Business Blog Posts

TAIPEI Reuters Asian stocks fell on Wednesday, with Japans Nikkei at a 16-month low, as investors sold riskier assets after a spate of worrying U.S. economic data, while the yen slipped from a 15-year high on a report Tokyo was considering weakening its currency.

But even if Japans government acted alone to try and halt yen strength, dealers were skeptical it could reverse the growing unwillingness among investors to take risks that has underlied the yens 10 percent rise against the dollar so far this year.

The dollar went to 83 yen, so the chance of intervention has increased, but it would take more than intervention, said Kiichi Murashima, economist at Citigroup Global Markets in Tokyo.

It has to be coupled with easing by the BOJ to have any impact, he said, referring to any further monetary policy easing by the Bank of Japan.

The dollar rose 0.6 percent against the yen to 84.37 yen on short-covering, having pulled up from a 15-year low of 83.58 yen hit on trading platform EBS on Tuesday.

Adding to investors worries about exposure to riskier assets, key U.S. stock indexes fell as much as 1.7 percent overnight after an unexpected plunge in existing home sales amplified fears that the economy could be sliding into a prolonged period of stagnation or even recession. .N

Chicago Federal Reserve Bank President Charles Evan said the risks of a double-dip U.S. recession have risen in the last six months. While he added he did not think that was the most likely scenario, he said high unemployment and a fractured housing sector would make the recovery a fragile one.

U.S. stock futures, though, were up 0.3 percent on Wednesday, with bargain hunters expected to provide some support.

That eased the blow on Asian stock markets, but an unmistakable falling trend in government bond yields around the world reflected deep unease about the prospect of another recession.

Japans Nikkei share average fell 0.85 percent after earlier hitting the lowest since May 2009. .T

Shares of exporters such as Honda Motor Co 7267.T, which was down around 2 percent, have been stung by the rising yen. The currencys strength has blown past many exporters assumptions for the year, threatening to crimp profits even as global demand appears to be cooling.

The MSCI index of Asia Pacific stocks outside Japan slipped 0.35 percent .MIAPJ0000PUS, led by sectors most sensitive to business cycles such as raw materials and technology.

However, the index, which is down 3.6 percent on the year, has held up better than the all-country world index, which has fallen 7.1 percent .MIWD00000PUS.

Asias relative growth advantage over Western economies has been a buffer against recent shocks, with emerging markets managing to keep attracting portfolio investment.

Indias stock market, for example, has absorbed $8 billion in foreign equity inflows since June, TrimTabs Investment Research said in a report.

WILL JAPAN INTERVENE?

Caution on the yen initially stemmed from a Nikkei business daily report saying Japans Ministry of Finance may consider unilateral yen-selling intervention without the blessing of other advanced economies if speculators drive up the currency.

Finance Minister Yoshihiko Noda reinforced that view, telling reporters on Wednesday that recent yen moves were one-sided and Tokyo will respond appropriately when necessary. The euro rose 0.2 percent to $1.2652, mostly ignoring Standard & Poors sovereign credit rating downgrade of Ireland.

The possibility of additional easing by the Federal Reserve has hurt the dollars attractiveness, but persistent concerns about Europes fiscal health have prevented investors from running to the euro en masse.

Japanese government bonds extended gains as investors moved into less risky assets, with the benchmark 10-year yield touching a fresh seven-year low, as the yens surge nudged up the previously negligible chances of monetary policy easing by the Bank of Japan before its rate review next month. The most likely move by the BOJ would be simply to increase the amount or extend the time period of a fixed-rate fund supply operation to banks, but market watchers doubt that would do much to halt the yens climb or spur more bank lending to boost the fragile economy.

Additional reporting by Leika Kihara and Tetsushi Kajimoto in TOKYO.

WASHINGTON Reuters Shareholders may soon get more power to shake up corporate boardrooms in the U.S. after the financial crisis exposed glaring weaknesses in how companies were managed.

The Securities and Exchange Commission will meet at 10:00 a.m. EDT Wednesday to decide whether to adopt a rule that would give shareholders an easier way to nominate corporate board directors.

