Paris vies to overtake London as finance hub post-Brexit

PARIS - British Prime Minister David Cameron once gleefully offered to "roll out the red carpet" for French executives wanting to escape staggering wealth taxes.

Now, with London's red carpet fraying after the Brexit vote to leave the European Union, Paris is stepping in to welcome bankers, investors and businesses who may want to escape the uncertainty hanging over the City's role as a global finance hub.

"In this new environment which is taking shape, we want France to be attractive," Prime Minister Manuel Valls said Wednesday.

As competition grows among Europe's capitals to benefit from the financial fallout of Brexit, Valls unveiled a series of measures to boost the allure of Paris.

Notably, he confirmed plans to cut France's corporate tax rate to 28 percent from 33 percent, a move previously announced by President Francois Hollande.

Britain's vote to leave the European Union "created shockwaves, for all European citizens but also, in a very concrete manner, many businesses settled in the United Kingdom," Valls said.

Valls said he wanted to improve the tax and legal framework to "welcome even more companies (and) make Paris the capital of smart finance."

The prime minister announced a tweak to a system allowing foreign employees to benefit from tax reductions, making it applicable for eight years instead of five.

Beyond these fiscal measures, the government also plans to put in place a "single entry point" to facilitate administrative matters for foreign companies seeking to set up shop in France -- where red tape can be a nightmare to navigate.

This service will help companies with questions about real estate, residency permits, schools and other issues.

Valls said France would open "as many international sections as needed in schools" to allow children of foreign employees to be taught in their mother tongue.

The Brexit vote has several European capitals clamoring to take London's spot as a major finance center, such as Frankfurt, Luxembourg and Dublin.

France is traditionally perceived as "anti-business", with its inflexible and hard-to-understand labor code.

According to the World Bank's 2016 "Ease of Doing Business" report, France ranks 27th out of 189 countries, while Britain comes in sixth.

'Supertax'

The Socialist government came into power in 2012 promising as 75 percent "supertax" on top earners -- which sent the rich fleeing -- and became another symbol of France's opposition to big business.

However the measure was slowly watered down and quietly dropped in 2015, as it failed to do much to boost a stagnating economy.

Hollande has since steered his government on a wildly different path to stimulate the economy, with a series of economic and labour reforms that have enraged the left flank of his party, which now accuses him of being too pro-business.

As an indication of how difficult the reforms have been, Valls had to force both sets of reforms through parliament without a vote using a special constitutional measure.

source: interaksyon.com

Asian stocks extend global rout as traders flee to safety

TOKYO, Japan -- Tokyo stocks led a rout across Asian markets Tuesday, while Japanese government bond yields turned negative, the dollar dived against the yen and gold jumped as fears about the global economy sent investors scrambling to safety.

While most of the region is closed for the Chinese New Year holiday, trading remained thin but dealers took their lead from New York and Europe where banking shares were battered.

The sell-off is the latest this year, which has seen trading screens from Asia to the Americas awash with red.

The latest round of blood-letting came on the back of worries about the financial sector as the global economy slows down, without the support of the Federal Reserve's easy monetary policies.

London, Paris and Frankfurt all finished down more than 2.5 percent, with the German DAX ending below 9,000 for the first time since October 2014. And Wall Street's three main indexes all lost more than one percent.

Financials were in focus as a slowdown in the world economy raises the prospect of loan defaults and lower interest rates, which eat into their bottom lines.

Banking stocks sagged in New York and Europe, with US titan Bank of America, Germany's Deutsche Bank and France's Societe Generale all tanking.

In Asian trade Tokyo slumped 5.3 percent in the afternoon, putting the market back into bear territory, a 20 percent fall from its recent highs.

Financial giant Mitsubishi UFJ plunging almost eight percent and rival Sumitomo Mitsui Financial Group tumbling 7.3 percent. Major brokerage Nomura tanked nearly 11 percent.

Exporters such as Toyota and Uniqlo operator Fast Retailing each down around five percent as they were hit by the strong yen.

The dollar sank to 114.50 yen, having sat above 120 yen just a week ago. The unit is considered a safe haven in times of uncertainty.

'Bucketload of concern'

The flight to safety also saw Japanese government bond yields dive below zero, extending a downtrend sparked by the Bank of Japan's surprise move last month to slap a negative interest rate on some commercial lenders' deposits.

And gold, another commodity considered low risk, climbed 1.5 percent Tuesday to $1,193.50.

Sydney shed 2.7 percent, Wellington was 1.4 percent off, Manila dived 1.5 percent and Jakarta was down 0.6 percent.

Shanghai, Hong Kong and Seoul, among others, were closed.

"Those off celebrating Lunar New Year will be happy their markets are closed," Chris Weston, chief markets strategist in Melbourne at IG Ltd., said in an email to clients.

"These markets need a strong shake up and sharp downside move, followed by a wave of buying to settle things down," he said, according to Bloomberg News.

"But until that comes there will be no clarity, absolutely no confidence and a bucketload of concern. It almost feels as though the markets are pushing central banks into some kind of action, but they don't know exactly what it is they want."

However, while regional equities were being scythed, crude prices staged a rebound after US benchmark West Texas Intermediate fell back below $30 a barrel on Monday.

WTI was up 1.4 percent at $30.10 and Brent added 0.7 percent to $33.12.

