Jan. 17 (Bloomberg) -- The yen and dollar weakened against most of their major counterparts after China’s gross domestic product expanded more than economists estimated and as advances in Asian stocks reduced the appeal of haven currencies.
The Australian dollar climbed versus 15 of its 16 major peers on prospects demand for the nation’s commodities will be sustained in China, Australia’s biggest export market. The yen retreated from near an 11-year high against the euro before U.S. data today projected to show manufacturing in the New York region expanded in January at the fastest pace in eight months. Singapore’s dollar strengthened after a report showed the city state’s exports unexpectedly gained in December.
“The stronger-than-expected China GDP helped boost risk sentiment in the markets a little bit,” said Minoru Shioiri, chief manager of foreign-exchange trading Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Risk assets such as the Aussie dollar and stocks are higher, while the dollar and yen are being sold.”
The yen depreciated 0.4 percent to 97.64 per euro as of 2:13 p.m. in Tokyo after rising to 97.04 yesterday, the strongest level since December 2000. The dollar lost 0.5 percent to $1.2728 per euro, breaking a two-day gain. The greenback was little changed at 76.72 yen. U.S. markets were closed yesterday for a holiday.
China’s economy expanded 8.9 percent in the three months ended Dec. 31 from a year earlier, the statistics bureau said today. Economists in a Bloomberg News survey had estimated an 8.7 percent gain.
‘Hard Landing’
The Australian dollar climbed 0.6 percent to $1.0378 and reached $1.0398, the strongest since Nov. 9. The so-called Aussie appreciated 0.1 percent to 81.54 euro cents, after earlier touching a record high of 81.64. The MSCI Asia Pacific Index of shares rose 1.2 percent, boosting the allure of higher- yielding currencies.
Today’s GDP report “certainly allays fears that China is going to see a hard landing and that is generally seen as a positive for the world,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “It’s hard to get too downbeat in the near term” about the Australian and New Zealand dollars.
The Federal Reserve Bank of New York’s general economic index rose to 11 this month, the highest since May, according to economist projections before the data. Readings higher than zero signal expansion.
Declines in the yen and dollar were limited before the European Financial Stability Facility, Spain and Greece sell bills today amid concern rating cuts by Standard & Poor’s will sap demand for European debt.
EFSF Downgrade
S&P yesterday removed the AAA rating for the EFSF, which is designed to fund rescue packages for Greece, Ireland and Portugal, after reducing the top grades of France and Austria by one level on Jan. 13. The company also downgraded Italy, Portugal and Spain.
The euro area’s bailout fund is scheduled to sell 1.5 billion euros ($1.9 billion) of bills. Greece will also offer bills, while Spain will auction securities maturing in 364 and 518 days.
“You can’t help becoming fairly pessimistic about the euro,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency margin company. “The EFSF’s downgrade limits options available for European leaders to overcome the sovereign crisis, and poor results at today’s auction are likely to lead to euro selling.”
The common currency has lost 4.2 percent over the past six months, according to the Bloomberg Correlation-Weighted Indexes. The yen has risen 9.3 percent, the best performance among the 10 currencies tracked by the gauges, while the dollar has advanced 7.4 percent.
Greek Talks
Greece will resume talks tomorrow with the Institute of International Finance, which represents private creditors, Greek Finance Minister Evangelos Venizelos has said. The Washington- based IIF broke off talks last week after failing to agree with the government about how much money investors will lose by swapping their bonds.
“Greece will default very shortly because even the debt exchange that has been proposed is a default by our definition,” Moritz Kraemer, S&P’s managing director of European sovereign ratings, said yesterday in an interview with Bloomberg Television. “It’s a distressed exchange.”
A German index of investor and analyst confidence in the economic outlook was minus 49.4 in January, according to a Bloomberg News survey of economists before the ZEW Center for European Economic Research releases the data today. While it would be an improvement from minus 53.8 in December, the gauge would be below zero for an eighth month.
Singapore’s dollar advanced 0.4 percent to S$1.2861 versus its U.S. counterpart after non-oil domestic exports jumped 9 percent last month from a year earlier, compared with the median forecast in a Bloomberg survey for a 1.2 percent decrease. A surge in pharmaceutical overseas sales offset a slump in electronics shipments.
(businessweek.com)
Monday 16 January 2012
China Statistics Chief: Should Be 'Confident' In 2012 GDP Outlook
BEIJING (Dow Jones)--China should be "confident" of its economic performance this year, despite gloomy economic prospects for the European Union and the U.S., Statistics Bureau Chief Ma Jiantang said Tuesday.
"The fundamentals for China's stable, relatively fast economic growth in the medium to long term haven't changed... For the economy in 2012, we should still be full of confidence," Ma said at a press briefing.
He said China's fourth-quarter gross domestic product growth of 8.9% is "within a normal range," and consistent with the government's macro-economic policy goals.
Ma made his remarks shortly after the bureau announced China's gross domestic product data. The 8.9% on-year growth in the fourth quarter of 2011 was slower than the previous quarter's 9.1% rise, but faster than economists' expectations for an 8.6% expansion. For the 2011 full year, China's GDP rose 9.2%, compared with a 10.4% expansion in 2010.
Ma said China should maintain its proactive fiscal policy and prudent monetary policy as the external economic environment is complicated.
Weakness in Europe and the U.S. are widely expected to hurt China's export growth this year, particularly in the first half.
Ma noted that China still faces medium- and long-term price pressures, with the longer-term pressures stemming from rising wages and land costs.
"It looks like China's biggest domestic economic challenge is still maintaining stable, relatively fast growth while also ensuring relative stability in price levels and making progress in (economic) restructuring," he said.
China has adopted tighter monetary policies to prevent inflation from spiraling out of control, but Beijing has more recently eased up on its monetary curbs.
Ma said he didn't see big challenges arising from local government debt or weakness in the real estate market, though these areas need to be monitored.
Economists have said these two areas pose the greatest risks to the nation's banking system.
Ma also said China should accelerate its economic restructuring and aim for relatively fast and balanced economic growth.
-By Owen Fletcher, Dow Jones Newswires; 8610 8400 7702; owen.fletcher@dowjones.com
"The fundamentals for China's stable, relatively fast economic growth in the medium to long term haven't changed... For the economy in 2012, we should still be full of confidence," Ma said at a press briefing.
He said China's fourth-quarter gross domestic product growth of 8.9% is "within a normal range," and consistent with the government's macro-economic policy goals.
Ma made his remarks shortly after the bureau announced China's gross domestic product data. The 8.9% on-year growth in the fourth quarter of 2011 was slower than the previous quarter's 9.1% rise, but faster than economists' expectations for an 8.6% expansion. For the 2011 full year, China's GDP rose 9.2%, compared with a 10.4% expansion in 2010.
Ma said China should maintain its proactive fiscal policy and prudent monetary policy as the external economic environment is complicated.
Weakness in Europe and the U.S. are widely expected to hurt China's export growth this year, particularly in the first half.
Ma noted that China still faces medium- and long-term price pressures, with the longer-term pressures stemming from rising wages and land costs.
"It looks like China's biggest domestic economic challenge is still maintaining stable, relatively fast growth while also ensuring relative stability in price levels and making progress in (economic) restructuring," he said.
China has adopted tighter monetary policies to prevent inflation from spiraling out of control, but Beijing has more recently eased up on its monetary curbs.
Ma said he didn't see big challenges arising from local government debt or weakness in the real estate market, though these areas need to be monitored.
Economists have said these two areas pose the greatest risks to the nation's banking system.
Ma also said China should accelerate its economic restructuring and aim for relatively fast and balanced economic growth.
-By Owen Fletcher, Dow Jones Newswires; 8610 8400 7702; owen.fletcher@dowjones.com
WRAPUP 2-S&P downgrades euro zone rescue fund, Greece pressured
BRUSSELS, Jan 17 (Reuters) - U.S. rating agency Standard & Poor's cut its credit rating of the euro zone's EFSF rescue fund on Monday, and Greece was under pressure to break a deadlock in debt swap talks if it is to avoid an unruly default.
French Finance Minister Francois Baroin said there was no need to shore up the European Financial Stability Facility after S&P downgraded it by one notch to AA+ from triple-A, echoing the view of Germany, the only major euro zone member to retain a top-notch credit rating.
S&P said in a statement the decision was all but inevitable following identical cuts three days earlier to the creditworthiness of France and Austria, two of the EFSF's guarantors.
"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place," the agency said in a statement.
"We have therefore lowered to AA+ the issuer credit rating of the EFSF, as well as the issue ratings on its long-term debt securities."
