Societe Generale Shares Rise on Takeover Report

(Bloomberg) -- Societe Generale SA, France's second-biggest bank, rose the most in five years in Paris trading on speculation that BNP Paribas SA is considering a takeover.

BNP, the country's largest bank, is holding preliminary internal discussions about a possible bid after Societe Generale's announcement last week of 4.9 billion euros ($7.2 billion) of losses from unauthorized bets, the Wall Street Journal reported. BNP said it does not comment on market rumors.

Traders speculated that President Nicolas Sarkozy's government is seeking a French partner for the bank to ward off any potential foreign bids. Prime Minister Francois Fillon told Parliament today that the government will ensure that Societe Generale remains in French hands.

``There's rumor of a bid by BNP on Societe Generale for 92 euros,'' said Constantin Salagaras, a trader at Aurel Leven Securities in Paris. ``The market is speculating on the will of Sarkozy to create a national champion.''

Societe Generale rose 10 percent to 78.45 euros in Paris, marking its biggest gain since Dec. 16, 2002 and valuing the bank at 36.3 billion euros. Societe Generale shares, down 21 percent since the start of the year, yesterday had a lower market value than Credit Agricole SA before rebounding today.

``Societe Generale is a great French bank and Societe Generale will remain a great French bank,'' Fillon told lawmakers in Paris today.

Trading Losses

Societe Generale's employee Jerome Kerviel, 31, was charged yesterday with falsifying documents, computer hacking and breach of trust by French judges.

Kerviel's unauthorized bets led to the biggest trading losses in banking history. Societe Generale said Kerviel amassed 50 billion euros in positions in European stock index futures, an amount that exceeded the company's market value.

``A takeover of Societe Generale is not impossible,'' Guillaume Tiberghien, an analyst at Credit Suisse, said in a report to clients. ``Any potential bidder would have to assess Societe Generale's risk control, assess the risk that the equity derivatives business might be damaged for the long term, assess the political and regulatory consequences of recent events for the entire banking sector.''

 

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U.S. Stocks Rise After Earnings, Durable Goods Top Forecasts

(Bloomberg) -- U.S. stocks rose for a second day, led by telephone companies and utilities, on better-than- forecast durable goods orders and earnings that topped estimates at two dozen members of the Standard & Poor's 500 Index.

Dow Chemical Co., American Electric Power Co. and Valero Energy Corp. led gains among the 30 companies in the S&P 500 that reported results since markets closed yesterday. Boeing Co. and Caterpillar Inc. climbed after the Commerce Department said orders for U.S. durable goods rose the most since July.

The S&P 500 added 1, or 0.1 percent, to 1,354.97 at 1:06 p.m. in New York. The benchmark for U.S. equities is still down 7.6 percent in 2008 on concern the collapse of the subprime mortgage market will drag the economy into recession. The Dow Jones Industrial Average rose 25.04, or 0.2 percent, to 12,408.93. The Nasdaq Composite Index decreased 6.52, or 0.3 percent, to 2,343.39, dragged down by a 2.1 percent drop in Google Inc.

``When you see a durable goods number like this and then earnings outside of the financial sector doing quite well, people are beginning to realize that perhaps the contagion effect may be somewhat limited,'' said Damon Barglow, who helps oversee $1.9 billion at Eastern Investment Advisors in Boston, in an interview with Bloomberg Radio.

Durable Goods

Index futures doubled their advances after the 5.2 percent gain in durable goods orders last month highlighted how growing overseas demand may spur manufacturing as the U.S. economy slows. The Federal Reserve is to expected to cut interest rates tomorrow in an effort to spur growth.

The S&P 500 has gained 3.5 percent from its 16-month low on January 22 after falling as much as 15 percent from its Oct. 31 record.

Fourth quarter earnings advanced 20 percent on average for the 155 non-financial companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Analysts expect the entire index to post an 18 percent average decline in profit.

Dow Chemical rose 43 cents to $38.02. The maker of 3,200 products ranging from synthetic latex to pesticides posted profit excluding some restructuring costs and other items of 84 cents, topping the 80-cent average estimate of 14 analysts surveyed by Bloomberg.

Valero, American Electric

Valero Energy Corp. climbed $5.22 to $60.12. The largest U.S. refiner posted fourth-quarter profit of $1.02 a share, topping the 59-cent average analysts' estimates compiled by Bloomberg. Earnings were buttressed by a cut in Valero's tax rate and increased use of low-grade crude oil.

Sunoco Inc., the largest oil refiner in the U.S. East, added $2.20 to $63.35. Tesoro Corp., the largest refiner in the U.S. West, gained $2.90 to $41.29. ConocoPhillips, the nation's second-biggest refiner, increased $1.18 to $77.59.

American Electric Power Co. gained 59 cents to $42.82. The biggest U.S. producer of electricity from coal said fourth- quarter profit rose 28 percent on higher power sales and a gain from the sale of a stake in a power plant. Sales rose 10 percent to $3.3 billion on higher utility rates and colder weather that increased use of electricity for heating.

Boeing, the world's second-biggest commercial airplane maker, climbed $2.34, or 3 percent, to $79.94. Caterpillar, the largest maker of bulldozers and excavators, added 72 cents to $68.93.

The dollar strengthened and yields on Treasury notes rose after the durable-goods report. Economists had forecast orders would increase 1.6 percent in December, according to the median of 64 estimates in a Bloomberg News survey.

Eli Lilly & Co. rallied 94 cents to $52.34. Excluding certain items, Lilly earned 90 cents a share, a penny higher than the average estimate of 17 analysts surveyed by Bloomberg.

 

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Goldman, Morgan Stanley probed on subprime

(Reuters) - Investigators are seeking information from Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research), Wall Street's largest banks by market value, regarding their activities related to subprime mortgages.

In its annual report filed with the U.S. Securities and Exchange Commission, Goldman said it was cooperating with requests from governmental agencies and self-regulatory organizations for information about securitizations, collateralized debt obligations and synthetic products related to subprime mortgages.

Meanwhile, in its annual report filed with the SEC, Morgan Stanley said it was responding to subpoenas and information requests from governments and regulators concerning subprime and non-subprime mortgages.

The SEC filings came on Tuesday.

Morgan Stanley also said it was a defendant in lawsuits over its role as an underwriter of preferred stock offerings for mortgage lenders New Century Financial Corp (NEWCQ.PK: Quote, Profile, Research) and Countrywide Financial Corp (CFC.N: Quote, Profile, Research). New Century is liquidating in bankruptcy, while Countrywide agreed on January 11 to be acquired by Bank of America Corp (BAC.N: Quote, Profile, Research).

Subprime mortgages go to people with poor credit. The U.S. housing crisis has caused dozens of mortgage lenders to go out of the business in the last year, and led to more than $100 billion of write-downs at banks worldwide.

Goldman and Morgan Stanley are among 21 banks sued on January 10 by the city of Cleveland. The city alleges that fee-hungry banks created a foreclosure crisis by offering mortgages that borrowers couldn't afford but which could be packaged into securities that investors could buy.

 

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NY Gov working on fix for bond insurers

(Reuters) - New York Gov. Eliot Spitzer said on Tuesday he was working "extraordinarily hard" to aid troubled bond insurers, adding that he would do what is appropriate for the bond market, and the municipal market in particular.

U.S. states, counties and cities buy insurance from bond guarantors because it makes it easier for the tax-free issuers to sell their debt. The insurance companies guarantee that if there is a default, investors will be paid all the principal and interest they are owed.

But bond insurers' expansion into the now-melting subprime mortgage sector threatens the companies' top "AAA" ratings their business requires.

As a result, tax-free issuers around the nation are increasingly skipping insurance or having to pay unusually high interest rates on some types of short-term notes whose liquidity partly depended on insurance.

New York Insurance Superintendent Eric Dinallo has been trying to help the bond insurers raise capital to strengthen their balance sheets, but has warned this will take time.

The Democratic governor told reporters: "We are deeply immersed in this to do what we think is appropriate for the marketplace and for the bond market and ... for the municipal market in particular."

 

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Wal-Mart cuts prices to lure Super Bowl shoppers

(Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) said on Tuesday it is cutting prices on thousands of items by 10 percent to 30 percent this week to win sales from cash-strapped shoppers ahead of the Super Bowl.

