Regions

[Muthukali]

Consumer sentiment at more than 4-yr high in May

(Reuters) - U.S. consumer sentiment rose to its highest level in more than four years in early May as Americans remained upbeat about the job market, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's preliminary May reading on the overall index on consumer sentiment improved to 77.8 from 76.4 in April, topping forecasts for 76.2. It was the highest level since January 2008.

Despite the recent slowdown in job growth, nearly twice as many consumers reported hearing about new job gains than said they had heard about recent job losses, the survey said.

The data suggests that either more positive numbers on the labor market will be seen soon, or that consumers have ratcheted up their expectations too high, survey director Richard Curtin said in a statement.

"The most likely prospect is that job growth returns to a modest pace of gains and consumers trim their overly optimistic expectations, with not much change in overall confidence until after the November (presidential) election and the decisions on tax policy," said Curtin.

The survey's barometer of current economic conditions also rose to its highest level in more than four years, jumping to 87.3 from 82.9.

The gauge of consumer expectations slipped to 71.7 from 72.3.

Consumers' assessment of their personal financial situations remained dismal, with just 29 percent of households saying their finances had improved, unchanged from a year ago.

The survey's one-year inflation expectation continued to ease after a run up earlier in the year, falling to 3.1 percent from 3.2 percent. The survey's five-to-10-year inflation outlook edged up to 3.0 percent from 2.9 percent.

 

[Muthukali]

Wall Street Week Ahead: Stocks face choppy seas of bank woes, uncertainty

(Reuters) - More volatility could be in store for stocks next week as investors grapple with less certainty about the economic outlook and a new blow to the financial sector after JPMorgan Chase's (JPM.N) trading loss.

Europe is expected to keep investors jumpy as well, with inconclusive results from the recent Greek election and the country's future appearing more worrisome.

The economic picture appears cloudy these days, with some data showing a more positive trend and other reports showing the opposite. An index of consumer sentiment rose to its highest in a more than four years, but last week's jobs report showed another monthly decline in hiring.

Next week brings minutes from the last Federal Reserve meeting, which investors will look to for more guidance on whether the central bank plans to give additional help to the economy.

Stocks closed lower for a second straight week on Friday after a week of choppy trading. Strategists say that's likely to be the case again in days to come.

"Expect more volatility. We're still seeing this natural risk aversion. We expect any source of bad news to trigger a sell-off, but we're still not in a red-alert area," said Omar Aguilar, chief investment officer of equities for Charles Schwab in San Francisco.

"The good economy in the U.S. is leading the way, with the Federal Reserve being very accommodating."

Citigroup's chief U.S. equity strategist, Tobias Levkovich, said the market has likely begun a pullback, and that the Standard & Poor's 500 index .SPX could fall 5 percent to 7 percent from its April 2nd intraday high of 1,422.

"We're going to probably spend several months in kind of choppy trading," he said.

News that JPMorgan Chase & Co (JPM.N), the largest U.S. bank by assets, lost billions of dollar on bad trades raised fresh worries that the financial sector was not on the mend. The KBW bank index .BKX fell 1.2 percent for the day.

There's likely to be more focus on the company next week. After the close of trading, Fitch Ratings cut JPMorgan's credit rating one notch and cited the bank's $2 billion trading loss, and Standard & Poor's revised its outlook of JPMorgan to negative.

The S&P financial index .GSPF has lost ground since rallying 21.5 percent in the first quarter. The index is still up 13.6 percent since the start of the year.

MESSAGE FROM THE FED
Wall Street will scrutinize the minutes from the FOMC's late April meeting, which the Fed will release on Wednesday at around 2 p.m. Eastern time.

At that April 24-25 meeting, the FOMC repeated its expectation that interest rates would not rise until late 2014 at the earliest, and it took no action on monetary policy.

But Federal Reserve Chairman Ben Bernanke spurred stock market gains when he told reporters on April 25 that "we remain entirely prepared to take additional balance-sheet actions as necessary to achieve our objectives. Those tools remained very much on the table and we would not hesitate to use them, should the economy require that additional support."

More focus may be on the Fed and economic data next week, with the first-quarter U.S. earnings period nearly done. Ninety percent of S&P 500 companies have already reported results.

Major retailers set to report earnings next week include Home Depot (HD.N), a Dow component, and JC Penney Co. (JCP.N), both on Tuesday, followed by Limited Brands (LTD.N), parent of Victoria's Secret, and discount chain Target Corp (TGT.N) on Wednesday. Wal-Mart Stores, Inc (WMT.N), the world's largest retailer and a Dow component, is set to report earnings on Thursday before the opening bell.

The week's mostly closely watched economic indicators will include the U.S. Consumer Price Index and retail sales, both for April, on Tuesday, followed by April housing starts and April, industrial output and capacity utilization, all on Wednesday.

In Europe, problems with the Greek elections raised the risk of it exiting the euro zone.

"I think earnings and valuations are still very compelling. Unfortunately, what we're looking at on earnings and valuations is going to be overshadowed by the fact that we've got these global issues we're dealing with: Greece and France and their elections, and debt issues and the possible breakup of the euro," said Evan Nowack, managing director at HighTower's Leventhal Group in Bethesda, Maryland.



BEARISH PATTERN
Technical charts indicate bearishness ahead.

"My 'bigger picture' view is that in the near or intermediate term, further downside is favored," said Chris Burba, short-term market technician at Standard & Poor's in New York.

S&P 500 charts are showing a "head-and-shoulders top," he said, noting that demand earlier this month was not strong enough to push the benchmark index above its April high.

He sees support just below 1,300, while resistance could come at 1,415 for the S&P 500. "The outlook stays bearish unless you get above 1,415," Burba said.

 

[Muthukali]

JPMorgan executives expected to leave over loss

(Reuters) - Three executives involved with the failed hedging strategy that has left JPMorgan Chase & Co with a $2 billion trading loss and a tarnished reputation are expected to leave the bank this week, sources close to the matter said on Sunday.

The company is expected to accept the resignation of Ina Drew, its chief investment officer and one of its highest-paid executives, in the next few days, the sources said. Two of Drew's subordinates who were involved with the trades, Achilles Macris and Javier Martin-Artajo, are expected to be asked to leave, according to the sources.

The unit Drew runs, known as the Chief Investment Office, mismanaged a portfolio of derivatives tied to the creditworthiness of bonds, according to bank executives. The portfolio was layered with hedging strategies that became too complicated to work and too big to unwind in the esoteric market.

Drew had repeatedly offered to resign after the magnitude of the debacle became clear, according to one of the sources. But the resignation was not immediately accepted because of Drew's past performance at the bank.

Until the loss was disclosed on Thursday night, Drew was considered in the industry to be one of the best managers of balance-sheet risks. She earned more $15 million in each of the last two years.

"Ina is an amazing investor," said a money manager who knows Drew, but who declined to be quoted by name. "She's done a really good job over a lot of years. But they only remember your last trade."

'SLOPPY', 'STUPID'
CEO Jamie Dimon said when he announced the loss on Thursday that the bank was continuing to investigate what went wrong and that disciplinary actions would be taken.

