Wall Street drops as Boeing delay, housing data weigh

Business Update: Asia tumbles
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By Leah Schnurr
NEW YORK (Reuters) - Stocks fell on Tuesday as Boeing again delayed the first test flight of its Dreamliner aircraft and housing data pointed to a sluggish economic recovery.
Boeing Co (BA.N), the Dow's biggest drag, said the inaugural flight of its long-delayed 787 Dreamliner will be postponed so it can reinforce a section of the aircraft. Boeing slid 9 percent to $42.72.
Sales of previously owned homes rose at a slower-than-expected pace in May, industry data showed, pointing to a tepid recovery from a severe recession.
"In my view the housing number suggests that things are bottoming, but that's a far cry from improving. I think the markets are focused on how fast the recovery is going to be, and I think it won't be as fast as people are thinking," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.
The Dow Jones industrial average .DJI slipped 33.18 points, or 0.40 percent, to 8,305.83. The Standard & Poor's 500 Index .SPX was off 1.79 points, or 0.20 percent, to 891.25. The Nasdaq Composite Index .IXIC eased 7.92 points, or 0.45 percent, to 1,758.27.
Losses were cushioned by a search for bargains the day after the worst session for stocks in two months. After a sharp rally off March's 12-year lows, the market has pulled back as investors questioned the strength of a recovery and fretted over a possible correction after a three-month run-up.
The broad S&P 500 dropped back into negative territory for the year on Monday. Though the index is up nearly 32 percent from a 12-year low in March, it has eased off a gain of as much as 40 percent.
Shares of Starbucks Corp (SBUX.O) and FedEx Corp (FDX.N) both benefited from broker upgrades. On the Nasdaq, Starbucks rose 2.8 percent to $14.10 after Robert W. Baird said it raised its rating to "outperform" from "neutral."
FedEx gained 2 percent to $51.04 after JPMorgan boosted the shares to "overweight" from "neutral" and said a turn in the economy will give significant upside to the stock.
A U.S. Treasury auction later in the day will be watched for how successfully the new securities are absorbed by the market. The auction of $40 billion in two-year notes is part of a total of $104 billion in new issuance this week, the largest single-week amount of debt sales.
(Reporting by Leah Schnurr; additional reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)

Source: Reuters

May U.S. existing home sales rise

WASHINGTON (Reuters) - Sales of previously owned homes in the United States rose at a slower-than-expected pace in May, an industry survey showed on Tuesday, pointing to a sluggish recovery from the severe economic recession.
The National Association of Realtors said sales rose 2.4 percent to an annual rate of 4.77 million units from a downwardly revised 4.66 million pace in April. That compared to market forecasts for a 4.81 million-unit pace. However, sales increased for a second straight month in May.
A separate survey from the Federal Reserve Bank of Richmond showed a reading of manufacturing sentiment in the U.S. mid-Atlantic states rose to 6 in June from 4 in May and minus 9 in April. However, manufacturers' outlook for the next six months softened somewhat, signaling conditions remain fragile.
U.S. stock indexes trimmed gains on the data, while Treasury debt prices were unchanged.
"The housing number suggests that things are bottoming, but that's a far cry from improving. I think the markets are focused on how fast the recovery is going to be, and I think it won't be as fast as people are thinking," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.
The Realtors report showed sales remained down 3.6 percent compared to May last year. The group's chief economist, Lawrence Yun, said sales in some areas appeared to be losing momentum and blamed the slower rise in May sales to poor home value appraisals, which he said were stalling transactions.
"Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting loans," he said.
"There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected."
Restoring stability to the housing market is seen critical to pulling the economy out of an 18-month-old recession, the longest since the Great Depression of the 1930s.
Collapsing home values and tighter access to credit are forcing U.S. households to become more frugal, a trend that could make the widely anticipated economic recovery in the second half of 2009 feeble and lacking on the jobs front.
Data on new and existing home sales have backed suggestions that the three-year housing slump was nearing a bottom, but a surge in mortgage rates and persistently high unemployment threatens this budding optimism.
Home loan rates have jumped in tandem with government yields amid speculation that massive capital injections to boost the economy by both the Federal Reserve and the government could stoke inflation pressures in the long term.
Yun said sales could actually rise in the coming months as buyers rushed to lock in mortgage rates, but cautioned that higher borrowing costs could hurt the nascent recovery.
The median national home price fell 16.8 percent, the third largest drop on record, from the same period a year ago to $173,000. Distressed properties made up 33 percent of sales, down from the 45 to 50 percent seen in recent months.
The Realtors report showed sales of single-family homes rose 1.9 percent last month to an annual rate of 4.25 million, while multifamily units -- the hardest-hit sector -- surged 6.1 percent to a 520,000-unit annual pace.
The supply of unsold homes fell 3.5 percent to 3.80 million. At the current sales pace, it would take 9.6 months to clear that supply, down from 10.1 months in April. Continued...
Source: Reuters

