`s information will not `shape and fortify the future of Wall Street regulation and oversight.`"
The government said statements sent to the court by defrauded investors, showed he "was not only responsible for wiping away the financial resources of many generations within families but also for causing profound levels of stress and emotional injury."
In its memorandum on Friday and in other court papers, prosecutors said that as of November last year, Madoff`s firm issued account statements that held a total of about $65 billion when in fact he had not bought any securities. Continued...
Original article

U.S. regulators close four small banks

2009-06-27T05:45:00.000+04:00

WASHINGTON (Reuters) - U.S. regulators closed four small banks on Friday -- two in Georgia, one in Minnesota and one in California, bringing the total of U.S. bank failures to 44 this year.
The Federal Deposit Insurance Corp said the closings were:
-- Community Bank of West Georgia, a small bank in Villa Rica, Georgia, with assets of $199.4 million and total deposits of $182.5 million, as of May 15. A buyer could not be found, so the FDIC was appointed as receiver and will mail checks to insured depositors for their insured funds on June 29.
-- Neighborhood Community Bank, of Newnan, Georgia, with $221.6 million in assets and $191.3 million in deposits, as of March 31. CharterBank, of West Point, Georgia, agreed to assume the insured deposits and $209.6 million of the assets. Neighborhood`s four offices will reopen as CharterBank branches.
-- Horizon Bank, of Pine City, Minnesota, with $87.6 million in assets and $69.4 million in deposits as of March 31. Stearns Bank, NA, of St Cloud, Minnesota, agreed to assume all of Horizon`s deposits and to buy $84.4 million of its assets. Horizon`s two offices will reopen on Saturday as Stearns branches.
-- MetroPacific Bank, of Irvine, California, with $80 million in assets and $73 million in deposits, as of June 8. Sunwest Bank, of Tustin, California, agreed to assume all of the deposits, excluding those from brokers, and virtually all of MetroPacific`s assets. MetroPacific`s sole office will reopen on Monday as a branch of Sunwest Bank.
Customers can access their money over the weekend by check, teller machine or debit card, the FDIC said.
In 2008, 25 U.S. banks were seized by officials, up from only 3 in 2007.
During the current financial crisis, Seattle-based lender Washington Mutual became the biggest bank to fail in U.S. history. It was closed in September while suffering from losses from soured mortgages and liquidity problems.
The FDIC will insure up to $250,000 per account.
The agency also has running a tally of problem banks that its examiners closely monitor. At the end of the first quarter, 305 undisclosed institutions were on that list.
(Reporting by Charles Abbott and Karey Wutkowski; Editing by Gary Hill)
Original article

IBM loses injunction against Dell executive

2009-06-27T05:33:00.000+04:00

By Jim Finkle
BOSTON (Reuters) - A U.S. judge turned down a request from International Business Machines Corp to bar its former head of mergers and acquisitions from working at Dell Inc over allegations that he would disclose trade secrets.
The ruling means the executive, David Johnson, will be able to continue to work as Dell`s senior vice president of corporate strategy while IBM proceeds with a lawsuit that claims he violated a non-compete agreement.
It often takes several years for such suits to work their way through the court system.
IBM spokesman Doug Shelton said his company intended to appeal Friday`s ruling.
M&A is a priority for both companies, which are looking to add technologies that will differentiate their products at a time when global technology spending is slumping. Dell has said it wants to increase sales of servers, storage equipment and expand its business to large corporations -- key areas for
IBM.
Johnson, a 27-year IBM veteran whose lawyer declined comment on Friday, has maintained that his 2005 non-compete document is invalid because it was not properly signed.
The battle has gotten increasingly bitter in recent days. In an amended complaint on Thursday, IBM said Johnson secretly misused company facilities, resources and personnel to help create a venture capital firm, JSJ Capital Management, to invest in technology companies.
"He misled his superiors about his activities, secretly undertaken on his own behalf, misrepresented the nature and scope of his planned activities at Dell," said IBM`s complaint filed in U.S. federal court in White Plains, New York.
Johnson has said in a court filing that he did not have access to confidential information at IBM that would provide a competitive advantage to Dell.
Federal District Court Judge Stephen Robinson said in his ruling on Friday that IBM had yet to demonstrate what type of trade secrets Johnson might bring to Dell.
A Dell spokesman declined comment.
Johnson has said he left IBM because the company broke a promise to consider him for a senior position that it made when it asked him to turn down an offer from another firm in 2001.
He maintains that the non-compete agreement is invalid because he intentionally signed his name in "the wrong spot" on the document in a bid to win time to work out his differences with his superiors.
"I believed that IBM did not consider the non-compete agreement agreed upon or entered because IBM returned to me the one I had signed in the wrong spot unexecuted and asked me to sign a new form," Johnson said in an affidavit. Continued...
Original article

U.S. spending and income rise, mood improves

2009-06-27T00:46:00.000+04:00

By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - U.S. consumer spending in May rose for the first time since February and savings hit a record high as federal stimulus measures boosted incomes, while consumer sentiment edged higher in June, bolstering the view that the economy was close to emerging from recession.
Consumer spending, which accounts for more than 70 percent of U.S. economic activity, rose 0.3 percent in May, the Commerce Department said on Friday. The department also revised up April`s figure to unchanged from a small decline previously.
Personal income jumped 1.4 percent last month, propped by social benefit payments from the government`s massive economic stimulus.
U.S. stocks fell as the jump in savings to the highest level since records began in 1959 boosted worries the economic recovery will not make much headway if consumers save rather than spend. The U.S. dollar extended losses versus the euro as the data reduced safe-haven demand for the greenback.
"Though consumption is positive, it`s kind of a tepid rebound versus the huge bounce-back everyone was expecting. So we have to see if this is stabilization," said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey.
"The government programs are new. We really have no history on it, and the rules tend to be changing as well. Right now we`re on new ground with a lot of this, at least in the short-term."
The stimulus provided for one-time payments of $250 to people receiving Social Security, supplemental security income, and other benefits.
Personal savings jumped to a record annual rate of $768.8 billion. The saving rate climbed to 6.9 percent, the highest since December 1993, the department said.
CONSUMER SENTIMENT RISES
A separate report showed U.S. consumer confidence improved in June to the highest since February 2008.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for June stood at 70.8, up from 68.7 in May, equaling February 2008`s reading. This was above economists` median expectation for a reading of 69.0, according to a Reuters poll.
The index of consumer expectations edged lower, however.
"Over the past four months, sentiment has improved moderately, suggesting that consumers` attitudes about the economy are improving," said Steven Wood, chief economist at Insight Economics in a research note.
"However, they remain very cautious. Nevertheless, these data do suggest consumers are no longer shell shocked."
Since the November 2008 low of 55.3, the sentiment index has gained 15.5 points, recouping about one-third of the loss posted since the peak in January 2007. Continued...
Original article

GE`s Immelt says U.S. economy needs industrial renewal

2009-06-26T23:34:00.000+04:00

By David Bailey and Soyoung Kim
DETROIT (Reuters) - General Electric Co Chief Executive Jeff Immelt said on Friday the United States needs to refocus its economy on manufacturing and exporting if it wishes to recover from a brutal recession.
The world`s largest economy can no longer count on consumer spending to drive demand, nor can it rely on Wall Street financial wizardry if it wants its population to continue to enjoy a high standard of living, the head of the largest U.S. conglomerate said.
"We should clear away any arrogance, false assumptions, or a sense that things will be `OK` just because we are America," Immelt told the Detroit Economic Club. "Our competitive edge has slipped away and this has hit the middle class hard."
The U.S. should work to have manufacturing represent about 20 percent of employment, more than double its current level, he said.
The world`s biggest maker of jet engines and electricity- producing turbines said on Friday it would be building a new manufacturing research center outside Detroit that will employ 1,100 people.
The move reflects Immelt`s belief that, like many U.S. companies GE has turned too many core technological procedures over to outside contractors and foreign operations.
"In some areas, we have outsourced too much," Immelt said, according to a copy of his prepared remarks. "We plan to `insource` capabilities like aviation component manufacturing and software development."
The United States need to reduce its reliance on financial services to drive economic growth, Immelt warned.
"While some of America`s competitors were throttling up on manufacturing and R&D, we de-emphasized technology," he said. "Our economy tilted instead toward the quicker profits of financial services."
That is a lesson GE has learned -- its shares have lost some 58 percent of their value over the past year, largely the result of falling profit at its GE Capital finance unit. Immelt is restructuring GE so it will count on finance for just 30 percent of its profit, down from half before the downturn.
"While our financial services business has performed well, I can`t tell you that we were entirely free of these errors," Immelt said. "We weren`t."
(Reporting by David Bailey and Soyoung Kim; writing by Scott Malone; editing by Andre Grenon)
Original article

