The following are the day's top business stories:
1. China Increases Interest Rates to Curb Its Fastest Inflation in Two Years 2. Copper Approaches Record as Swiss Franc Weakens on Global Recovery Signs 3. China Targets 11% Industrial Output Growth in 2011, Down From 15% in 2010 4. European Stocks Climb for Fourth Week; Paper Makers, ARM, Xstrata Advance 5. Russia Adds 13 Investment Banks to Advise on $59 Billion Asset Sales Plan 6. Santander Will Buy GE's Mexican Mortgage Unit With $1.95 Billion Portfolio 7. Safco Climbs to 26-Month High, Samba Falls as Saudi Shares Little Changed 8. Japan's 10-Year Bonds Rise Most Since October Before Consumer Prices Data 9. Treasury 10-Year Yields Increase for a Fourth Week as Economy Strengthens 10.Brazil to Resume Beef Exports to U.S. Next Week After Drug Issue Resolved 11.One Company Retains $3.5 Billion Dominant Copper Stake at LME, Data Show 12.Most Read on Bloomberg: Soros Gold Bubble, French AAA at Risk, U.S. Stocks
1. China Increases Interest Rates to Curb Its Fastest Inflation in Two Years
China raised interest rates for the second time since mid-October to counter the fastest inflation in more than two years and more moves may follow. The benchmark one-year lending rate will rise by 25 basis points to 5.81 percent and the one-year deposit rate will climb by the same amount to 2.75 percent, effective today, the People´s Bank of China said in a one-sentence statement on its website late yesterday. Economists surveyed by Bloomberg News earlier this month forecast one percentage point of increases in 2011. Premier Wen Jiabao is seeking to slow gains in property values and consumer prices that are making it harder for families to buy homes and pay for food. Bank lending and a wider-than-forecast November trade surplus have pumped more cash into an economy already awash with money. "This demonstrates how determined the government is to control inflation," said Wang Qing, a Hong Kong-based economist with Morgan Stanley. "Interest rates on medium and long-term loans are adjusted by banks at the beginning of every year so by raising rates now, this will have a much greater tightening effect than it would have in January."
2. Copper Approaches Record as Swiss Franc Weakens on Global Recovery Signs
Copper rose to almost a record high amid speculation the global recovery will continue into 2011. The Swiss franc declined and U.K. shares advanced for a fifth day before the holiday weekend. Copper gained 0.7 percent, extending this year´s rally to 27 percent. The franc depreciated 0.4 percent against the euro. The FTSE 100 Index added 0.2 percent, swinging to a gain from a loss in the final minutes of trading. The S&P/TSX added 0.1 percent at 1:10 p.m. in Toronto. The MSCI Emerging Markets Index fell less than 0.1 percent, the first drop in four days, as North Korea threatened to wage a "sacred war" if attacked. U.S. markets were closed for the Christmas holiday. Confidence among American consumers probably improved this month, economists said before the Conference Board´s report due to be released on Dec. 28. U.S. stocks completed a fourth straight weekly gain yesterday after data showed the nation´s economy grew more in the third quarter than initially reported and Americans increased spending in November for a fifth month. "The continuing advance of base metals continues to prove the strength of economic growth and the tortuous business of turning on additional supplies of metals," said Michael Smedley, who helps manage C$1.2 billion ($1.19 billion) as a money manager at Morgan Meighen & Associates Ltd. in Toronto. "In South America, the great major mines have been topping out for some time in production. It is not going to get easier, therefore, the pricing should not be getting easier."
3. China Targets 11% Industrial Output Growth in 2011, Down From 15% in 2010
China is targeting growth in industrial output of 11 percent next year, slowing from an expected 15 percent pace in 2010, the official Xinhua news agency reported, citing Li Yizhong, minister for industry and information technology. Li also estimated that investment in industries under the ministry, including information technology, will rise 19 percent next year, Xinhua said. He gave the forecasts at the annual work meeting of the ministry. The MIIT is targeting a 4 percent reduction in energy consumption per unit of industrial output next year, the report said. The ministry also aims for an average 10 percent growth in industrial output over the next five years, and a 16 percent cut in energy use and emissions per unit of output, Xinhua said.