U.S., EU launch WTO case against China on raw materials

By Susan Cornwell and Darren Ennis
WASHINGTON/BRUSSELS (Reuters) - The United States and European Union are launching a World Trade Organization case against China over its export restrictions on raw materials, officials announced on Tuesday.
The action follows failure to persuade resource-hungry China to reduce its export tariffs and raise quotas on key materials such as coke, zinc and yellow phosphorus.
The materials are used in steel, microchips, planes and other products, and the trade flows affected are worth billions of dollars, U.S. officials said.
"After more than two years of urging China to lift these unfair restrictions, with no result, we are filing at the WTO today," U.S. Trade Representative Ron Kirk told a news conference in Washington.
"We are most troubled that this appears to be a conscious policy to create unfair preferences for Chinese industries" that use the materials, he said.
The United States and the European Commission -- which oversees trade for the 27-nation EU bloc -- are formally seeking consultations with Beijing at the global trade watchdog. If these talks fail, the next step would be to request a WTO panel to hear the complaint.
"It is very much hoped that we will not have to proceed to the next stage," Kirk said.
In Brussels, EU Trade Commissioner Catherine Ashton said in a statement, "The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn."
"I hope that we can find an amicable solution to this issue through the consultation process," she said.
The EU and the United States say China has continued to restrict exports of raw materials despite Beijing's pledge to eliminate export taxes and charges when it joined the WTO in 2001.
This seriously disadvantages foreign "downstream producers" of goods, since the export restraints limit their access to raw materials and raise world market prices for the materials, while lowering the prices that domestic Chinese producers have to pay, U.S. officials said.
U.S. officials said the nine materials covered by their case were bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc.
Taking action at the WTO is expected to further damage already brittle trade relations with China. U.S.-China tensions have been exacerbated by the growth in the U.S. trade deficit.
Trade disputes between Brussels and Beijing are also on the rise since the EU's trade deficit with China has ballooned. Brussels has imposed a number of anti-dumping tariffs on imports of Chinese goods ranging from shoes to steel products.
In a move that may have been an attempt to forestall U.S. and European action, Beijing had said on Monday it was cutting export taxes on a range of materials, including some used to make steel.
(Editing by David Storey)

Source: Reuters

Ford to get government technology loan: sources

By John Crawley
WASHINGTON (Reuters) - Ford Motor Co (F.N) will receive a share of $25 billion in government loans designed to help automakers retool factories for making fuel-efficient cars, according to sources familiar with the decision by the Obama administration.
Energy Secretary Steven Chu will make the announcement later Tuesday at an event at Ford headquarters in Dearborn, Michigan, the sources said.
Government and industry sources confirmed that Ford had qualified for the first tranche of financing, approved last year by Congress and the Bush administration.
The amount was not disclosed, but Ford had sought billions in its application, sources have said.
The Obama administration previously said it would draw down $10 billion in loans this year and award the balance in 2010. The loan program is intended to help carmakers meet stricter government fuel-efficiency targets by spurring development of advanced gasoline-electric hybrids, all-electric vehicles and other efficient technologies.
It had been long expected that Ford would be approved for assistance.
General Motors Corp (GMGMQ.PK) and Chrysler CCMLPD.UL applied for funding as well, but government officials have said any decisions on their bids would have to wait until their finances improve.
Chrysler emerged from bankruptcy earlier this month and is operating under an alliance with Italy's Fiat (FIA.MI). GM is currently in bankruptcy.
Both GM and Chrysler have received billions in federal bailout money since January. The retooling money is only available to viable companies.
Ford has not asked for bailout assistance.
(Reporting by John Crawley; editing by John Wallace)

Source: Reuters

MySpace to cut two-thirds of global workforce

NEW YORK (Reuters) - MySpace, the social networking website owned by Rupert Murdoch's News Corp, said on Tuesday it plans to cut about two-thirds of its international workforce and close at least four of its offices outside the United States.
The proposed restructuring plan would reduce MySpace's international staff to about 150 people from 450, the company said in a statement.
The planned cuts come on top of MySpace's announcement last week that it was reducing its U.S. staff by about 30 percent to 1,000 people, saying its staffing levels were "bloated" and had hurt its ability to be efficient and nimble.
Roughly half of MySpace's total user base comes from outside the United States. Rival Facebook's worldwide user base is more than double that of MySpace, according to market researcher comScore.
"As we conducted our review of the company, it was clear that internationally, just as in the U.S., MySpace's staffing had become too big and cumbersome to be sustainable in current market conditions," MySpace Chief Executive Owen Van Natta said in a statement.
News Corp appointed Van Natta, formerly Facebook's chief operating officer, in April to replace MySpace co-founder Chris DeWolfe.
Under the proposed plan, MySpace would place its existing offices in Argentina, Brazil, Canada, France, India, Italy, Mexico, Russia, Sweden and Spain under review for possible restructuring.
Upon completion, London, Berlin and Sydney would become primary regional hubs for MySpace's international operations.
MySpace China, a locally owned, operated and managed company, and MySpace's joint venture in Japan will not be affected by the proposed plan, the company said.
MySpace, which currently has 15 international offices, declined to comment on specific staffing levels in each region.
(Reporting by Franklin Paul and S. John Tilak; editing by Tiffany Wu and Maureen Bavdek)

