Oil falls below $65 in Asia on US economic contraction, fears of demand slump
-- Oil prices slipped below $65 a barrel in Asia Friday, extending declines after data showed the U.S. economy contracted in the latest quarter, reinforcing expectations of a prolonged slump in demand.Light, sweet crude for December delivery was down $1.78 to $64.18 a barrel in electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The contract overnight fell $1.54 to settle at $65.96. Oil prices have fallen about 55 percent since peaking above $147 a barrel in mid-July.
U.S. gross domestic product, the broadest barometer of a nation's economic health, shrank at a 0.3 percent annual rate in the July-September quarter, the Commerce Department said overnight. It marked the worst showing for the world's largest economy since it contracted at a 1.4 percent pace in the third quarter of 2001.
The negative cue provided by the U.S. data continued into Asian trade, compounding the pressure from a generally strong dollar, said David Moore, commodity strategist with Commonwealth Bank of Australia in Sydney.
Investors often buy commodities such as crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises. Oil investors have also been tracking equity indexes as a barometer of global economic health.
The euro eased to $1.2697 from $1.3181 in late Asian trade Thursday and the dollar fell to 96.88 yen from 98.68. The region's stock markets were mixed after a rally the previous day with Japan's Nikkei index falling 5 percent while South Korea's market rose 2.6 percent and India's market jumped 6 percent.
"The dollar has been relatively firm and that has taken some of the edge off the market. There's also the other issues that have been in the market for a while such as worries about demand and consumption patterns," Moore said.
"A further fall in the oil price cannot be ruled out. It is difficult to predict where the bottom could be," he added. "An important factor over the next few months will be whether OPEC can achieve its output cuts. If it can that will certainly tighten market conditions."
Last week, the Organization of Petroleum Exporting Countries announced plans to cut 1.5 million barrels of production per day at an extraordinary meeting in Vienna called to address plummeting prices.
Venezuela's Oil Minister Rafael Ramirez says that OPEC, which controls about 40 percent of world crude oil production, will need to cut production at least another 1 million barrels per day to boost falling prices.
In other Nymex trading, gasoline futures fell 2.7 cents to $1.4395 a gallon. Heating oil fell 3.91 cents to $1.9450 a gallon and natural gas for December delivery was down 4.6 cents at $6.385 per 1,000 cubic feet.
In London, December Brent crude fell $1.89 to $61.82 a barrel on the ICE Futures exchange.
Friday, October 31, 2008
Asia markets mixed; Nikkei slides despite rate cut
Asian markets mixed; Japan's Nikkei falls despite first rate cut in 7 years
BANGKOK, Thailand (AP) -- Asian markets were mixed Friday as Japanese stocks fell despite the first rate cut in seven years while shares in India soared to catch up with the global market rally after a holiday there.
Investors were also digesting data overnight that confirmed the U.S. economy -- a major export market -- had contracted in the third quarter.
Tokyo's Nikkei 225 index sank 5 percent to 8,576.98 after the Bank of Japan cut its key interest rate from 0.5 percent to 0.3 percent. Investors who wanted a full quarter-point cut viewed the step as half-hearted.
South Korea's market extended the previous session's 12 percent rally with the Korea Composite Stock Price Index gaining 2.6 percent to 1,113.06. Australia's key index climbed out of negative territory to close 0.4 percent higher.
"Clients are a little more willing to re-enter the markets as the sense of panic has subsided a bit and valuations have been hammered to ridiculous levels," said Andrew Yates, vice president of foreign institutional sales at Asia Plus Securities in Bangkok.
"Obviously further volatility is likely but funds are picking up stocks at cheap levels for end of month rebalancing of portfolios," he said.
Hong Kong's Hang Seng slid as the afternoon progressed, falling 3.7 percent to 13,801.72 after vaulting 12.8 percent Thursday. Smaller Asian markets such as the Philippines and Taiwan both rose 4 percent or more, while Jakarta's main index shot up 5.9 percent.
In India, the benchmark Sensex index surged 5.6 percent to 9,547 as traders caught up with Thursday's rally in Asian markets, when investors cheered a U.S. Federal Reserve rate cut and further central bank steps to boost dollar liquidity in emerging markets.
U.S. stock index futures were about 1 percent lower, suggesting Wall Street would pull back Friday, a day after the Dow Jones industrial average rose 189.73, or 2.11 percent, to 9,180.69. The S&P 500 index rose 2.6 percent to 954.09.
Japanese stocks were modestly lower for much of the day after jumping nearly 10 percent Thursday on expectations of a rate cut by the central bank.
But when the Bank of Japan announced the smaller-than-expected cut -- the first since March 2001 -- the market fell sharply. With interest rates in Japan already the lowest in the developed world, many analysts doubt looser monetary policy will do much to stimulate the world's second largest economy.
"The move fell short of the widely expected cut to 0.25 percent," said Yumi Nishimura, market analyst at Daiwa Securities SMBC. "But the market also welcomed the move as a step to stay in line with the rest of the world."
The move comes two days after the U.S. Federal Reserve slashed its key rate by half a percentage point to 1 percent, a level seen only once before in the last half century. Earlier this week, South Korea's central bank lowered rates by three-quarters of a point -- its biggest cut ever -- to 4.25 percent. China, Hong Kong and Taiwan also reduced rates this week.
The Bank of Japan's policy board was split 4-4, so Gov. Masaaki Shirakawa, who has the final say in the event of a tie, voted in favor of the cut.
The bank warned that "adjustments in the world economy stemming from financial crises in the United States and Europe have further increased in severity."
In Tokyo, Honda Motor Co. fell 13 percent to 2523 yen, Mitsubishi UFJ Finance was down 5.4 percent at 598 yen and Sony Corp. was down 2.2 percent at 2280 yen.
U.S. data overnight confirmed the world's largest economy shrank in the July-September quarter by an annual pace of 0.3 percent, marking the worst showing since it contracted at a 1.4 percent pace in the third quarter of 2001.
"The U.S. economy obviously contracted a lot more than the data says and it is likely to be revised lower. There are clear signs the contraction accelerated from September onward so the fourth quarter will also be weak," said Yates.
Oil fell below $65 a barrel in Asian trade with light, sweet crude for December delivery down $1.94 to $64.02 a barrel in electronic trading on the New York Mercantile Exchange by Friday afternoon in Singapore.
Thursday, October 30, 2008
Exxon Mobil posts biggest US quarterly profit ever
Exxon Mobil shatters own record for largest profit from operations by a US corporation
HOUSTON (AP) -- Exxon Mobil Corp., the world's largest publicly traded oil company, reported income Thursday that shattered its own record for the biggest profit from operations b
Bolstered by this summer's record crude prices, the Irving, Texas-based company said net income jumped nearly 58 percent to $2.86 a share in the July-September period. That compares with $9.41 billion, or $1.70 a share, a year ago.
The previous record for U.S. corporate profit was set in the last quarter, when Exxon Mobil earned $11.68 billion.
Revenue rose 35 percent to $137.7 billion.
On average, analysts expected the company to earn $2.39 per share in the latest quarter on revenue of $131.4 billion.
Company shares fell 69 cents to $73.96 at the open of trade.
Exxon Mobil's results got a boost of $1.62 billion in the most-recent quarter from the sale of a natural gas transportation business in Germany. It also took a special, after-tax charge of $170 million related to a punitive damages award related to the 1989 Exxon Valdez oil spill.
Excluding those items, third-quarter earnings amounted to $13.38 billion -- nearly 15 percent above its previous profit record from the second quarter.
As expected, Exxon Mobil posted massive earnings at its exploration and production, or upstream, arm, where net income rose 48 percent to $9.35 billion. Higher oil and natural gas prices propelled results, even though production was down from the third quarter a year ago.
Oil producers are coming off a quarter during which crude prices reached an all-time high of $147.27 -- and their profits have reflected it. Crude prices, however, have quickly fallen 50 percent from the summer's highs, and the global economic malaise has raised questions about energy demand at least into 2009.
Some companies, especially smaller producers, are scaling back spending on new exploration and production projects because of the uncertainty, though analysts say that its less likely to happen at the well-heeled giants like Exxon Mobil.y a U.S. corporation, earning $14.83 billion in the third quarter.
HOUSTON (AP) -- Exxon Mobil Corp., the world's largest publicly traded oil company, reported income Thursday that shattered its own record for the biggest profit from operations b
Bolstered by this summer's record crude prices, the Irving, Texas-based company said net income jumped nearly 58 percent to $2.86 a share in the July-September period. That compares with $9.41 billion, or $1.70 a share, a year ago.
The previous record for U.S. corporate profit was set in the last quarter, when Exxon Mobil earned $11.68 billion.
Revenue rose 35 percent to $137.7 billion.
On average, analysts expected the company to earn $2.39 per share in the latest quarter on revenue of $131.4 billion.
Company shares fell 69 cents to $73.96 at the open of trade.
Exxon Mobil's results got a boost of $1.62 billion in the most-recent quarter from the sale of a natural gas transportation business in Germany. It also took a special, after-tax charge of $170 million related to a punitive damages award related to the 1989 Exxon Valdez oil spill.
Excluding those items, third-quarter earnings amounted to $13.38 billion -- nearly 15 percent above its previous profit record from the second quarter.
As expected, Exxon Mobil posted massive earnings at its exploration and production, or upstream, arm, where net income rose 48 percent to $9.35 billion. Higher oil and natural gas prices propelled results, even though production was down from the third quarter a year ago.
Oil producers are coming off a quarter during which crude prices reached an all-time high of $147.27 -- and their profits have reflected it. Crude prices, however, have quickly fallen 50 percent from the summer's highs, and the global economic malaise has raised questions about energy demand at least into 2009.
Some companies, especially smaller producers, are scaling back spending on new exploration and production projects because of the uncertainty, though analysts say that its less likely to happen at the well-heeled giants like Exxon Mobil.y a U.S. corporation, earning $14.83 billion in the third quarter.
Stocks open sharply higher after GDP report
Stocks open sharply higher after better-than-expected GDP report, Fed interest rate cut
Wall Street is feeling more upbeat after a government report showing that the economy contracted in the third quarter by less than expected and after the Federal Reserve's second interest rate cut in a month. Stocks are up sharply in early trading.
The Commerce Department says the gross domestic product, the measure of all goods and services produced within the U.S., fell at a 0.3 percent annual rate in the July-September quarter, rather than 0.5 percent the market expected.
That added to Wall Street's good mood a day after the Fed's decision to lower its fed funds rate by a half-point to 1 percent.
The Dow Jones industrials are up 200 at the 9,189 level, a 2.2 percent gain. The other major indexes are also showing gains of more than 2 percent.
Wall Street is feeling more upbeat after a government report showing that the economy contracted in the third quarter by less than expected and after the Federal Reserve's second interest rate cut in a month. Stocks are up sharply in early trading.
The Commerce Department says the gross domestic product, the measure of all goods and services produced within the U.S., fell at a 0.3 percent annual rate in the July-September quarter, rather than 0.5 percent the market expected.
That added to Wall Street's good mood a day after the Fed's decision to lower its fed funds rate by a half-point to 1 percent.
The Dow Jones industrials are up 200 at the 9,189 level, a 2.2 percent gain. The other major indexes are also showing gains of more than 2 percent.
Stocks end mixed in late slide after Fed rate cut
Stocks end mixed in late slide after Federal Reserve cuts interest rates by half a point
-- Wall Street received the interest rate cut it wanted, but still turned in a baffling late-day performance Wednesday, shooting higher and then skidding lower in the very last minutes of trading as some investors rushed to cash in profits after the previous session's big advance. The major indexes ended the day mixed, with the Dow Jones industrials falling 74 points -- only the third time in October that the blue chips had just a double-digit close.
Analysts were divided over why the market turned around so abruptly. Some cited reports of a lackluster profit forecast at General Electric Co. -- a Dow component that dropped nearly 4 percent from its late-session high -- and others contended investors were simply looking to cash in gains after the Federal Reserve's decision to lower its fed funds rate by a half-point to 1 percent.
"It was a panic sell in the last two minutes," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York, referring to reports that GE was aiming at 2009 profits to be little changed from 2008. The reports were subsequently called into question, and a GE spokesman said the statements were taken out of context.
Because of the last-hour confusion, it was likely that it would take the opening of trading on Thursday to get a better read on how the market feels about the Fed's rate cut and its accompanying economic statement. At the same time, the Commerce Department's expected reading on the gross domestic product for the third quarter will most likely shape trading.
The market waffled while it was still digesting the Fed's afternoon announcement, then advanced for most of the final hour of trading. Until shortly before the close, it looked like Wall Street was feeling more confident about the economy and would extend its huge rally from Tuesday, which propelled the Dow Jones industrials up nearly 900 points.
Policymakers spelled out a weakening of economic conditions in the U.S. and abroad, citing first a drop in spending by American consumers. The Fed also reiterated that it expects government steps, including its own efforts to increase liquidity, to improve credit market conditions and the economy over time.
Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, said the Fed's overall tone conveyed it regards the economic troubles as somewhat typical of a weak economy and not the kind of intractable problems that signal a deep recession is imminent.
"They more or less indicated elevated concerns about the economy but nothing in it suggests any real panic but that this is just one more step in their program to restore the financial system to complete functioning."
But the final hour of trading on Wall Street over the past month has seen turnarounds in sentiment as well as prices, and the late-session volatility that has become the norm was in force again Wednesday.
