Asian Stocks Continue Downside Action over Falling Commodity Prices, Lower Shipping Rates, and Concerns Insurers Will Have to Raise Capital Requirements

Weakness in Asia for opening trade

Feb. 17 (Bloomberg) — Asian stocks fell, led by finance and commodity companies, amid concern insurers may have to boost capital reserves and as metals prices and shipping rates declined.

T&D Holdings Inc., Japan’s largest publicly traded life insurer, plunged 9.7 percent, as the U.K.’s Financial Services Authority asked the industry to assess how well they can withstand market shocks. BHP Billiton Ltd., the world’s biggest mining company, fell 0.7 percent in Sydney as copper retreated. Brambles Ltd., the world’s biggest supplier of pallets used to move and store goods, tumbled 9.4 percent after a drop in profit prompted brokerage downgrades.

“In the current market climate, there is little incentive for investors to buy stocks,” Mamoru Shimode, a Tokyo-based equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

The MSCI Asia Pacific Index declined 0.8 percent to 80.58 as of 10:10 a.m. in Tokyo. Five stocks dropped for every two that advanced. The gauge has lost 10 percent this year, extending 2008’s record 43 percent tumble, as the credit crisis dragged the world’s biggest economies into recession.

The Nikkei 225 Stock Average lost 0.8 percent to 7,690.02. Benchmark measures in other Asian markets open for trading also fell. Futures on the U.S. Standard & Poor’s 500 Index fell 1.1 percent. U.S. markets were closed yesterday for Presidents’ Day.

T&D slumped 9.7 percent to 2,010 yen, tracking an 11 percent drop by the U.K.’s Legal & General Group Plc, which declined on speculation the 173-year-old British insurer may have to cut its dividend to boost capital reserves.

Broker Downgrades

BHP lost 0.7 percent to A$31.91. A measure of six primary metals traded in London fell 2.4 percent, with copper losing 2.9 percent. The Baltic Dry Index, a measure of shipping costs for commodities, dropped 3.2 percent on lower rates to haul coal and iron ore for steel production.

Brambles tumbled 9.4 percent to A$5.12. The stock was downgraded at Merrill Lynch & Co., JPMorgan Chase & Co. and Macquarie Group Ltd. a day after the company reported a 28 percent decline in first- half profit.

Oil Prices

What will oil do during ’09 ? $15-$30 $35-$50 $50-$75 $75-$100 $100 + Current Results

Cartel considers increasing their fetch on oil prices

Oil prices stayed above $37 a barrel Monday in Asia as OPEC members talked up more production cuts over the weekend amid weakening global demand for crude.

Light, sweet crude for March delivery fell 5 cents to $37.46 a barrel by late afternoon in Singapore on the New York Mercantile Exchange. The contract rose $3.53 on Friday to settle at $37.51.

The Organization of Petroleum Exporting Countries has implemented most of the 4.2 million barrels a day of output reductions announced since September, but the cuts have been overwhelmed by a collapse in crude demand amid the global slowdown.

GM still seeking concessions from bondholders and the UAW

DETROIT (Reuters) – General Motors Corp and the United Auto Workers union made progress in concession talks and bondholders offered proposals to slash GM’s debt on Monday, a day before the automaker must detail a new survival plan.

GM is seeking concessions from the UAW and creditors under the terms of its $13.4-billion federal bailout and faces a Tuesday deadline to submit a restructuring plan to U.S. officials showing how it can cut costs and pay back the loans.

GM was not expected to reach detailed agreements by the deadline but talks with both key groups made progress in the final day, people briefed on the discussions said.

GM’s board convened via a conference call on Monday to review a draft of the document, which is also expected to detail plans for closing excess plants and disposing of laggard brands like Hummer, Saab and Saturn.

Facing the same Tuesday deadline, GM’s smaller rival Chrysler LLC was locked in negotiations with the UAW. Those talks were making progress after stalling out over the weekend, people briefed on those parallel talks said.