Source: Reuters

Thomson Reuters UK delisting to force stake sales

By Paul Hoskins and Raji Menon
LONDON (Reuters) - Thomson Reuters' (TRIL.L) plan to cancel its London Stock Exchange listing prompted a jump in its shares on Tuesday, but the rally was tempered by fears some large UK shareholders will have to cut or sell their stakes.
London-listed shares in the news and financial data publisher rose as much as 7.3 percent, closing in on its more expensive U.S.-listed stock (TRI.N), which will replace the British shares on a one-for-one basis.
Chief Executive Tom Glocer said he hoped UK shareholders would retain their investments after the reorganization, but major institutional investors are likely to sell many or all of their shares, given the funds they manage are UK focused.
Thomson Reuters said U.K. shareholders now constitute only 5 percent of the company's combined shareholder base.
"Tom Glocer was good enough to come and see me yesterday afternoon together with the two other remaining institutional shareholders in London, and I am bitterly disappointed," said one top-10 institutional investor who wished to remain anonymous.
The fund manager said he had hoped the company would leave it five years before reaching a decision on its listings.
"The dozy old UK institutions and sell-side analysts are only just realizing that Thomson Reuters is a much better company than they thought," he said. "I think investors would have really come back to this one ... It's a real shame."
The company, formed in 2008 when Canadian data publishing company Thomson Corp bought British news and financial information provider Reuters, said the fragmentation in its share structure was deterring some investors.
It also stands to save millions of dollars in costs by exiting the London and Nasdaq exchanges, leaving it with two listings on the New York and Toronto exchanges (TRI.TO).
Analysts at Numis Securities said they could see the benefits the simpler shareholder structure would bring but that they too were disappointed by the move.
"We have been firm supporters of the group, which was one of our key picks in Media 2009, and are therefore greatly saddened to see the delisting," they wrote, adding that many UK institutional investors would likely have to sell their stakes.
Numis had a 'hold' rating on the London-listed stock prior to news of the reorganization but upgraded it to 'add' in order to reflect the discount relative to the U.S. shares.
At 8:08 a.m. EDT, London shares in Thomson Reuters, which also reconfirmed its full-year guidance, including revenue growth, were up 4.8 percent, down from a high of 1,750 pence earlier in the session.
That is still short of the 1,790 pence that Numis calculates it would have to reach to match valuations on the U.S. stock.
BRITISH DRAG Continued...
Source: Reuters

Stock futures point up as Moody's says U.S. rating safe

Business Update: Asia tumbles
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By Leah Schnurr
NEW YORK (Reuters) - Wall Street was set to rise at the open on Tuesday, the day after the worst one-day loss in two months, as Moody's Investors Service said the U.S. government was not in danger of losing its top rating.
Moody's said the United States' Aaa credit rating was safe, but added it could be at risk if Washington is unable to bring public debt back on a downward trajectory.
Investors are jittery that triple A-rated governments such as the U.S. and Britain could face credit rating downgrades as they borrow heavily to fund efforts to pull out of recession.
"We're going to get the opportunity to look at things in a fashion that may resemble more of a 'Where are the opportunities', versus 'How quickly can I get out of stocks?'" said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.
S&P 500 futures rose 3.80 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 16 points, and Nasdaq 100 futures added 4 points.
Hogan said defensive stocks could lead as investors shift into companies that are perceived as better able to weather the economic storm.
Among economic data on tap, the National Association of Realtors will release existing home sales for May, while the Federal Reserve Bank of Richmond will announce June indexes on area manufacturing and service sectors.
The Federal Open Market Committee begins a two-day meeting on interest-rate policy, and bond traders are watching for any changes to the central bank's $300 billion Treasury bond purchasing plan and the economic outlook.
Worries that a recovery will be tepid has caused stocks to pull back lately, and analysts will look at the day's data to see if the economy is stabilizing. Stocks could also get a lift as investors search for bargains after indexes saw their worst day since April 20.
The broad S&P 500 dropped back into negative territory for the year on Monday as investors reconsidered the health of the economy and grew nervous about the possibility of a correction after a three-month rally.
Though the S&P is up 32 percent from March's 12-year low, it has eased off a gain of as much as 40 percent.
Shares of Starbucks Corp (SBUX.O) rose 2.3 percent to $14.02 after Robert W. Baird upgraded the stock to "outperform" from "neutral."
A U.S. Treasury auction later in the day will be watched for how successfully the new paper will be absorbed by the market. The auction of $40 billion in two-year notes is part of a total of $104 billion in new issuance this week, the largest single-week amount of debt sales.
(Reporting by Leah Schnurr; editing by Jeffrey Benkoe)

Source: Reuters

U.S. credit rating a "solid triple-A": Moody's

TOKYO (Reuters) - Moody's Investors Service said on Tuesday that the U.S. government's triple-A credit rating was safe but added that it could be at risk if Washington were unable to bring its public debt back to a downward trajectory.
Financial markets have repeatedly been spooked this year by concern that triple-A rated governments such as the United States and Britain could face credit ratings downgrades as they borrow heavily to spend their way out of recession.
"The U.S. government triple-A is safe," Pierre Cailleteau, team managing director of Moody's Sovereign Risk Group, said at a media briefing on sovereign credit ratings held in Tokyo.
Moody's has a stable outlook on the U.S. rating, which indicates a change is not expected over the next 18 months.
Replying to a question about the sovereign rating of the United States, Cailleteau said the U.S. rating "remains a solid triple-A."
But he added that there were possible risks that could lead to a downgrade.
"That will happen for two reasons. Either our assumptions in terms of debt reversibility prove to be wrong. That is, in fact the U.S. government is unable to bring public debt back to a downward trajectory," he said.
The other reason would be if the United States' ability to raise a large amount of debt at a low cost were to be put at risk, Cailleteau said.
"It could be put at risk if the U.S. dollar was severely challenged as the main international reserve currency," he said.
But the possibility of the dollar being replaced as the main international reserve currency in the near future was a "pretty remote risk," he added.
Debate has flared in the past few months about the dollar's status as the world's reserve currency at a time when the United States' debt issuance is ballooning to pay for financial and economic rescue programs.
The bulk of the world's foreign exchange reserves are held in dollars, and Russia, the holder of the world's third-largest reserves after China and Japan, has repeatedly called for less global reliance on the dollar.
Moody's Investors Service said in May that it was comfortable with the triple-A sovereign rating on the United States, but it was not guaranteed forever.
It also warned in May that if the United States failed to reduce current debt levels once economic growth returned, the triple-A rating could come under pressure.
(Reporting by Masayuki Kitano; Editing by Chris Gallagher)

