President Barack Obama called anew for overhauling the nation’s immigration laws, saying a failure to do so will lead to “misguided” efforts such as legislation passed in Arizona.
“Our failure to act responsibly at the federal level will only open the door to irresponsibility by others,” Obama said at a Rose Garden naturalization ceremony for 24 members of the U.S. military. “That includes, for example, the recent efforts in Arizona.”
The state legislature passed a bill that would make it a state crime to be in the U.S. illegally and require local police to determine the immigration status of anyone an officer suspects of being in the country without proper documentation.
Arizona Governor Jan Brewer, who is running for a new term this year, signed the bill into law at a ceremony attended by several state officials hours after Obama’s comments. Brewer said she expects the measure to face constitutional challenges.
The measure has sparked protests in the state, where Census Bureau figures show about a quarter of the population is of Hispanic descent. It also shares a border with Mexico and has an estimated 460,000 residents living there illegally, the seventh highest total in the country, according to the Department of Homeland Security.
‘Notions of Fairness’
The actions by the Arizona legislature threaten “to undermine basic notions of fairness that we cherish as Americans,” Obama said. It also may hamper trust between residents and law enforcement authorities, he said.
He said he has instructed U.S. authorities to monitor the state’s actions and to “examine the civil rights and other implications” of the legislation.
The president’s comments came at a naturalization ceremony for 24 U.S. soldiers from 16 countries who took the oath to become citizens.
Democratic congressional leaders have said an overhaul of U.S. immigration law could advance through Congress this year if Senate Majority Leader Harry Reid can pick up enough Republican support to get it through the chamber.
The last try at revamping the law to create a guest worker program and provide a path to citizenship for some of those living in the U.S. illegally was in 2007. That was blocked amid opposition from Republicans and some Democrats.
Call for Solution
“Surely we can all agree that when 11 million people in our country are living here illegally, outside the system, that’s unacceptable,” Obama said. “The American people demand and deserve a solution.”
Obama lauded the work of Senators Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, to come up with a framework for legislation that can win bipartisan support.
Graham has said he’ll introduce legislation only after it’s finished and at least one other Republican signs on. He said this week that any effort to move immigration this year will fail badly because both parties need to “lay the groundwork” politically with tough border-control approaches first.
The president has been making calls to members of Congress, including Republicans, to win support for tackling an immigration law overhaul, White House press secretary Robert Gibbs said.
Friday, April 23, 2010
Geithner Says Bailouts Will Cost U.S. Taxpayers $87 Billion
U.S. government bailouts, including funds for Citigroup Inc. and American International Group Inc., will cost taxpayers about $87 billion, according to a letter Treasury Secretary Timothy F. Geithner sent congressional leaders.
The Troubled Asset Relief Program will lose about $117 billion, and funding related to Fannie Mae and Freddie Mac will cost taxpayers another $85 billion, Geithner said in a letter today to the Democratic and Republican leaders in the Senate and House. The government expects to make about $115 billion on Federal Reserve programs, including the purchase of mortgage- backed securities, he wrote.
Obama administration and regulator policies “have stabilized our financial system,” Geithner said. “The banking system is now better-capitalized than before the crisis.” A year ago the Treasury estimated that bailout costs could reach $500 billion, he said.
Congress authorized $700 billion for TARP in October 2008 to prevent a collapse of the U.S. financial system. The program has been criticized by lawmakers from both parties, including Senator Maria Cantwell, a Democrat from Washington state, and Representative Jeb Hensarling, a Texas Republican, for helping big banks more than average citizens.
Quick End
Treasury is ending TARP and other bailout programs “as quickly as possible,” Geithner said in the letter. The bailout costs will be less than 1 percent of gross domestic product, down from an estimate of 3.5 percent a year ago, he said.
“However, the financial and economic recovery is incomplete,” Geithner said.
Herbert Allison, the Treasury’s assistant secretary for financial stability, told Congress yesterday that TARP’s wind- down will vary by company.
“Some institutions are thriving and have the ability to repay Treasury now or in the very near future,” Allison told a House Appropriations subcommittee. “Other institutions will need more time to recover and repay Treasury, which is to be expected given the nature and impact of this financial crisis.”
General Motors Co. repaid $4.7 billion in loans to the Treasury on April 21. The company is still 61 percent owned by taxpayers as part of the financing for the automaker’s 2009 bankruptcy.
The Troubled Asset Relief Program will lose about $117 billion, and funding related to Fannie Mae and Freddie Mac will cost taxpayers another $85 billion, Geithner said in a letter today to the Democratic and Republican leaders in the Senate and House. The government expects to make about $115 billion on Federal Reserve programs, including the purchase of mortgage- backed securities, he wrote.
Obama administration and regulator policies “have stabilized our financial system,” Geithner said. “The banking system is now better-capitalized than before the crisis.” A year ago the Treasury estimated that bailout costs could reach $500 billion, he said.
Congress authorized $700 billion for TARP in October 2008 to prevent a collapse of the U.S. financial system. The program has been criticized by lawmakers from both parties, including Senator Maria Cantwell, a Democrat from Washington state, and Representative Jeb Hensarling, a Texas Republican, for helping big banks more than average citizens.
Quick End
Treasury is ending TARP and other bailout programs “as quickly as possible,” Geithner said in the letter. The bailout costs will be less than 1 percent of gross domestic product, down from an estimate of 3.5 percent a year ago, he said.
“However, the financial and economic recovery is incomplete,” Geithner said.
Herbert Allison, the Treasury’s assistant secretary for financial stability, told Congress yesterday that TARP’s wind- down will vary by company.
“Some institutions are thriving and have the ability to repay Treasury now or in the very near future,” Allison told a House Appropriations subcommittee. “Other institutions will need more time to recover and repay Treasury, which is to be expected given the nature and impact of this financial crisis.”
General Motors Co. repaid $4.7 billion in loans to the Treasury on April 21. The company is still 61 percent owned by taxpayers as part of the financing for the automaker’s 2009 bankruptcy.
Thursday, April 22, 2010
Microsoft Sales Miss Some Predictions
Microsoft Corp., the world’s largest software maker, reported third-quarter revenue that missed analysts’ most optimistic predictions, a sign that corporate customers may be putting off computer buying.
Sales rose 6.3 percent to $14.5 billion, compared with analysts’ estimates that were as high as $14.8 billion for the quarter that ended March 31. Shares fell in late trading.
While Microsoft’s Windows business has benefited from increased consumer demand for personal computers, corporations have hung back, avoiding purchases of new machines and long-term contracts. Investors held out for added evidence of a spending resurgence after chipmaker Intel Corp. last week forecast rising sales this quarter and record profit margins for 2010.
“Expectations were for more, given the strength we’ve seen in PC sales,” Brendan Barnicle, an analyst at Pacific Crest Securities, said in an interview from Portland, Oregon. He rates the shares “outperform” and said he doesn’t own them.
Microsoft fell $1.02, or 3.3 percent, to $30.37 in extended trading after the report. The shares had risen 6 cents to $31.39 at 4 p.m. New York time on the Nasdaq Stock Market. The stock fell 3.9 percent last quarter, while the Standard and Poor’s 500 Index rose 4.9 percent.
Third-quarter net income rose 35 percent to $4.01 billion, or 45 cents a share, beating the average forecast of 42 cents in a Bloomberg survey of analysts. Sales exceeded the $14.4 billion average in the survey, reflecting rising demand for Windows 7, the latest version of Microsoft’s flagship operating system.
Putting Off Orders
Still, some companies are reluctant to place orders that stretch over years. Unearned revenue, a measure of multiyear contracts, was $12.3 billion. Analysts’ average estimate was $12.8 billion, according to Katherine Egbert, an analyst at Jefferies & Co. In January, Microsoft reported second-quarter profit that beat analysts’ estimates by 15 cents.
“The deferred revenue was lower than expected, suggesting that enterprise spending is still just beginning to recover,” said Sarah Friar, a San Francisco-based analyst for Goldman Sachs Group who has a “buy” rating on Microsoft. “Enterprise spending is still making its way out of the downturn.”
Microsoft said operating expenses for the year ending June 30 will be $26.1 billion to $26.3 billion, compared with a January prediction of $26.2 billion to $26.5 billion. Microsoft no longer provides forecasts for sales and profit.
Mixed Bag
“Consumer demand is still strong, but we also saw for the first time growth in business hardware spending,” said Peter Klein, Microsoft’s chief financial officer, in an interview. Yet, it’s still taking longer to close multiyear deals. The company did have growth in billings for multiyear agreements, he said. “We are starting to fill that pipeline,” he said. “I think it will resolve itself over time.”
In the third quarter a year ago, net income was $2.98 billion, or 33 cents a share, on sales of $13.6 billion.
Technology bellwethers reporting earnings in recent weeks have given a mixed picture of the rebound in technology spending. Oracle Corp., the second-biggest software maker behind Microsoft, last month forecast the fastest sales growth for new software licenses since mid-2008. Intel, the world’s biggest chipmaker, last week indicated that recovery may be gathering steam with a forecast for rising sales this quarter.
“People had thought there would be closer correlation between what Intel said about PC demand and PC outlook” and Microsoft’s results, said Sasa Zorovic, a Boston-based analyst with Janney Montgomery Scott LLC. “That doesn’t seem to be the case.” He rates the shares “neutral.”
Office
Still, International Business Machines Corp. reported a drop in services signings, showing corporate spending on larger technology projects hasn’t picked up yet.
Microsoft Business Division revenue, mostly from Office productivity software, fell 5.9 percent to $4.24 billion as some customers held off purchases before Microsoft begins rolling out a new version next month. Server software sales were $3.58 billion, missing estimates from Goldman Sachs and UBS AG.
While sales of server computers have started to recover, it will take longer for sales of Microsoft’s related software to come back, Microsoft’s Klein said.
Information-technology spending will climb 1.7 percent in 2010, after dropping 3.1 percent last year, according to an estimate from Morgan Stanley. Personal-computer shipments rose 27 percent last quarter, according to Gartner Inc. The PC market bounced back from the year-earlier period, when the recession dragged down shipments almost 7 percent -- the worst performance since 2001, according to market research firm IDC.
Business, Bing
Revenue in Microsoft’s Business Division was reduced as the company deferred some sales to a future quarter. The company gave customers who have purchased older versions of Office the right to upgrade to the new version, Office 2010, which is available to businesses next month. It hits stores in June.
Online advertising revenue rose 19 percent as search and graphical display ad markets recovered, Klein said. Sales in the company’s online business rose 11.6 percent to $566 million.
Microsoft’s Bing search engine has increased the company’s share of searches by 3.7 percentage points since Microsoft overhauled the product in June, according to research firm ComScore Inc. Microsoft had 11.7 percent of the U.S. search market in March, compared with 65.1 percent for Google Inc. and 16.9 percent for Yahoo! Inc., according to ComScore.
Sales rose 6.3 percent to $14.5 billion, compared with analysts’ estimates that were as high as $14.8 billion for the quarter that ended March 31. Shares fell in late trading.
While Microsoft’s Windows business has benefited from increased consumer demand for personal computers, corporations have hung back, avoiding purchases of new machines and long-term contracts. Investors held out for added evidence of a spending resurgence after chipmaker Intel Corp. last week forecast rising sales this quarter and record profit margins for 2010.
“Expectations were for more, given the strength we’ve seen in PC sales,” Brendan Barnicle, an analyst at Pacific Crest Securities, said in an interview from Portland, Oregon. He rates the shares “outperform” and said he doesn’t own them.
Microsoft fell $1.02, or 3.3 percent, to $30.37 in extended trading after the report. The shares had risen 6 cents to $31.39 at 4 p.m. New York time on the Nasdaq Stock Market. The stock fell 3.9 percent last quarter, while the Standard and Poor’s 500 Index rose 4.9 percent.
Third-quarter net income rose 35 percent to $4.01 billion, or 45 cents a share, beating the average forecast of 42 cents in a Bloomberg survey of analysts. Sales exceeded the $14.4 billion average in the survey, reflecting rising demand for Windows 7, the latest version of Microsoft’s flagship operating system.
Putting Off Orders
Still, some companies are reluctant to place orders that stretch over years. Unearned revenue, a measure of multiyear contracts, was $12.3 billion. Analysts’ average estimate was $12.8 billion, according to Katherine Egbert, an analyst at Jefferies & Co. In January, Microsoft reported second-quarter profit that beat analysts’ estimates by 15 cents.
