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Recession Concern Plagues Executives Meeting in Davos

2008-01-23T00:48:00.000-08:00

Jan. 23 (Bloomberg) -- Recession across the world's biggest economies is the main concern of chief executive officers gathering today in the Swiss ski resort of Davos.

The threat of a decline ranked first among the concerns of business leaders surveyed by PricewaterhouseCoopers LLP as executives including News Corp. Chairman Rupert Murdoch and Merrill Lynch & Co.'s John Thain attend the World Economic Forum's annual meeting. It was the first time that the risk of a slump topped the survey, which the accounting and consulting firm has conducted for 11 years.

``The big concern on the minds of CEOs is an economic recession,'' said Samuel DiPiazza, chief executive of PricewaterhouseCoopers, in an interview in Davos.

The assembly of business leaders, investors, policy makers and academics takes place after stock markets from Hong Kong to London tumbled on speculation the world economy will be hobbled as a U.S. slowdown spreads. While the Federal Reserve yesterday lowered its benchmark interest rate in the first emergency shift since 2001, U.S. stocks still fell for a fifth day.

``There's panic in the markets and the effect of the Fed's rate move is already fizzling out,'' said Axel Heitmann, a delegate and chief executive officer of Lanxess AG, a German maker of chemicals used by the leather and automotive industries.

Europe, U.S. Gloomiest

Just half the 1,150 executives surveyed by PricewaterhouseCoopers said they were ``very confident'' about revenue growth this year, down from 52 percent last year. The drop was the first since 2003 and most pronounced in the U.S. and Europe.

The prospect of shrinking economies beat out over- regulation, terrorism and a dozen other challenges listed in the PricewaterhouseCoopers survey. The mood is in contrast to the buoyancy of last year's meeting, where guests celebrated a bumper year of profits and bonuses, and the strongest global economy in three decades on the ski slopes and party circuit.

Last year ``it was go-go-go, we're all going to win,'' said DiPiazza. ``The CEOs of the developed world know we're in for a bumpy ride.''

In the U.S., 36 percent of executives said they were ``very confident,'' compared with 54 percent last year, while 44 percent of Europeans expressed the same sentiment, down from 52 percent. Japanese executives were the most skittish, with just 31 percent calling themselves very optimistic.

``We have this very serious financial crisis with global repercussions,'' Kenneth Rogoff, a Harvard University economist said in Luxembourg yesterday as he headed to Davos. ``The U.S. is very lucky if the economy grows out slowly.''

Subprime Collapse

What's changed in the past year is the spreading fallout from the U.S. housing recession, which triggered a collapse in the market for subprime mortgages and investments tied to them. That has forced lenders to retrench, threatening consumer spending and business investment by pushing up credit costs around the world.

Economists at Goldman Sachs Group Inc. and Merrill Lynch are already predicting the world's biggest economy will fall this year into its first recession in seven years. The Fed yesterday said it cut rates ``in view of a weakening of the economic outlook and increasing downside risks to growth.''

The reduction in the target overnight lending rate to 3.5 percent from 4.25 percent was the biggest single cut since the Fed began using the rate as the principal tool of monetary policy around 1990.

Dollar, Oil

A falling dollar and near-record oil costs are providing more sources of discomfort for Davos executives.

``We are confronting a crisis, in many ways,'' Klaus Schwab, the forum's founder and chairman, said in an interview. ``The mood is concerned.''

One source of comfort was increased optimism among executives in emerging markets, reflecting the recent economic rise of countries such as China and India. In both China and Russia, 73 percent said they were ``very confident'' about revenue expansion in the year ahead, while 90 percent of those in India reported the same level of optimism. The level of optimism in Russia was more than double that of a year ago.

``Markets in China, India and Russia are growing much better and to a certain extent will provide compensation for the world economy for whatever losses the U.S. has,'' said Andrei Kostin, chief executive officer of VTB Group, Russia's second- biggest bank, in an interview.

Executives reported less appetite for international mergers and acquisitions, with just 38 percent of those surveyed saying they had completed or planned to conclude such a transaction, down from 47 percent last year.

The PricewaterhouseCoopers survey was conducted between September and November. About 40 percent of respondents were from companies with annual revenue of more than $1 billion.

India Investment Booms With Third Year of 9% GDP Growth in '08

2008-01-07T00:15:00.000-08:00

Jan. 7 (Bloomberg) -- Gordon Brown's plane will have barely departed New Delhi's Indira Gandhi International Airport this month before Nicolas Sarkozy's arrives with another contingent of executives seeking opportunities in India's rapidly opening markets.

The British prime minister and the French president, separately visiting the week of Jan. 20, are bringing along commercial delegations including retailers Tesco Plc and Carrefour SA, attracted by a burgeoning middle class and loosening curbs on foreign ownership in the nation of 1.1 billion people.

Overseas investment in India may double in 2008 for a second straight year to reach $30 billion, the government forecasts, as the world's second-fastest growing major economy arrives at what Lehman Brothers Holdings Inc. calls its ``take- off'' point. That's when consumer demand and business spending start feeding off one another and drive even more investment.

``India's growth acceleration is not a flash in the pan,'' says Robert Subbaraman, chief economist at Lehman Brothers Asia in Hong Kong. ``A middle class is fast emerging, which is spurring demand as consumption and investment interact.''

Like China and South Korea in previous decades, India is benefiting from an increasingly open economy that has already stimulated enough growth to double per-capita income since 2000, according to Lehman. The resulting surge in demand for consumer goods has tripled mobile phone use in two years and fueled a 29 percent jump in sales of microwave ovens in 2007, Lehman says.

Purchasing Power

With the explosion of purchasing power, India's economy is poised to expand 9 percent for a third straight year, while the U.S., Europe and Japan slow to less than 3 percent growth.

McKinsey & Co., the New York-based consulting firm, estimates that India's middle class -- those with annual disposable incomes between $4,380 and $21,890 in current dollars -- will increase more than 10-fold to 583 million by 2025.

India's appeal is more than a matter of demographics. Prime Minister Manmohan Singh, who as finance minister in 1991 started dismantling barriers to foreign investment and other Soviet- style controls on industry, is preparing to permit overseas companies to build retail chains in the country. That's prompting interest from companies including Hertfordshire-based Tesco, Britain's largest retailer, and Paris-based Carrefour, which operates supermarkets on four continents.

Bigger Stakes

Singh's government is also moving to raise the limit on foreign equity stakes in local insurers to 49 percent from 26 percent, and has a roadmap to let foreign banks increase holdings in India's private banks. Brown's party will include representatives of Prudential Plc, the U.K.'s second-biggest insurer, and Barclays Plc, the No. 3 British bank, both based in London.

``India has long been noted for its superb `micro' -- good companies, rule of law, democracy,'' says Stephen Roach, chairman of Morgan Stanley in Asia. ``What has been missing is the `macro' -- foreign direct investments, infrastructure. What's encouraging to me about India now is that the macro is starting to improve and is reinforcing the already positive micro.''

Foreign ownership in telecommunications has helped India become the world's third-largest user of telecom services after China and the U.S. It's the world's fastest-growing wireless market.

`Heart of Globalization'

``India is a country of enormous opportunity; it's the heart of globalization in a way,'' says Ben Verwaayen, chief executive officer of London-based BT Group Plc, the U.K.'s largest phone company. ``You see a growing base for companies from around the globe, being here not just for this region itself, but being here as a kind of base for what they can do in other parts of the world as well.''

San Jose, California-based Cisco Systems Inc., the world's largest maker of computer-networking equipment, plans to triple its Indian workforce to 10,000 by 2010, Chief Executive Officer John Chambers said in October.

Automakers including General Motors Corp. and Suzuki Motor Corp. are spending more than $6.6 billion to build new factories in the country. PricewaterhouseCoopers LLP says India's auto output will grow about 17 percent annually until 2011, the fastest among the 20 largest carmaking nations.

India's higher profile in the global economy not only makes it a magnet for foreign investment, but also gives its companies a bigger role on the world stage.

Overseas Acquisitions

Indian companies led by Tata Steel Ltd. and Hindalco Industries Ltd., both based in Mumbai, completed a record $39.2 billion of overseas acquisitions in 2007.

Tata's $12.9 billion purchase of Britain's Corus Group Plc, the biggest overseas takeover by an Indian company, made it the world's fifth-biggest steelmaker. Buying Novelis Inc. of Atlanta provided Hindalco, India's biggest aluminum producer, access to customers such as GM and Coca-Cola Co. The trend is continuing: Tata Motors Ltd. of Mumbai, India's largest truckmaker, last week was selected as the preferred bidder for Ford Motor Co.'s Jaguar and Land Rover units, the U.S. automaker announced.

Brown and Sarkozy are joining a parade of world leaders coming to India with agendas that include closer commercial ties. U.S. Treasury Secretary Henry Paulson, visiting in October, said U.S. companies will participate in India's $500 billion program to modernize roads, ports, power and other infrastructure by 2012. The U.S. will help India transform its financial capital, Mumbai, into an international financial center, he said.

During an August visit, then Japanese Prime Minister Shinzo Abe said Japan will help plan a $90 billion infrastructure corridor between New Delhi and Mumbai, including freight lines, power stations and improved access to ports and airports.

Impediment

Such projects may reduce one of the biggest remaining impediments to doing business in India -- poor infrastructure. For all the expansion in the Indian market, its foreign direct investment still pales in comparison to what China has received -- about $60 billion in each of the past three years.

It takes 24 days for Indian exports to reach the U.S. compared with only 15 days from China and 12 from Hong Kong, according to Lehman Brothers.

``If India doesn't get its act together on infrastructure urgently, then it can never realize its aim of accelerating growth,'' says Vineet Agarwal, executive director of Gurgaon- based Transport Corporation of India Ltd., the nation's biggest cargo transportation and logistics services company.

Even as India's economy reaches take-off speed, almost 300 million people continue to live on less than $1 a day, according to the World Bank.

Fewer Poor

The absolute number of poor in India fell for the first time between 1999 and 2004 after the government's policies to allow more foreign investment and reduce regulation on industry spurred growth, according to the Paris-based Organization for Economic Cooperation and Development.

``The Chinese take-off began in the 1980s and didn't show through in terms of increased living standards for the majority for quite some time,'' says Howard Davies, director of the London School of Economics and a former chairman of the U.K. Financial Services Authority. ``Just the same way, India has got the economic take-off but it needs to be sustained for a decade before you really see the place looking different.''

-- With reporting by Chris Burns and Carol Massar in New Delhi Editors: Mark Rohner, Christopher Wellisz

Singapore's GDP Unexpectedly Shrinks on Weaker Output

2008-01-01T22:05:00.000-08:00

Jan. 2 (Bloomberg) -- Singapore's economy unexpectedly contracted last quarter as factory output slowed, suggesting Asia's export-dependent markets may face increased risks from slower global growth.

Gross domestic product shrank an annualized 3.2 percent after adjusting for inflation, the first decline in 18 quarters, and followed a revised 4.4 percent expansion in the third quarter, the trade ministry said in a statement today. Economists were expecting a 3.1 percent gain.

Singapore's figures give economists an insight into how turmoil in global markets and the subprime-mortgage crisis in the U.S., the region's biggest export destination, may affect Asia's expansion. South Korea today said exports in December grew less than expected, and joined Taiwan in warning that easing demand for semiconductors, mobile phones and computers portends weaker growth in 2008.

``We definitely should expect to see more softness in exports in the next couple of quarters, and that's bad news for electronics-heavy Asian economies,'' said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. ``That means slower growth for Singapore and the rest of Asia.''

The Singapore dollar rose 0.1 percent to S$1.4406 per U.S. dollar as of 1 p.m. in Singapore. The benchmark Straits Times Index fell 0.8 percent to 3,453.15.

China, South Korea and the Philippines are due to report fourth-quarter GDP numbers later this month, while Japan, Taiwan and Malaysia are scheduled to release theirs in February.

Factory Output

Manufacturing climbed 0.5 percent in the last three months of 2007 from a year earlier, the smallest increase in 4 1/2 years. Output growth slowed from a revised 10.3 percent in the July-September period as pharmaceutical plants produced fewer drugs, the trade ministry said.

The Asian Development Bank last month said growth in emerging East Asia in 2008 will be 8 percent, half a percentage point lower than last year. The region is twice as reliant on exports as the rest of the world, with 60 percent of overseas sales ultimately destined for the U.S., Europe and Japan.

From a year earlier, Singapore's $132 billion economy grew 6 percent in the fourth quarter after gaining a revised 9 percent in the previous three months. Economists were expecting 7.7 percent growth.

``There's no imminent turnaround in electronics and we're unlikely to see a recovery in the next six months,'' said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. ``Pharmaceuticals, a key support for manufacturing, has been losing steam.''

Electronics Slump

Singapore's electronic exports have dropped each month since February, mired in the worst slump in five years. South Korea yesterday lowered its growth forecast for 2008, pointing to the likelihood of slowing exports. Taiwan is also predicting an easing in overseas shipments this year which it said will make its growth target ``highly challenging.''

Hynix Semiconductor Inc. Chief Executive Officer Kim Jong Kap last week told employees of the world's second-largest maker of memory chips, based in Ichon, South Korea, that ``a difficult period'' is foreseen for the first quarter or the first half.

South Korea's exports rose a less-than-expected 15.5 percent in December from a year earlier, the Commerce Ministry reported today. Overseas shipments are forecast to increase 11.6 percent in 2008, the ministry said.

Singapore's services industry climbed 8.3 percent from a year earlier, matching the growth rate in the previous three- month period.

Economists said demand for financial services probably eased as the rout in global credit markets increased risk aversion and the city-state's government implemented measures to cool the property market.

Stocks Tumble

Global stock markets have lost $1.6 trillion in value since October and the collapse of the subprime-mortgage market in the U.S. triggered more than $80 billion in writedowns among the world's largest banks.

``Singapore's financial services industry has been affected by the shadow of the subprime problem,'' Seah said. ``Investors are more cautious and that has slowed down activity.''

The island's burgeoning construction industry prevented a wider contraction in the economy last quarter as companies such as Exxon Mobil Corp. set up new plants and property developers build new office towers and condominiums. Southeast Asia's fourth-largest economy reported a record S$16 billion ($11 billion) in fixed-asset investments last year.

Construction surged 24.4 percent from a year earlier, after a revised 19.2 percent gain in the three months ended September.

The economy advanced 7.5 percent in 2007, easing from a 7.9 percent rate of expansion the year before. The government expects growth to be between 4.5 percent and 6.5 percent in 2008.

Singapore's growth had raised concern the economy is overheating, with consumer prices rising at the fastest pace in more than 25 years. Policy makers expect inflation to be between 3.5 percent and 4.5 percent this year, accelerating from a forecast average of 2 percent in 2007.

