Excel to Purchase Rival Quintana for $2.45 Billion

(Bloomberg) -- Excel Maritime Carriers Ltd. agreed to buy larger rival Quintana Maritime Ltd. for $2.45 billion, including debt, to become the largest dry-bulk shipper listed in the U.S.

Excel will pay $13 in cash and 0.4084 share for each Quintana share. That equals about $26.48 a share based on yesterday's closing price, Hamilton, Bermuda-based Excel said today in a statement. The price is 57 percent above Quintana's close yesterday.

Quintana in the third-quarter operated 29 ships and is awaiting delivery of eight more over the next two years, which will increase its capacity by 55 percent. Today's purchase will make the combined entity the fourth-largest Panamax-size carrier company in the world, according to Lloyd's Register-Fairplay. Panamax usually haul 75,000-ton cargoes.

``From a strategic standpoint, we like it,'' said Doug Mavrinac, a Houston-based Jeffries & Co. analyst who has a ``buy'' rating on both companies. ``It increases the size of Excel's fleet significantly, lowers its average age, and it increases time-charter coverage, and therefore their cash flow visibility''

Quintana rose $4.78, or 28 percent, to $21.67, at 12:12 p.m. in Nasdaq stock market composite trading. Excel fell $1.20, or 3.6 percent, to $31.80 in New York Stock Exchange composite trading.

 

Read more at Bloomberg

Northwest, JetBlue, AirTran Post Losses on Fuel Costs

(Bloomberg) -- Northwest Airlines Corp., JetBlue Airways Corp. and AirTran Holdings Inc. posted fourth-quarter losses as rising fuel costs erased gains from fare increases.

Northwest said its deficit was $8 million after a $267 million year-earlier loss in bankruptcy, while JetBlue's $4 million loss compared with net income of $17 million. AirTran pared its loss to $2.17 million from $3.55 million.

Fuel is ``the principal culprit,'' said Dave Swierenga, president of consulting firm AeroEcon in Round Rock, Texas. ``The softening economy is clearly also having a negative effect.''

Today's results from the three carriers echoed those reported earlier by larger rivals including American Airlines and United Airlines, which also blamed fuel for blunting benefits from higher fourth-quarter ticket prices.

JetBlue jumped as much as 16 percent, leading U.S. airline shares higher, as its loss was narrower than analysts expected. The shares rose 77 cents to $5.71 at 12:19 p.m. New York time in Nasdaq Stock Market composite trading.

Northwest gained 56 cents, or 3.1 percent, to $18.50 in New York Stock Exchange composite trading, while AirTran rose 29 cents, or 3.4 percent, to $8.75.

Northwest, the fifth-largest U.S. airline, and other big carriers raised fares six times last quarter to counter a 43 percent jump in average jet-fuel prices. The major airlines also doubled their fuel surcharges to $40 round trip. The surcharges are supposed to be temporary.

Northwest

Northwest's loss was 3 cents a share, narrower than the loss of 8 cents projected in a Bloomberg survey of nine analysts. Sales at the Eagan, Minnesota-based airline rose 3.9 percent to $3.1 billion.

Northwest said it would have broken even except for a $14 million pretax loss from selling its remaining holdings in commuter carrier Pinnacle Airlines Corp. The quarterly deficit was Northwest's first since leaving bankruptcy in May.

Spending on fuel rose 16 percent to $937 million, making it Northwest's largest cost and helping to boost operating expenses by 4.3 percent. Higher prices were partially offset by a drop in fuel consumption as Northwest retired older, less-efficient planes and reduced mainline capacity by 2.5 percent.

The surge in fuel is spurring calls by investors for airlines to consolidate and pare expenses. Northwest is considering a tie-up with Delta Air Lines Inc., according to Northwest's pilots union. The airlines have declined to comment on any merger talks.

 

Read more at Bloomberg

Bank of America Affirms Plan to Acquire Countrywide

(Bloomberg) -- Bank of America Corp. said its purchase of Countrywide Financial Corp. is proceeding and the bank doesn't need more capital after last week's preferred stock sale raised almost $13 billion.

``Everything is a `go' to complete this transaction,'' Bank of America Chief Executive Officer Kenneth Lewis said at an investor conference today, referring to Countrywide. The Calabasas, California-based mortgage company rose as much as 8.6 percent today in New York Stock Exchange composite trading.

Chief Executive Officer Angelo Mozilo agreed Jan. 11 to sell Countrywide, the biggest U.S. mortgage lender, for about $4 billion in stock to Bank of America, the nation's second- biggest bank by assets. Investors have speculated the bid might be revised if Countrywide didn't fulfill Mozilo's October vow to restore profit by year-end.

Countrywide posted a fourth-quarter net loss of $422 million, or 79 cents a share, compared with a profit of $621.6 million, or $1.01 a share, in the year-earlier period, the company said in a statement today. The loss was more than twice the 28 cents predicted in a Bloomberg survey of analysts.

The home lender rose 20 cents to $6.15 in 12:03 p.m. composite trading on the New York Stock Exchange as investors concluded Bank of America won't renege on the purchase. Bank of America, based in Charlotte, North Carolina, added 67 cents, or 1.6 percent, to $41.87.

Bank of America could have raised 2 1/2 times as much as it sought in last week's share offerings, Lewis told the New York investor conference today. The sale came with some of the highest yields in 15 years.

 

Read more at Bloomberg

Goldman, Morgan Stanley probed on subprime

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

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

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

The SEC filings came on Tuesday.

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

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

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

 

Read more Reuters

NY Gov working on fix for bond insurers

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

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

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

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

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

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

 

Read more at Reuters

Wal-Mart cuts prices to lure Super Bowl shoppers

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

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

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

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

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

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

 

Read more at Reuters

Verizon Profit Rises on Wireless; Sales Miss Estimate

(Bloomberg) -- Verizon Communications Inc., the second-largest U.S. phone company, said fourth-quarter profit rose 3.9 percent, driven by new wireless subscribers. Sales missed estimates after home-phone users defected to cable rivals.

Net income climbed to $1.07 billion, or 37 cents a share, from $1.03 billion, or 35 cents, a year ago, the New York-based company said today in a statement. Sales rose 5.5 percent to $23.8 billion, below the $24 billion average estimate of analysts in a Bloomberg survey.

Chief Executive Officer Ivan Seidenberg is spending $23 billion over seven years to offer TV service and higher Internet speeds, to compete with cable companies that sell phone plans. Verizon lost 875,000 phone lines in the quarter, an 8.1 percent drop from a year ago, compared with an 8 percent decline in the previous quarter.

``Line losses accelerated again,'' said Todd Rosenbluth, an equity analyst at Standard & Poor's in New York. ``That's a trend we expected, given cable competition.'' He recommends holding the shares.

Profit excluding items such as severance pay for fired workers was 62 cents a share, meeting the average estimate of 21 analysts in the Bloomberg survey. The wireless unit's operating margin, the percentage of sales remaining after deducting the costs of providing the service, expanded to 26.2 percent from 25 percent a year ago.

Verizon fell $1.02, or 2.7 percent, to $36.74 at 9:37 a.m. in New York Stock Exchange composite trading. The stock was little changed in the 12 months before today.

Job Cuts

The company said it began cutting jobs in the fourth quarter and plans to continue firing workers this year. Spokesman Bob Varettoni declined to say how many positions the company will eliminate.

Verizon's larger rival, AT&T Inc., also reported fourth- quarter revenue that fell short of analysts' estimates. While AT&T blamed the results on shutting off service to nonpaying customers, Verizon pointed to competition from cable companies such as Comcast Corp.

Seidenberg, 61, has been shedding businesses to focus on Verizon's fiber-optic network and wireless unit. Verizon is awaiting regulatory approval for a $2.72 billion deal to hand over about 1.6 million phone lines in the northeastern U.S. to FairPoint Communications Inc.

