Archive for January, 2011

Stock index futures mixed; Egypt in focus

Monday, January 31st, 2011 | Finance News

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(Reuters) – Stock index futures were mixed on Monday, with investors in a cautious mood due to the Egyptian political upheaval. Investors are worried about the possibility the unrest could spread to other Arab nations, which could drive up oil prices and potentially dampen growth prospects.

At 1018 GMT, futures for the S&P 500 were up 0.1 percent, Dow Jones futures were down 0.3 percent and Nasdaq futures were flat.

Brent crude closed in on $100 a barrel on Monday on the Egyptian unrest.

Corporate earnings will again be a focus for the market. Exxon Mobil Corp's, will release fourth-quarter earnings, with profits expected to rise more than 30 percent.

Other companies due to report fourth-quarter earnings include Anadarko Petroleum Corp., Gannett, Illinois Tool Works Inc. and Eastman Chemical Company.

On the macro economic front, the focus will be on the Institute for Supply Management-New York release of the January index of regional business activity at 1330 GMT, while the Chicago PMI for January is due out at 1445 GMT.

In M&A, Comcast Corp has completed its takeover of NBC Universal, creating a $30 billion media giant that controls how television shows and movies are delivered to people's homes not just how they are made.

The U.S. Justice Department's review of Google Inc's planned acquisition of airline ticketing software company ITA Software is focusing on making sure ITA's products remain available, even to Google's rivals.

Citigroup Inc is open to holding back some toxic assets in a bid to get the most value from the sale of its consumer finance business, CitiFinancial.

French media-to-aerospace conglomerate Lagardere said on Monday it would sell its international magazines to U.S.-based Hearst Corp for 651 million euros ($886.7 million) in cash.

Alpha Natural Resources said on Saturday it agreed to a $7.1 billion deal to buy Massey Energy Co, which was rocked by a deadly coal mining accident last year.

CNOOC Ltd will pay $1.3 billion in its second shale deal with America's Chesapeake Energy Corp, the latest move by China's top offshore oil producer in its aggressive drive for overseas acquisitions.

Bookseller Borders Group will conserve cash by delaying its January payments to vendors and landlords as it tries to complete a debt restructuring, the company said on Sunday.

The Wall Street Journal said, citing people familiar with the matter, the founder of U.S. hedge fund firm Barai Capital Management has been drawn into the government's insider trading probe that involves "expert network" firms.

European shares fell 0.4 percent on the Egyptian turmoil, with travel stocks among the worst performers.

Stocks suffered their biggest one-day loss in nearly six months on Friday as investors to fled risky assets following the anti-government rioting in Egypt.

The Dow Jones industrial average ended down 1.4 percent, the Standard & Poor's 500 Index was down 1.8 percent and the Nasdaq Composite Index fell 2.5 percent.

(Reporting by Joanne Frearson. Editing by Jane Merriman)

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Oil price nears $100 on Egypt crisis

Monday, January 31st, 2011 | Finance News

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LONDON (AFP) – World oil prices rose to within a whisker of $100 a barrel Monday on fears that violent unrest in Egypt could disrupt the flow of oil through the Suez Canal on its way to the West, analysts said.

Brent North Sea crude for delivery in March struck $99.97 a barrel in Asian deals. Crude last hit $100 dollars in October, 2008.

In later London trade, it pulled back to stand at $99.20, down 22 cents compared with the close on Friday.

New York's main contract, light sweet crude for March, was up 76 cents at $90.10 a barrel.

"The rising prices reflect continued tension in Egypt and the possibility that there would be (supply) constraints through the Suez Canal," said Ben Westmore, minerals and energy economist for National Australia Bank.

Tom Bentz of BNP Paribas said that about one million barrels of oil pass each day through the Suez Canal, a key transit route for shipments from the Persian Gulf region.

"There is some nervousness about supplies and that could affect Europe more than the US," he said.

On Sunday, Egypt's embattled President Hosni Mubarak tasked his new prime minister with ramming through democratic reforms as thousands of protesters in central Cairo defied a military curfew to demand the veteran leader's ouster.

His instructions to Prime Minister Ahmed Shafiq were read out on state television but had no discernible effect on protesters who vowed to continue their demonstrations until Mubarak stepped down.

Mubarak, who sacked his cabinet on Friday after a nationwide revolt, also said the new prime minister's priority was restricting unemployment and creating new jobs.

Investors are concerned that similar demonstrations -- which have also touched Tunisia, Yemen and Jordan -- could spread elsewhere in the oil-rich Middle East.