The figures today are computed from data for October and November. Revised numbers, including nominal gross domestic product, will be released next month.

Market falls on economic worries and Bhutto death

2007-12-27T09:19:00.000-08:00

NEW YORK (Reuters) - Stocks fell on Thursday after a weak durable goods report raised concerns about the outlook for the economy and an assassination in Pakistan sparked worries about global political stability.

Financial stocks were the main drag on the market after a Goldman Sachs analyst said Citigroup Inc (C.N), Merrill Lynch & Co (MER.N) and JPMorgan Chase & Co (JPM.N) may face larger fourth-quarter debt write-offs than previously expected.

Orders for big-ticket items such as computers and appliances rose a slender 0.1 percent in November, well below economists' 2 percent forecast. Adding to the unease about the health of the economy, new applications for U.S. jobless benefits unexpectedly rose.

News that Pakistani opposition leader Benazir Bhutto had been killed rattled stock markets and sent oil and gold higher.

"Durable goods was weak and set the market off to a weak footing. But it was the unfortunate death of Benazir Bhutto in Pakistan that grabbed the headlines. That's a global stability story," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

"Financials are continuing to languish, and will probably do so until the end of the year," he added.

The Dow Jones industrial average (.DJI) was down 123.48 points, or 0.91 percent, at 13,428.21. The Standard & Poor's 500 Index (.SPX) was down 11.50 points, or 0.77 percent, at 1,486.16. The Nasdaq Composite Index (.IXIC) was down 25.97 points, or 0.95 percent, at 2,698.44.

A private report showing U.S. consumer confidence was stronger-than-expected in December lent some support to the market.

The Conference Board said its index of consumer sentiment rose to 88.6 in December from a revised 87.8 in November. The median forecast of economists polled by Reuters was for a reading of 86.5.

Student loan provider Sallie Mae (SLM.N) fell 6 percent to $20.80 after the company said late Wednesday it plans to sell about $2.5 billion of stock and mandatory convertible securities to help pay off derivatives contracts that amounted to a bet that its share price would keep increasing.

S&P financials (.GSPF) fell 1.3 percent. Merrill Lynch dropped 2.3 percent to $53.25 while JP Morgan shares fell 1 percent to $44.51.

The Goldman analyst also said Citigroup may have to slash its dividend by 40 percent to preserve capital, sending Citi's shares down 2.2 percent to $29.78.

Bhutto dies in suicide blast

2007-12-27T08:30:00.001-08:00

RAWALPINDI: Pakistani opposition leader Benazir Bhutto died Thursday after a suicide bomb and gun attack.

"At 6.16pm (9.16pm Malaysian time) she expired,'' said Wasif Ali Khan, a member of Bhutto's party who was at Rawalpindi General Hospital.

A senior military official, who spoke on condition of anonymity because he was not authorised to comment, confirmed that Bhutto had died.

According to unconfirmed reports, the attacker had opened fire on her with a weapon before the explosion.

On hearing of her death, Bhutto's supporters at the hospital began chanting "Dog, Musharraf, dog,'' referring to Pakistan's President.

Some of them smashed the glass door at the main entrance of the emergency unit, others burst into tears. One man with a flag of Pakistan People's Party tied around his head was beating his chest.

Senator Babar Awan, Bhutto's lawyer, said, "The surgeons confirmed that she has been martyred.''

At least 20 others were killed in the blast that took place as Bhutto left a political rally where she addressed thousands of supporters to canvas votes for Jan 8 parliamentary elections.

Bhutto served twice as Pakistan's Prime Minister between 1988 and 1996. She had returned to Pakistan from an eight-year exile on Oct 18.

Her homecoming parade in Karachi was also targeted by a suicide attacker, killing more than 140 people. On that occasion she narrowly escaped injury. - AP

Toyota Raises 2008 Sales Forecast on Overseas Demand

2007-12-25T02:18:00.000-08:00

Dec. 25 (Bloomberg) -- Toyota Motor Corp. raised its sales forecast for 2008 to 9.85 million vehicles, cementing the company's lead as the world's most profitable carmaker.

Sales will rise 5 percent from an estimated 9.36 million this year, the Toyota City, Japan-based automaker said in a release today. Toyota plans to make 9.95 million vehicles, also a 5 percent increase. The company previously forecast sales of 9.8 million next year.

Toyota, close to ending General Motors Corp.'s 76-year reign as the world's largest automaker by sales, needs to sell more vehicles in emerging markets to achieve its targets, as demand for automobiles is forecast to decline in the U.S. and Japan, the company's two biggest markets. Toyota opened a factory in St. Petersburg, Russia, last week and will add production in China next year.

``Toyota will solidify its position as the top carmaker in 2008,'' said Hitoshi Yamamoto, who manages the equivalent of $5.5 billion in Japanese equities as chief executive officer of Fortis Asset Management in Tokyo. ``The company's cars give it an edge.''

Toyota made an estimated 9.51 million vehicles this year, up 5 percent from 2006. GM said on Dec. 3 its production will total about 9.26 million in 2007.

Sales and production figures for Toyota include vehicles built by its Daihatsu Motor Co. and Hino Motors Ltd. subsidiaries.

Emerging Markets

The automaker earned net income of 1.64 trillion yen ($14 billion) in the year ended March 31 compared with General Motors's $1.98 billion loss for the calendar year. GM in November reported a record $39 billion quarterly loss.

Toyota rose 1.3 percent to close at 6,100 yen at 3 p.m. on the Tokyo Stock Exchange. The stock has fallen 23 percent this year, compared with a 9.7 percent drop in the benchmark Nikkei 225 Stock Average.

Automakers are boosting sales and production in emerging economies such as China, Russia, and India, where rising incomes are making automobiles affordable to more people. The growth is offsetting slumping sales in Japan and the U.S., the world's biggest auto market.

``The importance of emerging markets will increase next year as demand in the U.S. may fall,'' Fortis's Yamamoto said.

Toyota aims to increase sales in Asia outside Japan, excluding those by Hino and Daihatsu, by 20 percent to 1.58 million vehicles next year, Executive Vice President Tokuichi Uranishi told reporters in Nagoya today.

Europe, Japan

Sales in China may jump 43 percent to 700,000 as Toyota starts to make Yaris compact cars in the country. The carmaker needs more capacity in China to catch up with faster-than- expected growth, Uranishi said.

Toyota said Dec. 21 it may build a second car plant in Russia. The company will also sell more cars in Europe, the Middle East and Central and South America, Uranishi said today.

In Europe, sales excluding Hino and Daihatsu may rise to 1.27 million vehicles next year, including 200,000 units in Russia, from 1.24 million. Toyota forecast sales in the Middle East to increase to 510,000 from 480,000. It expects to sell 420,000 vehicles in Central and South America.

Toyota's sales in Japan will be little changed next year at about 2.27 million vehicles, the company forecast. Industrywide sales of cars, minicars, trucks and buses in the country may decline 1.2 percent to about 5.32 million, the Japan Automobile Manufacturers Association said Dec. 20.

U.S.

Demand for automobiles in Japan declined for a third straight year in 2007 as the country's population decreased and wages fell. Auto sales will drop to the lowest in 26 years next year, according to the association's forecast.

Toyota predicted an increase in 2008 U.S. sales to 2.64 million vehicles from 2.62 million this year. Industrywide U.S. sales may be unchanged or fall next year, as the world's largest economy may slow down, said Katsuaki Watanabe, Toyota's president.

``We're getting to the stage where Toyota has grown so impressively in recent years that it's going to find the next stage of growth quite difficult'' in the U.S., said Ashvin Chotai, an automotive analyst for Global Insight Inc. in London.

Toyota added a pickup truck plant in Texas last year and will open a second plant in Ontario, Canada, to make RAV4 SUVs in 2008. The company is also building a plant in Mississippi that will make Highlander SUVs.

``The company's sales forecast may be very challenging, depending on the U.S. economic outlook next year,'' said Koji Endo, a senior analyst at Credit Suisse Securities (Japan) Ltd. in Tokyo. Toyota may report a drop in earnings next fiscal year, he said.

Hybrids, Batteries

Toyota, the world's largest producer of gasoline-electric hybrid cars, is in a race against GM to develop the first ``plug- in,'' or a hybrid model that can be recharged using an electrical outlet. Toyota is considering mass production of lithium-ion batteries with Matsushita Electric Industrial Co. to power such vehicles, President Watanabe said. GM, which is developing the Volt electric car, also plans to use lithium-ion batteries.

Toyota and Matsushita have a venture called Panasonic EV Energy Co. to manufacture batteries for Toyota's hybrids. The venture will also increase production capacity of the nickel- hydride batteries now used to power Toyota's hybrid vehicles.

Global Stocks Advance; BHP, Anglo American, Cap Gemini Gain

2007-12-24T03:08:00.000-08:00

Dec. 24 (Bloomberg) -- Stocks in Europe and Asia gained, led by commodity producers including BHP Billiton Ltd. and Anglo American Plc, as copper surged by its daily limit in Shanghai.

BHP Billiton also rallied after a U.K. regulator set a deadline for a formal takeover bid for Rio Tinto Group. Cap Gemini SA, Europe's largest computer-services company, rose the most in three months on a report that India's Wipro Ltd. will bid for the French company by the end of January. Samsung Electronics Co., South Korea's biggest exporter, climbed after consumer spending increased more than forecast in the U.S.

``Commodity prices are going to be particularly strong,'' said Andrew Pullar, who helps manage $900 million in London at Baker Steel Capital Managers LLC. Speculation of mergers among mining companies is ``very encouraging'' for the industry as it shows ``the global giants believe in stronger commodity prices.''

The MSCI World Index added 0.2 percent to 1,582.95 as of 10:48 a.m. in London, extending its gain for the year to 6.7 percent. Futures on the Standard & Poor's 500 Index were little changed at 1,497.70.

Raw-material producers have led the 2007 global advance, adding 29 percent, as surging demand from China sent metal prices higher. The MSCI World is still heading for its first fourth quarter decline since 2000, on concern that the subprime mortgage slump will send the U.S. economy into recession.

Trading may be slower than usual today with several markets including Germany, Italy, Spain, Switzerland, Japan and Indonesia shut. Trading in the U.K., Ireland, the Netherlands, Belgium and France will close early today, and all European markets will be shut tomorrow for Christmas.

European Benchmarks

European national benchmarks rose in all of the seven western European markets that were open. France's CAC 40 added 0.2 percent and the U.K.'s FTSE 100 climbed 0.3 percent.

The cost of borrowing euros fell for a fifth day, signaling action by central banks to relieve a global squeeze in money markets is working. European government bonds fell, while Treasury notes were little changed.

The MSCI Asia Pacific excluding Japan Index rose 2 percent. The measure has added 32 percent this year and is on course for its fifth annual increase. Benchmarks in all Asian markets open for trading rose. Hong Kong's Hang Seng Index added 1.8 percent and South Korea's Kospi Index rose 2.2 percent.

Markets in Japan, Indonesia, the Philippines and Thailand were shut today, and closed early in Australia, Hong Kong and Singapore.

BHP, Anglo American

BHP Billiton, the world's largest miner, increased 1 percent to 1,555 pence. Anglo American, the world's second- biggest, advanced 1.5 percent to 3,057 pence.

Copper in Shanghai rose by the exchange-imposed daily limit for a second day as stockpiles in China slumped to a 10- month low, signaling that the world's biggest consumer of the metal may need to step up buying. The London Metal Exchange is closed until Dec. 27 for the Christmas holiday.

BHP must bid for Rio by 5 p.m. on Feb. 6 or walk away until six months from when it announces its decision, the U.K. Takeover Panel said on Dec. 21. Rio asked the panel on Dec. 10 to force BHP to formalize its bid, currently worth $123 billion.

Separately, China's cabinet has approved a plan by state- owned companies to study strategies to counter a BHP takeover bid for Rio Tinto, the South China Morning Post reported, citing unidentified people.

Sun Bin, a spokeswoman at China International, declined to comment. Ning Xia, a spokeswoman at BOC International, didn't answer phone calls to her office.

Cap Gemini

Cap Gemini rallied 5.4 percent to 42.91 euros after the Hindustan Times newspaper reported that Wipro may bid for the company. The bid could be close to 48 euros ($69) per share, valuing Cap Gemini at between $6.4 billion and $7 billion, the Hindustan Times reported, citing unidentified investment bankers.

Wipro, the third-biggest software exporter, climbed 7.8 percent in Indian trading. Radha Radhakrishna, a spokeswoman for Wipro, declined to comment on the newspaper report. Christel Lerouge, a spokeswoman at Cap Gemini, couldn't immediately be reached.

Samsung

Samsung Electronics, South Korea's biggest exporter, advanced 3.2 percent to 578,000 won. Hon Hai Precision Industry Co., maker of iPods for Apple Inc., climbed 4.4 percent to NT$200.

U.S. consumer spending rose 1.1 percent in November, the Commerce Department said Dec. 21. That was higher than the median estimate of 0.7 percent in a Bloomberg News survey of economists and was the biggest increase since July 2005.

Mediatek Inc., Taiwan's biggest maker of mobile-phone chips, climbed 5.9 percent to NT$428 after the Taipei-based Commercial Times newspaper said the company may ship 65 million handset chips in the first quarter, an 8 percent increase from the three months through December.

Standard Chartered Plc rose 1 percent to 1,853 pence. Temasek Holdings Pte, its biggest shareholder, increased its stake in the U.K. bank that gets most of its profit from Asia by 1 percentage point to 18 percent.

The Singapore sovereign wealth fund bought 12 million shares to lift its stake to 253.7 million shares, the bank said in a filing on Dec. 21. The additional shares are worth 220 million pounds ($436 million) at that day's closing price of 1,835 pence.

Asian Stocks Gain for First Time in Eight Days; Sharp Gains

2007-12-20T19:38:00.001-08:00

Dec. 21 (Bloomberg) -- Asian stocks rose for the first time in eight days. National Australia Bank Ltd. paced an advance by Australian companies as investors bet recent declines have been excessive relative to earnings prospects.
``It has been a horrible seven days and now we're seeing the market bounce back a little bit,'' said Paul Xiradis, who helps manage the equivalent of $11 billion at Ausbil Dexia in Sydney. ``People are still cautious but they are seeing value out there.''
Sharp Corp., Japan's largest maker of liquid-crystal displays, paced gains in Japan after a report said Toshiba Corp. will align with the company on display panels. Canon Inc. fell to the lowest in almost 18 months after a report said the company's profit may rise 7 percent, missing forecasts.
The MSCI Asia Pacific Index gained 0.7 percent to 152.83 at 11:14 a.m. in Tokyo. All 10 industry groups on the benchmark climbed. The measure fell 2.4 percent this week.
Japan's Nikkei 225 Stock Average added 1.2 percent to 15,205.16. All Asia's benchmarks advanced.
Australia's S&P/ASX 200 rose 0.7 percent, snapping its longest losing streak in five years.
National Australia Bank, the country's biggest lender which fell 5.1 percent in the past four days, gained 2.4 percent to A$37.36. Westpac Banking Corp., the fourth-largest Australian bank, added 33 cents, or 1.2 percent, to A$27.62, after sliding 5.9 percent earlier this week.
Sharp gained 2.3 percent to 1,944 yen. Toshiba will buy 40- inch to 60-inch LCD panels made at Sharp's new Japanese factory, the Nikkei newspaper reported today. Sharp spokesman Hiroshi Takenami said the company is considering an alliance with Toshiba.