Both contracts lost more than 3.5 percent Monday after weekend talks between OPEC kingpin Saudi Arabia and Venezuela dashed hopes for a reduction in production, with Riyadh unwilling to move from its position.

Key figures around 0400 GMT

Tokyo - Nikkei 225: DOWN 5.3 percent at 16,107.26

Sydney - S&P/ASX 200: DOWN 2.9 percent at 4,829.30

Euro/dollar: UP at $1.1212 from $1.1193 on Monday

Dollar/yen: DOWN at 114.50 yen from 115.84 yen

New York - Dow: DOWN 1.1 percent at 16,027.05 (close)

London - FTSE 100: DOWN 2.7 percent at 5,689.36 points (close)

source: interaksyon.com

Global stocks fall, oil dips as Japan slips into recession

LONDON - Shares fell and the oil price slid on Monday after data showed Japan had slipped into recession, raising concerns about global growth.

European shares opened lower. They followed Tokyo's Nikkei index which lost 3 percent, its biggest one-day drop since August on news that the world's third-largest economy unexpectedly shrank by an annualised 1.6 percent in the third quarter.

This followed a 7.3 percent contraction in the previous quarter caused by a rise in the national sales tax and ran counter to economists forecasts for a 2.1 percent rebound.

The data initially pushed the yen to a seven-year low against the dollar, but as Tokyo stocks fell the Japanese currency rebounded.

It also shaved $1 off the price of Brent crude oil and sent ripples across Europe, where the FTSEurofirst 300 pan-European share index was down 0.3 percent.

Data on Friday showed euro zone economic output expanded more than expected in the third quarter but remained weak.

Leaders from the G20 group of countries agreed on Sunday a package of measures they said would add an extra 2.1 percentage points to growth over five years. They also agreed steps to tackle climate change and crack down on tax avoidance.

But financial markets focused on Japan's economic downturn.

"It's a bit of shock for the market, because people believed that the Bank of Japan had everything under control. But overall, the initial negative reaction shouldn't last too long. Investors still expect central bank action worldwide to support the global economy," FXCM analyst Nicolas Cheron said.

Other Asian shares also fell. MSCI's main index of Asia-Pacific stocks outside Japan lost 0.5 percent.

Chinese equities dropped as profit taking outweighed buying by foreign investors as a landmark Hong Kong-Shanghai trading link debuted on Monday.

The Shanghai Composite ended down 0.2 percent and Hong Kong's Hang Seng lost 1 percent.

The yen was the big mover on foreign exchange markets. After the GDP data, it fell to as low as 117.06 to the dollar but later rebounded and was last at 116.12, up 0.3 percent on the day.

The dollar index dipped 0.1 percent as a result and the euro made a similar gain versus the greenback.

As the Japanese data stoked concerns about the global economy, undermining stronger-than-expected U.S. retail sales data on Friday, German 10-year Bund yields also fell, opening down 2 basis points at 0.77 percent, just above a record low of 0.716 percent.

Brent crude last traded at $78.32 a barrel, down 1.4 percent after the Japanese data was seen hitting global demand.

"This is another knock on crude oil prices, another bearish factor," said Tony Nunan, oil risk manager at Mitsubishi Corp.

Eyes remain on possible OPEC production cuts when the oil cartel meets next week.

Gold held near two-week highs on a softer dollar. Spot gold was last at $1,185.60.

source: interaksyon.com

Bonds rally, stocks fall as global economy fears mount

NEW YORK - Stocks took a pounding on Wednesday, although Wall Street managed to peddle back from its steepest lows, and safe-haven government debt prices rose after U.S. and Chinese inflation data fanned worries about a global slowdown.

A key gauge of Wall Street anxiety hit its highest level since November 2011 as investors rushed to buy protection against further losses, and options activity surged as investors reevaluated their strategies in light of the latest signs that the global economy may be losing its footing.

The S&P 500 fell as much as 3 percent, briefly turning negative for the year, while European equities finished 3.2 percent lower and marked their biggest one-day slide in almost four years.

Popular trades that have worked for most of the year, including heavy bets on the dollar, more gains in stocks, and on an eventual rise in yields, are unraveling.

A fall in China's inflation rate to a five-year low and a decline in U.S. producer prices for the first time in over a year were worrisome signs to investors already skittish about the path of the global economy and caused them to reassess their views on when the U.S. Federal Reserve might hike interest rates.

"There's concern about an absence of aggregate demand in the world, and that's really what's weakening the market. The big fear out right now is we're not immune from that," said David Joy, chief market strategist at Ameriprise Financial in Boston.

"If you look at the lows of the day, maybe we've put in a little bit of a trading bottom here. But I don't think it makes these concerns go away."

The latest news on the spread of Ebola added to a climate of fear, with Texas officials reporting that another healthcare worker in Dallas tested positive for the deadly virus. Almost 4,500 people have died of the disease, mostly in West Africa.

An MSCI gauge of stocks in major markets was down 1 percent. The CBOE Volatility Index closed at 26.25, up 15.2 percent, after earlier hitting 31.06, the highest level since November 2011.

The Dow Jones industrial average fell 173.45 points, or 1.06 percent, to 16,141.74, the S&P 500 lost 15.21 points, or 0.81 percent, to 1,862.49, and the Nasdaq Composite dropped 11.85 points, or 0.28 percent, to 4,215.32.