"We set ourselves up in the last hour with a golden opportunity to lock in profits," said Ryan Larson, senior equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher.
He said that very late in the day, more investors were putting a somewhat downbeat spin on the Fed's statement, which Larson said indicated policymakers are willing to lower the fed funds rate below 1 percent if necessary. Traders started thinking, "if they're willing to go under 1 percent, there must be serious problems that we don't know about yet," he said.
The Dow was up as much as 298 points in the last quarter hour of the session, giving it a two-day gain of more than 1,187 points, when it began to slide. It closed down 74.16, or 0.82 percent, at 8,990.96. During the 21 trading days so far this month, the Dow has logged gains or losses of fewer than 100 points only twice -- on Oct. 1 and Oct. 14; the month has seen unprecedented volatility, with the blue chips recording their largest ever advance, 936 points, and their largest ever decline, 778 points.
Broader stock indicators were mixed. The S&P 500 index fell 10.42, or 1.11 percent, to 930.09, and the technology-heavy Nasdaq composite index advanced 7.74, or 0.47 percent, to 1,657.21.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume totaled 7.01 billion shares compared with 6.93 billion shares traded Tuesday.
Some traders expressed frustration at the market's finish.
"You cannot have moves like this and have any sort of investor confidence," said Joe Saluzzi, co-head of equity trading at Themis Trading LLC.
The credit markets had a lukewarm response to the Fed move. The yield on the three-month Treasury bill, regarded as the safest investment around and an indicator of investor sentiment, fell to 0.58 percent from 0.74 percent Tuesday. A drop in yield indicates an increase in demand. Meanwhile, the yield on the benchmark 10-year Treasury note rose to 3.86 percent from 3.84 percent late Tuesday.
Light, sweet crude rose $4.77 to settle at $67.50 a barrel on the New York Mercantile Exchange as the dollar fell against other major currencies. With many commodities priced in dollars a weaker greenback makes prices rise.
It was clear from Wednesday's trading that Wall Street is nowhere near moving away from the volatility that has devastated stock prices this month. And many investors are hesitant to re-enter the market after being hit hard -- even with Tuesday's jump, the three major stock indexes are still down more than 30 percent for the year, battered since last month's freeze-up of the credit markets. The troubles with the credit markets have made it harder and more expensive for businesses and consumers to get loans.
While signs have emerged that the government action to revive credit markets is starting to work, investors remain skittish over the effects of the prolonged credit freeze on the economy, which relies on lending to feed growth.
Investors are hoping the latest rate cut will complement the government's still-unfolding efforts to aid the commercial paper market, where companies turn for short-term loans, and the banks themselves. The Treasury Department this week is investing directly in banks, hoping the cash will make them more likely to issue loans.
Wall Street's rally Tuesday helped lift trading in most markets overseas. Japan's Nikkei stock average jumped 7.74 percent. Britain's FTSE 100 rose 8.05 percent, Germany's DAX index slipped 0.31 percent, and France's CAC-40 rose 9.23 percent.
Monday, October 27, 2008
SEC Brings Second-Highest Number of Enforcement Actions in Its History
The U.S. Securities and Exchange Commission brought 671 enforcement actions in fiscal year 2008, the second-highest total in the agency's history.
The SEC also repeated last year's total of distributing more than $1 billion to investors harmed by others' actions during fiscal 2008, which ended on Sept. 30.The agency looks forward to continuing its investor protection mission in the upcoming year, said Linda Chatman Thomsen, director of the SEC's division of enforcement.
"The SEC's role in policing the markets and protecting investors has never been more critical," Thomsen said.
The agency's higher enforcement caseload includes a spike of more than 25 percent in insider trading cases and more than 45 percent in market manipulation cases, compared with fiscal 2007 actions. The SEC also reported that it is conducting more than 50 investigations related to the subprime mortgage market.
The agency's major fraud cases include a suit against two former Bear Stearns hedge fund managers for misleading investors about two of the company's hedge funds. SEC v. Cioffi, No. 1:08-cv-02457 (E.D.N.Y.).
The SEC also settled a high-profile market manipulation and securities fraud case against a Wall Street short seller for spreading false rumors about a company and profiting from the stock price's subsequent drop. SEC v. Berliner, No. 1:08-cv-03859 (S.D.N.Y.).
The SEC also repeated last year's total of distributing more than $1 billion to investors harmed by others' actions during fiscal 2008, which ended on Sept. 30.The agency looks forward to continuing its investor protection mission in the upcoming year, said Linda Chatman Thomsen, director of the SEC's division of enforcement.
"The SEC's role in policing the markets and protecting investors has never been more critical," Thomsen said.
The agency's higher enforcement caseload includes a spike of more than 25 percent in insider trading cases and more than 45 percent in market manipulation cases, compared with fiscal 2007 actions. The SEC also reported that it is conducting more than 50 investigations related to the subprime mortgage market.
The agency's major fraud cases include a suit against two former Bear Stearns hedge fund managers for misleading investors about two of the company's hedge funds. SEC v. Cioffi, No. 1:08-cv-02457 (E.D.N.Y.).
The SEC also settled a high-profile market manipulation and securities fraud case against a Wall Street short seller for spreading false rumors about a company and profiting from the stock price's subsequent drop. SEC v. Berliner, No. 1:08-cv-03859 (S.D.N.Y.).
O'Melveny Cuts Associate, Staff Headcount
O'Melveny & Myers has reduced its staff and associate headcount amid cost-cutting measures that were announced last week, according to the firm and other sources.
According to the legal blog Above the Law, O'Melveny also has laid off five associates in its Los Angeles office. The moves come as O'Melveny's profits per partner have remained at about $1.6 million, on average, during 2006 and 2007, mostly due to a drop in large private equity deals, and as many other firms, including Katten Muchin Rosenman, Sonnenschein Nath & Rosenthal and Clifford Chance, have laid off associates and staff in recent weeks.
O'Melveny Chairman Arthur B. Culvahouse Jr. left a voicemail message to many of the firm's lawyers informing them of "cost-cutting measures," according to a former partner, who agreed to speak on condition of anonymity.
In a prepared statement, Sonja Steptoe, a firm spokeswoman, said: "There have been no economic layoffs of associates at O'Melveny & Myers and there are no plans to conduct such layoffs. We are in the midst of our annual associate evaluation process, which began as scheduled in September and some associates, as is always the case, are receiving less-than-satisfactory performance reviews. It would be inaccurate to infer a layoff from performance reviews given to less than 1 percent of our associates and counsel headcount. Our lawyer headcount has not declined year over year. We simply are choosing to pay and to promote the large majority of associates who are working very hard and at high levels."
"With respect to staff," she continued, "we have prudently been reviewing and reducing our cost structure for the past eight months, following two years in which our expenses have grown faster than our income. During this period we have reduced operating expenses, including staff, to reflect technology-driven efficiencies, to bring staff ratios into alignment with competitive norms and to address redundancies that are not required to support the modern practice of law."
In 2006 alone, the firm lost about a dozen partners who specialize in private equity deals, restructuring and other transactional work, including the former chairman of O'Sullivan, a New York private equity boutique that O'Melveny acquired nearly seven years ago.
Last year, three partners who specialize in private equity, joint ventures and cross-border mergers at O'Melveny's Tokyo office left for Morrison & Foerster. Also last year, Raymond Wong, a capital markets partner at O'Melveny's London office, left for Paul, Hastings, Janofsky & Walker.
This month, two finance lawyers at O'Melveny left for Bingham McCutchen's Tokyo office, and John "Jack" Hardy Jr., the former co-chairman of O'Melveny's capital markets practice, joined Washington-based Venable's Los Angeles office. Also, three partners from O'Melveny who specialize in transactional work joined the San Francisco office of New York's Shearman & Sterling.
According to the legal blog Above the Law, O'Melveny also has laid off five associates in its Los Angeles office. The moves come as O'Melveny's profits per partner have remained at about $1.6 million, on average, during 2006 and 2007, mostly due to a drop in large private equity deals, and as many other firms, including Katten Muchin Rosenman, Sonnenschein Nath & Rosenthal and Clifford Chance, have laid off associates and staff in recent weeks.
O'Melveny Chairman Arthur B. Culvahouse Jr. left a voicemail message to many of the firm's lawyers informing them of "cost-cutting measures," according to a former partner, who agreed to speak on condition of anonymity.
In a prepared statement, Sonja Steptoe, a firm spokeswoman, said: "There have been no economic layoffs of associates at O'Melveny & Myers and there are no plans to conduct such layoffs. We are in the midst of our annual associate evaluation process, which began as scheduled in September and some associates, as is always the case, are receiving less-than-satisfactory performance reviews. It would be inaccurate to infer a layoff from performance reviews given to less than 1 percent of our associates and counsel headcount. Our lawyer headcount has not declined year over year. We simply are choosing to pay and to promote the large majority of associates who are working very hard and at high levels."
"With respect to staff," she continued, "we have prudently been reviewing and reducing our cost structure for the past eight months, following two years in which our expenses have grown faster than our income. During this period we have reduced operating expenses, including staff, to reflect technology-driven efficiencies, to bring staff ratios into alignment with competitive norms and to address redundancies that are not required to support the modern practice of law."
In 2006 alone, the firm lost about a dozen partners who specialize in private equity deals, restructuring and other transactional work, including the former chairman of O'Sullivan, a New York private equity boutique that O'Melveny acquired nearly seven years ago.
Last year, three partners who specialize in private equity, joint ventures and cross-border mergers at O'Melveny's Tokyo office left for Morrison & Foerster. Also last year, Raymond Wong, a capital markets partner at O'Melveny's London office, left for Paul, Hastings, Janofsky & Walker.
This month, two finance lawyers at O'Melveny left for Bingham McCutchen's Tokyo office, and John "Jack" Hardy Jr., the former co-chairman of O'Melveny's capital markets practice, joined Washington-based Venable's Los Angeles office. Also, three partners from O'Melveny who specialize in transactional work joined the San Francisco office of New York's Shearman & Sterling.
Market Rebound Could Take Five Years, Says Wachtell's Lipton
In a seminar at New York University School of Law on Thursday night, legendary Wachtell, Lipton, Rosen & Katz M&A lawyer and firm founding partner Martin Lipton said something that deal lawyers and law students alike probably didn't want to hear: a full economic recovery could take between three and five years.Lipton was part of a panel that included retired Goldman Sachs Chairman Stephen Friedman (currently the chairman of the Federal Reserve Bank of New York) and Joseph Rice III, the founder and chairman of New York-based private equity firm Clayton Dubilier & Rice. The three spoke about the current global economic crisis and offered predictions on what the future might hold for both lawyers and businesses.
Reuters reports that when discussing the downturn in the mortgage and housing markets, Lipton said that assets held by banks would not stop declining until those markets are stabilized. "I don't think that's a matter that can be dealt with in a short period of time," Lipton said. "I'm afraid it will take three to five years before we can achieve that."
According to Reuters, Lipton went on to say that the economic downturn will result in a flurry of civil suits being filed against directors and officers, which, in turn, will be a driver for significant changes in corporate governance.
The New York Times' DealBook reports that Lipton also spoke of a shakeout in the financial institution world, whereby large banks control most of the capital necessary to fund deals, with smaller boutiques taking lesser roles.
And "[t]here will always be M&A," DealBook quotes Lipton as saying. "M&A is very psychological, and CEO's don't like to go to their boards in this type of economy."
Reuters reports that when discussing the downturn in the mortgage and housing markets, Lipton said that assets held by banks would not stop declining until those markets are stabilized. "I don't think that's a matter that can be dealt with in a short period of time," Lipton said. "I'm afraid it will take three to five years before we can achieve that."
According to Reuters, Lipton went on to say that the economic downturn will result in a flurry of civil suits being filed against directors and officers, which, in turn, will be a driver for significant changes in corporate governance.
The New York Times' DealBook reports that Lipton also spoke of a shakeout in the financial institution world, whereby large banks control most of the capital necessary to fund deals, with smaller boutiques taking lesser roles.
And "[t]here will always be M&A," DealBook quotes Lipton as saying. "M&A is very psychological, and CEO's don't like to go to their boards in this type of economy."
Baker Botts Defends SOX Board in Key Separation of Powers Case
Baker Botts fired the latest shot in the ongoing battle over whether a key cog in the Sarbanes-Oxley machine violates the U.S. Constitution by robbing the president of his appointment powers.
The cog in question is the Public Company Accounting Oversight Board, which monitors auditors to make sure their ratings of publicly traded companies are based on sound evidence instead of cronyism. A Nevada accounting firm, Beckstead & Watts, originally brought the case in federal district court; the court dismissed it. At that point, the Free Enterprise Fund, a group that lobbies for laissez-faire government and low taxes, hired a team led by Jones Day and former U.S. Solicitor General Kenneth Starr to pursue the case on appeal. That team lost in a contentious 2-1 decision at the U.S. Court of Appeals for the D.C. Circuit in August, but they asked that court to re! hear the case en banc in papers filed last month.
The board responded Wednesday, and, not surprisingly, it called on the same Baker Botts team that won the first appeals case.
The case is a dream for separation of powers wonks; the dissenting judge in the appeals case, Brett Kavanaugh, called it the "most important separation of powers case to reach the court in 20 years."
The Jones Day-Starr team argues that the board is unconstitutional because the SEC, not the president, has the power to appoint and dismiss members -- and in the latter case, only for cause instead of at will. They claimed such a structure takes away the president's power to remove anyone who disagrees with his policies.