Mobile-Phone Spending in U.S. Sets Record on IPhone

2007-12-20T19:36:00.000-08:00

Dec. 20 (Bloomberg) -- It took a computer maker and a pager company to convince Americans a mobile phone is worth paying for, and now shoppers are splurging.
U.S. customers shelled out 40 percent more for handsets last quarter than a year earlier, just as Apple Inc. put its Web-browsing iPhone on sale and Research In Motion Ltd. brought out BlackBerry e-mail phones with video features. Spending rose to a record and jumped the most since at least 2005.
Americans, previously hard-pressed to pay $50 for a phone, are now more like their European and Asian counterparts and paying $300 to $400 for the top devices. That will translate into higher sales for Apple and Research In Motion and may bolster rivals Nokia Oyj and Sony Ericsson Mobile Communications Ltd., which tried for years to promote camera and music phones to U.S. buyers.
``The iPhone has made the U.S. consumer appreciate the value of the mobile phone,'' said Carolina Milanesi, an analyst at Stamford, Connecticut-based Gartner Inc.
The trend will continue this holiday season, said analyst Ross Rubin at NPD Group, which collects retail data.
Sales of pricier handsets such as the iPhone almost tripled last quarter and made up 11 percent of phones sold in the U.S., Port Washington, New York-based NPD said. Shoppers spent $3.2 billion on phones, or $83 each, up from $2.2 billion a year earlier and the most since NPD's records began in 2005.
Investors will look for proof today that the pace held up over Thanksgiving when Research In Motion reports fiscal third- quarter earnings. Net income probably doubled to $351 million in the period through Dec. 1, while sales almost doubled to $1.65 billion, analysts in a Bloomberg survey estimated.
Shares Surge
Shares of both Waterloo, Ontario-based Research In Motion and Cupertino, California-based Apple have more than doubled this year amid the jump in demand for so-called smart phones. Research In Motion rose $4.86, or 4.8 percent, to $106.99 at 4 p.m. New York time in Nasdaq Stock Market trading, and Apple added $4.09, or 2.2 percent, to $187.21.
North America is the only region where the average phone price will increase this year, said Milanesi. Last year, mobile handsets sold in Japan cost 74 percent more than in North America. In Europe, they were 10 percent pricier.
While consumers in parts of Europe and Asia for years have spent hundreds of dollars on phones from Nokia and Sony Ericsson, only ``extraordinary'' devices have fetched such prices in the U.S., said analyst Roger Entner of IAG Research in New York.
The iPhone, which doubles as a music player, cost as much as $599 when it went on sale in June and now sells for $399. Apple shipped 1.4 million of them in the first three months. BlackBerrys go for as much as $300.
Subsidized Phones
U.S. carriers have used subsidies to keep prices of most other phones down. Motorola Inc.'s Razr, which sold for as much $500 when introduced in 2004, can now be had free.
Subsidies have made it difficult for phone makers to sell directly to consumers and made carriers the gatekeepers, deciding which phones to offer.
``Carriers cheapened the device in the eyes of the consumer,'' said Entner. ``That will change if manufacturers can keep coming up with really, really cool devices.''
For Steve Rogalski, a real-estate broker in Westchester County, New York, that change came in June. Having never spent more than $100 on a phone, he shelled out $599 for an iPhone, which he also uses as a map tool and a camera.
``I waited until the right device came along,'' said Rogalski, 61. ``No other phone'' ever made him want to spend that much.
Rivals' Challenge
Rivals to the iPhone and BlackBerry still need to prove they're up to the challenge. Apple benefits from a loyal following for its iPod music players and Macintosh personal computers, which sell at a premium compared with rival products.
Research In Motion won over bankers and lawyers with its reliable e-mail pager before branching into phones with video and music players for the consumer market in the past year.
``In the U.S., there are very few phones that are status symbols,'' said IAG's Entner. Even as demand increases, the handset needs to be ``really, really attractive'' to succeed.
Encouraged by the iPhone's success, Nokia, Motorola, Samsung Electronics Co. and Sony Ericsson will push higher-end phones on Americans, said Barry Gilbert, a vice president at researcher Strategy Analytics in Boston. They may open more stores to reach consumers directly, instead of relying on the carriers, which don't always offer the top models.
Nokia, the largest mobile-phone maker globally with almost 40 percent of the market, ranks fourth in the U.S. Sony Ericsson, fourth in worldwide sales, doesn't even crack the U.S. top five. The company is a joint venture of Sony Corp. and Ericsson AB.
Nokia is seeing signs of change, spokesman Keith Nowak said. Customers lined up outside its flagship store in Manhattan to buy the $699 N95 camera and navigation phone this year. The company, based in Espoo, Finland, also has an outlet in Chicago.
``People are willing to pay,'' said Nowak, who is based in White Plains, New York. ``The interest has been shifting to what these devices can do.''

U.S. Stocks Gain for 2nd Day; Morgan Stanley, Alcoa Advance

2007-12-19T08:19:00.001-08:00

Dec. 19 (Bloomberg) -- U.S. stocks gained for a second day, led by financial companies, after Morgan Stanley said China bought a $5 billion stake and the Federal Reserve added $20 billion to the banking system.
Morgan Stanley, the second-biggest U.S. securities firm, gained the most in a week. Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. also advanced. Alcoa Inc. climbed after the price of aluminum increased on speculation falling exports from China will reduce stockpiles.
The Standard & Poor's 500 Index added 6.17, or 0.4 percent, to 1,461.14 at 10:26 a.m. in New York. The Dow Jones Industrial Average rose 38.53, or 0.3 percent, to 13,271. The Nasdaq Composite Index increased 11.26, or 0.4 percent, to 2,607.29. About four stocks gained for every three that fell on the New York Stock Exchange. European stocks dropped, while most Asian benchmarks rose.
``For the financials it's positive because you need capital and the situation is only going to stabilize with more capital,'' said Steve Roukis, who helps oversee $1.8 billion, including Morgan Stanley shares, as managing director of Matrix Asset Advisors Inc. in New York.
Falling interest rates signaled that actions by central banks in Europe and North America to provide banks with cash may be easing gridlock in credit markets. The Federal Reserve lent the $20 billion in 28-day funds at a rate of 4.65 percent in the first of four auctions planned by the central bank.
Lower Rates
The three-month euro interbank offered rate, or Euribor, dropped 0.07 percentage point to 4.81 percent, the lowest since Nov. 30, the European Banking Federation said. The three-month rate for pounds declined 18 basis points to 6.21 percent, the lowest in four months, the British Bankers' Association said.
Today's advance pushed the S&P 500's gain for the year to 2.9 percent, while the Dow has added 6.4 percent and the Nasdaq is up 7.9 percent in 2007.
Morgan Stanley added 81 cents to $48.88 after it reported a fourth-quarter loss of $3.56 billion and said it obtained a $5 billion investment from China Investment Corp., the nation's sovereign wealth fund.
Bank of America, the second-biggest U.S. bank, rose 53 cents to $42.03. JPMorgan, the third-largest, climbed 47 cents to $44.37. Citigroup, the biggest, advanced 32 cents to $30.70.
TD Ameritrade gained 35 cents to $19.75. The third-largest U.S. discount broker raised its fiscal first-quarter earnings forecast after trading rose to a record. Earnings will be about 39 cents a share for the quarter ending this month, up from a previous forecast of as much as 33 cents, the company said. Rival E*Trade Financial Corp. gained 3 cents to $3.68.
Palm
Palm Inc. sank 62 cents to $5.31. The company's third- quarter loss will be 14 cents to 16 cents a share, excluding costs such as stock compensation, Palm said in a statement. Analysts on average had projected a loss of 5 cents, according to a Bloomberg survey. A year earlier, Palm had a profit of $11.8 million, or 11 cents.
Hovnanian Enterprises Inc., New Jersey's largest homebuilder, retreated 64 cents to $7.76 after reporting a loss that was four times analysts' estimate. The company's net loss was $7.42 a share. Eight analysts in a Bloomberg survey forecast a loss of $1.63 a share. The year-ago loss was $1.88 a share.
U.S. home foreclosures rose 68 percent in November from a year earlier as adjustable-rate mortgages left subprime borrowers unable to meet higher payments, according to data compiled by RealtyTrac Inc.
Darden Restaurants Inc. fell $6.34, or 17 percent, to $30, the steepest decline in the S&P 500. The company reported second-quarter profit that trailed analysts' estimates and reduced its full-year profit forecast.
U.S. stocks climbed for the first time in three days yesterday after the ECB injected $500 billion into the financial system.

Asian Stocks Rise for First Time in Six Days, Banks Lead Gains

2007-12-18T20:02:00.000-08:00

Dec. 19 (Bloomberg) -- Asian stocks rose for the first time in six days, led by banks and electronics makers, after the European Central Bank added $500 billion to the financial system as part of a global effort to ease credit-market gridlock.
Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. led banks higher after Credit Suisse Group raised its ratings on the shares, saying recent declines were excessive.
Nintendo Co. and Hon Hai Precision Industry Co. led gains among exporters. Centro Properties Group, the Australian owner of U.S. shopping malls that's struggling to repay debt, rebounded from a two-day, 86 percent plunge after saying it remains viable.
``The ECB has soaked the market in money to make sure there is no liquidity problem,'' said Dennes Chang, who helps manage $2.5 billion at Jih Sun Securities Investment Trust Co. in Taipei. ``The strong stance helped restore investor confidence.''
The MSCI Asia Pacific Index added 0.9 percent to 153.46 as of 12:31 p.m. in Tokyo, snapping the measure's longest losing streak since the period ended July 18, 2006. Nine of the 10 industry groups on the benchmark climbed.
Japan's Topix index gained 0.7 percent, led by Nippon Steel Corp. after the maker of the alloy said it is considering closer ties with its rivals. Benchmarks gained in all other markets open for trading, except in the Philippines. South Korea's stock exchange is closed today for the country's presidential election.
U.S. stocks climbed for the first time in three days yesterday on speculation the European Central Bank's injection of funds into the financial system will help the world's largest economy withstand a deteriorating housing market.
Banks Advance
Mitsubishi UFJ, Japan's largest publicly traded bank, gained 1.9 percent to 1,062 yen. Mizuho Financial, the No. 3 Japanese lender by market value, rose 1.7 percent to 545,000 yen. Credit Suisse raised its stock ratings on the two lenders to ``outperform'' from ``neutral.''
DBS Group Holdings Ltd., Southeast Asia's largest bank, advanced 1 percent to S$20.20 in Singapore. Hang Seng Bank Ltd., Hong Kong's second-biggest lender, climbed 2.3 percent to HK$149, snapping a five-day decline.
Exporters rose on speculation the ECB's added funds will help sustain global economic growth. Nintendo, which counts on the Americas as its biggest export region, gained 3.2 percent to 63,900 yen. Hon Hai Precision Industry, which makes Apple Inc.'s iPod, rose 4.5 percent to NT$186. Canon Inc., the world's largest maker of digital cameras, advanced 0.7 percent to 5,470 yen.
Japanese Steelmakers
Nippon Steel, the world's second-largest maker of the alloy, advanced 2.9 percent to 634 yen, the biggest gain since Nov. 30. Sumitomo Metal Industries, Japan's third-largest steelmaker, climbed 2.9 percent to 464 yen. Kobe Steel Ltd. gained 2.3 percent to 350 yen.
Nippon Steel said today it has been considering closer ties with its two rivals since October. The company will spend about 50 billion yen ($441 million) to buy more shares of Sumitomo Metal and Kobe Steel, the Nikkei newspaper reported today, without saying where it got the information.
Centro Properties rose 60 percent to A$1.29. The company said today it will aim to preserve shareholder value with asset sales and that its underlying business continues to perform strongly.

6 money dilemmas

2007-12-17T02:28:00.000-08:00

As you invest your money, shop for a home or tackle any one of the many financial decisions you have to make over your lifetime, do you sometimes wish you'd paid more attention in math class? Do you find yourself having to "run the numbers" and wondering how?

To help, we've taken six common financial quandaries and done the math for you. As you'll see, the solution isn't always black and white, and the "right" answer may depend on things that you can never know for sure, like your tax bracket in 2020 or how much your investments will grow.

Plus, at times emotional considerations may tip the balance. Even if the math favors buying stocks over prepaying your mortgage, say, you may simply sleep better being out of debt. So this guide will walk you through the caveats as well as the calculations. Use it to navigate some of your financial life's trickiest questions and come up with your best call.

Pay off a credit card OR fund your 401(k)

You should do both. If you can't, pay off the plastic first.

In an ideal world, you'd wipe out your costly debts and save for retirement. But in the real world, you may not have enough cash to do both at the same time. Of course, you must pay at least the minimum on your credit card every month. So the question is, Do you put the rest of your available cash in your 401(k) or devote it all to your credit card?

Strictly by the numbers By paying off credit-card debt, you get a guaranteed rate of return equal to your interest rate (the average is 14 percent today). But if your employer matches your 401(k) contributions, that's a 50 percent return (assuming the typical 50¢-to-the-dollar match on the first 6 percent of your salary).

Hard to beat. Or is it? The 50 percent match is a one-time gift; the 14 percent interest will compound every year. At some point the cost of that interest will overtake 50 percent. So if you have a big credit-card balance, attack that first.

Here's how that could play out if you're deciding what to do with $250 a month. With a $5,000 credit-card balance at a 14 percent rate, your minimum payment is $125 a month.

Suppose you put the rest in your 401(k). Because you don't pay taxes on that contribution, you can actually invest $174 a month (assuming a 28 percent tax rate). Keep paying $125 a month on your credit-card balance, and you'll need 55 months to wipe it out. During that time if you earn 8 percent annual returns and get the standard 50 percent match you'll amass $17,271 in your 401(k).

If you ignore the 401(k) for a while and instead plow your entire $250 toward the credit card, you'll pay it off in just 23 months. Then you could devote all your spare cash to your 401(k). By the end of the original 55 months, you'd have $18,515 in your plan. The one-at-a-time approach beats splitting your money because 55 months of paying 14 percent interest outweighs the 50 percent match.

But wait Suppose your credit-card debt isn't that big, and you can pay it off in just a couple of years even if you split your cash. Great. Go ahead and fund both goals. You'll get the benefit of the 50 percent match.

