Top Stories: Business and Finance
The following are the day's top business stories:
1. Goldman Sachs Turns Bullish on Stocks in European Banks Bond Market Shuns 2. Japan Stocks Rise for Third Day; Mitsui Mining, Japan Tobacco Lead Advance 3. Highest Relative Yields Since 2009 Spoil Company Debt Sales: India Credit 4. National Australia First-Quarter Cash Profit Rises 18% on Business Lending 5. Australia Can Delay Surplus Goal Without Jeopardizing AAA Rating, S&P Says 6. Ballmer Said to Plan Microsoft Management Shake-Up to Boost Tech Expertise 7. U.S. Consumer Credit Rose $6.1 Billion in December, Declined 1.3% for 2010 8. Bharti Plans Tower Companies in Africa After $9.7 Billion Zain Purchase 9. Centrica Gains on BP as Laidlaw Uses Oil Experience to Get North Sea Gas 10 Egypt Credit Risk Falls to Lowest Since Start of Protests as Crisis Eases 11.Singapore Air Traffic Falls as Cathay Pacific Rises on China: Chart of Day 12.Rail's Cash-Flow King Stakes $62 Billion for the Tokyo-Nagoya Maglev Route
1. Goldman Sachs Turns Bullish on Stocks in European Banks Bond Market Shuns
Goldman Sachs Group Inc. is telling investors to buy European bank stocks for the first time in more than 16 months. Bond buyers are taking the opposite view on concern that policy makers will fail to staunch the debt crisis. Banks in Spain, Italy and Greece have led the Bloomberg Europe Banks and Financial Services Index 16 percent higher since November. While shares of Spain´s Banco Santander SA rallied 23 percent and Italy´s UniCredit SpA jumped 28 percent, both lenders had to offer investors record premiums over government debt when they sold covered bonds in the same period. Equity investors are betting political leaders will bridge their differences over the mandate of the European Financial Stability Facility and stop the region´s debt crisis from spreading. Bond buyers are skeptical that the talks will succeed and concerned banks may be forced to accept losses on the more than $2 trillion of loans and other assets they have in Greece, Ireland, Italy, Portugal and Spain. Analysts say that while equity investors may be right in the short term, they risk ignoring a jump in funding costs that will erode future profit. "The fundamental split here is about whether policy measures in Spain and the rest of Europe are going to work in halting the crisis -- or not," said Huw van Steenis, a banking analyst at Morgan Stanley in London.
2. Japan Stocks Rise for Third Day; Mitsui Mining, Japan Tobacco Lead Advance
Japan´s stocks rose for a third day, after U.S. takeovers boosted investors´ optimism, and as companies reported improving earnings or raised their forecasts. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue overseas, rose 0.6 percent. Sharp Corp., Japan´s biggest maker of liquid-crystal displays, advanced 0.8 percent. Japan Tobacco Inc., the world´s third-largest publicly traded cigarette maker, rose 2.1 percent and Mitsui Mining & Smelting Co. Japan´s biggest producer of refined zinc, gained 3.9 percent after the companies raised their full-year profit forecasts. "Stocks will likely continue to rise since U.S. business sentiment is improving steadily," said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. The Nikkei 225 Stock Average rose 0.4 percent to 10,630.42 as of 9:18 a.m. in Tokyo, headed for its highest level since May 6. The broader Topix index gained 0.3 percent to 943.31 with about two stocks advancing for each that fell.
3. Highest Relative Yields Since 2009 Spoil Company Debt Sales: India Credit
Indian companies are finding it too expensive to sell local-currency bonds after central bank Governor Duvvuri Subbarao raised interest rates seven times in a year, spurring relative yields to the highest level since October 2009. Rupee bond offerings plunged 95 percent to 1 billion rupees ($22 million) in the week ended Feb. 4, from 21 billion rupees in the same period last year, according to data compiled by Bloomberg. January sales were the lowest for 15 months as Subbarao increased the repurchase rate to a two-year high of 6.5 percent, forecasting wholesale-price inflation may rise to 7 percent by March 31 from a prior 5.5 percent estimate. "The current rate environment doesn´t give much confidence to long-term investors," Suresh M. Hegde, group finance head at Videocon Industries Ltd., India´s biggest consumer electronics maker, said in a phone interview yesterday. "They´ll wait till inflation is under control and rates start to soften." Bond sales jumped to a record 1.94 trillion rupees last year as borrowers raised money to finance airports, power plants and roads in Asia´s third-largest economy. The difference between yields on top-rated Indian five-year company bonds and similar-maturity government debt has since widened to 122 basis points, or 1.22 percentage point, the most since it reached 131 basis points on Oct. 9, 2009. The spread is 76 more than last year´s low, amid speculation Subbarao will need to raise rates further.
