CAMBRIDGE, Mass.
IT’S not easy being gray.
For the first time ever, getting out of a car is no picnic. My back is hunched. And I’m holding on to handrails as I lurch upstairs.
I’m 45. But I feel decades older because I’m wearing an Age Gain Now Empathy System, developed by researchers at the Massachusetts Institute of Technology. Agnes, they call it.
At first glance, it may look like a mere souped-up jumpsuit. A helmet, attached by cords to a pelvic harness, cramps my neck and spine. Yellow-paned goggles muddy my vision. Plastic bands, running from the harness to each arm, clip my wingspan. Compression knee bands discourage bending. Plastic shoes, with uneven Styrofoam pads for soles, throw off my center of gravity. Layers of surgical gloves make me all thumbs.
The age-empathy suit comes from the M.I.T. AgeLab, where researchers designed Agnes to help product designers and marketers better understand older adults and create innovative products for them. Many industries have traditionally shied away from openly marketing to people 65 and older, viewing them as an unfashionable demographic group that might doom their product with young and hip spenders. But now that Americans are living longer and more actively, a number of companies are recognizing the staying power of the mature market.
“Aging is a multidisciplinary phenomenon, and it requires new tools to look at,” Joseph F. Coughlin, director of AgeLab, tells me, encumbered and fatigued after trying to conduct a round of interviews while wearing Agnes. Viewed through yellow goggles, the bright colors of Professor Coughlin’s bow tie appear dim. “Agnes is one of those tools,” he says.
AgeLab, like a handful of other research centers at universities and companies around the country, develops technologies to help older adults maintain their health, independence and quality of life. Companies come here to understand their target audience or to have their products, policies and services studied.
Often, visitors learn hard truths at AgeLab: many older adults don’t like products, like big-button phones, that telegraph agedness. “The reality is such that you can’t build an old man’s product, because a young man won’t buy it and an old man won’t buy it,” Professor Coughlin says.
The idea is to help companies design and sell age-friendly products — with customizable font size, say, or sound speed — much the way they did with environmentally friendly products. That means offering enticing features and packaging to appeal to a certain demographic without alienating other consumer groups. Baked potato chips are just one example of products that appeal to everybody but skew toward older people. Toothpastes that promise whitening or gum health are another.
Researchers at AgeLab are studying the stress levels of older adults who operate a hands-free parallel-parking system developed by Ford Motor. Although this ultrasonic-assisted system may make backing up easier for older adults who can’t turn their necks to the same degree they once did, the car’s features — like blind-spot detection and a voice-activated audio system — are intended to appeal to all drivers who enjoy smart technology.
“With any luck, if I am successful,” Professor Coughlin says, “retailers won’t know they are putting things on the shelves for older adults.”
THE first of about 76 million baby boomers in the United States turned 65 in January. They are looking forward to a life expectancy that is higher than that of any previous generation.
The number of people 65 and older is expected to more than double worldwide, to about 1.5 billion by 2050 from 523 million last year, according to estimates from the United Nations. That means people 65 and over will soon outnumber children under 5 for the first time ever. As a consequence, many people may have to defer their retirement — or never entirely retire — in order to maintain sustainable incomes.
Many economists view such an exploding population of seventy- and eighty-somethings not as an asset, but as a looming budget crisis. After all, by one estimate, treating dementia worldwide already costs more than $600 billion annually.
“No other force is likely to shape the future of national economic health, public finances and policy making,” analysts at Standard & Poor’s wrote in a recent report, “as the irreversible rate at which the world’s population is aging.”
Saturday, February 5, 2011
Treasury 10-Year Yield Reaches a Nine-Month High as Recovery Builds Steam
Treasuries tumbled, pushing 10-year yields to the highest since May, as an unexpected drop in the jobless rate and data showing growth by factories and service industries fueled bets the economic recovery is gaining steam.
Thirty-year yields had the biggest weekly increase since October as manufacturing also accelerated in Europe and China, making higher-yielding assets more attractive. The gap between U.S. 2- and 10-year yields reached the widest in almost a year as U.S. employers added jobs for a fourth month. The Treasury will auction $72 billion in notes and bonds next week.
“In context with the other data we’ve seen, the employment number is consistent with the idea of recovery -- net net, it’s taken as a bearish signal,” said Carl Lantz, head of interest- rate strategy in New York at Credit Suisse Group AG, one of 20 primary dealers that trade with the Federal Reserve. “The market probably won’t be able to catch its breath until we get through the auction process. Demand will be fairly strong.”
The benchmark 10-year note yield climbed 31 basis points to 3.63 percent yesterday in New York, from 3.32 percent on Jan. 28, according to BGCantor Market Data. It was the biggest weekly gain since Dec. 10. A basis point is 0.01 percentage point. The yield touched 3.66 percent yesterday, the highest since May 4.
The price of the 2.625 percent security maturing in November 2020 dropped 2 15/32, or $24.69 per $1,000 face amount, to 91 3/4.
Thirty-year bond yields advanced 20 basis points to 4.73 percent, the biggest jump since the five days ended Oct. 15. They touched 4.74 percent yesterday, the highest level since April 15. Two-year yields increased 21 basis points to reach 0.74 percent in the biggest rise since June 5, 2009.
Yield Spread
The yield gap between 2- and 10-year Treasuries widened to as much as 291 basis points, the most since Feb. 23, 2010.
Treasuries fell yesterday as the jobless rate decreased for a second month, Labor Department data showed. A Bloomberg survey had forecast it would rise to 9.5 percent, from 9.4 percent in December. Employers added 36,000 jobs, less than predicted, as storms swept the nation. It was the smallest increase in four months, the data showed.
“The weather distortions are so great that it’s hard to really extract any information about the strength of the labor market,” Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York, said yesterday.
Growth in Services
The jobs report came a day after data from the Institute for Supply Management showed U.S. service industries, which account for 90 percent of the U.S. economy, grew in January at the fastest pace since 2005. The ISM’s index of non- manufacturing businesses rose to 59.4, from December’s 57.1, the Tempe, Arizona-based group said.
A separate ISM factory index for the U.S. increased last month the most since 2004, the Tempe, Arizona-based group said on Feb. 1. Manufacturing in the 17-nation euro region, the U.K. and China also expanded, other reports that day showed.
Treasuries have lost 1.2 percent this year, according the Bank of America Merrill Lynch Treasury Master index. The Standard & Poor’s 500 Index has gained 4.2 percent.
“The overall tone of economic data has been positive, and the market has been acknowledging that,” said Thomas Simons, a government-debt economist in New York at primary dealer Jefferies Group Inc. “It’s still not a tremendously satisfying pace of recovery, but things are moving right along.”
Not Enough Growth
The Fed is unlikely to raise interest rates for at least 12 months because the U.S. economy isn’t generating enough growth to lower unemployment, Pacific Investment Management Co.’sBill Gross said yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene.
The central bank would probably like to see the economy adding at least 200,000 jobs a month before considering rate increases, said Newport Beach, California-based Gross, manager of the world’s biggest bond fund. Policy makers have held the benchmark interest rate near zero since December 2008.
Fed Chairman Ben S. Bernanke said in a speech on Feb. 3 in Washington the nation needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold.
The central bank bought $27.8 billion in U.S. debt this week, part of a $600 billion program to spur the economy. While Bernanke said in his speech that growth will pick up this year and the Fed’s purchases of Treasuries are “providing significant support to job creation and the economy,” he gave no indication whether he’ll maintain or adjust monetary stimulus after the asset buying-program ends in June.
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, widened to 2.36 percentage points from a 2010 low of 1.47 in August.
The Treasury will auction $32 billion of 3-year notes, $24 billion of 10-year debt and $16 billion of 30-year bonds next week in daily sales that begin Feb. 8.
Thirty-year yields had the biggest weekly increase since October as manufacturing also accelerated in Europe and China, making higher-yielding assets more attractive. The gap between U.S. 2- and 10-year yields reached the widest in almost a year as U.S. employers added jobs for a fourth month. The Treasury will auction $72 billion in notes and bonds next week.
“In context with the other data we’ve seen, the employment number is consistent with the idea of recovery -- net net, it’s taken as a bearish signal,” said Carl Lantz, head of interest- rate strategy in New York at Credit Suisse Group AG, one of 20 primary dealers that trade with the Federal Reserve. “The market probably won’t be able to catch its breath until we get through the auction process. Demand will be fairly strong.”
The benchmark 10-year note yield climbed 31 basis points to 3.63 percent yesterday in New York, from 3.32 percent on Jan. 28, according to BGCantor Market Data. It was the biggest weekly gain since Dec. 10. A basis point is 0.01 percentage point. The yield touched 3.66 percent yesterday, the highest since May 4.
The price of the 2.625 percent security maturing in November 2020 dropped 2 15/32, or $24.69 per $1,000 face amount, to 91 3/4.
Thirty-year bond yields advanced 20 basis points to 4.73 percent, the biggest jump since the five days ended Oct. 15. They touched 4.74 percent yesterday, the highest level since April 15. Two-year yields increased 21 basis points to reach 0.74 percent in the biggest rise since June 5, 2009.
Yield Spread
The yield gap between 2- and 10-year Treasuries widened to as much as 291 basis points, the most since Feb. 23, 2010.
Treasuries fell yesterday as the jobless rate decreased for a second month, Labor Department data showed. A Bloomberg survey had forecast it would rise to 9.5 percent, from 9.4 percent in December. Employers added 36,000 jobs, less than predicted, as storms swept the nation. It was the smallest increase in four months, the data showed.
“The weather distortions are so great that it’s hard to really extract any information about the strength of the labor market,” Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York, said yesterday.
Growth in Services
The jobs report came a day after data from the Institute for Supply Management showed U.S. service industries, which account for 90 percent of the U.S. economy, grew in January at the fastest pace since 2005. The ISM’s index of non- manufacturing businesses rose to 59.4, from December’s 57.1, the Tempe, Arizona-based group said.
A separate ISM factory index for the U.S. increased last month the most since 2004, the Tempe, Arizona-based group said on Feb. 1. Manufacturing in the 17-nation euro region, the U.K. and China also expanded, other reports that day showed.
Treasuries have lost 1.2 percent this year, according the Bank of America Merrill Lynch Treasury Master index. The Standard & Poor’s 500 Index has gained 4.2 percent.
“The overall tone of economic data has been positive, and the market has been acknowledging that,” said Thomas Simons, a government-debt economist in New York at primary dealer Jefferies Group Inc. “It’s still not a tremendously satisfying pace of recovery, but things are moving right along.”
Not Enough Growth
The Fed is unlikely to raise interest rates for at least 12 months because the U.S. economy isn’t generating enough growth to lower unemployment, Pacific Investment Management Co.’sBill Gross said yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene.
The central bank would probably like to see the economy adding at least 200,000 jobs a month before considering rate increases, said Newport Beach, California-based Gross, manager of the world’s biggest bond fund. Policy makers have held the benchmark interest rate near zero since December 2008.
Fed Chairman Ben S. Bernanke said in a speech on Feb. 3 in Washington the nation needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold.
The central bank bought $27.8 billion in U.S. debt this week, part of a $600 billion program to spur the economy. While Bernanke said in his speech that growth will pick up this year and the Fed’s purchases of Treasuries are “providing significant support to job creation and the economy,” he gave no indication whether he’ll maintain or adjust monetary stimulus after the asset buying-program ends in June.
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, widened to 2.36 percentage points from a 2010 low of 1.47 in August.
The Treasury will auction $32 billion of 3-year notes, $24 billion of 10-year debt and $16 billion of 30-year bonds next week in daily sales that begin Feb. 8.
Friday, February 4, 2011
Afghans resist IMF pressure to sell off bank
The International Monetary Fund wants Afghanistan to wind down and sell off Kabul Bank to stabilise the financial system, according to the governor of the country’s central bank.
Afghan officials fear, however, that any move to place the country’s largest bank into receivership may trigger renewed panic in the banking sector, which was rocked by Kabul Bank’s near-collapse amid corruption allegations five months ago.
The scandal at the bank, in which a coterie of businessmen and politicians took out huge loans, has become an emblem of the crony capitalism that has flourished in Afghanistan since the fall of the Taliban in 2001.
A protracted dispute over the lender’s fate could complicate attempts by donors to boost aid flows to shore up the government of Hamid Karzai, president, against a spreading insurgency, while further straining its ties with the west.
The central bank, which took over management of Kabul Bank after removing its top executives in September, believes it can nurse the lender back to health by working to recover assets from a loan book it values at $579m.
Abdul Qadir Fitrat, central bank governor, said he had secured commitments to return $315m of loans and was confident the bank could return to profitability by the end of this year and find a buyer by 2014.
“We tell them [the IMF] that we can achieve this without going into receivership, because we have now devised a rehabilitation plan,” Mr Fitrat told the Financial Times. “But they say no, we should do it through receivership.”
The IMF believes that placing the bank into receivership would represent the quickest and most effective option for resolving the scandal, officials in Kabul said.
The disagreement has emerged as a sticking point in Afghanistan’s attempts to regain the support of the fund, which was on the verge of signing a new support agreement when the Kabul Bank scandal erupted five months ago.
Afghanistan is keen to conclude a new deal, since many donor countries only provide budget support to governments with the fund’s seal of approval. An IMF delegation from Washington is due to arrive in Kabul this month.
Mr Fitrat was confident of signing a new agreement. “Once we negotiate I think everybody will agree, and I think our IMF colleagues will also understand our position,” Mr Fitrat said.
An IMF spokesman confirmed that a team would be visiting Afghanistan shortly to continue discussions on a possible fund-supported programme. “In this context, the authorities and the IMF will be discussing possible measures to reinforce the country’s financial system and a course of action with regard to Kabul Bank,” he said.
