Wednesday, September 19, 2012

FOREX-Yen gains broadly as BoJ eases more than expected - Reuters

Wed Sep 19, 2012 11:02am EDT

  * BOJ increases asset purchases more than expected      * Euro slips vs yen on profit-taking      * U.S. housing data show budding signs of recovery      * Spain deputy PM says still considering the terms of a  bailout        By Julie Haviv      NEW YORK, Sept 19 (Reuters) - The yen gained broadly on  Wednesday, erasing earlier losses incurred after the Bank of  Japan eased monetary policy more than expected, following in the  footsteps of recent aggressive action by other major central  banks.      The yen initially fell to a one-month low against the dollar  as the BOJ's decision encouraged investors to take more risk,  nudging the euro higher against the dollar before it succumbed  to fresh profit-taking. Talk of a European central bank  diversifying out of the euro also weighed on the single  currency.      The BOJ increased asset purchases by 10 trillion yen, almost  double what some had expected. This followed aggressive monetary  easing by the U.S. Federal Reserve and a European Central Bank  plan to buy unlimited amount of government bonds of indebted  euro zone states.       The timing of the BoJ's move was somewhat of a surprise  relative to market expectations, according to Vassili  Serebriakov, currency strategist at Wells Fargo in New York.       "The yen fell initially, but subsequently managed to recoup  most of these losses," he said. "Meanwhile, markets are  increasingly questioning the next European policy moves, and, in  particular, the possibility of Spanish government requesting  financial aid."      Accommodative global monetary conditions are supportive for  most commodity and emerging currencies, he said.      The dollar jumped to 79.21 yen, its highest since  Aug. 22, after the BOJ's decision. It last traded at 78.36 yen,  down 0.6 percent on the day.       Analysts said a repeat of the yen's sharp fall in  February-March in the wake of surprise easing by the BOJ was  unlikely as both the ECB and the Fed are viewed as having eased  more aggressively.      "The real test for dollar/yen is whether the current move  can carry it above 80 yen," said Niels Christensen, currency  strategist at Nordea in Copenhagen. "I think it will run out of  steam as you need very good numbers out of the U.S. and risk  appetite to maintain pressure on the yen."      BOJ Governor Masaaki Shirakawa said Japan's economic  recovery may be delayed by six months due to a prolonged  slowdown in global growth.        Risk aversion abated somewhat after U.S. housing data  showed the pace of U.S. home resales rose in August to its  fastest in over two years and groundbreaking on new homes also  climbed, hopeful signs that a budding housing market recovery is  gaining traction.                   EURO SLIPS       The euro erased earlier gains against the yen. The single  currency was last down 0.6 percent on the day at  102.16 yen, well below an earlier high of 103.63 yen.      Against the dollar, the euro last traded at $1.3046,  nearly unchanged on the day.       Given that the euro had rallied some 9 percent since late  July, traders said the pullback reflected some mild  profit-taking as markets waited to see whether Spain would apply  for aid and trigger the ECB's bond-buying programme.      While many market players expect Spain eventually to ask for  a bailout, some say investors' patience could be tested as  Madrid is likely to resist tough conditions which some northern  euro zone countries would want imposed in return for any aid.      Spain's deputy prime minister, Soraya Saenz de Santamaria,  said on Tuesday the government was still considering the terms  of a bailout.       The euro was expected to remain broadly in favour, however,  as the ECB's plans to tackle the debt crisis have encouraged  investors to pare aggressive short positions.  

Goldman's new CFO to receive $1.85 mln in annual salary - Reuters

Wed Sep 19, 2012 6:57pm IST

Sept 19 (Reuters) - Goldman Sachs Group Inc said newly named Chief Financial Officer Harvey Schwartz would receive an annual salary of $1.85 million and be eligible for variable compensation.

Goldman named Schwartz, a senior trading executive, to replace David Viniar as CFO, the latest in a series of executive shuffles as the investment bank prepares for a change in top management.

Viniar, 57, is among the best-paid executives on Wall Street. He received $15.8 million last year and held 1.8 million shares of Goldman as of March 26, according to a proxy filing. The company's stock closed at $119.88 on Tuesday.

The salary portion of his compensation, however, was the same $1.85 million that Schwartz is getting and that also was paid as a small base to the company's president, Gary Cohn, and two vice chairmen, Michael Evans and John Weinberg.

