The following are the day's top business stories:
1. S&P 500 Pares Loss; Bond Risk Climbs to Record as Europeans Prepare Sales 2. Portuguese Bond Buyers Set to Demand `Unsustainable Yields': Euro Credit 3. IPhone May Cost Verizon $5 Billion in Subsidies in Its First Year of Sales 4. Japanese Stocks Fall for First Time in Three Days on Europe Debt Concern 5. Alcoa Profit Beats Estimates as Aluminum Price Nears Pre-Recession Levels 6. Honda's `Aging Champion' Civic Compact Seeks Revival Amid Hyundai Rivalry 7. Thailand May Raise Interest Rate as Rising Wages, Oil Costs Spur Inflation 8. PetroChina Moves Into European Refining as Jiang Builds Global Oil Company 9. Toyota Plans Higher Output, Not Spending as Volkswagen Aims for Top Spot 10.Record Nordic Electricity Prices Prompt Factories to Halt: Energy Markets 11.American Airlines Wins Texas Court Order to Keep Sabre From Hiding Fares 12.Shorting the Rumor Pays Annual 14% on Takeover Tales That Don't Come True
1. S&P 500 Pares Loss; Bond Risk Climbs to Record as Europeans Prepare Sales
U.S. stocks pared losses and shares fell worldwide for a fourth day, the longest losing streak since November. The cost of insuring European sovereign debt against default rose to a record as Portugal, Spain and Italy prepared to borrow at least $43 billion this week. Oil surged. The Standard & Poor´s 500 Index slipped 0.1 percent at 4 p.m. New York time, trimming its decline from 0.7 percent at the start of trading. The MSCI All-Country World Index of shares in 45 nations fell 0.5 percent, driven by European and Asian losses. The Markit iTraxx SovX Western Europe index climbed a fourth day, reaching a record high. Oil rose as much as 2.2 percent after a leak at an Alaskan pipeline. March S&P 500 futures were unchanged as Alcoa Inc. dropped 1.5 percent to $16.24 at 4:48 p.m. in New York. U.S. stocks rebounded from the lows of the day as companies from Apple Inc. to General Electric Co. and Ford Motor Co. rallied, while Alcoa advanced before reporting quarterly profit that beat estimates following the close of U.S. exchanges. Equities dropped globally as Europe´s most indebted governments prepared to hold their first bond auctions this week for 2011, a year when they have to raise about $1 trillion. "There´s going to be a lot of seesawing over the next few days until we start to get some earnings reports," said John Carey, a Boston-based money manager a Pioneer Investments, which oversees about $250 billion. "Then, the direction will be clear. People are optimistic about the earnings outlook. Once you put the concern about the European debt crisis behind you and focus on the earnings, maybe you´ll be more optimistic."
2. Portuguese Bond Buyers Set to Demand `Unsustainable Yields': Euro Credit
Portuguese yields may be rising to levels that force the nation to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund to avert default. The nation plans a 10-year sale tomorrow, the first bond auction by any of the euro region´s most indebted countries this year. Its existing 10-year debt has yielded more than 7 percent in 10 of the past 62 days, according to Bloomberg data. Greece needed a rescue within 17 days of its 10-year yield breaching 7 percent on April 6, while Ireland lasted less than a month after it cracked that level in October. "Even if we see a successful auction, it doesn´t mean anything, because at rates above 7 percent it´s not sustainable," said Ioannis Sokos, a strategist at BNP Paribas SA in London. "It is inevitable that Portugal has to turn to the EU and IMF if they keep borrowing at these levels." The cost of insuring European sovereign debt has climbed to a record on concern backstopping the region´s banks will overwhelm government finances. Countries including Spain, Italy, the Netherlands and Germany are preparing bond and bill sales worth as much as 42 billion euros ($54 billion) this week. Portugal´s six-month borrowing cost jumped to 3.686 percent at a bill sale last week, up from 2.045 percent in September.
3. IPhone May Cost Verizon $5 Billion in Subsidies in Its First Year of Sales
Verizon Wireless, set to get Apple Inc.´s iPhone this month after four years of waiting, may spend $3 billion to $5 billion to subsidize customer purchases of the device this year, cutting into profits, analysts say. Verizon, the largest U.S. wireless carrier, will announce that it´s getting the device at an event in New York tomorrow and plans to put it on sale later in the month, a person familiar with the company´s plans said yesterday. The person could not be identified because the plans aren´t yet public. While the smartphone will help Verizon add more subscribers this year than rival AT&T Inc., currently the exclusive U.S. carrier for the iPhone, it will also crimp profits, said John Hodulik, an analyst at UBS AG. Hodulik said Verizon may sell 13 million of the devices with an estimated $400 subsidy this year, which would add up to a total of $5.2 billion. "You basically write customers a $400 check," said New York-based Hodulik, who rates parent Verizon Communications Inc.´s shares "neutral" and doesn´t own them. "We expect margins to be down pretty meaningfully in the first quarter and second quarter."
