All about finance

U.S. Funds Cut Loans to French Banks by 44%

14.08 egaoart No comments

AppId is over the quota
AppId is over the quota
October 14, 2011, 4:18 AM EDT By Radi Khasawneh

Oct. 14 (Bloomberg) -- The eight largest U.S. money-market funds reduced their lending to French banks by 44 percent last month as the European sovereign debt crisis worsened.

Holdings in BNP Paribas SA, Societe Generale SA, Natixis SA and Credit Agricole SA dropped to $23.2 billion at the end of September from $41.5 billion the previous month, according to filings compiled by Bloomberg and published in today’s Bloomberg Risk newsletter. The biggest falls were for Natixis, at 74 percent, and Credit Agricole, at 64 percent, the data showed.

The funds, which control $592.4 billion in assets between them, disclose their holdings every month. They are reducing loans to European banks on concern the sovereign-debt crisis has undermined lenders’ ability to access wholesale markets. EU banks are increasingly tapping the European Central Bank for emergency cash as short-term funding evaporates. The ECB last week reintroduced yearlong loans, giving banks unlimited access to cash through January 2013.

“There has been a substantial decrease in access to the wholesale funding markets whether for money market funds, debt security issuance or securitization,” Huw van Steenis, an analyst at Morgan Stanley in London, wrote in an Oct. 10 report. “Banks expect that funding markets will continue to deteriorate albeit at a slower pace.”

The reduction in U.S. money-market lending forced the ECB last month to reintroduce dollar funding through longer-term three-month repurchase agreements. The central bank said Oct. 12 that six lenders asked for a total of $1.35 billion of three- month dollar loans in the first of three operations. The banks will pay a fixed rate of 1.09 percent for the funds. Separately, one bank received a $500 million week-long dollar loan.

Global Recession

The ECB last introduced a three-month dollar loan in May 2010 to calm markets roiled by the threat of a Greek default. It has been lending banks as much euro cash as they need at its benchmark rate since October 2008, when the collapse of Lehman Brothers Holdings Inc. triggered a global recession.

The funds’ holdings in Societe Generale declined by 51 percent to $3 billion, and BNP Paribas by 20 percent to $14.8 billion, the filings show. Over the last 12 months, there has been an 83 percent decline in Societe Generale funding from U.S. money market funds and a 40 percent fall in funding for BNP Paribas. Spokesmen for Paris-based Societe Generale, BNP Paribas and Credit Agricole declined to comment on the reduction. Officials at Natixis didn’t return calls for comment.

“Even if it were to go to zero, there would be no problem,” Frederic Oudea, Societe Generale’s chief executive officer, said in a Sept. 13 interview. The bank could withstand an indefinite withdrawal of U.S. money market funding, he said.

Dollar Liabilities

European banks, including BNP Paribas and Societe Generale, have said they have reduced their reliance on U.S. money market funding. They are also increasingly using other sources of dollar funding to finance their U.S. operations.

The premium European banks pay to swap euro funding for dollar liabilities rose to within 4 basis points of the highest level since December 2008 earlier this month.

The funds also reduced their holdings in KBC Groep NV, Belgium’s biggest lender, by 80 percent to $587 million. KBC spokesman Stephane Leunens declined to respond to a request for comment.

The money market data are based on the most recent portfolio disclosures from Fidelity Cash Reserves Fund, JPMorgan Prime Money Market Fund, Vanguard Prime Money Market Find, Fidelity Institutional Money Market Portfolio, Fidelity Institutional Prime Money Market Portfolio, BlackRock TempFund, Wells Fargo Advantage Heritage Money Markets Fund and Federated Prime Obligations Fund. The figures include repo loans that are backed by government collateral.

‘Carefully Selected’

Federated Investors Inc. said that its funds would continue to invest in European banks. The use of “carefully selected” securities from major global European banks poses a “minimal credit risk,” said Meghan McAndrew, spokeswoman at Pittsburgh- based Federated Investors.

JPMorgan declined to comment. Fidelity Investments, Vanguard, BlackRock and Wells Fargo didn’t return requests for comment.

The funds’ assets dropped 1.7 percent in the month. U.S. money funds held $2.61 trillion in assets as of Oct. 11, including $1.45 trillion in funds eligible to invest in non- government debt, according to research firm iMoneyNet in Westborough, Massachusetts.

--With assistance from Chris Condon in Boston and Gavin Finch in London. Editors: Edward Evans, Francis Harris

To contact the reporters on this story: Radi Khasawneh in London at To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net; Ted Merz in New York at tmerz@bloomberg.net

New Apple iPhone sees thousands line up pre-dawn

13.32 egaoart No comments

AppId is over the quota
AppId is over the quota

Thousands of people camped out at electronics stores Friday morning as the newest iPhone went on sale in Canada and a half-dozen other countries.

Apple Stores and retailers Future Shop and Best Buy were opening two hours early across the country to kick off sales of the new model, the iPhone 4S.

A dozen people were waiting at the Future Shop in St. John's when it opened its doors at 8 a.m. NT, said Shaun Eary, the store's manager of cellular products. "I got there at seven and already there were four people lined up," he said.

An hour and a half later and 2,100 kilometres to the west, the Apple Store in Toronto's Eaton Centre shopping mall opened to a queue of hundreds of people. Some were lounging or napping in camping chairs while others spread out on the floor with sleeping mats, laptops and fast food.

There were also pre-dawn lineups in Montreal, Mississauga, Ont., and Ottawa and an overnight campout by dozens of people in Edmonton. The first person in line at the Apple Store in downtown Vancouver arrived Thursday at 8 a.m. PT — a full day ahead of time.

In London, nearly 1,000 people waited outside the Apple Store in Covent Garden to purchase the device, packing the street. About 200 people were at Apple's Fifth Avenue store in New York as it went on sale. Steve Wozniak, who founded Apple with Steve Jobs in a Silicon Valley garage in 1976, was first in line at a store in Los Gatos, Calif.

Customers wait in line in front of a store in Tokyo to buy its new iPhone 4S on Friday. Confetti fell from the air as the shop opened. Itsuo Inouye/Associated Press

Many said the event resembled a remembrance to Jobs, who died last week. Others joked that the 4S model stood "for Steve."

Una Chen, a 24-year-old banker, said she was just happy to swap out her BlackBerry Bold for the new iPhone, particularly after a BlackBerry outage affected her phone this week.

"It's not good to have a phone and not be able to use it," Chen said.

Wozniak came out to the California store even though he already had two new phones on the way. He told television station NBC11 on Thursday that while he waited for the store's opening Friday morning, he planned on getting caught up on his email and chatting with fans.

Apple sold a million of its latest smartphone on the first day of pre-orders last Friday, easily beating the 600,000 first-day pre-orders for the iPhone 4 last year. Based on those numbers, analysts are predicting the company will sell between three million and four million of the devices on its opening weekend.

All major Canadian wireless operators — including Telus, Rogers, Bell and Virgin Mobile — carry the iPhone 4S.

The phones also debuted Friday in Australia, France, Germany, Japan and Britain. They are coming to 22 more countries by the end of the month.

The base model of the iPhone 4S costs $159 in Canada with a three-year contract. Customers have a choice of white or black. Without a contract, it costs $649.

The phone — Apple's fifth — has a faster processor and an improved camera compared with last year's model. However, some customers and investors were disappointed that Apple didn't launch a more radical new model. It's been more than a year since Apple's previous model was released.

With files from The Associated Press Accessibility Links

Germany Backing Italy Seen as Key to Europe’s Bank Crisis

12.48 egaoart No comments

AppId is over the quota
AppId is over the quota
October 14, 2011, 5:32 PM EDT By Christine Harper, Aaron Kirchfeld and John Glover

(Updates 20th paragraph to show European officials considering 50 percent writedown on Greek bonds. See {EXT4 } for more on the euro-area financial crisis.)

Oct. 14 (Bloomberg) -- Italian media reported last month that Prime Minister Silvio Berlusconi had been caught on wiretaps making disparaging sexual comments about German Chancellor Angela Merkel.

A diplomatic blunder at any time, the insults were especially inopportune when the question haunting investors these days is whether Germany will get into bed with Italy.

European bank stocks have fallen as borrowing costs climbed in recent months amid rising concern that they may have to take greater losses on debt issued by Greece, Italy, Ireland, Portugal and Spain. As policy makers seek to make lenders hold more capital to absorb potential losses, investors and analysts say the banking crisis can’t be solved unless Germany, the region’s richest country, shows it’s willing to stand behind Italy and Spain, the two biggest debtors of the five countries.

“What needs to happen as part of this package is that the possibility, the discussion or even remote likelihood of haircuts on Spain and Italy needs to be killed and taken out of the market,” Philippe Bodereau, a portfolio manager and global head of financial institutions credit research at Pacific Investment Management Co., said in an Oct. 12 interview with Bloomberg Television. “Bank recapitalizations are necessary but not sufficient.”

