Author Archive
Apr
A flag flies on outside of the New York Stock Exchange building in New York in this May 6, 2010 file photo.
Credit: Reuters/Lucas Jackson/Files
NEW YORK |
NEW YORK (Reuters) - Global markets closed out a week to remember on Friday as Federal Reserve chairman Ben Bernanke’s pledge to keep cheap money flowing through the economy pushed the Nasdaq to a 10-year high, and gold and silver broke records.
Commodity investments were especially hot. Prices on everything from oil to silver have now risen eight straight months through April in their longest winning streak since 2003. Silver alone shot up 27 percent.
Bernanke signalled on Wednesday that the U.S. central bank is in no rush to scale back its support for the economy with the labour market still in a “very, very deep hole.”
“Bernanke’s assurance this week to maintain very low policy rates is encouraging investors to take even more risk in a variety of asset classes and commodities, both within and outside the U.S,” said Mohamed El-Erian, co-chief investment officer of Pacific Investment Management Co., which oversees $1.2 trillion (718.3 billion pounds) in assets.
Investors also dumped the dollar, pushing it to a three-year low on concerns the Fed’s money-printing operation will further debase the greenback’s value. They also have deep concerns about growth in the United States, which is slower than many of its largest trading partners.
Showing how important the Fed’s easy money policy has been in upending traditional investment views, money has been pouring into transportation stocks even though oil prices — a primary expense for transport companies — are at multi-year highs.
The Dow Jones Transportation Average .DJT surged to an all-time high on Thursday, the same day U.S. oil prices touched a 31-month high.
Benchmark U.S. silver futures rose almost 4 percent for the week after racing to near $50 an ounce. Gold saw its biggest daily gain in five months on Friday, finishing near $1,550 an ounce. The Dow Jones industrial average racked up its best month since December and small- and mid-sized stock indexes hit record highs.
Major stock indexes, including the Nasdaq, lagged precious metals but booked solid weekly and monthly gains, despite worries over the unrest in the Middle East, unsolved public debt problems on both sides of the Atlantic and the cost of the natural disasters that ravaged Japan in March.
The Dow Jones industrial average .DJI was up 47.23 points, or 0.37 percent, at 12,810.54. The Standard & Poor’s 500 Index .SPX was up 3.13 points, or 0.23 percent, at 1,363.61. The Nasdaq Composite Index .IXIC was up 1.01 points, or 0.04 percent, at 2,873.54.
The billions of dollars the U.S. central bank has created to help the economy have succeeded in inflating asset prices and stemming deflation, but have failed to generate robust growth and slash unemployment.
Bernanke’s promise of keeping U.S. interest rates near zero — made at a news conference after a two-day policy meeting — crushed the dollar as traders piled into “carry trades” using the cheap dollar to fund them.
World equities, as measured by the MSCI .MIWD00000PUS index, rose 3.9 percent in April, despite anxiety over oil prices slowing global growth.
Benchmark crude oil prices finished above $125 a barrel in London, as the tumbling dollar and violence in North Africa and the Middle East outweighed concerns about slowing U.S. economic growth. <O/R> U.S. crude settled at $113.93 a barrel after earlier touching $114.18, the highest intraday price since crude reached $130 on September 22, 2008.
Boosted by the rally in precious metals, the 19-commodity Reuters-Jefferies CRB index .CRB, a broad indicator of the commodity market, is up 10 percent for the year, making it the world’s best-performing asset group. On Friday, the CRB Index gained 1.2 percent to end at 370.56, after earlier touching 370.71, a 52-week intraday high.
April’s strength in equity and commodity markets came almost entirely at the dollar’s expense after Standard & Poor’s revised downward its outlook for the United States’ stellar triple-A sovereign credit rating.
Friday’s economic reports reinforced this fragile outlook. Data showed slowing growth in regional manufacturing and high gasoline prices reducing Americans’ purchasing power.
The U.S. dollar index versus major currencies .DXY fell as low as 72.834, the lowest since 2008. Late Friday, the dollar index was down 0.1 percent at 73.036.
The euro touched a 17-month high against the greenback, trading at $1.4844 by 1500 GMT.
U.S. Treasury prices rose, punctuating an April rally that lifted the market into positive territory for the year, as traders bet on slowing economic growth and the Fed’s accommodative monetary policy. <US/>
(Additional reporting by Barani Krishnan, Chuck Mikolajczak, Frank Tang, Robert Gibbons and Julie Haviv and Ellen Freilich, Editing by Chris Sanders and Jan Paschal)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
LONDON |
LONDON (Reuters) - European shares edged up on Friday, heading for a seventh straight session of gains, as some analysts said equities would be supported by positive company earnings and a steadily improving economic backdrop.