4. Japanese Stocks Fall for First Time in Three Days on Europe Debt Concern
Japanese stocks fell, dragging down benchmark indexes for the first time in three days, as concern increased that Europe´s government-debt crisis will worsen. Canon Inc., the world´s largest camera maker, sank 1.1 percent after the euro weakened against the yen to its lowest level since September, reducing the outlook for export earnings. Nippon Sheet Glass Co., which generates about 40 percent of its sales in Europe, lost 1.3 percent. Investors "can´t help becoming cautious about the issues" in Europe, said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. The Nikkei 225 Stock Average fell 0.5 percent to 10,487.83 as of 9:04 a.m. in Tokyo. The broader Topix index lost 0.3 percent to 924.11, with about four shares declining for every three that advanced.
5. Alcoa Profit Beats Estimates as Aluminum Price Nears Pre-Recession Levels
Alcoa Inc., the largest U.S. aluminum producer, reported its highest profit in nine quarters after the price of the metal approached pre-recession levels. The shares fell after sales missed analysts´ estimates. Net income of $258 million, or 24 cents a share, compared with a net loss of $277 million, or 28 cents, a year earlier, Alcoa said today in a statement. Sales gained 4 percent to $5.65 billion from $5.43 billion, missing the $5.75 billion average estimate of seven analysts in a Bloomberg survey. Alcoa, which advanced 27 percent in the quarter, fell 1.6 percent after the close of regular trading on the New York Stock Exchange. "The stock has had a nice run lately," John Stephenson, a fund manager at First Asset Investment Management Inc. in Toronto, said in an e-mail. "While it´s a beat, 3 cents is not a monumental beat for a name like Alcoa." The profit is Alcoa´s biggest since the third quarter of 2008, when commodities began to tumble after the bankruptcy of Lehman Brothers Holdings Inc. in September that year. New York- based Alcoa, led by Chief Executive Officer Klaus Kleinfeld, had net losses in 2008 and 2009, its worst run in at least 19 years. It fired more than 20,000 workers and closed plants in the U.S. and Europe during the global economic slowdown.
6. Honda's `Aging Champion' Civic Compact Seeks Revival Amid Hyundai Rivalry
Honda Motor Co.´s Civic, a U.S. benchmark for small cars since 1973, faces its toughest challenge in decades as models from Hyundai Motor Co. and U.S. rivals tout better fuel economy and fresher looks. Honda, Japan´s second-largest automaker, showed the ninth- generation Civic compact at the North American International Auto Show today in Detroit. The car will deliver "about" 40 miles per gallon in highway driving when it arrives on dealer lots in the next few months, said Honda U.S. Executive Vice President John Mendel. "Civic is the aging champion, one of the last bright spots for Honda since much of its lineup is lackluster," said Eric Noble, president of industry consultant The Car Lab in Orange, California. "There are also profit implications for keeping Civic successful, since it´s sort of the last man standing in terms of small cars among mainstream brands that make money." Honda delayed the Civic at least half a year for design changes, including making the car smaller and lighter. That may help it fend off Hyundai´s new Elantra compact, which gets 40 miles per gallon in highway driving and went on sale last month.
7. Thailand May Raise Interest Rate as Rising Wages, Oil Costs Spur Inflation
The Bank of Thailand will probably increase borrowing costs for the fourth time in seven months as rising wages and oil prices threaten to stoke inflation. The central bank will raise its benchmark one-day bond repurchase rate by a quarter of a percentage point to 2.25 percent at its meeting tomorrow, according to 18 out of 21 economists surveyed by Bloomberg News. Three expect no change. The decision is due at 2:30 p.m. in Bangkok. Thailand joined neighbors from Malaysia to China in raising rates last year as Asia rebounded from the global recession, pushing labor and commodity costs higher. Inflation accelerated to 3 percent in December and the nation has increased the daily minimum wage as well as the retail price of palm oil this year. "A relatively hawkish central bank and an increase in minimum wages across the country set the stage for another rate hike," said Rahul Bajoria, a Singapore-based economist at Barclays Plc. "The central bank appears comfortable with growth and expects core inflation to rise."