Schwartz will take over from Viniar, the longest-serving CFO on Wall Street, at the end of January. His compensation for 2011, when he served as a co-head of Goldman's securities division, has not been disclosed.

Viniar, who will become a member of Goldman's board after his retirement, is eligible for cash bonuses of several million dollars for 2011 and 2012 in addition to his conventional compensation if the company hits predetermined profitability targets set by the board's compensation committee.

Schwartz, 48, is among a small group of executives who are considered potential candidates to take over when Goldman Chief Executive Officer Lloyd Blankfein, 57, steps down. Blankfein, who received $16.2 million in total compensation last year, has not announced plans to leave the company.

Job loss figures at American Airlines still uncertain - Tulsa World

Read more coverage of American Airlines and view a timeline of the company’s history in Tulsa.

Among the variables affecting the final layoff totals, company and union officials said, are TWU seniority levels at each aircraft maintenance base and line station, the willingness of TWU members to relocate to other cities to claim jobs held by more junior members, and the number of workers who choose the early-retirement option offered by the company.

"There are so many moving parts, it's impossible to accurately predict how many (TWU members) would be willing to come here (Tulsa) and exercise their seniority," said John Hewitt, TWU Local 514's chairman of maintenance in Tulsa. "And we're not going to know the early-out numbers until after the (election) window closes."

American proposes to lessen the impact of job losses by offering TWU members who are at least 45 years old with 15 years' service an early-out option that includes severance pay of about $39,000.

As of Sunday, more than 800 TWU members, including more than 400 in Tulsa, have signed up for the early-out program.

The election window on the early-out option closes on Tuesday, but members have five days after the window closes to change their minds and withdraw from the program, TWU executives said.

Local 514 held information meetings on the early-out option Thursday, Monday and Tuesday.

"Last Thursday, there were two meetings, and the (union) hall was completely full," Hewitt said. "At the meeting yesterday (Monday), three-quarters of the hall was filled. It's different for everybody. Some are at retirement age. Some have employment somewhere else. Some say they are going fishing for a year.

"You have to realize how stressful this has been for the employees of American Airlines. We were in negotiations (for a new contract) for four or four-and-a-half years before the company filed for bankruptcy."

As part of its bankruptcy restructuring and to compete successfully in the airline industry, American said it needs to cut at least 10,000 employees companywide and reduce annual labor costs by $1.06 billion.

American said it will close the Fort Worth Alliance Airport maintenance base by year-end, costing 1,119 mechanics their jobs. The company also said it needs to outsource up to 35 percent of aircraft maintenance now performed in house.

On Monday, American notified 11,159 TWU members that they might be affected by a plant closing or involuntary reduction in force.

Eighty-three plant maintenance and fleet service workers in Tulsa were notified by American they may experience a job loss on Nov. 16.

Another 2,911 TWU workers in Tulsa - including 2,330 mechanics - were notified by American they could lose their jobs on Dec. 16.

The WARN letters of potential job losses are named for the Workers Adjustment and Retraining Notification Act that requires companies employing more than 100 people to give each employee at least 60 days' written notice of a facility's closing and the termination of their employment. Failure to provide the notice can make employers liable for 60 days of wages per employee, the law says.

"Because some of the incentive programs are still open, and because the business changes will take place over several months, we don't yet have final furlough numbers," said American spokesman Bruce Hicks. "We are issuing WARN notices to the unions and employees who may be affected to comply with state and federal law, but (we) expect the ultimate impact on jobs will be far less than the number of those notified."

Hewitt said an American mechanic receiving a WARN notice at Alliance Airport, for example, may have 10 options available for other positions he could "bump" to, based on seniority, at American facilities around the country.

"American has to notify all 10 of those people that they may be affected by a reduction in force even though nobody chooses to bump them," Hewitt said.

"An AFW (Alliance) guy's options could include coming to Tulsa and bumping the low senior person. But most likely he's going to stay in Texas if he can."

Original Print Headline: Job losses uncertain

D.R. Stewart 918-581-8451

US STOCKS-Index futures edge higher as housing data eyed - Reuters

Wed Sep 19, 2012 8:12am EDT

* Microsoft ups dividend

* Japanese central bank eases policy

* Bullish investors rise to 54.2 pct--Investors Intelligence

* Futures up: S&P 1.6 pts, Dow 23 pts, Nasdaq 4.5 pts

NEW YORK, Sept 19 (Reuters) - U.S. stock index futures edged higher on Wednesday as investors look ahead to a fresh batch of housing market data that is expected to confirm a recent uptick in the sector and may help cement the recent central bank-inspired equity rally.