Dimon called the handling and oversight of the derivative portfolio "sloppy" and "stupid."

Earlier on Sunday, Dimon said in a nationally televised interview that bank executives had reacted badly to warning flags last month that it had large losses in financial derivatives trading.

In the interview on NBC's "Meet the Press" television program, Dimon said bank executives were "completely wrong" in public statements they made in April after being challenged over the trades in media reports.

"We got very defensive. And people started justifying everything we did," Dimon said. "We told you something that was completely wrong a mere four weeks ago.

The loss, and Dimon's failure to heed the warnings, have become major embarrassments and have given regulators new arguments for tightening controls on big banks and requiring them to hold more capital to cushion possible losses.

The comments to NBC were Dimon's first public statements since he spoke to analysts in a conference call on Thursday. He is scheduled to speak again on Tuesday at the company's annual meeting in Tampa, Florida.

JPMorgan is the biggest bank in the United States by assets and has major investment banking and trading operations in Europe. The losses in Drew's unit stemmed from trades largely made in London in credit default swaps, an instrument that institutions use to buy and sell insurance against defaults and declines in the market value of bonds.

Some of the trades attracted attention and gossip in the swaps earlier this year because of their size. One JPMorgan trader working the portfolio, Bruno Iksil, was dubbed the 'London Whale.'

 

[Muthukali]

Groupon makes first profit, shares surge

(Reuters) - Groupon Inc posted its first quarterly profit by reining in marketing spending and signing up more customers and merchants, sending its stock about 18 percent higher.

The fledgling company started by music graduate Andrew Mason, which had lost half its value this year on concern about waning demand for its daily deals and persistent accounting problems, on Monday surpassed Wall Street's expectations for earnings and revenue growth.

The Chicago-based company revised fourth-quarter results at the end of March, admitting to "material weakness" in its financial statements and triggering a stock price slide. Even taking into account Monday's surge, the shares remain well below $20 initial public offering level in November.

Mason, who was criticized last year for heavy spending, told analysts on a conference call he wanted to expand Groupon's mobile business, while using rewards programs and other technology to attract and retain merchants and customers overseas.

He said the company will release new mobile application software in coming months, now that about a third of North American transactions happen on smartphones and other mobile devices.

"Revenue growth was impressive and they also had material margin expansion," said The Benchmark Company analyst Clayton Moran. "There are no signs of competitive pressure in this report. The take rate of 41 percent is very encouraging. Investor fears around competition and sustainability have been overdone."

The after-hours rally to about $13.83 followed a gain of more than 18 percent in regular trading on Nasdaq, its largest single-day gain since it went public in November. Analysts said short sellers scrambled to cover their positions, anticipating better-than-expected results after the bell.

If both gains were combined, they would equate to a 36 percent gain from last week's close of $9.90.

TAKE RATE
Groupon's take rate - which measures how much of the money it keeps after sharing cash with merchants running its deals - has also been a focus for investors.

The take rate peaked at 44 percent in the first quarter of 2011 and some on Wall Street expect it to decline as Groupon faces competition from Amazon.com Inc, Google Inc, LivingSocial and some merchants ask for bigger cuts.

Chief Financial Officer Jason Child said the take rate in the first quarter rose to 41.3 percent from 40 percent in the previous quarter.

TRACTION
Groupon said it now had 36.9 million active customers. And it served more than 100,000 unique merchants in the first quarter - crossing that threshold for the first time.

"Revenue came in much higher than expected and margins were higher," said Sameet Sinha, an analyst at B. Riley & Co.

"The domestic side of Groupon's business did well," he added. "They may be doing a better job of marketing or their new businesses may be gaining traction."

Groupon's operating profit margin was 7 percent in the first quarter, while Wall Street was looking for a 6.5 percent margin, Sinha noted.

NORTH AMERICA GROWTH
Analysts have been particularly concerned that growth was slowing in Groupon's relatively more mature North American business. However, Groupon said on Monday that first-quarter North America revenue rose 33 percent from the previous period - the strongest growth in a year.

That was partly driven by new technology, such as SmartDeals, which makes the company's daily deals more relevant. The company is also running more deals closer to customers. Increased relevance and especially proximity make it more likely customers will purchase, Chief Executive Andrew Mason said.

Groupon is rolling this technology out in other countries now and that should help the company's international business, beginning around the third quarter, Mason added.

LOWER MARKETING SPENDING
Groupon reported first-quarter pro-forma net income, which excludes option expenses, of 2 cents per share, versus a net loss of 41 cents a share, a year earlier. Revenue was $559.3 million, compared with $295.5 million in the first quarter 2011.

It was expected to make 1 cent per share in pro-forma first-quarter earnings, according to Thomson Reuters I/B/E/S. Net revenue was forecast to be $531 million.

Child said lower marketing expenses helped drive profitability. Marketing costs dropped to $117 million in the first quarter from $230 million a year earlier.

Groupon got more efficient at marketing, adding the same number of customers in the first quarter as it did in the previous three months while spending less, Child explained.

 

[Muthukali]

Stocks decline 2.14% on Greece, China concerns

Thai stocks fell 2.14% yesterday as worries about Greece and China led investors to retreat to low-risk assets.

The Stock Exchange of Thailand index yesterday closed at 1,165.51 points, down 25.5, in trade worth 33.41 billion baht. The index has lost 6% since reaching its high for the year of 1,240.03 earlier this month, but remains up 16% from January.

Foreign investors were net buyers of 390 million baht worth of stock yesterday, while broker proprietary trading recorded a net sell position of 1.16 billion. Banks yesterday fell 1.41%, energy counters were down 2.39% while information and communications stocks dropped 1.16%.

The declines mirrored other markets, with Hong Kong off 1.15%, Shanghai losing 0.6% and Tokyo closing off 0.23%.

Analysts said international markets remained jittery due to worries about political uncertainty in Europe. Greek politicians yesterday again failed to form a government, raising questions about a possible withdrawal of Greece from the euro zone.

A move by the Chinese central bank over the weekend to cut bank reserve requirements and boost market liquidity also failed to ease fears over a slowdown in the world's second-largest economy.

SET president Charamporn Jotikasthira said the euro-zone crisis was the main driver of market sentiment.

In addition to the fear of a Greek exit from the euro, protests in Spain against austerity measures and concerns about the political direction of Germany following polls over the weekend have also rattled markets, he said.

Mr Charamporn said while funds were shifting to low-risk assets such as US treasury bonds, he expressed confidence in the attractiveness of the Thai market, particularly following recent losses.

"Companies remain strong and continue to enjoy solid growth despite pressure from the global economy," he said.

Somchai Anaketaweepol, a research manager at Finansia Syrus Securities, said worries about the euro zone will continue to dominate markets in the short term, and projected the SET would trade between 1,160 and 1,180 points today.

 

[Muthukali]

Aussie Trades Below Parity for Second Day on Europe Debt Concern

The Australian dollar traded below parity with its U.S. counterpart for a second day amid mounting doubts that Greece can avoid an exit from Europe’s currency union, sapping demand for riskier assets.