Fertiliser maker Yara (YAR.OL) and industrial enzymes producer Novozymes (NZYMb.CO) posted strong quarterly results, sending their shares 4.8 and 5.2 percent higher respectively. German carmaker Daimler (DAIGn.DE), however, shed 1.8 percent as its first-quarter results were viewed as not robust enough.
Strong corporate earnings from the United States have helped push equities across the Atlantic higher in recent weeks despite the impact of Japan's devastating earthquake on global supply chains, unrest in the oil-rich Middle East and North Africa and the euro zone sovereign debt crisis.
But European companies, which kicked off the reporting season later than the U.S., have so far lagged their American peers in terms of the number of beats against market forecasts.
"Everybody that is a true earnings watcher knows coming in to this the comparison is getting more and more difficult on a quarter-to-quarter and more importantly on a year-on-year basis. Earnings are getting more demanding each time, so you are going to expect some variability," said Nick Tranter, head of derivatives at Espirito Santo in London.
"Even if they are coming in a tad light, or there is some issues about margins ... provided if you don't see analysts radically pull their numbers down, you can probably get through this and still be seen as a relatively positive reporting season."
By 12:12 p.m., the Euro STOXX 50 .STOXX50E -- an index of the euro zone's top blue chips -- was up 0.1 percent at 3,007.70, while the broader FTSEurofirst 300 .FTEU3 was up 0.07 percent at 1,154.47, after hitting an eight-week closing high on Thursday.
Volumes were relatively light as the UK market was closed for a holiday to mark the wedding of Prince William, the second-in-line to the throne.
Tranter recommended investors, who are unsure of the earnings season outlook but worry about being left behind as the market squeezes higher, can pick up the options to buy Euro STOXX 50 index in June at 3,050.
Nearly 60 percent of 81 STOXX Europe 600 .STOXX companies that have reported first quarter earnings beat or met analysts' forecasts, data from Thomson Reuters StarMine showed.
By comparison, 79 percent of 305 S&P 500 .SPX companies that have unveiled quarterly results that beat or met market expectations.
Solar stocks were in demand on Friday after France's Total (TOTF.PA) offered to pay up to $1.37 billion for a majority stake in U.S. solar firm SunPower Corp.
Q-Cells (QCEG.DE), SMA Solar (S92G.DE), Phoenix Solar (PS4G.DE) and SolarWorld (SWVG.DE) climbed between 4.4 and 5.7 percent.
Deutsche Bank (DBKGn.DE), BNP Paribas (BNPP.PA), Credit Suisse (CSGN.VX), UBS (UBSN.VX) and Commerzbank (CBKG.DE) were flat to 0.8 percent higher.
The five were among 16 global banks being investigated by the European Commission over possible abuse or collusion over the credit default swaps market.
(Editing by Erica Billingham)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
Gold plates are displayed for the media inside a Bank of Taiwan branch outlet in Taipei April 21, 2011.
Credit: Reuters/Nicky Loh
LONDON |
LONDON (Reuters) - Gold steadied on Friday, just shy of fresh record highs and set for its seventh successive weekly gain, driven largely by the decline in the dollar to its lowest in nearly three years.
The dollar fell to its lowest since July 2008 against a basket of major currencies, after data this week painted a picture of an economy with slower growth and higher inflation, and after the Federal Reserve signalled it would not tighten monetary policy any time soon.
An environment of low interest rates, a weak dollar and accelerating price pressures is usually positive for gold, which becomes cheaper to non-U.S. investors and can help insulate a portfolio against inflation.
Gold's inverse correlation to the U.S. dollar makes it cheaper for non-U.S. investors and means it draws more strength from weakness in the greenback. Highlighting gold's dependence on the dollar is the tepid performance of the metal versus other major currencies such as the euro, against which it has barely moved this week.
Spot gold was last up 0.1 percent at $1,536.30 an ounce by 11:55 a.m., on course for a 1.8 percent gain this week, when it hit a record $1,538.35. Trading volumes were restricted by a public holiday in London.
SILVER HOLDS FIRM
Meanwhile silver hovered close to its highest in over 31 years, having gained nearly 5 percent this week, although analysts say its robust performance against the other precious metals may not be sustainable.