G-20 Ministers

Finding a way out of the European crisis will top the agenda at a meeting of G-20 finance ministers and central bankers in Paris this weekend. None of the proposed solutions -- whether they involve the European Central Bank or the 440 billion-euro ($606 billion) rescue fund known as the European Financial Stability Facility -- can work without Germany, and by proxy the ECB, offering blanket support to Italy, said former International Monetary Fund Chief Economist Simon Johnson.

“Does the ECB stand behind Italian debt like the Federal Reserve stands behind U.S. debt? That’s the only question,” said Johnson, now a professor at the Massachusetts Institute of Technology and a Bloomberg View columnist. “Everything else is derivative from that question. They won’t tell you that, and they can’t decide.”

German and French leaders pledged at a meeting Oct. 9 to devise a plan to recapitalize banks, help Greece and strengthen Europe’s economic governance. Merkel said after meeting with French President Nicolas Sarkozy that Europe will do “everything necessary” to ensure banks have enough capital.

‘Temporarily Higher’

All lenders judged by the region’s top banking regulator to be systemically important should be required to hold “temporarily higher” amounts of capital, European Commission President Jose Barroso said on Oct. 12. The European Banking Authority discussed making the banks hold core capital equal to at least 9 percent of their assets, up from a 5 percent core Tier 1 capital requirement imposed in the stress tests carried out by the regulator earlier this year, according to a person familiar with the proposals.

That might not calm investors, said John Raymond, an analyst at research firm CreditSights Inc. in London.

“You can’t analyze banks’ capital needs until you know what’s going to happen to the sovereign debt, and they haven’t told us,” Raymond said. “That’s the problem.”

Dexia, Erste

The European Union moves come after this month’s breakup of Dexia SA, a Franco-Belgian lender, and a surprise 1.6 billion- euros in writedowns and provisions at Vienna-based Erste Group Bank AG illustrated the shortcomings of regulatory stress tests on about 90 of the region’s banks in July. Both Dexia and Erste passed the tests, which were criticized for failing to take into account potential markdowns on the value of government debt.

A new review should assess “all sovereign debt exposure in full transparency,” Barroso said. Government bonds will be valued more closely to current market prices than in the July stress tests, according to a person familiar with the matter.

Those new criteria would lead to a 220 billion-euro capital shortfall at 66 of the participating banks, with the biggest gaps at Edinburgh-based Royal Bank of Scotland Group Plc, Frankfurt-based Deutsche Bank AG and Paris-based BNP Paribas SA, according to a note published yesterday by Credit Suisse Group AG analysts.

The challenge is finding a source of capital. Requiring European governments to supply it would risk adding to the debt of countries already struggling with budget deficits, according to Alastair Wilson, chief credit officer for Europe, the Middle East and Africa at Moody’s Investors Service.

Raising Capital

“Concern about the banks is driven in part by the sovereigns, which may be weakened by putting money into the banks,” Wilson said in an interview. “We have to recognize that there are consequences for sovereigns in recapitalizing the banking system.”

Efforts by banks to raise capital from the private sector will be hampered unless investors can be sure there’s a limit to potential losses on sovereign debt, Ralph Schlosstein, chief executive officer of Evercore Partners Inc., a New York-based investment bank, said in an interview.

“If you want to have any hope of getting money for the banks from private sources, you have to be able to tell them what these sovereign debt assets are worth,” Schlosstein said. Europe has to show it’s providing a convincing level of support to countries including Spain and Italy “as a precondition or simultaneous to a recapitalization of the banks.”

Stress Tests

Greece, Italy, Ireland, Portugal and Spain, known as the GIIPS, have about 2.9 trillion euros of government bonds outstanding, according to data compiled by Bloomberg. Italy, the third-largest issuer of debt after the U.S. and Japan, accounts for more than half, or 1.59 trillion euros, the data show.

About 413 billion euros of GIIPS debt is held by 38 of Europe’s largest lenders, according to an analysis of the stress-test results by Alberto Gallo, a strategist at RBS in London. Those holdings equal almost 40 percent of the banks’ 1.1 trillion euros of equity, according to Gallo.

European banks, having agreed to a voluntary loss of about 21 percent, are bracing for further writedowns on Greece’s 288 billion euros of government bonds, which carry Moody’s second- lowest rating of Ca and an equivalent CC by Standard & Poor’s. European officials are considering writedowns of as much as 50 percent on Greek bonds as part of a revamped strategy to combat the crisis, people familiar with the discussions said.

Confidence Vote

Such losses could be dwarfed by writedowns on Italy’s debt.

“I can’t imagine a fund that is big enough to also guarantee Italy in total,” Martin Blessing, CEO of Frankfurt- based Commerzbank AG, said on Sept. 20, referring to the EU’s rescue fund, the EFSF, approved yesterday by Slovakia, the last of the 17 euro zone countries to do so. “Italy is a whole other situation than Greece.”

Berlusconi, the 75-year-old billionaire media tycoon and Italy’s longest-serving prime minister, today won a confidence vote in Parliament that he called earlier this week after the lower house failed to rubber stamp a 2010 budget report on Oct. 11. Last month he won approval for a 54 billion-euro package of budget cuts, the country’s second since July, which was adopted in exchange for ECB agreement to buy Italian bonds.

Mario Draghi, 64, the Bank of Italy governor who will become president of the ECB at the end of the month, said on Oct. 12 that Italy’s austerity plan won’t be sufficient because interest rates on the country’s debt could rise and create “a spiral that may end up being ungovernable.”

Ratings Cut

On Oct. 4, Moody’s cut its assessment of the nation’s long- term debt for the first time in almost two decades, lowering it three levels to A2 with a negative outlook, on concern that weak growth will hamper Berlusconi’s efforts to balance the budget. Italy’s debt is 119 percent of its gross domestic product, the second-highest in Europe behind Greece.

The downgrade meant Italy joined Spain, Ireland, Portugal, Cyprus and Greece as euro-region countries whose credit rating has been cut this year. Unlike Ireland and Portugal, which followed Greece in seeking bailouts from the European Union and the International Monetary Fund, Italy had managed to skirt the worst of the fallout from the debt crisis until this year.

Italian growth, 0.8 percent in the second quarter, has lagged behind the euro-region average for the past decade. Berlusconi told legislators yesterday that austerity may slow the economy further, and he promised tax, constitutional and judicial reforms to boost the economy.

‘Panicky Markets’

Italy’s borrowing costs climbed and the value of its debt fell. The yield on the country’s 10-year bonds has risen to 5.80 percent from 4.88 percent at the end of June. The yield surged as high as 6.19 percent on Aug. 4 before the ECB announced plans to start buying Italian and Spanish bonds.

“The real issue is that panicky markets treat the sovereign debt of big and solvent countries such as Italy and Spain as toxic assets,” said Holger Schmieding, a London-based chief economist for Berenberg Bank. “If policy makers can convince markets that these assets are safe, there would be no need for banks to bolster their capital against an imaginary risk of an actual writedown on these assets.”

Unlike the U.S. and Japan, Italy can’t print money to buy its own debt when demand runs low. Instead, its central bank is a part of the ECB, whose strict mandate to combat inflation was influenced by Germany’s pre-World War II experience with hyperinflation.

German Finance Minister Wolfgang Schaeuble said this week that Europe won’t use loose monetary policy or “cheap money” to alleviate the region’s debt burden and argued last month that financial institutions should be required to share the burden of helping the most troubled nations.

“The challenge to bring crisis-hit countries back on track must not be left to taxpayers alone,” Schaeuble said in a Sept. 24 speech in Washington during the annual meeting of the Institute of International Finance.

Italian Bonds

Italian bonds are trading below face value because investors have determined the debt doesn’t have the full backing of the ECB, said Kenneth Rogoff, a Harvard University economics professor and former chief economist at the IMF.

“It’s clear that it doesn’t, because if it did it wouldn’t be selling at a discount,” Rogoff said. “It’s clear that it’s not unambiguous how far the ECB would go and how far the EFSF would go.”

Rules promulgated by the Basel Committee on Banking Supervision have encouraged banks to hold government bonds issued in their own countries’ currency because they’re treated as risk-free and highly liquid assets.

Rogoff, co-author of “This Time Is Different: Eight Centuries of Financial Folly,” said there’s a long history of governments creating rules designed to encourage banks to hold their own debt.

‘Old Story’

“Just think about it: If you’re the government regulating the bank, what kind of government’s going to say, ‘Don’t hold too much of our debt, because you know you can’t trust us’?” he said. “One of the arguments that proponents of bailouts often use is if we don’t bail out the country and we let the government default, the banking system may not come back for a decade. This is an old story.”

Josef Ackermann, 63, CEO of Deutsche Bank, Germany’s biggest lender, said at a conference in Berlin yesterday that “it is not the capital funding of banks that is the problem, but rather the fact that government bonds have lost their status as risk-free assets.”

