Archive for September, 2011

China paper urges Europe get act together on debt crisis

Friday, September 30th, 2011 | Finance News

BEIJING (Reuters) – European countries must act decisively to resolve the euro zone debt crisis or risk having some member states forced out of the single currency, China's top newspaper said in a front page commentary on Saturday.

The call came in the overseas edition of the People's Daily, the official paper of the ruling Communist Party.

While such a piece does not amount to the official government line, it underscores the worries in Beijing about the safety of its investments in the euro zone.

"Europe is standing at a crucial juncture in its history. It must show great wisdom, great boldness and great resolve, and genuinely go into action," the commentary said.

"If it is able to set up a fiscal union, Europe can still turn its luck around. If the decision comes too late, some (euro) members may be forced to pull out."

While that outcome would be painful, it could work if the countries still remained in the European Union, added the commentary, whose author was identified as Qin Hong, an expert on international studies.

"But if Europe keeps dilly-dallying, the situation can only worsen and gather speed. Outsiders who want to help will not dare, and then the euro zone may really disintegrate. Without doubt, this would be a huge disaster for Europe and the world."

China's pile of $3.2 trillion in foreign exchange reserves, the biggest in the world, keeps growing thanks to trade surpluses and capital inflows.

Analysts estimate that China holds about a quarter of its foreign exchange in euro assets, and there are few other places for it to park investments of such a scale.

The government has said it has confidence in the euro and in the EU's efforts to tackle the crisis. But a chorus of voices has revealed anxieties about the security of euro assets.

China remains willing to invest in Europe but wants rich economies to show they are serious about tackling debt, Premier Wen Jiabao said last month, sending the euro zone a mix of reassurance and demands.

There has been debate in the EU about changes to treaties to facilitate deeper fiscal union and better deal with the crisis.

The People's Daily said that with huge differences in the economies of euro member states, especially in the north and south of Europe, this plan would not be easy to implement.

"Leaving aside how enlightened that plan may be, Europe's efforts to put it in place have been too sluggish. A failure to act when they should will certainly cause more trouble, and the euro zone's problems are now getting greater and greater."

(Reporting by Ben Blanchard; Editing by Ron Popeski)

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Alibaba’s Ma: "very interested" in buying Yahoo

Friday, September 30th, 2011 | Finance News

PALO ALTO, California (Reuters) – Jack Ma, the founder and CEO of Chinese e-commerce giant Alibaba, is keen on buying Yahoo Inc if the opportunity presents itself and has held discussions with other potential buyers about options.

Asked whether Alibaba might like to pick up the ailing U.S. Internet company, Ma told an audience at Stanford University that he would be "very interested in Yahoo."

The former English schoolteacher later added that, were he to have his way, he would be eager to acquire all of Yahoo, not just the stake it owns in Alibaba.

"The whole piece of Yahoo," Ma said in answer to a question from the audience about what part of Yahoo he was interested in. "China is already ours, right? It's already in my pocket."

Yahoo shares leaped 5 percent to $13.80 in after-hours trading.

Acquiring Yahoo could help Ma expand his online empire into one of the world's most important Internet markets.

Ma also said he planned to spend the next year in the United States learning more about the country and the market. An Alibaba spokeswoman said Ma would be based in the San Francisco Bay area, but would travel across the country and would continue his operational duties as chairman and CEO of the Alibaba Group.

Ma, who was speaking at the China 2.0 conference at Stanford, said he had not visited Yahoo to discuss a deal since he arrived in the United States 15 days ago.

"We are probably one of the very few companies that really understand Yahoo USA very well," he said, referring to his company's long-running relationship with Yahoo, which dates back to 2005.

That relationship has grown strained in recent years. Ma's attempts to buy back some of Yahoo's roughly 40 percent stake in his company were rebuffed by former Yahoo Chief Executive Carol Bartz, who was fired earlier this month.

Yahoo has received inquiries from multiple parties about "potential options," but the struggling company is expected to take months to decide its future. It has retained Allen & Co to help it conduct a long-term "strategic review.

Private equity firm Silver Lake Partners is among the parties that have been in touch with Allen & Co, according to a source familiar with the matter.

Yahoo's board has also started to look for a permanent CEO, but provided no details on its progress, or whether it hired an executive recruiting firm to oversee the search.