In their response filed late Wednesday, the board's team, led by Baker Botts partner Jeffrey Lamken, argues that the president can influence the SOX board through his appointment power at the SEC. The commission, according to Lamken and J. Gordon Seymour, the board's general counsel, can change the board's governing rules and order it to stop investigations at any time. The SEC can even disband the board altogether. In court papers, Lamken and Seymour liken board members to lower-level bureaucrats who can typically be removed only be their direct bosses, not the president.
Now all the legal teams can do is wait to see if the court will rehear the case en banc. One of the circuit's ten judges can ask for a rehearing. If a majority approves, Starr and Jones Day partners Michael Carvin and Christian Vergonis get their second chance.
The cog in question is the Public Company Accounting Oversight Board, which monitors auditors to make sure their ratings of publicly traded companies are based on sound evidence instead of cronyism. A Nevada accounting firm, Beckstead & Watts, originally brought the case in federal district court; the court dismissed it. At that point, the Free Enterprise Fund, a group that lobbies for laissez-faire government and low taxes, hired a team led by Jones Day and former U.S. Solicitor General Kenneth Starr to pursue the case on appeal. That team lost in a contentious 2-1 decision at the U.S. Court of Appeals for the D.C. Circuit in August, but they asked that court to re! hear the case en banc in papers filed last month.
The board responded Wednesday, and, not surprisingly, it called on the same Baker Botts team that won the first appeals case.
The case is a dream for separation of powers wonks; the dissenting judge in the appeals case, Brett Kavanaugh, called it the "most important separation of powers case to reach the court in 20 years."
The Jones Day-Starr team argues that the board is unconstitutional because the SEC, not the president, has the power to appoint and dismiss members -- and in the latter case, only for cause instead of at will. They claimed such a structure takes away the president's power to remove anyone who disagrees with his policies.
In their response filed late Wednesday, the board's team, led by Baker Botts partner Jeffrey Lamken, argues that the president can influence the SOX board through his appointment power at the SEC. The commission, according to Lamken and J. Gordon Seymour, the board's general counsel, can change the board's governing rules and order it to stop investigations at any time. The SEC can even disband the board altogether. In court papers, Lamken and Seymour liken board members to lower-level bureaucrats who can typically be removed only be their direct bosses, not the president.
Now all the legal teams can do is wait to see if the court will rehear the case en banc. One of the circuit's ten judges can ask for a rehearing. If a majority approves, Starr and Jones Day partners Michael Carvin and Christian Vergonis get their second chance.
Asia stock markets resume slide on recession fears
Asian stocks keep sliding on global recession fears; Philippine market plunges 12.3 pct
HONG KONG (AP) -- Asian stock markets resumed their downward slide Monday, led by a 12 percent plunge in the Philippines, as government rescue measures failed to ease fears that a global recession would be even worse than expected.Investors were hesitant to wade back into equities, worried a stream of economic data from the U.S. this week could bring more bearish news about the world's largest economy and trigger another round of selling, analysts said.
"Investors aren't totally convinced the worst is over yet," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong. "We're probably moving sideways this week and will see more volatility."
Japanese shares, after trading higher in the morning, retreated 5 percent to 7,266.83. The country's prime minister urged officials to draw up measures to calm volatile stock markets and to fend off further fallout from the crisis.
In South Korea, the Kospi skidded 3.4 percent even as the country's central bank slashed its key interest rate, by 0.75 percent, for the second time this month in a bid to boost the economy and reverse the market's recent slide.
Hong Kong's Hang Seng Index pulled back 4.2 percent and Australia's key stock measure lost 1.6 percent.
The Philippine stock market's key index plummeted 12.3 percent, to 1,713.83 points, steep losses that triggered a circuit-breaker that automatically halted trading for 15 minutes.
The biggest one-day drop since February 2007 was caused by "big fund players" withdrawing investments to get cash and meet redemptions at home, traders said.
"This is the loss of confidence in the market," said Emmanuel Soller, broker at EquitiWorld Securities Inc. "Our fundamentals were ignored; we followed the U.S. But I believe there was an overreaction by investors."
Tuesday's U.S. Federal Reserve meeting was more cause for caution. The central bank is expected to lower interest rates by at least a half-point to 1 percent, though the rate reduction is already priced into the market and unlikely to calm its restlessness.
On Friday on Wall Street, the Dow Jones industrial average fell 312.30, or 3.59 percent, to 8,378.95. By Monday morning, stock index futures were down, signaled a moderately lower open, with Dow futures down 82 points, or 1 percent, at 8,179. S&P and Nasdaq futures were also lower by about 1.5 percent.
In Japan, stocks fell despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.
"The reported plan by the government hardly cheered investors. What the market really wants is a package of stimulus measures to boost the Japanese economy," said Kazuki Miyazawa, market analyst at Daiwa Securities SMBC Co. Ltd.
Citing unidentified sources, the Yomiuri newspaper said Monday the government is considering injecting public money worth 10 trillion yen ($108 billion) into struggling banks in a bid to stabilize the financial market hit by sagging stocks and a soaring yen.
The yen, meanwhile, remained strong after surging to a 13-year high Friday. The dollar stood at 93.50 yen in Tokyo on Monday morning, compared with 94.24 yen late Friday in New York. At one point, the dollar fell as low as 91.88 yen. On Friday, the dollar hit the 90-yen level, the lowest since August 1995, as investors unwound so-called yen carry trades.
Financial ministers and central bank presidents of the Group of Seven major industrial countries issued a joint statement expressing concern about the recent volatility of the yen.
"We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," the G-7 finance officials said in a statement released in Washington, Tokyo and other G-7 capitals.
In oil, crude prices was steady at $64.14 a barrel after OPEC's move to cut production in an attempt to halt the declines. Light, sweet crude for December delivery was down 2 cents to $64.13 a barrel in Asian trade. The contract settled at $64.15 a barrel on the New York Mercantile Exchange on Friday.
HONG KONG (AP) -- Asian stock markets resumed their downward slide Monday, led by a 12 percent plunge in the Philippines, as government rescue measures failed to ease fears that a global recession would be even worse than expected.Investors were hesitant to wade back into equities, worried a stream of economic data from the U.S. this week could bring more bearish news about the world's largest economy and trigger another round of selling, analysts said.
"Investors aren't totally convinced the worst is over yet," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong. "We're probably moving sideways this week and will see more volatility."
Japanese shares, after trading higher in the morning, retreated 5 percent to 7,266.83. The country's prime minister urged officials to draw up measures to calm volatile stock markets and to fend off further fallout from the crisis.
In South Korea, the Kospi skidded 3.4 percent even as the country's central bank slashed its key interest rate, by 0.75 percent, for the second time this month in a bid to boost the economy and reverse the market's recent slide.
Hong Kong's Hang Seng Index pulled back 4.2 percent and Australia's key stock measure lost 1.6 percent.
The Philippine stock market's key index plummeted 12.3 percent, to 1,713.83 points, steep losses that triggered a circuit-breaker that automatically halted trading for 15 minutes.
The biggest one-day drop since February 2007 was caused by "big fund players" withdrawing investments to get cash and meet redemptions at home, traders said.
"This is the loss of confidence in the market," said Emmanuel Soller, broker at EquitiWorld Securities Inc. "Our fundamentals were ignored; we followed the U.S. But I believe there was an overreaction by investors."
Tuesday's U.S. Federal Reserve meeting was more cause for caution. The central bank is expected to lower interest rates by at least a half-point to 1 percent, though the rate reduction is already priced into the market and unlikely to calm its restlessness.
On Friday on Wall Street, the Dow Jones industrial average fell 312.30, or 3.59 percent, to 8,378.95. By Monday morning, stock index futures were down, signaled a moderately lower open, with Dow futures down 82 points, or 1 percent, at 8,179. S&P and Nasdaq futures were also lower by about 1.5 percent.
In Japan, stocks fell despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.
"The reported plan by the government hardly cheered investors. What the market really wants is a package of stimulus measures to boost the Japanese economy," said Kazuki Miyazawa, market analyst at Daiwa Securities SMBC Co. Ltd.
Citing unidentified sources, the Yomiuri newspaper said Monday the government is considering injecting public money worth 10 trillion yen ($108 billion) into struggling banks in a bid to stabilize the financial market hit by sagging stocks and a soaring yen.
The yen, meanwhile, remained strong after surging to a 13-year high Friday. The dollar stood at 93.50 yen in Tokyo on Monday morning, compared with 94.24 yen late Friday in New York. At one point, the dollar fell as low as 91.88 yen. On Friday, the dollar hit the 90-yen level, the lowest since August 1995, as investors unwound so-called yen carry trades.
Financial ministers and central bank presidents of the Group of Seven major industrial countries issued a joint statement expressing concern about the recent volatility of the yen.
"We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," the G-7 finance officials said in a statement released in Washington, Tokyo and other G-7 capitals.
In oil, crude prices was steady at $64.14 a barrel after OPEC's move to cut production in an attempt to halt the declines. Light, sweet crude for December delivery was down 2 cents to $64.13 a barrel in Asian trade. The contract settled at $64.15 a barrel on the New York Mercantile Exchange on Friday.
South Korea cuts rates record amount to tackle crisis
- South Korea on Monday delivered its largest ever interest rate cut and pledged more spending and tax cuts next year to help economic growth, already at a four-year low and likely to be hit further by the global financial storm.
But the 75 basis point rate cut to 4.25 percent failed to lift share prices after they dropped their most on record last week on growing fears that the economy, along with company profits, will buckle under the strain of the downturn across world markets.
"What investors really want isn't just a rate cut but measures to cure a liquidity squeeze," said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities. "It is the nervousness in the market that keeps credit tight."
South Korea's banks have looked particularly exposed to the global credit crunch, finding it difficult to roll over foreign currency loans, many of which are linked to forward covering of major export deals by local firms.
This lack of liquidity makes the banks in turn reluctant to lend at home, threatening domestic firms with their own credit crunch. This combination prompted the central bank's rate cut.
The Monetary Policy Committee slashed the base rate by 75 basis points to 4.25 percent -- its first emergency rate cut since the days after the September 11, 2001 attacks in the United States.
It was also the second cut this month. The central bank had cut rates by 25 basis points hours after a concerted rate cut among major central banks world wide aimed at boosting market confidence in the face of the deepest financial crisis in decades.
Bank of Korea Governor Lee Seong-tae told reporters the central bank was also considering its first ever purchase of commercial bank bonds to put cash into the financial system.
"We have not decided how much liquidity we would inject with bond purchases, but we are considering 5-10 trillion won ($3.5-7.0 billion)," he told reporters.
Some analysts said the central bank may need to make more rate cuts.
"The rate cut could help lessen the burden of household debt and play a role as a stepping stone to boost the economy ... Additional rate cuts are possible. A cut in rates might take place in December but more likely early next year," said Cho Seong-joon, economist at Meritz Securities.
South Korean household debt totaled about 500 trillion won by the end of August. The ratio of debt to disposable income has risen sharply, especially debt to non-bank lenders, which charge higher rates than banks.
The central bank also cut its special interest rate for small- and medium-sized companies by 75 basis points. These companies are the country's main employers, accounting for about 90 percent of the workforce.
BOOSTS SPENDING
President Lee Myung-bak is a budget speech to parliament said the government planned to further boost spending and cut taxes next year and stood ready to inject liquidity into the system until markets calm.
"The government plans to expand the role of fiscal spending in the face of the global downturn in the real economy," Lee said, putting priority on capital expenditure and funding to small-and-medium businesses and the service sector.
"Next year, we will increase disposable income through tax cuts equivalent to 13 trillion won and stimulate investment."
Lee came to power in February but has struggled to implement sweeping economic reforms he had promised because of strong opposition.
He said he would press on with deregulation of the financial sector despite the crisis.
"We cannot leave a financial industry that is lagging in competition compared to the scale of our economy," he said. "On the other hand, we need to strengthen credit review and supervision of the safety of assets."
MARKETS FAIL TO TAKE HEART
But financial markets failed to take much heart from Monday's moves, which follow more than $130 billion already offered this month by the government to help local banks and a teetering construction industry.
The main share index fell below 900 for the first time since January 2005.
By 12:03 a.m. EDT, it had recovered slightly to 908.50, down 3.22 percent on the day and about 37 percent so far this month alone.
The won, Asia's worst-performing currency monitored by Reuters, was also down at 1,439.80 per dollar. It has shed more than a third since the start of the year.
President Lee has already warned that Asia's fourth-largest economy faces even graver danger than during the 1997/98 Asian financial crisis, when the country was only rescued from sovereign default by a $60 billion International Monetary Fund-led bailout.
But the government has said its currency reserves of about $240 billion -- the world's sixth-largest -- and a sounder economy mean it is not looking to the IMF for help this time though even though it could take longer to emerge from this crisis.
But the 75 basis point rate cut to 4.25 percent failed to lift share prices after they dropped their most on record last week on growing fears that the economy, along with company profits, will buckle under the strain of the downturn across world markets.
"What investors really want isn't just a rate cut but measures to cure a liquidity squeeze," said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities. "It is the nervousness in the market that keeps credit tight."
South Korea's banks have looked particularly exposed to the global credit crunch, finding it difficult to roll over foreign currency loans, many of which are linked to forward covering of major export deals by local firms.
This lack of liquidity makes the banks in turn reluctant to lend at home, threatening domestic firms with their own credit crunch. This combination prompted the central bank's rate cut.