A Wal-Mart spokeswoman did not have an exact figure on the number of items included in the price cuts but said the world's largest retailer was reducing prices on groceries, popular electronics and other items that shoppers might buy before the Super Bowl football championship game on Sunday.

Wal-Mart typically announces such widespread price cuts during the ultra-competitive holiday shopping season.

But with 2008 U.S. retail sales forecast to rise at the slowest pace in six years, retailers are turning to promotions to lure shoppers into their stores to spend their limited budgets.

Ahead of the Super Bowl weekend, Best Buy Co Inc's (BBY.N: Quote, Profile, Research) Web site is advertising no interest for three years on all Samsung flat panel TVs $999 and up, while in a similar move, Circuit City Stores Inc (CC.N: Quote, Profile, Research) is offering no interest for 36 months on TVs $999 and higher.

Wal-Mart said it is charging no interest for 18 months on purchases of $250 or more with a Wal-Mart credit card.

 

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PetroChina's 44% Loss Proves BRIC Premium Is Nonsense

(Bloomberg) -- The biggest slide in emerging-market stock valuations in a year and a half is proving that a slowdown in the U.S. economy still matters to Brazil, Russia, India and China.

Shares in the MSCI Emerging Markets Index dropped 12 percent relative to profit this month as the prospect of a U.S. recession pushed two-thirds of the world's equity indexes into so-called bear markets. The last monthly decline as steep was in May 2006, according to data compiled by Bloomberg. Even the price-earnings ratio for the Standard & Poor's 500 Index, the benchmark for U.S. stocks, didn't fall as much.

Companies such as PetroChina Co., the country's biggest oil producer, and Russia's OAO Lukoil show the threat of a global slump is shaking the confidence of investors who viewed developing countries as a haven from the U.S. PetroChina's 44 percent plummet since November erased about $400 billion, more than the market value of Microsoft Corp., the No. 1 software maker. Russian stocks are headed for their biggest loss in 19 months after money managers bought an unprecedented amount in 2007.

``The only way they could decouple would be for them to be on another planet,'' said David Dreman, who oversees $20 billion as chief investment officer at Jersey City, New Jersey-based Dreman Value Management LLC. ``We are the biggest buyer of their products and biggest user of their services, so if our economy slows down their growth rate has to slow down. There's no other plausible way.''

Record High

The MSCI index rose to an all-time high in October on expectations economic growth in the so-called BRIC countries, which accounted for half the world's expansion last year, would shield stocks even if the U.S. stumbled.

Last year's surge pushed the valuation for the MSCI above the S&P 500 for the first time since the Internet bubble burst in March 2000. Investors were willing to risk capital on profit growth in developing markets as their governments boosted currency reserves and cut debt.

Now, the price-earnings ratio is 15.35, down from 17.44 at the end of last year and an all-time high of 90.6 in February 1999, Bloomberg data show. Investors pulled a record $10.7 billion from emerging-market stock funds last week, according to data compiled by Cambridge, Massachusetts-based research firm EPFR Global.

 

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Corn, Soybeans, Wheat Fall as Slumping U.S. Economy Cuts Demand

(Bloomberg) -- Corn and soybeans and wheat fell on speculation the U.S. economy will slide into recession, triggering a global slump and damping demand for grains and other commodities.

The Federal Reserve today cut its benchmark interest rate the most in 23 years in an effort to prevent a recession. Even after the move, U.S. equities and commodities fell. Before today, wheat prices had doubled in the past year and corn and soybean futures reached records last week.

``The projected growth in consumption of grains is in question,'' said Darrell Holaday, president of Advanced Market Concepts in Manhattan, Kansas. ``World economies are going to retract. We thought this could happen, but some thought that the rest of the world is insulated from the U.S. economy. It was a nice theory, but today, you can say that's not true.''

Corn futures for March delivery fell 4.5 cents, or 0.9 percent, to $4.9375 a bushel at 10:58 a.m. on the Chicago Board of Trade, the fifth-straight drop since the most-active futures rose to a record $5.1925 on Jan. 15. Corn gained 17 percent in 2007 after rising 81 percent in 2006 on record demand to produce ethanol and feed livestock.

Soybean futures for March delivery fell 15.75 cents, or 1.3 percent, to $12.4825 a bushel in Chicago, after last week falling for the first time in seven weeks. The price on Jan. 14 reached a record $13.415. Futures gained 78 percent last year after U.S. farmers planted the fewest acres in 12 years to sow the most corn since 1944.

Wheat futures for March delivery fell 7.5 cents, or 0.8 percent, to $9.55 a bushel in Chicago. Even with today's decline, the price has doubled in a year. Wheat reached a record $10.095 a bushel on Dec. 17 as global demand outpaced supply.

Hedge-Fund Bets

Since the end of November, hedge funds as of Jan. 16 increased bets by 44 percent that corn futures would rise, data from the Commodity Futures Trading Commission show. Funds that buy commodities in indexes raised bets 14 percent. Open interest has climbed 8.9 percent to almost 1.41 million contracts since the start of the year, the highest in more than nine months.

Funds that track commodity indexes cut bets on higher soybeans to 176,461 contracts as of Jan. 16, down 5.8 percent from a record net long position a week earlier, according to the CFTC report.

 

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Motorola May Face Razr 2 Flop as IPhone Sales Surge

(Bloomberg) -- Motorola Inc.'s Greg Brown, in his first earnings report as chief executive officer, may post disappointing sales of the Razr 2 phone after holiday shoppers flocked to Apple Inc.'s iPhone.

Motorola probably sold 2 million Razr 2s, the slimmer camera phones Brown is relying on to revive revenue, in the fourth quarter, said Lawrence Harris, a former Oppenheimer & Co. analyst in New York. Steve Jobs's Apple may have sold 2.4 million iPhones.

Harris estimated Motorola sold half as many Razr 2s over a similar period compared with the original model, whose 2004 debut started a craze for ever-thinner phones. Motorola, which fell to third place among global phone makers last year, may drop to fourth in 2008.

``The Razr 2 didn't set the world on fire and it won't be a phenomenon like the original one,'' Harris said.

Motorola, based in Schaumburg, Illinois, may say tomorrow that net income fell 59 percent to $257.9 million in the fourth quarter, according to the average of nine estimates compiled by Bloomberg. Sales probably slid 18 percent to $9.65 billion, the survey showed.

Jennifer Erickson, a spokeswoman for Motorola, declined to comment on sales or earnings before the report.

Motorola shares dropped 22 percent last year on the New York Stock Exchange, while Apple more than doubled. Motorola fell $1.48, or 11 percent, to $11.85 at 9:34 a.m. New York time, the lowest in more than four years. The Standard & Poor's 500 Information Technology Index dropped 4.3 percent.

No. 1 No Longer

The fading popularity of the original Razr probably cost Motorola its position as the top-selling handset at AT&T Inc., the biggest U.S. phone-service company, for the first time since 2004, said Piper Jaffray & Co. analyst Michael Walkley. Motorola probably ceded that spot to Samsung Electronics Co.'s Sync video and camera phone last quarter, he said.

The 47-year-old Brown, who took over as CEO after Ed Zander's Nov. 30 resignation, has to improve marketing to show consumers the new phone is a step up, Walkley said. The $300 Razr 2 is too similar to the first, which is available for free with a contract, said Minneapolis-based Walkley, who called Razr 2 holiday sales ``disappointing.''

Motorola probably sold about 3 million Razr 2s since the debut in the second quarter, Harris said. The original sold almost 6 million over a similar span after its release, and 12 million in the first year, he said.

Too Similar

The Razr 2 is thinner, has a better camera and can store more songs than the original. Consumers haven't bought the phones as quickly as Motorola shipped them, building inventories at carriers and retailers, Walkley said.

``The Razr 2 doesn't stand out the way the original did,'' said Brad Williams, who helps manage $11 billion as an analyst at MTB Investment Advisors in Baltimore. His firm sold its Motorola shares last year. ``You go to a store and there are less-expensive products that look strikingly similar to the Razr 2.''