Spinoff, Sale

Fourth-quarter results last year included expenses of 22 cents a share for taxes on the sale of assets in the Dominican Republic and the cost of spinning off a directories unit.

Verizon added 226,000 TV subscribers to its fiber-optic network, less than the 234,000 projected by UBS AG analyst John Hodulik in New York. The company also recruited 245,000 fiber Internet customers, missing Hodulik's 284,000 estimate.

The fiber-optic network, called FiOS, is available in parts of 16 states. Verizon plans to make it available to 18 million homes by the end of 2010, up from about 9 million last year.

Verizon Wireless, jointly owned by Verizon and Vodafone Group Plc, added 2 million wireless customers, including 1.6 million on long-term contracts. Verizon Wireless took subscribers from smaller rival Sprint Nextel Corp., which lost 683,000 contract customers last quarter. AT&T, owner of the biggest U.S. mobile-phone service, added 2.7 million users in the quarter, including 1.2 million on contracts.

 

Read more at Bloomberg

Oil in N.Y. Falls on Skepticism Rate Cut Will Bolster Economy

(Bloomberg) -- Crude oil dropped to a six-week low in New York on skepticism that an emergency interest rate reduction by the U.S. Federal Reserve will prevent the world's biggest energy consuming country from falling into recession.

The overnight lending rate was lowered to 3.5 percent from 4.25 percent, the Federal Open Market Committee said in a statement in Washington. Oil in New York has declined 11 percent since touching a record $100.09 a barrel on Jan. 3 on speculation demand will drop as global economies slow.

``Recessionary fears have spread from the U.S. to overseas markets in a pronounced fashion,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis. ``The Fed move has given us some support but it's not enough to reverse the downward course of the energy market.''

Crude oil for February delivery fell $1.26, or 1.4 percent, to $89.31 a barrel at 11:45 a.m. on the New York Mercantile Exchange. Prices touched $86.11 before the Fed announcement, the lowest since Dec. 6. Prices are up 75 percent from a year ago.

There was no floor trading in New York yesterday because of the Martin Luther King Day holiday. Yesterday's electronic trades will apply toward today's close.

Brent crude for March settlement rose 26 cents, or 0.3 percent, to $87.77 a barrel on London's ICE Futures Europe exchange. Brent touched $85 today, the lowest since Oct. 25. Futures dropped $1.72, or 1.9 percent, yesterday.

Oil would slide to ``the low $80s'' if all outstanding speculative contracts were sold, analysts at Goldman Sachs Group Inc. including London-based Jeffrey Currie, said in a report today. Investment funds have sold oil contracts amounting to as much as 100 million barrels in the past two weeks, Goldman said.

 

Read more at Bloomberg

UBS, Bank of America Recommend Buying U.S. Stocks

(Bloomberg) -- Investors should buy U.S. stocks in the ongoing market selloff, according to UBS AG and Bank of America Corp. strategists, because share prices already reflect a slowdown in earnings growth.

``We understand the macro challenges facing the economy and many uncertainties, but we believe this level of pessimism is unwarranted,'' UBS equity strategist David Bianco wrote in a note to investors today. ``The market is panicked over a substantial and secular drop in earnings power.''

More than half of the world's biggest stock indexes fell into a bear market this week on mounting concern the U.S. is headed for a recession. The Standard & Poor's 500 Index fell 0.7 percent to 1,316.01 as of 11:06 a.m. in New York today, even after the Federal Reserve lowered its benchmark rate in its first emergency move since 2001.

The U.S. index has fallen 16 percent from a record reached on Oct. 9.

``It makes sense for investors to consider increasing their exposure to equities'' after declines in the past 12 months, wrote Thomas McManus, chief investment strategist at Bank of America's securities unit, in a report today. He advised buying ``gingerly or aggressively,'' depending on each investor's goals.

 

Read more at Bloomberg

Bank of America, Wachovia Profits Slump on Writedowns

(Bloomberg) -- Bank of America Corp. and Wachovia Corp., the second- and fourth-largest U.S. banks, said earnings plummeted after more than $6 billion of combined mortgage- related writedowns.

Bank of America's fourth-quarter profit dropped 95 percent to $268 million, while net income at Wachovia was almost wiped out, plunging 98 percent to $51 million. Bank of America gained 15 cents to $36.12 at 10:25 a.m. in New York trading. Wachovia declined $1, or 3.3 percent, to $29.78 after the Federal Reserve lowered its benchmark interest rate in an emergency move for the first time since 2001.

Kenneth Lewis, Bank of America's chief executive officer, and Kennedy Thompson, his counterpart at Wachovia, said in separate statements today that the companies were battered by the fixed-income markets. Lewis said he expects economic growth to ``be anemic at best in the first half.'' Bank of America's reserve to cover losses from loans and debt securities doubled to $3.3 billion in the fourth quarter.

Bank of America and Wachovia, both based in Charlotte, North Carolina, reported the lowest quarterly profits in at least six years during the country's worst housing slump in more than two decades. The world's biggest banks and brokerages have disclosed more than $120 billion of writedowns and credit losses since June, mostly caused by the collapse of the subprime mortgage market.

``The revaluation of assets that initially looked like a very exclusive subprime problem is emerging to be something much more,'' Kevin Fitzsimmons, analyst at Sandler O'Neill & Partners in New York, said today in an interview.

Missed Estimates

Bank of America earned 5 cents a share in the fourth quarter, excluding merger and restructuring costs and a gain from the sale of Marsico Capital Management LLC, falling short of the 21-cent average estimate from 21 analysts surveyed by Bloomberg. Wachovia's profit of 8 cents a share, excluding takeover-related costs, also missed analysts' estimates.

National City Corp., Ohio's largest bank, reported a loss, and Fifth Third Bancorp and KeyCorp, the state's No. 2 and No 3 lenders, said profit declined.

``Our fourth-quarter results were severely impacted by ongoing dislocations in capital markets and the slowing economy,'' Lewis said in today's statement. He added that the company is ``cautiously optimistic about 2008.''

Bank of America increased its bet on the faltering U.S. economy earlier this month by agreeing to acquire Countrywide Financial Corp., the largest U.S. mortgage lender, for about $4 billion in stock.

Countrywide Financial

Countrywide would give Bank of America a 25 percent share of U.S. mortgage originations, Lehman Brothers Holdings Inc. analyst Jason Goldberg wrote in a Jan. 11 report to clients. Almost two-thirds of Countrywide's loan originations in 2007 came from mortgage brokers and other third parties, a practice that Lewis has said Bank of America expects to curtail.

The corporate and investment bank lost $2.76 billion, compared with a profit of $1.4 billion a year earlier, and earnings at the consumer and small-business banking unit declined 28 percent to $1.87 billion. Lewis has scaled back investment banking by cutting 1,150 jobs since October and putting the hedge-fund brokerage unit up for sale.

First Drop Since 2001

``Investment banking isn't Ken Lewis's core competency and he doesn't need it,'' said Bruce Foerster, a former Lehman Brothers managing director who's now president of the South Beach Capital Markets advisory firm in Miami.

Bank of America's total fourth-quarter revenue fell 31 percent to $12.7 billion, while non-interest costs rose 15 percent to $10.1 billion. Return on equity, a gauge of how effectively the company reinvests profit, declined to 11.1 percent for the year from 16.3 percent in 2006.

Full-year earnings dropped for the first time in Lewis's tenure since the 60-year-old CEO succeeded Hugh McColl Jr. in 2001, with net income sliding 29 percent to $15 billion.

Wachovia's fourth-quarter earnings were the lowest since 2001 after $1.7 billion of writedowns, including $1 billion for subprime mortgage-related holdings. The company's corporate and investment bank had a loss of $596 million after the costs.