The New Zealand dollar, known as the kiwi, touched a four- month low as Greek politicians discuss forming a government and European finance ministers meet for a second day in Brussels. Shares tumbled and bonds rallied, with Australian yields dropping to record lows after the Reserve Bank released minutes of its latest meeting when it cut rates by half a percentage point to 3.75 percent.

“It’s just not at all clear what the endgame is in Europe,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “While the Aussie doesn’t have a huge direct link to Europe compared to some other currencies, the sentiment does spill over into equities and into global risk appetite in general, and that tends to be negative for both the Aussie and kiwi.”

Australia’s dollar was at 99.76 U.S. cents as of 2 p.m. in Sydney from 99.58 at the close in New York yesterday. It earlier touched 99.45, the lowest since Dec. 20. The currency fetched 79.65 yen from 79.51. The New Zealand dollar traded at 77.70 U.S. cents, after falling to 77.52, the weakest since Dec. 30. It bought 62.04 yen from 62.

The MSCI Asia Pacific Index of stocks retreated 1.1 percent. The Standard & Poor’s 500 Index (SPX) of U.S. equities lost 1.1 percent yesterday, while the MSCI World Index of developed- market shares fell 1.5 percent.

Greek Political Turmoil
Greek President Karolos Papoulias will attempt to persuade divided party leaders today to accept his proposal for a government of prominent non-politicians to steer the country and avert new elections as concern grows that Greece may not be able to remain in the euro area. The nation may face another election unless leaders can agree on a new coalition.

The Reserve Bank of Australia opted to cut its overnight cash rate target by the most in three years in a bid to revive below-average growth, counter rising mortgage costs and shore up consumer confidence, minutes of its May 1 meeting showed.

“Growth outside of the mining sector was expected to be below trend in the near term, affected by the high exchange rate, softer government spending and subdued conditions in the housing market and building industry,” according to the minutes, which were released today in Sydney. “With financial markets remaining unsettled, the risks emanating from Europe continued to cloud the global outlook.”

RBA Rate Expectations
Traders are betting the RBA will cut its benchmark rate further, with overnight index swaps indicating at least a 60 percent chance that it will fall to a record low 2.75 percent by November, according to data compiled by Bloomberg.

The release of the minutes “does not contain a smoking gun that would prime the market even more for a follow-up RBA rate cut in June,” David de Garis, a senior economist at National Australia Bank Ltd. (NAB) in Melbourne, wrote in a research note. “We expect the RBA to hold fire at the upcoming June meeting after which some further net domestic economic softening would be necessary to support the case for easier monetary policy in the September quarter.”

The swaps data indicates that there is a more than 85 percent probability that the next cut will occur as soon as June.

Australia’s bonds advanced, pushing the yield on all notes maturing in three years or longer to record lows. The 10-year rate dropped as much as eight basis points to 3.201 percent, while the 15-year yield touched 3.535 percent and the three-year rate fell to 2.535 percent.

 

[Muthukali]

SET rockets up on Germany’s data

The Stock Exchange of Thailand main index rebounded more than 16 points on Tuesday afternoon on the back of German’s better than expected economic figures, reports said.

Investors’ concern on the ongoing financial crisis in Greece had hampered the country’s main index on Monday. The SET index closed on Monday at 1,165.51, down 25.50 points, or 2.14% in line with most regional shares. The trade value was 33.41 billion baht.

At 3.08pm, the SET index went up 16.23 points, or 1.39%, to stand at 1,181.74, with a total trade value of 18.99 billion baht.

At 4.16pm, the index slightly bounced back to stand at 1,179 points, up 14.08 points or 1.21%. The trade value was 24.06 billion baht.

At 4.26pm, the main index rose by 16.27 points, or 1.40%, to stand at 1,181.78 points, with the overturn value of 25.88 million baht.

At 4.33pm, the index continued to rose by 16.58 points, or 1.42%, to stand at 1,182.09 points, with a total tread value of 26.44 billion baht.

Thailand main index went up 19.04 point or 1.63% to close at 1,191.01 points at the end of trading session on Tuesday afternoon.

The trade value was 28.52 billion baht, with 4.78 billion shares traded.

 

[Muthukali]

U.S. Consumer-Price Index Unchanged, Core Rate Climbs 0.2%

A measure of the U.S. cost of living was unchanged in April, restrained by a drop in energy prices and supporting the view of some Federal Reserve policy makers that inflation will ease.

Last month’s consumer-price index matched the median forecast of economists surveyed by Bloomberg News and followed three straight gains that included a 0.3 percent rise in March, Labor Department data showed today in Washington. The so-called core measure, which excludes more volatile food and energy costs, rose 0.2 percent for a second month.

Some companies are holding the line on prices as job growth shows signs of cooling, limiting wage gains. Slowing inflation would underscore views of some Fed officials who have said higher fuel costs will have only a temporary effect, allowing the central bank to stick to its plan to keep interest rates low at least until late 2014.

Consumer prices are “about to embark on a rather precipitous slowing in the coming months,” Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York, said before the report. “This stems mainly from the fact that energy prices have lost considerable momentum as we head into a time of year when they should seasonally be increasing.”

A separate report from the agency showed average hourly earnings after adjusting for changes in prices were unchanged in April after a 0.1 percent decrease. Compared with the same month last year, real earnings fell 0.5 percent.

Estimates from the 80 economists surveyed ranged from a decrease of 0.1 percent to a 0.3 percent advance.

Year-Over-Year
Consumer prices increased 2.3 percent in the 12 months ended in April, the smallest gain since February 2011, today’s report showed.

The gain in the core gauge from March matched the median forecast of economists surveyed. Core prices were also up 2.3 percent for the last 12 months, matching the year-over-year gain in March.

A 1.5 percent jump in the cost of used vehicle prices contributed to the gain in the core measure, as did increases in medical care services, transportation and apparel.

Today’s report showed energy costs decreased 1.7 percent from a month earlier, the most since October, after climbing 0.9 percent in March. Gasoline prices dropped 2.6 percent, also the most in six months. Food costs rose 0.2 percent for a second month.

“So far, pricing is in line with our expectations,” Hugh Johnston, chief financial officer at PepsiCo Inc. (PEP), said on May 10 at a consumer products presentation. “We feel good about the pricing we have right now.”

The cost of rent climbed 0.2 percent, today’s report showed.

Federal Reserve
Fed officials, who’ve said energy costs would subside, have indicated they will hold off on more monetary stimulus unless prices rise more slowly than their 2 percent target or the economic expansion falters. Their preferred price gauge, issued by the Commerce Department and tied to consumer spending, rose 2.1 percent in the year ended in March.

Fed Chairman Ben S. Bernanke said on April 25 that a rise in gasoline prices “has created a temporary bulge” in inflation that’s likely to “pass through the system.”

Fuel prices have already started to recede. The cost of a gallon of regular gasoline at the pump eased to $3.73 on May 14 from a 10-month high of $3.94 reached on April 5, figures from AAA, the biggest U.S. auto group, show.

A Labor Department report last week showed the cost of imported goods dropped 0.5 percent in April, the most since June. Wholesale prices in April fell for the first time in four months, another Labor Department showed last week.

The CPI is the broadest of three price gauges because it includes goods and services. Almost 60 percent of the index covers prices consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.