Source: Reuters

Toyota confirms Akio Toyoda as new president

TOYOTA CITY, Japan (Reuters) - Toyota Motor Corp confirmed Akio Toyoda as its new president on Tuesday, promoting the grandson of the company's founder to guide the world's No.1 automaker through the worst downturn in its history.
Toyoda, 53, and a new management team that includes four new executive vice presidents and eight new board members, will need to hit the ground running with the company facing tanking car sales and a record loss for the year to March.
The industry slump, fueled by tight credit, volatile fuel prices and rising jobless numbers, has already helped drive U.S. rivals General Motors and Chrysler into bankruptcy.
"We expect to face continued hardship in our business environment for the near term, despite signs of recovery in some areas," outgoing President Katsuaki Watanabe told Toyota's annual shareholders' meeting, adding that the company would try to achieve deeper cost cuts than planned.
"We are sorry to have worried our shareholders," he said.
At a board meeting following the shareholders' meeting, Watanabe was confirmed as vice chairman along with the other management changes including the promotion of Toyoda.
Toyoda had long been seen as a candidate to head the company founded by his grandfather in 1937 as he rose through the ranks at nearly twice the speed as his predecessor.
Supporting Toyoda will be five vice presidents while two key company elders, Honorary Chairman Shoichiro Toyoda -- Akio's father -- and Senior Adviser Hiroshi Okuda, resigned from the board. Eight new officials joined the 29-member board.
In a move seen as an attempt to balance the newly promoted with seasoned veterans, Toyota brought back Yoshimi Inaba, an outspoken heavyweight who left as executive vice president in 2007 to head an airport that Toyota helped build.
Inaba returns as a director and will take charge of Toyota's North American operations, the company's largest and, until recently most profitable market. Inaba, fluent in English, headed Toyota Motor Sales U.S.A., the California-based sales arm, from 1999 to 2003.
Takeshi Uchiyamada, chief engineer of the first-generation Prius, will remain in his role as executive vice president, switching his responsibilities to R&D and product management from manufacturing. Uchiyamada was among those who pushed for Toyota's new Mississippi plant, which is now on hold as the automaker struggles to fill unused capacity elsewhere.
Senior managing directors Yukitoshi Funo, Atsushi Niimi, Shinichi Sasaki and Yoichiro Ichimaru will be promoted to executive vice president.
Funo, formerly head of operations in the Americas, will be in charge of emerging markets such as China, Latin America and the Middle East.
Niimi will head manufacturing, Sasaki will be responsible for purchasing and quality, and Ichimaru will head Japan sales, administration and finance issues.
Toyoda and his new management team are scheduled to hold a news conference in Tokyo on Thursday.
(Reporting by Nobuhiro Kubo and Chang-Ran Kim; Editing by Lincoln Feast)

Source: Reuters

U.S. may drop UBS tax evasion case: report

By Jason Rhodes and Emma Thomasson
ZURICH (Reuters) - The U.S. Justice Department may drop a legal case aimed at forcing Swiss bank UBS AG to reveal the names of 52,000 wealthy American clients suspected of offshore tax evasion, the New York Times reported on Tuesday.
Swiss Finance Minister Hans-Rudolf Merz said at the weekend that U.S. authorities could be willing to strike a deal after Switzerland agreed a new double taxation treaty with the United States last week aimed at fighting tax evasion.
The case could be dropped before July 13, when Judge Alan Gold of the United States District Court in Miami, is expected to hold a short trial on the issue, the New York Times said, citing a United States official briefed on the matter, adding that a deal could still collapse.
"We hope it's true but we also have to look at what conditions are attached," a Swiss finance ministry spokesman said, adding it wanted to see official confirmation.
UBS, the world's largest wealth manager which has seen big client outflows over the U.S. case, declined to comment on the report, while the U.S. Justice Department could not be immediately reached for comment.
"After both governments agreed on a new double taxation treaty last week it now seems as if a compromise could also be found for this case. This would be highly positive news for UBS," said Kepler Capital Markets analyst Dirk Becker.
However, he added that most of the damage had already been done to UBS's reputation.
Swiss Economics Minister Doris Leuthard was quoted on Tuesday as saying it will take some time before UBS -- one of Europe's banks hit hardest by the financial crisis -- is back to health, but its situation has improved under new Chief Executive Oswald Gruebel.
UBS shares were up 3 percent at 14.20 Swiss francs by 0745 GMT (3:45 a.m. EDT), outperforming a 0.1 percent lower DJ Stoxx European banking sector.
BERLIN SUMMIT
The Swiss agreement last week of a new tax treaty with the United States comes ahead of a summit in Berlin on Tuesday where ministers are expected to renew pressure on nations like Switzerland to weaken bank secrecy and increase tax cooperation.
Deutsche Bank analyst Matt Spick said the U.S. tax agreement increased the chances of a deal but said the U.S. Internal Revenue Service was unlikely to settle early to keep pressure on UBS clients to declare themselves voluntarily.
"This means that a settlement is likely to take place close to the July 13 court hearing date. Furthermore, an unfavorable ruling is still possible, which presents a key risk to the UBS franchise and share price," he wrote in a client note on Monday.
The Swiss government has warned it could have trouble getting new tax agreements ratified in possible referendums without the U.S. giving ground on the UBS case.
"UBS also has to make its contribution and the USA will move," Merz told Swiss Sunday paper SonntagsZeitung. Continued...
Source: Reuters

