Business Blog Posts

HONG KONG Reuters Asian stocks rose to a four-month high on Friday as some investors were inspired by positive U.S. and Japanese economic data to pick out bargains, with the shift to riskier assets weighing on the yen.

The yens yield disadvantage has also been growing this week, following upside surprises in U.S. and Australian economic figures, handing dealers an incentive to join any selloffs of the Japanese currency.

"The market is on a relief rally as key U.S. data, such as jobs and trade from the U.S., came out better than expected," said Hong Soon-pyo, an analyst at Daishin Securities in Seoul.

"The data gave the market more assurance about where the global economy is headed," Hong said.

U.S. stocks posted modest gains on Thursday as recent data eased concerns that the U.S. economy might be sliding back into recession, although sentiment was fragile as investors fretted over the health of European banks. .N

An upward revision to Japans second-quarter GDP, though widely expected, added to investor confidence in Asia, market players said.

Also on Friday, China reported stronger-than-expected import growth in August, indicating a possible rebound in domestic demand, and a 34.4 percent rise in exports year-on-year.

The import data reduced the politically sensitive trade surplus ahead of U.S. Congressional hearings next week on whether to punish Beijing for what many in Washington see as an unfairly undervalued yuan.

The Chinese data also bolstered currencies of major commodity exporters such as Australia, helping the Aussie dollar hold near a four-month high of $0.9227.

Still, risk taking has not become overwhelming by any stretch. Economists keep ratcheting down U.S. economic forecasts, corporate executives sound cautious and some of Europes banks may need more capital soon.

Tokyos Nikkei share average rose 2 percent .N225, with exporter Canon Inc the biggest gainer on the day, up 5.9 percent. The index is on its way to its biggest week increase since the week of July 11.

The MSCI index of Asia Pacific stocks outside Japan rose 0.4 percent .MIAPJ0000PUS to the highest since May 4, with the technology sector leading the pack.

The index is up nearly 11 percent in the quarter, on track for the largest gain since the third quarter of 2009.

The U.S. S&P 500 index overnight .SPX rose 0.5 percent and broke above its 100-day moving average, a medium-term obstacle, revealing its 200-day moving average only 1 percent away as the next significant barrier.

YEN

The yen suffered from traders closing out of short-term bets on the currency and hastening its decline.

The U.S. dollar rose 0.5 percent to 84.23 yen, pulling further from a 15-year low around 83.32 yen hit on Wednesday.

The U.S. dollar index, which measures its trade-weighted value compared with six other major currencies, rose 0.2 percent .DXY, climbing above its 55-day moving average, a technical obstacle the index has struggled to overcome in the last three weeks.

Investors betting on the yen have grown concerned about the moves in bond spreads that have gone against the Japanese currency. Overnight a lower-than-expected reading of U.S. initial jobless claims pushed up Treasury yields.

The spread of U.S. 10-year Treasury yields over Japan has widened 6 basis points this week, the biggest weekly gain since July 2010. Australian 2-year yields have shot up 22 basis points above same maturity Japanese yields this week, the largest increase since March 2010.

"Of course this could prove to be a false break particularly given doubts surrounding the fall in initial jobless claims but we would note U.S. yields appear to have been basing for a number of weeks now," Jonathan Cavenagh, strategist with Westpac in Sydney, said in a note.

"Hence if the yield spread continues to move in favor of the USD then USD/JPY is a good buy at current levels."

U.S. crude oil futures jumped more than 50 cents to near $75 a barrel after a leak forced the shut down of the biggest pipeline supplying Canadian oil to refineries in the Midwest.

Gold fell $2.52 an ounce to $1,245.75 an ounce, holding near a 1-week low hit the previous session.

Additional reporting by Jungyoun Park in Seoul

Editing by Kim Coghill

Reuters The U.S. securities regulator is investigating investment advisory firms that channel investors money into hedge funds, the Wall Street Journal reported.

The probe will investigate whether the firms are properly supervising client money and dealing with potential conflicts of interest, the report said, citing people familiar with the matter.

The Securities and Exchange Commissions SECs inquiry has identified about a dozen firms for questioning but the list could eventually increase, the newspaper reported.

The SEC could not immediately be reached for comment by Reuters outside of regular U.S. business hours.

The newspaper said the move would be one of SECs broadest examinations ever of funds of hedge funds and advisers specializing in hedge funds.