“The deferred revenue was lower than expected, suggesting that enterprise spending is still just beginning to recover,” said Sarah Friar, a San Francisco-based analyst for Goldman Sachs Group who has a “buy” rating on Microsoft. “Enterprise spending is still making its way out of the downturn.”
Microsoft said operating expenses for the year ending June 30 will be $26.1 billion to $26.3 billion, compared with a January prediction of $26.2 billion to $26.5 billion. Microsoft no longer provides forecasts for sales and profit.
Mixed Bag
“Consumer demand is still strong, but we also saw for the first time growth in business hardware spending,” said Peter Klein, Microsoft’s chief financial officer, in an interview. Yet, it’s still taking longer to close multiyear deals. The company did have growth in billings for multiyear agreements, he said. “We are starting to fill that pipeline,” he said. “I think it will resolve itself over time.”
In the third quarter a year ago, net income was $2.98 billion, or 33 cents a share, on sales of $13.6 billion.
Technology bellwethers reporting earnings in recent weeks have given a mixed picture of the rebound in technology spending. Oracle Corp., the second-biggest software maker behind Microsoft, last month forecast the fastest sales growth for new software licenses since mid-2008. Intel, the world’s biggest chipmaker, last week indicated that recovery may be gathering steam with a forecast for rising sales this quarter.
“People had thought there would be closer correlation between what Intel said about PC demand and PC outlook” and Microsoft’s results, said Sasa Zorovic, a Boston-based analyst with Janney Montgomery Scott LLC. “That doesn’t seem to be the case.” He rates the shares “neutral.”
Office
Still, International Business Machines Corp. reported a drop in services signings, showing corporate spending on larger technology projects hasn’t picked up yet.
Microsoft Business Division revenue, mostly from Office productivity software, fell 5.9 percent to $4.24 billion as some customers held off purchases before Microsoft begins rolling out a new version next month. Server software sales were $3.58 billion, missing estimates from Goldman Sachs and UBS AG.
While sales of server computers have started to recover, it will take longer for sales of Microsoft’s related software to come back, Microsoft’s Klein said.
Information-technology spending will climb 1.7 percent in 2010, after dropping 3.1 percent last year, according to an estimate from Morgan Stanley. Personal-computer shipments rose 27 percent last quarter, according to Gartner Inc. The PC market bounced back from the year-earlier period, when the recession dragged down shipments almost 7 percent -- the worst performance since 2001, according to market research firm IDC.
Business, Bing
Revenue in Microsoft’s Business Division was reduced as the company deferred some sales to a future quarter. The company gave customers who have purchased older versions of Office the right to upgrade to the new version, Office 2010, which is available to businesses next month. It hits stores in June.
Online advertising revenue rose 19 percent as search and graphical display ad markets recovered, Klein said. Sales in the company’s online business rose 11.6 percent to $566 million.
Microsoft’s Bing search engine has increased the company’s share of searches by 3.7 percentage points since Microsoft overhauled the product in June, according to research firm ComScore Inc. Microsoft had 11.7 percent of the U.S. search market in March, compared with 65.1 percent for Google Inc. and 16.9 percent for Yahoo! Inc., according to ComScore.
Bank of Japan Inflation Forecast May Fall Short of Finance Minister's Goal
Signs of a sustained Japanese economic recovery may spur the central bank to raise its growth projections and discuss predicting an end to deflation at a meeting next week, a survey of economists indicated.
Bank of Japan board members release semiannual economic forecasts after their April 30 gathering in Tokyo. Their median prediction may show an inflation rate of at least zero for the year to March 2012, up from a 0.2 percent drop, according to 14 of 16 economists surveyed by Bloomberg News.
The new projection may reinforce politicians’ calls for the central bank to expand stimulus measures after Finance Minister Naoto Kan said he wants an inflation rate of as high as 2 percent. The International Monetary Fund this week echoed the government’s concern, saying the BOJ may need to do more.
A recovery in prices “would be fragile, and Japan could tip back into deflation with changes in the foreign-exchange rate or oil price conditions,” said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo. Political pressure “makes it all the more unlikely the BOJ would embark on an exit strategy,” he said.
Japan, the only Group of Seven nation still reporting consumer-price declines, has been easing policy just as its counterparts in Asia begin to tighten credit as their economies drive the global recovery. The BOJ doubled a lending program for banks to 20 trillion yen ($215 billion) last month and has kept interest rates at 0.1 percent since December 2008.
Hold Off
The survey indicated that Governor Masaaki Shirakawa and his colleagues will hold off on further action next week, with 13 of the 16 economists predicting no change in policy. He and Kan are in Washington for meetings with their counterparts from Group of Seven and Group of 20 nations.
Shirakawa this month said the risk of another recession has “pretty much gone” and he sees “positive signs” for prices. Deputy Governor Kiyohiko Nishimura said this week that “beams of light” are visible in overcoming deflation.
Both policy makers have said they will keep monetary policy “accommodative,” a pledge that’s likely to be affirmed in next week’s semiannual outlook, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo. The central bank will reinforce that “it won’t hesitate to provide more liquidity if needed,” Kono said.
At Odds
Any forecast by the central bank for consumer prices to stop falling next fiscal year would put it at odds with economists, whose own projections are for a 0.1 percent decline, based on the median estimate in the Bloomberg survey. Prices excluding fresh food, the bank’s key gauge, slid 1.2 percent in February from a year earlier, the 12th straight drop.
“Sure, the economy is recovering, but growth still depends on exports, domestic demand hasn’t gained momentum, and Japan is stuck in chronic deflation,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo, who sees prices sliding 0.2 percent next fiscal year.
The analysts surveyed said prices will slip 1.1 percent in the current year ending March 2011, more than the 0.5 percent decrease forecast by the central bank in January.
The policy board will also review its economic growth forecasts at the meeting.
Gross domestic product will expand 2 percent in the current fiscal year and 1.7 percent in the year ending March 2012, according to the median estimate of the 16 economists. In January, the central bank forecast growth of 1.3 percent this year and 2.1 percent in fiscal 2011.
Elpida’s Profit
Elpida Memory Inc. is among Japanese exporters benefiting from a resurgence in global demand, led by Asia. Japan’s biggest maker of computer memory chips this week reported its first annual profit in three years.
Still, politicians are putting pressure on the BOJ to spur the economy as record public debt constrains the government’s ability to provide support. Fitch Ratings said yesterday that “in the absence of sustained economic recovery and fiscal consolidation, government debt will continue to rise.”
Finance Minister Kan told reporters in Washington yesterday that concerns about Japan’s finances may ease when the government releases its fiscal rehabilitation plan in June.
The yield on Japan’s 10-year bond rose half a basis point to 1.32 percent at 9:40 a.m. in Tokyo.
Kan this week told parliament the central bank should aim for inflation of as high as 2 percent. Prime Minister Yukio Hatoyama’s Democratic Party of Japan this week said it plans to include an inflation target in its platform for the July upper house elections.
Shirakawa said in a speech in New York yesterday that central bankers shouldn’t be “too fixated on short-term price stability” because that doesn’t necessarily lead to economic stability.
“The BOJ board will probably stand pat this time,” said Masaaki Kanno, a 25-year veteran of the central bank who is now chief economist at JPMorgan Chase & Co. in Tokyo. “But it’s highly likely that the bank will ease policy further to signal its cooperation with the government in June” when the fiscal plan is released, he said.
Bank of Japan board members release semiannual economic forecasts after their April 30 gathering in Tokyo. Their median prediction may show an inflation rate of at least zero for the year to March 2012, up from a 0.2 percent drop, according to 14 of 16 economists surveyed by Bloomberg News.
The new projection may reinforce politicians’ calls for the central bank to expand stimulus measures after Finance Minister Naoto Kan said he wants an inflation rate of as high as 2 percent. The International Monetary Fund this week echoed the government’s concern, saying the BOJ may need to do more.
A recovery in prices “would be fragile, and Japan could tip back into deflation with changes in the foreign-exchange rate or oil price conditions,” said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo. Political pressure “makes it all the more unlikely the BOJ would embark on an exit strategy,” he said.
Japan, the only Group of Seven nation still reporting consumer-price declines, has been easing policy just as its counterparts in Asia begin to tighten credit as their economies drive the global recovery. The BOJ doubled a lending program for banks to 20 trillion yen ($215 billion) last month and has kept interest rates at 0.1 percent since December 2008.
Hold Off
The survey indicated that Governor Masaaki Shirakawa and his colleagues will hold off on further action next week, with 13 of the 16 economists predicting no change in policy. He and Kan are in Washington for meetings with their counterparts from Group of Seven and Group of 20 nations.
Shirakawa this month said the risk of another recession has “pretty much gone” and he sees “positive signs” for prices. Deputy Governor Kiyohiko Nishimura said this week that “beams of light” are visible in overcoming deflation.
Both policy makers have said they will keep monetary policy “accommodative,” a pledge that’s likely to be affirmed in next week’s semiannual outlook, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo. The central bank will reinforce that “it won’t hesitate to provide more liquidity if needed,” Kono said.
At Odds
Any forecast by the central bank for consumer prices to stop falling next fiscal year would put it at odds with economists, whose own projections are for a 0.1 percent decline, based on the median estimate in the Bloomberg survey. Prices excluding fresh food, the bank’s key gauge, slid 1.2 percent in February from a year earlier, the 12th straight drop.
“Sure, the economy is recovering, but growth still depends on exports, domestic demand hasn’t gained momentum, and Japan is stuck in chronic deflation,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo, who sees prices sliding 0.2 percent next fiscal year.
The analysts surveyed said prices will slip 1.1 percent in the current year ending March 2011, more than the 0.5 percent decrease forecast by the central bank in January.
The policy board will also review its economic growth forecasts at the meeting.
Gross domestic product will expand 2 percent in the current fiscal year and 1.7 percent in the year ending March 2012, according to the median estimate of the 16 economists. In January, the central bank forecast growth of 1.3 percent this year and 2.1 percent in fiscal 2011.
Elpida’s Profit
Elpida Memory Inc. is among Japanese exporters benefiting from a resurgence in global demand, led by Asia. Japan’s biggest maker of computer memory chips this week reported its first annual profit in three years.
Still, politicians are putting pressure on the BOJ to spur the economy as record public debt constrains the government’s ability to provide support. Fitch Ratings said yesterday that “in the absence of sustained economic recovery and fiscal consolidation, government debt will continue to rise.”
Finance Minister Kan told reporters in Washington yesterday that concerns about Japan’s finances may ease when the government releases its fiscal rehabilitation plan in June.
The yield on Japan’s 10-year bond rose half a basis point to 1.32 percent at 9:40 a.m. in Tokyo.
Kan this week told parliament the central bank should aim for inflation of as high as 2 percent. Prime Minister Yukio Hatoyama’s Democratic Party of Japan this week said it plans to include an inflation target in its platform for the July upper house elections.
Shirakawa said in a speech in New York yesterday that central bankers shouldn’t be “too fixated on short-term price stability” because that doesn’t necessarily lead to economic stability.
“The BOJ board will probably stand pat this time,” said Masaaki Kanno, a 25-year veteran of the central bank who is now chief economist at JPMorgan Chase & Co. in Tokyo. “But it’s highly likely that the bank will ease policy further to signal its cooperation with the government in June” when the fiscal plan is released, he said.
Tuesday, April 20, 2010
India raises rates for second month
India raised interest rates for a second month on Tuesday in a bid to contain consumer prices that have been among the fastest rising in the world’s large economies.
It is the largest economy to tighten monetary policy with successive rate rises as its recovery from the global economic downturn gathers steam. India’s industrial production has picked up during the past six months to record double-digit growth, while the agricultural economy is expected to regain its strength this year with better seasonal rains.
EDITOR’S CHOICE
Video: India set for further tightening - Apr-20
Analysis: India: States of desire - Apr-20
Lex: Reserve Bank of India - Apr-20
Money Supply - Apr-20
Bank of Canada signals rate rise - Apr-20
Opinion: India faces new economic challenges - Apr-15
“With the recovery now firmly in place, we need to move in a calibrated manner in the direction of normalising our policy instruments,” said Duvvuri Subbarao, governor of the Reserve Bank of India, in a policy statement.
The wholesale price index, India’s most closely watched inflation measure, rose 9.9 per cent in March, similar to the previous month but the biggest rise since October 2008. Food inflation has been running at 15-20 per cent, a particular concern in a country where much of the 1.2bn population survives on meagre incomes.
Australia, which is slightly smaller in gross domestic product terms, is the only other Group of 20 nation that has tightened monetary policy with rate rises since the downturn. This month, its central bank raised interest rates to 4.25 per cent, its fifth rise since October. Within the region, Malaysia and Vietnam have also raised rates.
