Business Blog Posts

The Australian dollar slid after the head of the country's central bank said interest rates were about right for the near term, extinguishing speculation the currency's yield advantage would get a policy boost in the next few months.

Caution ruled in financial markets, with thinning volumes driving more stock investors to take profits in the year's winning sectors in Asia, such as consumer discretionary spending, and go to the sidelines.

The MSCI index of Asia Pacific stocks outside Japan slipped 0.3 percent .MIAPJ0000PUS, weighed down the most by a 0.8 percent fall in the consumer discretionary sector.

Powered by the view that the hunger of Asia's consumers for big-ticket items, such as cars and appliances will keep growing, this sector is still up 28 percent so far this year .MIAPJCD00PUS, making it by and far the best performer.

Japan's Nikkei share average .N225 was barely changed on the day, with strength in larger exporter shares offset by weakness in retailers and industrial stocks.

The Nikkei's 9.5 percent rise in November, driven in part by a weakening in the yen, is on course to be the biggest monthly gain since March.

Correspondingly, the U.S. dollar's 4.3 percent rise against the yen is also the steepest single-month advance since March.

Government bonds, in turn, sold off, with 10-year futures down 2.4 points in November, the biggest monthly decline since April 2008.

The December contract was down 0.3 point at its lowest since June 23, ahead of new supply of 10-year debt next week. The flows across the yield curve have been erratic, and dealers are keeping watch of cash yields of mid-maturity bonds to see if they follow the 10-years higher, which would trigger more bullish bets to be folded.

The U.S. dollar nudged up, though mainly because of weakness in other currencies.

The dollar index, a trade-weighted measure against six other major currencies, edged up 0.1 percent to 79.85. A major chart obstacle lies at 80.05, a level which served as support in April and August.

In the absence of fresh economic news, a clear break above that level will be a medium-term bullish signal for the dollar, especially if the index closes the week above 79.73, the 200-week moving average.

The Australian dollar was down 0.5 percent to US$0.9750 after Reserve Bank of Australia Governor Glenn Stevens said policy was appropriate for now, suggesting the central bank was in no hurry to tighten rates.

He later said it was not unreasonable for investors to price in a rate hike in the middle of 2011, a comfort to longer-term investors in the Australian dollar but no solace for short-term bulls who had hoped for a near-term push to parity.

(Additional reporting by IFR Analyst Takahiro Okamoto in TOKYO and Reuters FX Analyst Krishna Kumar in SYDNEY; Editing by Tomasz Janowski)

Chief Executive Akbar Al Baker lamented problems in plane projects at Boeing Co (BA.N) and Canada's Bombardier Inc (BBDb.TO) and threatened to shift extra business to Europe's Airbus (EAD.PA).

He said Boeing had failed in development of its 787 Dreamliner, which is seen likely to suffer a further delay following a fire on a test flight, while Bombardier was suffering problems with its C-Series jetliner.

"I was really taken aback by the (787) program. I never expected a program could be delayed so much with a company like Boeing, which has pride in its quality. They have very clearly failed," he told a news conference.

Development of the carbon-composite 787 is running about three years late and analysts expect a further delay as Boeing addresses a fire which led to test flights being grounded.

Al Baker said Qatar Airways had been notified of some delays to 787 deliveries, but declined to say whether this was before or after the prototype fire on November 9. Boeing declined to comment.

It is not the first time Al Baker has criticized Boeing and his remarks were spiced with warnings that Airbus could not afford to delay its second-largest plane -- a 350-seat variant of the future A350 -- or Boeing would have time to retaliate.

In 2006, Al Baker criticized Airbus's handling of delays in the 500-seat A380 and demanded compensation.

On Thursday, however, Al Baker said he was considering increasing his order for the world's largest airliner.

"Today we have only five A380s on order and most definitely we will consider increasing this order," he said.

Qatar Airways has not yet chosen engines for the 500-seat plane, but its decision will not be affected by the recent blowout of a Rolls-Royce (RR.L) engine on a Qantas (QAN.AX) A380, he said.

Al Baker said Qatar could order a possible upgrade of the Airbus A320 150-seat jet, the backbone of many medium-haul fleets, which he expected to be launched by year-end.

