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Government was told of Toyota claims in 2004: insurer

Fri Feb 19, 2010 7:15pm EST

http://www.reuters.com/article/2010/02/20/us-toyota-idUSTRE61D2TS20100220

DETROIT/LOS ANGELES - The largest U.S. auto insurer alerted regulators earlier than first believed about a worrying trend of accidents involving Toyota Motor Corp vehicles, while the Obama administration's top transportation official said on Friday he would not relax pressure on the carmaker.

Both developments came as Toyota's president, Akio Toyoda, readied to fly to Washington in an extraordinary appearance to answer questions from lawmakers next Wednesday about the safety crisis that has engulfed the company founded by his grandfather. State Farm, whose records have been sought by two congressional committees investigating recalls and complaints related to unintended acceleration in Toyota cars and trucks, revised its report on Friday of when it notified the government about certain Toyota claims activity. The insurer said earlier this month it had contacted the National Highway Traffic Safety Administration in late 2007. However, prompted by the public interest in Toyota, the insurer reviewed its records again and has now found that it contacted safety regulators initially in 2004, State Farm spokesman Phil Supple said in an emailed statement. The information has been sought by House of Representatives committees probing questions around recent recalls of millions of Toyota vehicles related to loose floor mats that can jam accelerators and gas pedals that do not spring back as designed. The government believes five crash deaths are linked to unintended acceleration and are investigating consumer complaints alleging up to 29 other fatalities since 2000 could be linked as well. Regulators have not linked any deaths to the "sticky pedal" problem. The first of three congressional hearings takes place on Tuesday but much of the focus for the moment has settled on the second hearing, the next day, when company president Toyoda is scheduled to testify. Toyoda said he intends to provide a "sincere explanation" to the House Oversight and Government Reform Committee of problems that led to the string of recalls since late last year. Toyoda's decision on Thursday to accept a congressional request to testify ended days of uncertainty over how the company would ultimately respond to calls that he come to the United States to address safety questions. The media-shy Toyoda, who took the top job last June, originally said he had no intention of appearing before Congress himself, drawing criticism from industry analysts and Japanese politicians. Even if Toyoda's appearance before the Oversight panel goes well, the carmaker still has problems to overcome from engineering challenges to lawsuits to restoring brand image. Toyota's stock has fallen 22 percent since January 21, erasing more than $30 billion in market value. U.S. Transportation Secretary Ray LaHood said on Friday that he is "very pleased" he will be able to meet Toyoda next week, and that the government has no intention of turning down the heat on the automaker. "We at DOT (the Department of Transportation) and we at our safety agency (the National Highway Transportation Safety Administration) will continue to work 24/7 and we will not sleep until every Toyota is safe for every American who owns one," LaHood told a news conference in Los Angeles. Congress is examining several issues in a string of Toyota recalls that date to September. A priority of lawmakers is how Toyota and NHTSA handled complaints and other matters related to unintended acceleration, whether the recalls were done swiftly enough, and whether they were sufficient. The Oversight committee will also hear from LaHood and a witness representing the family of Mark Saylor, a California highway patrol officer killed along with his wife, daughter and brother-in-law in an August crash that triggered renewed government scrutiny of unintended acceleration. Toyoda has said the company is investigating the causes of the unintended acceleration and braking that have led to a recall of about 8.5 million cars worldwide. INTENSE PREPARATION Analysts and public relations experts stressed the need for clear and honest testimony from Toyoda. By appearing to dodge questions, Toyoda could further stain Toyota's reputation. "Rather than getting bogged down with the details, I think (Toyoda) should use this as a chance to communicate Toyota's corporate philosophy," said Yasuhiro Matsumoto, a senior analyst at Shinsei Securities in Tokyo. "What's missing from Toyota right now is the big picture." Executives giving such testimony should also expect difficult questions, experts said. "The important thing is that they actually answer all questions and don't dodge or run away," said Shoichi Yoshikawa, chief executive of public relations firm Hill & Knowlton Japan. Toyoda, 53, will have to craft and deliver a message that resonates with millions of consumers, investors, employees and lawmakers around the world. He is likely to undergo intense preparation. Toyota may hire lawyers to drill him with mock questions, one consultant said. A company source said it had not yet been decided whether Toyoda would speak in Japanese or English, but the company has already contacted some translation companies. In addition to the recalls over unintended acceleration, a separate recall is under way to fix software controlling the brakes on Toyota's iconic Prius hybrid. Regulators have also begun a preliminary investigation into complaints about steering problems in late model Corollas. Toyota's safety woes are deepening at a time when automakers worldwide are struggling to emerge from a sharp sales dip that led to the bankruptcies of General Motors and Chrysler. (Additional reporting by John Crawley in Washington; Nick Carey in Detroit, Steve Gorman in Los Angeles; Helen Massy-Beresford in Paris; Chang-Ran Kim, Taiga Uranaka, Nobuhiro Kubo, Chisa Fujioka and Yoko Kubota in Tokyo; Editing by Matthew Lewis )

Oracle CEO optimistic on quick Sun profit potential

Sat Feb 20, 2010 6:29pm EST

http://www.reuters.com/article/2010/02/20/us-oracle-idUSTRE61J2WL20100220

SAN FRANCISCO - Oracle Corp ORCL.O Chief Executive Larry Ellison said on Saturday he expected Sun Microsystems, the unprofitable hardware maker that he bought last month for $7.5 billion, to be making a profit soon.

Oracle executives have previously declined to say how long it would take for Sun to start turning a profit, although they have promised it would add $1.5 billion to operating profit within a year. The company had posted losses of more than $2 billion in the two years prior to its sale. But Ellison, asked by reporters how the Sun integration was going on the sidelines of a news conference on Saturday in San Francisco, said: "I think it's going really well and we expect to be profitable right away." Some analysts are skeptical that Ellison will be able to quickly turn around Sun, which never fully recovered from the bursting of the dot-com bubble in the early 2000s that savaged demand for its high-end computers. He made the comments in his hometown after returning from Valencia, Spain, to show off the trophy he won for defeating rival billionaire Ernesto Bertarelli in the America's Cup sailing race. Ellison vowed to defend his title. But the 65-year-old, who founded Oracle more than 30 years ago, also said he has no intention of retiring from his position at the helm of Oracle to focus on sailing. "I love Oracle and I love sailing, and I think I can do both," he said, after accepting a key to the city from San Francisco Mayor Gavin Newsom, who, like Ellison, wants to see the next America's Cup race held in San Francisco Bay. "It certainly makes commuting easier," joked Ellison, whose Redwood City-based company is about 25 miles (40km) south of San Francisco. (Reporting by Braden Reddall in San Francisco and Jim Finkle in Boston; Editing by Bill Trott )

Roche poised for deal to get back into antibiotics: paper

Sun Nov 3, 2013 8:10am EST

http://www.reuters.com/article/2013/11/03/us-roche-antibiotics-idUSBRE9A207Y20131103

GENEVA - Swiss drugmaker Roche is poised to get back into antibiotics by taking over a candidate drug being developed by privately-owned Polyphor, the NZZ am Sonntag paper said on Sunday, without citing a source for the information.

The paper did not give any details of the transaction, but said the contract would be signed this weekend. Roche's Chief Executive Severin Schwan said last month that the company was interested in "bolt-on acquisitions". But a company spokesman declined to confirm the report on Sunday, saying the firm did not comment on rumors. "We have an open and pragmatic approach to R&D and have mentioned in the past that antibiotics is an area where a lot of interesting science is going on," Roche spokesman Daniel Grotzky said in an emailed reply to a Reuters enquiry. Polyphor, based in Allschwil in Switzerland, said in March it had successfully completed a phase 1 clinical trial for its POL7080 drug, a Pseudomonas specific antibiotic, which it said had shown outstanding efficacy against septicaemia, peritonitis and lung and thigh infection. Polyphor says POL7080 is the frontrunner in a novel class of antibiotics that can tackle bacteria that have grown resistant to other drugs. Drug-resistant "superbugs" are growing but not yet widespread and pharmaceutical companies have cut back research into antibiotics since they are unlikely to generate blockbuster profits. Apart from Roche, others to have cut back include Pfizer, once the leader in the field, which closed its antibiotic R&D center in Connecticut in 2011, as well as Bristol-Myers Squibb and Eli Lilly, leaving only a handful of firms such as GlaxoSmithKline, AstraZeneca and Merck & Co in the game. (Reporting by Tom Miles ; additional reporting by Caroline Copley in Zurich; editing by Tom Pfeiffer )

Chip designers see dollar signs in Bitcoin miners

Sun Nov 3, 2013 11:28am EST

http://www.reuters.com/article/2013/11/03/us-technology-bitcoins-idUSBRE9A209P20131103

SUNNYVALE, California - Tucked away in an air conditioned data center in Silicon Valley is a hodgepodge of black boxes, circuit boards and cooling fans owned by 27-year-old Aaron Jackson-Wilde, a modern-day prospector looking for Bitcoins.

Since discovering the digital currency a few months ago, Jackson-Wilde has paid about $2,000 for his "rigs," which are powered by specialized computer chips. They are designed to help operate and maintain the Bitcoin network - and, in return, generate a small reward in a process known as "Bitcoin mining." A form of electronic money independent of traditional banking, Bitcoins started circulating in 2009 and have since become the most prominent of several fledgling digital currencies. While they quickly gained a reputation for facilitating drug deals and money laundering, Bitcoins have of late garnered attention from investors, such as venture capital firm Andreessen Horowitz. The volume of transactions using Bitcoins today remains miniscule, but enthusiasts believe the peer-to-peer currency will play a major role in e-commerce and could eventually become as ubiquitous as email. Bitcoin mining is based on a unique feature of the digital currency. Unlike traditional currencies, where a central bank decides how much money to print based on goals like controlling inflation, no central authority governs the supply of Bitcoins. Instead, Bitcoin transactions are tracked by a network of computers that solve complex mathematical problems to validate transactions and prevent counterfeit. The system automatically generates new Bitcoins as the math problems are solved and rewards them to the computer operators. In a key twist that keeps inflation in check, the difficulty of the cryptographic math that leads to newly minted coins grows as more computers join the network. That has led some technology professionals to target a new market in souped-up computers and specialized chips aimed at the growing ranks of Bitcoin "miners." Consider Ravi Iyengar, who first heard of Bitcoins about six months ago. Since then he has quit his job as a senior chip architect at Samsung Electronics and raised $1.5 million to launch CoinTerra. He says he has already pre-sold more than $5 million worth of the hardware he has designed for Bitcoin mining. "I've been in arms races throughout my career - AMD, ARM, Intel," said Iyengar, referring to prominent semiconductor companies, "but none of them match the intensity of Bitcoin mining. Each month in Bitcoin mining is like a year." PERISHABLE SILICON Little is known about exactly who started Bitcoin, but the concept was introduced in a 2008 paper written under the pseudonym Satoshi Nakamoto. Since then, Satoshi Nakamoto has become sort of a patron saint among advocates pushing for Bitcoins as an alternative to national currencies. Bitcoin is not backed by physical assets, is not run by any person or group, and its value depends on people's confidence in the currency. The dollar price of Bitcoins has spiked over the past year as more people became aware of the currency and speculators jumped into the market, which remains highly volatile. Bitcoin recently broke $200, compared to $12 a year ago. The goal of Bitcoin miners is to pull in more than what they spend on their rigs - some cost over $20,000 - and the electricity they need to keep the machines running 24 hours a day. That is no easy feat. In the past three months, miners added so much gear with drastically improved chips that processing power on the network jumped from 289 terahashes per second to more than 4,000 terahashes per second, according to The Genesis Block, a blog that collects Bitcoin data. In reaction, the network drove up the difficulty of verifying each cryptographic block of transaction data, making it even harder to break even on investments in costly mining gear. "Bitcoin makes silicon perishable," said Andreas Antonopoulos, a digital currency entrepreneur in San Francisco. "Your mining rig rots away in front of your eyes every day you have it." It has become so hard to make a profit that comparisons to the 19th century California gold rush, when money was often made selling shovels to naive prospectors, have become a running joke among Bitcoin miners. "It's the guys who sell the equipment who are making the money, not the Bitcoin miners," said Jackson-Wilde, a manager at a company that makes motorcycle batteries. CoinTerra believes spending on new Bitcoin mining chips could easily hit $100 million a year for the next three years, assuming no change in prices. While that is peanuts for large semiconductor companies like Intel Corp and Qualcomm Inc, it is a lucrative market for a handful of small developers. About 11.9 million Bitcoins, worth $2.4 billion at recent prices, have been minted since the currency began circulating. Based on recent activity, the network is on track to create around 1.4 million new Bitcoins annually over the next three years, the equivalent of more than $280 million a year at recent exchange rates. Reflecting growing competition, Jackson-Wilde says his gear - which features model names like Erupter, Jalapeno and Spartan - now pulls in a tiny fraction of the Bitcoins it used to, but he expects another $10,000 worth of next-generation equipment to put him in the black. Despite the expenditures, he considers himself a hobbyist committed to supporting the Bitcoin network rather than a serious digital-currency investor. "Buying and selling Bitcoins is enticing, but it's not as enticing as being part of it and actually having hardware," he said. HOBBY STATE Mining with a simple laptop PC was easy back in 2009, when the fledgling Bitcoin network was a fraction of its current size. But within a year, hobbyists found that graphics chips, often referred to as GPUs and widely used by PC gamers, could provide a major boost in mining output. Miners cobbled together dozens of graphics chips in their garages and basements, surrounded by fans to keep the electronics from overheating. Then in 2010, entrepreneurs caught wind. Jeff Ownby and a handful of colleagues had just formed Butterfly Labs with the goal of using off-the-shelf programmable chips, known as FPGAs, to help banks run complex financial risk simulations. "As we were starting down the road planning this, we read about Bitcoin and said 'Wow, this is exactly what we're trying to do here,'" Ownby said. "It was pretty much in a hobby state, so we thought this might be something." Butterfly Labs and other startups optimized FPGAs, which are more typically used in factories and telecommunications gear, to work efficiently on the Bitcoin network. In 2012, the Bitcoin arms race escalated again when Butterfly Labs and rivals, all with little or no semiconductor engineering experience, started designing chips from the ground up. Custom chips, known as application specific integrated circuits (ASICs), are normally made by companies focused on high-volume products like televisions - not startups making small batches of digital mining devices. "They're the Wild West," said John Cheng, head of California based-Custom Silicon Solutions, which helped Butterfly Labs design and manufacture its ASIC. "There's a certain rhythm you're used to in the chip business. It's usually two or three years before your ramp, but these guys wanted to ramp in six months." Butterfly Labs said on Thursday it recently took a downpayment for new mining gear in Bitcoins equivalent to $1 million, the largest-ever transaction in the digital currency. It identified the customer as HashTrade, a company selling contracts for cloud-based Bitcoin mining run in data centers. David Johnston, executive director of BitAngels, an investment group, says consolidation in Bitcoin mining is well underway. "Mining has been going through these different generations and going up a learning curve, from amateurs running CPUs and GPUs to new professionally funded companies with experienced chip designers taking it to the state of the art," Johnston said. Still, there remain plenty of oddities in the Bitcoin mining business. Johnston cited ASICMiner, which both sells mining rigs and runs its own mining operations, as one of the largest and most respected operators. The company has even sold stock to online investors who paid in Bitcoins. ASICMiner recently had a market value equivalent to $50 million, according to data on the BitFunder online exchange. But few know where the company is located, or even who is in charge. The chief executive communicates through web forums under the pseudonym "Friedcat." (Reporting by Noel Randewich; Editing by Jonathan Weber, Tiffany Wu and Tim Dobbyn )

Covanta shares seen growing for years -Barron's

Sun Nov 3, 2013 2:33pm EST

http://www.reuters.com/article/2013/11/03/us-utilities-covanta-shares-idUSBRE9A20FW20131103

- U.S. waste management and energy company Covanta Inc ( CVA.N ) is likely to keep growing for years because most of its revenue is secured by long-term contracts and barriers to entry in the waste-to-energy business are high, according to an article in Barron's on Sunday.

Covanta's stock has tumbled 15 percent since management lowered it guidance for the year in its October 23 third-quarter earnings report, the article said, noting "this looks like a buying opportunity." In two to three years, Barron's said, the shares could reach the mid $20s, up at least 40 percent from a recent $17.35. Covanta operates 45 facilities that convert garbage into energy, making money from the waste it collects and the electricity and steam it produces, the article said. U.S. regulations have prevented new construction of waste-to-energy facilities since the 1990s, the article said. (Reporting by Scott DiSavino ; Editing by Steve Orlofsky)

IDB to launch $10 billion Islamic bond program in Dubai

Sun Nov 3, 2013 1:13am EDT

http://www.reuters.com/article/2013/11/03/us-finance-islamic-dubai-idUSBRE9A202820131103

DUBAI - The Islamic Development Bank (IDB) ISDBA.UL will set up a $10 billion sukuk issuance program on the Nasdaq Dubai exchange, a boost to Dubai's efforts to become a top center for Islamic finance in competition with other cities.

It would be the Jeddah-based IDB's third sukuk program - it already issues Islamic bonds in London and Kuala Lumpur - and its first in a Middle Eastern country. The international lender, which has 56 member countries, promotes economic development in Muslim countries and communities. In January, Dubai launched a drive to become a center for Islamic business; its exchanges have so far listed $12.5 billion of sukuk and the total is expected to reach $16 billion by year- end, a statement from the office of Dubai's ruler said late on Saturday. No time frame was given for the launch of the IDB's program. Its sukuk are highly sought after by Islamic investors because of their AAA credit rating, so they could offer a much-needed boost to trading volumes in Dubai and encourage more issuers from outside the emirate to choose Dubai as their listing venue. "As the IDB plans a significant expansion of its activities, Dubai's world class exchange and regulatory architecture together with its commitment to providing Islamic finance solutions of the highest quality make it a natural home for our securities," IDB president Ahmad Mohamed Ali was quoted as saying in the statement. The IDB also plans to expand its sukuk program on the London Stock Exchange ( LSE.L ) this month to $10 billion from the current $6.5 billion. It has issued 15 sukuk in London since 2005. In addition, the IDB has a 1 billion ringgit ($313 million) program listed on Bursa Malaysia ( BMYS.KL ), which has raised a total of 700 million ringgit via three sukuk since 2008. Dubai's announcement comes days after Britain unveiled plans to issue a 200 million pound ($320 million) sovereign sukuk, the first from a Western country, ramping up efforts to promote itself as an Islamic finance hub. Prime Minister David Cameron announced the intention during the World Islamic Economic Forum, a major conference for the industry, in London last week; the event will be held in Dubai next year. (Editing by Andrew Torchia )

Exclusive: Tri Pointe nears $2.7 billion deal for Weyerhaeuser unit: sources

Sun Nov 3, 2013 6:02pm EST

http://www.reuters.com/article/2013/11/03/us-tripointe-weyerhaeuser-idUSBRE9A20IZ20131103

NEW YORK - Tri Pointe Homes Inc ( TPH.N ) is near a deal to buy Weyerhaeuser Co's ( WY.N ) homebuilding division for about $2.7 billion, which would make it one of the 20 largest homebuilders in the United States, two people familiar with the matter said on Sunday.

The two companies are working toward an announcement possibly as soon as Monday, said the people, who cautioned that the proposed transaction is still subject to last-minute details and that the timetable may yet slip. Tri Pointe shares have risen more than 9 percent since Reuters first reported on October 21 that the homebuilder, which is backed by Barry Sternlicht's Starwood Capital Group LLC, was in advanced discussions to buy the Weyerhaeuser unit for around $2.7 billion and was trying to finalize an agreement within two weeks. Under the proposed terms of the deal, the two companies are using a structure known as Reverse Morris Trust - a transaction that allows a parent company to sell its subsidiary in a tax-efficient manner, the people said. In that structure, a company spins off a unit that it wants to divest and that unit merges with a smaller company, but the smaller company runs the combined entity. Shareholders of Weyerhaeuser are expected to own 80.5 percent of the merged company and Tri Pointe shareholders would own the remaining 19.5 percent, one of the people added. All the people asked not to be identified because the matter is confidential. Representatives for Tri Pointe did not immediately respond to requests for comment, while Weyerhaeuser and Starwood Capital declined to comment. Tri Pointe went public in January, one of the first U.S. homebuilders to do so in almost a decade as the housing sector rebounds from the trough of the financial crisis on the back of low mortgage rates and rising prices. That recovery has slowed in recent months as buyers started to balk at high prices and interest rates edged higher since the summer, yet analysts still expect home sales to pick up again in the near term. Irvine, California-based Tri Pointe, led by Chief Executive Douglas Bauer, builds houses in California and Colorado. Sternlicht, whose Starwood owns a large stake in the company, is chairman of Tri Pointe. Timber conglomerate Weyerhaeuser said in June it was considering a range of alternatives for Weyerhaeuser Real Estate Company (WRECO), including whether to continue to hold it, or a merger, sale or spin-off. It said the business is one of the 20 largest homebuilders in the United States, and that the "improving fundamentals" of the housing market make it a prudent time to explore strategic alternatives for the business. The Weyerhaeuser unit's biggest brand is Pardee Homes, which builds houses in Southern California and Las Vegas. Its other brands include Trendmaker Homes in Texas and Maracay Homes in Arizona. Weyerhaeuser, based in Federal Way, Washington, has pared its business lines over several years to focus on its timber business. In 2006, Weyerhaeuser used a Reverse Morris Trust structure to exit another one of its businesses. It spun off its fine paper business to be combined with Domtar Corp ( UFS.TO ), a deal that left Weyerhaeuser stockholders with 55 percent ownership of the merged company. (Editing by Matthew Lewis )

Swiss Finance Minister wants banks to boost leverage ratios: paper

Sun Nov 3, 2013 3:16pm EST

http://www.reuters.com/article/2013/11/03/us-switzerland-banks-leverage-idUSBRE9A20GI20131103

GENEVA - Swiss banks should be subject to higher leverage ratio requirements, Swiss Finance Minister Eveline Widmer-Schlumpf was quoted as saying on Sunday.

"We need to think about whether we need to further enhance the capital base," the Schweiz am Sonntag newspaper quoted her as saying. She said a ratio of 6-10 percent was under discussion. That is two or three times the required ratio set out by the global Basel III accord, which is being phased in by 2019. Under Basel III, banks will be subject to a leverage ratio requiring them to hold capital equivalent to at least 3 percent of their total non risk-weighted assets. Authorities have been grappling since the collapse of U.S. investment bank Lehman Brothers five years ago with the question of how banks regarded as systemically important, or too-big-to-fail, can be recapitalized without causing panic or needing taxpayer cash. She added that the change "would automatically mean that the banks need to consider whether they retained investment banking or placed more emphasis on asset management. "I am still of the opinion that banks should determine their own business. But they must be organized so that the state does not end up being liable." After Switzerland's biggest bank UBS had to be bailed out by the government in 2008, Swiss regulators have implemented tough new capital requirements for banks that go beyond the Basel III rules, which were laid out by a committee of banking supervisors from nearly 30 countries. But Switzerland's central bank chief Thomas Jordan said in September that the "too-big-to-fail problem is not yet fully solved". In its yearly stability report published in June, the Swiss National Bank urged UBS and Credit Suisse to further improve their leverage ratios. The paper said a rate of 6 percent would oblige UBS to add 20 billion Swiss francs ($21.92 billion) of equity and Credit Suisse to increase its equity base by 33 billion francs. ($1 = 0.9125 Swiss francs) (Reporting by Tom Miles ; editing by Tom Pfeiffer and Ralph Boulton )

Asian shares eke out gains, dollar holds firm

Sun Nov 3, 2013 6:29pm EST

http://www.reuters.com/article/2013/11/03/us-markets-global-idUSBRE96S00E20131103

SYDNEY - Asian markets started the week on a sluggish note on Monday as investors chose discretion over valor ahead of central bank meetings in Europe and the always-critical U.S. payrolls report.

Trading was thinned by holidays in both Japan and Singapore which kept MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS just a fraction firmer at 480.04. Australia's share market edged up 0.2 percent .AXJO as another domestic bank reported record profits. Major currencies were likewise quiet with the dollar still well supported in the wake of upbeat U.S. manufacturing data that stirred speculation the Federal Reserve might scale back its bond-buying in December, rather than in March as many in the market currently anticipate. There are no less than four Fed officials speaking on Monday, starting with Fed Bank of Dallas President Richard Fisher in Sydney. Fed Governor Jerome Powell and the heads of the St. Louis and Boston Feds all appear later in the day. The dollar index was holding firm at 80.715.DXY having climbed to a six-week peak on Friday. It was also up on the yen at 98.73 and threatening a major chart target at 99.00. The dollar fared best against the euro which was undermined by speculation the European Central Bank (ECB) would have to ease again given disappointing news on unemployment and a startlingly low reading of inflation. The single currency was pinned at $1.3489 on Monday, well below its recent high of $1.3832. The ECB holds a policy meeting on Thursday and it will be under intense pressure to stimulate the economy. "We expect the opening statement, and Q&A, to have a distinctly dovish tone," wrote analysts at RBC Capital Markets in a note to clients. "For now, we think that the Governing Council will refrain from any immediate action, but we expect the downbeat tone of next week's meeting to lay the groundwork for a policy response over the next few months." The Bank of England holds it policy meeting on Thursday and is expected to stay on hold following a run of improving economic data recently. A bigger event for markets will be Friday's U.S. payrolls report which is expected to show a modest rise of just 125,000 in October, amid some uncertainty about the impact of the government shut down. A soft report, and particularly any rise in the jobless rate, would lean against the Fed tapering in December. Also of note will be the first reading of U.S. gross domestic product (GDP) due on Thursday. That is expected to show annualized growth of 1.9 percent in the third quarter, down from 2.5 percent the previous quarter. All the talk of Fed tapering saw U.S. Treasury yields rise for a third straight session on Friday. Yields on the benchmark 10-year U.S. Treasury note jumped to 2.63 percent, leaving behind the week's low of 2.47 percent. Cash Treasuries were not trading in Asia on Monday due to the Japanese holiday, but Treasury futures were 3 ticks lower. The rise in yields was not enough to deter investors from buying stocks, and Wall Street ended Friday with moderate gains. The Dow Jones industrial average .DJI finished Friday with a gain of 0.45 percent, while S&P 500 Index .SPX rose 0.29 percent. For the week, the Dow gained 0.3 percent, the S&P added 0.1 percent, while the Nasdaq fell 0.5 percent. European stock markets eased off five-year highs amid weakness in regional corporate earnings. The pan-European FTSEurofirst 300 index .FTEU3 of leading European companies fell 0.31 percent. In commodity markets, prices were mostly pressured by the bounce in the U.S. dollar. Spot gold was trading at $1,314.34 an ounce having crumbled from a peak of $1,361.60 last week. Oil prices steadied following last week's losses as a firmer dollar and ample supplies outweighed concerns about a drop in Libyan crude exports. Brent crude for December delivery was up a single cent at $105.92 a barrel. U.S. oil for December delivery added 3 cents to $94.64. (Editing by Shri Navaratnam)

Air France sets tough conditions for Alitalia investment: report

Sun Nov 3, 2013 8:31am EST

http://www.reuters.com/article/2013/11/03/us-alitalia-aifrance-idUSBRE9A208E20131103

MILAN - Air France-KLM ( AIRF.PA ) has set tough conditions, including 5,000 job cuts, for investing more money in loss-making Italian airline Alitalia, financial daily Il Sole 24 Ore reported on Sunday.

In an unsourced report, the Italian newspaper said Air France-KLM, which is Alitalia's biggest shareholder with a 25 percent stake, had dictated its conditions to Italian Transport Minister Maurizio Lupi "around ten days ago". The paper said the two sides were locked in a tug-of-war. Air France-KLM's conditions, it said, included the removal of Alitalia's board of directors and a restructuring of its debts of nearly 1 billion euros ($1.35 billion) to reduce them by 70 to 80 percent. The 5,000 job cuts would be more than double what Alitalia's CEO Gabriele del Torchio has penciled in as part of a revised restructuring plan to keep it in business, the newspaper said. A source close to the matter said Air France-KLM, which is in the middle of its own restructuring, had asked for "many job cuts" but fewer than 5,000, without giving a figure. The Franco-Dutch airline declined to comment on the report and a spokesman for Lupi was not immediately available for comment. Air France-KLM gave its approval to a 300 million euros capital increase in the ailing Italian national carrier along with Alitalia's other investors, but is not obliged to participate and has always said it would attach strict conditions before giving any help. Part of a wider bailout, the cash call is seen as only a stopgap solution before talks on a possible tie-up between Alitalia and Air France-KLM, although Lupi has said Italy would seek a different international partner if Air France-KLM does not subscribe to the capital increase. On Thursday, Air France wrote off the value of its stake in Alitalia, which has not made a profit for more than a decade. Its Chief Executive, Alexandre de Juniac, told a news conference that conditions for any agreement included a deal on medium-haul and long-haul networks, "social mechanisms" and "financially, a very strong restructuring." Alitalia's shareholders have until mid-November to say whether they will take part in the capital increase. (Reporting by Silvia Aloisi , additional reporting by Cyril Altmeyer)

Hong Kong luxury home buyers queue amid talk of last hurrah

Sun Nov 3, 2013 4:04pm EST

http://www.reuters.com/article/2013/11/03/us-hongkong-property-idUSBRE9A20H420131103

HONG KONG - In a shopping mall in one of Hong Kong's prime retail districts, more than 100 people wait patiently to take a lift to the sales floors - not to buy luxury bags or clothes, but high-end apartments with price tags of up to $4.4 million.

Foster Lee, a 30-year-old banker, was among the lucky ones who won the chance to buy a unit after a ballot in which more than 1,600 people signed up for just 80 luxury units on offer. "I was expecting home prices to fall four years ago and they keep increasing. It really hurts," said Lee, who plans to buy one of the flats offered by New World Development and Wheelock & Company Ltd in the prime location near Kowloon West for his family. Signs on the ground point to a clear pick-up in demand from local and Chinese buyers, thanks in part to steep discounts offered by developers to offset higher stamp duties imposed a year ago to cool prices that have jumped 120 percent since 2008. The boom was fuelled in large measure by the Federal Reserve's dollar printing campaign, or quantitative easing, to drag the U.S. economy out of the global financial crisis. It became easy to borrow cheaply, and with Hong Kong's currency pegged to the U.S. dollar the effects of the policy were easily transmitted to the property market. But now some analysts expect property prices to fall as the Fed is expected to start withdrawing its monetary stimulus some time during coming months. Regardless, many home buyers, like Lee, have shrugged off recent forecasts of a drop of up to 50 percent in prices over the next 12 months and decided to take a chance. "You see that people who earn less than you have caught up with you because they bought then. It's like a girl you liked got married," Lee said. Last weekend, long queues at one project prompted developer Hang Lung Properties to postpone pre-sales and change the first-come, first-serve rule to a ballot system, in which more than 400 buyers competed for just 80 units priced from HK$8 million to HK$15 million ($1.93 million). Industry watchers said up to 30 percent of buyers at recent popular projects were mainland Chinese, whose presence in the new luxury home market had fallen to less than 12 percent from 43 percent after cooling steps in October last year. SWEETENERS LURE BUYERS "With stamp duty subsidies from developers, many Chinese buyers are attracted back to the market," CLSA property analyst Nicole Wong said, referring to a 15 percent tax on foreign buyers that many believe was targeted at mainland Chinese. "It's like there is no government tightening at all - developers cancel it for the Chinese buyers." In another sign of strong demand, new home transactions rose to a six-month high in September, according to real estate company Centaline Property Agency. Some analysts say the recent frenzy has also been spurred by people rushing in before an expected interest rate hike, which could lead to a collapse in Hong Kong's property market. "They (buyers) are concerned that the banks will further tighten up credit," said Jennifer Wong, tax partner at global accounting firm KPMG in Hong Kong. "This is one of the reasons they don't mind to pay a little bit more - they can secure the mortgage loan at a low interest." Almost everything hangs on when the Fed decides to taper, as a rise in U.S. interest rates would drive up borrowing costs in Hong Kong, where home prices have risen 4 percent over the past year on ultra-low interest rates, tight supply and abundant liquidity since cooling measures were imposed. REALITY CHECK While the picture on the ground looks promising, analysts see property prices undergoing a sharp correction. Deutsche Bank forecast last month that Hong Kong home prices could drop up to 50 percent in the next 12 months, while Barclays said the market will enter its first real downturn since 1998 with a 30 percent plunge by 2015. "The developers created this 'wow factor'. They managed to draw out some people who wanted to buy and were looking for price cuts," said Barclays property analyst Paul Louie, citing two recent projects that offered discounts of up to 40 percent. "We are just seeing the beginning of the round of price cutting. There will be more to come," he said. "The buyers will return to the sidelines and wait for better deals." The price difference between new launches and second-hand homes - an indicator of developers' profitability - dropped to its lowest since 2003 at 12 percent in the third quarter of 2013, according to real estate company Midland Realty. Hang Lung Properties and New World Development declined to comment on whether they would continue to offer discounts. Wong Leung Sing, research director at Centaline Property Agency believed the buyers, rather than the analysts, would be proven correct over the price trend. "We can't find the factors that will lead the market to plunge," Wong said. "Investors are still quite optimistic." More than 5,000 small-to-medium units will be released by developers such as Cheung Kong and Sino Land in the first quarter of next year, pushing inventory of new homes to a ten-year high and posting what Wong called "a real test" to mass consumers' purchasing power. "The day of reckoning will be decided by the middle class," Wong said. CALLING THE BOTTOM Amid forecasts of a collapse in the property market and general gloom over the outlook for home prices, there are still some who say the worst is over. "The government tightening just pushed back the timing of the purchase for Chinese buyers," said Patrick Chau, director of residential sales at property consultant Savills. "You can never suppress the demand from that market." Some developers are also upbeat, prompting them to start scaling back some of the incentives previously on offer. The city's largest developer Sun Hung Kai Properties raised the price of the high-end project near Kowloon West by up to 10 percent after a strong market response - it received over 2,000 applications for a re-launch of 60 units. With the city's healthy 54 percent loan-to-value ratio, the absence of an immediate interest rate hike, and strong purchasing power from end-users and investors, Chau expected home prices to rise a further 5 percent by the second quarter of 2014. "Here, at the front line of the market, we don't see the correction that investment banks are talking about." ($1 = 7.7535 Hong Kong dollars) (Editing by Anne Marie Roantree and Simon Cameron-Moore )

Banks hope futuristic flagships can tempt new customers

Sun Nov 3, 2013 3:08am EST

http://www.reuters.com/article/2013/11/03/us-banks-future-idUSBRE9A203720131103

VELIZY, France - Installation art, interactive walls and a robot doorman; the flagship branches of the world's top banks have come a long way from the iron grilles and potted plants of old.