Even talking about the need to recapitalize banks is harmful, he said.

‘Systemic Dimension’

Jean-Claude Trichet, 68, a Frenchman who is stepping down as ECB president after eight years in the role, warned on Oct. 11 that the region’s crisis “has reached a systemic dimension” because it has moved to some of Europe’s larger countries from the smaller economies.

His successor’s ability to pursue policies that would help Italy -- such as lower interest rates and ECB purchases of Italian debt -- will depend on whether Germany assents, said MIT’s Johnson. Policies pursued by the EFSF, which draws on money from all 17 euro-zone countries, also will be influenced by Germany, the fund’s largest contributor.

Asked in August if bailouts of euro-area nations unable to deal with widening budget deficits would be acceptable “even if they were necessary to keep the euro zone intact,” 59 percent of Germans disagreed and 20 percent agreed, according to a Bloomberg/YouGov Plc poll.

Berlusconi’s alleged remarks about Merkel haven’t been confirmed by the Italian government or prosecutors, whose wiretaps were reportedly the source of the recording. They were blogged about and commented on widely, including in Bild, Germany’s largest tabloid newspaper.

‘Perception Factor’

Berlusconi has never commented on reports of the remarks about Merkel and has condemned the use of wiretapping in investigations. Niccolo Ghedini, Berlusconi’s defense lawyer, couldn’t be reached on his mobile phone.

The Italian prime minister, who has been criticized for comments about women and diplomatic gaffes, faces four criminal charges, including one accusing him of paying for sex with a minor. Since entering politics, he has faced dozens of trials and investigations and, by his own count, has spent more than 400 million euros defending himself. He has said he is innocent of all charges and that Italian judges are out to destroy him.

“If you were a German taxpayer, how much would you be willing to pay to keep Silvio Berlusconi in the lifestyle to which he’s become accustomed? Not much,” Johnson said. “It’s a perception factor.”

--With assistance from Andrew Davis and Lorenzo Totaro in Rome, Owen Thomas and Linda Yueh in London and Serena Saitto in New York. Editors: Robert Friedman, Peter Eichenbaum

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; John Glover in London at johnglover@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net; Paul Armstrong at parmstrong10@bloomberg.net

$2 smartphone salvo in Samsung-Apple war

12.18 egaoart No comments

AppId is over the quota
AppId is over the quota

Sydney, Australia (CNN) – In the latest maneuver in the smartphone wars, Samsung is offering its latest Galaxy S II smartphone for a token $2 to the first 10 people in line each morning at a temporary store just steps away the Apple flagship store in Sydney.

Normally priced at $850, the deep discount attracted some young buyers to camp out three or four nights to snatch the phone. "We calculated that the amount of money we are saving ... makes it equivalent to being paid $15 an hour just to loaf around for four days,” one person waiting for a phone told CNN.

“Apple gives no discounts on the iPhone, so honestly I’m not sure why you would line up to pay full price for a phone that’s not as good as a Samsung,” said James Constantine, who bought a $2 phone after waiting outside for three days.

The line in front of the Samsung pop-up store Wednesday morning rivaled the numbers camped out in front of the Apple store awaiting Friday’s Australia release of the iPhone 4S, according to a report in the Sydney Morning Herald. Samsung has “no plans” to continue renting the property after Friday, the paper said.

Apple and Samsung have been waging an aggressive legal battle since April, filing more than 20 lawsuits against each other in nine countries, including the United States, France, Italy, Australia, South Korea and Japan. Apple contends that Samsung’s Galaxy line of mobile phone and tablets “slavishly” copied its iPhone and iPad, while Samsung claims that Apple has infringed on its mobile patents.

Last week, Apple rejected an offer from Samsung to settle the tablet dispute in Australia, prolonging the ban on Samsung’s launch of its Galaxy Tab 10.1 in that market. Apple also secured a ban in Germany last month on direct sales of the Galaxy Tab 10.1. In addition, a court in the Netherlands has barred Samsung from selling three models of its smartphone. A court ruling in California is expected today.

Samsung said it postponed the release of its latest Galaxy smartphone out of respect for Apple visionary and former CEO Steve Jobs, who passed away last Thursday, a day after the unveiling of the new iPhone 4S. However, Samsung has said that it does not plan to delay court hearings. In fact, it extended its patent-infringement lawsuit to France and Italy to ban the sale of the iPhone 4S less than 24 hours after its introduction.

Samsung and its Android-based smartphones pose the strongest challenge to Apple’s wildly popular iPhone. While Apple’s iPhone is the world best-selling smartphone, smartphones using Google’s Android operating system have a greater combined market share. Samsung is the largest maker of Android smartphones.

SAP Has Better-Than-Expected Quarterly Profit

11.37 egaoart No comments

AppId is over the quota
AppId is over the quota
October 14, 2011, 10:54 AM EDT By Cornelius Rahn

(Updates with litigation-related provision in seventh paragraph.)

Oct. 14 (Bloomberg) -- SAP AG, the largest maker of business-management software, reported third-quarter earnings that beat analysts’ estimates as new mobile and real-time analytics offerings boosted sales.

Operating profit, based on non-international financial reporting standards, rose 23 percent to 1.13 billion euros ($1.57 billion) while sales on that basis gained 12 percent to 3.41 billion euros, the company said today. The average analyst estimate in a Bloomberg survey was for earnings of 1.01 billion euros on revenue of 3.31 billion euros.

Co-Chief Executive Officers Jim Hagemann Snabe and Bill McDermott, whose contracts were extended in July to 2017, aim to boost SAP’s annual revenue to 20 billion euros by 2015, driven by mobile products, services and the real-time analytics technology Hana. While the Walldorf, Germany-based company today reiterated its full-year forecast, Evolution Securities analyst Roger Phillips said results were better than expected.

“It’s a big beat,” said Phillips, who has a “neutral” recommendation on SAP shares. “It now becomes a lot more clear” how the company plans to achieve its targets, he said.

SAP shares rose as much 3.7 percent to 42.04 euros and were up 2.6 percent as of 4:08 p.m. in Frankfurt. The shares have gained 9.2 percent this year, giving SAP a market value of 51.1 billion euros. Oracle climbed 1.8 percent to $31.69 as of 10:09 a.m. in New York.

Programming Reliance

SAP is betting on innovation in programming rather than on large purchases or adding hardware to battle Redwood City, California-based Oracle Corp., which ranks second in business software. SAP beat Oracle in software license sales in its second quarter. The U.S. company is scheduled to report earnings for its fiscal second quarter on Dec. 16.

SAP boosted its net result by 723 million euros after cutting a provision related to potential damage payments stemming from a legal fight with Oracle over copyright infringement by SAP’s former TomorrowNow unit. A U.S. federal judge last month threw out a $1.3 billion verdict, reducing the amount that SAP would have to pay to $272 million or allowing for a new trial. The company didn’t provide a figure for net income in today’s statement.

Pipeline

McDermott said in July that “the pipeline for Hana is the biggest in the history of SAP.” Abbreviated from High- Performance Analytic Appliance, the in-memory computing product is designed to speed up analysis of business data. It comes on servers from companies such as Hewlett-Packard Co., International Business Machines Corp., Dell Inc. and Cisco Systems Inc.

SAP, which makes payroll management, business intelligence tools and software that helps companies reduce their carbon emissions, also provides software for the order fulfillment behind Apple’s iTunes download system. Non-IFRS software and software-related services revenue rose 16 percent in the first nine months, the company said today.

This year, SAP won the U.S. National Hockey League team San Jose Sharks as a user of its on-demand software Business ByDesign, while Colgate-Palmolive Co. and Lenovo Group Ltd. started using the Hana in-memory technology.

“SAP’s pipeline remains very strong and companies continue to invest in information technology, in particular in innovative software solutions,” the company said today, adding that the “ongoing uncertain macroeconomic environment” prevented it from raising its targets.

The company said it still predicts that non-IFRS software and software-related services revenue growth will reach the top end of a range of 10 percent to 14 percent in the full year.

SAP said it now expects the effective IFRS tax rate to be 28.5 percent to 29.5 percent this year, up from 22.5 percent in 2010.

--Editors: Simon Thiel, Robert Valpuesta, David Risser

To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

Statoil Targets More North Sea Finds

11.06 egaoart No comments

AppId is over the quota
AppId is over the quota
October 14, 2011, 8:26 AM EDT By Marianne Stigset

(Updates with replacement ratio in seventh paragraph.)

Oct. 14 (Bloomberg) -- Statoil ASA is targeting more prospects in the North Sea after the Aldous-Avaldsnes oil find revived interest in the area and strengthened the company’s goal of keeping output at current levels until 2020.

“From an exploration perspective, 2011 has been a fantastic year,” Oeystein Michelsen, head of development and production in Norway, said yesterday on a platform at the North Sea Troll field. “Despite it being a mature area, we still see a lot of possibilities in the North Sea. It will deliver steady, high production.”