The $399 iPhone, which blends Apple's best-selling iPod music player with an e-mail-equipped handset, is stealing sales from Motorola. The iPhone broke AT&T's opening-weekend records and sold more in three days after its June 29 debut than the original Razr did in its first month.

Last week, Jobs, 52, said Apple has sold more than 4 million of the phones. Analysts including UBS AG's Benjamin Reitzes in New York said Apple probably sold 2.4 million last quarter.

Nokia Oyj, Samsung and Sony Ericsson Mobile Communications Ltd. also introduced phones superior to the Razr 2 in features, according to a Jan. 4 analysis by Cowen & Co. That may help Sony Ericsson overtake Motorola as the No. 3 handset maker in the world this year, according to Cowen analysts including Matthew Hoffman in Boston.

 

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ECB, BOE May Follow U.S. Fed Cut, Economists Say

(Bloomberg) -- The European Central Bank and the Bank of England may have to follow the Federal Reserve and cut interest rates as the risk of a U.S. recession threatens to drag down a global expansion, economists said.

``From a European and a U.K. perspective, the Fed cut adds to the risk of more and quicker rate cuts,'' said Amit Kara, an economist at UBS AG in London. Kara, a former economist at the U.K. central bank, predicts four cuts from the Bank of England this year and two by the ECB.

The Fed today lowered its benchmark rate in an emergency move for the first time since 2001 after global stock markets tumbled amid signs the world's largest economy is sliding into recession. The move spurred a rally in European stocks, though failed to stem a decline in U.S. indexes.

The widening interest-rate gap between the U.S. and Europe may spur gains in the euro, worsening the outlook for an economy already showing signs of a slowdown by hobbling exports. German investor confidence dropped to the lowest since 1992 in January and European manufacturing growth slowed in December.

``This market has been calling for help,'' said Alberto Espelosin, who helps to manage about $12 billion at Zaragoza, Spain-based Ibercaja Gestion. ``The ECB should follow suit.''

The Bank of Canada, in a scheduled meeting, lowered its main rate by a quarter point today to 4 percent and signaled it will act again to shield Canada from the U.S. slowdown.

Yields Fall

Investors are increasing bets Europe's two major central banks will cut borrowing costs, interest-rate futures trading shows. The ECB's benchmark rate is currently 4 percent, while the Bank of England's 5.75 percent is the highest among the Group of Seven industrial nations.

The yield on the June ECB contract fell to 3.80 percent today from yesterday's close of 3.94 percent. On the June U.K. contract, the yield fell 3 basis points to 4.89 percent.

The ECB and the U.K. central bank refused to give away their intentions. The Bank of England said it has no plans to bring forward next week's meeting of the Monetary Policy Committee, which is scheduled for Feb. 7. ECB council member Juergen Stark declined to comment on the Fed's decision when questioned by reporters in Brussels.

The Swiss National Bank also declined to comment, as did spokespeople for the central banks of Norway and Sweden.

The euro, which touched a record $1.4967 on Jan. 23, rose 1.1 percent to $1.4619 at 6:08 p.m. Frankfurt time after the Fed's announcement. The pound climbed 0.8 percent to $1.9592.

`Forced to Act'

``If it becomes clear that this is merely a temporary fix, and the situation deteriorates further, then the ECB will be forced to act,'' said Ken Wattret, an economist at BNP Paribas SA in London.

While David Brown, chief European economist at Bear Stearns Cos. in London, predicted the Bank of England will cut its rate next month and the ECB will do so in the second quarter, he ruled out either following the Fed in reducing rates outside their normally scheduled meetings, as they did in September 2001.

``It's not their style,'' said Brown. ``European central banks tend to move by the calendar.''

European inflation at a six-year high of 3.1 percent, breaching the ECB target of just below 2 percent, is limiting policy makers' room for maneuver. President Jean-Claude Trichet said Jan. 10 that the bank is ready to act ``preemptively'' to raise rates to contain consumer prices.

 

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U.S. Stocks Pare Declines; Exxon Retreats, Financials Gain

(Bloomberg) -- U.S. stocks fell for a fifth day, the longest streak of declines in 11 months, as growing concern about the slowing economy prompted the Federal Reserve to cut interest rates by the most in two decades.

The Standard & Poor's 500 Index pared its worst loss in five years after some investors were persuaded the Fed would continue cutting rates after its emergency reduction today. Exxon Mobil Corp., Microsoft Corp. and AT&T Inc. led declines. Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. helped carry financial shares higher for the first time in three days after the Fed cut its benchmark rate by 0.75 percentage point.

``It shows that they're trying to stem the negative sentiment that's out there that there's a recession under way,'' said Ed Peters, chief investment officer at PanAgora Asset Management in Boston, which manages $25 billion.

The S&P 500 retreated 23, or 1.7 percent, to 1,302.19 at 12 p.m. in New York. The Dow Jones Industrial Average decreased 179, or 1.5 percent, to 11,920.3. The Nasdaq Composite Index lost 56.66, or 2.4 percent, to 2, 283.36. About three stocks fell for every two that rose on the New York Stock Exchange.

Growing evidence that the U.S. economy is slowing has dragged more than half of the world's biggest stock indexes into a bear market and wiped out $7.3 trillion in global stock-market value this year.

`Increasing Downside Risks'

The Fed cited ``a weakening of the economic outlook and increasing downside risks to growth'' for its first emergency cut since 2001. Policy makers weren't scheduled to gather on rates until Jan. 29-30.

The U.S. market was closed for Martin Luther King Day yesterday. Stocks posted the steepest weekly drop since July 2002 last week after lower-than-estimated home construction, retail sales and manufacturing reinforced speculation that the economy is contracting.

Exxon, the largest U.S. crude producer, decreased $2.48 to $82.60. Chevron Corp., the second biggest, lost $2.96 to $80.50. Crude oil dropped to a six-week low, falling $2.39 to $88.18 a barrel in New York, on concern demand will diminish in an economic slowdown.

Microsoft, the biggest software company, retreated $1.04 to $31.87. AT&T slid 78 cents to $35.33.

Bank of America

Bank of America gained 87 cents, or 2.4 percent, to $36.84 even after reporting earnings that fell 97 percent. Fourth- quarter net income slumped to $268 million, or 5 cents a share, from $5.26 billion, or $1.16, a year earlier the bank said in a statement. Excluding merger and restructuring costs and a gain from the sale of Marsico Capital Management LLC, the company earned 5 cents a share, missing the 21-cent average estimate of analysts surveyed by Bloomberg.

Wells Fargo, the biggest bank on the West Coast, rose $1.35 to $26.83. JPMorgan, the third-largest U.S. bank, increased $1.30 to $40.89.

The MSCI World Index fell 0.6 percent. The Dow Jones Stoxx 600 Index of European shares added 2.4 percent.

The Nasdaq Composite today entered a so-called bear market, marked by a decline of at least 20 percent from a high. The S&P 500 and Dow average have both lost about 16 percent from their Oct. 9 records. The Nasdaq reached an almost seven-year high on Oct. 31.

Wachovia Corp., the fourth-largest U.S. bank, said profit fell 98 percent after writedowns for bad loans and mortgage- backed securities. Its shares added 15 cents to $30.95.

 

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Lekgotla to solve energy crisis

(Fin24) - Eskom CEO Jacob Maroga will face some tough questions from the South African government which will use its two-day Lekgotla, starting January 23, to help solve the country's energy supply shortfall.

Maroga joins the Lekgotla which brings together all ministers and their deputies, premiers, director-generals and representatives of the South African Local Government Association.

Rolling blackouts throughout South Africa have ground business to a halt and severely disrupted roads and other infrastructure, as well as weakened confidence in the country's ability to attract and support future investment.

After the Lekgotla all eyes will be on February 8, when President Thabo Mbeki's state of the nation address in parliament is expected to detail some of the Lekgotla's findings.

A statement released by the cabinet today apologised for the electricity predicament and the impact it has had on the country's citizens, economy and image.
 

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Rand climbs after US rate cut

(Fin24) - The rand has climbed against the dollar on Tuesday, after the US Federal Reserve cut its overnight rate, and global stocks pared their losses.
 