The Monetary Policy Committee slashed the base rate by 75 basis points to 4.25 percent -- its first emergency rate cut since the days after the September 11, 2001 attacks in the United States.
It was also the second cut this month. The central bank had cut rates by 25 basis points hours after a concerted rate cut among major central banks world wide aimed at boosting market confidence in the face of the deepest financial crisis in decades.
Bank of Korea Governor Lee Seong-tae told reporters the central bank was also considering its first ever purchase of commercial bank bonds to put cash into the financial system.
"We have not decided how much liquidity we would inject with bond purchases, but we are considering 5-10 trillion won ($3.5-7.0 billion)," he told reporters.
Some analysts said the central bank may need to make more rate cuts.
"The rate cut could help lessen the burden of household debt and play a role as a stepping stone to boost the economy ... Additional rate cuts are possible. A cut in rates might take place in December but more likely early next year," said Cho Seong-joon, economist at Meritz Securities.
South Korean household debt totaled about 500 trillion won by the end of August. The ratio of debt to disposable income has risen sharply, especially debt to non-bank lenders, which charge higher rates than banks.
The central bank also cut its special interest rate for small- and medium-sized companies by 75 basis points. These companies are the country's main employers, accounting for about 90 percent of the workforce.
BOOSTS SPENDING
President Lee Myung-bak is a budget speech to parliament said the government planned to further boost spending and cut taxes next year and stood ready to inject liquidity into the system until markets calm.
"The government plans to expand the role of fiscal spending in the face of the global downturn in the real economy," Lee said, putting priority on capital expenditure and funding to small-and-medium businesses and the service sector.
"Next year, we will increase disposable income through tax cuts equivalent to 13 trillion won and stimulate investment."
Lee came to power in February but has struggled to implement sweeping economic reforms he had promised because of strong opposition.
He said he would press on with deregulation of the financial sector despite the crisis.
"We cannot leave a financial industry that is lagging in competition compared to the scale of our economy," he said. "On the other hand, we need to strengthen credit review and supervision of the safety of assets."
MARKETS FAIL TO TAKE HEART
But financial markets failed to take much heart from Monday's moves, which follow more than $130 billion already offered this month by the government to help local banks and a teetering construction industry.
The main share index fell below 900 for the first time since January 2005.
By 12:03 a.m. EDT, it had recovered slightly to 908.50, down 3.22 percent on the day and about 37 percent so far this month alone.
The won, Asia's worst-performing currency monitored by Reuters, was also down at 1,439.80 per dollar. It has shed more than a third since the start of the year.
President Lee has already warned that Asia's fourth-largest economy faces even graver danger than during the 1997/98 Asian financial crisis, when the country was only rescued from sovereign default by a $60 billion International Monetary Fund-led bailout.
But the government has said its currency reserves of about $240 billion -- the world's sixth-largest -- and a sounder economy mean it is not looking to the IMF for help this time though even though it could take longer to emerge from this crisis.
Toyota's global sales down in July-September
Toyota's global sales down in July-September, 1st drop for third quarter in 7 years
TOKYO (AP) -- Toyota Motor Corp. said Monday its global sales in the July-September quarter fell for the first time in seven years due to faltering demand in the U.S.
Japan's top automaker sold 2.24 million vehicles worldwide during the quarter, down 4 percent from the same period last year. It marked the first year-on-year decline in the July-September period since 2001, the company said.Toyota had enjoyed strong U.S. sales earlier this year on robust demand for fuel-efficient vehicles, but September sales there dropped 32 percent due to sluggish consumer spending.
Toyota has been vying with General Motors Corp. to be the world's biggest automaker by global sales. Last year, Toyota's group sales -- including those from minicar maker Daihatsu Motor Co. and truck maker Hino Motors Ltd. -- rose to 9.366 million vehicles, just shy of GM's 9.37 million.
Shares in Toyota shed 0.9 percent to close the morning session at 3,170 yen Monday.
TOKYO (AP) -- Toyota Motor Corp. said Monday its global sales in the July-September quarter fell for the first time in seven years due to faltering demand in the U.S.
Japan's top automaker sold 2.24 million vehicles worldwide during the quarter, down 4 percent from the same period last year. It marked the first year-on-year decline in the July-September period since 2001, the company said.Toyota had enjoyed strong U.S. sales earlier this year on robust demand for fuel-efficient vehicles, but September sales there dropped 32 percent due to sluggish consumer spending.
Toyota has been vying with General Motors Corp. to be the world's biggest automaker by global sales. Last year, Toyota's group sales -- including those from minicar maker Daihatsu Motor Co. and truck maker Hino Motors Ltd. -- rose to 9.366 million vehicles, just shy of GM's 9.37 million.
Shares in Toyota shed 0.9 percent to close the morning session at 3,170 yen Monday.
Oil falls to $63 as investors eye falling demand
Oil falls to $63 in Asia as investors eye falling demand, brush off OPEC output cut
SINGAPORE (AP) -- Oil prices fell to 17-month lows at $63 a barrel Monday in Asia as investors weighed Friday's OPEC output cut against growing evidence of a severe global economic slowdown that would undermine crude demand.
Light, sweet crude for December delivery fell 32 cents to $63.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.
Investors brushed off a 1.5 million barrel-a-day cut announced by the Organization of Petroleum Exporting Countries on Friday, focusing instead on falling crude demand as economies across the globe reel from the impact of a credit crisis.
On Friday, oil fell $3.69 to settle at $64.15. Prices have plunged 57 percent from a record $147.27 on July 11.
"The mood is fairly negative reflecting worry about the international economic outlook," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "If there is further weak economic data in the U.S. or Europe, prices could come under more downward pressure."
Iran's OPEC governor Mohammad Ali Khatibi said Sunday a reduction in production "will be considered" at the group's next meeting in Algiers in December -- a meeting that might even be held early if necessary.
"I thought the OPEC cut was a fairly decisive act, but concerns of recession in the major economies remain dominant," Moore said. "OPEC's cut does take a step toward tightening the market."
Investors have been paying close attention to signs that a slowing economy and higher gasoline prices earlier this year have hurt crude demand in the U.S., the world's largest oil consumer.
The U.S. Department of Transportation said Friday that Americans drove 5.6 percent less, or 15 billion fewer miles, in August compared with same month a year ago -- the biggest single monthly decline since the data was first collected regularly in 1942.
Oil investors have also been eyeing stock markets to gauge sentiment on global economic health. Most Asian stock indexes fell Monday, led by Hong Kong, South Korea and Australia. Japanese shares rebounded slightly after plummeting last week.
The Dow Jones industrial average fell 3.6 percent Friday.
"If we're looking a severe economic downturn, it's hard to say what the bottom of any commodity price will be," Moore said.
In other Nymex trading, heating oil futures rose 0.13 cent to $1.95 a gallon, while natural gas for November delivery fell 19.8 cents to $6.04 per 1,000 cubic feet.
In London, November Brent crude was down 60 cents to $61.45 a barrel on the ICE Futures exchange.
SINGAPORE (AP) -- Oil prices fell to 17-month lows at $63 a barrel Monday in Asia as investors weighed Friday's OPEC output cut against growing evidence of a severe global economic slowdown that would undermine crude demand.
Light, sweet crude for December delivery fell 32 cents to $63.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.
Investors brushed off a 1.5 million barrel-a-day cut announced by the Organization of Petroleum Exporting Countries on Friday, focusing instead on falling crude demand as economies across the globe reel from the impact of a credit crisis.
On Friday, oil fell $3.69 to settle at $64.15. Prices have plunged 57 percent from a record $147.27 on July 11.
"The mood is fairly negative reflecting worry about the international economic outlook," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "If there is further weak economic data in the U.S. or Europe, prices could come under more downward pressure."
Iran's OPEC governor Mohammad Ali Khatibi said Sunday a reduction in production "will be considered" at the group's next meeting in Algiers in December -- a meeting that might even be held early if necessary.
"I thought the OPEC cut was a fairly decisive act, but concerns of recession in the major economies remain dominant," Moore said. "OPEC's cut does take a step toward tightening the market."
Investors have been paying close attention to signs that a slowing economy and higher gasoline prices earlier this year have hurt crude demand in the U.S., the world's largest oil consumer.
The U.S. Department of Transportation said Friday that Americans drove 5.6 percent less, or 15 billion fewer miles, in August compared with same month a year ago -- the biggest single monthly decline since the data was first collected regularly in 1942.
Oil investors have also been eyeing stock markets to gauge sentiment on global economic health. Most Asian stock indexes fell Monday, led by Hong Kong, South Korea and Australia. Japanese shares rebounded slightly after plummeting last week.
The Dow Jones industrial average fell 3.6 percent Friday.
"If we're looking a severe economic downturn, it's hard to say what the bottom of any commodity price will be," Moore said.
In other Nymex trading, heating oil futures rose 0.13 cent to $1.95 a gallon, while natural gas for November delivery fell 19.8 cents to $6.04 per 1,000 cubic feet.
In London, November Brent crude was down 60 cents to $61.45 a barrel on the ICE Futures exchange.
IMF pledges support for Ukraine and Hungary
Responding to global crisis, IMF pledges support for Ukraine and Hungary
WASHINGTON AP) -- Seeking to combat a spreading global financial crisis, the International Monetary Fund said Sunday it had reached a tentative agreement to provide Ukraine with $16.5 billion in loans and announced that emergency assistance for Hungary had cleared a key hurdle.
The decisions were announced by IMF Managing Director Dominique Strauss-Kahn, who stressed that the 185-nation lending agency would act with speed to provide support for countries whose economies are being buffeted by the crisis.
Strauss-Kahn said the loan for Ukraine was designed to bolster confidence and noted that the assistance was sizable in relation to the country's borrowing rights with the IMF.
In a separate announcement, Strauss-Kahn said the IMF staff had reached broad agreement with Hungarian authorities on a reform package that the country will implement as a condition for getting its own emergency loans from the IMF. Agreement on reforms is a necessary first step in receiving IMF assistance.
Strauss-Kahn said the IMF was ready to approve a "substantial financing package" for Hungary within the next few days after all the details of the reform program are put in final form.
He said the IMF's executive board would consider loans for Hungary under expedited procedures. He did not give a figure for how large the IMF loan to Hungary would be.
In his comments on Ukraine, Strauss-Kahn said in a statement, "The IMF is moving expeditiously to help Ukraine and this program is focused on the essential upfront measures needed to maintain confidence and economic and financial stability."
The decision to aid Ukraine came two days after the IMF announced it was supplying a $2 billion loan package to Iceland, whose banking system has collapsed amid the global credit crunch.
Iceland, the first Western nation to receive IMF assistance in more than three decades, and Ukraine will both be given IMF loans in an effort to stabilize their economies.
The IMF's executive board is expected to consider in the coming week ways to streamline its emergency loan programs as it braces for a stream of petitions from countries seeking support.
President Bush and other leaders of the Group of 20 major industrial and emerging market economies will meet in Washington next month to discuss ways to overhaul the global financial architecture to better cope with the current financial crisis.
The ongoing global turmoil has resulted in the biggest upheavals on Wall Street in 70 years and prompted Congress on Oct. 3 to pass a $700 billion rescue package for the U.S. financial system. Britain and other European nations have put forward massive resources to stabilize their countries' banks.
Strauss-Kahn said the agreement with Ukraine would be sent to the IMF's 24-member executive board for approval once the country's legislature has made changes to improve the way the government handles bank failures. He praised the reform package that Ukraine had worked out with an IMF staff team.
"Ukraine has developed a comprehensive policy package designed to help the country meet the balance of payments needs created by the collapse of steel prices and the global financial turmoil and related difficulties in Ukraine's financial system," Strauss-Kahn said.
Ukraine's Finance Ministry and its central bank said the loan would help shore up the country's flagging economic situation.
"The support by the fund will promote an accelerated cooperation between Ukraine and other international financial organizations, ... strengthen the confidence of private investors and ensure stable operations of the banking system of Ukraine," the institutions said in a joint statement.
If approved, the loan would be a crucial lifeline for the former Soviet republic, which is struggling to keep its financial system afloat amid the global economic crisis.
A sharp decline in world prices for steel, Ukraine's main export, and a steep drop in the value of its currency, the hryvna, have left many analysts speculating that the country faces dire economic straits.
It comes on top of continuing political turmoil, with the country's leading politicians feuding ahead of new parliamentary elections scheduled for December.
The world financial crisis has put heavy pressure on European currencies in recent days, with the British pound and the euro sagging on worries over Europe's exposure to emerging markets -- particularly its crisis-stricken eastern neighbors.
Sunday's IMF announcement came just two days after the Ukraine's National Bank announced that it would allow the official exchange rate for the hryvna to move closer to the market's exchange rate, fulfilling a key IMF condition.
The hryvna has lost more than 20 percent in the financial crisis that has hit Ukraine hard. The currency fell to its historic low Thursday, trading at 6.01 per $1 on the foreign currency exchange. The fall was due to a shortage of foreign currency because of a 40 percent decline in exports and a run on banks that stripped the banking sector of $3.4 billion this month.
The IMF loan is expected to help stabilize the financial sector, but the deepening political crisis threatened to block the deal.
Allies of Prime Minister Yulia Tymoshenko broke parliament's electronic voting system Friday as they protested President Viktor Yushchenko's order to hold early elections.