The inquiry is a "sweep exam" by the SECs Office of Compliance Inspections and Examinations, the Journal said, citing documents it had reviewed.

The sweep also could include alternative investment advisers focused on private equity and other registered advisers catering to pension funds, the paper said, citing people familiar with the situation.

The SECs initial inquiry has involved firms overseeing $100 million to $15 billion in assets, the newspaper said, citing one person with knowledge of the probe.

Funds of hedge funds collect fees from various investors and hand over the money to multiple hedge fund managers.

The advisers collect fees of 1 percent to 2 percent, or as much as $2 million for every $100 million invested. Clients pay additional fees to the underlying hedge funds, the newspaper said.

Reporting by Sakthi Prasad in Bangalore; Editing by Neil Fullick

NEW YORK Reuters Caseys General Stores Inc CASY.O confirmed it was in buyout talks with convenience store operator 7-Eleven, which offered the company $40 per share in cash earlier this month.

The $2.03 billion offer topped a $38.50-a-share offered by Canadas largest convenience store chain, Alimentation Couche-Tard Inc ATDb.TO. Ankeny, Iowa-based Caseys had previously said there was a rival bidder to Couche-Tard, without naming it.

Caseys said its board "firmly believes that Caseys value substantially exceeds $40 per share" but has authorized discussions with 7-Eleven. Goldman Sachs & Co is its financial advisor, while Cravath, Swaine & Moore LLP and Ahlers & Cooney PC are providing legal advice, the company said.

Reporting by Ritsuko Ando;editing by Sofina Mirza-Reid

NEW YORK Reuters New York state attorney general candidate Sean Coffey on Thursday said he was the only contender qualified to police Wall Street and called Democratic rivals career politicians fixated on becoming governor.

Coffey is one of five Democrats seeking the nomination to succeed Andrew Cuomo and Eliot Spitzer as the so-called Sheriff of Wall Street after Spitzer turned the office into an aggressive enforcer of financial crimes.

A former Wall Street lawyer who has represented wronged investors and firms, he boasted of being the only Democrat to promise not to run for governor if he was attorney general, as both Spitzer and Cuomo did.

The winner of Tuesdays primary will face Dan Donovan, the lone Republican running in the heavily Democratic state, in the November 2 general election. Donovan has made a similar pledge not to run for higher office.

"Theres nothing more dangerous than a prosecutor whos politically ambitious and has a cavalier attitude toward the facts," Coffey told Reuters in an interview, saying Democratic rival Kathleen Rice fit that category.

"I understand that the Attorney General can cut a stock price in half with a bad press release," Coffey said at another point, adding that his experience as a federal prosecutor taught him the value knowing when not to press a case.

Coffey said he would draw on pieces of both Cuomo and Spitzer but also stressed that, as a lawyer who has been a plaintiff and defender of firms accused of malfeasance, that prosecutorial discretion was paramount in an attorney general.

Spitzer successfully ran for governor in 2006 and Cuomo is the front-runner this year, though Spitzer resigned in 2008 when he was caught in a prostitution scandal.

Coffey took aim at Rice, the district attorney for Nassau County, and the other candidate he considers a serious rival, state Senator Eric Schneiderman. He overlooked two others in the primary fight: state Assemblyman Richard Brodsky and Eric Dinallo, a former Assistant Attorney General under Spitzer.

Seeking to distinguish his financial credentials from those of his rivals, he referred to collateralized debt obligations CDOs and credit default swaps CDSs -- two of the investment instruments at the heart of the 2008 financial crisis.

"Find out who actually knows the difference between a CDO and a CDS. There are a lot of folks here who dont have a clue," Coffey said, calling the race "very important for the financial markets" because the state attorney general may have to pursue offenses that federal regulators miss.

"Its important for the AG to understand Wall Street, not only so they can root out misconduct ... but also not to bring cases that chill legitimate profit-making conduct. In other words, knowing a good case from a bad case," Coffey said.

"The next AG needs to be pro-business when its appropriate."

Coffey is the son of an Irish immigrant who he says came to America with a fourth-grade education and put seven kids through college. He is now the father of three children aged 13 to 18.

As a teenager he worked on the former World Trade Center, hanging sheet rock in the north tower, before joining the U.S. Naval Academy. After completing active service, he attended law school while working a job in the Pentagon, going to work as a federal prosecutor and litigator in private practice.