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Crude Oil Falls as Equities Tumble on U.S. Recession Concerns

(Bloomberg) -- Crude oil fell to a one-month low as stock markets tumbled in Asia and Europe on concern the U.S. will lead a global economic slowdown.

Oil, down more than 11 percent from its $100.09 a barrel record on Jan. 3, led a decline across commodities markets as gold and copper also fell. The MSCI World Index, a measure of global stock prices, slipped 1.6 percent today. Slower growth may cut demand for energy and metals.

``The market is concerned about a recession,'' Thina Saltvedt, an analyst at Nordea Bank AB in Oslo, said today in a telephone interview. ``You will see an effect on demand in the first half of the year.''

Crude oil for February delivery declined as much as $1.90, or 2.1 percent, to $88.67 a barrel in electronic trading on the New York Mercantile Exchange. That's the lowest since Dec. 12. It was at $88.85 at 1:46 p.m . London time. The contract expires tomorrow.

The more active March contract fell $1.49, or 1.7 percent, to $88.43 a barrel at 1:50 p.m. London time. There will be no settlement prices today as the exchange's floor trading session is closed for the Martin Luther King Day holiday.

``Oil prices have lost ground this morning as Asian stock markets plunge lower,'' said Robert Laughlin, a senior broker at MF Global Ltd. in London.

Brent crude for March settlement fell as much as $1.68, or 1.9 percent, to $87.55 a barrel on the ICE Futures Europe exchange. The contract traded at $87.96 in London at 1:51 p.m. local time.

OPEC Waits

OPEC, the producer of more than 40 percent of the world's oil, hasn't yet made a decision on whether to raise output at its Feb. 1 meeting, the United Arab Emirates oil minister told reporters in Abu Dhabi today.

``We are going to meet in February and we will have so many options available,'' Minister Mohammed al-Hamli said. ``We will explore all options. There is a disconnect between the fundamentals and the price.''

Prices advanced earlier after Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said yesterday there is no need for the Organization of Petroleum Exporting Countries to raise output when it meets Feb. 1.

OPEC is ``reluctant to open its taps too wide, especially with a weakening U.S. economic outlook,'' the London-based Centre for Global Energy Studies said in a monthly report today. ``Ministers might veer in the opposite direction and cut production.''

Mexico, the third-largest supplier of crude to the U.S. in 2006, stopped shipments yesterday morning after strong winds and heavy rains shut terminals.

 

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Vale in Xstrata Talks, Says No `Concrete Results'

(Bloomberg) -- Cia. Vale do Rio Doce, the world's largest iron-ore producer, confirmed it's in talks with Xstrata Plc.

No ``concrete results'' have been reached, Vale said today in a statement. The Rio de Janeiro-based company said it's also studying other possible acquisitions. Vale is prepared to bid as much as $90 billion in cash and stock to buy Zug, Switzerland- based Xstrata, Valor Economico newspaper reported today.

Chief Executive Officer Roger Agnelli, who wants Vale to overtake BHP as the world's biggest mining company, is already spending $59 billion over five years to expand in Canada, Mozambique, Australia and China. Rio Tinto Group rejected a takeover bid by BHP last month that threatens to match Vale's iron-ore output.

BHP's three-for-one share offer for Rio added ``momentum'' to mining mergers, and Xstrata is ``perfectly positioned'' to benefit, Xstrata Chief Executive Officer Mick Davis said Dec. 6. Davis has developed the company's copper and nickel mining capacity through acquisitions including the $16.2 billion purchase of Canada's Falconbridge Ltd. in 2006.

Vale is also expanding into nickel, coal, copper and fertilizers. The company bought Canadian nickel producer Inco Ltd. for $17.4 billion in 2006 to become the second-largest producer of the stainless-steel ingredient. Vale has operations adjacent to Xstrata in Canada's Sudbury basin and on the French- controlled Pacific island of New Caledonia.

 

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Fujitsu reorganizes semiconductor operations

(Reuters) - Japanese electronics firm Fujitsu Ltd (6702.T: Quote, Profile, Research) said on Monday it would put its struggling semiconductor operations into a new unit, in a move that could smooth the way for partnerships with other chip makers.

Fujitsu's business building system chips, used in products ranging from digital cameras to supercomputers, has suffered from falling prices and the high cost of keeping up with the latest technology.

The company also said it would transfer development and test production of state-of-the art system chips to its Mie plant in central Japan from a technology centre in Tokyo, at a cost of some 10 billion yen ($94 million).

 

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Northern Rock bids deadline set

(Reuters) - Britain set a two-week deadline for a private-sector rescue of Northern Rock, as it confirmed plans to convert its almost 25 billions pounds ($49 billion) of loans to the stricken bank into bonds in a bid to smooth a deal.

The financing package will tie the government to Northern Rock, Britain's biggest casualty of the global credit crunch, for years to come.

But it also increases the prospect of a private-sector takeover, which would avoid a politically damaging nationalization for Prime Minister Gordon Brown, who has seen his popularity slump in opinion polls in recent weeks.

Details of the plan sent Northern Rock's battered shares soaring on Monday. By 1105 GMT they were up 40 percent at 90.5 pence, valuing the bank at 380 million pounds ($746 million), still down over 90 percent since the end of May.

The financing package will be available to the three front-runners for a private-sector deal -- Richard Branson's Virgin Group, a rival consortium led by investment firm Olivant, and an in-house solution under new Northern Rock management.

 

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BHP Billiton reportedly taps more banks for Rio bid

(Reuters) - BHP Billiton(BHP.AX: Quote, Profile, Research) has brought in more banks to help it find the $70 billion it needs to fund its planned takeover of Rio Tinto (RIO.AX: Quote, Profile, Research), Britain's Sunday Times newspaper reported.

Citing no sources, the paper said BHP has tapped Barclays (BARC.L: Quote, Profile , Research), UBS (UBSN.VX: Quote, Profile, Research), Goldman Sachs (GS.N: Quote, Profile, Research), HSBC (HSBA.L: Quote, Profile, Research), BNP Paribas (BNPP.PA: Quote, Profile, Research) and Santander (SAN.MC: Quote, Profile, Research) to work alongside original banker Citigroup on the funding.

Merrill Lynch, originally the other provider of finance alongside Citi, will remain as broker to BHP but will not provide any money, the paper said.

The new financing arrangements, which come as a global credit crunch makes raising money more difficult, will give BHP the flexibility to execute a $30 billion share buyback proposed as part of the deal, or add cash to the current around $130 billion all-share offer, the paper said.

BHP, the world's biggest miner, must make a formal offer by February 6 or leave Rio alone for at least six months under a deadline imposed by the UK Takeover Panel.

 

Read more at Reuters

Airbus posts record 2007 orders

(Reuters) - Airbus confirmed 2007 as a record year for planemakers on Wednesday by posting orders for 1,341 aircraft while boosting cost savings aimed at catching archrival Boeing Co.

Boeing took top spot with 1,413 orders and has suffered less from a weakened dollar than Airbus, which has launched its Power8 cost-savings drive in response.

"These are enormous numbers; it was a staggering year. Now it becomes a question of how we manage the backlog," Airbus chief Tom Enders told journalists.

"Power8 delivered cost savings very considerably ahead of schedule in 2007. The official version is more than 300 million euros; I can tell you it is close to 500 million," he said.

The planemaker aims to cut 10,000 jobs and sell plants to lower its costs. It said it had achieved 30 percent of its planned reduction in overhead positions in 2007, or 3,000 jobs, equally split between Airbus and its suppliers.

Yet despite the reductions achieved mainly through attrition, Airbus still needs to hire production workers and skilled engineers to deliver ambitious new projects.

The overall Airbus headcount of around 55,000 fell slightly in 2007, Chief Operating Officer Fabice Bregier said.

 

Read more at Reuters

Shoprite pockets rise in sales

(Fin24) - Pan-African food retailer Shoprite said sales for December 2007 rose by 16.1% when compared with 2006, which analysts have billed as "pleasing".

The 16.1% increase accounted for both inflation and volume
growth; for the same month, same-store sales grew by 11.7%.

Shoprite says that for the six months to end-December, sales rose by 21.8% to R23.3bn, but notes that the increase should be seen against the three-month strike which took place from August to October 2006, as earnings in thatperiod were affected.