Tymoshenko and Yushchenko were allies during the tumultuous 2004 Orange Revolution mass protests that propelled Yushchenko to the presidency. But the two have turned into fierce rivals ahead of the scheduled 2010 presidential election.
Yushchenko ordered a new parliamentary vote in December, but Tymoshenko is fighting to avoid the vote and retain her job.
WASHINGTON AP) -- Seeking to combat a spreading global financial crisis, the International Monetary Fund said Sunday it had reached a tentative agreement to provide Ukraine with $16.5 billion in loans and announced that emergency assistance for Hungary had cleared a key hurdle.
The decisions were announced by IMF Managing Director Dominique Strauss-Kahn, who stressed that the 185-nation lending agency would act with speed to provide support for countries whose economies are being buffeted by the crisis.
Strauss-Kahn said the loan for Ukraine was designed to bolster confidence and noted that the assistance was sizable in relation to the country's borrowing rights with the IMF.
In a separate announcement, Strauss-Kahn said the IMF staff had reached broad agreement with Hungarian authorities on a reform package that the country will implement as a condition for getting its own emergency loans from the IMF. Agreement on reforms is a necessary first step in receiving IMF assistance.
Strauss-Kahn said the IMF was ready to approve a "substantial financing package" for Hungary within the next few days after all the details of the reform program are put in final form.
He said the IMF's executive board would consider loans for Hungary under expedited procedures. He did not give a figure for how large the IMF loan to Hungary would be.
In his comments on Ukraine, Strauss-Kahn said in a statement, "The IMF is moving expeditiously to help Ukraine and this program is focused on the essential upfront measures needed to maintain confidence and economic and financial stability."
The decision to aid Ukraine came two days after the IMF announced it was supplying a $2 billion loan package to Iceland, whose banking system has collapsed amid the global credit crunch.
Iceland, the first Western nation to receive IMF assistance in more than three decades, and Ukraine will both be given IMF loans in an effort to stabilize their economies.
The IMF's executive board is expected to consider in the coming week ways to streamline its emergency loan programs as it braces for a stream of petitions from countries seeking support.
President Bush and other leaders of the Group of 20 major industrial and emerging market economies will meet in Washington next month to discuss ways to overhaul the global financial architecture to better cope with the current financial crisis.
The ongoing global turmoil has resulted in the biggest upheavals on Wall Street in 70 years and prompted Congress on Oct. 3 to pass a $700 billion rescue package for the U.S. financial system. Britain and other European nations have put forward massive resources to stabilize their countries' banks.
Strauss-Kahn said the agreement with Ukraine would be sent to the IMF's 24-member executive board for approval once the country's legislature has made changes to improve the way the government handles bank failures. He praised the reform package that Ukraine had worked out with an IMF staff team.
"Ukraine has developed a comprehensive policy package designed to help the country meet the balance of payments needs created by the collapse of steel prices and the global financial turmoil and related difficulties in Ukraine's financial system," Strauss-Kahn said.
Ukraine's Finance Ministry and its central bank said the loan would help shore up the country's flagging economic situation.
"The support by the fund will promote an accelerated cooperation between Ukraine and other international financial organizations, ... strengthen the confidence of private investors and ensure stable operations of the banking system of Ukraine," the institutions said in a joint statement.
If approved, the loan would be a crucial lifeline for the former Soviet republic, which is struggling to keep its financial system afloat amid the global economic crisis.
A sharp decline in world prices for steel, Ukraine's main export, and a steep drop in the value of its currency, the hryvna, have left many analysts speculating that the country faces dire economic straits.
It comes on top of continuing political turmoil, with the country's leading politicians feuding ahead of new parliamentary elections scheduled for December.
The world financial crisis has put heavy pressure on European currencies in recent days, with the British pound and the euro sagging on worries over Europe's exposure to emerging markets -- particularly its crisis-stricken eastern neighbors.
Sunday's IMF announcement came just two days after the Ukraine's National Bank announced that it would allow the official exchange rate for the hryvna to move closer to the market's exchange rate, fulfilling a key IMF condition.
The hryvna has lost more than 20 percent in the financial crisis that has hit Ukraine hard. The currency fell to its historic low Thursday, trading at 6.01 per $1 on the foreign currency exchange. The fall was due to a shortage of foreign currency because of a 40 percent decline in exports and a run on banks that stripped the banking sector of $3.4 billion this month.
The IMF loan is expected to help stabilize the financial sector, but the deepening political crisis threatened to block the deal.
Allies of Prime Minister Yulia Tymoshenko broke parliament's electronic voting system Friday as they protested President Viktor Yushchenko's order to hold early elections.
Tymoshenko and Yushchenko were allies during the tumultuous 2004 Orange Revolution mass protests that propelled Yushchenko to the presidency. But the two have turned into fierce rivals ahead of the scheduled 2010 presidential election.
Yushchenko ordered a new parliamentary vote in December, but Tymoshenko is fighting to avoid the vote and retain her job.
G-7 countries worried about Japanese currency
G-7 countries express concern about excessive volatility in Japanese currency
WASHINGTON (AP) -- The world's leading industrial countries are worried about the recent sharp rise in the value of the Japanese currency.
The financial ministers and central bank presidents of the Group of Seven major industrial countries issued a joint statement late Sunday in which they expressed their concern about the recent volatility of the yen.
The yen rose to a 13-year high against the dollar in trading Friday, raising concerns in Japan that it could harm its exports of cars and other products because they will now cost more in U.S. markets.
The statement by the G-7 finance officials was released in Washington, Tokyo and other G-7 capitals.
"We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," the G-7 finance officials said.
The group reaffirmed its shared interest in a "strong and stable financial system" and pledged to continue to monitor markets and "cooperate as appropriate."
Such a pledge could indicate the possibility of joint intervention in currency markets where governments would sell and buy currencies in an effort to influence their values.
However, the Bush administration has never participated in such an intervention during its nearly eight years in office, preferring to allow the dollar's value against other currencies to be set by markets.
WASHINGTON (AP) -- The world's leading industrial countries are worried about the recent sharp rise in the value of the Japanese currency.
The financial ministers and central bank presidents of the Group of Seven major industrial countries issued a joint statement late Sunday in which they expressed their concern about the recent volatility of the yen.
The yen rose to a 13-year high against the dollar in trading Friday, raising concerns in Japan that it could harm its exports of cars and other products because they will now cost more in U.S. markets.
The statement by the G-7 finance officials was released in Washington, Tokyo and other G-7 capitals.
"We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," the G-7 finance officials said.
The group reaffirmed its shared interest in a "strong and stable financial system" and pledged to continue to monitor markets and "cooperate as appropriate."
Such a pledge could indicate the possibility of joint intervention in currency markets where governments would sell and buy currencies in an effort to influence their values.
However, the Bush administration has never participated in such an intervention during its nearly eight years in office, preferring to allow the dollar's value against other currencies to be set by markets.
Sunday, October 26, 2008
GE CEO says company cutting costs
BRIDGMAN, Mich., Oct. 24 /PRNewswire-FirstCall/ -- Initial inspections and disassembly of the main turbine are complete at American Electric Power's (NYSE: AEP - News) Cook Nuclear Plant Unit 1, out of service since Sept. 20 after vibrations, likely caused by a broken low pressure turbine blade, damaged the main turbine. The vibration also caused a hydrogen leak, resulting in a fire in the main generator that caused minimal damage to the facility.The turbine rotors and other major components have been shipped to the original manufacturers for engineering analysis and repair. AEP expects to have a return-to-service schedule and cost estimates for the unit by late November.
"We are working diligently with Siemens and General Electric to develop accurate cost estimates and timelines to bring Unit 1 back into service," said Michael G. Morris, AEP's chairman president and chief executive officer. "Having one of our Cook units out of service is unfortunate, but a significant portion of the cost will be recovered through the vendor warranty and our insurance."
Cook Unit 1 has three low pressure turbines manufactured by Siemens and one General Electric high pressure turbine and main generator. The low pressure turbine rotors, casings and other support equipment have been shipped to the Siemens turbine facility in Charlotte, N.C., to determine whether the components will be repaired or replaced.
The high pressure turbine rotor has been shipped to a General Electric facility in Chicago and is undergoing similar assessments. Disassembly of the main generator is also complete. The generator rotor will be shipped to the GE facility in Chicago next week for testing and repair. Initial electrical testing of the generator rotor and stator has not detected any major issues. Generator parts, such as high voltage bushings and current transformers damaged during the event have been ordered.
At the site, AEP personnel have developed a schedule for the remaining inspections and completion of repairs on other plant equipment such as associated turbine piping and insulation, turbine bearings and turbine plant motors and pumps. In addition, cleaning of broken insulation in the turbine building, water from fire suppression and oil released from the turbine lube oil system during the event will be done. The oil was contained within plant systems during the event resulting in no impact to the environment.
Some of the turbine restoration work is being done by AEP's Central Machine Shop. Components have been shipped to their facility in Charleston, W.Va., and they are also performing repair work at the plant.
Siemens and GE are working to deliver parts and perform repairs. Once parts delivery and repair estimates are completed, they will be integrated into the plant schedule and AEP will release a return to service timeline and total cost estimate.
AEP maintains property insurance with a $1 million deductible. AEP also maintains a separate accidental outage policy whereby, after a 12-week deductible period, the company is entitled to weekly payments of $3.5 million during the outage period for a covered loss. The turbines causing the vibration were installed in 2006 and are under warranty from the vendor. The warranty provides for the replacement of the turbines if the damage was caused by a defect in the design or assembly of the turbines. A root cause analysis of the event is being completed by Siemens and an independent party.
Cook Unit 1 is rated at 1,030 megawatts (MW) net. Unit 2 continues to operate at full power and is rated at 1,070 MW net.
The turbine and generator are in the Turbine Building and are separate from the nuclear reactor that is located in the Containment Building. The nuclear systems were unaffected by the event. AEP has sufficient reserve generating capacity to ensure the continued reliable supply of electric generation to customers.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation's largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation's largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP's transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP's utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP's headquarters are in Columbus, Ohio.
This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of generating capacity and the performance of AEP's generating plants; AEP's ability to recover regulatory assets and stranded costs in connection with deregulation; AEP's ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP's ability to build or acquire generating capacity (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including the costs of projects that are canceled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance); resolution of litigation (including disputes arising from the bankruptcy of Enron Corp. and related matters); AEP's ability to constrain operation and maintenance costs; the economic climate and growth or contraction in AEP's service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impacting AEP's ability to refinance existing debt at attractive rates; AEP's ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading markets; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the implementation of the recently passed utility law in Ohio and the allocation of costs within regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP's pension, other postretirement benefit plans and nuclear decommissioning trust and the impact on future funding requirements; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.
"We are working diligently with Siemens and General Electric to develop accurate cost estimates and timelines to bring Unit 1 back into service," said Michael G. Morris, AEP's chairman president and chief executive officer. "Having one of our Cook units out of service is unfortunate, but a significant portion of the cost will be recovered through the vendor warranty and our insurance."
Cook Unit 1 has three low pressure turbines manufactured by Siemens and one General Electric high pressure turbine and main generator. The low pressure turbine rotors, casings and other support equipment have been shipped to the Siemens turbine facility in Charlotte, N.C., to determine whether the components will be repaired or replaced.
The high pressure turbine rotor has been shipped to a General Electric facility in Chicago and is undergoing similar assessments. Disassembly of the main generator is also complete. The generator rotor will be shipped to the GE facility in Chicago next week for testing and repair. Initial electrical testing of the generator rotor and stator has not detected any major issues. Generator parts, such as high voltage bushings and current transformers damaged during the event have been ordered.
At the site, AEP personnel have developed a schedule for the remaining inspections and completion of repairs on other plant equipment such as associated turbine piping and insulation, turbine bearings and turbine plant motors and pumps. In addition, cleaning of broken insulation in the turbine building, water from fire suppression and oil released from the turbine lube oil system during the event will be done. The oil was contained within plant systems during the event resulting in no impact to the environment.
Some of the turbine restoration work is being done by AEP's Central Machine Shop. Components have been shipped to their facility in Charleston, W.Va., and they are also performing repair work at the plant.
Siemens and GE are working to deliver parts and perform repairs. Once parts delivery and repair estimates are completed, they will be integrated into the plant schedule and AEP will release a return to service timeline and total cost estimate.
AEP maintains property insurance with a $1 million deductible. AEP also maintains a separate accidental outage policy whereby, after a 12-week deductible period, the company is entitled to weekly payments of $3.5 million during the outage period for a covered loss. The turbines causing the vibration were installed in 2006 and are under warranty from the vendor. The warranty provides for the replacement of the turbines if the damage was caused by a defect in the design or assembly of the turbines. A root cause analysis of the event is being completed by Siemens and an independent party.
Cook Unit 1 is rated at 1,030 megawatts (MW) net. Unit 2 continues to operate at full power and is rated at 1,070 MW net.
The turbine and generator are in the Turbine Building and are separate from the nuclear reactor that is located in the Containment Building. The nuclear systems were unaffected by the event. AEP has sufficient reserve generating capacity to ensure the continued reliable supply of electric generation to customers.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation's largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation's largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP's transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP's utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP's headquarters are in Columbus, Ohio.