Financial markets, which had fallen after the mass downgrades of euro zone members on Friday, showed little reaction to the latest blow -- which had been expected -- and Japan, a major buyer of EFSF bonds, said they remained an "attractive" investment.
A growing number of experts, including a Standard & Poor's official, warned that a Greek default was on the cards, after Greece's talks with creditors broke down on Friday.
Greece was under growing pressure to secure a last-ditch agreement with its private creditors to accept voluntary losses on their holdings of Greek bonds.
Athens risks going bankrupt when 14.5 billion euros of bond redemptions fall due in late March. Without a private sector bond swap involving a voluntary writedown, a 130 billion euro second international bailout for Greece could fall apart.
The talks with creditor banks broke down because of different views on what interest rate is acceptable, the head of the group leading private sector talks said.
Charles Dallara, managing director of the Institute of International Financial, said the banks were "very surprised" at the stance taken by some officials representing both governments and multilateral institutions, without naming them.
The EFSF was set up by the 17 governments that share the European single currency in May 2010 and has so far been used to provide emergency loans to Ireland and Portugal. It is also expected to contribute to a second bailout of Greece.
The fund has an effective lending capacity of 440 billion euros, which depends on guarantees, mainly from the euro zone's AAA countries, only four of which now remain: Germany, Luxembourg, Finland and the Netherlands.
LENDING CAPACITY UNAFFECTED
In a statement, the EFSF said the downgrade would not affect its lending capacity, and emphasised that its short-term rating remained at S&P's top level.
"The downgrade to 'AA+' by only one credit agency will not reduce EFSF's lending capacity of 440 billion euros," said the fund's chief executive, Klaus Regling.
"EFSF has sufficient means to fulfill its commitments under current and potential future adjustment programmes until the ESM becomes operational in July 2012," he added.
The ESM -- the European Stability Mechanism -- is a permanent rescue fund that is expected to have an effective capacity of 500 billion euros, based on paid-in capital of 80 billion euros and callable capital of 620 billion euros.
French Finance Minister Francois Baroin said there was no need to shore up the EFSF despite the S&P rating downgrade.
"The EFSF has kept intact its ability to lend, with enough means and guarantees to fulfil the full range of its present and future commitments," he said in a statement. "There is therefore no need to act on the EFSF at the moment."
German Chancellor Angela Merkel's spokesman, Steffen Seibert told reporters: "The government has no reason to believe that the volume of guarantees that the EFSF has now should not be sufficient to fulfill its current obligations.
"We should not forget that it has been decided to significantly move forward the ESM and to have it in place in mid-2012, one year earlier than planned."
There was also support from Japan, with Finance Minister Jun Azumi saying Tokyo's trust in EFSF bonds, in which it has so far invested 21 billion euros, had not been shaken.
"Japan has bought them by certain amounts and our stance will not immediately change just because of the downgrade," Azumi told reporters after a cabinet meeting.
The euro hovered just above a 17-month trough against the dollar early in Asia on Tuesday, but reaction to the S&P downgrade was muted. Trading overnight was subdued as U.S. markets were shut for the Martin Luther King holiday.
The head of Austria's debt office told Reuters the loss of Vienna's AAA status had also been priced into the market already, and Austria was able to sell treasury bills on Monday at rates very close to zero.
French President Nicolas Sarkozy brushed off the historic loss of Paris' top credit rating for the first time since 1975, a blow to his campaign for re-election in May, saying France's policy would not be dictated by rating agencies.
Contrasting S&P's move with a statement by rival watchdog Moody's, which still has France on an Aaa rating, he said: "My deep belief is that it changes nothing. We must reduce the deficit, we must reduce our spending and we must improve the competitiveness of our economy to return to a path of growth."
LOSERS TO PAY?
Italian Prime Minister Mario Monti, whose debt-laden country was downgraded by two notches along with Spain, called last week during a visit to Berlin for the EFSF to be increased to ward off attacks on his country's bonds.
But a senior politician in Merkel's conservative CDU party, Michael Meister, said it was the downgraded countries that should increase their guarantees for the fund.
"Germany was not downgraded so our contribution should not be changed. Countries that were affected must contribute more to the guarantees," Meister told Reuters.
Sources familiar with Greece's talks with its private creditors said EU paymaster Germany was pressing for new bonds to be given to banks in the planned swap to carry a low coupon of less than four percent that would increase the banks' effective losses to 75 percent.
The IMF was also weighing on the talks by warning that the Greek economy and the euro zone's economic outlook have worsened since the bailout package was agreed in October, raising Athens' funding needs to make its debt sustainable by 2020, they said.
Greece put a brave face on the standoff. "There is a little pause in these discussions," Greek Prime Minister Lucas Papademos told CNBC television. "But I am confident they will continue and we will reach an agreement that is mutually acceptable in time."
French Finance Minister Francois Baroin said there was no need to shore up the European Financial Stability Facility after S&P downgraded it by one notch to AA+ from triple-A, echoing the view of Germany, the only major euro zone member to retain a top-notch credit rating.
S&P said in a statement the decision was all but inevitable following identical cuts three days earlier to the creditworthiness of France and Austria, two of the EFSF's guarantors.
"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place," the agency said in a statement.
"We have therefore lowered to AA+ the issuer credit rating of the EFSF, as well as the issue ratings on its long-term debt securities."
Financial markets, which had fallen after the mass downgrades of euro zone members on Friday, showed little reaction to the latest blow -- which had been expected -- and Japan, a major buyer of EFSF bonds, said they remained an "attractive" investment.
A growing number of experts, including a Standard & Poor's official, warned that a Greek default was on the cards, after Greece's talks with creditors broke down on Friday.
Greece was under growing pressure to secure a last-ditch agreement with its private creditors to accept voluntary losses on their holdings of Greek bonds.
Athens risks going bankrupt when 14.5 billion euros of bond redemptions fall due in late March. Without a private sector bond swap involving a voluntary writedown, a 130 billion euro second international bailout for Greece could fall apart.
The talks with creditor banks broke down because of different views on what interest rate is acceptable, the head of the group leading private sector talks said.
Charles Dallara, managing director of the Institute of International Financial, said the banks were "very surprised" at the stance taken by some officials representing both governments and multilateral institutions, without naming them.
The EFSF was set up by the 17 governments that share the European single currency in May 2010 and has so far been used to provide emergency loans to Ireland and Portugal. It is also expected to contribute to a second bailout of Greece.
The fund has an effective lending capacity of 440 billion euros, which depends on guarantees, mainly from the euro zone's AAA countries, only four of which now remain: Germany, Luxembourg, Finland and the Netherlands.
LENDING CAPACITY UNAFFECTED
In a statement, the EFSF said the downgrade would not affect its lending capacity, and emphasised that its short-term rating remained at S&P's top level.
"The downgrade to 'AA+' by only one credit agency will not reduce EFSF's lending capacity of 440 billion euros," said the fund's chief executive, Klaus Regling.
"EFSF has sufficient means to fulfill its commitments under current and potential future adjustment programmes until the ESM becomes operational in July 2012," he added.
The ESM -- the European Stability Mechanism -- is a permanent rescue fund that is expected to have an effective capacity of 500 billion euros, based on paid-in capital of 80 billion euros and callable capital of 620 billion euros.
French Finance Minister Francois Baroin said there was no need to shore up the EFSF despite the S&P rating downgrade.
"The EFSF has kept intact its ability to lend, with enough means and guarantees to fulfil the full range of its present and future commitments," he said in a statement. "There is therefore no need to act on the EFSF at the moment."
German Chancellor Angela Merkel's spokesman, Steffen Seibert told reporters: "The government has no reason to believe that the volume of guarantees that the EFSF has now should not be sufficient to fulfill its current obligations.
"We should not forget that it has been decided to significantly move forward the ESM and to have it in place in mid-2012, one year earlier than planned."
There was also support from Japan, with Finance Minister Jun Azumi saying Tokyo's trust in EFSF bonds, in which it has so far invested 21 billion euros, had not been shaken.
"Japan has bought them by certain amounts and our stance will not immediately change just because of the downgrade," Azumi told reporters after a cabinet meeting.
The euro hovered just above a 17-month trough against the dollar early in Asia on Tuesday, but reaction to the S&P downgrade was muted. Trading overnight was subdued as U.S. markets were shut for the Martin Luther King holiday.
The head of Austria's debt office told Reuters the loss of Vienna's AAA status had also been priced into the market already, and Austria was able to sell treasury bills on Monday at rates very close to zero.