To compete against online-only rivals and to attract a new generation of customers to branches, banks are installing sleek interiors and hi-tech gadgetry. ATMs that read fingerprints, touch-screen desks to flick through your finances and videoconference units for expert advice are all on display at payments-technology firm Wincor Nixdorf's ( WING.DE ) showroom in the Paris suburb of Velizy. "Banks are investing a lot in their retail branches," said Steve Bousabata, head of Wincor's French banking services arm. "They want customers to come back." The reason is clear: after years of relying on branches to drive retail revenue, European banks expect such networks to supply only 62 percent of sales by 2020 from today's average of 81 percent, according to Equinox Consulting. Banks, especially those still nursing losses from the financial crisis, are under pressure to cut costs and are balancing the need to pare back branch networks by sprucing up select outlets. But branches are still the first point of contact for many customers and are still the primary location for product sales like mortgages, new accounts and insurance, underlining the importance of upgrading them for a more tech-savvy generation. The difficulty is knowing exactly what belongs in the branch of the future and what is better left behind. "Are all the things we see in branches today going to be seen in branches tomorrow? I very much doubt that," said Mike Baxter, head of management consultancy Bain's Americas Financial Services practice. "There's an awful lot of experimentation of stuff that turns out to be unsuccessful and uneconomic." Flashy "bank of the future" branches mixing gadgetry with design similar to Apple's ( AAPL.O ) minimalist stores have been opened by BNP Paribas ( BNPP.PA ) in Paris, Barclays ( BARC.L ) in London and Deutsche Bank ( DBKGn.DE ) in Berlin - at an estimated cost of 5 million euros ($7 million) each. They include lounge areas, giant interactive screens and other trimmings such as handbags for sale and pieces of art. Gauging their success is tricky. BNP was willing to give data on its refurbished flagship branch near the Paris Opera - which three years ago was fitted with a wall covered in plants, iPads for customer use and a touch-screen desk - saying that footfall was up 40 percent and new clients up 25 percent. Italy's Unicredit ( CRDI.MI ) also said that footfall and new business were up at its newly revamped flagship branch in the Bulgarian capital of Sofia, which offers "welcoming scents" and a touch-screen wall. Visits are up by an average of 60 percent while loans and deposits have doubled, a spokeswoman said. On the other hand, BNP has done away with some ideas that failed to click with consumers: it has scrapped the iPads and touch-screen desk in favor of an interactive wall. Deutsche Bank and Barclays declined to give data on single branches. More broadly, some 88 percent of bank executives view their flagship branches in main street areas as being "successful" in promoting brand awareness, according to a survey by Equinox. ROBOT BANKERS Beyond Europe, the experiments are even bolder. In South Korea, where mobile banking has flourished faster than in the West, Hana Bank ( 086790.KS ) allows mobile users to transfer money to one another by physically "bumping" smartphones. Shinhan Bank ( 055550.KS ) has also introduced unmanned "smart" branch kiosks that communicate with handsets. Commonwealth Bank of Australia ( CBA.AX ) is using a mobile app to drive mortgage sales by offering clients data on houses for sale, while BBVA's ( BBVA.MC ) U.S. unit Compass is testing drive-through ATMs with videoconferencing. Customers of the Washington D.C. branch of Carolina Premier Bank ( PARA.PK ) will soon find themselves face-to-face with a robot, which will greet visitors from November 15. Although some of these advances may prove too gimmicky or not functional enough to catch on, long-distance banking via videoconference is seen as a way to reduce branch staffing without hurting service, though customers still prefer a physical point of contact somewhere along the line. "Mortgage specialists sitting at headquarters, connecting via videoconference to the relationship manager; that works," said Bain's head of global retail banking, Dirk Vater. "But bank-to-consumer, with people sitting on the sofa using Skype and Facetime, has not been adopted yet. It will eventually ... But not yet." Increased ATM functionality as used by Citibank ( C.N ) Asia and more secure biometric readers are also promising, he added. The ultimate question of whether to scrap the branch entirely is one that is not being considered, consultants said. The preference is for a "hub-and-spoke" model that pools resources in urban areas and reduces smaller, rural branches. While this may lead to more ambitious flagship outlets, it can create gaps for new competitors to fill: France's Nickel, which offers a low-cost current account, is creating a branch network with the country's 27,000 tobacconists. IDLnL6N0I62C3 "Even in developed markets, the death of branches is somewhat exaggerated," Ernst & Young wrote in a 2012 report. "We will see further evolution of the branch experience from something that looks like a local government office ...(to) a hybrid between coffee shop and technology store." ($1 = 0.7312 euros) (Additional reporting by Steve Slater in London, Tsvetelia Tsolova in Sofia, Jackie Range in Sydney and Douwe Miedema in Washington; Editing by Carmel Crimmins and Giles Elgood )

Commerzbank CEO says independence no end in itself

Sat Nov 2, 2013 9:03pm EDT

http://www.reuters.com/article/2013/11/03/us-commerzbank-ceo-idUSBRE9A200T20131103

BERLIN - The chief executive of Commerzbank ( CBKG.DE ) said Germany's second largest lender should not remain independent at all costs, a German newspaper reported.

"To me, autonomy is no end in itself," Martin Blessing was quoted as saying by weekly Welt am Sonntag in an interview published on Sunday. "I want our employees to have the feeling that they can do something meaningful for the economy." That marks a shift in emphasis by the CEO, who told daily Handelsblatt in August that he expected the Frankfurt-based bank to be still independent when it celebrates its 150-year anniversary in 2020. Local media recently reported that the German government, which invested 18.2 billion euros ($24.55 billion) in Commerzbank as part of a bailout during the financial crisis, aims to sell off its 17 percent stake to another European bank. Major lenders including BNP, Unicredit and UBS have played down speculation linking them to Commerzbank, which analysts expect to post a sharp drop in third-quarter pretax profit on November 7. ($1 = 0.7414 euros) (Reporting by Andreas Cremer)

Swisscom builds 'Swiss Cloud' as spying storm rages

Sun Nov 3, 2013 10:18am EST

http://www.reuters.com/article/2013/11/03/us-swisscom-cloud-idUSBRE9A209S20131103

ZURICH - Swisscom is building a "Swiss Cloud" that could loosen the grip of U.S. technology giants and attract foreign companies looking for a way to shield sensitive data from the prying eyes of foreign intelligence services.

Companies are increasingly turning to cloud computing - an umbrella term for technology services such as email and business software offered remotely via the Internet instead of on-site - to cut costs and add flexibility to their IT departments. But revelations that the U.S. National Security Agency (NSA) secretly gathered user data from nine big U.S. tech companies including Google, Apple and Facebook has demonstrated that privacy for users of cloud services can be compromised, and some suggest customers could seek out alternatives to the dominant U.S. providers to try and protect sensitive information. Swisscom's head of IT services Andreas Koenig told Reuters the telecom provider's decision to set up a home cloud was unrelated to the recent NSA revelations and driven more by a desire to cut costs and make its systems more dynamic. Still, as the technology to protect against illegal threats progresses, Koenig says it will start to make more sense to store data in locations where strict privacy laws make it harder to retrieve sensitive information. "Data protection and privacy is a long tradition in Switzerland, and that's why it's pretty difficult to get to something," Koenig said. "But if legal requirements are there and we are asked by the judge to obtain or deliver certain information then we would obviously have to comply with it." Unlike in the United States, where the 2001 Patriot Act and the 2008 Foreign Intelligence Surveillance Act (FISAA) gives U.S. intelligence agencies the power to carry out mass information gathering, Swisscom would have to receive a formal request from a prosecutor before allowing access to data. Yet while Swiss privacy laws will govern data stored locally in Switzerland, Swisscom says it is hard to guarantee the security of data that crosses borders, such as information exchanged by employees working in different countries. Concern over the extent of foreign intelligence access to data has unnerved many countries, including Germany, where state-backed Deutsche Telekom wants communications firms to collaborate to shield local internet traffic. INFRASTRUCTURE SECURITY Swisscom, which is majority-owned by the Swiss government, wants to be at the forefront of new technology to monitor and detect illegal threats, such as hacking. "If you are a provider in a cloud environment you need to apply the highest standards of security you can get," said Koenig, adding the company was implementing new ways to look at intrusion and data threats. He said improvements in technology such as HTML 5, a new programming language for websites that can support apps on many different platforms, would make it harder to retrieve data. "It's like opening a data tunnel from the server to your screen and then displaying the data on your screen. That makes it pretty, pretty difficult for anyone to see what's there." In Switzerland, which upholds privacy and data secrecy for its citizens and has long profited from providing discreet banking services to foreigners, the NSA surveillance furor is particularly sensitive. The Swiss government is worried about surveillance of Switzerland's more than $2 trillion financial centre and is seeking measures to ensure against spying, Basler Zeitung reported last week, citing sources. Swisscom is subject to regulation requiring it to store all client data in Switzerland. The company counts banks among its biggest clients, and the country's financial regulator FINMA also stipulates that data and data transfer must happen within Switzerland. For now, the company is focusing on its Swiss-based clients but says it would have the capacity to support demand from foreign companies seeking a privacy haven. Koenig declined to disclose how much Swisscom was investing in its cloud nor how much it was planning to charge potential clients for the service, but said it would be competitive with other providers such as Amazon Web Services and International Business Machines. He said Swisscom's goal was to have 70 percent of its own IT infrastructure in the cloud by 2016, the equivalent of 200-300 petabytes of data. According to analysts at Deloitte Analytics, it would take 223,000 DVDs to hold just one petabyte. (Additional reporting by Katharina Bart; Editing by Will Waterman)

Forex probes may lead to further regulation of industry: Saxo Bank CEO

Sun Nov 3, 2013 7:49am EST

http://www.reuters.com/article/2013/11/03/us-forex-probe-saxo-idUSBRE9A207J20131103

ABU DHABI - Recent investigations into alleged manipulation of foreign exchange rates could be used by politicians as an excuse for new regulation of the industry, the co-head of Denmark's Saxo Bank has warned.

Benchmark foreign exchange rates, often referred to as fixes, are a cornerstone of global financial markets, used to price trillions of dollars worth of investments and deals and relied upon by companies, investors and central banks. Allegations of possible manipulation of these rates has prompted a global investigation. Regulators in Switzerland, the United Kingdom and Hong Kong said last month they were investigating conduct in currency markets, while a top federal prosecutor in the United States said last week the U.S. Justice Department had launched a criminal probe. "You could fear that the one market which regulators and politicians haven't got their teeth into yet is FX and, for sure, politicians can't wait to get their teeth into anything to do with financial markets," Lars Christensen, co-chief executive of Saxo Bank, said late on Saturday on the sidelines of the Formula One Abu Dhabi Grand Prix. "So it could be what gives them the excuse to also get into the over-regulation of this market." Copenhagen-based Saxo Bank is one of the biggest banks for retail forex trading, earning around two-thirds of its revenue from currency trading last year. Christensen said there would have to be consequences if people were "deceitfully manipulating the rates" but it was a tough market to do so because of its size, the amount of liquidity and its transparency. He said it was still too early to tell what kind of reputational damage the episode would have on the forex market generally and it was still unclear what the exact basis was for many of the trader investigations disclosed recently. A string of banks, including JP Morgan ( JPM.N ) and Citigroup ( C.N ), have put dealers on leave recently as regulators investigate possible manipulation in the $5.3 trillion-a-day foreign exchange market. Barclays ( BARC.L ), UBS ( UBSN.VX ) and Deutsche Bank ( DBKGn.DE ) said last week they were cooperating with regulators over possible manipulation of currency trading by banks, while Royal Bank of Scotland ( RBS.L ) said it was reviewing its FX processes. Deutsche Bank, Citigroup, UBS and Barclays are the four biggest players in the global FX market with a combined share of over 50 percent. (Reporting by David French; Editing by Susan Fenton)

Centrica set to drop 2 billion pounds offshore wind farm plans: report

Sun Nov 3, 2013 6:33pm EST

http://www.reuters.com/article/2013/11/03/us-centrica-racebank-idUSBRE9A20JP20131103

- British energy supplier Centrica Plc ( CNA.L ) is likely to drop plans to build a 2 billion-pound wind farm because of insufficient government subsidies, the Telegraph reported on Sunday, citing three sources.

Centrica will not go ahead with the Race Bank wind farm project off the Norfolk coast unless proposed government subsidies are significantly increased, the sources told the newspaper. For the Telegraph's story, click on link.reuters.com/sak44v . Offshore wind power is still in its infancy and its financing is a political issue because cash-strapped governments balk at the subsidies the industry says are necessary until economies of scale and streamlined processes can make it more competitive. The subsidies will be funded by government-imposed levies including green taxes, which Britain's "big six" energy suppliers, including Centrica, say are increasing energy bills for consumers. Centrica, which owns British Gas, increased its household electricity and gas prices last month by an average of 9.2 percent, more than three times the rate of inflation, adding to a political row over the rising cost of living. The Race Bank project will be the third big UK investment plan abandoned by Centrica. The company called off two gas storage projects in September after the government refused to help build stockpiling sites. In February, it pulled out of plans to build new nuclear power stations in Britain with partner EDF ( EDF.PA ). Centrica was not immediately available for comment. (Reporting by Abhirup Roy in Bangalore)

Merlin to close London float order books early: source

Sun Nov 3, 2013 6:45pm EST

http://www.reuters.com/article/2013/11/03/us-merlin-ipo-idUSBRE9A20K020131103

- Madame Tussauds owner Merlin Entertainments IPO-MEG.L is to close its London share sale early due to strong demand, a person familiar with the matter said on Sunday.

Order books on the offering, which will value private equity-backed Merlin at as much as 3.3 billion pounds ($5.3 billion), had been due to close on November 8 for members of the public and on November 11 for institutional investors. Both groups will now have until November 7 to put in orders for the shares, the person said. Merlin, which is offering the shares at 280 to 330 pence each, said last month it planned to raise 200 million pounds from the sale of new shares to reduce debt. {ID:nL5N0IB0NF] Its owners will also sell some of their holdings through the listing. Owners include Danish investment firm Kirkbi A/S, which controls Lego Group. Other owners are the private equity firms Blackstone Group ( BX.N ) and CVC, as well as company directors and employees. ($1 = 0.6281 British pound) (Reporting by Kylie MacLellan in London; editing by Matthew Lewis )

U.S. dollar frail, Tokyo stocks slip, gold shines

Fri Apr 22, 2011 3:53am EDT

http://www.reuters.com/article/2011/04/22/us-markets-global-idUSTRE71H0EB20110422

SINGAPORE - The dollar hovered around three-year lows on Friday and looked set to come under further pressure next week, while a stronger yen weighed on Tokyo stocks in holiday-thinned Good Friday trade.

Gold hit a fresh all-time high of $1,509 an ounce, extending its record-breaking rally to a sixth session, as the weaker dollar prodded investors toward assets less reliant on the U.S. economy. The dollar index .DXY was steady at 73.99 against a basket of major currencies after slipping to its lowest since mid-2008 on Thursday, weighed down by expectations that the Federal Reserve will keep interest rates at record lows for some time to come and by bitter divisions in Washington over how to slash the gaping budget deficit. Analysts said it could extend recent losses next week, with all eyes now on its record low of 70.698 struck in March 2008. "The biggest reason behind the fall is waning investor confidence in U.S. assets. The market is waking up to the fact that fiscal problems are not limited to euro periphery countries," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp in Japan. ID:nL23389078] Trade was expected to remain thin into early next week with most markets around the world closed from Friday through Easter Monday. Japan's Nikkei-225 share average .N225 ended down 0.04 percent but pared initial losses after news that Renesas Electronics 6723.T., a major chip supplier to the auto industry, would resume operations at an earthquake-hit factory earlier than expected Tokyo stocks had slipped in early trade as dollar weakness boosted the value of the yen. In Seoul, one of the other few Asian markets open on Friday, the Korea composite Stock Price Index .KS11 edged down 0.03 percent, while Shanghai .SSEC fell 0.7 percent, shrugging off gains in U.S. markets overnight. Wall Street posted its first positive week in three as healthy earnings news boosted the Dow Jones industrial average by 0.42 percent, though gains were offset by the fact that 180 S&P names were due to report financial results next week. .N DOLLAR WOES Adding to pressure on the dollar, data overnight showed the U.S. economy was struggling to regain momentum. Factory activity in U.S. Middle Atlantic states slowed sharply in April, new jobless claims fell less than expected and other reports showed steep declines in home prices in February. Data next week is expected to show U.S. growth slowed significantly in the first quarter. China's yuan hit another record high, trading at 6.5096 to the dollar in early afternoon as the central bank fixed its mid-point at an all-time high. Like many other Asian governments this year, Beijing appears to have decided to allow more gains in its currency to help tame imported inflation. But analysts discounted any notion that the People's Bank of China would oversee a one-off currency revaluation as it did in July 2005, a move that could hurt exporters and place huge pressure on the government. Oil prices also remained high, with the weaker dollar attracting more buying. U.S. Crude oil futures ended higher for the third straight day on Thursday and Brent crude stood at just over $124 a barrel.

Samsung countersues Apple over iPhone, iPad

Fri Apr 22, 2011 9:02am EDT

http://www.reuters.com/article/2011/04/22/us-samsung-apple-idUSTRE73L0DG20110422

SEOUL - Samsung Electronics Co has filed patent lawsuits against Apple over the U.S. firm's iPhone and iPad in a tit-for-tat case after Apple claimed Samsung's smartphones and tablets "slavishly" copied its products.

Apple filed a lawsuit last Friday alleging Samsung violated patents and trademarks of its iPhone and iPad, as the popular gadgets are being threatened by the fast rise of rival devices based on Google's free Android operating system. The legal battle between Apple and Samsung could jeopardize business ties between the two technology companies, as the Cupertino, California-based company depends heavily on Samsung for components such as chips and LCD displays. Operating systems have emerged as the key battlefield for dominance of the world's smartphone market. Android became the most popular smartphone software in the United States in the three months ending in February, ahead of Apple and Research in Motion, according to a recent survey by research firm comScore. Samsung is one of the fastest growing smartphone makers on the back of the Android boom and has emerged as Apple's strongest competitor in the tablet market, with models in three sizes. COUNTER LAWSUITS Samsung said in a statement Friday that Apple's iPhone and iPad infringe Samsung's 10 mobile technology patents and it called for Apple to stop infringing its technology and compensate the company. Samsung said the suits, filed in South Korea, Japan and Germany, involved 10 alleged infringements of patents mainly involving power reduction during data transmission, 3G technology for reducing errors during data transmission, and wireless data communication technology. "Samsung is responding actively to the legal action taken against us in order to protect our intellectual property and to ensure our continued innovation and growth in the mobile communications business," the statement said. Global technology companies are locked in a web of litigation as they try to defend their shares of the booming tablet and smartphone market. Strong sales of the iPhone and iPad translate into more revenue for Samsung. Apple was Samsung's second-biggest client after Japan's Sony Corp last year, bringing in around 6.2 trillion Korean won ($5.7 billion) of sales, and is widely expected to become Samsung's top client this year. The battle comes ahead of Samsung launching a new version of its successful Galaxy S smartphone next week in Korea, a key product for the world's No.2 handset maker to meet its target of 60 million units of smartphone sales this year. Shares in Samsung, Asia's biggest technology company with a market value of $140 billion, fell 2.5 percent by 0410 GMT after three consecutive sessions of gains, versus a 0.2 percent fall in the broader market. ($1 = 1080.950 Korean Won) (Editing by Ken Wills and Anshuman Daga )

Yuan continues climb to end at record; revaluation seen unlikely

Fri Apr 22, 2011 7:14am EDT

http://www.reuters.com/article/2011/04/22/us-markets-china-yuan-idUSTRE73L1HV20110422

SHANGHAI - The yuan ended at a fresh record high on Friday as the central bank continued to allow the currency to rise to help fight imported inflation, but onshore traders remained convinced it would not resort to any one-off revaluation despite rumors overseas.

The People's Bank of China (PBOC) has set repeated record highs for the yuan's daily mid-point over the last several weeks, engineering an accelerated rise against the dollar that means it has now gained nearly 5 percent since it was depegged last June. Those recent gains, together with comments this week by PBOC adviser Xia Bin that he would not rule out another one-off revaluation, have sparked talk among forex traders, especially those offshore, that such a move could be imminent. But a number of reasons argue against such a possibility. Policymakers as senior as Premier Wen Jiabao have repeatedly ruled out the possibility of another one-off revaluation, meaning any surprise would put the government's credibility at risk and could spark a backlash from the politically strong export sector. Traders also point to the fact that the PBOC could allow a spurt in the yuan of 2 to 3 percent over the course of a few trading days if it wanted to, just by continuing to set its mid-point higher and allowing the currency to rise in daily trade, negating the need for any one-off move. "There would be huge pressure for the government to explain if it conducted another one-off yuan revaluation of 2 or 3 percent -- a goal it can now easily reach via the market," said a senior trader at a major Chinese state-owned bank in Beijing. "An even larger one-off yuan rise would surely create a huge political storm in a country where quite a large number of people still believe yuan appreciation is part of a Western conspiracy aimed to contain China's development." CONTAINING FALL VERSUS BASKET Still, what has become clear is that Beijing is increasingly ready to let the yuan strengthen against the dollar as a way to help contain the rising cost of imports, which was one reason why the country racked up a rare trade deficit in the first quarter. While the official view in Beijing is that the yuan is no longer vastly undervalued, PBOC governor Zhou Xiaochuan pointed to the need to rely on the yuan in the inflation fight a week ago, echoing earlier comments by Premier Wen. The need to move further on appreciation comes in part because the dollar has recently fallen to three-year lows. Even though the yuan has risen by over 1 percent against the dollar so far this year, it has been falling against the currencies of other major trading partners given the dollar's weakness, making imports from places such as Europe more expensive. So in a sense, the PBOC is just limiting the yuan's fall against other currencies, not engineering a rise outright, something traders said showed the government's continuing caution about disrupting exporters and other rate-sensitive sectors. Spot yuan closed at a record high 6.5067 versus the dollar, up from Thursday's close of 6.5205. It has now risen 4.91 percent since it was depegged in June 2010, and 1.27 percent so far this year. The PBOC has set a series of record high mid-points -- the level from which the dollar/yuan exchange rate can trade up or down 0.5 percent on a given day -- to express the government's intentions for the yuan to rise. FASTER, PLEASE Judging by official comments, one might not expect a rise such as that over the last few weeks to continue for long. Guan Tao, an official with the State Administration of Foreign Exchange (SAFE), said in remarks published in China Finance that the yuan should not be allowed to rise sharply, even while Beijing takes steps to rein in the growth in the country's foreign exchange reserves. Still, traders said it may be more to China's benefit to let the yuan appreciate faster to take advantage of the higher value of the currency to fight inflation, while the PBOC could still pull back the currency quickly if market conditions change. If the yuan rises too slowly, lagging conditions in the global market, China's economy may not be cushioned in time from the effects of imported inflation, traders said, noting that it was possible that policy makers had reached a common understanding on the necessity for quicker appreciation. Revaluation or no revaluation, offshore traders continued to price in heightened expectations of accelerated appreciation over the next several months. One-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3220 in late trade, down from 6.3400 at Thursday's close. Those levels imply the yuan will appreciate 3.06 percent in a year's time, compared with 2.76 percent implied a day earlier, leaving open a window to bet on more yuan strength in the NDFs. NDFs appeared to be playing catch-up with widespread expectations of 5 to 6 percent yuan appreciation for 2011 after they lagged in forecasting the rise so far this year, partly due to capital outflows from the NDF market into Hong Kong's expanding yuan market. (Additional reporting by Kevin Yao in BEIJING; Editing by Kim Coghill)

Amazon, eBay wage costly battle for shoppers

Fri Apr 22, 2011 8:38am EDT

http://www.reuters.com/article/2011/04/22/us-amazon-ebay-idUSTRE73K7FG20110422

NEW YORK - When Amazon.com and eBay report quarterly results next week, investors will try to determine how well the e-commerce rivals' expensive fight for shoppers is paying off.

They will want to see if revenue is growing fast enough to justify the costs. Amazon has been moving further from its traditional business selling physical goods online to take on tech rivals like Apple Inc and Google Inc in areas such as selling digital entertainment and storing data. EBay is best known for its online auction website and PayPal, a payment system, but it has been making deals to compete more directly with Amazon, such as its $2 billion purchase in May of e-commerce services firm GSI Commerce. That deal is aimed at getting more retailers to sell to their customers using eBay. Amazon's growth -- its sales nearly doubled between 2008 and 2010 -- has come at a cost: shrinking operating margin. Amazon has made no bones about it, warning investors to expect pressure on its profitability for some time yet. The question for investors will be how much pressure. "They (Amazon) are investing for the future and it's just a matter of how long this investment process will take," said Michael Koskuba, a senior portfolio manager at Victory Capital Management, which has owned Amazon stock since March 2009. Amazon shares plunged 9 percent on January 27 when it reported a lower operating margin over the holiday quarter. Amazon has been challenging rivals from Apple to Barnes & Noble Inc and many others with low prices on e-books, cheap shipping and offering customers the ability to store music on its servers in a "music locker." A stellar sales performance by Amazon would mollify investors worried about the impact on profits, but a so-so performance could send shares down. "If Amazon has a strong revenue quarter, people will be more willing to overlook margins," said Cowen & Co analyst Jim Friedland. "If they come in close to expectations (on sales) but margins are weaker, that would absolutely provoke a sell-off." Ultimately, revenue will be the barometer of how well Amazon is doing at fending off a resurgent eBay. "Revenue reflects how much market share they still have to gain," said BGC Partners analyst Colin Gillis. On average, Wall Street analysts expect Amazon to report a first-quarter profit of 61 cents per share on $9.52 billion in sales, down from 66 cents a year earlier, according to Thomson Reuters I/B/E/S. They expect eBay's profit to come to 46 cents per share on revenue of $2.48 billion, compared to 42 cents per share a year earlier. For a graphic comparing Amazon and eBay's revenue growth, see: r.reuters.com/nuj29r SCRUTINY OF EBAY'S AUCTION SITE Investors will most likely be swayed by how much merchandise is sold on eBay's auction site as well as the number of new PayPal accounts. But one analyst said eBay would probably only get punished for weakness, rather than rewarded for strength. "If eBay falls short, it's more about stronger than expected competition from Amazon, but if it rises more than expected, it's more about the (better) overall economy," Cowen's Friedland said. Friedland is expecting gross merchandise volume, a closely watched measure of the total value of goods sold on eBay's marketplaces, to be up 6 percent increase, excluding vehicles. PayPal has led the company's revenue growth for years, while its marketplaces unit has matured. PayPal accounted for just over one third of sales last year but its revenues rose 23 percent, while the marketplaces business sales were up only 8 percent. Amazon shares trade at a 2011-earnings-to-price multiple of 55, far above most store chains as well as eBay, Apple and Google, suggesting the stock has downside. EBay shares trade a future earnings to price ration of 16.4 and analysts say that means it may have more upside than Amazon's if its results impress investors. They have slipped 10 percent since hitting a yearly high in February. "EBay is coming back. If you want e-commerce exposure, buy eBay." BCG's Gillis said. (Reporting by Phil Wahba. Editing by Gary Hill)

Toyota to recall 333,000 SUVs for airbag risk

Thu Apr 21, 2011 8:47pm EDT

http://www.reuters.com/article/2011/04/22/us-toyota-recall-idUSTRE73L04K20110422

DETROIT - Toyota Motor Corp said on Thursday it would recall about 333,000 RAV4 and Highlander SUVs because of the risk airbags sensors could fail and cause the curtain airbags to deploy.

The recall covers about 214,000 RAV4 and about 94,000 Highlander SUVs from the 2007 and 2008 model years in the United States, and about 19,000 RAV4 and 6,000 Highlanders in Canada. The recall only affects vehicles sold in North America, Toyota said. Toyota said owners of the vehicles would be notified of the recall by mail in May. Toyota said that, in cases where two sensors fail at almost the same time, the side curtain airbags designed to protect passengers in a rollover accident could be inflated outside such an accident. In cases where just one of the sensors fails, the airbags warning light will be activated, the automaker said. The sensors were made by Denso Corp. A Toyota spokesman said a change was made in the making of the sensors in January 2008 that fixed the issue and that no more recalls on this issue are expected. The spokesman said he knew of no accidents related to the curtain airbags issue, but said that some minor injuries have been reported. He said he did not know how many injuries have been reported. (Reporting by Kevin Krolicki and Bernie Woodall ; editing by Andre Grenon , Bernard Orr )

Rio says reaches accord with Guinea over Simandou

Fri Apr 22, 2011 3:21pm EDT

http://www.reuters.com/article/2011/04/22/us-riotinto-guinea-simandou-idUSTRE73L3LC20110422

DAKAR - Mining giant Rio Tinto ( RIO.L ) said on Friday it would pay the government of Guinea $700 million after reaching an agreement to resolve all outstanding disputes over blocks 3 and 4 of its Simandou iron ore project.

The company said in an emailed statement to Reuters that it had signed a settlement to secure Rio's mining title for the southern Simandou blocks, paving the way for some $10 billion in investment and the first shipment of iron ore by mid-2015. Anglo-Australian Rio once controlled all of the Simandou concession but it was stripped of the northern half, and last year Guinea's government said it might also lose the southern blocks, where Rio is looking to partner with China's Chalco. "Today's agreement gives us the certainty we need to allow us to invest and move forward quickly so we can bring this great resource into production," Sam Walsh, Rio Tinto Iron Ore's chief executive, said in the statement. Guinea stripped Rio of blocks 1 and 2 during the rule of former president Lansana Conte, who died in December 2008 and was replaced in a bloodless coup by a military junta. Rio has long sought to win the blocks back but BSG, a firm controlled by Israeli billionaire diamond trader Beny Steinmetz, secured them and signed a deal in April last year with Brazilian mining giant Vale SA ( VALE5.SA )( VALE.N ) to develop them. In recognition of the resolution of all outstanding issues and finalization of new investment agreement terms over the remaining blocks, Simfer, Rio's Guinean subsidiary, will pay $700 million to the Guinean treasury, the statement said. It added that the payment would be made after the passing of a presidential decree granting Rio the mining concession and the approval of its proposed Chalco ( 601600.SS ) and Rio Tinto Simandou joint venture. Rio is in talks with Chalco for a JV to develop Simandou. "Once the JV agreement with Chalco is complete, Rio Tinto's 95 percent interest in Simfer will be held in the new JV. Chalco will acquire a 47 percent interest in the new JV by providing $1.35 billion on an ongoing earn-in basis within several years," the statement said. According to the terms of the agreement, Guinea's government will have the right to take a stake of up to 35 percent in the project, including 15 percent at no cost to the government, which will be held by a state mining firm. Other terms of the deal included: * A stabilised fiscal regime agreed by the parties which will apply for the lifetime of the mine. * An income tax holiday of eight years from the first taxable profit, followed by a general tax rate of 30 percent. * Royalties will be payable at 3.5 percent FOB for all exported ore. * Simfer will also be exempt from withholding tax on dividends. All imported goods used for construction and maintenance will be exempt from value-added tax and customs duty. * A new rail line and a new Guinean port will be constructed to transport ore from mine to ship. (Reporting by Bate Felix; editing by David Lewis , Jane Baird and Dale Hudson )

Tenet rejects sweetened Community Health offer

Fri Apr 22, 2011 2:47pm EDT

http://www.reuters.com/article/2011/04/22/us-tenethealthcare-idUSTRE73L2W220110422

NEW YORK - Tenet Healthcare Corp's ( THC.N ) board rejected the latest $3.3 billion offer from Community Health Systems ( CYH.N ), saying the price "grossly undervalues the company."

After consultations with advisors, Tenet said on Friday, it had determined that the revised bid "not in the best interest of Tenet or its shareholders," leaving in doubt the outcome of a takeover battle that began last November. Community Health, the second-largest U.S. hospital chain, sweetened its hostile bid earlier this month, changing its $6 per share offer to all cash from $1 in Community Health stock and $5 in cash. The move was meant to protect Tenet shareholders from any risk associated with the stock of Community Health, which is the subject of a U.S. government probe into billing practices. In rejecting the bid, Tenet Chief Executive Trevor Fetter said that since the initial offer in November his company "has demonstrated improving business trends, including the best fourth quarter results in seven years. In addition, industry fundamentals are improving, and Tenet's outlook for 2011 and longer-term financial performance reflects strong growth." Those prospects were not reflected in the Community Health bid, he said. Community Health said it was disappointed by the decision. "We remain ready to engage in constructive discussions to move this transaction forward. We would welcome the opportunity to review additional information Tenet can provide and are prepared to recognize any additional value it can demonstrate," it said. Community Health has argued the combination would gain greater operating efficiencies and leverage for negotiating with insurers and recruiting physicians, providing a compelling strategic rationale for the transaction. The combined companies would have 176 hospitals in 30 states and an estimated revenue of $21.9 billion. In a letter to Community Health, CEO Fetter and Chairman Edward Kangas said they "have never been opposed to a sale," but said current offer shortchanged shareholders. Aside from the price, they pointed to concerns "regarding disclosure and regulatory compliance" that were the basis of a lawsuit Tenet filed against Community Health on April 11. Tenet's lawsuit accuses Community Health of admitting patients for needless stays and bilking the U.S. government and private insurers. Community Health has asked the courts to dismiss the lawsuit. Meanwhile, Community Health has also disclosed that the U.S. government had subpoenaed the company in connection with an investigation of possible improper claims submitted to Medicare and Medicaid. Community Health intends to present a full slate of 10 independent director nominees for election to Tenet's board at its 2011 annual meeting. That meeting has been delayed until November 3, and the entire board is up for re-election, Community Health said. Shares of Community Health fell 20 cents to $30.69 on Thursday, while Tenet shares rose 6 cents to $6.77. U.S. stock markets were closed Friday. (Reporting by Paul Thomasch; Editing by Marguerita Choy)

Toyota says output to return to normal by December

Fri Apr 22, 2011 7:35am EDT

http://www.reuters.com/article/2011/04/22/us-toyota-output-idUSTRE73L0ST20110422

TOKYO - Toyota Motor Corp ( 7203.T ) said it could take until the end of the year before production has fully recovered to levels before the massive earthquake and tsunami on March 11 devastated Japan's northeast, disrupting the supply of key parts.

In the clearest forecast yet of how long it would take for the Japanese auto industry to recover, Toyota said output would start to pick up in July in Japan and around August overseas, with a complete recovery expected in November or December. Until then, Toyota's domestic factories will continue to work at volumes equivalent to half of original plans, and at an average 40 percent outside Japan, the world's biggest automaker said. "With this many aftershocks, including one last night, we've seen some of the recovery work thrown back to square one many, many times," President Akio Toyoda told a hastily called news conference in Tokyo on Friday. "In that sense it's difficult to say what the impact on production volumes or earnings will be." The news from Toyota came just hours after Japan's Renesas Electronics Corp ( 6723.T ), a major supplier of chips to the auto industry, said it would resume operations at a damaged factory north of Tokyo on June 15 -- a few weeks ahead of schedule -- an easing of a key bottleneck for car makers. While Renesas -- like Toyota -- stopped short of specifying at what pace production would ramp up, investors cheered its announcement, pushing Japanese auto stocks sharply higher to reverse earlier losses. The projection from Renesas, which has a 40 percent market share in automotive microcontroller chips globally, was a "big factor" in Toyota's gaining more clarity on its own production, Toyota Executive Vice President Shinichi Sasaki said. "The market was worried about clarity on how long this could last, and Toyota provided a degree of that," Deutsche Securities auto analyst Kurt Sanger said. "It's positive news," he said. Shares in Toyota ended up 3.1 percent, while Nissan Motor Co ( 7201.T ) put on 3.6 percent and Honda Motor Co ( 7267.T ) gained 2.3 percent. Some said Toyota's forecast could prove conservative in light of recent signs of factories starting to come back on line, a fund manager said. "According to what we're hearing directly from companies, it looks like the recovery on the ground is faster than people think, and Toyota may well restart production even faster than they stated in this announcement," said Tetsuro Ii, chief executive officer of Commons Asset Management. RETHINKING PARTS PROCUREMENT Japanese automakers have slashed production due to the shortage mostly of electronic and resin-based parts from the magnitude-9.0 earthquake and the resulting tsunami and damage to a major nuclear plant that has disrupted power supply. By the end of this month, Toyota said it will have produced 500,000 fewer vehicles globally than it had initially planned, with 400,000 units of that in Japan. President Toyoda said Toyota did not yet know which car models would be built at what levels in the ramp-up toward the end of the year. But he said that giving even a rough sense of timing would be a help to dealers, who he said could now give customers at least a vague sense of when they could expect cars to be delivered. The disruption of parts supply in Japan has also affected car makers overseas such as General Motors Co ( GM.N ) and Ford Motor Co ( F.N ), underscoring the complexity, depth and breadth of the industry's supply chain and the flip side of its lean "just-in-time" manufacturing system when a part goes missing. While concentrating production of certain electronic parts was inevitable for suppliers to compete on the global stage, Toyota's Sasaki said addressing the risk of supply disruption was a task for industry as a whole in one of the world's most earthquake-prone countries. Even among the components that Toyota buys locally in overseas regions, there were secondary parts that originated in Japan, Sasaki said, causing a bottleneck at less visible levels. "In light of that, we want to consider encouraging our suppliers to set up more production sites overseas," he said. For its part, Toyota's manufacturing chief, Executive Vice President Atsushi Niimi, said the automaker remained committed to building at least 3.0-3.2 million vehicles a year in Japan in an effort to keep the tradition of "monozukuri," or manufacturing, strong in the country. (Additional reporting by Antoni Slodkowski; Editing by Edmund Klamann and Edwina Gibbs )

Six Flags says arbitrator rules in favor of former CFO

Fri Apr 22, 2011 4:01pm EDT

http://www.reuters.com/article/2011/04/22/us-sixflags-idUSTRE73L3Q320110422

BANGALORE - Theme park operator Six Flags Entertainment Corp ( SIX.N ) said an arbitrator ruled in favor of certain claims made by its former Chief Financial Officer Jeffrey Speed.