 

[Muthukali]

Retail Sales in U.S. Cool on Early Easter and Seasonable Weather

Retail sales in the U.S. rose in April at the slowest pace of the year, showing unseasonably mild weather and pre-Easter shopping may have pulled consumers to stores the prior month.

The 0.1 percent gain followed a 0.7 percent increase in March, Commerce Department figures showed today in Washington. Economists projected an advance of 0.1 percent, according to the median forecast in a Bloomberg News survey.

Categories like building materials, clothing and department stores dropped in April as the weather-induced gains of the first three months of 2012, the warmest on record, faded. Weaker employment growth will probably also make it more difficult for households to match last quarter’s pace of spending, which was the fastest in more than a year.

“The consumer is turning a little bit more cautious,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “That just reflects the downshift in the job market, very little wage growth and a still troubled housing market. Some of the weakness in April is weather related payback.”

Retail sales were projected to rise after a 0.8 percent advance previously reported for March, according to the Bloomberg survey. Estimates from the 80 economists surveyed ranged from a decrease of 0.3 percent to a gain of 0.7 percent.

Nine of 13 major categories showed gains last month, led by auto dealers, furniture stores and non-store retailers that included online merchants.

Weather, Easter
Part of the slowdown may reflect seasonal events that pulled sales into the previous month. The average temperature in March was the warmest on record in the U.S., and Easter fell on April 8 compared with April 24 the year before.

Demand at building-material stores dropped 1.8 percent, the biggest decrease since January 2011.

Spending decreased 0.7 percent at clothing stores and 0.1 percent at general merchandise stores.

Sales climbed 0.5 percent at automobile dealers, after a 0.2 percent increase the prior month, today’s report showed. The results are in sync with industry figures. Cars and light trucks sold at a 14.4 million annual rate in April, up less than 100,000 from the prior month, according to data from Ward’s Automotive Group.

Purchases excluding autos increased 0.1 percent, the retail sales report showed. They were projected to rise 0.2 percent, the survey median showed.

The retail sales category used to calculate gross domestic product, which excludes sales at auto dealers, building material stores and service stations, increased 0.4 percent after a 0.5 percent increase in the previous month.

Chain-Store Sales
Industry data showed retailers’ same-store sales trailed analysts’ estimates in April for the first time since November. Sales at Target Corp. (TGT), the second-biggest U.S. discount chain, rose 1.1 percent, below the 2.9 percent projection.

Consumer spending, which accounts for 70 percent of the economy, grew at a 2.9 percent annual rate last quarter, the most since the final three months of 2010, according to data from the Commerce Department.

Sustaining such a pace of purchasing may be more difficult with weaker job growth. Employers took on 115,000 workers last month, the fewest since October, a Labor Department report showed May 4. The jobless rate also declined as people left the work force.

“The consumer environment has been and continues to be tough,” G. Price Cooper, chief financial officer of restaurant chain Texas Roadhouse Inc. (TXRH), said during a May 9 investor conference. “It has been that way for a couple of years. Fortunately, I guess from the industry perspective, we’ve seen a pretty decent trend in sales over the last year.”

Gasoline Prices
Less expensive fuel will free up some of consumers’ cash for other goods and services. The average price of a gallon of regular gasoline fell to $3.73 on May 14 from a peak this year of $3.94 in early April, according to AAA, the nation’s largest auto club.

A more optimistic consumer could also help spur demand. The Thomson Reuters/University of Michigan preliminary sentiment index for May climbed to the highest level in four years, a report showed last week. For the first time since data began in 1978, the index advanced for nine consecutive months.

 

[Muthukali]

Facebook Said to Raise Size of IPO to 421 Million Shares

Facebook Inc. (FB) is boosting the number of shares for sale in its initial public offering to 421 million, letting it raise as much as $16 billion, two people with knowledge of deal said.

The world’s largest-social networking website is increasing by 25 percent an offering that was initially set at 337.4 million shares, said the people, who asked not to be identified because the change hasn’t been publicly disclosed.

Facebook, gearing up for the largest-ever IPO for a technology company, had already increased the IPO share-price range to $34 to $38 apiece. Investors are betting that Chief Executive Officer Mark Zuckerberg can overcome slowing sales growth by expanding into areas such as mobile advertising and e- commerce, said Samuel Schwerin, managing partner at New York- based Millennium Technology Value Partners.

“An increasing number of institutional investors are looking beyond the value of the business today and looking at the future growth,” Schwerin, whose firm oversees $1 billion, including Facebook stock, said earlier today. “Those drivers are extraordinary in size, including international and mobile and commerce.”

At $16 billion, Facebook’s debut would surpass that of General Motors Co. to be the second-largest in U.S. history, excluding so-called over-allotments, which let underwriters buy more shares at a later date, data compiled by Bloomberg show.

GM, Visa Sales
GM raised $15.8 billion in November 2010 before expanding the sale to $18.1 billion, when underwriters exercised the over- allotment option. Visa Inc. raised $17.9 billion in its 2008 IPO, the biggest in the U.S., and later expanded the sale to $19.7 billion.

Facebook’s underwriters will have the option to buy an additional 50.6 million shares from the company and its holders after the IPO, the company said in a filing today, before people said the company will enlarge the offering.

Zuckerberg celebrated his 28th birthday this week, during the final leg of a marketing tour aimed at building demand for the IPO and convincing investors that Facebook can make money from mobile users.

Some institutional investors had balked at buying into Facebook early in the road show over concern about the site’s growth prospects, people with knowledge of the matter said last week. In a Bloomberg Global Poll of more than 1,250 investors, analysts and traders taken before the price range increase, 79 percent said Facebook didn’t deserve such a high valuation.

Facebook’s shares are set to price May 17 and begin trading under the symbol FB on the Nasdaq Stock Market the following day. The Menlo Park, California-based company is expected to announce the increased IPO size in an IPO filing tomorrow, CNBC reported earlier.

Mike Buckley, a spokesman for Facebook, declined to comment.

 

[Muthukali]

Asian Stocks Swing Between Gains, Losses on Japan, Greece

Asian stocks swung between gains and losses as faster-than-estimated economic growth in Japan and optimism the Federal Reserve will do more to stimulate the U.S. economy offset concern Greece’s debt crisis is worsening.

Canon Inc., a camera maker that depends on Europe for almost a third of its sales, slid as much as 1.6 percent in Tokyo. Toll Holdings Ltd. (TOL), an Australian trucking company, slid 7.8 percent in Sydney, extending yesterday’s losses after forecasting lower full-year profit. Li & Fung Ltd. (494), a supplier for Wal-Mart Stores Inc., rose 1.6 percent. Korea Gas Corp. (036460) jumped 6 percent in Seoul after a report it discovered gas in Mozambique.

“Strong economic growth in Asia may not mean much if Europe’s situation continue to deteriorate,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees about $68 billion. “The Fed is giving a signal to the market that there’s no need for panic, by assuring it will do something before things get really bad.”

The MSCI Asia Pacific Index (MXAP) rose 0.4 percent to 114.77 as of 12:36 p.m. in Tokyo, after falling as much as 0.2 percent. About five stocks rose for every three that fell on the measure, which yesterday closed more than 10 percent below its Feb. 29 high, a retreat some traders call a correction.

