Business Blog Posts

The dollar remained broadly weak after details of the last meeting of the U.S. Federal Reserve suggested the central bank was closer to injecting fresh stimulus into the ailing economy.

Comments by Japan on South Korea's leadership of the forthcoming G20 forum underlined growing currency tensions globally. Finance Minister Yoshihiko Noda questioned Seoul's regular currency market interventions.

Intel (INTC.O), the world's largest chipmaker, raised expectations for higher technology earnings in the fourth quarter by forecasting stronger sales and margins for the period. The outlook was part of its third-quarter earnings reported after the close on Wall Street.

"It's not that Intel's results and outlook were great, but they were modestly better than the market's already lowered expectations," said Lee Min-hee, an analyst at Dongbu Securities in Seoul, where the Korea Composite Stock Price Index .KS11 (KOSPI) was up 0.21 percent.

"It is such relief that is lifting technology stocks. The PC market has been showing signs of improvement since September, and key memory chip prices are expected to stabilize by the end of this year."

Intel shares climbed 1 percent in after-hours trade.

In Asia, shares of Hynix Semiconductor (000660.KS), the world's No. 2 memory chipmaker, rose 3 percent and Elpida Memory (6665.T) gained 0.7 percent.

Expectations that the U.S. Fed is poised to bolster the economy has spurred something of a worldwide equity rally.

U.S. stocks hit a five-month high on Tuesday. The S&P 500 index is up 11.3 percent since the start of September, and last month's performance was one of the best for stocks in a decade.

MSCI's all-country world equity index .MIWD00000PUS has posted a 12.1 percent gain since the beginning of September. The index was up 0.86 percent at 459.03 at 6:15 a.m. ET.

MSCI's Asia ex-Japan index rose 0.8 percent .MIAPJ0000PUS.

Hong Kong's Hang Seng index .HSI was up 0.68 percent while Tokyo's Nikkei .N225 was up 86 percent.

Still, the Nikkei was capped by concerns over the yen's strength. The dollar rose 0.1 percent to 81.87 yen, but was not far away from a 15-year low of 81.37 struck on Monday.

"The market is watching for possible Japanese intervention. But as long as the yen stays strong, the Nikkei will stay under pressure," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

Regulators, seeking to prevent the repeat of the global credit crisis, agreed last month to force banks to increase the amount of top-quality capital which they must hold in reserve. Deutsche Bank (DBKGn.DE) kicked off a post-Basel III round of capital hikes earlier this month, raising 10.2 billion euros ($14.2 billion), in part to meet the new bank capital rules.

StanChart's Hong Kong-listed shares (2888.HK) were suspended from trade pending an announcement relating to a corporate action, the Hong Kong stock exchange said. Trading will resume on Wednesday afternoon.

A StanChart spokeswoman in Hong Kong declined to comment, while officials in London and Singapore were not immediately available for comment.

The UK-based bank could announce plans to raise 5-7 billion pounds ($7.9-$11 billion) as early as this week, the newspaper said, citing people close to the cash call.

A source familiar with the deal said Singapore state investor Temasek TEM.UL, StanChart's biggest shareholder, will support the rights issue.

The size of the rights issue was smaller than that reported by the FT, the source said, without providing further details.

A spokesman for Temasek, which owns about 18 percent of the bank as of March 2010 according to Thomson Reuters data, declined to comment.

Standard Chartered last raised about 1.8 billion pounds in a rights issue late 2008. JPMorgan (JPM.N), Goldman Sachs (GS.N) and UBS (UBSN.VX) had handled the sale then.

CAPITAL RULES

Some banks believe that to maintain a reputation for financial strength, they need to pre-empt the full impact of the new Basel III rules, which will be introduced gradually by 2019 and will redefine how the ratios are calculated.

StanChart reported a core tier one capital ratio of 9 percent on June 30, comfortably above the new requirement of 7 percent.

However, under the new Basel rules the definition of core tier one will be tightened so that common equity and retained earnings must make up the bulk of a bank's capital base. This means many banks' core tier one capital ratios will be substantially lower under the new rules than they are at present.

"Basel regulations will be difficult for some Western banks and they want to jump ahead of the line in raising capital before some of the European banks do that," CLSA analyst Daniel Tabbush said. "It could be the case that Basel regulations penalize more so banks like Standard Chartered and HSBC (HSBA.L) (0005.HK) within Asia, as they are more cross-border."

ACTIVE IN UNDERWRITING

Shares of Intel and rival Advanced Micro Devices Inc climbed 1 percent in after-hours trade. Analysts said Intel set a positive tone for the latest tech earnings, which some had feared would spell a disappointing holiday shopping season.

Intel's forecast for a better-than-expected December quarter gross margin of 67 percent -- plus or minus a couple percentage points -- affirmed hopes that higher-end spending on servers or data centers may help offset the loss of computer sales to a booming tablet segment.

And Chief Executive Paul Otellini told analysts on a conference call on Tuesday that early demand for Sandy Bridge -- its next-generation chip combining central processing and graphical functions -- was much greater than originally anticipated.

"Intel has set a high bar for tech earnings," said Canaccord Genuity analyst Bobby Burleson. "There was concern about Q4 ... and the number is better than the Street expected."