Statoil and Lundin Petroleum AB this year struck oil at the Aldous and Avaldsnes prospects in the North Sea, which together may hold as much as 2.6 billion barrels, the third-biggest oil find off Norway in more than 40 years of exploration. The country’s Petroleum Directorate estimated this week that resource growth is likely to outstrip production for the first time since 1997.

The Aldous-Avaldsnes discovery will help Statoil in its plans to add 700,000 barrels of oil equivalent a day in new production by 2020 to keep domestic output at 1.4 million barrels of oil equivalent a day. Gas will take a bigger share than today’s 50 percent, Michelsen said in an interview at Troll, off Bergen.

Lot of Prospect

“We plan to maximize the value of the North Sea and still see a lot of prospects, such as in the Oseberg area,” he said. Government-owned Statoil, which operates about 80 percent of Norway’s petroleum production, is investing 17 billion kroner ($3 billion) in four rigs and two compressors at the Troll field to boost output, after spending 6 billion kroner on a new pipeline and expanding facilities, Michelsen said.

Oil production for the seventh-largest crude exporter has dropped 50 percent in the past 10 years as North Sea fields such as Troll, Norway’s biggest gas deposit, mature and discoveries have become smaller. Gas production in Norway, which is less profitable, has doubled in the past decade.

Statoil is expanding in countries such as Angola, Brazil and the U.S. as in a bid to increase production and replace its reserves. While the company raised its replacement ratio to 87 percent in 2010 from 73 percent in 2009, it hasn’t been above 100 percent since 2004.

The North Sea “is undoubtedly an area where everybody has started looking at the seismic data again, wondering what they’ve missed,” Bente Nyland, head of the directorate, said at an Oct. 12 press conference in Stavanger.

Troll Output

Statoil expects to maintain gas output from Troll at current levels until 2030 and keep overall production going until 2060, recovering an estimated 6.5 billion barrels of oil equivalents, Michelsen said. Troll is also Norway’s third- biggest oil producer.

Statoil is investing in modifications on its installations off Norway to reduce the maintenance halt interval to every third year from every other year now, Michelsen said. The company expects to maintain spending levels on maintenance and upgrades at its platforms, which amounted to 10 percent of investments this year, he said.

“We don’t see investments galloping going forward -- they’ll remain at a solid, responsible level,” Michelsen said. “To the extent that we increase investments, that share may be somewhat less.”

While finds farther north in the Norwegian Sea have been disappointing in the past years, with prospects such as Dalsnuten, Gro and Victoria coming in at the lower end of early estimates, the Barents Sea is emerging as a “new industrial horizon,” Michelsen said.

Goliat Start

Eni SpA’s Goliat field, in which Statoil owns 35 percent, is scheduled to start production in 2014. Statoil is targeting a record development time of less than six years at the Skrugard find, which is estimated to contain 250 million to 500 million barrels, and will next year make a decision on investing in a second liquefied natural gas plant at Melkoeya, the onshore production facility near Snohvit.

“The probability of finding a profitable solution to this is good,” said Michelsen. Building a pipeline to the Barents Sea, which is being assessed by Norwegian authorities, “would require huge investments and large resources,” he said.

GDF Suez SA today reported that it had drilled a dry well in the Barents Sea, the third failed well this year in the sea off Norway’s northern tip. Three other wells found resources, including the Skrugard deposit.

Statoil also has “very big expectations” for the newly delimited area in the southeastern Barents Sea along the border with Russia, Michelsen said. OAO Lukoil’s Chief Executive Officer Vagit Alekperov last month said the company was interested in working with Statoil in the area.

Michelsen declined to comment on whether the company was in talks with Lukoil. “There are a lot of discussions on collaboration in the Barents Sea between just about all the companies,” he said.

--Editors: Jonas Bergman, Randall Hackley

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

Playing Chicken To Cut The Deficit

10.30 egaoart No comments

AppId is over the quota
AppId is over the quota

Alex Wong/Getty Images

U.S. Rep. Dave Camp (R-MI) speaks as Rep. Chris Van Hollen (D-MD) and Rep. Jim Clyburn (D-SC) listen during a hearing before the Joint Deficit Reduction Committee, also known as the supercommittee.

If you've ever thought that most of politics is game-playing, you're right. Political scientists often use mathematical game theory to describe how Congress works. And when they look at the current battle over how to handle the deficit, the game that comes to mind is chicken.

Steven Smith is a professor of political science at Washington University, and he says yes, Republicans and Democrats sometimes remind him of two cars driving as fast as they can toward a cliff.

"So in politics, we often times see two sides...showing the same thing, with one party trying to persuade the other party, that it is willing to walk away from the table even if that risks disaster," says Smith.

In this summer's debate over raising the debt ceiling, the game of chicken fell apart. Both cars swerved, both sides claimed victory, and nothing happened. No one wants a repeat of this, so Congress has changed the stakes of the game by creating a supercommittee.

They've put the supercommittee behind the wheel and filled each car with both political parties' children — budgetary items each party holds dear. If neither side swerves, automatic cuts will be made.

"The Republicans do not presumably want the defense budget cut, and Democrats do not want the domestic discretionary programs cut," says Smith.

The hope is that in the face of a treacherous crash, "they will work their way through to an agreement."

New Automobile

Education Information

Are we heading into another recession?

09.56 egaoart No comments

AppId is over the quota
AppId is over the quota

London (CNN) – You know things are bad when an email like this lands in your inbox:

Subject: is it time for a quick catch up?

Before the world expires…

The message takes on a new meaning when you realise it’s from the former head of one of the UK’s larger financial services companies.

As the eurozone crisis rages seemingly without end and big banks are being bailed out again, many are bracing themselves for a return of the pronounced recession that characterized the end of the last decade.

But is there evidence to support such a claim?

Economists at Deutsche Bank have done much of the number crunching for us. In a comprehensive presentation sent to clients this week, the lender’s research team put forward some sobering predictions.

Deutsche advises clients to brace themselves for the following:

-a mild recession in Europe

-no recession in the U.S. but anaemic growth nonetheless

-emerging markets growth will continue to "hold up well"

-the resolution of the eurozone crisis is likely to be "long and volatile"

Meanwhile stocks are looking cheap

Deutsche notes that stocks are looking increasingly cheap following the recent months of market turmoil with companies listed on the S&P 500 trading at a price of 12 times earnings versus 17 times earnings after the dot-com bubble burst in 2001-2002.

Having said that, shares haven’t fallen as much as they did 10 years ago when on average those on the S&P halved in value overnight.

So far so good. That is if you can cope with the volatility.

With trillions wiped off the world’s equity markets and 4% to 5% daily swings for the DAX, CAC40 and even the Dow, you’d be forgiven for thinking recent times have been historically volatile.

Yet the erratic movements again of the broader index –the S&P 500- as measured by the volatility index – or VIX- show that volatility peaked at 81 percent in 2008. So far this year we have only reached 48 percent. Mind you, volatility in European equities has been substantially higher.

Yet moving through the asset classes towards credit, the uncertain picture becomes more bleak.

The cost of insuring eurozone debt as measured by credit default swaps shows investors are pricing in what Deutsche calls "extreme" levels of default for the bonds of Europe’s banks and governments. Precipitating this situation: the fact that banks are increasingly wary of lending to each other.

Having said that, as long as the European Central Bank continues to make dollar funding available, Deutsche reckons it's unlikely the money markets will once again become as tight as they were during the credit crunch.

So credit is still out there to be had. But what about rates?

Across the eurozone Deutsche analysts estimate rates could come down by a quarter of a percent in November and at some point in the first quarter. Outgoing ECB President Jean-Claude Trichet was widely criticised for hiking rates too soon. His successor Mario Draghi takes the helm at the start of next month and may well want to make an impact.

As for the Fed, while the markets have concluded a third round of quantitative easing is now only a remote possibility, we could see a repeat of its ‘Operation Twist’ to bring down long-term interest rates.

Following the Bank of England’s surprise round of quantitative easing this month, Deutsche says we could well see another £50 billion being made available by February, though rates will stay on hold well into 2013.

It’s hard to say whether we are going back to our most recent recession.

The 2008-2009 financial crisis should have provided valuable lessons for world markets and leaders alike. Still, as any investor will know the small print on that prospectus always warns you that 'history is no guarantee of future returns.’

A New Muesli Maker's Quest For The Cereal Aisle

09.14 egaoart No comments

AppId is over the quota
AppId is over the quota

Zack Seward for NPR

Muesli Fusion for sale at the Rochester Public Market in Rochester, N.Y. Being a local brand has served owner Ian Szalinski well, but he has bigger plans for his cereal business.

Small businesses are often called the backbone of the U.S. economy; they employ about half of the nation's private sector employees. But in many cases, small companies start out with a workforce of just one — like cereal entrepreneur Ian Szalinski in Rochester, N.Y., who's trying to stake a claim to the breakfast market.

