Jan. 19 (Bloomberg) -- The following are the day's top business stories:
1. Asia Stocks Drop as U.S. Housing Starts, Goldman Sachs Earnings Disappoint 2. Default Swaps Climb to Six-Month High Amid Record-Debt Sales: Japan Credit 3. BHP's Ore Output Gains to Quarterly Record; Queensland Coal Hit by Floods 4. PBOC Knocks Corporate Bonds as AAA Yields Hit One-Year High: China Credit 5. Goldman Sachs Shares Drop After Earnings Fall for Third-Straight Quarter 6. EBay Says 2011 Sales May Beat Estimates on PayPal Service; Shares Advance 7. Danielle Chiesi Pleads Guilty to Insider Trading in Galleon Investigation 8. Nissan to Offer Commercial Truck in U.S. With Mississippi Plant Expansion 9. Korea's Kimchi Funds Losing Appeal as Thailand Boosts Rates: Chart of Day 10.Drought-Breaking Floods in Australia May Propel Next Wheat Crop to Record 11.Apple's `Underdog' Analysts Outperform Wall Street From Helsinki, Caracas 12.Palestine Fair Trade Olive Oil at Whole Foods Helps Ancient Trade Prosper
1. Asia Stocks Drop as U.S. Housing Starts, Goldman Sachs Earnings Disappoint
Asian stocks fell for the first time in three days after U.S. housing starts declined and Goldman Sachs Group Inc. failed to exceed profit estimates. Canon Inc., the world´s largest camera maker, sank 1.8 percent in Tokyo. James Hardie Industries SE, the biggest seller of home siding in the U.S., declined 1.7 percent in Sydney. BHP Billiton Ltd., the No. 1 mining company worldwide, dropped 1.5 percent as commodity prices slumped. OZ Minerals Ltd., which operates the A$1.2 billion ($1.2 billion) Prominent Hill mine in South Australia, lost 3.1 percent after reporting lower copper output. "It may be hard to find a good reason to buy," said Mitsushige Akino, who oversees about $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. The MSCI Asia Pacific Index fell 0.7 percent to 139.59 as of 9:21 a.m. in Tokyo, with about three stocks declining for each that rose. The gauge yesterday closed at its highest level in 2 1/2 years after Apple Inc. and International Business Machines Corp. reported earnings that exceeded analysts´ estimates.
2. Default Swaps Climb to Six-Month High Amid Record-Debt Sales: Japan Credit
Costs to protect against a default by Japan reached a six-month high as the nation sells longer- dated debt today and a record 144.9 trillion yen ($1.76 trillion) of bonds next fiscal year. Credit-default swaps, used to protect against nonpayment and speculate on changes in creditworthiness for five years, climbed to 86.49 basis points on Jan. 18 from as low as 52.78 on Oct. 13, before today´s sale of 1.1 trillion yen of 20-year notes. Japan´s debt load will be double its gross domestic product this year, the most in the world, according to the Organization for Economic Cooperation and Development. While 10-year bond yields are the lowest among major markets and swap prices signal little concern of a failure, the gain in insurance indicates increasing concern about Prime Minister Naoto Kan´s ability to control debt and return the economy to growth. Credit-default swaps on U.S. debt cost 49.85 basis points and more than 600 basis points for Ireland and Greece, which required bailouts last year. "Nobody can explain Japan´s low yields or strong currency from a fundamentals´ perspective," said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $328 billion. "I´m very, very nervous about Japan´s finances."
3. BHP's Ore Output Gains to Quarterly Record; Queensland Coal Hit by Floods
BHP Billiton Ltd., the world´s largest mining company, said second-quarter iron ore production rose 4 percent to a record, while coking coal output fell in Australia because of record rains and floods. Ore output was 33.7 million metric tons in the three months ended Dec. 31, from 32.5 million tons a year earlier, Melbourne- based BHP said in a statement. Coking coal output in Queensland state fell 30 percent from the first-quarter because of rain and floods, the company said. This drop matched a UBS AG forecast Robust growth in developing economies remains the primary driver of commodity demand, BHP said today. The company, the world´s third-largest producer of iron ore, wants to double production of the commodity used to make steel to 240 million tons a year by 2013 to meet Chinese demand. "The bulk of their earnings comes from iron ore and the result looks good and beat expectations, " said Chris Weston, an institutional dealer at IG Markets Ltd. in Melbourne. "Analysts were expecting to see those sorts of numbers" for the decline in coking coal production, he said.
