Regions

[Muthukali]

Singapore Export Growth Unexpectedly Quickens on Pharmaceuticals

Singapore’s export growth unexpectedly quickened in June as pharmaceutical shipments rebounded, countering a smaller increase in electronics sales.

Non-oil domestic exports climbed 6.8 percent from a year earlier, after a 3.2 percent gain in May, the trade promotion agency said in a statement today. The median of 13 estimates in a Bloomberg News survey was for a 2 percent increase.

The improvement is threatened by a deepening global slowdown, with the International Monetary Fund yesterday lowering its forecast for global growth this year and next. Asian policy makers have cut interest rates or signaled they have scope to add monetary and fiscal stimulus to bolster their economies as Europe’s debt crisis curbs demand for goods.

“Given the current global economic situation, it remains to be seen whether this signals a more sustained improvement,” Vincent Conti, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd., said before the report. “To be confident in a trend shift, we need to see China’s growth begin to pick up and the U.S. recovery regain steam.”

Gross domestic product fell an annualized 1.1 percent in the three months through June from the previous quarter, when it climbed 9.4 percent, the Trade Ministry said July 13.

Singapore’s electronics shipments by companies such as Venture Corp. rose 1.6 percent in June from a year earlier, after climbing 3.9 percent the previous month.

Non-electronics shipments, which include petrochemicals and pharmaceuticals, climbed 9.4 percent. Petrochemicals exports decreased 7.8 percent, while pharmaceutical shipments jumped 24 percent after rising 0.3 percent in May.

Singapore’s non-oil exports gained a seasonally adjusted 6.7 percent last month from May, when they slid a revised 2 percent, today’s report showed.

 

[Muthukali]

U.S. Stocks Advance Ahead of Bernanke’s Testimony

U.S. stocks rose, rebounding from yesterday’s drop, amid bets Federal Reserve Chairman Ben S. Bernanke will hint at more stimulus during testimony to Congress.

The Standard & Poor’s 500 Index (SPX) gained 0.4 percent to 1,358.84 as of 9:30 a.m. in New York. The U.S. equity benchmark lost 0.2 percent yesterday. The Dow Jones Industrial Average added 30.35 points, or 0.2 percent, to 12,757.56 today.

“The market is looking for the Fed chairman to be fairly definitive,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $103 billion, said in a phone interview. “Certainly the CPI numbers give the Fed ample room to be even more accommodative than what they’ve done before. They have room to be aggressive.”

Bernanke will deliver his semi-annual report on the economy and monetary policy before Congress today and tomorrow. Data yesterday showing a contraction in June retail sales kindled speculation the Fed will introduce more measures to support the world’s largest economy. The cost of living in the U.S. was little changed in June, a sign inflation may stay subdued.

No change in the consumer-price index followed a 0.3 percent drop in May, a Labor Department report showed today in Washington. The measure matched the median forecast of economists in a Bloomberg News survey. The so-called core measure that excludes volatile food and fuel costs rose 0.2 percent for a fourth month.

Bernanke Testimony
“Stocks are being helped by expectations about Bernanke’s testimony to Congress later today,” said Jakup Petur Baerentsen, a chief equity adviser at Nordea Private Bank in Copenhagen. “Investors are speculating if he’ll hint a third round of quantitative easing”

Minutes from the Fed’s June meeting, released on July 11, showed that two participants supported additional bond purchases, while two others said only a further deterioration in the economy would warrant them.

The Citigroup Economic Surprise Index for the U.S., which measures how much data from the past three months is beating or missing the median estimates in Bloomberg surveys, is at minus 64, near the almost 11-month low of minus 64.9 reached last week. The gauge peaked at 91.9 in January.

Earnings beat estimates at 31 of the 44 companies in the S&P 500 that have reported quarterly results so far, data compiled by Bloomberg showed.

“The earnings progression in the second quarter looks pretty good,” Russell said. “We heard from the financial companies and Goldman Sachs was notable.”

Goldman Sachs climbed 1.7 percent to $99.36. The fifth- biggest U.S. bank by assets reported an 11 percent drop in earnings that beat analysts’ estimates on trading even as first- half revenue fell to the lowest since 2005. State Street Corp., the third-largest custody bank, bought Goldman’s hedge-fund administration unit for $550 million.

 

[Muthukali]

FDI drops 3% amid slowdown

Foreign direct investment in China dropped 3 percent year-on-year to $59.1 billion in the first half of this year amid the country's economic slowdown and the slow recovery of the global economy.

FDI registered $12 billion in June, down 6.9 percent from the previous year, according to the Ministry of Commerce. The decline is the largest drop since December and compares with a 0.05 percent gain in May after a six-month slide.

"Despite the decline in the first half of this year, we hold that the whole year will see a steady expansion of FDI into China," Shen Danyang, spokesman for the ministry, told a news briefing on Tuesday.

"As the Chinese government take steps to stabilize economic growth and boost domestic consumption, the economic expansion will pick up in the second half of this year. This will boost the confidence of foreign investors and increase their investments in China," Shen said.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank of the ministry, said: "If there were no stimulus measures, FDI flowing into China would not grow significantly this year. The growth would be between 3 percent and 5 percent from the previous year."

He said this year is a very challenging one for China to attract FDI because the European Union is troubled by its debt crisis while the United States is struggling with its own recovery, and the emerging economies saw slower economic growth.

"China needs to take timely measures to enlarge FDI inflow because steady growth of FDI relates to China's stable trade growth and economic expansion, as well as employment."

Huo suggested the eastern region further open up its service sector to attract FDI.

"China can also invite foreign investment into its strategic industries and high-tech industry, and encourage foreign investment in the research and development areas of these industries after a clear definition of the fields open to foreign investment."

Zhang Yansheng, secretary-general of the academic committee of the National Development and Reform Commission, agreed, saying, "China's FDI will not grow fast this year because it has entered a slow expansion era since 2005."

China retained its position as the most attractive economy to multinational corporations in 2012, followed by the US and India, according to an annual survey of world investment prospects by the United Nations Conference on Trade and Development.

"This shows that multinational companies still have great confidence in China's development," Shen added.

Commerce Minister Chen Deming told foreign investors during a meeting on Friday that China will keep supporting the development of foreign enterprises in China while encouraging foreign investment in research and development as well as innovation.

"The huge domestic consumption market, which is expanding fast, provided great opportunities for foreign investors," Shen said.

The government has established a long-term mechanism to crack down on infringement of intellectual property rights, a move to improve the investment environment.

In the next step, the ministry will further open up the service sector and encourage foreign investment in emerging industries, modern agriculture and services, as well as energy conservation and environment protection. These measures will improve the country's use of foreign investments, Shen said.

FDI: Uncertainties, slow global recovery responsible for slump
In addition, the ministry is busy drafting the catalogue for the guidance of foreign investment industries in the central and western regions because foreign investors are enthusiastically investing in these areas after the government's encouragement," Shen added.

Huo said: "There is still room to enlarge the Industry Guidance Directory of Foreign Investment and improve the local investment environment. A broader investment field and better investment environment will ensure FDI flow into China in the long term."

The slow recovery of the world economy, rising costs at home and China's curbs on the real estate industry are jointly responsible for the slide of FDI into China in the first half of this year, according to Shen.

"Uncertainties in the world economy recovery, and the European debt crisis which still lacks a proper solution, affected the investment activities of multinational companies," Shen said.

The World Investment Report 2012 issued by the UNCTAD early this month said that the growth rate of global FDI will slow in 2012 with the value of both cross-border mergers and acquisitions and greenfield investments retreating in the first five months of 2012.

"Rising costs at home, including a shortage of land supply, also affect FDI in China. But the real estate industry is the major force driving down China's FDI expansion in the first half of this year," Shen said.

FDI flowing into China's real estate industry declined by 12.4 percent year-on-year in the first half of 2012 while FDI into China's financial industry surged by 73.3 percent in the same period, according to the ministry.

"The second half of this year will see China's imports pick up speed and the trade surplus in 2012 is likely to be bigger than last year's ($155.14 billion). But the proportion of the trade surplus in China's GDP or the whole-year trade volume will see no big change," Shen said.

 

[Muthukali]

Thailand’s TCC Said to Bid for OCBC’s Beverage Stakes

Thai Beverage Pcl (THBEV), Thailand’s biggest beer maker, said it’s in talks to buy Oversea-Chinese Banking Corp.’s S$2.85 billion ($2.3 billion) stakes in Fraser & Neave Ltd. (FNN) and Asia Pacific Breweries.

OCBC and its Great Eastern Holdings Ltd. (EH) unit are in talks with a bidder for their stakes, according to a stock exchange filing in Singapore July 16. Thai Beverage released the statement on the Singapore exchange following OCBC’s statement and reports of its connection in the transaction, it said.

Brewers including Asahi Group Holdings Ltd. (2502) and Kirin Holdings Co. have said they’re targeting takeovers in Southeast Asia, where young populations and growing economies are spurring beer sales. The population of Indonesia, the Philippines, Vietnam, Thailand and Malaysia will grow to more than 564 million by 2017 from 519 million in 2011, according to International Monetary Fund estimates compiled by Bloomberg.

“If you look at beer makers’ profitability, the more share they have, the more margin they get,” said Masashi Mori, an analyst at Deutsche Bank AG in Tokyo. “So both internally and externally, the size expansion is the tried and true tactic for beer makers.”

Thai Beverage is also Thailand’s largest whiskey producer. Shares of Fraser & Neave, Singapore’s biggest beverage maker, and Asia Pacific Breweries (APB) climbed to an all-time high yesterday after OCBC’s announcement.

“The company is presently in discussions to explore the possibility of acquiring the shareholders referred to in the joint announcement” by OCBC and Great Eastern, Thapana Sirivadhanabhakdi, Thai Beverage’s chief executive officer, said in the statement today. “No definitive binding agreement has yet been entered into.”