Giving shareholders the ability to place their director nominees on the corporate proxy statement has long been sought by big activist shareholders who want more say on how their companies are run.

Demand for proxy access increased after the government used billions of dollars in taxpayer funds to prop up companies like American International Group and Bank of America.

Corporate boards are the first line of defense to some of the excesses that led to the global financial crisis, said the Council of Institutional Investors, which represents public, union and corporate pension funds that hold more than $3 trillion in assets.

According to the plan under consideration, shareholders would have to hold at least 3 percent of the companys stock for a minimum period of three years in order to nominate a director, one source said.

Small companies, or companies with less than $75 million in market capitalization, could be given a three-year delay to comply with the proxy access rule, said the source.

The source requested anonymity because the plan is not final and could change before the SEC meeting later on Wednesday.

DODD-FRANK BILL

Over the past decade, two other SEC chairmen have tried to adopt proxy access rules with no success. This time, the SEC has backing from the Dodd-Frank financial regulation bill, which affirms the agencys authority to adopt proxy access rules.

The legislation will help shield the SEC from some lawsuits. In the past, the business community has threatened to sue the SEC saying the agency does not have the power to adopt the rule.

However, former Republican SEC Commissioner Paul Atkins said he still expects the SEC to be sued if it adopts a proxy access rule.

Because of the disparate treatment among shareholders that is one of the prime reasons that a challenge could arise, Atkins said on Reuters Insider television. I think something like that could be successful.

3 PCT OWNERSHIP

The SEC had contemplated setting the holding period at one year and creating a sliding scale ownership threshold between 1 percent and 5 percent.

But critics had argued that the one-year holding period was too short and that only requiring shareholders to own 1 percent of a large company would make it too easy for companies to fall prey to special interest groups.

Big investors such as the Council said the 3 percent ownership level is a very challenging but reasonable hurdle to impose on groups of long-term investors.

Currently, shareholders are able to nominate their own directors but must wage a proxy fight in order to do so. That process is considered expensive and burdensome, according to large activist shareholders.

Reporting by Rachelle Younglai, additional reporting by Karey Wutkowski; Editing by Phil Berlowitz

MELBOURNE/NEW YORK Reuters BHP Billiton plans to step up pressure on takeover target Potash Corp with a request to remove a poison pill, sources said, as the worlds biggest miner gets set to report massive profits on Wednesday.

The move to request the removal of Potashs shareholder rights plan would force the Canadian company to work faster as it seeks to line up a white knight to fend off BHPs $39 billion hostile bid.

BHP plans to ask a Canadian commission to end Potash Corps poison pill early if the bid appears likely to receive regulatory approval, sources familiar with the matter said on Tuesday.

Potash Corp adopted a 90-day shareholder rights plan last week in response to BHPs hostile $39 billion bid, and that plan would trigger a massive dilution in shares if a single investor acquires a stake of more than 20 percent.

But BHP can ask a provincial securities commission to have the shareholder rights plan lifted early so it can take up shares tendered to its offer.

Hostile bidders have had success removing poison pills in Canada in the past. Investor Carl Icahn successfully had a shareholder rights plan adopted by Lions Gate Entertainment voided earlier this year.

One source, who spoke on the condition of anonymity, said BHP could ask to have the pill removed within 30 to 45 days after its August 20 bid.

BHP Billiton filed an application for review of the takeover on Friday under the Investment Canada Act, setting out why it believes the deal will bring a net benefit to Canada. The government has up to 45 days to respond, making an answer likely by October 4.

BHP, which has put an October 19 deadline on its offer, declined to comment.

BOOMING PROFIT

The move came as the U.S. Securities and Exchange Commission charged two Spanish residents with insider trading in Potash Corp shares before BHP announced its bid.

The SEC alleged that the Madrid, Spain residents made nearly $1.1 million in profits using material nonpublic information to illegally trade Potash securities before the BHP announcement.

BHP is due to report annual results at around 2 a.m. EDT on Wednesday, with analysts expecting second-half profit rising 50 percent to $6.9 billion before one-offs, according to a survey of 13 international brokers.