The arbitrator has directed the company to pay $23.7 million, plus interest and attorney's fees, the company said. Six Flags replaced Speed as the CFO in September last year, and later terminated his employment, without cause, in October, the company said in a regulatory filing. In September, Speed filed with the American Arbitration Association a statement of claim and demand for arbitration against Six Flags, asserting various claims relating to and arising out of his employment agreement. Speed also filed a claim with the Department of Labor relating to his discharge which the company denies and plans to file a response shortly. The company, which will take a one-time restructuring charge related to the arbitration, said it disagrees with the arbitrator's award and is currently evaluating its options, including an appeal. (Reporting by Supantha Mukherjee in Bangalore; Editing by Sriraj Kalluvila)

Third day of Shanghai strike threatens China exports

Fri Apr 22, 2011 8:29am EDT

http://www.reuters.com/article/2011/04/22/us-china-strike-idUSTRE73L12X20110422

SHANGHAI - Striking truck drivers protested for a third day on Friday in Shanghai's main harbor district amid heavy police presence and signs the action has already started to curb exports from the world's busiest container port.

The strike is a very public demonstration of anger over rising consumer prices and fuel price increases in China. It comes as the government struggles to contain higher inflation, which hit 5.4 percent in March, fearful that rising prices could fuel protests like those that have rocked the Middle East. A crowd of up to 600 people milled about outside an office of a logistics company near the Baoshan Port, one of the city's ports. Some threw rocks at trucks whose drivers had not joined in the strikes, breaking the windows of at least one truck. The strikers, many of them independent contractors who carry goods to and from the port, stopped work on Wednesday demanding the government do something about high fuel costs and what some called high fees charged by logistics firms, said the drivers, who clashed with police on Thursday. China is especially wary about threats to social stability following online calls for Middle East-inspired "Jasmine Revolution" protests and has detained dozens of dissidents, including renowned artist Ai Weiwei. As many as 50 police officers were at the area on Friday, and at least two people were arrested after throwing rocks at trucks. Plainclothes officers also briefly detained some foreign reporters and manhandled a Reuters photographer. The crowd thinned out after a policeman said authorities planned to meet representatives of the truck drivers on Monday for talks aimed at ending the strike. "Please disperse and go back," he said through a megaphone to truckers who had gathered near a road junction. "We are already talking to your representatives. There will be an answer for you on Monday." But two truck drivers told Reuters that they would continue their campaign for the government to offset the rising cost of fuel. "We are continuing our strike," said a 38-year-old truck driver surnamed Liu. "There has been no response from the government or anybody else. There's nothing we can do." Workers organized the strike using word of mouth, said a driver. China's tightly controlled state media has made no mention of the unrest, and the city's government, which is working hard to turn glamorous Shanghai into a global financial hub to compete with Hong Kong and London, has denied knowledge of the strike. "We're currently not aware of the situation," a spokesman with the Shanghai city government said. He declined to be identified. EXPORTS SLOW Duncan Innes-Ker, China analyst at the Economist Intelligence Unit, said the strikes could inspire protests by workers in other transport sectors, given rising fuel prices. "There are strikes in the taxi driver industry on a regular basis in numerous cities across China," he said. "These are happening and they will continue to happen, and if the oil price continues to rise they will get worse." China said in early April it would lift retail gasoline and diesel prices by 5-5.5 percent to record highs. [ID:nSGE736009]. An official reached by telephone at Shanghai International Port (Group) Co, which runs the Shanghai port, told Reuters the strike "has not affected operations," though would not comment further. But one executive said the action was already starting to affect the port's operations, at least for exports. "The strike has delayed exports and many ships cannot take on a full load before leaving," said Wei Yujun, assistant to the general manager at China Star Distribution Center (Shanghai) Co. "For example, if one ship carries 5,000 containers en route to Hong Kong and the U.S., now they can only carry 1,000 or 2,000 containers," Wei said, adding that such containers typically carry goods such as textiles and machinery. Traders said that the strike had caused only minimal disruptions to refined copper flows. Waigaoqiao, together with two other bonded areas in Shanghai, hold about 80 percent of China's bonded copper stocks. "There is more than enough stocks in the bonded warehouses to offset any short-term impact on supplies," said Bonnie Liu, a Macquarie analyst based in Shanghai. Shanghai's most active copper futures contract closed flat at 71,440 yuan at midday. FEW OPTIONS FOR WORKERS Chinese workers have few means of pressing for better wages. The government prohibits unions independent of the All-China Federation of Trade Unions, an umbrella organization run by the Communist Party. Historically, the ACFTU tries to prevent strikes. "The most basic issue isn't simply that fuel prices are rising. It is that when fuel prices rise, the truck drivers don't have an independent channel to express their interests," said Li Qiang, executive director of China Labor Watch, told Reuters from New York. The unrest is occurring near at least one of the port's five major working zones -- Waigaoqiao, a massive free-trade zone and bonded storage warehouse. Shanghai overtook Singapore in 2010 to become the world's busiest container port. The Shanghai port handled 29.05 million 20-foot equivalent units, or TEUs, in 2010 -- 500,000 TEUs more than Singapore <ID: nTOE70700A>. Shanghai's cargo throughput rose to about 650 million tons in 2010, remaining the world's largest, up from 590 million tons in 2009. Situated in the middle of the 18,000 km-long Chinese coastline, the Shanghai port is managed by the publicly listed Shanghai International Port (Group) Co Ltd ( 600018.SS ), which is 44.23 percent owned by the Shanghai Municipal Government. Last May, a burst of labor disputes disrupted production for many foreign automakers including Toyota and Honda, which laid bare the rising demands of China's 150 million migrant workers and raised questions about the region's future as a low-cost manufacturing base. (Additional reporting by Jason Subler , Jane Lee, Carlos Barria in Shanghai, Ben Blanchard , Sui-Lee Wee , Michael Martina, Niu Shuping in Beijing and Tan Ee Lyn in Hong Kong,; Writing by Ben Blanchard and Sui-Lee Wee; Editing by Don Durfee and Robert Birsel )

Wall St Week Ahead: It's growth, but not as we know it

Fri Apr 22, 2011 1:42pm EDT

http://www.reuters.com/article/2011/04/22/us-usa-stocks-weekahead-idUSTRE73L02D20110422

NEW YORK - Large blue chips, including some consumer-oriented companies, will have to show they can counter sluggish developed economies by leveraging growth in emerging markets and technology -- if Wall Street is to maintain earnings momentum next week.

Companies like Microsoft, PepsiCo, and Coca-Cola, unloved on Wall Street, could turn out to be good buys if they can show they justify higher valuations than investors are now willing to give them. "If you see these Cokes and Pepsis and these kinds of multinational consumer names post good results, I think it is going to give the perception that the equity market can overcome a lot of these domestic issues," said Nick Kalivas, an analyst at MF Global in Chicago. Before the recession, the consumer and financial sectors benefited from huge credit expansion. Not so any more. Growth is now concentrated in industrial, materials and energy stocks that benefit from strong demand in emerging markets, as well as a technology sector boosted by robust demand from businesses. Average earnings growth across those sectors amounts to almost 33 percent in the first quarter over a year ago, according to Thomson Reuters data. That is more than double the estimated growth for the S&P 500 and towers over the 5 percent growth in a financial sector burdened by a weak housing market. Investors will also want to see at least stable performance in developed markets as they gear up for a press conference by U.S. Federal Reserve Chairman Ben Bernanke next week. Tough questions will be asked about what monetary policy will look like after the Fed's easy money policies come to a close at the end of June. EMBRACING THE UNLOVED Growth is scarce and it is driving up valuations in sectors where it is concentrated. During the week, investors chased a host of relatively expensive technology names like Apple and VMware. Some valuations look extreme: Cloud computing company Saleforce.com is priced at nearly 300 times current earnings. The trailing price-to-earnings ratio in the S&P's materials sector is more than 20 times current earnings compared with 16.3 for the whole market, according to data from Thomson Reuters' StarMine. For investors like Whitney Tilson, a hedge fund manager at T2 Partners in New York, that is creating opportunities in unloved blue chips, where he is focusing his attention instead. "There are a lot of big-cap blue-chip companies that are trading at moderate prices," he said. "At a time when everyone is getting enamored with high- growth darlings and commodities, that is precisely the time when we look to play defense and own boring companies that we think have a lot of growth." One of those less favored companies set to report next week is Microsoft. The company suffers from a reputation for slow growth and its price at nearly 11 times current earnings clearly reflects that. Comparing Microsoft to Apple, Tilson says that the former is an inherently better business as it is focused on software with marginal incremental production costs compared to Apple's consumer hardware business. Apple is "a fabulous business, but I'm simply pointing out that you can own a better business, albeit one that is not growing as quickly -- but still growing nicely -- for half the price in terms of price-to-earnings multiple," Tilson said. Blowout earnings from Apple and exceptionally strong results from other big tech and industrial companies drove the three major U.S. stock indexes higher for the week. The blue-chip Dow Jones industrial average ended the holiday-shortened week on Thursday at 12,505.99, its highest close for the year and its best closing level since June 5, 2008. For the week, the Dow and the benchmark Standard & Poor's 500 Index each gained 1.3 percent, while the Nasdaq Composite Index climbed 2 percent. U.S. financial markets were closed for Good Friday. EARNINGS FRENZY, TALKING FED Next week, 180 of the S&P 500 companies are set to report earnings. Of companies that have reported to date, 75 percent beat analysts' expectations. That is just above the average over the last four quarters, but well above the average of 62 percent since 1994, Thomson Reuters data showed. "As people are lowering GDP (estimated) numbers seemingly weekly, the companies are still maintaining some pretty solid revenue growth and margins are staying intact," said Jerome Heppelmann, portfolio manager and chief investment officer of Old Mutual Focused Fund in Berwyn, Pennsylvania. "I see it more as a broad-based continuation of the economic recovery," he said. "In some cases, the technology names are going to be more exposed and more levered to it." While earnings are driving ahead at full force, investors will also focus on the first of the Federal Reserve's press conferences. The press briefing on Wednesday is scheduled to start after the rate-setting Federal Open Market Committee wraps up its two-day meeting. Bernanke, the Fed chairman, intends to give four press briefings a year. There will likely be questions raised about the type of monetary policy the Fed will pursue when its $600 billion bond-buying program, known as quantitative easing, or QE2 on Wall Street, draws to a close at the end of the June. One school of thought says that QE2 drove the rally in stocks and commodities by underwriting the government's budget deficit and forcing money that would have gone into Treasury bonds into equity and commodity markets instead. "What happens when QE2 ends and the government starts to withdraw some of that liquidity?" Tilson asked. "How much of this is just artificial, deficit-driven, money-printing stimulus? And how much of it is really genuine? I don't know the answer to that, but I worry." (Wall St Week Ahead runs on Friday. Questions or comments on this column can be e-mailed to:edward.krudy(at)thomsonreuters.com) (Reporting by Edward Krudy; Editing by Jan Paschal )

POSCO outlook cautious, Q1 misses forecast on higher

Fri Apr 22, 2011 7:17am EDT

http://www.reuters.com/article/2011/04/22/us-posco-idUSTRE73L0ZE20110422

SEOUL - POSCO's ( 005490.KS ) annual earnings may remain under pressure due to fragile demand and high raw materials costs after the world's No. 3 steelmaker missed expectations with a 36 percent fall in quarterly profit.

The global steel sector, seen as a barometer of the broader economy's health, is facing a margin squeeze on record output from China and stubbornly high prices of iron ore and coaking coal. China's tightening is also weighing on steel demand and Japan's devastating earthquake has dimmed overall demand prospects from key consumers such as carmakers and shipbuilders as they struggle to normalize production. "Profits are seen improving gradually, but I don't expect booming demand ahead. Therefore there will be no strong upward momentum for (POSCO's) shares," said Cha Kyung-jin, a fund manager at Golden Bridge Asset Management, which owns POSCO shares. "Also, there isn't any clear signs of growth in the Chinese construction market, which may weigh on further demand," Cha said on Friday. Shares in POSCO, which counts billionaire investor Warren Buffett's Berkshire Hathaway ( BRKa.N ) ( BRKb.N ) as a major shareholder, have underperformed this year in a broader market .KS11 up 7 percent. JFE Holdings ( 5411.T ), the world's No. 5 steelmaker, reported a 67 percent fall in quarterly profit on Thursday after the March 11 earthquake curtailed shipments. The firm provided no outlook for the current financial year. Toyota Motor Corp ( 7203.T ) said on Friday it could take until the end of the year before production fully recovers to levels before the massive earthquake and tsunami on March 11. HIGHER OPERATING PROFIT POSCO CFO Choi Jong-tae said the company's annual operating profit is expected to be higher than last year, helped by price hikes. But he did not provide any profit target. This week, POSCO raised domestic steel prices by a higher-than-expected 16-18 percent in its first increase since July last year to reflect surging iron ore and coking coal costs. Spot iron ore prices have jumped more than 30 percent since July. The company increased its sales target for 2011 by 11 percent to 40 trillion won following the price increase and expected earnings would improve from the second quarter, as it aims at 1 trillion won in cost savings. POSCO, which trails ArcelorMittal ( ISPA.AS ) and Baosteel ( 600019.SS ), reported January-March operating profit of 921 billion won ($852 million), below the consensus forecast of 1.1 trillion won by Thomson Reuters I/B/E/S. The profit compares with 1.44 trillion won a year ago and 519 billion won in the previous quarter, POSCO said. The disappointing result comes after the World Steel Association forecast this week that growth in apparent global steel use this year will slow to 5.9 percent from last year's 13 percent due to uncertainties in Europe, the Middle East and Japan. POSCO said it had agreed to pay a quarter more for iron ore purchases in the second quarter from the previous quarter and 47 percent more for hard coking coal. "The iron ore market is likely to continue to remain tight in the second half due to strong demand from China, while coking coal prices may fall slightly as supply disruptions from Australia will ease," it said. Home rival Hyundai Steel's ( 004020.KS ) shares have jumped 18 percent. Ahead of the result, POSCO shares closed up 0.5 percent in a flat market. (Additional reporting by Ju-min Park; Editing by Jonathan Hopfner and Anshuman Daga )

Fannie, Freddie should recognize bad loan costs immediately: watchdog

Mon Aug 19, 2013 3:46pm EDT

http://www.reuters.com/article/2013/08/19/us-usa-fanniefreddie-watchdog-idUSBRE97I0II20130819

WASHINGTON - Fannie Mae ( FNMA.OB ) and Freddie Mac ( FMCC.OB ) are possibly masking billions of dollars in losses because of the level of delinquent home loans they carry, a federal watchdog said on Monday, adding that the companies should immediately be required to recognize the costs of some bad mortgages.

In 2012, the Federal Housing Finance Agency began work on accounting changes to require the two housing finance firms to set aside loan loss reserves for mortgages delinquent at least 180 days. The new standard is set to go into effect in 2015. In its report released on Monday, the FHFA's inspector general called the timeline for implementation "inordinately long." The change in the accounting treatment of these delinquent loans potentially could require Fannie and Freddie, which have rebounded to enormous profitability in the past two years as the housing market recovered, to "charge off billions of additional dollars related to loans," the report stated. The FHFA, which regulates Fannie Mae and Freddie Mac, said in a letter to the FHFA inspector general the two companies are on track to implement the new standards, and expects the companies to start reporting those estimates in their public financial statements. The letter also said the FHFA views the potential losses "to be reasonable." Fannie Mae and Freddie Mac were seized by the U.S. government in September 2008 as rising mortgage losses threatened them with insolvency. The mortgage companies have cost taxpayers almost $188 billion to stay afloat. The majority of Fannie Mae and Freddie Mac's losses are a result of guaranteeing mortgages that defaulted during the housing crisis. The companies have reduced their funds reserved to cover potential losses on bad loans due to the strengthening housing sector and higher home prices. The FHFA said the new accounting methods involve "changes in a significant policy" that required a lengthy implementation period. The regulator consulted with Fannie Mae and Freddie Mac and has allowed the mortgage companies until January 1, 2015, to make all of the adjustments, which will be rolled out in stages. The inspector general's report, dated August 2, called on the FHFA to require the firms to implement the changes at a faster pace and expressed concern that Fannie Mae and Freddie Mac were not recognizing the potential losses in their public financial statements. Fannie Mae on August 8 reported a $10.1 billion profit for the second quarter and said it would send a $10.2 billion payment to the U.S. Treasury for its federal aid. It was the sixth straight profitable period for the company and compares with a $5.1 billion profit for the year-earlier quarter. For the second quarter, Freddie Mac posted its second largest ever quarterly profit, reporting net income of $5 billion, and said it would make a $4.4 billion dividend payment as part of the reimbursement for its rescue aid. Work on the accounting changes began in April 2012. At that time, Fannie and Freddie were asked by the FHFA to provide an initial implementation plan and to take a closer look at new asset classifications, according to the FHFA's letter. Fannie and Freddie submitted the implementation plans by October 2012, the letter stated. During that time, FHFA did its own analysis on Fannie and Freddie's 180-day delinquent loans' performance and found the "financial impact to be reasonable." Both companies have noted the upcoming accounting changes in public filings with the Securities and Exchange Commission, although they have not yet estimated the size of possible losses. "The guidance FHFA has issued would change our methodology for charging off loans, but would not materially change our results," said Andrew Wilson, a spokesman for Fannie Mae. Freddie Mac is "making technological enhancements this year," to implement the plan the company sent its regulator, said Brad German, a spokesman for the company. (Reporting by Margaret Chadbourn ; Editing by Leslie Adler and Chris Reese )

Boeing undercuts rivals in South Korea fighter contest: sources

Mon Aug 19, 2013 11:14am EDT

http://www.reuters.com/article/2013/08/19/us-usa-southkorea-idUSBRE97I0E320130819

SEOUL - Boeing's ( BA.N ) bid in the 8.3 trillion won ($7.4 billion) tender to supply South Korea with 60 fighter aircraft was the only one below the price ceiling set by the country's arms procurement agency, sources close to the process said on Monday.

A final decision was not expected until mid-September, the sources said, but the price submitted by the U.S. company appears to be a significant step toward winning the contract. Boeing is pitching the latest variant of its F-15 fighter, dubbed the F-15 Silent Eagle, against the Eurofighter consortium's Typhoon and Lockheed Martin's ( LMT.N ) F-35 stealth jet. South Korea's Defense Acquisition Program Administration (DAPA), which led the assessment of the fighters, said on Friday that at least one bid, which it did not identify, came within its overall budget. The decision on one of the world's most closely watched military tenders will be made by a committee chaired by South Korea's defense minister after DAPA submits its final evaluation of the three fighters next month. DAPA will score the bids on a fixed set of criteria, although Korean law prevents the government from signing a contract that exceeds the allotted budget. "We will conduct a comprehensive evaluation on all three models," DAPA spokesman Baek Youn-hyeong said. "But ... only parties with under-budget bids will be subject for final selection." RIVALS DEFIANT A Seoul-based Boeing spokesman declined to comment, but on Sunday a spokesman in the United States said: "We believe our F-15 proposal can affordably meet the Republic of Korea's requirements. We await their decision and stand ready to deliver on our commitments." DAPA said on Sunday that an unnamed bidder submitted a price that fell within budget "by arbitrarily changing conditions that were previously agreed upon" on the last of the 13 rounds of bidding August 13-16. This bid will be considered as having "exceeded the budget," it added. The sources close to the process said this was the bid submitted by the Eurofighter consortium, in which EADS ( EAD.PA ) is an investor. EADS maintains that the Eurofighter remains in the race. "We are open for any constructive discussion with DAPA," Christian Scherer, head of sales and international operations at EADS Cassidian, said in a statement on Monday. The sources also said that the Lockheed Martin bid was over-budget, though the company responded on Sunday by saying that it had not received any official notification regarding the latest bidding results. Lockheed said reports that it had been eliminated from the competition were not accurate, and it continued to work with the U.S. government on its offer of the F-35 fighter for South Korea. It said the South Korean competition had multiple phases. One industry source said that the capabilities of the new fighters, rather than cost, would be a key factor in Seoul's decision. "It's not going to be decided on cost alone," said the source, who is not authorized to speak publicly, adding that the cost of the aircraft represents only 15 percent of the decision-making process. (Additional reporting by Ju-min Park in Seoul, Andrea Shalal-Esa in Washington and Julien Ponthus in Paris; Editing by Siva Govindasamy, David Goodman and Maureen Bavdek)

Obama asks regulators to speed up Wall Street reforms

Mon Aug 19, 2013 6:23pm EDT

http://www.reuters.com/article/2013/08/19/us-financial-regulation-obama-idUSBRE97I0TV20130819

WASHINGTON - President Barack Obama called top U.S. financial regulators to the White House on Monday, instructing them to speed up Wall Street reforms in the face of intense bank lobbying.

Roughly five years after the depths of the financial crisis, regulators have completed about 40 percent of the rules called for in the 2010 Dodd-Frank financial reform law. Agencies have missed numerous deadlines as they struggle to coordinate with one other and also consider feedback from the financial industry, consumer groups, Congress and others. In a readout of the afternoon meeting, the White House said Obama and the officials talked about ways the regulators could better coordinate, among other topics. "The president commended the regulators for their work but stressed the need to expeditiously finish implementing the critical remaining portions of Wall Street reform to ensure we are able to prevent the type of financial harm that led to the Great Recession from ever happening again," the statement said. A White House spokesman also reiterated before the meeting the importance of independent regulatory agencies resisting pressure from big banks to water down rules. Officials from the Federal Reserve, Federal Deposit Insurance Corp, the Consumer Financial Protection Bureau and other agencies attended the meeting. They left the White House without briefing reporters about the discussion. September will mark the fifth anniversary of the bankruptcy of Lehman Brothers, an investment bank whose failure roiled markets and is often viewed as a low in the financial crisis. The Dodd-Frank law, which Congress passed in response to the meltdown, called for hundreds of new rules, including new oversight of the massive swaps market, mortgages and consumer financial products, and large nonbank financial firms. Regulators have particularly wrestled with drafting the Volcker rule, which forbids banks from making risky trades with their own money. That reform is more than a year behind schedule, as five different agencies try to agree on a single rule. The Volcker rule and other Dodd-Frank reforms have been the subject of intense lobbying by Wall Street firms hoping to shape the rules in their favor. Republicans in Congress also claim Dodd-Frank piles too many new requirements on banks and could wind up restricting credit availability. "Dodd-Frank is an incomprehensively complex piece of legislation that is harmful to our floundering economy and in dire need of repeal," Representative Jeb Hensarling, a Republican and the chairman of the House of Representatives Financial Services Committee, said in a statement on Monday. Beyond Dodd-Frank, the White House said the president and top regulators also discussed efforts to revamp housing finance in the United States and the challenges posed by smaller budgets. (Reporting by Emily Stephenson; Editing by Karey Van Hall, Leslie Gevirtz and Lisa Shumaker )

U.S. program to curb stock price swings triggered frequently

Mon Aug 19, 2013 5:03pm EDT

http://www.reuters.com/article/2013/08/19/us-exchanges-tradinghalts-idUSBRE97I0S420130819

NEW YORK - The roll-out of a new program to limit wild price swings in publicly traded securities triggered dozens of trading halts on Monday as highly illiquid names were phased into the program.

By the session's end, 48 exchange-traded products (ETPs) had been halted or paused on NYSE Arca, a unit of exchange operator NYSE Euronext, according to trading information provided by exchange operator Nasdaq OMX Group Inc. Seven other securities were halted on Nasdaq. About 570 securities were rolled out on NYSE Arca as part of the second phase of the "Limit UP, Limit Down" program, which was approved by the Securities and Exchange Commission last year. A trading halt is triggered if a price rises or falls more than 5 percent over a five-minute span for the most heavily traded shares, composed mostly of securities with a market cap of about $1.8 billion or greater. The second phase of the program, with the price band widening to 10 percent to trigger a halt, includes more illiquid stocks, some of which do not trade on many days. A NYSE Euronext spokeswoman said the new program was in its initial phase of an expanded universe of ETPs. She said the exchange was working within established guidelines and would explore the trading limits with regulators and other exchanges. NYSE Arca accounts for about 90 percent of ETPs, a reason why so many of the trading halts occurred on its platform. The SEC declined to comment. The spread between the bid and offer price of an illiquid ETP can be so wide it will readily trigger a trading halt under the new program, said Dennis Dick, a proprietary trader in Detroit at Las Vegas-based Bright Trading LLC. "In some cases even a small-sized order could be enough to cause the price band threshold to be exceeded, which would trigger a trading pause," Dick added. (Reporting by Herbert Lash ; Editing by Andre Grenon and Steve Orlofsky)

GM taps Delphi executive to lead global powertrain unit

Mon Aug 19, 2013 5:32pm EDT

http://www.reuters.com/article/2013/08/19/us-autos-gm-powertrain-idUSBRE97I0YL20130819

DETROIT - General Motors Co ( GM.N ) has hired a top Delphi Automotive Plc ( DLPH.N ) executive to lead the largest U.S. automaker's global powertrain operations beginning next month, GM announced on Monday.

Steve Kiefer, who has led Delphi's powertrain systems unit since 2011, fills a position that has been left vacant for more than two years. He will start at GM on September 1. His hiring comes as GM tries to lop off about $1 billion a year in product development costs and boost its margins to better compete with U.S. rival Ford Motor Co ( F.N ). Kiefer, 50, will report to Mary Barra, head of GM's global product development unit, and will be based at GM's powertrain headquarters in Pontiac. (Reporting by Deepa Seetharaman. Editing by Andre Grenon)

India, Brazil, other emerging economies hit by currency rout

Mon Aug 19, 2013 4:06pm EDT

http://www.reuters.com/article/2013/08/19/us-markets-emerging-idUSBRE97I0UY20130819

MUMBAI/RIO DE JANEIRO - The Indian rupee plummeted to a record low against the dollar on Monday, leading a rout by Brazil's real and other emerging market currencies seen by investors as the most vulnerable to an exodus of foreign capital.

A fierce selloff in many emerging currencies shows no sign of abating as the expected withdrawal of U.S. monetary stimulus prompts investors to shun markets seen as riskier because of funding deficits, slowing economies and inflation. The rupee fits that bill, as do the Indonesian rupiah, the South African rand and the Brazilian real. The rupiah plunged to four-year troughs on Monday while the rand lost another 1 percent to bring year-to-date losses to almost 17 percent against the dollar. Brazil's real extended last week's fall of more than 5 percent fall to trade at its weakest level since March 2009 even as the central bank sold nearly $3 billion worth of currency swaps, which are derivatives that mimic an injection of dollars in the futures market. Like the rupee, it has been hammered by doubts over the efficacy of policy actions to stem the rout. The rupee and the real, respectively, have been the worst performers in Asia and Latin America since late May when the Fed first signaled that it may begin winding down its monetary stimulus this year. India's currency has lost 13 percent against the dollar this year while the real has plunged 15 percent in the same period. A decline in the Fed's bond purchases will push government debt yields higher, which should raise the attractiveness of the dollar and dollar-denominated assets. In Brazil, the currency weakness has complicated policymakers' efforts to rein in inflation, leading many investors to bet the central bank may speed up the pace of monetary tightening next week. In India, the rupee's sell-off threatens to drive Asia's third-largest economy towards a full-blown crisis. "Our primary concern is that the policy authorities still don't 'get it' - thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions," Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore, wrote in a note on the Indian currency on Monday. The partially convertible rupee has continued to weaken despite the central bank's dollar sales and its latest curbs on outflows from companies and individuals, announced last Wednesday, which have dented India's stock and bond markets. As the global flow of cheap money wanes, many emerging markets are feeling the heat. Among the most vulnerable to sudden capital flight are the currencies of countries already struggling with wide current account deficits, such as India and Indonesia. "The market is still acting on the negative current account and fiscal deficits," said Nizam Idris, a strategist with Macquarie Capital, when asked about the two Asian laggards. The latest blow for the Indonesian rupiah came late on Friday when central bank data showed the current account deficit jumped to 4.4 percent of GDP in the second quarter of the year, from 2.4 percent in the previous quarter. South Africa's central bank, unlike its peers, has not stood in the way of the rand's weakness. The rand hit a five-week low at around 10.2 per dollar on Monday as Fed-fuelled headwinds were exacerbated by fresh labor strife and upcoming Chinese data that is expected to paint a picture of weaker growth in South Africa's biggest export market. "They have very weak growth but can't cut interest rates so they are using the currency as the lever," said Guillaume Salomon, a strategist at Societe Generale in London. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC on Indian credit spreads and the rupee: link.reuters.com/zec52v GRAPHIC on emerging markets with funding gaps link.reuters.com/hen99t ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> TAPERING THREAT The risk for these so-called deficit economies is that as global liquidity is reeled back by the Fed, weakness in the real or the rupee will force investors to flee stocks and bonds. That could exacerbate the currency selloff in a self-perpetuating vicious cycle leading potentially to balance of payments crises. All these countries rely heavily on foreign capital inflows to plug current account gaps that range from 3 percent in Brazil and 4.8 percent in India to 6.5 percent in South Africa. "India and South Africa are the two currencies that are most at risk. As long as the currency trades with a weak bias, concerns about outflows will remain," Salomon of Societe Generale said. Those fears are now evident in financial markets, with Indian equities .BSESN sliding nearly 2 percent and 10-year borrowing costs rising above 9 percent to the highest since 2008. Stocks in Jakarta .JKSE fell 3 percent and bond yields surged to March 2011 peaks. South African yields were at their highest in over a year. Markets are waiting to see what else Brazil's central bank can do to reassure investors after an estimated $30 billion worth of intervention this year via currency swaps. So far, however, Brazilian policymakers seem unwilling to deplete their $370 billion foreign reserves to fight a global depreciation trend. As in India, Brazil's previously fast-growing economy has slowed, disappointing investors and Brazil, like Indonesia, has seen a sharp deterioration in its balance of trade due to a cooling in China's appetite for commodities. Other Latin American currencies, despite being seen as less vulnerable than the real, have also weakened sharply in the past few days. The Mexican peso lost about 1 percent on Monday after sliding 2.3 percent last week. Chile's peso, which is strongly correlated to copper prices, dropped 1 percent on Monday to close at its weakest level in more than a year. (Additional reporting by Andjarsari Paramaditha in Jakarta, Jongwoo Cheon and Vidya Ranganathan in Singapore and Sujata Rao in London; Writing by Alex Richardson ; Editing by Richard Borsuk, Susan Fenton and Kenneth Barry)

Employment gains falter in U.S. states

Mon Aug 19, 2013 1:21pm EDT

http://www.reuters.com/article/2013/08/19/us-usa-states-unemployment-idUSBRE97I0RO20130819

WASHINGTON - Jobless rates dropped in only eight states in July from the previous month and rose in 28, the Labor Department said on Monday, as employment gains sputtered.

The slight improvement in employment last month came after jobless rates fell in only 11 states in June from May. From July 2012, unemployment rates decreased in 36 states and the District of Columbia and increased in nine, the department said. For much of the last year, the majority of states have registered drops in monthly jobless rates. In May, rates dropped in 25 states and in April they fell in 40 states and Washington, D.C. Nationally, the jobless rate fell to 7.4 percent in July, the lowest level since December 2008, largely due to people giving up on the job hunt and dropping out of the work force. States point to the recent ebbs and flows in the labor force as a reason for their jobless rate swings, along with hemorrhaging public service employment and fluctuating education jobs. Mississippi had the largest drop in unemployment last month, to 8.5 percent from June's 9 percent. "The unemployment rate has been dropping since February in Mississippi. It's just been little changes," said Chief of Labor Market Information Mary Willoughby, noting that over the same time period, the state's labor force has shrunk as well. In neighboring Alabama, where the rate dropped to 6.3 percent from 6.5 percent in June, the labor force also shrank. While manufacturers in the state gained jobs, total employment "plunged this month, dropping by 14,700," according to Alabama's labor department, with most losses in construction, educational and health services, leisure and government. Conversely, Virginia pointed to an expanding labor force as the reason its jobless rate rose to 5.7 percent in July from 5.5 percent in June. At the same time, local governments' elimination of 4,500 jobs created a drag, with nonfarm employment increasing by 1,400 jobs last month, according to the Virginia employment department. In Montana, Utah, North Dakota, Hawaii, Nevada and New Jersey, the jobless rates edged down 0.1 percent. Nevada again had the highest jobless rate of all states in July, at 9.5 percent, followed by Illinois at 9.2 percent. North Dakota continued to have the lowest rate, at 3 percent. New Jersey lost the most jobs, 11,800, followed by Nevada at 10,200. The number of jobs filled in July rose in 32 states and decreased in 17 states and the District of Columbia. Employment was unchanged in South Dakota, while California gained the most jobs, with 38,100 new positions. It was followed by Georgia, which added 30,900 jobs, although Georgia was also one of the states where the jobless rate ticked up, to 8.8 percent from 8.5 percent in June. "The rate increased primarily because there was a significant number of new layoffs, and non-contract school employees remained unemployed because of the summer break," State Labor Commissioner Mark Butler said in a statement. "However, the vast majority of the layoffs were temporary, and the school employees are beginning to return to work." (Reporting By Lisa Lambert ; Editing by Michael Connor ; Editing by Dan Grebler)

Judge endorses use of fraud law against Bank of America

Mon Aug 19, 2013 6:14pm EDT

http://www.reuters.com/article/2013/08/19/us-bankofamerica-fraud-idUSBRE97I0ZX20130819

NEW YORK - A federal judge has endorsed a broad interpretation of a savings-and-loan era law that the Justice Department is trying to use in cases against Wall Street banks.