You do the math To see how long it would take you to pay off your credit cards, use the calculator at Bankrate.com.

Beyond the math Good savings habits are important too. If by putting off funding your 401(k) you'll never get around to it, work on both goals at once.

The bottom line If you have a big credit-card balance, wipe it out before you open a 401(k).

Save in a Roth 401(k) OR a regular 401(k)

Don't miss this new chance to lock in tax-free retirement income.

Wish you could forever shelter your retirement savings from taxes, but you make too much to contribute to a Roth IRA? With the recent arrival of the Roth 401(k), you may have, or may soon be getting, a second chance at tax-free income.

Grab it. With a traditional 401(k) you invest pretax dollars and pay taxes when you withdraw your money; with the Roth version you pay taxes on what you put in but nothing on your withdrawals.

About a quarter of employers have rolled out this option, and a majority of plans will likely offer it by 2009. Unlike a Roth IRA, which is off limits in 2008 once your modified adjusted gross income hits $169,000 (as a couple), a Roth 401(k) has no income caps.

Strictly by the numbers Let's say that you contribute the maximum of $15,500 to your 401(k) and you're in the 28 percent tax bracket. Assuming an 8 percent annual return, you'll end up with $72,245 tax-free in 20 years with a Roth.

If you go with the traditional 401(k) instead, you'll also end up with $72,245 in 20 years, but you'll pay taxes on the withdrawals. At the same 28 percent tax rate, you'd be left with $52,016 you could actually spend.

When you fund the traditional 401(k), however, you shelter $15,500 from taxes. But even if you invest that $4,340 tax savings outside your plan, you'd have to earn well in excess of 8 percent a year to equal your Roth total after taxes.

But wait Won't your tax bracket drop once you're no longer working? Don't count on it. If you're just starting your career, you'll almost certainly be earning more in 40 years. Even if you're mid-career, you can't assume your tax bracket will plummet.With federal tax rates currently at their lowest levels in decades and the federal deficit growing, it's not hard to imagine Congress raising taxes between now and your retirement. Assume a lower bracket only if you're near retirement and know your tax rate will fall.

You do the math Use the Roth 401(k) calculator at Dinkytown.net.

Beyond the math A regular 401(k) has one thing going for it: the up-front tax break. That's why you'll see your disposable income shrink if you switch to a Roth. But for the regular 401(k) even to come close to the Roth as a savings vehicle, you'd have to invest the extra cash that it put in your pocket. Would you?

The bottom line Unless you are on the verge of retiring and know your income will drop, the Roth wins.

Lease a car OR buy a car

Buying costs less if you own your car till it drops.

With leasing, you always drive a shiny new car, and your monthly payments are lower. So why would you buy?

Strictly by the numbers A 2008 Toyota Camry will run you just under $27,000 (including taxes and fees). Buy one and finance it with a no-money-down, five-year loan at 6.9 percent (today's average), and your monthly payments will be $526. Over five years, you'll spend $31,560. Say you instead pay $1,000 up front for a five-year lease. Your monthly payment will be $415. At the end of five years, you'll have spent $25,900.

So leasing wins? That's not the full story. If you buy a car, it'll be worth something once you've paid off the loan. Your Camry would fetch about $10,000 after five years, according to estimates by Edmunds.com. That cuts the out-of-pocket cost to $21,560.

But wait What if you really want a new car? In that case, the gap narrows. Take out a three-year loan on the Camry and your monthly payments would spike to $821, for a total of $29,556. If your three-year-old Camry sells for $14,000, your net cost drops to $15,556.

If you leased, though, your payment would be $485 a month, putting an extra $336 in your pocket compared with the loan. Invest that $336 in a money-market fund paying 4.5 percent, and you'd earn $589 after taxes in three years, assuming a 28 percent tax bracket. Factoring that in, your total lease cost would be $17,871.

Also, the Camry holds its value well. With models that don't, the manufacturer often sweetens the deal by inflating the car's assumed value at the end of the lease term. If you buy the same car, you won't make that much when you sell it, which could tilt the scales in favor of leasing.

You do the math Use the calculator at Edmunds.com.

Beyond the math Leases come with mileage restrictions, typically 12,000 miles a year. Plus, if you ding a leased car, you'll get dinged with fees.

The bottom line Over the long term, buying costs you less.

Prepay your mortgage OR invest

The feel-good choice isn't necessarily the smart choice.

When some extra cash comes your way, it's tempting to put it toward your mortgage. You'll save on interest and pay off your house earlier. Buying stocks, on the other hand, feels like a risky leap into the unknown, especially now.

Strictly by the numbers Paying off your mortgage or any loan is an investment, and your return is essentially the interest rate on the loan. If you have 25 years left on a 30-year mortgage with a fixed rate of 6.2 percent and you deduct your interest payments on your taxes, you'll earn 4.5 percent by prepaying the loan (assuming you're in the 28 percent tax bracket).

Now let's say you invest your spare cash in stocks instead. You'll pay a 15 percent tax rate on your long-term capital gains and dividends. So to beat the 4.5 percent return you'd get from prepaying your mortgage, you'd have to earn just 5.3 percent a year on your stocks before taxes.

The odds of your doing that over the 25-year remaining term of your mortgage are excellent: Historically, a portfolio of 80 percent stocks and 20 percent bonds has returned 7.5 percent a year after taxes.

But wait Paying down the mortgage earns you a risk-free 4.5 percent. That's as good as you'll do with Treasury bonds. True, and if you are investing for a near-term goal and don't want to take any risk, you can make a stronger case for prepaying your mortgage. But if you are investing for a goal that's more than a decade away, you can and should take more risk for a chance at a higher return.

You do the math To run the numbers on how much money you could end up with by investing, use the savings calculator at CNNMoney.com. To see how much interest you'd save by prepaying your mortgage, use the payoff calculator at Dinkytown.net.

Beyond the math Of course, all that mortgage debt may be keeping you awake at night, especially if you are worried about losing your job or you're approaching retirement and hope to live on less. You'd be grateful to be rid of that major monthly bill sooner. In that case, prepaying your mortgage starts looking better.

Remember, though, that by prepaying your mortgage, you are reducing your liquid assets. If you suddenly need money, it's easier to sell a mutual fund than it is to pull cash from your home, and you can always pay off your mortgage later with the money you invest now.

The bottom line Investing wins.

Buy a home OR rent a home

Even in today's crummy market, buying can beat renting if you're in for the long term.

You're relocating, or you're downsizing so you can harvest some real estate wealth. Do you buy right away or rent and wait out the housing bust? To get your answer, consider your monthly expenses, what you'd do with the profits from your old home if you didn't buy and your time horizon.

Strictly by the numbers If you plan to stay put for at least a decade, buying wins, even if your monthly cash flow is more flush with renting. Over time, rising prices reward home ownership.

Let's say you're 65 and own a $350,000 home in Edison, N.J., mortgage-free. You're moving to the warmer climes of Albuquerque, where similar homes go for $175,000. After commissions and closing costs on both sales, you'll net $152,000. Buy a fixed immediate annuity with that money, and you and your spouse will get $10,500 a year for life.

What if you instead decided to rent in Albuquerque? With the $329,000 you'd clear on the sale of your New Jersey home, you could buy an annuity that pays about $23,000 a year. Even after spending $6,500 a year more in rent than you'd pay in property taxes and upkeep, you'd be ahead by $4,250 a year after taxes.

But if you had bought a home, you can cash in on any future price gains. If you stayed in the new house for 10 years, the price would have to increase by 3.3 percent a year for buying to beat renting (assuming you invest the extra money you would have spent on rent). That's a low bar considering that home prices nationally increased by an average of 6.4 percent a year between 1963 and 2005, according to the research firm Winans International.

But wait What if housing prices keep tanking? No question, that could happen. That's why you need a long time horizon to ride out the ups and downs. Between 1963 and 2005, the worst 10-year home-price return was 2.5 percent.

You do the math Use the Rent vs. Buy calculator at Finance.cch.com.

Beyond the math Owning has other benefits: the comfort of knowing that you'll never be forced to move by your landlord; the freedom to redo your kitchen in any way that strikes your fancy. On the other hand, renting can spare you the onerous upkeep that comes with maintaining a home.

The bottom line Buying is best as long as you're confident you'll be staying put for several years.

Take Social Security early OR late

Most retirees should hold off four years for the bigger payout.

Collecting Social Security at age 62 cuts your annual benefit by about 25 percent compared with what you'd get if you waited until full retirement age that's 66 if you were born from 1943 to 1959, or 67 if you were born in 1960 or later. To do the math, you need to consider whether you expect to live a long life.

Strictly by the numbers Say you've just turned 62 and qualify for $17,280 a year now or $23,772 at 66 (in today's dollars). Start early and you'll have collected $69,120 by the time you reach 66. Wait, and higher payments will make up for those missed years in 10½ years.

If you live until at least 76½, postponing your benefits was worthwhile. The odds are in your favor: According to the Social Security Administration, the typical 62-year-old man should live until 80½, while the life expectancy for a 62-year-old woman is 83½.

But wait When you collect a Social Security check at 62, that's $17,280 you won't have to withdraw from your IRA. Add in the extra tax-deferred growth (assuming 5 percent returns), and your break-even point moves out by three years to age 79½. Even then, odds are you'll live that long.

The math can get even more complicated if you're married. According to new research from Boston College's Center for Retirement Research, the best strategy for many couples is for the wife to take Social Security at 62 and the husband to wait. The reason is that men, on average, earn more and die younger. In this scenario, a wife would take her benefit at 62 and inherit her husband's larger check later.

Finally, waiting to take Social Security assumes you can. Surveys show that 40 percent of retirees are forced into early retirement, through either downsizing or health issues.

You do the math Get a more precise handle on your break-even age with the Social Security Administration's Quick Benefits calculator at ssa.gov/OACT/quickcalc/.

The bottom line If you're healthy and don't need the cash, wait.

Dollar Gains Most Since 2004 Against Euro on Consumer Prices

2007-12-14T20:37:00.000-08:00

Dec. 14 (Bloomberg) -- The dollar advanced the most against the euro since August 2004 after the biggest increase in consumer inflation in two years prompted traders to pare expectations for interest-rate reductions.

The dollar gained against 14 of the 16 most-actively traded currencies as futures show the probability of a Federal Reserve rate cut in January declined from 100 percent. The U.S. currency has risen 1.6 percent against the euro over the past five days, the biggest weekly increase since June 2006.

``The fundamental picture started to move in the dollar's favor,'' said Michael Malpede, a senior currency analyst in Chicago at MF Global Ltd., the world's largest broker of exchange-traded futures and options contacts. ``Inflation is picking up, making it difficult for the Fed to aggressively cut interest rates.''

Against the euro, the dollar rose 1.4 percent to $1.4423 at 4 p.m. in New York, from $1.4633 yesterday. It strengthened to 113.41 yen from 112.21. The dollar touched $1.4412 per euro and 113.60 yen, both the strongest levels since November.

The euro fell to 163.57 yen from 164.21. The pound weakened to $2.0169 from $2.0414 yesterday. The Swiss franc declined to 1.1526 per dollar from 1.1412.

Interest-rate futures on the Chicago Board of Trade show traders have reduced bets on Fed rate cuts. The chances the Fed will lower its benchmark rate by a half-percentage point to 3.75 percent in the next three months are 38 percent, from 61 percent a week ago. The odds of a quarter-percentage point cut to 4 percent next month are 76 percent.

$1.4650 Level

The dollar's rally against the euro started in Asian and European trading after it breached a key resistance level at $1.4650, said Toshi Honda, a currency strategist in London at Mizuho Corporate Bank Ltd. A break above a resistance level may lead to new highs, according to technical analysis that uses price charts to forecast currency movements.

``The move approaching $1.50 was too rapid, irrational,'' Honda said. ``It was driven by fear of a U.S. economic meltdown, but I don't think the fear is going to be materialized. The overall sentiment is positive for the dollar.''

He predicted euro-dollar will end the year below $1.40.

The dollar's gain this week pared its loss this year to 8.5 percent against the euro. The Fed's three interest-rate cuts since September have dimmed the allure of U.S. financial assets. The euro rose to a record high of $1.4967 on Nov. 23.

Bundchen, Jay-Z

The U.S. currency has lost against the euro every year since 2002, except 2005, prompting Gisele Bundchen, the world's richest model, to insist last month that she be paid in major currencies other than the dollar. In a video for the movie ``American Gangster,'' hip-hop musician Jay-Z flashes a wad of 500-euro notes while driving through New York.

At a time when billionaire investors such as Warren Buffett and Bill Gross want nothing to do with the dollar, a growing number of firms including Deutsche Bank AG, the world's largest currency trader, say the stage is being set for a rally in 2008.

The U.S. currency will reach $1.45 per euro by the end of March and $1.40 by the end of 2008, according to the median forecast of 44 economists in a Bloomberg survey.

The U.S. Dollar Index traded on ICE Futures in New York rose 1.1 percent to 77.425. It earlier touched 77.485, the highest since Oct. 25. The gauge has rebounded from 74.484 on Nov. 23, the weakest since it started trading in 1973. The dollar will strengthen to $1.43 per euro by the end of the month, according to Malpede.

Dollar Versus Yen

The dollar advanced 1.6 percent against the yen this week, posting a third weekly gain, as stronger-than-forecast growth in U.S. retail sales and industrial production allayed concern that credit-market turmoil and a housing slump will curb economic growth.

The yen's decline against the dollar started today after a Bank of Japan survey showed business confidence declined for the first time since March, reducing the case for the central bank to raise borrowing costs from 0.5 percent, the lowest among industrialized nations.

The dollar was helped this week by a coordinated plan led by the Fed to alleviate the credit crunch and the U.S. central bank's third cut in interest rates this year to avert a recession in the world's largest economy.

U.S. consumer prices increased 0.8 percent last month after a 0.3 percent gain in October. The median forecast in a Bloomberg News survey was 0.6 percent. Producer prices rose the fastest in 34 years last month, data showed yesterday.

Krone, Rand, Australia

Currencies in Norway, South Africa, and Australia declined against the yen as rising inflation cut the outlook for global growth, pushing investors to pare holdings of higher-yielding assets funded by loans in Japan. A decrease in oil and gold also reduced the appeal of financial assets in these commodities- exporting nations.

South Africa's rand led declines among the 16 major currencies against the yen, losing 1 percent. Norway's krone and the Australian dollar fell 0.8 percent and 0.6 percent, respectively. Against the dollar, the krone weakened 1.9 percent while the rand dropped 2.1 percent.

The Chinese yuan posted its biggest weekly advance in more than a month as Chinese officials signaled they're willing to allow faster appreciation to cool economic growth.

The yuan rose 0.43 percent this week to 7.3715 per dollar, compared with 7.3692 yesterday and 7.4030 a week ago, according to the China Foreign Exchange Trade System.

