Top Stories: Business and Finance
The following are the day's top business stories:
1. U.S. Consumer Confidence Climbs to a Six-Month High, Benefiting Retailers 2. Treasuries Drop, S&P 500 Index Gains as U.S. Economic Data Beat Forecasts 3. China's Trade Surplus Adds Liquidity as Inflation Threatens to Surpass 5% 4. Goldman Sachs's Hylander to Retire After Leading Principal Strategic Group 5. GE Boosts Dividend a Second Time in Six Months as Immelt Unlocks War Chest 6. China's Sky-mobi Posts Biggest First-Day Drop in U.S. Since 2007 After IPO 7. Roche's Avastin Fails to Beat Chemotherapy in Early Breast-Cancer Patients 8. Madoff Trustee Sues Vienna's Medici Bank, Founder Kohn for $58.8 Billion 9. Junk Bonds Buck Debt Slump With Tightest Spreads Since '08: Credit Markets 10.Best Buy's `Episodic' Consumers Back Bernanke's Cautious View on Recovery 11.Mystery Shopper Learns to Haggle for 18% Breaks on Cartier, Rolex Watches 12.Fink Builds Wall Street's Brain as BlackRock Marks Rise of Asset Managers
1. U.S. Consumer Confidence Climbs to a Six-Month High, Benefiting Retailers
Confidence among U.S. consumers increased in December to a six-month high, coinciding with stronger holiday sales that show the economy is gathering speed. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. A Commerce Department report showed the U.S. trade deficit shrank more than forecast in October to $38.7 billion as growing economies overseas propelled exports to a two-year high. Retailers such as Neiman Marcus Group Inc. have benefited during the biggest shopping period of the year as Americans grew more optimistic about the labor market. Treasury securities fell after the trade report signaled the U.S. economy is getting a boost from a jump in exports stemming from growing demand in markets like China, Brazil and South Korea. "There´s a groundswell of good news right now," said Jonathan Basile, an economist at Credit Suisse in New York. "That to me is a sign that households and businesses can make purchases with a little more confidence."
2. Treasuries Drop, S&P 500 Index Gains as U.S. Economic Data Beat Forecasts
Treasury 10-year notes fell, pushing the yield toward its biggest weekly increase this year, and U.S. stocks gained as better-than-estimated reports on consumer confidence and the American trade deficit boosted optimism about the economy. The euro fell against most major counterparts. Yields on 10-year Treasuries rose 12 basis points to 3.32 percent at 4:04 p.m. New York time, up from 3.01 percent a week ago. The Standard & Poor´s 500 Index added 0.6 percent. The euro dropped versus the Swiss franc and pound as leaders from Germany and France said they are against increased funding to quell the sovereign-debt crisis before next week´s summit of European Union leaders. S&P GSCI index of 24 raw materials dropped 0.5 percent after advancing up to 0.9 percent. U.S. government bonds have tumbled this week amid speculation President Barack Obama´s agreement with Republicans to extend tax cuts enacted under his predecessor, George W. Bush, will spur growth in the world´s largest economy and drive down unemployment from the highest levels since the early 1980s. The S&P 500 is poised to post its second straight weekly gain. "Animal spirits are starting to come back," said Hank Smith, chief investment officer at Haverford Trust Co., which manages about $6.5 billion in Radnor, Pennsylvania. "That´s part of a strengthening economy. The latest figures, including consumer confidence, indicate that. It´s certainty replacing uncertainty."
3. China's Trade Surplus Adds Liquidity as Inflation Threatens to Surpass 5%
China´s rebounding trade surplus threatens to make it tougher for policy makers to contain consumer prices forecast to have climbed by the most in 27 months in November, approaching a 5 percent pace. The excess of exports over imports was $22.9 billion last month, the government said yesterday, the fifth reading this year exceeding $20 billion. The influx of cash from trade has contributed to a 20 percent jump in money supply in the past 12 months, stoking liquidity in the fastest-growing major economy. The central bank´s third increase in lenders´ reserve ratios in five weeks, announced yesterday, may be insufficient to rein in inflation, Credit Suisse Group AG said ahead of today´s report on consumer prices. The risk to Premier Wen Jiabao´s government of foregoing a rise in interest rates is an erosion of households´ purchasing power that impairs efforts to reduce the nation´s reliance on exports. "China seems to have fallen behind the process of normalization," said Dong Tao, chief regional economist for non-Japan Asia at Credit Suisse in Hong Kong. "The central bank is only keen to move on quantitative tightening, leaving interest rates little changed for fear of hot money inflows," he said, referring to the potential lure for speculative funds.