Ken Lewis retains backing of key BofA exec

2009-06-26T23:21:00.000+04:00

By Svea Herbst-Bayliss
BOSTON (Reuters) - Kenneth Lewis, Bank of America`s (BAC.N) embattled chief executive, retained the backing of a top lieutenant on Friday, when investment bank and wealth management chief Brian Moynihan called him the "right person" to lead the nation`s largest bank.
Moynihan, widely discussed as a possible candidate to replace Lewis eventually, called his 62-year-old boss the best man to lead the Charlotte, North Carolina-based bank out of its current difficulties.
Moynihan, who made the comments after delivering a speech in Boston, came to Bank of America through the FleetBoston Financial acquisition and replaced former Merrill Lynch chief John Thain in January. He rose through the ranks quickly and now oversees 80,000 employees.
Moynihan was careful to defer to his boss on when the bank may pay back its government loan and was cautious about details on how quickly his division will grow or when the bank may consider selling two of its units.
The bank`s group of 16,000 financial advisers will expand, Moynihan said, adding, "It has to be bigger than it is now." He declined to give any growth targets.
He was also mum on how quickly Bank of America may sell two businesses -- First Republic Bank, a San Francisco-based bank it acquired through Merrill Lynch, and Columbia Asset Management, which it picked up through its acquisition of FleetBoston Financial Corp.
While Moynihan called both units "good assets," he said it was difficult to own them. Columbia competes directly with asset manager BlackRock Inc, which is part-owned by Bank of America. Speculation has mounted recently that deals may be imminent, especially after BlackRock surprised the industry with its decision to buy Barclays Global Investors to become the industry`s biggest asset manager.
Investors have been keen to hear any details about the possible future of Lewis, who has been widely criticized for the bank`s falling share price and its January 1 acquisition of Merrill Lynch & Co.
"He is the right person for our company," Moynihan, president of global banking and wealth management, told reporters in response to a question.
Lewis has run Bank of America since 2001. Over the last two months, he has been stripped of his role as the bank`s chairman, and more than one-third of his board of directors has departed.
Evidence that regulators may have wanted him out altogether surfaced on Thursday when a House of Representatives subcommittee released documents subpoenaed in connection with testimony of Federal Reserve Chairman Ben Bernanke over Lewis` role in the Merrill merger.
Lewis has indicated that he may be willing to step aside by 2012, when he will turn 65.
Bank of America has taken $45 billion from the federal Troubled Asset Relief Program, and Lewis has suggested he would like to begin repaying the bailout money this year.
Moynihan deferred to Lewis when asked about how quickly the bank plans to send the money back. "As you have heard Ken say, it will be months, not years."
(Reporting by Svea Herbst-Bayliss, editing by Matthew Lewis)
Original article

IBM accuses former M&A exec of misusing resources

2009-06-26T23:10:00.000+04:00

By Jim Finkle
BOSTON (Reuters) - IBM (IBM.N) accused its former mergers and acquisitions chief of misusing resources, as part of a lawsuit that seeks to remove him from his new job at rival Dell Inc (DELL.O).
The suit claims the executive, David Johnson, violated a noncompete agreement by moving to Dell and bringing trade secrets with him. Both companies are looking to acquisitions to add technologies that will differentiate their products at a time when global technology spending is slumping.
In a separate document filed on Thursday, Johnson accused International Business Machines Corp of withholding $1.49 million from a retirement plan that he said was due to him upon his departure from the company.
U.S. District Court Judge Stephen Robinson is expected to rule later on Friday on IBM`s request to issue a restraining order that could force him to leave his job at Dell.
The technology giant filed the original lawsuit in May after Johnson left for Dell, saying he violated a 2005 noncompete agreement. Johnson, whose lawyer could not be reached for comment on Friday, has maintained that the document is invalid because it was not properly signed.
In an amended complaint on Thursday, IBM said Johnson secretly misused company facilities, resources and personnel to help create a venture capital firm, JSJ Capital Management, to invest in technology companies.
IBM alleged Johnson prepared investor presentations with company resources and used an IBM-funded trip to the Middle East to cultivate potential investors for JSJ.
IBM said there was a "grave risk" Johnson would disclose the company`s proprietary information to its rival Dell.
"He misled his superiors about his activities, secretly undertaken on his own behalf, misrepresented the nature and scope of his planned activities at Dell," said IBM`s complaint filed in U.S. federal court in White Plains, New York, on Thursday.
Dell spokesman Jess Blackburn said Johnson began work at the company earlier this month, but declined to discuss his job responsibilities or comment on the lawsuit.
Johnson has said in a court filing that he did not have access to confidential information at IBM that would provide a competitive advantage to Dell.
He said that he left IBM because the company broke a promise to consider him for a senior position that it made when it asked him to turn down an offer from another firm in 2001.
Johnson maintains that the noncompete agreement is invalid because he intentionally signed his name in "the wrong spot" on the document in a bid to win time to work out his differences with his superiors.
"I believed that IBM did not consider the noncompete agreement agreed upon or entered because IBM returned to me the one I had signed in the wrong spot unexecuted and asked me to sign a new form," Johnson said in an affidavit.
IBM spokesman Doug Shelton declined to comment on the charges levied by Johnson about the retirement account, saying the court documents speak for themselves. Continued...
Original article

Freddie Mac May portfolio shrank annualized 9.9 pct

2009-06-26T20:57:00.000+04:00

NEW YORK (Reuters) - Freddie Mac (FRE.P) (FRE.N), the second-largest U.S. home funding company, on Friday said its mortgage investment portfolio shrank by an annualized 9.9 percent rate in May, while delinquencies on loans it guarantees accelerated.
The portfolio decreased to $823.4 billion, for an annualized 5.6 percent increase year to date, the McLean, Virginia-based company said in its monthly volume summary.
In May 2008, the portfolio was $770.4 billion.
Delinquencies, which increase stress on the company`s capital, jumped to 2.62 percent of its book of business in May from 2.44 percent in April and 0.86 percent in May 2008.
The multifamily delinquency rate also rose, up 0.02 percentage point to 0.12 percent in May. A year earlier it was 0.03 percent.
Freddie Mac said refinance-loan purchase volume was $40.3 billion in May, down from April`s $43.3 billion. March`s $52 billion was its largest refinance month since 2003.
The amount of mortgage-related investments portfolio mortgage purchase and sale agreements entered into in May totaled $5.3 billion, up from April`s $956 million.
The company`s total mortgage portfolio decreased at a 1.6 percent annualized rate in May to $2.228 trillion.
In early September 2008, the U.S. government seized control of Freddie Mac and its larger sibling, Fannie Mae (FNM.P) (FNM.N), amid heightened worries about shrinking capital at the congressionally chartered companies.
The government is now relying heavily on Fannie Mae and Freddie Mac in its efforts to stimulate the U.S. housing market, which is in the midst of its worst downturn since the Great Depression, by buying more mortgage loans, easing refinancing and helping homeowners avoid foreclosure.
(Reporting by Julie Haviv; Editing by James Dalgleish)
Original article

Qantas cancels Dreamliners in new Boeing setback

2009-06-26T20:08:00.000+04:00

By Mette Fraende
SYDNEY (Reuters) - Boeing Co (BA.N), the world`s No.2 plane-maker, suffered another heavy blow to its Dreamliner project on Friday when a major customer, Australia`s Qantas Airways (QAN.AX), scrapped and deferred orders for 30 new planes.
Aviation analysts warned that more Boeing customers could follow Qantas, noting that cancellations of the fuel-efficient, long-haul plane were gaining momentum as airlines worldwide looked to conserve capital during the global recession.
Citing the tough operating environment, Qantas canceled orders for 15 of the B787-9 Dreamliners that had been due for delivery in 2014-15 and deferred for four years an order for another 15 of the same aircraft. It said the decision would save the company $3 billion in capital spending.
Qantas denied it was reacting to this week`s fresh delays to the Dreamliner`s development, when the first test flight was set back for a fifth time, but analysts said there was a clear risk of more order cancellations or deferrals from other airlines.
"It wouldn`t surprise me at all if we see more deferrals and more cancellations, particularly given the economic environment in the U.S. at the moment, it`s a complete basket case," said Bruce Low, investment analyst at Australian fund manager Fortis Investment Partners.
"The aviation industry is suffering very badly ... I guess the Boeing delays actually give the airlines an opportunity to pull out or defer."
Boeing`s defense unit was recently hit hard by sweeping cuts announced by U.S. Defense Secretary Robert Gates in the Pentagon`s fiscal 2010 budget request this year.
Even before the Qantas decision, the plane-maker had logged only nine net orders so far in 2009 as global economic weakness has spurred a string of cancellations, including 58 Dreamliners.
Rival Airbus (EAD.PA) faces the same economic pressures.
In March, Air France (AIRF.PA) said it would defer taking delivery of the sixth and seventh Airbus A380 aircraft in an order for 12 of the giant planes, to save cash on down payments.
Qantas CEO Alan Joyce said in a statement that "the operating environment for the world`s airlines has clearly changed dramatically" since Qantas announced its original B787 order in December 2005.
Qantas shares rose as much as 2.5 percent in early trade.
The stock has dived 24 percent so far this year, while the wider S&P/ASX 200 index .AXJO has risen about 5 percent.
Last month, Qantas said it expected to navigate the current aviation crisis, the industry`s worst, without having to further cut capacity or jobs or raise capital.
But it has forecast a loss in the second half of its 2009 financial year, and announced in March it would shed 90 top management positions, adding to 1,500 job cuts announced in 2008. Continued...
Original article