4. PBOC Knocks Corporate Bonds as AAA Yields Hit One-Year High: China Credit
China´s new system for restricting loan growth threatens to reduce banks´ investment in the nation´s $3 trillion bond market at a time when corporate borrowing costs are at about a one-year high. Yields on 10-year AAA corporate bonds have climbed 1.03 percentage points from last year´s low on Aug. 20 to 5.17 percent, as the People´s Bank of China announced four reserve ratio requirement increases. Three-year government debt yields rose 1.04 percentage points in that period, less than the 1.28 point jump in Brazil and more than the 0.79 percentage point increase in Russia and 0.46 percentage point gain in India. A different method for calculating how much money lenders must lodge at the central bank as reserves may cause them to curb debt investment, according to China International Capital Corp. Lenders invested a net 1 trillion yuan ($152 billion) in the bond market last year, almost 90 percent of total inflows, said Tang Guohui, a trader at Industrial Securities Co. in Shanghai. "2011 will be a bear market year for bond investors because the mismatch of supply and demand will be exacerbated" by the new reserve-requirement system, said Luo Jing, a Beijing- based bank analyst at CICC, the top-ranked brokerage for China research in Asiamoney magazine´s annual survey. "The central bank will now lock up funds that banks could have otherwise used for bond purchases."
5. Goldman Sachs Shares Drop After Earnings Fall for Third-Straight Quarter
Goldman Sachs Group Inc. shares fell the most in almost nine months after the firm reported its third straight quarterly earnings decline, led by a slowdown in trading and investment banking revenue. Fixed-income, currencies and commodities trading, the firm´s largest source of revenue, tumbled 48 percent from a year earlier to $1.64 billion, the New York-based company said today in a statement. Equities-trading revenue dropped 5 percent to $2 billion and investment banking fell 10 percent to $1.5 billion. Goldman Sachs´s clients bought and sold fewer stocks, bonds and other securities during the quarter because of the European debt crisis, regulatory changes and concern the economic rebound would stall, Chief Financial Officer David A. Viniar said on a conference call. While business picked up in January, Viniar said it´s too early to make predictions for the year. "It was just a very weak environment for fixed-income trading and to a certain extent equity trading as well," said Keith Davis, an analyst at Farr, Miller & Washington LLC in Washington, which manages about $700 million, including Goldman Sachs shares. "I don´t think one poor quarter from a trading perspective makes a trend."
6. EBay Says 2011 Sales May Beat Estimates on PayPal Service; Shares Advance
EBay Inc., owner of the largest e- commerce market, said sales this year may rise more than analysts estimated, evidence of progress on a turnaround effort at its main site and demand for the PayPal payment service. Sales in 2011 will be as high as $10.6 billion, the San Jose, California-based company said today in a statement. Excluding stock-option costs and other expenses, profit will be $1.90 to $1.95 a share. Analysts in a Bloomberg survey projected, on average, revenue of $10.2 billion and earnings of $1.86. Shares gained in extended trading. Chief Executive Officer John Donahoe, two-thirds of the way through a three-year turnaround effort, has overhauled the site and taken an early lead in mobile commerce. Today´s results suggest he´s making headway on a goal to boost sales at EBay´s fixed-price and auction site at a faster pace than the broader market. More users are also flocking to the PayPal service. "PayPal is a tremendous business and will continue to grow," said James Dobson, a Boca Raton, Florida-based analyst at Benchmark Co. "It really comes down to this Marketplace division. Is it going to be able to grow in line or better than the e-commerce market? The guidance gives people a glimmer of hope that that´s possible this year."
7. Danielle Chiesi Pleads Guilty to Insider Trading in Galleon Investigation
Danielle Chiesi, the former New Castle Funds LLC consultant charged with passing inside information to Galleon Group LLC co-founder Raj Rajaratnam and others, pleaded guilty in federal court in New York. Chiesi, 45, recorded on federal wiretaps cursing and fretting about getting caught, was arrested with Rajaratnam, 53, in October 2009 in the biggest U.S. crackdown on insider trading by hedge funds. She pleaded guilty today to three counts of conspiracy to commit securities fraud during a proceeding before U.S. District Judge Richard J. Holwell in Manhattan federal court, without naming Rajaratnam or other co-conspirators. Chiesi said the insider-trading scheme operated from Oct. 14, 2008, through Jan. 31, 2009, was based on tips she received from insiders at public companies. "I on occasion obtained what I thought to be material, non-public information about IBM, AMD and Sun Microsystems," Chiesi told Holwell. "I understood that this person was obtaining that information in violation of his fiduciary duty."
8. Nissan to Offer Commercial Truck in U.S. With Mississippi Plant Expansion
Nissan Motor Co. is building its first commercial trucks for the U.S. as Japan´s third-largest automaker seeks to boost regional revenue by expanding beyond sales of passenger cars and light trucks. Nissan today marked the start of assembly of NV commercial vans at its Canton, Mississippi, plant that previously made only light-duty pickups and sport-utility vehicles and Altima sedans. The Yokohama-based company said it spent $118 million to modify the plant to accommodate commercial-truck production. Given an improving U.S. economy, "we´re in a prime position to capture that tremendous pent-up demand for replacement vehicles," Joe Castelli, Nissan´s vice president of commercial vehicles, said during a press conference webcast from the facility. "We plan on becoming a major player in the U.S." Nissan, which for decades has sold commercial trucks in Japan and other overseas markets, will fight for U.S. sales against Daimler AG´s Sprinter vans and General Motors Co.´s Chevrolet Express and GMC Savana. Ford Motor Co. is also targeting a bigger share of U.S. commercial van and truck sales.
