Business Blog Posts

At a news conference in Pretoria, where he began what will be a curtailed visit to Africa, Cameron defended hiring former tabloid editor Andy Coulson, a figure at the center of the scandal, as his spokesman.

He rejected veiled criticism from the police chief, who quit after coming under fire for appointing Coulson's former deputy as a media adviser to his force.

"The situation in the Metropolitan Police Service is really quite different to the situation in government," Cameron said in response to remarks by outgoing Metropolitan Police Commissioner Paul Stephenson, who contrasted the prime minister's response to hiring one ex-journalist to his own resignation over the other.

Having cut short a planned week in Africa as the scandal snowballed, Cameron also said parliament would delay its summer recess to let him address lawmakers again on Wednesday.

The prime minister came under further pressure on Sunday with the resignation of Stephenson and arrest of Rebekah Brooks, who ran British newspapers for Murdoch's News Corp.

Murdoch, the 80-year-old Australian-born magnate whose grip on Britain's media and politicians of all parties have been shaken by two weeks of outrage, faces a parliamentary committee on Tuesday. He and his son James, 38, as well as Brooks, can expect a fierce grilling over allegations the News of the World tabloid hacked thousands of people's voicemails and bribed policemen.

The scandal may be reshaping the British establishment, with the press, police and politicians all facing harsh questioning from the public over cozy relationships and a failure over many years to protect the vulnerable, including child crime victims and the nation's war dead, from intrusive tabloid journalism.

The affair has prompted Murdoch to shut down the 168-year-old News of the World, Britain's top-selling Sunday paper, and to drop a bid for pay-TV network BSkyB that was a key part of its global expansion in television. That in turn has raised questions from investors over the family's management.

News Corp shares plunged during Australian trading on Monday, hitting a two-year low of A$13.65 following global drama for the group during the weekend closure. On Friday, Brooks, a former News of the World editor, resigned, as did Les Hinton, head of Murdoch's Dow Jones & Co, publisher of the Wall Street Journal. Hinton used to run News International in Britain.

The shares ended 4.1 percent lower at A$14.16.

CAMERON UNDER FIRE

In resigning on Sunday, police chief Stephenson said he had done nothing wrong but did not want distractions from the affair to hamper security preparations for next year's London Olympics. And he aimed unusually sharp, if veiled, barbs at Cameron.

Amid public anger at the police's refusal for several years to act on allegations of widespread phone hacking, Stephenson had faced questions over his senior officers' closeness to News International. He was particularly under fire over the appointment of Neil Wallis, a former deputy editor at the News of the World, as a public relations adviser to his force.

Stephenson noted that Wallis, who was arrested last week and is one of 10 journalists so far being questioned as suspects in the phone hacking and bribery case, had not been linked to the scandal when he was hired. He contrasted that to Cameron's hiring in 2007 of Coulson, Wallis's editor at the paper.

Coulson resigned as editor when his royalty correspondent was jailed for hacking the phones of royal aides, although he denied knowing of any wrongdoing. Coulson quit the prime minister's office in January this year as police reopened their investigation of the paper. He was arrested this month.

Asked about Stephenson's comments on his appointment of Coulson, Cameron said: "I don't believe the two situations are the same in any shape or form.

"There is a contrast with the situation at the Metropolitan Police, where clearly the issues have been around whether or not the investigation is being pursued properly.

"In terms of Andy Coulson, no one has argued that the work he did in government in any way was inappropriate or bad. He worked well in government, he then left government."

He reiterated the steps he has taken to tackle the scandal, notably funding the renewed police investigation and setting up an independent public inquiry in response to revelations that the hacking extended beyond the voicemails of the rich, famous and powerful to include those of abducted teenager Milly Dowler, later found murdered in 2002, and many other private citizens.

POLITICAL DAMAGE

Cameron, a 44-year-old former public relations executive, revived Conservative fortunes after taking the leadership in 2005, winning power 14 months ago after 13 years of Labour rule.

Many see the scandal as his biggest test to date, though few see anything other than a remote threat to his political future.