Its shares have dropped 6.6 percent since it announced the bid for Potash Corp, underperforming a 0.5 percent dip in rival Rio Tinto, as investors are worried about the risks BHP is taking on with the bid and see Rio as a safer mining play.

Potash Corp shares slipped 0.7 percent on Tuesday to $149.11, trading 15 percent above BHPs offer.

Potash Corp investors polled by Reuters said they would be willing to accept an offer around $162 a share, while many analysts think an offer around $157 would clinch a deal.

Additional reporting by Rachelle Younglai in Washington; Editing by Lincoln Feast

NEW YORK/SAN FRANCISCO Reuters 3PAR Inc said on Tuesday it will start merger talks with Hewlett-Packard Co after HPs $1.6 billion offer for the data storage company trumped a bid by its smaller rival Dell Inc.

3PAR has determined that HPs proposal was reasonably likely to lead to a superior offer over Dells $1.15 billion bid and has informed Dell of its intention to enter talks with HP, the company said in a filing with the U.S. Securities and Exchange Commission.

If 3PARs board endorses the bid by HP, it will give Dell 3 business days to sweeten its offer, 3PAR said in the filing, adding that it has not yet made such a determination.

The filing comes a day after HP offered to buy the high-end data storage company for $24 per share, topping Dells bid by a third in a surprise move that could spark a rare bidding war in the technology sector.

3PAR said its board met on Monday to discuss HPs offer and decided to open its books to the company.

3PAR intends to engage in discussions with HP promptly regarding its unsolicited acquisition proposal, and share nonpublic information with HP regarding 3PAR, in order to more fully evaluate HPs proposal with a view to establishing whether it is a superior proposal, the company said in the filing.

Investors have been expecting Dell to come back with a more attractive offer, but the looming bidding war raised fears that it might overpay, as the worlds two largest PC makers vie for a pivotal asset to broaden their scope.

A Reuters survey of 9 fund managers and analysts on Tuesday found most expect another bid or two, and a final price of around $29 per share -- nearly three times where they were before Dells first public offer for $18 billion a share.

Earlier on Tuesday, Bloomberg reported Dell may convey a higher offer price within days to counter HPs offer, citing a person familiar with the matter, sending its shares down 3 percent. Dell was not available for comment.

3PAR shares rose 3.6 percent to $27.04, above the $24 a share HP has offered -- which was about 33 percent higher than Dells $18 a share bid.

ENCROACHMENT

Tech giants such as HP and IBM Corp are expanding rapidly into new areas, hoping to offer more comprehensive products, but encroaching increasingly into each others traditional markets.

3PAR is one of a few candidates that could help Dell expand from computers to corporate solutions in both software and hardware, but bids for the company already look expensive, said Jeffrey Fidacaro, an analyst at Susquehanna Financial Group, a market maker in shares of Dell.

These are pretty high valuations to be paying for this asset, so now it comes down to who strategically needs this the most, Fidacaro added.

Dells shares fell 3 percent, or 36 cents, to close at $11.59 on the Nasdaq stock exchange.

HP shares ended 1.7 percent lower at $38.39 on the New York Stock Exchange.

Bidding wars are rare in the tightly knit technology sector, where deals are often made behind closed doors, with a few exceptions such as the 2009 battle between Oracle Corp and IBM for Sun Microsystems. Oracle eventually bought the computer maker for $7 billion.

For 3PAR, a deal with a large company such as Dell or HP would give it a broader sales reach, helping it compete against rival EMC and smaller players such as Isilon Systems Inc and Compellent Technologies Inc.

IBM, HP and Oracle have been boosting investment in cloud computing and virtualization technology, which allows users to access data and software over the Internet and corporate networks.

3PAR is advised by veteran technology banker Frank Quattrone and his outfit Qatalyst Partners. Credit Suisse Group AG is advising Dell and JPMorgan Chase & Co advises HP.

Reporting by Soyoung Kim and Liana B. Baker and Yinka Adegoke in New York and Noel Randewich in San Francisco; Editing by Gary Hill and Dhara Ranasinghe

TOKYO Reuters Japans Ministry of Finance may consider unilateral yen-selling market intervention if speculators drive up the currency, the Nikkei newspaper reported, after failed attempts to verbally curb sharp yen gains.