The Reserve Bank of India at its quarterly policy meeting on Tuesday raised the repo rate, a key lending rate, 25 basis points to 5.25 per cent and raised the cash reserve ratio, the amount of money banks are required to hold with the central bank, 25bp to 6 per cent.
In an unscheduled move last month, the bank increased the repo rate 25bp to 5 per cent. In January, it raised the reserve ratio 75bp to 5.75 per cent to soak up excess liquidity.
Economists predict steady tightening throughout the year as the government withdraws fiscal stimulus measures introduced to help the economy weather the effects of the global financial crisis. They have recommended that the central bank aggressively tackle domestically generated price pressures, which they say are not well captured by the wholesale index or consumer price index.
“While recovery in private demand needs to be stronger to reinforce the growth momentum, the already elevated headline inflation suggests that the weight of policy balance may have to shift to containing inflation, since high inflation itself will dampen recovery in growth,” the RBI said in a statement on Monday night.
In the weeks ahead of its next policy review in July, the RBI is likely to focus on the strength of the monsoon rains, on which much agricultural activity depends across south Asia.
“Provided there is a normal monsoon, agricultural production will rebound, sharply reducing food price inflation and boosting consumer confidence,” said Nikhilesh Bhattacharyya, associate economist at Moody’s Analytics. “This has been the pattern following prior food price spikes.”
Last year’s rains were the worst in 37 years. They badly hit agricultural output, which has a declining share of GDP. India rarely suffers two bad monsoons in a row. Some of the highest temperatures in March and April for a century have encouraged forecasts that heavy monsoon rains are on their way. Better agricultural performance would spur the economy to the government’s goal of reaching 9-10 per cent economic growth.
Montek Singh Ahluwalia, deputy chairman of the planning commission, said: “I don’t know what it is that causes a system or a private sector to be optimistic. It’s not the case that it depends on little instruments like whether you raise interest rates or lower the repo rate.
“The positive thing about India at the moment is that there is a tremendous amount on optimism. This will certainly keep the momentum going.”
It is the largest economy to tighten monetary policy with successive rate rises as its recovery from the global economic downturn gathers steam. India’s industrial production has picked up during the past six months to record double-digit growth, while the agricultural economy is expected to regain its strength this year with better seasonal rains.
EDITOR’S CHOICE
Video: India set for further tightening - Apr-20
Analysis: India: States of desire - Apr-20
Lex: Reserve Bank of India - Apr-20
Money Supply - Apr-20
Bank of Canada signals rate rise - Apr-20
Opinion: India faces new economic challenges - Apr-15
“With the recovery now firmly in place, we need to move in a calibrated manner in the direction of normalising our policy instruments,” said Duvvuri Subbarao, governor of the Reserve Bank of India, in a policy statement.
The wholesale price index, India’s most closely watched inflation measure, rose 9.9 per cent in March, similar to the previous month but the biggest rise since October 2008. Food inflation has been running at 15-20 per cent, a particular concern in a country where much of the 1.2bn population survives on meagre incomes.
Australia, which is slightly smaller in gross domestic product terms, is the only other Group of 20 nation that has tightened monetary policy with rate rises since the downturn. This month, its central bank raised interest rates to 4.25 per cent, its fifth rise since October. Within the region, Malaysia and Vietnam have also raised rates.
The Reserve Bank of India at its quarterly policy meeting on Tuesday raised the repo rate, a key lending rate, 25 basis points to 5.25 per cent and raised the cash reserve ratio, the amount of money banks are required to hold with the central bank, 25bp to 6 per cent.
In an unscheduled move last month, the bank increased the repo rate 25bp to 5 per cent. In January, it raised the reserve ratio 75bp to 5.75 per cent to soak up excess liquidity.
Economists predict steady tightening throughout the year as the government withdraws fiscal stimulus measures introduced to help the economy weather the effects of the global financial crisis. They have recommended that the central bank aggressively tackle domestically generated price pressures, which they say are not well captured by the wholesale index or consumer price index.
“While recovery in private demand needs to be stronger to reinforce the growth momentum, the already elevated headline inflation suggests that the weight of policy balance may have to shift to containing inflation, since high inflation itself will dampen recovery in growth,” the RBI said in a statement on Monday night.
In the weeks ahead of its next policy review in July, the RBI is likely to focus on the strength of the monsoon rains, on which much agricultural activity depends across south Asia.
“Provided there is a normal monsoon, agricultural production will rebound, sharply reducing food price inflation and boosting consumer confidence,” said Nikhilesh Bhattacharyya, associate economist at Moody’s Analytics. “This has been the pattern following prior food price spikes.”
Last year’s rains were the worst in 37 years. They badly hit agricultural output, which has a declining share of GDP. India rarely suffers two bad monsoons in a row. Some of the highest temperatures in March and April for a century have encouraged forecasts that heavy monsoon rains are on their way. Better agricultural performance would spur the economy to the government’s goal of reaching 9-10 per cent economic growth.
Montek Singh Ahluwalia, deputy chairman of the planning commission, said: “I don’t know what it is that causes a system or a private sector to be optimistic. It’s not the case that it depends on little instruments like whether you raise interest rates or lower the repo rate.
“The positive thing about India at the moment is that there is a tremendous amount on optimism. This will certainly keep the momentum going.”
Mumbai Hotel, a Killing Zone, Is Grand Again
MUMBAI, India — On Wednesday, the Oberoi Hotel, one of two five-star hotel complexes attacked by 10 Pakistan-based gunmen in November 2008, will welcome its first guests after a comprehensive $45 million reconstruction.
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Times Topic: Terrorism in India
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Prashanth Vishwanathan for The New York Times
The Oberoi’s lobby, once ravaged by guns and grenades, has been renewed.
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Lefteris Pitarakis/Associated Press
Terrorists struck the Oberoi and the Taj Mahal Palace & Tower.
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Prashanth Vishwanathan for The New York Times
A bedroom and bathroom at the Oberoi.
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Prashanth Vishwanathan for The New York Times
Housekeeping staff giving a final touch-up before the reopening on Wednesday.
The lobby, which had been ravaged by gunshots and grenade blasts during the three-day siege, has been rebuilt with milky-white marble from the Greek island of Thassos. The already luxurious guestroom baths have been upgraded to include flat-screen televisions. Dozens of security guards watch the premises. And the Tiffin restaurant, where many guests and employees were killed in the terrorist attack, is now called Fenix.
The rebirth of the Oberoi — along with the expected return to full service of the other hotel attacked, the Taj Mahal Palace and Tower — is an important milestone for Mumbai, formerly known as Bombay. The brazen strike, in which 163 people died, dealt India and Mumbai a significant psychic and economic blow, and recovery has come slowly.
As in the rest of the world, India’s economy slowed sharply at the end of 2008 because of the global financial crisis. But the attacks compounded the damage here by shaking the confidence of investors, corporate executives and consumers.
In the last nine months, however, government stimulus and strong domestic consumer demand have helped revive the economy. India is still some way from the heady 9 percent growth rate of 2007, but the government is projecting 8 percent growth for the 2010-11 fiscal year, up from 7.2 percent last year.
Tourism and travel are also rebounding. In the first quarter, India had 1.56 million foreign tourists, up 13 percent from the first three months of 2009 and just shy of the 1.6 million that showed up in the same period in 2008, according to the Tourism Ministry.
Domestic and foreign hotel companies are adding rooms at a breakneck pace. For instance, Hyatt Hotels, the chain based in Chicago, which currently has five hotels in India, plans to open 20 more properties in the country in the next four to five years.
The Oberoi, which formally reopens on Saturday, and the Taj are the last of the sites affected by the 2008 attacks to return to something resembling normal operations. The Taj, part of which is usable now, is expected to open guest rooms in its century-old palace wing soon, although the hotel has not provided an exact date.
Crushing as the attacks were for the rest of India, they were devastating for the two hotels — widely considered among the finest in the city — and the companies that own them.
The Mumbai Oberoi, for instance, accounted for about one-fifth of the revenue of the chain before the attacks. The earnings of East India Hotels, the publicly listed company that operates the hotels, fell nearly 70 percent in the nine months ended in December, compared with the same period a year earlier.
“We were affected severely,” said P. R. S. Oberoi, chairman of the parent company, the Oberoi Group, and the son of its founder. “Lehman Brothers was in September, and we had started feeling some of the effect maybe a little before that. Then the attacks happened and Bombay emptied out.”
In an interview last week at the hotel, Mr. Oberoi said occupancy rates at the Trident, the company’s business hotel next door, which did not suffer extensive damage, were back to levels that prevailed before the attack. But he noted that the supply of hotel rooms in Mumbai’s prime business district had shrunk significantly because the Oberoi and the palace wing of the Taj had been closed.
Mr. Oberoi, who himself narrowly missed being caught up in the attack on the hotel because he had left to attend an event elsewhere, said he had feared the hotel would be unsalvageable. But after four months of planning and 11 months of reconstruction, the innards of the hotel, which was built in 1986, have been transformed.
A big part of the focus has been to improve security. The hotel now has 150 security cameras, up from just 15 at the time of the attacks. It has 50 security personnel, five times the number it had in 2008. Visitors who drive up are greeted by a big steel gate where their cars are searched. The large windows in the lobby that overlook south Mumbai’s picturesque, crescent-shaped bay are now made from reinforced, shatterproof glass.
Still, Mr. Oberoi said that securing the hotel against every possible attack would be impossible. “What about suicide bombers? How do you stop them?” he said. “We check everybody, including me.”
At an age where many corporate executives spend much of their time on their golf game, Mr. Oberoi, 81, seems to have immersed himself in the details of rebuilding his flagship hotel. His staff said that he personally inspected hundreds of marble tiles to make sure no blemished pieces made it onto the floor, rejecting about 70 percent of the tiles the company received. Last week, during a tour with two visitors, he kept pointing out minor defects to his staff.
Many of the changes at the Oberoi are meant to make the hotel even more opulent and luxurious than it already was. Two big coffee tables in the lobby are topped with marble inlaid with precious stones. Those tables, and 600 others placed in guest rooms, were made by workers who, Oberoi executives said, are descendants of craftsmen who worked on the Taj Mahal.
Officials have made bathrooms bigger, added shower stalls and installed the TVs in front of free-standing bathtubs. Clear glass walls separate bathrooms from living rooms; a screen can be drawn for privacy. Rooms have “butler” buttons, which will summon a hotel employee within three minutes.
The Oberoi now has 81 suites, up from 26, because demand for suites has held up better than standard rooms, officials said. In total, the number of rooms has declined to 287, from 330. The price for a night’s stay ranges from 25,000 rupees ($560) for the smallest room to 300,000 rupees ($6,714) for the top suites.
The Taj has been making similar changes, increasing the number of suites. In an interview late last year, executives said one of the challenges of rebuilding their hotel was that no two rooms in the palace wing had the same layout. So, officials decided to redo every room using five templates.
“We are not going to just repair what is damaged and reopen the hotel,” said Ajoy K. Misra, a senior vice president for the Indian Hotels Company, which owns the Taj. “We are going to redesign the hotel.”
Related
*
Times Topic: Terrorism in India
Enlarge This Image
Prashanth Vishwanathan for The New York Times
The Oberoi’s lobby, once ravaged by guns and grenades, has been renewed.
Enlarge This Image
Lefteris Pitarakis/Associated Press
Terrorists struck the Oberoi and the Taj Mahal Palace & Tower.
Enlarge This Image
Prashanth Vishwanathan for The New York Times
A bedroom and bathroom at the Oberoi.
Enlarge This Image
Prashanth Vishwanathan for The New York Times
Housekeeping staff giving a final touch-up before the reopening on Wednesday.
The lobby, which had been ravaged by gunshots and grenade blasts during the three-day siege, has been rebuilt with milky-white marble from the Greek island of Thassos. The already luxurious guestroom baths have been upgraded to include flat-screen televisions. Dozens of security guards watch the premises. And the Tiffin restaurant, where many guests and employees were killed in the terrorist attack, is now called Fenix.
The rebirth of the Oberoi — along with the expected return to full service of the other hotel attacked, the Taj Mahal Palace and Tower — is an important milestone for Mumbai, formerly known as Bombay. The brazen strike, in which 163 people died, dealt India and Mumbai a significant psychic and economic blow, and recovery has come slowly.
As in the rest of the world, India’s economy slowed sharply at the end of 2008 because of the global financial crisis. But the attacks compounded the damage here by shaking the confidence of investors, corporate executives and consumers.