The IMF is expected to seek Afghanistan’s proposals for financing the money it has committed to shoring up the bank, perhaps by issuing debt. The cost of keeping it afloat is estimated to run into hundreds of millions of dollars.
The scandal widened this week when a series of media reports named prominent reformers in Mr Karzai’s government as among politicians who benefited from payments designed to buy their silence over illicit dealings at the bank.
Omar Zakhilwal, the finance minister, urged anti-corruption authorities to launch an investigation into the allegations against him on Wednesday. He and the other officials named in the reports deny wrongdoing.
Afghan officials fear, however, that any move to place the country’s largest bank into receivership may trigger renewed panic in the banking sector, which was rocked by Kabul Bank’s near-collapse amid corruption allegations five months ago.
The scandal at the bank, in which a coterie of businessmen and politicians took out huge loans, has become an emblem of the crony capitalism that has flourished in Afghanistan since the fall of the Taliban in 2001.
A protracted dispute over the lender’s fate could complicate attempts by donors to boost aid flows to shore up the government of Hamid Karzai, president, against a spreading insurgency, while further straining its ties with the west.
The central bank, which took over management of Kabul Bank after removing its top executives in September, believes it can nurse the lender back to health by working to recover assets from a loan book it values at $579m.
Abdul Qadir Fitrat, central bank governor, said he had secured commitments to return $315m of loans and was confident the bank could return to profitability by the end of this year and find a buyer by 2014.
“We tell them [the IMF] that we can achieve this without going into receivership, because we have now devised a rehabilitation plan,” Mr Fitrat told the Financial Times. “But they say no, we should do it through receivership.”
The IMF believes that placing the bank into receivership would represent the quickest and most effective option for resolving the scandal, officials in Kabul said.
The disagreement has emerged as a sticking point in Afghanistan’s attempts to regain the support of the fund, which was on the verge of signing a new support agreement when the Kabul Bank scandal erupted five months ago.
Afghanistan is keen to conclude a new deal, since many donor countries only provide budget support to governments with the fund’s seal of approval. An IMF delegation from Washington is due to arrive in Kabul this month.
Mr Fitrat was confident of signing a new agreement. “Once we negotiate I think everybody will agree, and I think our IMF colleagues will also understand our position,” Mr Fitrat said.
An IMF spokesman confirmed that a team would be visiting Afghanistan shortly to continue discussions on a possible fund-supported programme. “In this context, the authorities and the IMF will be discussing possible measures to reinforce the country’s financial system and a course of action with regard to Kabul Bank,” he said.
The IMF is expected to seek Afghanistan’s proposals for financing the money it has committed to shoring up the bank, perhaps by issuing debt. The cost of keeping it afloat is estimated to run into hundreds of millions of dollars.
The scandal widened this week when a series of media reports named prominent reformers in Mr Karzai’s government as among politicians who benefited from payments designed to buy their silence over illicit dealings at the bank.
Omar Zakhilwal, the finance minister, urged anti-corruption authorities to launch an investigation into the allegations against him on Wednesday. He and the other officials named in the reports deny wrongdoing.
Egyptian Riots Add Pressure on OPEC as Crude Exceeds $100: Energy Markets
OPEC is under pressure from consumers to boost supply as most of the world’s benchmark crudes surpass $100 a barrel amid political unrest in North Africa and the Middle East.
Oil prices are high enough to “derail” the global economic recovery, Fatih Birol of the International Energy Agency said this week. Saudi Arabian Oil Minister Ali al-Naimi said last week prices nearer $75 would be “appropriate.” Goldman Sachs Group Inc. says the Organization of Petroleum Exporting Countries has already raised output.
“OPEC needs to put in more barrels this year, given how strong demand has been,” said Amrita Sen, a commodity analyst at Barclays Capital in London. “Above $100 there would be a bit more urgency to increase their volumes, because at the end of the day what they want is more stability.”
Riots in Egypt that have led to concern of disruption to shipments through the Suez Canal sent North Sea Brent above $100 a barrel for the first time since October 2008 this week. Six of the world’s 10 most-used oil price markers, including Nigeria’s Bonny Light, Malaysia’s Tapis, Indonesia’s Minas and Louisiana’s Heavy Sweet and Light Sweet grades, have breached three digits, stoking speculation governments will struggle to contain inflation as economies recover from the recession.
‘Calm the Market’
“Naimi has announced they’re thinking of production increases; there will be some production increases,” Christof Ruehl, chief economist at BP Plc, Europe’s second-biggest company, said in an interview with Bloomberg Television on Feb. 2. “If markets are getting very worried about the political situation in the Middle East that could even foster production increases by OPEC to calm the market down.”
The world’s energy bill as a share of the economy will return to the 9 percent level of the 1980s, when oil costs tipped consuming nations into a recession, should crude advance to $115 a barrel this year, Bank of America Merrill Lynch said in a Jan. 25 research report.
Twelve European nations, recuperating from last year’s sovereign debt crisis, already face record gasoline prices, including taxes, European Commission data on Bloomberg shows.
Brent crude dropped $1.90 to $99.86 a barrel on the ICE Futures Europe exchange in London as of 5:19 p.m. local time. It reached $103.37 during yesterday’s trade, the highest level in 28 months. West Texas Intermediate fell as much as 2.3 percent to $88.45 on the New York Mercantile Exchange after a U.S. government report showed that the economy added fewer jobs in January than economists forecast.
Derail Economy
“Just before the turmoil in Egypt we already had very high prices as a result of strong demand growth expectations for the next year,” Birol, the chief economist of the Paris-based IEA, which has advised energy-consuming nations since 1974, said in a Feb. 2 interview with Bloomberg Television. “The turmoil in Egypt has been a trigger. Brent over $100 is a risk to derail the economic recovery.”
The Suez Canal and the adjacent Suez-Mediterranean Pipeline have remained open throughout the Egyptian unrest, carrying about 2 million barrels a day, or 2.5 percent of world oil production, according to Goldman Sachs. Even before the unrest the links weren’t operating at full capacity which is about double this amount.
A halt of 1 million barrels a day or more would trigger a response from OPEC, according to the group’s Secretary-General Abdalla El-Badri. “If we see a real shortage we will have to act,” he told reporters in London on Jan. 31. “But I don’t think this will happen.”
The 11 OPEC members subject to production quotas pumped 26.85 million barrels a day last month, the most since it announced supply cuts in late 2008. The group accounts for 40 percent of global supply.
Curbing Rally
Saudi Arabia, the largest member, may already be seeking to curb the oil rally. State-run Saudi Aramco on Feb. 2 cut prices for its March crude sales to Asia, its biggest market, contrary to the expectations of five refiners surveyed the previous day by Bloomberg News.
OPEC is due to meet on June 2 to review its daily quota of 24.845 million barrels, which it’s currently exceeding by about 2 million barrels, according to data compiled by Bloomberg. Most OPEC ministers will also gather in Riyadh, Saudi Arabia, on Feb. 22 for a meeting of the International Energy Forum.
While OPEC has left its quota unchanged at seven consecutive meetings, global inventory levels suggest the group is raising output, Goldman Sachs said in a report on Jan. 24. The group’s effective spare capacity, which excludes Iraq, Nigeria and Venezuela, dropped below 5 million barrels a day in December, the first time in two years, according to a Jan. 18 IEA report. Stockpiles held by companies in the most developed economies were at 2.742 billion barrels in November, close to the top of their five-year range, it said.
‘No Shortage’
Plentiful supplies make any production increase unnecessary, according to Shokri Ghanem, chairman of Libya’s National Oil Corp. “We don’t feel there is a shortage in the market,” he said in a Feb. 3 Bloomberg Television interview.
The political turmoil in the region started in Tunisia with the Jan. 14 ouster of President Zine El Abidine Ben Ali has spread to Yemen, where thousands of demonstrators gathered yesterday in the capital and police used tear gas in the port city of Aden. More violence may occur in Egypt today after Friday prayers.
Any escalation of the crisis in Egypt would require Middle East producers to divert Suez shipments on a longer route that avoids the canal, rather than increase supply, according to Edward Morse, Credit Suisse AG’s head of commodities research. Additional barrels aren’t needed because demand will slacken as winter ends in the Northern Hemisphere.
‘Dangerous Time’
“This is a particularly dangerous time to open the taps,” Morse said in an interview in London on Feb. 1. “This is not a supply disruption. It just means that flows that would have occurred now occur in a more expensive way and take longer to get where they’re going.”
Rising demand means an extra 300,000 barrels a day is needed from OPEC to stem oil’s advance, Bank of America Merrill Lynch said on Jan. 25. JPMorgan Chase & Co. said that any premium caused by events in Egypt has already dissipated, and that $100 oil reflects levels of supply versus demand.
Rather than damping oil’s rally, additional OPEC exports may signal that demand is recovering faster than anticipated and that spare supply will shrink, according to Goldman Sachs.
Higher production “ultimately accelerates the draw on OPEC spare capacity,” analysts led by Jeff Currie in London wrote on Jan. 24. This may indicate “the market may already have moved into the second stage of its cyclical recovery to a structural bull market,” they said.
The four benchmark crudes that haven’t risen above $100 a barrel are WTI and Mars blend in the U.S., Oman and Murban grades in the Middle East.
Oil prices are high enough to “derail” the global economic recovery, Fatih Birol of the International Energy Agency said this week. Saudi Arabian Oil Minister Ali al-Naimi said last week prices nearer $75 would be “appropriate.” Goldman Sachs Group Inc. says the Organization of Petroleum Exporting Countries has already raised output.
“OPEC needs to put in more barrels this year, given how strong demand has been,” said Amrita Sen, a commodity analyst at Barclays Capital in London. “Above $100 there would be a bit more urgency to increase their volumes, because at the end of the day what they want is more stability.”
Riots in Egypt that have led to concern of disruption to shipments through the Suez Canal sent North Sea Brent above $100 a barrel for the first time since October 2008 this week. Six of the world’s 10 most-used oil price markers, including Nigeria’s Bonny Light, Malaysia’s Tapis, Indonesia’s Minas and Louisiana’s Heavy Sweet and Light Sweet grades, have breached three digits, stoking speculation governments will struggle to contain inflation as economies recover from the recession.
‘Calm the Market’
“Naimi has announced they’re thinking of production increases; there will be some production increases,” Christof Ruehl, chief economist at BP Plc, Europe’s second-biggest company, said in an interview with Bloomberg Television on Feb. 2. “If markets are getting very worried about the political situation in the Middle East that could even foster production increases by OPEC to calm the market down.”
The world’s energy bill as a share of the economy will return to the 9 percent level of the 1980s, when oil costs tipped consuming nations into a recession, should crude advance to $115 a barrel this year, Bank of America Merrill Lynch said in a Jan. 25 research report.
Twelve European nations, recuperating from last year’s sovereign debt crisis, already face record gasoline prices, including taxes, European Commission data on Bloomberg shows.
Brent crude dropped $1.90 to $99.86 a barrel on the ICE Futures Europe exchange in London as of 5:19 p.m. local time. It reached $103.37 during yesterday’s trade, the highest level in 28 months. West Texas Intermediate fell as much as 2.3 percent to $88.45 on the New York Mercantile Exchange after a U.S. government report showed that the economy added fewer jobs in January than economists forecast.
Derail Economy
“Just before the turmoil in Egypt we already had very high prices as a result of strong demand growth expectations for the next year,” Birol, the chief economist of the Paris-based IEA, which has advised energy-consuming nations since 1974, said in a Feb. 2 interview with Bloomberg Television. “The turmoil in Egypt has been a trigger. Brent over $100 is a risk to derail the economic recovery.”
The Suez Canal and the adjacent Suez-Mediterranean Pipeline have remained open throughout the Egyptian unrest, carrying about 2 million barrels a day, or 2.5 percent of world oil production, according to Goldman Sachs. Even before the unrest the links weren’t operating at full capacity which is about double this amount.
A halt of 1 million barrels a day or more would trigger a response from OPEC, according to the group’s Secretary-General Abdalla El-Badri. “If we see a real shortage we will have to act,” he told reporters in London on Jan. 31. “But I don’t think this will happen.”
The 11 OPEC members subject to production quotas pumped 26.85 million barrels a day last month, the most since it announced supply cuts in late 2008. The group accounts for 40 percent of global supply.
Curbing Rally
Saudi Arabia, the largest member, may already be seeking to curb the oil rally. State-run Saudi Aramco on Feb. 2 cut prices for its March crude sales to Asia, its biggest market, contrary to the expectations of five refiners surveyed the previous day by Bloomberg News.
OPEC is due to meet on June 2 to review its daily quota of 24.845 million barrels, which it’s currently exceeding by about 2 million barrels, according to data compiled by Bloomberg. Most OPEC ministers will also gather in Riyadh, Saudi Arabia, on Feb. 22 for a meeting of the International Energy Forum.
While OPEC has left its quota unchanged at seven consecutive meetings, global inventory levels suggest the group is raising output, Goldman Sachs said in a report on Jan. 24. The group’s effective spare capacity, which excludes Iraq, Nigeria and Venezuela, dropped below 5 million barrels a day in December, the first time in two years, according to a Jan. 18 IEA report. Stockpiles held by companies in the most developed economies were at 2.742 billion barrels in November, close to the top of their five-year range, it said.
‘No Shortage’
Plentiful supplies make any production increase unnecessary, according to Shokri Ghanem, chairman of Libya’s National Oil Corp. “We don’t feel there is a shortage in the market,” he said in a Feb. 3 Bloomberg Television interview.
The political turmoil in the region started in Tunisia with the Jan. 14 ouster of President Zine El Abidine Ben Ali has spread to Yemen, where thousands of demonstrators gathered yesterday in the capital and police used tear gas in the port city of Aden. More violence may occur in Egypt today after Friday prayers.