French President Nicolas Sarkozy brushed off the historic loss of Paris' top credit rating for the first time since 1975, a blow to his campaign for re-election in May, saying France's policy would not be dictated by rating agencies.
Contrasting S&P's move with a statement by rival watchdog Moody's, which still has France on an Aaa rating, he said: "My deep belief is that it changes nothing. We must reduce the deficit, we must reduce our spending and we must improve the competitiveness of our economy to return to a path of growth."
LOSERS TO PAY?
Italian Prime Minister Mario Monti, whose debt-laden country was downgraded by two notches along with Spain, called last week during a visit to Berlin for the EFSF to be increased to ward off attacks on his country's bonds.
But a senior politician in Merkel's conservative CDU party, Michael Meister, said it was the downgraded countries that should increase their guarantees for the fund.
"Germany was not downgraded so our contribution should not be changed. Countries that were affected must contribute more to the guarantees," Meister told Reuters.
Sources familiar with Greece's talks with its private creditors said EU paymaster Germany was pressing for new bonds to be given to banks in the planned swap to carry a low coupon of less than four percent that would increase the banks' effective losses to 75 percent.
The IMF was also weighing on the talks by warning that the Greek economy and the euro zone's economic outlook have worsened since the bailout package was agreed in October, raising Athens' funding needs to make its debt sustainable by 2020, they said.
Greece put a brave face on the standoff. "There is a little pause in these discussions," Greek Prime Minister Lucas Papademos told CNBC television. "But I am confident they will continue and we will reach an agreement that is mutually acceptable in time."
Friday 13 January 2012
S&P Europe Downgrades Said to Be Imminent
LONDON—Standard & Poor's has notified European governments that it is about to announce downgrades in the credit ratings of France and a number of European sovereigns as early as Friday, said two people familiar with the matter.
One of the people said an S&P notice is being circulated among euro-zone governments and that an announcement "could be imminent." S&P declined to comment.
In December, the ratings firm placed 15 of the 17 euro-zone countries on watch for possible downgrade, citing new systemic stresses that are pressuring the euro zone's credit standing as a whole.
Talk that S&P is on the brink of downgrading several European countries pushed the euro to a fresh session low against the dollar in Friday trading in New York. The common currency dropped as low as $1.2662, down from $1.2814 late Thursday.
The biggest question for financial markets is whether France will lose its triple-A rating after showing signs of fiscal slippage during its economic slowdown over the past year.
A downgrade of France's rating will, indirectly, raise the cost of borrowing for the European Financial Stability Facility, whose own rating depends largely on the credit quality of the countries that back it. The EFSF, which has also been placed on negative credit watch by the S&P, would then have to pass on those higher borrowing costs to countries such as Ireland and Portugal, making it even harder for them to reduce their budget deficits as planned.
The downgrades would also be a blow to Italy, which had seen a decline in its bond yields in recent sessions. The euro zone's third-largest economy is scheduled to sell €440 billion ($563.8 billion) of bonds and treasury bills in 2012 and investors are expected to demand higher yields for the risk of holding a lower-rated security.
The S&P's negative ratings watch included top-rated Germany, France, the Netherlands, Austria, Finland and Luxembourg—countries that S&P said could lose their premier credit status if European policy makers continue stumbling in efforts to tackle the immediate market confidence crisis. S&P also pointed to markedly higher risk premiums on a growing number of euro-zone sovereigns, including some rated triple-A.
Germany, which also has a triple-A credit rating, isn't expected to be among the downgrades.
Greece and Cyprus were the only two euro-zone sovereigns not affected by S&P's latest action. Cyprus had already been placed on negative watch, and Greece's status remained unchanged because its double-C rating already connotes a relatively high near-term probability of default.
Fitch Ratings, which has placed six euro-zone countries on negative ratings watch, has said it expects to complete its review by the end of January.
Bond yields of indebted euro-zone states reversed earlier falls and moved sharply higher on the news.
The Italian 10-year yield added 0.2 percentage points to trade at 6.75% after having made a low of 6.46% Friday, according to data from Tradeweb.
Spanish yields joined in the bearish move with the 10-year adding 0.18 percentage points to trade at 5.21% after having traded as low as 5% Friday.
France wasn't immune from the bearish sentiment with the 10-year bond yield rising by 0.07 percentage points to 3.03%.
Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved
(online.WSJ.com)
One of the people said an S&P notice is being circulated among euro-zone governments and that an announcement "could be imminent." S&P declined to comment.
In December, the ratings firm placed 15 of the 17 euro-zone countries on watch for possible downgrade, citing new systemic stresses that are pressuring the euro zone's credit standing as a whole.
Talk that S&P is on the brink of downgrading several European countries pushed the euro to a fresh session low against the dollar in Friday trading in New York. The common currency dropped as low as $1.2662, down from $1.2814 late Thursday.
The biggest question for financial markets is whether France will lose its triple-A rating after showing signs of fiscal slippage during its economic slowdown over the past year.
A downgrade of France's rating will, indirectly, raise the cost of borrowing for the European Financial Stability Facility, whose own rating depends largely on the credit quality of the countries that back it. The EFSF, which has also been placed on negative credit watch by the S&P, would then have to pass on those higher borrowing costs to countries such as Ireland and Portugal, making it even harder for them to reduce their budget deficits as planned.
The downgrades would also be a blow to Italy, which had seen a decline in its bond yields in recent sessions. The euro zone's third-largest economy is scheduled to sell €440 billion ($563.8 billion) of bonds and treasury bills in 2012 and investors are expected to demand higher yields for the risk of holding a lower-rated security.
The S&P's negative ratings watch included top-rated Germany, France, the Netherlands, Austria, Finland and Luxembourg—countries that S&P said could lose their premier credit status if European policy makers continue stumbling in efforts to tackle the immediate market confidence crisis. S&P also pointed to markedly higher risk premiums on a growing number of euro-zone sovereigns, including some rated triple-A.
Germany, which also has a triple-A credit rating, isn't expected to be among the downgrades.
Greece and Cyprus were the only two euro-zone sovereigns not affected by S&P's latest action. Cyprus had already been placed on negative watch, and Greece's status remained unchanged because its double-C rating already connotes a relatively high near-term probability of default.
Fitch Ratings, which has placed six euro-zone countries on negative ratings watch, has said it expects to complete its review by the end of January.
Bond yields of indebted euro-zone states reversed earlier falls and moved sharply higher on the news.
The Italian 10-year yield added 0.2 percentage points to trade at 6.75% after having made a low of 6.46% Friday, according to data from Tradeweb.
Spanish yields joined in the bearish move with the 10-year adding 0.18 percentage points to trade at 5.21% after having traded as low as 5% Friday.
France wasn't immune from the bearish sentiment with the 10-year bond yield rising by 0.07 percentage points to 3.03%.
Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved
(online.WSJ.com)
Euro Heads for Weekly Advance on Italy Bond Gains, ECB Optimism
Jan. 13 (Bloomberg) -- The euro headed for its first weekly gain versus the dollar in six weeks as Italian bonds advanced and European Central Bank President Mario Draghi said policy makers have averted a credit shortage.
The 17-nation currency strengthened earlier as Italy prepared to auction notes today. The Dollar Index was poised for its first weekly decline in three weeks before a U.S. report that economists said will show consumer confidence improved this month, reducing demand for the U.S. currency as a haven.
“Investors will focus on the outcome of today’s Italian bond auction,” Valentin Marinov, a senior foreign-exchange strategist at Citigroup Inc. in London, wrote in a note to clients. “Indications of resilient private demand could help the euro extend its gains further, especially against the dollar and yen.”
The euro was little changed at $1.2829 at 9:57 a.m. in London, having strengthened 0.9 percent this week, the first five-day advance since the period ended Dec. 2. The currency was was little changed at 98.38 yen, after advancing as much as 0.5 percent. The dollar fell 0.1 percent to 76.69 yen.
Italy will sell bonds due in 2014 and 2018 today after the nation’s borrowing costs more than halved at an auction of one- year bills yesterday. Italy’s 10-year yield fell 12 basis points, or 0.12 percentage point, today to 6.52 percent. Spanish 10-year yields dropped four basis points to 5.10 percent.
Stabilization Signs
Draghi said the central bank’s massive injection of cash into the financial system last month is beginning to flow through into credit markets. “There are tentative signs of stabilization of economic activity,” he said in Frankfurt after the ECB’s policy meeting yesterday. Policy makers kept the benchmark rate at a record low of 1 percent after two straight quarter-point reductions.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.1 percent to 80.739, having declined 0.6 percent this week.