This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of generating capacity and the performance of AEP's generating plants; AEP's ability to recover regulatory assets and stranded costs in connection with deregulation; AEP's ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP's ability to build or acquire generating capacity (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including the costs of projects that are canceled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance); resolution of litigation (including disputes arising from the bankruptcy of Enron Corp. and related matters); AEP's ability to constrain operation and maintenance costs; the economic climate and growth or contraction in AEP's service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impacting AEP's ability to refinance existing debt at attractive rates; AEP's ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading markets; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the implementation of the recently passed utility law in Ohio and the allocation of costs within regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP's pension, other postretirement benefit plans and nuclear decommissioning trust and the impact on future funding requirements; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.
Sector Snap: Steel off on lower price expectations
Steel producers' shares fall on expectations that product prices are headed lower
NEW YORK (AP) -- Shares of steel makers tumbled Wednesday amid expectations that demand for their products will fall in Europe and North America.
Goldman Sachs analyst Sal Tharani, in a client note about United States Steel Corp., warned about "deteriorating European and U.S. markets and our expectations of declining ... prices" for the steel pipes used in drilling for crude oil and natural gas.Many of the day's biggest stock price declines came in shares of steel producers that rely less on the spot market for scrap metal.
"Mini-mills (like Nucor Corp.) are better positioned in the near term than integrated steel makers, in our view, due to their variable cost structure as scrap prices have declined more than steel prices," Tharani said, mentioning US Steel as an example of an integrated steel producer.
He cut his price target on US Steel shares to $42 from $56, downgraded the shares to "Sell" from "Neutral" and added the stock to his "Americas Conviction Sell" list.
In late morning trading, US Steel shares fell $4.47, or 11 percent, to $37.88, Nucor was off 56 cents to $35.50, Steel Dynamics Inc. declined 88 cents, or 8.2 percent, to $9.86 and AK Steel Holding Corp. gave up $1.19, or 8.5percent, to $12.77.
NEW YORK (AP) -- Shares of steel makers tumbled Wednesday amid expectations that demand for their products will fall in Europe and North America.
Goldman Sachs analyst Sal Tharani, in a client note about United States Steel Corp., warned about "deteriorating European and U.S. markets and our expectations of declining ... prices" for the steel pipes used in drilling for crude oil and natural gas.Many of the day's biggest stock price declines came in shares of steel producers that rely less on the spot market for scrap metal.
"Mini-mills (like Nucor Corp.) are better positioned in the near term than integrated steel makers, in our view, due to their variable cost structure as scrap prices have declined more than steel prices," Tharani said, mentioning US Steel as an example of an integrated steel producer.
He cut his price target on US Steel shares to $42 from $56, downgraded the shares to "Sell" from "Neutral" and added the stock to his "Americas Conviction Sell" list.
In late morning trading, US Steel shares fell $4.47, or 11 percent, to $37.88, Nucor was off 56 cents to $35.50, Steel Dynamics Inc. declined 88 cents, or 8.2 percent, to $9.86 and AK Steel Holding Corp. gave up $1.19, or 8.5percent, to $12.77.
ArcelorMittal shares hit 4-year low
ArcelorMittal shares hit lowest point in more than 4 years; analyst cuts profit estimates
U.S.-traded shares of Luxembourg-based ArcelorMittal closed down $1.02, or 4.2 percent, to $23.16. Earlier in the session, the stock slid to $21.43, its lowest point since August 2004.
In a client note, JPMorgan analyst Michael F. Gambardella said his firm was lowering its fourth-quarter and 2009 estimates "on expectations that falling steel prices and (ArcelorMittal's) relatively high fixed costs will accelerate pressure on margins."
"We estimate that (ArcelorMittal's) steel mill shipments will decline by 9 percent year over year in 2009 as the credit crisis spills over from the financial economy into the manufacturing and construction economies and negatively impacts not only steel demand growth but also what customers can pay for steel," he wrote.
JPMorgan reduced its fourth-quarter profit forecast to $2.33 per share from $4.07 per share and its 2009 estimate to $5.80 per share from $14.45 per share. The firm maintained its third-quarter profit estimate of $4.06 per share, in line with the company's recently reiterated guidance.-- Shares of ArcelorMittal slid to their lowest level in more than four years Thursday as an analyst cut profit estimates for the world's largest steel producer, partly due to falling steel prices.
U.S.-traded shares of Luxembourg-based ArcelorMittal closed down $1.02, or 4.2 percent, to $23.16. Earlier in the session, the stock slid to $21.43, its lowest point since August 2004.
In a client note, JPMorgan analyst Michael F. Gambardella said his firm was lowering its fourth-quarter and 2009 estimates "on expectations that falling steel prices and (ArcelorMittal's) relatively high fixed costs will accelerate pressure on margins."
"We estimate that (ArcelorMittal's) steel mill shipments will decline by 9 percent year over year in 2009 as the credit crisis spills over from the financial economy into the manufacturing and construction economies and negatively impacts not only steel demand growth but also what customers can pay for steel," he wrote.
JPMorgan reduced its fourth-quarter profit forecast to $2.33 per share from $4.07 per share and its 2009 estimate to $5.80 per share from $14.45 per share. The firm maintained its third-quarter profit estimate of $4.06 per share, in line with the company's recently reiterated guidance.-- Shares of ArcelorMittal slid to their lowest level in more than four years Thursday as an analyst cut profit estimates for the world's largest steel producer, partly due to falling steel prices.
Back to Bretton Woods
LONDON (MarketWatch) -- Forget Davos. As world leaders attempt to pick up the pieces left by the most terrifying financial crisis since the Depression, it may be time for a New Hampshire mountain resort town to reclaim the spotlight.
European leaders invoke historic conference to fix financial system
By William L. Watts, MarketWatch
French President Nicolas Sarkozy and British Prime Minister Gordon Brown have sounded calls for a revisit of the 1944 Bretton Woods conference that laid the groundwork for much of the postwar financial world order.
President Bush earlier this week acquiesced to calls by Sarkozy and European Union officials, setting a Nov. 15 summit of leaders from the Group of 20 leading industrial and developing nations to be held at the National Building Museum in Washington.
While they won't be meeting at the New Hampshire resort town that gave the Bretton Woods system its name, European leaders hope the gathering will get the ball rolling on a number of potentially major reforms.
"The U.S. really is the epicenter of the crisis, so the Europeans may think they're on the moral high ground and try to lead the process of reform," said economist Morris Goldstein, a senior fellow at the Peterson Institute for International Economics in Washington. "We'll have to see how this turns out."
Sarkozy was the first to make a call for a new "Bretton Woods."
Last week, he told the European Parliament that the talks must aim to "overhaul capitalism," not by "questioning the idea of a market economy" but by implementing certain principles, including subjecting all financial institutions to regulation, ensuring bonuses don't provide incentives for undue risks and re-thinking the monetary system.
Not to be outdone, Brown, in an Oct. 17 op-ed in the Washington Post, also called for a "new Bretton Woods."
The same "sort of visionary internationalism is needed to resolve the crises and challenges of a different age. And the greatest of global challenges demands of us the boldest global cooperation," he wrote.
Brown declared the old postwar financial institutions "out of date" and in need of rebuilding to deal with a "wholly new era in which there is global, not national, competition and open, not closed economies." He reiterated calls for cross-border supervision of financial institutions, shared global accounting standards, "more responsible" executive pay and a role for international institutions to serve as an early-warning system. The original Bretton Woods
Convinced that economic hardship had led to the rise of fascism, the Allies called the Bretton Woods conference in an attempt to address the causes of the Great Depression. The primary focus, economists say, was to come up with a currency system less rigid than the gold standard while providing similar stability. As part of the effort, the conference laid the foundations for the International Monetary Fund and the World Bank.
The resulting system remained in place until 1971, when the Nixon administration removed the dollar's peg to gold and allowed the greenback to float -- effectively putting an end to the fixed-rate system.
Some economists find references to Bretton Woods curious.
"Bretton Woods was about exchange-rate management and setting up facilities for country-to-country lending under duress, and that actually hasn't worked bad in this crisis," said Roger Kubarych, chief U.S. economist at UniCredit MIB and a senior fellow at the Council on Foreign Relations.
"It's mainly a banking crisis. It's not a currency crisis,Goldstein agreed.
While some emerging economies, such as Iceland and Hungary, have seen runs on their currencies, "there's been no run on the dollar, there's been no run on the major currencies," he said. Chances of a major move back toward fixed exchange rates appear quite unlikely.
But Simon Derrick, chief currency strategist at Bank of New York Mellon in London, thinks the references to Bretton Woods may point, in part, to a desire to rein in recent volatility in foreign exchange markets.
Derrick also noted that European Central Bank President Jean-Claude Trichet warned in a news conference following this month's meeting of Group of Seven finance ministers and central bankers that authorities viewed excess volatility as a problem, even though no mention of currencies was made in the G7's official communique.
European leaders invoke historic conference to fix financial system
By William L. Watts, MarketWatch
French President Nicolas Sarkozy and British Prime Minister Gordon Brown have sounded calls for a revisit of the 1944 Bretton Woods conference that laid the groundwork for much of the postwar financial world order.
President Bush earlier this week acquiesced to calls by Sarkozy and European Union officials, setting a Nov. 15 summit of leaders from the Group of 20 leading industrial and developing nations to be held at the National Building Museum in Washington.
While they won't be meeting at the New Hampshire resort town that gave the Bretton Woods system its name, European leaders hope the gathering will get the ball rolling on a number of potentially major reforms.
"The U.S. really is the epicenter of the crisis, so the Europeans may think they're on the moral high ground and try to lead the process of reform," said economist Morris Goldstein, a senior fellow at the Peterson Institute for International Economics in Washington. "We'll have to see how this turns out."
Sarkozy was the first to make a call for a new "Bretton Woods."
Last week, he told the European Parliament that the talks must aim to "overhaul capitalism," not by "questioning the idea of a market economy" but by implementing certain principles, including subjecting all financial institutions to regulation, ensuring bonuses don't provide incentives for undue risks and re-thinking the monetary system.
Not to be outdone, Brown, in an Oct. 17 op-ed in the Washington Post, also called for a "new Bretton Woods."
The same "sort of visionary internationalism is needed to resolve the crises and challenges of a different age. And the greatest of global challenges demands of us the boldest global cooperation," he wrote.
Brown declared the old postwar financial institutions "out of date" and in need of rebuilding to deal with a "wholly new era in which there is global, not national, competition and open, not closed economies." He reiterated calls for cross-border supervision of financial institutions, shared global accounting standards, "more responsible" executive pay and a role for international institutions to serve as an early-warning system. The original Bretton Woods
Convinced that economic hardship had led to the rise of fascism, the Allies called the Bretton Woods conference in an attempt to address the causes of the Great Depression. The primary focus, economists say, was to come up with a currency system less rigid than the gold standard while providing similar stability. As part of the effort, the conference laid the foundations for the International Monetary Fund and the World Bank.
The resulting system remained in place until 1971, when the Nixon administration removed the dollar's peg to gold and allowed the greenback to float -- effectively putting an end to the fixed-rate system.
Some economists find references to Bretton Woods curious.
"Bretton Woods was about exchange-rate management and setting up facilities for country-to-country lending under duress, and that actually hasn't worked bad in this crisis," said Roger Kubarych, chief U.S. economist at UniCredit MIB and a senior fellow at the Council on Foreign Relations.
"It's mainly a banking crisis. It's not a currency crisis,Goldstein agreed.
While some emerging economies, such as Iceland and Hungary, have seen runs on their currencies, "there's been no run on the dollar, there's been no run on the major currencies," he said. Chances of a major move back toward fixed exchange rates appear quite unlikely.
But Simon Derrick, chief currency strategist at Bank of New York Mellon in London, thinks the references to Bretton Woods may point, in part, to a desire to rein in recent volatility in foreign exchange markets.
Derrick also noted that European Central Bank President Jean-Claude Trichet warned in a news conference following this month's meeting of Group of Seven finance ministers and central bankers that authorities viewed excess volatility as a problem, even though no mention of currencies was made in the G7's official communique.
U.S. stocks looking for the bottom
NEW YORK (MarketWatch) -- Stocks will start the coming week with weary investors hopeful that a wave of selling in markets around the world will either abate or reach a climax, while reports are expected to show the economy contracting for the first time since 2001. "There's no question there remains a lot of volatility and that we could see much bigger declines ahead given all the deleveraging by funds that's taking place," said Hugh Johnson chairman of Johnson Illington Advisors.
Worries that the global economy is sliding into recession last week spurred massive dollar repatriation and fueled so-called deleveraging -- when investment funds scramble to raise cash to repay money borrowed to make investments that went wrong. Oil and commodities were the hardest hit, with crude oil futures sliding 11% in one week to finish below $65 a barrel. See Futures Movers. Energy and materials stocks led broad declines in U.S. stocks, which slumped more than 5% for the week.
Amid a flurry of economic reports next week, investors will especially look to the first reading of the third-quarter gross domestic product, which is expected to confirm the economy contracted by 0.5%, according to the median forecast of economists surveyed by MarketWatch.
The Federal Reserve, which meets on Tuesday and Wednesday, is widely expected to again cut interest rates to try and provide a boost to the ailing economy. Futures traders gave more than 100% odds that the central bank will cut its target rate by half a percentage point. See The Fed
"Next week, the focus will be on the economy, earnings, and the Fed, along with short-term credit conditions and stock markets around the world," Johnson said. "We've got to watch everything."