Heineken’s Stake
The stake in Fraser & Neave was worth S$2.1 billion at yesterday’s closing price in Singapore, while the Asia Pacific Breweries holding was valued at S$757 million. OCBC, Singapore’s second-biggest bank, and Great Eastern hold 18.2 percent of Fraser & Neave and 7.92 percent of Asia Pacific Breweries, according to their filing.

Thai Beverage is controlled by TCC Group, controlled by Thai billionaire Charoen Sirivadhanabhakdi, who also owns companies in industries ranging from insurance to property development.

Charoen wasn’t available to comment because he is traveling, according to a person who answered the phone at his office in Bangkok yesterday and declined to be identified. Koh Ching Ching, a spokeswoman for OCBC, also declined to comment yesterday.

Kirin, Heineken
Kirin, Japan’s largest brewer by market value, bought 14.7 percent of Fraser & Neave two years ago for S$1.34 billion, paying S$6.50 each per share. The stock rose 2.5 percent yesterday to close at S$8.10.

Heineken NV (HEIA), the world’s third-largest brewer, owns a 42 percent stake in Asia Pacific Breweries, the maker of Tiger beer. Fraser & Neave owns 40 percent. The brewer’s shares jumped 6.7 percent to close at S$37 yesterday.

Heineken said yesterday in a statement that it has noted the announcement on Fraser & Neave and Asia Pacific Breweries and is “actively considering” its options. The company didn’t say whether it plans to make an offer for Asia Pacific Breweries. Kirin (2503) spokesman Kan Yamamoto declined to comment.

Charoen was born and raised in Bangkok’s Chinatown district after his parents moved from Shantau in China, according to TCC’s website.

He started a trading business that supplied distilleries, and became a distiller after being awarded concessions to produce liquor in Thailand. Charoen bid for the rights to operate distilleries under the Sang Som Group during the liberalization of the nation’s liquor industry, and later expanded into beer, alcohol, sugar, and packaging businesses, according to the company.

Thai Beverage sold shares in Singapore in 2006 after anti- alcohol protesters blocked an offering in its home market. The company offered to buy Serm Suk Pcl (SSC), the bottler of PepsiCo Inc. (PEP) beverages in the Southeast Asian nation, for as much as 15.4 billion baht ($488 million) last September, saying the purchase will allow it to expand its “non-alcoholic product portfolio.”

 

[Muthukali]

Bernanke offers gloomy view but few new hints on easing

(Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday offered a gloomy view of the economy's prospects, but provided few concrete clues on whether the U.S. central bank was moving closer to a fresh round of monetary stimulus.

Bernanke told the Senate Banking Committee the economic recovery was being held back by anxiety over Europe's debt crisis and the path of U.S. fiscal policy, and he expressed unease over a stagnant jobs market.

The Fed chairman told lawmakers the central bank was considering a range of tools it could employ to help the economy but he hewed closely to the message of watchful waiting that the central bank's policy panel delivered in June.

"Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to economic growth, the committee made clear at its June meeting that it is prepared to take further action," Bernanke said in his testimony on the Fed's semi-annual monetary policy report.

Some investors had hoped the Fed chief would signal that the central bank was moving close to a third round of bond purchases -- or QE3 in market parlance -- to support the economy.

Prices for U.S. stocks initially fell on disappointment but clawed back to close up on the day on better-than-expected profit forecasts from Coca-Cola and Goldman Sachs. Prices for U.S. government debt fell.

"The market was preparing for some signal of imminent policy action from the Fed and they certainly did not get that," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.

JOB SLOWDOWN CAN'T BE EXPLAINED AWAY
The Fed has held overnight borrowing costs near zero since December 2008 and has bought $2.3 trillion in government and mortgage-related debt to push long-term interest rates lower.

As the recovery faltered, it promised to hold rates at rock bottom levels until at least 2014 and, at its June meeting, it extended a program to lengthen the average maturity of bonds in its portfolio to depress long-term borrowing costs.

It next meets on July 31-August 1. Few economists expect it to take further steps to spur the recovery then, but many think fresh stimulus measures could come as early as the subsequent meeting in September.

"I think the issue is not if but when we'll have another round of quantitative easing," said Nouriel Roubini, chairman of Roubini Global Economics.

Despite the extensive support the Fed has lent the recovery, growth is too weak to cut unemployment. The economy expanded at a tepid 1.9 percent annual rate in the first quarter, and economists think the second quarter will be even weaker.

With growth slowing around the globe, many central banks have eased policy recently, including the European Central Bank and the central banks of Britain and China.

At the hearing, lawmakers sought to lobby the Fed from both ends of the political spectrum. New York Democrat Chuck Schumer urged the Fed to ramp up its support for growth while Tennessee Republican Bob Corker advised it to stay on the sidelines.

Bernanke said the risks of a surge in inflation were low and that there was a modest risk of a broad-based decline in prices.

He said Fed policymakers would consider a range of tools to further stimulate growth if it became clear the labor market was not improving or if deflation risks mounted.

He cited the possibility of additional bond buying -- whether Treasury debt or mortgage-backed securities -- lending through the Fed's emergency loan window, and lowering the rate the Fed pays banks on reserves held at the central bank. The Fed could also use communications tools, such as extending its pledge to hold rates exceptionally low, Bernanke added.

He said recent deterioration in the labor market suggests the nation's 8.2 percent jobless rate will come down all too gradually, saying for the first time the softness in hiring could not be explained away by purely seasonal factors.

During the second quarter, job creation averaged 75,000 per month, down from an average of 226,000 in the first quarter.

JPMorgan economist Michael Feroli said Bernanke's assessment of the economy was "slightly more downbeat" than that offered by minutes of the Fed's June meeting released last week.

TROUBLE AT HOME AND ABROAD
Bernanke told the committee that manipulation of the global benchmark interest rate Libor by banks and traders had undermined confidence in financial markets, and he called the process of calculating Libor "structurally flawed."

However, he said the Fed had limited authority to force changes since Libor was overseen by the British Bankers' Association.

Bernanke told lawmakers it was essential to find a way to avoid the "fiscal cliff" of sharp spending cuts and tax hikes that are scheduled to take place in the United States at the start of next year, warning it could tip the already weak economy into a recession.

He also said the Fed remains in close contact with European authorities, and is focused on making sure the U.S. financial system remains resilient to financial shocks.

"Europe's financial markets and economy remain under significant stress, with spillover effects on financial and economic conditions in the rest of the world, including the United States," he said.

 

[Muthukali]

IMF: Eurozone in critical danger

The eurozone is in "critical" danger but can restore credibility with urgent action for a banking union, with some form of eurobonds, and if the ECB ramps up injections of cash, the IMF said on Wednesday.

The European Central Bank should pull harder on its levers of special measures to buy government debt and fund banks, and should be open about its targets, the IMF said.

In a hard-hitting review of policies for the euro area, it warned: "The euro area crisis has reached a new and critical stage.

"Despite major policy actions, financial markets in parts of the region remain under acute stress, raising questions about the viability of the monetary union itself."

A worsening of the crisis would have a big impact on neighbouring European countries "and the rest of the world."

It warned: "A determined move toward a more complete union is needed now."

On growth, the International Monetary Fund said that the "stark" truth was that eurozone countries had lagged the best performers for 50 years.

The euro is slightly over-valued by zero to 5.0 percent, the IMF estimated, but some countries in crisis needed a much bigger adjustment, of 5.0-10.0 percent for Italy and 10.0-15.0 percent for Spain.

Determined programmes for structural reforms to raise competitiveness were vital, the IMF said, warning also of a risk of deflation and suggesting that strong countries in northern Europe could allow wages and inflation to rise.

EU authorities should be flexible in mobilising new rescue funds (EFSF and ESM) to prevent contagion, for example if a crisis in a big bank threatened the financial system.

These IMF recommendations on eurobonds, inflation in strong countries and the role of the ECB run counter to the line taken by Germany, the main pillar of strength in the eurozone, and the ECB is also reticent about ramping up its special measures.

The view of the IMF is particularly significant because the fund is committed with EU authorities to direct bailouts for Greece, Ireland and Portugal, in defining the conditions and auditing the progress of rescue programmes.

The IMF stressed that the key to growth was further action to put over-strained public finances on a sound basis, coupled with longer-term reforms to increase efficiency.

Even by halving the gap with best practice in other countries and in four areas -- employment and tax laws, and opening up markets for tradeable and non-tradeable goods -- growth could be boosted by five percentage points over five years.

The term non-tradeable goods refers implicitly in part to the public sector.

The IMF prescribed policies which it considered should be pursued urgently. Amounting to a radical adjustment of the so-called European economic model, they said:

- "The first priority is a banking union for the euro area." This must be in line with rules for all 27 members of the European Union but was urgent for the 17 eurozone countries.

It could combine a pan-European scheme to guarantee bank deposits, a "bank resolution" mechanism involving private creditors in the orderly winding-down of a failed bank, and common bank supervision which could be assigned to the ECB for the eurozone.

- This had to be backed by fiscal integration and "more risk sharing" to prevent a shock in one country from imperilling the entire eurozone.

- The "introduction of a limited form of common debt" could be a half-way step towards "fiscal integration and risk sharing," it said in an implicit reference to some form of eurobonds.

- The European Central Bank still had some room to reduce interest rates, could announce a big programme to buy bonds on the secondary market, (known as Quantative Easing), and could announce more long-term operations guaranteeing banks access to cheap funds for several years.

It could also dilute further its conditions for collateral from banks in return for funds.

- Wage and asset price rises and "higher inflation" in northern eurozone countries would reduce a gap between current account surpluses in the north and deficits in the south, and to "reduce the risk of debt-deflation spirals in the south."