Trading volume in the options market was the busiest of the year, according to Trade Alert data, while equities volume on Wall Street was near 12 billion shares, a nearly 50 percent increase from the average daily volume so far this month.

It was also the heaviest trading day for on-the-run 10-year Treasury note contracts since May 2008.

Bonds rally, oil falls further

Flight from risk resulted in a massive rally in U.S. Treasuries, pushing the benchmark 10-year note's yield as low as 1.865 percent, its lowest level since May 2013.

Benchmark yields retraced a large part of the downward move in late trading, but ended lower on the day, with prices up 22/32 to yield 2.1288 percent, compared with 2.206 percent in late trading on Tuesday.

Ten-year Bund yields hit a record low of 0.719 percent before edging up to 0.757 percent.

Rate futures now show the market does not expect the Fed to raise rates until early 2016, a dramatic change from a few weeks ago, which could keep downward pressure on yields.

"Everyone's animal spirit is dead. This is a pretty dramatic move when everyone was expecting higher rates," said George Goncalves, head of U.S. interest rates strategy at Nomura Securities International in New York. "It's all about capital preservation at this point. All the crowded trades are being tested, which is why I’m not sure this is over."

The spread of high-yield corporate bond spreads over the benchmark U.S. Treasuries, which represents the premium paid to investors to compensate for the risky corporate debt, rose to match the high hit in September 2013, at 483 basis points. The spread had bottomed at 335 bps in June.

A repricing of Fed expectations fueled a selloff in the dollar, which has been rising recently on bets on policy tightening at the Fed while other central banks continue easing.

The soft data "paired with the decline in Treasury yields and declines in energy prices, are all raising concern regarding the timing of the Fed's next move," said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York.

Although U.S. September retail sales had been expected to decline, the weakness was surprising because it was broad-based.

The euro rose 1.4 percent against the dollar at $1.2836, just below a three-week high of $1.2885 hit earlier. The greenback lost 1 percent against the yen at 105.93.

Spot gold prices rose 0.7 percent, up for the sixth time in the last eight sessions with the help of the weaker dollar, but copper prices tumbled 2.3 percent.

The crude trampling

Brent and U.S. crude futures fell, a day after posting their biggest daily drop in years, with more production, less demand and deflation expectations weighing heavily.

Brent lost 2 percent to $83.36 a barrel while U.S. crude fell 1 percent to $81.02.

Emerging markets were also hit with a fall in Russia's rouble to its weakest level on record, while Russian government 10-year yields hovered near a five-year high, and shares in Moscow closed near a seven-month low hit last week.

source: interaksyon.com

US lawmakers split despite October 17 debt deadline

WASHINGTON DC - The United States is still facing a potentially devastating sovereign debt default, after senators failed to agree on terms to reopen the federal government and raise the country's borrowing limit.

Republicans and Democrats -- at war over the country's finances and ideological direction for more than two weeks -- tried to shed a positive light Sunday on a weekend of talks that despite the threat of global economic censure did not produce a solution.

The Senate convened a rare Sunday session to try and break the budgetary impasse that prompted the government to shut down on October 1, a move that has since damaged domestic confidence and undermined America's reputation as the world's leading economic superpower.

If the US debt ceiling is not raised by October 17, the Treasury would run out of money and could begin defaulting on its obligations for the first time in history, with likely dire consequences for the global economy.

Seeking to avert that outcome, the Democratic leader in the Senate, Harry Reid, talked up the dialogue with Republicans -- represented by top Senator Mitch McConnell -- though nothing concrete was disclosed.

"I'm optimistic about the prospect for a positive conclusion," Reid said.

US Treasury Secretary Jacob Lew has told the International Monetary Fund's policy steering committee that Washington understood its reputation as a safe harbor was at risk.

Stock markets are already factoring in a possible default if no deal is reached between President Barack Obama, his Democratic Party and rival Republicans by Thursday night.

But the threat of a global economic rebuke has so far done little to prompt an agreement.

Polls released during the shutdown have shown Congress's approval rating at record lows, with Republicans blamed most for the political gridlock in Washington.

Both parties in recent days indicated a deal must be done at all costs, despite the bitter bipartisan rancor.

"This is something that's wreaking havoc around the world and will affect economic growth, and I do hope that over the next week we'll reach a conclusion and I think we will," Republican Senator Bob Corker told "Fox News Sunday."

Obama rejected an offer by Republicans in the House of Representatives to lift the debt ceiling for six weeks while negotiations would continue on reopening the government, insisting on a longer-term solution.

Following talks with the top House Democrat, Nancy Pelosi, the president said they were not budging from their position.

Obama and Pelosi "reinforced that there must be a clean debt limit increase that allows us to pay the bills we have incurred and avoid default," the White House said in a statement.

"The House needs to pass the clean continuing resolution to open up the government and end the shutdown that is hurting middle class families and businesses across the country."

Senate leader Reid had on Saturday turned down a second compromise proposal, offered by moderate Republican Senator Susan Collins.

It called for lifting the US debt limit for up to a year, reopening the government and repealing a tax on medical devices under Obama's signature health care law.

But Collins said her proposal could still become the basis of a deal, telling CNN's "State of the Union" she had support from a growing, bipartisan group of senators.

Senator Charles Schumer, a key Democratic power broker, said Reid and McConnell "were not that far apart" Saturday, when they held their first talks of the crisis.