It says like-for-like business in the six-month period
grew by 16.5%.

Nedcor Securities retail analyst Syd Vianello says that
while the numbers were good, the market may be a little disappointed and may have expected more growth given increased social grants, higher food inflation and the perception that Shoprite is taking market share away from Pick n Pay.

Room to fall further

Coronation Fund Managers' food retail analyst Quinton Ivan
says high food inflation - especially in staple foods, which comprise a large part of the Shoprite basket - was beneficial for food retailers' numbers because, despite higher prices, sales volumes do not drop as food is a basic commodity.

Ivan says that while Shoprite is on a heavier rating
(trading on an earnings multiple of 19.3) when compared with Spar (17.6) and Pick n Pay (19.2), its earnings have grown at a faster rate.

Ivan's preference in the food-retail space remains Spar.

Ivan was particularly impressed with the 32.5% growth (20.2% on a like-for-like bases) in Shoprite's African operations. As at end-June 2007 (the most recent figures available), Shoprite had 120 stores in 16 African countries.

Negative overall market sentiment, which saw the all-share index down 3.4% by 13:00 - overshadowed the positive trading update, with Shoprite shares falling 5.4% to 3 700c.

Shoprite's fall was in line with that of fellow food
retailers Pick n Pay (down ) and Spar Group (down 3.6% to 5 300c).

Nedcor Securities retail analyst Syd Vianello says that food retail stocks have, until now, held up well due to them being defensive plays.

Vianello says that while the sell-off presented a buying opportunity, there was room for food retailers to fall further relative to apparel retailers, which have been trading at low price levels.
 

Read more at Fin24

Rand on back foot

(Fin24) - The rand remained on the back foot in late trade on Wednesday amid continuing turmoil in global stock markets with a raft of recent US economic data adding to fears of a
recession in the world's biggest economy.

Dealers added that local data indicating a slowdown in retail sales which supports the argument against another South African rate hike later this month had also contributed to the rand's weakness.

By 15:55 the rand was bid at R6.9210 to the dollar from its previous close of R6.8050. It was bid at R10.2638 to the euro from a previous R10.1070 and at R13.6167 against sterling from R13.1853 before.

The euro was bid at $1.4805 from $1.4780 overnight, while gold was quoted at $890.75 a troy ounce from its previous close of $889.10/oz.

 

Read more at Fin24

Court Limits Shareholder Suits Against Vendors, Banks

 (Bloomberg) -- The U.S. Supreme Court put new limits on shareholders suits against a company's banks and business partners in a ruling that may hinder efforts to recoup billions of dollars lost in frauds at Enron Corp. and HealthSouth Corp.

The justices, voting 5-3, threw out a lawsuit by Charter Communications Inc. investors against two of its suppliers, Motorola Inc. and Scientific-Atlanta Inc. The court said the shareholders didn't show they relied on the alleged deception by the suppliers in making investment decisions.

Allowing additional shareholder lawsuits ``may raise the cost of being a publicly traded company under our law and shift securities offerings away from domestic capital markets,'' Justice Anthony Kennedy wrote for the court.

Business groups called the case their highest priority in the court's 2007-08 term. Trade groups representing banks, accounting firms and law firms took an especially keen interest, saying their members might present tempting targets for shareholder lawyers. The ruling will bolster efforts by Merrill Lynch & Co. to block a lawsuit by Enron investors and by UBS AG to defeat claims by HealthSouth shareholders.

The case split the court along ideological lines, with Chief Justice John Roberts and Justices Samuel Alito, Antonin Scalia and Clarence Thomas joining Kennedy's opinion.

Seeking a Remedy

Justices John Paul Stevens, Ruth Bader Ginsburg and David Souter dissented. Stevens wrote that Congress enacted the federal securities laws ``with the understanding that the federal courts respected the principle that every wrong would have a remedy.''

Justice Stephen Breyer didn't participate in the case. He owns stock in Cisco Systems Inc., which is now Scientific- Atlanta's parent company.

The Supreme Court in 1994 ruled 5-4 that federal securities law bars suits for ``aiding and abetting'' another company's wrongdoing. Congress changed the law in 1995 to permit aiding- and-abetting suits by the Securities and Exchange Commission, but not by private shareholders.

Investors said the 1994 ruling left room for accusations that outsiders took part in a scheme to deceive shareholders, while business groups said those types of claims were barred. The Bush administration largely supported the companies, though using different reasoning.

 

Read more at Bloomberg

Luxury Shoppers Shut Their Purses

(Businessweek) - Purveyors of luxury goods are finding that even their well-cushioned customers are feeling the economic pinch and putting their credit cards away

 

Luxury stores have finally caught the economy's cold.

For months, high-end retailers posted healthy sales increases, thumbing their noses at dismal reports of slumping home sales, risky mortgages, and rising energy prices. But now it looks as though even well-heeled consumers are pulling back. On Jan. 10, the upscale department store Nordstrom ( JWN) said that December sales at stores open at least a year fell 4% from last year, compared with an 8.7% increase in November. Saks (SKS), New York's Fifth Avenue luxury mainstay, also reported that its same-store sales were up a mere 0.8%, compared with a 25.7% increase in the previous month. And blue-blood retailer Neiman Marcus eked out a tepid 2.9% sales increase, vs. 5.8% in November and 8.5% in October.

"Everyone's shopping for the bare necessities, and people have stopped treating themselves," says Patricia Pao, founder of the Pao Principle, a New York retail consultant.

 

Read more at Businessweek

More power cuts on the cards

(Fin24) - Power cuts resumed on Monday and would continue nationally for the rest of the week, Eskom said.

Eskom's media desk said some areas might experience power cuts up to twice a day, for up to two and a half hours at a time.

Eskom needed to reduce demand for electricity in order to stabilise the electricity system nationally, the power utility's statement said.

Power cuts resumed on Saturday after Eskom experienced technical difficulties at generating units, coupled with a low reserve margin.

The utility called on all consumers to use electricity sparingly to reduce the number of power cuts.
Read more at Fin24

Diamond Core BRC merger okayed

(Fin24) - The proposed merger of Northern Cape diamond explorer Diamond Core Resources (DMR) and BRC Diamond
Corporation, a Canadian diamond exploration company, looks set to go ahead after Diamond Core secured shareholder approval for the transaction today.

The merger will create a company with a combined value of $200m, which will make it the fifth-largest diamond junior mining company in Africa.

Diamond Core said in a statement to the JSE that shareholders
representing 99.52% of the total number of votes voted in favour of the merger.

The proposed merger, which will be done by way of a court-sanctioned scheme of arrangement, was first announced in July last year.

 

Read more at Fin24

Sarkozy slams oil prices

(Fin24) - French President Nicolas Sarkozy, on a visit to Saudi Arabia, has said that he is worried about the "brutality" of recent oil price increases which "are affecting growth and purchasing power."
 

Read more at Fin24

Back in the swing of things

(Fin24) - The festive season has come to an end and it's back to business as usual in the South African corporate world.

For starters, four JSE-listed companies and one AltX-listed company are holding their annual general meetings (AGMs) this week.

JSE-listed financial services company AfroCentric Investment Corporation formerly known as WB Holdings, had mixed results in 2007 as far as its share price was concerned. The share price rose to a high of 445c in April but went down to 220c in August and September after opening the year around 325c. The share price has since recovered and is currently trading around the 275c mark. The recovery should please the directors and the shareholders alike.

At the beginning of the year, Petmin's share price slumped to 390c and according to Numis Securities, the company was ripe for the picking. This is despite an acquisition spree which included a 25% stake in Kermas Group and a 75% stake in the Veremo project in late November. However, the slump hasn't discouraged the directors from anticipating a strong growth for the company until 2012. 

Diversified mid-tier mining group Metorex has been very active of late and its offer to Copper Resources Corporation (CRC) has hogged the business headlines in the first week of the new year.

With nothing concluded on the proposed deal thus far, the offer has again been extended, this time to January 18. The AGM on Wednesday gives shareholders a perfect platform to pose questions they might have on the deal.

Property loan-stock company Redefine Income Fund has had a good run so far and this should boost shareholders' confidence for the year ahead. With Redefine's distributions increasing by 20% late in 2007, the company has outperformed the sector.