European Stocks Rise; ICAP, Hochtief, Royal Dutch Shell Gain

2007-12-14T02:38:00.000-08:00

Dec. 14 (Bloomberg) -- European stocks advanced after yesterday's drop, the biggest in three weeks, left shares in the region near their cheapest in at least five years.

ICAP Plc, the world's largest broker of transactions between banks, and Hochtief AG, Germany's biggest builder, gained. Erste Bank AG climbed after Lehman Brothers Holdings Inc. recommended buying shares in Austria's largest bank. Royal Dutch Shell Plc led oil producers higher as crude rose in New York.

The Dow Jones Stoxx 600 Index added 0.4 percent to 367.15 at 10:10 a.m. in London, limiting the retreat this week to 1.6 percent. Stocks sank the most since Nov. 21 yesterday on concern a plan by central banks to ease the credit squeeze won't be enough to prevent an economic slowdown.

``Valuations are attractive,'' said Philippe Gijsels, senior equity strategist at Fortis Global Markets which manages $62 billion in Brussels. ``It's maybe a good idea to look at some banks that have already come clean and have moved toward a solution.''

The Stoxx 600 is valued at 12.66 times profit, the lowest since at least January 2002, weekly data compiled by Bloomberg show.

The risk of European companies defaulting on their debt fell, according to traders of credit-default swaps. U.S. Treasuries were little changed today before a government report that economists said will show consumer prices are increasing at the fastest pace in six months.

The Standard & Poor's 500 Index added 0.1 percent yesterday, while the Dow Jones Industrial Average gained 0.3 percent.

National benchmarks increased in 12 of the 18 western European markets. France's CAC 40 gained 0.3 percent, while Germany's DAX added 0.5 percent. The U.K.'s FTSE 100 also climbed 0.5 percent.

Stoxx 50

The Stoxx 50 increased 0.3 percent, as did the Euro Stoxx 50, a measure for the euro region.

ICAP advanced 2.2 percent to 697 pence. Hochtief climbed 2.4 percent to 91.15 euros.

Freddie Mac, the second-biggest U.S. mortgage finance company, has raised enough capital to ride out credit losses next year as tighter underwriting and higher guarantee fees increase profit, Bear Stearns Cos. analysts said.

The Wall Street Journal reported today that Goldman Sachs Group Inc. may post record full-year profit of more than $11 billion on Dec. 18, boosted by $4 billion from bets on subprime mortgage-related lending. The Journal cited analysts in the forecast.

Citigroup Inc. shares gained in Europe after the company said it will take over seven troubled investment funds and assume $58 billion of debt to avoid forced asset sales that would further erode confidence in capital markets.

``There are individual and group initiatives,'' said Jean- Paul Pierret, a strategist at Dexia Securities in Paris. ``They all converge for the beginnings of better transparency'' in the credit-market turmoil

Erste Bank

Erste Bank advanced 2.5 percent to 48 euros. Lehman Brothers initiated coverage with an ``overweight'' recommendation and a price estimate of 66 euros.

``With signs of a global slowdown looming, we would argue the Austrian banks are well positioned as they offer structurally driven growth,'' the analysts wrote in a note. They started coverage of Austrian banks with a ``positive'' view.

Shell, Europe's largest oil company by market value, added 1.1 percent to 2,015 pence. OMV AG, the Austrian oil company that wants to acquire Hungarian rival Mol Nyrt., rose 1.7 percent to 50.60 euros. Galp Energia SGPS SA, Portugal's biggest oil company, jumped 6.9 percent to 16.49 euros.

Crude oil rose to near $93 a barrel in New York. The contract for January settlement climbed as much as 67 cents, or 0.7 percent, to $92.92 a barrel on the New York Mercantile Exchange.

Chemical Makers

Ciba Specialty Chemicals AG led chemical makers higher after Citigroup Global Markets said Dow Chemical Co. may buy a company in the industry. Ciba advanced 3 percent to 54.95 francs. Umicore gained 1.6 percent to 155 euros.

Dow Chemical, which will get $9.5 billion from selling 50 percent of its commodity-plastics unit to Kuwait, may use the cash to buy a specialty-chemical maker as big as Celanese Corp. of the U.S., Citigroup Global Markets said. Switzerland's Ciba and Brussels-based Umicore also fit Dow's acquisition criteria, the analysts said.

Ubisoft SA surged 7.4 percent to 63.76 euros. Europe's second-largest maker of video games raised its revenue and profit margin forecasts, citing record sales of the ``Assassin's Creed'' game.

United Business Media Plc rose 2.9 percent to 596 pence. The company said second-half revenue will increase 6 percent to 7 percent, helped by ``strong'' sales at the U.K. company's PR Newswire unit and its exhibition services.

Inspicio Plc rallied 11 percent to 219.5 pence after 3i Group Plc, Europe's second-biggest publicly traded private equity firm, agreed to buy the U.K.'s biggest food tester in a bid that values that values the company at 228.6 million pounds ($467 million). 3i rose 0.7 percent to 1,016 pence.

Continental AG fell 1.3 percent to 88.80 euros. Europe's second-largest tiremaker was given an ``underweight'' recommendation as Morgan Stanley restarted coverage.

U.S. Stocks Gain on Fed's Liquidity Boost; Exxon, AT&T Rise

2007-12-12T08:00:00.000-08:00

Dec. 12 (Bloomberg) -- U.S. stocks rallied the most in two weeks, led by technology and energy shares, after the Federal Reserve and four other central banks said they will add cash to the financial system to spur lending and economic growth.

Exxon Mobil Corp., Cisco Systems Inc. and AT&T Inc. gained, helping the Standard & Poor's 500 Index recoup more than half its loss from yesterday after the Federal Reserve's quarter- point rate cut disappointed investors. Centex Corp. and D.R. Horton Inc. led a rebound in homebuilders from their biggest drop ever.

The S&P 500 added 26.99, or 1.8 percent, to 1,504.64 as of 10:23 a.m. in New York. The Dow Jones Industrial Average increased 200.45, or 1.5 percent, to 13,633.22. The Nasdaq Composite Index gained 51.27, or 1.9 percent, to 2,703.62. Stocks in Europe also climbed after the announcement.

``The course the Fed was on didn't seem to be working,'' said Doug Peta, a New York-based market strategist at J&W Seligman & Co., which manages about $20 billion. ``We've got this new medicine we can try. I think we all can celebrate that.''

The Fed said it is coordinating the measures with the European Central Bank, Bank of England, Bank of Canada and Swiss National Bank in the biggest act of international economic cooperation since the Sept. 11 terrorist attacks.

Exxon Mobil, the world's biggest oil company, climbed $2.61 to $92.89. Cisco, the largest maker of computer-networking equipment, added 98 cents to $29.

AT&T

AT&T Inc. advanced $1.72 to $41.18. Lehman Brothers Holdings Inc. raised its share-price estimate for the biggest U.S. phone company by 8 percent to $54. AT&T yesterday announced a $15.2 billion stock buyback plan and raised its dividend 13 percent.

D.R. Horton, the fourth largest U.S. homebuilder, advanced $1.22 to $14.43. Centex rose $1.62 to $24.60. Homebuilders in S&P indexes climbed 4 percent as a group.

JPMorgan Chase & Co., the third-largest U.S. bank, climbed $1.02 to $46.96. American International Group Inc., the world's biggest insurer, added $1.46 to $60.71. Financial shares in the S&P 500 climbed 0.9 percent as a group.

The central banks' actions are a response to a surge in short-term borrowing costs. The three-month dollar London Interbank Offered Rate, a gauge followed by central bankers, rose to a two-month high of 5.15 percent a week ago.

The Fed lowered its target rate for overnight loans between banks and its discount rate for direct loans by a quarter percentage point each yesterday. U.S. stocks posted their biggest drop in a month after the cuts failed to allay concern the economy will slip into a recession.

Ford, Chevron

Ford Motor Co., the country's second-biggest automaker, climbed 16 cents to $7.13 after the Financial Times said the second-biggest automaker may disclose its preferred bidder for the Jaguar and Land Rover brands this week. The offers may range from $1.8 billion to $2.2 billion, the Financial Times reported, adding that two people close to the auction said they expect a response from Ford as early as today.

Chevron Corp., the second-largest U.S. oil company, added $2.49 to $92.38. Goldman Sachs Group Inc. lifted its average 2008 forecast for crude oil to $95 from $85 a barrel on ``technological and political uncertainty.'' Oil futures, traded on the New York Mercantile Exchange, may rise to as much as $105 a barrel by the end of next year, the world's largest securities firm said.

Merck

Merck & Co. advanced 83 cents to $61.23. Goldman increased its share-price estimate for the third-biggest U.S. drugmaker by 5.1 percent to $62 following Merck's ``upbeat'' 2007 annual briefing. The company's cervical-cancer vaccine Gardasil is ``a key opportunity,'' analysts wrote in a report.

Microchip Technology Inc. gained $1.53, or 5.1 percent, to $31.73. The computer-chip maker said fourth-quarter profit will be higher than previously estimated and authorized a new share buyback program.

Intel Corp., the world's largest maker of computer chips, added 54 cents to $27.47. Texas Instruments Inc., the biggest maker of chips for mobile phones, rose 68 cents to $33.61.

Manitowoc Co. climbed $3.05, or 7 percent, to $46.60, the steepest gain in the S&P 500. The maker of construction equipment raised its 2007 profit forecast on increased demand for cranes. Annual profit will be as much as $2.60 cents a share, Manitowoc said, 10 cents more than the upper end of the company's previous prediction.

Bank of America

Bank of America Corp. fell 76 cents to $43.89. The nation's second-biggest bank expects writedowns to increase and ``weak'' earnings through the first quarter of next year. ``You certainly can assume results will again be quite disappointing,'' said Chief Executive Officer Kenneth Lewis in a presentation to investors. The final writedowns are ``unknowable,'' he said, ``but we expect to be profitable in the fourth quarter.''

Boeing Co. dropped 50 cents to $88.20. The world's second- biggest commercial-plane maker was downgraded to ``equal weight'' from ``overweight'' at Morgan Stanley. Risks related to its new 787 Dreamliner may weigh on the stock, analysts said. Boeing said yesterday it's still working through ``wrinkles'' in the supply chain for its new 787 Dreamliner and will deliver the first aircraft as scheduled in late 2008.

Morgan Stanley also lowered its view on the airline industry to ``cautious'' from ``attractive.''

U.S. Stocks Fall After Fed Cuts Benchmark Rate by Quarter Point

2007-12-11T13:46:00.000-08:00

Dec. 11 (Bloomberg) -- U.S. stocks tumbled the most in a month as investors speculated the Federal Reserve's quarter- point interest-rate cut will fail to prevent a recession.

Bank of America Corp. and Citigroup Inc. led all 93 companies in the S&P 500 Financials Index lower, and homebuilder shares fell the most ever after the Fed said the housing slump is getting worse. Washington Mutual Inc., the largest U.S. savings and loan, posted its steepest drop in a month on plans to write down the value of its home-lending unit. Freddie Mac, the second-biggest mortgage-finance company, slid for a third day after forecasting a wider loss than analysts estimated.

The S&P 500 lost 38.31, or 2.5 percent, to 1,477.65. The Dow Jones Industrial Average retreated 294.26, or 2.1 percent, to 13,432.77. The Nasdaq Composite Index decreased 66.6, or 2.5 percent, to 2,652.35. Almost 14 stocks declined for every one that rose on the New York Stock Exchange. Treasuries rallied and the dollar weakened against the euro and yen.

``It should have been more aggressive,'' said Quincy Krosby, who helps manage $330 billion as chief investment strategist at the Hartford in Hartford, Connecticut. ``The market's instinctive reaction is that it's too little too late and that the Fed is behind the curve.''

Rate Bets

Some investors had expected the Fed to do more to preserve the economy's six-year expansion. Before the central bank's announcement, futures trading showed 36 percent odds of a half- point reduction to 4 percent, up from 28 percent yesterday. The central bank also reduced the discount rate it charges banks for direct loans by a quarter percentage point to 4.75 percent.

Wells Fargo & Co. Chairman Richard Kovacevich said in interview this morning he expected the Fed to cut its discount rate by as much as three-quarters of a point.

Bank of America fell $1.99 to $44.65. Citigroup tumbled $1.54 to $33.23. Wells Fargo lost $1.87 to $30.77. The S&P 500 Financials Index slumped 4.9 percent, the most since Nov. 7.

Citigroup named former Morgan Stanley President Vikram Pandit as chief executive officer before the Fed's decision was announced. Pandit, who takes over immediately, will try to help the largest U.S. bank recover from at least $9 billion of mortgage losses under predecessor Charles O. Prince.

Washington Mutual dropped $2.46 to $17.42. The company will slash its dividend by 73 percent, write down the value of its home-lending unit by $1.6 billion in the fourth quarter and cut about 6 percent of its workforce as mortgage-market losses increase.

Freddie Mac slid $3.73 to $31.31 after saying fourth- quarter results are not going to be better than a third-quarter loss of $2.02 billion, or $3.29 a share. Analysts in a Bloomberg survey had estimated a loss of about $1.27 a share, excluding some items. The company said it doesn't see a ``short-term quick fix'' to the housing market deterioration.

Fed Lowers Rate by a Quarter Point to 4.25 Percent

2007-12-11T12:25:00.000-08:00

Dec. 11 (Bloomberg) -- The Federal Reserve cut its benchmark interest rate by a quarter-point to 4.25 percent to prevent the housing slump and credit squeeze from undoing the six-year expansion.

The change ``should help promote moderate growth over time,'' the Federal Open Market Committee said in a statement after meeting today in Washington. ``Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.''

The economy is faltering after a third-quarter surge as house prices drop, consumer spending slows and banks tighten lending standards for even their best customers. Stocks fell and Treasury notes rallied after the decision by the Fed, which also said some inflation risks remained.

``Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending,'' the FOMC said. ``The committee will continue to assess the effects of financial and other developments in economic prospects and will act as needed to foster price stability and sustainable economic growth.''

The Fed's Board of Governors also voted to cut the discount rate, the cost of direct loans from the central bank, by a quarter point to 4.75 percent. The gap with the federal funds rate remains half a point. Some economists had predicted the Fed would reduce the spread between the two.

Rosengren Dissents

Today's decision, which matches the median forecast of economists surveyed by Bloomberg News, wasn't unanimous. Boston Fed President Eric Rosengren voted in favor of a half point cut.

The benchmark rate is now at the lowest level since January 2006. Bernanke, 53, who succeeded Alan Greenspan as chairman the following month, continued a series of increases that lifted the federal funds rate to 5.25 percent by June last year.