In the last nine months, however, government stimulus and strong domestic consumer demand have helped revive the economy. India is still some way from the heady 9 percent growth rate of 2007, but the government is projecting 8 percent growth for the 2010-11 fiscal year, up from 7.2 percent last year.
Tourism and travel are also rebounding. In the first quarter, India had 1.56 million foreign tourists, up 13 percent from the first three months of 2009 and just shy of the 1.6 million that showed up in the same period in 2008, according to the Tourism Ministry.
Domestic and foreign hotel companies are adding rooms at a breakneck pace. For instance, Hyatt Hotels, the chain based in Chicago, which currently has five hotels in India, plans to open 20 more properties in the country in the next four to five years.
The Oberoi, which formally reopens on Saturday, and the Taj are the last of the sites affected by the 2008 attacks to return to something resembling normal operations. The Taj, part of which is usable now, is expected to open guest rooms in its century-old palace wing soon, although the hotel has not provided an exact date.
Crushing as the attacks were for the rest of India, they were devastating for the two hotels — widely considered among the finest in the city — and the companies that own them.
The Mumbai Oberoi, for instance, accounted for about one-fifth of the revenue of the chain before the attacks. The earnings of East India Hotels, the publicly listed company that operates the hotels, fell nearly 70 percent in the nine months ended in December, compared with the same period a year earlier.
“We were affected severely,” said P. R. S. Oberoi, chairman of the parent company, the Oberoi Group, and the son of its founder. “Lehman Brothers was in September, and we had started feeling some of the effect maybe a little before that. Then the attacks happened and Bombay emptied out.”
In an interview last week at the hotel, Mr. Oberoi said occupancy rates at the Trident, the company’s business hotel next door, which did not suffer extensive damage, were back to levels that prevailed before the attack. But he noted that the supply of hotel rooms in Mumbai’s prime business district had shrunk significantly because the Oberoi and the palace wing of the Taj had been closed.
Mr. Oberoi, who himself narrowly missed being caught up in the attack on the hotel because he had left to attend an event elsewhere, said he had feared the hotel would be unsalvageable. But after four months of planning and 11 months of reconstruction, the innards of the hotel, which was built in 1986, have been transformed.
A big part of the focus has been to improve security. The hotel now has 150 security cameras, up from just 15 at the time of the attacks. It has 50 security personnel, five times the number it had in 2008. Visitors who drive up are greeted by a big steel gate where their cars are searched. The large windows in the lobby that overlook south Mumbai’s picturesque, crescent-shaped bay are now made from reinforced, shatterproof glass.
Still, Mr. Oberoi said that securing the hotel against every possible attack would be impossible. “What about suicide bombers? How do you stop them?” he said. “We check everybody, including me.”
At an age where many corporate executives spend much of their time on their golf game, Mr. Oberoi, 81, seems to have immersed himself in the details of rebuilding his flagship hotel. His staff said that he personally inspected hundreds of marble tiles to make sure no blemished pieces made it onto the floor, rejecting about 70 percent of the tiles the company received. Last week, during a tour with two visitors, he kept pointing out minor defects to his staff.
Many of the changes at the Oberoi are meant to make the hotel even more opulent and luxurious than it already was. Two big coffee tables in the lobby are topped with marble inlaid with precious stones. Those tables, and 600 others placed in guest rooms, were made by workers who, Oberoi executives said, are descendants of craftsmen who worked on the Taj Mahal.
Officials have made bathrooms bigger, added shower stalls and installed the TVs in front of free-standing bathtubs. Clear glass walls separate bathrooms from living rooms; a screen can be drawn for privacy. Rooms have “butler” buttons, which will summon a hotel employee within three minutes.
The Oberoi now has 81 suites, up from 26, because demand for suites has held up better than standard rooms, officials said. In total, the number of rooms has declined to 287, from 330. The price for a night’s stay ranges from 25,000 rupees ($560) for the smallest room to 300,000 rupees ($6,714) for the top suites.
The Taj has been making similar changes, increasing the number of suites. In an interview late last year, executives said one of the challenges of rebuilding their hotel was that no two rooms in the palace wing had the same layout. So, officials decided to redo every room using five templates.
“We are not going to just repair what is damaged and reopen the hotel,” said Ajoy K. Misra, a senior vice president for the Indian Hotels Company, which owns the Taj. “We are going to redesign the hotel.”
India, Brazil Back U.S. Position on Yuan Before G-20
April 21 (Bloomberg) -- Central bank governors in India and Brazil backed a stronger Chinese yuan, siding with U.S. President Barack Obama before a meeting of the Group of 20 nations this week.
Exports from China to India have grown faster than Indian shipments to its northern neighbor “and that obviously is a reflection of differences in the exchange-rate management,” Reserve Bank of India’s Duvvuri Subbarao told reporters in Mumbai yesterday. Brazil’s Henrique Meirelles told a senate hearing yesterday in Brasilia it was “absolutely critical” that China should let its currency appreciate.
Obama, who considers the yuan “undervalued,” is seeking to gain broader support from finance officials of the G20, who will discuss outlook for the global economy in Washington for three days starting April 22. Speculation that China may scrap the yuan’s peg to the dollar intensified this month after Treasury Secretary Timothy F. Geithner delayed a report that could brand the nation a currency manipulator.
“This meeting will be the first test by the U.S. to use a multilateral forum to press China into action on its currency,” Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd. wrote in a research note yesterday.
The discussions will include a range of topics including currencies and a communiqué will be released on April 23, a U.S. Treasury Department official, who declined to be identified, said yesterday. Bank Indonesia Deputy Governor Hartadi Sarwono declined to discuss his position before the meeting and the Bank of Korea also preferred not to comment when contacted yesterday.
Giving Opinions
India will give its opinion if the issue is raised in the G20 meeting, Subbarao said. “When it is discussed we will certainly give our opinion or view on the subject,” he said.
“If China revalues the yuan, it will have a positive impact on our external sector,” Subbarao said. “If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively.”
China has pegged its currency at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years. China won’t revalue until the middle of the year when it can see evidence of sustainable growth and inflation, Win Thin, a New York-based strategist at Brown Brothers Harriman & Co. said this week. Calls for revaluation will delay the process, he said.
Twelve-month non-deliverable yuan forwards traded at 6.622, reflecting bets the currency will strengthen 3.1 percent from the spot rate. The Brazilian real has gained 28 percent against the yuan in the past year, while the rupee climbed 13 percent.
India’s Imports
India imported $14.9 billion of goods in the six months to September 2009 from China, more than double the exports from the second-ranked U.S. India shipped $3.9 billion of goods to China in the same period.
U.S. lawmakers have urged Obama to step up pressure on China, accusing officials in Beijing of keeping the currency artificially weak to gain export advantage. Chinese President Hu Jintao told Obama on April 13 in Washington that the country wouldn’t yield to “external pressure” in deciding when to adjust the yuan.
The Chinese government will decide on the valuation of its currency and is seeking a stable yuan to control speculative capital inflows, Yao Jian, spokesman for the Ministry of Commerce, told reporters April 15.
Brazil Versus China
China boosted exports to Argentina, Uruguay and Paraguay, members of the Brazil-led Mercosur trade bloc, by 7.3 percent to $4.8 billion in the first eight months of 2009 from two years earlier, while Brazilian sales to its neighbors fell 18 percent to $9.6 billion during the same period.
Chinese-made products such as tires and stereo speakers are the target of 26 Brazilian anti-dumping measures, more than any other country and nearly half of all 68 in place, according to Brazil’s Trade Ministry. Soy and iron ore accounted for 66 percent of $20 billion in Brazilian sales to China last year.
“It’s absolutely critical that China appreciate its currency to ensure equilibrium in the global economy,” said Brazil’s Meirelles.
Exports from China to India have grown faster than Indian shipments to its northern neighbor “and that obviously is a reflection of differences in the exchange-rate management,” Reserve Bank of India’s Duvvuri Subbarao told reporters in Mumbai yesterday. Brazil’s Henrique Meirelles told a senate hearing yesterday in Brasilia it was “absolutely critical” that China should let its currency appreciate.
Obama, who considers the yuan “undervalued,” is seeking to gain broader support from finance officials of the G20, who will discuss outlook for the global economy in Washington for three days starting April 22. Speculation that China may scrap the yuan’s peg to the dollar intensified this month after Treasury Secretary Timothy F. Geithner delayed a report that could brand the nation a currency manipulator.
“This meeting will be the first test by the U.S. to use a multilateral forum to press China into action on its currency,” Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd. wrote in a research note yesterday.
The discussions will include a range of topics including currencies and a communiqué will be released on April 23, a U.S. Treasury Department official, who declined to be identified, said yesterday. Bank Indonesia Deputy Governor Hartadi Sarwono declined to discuss his position before the meeting and the Bank of Korea also preferred not to comment when contacted yesterday.
Giving Opinions
India will give its opinion if the issue is raised in the G20 meeting, Subbarao said. “When it is discussed we will certainly give our opinion or view on the subject,” he said.
“If China revalues the yuan, it will have a positive impact on our external sector,” Subbarao said. “If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively.”
China has pegged its currency at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years. China won’t revalue until the middle of the year when it can see evidence of sustainable growth and inflation, Win Thin, a New York-based strategist at Brown Brothers Harriman & Co. said this week. Calls for revaluation will delay the process, he said.
Twelve-month non-deliverable yuan forwards traded at 6.622, reflecting bets the currency will strengthen 3.1 percent from the spot rate. The Brazilian real has gained 28 percent against the yuan in the past year, while the rupee climbed 13 percent.
India’s Imports
India imported $14.9 billion of goods in the six months to September 2009 from China, more than double the exports from the second-ranked U.S. India shipped $3.9 billion of goods to China in the same period.
U.S. lawmakers have urged Obama to step up pressure on China, accusing officials in Beijing of keeping the currency artificially weak to gain export advantage. Chinese President Hu Jintao told Obama on April 13 in Washington that the country wouldn’t yield to “external pressure” in deciding when to adjust the yuan.
The Chinese government will decide on the valuation of its currency and is seeking a stable yuan to control speculative capital inflows, Yao Jian, spokesman for the Ministry of Commerce, told reporters April 15.
Brazil Versus China
China boosted exports to Argentina, Uruguay and Paraguay, members of the Brazil-led Mercosur trade bloc, by 7.3 percent to $4.8 billion in the first eight months of 2009 from two years earlier, while Brazilian sales to its neighbors fell 18 percent to $9.6 billion during the same period.
Chinese-made products such as tires and stereo speakers are the target of 26 Brazilian anti-dumping measures, more than any other country and nearly half of all 68 in place, according to Brazil’s Trade Ministry. Soy and iron ore accounted for 66 percent of $20 billion in Brazilian sales to China last year.
“It’s absolutely critical that China appreciate its currency to ensure equilibrium in the global economy,” said Brazil’s Meirelles.
Indian group fuels UK public waste row
The head of one of India’s biggest IT outsourcing companies has waded into the debate on UK public sector efficiency savings, complaining of an “old boys’ network” in government procurement.
In an interview with the Financial Times, Vineet Nayar, chief executive of HCL Technologies, hit out at the “stranglehold of a few companies” in Britain’s £17bn market for public sector technology.
EDITOR’S CHOICE
Watchdog chief’s pay to test politicians - Feb-14
National pay bargaining ‘does real damage’ - Feb-04
Whitehall ponders a commercial future - Dec-14
Civil servants face redundancy deal cuts - Dec-05
Pay for results, public sector told - Dec-01
Labour seeks £9bn Whitehall savings - Nov-29
His comments come at a sensitive time, with government “waste” emerging as a big issue in the general election campaign. Critics of the government have seized on apparent inefficiencies in IT spending.
As part of its promised efficiency savings, the Tories pledged to loosen the grip a small number of companies have on the market.
“Your contracts are bad, your competition is limited,” Mr Nayar said of the UK public sector. “All we are asking is for a level playing field.”
He said HCL, whose private sector customers include Rolls-Royce, KPMG and Vodafone, could run IT services on behalf of clients for about 20 per cent less than its western rivals. Most of its 60,000 employees are based in India.
He said many UK public sector bodies were unwilling to select or even shortlist HCL, in part because of their strong relationships with existing suppliers.
Some procurement experts lent significant support to his comments.
“The UK [public sector] IT industry is probably the most concentrated in history,” said Patrick Dunleavy, chair of the public policy group at the London School of Economics. While in recent years the government had sought to diversify its suppliers, it had been “woefully poor at getting the costs down”, he said.