- The authorities should make clear that the ECB and the rescue funds would not have priority over private investors in the event of a default. "A clear commitment to accept equal status ... as in the case of Spain" would boost confidence, the IMF said, referring to a rescue for Spanish banks.

- "Long-standing structural rigidities need to be tackled to raise long-term growth prospects", focusing on "improving competitiveness". This was "essential".

- Short-term support for growth will also be needed, partly to offset the recessionary effects of budget rigour in countries overwhelmed by debt. Budget correction must be pursued, urgently in the weakest countries and at a measured pace where crisis is less acute.

- "If the crisis escalates, policymakers will have to stand ready to support the euro area banking system, including through a flexible use of the European firewall."

In any case the outlook was bleak, with average eurozone growth set to fall from 1.5 percent in 2011 to shrinkage of 0.3 percent this year and of 0.7 percent next year.

Unemployment rates would remain high this year, from 5.5 percent in Germany to 24.0 percent in Spain, and these differences would persist.

The risk of deflation was low in the faster-growing economies but "significant in the periphery."

The causes of the crisis had not been tackled, the IMF suggested, saying the authorities still lacked the "basic tools" to prevent government debt, banking tensions and low growth from generating a vicious cycle of crisis.

 

[Muthukali]

SET drops 4.07 points

The Stock Exchange of Thailand main index went down 4.07 points or 0.33% to close at 1,220.14 points at the end of trading session on this afternoon. The trade value was 28.05 billion baht, with 4.44 billion shares traded.

The SET50 index ended at 846.80 points, down 4.64 points or 0.54%, with a total trade value of 18.84 billion baht.

The SET100 index fell 8.66 points or 0.47% to stand at 1,841.53 points, with a total turnover of 22.92 billion baht.

The SETHD index went up 3.73 points or 0.34% to stand at 1,113.15 points, with total trade value of 6.32 billion baht.

The MAI index rose 2.56 points or 0.85% to close at 302.80 points, with total transaction value of 733.75 million baht.

Top five most active values were as follows;

ADVANC - stood at 202.00 baht, down 7.00 baht (3.35%)
INTUCH - stood at 63.75 baht, down 1.50 baht (2.30%)
PTTGC - stood at 59.25 baht, unchanged
PTTEP - stood at 166.00 baht, down 5.00 baht (2.92%)
PTT - stood at 340.00 baht, up 4.00 baht (1.19%)

 

[Muthukali]

U.S. Stocks Gain With Treasuries, Commodities; Euro Falls

U.S. stocks rose for a second day amid better-than-estimated earnings and a jump in housing starts. Treasuries climbed while the dollar fell against most peers and natural gas led commodities to a sixth straight gain.

The Standard & Poor’s 500 Index added 0.7 percent to 1,372.78 at 4 p.m. in New York and the Stoxx Europe 600 Index closed up 1.1 percent. Ten-year Treasury yields dropped one basis point to 1.49 percent. German two-year notes rose after the nation sold 4.17 billion euros ($5.1 billion) of the securities with a negative yield for the first time, and the government’s five-year rate declined to the lowest ever. The euro halted a three-day advance to trade 0.1 percent lower.

Intel Corp. climbed 3.3 percent to pace the advance in technology companies and Honeywell International Inc. (HON) surged 6.7 percent to help lead industrial shares up after profits topped analyst estimates. U.S. housing starts jumped 6.9 percent to the highest level since 2008. Federal Reserve Chairman Ben S. Bernanke testified to Congress for a second day on the state of the economy, telling lawmakers in the House that monetary policy has helped growth and the job market.

“Earnings have been a mixed bag so far but given the healthy state of corporate America with cash on the balance sheets and valuations undemanding, we can weather this environment in terms of share prices,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a telephone interview. “Looking at the markets, all I can see in them is the Bernanke bid.”

Bernanke Watch
Stocks rallied yesterday, sending the S&P 500 up 0.7 percent, after Bernanke told the Senate Banking Committee that policy makers are studying options for further easing that may include additional asset purchases. Bernanke today said central bankers are capable of removing record stimulus from the financial system and raising interest rates when needed to avoid triggering inflation.

“It will be a similar pattern to what we’ve seen in previous episodes where the Fed cut rates, provided support for the recovery, and when the recovery reached a point of takeoff where it could support itself on its own, then the Fed pulled back, took away the punch bowl,” Bernanke told the House Financial Service Committee as part of his semi-annual testimony to Congress.

The Fed said the economy expanded at a “modest to moderate” pace in June and early July, as retail sales and manufacturing cooled in some regions, according to the central bank’s Beige Book business survey today, which is based on reports from its 12 district banks.

Market Leaders
Technology shares surged 1.9 percent as a group and industrial companies added 1.7 percent to lead gains among the 10 main industries in the S&P 500. Intel’s earnings of 54 cents a share topped the average analyst estimate of 52 cents. The company said revenue will increase 3 percent to 5 percent in 2012, lower than an earlier prediction for growth in the high single-digit percentages.

Intel had the biggest gain in the Dow Jones Industrial Average, followed by gains of more than 2 percent in Cisco Systems Inc., Microsoft Corp., International Business Machines Corp. and Hewlett-Packard Co.

‘Not Disastrous’
“Intel lowered guidance but it was not unexpected and not disastrous,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an e- mail. “Pessimism (INTC) was pretty high and we’re now seeing people both covering and getting long some names. Intel’s leading the the technology group higher.”

EMC Corp. surged 9.4 percent after the software company said Pat Gelsinger will succeed Paul Maritz as chief executive officer of VMware Inc. Maritz will return to EMC, which owns 79 percent of VMware, as chief strategist. VMWare jumped 12 percent.

Honeywell rallied 6.7 percent after the maker of flight controls and thermostats reported better-than-estimated results driven by sales in its aerospace unit. Amphenol Corp., a maker of fiber-optic cables, and W.W. Grainger Inc., a distributor of building maintenance supplies, surged more than 11 percent for the biggest gains in the S&P 500 after releasing improved earnings forecasts.

Earnings Season
The S&P 500 has climbed for two straight days after slumping in seven of the previous eight sessions. The index is down more than 3 percent from a four-year high in April amid concern the economic recovery was slowing while investors braced for what is projected to be the first drop in quarterly earnings in almost three years.

Earnings have exceeded analyst estimates at 72 percent of the 68 companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Profits have slumped 3.3 percent for the group and the entire index is projected to report a 2.1 percent decrease in earnings.

Credit Suisse Group AG (CSGN) cut its year-end forecast for the S&P 500 to 1,425 from 1,440, citing the potential of a U.S. recession induced by so-called fiscal cliff. Andrew Garthwaite, global equity strategist, said he sees a 10 percent chance of the economy contracting should lawmakers do nothing to prevent about $607 billion of tax increases and spending cuts from kicking in at the end of the year.

The dollar weakened against 10 of 16 major peers, losing more than 0.3 percent versus the Japanese yen, Swedish krona and Australian dollar. The U.S. currency was little changed at $1.2284 per euro.

Commodities Gain
Natural gas surged as much as 8 percent, leading gains in 22 of 24 commodities tracked by the S&P GSCI Index, amid predictions of a smaller-than-normal increase in stockpiles. Cattle futures and hogs gained more than 2 percent on speculation that the declining U.S. herd size caused by rising feed costs will lead to a shortage of supplies.

Wheat rose for a sixth straight session on forecasts that dry weather will persist for the next week, further cutting the condition of U.S. crops.

Among European stocks, Credit Suisse jumped 4.5 percent after it announced measures to cut costs and boost capital by 8.7 billion Swiss francs ($8.9 billion). Puma SE tumbled 4.8 percent after Europe’s second-largest sporting-goods maker cut forecasts for sales and profit in 2012.

Analysts are cutting European profit forecasts at the fastest rate since 2009 as the region heads for a recession and growth in China slows for a sixth quarter.

European Yields
U.K. five-year note yields fell six basis points to 0.49 percent after Bank of England minutes indicated policy makers may reconsider the case for an interest-rate cut.

Germany’s two-year note yield dropped one basis points to minus 0.06 percent, while Finnish two-year yields fell below zero for the first time. Spain’s 10-year bond yield rose 14 basis points to 6.96 percent as the securities dropped for a fifth day.

The MSCI Emerging Markets Index declined 0.2 percent, halting a three-day gain. China’s Shanghai Composite Index rose 0.4 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong dropped 0.9 percent. South Korea’s Kospi index slid 1.5 percent while Taiwan’s Taiex Index and the Philippine Stock Exchange Index lost more than 1 percent.

Chinese Premier Wen Jiabao said the nation’s labor situation will become more “severe,” stoking bets he’ll announce measures to spur growth as the State Council meets.

“There are expectations for more measures to boost the economy at the State Council meeting so investors are using that as a reason to buy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

 

[Muthukali]

Vietnam two-year bonds fall ahead of debt auction; dong steady

Vietnam’s two-year bonds fell on speculation yields may rise at a debt auction later this week. The dong was little changed.

The State Treasury will offer VND1 trillion ($48 million) of two-year bonds and VND2 trillion of five-year securities at a sale on July 19, according to a statement on the Hanoi Stock Exchange’s website. The Treasury sold VND500 billion of five-year notes at 9.9 percent on July 12, according to the Hanoi Stock Exchange, compared with the 9.6 percent yield on similar-maturity bonds at the previous offer on July 5.

Last week’s auction “had a very negative affect on the secondary market,” said Tran Kieu Hung, a Hanoi-based fixed-income trader at Bank for Investment & Development of Vietnam. “That has made secondary-market liquidity very poor and caused yields to increase.”

Vietnam Bank for Social Policies will offer VND1 trillion each of three- and five-year securities at an auction on July 20, according to the Hanoi Stock Exchange.

