The following are the day's top business stories:
1. Commodities Beat Stocks, Bonds and Dollar as All Asset Prices Rise in 2010 2. Yen Trades Near Two-Week Low Versus N.Z. Dollar on Global Growth Outlook 3. Taiwan Steps Up Fight Against Capital Inflows as Interest Rate Is Raised 4. Rattner Will Pay $10 Million to Settle Cuomo's New York Pension-Fund Probe 5. Singapore Economy Probably Expanded on Manufacturing, Capping Record Year 6. Equity Funds in U.S. Have First Weekly Inflow Since April, ICI Data Show 7. Indonesia Can Reach `Sustainable' 8% Economic Growth, U.S. Ambassador Says 8. Pimco to Pay $92 Million to Settle Lawsuit Over Treasury Futures Contracts 9. Oil Services Are BP Spill Winners in 2010, Drillers Lose: Chart of the Day 10.Champagne Entices Big Spenders Even as Discounts on Cheaper Brands Abound 11.Singapore Air's New CEO May Sell Virgin Stake as Asian Competition Grows 12.Highest-Paid U.S. Doctors Get Rich With Fusion Surgery Debunked by Studies
1. Commodities Beat Stocks, Bonds and Dollar as All Asset Prices Rise in 2010
Commodity prices beat gains in stocks, bonds and the dollar this year as China, the biggest user of everything from cotton to copper to soybeans, led the recovery from the first global recession since World War II. The Thomson Reuters/Jefferies CRB index, a gauge of 19 raw materials, jumped 15 percent since the end of 2009 through yesterday. The MSCI All Country World Index of stocks rose 13 percent after accounting for reinvested dividends. Global bonds returned 4.7 percent as measured by Bank of America Merrill Lynch´s Global Broad Market Index. The U.S. Dollar Index, which tracks the currency against six counterparts, added 2.1 percent. Investors snapped up raw materials this year as China´s economic growth spurred record demand for sugar and soybeans and rising imports of copper. Drought in Russia, flooding in Pakistan and Australia and dry weather in Argentina and Brazil slashed grain production. This is the first time since 2007 that the CRB has outperformed other asset classes. "This year has been incredibly strong," said Nic Johnson, who helps manage about $24 billion in commodities at Pacific Investment Management Co. in Newport Beach, California. "You´ve had strong growth from China that put a bid into copper, and global crop problems cause huge rallies."
2. Yen Trades Near Two-Week Low Versus N.Z. Dollar on Global Growth Outlook
The yen traded near a two-week low against New Zealand´s dollar as speculation the global economic recovery will pick up next year boosted demand for assets in nations with higher returns. The yen extended this month´s decline versus most higher- yielding currencies after a report showed South Korea´s consumer prices rose more than forecast and before data that may show manufacturing in the U.S. expanded at the fastest pace in seven months. The dollar was close to a two-week low versus the euro after the International Monetary Fund announced it decreased the weight of the greenback and yen in a basket of currencies it uses. "The U.S. economy will start to show good signs of a recovery," said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. "People will be looking to invest where they do gain some sort of yield. The yen will weaken." Japan´s currency traded at 62.87 per New Zealand dollar at 7:57 a.m. in Singapore from 62.81 in New York yesterday, when it declined to 63.03, the lowest level since Dec. 14. It has fallen 1.2 percent versus the so-called kiwi this month. The yen was at 108.40 per euro from 108.33, and fetched 81.52 per U.S. dollar from 81.53. The financial markets in Japan are closed today for a public holiday.
3. Taiwan Steps Up Fight Against Capital Inflows as Interest Rate Is Raised
Taiwan unveiled additional measures to counter capital inflows as it raised borrowing costs for the third time this year and tightened lending rules to avert a property bubble. Governor Perng Fai-nan and his board raised the discount rate on 10-day loans to banks by 0.125 percentage point to 1.625 percent. All 14 economists in a Bloomberg News survey predicted the decision, announced yesterday. The central bank increased the reserve requirement on some local-currency deposits by foreigners to as much as 90 percent, effective Jan. 1. Taiwan joins neighbors from Thailand to South Korea in increasing interest rates to damp price pressures while stepping up efforts to counter inflows, which are stoking currency appreciation. The local dollar has risen the most in Asia against its U.S. counterpart in the past six months, and Perng said the gains will eventually hurt exports. "The focus is really on dealing with asset-price inflation, particularly home prices," said Tony Phoo, an economist at Standard Chartered Plc. in Taipei. A larger interest-rate increase might have "attracted more hot money flows," he said.
