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

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

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

Putnam Chairman Charles "Ed" Haldeman stepping down

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

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

Fed`s Bullard says must shield Fed independence

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

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

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Fed`s Bullard says policy to stay loose for awhile

Wal-Mart supports employer mandated health coverage

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

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

Fed`s Bullard says policy to stay loose for awhile

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

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

Crisis far from over: World Bank chief

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

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

Cisco may take on Microsoft`s Office

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

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

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

(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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Oil rises towards $69 on Nigeria attack

Enterprise Partners to buy Teppco for $3.3 billion

(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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Enterprise Partners to buy Teppco for $3.3 billion

EU says making progress on gas loan to Ukraine

(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.
 
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Gas contracts with Ukraine will not be changed - Gazprom CEO

Gazprom to buy 0.5 bcm of Azerbaijani gas annually from 2010

(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

Gas contracts with Ukraine will not be changed - Gazprom CEO

([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

Recovery frail but stimulus exit must be timely

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

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

Oil rises over $69 after Nigerian attack report

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

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

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

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)
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IBM loses injunction against Dell executive

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...
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Ken Lewis retains backing of key BofA exec

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)
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Nigerian rebels say hit Shell site despite amnesty

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...
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Oil rises above $70 on Nigeria attacks, econ hopes

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)
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