ARMONK, N.Y. and CHICAGO, July 28 /PRNewswire-FirstCall/ — IBM (NYSE: IBM) and SPSS Inc. (Nasdaq: SPSS – News) today announced that the two companies have entered into a definitive merger agreement for IBM to acquire SPSS, a publicly-held company headquartered in Chicago, in an all cash transaction at a price of $50/share, resulting in a total cash consideration in the merger of approximately $1.2 billion. The acquisition is subject to SPSS shareholder approval, applicable regulatory clearances and other customary closing conditions. It is expected to close later in the second half of 2009.
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Most Asian Markets Trade Slightly Higher
By Patrick Rial and Shani Raja
July 28 (Bloomberg) — Asian stocks climbed, lifting the MSCI Asia Pacific Index for an 11th day, as brokerages upgraded banks and steelmakers ahead of earnings announcements.
Sumitomo Mitsui Financial Group Inc., Japan’s third-largest lender, rose 3.9 percent as Nomura Holdings Inc. recommended investors buy the shares. JFE Holdings Inc., Japan’s No. 2 steelmaker, jumped 7.3 percent after Goldman Sachs Group Inc. said earnings are set to improve from this quarter. Tata Motors Ltd., the Indian truckmaker that owns Jaguar Land Rover, jumped 11 percent after reporting profit that beat analyst estimates.
“Investors have been taking comfort that the reporting season hasn’t been horrific,” said Chris Hall, who helps manage $2.6 billion at Argo Investments Ltd. in Adelaide. “The market’s looking like fair value right now, but definitely not what I’d call cheap.”
The MSCI Asia Pacific Index rose 1.3 percent to 110.50 as of 7:39 p.m. in Tokyo. An acceleration in China’s economic growth and better-than-expected U.S. earnings have helped drive a 13 percent climb in the past 11 days. That’s the longest winning streak since January 2004.
Hong Kong’s Hang Seng Index gained 1.8 percent, while Australia’s S&P/ASX 200 Index rose 0.7 percent to a more than eight-month high. James Hardie Industries NV, the biggest seller of home siding in the U.S., added 2.2 percent in Sydney after new-home purchases in America surged the most in eight years.
Taiwan’s Taiex Index rose 1.6 percent, led by Compal Electronics Inc., which climbed 3.2 percent after the Commercial Times said the company will supply laptops to Acer Inc.
Fluctuating Stocks
China’s Shanghai Composite Index fell 0.4 percent, its first drop in a week. Sichuan Expressway Co. slumped 10 percent after tripling in value in its trading debut yesterday. Japan’s Nikkei 225 Stock Average closed little changed.
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent today. The gauge climbed 0.3 percent yesterday as a government report showed sales of new homes jumped 11 percent last month from May, the most in eight years and higher than every economist forecast in a Bloomberg survey.
Sumitomo Mitsui, Japan’s No. 3 listed bank, climbed 3.9 percent to 3,990 yen. The company had its investment rating lifted to “buy” from “neutral” at Nomura with a price estimate of 4,500 yen. Improved capital ratios boost the bank’s growth prospects, Nomura analyst Keisuke Moriyama wrote in a Japanese-language report yesterday.
Mitsubishi UFJ Financial Group Inc., the country’s biggest lender by value, rose 0.4 percent to 555 yen, while smaller rival Mizuho Financial Group Inc. added 0.5 percent to 212 yen. The three banks all report first-quarter earnings this week.
Stimulus Policies
Analysts have boosted estimates since the beginning of April for companies in Asia outside Japan, according to data compiled by Bloomberg. Profit forecasts have actually declined within Japan, the data show.
“Earnings season is kicking into high gear this week, so investors are focusing on the individual winners and losers,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo.
JFE climbed 7.3 percent to 3,550 yen, while Sanyo Special Steel Co. surged 13 percent to 395 yen after Goldman lifted shares of both companies to “buy.” JFE reported a first- quarter net loss of 41.6 billion yen ($437 million) an hour before the close of trading.
