Business Blog Posts

GM's results, due on Thursday, come at a pivotal time for investor sentiment in the U.S. auto industry, still widely seen as being in the early stage of recovery from its near-collapse in 2008 and 2009.

Analysts have been encouraged by GM's strength in China and its progress in slashing costs and debt in a bankruptcy funded by the Obama administration in 2009.

But since GM's record-setting $23 billion initial public offering in November, investors have also become concerned about the pressure on profit margins from rising commodity prices, higher costs for launching new vehicles and the risk of a sustained spike in oil prices.

GM's closest rival Ford Motor Co reported a fourth-quarter profit last month that fell far short of expectations after a $1 billion surge in costs from the third quarter.

The results sent both Ford and GM shares lower as investors worried about the risk that higher costs for everything from steel to plastic to the engineering teams behind new vehicles would erode profitability in future quarters.

GM shares have fallen 11 percent in the four weeks since Ford's results. Ford is down 21 percent in the same period.

GM management led by Chief Executive Dan Akerson had cautioned in a January meeting with analysts that fourth-quarter earnings would be below the rate for the first three quarters of the year.

"Ford has obviously taken a lot of wind out of the upside speculation of GM," said Josef Schuster, founder of IPOX Schuster LLC and a fund manager specializing in IPOs.

"If Ford is not meeting the earnings (expectations), it's hard to imagine that GM would strongly outperform," said Schuster, whose funds hold GM shares.

Analysts polled by Thomson Reuters I/B/E/S on average forecast fourth-quarter profit for GM of about $966 million and a full-year 2010 profit of about $5.3 billion.

Fourth-quarter revenue is expected to be nearly $33 billion with earnings of 46 cents per share, according to the average forecasts.

From 2005 to 2009, GM had lost about $88 billion in its slide to bankruptcy.

In the decade prior to then, annual U.S. auto sales averaged almost 17 million vehicles. The total plunged to a low of 10.4 million in 2009, the year that GM was overtaken by Toyota Motor Corp as the global top seller.

FOCUS ON EUROPE, ASIA

U.S. crude futures continued to climb, reaching a 2-1/2-year peak above $96 a barrel on concern that unrest in oil-rich Libya could spread to other top oil producers in the region and cut more output.

A senior aide to Muammar Gaddafi's influential son Saif resigned on Wednesday, the latest top official to walk out after the Libyan leader vowed to crush a revolt that threatens his four-decade rule.

European stocks fell for a third consecutive session on Wednesday, down 0.3 percent in morning trade, with tech shares featuring among the top losers.

U.S. tech shares will be in the spotlight after Hewlett-Packard Co (HPQ.N) trimmed its 2011 revenue projections on weak consumer PC demand and a lackluster showing from its IT services arm, sending its shares plummeting 12 percent in after-hour trading. Shares of the company traded in Frankfurt (HPQ.N) were down 11 percent.

Nasdaq OMX Group Inc (NDAQ.O), left out of a global merger frenzy among exchanges, is exploring options that include teaming up with a partner on a rival bid for NYSE Euronext (NYX.PA) (NYX.N), a person familiar with the situation said on Tuesday.

The U.S. Air Force may announce as early as Thursday whether Boeing Co (BA.N) or Europe's EADS (EAD.PA) has won a projected $35 billion contract for 179 new refueling planes, a senior defense official said.

Car rental company Hertz Global Holdings Inc (HTZ.N) posted a better-than-expected fourth-quarter adjusted profit, helped by strong growth at its U.S. off-airport business.

The Federal Reserve's monetary policy should remain accommodative for some time yet, Chicago Federal Reserve President Charles Evans was quoted on Wednesday as saying.

Wall Street suffered its worst day since August on Tuesday as investors dumped stocks on turmoil in oil exporter Libya, in what could be the start of a long-anticipated pullback after a lengthy rally.

The Dow Jones industrial average .DJI lost 178.46 points, or 1.44 percent, to end at 12,212.79. The Standard & Poor's 500 Index .SPX fell 27.57 points, or 2.05 percent, to 1,315.44. The Nasdaq Composite Index .IXIC dropped 77.53 points, or 2.74 percent, to 2,756.42.

(Reporting by Blaise Robinson; Editing by Jon Loades-Carter)

This is one option Nasdaq, valued at $5.7 billion, is considering as a spate of deals shakes up a global industry under intense cost pressure from upstart electronic rivals.

Looking to press home a merger between Toronto market operator TMX Group Inc and the London Stock Exchange, the head of TMX warned Canadian lawmakers opposed to the tie up that the country risked damaging its free-trade credentials if it blocked the agreed deal.

TMX Chief Executive Thomas Kloet told Reuters in an interview he was taking political opposition to a deal "very seriously."

Even so, he said Canada was putting its reputation on free trade and competition on the line as it considers a proposal to create a transatlantic operator worth $7 billion in market value and the world's fifth-largest exchange ranked by trading volume.

"One of the things Canada has to make sure to consider as it goes through this is what if it says no," Kloet said.

While the agreed merger of LSE and TMX has piqued the interest of industry experts, the merger talks between Deutsche Boerse and NYSE Euronext is drawing comparisons with the Chicago Mercantile Exchange (CME), the world's biggest derivatives marketplace.

Nasdaq focuses on intensely competitive, low-margin equities trading, so may feel vulnerable to more price-competitive exchanges that could result from the wave of merger plans.

A source familiar with the matter told Reuters that Nasdaq's alternatives include the possibility of tying up with IntercontinentalExchange Inc or CME to wrest NYSE Euronext out of its planned $10.2 billion takeover by Deutsche Boerse.

The source asked to remain anonymous because the talks are private.

The Wall Street Journal said Nasdaq may also consider selling itself or buying another competitor if it is unable to compete with Deutsche Boerse on the NYSE deal. A Nasdaq spokesman was not available to comment.