"I'm cautiously hopeful, optimistic, that we can come to an agreement and open up the government and avoid default based on the bipartisan meetings that are going on," Schumer told CBS's "Face the Nation."

Democrats, meanwhile, have added a demand of their own -- that any deal also involve undoing the across-the-board spending cuts known as the sequester that went into effect earlier this year.

Schumer acknowledged it was a "sticking point."

Corker said House Republicans had gone too far in demanding that Obama's signature health care law be defunded, the initial cause of the government shutdown.

But "now the Democrats are on the verge of being one tick too cute," he said, referring to the bid to undo the sequester.

Global pressure for a deal in Washington is mounting.

"The standing of the US economy would, again, be at risk," International Monetary Fund chief Christine Lagarde said on NBC's "Meet the Press," comparing the effects of failing to raise the debt ceiling and reopening the government to the 2008 global financial meltdown.

source: interaksyon.com

What happens if the US government shuts down?

WASHINGTON -- A US government shutdown is possible on Tuesday, the first day of fiscal 2014, because Congress has so far failed to find a way to pay for it.

A closure would have far-reaching consequences at federal agencies dealing with everything from sending out Social Security checks to collecting admission fees at national parks.








Here is a roundup of how the impact would be felt:  


FEDERAL WORKERS: As many as 1 million US federal employees could face unpaid furloughs or payless paydays, according to the president of the American Federation of Government Employees, which represents 670,000 union members.

NATIONAL PARKS: National parks would close, meaning a loss of 750,000 daily visitors and an economic loss to gateway communities of as much as $30 million for each day parks are shut, according to the non-profit National Parks Conservation Association.

DEFENSE DEPARTMENT: All military personnel would continue on normal duty status, but many civilian employees would be temporarily furloughed, Deputy Defense Secretary Ashton Carter said in a memo. He said furlough notices would be issued on Tuesday, October 1, if no agreement to fund the government is reached.

The ratings agency Standard & Poor's said a shutdown of less than two weeks would not materially affect the credit of big defense contractors, though a longer shutdown could weaken smaller defense contractors. Most defense contractors would not be paid, new contracts would not start and orders would be delayed, with service contracts hardest hit, S&P said.

INTERNAL REVENUE SERVICE: Most of the federal tax agency's 90,000 employees would be furloughed. Taxpayers who requested an extension beyond the April 15 deadline to file their 2012 taxes must do so by October 15, and they will still be able to file these returns even if the IRS is still shut down then.

FEDERAL RESERVE AND OTHER FINANCIAL AGENCIES: The Fed would stay open, since it does not depend on congressional appropriations to operate; so would the Consumer Financial Protection Bureau, which the Fed funds. The Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency pay for themselves and would remain open. The Commodity Futures Trading Commission has been rushing through approvals for a new, untested type of trading platform ahead of a possible shutdown, its top regulator said.

JUSTICE DEPARTMENT: Fewer than 18,000 of the department's 114,486 employees would be furloughed, and if the furlough is prolonged, some of those could be brought back to work. Criminal litigation would continue under a government shutdown, while civil litigation would be curtailed or postponed as much as possible "without compromising to a significant degree the safety of human life or the protection of property," the department said in its contingency plan.

COURTS: The US Supreme Court would probably operate normally, as it has during previous shutdowns, but a spokesman declined to share the high court's plans.

Federal courts would remain open for approximately 10 business days if the government closes on October 1, and would reassess on or about October 15.

NATIONAL INSTITUTES OF HEALTH: The agency's research hospital in Bethesda, Maryland, would take no new patients.

US TRADE REPRESENTATIVE'S OFFICE: Already squeezed by automatic spending cuts imposed by so-called sequester, the USTR office has cut back on travel to the 41 countries where there are concerns about intellectual property, Trade Representative Michael Froman said.

ENVIRONMENTAL PROTECTION AGENCY: EPA Administrator Gina McCarthy said this week that the agency would effectively shut down with only a core group of individuals available in case of a "significant emergency."

AGRICULTURE DEPARTMENT: USDA meat inspectors would stay on the job, industry experts said. Statistical reports would be delayed. An October 1 shutdown would come as the agency is surveying farmers and checking fields for yields and acreage in advance of the October 11 crop report. A government closure of more than a few days could delay the report, relied upon by traders and food manufacturers as the best estimate available of the US food supply.

WASHINGTON DC SIGHTS: Some popular tourist spots in the nation's capital would probably close, including the FDR Memorial, the Kennedy Center for the Performing Arts, the Library of Congress, the Lincoln Memorial, the National Archives, the National Zoo and all Smithsonian Museums.