The yen rose to a 15-year high against the dollar and a nine-year peak versus the euro on Tuesday amid fears the global economy is slowing, testing Japanese authorities resolve to stem the currencys climb.

The sharp yen rise and declines in the Nikkei stock average have nudged up the previously negligible chances of a monetary easing by the Bank of Japan before its rate review next month, sources told Reuters.

The MOF will consider intervening unilaterally if the Japanese currency rises at a pace of several yen against the dollar in a single day, the Nikkei reported in its Wednesday morning edition.

The dollar sank as deep as 83.60 yen at one point, before crawling up to 84.25 on the Nikkei report. The euro fell as much as 2.2 percent to 105.44 yen, before steadying at 106.43.

Japanese policymakers have tried to talk down the yen and the finance minister sharpened his rhetoric on Tuesday.

But that was not enough to stop traders from pushing the yen to new highs as markets took his refusal to comment on the chance for intervention as a sign the authorities were not ready yet to back up words with action.

Japan has not intervened in the currency market after ending in 2004 a massive yen-selling intervention aimed at preventing a rapid yen rise from aggravating deflation and derailing a fragile economy.

Tokyo will likely have difficulty convincing its U.S. and European counterparts, who see little need to reverse the weakening of their currencies that benefit exports, to jointly step into the market.

But solo intervention by Japan is unlikely to have much effect in curbing yen gains, traders say.

The BOJ is also considering easing monetary policy and lining up its options, although officials are divided on whether to do so before its September 6-7 rate review at an emergency meeting.

The most likely option is for the BOJ to increase the size or extend the duration of a short-term fund supply operation put in place in December, sources familiar with the matter say.

The Nikkei also said the BOJ is considering taking additional monetary easing steps and may do so at an emergency meeting.

Going the quantitative easing route seems to be the preferred policy move from Japanese authorities should they decide to act, said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.

With U.S. yields where they are, all simple intervention will do is give speculators better levels at which to buy yen.

Editing by Dean Yates

Additional reporting by Wanfeng Zhou, Vivianne Rodrigues, Steven C. Johnson and Nick Olivari in New York

LOS ANGELES Reuters Dell Inc on Tuesday released its first U.S. smartphone, entering the increasingly crowded market with a 3.5-inch Android device called the Aero that costs about $100 on AT&T network.

The long-anticipated move by the computer manufacturer puts Dell in competition with Apple Inc, the market leader in smartphones, and with a clutch of other phones that use Google Incs Android operating system.

Round Rock, Texas-based Dell said its new smartphone will sell for $99.99 with a 2-year contract from AT&T, or $299.99 without the contract.

Dell said the Aero will be one of the lightest Android smartphones in the United States, and will support Adobe Systems Incs Flash software. That sets Dell apart from Apple, which has declined to use Flash on its mobile devices.

The personal computer maker entered the smartphone market in late 2009 with the release of its Mini 3 in China. The company also released a 5-inch tablet called the Streak this month, which also runs on Android and uses the AT&T network for phone calls. That will compete with Apples iPad.

The worldwide smartphone market is expected to grow 36 percent to 247 million units in 2010 from 182 million in 2009 according to IT research outfit iSuppli.

Reporting by Alex Dobuzinskis; Additional reporting by Sinead Carew; Editing by Richard Chang

NEW YORK Reuters Financial markets are knocking down a wall of debt maturity that has endangered the U.S. economic recovery and threatened to push more companies into bankruptcy, according to an investment firm report on Tuesday.

Companies must refinance about $400 billion in debt over the next five years, according to Morgan Joseph LLCs second-quarter financial restructuring outlook. The specter of companies defaulting en masse has worried investors even as bankruptcy attorneys have geared up for a busy few years.

But that mountain of debt has shrunk by more than 25 percent over the last two years as lenders agreed to extend favorable terms rather than forcing repayments. It is expected to crumble more as companies including formerly bankrupt plastics maker LyondellBasell Industries NV LALLF.PK have sold high-yield junk bonds to raise cash to repay loans.