Policy makers held their ground until August this year, when the collapse in assets backed by subprime mortgages roiled markets around the world and forced central banks to pump billions of dollars into the banking system. It also spurred the Fed to start cutting the federal funds rate in September. The Fed was joined last week by the Bank of Canada and Bank of England.

Investors became confident of further reductions after Bernanke and Vice Chairman Donald Kohn said in separate speeches last month that ``turbulent'' markets could alter their outlook for growth. Fed officials estimated in October the economy would grow 1.8 percent to 2.5 percent in 2008. Rosengren said Dec. 3 that the expansion will be ``well below'' its long-term pace for the next two quarters.

Feldstein Pessimistic

``Whether it be consumer confidence, or real incomes, or business plans, we're seeing an economy that is continually slipping and therefore an increasing probability of a recession next year,'' Harvard University economist Martin Feldstein said in an interview last week. ``The Fed has to be prepared to continue cutting rates as we go into 2008.''

Since Fed officials made their forecasts, government reports show orders for U.S.-made durable goods fell in October, capacity-use rates in the nation's factories slipped and retail sales slowed. Payrolls increased by 94,000 jobs last month, after a 170,000 increase in October.

The economy will expand at an annual pace of 1 percent in the fourth quarter, down from 4.9 percent in the previous three months, according to the median estimate in a Bloomberg News survey of 63 economists.

The number of Americans who fell behind on their mortgage payments rose to a seasonally adjusted 5.6 percent in the third quarter, the highest in two decades, the Mortgage Bankers Association said last week. New foreclosures hit a record.

House Prices

As creditors took possession of properties, the supply of unsold homes grew to a 10.8-month supply in October. Prices of previously owned homes fell 5.1 percent from a year ago, the most on record, according to the National Association of Realtors.

The Fed ``has worries of many dimensions,'' Mickey Levy, chief economist at Bank of America Corp. in New York, said in an interview. ``While easing helps the economy in the short run, it won't kick in until the second half of next year.''

The credit deterioration has spread to Wall Street and commercial banks around the world that hold bonds and derivative contracts created from pools of home loans. Banks including Credit Suisse Group in Zurich and London-based Barclays Plc are among lenders that have marked down more than $50 billion on losses linked to U.S. home loans.

Lending Restrictions

Because banks are protecting capital, lending has been cut and concerns about counter-party risk are higher. About 40 percent of lenders have increased their standards for the most creditworthy borrowers to qualify for a so-called prime loan, according to a Fed study in October.

Interest rates for jumbo 30-year fixed-rate mortgages are about 6.68 percent, a spread of 92 basis points over non-jumbo loans of $417,000 or less. A year earlier, the spread was 36 basis points, and last month it was 57. A basis point is 0.01 percentage point.

Throughout the rate cutting-cycle, Fed officials have highlighted longer-term inflation risks in their statements and their public remarks. Oil prices hit a record $99.29 a barrel in New York on Nov. 21, and traded at $89.21 this morning.

The Fed's preferred gauge, the personal consumption expenditures price index excluding food and energy, rose 1.9 percent in October from a year ago. The index has remained below 2 percent since June.

U.S. Stocks Rise for 2nd Week on Bush Plan to Avert Recession

2007-12-08T17:47:00.000-08:00

Dec. 8 (Bloomberg) -- U.S. stocks posted their steepest two- week advance since September after President George W. Bush announced a plan to freeze some mortgage rates to prevent foreclosures from causing a recession.

Centex Corp. and D.R. Horton Inc. led homebuilders as they climbed the most in seven years. Intel Corp., Micron Technology Inc. and other semiconductor companies in the Standard & Poor's 500 Index rose the most since June following analyst predictions that demand for computers will increase. All 10 industries in the S&P 500 gained.

Stocks have rebounded after losing their 2007 gain at the end of last month, spurred by speculation the Federal Reserve will reduce interest rates to prop up the world's largest economy. The S&P 500 declined yesterday after a Labor Department report showed U.S. employers added more jobs than estimated in November, diminishing the odds that central bankers will cut their rate benchmark by half a point on Dec. 11.

``The economy is slowing, but it's not falling off a cliff,'' Jeremy Siegel, an economics professor at the University of Pennsylvania's Wharton School of Business, said during an interview in New York. ``That's important for investors.''

The S&P 500 added 1.6 percent to 1,504.66, bringing its two- week gain to 4.4 percent and its advance this year to 6.1 percent. The Dow Jones Industrial Average rose 1.9 percent to 13,625.58. The Nasdaq Composite Index climbed 1.7 percent to 2,706.16.

Quarter-Point Cut

Ten-year Treasury yields had the first weekly gain since October, rising to 4.11 percent, as traders pared bets that the Fed will reduce its rate benchmark by more than a quarter point. Two-year yields rose to 3.10 percent.

Homebuilders in the S&P 500, which fell as much as 78 percent from their July 2005 peak through Nov. 27, added 17 percent for the steepest weekly advance since August 2000. Centex gained the most, climbing 24 percent to $25.81. D.R. Horton rose 16 percent to $13.86.

Bush announced on Dec. 6 an agreement between the government and the lending industry that would freeze rates for five years on some variable rate mortgages and provide assistance to as many as 1.2 million homeowners.

The government's plan may help end the recession in the U.S. housing market, which is entering its third year. The number of Americans behind on their mortgage payments in the third quarter was the highest in 20 years, the Mortgage Bankers Association said Dec. 6.

`Muddle Through'

``The economy will muddle through without tipping into recession,'' said Joshua Feinman, chief economist in New York at Deutsche Asset Management, which oversees $798 billion. Growth will accelerate during the second half of next year, he said.

Intel gained the most in the Dow average, climbing 6.3 percent to $27.73. Thomas Weisel Partners LLC analyst Kevin Cassidy raised his rating on the world's largest chipmaker to ``overweight'' and increased his 2008 profit estimate in part because of growing demand for computers from Brazil, Russia, India and China.

Micron, the largest U.S. maker of computer-memory chips, rose 8.5 percent to $9.03. Nvidia Corp., the world's second- biggest maker of computer-graphics chips, advanced 7.4 percent to $33.88.

MBIA Inc., the largest bond insurer, lost 18 percent to $30 for the biggest decline in the S&P 500. Moody's Investors Service said MBIA is ``somewhat likely'' to face a shortage of capital that threatens its AAA credit rating.

Comcast Cuts Forecast

Comcast Corp. dropped 11 percent to $18.28. The biggest U.S. cable-television provider cut its 2007 forecasts for sales, new customers and cash flow.

Payrolls rose by 94,000 in November, the Labor Department said yesterday. The jobless rate remained at 4.7 percent for the third month in a row. Economists predicted a gain of 80,000 jobs and an unemployment rate of 4.8 percent, according to the median estimates in a Bloomberg survey.

Sales at U.S. retailers probably rose in November as discounts and wage gains helped Americans cope with near-record fuel costs, economists said before reports this week.

``The economy from a numbers standpoint is stronger than what people's perceptions are,'' said Scott Fullman, director of investment strategy at Israel A. Englander & Co. in New York, a derivatives brokerage firm for institutional clients with combined assets under management of more than $100 billion.

Lehman Brothers Holdings Inc. and H&R Block Inc. are among at least five members of the S&P 500 that will report quarterly results next week.

Dollar Down So Long Looks Like It's Going Up

2007-12-06T23:51:00.000-08:00

Dec. 7 (Bloomberg) -- Just when bellyaching about the weak dollar is reaching a crescendo, the U.S. currency is showing signs of redemption.

To be sure, the dollar isn't about to perform as if it suddenly received a dose of Viagra, and a bullish reversal of its multiyear decline is probably several months away.

Still, improving U.S. trade, damage from a weak U.S. economy spreading to other countries, the prospect of lower interest rates in Europe and overwhelming disenchantment with the dollar's decline suggest the U.S. currency is about to stop falling -- if it hasn't already.

``Forecasts of a dollar rebound in 2008 are becoming more frequent as the U.S. current account and budget deficits continue shrinking,'' says Ashraf Laidi, New York-based chief foreign- exchange analyst at CMC Markets.

After climbing to a record $1.4967 on Nov. 23, the euro has retreated to about $1.46 in late London trading yesterday, indicating that some of the steam may be coming out of the currency used by 13 European countries. Ditto the U.K. pound, which traded at a 26-year peak of $2.1161 on Nov. 9, but has since dropped back to $2.03.

The dollar has fallen 44 percent against the euro in the past seven years; so far in 2007, it is down 9.8 percent against the European common currency. Adjusted to reflect U.S. trade with other countries, the dollar has sunk 23 percent since February 2002 and 8 percent this year.

The U.S. currency is key to global corporate competitiveness, company profits, the price of gold and other commodities and world equity-market performance.

`No Choice'

Yet dollar sentiment is still stunningly negative -- so much so that the pessimism is music to a contrarian's ear.

On the corporate front, Louis Gallois, chief executive officer of European Aeronautic, Defence & Space Co. said on Dec. 3 that the weak dollar left his company ``no choice'' but to shift some production to the U.S. and other countries linked to the American currency. Two days earlier, French military and business-jet maker Dassault Aviation SA said it was considering similar moves.

In late October, billionaire Warren Buffett, the CEO of Omaha, Nebraska-based Berkshire Hathaway Inc., reiterated his disaffection for the U.S. currency. Six days later, Bill Gross, chief investment officer of Pacific Investment Management Co. in Newport Beach, California, said, ``We've told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non-dollar currency.''

Economist's Warning

The cover of the Nov. 29 edition of the Economist magazine shows a $1-bill likeness of George Washington portrayed as a World War I pilot in a burning plane about to crash. ``The panic about the dollar,'' reads the headline.

The Economist cover ``is a classic warning sign that a trend change is near,'' says David Abramson, Montreal-based head of currency strategy at BCA Research Ltd.

From a more fundamental perspective, the weak dollar has fueled U.S. export growth and shrunk the trade deficit to $56.5 billion in September this year from a record $67.6 billion in August 2006. The shortfall in the current account, a broad measure of trade in goods and services plus certain financial transfers, has narrowed to 5.8 percent of U.S. gross domestic product from a record 6.3 percent last year.

Meanwhile, the American disease -- a weak currency, slowing growth, reduced domestic spending and rising credit costs -- is spreading, discrediting the theory that other countries were strong enough to ``decouple'' from the $13 trillion U.S. economy.

European Slowdown

Consumer confidence in the euro area, U.K. and Japan is slumping. European GDP growth in the third quarter fell to 2.7 percent from a year earlier compared with 3.3 percent in the last three months of 2006; industrial production dropped in September and strengthening European currencies are starting to eat into exports. Retail sales in Germany, Europe's biggest economy, declined 3.3 percent in October from September.

The U.K. economy is vulnerable to tighter credit conditions, deteriorating global growth, the eventual impact of sterling strength on exports and a long-anticipated slowdown in housing. Service-industry growth is the slowest since May 2003. U.K. house prices fell for the third consecutive month in November, the worst performance since 1995.

``The extent of the dollar rebound will largely depend on the scope of interest-rate cuts in Europe, Canada and Australia, serving as an offset to further rate cuts by the Federal Reserve,'' Laidi says.

Rate Reductions

Britain lowered rates yesterday, preceded by Canada two days earlier. Meanwhile, the U.S. has already cut its benchmark to 4.50 percent from 5.25 percent, and further reductions are priced in. Traders are betting there is a 58 percent probability the Fed will cut its federal funds rate to 4.25 percent on Dec. 11 and a 55 percent chance of a reduction to 4 percent on Jan. 30, according to futures contracts.

``The euro could easily trade back below $1.40 over the next couple of months,'' Abramson says. Laidi, who has a similar euro view, sees sterling retreating to $2.01 before year end.

The euro will trade at $1.46 in the first quarter of 2008, according to the median forecast of 41 institutions surveyed by Bloomberg, while the median projection of 39 analysts puts the pound at $2.04.

Unfortunately, those exchange rates won't quell the complaints, especially if a dollar rebound is more the product of negative news abroad than solid domestic growth and dynamic financial markets in the U.S.

(Michael R. Sesit is a Bloomberg News columnist. The opinions expressed are his own.)

Biggest India Bull Duggal May Ask Holders to Cash Out

2007-12-06T23:39:00.000-08:00

Dec. 6 (Bloomberg) -- India's biggest bull is on the verge of becoming its biggest bear. Sanjiv Duggal, who manages the world's largest holding of Indian equities, may even urge his clients to cash out.

``Investors aren't factoring in earnings and news flows, but valuing people's dreams,'' said Duggal, 43, who oversees about $11 billion in Indian equities as investment director at HSBC Holdings Plc's Halbis Capital Management in Singapore. ``The risk-reward ratio is not favorable.''

Indian equities are valued at an average of 23.6 times estimated earnings, compared with Hong Kong's Hang Seng Index at 20.2 times and Korea's Kospi index at 14.6 times. The Standard & Poor's 500 Index is valued at 15.9 times profit.

Duggal's Luxembourg-based $8.5 billion Indian Equity Fund, which targets overseas investors, has had a total return of 63 percent this year. It is the second-best performance among 15 offshore equity funds with more than $1 billion in assets that invest in India, according to data compiled by Bloomberg.

India's Sensitive Index has fallen 1 percent since passing 20,000 for the first time on Oct. 29, the day Duggal turned pessimistic. It rose 0.3 percent to 19,795.87 today. He has not yet told his investors of his change of heart. The Sensex has doubled in less than two years and is Asia's third-best performer in 2007, after China and Bangladesh.

``The market is pricing in a lot of growth for the next two to three years,'' Duggal said.

Cashing Out

Power equipment manufacturers, for example, are seeing revenue growth of 25 percent to 30 percent a year and their stock prices assume the rate will continue, he said. But government projections of power generation by the year 2020 imply a growth rate of less than 10 percent.

Duggal said he is considering inviting investors to take some of their money out of the fund and seek better-valued equities elsewhere. He expects Indian stocks to decline over the next 18 months to 24 months.

His fund, on the other hand, has to stay invested in the country, so he is looking for the best bargains.

India Equity is going for ``more of a defensive and value bias and a few selective growth stocks, but I don't want to hold stocks where growth is priced in,'' he said.

Duggal's fund holds fewer banks and consumer staple companies than represented in benchmarks, while it's overweight on technology. The Bombay Stock Exchange's 18-stock banking index is valued at 26.5 times future earnings, while the consumer staples index trades at 27.7 times. The technology index has a multiple of 23.4.

Selling Banks

Overall earnings growth will slow to between 10 percent and 15 percent for the next three years to March 31, 2010, Duggal estimates, from about 30 percent in the previous period.

He said his view is also shaped by the rupee's 12 percent gain against the dollar this year. Almost 50 percent of revenue at Indian companies comes from exports, Duggal estimates. The rupee is the second-best performing currency in Asia after the Philippine peso.