source: interaksyon.com

PH stock market ekes out modest gain after US fails to break budget impasse

MANILA - Philippine share prices squeezed out marginal gains on Tuesday as the US government partially shut down after Congress failed to reach a deal to fund federal operations. At the Philippine Stock Exchange, the benchmark index inched up 6.04 points, or 0.1 percent, to close at 6,197.84, tracking the modest advance of most Asian markets. Among the sub-indices, only the service and property counters finished in the green with gains of 0.45 percent and 0.35 percent, respectively. Market breadth was negative as decliners beat advancers, 84 to 57, while 41 issues were unchanged. A total of 1.53 billion stocks worth P7.88 billion changed hands. Actively traded stocks were Meralco, Alliance Global, Metrobank, Universal Robina and Ayala Land. Top gainers were Ginebra, Maybank and PAL, while the biggest losers were Keppel Properties, Keppel Holdings and Philex Petroleum. The US government began a partial shutdown for the first time in 17 years after US lawmakers missed the October 1 deadline to agree on the budget for the new fiscal year. The Republican-controlled House of Representatives was pushing for the delay of President Barack Obama's signature healthcare law by a year, while the Senate Democrats refused to do so. "Markets held on to the morning gains for a while, taking time to digest the latest development. Yet as the afternoon session progressed it became evident investors found the sidelines a more enticing place to ride out the uncertainty as to how long the shutdown will last," said Jun Calaycay of Accord Capital Equities Corp. The PSE index fell nearly three percent on Monday as investors braced for a US government shutdown amid a budget impasse. The main gauge jumped to a high of 0.96 percent in early Tuesday trades but succumbed to profit-taking in the afternoon session.

source: interaksyon.com

HSBC raises growth forecast for Philippines

MANILA - HSBC has upgraded its growth forecast for the Philippines on the back of government spending, loose monetary policy and an improving global economy.

In a research note, the London-based bank said it raised its forecast to 5.9 percent form the initial estimate of 4.9 percent.

HSBC said the Philippines would grow faster than initially predicted, given signs of recovery in Japan and the US, and of accommodative monetary policy around the world.

For the first quarter of this year, HSBC sees Philippine gross domestic product (GDP) growing 6 percent, slower than the 6.8 percent in the fourth quarter of 2012. Growth would further slip to 5.7 percent and 5.4 percent in the second and third quarters, respectively, before picking up to 6.5 percent in the fourth quarter.

This would bring full-year growth to 5.9 percent, or a tad lower than the government's full-year target of 6-7 percent.

Trinh Nguyen, HSBC economist, said the bank expects Philippine exports to benefit from "Abenomics," referring to the economic policies of Japanese Prime Minister Shinzo Abe.

Nguyen said domestic demand would remain the main prop for Philippine GDP, adding that remittances would stay steady this year and expand by 6.3 percent given more job contracts in the Middle East and Asia.

The country's growth story is also supported by positive political and macro news, with the Aquino administration gaining public trust, as shown by surveys, due to its fiscal consolidation and anti-corruption thrust, Nguyen said.

Because of the "sensible" fiscal and monetary policies, the country will likely earn an investment grade status from the major credit rating agencies by the second half of this year, she said.

While the Philippines has enjoyed strong portfolio inflows, the same cannot be said of the job-generating foreign direct investments (FDI), HSBC said.

It said foreigners are still wary of putting their money into factories and other long-term bets, as shown by the lackluster performance in the area of FDI, flows of which were flat in the first 11 months of last year at $1.2 billion.

"FDI inflows are more indicative of investors’ perceptions of the government’s progress in resolving long-standing challenges. While attaining an investment rating upgrade will likely have a positive effect on FDI inflows as funding becomes cheaper for corporations, foreign investors will be watchful of reform momentum such as improving electricity production, transportation, and most importantly easing restrictions on foreign ownership," Nguyen said.

She said reform in foreign ownership, for one, would take long in coming, the earliest in 2016 when President Benigno Aquino III "can afford to use his political capital to change the Constitution."

Another bane of the country is the underperformance of the Aquino administration's public-private partnership (PPP) scheme, leaving government to shoulder most of the infrastructure spending, which in turn would hinge on tax collection improvements, HSBC said.

In this regard, the Aquino administration would have no choice but to increase tax rates of expand the tax base, starting with the mining sector reform, the bank said.

"At the moment, both seem politically unviable. As such, FDI inflows will continue to underperform in the coming years," Nguyen said.

While surveys indicate that the upcoming mid-term elections would lean towards the administration party winning, HSBC said the more crucial signal is succession after Aquino steps down in 2016.

"What’s more noteworthy to watch is the replacement of President Aquino in 2016, which would signal whether the reform momentum in the Philippines will be sustained. While a foundation is laid, reforms to long-standing challenges are still required. With the international community cheering it on, this is an opportunity that leaders of the Philippines should not squander," Nguyen said.

source: interaksyon.com

US stocks end higher for sixth straight week, tech leads

NEW YORK - The Nasdaq composite stock index closed at a 12-year high and the S&P 500 index at a five-year high, boosted by gains in technology shares and stronger overseas trade figures.

The S&P 500 also posted a sixth straight week of gains for the first time since August.

The technology sector led the day's gains, with the S&P 500 technology index up 1.0 percent. Gains in professional network platform LinkedIn Corp and AOL Inc after they reported quarterly results helped the sector.

Shares of LinkedIn jumped 21.3 percent to $150.48 after the social networking site announced strong quarterly profits and gave a bullish forecast for the year.

AOL Inc shares rose 7.4 percent to $33.72 after the online company reported higher quarterly profit, boosted by a 13 percent rise in advertising sales.

Data showed Chinese exports grew more than expected, a positive sign for the global economy. The U.S. trade deficit narrowed in December, suggesting the U.S. economy likely grew in the fourth quarter instead of contracting slightly as originally reported by the U.S. government.

"That may have sent a ray of optimism," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

Trading volume on Friday was below average for the week as a blizzard swept into the northeastern United States.

The U.S. stock market has posted strong gains since the start of the year, with the S&P 500 up 6.4 percent since December 31. The advance has slowed in recent days, with fourth-quarter earnings winding down and few incentives to continue the rally on the horizon.