Capital markets save dealmakers` fees as M&A wilts

2009-06-26T12:55:00.000+04:00

By Douwe Miedema and Jessica Hall
LONDON/NEW YORK (Reuters) - Dealmakers saw business pick up again in the second quarter as they helped companies raise cash in capital markets, but lucrative mergers and acquisitions (M&A) languished.
Worldwide combined capital markets and M&A fees rose for the first time in a year, Thomson Reuters data showed on Friday, up 29 percent from the first quarter, with share sales -- such as rights offerings -- the most buoyant.
"There`s a shift away from banks being the sole capital source for growth. There are fewer banks in the world and they have less money," David Fass, head of global banking at Deutsche Bank, told Reuters.
Banks are hesitant to lend after the credit crunch depleted their treasure chests, and cash-hungry companies are instead selling bonds and shares to rebuild their balance sheets, refinance maturing debt, or expand.
The year has seen mammoth bond sales to fund mergers, with Pfizer Inc raising more than $23 billion for its purchase of Wyeth, after Roche sold $30 billion in bonds to help buy Genentech.
Banks have embarked on massive rights issues to refill their coffers, with HSBC`s $19 billion share sale in April topping the table of large deals, the second-largest rights issue of all time, according to the data.
"Markets for capital raising have been extremely active, you have seen equity balance sheet repair for the financial sector and increasingly the corporate sector," Enrico Bombieri, head of European investment banking at JP Morgan Chase & Co, said at a media briefing this month.
JP Morgan benefited most from the surge in capital market transactions, topping first-half global league tables in equity capital markets, bonds and syndicated loans.
From underwriting 166 equity issues, the bank earned an estimated $1 billion in fees.
NO MORE LOANS
Global mergers and acquisitions saw the steepest decline since 2001, the data showed, dropping 44.5 percent in the first half of the year from the year-ago period, with companies wary to take on more risk and funding scarce.
Morgan Stanley took the lead in both global and U.S. M&A advisory work, edging aside Goldman Sachs Group Inc in the first half of the year.
Part of the weak deal flow is that banks can no longer support these deals with loans, scared that the recession will cause more bad loans and further toxic assets may come to light, prompting them to reduce their debt levels.
Significantly, syndicated loans -- traditionally the first point of call for acquisition funding in Europe -- all but dried up, hitting their lowest volume in 13 years and dropping 58 percent from the year-ago period.
"Europe has traditionally been a bank-financed market ... fundamentally we`re seeing a shift away from the loan market to the capital markets," Viswas Raghavan, JP Morgan head of international capital markets, said at the briefing. Continued...
Original article

Nigerian rebels say hit Shell site despite amnesty

2009-06-26T12:43:00.000+04:00

By Nick Tattersall
LAGOS (Reuters) - Nigeria`s main militant group said it had blown up a well-head in a Royal Dutch Shell oil field in Delta state late Thursday, hours after President Umaru Yar`Adua announced an amnesty offer for gunmen.
The Movement for the Emancipation of the Niger Delta (MEND) accused the military of going on a "punitive expedition" to hunt down suspected militants in the Agbeti community of Delta state after Yar`Adua`s amnesty proclamation.
"In response ... (operation) Piper Alpha continued its rampage on the Nigerian oil industry by blowing up the second remaining well-head of the Shell Afremo offshore oil fields in Delta state," MEND said in a statement e-mailed to media.
The military denied carrying out any such campaign.
"Our troops did not carry out any operation in Agbeti. This is a lie, propaganda by these miscreants to justify their attacks on isolated oil facilities," said Colonel Rabe Abubakar, spokesman for the joint military taskforce in the Niger Delta.
Afremo was one of the sites MEND also claimed to have attacked in a triple raid Sunday. It described the field as being 14 miles from an export terminal through which crude oil from Shell`s Forcados fields is pumped.
A senior industry source said at the time the location was not a deepwater installation, but a facility located in or close to the mangrove creeks, where pipelines and equipment run across broad stretches of water.
Shell has said it is checking its operations for damage from Sunday`s attacks.
BILLIONS IN LOST REVENUE
Yar`Adua Thursday offered the amnesty to gunmen who laid down their weapons during a 60-day period ending on October 4, in a bid to end years of unrest which have cost Africa`s top oil exporter billions of dollars in lost revenue.
Pipeline bombings, attacks on oil and gas installations and the kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two thirds of its installed capacity of 3 million barrels per day of oil.
The supply disruption has at times helped push world energy prices higher and cost Africa`s most populous nation, which relies on crude oil for 90 percent of its foreign earnings, tens of millions of dollars a day.
MEND`s latest campaign of sabotage, which began just over a month ago and which it has dubbed "Hurricane Piper Alpha," has already forced at least 133,000 barrels per day (bpd) of production to be shut down.
It has again had an impact on global energy prices, helping push oil toward $71 a barrel Friday.
One faction leader, Ateke Tom, has indicated he would consider taking part in an amnesty while a lawyer for Henry Okah, the suspected leader of MEND who is on trial for treason, has said he hoped his client would be covered by the proposal. Continued...
Original article

Oil rises above $70 on Nigeria attacks, econ hopes

2009-06-26T09:27:00.000+04:00

By Jennifer Tan
SINGAPORE (Reuters) - Oil surged above $70 a barrel on Friday, extending a 2 percent gain the day before, after rebel attacks on Nigerian oil facilities disrupted supply and equity markets rallied on optimism the global recession was ebbing.
The release of the June consumer sentiment index by the Reuters/University of Michigan Surveys of Consumers later is expected to reflect a mildly improving outlook for the U.S. economy, auguring well for ailing world energy demand.
U.S. crude futures for August gained 36 cents to $70.59 a barrel by 11:33 p.m. EDT, off a morning high of $70.77 and after settling at $70.23 in the previous session. London Brent crude rose 28 cents to $70.06
Oil is on course for a 1.5 percent gain this week, buoyed by optimism over a potential economic recovery that has lifted prices from below $40 over the past three months.
"Worry over the geopolitical situation is a big factor right now, and that`s what`s giving the market traction," said Peter McGuire, managing director of Commodity Warrants Australia, referring to the situation in Iran.
"We had a correction earlier in the week, and the technicals still look a little bearish, but you can`t rule out the fundamentals, and you can`t rule out the geopolitical."
About 20 people have been killed in protests after Iran`s June 12 presidential election, the worst unrest since the 1979 Islamic revolution.
Investors are also keeping their eyes peeled on Nigeria, where President Umaru Yar`Adua on Thursday offered amnesty to gunmen in the Niger Delta who lay down their weapons by October 4, a bid to end unrest which has cost Africa`s top oil exporter billions of dollars in lost revenue.
The main militant group, the Movement for the Emancipation of the Niger Delta (MEND), sabotaged a Royal Dutch Shell (RDSa.L) oil pipeline on Thursday, the latest act in a month-old campaign which has shut in at least 133,000 barrels per day. The attack helped push oil to near $71 a barrel.
Fuelling oil`s rise, Exxon Mobil (XOM.N) said its huge Baytown refinery suffered an operational glitch that triggered flaring, sparking worries the largest U.S. oil refinery could tighten gasoline stockpiles during this summer`s peak demand driving season.
Firmer Asian stocks on the back of Wall Street`s rally also lent support to oil, with shares outside Japan .MIAPJ0000PUS climbing 1 percent and Japan`s Nikkei .N225 up 0.2 percent.
A further boost came from a fall in the dollar against most major currencies on Friday, extending losses the previous day, as investors shifted funds back into risky assets after the Federal Reserve this week appeared to confirm it would keep interest rates low for a while. <USD/>
The Reuters/University of Michigan final June consumer sentiment index, due at 1355 GMT, is expected to show a reading of 69.0 compared with 68.7 in the May report, a Reuters poll of economists showed.
(Editing by Ben Tan)
Original article

Wall Street rallies on Bernanke relief, consumer shares

2009-06-26T08:27:00.000+04:00

By Caroline Valetkevitch
NEW YORK (Reuters) - Stocks rallied on Thursday as investors were relieved Fed Chairman Ben Bernanke withstood a barrage of pointed questions from Congress on the Bank of America-Merrill Lynch deal relatively unscathed.
Retailers and home builders led stocks higher for much of the session, helped by a surprising profit increase from retailer Bed Bath & Beyond Inc(BBBY.O). Energy companies` shares also rose as oil prices climbed above $70 a barrel.
Stocks extended gains shortly before midday as investors took Bernanke`s hearing in stride. Despite lawmakers` criticisms of Bernanke, the Fed chairman is well liked on Wall Street and most analysts anticipate he will be reappointed.
The U.S. House of Representatives Oversight and Government Reform Committee questioned Bernanke on the Fed`s role in Bank of America`s takeover of Merrill Lynch, and whether he pressured Bank of America`s CEO Ken Lewis to go through with the deal after Lewis raised objections.
"There was concern as to what might happen there. He seemed to give some pretty decent testimony; at least it didn`t get out of hand," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.
The Dow Jones industrial average .DJI jumped 172.54 points, or 2.08 percent, to 8,472.40, snapping a four-day losing streak. The Standard & Poor`s 500 Index .SPX gained 19.32 points, or 2.14 percent, to 920.26. The Nasdaq Composite Index .IXIC advanced 37.20 points, or 2.08 percent, to 1,829.54.
With the second quarter ending early next week, some portfolio managers have already begun their end-of-quarter "window dressing" of selling some shares with big losses and buying some of the quarter`s best-performing stocks to help improve their returns. This Wall Street ritual also is likely to have helped ignite Thursday`s rally.
The S&P 500 is up 36 percent from a 12-year closing low hit on March 9.
Another sign that encouraged investors was news the Federal Reserve was scaling back some emergency funding programs even while extending a number of others.
"What we saw is an improvement here in that one program went away, but also the flexibility that these other ones are staying around in case they`re needed," Hellwig said.
PALM POPS UP AFTER THE BELL
After the close, Palm Inc (PALM.O) shares rose 10.2 percent to $15.45 after the smartphone maker posted a narrower-than-expected loss despite a steep revenue decline.
On Nasdaq, Palm added 0.6 percent to close at $14.02 ahead of the results.
During the regular session, shares of energy companies gained, including Exxon Mobil Corp (XOM.N), up 2.1 percent at $69.88. Oil jumped $1.56 to end at $70.23.
Also boosting the market was home builder Lennar Corp (LEN.N), which posted a wider quarterly loss, but noted an increase in new home sales and orders. Its stock shot up 17.5 percent to $9.19. Continued...
Original article