EU recovery hopes punctured

By Nigel Davies and Alan Wheatley
LONDON/BEIJING (Reuters) - A stumble in sentiment punctured hopes of a rapid rebound from recession in the euro zone's services-led economy and the European Union and United States faced off against China in a looming trade dispute over raw materials.
Euro zone purchasing managers figures on Tuesday showed a recovery had stalled, although manufacturers fared better as, aided in part by government stimulus measures, they ran down stocks of goods to new lows.
In Washington, the U.S. administration readied measures to stem unemployment, while The United States and European Union were expected to launch a World Trade Organization case against China over its export restrictions on raw materials, industry sources said. [nN22519893]
A Chinese central bank official said the country's economy is headed in the right direction and should recover faster than many others'. But the foundations of the rebound were not yet solid, he said, adding his to a chorus of voices cautioning against hopes of a quick upturn.
"The recovery is not there yet. We are going to get out of recession slowly in the second half and we're not going to see a sharp V-shaped recovery," said Olivier Gasnier, analyst at Societe Generale, after weaker-than-expected French consumer spending figures.
The world economy is struggling to overcome problems stemming from last year's housing and financial market meltdown against a background of continued tight credit conditions, the corporate sector's reluctance to spend and mounting job losses.
U.S. MOVES
U.S. Trade Representative Ron Kirk was expected to launch WTO action against China at a news conference on Tuesday, industry sources said, though his office gave no details.
Barack Obama, who has focused his first five months as president on trying to end the recession, was likely to outline plans to create jobs and stem unemployment, which economists expect to hit 10 percent in coming months.
In his fourth White House press conference since taking office, the president was expected later on Tuesday to throw his weight behind legislative bids to reform healthcare and cut U.S. greenhouse gas emissions.
In the euro zone, surveys hinted that the worst of a dark recession had passed, but that a recovery may well take time to take root.
In France consumer spending fell by more than expected in May, underlining concerns about fragile domestic demand, while in Germany a purchasing managers' index showed the rate of contraction in Germany's private sector accelerated in June.
The PMI data added to signs Europe's largest economy faces a bumpy recovery from record recession and overshadowed a report by German GfK market research group that consumer sentiment was poised to push up.
Chris Williamson, chief economist at financial information company Markit, said the German PMI data highlighted concerns that recovery was going to be difficult.
"We may see some plateauing and ... the economy still contracting as we move through the rest of the year," he said. Continued...
Source: Reuters

Oil falls towards $67 on economic outlook

By Joe Brock
LONDON (Reuters) - Oil fell toward $67 a barrel on Tuesday as uncertainty over the state of the global economy hit equity markets and increased expectation that oil demand could be slow to revive significantly.
However, oil's losses were limited by U.S. dollar weakness. A lower dollar can strengthen commodities denominated in the currency.
U.S. crude for August was down 28 cents at $67.22, by 7 a.m. EDT, off an earlier low of $66.37. U.S. crude for July delivery expired Monday, settling down $2.62 at $66.93 a barrel.
London Brent crude fell 33 cents to $66.65.
The market awaited U.S. weekly inventory data from the American Petroleum Institute due later Tuesday and U.S. government oil stocks figures Wednesday for clues on the demand outlook for the world's top energy consumer.
A Reuters poll of analysts ahead of the government inventory data forecast crude stocks fell by 1.3 million barrels last week on lower imports, while gasoline stocks and distillates, including heating oil and diesel fuel, were seen rising.
The API will release its weekly stockpile data at 4:30 p.m. EDT, while the U.S. Energy Information Administration will release its report Wednesday at 10:30 a.m. EDT.
"The stock markets and global economic outlook pushed oil through key support levels but they now seem to be finding support at around $67 on WTI (U.S. crude) and $66 on front month Brent," said Christopher Bellew, a broker at Bache Commodities.
A renewed focus on economic weakness saw U.S. stock markets suffer their worst one-day loss in two months, adding pressure to oil prices. The S&P 500 fell back into negative territory for the year Monday, as investors reconsidered the health of the economy.
Following Wall Street's fall, Japan's Nikkei average closed down almost 3 percent Tuesday.
Equity losses came after the World Bank said prospects for the global economy remained "unusually uncertain" as it cut 2009 growth forecasts for most economies, adding to concerns of a slower turnaround.
Investors were also cautious ahead of a two-day U.S. Federal Reserve policy meeting on interest rates.
The Organization of the Petroleum Exporting Countries wants an oil price of $75 a barrel by the end of the year, according to the group's president.
U.S. oil hit a high above $73 a barrel this month but has not been at $75 since October 2008.
"It's the goal to achieve this price," Jose Botelho de Vasconcelos, who is also Angolan oil minister, told reporters on his arrival in Vienna Monday ahead of talks Tuesday between the European Union and OPEC.
(Editing by William Hardy)

