Business Blog Posts

Equities have been pressured recently, with the S&P 500 down 3.2 percent so far this month. Investors said Wednesday's rally, which broke a three-day losing streak in stocks, may not be enough to overcome macroeconomic worries.

The preliminary estimate of first-quarter gross domestic product is due at 8:30 a.m. (1230 GMT) and is seen rising by 2.1 percent compared with the 1.8 percent rate previously estimated by the government.

Though the economy was seen expanding in the quarter despite sovereign debt woes, geopolitical tensions and natural disasters overseas, a weaker-than-expected reading could exacerbate concerns about global growth.

Weekly jobless claims are also on tap, with 400,000 initial claims expected, down from the 409,000 posted last week but still considered high.

S&P 500 futures rose 2.7 points and were slightly above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 21 points and Nasdaq 100 futures were flat.

Influential hedge fund manager David Einhorn called for Steve Ballmer, the chief executive of Microsoft Corp (MSFT.O), to step down, saying the world's largest software company's leader is stuck in the past.

The Federal Reserve Bank of New York is investigating whether Goldman Sachs' (GS.N) mortgage servicing arm did not conduct proper reviews before denying borrowers the option to lower their payments under a government loan modification program.

Companies scheduled to report quarterly results include H.J. Heinz Co (HNZ.N), Tiffany & Co (TIF.N) and Big Lots Inc (BIG.N).

The CME Group (CME.O), which this month raised the amount of money required to trade silver and oil in response to wild price swings, may bring down margins over time once the market volatility eases, a senior official said on Thursday.

The successive margin increases, cited as one of the triggers for the big commodities rout on May 5, contributed to a slide in silver prices since touching a record high of $49.51 an ounce on April 28.

(Editing by Kenneth Barry)

Havoc to supply chains and the physical damage caused by Japan's earthquake and tsunami has clouded Sony's near-term prospects in its home market.

It forced the Japanese company on Monday to take a charge on tax credits that resulted in a $3.2 billion net loss for the business year just ended, its biggest deficit since 1995 and the second worst on record.

The latest travails for the maker of PlayStation video games, Vaio computers and Bravia TVs come as it struggles to regain a market lead lost to Apple Inc in portable music and Samsung Electronics in flat-screen TVs.

Sony on Thursday predicted an 80 billion yen ($975 million) net profit for the year that started April 1, compared with analysts' consensus of 105 billion yen, according to Thomson Reuters StarMine SmartEstimates, which places more weight on recent forecasts by top-rated analysts.

It expects to make an operating profit of 200 billion yen this business year, reiterating guidance given earlier in the week, which helped its shares rise.

But some think those forecasts might be too ambitious.

"Looking at their forecast, it appears Sony is expecting a recovery in the latter half of the year, which is a bullish forecast, but there's a lot of uncertainty and there is a risk they come in below that expectation," said Koji Takeuchi, senior economist at Mizuho Research Institute.

"It is still unclear what the financial burden of the security breach will be."

The company said it would get some production re-started at the worst-damaged of its plants in northern Japan over the next two months, but that the disaster would continue to affect units from TVs to cameras, cutting operating profit by 150 billion yen over the year.

"Although most of the 150 billion yen effect will be in electronics, there will be an impact on almost all product categories," chief financial officer Masaru Kato told reporters. "Those that are likely to be worst hit are televisions, digital cameras and devices," he added.

HACKED

Sony said its liquid crystal display TV business was likely to stay in the red for an 8th straight year.

Sony is also reeling from one of the biggest ever Internet security breaches, which forced it to close its PlayStation videogames network for nearly a month after data on more than 100 million user accounts was leaked.

On Tuesday Sony said additional websites in four countries had also been hacked. Among the break-ins, personal information for 8,500 people was leaked from its Greek Sony Music Entertainment website.

Sony said on Monday it expects the hacking to drag down operating profit by 14 billion yen in the current financial year, including costs for boosting security measures. It said it was aiming to restore its PlayStation Network in full by the end of May.

Worries about both incidents have weighed on Sony shares, which have fallen by almost a quarter this year, three times the fall in the Nikkei average. The stock closed up 0.1 percent on Thursday ahead of the announcement, compared with a 1.5 percent gain in the benchmark.

During the year ending March 31, the company predicted that it will sell 15 million of its flagship PlayStation 3 game compared with 14.3 million in the year just ended. Sony reiterated its plan to release a next generation portable games device by the end of 2011.