The Thomson Reuters/University of Michigan preliminary consumer confidence index rose to 71.5 for January from 69.9 in December, according to a Bloomberg survey before today’s report.
The dollar has depreciated 0.7 percent in the past week, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 0.2 percent.
Gains in the euro may be tempered as it approaches levels of so-called resistance at $1.2860 and $1.2933, according to Karen Jones, head of fixed-income, commodity and currency technical analysis at Commerzbank AG in London. These represent last-year’s low and a short-term down channel, she wrote today in a note to clients.
(businessweek.com)
The 17-nation currency strengthened earlier as Italy prepared to auction notes today. The Dollar Index was poised for its first weekly decline in three weeks before a U.S. report that economists said will show consumer confidence improved this month, reducing demand for the U.S. currency as a haven.
“Investors will focus on the outcome of today’s Italian bond auction,” Valentin Marinov, a senior foreign-exchange strategist at Citigroup Inc. in London, wrote in a note to clients. “Indications of resilient private demand could help the euro extend its gains further, especially against the dollar and yen.”
The euro was little changed at $1.2829 at 9:57 a.m. in London, having strengthened 0.9 percent this week, the first five-day advance since the period ended Dec. 2. The currency was was little changed at 98.38 yen, after advancing as much as 0.5 percent. The dollar fell 0.1 percent to 76.69 yen.
Italy will sell bonds due in 2014 and 2018 today after the nation’s borrowing costs more than halved at an auction of one- year bills yesterday. Italy’s 10-year yield fell 12 basis points, or 0.12 percentage point, today to 6.52 percent. Spanish 10-year yields dropped four basis points to 5.10 percent.
Stabilization Signs
Draghi said the central bank’s massive injection of cash into the financial system last month is beginning to flow through into credit markets. “There are tentative signs of stabilization of economic activity,” he said in Frankfurt after the ECB’s policy meeting yesterday. Policy makers kept the benchmark rate at a record low of 1 percent after two straight quarter-point reductions.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.1 percent to 80.739, having declined 0.6 percent this week.
The Thomson Reuters/University of Michigan preliminary consumer confidence index rose to 71.5 for January from 69.9 in December, according to a Bloomberg survey before today’s report.
The dollar has depreciated 0.7 percent in the past week, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 0.2 percent.
Gains in the euro may be tempered as it approaches levels of so-called resistance at $1.2860 and $1.2933, according to Karen Jones, head of fixed-income, commodity and currency technical analysis at Commerzbank AG in London. These represent last-year’s low and a short-term down channel, she wrote today in a note to clients.
(businessweek.com)
Wednesday 11 January 2012
An Oil Strategy in Case Iran’s Navy Shuts Down the Strait of Hormuz
Let’s just say Iran makes good on its recent threats to shut down the Strait of Hormuz. And let’s say that with one-fifth of the world’s oil supply bottled up, the price of a barrel of oil then almost doubles, as some analysts predict, to more than $200.
What can the world do to bring prices down before a still- woozy global economy gets pushed back into recession?
Pipelines that circumvent the strait could carry to market at least 7 million of the 17 million barrels of tanker-borne oil that passes through the strait each day. The U.S. could, for the first time since the Gulf War in 1991, release oil from its 700 million-barrel Strategic Petroleum Reserve; other members of the International Energy Agency (set up after the 1973-74 oil crisis) could also tap the 90-day supply stocks that they are required to maintain.
The IEA has already prepared a plan to release as many as 14 million barrels a day in the event of a Gulf closure. Saudi Arabia, long the self-appointed swing man of the Organization of the Petroleum Exporting Countries, has a spare production capacity -- on paper, at least -- of about 3 million barrels per day; everyone else is producing almost flat out.
The U.S. now gets only about 9 percent of the oil it consumes from the Persian Gulf. Countries such as China, India, Japan and South Korea, however, rely on Gulf exports, particularly from Iran, to power their economies. In the European Union, debt-ridden Greece gets 14 percent of its oil imports from Iran, Italy 13 percent and Spain almost 10 percent. And because oil is a global commodity, as far as oil prices are concerned, what happens in the Persian Gulf does not stay in the Persian Gulf.
For all Iran’s missile-rattling, however, there is little reason to think it will carry through on its bluster. To block the Gulf would verge on economic suicide: Petroleum products account for 20 percent of Iran’s gross domestic product, 80 percent of exports and 70 percent of its government revenue. Any attempt to close the Gulf could also provoke a war with the U.S. and vaporize what diplomatic support and leverage Iran gets from countries (and clients) such as China.
Iran may not intend ultimately to close the strait, but its threats to do so can still instigate tremendous economic uncertainty with very real consequences, especially in a hyper- connected world wired with complex speculative instruments. The challenge is similar to dealing with terrorist groups such as al-Qaeda, which command our attention and resources through their potential no less than their actions. In either case, the goal is to balance the risks that such threats present with the costs of protecting against them.
More pipelines would be a good start. Unfortunately, the United Arab Emirates just announced that the opening of a 1.8 million barrel-per-day pipeline that circumvents the strait will be put off until May. The use of drag-reduction agents -- an estimated $600 million investment -- could increase the capacity of Saudi Arabia’s existing two pipelines that reach the Red Sea to as many as 11 million barrels per day. And if the Kingdom wants to bolster its reputation as a “stable, reliable” supplier of oil, it could invest the several billion dollars needed to build another pipeline -- a prospect that may be less painful if oil prices remain high. The current turmoil is another reason why Iraq needs to repair its pipeline to Turkey. At home, we support the building of the Keystone XL pipeline that will bring oil from Canada’s tar sands to market.
The IEA’s plan to release oil from emergency stocks will only work if China, India and other non-IEA countries agree not to hoard. That would require an unprecedented degree of policy coordination. One way to reduce future shocks, especially in Asia, may be more positioning of exports in regional storage depots and greater use of floating stocks. Governments may also want to dust off the IEA’s 2005 blueprint for cutting the amount of fuel consumed by cars, trucks and buses. If the crisis continues, the market’s response could also be an important first test of the Commodity Futures Trading Commission’s soon- to-be-imposed limits on trading by speculators.
Over the last few years, the U.S. has reduced its dependence on oil imports in general and from the Middle East in particular. Yet, almost four decades after the first oil shocks, the economy remains deeply vulnerable to the threat of a cutoff of oil from the Persian Gulf -- a state of affairs that calls into question the commitment of, by some estimates, trillions of dollars to keep the Gulf stable and the Strait of Hormuz open. Factor that “externality” into the price of a barrel of oil, and alternative fuels begin to look like a bargain by comparison -- at least until someone figures out how to take away the sun, wind, rivers and tides.
(bloomberg.com)
What can the world do to bring prices down before a still- woozy global economy gets pushed back into recession?
Pipelines that circumvent the strait could carry to market at least 7 million of the 17 million barrels of tanker-borne oil that passes through the strait each day. The U.S. could, for the first time since the Gulf War in 1991, release oil from its 700 million-barrel Strategic Petroleum Reserve; other members of the International Energy Agency (set up after the 1973-74 oil crisis) could also tap the 90-day supply stocks that they are required to maintain.
The IEA has already prepared a plan to release as many as 14 million barrels a day in the event of a Gulf closure. Saudi Arabia, long the self-appointed swing man of the Organization of the Petroleum Exporting Countries, has a spare production capacity -- on paper, at least -- of about 3 million barrels per day; everyone else is producing almost flat out.
The U.S. now gets only about 9 percent of the oil it consumes from the Persian Gulf. Countries such as China, India, Japan and South Korea, however, rely on Gulf exports, particularly from Iran, to power their economies. In the European Union, debt-ridden Greece gets 14 percent of its oil imports from Iran, Italy 13 percent and Spain almost 10 percent. And because oil is a global commodity, as far as oil prices are concerned, what happens in the Persian Gulf does not stay in the Persian Gulf.
For all Iran’s missile-rattling, however, there is little reason to think it will carry through on its bluster. To block the Gulf would verge on economic suicide: Petroleum products account for 20 percent of Iran’s gross domestic product, 80 percent of exports and 70 percent of its government revenue. Any attempt to close the Gulf could also provoke a war with the U.S. and vaporize what diplomatic support and leverage Iran gets from countries (and clients) such as China.
Iran may not intend ultimately to close the strait, but its threats to do so can still instigate tremendous economic uncertainty with very real consequences, especially in a hyper- connected world wired with complex speculative instruments. The challenge is similar to dealing with terrorist groups such as al-Qaeda, which command our attention and resources through their potential no less than their actions. In either case, the goal is to balance the risks that such threats present with the costs of protecting against them.