"The reason I left the comfort of private life was to be a catalyst for reform in Albany," Coffey said, referring to the state capital and a synonym for what he called New Yorks "non-functioning state government."

To fight Albanys legendary corruption, he vowed to back a law requiring state lawmakers to disclose income earned outside of their legislative salaries, to support non-partisan redistricting, and to remove a law that requires the attorney general to seek permission from other state authorities before opening an investigation into political corruption.

Reporting by Daniel Trotta, Grant McCool, Edith Honan and Basil Katz; Editing by Mark Egan and Andrew Hay

WASHINGTON Reuters New claims for unemployment benefits fell more than expected last week to their lowest level in two months, a hopeful sign for the troubled labor market.

Initial claims for state unemployment benefits dropped 27,000 to a seasonally adjusted 451,000, the lowest since the week ended July 10, the Labor Department said on Thursday.

Analysts polled by Reuters had forecast claims dipping to 470,000 from the previously reported 472,000 the prior week, which was revised up to 478,000 in Thursdays report.

Reporting by Lucia Mutikani; Editing by James Dalgleish

CHICAGO Reuters McDonalds Corp MCD.N reported higher global sales at restaurants open at least 13 months in August, helped by sales of smoothies, frappes and other cold drinks in the United States.

McDonalds said Thursday that same-store sales increased 4.9 percent for the month, up from a 2.2 percent increase in August 2009.

A 4.6 percent rise in U.S. same-store sales came after hot weather spurred demand for new high-margin fruit smoothies, helping McDonalds beat a 1.7 percent increase in August 2009.

The United States, which contributes 35 percent of company sales, has benefited from new drinks like lattes, smoothies and frappes as well as the marketing of low-cost food items.

Same-store sales in Europe, which accounts for 40 percent of company revenue and was hurt by weak performance in France, increased 2.2 percent compared with a 3.5 percent increase in August 2009.

Same-restaurant sales rose 7.8 percent in the companys Asia Pacific, Middle East and Africa segment.

McDonalds shares fell 2.4 percent to $74.26 in premarket trading.

Reporting by Emily Stephenson, editing by Gerald E. McCormick

LONDON Reuters British Members of Parliament MPs will next week grill outgoing BP Plc Chief Executive Tony Hayward, as part of an investigation into risks around deepwater drilling in the North Sea.

BPs Gulf of Mexico oil spill has raised concerns globally about the dangers of drilling in ever-deeper waters.

North Sea producers are fighting to convince the British government that the UK does not need a moratorium on drilling, like the one imposed in the U.S. by President Barack Obama, pending a review of the cause of the disaster.

Norway has halted new offshore projects until the causes of the rig blast that led to the BP oil spill are known.

A statement from the Commons Energy and Climate Change Select Committee on Thursday said Hayward would testify on Wednesday next week and be accompanied by BPs North Sea boss Bernard Looney and Mark Bly, BPs head of safety.

On Wednesday this week, Bly presented BPs internal probe into the accident which laid most of the blame for the accident on BPs contractors, driller Transocean and Halliburton, the company which cemented the well.

The companies rejected the accusations.

Transoceans North Sea boss Paul King appeared before the Commons committee on Tuesday and was challenged about a report from the UK safety regulator in which employees alleged they had been pressured not to report safety concerns.

While the committee said it would question Hayward about the implications of the Gulf of Mexico oil spill for deepwater drilling in the UK, the agenda did not specifically include plans to discuss the causes of the spill itself.

Hayward is due to be replaced next month by Bob Dudley, who is currently leading the BP cleanup effort in the Gulf.

Reporting by Tom Bergin; Editing by Hans Peters

PARIS Reuters Stock index futures pointed to a higher open on Wall Street on Thursday, with futures for the S&P 500 up 0.25 percent, Dow Jones futures up 0.45 percent and Nasdaq 100 futures up 0.2 percent at 5.16 EDT.

Investors awaited data on claims for jobless benefits for the week ended September 4. Economists in a Reuters survey forecast a total of 470,000 new filings compared with 472,000 in the prior week.

Investors will also keep an eye on monthly international trade data. Economists in a Reuters survey forecast a $47.3 billion deficit compared with a $49.9 billion deficit in June.