Bernanke denies Fed threatened BofA over Merrill deal

2009-06-26T08:15:00.000+04:00

By Mark Felsenthal and Kim Dixon
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke, facing his toughest grilling yet by U.S. lawmakers, said on Thursday he had never threatened to fire Bank of America`s management if they pulled the plug on a planned merger with Merrill Lynch.
During a tense three-hour hearing, lawmakers repeatedly pressed Bernanke on whether he had coerced Bank of America chief Kenneth Lewis in December to go forward with the deal despite Merrill`s quickly deteriorating finances.
Bernanke, holding his ground, told the members of the House of Representatives Oversight and Government Reform Committee the Fed never did anything "beyond the law or unethical."
"I did not tell Bank of America`s management that the Federal Reserve would take action against the board or management," he said.
Bernanke also said neither he nor other Fed officials had "ever directed, instructed, or advised" the bank to withhold information about Merrill`s mounting losses from the public, another charge lawmakers have leveled at the central bank.
The Fed has faced intense scrutiny from both Democrats and Republicans on Capitol Hill for many of the extraordinary actions it has taken since the financial crisis erupted in the summer of 2007.
After Bank of America`s eventual decision to go through with its purchase of Merrill, the bank received a fresh injection of $20 billion in public funds and a government backstop on potential losses on a $118 billion pool of shaky assets.
"It is still unclear whether Bank of America was forced by the federal government to go through with the Merrill deal or whether Ken Lewis pulled off what may have been the greatest financial shakedown in a long, long time," the committee`s chairman, Representative Edolphus Towns, said.
Representative Darrell Issa, the panel`s top Republican, charged on Wednesday that the Fed had covered up its involvement in the merger and "deliberately hid" important details from other federal regulators.
During the hearing, lawmakers cited an e-mail written by Richmond Federal Reserve Bank President Jeffrey Lacker as possible evidence of undue Fed pressure on Lewis. In the e-mail, Lacker said Bernanke had told him he planned to make it clear that pulling back from the merger could result in managers losing their jobs if Bank of America ended up needing aid.
SYSTEMIC RISK ROLE QUESTIONED
The probe into the merger comes as lawmakers debate an Obama administration plan for a regulatory overhaul that would expand the Fed`s powers over the financial system. Some lawmakers said lingering questions over the Fed`s role raised doubts about whether it should be given more power.
Financial market participants watched the hearing with some anxiety that it signals a search for a scapegoat for the financial crisis and a possible erosion of political support for a Fed chairman who has earned high marks on Wall Street.
"It does have a kind of a Watergate feel to it," said Chris Rupkey of Bank of Tokyo/Mitsubishi UFJ in New York, referring to dramatic congressional hearings in the early 1970s that were precursors to the resignation of President Richard Nixon.
The controversy over the Fed`s role in the Bank of America-Merrill deal could also color President Barack Obama`s looming decision on whether to reappoint Bernanke when his four-year term as chairman expires January 31. Continued...
Original article

Allen Stanford pleads not guilty in fraud case

2009-06-26T08:02:00.000+04:00

By Anna Driver and Eileen O`Grady
HOUSTON (Reuters) - Texas financier Allen Stanford will spend another night in a Texas jail after he pleaded not guilty on Thursday to 21 criminal charges that he ran a $7 billion Ponzi scheme.
U.S. Magistrate Judge Frances Stacy set Stanford`s bond at $500,000 with a $100,000 cash deposit. But Judge Stacy stayed her order until 4:30 p.m. CDT on Friday (2130 GMT) after the U.S. Justice Department said it plans to appeal, arguing that Stanford was likely to flee the country rather than face life in prison if convicted of the charges.
The once high-flying billionaire and sports promoter has been in federal custody since June 18, when he surrendered to the FBI in Virginia after a Houston grand jury indicted him on 21 counts of conspiracy, fraud and obstruction of justice.
"Not guilty, Your Honor," said Stanford, 59, wearing an orange jump-suit and with his hands manacled in front of him.
Stanford is the second high-profile fraud case to shake public confidence in Wall Street and the U.S. financial regulatory system, after veteran financier Bernard Madoff pleaded guilty to a massive Ponzi scheme that could have cost investors as much as $65 billion.
Stanford, who once owned a fleet of 6 private aircraft, a luxury yacht and houses and castles stretching from Houston to the Caribbean, has spent a week in detention centers in Virginia and recently in the Montgomery County Jail in Conroe, about an hour`s drive north of Houston.
"The big fight is still ahead and I`m confident the world will see Stanford didn`t defraud anybody," Stanford`s criminal attorney, Dick DeGuerin, told reporters outside the courthouse.
Stanford is taking the anti-anxiety drug Ativan after initially turning to alcohol to deal with the stress of the case, DeGuerin said in a filing.
Professional golfer Vijay Singh had offered to cosign Stanford`s bail bond but the court rejected the offer because Singh is not a U.S. citizen, DeGuerin said.
Fijian Singh had an endorsement deal with Stanford and sported a shirt and hat emblazoned with Stanford Financial Group`s eagle insignia when he was competing in last week`s U.S. Open at Bethpage Black in New York.
"HI, DADDY"
Dozens of Stanford`s family sat in the packed courtroom, including James Stanford, his father, and Andrea Stoelker, his girlfriend. "Hi Daddy," his daughter said as Stanford entered the court room after a lunch recess. Stanford winked at her.
According to the U.S. Securities and Exchange Commission, Stanford, with the help of executives at his firm and a top Antigua and Barbuda financial regulator, ran a "massive Ponzi scheme" for over a decade that centered on certificates of deposit in his bank in Antigua.
Stanford says he is innocent of the charges and that his multinational business was legitimate until the SEC "disemboweled" it by filing civil charges, which led to the confiscation of all his assets by a court-appointed receiver.
U.S. District Judge David Hittner will decide on Friday whether the court should keep Stanford in custody, after Justice Department attorneys argued that Stanford was a "serious flight risk." Continued...
Original article

CORRECTION: Pre helps Palm beat expectations, shares rise

2009-06-26T07:51:00.000+04:00

(Corrects ninth paragraph and bullet point to show Palm is saying it "could turn cash-flow positive, not "expects" to)
By Gabriel Madway
SAN FRANCISCO (Reuters) - Palm Inc (PALM.O) posted a narrower-than-expected fiscal fourth quarter loss on Thursday, and highlighted strong demand for its just-unveiled Pre smartphone.
Palm`s shares rose more than 14 percent in after-hours trading.
Executives said early signs were promising for the Pre, which will compete head-to-head with Apple Inc`s (AAPL.O) iPhone and Research in Motion`s (RIM.TO) BlackBerry and which Palm hopes will lead the company out of persistent losses.
Palm said demand for the Pre was exceeding its expectations. The device is expected to enhance margins at the company, which in past years has steadily relinquished market share to rivals.
Avian Securities` Matthew Thornton estimated Palm booked revenue for 70,000 Pre units in the May quarter, which ended May 29. He said that, along with a more favorable tax rate and lower-than-expected operating expenses, helped the company blow by Wall Street estimates.
"We`re successfully ramping supply to meet demand that is strong and growing," Chief Executive Officer Jon Rubinstein told analysts on a conference call, referring to the Pre.
The device, which went on sale at the beginning of June, has garnered generally favorable reviews. Analysts estimate Palm has shipped about 150,000 units so far.
The Pre`s impact will be more fully reflected in the current quarter, because of its June launch date. Sprint Nextel Corp (S.N) is the exclusive U.S. carrier for the device.
Palm said it could turn cash-flow positive in the second-half of fiscal 2010 and reassured analysts that its capital position was sufficient, which Thornton called the "most interesting takeaways."
The company posted a net loss applicable to common shareholders of $105 million, or 78 cents a share in the fiscal fourth-quarter ended May 29, compared with a loss of $43.4 million, or 40 cents a share, in the year-ago period.
Excluding items, Palm`s loss was 40 cents a share, compared with an average analyst estimate for a loss of 65 cents a share, according to Reuters Estimates.
Revenue fell 71 percent to $86.8 million. The Wall Street estimate was for revenue of $80.3 million.
Palm pioneered the market for handheld devices in the 1990s, but it has fallen behind competitors like Apple and Research in Motion, which were quicker to roll out models with popular applications.
The Pre, featuring Palm`s new WebOS, is now entering a market chock-full of other competitors from Nokia (NOK1V.HE) to HTC. A new iPhone 3GS launched last Friday and sold more than 1 million units in the first three days. Continued...
Original article