"I think we're in the middle of a trading range and I'd put plus or minus 5.0 percent around it. Fundamental factors are best described as neutral," Dickson said.

The Dow Jones industrial average ended up 48.92 points, or 0.35 percent, at 13,992.97. The Standard & Poor's 500 Index was up 8.54 points, or 0.57 percent, at 1,517.93. The Nasdaq Composite Index was up 28.74 points, or 0.91 percent, at 3,193.87, its highest closing level since November 2000.

For the week, the Dow was down 0.1 percent, the S&P 500 was up 0.3 percent and the Nasdaq up 0.5 percent.

Shares of Dell closed at $13.63, up 0.7 percent, after briefly trading above a buyout offering price of $13.65 during the session.

Dell's largest independent shareholder, Southeastern Asset Management, said it plans to oppose the buyout of the personal computer maker, setting up a battle for founder Michael Dell.

Signs of economic strength overseas buoyed sentiment on Wall Street. Chinese exports grew more than expected in January, while imports climbed 28.8 percent, highlighting robust domestic demand. German data showed a 2012 surplus that was the nation's second highest in more than 60 years, an indication of the underlying strength of Europe's biggest economy.

Separately, U.S. economic data showed the trade deficit shrank in December to $38.5 billion, its narrowest in nearly three years, indicating the economy did much better in the fourth quarter than initially estimated.

Earnings have mostly come in stronger than expected since the start of the reporting period. Fourth-quarter earnings for S&P 500 companies now are estimated up 5.2 percent versus a year ago, according to Thomson Reuters data. That contrasts with a 1.9 percent growth forecast at the start of the earnings season.

Molina Healthcare Inc surged 10.4 percent to $31.88 as the biggest boost to the index after posting fourth-quarter earnings.

The CBOE Volatility index, Wall Street's so-called fear gauge, was down 3.6 percent at 13.02. The gauge, a key measure of market expectations of short-term volatility, generally moves inversely to the S&P 500.

"I'm watching the 14 level closely" on the CBOE Volatility index, said Bryan Sapp, senior trading analyst at Schaeffer's Investment Research. "The break below it at the beginning of the year signaled the sharp rally in January, and a rally back above it could be a sign to exercise some caution."

Volume was roughly 5.6 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.

Advancers outpaced decliners on the NYSE by nearly 2 to 1 and on the Nasdaq by almost 5 to 3.

source: interaksyon.com

Burberry warning sends shiver through luxury sector

LONDON - British fashion brand Burberry issued a profit warning on Tuesday, the clearest sign yet that slowing economic growth in China and Europe's debt crisis are bringing a boom in demand for luxury clothes and accessories to a halt.

The company, famous for its raincoats lined with a distinctive camel, red and black check pattern, said it expected underlying full-year profit to be around the lower end of market forecasts.

That sent its shares down 19 percent and dragged down rivals including LVMH, the world's largest luxury goods group.

China has been one of the main drivers of a boom in luxury brands, with consumers eager to buy designer labels, including Burberry's raincoats and other high-end fashions.

But luxury goods firms' shares have wobbled in the past few months over worries about Europe's sovereign debt crisis and slowing growth in China and other emerging markets, where demand for designer brands has managed to offset weaker trends in the United States and Europe.

Morgan Stanley analysts said in a note to clients on Tuesday that Burberry's statement was the first major disappointment for European luxury companies.

Shares in France's LVMH and PPR were both down 4 percent, while Switzerland's Richemont was down 3 percent.

Burberry said comparable store sales didn't grow in the 10 weeks to September 8, the bulk of its financial second quarter, compared with a year earlier. Total sales rose 6 percent, underpinned entirely by new store openings.

That represented a marked slowdown from first-quarter retail revenue growth of 14 percent and comparable store sales up 6 percent.

The company reported a fall in first-quarter sales growth in July, as China slowed.

"Given this background, we are tightly managing discretionary costs and taking appropriate actions to protect short term profitability," Chief Executive Angela Ahrendts said on Tuesday.

Analysts had expected Burberry to post pretax profit for the year to March 2013 of between 407 and 451 million pounds ($652-$722 million), with a consensus of 433.21 million, according to a Reuters poll of 18 analysts.

"Burberry's latest results show that even the top end of the market isn't functioning at full capacity in the current economic climate," said Jaana Jatyri, CEO of fashion forecasting company, Trendstop.com.

"The global economic crisis is dragging on and the longer it drags on the less confident even wealthier individuals become. Unfortunately, people lacking confidence do not shop at Burberry."

source: interaksyon.com

China, Russia sound alarm on world economy at APEC summit

VLADIVOSTOK, Russia - China and Russia sounded the alarm about the state of the global economy and urged Asian-Pacific countries at a summit on Saturday to protect themselves by forging deeper regional economic ties.

Chinese President Hu Jintao said Beijing would do all it could to strengthen the 21-member Asia-Pacific Economic Cooperation (APEC) by rebalancing its economy, Asia's biggest, to improve the chances of a global economic recovery.

Russian President Vladimir Putin said trade barriers must be smashed down as he opened the APEC summit which he is hosting on a small island linked to the Pacific port of Vladivostok by a spectacular new bridge that symbolizes Moscow's pivotal turn to Asia away from debt-stricken Europe.

