Archive for March, 2011

Stock futures flat before jobless claims data

Thursday, March 31st, 2011 | Finance News

NEW YORK (Reuters) – U.S. stock index futures were little changed on Thursday as investors looked ahead to weekly jobless claims data on the final day of the first quarter.

The week has been marked by some of the year's lowest volumes as traders opt to ride recent winners amid global risks. The S&P 500 is up 5.6 percent in the quarter, based on Wednesday's close.

Initial jobless claims, due at 8:30 a.m., are forecast at 380,000, a slight decline from the prior week. Wednesday's reassuring ADP report on private payrolls kept sentiment up for Friday's key government non-farm payrolls report.

David Sokol, the man widely seen as the leading successor to Warren Buffett to head up Berkshire Hathaway (BRKa.N) (BRKb.N), has resigned after buying shares in chemical company Lubrizol Corp (LZ.N) before pushing Buffett to acquire it. Berkshire's Class B shares fell 2.6 percent to $83.25 in premarket trading.

S&P 500 futures fell 0.4 point and were even with fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 8 points and Nasdaq 100 futures slid 0.5 point.

February durable goods and factory orders data will be released after the market opens; factory orders are seen rising by a smaller amount than in the previous month.

Chicago PMI data and the New York ISM number, both for March, will also be released.

Microsoft Corp (MSFT.O) stepped up its rivalry with Google Inc (GOOG.O) on Thursday by filing a formal complaint with the European Commission claiming Google systematically thwarts Internet search competition.

The Macau unit of Las Vegas Sands Corp (LVS.N) said it is being investigated by the Hong Kong Securities and Futures Commission for alleged regulatory breaches, the latest twist in a case that involves allegations of corruption and bribery. Shares of Las Vegas Sands fell 3.7 percent to $41.85 before the bell.

U.S. stocks rose for a second session on Wednesday with activity dominated by some of the strongest-performing groups in the first quarter, including energy and small-cap stocks.

(Editing by Kenneth Barry)

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Japan extra budgets may top $120 billion

Thursday, March 31st, 2011 | Finance News

TOKYO (Reuters) – Japan's government may need to spend over 10 trillion yen ($120 billion) in emergency budgets for post-quake disaster relief and reconstruction, with part of them possibly covered by new taxes, deputy finance minister Mitsuru Sakurai signaled on Thursday.

Sakurai told a news conference he hoped the government could ask the public to help shoulder the burden of reconstruction while a newspaper reported Tokyo was working on legislation that would introduce additional taxes and special bonds to help finance the rebuilding effort.

The Nikkei newspaper also said the bill could pave the way for the Bank of Japan to directly buy government bonds, something it can be allowed to do only under special circumstances.

BOJ Governor Masaaki Shirakawa has repeatedly rejected such an idea floated by some ruling party and opposition lawmakers, saying such a move could unsettle the bond market and undermine investor confidence in the yen. Government ministers have so far denied considering such a plan.

The BOJ's stance remains unchanged, a source familiar with the central bank's thinking said after the Nikkei report.

Japan faces its biggest reconstruction effort since the post-World War Two period after the 9.0 magnitude earthquake and a deadly tsunami hit Japan's northeast on March 11, leaving more than 27,500 dead or missing and triggering the world's worst nuclear crisis in 25 years. The government estimates the material damage alone could top $300 billion, making it by far the world's costliest natural disaster.

Asked how the government will finance extra budgets, Sakurai told a news conference: "When considering the magnitude (of the damage), I don't think it will be something like 10 trillion yen," suggesting the amount will be much higher.

"We also need to take into account the bond market," Sakurai said, suggesting that the government would prefer to limit new borrowing to minimum, concerned about adding much to a debt pile that already exceeds twice the size of the $5 trillion economy.

"If we can ask the public to broadly share the burden, we'd like to do so," he said.

Bond strategists said they were closely watching the debate about the size and financing of extra budgets, but so far the figures suggested by officials and floated in the media were broadly in line with market expectation and did not warrant any sharp reaction.

Analysts also said tax increases would be welcome news for bond investors because they would allow to limit new borrowing to levels that the market could easily digest.