It forecast liquid crystal TV sales of 27 million units compared with 22.4 million sets in the previous term, but declined to say whether it expected the unit to be profitable. ($1 = 82.000 Japanese Yen)

(Additional reporting by Takeshi Yoshiike and Tim Kelly; Editing by Chris Gallagher and Lincoln Feast)

The risks surrounding the euro have not eased much, with Greece fighting to avoid a debt restructuring that could have a huge ripple effect across other high risk-European countries struggling with gaping fiscal deficits.

For now though, the pendulum was swinging back to risk taking on Thursday, with volatility in precious metals and crude prices having faded, allowing investors to scamper back to scoop up recently beaten-down shares, albeit in reduced trading volumes.

European stock index futures pointed to early gains while U.S. S&P 500 futures rose 0.2 percent, suggesting a higher open on Wall Street later in the day after closing well off the lows of the day overnight. .N

Japan's Nikkei share average climbed 1.5 percent .N225, with camera maker Canon Inc (7751.T) leading the charge. The stock surged 5.8 percent after it said on Wednesday that would buy back 50 billion yen ($610 million) of its own shares.

The Nikkei has been in a fairly narrow downtrend in May, though this week has bounced off of the April low.

The MSCI index of Asia Pacific stocks outside Japan was up 1.7 percent, the biggest daily percentage gain since April 20, after closing at a two-month low on Wednesday.

Among the domestic benchmark indexes, Korea was out in front, with the KOSPI up 2.8 percent .KS11 on the first net buying by foreign investors in 10 days.

Investors kept their buying focused mostly in the energy, materials and consumer discretionary sectors, areas of the market that have been among the highest returning segments so far this year.

"The two key themes for those with a longer-term view remain demographics and consumption," said Sarah Lien, senior research analyst with Russell Investments.

"We're seeing managers still add to consumption-related stories. The thing to remember in Asia, though, is that sectors such as property, insurance and wealth management are also a play on consumption as disposable income rises," she said.

A survey by Russell Investments of 40 institutional managers globally found 63 percent still rate Asia as the most attractive investment destination, with the United States the next most-favored at 14 percent.

A sustained equity rally in Asia with a pickup in trading volumes before the summer lull may be enough to attract some investors back to the region. The Asia Pacific ex-Japan index has underperformed the all-country world stocks index so far this year, slipping 0.3 percent compared with a 2.7 percent rise in global shares.

EURO REBOUNDS, BUT FOR HOW LONG?

The euro was up 0.7 percent at $1.4188 in the early Asian afternoon, after bears were unable to push the currency below the 100-day moving average this week.

Hedge funds eager to trim their bets against the euro after it made little progress below $1.40 earlier this week helped to push it back up in Asia trading.

A Financial Times report also cited by traders as supporting the euro said that China and other Asian investors would buy a "strong proportion" of bailout bonds for Portugal to be issued next month by the European Financial Stability Facility.

"We've seen the euro test downwards recently, but I feel there are plenty of euro-buying needs as European investors would want to repatriate funds ahead of more potential stress tests in Europe," said Hideki Amikura, a forex manager at Nomura Trust and Banking in Tokyo.

The Australian dollar, which serves as a weather vane of investor risk taking, was up 0.7 percent at $1.0603, trimming nearly all its losses on the week.

Oil futures were trying to add to the week's gains. U.S. crude for July was up 0.3 percent at $101.61 a barrel while Brent was steady at $114.93 a barrel.

U.S. crude has bounced $7 since hitting the lowest since mid February in early May.

Precious metals edged higher, helped by the softer dollar. Spot gold rose 0.4 percent to $1,529.56 an ounce and silver was up 2.2 percent to $38.72, rallying for the third straight session.

(Additional reporting by Vikram Subhedar in HONG KONG)

"His continued presence is the biggest overhang on Microsoft's stock," Einhorn said in reference to Ballmer.

The comments by outspoken Einhorn, who made his name warning about Lehman Brothers' financial health before the investment bank's collapse, are the most pointed yet from a high-profile investor against Microsoft's leadership.

Microsoft shares, which have been static for over a decade, gained 0.87 percent in after-hours trading after Einhorn's comments, the most of any Dow Jones industrial average component.

The software giant, which was the largest U.S. company by market value in the late 1990s, has since been overtaken by Apple Inc and IBM in market value, and is no longer seen as a dominating force in technology after a failure to capitalize on new Internet and mobile computing markets.