"The move in gold has been much slower with silver continuing to outperform," said Saxo Bank manager Ole Hansen.
"Against the other major currencies the performance year to date has been pretty flat with euro (priced) gold showing a negative return of 2.5 percent," he added.
Silver was last up 0.9 percent at $48.86 an ounce, profiting also from the softness in the dollar, which fell 0.3 percent against a basket of currencies.
"If the dollar continues to weaken, then it's only likely to boost gold as well as silver as the inverse relationship between the two assets persists. I would say that for gold I am still looking for it to hit $1,600 this year," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.
"In the long term, I think, if we see silver prices at such a high level, then it could hurt the industrial demand."
But dealers said strong investment demand for silver would keep the metal at record levels, while a lack of scrap sales in the physical market suggested that investors expected more gains. Year to date, silver was up almost 60 percent, sharply above gold's 8 percent gain.
"There's some selling but I would say it's very light," said a dealer in Singapore, who trades gold and silver. "It had been a very busy week, and I am glad today is Friday. It's all quiet, finally."
The CME Group Inc, parent of the Chicago Board of Trade, said on Thursday it would raise maintenance margins for COMEX 5000 Silver futures by 13.2 percent, making it more expensive for silver speculators to trade in.
Soaring prices hurt the bottom line of certain manufacturers, including photography company Eastman Kodak, which said on Thursday a hike in raw material costs, particularly silver, led to a decrease in its film business revenue.
In the energy market, crude eased on Friday, after settling at a 31-month high in the previous session, on concerns that slowing growth in top consumer United States may pare demand, but a weaker dollar and unrest in the Middle East helped stem a slide in prices.
Platinum echoed the strength in gold and silver, rising 0.3 percent on the day to $1,841.99 an ounce, while palladium rose 1.8 percent to $784.47. (Additional reporting by Lewa Pardomuan in Singapore; editing by Anthony Barker)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
The illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in Frankfurt April 5, 2011.
Credit: Reuters/Kai Pfaffenbach
BRUSSELS |
BRUSSELS (Reuters) - Euro zone inflation rose further above the European Central Bank's target in April, increasing the chances of an interest rate rise in June, despite a weakening of economic sentiment and household demand.
Inflation in the 17 countries using the euro rose to 2.8 percent year-on-year this month from 2.7 percent a month earlier, the highest level since October 2010, when it was 3.2 percent.
Consensus expectations had been for a flat reading compared to March ahead of next Thursday's European Central Bank meeting on interest rates.
"I can imagine that some market participants will expect the rate increase by the European Central Bank at an earlier date. We expected June, the market is still expecting July. I guess the consensus will now move to June," said Piet Lammens, economist at KBC.
The ECB raised its main interest rate from record lows of 1.0 percent to 1.25 percent in April, concerned about the impact on consumer prices of rising costs of energy and food.
Other data this month has suggested growth in both Germany and the euro zone is peaking and figures from Spain, the biggest of the economies under threat in Europe's debt crisis, showed unemployment soaring and retail sales sinking.
A monthly European Commission survey showed economic sentiment in the euro zone as a whole fell for the second month in a row to 106.2 in April, down from 107.3 in March and below market expectations of a decline to 107.0.
"Survey data from the European Commission clearly indicates that the combination of high oil prices, a strong euro, and fiscal and monetary tightening has started to dent the economic mood in the euro zone," said Martin van Vliet, economist at ING.
The decline in sentiment was in all sectors of the economy except construction, with consumer optimism falling the most to -11.6 from -10.6 in March.
NO LOAN BOOST
ECB data also showed that the annual growth rate of loans to the private sector in the single currency area slowed in March, bucking expectations for a rise, but M3 money supply growth accelerated.
"Monetary data continue to point to a modest recovery in euro area money and loan growth," said Christoph Balz, economist at Commerzbank.
"While the data in itself do not indicate upside risks to price stability that require further monetary tightening, they are further proof that the economic situation has changed substantially since 2009 -- which is why the ECB thinks that extremely low interest rates are no longer appropriate.
More evidence of weakening household demand could be seen in retail sales data.
Sales in Germany fell in March, defying expectations of a rise as consumers bought fewer groceries and textiles during a month when inflation surpassed the 2 percent threshold.
Adjusted for consumer price rises, sales declined by 2.1 percent month-on-month, and by 3.5 percent year-on-year.
The drop in consumer demand was more pronounced in the "peripheral" euro zone countries seeking to win back market confidence in their public finances with tough austerity measures.