Concern about Europe’s crisis drove the MSCI Asia Pacific Index down for the past six days, dragging the gauge to its lowest level since Jan. 2, as markets in South Korea and Hong Kong entered a so-called correction from their recent highs. The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area.

Japanese Growth
Japan’s Nikkei 225 Stock Average swung between gains and losses after the Cabinet Office reported the nation’s economy grew an annualized 4.1 percent in the first quarter, exceeding the 3.5 percent estimate of economists surveyed by Bloomberg.

Australia’s S&P/ASX 200 Index declined 0.5 percent and South Korea’s Kospi Index rose 0.3 percent. Hong Kong’s Hang Seng Index climbed 0.5 percent.

Singapore’s Straits Times Index rose 0.5 percent after a government report showed gross domestic product rose an annualized 10 percent in the three months through March 31 from the previous quarter.

Fed Minutes
The MSCI Asia Pacific Index is less than 1 percent away from erasing this year’s gains. That compares with a 5.3 percent increase by the S&P 500 and a drop of less than 1 percent for the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.7 times estimated earnings on average, compared with a multiple of 12.6 for the S&P 500 and 10.1 times for the Stoxx 600.

The uncertainty in Greece “seems likely to confine equity markets to several weeks of nervous limbo,” said Michael Kurtz, head of global equity strategy at Nomura Holdings Inc., Japan’s largest brokerage. “We will look back on this juncture as an extraordinary buying opportunity even if events ultimately conspire to eject Greece from the euro.”

In the U.S., several Federal Reserve policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery going, minutes of their last meeting showed.

Futures on the Standard & Poor’s 500 Index (SPX) rose 0.4 percent today. The index slipped 0.4 percent in New York yesterday as concern that Greece’s debt crisis is worsening offset better- than-estimated reports on U.S. housing starts and industrial production.

Korea Gas rose 6 percent to 44,950 won in Seoul after its Italian partner Eni SpA reported it discovered more gas than previously estimated in a field off Mozambique, citing the company.

Link REIT, a shopping center operator in Hong Kong, dropped 3.3 percent after a report an investor is selling as much as HK$1.98 billion ($255 million) of its shares.

Toll Holdings slid 7.8 percent to A$4.36 in Sydney, the steepest drop in the MSCI Asia Pacific Index. It tumbled 15 percent yesterday after saying earnings before interest and tax will lower in the 12 months ending June from the previous year. The stock’s rating was cut to hold from buy at Deutsche Bank AG.

 

[Muthukali]

Several brokerages stop taking Facebook IPO orders

(Reuters) - Investors who want Facebook Inc shares when the No. 1 online social network goes public later this week may have lost the opportunity. TD Ameritrade and Fidelity's brokerage arm both stopped accepting orders of Facebook shares as of Tuesday evening, according to representatives for each of the companies.

Morgan Stanley & Co did the same, according to three advisers at the firm who declined to be named because they are not authorized to speak to the press. E*Trade Financial also stopped accepting orders as of 4 p.m. Eastern Tuesday, according to a client alert sent out that day.

Wells Fargo & Co's brokerage arm, Wells Fargo Advisors, stopped accepting new orders as of 4:00 p.m. EDT Wednesday, according to two advisers at the firm.

A Morgan Stanley spokesman and a Wells Fargo spokeswoman declined to comment.

Facebook is going public with almost a billion users, nearly $4 billion in annual revenue and a popular brand name.

On Monday Morgan Stanley, one of the 33 underwriters of the much anticipated IPO, told its advisers that it would cap the number of Facebook shares for each client at 500, according to four sources familiar with the situation. The goal is to make the shares widely available. But not everyone will get 500 shares, said the sources.

Some Morgan Stanley advisers with smaller accounts were surprised to learn they might have a chance to get shares for their clients, said one of the sources who is an adviser at the firm. Shares of popular IPOs would usually only be available to institutional investors and to top advisers who have sold IPOs in the past.

"It was a mad scramble," the adviser said. The adviser had less than two days to contact clients to see if they were interested in Facebook and go through the "extensive paperwork," the adviser said. The adviser said several clients did not get their paperwork in by the deadline on Tuesday evening.

An account alert sent out to E*Trade Financial Corp clients obtained by Reuters on Tuesday said the firm would no longer accept new conditional offers for the Facebook IPO as of 4 p.m. Eastern that day, though cancellation and modification of existing orders would still be permitted.

E*Trade was a last minute addition to Facebook's list of 33 underwriters. Officials at the online brokerage were not immediately available for comment.

Fidelity Brokerage, part of privately held FMR Corp in Boston, says it closed the offering period to qualified retail clients and registered investment advisers on Tuesday evening.

"The demand from customers is high," said Fidelity spokesman Stephen Austin. Fidelity has an exclusive retail distribution agreement with Deutsche Bank Securities, an underwriter in the Facebook deal.

 

[Muthukali]

Toshiba plans to double operating profit by 2014/15

TOKYO (Reuters) - Japan's Toshiba Corp (6502.T) said on Thursday it aims to more than double its annual operating profit in three years to $5.6 billion, by expanding its social infrastructure business and boosting sales of electronics devices.

The electronics conglomerate, whose television sales have been sliding along with those of rivals Sony Corp (6758.T), Panasonic Corp (6752.T) and Sharp Corp (6753.T), has been buoyed by strong sales of Apple Inc's (AAPL.O) iPhones, which use Toshiba's NAND flash chips.

The world's No.2 maker of NAND flash chips, behind Samsung Electronics (005930.KS), Toshiba forecast NAND chip sales of 700 billion yen in the 2015/16 business year.

Shares of Toshiba Corp (6502.T) jumped 5.6 percent to 322 yen after the release of its mid-term business plan, outpacing a 0.9 percent rise in the Nikkei, and partly retracing a steep fall from levels above 380 yen in recent weeks.

Toshiba said its annual operating profit was likely to reach 450 billion yen by the year ending March 2015, up from 206.7 billion yen for the year ended March 2012.

The company said earlier on Thursday that it has halted domestic production of LCD televisions in the face of price falls, following a similar decision by Hitachi Corp (6501.T).

"We have shut down our domestic TV production. We are looking at all areas (of the TV business), number of models, numbers of panels, in order to re-strengthen this division," Toshiba president and CEO Norio Sasaki told reporters.

He added that the firm was shifting its focus to emerging economies and growing markets after domestic demand for TVs fell more than expected in the previous year.

Toshiba said sales for its digital products division, home to its loss-making LCD TVs, would reach 200 billion yen in business year 2015/16.

However, it pushed back its 1 trillion yen sales target for the nuclear power business for two years to 2017/18, following the Fukushima radiation disaster and stricter atomic regulations in the United States.

The firm also said it has been approached by several buyers interested in its majority stake in U.S. nuclear power company Westinghouse Electric.

Toshiba said in its business plan that capital spending for the three years to March 2015 would be about 1.4 trillion yen, and it planned to spend around 1.1 trillion yen on research and development during the same period.

