(Bloomberg) -- Crude oil rose for a third day in New York, poised for the biggest weekly gain since March, on signs the global economy may be starting to recover.
Oil has advanced this week after reports showed fewer Americans filed claims for unemployment benefits, China’s manufacturing expanded for the first time in nine months and Australia’s jobless rate unexpectedly dropped last month.
“We are getting a bit of a consistent run of slightly better-than-expected economic data out of the U.S.,” said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. “Oil is maybe moving to a higher trading range, pushing through what looked like a key resistance level of $55 a barrel.”
Crude oil for June delivery rose as much as 68 cents, or 1.2 percent, to $57.39 a barrel in electronic trading on the New York Mercantile Exchange, and was at $57.27 at 11:20 a.m. Singapore time.
Oil is set to reach $62.65 a barrel “in the near future” and rally to $78 within six months as prices retrace the surge that started in 1998, according to technical analysis by PVM Oil Associates Ltd.
Yesterday, oil closed at $56.71, the highest settlement since Nov. 14. Prices have gained 7.6 percent this week, poised for the largest gain since the week ended March 20, and are up 28 percent this year.
Intraday High
Crude retreated from an intraday high of $58.57 yesterday as declines in U.S. financial, telephone and technology shares snuffed out an early rally. The S&P 500, which has risen 34 percent from a 12-year-low in March, slid 1.3 percent to 907.39. The Dow Jones Industrial Average decreased 1.2 percent to 8,409.85.
Prices earlier climbed on signs that U.S. refiners were ramping up production ahead of the peak driving demand season this summer. Processors increased their utilization by 2.7 percentage points to 85.3 percent last week, the Energy Department said in a May 6 report.
Refiners have more incentive to produce gasoline as the so- called crack spread, the profit from making motor fuel versus crude oil, has climbed 48 percent in the past two weeks to $13.64 a barrel today. It was $8.10 a barrel a year ago.
“With gasoline prices lower than last year, you’d think we’d have a more healthy driving season,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “You can argue that people will drive more because it’s a cheaper form of travel. Directionally we’re coming into a stronger demand season.”
Gasoline Gains
Gasoline for June delivery has risen to $1.6853 a gallon today at 10:48 Singapore time on the Nymex, the highest in six months. That’s 46 percent less than a year ago.
U.S. crude oil inventories rose 605,000 barrels to 375.3 million during the week ended May 1, the highest since 1990, said the Energy Department. Analysts forecast a gain of 2.5 million barrels. Gasoline supplies fell 167,000 barrels to 212.4 million, leaving stockpiles 2.8 percent above the five-year average for the period.
The number of Americans filing for unemployment insurance fell last week to the lowest level in three months. Initial jobless claims dropped by 34,000 to 601,000 in the week ended May 2, the fewest since late January, the Labor Department said in Washington yesterday.
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Thursday, May 7, 2009
Macquarie Said to Bid for AIG Unit in Strategy Shift
(Bloomberg) -- Macquarie Group Ltd., Australia’s biggest investment bank, is bidding for an American International Group Inc. fund unit with about $100 billion under management, said two people with the knowledge of the matter.
AIG expects to sell the unit for as much as $500 million, one of the people said, speaking on condition of anonymity because the talks are private. Macquarie is among several firms pursuing AIG Investments, a New York-based fund manager put up for sale in January, the people said.
Macquarie last week raised A$540 million ($407 million) in a stock sale and would more than triple assets under management at its fund division with a successful bid. Chief Executive Officer Nicholas Moore is shifting focus from infrastructure investments to businesses such as managing stocks and bonds for clients after a 16-year run of rising profits was snuffed out by writedowns.
“It would make sense,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney, including Macquarie shares. “The business model of Macquarie is going to be more orientated toward transactional-type management rather than recycling assets as they have done in the past because the structure of the market has changed.”
Macquarie slipped 0.5 percent to A$35.03 in Sydney trading at 11:35 a.m. The stock has more than doubled since slumping to a decade-low on March 3.
Forced Seller
AIG Investments, run by Win Neuger, has 46 offices from Atlanta to Zurich and manages money for institutions, pension funds and wealthy individuals in stock, bond, private equity and hedge funds, according to the company’s Web site.
AIG, once the world’s largest insurer, is selling assets to raise cash after its near collapse led to four U.S. government rescues worth $182.5 billion in all.
“AIG is a forced seller, so it could be quite attractive from a valuation point of view,” Xiradis said.
The insurer received about a half-dozen bids in all for the unit, including from private equity firms and rival asset managers, the Wall Street Journal reported on April 7, citing unidentified sources.
Macquarie spokeswoman Fiona Tyndall and AIG spokesman Peter Tulupman declined to comment.