"This crisis has understandably shaken the Cameron circle. Some dared to hope the storm had passed," wrote Andrew Grice, political editor of the Independent newspaper. "Yesterday they realized the storm is still gathering pace. It could last for years. No one knows where it will end, least of all Mr Cameron."

Tim Bale, politics professor at the University of Sussex, said: "It has become almost a crisis of governance in the United Kingdom ... There is a sense of things sliding out of control.

"The actual text of (Stephenson's) statement pointing to parallels between himself and the prime minister is quite breathtaking. It won't make Mr Cameron do the same thing, but it reminds people once again of the Coulson problem."

Iain Dale, a prominent Conservative commentator, wrote on his blog: "I can't believe I am even writing this, but it is no longer an impossibility to imagine this scandal bringing down the prime minister, or even the government."

Yet, he said, that remained far-fetched, as did Toby Young, a commentator blogging at the Conservative-supporting Daily Telegraph, who cited Cameron's assured demeanor in public and efforts to highlight Labour's own long relationship with the Murdoch press as reasons for expecting the crisis to blow over.

"I don't rule out the prime minister being toppled by this scandal," Young wrote. "I just don't think any of the details that have emerged so far, or his handling of the crisis, put him in serious jeopardy."

As well as the issue of hiring Coulson, who edited the News of the World from 2003 to 2007, Cameron has come under fire for his friendship with Brooks, Coulson's predecessor as editor.

She will face parliament's media committee on Tuesday, though many believe her answers will be curtailed due to her having been arrested and bailed after 12 hours of questioning at a London police station on Sunday. Alongside her will be Murdoch himself and his son James, the chairman of News International.

Lawmakers, who gave senior police officers a fierce grilling last week, are expected to do so again on Tuesday in a separate committee hearing covering interior ministry affairs.

Labour, whose hitherto low-profile new leader Ed Miliband has capitalized on Cameron's discomfort, seized on Stephenson's reference to the Coulson appointment in his resignation speech.

"It is striking that Sir Paul Stephenson has taken responsibility and answered questions about the appointment of the deputy editor of the News of the World," Labour's home affairs spokeswoman Yvette Cooper said in a statement.

"The prime minister still refuses to recognize his misjudgment and answer questions on the appointment of the editor of the News of the World at the time of the initial phone hacking investigation."

With politicians from Australia to the United States demanding to know if similar abuses occurred elsewhere in Murdoch's global media business, Murdoch has been forced uncharacteristically onto the defensive and the position of his son James as heir-apparent has been called into question.

Labour leader Miliband called for new rules to curb how much of Britain's media could be controlled by one proprietor: "Concentrations of power damage our culture," he said.

Murdoch, who some media commentators say at first misjudged the strength of public anger, published apologies in several British newspapers at the weekend.

He also met and apologized to the family of murdered schoolgirl Milly Dowler in an acknowledgment of the likely truth of allegations that a News of the World investigator not only listened in to their missing daughter's voicemails but may have deleted some to make way for more -- misleading police who were hunting for her and giving her parents false hope she was alive.

($1 = 0.940 Australian Dollars)

(Additional reporting by Jodie Ginsberg in Pretoria and Stephen Mangan, Christina Fincher, Sven Egenter, Ralph Gowling and Michael Roddy in London; Writing by Alastair Macdonald, editing by Mark Trevelyan)

News Corp (NWSA.O) will be in the spotlight after the company's shares traded in Australia (NWS.AX) sank to a two-year low on Monday as the UK phone hacking scandal fallout worsened. Rebekah Brooks, the former head of the company's UK paper business, was arrested on Sunday and top policeman Paul Stephenson quit over the scandal.

With five days remaining before President Barack Obama's deadline for a deal to raise the U.S. debt ceiling, Republicans and Democrats have yet to agree on a big plan to cut the nation's deficit and raise its debt limit in time to avoid an unprecedented U.S. default. Efforts to reach a comprehensive deficit-reduction deal are at an impasse over tax breaks as lawmakers -- with an eye on 2012 elections -- hold on to entrenched positions.

The euro fell while gold hit record highs on Monday as disappointment over financial health checks on European banks and escalating U.S. and euro zone debt problems sent investors scrambling for safe haven assets.