4. Goldman Sachs's Hylander to Retire After Leading Principal Strategic Group
Goldman Sachs Group Inc., which makes the most from equity trading of all Wall Street banks, is losing the head of a unit that invests in securities exchanges and two senior executives from its London equities division. Phillip Hylander, 42, who leads the Principal Strategic Investment Group, will step down at the end of the year, according to a Dec. 8 memorandum sent to employees and obtained by Bloomberg News. He will become an advisory director to the firm on retirement, according to the document. Matthew H. Cyzer, head of sales trading in Europe, and John A. Ashdown, 42, head of trading in the region, are retiring, said a person with knowledge of the matter who declined to be identified because the departures haven´t been publicly announced. Cyzer and Hylander joined Goldman Sachs from Deutsche Bank AG in 2002. While Hylander joined the firm as a partner, the New York-based firm´s highest rank, Cyzer and Ashdown were promoted to the position in 2004. "These guys have been doing it for a while, they´ve had enough time to raise and grow people beneath them," said Jason Kennedy, chief executive officer of Kennedy Group, a London- based executive search firm. "Those who have made enough to retire like Hylander and Ashdown are seeing a good reason to step down."
5. GE Boosts Dividend a Second Time in Six Months as Immelt Unlocks War Chest
General Electric Co. raised its dividend for the second time in five months, giving investors a 17 percent boost as Chief Executive Officer Jeffrey Immelt unlocks a war chest of cash hoarded in the financial crisis. The quarterly payout will jump to 14 cents from 12 cents, after climbing from 10 cents in July, GE said today. The dual increases are GE´s first in a single year since 1992. "Strong cash generation, accelerated recovery at GE Capital and solid underlying performance in our industrial businesses" drove the decision, Immelt said in a statement. The higher dividend, payable Jan. 25 to shareholders of record on Dec. 27, marks a return to GE´s pattern of announcing annual increases in the fourth quarter, which the company did from 1983 through 2007. In February 2009, GE cut its quarterly dividend to 10 cents from 31 cents, about 68 percent, as the recession deepened.
6. China's Sky-mobi Posts Biggest First-Day Drop in U.S. Since 2007 After IPO
Sky-mobi Ltd., the operator of China´s biggest mobile application store by sales, posted the biggest first-day decline in the U.S. since 2007 after pricing its initial public offering at the bottom of the forecast range. Sky-mobi slid 25 percent to $6 in Nasdaq Stock Market trading today. The company, located in the city of Hangzhou in Zhejiang province, sold 7.25 million American depositary receipts for $8 apiece after offering them for as much as $10 each, according to its filing with the Securities and Exchange Commission and data compiled by Bloomberg. While Beijing-based online companies Youku.com Inc. and E- Commerce China Dangdang Inc. surged after their IPOs this week, the six other mainland companies that completed sales from Nov. 17 through yesterday retreated as the government said it may impose price controls to combat inflation, data compiled by Bloomberg show. Bona Film Group Ltd., China´s largest privately owned film distributor, yesterday posted the steepest first-day loss for a U.S. IPO in 2010 before Sky-mobi´s slump exceeded it. "When you put the two themes of China and Internet together, it creates good conditions to bring a company public," said Walter Todd, co-chief investment officer at Greenwood, South Carolina-based Greenwood Capital, which oversees about $900 million. "You can´t necessarily translate that to other industries. Issuers may be assuming that because it´s a Chinese IPO, they can ask for lofty valuations, and they´re getting some pushback."
7. Roche's Avastin Fails to Beat Chemotherapy in Early Breast-Cancer Patients
Roche Holding AG´s Avastin failed to eradicate tumor cells better than standard chemotherapy in women with early stage breast cancer, a finding that could limit the efforts to expand use of the oncology drug. The 1,190-patient trial found 15 percent of women on chemotherapy had no signs of disease when they underwent surgery, compared with 17.5 percent of those also given Avastin. The difference wasn´t statistically meaningful, researchers said yesterday at the San Antonio Breast Cancer Symposium. The U.S. Food and Drug Administration is due to decide by Dec. 17 whether to revoke Avastin´s marketing clearance for breast malignancies. Outside advisers to the FDA in July voted to rescind an accelerated approval after a study failed to show Avastin was better than chemotherapy alone. The FDA will rule on Avastin´s use with various chemotherapies. Results from four more Avastin trials in early breast cancer are pending. "We´re still waiting for the results of the definitive trials, but it´s a little concerning," said Eric Winer, chief of the division of women´s cancer at the Dana-Farber Cancer Institute in Boston. "I don´t think people are thinking necessarily so positively."
8. Madoff Trustee Sues Vienna's Medici Bank, Founder Kohn for $58.8 Billion
The trustee liquidating Bernard L. Madoff´s company sued Bank Medici AG and its founder, Sonja Kohn, calling her the con man´s "criminal soul mate" and demanding $58.8 billion for victims of his fraud. Kohn, 62, used a relationship with Madoff that began in 1985 to help build the Vienna-based bank, feeding more than $9.1 billion of investor money into his company, trustee Irving H. Picard said today in a complaint in U.S. Bankruptcy Court in New York. "The illegal scheme enriched Kohn, her family, and scores of other individuals and entities, including the largest banks in Austria and Italy, at the expense of the BLMIS estate and on the backs of Madoff´s victims," Picard said in the complaint, referring to Bernard L. Madoff Investment Securities LLC. The lawsuit names Kohn, Bank Medici, Bank Austria, UniCredit SpA and dozens of other parties. It seeks $19.6 billion trebled to $58.8 billion under the Racketeer Influenced and Corrupt Organizations Act. It´s by far the biggest claim filed by Picard, who has sued investors, banks, feeder funds and others seeking money to pay investors with valid claims.