‘Global Scale’
Macquarie’s Funds Group manages A$49.7 billion in assets, the company said May 1. The unit’s earnings plunged 85 percent from a year earlier to A$45 million on higher expenses, writedowns and impairments.
The Funds Group “will use Macquarie’s strong capital position to seek to gain global scale through acquisitions,” the company said in a May 1 investor presentation.
Macquarie on May 1 sold 20 million shares to raise A$540 million and announced a stock purchase plan for ordinary shareholders, which may raise as much as A$200 million according to a person with knowledge of the sale.
Following the share sales, which come two months after the company said it didn’t need to raise capital, Macquarie will have A$4.1 billion to spare above its regulatory minimum.
“What we have always done is raised capital ahead of needing the capital,” Moore said in an interview on May 1. “Whether it is because of uncertain markets or opportunities coming from the markets, we always want to make sure we are in a very strong capital position.”
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AIG expects to sell the unit for as much as $500 million, one of the people said, speaking on condition of anonymity because the talks are private. Macquarie is among several firms pursuing AIG Investments, a New York-based fund manager put up for sale in January, the people said.
Macquarie last week raised A$540 million ($407 million) in a stock sale and would more than triple assets under management at its fund division with a successful bid. Chief Executive Officer Nicholas Moore is shifting focus from infrastructure investments to businesses such as managing stocks and bonds for clients after a 16-year run of rising profits was snuffed out by writedowns.
“It would make sense,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney, including Macquarie shares. “The business model of Macquarie is going to be more orientated toward transactional-type management rather than recycling assets as they have done in the past because the structure of the market has changed.”
Macquarie slipped 0.5 percent to A$35.03 in Sydney trading at 11:35 a.m. The stock has more than doubled since slumping to a decade-low on March 3.
Forced Seller
AIG Investments, run by Win Neuger, has 46 offices from Atlanta to Zurich and manages money for institutions, pension funds and wealthy individuals in stock, bond, private equity and hedge funds, according to the company’s Web site.
AIG, once the world’s largest insurer, is selling assets to raise cash after its near collapse led to four U.S. government rescues worth $182.5 billion in all.
“AIG is a forced seller, so it could be quite attractive from a valuation point of view,” Xiradis said.
The insurer received about a half-dozen bids in all for the unit, including from private equity firms and rival asset managers, the Wall Street Journal reported on April 7, citing unidentified sources.
Macquarie spokeswoman Fiona Tyndall and AIG spokesman Peter Tulupman declined to comment.
‘Global Scale’
Macquarie’s Funds Group manages A$49.7 billion in assets, the company said May 1. The unit’s earnings plunged 85 percent from a year earlier to A$45 million on higher expenses, writedowns and impairments.
The Funds Group “will use Macquarie’s strong capital position to seek to gain global scale through acquisitions,” the company said in a May 1 investor presentation.
Macquarie on May 1 sold 20 million shares to raise A$540 million and announced a stock purchase plan for ordinary shareholders, which may raise as much as A$200 million according to a person with knowledge of the sale.
Following the share sales, which come two months after the company said it didn’t need to raise capital, Macquarie will have A$4.1 billion to spare above its regulatory minimum.
“What we have always done is raised capital ahead of needing the capital,” Moore said in an interview on May 1. “Whether it is because of uncertain markets or opportunities coming from the markets, we always want to make sure we are in a very strong capital position.”
Read more here
Australian Economy to Shrink 1.25% Before Recovering, RBA Says
(Bloomberg) -- Australia’s central bank said the nation’s economy will shrink 1.25 percent in the 12 months through June before the lowest interest rates in five decades spur a “gradual” recovery next year.
The bank today revised its gross domestic product forecasts in line with Governor Glenn Stevens’ statement last month that the economy is in a recession. The bank said GDP will contract this year before gaining 0.25 percent in the 12 months through June, 2010, compared with its February prediction of 0.25 percent growth this fiscal year and 1.25 percent a year later.
A record 4.25 percentage points of interest-rate cuts since September and government spending will “provide significant support to domestic demand,” the central bank said in its quarterly monetary policy statement released in Sydney. Signs that a recovery may already be emerging include reports this week showing retail sales jumped in March, the unemployment rate dropped and exports to China have surged 80 percent this year.
“They don’t look keen to cut rates again,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “If we see a recovery, inflation will rise.”
The bank said today that inflation will slow to 1.5 percent in the 12 months through June, before accelerating to 2.5 percent the following year. Inflation will then cool again to 1.5 percent in the year through June 2011, it said.