The maturity wall may not be the doomsday liquidity event once projected, the investment firm said.

In the last 18 months, loans due in 2011 have been almost entirely addressed, the firm said. Loans due the following year have been cut in half, it said.

Still, the problem may have just been delayed for a few years, said James Decker, head of the firms financial restructuring group, in an interview.

The wall of maturity is out there -- its just been pushed down the street, said Decker.

Companies require new capital in addition to financing debt. An absence of new money could crimp broader economic development.

As long as the economy is in a deleveraging mode, youre going to be in a period of generally flat economic performance, he said.

Reporting by Chelsea Emery; editing by Robert MacMillan and Matthew Lewis

WASHINGTON Reuters The massive stimulus package boosted real GDP by up to 4.5 percent in the second quarter of 2010 and put up to 3.3 million people to work, the nonpartisan Congressional Budget Office said on Tuesday.

CBOs latest estimate indicates that the stimulus effort, which remains a political hot potato ahead of the November congressional elections, may have prevented the sluggish U.S. economy from contracting between April and June.

Economists surveyed by Reuters expect that revised numbers due out on Friday will show that the economy grew at an anemic 1.4 percent pace during that time period -- less than the boost of at least 1.7 percent that the stimulus provided, according the CBO estimate.

The stimulus package, passed in March 2009 in the midst of the deepest recession since the 1930s, raised employment by between 1.4 million and 3.3 million jobs during that time period, CBO estimated.

CBO said the package, officially known as the American Recovery and Reinvestment Act, would cost $814 billion, down from its previous estimate of $862 billion.

With both the House of Representatives and the Senate up for grabs in November, Democrats hope voters will give them credit for breathing some life into the economy. Republicans, who almost universally opposed the stimulus, have criticized it as wasteful and ineffective.

Reporting by Andy Sullivan and Emily Kaiser

NEW YORK Reuters Japans Ministry of Finance may consider unilateral yen-selling market interventions if speculators drive up the currency, Nikkei Business Daily reported on Tuesday.

The yen rose to a 15-year high against the U.S. dollar and a nine-year peak versus the euro on Tuesday amid fears the global economy is slowing, testing Japanese authorities resolve to stem the currencys climb.

Nikkei also said in its August 25 morning edition that the Bank of Japan is considering additional steps to loosen monetary policy. Depending on market conditions, the policy board may decide to take action sooner by convening an extraordinary meeting, according to the report.

Actions could include boosting its facility that provides three-month funding at a low 0.1 percent to 30 trillion yen from the current 20 trillion yen. Extending the funding period to six months would be another option, Nikkei said.

The U.S. dollar briefly pared losses against the yen after the Nikkei report. It was last down 1.1 percent at 84.14 yen, not far from a session low of 83.61 yen, according to Reuters data.

Going the quantitative easing route seems to be the preferred policy move from Japanese authorities should they decide to act, said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.

With U.S. yields were they are, all simple intervention will do is give speculators better levels at which to buy yen.

The Nikkei report cautioned that the impact of unilateral intervention could be muted given that other major economies are not expected join the move.

Reporting by Wanfeng Zhou, Vivianne Rodrigues, Steven C. Johnson and Nick Olivari

INDIANAPOLIS Reuters The risks of a double-dip U.S. recession have risen in the last six months, Chicago Federal Reserve Bank President Charles Evans said on Tuesday.

While a new contraction in the economy is still not the most likely scenario, high unemployment and a fractured housing sector make this recovery a fragile one, he said.

A double dip is not the most likely outcome but I am concerned about how strong the recovery will be, Evans said at a housing event in Indianapolis.

Against that backdrop, Evans said the Feds ultra-easy monetary policy is appropriate.

In response to the financial crisis of 2007-2009, the U.S. central bank cut short term interest rates to near zero, and also undertook a host of emergency measures such as U.S. Treasury bond and mortgage debt purchases to keep borrowing costs down.

The Fed announced earlier this month it would add to this stimulus by investing proceeds from maturing mortgages securities in its portfolio into Treasury debt.