Source: Reuters

Asia stocks fall on economy doubts

By Kevin Plumberg
HONG KONG (Reuters) - Asian stocks tumbled on Tuesday, after falling commodity prices and a sharp drop on Wall Street spooked investors into taking profits and buying the yen on speculation the rapid pace of recovery may not be sustainable.
Questions about the extent of Chinese restocking of various commodities weighed on base metals prices and oil overnight, with U.S. crude dropping below $67 a barrel, down $6 from an eight-month high reached on June 11.
The U.S. recession was widely viewed as ending sometime in the second half of 2009, but that has already been priced in, leading investors to trim positions into the end of the first half and wait for further confirmation.
"Whether demand in oil and commodity markets can move higher from here is a big question mark," said Tony Russell, a senior equities adviser at ABN AMRO Morgans in Australia. "We have seen some better news on the economy but we need to see more."
Big liquid markets were sitting targets for investors looking to cut down their exposure to risk.
Japan's Nikkei share average fell 3.1 percent .N225, as investors shifted money from stocks that would benefit the most from upward turns in business cycles to defensive sectors.
The MSCI index of Asia Pacific shares outside Japan .MIAPJ0000PUS dropped 2.9 percent, falling to the lowest in about a month. The index has declined for six of the last seven trading days.
In the last 20 days, the index has returned 1.2 percent, compared with a decline of 2.3 percent on the all-country world index .MIWD00000PUS. Investors continue to place a premium on Asia's growth prospects and its resilience to global weakness.
Hong Kong's Hang Seng index led the region lower, falling 3.8 percent. Index heavy weights HSBC (0005.HK) and China Mobile (0941.HK) were the biggest drags.
The S&P 500 index of U.S. stocks .SPX posted its biggest one-day loss in two months, closing below its 200-day moving average for the first time in 15 days.
Though companies will likely keep refilling inventories of materials, prospects for final demand for products are still highly uncertain.
As a result, copper for three-month delivery on the London Metal Exchange fell more than 1 percent to $4,710 a tonne after dropping 5 percent on Monday. Year-to-date copper was still up 53 percent.
U.S. oil for August delivery was down 0.6 percent to $67.09 a barrel, while Brent crude was down 0.7 percent to $66.54.
After the Chicago Board Options Exchange volatility index, better known as the VIX .VIX gapped higher for the second time in June last night, knee-jerk demand for yen increased.
The U.S. dollar dropped to the lowest since June 1, at 95.25 yen, down 0.7 percent. The Australian dollar was down 1 percent to 74.64 yen. Continued...
Source: Reuters

S&P turns negative for year in broad sell-off

Business Update: Global sell-off
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By Caroline Valetkevitch
NEW YORK (Reuters) - Stocks suffered their worst one-day loss in two months, dropping the S&P 500 back into negative territory for the year on Monday in a broad-based sell-off, as investors reconsidered the health of the economy.
Shares of economically sensitive sectors such as financials, energy and materials led the S&P 500's .SPX decline. A sharp drop in U.S. crude oil futures and other commodities hit shares of companies sensitive to those prices, including Exxon Mobil Corp (XOM.N), which lost 3.1 percent to $68.84.
Analysts said investors were keen to sell shares that led the market up in its rally since early March. Major averages have largely been trading sideways in recent weeks and many investors have speculated that more obstacles were in store for stocks.
"The recovery is likely to be anemic by post-war standards," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, in Albany, New York. "The recovery in the economy and earnings is unlikely to be as strong as the rise in stock prices since early March has implied."
Underscoring worries about the economy's outlook, the World Bank said prospects for the global economy remain "unusually uncertain" as it cut 2009 growth forecasts for most economies.
The Dow Jones industrial average .DJI dropped 200.72 points, or 2.35 percent, to end at 8,339.01. The Standard & Poor's 500 Index .SPX was down 28.19 points, or 3.06 percent, at 893.04. The Nasdaq Composite Index .IXIC was down 61.28 points, or 3.35 percent, at 1,766.19.
European shares also slid, with the FTSEurofirst 300 .FTEU3 index of top European shares hitting its lowest closing level since mid-May.
WORST DAY SINCE LATE APRIL
It was the worst day for the three indexes since April 20 when results from Bank of America (BAC.N) reignited concerns about the banking industry.
The S&P financial index .GSPF fell 6.2 percent, while the energy index .GSPE dropped 4.6 percent. The financial sector saw the biggest gains since the S&P 500 hit a 12-year closing low in early March, and the sector is still up more than 80 for that period. The S&P, meanwhile, is up 32 percent from its March closing low.
"Some people are skeptical of how the summer is going to play out and may be taking some profits," said John O'Brien, senior vice president at MKM Partners LLC in Cleveland.
While lower crude oil prices tend to be a positive for the broader stock market, they often hurt shares of energy companies by giving investors a reason to unload some holdings in that sector.
Crude oil prices fell $2.62, or almost 4 percent, to settle at $66.93 a barrel. Chevron Corp (CVX.N) sank 3.4 percent to $65.76.
Metal prices also slid, dragging down shares of resource companies. Freeport-McMoRan Copper & Gold Inc (FCX.N) dropped 11.3 percent to $45.18.
On the Nasdaq, big-cap technology stocks led the decline. Continued...
Source: Reuters

Apple CEO Jobs at work on Monday: witness

By Clare Baldwin and Sinead Carew
SAN FRANCISCO/NEW YORK (Reuters) - Apple Inc Chief Executive Steve Jobs was at the company's headquarters on Monday, underscoring speculation the pancreatic cancer survivor may have returned to work.
Jobs, who has been on medical leave since January, was seen by a Reuters reporter leaving the Apple campus in Cupertino, California dressed in his trademark black turtleneck and jeans. He walked out chatting with another person before climbing into a black car that then drove off.
Speculation has mounted that Jobs could be back at work soon, fueled in part by a Wall Street Journal article last weekend that said the CEO had a liver transplant two months ago.
On Monday, Jobs, 54, was also cited in an Apple press release for the first time in months, triggering talk that the man considered the visionary behind Apple's innovation machine had returned from his leave of absence.
"This is the first time we've heard from Steve Jobs since he reported he was taking medical leave," said Oppenheimer & Co analyst Yair Reiner. "It's a sign Apple has its CEO back."
Apple said in the release that it had sold more than 1 million of its newest iPhone 3GS in the first three days of launch, beating analysts' expectations.
"Customers are voting, and the iPhone is winning," Jobs said in the statement.
Apple, which has not disclosed details on Jobs' state of health while he's been on medical leave, declined to comment.
The company has said in the past that Jobs remains deeply involved in decision-making. He has visited Apple periodically since starting his medical leave in January, according to blog reports that follow his every move.
The Wall Street Journal reported on Saturday that Jobs had a liver transplant two months ago, but was expected back at work before the end of June.
DISTRACTIONS
Shares of Apple rose as much as 1.5 percent in early trading before falling with the broader market to end the day down 1.5 percent at $137.37. Its stock was flat to slightly lower in after-hours trading.
Analysts said the iPhone sales figures would distract some investors from concerns about Jobs' health to a certain extent.
"Investors will realize that Apple executed well on the launch in Jobs' absence," said Susquehanna Financial Group analyst Jeffrey Fidacaro.
He said the 3GS sales were strong considering it was available in only eight countries. The last iPhone was launched in 21 countries and also booked 1 million sales in its first weekend. "It shows that the iPhone momentum remains strong." Continued...
Source: Reuters