The yield on the two-year bonds rose five basis points, or 0.05 percentage point, to 9.80 percent, according to a daily fixing rate from banks compiled by Bloomberg.

The dong traded at 20,853 per dollar as of 3:57 p.m. Tuesday in Hanoi, compared with 20,860 on Monday, according to data compiled by Bloomberg. The State Bank of Vietnam set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade as much as 1 percent on either side of the rate.

 

[Muthukali]

Asian Stocks Drop With Euro on Global Growth Concern; Oil Falls

Asian stocks and the euro declined amid concern Europe’s debt crisis is dragging on global growth and as China pledged to keep curbs on its property market. Oil fell from the highest level in nine weeks.

The MSCI Asia Pacific Index (MXAP) fell 0.3 percent at 11:26 a.m. in Tokyo as Japan’s Topix (TPX) Index dropped 0.8 percent for its 10th drop in 11 days. Standard & Poor’s 500 Index futures slid 0.2 percent. The euro weakened against most of its 16 major peers and oil declined 0.6 percent. Corn rose 0.4 percent as a U.S. drought threatened supplies.

“For the market, the environment will continue to be quite challenging,” Steven Sun, an equity strategist at HSBC Holdings Plc., said in a Bloomberg Television interview. “Central banks globally are easing monetary policy to lower financial market volatility and avoid downside growth risk.”

China won’t relax property control policies and will instead seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, Xinhua News Agency said. Earnings at U.S. companies have exceeded analyst estimates at about 71 percent of the 110 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg. Profits are down 0.7 percent for the group.

U.S. stocks rose for a third day yesterday as earnings at companies from International Business Machines Corp., the biggest computer-services provider, and EBay Inc., the largest Internet marketplace, beat estimates. General Electric Co., the world’s biggest maker of jet engines, power generation equipment and health-care imaging devices, will release its results today.

Euro Weakens
The euro declined 0.2 percent to $1.2258 per dollar. It was little changed at 96.55 yen and set to complete a fourth weekly drop. The Australian dollar traded 0.3 percent from an 11-week high against the dollar as U.S. data added to the case for more stimulus from the Federal Reserve. U.S. initial jobless claims were higher than estimated, and measures of manufacturing activity and sales of existing homes missed estimates, reports yesterday showed.

About nine stocks fell for every seven that rose on the MSCI Asia Pacific Index. Carmaker Toyota Motor Corp., which depends on North America for a quarter of its sales, dropped 0.5 percent. Toshiba added 2.1 percent after chipmaking partner SanDisk Corp. posted profits that topped analysts’ estimates.

Oil traded at $92.27 a barrel after climbing to $92.66 yesterday, the highest close since May 16, on concern increased tension in the Middle East will threaten crude supplies. The Organization of Petroleum Exporting Countries, responsible for about 40 percent of global supplies, will curb exports by 0.9 percent to 23.78 million barrels a day in the four weeks to Aug. 4, compared with 24 million a month earlier, Oil Movements said yesterday in an e-mailed report.

Corn Gains
Corn for December delivery was at $7.8325 a bushel on the Chicago Board of Trade after reaching $7.99 yesterday. The record for a most-active contract is $7.9925, reached on June 27, 2008. The U.S., the world’s largest grower and shipper, is facing its worst drought in more than 50 years. Corn climbed to $7.87 a bushel, 12.25 cents from a June 2008 record.

Severe to exceptional drought expanded to 48 percent of the Midwest as of July 17 from 33 percent a week earlier, the U.S. government said yesterday. World food prices tracked by the Food & Agriculture Organization will climb in July, according to Abdolreza Abbassian, an economist at the group.

 

[Muthukali]

S&P 500 Has First Back-to-Back Weekly Gain Since June

U.S. stocks rose this week, with the Standard & Poor’s 500 Index posting its first back-to-back gains since June, as earnings from International Business Machines Corp. (IBM) to Baker Hughes Inc. beat estimates and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus.

The benchmark index snapped a three-day rally today amid concern Europe’s crisis is intensifying. Baker Hughes surged 16 percent this week to lead energy shares to the biggest gain among the 10 S&P 500 industry groups. Technology stocks rose 1.9 percent as IBM climbed 3.5 percent and EBay Inc. (EBAY) jumped 12 percent amid better-than-expected earnings. Financial companies had the biggest retreat after Bank of America Corp. (BAC) and Morgan Stanley (MS) sank more than 9 percent amid disappointing results.

The S&P 500 added 0.4 percent to 1,362.66 during the week, extending its gain for the year to 8.4 percent. The Dow Jones Industrial Average climbed 45.48 points, or 0.4 percent, to 12,822.57, the biggest weekly gain since June 29.

“There is this euphoria that maybe things are starting to turn around,” Linda Bakhshian, a money manager with Federated Investors in Pittsburgh, said in an interview this week. Her firm oversees $363.6 billion. “Expectations were pulled back. Companies are beating and the market is happy again because things are not that bad.”

Optimism about corporate earnings and monetary stimulus has sent the S&P 500 up 6.6 percent from a low on June 1. Profits (SPX) have exceeded analyst forecasts at about 73 percent of the 118 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg. Apple Inc., Exxon Mobil Corp. and about 170 other S&P 500 companies are scheduled to announce earnings next week.

Earnings Projections
Analysts ratcheted down their projections for second- quarter profits at the start of earnings season, forecasting a decrease of 2.1 percent, compared with an increase of 4.4 percent at the beginning of this year, data compiled by Bloomberg show. By the end of this week, their outlook improved and they now estimate a 1.6 percent decline.

Stocks rose early in the week after Bernanke told senators that the central bank is prepared to act to boost growth if the labor market doesn’t improve. Disappointing data added to evidence the world’s largest economy is slowing, with reports showing that retail sales unexpectedly slid, manufacturing in the Philadelphia region contracted for a third month, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.

‘Boost Growth’
“The assumption is that the Fed is going to continue to try to do what it can to boost growth, or at least continue conditions that could give it a chance,” Dean Gulis, who oversees about $3.5 billion as a fund manager at Loomis Sayles & Co. in Bloomfield Hills, Michigan, said in a telephone interview this week.

Europe’s debt crisis and concern about a global economic slowdown continued to loom over the markets. The S&P 500 fell 1 percent from a two-month high today after Spain said the recession will extend into next year and the region of Valencia prepared to seek a rescue from the central government. Xinhua News Agency said China will seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, intensifying concern an economic slowdown could reduce demand for raw materials.

An S&P 500 index of energy shares advanced 2.6 percent this week. Baker Hughes (BHI) jumped 16 percent to $45.59. The third- largest oilfield-services company reported per-share profit that beat analysts’ estimates by 30 percent, the most since at least 2001, data compiled by Bloomberg show.

IBM Climbs
Technology companies added 1.9 percent for the second- biggest increase among the 10 groups in the S&P 500. IBM climbed 3.5 percent to $192.45. The world’s biggest computer-services provider boosted its full-year earnings forecast after second- quarter profit beat analysts’ estimates, helped by a decade-long shift to higher-margin software sales.

EBay advanced 12 percent to $44.85 for the biggest gain since September. The world’s largest Internet marketplace reported sales and profit that topped analysts’ estimates as more U.S. consumers shopped for new items on the site.

SanDisk Corp. (SNDK) surged 16 percent, the most since April 2010, to $38.70. The maker of flash memory for mobile devices exceeded analysts’ per-share earnings estimate by 14 percent, the most in a year, according to data compiled by Bloomberg.

Google Inc. (GOOG) climbed 6 percent to $610.82. The owner of the world’s most popular search engine said second-quarter revenue surged 35 percent, helped by its acquisition of Motorola Mobility Holdings and as more users clicked on advertisements.

Intel, AMD
Intel Corp. added 1.1 percent to $25.52. The world’s largest semiconductor maker reported second-quarter profit that topped analysts’ estimates while scaling back its annual sales forecast. Advanced Micro Devices Inc. (AMD), a rival of Intel, tumbled 14 percent to $4.22 after predicting a revenue decline amid market-share losses and diminished demand for personal computers.

Walgreen Co. (WAG) surge 13 percent to $34.60 for the biggest rally since 2000. The largest U.S. drugstore chain renewed a contract to provide Express Scripts Inc. (ESRX) customers with prescriptions, ending a dispute that contributed to an 11 percent decline in the retailer’s quarterly profit.

Financial shares fell 2.4 percent as a group, the most in seven weeks. Wall Street’s five biggest banks reported the worst start to a year since 2008, with combined first-half revenue falling 4.5 percent to $161 billion, the lowest since $135 billion four years ago. The firms blamed the decline on low interest rates and a drop in trading and deal-making.

Headcount Cuts
Bank of America sank 9.6 percent to $7.07 for the biggest loss since November. The lender said demands for buybacks from mortgage-bond investors and insurers surged more than $6 billion in the second quarter to $22.7 billion. Record claims for refunds on faulty mortgages cast doubt on whether improvements in the lender’s real estate operations will last, according to Paul Miller, an analyst at FBR Capital Markets.

Morgan Stanley reported a 50 percent drop in earnings on the biggest decline in trading revenue among Wall Street firms and said it will cut headcount by 4,000 this year. The stock slumped 9 percent to $12.78 for the week.

Chipotle Mexican Grill Inc. (CMG) plunged 19 percent, the most since its 2006 initial public offering, to $316.98 after second- quarter sales trailed analysts’ estimates. Slower U.S. consumer spending hurt the chain’s sales with smaller gains as the year proceeded, Chief Financial Officer Jack Hartung said on an analyst call. Extreme weather may boost food costs later this year and next, Hartung said.

 

[Muthukali]

SET dips 4.41 points

Thai stocks dipped 4.41 points on Friday to close at 1,208.55 points, down 0.1% from the end of the previous week for its first decline in four weeks.