U.S. District Judge Jed Rakoff in Manhattan said Monday that a "straightforward application of the plain words" of the Financial Institutional Reform, Recovery and Enforcement Act (FIRREA) allowed the interpretation sought by the government. The law has a low burden of proof, strong subpoena power and a 10-year statute of limitations, twice as long as the typical limit for fraud cases. Rarely asserted until recently, it has become the basis of three lawsuits by lawyers under Manhattan U.S. Attorney Preet Bharara against banks including Bank of America Corp, Wells Fargo & Co and Bank of New York Mellon Corp. The latest decision came in a case the Justice Department brought last October against Bank of America over toxic mortgages that its Countrywide Financial mortgage unit sold to Fannie Mae and Freddie Mac in the financial crisis. The government's case, which is set for trial on September 23, focuses on a program instituted in 2007 by Countrywide called "High Speed Swim Lane" and also known as "HSSL" or "Hustle." The government contends the program speeded up some home loan processing by removing quality checkpoints, resulting in thousands of fraudulent and defective mortgages being sold to Fannie and Freddie. Rakoff issued a brief order in May dismissing some claims but largely allowing the case to move forward. His ruling on Monday explained his reasoning, particularly why the government could proceed with claims brought under a law adopted in the wake of the savings and loan scandals of the 1980s. The FIRREA law allows the government to pursue civil penalties against those who commit frauds "affecting a federally insured financial institution." Under the government's position, claims under FIRREA can be asserted against a bank when the affected financial institution is the bank itself. Banks have objected to this so-called "affect yourself" theory, saying it ignores the statute's original purpose. Rakoff agreed with the government. Citing a dictionary definition of "affect," he said Bank of America paid billions of dollars to resolve demands by Fannie and Freddie to buy back defective mortgages. "The fraud here in question had a huge effect on BofA itself (not to mention its shareholders)," Rakoff wrote. The ruling followed a similar decision in April by U.S. District Judge Lewis Kaplan, also in Manhattan, who allowed the advancement of a FIRREA lawsuit that accused Bank of New York Mellon of overcharging clients for trading currencies. The rulings mean the Justice Department can now use FIRREA to not just go after bank fraud but the banks themselves for defrauding others, said Andrew Schilling, a former head of the civil division in the Manhattan U.S. Attorney's Office. The rulings will encourage the government to tackle "a wider range of targets in the financial services industry, and a much broader range of alleged misconduct, including potentially consumer fraud," said Schilling, a partner at law firm BuckleySandler. In his ruling on Monday, Rakoff said there were limits to the government's reach under FIRREA. In an alternative argument, the Justice Department said it could also use FIRREA against Bank of America because the alleged fraud affected a small bank that invested in Fannie and Freddie. Rakoff did not rule on that alternative argument because he had already allowed the case to proceed based on the effects on Bank of America. But he said Bank of America's response - that Congress had not intended the law to cover indirect impacts on a bank - "is not without some force." A spokeswoman for Manhattan U.S. Attorney Bharara, whose office has been pursuing the Bank of America case, declined to comment. Lawrence Grayson, a spokesman for the bank, said the bank continues to believe "neither Bank of America nor Countrywide defrauded Fannie Mae or Freddie Mac, and we look forward to addressing the remaining allegations as this matter proceeds." The case is U.S. ex rel. O'Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422. (Reporting by Nate Raymond; Editing by Ken Wills )

China Everbright Securities slapped with restrictions after trading fluke

Mon Aug 19, 2013 12:34am EDT

http://www.reuters.com/article/2013/08/19/us-china-everbright-idUSBRE97I01820130819

SHANGHAI - China has slapped restrictions on the number of new stock index futures positions that Everbright Securities can build after a glitch in the brokerage's systems caused a brief spike in the country's stock indexes last week.

Reuters calculations show the surge created and then wiped out roughly $100 billion worth of share value on the CSI300 Index, which tracks the largest listed firms in China, in the course of a single day. The malfunction in Everbright's internal propriety trading system comes at a time when China is trying to revive investor confidence in its sagging stock markets. This does not bode well for corporates looking to raise funds through share sales. Many Chinese firms are under increasing funding pressure as economic growth indicators in China show signs of stuttering. But Beijing is uncomfortable with loading up the banking system with more risky loans - or with pushing such firms into the country's so-called shadow banking system where non-bank lenders price credit at far higher levels. The China Securities Regulatory Commission (CSRC) said it would launch a formal investigation into Everbright. While there was no indication that the systems glitch involved other brokerages, the state media is saying the trading fluke is symptomatic of broader market ills. The official China Securities Journal said on Monday that the malfunction has exposed major flaws in how Chinese stock exchanges are run, alleging that there are defects in bourses' warning mechanisms. The glitch on Friday caused Everbright's system to send out a spate of buy orders that lifted the Shanghai Composite Index and the CSI300 Index by 5.6 percent and 4.4 percent, respectively. The indexes later fell back into negative territory for the day. The Shanghai Composite was down 0.2 percent as of 0400 GMT (12:00 a.m. EDT) on Monday, while the CSI300 was 0.28 percent lower. "It is unclear how strong the impact of the Everbright Securities trading error will be on wider market sentiment," said an analyst at Cinda Securities Co Ltd, who spoke anonymously as he is not authorized to talk to the press. "From today's stock performance, we can see that there hasn't been a large fall in share prices in the market. If it is a one-off accident, then it won't have an impact. But if the results from the investigation result in new stricter regulatory measures, then this may have more of an impact." He also said it was unclear whether the development would impact plans to restart initial public offerings (IPOs) later this year, or the proposed launch of a government futures trading market, once said to be scheduled for August. Since late last year, China has halted all IPO approvals as it rewrites listing rules to improve transparency as part of efforts to boost the sagging market. But regulators have come under pressure from companies to allow new listings to resume, having already given way and permitted a few select firms to conduct secondary issuances. The decision has not been welcomed by Chinese investors, who have long advocated for a freeze on both IPOs and reissuances, arguing that they only serve to dilute valuations and further diminish confidence. TRADING RESTRICTIONS Everbright Securities said on Friday it placed unintended buy orders totaling 23.4 billion yuan ($3.83 billion), of which 7.27 billion yuan was actually traded. Because of a T+1 system in China's stock market, the brokerage could not sell shares it bought on the same day, which forced it to build huge short positions in the index futures market, totaling 7,130 lots, the brokerage had said. The China Financial Futures Exchange (CFFEX) on Sunday imposed restrictions on Everbright Securities, limiting its ability to establish fresh stock index futures. Many persons claiming to be Everbright clients have complained online that while Everbright's trading mistake would come at their expense, the profits booked off the short hedging would not be redistributed fairly. Everbright said on Monday that any profits yielded from the massive index short positions it erected on Friday to offset the impact of its accidental purchases would be dealt with legally. Everbright also said Shanghai securities authorities have informed them that the brokerage's proprietary stocks trading in the spot market has been suspended for three months until November 18. Trading in the yuan-denominated shares of China's fifth-biggest brokerage has been halted since Friday afternoon on the discovery of the trading error. "The exchange has agreed that trading in our company's share to resume on Tuesday," Everbright said. The brokerage's A-shares changed hands at 12.12 yuan each at midday on Friday, up 6.69 percent in line with the market spike, before trading was suspended. The news also impacted the performance of Hong Kong-listed China Everbright Ltd (CEL), which is owned by the same parent company China Everbright Group and holds around 33 percent of Everbright Securities. Shares in CEL were down more than 6 percent on Monday morning. INVESTOR CONFIDENCE Whether the Everbright incident dents existing investor confidence levels or not, it is unlikely to reinvigorate Chinese interest in equities as an asset class, give their historically poor performance compared to other kinds of investments. This is a problem for the government because Beijing is keen to wean domestic investors off overdependence on other investments such as real estate and high-yielding wealth management products (WMPs). Many investors prefer WMPs sold by Chinese banks because they believe they are subject to an implicit guarantee by the government. The Chinese government has never allowed a corporate debt default, consistently moving to buy out bond investors in troubled companies, but the same is not true of equities. "When you look at the (WMPs), they sold so well because people believed they would never fail," said Yuan Ding, head of the finance and accounting department at the China Europe International Business School (CEIBS) in Shanghai. "The only place in China people have learned anything about risk is in the equity market." ($1 = 6.1150 Chinese yuan) (Additional reporting by Kazunori Takada and the Shanghai Newsroom, and Vikram Subhedar in HONG KONG; Editing by Ryan Woo)

Lloyds readies sale of German insurer: source

Mon Aug 19, 2013 7:12am EDT

http://www.reuters.com/article/2013/08/19/us-lloyds-insurance-idUSBRE97I0DJ20130819

LONDON - Lloyds Banking Group ( LLOY.L ) is readying a sale of its German life insurance business, a source with knowledge of the matter said, as the British state-backed bank exits overseas markets to focus on lending at home.

Lloyds could raise around 400 million euros ($533 million)from the sale of Heidelberger Leben, the source said, with German reinsurer Hannover Re ( HNRGn.DE ) tipped as the most likely buyer. The government is preparing to start selling its 39 percent stake in Lloyds, acquired as part of a bailout during the 2008 financial crisis, after the shares surged above its breakeven price of 61 pence. Lloyds' German insurance sale, which the source said could be announced as early as this week, follows the disposals of its $5 billion U.S. mortgage book, Spanish retail banking operations and international private banking business. The bank has been trying to sell Heidelberger for at least two years but struggled to find a buyer. When the insurer was put up for sale in 2011 it was reported to have an embedded value - an insurance-specific valuation measure - of 1 billion euros. Lloyds aims to halve its non-core loan book by the end of 2014 from 141 billion at the end of 2011. Lloyds, Heidelberger and Hannover all declined to comment. (Reporting by Laura Noonan in London and Alexander Huebner in Frankfurt; Writing by Tommy Wilkes; Editing by Carmel Crimmins and Erica Billingham)

Icahn seeks to end Herbalife short-seller's lawsuit

Mon Aug 19, 2013 6:47pm EDT

http://www.reuters.com/article/2013/08/19/us-herbalife-lawsuit-icahn-idUSBRE97I0XL20130819

NEW YORK - Carl Icahn on Monday asked a federal judge to dismiss a lawsuit brought by a short seller who accused the activist investor of perpetuating an alleged pyramid scheme at nutritional products company Herbalife Ltd ( HLF.N ).

In papers filed with the U.S. District Court in Manhattan, Icahn said the lawsuit by Daniel Ravicher was based on an "inaccurate and absurd" allegation that the billionaire had "publicly conceded" that Herbalife is a fraud. Icahn said Ravicher's claim was premised merely on statements by Icahn that he had conducted "considerable research on Herbalife and its business" and believed in its "proven ability to increase revenues." Ravicher, a lawyer based in Florida, has alleged he lost more than $75,000 on his short position. He said he took that position around the time that hedge fund investor William Ackman last December said he was shorting Herbalife stock, also calling the company a pyramid scheme. A short sale is a bet that a stock price will fall. Ravicher's investments stand to expire worthless in November if Herbalife's stock price is $45 or higher, court papers show. The shares have risen 89 percent this year despite closing down 4.1 percent at $62.27 on Monday. In a phone interview, Ravicher called Icahn's filing "predictable." "We will respond in due course. It is quite noticeable that he failed to respond to my allegation that his entire Herbalife investment was motivated by a vendetta against Bill Ackman," Ravicher said. Icahn, through a spokeswoman, was not immediately available for comment. Monday's filing came 10 days after Bank of America Corp ( BAC.N ), JPMorgan Chase & Co ( JPM.N ) and Wells Fargo & Co ( WFC.N ) and 50 current and former officers and directors sought to dismiss two lawsuits in which Ravicher accused them of aiding a fraud at Herbalife by providing $1.2 billion of financing. Ackman's firm, Pershing Square Capital Management, has a $1 billion short bet on Herbalife, and has lost more than $300 million so far, Reuters has reported. Herbalife has offices in Los Angeles but is incorporated in the Cayman Islands. The case is Ravicher v Icahn, U.S. District Court, Southern District of New York, No. 13-01666. The cases against the banks are Ravicher v. Moynihan et al in the same court, No. 13-01665; and Ravicher v. Bank of America Corp et al in the same court, No. 13-03908. (Editing by Matthew Lewis and Andrew Hay)

Alibaba in talks with HKEx on ownership structure ahead of IPO: sources

Mon Aug 19, 2013 7:06am EDT

http://www.reuters.com/article/2013/08/19/us-alibaba-listing-idUSBRE97I0A020130819

HONG KONG - Alibaba Group Holding Ltd ALIAB.UL is in talks with the Hong Kong stock exchange about allowing its founders to maintain control over the Chinese e-commerce company even after it becomes listed, people familiar with the matter told Reuters.

Alibaba is widely expected to launch an initial public offering worth more than $15 billion by the end of the year, with Hong Kong tipped as the likely venue. The Hong Kong Exchanges and Clearing Ltd ( 0388.HK ), however, generally disapproves of dual class listings, which favor a company's founders and management over its individual investors. Such a structure would also need approval from the regulator, the Securities and Futures Commission, which turned down a similar request by UK football club Manchester United ( MANU.N ). Manchester United eventually listed on the New York Stock Exchange last year. "If Alibaba wants to pursue this type of structure, I think they'll have to try and do something more subtle, more realistic than a dual share," said one Hong Kong banker familiar with the discussions between Alibaba and the exchange. Alibaba, which has yet to officially announce that it will hold an IPO, and the Hong Kong exchange both declined to comment on the shareholding talks. Swire Pacific ( 0019.HK ) is the only Hong Kong listed company that has dual class shares, a structure that pre-dated tougher rules implemented by the exchange a few years ago. U.S. exchanges like Nasdaq and the New York Stock Exchange, allow dual class listings and Alibaba is still weighing "the pros and cons" of listing in the United States vis-a-vis Hong Kong, according to people familiar with the matter. A Hong Kong securities lawyer said the potential size of the Alibaba IPO may sway the Hong Kong exchange. "They will have said no to a lot of people over the years and it would be hard for them to move, although tempting if it would get them that listing," the lawyer said. Alibaba was founded by former English teacher Jack Ma and 17 others in China's eastern city of Hangzhou. Ma and Joseph Tsai, a co-founder and former Alibaba chief financial officer, own about 10 percent of the company between them, according to securities filings. Japanese Internet and telecoms group Softbank Corp ( 9984.T ) owns 35 percent of Alibaba and U.S. tech company Yahoo Inc. ( YHOO.O ) owns a 24 percent stake. (Additional reporting by Paul Carsten in BEIJING and Rachel Armstrong in SINGAPORE; Editing by Miral Fahmy )

Wall Street falls for fourth straight session as Fed eyed

Mon Aug 19, 2013 6:50pm EDT

http://www.reuters.com/article/2013/08/19/us-markets-stocks-idUSBRE9770GZ20130819

NEW YORK - U.S. stocks lost ground on Monday, with each of the major indexes falling for a fourth straight session, as investors were hesitant to make new bets ahead of an expected shift in Federal Reserve policy that could lead to higher interest rates.

The declines marked the longest losing streak of the year for the Dow and S&P 500, while the Nasdaq matched its longest string of declines since mid-June. The Nasdaq was positive for most of the session, spurred by gains in technology shares, such as Apple Inc ( AAPL.O ) and Google Inc ( GOOG.O ), before selling pressure in the last hour of trading turned the index negative. Apple shares gained 1.1 percent to $507.74 while Google advanced 1 percent to $865.65. The Fed's policy of buying large amounts of bonds in an attempt to keep interest rates low has been a major force in the nearly 16 percent gain in the benchmark S&P 500 for the year. But many analysts expect that to change at the Fed's September policy meeting. With a relatively light calendar this week for economic indicators, market participants are focused on the minutes from the July Fed meeting, due on Wednesday, for possible clues into policymakers' thinking. "The market is just sitting on its hands right now until Wednesday with the Fed," said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania. "The market has made a big run year-to-date and now investors have to consider the possibility of rising interest rates that could be for real, because the economy is growing for real, as opposed to all the stimulus and there is the possibility of the stimulus tapering." Growing concerns about a pullback in the program contributed to the Dow's largest weekly drop in more than a year last week. In the bond market, the U.S. benchmark 10-year note yield touched a two-year high of 2.90 percent on Monday. <US/> Market breadth deteriorated in the latter stages of trading. The cumulative net of trades on listed stocks was slanted by over 32,000 to the negative, the largest disparity since June 20, the day after Fed Chairman Ben Bernanke said the Fed could reduce its bond-buying plan. The Dow Jones industrial average .DJI fell 71.11 points or 0.47 percent, to 15,010.36, the S&P 500 .SPX lost 9.77 points or 0.59 percent, to 1,646.06 and the Nasdaq Composite .IXIC dropped 13.692 points or 0.38 percent, to 3,589.086. The S&P 500 closed below its 50-day moving average for a second consecutive session, a technical support level which could portend further declines. Financial shares .SPSY dropped 1.3 percent. JPMorgan Chase & Co ( JPM.N ) fell 2.7 percent to $51.83 after a person familiar with the matter said the bank was the target of a federal bribery investigation into whether it hired the children of to Chinese officials to help win business. Bank of America Corp ( BAC.N ) fell 1.9 percent to $14.15 while Citigroup Inc ( C.N ) lost 2 percent to $49.33. Zillow ( Z.O ) shares slumped 7.1 percent to $84.74 after the company announced a stock offering and said it agreed to buy New York real estate website StreetEasy for $50 million. Intel Corp ( INTC.O ) was a bright spot, up 1.7 percent to $22.28 as the biggest percentage gainer on the Dow. Piper Jaffray upgraded the Dow component and boosted its price target on the stock. Trading volume was once again light as a result of uncertainty over the Fed and a lack of catalysts for investors. About 5.22 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, below the daily average of 6.32 billion. Declining stocks outnumbered advancing ones on the NYSE by 2,487 to 576, while on the Nasdaq, decliners beat advancers 1,774 to 759. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

China Everbright Securities blames human error for mistaken bond trade

Mon Aug 19, 2013 1:14am EDT

http://www.reuters.com/article/2013/08/19/us-china-everbright-securities-blames-hu-idUSBRE97I03F20130819

SHANGHAI - Everbright Securities ( 601788.SS ), the Chinese brokerage caught up in mistaken trades on Friday and again this week, said human error was responsible for a mistaken bond trade on Monday morning.

Monday's mistake occurred on a trade with a face value of 10 million yuan ($1.64 million) of government bonds. A trader mistakenly inputted a yield of 4.20 percent, 25 basis points higher than the yield on the same bond at Friday's close, the brokerage said in a statement on its website on Monday afternoon. The Chinese Securities Regulatory Commission blamed a trading system error for mistaken stock trades that occurred on Friday. ($1 = 6.1150 Chinese yuan) (Reporting by Gabriel Wildau ; Editing by Ryan Woo)

IRS debuts online registration for firms ahead of FATCA law

Mon Aug 19, 2013 6:15pm EDT

http://www.reuters.com/article/2013/08/19/us-usa-tax-fatca-idUSBRE97I0YN20130819

WASHINGTON - The Internal Revenue Service on Monday launched an online registration program for the hundreds of thousands of financial firms around the world that must comply with a U.S. anti-tax evasion law or risk being shut out of financial markets.

Starting the registration process, which is accessible on the IRS website, was one of the last steps the tax agency needed to take before the Foreign Account Tax Compliance Act (FATCA), enacted in 2010, takes effect in July 2014 with steep penalties for firms that do not comply. FATCA requires foreign banks, investment funds and insurance companies to report to the IRS Americans' offshore accounts worth more than $50,000. It was enacted after a Swiss banking scandal showed U.S. taxpayers hid substantial fortunes overseas. Foreign financial institutions that fail to comply with FATCA face a 30-percent withholding tax on their U.S. source income, a penalty that could effectively freeze them out of U.S. financial markets. To register in compliance with the law, a firm gives the IRS its name, mailing address, any branch offices and other basic information. The IRS will start approving firms' registrations in 2014. Firms must register by April 25, 2014, to avoid FATCA's withholding penalties. In June 2014, the IRS will publish online a list of all the firms complying with FATCA. The IRS will start collecting the firms' customer account information in 2015. The fact that the registration process started on schedule was a victory for the IRS, which has struggled to meet its own deadlines to implement FATCA, tax lawyers said on Monday. The U.S. Treasury Department last month postponed the start of FATCA to July 2014 from January 2014. Before the registration process was finalized, firms did not know what information they would need to tell the IRS, making it difficult to prepare their internal systems, said Michael Silva, a partner at law firm DLA Piper. "We finally have something tangible to put our teeth into," Silva said. However, some challenges remain, Silva said. Foreign firms will need to register in English, an added headache for some, he said. Additionally, it is unclear whether U.S. companies that have lending businesses abroad will need to comply with FATCA, Silva said. Many manufacturers have lending operations abroad to sell tractors, for example, and other products on credit. (Reporting by Patrick Temple-West ; Editing by Howard Goller and Ken Wills )

Atlas Copco to diversify into pumps with $1.6 billion Edwards buy

Mon Aug 19, 2013 12:05pm EDT

http://www.reuters.com/article/2013/08/19/us-sweden-atlas-copco-idUSBRE97I05120130819

STOCKHOLM - Sweden's Atlas Copco ( ATCOb.ST ) is buying British vacuum pump specialist Edwards Group ( EVAC.O ) for up to $1.6 billion in cash as tries to offset deteriorating profits from its mining engineering business, it said on Monday.

CEO Ronnie Leten said he first looked at buying Edwards in 2006, but in 2007 private equity firm CCMP bought it for 460 million pounds ($720 million), listing it last year and keeping 84 percent with its associate Unitas. Edwards - the market leader in chemical and semiconductor industry pumps - is Atlas Copco's first big buy since 2007 when it acquired road-compactor maker Dynapac for almost $1 billion. "It is a great segment to be in. It's a $6 billion market, and it is still growing," Leten said on a call with analysts. "This project is a real growth project. Of course, there are cost synergies, but the main driving factor for us is to create synergies within sales and services from compressors and vacuums," said Leten, whose firm has more than 40,000 employees. The deal, priced at a 24 percent premium to Edwards' close on Friday assuming the maximum offer, sent Atlas Copco shares up 1.4 percent compared with a broadly weaker Stockholm bourse .OMXS30 . Edwards shares rose 18 percent to trade at $9.99 a share. Edwards, whose competitors include Japan's Ebara ( 6361.T ) and Gardner Denver in the United States, employs more than 3,200 in 20 countries and had revenues of 595 million pounds in 2012, or about 7 percent of Atlas' sales. Revenues, however, were down from 701 million pounds in 2011 while operating earnings fell 30 percent to 114 million. A third of Edwards' revenues come from the United States and more than half from Asia. Just under 30 percent of Atlas Copco's revenues are from Asia and Australia, 20 percent from North America and 30 percent from Europe. According to Thomson Reuters data Atlas Copco will pay 7.2 times Edward's expected earnings before interest, tax, depreciation and amortization (EBITDA) for 2013. That compares with European industrial deals of about 7.8 times EBITDA this year and 10.5 times EBITDA for such deals in the United States. Other large-scale engineering deals this year include France's Schneider Electric ( SCHN.PA ) buying British engineer Invensys ( ISYS.L ) last week for 3.4 billion pounds ($5.2 billion) and private equity firm KKR & Co LP ( KKR.N ) agreeing in March to buy Gardner Denver for $3.5 billion. MINING PRESSURE Analysts said the acquisition made sense given Atlas has come under pressure from a weak mining industry, which has suffered as softer prices for commodities such as coal, copper and gold have raised doubts about future investment returns. The Swedish firm's compressor and industrial businesses, which like mining and rock excavation accounts for roughly a third of sales, have fared better and tempered a fall in group order bookings in the second quarter. "It is something which is quite clear that Atlas has intended to do - expand its business in surrounding disciplines," said Peter Frolen, an analyst at Handelsbanken. "The vacuum side is definitely a growth area for the company... this is going to generate revenue and cost synergies." Folding in Edwards' revenues will take the contribution of the division to 43 percent of total sales, Leten said. Atlas Copco said it would pay up to $10.50 per share for Edwards, including net debt, representing a 24 percent premium to Friday's closing price of $8.45. Shareholders will initially receive $9.25 per share, plus an additional payment of up to $1.25 once Edwards' 2013 income statement is final, the company said. Depending on the additional payment, the offer represents a premium of 11 to 26 percent to Edwards' 30-day average closing share price up to Friday's close, it said. Danske said in a note that it was positive Atlas was doing a large acquisition and cutting back its exposure to mining. It still did not rule out an extra dividend for the year. "M&A is an important part of our positive view of durable goods and we expect more deals to be made public in the second half of the year," it wrote. The deal is scheduled to close in the first quarter. (Editing by Louise Ireland )

Strike brings South African auto sector to near standstill

Mon Aug 19, 2013 6:33am EDT

http://www.reuters.com/article/2013/08/19/us-safrica-auto-idUSBRE97I04F20130819

CAPE TOWN - South Africa's auto manufacturing industry came to a near standstill on Monday when about 30,000 workers downed tools, adding to the labor woes of the continent's largest economy which has been hit by violent unrest at its mines.

The stoppage would cost the industry about 600 million rand ($60 million) a day in lost production, the National Association Automobile Manufacturers of South Africa (NAAMSA) said. "The strike affects the entire value chain of the industry," NAAMSA director Nico Vermeulen said. Five of the seven companies operating in the South African auto sector, including Toyota ( 7203.T ), Ford ( F.N ) and General Motors ( GM.N ), said production had been halted or affected. Underpinned by government incentives, the industry contributes at least 6 percent to gross domestic product and accounts for 12 percent of exports. A fresh round of labor unrest will be a political headache for President Jacob Zuma and the ruling African National Congress (ANC) ahead of elections next year. The strike was called last week by the National Union of Metalworkers of South Africa (NUMSA), its largest manufacturing union, which wants pay hikes of 20 percent for its members, compared with inflation at 5.5 percent. Companies have offered 6 percent. The central bank has warned about the inflationary impact of high wage settlements on consumer prices. But workers are stretched financially and often have several dependents, with the unemployment rate officially at 25 percent, and at 40 percent, according to most analysts. Strikes also loom in the mining sector with unions seeking pay rises of up to 150 percent, which companies say they can ill afford as metal prices slump. Mining strikes over the last 18 months have killed more than 60 people, slowed economic growth, hit the rand currency and led to sovereign credit downgrades. LABOUR HEADACHE FOR ZUMA Zuma and the ANC have faced heavy criticism for their handling of last year's wave of wildcat strikes in the mines, which also dented growth and alarmed foreign investors. Elias Kubeka, national motor sector coordinator for NUMSA, said the auto industry strike was "very well supported and all of the factories, 100 percent, are shut down". Meetings between the two sides were scheduled for later on Monday. Toyota said 80 percent of its 8,000-strong South African workforce had not turned up for work. Guy Kilfoil, a spokesman for BMW ( BMWG.DE ) in South Africa, said the strike was costing it 345 cars a day. "We work 24 hours, seven days a week. There is no production and there is no plan to make it up," he said. Wages in the auto sector range from about $850 a month for basic workers to $1,800 a month for qualified technicians. In the United States, according to the U.S. Bureau of Labor Statistics, the annual average hourly wage in 2012 in vehicle manufacturing was $28.08. Assuming a 40-hour week, this would be close to $4,500 a month. But worker productivity in South Africa is constrained by low skills and training, industry experts say. (Writing by Ed Stoddard ; Editing by Louise Ireland and Pascal Fletcher )

U.S. pushes for more access to Japan auto, insurance markets

Mon Aug 19, 2013 7:53am EDT

http://www.reuters.com/article/2013/08/19/us-japan-usa-trade-idUSBRE97I0FJ20130819

TOKYO - The United States urged Japan on Monday to open its auto and insurance markets more to foreign companies as the two countries pursue bilateral talks linked to a broader free-trade agreement that covers two-fifths of the globe.

The United States hopes to make a proposal to Japan on its trade barriers in September, U.S. Trade Representative Michael Froman said, as part of a drive to reach a conclusion on the Trans-Pacific Partnership (TPP) free trade initiative by the end of the year. Reports that Japan's government is willing to phase out tariffs on 85 percent of goods under negotiations for the TPP are a "good initial step", Froman said, suggesting there was still a gap between the trading partners. "The foreign share of the Japanese auto market is about 6 percent," Froman told a news conference. "The foreign share of the U.S. auto market is closer to 40 percent. I don't think there is any question that the U.S. market is quite open." The U.S. government has long pushed for fewer tariffs on its cars and more access to Japan's insurance market but has met with little success. U.S. markets are some of the most open in the world, Froman said, suggesting there was not much that the United States could offer in return to the access that it was seeking. However, making it easier for foreign firms to do business in these two areas would increase Japan's productivity, contribute to its economic growth strategy and help secure progress in TPP negotiations, Froman said. Officials from the 12 countries in TPP talks will meet in Brunei from Thursday, but vested interests make it difficult to agree on lowering tariffs for agricultural products or barriers to industries that countries want to protect. Japan is under heavy pressure from farmers to resist cutting tariffs for products like rice. There is also resistance in Vietnam and Malaysia, where state-linked enterprises and selective handouts of government contracts are entrenched and politically sensitive. Froman, in Tokyo for talks with Japanese government officials, said it was natural for every country to have areas that they were sensitive about, but those areas should be dealt with in TPP negotiations. The United States is spear heading the TPP initiative, which includes Australia, New Zealand, Mexico, Canada, Chile, Peru, Malaysia, Vietnam, Singapore, Japan and Brunei, as part of a shift to focus more on Asia. China has said it is studying joining the TPP but it is not part of negotiations on the grouping. (Editing by Robert Birsel )

U.S. bond yields hit two-year high; emerging currencies slide

Mon Aug 19, 2013 5:52pm EDT

http://www.reuters.com/article/2013/08/19/us-markets-global-idUSBRE96S00E20130819

NEW YORK - U.S. benchmark bond yields hit a two-year high near 3 percent on Monday and emerging market currencies from India to Indonesia tumbled as markets braced for the Federal Reserve to start withdrawing support for the U.S. economy.

Major U.S. stock indexes fell for a fourth straight session. Interest-rate sensitive real estate shares in particular suffered, with the PHLOX Housing Sector Index losing 2.5 percent. Fear that the Fed will scale back stimulus spending next month has rattled Wall Street of late, with the Dow industrials last week marking their worst weekly run of the year. Political uncertainty in Italy dragged down a broad European stock index. Minutes from the Fed's last policy meeting will be released on Wednesday and could shed light on when the central bank plans to slow its $85 billion-a-month in bond purchases, a prospect that has been making markets nervous for months. The Fed has said it expects the economy to strengthen in the second half of this year and into 2014, and recent U.S. data has suggested labor market improvement and rising price pressure. That has pushed long-term interest rates up sharply over the last few months, with the U.S. benchmark 10-year Treasury yield hitting a two-year high of 2.90 percent on Monday, up more than a percentage point since May. However, Fed policymakers have also said that any sign of weakness could delay the timetable for tapering bond purchases. "What you are seeing at the moment in a way is central bankers versus the markets," said ABN Amro economist Nick Koumiss. "The markets are pushing up the rate expectations and central bankers have been trying to pour cold water on the moves, but it is proving more difficult against a background of stronger economic data." Rates on U.S. 30-year fixed-rate mortgages have followed Treasury yields higher, which could threaten a housing market recovery. That weighed on shares of real estate investment trusts such as Mace rich, which fell 1.8 percent. "Housing's been a bright spot and it's already been dulled a bit because refinancing activity has slowed," said John Canaan, a market strategist at Stone & McCarthy Research Associates. But he said rates are still at "very low levels" and would need to go much higher to cause serious trouble for housing. Capital-intensive industries such as miners and utilities, however, could struggle in a higher interest rate environment. "Anybody with a large amount of short-term debt," said Kim For rest, senior equity research analyst at Fort Pitt Capital Group. "And if they pay a dividend, it can be at risk." The Dow Jones industrial average .DJI closed down 70.73 points, or 0.47 percent, at 15,010.74. The Standard & Poor's 500 Index .SPX fell 9.77 points, or 0.59 percent, to 1,646.06. The Nasdaq Composite Index .IXIC closed down 13.69 points, or 0.38 percent, at 3,589.09 German 10-year government bond yields rose 1.3 basis points to 1.89 percent, having earlier hit their highest since March 2012 at 1.92 percent. EMERGING TURBULENCE European shares have held up better in recent weeks. The 17-country euro zone ended an 18-month recession last quarter, growing 0.3 percent, and August business surveys this week are likely to show the modest recovery is slowly broadening out. But a sharp slide in Italian stocks on Monday weighed on the FTSEurofirst 300 .FTEU3 , which shed 0.6 percent. Uncertainty about the strength of Italy's coalition government hurt shares. An index of global stocks fell 0.4 percent. Rising interest rates are also hurting emerging markets that have benefited from large cash inflows courtesy of the Fed's and other central banks' loose monetary policies. The Indian rupee slid to a record low of 63.30 per dollar, while the country's stock market .INES lost 1.4 percent, extending a 4 percent drubbing sustained on Friday. In late New York trade, one-month dollar rupee non-deliverable forwards gapped to a record high 64.50, albeit on thin volume, signaling the currency is likely to find more sellers once Asian trade opens for business on Tuesday. Trading in these forward contracts closed in Europe at 63.50. "With the turnaround of developed markets, foreign institutional investors have greater investment opportunities in Western Europe and North America," said Souring Bane, a professor at Warwick Business School in Britain. "This situation is aggravated with the tapering of quantitative easing." India's central bank has tried to restrict how much money Indian residents and companies can send offshore, but that only raised fears of outright capital controls that would further undermine the confidence of foreign investors. Indonesia's rupiah fell to a four-year low of 10,485 per dollar and the strain also showed in MSCI's broadest index of Asia-Pacific shares excluding Japan .MIAPJ0000PUS, which fell 0.5 percent. Data later in the week will bring an early reading on Chinese manufacturing from HSBC. Recent data suggested the economy is stabilizing, which should cheer Asian investors. Eventually higher U.S. yields should make the dollar more attractive, though it has struggled of late on fear that Fed tapering could drive investors out of U.S. fixed-income markets. The dollar was flat at $1.3337 per euro and was also little changed at 97.55 yen. "We think over time the dollar will begin to outperform against the major currencies, but at the moment it is being offset by higher yields in Europe, where markets have been very much focused on the improving cyclical momentum," said Lee Hardman, a currency analyst at Bank of Tokyo-Mitsubishi. U.S. crude oil prices fell 46 cents to $107 a barrel despite oil markets' focus on the violent unrest in Egypt, which has stoked fears for exports from oil producers in the Middle East and North Africa. Copper slid 1.3 percent to $7,306.15 a ton after hitting a 10-week peak of $7,420 on Friday, while gold shed $9.08 to $1,366.70. (Additional reporting by Marc Jones in London and Rodrigo Campos in New York; Editing by Dan Grebler)

Exclusive: Indonesia oil regulator suspends energy tenders amid graft scandal

Mon Aug 19, 2013 7:15am EDT

http://www.reuters.com/article/2013/08/19/us-indonesia-corruption-skkmigas-idUSBRE97I0DO20130819

JAKARTA - Indonesia's energy regulator has suspended all oil, condensate and natural gas sell tenders as it reviews internal procedures after its chairman was caught taking an alleged bribe from an oil trader last week, an agency official said on Monday.

The suspension is the first evidence that the graft scandal engulfing SKKMigas is starting to impact day to day operations for Indonesia's huge oil and gas industry. SKKMigas suspended a tender to sell around 400,000 barrels of condensate from Total's ( TOTF.PA ) Senipah complex that was due to close on Monday, said an agency official who wished not to be named. "The tender process is on hold. We aren't continuing the tender process," he told Reuters, adding that he was not sure how long the halt would last. On Wednesday, SKKMigas chairman Rudi Rubiandini was arrested for taking an alleged bribe from an executive with Singapore energy trader Kernel Oil Pte Ltd, heightening the uncertainty over energy policy in Southeast Asia's largest economy, where oil and gas production contributes a fifth of government revenue. Kernel Oil was a participant in Monday's suspended tender, worth at least $41.5 million based on July prices. The small company, which has denied involvement in the graft case, is among 40 companies authorized to buy oil and gas from SKKMigas. "We need to start over because Kernel was already listed as a participant (in the tender)," the official said. "The impact (from the suspension), of course, is that the income to our nation will be a little bit delayed. But in terms of impact over one year, I don't think the impact will be that (significant)." SKKMigas, which sells excess oil and gas that cannot be used by state energy company PT Pertamina Persero, has conducted at least seven tenders this year, selling Minas and Duri crudes and Senipah and Geragai condensate. After Rubiandini's arrest, the scandal widened on Friday to include three other top SKKMigas officials. The heads of the regulators' crude and natural gas commercial divisions, as well as the chief of operations support, were all suspended and barred from travel. Officials from the Corruption Eradication Agency (KPK) over the weekend confiscated documents from the office of SKKMigas' interim chairman Johanes Widjornarko, who replaced Rubiandini. A KPK spokesman said the action was part of the investigation but that Widjornarko was not a suspect. The KPK spokesman said the agency had also seized $200,000 from the office of a top energy ministry official, which it believed was linked to the Rubiandini case. The energy regulator, which has named temporary replacements for the impugned officials, had earlier said the scandal would not affect oil operations. SKKMigas has existing production sharing contracts with oil majors including BP Plc ( BP.L ), Chevron ( CVX.N ) and Exxon Mobil ( XOM.N ). (Additional reporting by Florence Tan in SINGAPORE; Editing by Tom Hogue)

Statoil funds growth, OMV seals output with $2.65 billion North Sea deal

Mon Aug 19, 2013 10:27am EDT

http://www.reuters.com/article/2013/08/19/us-statoil-omv-sale-idUSBRE97I04D20130819

OSLO/VIENNA - Norway's Statoil ( STL.OL ) sold stakes in North Sea oil fields to Austria's OMV ( OMVV.VI ) on Monday, in a $2.65 billion deal giving the former cash to develop new projects and placing the latter on course to meet ambitious output targets.