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India approves long-delayed $12 billion POSCO steel mill

Monday, January 31st, 2011 | Finance News

NEW DELHI (Reuters) – India's environment ministry approved on Monday South Korean POSCO's plans for a $12 billion steel mill, a boost for the foreign investment climate in Asia's third-largest economy after several setbacks for big ticket industrial projects.

The long-delayed clearance for India's biggest foreign direct investment (FDI) follows a year in which Environment Minister Jairam Ramesh has blocked several projects, raising criticism he was jeopardizing India's growth story.

India, one of the world's fastest growing major economies, needs foreign capital to boost infrastructure and allow its economy to grow at near double digits. But projects have met with protests from largely poor farmers in this densely populated country.

"It's very good news that this issue has now been settled," said Taina Erajuuri, Helsinki-based portfolio manager at FIM India, which owns about $150 million worth of Indian shares.

"India, unlike China, is a very difficult country for foreign companies to get approvals, specially environmental approvals. Many foreign companies want to come to India but the country is very bureaucratic, to put it mildly."

The mill in eastern Orissa state has been delayed by criticism it would ruin lives of thousands of poverty-stricken people, who say the plant will disrupt their betel leaf plantations and forest-based livelihoods.

"Undoubtedly projects such as that of POSCO have considerable economic, technological and strategic significance for the country," the environment ministry said. "At the same time, laws on environment and forests must be implemented seriously."

The ministry attached a series of additional conditions for POSCO, but analysts said they were not major obstacles. A government panel had earlier said there were no ecological concerns over the plant.

POSCO is among several corporations, including Vedanta Resources, which have come under scrutiny from Ramesh, putting his ministry in conflict with others in the government who are pushing for rapid industrialization.

A series of corruption scandals has shaken the government of Prime Minister Manmohan Singh and a recent minor cabinet reshuffle saw several ministers' portfolios change, but Ramesh stayed on as environment minister, indicating his influence.

The ruling Congress party head, Sonia Gandhi, is keen to win over farmers hit by big projects at well as ensuring industrial jobs are created -- a fine line that may have helped create regulatory uncertainty before state elections this year and a general election in 2014.

REGULATORY UNCERTAINTY

While investors tend to shrug off corruption scandals as a risk of emerging markets, regulatory uncertainty threatens to taint India's attractiveness as a destination for foreign firms eager for a slice of its booming $1.3 trillion economy. And the approval granted to POSCO is unlikely to change sentiment.

"I don't think there will be a rush of investments or environmental clearances after this (approval), it should still continue to be a slow process," said Andrew Holland, chief executive for equities at Ambit Capital in Mumbai.

FDI in India fell 27 percent to about $14 billion in the current fiscal year through November, dragged down in part by delays in big investments. The central bank has also raised concern about the regulatory environment.

China, whose economy is almost four times bigger than India's but which Delhi regards as its regional rival, drew a record $105.7 billion in FDI in 2010.

In October, Ramesh threw out plans by London-listed Vedanta to expand its alumina refinery over worries it would destroy a hill considered scared by tribal peoples.

But this month, he said he was willing to conditionally reconsider Vedanta's expansion plan, and the ministry also said it could consider approving Hindustan Construction Co's ambitious Lavasa project, a $31 billion town proposed to be built in a forested area near the city of Pune.

A back-and-forth on whether to ban iron ore exports in the Karnataka state has also worried investors. ArcelorMittal, the world's top steel maker, has also faced years of delays in building several plants in India.

Approval for the POSCO mill would see the Orissa government immediately starting to acquire land for the world's third-largest steelmaker's project.

"The decision will help us proceed with the stalled project, as it will allow us to resume land acquisition among other things," said a POSCO spokesman in Seoul.

POSCO still faces a series of hurdles that could delay the project, such as a court case filed by a local firm against the Orissa government, contesting its decision to grant a mining concession to the South Koreans.

India, which has not yet been able to exploit its potential as a natural resources-rich country, is keen to boost its trade and political ties with South Korea while Seoul looks to tap into the $150 billion Indian nuclear power market.

Direct investors -- companies building factories or power plants or buying local firms -- often have less flexibility and more to lose than fund investors and are especially sensitive to regulatory uncertainty.

Leading global companies such as Wal-Mart Stores, Vodafone and POSCO have been frustrated for years in their efforts to negotiate regulations in a promising but perilous market, and FDI has suffered.

(Additional reporting by Krittivas Mukherjee in NEW DELHI, Sumeet Chatterjee and Prashant Mehra in MUMBAI and Miyoung Kim in SEOUL; writing by Paul de Bendern; Editing by Alistair Scrutton and Miral Fahmy)

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