The stock is down 6 percent in the last two weeks alone after Microsoft agreed to pay $8.5 billion for Internet phone service Skype, a move which mystified many investors.

Speaking at the annual Ira Sohn Investment Research Conference in New York on Wednesday, Einhorn said it was time for Ballmer -- who succeeded co-founder Bill Gates in 2000 -- to step aside and "give someone else a chance."

Einhorn's comments echo what some investors have said for some years in private.

A Microsoft spokesman declined comment on Einhorn's remarks.

RECENT BUYER

Einhorn's Greenlight Capital hedge fund has been a recent buyer of Microsoft stock, which at under 10 times expected earnings is regarded by many as undervalued.

Greenlight held about 9 million shares in Microsoft, or 0.11 percent of the company's outstanding shares, at the end of the first quarter, according to Thomson Reuters data.

Einhorn also said it was time for Microsoft to consider strategic alternatives for its money-losing online business, which has so far failed to win share from online search leader Google Inc.

The online services unit, which runs the Bing search engine and MSN web portal, had a loss of $726 million last quarter and has now lost $7 billion in four years.

Bing has made some progress, raising its U.S. Internet search market share to 14 percent from 8 percent in the two years since launch, but has not taken any share from Google, which has held on to its 65 percent share, according to research firm comScore.

Einhorn declined to comment further.

OLD FOES APPLE, IBM REVIVED

On Tuesday, Microsoft was overtaken by IBM in market value for the first time in 15 years, chiefly because of Microsoft's static share price. Apple roared past it last year to become the world's most valuable tech company.

(Graphic showing market value of Apple, IBM and Microsoft over time: r.reuters.com/jaw69r )

An investor who put $100,000 into Microsoft stock 10 years ago would now have about $69,000 worth.

Einhorn, the president of Greenlight Capital, which had $7.8 billion of assets as of January 1, made his name with the prescient call on Lehman's accounting troubles.

In the spring of 2008, Einhorn said Lehman -- and its then-Chief Financial Officer Erin Callan -- had understated its own problems and needed to raise capital to support a balance sheet peppered with risky assets.

Einhorn's public speeches on the matter in April and May 2008 -- including one at the Ira Sohn conference that year -- touched a nerve with other investors and are widely credited as leading to Callan's departure from the company a few months before its collapse.

Microsoft shares, which gained 4 cents in normal trading, ended up a further 12 cents at $24.31 in after-hours activity.

(Reporting by Bill Rigby, Svea Herbst and Edwin Chan; Editing by Steve Orlofsky, Lisa Shumaker and Carol Bishopric)

Microsoft, which was the largest U.S. company by market value in the late 1990s, has seen its stock stand still for the past 10 years as it failed to attack new Internet and mobile computing markets, surrendering leadership of the tech sector to Apple Inc.

Microsoft shares shot up 0.87 percent in after-hours trading, the most of any Dow Jones industrial average component.

Many have been privately critical of Ballmer, but Einhorn's remarks are the most pointed yet from a high-profile investor.

Einhorn's Greenlight Capital hedge fund has been a recent buyer of Microsoft stock, which at under 10 times expected earnings is regarded by many as undervalued.

Greenlight currently holds about 9 million shares in Microsoft, or 0.11 percent of the company's outstanding shares, according to Thomson Reuters data.

Speaking at the annual Ira Sohn Investment Research Conference in New York on Wednesday, Einhorn said it was time for Ballmer -- who succeeded co-founder Bill Gates in 2000 -- to step aside and "give someone else a chance."

"His continued presence is the biggest overhang on Microsoft's stock," he said.

On Tuesday, Microsoft was overtaken by IBM in market value for the first time in 15 years, chiefly because of its static shares. Apple roared past it last year to become the world's most valuable tech company.

An investor who put $100,000 into Microsoft stock 10 years ago would now have about $69,000 worth.

Einhorn, the president of Greenlight Capital, which had $7.8 billion of assets as of January 1, first rose to prominence for making a prescient call on Lehman Brothers' accounting troubles before the bank's subsequent collapse.

Shares of Microsoft edged up 0.87 percent to $24.40 in afterhours trade from a regular-session close of $24.19.

(Reporting by Bill Rigby, Svea Herbst and Edwin Chan; Editing by Steve Orlofsky and Lisa Shumaker)