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Top Stories: Business and Finance
The following are the day's top business stories:
1. Fed Governor Kevin Warsh Resigns; Bernanke Adviser Had Questioned Stimulus 2. Australia Stocks Drop on Concern Egypt Crisis Remains Threat; Korea Rises 3. Lowest BRIC Yields Rising as Zhou Struggles With Inflation: China Credit 4. Bank of America's Lewis Paid `Crazy Price' for Merrill Lynch, Buffett Says 5. Newcrest Mining Posts First-Half Profit of $440 Million, Missing Estimates 6. South Korean Jump in Producer Prices Bolsters Case for Raising Rates Today 7. Axel Weber Moves Markets to Confusion With Hints of Exiting His Bundesbank 8. Anil Ambani's Reliance Communications Profit May Slump 66% on Discounting 9. Egypt Bonds, Stock Fund Advance as Mubarak Pledges to Delegate Authority 10.Akamai's Chief Sagan Plans to Go It Alone Amid Persisting Takeover Talks 11.Disney Battles Hong Kong Government Park as Buzz Lightyear Rides to Rescue 12.Bustling Business of Cheating Has Nothing to Do With Wall Street This Time
1. Fed Governor Kevin Warsh Resigns; Bernanke Adviser Had Questioned Stimulus
Federal Reserve Governor Kevin Warsh, who was one of Chairman Ben S. Bernanke´s closest financial-crisis advisers before becoming the only governor to question the expansion of record monetary stimulus in November, resigned after five years at the central bank. Warsh, 40, a former investment banker who was the youngest- ever Fed governor when then-President George W. Bush appointed him in 2006, will leave "on or around March 31," he said in a letter today to President Barack Obama that was released by the Fed in Washington. His departure may give Bernanke a stronger hand to complete or potentially expand $600 billion in Treasury purchases through June. At the same time, Bernanke loses a link to Wall Street executives and Republican politicians as he carries out Congress´s overhaul of financial regulation and faces criticism from a political party that in the midterm election gained control of the U.S. House. "You lose a forceful internal advocate for ending QE and trying to renormalize policy quicker," said Vincent Reinhart, the Fed´s director of monetary affairs from 2001 to 2007, referring to the stimulus program known as quantitative easing.
2. Australia Stocks Drop on Concern Egypt Crisis Remains Threat; Korea Rises
Australian stocks fell, ending seven days of gains, amid concern Egyptian President Hosni Mubarak´s steps to subdue anti-government protests will fail to contain regional turmoil that threatens a global economic recovery. BHP Billiton Ltd., the world´s biggest mining company, dropped 0.5 percent in Sydney, and Rio Tinto Group, which reported earnings late yesterday, sank 1.1 percent. Newcrest Mining Ltd., Australia´s largest gold mining company, declined 0.6 percent after reporting first-half net income that missed analyst estimates. Independence Group NL, an Australian nickel producer, slumped 3.1 percent after analysts at Goldman Sachs & Partners Australia Pty. lowered its investment rating. Australia´s S&P/ASX 200 Index fell 0.2 percent to 4,903.8 as of 10:48 a.m. in Sydney, with mining and energy stocks leading today´s declines. New Zealand´s NZX 50 Index gained 0.5 percent in Wellington. South Korea´s Kospi Index climbed 0.4 percent in Seoul. Futures on the U.S. Standard & Poor´s 500 Index slid 0.4 percent today. The gauge advanced 0.1 percent at 4 p.m. in New York yesterday, reversing an earlier slide of as much as 0.7 percent, after Mubarak´s plan to delegate authority to his vice president initially spurred optimism that the nation´s political crisis won´t threaten the global economy. Mubarak failed to resign in a speech late yesterday, instead handing powers to his deputy, Omar Suleiman.
3. Lowest BRIC Yields Rising as Zhou Struggles With Inflation: China Credit
China´s 10-year bond yield is in jeopardy of rising further from a two-year high on speculation that central bank interest rates, the lowest among BRIC nations, are failing to cool the fastest-growing major economy. Yields on debt due in 2020 may climb to 4.35 percent from 4.13 percent yesterday, according to the median estimate in a Bloomberg News survey of eight analysts. Data next week may show lending surged in January and inflation was at a 30-month high, according to separate polls. Retail sales rose 19 percent from a year earlier during a weeklong Lunar New Year holiday that ended Feb. 8, the Commerce Ministry said. The central bank´s 0.25 percentage point increase in the one-year deposit rate to 3 percent this week still leaves China´s benchmark below Brazil´s 11.25 percent, India´s 6.5 percent and Russia´s 7.75 percent. Rising returns on savings have already swelled inflows of capital betting on yuan gains, which have added to inflation and asset-bubble risks. "A much tighter monetary policy is necessary," said Tim Condon, head of Asian research in Singapore at ING Groep NV, who sees inflation exceeding 7 percent in April and the 10-year yield at 4.5 percent by June 30. "Excess liquidity has increased the risk of a broad-based inflation spiral."