The deal, which analysts said came at a comfortable premium, gives OMV a foothold in one of Norway's biggest future oil developments and underlines a rebound in North Sea investments driven by a string of new oil field discoveries as well as high oil prices and better recovery technology. "This is a very good price: it's at two times book value while Statoil itself trades at 1.3 times book value," said ABG oil sector analyst John Olaisen. "OMV is a not a brand player but it's very aggressive. It shows that Europeans are positive about the Norwegian Continental Shelf." Statoil sold minority stakes in the mature Gullfaks field, the brand new Gudrun development, Chevron's ( CVX.N ) Rosebank field in the U.K and BP's ( BP.L ) Schiehallion field. OMV will cover Statoil's capital expenditure between January 1 and the closing of the deal, meaning it could be worth as much $3.15 billion in total. It also agreed optional cooperation in 11 of Statoil's exploration licences in the Norwegian North Sea, West of Shetland and the Faroe Islands. That cash - in addition to funds earmarked for projects it will no longer own - gives Statoil a sizeable budget to fund new projects, push on with new exploration and appease investors worried about soaring capital expenditure. "The idea is to use the proceeds to reinvest in high-return projects," Statoil Chief Executive Helge Lund said. "It will increase our financial flexibility in the sense it releases $7 billion in future capital expenditure from these assets." Statoil needs to pay for the development of the giant Johan Sverdrup field in the North Sea, which it estimates could hold up to 3.3 billion barrels of oil, as well as huge discoveries in Brazil, Tanzania and Norway, while simultaneously pushing ahead with an aggressive exploration portfolio. Lund said the deal would not affect its ability to delver on its 2.5 million-barrel target for 2020. Shares in Statoil rose 1 percent on Monday while shares in OMV were down 2.2 percent. "NICE PRICE" "This is a very nice price," Trond Omdal, an oil sector analyst with Arctic Securities in Oslo said. Using the industry standard of an 8 or 9 percent discount rate and basing his calculation on the weighted cost of capital, he calculated that the deal brought a 41 percent or 50 percent premium. OMV said it would use proceeds from divesting petrol stations in the Balkans, its lubricants business and a stockholding unit to partially fund the deal, which it said should contribute more than $500 million a year to operating profit from 2014, assuming stable oil prices. For OMV, in the process of exiting lower-margin downstream operations to focus on more lucrative upstream business, the deal gives that effort, cheered by analysts, a major push. Wood and Co. brokerage said on Monday the deal was "transformative". The deal lifts OMV's proven and probable reserves by about 320 million barrels of oil equivalents, or about 19 percent, and will boost production by about 40,000 barrels in 2014 and almost 60,000 barrels in 2016. That is enough to put it well on course to meet its 2016 target of lifting production to around 400,000 barrels a day from 297,000 barrels in the second quarter. "The transaction will provide a huge boost to OMV's strategy and will be a key factor in achieving our 2016 targets," said Gerhard Roiss, the Austrian company's chief executive. "It confirms OMV's clear focus towards increasing the significance of its exploration and production activities. OMV has already bought into Statoil's Aasta Hansteen's gas project in the Norwegian Sea and taken a stake Lundin Petroleum's ( LUPE.ST ) Edvard Grieg field, giving it a big exposure to future Norwegian production. (Additional reporting by Gwladys Fouche and Henrik Stolen in Oslo; Editing by Sophie Walker)

U.S. court gives lawsuit over Barclays disclosures second chance

Mon Aug 19, 2013 7:18pm EDT

http://www.reuters.com/article/2013/08/19/us-barclays-lawsuit-idUSBRE97I0K620130819

NEW YORK - A U.S. appeals court on Monday said investors may revive a lawsuit accusing Britain's Barclays Plc of misleading them in a 2008 stock offering about its subprime mortgage exposure and ability to manage credit risks.

Reversing a lower court, the 2nd U.S. Circuit Court of Appeals in New York said investors may sue Barclays and its underwriters over a $2.5 billion offering of American depositary shares in April 2008 that lost much of its value within a year. The lawsuit is one of many accusing major banks of inflating their share prices by concealing or being too slow to report deteriorating credit conditions on their balance sheets. Barclays' offering came just four months before the London-based bank took a 2.8 billion pound ($4.4 billion) writedown on subprime mortgages and other risky debt. Soon after the writedown, it announced a large capital-raising plan. "In a quickly deteriorating credit market, we believe the particulars about a firm's exposure to that market could assume a level of importance, and hence materiality, that may not have been the case in less economically stressful times," Circuit Judge Barrington Parker wrote for a two-judge 2nd Circuit panel. However, the panel upheld the dismissal of claims over three offerings totaling $2.95 billion between April 2006 and November 2007, saying the plaintiffs missed a one-year deadline to sue. U.S. District Judge Paul Crotty in Manhattan had dismissed all of the plaintiffs' lawsuit in January 2011. Monday's decision sends the case back to his courtroom. Barclays spokesman Brandon Ashcraft declined to comment. Darren Robbins, a partner at Robbins Geller Rudman & Dowd representing the plaintiffs, said he is pleased with the decision, and looks forward to pursuing the case over the 2008 offering. Investors had sought class-action status on behalf of purchasers of 218 million Callable Dollar Preference Shares of Barclays Bank Plc. These were originally priced at $25 each, but their value plunged to between $5 and $7 by March 2009. "OBJECTIVELY FALSE" STANDARD The plaintiffs accused Barclays of failing to disclose in offering materials roughly 36 billion pounds ($56.3 billion) of credit exposure, and misleading them that the bank's risk management would prevent big losses. They said this violated Sections 11 and 12(a)(2) of the Securities Act of 1933. Parker said that under the 2nd Circuit decision in Fait v. Regions Financial Corp, which was decided in 2011 after Crotty's ruling, a defendant may be liable under the 1933 Act for a misstatement of belief or opinion that was "objectively false and disbelieved by the defendant" when made. Based on that decision, Parker said "the district court erred in stating that claims of disbelief of subjective opinions must necessarily be brought as fraud claims," which require a different burden of proof. This didn't apply to the earlier offerings, however, because Barclays had by February 2008 made "corrective" disclosures that started the one-year period to bring a lawsuit, Parker wrote. By waiting until March 2009 to sue, the investors waited too long, he concluded. The case is Freidus et al v. Barclays Bank Plc et al, 2nd U.S. Circuit Court of Appeals, No. 11-2665. (1 pound = US$1.565) (Reporting by Jonathan Stempel in New York; Editing by Gerald E. McCormick, Lisa Von Ahn, Alden Bentley and Andre Grenon )

New Zealand announces plans for Fonterra tainted dairy inquiry

Mon Aug 19, 2013 2:21am EDT

http://www.reuters.com/article/2013/08/19/us-newzealand-dairy-inquiry-idUSBRE97I04H20130819

WELLINGTON - New Zealand on Monday announced plans for a government inquiry into how ingredients made by dairy giant Fonterra became contaminated with a botulism-causing bacteria, as the country tries to salvage its reputation as an exporter of safe agricultural products.

The inquiry, to be held alongside two internal Fonterra investigations and another by the country's agricultural regulator, will examine how the potentially contaminated products entered the international market and whether adequate regulatory practices were in place to deal with the issue. "This will provide the answers needed to the questions that have been raised about this incident, both domestically and internationally," said Primary Industries Minister Nathan Guy, who is leading the inquiry along with Food Safety Minister Nikki Kaye. "It is also an important step in reassuring our trading partners that we take these issues seriously," he said in a statement. The contamination announced earlier this month has led to product recalls in countries from China to Saudi Arabia. Fonterra, the world's largest dairy exporter, has come under attack at home and abroad for dragging its feet in disclosing the discovery of the bacteria. Fonterra Chief Executive Theo Spierings welcomed the inquiry, saying in the statement that the company would provide all necessary information. The inquiry will be expected to provide an interim report in around three months. New Zealand depends on the dairy industry for a quarter of its total exports. China is a major export market for New Zealand's dairy products. Foreign Affairs Minister Murray McCully is visiting Beijing this week in to smooth relations with the country's biggest milk powder customer, and Prime Minister John Key has said he plans to visit China later this year to discuss the contamination issue after the inquiry results are complete. (Reporting by Naomi Tajitsu ; Editing by Chris Gallagher )

China bans more New Zealand dairy products on new contamination scare

Mon Aug 19, 2013 2:07am EDT

http://www.reuters.com/article/2013/08/19/us-newzealand-dairy-westland-idUSBRE97I01D20130819

WELLINGTON - More New Zealand milk products sold to China have been banned after elevated levels of nitrates were found, raising further concerns over quality and testing in the world's largest dairy exporter in the wake of a contamination scare earlier this month.

New Zealand's agricultural regulator said on Monday it has revoked export certificates for four China-bound consignments of lactoferrin manufactured by Westland Milk Products after higher- than-acceptable nitrate levels were found by tests in China. Two of the four consignments had been shipped to China but had not reached consumers, New Zealand's Ministry of Primary Industries (MPI) said. "Any food safety risk to Chinese consumers is negligible because the quantities of lactoferrin used in consumer products was very small, meaning the nitrate levels in those products would easily be within acceptable levels", Scott Gallacher, the acting director-general of the MPI, said in a statement. The announcement comes just weeks after Westland's much bigger competitor, Fonterra, said some of its dairy ingredients were contaminated with a botulism-causing bacteria. This prompted a recall of infant formula products, sports drinks and other products in China, New Zealand and other Asia-Pacific nations. "All of the product has been located, none of it has entered the retail food chain," Westland Chief Executive Rod Quin told Reuters. "We're well aware of the wider context of the issue and related concerns, so we've acted to make sure the product doesn't go any further." China's top quality watchdog said it had halted all imports of the product from Westland and asked other New Zealand dairy companies exporting lactoferrin to provide nitrate test reports. The General Administration of Quality Supervision, Inspection and Quarantine of China urged the New Zealand government to thoroughly scrutinize its dairy companies as well as their products to ensure the safety of exports to China, New Zealand's top dairy market. AFFECTED BATCHES The four consignments were derived from two affected batches of lactoferrin, a naturally occurring protein found in milk, manufactured by Westland at its Hokitika factory on the country's South Island. Initial investigations pointed to contamination by cleaning products which contain nitrates that were not property flushed from the plant, Quin said. Privately owned Westland makes about 120,000 tons of dairy product each year, exporting the majority. Its production pales in comparison with that of Fonterra, which exports 2.5 million tons of product. ANZ agricultural economist Con Williams said that the 390 kg of affected Westland product was much smaller than the 38 tons of contaminated product produced by Fonterra. As a result, he expected it would have limited impact on global demand for New Zealand dairy products. "The timing isn't ideal. There's heightened concern around food safety issues at the moment especially in the dairy sector in light of the Fonterra issue two weeks ago," Williams said. "But in terms of the actual issues, it doesn't seem to be substantial ... It looks like only a very small amount of product was affected and it doesn't seem to be a food safety issue." The two batches of lactoferrin showed nitrate levels of 610 and 2,198 parts per million, respectively, above the New Zealand maximum limit of 150 parts per million. Westland exported one batch directly to a Chinese distributor, which sold the product on as an ingredient for other dairy products. The second batch was supplied to New Zealand's Tatua Co-operative Dairy Company, and also exported to China. "MPI, the Ministry of Foreign Affairs and Trade and the companies concerned are working closely with the Chinese authorities on this issue," Gallacher said. There was no affected lactoferrin used in products in New Zealand or exported elsewhere. New Zealand relies on diary exports for about a quarter of its NZ$46 billion ($37 billion) in annual export earnings. ($1 = 1.2332 New Zealand dollars) (Writing by Lincoln Feast ; Editing by Paul Tait and Chris Gallagher )

JPMorgan faces Dept of Justice probe on energy trades: WSJ

Mon Aug 19, 2013 6:01pm EDT

http://www.reuters.com/article/2013/08/19/us-jpmorgan-energyprobe-idUSBRE97I0ZJ20130819

- JPMorgan Chase & Co ( JPM.N ) is being investigated by the U.S. Department of Justice for possible manipulation of energy markets following the company's settlement of civil allegations last month with a separate federal energy agency, the Wall Street Journal reported on Monday, citing people familiar with the case.

The probe, which was said to be in early stages, is being handled by U.S. Attorney Preet Bharara in Manhattan, the newspaper said on its website. Bharara recently brought criminal charges against two former JPMorgan traders for understating losses from the bank's disastrous London Whale derivatives trades last year. The Justice Department began the probe of JPMorgan's energy trades as the company agreed to pay $410 million to end an enforcement action by the Federal Energy Regulatory Commission, according to the report, which said the new probe is to include some of the same issues. It is not known if the investigation is civil or criminal, the newspaper said. A JPMorgan spokesman declined to comment on the report. A Justice Department spokeswoman in Washington had no immediate comment. Chief Executive Officer Jamie Dimon has publicly vowed to resolve the company's regulatory issues. (Reporting by David Henry in New York; Editing by Carol Bishopric)

KKR, Warburg Pincus vying for Mitchell International: sources

Mon Aug 19, 2013 5:58pm EDT

http://www.reuters.com/article/2013/08/19/us-mitchellinternational-sale-idUSBRE97I0ZG20130819

NEW YORK - KKR & Co LP ( KKR.N ) and Warburg Pincus LLC are among the private equity firms competing for Mitchell International Inc, a car and property claims software company that could fetch up to $1.5 billion, according to four people familiar with the matter.

Advent International Corp and Blackstone Group LP ( BX.N ) are also participating in the auction for Mitchell, which is in the second round of bidding, the sources said on condition of anonymity because the process is confidential. Owned by buyout firm Aurora Capital Group, Mitchell has annual earnings before interest, tax, depreciation and amortization (EBITDA) of about $90 million, the sources said. Aurora, Warburg Pincus, Advent International and Blackstone declined to comment. Mitchell and KKR did not respond to a request for comment. Founded in 1946, San Diego, California-based Mitchell provides information and software services to insurance companies and collision repair facilities, which rely on the company's information to estimate labor times and the cost of replacement parts. Joined by investors that included General Electric Pension Trust ( GE.N ), Aurora acquired Mitchell in 2007 from private equity peer Hellman & Friedman LLC for an undisclosed amount. The North American market for software and services designed to automate the auto insurance claims process is dominated by a few players - Mitchell, CCC Information Services Inc, and Solera Holdings Inc ( SLH.N ) - according to Standard & Poor's Ratings Services. In January, Leonard Green & Partners LP, another buyout firm, acquired CCC from Investcorp INVB.BH, one of the Middle East's largest private equity houses, for more than $550 million. <ID:L6N0AK1BS> Aurora has hired Goldman Sachs Group Inc ( GS.N ) to explore a sale of Mitchell International, people familiar with the matter told Reuters in April. (Reporting by Greg Roumeliotis and Nadia Damouni in New York; Editing by Leslie Gevirtz )

Spanish banks' bad loan ratio rises to record in June

Mon Aug 19, 2013 5:12am EDT

http://www.reuters.com/article/2013/08/19/us-spain-bad-loans-idUSBRE97I07R20130819

MADRID - Spanish banks' bad loans as a percentage of total credit rose to a fresh high of 11.6 percent in June, Bank of Spain data showed on Monday, as more households and small companies, particularly those from the property sector, struggle with debts.

The rise in loans in arrears has dragged on Spanish banks' earnings in the first half of 2013, even though in the second quarter some reported a slower rate of increase in bad loans. The overall bad debt ratio for Spanish banks was up from 11.2 percent in May and has been steadily increasing since a drop-off at the end of last year when rescued lenders transferred toxic property assets to Spain's so-called bad bank. The Bank of Spain had previously put the bad debt ratio at 11.6 percent last November, using provisional data, though this was later revised to 11.4 percent. Spanish lenders' earnings were gutted last year by steep government-enforced provisions on properties and loans to developers, in the wake of a 2008 real estate crash. Those unable to cope were bailed-out with European funds, and most of their real estate loans were transferred to a government-backed bad bank. Some top lenders, including healthy ones such as BBVA ( BBVA.MC ), have said that bad debts with property-related businesses in particular could keep rising into the first quarter of 2014. Many economists believe Spain could return to growth later this year from its deep recession, though the country is still fighting high unemployment. (Reporting by Sarah Morris and Sarah White; Writing by Clare Kane; Editing by Greg Mahlich)

India does not need an IMF credit line: World Bank economist

Mon Aug 19, 2013 4:36am EDT

http://www.reuters.com/article/2013/08/19/us-india-economy-basu-idUSBRE97I06520130819

- India does not need to seek a line of credit from the International Monetary Fund (IMF) to help fix the economy, World Bank chief economist Kaushik Basu said in New Delhi on Monday, on the same day the rupee fell to another record low.

"I don't think that we are in a situation where there is any need for that," Basu told reporters after giving a lecture in the Indian capital, when asked whether India should ask the IMF for money. "India has enough foreign exchange reserves, so the question of having to turn to the IMF is not there." The rupee fell despite a series of measures unveiled last week to try to stall its decline. The rupee has been the worst performer in Asia since late May, when the U.S. Federal Reserve first signaled that it may begin tapering its monetary stimulus this year, sparking an exodus of cheap money from emerging markets worldwide. (Reporting By Rajesh Kumar Singh ; editing by Matthias Williams )

Amazon.com back up after going down for U.S., Canadian users

Mon Aug 19, 2013 4:17pm EDT

http://www.reuters.com/article/2013/08/19/net-us-amazon-website-idUSBRE97I0UT20130819

NEW YORK - Amazon.com, the website of the world's largest online retailer, went down for about 15 minutes on Monday in a rare outage for many users across the United States and Canada.

It was unclear what triggered the rare disruption. The company, whose Amazon Web Services is designed to ramp up server capacity for customers to prevent outages, did not respond to multiple requests for comment. Earlier on Monday, users from New York and Toronto to San Francisco got only error messages when trying to access the popular shopping website. The news came less than a week after the website of the New York Times went down for about two hours. Amazon has $86 billion in annual gross merchandise volume, including its business through third-party sellers, according to consultants at RetailNet Group. Going by that estimate, Amazon processes some $163,622 in transactions per minute on average. (Reporting By Dhanya Skariachan and Edwin Chan; Editing by Bernard Orr )

Spain's El Corte Ingles in 3.8 billion euro debt refinancing deal

Mon Aug 19, 2013 10:20am EDT

http://www.reuters.com/article/2013/08/19/us-elcorteingles-debt-idUSBRE97I0LF20130819

MADRID - Spanish department store El Corte Ingles, the country's largest privately held company, said on Monday it had reached a deal to refinance three quarters of its 5 billion euro ($6.7 billion) debt.

El Corte Ingles, one of Spain's largest employers and most venerable retailers, has been hit by austerity and falling sales and has cut prices to compete with cheaper retailers, particularly in the food sector. The chain said in a statement it had agreed with lenders Santander ( SAN.MC ), BBVA ( BBVA.MC ), CaixaBank ( CABK.MC ), Sabadell ( SABE.MC ), Popular ( POP.MC ) and Bankia ( BKIA.MC ) to refinance 76 percent of its debt, or 3.8 billion euros. The new loans will mature in 2021. El Corte Ingles also said assets worth 7.4 billion euros and annual revenues of around 15 billion euros would help it persuade other banks to refinance the remainder of its debt. (Reporting by Julien Toyer ; Editing by David Cowell)

Analysis: In choice of next Fed chair, a focus on regulatory views

Mon Aug 19, 2013 4:12pm EDT

http://www.reuters.com/article/2013/08/19/us-usa-fed-succession-regulation-analysi-idUSBRE97I0VP20130819

SAN FRANCISCO - As President Barack Obama weighs whom to nominate to succeed Federal Reserve Chairman Ben Bernanke, he will look well beyond their stance on monetary policy, the traditional measure of a good central bank chief.

Indeed, how the top two contenders to lead the U.S. central bank - former Treasury secretary Lawrence Summers and Fed Vice Chair Janet Yellen - rate as regulators may be a decisive factor in Obama's pick. The 2007-2009 financial crisis left deep scars on the U.S. economy, and underscored the importance of smart regulation in maintaining the stability of the financial system. Whoever takes the helm of the Fed when Bernanke's term expires at the end of January will bear responsibility for protecting the economy from a return of financial excesses. "We are used to thinking about inflation or unemployment, but the Fed has taken on a massive role as a financial regulator, and I think that is going to be a much larger task for the new chairman," said John Cochrane, a professor at University of Chicago's Booth School of Business. The differences between Summers and Yellen on regulation may be narrower than commonly thought. From her early days at the Fed board in the 1990s, Yellen was an advocate of tough banking supervision within the Fed. As president of the San Francisco Federal Reserve Bank she raised early alarms not only publicly about the dangers of the housing crisis but within the central bank about the need for higher capital requirements for banks with large exposures to risky real estate lending. As Fed vice chair she has spoken regularly about the need for additional standards to protect the financial system. The regulatory views of Summers have been less consistent. As Treasury secretary under President Bill Clinton, Summers oversaw the repeal of the Glass-Steagall Act, which had imposed barriers between commercial and investment banking. The repeal opened the door to the creation of giant financial institutions that now are considered "too big to fail." He also helped torpedo a plan to regulate swaps, setting the stage for an explosion in derivatives trading that ended up contributing to the financial crisis. But Summers also coauthored a slew of recommendations on curbing predatory lending practices and, as Obama's economic adviser from 2009 to 2010, he championed creation of a new regulator to protect consumers from the abusive lending practices that helped sow the seeds of the financial crisis. "I wouldn't have described him as deregulatory in the '90s and massively regulatory now," said Michael Barr, a law professor at the University of Michigan who worked at the Treasury on Wall Street reform when Summers was an economic adviser to Obama. "I think his views have been nuanced." Between his stints in public service came a somewhat infamous episode at the Kansas City Fed's central bankers' meeting in Jackson Hole, Wyoming, in 2005. There, Harvard University's then-president belittled a paper by an up-and-coming economist warning of a financial crisis, calling its suggestion for tighter regulatory limits "Luddite" and "problematic." The student, Raghuram Rajan, was last week appointed to head India's central bank. He said later the episode left him feeling like "an early Christian who had wandered into a convention of half-starved lions." But Summers' views are closer now to Yellen's than they had been. He backed away from his earlier stance on swaps after seeing the massive growth in the industry, and now, like Yellen, embraces derivatives clearing as part of the solution. "You can see a shift in his views in that he saw mandatory clearing was absolutely essential by 2008," Barr said. That shift is also apparent in how he now talks about the role of regulation. "The roots of this crisis lie not in the stars, they lie heavily in the failure of government to regulate financial markets with adequate vigor," he said during a policy debate at Stanford University last year, adding that the "most embarrassing" photo op in American political history was a 2003 shot of financial regulators taking shears and a power saw to a thick book of rules. "I am right now more worried about the gaps in the regulatory system than I am about the excesses of regulation," he said. Some have raised doubts that a man who has worked for hedge fund giant DE Shaw and Citibank, and who was seen as a force for deregulation in the 1990s, could be serious about cracking down on financial firms. But supporters argue that the critics have it wrong. "I can report that in internal discussions, he was one of the most uncompromising advocates for financial regulation," Obama's regulation czar, Cass Sunstein, wrote recently. Spokespersons for Summers and Yellen declined to provide comment for this article. The biggest difference between the contenders to be the next Fed chair may be in how they view their own actions in relation to the crisis. Summers has staunchly defended his best-known deregulatory effort, saying the repeal of the Depression-era law that had kept commercial banks from merging with investment banks played no part in the crisis. "I don't think that the argument - that somehow if you separated investment banking activities and commercial banking activities you wouldn't have had the crisis - is a very plausible one," Summers said in 2009. "If anything, excessive separation between them may have led to more crisis." Yellen by contrast seemed to blame herself for being completely blindsided by the extent of the crisis. "Did I in any way see or contemplate the massive meltdown that we had because of securitization, the credit rating agencies, the growth in leverage in the shadow banking system?" Yellen, who headed the San Francisco Fed from 2004 to 2010, told the Financial Crisis Inquiry Commission shortly after she took her current job. "I didn't. I'm sorry. I wish I had, but I didn't." (Reporting by Ann Saphir; Editing by David Gaffen and Chizu Nomiyama )

China probe is latest legal headache for JPMorgan

Mon Aug 19, 2013 4:08am EDT

http://www.reuters.com/article/2013/08/19/us-china-jpmorgan-legal-idUSBRE97I03A20130819

NEW YORK - A federal bribery investigation into whether JPMorgan Chase & Co. hired the children of key Chinese officials to help it win business is just the latest in a series of legal and regulatory headaches for Chief Executive Jamie Dimon.

Dimon piloted the bank through the financial crisis, but it is now facing at least a dozen investigations from federal agencies and state and foreign governments, including over the "London Whale" trading scandal that cost it more than $6.2 billion. In the latest probe, the Securities and Exchange Commission (SEC) is looking at whether the bank's Hong Kong office hired the children of powerful heads of state-owned companies in China with the express purpose of winning underwriting business and other contracts, a person familiar with the matter said. The SEC is questioning JPMorgan's relationships with at least two families in China that may have legitimate explanations, the source said. U.S. law does not stop companies from hiring politically well-connected executives. But hiring people in order to win business from relatives can be bribery, and the SEC is investigating JPMorgan's actions under the U.S. Foreign Corrupt Practices Act. SEC spokeswoman Florence Harmon declined to comment on the investigation. A Hong Kong-based spokeswoman for the bank declined to comment beyond what was in the bank's regulatory filings and said the bank was cooperating with probes. REGULATORY HEADACHES Whatever the outcome of the latest investigation, Dimon's time is increasingly being consumed by regulatory matters. Federal prosecutors on Wednesday brought criminal charges against two former JPMorgan traders, accusing the pair of deliberately understating losses in the "Whale" scandal. The SEC is seeking an admission of wrongdoing from the bank in a parallel civil action, a rare step for the government agency. Earlier this month, the bank revealed that it was facing parallel criminal and civil probes by the U.S. Department of Justice in California into mortgage bonds that it sold before the financial crisis. And last month, the bank agreed to pay a $285 million penalty and give back $125 million of trading profits in a settlement with the Federal Energy Regulatory Commission for alleged power market manipulation. JPMorgan neither admitted nor denied violations. Since 2011, the bank has been writing in its quarterly filings with regulators that it "is currently experiencing an unprecedented increase in regulation and supervision, and such changes could have a significant impact on how the firm conducts business". In its last quarter, JPMorgan estimated that it could have legal losses that are $6.8 billion beyond an undisclosed sum that it has already set aside to cover those charges. Wall Street analysts may be understating the extent of the bank's future litigation expenses, said independent analyst Charlie Peabody of Portales Partners. JPMorgan's annual litigation costs have been around $4.9 billion for each of the last two years, and Peabody expects the cost will be $1.5 billion to $2 billion over each of the next two quarters. On average Wall Street expects roughly $300 million to $500 million per quarter, he added. While major U.S. banks have faced a litany of probes since the financial crisis, Dimon has repeatedly griped in public about how regulations designed to prevent the next financial crisis are stifling banking and its ability to help the economy. A report from a U.S. Senate subcommittee described an episode where Dimon shouted at his then-chief financial officer for giving information to a regulator. The bank's board of directors has made it clear to the chairman and chief executive that he must improve his relationship with regulators, a source familiar with the matter told Reuters earlier this year. Even with heavy litigation costs, JPMorgan posted $21.28 billion of net income last year, its highest level ever even after it suffered from $6.2 billion of trading losses from the bad derivatives bets made by Bruno Iksil, the trader nicknamed the "London Whale". "ELEPHANT HUNTING" In the China case, the New York Times said that JPMorgan at one point hired Tang Xiaoning, the son of Tang Shuangning, chairman of the China Everbright Group, a state-controlled financial conglomerate. He also had been a Chinese banking regulator, the Times reported. After the younger Tang joined JPMorgan, the bank secured several important assignments from the Chinese conglomerate, including advising a subsidiary on a stock offering, according to the newspaper. Another matter the SEC is probing is JPMorgan's hiring Zhang Xixi, the daughter of a now-disgraced Chinese railway official. The bank went on to help advise the official's company, which builds railways for the Chinese government, on its plans to go public, the Times said. The bank has not been accused of wrongdoing, the New York Times said, citing a government document. There is no documentary evidence that Zhang Xixi or Tang Xiaoning were unqualified, but the SEC is checking whether the bank's Hong Kong office routinely won business from companies connected to its employees, the newspaper reported. Marie Cheung, a Hong Kong-based spokeswoman for the bank, said on Sunday that the bank had publicly disclosed the investigation in its quarterly regulatory filing earlier this month, and was cooperating with regulators. The quarterly filing said that the SEC's enforcement division had requested "information and documents relating to, among other matters, the firm's employment of certain former employees in Hong Kong and its business relationships with certain clients". The practice of hiring politically-connected bankers in China was widespread in the early to mid-2000s, when Wall Street firms engaged in so-called 'elephant hunting', a term used to describe the chasing of mandates to manage the multi-billion dollar stock offerings of the country's big state-owned enterprises. One of the more well-known China bankers from that era is Margaret Ren, the daughter-in-law of former Chinese Premier Zhao Ziyang, who has worked at several banks. Most major investment banks have employed a politically connected Chinese banker, whether a high level professional such as Ren or a college age associate, at some stage in the last decade. Many senior investment bankers in China now feel that the heyday for such underwriting contracts has passed, with far fewer jumbo state-owned company listings happening. But banks and private equity firms alike still prize connections to top decision makers. (Additional reporting by Michael Flaherty and Lawrence White in Asia, Tom Brown and Ian Simpson in the United States; Editing by Dan Wilchins , Peter Henderson and Alex Richardson )

Rupee, rupiah lead emerging market slide on Fed fears

Mon Aug 19, 2013 4:46am EDT

http://www.reuters.com/article/2013/08/19/us-markets-emerging-idUSBRE97I08820130819

MUMBAI/JAKARTA - India's rupee crashed to a record low and the Indonesian rupiah hit a 4-year trough on Monday, as the expected withdrawal of U.S. monetary stimulus prompts investors to shun emerging markets burdened by weak external balances, slowing economies and inflation.

It followed a slide on Friday in Brazil's real, a currency that, like the rupee, has been hammered by investor doubts that actions taken by monetary authorities last week will prove effective in stemming the sell-off. "Our primary concern is that the policy authorities still don't 'get it' - thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions," Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore, wrote in a note on the Indian currency on Monday. Growing expectations that the U.S. Federal Reserve will start scaling back its bond purchases as early as next month, slowing the flow of cheap money into higher yielding overseas assets, have weighed on many emerging markets. The currencies of countries already struggling with wide current account deficits, such as India and Indonesia, are seen as among the most vulnerable to sudden capital flight and have been hit hardest. "The market is still acting on the negative current account and fiscal deficits," said Nizam Idris, a strategist with Macquarie Capital, when asked about the two Asian laggards. The latest blow for Indonesia's currency was delivered by central bank data released late on Friday that showed the current account deficit grew to 4.4 percent of GDP in the second quarter of the year, from 2.4 percent in the previous quarter. "Although the current level of reserves is still equivalent to a reasonably healthy 5.5 months of imports, the Bank can't continue to burn reserves at the current rate without the market worrying about a 'crisis' scenario unfolding," Credit Suisse said in a note. Indonesia's Finance Minister Chatib Basri said he was not worried by the rupiah weakness and predicted the current account deficit, though it would remain into next year, would narrow. 'TAPERING' THREAT Some analysts predicted the weakness could ripple out to other Asian markets, with Malaysia's current account data due on Wednesday likely to be closely watched. India's tumbling currency has been the worst performer in Asia since late May, when the Fed first signaled that it may begin "tapering" its monetary stimulus this year. Indian policymakers are grappling with a record current account deficit at 4.8 percent of GDP - and market participants aren't convinced the government can reduce the gap to a targeted 3.7 percent this financial year. The Reserve Bank of India (RBI) has been selling dollars to support the rupee and last week announced curbs on outflows from companies and individuals, denting stock and bond markets. "Forex intervention will continue by the central bank," said Param Sarma, chief executive at Brokerage NSP Forex. "Further measures are expected from the RBI but are unlikely to be effective." Brazil's central bank has also intervened to try and reassure investors, but could not prevent the real from sinking on Friday to its lowest level since the depths of the global financial crisis in 2009. The real's poor record during previous bouts of market volatility and its steep gains over the past decade are some of the reasons why it is now seen as a risky trade - a "high beta" currency in the jargon of the foreign exchange markets. Domestic concerns have also made things worse. As with India, a previously fast-growing economy has slowed, disappointing investors. Also, like Indonesia, a cooling in China's appetite for its commodities exports has resulted in a sharp deterioration in its balance of trade. (Additional reporting by Jongwoo Cheon and Vidya Ranganathan in Singapore and Walter Brandimarte and Tiago Pariz in Rio de Janeiro; Writing by Alex Richardson ; Editing by Richard Borsuk)

Fed tells big banks to improve capital planning

Mon Aug 19, 2013 2:02pm EDT

http://www.reuters.com/article/2013/08/19/us-financial-regulation-stresstests-idUSBRE97I0S920130819

WASHINGTON - Big banks must improve the way they determine how much capital they need to withstand any future crisis, the U.S. Federal Reserve said, citing observations from regulators' periodic tests of banks' health.

The Fed said in a paper released on Monday that banks participating in regular "stress tests" had flaws in their capital planning processes, such as being unable to show that they considered all of the relevant risks to their businesses. "Large bank holding companies have considerably improved their capital planning processes in recent years, but have more work to do," the Fed said. Stress testing banks has become a key tool for regulators to monitor the health of the financial system after the 2007-2009 meltdown. The tests aim to determine whether the biggest banks are maintaining adequate capital levels by examining how they would weather a hypothetical market shock. The Fed also uses the tests to decide whether banks can buy back shares or pay dividends to shareholders. Some in the financial services industry have complained that the Fed's rubric for the tests is not transparent enough. In the round of testing that wrapped up in March, the Fed reprimanded JPMorgan Chase and Goldman Sachs based on 'qualitative' concerns about their capital planning, even though regulators said the banks' ratios were acceptable. The Fed approved capital plans at 14 other firms, including Citigroup and Bank of America, with no strings attached. But the regulator said on Monday that all the banks needed to improve their planning in some way. The Fed said its paper, which did not identify banks, describes regulators' expectations and pointed out practices that were weak or unacceptable in previous stress tests. The paper pointed to problems such as modeling techniques that did not address bank-specific risks, loss and revenue projections that could not be replicated, or problems with governance of the planning process. Regulators said the next set of Fed-administered stress tests will start this fall. The 18 firms that participated in 2013, plus 12 additional banks with more than $50 billion in assets, will be included, the Fed said. (Reporting by Emily Stephenson ; Editing by Karey Van Hall and Chris Reese )

Indian rupee falls to record low; bond yields hit five-year high

Mon Aug 19, 2013 8:13am EDT

http://www.reuters.com/article/2013/08/19/us-india-markets-rupee-idUSBRE97I0DD20130819

MUMBAI - The rupee hit a record low on Monday as India's defense of the currency failed to stop its decline but exacted a rising toll, with bond yields surging to five-year highs and investors demanding higher returns in an auction of cash bills.