“We believe that the outlook for 2010-11 is beginning to improve markedly from our previous assumptions, based on the coordinated policy response from governments around the globe,” analysts led by Rajeev Das wrote in a report. “We also believe the end of the June quarter marks a trough for the current cycle.”
U.S. Economy
Tata Motors climbed 11 percent to 414.35 rupees. The company posted a 58 percent increase in net income for the quarter ended in June as a change in accounting rules and lower commodity prices helped mask a fall in demand.
James Hardie climbed 2.2 percent to A$5.12 following the U.S. home sales report. Nissan Motor Co., which gets 34 percent of its sales in North America, gained 1.6 percent to 626 yen.
The MSCI Asia Pacific Index has climbed 57 percent from a more than five-year low on March 9 on speculation stimulus policies worldwide will revive the global economy. Stocks on the gauge are valued at an average 24.5 times estimated net income, the most expensive level since March 31.
U.S. companies including Intel Corp. and Apple Inc. this month reported better-then-expected results. Government figures due July 31 may show that the contraction in the U.S. economy narrowed to a 1.5 percent pace in the second quarter, following a 5.5 percent drop in the first three months of 2009, economists surveyed by Bloomberg News predicted.
Beating Estimates
Compal, which gets 31 percent of its sales in America, rose 3.2 percent to NT$33.50. Acer will contract out the production of 20 million laptops in the first phase of contracts, and Compal, the world’s No.2 maker of notebook computers, will be the largest supplier, the Commercial Times reported today.
Sapporo Holdings Ltd. rose 5.5 percent to 600 yen in Tokyo after the brewer said it will post a smaller-than-expected net loss for the six months ended in June.
In Shanghai, Sichuan Expressway, which operates toll roads, sank 10 percent to 9.81 yuan. The stock soared 203 percent in its first day of trading yesterday.
China’s Shanghai Composite Index has climbed 89 percent this year, as government stimulus, record bank lending and an economic rebound spurs demand for equities. Companies in the benchmark are valued at 26 times estimated earnings, up from 13 times on Nov. 4, when the gauge fell to a two-year low.
“While it’s obvious that the market is in a bubble, the rally could still go on as the government hasn’t stopped the liquidity,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million. “If a correction starts, that will be powerful.”
By Adam Haigh
July 28 (Bloomberg) — European stocks were little changed after better-than-estimated earnings offset a forecast by BP Plc Chief Executive Officer Tony Hayward that any recovery from the first global recession since World War II will be “long and drawn out.”
Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, gained 3.8 percent after quarterly profit climbed. Sage Group Plc added 4.6 percent as the largest U.K. software maker said results were “consistent” with its forecasts. BP, Europe’s second-biggest oil producer, slid 1.5 percent even after earnings topped estimates.
Europe’s Dow Jones Stoxx 600 Index slipped 0.1 percent to 220.35 as of 11:13 a.m. in London, having earlier risen as much as 0.7 percent. The gauge has surged 12 percent since July 10 after companies from Goldman Sachs Group Inc. to Roche Holding AG and Apple Inc. posted better-than-estimated results and U.S. Federal Reserve Chairman Ben S. Bernanke said the world’s largest economy is showing “tentative signs of stabilization.”
“To start to talk about a sustainable economic recovery is a bit premature,” Hans Goetti, who oversees about $10 billion as chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd., said in a Bloomberg Television interview. “These earnings come based on pretty low expectations and of course they surprise on the upside.”
Valuation
The rally has pushed the Stoxx 600’s valuation to 27.4 times the earnings of its companies, according to Bloomberg data, the highest level since January 2004.
The MSCI Asia Pacific Index increased 1.4 percent today, while futures on the Standard & Poor’s 500 Index slid 0.3 percent.
BBVA rose 3.8 percent to 10.63 euros after second-quarter net income increased 34 percent to 1.56 billion euros ($2.23 billion), beating analyst estimates of 1.3 billion euros.
More than half of per-share earnings at European companies that have reported results since July 8 beat analyst forecasts, according to Bloomberg data. Profits in the Stoxx 600 fell 20 percent on average in the period, while 46 out of 86 companies have reported better-than-estimated results, the data show.