Prof Dunleavy estimated that five companies, including HP Enterprise Services, IBM and BT Group, had a UK public sector market share of about 90 per cent.
Through Axon, its British subsidiary acquired in December 2008, HCL has several UK public sector clients, including Birmingham and Manchester city councils, Transport for London and the Metropolitan police.
The £441m purchase of Surrey-based Axon, the former FTSE 250 technology services company, was the Indian outsourcing sector’s biggest overseas takeover.
Operators in the industry have increased their presence in overseas markets to enable them to get closer to clients. Such companies have also sought to enhance their cost-cutting image by providing a wide range of services for clients.
In response to Mr Nayar’s comments, the Office of Government Commerce said public sector bodies were obliged to “adhere to strict legislation set out by governing entities such as the European Union and the World Trade Organisation”.
“In most cases, public contracts should be advertised in a transparent way that avoids discriminatory clauses,” it said, adding: “Members of the WTO government procurement agreement benefit from this legislation more directly. It is worth pointing out that at present India has not joined the WTO GPA.”
Jonathan Steel, chief executive of IT consultancy Bathwick Group, said of the UK public sector market: “Clearly, you’re going to have people who know people and they will be at an advantage in sales situations.
“Having said that, if there was any suspicion of old boys’ networks, that’s going to be blown away by the current financial crisis.”
In an interview with the Financial Times, Vineet Nayar, chief executive of HCL Technologies, hit out at the “stranglehold of a few companies” in Britain’s £17bn market for public sector technology.
EDITOR’S CHOICE
Watchdog chief’s pay to test politicians - Feb-14
National pay bargaining ‘does real damage’ - Feb-04
Whitehall ponders a commercial future - Dec-14
Civil servants face redundancy deal cuts - Dec-05
Pay for results, public sector told - Dec-01
Labour seeks £9bn Whitehall savings - Nov-29
His comments come at a sensitive time, with government “waste” emerging as a big issue in the general election campaign. Critics of the government have seized on apparent inefficiencies in IT spending.
As part of its promised efficiency savings, the Tories pledged to loosen the grip a small number of companies have on the market.
“Your contracts are bad, your competition is limited,” Mr Nayar said of the UK public sector. “All we are asking is for a level playing field.”
He said HCL, whose private sector customers include Rolls-Royce, KPMG and Vodafone, could run IT services on behalf of clients for about 20 per cent less than its western rivals. Most of its 60,000 employees are based in India.
He said many UK public sector bodies were unwilling to select or even shortlist HCL, in part because of their strong relationships with existing suppliers.
Some procurement experts lent significant support to his comments.
“The UK [public sector] IT industry is probably the most concentrated in history,” said Patrick Dunleavy, chair of the public policy group at the London School of Economics. While in recent years the government had sought to diversify its suppliers, it had been “woefully poor at getting the costs down”, he said.
Prof Dunleavy estimated that five companies, including HP Enterprise Services, IBM and BT Group, had a UK public sector market share of about 90 per cent.
Through Axon, its British subsidiary acquired in December 2008, HCL has several UK public sector clients, including Birmingham and Manchester city councils, Transport for London and the Metropolitan police.
The £441m purchase of Surrey-based Axon, the former FTSE 250 technology services company, was the Indian outsourcing sector’s biggest overseas takeover.
Operators in the industry have increased their presence in overseas markets to enable them to get closer to clients. Such companies have also sought to enhance their cost-cutting image by providing a wide range of services for clients.
In response to Mr Nayar’s comments, the Office of Government Commerce said public sector bodies were obliged to “adhere to strict legislation set out by governing entities such as the European Union and the World Trade Organisation”.
“In most cases, public contracts should be advertised in a transparent way that avoids discriminatory clauses,” it said, adding: “Members of the WTO government procurement agreement benefit from this legislation more directly. It is worth pointing out that at present India has not joined the WTO GPA.”
Jonathan Steel, chief executive of IT consultancy Bathwick Group, said of the UK public sector market: “Clearly, you’re going to have people who know people and they will be at an advantage in sales situations.
“Having said that, if there was any suspicion of old boys’ networks, that’s going to be blown away by the current financial crisis.”
Monday, April 19, 2010
Tata Consultancy Profit Rises Fastest in Three Years on Demand
April 20 (Bloomberg) -- Tata Consultancy Services Ltd. reported the fastest profit growth in three years as overseas companies and governments outsourced more computer operations to India’s largest software-services provider.
Net income rose 47 percent to 19.3 billion rupees ($431 million) in the three months ended March 31, Mumbai-based Tata Consultancy said yesterday. That compared with the 18 billion rupee average of 26 analyst estimates compiled by Bloomberg. Profit jumped by the most since the three months through March 2007.
Tata Consultancy joins second-ranked Infosys Technologies Ltd. in signaling demand for their services is strengthening as customers in the U.S. and Europe resume spending. Orders are set to rise at Indian technology vendors after Oracle Corp. forecast the fastest growth in new software licenses since the onset of the global recession, according to Forrester Research Inc.
“Work will soon start to kick in following these licensed software sales” as companies hire Tata Consultancy and rivals to customize software, Andrew Bartels, an analyst at Cambridge, Massachusetts-based Forrester said by phone before the earnings announcement. “For service vendors, it looks like it’s going to be a summer, not just a spring.”
Tata Consultancy fell 0.4 percent to 811.95 rupees in Mumbai yesterday. The earnings were announced after markets closed. The stock was the third-best performer in the past 12 months on India’s Sensitive Index, almost tripling in value compared with a 58 percent advance by the benchmark index in the period.
‘Across the Board’
Fourth-quarter sales grew 7.9 percent to 77.4 billion rupees, after the company won orders including a five-year contract for information-technology infrastructure services from Malaysian Airline System Bhd. Tata Consultancy, which provides computer services and back office support to 917 clients including Citigroup Inc. and BP Plc, was last month picked by the Personal Accounts Delivery Authority in the U.K. to administer the national pension program.
“The good thing is traction is happening and we are seeing a deal pipeline across the board,” Chief Executive Officer N. Chandrasekaran told reporters in Mumbai yesterday. “Growth will be led by the U.S. and emerging markets followed by the U.K. and Europe.”
Pursuing Contracts
Tata Consultancy is pursuing contracts of various sizes ranging from $50 million to $500 million and plans to spend about $200 million on salary increases in the year that started April 1. Revenue from corporations in North America accounted for 54 percent of sales in the last quarter, rising from 52.5 percent in the prior three-month period, the company said.
Worldwide information and communication technology spending, which includes computer and network equipment purchases, will grow 7.7 percent this year from an estimated $1.46 trillion in 2009, according to Forrester. Spending in the U.S. will outpace gross domestic product growth as companies increase discretionary spending to make up for orders delayed during last year’s recession, the researcher said.
Infosys last week forecast sales in the 12 months ending March 31, 2011, may increase as much as 18 percent to $5.67 billion, the fastest pace in three years. Accenture Plc has projected sales may grow as much as 10 percent next year as companies resume technology spending, which is forecast to grow 8.4 percent in the U.S. this year, according to Forrester.
Tata Consultancy, which ended the 12-month period through March with 160,429 employees, has made more than 20,000 job offers on college campuses, according to a company presentation to analysts on its Web site.
Net income rose 47 percent to 19.3 billion rupees ($431 million) in the three months ended March 31, Mumbai-based Tata Consultancy said yesterday. That compared with the 18 billion rupee average of 26 analyst estimates compiled by Bloomberg. Profit jumped by the most since the three months through March 2007.
Tata Consultancy joins second-ranked Infosys Technologies Ltd. in signaling demand for their services is strengthening as customers in the U.S. and Europe resume spending. Orders are set to rise at Indian technology vendors after Oracle Corp. forecast the fastest growth in new software licenses since the onset of the global recession, according to Forrester Research Inc.
“Work will soon start to kick in following these licensed software sales” as companies hire Tata Consultancy and rivals to customize software, Andrew Bartels, an analyst at Cambridge, Massachusetts-based Forrester said by phone before the earnings announcement. “For service vendors, it looks like it’s going to be a summer, not just a spring.”
Tata Consultancy fell 0.4 percent to 811.95 rupees in Mumbai yesterday. The earnings were announced after markets closed. The stock was the third-best performer in the past 12 months on India’s Sensitive Index, almost tripling in value compared with a 58 percent advance by the benchmark index in the period.
‘Across the Board’
Fourth-quarter sales grew 7.9 percent to 77.4 billion rupees, after the company won orders including a five-year contract for information-technology infrastructure services from Malaysian Airline System Bhd. Tata Consultancy, which provides computer services and back office support to 917 clients including Citigroup Inc. and BP Plc, was last month picked by the Personal Accounts Delivery Authority in the U.K. to administer the national pension program.
“The good thing is traction is happening and we are seeing a deal pipeline across the board,” Chief Executive Officer N. Chandrasekaran told reporters in Mumbai yesterday. “Growth will be led by the U.S. and emerging markets followed by the U.K. and Europe.”
Pursuing Contracts
Tata Consultancy is pursuing contracts of various sizes ranging from $50 million to $500 million and plans to spend about $200 million on salary increases in the year that started April 1. Revenue from corporations in North America accounted for 54 percent of sales in the last quarter, rising from 52.5 percent in the prior three-month period, the company said.
Worldwide information and communication technology spending, which includes computer and network equipment purchases, will grow 7.7 percent this year from an estimated $1.46 trillion in 2009, according to Forrester. Spending in the U.S. will outpace gross domestic product growth as companies increase discretionary spending to make up for orders delayed during last year’s recession, the researcher said.
Infosys last week forecast sales in the 12 months ending March 31, 2011, may increase as much as 18 percent to $5.67 billion, the fastest pace in three years. Accenture Plc has projected sales may grow as much as 10 percent next year as companies resume technology spending, which is forecast to grow 8.4 percent in the U.S. this year, according to Forrester.
Tata Consultancy, which ended the 12-month period through March with 160,429 employees, has made more than 20,000 job offers on college campuses, according to a company presentation to analysts on its Web site.
Asian Stocks Rise on Divided Goldman Sachs Vote, Citigroup, Yen
April 20 (Bloomberg) -- Asian stocks rose, led by finance companies, as people familiar with the matter said regulators were split on suing Goldman Sachs Group Inc., easing concern over the impact increased scrutiny on banks will have on profits.
Sumitomo Mitsui Financial Group Inc. rose 1.4 percent in Tokyo as Morgan Stanley upgraded the nation’s banks and Citigroup Inc.’s profit beat estimates. National Australia Bank Ltd., the nation’s third-biggest lender, climbed 2.8 percent in Sydney. Honda Motor Co., which gets 44 percent of its sales in North America, gained 1.7 percent in Tokyo after the yen weakened against the dollar.
The MSCI Asia Pacific Index gained 0.6 percent to 126.30 as of 9:44 a.m. in Tokyo. The gauge slumped the most since Feb. 19 yesterday after regulators sued Goldman Sachs for fraud related to collateralized debt obligations. Securities and Exchange Commission officials voted 3-2 to pursue the case, two people familiar with the matter said.
“The divided vote on Goldman suggests excessive regulation that would reduce bank earnings will be avoided,” said Fumiyuki Nakanishi, a senior strategist at SMBC Friend Securities Co. in Tokyo.
Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. The gauge rose 0.5 percent yesterday as the index of U.S. leading indicators rose in March by the most in 10 months.
Sumitomo Mitsui Financial Group Inc. rose 1.4 percent in Tokyo as Morgan Stanley upgraded the nation’s banks and Citigroup Inc.’s profit beat estimates. National Australia Bank Ltd., the nation’s third-biggest lender, climbed 2.8 percent in Sydney. Honda Motor Co., which gets 44 percent of its sales in North America, gained 1.7 percent in Tokyo after the yen weakened against the dollar.
The MSCI Asia Pacific Index gained 0.6 percent to 126.30 as of 9:44 a.m. in Tokyo. The gauge slumped the most since Feb. 19 yesterday after regulators sued Goldman Sachs for fraud related to collateralized debt obligations. Securities and Exchange Commission officials voted 3-2 to pursue the case, two people familiar with the matter said.
“The divided vote on Goldman suggests excessive regulation that would reduce bank earnings will be avoided,” said Fumiyuki Nakanishi, a senior strategist at SMBC Friend Securities Co. in Tokyo.
Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. The gauge rose 0.5 percent yesterday as the index of U.S. leading indicators rose in March by the most in 10 months.