European stocks were down around 0.6 percent in morning trade, adding to last week's sharp losses, as banking stocks dropped after the region's stress test results published late on Friday failed to dispel investors' concerns over the potential impact from the region's sovereign debt crisis. .EU

On the earnings front, investors awaited results from Gannett Co, Halliburton, Hasbro (HAS.O), IBM, Charles Schwab, Stanley Black and Decker, Wynn Resorts (WYNN.O) and Zions BanCorp. (ZION.O).

Google's blowout quarter led the Nasdaq higher on Friday but mounting uncertainty about the government's ability to reach a debt-reduction deal may keep investors at bay in the coming week.

The Dow Jones industrial average .DJI rose 42.61 points, or 0.34 percent, to end at 12,479.73. The Standard & Poor's 500 Index .SPX gained 7.27 points, or 0.56 percent, to finish at 1,316.14. The Nasdaq Composite Index .IXIC advanced 27.13 points, or 0.98 percent, to close at 2,789.80.

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

Investors sent News Corp shares down as much as 7 percent in heavy volume after Rebekah Brooks, the former head of the company's UK paper business, was arrested on Sunday and top policeman Paul Stephenson quit over the scandal.

"I think people would rather be cautious and mark it down rather than find a reason to defend it," said Invesco senior investment manager Jackson Leung in Melbourne. Invesco is News Corp's second-largest institutional shareholder with a 1.68 percent stake, according to Thomson Reuters data.

News Corp shares ended down 4.1 percent at A$14.16 after touching a low of A$13.65.

Shares in a News Corp takeover target, pay-tv firm Austar (AUN.AX), also fell on worries the deal may not proceed after the furor in Britain forced News to drop a $12 billion plan to buy all of highly profitable broadcaster BSkyB (BSY.L).

Austar has agreed to a $2 billion-plus takeover offer from its bigger rival Foxtel, which is owned by News Corp's (NWSA.O) News Ltd division, billionaire James Packer's Consolidated Media Holdings (CMJ.AX), and telecoms firm Telstra (TLS.AX).

The Australian government last week said it may review media laws and ownership, following pressure from the influential Greens party.

Rupert Murdoch's News Ltd dominates the Australian newspaper industry, commanding nearly three-quarters of daily metropolitan newspaper circulation, and the UK scandal has riveted attention in his homeland.

Murdoch, who now has U.S. citizenship, started his global media empire in Adelaide when he inherited the now defunct Adelaide News from his father, Sir Keith Murdoch.

He owns 150 national, capital city and suburban news brands in Australia, which include mass circulation daily tabloids in Sydney (Daily Telegraph) and Melbourne (Sun Herald) and the national daily The Australian.

Austar closed down 3.8 percent while Consolidated Media fell 2.9 percent, against a flat broader market, reflecting investor concerns on the future of the deal.

Still, the Austar and Foxtel camps and banking sources familiar with the deal said the offer was on track and did not expect it to be derailed because Foxtel is only 25 percent owned by News Corp.

"This has long been a transaction with a compelling logic to it and is in the best interests of shareholders. We will continue to keep the market informed as and when appropriate," a spokeswoman for Austar told Reuters in an e-mailed message.

Australia's competition watchdog is due to rule on the bid for Austar on July 21.

Murdoch, through BSkyB, also has an interest in 24-hour news channel Sky News Australia, which is 33 percent-owned by BSkyB. Sky News TV in Australia is in a battle with the government-owned Australian Broadcasting Corp to run the country's overseas TV network -- Australia Network.

On Sunday, detectives arrested Brooks, former head of News Corp's British newspaper arm, on suspicion of intercepting communications and corruption.

Stephenson, London's police commissioner, quit in the face of allegations that police officers had accepted money from the paper and had not done enough to investigate hacking charges that surfaced as far back as 2005.

SHARES OFF 18 PERCENT IN JULY

News Corp's Australian shares have dived 18 percent, or nearly A$3, this month as the News of the World hacking scandal engulfed News Corp executives.

On Monday, the shares fell 7.6 percent to an intraday low of A$13.65, the weakest since July 2009, and also a 7.4 percent discount to News Corp's (NWSA.O) last U.S. close, implying a $3 billion drop of market capitalization at that level.