Sage Group climbed 4.6 percent to 193.9 pence after it said results for the nine months to June 30 were “consistent with management expectations.”
BP lost 1.5 percent to 511.2 pence. Hayward said in a statement that there is “little evidence of any growth in demand” for fuel and he expects “the recovery to be long and drawn out.”
BP’s earnings excluding one-time items and inventory changes were $2.94 billion in the second quarter, beating the $2.82 billion median estimate of 17 analysts compiled by Bloomberg.
Sanofi, PPR Upgrades
Sanofi-Aventis SA added 2.4 percent to 47.18 euros after Morgan Stanley raised France’s largest drugmaker to “overweight” from “equal weight,” saying that its concern about lost sales of the diabetes drug Lantus was unfounded.
PPR SA, the owner of the Gucci brand, added 2.7 percent to 67.18 euros. Morgan Stanley increased its recommendation to “overweight” from “equal weight,” saying the group has been “overlooked” by the market.
Deutsche Bank AG dropped 8.1 percent to 47.82 euros after Germany’s largest lender reported a surge in loss provisions. Second-quarter net income rose to 1.09 billion euros from 649 million euros a year earlier, exceeding the 944 million-euro median estimate of 13 analysts surveyed by Bloomberg. UBS AG downgraded the shares to “neutral” from “buy.”
Home prices in 20 major U.S. metropolitan areas probably fell at a slower pace in May, another sign the market is stabilizing, economists said ahead of the S&P/Case-Shiller index report due 9 a.m. New York time.
U.S. Steel Corp. and McGraw-Hill Cos. are among companies expected to report earnings before the open of U.S. equity markets today.
— With assistance from Linzie Janis in London. Editors: Andrew Rummer, Christiane Lenzner.
Oil Hangs On To Marginal Gains
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Vienna’s JBC Energy attributed the buoyancy of oil markets to “enthusiastically absorbed earning figures of selected companies.
“In the U.S., the release of second-quarter GDP estimates on Friday will be a first test to market optimism,” said JBC’s newsletter Tuesday.
Benchmark crude for September delivery was up 15 cents, fetching $68.53 a barrel by noon in European electronic trading on the New York Mercantile Exchange. On Monday, the contract rose 33 cents to settle at $68.38.
Oil has surged from $58.78 a barrel earlier this month as solid second-quarter company earnings bolstered investor optimism that the global economy is recovering.
The Commerce Department said Monday that new U.S. home sales rose 11 percent in June as buyers jumped on reduced prices, low interest rates and a federal tax credit for first-time homeowners. However, disappointing earnings from Verizon Communications Inc., Aetna Inc. and Corning Inc. undermined investor confidence.
The Dow Jones industrial average rose 0.2 percent Monday, cooling off after jumping 11 percent in two weeks.
“The speed and magnitude of the recent rebound has taken us a bit by surprise,” Societe Generale said in a report. “There’s a high level of uncertainty about near-term price direction for oil.”
In other Nymex trading, gasoline and heating oil for August delivery were up slightly at $1.93 and $1.80 a gallon. Natural gas for August delivery jumped by nearly 6 cents to $3.66 per 1,000 cubic feet.
In London, Brent crude prices rose 20 cents to $71.01 a barrel on the ICE Futures exchange.
—
Associated Press writer Alex Kennedy contributed to this report from Singapore.
By Cherian ThomasJuly 28 (Bloomberg) — India’s central bank kept borrowing costs unchanged, signaling an end to its deepest round of interest-rate cuts on concern that inflation will “creep up” from October.
The Reserve Bank of India held its reverse repurchase rate at 3.25 percent, according to a statement in Mumbai today. The central bank raised its inflation forecast for the year to March 31 to around 5 percent from an April estimate of 4 percent and said it may soon need to “reverse” the loose monetary policy of the past ten months.
Inflation risks increased after Finance Minister Pranab Mukherjee this month unveiled plans to raise spending and widen the budget deficit to a 16-year high to bolster growth. Policy makers from Tokyo to London, who in some cases cut interest rates to close to zero, have started to discuss when they will exit from the emergency measures employed to ease a global credit freeze.