Trade was modest at 25.84 billion baht with 3.81 billion shares changing hands. Foreign investors were net sellers of 1 billion baht worth of shares on the day. Local institutions sold shares worth 1.24 billion and brokers sold 209.9 million, while retail investors were net buyers of 2.46 billion baht.

Among major movers on Friday were shares of Oishi Group Plc (OISHI), controlled by billionaire Charoen Sirivadhanabhakdi, which dropped 1.2% to 160 baht. Berli Jucker Plc (BJC), another affiliate of Mr Charoen's flagship Thai Beverage Plc, lost 3.6% to 40.50 baht, its biggest loss since since March 22.

The declines were linked to news that Heineken NV, the world’s third-biggest brewer, will offer as much as $6 billion to take over Singapore-based Asia Pacific Breweries Ltd, blocking an attempt by Thai Beverage to build up its stake in the brewer of Tiger beer and Heineken in the region.

The SET50 index of blue-chips ended the day at 836.99 points, down 3.78 points or 0.45%, on turnover of 17.74 billion baht. The SETHD index of high-dividend stocks declined 8.65 points or 0.78% to 1,105.39. The Market for Alternative Investment rose 2.04 points to 303.63, in trade worth 644.44 million baht.

The five most active stocks by value were Advanced Info Service (ADVANC), gaining 2 baht to close at 197; KBANK, down 1 baht to 161.50; PTT Global Chemical (PTTGC), up 25 satang to 60.75 baht; Charoen Pokphand Foods (CPF), down 25 satang to 35 baht; and ADVANC parent INTUCH (formerly Shin Corp), up 25 satang to 652.50 baht.

Among other major movers, CIMB Thai Bank Plc (CIMBT) declined 2.7% to 2.16 baht, the lowest close since June 21, after reporting an 89% year-on-year decline in net profit to 28.7 million baht. Krung Thai Bank climbed 2% to 16.30 baht, halting a three-day slide, after reporting a 40% rise in net profit to 7.34 billion baht.

Indorama Ventures Plc (IVL), the world's largest PET maker, rose 1.6% to 31 baht, the highest close since May 15. The company yesterday started commercial operations of a plant in Nigeria to tap demand in Africa.

In the currency markets, the baht fell slightly on Friday in anticipation of data that may show export growth slowed for a second month in June.

Overseas shipments, accounting for about two-thirds of the Thai economy, rose 4.5% last month after increasing about 7.7% in May, according to the median forecast of economists in a Bloomberg survey. The official figures for June will be rfeleased next Wednesday.

"Real demand conditions show exports are likely to weaken," said Radhika Rao, an economist at Forecast Pte in Singapore. "That would keep the baht on a weakening trend."

The baht was trading late yesterday in Bangkok at 31.64/66 to the dollar, compared with 31.61/63 on Thursday.

 

[Muthukali]

Greek stocks dive 7.1%

Stocks in Athens on Monday tumbled by 7.10 percent, with banks hit the hardest, ahead of a crucial EU-IMF audit and mounting fears that Spain was heading for a eurozone bailout.

The bank index fell by 9.82 percent with top lenders taking heavy losses.

National Bank shed 11.29 percent, Alpha Bank lost 9.17 percent, Eurobank dived by 10.91 percent and Piraeus Bank dropped 9.59 percent.

Eurobank had earlier announced that its parent EFG Group, based in Zurich, was to transfer 44 percent of its 45-percent stake in the Greek lender to members of the Latsis family, the founders of the group.

Auditors from the EU, International Monetary Fund and the European Central Bank - the so-called troika of Greek creditors - return to Athens on Tuesday seeking answers from the government on how to bring troubled structural reforms on track.

At stake are 11.5 billion euros in spending cuts in 2013-2014 which Greece was originally supposed to identify in June under agreements signed earlier this year, and a privatisation drive that is months behind schedule.

The troika's report will determine whether Greece will receive fresh loans of 31.5 billion euros ($38 billion) by September under its debt rescue programme.

 

[Muthukali]

Hong Kong Markets Delay Opening As Typhoon Vicente Passes

Hong Kong hoisted its highest storm signal for the first time since 1999 as Severe Typhoon Vicente intensified while passing the city, injuring more than 100 people, grounding flights and delaying stock-market trading.
The Hong Kong Observatory issued the number 10 hurricane signal at 12:45 a.m. local time today, as winds and rain caused five cases of flooding and toppled trees. At least 118 people were injured. It reduced the warning level to No. 8, the third- highest, at 3:35 a.m.

“Present indications are that local winds have started to weaken,” and the signal will be reduced when wind drops below gale force, the observatory said in a statement posted on its website at about 7 a.m. local time. Maximum sustained wind speeds of as much as 93 kilometers (58 miles) an hour were recorded over parts of the city in the previous hour, it said.

The government closed all schools and public clinics yesterday as strong winds and heavy rain emptied streets. Cathay Pacific Airways Ltd. (293), the city’s biggest carrier, halted all local operations last night and will resume services at 8 a.m. today, with six flights delayed, according to an e-mailed statement. Ferry services have also been suspended.

Hong Kong Exchanges and Clearing Ltd. cancels pre-market trading when signal 8 is still in force at 7 a.m. The morning trading session will begin at least 2 hours after the signal is reduced, and will be canceled if the No. 8 is still hoisted at 9 a.m. local time. There will be no trading today if the warning remains in force at noon.

Local banks will remain closed, reopening if the signal is lowered by noon, the Hong Kong Association of Banks said.

Injuries, Damage
Fifty-three men and 65 women sought hospital treatment as of 6 a.m., according to a statement on the government website. Fifty-two were admitted, it said. Authorities are dealing with one landslide, five instances of flooding and 662 reports of fallen trees, it said.

Forty-four passenger flights had been canceled and 276 delayed as of 6:30 a.m., the government said. Port operators shut down gate services.

Typhoon Vicente was centered about 160 kilometers west of Hong Kong at 7 a.m., the observatory said. Rainstorm and landslide warnings were still in effect, according to the weather bureau’s website.

More than 100 subway passengers were stranded overnight when the No. 10 signal was hoisted, RTHK said on its website. The last time the No. 10 signal was raised was for Typhoon York in 1999, the government-run broadcaster said.

 

[Muthukali]

Dow Rallies Above 13,000 On Speculation ECB To Buy Bonds

The Dow Jones Industrial Average (INDU) climbed above 13,000, capping its longest weekly advance since January, amid speculation the European Central Bank will buy bonds to help lower borrowing costs and preserve the euro.

Alcoa Inc. (AA) and Caterpillar (CAT) Inc. rose more than 3.1 percent to pace gains in the biggest companies. Merck & Co. (MRK) and Amgen Inc. (AMGN) added at least 4 percent, driving health-care shares higher, as earnings beat estimates. Expedia Inc. (EXPE) surged 20 percent as the online-travel company raised its dividend. Facebook Inc. (FB) fell 12 percent to a record low after its results.

About nine stocks rose for every two falling on U.S. exchanges at 4 p.m. New York time. The Standard & Poor’s 500 Index advanced 1.9 percent to 1,385.97. The Dow average rallied 187.73 points, or 1.5 percent, to 13,075.66.

Both climbed to the highest levels since May and completed three straight weeks of gains. Volume for exchange-listed stocks in the U.S. was 7.9 billion shares, or 18 percent above the three-month average.

“They’ve got to buy bonds,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, said in a phone interview. “There’s been a lot of rhetoric as far as opening up the checkbook for whatever needs to be done to stabilize the euroland. It’s a giant deal if they actually do what they say they are prepared to do.”

American stocks joined a global rally after two central bank officials said ECB President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases. German Chancellor Angela Merkel and French President Francois Hollande echoed yesterday’s pledge by Draghi that they will do everything to protect the euro.

Economic Data
In the U.S., data showed that the economy expanded at a slower pace in the second quarter as a softening job market prompted Americans to curb spending. Consumer confidence in July dropped to the lowest this year, according to a separate report. Cooling growth makes it harder to reduce unemployment, helping explain why Federal Reserve Chairman Ben S. Bernanke has said policy makers stand ready with more stimulus if needed.

“Growth has decelerated sharply,” said Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees $355.9 billion. He spoke in a telephone interview. “We need something to reverse that downtrend and that ‘something’ is policy.”

Consumers are cutting back just as Europe’s crisis and looming U.S. tax-policy changes dent confidence, hurting sales at companies from United Parcel Service Inc. to Procter & Gamble Co. Sales at almost 60 percent of S&P 500 (SPXL1) companies which reported second-quarter results missed estimates, data compiled by Bloomberg show. Still, 72 percent beat profit forecasts.

Alcoa, Caterpillar

Bets on global policy action paced a surge in companies that are most-dependent on economic growth. The Morgan Stanley Cyclical Index jumped 2.7 percent. Alcoa, the largest U.S. aluminum producer, rose 3.2 percent to $8.45. Caterpillar, the largest maker of construction equipment, climbed 3.4 percent to $86.16. JPMorgan Chase & Co. (JPM) added 3 percent to $36.89.

Better-than-estimated earnings helped drive health-care companies higher today. The group rallied 2.5 percent for the biggest advance among 10 industries in the S&P 500.

Merck gained 4.1 percent to $45.10, the highest price since 2008. The company, facing generic competition in August to its top-selling asthma drug Singulair, reported second-quarter profit that beat analyst estimates on higher sales of the diabetes medicines Januvia and Janumet.

Amgen advanced 5.8 percent to $83.92 to the highest since 2005. The largest biotechnology company reported profit topped analysts’ estimates on increased demand for its rheumatoid arthritis and bone drugs and it raised its 2012 forecast.