"It's important to build bridges, not walls. We must continue striving for greater integration," Putin told the APEC leaders, seated at a round table in a room with a view of the $1 billion cable-stayed bridge, the largest of its kind.

"The global economic recovery is faltering. We can overcome the negative trends only by increasing the volume of trade in goods and services and enhancing the flow of capital."

Hu told business leaders before the summit the world economy was being hampered by "destabilizing factors and uncertainties" and the crisis that hit in 2008-09 was far from over. China would play its role, he said, in strengthening the recovery.

"We will work to maintain the balance between keeping steady and robust growth, adjusting the economic structure and managing inflation expectations. We will boost domestic demand and maintain steady and robust growth as well as basic price stability," he said.

Hu spelled out plans for China, whose economic growth has slowed as Europe's debt crisis worsened, to pump $157 billion into infrastructure investment in agriculture, energy, railways and roads.

Hu steps down as China's leader in the autumn after a Communist Party congress, but he promised continuity and stability for the economy.

Putin, who has just begun a new six-year term as president, said on Friday Russia would be a stable energy supplier and a gateway to Europe for Asian countries, and also pledged to develop his country's transport network.

RUSSIA LOOKS EAST

The relative strength of China's economy, by far the largest in Asia and second in the world to the United States, is key to Russia's decision to look eastwards as it seeks to develop its economy and Europe battles economic problems.

APEC, which includes the United States, Japan, South Korea, Indonesia and Canada, groups countries around the Pacific Rim which account for 40 percent of the world's population, 54 percent of its economic output and 44 percent of trade.

APEC members are broadly showing relatively strong growth, but boosting trade and growth is vital for the group as it tries to remove the trade barriers that hinder investment.

The European Union has been at odds with both China and Russia over trade practices it regards as limiting free competition. Cooperation in APEC is also hindered by territorial and other disputes among some of the members.

Putin, 59, limped slightly as he greeted leaders at the summit. Aides said he had merely pulled a muscle. Underlining Putin's good health, a spokesman said he had a "very active lifestyle."

Discussions at the two-day meeting will focus on food security and trade liberalization. An agreement was reached before the summit to slash import duties on technologies that can promote economic growth without endangering the environment.

Breakthroughs are not expected on other trade issues at the meeting, which U.S. President Barack Obama is missing. He has been attending the Democratic Party convention and Washington is being represented by Secretary of State Hillary Clinton.

U.S. officials say Clinton's trip is partly intended to assess Russia's push to expand engagement in Asia, which parallels Washington's own turn towards the Asia-Pacific region.

Also missing the summit was Australian Prime Minister Julia Gillard. Putin said she had dropped out because her father had died.

source: interaksyon.com

ANALYSIS: Euro woes tilt financial power in Asia's favor

LONDON - As European banks retrench to recover from the global financial meltdown, they are finding ready buyers in Asia for everything from loans to entire insurance and broking operations.

There are other tell-tale signs of a shift in power: this year's two biggest initial public offerings after Facebook were launched not in the United States or Europe, but in Malaysia.

Yet perhaps what is more striking is that, with one or two exceptions, Asian financial firms are not doing more in Europe itself to capitalize on the euro zone's festering debt and banking crisis.

Take China. The economy has more than doubled in size in five years. It has some of the biggest banks in the world. And its appetite for snapping up natural resources is undiminished: witness last month's $15.1 billion agreement by state oil company CNOOC Ltd to buy Canada's Nexen Inc, the biggest foreign acquisition to date by a Chinese company.

When it comes to the financial sector, however, the glass is half-empty, not half-full, said Andre Loesekrug-Pietri, chairman of A Capital, a China-Europe investment fund.

"There's a front-cover story every other month about China buying up the world, but China is still a very small player in international M&A," he said.

Waiting game

David Marsh, co-founder of a forum in London that connects central banks and sovereign wealth funds with banks and asset managers, said the West no longer had a monopoly on innovation and dynamism in financial services.

But China was playing a long game, biding its time and waiting for bargains. With plenty of bankers and traders being made redundant, Chinese firms have the chance gradually to build up teams and expertise rather than making giant acquisitions.

"They'll be much more clever than simply buying moribund banks at high prices: they'll be buying people," Marsh said.

"What we're seeing now is just the precursor of a much bigger shift that will take place over the next 10 years, but it won't happen in one fell swoop."

China has not been completely asleep on the acquisitions front.

Two Chinese private equity funds are on the final shortlist of bidders for the asset management arm of Franco-Belgian financial group Dexia, a deal that could be worth 500 million euros or more.

And CITIC Securities has agreed to buy CLSA Asia-Pacific Markets, a highly regarded Hong Kong-based brokerage, from its French parent, Credit Agricole SA, in a two-stage transaction worth $1.25 billion.

The deal is symbolic. Whereas CITIC is China's biggest brokerage, Credit Agricole is battling mounting losses in Greece, the epicenter of the euro zone crisis, where it owns the country's sixth-largest bank, Emporiki.

"Distressed banks selling good assets always happens in a crisis like this. Banks which don't want to raise capital by issuing new equity end up selling their offshore assets, and typically they sell the crown jewels," said Ken Courtis, founding partner of Themes Investment Management and a former vice-chairman of Goldman Sachs Asia.

A clutch of other European financial institutions is also beating the retreat in Asia.