 

Read more at Fin24

Rand remains on front foot

(Fin24) - The South African rand remained on the front foot in late trade on Monday on the back of a surging bullion price and a weaker dollar which is being hit by fears over 4Q US bank earnings this week that could show even larger-than-anticipated losses because of subprime exposure.

By 15:55 the rand was bid at R6.7270 to the dollar from its previous close of R6.7400. It was bid at R10.0318 to the euro from a previous R9.9834 and at R13.1909 against sterling from R13.2024 before.

The euro was bid at $1.4884 from $1.4806 overnight, while gold was quoted at $906.80 a troy ounce from its previous close of $897.20/oz.

Gold rose to a fresh all-time high of $914.40 an ounce on Monday following ongoing bullish momentum from a weakening US dollar and concerns over the gloomy outlook for the US economy, traders said.

Meanwhile, Dow Jones reports that fears that fourth-quarter earnings from major US banks will show even greater than anticipated losses were helping to drive the dollar lower in Europe Monday.

The rise in risk aversion is helping to push the yen higher across the board, while the euro is still pushing ahead on the assumption that the European Central Bank will remain hawkish, even in the face of weaker euro- zone data.

The tone for the dollar was initially set by US Federal Reserve chairperson Ben Bernanke late last week when he made it clear that the Fed is willing to cut interest rates by as much as 50 basis points at the end of this month.

New data this week, including retail sales and producer prices, are expected to reinforce this view, with some analysts suggesting that the Fed may even cut rates before the scheduled open market committee meeting January 30.

Read more at Fin24

Regulators reviewing pre-M&A trades: report

(Reuters) - Securities regulators are reviewing whether investment banks' trades in shares of companies linked to M&A deals they were advising were based on coincidence or inside information, according to The Wall Street Journal on Monday.

Investment banks must keep their trading and merger advisory businesses separate, although one arm of a bank could buy shares in a company without knowing that another arm is advising on a deal involving that firm.

The report quoted Stephen Luparello, a top official at the Financial Industry Regulatory Authority (FINRA), as saying the issue was "definitely on our radar screen". FINRA is the largest non-governmental regulator of the U.S. securities industry.

Its interest stemmed from an academic study which found such trading happens more often than would be expected by chance, the report said.

The Wall Street Journal said it had reviewed stock ownership and deal records and found dozens of cases in which investment banks appeared to buy shares in companies that were targets of acquisitions by firms they were advising.

 

Read more at Reuters

Sovereign Bancorp to take $1.58 billion charge

(Reuters) - Sovereign Bancorp Inc (SOV.N: Quote, Profile, Research), the second-largest U.S. savings and loan, said on Monday it expects to take $1.58 billion in fourth-quarter charges, hurt by worsening credit quality and a tough mortgage environment.

The Philadelphia-based thrift expects to write down $1.4 billion of goodwill. This includes $600 million related to consumer lending, which has been hurt by weaker credit and a decision to stop making some auto loans.

It also includes $800 million related to operations in the New York area. Sovereign in June 2006 paid $3.6 billion for Brooklyn, New York's Independence Community Bank Corp, and said revenue and deposit growth have been lower than expected.

Results also reflect a $180 million write-down related to preferred stock investments in mortgage financiers Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research).

Sovereign also said it will set aside $738 million for bad loans and leases, up from $650 million in the prior quarter. It also plans $27 million in charges related to financings to two mortgage companies that have defaulted.

Chief Executive Joseph Campanelli in a statement said Sovereign remains a "fundamentally sound financial institution," despite market and credit pressures. The company operates about 750 banking offices in eight Northeastern U.S. states, and ended September with $86.6 billion in assets.

 

Read more at Reuters

Money-Market Rates in Dollars Drop Before Fed

(Bloomberg) -- The cost of borrowing dollars fell the most in four months before a $30 billion cash auction by the Federal Reserve to break the logjam in short-term lending.

The three-month London interbank offered rate, or Libor, for dollars fell 20 basis points to 4.06 percent, the British Bankers' Association said today. That's the biggest decline since Sept. 19, the day after the Fed lowered its benchmark interest rate a half point. The equivalent euro and pound rates also dropped.

The Fed is offering cash in the first of two $30 billion emergency-cash injections. The European Central Bank plans two $10 billion auctions this month and the Bank of England will offer 10 billion pounds ($19.6 billion) tomorrow. Policy makers are responding to about $100 billion of losses at financial institutions after the collapse of the U.S. subprime-mortgage market.

``Central banks are committed to providing banks with as much cash as is necessary to prevent pressures escalating,'' said Lena Komileva, an economist in London at Tullett Prebon Plc, part of the world's second-biggest inter-dealer broker. ``There's a consensus view among policy officials that further coordinated action will be required to achieve this.''

The three-month euro interbank offered rate, or Euribor, dropped 2 basis points to 4.56 percent, the European Banking Federation said. It was at a seven-year high of 4.95 percent on Dec. 12, when policy makers said they would combine forces to counter a short-term credit shortage. The comparable pound rate fell 1 basis point to 5.67 percent.

 

Read more at Bloomberg

Rock raises £2.25bn from mortgage sale

(FT.com) - Northern Rock expects to raise £2.25bn through the sale of its portfolio of Lifetime home equity release mortgages to JPMorgan Chase at a premium to its balance sheet value.

 

The move is likely to be seen as an encouraging sign that buyers are beginning to emerge for mortgage assets owned by the stricken bank that are regarded as good quality.

 

However it may raise concerns that Northern Rock is selling off the better quality assets, leaving the government and shareholders with less attractive portfolios.

A spokesman for Northern Rock said: "It's not a question of degrees of quality. This was an opportunity to sell a relatively small percentage of our assets."

In another twist in the Northern Rock saga, trustees of the pension scheme have asked the company to place members on the same footing as depositors by setting aside enough mortgage assets to guarantee that all promised benefits could be fully paid if the bank becomes insolvent.

The move, detailed in a letter to scheme members sent on Friday, puts yet more pressure on a government that has already extended more than £25bn in loans to keep Northern Rock solvent.

But the bank would be unable to meet the trustees' request to pledge assets as security without the permission of its regulator and the guarantors of its loans - the Financial Services Authority, Bank of England and the Treasury.

In the letter, Sir David Chapman, chairman of the Trustees, notes that if Northern Rock were to become insolvent immediately "significant additional funds would need to be paid into the scheme" of around £150m to £200m.

Last October, as the lender's woes mounted, Trustees moved to shift the scheme's assets into much less risky areas. Nearly half is currently invested in index-linked government gilts.

But Friday's sale of the mortgage portfolio may raise hopes at the Treasury, the FSA and the Bank that a private sale may still be possible.

However, among leading shareholders concerns that the bank is selling the lender's most desirable assets may rise.

The sale value of £2.2bn, represents a premium of 2.25 per cent or about £50m over the balance sheet value, bringing the total cash proceeds from the agreed sale to £2.25bn. The Lifetime assets comprise about 2 per cent of the company's total assets.

Andy Kuipers, new chief executive, welcomed the sale.

"This...is a positive development in the company's ongoing strategic review," he said in a statement.

"It illustrates the quality of our assets, which has enabled us to achieve a sale at a premium despite continuing difficult financial markets, and will allow the company to reduce its debt to the Bank of England."

Read more at FT.com

FTSE falls amid global weakness, food stocks weigh

(Reuters) - Britain's top share index fell on Friday amid global weakness in equities fuelled by fears of more subprime-related writedowns and as food stocks suffered from a brokerage downgrade and profit-warning talk.

Britain's FTSE 100 .FTSE shed 0.3 percent to end at 6,202.0 points, while the pan-European FTSEurofirst 300 benchmark hit its lowest level in over a year before ending down 0.5 percent.

The New York Times reported Merrill Lynch (MER.N: Quote, Profile, Research) is expected to suffer $15 billion in losses stemming from soured mortgage investments, reminding investors the jury was still out on the extent of the fallout of the credit crisis.

This came on the heels of a profit warning from American Express (AXP.N: Quote, Profile , Research).