Cash is king
The past week had started on a hopeful note that stocks had stabilized, with the Dow industrials rallying more than 400 points Monday as Federal Reserve Chairman Ben Bernanke backed more fiscal stimulus to boost the economy. Government plans to re-capitalize ailing banks around the globe had helped stocks rise the previous week, as inter-bank lending showed signs of life. But it wasn't long until more economic reports from Europe and Asia rekindled concerns that the U.S. won't be alone when its economy goes into recession.
The Dow ($INDU:
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$INDU, , ) slumped more than 500 points on Wednesday, and after a brief respite Thursday, it joined a sell-off in Asian and European stock markets Friday to lost another 312 points and finish the week at 8,378. See Market Snapshot
For the week, the blue-chip average lost 5.3%, while the broad S&P 500 index ($SPX:
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$SPX, , ) fell 6.8% and the Nasdaq Composite ($SPX:
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$SPX, , ) plunged 9.4%.
Bottom holds
Some market strategists remain hopeful that the worst of the downdraft in stocks might be behind, even as they predict volatile conditions to remain in place for the foreseeable future.
On Friday, futures for the Dow industrials were halted after they plunged more than 550 points as global markets skidded. Some in the market hoped for the market to experience capitulation, when selling first reaches a climax that eventually leads to a bottoming out process.
While Friday wasn't that day, some investors believe the move could be seen next week.
"The deleveraging process has put pressure on markets, but sellers will exhaust themselves at some point," said Owen Fitzpatrick, head of U.S. equities at Deutsche Bank. "You need a buyer at the end of the day but the [selling] has to become more severe than what we have now to get the buyers in."
Other strategists, such as Johnson, believe market lows were already made after near-panic selling on Oct. 10, when the Dow plunged to an intraday low of 7,773.
"The worst for the stock market may be behind, even as the worst for the economy remains ahead," Johnson said. "The market has already discounted a very gloomy outcome for the economy and earnings. I have my fingers crossed that 'gloomy' is the right word and that it won't get much worst than that."
Besides the GDP on Thursday, data on new home sales in September will be released on Monday and on home prices and consumer confidence on Tuesday. The Fed decision on rates is expected Wednesday, along with be a report on orders for durable goods. This will be followed by weekly jobless claims Thursday, and on Friday, a key inflation reading, and data on manufacturing in the Chicago region.
Earnings
Financial results for the S&P 500 companies, including the 245 that have already reported and analysts' estimates for the rest, are on track for 21% decline in the third quarter, according to FactSet Research.
Such a drop would mark the fifth straight period corporate earnings have contracted from the year-ago period.
Next week brings another peak week for earnings, with 123 S&P 500 companies reporting. Those Dow components Verizon (VZ:
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VZ, , ) on Monday, Procter & Gamble (PG:
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PG, , ) on Wednesday, Exxon Mobil (XOM:
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XOM, , ) on Thursday, and Chevron (CVX:
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But investors are now mostly concerned with the outlook for earnings, and even though the fourth-quarter has an easy comparison to last year's -- which already reflected the impact of the credit crisis -- forecasts are now coming down fast.
"Analysts are cutting estimates across a broader array of sectors," said Thomson earnings analyst John Butters. And that's not just in financials but also in the energy, industrials, materials, technology and telecoms sectors.
Microsoft’s Profit Rises, but Outlook Is Cautious
Microsoft, the world’s largest software company, reported quarterly sales and profits that slightly surpassed Wall Street’s expectations. But like so many technology companies, even the ones who managed to sidestep the fallout from the financial crisis in the September quarter, Microsoft delivered a cautious outlook.The financial crisis prompted a slowdown in software sales, Christopher P. Liddell, Microsoft’s chief financial officer, observed in a conference call Thursday. So the company lowered its revenue and profit forecasts into 2009, he said, to reflect “the likelihood of continued economic weakness.”
Microsoft, more than most other big technology companies, spans a range of business and consumer markets. Its product portfolio ranges from software that runs corporate data centers to personal computer software to video game machines to Internet advertising. The company is a bellwether for the technology industry.
The state of the industry provides a window into the broader economy because about half of all private investment today is in computer hardware, software and services. In the modern economy, technology is the vital input, much as steel and coal were in the postwar manufacturing-based economy.
A survey last week by Morgan Stanley found business confidence had fallen sharply in the last month with only 11 percent of those polled saying they were optimistic about the outlook, the lowest level since the bank’s survey began six years ago.
Not surprisingly, the souring economy is expected to hit the technology industry. Gartner, a market research firm, recently said that if the economy is weak, technology spending in 2009 in North America will increase only half a percent, down from the 5.3 percent it had forecast previously.
Information technology is now so woven into the fabric of business and commerce, noted Peter Sondergaard, Gartner’s senior vice president for research, that spending will not grow much more or much less than the economy as a whole.
“In that sense, there is a safety net under the industry,” Mr. Sondergaard said.
Still, for the economy as a whole, analysts have been scaling back their projections for business investment and profits over the next year.
In early September, for example, Mark Zandi, the chief economist for Moody’s Economy.com, had expected business investment in the United States to be flat in 2009. Today, the Economy.com forecast calls for a 4.2 percent decline in 2009, while the forecast for total corporate profits for next year has been sheared by $100 billion in the past six weeks.
“The financial panic has been a body blow to business investment and corporate profits,” said Mr. Zandi, who now expects the weak conditions to continue until the fourth quarter of 2009.
Microsoft’s overall performance held up well, a bit better than expected, said Charles Di Bona, an analyst for Sanford C. Bernstein. Microsoft’s revenue in its first quarter, ended Sept. 30, rose 9 percent to nearly $15.1 billion from $13.8 billion a year ago. Net income increased 2 percent to $4.37 billion, or 48 cents a share, from $4.29 billion, or 45 cents a share, in the year-ago quarter. The consensus among Wall Street analysts was revenue of $14.8 billion and net income per share of 47 cents.
Microsoft delivered healthy growth of 20 percent in sales of business software, which includes its Office desktop productivity, collaboration and online meeting programs. Indeed, the business software group surpassed the Windows desktop operating systems unit in both sales and operating profits.
The Windows group posted a modest revenue gain of 2 percent and a decline of 4 percent in operating income from the year-earlier quarter. The slower growth, Mr. Liddell said, reflected a higher share of Windows sales for low-cost PCs both in developed countries and emerging markets, which have lower profit margins.
The weakness in the Windows business, Mr. Di Bona said, showed that corporations are not upgrading their PCs to Windows Vista, which was introduced in January 2007, as quickly as in past product cycles for new Microsoft operating systems.
Microsoft’s revenue was also helped by stronger-than-expected sales of its Xbox 360 video game consoles, which were introduced in 2005. Despite its other strengths Microsoft still struggles in its online business, trailing well behind the leader in Internet advertising, Google.
For its 2009 fiscal year, which ends in June 2009, Microsoft offered guidance to analysts that was less optimistic than their projections. For the fiscal year, Microsoft said it expected to earn $2 to $2.10 a share on revenue of $64.9 billion to $66.4 billion. The analysts’ consensus, as complied by Thomson Reuters, was net income of $2.13 a share on revenue of $67.12 billion.
In the regular trading session, before the quarterly results were released, the company’s shares rose 79 cents, or nearly 4 percent, to $22.32 a share.
Most technology companies are either adopting more conservative assumptions about their business prospects, like Microsoft, or taking big steps to prepare for tougher times. For example, Xerox, the big printer and document-handling company, reported profits on Thursday morning that were slightly below Wall Street’s expectations, and announced plans to cut 3,000 jobs. The move, the company said, is intended to save $200 million a year in expenses.
Microsoft, more than most other big technology companies, spans a range of business and consumer markets. Its product portfolio ranges from software that runs corporate data centers to personal computer software to video game machines to Internet advertising. The company is a bellwether for the technology industry.
The state of the industry provides a window into the broader economy because about half of all private investment today is in computer hardware, software and services. In the modern economy, technology is the vital input, much as steel and coal were in the postwar manufacturing-based economy.
A survey last week by Morgan Stanley found business confidence had fallen sharply in the last month with only 11 percent of those polled saying they were optimistic about the outlook, the lowest level since the bank’s survey began six years ago.
Not surprisingly, the souring economy is expected to hit the technology industry. Gartner, a market research firm, recently said that if the economy is weak, technology spending in 2009 in North America will increase only half a percent, down from the 5.3 percent it had forecast previously.
Information technology is now so woven into the fabric of business and commerce, noted Peter Sondergaard, Gartner’s senior vice president for research, that spending will not grow much more or much less than the economy as a whole.
“In that sense, there is a safety net under the industry,” Mr. Sondergaard said.
Still, for the economy as a whole, analysts have been scaling back their projections for business investment and profits over the next year.
In early September, for example, Mark Zandi, the chief economist for Moody’s Economy.com, had expected business investment in the United States to be flat in 2009. Today, the Economy.com forecast calls for a 4.2 percent decline in 2009, while the forecast for total corporate profits for next year has been sheared by $100 billion in the past six weeks.
“The financial panic has been a body blow to business investment and corporate profits,” said Mr. Zandi, who now expects the weak conditions to continue until the fourth quarter of 2009.
Microsoft’s overall performance held up well, a bit better than expected, said Charles Di Bona, an analyst for Sanford C. Bernstein. Microsoft’s revenue in its first quarter, ended Sept. 30, rose 9 percent to nearly $15.1 billion from $13.8 billion a year ago. Net income increased 2 percent to $4.37 billion, or 48 cents a share, from $4.29 billion, or 45 cents a share, in the year-ago quarter. The consensus among Wall Street analysts was revenue of $14.8 billion and net income per share of 47 cents.
Microsoft delivered healthy growth of 20 percent in sales of business software, which includes its Office desktop productivity, collaboration and online meeting programs. Indeed, the business software group surpassed the Windows desktop operating systems unit in both sales and operating profits.
The Windows group posted a modest revenue gain of 2 percent and a decline of 4 percent in operating income from the year-earlier quarter. The slower growth, Mr. Liddell said, reflected a higher share of Windows sales for low-cost PCs both in developed countries and emerging markets, which have lower profit margins.
The weakness in the Windows business, Mr. Di Bona said, showed that corporations are not upgrading their PCs to Windows Vista, which was introduced in January 2007, as quickly as in past product cycles for new Microsoft operating systems.
Microsoft’s revenue was also helped by stronger-than-expected sales of its Xbox 360 video game consoles, which were introduced in 2005. Despite its other strengths Microsoft still struggles in its online business, trailing well behind the leader in Internet advertising, Google.
For its 2009 fiscal year, which ends in June 2009, Microsoft offered guidance to analysts that was less optimistic than their projections. For the fiscal year, Microsoft said it expected to earn $2 to $2.10 a share on revenue of $64.9 billion to $66.4 billion. The analysts’ consensus, as complied by Thomson Reuters, was net income of $2.13 a share on revenue of $67.12 billion.
In the regular trading session, before the quarterly results were released, the company’s shares rose 79 cents, or nearly 4 percent, to $22.32 a share.
Most technology companies are either adopting more conservative assumptions about their business prospects, like Microsoft, or taking big steps to prepare for tougher times. For example, Xerox, the big printer and document-handling company, reported profits on Thursday morning that were slightly below Wall Street’s expectations, and announced plans to cut 3,000 jobs. The move, the company said, is intended to save $200 million a year in expenses.
Yahoo to Cut About 10% of Workers
SAN FRANCISCO — Yahoo was hurting long before the financial crisis got everyone worried about a global recession. Now its pain has become more acute.Yahoo said Tuesday that it would lay off at least 10 percent of its 15,000 workers as it tries to bring down its expenses. It said reduced marketing budgets had taken a bite out of its online advertising business, sending its net income for the third quarter tumbling by 64 percent.
The company also lowered its revenue projections for the remainder of the year and said it was too early to make forecasts for 2009.
The results come as strategic moves that Yahoo has been considering, including a search advertising partnership with its rival Google and a merger with Time Warner’s AOL unit, have gotten bogged down, leaving the company with few options but to cut expenses, analysts said.
“They just have to batten down the hatches, lighten the load and ride this thing out,” said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Company.
“Hopefully,” he added, “they will make it to the other side with their cash intact, presumably as a smaller and more efficient organization.”
Yahoo executives said events like the Beijing Olympics, the presidential campaign and the financial crisis delivered a surge of viewers to the company’s popular Web sites during the quarter.
However, Yahoo was not able to turn those extra visitors into dollars at the rate it had hoped, they said. The company said it had been especially hurt by a retrenchment among marketers who buy high-priced display ads, one of the mainstays of Yahoo’s business.
In an interview, Jerry Yang, a Yahoo co-founder and its chief executive, said the layoffs were a necessary step that would allow Yahoo to operate more efficiently and weather a downturn.
“Going through layoffs is a very tough thing, but I also think we are doing the right thing by keeping flexibility for the company,” Mr. Yang said.
While the cuts will affect all parts of the company, they will not be uniform, and Yahoo will continue to invest in some important projects, like a new advertising system and a new home page, he said. Yahoo might cut some of its services altogether, he said, but declined to name which projects may be headed for the chopping block.
The goal was to reduce annual expenses by more than $400 million before the end of the year, he said.
Yahoo said revenue rose a sluggish 1 percent to $1.79 billion, from $1.77 billion a year ago. Net revenue, which excludes commissions paid to advertising partners, was $1.32 billion, compared with $1.28 billion a year ago, a 3 percent increase. Analysts expected net revenue to be $1.37 billion.