At an all-hands meeting the day after Bartz was fired, Yahoo founder Jerry Yang said the company was not for sale, according to another source familiar with the matter. But analysts are staking good odds that Yahoo could eventually be acquired.

Ma said he couldn't predict when a deal to acquire Yahoo might take place.

"It's more complicated than we thought. And there's so many people interested in that. And we are also talking to them and they are talking to us," he said.

"I cross my fingers, just to say we are very, very interested," Ma said.

(Reporting by Alexei Oreskovic; editing by Andre Grenon, Gary Hill)

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World stocks post worst quarter in 3 years

Friday, September 30th, 2011 | Finance News

NEW YORK (Reuters) – Global stocks closed their worst quarter in nearly three years on Friday on nagging concerns about the world economy and the lack of a credible solution to Europe's debt crisis.

The euro and most commodity prices also fell as investors' search for safety drove up U.S. government bonds and the dollar.

Adding to a string of global data that has crushed growth-related assets in the past three months, China's manufacturing sector contracted for a third straight month in September while German retail sales slid at their sharpest pace in more than four years.

An unexpected rise in euro-zone inflation for September also moderated talk that the European Central Bank would cut interest rates. Still, the euro fell sharply to close its worst quarter against the U.S. dollar since mid 2010.

"The combination of sovereign debt crisis, a slowing economy and really what appears to be ineffective leadership in Europe has led to this decline, and we expect that to continue to play out in the fourth quarter," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

U.S. stocks fell, closing their worst quarter since the collapse of Lehman Brothers in late 2008 with sharp declines.

The MSCI All Country World Index slumped 18 percent for the quarter, with a drop of 2.3 percent on Friday. It lost roughly $5.29 trillion in market capitalization in the quarter, according to Thomson Reuters Datastream.

On Friday, the Dow Jones industrial average dropped 240.60 points, or 2.16 percent, to 10,913.38. The S&P 500 fell 28.98 points, or 2.50 percent, to 1,131.42. The Nasdaq Composite slid 65.36 points, or 2.63 percent, to 2,415.40.

U.S. crude oil prices fell 4.1 percent on Friday, down more than 17 percent in the quarter. Copper, a key industrial metal that is a proxy for growth expectations, was down 25.8 percent over the last three months.

"There is a lot of fear that GDP growth is going to slow down, or it's not going to be as fast as consensus estimates assume," said Adam Krejcik, an analyst at Roth Capital in Newport Beach, California. "Generally speaking, there is a lot of fear out there, just a crisis of confidence."

Mining stocks were among the worst performers, hit by the news of slowing growth in China, the world's second-largest economy and an engine of global growth.

EURO OFF, BONDS FLY AMID THE GLOOM

The euro slipped versus the U.S. dollar and posted its biggest monthly drop in nearly a year, weighed down by the lack of a visible solution to the euro zone's deepening debt troubles.

The single currency fell to a low of $1.3384 and was last at $1.3392, down 1.5 percent for the day. For the month of September, the euro lost 6.6 percent, its weakest performance since November 2010.

In contrast, a gauge of the U.S. dollar against major currencies rose 0.9 percent.

A boost to the euro after Germany's parliament approved new powers for the euro-zone bailout fund proved fleeting after the data on the slump in German retail sales in August.

Leaders in Germany's ruling coalition said they opposed moves to increase states' liabilities to the bailout fund, keeping alive concerns that Europe will not be able to do enough to prevent the crisis from spreading.

The deepening economic gloom has prompted investors to slash bets on risky assets for most of the quarter that ended Friday.

The retreat continued to push safe-haven U.S. Treasury debt prices higher on Friday, with longer-maturity bonds posting their best quarter since the final period of 2008.

U.S. Treasuries held steady at higher price levels after the New York Fed announced the initial schedule for its $400 billion bond program, known as Operation Twist.

The benchmark 10-year note was last up 25/32 in price to yield 1.9172 percent, down from 2.00 percent late on Thursday.

The 30-year bond jumped 3-3/32 in price to yield 2.917 percent, down from 3.06 percent.

(Additional reporting by Karen Brettell, Wanfeng Zhou and Edward Krudy; Editing by Leslie Adler, Jan Paschal and Dan Grebler)

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