Innovation Trail is a reporting collective that covers the economy, technology and innovation in upstate New York.

Almost every day for years, Szalinski ate muesli cereal for breakfast. Sometimes he'd eat it with milk, sometimes with yogurt or cooked hot like oatmeal. But no matter the brand, Szalinski says, it was almost always the same mix of oats, whole grains, raisins and nuts.

"I just got sick of eating it after years and years," Szalinski says. "If I had some extra walnuts in the cupboard I'd throw them in or some coconut ... but I'd never go out of my way to get extra ingredients just to add to my muesli."

And thus, a business idea was born. The recent college grad formed his own company, bought raw ingredients and rented some space on Rochester's east side.

Before long, the 23-year-old Szalinski was, among other things, president of Muesli Fusion.

"Bagger, marketer, salesman, inventory manager, accounts receivable, you name it," he says of his job duties.

In six months of sales, Szalinski has had some early success. His muesli is in nearly two-dozen health food stores in four states: New York, Pennsylvania, Utah and California.

Small Margins For A Small Business

But as a one-man operation, Szalinski mixes and packages every bag by hand. He's sold about 6,000 of them so far. As he refines his product lineup and plans a package redesign, Szalinski is beginning to feel the pinch.

"It is going to increase my costs right now, which is difficult as a small business — cutting down my margins when I don't even have great margins to begin with," Szalinski says. "But it's going to give me overall better product, and that's what I need to get to that next level."

Louise Kramer, the spokeswoman for the National Association for the Specialty Food Trade, says small-food manufacturers like Szalinski have a hard time staying competitive on pricing. With small production runs, ingredients and materials are more expensive.

It is going to increase my costs right now, which is difficult as a small business ... But it's going to give me overall better product and that's what I need to get to that next level.

- Ian Szalinski, founder of Muesli Fusion

But Kramer also says the specialty foods sector is thriving. Sales grew by more than 7 percent in 2010, and she says cereal is not a bad place to be.

"Consumers eat cereal for breakfast, lunch and dinner and snacks. I have cereal for dinner myself," she says. "I'm a guilty party."

Making The Jump To Supermarkets

For small producers like Szalinski, one option is finding a so-called "co-packer," short for contract packer, that could increase production by handling manufacturing duties and help Muesli Fusion find a way into bigger supermarkets.

Szalinski's holy grail for now is Wegmans, the Northeast grocery store chain. Wegmans spokeswoman Jo Natale points out that the cereal aisle is one of the more daunting sections of any supermarket, since there are a lot of choices.

Still, she says, the natural and organic food section is the fastest-growing area company-wide. A major consideration for landing on Wegmans' shelves is how well you stand out from the crowd.

"What kind of a marketing plan does a company have?" Natale asks. "Big or small, you need to let customers know about your product to create demand."

Natale says Wegmans has already met with Muesli Fusion, but the store is waiting on that package redesign before making a final call.

Beyond the cereal aisle, many entrepreneurs face similar challenges. For small-food manufacturers and tech startups alike, small isn't always sustainable, and the path to scaling up is littered with companies that couldn't.

Around the Nation

Subscribe to Around the Nation podcast via:

Or use this URL:

Morning Edition–

The move reduces federal regulations that Republicans say are burdensome.

Kansas City-St. Joseph Catholic Diocese Bishop Robert Finn pleaded not guilty to a misdemeanor.

A sample of Republican voters tell NPR they favor Herman Cain — and they especially like his 9-9-9.

New Automobile

Education Information

Defending Defense Contracts: Programs Turn To PR

08.34 egaoart No comments

AppId is over the quota
AppId is over the quota

Enlarge Ted Robbins/NPR

In southern Arizona, troops take part in a large-scale search-and-rescue exercise called Operation Angel Thunder.

Ted Robbins/NPR

In southern Arizona, troops take part in a large-scale search-and-rescue exercise called Operation Angel Thunder.

Five Air Force Pave Hawk helicopters are parked or landing in the high desert east of Tucson, Ariz. They are transporting victims of a mock earthquake as part of a training exercise called Operation Angel Thunder.

"We were always known for staying really quiet and not really saying much," says Brett Hartnett, who started Operation Angel Thunder five years ago.

This year — with the Obama administration seeking 10 percent, or $450 billion, in defense cuts over the next decade — Hartnett realized that's not such a great strategy. So he pushed for public exposure through the media.

"I think there's concern everywhere that money might disappear, and we're as concerned as everybody else," he says.

Since the program began, it has grown to include military and civilians from 16 countries.

"We're the same guys who do the Katrinas, the Ritas, the pulling people off of Mount McKinley, are the same guys doing the combat rescues in Iraq, in Afghanistan," Hartnett says.

The two-week exercise costs less than $2.5 million, a pittance to the military.

Enlarge Ted Robbins/NPR

A member of a helicopter flight crew participating in Operation Angel Thunder walks across the desert in southern Arizona.

Ted Robbins/NPR

A member of a helicopter flight crew participating in Operation Angel Thunder walks across the desert in southern Arizona.

Todd Harrison, who analyzes the Defense Department for the Center for Strategic and Budgetary Assessments, a nonpartisan Washington think tank, says programs such as Angel Thunder are probably safe.

"You could cut them, you could even eliminate them, but it doesn't free up enough money to be worth your time as a budget cutter," he says.

When you need to cut money, he says, you go where the money is.

"The largest program right now in DOD is the Joint Strike Fighter," he says. "So just by the fact of its size, it's going to come under increased scrutiny."

The fighter is also behind schedule and over budget. So far, it has cost taxpayers $235 billion. Some estimates say it could eventually cost up to $1 trillion. Weapons systems, though, can actually be easier to cut than other programs.

By Harrison's count, the military canceled 12 major weapons systems over the past decade — $50 billion spent, with none of them deployed. He says the current consensus is that the U.S. needs to cut troop levels.

"I can tell you that a lot of people think that we may now be overinvested in our ground forces," he says.

Ending two wars would allow a troop drawdown, but those are tough cuts — jobs. More than half of all federal employees work under the Defense budget. Local economies depend on existing defense programs. To keep funding, those programs need to maintain support — inside the Pentagon itself and among members of Congress. And finally, assuming your project is not top-secret, you get the word out to the public.

"People just don't realize what this really is until they see it," Hartnett says regarding Angel Thunder. "Once you see what this is, people are pretty amazed."

The one thing that could hurt Operation Angel Thunder regardless of its size? If Congress decides that it's too hard to pick individual programs to cut and orders an across-the-board reduction instead.

National Security

Subscribe to National Security podcast via:

Or use this URL:

Morning Edition–

Robert Siegel talks to NPR's Michele Kelemen for more.

One expert says certain groups tend to be very resilient even when their leaders are removed.

As budgets tighten, Defense programs are mounting public-relations campaigns to keep their funding.

New Automobile

Education Information

CPP, Oxford team up on new Toronto bank tower

07.53 egaoart No comments

AppId is over the quota
AppId is over the quota

Two of Canada's largest pension plans are teaming up to build a new office tower in downtown Toronto that's slated to be the headquarters for Canada's largest bank.

The Canada Pension Plan Investment Board and Oxford Properties, the real estate arm of OMERS will build RBC WaterPark Place, a 30-storey office tower on Queens Quay between Bay and York Streets in Toronto's financial district.

An artist's rendering of what the building that will serve as Royal Bank's headquarters will look like. Oxford Properties

Construction is expected to begin by the end of the year and be completed by the third quarter of 2014.

Financial terms for the deal were not released.

The building will have 930,000 square foot and the Royal Bank of Canada has signed on to be the anchor tenant, headquartering its domestic banking business in the LEED-certified building.

RBC will occupy 550,000 or 60 per cent of the 930,000 square feet. Their space alone will house some 4,000 employees.

The venture will be split evenly between the two parties. The two companies already co-own a portfolio of office properties across Canada valued at approximately $3 billion.

OMERS is the pension plan for municipal workers in Ontario. The fund currently has $53 billion worth of assets under management. The CPPIB manages the assets of the Canada Pension Plan not currently required to pay benefits for 17 million Canadian contributors and beneficiaries. At the end of June, the CPPIB had $153.2 billion in assets under management.

Accessibility Links

Stocks, Commodities Rally, Treasuries Drop on G-20, Retail Data

07.21 egaoart No comments

AppId is over the quota
AppId is over the quota
October 14, 2011, 5:24 PM EDT By Michael P. Regan and Rita Nazareth

Oct. 14 (Bloomberg) -- Stocks gained, extending the biggest weekly rally since July 2009, as the Group of 20 began talks to tame Europe’s debt crisis and U.S. retail sales and Google Inc.’s results beat estimates. Commodities rose and the euro completed the largest weekly advance versus the dollar since March 2009.