Worries over global growth pushed the price of crude further off record highs hit last week, taking oil stocks along with it. BP (BP.L: Quote, Profile, Research) fell 0.7 percent and Royal Dutch Shell (RDSa.L: Quote, Profile, Research) shed 1.6 percent as crude slipped to near $93 a barrel.

Unilever (ULVR.L: Quote, Profile, Research) was among the biggest percentage losers on the index after Morgan Stanley downgraded its rating on the consumer goods giant late on Thursday to "underweight" from "equal weight".

Elsewhere in the sector Reckitt Benckiser (RB.L: Quote, Profile, Research) fell 3.4 percent and Associated British Foods (ABF.L: Quote, Profile, Research) fell 0.9 percent. Cadbury (CBRY.L: Quote, Profile, Research) shed nearly 3 percent, with traders citing market talk the confectionery group would issue a profit warning. The company had no immediate comment.

 

Read more at Reuters

Merrill seen suffering $15 billion loss: report

(Reuters) - Merrill Lynch (MER.N: Quote, Profile, Research) is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost twice the company's original estimate, the New York Times reported on Friday.

The losses were prompting the company to raise additional capital from an outside investor, the newspaper said in a report on its Web site. Merrill is expected to disclose the huge write-down when it reports earnings next week, the New York Times said, citing people who had been briefed on the company's plans.

The loss exceeds the $12 billion hit that many Wall Street analysts had forecast, the newspaper said.

 

Read more at Reuters

Tony Blair to join JPMorgan: source

(Reuters) - Former British prime minister Tony Blair is expected on Thursday to join U.S. bank JPMorgan Chase & Co Inc as a senior adviser, according to a person familiar with the situation.

JPMorgan declined to comment. The Financial Times in London first reported the move on its Web site, saying it would be the first of a series positions Blair expects to take in the private sector.

Blair, a key ally of U.S. President George W. Bush, was replaced last year by Gordon Brown as prime minister amid growing discontent over Great Britain's policy in Iraq.

Details of Blair's duties with JPMorgan, the third largest U.S. bank, were not immediately available.

 

Read more at Reuters

S.Africa business confidence falls to 4-year low

(Reuters) - South African business confidence fell to a four-year low in December as companies were nervous about economic growth in 2008, the South African Chamber of Commerce and Industry (SACCI) said on Wednesday.

The Business Confidence Index fell to 94.8 points, its lowest level since November 2003, after declining to 95.8 in the previous month.

SACCI said in a statement a stable rand currency assisted exports and manufacturing output,

"The other sub-indices all turned negative...trade, residential construction and import volumes declined substantially while inflation moved higher while the stock market lacked direction."

Inflation climbed to a four-and-half year high of 7.9 percent year-on-year in November, raising expectations that the central bank would hike interest rates again on Jan 31, after raising them by 400 basis points since June 2006.

 

Read more at Reuters Africa

Bear Stearns Turns to Insider Schwartz for New Course

(Bloomberg) -- In naming insider Alan Schwartz as its new chief executive officer, Bear Stearns Cos. is pursuing a different course than other firms that replaced their leaders after suffering subprime mortgage losses.

Schwartz, an executive with more than 30 years of experience at Bear Stearns, was the hand-picked choice of his predecessor, James ``Jimmy'' Cayne, 73, who remains as non-executive chairman. Other firms such as Merrill Lynch & Co. and Citigroup Inc. sent their CEOs packing and named replacements with extensive experience elsewhere.

The 57-year-old Schwartz is known for his collegial style, which he will need as Bear Stearns seeks to rebuild confidence in the firm, battered by subprime losses and a languishing stock price. Cayne, who stepped down yesterday, wasn't known for his personal skills.

 

Read more at Bloomberg

Eskom may quit South Dunes

(Fin24) - Another large tranche of export entitlement through the Richards Bay Coal Terminal (RBCT) will soon become available for black empowered coal companies if Eskom Enterprises pulls out of the South Dunes Coal Terminal (SDCT).

Eskom Enterprises is a 50% shareholder in the SDCT which has a six million tonnes (Mt) entitlement to export through the RBCT in terms of its R1.2bn phase five expansion.

It is understood that Eskom is reviewing its participation in the SDCT and is likely to decide to opt out meaning its 3Mt entitlement will be up for grabs.

There should be no shortage of bidders for that entitlement. When the RBCT last year offered 9Mt/year of "subscription quota" coal in terms of the phase five expansion it received 26 applications for a total of 26.85Mt/year.

Of those, 18 applications totalling 19Mt met all the pre-qualification criteria but only eight companies were successful.

 

Read more at Fin24

Gold Climbs to Record on Higher Oil Prices, Weakening Dollar

(Bloomberg) -- Gold rose to a record as higher crude oil and a weaker dollar spurred demand for the metal as a hedge against inflation.

Gold is off to its best start to the year since 1980. Oil rose to a record $100 last week, U.S. warships were confronted by Iranian boats over the weekend, and the dollar today fell against 15 of 16 major currencies.

``The U.S. dollar is weakening and oil has picked back up,'' said David Thurtell, a metals analyst at BNP Paribas SA in London. ``There are a lot of supportive reasons to buy and not many reasons to sell.''

Gold for immediate delivery rose as much as $17.84, or 2.1 percent, to $876 an ounce in London, exceeding the previous record of $868.89 set Jan. 3. The metal traded at $874.90 as of 12 p.m. in London. Gold for February delivery rose as much as $16.80, or 2 percent, to $878.80 an ounce on the Comex division of the New York Mercantile Exchange.

The metal last reached an all-time high in New York in 1980, when the dollar was weakening, oil prices were rising and the U.S. and Iran were at loggerheads. U.S. Navy warships were approached by Iranian ``fast boats'' in the Straits of Hormuz on Jan. 6, the U.S. Defense Department said yesterday. The straits are the sea route for about a quarter of the world's oil.

 

Read more at Bloomberg

U.S. Stocks Climb for Second Day; Chevron, Bear Stearns Advance

(Bloomberg) -- U.S. stocks advanced the most in two weeks, led by miners and energy producers, after gold rose to a record and oil rebounded from its biggest decline in more than a month.

Chevron Corp., the second-largest U.S. energy company, and Schlumberger Ltd., the world's biggest oilfield-services provider, climbed. Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. rallied as prices for precious and industrial metals increased. Bear Stearns Cos. gained after a person with knowledge of the matter said Chief Executive Officer James Cayne plans to resign.

The Standard & Poor's 500 Index increased 5.45, or 0.4 percent, to 1,420.62 as of 9:39 a.m. in New York. The Dow Jones Industrial Average added 24.22, or 0.2 percent, to 12,851.71. The Nasdaq Composite Index advanced 2.34, or 0.1 percent, to 2,501.8. About 13 shares climbed for every five that fell on the New York Stock Exchange.

Shares rose in Europe and Asia, led by miners and telephone companies. The Dow Jones Stoxx 600 Index of European shares added 0.9 percent for its first gain of the year.

``With oil where it is right now between $90 and $100, the oil companies do pretty darn well and they still look relatively inexpensive,'' Jeffrey Saut, who helps oversee about $190 billion as chief investment strategist at Raymond James & Associates, said in a Bloomberg Television interview.

U.S. equities also got a boost as the cost for banks to borrow in dollars and euros slid, signaling efforts by central banks to restore confidence in money markets is working. Investors will get further clues on the outlook for economic growth and interest rates from a private report today that may show pending home sales fell for the first time in three months.

 

Read more at Bloomberg

Rand poses 'real risk'

(Fin24) - The deterioration in SA's growth/inflation trade-off should stay limited unless the rand weakens sharply, says chief economist for Citigroup in SA, Jean Mercier.

He adds that he does view the threat to the rand as "a real risk".

"Despite being sheltered from the subprime crisis, growth in SA is suffering from an inflation-induced tightening of monetary policy," says Mercier.

Reuters reports that the rand weakened one percent against the dollar on Monday, tracking weaker global markets as investors fled risky assets.

Read more at Fin24

Electronics makers keep eye on U.S. economy

(Reuters) - Electronics makers considering the strain on the U.S. economy are hoping consumers will cut other expenses first, but many see some worrying signs ahead.