4. National Australia First-Quarter Cash Profit Rises 18% on Business Lending
National Australia Bank Ltd., the nation´s fourth-largest lender, posted an 18 percent increase in first-quarter profit and said it´s well placed to absorb fallout from government banking reforms and natural disasters. Unaudited cash earnings for the three months ended Dec. 31 rose to A$1.3 billion ($1.3 billion), the Melbourne-based bank said in a statement today. That compares with A$1.1 billion profit reported in the same period a year earlier. Chief Executive Officer Cameron Clyne has stoked earnings by expanding the bank´s business lending, which outpaced rivals in the quarter, after Australia´s regulator rejected his bid for asset manager Axa Asia Pacific Holdings Ltd. The shares rose to the highest in three months after Clyne said he expects to see demand for business lending accelerate this year. "The market´s assessment of the risk associated with NAB will continue to decline each time the bank delivers a sound `business as usual´ outcome, as they have today," said Angus Gluskie, who manages about $350 million at White Funds Management Pty in Sydney. "The continued reduction in bad debts, and limited impact of recent weather events were important issues the market was looking for."
5. Australia Can Delay Surplus Goal Without Jeopardizing AAA Rating, S&P Says
Australia has room to delay its goal of returning to a budget surplus by 2013 and pay for two months of natural disasters without jeopardizing its AAA credit rating, a Standard & Poor´s analyst said. S&P sovereign credit analyst Kyran Curry, in a telephone interview today from Melbourne, said more government borrowing to pay for reconstruction and delaying the return to surplus by a year wouldn´t affect the top rating. Australian government bonds were the world´s best performers over the past year. "The government has a strong enough balance sheet in the first instance to cope with additional spending and it doesn´t immediately affect the rating itself," Curry said. "If the surplus slips one year, it´s not materially going to impact on the rating, given the balance sheet is in strong shape to wear an additional year of deficits." S&P´s analysis supports the view of Reserve Bank of Australia board member Warwick McKibbin, who last month derided lawmakers´ "fetish" for avoiding budget deficits. McKibbin called borrowing a "far better strategy" than Prime Minister Julia Gillard´s proposed levy on income to help pay flood costs.
6. Ballmer Said to Plan Microsoft Management Shake-Up to Boost Tech Expertise
Microsoft Corp. Chief Executive Officer Steve Ballmer plans to extend a management reshuffling aimed at adding senior product executives with an engineering background, two people with knowledge of the decision said. Changes may be announced this month, said one of the people, who declined to be named because the plans are private. Last month, Ballmer pushed out server division president and 23- year company veteran Bob Muglia, saying the company needed new leadership that could focus on areas such as cloud software. The move would expand on an effort to promote managers who have engineering chops and experience executing product plans -- a bid to help Microsoft catch up with rivals such as Apple Inc. and Google Inc. in Web services, smartphones and tablet computers. The overhaul also may quell criticism from the board and investors that Microsoft is falling behind in some markets. Four top executives have left the company since May. "You see the engineering team ascending because Steve is realizing that there is a need to execute on a vision and in order to do that you have to actually understand how software is built," said Wes Miller, an analyst at the Kirkland, Washington-based research firm Directions on Microsoft. "It´s a whole other thing to be able to say, `I´ve been at Microsoft, I understand software, and what you are saying will or will not work.´"
7. U.S. Consumer Credit Rose $6.1 Billion in December, Declined 1.3% for 2010
U.S. consumer borrowing rose in December for a third consecutive month, led by the first increase in credit-card charges in more than two years as holiday sales improved. Credit rose by $6.1 billion to $2.41 trillion after increasing a revised $2.02 billion in November, according to Federal Reserve data issued today in Washington. Economists projected a $2.4 billion increase, according to the median forecast in a Bloomberg News survey. Borrowing remains below the peak of $2.58 trillion in July 2008. For all of 2010, credit contracted. A thawing of credit makes it more likely that consumer spending, which accounts for about 70 percent of the economy, will keep increasing after climbing last quarter at the fastest pace in four years. Gap Inc. and General Motors Co. are among companies that beat sales estimates at the start of this year as customers took advantage of post-holiday discounts. "People are starting to get out, little by little, and spend," said Yelena Shulyatyeva, an economist at BNP Paribas in New York. "This is in line with consumer spending, and the overall economy, picking up."
8. Bharti Plans Tower Companies in Africa After $9.7 Billion Zain Purchase
Bharti Airtel Ltd., India´s biggest mobile-phone operator, plans to create tower companies in each of the 16 African countries where it operates following its $9.7 billion purchase of assets from Kuwait´s Zain. Seven months after the transaction, Bharti is pushing programs to turn around the operations it bought, working on cutting costs -- through projects such as pooling tower assets into a separate entity -- and boosting subscriptions. "Our 100 percent focus is to get these 16 properties into very good health," Manoj Kohli, Airtel Africa chief executive officer said in an interview from Nairobi yesterday. Profits and market shares at businesses Bharti bought from Zain were declining, Kohli said. In the past two quarters the slide has been arrested and the group had net additions of 2 million users for a total of 42 million at the end of December. The plan to cap costs by separating and sharing the mobile-phone towers mirrors a system Bharti has tested in India.