4. European Stocks Climb for Fourth Week; Paper Makers, ARM, Xstrata Advance
European stocks climbed for a fourth week, the longest stretch of gains since April, amid speculation that the economic recovery will continue into 2011. UPM-Kymmene Oyj led a rally in paper makers after the company agreed to acquire two rivals. ARM Holdings Plc surged as Microsoft Corp. is set to unveil a version of its Windows computer operating system that runs on the British company´s technology for the first time. Xstrata Plc and Antofagasta Plc led raw-material shares higher as metal prices were boosted by reports on economic growth. The Stoxx Europe 600 Index climbed 1.6 percent to 280.90 this week, extending this year´s rally to 11 percent. The gauge has recovered from the plunge that followed Lehman Brothers Holdings Inc.´s collapse in September 2008 as companies reported higher earnings, the European Union bailed out Greece and Ireland and the Federal Reserve unveiled $600 billion of additional bond purchases to help the economy. "Growth will continue to progress, although at a slower pace," said Giordano Lombardo, who oversees about 186 billion euros ($244 billion) as chief investment officer at Pioneer Global Asset Management SpA in Milan. Attractive valuations and strong corporate profits "will underpin equities as the strongest candidate for the best asset class of next year, provided there are no major policy mistakes in the U.S. or Europe."
5. Russia Adds 13 Investment Banks to Advise on $59 Billion Asset Sales Plan
Russia has expanded the list of investment banks that will advise it on its planned $59 billion state asset sale program over the next five years. The government had previously selected 10 banks, including Morgan Stanley, Credit Suisse Group AG, Renaissance Capital and VTB Capital in October for its asset sales starting next year. It added 13 more lenders to the list, according to a Dec. 20 decree posted on its website late yesterday. Moscow-based OAO Sberbank, the country´s biggest lender, Alfa Bank, the largest private lender, and Troika Dialog, Russia´s oldest investment bank, are among those added along with BNP Paribas SA, Citigroup Inc., Royal Bank of Scotland Plc. and UBS AG, according to the decree. Russia plans to sell as much as 15 percent of OAO Rosneft, its biggest oil producer, and stakes in its two biggest banks, Sberbank and VTB Group, as the government seeks to raise 1.8 trillion rubles ($59 billion) in asset sales over five years to help balance the budget.
6. Santander Will Buy GE's Mexican Mortgage Unit With $1.95 Billion Portfolio
Banco Santander SA said its Mexican unit agreed to pay 2 billion pesos ($162 million) for the mortgage operations of General Electric Co. to become that country´s second-largest home lender. Santander will gain a portfolio of about 24 billion pesos in the deal, which will be completed in the first half of 2011, the Madrid-based bank said today in a statement to Mexico´s stock exchange. Santander agreed to pay undisclosed financing costs, according to the statement. Santander is expanding in Latin America´s second-largest economy after agreeing in June to pay $2.5 billion to buy back the stake in its Mexican unit that it had sold to Bank of America Corp. in 2003. GE Chief Executive Officer Jeffrey Immelt has sold units including plastic and reinsurance to streamline the Fairfield, Connecticut-based company, the world´s biggest maker of jet engines, power-plant turbines and locomotives. "This sale is consistent with our strategy to exit non- strategic businesses that lack scale to help reduce GE Capital´s balance sheet while investing in core industrial and commercial finance platforms, including in Mexico," said Mark Begor, CEO of GE Capital, Restructuring Operations, in a statement.
7. Safco Climbs to 26-Month High, Samba Falls as Saudi Shares Little Changed
Saudi Arabian shares were little changed on the first day of the week as international markets started extended holidays and investors prepare for the release of fourth-quarter results in the kingdom. The Tadawul All Share Index swung between gains and losses during the day´s trading, ending down less than 0.1 percent at the 3:30 p.m. close in Riyadh to 6609.14, the lowest since Dec. 21. Banks, led by Samba Financial Group, Saudi Arabia´s second- largest lender by market value, drove declining stocks, while petrochemicals led by Saudi Arabian Fertilizer Co., a unit of Saudi Basic Industries Corp., the world´s largest petrochemicals maker, paced gaining shares. The 146-company gauge has climbed 8 percent this year. "The market is flat on extended holidays and light trading in international markets until the new year," Asim Bukhtiar, an equity analyst at Riyad Capital, said in Riyadh. "Holiday shopping has encouraged an optimistic outlook for 2011." European and U.S. stocks rose for a fourth week. The Stoxx Europe 600 Index climbed 1.6 percent, extending this year´s rally to 11 percent. The S&P 500 rose 1 percent, topping its close of 1,251.70 on Sept. 12, 2008, the last trading session before Lehman Brothers Holdings Inc. filed the world´s biggest bankruptcy.