The U.S. Commerce Department releases housing starts and permits data for August at 8:30 a.m. (1230 GMT) followed by existing home sales at 10 a.m. The reports come as investors look for improving economic data to help bolster a 7 percent rally since early August that was largely driven by monetary action from the Federal Reserve and the European Central Bank.

"Across the board the housing sector appears to be finding a bottom here and in the long run that is going to be one of the most important things that we discovered this summer," said Art Hogan, managing director of Lazard Capital Markets in New York.

The recent surge in stock prices has led to an increase in bullish sentiment among U.S. investors. The proportion of equity bulls climbed to 54.2 percent from 51.1 percent a week ago and posted its third straight reading above 50, according to a weekly survey by Investors Intelligence. Some investors see high levels of enthusiasm as a warning that prices may be topping.

S&P 500 futures rose 1.6 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 23 points, and Nasdaq 100 futures added 4.5 points.

"When you look at the weeks that preceded this, we really had massive moves on a back-to-back basis and it's not unusual to see this type of consolidation where we trade sideways for a few days, at least until we get a new catalyst," said Hogan, managing director of Lazard Capital Markets in New York.

On the U.S. data front, economists in a Reuters survey forecast housing starts at an annualized rate of 765,000 units versus 746,000 in July. A total of 796,000 permits are expected in August compared with 811,000 in the prior month.

Existing home sales were expected to come in at 4.55 million units on an annualized basis, versus 4.47 million in July.

Microsoft Corp raised its dividend by 15 percent on Tuesday, marking a slowdown in the growth in payouts to investors after a year marked by a downturn in computer sales and a large write-off for a failed acquisition. The shares fell 0.2 percent premarket.

Japan's Nikkei share average hit a four-month closing high on Wednesday after Tokyo's central bank eased monetary policy to bolster an economy struggling with sluggish global demand and fallout from a territorial dispute with China.

The Bank of Japan's move, which follows recent monetary stimulus plans by the U.S. Federal Reserve and the European Central Bank, also boosted some commodity futures.

European shares rose although gains were capped by uncertainty over whether Spain would apply for a sovereign bailout, which the country has to do before the ECB can intervene in bond markets to tame government borrowing costs.

Shareholders of News Corp will make their case in a U.S. court on Wednesday for holding its board responsible for phone hacking scandals that cost the company a major newspaper and a deal for full control of the BSkyB satellite business.

Northrop Grumman and AgustaWestland, a unit of Italy's Finmeccanica SpA, said on Tuesday they were joining forces to compete for the new U.S. Air Force Combat Rescue helicopter and the U.S. Navy's new "Marine One" presidential helicopter.

BOE Unanimous on QE Amid Divisions on Inflation Risks - Bloomberg

Bank of England policy makers voted unanimously to maintain their bond-purchase target this month as officials differed on the need for more stimulus in light of growing inflation risks.

The nine-member Monetary Policy Committee led by Governor Mervyn King voted 9-0 to keep the target at 375 billion pounds ($610 billion), according to minutes of the Sept. 5-6 meeting published in London today. It also voted unanimously to hold the benchmark interest rate at 0.5 percent.

“For most members this decision was relatively straightforward, although some of these members felt that additional stimulus was more likely than not to be needed in due course,” the central bank said. “Others saw the risks to inflation in the medium as being more balanced around” the 2 percent target.

The minutes also showed that this month’s decision was “more finely balanced” for one MPC member, who saw a “good case” for adding more bond purchases this month. The pound was little changed against the dollar and traded at $1.6252 as of 9:32 a.m. in London.

Global central banks are continuing to loosen policy to aid their economies. The Bank of Japan (8301) unexpectedly expanded its asset-purchase fund today, a week after the U.S. Federal Reserve voted to extend its quantitative-easing program. The European Central Bank earlier this month agreed to buy the bonds of governments that accept austerity conditions in return as it seeks to end the euro-area debt crisis.

Euro-Area Risks

The Bank of England said that “very substantial risks” from the euro area were likely to remain for some time. These, if they crystallized, “could have a considerable impact on the stability of the global banking system,” it said.

