Archive for January, 2010

European stocks steady as US heads for solid open (AP)

Monday, January 25th, 2010 | Finance News

LONDON – European stock markets traded in a narrow range Monday as expectations of a rebound on Wall Street helped limit ongoing fallout from President Barack Obama's plan to curb bank risk-taking.

The FTSE 100 index of leading 100 shares was up 16.60 points, or 0.3 percent, at 5,319.59 while Germany's DAX fell 14.34 points, or 0.3 percent, to 5,680.98. The CAC-40 in France was 7.54 points, or 0.2 percent, lower at 3,813.24.

Wall Street was poised to recoup some of Friday's big losses — Dow futures rose 78 points, or 0.8 percent, at 10,229 while the broader Standard & Poor's 500 futures rose 9.2 points, or 0.8 percent, at 1,100.20.

Stocks have been on the retreat since last Wednesday, when Obama announced his intention to limit the size of U.S. banks and imposing restrictions on their more risky trading activities.

In essence, his proposals may mean the break-up of some of the U.S. banks but the details need to be ironed out between the White House and lawmakers in Congress — at a time when the economic recovery is far from assured and Obama's Democrats face a rejuvenated Republican Party in midterm elections later in the year.

"The uncertainty surrounding the detail of the reforms is making the markets extremely nervous," said Robert Pike, a trader at Spreadex.

There's now growing talk in the markets that the President's plan may have brought an end to the ten-month bull run in equities, which has seen most of the world's main indexes recover all their losses since the collapse of Lehman Brothers in September 2008.

A mixed start to the fourth-quarter U.S. corporate earnings season and apparently rising opposition to U.S. Federal Reserve Chairman Ben Bernanke's reappointment are also weighing on sentiment.

A raft of economic news this week is also likely to keep investors on edge. While Bernanke awaits a Senate vote, he will be sitting down with his colleagues on the Federal Open Market Committee on Tuesday and Wednesday to assess the latest batch of information surrounding the U.S. economy.

Though the Fed is expected to keep its benchmark interest rate unchanged at a range between zero and 0.25 percent, investors will be particularly interested to see the accompanying statement and especially if there's continued support for keeping borrowing costs "exceptionally low and for an extended period."

Neil Mackinnon, global macro strategist at VTB Capital, thinks that in the absence of any deterioration in inflation expectations, "there is no need for the Fed to signal an early policy change to the markets especially when markets are currently unsettled."

It's also a busy week in Europe — Tuesday could be particularly important with figures set to confirm that Britain finally emerged from recession in the fourth quarter of 2009. The monthly business confidence survey from the well-respected Ifo Institute will also be closely monitored given a mixed batch of European economic data recently.

The inconsistency of recent data was underlined by figures earlier from the EU's statistics office, Eurostat, that industrial orders in the 16 countries that use the euro rebounded by a sharper than expected 2.7 percent in November from the previous month.

Analysts said interest rate decisions from the central banks of India, Brazil, Hungary and New Zealand could also impact on market sentiment, while fears of contagion from Greece's debt troubles are unlikely to go away.

In Asia, investors already on edge about China's economy and moves to prevent its overheating were further unnerved after Bank of China said it would seek to raise billions of dollars by issuing new equity and bonds. The move, designed to help the country's third-biggest lender to replenish its capital and meet government standards, added to concerns about banks after a flood of lending to prop up the economy.

Clive McDonnell, head of Asia strategy at BNP Paribas Securities, said the markets could trade lower for now unless Chinese policymakers expressed new confidence in the country's growth or the U.S. clarified its banking proposal to calm investors. Still, he expected markets to bounce back.

"Sentiment is fairly poor at the moment," said McDonnell, who is based in Singapore. "But I don't see any of the fundamentals have changed whatsoever and I don't think (stock) valuations are overly expensive. In our view, the markets are going to remain strong in 2010."

Earlier in Asia, Japan's Nikkei 225 stock average fell 77.86 points, or 0.7 percent, to 10,512.69, and Hong Kong's Hang Seng fell 127.63 points, or 0.6 percent, to 20,598.55.

Elsewhere, South Korea's market dropped 14.15 points, or 0.8 percent, to 1,670.20. China's Shanghai index lost 1.1 percent, Australia's market was down 0.7 percent.

Oil prices lingered below $75 a barrel, with benchmark crude for March delivery down 7 cents to $74.47 a barrel. The contract lost $1.54 to settle at $74.54 on Friday.

The dollar was down 0.1 percent at 90.24 yen while the euro was up 0.2 percent at $1.4193.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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Owners: $5.4B NY housing complexes go to creditors (AP)

Monday, January 25th, 2010 | Finance News

NEW YORK – The financially troubled owners of two massive apartment complexes that sold for a record $5.4 billion a few years ago said Monday they're turning them over to their creditors.