8. Japan's 10-Year Bonds Rise Most Since October Before Consumer Prices Data
Japan´s 10-year bonds completed the biggest weekly gain since October before a report next week that economists said will show consumer prices continued to drop, boosting demand for the fixed payments of debt. Bonds gained as local stocks fell, enhancing the appeal of safer assets. Bank of Japan Governor Masaaki Shirakawa on Dec. 21 warned about risks to the economy from bond yield gains after the central bank left its credit programs unchanged and kept the benchmark interest rate between zero and 0.1 percent. "Deflation is likely to persist next year even if a drop in prices slows down," said Akira Terabayashi, a researcher in Tokyo at Norinchukin Research Institute Co., the central bank for Japan´s agricultural, forestry and fishery cooperatives. "Investors maintained an appetite for buying on dips throughout this week, weighing on yields." The yield on the 1.2 percent bond due December 2020 fell 4.5 basis points to 1.15 percent this week in Tokyo at Japan Bond Trading Co., the nation´s largest interdealer debt broker. That´s the biggest yield drop since the week ended Oct. 8. The price gained 0.403 yen to 100.447 yen.
9. Treasury 10-Year Yields Increase for a Fourth Week as Economy Strengthens
Treasury 10-year note yields rose for a fourth week, the longest stretch of gains in 19 months, as reports showing the economy expanded, consumer spending advanced and orders for capital goods increased bolstered speculation the recovery is gathering momentum. Government securities have lost 2.4 percent in December, the biggest monthly drop in a year, according to Bank of America Merrill Lynch index data. The Treasury will sell $99 billion of two-, five- and seven-year notes next week, the same amount in the previous two months. "Economic data of late has been better, and with firms upping their growth forecasts the risk is to higher yields from here," said Gary Pollack, who helps oversee $12 billion as head of fixed income trading at Deutsche Bank AG´s private wealth management unit in New York. The 10-year note yield advanced five basis points, or 0.05 percentage point, to 3.39 percent, according to BGCantor Market Data. The price of the 2.625 percent security maturing in November 2020 dropped 13/32, or $4.06 per $1,000 face amount, to 93 21/32.
10.Brazil to Resume Beef Exports to U.S. Next Week After Drug Issue Resolved
Brazil will resume beef exports to the U.S. on Dec. 27 after reducing the use of a de-worming drug to meet U.S. guidelines, the South American country´s Agriculture Ministry said in an e-mailed statement. The U.S. Department of Agriculture´s Food Safety and Inspection Service gave authorization for 12 Brazilian meatpackers to resume exports, according to the statement. Beef shipments by companies including JBS SA, the world´s largest meat processor, were suspended in May after levels of the drug Ivermectin exceeded what the U.S. considers tolerable. "This is a recognition of the quality of our products," Agriculture Minister Wagner Rossi said in the statement. The decision "will certainly have an impact on winning new markets." Meatpackers in the states of Mato Grosso, Mato Grosso do Sul, Minas Gerais, Rio de Janeiro, Rio Grande do Sul and Sao Paulo will be allowed to resume exports, the ministry said.
11.One Company Retains $3.5 Billion Dominant Copper Stake at LME, Data Show
One unidentified company has the potential to own at least 90 percent of the copper in warehouses monitored by the London Metal Exchange, the largest such position in two years, bourse data showed. The so-called dominant position indicated in the Warrant Tom Banding Report was previously 80 percent to 89 percent and last exceeded 90 percent on Nov. 7, 2008, according to the LME. The report is used by the LME to apply guidelines that oblige the owner to lend metal at fixed rates. The figure includes stockpile holdings and futures contracts that expire in the next two trading days. Ninety percent of the LME stockpiles is worth about $3.5 billion at today´s price. The metal, used in everything from car wiring to plumbing, has climbed 27 percent this year after stockpiles declined. Inventories are heading for the first annual decline since 2004 as mining companies failed to keep pace with demand. Copper has tripled in two years on demand from China, the largest buyer. "It´s purely demand for exposure to copper as a commodity that´s driving the price," said Kevin Tuohy, a metals trader at MF Global U.K. Ltd. in London. As far as the dominant position is concerned, "the metal is still there, still in the warehouse. It´s not being consumed or moved out of the warehouse, so no, not attaching too much importance to it."
-0- Dec/26/2010 00:35 GMT