Medicaid Business

Coventry Health Care Inc. (CVH) climbed 11 percent to $34.07. The company beat analysts’ second-quarter earnings estimates because of increased membership in its U.S. government insurance programs and lower costs for its Medicaid business in Kentucky.

Gilead Sciences Inc. (GILD) added 7.4 percent to $55.50. It plans to start a combination study of two drugs in a single pill to treat hepatitis C by the end of the year, putting it on track to request U.S. regulatory approval for the medicine in 2014.

Expedia surged 20 percent to $54.90 amid a jump in sales. The company saw stronger second-quarter demand for hotel rooms, Chief Executive Officer Dara Khosrowshahi said. Expedia will lift its dividend 44 percent to 13 cents a share.

Amazon.com Inc. (AMZN) rallied 7.9 percent to $237.32. The largest Internet retailer gained as investors bet that investments in its distribution network will pay off by the holiday season.
Coal Companies

Arch Coal Inc. (ACI) led a surge in producers of the fuel as second-quarter results beat estimates. Arch climbed 29 percent, the most since 2000, to $6.80. Alpha Natural Resources Inc. (ANR) jumped 20 percent, the biggest gain in the S&P 500, to $7.02. Peabody Energy Corp. (BTU) advanced 5.6 percent to $20.80.

Goodyear Tire & Rubber Co. (GT) increased 6.9 percent to $10.57. Michelin & Cie., the world’s second-largest tiremaker, reported a 36 percent jump in first-half earnings that beat estimates.

Chubb Corp. (CB) rallied 4 percent to $72.32. The insurer of commercial property and high-end homes reported profit that beat estimates and boosted its outlook for the second half.

Facebook tumbled 12 percent to $23.71, 38 percent below its initial public offering price of $38. Executives led by Chief Executive Officer Mark Zuckerberg, addressing analysts for the first time since the company’s May 17 IPO, issued no growth forecasts and said little else to reassure investors who fret that the company is overvalued.

Starbucks Corp. (SBUX) lost 9.4 percent to $47.47. The world’s largest coffee-shop chain forecast fourth-quarter profit that trailed estimates as consumers pull back around the globe.

Newmont Mining

Newmont Mining Corp. (NEM) slid 3.4 percent to $44.53. The largest U.S. gold producer reported second-quarter profit that missed analysts’ estimates as costs rose faster and production was lower than projected.

CA Inc. slumped 7.2 percent to $24.43. The maker of software for managing information technology cut its annual revenue forecast. Chief Executive Officer Bill McCracken said on a conference call that a sluggish economy and a business reorganization led to a slow start for the year.

ATP Oil & Gas Corp. dropped 28 percent to $1.40, a record low. Bloomberg News reported bondholders are organizing for a potential restructuring, citing two people familiar with the matter. ATP Chief Financial Officer Albert Reese and Isabel Plume, a spokeswoman for the company, didn’t return calls for comment yesterday.

Amarin Corp. (AMRN) lost 12 percent to $13.51. U.S. approval for the company’s first product, a drug to combat high levels of blood fat that can lead to stroke and heart attack, included limits on its use that may have disappointed investors.

Better Returns

Abby Joseph Cohen, the senior U.S. investment strategist at Goldman Sachs Group Inc., said equities will generate better returns than bonds for investors in the medium-to-long term.
“If we were to look just at fair-value estimates over the next year to three, we think that returns that are roughly 8 to 10 percent on the stock market are sensible,” she said in an interview on “Bloomberg Surveillance” today with Tom Keene. “It is sensible as well for a long-term outlook, even though we assume that economic growth will not be as robust as it was in the years immediately prior to the financial crisis.”

To contact the reporter on this story: Rita Nazareth in New York at [email protected]

To contact the editor responsible for this story: Lynn Thomasson at [email protected]

 

[Muthukali]

SEC Freezes Trader Assets In Probe Of Cnooc’s Nexen Purchase

The U.S. Securities and Exchange Commission obtained a court order to freeze assets of traders who allegedly reaped more than $13 million by trading illegally ahead of Cnooc Ltd. (883)’s announcement that it would buy Nexen Inc. (NXY)

Hong Kong-based Well Advantage Limited and other unknown traders stockpiled shares of Nexen based on confidential information about the deal, the SEC said in a July 27 statement announcing a complaint filed at federal court in Manhattan. The court order froze about $38 million in assets, the SEC said.

Nexen’s stock rose more than 50 percent on July 23 after Cnooc, China’s largest offshore oil and gas explorer, said it would pay $15.1 billion in cash to acquire the Calgary-based company in the biggest overseas takeover by a Chinese firm. The price was $27.50 for each common share, a premium of 61 percent to Nexen’s closing price on July 20, the previous trading day.

“Well Advantage and these other traders engaged in an all- too-familiar pattern of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts,” Sanjay Wadhwa, deputy head of the SEC’s market abuse enforcement unit, said in a statement.

Almost all of the purchases of Nexen stock occurred during the seven trading days before the acquisition was announced, and the accounts used for the transactions had little or no history of buying Nexen shares. Well Advantage’s owner is controlling shareholder of a Hong Kong-based company that engages in significant business activities with Cnooc, the SEC said.

Close Ties

The SEC complaint didn’t list defense counsel for Well Advantage and the other traders. A telephone call at the weekend to a Hong Kong number listed for Zhang Zhi Rong, Well Advantage’s sole owner, wasn’t answered. Calls and e-mails to a spokesman weren’t answered July 28.

Zhang controls shipbuilder and petrochemical engineering firm China Rongsheng Heavy Industries Group Holdings Ltd. (1101), a company that has close business ties to Cnooc, according to the SEC’s filing. China Rongsheng declined to comment on what it said were private affairs and said the group’s normal business operations won’t be affected, in an e-mailed response to questions.

Zhang, who is also the chairman and founder of Glorious Property Holdings Ltd., (845) according to data compiled by Bloomberg, was listed as China’s 38th richest person with a fortune of $2.9 billion in the 2010 Hurun Report, which tracks the country’s wealthy.

Bloomberg data showed trading in bullish Nexen options reached the highest level since 2008 before Cnooc announced it would buy the energy company. A total of 47,302 calls traded on the company’s U.S. shares last week, with bullish contracts reaching 24,554 on July 20, the most since March 2008.

Call options that convey the right to acquire shares for a given price by a certain date usually offer higher returns than stock to traders speculating on takeover. Nexen said last year it was exploring a sale and the departure of its chief executive officer in January spurred speculation it might find a buyer.

To contact the reporter on this story: Joshua Gallu in Washington at [email protected]

To contact the editor responsible for this story: Maura Reynolds at [email protected]

 

[Muthukali]

Most U.S. Stocks Slip After Two-Day Rally; Corn At Record

Most U.S. stocks fell following the biggest two-day rally of the year, while European equities rose for a third day and Spanish bonds rallied on speculation policy makers will take action to ease the region’s debt crisis. Corn jumped to a record as an American drought persisted.

The Standard & Poor’s 500 Index (SPXL1) slipped 0.05 percent to 1,385.3 at 4 p.m. in New York after jumping 3.6 percent over the previous two sessions. Three stocks retreated for every two that rose on U.S. exchanges. The Stoxx Europe 600 Index surged 1.6 percent to extend a rally since July 25 to more than 5 percent. Ten-year Treasury notes halted a three-day retreat, sending rates down five basis points to 1.50 percent. The euro depreciated 0.5 percent to $1.2258, snapping a three-day gain. Corn, wheat and soybeans rallied at least 1.8 percent.

European Central Bank President Mario Draghi met with U.S. Treasury Secretary Timothy Geithner in Frankfurt today after leaders in Berlin, Paris and Rome backed him by saying they will do what’s needed to protect the 17-nation euro. Spain’s economy shrank 0.4 percent in the second quarter, the National Statistics Institute in Madrid said today. The Federal Reserve will start a two-day meeting tomorrow.

“People looked at their portfolios over the weekend and, after a move like we saw, that usually brings more sellers and people rearranging their positions,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in a telephone interview. His firm oversees $12 billion in assets. “It’s an extremely frustrating market. People that were shorting lost it all in two days, people that were more long came back but nobody is killing it.”

Market Leaders
JPMorgan Chase & Co. (JPM) fell 2 percent to lead losses in the Dow Jones Industrial Average as Deutsche Bank AG cut its recommendation on the stock and said earnings expectations may be too high. Loews Corp. (L) slumped 5.2 percent as Chief Executive Officer James Tisch said he’s “very concerned” about the global economy after profit fell for a third-straight quarter. A measure of homebuilders in S&P indexes dropped 2 percent as Citigroup Inc. said the industry’s shares may decline after this year’s surge.

The Shaw Group Inc. (SHAW) jumped 55 percent, the most since going public in 1993, after Chicago Bridge & Iron Co. agreed to buy the company for about $3 billion to expand its portfolio of engineering and construction projects across the energy industry.

Fed policy makers meet this week before a jobs report to decide whether additional stimulus is needed to combat a slowdown in the world’s biggest economy. Labor Department data on Aug. 3 is forecast by economists to show U.S. employers added 100,000 jobs to payrolls in July and the unemployment rate held at 8.2 percent. Other data may show manufacturing stagnated in July and consumer confidence fell for a fifth month.

Further Easing
“It’s increasingly likely that the Fed and European Central Bank will ease further by September,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official. In Japan, the government may implement a supplementary budget by September, with the central bank expanding asset purchases, Adachi said.

The Stoxx 600 (SXXP) has gained for eight straight weeks, its longest rally in more than six years. It has rebounded 13 percent from its low for the year in June. Air France-KLM Group surged 19 percent as Europe’s biggest airline reported a narrower-than-estimated loss. JC Decaux SA sank 6.9 percent after the French billboard company said so-called organic revenue was lower than forecast in the second quarter.

