Archive for April, 2009

World stocks hit 4-month peak (Reuters)

Thursday, April 30th, 2009 | Finance News

HONG KONG (Reuters) –
World stocks scaled a four-month peak on Thursday, powered by solid gains in Asia, as investors took heart from signs of improvement in the U.S. economy suggesting regional exporters may need to start cranking up production.

European shares (.FTEU3) also rose in early trade, gaining more than a percent.

A record drop in U.S. business inventories in the first-quarter and surprisingly robust consumer spending were widely seen by economists as positive pointing to a growth pick-up in the world's largest economy in coming months.

The U.S. Federal Reserve tweaked its policy statement to say that the economic outlook was improving while vowing to keep rates at a historic low for a long stretch.

Safe-haven government bonds slid and higher-yielding currencies tied to risk appetite such as the Australian dollar jumped against the low-yielding yen.

Reports that talks between struggling U.S. automaker Chrysler and the government had broken down and a bankruptcy filing was imminent only briefly dented the jump in riskier assets.

"People were so bearish that the burden of proof to surprise people is relatively low. What you're getting is a joyless rally," said Adrian Mowat, emerging market and Asia equity strategist at JPMorgan Chase in Hong Kong.

"As earnings expectations are revised up with economic activity, the market goes up with that," he said.

Data in Japan showing industrial production grew twice as much as expected in March thanks to strong Chinese demand for electronics is one of the main factors fuelling the rally in Asian technology shares in the past two months.

The multiple signs of economic activity recovering around the world has stoked expectations that Asian companies and exporters may have cut inventories too quickly and may need to switch gears and start restocking to meet demand.

Investors have also taken in stride the outbreak of swine flu around the world that prompted the World Health Organization on Wednesday to raise its threat level, saying the world is on the brink of a pandemic.

Taiwan's TAIEX index (.TWII) posted its biggest daily gain in 19 years with a 6.7 percent rise on expectations for an influx of Chinese investment after a series of cross-straits talks have led to warmer ties between the two countries.

The MSCI index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) soared more than 4 percent to a six-month high and was up more than 13 percent on the year. The MSCI all-countries world index (.MIWD00000PUS) was up about a percent, mainly driven by the 3.9 percent jump in Japan (.N225)

RESTOCKING TO HELP

The rise came as the forward 12-month price-to-earnings ratio for the benchmark Asian index touched 13.99, the highest since January 2008 and up sharply from a low of 7.87 touched in November when the regional index hit a five-year low, according to data from Thomson Reuters I/B/E/S.

But JPMorgan's Mowat said the forward P/Es tend to look high at low points, and that by their study the Asia market has only been cheaper 5 percent of the time going back to the early 1990s.

Tim Rocks, Asia equity strategist at Macquarie Securities in Hong Kong, said in a report this week that the largest inventory restocking cycle in living memory is under way,

Rocks said that historically Asia benefits from production bounces tied to inventory restocking, with sectors like technology benefiting the most.

Since the beginning of March when the MSCI Asia benchmark bottomed out, the tech sector has been one of the biggest winners with a surge of 41 percent.

South Korean industrial production also beat expectations in March with a 4.8 percent increase, showing that factories across the region are boosting activity.

The solid gains in Asian equity markets outpaced the 2.2 percent rise in the U.S. S&P 500 index (.SPX) on Wednesday, while S&P futures were up about a percent and pointing to a positive start when U.S. markets open later in the day.

Thursday marks the last day of the week for many markets around the world observing May 1 holidays. In Asia, markets in South Korea, Taiwan, Hong Kong and Singapore among others will be closed on Friday.

Japanese markets will be open on Friday but then close Monday through Wednesday for the rest of the country's Golden Week break.

DOLLAR DOWN, AUSSIE JUMPS, KIWI RECOVERS

The dollar slid as investors shifted funds into higher-yielding currencies and riskier assets. The dollar shed 0.75 percent to 84.010 (.DXY), while the euro climbed 0.9 percent to 41.3370.

Gold and oil prices both edged up.

The Australian dollar was up 1.6 percent at $0.7353, adding to hefty gains scored the previous day as market players chased the relatively higher-yielding currency on the rally in equities.

Even the New Zealand dollar bounced back from an initial slide after the country's central bank cut interest rates by half a point to a record low of 2.5 percent, as expected, and pledge to keep rates low for a while.

The kiwi was little changed at $0.5730 after tumbling more than 1 percent earlier The rate cut and remarks drove the two-year New Zealand swap rate down about 20 basis points.

(Editing by Mathew Veedon)

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Ericsson first-quarter overshoots (Reuters)

Wednesday, April 29th, 2009 | Finance News

STOCKHOLM (Reuters) –
Telecom gear maker Ericsson (ERICb.ST) posted a smaller-than-expected fall in first-quarter net profit on Thursday and said the effect of the global downturn on the mobile network market remained limited.