In Spain sales fell 8.6 percent year-on-year in March and in Greece the decline was 10.6 percent in February.
Euro zone consumer inflation expectations, which have been rising quickly since November 2010, edged marginally lower to 30.7 from 30.8. Selling price expectations among manufacturers, on the rise since August 2010, fell more markedly to 21.5 from 24.4.
The European Commission's business climate indicator, which points to the phase of the business cycle, also fell for the second month in a row, to 1.28 points from 1.43 in March.
"Despite this, the current level of the indicator remains close to historic peaks, suggesting that the recovery in industry will continue in the coming months," the Commission said.
Eurostat data also showed that unemployment in the euro zone held stable at 9.9 percent of the workforce in March.
(Additional reporting by Madrid, Berlin, Frankfurt and Athens bureaux; editing by Rex Merrifield and Patrick Graham)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
A employee is seen at Rio Tinto Limited Shanghai Representative Office in Shanghai January 12, 2010.
Credit: Reuters/Aly Song
SYDNEY |
SYDNEY (Reuters) - Rio Tinto (RIO.AX)(RIO.L) on Friday proposed to delist Riversdale Mining (RIV.AX) after it said it had control of more than 73 percent of the firm and extended the A$4 billion (2 billion pound) takeover offer to May 6.
Riversdale's biggest shareholder ahead of the bid, India's Tata Steel (TISC.BO), held on to its 27 percent stake, looking to secure high quality coking coal from Riversdale's projects in Mozambique.
The other major hold-out against the A$16.50 a share offer, Brazilian steel maker CSN (CSNA3.SA), has sold its 19.9 percent stake to Rio Tinto.
(Reporting by Narayanan Somasundaram; Editing by Ed Davies)
- Tweet this
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
A emergency exit sign is pictured above a logo of German car manufacturer Daimler AG, before the annual news conference in Stuttgart February 18, 2010.
Credit: Reuters/Johannes Eisele
FRANKFURT |
FRANKFURT (Reuters) - Daimler (DAIGn.DE) warned that commodity prices may rise by more than it bargained for in coming months and maintained its full-year outlook after posting stronger than expected first-quarter operating profit.
Chief Financial Officer Bodo Uebber said the 700 million euros (624 million pounds) Daimler had earmarked for additional raw material costs this year may prove insufficient.
"I also expect that we will continue to see a very volatile exchange rate situation," Uebber told reporters during a conference call on Friday after Daimler published quarterly results.
He said Daimler has hedged 80 percent of its exposure to the U.S. dollar for this year to cushion the impact of exchange rate fluctuations.
Daimler affirmed its full-year outlook, saying it saw 2011 EBIT significantly up from last year. Analysts on average expect 2011 EBIT to advance 18 percent to 8.59 billion euros this year.
Daimler shares fell 2.13 percent to 51.96 euros by 0756 GMT, underperforming the STOXX Europe 600 Automobiles & Parts .SXAP, which was down 1.22 percent.
Some analysts said Daimler's results failed to reflect strength seen recently at rivals such as Volkswagen (VOWG_p.DE) or Volvo (VOLVb.ST).
"Daimler continued to perform below its peer group, which makes it hard to see the stock outperforming," said Credit Suisse analyst Arndt Ellinghorst.
Daimler trades at 9.5 times estimated 12-month forward earnings, according to Thomson Reuters StarMine, below Volvo's multiple of 13.6 or BMW (BMWG.DE) at 10.
Daimler's first-quarter earnings before interest and tax (EBIT) rose 71 percent to 2.03 billion euros, above the average analyst estimate of 1.99 billion euros in a Reuters poll.
CHINA DEMAND
Daimler's passenger car business beat expectations on the back of demand from emerging markets such as China -- now the world's largest car market. Daimler sold 82 percent more cars in the first three months of this year than a year earlier.
Global luxury car makers, from Volkswagen's (VOWG_p.DE) Audi to BMW (BMWG.DE), have racked up eye-popping sales in China, where a growing army of super-rich is fuelling demand for everything from Gucci handbags to Rolls-Royce cars.
Uebber said he had no indication that demand in China would ease in coming months, adding he expected Daimler to grow faster than the market there.
Daimler expects unit sales of Mercedes-Benz branded cars to reach a record level of more than 1.2 million this year, helped among other by strong sales of its top-of-the-range S-Class model.