"For example, if the government increases annual bond sale to market by 5 trillion yen it may impact the market with some degree," said Chotaro Morita, head of Japan fixed income strategy research at Barclays Capital. "But I don't think the 10-year JGB yield will jump, say, to 1.5 percent, which we have not see for a while, from the current level of around 1.2 percent."

In the immediate aftermath of the quake, officials were offering assurances that no tax increases were planned to finance that effort. But they later changed tack and Prime Minister Naoto Kan told parliament earlier this week that he would not rule out any source of funding, including a tax increase or dropping a plan to cut corporate tax.

The extra disaster levy could come in the form of an increase in sales, corporate or personal income taxes, Nikkei said without citing any sources. The special bonds would serve to finance rebuilding of roads, sewers and other infrastructure in the worst-hit areas, it said.

The newspaper said on Wednesday, that the first emergency budget worth about 2 trillion yen would be submitted to parliament in April.

Analysts say the government will probably need two more extra budgets, worth 10 trillion yen or more, with some putting the total bill at as much as 20 trillion.

($1 = 82.875 Japanese Yen)

(Additional reporting by Leika Kihara; Editing by Tomasz Janowski)

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Irish bank rescue could cost further $28-35 billion: report

Thursday, March 31st, 2011 | Finance News

DUBLIN (Reuters) – Ireland's stress tests on Thursday will reveal an additional 20-25 billion euro ($28-35 billion) hole in its banks capital and will be followed by a radical restructuring of the sector, the Irish Independent newspaper reported.

The paper, which said only that it had spoken to government sources ahead of the publishing of the tests, said the EBS building society (EBSBS.UL) would be merged into the country's second largest lender AIB (ALBK.I).

The insurance arm of Irish Life (IPM.I) will also be sold and the government will also create special vehicles to take 80 billion euros off the balance sheets of the four main banks, the newspaper said.

The overall figures were roughly in line with analysts' estimates of the scale of the further boost Ireland's banks would need and is still well inside the 35 billion euros set aside for banking losses by Dublin under its international bailout.

The government will publish what is meant to be the final bill for propping up its banks at 1530 GMT (11:30 a.m. ET), in a last-ditch bid to convince investors it can avoid a damaging restructuring that would deepen Europe's debt woes.

Ireland's new government has pledged to outline a "credible" plan for sorting out its financial system on the back of fresh stress tests but its plausibility will rest on any concessions Dublin can win from its paymasters in Brussels and Washington.

A bailout from the European Union and the International Monetary Fund late last year failed to resolve the financial crisis and Dublin's dismal record in calling the end of its banking woes, now in their third year, mean skepticism is high.

"Once more we cross our fingers and hope that this will be the defining moment and we will be able to begin to look beyond the current difficulties," said Austin Hughes, chief economist at KBC Bank.

"The crucial element is that we get a coherent response on this from government and Europe."

ECB MONEY TO COST

Dublin is relying on the European Central Bank (ECB) to give medium-term funding to its banks to help cap the cost of recapitalizing them below the 35 billion euros set aside for the lenders in an 85 billion-euro bailout package.

An announcement on such a facility, revealed to Reuters by a euro zone central banking source last week, may come after the results of the stress tests are published at 1530 GMT in Dublin.

But government sources told the Irish Independent that the funding scheme was subject to last minute talks amid concern that legal difficulties could delay its launch. It said the funding would likely carry a premium over market interest rates and may only be available to solvent banks.

Even with a credible banking bill and funding from the ECB, Ireland's Prime Minister Enda Kenny still needs to persuade European partners to cut the cost of their loans to the euro zone struggler and possibly extend the loans' duration to convince investors Ireland can tackle its debt mountain.

The Irish Independent said Bank of Ireland (BKIR.I), Allied Irish Banks (ALBK.I), Irish Life & Permanent (IPM.I) and EBS Building Society (EBSBS.UL) will need between 20 billion and 25 billion euros in additional capital after the tests.

Six analysts surveyed by Reuters have put a figure of 23 billion euros on the bill.

Anglo Irish bank, which is being wound down at a cost the government says could exceed 30 billion euros, on Thursday announced a loss of 17.7 billion euros for 2010, the largest in Irish corporate history. Its unaudited results had said the loss would be 17.6 billion.

(Editing by Patrick Graham)

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