More pipelines would be a good start. Unfortunately, the United Arab Emirates just announced that the opening of a 1.8 million barrel-per-day pipeline that circumvents the strait will be put off until May. The use of drag-reduction agents -- an estimated $600 million investment -- could increase the capacity of Saudi Arabia’s existing two pipelines that reach the Red Sea to as many as 11 million barrels per day. And if the Kingdom wants to bolster its reputation as a “stable, reliable” supplier of oil, it could invest the several billion dollars needed to build another pipeline -- a prospect that may be less painful if oil prices remain high. The current turmoil is another reason why Iraq needs to repair its pipeline to Turkey. At home, we support the building of the Keystone XL pipeline that will bring oil from Canada’s tar sands to market.
The IEA’s plan to release oil from emergency stocks will only work if China, India and other non-IEA countries agree not to hoard. That would require an unprecedented degree of policy coordination. One way to reduce future shocks, especially in Asia, may be more positioning of exports in regional storage depots and greater use of floating stocks. Governments may also want to dust off the IEA’s 2005 blueprint for cutting the amount of fuel consumed by cars, trucks and buses. If the crisis continues, the market’s response could also be an important first test of the Commodity Futures Trading Commission’s soon- to-be-imposed limits on trading by speculators.
Over the last few years, the U.S. has reduced its dependence on oil imports in general and from the Middle East in particular. Yet, almost four decades after the first oil shocks, the economy remains deeply vulnerable to the threat of a cutoff of oil from the Persian Gulf -- a state of affairs that calls into question the commitment of, by some estimates, trillions of dollars to keep the Gulf stable and the Strait of Hormuz open. Factor that “externality” into the price of a barrel of oil, and alternative fuels begin to look like a bargain by comparison -- at least until someone figures out how to take away the sun, wind, rivers and tides.
(bloomberg.com)
Most Asia Stocks Rise on U.S. Economic Optimism
Jan. 11 (Bloomberg) -- Ethan Devine, a partner at Indus Capital Partners LLC, talks about the scandal at Japan camera maker Olympus Corp. Olympus shares rose the most in more than two months yesterday on optimism the company will survive a delisting threat and after its auditors took legal action against executives over a $1.7 billion accounting fraud. Devine speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Asian stocks swung between gains and losses as optimism about the U.S. economy tempered concern Europe’s debt crisis is worsening ahead of a German bond sale.
James Hardie Industries SE (JHX), a maker of building materials that gets most of its sales in the U.S., climbed 3 percent in Sydney. AU Optronics Corp. (2409), a supplier of liquid-crystal displays to Nokia Oyj and Dell Inc., gained 4.4 percent in Taipei. China Unicom (Hong Kong) Ltd. fell 3.7 percent amid concern competition will increase among mainland telecoms.
“There are more positive signs particularly on employment” and consumer spending in the U.S., saidStephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outlook in the U.S. is for modest growth this year, and that’s better than Europe. Expectations are Europe will be in a recession.”
The MSCI Asia Pacific Index added 0.1 percent to 116.23 as of 3:22 p.m. in Tokyo, having swung between gains and losses at least eight times. About three shares rose for every two that fell on the measure. The gauge advanced 0.9 percent last week as manufacturing growth from China to the U.S. bolstered confidence in the global economy.
Australia’s S&P/ASX 200 Index increased 0.9 percent, while Japan’s Nikkei 225 Stock Average rose 0.3 percent. Hong Kong’s Hang Seng Index added 0.3 percent. South Korea’s Kospi Index lost 0.4 percent.
China Inflation
China’s Shanghai Composite Index (SHCOMP) decreased 0.2 percent on concern inflation will hamper the government’s ability to ease lending curbs. A report due tomorrow will probably show consumer prices rose 4 percent in December, according to analysts’ estimates.
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge rose 0.9 percent in New York yesterday as global equities rallied amid bets that China will ease monetary policy to spur growth in the world’s second-largest economy.
Exporters advanced as U.S. employers hired 4.15 million workers in November, 107,000 more than in the prior month, the Labor Department said yesterday. A survey by Chief Executive magazine showed confidence among American CEOs rose last month to the highest level since May.
James Hardie rose 3 percent to A$7.12 in Sydney. AU Optronics climbed 4.4 percent to NT$14.30 in Taipei. LG Display Co. (034220), the world’s second-largest LCD maker by sales, gained 2.7 percent to 26,800 won in Seoul.
Europe Risk
“The strong outlook and underpinnings of the U.S. economy are much more important to the Asian market outlook than European uncertainty,” said Sandy Mehta, Hong Kong-based chief executive officer of Value Investment Principals Ltd. “We think the Europe situation remains difficult and presents risk, but much of this is already discounted by investors and the situation will be more stable by mid-year.”
Reports today may show Germany’s economic growth slowed last year and Spanish industrial production shrank by the most since 2009. Spain will auction as much as 5 billion euros ($6.4 billion) of bonds due 2015 and 2016 tomorrow, while Italy is scheduled to sell 12 billion euros of bills. Germany will auction 4 billion euros of five-year notes today.
Raw material producers advanced after the London Metals Exchange Index (LMEX), which tracks prices of six primary metals including aluminum and copper, rose for a third day yesterday. Aluminum prices may rise more than 6 percent by the end of the quarter as processing companies replenish inventory to meet demand, said Vedanta Resources Plc, India’s biggest producer.
Apple’s iPhone
BHP Billiton Ltd. (BHP), the world’s biggest mining company, increased 1.5 percent to A$36.18 in Sydney. Jiangxi Copper Co., China’s largest producer of the metal, advanced 1.7 percent to HK$17.88 in Hong Kong. Aluminum Corp. of China Ltd., the nation’s No. 1 supplier of the light metal, climbed 2.6 percent to HK$3.62.
Chinese phone companies declined today amid concern increasing competition will hurt profit as China Telecom Corp., the nation’s third-largest carrier, moves closer to getting government approval to offer Apple Inc.’s iPhone.
China Unicom, the mainland’s only iPhone distributor, sank 3.7 percent to HK$15.84. China Telecom lost 1.4 percent to HK$4.22.
The MSCI Asia Pacific Index (MXAP) lost 17 percent in 2011 as China took steps to cool its property market and Europe struggled to resolve its debt crisis. The S&P 500 Index broke even for the year and the Stoxx Europe 600 Index dropped 11 percent. Stocks in the Asian gauge were valued at 12.2 times estimated earnings on average as of yesterday, compared with 12.3 times for the S&P 500 and 10 times for the Stoxx 600.
Tokyo Electric Power Co., the utility at the center of the Fukushima Dai-Ichi nuclear disaster, declined 6.1 percent to 202 yen. Tepco, as the company is known, is in talks with banks to borrow as much as 2 trillion yen ($26 billion) to help stave off bankruptcy.
To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
(bloomberg.com)
Asian stocks swung between gains and losses as optimism about the U.S. economy tempered concern Europe’s debt crisis is worsening ahead of a German bond sale.
James Hardie Industries SE (JHX), a maker of building materials that gets most of its sales in the U.S., climbed 3 percent in Sydney. AU Optronics Corp. (2409), a supplier of liquid-crystal displays to Nokia Oyj and Dell Inc., gained 4.4 percent in Taipei. China Unicom (Hong Kong) Ltd. fell 3.7 percent amid concern competition will increase among mainland telecoms.
“There are more positive signs particularly on employment” and consumer spending in the U.S., saidStephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outlook in the U.S. is for modest growth this year, and that’s better than Europe. Expectations are Europe will be in a recession.”
The MSCI Asia Pacific Index added 0.1 percent to 116.23 as of 3:22 p.m. in Tokyo, having swung between gains and losses at least eight times. About three shares rose for every two that fell on the measure. The gauge advanced 0.9 percent last week as manufacturing growth from China to the U.S. bolstered confidence in the global economy.
Australia’s S&P/ASX 200 Index increased 0.9 percent, while Japan’s Nikkei 225 Stock Average rose 0.3 percent. Hong Kong’s Hang Seng Index added 0.3 percent. South Korea’s Kospi Index lost 0.4 percent.
China Inflation
China’s Shanghai Composite Index (SHCOMP) decreased 0.2 percent on concern inflation will hamper the government’s ability to ease lending curbs. A report due tomorrow will probably show consumer prices rose 4 percent in December, according to analysts’ estimates.
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge rose 0.9 percent in New York yesterday as global equities rallied amid bets that China will ease monetary policy to spur growth in the world’s second-largest economy.