``The continued turmoil in the capital markets and the dramatic change in the credit environment diminished our fourth- quarter results substantially,'' Thompson said in the statement.

Fourth-quarter revenue fell 17 percent to $7.2 billion. Return on equity was 0.28 percent, down from 13.1 percent a year earlier. The net interest margin, the difference between what Wachovia pays for deposits and what it charges on loans, narrowed to 2.88 percent from 2.92 percent on Sept. 30.

 

Read more at Bloomberg

Corporate Default Risk Soars as Fed Rate Cut Signals Recession

(Bloomberg) -- The risk of companies defaulting soared on concern that an emergency interest rate cut by the Federal Reserve will fail to halt a worsening global economic slowdown, credit-default swaps show.

Contracts on Ambac Financial Group Inc. rose to a record after the second-largest bond insurer reported its biggest-ever loss. Merrill Lynch & Co. increased on concern that ratings downgrades at bond insurers including Ambac will cause losses at financial firms to surge. Benchmark gauges of corporate default risk in the U.S. and Europe climbed to the highest since they were created in 2004.

``The Fed's behind the curve; they had to cut,'' said Mark Kiesel, who oversees $158 billion in corporate bonds as executive vice president at Pacific Investment Management Co. in Newport Beach, California. ``The big question is, `Can the Fed change the willingness to take risk?' I'm not so sure.''

Contracts on the Markit CDX North America Investment-Grade Index, tied to the bonds of 125 companies in the U.S. and Canada, climbed as much as 16 basis points to 126, before falling back to 117 at 10:45 a.m. in New York, according to Deutsche Bank AG. Contracts on the Markit iTraxx Europe index of 125 investment- grade companies rose as much as 10.25 basis points to a record 92.5 today before falling back to 81.75, according to JPMorgan Chase & Co.

``The issues that plague the markets and the economy aren't necessarily fixed by simple rate cuts, but it helps,'' said Gregory Peters, head of credit strategy at Morgan Stanley in New York. ``The overarching issue is the Fed seems extremely responsive to just the markets, which doesn't engender confidence necessarily.''

Stock Markets Tumble

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

The Fed lowered its benchmark interest rate in an emergency move for the first time since 2001 after stock markets tumbled from Hong Kong to London and amid increasing signs the U.S. economy is headed into a recession. The central bank lowered its target overnight lending rate to 3.5 percent from 4.25 percent.

U.S. stocks declined for a fifth day, the longest stretch of declines in 11 months.

Contracts on Ambac climbed 4 percentage points to 32 percent upfront and 5 percent a year, according to CMA Datavision in London. The New York-based company posted a $3.6 billion loss after writing down the value of guarantees on subprime debt by $5.21 billion. Armonk, New York-based MBIA Inc., the largest bond insurer, climbed 3 percentage points to 29 percent upfront and 5 percent a year, CMA prices show.

Risk of Default

Sellers of credit-default swaps demand upfront payments when they see a high risk of default.

Fitch Ratings cut Ambac's top grade last week and Moody's Investors Service and Standard & Poor's are reviewing the company, along with MBIA, for possible downgrade.

Credit-default swaps on New York-based Merrill Lynch, the biggest U.S. brokerage firm, rose 23 basis points to 190 basis points, prices from broker Phoenix Partners Group and CMA show.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Contracts With Insurers

``No one wants to wait to find out how it's all going to end,'' said Nigel Myer, a credit analyst at Dresdner Kleinwort in London. ``They just want to sell, preferably at last week's prices. The general reckoning is that the banks will be taking more charges.''

Banks led by Citigroup Inc. and Merrill Lynch have a net $1 trillion at risk because of contracts with insurers, according to the International Swaps and Derivatives Association.

Contracts on Charlotte, North Carolina-based Bank of America Corp. rose 6 basis points to 100 basis points, CMA prices show. The second-largest U.S. bank said today earnings dropped 95 percent after at least $5.28 billion of mortgage-related writedowns.

Financial firms have already lost more than $100 billion because of the worst U.S. housing slump for 27 years.

New York-based ACA Capital Holdings Inc., an insurer which guaranteed $26.6 billion of collateralized debt obligations backed by subprime mortgages, had its ratings cut to CCC from A by S&P in December. That prompted Merrill Lynch to announce $2.6 billion of writedowns on securities insured by the company.

 

Read more at Bloomberg

Ambac Reports Loss, Talks With `Potential Parties'

(Bloomberg) -- Ambac Financial Group Inc., the first bond insurer to be stripped of its AAA credit rating, reported its biggest-ever loss and said it is talking to ``a number of potential parties'' to help overcome a slump in the value of guarantees on subprime-mortgage securities.

New York-based Ambac, the second-largest bond insurer, jumped as much as 37 percent in New York Stock Exchange trading on optimism the company may be sold. Ambac posted a $3.26 billion loss after writing down the value of guarantees on subprime debt by $5.21 billion, according to a statement by the company today.

Ambac said ratings companies are ``underestimating'' its ability to weather the rout in credit markets. Ambac, an underwriter of $556 billion of municipal and structured finance debt, last week scrapped a $1 billion equity sale after a 71 percent drop in the stock and the departure of its chief executive officer, prompting Fitch Ratings to reduce its insurance rating to AA from AAA.

``They can't issue equity and they can't issue debt,'' said Robert Haines, an analyst at bond research firm CreditSights Inc. in New York. ``The new CEO might be prepping the company for a potential sale.''

Michael Callen, who became interim CEO after Robert Genader left last week, said in a statement today that Ambac is ``exploring the attractiveness'' of various alternatives. He wasn't more specific.

The fourth-quarter net loss, which equated to $31.85 a share, took the 2007 deficit to $3.23 billion, the company's first ever annual loss. Ambac on Jan. 16 forecast a fourth- quarter net loss of about $32.83 a share. The company reported an operating loss, excluding writedowns on contracts to guarantee subprime securities, of $6.21 per share.

Hobbled by Expansion

The AAA rated bond insurers place their stamp on $2.4 trillion of debt. Losing those rankings may cost borrowers and investors as much as $200 billion, according to data compiled by Bloomberg. The industry guaranteed $127 billion of collateralized debt obligations linked to subprime mortgages that have plunged in value as defaults by borrowers with poor credit soar to records.

Ambac, which pioneered municipal bond insurance in 1971, has been hobbled by its expansion into CDOs, which package pools of debt and slice them into pieces with varying ratings. The CDO declines forced Ambac and others to reduce the value of contracts designed to protect CDO holders from default. Ambac said most of the writedowns aren't necessarily permanent losses and it hasn't paid any claims on its CDO portfolio.

Dividend Cut

Ambac shares rose 99 cents, or 16 percent, to $7.19 at 9:41 a.m. in New York Stock Exchange composite trading. The stock has tumbled 93 percent in the past year, shaving $8.8 billion from the company's market capitalization.

Ambac on Jan. 16 slashed its dividend 67 percent and said it would sell stock or equity-linked notes to bolster its capital, in part to meet Fitch's demand to raise $1 billion by the end of January. Two days later it scrapped the share sale.

The plan provoked a boardroom dispute that led to the departure of Genader, who disagreed with the capital raising, according to the company's regulatory filings.

Ambac's loss reported today followed the company's first- ever loss in the third quarter. Before 2007, Ambac had reported profit increases every year for the past decade.

``In retrospect, insurers wish they'd never heard the term structured finance, much less written the business,'' said Donald Light, an insurance analyst at Celent, a consulting firm in Boston.

Credit-Default Swaps

Prices for credit-default swaps that pay investors if Ambac can't meet its debt obligations imply a 72 percent chance it will default in the next five years, according to a JPMorgan Chase & Co.