"The question really is, what's the mix of business? And the margin's good, which seems to hint at a better mix, and maybe a little more business on the data center and server side."

The world's largest chipmaker forecast revenue of $11.0 billion to $11.8 billion in the final three months of 2010, in line with analysts' expectations of $11.32 billion, according to Thomson Reuters I/B/E/S. (For a graphic on Intel earnings, click: link.reuters.com/byj28p)

"We'll see the consumer market growing but likely a little less than you'd normally expect. I attribute that to consumers pulling back a little bit based on economic uncertainty," Intel Chief Financial Officer Stacy Smith told Reuters.

LITTLE NUMBERS DRAMA

Shares of Intel rose to $20 in extended trading after closing 1.07 percent higher at $19.77 on Nasdaq.

Its third-quarter net profit was $2.955 billion, or 52 cents a share, versus $1.86 billion in the year-ago quarter. That was slightly higher than the 50 cents per share expected by analysts.

Revenue in the quarter ended September 25 was $11.1 billion, slightly above the $10.99 billion expected.

Since Intel warned in August about weak consumer demand for personal computers, semiconductor stocks have surged in part on expectations that the worst may be over for the technology sector, and investors are looking for signs of strength to back their bets -- or sell.

Longer term, Wall Street remains concerned about the threat to Intel, whose microprocessor brains drive eight out of 10 of the world's personal computers, from the fast-growing tablet segment popularized by Apple's iPad.

"Consumers will have a limited amount of discretionary income and some will choose to purchase a tablet instead of upgrading an existing PC or purchasing a netbook in any given period," Otellini conceded on the conference call.

The Fed officials who gathered on September 21 focused both on the possibility of buying more longer-term U.S. government debt to drive borrowing costs lower and ways to nudge the public into expecting higher levels of inflation in the future to spur spending, the central bank said on Tuesday.

Policy-makers had a "sense that (more) accommodation may be appropriate before long," minutes of the meeting said.

The U.S. central bank's policy committee released its members' views as international debate intensified over how the Fed's easy monetary policy was driving down the dollar and in turn boosting the currencies of many emerging economies.

To help shift inflation expectations, policy-makers debated providing more detail on what rates of inflation they would prefer and discussed showing a willingness to tolerate even higher inflation temporarily, a policy approach known as price-level targeting.

They also considered the possibility of targeting a path for GDP growth.

The news helped U.S. stocks trim losses, with major indexes ending the day just in positive territory. The dollar was up against the euro for much of the day but lost ground after the minutes were released.

The Fed has kept overnight rates near zero since December 2008 and has bought about $1.7 trillion in bonds to lower other borrowing costs to help the economy recover from the worst recession since the 1930s.

The minutes bolstered expectations the Fed will move to drive down rates further by restarting purchases of Treasury debt as soon as its next meeting on November 2-3. However, they provided no details about the scope of potential purchases.

"The Fed will buy Treasury securities, but in what amount, for how long or until what economic goal is met is unclear," said Paul Ashworth, an economist for Capital Economics in Toronto.

TAILORING THE MESSAGE

The minutes showed the Fed grappling for fresh ways to spur the economy. If the central bank were able to foster higher expectations of future inflation, businesses and consumers may not want to postpone purchases, thereby providing an immediate boost to the economy.

After their September 21 meeting, policymakers said they stood ready to provide more support if needed to keep the recovery on track and raise inflation from undesirably low levels.

Over the past 12 months, the core Consumer Price Index has risen just 0.9 percent. Fed officials would like to see that north of 1.5 percent.

"Many members considered the recent and anticipated progress toward meeting the committee's mandate of maximum employment and price stability to be unsatisfactory," the minutes said.

Policy-makers had a "sense that (more) accommodation may be appropriate before long," the central bank said on Tuesday.

In minutes of the its last policy-setting session held September 21, the Fed said officials discussed several approaches to aiding the economy but focused on buying additional longer-term Treasury securities and ways to nudge the public into expecting higher levels of inflation in the future.

On Wall Street, stocks trimmed their losses, with both the Dow Jones industrial average .DJI and the Standard & Poor's 500 Index .SPX briefly turning higher after the FOMC's minutes came out.

To help shift inflation expectations, policy-makers debated providing more detailed information about what rates of inflation they would prefer, or the possibility of making clear they would tolerate a higher level of inflation on a temporary basis, a policy approach known as price-level targeting.

They also discussed the possibility of targeting a path for GDP growth.

The Fed has kept overnight interest rates near zero since December 2008 and has bought about $1.7 trillion in mortgage-linked securities and longer-term government debt to lower other borrowing costs to help the economy recover from the worst recession since the 1930s.

As the recovery showed signs of fading over the summer, sapped by the drying up of government stimulus measures and the shock of a sovereign debt crisis in Europe, Fed officials said they would consider additional stimulus measures to support the sluggish economy.

The September meeting's minutes showed a number of Fed officials were close to pulling the trigger.

"Many members considered the recent and anticipated progress toward meeting the committee's mandate of maximum employment and price stability to be unsatisfactory," the Fed said.

Several officials felt that unless conditions improved, they would consider it appropriate to take action soon in hopes of spurring a stronger recovery.

(Reporting by Mark Felsenthal and Jason Lange; Editing by Jan Paschal)