The following are the day's top business stories:
1. LSE Is in Advanced Talks to Acquire Toronto Stock Exchange Owner TMX Group 2. `Heavy Lifting' to Come as China Leaves Deposit Rate Below Inflation Pace 3. Japanese Stock Futures, Australian Shares Advance on Earnings, U.S. Retail 4. Yield Curve Hits Eight-Month High as Economic Growth Resumes: Japan Credit 5. Toyota Rebound Aided by `Best' Hoped-For Findings on Sudden Acceleration 6. Former SAC Capital Employees Among Four Charged in U.S. Insider Crackdown 7. Brazil's CSN Boosts Riversdale Stake Amid Rio Tinto's $4 Billion Takeover 8. Blizzards in U.S. to Cut Europe February Gasoline Cargoes: Energy Markets 9. E.ON's U.K. Grid Said to Draw Interest From MidAmerican, PPL, Cheung Kong 10.South Korea to Raise Rates as Inflation Exceeds Bank's Goal: Chart of Day 11.Race to Be China's Facebook Pits Renren Against 600 Million Tencent Users 12.Dines Parlays Decades Atop BHP China in Hedge Fund Bet on Food, Technology
1. LSE Is in Advanced Talks to Acquire Toronto Stock Exchange Owner TMX Group
London Stock Exchange Group Plc is in advanced talks to purchase TMX Group Inc., owner of the Toronto Stock Exchange, to create the world´s eighth-largest exchange operator by market value. LSE plans to issue stock according to a ratio that is similar to the companies´ relative market values, according to e-mailed statements. LSE would control 56 percent of the combined entity given its market capitalization of 2.42 billion British pounds ($3.89 billion) and TMX´s C$3 billion ($3.01 billion), according to data compiled by Bloomberg. The negotiations, following a decade-long wave of mergers among exchange companies, would unite two of the biggest venues for commodity producers. While energy and raw-materials suppliers make up 22 percent of the value of equities worldwide, they account for 36 percent of companies listed in the U.K. and 50 percent in Canada, data compiled by Bloomberg show. "It seems so logical to me because you´re creating the largest resources exchange in the world," said Thomas Caldwell, chief executive officer of Caldwell Securities Ltd. in Toronto, which, with its affiliates, oversees about C$1 billion, including LSE and TMX shares. "We actually recommended it to both companies months ago."
2. `Heavy Lifting' to Come as China Leaves Deposit Rate Below Inflation Pace
China´s central bank will likely need to increase interest rates further in coming months as the three moves since mid-October leave household wealth being eroded by accelerating inflation. The People´s Bank of China yesterday raised the one-year lending rate by a quarter point to 6.06 percent and the one-year deposit rate an equivalent amount to 3 percent. The deposit rate remains almost 2 percentage points less than the pace of consumer-price gains, giving savers an incentive to buy goods and assets. "There is still a substantial amount of heavy lifting to do in terms of rates -- at this stage of the cycle, the fact that we still have negative real rates is quite alarming," said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong and a former adviser to Australia´s government. Premier Wen Jiabao´s government has yet to return rates to pre-crisis levels, seeking to sustain the economy´s rebound to growth of about 10 percent. With overheating a danger in the first half of the year, policy makers are likely to raise their benchmarks further, order banks to set aside more cash as reserves and let the yuan appreciate to stem price pressures, Wang Qing, a Morgan Stanley economist in Hong Kong, wrote in a note yesterday.
3. Japanese Stock Futures, Australian Shares Advance on Earnings, U.S. Retail
Japanese stock futures rose as companies reported improving earnings and U.S. retail sales rebounded. American depositary receipts of Toyota Motor Corp., the world´s largest automaker, jumped 4.5 percent from the closing share price in Tokyo yesterday after the company raised its profit forecast. Those of Honda Motor Co., a competitor, gained 1.3 percent. Commonwealth Bank of Australia, the country´s biggest lender, climbed 2.3 percent in Sydney after the bank said fiscal first-half profit increased. "Although there are factors of uncertainty, the U.S. economy is steadily improving and the environment is getting supportive for stocks," said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc. Futures on Japan´s Nikkei 225 Stock Average expiring in March closed at 10,680 in Chicago, compared with 10,630 in Osaka, Japan. They were bid in the pre-market at 10,670 in Osaka at 8:05 a.m. local time today. Australia´s S&P/ASX 200 Index gained 0.6 percent today, and New Zealand´s NZX 50 Index climbed 0.2 percent.