Sasaki also said that he wants to strengthen alliances with Toshiba's partners to expand its "smart community business", which helps energy users efficiently manage their power usage.

Last year, Toshiba bought Swiss-based Landis+Gyr in a deal valued at $2.3 billion in an effort to move into the promising overseas smart grid market, designed to accommodate a range of power generation options and give real-time information on energy use.

Toshiba last week forecast an annual operating profit of 300 billion yen for the business year ending March 2013, buoyed by strong sales of its flash NAND memory chips.

 

[Muthukali]

Santander, BBVA Among Spanish Banks Downgraded by Moody’s

Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s biggest lenders, were cut three levels by Moody’s Investors Service, which cited a recession and mounting loan losses in downgrading 16 of the nation’s banks.

Nine firms were cut three notches and seven were kept on review for further reductions, Moody’s said yesterday in a statement. Santander’s U.K.-based subsidiary also was cut.

The moves followed Moody’s May 14 downgrade of 26 Italian banks and its Feb. 13 cut of Spain’s sovereign debt. The main drivers for the Spanish bank downgrades were a surge in soured loans, the recession, restricted funding access and the reduced ability of the government to support lenders as its own creditworthiness diminishes, Moody’s said.

“Banks will continue to face highly adverse operating and market funding conditions that pose a threat to their creditworthiness,” the ratings firm said. “The Spanish economy has fallen back into recession in first-quarter 2012, and Moody’s does not expect conditions to improve” this year.

Santander and BBVA both were cut to A3, the same as the Spanish government, from Aa3, according to Moody’s. Spokesmen for both banks didn’t return phone messages seeking comment on the downgrades.

Doubts about the health of Spain’s banking system have helped drive up the country’s borrowing costs on concern it will struggle to cover losses caused by a real estate collapse that threatens to force some lenders to seek state aid. The yield on 10-year Spanish government debt climbed 2 basis points to 6.31 percent yesterday as the spread over German bunds widened to 490 basis points from 482 basis points.

Property Slump
A four-year property slump has driven up loan defaults and heightened investor suspicions that firms’ balance sheets don’t fully reflect the scale of potential losses. The nation’s lenders carry 184 billion euros ($234 billion) of what the Bank of Spain terms “problematic” real estate-linked assets and the ratio of bad loans to total lending surged to 8.16 percent in February compared with less than 1 percent in 2007.

The government, in its latest attempt to bolster confidence in banks, said on May 11 it would require lenders to set aside about 30 billion euros to cover potential losses on real estate loans that are still performing.

That’s on top of 53.8 billion euros of charges and capital ordered in February. Economy Minister Luis de Guindos also said the government would hire two auditors to value lenders’ assets.

The government on May 9 took over the Bankia (BKIA) group, the lender with the biggest Spanish asset base after it filed 2011 earnings without certification from auditors. Deputy Economy Minister Fernando Jimenez Latorre yesterday denied deposits were leaking from Bankia after El Mundo newspaper reported that 1 billion euros had been withdrawn by customers since May 9. Bankia’s newly appointed chairman, Jose Ignacio Goirigolzarri, said yesterday that the bank’s activity had been “basically normal” in recent days.

Moody’s on Feb. 13 cut the debt ratings of Spain and five other countries including Italy and Portugal, citing Europe’s debt crisis. On April 30, Standard & Poor’s cut its credit ratings for 11 Spanish banks, including Santander and BBVA.

 

[Muthukali]

Nikkei May Fall Even as Indicators Say Buy: Technical Analysis

Japan’s Nikkei 225 Stock Average (NKY) may deepen its slide even as a technical measure of investor sentiment signaled a rally in shares, according to an analyst at Mizuho Securities Co.

The 25-day Toraku index, which compares advancing and declining shares on the Tokyo Stock Exchange, has fallen below 70, a level some traders take to signal that shares have dropped too far. The time may not be right for a turnaround, said Yutaka Miura of Mizuho Securities, a unit of Japan’s second-biggest bank by assets.

“The Nikkei may have further to fall as investors are becoming more risk-off amid revived concern over Greece and Europe,” Miura said. “In recent years, the Toraku buy signal has shifted toward 60 from 70 in some cases so there could be more room to fall.”

There have been six times since 2000 when the Nikkei 225 deepened its slide more than 5 percent even after the Toraku fell below 70. Five of those instances occurred since 2006. The Nikkei plunged 36 percent in the 16 trading days after the Toraku threshold was breached in October 2008, as global markets plunged following the collapse of Lehman Brothers Holdings Inc.

Trading volume is key to a lasting rally, Miura said. The Nikkei 225 advanced 5 percent in six sessions with average daily volume of 1.2 trillion yen ($15 billion) after the Toraku bottomed last year on Aug. 24. The market soared 61 percent in the 12 months after the indicator fell to 68 in April 2005. Average daily volume was 2.1 trillion yen.

The Nikkei 225 has fallen 13 percent from March 27, when the gauge closed at its highest since September. Shares dropped amid political turmoil in Europe, slowing growth in China and a strengthening yen.

The recent market slide sent the value of stocks on the broader Topix Index (TPX) to 0.91 times book value, the lowest since Jan. 16. A number below one means investors can buy a company for less than the value of its net assets. The price-earnings ratio fell to 12 times, the lowest since October 2008.

 

[Muthukali]

Facebook Tells Staff to Keep Focus Amid Market Debut

Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg sent a message to newly wealthy employees of the largest social-networking service on the day of its delayed stock-market debut: “Stay focused” and “keep hacking.”

The words were emblazoned on T-shirts handed out during a gathering of more than 2,000 people at the company’s Menlo Park, California, headquarters, according to a person who attended and asked not to be identified because the event was private. They were there to watch Zuckerberg mark the opening of trading on the Nasdaq Stock Market -- an event set back after Nasdaq OMX Group Inc. (NDAQ) failed to deliver trade-execution messages.

“Right now, this all seems like a big deal. Going public is an important milestone in our history,” Zuckerberg, who was wearing his trademark hoodie and flanked by Chief Operating Officer Sheryl Sandberg and Nasdaq CEO Robert Greifeld, told attendees. “But here’s the thing: Our mission isn’t to be a public company. Our mission is to make the world more open and connected.”

Facebook employees, including Zuckerberg himself, had only recently emerged from a “hackathon,” which drew together programmers working all night crafting code that might become the foundation for a new Facebook feature or application.

Pizza, Beer
Throughout the night, staffers drank keg beer and ate pizza and chicken wings while building new apps, a person familiar with the festivities said. One group organized an impromptu foot race to In-N-Out Burger, a fast-food chain more than six miles away, while others lined up to wait for a campus coffee shop to hold its grand opening at 5 a.m.

By morning, television camera crews filled the parking lot outside while three news helicopters buzzed overhead. Zuckerberg was introduced to a throng of workers by Greifeld, who presented him with a Nasdaq-branded hooded sweatshirt.

“It’s sort of the changing of the guard,” Dan Rosensweig, the CEO of online book rental startup Chegg Inc., told a group of reporters who had gathered outside the Facebook headquarters. Rosensweig, the former chief operating officer at Yahoo! Inc., was involved in the Web portal’s negotiations to acquire Facebook for $1 billion in 2006.

