Business Blog Posts

The common currency, last at $1.3330, raced to a high of $1.3383 on Thursday after the European Central Bank caught markets off guard by hinting it could lift interest rates to contain inflation, even while the bloc was tackling a debt crisis.

The hawkish comments followed interest rate hikes in Thailand and South Korea this week as policymakers grow increasingly worried about inflationary pressure.

"The signals from the ECB also reinforce our view that it will hike before the Fed does," said Ken Wattret, BNP Paribas chief eurogroup market economist.

"As relatively little in the way of rate hikes has been priced in for this year, the market is likely to continue to shift in the direction of early tightening, absent a resurgence in market volatility."

The euro's rise marked an impressive turnaround from a four-month low around $1.2871 on Monday and set the scene for a retest of the December high of $1.3500. It is up about 3.5 percent this week, the biggest weekly rise since May 2009.

Well-received bond sales from highly indebted euro zone members Portugal and Spain this week and speculation that European policymakers will boost their war chest against attacks on euro zone sovereign debt all contributed to the currency's better tone.

Gains in the euro saw the dollar index .DXY, which tracks the greenback's performance against a basket of major currencies, retreat to below 80.000 from this week's high of 81.313.

But Tsutomu Soma, manager of foreign securities at Okasan Securities, said the euro's rise was nothing more than short-covering from overselling late last year on excessively bearish view on the euro zone.

"Given that the fiscal problems in the region are unresolved, investors will be cautious about chasing the currency higher."

STOCKS SUBDUED

Meanwhile, Asian shares were generally softer as investors took profits on recent sharp gains and as a pullback in oil and metals prices hit stocks of resource companies.

Japan's Nikkei average .N225 slipped 0.3 percent, a day after hitting an eight-month high, while stocks elsewhere in Asia .MIAPJ0000PUS edged down 0.1 percent.

South Korea's KOSPI .KS11 was flat, Australia's S&P/ASX 200 index .AXJO lost 0.2 percent and Hong Kong's Hang Seng index .HSI was 0.1 percent lower.

POSCO (005490.KS) fell more than 1 percent after the world's No.3 steelmaker disappointed investors with its fourth quarter earnings and warned it was struggling to pass on higher costs of raw materials.

Shares in the world's largest chipmaker, whose net profit surged 48 percent year on year, gained 2.4 percent, driven by hopes for strong sales of its Sandy Bridge microprocessors, its newest and most advanced line.

"The expectation was there might be a miss. There is a lot of concern over smartphones and tablets, but that will take a backseat in the meantime," said Mahesh Sanganeria, an analyst at RBC Capital Markets.

Despite an apparent early success with Sandy Bridge, Intel faces sluggish personal computer sales and a major challenge from the exploding popularity of mobile devices, a market dominated by Britain's ARM Holdings.

Intel's processors are the brains in 80 percent of the world's PCs but the company has yet to make its mark in mobile gadgets that people increasingly depend on to surf the Web and update their social networking profiles.

"Right now there's just a larger overhang over the stock when it comes to tablets and smartphones. That may be an area where investors are more cautious," said Patrick Wang, an analyst at Wedbush Securities.

But for the shorter term, many investors are betting on a bump in revenue growth from the chip giant's newest product line, considered one of its most important advances in computer processing power. Intel unveiled its Sandy Bridge microchip last week.

"It seems to be getting widespread acceptance from the customers. Even with the consumer market being a little bit weak we expect it to ramp sales nicely in Q1," Chief Financial Officer Stacy Smith told Reuters.

BY THE NUMBERS

Shares of Applied Materials, KLA Tencor, Novellus and other producers of chipmaking equipment rallied between 4 and 6 percent after Intel executives said they were almost doubling capital spending in 2011 to $9 billion, plus or minus $300 million.

Intel is building a new fabrication plant in Oregon and upgrading several existing factories to manufacture its next-generation 22-nanometer microprocessors.

Intel stock rose 2.4 percent in after-hours trading, after closing down 0.06 percent at $21.81 on Nasdaq.

Intel posted an 8 percent increase in fourth-quarter revenue and forecast revenue of $11.1 billion to $11.9 billion in the first three months of 2011.

The fourth-quarter revenue slightly exceeded the $11.37 billion expected by analysts, according to Thomson Reuters I/B/E/S. Analysts, on average, had expected revenue of $10.73 billion in the first three months of 2011.

Intel had a record gross margin of 67.5 percent in the fourth quarter, compared to 66.7 percent expected by analysts.

Shares in the world's largest chipmaker gained 2.7 percent after its forecast for first-quarter revenue and gross margin surpassed expectations, driven by hopes for strong sales of its cutting-edge Sandy Bridge microprocessors.

"The expectation was there might be a miss. There is a lot of concern over smartphones and tablets, but that will take a backseat in the meantime," said Mahesh Sanganeria, an analyst at RBC Capital Markets.