GM says bankruptcy sale delay would kill suppliers

2009-06-26T04:41:00.000+04:00

DETROIT (Reuters) - General Motors Corp needs to exit from bankruptcy quickly in order to avoid a "fatal" blow to many of its suppliers and the loss of thousands of jobs, Chief Executive Fritz Henderson said in a court filing on Thursday.
"Many of GM`s suppliers are already in the midst of a severe liquidity crisis, which has only been exacerbated by the current shutdown of certain GM production facilities," Henderson said.
GM has shut 13 of its U.S. assembly plants for up to 11 weeks in some cases as part of a bid to cut production and run down inventory as it reorganizes.
Henderson said tentative plans to resume operations at some GM plants by July 13 could be endangered if the court does not approve GM`s sale of its best assets out of bankruptcy in a deal brokered by the Obama administration`s autos task force and funded by the U.S. Treasury.
"If ... (the) new GM is not able promptly to commence operations, many of GM`s suppliers will have further draconian reductions in revenue and no income," Henderson said.
That could force suppliers "to shut down their respective operations -- perhaps permanently -- and thereby (terminate) thousands of jobs."
GM, which filed for bankruptcy on June 1, is seeking bankruptcy court approval to sell its best assets to a reorganized company funded by the U.S. Treasury .
Judge Robert Gerber of the federal bankruptcy court in Manhattan has scheduled a June 30 hearing on the proposed sale.
Some of GM`s smaller unions, including the IUE-CWA and the United Steelworkers and a group of states, including Ohio and Connecticut have filed objections to the sale.
No competing bidders have emerged as an alternative to the U.S. government`s $60 billion financing for GM, including a proposed equity investment of $50 billion that would give the U.S. Treasury a 60 percent ownership stake.
At least 15 auto parts suppliers have filed for bankruptcy or had their assets seized by creditors in 2009, according to the Motor & Equipment Manufacturers Association, which represents the industry.
Those suppliers include Visteon Corp, Metaldyne Corp and Noble International Ltd.
Last week, the White House rejected a request for up to $10 billion in additional emergency funding from the auto parts industry.
The case is In re: General Motors Corp, U.S. Bankruptcy Court, Southern District of New York, No. 09-50026.
(Reporting by Kevin Krolicki; editing by Andre Grenon)
Original article

Nominees emerge for U.S. panel on Wall Street meltdown

2009-06-26T02:29:00.000+04:00

By Karey Wutkowski
WASHINGTON (Reuters) - A bipartisan panel armed with subpoena power to investigate causes of the Wall Street meltdown is on the brink of being launched, as Congress embarks on an ambitious effort to reform policing of the financial sector.
A short list of names has emerged for the Financial Crisis Inquiry Commission that includes former Republican presidential candidate Fred Thompson; former Democratic head of the Commodities Futures Trading Commission Brooksley Born; and Alex Pollock, a fellow at the conservative think tank American Enterprise Institute, according to a source familiar with the matter.
Congress last month created the 10-member commission to study how fraud, regulatory lapses, monetary policy, accounting, lending practices and executive pay contributed to the worst U.S. financial crisis since the Great Depression.
House of Representatives Speaker Nancy Pelosi has said the panel is modeled after the Pecora Commission, a Depression-era U.S. Senate panel that investigated the causes of the 1929 Wall Street crash.
"I think the announcement should be coming in the near future," Pelosi spokesman Nadeam Elshami said about the naming of the appointees.
The source, speaking anonymously because discussions were still ongoing, said other possible appointees include Bill Thomas, former Republican chairman of the House Ways and Means Committee; Jake Garn, former Republican senator; and Bob Graham, the former Democratic senator and Florida governor.
Born, Pollock and Thomas declined to comment. Thompson, Garn, and Graham did not immediately respond to messages.
The crisis commission must report its findings to Congress in December 2010. Its work will run parallel to Congressional efforts to draft the most dramatic overhaul of the financial regulatory system since the 1930s.
President Barack Obama has said he hopes reform legislation can be finalized by the end of this year. Obama`s proposal, unveiled earlier this month, calls for the Federal Reserve to police systemic risks to the economy and proposes consolidating primary bank supervision into a new regulator.
The plan also calls for creating a new consumer financial product watchdog and for giving the federal government the power to unwind troubled firms whose stability impact the broader financial system.
The Financial Crisis Inquiry Commission will study what led to the failure of several large Wall Street firms, which prompted Congress last year to pass a $700 billion financial bailout that has been unpopular among voters.
The U.S. economy has shed six million jobs since December 2007 in the midst of a recession that has seen the jobless rate hit 9.4 percent.
The crisis commission was given the power to hold hearings and to subpoena witnesses` testimony as well as correspondence and documents.
(Reporting by Karey Wutkowski, additional reporting by Jeremy Pelofsky; editing by Carol Bishopric)
Original article

Lear prepared to file for bankruptcy next week: report

2009-06-26T02:04:00.000+04:00

DETROIT (Reuters) - Auto parts supplier Lear Corp (LEA.N) is preparing to file for bankruptcy as soon as next week, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
The news comes as Lear faces a June 30 window, through which its lenders have agreed to waive the existing defaults under its primary credit facility.
Lear, which warned in March it might have to file for bankruptcy, has been exploring alternatives to restructure its debt outside of bankruptcy over the past months.
Lear spokesman Mel Stephens declined to comment.
The Journal reported that Lear had been in talks with banks in recent days for debtor-in-possession loans, the funding companies typically use to finance their stays in bankruptcy court. JPMorgan Chase (JPM.N) and Citigroup (C.N) will provide the bulk of the loan, according to the report.
Shares of Lear closed down 39 percent, or 34 cents, at 54 cents on the New York Stock Exchange before the news.
Southfield, Michigan-based Lear was in breach of its leverage covenants at the end of 2008 after borrowing all of the $1.2 billion available to it under the primary credit facility during the fourth quarter.
It had $3.5 billion of outstanding debt at the end of 2008, according to a filing with the Securities and Exchange Commission.
Lear, which makes seating and electrical equipment for vehicles, has suffered because of steep production cuts by General Motors Corp (GMGMQ.PK) and Ford Motor Co (F.N), which accounted for 42 percent of its global revenue in 2008.
U.S. auto sales fell 36.5 percent in the first five months of 2009 to their lowest level in nearly three decades.
The U.S. auto parts sector, already teetering on the brink of failure, has come under further pressure after Chrysler shut down nearly all of its production for the duration of its bankruptcy reorganization.
GM, which filed for bankruptcy on June 1, has also idled 13 assembly plants in North America for as long as nine weeks starting in mid-May.
(Reporting by Soyoung Kim; Editing Bernard Orr)
Original article

Emotions run high as Madoff sentencing nears

2009-06-25T23:15:00.000+04:00

By Martha Graybow
NEW YORK (Reuters) - Next Monday, Wall Street`s biggest and most brazen crook, Bernard Madoff, will leave his jail cell to hear his punishment. But for his victims, even a lifetime in prison may not be enough.
Madoff`s clients, who once considered themselves lucky to be part of his seemingly exclusive investment circle, have struggled in the six months since his arrest with lost nest eggs, unpaid bills, anxiety, depression and anger over what they see as an unfair process to try to get any money back.
The courtroom drama is expected to draw many victims, including a few who will describe their financial ruin to the judge. Others plan a rally to publicize their plight, saying they worry they`ll be forgotten once Madoff is put in prison.
"We don`t care about what happens to Madoff," said Laurance Cohen, 79, of Eldorado, New Mexico, who together with his wife Marcia, 78, plan to be outside the Manhattan federal courthouse when the swindler is sentenced.
"We just want to get our money back."
For many, there will be no justice until more people they believe were in on the crime join Madoff behind bars. Madoff, 71, has pleaded guilty to running a long-standing Ponzi scheme and is expected to spend the rest of his life in prison.
They also are angry that Madoff`s wife, their two sons and his brother, who have not been charged with any wrongdoing in what was a family-run business, do not appear to be suffering like they are.
"I think my biggest concern is that, basically, everything has gone according to his plan," said Jen Meerow, a New York resident who lost money to Madoff. "It is upsetting to know there are people at all levels of this that are probably going to get away with it."
Meerow, 32, whose parents also were bilked, said she fears Madoff long ago hid cash in anticipation of his arrest.
"He knew this day would come," she said. "What if he arranged to stash away some money in an offshore account and his children will get it in 20 years?"
Madoff is expected to speak at the sentencing hearing and will address "the shame he has felt" and "the pain he has caused," his lawyer said in court papers this week. The swindler has been told of the more than 100 victim letters describing the devastating toll of his fraud, his lawyer said.
Only Madoff and an outside auditor have been charged with criminal wrongdoing tied to the $65 billion scam, although U.S. stock regulators have brought civil fraud charges against several middlemen.
Much of the investors` vitriol has been directed at Madoff`s wife, Ruth, who is still living in the couple`s four- bedroom Manhattan penthouse. She has argued she should be allowed to keep the apartment plus $62 million in assets she contends are unrelated to her husband`s crimes.
She spends most of her time at home and, according to the New York Times, was banned from the exclusive hair salon where she used to get blond highlights. Wiped-out victims say such an inconvenience is hardly equal to what they are enduring.
"I do not see his family suffering," investor Rosalind Clark, of San Anselmo, California, wrote to the judge who will sentence Madoff. "They are still leading lives of excess." Continued...
Original article