The MSCI All-Country World Index rose 1.4 percent, extending its weekly gain to 5.5 percent. The Standard & Poor’s 500 Index jumped 1.7 percent to 1,224.58, the highest level since Aug. 3. Google jumped 5.9 percent, rising a ninth straight day. Copper increased 3.1 percent as the S&P GSCI Index of materials climbed 2.4 percent today and 5.2 percent this week, its best advance of the year. Ten-year Treasury note yields rose six basis points to 2.25 percent. The euro was at $1.3881, up 3.8 percent this week.

Equities rallied as elements of the European rescue plan emerged with finance officials from the G-20 beginning talks in Paris. The bigger-than-forecast 1.1 percent increase in U.S. retail sales last month eased concern that slumping consumer confidence will hurt spending, while Google’s earnings showed growing demand for online advertising.

“The economy seems to be re-accelerating as the various threats to growth moderate,” David Goerz, the San Francisco- based chief investment officer at Highmark Capital Management Inc., which oversees $17.2 billion, said in an e-mail.

Debt Turmoil

Policy makers are discussing an expansion of the International Monetary Fund’s role as part of a global G-20 agreement next month in Cannes, France, according to three officials, who declined to be identified because the discussions are not public. Talks are in preliminary stages as potential contributors wait to see what measures Europeans take to end the debt turmoil at an Oct. 23 summit, they said.

European officials were said to consider writedowns of as much as 50 percent on Greek bonds, people familiar with the discussions said.

The S&P 500 capped its first back-to-back weekly gain since July. Apple Inc. rose 3.3 percent as analysts predicted it will sell as many as 4 million new iPhone 4S devices this weekend as customers around the world lined up. Energy companies led gains among 10 S&P 500 industries, climbing 3.6 percent. Technology companies added 2.1 percent.

The better-than-forecast growth in retail sales helped the Citigroup Economic Surprise Index for the U.S. turn positive for the first time since April 29, the day the S&P 500 peaked at an almost three-year high. A positive reading in the index signals that data has collectively exceeded estimates over the past three months.

Consumer Confidence

U.S. equities maintained gains even after the Thomson Reuters/University of Michigan preliminary October index of consumer sentiment fell to 57.5 from 59.4 a month earlier, the group reported today.

The S&P 500 has rebounded more than 11 percent from a 13- month low on Oct. 3 and today rose above levels where rallies stopped in August and September. The gauge closed at 1,218.89 on Aug. 31 before dropping 4.4 percent in the next three sessions, and ended at 1,216.01 on Sept. 16 before losing 7.1 percent by Sept. 22. The index has fluctuated intraday between a high of 1,230.71 and a low of 1,074.77 since Aug. 5.

‘Clear That Hurdle’

"It would be pretty important to break that trading range," Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. "Even as we had this robust rally, it hasn’t drawn the technicians to have conviction in buying. If we crack through this 1,230 area, then they are going to say -- it’s clear that hurdle."

Corporate profits are calming U.S. stock investors more than any time in 19 years, reducing the cost of insurance against losses at the same time investors gain confidence in European efforts to solve the debt crisis.

The Chicago Board Options Exchange Volatility Index fell 28 percent in the six trading sessions before New York-based Alcoa Inc. posted results, a record drop before the start of earnings season, according to data since January 1993 compiled by Bloomberg. The VIX , as the benchmark measure of U.S. equity derivatives is known, fell 6.6 percent through yesterday since Alcoa’s earnings trailed analyst estimates Oct. 11.

The Stoxx Europe 600 Index rose 0.8 percent and climbed 2.8 percent in five days for a third straight weekly gain, its longest stretch since April. SAP AG increased 2.1 percent after the largest maker of business-management software said earnings and sales rose in the third quarter on rising demand for its services. SAP also reiterated its full-year forecast.

All 19 industry groups in the Stoxx 600 advanced except for banks, which slipped after Fitch Ratings put more than a dozen lenders on watch negative as part of a global review. BNP Paribas SA dropped and Societe Generale SA fell more than 3 percent.

Italy Confidence Vote

Italy’s FTSE MIB Index rallied 2.5 percent to lead gains among European nations and the 10-year bond yield lost two basis points to 5.80 percent, according to generic rates. Prime Minister Silvio Berlusconi won a parliamentary confidence vote today to avert the collapse of his government, giving him more time to try and steer Italy out of Europe’s debt crisis.

Spain’s 10-year note yield climbed four basis points to 5.24 percent after. The extra yield investors demand to hold French 10-year bonds instead of benchmark German bunds widened eight basis points to 93 basis points, the most since the euro started in 1999. The Belgian two-year note yield increased 10 basis points to 2.52 percent.

The cost of insuring European sovereign debt rose after S&P said it was downgrading Spain because of slowing growth and concern rising defaults will undermine banks. The Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments gained 3.4 basis points to 337.

Copper Rallies

Copper rallied 3.1 percent to $3.4085 a pound in New York and is up 4.1 percent in five days, its biggest weekly gain since July. Stockpiles in London Metal Exchange warehouses decreased for an eighth day to the lowest level since April 13. Copper imports by China climbed for a fourth month to the highest level in 16 months in September, according to customs data.

Shares of Freeport-McMoRan Copper & Gold Inc. gained as Morgan Stanley said in a note that stabilizing copper inventories worldwide and rising demand from China are “favorable” for the world’s largest publicly traded producer of the metal.

Oil for November delivery climbed 3.1 percent to $86.80 a barrel, a three-week high, on the New York Mercantile Exchange, reversing an early decline.

The MSCI Emerging Markets Index rose 0.5 percent, heading for its eighth consecutive gain, the longest streak since July 2010.

Hong Kong, Russia

The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong fell 2.2 percent. The National Bureau of Statistics said consumer prices rose 6.1 percent in September from a year earlier, the fourth consecutive month of inflation above 6 percent. China’s money supply grew at the slowest pace in almost a decade as inflation stayed above the government’s target, highlighting the risk that efforts to tame prices will trigger a slowdown.

The Micex Index jumped 3.1 percent in Moscow as oil rose. The ISE National 100 Index rose 1.3 percent in Istanbul and the Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 1.2 percent.

The euro rose 1.2 percent to 107.17 yen, which retreated against all 16 major currencies as investors pursued riskier assets. Australia’s dollar and the Mexican peso led currencies that strengthened versus the euro. The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.5 percent.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Walsh Carving Up Iberia to Boost BA: Union

06.49 egaoart No comments

AppId is over the quota
AppId is over the quota
October 14, 2011, 11:44 AM EDT By Steve Rothwell

Oct. 14 (Bloomberg) -- Willie Walsh, chief executive officer of the merged British Airways-Iberia, favors growth at the U.K. carrier and will carve up its partner to cut costs, the head of the Spanish unit’s pilot union said.

Plans announced Oct. 6 to switch 13 planes from Iberia’s mainline operation to a low-cost unit by Dec. 31 are aimed at bypassing merger terms designed to guarantee the Spanish carrier’s status within International Consolidated Airlines Group SA, Sepla union official Justo Peral said in an interview.

“We think it’s a way to cut the company to pieces,” said Peral, who is president of Sepla’s Iberia branch, adding that the strategy was probably imposed by Walsh on the Spanish carrier’s CEO, Rafael Sanchez-Lozano, “to make pieces of Iberia and have a new hub in Madrid without any restrictions.”

Sepla, which represents about 1,600 Iberia pilots, is consulting with other unions on strikes and legal action over the creation of Iberia Express, which IAG says aims to boost margins on short-haul flights that might otherwise be unviable. Workers are also concerned that BA is growing faster than Iberia and will operate a newer aircraft fleet, Peral said.

IAG closed up 0.5 percent yesterday in London, where it’s based. The stock has declined 41 percent since the company’s formation in a Jan. 24 merger, giving a market value of 3.1 billion pounds ($4.9 billion).

‘Simulated Negotiations’

Before IAG announced the creation of Iberia Express, Sepla and other unions offered to cut pay and boost productivity to save 150 million euros annually and better compete with discount specialists Ryanair Holdings Plc and EasyJet Plc, a proposal that was ignored, Peral said Oct. 12 by phone from Madrid.

“They never gave us a reason,” he said. “They simulated to negotiate with us, but they never did really. We have managers from the company who told us the CEO’s aim was to outsource and that he was never ready to negotiate something different. We were ready to work like Ryanair and EasyJet within Iberia.”

The union plan would have taken “many years” to deliver the promised savings, Iberia spokeswoman Consuela Arias said.

“If the pilot’s proposal was really that good it would have been accepted,” she said by phone. “We need a solution now.”

Peral says that prior to the merger with British Airways Sepla secured a deal with Iberia precluding the subcontracting of work to other units, such as franchise partner Air Nostrum and Vueling Airlines SA, in which it has a 46 percent stake.

No Credibility

“We’re very disappointed that IAG in their first decision after the merger has managed to violate our agreement,” he said.