“The best thing I’ve done is change the world by not getting the deal closed,” Rosensweig said of Yahoo’s failed bid.

Others visiting the Facebook offices included Donald Graham, the chairman and CEO of Washington Post Co., who has served as a mentor to Zuckerberg and a member of the social network’s board; David Sze, a partner at Facebook backer Greylock Partners, and Kirsten Keith, mayor of Menlo Park.

‘New Money’
“Any time when you have new money, as we’ve seen with other companies here in Silicon Valley, it helps the economy,” Keith said in an interview. “And hopefully, we have great people who are becoming millionaires that want to give back to the community.”

Facebook shares hovered near the initial public offering price in its trading debut, following a record IPO that made the social network more costly than almost every company in the Standard & Poor’s 500 Index. (SPX)

The shares rose 23 cents above the IPO price of $38 as of 4 p.m. in New York. Facebook sold 421.2 million shares to raise $16 billion yesterday, giving the company a $104.2 billion market value.

By mid-morning, dozens of employees were leaving the headquarters in cars and shuttle buses. Jasper Hauser, a graphic designer at the company, summarized his thoughts in a post on Twitter Inc.

“I want sleeeeppphgzzzzzz,” Hauser tweeted.

 

[Muthukali]

SET volatile on EU fears - Thailand

The Thai share market yesterday plunged in line with other Asian stock markets over escalating concerns about the global economy and on signs that the financial crisis in Europe is getting worse.

The SET index dropped 1.63%, to close at 1,154.44 points, on trading worth 28.6 billion baht. Foreign investors were net sellers of 3.4 billion baht worth of stock, while retail investors were net buyers of 4.28 billion baht worth of stock.

Moody's on Thursday downgraded the debt ratings of 16 Spanish banks by 1-3 notches, citing the effects of the ongoing recession and the reduced credit-worthiness of the Spanish government.

Santander and BBVA were both hit with three-notch downgrades from Aa3 previously to A3, which for Moody's is an upper-medium credit grade. Banesto and CaixaBank were also cut to A3.

Not included in the ratings review was Bankia, the fourth largest bank in the country, which the government rescued May 9.

Fitch Ratings downgraded Greece's long-term foreign and local currency Issuer Default Ratings to CCC from B-.

Fitch's downgrade reflects the heightened risk that Greece may not be able to sustain its membership in the European Monetary Union (EMU). An exit of Greece from the EMU would be probable if the June 17 general election fails to result in a government with a mandate to continue with the EU-IMF programme of fiscal austerity and structural reform.

China's economy weighed on the Shanghai market after data showed home prices in China fell for a second month in April from a year earlier.

Parin Kitjathornpitak, the research manager at KTB Securities (Thailand), said global risk will continue to rattle the markets next week, especially if Greece exits the euro zone. The SET index could drop to 1,120 points.

The index may rebound in the middle of the week when the National Economic and Social Development Board announces the gross domestic product for the first quarter 2012.

However, the euro-zone crisis will continue to threaten equity prices for the next two or three months and stocks will be highly volatile.

"The SET index just made its 16-year high two weeks ago," he said.

From the peak of 1,240.03 points on May 3 until yesterday, the SET index dropped 85.59 points or 6.9%.

 

[Muthukali]

SET dives as region stable - Thailand

The Thai share market continued its decline by 1.67% yesterday mainly on short futures trading following the momentum since Friday, say analysts.

The Stock Exchange of Thailand closed at 1,135.16 points with trading worth 25.47 billion baht yesterday.

Analysts were optimistic the SET would rebound after the global markets recover.

Banpu saw a large sell-off as the coal price index continued to fall, followed by other high-beta stocks. Foreign investors were net sellers of 2.16 billion baht, while retail were net buyers of 2.49 billion baht.

Asian markets excluding Hong Kong and Indonesia rose yesterday on optimism the Greek crisis would ease soon. Hong Kong dipped because HSBC's holdings earnings weakened.

Chai Jirasevenupraphan, a strategist at Capital Nomura Securities, said the Thai share market is likely to continue to test a support line at 1,123 points.

Therada Charnyingyong, an assistant research manager at Phillip Securities, noted other markets in the region rose along with Dow Jones index.

"It is possible some short-futures contracts remain to be settled following Friday's activities. So many large cap stocks were sold as investors are worried about Greece's situation," she said.

Thailand's economy fully recovered from the floods, posting 0.3% growth in the first quarter, while full-year growth is projected to jump to 6% following consumption and investment gains.

Investors should continue to follow foreign traders, as they have outsized influence over markets across the region, said Sappasak Chatchawan, a lecturer in Economics at the Prince of Songkla University. His research showed foreign investors' behaviour often contradicts market sentiment.

Somnuk Suteerapornchai, senior wealth advisor at DBS Vickers Securities, said as Western economies sputtered, stimulus measures left investors with plenty of cash.

"Usually when a large player in the region such as Taiwan or Indonesia reacted positively, the smaller Thai market would follow the trend, and similarly when it fared poorly," said Mr Somnuk.

He suggested watching the US dollar. If it appreciates, equity markets will slow, but if it weakens, equities will be active.

The Thai market is still attractive compared with others in the region as listed firm will benefit from the corporate income tax reduction. The benefit from the tax cut will be around 5% this year and 8% next year, in line with declining tax rates.

 

[Muthukali]

Facebook 11% Drop Means Morgan Stanley Gets Blame for Flop: Tech

Let the Facebook Inc. (FB) finger-pointing begin.

After one of the most anticipated initial public offerings in history, Facebook’s 11 percent drop yesterday prompted investors to fault everything from Morgan Stanley’s role as lead underwriter, to the company’s greed and the Nasdaq Stock Market.

“It was like the gang that couldn’t shoot straight,” said Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston. He said he placed Facebook orders for clients. “The underwriters mis- estimated what actual demand was, and there was pure execution failure coming out of the Nasdaq.”

Taking the most heat is Morgan Stanley, said Mullaney. The bank was lead underwriter among the 33 firms Facebook hired to manage the $16 billion sale of stock. The bank decided with Facebook executives to boost the size and price days before the May 17 IPO, ignoring advice from some co-managers, said people with knowledge of the matter, who declined to be identified because the process was private. Morgan Stanley (MS) talked with few of its fellow underwriters aside from JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) throughout the IPO, one person said.

“They overplayed the enthusiasm and probably just misread the atmosphere of the marketplace,” said Keith Wirtz, who oversees $15 billion as chief investment officer at Fifth Third Asset Management in Cincinnati and bought some stock in the IPO.

Blame Game
Facebook increased the number of shares being sold in the IPO by 25 percent last week to 421.2 million and raised its asking price to a range of $34 to $38 from $28 to $35. Had Facebook kept the original terms, investors may have had a better shot at a first-day pop. Instead, the stock was little changed in its debut because Morgan Stanley intervened to prevent it from falling below the IPO price. The shares closed at $34.03 yesterday.