The euro declined 0.8 percent versus the yen, falling for the first time in four days.

Krona Rallies
The Swedish krona rose against all 16 of its most-traded peers, appreciating 1.7 percent against the euro and 1.2 percent versus the dollar after Statistics Sweden data showed gross domestic product unexpectedly accelerated in the second quarter. GDP grew 1.4 percent, beating a median forecast for a gain of 0.2 percent in a survey of economists by Bloomberg.

The cost of insuring European corporate and sovereign bonds using credit-default swaps declined for a fourth day. The Markit iTraxx Crossover Index of swaps on 50 mostly junk-rated European companies fell 15 basis points to 626. The Markit iTraxx SovX Western Europe Index tied to the debt of 15 governments dropped 20 basis points to 255.

Draghi’s proposal involves Europe’s rescue fund buying government bonds on the primary market, buttressed by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, two central bank officials said July 27 on condition of anonymity. Further ECB rate cuts and long- term loans to banks are also up for discussion, one of the officials said.

‘Structural Adjustment’
“Given the sheer scale of the structural adjustment that is still needed in Europe and accelerating capital flight from peripheral countries to the core, it will take extraordinary efforts from the ECB to implement lasting solutions,” said Kaha Kiknavelidze, London-based managing partner at Rioni Capital Partners LLP, an emerging-markets hedge fund that manages $30 million.

Draghi must now deliver or face a renewed selloff on bond markets, where soaring Spanish and Italian yields have fueled speculation that the monetary union could fall apart. The ECB chief is also attempting to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases.

Figures tomorrow may show euro-area unemployment climbed to a record 11.2 percent last month, a Bloomberg survey showed.

Italian 10-year bonds stayed lower after the nation sold 5.5 billion euros ($6.8 billion) of government debt due between 2015 and 2022. The 10-year yield climbed seven basis points to 6.03 percent. The rate on Italian five-year notes added three basis point to 5.38 percent after increasing as much as 12 points earlier.

Emerging Markets
The MSCI Emerging Markets Index (MXEF) added 0.8 percent to a three-week high. The Hang Seng China Enterprise Index (HSCEI) of mainland companies listed in Hong Kong gained 1.3 percent, while the BSE India Sensitive Index (SENSEX) added 1.8 percent. The Micex Index jumped 1.5 percent in Moscow. The Shanghai Composite Index (SHCOMP) fell 0.9 percent to the lowest level since March 2009.

Japan’s bonds fell, sending 10-year yields up the most in seven weeks. Japan’s industrial output decreased 0.1 percent in June from May, when it declined 3.4 percent, the Trade Ministry said. The median estimate of 29 economists surveyed by Bloomberg News was for a 1.5 percent increase.

The nation’s benchmark 10-year bond, which saw yields slide to nine-year lows last week, led declines amid speculation traders sold the notes ahead of an auction on Aug. 2. The 10- year yield advanced 3 1/2 basis points, or 0.035 percentage point, to close at 0.78 percent, according to Japan Bond Trading Co., Japan’s largest interdealer debt broker. That was the highest level since July 12 and the sharpest rise since June 5.

Corn Surges
December-delivery corn climbed as much as 3.1 percent to $8.1775 a bushel on the Chicago Board of Trade. Soybeans for November delivery jumped as much as 2.9 percent to $16.648 a bushel and wheat for September delivery gained as much as 2.4 percent to $9.1975 a bushel.

The drought in the Midwest is unlikely to be broken in the six to 10 days from July 27, as rains that fell in many parts of the region were not enough to improve conditions, Telvent DTN Inc. said.

Crop conditions are the poorest since 1988 and parts of the U.S. are suffering from the worst drought since 1956. Corn has soared 61 percent since June 15, signaling higher food prices and boosting costs for producers of meat and ethanol.

Oil for September delivery fell 0.4 percent to $89.78 a barrel in New York as a stronger dollar weighed on crude.

To contact the reporters on this story: Rita Nazareth in New York at [email protected]; Julia Leite in New York at [email protected]

To contact the editor responsible for this story: Lynn Thomasson at [email protected]

 

[Muthukali]

Fed Signals More Steps to Spur Economy Amid Slower Growth

The Federal Reserve said it would take new steps as needed to boost the weakening expansion and reduce unemployment.

The Federal Open Market Committee “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said today in a statement at the conclusion of a two-day meeting in Washington. “Economic activity decelerated somewhat over the first half of this year.”

Chairman Ben S. Bernanke held off on stepping up record stimulus even as consumer spending flagged, economic growth slowed and unemployment persisted at 8.2 percent. Before their next meeting starts Sept. 12, Bernanke and his colleagues will assess reports on unemployment in July and August, and the European Central Bank may take steps to ease Europe’s debt crisis at a meeting tomorrow.

Stocks erased gains after the statement. The Standard & Poor’s 500 Index fell 0.1 percent to 1,378.06 at 2:25 p.m. in New York. The yield on the 10-year Treasury note rose to 1.49 percent from 1.47 percent late yesterday.

The FOMC said in today’s statement that “household spending has been rising at a somewhat slower pace than earlier in the year.”

Operation Twist
The Fed said it will continue swapping $667 billion of short-term debt with longer-term securities to lengthen the average maturity of its holdings, an action dubbed Operation Twist. The central bank will also continue reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities.

The Fed left unchanged its statement that economic conditions would likely warrant holding the benchmark Fed funds rate near zero “at least through late 2014.”

Policy makers said inflation would run “at or below” their goal of 2 percent for the personal consumption expenditures index, the same as in the last statement.

Consumer prices in June rose 1.5 percent from a year earlier, the Commerce Department reported yesterday. Excluding food and energy, prices increased 1.8 percent.

Richmond Fed President Jeffrey Lacker dissented for the fifth consecutive meeting, saying he preferred to omit the 2014 time horizon. Lacker opposed the FOMC’s June decision to extend Operation Twist through the end of the year and has said he expects interest rates will need to be raised in 2013.

Economist Forecasts
Twelve percent of economists surveyed by Bloomberg News predicted that the FOMC would announce a new round of large scale asset purchases today, while 48 percent forecast such purchases would be announced at the Fed’s Sept. 12-13 meeting.

At the September meeting, policy makers will update their forecasts for growth, unemployment, inflation and interest rates before Bernanke holds a press conference. He doesn’t plan a press conference today.

Bernanke in congressional testimony last month said the central bank may ease further should U.S. employment fail to steadily improve. A Labor Department report on Aug. 3 will probably show that the economy added 100,000 jobs in July, while the jobless rate was unchanged at 8.2 percent, according to the median estimate in a Bloomberg News survey of economists.

“It’s very important that we see sustained progress in the labor market and avoid deflation risk,” Bernanke said in July. “Those are the things we’ll be looking at as the committee meets later this month and later this summer.”

Sources of Risk
The Fed is also watching “two main sources of risk,” Bernanke said. The first is the so-called fiscal cliff, about $600 billion of spending cuts and tax increases that will go into force in January and impair growth unless Congress acts.

Congressional leaders said yesterday they will vote in September on a $1.047 trillion, six-month stopgap measure that would keep the government operating after the start of the fiscal year on Oct. 1. The measure would give lawmakers more time to debate how to avoid the fiscal cliff.

The second risk is that the European debt crisis will create turmoil in global financial markets, Bernanke said.

ECB President Mario Draghi is attempting to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before policy makers convene tomorrow. Also tomorrow, the Bank of England in a statement will probably maintain its bond purchase program.

Draghi sparked a global market rally last week with a pledge to do “whatever it takes to preserve the euro.” Last month, the ECB cut its benchmark interest rate to a record low of 0.75 percent.

Corporate Earnings
U.S. stocks have risen on speculation the Fed will continue to add stimulus and as corporate earnings have beaten estimates. The Standard & Poor’s 500 Index has rallied 9.7 percent this year through yesterday and remains near a three-month closing high of 1,385.97 on July 27. All 10 industry groups have advanced. The S&P 500 closed yesterday at 1,379.32.

The U.S. two-year interest-rate swap spread, a measure of stress in bond markets, traded today at about 20.5 basis points, about the lowest in a year and down from 2012’s high of almost 60 basis points in October. The gauge, which dropped 4.4 basis points in July for the second straight monthly decline, widens when investors seek the perceived safety of government securities and narrows when they favor assets such as corporate bonds.

Global Demand
Treasuries are benefitting from global demand for the safety of U.S. debt as investors flee troubled European nations from Spain to Italy. The yield on the 10-year Treasury note declined to an all-time low of 1.3790 percent on July 25. The 10-year yield yesterday fell three basis points, or 0.03 percentage point, to 1.47 percent in New York, according to Bloomberg Bond Trader prices.

U.S. consumers are cutting back as Europe’s debt crisis and looming U.S. tax-policy changes dent confidence. Household consumption, which accounts for about 70 percent of the economy, rose at a 1.5 percent rate from April through June, down from a 2.4 percent gain in the prior quarter, according to Commerce Department data.

Manufacturing in the U.S. unexpectedly contracted for a second month in July, a report today from the Institute for Supply Management showed. The ISM’s factory index was 49.8 last month, close to the three-year low of 49.7 reached in June. Fifty marks the dividing line between expansion and contraction.

Profit Outlook
FedEx Corp. (FDX), the Memphis, Tennessee-based operator of the biggest cargo airline, gave a smaller profit forecast than analysts estimated for the fiscal year ending in May 2013. “Weaker global economic conditions,” such as Europe’s debt crisis and slowing growth in Asia, will impair performance, Chief Financial Officer Alan Graf said on a June 19 earnings call.