Allen Stanford pleads not guilty in fraud case

2009-06-25T22:51:00.000+04:00

By Anna Driver
HOUSTON (Reuters) - After spending a week in jail, Texas financier Allen Stanford pleaded not guilty on Thursday to 21 criminal charges that he ran a $7 billion Ponzi scheme.
The once high-flying billionaire and sports promoter has been in federal custody since June 18, when he surrendered to the FBI in Virginia after a Houston grand jury indicted him on 21 counts of conspiracy, fraud and obstruction of justice.
U.S. Magistrate Judge Frances Stacy has yet to rule on whether Stanford must remain behind bars while he awaits a trial that is set to start on August 25.
"Not guilty, Your Honor," said Stanford, 59, wearing an orange jump-suit and hands manacled in front of him. The Texas native could face life in prison if convicted of the charges.
Stanford is the second high-profile fraud case to shake public confidence in Wall Street and the U.S. financial regulatory system after veteran financier Bernard Madoff pleaded guilty to a massive Ponzi scheme that could have cost investors as much as $65 billion.
Stanford is taking the anti-anxiety drug Ativan after initially turning to alcohol to deal with the stress of the case, his criminal attorney said in a filing.
Stanford was ushered into the Houston courthouse early on Thursday after spending a week in detention centers in Virginia and recently in Conroe, Texas, about an hour north of Houston.
According to the U.S. Securities and Exchange Commission, Stanford, with the help of executives at his firm and a top Antigua and Barbuda financial regulator, ran a "massive Ponzi scheme" for over a decade that centered on certificates of deposit in his bank in Antigua.
On Thursday, the island nation`s authorities arrested the country`s former chief financial regulator Leroy King, after the U.S. government last week filed criminal charges against him. A related SEC civil case accused him of taking bribes from Stanford in the form of over $100,000 in cash, Super Bowl tickets and access to Stanford`s fleet of private aircraft.
Stanford says he is innocent of the charges and that his multinational business was legitimate until the SEC "disemboweled" it by filing civil charges, which led to the confiscation of all his assets by a court-appointed receiver.
According to Dick DeGuerin, Stanford`s criminal attorney, his client is not a flight risk, and the government should not force him to take a "perp walk," where the accused is paraded in manacles in front of television cameras.
The U.S. government argued in a filing that Stanford was a "serious flight risk" because he had the means and the motives to flee the country rather than face life imprisonment.
About $1 billion in investors` deposits in the Antigua bank are still missing, and investigators have found $20 million in a Swiss bank account that was not documented in company records, the Justice Department said.
Stanford has an international network of "wealthy acquaintances" who could assist him and has "experience using private jets at a moments` notice," the department said in a filing.
Laura Pendergest-Holt, the former chief investment officer for Stanford Financial Group, charged with obstructing the SEC`s investigation of Stanford, also pleaded not guilty on Thursday. Continued...
Original article

Microsoft to cut prices on Windows 7 system

2009-06-25T22:27:00.000+04:00

By Bill Rigby
SEATTLE (Reuters) - Microsoft Corp (MSFT.O) will sell the standard home-user version of its new Windows 7 operating system for 8 percent less than the comparable version of its Vista system, as the global downturn hits spending on technology.
The world`s largest software company, whose recent ads champion low-priced PCs against more expensive Apple Inc (AAPL.O) computers, said the new system will be available at even lower prices for a short time, as it looks to tempt buyers ahead of the holiday shopping season.
The new operating system, which Microsoft hopes will be a bigger hit than the poorly received Vista, will be generally released on October 22. It will be available on pre-order from U.S. stores such as Best Buy Co Inc (BBY.N), online retailer Amazon.com Inc (AMZN.O) and the company`s own website from Friday.
Microsoft did not detail how much it would charge PC makers such as Hewlett-Packard Co (HPQ.N), Dell Inc (DELL.O) and Acer Inc (2353.TW) for preloading Windows 7 on their machines, which is how most customers will come to use the operating system.
The price Microsoft charges manufacturers is becoming a thorny point, as both sides look to maximize their share of profits as PC sales dip and prices are driven down.
The software giant said it would sell the Home Premium upgrade version of Windows 7 -- which most nonbusiness customers already using Windows will want -- for $49.99 from Friday until July 11 in the United States. The discs would be shipped after general release.
After July 11, the pre-order price will be $119.99, 8 percent less than the current $129.99 price tag for the comparable version of Vista, which cost $159.99 at launch in early 2007.
The Professional upgrade version of Windows 7 -- aimed at small companies using multiple computers -- will be on sale until July 11 at $99.99, then at $199.99 afterward. The comparable Vista version is the same price.
Prices for the full retail versions of the software -- for customers who want to install the system from scratch rather than upgrade their existing Windows system -- are also being reduced or held.
Microsoft will sell the full Home Premium version of Windows 7 for $199.99, 17 percent less than the comparable Vista version. Full versions of the more advanced Professional and Ultimate editions will be unchanged at $299.99 and $319.99, respectively.
To further tempt buyers, Microsoft said it was making a free upgrade option available to computer makers, meaning that customers who buy a PC or laptop with all but the most basic Vista versions from Friday should be able to get a free upgrade to the equivalent Windows 7 version.
How that offer is made available to customers is up to the individual PC makers. Both Microsoft and the manufacturers are hoping such an offer will avoid a sudden drop-off in already falling PC sales by persuading customers not to hold off on purchases until Windows 7 is launched.
Because the upgrade option means Microsoft is essentially selling two operating systems for the price of one, the company is deferring half the revenue from Vista sales over the next several months.
As a result, it said it would defer about $200 million to $300 million revenue from its fiscal fourth quarter, ending June 30, to later quarters, recognizing it either when a customer takes advantage of the upgrade, or at the end of the program on January 31, 2010. The move has no effect on cash flow.
In contrast to the Vista operating system, which was released in different language versions over several months, Microsoft said Windows 7 would be available in 14 languages on October 22 and a further 21 on October 31. Continued...
Original article

Allen Stanford in courtroom seeking bail

2009-06-25T20:50:00.000+04:00

By Anna Driver
HOUSTON (Reuters) - After spending a week in jail, Texas financier Allen Stanford on Thursday will face a U.S. judge who will decide whether the he must remain behind bars while he awaits trial for an alleged $7 billion swindle.
The once high-flying billionaire and sports promoter has been in federal custody since June 18, when he surrendered to the FBI in Virginia after a Houston grand jury indicted him on 21 counts of conspiracy, fraud and obstruction of justice.
Stanford, 59, a native of Mexia, Texas, could face life in prison if convicted of the charges.
Stanford, who arrived at the courthouse early this morning, is scheduled to appear at 10:00 a.m. CDT (11 a.m. EDT) before a U.S. magistrate in Houston who will rule on whether he must remain in federal custody pending trial.
According to the U.S. Securities and Exchange Commission, Stanford, with the help of top executives at his firm and a top Antigua financial regulator, ran a "massive Ponzi scheme" for over a decade that centered on certificates of deposit in his bank in Antigua.
Stanford says he is innocent of the charges and that his multinational business was legitimate until the SEC "disemboweled" it by filing charges, which led to the confiscation of all his assets by a court-appointed receiver.
At a detention hearing in Richmond, Virginia, on June 19, Justice Department lawyers convinced U.S. Magistrate Hannah Lauch that Stanford should remain in custody pending his Houston appearance on Thursday. Since then, Stanford has spent time in detention centers in Virginia and recently in Conroe, Texas, about an hour north of Houston.
The Justice Department is expected to oppose a motion from Stanford`s lawyers to grant bail on Thursday.
According to Dick DeGuerin, Stanford`s criminal attorney, his client is not a flight risk, and the government should not force him to take a "perp walk," where the accused is paraded in manacles in front of television cameras.
Stanford has already offered to surrender to U.S. authorities three times, and was denied each time because the government did not have a warrant for his arrest.
"The government has engineered circumstances designed to thwart Allen Stanford`s efforts to voluntarily surrender and appear," DeGuerin said in court papers filed on Wednesday. "Allen Stanford has shown he is not a flight risk through his actions thus far."
DeGuerin cited five high-profile white-collar crime cases where pretrial release of defendants was granted -- including confessed swindler Bernard Madoff and former HealthSouth Corp head Richard Scrushy, who is serving a seven-year prison term for bribery.
Three other former Stanford employees are also expected to appear separately on Thursday.
They are Laura Pendergest-Holt, the former chief investment officer for Stanford Financial Group, charged with obstructing the SEC`s investigation of Stanford, and two accountants charged with helping him falsify financial records.
Original article