Exporters advanced as U.S. employers hired 4.15 million workers in November, 107,000 more than in the prior month, the Labor Department said yesterday. A survey by Chief Executive magazine showed confidence among American CEOs rose last month to the highest level since May.
James Hardie rose 3 percent to A$7.12 in Sydney. AU Optronics climbed 4.4 percent to NT$14.30 in Taipei. LG Display Co. (034220), the world’s second-largest LCD maker by sales, gained 2.7 percent to 26,800 won in Seoul.
Europe Risk
“The strong outlook and underpinnings of the U.S. economy are much more important to the Asian market outlook than European uncertainty,” said Sandy Mehta, Hong Kong-based chief executive officer of Value Investment Principals Ltd. “We think the Europe situation remains difficult and presents risk, but much of this is already discounted by investors and the situation will be more stable by mid-year.”
Reports today may show Germany’s economic growth slowed last year and Spanish industrial production shrank by the most since 2009. Spain will auction as much as 5 billion euros ($6.4 billion) of bonds due 2015 and 2016 tomorrow, while Italy is scheduled to sell 12 billion euros of bills. Germany will auction 4 billion euros of five-year notes today.
Raw material producers advanced after the London Metals Exchange Index (LMEX), which tracks prices of six primary metals including aluminum and copper, rose for a third day yesterday. Aluminum prices may rise more than 6 percent by the end of the quarter as processing companies replenish inventory to meet demand, said Vedanta Resources Plc, India’s biggest producer.
Apple’s iPhone
BHP Billiton Ltd. (BHP), the world’s biggest mining company, increased 1.5 percent to A$36.18 in Sydney. Jiangxi Copper Co., China’s largest producer of the metal, advanced 1.7 percent to HK$17.88 in Hong Kong. Aluminum Corp. of China Ltd., the nation’s No. 1 supplier of the light metal, climbed 2.6 percent to HK$3.62.
Chinese phone companies declined today amid concern increasing competition will hurt profit as China Telecom Corp., the nation’s third-largest carrier, moves closer to getting government approval to offer Apple Inc.’s iPhone.
China Unicom, the mainland’s only iPhone distributor, sank 3.7 percent to HK$15.84. China Telecom lost 1.4 percent to HK$4.22.
The MSCI Asia Pacific Index (MXAP) lost 17 percent in 2011 as China took steps to cool its property market and Europe struggled to resolve its debt crisis. The S&P 500 Index broke even for the year and the Stoxx Europe 600 Index dropped 11 percent. Stocks in the Asian gauge were valued at 12.2 times estimated earnings on average as of yesterday, compared with 12.3 times for the S&P 500 and 10 times for the Stoxx 600.
Tokyo Electric Power Co., the utility at the center of the Fukushima Dai-Ichi nuclear disaster, declined 6.1 percent to 202 yen. Tepco, as the company is known, is in talks with banks to borrow as much as 2 trillion yen ($26 billion) to help stave off bankruptcy.
To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
(bloomberg.com)
Kodak’s Latest Apple, HTC Lawsuits May Goose Value of Patents
Jan. 11 (Bloomberg) -- Eastman Kodak Co., seeking to sell or license a portfolio of more than 1,100 patents, sued Apple Inc. and HTC Corp. in an expansion of a legal strategy that may help boost the value of its inventions to fund a turnaround.
Two infringement lawsuits filed yesterday in federal court in Rochester, New York, accuse the smartphone makers of using without permission Kodak technology for image transmission, including a way for users to share images directly from cameras. Kodak also claims HTC is infringing an additional patent for a preview feature, which is at the center of a U.S. International Trade Commission case against Apple and Research In Motion Ltd.
“They’re trying to generate value for their patent portfolio,” said Ron Epstein, chief executive officer of patent brokerage Epicenter IP Group LLC in Redwood City, California.
Kodak, which is predicted by analysts to report its fourth straight annual net loss, has put the Rochester-based company’s digital-imaging patents up for sale to help fund changes to its business. CEO Antonio Perez, who is now betting on digital printers for publishers, packagers, advertisers and households to lift Kodak, has said that the Apple-RIM trade commission case could generate $1 billion in new revenue from settlements.
Kodak, which didn’t say how much the new Apple and HTC cases could be worth, also filed companion complaints at the trade commission yesterday in Washington, seeking to block imports of products including Apple’s iPad and iPhone, and HTC’s Flyer tablet and Wildfire S phone.
Bankruptcy Risk
“This is an important part of ongoing operations to get them through the transition,” said Erin-Michael Gill, chief intellectual property officer for MDB Capital Group LLC, a Santa Monica, California-based investment bank. “A bad sign would be them sitting on their hands and waiting for these to sell.”
Kodak said last year it hired Lazard Ltd. to help it sell the patents and retained Jones Day among advisers helping on strategic options.
The Apple-RIM trade commission case filed in 2010, involving the single image-preview patent, has met with delays including the retirement of the judge handling the case, and a final decision isn’t scheduled until September.
Moody’s Investors Service on Jan. 5 cut ratings on about $1 billion of Kodak debt with a negative outlook, citing “a heightened probability of a bankruptcy over the near-term” as liquidity deteriorates, making a patent sale more challenging.
Portfolio Perceptions
Adding four new patents into the mix “helps, even without litigating any of the issues, to counteract the impression that there’s only one good patent” in the portfolio, said Ron Laurie, managing director of Inflexion Point Strategy LLC in Palo Alto, California, which counsels companies on intellectual property purchases. Kodak “wanted to defuse that impression.”
The four patents asserted against Apple and HTC have as co- inventor Kodak researcher Kenneth Parulski, who has more than 190 patents and is “recognized as a pioneer in numerous digital camera technologies,” according to the complaints.
Kodak claims infringement by Apple’s iPad 2, iPhone and iPod Touch, and by HTC’s tablets and phones, including the Flyer, EVO View 4G, Jetstream, Vivid, Amaze 4g, Desire, Hero S, Rezound, Rhyme, Sensation 4G and Wildfire S.
“We’ve had numerous discussions with both companies in an attempt to resolve this issue, and we have not been able to reach a satisfactory agreement,” Laura Quatela, Kodak’s chief operating officer, said in a statement. “Our primary interest is not to disrupt the availability of any product but to obtain fair compensation for the unauthorized use of our technology.”
HTC, based in Taoyuan, Taiwan, had no comment on the complaints. Officials with Cupertino, California-based Apple didn’t reply to a request for comment.
Stock Market Value
Selling patents and debt will help determine “the company’s ability to continue its operations” in the next 12 months, Kodak said in a quarterly regulatory filing in November. Kodak said then it would pursue licensing opportunities for the patents if unable to sell them at “an appropriate price.”
Kodak, which lost 88 percent of its stock market value last year, has struggled since demand for photographic film began evaporating as the world embraced digital cameras. Kodak’s cash and equivalents fell to $862 million at the end of its third quarter from $1.4 billion a year earlier. The company is scheduled to report fourth-quarter results Jan. 26.
Management Changes
Kodak rose 50 percent yesterday, to 60 cents, after saying it was adjusting its management structure and creating a chief operating office to reduce costs as its sales decline and cash reserves dwindle. The chief operating office will be led by Quatela and Philip Faraci, both presidents at Kodak. Faraci will focus on the commercial segment and sales and regional operations, and Quatela will lead the consumer segment and certain corporate functions, Kodak said.
The company’s $162 million market value “is lower than the potential damages” the company could generate from litigation, Epstein said.
“They’re looking at the mobile device companies and saying, ‘The brilliance of your user interface and product integration does not detract from the fact that you have integrated my innovation into your product and you owe me something for it,’” Epstein said.
The new case against Apple is Eastman Kodak Co. v. Apple Inc., 12cv6020, and the case against HTC is Eastman Kodak Co. v. HTC, 12cv6021, both U.S. District Court for the Western District of New York (Rochester).
--With assistance from Beth Jinks in New York. Editors: Romaine Bostick, Andrea Snyder
(businessweek.com)
Two infringement lawsuits filed yesterday in federal court in Rochester, New York, accuse the smartphone makers of using without permission Kodak technology for image transmission, including a way for users to share images directly from cameras. Kodak also claims HTC is infringing an additional patent for a preview feature, which is at the center of a U.S. International Trade Commission case against Apple and Research In Motion Ltd.
“They’re trying to generate value for their patent portfolio,” said Ron Epstein, chief executive officer of patent brokerage Epicenter IP Group LLC in Redwood City, California.