(Reporting by Maria Sheahan; Editing by Hans Peters)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
Visitors walk past the Samsung area at the GSMA Mobile World Congress in Barcelona, February 14, 2011.
Credit: Reuters/Albert Gea
SEOUL |
SEOUL (Reuters) - Samsung Electronics (005930.KS) faces a challenging outlook after reporting its third consecutive fall in quarterly profit as it struggles to make ground on Apple Inc (AAPL.O) and deal with a tepid recovery in its TV and flat screens business.
The world's No.2 handset maker, however, said its mainstay memory chip business was rebounding after Japan's devastating earthquake and tsunami in March hobbled production from rivals including Toshiba Corp (6502.T).
"Although the memory chip business is reviving, other operations such as telecommunications and displays are facing tough times ahead," said Han Se-woong, a fund manager at AssetPlus Investment Management, which owns Samsung shares.
"Its race with Apple seems pretty difficult and income in its display division is in a slump."
Samsung's Galaxy model smartphones and tablet computers were seen among the biggest potential rivals to Apple's iPhone and iPad but it has been unable to match the U.S. company's roaring sales growth.
Sony (6758.T) plans to soon join the fray with the launch of its first tablets in a market set to quadruple in four years.
Samsung is also the world's largest top maker of memory chips, flat screens and televisions. Shares in the company, whose $136 billion (81 billion pounds) market value is bigger than Sony (6758.T), Nokia (NOK1V.HE), Toshiba Corp (6502.T) and Panasonic Corp (6752.T) combined, ended 0.8 percent lower in a broader market .KS11 down 0.7 percent.
After hitting life-time highs in late January, Samsung shares have lost 12 percent, as analysts lower expectations for its telecoms division, which includes smartphones and tablets.
Samsung reported a 2.95 trillion won ($2.75 billion) operating profit for January-March compared to the consensus forecast for a 3.1 trillion won profit by Thomson Reuters I/B/E/S. That was in line with Samsung's estimate for an operating profit of between 2.7 trillion won and 3.1 trillion won.
SMARTPHONES
Samsung, which had negligible share of the smartphone market until early last year, has muscled in with its Galaxy models. It has since sold 14 million Galaxy S smartphones and launched the Galaxy Tab tablet in three different sizes.
This week, it rolled out a new version of its flagship Galaxy S smartphone in Korea and expects the model to sell more than 10 million units as the product makes a global debut from May through 140 carriers in 120 countries.
SK Telecom (017670.KS), South Korea's top mobile carrier, said on Friday it had received 160,000 preorders for the new Galaxy smartphone since it started taking orders on Monday and expects 60,000 customers will get the phone on Friday and Saturday when it launches service.
Apple is seeking to keep Samsung at bay with lawsuits claiming Samsung's Galaxy line of phones and tablets "slavishly" copy the iPhone and iPad.
Samsung has countersued and on Wednesday, it broadened a patent dispute against Apple by filing a lawsuit in federal court in California arguing that Apple's iPhone, iPod and iPad had infringed 10 mobile technology patents. Samsung made similar claims in Korea, Japan and Germany last week.
Samsung sold around 70 million handsets in the first quarter including tablets. It did not give breakdowns and analysts estimate it sold around 1 million tablets. Apple sold 4.7 million units of its iPad last quarter.
Soaring demand for tablets and smartphones is likely to fuel further growth at its semiconductor business, as Samsung counts Apple as its biggest client. Prices of computer memory chips have rebounded since last month's earthquake in Japan.
"I expect Samsung's operating profit to strongly rebound in the second quarter... Chip profits will be pretty good in the second quarter because of the rise in average sales prices," said Kim Sung-in, an analyst at Kiwoom Securities.
Samsung's profit is expected to rebound by a third to 4 trillion won in the current quarter, according to StarMine SmartEstimates, which places more weight on recent forecasts by top rated analysts.
CHIPS, TELECOMS GROW
Samsung said the chip market would improve slightly in the current quarter and demand for NAND flash chips would also sustain growth momentum thanks to solid smartphone and tablet markets.
The first-quarter operating profit, the lowest since the second quarter of 2009, compared with a 3.0 trillion won profit in the preceding quarter and 4.4 trillion won a year earlier.
Semiconductor and telecoms were the main profit pillars in the first quarter. Operating profit from semiconductors accounted for 56 percent of the group's total profit and the rest came from the telecoms division.
Its television and appliances unit reported an 80 percent drop in profit to almost breakeven, while the flat screen division swung to a 230 billion won loss from a 490 billion won profit a year ago.