The A320 with new engines, dubbed the NEO, is designed to compete with Bombardier, which is trying to eat into Airbus and Boeing's markets. Qatar nearly ordered the Bombardier C-Series at Farnborough in July, but pulled out at the last minute.

Qatar's concerns relate to the plane's engines, produced by United Technologies (UTX.N) unit Pratt & Whitney.

"If they (Bombardier) do not roll up their sleeves pretty fast then the NEO will eclipse them and people will be interested because they have the infrastructure in place," Al Baker said.

An announcement is expected later on Thursday, said the source, who declined to be identified by name because the talks were not public. A deal to acquire Del Monte, maker of Meow Mix cat food, Milk-Bone dog biscuits and canned vegetables, would be the latest in a flurry of private equity activity.

A $19 per share offer would mark a 5.6 percent premium over Del Monte's closing stock price of $17.99 on Wednesday. Del Monte's stock has surged 62 percent this year, with sharp gains over the past week due to takeover reports.

Vestar Capital Partners and a fund run by Centerview partner James Kilts will join KKR in the deal, which would rank as one of the largest U.S. leveraged buyouts of the year.

Del Monte could not be immediately reached for comment. KKR and Centerview could not be immediately reached for comment. Vestar declined to comment.

San Francisco-based Del Monte has a history of private equity ownership. TPG Capital TPG.UL purchased the company from a consortium of investors in 1997 for a reported $800 million, including debt. TPG later took Del Monte public, raising about $250 million, and gradually reduced its stake through the years.

Centerview recently bought pizza maker Richelieu Foods Inc from Brynwood Partners. Vestar has invested in consumer-focused companies including Birds Eye Foods and Sun Products.

In September, Del Monte cut its full-year sales forecast due to higher rebates paid to retailers to spur consumer spending. In July, Del Monte first cut its sales estimates for the year, citing a shift in marketing spending toward trade promotions.

Such promotions include amounts the company pays to retailers to lower the selling price of its products to increase their competitiveness.

A Del Monte deal would be the latest high-profile private equity deal. Earlier this week, private equity firms TPG Group and Leonard Green & Partners LP struck a deal to buy J Crew Group Inc (JCG.N) for $2.86 billion.

TPG has also been pursuing hard-disk drive manufacturer Seagate Technology (STX.O), which has a market capitalization of $6.53 billion, sources previously told Reuters. Rival Carlyle Group CYL.UL also recently struck a number of deals, including a $2.6 billion deal to buy Syniverse Technologies Inc.

Private equity firms are under pressure to invest billions of dollars raised over the past few years, with some funds facing deadlines on their investment periods, and firms have become increasingly active in buying assets over the past few months.

(Reporting by Megan Davies in New York and Jessica Hall in Philadelphia; Editing by Andrew Hay)

"There is zero danger," Klaus Regling, chief of the euro's financial safety net, European Financial Stability Facility (EFSF), told German daily Bild in an interview published on Thursday when asked if the euro zone could break apart.

"It is inconceivable that the euro fails," he said.

Some economists and commentators, mostly in Britain and the United States, have suggested the 16-nation common currency launched in 1999 could split because of peripheral members' high debts and deficits, and a loss of competitiveness with Germany.

But Regling said: "No country will give up the euro of its own will: for weaker countries that would be economic suicide, likewise for the stronger countries. And politically Europe would only have half the value without the euro."

Greece received a three-year 110-billion-euro EU/IMF bailout in May, leading to the creation of the EFSF, which Ireland has now applied to tap to cope with the devastating impact of a banking crisis on its public finances.

The cost of insuring Irish debt against default continued to rise on Thursday amid market doubts about Dublin's austerity plan. In another sign of waning confidence, European clearing house LCH.Clearnet increased the deposit it requires traders in Irish government bonds to post for the third time this month.

The euro tumbled this week after German Chancellor Angela Merkel alarmed markets by saying the single currency was in an "exceptionally serious" situation.

German Bundesbank chief Axel Weber, a powerful member of the European Central Bank's governing council, said he was convinced EU leaders would do whatever it takes to repel what he called an "opportunistic attack" on the currency area.

Weber noted that the EFSF and other EU rescue funds had enough money, if necessary, to cover the borrowing needs of the four financially troubled members of the euro zone -- Greece, Ireland, Portugal and Spain.