Kimberly-Clark to cut about 1,600 jobs

2009-06-25T19:13:00.000+04:00

By Jessica Wohl
CHICAGO (Reuters) - Kimberly-Clark Corp (KMB.N) said on Thursday that it would cut about 1,600 salaried jobs, or roughly 3 percent of its workforce, as it tries to trim costs and respond faster to rivals and store brands.
The latest move comes four years after the maker of Kleenex tissues kicked off a three-and-a-half year cost cutting plan that included slashing about 6,000 jobs and closing about 20 manufacturing plants.
The plan announced on Thursday does not include closing any facilities. Kimberly-Clark had said in April that it expected to cut jobs in the second and third quarters as it tries to squeeze more costs out of the organization.
Its household products, such as Kleenex and Huggies diapers, have faced stiff competition from lower-cost store brands sold by retailers such as Wal-Mart Stores Inc (WMT.N) as consumers cut back. At the same time, its K-C Professional division has been pressured because the restaurants and other businesses it serves have been hit hard by the recession.
The move is "likely a necessary step" to allow Kimberly-Clark to invest in areas such as advertising and promotion as it tries to protect its market share, Sanford Bernstein analyst Ali Dibadj said.
Procter & Gamble Co (PG.N), in particular, has stepped up its push to grab cash-strapped consumers with lower priced versions of Bounty paper towels and Charmin toilet paper, as well as a lower cost line of diapers, Luvs. Kimberly-Clark competes directly with P&G in those categories.
PREDICTS $60 MILLION IN SAVINGS THIS YEAR
Kimberly-Clark said the latest round of job cuts would be in all regions and businesses and mainly impact salaried and non-production jobs.
The company offered a voluntary severance program for U.S. salaried employees this spring which about 600 people accepted, a spokesman said. Those jobs are included in the plan to reduce about 1,600 jobs from the company`s total of around 53,000.
Kimberly-Clark expects to record charges of $140 million to $150 million, or about 25 cents per share. About $110 million of those charges are slated for the second quarter.
It expects to see savings of about $60 million, or 10 cents per share, during the second half of the year.
In another effort to save, Kimberly-Clark decided earlier this year to freeze pension plan benefits for U.S. non-union employees.
Shares of Kimberly-Clark fell 0.6 percent to $51.46 in morning trade.
The shares slipped 1.8 percent from the beginning of the year through Wednesday, outperforming P&G, whose shares fell 11 percent in that period.
(Reporting by Jessica Wohl, editing by Dave Zimmerman)
Original article

U.S. jobless claims rose 15,000 in latest week

2009-06-25T18:49:00.000+04:00

By Glenn Somerville
WASHINGTON (Reuters) - The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft.
Gross domestic product, which measures total output within U.S. borders, dropped at a 5.5 percent annual rate in the first quarter after shrinking 6.3 percent in the fourth quarter of last year and 0.5 percent in the third quarter.
Separately, the Labor Department said the number of workers filing new claims for jobless benefits unexpectedly rose last week by 15,000 to a seasonally adjusted 627,000 -- a measure of the strain still faced by hard-pressed consumers.
"This will send a message that the labor market remains difficult and that it`ll be a while until we get some recovery," said Peter Boockvar, equity strategist with Miller Tabak & Co in New York.
Bond prices rose after the jobless claims data was issued as investors grew more cautious, while Wall Street appeared set for a weak stock-market opening.
The GDP reading was the final one for the first quarter. The Commerce Department initially said it shrank 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall. GDP is expected to slip again in the second quarter ending June 30 though less severely than in the first quarter.
"The economic data we`ve seen so far for the second quarter suggest the preliminary number for the second quarter will show a modest decline, maybe half the rate we saw in the first quarter," said Gary Thayer, senior economist with Wells Fargo Advisors in St. Louis, Missouri.
The GDP report reflected an economy still deep in recession as the year began, though the Paris-based Organization for Economic Cooperation and Development predicted this week the U.S. downturn will bottom out this year and be followed by a soft recovery in 2010.
Consumer spending, which fuels two-thirds of U.S. economic activity, increased at a downwardly revised 1.4 percent rate instead of the 1.5 percent previously estimated. Weak job markets and falling home prices are expected to dampen spending for some time.
Partly accounting for the revised GDP figure, the department said companies cut inventories at a slightly less vigorous rate in the first quarter than thought previously. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, meaning they subtracted less from growth.
Reflecting the weak pace of global economic activity, exports plunged at a 30.6 percent rate in the first quarter instead of the 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947.
The department said the drop in exports cut 4.16 percentage points from GDP.
Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980.
Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.
(Additional reporting by Alister Bull; Editing by James Dalgleish)
Original article

U.S. GDP contracts less in Q1, demand still soft

2009-06-25T18:25:00.000+04:00

By Glenn Somerville
WASHINGTON (Reuters) - The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft.
Gross domestic product, which measures total output within U.S. borders, dropped at a 5.5 percent annual rate in the first quarter after shrinking 6.3 percent in the fourth quarter of last year and 0.5 percent in the third quarter.
The GDP reading was the final one for the first quarter. The Commerce Department initially said it contracted 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall. GDP is expected to decline again in the current quarter ending June 30 though less severely than in the first quarter.
The GDP report reflected an economy still deep in recession as the year began, though the Paris-based Organization for Economic Cooperation and Development predicted this week the U.S. downturn will bottom out this year and be followed by a soft recovery in 2010.
Consumer spending, which fuels two-thirds of U.S. economic activity, increased at a downwardly revised 1.4 percent rate instead of the 1.5 percent previously estimated. Weak job markets and falling home prices are expected to dampen spending for some time.
Partly accounting for the revised GDP figure, the department said companies cut inventories at a slightly less vigorous rate in the first quarter than thought previously. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, which meant they subtracted less from growth.
Reflecting the weak pace of global activity, exports plunged at a 30.6 percent rate in the first quarter instead of 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947.
The department said the drop in exports cut 4.16 percentage points from GDP.
Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980.
Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.
(Editing by James Dalgleish)
Original article

AIG to spin off two units, cut government debt

2009-06-25T18:01:00.000+04:00

NEW YORK (Reuters) - American International Group Inc (AIG.N), which received $180 billion of taxpayer bailouts, said it will give the government stakes in two big life insurance units that it plans to spin off.
The embattled insurer said on Thursday it will put the equity of the units, American International Assurance Co (AIA) and American Life Insurance Co (ALICO), into special purpose vehicles, preparing both for initial public offerings.
The Federal Reserve Bank of New York will receive "preferred stakes" of $16 billion in AIA and $9 billion in ALICO, it said.
The transactions will reduce AIG`s debt to the Fed under a credit facility to $15 billion from $40 billion, it said.
Edward Liddy, AIG`s chief executive, said the agreement with the New York Fed "represents a major step toward repaying taxpayers and preserving the value of AIA and ALICO."
The New York Fed, in a separate statement, said the agreement will help AIG repay taxpayers and restructure. The AIA and ALICO transactions are expected to close in the second half of 2009, pending regulatory approvals.
ALICO operates in more than 50 countries but generates more than half its revenue in Japan.
Once the world`s largest insurer by market value, AIG nearly collapsed last year because of soaring losses from credit default swaps, as customers who bought debt protection from the company`s financial products unit boosted their demands for collateral.
AIG lost more than $99 billion in 2008 and has received a series of government bailouts, including roughly $85 billion of loans.
The company has found it more difficult to sell assets for good prices because prospective buyers know it needs to dismantle itself to help repay taxpayers.
Last year AIG tried to sell AIA privately for as much to $20 billion but failed to find a buyer.
Liddy, a former chief executive at Allstate Corp (ALL.N), last month announced plans to step down as AIG CEO, saying he had planned for his stay to be temporary. He said at the time it might take several years for AIG to repay taxpayers.
AIG shares closed Wednesday at $1.42 on the New York Stock Exchange.
(Reporting by Jonathan Stempel in New York and Sweta Singh in Bangalore; Editing by Dinesh Nair and John Wallace)
Original article

Lennar loss wider than estimates

2009-06-25T17:37:00.000+04:00

(Reuters) - U.S. homebuilder Lennar Corp (LEN.N) posted a wider-than-expected quarterly loss, weighed by falling home deliveries and average home prices, even as the housing market experienced an uptick in new home sales.
"While we are sensing pent-up demand in the market, rising unemployment, increased foreclosures and tighter credit standards continue to present challenges for the industry...," Chief Executive Stuart Miller said in a statement.
This combined with a recent spike in mortgage rates has made it difficult to predict when the market will ultimately turn the corner, he added.
Second-quarter loss was $125.2 million, or 76 cents a share, compared with a loss of $120.9 million, or 76 cents a share a year ago. Revenue fell 21 percent to $891.9 million.
On a comparable basis, analysts were looking for a loss of 70 cents a share on revenue of $599.5 million, according to Reuters Estimates.
The quarterly loss included charges of 38 cents a share related to valuation adjustments and other write-offs, and 27 cents a share on a non-cash deferred tax asset valuation allowance, Lennar said.
New home deliveries fell 16 percent, excluding unconsolidated entities, while average sales price of homes delivered fell 8 percent during the quarter, the company said.
Cancellation rate fell to 15 percent from 22 percent a year ago.
The company ended the quarter with $1.4 billion in cash, helped by cutting down its completed, unsold inventory by 53 percent to 626 homes at February 28.
Lennar shares were down 2 percent at $7.66 in trading before the bell. They had closed at $7.82 Wednesday on the New York Stock Exchange.
(Reporting by Dhanya Ann Thoppil in Bangalore; Editing by Anil D`Silva, Himani Sarkar)
Original article