“Central banks need to put in place now a timely, smooth and systematic exit from the monetary easing,” said Siddhartha Sanyal, an economist at Edelweiss Capital Ltd. in Mumbai. “For India, it would be difficult to continue pursuing the current low-rate regime beyond six to nine months.”
Governor Duvvuri Subbarao said the central bank will maintain an “accommodative monetary stance” until there are “definite and robust” signs of recovery.
Policy Reversal
“This accommodative monetary stance is, however, not the steady state stance,” he said in today’s statement. “On the way forward, the Reserve Bank will have to reverse the expansionary measures to subdue inflationary pressures while preserving the growth momentum.”…..
By Matthew Brown and Yasuhiko Seki
July 28 (Bloomberg) — The dollar fell as stocks extended their longest rally since 2003 and investors sought higher- yielding assets on speculation the global economy is emerging from the recession.
The Dollar Index dropped to its lowest level this year as the MSCI World Index rose for a 12th day. The Australian dollar gained for a third day against the U.S. currency after the Reserve Bank of Australia said the economy may rebound faster than forecast six months ago. The euro climbed to a seven-week high against the dollar after Deutsche Bank AG said second- quarter profit rose 68 percent, beating analysts’ estimates.
“Riskier currencies are trying to break higher as stocks rally,” said Ian Stannard, a foreign-exchange strategist in London at BNP Paribas SA, France’s largest bank. “Upside potential is limited as euro-dollar has been quite disappointing in recent weeks, given that we’ve had near-perfect conditions for a rally to develop.”
The Dollar Index, which the ICE uses to track the dollar against currencies including the yen, pound and Swedish krona, fell to 78.315 today, the lowest level since Dec. 18. It was at 78.467 as of 10:03 a.m. in London, from 78.626 yesterday. The dollar weakened to $1.4271 per euro, from $1.4232, and traded at $1.4304 earlier, the lowest level since June 3. The U.S. currency fell 0.5 percent to 94.75 yen.
The MSCI World Index of global shares rose 0.4 percent, capping its the longest winning streak since June 2003. The Dow Jones Stoxx 600 Index of European shares climbed 0.2 percent.
Housing Report
U.S. home prices probably fell at a slower pace in May, indicating that the American economy is recovering. The S&P/Case Shiller index of 20 major metropolitan areas, due for release today, will show property values fell 17.9 percent in May from a year earlier, according to a Bloomberg News survey of economists. The measure was down 18.1 percent in the 12 months ended April.
The Australian dollar climbed after RBA Governor Glenn Stevens said it appears “that the downturn we are having may turn out not to be one of the more serious ones of the postwar era, in contrast to the experiences of so many other countries.”
“We can much more easily imagine upside risks to the outlook, to balance out the downside ones, than was the case six month ago,” the Reserve Bank chief said in Sydney today.
The Australian dollar added 1.1 percent to 83.17 U.S. cents, while the New Zealand dollar gained 0.9 percent to 66.28 U.S. cents. The Canadian dollar rose for an eighth day to 92.98 U.S. cents, from 92.49 cents.
‘Jammed on’
Stevens left the benchmark lending rate at 3 percent on July 7 for a third month amid signs the lowest borrowing costs in half a century and government spending helped the nation skirt a recession.
The benchmark interest rate is 8.75 percent in Brazil and 0.25 percent in Sweden. Japan’s is 0.1 percent. The U.S. key rate is as low as zero.
A pick-up in the 25-day rolling correlation between Aussie- dollar and the two-year swap rate differential “suggests further Australian dollar gains,” Steven Pearson, head of Group of 10 foreign-exchange strategy in London, wrote in a research report today.
“With the risk appetite switch jammed on pressure on the dollar and the yen continues to mount,” Pearson wrote.
BOA Closes Down 10% of its Branches Down; Just In Time For Recovery
By DAN FITZPATRICK
Bank of America Corp. Chief Executive Kenneth Lewis told investors last week he is planning to shrink the company’s 6,100-branch network by about 10%, a pullback from the two-decade expansion that took the bank from coast to coast.
