Stocks rise on reassuring comments from Ford CEO

Stocks advance on reassuring comments from Ford CEO; investors await November sales

NEW YORK (AP) -- A stock market reassured by Ford Motor Co.'s assessment of its financial health bounced back Tuesday, regaining some of the ground lost in the previous session's huge drop. The Dow Jones industrials rose 180 points, regaining more than a quarter of Monday's nearly 680-point plunge.Calming words came from Ford CEO Alan Mulally, who said his company has enough cash to make it through 2009 and may not need government help. Mulally's comments, in an interview with The Associated Press, came as Ford, General Motors Corp. and Chrysler LLC were scheduled to submit to Congress plans for remaking themselves; lawmakers demanded those plans before considering whether to give the automakers $25 billion in government support.

The news placated investors who sold stocks lower Monday amid a stream of bad economic news that started with lackluster Thanksgiving weekend retail sales and that also included an official confirmation that the country is in recession. Still, some buying was to be expected after the stock market suffered one of its worst days since the start of the financial crisis on Monday.

But investors remained wary; the automakers were releasing their November sales figures later Tuesday.

They were also concerned about the financial sector following a report that Goldman Sachs Group Inc. could face losses totaling $2 billion when it reports its fiscal fourth-quarter results because of continued market turmoil. The report underscored concerns that banks will be saddled with more losses in the coming quarters due to the ongoing troubles in the credit and housing markets.

And there were more signs of trouble for retailers, a worrisome turn for the market that is concerned that consumers won't be able to spend enough to boost the sagging economy. Sears Holdings Corp., battered by hefty charges and weak results at its U.S. department stores and Kmart locations, reported that it swung to a loss in the quarter. The company has previously said it will close eight more underperforming stores this year.

Office supply chain Staples Inc., meanwhile, said its third-quarter profit dropped 43 percent because of hefty charges from restructuring and an acquisition. Excluding the charges, results topped Wall Street estimates. Revenue rose 35 percent, even though North American retail sales suffered.

In midmorning trading, the Dow Jones industrial average rose 182.55, or 2.24 percent, to 8,331.64. Standard & Poor's 500 index rose 21.24, or 2.60 percent, to 837.45, while the Nasdaq composite index gained 33.81, or 2.42 percent, to 1,431.88.

The Russell 2000 index of smaller companies rose 12.72, or 3.05 percent, to 429.79.

Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 343 million shares.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged from late Monday at 2.76 percent. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.11 percent from 0.03 percent late Monday.

The market's steep drop on Monday, when the Dow plunged 679.95 points, ended a five-day rally -- the first such winning streak for the Dow and the S&P 500 since July 2007.

There was further evidence Tuesday that the housing sector remains under pressure. Homebuilder Beazer Homes USA Inc. said its fiscal fourth-quarter losses more than tripled as revenue plunged. The company said demand for new homes continues to be hurt by low consumer confidence, falling prices, extensive supply and less access to financing.

Goldman Sachs could face losses of about $5 per share, according to a report in The Wall Street Journal citing industry insiders and analysts. Analysts polled by Thomson Reuters, on average, forecast Goldman will lose $1.06 per share for the quarter ended Nov. 30. It would be Goldman's first quarterly loss since it went public in 1999.

Goldman Sachs shares dropped $2.83, or 4.3 percent, to $62.93. JPMorgan Chase & Co. fell $1.31, or 5 percent, to $24.81.

Investors have also been worried that the government's financial rescue plan might not be enough to prop up the country's financial institutions.

General Electric Co. said it expects fourth-quarter earnings to be near the low end of its previous guidance.

The diversified industrial, finance and media conglomerate will give investors greater detail Tuesday on plans to reorganize its ailing GE Capital finance unit. The changes are expected to save GE $2 billion next year, but will likely lead to job cuts. GE rose 83 cents, or 5.4 percent, to $16.33.

The dollar fell against other major currencies. Gold prices rose.

Light, sweet crude rose 46 cents to $49.74 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 6.35 percent. In afternoon trading, Britain's FTSE 100 was up 0.19 percent, Germany's DAX index was up 0.74 percent, and France's CAC-40 was down 0.30 percent.

Asian markets fall on new worries

Asian stocks fell on Tuesday, following the global trend, on continued worries about the world economy.

The markets were hit by the latest weak economic data from the US, with exporters such as Honda Motor among the top losers.

US factory activity fell in November to a fresh 26-year low, while the National Bureau of Economic Research said the US entered a recession in December 2007.

Japan's Nikkei fell 6.4%, and Hong Kong's Hang Seng dropped 4.9%.

Stock markets in South Korea, the Philippines, Taiwan and Singapore also fell.

Shares in one of the biggest steelmakers in the world, JFE Holdings dropped 9.5% in Tokyo.