Any escalation of the crisis in Egypt would require Middle East producers to divert Suez shipments on a longer route that avoids the canal, rather than increase supply, according to Edward Morse, Credit Suisse AG’s head of commodities research. Additional barrels aren’t needed because demand will slacken as winter ends in the Northern Hemisphere.
‘Dangerous Time’
“This is a particularly dangerous time to open the taps,” Morse said in an interview in London on Feb. 1. “This is not a supply disruption. It just means that flows that would have occurred now occur in a more expensive way and take longer to get where they’re going.”
Rising demand means an extra 300,000 barrels a day is needed from OPEC to stem oil’s advance, Bank of America Merrill Lynch said on Jan. 25. JPMorgan Chase & Co. said that any premium caused by events in Egypt has already dissipated, and that $100 oil reflects levels of supply versus demand.
Rather than damping oil’s rally, additional OPEC exports may signal that demand is recovering faster than anticipated and that spare supply will shrink, according to Goldman Sachs.
Higher production “ultimately accelerates the draw on OPEC spare capacity,” analysts led by Jeff Currie in London wrote on Jan. 24. This may indicate “the market may already have moved into the second stage of its cyclical recovery to a structural bull market,” they said.
The four benchmark crudes that haven’t risen above $100 a barrel are WTI and Mars blend in the U.S., Oman and Murban grades in the Middle East.
Singh Says India Needs to Slow Accelerating Inflation With `Great Urgency'
Prime Minister Manmohan Singh said India needs to urgently contain prices, that are rising at the fastest pace among major economies in Asia, signaling the government may withdraw fiscal stimulus.
“Inflation is something, which needs to be tackled with great urgency,” Singh said, addressing a meeting of government officials in New Delhi. The Indian economy “has been on a high growth trajectory, but inflation poses a serious threat to the growth momentum.”
Singh’s Finance Minister Pranab Mukherjee may increase taxes when he presents the government’s budget on Feb. 28, aligning fiscal policy with the central bank’s move to raise its policy rates, said Namrata Padhye, an economist at IDBI Gilts Ltd. Rising demand for Hero Honda Motors Ltd.’s motorcycles and Hindustan Unilever Ltd.’s soaps has fueled inflation, which averaged more than 9 percent last year.
“The monetary and the fiscal policy has to be on the same footing to control inflation,” said Mumbai-based Padhye. “The government will need to do its bit by way of fully rolling back fiscal stimulus measures as the monetary policy tries to curb demand.”
Governor Duvvuri Subbarao raised the benchmark repurchase rate by a quarter-point to 6.5 percent on Jan. 25 and urged the government to take steps to control spending on subsidies that is adding to inflation.
The “challenge to effective management of inflation by monetary policy arises from the persistence of a large fiscal deficit,” Subbarao said in a Jan. 25 statement. “While subsidies may contribute in the short term to keeping supply- side inflationary pressures in check, they may more than offset this benefit by adding to aggregate demand.”
Milk, Meat, Eggs
India’s benchmark wholesale-price inflation rate advanced 8.43 percent in December from 7.48 percent in the previous month, the biggest jump in ten months, due to higher costs of food and oil. The recent spurt in prices has been driven by an increase in the prices of vegetables, fruits, milk, meat, eggs and fish, Singh said.
The yield on the most-traded 8.13 percent bond due in September 2022 rose 3 basis points to 8.22 percent at 1:06 p.m. today, after rising 19 basis points since January. The Bombay Stock Exchange’s Sensitive Index fell 1.24 percent today and the rupee was little changed at 45.63 against the dollar.
Inflation may also rise as companies including Indian Oil Corp., the biggest state-run oil refiner, and rivals raise prices. Higher raw material costs will make Videocon Industries Ltd., India’s biggest consumer electronics maker, increase refrigerator and air conditioner prices by 2 percent, Shekhar Jyoti, chief operating officer of the company’s electronics and appliances division, said in December.
‘Lasting Solution’
Prime Minister Singh today said India will need to increase the production of commodities to meet rising domestic consumption, driven by higher incomes.
“The lasting solution for food price inflation lies in increasing agricultural productivity and production not only of cereals but also of pulses, oilseeds, vegetables and fruits, and augmenting the supply of milk and milk products, poultry, meat and fish,” he said.
Finance Minister Mukherjee, in his last budget increased the excise tax rate on manufacturers to 10 percent from 8 percent. It stood at 12 percent before the global financial crisis. He kept the service tax at 10 percent.
“Inflation is something, which needs to be tackled with great urgency,” Singh said, addressing a meeting of government officials in New Delhi. The Indian economy “has been on a high growth trajectory, but inflation poses a serious threat to the growth momentum.”
Singh’s Finance Minister Pranab Mukherjee may increase taxes when he presents the government’s budget on Feb. 28, aligning fiscal policy with the central bank’s move to raise its policy rates, said Namrata Padhye, an economist at IDBI Gilts Ltd. Rising demand for Hero Honda Motors Ltd.’s motorcycles and Hindustan Unilever Ltd.’s soaps has fueled inflation, which averaged more than 9 percent last year.
“The monetary and the fiscal policy has to be on the same footing to control inflation,” said Mumbai-based Padhye. “The government will need to do its bit by way of fully rolling back fiscal stimulus measures as the monetary policy tries to curb demand.”
Governor Duvvuri Subbarao raised the benchmark repurchase rate by a quarter-point to 6.5 percent on Jan. 25 and urged the government to take steps to control spending on subsidies that is adding to inflation.
The “challenge to effective management of inflation by monetary policy arises from the persistence of a large fiscal deficit,” Subbarao said in a Jan. 25 statement. “While subsidies may contribute in the short term to keeping supply- side inflationary pressures in check, they may more than offset this benefit by adding to aggregate demand.”
Milk, Meat, Eggs
India’s benchmark wholesale-price inflation rate advanced 8.43 percent in December from 7.48 percent in the previous month, the biggest jump in ten months, due to higher costs of food and oil. The recent spurt in prices has been driven by an increase in the prices of vegetables, fruits, milk, meat, eggs and fish, Singh said.
The yield on the most-traded 8.13 percent bond due in September 2022 rose 3 basis points to 8.22 percent at 1:06 p.m. today, after rising 19 basis points since January. The Bombay Stock Exchange’s Sensitive Index fell 1.24 percent today and the rupee was little changed at 45.63 against the dollar.
Inflation may also rise as companies including Indian Oil Corp., the biggest state-run oil refiner, and rivals raise prices. Higher raw material costs will make Videocon Industries Ltd., India’s biggest consumer electronics maker, increase refrigerator and air conditioner prices by 2 percent, Shekhar Jyoti, chief operating officer of the company’s electronics and appliances division, said in December.
‘Lasting Solution’
Prime Minister Singh today said India will need to increase the production of commodities to meet rising domestic consumption, driven by higher incomes.
“The lasting solution for food price inflation lies in increasing agricultural productivity and production not only of cereals but also of pulses, oilseeds, vegetables and fruits, and augmenting the supply of milk and milk products, poultry, meat and fish,” he said.
Finance Minister Mukherjee, in his last budget increased the excise tax rate on manufacturers to 10 percent from 8 percent. It stood at 12 percent before the global financial crisis. He kept the service tax at 10 percent.
Germany and France Roll Out Plan to Boost Euro
BRUSSELS — Initiating a bold effort to strengthen the euro, Germany and France on Friday laid down far-reaching plans to deepen integration among the 17 nations that use the currency. The move prompted immediate opposition, but could lead to embryonic economic government for Europe.
After days of speculation, the proposal from the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, was greeted with criticism from governments that fear they may have to raise corporate tax rates or scrap deals that link annual wage increases to inflation.
At a European Union summit meeting in Brussels, several prime ministers from euro-zone countries, including Belgium’s caretaker premier, Yves Leterme, criticized the proposal or questioned the way it would operate. Non-euro nations, including Poland, expressed fears they could be sidelined.
Mr. Sarkozy, reacting to the opposition from nations, including Ireland, over taxation, said that the aim was “not to impose the same thing on everyone.” Friday’s objective, he added, was not a detailed agreement but to reach a consensus on a desire “for a pact, economic government and convergence.”
The strength of the reaction underlines how high the stakes are. Analysts said that the Franco-German move potentially marked an important turning point, one that could lead to the euro nations agreeing on more of their key economic policies in a unified bloc.
Berlin, which once opposed the idea of greater decision-making among euro-zone leaders, now wants to make it a central part of a package of measures to be agreed upon in March. These will also strengthen the rescue fund for the euro zone by allowing it to lend its full, €440-billion ceiling figure, and perhaps use its funds more flexibly.
In exchange for bolstering the fund, Berlin hopes to use the new “pact for competitiveness” to force weaker euro-zone economies to mirror Germany’s more disciplined example.
Standing side by side, Mrs. Merkel and Mr. Sarkozy appeared to have reached the conclusion of many critics of the single currency who argue that the financial crisis exposed a flaw in the design of the euro by creating monetary union without either economic convergence or political union.
Under the plans outlined Friday, the leaders of euro zone will meet in March to draw up a blueprint for closer coordination of economic policy, a strategy that the remaining 10 E.U. nations would later be given the option of adhering to, Mrs. Merkel said.
“The E.U. — but above all those countries that use the euro — wants to grow together,” Mrs. Merkel said. “Politically we will grow step-by-step closer together.”
If other countries can be persuaded to go along, the initiative could lead to the fulfillment of a long-standing French demand for a stronger leadership of the euro zone, presided over by regular meetings of their leaders.
In exchange, however, Berlin laid down a series of criteria by which competitiveness would be judged, and which would be designed to bring other economies closer to the standards of competitiveness achieved by Germany, which has emerged from the financial crisis as Europe’s economic lodestar.
“I think we are seeing the beginning of a euro group which could become a more important organization politically as well as economically,” said Charles Grant, director of the Center for European Reform. “France has long wanted the euro zone to be on a basis that made it more important and the Germans have now accepted that logic.”
The criteria identified in a German policy paper that circulated before the summit meeting included abolition of wage indexation systems, creation of a common base for assessing corporate tax, alignment of pension system and legally binding commitments to tough fiscal policies.
The approach is controversial because it touches some of the most sensitive areas of policy — like taxation and wage policy — where many nations guard their sovereignty jealously.
“I totally disagree with the current proposals,” Mr. Leterme of Belgium said. “We will not let the cornerstones of this system be undermined.”
Belgium argues that its system of wage indexation has not delivered higher inflation than Germany.
Reservations even emerged from neighboring Holland, where the government generally supports Germany on economic policy.
“We welcome stronger economic coordination on the basis of best practices, but we will always remain the master of our taxes, pensions and wages,” said the Dutch prime minister, Mark Rutte.
The range of complaints from within the euro zone alone reflects how difficult it will be to make the pact work.
Ireland sees its low rate of corporate tax as one of its few weapons in the battle to revive an economy so badly battered by the crisis that it accepted a bailout last year. Estonia and Slovakia also want to protect their low tax regimes.
But France and German politicians have long complained at being undercut by the E.U. nations with lower corporate tax.
Some countries also dislike the fact that the new structure would be orchestrated by governments, rather than the bloc’s executive, the European Commission, which is seen by many smaller nations as a protector of their interests.
Many issues remain to be resolved, including how the new group would operate, how its rules would be enforced, and whether nations that do not use the euro — like Britain, Poland or Sweden — would want to join and be invited to join in.
After days of speculation, the proposal from the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, was greeted with criticism from governments that fear they may have to raise corporate tax rates or scrap deals that link annual wage increases to inflation.
At a European Union summit meeting in Brussels, several prime ministers from euro-zone countries, including Belgium’s caretaker premier, Yves Leterme, criticized the proposal or questioned the way it would operate. Non-euro nations, including Poland, expressed fears they could be sidelined.
Mr. Sarkozy, reacting to the opposition from nations, including Ireland, over taxation, said that the aim was “not to impose the same thing on everyone.” Friday’s objective, he added, was not a detailed agreement but to reach a consensus on a desire “for a pact, economic government and convergence.”
The strength of the reaction underlines how high the stakes are. Analysts said that the Franco-German move potentially marked an important turning point, one that could lead to the euro nations agreeing on more of their key economic policies in a unified bloc.
Berlin, which once opposed the idea of greater decision-making among euro-zone leaders, now wants to make it a central part of a package of measures to be agreed upon in March. These will also strengthen the rescue fund for the euro zone by allowing it to lend its full, €440-billion ceiling figure, and perhaps use its funds more flexibly.
In exchange for bolstering the fund, Berlin hopes to use the new “pact for competitiveness” to force weaker euro-zone economies to mirror Germany’s more disciplined example.
Standing side by side, Mrs. Merkel and Mr. Sarkozy appeared to have reached the conclusion of many critics of the single currency who argue that the financial crisis exposed a flaw in the design of the euro by creating monetary union without either economic convergence or political union.
Under the plans outlined Friday, the leaders of euro zone will meet in March to draw up a blueprint for closer coordination of economic policy, a strategy that the remaining 10 E.U. nations would later be given the option of adhering to, Mrs. Merkel said.
“The E.U. — but above all those countries that use the euro — wants to grow together,” Mrs. Merkel said. “Politically we will grow step-by-step closer together.”
If other countries can be persuaded to go along, the initiative could lead to the fulfillment of a long-standing French demand for a stronger leadership of the euro zone, presided over by regular meetings of their leaders.
In exchange, however, Berlin laid down a series of criteria by which competitiveness would be judged, and which would be designed to bring other economies closer to the standards of competitiveness achieved by Germany, which has emerged from the financial crisis as Europe’s economic lodestar.
“I think we are seeing the beginning of a euro group which could become a more important organization politically as well as economically,” said Charles Grant, director of the Center for European Reform. “France has long wanted the euro zone to be on a basis that made it more important and the Germans have now accepted that logic.”