Net income for the quarter fell to $54 million, or 4 cents a share, from $151 million, or 11 cents a share, a year earlier. Excluding the cost of stock options and other items, income was $123 million, or 9 cents a share, compared with 11 cents a share a year ago, in line with analysts’ forecasts.
Some analysts said that under Mr. Yang, who became chief executive in June 2007, Yahoo has been lurching from crisis to crisis and has been unable to outline a credible turnaround plan. The layoffs are not likely to address some of the problems plaguing Yahoo, which include a loss of market share to Google in Web search and to others in display advertising, they said.
“In our mind, it isn’t solely about cost cutting,” said Derek Brown, an analyst with Cantor Fitzgerald. “Unless the layoffs can lead to more rapid, more creative product introductions or more competitive wins, they won’t move the needle.”
Yahoo cut roughly 1,000 jobs this year, but new hires and small acquisitions since then have left the company with more than 15,000 employees, slightly more than at the beginning of the year.
Many investors say that Mr. Yang’s — and Yahoo’s — most significant mistake was to rebuff a $33-a-share buyout bid from Microsoft in May. Microsoft withdrew its offer after Mr. Yang said it was too low.
Since then, Yahoo signed a search advertising partnership with Google, which was expected to be in place by early October and to bring $250 million to $450 million in additional operating cash flow to Yahoo in the first year. But the deal has been held up by antitrust regulators, who are considering the damage it could do to competition in search advertising, a market that Google dominates.
The time allotted for the review was recently extended. A person briefed on the matter, who agreed to talk on condition of anonymity because of the confidentiality surrounding the inquiry, said lawyers from the companies and the Justice Department were discussing possible limits on the scope of the deal, like a cap on the number of ads that Google could place on Yahoo’s pages.
And Yahoo’s merger talks with AOL have failed to bear fruit.
“We think it is not happening because there is a huge gap on the price,” Mr. Lindsay said. A merger with AOL, which is also struggling, would not necessarily solve Yahoo’s problems, he said, and would require deep cuts at the combined company.
Yahoo’s protracted troubles have disappointed investors who have continued to sell its shares. They closed on Tuesday at $12.07, down nearly 50 percent since the beginning of the year. But shares rose in after-hours trading, following the earnings announcement.
IMF director gets to keep job despite affair
MF board opts not to fire director who had affair with subordinate
WASHINGTON (AP) -- The head of the International Monetary Fund will keep his job despite having an affair with a married subordinate, the agency's executive board concluded.
The IMF board issued a statement late Saturday saying that the actions of IMF Managing Director Dominique Strauss-Kahn were "regrettable and reflected a serious error of judgment."
However, the 24-member board of directors decided that Strauss-Kahn's relationship with the former IMF employee was consensual and did not involve any type of sexual harassment, favoritism or any abuse of authority.
The board, which represents all 185 member-nations of the lending institution, reached its conclusions at the end of a daylong meeting at IMF headquarters in Washington.
In a statement, the board said that based on the findings of an outside law firm hired to investigate the matter and discussions Saturday with Strauss-Kahn, that they now consider the incident closed.
Shakour Shaalan, the dean of the executive board, told reporters during a conference call that the board believed that the incident would not harm Strauss-Kahn's effectiveness going forward.
An investigative report by the law firm of Morgan, Lewis & Bockius said the two IMF employees acknowledged that there was "consensual physical relationship of short duration in January 2008."
The report noted there was no evidence that Strauss-Kahn "arranged for or provided the female staff member with any work-related benefit for participating in the affair." It also found no evidence that Strauss-Kahn "threatened the female staff member in any way" to keep the affair confidential.
The IMF is expected to play a critical role in providing loans to countries harmed by the current global financial crisis.
The former employee with whom Strauss-Kahn had the affair has been identified as Piroska Nagy, now in London with the European Bank for Reconstruction and Development.
The incident involving Strauss-Kahn occurred 15 months after Paul Wolfowitz resigned as president of the World Bank amid controversy over a pay package for his girlfriend, a bank employee. The World Bank is a sister lending institution to the IMF.
In a statement released with the board's findings, Strauss-Kahn, who became the IMF's 10th managing director a year ago, called what he did a "serious error of judgment" but said he was grateful that the board had found that he had not abused his authority.
"I very much regret this incident, and I accept responsibility for it," Strauss-Kahn said in his statement. "I have apologized for it to the board, to the staff of the IMF and to my family. I would also like to reiterate my apology to the staff member concerned for the distress this process has caused."
WASHINGTON (AP) -- The head of the International Monetary Fund will keep his job despite having an affair with a married subordinate, the agency's executive board concluded.
The IMF board issued a statement late Saturday saying that the actions of IMF Managing Director Dominique Strauss-Kahn were "regrettable and reflected a serious error of judgment."
However, the 24-member board of directors decided that Strauss-Kahn's relationship with the former IMF employee was consensual and did not involve any type of sexual harassment, favoritism or any abuse of authority.
The board, which represents all 185 member-nations of the lending institution, reached its conclusions at the end of a daylong meeting at IMF headquarters in Washington.
In a statement, the board said that based on the findings of an outside law firm hired to investigate the matter and discussions Saturday with Strauss-Kahn, that they now consider the incident closed.
Shakour Shaalan, the dean of the executive board, told reporters during a conference call that the board believed that the incident would not harm Strauss-Kahn's effectiveness going forward.
An investigative report by the law firm of Morgan, Lewis & Bockius said the two IMF employees acknowledged that there was "consensual physical relationship of short duration in January 2008."
The report noted there was no evidence that Strauss-Kahn "arranged for or provided the female staff member with any work-related benefit for participating in the affair." It also found no evidence that Strauss-Kahn "threatened the female staff member in any way" to keep the affair confidential.
The IMF is expected to play a critical role in providing loans to countries harmed by the current global financial crisis.
The former employee with whom Strauss-Kahn had the affair has been identified as Piroska Nagy, now in London with the European Bank for Reconstruction and Development.
The incident involving Strauss-Kahn occurred 15 months after Paul Wolfowitz resigned as president of the World Bank amid controversy over a pay package for his girlfriend, a bank employee. The World Bank is a sister lending institution to the IMF.
In a statement released with the board's findings, Strauss-Kahn, who became the IMF's 10th managing director a year ago, called what he did a "serious error of judgment" but said he was grateful that the board had found that he had not abused his authority.
"I very much regret this incident, and I accept responsibility for it," Strauss-Kahn said in his statement. "I have apologized for it to the board, to the staff of the IMF and to my family. I would also like to reiterate my apology to the staff member concerned for the distress this process has caused."
Companies start competing for bailout money
Insurance firms, auto companies and foreign banks petition for part of $700 billion bailout
The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.
These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.
The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.
Lobbying efforts are intensifying.
The Financial Services Roundtable wrote Treasury officials on Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks. The Treasury's plan is intended to bolster banks' tattered balance sheets and get them to resume making loans.
As the Treasury now interprets it, these additional groups would not participate in the bank stock program. They could receive help from a separate part of the $700 billion rescue that will buy bad assets from financial institutions.
Steve Bartlett, the president of the Roundtable, urged the Treasury to broaden the definition of those eligible for the stock purchase program.
"The institutions that are excluded play a vital role in the U.S. economy by providing liquidity to the market," Bartlett wrote Neel Kashkari, the Treasury Department official running the bailout program.
Referring to U.S. subsidiaries of foreign companies, Bartlett said, "This is a global crisis and to not recognize the U.S. firms controlled by foreign banks or companies would create further impediment to the market's recovery."
A financial industry official said Treasury Secretary Henry Paulson met over the past week with various groups, including hedge fund managers, that were petitioning for assistance. The official spoke on condition of anonymity because the Treasury has not made a decision.
This official said the discussions with insurance industry executives were being held in advance of what are expected to be disappointing earnings reports by some insurance companies in the coming week.
The official said the insurance industry would like to get government purchases of their stock on a mandatory basis, duplicating the agreement Paulson struck two weeks ago with nine major banks.
Paulson pressured the big banks to go along with the program as a way of removing the stigma that might be attached to the payments if only a few major banks had received them.
Some insurers technically would be eligible for stock purchases now if they own subsidiaries that are savings and loan institutions regulated by the Office of Thrift Supervision.
Last month, American International Group, the country's largest insurance company, received an $85 billion loan from the Federal Reserve. Since then, it has gotten further support in an effort to withstand the biggest upheavals on Wall Street since the Great Depression.
Complicating the government's decision-making is that the Bush administration will not be in charge after Jan. 20. Paulson, who has said he has no intention of staying on the job, has pledged to consult with both campaigns on his bailout actions.
Democrat Barack Obama's presidential campaign said Friday it supported the effort by the auto industry to get money from the $250 billion made available for stock purchases. That would be in addition to $25 billion recently approved by Congress for low-interest loans to help the struggling industry retool and build fuel efficient vehicles.
The debate over expanding the bailout comes as the Treasury is rushing to get money out the door to the primary recipients: banks that sharply curtailed lending after suffering billions of dollars of losses on mortgage-related assets as home foreclosures soared in the housing slump.
Lawmakers are pressuring the Treasury to do more in the foreclosure area, as well.
Sheila Bair, head of the Federal Deposit Insurance Corp., told Congress about efforts to provide government-backed loan guarantees for mortgages that are reworked to help homeowners in danger of default. That would give banks an incentive to speed up refinancing efforts because the government would back part of the reworked loan.
The Treasury also is moving ahead to get bank stock purchases approved. It announced on Oct. 14 that it was spending $125 billion to buy stock in nine of the largest financial institutions. An announcement was expected Friday about a second round involving 20 to 22 other banks.
But it was decided each bank would announce its own agreements with the Treasury, out of concern that excluded banks could suffer a stock sell-off from disappointed investors.
PNC Financial Services Group Inc. announced Friday it was acquiring National City Corp. for $5.58 billion, in what was the first instance of a bank using fresh investments from the bailout program to make an acquisition. PNC said it had received $7.7 billion in cash through selling stock to the government under the program.-- The bailout is now the hottest lobbying game in town.
Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.
Saturday, October 25, 2008
Asia, Europe reach consensus on financial crisis
Saturday October 25, 7:07 am ET
By Christopher Bodeen,BEIJING (AP) -- Asian and European leaders said Saturday they have reached a broad consensus on ways to deal with the global financial meltdown and will present their views at a crisis summit next month in Washington.
Speaking at the close of a two-day Asia-Europe Meeting in China's capital, the leaders called for new rules for guiding the global economy and a leading role for the International Monetary Fund in aiding crisis-stricken countries.
The biennial forum, known as ASEM, generally does not make decisions, and a statement issued by the leaders indicated how much the crisis in global markets has driven world opinion and institutions.
"I'm pleased to confirm a shared determination and commitment of Europe and Asia to work together," EU Commission President Jose Barroso said at a closing news conference.
He said participants would use the statement as the basis of their approach at the Nov. 15 Washington summit of the 20 largest economies.
Although short on details, the statement, adopted Friday, calls on the IMF and similar institutions to help stabilize struggling banks and shore up flagging share prices.
"Leaders agreed that the IMF should play a critical role in assisting countries seriously affected by the crisis, upon their request," it said.
Participants also agreed to "undertake effective and comprehensive reform of the international monetary and financial systems," the statement said.
The document is one of the strongest endorsements yet for a leading role in the crisis for the Washington-based IMF, long known as the international lender of last resort.
Responses to the crisis among participants have been varied thus far. The 15 euro countries and Britain reacted in dramatic fashion, agreeing to put up a total of US$2.3 trillion in guarantees and emergency aid to help banks. In contrast, South Korea, China, Japan and the 10-country Association of Southeast Asian Nations have merely recommitted themselves to an US$80 billion emergency fund to help those facing liquidity problems -- to be established by next June -- even while their stock markets tumble and export markets dry up.
Speaking for the hosts, Chinese Premier Wen Jiabao said financial innovation needed to be balanced with regulation, and called for measures to reduce the impact of the meltdown on jobs, growth and trade.
"We need to use every means to prevent the financial crisis from having an impact on the growth of the real economy," Wen said.
He said that the direct impact of the crisis on China had been relatively light, but the accompanying slowdown in the world economy and export demand would "inevitably have an impact on China's economy."
China will seek to do its part by maintaining "fairly fast and stable economic growth," Wen said. Although growth in the third quarter slowed to 9 percent -- down from 11.9 percent for all of 2007 -- China's economy continues to grow at the fastest rate among the largest economies.
French President Nicolas Sarkozy said the Beijing summit had raised expectations for solid results when the leaders meet in Washington.
"They have all expressed their willingness for the Washington summit to be a place where we make some decisions, and we have all understood that it would not be possible to simply meet and have a discussion, we need to turn it into a decision-making forum," Sarkozy said.
German Chancellor Angela Merkel called for the IMF to become a "guard for the stability of the international finance system," and said there was unanimous agreement that it needed to take on a supervisory role.
She also called for the step-by-step integration of the IMF into the Financial Stability Forum, founded in 1999 by the Group of Seven leading industrialized countries and aimed at bolstering the international financial system.
The IMF, whose loans normally include strict provisions, is discussing loan packages with close to a dozen countries from Iceland to Pakistan, and is examining ways to speed up the process.
Associated Press writers Henry Sanderson in Beijing and Kwang-tae Kim in Seoul, South Korea, and researcher Bonnie Cao in Beijing contributed to this report., Associated Press Writer
Asian, European leaders reach broad consensus on dealing with financial crisis
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