The partially convertible rupee tumbled as far as 63.30 to the dollar despite measures in recent weeks by the central bank and government to defend it. It ended at 63.13/14, down 2.3 percent, its biggest single-day fall since September 22, 2011. Efforts to prop up the currency, which has tumbled nearly 13 percent against the dollar this year, have thus far proved ineffective, making it the worst performer in emerging Asia and threatening to drive the region's third-largest economy towards a full-blown crisis. In a further threat to the already-slowing economy, the central bank's effort to shore up the currency by draining liquidity from financial markets is pushing up market interest rates. Axis Bank ( AXBK.NS ) on Monday became the latest lender to raise its minimum lending rate by 25 basis points, to 10.25 percent, pushing up the cost of home and auto loans. "Our primary concern is that the policy authorities still don't 'get it' - thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions," Robert Prior-Wandesforde, an economist at Credit Suisse, wrote in a note on Monday. "If this remains the case, then a swift move to 65 against the U.S. dollar is probable, which in turn should help focus minds." While India's current crisis has evoked parallels to 1991, when it had to pledge gold to the International Monetary Fund, the World Bank's chief economist on Monday said such comparisons were unwarranted and India need not seek a credit line from the IMF. [ID:nD8N0G901T] "Several people have come to me (asking) are we back to 1991? That is completely a non-question because if you look at a couple of numbers there is absolutely no comparison," Kaushik Basu, a former senior Indian government official now at the World Bank, said in New Delhi. A record-high current account deficit of 4.8 percent of gross domestic product (GDP) in the last fiscal year has made India particularly vulnerable as funds leave emerging markets in expectation that the U.S. Federal Reserve will soon scale back its quantitative easing. Net outflows from Indian bonds and stocks total $11.4 billion since late May. Still, India has reserves to cover about seven months of imports, compared with just three weeks in 1991. India's bond market has borne the brunt of the outflows, with foreigners taking out around $10 billion since May 22. The benchmark 10-year bond yield surged 35 basis points on the day, to 9.23 percent. Equity markets have remained relatively insulated with outflows from the cash market at less than $100 million on Friday, when the main stock benchmark fell about 4 percent, the most in nearly two years. Heightened selling in equities could exacerbate the rupee's fall, dealers said. Mumbai's main stock index .BSESN fell 1.6 percent on Monday. .BO RUPEE SWOONS The cost of insuring debt of State Bank of India ( SBI.NS ), a proxy for Indian sovereign debt, jumped on Monday to 14-month highs as the rupee plunged. Five-year credit default swaps (CDS) on SBI traded at 351 basis points, a 45 bps rise from Friday's close, data provider Markit said. Continued dollar demand by banks and oil refiners contributed to the rupee's latest fall, dealers said. Some dealers expect further dollar selling by the Reserve Bank of India (RBI) as well as other measures to support the currency. On Monday, however, traders said they did not see any noticeable central bank dollar selling. Traders seemed unconvinced about the efficacy of steps unveiled last week to cut the current account deficit to 3.7 percent of GDP during the current fiscal year. "Forex intervention will continue by the central bank. Further measures are expected from the RBI but are unlikely to be effective. The rupee is expected to touch 63 in no time," said Param Sarma, chief executive at Brokerage NSP Forex. Finance Secretary Arvind Mayaram told Monday's Economic Times that the government was not looking for now to take further steps to tackle the rupee's fall, but wanted to see the impact of its recent measures. ( link.reuters.com/fub52v ) The rupee's tumble has fuelled expectations of more action from the RBI, which last week curbed outflows from companies and individuals, roiling stock and bond markets. YIELD SURGE The yield on India's 10-year benchmark government bond climbed as high as 9.26 percent, its highest since August 1, 2008, before the Lehman Brothers collapse. The RBI set a cutoff of 12.2370 percent on 28-day cash management bills on Monday. It had sold 35-day paper at 11.7056 pct last week. "The priority is clearly rupee management. Pressure will rise on the fiscal side with yields rising, but the government can compress expenditure later," said Anjali Verma, economist at PhillipCapital in Mumbai. Many economists believe the RBI's liquidity tightening will stay in place longer than initially expected, and many have cut their economic growth forecasts for the current fiscal year. India's economy grew at a decade-low 5 percent in the last fiscal year, and some economists now see little improvement on that in the current year, as political gridlock ahead of national elections due by May limits New Delhi's ability to enact structural reforms to attract long-term inflows. (Additional reporting by Umesh Desai in HONG KONG, Rajesh Kumar Singh in NEW DELHI, and Sujata Rao in LONDON; Editing by Tony Munroe and Nick Macfie )

Falcone agrees to industry ban in new SEC settlement

Mon Aug 19, 2013 6:49pm EDT

http://www.reuters.com/article/2013/08/19/us-sec-falcone-settlement-idUSBRE97I0VR20130819

NEW YORK - Hedge fund manager Philip Falcone agreed to a five-year ban from the financial industry and will admit wrongdoing to settle charges by the U.S. Securities and Exchange Commission that he improperly used money from his hedge fund and unfairly favored some of his investors, the SEC announced on Monday.

The ban would put at least a temporary end to Falcone's controversial career of managing investor money, which was notable for a dramatic rise and fall during and soon after the financial crisis. But it would not prevent him from serving as a director or officer of a public company. The new settlement agreement, which involves Falcone and his hedge fund Harbinger Capital, comes after the Commission rejected an earlier proposal because it was too lenient, lacking any admission of wrongdoing or a full industry ban. The new agreement also appeared to be the first to require a defendant to admit wrongdoing since new SEC Chairman Mary Jo White announced a much tougher policy that would require such admissions more often. The agreement must still be approved by a federal judge. "Falcone and Harbinger engaged in serious misconduct that harmed investors, and their admissions leave no doubt that they violated the federal securities laws," said Andrew Ceresney, Co-Director of the SEC's Division of Enforcement. "Falcone must now pay a heavy price for his misconduct by surrendering millions of dollars and being barred from the hedge fund industry." Falcone, 51, who made a hugely successful bet against the subprime mortgage market before getting hit by steep losses from a failed wireless startup, LightSquared Inc, said in a statement he was "pleased" to reach a settlement. "I believe putting these issues behind me now is the best course of action for me and our investors," he said. His fund Harbinger Capital, which once boasted assets under management of $26 billion, fell to around $3 billion earlier this year. The fund's current size could not immediately be ascertained. Falcone, whose rags-to-riches story took him from a poor upbringing in Minnesota to the trappings of wealth, including the purchase of a New York mansion once owned by former Penthouse Magazine publisher Bob Guccione, might have a tough time getting back into the industry. "This is a more traditional SEC settlement. It's far more comprehensive than what they had before," said C. Evan Stewart, a partner at Zuckerman Spaeder in New York. To reenter the business, Falcone would have to apply to the SEC for permission once the five years have passed. "That's an agency that has found him not a good person to be in charge of other people's money," Stewart said. "The likelihood that that's going to a change in five years, that's not automatic. There's a pretty high barrier to getting back in." The government asserted that, at the height of the financial crisis, when many of the fund's assets were tied up in the collapse of Lehman Brothers, Falcone let select investors get out while denying that opportunity to others. The SEC also claimed Falcone illegally loaned himself $113 million from the fund to pay his taxes, leaving investors unable to access their money. Falcone eventually repaid the loan. To settle the charges, Falcone will have to admit to having done what the SEC alleges he did. He will have to personally pay around $11.5 million in disgorgement and fines, while his hedge fund, Harbinger Capital, will pay $6.5 million, according to the SEC's announcement. BAN AND ADMISSION David Marder, a former assistant district administrator for the SEC in Boston, called Harbinger a "big deal" for lawyers seeking an indication of what cases will require admissions in the future. The policy of allowing defendants to neither admit nor deny wrongdoing came under scrutiny after U.S. District Judge Jed Rakoff rejected a $285 million settlement with Citigroup Inc based in part on the lack of admissions. During Falcone's five-year ban, he will be allowed to help meet redemption requests from Harbinger's investors under the supervision of an independent monitor. He will also be able to continue as chairman and chief executive of his publicly traded company, Harbinger Group Inc. However, his securities industry ban and admission of wrongdoing will likely prevent other public companies from choosing him for their boards. "He could still technically serve on the board of other public companies," said Mark Kornfeld, a partner at BakerHostetler. "In the short-term, most would expect companies to shy away from bringing him aboard." BOOM AND BUST At the height of his success, Falcone earned a 116 percent gain for Harbinger in 2007 betting against subprime mortgages. But Falcone struggled during the financial crisis, losing 22 percent in 2008 and telling investors on Christmas Eve that they would not be able to get their money out of the fund in order to stave off a rush of redemptions. A little more than a year ago, his hedge fund owned 96 percent of LightSquared, a venture that depended on government approval to build a high-speed, wireless network that tests eventually showed would risk interfering with the Global Positioning Systems. When the Federal Communications Commission failed to give final approval to the venture, LightSquared was forced to file for bankruptcy, which led to heavy losses at Harbinger in 2012. Falcone said of the settlement: "It will allow me to continue to focus on my permanent capital vehicles and maximizing the value of LightSquared for all stakeholders. I remain committed to managing Harbinger Capital's portfolio of investments for the benefit of our investors." (Reporting By Emily Flitter; Additional reporting by Katya Wachtel and Nate Raymond in New York and Svea Herbst-Bayliss in Boston; Editing by Andre Grenon )

Lilly defends blockbuster Alimta with unusual ammo

Mon Aug 19, 2013 2:01pm EDT

http://www.reuters.com/article/2013/08/19/us-lilly-teva-alimta-idUSBRE97I0R920130819

- Eli Lilly and Co, now facing one of the worst patent cliffs in its history, could find $15 billion in sorely needed relief if it beats the odds and wins a closely watched patent battle with generic drugmaker Teva Pharmaceutical Industries.

While a Lilly victory is not widely expected, a number of patent attorneys and industry analysts say the patent being challenged by Teva, beginning Monday in Indianapolis federal court, will pass legal muster. The U.S. Court of Appeals in Washington last summer upheld the validity of the basic patent on the chemical structure of Alimta, protecting Lilly's $2.6 billion-a-year lung cancer drug from generics until January 2017. The Indianapolis court will weigh the merits of a separate "method-of-use" patent on the way Alimta is administered. If the court upholds the patent, Lilly would be able to fend off generic alternatives to Alimta until 2022. The so-called '209 patent covers administration of two nutrients - folic acid and vitamin B12 - to patients before they receive Alimta, to prevent side effects of the drug. Alimta's package insert label instructs doctors to administer the nutrients prior to and during use of the medicine. For a generic to win approval, it usually has to copy the language of the branded drug's label, Ben Hsing, a partner in the law firm of Kaye Scholer in New York, said in a recent interview. But generics could have a hard time doing so because of Lilly's patented descriptions of the need to take the nutrients and how to do so, said Hsing, who last year successfully defended Roche Holding AG's Tarceva lung cancer drug from patent challenges by generic drugmaker Mylan Inc. "This is the first time I've heard of a company going down this route to defend a patent, by adding nutrients" to a drug regimen, said Les Funtleyder, a healthcare strategist at investment firm Poliwogg. "So the likely outcome of this case is not clear cut." The majority view, however, is that Teva will prevail over Lilly, according to Morningstar analyst Damien Conover, who said most method of use patents do not stand up in court. Generic drugmakers Teva and Fresenius SE & Co KGaA have challenged the validity of the '209 patent. The companies on Monday declined to comment on the case. Lilly has said it expects cheaper copycats to flood the market in 2017, after Alimta's basic patent lapses. But the drugmaker on Monday said it plans to vigorously defend the method-of-use patent. "We believe this patent is valid and enforceable and we are prepared to defend our intellectual property," said company spokesman Ed Sagabiel. "The significant scientific research that Lilly performed in support of the vitamin dosage regimen patent deserves intellectual property protection." Sagabiel declined to comment further, including whether Lilly had changed its view and now expects to prevail in the case. Lilly badly needs to hold onto whatever revenue it can, and to launch new products, to offset plunging sales of other drugs that have been hit by generics or soon will be. Its Zyprexa schizophrenia treatment, with one-time annual sales of $4.5 billion, lost patent protection in late 2011, and its current flagship product, $5 billion-a-year antidepressant Cymbalta, goes generic in December. Adding to the pain, copycat forms of its blockbuster Evista osteoporosis treatment are due to arrive in early 2014. Aside from assuring continued blockbuster sales of Alimta, a patent victory in Indianapolis would enable Lilly to use the drug as a calling card to introduce new cancer therapies to doctors, Funtleyder said, including a promising lung cancer medicine called necitumumab now in late-stage trials at Lilly. (Reporting by Ransdell Pierson; Editing by Steve Orlofsky) (This story was corrected to show in paragraph 13 that Lilly has not commented again on likely trial outcome)

Career Education settles New York probe of job placement rates

Mon Aug 19, 2013 6:07pm EDT

http://www.reuters.com/article/2013/08/19/us-careereducation-settlement-newyork-idUSBRE97I0XX20130819

- Career Education Corp has agreed to pay $10.25 million to settle a New York state probe in which the for-profit education company was accused of inflating job placement rates to attract prospective students to its schools.

The settlement was announced on Monday by Eric Schneiderman, the state's attorney general. New York accused Career Education of inflating job placement rates from 2009 through the spring of 2011, disclosing annual placement rates of 54.9 percent to 80.2 percent that should have instead been 24.1 percent to 64.1 percent. The settlement requires Career Education to make $9.25 million in restitution to students, pay a $1 million penalty, hire an independent company to verify placement rates for three years and change what employment qualifies as placements. Career Education did not admit or deny the state's findings, but Schneiderman said the Schaumberg, Illinois-based company fired several high-level managers involved in inflating placement rates and took steps to modify its practices. Mark Spencer, a spokesman for Career Education, said the settlement "closes an important chapter and allows us to move forward with a heightened focus on student outcomes, including our critically important job placement services." Career Education said it has more than 90 campuses serving roughly 57,600 students. The New York probe focused on activity at seven campuses and two online institutions. The state said Career Education inflated placement rates through such means as counting employment at one-day "health fairs," and the employment of criminal justice graduates in retail sales and data processing. It cited one example in which a criminal justice graduate who processed parking ticket data was credited as having obtained a "related field" placement because the graduate's duties involving dealing "with the courts." "Students pay thousands of dollars to for-profit colleges because they rightly believe education is the ticket to success in their careers," Schneiderman said in a statement. "That's why it's so unfortunate that this company exploited students' aspirations and published misleading information." In a regulatory filing this month, Career Education said other regulators, including Illinois' attorney general and the U.S. Securities and Exchange Commission, have inquired about its placement rate practices, and that it is cooperating. It also said it had set aside $10 million to cover a settlement with New York. Matt Mittenthal, a spokesman for Schneiderman, confirmed that the New York attorney general's office has open investigations of practices at other for-profit schools. (Reporting by Jonathan Stempel in New York; Editing by Bernard Orr and Dan Grebler)

Amplats to cut 7,000 South African jobs, union 'shocked'

Mon Aug 19, 2013 3:11pm EDT

http://www.reuters.com/article/2013/08/19/us-amplats-jobs-idUSBRE97I0MS20130819

JOHANNESBURG - Anglo American Platinum (Amplats) said it planned almost 7,000 job cuts at its South African operations including thousands of compulsory lay-offs, drawing an angry response from a labor union and raising the risk of renewed unrest at its mines.

Amplats ( AMSJ.J ), the world's top platinum producer and a unit of Anglo American ( AAL.L ), had aimed for 14,000 job cuts after posting its first loss last year, but lowered the target after a backlash from the government and the unions, which organized a series of strikes. After months of consultations with government officials and worker representatives, the company said 6,000 mining jobs would go and that "approximately 900 corporate and overhead employees will also be affected". The addition of white-collar job cuts might alleviate some criticism of the lay-off plan, since not only blue-collar workers would be affected. But at least one union saw the decision by Amplats as a betrayal, saying the company had committed only last week to avoiding forced lay-offs. "We are shocked. Our agreement with Amplats was to cut 3,000 jobs and those jobs would not be forced retrenchments but voluntary severance packages. This agreement was reached a week ago," said National Union of Mineworkers spokesman Lesiba Seshoka. A source familiar with the talks said about a third of the 6,000 cuts would be made via voluntary redundancy, retirement and redeployment. That means around 4,000 are likely to be laid off. The job cuts will lower production and may lend support to prices of platinum, used in emissions-capping catalytic converters in automobiles. The white metal's price has been depressed by poor global demand. "We are at a critical stage of the process and this restructuring will be a crucial step to enable us to return to profitability," said Amplats Chief Executive Chris Griffith. A month's notice period for the targeted employees will commence on September 1, said Griffith. Amplats has a high rate of employee turnover in its South African mines and the company may shed some jobs by not replacing departing miners. The issue of mining jobs is sensitive in South Africa ahead of elections next year and comes as companies and unions lock horns in the toughest ever talks over wages. Mining companies are struggling to cut costs to deal with a drop in metal prices, while an increasingly militant union movement is pushing hard for better pay and working conditions for miners. Officials from NUM's arch-rival, the Association of Mineworkers and Construction Union (AMCU), whose activists staged the strikes at Amplats mines this year, were not reachable for comment on the job cut plans. LABOUR UNREST More than 60 people have died in violent strikes in South Africa's platinum belt and gold regions since a bitter turf war between NUM and AMCU was taken from the shafts to the streets. NUM is a key ally of President Jacob Zuma's ruling African National Congress and the defection of tens of thousands of members to AMCU has meant a potential loss of votes, helping explain why the government has been keen to see a reduction in the number of job cuts at Amplats. Job losses may also be in the offing in the gold sector, where about half of the shafts are estimated to be losing money. Unions and boardrooms in the bullion industry are in wage talks and remain poles apart, with the NUM demanding pay hikes as large as 60 percent. A strike notice could be issued as early as this week if talks remain deadlocked. South Africa's black mine labor force is mostly semi-literate and drawn from rural, peasant areas far from the mine shafts. Those laid off will struggle to find a new livelihood in a country with an official jobless rate of around 25 percent, but which many analysts believe is over 40 percent. The process of cutting jobs at Amplats has dragged on for months and Monday's announcement looked like the company's final decision. But the unions are likely to resist, raising the prospect of more strikes and possible unrest. Amplats is aiming for annual production of 2.2 to 2.4 million ounces. Last year, the company produced 2.379 million ounces but output may well have been higher if not for strikes. (Additional reporting by Clara Ferreira-Marques in London; editing by Tom Pfeiffer )

Greek current account surplus widens in June, helped by tourism

Mon Aug 19, 2013 4:41am EDT

http://www.reuters.com/article/2013/08/19/us-greece-payments-idUSBRE97I08220130819

ATHENS - Greece's current account surplus widened in June, helped by a smaller trade gap and surging tourism receipts, the Bank of Greece ( BOGr.AT ) said on Monday.

The current account balance, a key measure of economic competitiveness, showed a surplus of 663 million euros ($884 million) from 73.1 million euros in the same month last year. Tourism receipts, the country's biggest money earner, rose 21 percent year-on-year to 1.59 billion euros in June. This brings total tourism receipts in the first half of the year to 3.32 billion euros, up 18 percent compared with the same period last year. (Reporting by Harry Papachristou)

China probe is latest legal headache for JPMorgan

Mon Aug 19, 2013 6:54pm EDT

http://www.reuters.com/article/2013/08/19/us-china-jpmorgan-hiring-idUSBRE97I0H620130819

NEW YORK - A federal bribery investigation into whether JPMorgan Chase & Co. ( JPM.N ) hired the children of key Chinese officials to help it win business is just the latest in a series of legal and regulatory headaches for Chief Executive Jamie Dimon.

Dimon piloted the bank through the financial crisis, but it is now facing at least a dozen investigations from federal agencies and state and foreign governments, including over the "London Whale" trading scandal that cost it more than $6.2 billion. In the latest probe, the Securities and Exchange Commission (SEC) is looking at whether the bank's Hong Kong office hired the children of powerful heads of state-owned companies in China with the express purpose of winning underwriting business and other contracts, a person familiar with the matter said. The SEC is questioning JPMorgan's relationships with at least two families in China that may have legitimate explanations, the source said. U.S. law does not stop companies from hiring politically well-connected executives. But hiring people in order to win business from relatives can be bribery, and the SEC is investigating JPMorgan's actions under the U.S. Foreign Corrupt Practices Act. SEC spokeswoman Florence Harmon declined to comment on the investigation. A Hong Kong-based spokeswoman for the bank declined to comment beyond what was in the bank's regulatory filings and said the bank was cooperating with probes. REGULATORY HEADACHES Whatever the outcome of the latest investigation, Dimon's time is increasingly being consumed by legal and regulatory matters. The Department of Justice is investigating whether the bank manipulated U.S. energy markets, the Wall Street Journal reported on Monday. Last month, the bank agreed to pay a $285 million penalty and give back $125 million of trading profits in a settlement with the Federal Energy Regulatory Commission for alleged power market manipulation. JPMorgan neither admitted nor denied violations. Federal prosecutors last week brought criminal charges against two former JPMorgan traders, accusing the pair of deliberately understating losses in the "Whale" scandal. The SEC is seeking an admission of wrongdoing from the bank in a parallel civil action, a rare step for the government agency. Earlier this month, the bank revealed that it was facing parallel criminal and civil probes by the U.S. Department of Justice in California into mortgage bonds that it sold before the financial crisis. Since 2011, the bank has been writing in its quarterly filings with regulators that it "is currently experiencing an unprecedented increase in regulation and supervision, and such changes could have a significant impact on how the firm conducts business." In its last quarter, JPMorgan estimated that it could have legal losses that are $6.8 billion beyond an undisclosed sum that it has already set aside to cover those charges. Wall Street analysts may be understating the extent of the bank's future litigation expenses, said independent analyst Charlie Peabody of Portales Partners. JPMorgan's annual litigation costs have been around $4.9 billion for each of the last two years, and Peabody expects the cost will be $1.5 billion to $2 billion over each of the next two quarters. On average Wall Street expects roughly $300 million to $500 million per quarter, he added. While major U.S. banks have faced a litany of probes since the financial crisis, Dimon has repeatedly griped in public about how regulations designed to prevent the next financial crisis are stifling banking and its ability to help the economy. A report from a U.S. Senate subcommittee described an episode where Dimon shouted at his then-chief financial officer for giving information to a regulator. The bank's board of directors has made it clear to the chairman and chief executive that he must improve his relationship with regulators, a source familiar with the matter told Reuters earlier this year. Even with heavy litigation costs, JPMorgan posted $21.28 billion of net income last year, its highest level ever even after it suffered from $6.2 billion of trading losses from the bad derivatives bets made by Bruno Iksil, the trader nicknamed the "London Whale." "ELEPHANT HUNTING" In the China case, the New York Times said that JPMorgan at one point hired Tang Xiaoning, the son of Tang Shuangning, chairman of the China Everbright Group, a state-controlled financial conglomerate. He also had been a Chinese banking regulator, the Times reported. After the younger Tang joined JPMorgan, the bank secured several important assignments from the Chinese conglomerate, including advising a subsidiary on a stock offering, according to the newspaper. Another matter the SEC is investigating is JPMorgan's hiring of Zhang Xixi, the daughter of a now-disgraced Chinese railway official. The bank went on to help advise the official's company, which builds railways for the Chinese government, on its plans to go public, the Times said. The bank has not been accused of wrongdoing, the New York Times said, citing a government document. There is no documentary evidence that Zhang Xixi or Tang Xiaoning were unqualified, but the SEC is checking whether the bank's Hong Kong office routinely won business from companies connected to its employees, the newspaper reported. Marie Cheung, a Hong Kong-based spokeswoman for the bank, said on Sunday that the bank had publicly disclosed the investigation in its quarterly regulatory filing earlier this month and was cooperating with regulators. The quarterly filing said that the SEC's enforcement division had requested "information and documents relating to, among other matters, the firm's employment of certain former employees in Hong Kong and its business relationships with certain clients". The practice of hiring politically connected bankers in China was widespread in the early to mid-2000s, when Wall Street firms engaged in so-called 'elephant hunting', a term used to describe the chasing of mandates to manage the multi-billion dollar stock offerings of the country's big state-owned enterprises. One of the more well-known China bankers from that era is Margaret Ren, the daughter-in-law of former Chinese Premier Zhao Ziyang, who has worked at several banks. Most major investment banks have employed a politically connected Chinese banker, whether a high level professional such as Ren or a college age associate, at some stage in the last decade. Many senior investment bankers in China now feel that the heyday for such underwriting contracts has passed, with far fewer jumbo state-owned company listings happening. But banks and private equity firms alike still prize connections to top decision makers. (Additional reporting by Michael Flaherty and Lawrence White in Asia, Tom Brown and Ian Simpson in the United States; Editing by Dan Wilchins , Peter Henderson , Alex Richardson and Ken Wills )

Indian rupee sags to record low despite government steps

Mon Aug 19, 2013 1:47am EDT

http://www.reuters.com/article/2013/08/19/us-india-markets-rupee-idUSBRE97I03T20130819

MUMBAI - The Indian rupee fell to a record low on Monday and looked poised for further losses, with a series of measures unveiled last week failing to stall its decline.

The currency fell as far as 62.46 to the dollar in early trade, breaching the previous low of 62.03 hit on Friday. Some dealers are expecting further dollar selling by the central bank as well as other measures to prop up a currency that is down 10.8 percent in 2013, making it the worst performer in emerging Asia. Traders seemed unconvinced about the efficacy of steps unveiled last week to contain the current account deficit at 3.7 percent of gross domestic product (GDP) during the current fiscal year, sharply lower than the record high 4.8 percent in the previous year. "Forex intervention will continue by the central bank. Further measures are expected from the RBI but are unlikely to be effective. The rupee is expected to touch 63 in no time," said Param Sarma, chief executive at Brokerage NSP Forex. The partially convertible rupee closed trading at 61.65/66 last week. Finance Secretary Arvind Mayaram told the Economic Times that the government was not looking for now at taking further steps to tackle the rupee's fall, but wanted to watch the impact of its recent measures. ( link.reuters.com/fub52v ) The rupee's tumble has fuelled expectations of more action from the Reserve Bank of India (RBI), which last week curbed outflows from companies and individuals, roiling stock and bond markets on Friday. Policymakers later stepped in to assuage nerves that the government was not looking at curbing foreign money outflows. "Our primary concern is that the policy authorities still don't 'get it' - thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions," Robert Prior-Wandesforde, an economist at Credit Suisse, wrote in a note on Monday. "If this remains the case, then a swift move to 65 against the U.S. dollar is probable, which in turn should help focus minds." The rupee has been the worst performer in Asia since late May, when the U.S. Federal Reserve first signaled that it may begin tapering its monetary stimulus this year, sparking an exodus of cheap money from emerging markets worldwide. "The panic is overdone. Foreign exchange reserves are more than adequate. We also think inflows would gradually start to come in while the RBI will also continue to intervene in the market," said Samir Lodha, managing director at QuantArt Market Solutions, a consultancy and brokerage in Mumbai. Net outflows from the bond and equity markets have totaled $11.4 billion since late May. The bond market has borne the brunt of the outflows, with foreigners taking out around $10 billion since May 22. Equity markets have remained relatively insulated with outflows from the cash market at less than $100 million on Friday, when the main stock benchmarks fell about 4 percent, the most in nearly two years. Heightened selling in equities could exacerbate the rupee's falls, dealers feared. Mumbai's main stock index .BSESN fell 1.2 percent on Monday. Traders in Hong Kong reported continued selling in Indian bank cash bonds as fast money increased short positions and increased protection buying widened credit default swap spreads. Analysts also are concerned about growing bad loans in the June-quarter earnings of lenders like State Bank of India as slowing economic growth spurs defaults by companies and individuals. State Bank of India at mid-315 basis points (bpd) has soared from end-May lows of 180 bps. Government bond yields remained at 21-month highs with the 10-year bond at 8.95 percent, up 7 bps. India will sell 110 billion rupees of cash management bills on Monday as part of the central bank's ongoing efforts to tighten cash. (Additional reporting by Swati Bhat in Mumbai and Umesh Desai in Hong Kong; Editing by Tony Munroe & Kim Coghill)

Australian bond traders suspect mystery buyer a central bank

Mon Aug 19, 2013 1:05am EDT

http://www.reuters.com/article/2013/08/19/us-australia-bonds-idUSBRE97I03620130819

SYDNEY - A mystery buyer outbid dozens of others at recent sales of Australian government bonds to snap up all the A$1.6 billion ($1.47 billion) on offer, in a highly unusual and expensive vote of confidence in the country's debt.

Dealers were unsure if it was the same buyer at each sale, but they suspected it was, raising the prospect that a foreign central bank or sovereign wealth fund was the unknown bidder. Traders reckoned the buyer, or buyers, would have to have deep pockets and a relaxed attitude to costs to outspend between 40 and 52 other bids in the auctions on July 16, July 31 and August 2. "It is very rare to see one buyer on three different tenders. It could be a central bank or sovereign wealth fund," said a bond trader at an Asian bank in Sydney. It would be a positive for the Australian dollar, and could be one reason it has rallied recently after several months of losses. The Aussie dollar was up at $0.9213 on Monday after bouncing from three-year lows under 89 cents touched just a couple of weeks ago. It would also be a vote of confidence in Australia's debt even as the Labor government has put back plans to return its budget to surplus and intends to borrow more. COST NOT A PRIORITY The last time an auction was taken by just one buyer was back in April 2008 and that had been for a much smaller amount. "To outbid everyone at an auction is an expensive way to build a portfolio," said a dealer at a local bank. "Clearly, cost was not an over-riding factor. Frankly, people are scratching their heads wondering why they would do it this way." Also puzzling was the eclectic range of debt purchased. Some A$700 million of both a 2017 and a 2027 issue along with A$200 million of a 2022 inflation-linked offer all went to a single bidder. On that evidence, dealers suspected a foreign central bank or sovereign wealth fund. Central banks have been active buyers of Australian dollars in recent years as part of their efforts to diversify currency reserves away from U.S. dollars and euro. Even institutions as financially conservative as the Swiss National Bank and Bundesbank have started adding Australian dollars to their reserves. The Australian Office of Financial Management (AOFM) this month increased its bond issuance target for the fiscal year to end June 2014 by A$10 billion to A$60 billion. Total debt on issue will now peak around A$370 billion by 2015/16, but that is still minor compared to many other major economies and one reason Australia has a triple A credit rating. Around 70 percent of government debt is currently held by offshore investors, down from a peak of 78 percent last year but a long way above the levels seen in the early 2000's. (Reporting by Wayne Cole; Editing by Simon Cameron-Moore )

Poles ready to shrug off shortest of European downturns

Mon Aug 19, 2013 5:38am EDT

http://www.reuters.com/article/2013/08/19/us-poland-economy-idUSBRE97I09K20130819

WARSAW - Only months after a stagnant winter marked the end of one of Europe's few recent economic success stories, financial experts are increasingly convinced Poland is mounting a robust recovery.

The question when the European Union's biggest eastern member stalled at the end of 2012 was whether a decade of growth after its entry to the bloc in 2004 had been a one-off honeymoon, or could be repeated. No doubt Poles are feeling the effect of the slowdown after a rise in joblessness and insecurity. Living standards still trail a long way behind those of their western neighbors, or even the Czech Republic. But all signs in Warsaw this week are that the conditions are in place for a gradual and sustainable revival. "The economy is still weak overall but there are green shoots now which we can say are firmly in place," said Peter Attard Montalto, emerging markets economist with Nomura in London. Profits and productivity gains had proven easy in the years after EU entry as a population used to low wages, cramped housing and the search for a cheap solution to every problem discovered new ideas like easily available consumer credit. Millions of Poles headed west to work - far more proportionally than any of their eastern European neighbors - and sent cash pouring back that has bought cars, built houses and bolstered small businesses. But many wondered how long the credit boom could run as cash-strapped Western banks cut back on funding for subsidiaries; whether Polish firms were capable of investing to compete with bigger companies in Germany and elsewhere; and how long labor costs would remain competitive as wage expectations rose. The answers on all those fronts are looking positive. Investment in longer-term and bigger scale projects both public and private has been strong throughout the boom and the results are beginning to show. Warsaw is finally well connected by road to Germany, the Czech Republic and the country's other major cities and - importantly for a population of 37 million in this year's heat wave - lake, mountain and coastal holiday resorts. Exports, whose long-term growth slowed after 2008, rose 6 percent in the first six months of 2013 compared to a year earlier, including a rise of 2 percent to other EU countries and some 22 percent to other emerging economies. Poland's government shied away from cutting as aggressively as some economists demanded in the early days after the 2008 financial crisis, and has now opted to allow this year's budget deficit to widen to help the recovery. State bank BGK has issued 2.7 billion zlotys ($863 million) of loan guarantees since mid-March, translating into 4.5 billion zlotys of new loans for companies. With private sector debt among the lowest in Europe at 78 percent of GDP, there is plenty of room left to grow. "Poland maintains an advantage over the region as the balance sheets of households and firms are improving," says Goldman Sachs economist Magdalena Polan. "The problem of foreign exchange mortgages is much less pronounced and we think that a recovery can be sustained with less risk than in more indebted or export-oriented countries of the region, like Hungary." BANKRUPTCIES Second quarter figures last week showed annual growth accelerated to 0.8 percent and economists and the central bank agree it will improve further in the second half of the year. But the slow down did not come without costs. Corporate bankruptcies are up by a third this year to their highest since the financial crisis of 2008 and unemployment is only just showing signs of stabilizing at around 13 percent. Ordinary Poles, used to a steady rise in living standards since the 1990s, are not happy and may well vote out Prime Minister Donald Tusk in a 2015 election. Opinion polls show his party has slipped behind the opposition. "All anyone seems to want to talk about is crisis. How much longer?" says 63-year old Pawel Sikorski, who runs maintenance on a housing cooperative on Warsaw's poorer eastern half. "Somehow there always seems to be money for them (bosses), there are bonuses, there are contracts for their friends. Just nothing for the ordinary man from whom they only want more every day." Yet it is that ability to swallow lower pay and the still large gap in living standards which is powering Polish companies' competitive strength. Mid-sized firms and producers of more sophisticated goods are growing, having raised investment by double digit percentages while times were good. Poznan-based firm Solaris said it sold more buses in Germany last year than any foreign supplier and the third most overall, as well as half of all those bought in Poland. "We know that sales this year will be higher," said chief financial officer Zbigniew Wlodarczak. "The rise (comes from) a combination of high quality and an attractive price, which allows us to place offers that win." (Editing by Toby Chopra)

Dutch economist accused of stalking Citi executive faces more charges

Mon Aug 19, 2013 2:29pm EDT

http://www.reuters.com/article/2013/08/19/us-citigroup-stalking-idUSBRE97I0TD20130819

NEW YORK - A Dutch economist faces additional criminal charges in New York for allegedly stalking Citigroup Inc's ( C.N ) global chief economist, Willem Buiter.