Kodak, which is predicted by analysts to report its fourth straight annual net loss, has put the Rochester-based company’s digital-imaging patents up for sale to help fund changes to its business. CEO Antonio Perez, who is now betting on digital printers for publishers, packagers, advertisers and households to lift Kodak, has said that the Apple-RIM trade commission case could generate $1 billion in new revenue from settlements.
Kodak, which didn’t say how much the new Apple and HTC cases could be worth, also filed companion complaints at the trade commission yesterday in Washington, seeking to block imports of products including Apple’s iPad and iPhone, and HTC’s Flyer tablet and Wildfire S phone.
Bankruptcy Risk
“This is an important part of ongoing operations to get them through the transition,” said Erin-Michael Gill, chief intellectual property officer for MDB Capital Group LLC, a Santa Monica, California-based investment bank. “A bad sign would be them sitting on their hands and waiting for these to sell.”
Kodak said last year it hired Lazard Ltd. to help it sell the patents and retained Jones Day among advisers helping on strategic options.
The Apple-RIM trade commission case filed in 2010, involving the single image-preview patent, has met with delays including the retirement of the judge handling the case, and a final decision isn’t scheduled until September.
Moody’s Investors Service on Jan. 5 cut ratings on about $1 billion of Kodak debt with a negative outlook, citing “a heightened probability of a bankruptcy over the near-term” as liquidity deteriorates, making a patent sale more challenging.
Portfolio Perceptions
Adding four new patents into the mix “helps, even without litigating any of the issues, to counteract the impression that there’s only one good patent” in the portfolio, said Ron Laurie, managing director of Inflexion Point Strategy LLC in Palo Alto, California, which counsels companies on intellectual property purchases. Kodak “wanted to defuse that impression.”
The four patents asserted against Apple and HTC have as co- inventor Kodak researcher Kenneth Parulski, who has more than 190 patents and is “recognized as a pioneer in numerous digital camera technologies,” according to the complaints.
Kodak claims infringement by Apple’s iPad 2, iPhone and iPod Touch, and by HTC’s tablets and phones, including the Flyer, EVO View 4G, Jetstream, Vivid, Amaze 4g, Desire, Hero S, Rezound, Rhyme, Sensation 4G and Wildfire S.
“We’ve had numerous discussions with both companies in an attempt to resolve this issue, and we have not been able to reach a satisfactory agreement,” Laura Quatela, Kodak’s chief operating officer, said in a statement. “Our primary interest is not to disrupt the availability of any product but to obtain fair compensation for the unauthorized use of our technology.”
HTC, based in Taoyuan, Taiwan, had no comment on the complaints. Officials with Cupertino, California-based Apple didn’t reply to a request for comment.
Stock Market Value
Selling patents and debt will help determine “the company’s ability to continue its operations” in the next 12 months, Kodak said in a quarterly regulatory filing in November. Kodak said then it would pursue licensing opportunities for the patents if unable to sell them at “an appropriate price.”
Kodak, which lost 88 percent of its stock market value last year, has struggled since demand for photographic film began evaporating as the world embraced digital cameras. Kodak’s cash and equivalents fell to $862 million at the end of its third quarter from $1.4 billion a year earlier. The company is scheduled to report fourth-quarter results Jan. 26.
Management Changes
Kodak rose 50 percent yesterday, to 60 cents, after saying it was adjusting its management structure and creating a chief operating office to reduce costs as its sales decline and cash reserves dwindle. The chief operating office will be led by Quatela and Philip Faraci, both presidents at Kodak. Faraci will focus on the commercial segment and sales and regional operations, and Quatela will lead the consumer segment and certain corporate functions, Kodak said.
The company’s $162 million market value “is lower than the potential damages” the company could generate from litigation, Epstein said.
“They’re looking at the mobile device companies and saying, ‘The brilliance of your user interface and product integration does not detract from the fact that you have integrated my innovation into your product and you owe me something for it,’” Epstein said.
The new case against Apple is Eastman Kodak Co. v. Apple Inc., 12cv6020, and the case against HTC is Eastman Kodak Co. v. HTC, 12cv6021, both U.S. District Court for the Western District of New York (Rochester).
--With assistance from Beth Jinks in New York. Editors: Romaine Bostick, Andrea Snyder
(businessweek.com)
Tuesday 10 January 2012
Street Aims Higher, Brushes Off Red Ink From Alcoa
Alcoa booked a fourth-quarter loss in line with expectations Monday, and investors did not seem to be in a mood to nitpick Tuesday morning as the aluminum producer and the broader market aimed for a fast start.
Shares of Alcoa were 1.2% higher trading, after recording better than expected revenue of just under $6 billion and a loss of 3 cents per share, excluding restructuring charges, that was in line with estimates. The aluminum giant’s forecast for 7% demand signals slower industry-wide growth than in the past two years, but was still in line with its long-term forecast.
The Dow Jones industrial average, which counts Alcoa among its 30 components, gained 110 points to 12,503 in the opening minutes of trading, while the S&P 500 jumped 15 points to 1,296 and the Nasdaq rallied 34 points to 2,711.
Alcoa provides the informal kickoff to fourth-quarter earnings season, which gets a batch of major reports from the financial sector starting this week with JPMorgan Chase. The reports come as the Federal Reserve reviews the capital plans major U.S. banks were required to submit by Monday. The latest version of the central bank’s stress tests requires banks to shock their portfolios to judge resilience to scenarios including a repeat of the credit crunch of 2008 and negative outcomes to the European sovereign debt crisis.
Shares of JPMorgan were 2.8% higher Tuesday ahead of Friday’s earnings, while rivals Bank of America, Citigroup and Wells Fargo, due to report next week, were also in positive territory.
WebMD Health was one of the stocks not participating in the early gains, plunging 29.7% after announcing the abrupt resignation of Chief Executive Wayne Gattinella. The company also terminated its board’s exploration of a potential sale and warned that its fourth-quarter results will come in toward the lower end of its guidance. Even worse, WebMD said revenue could fall 2-8% in 2012, with the sharpest pain coming in the first half of the year. CFO and COO Anthony Vuolo will serve as interim CEO while the company conducts an executive search.
Tiffany was also left out of Tuesday’s rally, with shares falling 10.4% after the upscale retailer lowered its full-year earnings view on weaker than anticipated holiday sales. After a strong performance for three quarters, the company said jewelry spending was more cautious in the U.S. and Europe during the holiday season. Earnings for the fiscal year ending Jan. 31 are now expected to come in at $3.60-$3.65 per share, down from $3.70-$3.80.
(forbest.com)
Shares of Alcoa were 1.2% higher trading, after recording better than expected revenue of just under $6 billion and a loss of 3 cents per share, excluding restructuring charges, that was in line with estimates. The aluminum giant’s forecast for 7% demand signals slower industry-wide growth than in the past two years, but was still in line with its long-term forecast.
The Dow Jones industrial average, which counts Alcoa among its 30 components, gained 110 points to 12,503 in the opening minutes of trading, while the S&P 500 jumped 15 points to 1,296 and the Nasdaq rallied 34 points to 2,711.
Alcoa provides the informal kickoff to fourth-quarter earnings season, which gets a batch of major reports from the financial sector starting this week with JPMorgan Chase. The reports come as the Federal Reserve reviews the capital plans major U.S. banks were required to submit by Monday. The latest version of the central bank’s stress tests requires banks to shock their portfolios to judge resilience to scenarios including a repeat of the credit crunch of 2008 and negative outcomes to the European sovereign debt crisis.
Shares of JPMorgan were 2.8% higher Tuesday ahead of Friday’s earnings, while rivals Bank of America, Citigroup and Wells Fargo, due to report next week, were also in positive territory.
WebMD Health was one of the stocks not participating in the early gains, plunging 29.7% after announcing the abrupt resignation of Chief Executive Wayne Gattinella. The company also terminated its board’s exploration of a potential sale and warned that its fourth-quarter results will come in toward the lower end of its guidance. Even worse, WebMD said revenue could fall 2-8% in 2012, with the sharpest pain coming in the first half of the year. CFO and COO Anthony Vuolo will serve as interim CEO while the company conducts an executive search.
Tiffany was also left out of Tuesday’s rally, with shares falling 10.4% after the upscale retailer lowered its full-year earnings view on weaker than anticipated holiday sales. After a strong performance for three quarters, the company said jewelry spending was more cautious in the U.S. and Europe during the holiday season. Earnings for the fiscal year ending Jan. 31 are now expected to come in at $3.60-$3.65 per share, down from $3.70-$3.80.