‘Less Severe’
The Australian dollar fell to 75.20 U.S. cents at 1 p.m. in Sydney from 75.38 cents just before the statement was released. The two-year government bond yield dropped 2 basis point to 3.53 percent. A basis point is 0.01 percentage point.
Australia’s recession will be “less severe” than in many other countries, helped by lower borrowing costs for home buyers and businesses, the nation’s healthier financial system, a decline in the currency and “the recent recovery in the Chinese economy,” today’s statement said.
The central bank’s view echoes Australia & New Zealand Banking Group Ltd. Chief Executive Officer Mike Smith, who said Australia’s recession won’t be as “deep or protracted” as other developed economies.
“Our region remains the best-performing part of the world economy,” Smith said in a speech in Brisbane yesterday.
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The bank today revised its gross domestic product forecasts in line with Governor Glenn Stevens’ statement last month that the economy is in a recession. The bank said GDP will contract this year before gaining 0.25 percent in the 12 months through June, 2010, compared with its February prediction of 0.25 percent growth this fiscal year and 1.25 percent a year later.
A record 4.25 percentage points of interest-rate cuts since September and government spending will “provide significant support to domestic demand,” the central bank said in its quarterly monetary policy statement released in Sydney. Signs that a recovery may already be emerging include reports this week showing retail sales jumped in March, the unemployment rate dropped and exports to China have surged 80 percent this year.
“They don’t look keen to cut rates again,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “If we see a recovery, inflation will rise.”
The bank said today that inflation will slow to 1.5 percent in the 12 months through June, before accelerating to 2.5 percent the following year. Inflation will then cool again to 1.5 percent in the year through June 2011, it said.
‘Less Severe’
The Australian dollar fell to 75.20 U.S. cents at 1 p.m. in Sydney from 75.38 cents just before the statement was released. The two-year government bond yield dropped 2 basis point to 3.53 percent. A basis point is 0.01 percentage point.
Australia’s recession will be “less severe” than in many other countries, helped by lower borrowing costs for home buyers and businesses, the nation’s healthier financial system, a decline in the currency and “the recent recovery in the Chinese economy,” today’s statement said.
The central bank’s view echoes Australia & New Zealand Banking Group Ltd. Chief Executive Officer Mike Smith, who said Australia’s recession won’t be as “deep or protracted” as other developed economies.
“Our region remains the best-performing part of the world economy,” Smith said in a speech in Brisbane yesterday.
Read more here
Wednesday, May 6, 2009
Atlanta bank failure to have big impact
(CNNMoney.com) -- When regulators announced last Friday they had seized control of the relatively unknown Silverton Bank, its collapse struck many as just another minor casualty in the ongoing economic crisis.
But the demise of the Atlanta-based bank could have broad implications for the entire industry, given Silverton's unique role as a so-called "bankers' bank".
Unlike the 31 other banks that have failed so far this year, Silverton did not take deposits from, or make loans to consumers. Instead, its primary purpose was to offer a variety of services such as check clearing and credit card operations to community banks around the country that find it too costly to do this on their own.
Silverton also often acted as the lead banker on some syndicated commercial real estate loans, a business that helped contribute to its failure.
All told, Silverton serviced approximately 1,400 community banks in 44 states, according to the Federal Deposit Insurance Corporation, making it one of the largest of the 20 or so "bankers' banks" in the country.
But even as regulators attempt to smooth the transition for Silverton's clients, many community banks will suffer as a result of its collapse.
Arguably among the hardest hit will be the hundreds of community banks that were shareholders in Silverton's holding company. Their stakes have been completely wiped out as a result of the failure. Most bankers' banks are cooperatively owned by their community bank customers.
The total dollar impact may be tough to discern at this point, but some individual banks are already warning that they are on the hook for millions as a result.
Nashville-based Pinnacle Financial Partners (PNFP), for example, revealed last week that it would write off $21.55 million in its second-quarter results as a result of the Silverton failure.
Banks that participated on some of the troubled commercial real estate loans that Silverton helped generate may also find themselves at risk, notes Chris Cole, a vice-president and senior regulatory counsel for the Independent Community Bankers of America.
In addition, the institutions that relied on Silverton on a daily basis for services now have to deal with the disruption of finding a new provider.
"There will be some pain," said Cole.
Read more here
But the demise of the Atlanta-based bank could have broad implications for the entire industry, given Silverton's unique role as a so-called "bankers' bank".
Unlike the 31 other banks that have failed so far this year, Silverton did not take deposits from, or make loans to consumers. Instead, its primary purpose was to offer a variety of services such as check clearing and credit card operations to community banks around the country that find it too costly to do this on their own.
Silverton also often acted as the lead banker on some syndicated commercial real estate loans, a business that helped contribute to its failure.