Contracts on Ambac climbed 2.5 percentage points to 30.5 percent upfront and 5 percent a year today, prices from CMA Datavision in London show.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

 

Read more at Bloomberg

Blackouts a worry: Lehman

(Fin24) - Global analysts Lehman Brothers has expressed concern over the effect of Eskom's blackouts on infrastructure-related work in South Africa.

Wide-scale blackouts continued over the weekend as Eskom could not keep up with demand.

"Of concern are reports in the local press that the power cuts are now affecting infrastructure work related to the World Cup and industry in general," said the analysts in a research note.   

According to the energy supplier, the country needs to reduce its load demand by about 20%.
 

Read more at Fin24

JSE boosted by US rates cut

(Fin24) - The JSE turned around on Tuesday afternoon and was trading the black after the US Federal Reserve announced
an emergency rate cut of 75 basis points.

The JSE's all share index fell as low as 24 005.35 at one stage this morning, but recovered to 25 213.200 by noon. Shortly after the Fed's announcement it turned around and was last at 265 615.56 - up 192 points from its previous close.
 

The Fed announced an emergency rate cut of 75 basis points to bring the fed fund rate to 3.5%.
 

Read more Fin24

Stark Says Growth Will Hold Up, ECB Ready to Act on Inflation

(Bloomberg) -- European Central Bank Executive Board member Juergen Stark said the bank still expects the economy to expand around 2 percent this year and remains ready to raise interest rates to counter inflation.

``We're sticking to our assessment that, based on current data, growth will be around potential in 2008,'' Stark said in an interview in Viernheim, Germany, today. ``I want to repeat that we have said that we will do what is needed to avoid so-called second-round effects. We are ready to act.''

ECB President Jean-Claude Trichet threatened to raise rates on Jan. 10 if unions push through bigger wage demands to compensate for faster inflation. Since then, several ECB policy makers have expressed concern that economic growth may slow more markedly as the U.S. economy teeters on the brink of recession.

Stark said while risks to the growth outlook ``are pointing downward,'' even a more pronounced slowdown wouldn't necessarily damp inflation.

``Price and wage stickiness in Europe is considerably more pronounced than in other regions, for example the U.S., so that a possible growth slowdown does not automatically lead to a drop in the inflation rate.''

 

Read more at Bloomberg

ACA Customers Allow More Time to Unwind Default Swaps

(Bloomberg) -- ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month's grace to unwind $60 billion of credit-default swap contracts that it can't pay.

ACA, under the control of the Maryland Insurance Administration, extended an agreement that waives collateral requirements, policy claims and termination rights until Feb. 19, the New York-based company said in a statement on Business Wire late yesterday.

The insurer is working with its trading partners ``to develop a permanent solution to stabilize its capital position,'' according to the statement.

Standard & Poor's cut ACA's rating 12 levels to CCC last month, casting doubt on the company's guarantees and triggering collateral requirements. ACA, which lost 97 percent of its market value in the past 12 months, caused Merrill Lynch & Co. to write down $1.9 billion of securities last week and Canadian Imperial Bank of Commerce to sell more than C$2.75 billion ($2.7 billion) in stock to cover writedowns.

Bond insurer shares plunged last week and credit-default swaps rose to a record on concern the companies may be unable to meet their obligations as the subprime-mortgage securities and collateralized debt obligations they guarantee slump in value.

Ambac Financial Group Inc., the second-largest bond insurer, had its AAA credit ranking cut to AA by Fitch Ratings. Both Ambac and its larger rival, MBIA Inc., are under threat of losing the top grades from Moody's Investors Service and S&P, a move that would throw doubt on the ratings of $2.4 trillion of securities.

An after-hours call to ACA last night by Bloomberg News wasn't immediately returned.

Derivative Contracts

``ACA is an important case to follow because it shows how the banks' react to fast-deteriorating counterparty creditworthiness,'' said Toby Nangle, who helps oversee $37 billion as head of global aggregate business at Baring Asset Management in London.

The bond insurers, also known as monolines, guaranteed $127 billion of CDOs backed by subprime-mortgage securities as of June 30, according to S&P. CDOs are created by packaging debt or derivatives into new securities with varying ratings.

Most of those guarantees are in the form of derivatives. Unlike insurance, these contracts are required to be valued at market rates. Derivatives are contracts whose value is derived from assets including stocks, bonds, currencies and commodities, or from events such as the weather or changes in interest rates.

South Dakota Bonds

ACA was founded in 1997 by former Fitch executive H. Russell Fraser, who left the ratings company in 2001 as it shifted focus to structured finance from municipal bonds.

Fraser said his idea was to start an A rated municipal bond insurance company to guarantee a new crop of borrowers he sometimes called ``the cream of the crap.'' ACA's larger competitors such as Ambac and MBIA had enough cash to get the top AAA ratings on their insured bonds.

ACA backed $51.5 million of bonds sold to finance the construction of a jail in Pinal County, Arizona, and $4.7 million of bonds for the city of Deadwood, South Dakota.

CDOs were created by Wall Street by repackaging assets such as mortgage bonds and buyout loans into new obligations for sale to institutional investors. The insurers agreed to pay CDO holders, many of them banks that created the securities, in the event of a default.

CDO Downgrades

The tipping point came last year when the three major rating companies downgraded thousands of CDOs. Ratings on more than 2,000 CDOs were cut in November alone, according to a Dec. 13 UBS AG research report.

Maryland Insurance Administration held off filing delinquency proceedings last month while ACA sought capital. ACA was required under its credit-default swap contracts to post collateral if its rating fell below A-.

ACA gained 2 cents, or 4 percent, to 48 cents in over-the- counter trading on Jan. 18 in New York.

``The monolines are dead, their business model is dead,'' said David Roche, head of investment consultancy Independent Strategy in London. ``The government is going to have to recapitalize this industry or there will be communities in the U.S. where they can't even flush their toilets'' because they can't afford the services.

 

Read more at Bloomberg

U.S. energy chief pleads for more Saudi, OPEC oil

(Reuters) - U.S. Energy Secretary Sam Bodman repeated his plea on Monday for more oil from top exporter Saudi Arabia, undeterred by OPEC's cautious response to Washington's request so far.

Oil has fallen by more than 10 percent from a record high of $100.09 a barrel hit early this month, easing some of the pressure on OPEC to raise supplies, analysts said.

Bodman told reporters in Abu Dhabi there were short-term concerns about the performance of the U.S. economy and he was hopeful Riyadh would steer a decision to increase oil supplies at OPEC's meeting on February 1 in Vienna.

"I continue to believe in my earlier statement that we are hopeful they will increase supplies," he said. "I am of the view that there needs to be increased supply in order to call the markets of the world well supplied with oil."

Bodman, who met the Saudi oil minister at the weekend, said the United States expected oil inventories to drop in the first half of 2008 but the Saudis held "different views".

The United Arab Emirates Oil Minister Mohammed al-Hamli said OPEC would examine all options when its ministers meet.

"OPEC ... will look then at all the options," Hamli told reporters on the sidelines of a green energy conference. "There is a disconnect between fundamentals and the price."

 

Read more at Reuters

L.A. Times editor fired, "significant changes" ahead

(Reuters) - The editor of the Los Angeles Times, James O'Shea, has been fired over a budgetary dispute only 14 months after he took over the post, the newspaper said on Sunday.

O'Shea, a veteran of the Chicago Tribune who was hired by the Times in November 2006, was fired by publisher David Hiller after he refused to carry out some $4 million in cuts, said the newspaper on its Web site, citing an unnamed source. The news was first reported by The Wall Street Journal.

In a separate statement late on Sunday, the newspaper said that like all newspaper companies, it was "facing major challenges in charting a course that will be successful for the future".