4. Newcrest Mining Posts First-Half Profit of $440 Million, Missing Estimates
Newcrest Mining Ltd., Australia´s largest gold mining company, said first-half profit more than doubled after the purchase of Lihir Gold Ltd. and a surge in prices. Net income was A$438 million ($440 million) in the six months ended Dec. 31, compared with A$176 million a year earlier, the Melbourne-based company said today in a statement. This was less than the A$457 million mean of four analyst estimates surveyed by Bloomberg. Gold recorded a 10th straight annual gain in 2010 as concern about rising inflation and currency debasement spurred investors to seek the metal as a store of value. Sales from Newcrest´s mines in Australia, Indonesia, Papua New Guinea and West Africa rose 66 percent to A$1.97 billion. Greg Robinson, Newcrest´s executive director finance, will succeed retiring Chief Executive Officer Ian Smith from July 1, the company said in a separate statement.
5. South Korean Jump in Producer Prices Bolsters Case for Raising Rates Today
South Korea´s producer-price inflation rate climbed at the fastest pace in more than two years, bolstering the case for the central bank to raise borrowing costs for a second straight month today. Producer prices increased 6.2 percent in January from a year earlier, the biggest gain since November 2008, compared with a 5.3 percent advance in December, the Bank of Korea said in a statement in Seoul today. Prices advanced 1.6 percent from December, the fastest pace in more than two years. The Bank of Korea will raise its benchmark policy rate by a quarter percentage point to 3 percent at its meeting today, according to nine of 12 analysts surveyed by Bloomberg News. "The BOK needs to act more aggressively to keep inflation expectations from running out of control," Kwon Young Sun, an economist at Nomura Holdings Inc. in Hong Kong, said before the report. "The success of rate hikes will depend on how much the won appreciates to curb import prices."
6. Axel Weber Moves Markets to Confusion With Hints of Exiting His Bundesbank
Axel Weber may be heading toward the exit of the Bundesbank on the same unconventional path he´s treaded throughout seven years as a central banker. The 53-year old German, who once argued "it´s not so important" for a central banker to be a diplomat, sowed confusion among investors for a second day yesterday by declining to clarify whether he´s quitting and no longer a candidate to run the European Central Bank. The disarray meshes with the unorthodox and outspoken approach Weber took to the presidency of the Bundesbank and which harmed his chances of succeeding Jean-Claude Trichet at the ECB. Where Trichet is smooth, Weber´s public objections to buying bonds and cutting interest rates suggested he placed the primacy of his own views on beating inflation and maintaining central bank independence above the need to appease politicians or strike a consensus with colleagues. "It´s like he´s wanting to prove he´s not the right person," said Christoph Kind, head of asset allocation at Frankfurt Trust, which manages about 16 billion euros ($22 billion). "The way he´s communicated about whether he does or doesn´t want the job shows me he´s lacking the feeling for the public and politicians that the ECB job needs."
7. Anil Ambani's Reliance Communications Profit May Slump 66% on Discounting
Reliance Communications Ltd., India´s second-largest mobile-phone operator and the flagship company of billionaire Anil Ambani´s business group, may report a sixth consecutive drop in profit as call rates tumble. Net income may fall 66 percent to 3.7 billion rupees ($81 million) in the third quarter, from 11 billion rupees a year earlier, according to the average of 25 analyst estimates compiled by Bloomberg. The company announces earnings Feb. 14. Reviving profit growth is important to convince investors that the company will be able to pare down debt after plans to sell equity and a tower unit last year didn´t go through, analysts said. Ambani´s companies lost a combined $2.6 billion in market value on Feb. 9 after the group said "vicious and illegal" rumors sparked a sell off. "Earnings are immaterial now," said Jigar Shah, an analyst with Kim Eng Securities India Pvt. in Mumbai, who has a "sell" rating on the shares. "What is critical is how they are able to reduce debt levels."