9. Centrica Gains on BP as Laidlaw Uses Oil Experience to Get North Sea Gas
Sam Laidlaw is using three decades of oil and gas drilling experience to make Centrica Plc, the U.K.´s largest utility, a competitor in the North Sea, a region where Exxon Mobil Corp. and BP Plc are selling assets. Centrica pumps enough gas to supply over 5 million gas customers, around 60 percent its U.K. total, compared with around 37 percent four years ago. Acquisitions and a successful drilling program -- 11 out of 15 wells were discoveries in 2010 -- will ensure the company can maintain its position as older fields decline, said Chief Executive Officer Laidlaw. A similar campaign is planned for this year. "As long as gas is being produced in the North Sea it´s logical for us to continue to be there to satisfy our customers," Laidlaw, 55, whose last job was head of business development at Chevron Corp., said in a Feb. 2 interview in London. "So while a lot of the majors might be exiting, we´re likely to stay." The gas field-to-boiler strategy has helped Centrica outperform rivals. The stock has gained 24 percent in the last year as U.K. competitor Scottish & Southern Electricity Plc shares have remained flat and GDF Suez, Europe´s largest utility, gained 11 percent. Centrica is expected to announce a 23 percent gain in operating profit on Feb. 24 after the coldest U.K. December in 100 years boosted gas and power demand.
10.Egypt Credit Risk Falls to Lowest Since Start of Protests as Crisis Eases
Egypt´s credit risk is falling to the lowest level since anti-government protests began two weeks ago and international borrowing costs are dropping as the nation´s biggest political crisis in three decades eases. The cost of insuring Egyptian sovereign debt retreated 32 basis points, or 0.32 percentage point, yesterday to 334, the lowest level since Jan. 25, according to CMA prices in London. The yield on Egypt´s 5.75 percent bond due in April 2020 slumped 39 basis points to 6.21 percent after climbing to a record 7.2 percent on Jan. 31, data compiled by Bloomberg show. The government raised most of the 15 billion Egyptian pounds ($2.5 billion) sought at a debt auction yesterday as negotiations between opposition leaders and Vice President Omar Suleiman on constitutional changes needed to end the 30-year rule of President Hosni Mubarak made "big progress," Egyptian billionaire Naguib Sawiris, a participant in the talks, said on Bloomberg Television. "The market has digested the fact that things have changed and that the end result currently does not look calamitous," said Oliver Bell, who helps oversee about $10 billion of emerging-market assets as a London-based senior investment manager at Pictet Asset Management. "It´s not as bad as everyone thought when the violence erupted, but I don´t think we can be certain that we know the outcome yet."
11.Singapore Air Traffic Falls as Cathay Pacific Rises on China: Chart of Day
Singapore Airlines Ltd., facing competition from low-cost carriers and Middle East rivals, is missing out on an Asian travel boom that likely helped Cathay Pacific Airways Ltd. make a record 2010 profit. The CHART OF THE DAY shows that the Singapore-based company´s passenger numbers fell in four of the last five months of 2010, while Hong Kong-based Cathay posted increases of as much as 18 percent. Singapore´s Changi Airport reported increased use in the period, while overall traffic in the Asia- Pacific region also rose, according to International Air Transport Association data. Singapore Air, the third-worst performing share in the Bloomberg Asia-Pacific Airlines Index last year, is losing market share as budget carriers such as Jetstar and AirAsia Bhd. add flights and Dubai-based Emirates Airline boosts efforts to lure premium travelers. Singapore´s national carrier also has a geographic disadvantage to Cathay in tapping China travel. "Low-cost carriers are gaining market share very quickly," said Julius Yeo, a Singapore-based aerospace consultant at Frost & Sullivan Inc. "Cathay is benefiting from mainland business because many international travelers use Hong Kong as a gateway."
12.Rail's Cash-Flow King Stakes $62 Billion for the Tokyo-Nagoya Maglev Route
Central Japan Railway Co., whose high-speed trains carried more passengers than the world´s largest airline last year, is staking 5.1 trillion yen ($62 billion) on building the world´s fastest train. The company plans to fund the project, at a cost almost eight times the $8 billion President Barack Obama is giving to U.S. high-speed and conventional rail projects, with cash, loans and bonds, said Kinya Tani, a spokesman for the Nagoya, Japan- based company. JR Central will issue 5-year, 10-year and 20-year bonds in equal amounts, according to the company. JR Central is using the greatest free cash flow of any listed rail operator to finance a magnetic levitation train that will travel between Tokyo and Nagoya, Japan´s fourth-largest city, at a speed of 500 kilometers per hour (311 miles per hour) when the line is completed in 2027. The 290-kilometer link, about the distance from New York to Baltimore, will later be extended to Osaka, the nation´s third-largest city. "It´s like launching a rocket into space," said Masayuki Kubota, who oversees the equivalent of $2.1 billion in Tokyo at Daiwa SB Investments Ltd. "The first time is very expensive and risky, but once it´s successful, it can become a big business."
-0- Feb/08/2011 00:35 GMT
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