Gathered in Las Vegas this week for the Consumer Electronics Show, gadget, cell phone and television makers are placing their bets on whether U.S. economic troubles from rising unemployment to mortgage market problems will stop consumer spending.

"We need to watch just how cold sentiment is getting," Toshihiko Fujimoto, chief executive of Sharp Corp's (6753.T: Quote, Profile, Research) Sharp Electronics, said on Sunday. "We can't say business is especially good."

Sony Corp's (6758.T: Quote, Profile, Research) Sony Electronics President Stan Glasgow, who oversees the U.S. electronics business, told Reuters the company had strong sales in recent months, boosted by demand for its Bravia line of televisions.

 

Read more at Reuters

Wal-Mart May Appeal $33.5 Million North Carolina Court Decision

(Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, may appeal a judge's dismissal of its attempt to get a $33.5 million refund from North Carolina's tax authorities.

The retailer contends it's entitled to the return of taxes and penalties it paid after the state said it couldn't deduct store rents to Wal-Mart real estate units.

The decision threatens tax deductions Bentonville, Arkansas-based Wal-Mart and other companies can get by paying rent to real-estate investment trust units that transfer tax- free income to their owners. The Wall Street Journal reported that Wal-Mart may have saved $230 million in state taxes across the U.S. over four years through similar arrangements.

 

Read more at Bloomberg

Ford Plans to Introduce More Fuel-Efficient Engine in 2009

(Bloomberg) -- Ford Motor Co., the second-largest U.S.-based automaker, plans to introduce a new, more fuel- efficient engine as the company tries to halt a sales slide in its home market.

Ford says the EcoBoost engine can improve mileage by as much as 20 percent. The new engine uses turbocharging, which forces air through it. The company says the EcoBoost engine can be smaller and lighter without sacrificing power.

``Customers do want better fuel economy,'' Derrick Kuzak, Ford's product-development chief, told reporters during a Dec. 11 briefing at a company facility in Dearborn, Michigan. ``We need to do it to gain share and volume.''

Ford, which is also based in Dearborn, was passed by Toyota Motor Corp. in 2007 for the No. 2 spot in U.S. sales. Ford had held the position since 1931 and hasn't been third or smaller in U.S. sales since 1905. The company has had 12 consecutive years of declining U.S. market share.

 

Read more at Bloomberg

US STOCKS-Market sinks as jobs data stirs recession fears

(Reuters) - U.S. stocks tumbled on Friday, dragging the Dow to its worst three-day start to a year since the Great Depression, as a sharp rise in the unemployment rate heightened fears the economy is heading into a recession.

Technology shares were the worst performer in a broad-based decline after chip maker Intel Corp skidded 8.1 percent on concerns that businesses are unlikely to upgrade computer equipment in the face of a slowdown.

The Nasdaq fell 3.77 percent, bringing the index to its worst three-day kick-off to a new year since it was created in 1971.

The U.S. Labor Department reported job creation nearly ground to a halt in December and unemployment rose to a two-year high of 5 percent.

"The payroll numbers are showing that we don't have the jobs, and if you don't have job income you don't have consumers doing any spending," said Gary Shilling, president of A. Gary Shilling & Co. of Springfield, New Jersey. "I don't think there's much question we're in a recession now."

 

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U.S. Stocks Fall After Job Growth Misses Forecast; Apple Drops

(Bloomberg) -- The U.S. stock market got off to its worst start since 2000 after government reports on jobs and manufacturing added to concern the economy will sink into recession.

Apple Inc., maker of the iPod music player, fell the most since April 2005 and was the biggest drag on the Standard & Poor's 500 Index. Apple declined after Intel Corp., the largest chipmaker, was downgraded by JPMorgan Chase & Co. Alcoa Inc., Home Depot Inc. and Hewlett-Packard Co. led the Dow Jones Industrial Average to its third retreat in four days.

 

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Consumers late payers on most loans since recession

(Reuters) - Americans are falling further behind on consumer loans, with late payments rising to the highest level since the nation's last recession in 2001, data released Thursday show.

In its quarterly study of consumer borrowing, the American Bankers Association said the percentage of loans at least 30 days past due rose to 2.44 percent in the July-to-September period from 2.27 percent in the previous quarter.

The delinquency rate, which covers eight loan categories, was the highest since a 2.51 percent rate in the second quarter of 2001. Late payments on some types of loans rose to levels not seen since the 1990s.

The ABA attributed some of the summer increase to rising oil prices and the inability of thousands of homeowners to keep up with mortgage payments.

 

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Oil majors' winnings from $100/barrel seen limited

(Reuters) - Crude prices at a $100/barrel should boost major international oil companies' profits, but increasing competition from governments and suppliers for a bigger share of the bonanza will cap their gains.

Shares in European oil companies opened higher on Thursday after U.S. crude hit a record $100/barrel on Wednesday.

The DJ Stoxx European oil and gas sector index was up 1.9 percent at 8:40 a.m. EST on Thursday, echoing a smaller rise across the U.S. oil industry on Wednesday.

 

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Tata in Talks to Buy Ford's Jaguar, Land Rover Units

(Bloomberg) --Ford Motor Co. selected Tata Motors Ltd. as the preferred bidder for Jaguar and Land Rover, putting India's largest truckmaker in a position to take over two of the best-known luxury auto brands.

Tata and the U.S. automaker ``will proceed with further substantive discussions,'' Ford Executive Vice President Lewis Booth said in a statement today. ``There is still a considerable amount of work to do.''

Buying the iconic British brands would give Mumbai-based Tata a presence outside Asia and provide access to new technology. A sale would allow Ford, the world's third-largest automaker, to focus on revamping its North American operations, the biggest cause of a record $12.6 billion loss in 2006.

``Tata gains an entry into the prestige market, although the snob factor says an Indian Jaguar will be a tough sell,'' said Stephen Pope, chief global markets strategist at Cantor Fitzgerald in London. Ford, of Dearborn, Michigan, may get 1 billion pounds ($1.98 billion) from a sale, he estimated.

The talks comes less than a year after the 139-year-old Tata group, led by Harvard-educated Ratan Tata, bought steelmaker Corus Group Plc. for $12.9 billion. That made Tata Steel Ltd. one of the world's top 10 steel producers.

 

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U.S. Stocks Rise on Factory Report; Exxon Mobil, Monsanto Gain

(Bloomberg) - U.S. stocks rose, led by oil companies, after a government report showed orders to petroleum refiners climbed by the most in two years.

Exxon Mobil Corp. and Chevron Corp., the largest U.S. energy producers, gained after the Commerce Department said a 16 percent jump in demand at refiners helped boost factory orders by three times the forecast rate. Monsanto Co., the largest seed maker, led commodity companies to the biggest gain in the Standard & Poor's 500 Index after profit topped analysts' estimates.

The S&P 500 added 4.97, or 0.3 percent, to 1,452.13 as of 11:13 a.m. in New York, following its worst decline in two weeks yesterday. The Dow Jones Industrial Average increased 52.76, or 0.4 percent, to 13,096.72. The Nasdaq Composite Index advanced 1.24, or 0.1 percent, to 2,610.87.

Orders to U.S. factories rose 1.5 percent in November, the most in four months, and were higher in October than first reported, according to the Commerce Department. A report from ADP Employer Services showed companies in the U.S. added 40,000 jobs in December, more than projected. The reports helped assuage concern the U.S. economy is headed for a recession.

``It is a relief to have factory orders not only increase threefold greater than expected but also have a revision up of last month,'' said Thomas Sowanick, who helps manage $10 billion as chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey.

 

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Philippines to Boost Security After Attack on Xstrata

(Bloomberg) - Security at mines in the Philippines will be stepped up after a New Year's Day raid by communist rebels against Xstrata Plc's $2 billion copper-gold project in which a local army post was shot up and buildings torched.

``There was a lapse of security there because the mine was located near an army camp,'' Natural Resources Secretary Lito Atienza said, referring to Xstrata's Tampakan mine, which is under development. Defense officials will meet next week to review mine security plans, Atienza said in a phone interview today.

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Spot gold hits record high above $850 per ounce

(Reuters) - Spot gold hit a record high at $855.10 an ounce on Wednesday in buying fuelled by a struggling dollar, surging oil and simmering geo-political tensions, traders said.

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