Despite an apparent early success with Sandy Bridge, Intel faces sluggish personal computer sales and a major challenge from the exploding popularity of mobile devices, a market dominated by Britain's ARM Holdings.

Intel's processors are the brains in 80 percent of the world's PCs but the company has yet to make its mark in mobile gadgets that people increasingly depend on to surf the Web and update their social networking profiles.

"Right now there's just a larger overhang over the stock when it comes to tablets and smartphones. That may be an area where investors are more cautious," said Patrick Wang, an analyst at Wedbush Securities.

But for the shorter term, many investors are betting on a bump in revenue growth from the chip giant's newest product line, considered one of the most important advances in computer processing power. Intel unveiled its Sandy Bridge microchip last week.

"It seems to be getting widespread acceptance from the customers. Even with the consumer market being a little bit weak we expect it to ramp sales nicely in Q1," Chief Financial Officer Stacy Smith told Reuters.

BY THE NUMBERS

Intel posted an 8 percent increase in fourth-quarter revenue and forecast revenue of $11.1 billion to $11.9 billion in the first three months of 2011.

The fourth-quarter revenue slightly exceeded the $11.37 billion expected by analysts, according to Thomson Reuters I/B/E/S. Analysts, on average, had expected revenue of $10.73 billion in the first three months of 2011.

Intel had a record gross margin of 67.5 percent in the fourth quarter, compared to 66.7 percent expected by analysts.

It forecast a gross margin of 64 percent in the current quarter, plus or minus two percentage points. Analysts had forecast a first-quarter gross margin of 63.5 percent.

Intel said net income totaled $3.4 billion, or 59 cents a share, in the fourth quarter, compared with 53 cents per share expected by analysts.

Major technology companies are expected to keep up sales and profit growth in 2011, but economic troubles in the United States and Europe could temper their results.

Shares of Intel rose 2.7 percent in after-hours trading, after closing down 0.06 percent at $21.29 on Nasdaq.

(Additional reporting by Alexei Oreskovic, Liana B. Baker, Yinka Adegoke and Caroline Valetkevitch; Editing by Edwin Chan and Richard Chang)

JPMorgan Chief Executive Jamie Dimon was among the executives attending the meeting. Dimon entered the building of law firm Davis Polk & Wardwell LLP just after 9:30 a.m. EST (1430 GMT) in New York. Asked how the meeting went as he left, Dimon laughed and said: "How'd what go?"

Morgan Stanley CEO James Gorman left the building shortly after Dimon's arrival. The bankers on Gorman's team were carrying thick blue folders adorned with the U.S. flag. One of Gorman's colleagues carried a bag full of folders.

Gorman also declined to comment.

Bank of America Corp's Brian Moynihan also came to the so-called "bakeoff," arriving just before 11 a.m. EST.

Security was tight, with guards keeping a close eye on all of the building's entrances and trying to block reporters and passers-by from seeing executives as they came and went.

Bankers are expected to come and go throughout the day to make their case for managing a share sale that could exceed $20 billion, between the shares sold by the U.S. Treasury and those offered directly by AIG.

After a recapitalization deal closes on Friday, the Treasury will own 92.1 percent of AIG. The government rescued AIG from the brink of failure in September 2008 in a bailout that topped $182 billion.

Sources told Reuters on Wednesday that bankers were expected to pitch a fee structure of 75 basis points or less -- low for a secondary offering, but still worth perhaps $150 million in fees to the winning banks if the share sale reaches $20 billion.

Sources have said the first share sale is most likely to take place after mid-May, once AIG has filed its quarterly report for the first quarter with securities regulators. There is the possibility, however, that the sale could happen as soon as March if conditions were right.

AIG shares were trading 34 cents higher at $58.74 on Thursday morning on the New York Stock Exchange.

The shares are expected to drop sharply next week, into the mid-$40 range, when recently approved stock warrants begin trading. The warrants, entitling holders to 75 million AIG common shares, were the final key step in the recap deal.

(Reporting by Ben Berkowitz. Editing by Robert MacMillan and Matthew Lewis)

The number of Americans filing for first-time unemployment benefits rose to 445,000 from an upwardly revised reading of 410,000 in the prior week, the Labor Department said on Thursday. It was the biggest one-week jump in about six months, confounding analyst forecasts for a small drop to 405,000.

A Labor Department official noted the rebound occurred following the holidays, which may have hindered reporting of new claims and created a backlog.

Continuing claims retreated sharply to 3.88 million from 4.13 million, a potentially encouraging sign. However, the total number of Americans on benefit rolls, including extended benefits under emergency government programs, jumped to 9.19 million from 8.77 million.

The four-week moving average of new claims, which strips out short-term volatility in the data, rose by 5,500 to 416,500.

The U.S. economy has been expanding since the summer of 2009, but the pace of growth has not been sufficient to put a significant dent in the unemployment rate, which remains at an elevated 9.4 percent.