4. Yield Curve Hits Eight-Month High as Economic Growth Resumes: Japan Credit
Traders are lifting yields on longer- term Japanese bonds to an eight-month high relative to shorter- term debt on expectations the central bank will keep interest rates near zero as the economy returns to growth. Yields on benchmark 10-year government bonds rose to 1.315 percent yesterday and two-year rates increased to 0.225 percent, driving the so-called yield curve to 109 basis points, the most since June and up from 72 in October. In the U.S., where the Federal Reserve´s target rate is between zero and 0.25 percent, the gap has widened to 287 basis points, or 2.87 percent. India´s yield curve narrowed to 47 basis points from 249 in January last year as policy makers raised borrowing costs seven times in the past year. Japan´s Ministry of Finance said last month that every 1 percentage point increase in 10-year yields above 2 percent would add 1 trillion yen ($12 billion) in debt-servicing costs to a projection of 22.9 trillion yen for the fiscal year starting April 2012. Ten-year yields have risen from a seven- year low of 0.82 percent in October, as the government plans to sell a record 144.9 trillion yen in bonds next fiscal year. "The Japanese bond market´s outlook isn´t as rock solid as before," said Yuuki Sakurai, who helps oversee about $8.4 billion as chief executive officer at Fukoku Capital Management Inc. in Tokyo. "Stocks are rising and optimism over the global recovery is growing," prompting the selling of bonds, he said.
5. Toyota Rebound Aided by `Best' Hoped-For Findings on Sudden Acceleration
Toyota Motor Corp.´s rebound from record recalls that depressed sales and hurt its reputation for quality got a boost from a U.S. government report finding no link between electronics in the company´s vehicles and sudden acceleration incidents. The findings are the "best Toyota could have hoped for," said Efraim Levy, an auto analyst at Standard & Poor´s Equity Research in New York, who rates Toyota´s American depositary receipts a "hold." "The brand may not return to the zenith it once enjoyed, but it will recover." While the U.S. findings support Toyota´s position that electronics played no part in its global recalls of more than 8 million autos for flaws linked to unintended acceleration and other defects, the company must still convince consumers its quality has recovered. The recalls triggered a 0.4 percent U.S. sales drop even as industrywide deliveries grew 11 percent last year, hundreds of lawsuits and record federal fines. The findings don´t change the fact that the recalled cars and trucks had flaws, said Rebecca Lindland, an analyst at IHS Automotive in Lexington, Massachusetts.
6. Former SAC Capital Employees Among Four Charged in U.S. Insider Crackdown
Former SAC Capital Advisors LP junior portfolio managers Noah Freeman and Donald Longueuil were accused of insider trading while working at the $12 billion hedge fund in the latest round of charges stemming from a nationwide crackdown by federal prosecutors. The allegations mark the first time in the 16-month U.S. probe that insider trading has been publically alleged to have occurred at SAC Capital. Longueuil, who worked at SAC Capital´s CR Intrinsic unit from July 2008 to July 2010, was arrested this morning. Freeman, who worked at the hedge fund founded by Steven A. Cohen from June 2008 to January 2010, pleaded guilty yesterday as part of a cooperation deal with prosecutors. Two others charged in the probe are Samir Barai, the founder of Barai Capital Management, and Jason Pflaum, who worked for Barai. Pflaum pleaded guilty in December as part of a cooperation deal. From 2006 to 2010, the four men, while working at six funds, swapped tips from employees of public companies and from consultants at an expert networking firm, prosecutors said.
7. Brazil's CSN Boosts Riversdale Stake Amid Rio Tinto's $4 Billion Takeover
Cia Siderurgica Nacional SA, the second-largest shareholder in Riversdale Mining Ltd., increased its stake in the company amid Rio Tinto Group´s A$3.9 billion ($4 billion) takeover bid for the African-focused coal developer. CSN, as the company is known, raised its holding to 17.58 percent from 16.29 percent, the Rio De Janeiro-based company bought said today in a statement to the Australian stock exchange. The Brazilian company bought the shares between Feb. 1 and Feb. 8, it said in the statement. Rio Tinto, based in London, is targeting Riversdale to boost its reserves of steelmaking coal as demand and prices climb. It has set a minimum acceptance condition of 50 percent. Riversdale´s largest shareholder Tata Steel Ltd. holds 24.1 percent, according to data compiled by Bloomberg. Rio has offered A$16 cash a share. Riversdale shares have more than doubled in the past year. The offer has been recommended by the board of Riversdale, and Managing Director Steve Mallyon said in a Jan. 24 interview that he expected Rio´s bid to succeed. Mallyon´s travelling overseas and wasn´t available when contacted at his Sydney office.