9. Korea's Kimchi Funds Losing Appeal as Thailand Boosts Rates: Chart of Day
South Korean government bonds are losing their allure for Thai investors, the second-biggest overseas holders of the debt, as the difference between yields in the two nations narrows, Societe Generale SA said. Korean bonds held by Thais, often in so-called kimchi funds, fell 11 percent to 14.9 trillion won ($13.4 billion) last year, leaving the U.S. as the largest foreign owner of the debt, data compiled by the Seoul-based Financial Supervisory Service show. Money brought back to Thailand will flow into domestic shorter-maturity securities, lowering yields and pushing down short-term interest-rate swaps, Societe Generale said. THE CHART OF THE DAY shows South Korea´s advantage over Thai debt, including currency hedging costs, has vanished, resulting in investors from the Southeast Asian nation pulling out of kimchi funds. The lower panel shows the gap between two- and five-year swap rates in Thailand has widened to the most in 10 months, while it has narrowed in South Korea. "There will be little incentive to reinvest maturing kimchi funds in Korea," said Wee-Khoon Chong, a fixed-income strategist at Societe Generale in Hong Kong. "We see potential for a steepening of swap curves."
10.Drought-Breaking Floods in Australia May Propel Next Wheat Crop to Record
Rain that caused billions of dollars of destruction in Australia could propel wheat output in the fourth-largest exporter to a record next harvest and boost irrigated crops after floods swept formerly parched land. Heavy rains saturated soils, providing moisture for the next wheat-growing season and raising dam levels for irrigated crops such as cotton, commodities analyst Wayne Gordon and sustainability analyst Tracey Allen at Rabobank Groep NV said in an interview yesterday. Rising milling wheat and cotton supplies from Australia may help curb global prices that soared last year on concerns that demand may outpace supply. Floods this month followed the country´s wettest July-to-December on record, ending a drought that lasted a decade in some areas and filling dams in the Murray-Darling Basin, which produces more than a third of the nation´s food supply. "It´s plausible to see that we could plant and perhaps grow a record wheat crop in the coming year," Gordon said by phone. Still, that depends on improved production in Western Australia, where drought persists, and "top-up" rains in the east, he said. The grain is mostly planted from April to June.
11.Apple's `Underdog' Analysts Outperform Wall Street From Helsinki, Caracas
The most accurate analyst covering Apple Inc. isn´t on Wall Street. It´s Horace Dediu -- a blogger, ex-Nokia Oyj worker and self-described "entertainer" who writes from a home overlooking the Baltic Strait in Helsinki. Over the past four quarters, Dediu has published the most accurate estimates about Apple, topping analysts from such firms as Morgan Stanley, Citigroup Inc. and Deutsche Bank AG, according to a leader board maintained for the past year by fellow blogger Daniel Tello. After Apple reported first-quarter results yesterday, Dediu, a Harvard Business School graduate, held on to the top spot. Dediu and Tello are part of a cadre of amateur analysts who study Apple and post their insights on personal blogs and websites such as Mac Observer´s Apple Finance Board. Their accuracy projecting Apple´s performance -- data that can help predict stock movements -- is giving investors a free alternative to Wall Street and creating a rivalry with the pros. "Competitiveness with Wall Street analysts is a natural consequence of us bloggers backing each other as the `underdogs,´" said Tello, who writes his posts from Caracas.
12.Palestine Fair Trade Olive Oil at Whole Foods Helps Ancient Trade Prosper
Nasser Abufarha was sipping coffee at a Madison, Wisconsin, cafe called Michelangelo´s a few years back when it dawned on him how he might help struggling Palestinian olive growers back home. If the crowd could derive virtuous pleasure from mugs of "fair trade" organic coffee, they might just be convinced of the superiority of extra-virgin oil pressed from West Bank olives. That was enough for Abufarha, a graduate student in anthropology at the University of Wisconsin in Madison, to wrap up his dissertation on suicide bombers and head home to the West Bank. The olive farming industry there was in a shambles. Yields were low due to poor soil treatment, and farmers were barely breaking even, leading many to abandon their fields and migrate to Palestinian cities where unemployment hovered around 40 percent, Bloomberg Businessweek reports in its Jan. 22 edition. Tapping into savings from running a Middle Eastern restaurant in Madison, Abufarha in 2004 invested some $100,000 to start a company he called Canaan Fair Trade. The son of a watermelon farmer, he offered growers nearly twice the going rate during the olive harvest that year and soon started shipping oil to the U.S. and Europe.
For the complete stories summarized here, and for more of the day's top news, see TOP <Go>.