IAG is also circumventing an accord struck by pilots in 2009 guaranteeing that any expansion at the Madrid hub would be shared equally between Iberia and British Airways, Peral said.

“The only growth we’ve had since the merger was flights to Brazil and Argentina, and now they’ve cut these,” he said. “So we’re not growing at Iberia, and BA is going to grow at five to six percent a year and has ordered new, efficient planes.”

Michael O’Leary, CEO at Ryanair, Europe’s biggest low-cost airline, said yesterday in an interview that IAG’s unveiling of Iberia Express may have “more to do with its negotiations with pilots” than the genuine foundation of a discount unit.

“No flag-carrier airline in Europe has had any credibility or success in setting up a low-fare subsidiary,” O’Leary said in Frankfurt. “They’ve all tried, and Iberia already claimed to have a low-cost subsidiary in Vueling, and now they’re back talking about another. It has no chance of success whatsoever.”

--With assistance from Alex Webb in Frankfurt. Editors: Chris Jasper, Chris Reiter.

A roadmap or dead end? Barroso to the rescue

06.15 egaoart No comments

AppId is over the quota
AppId is over the quota

London (CNN) – It's taken months, but Europe's leaders are starting to put pen to paper and be willing to spell out, in some detail, how to fix the eurozone - if it's fixable.

I think it is fixable. It will include a massive restructuring of Greek debt, call it default or not.

European Commission president Jose Manuel Barroso - or what he should be called; the euro cheerleader - did not say as much in his speech to the European Parliament Wednesday.

He did do, however, lay out in some detail five road marks on how to get out of the euro mess. I did have to laugh when he said there was no option but "to act now." You think?

The plan he presented for Parliament's approval included of course sorting out Greece now, building up Europe's bail out fund and building more Europe, not less.

Nothing new there. But he did call for Europe's permanent bailout backstop, the European Stability Mechanism (get used to the term EMS) to be up and running by mid 2012, not 2013.

We know the existing bail out fund - the European Financial Stability Facility - will be enhanced. But Barosso argues the EMS should start sooner to "reinforce confidence." Again, the theory being that having the firepower around would hopefully mean it would not have to be used.

Barroso also went into some detail about recapitalizing the banks. We all know this is coming, no matter what the French have been saying before this week, so now its about what banks (only troubled ones), with what money and how much tier 1 capital they must hold (7% or 9%).

There are those who say it does not matter much what Barroso tells unknown European parliamentarians. I have some sympathy for that position, given that what really matters is that 'Merkozy' will do: Germany and France make up half the eurozone economy, and no agreement on how to allow Greece to default, no agreement how to recapitalize banks, no agreement on a fiscal union will come about unless Berlin and Paris agree.

It is clear to me that while Europe has not been speaking with one voice, for a few weeks now various voices have been floating trial balloons and the markets have been going higher. Mr Barroso did the same today.

Occupy protesters 'emboldened' by park cleanup delay

05.39 egaoart No comments

AppId is over the quota
AppId is over the quota

The decision to postpone a planned cleanup of a New York private park occupied by Wall Street protesters has "emboldened the movement," organizers said Friday.

In an emailed statement, Brookfield Properties said Friday that it had deferred cleaning the park for a short period while it negotiates with protesters.

"At the request of a number of local political leaders, Brookfield Properties has deferred the cleaning of Zuccotti Park for a short period of time while an attempt is made to reach a resolution regarding the manner in which Zuccotti Park is being used by the protesters," the company said.

But New York organizers said in a statement that the postponement "has emboldened the movement and sent a clear message that the power of the people has prevailed against Wall Street."

New York City Mayor Michael Bloomberg said the planned cleanup was postponed after the park's owners received threatening calls from the city's elected public officials.

Speaking on his weekly radio commentary on New York's WOR Radio, Bloomberg said he didn't know who made the threats, CNN reported.

"Late last night, we received notice from the owners of Zuccotti Park — Brookfield Properties — that they are postponing their scheduled cleaning of the park, and for the time being withdrawing their request from earlier in the week for police assistance during their cleaning operation," NYC Deputy Mayor Cas Holloway said in a statement issued before Bloomberg's comments.

The company believes it can make arrangements with the protesters to "ensure the park remains clean, safe, available for public use," Holloway's statement said.

Hundreds of protesters had vowed not to leave the small park in Lower Manhattan at the 7 a.m. ET Friday deadline.

The protesters had said the plan to clean the park was an excuse to shut them down. In a bid to address the rationale for clearing the park, the protesters worked feverishly overnight Thursday to clean the park themselves.

"It shows when people work together, you really can make a difference and make justice happen," jubilant protester Nick Glottal, 23, said following the deputy mayor's announcement.

CBC's David Common reported from New York City that the postponement helped the city and Brookfield avert the spectacle of police moving against the protesters.

"That's why we've seen this postponement," Common said. "It is just that. At some point, these protesters will again be asked to leave. But, at this point, that day is not today."

Some arrests were reported when several hundred protesters left the park and marched toward the city's financial district.

The demand that protesters clear out set up a turning point in a movement that began Sept. 17 with a small group of activists and has swelled to include several thousand people at times, from many walks of life. Occupy Wall Street has inspired similar demonstrations across America, is spreading to Canada and Britain, and become an issue in the Republican presidential primary race.

The protesters' demands are amorphous, but they are united in blaming Wall Street and corporate interests for the economic pain they say all but the wealthiest Americans have endured since the financial meltdown.

There was a scramble of activity in the park Thursday afternoon and into the night. Hundreds of demonstrators scrubbed benches and mopped the park's stone flooring in an attempt to get Brookfield to abandon its cleanup plan.

Occupy Wall Street protesters celebrate by marching to city hall in New York after learning that they will not be evicted from Zuccotti Park. (Jessica Rinaldi/Reuters)

Members of the protesters' sanitation working group passed out bins for people to organize their belongings.

Protesters would have been allowed to return after the cleaning, which was expected to take 12 hours, but Brookfield said it plans to start enforcing regulations that have been ignored. That means no more tarps, no more sleeping bags, no more storing personal property on the ground — in other words, no more camping out for the Occupy Wall Street protesters, who have been living at Zuccotti Park for weeks. The park is privately owned but is required to be open to the public 24 hours per day.

"They're going to use the cleanup to get us out of here," said Justin Wedes, a 25-year-old part-time public high school science teacher from Brooklyn who was one of about 400 people in the park Thursday night. "It's a de facto eviction notice."

A spokesman for Mayor Michael Bloomberg, whose girlfriend is a member of Brookfield's board of directors, said Brookfield requested the city's assistance in maintaining the park. "We will continue to defend and guarantee their free speech rights, but those rights do not include the ability to infringe on the rights of others," Bloomberg spokesman Marc La Vorgna said, "which is why the rules governing the park will be enforced."

Protesters said the only way they will leave is by force. Organizers sent out a mass email asking supporters to "defend the occupation from eviction."

"We are doubling up on our determination to stay here as a result of this," Sophie Mascia, 26, a Queens resident who has been living in Zuccotti Park for three weeks, said before the postponement was announced. "I think this is only going to strengthen our movement."

Protesters have had some run-ins with police, but mass arrests on the Brooklyn Bridge and an incident in which some protesters were pepper-sprayed by police seemed to energize their movement.

Bill de Blasio, the city's public advocate, expressed concern over the city's actions as he inspected the park Thursday afternoon and listened to protesters' complaints.

"This has been a very peaceful movement by the people," he said. "I'm concerned about this new set of policies. At the very least, the city should slow down."

Attorneys from the New York City chapter of the National Lawyers Guild — who are representing an Occupy Wall Street sanitation working group — wrote a letter to Brookfield saying the company's request to get police to help implement its cleanup plan threatens "fundamental constitutional rights."

"There is no basis in the law for your request for police intervention, nor have you cited any," the attorneys wrote in a letter Thursday to Brookfield CEO Richard B. Clark. "Such police action without a prior court order would be unconstitutional and unlawful."

The attorneys said the sanitation working group has "committed itself to carrying out a thorough and complete cleaning" and to negotiate with the park's owner in good faith.

The protest has led sympathetic groups in other cities to stage their own local rallies and demonstrations: Occupy Boston, Occupy Cincinnati, Occupy Houston, Occupy Los Angeles, Occupy Philadelphia, Occupy Providence, Occupy Salt Lake and Occupy Seattle, among them.

In Denver, police moved early Friday to push protesters from a park near the state Capitol. Officers placed plastic handcuffs on protesters and took down tents.

More protests are planned 15 Canadians cities, including Toronto and Vancouver, this weekend, and European activists also are also joining in. Organizers announced a protesters' "occupation" of the London Stock Exchange to begin there on Saturday.

The movement has also drawn reaction from world leaders, including U.S. President Barack Obama, former Polish president Lech Walesa, Iran's Ayatollah Ali Khamenei and former Russian president Mikhail Gorbachev.