On the U.K. economy, the central bank said there may be further volatility in measured gross domestic product in the short term, though the level of demand “remained weak and the outlook was subdued and uncertain.”

Still, it said that recent industrial production data suggested some “modest underlying expansion,” and it forecast a modest recovery in underlying activity “beginning towards the end of the year and into next year.”

The central bank also said that inflation may cool at a slower pace than forecast in August. U.K. consumer-price growth eased to 2.5 percent last month, though the Bank of England noted that oil prices had risen and tensions in the Middle East could add to upward pressure.

“The rise in energy prices would mean that the squeeze on real household incomes would not ease further in the short term,” the central bank said.

FLS Outlook

The bank said the recovery in the U.K. would in part depend on the success of the Funding for Lending program, set up to boost credit to companies and households.

“The committee noted that banks would need time to review fully their lending plans and products, and it was likely to be some while before there would be drawdowns on a significant scale” from the FLS, it said. “Lending rates were thus a more immediate guide to the scheme’s impact and it was encouraging that there had been further cuts announced by some banks.”

To contact the reporter on this story: Jennifer Ryan in London at

To contact the editor responsible for this story: Matthew Brockett at

Enlarge image Bank of England Voted 9-0 to Maintain Bond-Purchase Target

Bank of England Voted 9-0 to Maintain Bond-Purchase Target

Bank of England Voted 9-0 to Maintain Bond-Purchase Target

The Bank of England said that “very substantial risks” from the euro area were likely to remain for some time.

The Bank of England said that “very substantial risks” from the euro area were likely to remain for some time. Photographer: Simon Dawson/Bloomberg

Yahoo to return $3B to shareholders - CNN

A pedestrian walks past advertising in Hong Kong.
A pedestrian walks past advertising in Hong Kong.
  • Yahoo will return to shareholders most of the $4.3B from Alibaba sale
  • China's Alibaba bought back more than 20 per cent of its stock from Yahoo
  • Valued at $2.5B when Yahoo invested in 2005, Alibaba now worth more than Yahoo

(Financial Times) -- Yahoo will return to shareholders most of the $4.3bn in net proceeds from selling half of its stake in China's Alibaba Group despite new chief executive Marissa Mayer's suggestion in July that she might keep the cash for acquisitions.

The buyback by Alibaba of more than 20 per cent of its stock from Yahoo valued China's largest ecommerce group at more than $40bn. Alibaba, valued at $2.5bn when Yahoo first invested in 2005, is now worth more than twice as much as the struggling US internet company.

The deal will see Yahoo receive $6.3bn in cash and $800m in Alibaba preference shares, plus another $550m to alter the companies' technology and patent licensing agreement. It also paves the way for an initial public offering by Alibaba, after which it can buy back Yahoo's remaining stake.

Yahoo had agreed to sell half its 40 per cent stake in Alibaba in May. In July, shortly after Ms Mayer was appointed chief executive, Yahoo said it was re-evaluating its previous plan to return the full proceeds to shareholders, causing its shares to fall.

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After taxes and fees, the deal nets Yahoo around $4.3bn.

"The Yahoo board and management have met, reviewed the strategy with regard to the proceeds and are pleased to announce that we will be returning $3bn of the proceeds to shareholders in addition to the 'downpayment' of $646m made over the past few months," Ms Mayer said in a statement on Tuesday afternoon, sending Yahoo stock up 1.2 per cent.

"This yields a substantial return for investors while retaining a meaningful amount of capital within the company to invest in future growth."

Yahoo has not yet determined whether to use the $3bn to buy back shares or pay a special dividend. The $646m 'downpayment' was returned through buybacks.

Jack Ma, Alibaba's chairman and chief executive, said the deal "begins a new chapter" in the relationship between the two groups, which began when Jerry Yang, Yahoo's co-founder, invested $1bn seven years ago. "I look forward to working with Marissa Mayer and her team in our continued partnership," Mr Ma said.

Alibaba raised debt and equity from an international consortium of investors, including China Investment Corp, the sovereign wealth fund, to pay Yahoo $7.6bn for its shares.

Alibaba suggested that the private financing was China's largest for a pre-IPO company. The fundraising began just before Facebook's troubled stock market debut and was completed at a higher valuation than initially expected, despite several US internet companies, such as Groupon and Zynga, seeing their stock prices tumble after listing.