Britain's Royal Bank of Scotland has offloaded some of its Asia-Pacific investment banking operations to Malaysia's CIMB Group Holdings Bhd, while ING is selling its $7 billion Asia insurance business. Both banks had to be bailed out by their governments during the crisis.

Integrating independent-minded CLSA would be one of the biggest challenges for CITIC, Courtis said. Chinese financial institutions in general have a narrow bench of executives with the right linguistic and overseas management expertise - one reason why they are initially beefing up their offshore presence in more-or-less familiar Hong Kong, he said.

"They don't have a lot of people who have experience managing big international pools of capital," Courtis said. "So they will do this step by step. We'll continue to see them move ahead slowly."

Burned fingers

Underscoring that cautious approach, Bank of China said last month it was ending a four-year foray into Swiss private banking and transferring under 1 billion Swiss francs in assets to Julius Baer under a pact to refer clients to each other.

One reason why China is treading carefully is that it its sovereign wealth fund made big paper losses when it bought stakes in fund manager Blackstone and investment bank Morgan Stanley before the financial crisis broke.

Ping An Insurance, China's second-largest insurer, lost about $3 billion on its 2007 investment in Belgian-Dutch Fortis, which foundered during the credit crunch.

Chastened, the authorities in Beijing blocked several other financial deals as too risky, including a proposal by Bank of China to buy 20 percent of French private bank La Compagnie Financiere Edmond de Rothschild.

"Today we don't have so much support from the government to do financial services M&A," said A Capital's Loesekrug-Pietri.

According to figures compiled by Rhodium Group, a New York consultancy, China invested $526 million in financial services and insurance in the European Union between 2000 and 2011, just 2.5 percent of the country's total direct investment in the 27-nation bloc over that period.

But that sum includes only two mergers and acquisitions, valued at $31 million. The rest of the investment was in the form of "greenfield" projects, such as setting up new offices.

London's ambitions to become a hub for trading the yuan, together with Chinese corporations' growing presence in Europe, should ensure plenty of opportunities for further organic expansion whether takeovers eventually flourish or not.

"We increasingly see Chinese service providers following their domestic clients abroad to provide support with overseas operations. Chinese banks, now present in all major European markets, are an example," Rhodium said in a recent report.

source: interaksyon.com

Little First-Quarter Growth Seen for India Outsourcers, Recovery Hopes Fade

BANGALORE (Reuters) - Uncertainty about spending by U.S. and European clients in a weak global economy will likely weigh on the earnings of Indian outsourcers, dampening hopes that demand will pick up in the second half of the year.

India's $100 billion-a-year information technology and back-office outsourcing industry earns about three-quarters of its revenues from customers in the United States and Europe.

Analysts expect No.2 ranked Infosys Ltd., the only top-three vendor to provide a full-year forecast, to pare its revenue growth estimate for the current fiscal year to as low as 5 percent when it posts quarterly earnings on July 12.

The company in April had forecast 8-10 percent growth for the fiscal year ending March 2013, already disappointing investors enough to cut 13 percent of its market value on the day. It has gained about 2 percent since.

The National Association of Software and Service Companies, or NASSCOM, an industry lobby, expects the industry to grow exports by 11-14 percent in the current fiscal year that ends in March.

Customers continue to hold back discretionary spending due to the extended euro-zone crisis and the absence of unequivocal data that an economic recovery is under way in the United States, the Indian providers' biggest market.

"Hopes of a recovery in the second half are just that, hopes," said Apurva Shah, head of research at BNP Paribas Mutual Fund, which manages investments of about $750 million, including in the top Indian IT companies.

Due to the continued uncertainty in the demand environment and discretionary spending not coming through, the fund was "underweight" on the sector, Shah said.

FADING FAST

The sluggish global economy is prompting clients to demand more for every dollar spent. This adds to the pressure on billing rates on a commoditized set of services that Indian firms, competing with Accenture and IBM, rely on for the bulk of their revenues.

"The depressed situation in the west appears to continue to be of concern, but the hope is that they will recover slowly," Tata Consultancy Services Chairman Ratan Tata said at the company's annual shareholder meeting on June 29.

Shares of Infosys, which has a market value of about $25 billion, are down about 11.5 percent this year, while those of top-ranked TCS are up about 8.7 percent. By comparison, the main 30-share Bombay index has gained about 13 percent.

A weaker first half may have been factored in by the street, but "hopes for recovery in 2HFY13 are fading fast," Bhavin Shah, chief executive of Equirus Securities, said in a July 2 report. He has an "underweight" rating on the IT sector.

For the June quarter, analysts expect little or no sequential dollar-term sales growth for Infosys. The company may say sales grew 0.5 percent, Deutsche Bank analyst Aniruddha Bhosale said in a note. Bhosale, who advises clients pick TCS, expects it to report sequential growth of 2.6 percent.

Infosys is seen posting a profit of 23 billion Indian rupees ($413.71 million), compared with 17.2 billion rupees a year ago, while TCS is seen coming in at 29.7 billion rupees, 23.3 percent more than the year-earlier period, according to Thomson Reuters I/B/E/S.

The companies are expected to benefit from an 8.5 percent fall in the rupee during the quarter. However, analysts see some negative cross-currency effect due to the move in the euro and British pound versus the U.S. dollar.

"The rupee depreciating is not a reason good enough to play these stocks, as the outlook in terms of overall demand remains weak," Apurva Shah said.

($1 = 55.5950 Indian rupees)

source: nytimes.com