Volume was 11.4 million shares, or 4.5 times the average daily volume over the past 90 days, according to Thomson Reuters data.

A News Ltd spokesman in Sydney declined to comment on the share move, saying any comment would have to come out of New York.

"There's a lot of sentiment and emotion driving the stock," said Simon Burge, chief investment officer at ATI Asset Management in Sydney, which holds News Corp shares.

"From an earnings point of view, News of the World was less than 1 percent of earnings but this has catapulted to something greater and it is hard to quantify."

In a report on its web site, Bloomberg News cited two unnamed sources as saying independent directors of New York-based News Corp have begun questioning the company's response to the crisis and whether a leadership change is needed.

On the board, venture capital executive Tom Perkins and Viet Dinh, a law professor at Georgetown University, were leading the efforts of independent directors, according to one of the people in the Bloomberg report.

However, in an emailed response to Reuters, Perkins denied the report.

"The Bloomberg reporter didn't talk to me. There is no substance to her speculations, as far as I know," Perkins said.

The News of the World, which published its final edition a week ago, is alleged to have hacked up to 4,000 phones including that of murdered 13-year-old Milly Dowler.

(Additional reporting by Michael Erman in New York and Sonali Paul in Melbourne; Editing by Balazs Koranyi and Lincoln Feast)

The benchmark S&P 500 index last week recorded its worst weekly loss in five weeks.

Investors, frustrated by the lack of progress in the debate between the Democrat-controlled White House and Senate and the Republican-majority House of Representatives, could move into what are perceived as safer assets, such as cash.

While the wrangling over the debt ceiling takes center stage, earnings season will continue to heat up after a solid first week. According to Thomson Reuters data, 39 companies in the benchmark S&P 500 index .SPX have posted results, with 74 percent reporting earnings that topped Wall Street estimates.

Companies in the index are forecast to show a 6.5 percent rise in profits over the second quarter of 2010 when all the reports are in.

For last week, the S&P 500 ended down 2.1 percent; the Dow fell 1.4 percent and the Nasdaq declined 2.5 percent.

The overhang from the debt ceiling issue could diminish the focus on earnings.

House Speaker John Boehner, the top Republican in Congress, said on Friday that President Barack Obama and Democrats still had not put a serious deficit plan on the table, underscoring the acrimony in negotiations to avert a government default.

"The news flow (this) week dealing with the deficit issues and the political posturing that is taking place is going to intensify and is really going to drive these markets," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"People are starting to get nervous about what they are seeing out there. For a portfolio manager -- let alone an average investor -- this is a treacherous market to be trying to position yourself in."

ECONOMY IS A "DISASTER"

Economic data on tap for the coming week includes several reports on the housing market -- June housing starts on Tuesday and existing-home sales on Wednesday. In addition, data is due on leading economic indicators for June and the Philadelphia Fed survey of manufacturing activity in the Mid-Atlantic region. Economic reports over the last month have raised questions about the health of the U.S. recovery.

"The bigger picture is the economy is still a disaster," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

Saluzzi said people still are watching earnings for signs growth may be stagnating. "Eventually, companies are not going to keep cutting costs."

Quarterly results are expected from a slew of companies this week, with more than 10 Dow components scheduled to report.

Major financial companies due to report include Goldman Sachs (GS.N), Morgan Stanley (MS.N), Bank of America Corp (BAC.N) and American Express (AXP.N). Also on the calendar are earnings news from technology companies Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Intel Corp (INTC.O).

"Let's see what all the rest of these guys have. Let's see if it's still being driven by cost cuts or are they actually getting revenue gains. That is going to tell me a lot more than if they cut the debt deal," said Saluzzi.

After the S&P 500 weekly loss, the index was just below its 50-day moving average, a technical level that could indicate more selling. Some analysts believe the market could still come back if the U.S. debt issue is resolved soon.

"This area, as far as it pulling back, is balancing the threat of a default, but it would take an actual default to take us much lower than here," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.