NYSE Euronext and Deutsche Boerse dominate futures and options on European bonds, shares and rates, with Deutsche Boerse's Eurex unit focused on the long end of the interest rate curve and NYSE Euronext's Liffe unit on the short end.

The Deutsche Boerse-NYSE Euronext merger would give the combination annual trading volume exceeding $20 trillion but to succeed it needs approval from a host of regulators.

A $7.9 billion bid by Singapore Exchange for the Australia stock exchange operator ASX Ltd late last year kicked off a wave of industry consolidation last seen just before the global financial crisis.

NO BIG ASIAN M&A

Popular protests in Egypt and Tunisia have toppled entrenched leaders, but a defiant Gaddafi, the world's second-longest-serving leader after the Sultan of Brunei, said he would not be forced out by the deadly unrest sweeping his nation.

The turmoil in Libya, which pumps nearly 2 percent of world oil output, sent London Brent crude prices above $108 a barrel to a 2-1/2 year high but they settled below $106 on Tuesday as the Organization of the Petroleum Exporting Countries (OPEC) said it would act should there be a supply shortage.

On Wednesday, Brent was trading up around 70 cents at around $106.47. NYMEX crude for April delivery was up 50 cents at $95.92 a barrel. The contract earlier rose as high as $96.08, the highest for any nearby month since October 2008.

Japan's Nikkei 225 index .N225 was down 0.2 percent and the MSCI's index of Asia Pacific shares outside Japan .MIAPJ0000PUS was off 0.3 percent.

Transporter companies, whose fuel bills are headed up, extended sharp losses from Tuesday, with Korean Air Line (003490.KS) shedding 1.5 percent.

"The only observation an outsider sitting in Asia can make about events in the Middle East and North Africa is that the unpredictability of events and the difficulty in ascertaining the 'end game' mean that equity markets settling back into equilibrium is still some way off," said Nomura analyst Sean Darby.

"The ongoing risk is if food prices were to continue to rise due to unseasonal weather and indeed if fuel prices were to climb further. Non-linear responses such as bans on exports of food by producers or curtailment of shipments of fuel due to non-payment would only exacerbate the situation on the ground and make it more difficult to return to normalcy."

Gold, a traditional safe haven in times of trouble, were little changed around $1,400 an ounce on Tuesday, after a six-session rally, but the trend is still expected to be upwards.

Currencies viewed as safe havens, such as the yen and Swiss franc, have also been boosted by events in Libya.

The dollar traded around 0.9371 Swiss francs, not far off a three-week low around 0.9362 plumbed overnight. The euro fell to a 3-1/2 week low at 1.2782 francs and last stood around 1.2834.

The euro was at $1.3697, after having briefly risen as high as $1.3704 on EBS after European Central Bank officials said they were ready to fight inflation.

Wall Street stocks on Tuesday suffered their worst day since August in what could be the start of a long-anticipated pullback after gaining more than 20 percent in the past six months.

The Dow Jones industrial average .DJI closed down 1.44 percent. The Standard & Poor's 500 Index .SPX fell 2.05 percent. The Nasdaq Composite Index .IXIC dropped 2.74 percent.

U.S. stock futures were slightly higher, suggesting Wall Street will rise again when it reopens on Wednesday.

(Editing by Ramya Venugopal)

Violent clashes in Libya have resulted in at last three oil companies halting output in Africa's third-largest producer. Libya pumps 1.6 million barrels per day (bpd), or nearly 2 percent of global supply.

The disruptions mark the first reduction in oil supply stemming from a wave of protests that have swept through the oil-producing Middle East and North Africa. Investors fear for the potential impact on the flow of oil from top exporter Saudi Arabia if it suffers similar unrest.

U.S. crude rose as high as $96.08 a barrel, the highest level since October 2008. By 0355 GMT, the contract had trimmed gains to trade at $95.70, up 28 cents on the day.

Brent crude rose 78 cents to $106.56 a barrel. On Monday, Brent hit a 2-1/2-year high of $108.70.

"Even if Libya completely shuts down, there isn't a supply issue. But the (U.S. crude) could go to $100, given the potential for this contagion to spread to Saudi Arabia," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

To date, protests in Saudi have been low key. But majority Shi'ites in neighboring Bahrain are protesting against the Sunni government and there is concern this could spill over to the Shi'ite minority living in Saudi Arabia's oil-producing eastern province.

A pipeline pumping Libyan gas to Italy was also closed, and operations at Libya's export terminal operations disrupted. Libyan leader Muammar Gaddafi has refused to step aside despite the growing revolt and threatened tougher action against protesters in a defiant speech on Tuesday.{ID:nLDE71L2LE]

International Energy Agency (IEA) chief economist Fatih Birol said on Tuesday that oil prices were in the danger zone and could rise further if turmoil continues in the Middle East.

"The global economy is more fragile now than it was in 2008. Growth has been driven by stimulus packages and austerity measures. I don't see it being able to absorb a rise to $140 like it did two years ago," Barratt said.

Brent crude has risen more than 13 percent so far this year. U.S. crude is up over 2 percent on the year, but is over $50 below its 2008 high of $147.27.

"(Brent) prices have broken through the $105 resistance, and if it breaks $110, it could easily move to $120," said Ken Hasegawa, a commodity derivatives manager at Newedge brokerage in Tokyo.

NO MORE CRUDE FROM SAUDI

Top exporter Saudi Arabia on Tuesday stopped short of pouring more oil on to markets, telling visiting consumer nations prices were driven by fear.

The kingdom could ramp up its oil production enough within one month to replace all of Libya's crude exports if growing strife in the African nation cuts off its oil shipments, a senior U.S. government energy official said on Tuesday.