In a potential breakthrough, representatives of GM bondholders outlined proposals on how to swap some $28 billion in debt for equity in a document submitted to the automaker, according to a person with knowledge of those talks.

GM has not accepted those proposals, which were designed to discourage bondholders from dropping out of the deal in order to maximize its chances for success, the person said.

The debt swap is a crucial element in the restructuring plan for GM, which has received $9.4 billion in government aid and has been pledged $4 billion more by Tuesday. [nN16324404]

Without a framework deal on how to cut GM’s crippling debt load, analysts have said the Obama administration would confront a political and economic dilemma in the coming days.

A bankruptcy for GM could cost tens of thousands of jobs and topple suppliers and dealers just as the White House is focused on trying to pull the economy from a deeper recession.

But expanded aid could cost taxpayers billions of dollars more and risk a stronger bailout backlash by voters.

U.S. Rep. Thaddeus McCotter, a Michigan Republican, told Reuters progress in GM’s talks with its bondholders appeared to have spurred progress in its talks with the UAW, which is also being pressed to forgive debt.

“They will get this done,” said McCotter, who sits on the House Financial Services Committee that heard testimony from automakers as part of the bailout debate.”

U.S. Rep. Sander Levin, a Michigan Democrat, said the automakers remained focused on “how to make this work without bankruptcy.”

Japan’s GDP shrunk by 12.7%

Feb. 16 (Bloomberg) — Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, as recessions in the U.S. and Europe triggered a record drop in exports.

Gross domestic product fell for a third straight quarter in the three months ended Dec. 31, the Cabinet Office said today in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for an 11.6 percent contraction.

Exports plunged an unprecedented 13.9 percent from the third quarter as demand for Corolla cars and Bravia televisions collapsed amid a slump that the Group of Seven nations said will persist for most of 2009. Toyota Motor Corp., Sony Corp. and Hitachi Ltd. — all of which forecast losses — are firing thousands of workers, heightening the risk a decline in household spending will prolong the recession.

“The economy is in terrible shape and the scary part is that we’re likely to see a similar drop this quarter,” said Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo. “All we can do is wait for overseas demand to pick up.”

Stocks in Europe and Asia declined after the report. The MSCI World Index dropped 0.5 percent to 832.99 at 1:43 p.m. in London, extending its 2009 retreat to 9.5 percent. Europe’s Dow Jones Stoxx 600 Index fell for the fourth time in five days.

In Japan, the Nikkei 225 Stock Average fell 0.4 percent in Tokyo, extending the loss so far this year to 13 percent. The yen rose to 91.59 per dollar from 91.76 on speculation Japan will refrain from taking measures to weaken the currency. The yen’s 18 percent gain in the past year has compounded exporters’ woes by eroding the value of their overseas sales.

Worse Than U.S., Europe

The world’s second-largest economy shrank 3.3 percent from the third quarter, today’s report showed. That compared with the U.S.’s 1 percent contraction and the euro-zone’s 1.5 percent decline, which was the sharpest in at least 13 years.

“There’s no doubt that the economy is in its worst state in the postwar period,” Economic and Fiscal Policy Minister Kaoru Yosano said in Tokyo. “The Japanese economy, which is heavily dependent on exports of autos, electronics and capital goods, has been severely hit by the global slowdown.”

G-7 finance chiefs meeting in Rome on the weekend vowed to tackle a “severe” economic downturn. Indonesia grew 5.2 percent in the fourth quarter from a year earlier, the slowest in more than two years, the government said in Jakarta today.

Global Contraction fears grip overseas markets

Feb. 16 (Bloomberg) — Stocks in Europe and Asia fell as Japan’s economy contracted the most since 1974, Britain was warned it faces the worst recession in almost three decades and the Group of Seven offered no solution to revive global growth. Brazil’s Bovespa Index slid for the fifth time in six days.