Sunday, April 18, 2010
India May Increase Rates for Second Time in Month on Inflation
April 19 (Bloomberg) -- India’s central bank may raise interest rates for the second time in a month to tame the fastest inflation among Group of 20 nations.
The Reserve Bank of India will probably increase the reverse repurchase rate to 3.75 percent from 3.5 percent and the repurchase rate to 5.25 percent from 5 percent, according to the median forecast of 25 economists in a Bloomberg News Survey. The announcement is due at 11:15 a.m. in Mumbai tomorrow.
Governor Duvvuri Subbarao’s struggle against inflation exposes the roadblocks in the Indian economy -- inadequate capacity in power, roads and ports that drive up prices. In China, where infrastructure spending is double that of India, the fastest growth in almost three years in the first quarter came with a slowdown in inflation, complicating the decision in the country on when to raise interest rates.
“Domestic demand pressures are building in the Indian economy without a commensurate increase in capacity creation,” said Chetan Ahya, a regional economist at Morgan Stanley in Singapore. “That coupled with a rise in global commodity prices is resulting in a spike in non-food inflation.”
Consumer prices paid by industrial workers in India rose 14.9 percent in February from a year earlier. The nation’s wholesale-price inflation rate held at a 17-month high of 9.9 percent in March.
India’s $1.2 trillion economy may grow 7.5 percent in 2010, the fastest pace after China among the major economies, according to the World Bank. Subbarao on March 19 raised interest rates by a quarter-point for the first time in almost two years.
Poor Roads
The Reserve Bank may also increase the cash reserve ratio, or the proportion of deposits that lenders need to set aside as reserves, to 6 percent from 5.75 percent, according to the Bloomberg survey. Nine of 25 economists surveyed forecast a half-point increase in the reverse repurchase rate.
India produces about 10 percent less electricity than it needs, while roads, which account for 65 percent of the nation’s cargo, are plagued by single lanes and irregular surfaces, boosting companies’ costs, according to government estimates.
Infrastructure spending accounts for just 4 percent of India’s gross domestic product compared with 9 percent of GDP in China, according to CLSA Asia-Pacific Markets. The Planning Commission of India estimated last month the country needs to more than double spending on infrastructure to $1 trillion in the five years to March 2017.
Oil Prices
Increasing costs for commodities such as oil, which India imports to meet three-quarters of its needs, are also spurring price pressures. Crude oil prices have surged 70 percent in the past year.
Wal-Mart Stores Inc., the world’s largest retailer, said last week India’s inflation would slow by at least two percentage points if the government agreed to allow foreign investment in retail.
Wal-Mart, Carrefour SA and Tesco Plc are betting that their supply chain network and sourcing ability will allow them to remove middle men and sell products directly to consumers in India at lower prices. Local laws, aimed at protecting small shop owners, let global companies operate only wholesale stores that sell groceries and goods to retailers and businesses. An increase in the cost of Indian interest-rate swaps signaled investors are using the derivatives to guard against an increase in borrowing costs. One-year swap rates have added 12 basis points in the past two weeks, the most in such a period since December. The rate, a fixed payment made to receive floating rates, touched a two-month high of 5.13 percent on April 15.
Stronger Currency
The yield for benchmark 10-year Indian government bonds has added 47 basis points this year to 8.06 percent on the inflation outlook. The central bank has allowed the rupee to appreciate to make imports cheaper and fight inflation. The currency has gained 4.4 percent since Jan. 1 against the U.S. dollar.
“India has the highest inflation of any of the economies currently around Asia,” said Timothy Moe, Goldman Sachs Group Inc. chief Asian strategist. “The economy we felt was most in need of raising rates.”
Consumer prices in China rose 2.4 percent in March, less than economists expected. India, Australia and Malaysia have already raised borrowing costs, while Singapore last week announced it will allow its currency -- the city-state’s principal monetary tool -- to strengthen, as Asia Pacific economies recovered from the worst recession since World War II.
‘Cost Pressures’
Prices may rise further in India as the Purchasing Managers’ Index, released by HSBC Group Plc and Markit Economics, was 57.8 in March, indicating growing consumer demand. A reading above 50 indicates a gain in factory production.
HSBC economist Robert Prior-Wandesforde said the most “attention-grabbing” aspect of the March factory index data was the surge in input prices, which suggests that companies are facing “sizeable and mounting cost pressures.”
Toyota Motor Corp.’s Indian unit on April 1 raised prices of its Corolla, Innova and Fortuner vehicles to offset rising input costs, while Indian Oil Corp., the nation’s second-largest refiner, increased jet fuel prices.
The Reserve Bank of India will probably increase the reverse repurchase rate to 3.75 percent from 3.5 percent and the repurchase rate to 5.25 percent from 5 percent, according to the median forecast of 25 economists in a Bloomberg News Survey. The announcement is due at 11:15 a.m. in Mumbai tomorrow.
Governor Duvvuri Subbarao’s struggle against inflation exposes the roadblocks in the Indian economy -- inadequate capacity in power, roads and ports that drive up prices. In China, where infrastructure spending is double that of India, the fastest growth in almost three years in the first quarter came with a slowdown in inflation, complicating the decision in the country on when to raise interest rates.
“Domestic demand pressures are building in the Indian economy without a commensurate increase in capacity creation,” said Chetan Ahya, a regional economist at Morgan Stanley in Singapore. “That coupled with a rise in global commodity prices is resulting in a spike in non-food inflation.”
Consumer prices paid by industrial workers in India rose 14.9 percent in February from a year earlier. The nation’s wholesale-price inflation rate held at a 17-month high of 9.9 percent in March.
India’s $1.2 trillion economy may grow 7.5 percent in 2010, the fastest pace after China among the major economies, according to the World Bank. Subbarao on March 19 raised interest rates by a quarter-point for the first time in almost two years.
Poor Roads
The Reserve Bank may also increase the cash reserve ratio, or the proportion of deposits that lenders need to set aside as reserves, to 6 percent from 5.75 percent, according to the Bloomberg survey. Nine of 25 economists surveyed forecast a half-point increase in the reverse repurchase rate.
India produces about 10 percent less electricity than it needs, while roads, which account for 65 percent of the nation’s cargo, are plagued by single lanes and irregular surfaces, boosting companies’ costs, according to government estimates.
Infrastructure spending accounts for just 4 percent of India’s gross domestic product compared with 9 percent of GDP in China, according to CLSA Asia-Pacific Markets. The Planning Commission of India estimated last month the country needs to more than double spending on infrastructure to $1 trillion in the five years to March 2017.
Oil Prices
Increasing costs for commodities such as oil, which India imports to meet three-quarters of its needs, are also spurring price pressures. Crude oil prices have surged 70 percent in the past year.
Wal-Mart Stores Inc., the world’s largest retailer, said last week India’s inflation would slow by at least two percentage points if the government agreed to allow foreign investment in retail.
Wal-Mart, Carrefour SA and Tesco Plc are betting that their supply chain network and sourcing ability will allow them to remove middle men and sell products directly to consumers in India at lower prices. Local laws, aimed at protecting small shop owners, let global companies operate only wholesale stores that sell groceries and goods to retailers and businesses. An increase in the cost of Indian interest-rate swaps signaled investors are using the derivatives to guard against an increase in borrowing costs. One-year swap rates have added 12 basis points in the past two weeks, the most in such a period since December. The rate, a fixed payment made to receive floating rates, touched a two-month high of 5.13 percent on April 15.
Stronger Currency
The yield for benchmark 10-year Indian government bonds has added 47 basis points this year to 8.06 percent on the inflation outlook. The central bank has allowed the rupee to appreciate to make imports cheaper and fight inflation. The currency has gained 4.4 percent since Jan. 1 against the U.S. dollar.
“India has the highest inflation of any of the economies currently around Asia,” said Timothy Moe, Goldman Sachs Group Inc. chief Asian strategist. “The economy we felt was most in need of raising rates.”
Consumer prices in China rose 2.4 percent in March, less than economists expected. India, Australia and Malaysia have already raised borrowing costs, while Singapore last week announced it will allow its currency -- the city-state’s principal monetary tool -- to strengthen, as Asia Pacific economies recovered from the worst recession since World War II.
‘Cost Pressures’
Prices may rise further in India as the Purchasing Managers’ Index, released by HSBC Group Plc and Markit Economics, was 57.8 in March, indicating growing consumer demand. A reading above 50 indicates a gain in factory production.
HSBC economist Robert Prior-Wandesforde said the most “attention-grabbing” aspect of the March factory index data was the surge in input prices, which suggests that companies are facing “sizeable and mounting cost pressures.”
Toyota Motor Corp.’s Indian unit on April 1 raised prices of its Corolla, Innova and Fortuner vehicles to offset rising input costs, while Indian Oil Corp., the nation’s second-largest refiner, increased jet fuel prices.
Volcanic Ash May Weigh on European Economy
FRANKFURT — The past weekend was definitely not a good time to be a Kenyan flower grower, an Israeli avocado farmer, a package tour operator or anyone else trying to run a business that depends on air transport to or from Europe.
Consider TUI, the largest travel operator in Germany. With all the country’s airports closed because of the danger posed by a cloud of volcanic ash from Iceland, the company, based in Hanover, had to take extraordinary — and costly — steps to bring customers back from Mediterranean vacations.
Late Saturday, TUI flew 540 of its customers from the Spanish island of Mallorca to Barcelona. After staying overnight in hotels paid for by TUI, the vacationers boarded a dozen buses for a 20-hour trip to Frankfurt. From there they continued home by train.
Economists have begun considering when, and to what extent, the extra costs sustained by companies like TUI — not to mention the airlines — will start to damage Europe’s already shaky economy.
Most say the effects will not be catastrophic if the skies clear soon.
There were signs of hope Sunday as airports in Frankfurt, Berlin and some other European cities reopened on a restricted basis, at least temporarily.
But a longer spell of airport closures — or intermittent disruptions in the coming weeks and months as the volcano continues to erupt and winds carry the ash to Europe — could start to take a toll.
“Given that the recovery of the euro-area economy is anyway so weak, it might have an impact,” Daniel Gros, director of the Center for European Policy Studies in Brussels, wrote in an e-mail message.
While most economists are not predicting that the volcano will push Europe back into recession, there is a risk of unexpected consequences that could amplify the economic damage.
If, for example, ash falls to the ground in greater quantities than expected, creating a real or perceived health risk, consumer sentiment could have a serious decline.
“People get spooked and they don’t do anything anymore,” said Jacques Cailloux, chief European economist for Royal Bank of Scotland in London.
While such a prospect is unlikely, Mr. Cailloux said, “it’s something to be monitoring.”
Even if the macroeconomic effects are limited, businesses and industries that depend on air transport are already feeling the pain. Kenyan growers, who account for 35 percent of the European Union’s imports of flowers, are losing up to $2 million a day in earnings because they cannot fly their blooms to market, Reuters reported.
Produce growers in North Africa and Israel will suffer the same effect. Most fresh produce travels by air because it is perishable.
“Europe is the market where they get the most profit,” said Aliza Fleischer, a specialist in the economic effects of climate change at the Hebrew University of Jerusalem.
Makers of high-tech goods like semiconductors and cellphones could have their finely tuned logistics operations thrown out of whack.
“Where you might have an impact is where the goods are mission critical — phones, parts that are important to the production process,” said Mr. Cailloux of Royal Bank of Scotland.
As if Greece did not already have enough problems managing its debt, the country could be among the hardest hit if the disruptions continue long enough to interfere with the peak holiday season.
“It could make matters worse for Greece, which obviously needs every penny from tourism,” Mr. Cailloux.
Hard to measure, but potentially significant, is the effect of the air travel shutdown on productivity. Hundreds of thousands of people will miss work because they are stuck in a foreign city somewhere, said Peter Westaway, chief economist for Europe at Nomura’s offices in London. He should know. Mr. Westaway spoke by cellphone from Tokyo, where he was watching British football on a barroom television at 3 a.m. and waiting for news of when he might be able to get back to London.
The effect will not be drastic if the airport shutdowns end soon, but could be significant if the situation lasts longer.
Consider TUI, the largest travel operator in Germany. With all the country’s airports closed because of the danger posed by a cloud of volcanic ash from Iceland, the company, based in Hanover, had to take extraordinary — and costly — steps to bring customers back from Mediterranean vacations.
Late Saturday, TUI flew 540 of its customers from the Spanish island of Mallorca to Barcelona. After staying overnight in hotels paid for by TUI, the vacationers boarded a dozen buses for a 20-hour trip to Frankfurt. From there they continued home by train.
Economists have begun considering when, and to what extent, the extra costs sustained by companies like TUI — not to mention the airlines — will start to damage Europe’s already shaky economy.