(forbest.com)
Stocks edge higher on earnings hopes
NEW YORK (AP) – U.S. stocks rose Tuesday after aluminum producer Alcoa issued an outlook that suggested improving prospects for the global economy.
The Dow Jones industrial average, the broader Standard & Poor's 500 index and the Nasdaq composite index all jumped close to or more than 1% in the first few minutes of trading. Late Monday, Alcoa CEO Klaus Kleinfeld predicted that global aluminum demand will increase 7% in 2012.
Fourth-quarter revenue for Alcoa (AA) topped expectations and the results gave investors hope for a strong earnings season in the U.S. They also are looking to a new round of talks in Berlin for progress in solving Europe's debt crisis. European markets are sharply higher.
Stock trend
Dow Jones industrial average, five trading days
On the negative side, luxury jeweler Tiffany & Co. (TIF) reported weak holiday sales growth in the U.S. and Europe, and shares dropped more 6.4% in early trading.
The U.S. economy has shown signs of strength recently, and investors are hoping that will boost corporate earnings results due to be announced in coming weeks. In particular, improvement in the U.S. labor market has raised the possibility of a recovery in American consumer spending, one of the main motors of global economic growth.
The European Central Bank said Tuesday that the amount of overnight deposits that the region's banks held with it rose to 481.9 billion euros, or $613 billion, on Monday, breaking the record 463.6 billion euros set only a day before.
The high deposits mean banks are keeping spare cash in a safe place even though they earn low interest. They also reflect large amounts of cash put into the banking system from ECB emergency loans of 489 billion euros taken up by more than 500 banks in late December.
Dutch electronics giant Royal Philips Electronics NV kicked off Europe's corporate earnings season by warning that its fourth-quarter profit was less than expected due to a weak European market that made it difficult to charge customers as much as it wanted to for light bulbs.
Overnight markets in Asia were marginally higher, thanks to improving economic data out of the U.S., said Cameron Peacock of IG Markets in Melbourne.
The optimism was tempered by news that China's import growth decelerated sharply in December in a new sign the world's second-largest economy is slowing.
Benchmark crude for February delivery rose $1.46 to $102.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $101.31 in New York on Monday.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The Dow Jones industrial average, the broader Standard & Poor's 500 index and the Nasdaq composite index all jumped close to or more than 1% in the first few minutes of trading. Late Monday, Alcoa CEO Klaus Kleinfeld predicted that global aluminum demand will increase 7% in 2012.
Fourth-quarter revenue for Alcoa (AA) topped expectations and the results gave investors hope for a strong earnings season in the U.S. They also are looking to a new round of talks in Berlin for progress in solving Europe's debt crisis. European markets are sharply higher.
Stock trend
Dow Jones industrial average, five trading days
On the negative side, luxury jeweler Tiffany & Co. (TIF) reported weak holiday sales growth in the U.S. and Europe, and shares dropped more 6.4% in early trading.
The U.S. economy has shown signs of strength recently, and investors are hoping that will boost corporate earnings results due to be announced in coming weeks. In particular, improvement in the U.S. labor market has raised the possibility of a recovery in American consumer spending, one of the main motors of global economic growth.
The European Central Bank said Tuesday that the amount of overnight deposits that the region's banks held with it rose to 481.9 billion euros, or $613 billion, on Monday, breaking the record 463.6 billion euros set only a day before.
The high deposits mean banks are keeping spare cash in a safe place even though they earn low interest. They also reflect large amounts of cash put into the banking system from ECB emergency loans of 489 billion euros taken up by more than 500 banks in late December.
Dutch electronics giant Royal Philips Electronics NV kicked off Europe's corporate earnings season by warning that its fourth-quarter profit was less than expected due to a weak European market that made it difficult to charge customers as much as it wanted to for light bulbs.
Overnight markets in Asia were marginally higher, thanks to improving economic data out of the U.S., said Cameron Peacock of IG Markets in Melbourne.
The optimism was tempered by news that China's import growth decelerated sharply in December in a new sign the world's second-largest economy is slowing.
Benchmark crude for February delivery rose $1.46 to $102.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $101.31 in New York on Monday.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Nomura’s wholesale banking chief quits
Nomura’s ambition to become a successful global investment bank took another blow on Tuesday after Jesse Bhattal, head of wholesale banking, resigned after less than two years in the job.
Mr Bhattal became the first non-Japanese to sit on Nomura’s 14-member executive management board when he was made chief executive of the wholesale division in March 2010. His appointment marked the company’s determination to build a global franchise, but the wholesale unit has consistently struggled to generate sufficient revenues to cover its costs.
At the end of the last fiscal year to April, Nomura assured investors that it was addressing the problems. But second-quarter figures announced in November – the first quarterly loss since March 2009 – showed that the situation had deteriorated, forcing the bank to add another $800m to a $400m cost-cutting exercise announced in July.
Nomura is due to report third-quarter earnings on February 1. Natsumu Tsujino, analyst at JPMorgan, expects another operating loss, excluding one-off items.
“The wholesale business has been the key drag on Nomura’s profitability, and the major reason they’re at risk of downgrades from credit rating agencies. It was only a matter of time before they got someone to take responsibility,” said Makarim Salman, an analyst at Jefferies, the independent investment bank.
Nomura’s lack of traction is evident in investment banking league tables, which show little improvement on rankings in 2009, the first year after the brokerage bought the European and Asian operations of Lehman Brothers.
Last year, Nomura ranked 13th in global M&A by total value of deals, according to Dealogic, fractionally ahead of Evercore, the advisory boutique. In equity capital markets, it was the 10th-ranked bookrunner by value. In debt underwriting, it finished outside the top 10 in almost all categories.
Mr Bhattal, 55, joined Nomura from Lehman Brothers in 2008. A former Rhodes scholar at Oxford university, he was head of Lehman’s Asian business at the time.
A spokesperson in Tokyo said Mr Bhattal’s resignation would have no impact on Nomura’s overall strategy to become Asia’s number one global investment bank.
Speaking on Thursday to the Nikkei Shimbun, Japan’s leading business daily, chief executive Kenichi Watanabe said the group would weather the market slump without disrupting its global network.
“Simply slashing personnel is meaningless,” he said. “We aim to trim costs without wrecking our global network.”
Mr Bhattal’s position will be assumed on an interim basis by Takumi Shibata, group chief operating officer and chairman of the wholesale division.
Copyright The Financial Times Limited 2012. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
(ft.com)
Mr Bhattal became the first non-Japanese to sit on Nomura’s 14-member executive management board when he was made chief executive of the wholesale division in March 2010. His appointment marked the company’s determination to build a global franchise, but the wholesale unit has consistently struggled to generate sufficient revenues to cover its costs.
At the end of the last fiscal year to April, Nomura assured investors that it was addressing the problems. But second-quarter figures announced in November – the first quarterly loss since March 2009 – showed that the situation had deteriorated, forcing the bank to add another $800m to a $400m cost-cutting exercise announced in July.
Nomura is due to report third-quarter earnings on February 1. Natsumu Tsujino, analyst at JPMorgan, expects another operating loss, excluding one-off items.
“The wholesale business has been the key drag on Nomura’s profitability, and the major reason they’re at risk of downgrades from credit rating agencies. It was only a matter of time before they got someone to take responsibility,” said Makarim Salman, an analyst at Jefferies, the independent investment bank.
Nomura’s lack of traction is evident in investment banking league tables, which show little improvement on rankings in 2009, the first year after the brokerage bought the European and Asian operations of Lehman Brothers.
Last year, Nomura ranked 13th in global M&A by total value of deals, according to Dealogic, fractionally ahead of Evercore, the advisory boutique. In equity capital markets, it was the 10th-ranked bookrunner by value. In debt underwriting, it finished outside the top 10 in almost all categories.
Mr Bhattal, 55, joined Nomura from Lehman Brothers in 2008. A former Rhodes scholar at Oxford university, he was head of Lehman’s Asian business at the time.
A spokesperson in Tokyo said Mr Bhattal’s resignation would have no impact on Nomura’s overall strategy to become Asia’s number one global investment bank.
Speaking on Thursday to the Nikkei Shimbun, Japan’s leading business daily, chief executive Kenichi Watanabe said the group would weather the market slump without disrupting its global network.
“Simply slashing personnel is meaningless,” he said. “We aim to trim costs without wrecking our global network.”
Mr Bhattal’s position will be assumed on an interim basis by Takumi Shibata, group chief operating officer and chairman of the wholesale division.
Copyright The Financial Times Limited 2012. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
(ft.com)
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