Oil rose toward $75 a barrel on Thursday, drawing some strength from an initial report of falling U.S. inventories. Industry data late on Wednesday surprised the market with news of a decline in U.S. fuel stockpiles, which have hit record levels, but government statistics for release on Thursday could contradict that.

Convenience store operator 7-Eleven is the mystery third party that offered to buy Caseys General Stores Inc CASY.O for $40 a share, or $2.03 billion, a source familiar with the situation said on Wednesday. The bid exceeds the $38.50 a share offered by Canadas largest convenience store chain, Alimentation Couche-Tard Inc ATDb.TO, which has been embroiled in a hostile takeover bid for the smaller rival since April.

Goldman Sachs GS.N has been fined 17.5 million pounds $27 million by UK financial regulator the Financial Services Authority for failing to disclose it was under fraud investigation by its U.S. counterpart.

Private equity groups including Apax Partners and Blackstone Group BX.N are interested in bidding for a controlling stake in Polish mobile operator Polkomtel, its chief executive told Reuters.

European stocks inched higher in morning trade on Thursday, adding to the previous sessions sharp rally, as buoyant mining and banking shares such as Barclays BARC.L and BHP Billiton BLT.L offset a drop in defensive utilities and telecom sectors.

Japans Nikkei average rose 0.8 percent on Thursday, lifted by short-covering after successful bond auctions in Portugal and Poland helped ease worries about Europes debt problems.

U.S. stocks rose on Wednesday as investors latched onto positive news out of Europe in the latest in a string of low-volume sessions suggesting little confidence in market direction.

The Dow Jones industrial average .DJI rose 46.32 points, or 0.45 percent, at 10,387.01. The Standard & Poors 500 Index .SPX added 7.03 points, or 0.64 percent, at 1,098.87. The Nasdaq Composite Index .IXIC climbed 19.98 points, or 0.90 percent, at 2,228.87.

Reporting by Blaise Robinson; Editing by Mike Nesbit

LONDON Reuters Britains financial watchdog slapped a 17.5 million pounds $27 million fine on Goldman Sachs on Thursday for inadequate disclosure of a U.S. probe into the Wall Street powerhouse.

The fine -- one of the biggest ever imposed in Britain -- was related to Goldmans troubled Abacus mortgage-security product, which resulted in the investment bank being investigated by the U.S. Securities & Exchange Commission SEC.

In July, Goldman agreed to pay $550 million to settle civil fraud charges over how it marketed the Abacus subprime mortgage product, ending months of negotiations that rattled the banks clients and investors.

The Abacus product was marketed by French banker Fabrice Tourre. Tourre, who had dubbed himself as "Fabulous Fab," denied allegations that he or the bank had misled investors over the high-risk Abacus product.

Britains Financial Services Authority said on Thursday that Goldman had not adequately informed it of the American investigation into the Abacus affair.

"Goldman Sachs International did not set out to hide anything, but its defective systems and controls meant that the level and quality of its communications with the FSA fell far below what we expect of an authorized firm," FSA director Margaret Cole said in a statement.

In a seven-word response to the FSA fine, a Goldman Sachs spokeswoman said: "Were pleased the matter is resolved."

Reporting by Sudip Kar-Gupta; Editing by Mike Nesbit

$1=.6463 pounds

HONG KONG Reuters Asian stocks edged up and the yen held below a 15-year high on Thursday, after a small rally on Wall Street driven by successful European bond auctions gave investors an excuse to lighten up on their bets.

The two biggest issues on investors minds -- European financial stability and the slowing U.S. recovery -- held bargain hunting in check and risk taking to a minimum.

Australia was the exception, where rising equities led Asia on a solid labor market report, which also drove the Australian dollar to a four-month high.

With few major economic reports due, traders will probably focus on significant chart indicators for the rest of the day.

The 55-day moving average of the U.S. dollar index .DXY has been capping moves higher for the last three weeks, while the 100-day moving average is the closest obstacle in front of U.S. S&P 500 index gains .SPX.

Meanwhile, the yens 11 percent rise this year has depressed Japanese equity valuations, with stocks trading at the cheapest relative to expected earnings since December 2008.

With uncertainty rife about how much longer the yens climb has to run, investors were cautious about rebuilding their Japanese stock portfolios just yet.