Duggal, whose fund holds more of industrial companies Bharat Heavy Electricals Ltd. of New Delhi and Mumbai-based Larsen & Toubro Ltd. than their representation in its benchmark, said he is cutting back.

The fund has reduced holdings in banks to less than the benchmark, the S&P/IFC Emerging Markets Investable India Index. High interest rates will dent demand for loans and the central bank will lift reserve requirements, Duggal said. Telecommunications and utilities are other industries where the fund is underweight.

`Growth Sector'

By contrast, the fund exceeds its benchmark for technology companies for the first time in three years on the view that revenue growth will boost earnings even if the economy slows.

``Technology is one of the fastest growing and cheapest valued growth sectors in India,'' Duggal said. Software stocks are trading at a 20 percent discount to the Sensex, down from a 50 percent premium earlier this year, he said.

His top 10 holdings include Mumbai-based Tata Consultancy Services Ltd., India's largest software developer, and Wipro Ltd. of Bangalore, the third biggest.

It also holds more pharmaceuticals, such as Glenmark Pharmaceuticals Ltd. of Mumbai and Hyderabad-based Dr. Reddy's Laboratories Ltd., than represented in its benchmark. The Bombay Stock Exchange's Healthcare Index gained 5.2 percent this year, trailing the Sensex's 44 percent advance.

Safe Haven

Money manager A.S.T. Rajan says he is more optimistic about the Indian market, given the outlook for economic growth in the world's second-most populous nation. Gross domestic product will expand by almost 9 percent in the fiscal year ending in March, Finance Minister Palaniappan Chidambaram said Nov. 5. GDP has grown an annual average of 8.6 percent since 2004, the fastest pace since independence in 1947.

``One can't ignore markets like India and China,'' said Rajan, who manages $200 million in Indian equities as managing director at Aquarius Investment Advisors in Singapore. ``Given the earnings and economic growth, we are seeing a paradigm shift of funds to safe havens in Asia.''

Rajan likes construction companies and those that rely on domestic demand, such as banks and automakers.

Duggal says he will stick to his bets even if they underperform in the near term. The Indian fund is the best performer over five years among the 15 offshore Indian stock funds managing more than $1 billion that are tracked by Bloomberg, with an annualized return of 57 percent.

This year, the fund, part of HSBC's Global Investment Funds group, has only been beaten in its class by the $1.3 billion PCA India Infrastructure Stock Fund, with a return of 70 percent, according to Bloomberg data. Duggal lags behind the 68 percent return of his benchmark.

`Struggle'

Duggal, who was born in Rugby, England, completed a chartered accountant degree in London in 1988 and began work as an internal auditor at Lloyds TSB Group Plc. Later, he moved to its Hill Samuel unit, switching to portfolio management in 1994.

He joined HSBC's emerging-markets team in London in 1996 and moved to Mumbai in 2002 as chief investment officer to manage Indian equities. In 2006 he moved to Singapore to join Halbis as an investment director.

Duggal put out a ``sell'' call on Indian equities in April 2004 prior to general elections in May because his team was of the view the ruling Bharatiya Janata Party, which oversaw asset sales, would not win a second term. The benchmark plummeted 11 percent on May 17, 2004, when Sonia Gandhi's Congress party ousted the government and had to form a coalition with communist parties for a parliamentary majority.

Duggal again told investors in April 2006 to sell Indian equities on price. The Sensex plunged 26 percent starting in April that year to a low of 8,929.44 on June 14.

``I have a cautious view on India as it's become increasingly difficult to find value,'' says Duggal. ``Markets will struggle to perform over the next year.''

Rational Investing and Tricks the Mind Plays

2007-12-03T18:30:00.000-08:00

Nov. 7 (Bloomberg) -- How good an investor are you? If you're like the average Joe or Jane, you think -- for sure -- you're better than most. You remember every one of your winners, in detail. You bury your losers. You never average the two together, which means you have no idea whether you're beating the market or not. If asked how you're doing, however, you'll probably say that you're ahead.

This confident approach to investing does wonders for your self-esteem. Where it leaves your portfolio is another story. We all know we're not supposed to trust our emotions when we buy a stock. What we didn't know is that our investing brain is a traitor, too.

We're hard-wired to kid ourselves. If you doubt it, take a look at ``Your Money and Your Brain,'' a new book by Money magazine writer Jason Zweig. He visited the scientists who study the neural circuits that switch on and off when we invest. It turns out that our brains amount to a hostile environment. To be better investors, we have to work against what our minds want most to do.

Take one of our sturdiest investment beliefs: that with study, we can get good at predicting whether a stock or the general market will rise or fall. To do this, we search for patterns that can tell us what the future holds.

The human brain loves patterns. We see them even where they don't exist. Give us random facts and we'll assemble them into a story. Give us random data -- like the millions of stock quotes flying around -- and we'll arrange them to ``make sense,'' whether they do or not.

Seeing Patterns

You can see this tendency at work in a series of studies done at Dartmouth College. Researchers flashed red or green lights on a screen. The participants had to predict which color would come next. Eighty percent of the flashes were green but the order was random. Over time, the participants learned that green was the most likely call.

Rats and pigeons, fed when they made the right guess, quickly learned to pick green almost all the time.

That's not what human subjects do. We -- the brainiest mammal -- start trying to guess when the next red flash will come. We look for patterns, even when told that the flashes are random. The longer we play the game, the worse we do. Rats outscore us every time. Various iterations of this study have been done since the late 1960s, always with the same results.

Then there's dopamine, the brain chemical that spurs us to act when we sense the possibility of a reward. An unexpected gain -- say, a chat-board tech stock doubling in three months -- sprays dopamine over every available surface. If it happens twice, we're sure the chat board is in the know.

Getting Hooked

Zweig calls this our ``prediction addiction.'' We're addicts for sure. The brain activity in a cocaine user expecting a hit looks almost the same as that of an investor expecting a big score.

The startling thing about pattern seeking is that your brain makes you do it. You can't say no. The response is subconscious and automatic. Because you're unaware of what's going on, the patterns you see seem objectively true rather than neurally driven. Your dopamine turns you into a dope.

We find patterns fast. Two accurate calls will make you expect -- and bet on -- a third. Three is a ``trend.'' Studies show that people seeking new money managers tend to hire a firm after a three-year hot streak and fire one after a three-year cold streak (even though both of these streaks are probably about to change).

Seersucker Investing

The seersucker theory of investing says that, for every seer, there's a sucker. David Leinweber, an expert in quantitative investment, satirized the ``science'' of prediction by sifting through numbers to see how he could have forecast the performance of the U.S. stock market from 1981 through 1993. He combined the total volume of butter produced each year in Bangladesh with the number of sheep in the U.S. and a few other variables, to produce a formula that forecast the past with 99 percent accuracy.

Wall Street is afloat in back-tested formulas meant to forecast prices. The next time you see one, think baaaaa.

You can't quit predicting, but you can quit following your mischievous brain. Handcuff yourself to some form of automatic ``program'' investing. Buy-and-hold. Dollar-cost averaging. Fixed asset allocations (say, 70 percent stocks, 30 percent bonds), rebalancing when your portfolio drifts away from those levels.

Quit checking your stocks all the time. Those random squiggles will start looking like patterns before you can tear yourself away.

Finally, make an effort to find out how well you actually perform. For example, keep track of your stocks on Bloomberg.com's Portfolio Tracker. Average the winners and losers together to see how you've done each year.

While you're at it, keep track of the stocks you sold (something investors rarely do). If the ones you sold do better than the ones you bought, maybe your dopamine is still in charge.

Chidambaram Says India, China to Drive Global Growth

2007-12-02T09:21:00.000-08:00

Dec. 2 (Bloomberg) -- India and China will continue to drive global expansion as they are more ``nimble'' and can produce at lower cost, Indian Finance Minister Palaniappan Chidambaram said.

``China and India have much to look forward to,'' Chidambaram told the India Economic Summit organized by the World Economic Forum in New Delhi today. ``Developing countries have acquired greater capacity to compete with developed countries.''

The two Asian economies, the world's fastest growing, adapt better to changes in global market conditions as they have cheap labor and can more quickly seize opportunities, Chidambaram said. That doesn't mean economic power has moved to China and India, the Harvard-trained minister said.

``As long as advanced countries have the edge in knowledge, financial and material resources, I don't think power has shifted to developing countries,'' Chidambaram said. ``What has changed is that developing countries have acquired greater capacity to compete with developed countries.''

India's $906 billion economy grew 8.9 percent last quarter from a year earlier, while China's $2.6 trillion economy expanded 11.5 percent. That kind of pace is more than three times the rate of growth in the U.S. and countries sharing the euro. Still, the World Bank estimates more than half India's 1.1 billion people live on less than $2 a day.

Reducing Poverty

``Only by solving poverty can India be accepted as a true power in the world,'' said Anand Mahindra, managing director of Mahindra & Mahindra Ltd., India's biggest maker of sport-utility vehicles.

Advanced countries hold ``pride of place'' in building knowledge societies as they have the best universities and laboratories and attract the brightest minds, Chidambaram said. Similarly, the world's most ``influential financial centers'' are cities in the U.S., U.K. and other developed nations, which also have substantial control over the world's gas, oil and other material resources.

Chidambaram said sooner or later, India and China will secure material resources, ``but in the next 10 to 20 years our strength will come from our ability to produce goods and services at lower costs, from nimbleness to adjust to change and from a demographic dividend.''

He said India, where more than half the population is younger than 25, can benefit from its so-called demographic dividend if the government ensures every child goes to school and imparts skills to them when they finish their studies.

`Rigid Bureaucracies'

Among his regrets after more than three years in office is the government's failure to deliver results in education, health and irrigation even after more than doubling spending in these areas in the past four years, the minister said.

``While we have expanded outlays in irrigation, education and health, we are still totally dependent on tried-and-failed systems to deliver results,'' he said. ``We haven't looked at an alternative solution to the rigid bureaucracies we have.''

Chidambaram said investment was the key to sustain economic growth in the South Asian nation.

``An increase in investment means more jobs, which means more incomes and savings, which in turn means more investment,'' he said.

India's ratio of investment to gross domestic product touched a record 35.1 percent in the year ended March 31, and Chidambaram expects it to be ``slightly more'' this year.

European Stocks Rise Most Since June on Rate-Cut Speculation

2007-12-01T09:26:00.000-08:00

Dec. 1 (Bloomberg) -- European stocks had their biggest weekly gain since June on speculation the Federal Reserve will lower interest rates to prevent credit-market losses from dragging the world's biggest economy into a recession.

``The situation is serious enough to expect further rate cuts,'' said Guenther Gerstenberger, a fund manager at Oberursel, Germany-based PEH Wertpapier AG, which oversees the equivalent of $5.5 billion. ``In the medium term we'll see strong equity markets.''

Commodity stocks rose the most in 10 weeks, led by BHP Billiton Ltd., Anglo American Plc and Rio Tinto Group. Barclays Plc and Commerzbank AG paced an advance of financial stocks after strategic buyers from emerging-market countries bought stakes in Citigroup Inc., the biggest U.S. bank, and Fortis of Belgium.

The Dow Jones Stoxx 600 Index added 3.5 percent to 370.36 this week. Still, the gauge dropped 4.7 percent in November for the worst monthly performance since May 2006 as concern mounted that credit-market turmoil may damp economic and profit growth.

Federal Reserve Chairman Ben S. Bernanke said Nov. 29 policy makers must decide whether ``renewed turbulence'' in financial markets has shifted the risks between growth and inflation, signaling the Fed's concern that credit-market losses may be expanding into the broader economy.

The remarks stoked investors' expectations for the Fed to lower interest rates on Dec. 11. Fed funds futures on the Chicago Board of Trade show traders see a 100 percent chance of a reduction in the benchmark rate next month.

Swedish Decline

On Nov. 26, the Standard & Poor's 500 Index extended its drop to 10.1 percent from its Oct. 9 record. A fall of 10 percent for a benchmark is commonly considered a ``correction.''

National benchmarks gained in all 18 western European markets this week. Germany's DAX Index advanced 3.4 percent. France's CAC 40 added 2.7 percent, as did the U.K.'s FTSE 100. The Stoxx 50 increased 3.4 percent, and the Euro Stoxx 50, a measure for the euro region, rose 3 percent.

The OMX Stockholm 30 Index increased 4.5 percent in the last three trading days. As of the close on Nov. 27, the index had lost 19.3 percent from its seven-year high reached on July 16. A loss of 20 percent is considered the beginning of a bear market.

The Dow Jones Stoxx Basic Resource Index climbed 7.3 percent this week, the most since September, as prices for copper, tin and lead increased, and amid renewed takeover speculation.

As of the close of European equity markets, copper gained 4.6 percent in the past five trading days, rising to more than $7,000 a metric ton and heading for the biggest weekly gain since September.

Mining Companies

``As long as there are no signs of a slowdown in the emerging markets, commodity stocks are attractive,'' said Carsten Klude, who helps manage $20 billion as head of investment strategies at M.M. Warburg & Co. in Hamburg.

BHP Billiton gained 2.5 percent. Rio Tinto added 6.1 percent. Anglo American rose 10 percent.

BHP, under pressure from investors to increase its unsolicited $128 billion offer for Rio Tinto Group, said Nov. 28 competitors couldn't match the proposal and it wouldn't speculate on making a higher bid.

Vedanta Resources Plc jumped 13 percent on speculation India's largest copper and zinc producer will receive a takeover bid. The company's London-based spokesman Robin Walker said Nov. 29 the company isn't talking ``with any parties.''

Bank shares rebounded from a two-year low after Abu Dhabi's government said it will buy as much as 4.9 percent in Citigroup Inc., the biggest U.S. bank, and China's second-biggest insurance company bought a stake in Belgium's Fortis.

`Value'

``Long-term investors are starting to see value in the financial industry,'' said Sergi Martin Amoros, who helps oversee $5.3 billion at Credit Andorra SA in Andorra. ``Bad news is still to come, but we will see plenty of opportunities. We are close to an end of this nightmare.''

Barclays jumped 10 percent. The U.K.'s third-biggest bank said Nov. 27 pretax profit in 2007 will be ``broadly in line'' with analysts' average estimate of about 7.1 billion pounds ($15 billion). The bank didn't provide guidance for 2008.

Commerzbank, Germany's second-largest lender, advanced 14 percent.

Fortis increased 7.3 percent. Ping An Insurance (Group) Co. bought a 4.2 percent stake in Belgium's biggest financial- services company for 1.81 billion euros ($2.7 billion) in the largest overseas acquisition by a Chinese insurer.

Northern Rock Plc advanced 37 percent after billionaire Richard Branson's Virgin Group Ltd. won British government support to buy the mortgage lender bailed out two months ago by the Bank of England.

Porsche

``There is much more to go in this subprime issue,'' said Sailesh Bhundia, who helps manage $2.4 billion at EFG Asset Management in London. ``I don't think financial stocks will be able to lead the broader market higher, they need time to restore their balance sheets.''