Legal & General Group Plc dropped 11 percent on speculation the insurer is in talks with the Financial Services Authority over the amount of money it should set aside for defaults in its bond portfolio. Takefuji Corp. slid 9.5 percent after Japan’s third-biggest consumer lender forecast a full-year loss and the country’s gross domestic product contracted at an annual 12.7 percent pace. Gerdau SA, Latin America’s largest steelmaker, decreased 1.7 percent as metals declined.

“It is all just illustrating that we are really in a deep recession,” said Mike Lenhoff, who helps oversee about $36.4 billion as chief strategist at Brewin Dolphin Securities Ltd. in London. “Markets aren’t getting any relief from any good news at the moment. It is going to remain under pressure for a while.”

The MSCI World Index decreased 0.7 percent to 830.90 at 4:31 p.m. in London, extending its 2009 retreat to 9.7 percent. The gauge of 23 developed markets has dropped for five days as companies from Electricite de France SA to Diageo Plc posted disappointing results and U.S. Treasury Secretary Timothy Geithner failed to convince investors his bank rescue will work.

Futures on the Standard & Poor’s 500 Index slipped 1.2 percent. Markets in the U.S. and Canada were closed for holidays.

‘Severe’ Recession

Europe’s Dow Jones Stoxx 600 Index fell for the fourth time in five days, losing 1.2 percent. The MSCI Asia-Pacific Index declined 0.6 percent as washing-machine maker Fisher & Paykel Appliances Holdings Ltd. said it doesn’t expect a profit this fiscal year.

Brazil’s Bovespa slipped 1.2 percent, led by Lojas Renner SA, extending last week’s drop of 2.5 percent. The MSCI Emerging Markets Index of 23 developing nations declined 1.6 percent.

The G-7’s finance ministers and central bankers said in a statement released after talks in Rome that they were working to restore confidence in markets and revive the world economy. They predicted the full effect of individual rescue packages will “build over time” and a “severe” economic decline will persist for most of 2009.

The Japanese economy contracted the most since the 1974 oil shock, according to figures from the Cabinet Office, with gross domestic product falling for a third straight quarter.

The U.K.’s GDP will decrease 3.3 percent this year, instead of the 1.7 percent predicted in November, the Confederation of British Industry said. By the end of 2009, the economy will have contracted for six consecutive quarters, the business lobby said.

Geithner Proposals

U.S. investors and lawmakers last week criticized Geithner for failing to provide enough details of his proposals to prop up banks and tackle the credit crisis that lies at the heart of the worst global recession since World War II. The G-7 finance chiefs in Rome pushed the Treasury secretary to move faster in attempts to fix the banking system.

Legal & General lost 11 percent to 44.3 pence. The Financial Times reported the insurer is in talks with the FSA and may increase the reserve funds when it reports preliminary results next month. Spokesman Richard King said the company “had no more conversations with the FSA than we usually have before the end- of-year results.”

Takefuji tumbled 9.5 percent to 572 yen. The lender forecast a full-year loss of 264.1 billion yen ($2.9 billion) on rising claims to return overpaid interest and lower income from lending. The company had estimated in November a profit of 3 billion yen.

Gerdau, Lojas Renner

Gerdau fell 2 percent to 15.60 reais. The Bloomberg Base Metals 3-Month Price Commodity Index slid 2.3 percent.

Lojas Renner, Brazil’s biggest publicly traded clothing retailer, sank 3.5 percent to 14.11 reais. Brazil’s gross domestic product will grow 1.5 percent this year, down from a 1.7 percent forecast the week before, according to a weekly survey of about 100 economists taken Feb. 13 and published today.

CRH Plc declined 5.3 percent to 17.75 euros after the Sunday Telegraph reported the world’s second-biggest maker and distributor of building materials is considering a 1 billion-euro ($1.3 billion) rights offer. The newspaper didn’t say where it obtained the information.

The Irish supplier of asphalt and concrete slabs may be looking to raise money from investors, anticipating it can take advantage of rivals in financial distress after a construction slump spread to Europe from the U.S., analysts at Bloxham Stockbrokers in Dublin said in a note today.