Most say the effects will not be catastrophic if the skies clear soon.
There were signs of hope Sunday as airports in Frankfurt, Berlin and some other European cities reopened on a restricted basis, at least temporarily.
But a longer spell of airport closures — or intermittent disruptions in the coming weeks and months as the volcano continues to erupt and winds carry the ash to Europe — could start to take a toll.
“Given that the recovery of the euro-area economy is anyway so weak, it might have an impact,” Daniel Gros, director of the Center for European Policy Studies in Brussels, wrote in an e-mail message.
While most economists are not predicting that the volcano will push Europe back into recession, there is a risk of unexpected consequences that could amplify the economic damage.
If, for example, ash falls to the ground in greater quantities than expected, creating a real or perceived health risk, consumer sentiment could have a serious decline.
“People get spooked and they don’t do anything anymore,” said Jacques Cailloux, chief European economist for Royal Bank of Scotland in London.
While such a prospect is unlikely, Mr. Cailloux said, “it’s something to be monitoring.”
Even if the macroeconomic effects are limited, businesses and industries that depend on air transport are already feeling the pain. Kenyan growers, who account for 35 percent of the European Union’s imports of flowers, are losing up to $2 million a day in earnings because they cannot fly their blooms to market, Reuters reported.
Produce growers in North Africa and Israel will suffer the same effect. Most fresh produce travels by air because it is perishable.
“Europe is the market where they get the most profit,” said Aliza Fleischer, a specialist in the economic effects of climate change at the Hebrew University of Jerusalem.
Makers of high-tech goods like semiconductors and cellphones could have their finely tuned logistics operations thrown out of whack.
“Where you might have an impact is where the goods are mission critical — phones, parts that are important to the production process,” said Mr. Cailloux of Royal Bank of Scotland.
As if Greece did not already have enough problems managing its debt, the country could be among the hardest hit if the disruptions continue long enough to interfere with the peak holiday season.
“It could make matters worse for Greece, which obviously needs every penny from tourism,” Mr. Cailloux.
Hard to measure, but potentially significant, is the effect of the air travel shutdown on productivity. Hundreds of thousands of people will miss work because they are stuck in a foreign city somewhere, said Peter Westaway, chief economist for Europe at Nomura’s offices in London. He should know. Mr. Westaway spoke by cellphone from Tokyo, where he was watching British football on a barroom television at 3 a.m. and waiting for news of when he might be able to get back to London.
The effect will not be drastic if the airport shutdowns end soon, but could be significant if the situation lasts longer.
Europe Carriers Press for Airspace Re-Opening After Ash Cloud
April 19 (Bloomberg) -- Deutsche Lufthansa AG, Air France- KLM Group and industry groups are pressing European governments to re-examine an unprecedented closing of the region’s airspace from last week’s Icelandic volcanic eruption as losses from the grounding of aircraft pile up.
Lufthansa and Air France’s KLM unit reported successful testing of flights without passengers during the weekend, and Air France said an inspection of an Airbus A320 flown yesterday from Paris to Toulouse showed “no anomalies.” The Association of European Airlines, which represents 36 carriers, said it wants an “immediate” assessment of the airspace restrictions.
“We’re appealing to the government day and night to get an easing of the ban, but frankly there’s not much more we can do but keep knocking on the door,” Andreas Bartels, a spokesman for Cologne, Germany-based Lufthansa, said in a telephone interview. “We’re an airline and we want to fly.”
As many as 63,000 flights have been canceled after the April 14 eruption at the Eyjafjallajökull volcano spewed dust across Europe’s airspace, causing airports from Dublin to Moscow to shutter. Spain, holder of the European Union presidency, called a video conference among transport ministers today to discuss emergency plans.
The disruptions are costing carriers $200 million a day, according to an estimate by the International Air Transport Association. British Airways Plc, with daily revenue of about 24 million pounds ($37 million), has canceled all flights to and from London through tomorrow. Chief Executive Officer Willie Walsh was on a test flight yesterday from Heathrow to Cardiff that encountered “no difficulties,” the carrier said.
Stock Slump
Airline stocks, including British Airways, Lufthansa, and Ryanair Holdings Plc, slumped on April 16, with the Bloomberg EMEA Airlines Index falling 3.1 percent, the steepest decline in 2 1/2 months.
Volcanic ash can cause jet engines to fail by melting and then congealing in the turbines.
While Brussels-based Eurocontrol, which oversees Europe’s flight paths, predicts as much as half of Europe’s airspace may be “risk free” today, U.K. Transport Minister Andrew Adonis said in televised comments yesterday that flights across northern Europe won’t be safe in the next 24 hours, citing advice given by the country’s Met Office.
KLM operated 10 test flights with only a crew over the weekend and concluded that the quality of the atmosphere is “in order.” Air France said its engineers found no visual impact during a flight from Paris to Toulouse and no problems with the jet afterwards. Lufthansa sent 10 aircraft from Munich to Frankfurt to reposition its fleet on April 17.
‘Worse Than 9/11’
“With 313 airports paralyzed at the moment, the impact is already worst than 9/11,” Olivier Jankovec, Director General at Airports Council International, said in a statement. “While safety remains a non-negotiable priority, it is not incompatible with our legitimate request to reconsider the present restrictions.”
The disruption to European air traffic caused by the cloud of volcanic ash is “unsustainable,” Transport Commissioner Siim Kallas told a briefing in Brussels yesterday. The Commission will set up a group to assess the impact of the ash cloud on the economy and European travel.
A Eurocontrol spokesman didn’t answer calls for comment.
German Transport Minister Peter Ramsauer expects restrictions over the country’s airspace to be maintained for “the coming days,” he told the Bild newspaper in an interview published today.
French Environment Minister Jean-Louis Borloo, speaking to reporters yesterday, said he doesn’t expect a complete reopening of the European airspace “from one day to the next.”
France, Germany
France’s airspace in the north and east, which includes the airports of Paris and Lyon, will remain closed until at least the morning of April 20. Civil aviation authorities reopened the airspace over the southwest, allowing Air France to fly seven long-haul flights from Toulouse today.
Germany’s DFS flight safety authority shut all of the country’s airports by 10 p.m. yesterday after easing a ban earlier on hubs including Berlin and Frankfurt. Airspace closure will remain until at least 2 p.m.
U.K. airspace remains restricted until at least 7 p.m., flight-control authority National Air Traffic Services said. The Netherlands extended the closure of its airspace until 8 p.m.
Norway re-opened some airspace north of Bergen airport until Berlevag, and the south may be cleared later. Sweden re- opened the area north of Soderhamn, including Kiruna airport. Airspace in northern Spain was shut.
Asia, U.S.
“We hope to receive permission as soon as possible after that to start up our operations and to transport our passengers to their destinations,” KLM Chief Executive Officer Peter Hartman said in a statement.
Airlines in the Asia-Pacific region canceled most Europe- bound flights, with Qantas Airways Ltd. saying it won’t fly to European destinations before April 20. Carriers including Air China Ltd., Japan Airlines Corp., Thai Airways International Pcl, Korean Air Lines Co. and Cathay Pacific Airways Ltd. also shut down services to Europe.
United Parcel Service Inc., the world’s largest package- delivery firm, began trucking items from Asia through Istanbul and into Europe. The company made a flight from Dubai to Istanbul yesterday, then put those goods on trucks bound for Europe, according to spokesman Norman Black. UPS’s air hub in Cologne, Germany has been closed since April 16.
Little Visibility
Haraldur Eiriksson, a meteorologist at the Icelandic meteorological office, predicts little change in the ash pattern in Europe at least through April 23.
“This could have an ongoing impact on European air travel,” he said. “The forecast hasn’t changed, although the height the volcano is spewing the ash into has decreased from 5 to 6 kilometers to less than 3 kilometers and now it can’t be seen on our radars.”
Volcanic eruptions may continue for months and curtail European air traffic, said Sigrun Hreinsdottir, a geophysicist at the University of Iceland in Reykjavik. “It could erupt, pause for a few weeks, and then possibly erupt again.”
The last eruption of the 1,666-meter (5,466-foot) Eyjafjallajökull in December 1821 continued until January 1823. The current blast has sent ash as high as 7 kilometers (4.5 miles), according to Gudrun Larsen, a vulcanologist at the University of Iceland. The magma had to pierce 200 meters of ice before reaching the air, she said.
Obama, Merkel
“We really don’t know if this eruption is going to last as long as the previous one, but we can’t say it’s not a possibility,” Larsen said by telephone.
The volcanic ash cloud also led world leaders, including Barack Obama, German Chancellor Angela Merkel and French President Nicolas Sarkozy to cancel plans to attend yesterday’s funeral of Polish President Lech Kaczynski, killed with 95 others in an April 10 plane crash.
The U.S.-based Air Transport Association said yesterday that 310 non-stop flights scheduled between the U.S. and Europe, or 92 percent of the total for the day, were canceled.
Delta Air Lines Inc., the world’s largest carrier, scrapped 97 flights yesterday to and from Europe, spokesman Anthony Black said. A further 49 flights have been grounded for today. AMR Corp.’s American Airlines canceled 60 flights to and from Europe.
The eruption began on March 20 with a lava flow on the eastern flank of the Eyjafjallajökull volcano, according to the Institute of Earth Sciences at the University of Iceland. After a lull, it resumed early on April 14, directly under the icecap that covers most of the mountain.
Lufthansa and Air France’s KLM unit reported successful testing of flights without passengers during the weekend, and Air France said an inspection of an Airbus A320 flown yesterday from Paris to Toulouse showed “no anomalies.” The Association of European Airlines, which represents 36 carriers, said it wants an “immediate” assessment of the airspace restrictions.
“We’re appealing to the government day and night to get an easing of the ban, but frankly there’s not much more we can do but keep knocking on the door,” Andreas Bartels, a spokesman for Cologne, Germany-based Lufthansa, said in a telephone interview. “We’re an airline and we want to fly.”
As many as 63,000 flights have been canceled after the April 14 eruption at the Eyjafjallajökull volcano spewed dust across Europe’s airspace, causing airports from Dublin to Moscow to shutter. Spain, holder of the European Union presidency, called a video conference among transport ministers today to discuss emergency plans.
The disruptions are costing carriers $200 million a day, according to an estimate by the International Air Transport Association. British Airways Plc, with daily revenue of about 24 million pounds ($37 million), has canceled all flights to and from London through tomorrow. Chief Executive Officer Willie Walsh was on a test flight yesterday from Heathrow to Cardiff that encountered “no difficulties,” the carrier said.
Stock Slump
Airline stocks, including British Airways, Lufthansa, and Ryanair Holdings Plc, slumped on April 16, with the Bloomberg EMEA Airlines Index falling 3.1 percent, the steepest decline in 2 1/2 months.
Volcanic ash can cause jet engines to fail by melting and then congealing in the turbines.
While Brussels-based Eurocontrol, which oversees Europe’s flight paths, predicts as much as half of Europe’s airspace may be “risk free” today, U.K. Transport Minister Andrew Adonis said in televised comments yesterday that flights across northern Europe won’t be safe in the next 24 hours, citing advice given by the country’s Met Office.
KLM operated 10 test flights with only a crew over the weekend and concluded that the quality of the atmosphere is “in order.” Air France said its engineers found no visual impact during a flight from Paris to Toulouse and no problems with the jet afterwards. Lufthansa sent 10 aircraft from Munich to Frankfurt to reposition its fleet on April 17.
‘Worse Than 9/11’
“With 313 airports paralyzed at the moment, the impact is already worst than 9/11,” Olivier Jankovec, Director General at Airports Council International, said in a statement. “While safety remains a non-negotiable priority, it is not incompatible with our legitimate request to reconsider the present restrictions.”
The disruption to European air traffic caused by the cloud of volcanic ash is “unsustainable,” Transport Commissioner Siim Kallas told a briefing in Brussels yesterday. The Commission will set up a group to assess the impact of the ash cloud on the economy and European travel.
A Eurocontrol spokesman didn’t answer calls for comment.
German Transport Minister Peter Ramsauer expects restrictions over the country’s airspace to be maintained for “the coming days,” he told the Bild newspaper in an interview published today.
French Environment Minister Jean-Louis Borloo, speaking to reporters yesterday, said he doesn’t expect a complete reopening of the European airspace “from one day to the next.”
France, Germany
France’s airspace in the north and east, which includes the airports of Paris and Lyon, will remain closed until at least the morning of April 20. Civil aviation authorities reopened the airspace over the southwest, allowing Air France to fly seven long-haul flights from Toulouse today.