The slowdown in consumer and business spending is hurting growth. The economy expanded at a 1.5 percent annual rate in the second quarter after a revised 2 percent gain in the first quarter, the Commerce Department said July 27. Economists estimate that GPD will rise 2.1 percent this year, according to the median of 72 forecasts in a Bloomberg survey.

United Parcel Service Inc. (UPS), the world’s largest package- delivery company, cut its full-year earnings forecast July 24 amid a drop in international package sales. Chief Executive Officer Scott Davis said the Atlanta-based firm predicts the economy will expand 1 percent in the second half of the year.

More Uncertainty
“Our macro concerns start with the fact that we saw lousy numbers in the last couple of months,” Davis said on a call with analysts and investors, citing declines in gauges of retail sales and manufacturing. “There’s just more uncertainty out there than ever.”

While many U.S. companies face headwinds from slowing growth, others are surpassing Wall Street estimates for quarterly earnings. Of the 353 companies in the S&P 500 Index that have reported results, 253 beat analyst estimates, data compiled by Bloomberg show.

“We’re in a real muddle-through economy that’s very disappointing in the rate of job creation,” said Michael Dueker, a former St. Louis Fed economist who is now chief economist for Seattle-based Russell Investments, which oversees $152 billion.

“There’s been a real drop-off in demand in the economy from the first to second quarter,” he said. “I don’t think the economy is in danger of recession but it is unacceptably slow.”

Seventy-four percent of economists in the Bloomberg Survey said the Fed wouldn’t change its statement that it expects low interest rates through at least 2014. Ninety-six percent said the central bank would not lower the interest rate paid on reserves that banks keep with the Fed, with 74 percent never expecting such a move.

To contact the reporters on this story: Joshua Zumbrun in Washington at [email protected] Jeff Kearns in Washington at [email protected]

To contact the editor responsible for this story: Christopher Wellisz at [email protected]

 

[Muthukali]

Euro Climbs Before ECB Decision as Spain Bonds Advance

The euro strengthened and European stocks rose for a second day before a policy announcement from the 17-nation currency union’s central bank. Spain’s 10-year bonds gained as the government sold more debt than it planned.

The euro appreciated 0.4 percent to $1.2272 at 7 a.m. in New York. The yield on Spain’s 10-year bond fell nine basis points, and Italy’s slid 12 basis points. The Stoxx Europe 600 Index increased 0.5 percent and Standard & Poor’s 500 Index futures added 0.4 percent. Emerging-market stocks ended the longest rally in three months. Brent crude advanced 0.7 percent, while natural gas lost 0.8 percent.

European Central Bank President Mario Draghi pledged last week to do “whatever it takes” to preserve the euro, raising expectations for today’s policy decision. The Federal Reserve signaled its readiness to support the U.S. economy even as it refrained from adding to bond purchases yesterday. Jobless claims probably rose last week, economists said before Labor Department data that precede tomorrow’s monthly payrolls report.

“What is different this time is that Draghi seems to signal a change in the ECB’s target,” said Ramin Nakisa, an allocation strategist at UBS AG in London. “We no longer expect a deterioration of the sovereign crisis in Europe. We’re waiting with a neutral position on European equities to see whether he follows through with actions.”

ECB Decision
The euro appreciated 0.3 percent versus the yen, rising against a majority of its 16 most-traded peers. The Swedish krona strengthened 0.2 percent versus the 17-nation currency and gained 0.5 percent against the dollar.

The ECB will keep its main rate at a record low 0.75 percent, according to the median forecast of 55 analyst estimates compiled by Bloomberg News.

“Draghi has certainly raised expectations with his comments last week,” said Charles Diebel, head of market strategy at Lloyds Banking Group Plc in London. “The delivery is not going to come today. If there are promises not only within his mandate but also of what’s to come, the market may not be as disappointed as everyone thinks it’s going to be.”

The Bank of England left its key rate unchanged at an all- time low 0.5 percent and held its asset-purchase program target at 375 billion pounds ($582 billion). The pound gained 0.2 percent to $1.5566.

The extra yield investors demand to hold Spanish 10-year bonds instead of benchmark German bunds narrowed seven basis points to 530 basis points. Spain sold 3.13 billion euros ($3.8 billion) of debt, exceeding the target of 3 billion euros.

Master Blenders
The Stoxx 600 is on course for a ninth straight week of gains, the longest winning streak since January 2006. Societe Bic SA, the French manufacturer of pens, advanced 7.4 percent today after reporting an increase in second-quarter profit and revenue. D.E Master Blenders 1753 (DE) tumbled 5.7 percent after the beverage business spun off from the former Sara Lee Corp. said it will restate earnings because of accounting irregularities and tax provisions at its Brazilian operations.

The cost of insuring European corporate debt declined to the lowest in four months, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated European companies falling 14 basis points to 605.

The S&P 500 (SPX) has declined for three straight days, bringing this week’s retreat to 0.8 percent. Abercrombie & Fitch Co., the teen retailer with more than 1,000 stores, plunged 16 percent in pre-market trading after cutting its annual forecast, citing an anticipated drop in same-store sales in the second half of 2012. Knight Capital Group Inc. climbed 2.3 percent, rebounding from a 33 percent slide. The shares tumbled yesterday as Knight as a systems breakdown forced it to advise some clients to route orders elsewhere.

Jobless Claims
A Labor Department report at 8:30 a.m. in Washington may show U.S. initial jobless claims climbed to 370,000 last week, from 353,000 the previous period, according to the median forecast of 46 economists in a Bloomberg survey. Separate data will probably show that growth in factory orders slowed in June.

Natural gas futures fell for a third day to $3.145 per million British thermal units. Brent oil in London rose for a second day.

The MSCI Emerging Markets Index (MXEF) retreated 0.5 percent, snapping a five-day rally. The Hang Seng China Enterprises Index (HSCEI) lost 1 percent, its steepest drop since July 23. The Shanghai Composite Index slipped 0.6 percent, as Poly Real Estate Group Co. (600048), China’s second-largest property developer, tumbled 9.2 percent, the most since April 2010. India’s Sensex Index declined 0.4 percent.

To contact the reporters on this story: Stephen Kirkland in London at [email protected];

To contact the editor responsible for this story: Justin Carrigan at [email protected]

 

[Muthukali]

Jobless Claims in U.S. Climbed Less Than Forecast Last Week

The number of Americans filing applications for unemployment benefits rose less than forecast last week as annual auto shutdowns continued to influence the number.

Jobless claims climbed by 8,000 to 365,000 in the week ended July 28, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for an increase to 370,000. Starting next week, the data should be clear of any influence from the annual auto plant retooling closures that make it difficult to adjust the data for seasonal variations, a Labor Department spokesman said as the report was released to the press.

Apart from the statistical noise, the job market may take time to heal as a global slowdown and looming U.S. fiscal policy changes in the world’s biggest economy keep employers reluctant to add workers. Unemployment above 8 percent is among reasons Federal Reserve policy makers yesterday said they would take new steps as needed to boost the expansion.

“It is still a difficult job market,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Companies are not panicking by cutting workers. They are going to wait out the uncertainty related to Europe and the U.S. fiscal cliff.”

Futures Climb
Stock-index futures dropped as European Central Bank President Mario Draghi failed to reassure investors that policy makers were ready to take immediate steps to support the region’s economy after the central bank left its benchmark rate unchanged. The contract on the Standard & Poor’s 500 Index maturing in September fell 0.9 percent to 1,358.8 at 9:02 a.m. in New York.

Claims estimates in the Bloomberg survey ranged from 340,000 to 390,000. The Labor Department revised the previous week’s figure up to 357,000 from an initially reported 353,000.

Another report today showed employers announced fewer job cuts in July than the same month last year as dismissals eased at retailers, government agencies and some manufacturers.

Planned firings fell 44.5 percent from July 2011 to a 15- month low of 36,855, according to figures released by Chicago- based Challenger, Gray & Christmas Inc. The year-over-year decline in dismissals was the biggest since January 2011.

The four-week moving average for jobless claims, a less volatile measure than the weekly figures, fell to 365,500 last week, the lowest since March, from 368,250.

Jobs Forecast
The employment report for July, to be released tomorrow, is projected to show payrolls increased by 100,000 after a 80,000 gain in June, according to the Bloomberg survey median. The jobless rate, which has been stuck above 8 percent since February 2009, was probably at 8.2 percent for a third moth.

Today’s report showed the number of people continuing to receive jobless benefits dropped by 19,000 in the week ended July 21 to 3.27 million, a two-month low.

The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 46,500 to 2.55 million in the week ended July 14.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 2.6 percent, today’s report showed.

State Breakdown
Forty-seven states and territories reported a decline in claims, while five reported an increase. These data are reported with a one-week lag.

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.

Ford Motor Co. (F) said it would idle 13 U.S. plants for one week instead of two for its annual summer shutdown. The Dearborn, Michigan-based automaker on July 25 lowered its outlook for the year as ballooning losses in Europe overshadowed earnings in North America.

Businesses announcing job reductions last month included Cisco Systems Inc. (CSCO) The biggest maker of computer-networking equipment, said July 23 it plans to eliminate about 1,300 jobs, or 2 percent of the workforce, as Europe’s debt crisis and sluggish corporate spending threaten sales.

The cuts are part of a “continuous process of simplifying the company, as well as assessing the economic environment in certain parts of the world,” San Jose, California-based Cisco said in an e-mailed statement.

Fed Action
Fed officials, at the conclusion of a two-day meeting yesterday, left unchanged their statement that economic conditions would likely warrant holding the benchmark interest rate target near zero at least through late 2014.

The Federal Open Market Committee “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said in a statement. The group “expects economic growth to remain moderate over coming quarters and then to pick up very gradually.”

To contact the reporter on this story: Shobhana Chandra in Washington at [email protected]

To contact the editor responsible for this story: Christopher Wellisz at [email protected]