Some investors say they felt misled by the underwriters. According to one London-based fund manager who asked not to be named, bankers indicated demand was so strong that he placed a bigger order than he thought he would get, leaving him with 40 percent more Facebook shares than anticipated. He sold most of that stock on the first day of trading.

The decision to boost the price range reflected the demand in the market, said a person involved in the process. Michael DuVally, a spokesman for Goldman Sachs, and Pen Pendleton, a spokesman for Morgan Stanley, declined to comment. Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment.

Morgan Stanley and Facebook consider problems with Nasdaq OMX Group Inc.’s computer systems among the reasons for the IPO’s performance so far, according to people familiar with the matter. Nasdaq’s trading platform was overwhelmed by order cancellations and updates that made the stock-market operator unable to finish the auction required to open trading. The U.S. Securities and Exchange Commission said it will review the trading.

Opening Auction
Nasdaq Chief Executive Officer Robert Greifeld said on a call with reporters on May 20 about the glitch that the opening delay “had no apparent impact on the stock price,” noting the share decline began after all brokers had received confirmation about their trades in the opening auction. Robert Madden, a spokesman for Nasdaq OMX, declined to comment beyond Greifeld’s statement.

Nasdaq said in a notice yesterday it delivered all outstanding execution and cancellation messages to brokers for their IPO cross orders at 1:50 p.m. Facebook declined 5.9 percent after 1:50 p.m.

‘Mispriced’ Market Value
Facebook CEO Mark Zuckerberg and the early backers should be held accountable for the stock drop, said Francis Gaskins, president of researcher IPOdesktop.com in Marina Del Rey, California. Goldman Sachs, Accel Partners, Digital Sky Technologies and other existing holders boosted the number of IPO shares they offered in Facebook on May 16, a day after the company increased its price range.

“It’s a combination of Zuckerberg’s ego for that $100 billion market cap, and the shareholders selling who wanted an exit,” said Gaskins. “Somehow it just missed them that this was mispriced.”

Larry Yu, a spokesman for Menlo Park, California-based Facebook, declined to comment. Rich Wong, a partner at Palo Alto-based Accel Partners, and Yuri Milner, founder of Digital Sky Technologies in Moscow, didn’t respond to requests for comment.

Facebook Chief Financial Officer David Ebersman was the point person on the deal, while Zuckerberg and Chief Operating Officer Sheryl Sandberg weighed in on major decisions throughout the process, people said. At Morgan Stanley, Dan Simkowitz, chairman of global capital markets, was one of the main bankers on the offering. Michael Grimes, global co-head of technology investment banking at Morgan Stanley, also played a key role.

Paper Into Cash
Underwriters did accomplish part of what they set out to do: turn paper into cash for pre-IPO holders.

“It was successful for the liquidating owners, absolutely, because they got all that and then some,” said Peter Sorrentino, a fund manager who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati.

For the investors it was a different story.

“I shame the people who were lining up to buy the thing,” said Sorrentino, whose firm didn’t buy stock in the IPO and tried to talk clients out of purchases. “The financials were there, do the math. Everyone wanted to be caught up in the glamour offering of the year. People just had stars in their eyes.”

 

[Muthukali]

Global markets extend gains on value hunt, hopes for EU summit



TOKYO (Reuters) - Markets extended gains on Tuesday with investors hunting for bargains after prices reclaimed some ground off 2012 lows, as hopes grew that Europe would embark on fresh action to tackle its debt crisis while promoting growth.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.2 percent, having recovered the previous day from a plunge to a 2012 low on Friday.

Its top performers included the technology, industrials and materials sectors, all of which had been battered in recent sessions by fears over Greece's departure from the euro bloc and global growth slowdown.

Australian shares gained 0.9 percent as investors picked up miners and mining services companies on expectations China will undertake further stimulus as it makes maintaining expansion a priority.

"Last week was quite brutal in terms of the selling ... Was that totally necessary?," said Martin Angel, a dealer at Patersons Securities, adding that BHP, Rio Tinto and gold miners had been hit too hard. "I reckon there's good opportunities to pick them up while they're at these levels."

Seoul shares rose back above the key technical chart level of 1,800 points as investors saw value in battered blue-chip technology shares such as Samsung Electronics

Bargan hunters also lifted Japan's Nikkei stock average 1 percent.

"Things are no better in Europe or China, but the current situation has been priced in, and now it's just short-covering," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.

Copper, which fell to a four-month low below $7,500 a tonne last week, climbed 0.8 percent to $7,790 a tonne on Tuesday.

Xstrata (XTA.L), the world's fourth-largest copper miner, said on Tuesday Chinese demand for copper was likely to improve in the second half, coming amid some cautious remarks about the outlook of commodities markets.

Markets are sensitive to demand and growth prospects in China, the world's leading consumer of materials and second-largest economy, as the financial crisis weighs on European growth while the United States continues to show mixed signals.

A Chinese media report said on Tuesday the Chinese government will fast track its approval of infrastructure investments to combat slowing growth and a sluggish property sector.

Evidence that strictly abiding by austerity measures to fix the euro zone's debt restructuring has only compounded the situation prompted leaders of the G8 major industrialised nations to call for promoting growth.

Markets are keeping watch on a European Union summit on Wednesday intended to focus on specific steps to spur growth and create jobs across the bloc.

OPTIMISM ESCAPES EURO
Despite the general improvement in market sentiment, the euro struggled to hold above $1.28, easing 0.2 percent to $1.2787 on Tuesday. It hit a four-month low of $1.2642 on Friday when concerns about Greece exiting the euro were compounded by mounting banking stress in Spain.

"Talk about growth is fine. But it comes down to question of who will shoulder the bill for it. Unless it becomes clear, the fog on the euro zone won't disappear," said Katsunori Kitakura, associate general manager at Sumitomo Mitsui Trust Bank.

Market gauges showed players remain guarded against funding stresses, with the three-month spread between Libor rates and overnight index swap rates holding steady at around 30 basis points over the past two months, after shrinking from 55 basis points.

But appetite for the yen, widely seen as a safe-haven currency, retreated slightly, with the currency trading away from its three-month high near 79 yen hit on Friday. The yen stood at 79.38 yen on Tuesday.

"The last 12 hours has given us the first signs of a meaningful correction in FX," said ANZ in a research note. "It's impossible, quite frankly, to know whether this is THE turn, or just a correction. At the very least, however, we wouldn't be fighting it yet," it said, adding the key was the EU summit.

Given that market sentiment had turned extremely bearish on the Greek political turmoil, if the EU meeting at the very least indicates a shift in approach to the euro zone crisis, the correction in currencies will likely extend a bit, it said.

At Wednesday's informal EU meeting, France's new president, Francois Hollande, is likely to propose mutualising European debt.

The idea of bonds jointly underwritten by all euro zone member states could fend off contagion of funding difficulties from troubled euro zone economies, but Germany remains opposed.

U.S. crude futures held steady at $92.53 a barrel on Tuesday, after adding 1.19 percent the day before. Brent rose 0.1 percent to $108.93 a barrel after gaining for the first time in four sessions on Monday and settled up 1.56 percent.

Asian credit markets firmed on Tuesday, with the spread on the iTraxx Asia ex-Japan investment-grade index narrowing by six basis points.