8. Egypt Bonds, Stock Fund Advance as Mubarak Pledges to Delegate Authority
Egyptian dollar bonds and a fund tracking the nation´s stocks gained as President Hosni Mubarak pledged to hand authority to Vice President Omar Suleiman. The yield on the government´s 5.75 percent dollar bond due 2020 fell 11 basis points to 6.48 percent as Mubarak said in a speech on state television yesterday that he would hand over the responsibilities of office to his deputy ahead of September elections. The Market Vectors Egypt Index ETF, an exchange- traded fund that holds Egyptian shares, gained 0.5 percent in New York after earlier rising as much as 6.1 percent. Egyptian bonds are rebounding after yields surged to a record 7.2 percent on Jan. 31 as hundreds of thousands of Egyptians flooded the country´s main squares and thoroughfares to demand Mubarak´s exit. The violence, which the United Nations says has killed about 300 people, sparked concern about contagion in the region, which holds more than 50 percent of the world´s known oil reserves. "The succession for the president needs to be acceptable to the people," said Mohammed Ali Yasin, chief investment officer at Abu Dhabi-based financial services company CAPM Investments PJSC. "If so, it will prompt a strong rebound in the stock market and the economy in general. People had expected markets to sell off. You may find them now talking about opening limit up and not limit down."
9. Akamai's Chief Sagan Plans to Go It Alone Amid Persisting Takeover Talks
Akamai Technologies Inc. has been a rumored takeover target 21 times since 2005, more than any other company, according to Bloomberg data. Chief Executive Officer Paul Sagan says nobody there is paying attention. "I get more questions from employees about whether we can get more showers in the office," he says. Told that Akamai had been crowned king of the rumor mill, he laughs: "Well, I guess that makes you guys wrong more often than anyone." The takeover chatter has included Apple Inc., AT&T Inc., Cisco Systems Inc., and Google Inc., Bloomberg Businessweek reports in its Feb. 14 edition. Although shares of the Cambridge, Massachusetts-based company with the funny name -- it means "intelligent" in Hawaiian -- tumbled 12 percent on Feb. 9 after a weaker-than-expected forecast for the current quarter, Akamai still trades at about 50 times earnings. Apple, by comparison, trades at about 20 times profits. It´s a sign that Wall Street expects Akamai´s sales to keep zooming upward. Revenue increased 19 percent in the fourth quarter of 2010, to $285 million.
10.Disney Battles Hong Kong Government Park as Buzz Lightyear Rides to Rescue
For 15 minutes, 11-year-old Lily Li stared through a glass panel at hammerhead sharks and bluefin tuna in Hong Kong´s newest attraction, Aqua City. "It´s like a dream," said Li, from China´s Guangdong province, who crowded with her mother and about 50 others at the window, the width of a basketball court, on the packed Jan. 27 opening day. The egg-shaped building, with nightly water shows, is part of a HK$5.5 billion ($707 million) redevelopment by government- owned Ocean Park to profit from a jump in mainland Chinese visitors. The revamp adds pressure on Walt Disney Co.´s Hong Kong Disneyland, which has trailed Ocean Park since its 2005 opening, has yet to make a profit, and is spending HK$3.6 billion on its own expansion, including "Toy Story Land." "Home-grown theme parks like Ocean Park have proven that they can compete with a big global corporation like Disney," said Jonathan Galaviz, managing director of Galaviz & Co., a tourism industry economist. "As consumer disposal income increases in Asia, the first place that Asian consumers will spend that money on is travel, tourism, and fun experiences."
11.Bustling Business of Cheating Has Nothing to Do With Wall Street This Time
Do you want to have an affair? After hearing an ad on Howard Stern´s radio show or seeing a schlocky commercial on late-night TV, you might find yourself on AshleyMadison.com -- the premier "dating" website for aspiring adulterers. Type in the URL, and as the page loads a gauzy violet backdrop appears with a fuzzy image of a half-dressed couple going at it beyond a hotel doorway. "Join FREE & change your life today. Guaranteed!" Setting up a profile costs nothing and takes about 12 seconds, Bloomberg Businessweek reports in its Feb. 14 edition. First you check off your availability status: "attached male seeking females," "attached female seeking males," or, even though the concept of the site is that all users are in relationships and therefore equally invested in secrecy, "single female seeking males." Next you´re asked for location, date of birth, height and weight, and whether you´re looking for something "short term," "long term," "Cyber affair/Erotic Chat," "Whatever Excites Me," and so on. If you´re like me, you choose a handle based on the cupcake you most recently ate -- "redvelvet2" -- and then shave a few years and pounds off your numbers.
-0- Feb/11/2011 00:35 GMT