Heleen Mees, 44, was arraigned in New York City Criminal Court on Monday on an amended criminal complaint that contained further details of the alleged harassment. She had previously been charged in connection with the case in July, but prosecutors from the Manhattan district attorney's office added more charges on Monday. According to the amended complaint, Buiter told police Mees used a fake name to try to meet him at a hotel in Amsterdam in January, after trying to catch up with him at a Beijing hotel in 2010. All together, the revised complaint said, Mees sent Buiter more than 3,000 emails between November 7, 2009, and July 1, 2013. The emails ranged from the obscene to the threatening, Buiter told police. "I hope you die," read one email sent last September, according to the complaint. Another email allegedly contained pictures of dead birds. In a two-week stretch in May, Mees sent Buiter 55 sexually explicit emails, and between late May and late June Mees emailed him 68 times asking to meet for a drink, the complaint said. Mees now faces one count of menacing, two counts of stalking, four counts of aggravated harassment and one count of harassment, all misdemeanors. The most serious charges carry up to one year in prison. Mees' attorney, Ira London, was not immediately available to comment. Her previous court-appointed lawyer said at an earlier court appearance that Mees and Buiter had a "longstanding relationship," according to news reports. Mees' 2012 doctoral thesis, "Changing Fortunes: How China's Boom Caused the Financial Crisis," included the dedication, "For Willem." In the acknowledgements, Mees thanked Buiter for meeting with her in 2008 to discuss the paper. Buiter, 63, is married to Anne Sibert, an economics professor at the University of London, and has two children. He lives in New York. Mees is due back in court on October 24. (Editing by Dan Grebler)

Saks reports weak second-quarter sales, deeper loss

Mon Aug 19, 2013 8:34am EDT

http://www.reuters.com/article/2013/08/19/us-saks-results-idUSBRE97I0HA20130819

- Saks Inc SKS.N on Monday reported a deeper than expected second-quarter loss after disappointing sales of shoes and handbags forced the luxury retailer to mark down prices.

Saks, which last month reached a deal to be bought by Canada's Hudson's Bay Co ( HBC.TO ), reported same-store sales rose 1.5 percent, well below the 4.5 percent rise Wall Street analysts had expected. Saks becomes the latest U.S. retailer across the price spectrum to report mediocre sales: last week Macy's Inc ( M.N ), Nordstrom Inc ( JWN.N ), Kohl's Corp ( KSS.N ) and Wal-Mart Stores Inc ( WMT.N ) all reported lower than expected sales. Overall sales rose 0.5 percent to $707.8 million for the quarter. Saks was scheduled to report its earnings on Tuesday. The company said it will not hold its regularly scheduled call because of its pending acquisition by Hudson's Bay. Saks' gross margin fell because it had built up too much inventory of men's and women's shoes and handbags and had to slash prices to clear unsold merchandise. For the quarter ended August 3, Saks had a net loss of $19.6 million, or 13 cents a share, compared with a net loss of $12.3 million, or 8 cents a share, a year earlier. Excluding costs including expenses related to store closings and the Hudson's Bay deal, Saks lost 10 cents per share, 2 cents worse than expected. (Reporting by Phil Wahba in New York; Editing by Gerald E. McCormick)

China central bank chief says sees no big changes to policy: TV

Mon Aug 19, 2013 12:22am EDT

http://www.reuters.com/article/2013/08/19/us-china-cbank-zhou-idUSBRE97I02Q20130819

BEIJING - China's central bank governor said the country would fine-tune its prudent monetary policy stance in the rest of the year if needed, but does not expect any big adjustments to be made.

Zhou Xiaochuan said in an interview with China's official television station that the government is making plans to relax controls on deposit rates. Zhou also said China hopes the yuan would rise or fall within a range to reflect rising market forces in currency trading. (Reporting by Aileen Wang, Langi Chiang and Koh Gui Qing; Editing by Kim Coghill)

Key Euribor rate steady as ECB rate cut hopes dim

Mon Aug 19, 2013 5:18am EDT

http://www.reuters.com/article/2013/08/19/us-markets-euribor-idUSBRE97I09220130819

FRANKFURT - The key Euribor bank-to-bank lending rate held steady on Monday as expectations of an ECB interest rate cut faded after data last week showed the euro zone exited recession in the second quarter.

Stronger growth in the euro zone's two largest economies, Germany and France, helped the currency bloc emerge from its longest recession to date in the April-June period, supporting the European Central Bank's expectation for a fragile recovery. The improved economic outlook has led to a rise in short-term money market rates, as investors see less reason for the euro zone's central bank to cut interest rates from their record low of 0.50 percent any time soon. Money markets are pricing out expectations of another ECB rate cut. On Monday, the three-month Euribor rate, traditionally the main gauge of unsecured bank-to-bank lending, was unchanged for the third session running at 0.226 percent. The six-month Euribor rate was also unchanged, at 0.342 percent, while the one-week rate stayed at 0.101 percent. The overnight Eonia rate edged up to 0.078 percent from 0.077 percent. Dollar-priced bank-to-bank Euribor lending rates were mixed, with three-month rates dipping to 0.49833 percent from 0.50000 percent and one-week rates unchanged at 0.30333 percent. Excess liquidity in the euro zone banking sector stood at 258 billion euros, still high enough to keep short-term market rates below the ECB's refinancing rate. The ECB said in its July monthly bulletin that as long as excess liquidity "remains above a certain threshold, estimated to be in the range of 100 billion to 200 billion euros, short-term money market rates are expected to stay slightly above the deposit rate". The ECB's main refi rate is at 0.5 percent and the deposit rate at zero. (Reporting by Frankfurt newsroom; Editing by Catherine Evans )

Greek tourism receipts surge in June, boosts hopes for season

Mon Aug 19, 2013 5:50am EDT

http://www.reuters.com/article/2013/08/19/us-greece-payments-idUSBRE97I09V20130819

ATHENS - Spending by tourists in Greece surged in June, central bank data showed on Monday, confirming forecasts that a record summer season could give the debt-laden country a welcome injection of foreign cash.

With domestic spending, investment and industrial production all in an austerity-driven slump, spending by foreign visitors is becoming the only growth driver for Greece's economy, which is expected to shrink 4.2 percent this year. Tourism receipts, the country's biggest foreign-currency driver, rose 21 percent year-on-year to 1.59 billion euros in June, the first month of Greece's busy summer holiday season. That brings total tourism receipts in the first half of the year to 3.32 billion euros, Bank of Greece figures showed, up 18 percent compared with the same period last year, when fears of a Greek euro zone exit kept tourists away. The local tourism industry is currently forecasting a 10 percent rise in tourism receipts for the full year to 11 billion euros from a record 17 million visitors. Hoteliers, restaurant owners and tourism businesses have slashed prices and upgraded services to weather the crisis and lure more visitors. A better mix of visitors - including those who stay longer and spend more on average, like Russian tourists - is also helping. The number of Russian visitors, who usually spend more than Germans or Britons, has risen 34 percent, official figures for the January to May period showed. As a result of surging tourism receipts, Greece's current account surplus widened in June to 663 million euros ($884 million) from 73.1 million euros in the same month last year, the Bank of Greece said. ($1 = 0.7500 euros) (Reporting by Harry Papachristou)

Wall Street bankers brace for bonus cuts

Fri Aug 1, 2008 7:40pm EDT

http://www.reuters.com/article/2008/08/01/us-wallstreet-bonuses-idUSN0137386920080801

NEW YORK - Bankers and traders are bracing for sharply reduced bonuses amid one of the worst downturns ever -- and they will be the lucky ones.

With more than 75,000 jobs already cut and more than $400 billion of credit losses, the proverbial blood is flowing on Wall Street. And while there are still four to five months left in the year, annual bonuses representing the bulk of Wall Street pay are expected to fall by 30 to 40 percent, recruiters and compensation experts said. Given the environment, there may be little choice but to accept the cuts and hope for a 2009 rebound. "It's clearly a buyers' market," said Robert Sloan, head of the U.S. financial services recruiting practice at Egon Zehnder International. "The assumption going into this year is you can take your base salary or severance. That's the choice. There's a resignation in the market." Wall Street firms typically pay out about half their revenue as compensation. Based on performance so far this year, a period that saw Bear Stearns fall off the map, payouts are poised to fall hard. Morgan Stanley ( MS.N ) last month said its first-half revenue fell 28 percent, and the funds set aside for compensation dropped at the same rate to $7.03 billion. Goldman Sachs ( GS.N ) revenue fell 22 percent, with the compensation pool down 23 percent to $8.5 billion. Last week, New York state officials estimated total bonus payments from the nation's financial hub would plunge 20 percent, removing billions of dollars from the tax rolls. "Things have been bleak," said Brent Longnecker, chief executive of Longnecker & Associates, a compensation firm. FROM ZERO TO $40 MILLION Actual payouts will span the range from zero to healthy increases. Some executives are refusing bonuses, notably Lehman Brothers LEH.N Chief Executive Richard Fuld and President Herbert "Bart" McDade. Others will still strike it rich. Former Goldman star Thomas Montag, who starts work at Merrill Lynch on Monday as head of sales and trading, will receive a guaranteed $40 million for five months work. Meanwhile some firms are building up certain businesses even as they hand out pink slips at others. Morgan Stanley this week said it will redeploy some of the $1 billion of savings from 4,800 job cuts to recruit top executives. Goldman Sachs says its headcount will rise by low single digit percentages, despite slashing 10 percent earlier this year, fueled by expansion in fast growing markets outside New York. But these are exceptions. "Right now we see the volume of opportunistic hiring is also reduced," Sloan said. Compensation experts also said that with firms eager to conserve cash while holding on to key employees, a bigger slice of bonuses will be paid out in restricted shares. Banks, moreover, are asking for longer hold periods -- for three or five years. That said, last year actual bonuses proved higher than predicted as many firms paid up to avoid losing top bankers and traders, mindful of past downturns when markets quickly snapped back. Yet U.S. housing prices remain under pressure and the credit crisis continues to spread. Many Wall Street executives say the current downturn is far worse than other recent slumps, including the post-Internet bubble period of 2002 and 2003. So until profits do bounce back, banks and their employees will be playing defense. "It's a cyclical business," said Adam Zoia, managing partner of Glocap Search. "And the key thing during a downturn is keeping your job." (Editing by Tim Dobbyn )

GM July sales drop 27 percent as buyers shun trucks

Fri Aug 1, 2008 2:55pm EDT

http://www.reuters.com/article/2008/08/01/us-usa-autosales-gm-idUSN0135577320080801

DETROIT - General Motors Corp. on Friday reported a 27 percent drop in U.S. sales in July as high gas prices, tight credit and a shift away from light trucks produced results for the month below Wall Street expectations.

Adjusting for the two extra selling days last month compared with the same month a year earlier, GM reported a sales decline of 32 percent. Analysts had expected GM sales to decline on that adjusted basis of between 22 percent and 27 percent for July. GM sales of light trucks in July dropped 40 percent while car sales fell 19 percent on an adjusted basis. GM extended a range of sales incentives in the month, including zero-percent financing, but said competitors including Nissan Motor had been more aggressive in discounting light trucks in a slack market. The weak sales results for GM came on the same day that GM posted a $15.5 billion loss for the second quarter. GM said that its vehicle inventory had fallen to a three-year low in July at 747,000 vehicles in stock. That inventory level was down 21 percent from the same month a year earlier. (Reporting by Poornima Gupta ; Editing by Steve Orlofsky)

Car industry gloom descends on GM, BMW, Nissan

Fri Aug 1, 2008 7:30pm EDT

http://www.reuters.com/article/2008/08/01/us-autos-idUSL166453420080801

FRANKFURT/DETROIT - The meltdown in the global car industry claimed more victims on Friday as General Motors lost another $15.5 billion, BMW warned on profits and Nissan earnings missed expectations by a wide margin.

General Motor Corp's ( GM.N ) quarterly loss -- the third largest in its 100-year history -- came as its North American sales fell 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business. The No. 1 U.S. automaker also burned through $3.6 billion in cash in the quarter, refocusing investor attention on whether GM can complete a rushed restructuring before its cash and available credit runs down. nN01288721 Germany's BMW AG ( BMWG.DE ), the world's biggest premium carmaker, said it would miss its 2008 targets after a 44 percent plunge in quarterly pretax profit. "Business conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the U.S. dollar, the impact of the international financial crisis and a weaker U.S. economy," BMW said. Nissan Motor Co ( 7201.T ), Japan's No.3 automaker controlled by Renault SA ( RENA.PA ), posted a much worse-than-expected 46 percent drop in quarterly operating profit. It stuck to annual forecasts for its lowest operating profit in seven years. On Friday, the world's automakers reported a 13.2 percent drop in U.S. auto sales in July as an uncertain U.S. economy bludgeoned manufacturers in the largest and most lucrative auto market. It was the ninth consecutive month of declining sales in the U.S. market -- the first time that has happened since the last U.S. recession seven years ago -- and the worst showing since April 1992. nN01496226 The roiling U.S. market has also made leasing an issue for U.S.-based automakers. Chrysler's financial arm has stopped supporting leasing in the United States, while GM and Ford Motor Co ( F.N ) have pared those programs in favor of adding retail incentives. MORE RISK AHEAD Because of that pullback and tighter credit, auto executives and analysts say the industry may be battered by double-digit sales declines in coming months and cannot forecast an end to the slide. The economic contagion is spreading to other markets, leading to a decline in Europe of nearly 8 percent last month. U.S.-based GM, Ford and Chrysler have taken a deeper hit from the shift toward cars than transplant automakers have in the United States because of their greater focus on trucks. However, few have been spared. Ford reported a record $8.7 billion quarterly loss in late July and even reliable outperformer Toyota Motor Corp ( 7203.T ) has slashed sales targets. Renault has backed away from its 2009 profit forecast, Honda Motor Co Ltd ( 7267.T ) trimmed its expectations and Daimler AG ( DAIGn.DE ) sharply marked down its 2008 guidance. Privately held Chrysler disclosed some financial figures on Friday to quell concerns about its financial strength. Chrysler said its finance arm had successfully negotiated the framework for a refinancing of $30 billion in working capital and the automaker's operating cash flow kept it "well ahead of plan." Chrysler, acquired by Cerberus Capital Management CBS.UL from Daimler a year ago, said it ended June with $11.7 billion in cash and earned $1.1 billion in the first half of 2008 before interest, tax, depreciation and amortization. BMW, which had been widely expected to lower its 2008 targets after Mercedes-Benz parent Daimler's warning last week, dashed hopes for a quick rebound the following year. "We assume that 2009 will be another difficult year full of challenges," Chief Executive Norbert Reithofer said. BMW now expects the growing raw materials bill this year to make a further 400 million euro dent in profit as prices for steel, metals and plastics continue to rise. Nissan's vehicle sales grew 6.9 percent in the first quarter thanks to brisk sales of the Qashqai crossover and Versa subcompact. But Nissan, like many of its rivals, is being forced to reduce light truck production amid flagging demand. Underscoring the severity of the U.S. market, Nissan this week said it would offer buyouts at two plants in Tennessee in the hope of eliminating 1,200 workers, about a fifth of its head count. It is operating far below capacity in North America as sales of pickups and other big vehicles slump. (Additional reporting by David Bailey in Detroit and Chang-Ran Kim in Tokyo; editing by Will Waterman, Sue Thomas and Andre Grenon ) (michael.shields@thomsonreuters.com, Reuters Messaging: michael.shields.reuters.com@reuters.net; +49 69 7565 1266)) ($1=.6423 Euro) ($1=107.58 Yen)

FDA caution seen with Schering drug denial

Fri Aug 1, 2008 5:27pm EDT

http://www.reuters.com/article/2008/08/01/us-scheringplough-bridion-fda-idUSN0145661420080801

WASHINGTON - The unusual rejection of an experimental drug that had unanimous support from outside experts signals further caution by the U.S. Food and Drug Administration and increased uncertainty for investors.

The FDA's surprising refusal on Friday to approve Schering-Plough Corp's SGP.N Bridion, for reversing the effects of anesthesia, is the latest negative decision that has jolted Wall Street. Schering-Plough -- shares of which fell as much as 8.6 percent after the company announced the FDA's rejection -- said the agency cited safety concerns in its decision. Meanwhile, European officials approved the drug earlier this week. Bridion's rejection is "just the latest example of the agency's inexplicable behavior," said analyst Ira Loss of Washington Analysis. "A legitimate question can be posed to FDA management: Is the fear of future congressional or press oversight so great that there is no one with the courage to approve a product that was unanimously endorsed by an advisory committee and approved in Europe earlier this week?" Loss said. The FDA has been stung by criticism for its handling of serious side effects from Merck & Co's ( MRK.N ) arthritis pill Vioxx, pulled from the market in 2004, plus controversies surrounding antidepressants and other widely used drugs. Consumer groups and lawmakers have pushed the FDA to look more closely at potential side effects to better protect the public from medicines that are too risky. Drug company executives complain, however, that attacks from critics have made the FDA too nervous to approve drugs with acceptable side effects. For example, Merck's cholesterol drug Cordaptive has been approved in Europe under another name but was rejected by the FDA. GlaxoSmithKline's cervical cancer vaccine is cleared in Europe but the FDA has delayed a final ruling. Eli Lilly & Co's ( LLY.N ) long-acting form of schizophrenia drug Zyprexa also received a near-unanimous FDA panel recommendation in February. All panelists said the drug was safe and effective, except for one who abstained on the safety vote. The FDA rejected the drug two weeks later. The FDA "has become increasingly unpredictable," Sanford Bernstein analyst Tim Anderson said in a research note. Over the past two years, roughly 50 percent of FDA review decisions for big drugmakers have had worse-than-expected outcomes, JP Morgan analyst Chris Schott said, adding that he does not expect the trend to improve in the near term. The Bridion decision is "yet another incidence of the high level of FDA conservatism," Schott said in a research note. Bridion, known generically as sugammadex, seemed likely to win approval after an FDA panel of outside advisers unanimously ruled the drug was safe and effective in March. The FDA typically approves medicines with panel endorsements, particularly unanimous ones. The agency also had given Bridion a priority review, a designation reserved for drugs meant to address an unmet medical need. Schering-Plough said the FDA cited concerns about "hypersensitivity/allergic reactions." The advisory panel heard data on the issue and was comfortable the drug could be used safely in a hospital where any reactions could be managed, Loss said. FDA spokeswoman Susan Cruzan declined to comment about Bridion on Friday, saying the agency could not speak publicly about products that are not approved. She said, however, that "FDA's standards for what constitutes a safe, effective drug have not changed. We haven't raised the bar for drug approvals." Agency officials make independent, final decisions after carefully weighing advisory panel recommendations, Cruzan said. Rulings "are based on factors beyond those addressed by the advisory committees," she said. Loss and others analysts see high hurdles continuing at the FDA at least until a new U.S. president takes office next year and appoints an agency leader that could change direction. The chances of "a more rational and timely approval process occurring before the election, and before there is new effective leadership at the top of the agency, is zero," Loss said. (Reporting by Lisa Richwine; Additional reporting by Susan Heavey ; Editing by Gerald E. McCormick and Carol Bishopric)

Jobless rate highest in 4 years, payrolls drop

Fri Aug 1, 2008 4:58pm EDT

http://www.reuters.com/article/2008/08/01/us-usa-economy-jobs-idUSN3133083420080801

WASHINGTON - The U.S. unemployment rate hit its highest in four years during July as employers cut jobs for a seventh straight month, though less severely than predicted, a Labor Department report showed on Friday.

The rising toll of job losses and plunging new-car sales in July fueled worry that a recession may be unavoidable and helped drive stock prices lower again. The jobless rate climbed to 5.7 percent from 5.5 percent in June as 51,000 jobs were eliminated in July, bringing losses for the year to 463,000. Economists had expected 75,000 jobs would be cut last month but had forecast the unemployment rate would rise only to 5.6 percent. In a separate report, the Institute for Supply Management said manufacturing activity held steady in July and noted some moderation in inflation pressures. Its index of national factory activity slipped a bit to 50 from 50.2 in June -- with 50 being the dividing line between expansion and contraction. "If you look at ISM and the unemployment number together, it suggests an economy that is, at best, stuck in neutral," said Subodh Kumar, chief investment strategist with Subodh Kumar & Associates in Toronto. Stock prices dropped, with the Dow Jones industrial average off 51 points to end at 11,326 and the Nasdaq Composite Index down 14 points to 2,310. Prices for U.S. Treasury debt securities rose moderately as investors sought safer haven. In an interview with Reuters, U.S. Commerce Secretary Carlos Gutierrez said economic stimulus payments that are being sent out to qualifying Americans should bolster the economy but wouldn't predict when more jobs would be created. JOB PICTURE CLOUDED "I won't speculate," he said. "But we are forecasting continued growth in the economy for the back half of the year and it will be that growth that will determine a return to job creation." But consumers, whose purchases fuel two-thirds of national output, appeared to be frightened by soaring energy and other costs and by tightening credit conditions. Sales of new cars by General Motors Corp. plummeted 27 percent in July from year-earlier levels, Ford Motor Co. sales fell 15 percent and Toyota Motor Corp. was off 12 percent. GM lost a staggering $15.5 billion in the second quarter. In St. Petersburg, Florida, Democratic presidential candidate Barack Obama called for new measures, including $25 billion of spending on infrastructure projects like roads. "With job losses mounting, prices rising, increased turbulence in our financial system, a growing credit crunch, we need to do more," Obama said at a town hall meeting. The Labor Department trimmed estimates for job losses in both May and June. It said a total of 26,000 fewer jobs were lost in the two months than previously thought. Policy-makers at the Federal Reserve meet next week and are expected to keep official interest rates unchanged as they weigh concerns about economic weakness against worries about bubbling price pressures. Brian Gendreau, an investment strategist with ING Investment Management Americas in New York, described monthly job losses as "painful" and consistent with a weak economy. "We are clearly in a growth recession and my fear is that we are in a mild, but longer recession than the one we experienced in 2001-2002," Gendreau said. HOUSING SLIDE CONTINUES The unexpectedly steep climb in the unemployment rate underlines how a deterioration in the housing sector continues to chill economic growth. The last time the jobless rate was higher was in March 2004, when it hit 5.8 percent. While July's job loss was not as bad as feared, it did not change the picture of an economy that is basically treading water, analysts said. "Overall the report looks to be broadly consistent with other data that show the economy quite soft, basically stalled, not growing very much, but not contracting very much either," said David Resler, chief economist for Nomura Securities International in New York. The report showed 16-to-24 year olds facing particular difficulty in trying to nail down summer jobs, a factor that helped push up the overall unemployment rate. In addition, the average workweek slipped to 33.6 hours, the lowest since November 2004, from 33.7 hours in June, a further suggestion of economic weakness. July job losses were widespread. The only major sectors showing any gains were government, hospitality, and education and health services. Construction industries shed another 22,000 employees and factories cut 35,000 jobs. A Commerce Department report on June construction spending underlined the continuing slide in building that is dragging employment lower in the construction sector, with spending falling a steeper-than-expected 0.4 percent. (Additional reporting by Burton Frierson and Chris Reese in New York, Patrick Rucker in Washington and John Whitesides in St. Petersburg; Editing by Neil Stempleman ) ((glenn.somerville@thomsonreuters.com; +1-202-898-8377; Reuters Messaging: glenn.somerville.reuters.com@reuters.net)

GM's Q2-ending cash better than forecast: CFO

Fri Aug 1, 2008 9:38am EDT

http://www.reuters.com/article/2008/08/01/us-gm-cfo-idUSN0128661620080801

DETROIT - General Motors Co's cash at the end of the second quarter was a little better than forecast and its liquidity remains in "a very strong position," Chief Financial Officer Ray Young said on Friday.

GM, which posted a $15.5 billion net loss for the quarter amid the downturn in the North American auto sector, had a negative cash flow of about $3.6 billion in the second quarter. The automaker's decision to draw down some inventory resulted in an overstatement of negative cash flow in the quarter, Young told reporters. GM had $21 billion of cash and $5 billion of available credit at the end of the quarter. "In reality, the $21 billion is a little better than I thought when we made the forecast," Young told reporters. GM ended the second-quarter with inventory well below 800,000 units, and 800,000 units is a reasonable amount of inventory in the current market, Young said. GM will defend its U.S. market share "on a profitable basis," Young said, adding that maintaining a 21 percent market share in the United State over the next three years would be "realistic." Young said GM remains committed to leasing in the United States, albeit at lower levels with some cash incentives and retail financing offers to reduce the impact on sales. GM announced plans in mid July to make $10 billion of cost cuts, plus asset sales and new borrowing to shore up its liquidity through the U.S. industry downturn. Some of those cuts include 20 percent of salaried expenses. Young said GM was focused on percentage costs rather than specific head-count figures, but that a 15 percent reduction in salaried workers would probably be about accurate. "From my perspective, we are going to get the second quarter behind us and just move ahead with our restructuring and liquidity plans that we announced over the last 60 days," Young said. (Reporting by Kevin Krolicki and David Bailey ; Editing by Derek Caney and Steve Orlofsky)

GM posts $15.5 billion loss as sales sputter

Fri Aug 1, 2008 7:30pm EDT

http://www.reuters.com/article/2008/08/01/us-gm-idUSN0128872120080801

DETROIT - General Motors Corp ( GM.N ) reported a $15.5 billion quarterly loss on Friday as North American sales dropped by 20 percent and resale prices for SUVs coming off lease plunged.

GM shares fell as much as 11 percent in reaction to the automaker's announcement of the much bigger-than-expected quarterly loss, the third-largest in its 100-year history. The No. 1 U.S. automaker burned through $3.6 billion in cash in the quarter as it cut factory output by 27 percent in response to an accelerating downturn in its home market that has hammered sales of its trucks and SUVs. GM executives declined to say how much cash the automaker expects to burn in the second half of this year but said the company needs a minimum of $11 billion to $14 billion to run its global operations. GM ended the second quarter with $21 billion in cash and $5 billion in undrawn credit. It has since drawn down a revolving loan facility by $1 billion. "GM does not face imminent liquidity concerns but we think will need to raise liquidity over the next 12 to 18 months," J.P. Morgan analyst Himanshu Patel said in a note. GM has said it has the cash needed through 2009 even assuming industry-wide U.S. auto sales drop by some 13 percent this year and hold flat next year, as many analysts now expect. Chief Financial Officer Ray Young said GM is on track to free up $15 billion in liquidity with cost-cutting, asset sales and new borrowing under a July plan intended to assure investors that the automaker can ride out the downturn. "The second-half cash flows are fully baked into our plan," Young said on a conference call. But after losses of $51 billion over three years and a drop in its share price to 54-year lows, GM is exposed to the risk of a further slowdown in the U.S. market, analysts said. GM sales figures for July, released after earnings, showed that the market slide gathered momentum at the start the current quarter. July sales dropped 27 percent from a year earlier compared with a 16 percent decline in the first half. "There is a long list of things they need to do," Calyon Securities analyst Mark Warnsman said. "It is all about managing for cash at this point." LOSS DEEPER THAN ESTIMATES GM's net loss was equal to $27.33 per share, compared with a profit of $891 million, or $1.56 per share, a year earlier, reflecting a sharp drop in demand for the light trucks that represent about 60 percent of its sales. The company took $9.1 billion in charges, including $4.4 billion for restructuring and buyouts of U.S. factory workers and $2.8 billion for its exposure to bankrupt former parts unit Delphi Corp DPHIQ.PK. GM also wrote down $1.3 billion of its equity interest in GMAC, its former finance unit. Revenue fell to $38.2 billion from $46.7 billion. Excluding charges, GM lost $11.21 per share. That was more than four times the $2.67 a share that Wall Street analysts expected, as tracked by Reuters Estimates. GM's global auto sales dropped 5 percent and it lost $4 billion on its auto operations before charges as record gas prices sank demand for trucks and SUVs. GM, like rival Ford Motor Co ( F.N ), incurred large losses for light-truck and SUV leases. Under lease contracts, automakers and their finance companies rent vehicles to consumers and sell the used vehicles at wholesale auctions when the leases expire. But the drop in demand for SUVs this year has been accompanied by a plunge in their resale value by 25 percent and more as consumers flock to more fuel-efficient passenger cars. GM said declining lease values at GMAC depressed its second-quarter results by nearly $2 billion. Shares of GM were down almost 6 percent at $10.46 in afternoon trading and remain down 55 percent since the start of the year. The shares bounced back from a 54-year low of $8.82 in mid-July after the automaker outlined its plans to raise liquidity. But credit markets have priced in deeper risks for GM over the same period. GM bonds traded at record lows of less than 50 cents on the dollar on Friday after Standard & Poor's cut its rating on GM and said it expected it to burn through $16 billion in cash this year. The cost to insure GM's debt against default jumped to record highs. Five-year credit default swaps on GM's debt jumped to 41.5 percent of the sum insured, from 38.35 percent on Wednesday, plus annual premiums of 5 percentage points, according to Markit Intraday. About 90 percent of the 19,000 GM factory workers who took buyouts had left the GM's payroll by the second quarter. But GM will face charges this quarter from a just-launched buyout program intended to cut about 5,000 white-collar jobs. Tim Ghriskey, chief investment officer with Solaris Asset Management, said GM's cash burn could deepen if the economy worsens but said the automaker was showing a new urgency. "The Detroit automakers have had their heads in the sand for a long time, but they seem to have pulled them out now and are reacting and reacting quickly," Ghriskey said. (Additional reporting by Poornima Gupta , Ben Klayman in Chicago) (Reporting by Kevin Krolicki; Editing by Dave Zimmerman and Steve Orlofsky)

Pratt & Whitney to pay $52 mln to settle DOJ case

Fri Aug 1, 2008 6:55pm EDT

http://www.reuters.com/article/2008/08/01/us-unitedtech-settlement-idUSN0130568020080801

WASHINGTON - United Technologies Corp's ( UTX.N ) Pratt & Whitney unit and its supplier will pay $52 million to settle allegations they knowingly sold defective parts for military fighter jets, the U.S. Department of Justice said on Friday.

The case centered on turbine blade replacements for jet engines designed by Pratt & Whitney and used in twin-engine F-15s and single-engine F-16s operated by the U.S. Air Force. The blades, cast by a subcontractor, a unit of Precision Castparts Corp ( PCP.N ), had a defect that caused the crash of an F-16 fighter jet in Arizona in 2003, the Justice Department said in a statement. The pilot ejected safely. Pratt & Whitney will pay $45.5 million and provide $4.8 million in services reinspecting engine blades bought by the Air Force, the statement said. Precision Castparts will pay $2 million. Both companies previously took corrective action, which the government valued at $47.1 million. The Air Force had not identified any future safety concerns, the department said. Jay DeFrank, a spokesman for Pratt & Whitney, said the company believed the Justice Department allegations were unfounded but agreed to a settlement to avoid "lengthy and protracted litigation with an important customer." He stressed that the settlement was not an admission of liability, adding, "Pratt & Whitney took voluntary and immediate actions to remedy a problem suffered by our customer. We do not agree with the DOJ allegations." DeFrank said the company voluntarily provided 54,000 replacement blades to the Air Force and 42,000 blades to other customers as soon as the problem was identified. The company also inspected tens of thousands of parts to ensure that none of the estimated 3,000 engines in the field were at risk. Separately, the U.S. District Court for the Southern District of Ohio ruled on Friday that Pratt & Whitney must pay a $7 million fine for submitting inflated cost estimates on Air Force orders dating back to 1985 through 1990. The court said the company did not have to pay $624 million in damages sought by the federal government in its lawsuit dating back to 1999 since the U.S. Air Force never actually paid the higher charges. "Pratt & Whitney is reviewing the opinion carefully and hopes this decision will bring an end to almost nine years of litigation over events that occurred almost 25 years ago," DeFrank said. He said he was unaware of any current Justice Department investigations involving Pratt & Whitney. Last summer, the company encountered problems with engine blades it is building for the Short Takeoff Vertical Landing version of the Lockheed Martin Corp ( LMT.N ) F-35 Joint Strike Fighter, but it has developed a remedy. DeFrank said the company and the F-35 program office were preparing for a series of ground engine tests ahead of a flight test in the fourth quarter of 2008. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn )

Chrysler says near $30 bln refinancing deal

Fri Aug 1, 2008 6:54pm EDT

http://www.reuters.com/article/2008/08/01/us-chrysler-idUSN0132312320080801

DETROIT - Chrysler LLC said on Friday its finance arm had successfully negotiated the framework for a refinancing of $30 billion in working capital as the automaker posted operating cash flow that put it "well ahead of plan."

The company, which has released limited financial data since Cerberus Capital Management bought it from Daimler AG ( DAIGn.DE ) a year ago, said it ended June with $11.7 billion in cash and had earnings before interest, tax, depreciation and amortization of $1.1 billion in the first half of the year. Chief Financial Officer Ron Kolka disclosed the two cash-based financial measures in a surprise statement after the automaker reported a 29 percent sales drop in July sales. Chrysler said it considered its performance to be strong, given the pressure on the industry. "False speculation is rumbling around about our company and instead of letting other people define us...(we) decided to release some data," vice chairman and sales chief Jim Press told reporters. "And as you could see, it's pretty damm good." Chief Executive Bob Nardelli, in a memo to employees, said Chrysler was able to generate cash more easily as a private company through sale of non-earning assets. "This enhances our ongoing operational improvement efforts, enabling us to continue to invest in new products as we work to reduce our fixed costs, inventory and working capital," he said in the memo, which was released to the media. Nardelli also said the automaker was looking to boost its car line-up through internal development and partnerships. FACING SCRUTINY Chrysler is in talks with India's Tata Motors Ltd ( TAMO.BO ) and Italy's Fiat ( FIA.MI ) as it seeks to raise cash and open doors to faster-growing markets outside the United States, sources have told Reuters. Kolka said Chrysler Financial, the automaker's financing affiliate, was nearing completion of a deal to refinance about $30 billion in debt backed by auto loans and leases. A decision by Chrysler Financial to suspend lease financing, a risky form of vehicle financing that has saddled Chrysler's U.S. rivals with large losses, was a positive move in negotiations with bank creditors, Kolka said. "The general credit crunch and the sensitivity of the credit markets made banks very skeptical of buying lease portfolios," he told reporters. "We could have done it if we had wanted it but we would have paid a high price." "At the end of the day, the cost of funds will be going up in the conduit (financing) renewal because of the current environment," he added. "Anyone issuing new debt today, the cost of funds is going to go up." Like its larger competitors General Motors Corp ( GM.N ) and Ford Motor Co ( F.N ), Chrysler has faced scrutiny over its cash position and its ability to ride out a downturn in U.S. auto sales that many analysts expect to stretch through 2009. Chrysler said its $11.7 billion in cash holdings as of the end of June included $2.3 billion in restricted cash. The positive operating cash flow reported by Chrysler contrasts with that of GM, which burned through over $7 billion in cash during the first-half. All three U.S. automakers were hit hard by the sharp decline in sales of pickup trucks, SUVs and vans that followed the rise in gas prices. (Reporting by Kevin Krolicki ; Editing by Toni Reinhold and Ted Kerr )

UK's FSA finds no sign of HBOS share manipulation

Fri Aug 1, 2008 6:44am EDT

http://www.reuters.com/article/2008/08/01/us-fsa-hbos-idUSL139914320080801

LONDON - Britain's financial watchdog has found no evidence that illegal dealing was behind an abrupt fall in the shares of mortgage lender HBOS HBOS.L in March, but warned it would not relax its surveillance of the market.