"If that is not enough, I am convinced euro zone states will do what is necessary to protect the euro," Weber told French business and political leaders in Paris on Wednesday evening. "But 750 billion (euros) should be more than enough to see off an attack on the euro zone."

Currency and credit markets have been unnerved by German proposals to force bond holders to share the cost of any future default by highly indebted euro zone countries, as well as by the alarmist tone of recent comments by Merkel and European Council President Herman Van Rompuy.

ECB policymaker Ewald Nowotny voiced irritation at Merkel for not "differentiating between the euro as a currency and the problems of individual (euro zone) states."

Euro zone policymakers are hoping that Spain and Portugal can stave off an Irish- or Greek-style debt meltdown.

A Reuters poll this week showed 34 out of 50 analysts surveyed believe Portugal will be forced to follow Ireland and ask for help. In a separate survey only four out of 50 economists thought Spain would seek external aid.

Experts throughout the aviation industry have been predicting a delay since the November 9 electrical fire that led to an emergency landing in Laredo, Texas and a stop to 787 test flights. Time-frame estimates for a new delay range from a month to a few years.

Boeing's new carbon-composite plane, already six times delayed and almost three years late, is supposed to be delivered to the first customer in the first quarter of next year.

The world's second-largest plane-maker after Airbus (EAD.PA) said on Wednesday it is making minor design changes to power distribution panels on the 787 and updating software that manages power as it plots its way to getting the plane flying again.

It said the fault which led to the fire was most likely caused by foreign debris.

A revised 787 program schedule "is expected to be finalized in the next few weeks," the company added.

The 787, a light-weight, fuel-efficient airplane, has generated about 850 orders but has also been dogged by engineering, labor and supply chain problems.

According to its latest schedule, the company had planned to deliver a Dreamliner to its first customer, Japan's All Nippon Airways (9202.T), in the first quarter of 2011. The original target date was May 2008.

(Reporting by Kyle Peterson and Bill Rigby; editing by Gunna Dickson)

A rare bit of good news on the U.S. labor market overnight was not met with investors' applause in the Asian session, with other factors such as the fast closing window on financing in the region and fears of the next fiscal domino to fall in Europe keeping investors focused on preserving capital.

With equity markets off to a cautious start, the Australian dollar -- which has become an indicator for risk taking in the region -- slipped below US$0.98.

Japan's Nikkei share average was up 0.5 percent .N225, extending what has been a surprising outperformance of the rest of the region this month.

The Nikkei has risen 9.5 percent so far in November, and with three more trading days to go in the month is on track for the best performing month since March.

The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS is down 1.3 percent in November, perhaps collateral damage from the need of investors to hide out in deeper markets until the new year.

The index was largely steady on the day, with consumer-related sectors seeing a bias to sell.

"With growth above potential in many emerging markets, particularly in Asia, the risk of broad-based inflation is real and growing," Goldman Sachs analysts said in a note.

"And, as policy responds to this in the form of rate hikes or nominal currency appreciation, equities -- stuck between the pull of growth and the push of tightening policy -- are likely to have a bumpier ride.."

In capital markets, bankers found even Asia's financing stronghold of Hong Kong was having difficulty pushing deals through given thinning market conditions and increased risks. More than $3 billion worth of proposed IPOs in Hong Kong were deferred, while Hong Kong Electric Holdings (0006.HK) delayed the pricing of its high-grade 10-year dollar bond to next week.

The Thanksgiving holiday in the United States will also keep trading activity limited on Thursday.

The need for liquidity has not necessarily benefited U.S. Treasuries, though higher yields have been a draw to the dollar.

After poor auctions of mid-maturity debt, the U.S. 5-year yield hit a two-month high of 1.59 percent overnight, having now risen more than 50 basis points since the most recent Federal Reserve meeting.

Meanwhile, the U.S. dollar index, a measure of its performance against six other major currencies, was up 0.2 percent, heading back up to 80.00, a level that was test overnight when the index hit the highest since Sept 24.

The high-yielding Australian and New Zealand dollars were underperformers among G10 currencies on Thursday. Uncertainty about what measures China may take to pull down inflation has haunted these currencies.