Oil companies also fell after crude prices dipped to a three-year low. Japanese oil explorer Inpex lost 10%.

European markets opened slightly down on Tuesday but turned positive by midday, with Britain's FTSE up 1.1%, Germany's Dax gaining 2.2% and France's Cac rising 1%.

On Monday in New York, the Dow Jones industrial average index lost 7.7%, while the S&P 500 dived 8.9%. The Nasdaq index dropped almost 9%.

Confirmed fears

Analysts said the fall in Asian markets was due to fears of the US slowdown impacting on Asian exporters.

"The [US business cycle] committee's recession statement confirmed what people have long suspected but were not sure of, and combined with the US factory data , which confirms the gravity of the ongoing recession, stoked worries about how much longer the world's largest economy will be submerged in economic downturn," said Bae Sung-young at Hyundai Securities.

Meanwhile, the Bank of Japan announced a set of measures, including a new lending scheme, aimed at tackling the ongoing crisis.

Japan's central bank will lend unlimited amounts of funds to banks, and will accept a wider range of corporate debt as collateral.

"The launch of the new lending scheme may help reinvigorate the securitised market, which had been the main source for corporate funding but stopped working properly due to the credit crisis," said Yasuhiko Onakado at Daiwa SB Investments.

Caveat Vendor

American stores are dropping prices to lure holiday shoppers; the squeeze on profit margins is apt to strangle some of them.From Yves Saint Laurent to Wal-Mart, retailers are slashing prices to mobilize America's down trodden consumers. Their paring knives are likely to cut both ways, however, drawing unprofitable traffic that will be the undoing of the weaker competitors.

Faced with rising unemployment, home foreclosures and a metastasized credit crisis, Americans and those who depend on their free-spending ways are understandably nervous— November’s consumer confidence edged up just slightly to a still dismal reading of 44.9. Black Friday, the first day of the shopping season, began with better traffic than might have been expected, but not necessarily with a lot of money being spent. (See "Scrooges Flood The Malls." )That does not bode well for the holiday shopping season. The November-December stretch is always a crucial period (many retailers, like Toys 'R' Us garner 40.0% of their year’s revenues in that window), but perhaps even more so this year, as retailers try to compensate for lackluster fall sales. In October, Neiman Marcus saw a 26.8% drop in same-store sales, J.C. Penney (nyse: JCP - news - people ) lost 13.0%, and Saks (nyse: SKS - news - people ) tumbled 16.6%. The one bright spot was discount mecca, Wal-Mart Stores (nyse: WMT - news - people ), which saw sales tick up 2.4% from the year-ago perod, on its reputation for bargain-basement prices.

Now the rest of the field is trying to mimic Wal-Mart’s black sheep success by becoming the value destination within their niche. Long before Black Friday, retailers across the board rolled out value-oriented advertisements and eye-popping discounts— while 20.0%-40.0% price reductions are typical this time of year, many have been discounting at 50.0%-60.0% off. At the ultra high-end, retailers like Hermes International (other-otc: HESAF - news - people ) have focused on classic items that can be promoted as investment pieces.

“From our perspective it’s all the more important to make sure the customer feels that we understand the pressures she’s seeing and that we have the style and quality at the price that she thinks is really smart,” Myron Ullman, chief executive of J.C. Penney, told Forbes.com. Ullman does not expect consumer spending to recover until the second half of 2009.

Needham analyst Sean McGowan said retailers have to highlight value because the crisis has triggered a fundamental shift in U.S. consumer psychology.

“People are trading down from higher-priced items to more affordable items,” McGowan said. “We’re seeing consumers holding out until they get something that makes them feel like they’re getting a deal.”Retailers could deliver an upside surprise in November sales as consumers flock to take advantage of what seem like great deals. But if they really are great deals, that will punish the stores' profit margins. The weak are unlikely to surive.

“This value message is going to persist,” McGowan said. “There’s been a discussion for quite a number of years of how overstored America is. A lot of the retailers acted like a lot of the consumers did, they were buying unleveraged, living beyond their means. I think we’ve just begun to see a wave of a lot of closings. We’ll see probably many thousands of stores close in 2009.”

Lloyds TSB's HBOS deal is cleared

Business Secretary Lord Mandelson has cleared the planned merger between Lloyds TSB and HBOS after ruling the deal was in the public interest.

"Preserving the stability of the financial system" outweighed any potential anti-competitive effects, he said in a statement.

There was no need to refer the deal to the Competition Commission, he added.

The Office of Fair Trading had reported that competition could be affected by the planned merger.

The tie-up between the two institutions will create a bank which will control about 25% of British customers' personal bank accounts and about 28% of the mortgage market - which would normally have raised competition concerns.