"In that vein, we will be making several significant organizational changes to put us in the best position to succeed."

It said as a result of these changes, O'Shea would be leaving the newspaper, and did not elaborate further.

O'Shea's firing comes one month after the paper's parent, Tribune Co, completed an $8.2 billion buyout led by Chicago real estate tycoon Sam Zell.

The deal restructured Tribune as an employee-owned company funded largely by debt.

The Times has struggled along with other media companies in an adverse newspaper advertising environment, and has cut staff and editorial resources in recent years.

 

Read more at Reuters

U.S. Economy: Inflation Slows, Industrial Production Unchanged

(Bloomberg) -- Consumer prices in the U.S. rose at a slower pace in December and industrial production failed to grow, giving the Federal Reserve the room and reason to cut interest rates at their next meeting on Jan. 30.

The cost of living increased 0.3 percent after a 0.8 percent gain in November, the Labor Department said today in Washington. Output at U.S. factories was unchanged in December as exports helped make up for declines in auto and housing- related production, the Federal Reserve said separately.

Slower growth will make it more difficult for companies to pass on higher costs, suggesting inflation will cool from last year's pace, the fastest in 17 years, economists said. Investors' attention may now shift to Chairman Ben S. Bernanke's testimony on the economy tomorrow at a hearing in Congress.

``With the sluggish growth outlook and rising risk of recession, inflation concerns have receded,'' said Zach Pandl, an economist in New York at Lehman Brothers Holdings Inc., which correctly forecast the increase in prices. ``The Fed is clearly focusing on growth at this point.''

Economists had anticipated a 0.2 percent increase in consumer prices last month, according to the median forecast in a Bloomberg News survey.

Prices excluding food and energy advanced 0.2 percent, after a 0.3 percent increase, matching the median estimate.

Treasury notes were little changed after the consumer price report and later slipped. The yield on the benchmark 10-year note was 3.68 percent at 10:33 a.m. in New York, little changed from late yesterday. Stocks dropped after an Intel Corp. sales forecast spurred concern technology profits will weaken.

Capacity Use

Capacity utilization, which measures the proportion of plants in use, fell to 81.4 percent from 81.6 percent in November, indicating greater slack in the economy, the Fed's report showed. Economists had predicted a 0.2 percent drop in output and a capacity-in-use rate of 81.2 percent.

``There is nothing that would keep the Fed from cutting 50 to 75 basis points later this month,'' based on today's data, said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon Corp. in New York.

Traders anticipate the Fed will cut its benchmark rate to 3.75 percent, from 4.25 percent, this month, futures prices show. The chance of a 75 basis-point cut was 42 percent. Policy makers are next scheduled to gather Jan. 29-30. A basis point is 0.01 percentage point.

For all of last year, consumer prices rose 4.1 percent, the most since 1990. The core rate climbed 2.4 percent after a 2.6 percent increase in 2006.

Energy Costs

Energy prices last month rose 0.9 percent, after gaining 5.7 percent the previous month. Fuel costs were up 18 percent in 2007, also the most in 17 years.

Food prices, which account for about one-fifth of the CPI, increased 0.1 percent, the smallest gain of any month in 2007.

The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.

The government yesterday said producer prices unexpectedly eased 0.1 percent at the end of a year that saw the biggest annual jump in more than a quarter century. The cost of imported goods was unchanged in December, a report last week showed.

PPI and CPI have some differences in timing that may cause discrepancies. In calculating wholesale prices, the government asks survey participants to report costs as of the Tuesday of the week that includes the 13th. Consumer prices are based on average costs over the entire month.

Rents, which make up almost 40 percent of the core CPI, rose 0.3 percent.

 

Read more at Bloomberg

Wells Fargo profit falls

(Reuters) - Wells Fargo & Co (WFC.N: Quote, Profile, Research) on Wednesday said its fourth-quarter profit fell 38 percent, the first decline in more than six years, hurt by rising losses from home equity loans.

However, the decline was smaller than expected, and shares of the financial company were up 41 cents, or 1.5 percent, to $26.90 in early trading on the New York Stock Exchange after climbing to a session high of $28.11.

The weaker results reflect how the housing slump and tight credit markets have affected even mortgage providers such as Wells Fargo, whose lending practices are considered conservative.

"Except for the admitted slip of getting involved in third-party home equity loans, they've done a fine job in a challenging market in avoiding credit missteps," said Thomas Russo, who helps invest more than $3 billion at Gardner, Russo & Gardner in Lancaster, Pennsylvania, including 4 percent in Wells Fargo. "They're not immune, but have less exposure."

Net income for the San Francisco-based bank, which is the nation's fifth-largest bank and second-largest mortgage lender, fell to $1.36 billion, or 41 cents per share, from $2.18 billion, or 64 cents, a year earlier. Revenue increased 8 percent to $10.21 billion.

Analysts on average expected a profit of 39 cents per share on revenue of $10 billion, according to Reuters Estimates.

Wells Fargo said it tripled the amount set aside for loan losses to $2.6 billion, including $1.4 billion tied to home equity loans. The latter reduced after-tax profit by 27 cents per share. In November, the bank significantly scaled back offering home equity loans through brokers.

 

Read more at Reuters

Load shedding inquiry looms

(Fin24) - The public protector is considering whether or not to mount an investigation into the load shedding currently being experienced by South Africans, which, he says "is having a devastating effect ... on service delivery by government, is causing serious prejudice to the private sector and negatively affects the lives of many of the people."

In a letter to the chief executive of Eskom, Jacob Maroga, the public protector, Lawrence Mushwana, on Wednesday said that he is mandated to investigate on his own initiative or on receipt of a complaint, conduct by public entities that causes unlawful or improper prejudice to any person.

He poses a series of questions to the Eskom chief to help him decide whether to proceed.

He asks Maroga to explain the reasons for the load shedding, the measures that were put in place by Eskom to prevent what is causing the load shedding and the expected duration of the load shedding practice.

He also asks for detailed information "as a matter of urgency" on steps that have been taken by Eskom to address the reasons for the load shedding and the time frames within which the problems will be resolved.

 

Read more at Fin24

Metorex guns for CRC control

(Fin24) - Metorex, the JSE-listed diversified mining group, said it was confident it would vacuum up the remaining 5% it needed to complete the takeover of Copper Resources Corporation (CRC), an AIM-traded company with mining prospects in the Congo.

"We already own 45% of the company," said Charles Needham, CEO of Metorex at the group's annual general meeting held in Johannesburg suburb, Rosebank. "We have approached between 7% to 8% of CRC shareholders who are outside the offer to sell us the shares on the same terms and conditions."

"What if something goes wrong?" a shareholder asked Needham.

Said Needham: "We are pretty certain about getting at least 5% of those."

Metorex bought 38.7% of CRC in July last year plus a 5% stake in its 75% held subsidiary MMK from the Forrest group for R600m. The Metorex share price stood around R24 at the time and it subsequently rose to an all-time high of 2 950c.

But by mid-January, Metorex's share price was 38% off its 12-month high and was last trading at 1 902c, another 5% decline on the day.

 Read more at Fin24

Williams-Sonoma Shares Fall Most in 5 Years on Lower Forecast

(Bloomberg) -- Williams-Sonoma Inc., the U.S. gourmet-cookware retailer, fell the most in five years in New York trading after reducing its fourth-quarter profit forecast on an unexpected decline in holiday sales.

Fourth-quarter earnings per share, excluding some items, will probably be $1.12 to $1.15, compared with an earlier forecast of no less than $1.20, the San Francisco-based retailer said today in a statement. Sales at Williams-Sonoma's stores open more than a year fell 0.4 percent for the nine weeks through Dec. 30, the company said.