The criteria identified in a German policy paper that circulated before the summit meeting included abolition of wage indexation systems, creation of a common base for assessing corporate tax, alignment of pension system and legally binding commitments to tough fiscal policies.
The approach is controversial because it touches some of the most sensitive areas of policy — like taxation and wage policy — where many nations guard their sovereignty jealously.
“I totally disagree with the current proposals,” Mr. Leterme of Belgium said. “We will not let the cornerstones of this system be undermined.”
Belgium argues that its system of wage indexation has not delivered higher inflation than Germany.
Reservations even emerged from neighboring Holland, where the government generally supports Germany on economic policy.
“We welcome stronger economic coordination on the basis of best practices, but we will always remain the master of our taxes, pensions and wages,” said the Dutch prime minister, Mark Rutte.
The range of complaints from within the euro zone alone reflects how difficult it will be to make the pact work.
Ireland sees its low rate of corporate tax as one of its few weapons in the battle to revive an economy so badly battered by the crisis that it accepted a bailout last year. Estonia and Slovakia also want to protect their low tax regimes.
But France and German politicians have long complained at being undercut by the E.U. nations with lower corporate tax.
Some countries also dislike the fact that the new structure would be orchestrated by governments, rather than the bloc’s executive, the European Commission, which is seen by many smaller nations as a protector of their interests.
Many issues remain to be resolved, including how the new group would operate, how its rules would be enforced, and whether nations that do not use the euro — like Britain, Poland or Sweden — would want to join and be invited to join in.
Thursday, February 3, 2011
JPMorgan Hid Doubts on Madoff, Documents Suggest
Senior executives at JPMorgan Chase expressed serious doubts about the legitimacy of Bernard L. Madoff’s investment business more than 18 months before his Ponzi scheme collapsed but continued to do business with him, according to internal bank documents made public in a lawsuit on Thursday.
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Daniel Acker/Bloomberg News
Irving H. Picard, center, the trustee, leaves federal bankruptcy court on Tuesday with his lawyer David J. Sheehan.
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Madoff Trustee’s Lawsuit Against JPMorgan Chase
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On June 15, 2007, an evidently high-level risk management officer for Chase’s investment bank sent a lunchtime e-mail to colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”
Even before that, a top private banking executive had been consistently steering clients away from investments linked to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.” And the first Chase risk analyst to look at a Madoff feeder fund, in February 2006, reported to his superiors that its returns did not make sense because it did far better than the securities that were supposedly in its portfolio.
Despite those suspicions and many more, the bank allowed Mr. Madoff to move billions of dollars of investors’ cash in and out of his Chase bank accounts right until the day of his arrest in December 2008 — although by then, the bank had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds, according to the litigation.
The lawsuit against the bank was filed under seal on Dec. 2 by Irving H. Picard, the bankruptcy trustee gathering assets for Mr. Madoff’s victims. At that time, David J. Sheehan, the trustee’s lawyer, bluntly asserted that Mr. Madoff “would not have been able to commit this massive Ponzi scheme without this bank.” But with the case under seal, there was no way to gauge the documentation on which the trustee based his $6.4 billion in claims against the bank — until now.
In a statement, JPMorgan Chase strongly disputed Mr. Picard’s accusations and said it would “vigorously” challenge the claims in court.
The bank and Mr. Picard mutually agreed to unseal the complaint, which is one of dozens of big-ticket claims he has filed to recover assets for the victims of the Ponzi scheme. Other defendants include a half-dozen global banks, including HSBC in London and UBS in Switzerland, and the Wilpon family, the owners of the New York Mets.
To date, Mr. Picard has collected about $10 billion through settlements and asset sales; he estimates the total cash losses in the fraud at $20 billion.
In a statement released Thursday, the bank said the trustee’s complaint was “based on distortions of both the relevant facts and the governing law.” It denied that it had known about or played any role in Mr. Madoff’s fraud and dismissed the claim that it turned a blind eye to his activities to retain income from his business.
“Madoff’s firm was not an important or significant customer in the context of JPMorgan’s commercial banking business,” the statement said. “The revenues earned from Madoff’s bank account were modest and entirely consistent with conventional market rates and fees.”
As for Mr. Picard’s claim that the bank should have frozen Mr. Madoff’s bank account or reported his suspicious activity to regulators, the bank said, “At all times, JPMorgan complied fully with all laws and regulations governing bank accounts, including the regulations invoked by the trustee.”
Although lawyers redacted the names and specific positions of bank executives involved in the incidents described in the lawsuit, other information in the complaint makes it clear that many of them held prominent positions.
Deborah H. Renner, one of the trustee’s lawyers with Baker & Hostetler, reinforced that impression in a statement released Thursday. Ms. Renner said, “Incredibly, the bank’s top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme, yet the bank appears to have been concerned only with protecting its own investments.”
One discussion of the bank’s “due diligence” on Mr. Madoff was aired on June 15, 2007, at a meeting of the bank’s hedge fund underwriting committee. According to the complaint, that committee was composed of “senior business heads and bankers, including individuals such as the chief risk officer and the heads of equities, syndicated leveraged finance, sales and hedge funds.”
News accounts identified the chief risk officer for Chase’s investment bank in June 2007 as John J. Hogan, who is currently a member of the bank’s executive committee.
The newly public material offers the clearest picture yet of the long and complex relationship between Mr. Madoff and Chase, the global institution that served as his primary bank since 1986.
Enlarge This Image
Daniel Acker/Bloomberg News
Irving H. Picard, center, the trustee, leaves federal bankruptcy court on Tuesday with his lawyer David J. Sheehan.
Back Story With The Times's Diana Henriques
Multimedia
Document
Madoff Trustee’s Lawsuit Against JPMorgan Chase
INTERACTIVE FEATURE: Cleaning Up the Madoff Mess
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JPMorgan Chase & Company
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On June 15, 2007, an evidently high-level risk management officer for Chase’s investment bank sent a lunchtime e-mail to colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”
Even before that, a top private banking executive had been consistently steering clients away from investments linked to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.” And the first Chase risk analyst to look at a Madoff feeder fund, in February 2006, reported to his superiors that its returns did not make sense because it did far better than the securities that were supposedly in its portfolio.
Despite those suspicions and many more, the bank allowed Mr. Madoff to move billions of dollars of investors’ cash in and out of his Chase bank accounts right until the day of his arrest in December 2008 — although by then, the bank had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds, according to the litigation.
The lawsuit against the bank was filed under seal on Dec. 2 by Irving H. Picard, the bankruptcy trustee gathering assets for Mr. Madoff’s victims. At that time, David J. Sheehan, the trustee’s lawyer, bluntly asserted that Mr. Madoff “would not have been able to commit this massive Ponzi scheme without this bank.” But with the case under seal, there was no way to gauge the documentation on which the trustee based his $6.4 billion in claims against the bank — until now.
In a statement, JPMorgan Chase strongly disputed Mr. Picard’s accusations and said it would “vigorously” challenge the claims in court.
The bank and Mr. Picard mutually agreed to unseal the complaint, which is one of dozens of big-ticket claims he has filed to recover assets for the victims of the Ponzi scheme. Other defendants include a half-dozen global banks, including HSBC in London and UBS in Switzerland, and the Wilpon family, the owners of the New York Mets.
To date, Mr. Picard has collected about $10 billion through settlements and asset sales; he estimates the total cash losses in the fraud at $20 billion.
In a statement released Thursday, the bank said the trustee’s complaint was “based on distortions of both the relevant facts and the governing law.” It denied that it had known about or played any role in Mr. Madoff’s fraud and dismissed the claim that it turned a blind eye to his activities to retain income from his business.
“Madoff’s firm was not an important or significant customer in the context of JPMorgan’s commercial banking business,” the statement said. “The revenues earned from Madoff’s bank account were modest and entirely consistent with conventional market rates and fees.”
As for Mr. Picard’s claim that the bank should have frozen Mr. Madoff’s bank account or reported his suspicious activity to regulators, the bank said, “At all times, JPMorgan complied fully with all laws and regulations governing bank accounts, including the regulations invoked by the trustee.”
Although lawyers redacted the names and specific positions of bank executives involved in the incidents described in the lawsuit, other information in the complaint makes it clear that many of them held prominent positions.
Deborah H. Renner, one of the trustee’s lawyers with Baker & Hostetler, reinforced that impression in a statement released Thursday. Ms. Renner said, “Incredibly, the bank’s top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme, yet the bank appears to have been concerned only with protecting its own investments.”
One discussion of the bank’s “due diligence” on Mr. Madoff was aired on June 15, 2007, at a meeting of the bank’s hedge fund underwriting committee. According to the complaint, that committee was composed of “senior business heads and bankers, including individuals such as the chief risk officer and the heads of equities, syndicated leveraged finance, sales and hedge funds.”
News accounts identified the chief risk officer for Chase’s investment bank in June 2007 as John J. Hogan, who is currently a member of the bank’s executive committee.
The newly public material offers the clearest picture yet of the long and complex relationship between Mr. Madoff and Chase, the global institution that served as his primary bank since 1986.
Before Sunday, a Taste of the Bowl
For decades, most Super Bowl advertisers followed a simple rule: Keep commercials under wraps until the moment they go on the air.
But social media like Facebook, Twitter and YouTube have ushered in a new era, and marketers are doing what was once unthinkable. In addition to offering sneak peeks of their spots and revealing contents of the commercials, many, like the vacation rental company HomeAway, are going the full Monty and sharing the entire ads in advance.
“Last year, we thought, ‘We ought to keep this close to the vest and make it a big surprise,’ ” said Brian Sharples, chief executive of HomeAway in Austin, Tex. The response last year to the company’s Super Bowl spot, its first ever, “exceeded our expectations,” he added, and “this year, we said, ‘Let’s put it out there.’ ” So the commercial, scheduled to run in the third quarter of the game, went live this week on the HomeAway Web site.
Brands like Audi, Best Buy, Budweiser, CareerBuilder, Chevrolet, Coca-Cola, E*Trade, GoDaddy, Kia, Mercedes-Benz, Snickers, Teleflora, 20th Century Fox and Volkswagen are all over social media trying to drum up interest in the commercials they plan to run during Super Bowl XLV on Fox on Sunday.
Because social media can “build buzz” for Super Bowl commercials before, during and after the game, Mr. Sharples said, “if you don’t take advantage of all that, you’re not getting the most bang for your buck.”
Motorola Mobility is offering previews of a 60-second spot it plans to run in the second quarter of the game, for the new Motorola Xoom tablet.
“It makes a lot of sense to build the relationship with your loyal customers, and one way is to give them things in advance and let them feel part of the process,” said Bill Ogle, chief marketing officer at Motorola Mobility in Libertyville, Ill.
Beginning on Friday, Motorola Mobility and its agency, Anomaly in New York, will provide information about the commercial, which evokes the famous “1984” Apple Super Bowl spot, to technology bloggers and reporters. Later, the companies plan to upload excerpts to the Motorola Web site as well as the Motorola Facebook page, where the company has close to 300,000 fans.
“There are so many spots in a Super Bowl that it can be hard to stand out,” said Timothy Calkins, clinical professor of marketing at the Kellogg School of Management at Northwestern University in Evanston, Ill. “A lot of the strategy is now focused on how you position yourself in advance of the game, because if you wait till the last minute, it makes it harder to break through.”
“It reduces your risk to get ahead of it,” he added, because that can help “achieve return on investment.”
That is important because Fox, part of the News Corporation, is charging sponsors an estimated $2.8 million to $3 million for each 30 seconds of national commercial time in the game — in other words, as much as $100,000 a second.
“Companies are recognizing they can leverage their investments if they create some curiosity before the Super Bowl,” said George Belch, marketing professor at San Diego State University, or “extend the life of the campaign after the game.”
“The financial people are asking, ‘Where’s our R.O.I.?’ ” he added, referring to return on investment, “so if you have all these online views before or after, you can show you’re getting a lot of bang for the buck.”
There was “a bit of it last year, two years ago,” Mr. Belch said of the efforts by advertisers to front-run their Super Bowl spots, “but this year, it’s really taking off,” reflecting how ardently consumers are embracing social media, where they can “vote on ads, send them on to friends, enter contests and become ‘fans’ of brands.”
“The common thread is, ‘What can we do to get greater engagement with consumers?’ ” he added.
The strategy is not without risk, experts say.
“There’s some real concern that it may dilute the ‘specialness’ that’s associated with advertising in the Super Bowl,” said Shawn McBride, vice president at Ketchum Sports and Entertainment in New York, part of the Ketchum public relations unit of the Omnicom Group.
“The Super Bowl delivers a spectacularly large audience, one that watches the commercials with a high level of attention,” he added. “So the idea of cutting your own grass ahead of time means there may not be that ‘aha!’ moment when your commercial comes on during the game.”
Mr. Calkins, the Kellogg marketing professor, said that when “the Super Bowl spot is part of a much bigger campaign, and there’s a lot of activity before and after the game, you wonder if the ad itself may be anticlimactic because there’s so much buildup.”
To avoid that problem, Mr. Ogle at Motorola Mobility said, the complete commercial for the Xoom will not be available before the game.
“We want to create a sense of anticipation,” he said. “What we don’t want to do is let the cat completely out of the bag.”
Mr. Sharples of HomeAway was more philosophical about spilling the beans for his Super Bowl spot, which is being created by an Austin agency, Vendor.
“If we let it go early,” he said, laughing, “it’ll still be a surprise to 95 or 98 million people.”
Nielsen estimated that a record 106.5 million people watched Super Bowl XLIV last year. Some media industry analysts are projecting that the game on Sunday may attract 110 million viewers, given the popularity of the teams, the Green Bay Packers and the Pittsburgh Steelers.
Also, the wintry weather in many parts of the country could keep people indoors, watching TV and browsing Facebook.