Anglo rejects Xstrata merger of equals plan

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By Eric Onstad and Raji Menon
LONDON (Reuters) - Anglo American rejected rival mining group Xstrata's "merger of equals" proposal on Monday, knocking a no-premium marriage and a combination with what it regards as Xstrata's inferior mines.
The snub came a day after Xstrata unveiled its plan and after top Anglo shareholders pressed for a big premium to create a giant to compete in a consolidating mining sector.
"We are disappointed by Anglo American's rapid rejection of our proposal for an all-share merger of equals," a spokesman for Xstrata said following the Anglo rejection.
"We are also surprised that the Anglo American board has not seen fit to engage with Xstrata to discuss our proposal in view of the substantial value for both companies' shareholders that would arise uniquely from a merger of the two companies," he said in a statement.
Anglo had said in a statement "a combination with Xstrata would profoundly impact the nature of the group's portfolio by significantly diluting Anglo American's unique exposure to the structurally attractive platinum, iron ore and diamond markets.
"Irrespective of this lack of strategic merit, the terms proposed by Xstrata were totally unacceptable."
That echoed what a source close to the situation told Reuters last week, that Anglo was likely to brush aside any fresh attempt at a tie-up by Anglo-Swiss Xstrata, which has long had Anglo in its sights.
Xstrata came up against another obstacle to its proposal on Monday when South Africa said it feared job losses at Anglo mines if a merger went ahead.
Xstrata, whose market value has risen tenfold since floating in 2002 through a string of takeovers, said on Sunday it asked Anglo for talks about a merger.
SHAREHOLDERS DEMAND PREMIUM
Top Anglo shareholders rejected Xstrata's call for "a merger of equals," betting that initial proposal was just an opening play.
"If they won't pay a premium, they are not going to get anywhere," said one top-20 investor in Anglo who declined to be named. The shareholder was also a top 10 Xstrata investor.
"Takeovers are typically at a premium of 30 percent plus. You would be looking for reasons why it should not be 30 percent -- in this case, I don't see any," he said.
Uncertainty about a possible marriage of the two groups dimmed a run-up in Anglo shares, which soared as much as 12 percent in early trade but pared gains to close 4.6 percent higher at 1,698 pence before Anglo issued its statement. Before Monday, Anglo shares in London had underperformed the British mining index by 20 percent this year.
Shares in Xstrata fell 6.7 percent to 635.1 pence, compared with a 3.2 percent fall in the British mining index. Continued...
Source: Reuters

Fed says central OTC clearing would curb market risk

WASHINGTON (Reuters) - Centralized clearing of over-the-counter derivatives would help to reduce the risk that these instruments pose to the wider financial system, a senior Federal Reserve official said on Monday.
Patricia White, associate director of research and statistics at the Federal Reserve, said in testimony prepared for the Senate that OTC derivatives had amplified shocks during the financial crisis, which resulted in the failure of investment bank Lehman Brothers in September.
"The Board believes that moving toward centralized clearing for most or all standardized OTC products would have significant benefits," she told the Senate Subcommittee on Securities, Insurance and Investment.
Regulators have been working to limit the risks of spillover from problems in one market to the wider system. The spillover made matters much worse during the current financial crisis and the White House has proposed a sweeping overhaul of the U.S. regulatory structure.
These plans, which are being intensely debated by Congress, include making the Fed a systemic regulator for all firms, payments and clearing systems whose failure could endanger the broader financial system.
White said one promising route to achieve the centralized clearing of OTC products was via establishing central counterparties. Several already exist, and regulators here and abroad are trying to speed up the creation of new entities to embrace a broader range of OTC products, she said.
Such steps will require the development of electronic systems to feed trade data to new central counterparties and better back-office processes to speed up trade confirmation.
But White said the Fed did not think that all OTC products should be centrally cleared, and she said it was important to retain flexibility for nonstandard OTC instruments, although these should also be subject to greater scrutiny.
"A flexible approach that addresses systemic risk with respect to standardized and non-standardized OTC derivatives, albeit in different ways, is most likely to preserve the benefits of these products," she said.
(Reporting by Alister Bull, Editing by Kenneth Barry)