Walesa said Thursday that he supports the New York protest and is planning to either visit or write a letter to the protesters. He said the global economic crisis has made people aware that "we need to change the capitalist system" because we need "more justice, more people's interests, and less money for money's sake."

Khamenei said Wednesday that the wave of protests reflects a serious problem that will ultimately topple capitalism in America. He claimed the United States is in a full-blown crisis because its "corrupt foundation has been exposed to the American people."

With files from The Associated Press Accessibility Links

Gucci faces 'sweatshop' claims in China

04.54 egaoart No comments

AppId is over the quota
AppId is over the quota

Hong Kong (CNN) – Gucci stores in Shenzhen, China are facing allegations from former employees of operating as high-end “sweatshops,” according to reports earlier this week in China’s English-language newspapers, China Daily and Global Times.

In late September, five former employees released online an open letter to senior executives of the Italian designer brand, including claims of a draconian list of employment regulations such as time limitations on bathroom use and unpaid overtime extending past midnight.

A Gucci spokesperson told Chinese media, “Gucci does not and will not endorse or tolerate the alleged malpractices.”

Employees said they needed to seek permission for basic activities such as drinking water and bathroom breaks were limited to a maximum of five minutes.

They also complained of having to stand for more than 12 hours per day and work extensive overtime without compensation. While the official store closing time is 10:00 p.m., employees were required to stay as late as 3:00 a.m. to conduct inventory checks.

One of the five employees in the letter, surnamed He, told the Global Times, “Two of my former colleagues had to have abortions because we all had to stand so long each day.” The employee also spoke of other health consequences among staff: "Many of us ended up with various occupational diseases as a result of these inhuman rules. I have been suffering from stomach and urinary system illnesses."

The lawyer representing the five employees, Yang Qianwu, told the Global Times that each employee is demanding an average settlement of 100,000 yuan in overtime wages over their more than two years of employment.

In an e-mail statement to Chinese reporters Tuesday night, Ben Huang, Gucci’s Director of Marketing and Communications in China, said that Gucci is paying close attention to the recent media coverage and has conducted an investigation of the complaints. The company has also hired an external consultant to evaluate its store management in China.

Huang said Gucci has already taken a series of measures, including the dismissal of store managers involved in the situation. The company has also improved internal communications and training and will seek to continuously improve the working environment in its stores.

Xinhua reported that Gucci has asked its employees to refrain from commenting on the matter to the media.

According to China Daily, the case has also attracted the attention from the Shenzhen government. An official from the labor and human resources bureau from Luohu district has promised to investigate the case, while the deputy director of the Shenzhen Trade Union encouraged employees to report workplace abuses.

Chinese netizens have expressed outrage on the popular micro-blogging site Sina Weibo, criticizing lax government controls over workplace conditions.

User LiuSuorHuanHuan commented, “Why do large foreign enterprises always have problems when they enter China? …Chinese policies have too many loopholes that create opportunities for foreign investors to use them toward their advantage.” Another user, Sartorialist, wrote, “The main reason behind these blood factories of foreign companies in China is the lack of monitoring and excessive tolerating by local government.”

As China has become the ‘world’s factory’, worker complaints of sweatshop conditions to produce the goods and services of multi-national corporations are nothing new. The Global Times quoted a former manager at Gucci’s Beijing office saying that “mistreatment of employees is rife at all levels in the brand's mainland stores.” A user named MinGanCi sarcastically commented that “…Gucci management is truly aware of China’s customs—they have already localized their treatment of employees.”

- CNN's Nini Suet and Haolan Hong contributed to this report

G20 ministers face off over Europe debt crisis

04.20 egaoart No comments

AppId is over the quota
AppId is over the quota

Finance ministers and central bank governors from the world's 20 most advanced economies are gathering in Paris Friday to develop a comprehensive plan to deal with Europe's debt crisis.

The stakes are high, with many participants and economists arguing that a failure to get this right could plunge the world back into recession.

The discussions among the Group of 20 ministers, which continue Saturday, are expected to be frank, given market perceptions that European leaders have lagged in their efforts to agree on measures to prevent the problems of heavily indebted economies such as Portugal, Ireland, Italy, Greece and Spain from spreading to the larger economies.

The debt crisis has weighed on global stock markets, including the Toronto Stock Exchange, which has fallen 16 per cent from its 2011 high in April.

Jim Flaherty, Canada's finance minister, and Mark Carney, governor of the Bank of Canada, are attending.

Flaherty has been pressuring his European colleagues to move faster on measures to shore up the cash reserves of the biggest European banks. Carney has warned the region is "extremely vulnerable" to recession if bank cash isn't adequate.

Those banks hold large numbers of loans made to Greece and other troubled governments, and the value of those assets could drop substantially should Greece default.

The G20 finance ministers want the banks to raise new capital to shore up their cash reserves, but raising capital is expensive these days. It has been estimated that banks may need a minimum of €100 billion ($141 billion).

In September, the International Monetary Fund estimated that the loss in value of those loans may be twice that amount.

So instead of raising reserves, the banks may simply cut back on lending and plunge Europe and the rest of the world back into recession.

Despite the high stakes, leaders have kept expectations low. They have promised a plan by the end of the month, and this weekend is likely to be dominated by behind-doors negotiations.

But recent moves by credit rating agencies have underscored the need for action soon to prevent a loss of confidence from undermining the governments and banks of larger European economies:

On Thursday, Standard & Poor’s cut Spain’s credit rating for the third time in three years.Moody's Investors Service has warned Belgium its ratings might be cut in the next three months, in part because of its exposure to troubled bank Dexia.Moody’s has also downgraded a dozen British and nine Portuguese banks.And S&P has also cut the ratings of the Italian government and seven Italian banks, while Fitch Ratings has downgraded Italy’s and Spain’s government bonds.

The meeting opens Friday evening with a dinner. Among the topics expected to be addressed are the recapitalization of banks, a way to lower Greece's debt burden and measures to stimulate the world economy.

Providing a backdrop to the discussions will be the European Commission’s plan for dealing with the crisis, which was arrived at on Wednesday, but has still not been fully disclosed in detail.

It would force the banks to raise billions in new capital, provide continued support for Greece, make more effective use of the resources of the eurozone bailout fund, and expand the powers of the commission to control the taxation, spending and borrowing of the 17 nations which use the euro.

The commission, which is the European Union's executive body, hopes the bloc's leaders will embrace its suggestions at a crucial summit on Oct. 23 so that the plan can be presented to the G20 leaders’ summit Nov 3-4.

With files from The Associated Press Accessibility Links

Study: Women ask for raises, but aren’t heard

03.50 egaoart No comments

AppId is over the quota
AppId is over the quota

(CNN) – A new Catalyst study examining career advancement strategies has debunked the myth that women make less because they don’t ask—they do, they just aren’t being heard.

According to the study, men who employ traditional career advancement strategies—such as making your willingness to put in time and effort known and accepting challenges—are more likely to be rewarded, in the form of promotions or pay raises, than men who don’t.

However, women who adopted these strategies were not much more likely to advance than women who didn’t.

“This study busts the myth that ‘Women don’t ask.’ In fact, they do! But it doesn’t get them very far. Men, by contrast, don’t have to ask. What’s wrong with this picture?” Ilene H. Lang, President and CEO of Catalyst, said in a release.

The study suggests that women are rewarded for consistent performance whereas men are rewarded for potential. Women who changed jobs two or more times after completing their MBA earned $53,472 less than women who rose through promotions at their first organization. Men, on the other hand, made $13,743 more if they switched jobs after completing their MBA than if they stayed.

This translates into a $4,600 salary gap between men and women in their first job after completing an MBA, which balloons to a $31,258 gap mid-career.

While the pay gap between male and female executives was narrowing, at the current rate it would still take 98 years to close the gap in the UK, according to a study last month by the Chartered Management Institute.

A United Nations report entitled “Progress of the World’s Women” notes that worldwide, women are paid 10-30% less than men and 23% less in the U.S. The report cites maternity leave legislation and practices as key in guaranteeing equal opportunity, noting that the U.S. is “the only developed country that does not specify that [maternity] leave must be paid.”

A 2005 World Economic Forum study reports that worldwide, Nordic countries, notably Sweden, perform best in terms of gender equality. The report credits this to their generous maternity leave policies; the UN report shows that Sweden has 480 days of paid maternity leave, as well as paid, mandatory paternity leave.

Women are, not surprisingly, less satisfied with their career advancement than men, Catalyst reports, challenging the notion that women seek slower career tracks.

Perhaps the most important thing Catalyst revealed was that women need to employ different career advancement strategies than men. Women advanced further when they made their achievements known and networked with influential people. Men, while also benefiting from networking, did not see much benefit from making their achievements known, but rather through expressing willingness to work long hours and being aware of opportunities outside their organization, study authors said.