The joint venture ownership team led by Tishman Speyer Properties and BlackRock Realty, hurt by the real estate market collapse, couldn't make a multimillion-dollar loan payment earlier this month for the Stuyvesant Town and Peter Cooper Village apartments in Manhattan.

Over the last few days it became clear the only viable alternative to bankruptcy would be to transfer to lenders control and operation of the 110 buildings and 11,000 apartments overlooking the East River, partnership spokesman Bud Perrone said.

"We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city," Perrone said in an e-mailed statement.

The group bought the complexes, which have about 25,000 tenants, in 2006 at the height of the real estate bubble in the nation's largest residential real estate deal.

The record purchase price seemed outrageous to many real estate analysts, but the partnership believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar.

But the tactic was a bust as the city's housing market cooled considerably. Ratings firms estimated the value of the 80-acre area had fallen to as little as $2 billion — far less than the outstanding loan balance.

Apartment conversions happened much slower than expected, tenants fought back and a state court ruled that about $200 million in the partnership's new rent increases was improper.

The group, which used a $3 billion mortgage and a $1.4 billion secondary loan to buy the properties, had been trying to restructure its debt. It couldn't make a $16 million loan payment due Jan. 8.

Analysts had been expecting the ownership group to default on its loan for several months.

It hasn't been determined when the ownership transfer of the sister properties will take place and who specifically the new owners will be, Perrone said.

Tishman Speyer, whose other properties include Rockefeller Center and the Chrysler Building, said it wouldn't consider a long-term management contract to continue operating the apartment complexes if it didn't involve ownership. It said it was committed to an efficient transition of the properties' operations and would manage them during that transition.

The housing complexes, which are so big they have their own newspaper, were built by Metropolitan Life in the 1940s for returning World War II veterans. MetLife Inc. decided to sell them in 2005, when real estate prices were soaring.

Tenants launched their own bid to take over the 11,227 units, three out of four of which were rent-stabilized and priced far below the market rate, before MetLife announced it had closed a deal with the partnership led by Tishman Speyer and BlackRock.

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Ericsson to cut 1,500 more jobs as profit plunges (AP)

Monday, January 25th, 2010 | Finance News

STOCKHOLM – Wireless equipment maker LM Ericsson AB on Monday said it will cut another 1,500 jobs this year after reporting a 92 percent drop in fourth-quarter profit as mobile operators slashed spending.

Ericsson said net profit in the October-December period was 314 million kronor ($43.4 million), down from 3.9 billion kronor in the same three months 2008, while full year profits dropped 67 percent to 3.7 billion kronor ($512 million).

Quarterly sales fell by 13 percent to 58.3 billion kronor ($8.1 billion), from 67 billion a year earlier. Sales for 2009 fell by 1 percent to 206.5 billion kronor ($28.6) from 208.9 billion kronor.

The company, based in Stockholm, raised the target for its savings program to 15-16 billion kronor ($2.1-2.2 billion) in annual savings from 10 billion kronor before. It said the expansion of the savings program will increase total layoffs to 6,500 from the 5,000 previously planned.

The scheme, which was launched a year ago, is expected to be completed in the second quarter of 2010 at a cost of 13-14 billion kronor ($1.8-1.9 billion).

Network sales were hit by reduced operator spending in several markets, but Ericsson managed to maintain market share, the company's new CEO, Hans Vestberg, said in a statement.

Vestberg said the downturn in investments coincided with an anticipated decline in sales related to the GSM cellular standard, as telecommunication operators shifted their focus from voice telephony to mobile broadband.

Vestberg replaced Carl-Henric Svanberg as Ericsson's president and CEO on Jan. 1 as Svanberg took over as chairman of oil major BP Group PLC.

Greger Johansson, an analyst at research firm Redeye, said the result was largely in line with expectations, although in the lower end of forecasts.

"Professional services were weaker than expected and network sales somewhat worse than forecast," he said.

However, he added the expansion of the savings program was positive news.

Shares in Ericsson fell by 3.2 percent to 69.6 kronor ($9.63) in early trading on the Stockholm stock exchange.

Ericsson's handset arm Sony Ericsson — a joint venture with Japan's Sony Corp. — last week said its losses narrowed to euro167 million ($235 million) in the fourth quarter, from euro187 million in the same period 2008.

Ericsson proposed to raise the dividend to shareholders to 2 kronor per share from 1.85 kronor last year.

With more than 80,000 employees worldwide, Ericsson is one of Sweden's biggest companies and has long been a key global supplier of fixed and mobile phone networks. It is increasingly focusing on providing services, like managing the networks of operators.

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On the Net: http://www.ericsson.com

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