Fisher & Paykel

Fisher & Paykel plummeted 35 percent to 65 New Zealand cents. The company, which makes about 80 percent of its sales outside the country, said it may break even in the 12 months ending March 31, after reporting a profit of NZ$54.2 million ($28 million) a year earlier.

Premiere AG sank 14 percent to 2.37 euros. Germany’s biggest pay-television company reported its fifth straight quarterly loss after refinancing debt and said subscriber growth will be “broadly flat” in the first half of 2009. The net loss widened to 114.3 million euros from 23.5 million euros a year earlier.

Profits have declined 65 percent for 619 companies in western Europe that have released earnings since Jan. 12, data compiled by Bloomberg show.

TNT Earnings

TNT NV declined 6.7 percent to 13.62 euros. Europe’s second- largest express-delivery company said fourth-quarter net income fell 60 percent to 59 million euros. The underlying figure, excluding currency changes and restructuring charges, declined 17 percent to 207 million euros, the Dutch company said.

Air Liquide SA added 7.2 percent to 64.55 euros. The world’s biggest maker of industrial gases forecast sales and profit growth in 2009, buoyed by demand for gases used in health care and refining. The company also said it will propose a 2008 dividend of 2.25 euros a share.

Aareal Bank AG surged 15 percent to 4.37 euros after the bank applied for state aid and guarantees even as the German commercial-property lender posted a profit in the fourth quarter and for all of 2008.

Aareal Bank will receive 525 million euros in fresh funds from the German Financial Markets Stabilization Fund, SoFFin, as well as a debt guarantee of 4 billion euros with a maximum maturity of 36 months.

Business cancellations are up costing Sin City revenue

LAS VEGAS (AP) – Sin City is worried that its well-honed style is crimping its business.

Born of carefully crafted slogans – “What happens here stays here” – and smiling, sequined showgirls, the image of a 24-hour adult Disneyland with free-flowing booze and casino chips is making the tourist destination seem radioactive to companies keen on not appearing frivolous as they seek government bailouts.

In the past two weeks, at least four major companies canceled meetings worth hundreds of thousands of dollars – not because of costs but because of appearances. Even President Barack Obama questioned the propriety of flying off to Las Vegas if taxpayers were helping foot the bill.

Tourism officials, already nervous after watching meeting and convention attendance decline 5 percent in 2008, are challenging the impression that business meetings are wasteful – especially those conducted under the neon lights of Las Vegas.

“It’s necessary, for us to thrive in this community, that folks come here and realize that this is not some stepchild,” Las Vegas Mayor Oscar Goodman said. “This is a very important place for people to conduct very important business.”

Goodman – who often appears at functions with a showgirl at each arm – sent a letter this week to Obama objecting to his remarks.

“You can’t get corporate jets, you can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer’s dime,” Obama said during a town hall meeting in Indiana.

Obama’s comment came after Wells Fargo & Co. canceled a conference at two high-end Las Vegas hotels in response to a barrage of criticism from Capitol Hill after The Associated Press reported on the company’s previous luxury-laden trips for its top employees.

The company, which received a $25 billion bailout, cried foul in a full-page New York Times ad and said media reports about bailed-out companies have been “deliberately misleading.” The bank said it would cancel all its recognition events this year.

Wells Fargo is not alone. Since the fall, companies that have taken $277 billion in federal assistance through the Troubled Asset Relief Program have faced increased scrutiny for travel practices by lawmakers and an angry public.

Goldman Sachs Group Inc. moved a three-day conference from the Mandalay Bay hotel-casino to San Francisco, incurring a $600,000 cancellation penalty to skip town. U.S. Bancorp, which received $6.6 billion, dropped plans to reward top managers with a trip to Naples, Fla. Morgan Stanley, which has received $10 billion in bailout funds, canceled a trip for top employees to Monte Carlo.