Sales of flat-panel TVs edged up 5 percent from a year ago but tumbled 31 percent from the previous quarter to 8.8 million units.
From Sony to Dutch electronics group Philips (PHG.AS), TV makers are struggling with fierce competition from cheaper brands and fragile consumer spending.
(Additional reporting by Ju-min Park, Hyunjoo Jin and Yerim Kim; Editing by Jonathan Hopfner and Anshuman Daga)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
The DAX board and trading floor are pictured at the Frankfurt stock exchange April 4, 2011.
Credit: Reuters/Alex Domanski
NEW YORK/LONDON |
NEW YORK/LONDON (Reuters) - Nasdaq OMX and IntercontinentalExchange are poised to go hostile in their bid for NYSE Euronext after shareholders ratcheted up pressure on the Big Board parent to get a better deal.
Nasdaq OMX Group Inc (NDAQ.O) and IntercontinentalExchange Inc (ICE.N) are expected to soon take their $11.1 billion (6.6 billion pounds) bid directly to NYSE's shareholders through a tender offer, two sources familiar with the situation said.
The move is seen as the next logical step for Nasdaq and ICE after being rebuffed twice by NYSE, which has refused to open talks on their offer. NYSE favours its existing $10.1 billion deal with Germany's Deutsche Boerse AG (DB1Gn.DE).
A direct appeal to shareholders through a tender offer would ramp up the pressure that NYSE is already under, although they also have defences to keep Nasdaq and ICE at bay.
NYSE, for instance, can institute a poison pill, which would thwart the hostile bid by making it more difficult and expensive for the rivals to buy its shares.
In signs the Big Board is facing growing dissent over its strategy of just saying "no," shareholders at its annual meeting on Thursday approved two proposals that the board had advised against, and directors who were up for election got fewer votes than before.
Investors at the packed meeting in New York urged NYSE management and board to start talks with Nasdaq and ICE, while also asking them to press Deutsche Boerse to sweeten its deal.
"This merger is grossly unfair to the shareholders," said Kenneth Steiner, who owns about 1,000 NYSE Euronext shares. "I voted against the directors. I believe they should be removed and replaced with those who can get us the appropriate value for our shares."
The NYSE board and managers who launched a charm offensive to woo shareholders stuck to their belief that the Deutsche Boerse deal was the better way to go.
Earlier on Thursday, NYSE CEO Duncan Niederauer said he would close the "perceived value gap" between the deals. The Nasdaq/ICE offer is about 10 percent higher than the Deutsche Boerse deal.
Niederauer, a fierce rival of Nasdaq's Robert Greifeld, promised that a combined NYSE-Deutsche Boerse would have much higher earnings, diverse revenues and would cut costs.
With shareholders pushing for a sweeter deal from the German exchange, Niederauer said, "We would hate to miss out on an accelerating opportunity because we just got a touch too greedy on the ratio."
DISRUPTIVE TACTICS
NYSE Chairman Jan-Michiel Hessels called the unsolicited offer from Nasdaq and ICE "illusory" and "fraught with unacceptable execution risk.
"We believe their request for a meeting is a tactic principally designed to be disruptive to our combination and therefore we see no basis for which to meet with them," Hessels said.
NYSE's board took just 10 days to snub Nasdaq this month, dismissing its bid as "strategically unattractive" and warning of heavy U.S. job losses from such a deal.
Eight of nine institutional investors polled by Reuters this week said NYSE Euronext should at least sit down with Nasdaq and ICE. [ID:nN27170727]
On Thursday, shareholders approved a proposal that gives investors with just 10 percent of the company's shares the power to call special meetings -- a move that could make it easier for Nasdaq and ICE to pursue their counter-bid if it drags on after a July shareholder vote.
NYSE said it would likely take 12 months to adopt the proposal.
The shareholders reelected the directors with an average of 80 percent support, according to preliminary results. Last year, the directors got more than 90 percent support.
STRONG RESULTS
Separately, Deutsche Boerse said it has no plans to sweeten its offer, but highlighted possible cost savings of at least 500 million euros ($742 million) from the deal.
The target is 100 million euros higher than the initial estimates. Half of the additional savings would come from the technology unit.
Deutsche Boerse and NYSE Euronext also reported strong first-quarter results, topping analyst expectations.
NYSE earned 68 cents a share, excluding items, topping the 60 cents Wall Street expected.