Wall Street futures signal higher open

2009-06-25T15:36:00.000+04:00

(Reuters) - Dow Jones futures rose 0.6 percent, S&P 500 futures were up 0.5 percent and Nasdaq futures traded 0.6 percent higher early on Thursday morning, suggesting benchmark U.S. equity indexes would open higher.
Bank of America (BAC.N) was likely to be in the spotlight after the top Republican on the House Oversight and Government Reform Committee, Darrell Issa, said the Federal Reserve sought to hide its involvement in the bank`s takeover of Merrill Lynch.
Fed Chairman Ben Bernanke is due to testify on that acquisition before the committee at 10 a.m. EDT.
Also among financials, Barclays on Thursday cut its Q2 earnings per share estimate for Goldman Sachs (GS.N) to $3.55 from $5.20 and for Morgan Stanley (MS.N) to a Q2 loss per share of $0.70.
Investors were also likely to continue to digest the outcome of the Fed`s two-day interest rate policy meeting, which ended on Wednesday with the central bank sticking to its program of buying government and mortgage debt and saying it saw signs the U.S. recession was easing.
Blue-chip stocks on the move after Wall Street`s closing bell on Wednesday included sport goods maker Nike (NKE.N), down more than 6 percent on the back of disappointing orders reported with its Q4 results.
Other notable after-the-bell movers were Jazz Pharmaceuticals (JAZZ.O), up 30 percent on results of a late-stage drug study, retailer Bed Bath & Beyond (BBBY.O), up 6 percent after Q1 results, and investment bank Jefferies (JEF.N), up 7 percent, after saying it expects record net earnings in Q2.
Four S&P 500 companies are scheduled to report quarterly results on Thursday: Lennar Corporation (LEN.N), McCormick & Co Inc (MKC.N), Micron Tech (MU.N) and ConAgra Foods (CAG.N).
Economic data include final Q1 GDP and corporate profits as well as weekly jobless claims, all at 1230 GMT, and the Kansas City Fed`s June manufacturing survey at 1500 GMT (11 a.m. EDT).
Europe`s benchmark FTSEurofirst 300 index .FTEU3 was down 0.
(Reporting by Peter Starck; editing by John Stonestreet)
Original article

Toyota`s new boss warns of two more tough years

2009-06-25T15:12:00.000+04:00

Chang-Ran Kim; Asia Autos Correspondent
TOKYO (Reuters) - Toyota Motor Corp`s new president, the grandson of the group`s founder, warned on Thursday the auto industry faces another two tough years as he outlined his strategy to return the world`s No.1 car company to profit.
Toyota aims to build more autonomous operations in North America and shift its focus to marketing a region-specific vehicle line-up, rather than offering a full line-up in every region, Akio Toyoda told his first media conference in the job.
Most of Toyota`s factories around the world are underused as a global recession hammers car sales, sending two of America`s three big car makers into receivership.
Facing a second year of record losses, Toyota aims to cut costs from its already lean operations so it can be profitable using just 70 percent of its factory capacity.
"We want to do everything possible to avoid a third consecutive year of losses," Toyoda told reporters.
Toyoda said European efforts would focus on hybrid models.
Its remodeled Prius hybrid, launched last month, has been a rare bright spot, winning more than 180,000 orders in Japan.
Production has been limited to two plants so far, creating a bottleneck for delivery, while analysts say the fuel-sipping model could eat into sales of Toyota`s other more profitable cars.
Toyoda has said he aims to steer the company "back to basics" -- a promise also made by his predecessor, Katsuaki Watanabe, when he took over in 2005 as Toyota`s factories scrambled to meet soaring demand.
The push for profits would not involve plant closures, Executive Vice President Atsushi Niimi told the news conference.
"Right now, the market is very tough. But in two years, or at most three years, it will recover so we want to make sure we have the means to meet demand then," said Niimi, who heads manufacturing operations in Toyoda`s new-look executive team.
At the annual meeting this week, Toyota promised shareholders to do better to recover from a 461 billion yen ($4.8 billion) operating loss.
For the year to March 2010, it has forecast an even bigger loss, of 850 billion yen, although consensus forecasts are for a much smaller loss of 495 billion yen.
Unlike bankrupt U.S. rivals Chrysler and General Motors, Toyota has said it plans to ride out the downturn without slashing full-time jobs.
Many industry executives have said recent sales trends in major markets such as the United States and Japan indicate that demand has bottomed, but opinion is divided over when it will recover convincingly. Continued...
Original article

Oil rises towards $69 on Nigeria attack

2009-06-25T14:47:00.000+04:00

By Ramthan Hussain
SINGAPORE (Reuters) - Oil rose toward $69 on Thursday, after Nigeria`s main militant group raided a Royal Dutch Shell pipeline and disrupted a major export terminal, recouping losses caused by hefty builds in U.S. fuel stocks.
Prices had earlier extended Wednesday`s fall after data showed gasoline stocks in the world`s top consumer rose 3.9 million barrels last week, exceeding analysts` predictions, as refiners prepared for the peak driving season that was expected to be less robust this year, while distillates hit 10-year highs.
Analysts said the price drop was limited by a sharp 3.8 million barrel decline in U.S. crude stocks.
U.S. crude futures for August gained 27 cents to $68.94 a barrel by 0626 GMT (2:26 a.m. EDT), after falling to $68.11 earlier. London Brent crude rose 35 cents to $68.68.
"The EIA report which shows a large increase in products stocks was a negative factor for oil prices. But we are seeing that with oil falling from the high $60s, buying support emerged and limited the downside," said David Moore, commodity strategist at Commonwealth Bank in Sydney.
The Movement for the Emancipation of the Niger Delta (MEND) said it had attacked the Billie/Krakama pipeline in Rivers state in the Niger Delta that feeds into pumping stations linked to the Bonny crude terminal, one of Nigeria`s main export terminals.
No independent verification was immediately available on MEND`s latest statement, which came after the group also claimed responsibility on Sunday for attacks on three installations run by Shell, which had said it was investigating the reports.
The raids came ahead of the Nigerian president`s proposal later on Thursday for a 60-day amnesty programme for the militants, in a bid to end years of attacks on the oil industry, which have cut output to less than two-thirds of its installed capacity of 3 million barrels per day over the last three years.
"Bonny is a big stream and it will have a bullish impact," said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.
He added that the market had been in a correction phase after running up to as high as $73.23, the near eight-month high hit on June 11, which analysts see as a key resistance level.
Traders said oil`s recovery was partly due to a rally in Asian shares for a second day after the Federal Reserve reinforced that interest rates will be kept at a record low for a while.
The Fed left interest rates near zero percent but tweaked its statement to say financial markets had improved and signaled less concern about deflation, while reiterating the economy will remain weak.
The U.S. dollar gave up some of its gains, losing some ground to higher-yielding currencies, such as the Australian dollar, on the rise in stocks. A firmer dollar makes commodities priced in dollars more expensive for holders of other currencies.
Optimism over a potential recovery lifting oil demand has raised prices from below $40 over the past three months, though fears about the global economy lingered.
And government forecasters said that even though U.S. oil demand should rebound when the economy recovers, crude imports might not resume growth as quickly as they did when past recessions ended because of new domestic oil production coming onstream.
(Editing by Ben Tan)
Original article

BP selects Ericsson CEO as next chairman

2009-06-25T14:23:00.000+04:00

By Tom Bergin
LONDON (Reuters) - Ericsson (ERICb.ST) Chief Executive Carl-Henric Svanberg is stepping down to become Chairman of BP Plc (BP.L) in a surprise appointment that ends the oil major`s lengthy search for a new chairman.
Ericsson said it had appointed its current Chief Financial Officer, Hans Vestberg, to replace Svanberg as President and CEO.
Svanberg will step down at Ericsson at the end of the year and take over from Peter Sutherland at BP in January 2010.
"Everyone had been waiting for something to happen, that is that Carl-Henric would step down," Nordea analyst Mats Bergstrom said.
"That Hans Vestberg is chosen indicates that the board feels the business is moving along well, and investors will appreciate this, feeling that he has a good grip of the numbers."
But a dealer said Svanberg`s move follows investor dissatisfaction with management at the telecoms equipment maker.
The surprise appointment ends a fraught recruitment process at BP. Sutherland had expected to stand down late last year or earlier this year.
BP initially selected miner Rio Tinto`s (RIO.AX) then chairman Paul Skinner, a former Royal Dutch Shell Plc (RDSa.L) executive, to fill the job.
However, Skinner withdrew following investor unease over Rio`s plan to sell $19.5 billion in assets and bonds to Chinese state-owned aluminum group Chinalco, BP sources said.
Skinner stepped down from his Rio role in March and earlier this month, Rio dropped the Chinalco deal.
The failed Skinner appointment poisoned the role for some potential candidates, especially UK businessmen, some executives said.
BP had hoped to select someone with oil industry experience, sources close to the process said, but the Skinner debacle limited its options.
Svanberg will join the BP board in September and, once he becomes Chairman, will be based in London and devote the majority of his time to BP business, BP said.
Svanberg will remain a member of the Ericsson Board of Directors, Ericsson said.
(Additional reporting by Mia Shanley in Stockholm)
(editing by Will Waterman, John Stonestreet)
Original article