Customer visits to home-furnishings stores slowed more than Williams-Sonoma expected, and 2008 may be ``increasingly challenging,'' Chief Executive Officer Howard Lester said in the statement. The retailer cut prices and offered cheaper shipping at its Pottery Barn home-furnishings unit during the holidays to lure shoppers discouraged by falling house prices.

``Home furnishings retailers in general were highly promotional this holiday period,'' Laura Champine, a New York- based analyst with Morgan Keegan Inc. said in an interview Jan. 11.

Williams-Sonoma declined $2.30, or 10 percent, to $19.90 at 9:53 a.m. in New York Stock Exchange trading. It was the biggest decline since July 2002.

Three analysts surveyed by Bloomberg estimated an average gain of about 0.8 percent in comparable-store sales during the November-December period. For the fourth quarter, 21 analysts expected profit of $1.20 a share, on average.

 

Read more at Bloomberg

Street Talk: How Far Will Bernanke Go?

(Businessweek) - What leading economists and market strategists are saying about the Fed's next moves

 

What will Ben Bernanke & Co. do next in the face of a weakening economy and volatile financial markets? Here's a roundup of Jan. 11 comments from Wall Street economists and market strategists on their Federal Reserve policy expectations, as compiled by Standard & Poor's and BusinessWeek editors:

Ben States His Case

David Wyss, chief economist, Standard & Poor's

[In his Jan. 10 speech] Bernanke's worries about inflation were cited with uncharacteristic clarity: "[I]nflation expectations appear to have remained reasonably well-anchored, and pressures on resource utilization have diminished a bit." However, to make sure we didn't think that the Fed was getting too complacent, he also said that, "the increase in oil prices…is also lifting overall consumer prices and probably putting upward pressure on core inflation."

But the speech stressed the risk to growth much more than inflation. "The baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become much more pronounced." The bottom line is that, "we stand ready to take substantive additional action as needed to support growth and provide adequate insurance against downside risks." Markets interpret this statement to mean that the Fed will start to cut rates more aggressively, beginning with a half-point cut in January. Another cut, perhaps another half-point, is likely at the March meeting and again in April. The federal funds rate seems likely to fall to 3% by midyear, rather than the 3.5% we had been assuming.

Read more at Businessweek

The AltX acquisitors

(Fin24) - Recent listings on the JSE's AltX exchange are taking advantage of their new firepower as listed entities to consolidate the lower end of their respective markets.

Companies ranging from call-centre business Dialogue Group to engineering technology business Ansys, biometrics company Ideco, consumer electronics company Ellies, and managed telecoms player Huge Group have announced acquisitions since late last year.

Meanwhile others, like cellular least-cost router TeleMasters and applications software business Dynamic Visual Technologies are trading under cautionary, the former since January 10, and the latter, since January 3.

Although Vox Telecom is not currently trading under cautionary, it has been highly acquisitive, buying 12 companies in the past 18 months.

Its most recent purchases were of Absa's internet customer base, and complementary business Storm Telecom. Vox is likely to be a player in other sector consolidation opportunities that may arise.

In the most recent of the AltX company acquisitions, Dialogue announced on January 11 that it would pay at least R47.5m in cash and shares for a company called Verge, a consultancy and provider of business process outsourcing services to the public sector, from Simeka Group.

Dialogue said this was in line with its expansion strategy and desire to further penetrate the public sector. Dialogue already owns 50% of one of Verge's businesses, Sibize International, and is buying the other half as part of this transaction. It is also buying various outsourcing contracts, the price of which will be determined at a later stage.
 

Read more at Fin24

Prosecutors raid Samsung office

(Fin24) - Investigators probing alleged corruption at the massive Samsung conglomerate raided an office of Chairperson Lee Kun-hee, an official said on Monday, as part of a special probe reluctantly approved last year by South Korea's president.

Kang Dong-ju, an official with the team carrying out the probe, would say only that a total of eight locations associated with Samsung Group executives were raided. South Korean media said Lee's home was part of the sweep, though Kang only mentioned an office.

Lee, who late last year marked 20 years at the helm of Samsung, is widely reported to mostly work from his residence. Photos and television footage showed what appeared to be prosecutors entering and later leaving his hilltop Seoul home.

Yim Jun-seok, a Samsung spokesperson, said earlier that he could not confirm media reports of the raid and could not be reached later.

Samsung, a conglomerate spanning dozens of companies with interests ranging from construction to shipbuilding, is anchored by Samsung Electronics, South Korea's biggest corporation.
 

Read more at Fin24

Platinum miners soar on JSE

(Fin24) - A record platinum price hit on Monday underpinned a robust performance among platinum mining stocks on the JSE, giving the bourse an extra boost and helping it close 1.61% higher.

By the end of trade, the platinum mining index had advanced 6.97%, and resources collected 2.28%. The gold mining index was only a mere 0.09% in the black though. Banks and financials gained 1.84% and 1.44% respectively, and
industrials recovered 0.85%.

The rand was bid at R6.74 to the dollar from R6.79 when the JSE closed on Friday, while gold was quoted at $902.50 a troy ounce from $891.45/oz at the JSE's last close.

During the day, gold hit a record high of $914.40/oz, while platinum reached new highs of $1,590/oz.

"The JSE is up, but off its best levels. It has been quite an ironic day where the gold price hit an all time high, but there was a fluctuation in gold shares with a disappointing performance by gold shares relative to the huge gain in the gold price," said a Johannesburg-based equities trader.

He added that platinum shares "just exploded" as a result of the new record platinum price, and gains in heavyweights like Anglo American and BHP Billiton lifted the JSE higher.
 

Read more at Fin24

Pelosi and Bernanke to discuss economy

(Reuters) - Federal Reserve Chairmen Ben Bernanke will meet on Monday with House of Representatives Speaker Nancy Pelosi to discuss how they can work together to boost the U.S. economy, a spokesman for the California Democrat said.

Falling home values, higher oil prices and a decline in the stock market have raised concerns that the United States could slip into recession this year.

Pelosi will meet one-on-one with Bernanke to get his views on what steps Congress should take, as well as to let him know what ideas Democratic leaders are considering, Pelosi spokesman Brendan Daly said on Saturday.

It will be a "mutual exchange," Daly said.

Bernanke, who earlier this week sent a strong signal that the Fed was prepared to cut interest rates further to spur growth, also will speak to House Democrats at their policy retreat later this month, Daly said.

Many prominent economists believe Congress should supplement any Federal Reserve action with a temporary fiscal stimulus package that could include tax breaks.

Pelosi and Senate Majority Leader Henry Reid have asked to discuss the issue with President George W. Bush soon after he returns on Wednesday from a trip to the Middle East.

 

Read more at Reuters

Gulf funds eyed for further U.S. bank bailouts

(Reuters) - The sovereign funds of Kuwait and other Gulf states were in the spotlight on Monday as Citigroup sought extra emergency funding and its fellow U.S. bank Merrill Lynch was said to want more cash too.

The moves came as one newspaper report raised questions over whether previously agreed Chinese funding for Citigroup may fall through.

Citigroup, the largest U.S. bank by assets, is looking for more funds to help it through losses from the subprime crisis after securing $7.5 billion from the Abu Dhabi Investment Authority in November, a source familiar with the situation told Reuters in New York.

Merrill is seeking about $4 billion from the Kuwait Investment Authority and others as it faces as much as $15 billion in credit market losses, The Financial Times newspaper reported.

The newspaper said a Merrill deal could be announced as soon as midweek, and that other investors could come from Europe.

A public relations official for the KIA, which manages funds for Kuwait, referred calls to Managing Director Bader al-Sa'ad, who could not be reached in his office or on his mobile phone.

In December, Merrill shored up its capital base by as much as $7.5 billion after selling a stake to Singapore state fund Temasek and asset manager Davis Selected Advisers.