Britain's biggest provider of home loans saw its shares abruptly plunge more than 17 percent to a record low on March 19 following a flurry of rumors in a market unsettled by the weekend rescue of U.S. bank Bear Stearns. The drop prompted an unusual intervention by British regulators, still smarting from criticism of their failures over Northern Rock, who vowed they would probe the share price moves. In its report concluded on Friday, however, the Financial Services Authority said it had not been able to show how much impact the rumors had, given broader worries on the day, and said it had not uncovered evidence they were spread as part of a concerted effort to manipulate the share price. "Despite the likelihood that the rumors contributed to the fall in the share price, the FSA has not uncovered evidence that they were spread as part of a concerted attempt by individuals to profit by manipulating the share price," it said. The failure to uncover a "smoking gun" is likely to prompt fresh criticism of the FSA's ability to prosecute high-profile cases that may involve insider dealing and market abuse, despite a hardened stance on financial crime. The FSA said it spoke to "a number" of market participants at banks, broker dealers and hedge funds, scrutinized trading records and reviewed emails and messages during its probe. "There is no doubt that false and damaging rumors were circulating about HBOS on 19 March 2008 and these would have had some impact on HBOS' share price," the watchdog said in a statement. "It is difficult, however, to say how much impact, as the share price was also affected by the interaction of a number of other complex factors on the day." These included a lack of liquidity and the effect of algorithmic trading strategies which amplified the drop. The FSA warned, however, that it would continue to react quickly to market abuse, even if it does not always uncover evidence and if probes do not lead to fines or prosecution. It said firms or individuals found to have benefited from rumors would have to provide immediate access to traders, information, trading strategies as well as email, messaging and telephone records. The FSA is separately reviewing companies' systems and controls for dealing with rumors. The results of that investigation are due in the early autumn. (Reporting by Clara Ferreira-Marques ; editing by Elaine Hardcastle)

U.S. woes halve Nissan Q1 but outlook unchanged

Fri Aug 1, 2008 7:50am EDT

http://www.reuters.com/article/2008/08/01/us-nissan-idUST16709820080801

TOKYO - Nissan Motor Co ( 7201.T ) posted a much-worse-than-expected 46 percent drop in quarterly operating profit on Friday due to a severe downturn in the U.S. market, but stuck to its annual forecasts, counting on a weaker yen.

Nissan, controlled by Renault SA ( RENA.PA ), is already forecasting its lowest operating profit in seven years due to a weaker dollar, high raw material prices and sinking U.S. demand. Analysts think a downward revision will follow eventually, as a sales slowdown in the United States, Nissan's biggest market, has deepened in recent months due to a collapse in demand for gas-guzzling vehicles. That forced Nissan, Japan's No.3 automaker, to take a provision of 42 billion yen ($390 million) in the April-June quarter as resale values slide for vehicles in its leasing business. Leasing accounts for just over one-fifth of Nissan's U.S. sales volume. Nissan's first-quarter operating profit fell to 79.95 billion yen, against an average estimate of 101.9 billion yen in a Reuters poll of nine brokerages. Net profit fell 43 percent to 52.8 billion yen on revenues of 2.347 trillion yen, down 4.1 percent. "This really isn't very good," said Takeshi Osawa, a senior fund manager at Norinchukin Zenkyoren Asset Management. "And given the way the market is at present -- responding very quickly to bad news -- it is likely to spark (share) selling," he said, adding that the chance of a profit warning would likely rise as the year progresses. Mitsushige Akino, chief fund manager for Ichiyoshi Investment Management, said he expected a downward revision in the annual outlook in three months' time. "The market in North America is difficult, and unless there are huge changes in oil prices or exchange rates, it's only going to get more difficult," he said. "I was expecting a downward revision from Nissan, so I was slightly surprised." For the year to the end of March 2009, Nissan kept its forecast for an operating profit of 550 billion yen and net profit of 340 billion yen, both down 30 percent from last year. It kept its assumptions for the dollar and euro to average 100 yen and 155 yen this year, against current rates of around 107 yen and 167 yen. Nissan says every 1 yen change in the dollar affects its operating profit by 14.5 billion yen. Consensus forecasts from 18 brokerages call for an operating profit of 586 billion yen and net profit of 364 billion yen. RESIDUAL VALUE -- NEW INDUSTRY HEADACHE In the past few months, the resale value of big, used cars has fallen as consumers seek fuel efficiency, dropping by as much as 30 percent in the latest quarter from the year before. About 30 percent of Nissan's U.S. sales are in light trucks. Even rival Honda Motor Co ( 7267.T ), whose model line-up is dominated by smaller cars, last week set aside an additional allowance of 25 billion yen this year on such writedowns. "A further decline of used vehicle values in the United States remains a risk, but so far a weaker-than-assumed yen exceeds that comfortably so we're keeping our forecasts intact," Corporate Vice President Joji Tagawa told a news conference. Plunging resale prices for light trucks such as SUVs prompted Chrysler LLC's CBS.UL decision last week to stop offering vehicle leases -- which rely on a healthy resale value for a vehicle when a lease ends to make a profit. Bigger rival Ford Motor Co ( F.N ) took a $2.1 billion charge for its finance company when it reported second-quarter results, while General Motors Corp's ( GM.N ) finance arm took a $716 million write-down on North American vehicle leases. Chief Executive Carlos Ghosn last week forecast U.S. industry sales of 14.3 million vehicles in 2008, the lowest level in more than a decade. Global vehicle sales grew 6.9 percent in the first quarter thanks to brisk sales of the Qashqai compact SUV, known as the Dualis in some markets, and the launch of new models, including the Livina series. But Nissan, like many of its rivals, faces falling demand for gas-guzzling vehicles and has been forced to significantly reduce production of light trucks. Underscoring the severity of the U.S. market, Nissan this week said it would seek to axe 1,200 workers at two plants in Tennessee, about one-fifth of its headcount. It is operating far below capacity in North America as sales of pickups and other big vehicles slump. Shares of Nissan have fallen 32 percent in the year to date, worse than Tokyo's transport sub-index .ITEQP.T, which has lost 21 percent. Before the results, Nissan ended down 1.4 percent at 828 yen. ($1=107.75 Yen) (Additional reporting by Elaine Lies and Mari Saito ; Editing by Michael Watson )

Jobs drop alone not enough to say recession: BLS

Fri Aug 1, 2008 12:43pm EDT

http://www.reuters.com/article/2008/08/01/us-usa-economy-jobs-bls-idUSN0146215520080801

WASHINGTON - The U.S. economy is not strong enough to support job growth, but this year's drop in employment is not enough on its own to prove a recession, the head of the Bureau of Labor Statistics said on Friday.

"I hesitate to say ... recession ... because there are so many other things that are important in that," BLS Commissioner Keith Hall told the congressional Joint Economic Committee, citing industrial output and income among those other factors. But he added, "It certainly means that economic growth is not strong enough to support job growth. (It is) not a strong labor market." Asked if the government data pointed to recession, Hall said, "The best I can say is that (in) the last two recessions we had eight months of job loss." Earlier on Friday, BLS -- the statistical arm of the Labor Department -- said U.S. nonfarm payrolls fell for a seventh straight month in July. "It is important that we had job loss for so many months in a row. It is important. It hasn't been as severe (as past recessions) -- but it is job loss," he said. "While it is true that job loss is centered in construction and construction related, weakness is fairly broad," Hall said. A diffusion index contained in the report showed only 41.2 percent of the 274 industries gauged increased payrolls in July, the lowest since August 2003. (Reporting by Melissa Bland; Editing by Andrea Ricci )

Timeline: The credit crunch of 2007/2008

Fri Aug 1, 2008 10:48am EDT

http://www.reuters.com/article/2008/08/01/us-crunch-timeline-idUSL155564520080801

LONDON - Credit market turmoil has hammered the global banking system, forced asset writedowns of more than a third of a trillion dollars to date, squeezed lending everywhere and initiated a sharp slowing of the world economy.

Reuters News is producing a package of stories analyzing the impact of the credit crunch on consumers, policymakers and investors around the world. To view the stories, accompanying pictures and graphics via the Web, double click on the following link: here Below is a timeline of events. -- * Q4, 2006 - U.S. housing market slows after two years of rising official interest rates. Delinquency rates on U.S. subprime mortgages rise, leading to wave of bankruptcies at subprime lenders. Interest rate premia on Collateralised Debt Obligations, repackaged bonds and loans which included subprime mortgage debt, jump sharply in December 2006 and January 2007. -- * Feb 8, 2007 - HSBC says more funds will have to be set aside to cover bad debts in U.S. subprime lending portfolios. California's New Century Financial Corp -- the third largest U.S. subprime lender -- said it expected Q4 2006 loss. Spreads on non-investment grade tranches of home equity CDOs widen more than 200 basis points in two days that follow. -- * June 6 - European Central Bank raises key interest rates by a quarter point to 4.0 percent. -- * June 20 - Two hedge funds managed by U.S. investment bank Bear Stearns announce losses after making bad bets on securities backed by subprime loans. They sell $4 billion of assets to cover investor redemptions and expected margin calls. Merrill Lynch sells off assets seized from the funds. -- * July 5 - Bank of England raises key interest rates by a quarter percentage point to 5.75 percent. -- * July 10 - Credit ratings firm Standard & Poor's said it may cut ratings on some $12 billion of subprime debt. U.S. firms Home Depot ( HD.N ) and D.R. Horton ( DHI.N ) issue warnings about housing market. Credit spreads soar by full percentage point in 6 weeks from record low of 188 basis points hit on June 1. -- * July 17 - Bear Stearns says two hedge funds with subprime exposure have very little value; credit spreads soar. Two days later, S&P slashes ratings on some top-rated mortgage bonds by eight notches. -- * July 30 - German bank IKB IKB.DE cuts earnings targets for 2007/08, citing losses linked to U.S. subprime. Credit spreads balloon to record highs above 500 basis points. -- * Aug 7 - U.S. Federal Reserve leaves interest rates at 5.25 percent, saying economic growth remains moderate despite tighter credit conditions and that inflation remains its main concern. -- * Aug 9 - European Central Bank adds 94.8 billion euros of one-day funds to money markets as interbank lending seizes up amid concern about banks subprime exposure and surging overnight borrowing rates. ECB move comes after French bank BNP Paribas froze $2.2 billion worth of funds, citing subprime problems. Fed and Bank of Canada also add liquidity to their banking systems. Germany's Bundesbank organizes meeting to rescue IKB. German regulators say they are looking into $17.5 billion funding vehicle of German state bank SachsenLB, raising concerns about bank conduits and bank-sponsored structured investment vehicles heavily dependent on short-term finance. -- * Aug 17 - Fed surprises markets by cutting discount rate for direct loans to banks by half a percentage point to 5.75 percent, citing downside risks to growth from tightening credit. SachsenLB said German savings banks provide credit facility of 17.3 billion euros to secure liquidity of its Ormond Quay conduit. -- * Aug 21 - Britain's Barclays Bank ( BARC.L ) borrows 314 million pounds from Bank of England's standing lending facility, the first use of that penalty rate facility since credit crisis began. Barclays taps central bank for emergency funds of some 1.6 billion pounds for a second time on August 30, citing a technical hitch in UK clearing system. -- * Sept 6 - ECB leaves interest rates at 4.0 percent, widely seen as postponement of rate rise it had signaled in August. -- * Sept 13 - British mortgage lender Northern Rock NRK.L seeks emergency financial support from the BoE, according to TV news reports. Report and its confirmation spark a run on bank's deposits by worried savers in days that follow. -- * Sept 17 - British finance minister Alistair Darling says UK government will guarantee all deposits at Northern Rock. -- * Sept 18 - U.S. Fed cuts its key Federal funds target rate and discount rate by half a percentage point to 4.75 percent and 5.25 percent respectively, saying the cuts were a pre-emptive move to neutralize the impact of the financial market turmoil. -- * Sept 24/25 - International Monetary Fund says sustained tightening of credit will slow the world economy. -- * Sept 27 - ECB announces it lent out 3.9 billion euros ($5.5 billion) at its penalty rate of 5 percent on Sept 26 but it declined to say which bank or banks needed the funds. -- * Oct 1 - Swiss bank UBS AG ( UBSN.VX ) said it would write down $3.4 billion of assets and record its first quarterly loss in nine years. Citigroup ( C.N ) said it expected third-quarter net income to fall by about 60 percent. -- * Oct 15 - Bank of America ( BAC.N ), Citigroup ( C.N ) and JPMorgan Chase & Co ( JPM.N ) float plans to set up a fund aimed at pooling assets from stressed SIVs and preventing a fire sale of these assets undermining credit markets further. After months of discussion the plan never gets off the ground. Separately, Citigroup announces $6.5 billion of losses and writedowns on subprime-related debt and leveraged loans in Q3, registering its largest quarterly profit decline in three years. -- * Oct 24 - Merrill Lynch MER.N announces $8.4 billion of losses and writedowns in CDOs, subprime and leveraged loans in Q3 -- leading to biggest quarterly loss in the firm's history and the exit of Chief Executive Stan O'Neal on October 30. -- * Oct 31 - Fed cuts key Fed funds target and discount rates by quarter percentage point each to 4.5 percent and 5.0 percent respectively, saying economy to slow as housing weakens further. -- * Nov 4 - Citigroup announces further $8-11 billion of writedowns. Charles Prince resigns as Chief Executive. -- * Nov 5 - Fitch says it may cut the AAA credit ratings of bond insurers, raising concern such action could trigger a wave of downgrades of some of the $2.5 trillion of bonds they insure. --

Clorox cuts fiscal-year earnings forecast

Fri Aug 1, 2008 11:36am EDT

http://www.reuters.com/article/2008/08/01/us-clorox-idUSN0142711420080801

CHICAGO - Clorox Co ( CLX.N ) cut its earnings forecast for the current fiscal year on Friday, saying commodity and energy costs will be higher than expected.

The outlook came even as the maker of Clorox bleach, Glad plastic bags and Hidden Valley salad dressing said price increases and cost-cutting measures helped it post earnings for the fourth quarter ended June 30 that beat analysts' expectations. For fiscal 2009, the company now expects earnings of $3.60 to $3.75 a share, saying that rising commodity and energy costs would offset the benefits of cost cutting and price increases. In May, the company forecast $3.75 to $3.90 a share. Fourth-quarter profit fell to $158 million, or $1.13 a share, from $164 million, or $1.07 a share, a year earlier, when there were about 14 million more shares outstanding. Analysts on average had forecast $1.10 a share, according to Reuters Estimates. Earlier this month, Clorox said earnings would come in at $1.10 to $1.13. Sales rose 11 percent to $1.5 billion. Clorox shares were up 31 cents at $54.81 in early New York Stock Exchange trade. (Reporting by Brad Dorfman ; Editing by Gerald E. McCormick and Lisa Von Ahn)

Ex-NBC Universal bookkeeper pleads guilty to fraud

Fri Aug 1, 2008 5:55pm EDT

http://www.reuters.com/article/2008/08/01/us-nbcuniversal-fraud-idUSN0145672820080801

NEW YORK - A former bookkeeper at NBC Universal pleaded guilty on Friday to participating in a scheme to steal more than $1 million that he and his boss were accused of using for personal expenses, including a summer rental home.

The plea comes several months after a guilty plea by the man's supervisor, former NBC Universal treasurer Victor Jung, who was charged in January 2007 with taking part in the scheme to steal from the media conglomerate. James Walsh, 35, who was not named as a defendant in the original case, pleaded guilty to one count of conspiracy and one count of wire fraud at a hearing in U.S. Magistrate's Court in Manhattan. According to a superseding indictment in the Jung case filed by prosecutors in May, Jung and an unidentified co-conspirator engaged in a scheme to embezzle funds from the media company. A lawyer for Walsh, Douglas Grover, said after Friday's hearing that Walsh was the person named as the unidentified co-conspirator in the May court papers. Walsh left the General Electric Co-owned media company in 2006, his lawyer said. In court on Friday, Walsh said he helped his boss carry out the fraud, which began in 2005. He admitted to knowingly causing a $238,450 illegal wire transfer in April 2006 from a GE account to a checking account for a dummy company that, according to court documents, had been set up by Jung. Walsh told Magistrate Judge Theodore Katz he kept some of the money from the scheme to pay down credit card loans and other personal expenses. According to the May indictment, Jung and his unidentified co-conspirator used the stolen money to pay about $40,000 in fees for a summer rental home in Southampton, New York, as well as for a birthday party that Jung threw for Walsh. The indictment said Jung, along with others who were not identified, also used some of the money to fly by private jet to Miami, Antigua and the Turks and Caicos Islands. An NBC Universal representative declined to comment on the case. According to sentencing guidelines, Walsh could get a prison term of 21 months to 27 months when he is sentenced. His sentencing date was set for November 4. Jung pleaded guilty in May to one count of conspiracy and three counts of wire fraud. He is also due to be sentenced in November, according to court filings. (Editing by Andre Grenon , Toni Reinhold )

Volatility looms as eyes on profits, Fed, oil

Fri Aug 1, 2008 6:57pm EDT

http://www.reuters.com/article/2008/08/01/us-column-stocks-outlook-idUSN0146124520080801

NEW YORK - Wall Street could be in for more volatility next week as investors brace for a new batch of key earnings reports and the U.S. Federal Reserve's assessment of the economy.

A slightly positive but extremely mixed bag of corporate earnings so far, coupled with choppy oil prices, has had the market on a roller-coaster ride. After General Motors' ( GM.N ) $15.5 billion second-quarter loss soured the stock market on Friday, investors are now putting their hopes on upcoming results from tech bellwether Cisco Systems ( CSCO.O ), consumer products maker Procter & Gamble ( PG.N ) and insurer American International Group ( AIG.N ), which are all due to report on Tuesday. If the earnings show further weakness on the consumer side and deterioration in the broader economy, Wall Street could falter. Oil could also be a major headwind amid growing tensions over Iran's nuclear work. "We're still only two-thirds of the way through earnings season, so people will be focused on that," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co in Lake Oswego, Oregon. "Generally, investors have felt relieved that the earnings have continued to be better than expected, realizing of course that the bar had been set awfully low." Despite a mildly positive earnings picture, Wall Street was largely unable to advance during the past week, and remained not so far away from multi-year lows hit in mid-July. The Dow Jones industrial average .DJI ended Friday with weekly losses of 0.4 percent, while the S&P 500 .SPX edged up 0.2 percent and the Nasdaq .IXIC finished the week flat. Even if earnings bring some relief, investors will be on edge as concerns about the impact of the credit crisis on the economy persist, especially after a government report on Friday showed U.S. unemployment rose to 5.7 percent in July, its highest rate in four years, as employers cut 51,000 non-farm payroll jobs. The spotlight will fall on the Fed's statement that will accompany its policy-makers' decision on interest rates on Tuesday. After Fed policy-makers voiced concerns about inflation at their last meeting, the statement will take on added importance with oil prices remaining volatile. The bleak jobs report for July, along with a lower-than-expected second-quarter U.S. gross domestic product reading, have helped cement views that the Fed will keep benchmark lending rates steady at 2 percent for several months. Short-term interest rate futures, which measure market sentiment toward Fed policy, were little changed in the wake of the jobs report. "We have the Fed meeting but I am not expecting any big reaction to that. I think the market is going to stay in a fairly well constrained trading range and is going to move up and down with daily movements in oil," Dickson said. OIL A WILD CARD Even with oil prices significantly below their all-time high above $147 per barrel, they continue to be a wild card as geopolitical tensions remain high in the Middle East. On Friday, Israeli Deputy Prime Minister Shaul Mofaz said Iran will have the option to reach uranium production at military levels as soon as 2010. Iran has until Saturday to respond to an offer by major powers on its nuclear program, but European diplomats say they are ready to wait a few more days beyond that informal deadline for an answer. Markets are concerned about a potential confrontation that could disrupt supply from the OPEC nation. U.S. crude oil prices closed Friday at $125.10 per barrel, up $1.02. Also on investors' radar will be the financial sector, which appeared more stable during the past few days after U.S. officials acted to stabilize the market on Wednesday, extending liquidity offerings to stressed banks and securities. "If you look at the financials, they have been surprisingly strong despite the volatility in the market. You see Citigroup getting its act together and certainly Merrill doing house cleaning," said Tom Hepner, investment adviser at Ruggie Wealth Management in Tavares, in Florida. The benchmark KBW index of banks .BKX closed the week with gains of 6.4 percent. (Wall St Week Ahead runs weekly. Questions or comments on this one can be e-mailed to: walter.brandimarte@thomsonreuters.com) (Additional reporting by Ellis Mnyandu and Steven C. Johnson ; Editing by Leslie Adler)

U.S. jobs woes add to global factories gloom

Fri Aug 1, 2008 3:28pm EDT

http://www.reuters.com/article/2008/08/01/us-economy-global-idUSL134839920080801

NEW YORK/LONDON - Factories are struggling in countries ranging from China to Europe to the United States, while U.S. unemployment hit a four-year high, raising concerns that economies around the globe could slip into recession, according to data released on Friday.

In the United States, the world's largest economy, the jobless rate jumped to 5.7 percent in July as employers cut jobs for the seventh straight month, which is likely to weaken U.S. consumers' appetite for global goods. This could deepen the fall in demand already hurting manufacturers around the world, which are also struggling with high commodities prices. It also puts central banks in a bind over interest rates as they worry about the opposing problems of elevated inflation and low growth. Reports from China, the euro zone, Germany, Britain and Sweden pointed to a rapid slowdown that is leaving few unscathed a year after the start of a credit crunch, which still has world markets in its clutches. In Europe, where some of its most fragile economies like Italy and Spain are flirting with recession, surveys of manufacturing companies published on Friday suggested that tougher times lay ahead. "There is a risk that the euro zone could fall into recession," said Juergen Michels, an economist with Citigroup in London. Even China, the world's fourth-largest economy that has been booming for years, saw manufacturing activity stumble in July. The Institute for Supply Management said U.S. factory activity managed to hold steady last month, a decent achievement given the economic headwinds. But there were signs that weakness in the global economy could be starting to hurt exports, one of the few bright spots for the United States this year. "If you look at ISM and the unemployment number together, it suggests an economy that is, at best, stuck in neutral," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto. Stocks were lower on Wall Street and ended down in Europe and Tokyo. The dollar gained against the euro. U.S. government bonds were mixed. INACTIVE Global manufacturing activity slipped to its lowest level in over five years in July, dragged down by sharp falls in Britain, the euro zone and Japan, while prices soared to record highs, a survey showed. The JP Morgan Global Manufacturing PMI, compiled with research and supply management organizations, fell to 49.0 in July from 49.5, its lowest level in over five years. It was the second month in a row that the index remained below the 50.0 mark dividing growth from contraction. China's manufacturing sector contracted in July for the first time since the 2005 launch of an official monthly survey, an indication that weaker exports are taking a toll on the economy. President Hu Jintao said sustaining strong growth is now an economic priority -- along with containing price rises, which until now has been the Chinese authorities' central concern through years of double-digit economic growth. Major central banks this week extended programs to inject cash into money markets, but the European Central Bank and the Bank of England, as well as the U.S. Federal Reserve are not expected to shift interest rate policy any time soon. The Chinese authorities, which many times last year hiked interest rates to slow an overheating economy, on Friday raised banks' lending quotas by 5 percent in a move to prop up the economy. In Britain, which has been struggling with the early stages of a property market bust, rapidly slowing growth and soaring inflation, policy-makers were dealt perhaps the worst possible combination of data from the manufacturing sector on Friday. Activity contracted at its fastest pace in a decade while factories ramped up their prices at the fastest pace since the CIPS/Markit monthly survey began recording them during the boom times of late 1999. "Recession here we come!" quipped Alan Clarke, UK economist at BNP Paribas. Even in Germany, where the country's traditionally strong export sector has proved surprisingly resilient in the face of the record high euro currency, domestic demand appears to be falling away and will not be able to prop up growth if exports flounder. German June retail sales fell a sharp 2.8 percent on the month according to Bundesbank figures. In Scandinavia, the Swedish economy did not grow at all in the second quarter, confounding forecasts for a modest 0.3 percent expansion and throwing two more expected interest rate hikes from the Riksbank into question. The Swedish manufacturing PMI also registered contraction for the first time since 2003. (With reporting by bureaus in Asia, Europe and North America; Editing by Leslie Adler)

INSTANT VIEW: Jobless rate highest in 4 yrs in July

Fri Aug 1, 2008 9:20am EDT

http://www.reuters.com/article/2008/08/01/us-usa-economy-payrolls-idUSN0143607820080801

NEW YORK - The U.S. unemployment rate climbed to 5.7 percent in July, its highest in more than four years as employers cut payrolls for a seventh month in a row, though less severely than predicted, according to a government report in Friday.

KEY POINTS: * The Labor Department said 51,000 non-farm jobs were eliminated in July, bringing losses for the year to 463,000. * Analysts polled by Reuters had expected the 75,000 jobs to be cut last month but had forecast the unemployment rate would rise only to 5.6 percent. * The unemployment rate in June was 5.5 percent. * The department revised its estimates for job losses in each of May and June. * It said 47,000 jobs were cut in May instead of 62,000 and 51,000 in June rather than 62,000 - a total 26,000 fewer jobs lost in the two months than previously thought. COMMENTS: CARL LANTZ, U.S. INTEREST RATE STRATEGIST, CREDIT SUISSE, NEW YORK: "It looks like we have this continued pattern where more people are coming into the labor market looking for work. "For any given household people who weren't at work before are now working to try to make up the gap in income, so you had a 213,000 rise in the labor force. "It's a bit of a mixed bag. On the margin it's probably a little better than what the markets had feared going into it, but it's not a slam-dunk positive by any means. "We're still in this limbo. The Fed can't ease, the Fed can't hike." DOUG ROBERTS, CHIEF INVESTMENT STRATEGIST, CHANNEL CAPITAL RESEARCH, SHREWSBURY, NEW JERSEY: "Wall Street breathed a sigh of relief because the employment news was bad, but not terrible. The July data were a mixed bag. The non-farm payrolls figures were better than expected and the revision to the prior month was better than expected, but the unemployment rate rose. That's why you're seeing the S&P rallying. "We're on a roller coaster right now but people are afraid of a crash. This report reassures us that the employment situation is bad, but not about to careen out of control and crash. The job market won't get better for a while. Recessions don't tend to be as dramatic because the manufacturing base has gone offshore so you don't get those massive layoffs in manufacturing. The flip side is you're not going to have the dramatic upticks either. These shifts tend to be prolonged." DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR'S, NEW YORK: "It's sort of a mixed bag. The payroll numbers were a little bit better than expected, they were only down 51,000. But on the other hand the unemployment rate shot up to 5.7 percent, which is worse than anticipated. "We were little surprised last month because the labor force participation rate dropped, and I think what this indicates that was a bit of a fluke, and it came back this time. A lot of the decline last time was in teenagers, and that's the unemployment rate that really shot up this time. That was up 2.2 points. I think that was just a fluke caused probably by seasonal adjustment issues. They couldn't find a job, they dropped out of the labor force... (Unemployment rate) "It's a high number, we're above the historical average slightly. By itself, the actual level is not that big a deal, but it's up 1.3 points from where it was at the bottom. We've never had that big an increase where it wasn't called a recession. "My opinion remains the same. We're in a recession. It's going to be a mild recession one but a long one." MARC PADO, U.S. MARKET STRATEGIST, CANTOR FITZGERALD & CO., SAN FRANCISCO: "People really thought the non-farm payrolls number was going to be bad number. You're bouncing back in equity futures from the fact that the number wasn't as bad. "So not only was the latest number 20-25,000 better-than-expected but the prior two months were revised up. So it's not a good number but it's not as bad as expected." FERGAL SMITH, MANAGING MARKET STRATEGIST, ACTION ECONOMICS, TORONTO: "We're pretty close to expectations. The market was bracing itself for an ugly number. The dollar rallied on the data because we didn't get a steep decline in payrolls as had been forecasted. For the dollar, it will be technical for the rest of the day. If $1.5518 (for EUR/USD) is broken, we'll probably see further strength in the U.S. dollar." BRIAN GENDREAU, INVESTMENT STRATEGIST, ING INVESTMENT MANAGEMENT AMERICAS, NEW YORK: "This is exactly in line with the weak U.S. economy. While we aren't seeing a loss of 200,000 or 300,000 in layoffs, we never really saw corporations go on a hiring binge either. We are clearly in a growth recession and my fear is that we are in a mild, but longer recession than the one we experienced in 2001-2002. This figure might not be as weak as expected but it is still painful. I don't think this will change anyone's perceptions on slow economic growth." RICHARD DEKASER, CHIEF ECONOMIST, NATIONAL CITY CORP., CLEVELAND: "On balance, it's a favorable report. It has to be perceived as better than expected because of the payroll number which is not as dire as feared. "A higher jobless rate is worrisome from a worker perspective. But from the Fed perspective, this should assuage inflation concerns because a higher unemployment rate clamps down upward pressure on compensation." JIM O'SULLIVAN, ECONOMIST, UBS, STAMFORD, CONNECTICUT: "Clearly it's a pretty weak labor market. Payrolls are more than weak enough to keep the unemployment rate going up, and there's no sign of a turnaround. For now the Fed is hold, but we still think the next move is down not up. If unemployment keeps going up I think ultimately there'll be pressure for them to ease again." DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES INTERNATIONAL, NEW YORK: "Based on the headlines it is not as discouraging as we thought it would be -- it is the smallest job loss in a few months anyway. Job losses in manufacturing were significant but not as large as I feared they might be. Overall the report looks to be broadly consistent with other data that show the economy quite soft, basically stalled, not growing very much, but not contracting very much either." GARY THAYER, SENIOR ECONOMIST, WACHOVIA SECURITIES, ST. LOUIS, MISSOURI: "The job losses are not dramatic, but they show that the economy is very close to recession and that problems in the labor market are probably going to be a concern to consumers. "Payroll employment fell for the seventh consecutive month, showing that companies are still trimming their workforce. The unemployment rate rose to 5.7 percent, partly because more people are looking for jobs and it's a difficult job market." MARKET REACTION: STOCKS: U.S. equity index futures rise BONDS: U.S. Treasuries turn negative DOLLAR: U.S. dollar rises RATE FUTURES: Fed fund futures trim gains, see 30 percent chance of September rate hike, up from 26 percent before data

Tax rebates to pay debt or into savings: survey

Fri Aug 1, 2008 10:30am EDT

http://www.reuters.com/article/2008/08/01/us-usa-economy-rebate-idUSN0135754920080801

NEW YORK - Among U.S. households receiving a federal tax rebate, about one-in-four planned to spend the money sometime in the next year or so, with most planning to pay debts or add to their savings and reserves, according to a Reuters/University of Michigan poll released on Friday.

Overall, these results reflect both the pressures on household budgets from rising fuel and food prices as well as more cautious spending plans due to heightened uncertainty about future economic prospects, the consumer survey said. The intended uses of the tax rebate have remained largely unchanged over the past six months, and are comparable to consumers' responses to the 2001 tax rebate. Importantly, only a minor portion of the spending from the 2008 tax rebate was reported to have already occurred by July, with planned spending reaching a peak in the third and fourth quarters of 2008. The 10 percent of all households that did not expect to receive a tax rebate were excluded from the estimates included in this report. The median tax rebate was $1,000; the mean was $1,007. The tax rebates were distributed nearly evenly between mail and direct deposit. In addition to the tax rebate, 62 percent of respondents reported receiving a refund on their 2007 taxes. Those who reported refunds on 2007 taxes held similar spending intentions. Perhaps the most significant tilt toward using the tax rebate to repay debt was among households who reported they had experienced problems with obtaining a new loan in the past year, an indication their financial situation had been overextended; nearly three-in-four of these consumers plan to use the rebate to reduce their indebtedness. Higher income, older consumers, and those who reported recent gains in their finances were slightly more likely to plan to spend the tax rebate, whereas lower income, younger consumers, and those who reported a worsened economic situation were more likely to report using the money to repay debt. While adding to saving balances or repaying debt are equivalent in terms of "savings" and a precaution against unforeseen contingencies, repaying debt has the added advantage of reducing net interest costs. (Reporting by Ellen Freilich ; Editing by Neil Stempleman )

Deutsche CEO says conditions bad for big buys: report

Fri Aug 1, 2008 6:54am EDT

http://www.reuters.com/article/2008/08/01/us-deutschebank-ackermann-idUSL137297220080801

FRANKFURT - Deutsche Bank ( DBKGn.DE ) Chief Executive Josef Ackermann thinks difficult market conditions have made it harder for banks to do large acquisitions, he said in a New York Times interview published on Friday.

While he would not comment directly on a possible takeover bid for Deutsche Postbank ( DPBGn.DE ), Germany's largest retail bank, the newspaper said he seemed to signal that this was unlikely. "The current environment is not particularly intriguing. It's more challenging to make a deal and explain it to our shareholders," he was quoted as saying. Deutsche Bank on Thursday reiterated it was interested in principle in takeovers but would not do deals at any price. It lost out to French bank Credit Mutuel, for instance, in the contest to buy Citigroup's ( C.N ) German retail banking business. Deutsche Post ( DPWGn.DE ) has for weeks been in talks with potential suitors for its majority stake in Postbank, but has not struck a deal so far. Sources familiar with the situation say Deutsche Bank is among the interested parties along with Banco Santander ( SAN.MC ) and ING ( ING.AS ). One main issue is the valuation of Postbank, whose market capitalization has fallen to around 7.6 billion euros. This is well below the sale price above 10 billion euros that the sources say had been floated just a few weeks ago. (Reporting by Jonathan Gould and Philipp Halstrick )

ArcelorMittal in talks to buy Alpha Natural: source

Fri Aug 1, 2008 3:17pm EDT

http://www.reuters.com/article/2008/08/01/us-alphanatural-arcelormittal-idUSWEN718820080801

LONDON - ArcelorMittal ( ISPA.AS ), the world's top steelmaker, is in discussions with U.S. coal miner Alpha Natural Resources Inc ( ANR.N ) about a possible takeover, a source familiar with the matter said on Friday.

"It is a complex matter," the source said, adding that discussions were ongoing. ArcelorMittal declined to comment. Last month, Alpha Natural agreed to be acquired by iron ore pellet maker Cleveland-Cliffs Inc ( CLF.N ) in a deal now worth about $8.7 billion. On Thursday, the Financial Times reported that ArcelorMittal was mulling a counterbid for Alpha Natural, whose shares were up 6.4 percent at $105.30 in afternoon trading. The paper said ArcelorMittal had indicated its willingness to make an all-cash offer for Alpha in June. ArcelorMittal's bid was at or near $110 a share, the FT said, citing its sources. Alpha Natural and Cleveland-Cliffs could not immediately be reached for comment. But after the FT report, an Alpha spokesman told Reuters that it has a "definite merger agreement" with Cleveland-Cliffs and that Alpha was determined to see the deal to the finish line. The spokesman then declined to comment on any counterbids the company may have been offered. The FT said that ArcelorMittal could also wait for the deal to break down or for it to go through, which could make the combined entity a takeover target as well. Alpha Natural's shares were up $6.35 on the New York Stock Exchange, while Cleveland Cliffs shares were down $3.36, or 3.1 percent, at $105.05. ArcelorMittal shares closed down 3.7 percent. (Reporting by Eleanor Wason; Additional reporting by Michael Erman and Paritosh Bansal in New York; Editing by Brian Moss and Gerald E. McCormick)

ArcelorMittal mulling Alpha Natural counter bid: report

Fri Aug 1, 2008 5:48am EDT

http://www.reuters.com/article/2008/08/01/us-arcelormittal-alpha-idUSN3138989320080801

NEW YORK - ArcelorMittal, the world's top steel maker, is mulling breaking up a takeover bid from Cleveland-Cliffs Inc for U.S. coal miner Alpha Natural Resources, with a counter bid, the Financial Times reported.

ArcelorMittal had indicated its willingness to make an all-cash offer for Alpha in June, prompting the latter to seek other higher bids, the Financial Times said, citing people close to the companies. ArcelorMittal's bid was at or near $110 a share, the FT added, citing its sources. However, a spokesman for Alpha told Reuters it has a "definite merger agreement" with Cleveland-Cliffs, for about $8.3 billion as announced in mid-July, and that Alpha was determined to see the deal to the finish line. The spokesman declined to comment on any counter bids the company may have been offered. ArcelorMittal could also wait for the deal to break down or for it to go through, which could make the combined entity a takeover target as well, the FT said. An ArcelorMittal spokesman reached via e-mail declined to comment on the FT report. Cleveland-Cliffs did not immediately return a call seeking comment. (Reporting by Aarthi Sivaraman ; Editing by Clarence Fernandez)