Source: Reuters

Blavatnik sues JPMorgan over investment losses

NEW YORK (Reuters) - U.S. billionaire Len Blavatnik filed a lawsuit against JPMorgan Chase (JPM.N) on Monday, accusing the bank of mismanaging an investment account that held about $1 billion in assets owned by Blavatnik's industrial holding company, Access Industries.
Blavatnik's lawyers blame Ted Ufferfilge, a JPMorgan banker appointed to manage the assets for Access, for losing $98 million of the company's money betting on risky subprime mortgage securities, according to court documents.
"JPMorgan and Mr. Ufferfilge implemented a series of ill-conceived investment strategies," wrote Access' law firm, Quinn Emanuel Urquhart Oliver & Hedges, in the complaint.
The lawsuit contends that Access hired JPMorgan to manage the investment account, called CMMF, with conservative objectives and specific diversification and liquidity requirements.
Instead, the bank and Ufferfilge invested the fund in risky and illiquid mortgage-related securities.
"JPMorgan and Mr. Ufferfilge made the reckless and unnecessary decision to saturate CMMF's portfolio with the riskiest and most illiquid residential real estate securities," according to the lawsuit.
These investments for Access were made at the same time as companies affiliated with JPMorgan were dumping similar real estate securities from their own portfolios, the lawsuit says.
JPMorgan intends to contest the lawsuit.
"We believe this case is without merit," a spokeswoman for JPMorgan said. "We intend to defend it vigorously."
JPMorgan has hired the law firm Paul, Weiss, Rifkind, Wharton & Garrison to represent it in the case, she added.
CMMF had tried to resolve the matter with JPMorgan without litigation, but it was unable to do so, said a spokesman for Access in an emailed statement.
The case is: CMMF LLC vs. J.P. Morgan Investment Management, New York State Supreme Court (New York County), no. 09-601924.
(Reporting by Chakradhar Adusumilli in Bangalore and Elinor Comlay in New York; Editing by Muralikumar Anantharaman and Tim Dobbyn)

Source: Reuters

Wal-Mart should modify "Unbeatable" ads: group

SAN FRANCISCO (Reuters) - Wal-Mart Stores Inc (WMT.N) needs to make its price-matching policies clearer and stop claiming in a television commercial that viewers can save more than $700 a year buying groceries in its stores, an advertising industry self-regulating group said on Monday.
The National Advertising Division of the Council of Better Business Bureaus said it examined Wal-Mart's ads after competing food retailer H-E-B Grocery Co challenged the discount retailer's claims.
H-E-B said Wal-Mart's ads touting "Unbeatable Prices" were interpreted by consumers as a lowest price guarantee, but Wal-Mart's disclaimer failed to fully reveal limitations on its price-matching program.
H-E-B also challenged a Wal-Mart ad telling consumers that if they spent $100 a week on groceries at a supermarket, "you could save on average over $700 a year" by buying those kinds of groceries at Wal-Mart.
After studying the ads, NAD said that while Wal-Mart, the largest U.S. grocery seller, could support its "Unbeatable Prices" advertising claims, it should make its price-matching disclosures "substantially more clear and conspicuous" in ads where it uses the "Unbeatable" claim.
NAD also said that Wal-Mart's claim of $700 in grocery savings "was not supported by the evidence in the record" and should be discontinued.
While the Wal-Mart ad cites a cost comparison study by Global Insight, NAD said there was a "significant disconnect" between the study and the claim made in the commercial.
"In the challenged commercial, Wal-Mart promises 'you,' i.e. the individual watching the commercial, that 'you' could save, on average, over $700 a year by shopping at Wal-Mart," NAD said in its report.
But NAD said the "Global Insight Study cannot support this message, as it concerns a national average. The competitive landscape of grocers varies largely throughout the nation."
Wal-Mart said it disagreed that its $700 grocery savings claim was not adequately substantiated.
"Although we are not currently running this particular spot, we firmly believe that this claim is well-supported by the Global Insight study," Wal-Mart said in a statement.
The retailer said it would take NAD's recommendations into account in future advertising.
(Reporting by Nicole Maestri, editing by Matthew Lewis)

Source: Reuters

Warren Buffett charity lunch bid tops $70,000

By Jonathan Stempel
NEW YORK (Reuters) - The annual charity auction of a steak lunch with billionaire investor Warren Buffett, which raised a record $2.11 million last year, is off to a strong start.
The high bid was $70,100 as of 5:05 p.m. EDT Monday in the 10th annual fundraiser, which began Sunday on eBay Inc's website. Four bidders have so far made a total of 28 bids, after bidding began at a starting price of $25,000. The auction ends June 26.
As in recent years, the winner and up to seven friends may dine with the world's second-richest person at the Smith & Wollensky steakhouse in New York.
The auction benefits the Glide Foundation, a nonprofit in San Francisco's Tenderloin district that offers housing, job training, health and child care, and meals for the poor.
It was unclear how the recession will affect this year's bidding. In previous auctions, a flurry of activity typically drove the winning bid higher in the last couple of hours.
"You have clashing dynamics: in this economy, there is a heightened sense of rationality where people won't spend huge amounts of money, juxtaposed with the prospect of auction fever and competitive arousal where irrational bidding could take place," said Jonathan Carson, chief executive of BiddingForGood.com, an online charity auction platform.
"In the Buffett case," he added, "I would think the latter is likely to continue. It is unlikely, though, that any bidder will mortgage his future for the sake of a lunch."
Zhao Danyang, who runs the Pureheart China Growth Investment Fund in Hong Kong, won last year and is scheduled to dine with Buffett on Wednesday.
The previous auctions raised more than $4.2 million for Glide. Buffett was introduced to the nonprofit by his first wife, Susie, who died in 2004. The first three auctions were held live. Winning bids soared when they moved online in 2003.
The auction is a key source of funding for Glide, which has seen demand for its services jump 20 percent in the last year.
"People have said to us as they line up, they had jobs most of their lives and now they don't," said Rev. Cecil Williams, Glide's founder. "It makes them feel like they don't count. The money from the auction can help pick them up."
According to Forbes magazine, Buffett is worth about $40 billion. He built his fortune through Omaha, Nebraska-based Berkshire Hathaway Inc, his insurance and investment company valued at about $133 billion.
Berkshire Class A shares closed Monday down $740 at $86,510 on the New York Stock Exchange.
(Reporting by Jonathan Stempel; editing by John Wallace, Gary Hill)

Source: Reuters