9. Junk Bonds Buck Debt Slump With Tightest Spreads Since '08: Credit Markets
Junk bonds are becoming a haven for fixed-income investors roiled by mounting losses in government, investment-grade corporate and municipal debt. Gains of 0.8 percent this month on high-yield, high-risk bonds compare with losses of 1.9 percent for Treasuries, 1.5 percent on high-grade company notes and 1.4 percent on state and local debt, according to Bank of America Merrill Lynch index data. Relative yields on junk bonds versus higher-rated corporates narrowed to 388 basis points, or 3.88 percentage points, a level that hasn´t been breached in three years. "Junk bonds have benefited greatly by the fact that they´re the only place in the fixed-income world you can get some nice return," said Dan Sheppard, a New York-based director in fixed-income at Deutsche Bank AG´s Private Wealth Management unit, where he helps oversee $12 billion. Bonds of borrowers from credit-card processor First Data Corp. to Camp Hill, Pennsylvania-based Rite Aid Corp. are gaining as Pacific Investment Management Co. raises its forecast for U.S. growth next year. Other debt is tumbling after President Barack Obama agreed this week to extend tax cuts enacted under his predecessor and Federal Reserve Chairman Ben S. Bernanke said the central bank may expand bond purchases, spurring speculation inflation will accelerate.
10.Best Buy's `Episodic' Consumers Back Bernanke's Cautious View on Recovery
Best Buy Co., whose electronics make it a barometer of discretionary spending, is opening its U.S. stores an hour earlier than usual this holiday season in a bid to win over consumers battered by job losses. With the unemployment rate at a seven-month high of 9.8 percent and a quarter of U.S. homes worth less than their mortgages, consumers are holding back spending until occasions such as Thanksgiving and Christmas, said Scot Ciccarelli, an analyst at RBC Capital Markets in New York. "The episodic consumer is becoming even more apparent," said Robert Yerex, chief economist for Kronos Inc., a closely held Chelmsford, Massachusetts-based maker of payroll and hiring software for retailers and other businesses. "Unemployment is really holding back the recovery." Even as Americans are poised to boost holiday spending by the most in four years, according to the National Retail Federation, short-lived gains underscore Federal Reserve Chairman Ben S. Bernanke´s concern the recovery may not be sustainable. "The unemployment rate is just not going down," he said in an interview broadcast this month by CBS Corp.´s "60 Minutes" program.
11.Mystery Shopper Learns to Haggle for 18% Breaks on Cartier, Rolex Watches
It started with an e-mail. Second to None, an Ann Arbor, Michigan-based field research company, was looking for people in the New York area who would pretend to shop for a luxury watch, negotiate on the price, then complete an online questionnaire about the experience. Training would be provided, and I was to receive $80 for each negotiation, plus the occasional bonus. Many companies hire mystery shoppers -- just like regular shoppers, except nosier -- to find out if their front-line customer-service representatives and sales associates comply with corporate guidelines, Bloomberg Businessweek reports in its Dec. 13 edition. They hire outfits such as Second to None to oversee the fieldwork. It´s a $1 billion industry with more than 250 companies and 1.5 million independent contractors worldwide, according to the Dallas-based Mystery Shopping Providers Association. I love shopping for watches. And the idea that I might be paid to shop for them trumped my innate fear of e-mails that seem too good to be true -- even if I wasn´t actually purchasing a watch. (Transactions were ended by, for example, claiming I´d forgotten my credit card.)
12.Fink Builds Wall Street's Brain as BlackRock Marks Rise of Asset Managers
As chairman and chief executive officer of BlackRock Inc., Larry Fink controls more money than Germany has gross domestic product. BlackRock is the world´s biggest asset-management firm, a $3.45 trillion powerhouse that is Wall Street´s largest trading partner, set to pay investment banks $1 billion in fees this year. It manages $1.4 trillion for public pension funds in states including New York, New Jersey and California, and invests $240 billion for central banks and sovereign wealth funds such as the Abu Dhabi Investment Authority. The company serves as the U.S. Treasury Department´s go-to source for private-sector financial expertise and managed at least $150 billion in toxic assets on behalf of U.S. taxpayers after the 2008 bailouts of American International Group Inc. and Bear Stearns Cos. While running the company is a team effort, Fink, 58, is BlackRock´s brain, and BlackRock, increasingly, is Wall Street´s, Bloomberg Businessweek reports in its Dec. 13 edition. "There´s no bank, no sovereign wealth fund, no insurance company that´s as large as BlackRock," says Ralph Schlosstein, a co-founder who left in 2007 and is now CEO of Evercore Partners Inc., a New York-based investment bank. "BlackRock today is one of, if not the, most influential financial institutions in the world."
-0- Dec/11/2010 00:35 GMT
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