8. PetroChina Moves Into European Refining as Jiang Builds Global Oil Company
PetroChina Co., China´s biggest energy producer, gained a foothold in Europe after agreeing to set up a joint venture with Ineos Group Holdings Plc to accelerate its global expansion. PetroChina and Ineos, the U.K.´s largest privately-held company, will refine and trade oil products at the Grangemouth refinery in Scotland and the Lavera plant in southern France, according to a statement yesterday. Both have daily oil- processing capacities of about 210,000 barrels, it said. The Hong Kong-listed company is investing in refineries to raise fuel production while expanding exploration and overseas cooperation. PetroChina aims to spend at least $60 billion in the next decade on overseas acquisitions, Chairman Jiang Jiemin has said. That will help offset the effect of higher interest rates as China seeks to tame inflation. "With global oil prices and refining margins rising, PetroChina is keen to acquire oil and gas fields and refineries overseas to boost production and profits," said Gordon Kwan, head of regional energy research at Mirae in Hong Kong. "The Ineos deal is also a hedge against the uncertain domestic product pricing policies amid China´s inflation clampdown."
9. Toyota Plans Higher Output, Not Spending as Volkswagen Aims for Top Spot
Toyota Motor Corp. plans to produce more vehicles while keeping capital investments little changed as Volkswagen AG attempts to supplant it as the world´s largest carmaker by 2018. "We are challenging ourselves to produce more even as we restrain capital spending," President Akio Toyoda said today at the North American International Auto Show in Detroit. The carmaker plans to keep annual capital spending at about 700 billion yen ($8.46 billion) for at least the next five years, Executive Vice President Atsushi Niimi said Dec. 24. With more efficient processes, the Toyota City, Japan-based carmaker seeks to achieve the same productivity as when it spent more than twice that three years ago, he said. "There have been companies that have gone belly-up for carrying excess capacity, but no company has gone bankrupt for not being able to produce," Niimi said. "We now realize humbly that we shouldn´t make cars until we´re absolutely certain they will sell."
10.Record Nordic Electricity Prices Prompt Factories to Halt: Energy Markets
Electricity prices in the Nordic region are trading at an all-time high, forcing manufacturers to halt production lines as nations turn to energy imports from Germany to meet demand. Day-ahead power averaged 81.67 euros ($105.57) a megawatt- hour last month on Nord Pool Spot AS, the highest level since Sweden, Norway, Denmark and Finland started the joint market more than 10 years ago. That compares with 55.55 euros for German power on the Epex Spot SE exchange. The difference between the two markets hasn´t been so wide since February 2010, according to data compiled by Bloomberg. Water reservoirs, used for more than half the region´s power, are at a 30-year low, driving up prices just as the Nordic countries recover from the global financial crisis. Rottneros AB, a paper maker, halted a pulp factory last month, while Svenska Cellulosa AB shut a production unit for two days, citing rising costs. "Industries shutting down production certainly comes with a cost, but with power spot prices where they are, that particular cost is lower than the cost of producing," Stefan Fastesson, principal partner at Commodity Advisors, which provides risk-management services to industry, said in an interview from Sollentuna, Sweden. "Even industries that have hedged are closing down and selling back into the market."
11.American Airlines Wins Texas Court Order to Keep Sabre From Hiding Fares
AMR Corp.´s American Airlines won a temporary restraining order from a Texas judge barring Sabre Holdings Inc. from hindering electronic access to flight and fare data during a contract dispute. The Tarrant County, Texas District Court granted the provisional order today after a hearing in Fort Worth. American Airlines, which initially sued Sabre on Nov. 5, asked the court for injunctive relief earlier today. "The order prohibits Sabre from continuing its recently announced practice of intentionally making it difficult for American´s agents and customers from finding and purchasing American services" through Sabre, the airline said in a statement. American has developed an electronic reservation system, Direct Connect, to provide pricing options directly to larger online travel agencies. Direct Connect competes against Sabre, which was once owned by the airline.
12.Shorting the Rumor Pays Annual 14% on Takeover Tales That Don't Come True
The surest way to profit from takeover speculation in the stock market is to bet it´s wrong. Electronic news services, brokerages and newspapers reported at least 1,875 rumors about potential buyouts of 717 companies between 2005 and 2010, according to data compiled by Bloomberg. A total of 104, or 14.5 percent, were acquired, the data show. While stocks that were the subject of takeover speculation initially jumped 2.9 percent, betting on declines yielded average profits of 1.2 percent in the next month, an annualized gain of 14 percent. Opportunities to employ the strategy are increasing as mergers recover from the worst recession in more than 70 years, data compiled by Bloomberg show. After bottoming in 2008, the number of unconfirmed stories about possible mergers surged 71 percent to 611 last year from 2009, data compiled by Bloomberg from more than 50 news providers and brokerages show. "Sell into the strength," said John Orrico, who focuses on mergers and acquisitions at New York-based Water Island Capital LLC, which oversees about $2.2 billion. "We see it as an opportunity to sell if we think the rumor is false or ridiculous, which in most cases they are."
-0- Jan/11/2011 00:35 GMT