But the British government has relaxed the competition rules, in the interest of maintaining the stability of the British banking system.

There has been some opposition to the move in Scotland, with the Scottish National Party and Liberal Democrats calling for the deal to be re-examined to see if HBOS could survive on its own under the recapitalisation scheme.

Bail-out

In its report last week, on the impact of the deal on competition in the UK banking sector, the Office of Fair Trading said there could be a "substantial lessening of competition" in personal current accounts, bank services for smaller firms and the mortgage market.

In his statement, Lord Mandelson said: "I recognise that there are some concerns about the possible effects of the merger on competition.

"I am asking the Office of Fair Trading to continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy," he added.

Earlier, Prime Minister Gordon Brown said HBOS would not exist, had it not been for the public bail-out of the bank."We were faced with a situation where the Halifax Bank of Scotland was collapsing, where they could not continue to function. And we helped make possible the only bid that was available at that time, [from] Lloyds TSB," he said.

Mr Brown said he was "absolutely sure" that without the government's rescue, "HBOS would not exist".

Lloyds has said it expects to complete its takeover of HBOS by January, after shareholders vote on the deal in November.

However, Tavish Scott, leader of the Scottish Liberal Democrats, said the OFT report found the takeover would be "bad news" for Scottish customers.

"The OFT makes it clear that personal and business customers in Scotland will lose out the most," said Mr Scott.

"This is not a done deal because shareholders have yet to see a proposal.

"The biggest shareholder of all, the taxpayer, is deeply concerned by job losses and the loss of the headquarters, a view clearly expressed in the Scottish Parliament yesterday."

Scotland's first minister said the report underlined the need for a "full and proper" examination of a merger.

Alex Salmond said: "The OFT report quite clearly shows that as well as concerns about jobs and decision-making, there are also major questions about a substantial loss of competition for individuals and businesses in Scotland - with specific issues raised about the impact north of the border."

Tokyo, Shanghai in glum mood; Honda shares fall

A last-ditch attempt to block the planned Lloyds TSB takeover of Halifax Bank of Scotland has been launched.

A group of businessmen, bank customers and shareholders is to seek a legal ruling over Business Secretary Lord Mandelson's decision to allow the deal.

The group is to seek the ruling from the Competition Appeal Tribunal, a specialist legal body which decides appeals on competition issues.

The UK Government gave the green light to the takeover on 31 October.

It over-ruled competition concerns raised by the Office of Fair Trading.

Financial system

The legal bid is being mounted by the Merger Action Group (MAG), whose spokesman is an Edinburgh architect, Malcolm Fraser, who was responsible for the repair and renewal of HBOS's historic headquarters in Edinburgh.

Lord Mandelson said the public interest of "preserving the stability of the financial system" outweighed any potential anti-competitive effects.

Lloyds TSB shareholders backed the deal at a meeting in Glasgow on 19 November and HBOS shareholders are to decide in December.

MAG is asking for the tribunal to sit in Edinburgh as it is a Scottish group and both banks are registered in Scotland.

But it also wants to act as a rallying point across the UK and is seeking the support of unions, industry bodies and consumer groups.Mr Fraser said: "As a group, we are extremely concerned that due legal process has been ignored.

"In Scotland, particularly, there is a widespread and growing unease at what has taken place.

"Given that taxpayers are ultimately funding the takeover, we are simply asking that the law is properly applied and that our long-term interests are protected."

He said the tribunal had the power under the Competition Act to force Lord Mandelson to refer the proposed merger to the Competitions Commission.

Scottish National Party MSP Alex Neil welcomed the latest bid to block the takeover.

He said: "This is a serious case for the Competition Appeals Tribunal and is their chance to show that riding roughshod over competition law to keep the prime minister happy is not acceptable.

"Throughout this merger Labour has gone out of its way to see that no other deal could be put forward and that no alternative was ever offered to HBOS. That is something that must be looked into."

Scottish Liberal Democrat leader Tavish Scott said: "This is an important new and emerging campaign to keep HBOS independent.

"People who are worried about their jobs and local branches will be relieved to see business leaders standing up for them."

HBOS spokesman Shane O'Riordain said: "We believe this appeal has no merit whatsoever.

"It is an unnecessary distraction and we would ask this group to reconsider their action.

"Our recommended transaction with Lloyds TSB is in the interests of all our stakeholders, including those in Scotland."

Brown pledges Woolworths support

The government is working to ensure that Woolworths stores remain open over the Christmas period, Prime Minister Gordon Brown has said.

He said arrangements had been discussed to ensure staff would still be paid and employees threatened with redundancy would be helped to find work.

Administrators were appointed to the struggling chain on Wednesday.

Woolworths was dealt a further blow when lottery operator Camelot stopped selling tickets through its shops.