Evans said unemployment, currently at 9.5 percent, is likely to remain uncomfortably high for the foreseeable future.

His comments came just before a report on existing home sales showed a record monthly drop in existing home sales to their lowest level in 15 years.

PERVERSE INCENTIVES

In his speech, Evans argued that the securitization process, in which mortgages are repackaged into bonds that are then sold to investors, reduces the incentive of lenders to modify troubled home loans.

In remarks that focused on the countrys housing market weakness and various attempts to ease it, Evans said efforts to modify home loans to prevent foreclosure were a drop in the bucket compared with the problem at hand.

The securitization process appears to have created conflicts between the interests of servicers and lenders, Evans said. These and other impediments have kept the number of modifications lower than we might have hoped.

The U.S. housing market has been in a downturn for about three years now, with home construction running at less than a quarter of its boom-time peaks and prices down sharply across the country.

Many economists worry that, without housing as an engine of growth, the economy could take much longer than usual to recover.

Evans also cast some doubt on the value of financial education in preventing mortgage and other borrower distress, a break from Fed tradition.

Staff members at the Chicago Fed have recently undertaken a thorough review of studies evaluating the effects of financial education. What they find is that the evidence on the effectiveness of education and counseling is rather mixed, he said.

WASHINGTON Reuters Sales of previously owned U.S. homes dropped more steeply than expected in July to their lowest pace in 15 years, an industry group said on Tuesday, implying further loss of momentum in the economic recovery.

The National Association of Realtors said sales dropped a record 27.2 percent from June to an annual rate of 3.83 million units, the lowest level since May 1995. Junes sales pace was revised down to a 5.26 million-unit pace.

Analysts polled by Reuters expected existing home sales to tumble 12 percent to a 4.70 million-unit pace from the previously reported 5.37 million units in June.

Reporting by Lucia Mutikani; Editing by James Dalgleish

NEW YORK Reuters Dell Inc is preparing to sweeten its bid for 3PAR Inc after its earlier bid was topped by rival Hewlett-Packard Cos $1.6 billion offer for the data storage company, according to a report on Bloombergs website.

The report, which cited one person familiar with the matter, said Dell may send the offer within days. A representative for Dell was not immediately available for comment.

In early trade on Tuesday, 3PARs shares were trading up 3.1 percent at $26.90, above the $24 a share that HP has offered. HPs price is about 33 percent higher than Dells $18-a-share bid.

Bidding wars are rare in the tight-knit technology industry, where deals are often made behind closed doors, with exceptions like the 2009 battle between Oracle Corp and IBM for Sun Microsystems. Oracle eventually bought the computer maker for $7 billion.

For 3PAR, a deal with a large company like Dell or HP would give it a broader sales reach, helping it compete against rival EMC and smaller players like Isilon Systems Inc and Compellent Technologies Inc.

IBM, HP and Oracle have been boosting investment in cloud computing and virtualization technology, which allows users to access data and software over the Internet and corporate networks.

In premarket trade, shares of HP were off 1.2 percent at $38.56, while Dell was down 2.1 percent at $11.69.

Reporting by Liana B. Baker and Yinka Adegoke; Editing by Gary Hill, Dave Zimmerman

NEW YORK Reuters Burger King Holdings Inc BKC.N reported a lower quarterly profit, hurt by declining restaurant sales worldwide and unfavorable foreign exchange rates, and the fast-food chain forecast its business would remain under pressure.

Burger King, known as the home of the Whopper, had net income of $49 million, or 36 cents a share, for the fiscal fourth quarter ended June 30, down from $58.9 million, or 44 cents a share, a year earlier.

Revenue slipped 1 percent to $623 million.

Worldwide sales at restaurants open at least 13 months were down 0.7 percent, driven by a 1.5 percent drop in the United States and Canada.

Burger King, which is more exposed to the job markets problems than rival McDonalds Corp MCD.N because a larger share of its customers are young males, warned that worldwide comparable sales are expected to remain under pressure in its fiscal year 2011 because of lingering unemployment and government austerity programs in several European countries.

Reporting by Phil Wahba and Lisa Baertlein; editing by John Wallace