The equity financing was led by CIC International, Boyu Capital and Citic Capital, two Chinese private equity firms, and CDB Capital, the equity investment arm of China Development Bank.

Silver Lake, DST Global and Temasek, who were among those to invest $2bn a year ago to provide liquidity to Alibaba's existing investors and employees, increased their investment as part of the deal.

A consortium of eight international banks, including Barclays, Citigroup, Credit Suisse and Deutsche Bank, provided $1bn in senior debt financing, while another $1bn was provided by China Development Bank.

© The Financial Times Limited 2012

QE3 may have little impact on mortgage borrowers - Washington Post

The Federal Reserve took aim at the nation’s wobbly housing market last week with its biggest stimulus action in two years, but that firepower is doing little to lower mortgage rates or make home loans more available for Americans.

Instead, banks are set to see a windfall since the Fed’s actions will immediately lower the cost of issuing loans. It may take months or longer for benefits to trickle down to consumers, analysts say.

The emerging scenario highlights the limitations of the Fed’s ability to jump-start the housing market on demand: Rather than intervene directly with consumers, the Fed must rely on banks, brokers and other industry actors to offer borrowers better terms.

Banks say they are keeping rates high right now because lowering them any further would overwhelm them with customers. They say that over time, as volume thins out, rates could come down to attract new borrowers.

“Bank of America, Wells, Chase, whomever, have fixed capacity. You can’t take in more loans than you can handle,” said Matt Vernon, a senior mortgage executive at Bank of America.

Critics argue that banks are simply maximizing profits at the expense of consumers. Mortgage bankers are recording higher gains from home loans as the gap widens between the interest rate they charge consumers and the rate they must pay investors who finance the loans by buying mortgage securities.

Another challenge for the Fed is that many people eager to buy a home or refinance an existing mortgage simply can’t qualify because of poor credit histories. That may not change even if rates fall.

People “are seeing a dangling low fruit, but they just cannot reach it,” said Lawrence Yun, chief economist for the National Association of Realtors.

At a news conference last Thursday following the announcement that the Fed would begin buying $40 billion worth of mortgage bonds per month, Fed Chairman Ben S. Bernanke faced several questions about the significance of the central bank’s actions on the housing market.

Bernanke said that the initiative should “provide further support for the housing sector by encouraging home purchases and refinancing.” The chairman said “housing is usually a big part of the recovery process,” but has been “one of the missing pistons in the engine.”

Yun said he believes the Fed was right to focus its latest round of stimulus at the long-suffering housing market, but it remains far from certain that the action will have meaningful impact.

Rates are already at generational lows, he said. Pushing them lower might spur some additional refinancing, but Yun said it is unlikely to create a new wave of home buyers.

Mortgage Bankers Association chief executive David Stevens expects even the refinancing boom to “burnout” since everyone who could qualify for a lower mortgage will have refinanced already.

To move that process along, banks are ramping up. Bank of America has added more than 800 people to its mortgage lending team to keep pace with refinancing applications. Vernon, the mortgage executive, said as banks continue to work through backlogs of loans more quickly, they should begin offering consumers lower rates.

Once the refinancing activity dies out, demand for new homes will climb as borrowers gain confidence in the market, analysts say. The Mortgage Bankers Association is forecasting that loans used to purchase homes could increase by 20 percent to 25 percent.

Some regions of the country, which experienced only moderate price declines, are seeing a dearth of desirable homes for sale. Lower interest rates, therefore, may have little effect on boosting sales.

In Washington, the number of active listings in June set a historic low, down 33 percent from a year ago. The result has been a wave of eager but frustrated buyers and a return of bidding wars, escalation clauses and offers to forego requests for any repairs by sellers.

Wells Fargo senior economist Mark Vitner said he expects the Fed’s actions will give home builders confidence to build new properties in anticipation of demand.

“When Bernanke talked about giving a boost to the housing market, he was really talking about home building,” Vitner said. “Inventories are so low today and sales are growing that I think these actions are really meant to improve buying.”

Indeed, Bernanke said increasing home sales would provide the much-needed boost to the overall economy. “House prices are beginning to rise in some markets, which will encourage people to look at homes, will encourage lenders to make more mortgage loans,” Bernanke said. “So I’m hopeful that we’ll see continued progress in the housing market.”