All told, Silverton serviced approximately 1,400 community banks in 44 states, according to the Federal Deposit Insurance Corporation, making it one of the largest of the 20 or so "bankers' banks" in the country.
But even as regulators attempt to smooth the transition for Silverton's clients, many community banks will suffer as a result of its collapse.
Arguably among the hardest hit will be the hundreds of community banks that were shareholders in Silverton's holding company. Their stakes have been completely wiped out as a result of the failure. Most bankers' banks are cooperatively owned by their community bank customers.
The total dollar impact may be tough to discern at this point, but some individual banks are already warning that they are on the hook for millions as a result.
Nashville-based Pinnacle Financial Partners (PNFP), for example, revealed last week that it would write off $21.55 million in its second-quarter results as a result of the Silverton failure.
Banks that participated on some of the troubled commercial real estate loans that Silverton helped generate may also find themselves at risk, notes Chris Cole, a vice-president and senior regulatory counsel for the Independent Community Bankers of America.
In addition, the institutions that relied on Silverton on a daily basis for services now have to deal with the disruption of finding a new provider.
"There will be some pain," said Cole.
Read more here
Wells Fargo freezes pension plan, cuts 548 jobs
(Reuters) - Wells Fargo & Co (WFC.N) on Wednesday said it is freezing its cash-balance pension plan for all employees, and has issued layoff notices to 548 workers in uptown Charlotte, North Carolina, the former home of Wachovia Corp.
The moves will reduce costs, spokeswoman Mary Eshet said. Wells Fargo bought Wachovia for $12.5 billion at the end of 2008, and has said it expects about $5 billion of annual cost savings related to the merger, with job cuts beginning this quarter. It has not said how many jobs it plans to cut.
Wells Fargo said it will maintain its 401(k) retirement plan, under which the San Francisco-based bank matches employee contributions for up to 6 percent of total pay. Many other large companies have also cut back traditional pension plans.
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The moves will reduce costs, spokeswoman Mary Eshet said. Wells Fargo bought Wachovia for $12.5 billion at the end of 2008, and has said it expects about $5 billion of annual cost savings related to the merger, with job cuts beginning this quarter. It has not said how many jobs it plans to cut.
Wells Fargo said it will maintain its 401(k) retirement plan, under which the San Francisco-based bank matches employee contributions for up to 6 percent of total pay. Many other large companies have also cut back traditional pension plans.
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Fiat's Marchionne says he will lead Chrysler: report
(Reuters) - Fiat SpA (FIA.MI) Chief Executive Officer Sergio Marchionne plans to take the top spot at Chrysler LLC after the automaker emerges from bankruptcy, he told Bloomberg in an interview on Wednesday.
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House panel to ask BofA CEO to testify: report
(Reuters) - Bank of America Corp's (BAC.N) chief executive and top federal officials will be asked by a Congressional panel to testify next month about claims that the bank was pressured by the government to complete its purchase of Merrill Lynch & Co, the Wall Street Journal reported on Wednesday, citing a person familiar with the investigation.
Investigators with the U.S. House Committee on Oversight and Government Reform spent the last week looking at documents and notes from telephone conversations involving Federal Reserve officials, the Journal reported the person as saying.
Their findings suggest "there's fire there," the newspaper quoted the source as saying.
The panel is chaired by New York Democrat Edolphus Towns, who could not be immediately reached for comment. A Bank of America spokesman declined to comment
Lawmakers on the House panel have not yet determined which U.S. officials will be called to testify under oath, the person familiar with the investigation told the Journal.
Top Treasury and Fed officials could be called to appear under oath, according to the Journal, citing the person familiar with the investigation.
The probe could touch a number of prominent government officials. In addition to former Treasury Secretary Henry Paulson, and Fed Chairman Ben Bernanke, top aides for each could also face scrutiny as part of the investigation, the newspaper said on its website.
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Investigators with the U.S. House Committee on Oversight and Government Reform spent the last week looking at documents and notes from telephone conversations involving Federal Reserve officials, the Journal reported the person as saying.
Their findings suggest "there's fire there," the newspaper quoted the source as saying.
The panel is chaired by New York Democrat Edolphus Towns, who could not be immediately reached for comment. A Bank of America spokesman declined to comment
Lawmakers on the House panel have not yet determined which U.S. officials will be called to testify under oath, the person familiar with the investigation told the Journal.
Top Treasury and Fed officials could be called to appear under oath, according to the Journal, citing the person familiar with the investigation.
The probe could touch a number of prominent government officials. In addition to former Treasury Secretary Henry Paulson, and Fed Chairman Ben Bernanke, top aides for each could also face scrutiny as part of the investigation, the newspaper said on its website.
Raed more here
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