But the longer the debt ceiling question continues without a conclusion, the bigger the risk for further declines in stocks and for volatility to spike. The CBOE Volatility index .VIX rose nearly 30 percent last week

"The more it drags out into Tuesday, Wednesday, Thursday or whatever, then we've got some serious issues. That will be an overhang no matter how good the financials come in terms of earnings reports next week," said Tommy Huie, chief investment officer of BMO Asset Management U.S. in Milwaukee, Wisconsin.

"It could be a pretty volatile week, no doubt about it."

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

From Washington to Brussels, Moody's, Standard & Poor's and Fitch have added to the intense pressure on governments trying to deal with crushing sovereign debt.

Their warnings about the precarious finances of the world's top economies have also roiled investors more accustomed to seeing emerging market countries take the brunt of criticism.

Tension hit new highs on both sides of the Atlantic last week as Moody's and Standard & Poor's threatened to downgrade the United States' prized "triple-A" rating.

A few days earlier, Moody's slashed ratings in Ireland and Portugal to "junk" status, triggering an outcry from European officials.

"These opinions, they continue to give them in such a way that it worsens the crisis," Ewald Nowotny, a member of the European Central governing council, said on Tuesday, referring to the agencies. He said markets could live without them.

Now that the agencies are focusing their fire on the rich world, U.S. and European officials -- long proponents of seeing indebted nations "take their medicine" -- are crying foul.

Their complaints carry a strong sense of deja-vu.

In 1998, when Moody's pushed Brazil deeper into "junk" rating territory, the country's finance ministry called the decision a "mistake" that showed the agency needed to invest more in sovereign risk analysis.

In a sign of the turnaround of the fortunes of many emerging economies, 11 years later in its New York headquarters Moody's received a much friendlier Brazilian finance minister, Guido Mantega, to hand him Brazil's much-awaited "investment-grade" status.

The question now is whether the agencies will be able to withstand much stronger political pressures while the debt crisis rages in developed countries.

In Europe and the United States, policymakers have already promised tougher regulations for the agencies after they failed to spot the housing bubble in the middle of the last decade. and stand accused of contributing to it by giving generous ratings to subprime mortgage bonds.

Rating agencies came under fire from holders of subprime-related securities because raters are paid by the firms issuing the securities. Investors argued that kind of "economic incentive" blurred the analysis.

Sovereign nations, by contrast, do not shell out any money for their ratings.

That has not lessened the political anger. On Wednesday, U.S. Congressman Dennis Kucinich said: "No nation, agency or organization has the authority to dictate terms to the United States government. Moody's and its compatriot S&P were a direct cause of the near collapse of the economy of the United States."

EUROPEAN RATING AGENCY

In Europe, where the agencies poured cold water on a plan for Greece to extend debt maturities and avoid a default, sentiment is even worse. European Commission President Jose Manuel Barroso accused them of having an anti-European bias.

Barroso and other policymakers want the creation of an European rating agency which, they argue, would be better equipped to analyze euro zone issues. That argument overlooks the fact that Fitch is majority-owned by a French company.

The intensity of Europe's reaction to the latest sovereign downgrades is proportional to the power that ratings agencies retain over financial markets -- a clout that even the ratings agencies suggest is exaggerated.

In a recent special report about proposed regulation changes, Moody's said the agencies should not be seen as "gatekeepers in the financial markets" and their ratings should not be used as substitutes for disclosure by issuers.

WRONG TIMING

Some say policy makers may have a point when they criticize the timing of the downgrades by ratings agencies.

Their failure to anticipate the severe deterioration of sovereign credit was an issue in emerging market debt crises in the past, said Claudio Loser, a former Western hemisphere director for the International Monetary Fund.

"My experience with the rating agencies in Latin America during the debt crisis of the 1980s and 1990s is that they were a destabilizing factor," said Loser, now president of the Centennial Latin America consulting firm.

"They did not warn the markets when they should have and they did actually create more noise when it was not the appropriate thing to do."

Loser believes policymakers will force the agencies to "adjust significantly," and that they will emerge stronger from this crisis.

(Reporting by Walter Brandimarte; Editing by David Gaffen, Jennifer Ablan and Maureen Bavdek)