But social media like Facebook, Twitter and YouTube have ushered in a new era, and marketers are doing what was once unthinkable. In addition to offering sneak peeks of their spots and revealing contents of the commercials, many, like the vacation rental company HomeAway, are going the full Monty and sharing the entire ads in advance.
“Last year, we thought, ‘We ought to keep this close to the vest and make it a big surprise,’ ” said Brian Sharples, chief executive of HomeAway in Austin, Tex. The response last year to the company’s Super Bowl spot, its first ever, “exceeded our expectations,” he added, and “this year, we said, ‘Let’s put it out there.’ ” So the commercial, scheduled to run in the third quarter of the game, went live this week on the HomeAway Web site.
Brands like Audi, Best Buy, Budweiser, CareerBuilder, Chevrolet, Coca-Cola, E*Trade, GoDaddy, Kia, Mercedes-Benz, Snickers, Teleflora, 20th Century Fox and Volkswagen are all over social media trying to drum up interest in the commercials they plan to run during Super Bowl XLV on Fox on Sunday.
Because social media can “build buzz” for Super Bowl commercials before, during and after the game, Mr. Sharples said, “if you don’t take advantage of all that, you’re not getting the most bang for your buck.”
Motorola Mobility is offering previews of a 60-second spot it plans to run in the second quarter of the game, for the new Motorola Xoom tablet.
“It makes a lot of sense to build the relationship with your loyal customers, and one way is to give them things in advance and let them feel part of the process,” said Bill Ogle, chief marketing officer at Motorola Mobility in Libertyville, Ill.
Beginning on Friday, Motorola Mobility and its agency, Anomaly in New York, will provide information about the commercial, which evokes the famous “1984” Apple Super Bowl spot, to technology bloggers and reporters. Later, the companies plan to upload excerpts to the Motorola Web site as well as the Motorola Facebook page, where the company has close to 300,000 fans.
“There are so many spots in a Super Bowl that it can be hard to stand out,” said Timothy Calkins, clinical professor of marketing at the Kellogg School of Management at Northwestern University in Evanston, Ill. “A lot of the strategy is now focused on how you position yourself in advance of the game, because if you wait till the last minute, it makes it harder to break through.”
“It reduces your risk to get ahead of it,” he added, because that can help “achieve return on investment.”
That is important because Fox, part of the News Corporation, is charging sponsors an estimated $2.8 million to $3 million for each 30 seconds of national commercial time in the game — in other words, as much as $100,000 a second.
“Companies are recognizing they can leverage their investments if they create some curiosity before the Super Bowl,” said George Belch, marketing professor at San Diego State University, or “extend the life of the campaign after the game.”
“The financial people are asking, ‘Where’s our R.O.I.?’ ” he added, referring to return on investment, “so if you have all these online views before or after, you can show you’re getting a lot of bang for the buck.”
There was “a bit of it last year, two years ago,” Mr. Belch said of the efforts by advertisers to front-run their Super Bowl spots, “but this year, it’s really taking off,” reflecting how ardently consumers are embracing social media, where they can “vote on ads, send them on to friends, enter contests and become ‘fans’ of brands.”
“The common thread is, ‘What can we do to get greater engagement with consumers?’ ” he added.
The strategy is not without risk, experts say.
“There’s some real concern that it may dilute the ‘specialness’ that’s associated with advertising in the Super Bowl,” said Shawn McBride, vice president at Ketchum Sports and Entertainment in New York, part of the Ketchum public relations unit of the Omnicom Group.
“The Super Bowl delivers a spectacularly large audience, one that watches the commercials with a high level of attention,” he added. “So the idea of cutting your own grass ahead of time means there may not be that ‘aha!’ moment when your commercial comes on during the game.”
Mr. Calkins, the Kellogg marketing professor, said that when “the Super Bowl spot is part of a much bigger campaign, and there’s a lot of activity before and after the game, you wonder if the ad itself may be anticlimactic because there’s so much buildup.”
To avoid that problem, Mr. Ogle at Motorola Mobility said, the complete commercial for the Xoom will not be available before the game.
“We want to create a sense of anticipation,” he said. “What we don’t want to do is let the cat completely out of the bag.”
Mr. Sharples of HomeAway was more philosophical about spilling the beans for his Super Bowl spot, which is being created by an Austin agency, Vendor.
“If we let it go early,” he said, laughing, “it’ll still be a surprise to 95 or 98 million people.”
Nielsen estimated that a record 106.5 million people watched Super Bowl XLIV last year. Some media industry analysts are projecting that the game on Sunday may attract 110 million viewers, given the popularity of the teams, the Green Bay Packers and the Pittsburgh Steelers.
Also, the wintry weather in many parts of the country could keep people indoors, watching TV and browsing Facebook.
Asian Earnings Swell From U.S. Consumer Spending, China's Economic Growth
Asian companies including Samsung Electronics Co., Hyundai Motor Co. and Nippon Yusen K.K. boosted earnings last quarter as economic growth in the U.S. and China spurred consumers to buy more electronics and cars.
Samsung, the world’s second-largest maker of mobile phones, raised net income in the three months ended Dec. 31 by 13 percent from a year earlier, it said Jan. 28. Profit at Hyundai, South Korea’s largest carmaker, jumped 48 percent to a record, while earnings surged 10-fold at Nippon Yusen, Japan’s largest shipping line, the companies reported separately.
Spending by U.S. consumers climbed the most in more than four years in the quarter, helping Asian manufacturers sell more goods in the world’s largest economy, while economic expansion accelerated in China. Canon Inc. and Honda Motor Co. projected rising sales and profits as demand for cameras and cars rebounds.
“Our profitability is getting close to where we were before Lehman collapsed,” Yoichi Hojo, Honda’s chief financial officer, said in a Feb. 2 interview, referring to the 2008 financial crisis that felled Lehman Brothers Holdings Inc. and led to a global recession. The Tokyo-based carmaker, Japan’s third-largest, raised its full-year profit forecast on Jan. 31.
Rising incomes and a payroll tax cut may help sustain higher U.S. consumer spending in 2011. China’s economy, estimated to have surpassed Japan as the world’s second-largest last year, may grow 8.7 percent this year after expanding 10 percent in 2010, the World Bank said Jan. 12.
‘Recovery Trend’
Asian earnings reports “confirm a recovery trend is continuing,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm.
Samsung’s net income of 3.42 trillion won ($3.1 billion) last quarter exceeded analyst estimates and was boosted by demand for the Suwon, South Korea-based company’s smartphones and tablet computers.
Industrywide sales of smartphones and tablets will probably grow to about 1 billion units by 2015 from 300 million last year, according to Meritz Securities Co.
Demand for the gadgets also bolstered earnings at companies that make semiconductors. The market for NAND flash memory chips used to store data in smartphones, music players and digital cameras may expand 18 percent this year after climbing 38 percent in 2010, according to IHS Inc.’s ISuppli.
Consumer Electronics
Samsung, the world’s largest maker of NAND memory chips, said profit from its semiconductor division rose 34 percent last quarter. Toshiba Corp., the second-largest maker of flash memory, raised its full-year profit forecast 43 percent to 100 billion yen ($1.2 billion) as the Tokyo-based company reported a fourth straight quarterly profit.
Total shipments of consumer electronics products may rise 2.6 percent to 1.6 billion units in 2011 after climbing 4 percent in 2010, ISuppli said Jan. 25. Canon, the world’s largest camera maker, said Jan. 27 its sales of cameras with interchangeable lenses may rise 18 percent, driving a projected 26 percent jump in profit this year.
Canon’s net income in 2010 surged 87 percent to 246.6 billion yen, the Tokyo-based company said.
Sony Corp., Japan’s biggest exporter of consumer electronics, reported profit that beat analyst estimates after earnings from its PlayStation games division doubled and camera sales rose. Net income fell 8.6 percent to 72.3 billion yen in the quarter ended Dec. 31, compared with the 65.9 billion yen average of six analyst estimates compiled by Bloomberg.
U.S. Auto Sales
Demand for consumer electronics gained as the U.S. economy expanded at a 3.2 percent annual rate last quarter. The economy grew 2.9 percent on a full-year basis, the most in five years, helping automakers as the nation’s vehicle demand rose 11 percent from a 27-year low in 2009.
Passenger-car sales in China, which overtook the U.S. as the world’s largest vehicle market in 2009, surged 33 percent last year to 13.8 million as rising affluence and government stimulus measures increased demand.
Hyundai said Jan. 27 its profit last quarter rose to 1.4 trillion won as the Seoul-based company’s U.S. vehicle sales jumped 38 percent from a year earlier, while deliveries in China climbed 22 percent.
Honda raised its profit forecast for the year ending March 31 by 6 percent to 530 billion yen, citing the outlook for the U.S. auto market.
Toyota Motor Corp., the world’s largest carmaker, is scheduled to report earnings Feb. 8.
Growing demand for goods from Asia is also boosting container-shipping rates, benefiting Nippon Yusen and China Cosco Holdings Co.
Nippon Yusen’s profit for the three months ended Dec. 31 jumped to 26.9 billion yen as rates for transporting goods by container to the U.S. and Europe rose, it said Jan. 31.
China Cosco, China’s biggest shipping line, expects to post a 2010 profit, rebounding from a loss in 2009, the Tianjin-based company said Jan. 5.
Samsung, the world’s second-largest maker of mobile phones, raised net income in the three months ended Dec. 31 by 13 percent from a year earlier, it said Jan. 28. Profit at Hyundai, South Korea’s largest carmaker, jumped 48 percent to a record, while earnings surged 10-fold at Nippon Yusen, Japan’s largest shipping line, the companies reported separately.
Spending by U.S. consumers climbed the most in more than four years in the quarter, helping Asian manufacturers sell more goods in the world’s largest economy, while economic expansion accelerated in China. Canon Inc. and Honda Motor Co. projected rising sales and profits as demand for cameras and cars rebounds.
“Our profitability is getting close to where we were before Lehman collapsed,” Yoichi Hojo, Honda’s chief financial officer, said in a Feb. 2 interview, referring to the 2008 financial crisis that felled Lehman Brothers Holdings Inc. and led to a global recession. The Tokyo-based carmaker, Japan’s third-largest, raised its full-year profit forecast on Jan. 31.
Rising incomes and a payroll tax cut may help sustain higher U.S. consumer spending in 2011. China’s economy, estimated to have surpassed Japan as the world’s second-largest last year, may grow 8.7 percent this year after expanding 10 percent in 2010, the World Bank said Jan. 12.
‘Recovery Trend’
Asian earnings reports “confirm a recovery trend is continuing,” said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan Co., a Tokyo-based hedge fund advisory firm.
Samsung’s net income of 3.42 trillion won ($3.1 billion) last quarter exceeded analyst estimates and was boosted by demand for the Suwon, South Korea-based company’s smartphones and tablet computers.
Industrywide sales of smartphones and tablets will probably grow to about 1 billion units by 2015 from 300 million last year, according to Meritz Securities Co.
Demand for the gadgets also bolstered earnings at companies that make semiconductors. The market for NAND flash memory chips used to store data in smartphones, music players and digital cameras may expand 18 percent this year after climbing 38 percent in 2010, according to IHS Inc.’s ISuppli.
Consumer Electronics
Samsung, the world’s largest maker of NAND memory chips, said profit from its semiconductor division rose 34 percent last quarter. Toshiba Corp., the second-largest maker of flash memory, raised its full-year profit forecast 43 percent to 100 billion yen ($1.2 billion) as the Tokyo-based company reported a fourth straight quarterly profit.
Total shipments of consumer electronics products may rise 2.6 percent to 1.6 billion units in 2011 after climbing 4 percent in 2010, ISuppli said Jan. 25. Canon, the world’s largest camera maker, said Jan. 27 its sales of cameras with interchangeable lenses may rise 18 percent, driving a projected 26 percent jump in profit this year.
Canon’s net income in 2010 surged 87 percent to 246.6 billion yen, the Tokyo-based company said.
Sony Corp., Japan’s biggest exporter of consumer electronics, reported profit that beat analyst estimates after earnings from its PlayStation games division doubled and camera sales rose. Net income fell 8.6 percent to 72.3 billion yen in the quarter ended Dec. 31, compared with the 65.9 billion yen average of six analyst estimates compiled by Bloomberg.
U.S. Auto Sales
Demand for consumer electronics gained as the U.S. economy expanded at a 3.2 percent annual rate last quarter. The economy grew 2.9 percent on a full-year basis, the most in five years, helping automakers as the nation’s vehicle demand rose 11 percent from a 27-year low in 2009.
Passenger-car sales in China, which overtook the U.S. as the world’s largest vehicle market in 2009, surged 33 percent last year to 13.8 million as rising affluence and government stimulus measures increased demand.
Hyundai said Jan. 27 its profit last quarter rose to 1.4 trillion won as the Seoul-based company’s U.S. vehicle sales jumped 38 percent from a year earlier, while deliveries in China climbed 22 percent.
Honda raised its profit forecast for the year ending March 31 by 6 percent to 530 billion yen, citing the outlook for the U.S. auto market.
Toyota Motor Corp., the world’s largest carmaker, is scheduled to report earnings Feb. 8.
Growing demand for goods from Asia is also boosting container-shipping rates, benefiting Nippon Yusen and China Cosco Holdings Co.
Nippon Yusen’s profit for the three months ended Dec. 31 jumped to 26.9 billion yen as rates for transporting goods by container to the U.S. and Europe rose, it said Jan. 31.
China Cosco, China’s biggest shipping line, expects to post a 2010 profit, rebounding from a loss in 2009, the Tianjin-based company said Jan. 5.
Wednesday, February 2, 2011
News Corporation Introduces The Daily, a Digital-Only Newspaper
Rupert Murdoch on Wednesday pushed the send button on The Daily, a news application designed for the iPad that he hopes will position his News Corporation front and center in the digital newsstand of the future.