8. Blizzards in U.S. to Cut Europe February Gasoline Cargoes: Energy Markets
European gasoline exports to the U.S. are poised to decline this month after blizzards cut demand from the world´s largest consumer to the lowest level in a year. Profit from buying gasoline in Europe and shipping it to the U.S. was 2.92 cents a gallon on Feb. 4, down from 14.52 cents on Dec. 31, the most since Aug. 5, based on futures for delivery to New York harbor and benchmark 95-octane grade fuel in the Amsterdam-Rotterdam-Antwerp region. U.S. gasoline usage has tumbled during the past two weeks as snowstorms across northern states hampered motoring, reducing demand for auto fuel. At the same time, maintenance programs by refineries in Europe are driving up prices on the continent, sapping the so-called arbitrage profit traders get from buying the fuel in one market and selling it in the other. "There´ll be a strengthening in gasoline prices in northwest Europe while the refinery maintenance is on, and that will undoubtedly, on paper, make the arbitrage less attractive," said Roy Jordan, a London-based analyst at Facts Global Energy.
9. E.ON's U.K. Grid Said to Draw Interest From MidAmerican, PPL, Cheung Kong
E.ON AG´s U.K. power grid is drawing interest from MidAmerican Energy Holdings Co., PPL Corp. and Cheung Kong Infrastructure Holdings Ltd. in a sale that may fetch about $6 billion, said people with knowledge of the talks. E.ON, Germany´s largest utility, is considering the new approaches after earlier talks to sell the asset failed, said the people, who declined to be identified because the negotiations are private. CKI, controlled by Hong Kong billionaire Li Ka-shing, MidAmerican, owned by Warren Buffett´s Berkshire Hathaway Inc., and PPL all have operations in the U.K., according to their websites. The sale of the U.K. electricity lines is part of E.ON´s plan to sell 15 billion euros ($20.5 billion) of assets by the end of 2013. The company is seeking to slash debt and raise funds for growth outside Europe, where it faces stagnant demand and levies from governments trying to reduce budget deficits. E.ON had entered exclusive talks last year to sell the assets to a group led by the Canada Pension Plan Investment Board, people familiar with the matter said in November. Dusseldorf-based E.ON began talks with other parties after it rejected a revised bid from the group, people said.
10 South Korea to Raise Rates as Inflation Exceeds Bank's Goal: Chart of Day
Policy makers in South Korea, unlike those in the Philippines, may raise borrowing costs this week as inflation has breached the central bank´s target and exports are surging, according to Action Economics LLC. THE CHART OF THE DAY shows that South Korea´s consumer- price index climbed 4.1 percent in January from a year earlier, above the Bank of Korea´s 4 percent ceiling. Inflation in the Philippines was 3.5 percent, the most in four months, and within the central bank´s goal of 3 percent to 5 percent. The lower panel shows that gains in the won that followed three rate increases since the start of July haven´t hurt overseas sales, which account for about half of the $833 billion economy. "In Korea, the policy rate is below inflation, so that would be one reason for them to raise borrowing costs, together with the fact that exports have been strong," said David Cohen, the head of Asian forecasting at Action Economics in Singapore. Philippine policy makers "feel they can wait a little longer," he said. The Bank of Korea, which raised its policy rate by a quarter of a percentage point to 2.75 percent last month, will boost it to 3 percent on Feb. 11, according to nine of 12 economists surveyed by Bloomberg. The Philippine central bank will leave its main rate unchanged at 4 percent tomorrow, according to 12 of 13 economists in a separate poll.
11.Race to Be China's Facebook Pits Renren Against 600 Million Tencent Users
The top social-networking service in the world´s biggest Internet market was created by graduates of a prestigious university to help students communicate with each other. And it´s not Facebook Inc. Renren.com leads China´s surging social-networking market with more than 160 million registered users, according to Analysys International in Beijing. Competitor Kaixin001.com has more than 93 million. Their edge over billionaire Mark Zuckerberg´s service: a government that blocks Facebook access. "Our service is basically the same as Facebook´s, in terms of functions and features," said Donna Li, a general manager at Renren. "We are more tailored to the China market." With Facebook´s valuation topping $63 billion, Renren and peers may be the next investment opportunities in a market with more Internet users than the combined populations of the U.S. and Japan. Those sites and competitors Tencent Holdings Ltd. and Baidu Inc. have room to grow as the online advertising market is projected to triple to almost $13 billion by 2014.
12.Dines Parlays Decades Atop BHP China in Hedge Fund Bet on Food, Technology
Clinton Dines said he had a rude introduction to China deal-making -- being held "prisoner" while negotiating a ball-bearing export contract to Germany. That was in the early 1980s in central Hubei province when he worked in the trading department of Hong Kong-based Jardine Matheson Ltd. "These guys couldn´t get the price out of me that they wanted," said Dines in an interview. "So they kept on telling me, `Sorry there are no trains.´ They virtually held me prisoner for a week." Australian-born Dines, 52, is now executive chairman Asia for Caledonia Investments Pty, which manages more than A$2 billion ($2 billion). He´s raising money for an Asia hedge fund for Caledonia to tap growth in China. Besides lessons learned from rough negotiations three decades ago, he´s tapping contacts and experience from 21 years as the China president for BHP Billiton Ltd.
-0- Feb/09/2011 00:35 GMT