The world's top mobile equipment maker reported quarterly net earnings of 1.8 billion Swedish crowns ($222.8 million) against a mean forecast of 1.5 billion in a Reuters poll and 2.6 billion in the same quarter in 2008.

Ericsson said the 30 percent fall in net income was due mainly to a pretax loss of 370 million euros at mobile phone joint venture Sony Ericsson (6758.T).

The firm said network infrastructure sales were stable and the market for professional services was growing.

"The effects of the global economic recession on the global mobile network market are so far limited," Chief Executive Carl-Henric Svanberg said in a statement.

He said dramatic currency moves had prompted operators in some markets to put off investments.

"Some operators are also more cautious with longer-term investments in fixed networks, such as rollout of fiber networks. Most operators, however, have healthy financial positions, there is a strong traffic growth and the networks are fairly loaded," Svanberg said.

Ericsson's relative optimism contrasts with its rivals.

Earlier this month, rival Nokia Siemens Networks (NSN.UL) posted its first ever quarterly loss and forecast the global market for telecoms infrastructure and related services would fall some 10 percent in 2009 in euro terms.

($1=8.078 Swedish Crown)

(Editing by Jon Loades-Carter)

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Visa second quarter earnings beat estimates (Reuters)

Wednesday, April 29th, 2009 | Finance News

NEW YORK (Reuters) –
Visa Inc (V.N) posted better-than-expected quarterly earnings on Wednesday as the world's largest credit card network increased prices, slashed expenses and consumers used debit cards more.

Net income rose 70 percent to $536 million, or 71 cents per diluted class A share, for the second quarter ended March 31, compared with a profit of $314 million, or 39 cents per diluted share, a year earlier.

On an adjusted basis, reflecting a normalized tax rate, restructuring and purchase amortizations, quarterly net income rose 38 percent to $553 million, or 73 cents per diluted class A common share. On that basis, analysts expected earnings of 64 cents per share, according to Reuters Estimates.

"What caught my attention most was the expense control they had. For instance, advertising falling from $210 million to $196 million. Their ability to cut costs in this environment is surprising," said Ken Crawford, senior portfolio manager at Argent Capital Management.

"It speaks of the flexibility and profitability of card processor companies. MasterCard Inc (MA.N) reports on Friday morning and it sets a stage," Crawford said.

Adjusted operating expenses fell 5 percent to $745 million, as the company cut personnel, advertising and marketing, as well as consulting fees, and administrative costs.

Net operating revenue rose 13 percent to $1.6 billion, while total processed transactions -- which represent transactions processed by VisaNet -- increased 6 percent to 9.4 billion.

Visa said payments volume fell 1 percent for the quarter ended December 31, which translates to revenue in the following quarter.

"The results turned out to be pretty good," said Robert Dodd, an analyst at Morgan, Keenan & Company.

DEBIT OFFSETS IMPACT OF CREDIT CRISIS

Visa is partially insulated from the credit crisis because it processes transactions rather than lends funds. However, the company has seen a slowdown in the growth of revenue and transaction volumes as battered consumers used their credit cards less.

Still, debt-burdened consumers have been increasing the use of their debit cards.

"The continued strength of debit is attributable in part to that product's strong correlation with non-discretionary spend categories, which are holding up relatively well in the face of a tough economy," Chief Financial Officer Byron Pollitt said in a conference call with analysts.

"In fact, in the quarter ending December, for the first time in Visa's history, U.S. debit payment volumes eclipsed that of credit," Pollitt added.

Payments volume fell 7 percent in credit in the United States to $203 billion, while debit volumes grew 5.5 percent to $206 billion.

In addition, Visa said debit grew in the first four months of 2009, while credit shrank.

Visa forecast further pressure on its revenue in the second half of its 2009 fiscal year, which ends in September, hurt by foreign exchange headwinds as the U.S. dollar strengthened in recent months and lower cross-border transactions given the global economic recession.

But the company anticipated a recovery from October helped by more favorable year-over-year gas prices and foreign exchange rates, if the global economy shows signs of improvement.

Visa increased its forecast for its annual adjusted operating margin to the low 50 percent range from a range of the high 40 percent to the low 50 percent range.

NO IMPACT FROM SWINE FLU

The firm said it did not expect a significant impact on its revenue growth from the swine influenza -- which has already killed 159 people in Mexico and is threatening to become a pandemic flu.

The company affirmed its forecast of an annual net revenue growth of high single digits in 2009 and at the lower end of the 11 to 15 percent range in 2010.

Visa also reiterated its annual adjusted diluted class A common stock earnings per share will grow over 20 percent.

Visa shares were slightly lower after closing up 4.6 percent at $63.51 on the New York Stock Exchange. The stock is up 20 percent in 2009.

(Reporting by Juan Lagorio; Editing by Phil Berlowitz and Andre Grenon)

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