 

Read more at Reuters

Romney, McCain, Huckabee Shift to Economy in Michigan

(Bloomberg) -- Michigan's hard-hit economy occupies center stage as two favorite sons, Mitt Romney and John McCain, square off in a potentially decisive contest for the Republican presidential nomination, with an outsider, Mike Huckabee, gaining ground.

``It's a strong three-man race,'' said Scott Reed, a Republican strategist who isn't affiliated with any candidate. Michigan's primary tomorrow ``is a must-win for Romney, a need- to-win for McCain, and Huckabee just has to do well enough to go on to South Carolina,'' which votes Jan. 19.

Romney, who was born and raised in Michigan, is staking his candidacy on a victory in the state after his second-place showings in Iowa and New Hampshire this month. Even though Romney, 60, hasn't lived in the state for more than three decades, he benefits from high name recognition: His late father, George, was chairman of American Motors Corp., a three- term governor in the 1960s and a presidential candidate.

Michigan's highest-in-the-nation unemployment rate and ballooning home-mortgage foreclosures have forced the candidates to tout their economic remedies.

``When the nation begins to feel a hiccup, we all talk about a stimulus package, the need to put money in the hands of consumers and so forth,'' Romney said in an interview today. ``But when Michigan has been suffering for 10 years, people have sat by and been somewhat idle.''

This weekend, Romney and McCain sparred over who would best be able to address the state's economic woes. Romney, who promises to lower tax rates ``across the board'' to stimulate the economy, criticized McCain for saying some lost jobs would never come back.

`Going Away'

``Some say these are jobs that are just going away and you better get used to it,'' the former Massachusetts governor said at a campaign stop Jan. 12 outside a General Motors Corp. plant in Ypsilanti where the automaker has announced plans to fire 200 workers. ``Are we going to allow the entire domestic automotive manufacturing industry to disappear?''

After losing to Huckabee in Iowa and to McCain in New Hampshire, Romney is relying on a win in Michigan to stay competitive. Last week, his campaign canceled ad purchases in South Carolina and Florida and shifted the money to the Wolverine State.

``Romney's running as someone who really understands Michigan's problems,'' said Tom Rath, one of the candidate's top strategists.

2000 Race

McCain, 71, also is well-known in Michigan, having won the state's Republican primary in 2000, defeating then-Texas Governor George W. Bush.

The Arizona senator is counting on a repeat performance to give him momentum for subsequent primaries. Like Romney, McCain rushed from New Hampshire to Michigan, where he began touting an economic agenda that includes reining in federal spending, shoring up Social Security and Medicare, middle-class tax cuts and job training.

Michigan had a 7.4 percent unemployment rate in November, compared with a national rate of 4.7 percent, according to the U.S. Labor Department. It is also feeling the effects of the credit crisis: In 2007, Michigan accounted for 35,404 of the 588,882 U.S. home-mortgage foreclosures, according to foreclosure.com.

In Livonia on Jan. 12, McCain said training and technological improvements would lead to new, better-paying jobs.

`Bright Future'

``Michigan has a bright future; but it will not be reached attempting to recreate the past,'' McCain said.

Huckabee, 52, has also jumped into the economic debate. In an address at the Detroit Economic Club on Jan. 11, the former Arkansas governor laid out his proposals for a ``fair tax'' based on consumption that would replace federal income and payroll levies.

The state ``helped save America'' during World War II ``and now it may be time for America to help save Michigan,'' he said.

His low-budget campaign is also is running a TV ad that obliquely takes a shot at Romney's background as co-founder of Bain Capital LLC, a Boston buyout firm, suggesting he reminds Americans of ``the guy who laid them off.''

The ordained Baptist minister's appeal goes beyond his economic message. Lower and Western Michigan have blocs of evangelical voters who may turn out for him in large numbers. These voters account for up to 30 percent of the state's Republican electorate, and their support for Huckabee would hurt Romney more than McCain, said Reed, who managed Bob Dole's 1996 presidential campaign.

 

Read more at Bloomberg

Merck, Schering-Plough's Vytorin Misses Study Goal

(Bloomberg) -- Merck & Co. and Schering-Plough Corp. said their combination cholesterol drug Vytorin did no better job of reducing the risk of stroke by clearing arteries of plaque buildup than did Zocor, an older generic medicine that forms part of Vytorin.

The study examined the carotid artery and found ``no statistically significant difference between treatment groups,'' the companies said in a release distributed today by Business Wire. If that artery is blocked, it can cut blood supply to the brain and cause a stroke. The 720-person trial, called Enhance, is looking at the highest possible dose of Vytorin for patients with a genetic predisposition to high cholesterol.

The drugs had similar safety profiles, the companies reported. The results were submitted to the American College of Cardiology for presentation to a meeting in March.

 

Read more at Bloomberg

China, U.S. Make Plans for North Korea Collapse, Reports Say

(Bloomberg) -- China and the U.S.-South Korean alliance have begun planning for military intervention in case the Kim Jong Il regime in North Korea collapses, according to two newly published studies -- one of which foresees a race to occupy and control the impoverished communist country.

``If the international community did not react in a timely manner as internal order in North Korea deteriorated rapidly, China would seek to take the initiative in restoring stability,'' says a Jan. 3 report by Washington's Center for Strategic and International Studies and the U.S. Institute of Peace.

The report says its unnamed Chinese sources see North Korea as stable for the moment, ``but they worry that the potential for instability may grow.''

Meanwhile, U.S. and South Korean military planners were scheduled to complete by the end of 2007 a contingency plan for controlling the spread of weapons of mass destruction and dealing with refugees fleeing North Korea in the event of a collapse, according to an article in the January/February issue of the U.S. Army journal Military Review.

To beat China to the punch, joint planners should go farther and prepare for a South Korean occupation of the North, argues the author, Army Capt. Jonathan Stafford.

``A failure to prepare for this monumental task risks losing the Korean dream of reunification to Chinese hegemony,'' he writes. ``If South Korea cannot occupy the DPRK immediately and effectively, China will.''

DPRK stands for Democratic People's Republic of Korea, North Korea's official name.

Multilateral Approach

The authors of the CSIS-USIP report said Chinese specialists in North Korean affairs they interviewed hoped for a multilateral approach to North Korea rather than a contest for hegemony.

``In the event of instability in North Korea, China's priority will be to prevent refugees from flooding across the border,'' says the report, entitled ``Keeping an Eye on an Unruly Neighbor.'' If Chinese troops need to go into North Korea, ``China's strong preference is to receive formal authorization and coordinate closely with the United Nations,'' it says.

China's People's Liberation Army has contingency plans for at least three possible missions in the country, the report says. One is humanitarian: refugee assistance, or helping with the aftermath of a natural disaster. The second is policing the country to maintain order. The third is to secure North Korea's nuclear weapons and fissile material, or clean up nuclear contamination in the event of a strike -- the report does not specify by whom -- on North Korean nuclear facilities near the border.

China's Reaction

A Chinese foreign ministry spokeswoman on Jan. 8 denied knowledge of the plan, according to Agence France Press. ``I have never heard of nor seen the so-called plan mentioned in the report,'' AFP cited the spokeswoman saying.

Regarding nuclear-related contingencies, ``some Chinese experts say explicitly that they favor holding a discussion on stability in North Korea in official channels with the United States,'' the report says.

China is the organizer and host of ongoing talks with the U.S., North and South Korea, Japan and Russia on denuclearizing the North.

Stafford in his article argues that ``the Chinese have been busy laying the political, diplomatic and historical foundations for an occupation and perhaps even an annexation of North Korea.''