Camelot said it had suspended trading with Woolworths with immediate effect, "pending the company finding a satisfactory resolution to its current trading difficulties" .

The decision means that Woolworths will no longer be able to sell National Lottery tickets and scratchcards, or process prize claims.

Although the stores will stay open until after Christmas there is still concern over the future of Woolworths' 30,000-strong workforce.

The prime minister said: "The important thing is in the long-run that employees in this company - where the businesses and the shops are not going to stay open in the longer term - can get other jobs quickly.

"That's why we're going to move in immediately to give advice to employees in the company."

'Interest'

Accountancy firm Deloitte, who have been appointed as administrator, said the search was on for a suitable buyer for Woolworths' stores and the Entertainment UK business, which supplies DVDs to supermarket groups."In the last 24 hours, we have received expressions of interest from a number of parties for both the retail and wholesale businesses," said Dan Butters, who works for the administrator.

The company had tried to sell itself for a nominal price of £1 to Hilco, a restructuring firm, which would have taken on the firm's debt, but this deal fell through.

Deloitte said Woolworths' employees in stores would be paid.

Woolworths' 815 stores and four distribution centres employ 25,000 staff, while Entertainment UK employs about 5,000 people.

Woolworths' publishing joint venture with BBC Worldwide, 2 Entertain, and its book wholesale arm Bertram have not been put into administration.

The firm said it remained in talks to sell its 40% stake in 2 Entertain to BBC Worldwide, the BBC's commercial arm.Eye of storm'

Woolworths is not the only retailer suffering in the current climate. Analysts think more companies could face collapse. "The eye of the storm has moved on from the banks to the retailers," said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers.

* Furniture chain MFI has also gone into administration. It blamed falling demand for big ticket items, cash-flow problems and the withdrawal of credit
* The owner of Currys and PC World, DSG International, has reported a half-year loss of £29.8m, blaming a "tough and volatile" trading environment
* Retail group Kingfisher said sales at its B&Q home improvement chain were down nearly 9% amid the slump in consumer spending and the housing market

There are also fears that Woolworths' demise could spark a price war if the administrators slash prices to shift the company's stock.

BBC business editor Robert Peston said this would be good news for shoppers but could be devastating for weak competitors.

Struggle

Woolworths had cash flow problems and struggled under the weight of its £385m of debt.Its problems were compounded in the past couple of months when it was forced to pay cash when buying goods from suppliers, because trade credit insurers were no longer prepared to insure suppliers to Woolworths.

Robert Peston said that Woolworths had been one of the UK's weakest retailers for years.

But the sudden deterioration in the real economy and financial markets had triggered its demise.

"It's the suddenness of how everything turned bad that shocks and this means Woolies will not be the last casualty," he said.

Dragon 'may bid for Woolworths'

Dragons' Den entrepreneur Theo Paphitis is among several potential bidders for Woolworths, the BBC has learned.

Deloitte, Woolworths' administrator, said there had been "substantial interest" in the firm.

Mr Paphitis is believed to be working on a plan to rescue some of the chain's most profitable stores and preserve the Woolworths' brand.

Ardeshir Naghshineh, Woolworths' largest shareholder, is also reported to be preparing a bid.

A Deloitte spokesman said there had been talks with a number of parties on Friday and these would resume on Monday.

However the BBC has learned that no deal is likely to be announced immediately it is unlikely that any one buyer would take control of the entire business.

Around 10 potential bidders have expressed interest in substantial parts of Woolworths' operations and many more parties have registered interest in smaller parts of the company or individual stores, he added.The BBC's business correspondent Joe Lynam confirmed Mr Paphitis had registered his interest in the company.

He said: "Deloitte are up against the clock to secure deals, with many suppliers already refusing to deliver to Woolworths."

Mr Paphitis has revived the fortunes of several companies, including stationers Ryman and Partners and the La Senza lingerie chain.

Mr Naghshineh, a property developer who owns London's Centrepoint building, is putting together a deal team and financing package, according to the Independent on Sunday.

Supermarkets Sainsbury's, Asda, Tesco and the Co-op and discount chain Poundland are also thought to want to pick up some of Woolworths' prime stores.

Website suspended

Woolworths' retail and wholesale operations went into administration on Wednesday, putting the jobs of 30,000 staff at risk.

In addition to 815 stores and four distribution centres, Woolworths owns Entertainment UK, which distributes DVDs to supermarket groups and other retailers.

The company and BBC Worldwide are joint shareholders in a distribution venture called 2 Entertain Ltd.

Mr Lynam said it looked "increasingly likely" that BBC Worldwide would buy Woolworths' 40% share in that particular business.

The stores will remain open until after Christmas, however the company's website -www.woolworths.co.uk - has been suspended and was no longer accepting orders.