Anglo Irish Bank Plc rose 27 percent. Ireland's third- largest bank posted a 52 percent gain in full-year profit to 998 million euros as business and property lending increased at home and the company expanded in the U.K. and U.S.

Porsche SE jumped 9.5 percent. The maker of the 911 sports car said Nov. 28 four-month sales gained 15 percent on demand for an upgraded Cayenne sport-utility vehicle and that it's ``carefully optimistic'' about full-year performance.

Vedior NV soared 45 percent, the steepest gain in the Stoxx 600 this week. The second-biggest Dutch provider of temporary employment received an indicative takeover proposal from Randstad Holding NV, the world's third-largest staffing company.

The two Dutch companies are holding talks that may lead to a public offer by Randstad, Amsterdam-based Vedior said.

Signet Group Plc plummeted 20 percent, the steepest drop in the Stoxx 600. The world's largest jewelry store owner reported a 69 percent decrease in third-quarter profit and said it's unlikely to meet analysts' full-year estimates because of a slump in U.S. sales.

China's Ping An Pays $2.7 Billion for Stake in Fortis

2007-11-28T19:14:00.000-08:00

Nov. 29 (Bloomberg) -- Ping An Insurance (Group) Co. paid 1.81 billion euros ($2.7 billion) for a stake in Fortis, Belgium's biggest financial-services company, in the largest overseas acquisition by a Chinese insurer.

Ping An, the nation's second-biggest insurance company, purchased 4.18 percent of Fortis, based in Brussels and the Dutch city of Utrecht, the Chinese firm said in a statement to Hong Kong's stock exchange today. Fortis said it invited Ping An President Louis Cheung to join its board.

Chinese companies including Industrial & Commercial Bank of China Ltd. and Citic Securities Co. have announced overseas purchases in the past six weeks, taking advantage of tumbling financial stocks. Fortis, part of a group that bought ABN Amro Holding NV, has fallen 33 percent this year as the credit-market slump hurt earnings at its insurance division.

Fortis, in a statement to Hugin wire, said Ping An's investment ``allows it to gain access to high-growth markets, in particular China.''

Ping An bought 95.01 million Fortis shares on the Euronext Brussels and Euronext Amsterdam as of Nov. 27, it said in the release.

ICBC, paying $5.6 billion for 20 percent of South Africa's Standard Bank Group Ltd.; and Citic Securities, injecting $1 billion into Bear Stearns Cos., also promised access to the world's fastest growing economy as part of their investments.

Spreading Risks

Insurance premiums in China increased 24 percent in the first nine months from a year earlier, driven by an economy that expanded 11.5 percent, according to data from the industry regulator.

China's insurance regulator has urged firms to spread risk on their more than $300 billion of assets. In July, China allowed them to invest 15 percent of assets in overseas stocks and bonds, up from 5 percent. Ping An said its acquisition was part of its strategy of ``applying its insurance funds and matching its assets to its liabilities.''

Ping An, based in the southern Chinese city of Shenzhen, quadrupled third-quarter profit to 3.6 billion yuan ($487.1 million), powered by gains on investments in Chinese stocks, the world's best performers this year. The company oversaw $45 billion of investments as of June 30.

Ping An's bigger rival, China Life Insurance Co., is also on the prowl for possible acquisitions. The world's largest insurer by market value is ``very interested'' in buying foreign banks, Board Secretary Liu Ting said yesterday.

Citigroup Infusion

``Overseas banks are looking very attractive after the subprime crisis brought their share prices down,'' said Liu at a briefing in Beijing. ``This provides great opportunities for China Life and is a very worthwhile option for us to consider.''

The MSCI World Finance Index has fallen 7.9 percent this year, the worst performance among 10 industry groups on the MSCI World Index. Citigroup Inc., the largest U.S. bank by assets, has tumbled 42 percent in New York amid mounting credit market losses, leading to the departure of Chief Executive Officer Charles Prince.

Citigroup, which until July was the world's biggest bank by market value, this week said it's receiving a $7.5 billion cash infusion from Abu Dhabi to shore up its capital.

Fortis tumbled 7.2 percent in Amsterdam on Nov. 8, the biggest drop in four years, after reporting an unexpected decline in third-quarter profit. The stock has jumped 11 percent in the past week, closing at 18.15 euros last week and giving Fortis a market value of 40 billion euros.

Oil Closes at Record in New York as Fuel Inventories May Drop

2007-11-23T19:36:00.000-08:00

Nov. 23 (Bloomberg) -- Crude oil futures rose in New York, reaching a record closing price above $98 a barrel, on concern fuel stockpiles will drop as the heating season gets under way.

Futures have surged 21 percent in the past two months as the dollar fell and U.S. inventories declined. Supplies of crude oil and distillate fuel, a category that includes heating oil and diesel, fell last week, according to an Energy Department report on Nov. 21. Transactions were lighter than usual today as some traders took a long Thanksgiving holiday weekend.

``Most of the issues that brought us here are still around so I think at some point, maybe next week, we will hit $100,'' said Tom Bentz, a broker at BNP Paribas in New York.

Crude oil for January delivery rose 89 cents, or 0.9 percent, to settle at $98.18 a barrel at 1:53 p.m. on the New York Mercantile Exchange. It was a record closing price. Futures climbed to $99.29 on Nov. 21, the highest intraday price since trading began in 1983. Prices are up 66 percent from a year ago.

Floor trading ended an hour early today because of the Thanksgiving holiday. Volume as of 1:30 p.m. was about 100,000 contracts, compared with 468,546 for the session on Nov. 21.

Brent crude oil for January settlement rose $1.26, or 1.3 percent, to $95.76 a barrel on the London-based ICE Futures Europe exchange. Brent reached $96.53 a barrel on Nov. 21, the highest since trading began in 1988.

``I don't think you can read much into the moves today because volume is light,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis.

Inventory Gain

Prices fell 0.8 percent on Nov. 21, after the Energy Department reported that crude-oil inventories at Cushing, Oklahoma, the delivery point for New York futures, rose 1.14 million barrels to 14.6 million last week.

The Organization of Petroleum Exporting Countries will load 24.5 million barrels a day onto tankers in the four weeks to Dec. 8, compared with 23.8 million barrels in the month ended Nov. 10, Oil Movements said. It will be OPEC's 14th consecutive increase and the biggest this year, according to the company, which tracks shipments.

OPEC, which produces more than 40 percent of the world's oil, is scheduled to discuss crude-oil production for the first quarter of 2008 at a meeting in Abu Dhabi on Dec. 5.

``It looks like we will need some strong political news or a significant inventory drop to send us above $100'' a barrel, said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``We've tested $100 twice and haven't achieved it, which raises questions about whether we can actually do it.''

Asian Stocks Gain for First Time in Seven Days; ICBC Advances

2007-11-22T20:33:00.000-08:00

Nov. 23 (Bloomberg) -- Asian stocks advanced for the first time in seven days, trimming a regional index's worst weekly loss in three months. Hong Kong shares rebounded from a two-month low as investors judged that recent declines were excessive.

Industrial and Commercial Bank of China Ltd. and Cnooc Ltd. led gains in Hong Kong after billionaire Lee Shau-kee said he invested more than HK$1 billion ($129 million) in the city's shares yesterday. Benchmarks across the region have retreated this week, except for Pakistan. Japan's markets are closed today for a holiday.

The MSCI Asia Pacific excluding Japan Index added 0.6 percent to 508.92 at 11:01 a.m. in Hong Kong, halting a six-day, 8.3 percent drop. The regional benchmark has dropped 4.4 percent this week, its fourth straight loss and the worst weekly performance since the five days ended Aug. 17.

``It's a dead cat bounce,'' said Jason Lee, who helps oversee $1.4 billion at JMF Asset Management in Kuala Lumpur. ``The outlook is still hazy.''

Samsung Electronics Co., the world's largest liquid-crystal display maker, climbed to a one-week high in Seoul after saying it will invest 2.06 trillion won ($2.2 billion) to expand a factory to meet rising demand for LCDs.

Benchmarks advanced in the region except for South Korea, Taiwan, China and Australia. Westpac Banking Group led a fourth straight decline in bank stocks on concern U.S. subprime mortgage losses will weigh on their earnings.

Japan's Topix index slid 0.1 percent yesterday, after having dropped 21 percent from its February peak, making the country the first of the world's 10 biggest stock markets to enter a bear market this year. U.S. markets were shut yesterday for the Thanksgiving holiday.

Bet on Hong Kong

ICBC, the world's largest lender by market value, added 3.5 percent to HK$5.96 in Hong Kong, after dropping yesterday to the lowest since Oct. 4. Cnooc, China's biggest offshore oil producer, jumped 4.9 percent to HK$13.36. China Mobile Ltd., the world's largest wireless operator, climbed 2.6 percent to HK$129.80.

Lee, chairman of Henderson Land Development Co. and the second-richest man in Hong Kong, said he invested more than HK$1 billion in stocks yesterday, when the Hang Seng Index fell 2.3 percent to the lowest since Sept. 21. The benchmark may reach 33,000 by spring, he added.

By yesterday, the Hang Seng was down 18 percent from a record on Oct. 30.

Samsung gained 2.6 percent to 553,000 won, set for its highest close since Nov. 16. Demand for LCD TV panels measuring 50 inches or more will increase 65 percent annually until 2010, Samsung said yesterday, citing estimates by research firm DisplaySearch.

`Ongoing Concern'

Westpac, Australia's fourth-largest lender, slid 1.5 percent to A$26.86. National Australia Bank Ltd., the country's biggest, fell 0.9 percent to A$40.11. Commonwealth Bank of Australia, the second biggest, dropped 1.1 percent to A$57.28.

The S&P/ASX 200 Finance Index fell 0.3 percent today in Sydney, taking its weekly decline to 2.4 percent. Losses from U.S. subprime mortgage foreclosures, coupled with slowing economic growth and falling house prices, could reach as much as $300 billion, the Organization for Economic Cooperation and Development said.

``Ongoing concern about the subprime issue is continuing to weigh on the banks as obviously funding issues are still a worry,'' said Shane Oliver, who helps manage the equivalent of $103 billion at AMP Capital Investors in Sydney.

Buffett, Greenspan Concern May Hurt China Finance

2007-11-22T07:32:00.000-08:00

Nov. 21 (Bloomberg) -- If Warren Buffett, Alan Greenspan and Li Ka-shing are right about China's stock market, China Finance Online Co. may lose its rank as the best-performing foreign company listed in the U.S.

American depositary receipts for the Beijing-based company, China's biggest provider of online financial data, have dropped 32 percent this month, as the nation's benchmark CSI 300 Index fell 12 percent. The ADRs lost 20 percent today alone, to $23.74.

China's world-beating rally may be a ``bubble'' ready to burst, say the former U.S. Federal Reserve chairman and Li, Asia's richest man. Billionaire Buffett, chairman of Berkshire Hathaway Inc., last month urged investors to be ``cautious.''

``If there is a slump in China, the risk of investing in some companies whose earnings are closely linked to the market will increase,'' said Tim Leung, who helps manage $1.7 billion at IG Investment Ltd. in Hong Kong. ``When there is a slump in the market, retail investors do much less trading.'' Leung said he doesn't own China Finance shares.

China Finance's ADRs have climbed more than fivefold this year on the Bank of New York ADR index, outperforming U.S.-listed PetroChina Co., BHP Billiton Ltd. and Baidu.com Ltd. The number of customers who pay for the company's stock-picking software and financial data rose 61 percent to 45,500 in the first nine months.

The ADRs, certificates that represent shares of foreign companies, are also the best performer in the Nasdaq Computer Index and the USX China Index in the past six months.

More Investors

China's CSI 300 index has surged 148 percent this year, the world's best return. The benchmark tracks the 300 biggest companies on the yuan-denominated A-share markets in Shanghai and Shenzhen.

Domestic investors opened about 33 million accounts for trading stocks and mutual funds in the first eight months of this year, six times the number opened in all of 2006, according to China Securities Depository and Clearing Corp.

China Finance's profit in the third quarter more than tripled to $1.9 million from a year earlier, it said in a statement today. The company forecast 2007 sales of as much as $60 million, compared with a previous projection of at least $45 million.

``Right or wrong, China Finance's stock moves with Chinese A-share and Hong Kong market sentiment,'' said Alex Xu, an analyst with Brean Murray Carret & Co. in New York.

Xu, who has a ``buy'' rating, is one of two analysts covering the company, according to Bloomberg data. Dick Wei, an analyst at JPMorgan Securities Inc. in Hong Kong, has an ``overweight'' recommendation on China Finance.

`Irrational Exuberance'

Hutchison Whampoa Ltd. Chairman Li said in May that the Chinese stock market ``must be a bubble.'' The CSI 300 trades at about 39 times estimated earnings, compared with about six times for the MSCI Asia Pacific Index, which tracks more than 1,000 companies in the region.

Asked if China was in a state of ``irrational exuberance,'' Greenspan told a conference of insurance executives in Boston on Oct. 30: ``I think so.''

``When you don't expect it, it breaks,'' Greenspan said, echoing Buffett, who said on Oct. 24 that ``it's easy to be carried away in the stock market when things are going well.''

Investors may be starting to listen. As of Nov. 20, the CSI 300 has risen in just three trading days this month.

``The biggest risk for China Finance is if there is a long- term pullback in the Chinese stock market,'' said JPMorgan's Wei.

Shorts Multiply

Short positions against China Finance Online surged ninefold to 2.1 million shares as of Oct. 15, from 226,714 a month earlier. ``Shorts'' are shares borrowed and sold by investors who bet they will fall so they can be repurchased at a lower price. The investor pockets the difference.

``China's retail investors have driven the rally, and when we have a correction, retail investors will emphasize it,'' said Gabriel Gondard, who manages about $10 billion at Societe Generale SA venture Fortune SGAM Fund Management Co. in Shanghai.

The CSI 300 index hit a record low in June 2005. In the same month, China Finance's ADRs had fallen by 50 percent from the initial offering price of $13. The online financial data provider, founded in 1998, listed on the Nasdaq in October 2004.

``If there is a correction in the market, investors will have greater need for information and data about the market,'' China Finance Chief Executive Officer Zhao Zhiwei said by e-mail. ``To a certain degree, that may result in a greater demand for our services.''

China's economy, which has grown more than 11 percent for three consecutive quarters, may continue to fuel increases in the nation's equity markets. Disposable incomes for urban households, after adjusting for inflation, rose 13.2 percent in the first nine months from a year earlier. Earnings in rural areas increased 14.8 percent, according to government data.

``As people in China have more money, more and more of them will begin to put their money in the stock market seeking higher returns,'' said JPMorgan's Wei. ``I'm optimistic on the outlook for China Finance.''