4. Rattner Will Pay $10 Million to Settle Cuomo's New York Pension-Fund Probe
Steven Rattner, a co-founder of the private-equity firm Quadrangle Group LLC, will pay $10 million to settle kickback allegations involving New York´s pension fund, a deal that largely ends an investigation that has yielded eight guilty pleas. Rattner´s restitution is less than half of the $26 million state Attorney General Andrew Cuomo sought in a lawsuit. Rattner also agreed to be banned from appearing "in any capacity" before any public pension fund in the state for five years, the attorney general´s office said today in an e-mailed statement. Cuomo, New York´s governor-elect, sought a lifetime ban from the securities industry. "I am gratified that we have been able to reach an agreement in this case, as it resolves the last major action of our multiyear investigation," Cuomo said in the statement. Rattner, 58, helped overhaul General Motors Co. and Chrysler Group LLC when he headed the U.S. government´s Automotive Task Force. He said in the same statement he was "pleased to have reached a settlement."
5. Singapore Economy Probably Expanded on Manufacturing, Capping Record Year
Singapore´s economy probably returned to growth this quarter as manufacturing rebounded, putting the nation on course to surpass Malaysia´s output with the world´s second-fastest growth rate this year. Gross domestic product rose an annualized 9.4 percent in the three months through Dec. 31 from the previous quarter, when it contracted 18.7 percent, according to the median estimate of eight economists surveyed by Bloomberg News. The economy grew 13.2 percent from a year earlier, the median of 12 estimates showed. The report is due at 8 a.m. on Jan. 3. Asia has led a global recovery this year as growth in developed markets was restrained by Europe´s sovereign credit woes and U.S. unemployment that remains above 9 percent. Prime Minister Lee Hsien Loong has said Singapore can´t maintain this year´s pace of expansion, forecast at 15 percent, and his policy makers have moved to cool the property market and allowed faster currency gains to tame prices. "Inflation risks for Singapore appear to be tilted toward the upside," said Alvin Liew, a Singapore-based economist at Standard Chartered Plc. After the boost from manufacturing this year, Singapore´s tourism and financial services industries will increasingly drive growth in 2011, spurred by "rising regional domestic demand from China and Southeast Asia," he said.
6. Equity Funds in U.S. Have First Weekly Inflow Since April, ICI Data Show
Funds that focus on U.S. equities ended an eight-month period of withdrawals last week, signaling investors are regaining confidence in the economic recovery, according to estimates from the Investment Company Institute. Flows turned positive in the week ended Dec. 21, when investors added $335 million to American equity funds, the Washington-based firm said in a report yesterday. They sent $3.6 billion to U.S.-based funds that invest overseas. Before last week, about $90 billion was pulled from U.S. equity mutual funds since the start of May, when a 20-minute plunge briefly erased $862 billion from the value of U.S. stocks. Americans are coming back to stocks after the Federal Reserve signaled it would support the economy by buying more bonds and third-quarter earnings reports showed results that beat estimates. The Standard & Poor´s 500 Index has gained 23 percent since July 2, including a 6.7 percent advance since Nov. 30, the biggest December rally since 1991. "When the stock market works its way higher, people feel better and have the sense that it´s safe to commit assets to the equity market," said Hank Smith, chief investment officer at Haverford Trust Co., which manages $6.5 billion in Radnor, Pennsylvania. "The market is reflecting today that the double- dip scenario is an unlikely one, and I think what´s not priced into the market is the real possibility that GDP growth might be a little bit better than way below average, as it´s expected."
7. Indonesia Can Reach `Sustainable' 8% Economic Growth, U.S. Ambassador Says
Indonesia can achieve economic growth of 8 percent that is driven by domestic as well as international investment, if regulatory clarity and infrastructure in the country are improved, U.S. Ambassador Scot Marciel said. "Indonesia´s growing around 6 percent this year," Marciel said in an interview in his office at the U.S. Embassy in Jakarta. "I think that could reach 8 percent sustainably, without tremendous difficulty, by addressing some of the infrastructure issues and opening up a little bit more." President Susilo Bambang Yudhoyono seeks to expand Southeast Asia´s biggest economy by as much as 7.7 percent and create 10.7 million jobs by the end of his second term in 2014, he said in his annual state-of-the-nation address Aug. 16. Indonesia also aims to cut the poverty rate by about a third to between 8 percent and 10 percent over the next four years. "It´s not so much about making it attractive to foreign investors," said Marciel, who was named ambassador in August. "To the extent Indonesia can work on infrastructure, and improve transparency and the regulatory environment and battle corruption, it creates a good environment for Indonesian businesses. Then foreign business will also find it attractive."
8. Pimco to Pay $92 Million to Settle Lawsuit Over Treasury Futures Contracts
Pacific Investment Management Co., manager of the world´s biggest bond fund, agreed to pay $92 million to settle a private class action lawsuit that accused it of manipulating the price of Treasury futures contracts. Pimco, which manages about $1.2 trillion, was accused of cornering the market for contracts on the 10-year notes in May and June 2005 on the Chicago Board of Trade. The lawsuit, which sought as much as $600 million in damages, alleged that Pimco used its holdings to drive up the price for traders who had sold the securities short, betting they would fall. "Pimco´s position is that all such trades were properly designed to secure best execution for its clients," the firm, based in Newport Beach, California, said today in a statement announcing the settlement. Mark Porterfield, a spokesman for Pimco, declined to comment beyond the statement. Pimco allegedly bought a "long position" of June 2005 10- year Treasury note futures contracts, while owning notes that were underlying the contract, according to the 2005 lawsuit filed by investors Josef Kohen and Richard Hershey and Breakwater Trading LLC.