Germany’s DFS flight safety authority shut all of the country’s airports by 10 p.m. yesterday after easing a ban earlier on hubs including Berlin and Frankfurt. Airspace closure will remain until at least 2 p.m.
U.K. airspace remains restricted until at least 7 p.m., flight-control authority National Air Traffic Services said. The Netherlands extended the closure of its airspace until 8 p.m.
Norway re-opened some airspace north of Bergen airport until Berlevag, and the south may be cleared later. Sweden re- opened the area north of Soderhamn, including Kiruna airport. Airspace in northern Spain was shut.
Asia, U.S.
“We hope to receive permission as soon as possible after that to start up our operations and to transport our passengers to their destinations,” KLM Chief Executive Officer Peter Hartman said in a statement.
Airlines in the Asia-Pacific region canceled most Europe- bound flights, with Qantas Airways Ltd. saying it won’t fly to European destinations before April 20. Carriers including Air China Ltd., Japan Airlines Corp., Thai Airways International Pcl, Korean Air Lines Co. and Cathay Pacific Airways Ltd. also shut down services to Europe.
United Parcel Service Inc., the world’s largest package- delivery firm, began trucking items from Asia through Istanbul and into Europe. The company made a flight from Dubai to Istanbul yesterday, then put those goods on trucks bound for Europe, according to spokesman Norman Black. UPS’s air hub in Cologne, Germany has been closed since April 16.
Little Visibility
Haraldur Eiriksson, a meteorologist at the Icelandic meteorological office, predicts little change in the ash pattern in Europe at least through April 23.
“This could have an ongoing impact on European air travel,” he said. “The forecast hasn’t changed, although the height the volcano is spewing the ash into has decreased from 5 to 6 kilometers to less than 3 kilometers and now it can’t be seen on our radars.”
Volcanic eruptions may continue for months and curtail European air traffic, said Sigrun Hreinsdottir, a geophysicist at the University of Iceland in Reykjavik. “It could erupt, pause for a few weeks, and then possibly erupt again.”
The last eruption of the 1,666-meter (5,466-foot) Eyjafjallajökull in December 1821 continued until January 1823. The current blast has sent ash as high as 7 kilometers (4.5 miles), according to Gudrun Larsen, a vulcanologist at the University of Iceland. The magma had to pierce 200 meters of ice before reaching the air, she said.
Obama, Merkel
“We really don’t know if this eruption is going to last as long as the previous one, but we can’t say it’s not a possibility,” Larsen said by telephone.
The volcanic ash cloud also led world leaders, including Barack Obama, German Chancellor Angela Merkel and French President Nicolas Sarkozy to cancel plans to attend yesterday’s funeral of Polish President Lech Kaczynski, killed with 95 others in an April 10 plane crash.
The U.S.-based Air Transport Association said yesterday that 310 non-stop flights scheduled between the U.S. and Europe, or 92 percent of the total for the day, were canceled.
Delta Air Lines Inc., the world’s largest carrier, scrapped 97 flights yesterday to and from Europe, spokesman Anthony Black said. A further 49 flights have been grounded for today. AMR Corp.’s American Airlines canceled 60 flights to and from Europe.
The eruption began on March 20 with a lava flow on the eastern flank of the Eyjafjallajökull volcano, according to the Institute of Earth Sciences at the University of Iceland. After a lull, it resumed early on April 14, directly under the icecap that covers most of the mountain.
National Bank of Oman, NBK, Sabic, Samba: Gulf Equity Preview
April 18 (Bloomberg) -- The following stocks may rise or fall in Persian Gulf markets. Stock symbols are in parentheses and prices are from the last close.
The Dubai Financial Market General Index lost 0.4 percent to 1,816.43, the lowest in a week. Abu Dhabi’s measure gained 0.1 percent, while Kuwait’s index declined 0.2 percent. Qatar’s measure lost 1.2 percent and Oman’s measure gained less than 0.1 percent. Saudi Arabia’s Tadawul All Share Index fell 0.1 percent.
Dar Al Arkan Real Estate Development Co. (ALARKAN AB): Saudi Arabia’s biggest developer by market value said first- quarter profit declined 6.1 percent to 398.6 million riyals ($106.3 million) as property prices fell. The shares lost 1.1 percent to 13.85 riyals.
National Bank of Kuwait SAK (NBK KK): The country’s largest lender said first-quarter profit rose 20 percent to 76.3 million dinars ($265 million), bolstered by income from expansion in Egypt and Qatar. The shares were unchanged at 1,220 fils.
National Bank of Oman SAOG (NBOB OM): The Persian Gulf country’s second-biggest bank by assets said first-quarter profit declined 10 percent to 6.57 million rials ($17 million). The shares declined 0.6 percent to 0.344 rials.
Oman Cable Industry SAOG (OCAI OM): The sultanate’s biggest cables and wires maker by market value posted a first-quarter profit of 1.7 million rials compared with a loss of 950,000 rials in the year-earlier period. The shares dropped 2.3 percent to 1.442 rials.
Samba Financial Group (SAMBA AB): Saudi Arabia’s second- largest bank by market value said first-quarter profit declined 4.8 percent to 1.21 billion riyals. The shares fell 1.2 percent to 60.25 riyals.
Saudi Basic Industries Corp. (SABIC AB): The world’s largest petrochemical maker posted a first-quarter profit of 5.43 billion riyals on renewed global demand for fertilizers and plastics. The shares were unchanged at 103.25 riyals.
The Dubai Financial Market General Index lost 0.4 percent to 1,816.43, the lowest in a week. Abu Dhabi’s measure gained 0.1 percent, while Kuwait’s index declined 0.2 percent. Qatar’s measure lost 1.2 percent and Oman’s measure gained less than 0.1 percent. Saudi Arabia’s Tadawul All Share Index fell 0.1 percent.
Dar Al Arkan Real Estate Development Co. (ALARKAN AB): Saudi Arabia’s biggest developer by market value said first- quarter profit declined 6.1 percent to 398.6 million riyals ($106.3 million) as property prices fell. The shares lost 1.1 percent to 13.85 riyals.
National Bank of Kuwait SAK (NBK KK): The country’s largest lender said first-quarter profit rose 20 percent to 76.3 million dinars ($265 million), bolstered by income from expansion in Egypt and Qatar. The shares were unchanged at 1,220 fils.
National Bank of Oman SAOG (NBOB OM): The Persian Gulf country’s second-biggest bank by assets said first-quarter profit declined 10 percent to 6.57 million rials ($17 million). The shares declined 0.6 percent to 0.344 rials.
Oman Cable Industry SAOG (OCAI OM): The sultanate’s biggest cables and wires maker by market value posted a first-quarter profit of 1.7 million rials compared with a loss of 950,000 rials in the year-earlier period. The shares dropped 2.3 percent to 1.442 rials.
Samba Financial Group (SAMBA AB): Saudi Arabia’s second- largest bank by market value said first-quarter profit declined 4.8 percent to 1.21 billion riyals. The shares fell 1.2 percent to 60.25 riyals.
Saudi Basic Industries Corp. (SABIC AB): The world’s largest petrochemical maker posted a first-quarter profit of 5.43 billion riyals on renewed global demand for fertilizers and plastics. The shares were unchanged at 103.25 riyals.
New Hope Will Seek Other Acquisitions If Bid Fails
April 18 (Bloomberg) -- New Hope Corp., battling Peabody Energy Corp. and Noble Group Ltd. for control of Macarthur Coal Ltd., will look for other acquisitions if it is unsuccessful in its bid for Australia’s largest producer of pulverized coal, Chairman Rob Millner said.
Macarthur said April 15 that New Hope’s revised takeover bid, which included A$950 million ($878 million) in cash, doesn’t represent an adequate premium for control of the company, and therefore will not recommend the offer to shareholders. Instead, Brisbane-based Macarthur said April 16 it intends to enter into talks with St. Louis-based Peabody, which sweetened its bid to A$16 a share, valuing the company at A$4.1 billion.
New Hope, based in Ipswich, Queensland, will continue to focus on coal acquisitions, Millner said today in an interview on the Australian Broadcasting Corporation. “If we can’t find anything in coal, we’ll have to go and look somewhere else.”
Growing demand from China and India led coal prices to double last year, and boosted the resources industry in Australia, the world’s biggest shipper of coal and iron ore. In 2009, China’s coal imports more than tripled to 125.8 million tons, according to data from the Beijing-based General Administration of Customs.
“Going forward, there’s a real shortage of particularly pulverized coal in the world, and most of the ports around the world are constrained by capacity, so I see a good future for coal, both thermal and PCI coal,” Millner said.
New Hope’s Offer
New Hope is in a good position financially to make a play for Macarthur, Andrew Harrington, coal analyst at Paterson Securities, said in an interview on ABC.
“They don’t have any debt on their balance sheet,” he said. “They’ve got A$1.5 billion in cash in the bank and probably another half billion coming from the sale of their Arrow Energy shares, so they could easily plonk down the cash and raise some financing to afford this.”
If New Hope is successful in its bid for Macarthur, the company will have about A$1 billion to develop its own and Macarthur’s assets, Millner said.
“Both companies have some considerable development work to do in the next two to three years, so we will need that cash,” he said.
Macarthur Bids
Xstrata Plc may have joined the tussle for Macarthur, offering major shareholders a cash-and-shares offer of just under A$16 a share, the Australian Financial Review reported April 15 in its Street Talk column.
Macarthur’s second-largest shareholder, ArcelorMittal, said Peabody’s revised bid, a 14 percent improvement on its previous offer, merits further study. Third-largest shareholder Posco said it supported the offer in the absence of a higher bid and depending on Macarthur recommending the deal, the companies said April 16.
Macarthur postponed a shareholder meeting scheduled for April 19, a condition of Peabody’s revised offer, to vote on a proposal to make Hong Kong-based Noble its biggest shareholder.
Noble’s offer proposes that Macarthur buy Gloucester Coal Ltd., which is 87.7 percent owned by the Hong Kong commodity supplier. Noble is backed by China’s sovereign wealth fund.
Macarthur said April 15 that New Hope’s revised takeover bid, which included A$950 million ($878 million) in cash, doesn’t represent an adequate premium for control of the company, and therefore will not recommend the offer to shareholders. Instead, Brisbane-based Macarthur said April 16 it intends to enter into talks with St. Louis-based Peabody, which sweetened its bid to A$16 a share, valuing the company at A$4.1 billion.
New Hope, based in Ipswich, Queensland, will continue to focus on coal acquisitions, Millner said today in an interview on the Australian Broadcasting Corporation. “If we can’t find anything in coal, we’ll have to go and look somewhere else.”
Growing demand from China and India led coal prices to double last year, and boosted the resources industry in Australia, the world’s biggest shipper of coal and iron ore. In 2009, China’s coal imports more than tripled to 125.8 million tons, according to data from the Beijing-based General Administration of Customs.
“Going forward, there’s a real shortage of particularly pulverized coal in the world, and most of the ports around the world are constrained by capacity, so I see a good future for coal, both thermal and PCI coal,” Millner said.
New Hope’s Offer
New Hope is in a good position financially to make a play for Macarthur, Andrew Harrington, coal analyst at Paterson Securities, said in an interview on ABC.
“They don’t have any debt on their balance sheet,” he said. “They’ve got A$1.5 billion in cash in the bank and probably another half billion coming from the sale of their Arrow Energy shares, so they could easily plonk down the cash and raise some financing to afford this.”
If New Hope is successful in its bid for Macarthur, the company will have about A$1 billion to develop its own and Macarthur’s assets, Millner said.
“Both companies have some considerable development work to do in the next two to three years, so we will need that cash,” he said.
Macarthur Bids
Xstrata Plc may have joined the tussle for Macarthur, offering major shareholders a cash-and-shares offer of just under A$16 a share, the Australian Financial Review reported April 15 in its Street Talk column.
Macarthur’s second-largest shareholder, ArcelorMittal, said Peabody’s revised bid, a 14 percent improvement on its previous offer, merits further study. Third-largest shareholder Posco said it supported the offer in the absence of a higher bid and depending on Macarthur recommending the deal, the companies said April 16.
Macarthur postponed a shareholder meeting scheduled for April 19, a condition of Peabody’s revised offer, to vote on a proposal to make Hong Kong-based Noble its biggest shareholder.
Noble’s offer proposes that Macarthur buy Gloucester Coal Ltd., which is 87.7 percent owned by the Hong Kong commodity supplier. Noble is backed by China’s sovereign wealth fund.
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