 

Read more at Bloomberg

Gold Futures Rise to Record $900.10 on Interest-Rate Outlook

(Bloomberg) -- Gold futures rose to a record $900.10 an ounce on speculation the Federal Reserve will further cut U.S. interest rates, weakening the dollar and boosting the investment appeal of the precious metal. Silver also climbed.

Interest-rate futures show a 68 percent chance the Fed will lower borrowing costs 0.5 percentage point to 3.75 percent by Jan. 30 after Fed Chairman Ben S. Bernanke suggested cuts may be necessary to guard against an economic slowdown. Gold rose 31 percent last year when the Fed slashed rates 1 percentage point, sending the dollar 9.5 percent lower against the euro.

``If the Fed drops rates, a lower dollar will propel gold higher,'' said Leonard Kaplan, president of Prospector Asset Management in Chicago. ``Everything we buy is going to be more expensive. Any raw material will go through the roof. The smart people see inflation.''

Gold futures for February delivery rose $4.70, or 0.5 percent, to $898.30 an ounce at 11:55 a.m. on the Comex division of the New York Mercantile Exchange. The price reached the record at 10:40 a.m. The record level was confirmed by Nymex.

Silver futures for March delivery rose 2 cents, or 0.1 percent, to $16.295 an ounce. The price earlier reached $16.415, the highest since January 1981. The metal gained 15 percent last year.

HSBC Securities USA Inc. and Morgan Stanley predicted the Fed will reduce its benchmark rate by half a percentage point this month after Bernanke's comments, up from their previous forecast of a quarter point.

 

Read more at Bloomberg

Zapatero seeks to dispel fears over economy

(FT)  - Spain's Socialist prime minister on Wednesday accused his conservative opponents of "unpatriotically" sowing alarm about the economy as he sought to dispel fears that the country was succumbing to the international credit squeeze ahead of a general election in early March.

José Luis Rodríguez Zapatero said he was confident Spain would grow by "at least" 3 per cent in 2008, compared with 3.7 per cent in 2007 and that, with the end of the construction boom, growth would be "more balanced, more productive and more sustainable".

 

Read more at FT.com

 

 

Rates yet to halt spending

(Fin24) -  Latest retail sales figures show consumers are   struggling to shell out money for big-ticket items as interest  rates begin to bite.

However, economists point out that retail sales growth is calculated off a high base and credit spending remains robust. 

The retail sales figures for October show that there was an 8.1% decline in sales of household furniture, appliances and equipment in  the three months from August to October compared with the same three months last year.

The Reserve Bank Quarterly Bulletin also says there was a decline year-on-year in real household expenditure on durable goods.  

The bulletin shows overall consumption spending cooled down to a fairly sedate 4.5% in the third quarter of last year from a robust 8.25% for the whole of 2006. 
 

Read more at FIN24

S.Africa Dec new vehicle sales fall 15.1 pct yr/yr

(Reuters) - South African new vehicle sales dropped 15.1 percent year-on-year in December on higher interest rates and tighter credit laws, and should moderate further this year, the National Association of Automobile Manufacturers said on Wednesday.

NAAMSA said new vehicle sales fell to 41,813 units in December compared to the same month in 2006.

New sales incorporating Associated Motor Holdings were 44,926 vehicles in December compared to 54,874 over the same period the year before.

AMH is an importing and distributing company whose data is reported separately because it does not provide some of the vehicle sale breakdowns required by NAAMSA.

New vehicle sales during the whole of 2007 fell by 5.2 percent to 612,707 compared to 2006, after registering four successive record years previously, NAAMSA added.

"During 2007, the automotive industry was buffeted by a series of negative events (including) progressive increases in interest rates, the introduction of the National Credit Legislation ... which introduced stricter disciplines governing the granting of credit," it said.

 

Read more at Reuters Africa

Bear Stearns Turns to Insider Schwartz for New Course

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

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

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

 

Read more at Bloomberg

Eskom may quit South Dunes

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

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

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

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

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

 

Read more at Fin24

Gold Climbs to Record on Higher Oil Prices, Weakening Dollar

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

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

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

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

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

 

Read more at Bloomberg

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

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

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

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

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

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

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

 

Read more at Bloomberg

Rand poses 'real risk'

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

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

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

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

Read more at Fin24

Electronics makers keep eye on U.S. economy

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

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

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

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

 

Read more at Reuters

Sallie Mae Names Terracciano Chairman; Lord Still CEO

(Bloomberg) -- SLM Corp., the biggest U.S. educational lender, named Anthony P. Terracciano chairman, succeeding Albert L. Lord.

Lord will be vice chairman of the board and remains chief executive officer, Reston, Virginia-based SLM, known as Sallie Mae, said today in a Business Wire statement. John F. Remondi was named vice chairman and chief financial officer.

Lord, 62, served as Sallie Mae's CEO from 1997 to 2005 and resumed the post on Dec. 14, after the collapse of a proposed $25.3 billion takeover by investors including J.C. Flowers & Co.

Sallie Mae has slumped 40 percent in New York Stock Exchange trading since Dec. 13, as Lord has completed a sale of $2.9 billion in shares to pay for stock buybacks and to help improve the company's credit rating.

 

Read more at Bloomberg

U.S. Stocks Rise for First Time in 2008; JPMorgan, Celgene Gain

(Bloomberg) -- U.S. stocks advanced for the first time this year on speculation the Federal Reserve will cut interest rates to prevent the world's largest economy from sinking into recession.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the biggest U.S. banks, climbed. Celgene Corp., a maker of cancer treatments, rose after saying profit will jump 45 percent in 2008. Microsoft Corp. gained after Chairman Bill Gates said the world's biggest software maker shipped 100 million copies of its Windows Vista operating system.

The Standard & Poor's 500 Index advanced 5.35, or 0.4 percent, to 1,416.98 as of 9:36 a.m. in New York. The Dow Jones Industrial Average increased 45.11, or 0.4 percent, to 12,845.29. The Nasdaq Composite Index rose 5.01, or 0.2 percent, to 2,509.66.

 

Read more at Bloomberg

Ford Plans to Introduce More Fuel-Efficient Engine in 2009

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

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

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

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

 

Read more at Bloomberg

US STOCKS-Market sinks as jobs data stirs recession fears

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

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

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

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

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

 

Read more at Reuters

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

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

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

 

Read more at Bloomberg

Consumers late payers on most loans since recession

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

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

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

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

 

Read more at Reuters

Oil majors' winnings from $100/barrel seen limited

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

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

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

 

Read more at Reuters

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

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

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

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

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

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

 

Read more at Bloomberg

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

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

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

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

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

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

 

Read more at Bloomberg

Real, Rand, Lira Rallies Are at Risk as Yields Fall

(Bloomberg) - The world's biggest foreign-exchange traders say the best performing emerging market currencies will decline against the U.S. dollar this year as economic growth slows and price swings increase.

Brazil's real, Turkey's lira and South Africa's rand may weaken at least 3.75 percent after gains of more than 14 percent in 2007, according to the median forecasts of banks and securities firms surveyed by Bloomberg News. The lira and rand last fell in 2006, while the real has strengthened for five straight years.

Read more at Bloomberg

S.Africa stocks up on miners, rand firms on gold

(Reuters) - South Africa's bourse rose one percent on Wednesday as resource shares led by BHP Billiton shone on the back of stronger metal prices as the rand firmed on the back of a firmer price for bullion.

Stocks market heavyweight BHP rose 1.40 percent, and rival Anglo American Plc added 1.06 percent to 415.10 rand, as gold, platinum and copper prices jumped in London.
Impala Platinum and Anglo American rose 2.17 and 3.06 percent to 242.40 and 1,041 rand."Precious and base metals such as gold, platinum and copper are having a good day on the London Metal Exchange," Greg Potter, a trader at Nedcor securities said

Read more at Reuters Africa