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