“New times demand new journalism,” Mr. Murdoch said on stage at the Solomon R. Guggenheim Museum in New York before an audience of reporters, media executives, employees and advertising partners.
The Daily will be a first of its kind for tablet computers: a general interest publication that will refresh every morning and will bill customers’ credit cards each week for 99 cents or each year for $40.
In journalistic and marketing ambition and scope, The Daily recalls USA Today when it began in 1982: a publication of no city or region that aspires to be a first-read in the homes of millions of Americans despite having no brand recognition.
The Daily takes that same sensibility to the digital age by trying to enliven the printed word with photographs, video and interactive features that work seamlessly together.
“This is about as close as you’re going to get to the first big test of content on the iPad,” said Mike Vorhaus, the president of the media consulting firm Magid Advisors.
For Mr. Murdoch and the News Corporation, The Daily represents something far grander and more ambitious than a new business undertaking: it is an opportunity to try to reinvent the business model for news publishing.
“There’s a growing segment of the population here and around the world that is educated and sophisticated that does not read national print newspapers or watch television news,” said Mr. Murdoch, the owner of television stations and newspapers around the world. “We can and we must make the business of newsgathering and editing viable again.”
With vibrant photos, crisp black-on-white text and high-definition video, The Daily is pan-media — a news Web site, a glossy magazine and a network newscast. Its articles run the gamut from breaking global news to feature writing.
It has the sensibility of a tabloid. There is a separate section for gossip, which is listed as the second section, after news. “Only in The Daily” boasted a brightly colored bubble superimposed over one article in Wednesday’s edition. A headline accompanying an article about the crisis in Egypt blared in a large, boldface font: “Falling Pharaoh.”
Mr. Murdoch indicated that The Daily was intended for a generation of consumers who expect “content tailored to their specific interests to be available anytime, anywhere.”
But the generation of readers that has grown accustomed to curating the abundance of news content on the Internet rather than reading it in one daily or weekly publication has also grown accustomed to having it free.
The Daily’s price is deliberately low. Available only on iPads, it will be free to users for the first two weeks, courtesy of a sponsorship deal with Verizon. After that, it will cost 99 cents a week (or “14 cents a day,” as Mr. Murdoch put it), or $39.99 a year.
With roughly 15 million iPads already sold, the pool of potential customers is not yet large enough to yield the kinds of returns that the News Corporation would need to quickly recoup its initial investment in The Daily — roughly $30 million. Mr. Murdoch said the costs of producing The Daily would be around $500,000 a week, relatively low because it requires none of the machinery needed to produce and distribute a printed news product.
“Our ambitions are very big, but our costs are very low,” Mr. Murdoch said. Subscriptions will make up the bulk of The Daily’s revenue at first. Advertising will make up a smaller piece. So far HBO, Virgin Atlantic Airways and Range Rover are among those to have signed on.
The endeavor has the full weight of the News Corporation behind it, a fact underscored by Mr. Murdoch’s appearance at The Daily’s debut reception. Fox News, part of the News Corporation, broke into coverage of the civil unrest in Egypt to carry the event live. In response to viewer comments that Fox News was covering the news conference because the business was owned by the same boss, Neil Cavuto, the business anchor said, “that might have something to do with it.”
The News Corporation has cultivated a close relationship with Apple and its co-founder Steven P. Jobs, who agreed to allow recurring subscriptions of The Daily as part of an arrangement that stood to benefit fledgling projects at both companies, according to one person with direct knowledge of the discussions about The Daily’s development. This person spoke only on the condition of anonymity because the conversations were intended to be confidential.
“New times demand new journalism,” Mr. Murdoch said on stage at the Solomon R. Guggenheim Museum in New York before an audience of reporters, media executives, employees and advertising partners.
The Daily will be a first of its kind for tablet computers: a general interest publication that will refresh every morning and will bill customers’ credit cards each week for 99 cents or each year for $40.
In journalistic and marketing ambition and scope, The Daily recalls USA Today when it began in 1982: a publication of no city or region that aspires to be a first-read in the homes of millions of Americans despite having no brand recognition.
The Daily takes that same sensibility to the digital age by trying to enliven the printed word with photographs, video and interactive features that work seamlessly together.
“This is about as close as you’re going to get to the first big test of content on the iPad,” said Mike Vorhaus, the president of the media consulting firm Magid Advisors.
For Mr. Murdoch and the News Corporation, The Daily represents something far grander and more ambitious than a new business undertaking: it is an opportunity to try to reinvent the business model for news publishing.
“There’s a growing segment of the population here and around the world that is educated and sophisticated that does not read national print newspapers or watch television news,” said Mr. Murdoch, the owner of television stations and newspapers around the world. “We can and we must make the business of newsgathering and editing viable again.”
With vibrant photos, crisp black-on-white text and high-definition video, The Daily is pan-media — a news Web site, a glossy magazine and a network newscast. Its articles run the gamut from breaking global news to feature writing.
It has the sensibility of a tabloid. There is a separate section for gossip, which is listed as the second section, after news. “Only in The Daily” boasted a brightly colored bubble superimposed over one article in Wednesday’s edition. A headline accompanying an article about the crisis in Egypt blared in a large, boldface font: “Falling Pharaoh.”
Mr. Murdoch indicated that The Daily was intended for a generation of consumers who expect “content tailored to their specific interests to be available anytime, anywhere.”
But the generation of readers that has grown accustomed to curating the abundance of news content on the Internet rather than reading it in one daily or weekly publication has also grown accustomed to having it free.
The Daily’s price is deliberately low. Available only on iPads, it will be free to users for the first two weeks, courtesy of a sponsorship deal with Verizon. After that, it will cost 99 cents a week (or “14 cents a day,” as Mr. Murdoch put it), or $39.99 a year.
With roughly 15 million iPads already sold, the pool of potential customers is not yet large enough to yield the kinds of returns that the News Corporation would need to quickly recoup its initial investment in The Daily — roughly $30 million. Mr. Murdoch said the costs of producing The Daily would be around $500,000 a week, relatively low because it requires none of the machinery needed to produce and distribute a printed news product.
“Our ambitions are very big, but our costs are very low,” Mr. Murdoch said. Subscriptions will make up the bulk of The Daily’s revenue at first. Advertising will make up a smaller piece. So far HBO, Virgin Atlantic Airways and Range Rover are among those to have signed on.
The endeavor has the full weight of the News Corporation behind it, a fact underscored by Mr. Murdoch’s appearance at The Daily’s debut reception. Fox News, part of the News Corporation, broke into coverage of the civil unrest in Egypt to carry the event live. In response to viewer comments that Fox News was covering the news conference because the business was owned by the same boss, Neil Cavuto, the business anchor said, “that might have something to do with it.”
The News Corporation has cultivated a close relationship with Apple and its co-founder Steven P. Jobs, who agreed to allow recurring subscriptions of The Daily as part of an arrangement that stood to benefit fledgling projects at both companies, according to one person with direct knowledge of the discussions about The Daily’s development. This person spoke only on the condition of anonymity because the conversations were intended to be confidential.
Indian IT groups shift focus
Indian information technology companies intend to reduce their dependency on a US market they regard as “protectionist”, citing a decision to increase visa fees for skilled workers that will raise their personnel costs by up to $250m a year.
Tata Consultancy Services and Infosys, the two largest Indian outsourcing companies, told the Financial Times that while the US would remain an important market, they wanted to boost revenues in Europe and emerging markets.
The IT companies’ negative stance towards the US highlights the challenges Barack Obama’s administration faces to create jobs in the tech sector as part of its efforts to reduce high unemployment.
In his State of the Union speech last week, the president cited the IT industry as a key driver of job creation.
N. Chandrasekaran, chief executive of TCS, said that plans to scale up the company’s US operations had been slowed by a number of domestic hurdles, while its business in Latin America and Asia had grown at a much faster pace.
“Unemployment remains high so the protectionist measures they introduced last year are still there and this causes concern to us,” he said.
The US passed a law last year that increased the fee for H1B and L-1 visas – commonly used by India’s IT outsourcing companies to bring talent into the US – to $2,000, up from $320. Nasscom, India’s IT software outsourcing industry lobby, said that the measures would increase annual US visa costs for the Indian IT industry by $200m-$250m per year.
T K Kurien, chief executive of Wipro, India’s third-largest IT company, told the FT. “The west preached liberalisation for many years until they realised they were being hurt by liberalisation and life changed.”
“We are really trying to reduce our dependency on the US for several reasons,” said Kris Gopalakrishnan, Infosys chief executive.
“Europe spends as much as the US on IT and we want to make sure that our revenues mirror that IT spend.”
Tata Consultancy Services and Infosys, the two largest Indian outsourcing companies, told the Financial Times that while the US would remain an important market, they wanted to boost revenues in Europe and emerging markets.
The IT companies’ negative stance towards the US highlights the challenges Barack Obama’s administration faces to create jobs in the tech sector as part of its efforts to reduce high unemployment.
In his State of the Union speech last week, the president cited the IT industry as a key driver of job creation.
N. Chandrasekaran, chief executive of TCS, said that plans to scale up the company’s US operations had been slowed by a number of domestic hurdles, while its business in Latin America and Asia had grown at a much faster pace.
“Unemployment remains high so the protectionist measures they introduced last year are still there and this causes concern to us,” he said.
The US passed a law last year that increased the fee for H1B and L-1 visas – commonly used by India’s IT outsourcing companies to bring talent into the US – to $2,000, up from $320. Nasscom, India’s IT software outsourcing industry lobby, said that the measures would increase annual US visa costs for the Indian IT industry by $200m-$250m per year.
T K Kurien, chief executive of Wipro, India’s third-largest IT company, told the FT. “The west preached liberalisation for many years until they realised they were being hurt by liberalisation and life changed.”
“We are really trying to reduce our dependency on the US for several reasons,” said Kris Gopalakrishnan, Infosys chief executive.
“Europe spends as much as the US on IT and we want to make sure that our revenues mirror that IT spend.”
Scotia Sees More Brazil Oil Deals as Asia Fuels $30 Billion Asset Scramble
Scotia Waterous, the energy mergers and acquisitions unit of Canada’s third-largest bank, said it sees “sizeable” oil transactions in Brazil this year after advising on $16 billion of Latin American deals in 2010.
“There’s definitely potential to see transactions for several billion of dollars,” Randy Crath, managing director for Latin American business at the Bank of Nova Scotia unit, said in a telephone interview. “Brazil would continue to be very important for the next couple of years at least,” he said.
BP Plc, Europe’s second-biggest oil producer, and China Petrochemical Corp. are among companies interested in oil and gas assets in Brazil, site of the Western Hemisphere’s largest discovery in three decades. Crath, who worked on more than half of last year’s $30 billion of exploration and production deals in Latin America, said he expects companies to seek partners to help fund exploration or exit Brazil for strategic reasons.
“It has been a hot place, absolutely,” he said of Brazil, where he lived 4 years. “The pre-salt in general and all the excitement surrounding the discoveries and the development that is going on there it’s attracting a lot of interest worldwide.”
Scotia last year advised China Petrochemical, known as Sinopec, on its acquisition of a 40 percent stake in Repsol YPF SA’s Brazilian unit for $7.1 billion and also on its purchase of Occidental Petroleum Corp.’s Argentine subsidiary. Crath’s team of 10 bankers also advised SK Energy Co.’s on its sale of three oil blocks in Brazil to Maersk Oil for $2.4 billion.
Chinese Interest
Sinopec and Sinochem Group, which last year agreed to pay $3 billion to Statoil ASA for 40 percent of the Brazilian offshore Peregrino field, will likely be active in Latin America again during 2011, together with other Asian companies such as Cnooc Ltd., China’s largest offshore energy producer, and PTT Exploration & Production Pcl, Thailand’s only listed oil and gas explorer, he said. China National Petroleum Corp., known as CNPC, and Korea National Oil Corp. may also be involved in deals.
“The Chinese companies are actively looking at alternatives, they are looking globally and Latin America is an attractive place for them to invest,” said Crath, 48, who lived for almost 14 years in the region. “I would expect to see Asian transactions in Latin America during 2011,” he said from Houston.
OGX Petroleo & Gas Participacoes SA, the Brazilian oil company controlled by Eike Batista, plans to sell a minority stake in its Campos oil field. Batista said in September that Cnooc and Sinopec were among companies likely to bid for the assets. OGX, based in Rio de Janeiro, said Dec. 6 that it is continuing talks this year on the sale.
Royal Dutch Shell
Royal Dutch Shell Plc, Europe’s largest oil company, is seeking to sell stakes in four blocks offshore Brazil to raise cash for development, it said Aug. 19. The stakes range from 20 percent of the BM-S-8 block to 82.5 percent of BM-ES-28.
The so-called pre-salt area hosts fields lying two miles below the ocean surface and another two to four miles beneath the seabed. The region holds at least 123 billion barrels of oil, according to a study by Hernani Chaves, a professor at the Rio University who worked at Brazilian state-controlled oil producer Petroleo Brasileiro SA for 35 years.
The forecast, which the study puts at a 90 percent probability, compares with the 50 billion-barrel estimate that Brazil’s oil regulator uses in presentations. Saudi Arabia, holder of the world largest proved reserves, has 265 billion barrels according to BP Plc’s 2010 Statistical Review.
In March, BP agreed to buy $7 billion of assets from Devon Energy Corp. in the Gulf of Mexico, Brazil and Azerbaijan. Michael Daly, BP’s executive vice president for exploration, said Feb. 1 he expected the acquisition of offshore assets in Brazil from Devon in the first half of the year.
“There’s definitely potential to see transactions for several billion of dollars,” Randy Crath, managing director for Latin American business at the Bank of Nova Scotia unit, said in a telephone interview. “Brazil would continue to be very important for the next couple of years at least,” he said.