Separately, CME Group Inc (CME.O) said its first-quarter profit rose 22 percent, beating expectations, as the biggest U.S. futures exchange operator handled record trading in energy and grains.
(Additional reporting by Ann Saphir in Chicago and Edward Taylor in Frankfurt; editing by Sophie Walker, Jon Loades-Carter, Robert MacMillan and Andre Grenon)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
Microsoft CEO Steve Ballmer delivers his keynote address on the eve of the Consumer Electronics Show in Las Vegas, Nevada, January 5, 2011.
Credit: Reuters/Rick Wilking
SEATTLE |
SEATTLE (Reuters) - Microsoft Corp reported a dip in quarterly sales of its core Windows operating system, mirroring a recent downturn in personal computers and sending its shares down slightly.
The world's largest software company met Wall Street profit estimates after strong sales of its Office suite of applications and Xbox game systems took up the slack.
But its stock has waned in past weeks, spooked by a dip in PC sales -- which generate most of its revenue -- and by fears the Apple Inc iPad and other mobile devices will eventually erode the PC business.
Microsoft's shares fell 1.2 percent to $26.37 in after-hours trading following the earnings report on Thursday.
"Microsoft to me is no longer a growth stock, but it is a very attractive value stock. They continue to generate tremendous free cash flow. Their balance sheet is really unmatched," said Channing Smith, co-manager of the Capital Advisors Growth Fund.
"What you will begin to see is a shift away from growth investors. You are seeing that transition where Microsoft is in no man's land, but I think they will become increasingly more attractive to value investors."
Microsoft has sold a record-breaking 350 million licenses for its Windows 7 operating system since launching it 18 months ago, but demand appears to be waning in an uncertain economy.
PC sales -- the engine guiding Microsoft's financial success -- fell 1 percent in the first three months of the year, according to one research firm.
CFO Peter Klein told Reuters in a phone interview the company expects corporate spending on PCs to outpace consumer PC sales through the next 12 months. He acknowledged that sales of low-end netbooks were suffering particularly, partly because of the success of tablets and other mobile devices.
"The concern is PC markets are being disrupted. There's some validity," said BGC Financial analyst Colin Gillis. "But it's also overblown when you factor in that Windows 7 is the fastest-selling OS in history."
CAN DO WRONG?
The company co-founded by billionaire Bill Gates has exceeded Wall Street's expectations in seven straight quarters -- but its stock remains at 2001 levels. Investors fear that new gadgets, led by the iPad, are the thin end of the wedge that will one day separate Microsoft from its core customers.
Microsoft shares are down 14 percent over the past 12 months, compared with a 16 percent gain in the Nasdaq.
Longer term, some see the new devices as unleashing a genie that Microsoft may never be able to put back in the bottle.
Microsoft notched a 31 percent increase in fiscal third-quarter net profit, reporting $5.2 billion (3.1 billion pounds), or 61 cents per share, compared with $4 billion, or 45 cents per share, in the year-ago quarter. Five cents per share of that profit was attributed to a one-time tax benefit.
Excluding the tax benefit, profit met the 56 cents expected by Wall Street analysts, according to Thomson Reuters I/B/E/S.
Despite the dip in the Windows unit, overall sales rose 13 percent to $16.4 billion, ahead of the $16.2 billion expected by analysts, helped by sales of Office and its Xbox game system and Kinect add-on.
Sales at its Windows unit fell 4 percent to $4.4 billion, but that was offset by a 21 percent increase at the Office unit to $5.2 billion, as people continued to buy copies of the new Office 2010, released last year.
The entertainment and devices unit -- which makes the Xbox and phone software -- posted a 60 percent increase in sales to $1.9 billion, mostly due to the success of the Kinect motion-sensor, launched last November.
The online services unit, which runs the Bing search engine and MSN web portal, raised revenue 14 percent to $648 million, but it still made a loss of $726 million in the quarter as Microsoft continued to step up efforts to challenge Google Inc in Internet search. The unit has now lost $7 billion in four years.
Microsoft said its agreement to power Yahoo Inc Internet searches by Bing was still not bringing the results it had hoped for, with revenue per search below expectations. That echoed similar remarks by Yahoo last week.
Microsoft stock is now trading at 9.6 times expected earnings for the next 12 months. That is half the stock's 10-year average and below the 13 times average for major tech companies.
Even its 2.5 percent dividend yield, which lags only Intel Corp's among big tech, is not enough to persuade investors to change their outlook.