9. Oil Services Are BP Spill Winners in 2010, Drillers Lose: Chart of the Day
In a year dominated by the Gulf of Mexico spill, services companies emerged as the strongest performers in the oil industry. Drilling companies and BP Plc, the owner of the runaway well, fared the worst. The CHART OF THE DAY shows shares of oilfield services and equipment providers Halliburton Co., Schlumberger Ltd. and Cameron International Corp. have risen since the April 20 accident that started the spill. BP, Deepwater Horizon rig operator Transocean Ltd. and Diamond Offshore Drilling Inc., the largest U.S. deep-water driller, are down at least 26 percent. President Barack Obama ended a moratorium on deepwater drilling in the Gulf of Mexico in October after the Interior Department tightened rules on safety and beefed up inspections. "Companies are going to be cautious going back into the Gulf until it´s clear what the new regulations are going to be," said Randy Ollenberger, an analyst at BMO Capital Markets in Calgary. "There´s definitely going to be more money spent on services to comply with new rules. Oil prices above $90 are positive for everyone in the sector."
10.Champagne Entices Big Spenders Even as Discounts on Cheaper Brands Abound
As New Year´s revelers ring in 2011 with a bottle of bubbly, the makers of the most expensive champagnes are celebrating a return to favor after two years of decline while cheaper brands continue to battle on price. "The market is polarizing," said Andrew Hawes, managing director of Mentzendorff, the U.K. distributor of Bollinger, and chairman of the U.K. Champagne Agents´ Association. After discounting across the board in 2009, "we´re seeing this year that certain brands aren´t involved in it. We´re seeing a parting of the ways, and that trend is going to continue." Sales of the most expensive wines including those made by LVMH Moet Hennessy Louis Vuitton SA are bucking the industry trend as the wealthiest drinkers shell out more than 100 euros ($133) a pop for a bottle of champagne again amid a revival in luxury spending after the credit crunch. Sales dropped in 2008 and 2009, when conspicuous consumption was "seen as virtually socially unacceptable," Hawes said. Champagne sales as a whole are set to post a decline of 0.9 percent by value this year, the third straight drop, according to Euromonitor research. Volume of the highest-priced champagne segment will continue to grow at a compound annual growth rate of 1.8 percent from 2009 to 2015, according to a report by market researcher International Wine and Spirit Record.
11.Singapore Air's New CEO May Sell Virgin Stake as Asian Competition Grows
Singapore Airlines Ltd.´s Goh Choon Phong, who takes over as chief executive officer tomorrow, may shed the last major remains of the carrier´s global expansion strategy as he confronts rising competition in Asia. Goh, 47, may get offers for the airline´s 49 percent stake in Virgin Atlantic after the U.K. carrier said this month it had received tie-up inquiries. Outgoing CEO Chew Choon Seng called the investment "underperforming" two years ago and has said the airline would consider a sale. In Asia, Goh faces low-fare competition on long-haul routes from Jetstar and AirAsia X Sdn., as well as renewed efforts by Cathay Pacific Airways Ltd. and Korean Air Lines Co. to lure lucrative business-class travelers. Middle East carriers Emirates Airline, Qatar Airways Ltd. and Etihad Airways have also ordered close to 300 planes since 2007 as they build hubs linking Europe and the Asia-Pacific region. "Goh has a tough job ahead of him," said K. Ajith, a UOB- Kay Hian Research Pte analyst in Singapore. "The environment is drastically different from five or 10 years ago, when SIA managed to fend off competition by focusing on its branding."
12.Highest-Paid U.S. Doctors Get Rich With Fusion Surgery Debunked by Studies
Suffering from an aching back, truck driver Mikel Hehn went to see surgeon Jeffrey Gerdes in 2008. The St. Cloud, Minnesota, doctor diagnosed spinal disc degeneration, commonly treated with physical therapy, and said surgery wasn´t called for. Unhappy with the answer, Hehn turned to Ensor Transfeldt, a surgeon at Twin Cities Spine Center in Minneapolis. Transfeldt performed fusion surgery on Hehn, screwing together three vertebrae in his lower spine. Fusion aims to limit painful spine movements. This one didn´t work out. Two years later, the pain in Hehn´s neck, lower back, buttocks and thighs is so bad that he can´t hold a job and seldom leaves home, he said in an interview. "There´s days when I just can´t take it and the tears run," said Hehn, 52, who lives in Sartell, Minnesota. He said he takes oxycodone for pain, Soma to sleep, Lexapro for depression and Imitrex for headaches.
-0- Dec/31/2010 00:35 GMT