Mr. Lewis discussed the plans during a meeting Thursday in the bank’s hometown of Charlotte, N.C., according to people familiar with the conversation. Liam McGee, president of Bank of America’s consumer and small-business bank, also said branch closures are in the works but added it would be premature to specify how many locations could be closed, these people said.
Bloomberg News
Bank of America’s plans would mean closing many of the lending giant’s branches. Above, a Bank of America location in New York.
The driving force for the closings is changing customer preferences, Mr. McGee said, according to these people, as online and mobile banking take transactions away from traditional branches. Messrs. Lewis and McGee didn’t say when the shutterings would occur, these people said. Neither executive was available for comment Monday, and a Bank of America spokesman wouldn’t discuss the matter.
At the end of 2008, Bank of America’s retail-banking operations covered about 82% of the U.S. population, with its red-and-blue flag logo in 13 of the 15 fastest-growing U.S. states and 32 states overall. The company holds 12.2% of all U.S. deposits, according to SNL Financial, followed by Wells Fargo & Co. and J.P. Morgan Chase & Co.
In the 1990s, Bank of America pushed ahead with a branch-building strategy as rivals scaled back, believing that the corner branch was crucial to the bank’s overall strategy. Acquisitions since 1998 also added to its heft in California, Florida, the Northeast and the Midwest.
![[Bank of America]](http://ibankcoin.com/cronkite/wp-content/imagescaler/f14aff621e848162d2ef21f6ea6e1977.gif)
Bank of America is facing a growing challenge from Wells Fargo, which has 6,668 branches in 39 states following its takeover of Wachovia Corp. The San Francisco bank has no plans to retreat, a spokeswoman said Monday. J.P. Morgan has about 5,100 U.S. branches. It has closed about 390 former Washington Mutual branches since buying the banking operations of that failed thrift last September. A spokesman said the bank typically builds 100-125 new branches a year and said that will continue “for the foreseeable future.”
The retrenchment at Bank of America comes as it continues its integrations of Merrill Lynch & Co. and Countrywide Financial Corp., reshuffles leadership at the behest of regulators and fends off rising credit losses. Mr. Lewis said July 17 that it would be “much tougher” to make money in the second half of 2009.
Grantham Calling For China To Fall
China is bailing out the world economy, growing at 8% a year while the rest of the globe struggles.
Unfortunately, if China bears are right, those days will soon be over.
Jeremy Grantham of GMO is nervous about emerging markets, especially China.
Our other perennial favorite – emerging market equities
– has had an amazing recovery, all things considered, and is no doubt also vulnerable to a reassessment of how quickly the global economy is recovering. Deciphering the strength of the Chinese economy will also play a major role in formulating our view of any future relative strength of emerging. My colleague, Edward Chancellor, strongly suspects that the Chinese economy is dangerously
unbalanced and very likely to come unhinged in the next
few quarters, surprising the pants off investors.
Meanwhile, Jeremy’s prediction earlier this year that S&P would soar to 1000-1100 and then collapse for 7 years seems right on track.
See Also: Ex-Bear Jeremy Grantham Now A Snorting Bull, Says Stocks Going To Moon
Obama Strikes Out @ Mitigating Home Foreclosure
At one point does this stop being story?
WSJ: An Obama administration effort to reduce home foreclosures by lowering the mortgage payments of struggling borrowers before they fall behind is failing to help as many people as expected.
Among the problems: Some homeowners are being told they must be behind on their payments to receive help, which runs counter to the aim of the program. In other cases, delays are so long that borrowers who are current on their payments when they ask for a loan modification are delinquent by the time they receive one. There is also confusion about who qualifies.
To help get the modifications in high gear, officials from 25 mortgage-servicing companies will meet with the administration to discuss what’s holding back the program.
Will this chit-chat help? Maybe.
What needs to happen is the mortgage-servicers need to level with the administration about why their operations are so dysfunctional. If it’s just a matter of the difficulty in ramping-up and building the mortgage-mod infrastructure then that’s fine, and the program should be given more time before we render a judgment.