"The question to ask is: is there any product line in Microsoft that they are not playing catch-up on?" asked Trip Chowdhry at Global Equities Research
(Editing by Gary Hill, Bernard Orr)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
Apr
WASHINGTON |
WASHINGTON (Reuters) - Economic growth braked sharply in the first quarter as higher food and gasoline prices dampened consumer spending and sent inflation rising at its fastest pace in 2-1/2 years.
Another report on Thursday showed a surprise jump in the number of Americans claiming unemployment benefits last week, which could cast a shadow on expectations for a significant pick-up in output in the second quarter.
Growth in gross domestic product slowed to a 1.8 percent annual rate after a 3.1 percent fourth-quarter pace, the Commerce Department said. Economists had expected a 2 percent pace.
With much of the pull back traced back to sharp cuts in defence spending and harsh winter weather, analysts were hopeful the economy would regain speed in the second quarter. The drop in defence spending was seen as temporary.
"Growth was disappointing given the momentum of the economy heading into the year. We are still of the belief that the economy will improve out of the soft patch through this quarter into the second half of the year," said Brian Levitt, an economist at OppenheimerFunds in New York.
Economists were encouraged that details of the report, in particular consumer spending and business outlays on software and equipment, were not as weak as they had feared and said this suggested a foundation for stronger growth was in place.
Consumer spending accounts for about 70 percent of U.S. economic activity.
Labour MARKET WEAKNESS?
While a 25,000 rise in claims for state jobless benefits to 429,000 last week hinted at some weakening in the labour market, analysts cautioned against reading too much into the gain. They said severe weather in some parts of the country and the Easter holiday could have distorted the figure.
Still, the data suggested improvements in the labour market were still only coming grudgingly.
"The underlying downtrend in initial claims that had been in place since late last year has flattened out," said Omair Sharif, an economist at RBS in Stamford, Connecticut. But he added: "It seems a little too early to suggest that the underlying pace of layoffs has picked up."
Hiring accelerated in March and a report next week is expected to show job creation remained relatively robust in April.
MODERATE PACE
The weak GDP report and the Federal Reserve's stated commitment to a loose monetary policy stance after a two-day meeting on Wednesday drove the dollar to a three-year low against a basket of currencies.
But investors on Wall Street largely brushed it aside and pushed stocks higher. Prices for U.S. government debt rose.
The Fed on Wednesday trimmed its growth estimate for 2011 to between 3.1 and 3.3 percent from a 3.4 to 3.9 percent January projection.
Some economists felt the U.S. central bank's estimates might be a little optimistic, given the poor start to the year even though most agreed growth would soon strengthen.
Optimism the economy would find a firmer footing in the second quarter was bolstered by a report showing pending sales of previously owned homes rose 5.1 percent in March. Housing is struggling to recover and is one of the headwinds facing the economy.
Growth in the first quarter was curtailed by a sharp pull back in consumer spending, which expanded at a rate of 2.7 percent after a strong 4 percent rise in the fourth quarter.
Rising commodity prices meant consumers had less money to spend on other items. Gasoline prices remain a concern, even though they are expected to stabilise somewhat.
INFLATION RISING
The GDP report underscored the pain that strong food and gasoline prices are inflicting on households.
A inflation gauge contained in the report rose at a 3.8 percent rate -- the fastest pace since the third quarter of 2008 -- after increasing 1.7 percent in the fourth quarter.
A core price gauge, which excludes food and energy costs, accelerated to a 1.5 percent rate -- the fastest since the fourth quarter of 2009 -- from 0.4 percent in the fourth quarter. The core gauge is closely watched by Fed officials, who would like to see it closer to 2 percent.
In the first quarter, restocking by businesses picked up, with inventories increasing $43.8 billion (26.3 billion pounds) after a $16.2 billion rise in the fourth quarter. However, the buildup was less than economists had expected and some said they looked for further inventory building to bolster growth in the second quarter.
Inventories added 0.93 percentage point to first-quarter GDP growth. Excluding inventories, the economy grew at a pedestrian 0.8 percent pace after a brisk 6.7 percent rate in the fourth quarter.
Business spending on equipment and software gained pace, but government spending suffered its deepest contraction since the fourth quarter of 1983.
Home building made no contribution, while investment in nonresidential structures dropped at its quickest pace since the fourth quarter of 2009, likely the result of bad weather.
(Additional reporting by Mark Felsenthal; Editing by Neil Stempleman and Andrew Hay)
- Share this
- Link this
- Digg this
- Reprints
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Libya and Oil.
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
