Business Blog Posts

The Sunday Times said in an unsourced report that the maker of Cheerios cereal could pay 1 billion pounds ($1.56 billion) for unlisted Yoplait, whose products it distributes in the United States.

"As a standing practice, we don't respond to rumors or comment on speculation," General Mills spokeswoman Kirstie Foster said.

General Mills said last week it was seeking arbitration over a dispute with the French entity from which it licenses the Yoplait name. It said it was objecting to a French bid to terminate their 30-year-old distribution deal.

Yoplait is co-owned by Sodiaal, France's largest milk cooperative, and private equity fund PAI Partners.

The French fund said in July that it would be open to potential offers for its stake.

A U.S. bid in the French dairy sector could rekindle memories of an unexpected dispute over the industry five years ago.

Speculation of a bid from PepsiCo (PEP.N) for Yoplait's French rival Danone (DANO.PA) drove up the latter's share price in mid-2005 and triggered talk of a foreign takeover.

The then-conservative government -- led by Dominique de Villepin, a party rival to the current conservative President Nicolas Sarkozy -- responded by declaring the dairy industry strategic and introducing a policy of "economic patriotism."

The interest from PepsiCo was never publicly confirmed, but the dispute was credited with speeding up the introduction of rules to regulate hostile foreign bids in strategic industries.

A presidential decree named 11 protected industries such as defense, leaving a lasting mark on French merger policy even though dairy did not make it to the ring-fenced list.

(Reporting by Ransdell Pierson and Tim Hepher; Editing by Maureen Bavdek)

The S&P 500 closed the week at the higher end of that range, just below 1,130. Some chartists see a break above it as presaging a test of the year's highs.

But options trading suggests some see 1,130 as the market's ceiling and are protecting their portfolios against a decline.

Other investors see the Federal Open Market Committee policy meeting on Tuesday as the turning point that stocks have been searching for to break out of the range with conviction.

"Going up to the close on Tuesday, we could see a little bit of enthusiasm, and perhaps it could be the catalyst that could push us above 1,130 on the S&P," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

In late August, Fed Chairman Ben Bernanke said he would need to see a significant deterioration in economic conditions before easing monetary conditions further. Recent data, including a stronger-than-expected reading on private-sector jobs growth, could prevent further action from the Fed.

If the Fed does move, people "wouldn't interpret it as a bad sign (for the economy) but as the Fed being vigilant in trying to keep this recovery going," Jacobsen said.

Most analysts do not see the Fed moving in that direction immediately, but Jacobsen said any signal will be welcome.

"It could be the impetus that's needed to push people out of bonds and into stocks, finally," he said.

ALL EYES ON TECHNICALS

Even with stocks losing a bit of momentum as some technical indicators suggest, the S&P 500 seems poised to move above 1,130. Some chartists see breaking that level as a harbinger of future gains, with overhead resistance not seen until 1,173 and then at the year's high near 1,220.

Having pierced 1,130 three times in the last three months, the level is garnering attention even from investors who are more focused on fundamentals than technical analysis.

"Whenever economic uncertainty bubbles up, that's when technicals take over in terms of what market participants look for," said Wasif Latif, vice president of equity investments at USAA in San Antonio, Texas.

"A lot of people have been looking at 1,130 and we look at it as a component because other people are acting on it."

For the week, the Dow Jones industrial average .DJI gained 1.4 percent, while the Standard & Poor's 500 Index .SPX advanced 1.5 percent and the Nasdaq Composite Index .IXIC jumped 3.3 percent.

OPTION TRADERS HEDGING BETS

The CBOE Volatility index, or VIX VIX.N, continued to show high volume as investors were bracing for volatility.

"After VIX September options expired on Wednesday, I expected that index options activity to drop," said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.

"But on the day, there was actually a big volume on puts and calls, suggesting that as soon as September contracts expired, they replaced the VIX contracts again for protection."

A large put spread was made on the S&P 500 index .SPX that suggested a substantial move lower in the short term, according to Chris McKhann, an analyst at optionMonster.com.

HOUSING DATA ALL WEEK LONG

In terms of economic data, this week's schedule has nearly a daily dose of housing indicators. From the housing market index on Monday to housing starts on Tuesday, followed by existing home sales on Thursday and new home sales on Friday, investors will get a clearer picture of a key sector that must improve before the economic recovery can really kick in.

"It's been so terrible lately that it doesn't have to be strength -- just a sign of life in the housing market could be support for financial markets overall," Jacobsen said.

(Reporting by Rodrigo Campos; Additional reporting by Angela Moon; Editing by Jan Paschal)

Weekly Euro am Sonntag reported that Rehm had told an event hosted by Dresden-based asset management firm Damm-Rumpf-Hering Vermoegensverwaltung that German lenders needed more money.

"German banks need 200 billion euros in additional capital," Euro am Sonntag reported Rehm as saying.

Speaking via his spokeswoman on Sunday, Rehm said he had been misquoted and had referred to a sum which lenders among the Group of 20 (G20) industrial powers may have to raise between 2013 and 2018 to meet tougher new rules for the financial sector.

"According to existing studies there could be an additional equity capital requirement of 200 billion euros in the G-20 nations," Rehm said, referring to the rules known as Basel III.

Earlier, Rocco Damm, one of the organisers of the event, told Reuters he and his business partners were adamant that Rehm had not mentioned the sum in relation to German banks.

Damm said there had been talk about a figure of 50 billion euros, which, according to media reports, Germany's 10 biggest banks might need to comply with Basel III.

(Reporting by Dave Graham; Editing by Hans Peters)