"Worries about Europe were soothed somewhat following a bond auction in Portugal, and that prompted short-covering in the market, which was hit hard by the advance in the yen versus the dollar and the euro yesterday," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

"But market players were reminded that Europes sovereign concerns are continuing and thats not something that will improve right away," Segawa said.

CHEAP JAPAN

The Nikkei share average .N225 closed 0.8 percent higher but was still down 3 percent for the quarter and is the third-worst performing Asian stock market this year.

Japanese stocks were trading at 12.9 times expected earnings one year hence, the lowest since December 2008, when markets were in the midst of the financial crisis, Thomson Reuters I/B/E/S data showed.

"Relatively low prices may trigger occasional bottom fishing, but we do not see the market emerging from its downward spiral until momentum indicators stop deteriorating," TrimTabs Investment Research said in a report.

The MSCI index of Asia Pacific stocks outside Japan was up 0.6 percent, led by early gains in the materials sector. The index has risen 10 percent in the quarter so far, slightly outperforming the all-country world indexs 8.6 percent rise.

Investors were skittish just about everywhere though and did not hesitate to dump positions on the slightest sign of trouble.

The Shanghai composite index .SSEC led declining Asian markets, falling 1.1 percent after a sudden drop in commodities futures prompted some profit taking ahead of a slew of economic data to be released over the next few days.

The yen was steady with global equity markets edging higher. The dollar was at 83.64 yen, down 0.3 percent on the day but above a 15-year low hit on Wednesday around 83.34 yen.

The Australian dollar was a big mover on the day, rising to $0.9224, the highest since May, before drifting to $0.9213, up 0.3 percent. Australian employment in August was surprisingly strong, lifting the stock market .AXJO and knocking bond futures lower.

"Its good news in a sense it means household income and spending will probably grow," Michael Blythe, chief economist at CBA in Sydney, said of the surge in Australian employment. "But it comes at the risk of rising inflation pressure as well."

U.S. oil and Brent futures traded nearly flat on the day, at $74.78 a barrel and $78.22 a barrel, cutting gains on chatter that Chinese regulators were investigating speculative funds in the rubber market. The rumor caused widespread weakness in China-traded commodities, from copper to zinc, analysts said.

Additional reporting by Aiko Hayashi in TOKYO; Editing by Alex Richardson

WASHINGTON Reuters Projected U.S. economic growth for the rest of this year and next was revised down for a third month in a row by a panel of about 50 economists.

The latest Blue Chip Economic Indicators report on Thursday said the weaker outlook for second-half 2010 growth stemmed from lower expectations for consumer spending, business investment and private construction.

"Growth in the current quarter now is expected to be little better than the disappointingly soft advance registered last quarter," the survey said. Gross domestic product grew at a meager 1.6 percent annual rate in the second quarter, less than half the first quarters 3.7 percent rate.

But the economists group said that, after the mid-year soft patch, it saw a gradual improving trend setting in with growth slightly surpassing trend rate in the second half of 2011.

Blue Chip defines GDP trend growth at about 2-3/4 percent a year.

"For all of 2010, real GDP now is forecast to increase 2.7 percent on a year-to-year basis, 0.2 of a percentage point less than a month ago and 0.6 of a point less than predicted in June," the survey said.

Its consensus forecast for real GDP growth in 2011 was cut by 0.3 of a percentage point from a month ago to 2.5 percent.

"Given the depth of the recession, a forecast of roughly trend growth this year and next amounts to a very disappointing pace of recovery, with little progress expected to be made in lowering the unemployment rate," the forecast said.

Its consensus forecast is that the U.S. unemployment rate will end this year at 9.6 percent and fall only to 9 percent by the end of 2011.

It forecast that after averaging 554,000 new housing units in 2009, starts this year will rise to 600,000 and to 760,000 units in 2011. "Although residential investment appears destined to subtract from GDP in the second half of this year, double digit growth is expected by early 2011, with rates of growth over 30 percent by the second half," Blue Chip said.

The economists said they expect short-term interest rates to remain very low before starting to rise next summer. They said the Federal Reserve -- the U.S. central bank -- likely will keep the federal funds rate at its current range of zero to 0.25 percent through mid-2011, finally raising it to 0.75 percent by the end of 2011.

Reporting by Glenn Somerville; Editing by James Dalgleish