BP Plc, Europe’s second-biggest oil producer, and China Petrochemical Corp. are among companies interested in oil and gas assets in Brazil, site of the Western Hemisphere’s largest discovery in three decades. Crath, who worked on more than half of last year’s $30 billion of exploration and production deals in Latin America, said he expects companies to seek partners to help fund exploration or exit Brazil for strategic reasons.
“It has been a hot place, absolutely,” he said of Brazil, where he lived 4 years. “The pre-salt in general and all the excitement surrounding the discoveries and the development that is going on there it’s attracting a lot of interest worldwide.”
Scotia last year advised China Petrochemical, known as Sinopec, on its acquisition of a 40 percent stake in Repsol YPF SA’s Brazilian unit for $7.1 billion and also on its purchase of Occidental Petroleum Corp.’s Argentine subsidiary. Crath’s team of 10 bankers also advised SK Energy Co.’s on its sale of three oil blocks in Brazil to Maersk Oil for $2.4 billion.
Chinese Interest
Sinopec and Sinochem Group, which last year agreed to pay $3 billion to Statoil ASA for 40 percent of the Brazilian offshore Peregrino field, will likely be active in Latin America again during 2011, together with other Asian companies such as Cnooc Ltd., China’s largest offshore energy producer, and PTT Exploration & Production Pcl, Thailand’s only listed oil and gas explorer, he said. China National Petroleum Corp., known as CNPC, and Korea National Oil Corp. may also be involved in deals.
“The Chinese companies are actively looking at alternatives, they are looking globally and Latin America is an attractive place for them to invest,” said Crath, 48, who lived for almost 14 years in the region. “I would expect to see Asian transactions in Latin America during 2011,” he said from Houston.
OGX Petroleo & Gas Participacoes SA, the Brazilian oil company controlled by Eike Batista, plans to sell a minority stake in its Campos oil field. Batista said in September that Cnooc and Sinopec were among companies likely to bid for the assets. OGX, based in Rio de Janeiro, said Dec. 6 that it is continuing talks this year on the sale.
Royal Dutch Shell
Royal Dutch Shell Plc, Europe’s largest oil company, is seeking to sell stakes in four blocks offshore Brazil to raise cash for development, it said Aug. 19. The stakes range from 20 percent of the BM-S-8 block to 82.5 percent of BM-ES-28.
The so-called pre-salt area hosts fields lying two miles below the ocean surface and another two to four miles beneath the seabed. The region holds at least 123 billion barrels of oil, according to a study by Hernani Chaves, a professor at the Rio University who worked at Brazilian state-controlled oil producer Petroleo Brasileiro SA for 35 years.
The forecast, which the study puts at a 90 percent probability, compares with the 50 billion-barrel estimate that Brazil’s oil regulator uses in presentations. Saudi Arabia, holder of the world largest proved reserves, has 265 billion barrels according to BP Plc’s 2010 Statistical Review.
In March, BP agreed to buy $7 billion of assets from Devon Energy Corp. in the Gulf of Mexico, Brazil and Azerbaijan. Michael Daly, BP’s executive vice president for exploration, said Feb. 1 he expected the acquisition of offshore assets in Brazil from Devon in the first half of the year.
India Ex-Telecom Minister's Arrest May Fail to End Impasse Before Budget
The arrest of Indian Prime Minister Manmohan Singh’s former telecommunications minister in a $31- billion phone-license probe may fail to end a political gridlock as the government prepares its budget, analysts said.
The Central Bureau of Investigation yesterday arrested Andimuthu Raja, his personal secretary and the former top bureaucrat in the ministry after India’s chief auditor said in November second-generation airwaves were sold for an “unbelievably low” $2.7 billion when they may have been worth at least 10 times more. The CBI apprehended the three men for favoring certain companies and violating guidelines, it said in a statement yesterday.
The opposition, led by the Bharatiya Janata Party has stalled parliament calling for a joint probe into the auction, which Singh has refused. The stalemate disrupted the entire session that ended in December, making it the least productive in at least 25 years. The houses are scheduled to meet from Feb. 21 to pass the government’s budget.
Raja’s arrest strengthens the opposition’s case, said N. Bhaskara Rao, chairman of the Centre for Media Studies in New Delhi. “They will stick to their demand for a joint parliamentary committee probe,” he said. The arrests “bring out the gravity of the situation with regard to corruption in the country and the need for urgent action to check that.”
Raja’s Resignation
Raja resigned from Singh’s cabinet on Nov. 14, two days before the Comptroller & Auditor General of India unveiled its report on the 2008 sale of airwaves. Telenor ASA and Emirates Telecommunications Corp. were among operators that purchased stakes in Indian companies the auditor said weren’t qualified for the licenses.
The Bharatiya Janata Party said Raja’s arrest is “belated” and has strengthened the demand for a cross-party probe into the spectrum allocation irregularities.
“I wish the prime minister had acted three years ago so that this huge loss to the public exchequer had not taken place,” BJP leader Arun Jaitley said in New Delhi yesterday.
The ruling Congress Party said the development will not affect Singh’s credibility.
“Those who doubted the sincerity and commitment to take action as per law should be silenced,” said party spokesman Abhishek Singhvi.
Raja has denied wrongdoing. His lawyer T.R. Andhyarujina declined to comment when reached on his mobile phone yesterday. Raja is a member of the Dravida Munnetra Kazhagam party, a key member of Singh’s ruling coalition.
‘Transparency in Policy’
“What happens to Raja is important for the future of how policy gets made and the transparency with which these decisions are taken,” said Kunal Bajaj, head of telecommunications consultant Analysys Mason India Pvt.
Raja was questioned by the CBI in December and January. Investigators said on Dec. 8 that they had found “incriminating” documents at his residences.
Singh told his party workers on Dec. 20 that he would punish anyone found guilty of corruption.
In November, federal agents arrested eight executives at the nation’s biggest life insurer, a brokerage and three state- run banks in a housing-loan probe and detained organizers of the Commonwealth Games for misuse of public funds. Last month, the government fired Suresh Kalmadi as the chairman of the games’ Organizing Committee.
The Central Bureau of Investigation yesterday arrested Andimuthu Raja, his personal secretary and the former top bureaucrat in the ministry after India’s chief auditor said in November second-generation airwaves were sold for an “unbelievably low” $2.7 billion when they may have been worth at least 10 times more. The CBI apprehended the three men for favoring certain companies and violating guidelines, it said in a statement yesterday.
The opposition, led by the Bharatiya Janata Party has stalled parliament calling for a joint probe into the auction, which Singh has refused. The stalemate disrupted the entire session that ended in December, making it the least productive in at least 25 years. The houses are scheduled to meet from Feb. 21 to pass the government’s budget.
Raja’s arrest strengthens the opposition’s case, said N. Bhaskara Rao, chairman of the Centre for Media Studies in New Delhi. “They will stick to their demand for a joint parliamentary committee probe,” he said. The arrests “bring out the gravity of the situation with regard to corruption in the country and the need for urgent action to check that.”
Raja’s Resignation
Raja resigned from Singh’s cabinet on Nov. 14, two days before the Comptroller & Auditor General of India unveiled its report on the 2008 sale of airwaves. Telenor ASA and Emirates Telecommunications Corp. were among operators that purchased stakes in Indian companies the auditor said weren’t qualified for the licenses.
The Bharatiya Janata Party said Raja’s arrest is “belated” and has strengthened the demand for a cross-party probe into the spectrum allocation irregularities.
“I wish the prime minister had acted three years ago so that this huge loss to the public exchequer had not taken place,” BJP leader Arun Jaitley said in New Delhi yesterday.
The ruling Congress Party said the development will not affect Singh’s credibility.
“Those who doubted the sincerity and commitment to take action as per law should be silenced,” said party spokesman Abhishek Singhvi.
Raja has denied wrongdoing. His lawyer T.R. Andhyarujina declined to comment when reached on his mobile phone yesterday. Raja is a member of the Dravida Munnetra Kazhagam party, a key member of Singh’s ruling coalition.
‘Transparency in Policy’
“What happens to Raja is important for the future of how policy gets made and the transparency with which these decisions are taken,” said Kunal Bajaj, head of telecommunications consultant Analysys Mason India Pvt.
Raja was questioned by the CBI in December and January. Investigators said on Dec. 8 that they had found “incriminating” documents at his residences.
Singh told his party workers on Dec. 20 that he would punish anyone found guilty of corruption.
In November, federal agents arrested eight executives at the nation’s biggest life insurer, a brokerage and three state- run banks in a housing-loan probe and detained organizers of the Commonwealth Games for misuse of public funds. Last month, the government fired Suresh Kalmadi as the chairman of the games’ Organizing Committee.
Sunday, January 30, 2011
Inflation in China May Limit U.S. Trade Deficit
HONG KONG — Inflation is starting to slow China’s mighty export machine, as buyers from Western multinational companies balk at higher prices and have cut back their planned spring shipments across the Pacific.
Markups of 20 to 50 percent on products like leather shoes and polo shirts have sent Western buyers scrambling for alternate suppliers. But from Vietnam to India, few low-wage developing countries can match China’s manufacturing might — and no country offers refuge from high global commodity prices.
Already, the slowdown in American orders has forced some container shipping lines to cancel up to a quarter of their trips to the United States this spring from Hong Kong and other Chinese ports.
The trend, if continued, could ease tensions by beginning to limit America’s huge trade deficit with China. Those tensions were an undercurrent during Chinese President Hu Jintao’s recent Washington talks with President Obama.
Manufacturers and distributors across a range of industries say the likely result of the export slowdown is higher prices for American shoppers in the coming months, and possibly brief shortages of some products if Western retailers delay purchases too long while haggling over prices.
China exports more than $4 of goods to the United States for each $1 it imports from America, creating a trade surplus of about $275 billion. The higher Chinese prices will tend to show up mainly in products like inexpensive clothing and other commodity goods in which labor and raw materials represent a bigger part of the final value — rather than in sophisticated electronics like Apple iPads, in which Chinese assembly is only a small fraction of the cost.
Of course, the slowdown in the volume of imports could also prove temporary, if American consumers accept higher prices and Western corporate buyers end up renewing contracts at much higher cost. In the meantime, if the average price for each imported product rises faster than the volume of shipments falls, China’s surplus with the United States could continue increasing temporarily.
But whatever the eventual impact on trade, Chinese inflation might also reduce Washington’s pressure on Beijing over its currency, the renminbi. For more than a year, the Obama administration has been pushing China to let the renminbi rise in value against the dollar.
China’s intervention in the currency market has kept its currency artificially low. But that flood of money has also driven inflation, giving Beijing an incentive to let the renminbi move higher. Indeed, the renminbi has increased 3.6 percent against the dollar since last June.
The Obama administration is starting to suggest that the currency problem could gradually solve itself if Chinese prices rise so fast that American goods become more competitive.
The first signs of a potential slowdown in Chinese exports have shown up in shipping. As factories closed on Friday across much of China in preparation for weeklong Chinese New Year celebrations, ports in Hong Kong and elsewhere along the coast were working long hours to meet last-minute shipments.
But the annual pre-New Year rush has been nothing like that of recent years, causing shipping lines to reverse rate increases and cancel sailings they introduced last summer as the American economy improved. This winter, the scurrying started only two weeks before the holidays, instead of the usual four weeks, according to shipping executives. That is because many Chinese factories simply cut back production this month as their Western customers began resisting steep price increases.
China’s inflation is running 5 percent at the consumer level, according to official measures. But Chinese and Western economists describe these measures as based on flawed, outdated techniques and say the real figure may be up to twice as high.
In contrast, the annual inflation rate in the United States is low by historical standards — about 1.5 percent currently.
China imposed price controls on food in mid-November to limit inflation. But Chinese state media began warning the public on Wednesday that those controls might be ineffective, as a drought in northern China has damaged the winter wheat crop and frost has spoiled part of the vegetable harvest in the south.
China’s $6 trillion economy used to be heavily dependent on exports for growth. Exports still account for about one-fifth of the economy, after excluding goods that are merely imported to China for final assembly and then re-exported. But China’s economy has grown powerfully for the last two years mainly on the strength of investment-led domestic demand. That demand, partly fed by low-interest lending by state-owned banks, is another factor in China’s inflation.
Markups of 20 to 50 percent on products like leather shoes and polo shirts have sent Western buyers scrambling for alternate suppliers. But from Vietnam to India, few low-wage developing countries can match China’s manufacturing might — and no country offers refuge from high global commodity prices.
Already, the slowdown in American orders has forced some container shipping lines to cancel up to a quarter of their trips to the United States this spring from Hong Kong and other Chinese ports.
The trend, if continued, could ease tensions by beginning to limit America’s huge trade deficit with China. Those tensions were an undercurrent during Chinese President Hu Jintao’s recent Washington talks with President Obama.
Manufacturers and distributors across a range of industries say the likely result of the export slowdown is higher prices for American shoppers in the coming months, and possibly brief shortages of some products if Western retailers delay purchases too long while haggling over prices.
China exports more than $4 of goods to the United States for each $1 it imports from America, creating a trade surplus of about $275 billion. The higher Chinese prices will tend to show up mainly in products like inexpensive clothing and other commodity goods in which labor and raw materials represent a bigger part of the final value — rather than in sophisticated electronics like Apple iPads, in which Chinese assembly is only a small fraction of the cost.
Of course, the slowdown in the volume of imports could also prove temporary, if American consumers accept higher prices and Western corporate buyers end up renewing contracts at much higher cost. In the meantime, if the average price for each imported product rises faster than the volume of shipments falls, China’s surplus with the United States could continue increasing temporarily.
But whatever the eventual impact on trade, Chinese inflation might also reduce Washington’s pressure on Beijing over its currency, the renminbi. For more than a year, the Obama administration has been pushing China to let the renminbi rise in value against the dollar.