But, if it really comes down to economic incentive, namely that the holders of mortgages don’t want to modify for fear that if they do they’ll modify themselves straight into insolvency then that needs to get out so we stop with the charade, and all the confusion and extra cost that falls upon desperate homeowners.
Officially all the banks support the administration’s plan and that’s great. But if secretely they have to drag their feet, then let’s kill it now and think of something else.
Kirby Daley Commentary On The Next Financial Collapse
See link For podcast
Rebel Traders Digs A China Bubble Story From A French Paper
More evidence appears today of the bubble affecting the Chinese stock market after part of the Chinese stimulus was diverted into the markets.
The French economic daily Les Echos reports today that the Shanghai stock exchange is today the world’s fourth largest market with a capitalization of about 2.3 trillion USD. The Shanghai SSE index moved up by 89 % since the beginning of the year.
What is more, irrational exuberance continues on any IPO taking place. The introduction yesterday of Sichuan Expressway, a highway company saw the share jump by 203 % in a single day.
And another similar meteoric rise may take place tomorrow with the IPO of China State Construction Engineering, a company that will have a capital of 50.2 Bn Yuan.
Other typical factor: in May, the capitalization of the oil giant, Petrochina went beyond that of its US rival, ExxonMobil, making it the largest traded company in the world.
I’ll only recall my earlier posts in that respect and forewarn you for the bubble burst when it will come.
As for the efficiency of the Chinese in manipulating the markets, I believe the short article published today in the China Economics Review gives you all the story.
China’s state-owned enterprises (SOEs) have lost billions of dollars in losses related to commodity price or foreign exchange trading over the past year, Reuters reported. Although a few of the most recent cases appear to have been simply bad luck on hedging markets at the peak, other instances have been blamed on a “rogue” element – a risk manager, a lone trader – who was operating beyond his mandate. The mounting losses have caused Beijing to crack down on all forms of overseas derivatives trading. In response, the State-owned Assets Supervision and Administration Commission (SASAC) launched legislation that requires all SOEs engaged in trading derivatives to make quarterly reports about their investment situations. Kuang Yongsheng, an official from SASAC said, “We don’t want to see them diverge their core businesses to speculate in the financial market.” One recent example happened in January of 2009 when three of China’s largest airlines, Air China, Shanghai Airlines and China Eastern, collectively lost a reported US$1.94 billion on aviation fuel hedging contracts, according to state media.
Retailers Report Woes on High Street
High street sales fell more than expected in July but the decline has slowed down according to new figures from the Confederation of British Industry (CBI).
In its monthly survey of Distributive Trades, some 32 per cent of retailers said sales volumes were higher than in July last year, but 47 per cent said they had fallen.
The resulting balance of -15 per cent was higher than the -12 per cent analysts had expected, but more modest than the balance of -17 per cent recorded in June.
It is also well down on the falls recorded in the earlier months of the year.
Official data showed that retail sales rose by 2.8 per cent in June, but Fitch, the ratings agency, yesterday warned that better than expected results from the high street were due to the heatwave and early sales.
The outlook for August was also downbeat, with 23 per cent more retailers saying that sales were likely to be lower rather than higher than in August last year.
There are fears that increases in unemployment could further impact consumer spending, taking a heavy toll on the high street.
Andy Clarke, chief operating officer of Asda and chairman of the survey panel, said: “Many retailers are having a difficult summer and no pick-up is expected for August.
“But the overall sales falls are not as heavy as we saw at the start of the year, and some retail sectors are reporting growth.”
Supermarkets performed the best on the high street, with grocers continuing to see strong growth on a year ago. The only other sector to report a rise in sales were shoe shops. Some 64 per cent more footwear and leather retailers reported higher, rather than lower, sales, the highest margin since August 2007.
Falling sales were reported by shops selling hardware, china & DIY, and furniture & carpets.
Sales of cars slumped to a six-month low however, undermining hopes that the car scrappage scheme would provide a shot in the arm of the ailing car market.