China’s intervention in the currency market has kept its currency artificially low. But that flood of money has also driven inflation, giving Beijing an incentive to let the renminbi move higher. Indeed, the renminbi has increased 3.6 percent against the dollar since last June.
The Obama administration is starting to suggest that the currency problem could gradually solve itself if Chinese prices rise so fast that American goods become more competitive.
The first signs of a potential slowdown in Chinese exports have shown up in shipping. As factories closed on Friday across much of China in preparation for weeklong Chinese New Year celebrations, ports in Hong Kong and elsewhere along the coast were working long hours to meet last-minute shipments.
But the annual pre-New Year rush has been nothing like that of recent years, causing shipping lines to reverse rate increases and cancel sailings they introduced last summer as the American economy improved. This winter, the scurrying started only two weeks before the holidays, instead of the usual four weeks, according to shipping executives. That is because many Chinese factories simply cut back production this month as their Western customers began resisting steep price increases.
China’s inflation is running 5 percent at the consumer level, according to official measures. But Chinese and Western economists describe these measures as based on flawed, outdated techniques and say the real figure may be up to twice as high.
In contrast, the annual inflation rate in the United States is low by historical standards — about 1.5 percent currently.
China imposed price controls on food in mid-November to limit inflation. But Chinese state media began warning the public on Wednesday that those controls might be ineffective, as a drought in northern China has damaged the winter wheat crop and frost has spoiled part of the vegetable harvest in the south.
China’s $6 trillion economy used to be heavily dependent on exports for growth. Exports still account for about one-fifth of the economy, after excluding goods that are merely imported to China for final assembly and then re-exported. But China’s economy has grown powerfully for the last two years mainly on the strength of investment-led domestic demand. That demand, partly fed by low-interest lending by state-owned banks, is another factor in China’s inflation.
Asian Stocks, U.S. Futures Fall as Dollar, Yen Gain on Egypt
Asian stocks fell, extending the biggest global share slump in two months, and U.S. index futures declined while the yen and dollar gained on speculation Egypt’s crisis will slow the global recovery. Oil prices jumped.
The MSCI Asia Pacific Index sank 0.9 percent as of 9:07 a.m. in Tokyo, with Japan’s Nikkei 225 Stock Average posting the biggest loss among markets open for trading. Standard & Poor’s 500 Index futures dropped 0.4 percent after the gauge posted on Jan. 28 its biggest slump since August. The dollar, yen and Swiss franc gained against higher-yielding currencies while oil traded above $90 a barrel in New York on concern the unrest will spread to crude-producing parts of the Middle East.
Shares worldwide plunged on Jan. 28 by the most since November, wiping out more than $500 billion from global market values, as the escalating tensions in Egypt overshadowed U.S. data showing gross domestic product accelerated in the fourth quarter. Egyptian President Hosni Mubarak yesterday met with top military commanders as tens of thousands of protesters defied a curfew and gathered in central Cairo.
“The concerns are that we’re going to see contagion from Egypt to other parts of the Middle East,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As long as these concerns about Egyptian political tensions persist, flight-to-safety flows are likely to favor the dollar, yen and Swiss franc.”
The MSCI World Index slipped 0.3 percent, extending the 1.4 percent drop on Jan. 28. The Nikkei 225 dropped 1.4 percent while Australia’s S&P/ASX 200 Index retreated 0.8 percent. The drop in S&P 500 futures indicate the gauge may extend its 1.8 percent loss on Jan. 28.
Egypt’s Crisis
Dubai’s DFM General Index tumbled 4.3 percent yesterday, the most since May 25. Egypt’s banks and markets stayed shut after clashes in the most populous Arab country left as many as 150 people dead.
Protestors demonstrated for a sixth day, demanding the resignation of Mubarak. The unrest was a sign that Mubarak’s appointment of the first vice president since his rise to power in 1981 and his naming of a new premier may not placate protesters.
The dollar rose to $1.3589 per euro from $1.3611 in New York last week. The yen gained to 111.63 per euro from 111.77 after earlier touching 111.28, the most since Jan. 20. The Swiss franc advanced to 1.2791 per euro from 1.2821 after rising 1.3 percent against Europe’s common currency on Jan. 28. The greenback was at 82.16 yen from 82.12.
Oil for March delivery rose 1.4 percent to $90.60 a barrel in electronic trading on the New York Mercantile Exchange. The contract surged $3.70, or 4.3 percent, to $89.34 on Jan. 28.
Gold rose 0.6 percent, adding to a 1.7 percent gain on Jan. 28, amid demand for a haven.
The MSCI Asia Pacific Index sank 0.9 percent as of 9:07 a.m. in Tokyo, with Japan’s Nikkei 225 Stock Average posting the biggest loss among markets open for trading. Standard & Poor’s 500 Index futures dropped 0.4 percent after the gauge posted on Jan. 28 its biggest slump since August. The dollar, yen and Swiss franc gained against higher-yielding currencies while oil traded above $90 a barrel in New York on concern the unrest will spread to crude-producing parts of the Middle East.
Shares worldwide plunged on Jan. 28 by the most since November, wiping out more than $500 billion from global market values, as the escalating tensions in Egypt overshadowed U.S. data showing gross domestic product accelerated in the fourth quarter. Egyptian President Hosni Mubarak yesterday met with top military commanders as tens of thousands of protesters defied a curfew and gathered in central Cairo.
“The concerns are that we’re going to see contagion from Egypt to other parts of the Middle East,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As long as these concerns about Egyptian political tensions persist, flight-to-safety flows are likely to favor the dollar, yen and Swiss franc.”
The MSCI World Index slipped 0.3 percent, extending the 1.4 percent drop on Jan. 28. The Nikkei 225 dropped 1.4 percent while Australia’s S&P/ASX 200 Index retreated 0.8 percent. The drop in S&P 500 futures indicate the gauge may extend its 1.8 percent loss on Jan. 28.
Egypt’s Crisis
Dubai’s DFM General Index tumbled 4.3 percent yesterday, the most since May 25. Egypt’s banks and markets stayed shut after clashes in the most populous Arab country left as many as 150 people dead.
Protestors demonstrated for a sixth day, demanding the resignation of Mubarak. The unrest was a sign that Mubarak’s appointment of the first vice president since his rise to power in 1981 and his naming of a new premier may not placate protesters.
The dollar rose to $1.3589 per euro from $1.3611 in New York last week. The yen gained to 111.63 per euro from 111.77 after earlier touching 111.28, the most since Jan. 20. The Swiss franc advanced to 1.2791 per euro from 1.2821 after rising 1.3 percent against Europe’s common currency on Jan. 28. The greenback was at 82.16 yen from 82.12.
Oil for March delivery rose 1.4 percent to $90.60 a barrel in electronic trading on the New York Mercantile Exchange. The contract surged $3.70, or 4.3 percent, to $89.34 on Jan. 28.
Gold rose 0.6 percent, adding to a 1.7 percent gain on Jan. 28, amid demand for a haven.
ONGC’s Record Profit May Send Shares Higher, Boost Stake Sale
Oil & Natural Gas Corp. posted a record profit in the third quarter that may drive gains in the stock and increase investor confidence before a share sale likely to raise 121.2 billion rupees ($2.6 billion).
ONGC rose 1.7 percent to 1,132.90 rupees in Mumbai before the earnings announcement on Jan. 28, giving the company a market value of $53 billion. The stock dropped 12 percent this month compared with the benchmark Sensitive Index’s 10 percent decline.
“Investors will probably be positive after ONGC’s results,” said K.K. Mital, a New Delhi-based fund manager with Globe Capital Market Ltd. “Sentiment on the ONGC stock should get a boost, especially after it has dropped so much recently.”
The government plans to sell a 5 percent stake in the state-run explorer in March as Prime Minister Manmohan Singh raises funds to build roads, ports and power stations. ONGC proposes to recover royalties paid on behalf of partner Cairn India Ltd. for oil sales from India’s biggest onland oil deposit in Rajasthan in a bid to increase profit.
ONGC’s net income in the three months ended Dec. 31 more than doubled to 70.8 billion rupees, according to a statement to the Bombay Stock Exchange. Profit beat the mean estimate of 54.1 billion rupees in a Bloomberg survey of 19 analysts. Profit was helped by higher crude oil and natural gas prices and a one-time 19 billion rupee payment of dues from gas sales.
Cairn Royalty
The state-run explorer will ask the oil ministry to include royalty payments on crude oil produced from the Rajasthan block in the project cost, which can then be recovered from the sale of oil, Chairman R.S. Sharma told reporters in New Delhi yesterday. The ministry is reviewing Vedanta Resources Plc’s bid to buy a majority stake in Cairn India.
ONGC owns 30 percent in the Rajasthan block and pays royalties on the entire output, an incentive offered to attract overseas explorers to India before the government started auctioning fields in 1999.
Cairn and Vedanta need to get ONGC’s approval for the planned $9.6 billion transaction, Sharma said. ONGC decided at a board meeting Jan. 29 not to make a counterbid for Cairn India.
The ONGC stake may be sold in March, Disinvestment Secretary Sumit Bose said Jan. 21. The sale would raise $2.6 billion for the government, based on the current share price.
The company approved a special midyear dividend, a stock split and free shares for investors in December in preparation for the stake sale.
Fuel Subsidy
Citigroup Inc., Nomura Holdings Inc., Bank of America Corp., HSBC Holdings Plc, JM Financial Services Ltd. and Morgan Stanley, may manage ONGC’s share sale, two people with knowledge of the matter said Jan. 16.
New Delhi-based ONGC sold crude oil at $64.79 a barrel, an increase of 12 percent from a year earlier, according to the statement. The company supplies oil to state refiners at a discount to partially compensate them for selling fuels below cost.
The discount given in the third quarter rose 21 percent from a year earlier to 42.2 billion rupees, ONGC said.
“Investors want more clarity on how ONGC will share the subsidy burden, especially ahead of the planned follow-on offering,” said Jagdish Meghnani, an oil and gas analyst at Alchemy Share & Stock Brokers Ltd. in Mumbai. “The government has to be specific about how much subsidy ONGC will bear exactly when oil prices are trading at a particular price range.”
India more than doubled the price of natural gas produced from fields awarded to state explorers. The price was increased to 6,818 rupees per thousand cubic meters from 3,200 rupees, the first revision since 2005.
Crude oil in New York climbed 12 percent to an average of $85.24 a barrel in the three months ended Dec. 31 from a year earlier, according to data compiled by Bloomberg. Prices rose 15 percent in 2010 as demand increased from China and India.
ONGC rose 1.7 percent to 1,132.90 rupees in Mumbai before the earnings announcement on Jan. 28, giving the company a market value of $53 billion. The stock dropped 12 percent this month compared with the benchmark Sensitive Index’s 10 percent decline.
“Investors will probably be positive after ONGC’s results,” said K.K. Mital, a New Delhi-based fund manager with Globe Capital Market Ltd. “Sentiment on the ONGC stock should get a boost, especially after it has dropped so much recently.”
The government plans to sell a 5 percent stake in the state-run explorer in March as Prime Minister Manmohan Singh raises funds to build roads, ports and power stations. ONGC proposes to recover royalties paid on behalf of partner Cairn India Ltd. for oil sales from India’s biggest onland oil deposit in Rajasthan in a bid to increase profit.
ONGC’s net income in the three months ended Dec. 31 more than doubled to 70.8 billion rupees, according to a statement to the Bombay Stock Exchange. Profit beat the mean estimate of 54.1 billion rupees in a Bloomberg survey of 19 analysts. Profit was helped by higher crude oil and natural gas prices and a one-time 19 billion rupee payment of dues from gas sales.
Cairn Royalty
The state-run explorer will ask the oil ministry to include royalty payments on crude oil produced from the Rajasthan block in the project cost, which can then be recovered from the sale of oil, Chairman R.S. Sharma told reporters in New Delhi yesterday. The ministry is reviewing Vedanta Resources Plc’s bid to buy a majority stake in Cairn India.
ONGC owns 30 percent in the Rajasthan block and pays royalties on the entire output, an incentive offered to attract overseas explorers to India before the government started auctioning fields in 1999.
Cairn and Vedanta need to get ONGC’s approval for the planned $9.6 billion transaction, Sharma said. ONGC decided at a board meeting Jan. 29 not to make a counterbid for Cairn India.
The ONGC stake may be sold in March, Disinvestment Secretary Sumit Bose said Jan. 21. The sale would raise $2.6 billion for the government, based on the current share price.
The company approved a special midyear dividend, a stock split and free shares for investors in December in preparation for the stake sale.
Fuel Subsidy
Citigroup Inc., Nomura Holdings Inc., Bank of America Corp., HSBC Holdings Plc, JM Financial Services Ltd. and Morgan Stanley, may manage ONGC’s share sale, two people with knowledge of the matter said Jan. 16.
New Delhi-based ONGC sold crude oil at $64.79 a barrel, an increase of 12 percent from a year earlier, according to the statement. The company supplies oil to state refiners at a discount to partially compensate them for selling fuels below cost.
The discount given in the third quarter rose 21 percent from a year earlier to 42.2 billion rupees, ONGC said.
“Investors want more clarity on how ONGC will share the subsidy burden, especially ahead of the planned follow-on offering,” said Jagdish Meghnani, an oil and gas analyst at Alchemy Share & Stock Brokers Ltd. in Mumbai. “The government has to be specific about how much subsidy ONGC will bear exactly when oil prices are trading at a particular price range.”
India more than doubled the price of natural gas produced from fields awarded to state explorers. The price was increased to 6,818 rupees per thousand cubic meters from 3,200 rupees, the first revision since 2005.
Crude oil in New York climbed 12 percent to an average of $85.24 a barrel in the three months ended Dec. 31 from a year earlier, according to data compiled by Bloomberg. Prices rose 15 percent in 2010 as demand increased from China and India.
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