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On the Wires

“We have seen it for several years now: foreclosure sales—there were 5 million since the peak of the housing bubble—have become the hunting grounds for investors with two goals: hanging on to these homes until the Fed’s flood of money drives up their value; and defraying the expenses of ownership by renting them out. And funds have a third goal: collecting management fees.

Thousands of smaller investors have piled into the game. And so have the giants.

Blackstone Group LP, the world’s largest private equity firm, plowed over $3.5 billion into the housing market, according to Bloomberg, to gobble up 20,000 vacant and foreclosed single-family homes. It just fattened up a credit line to $2.1 billion to do more of the same. Colony Capital LLC, which already owns 7,000, is putting $2.2 billion to work.

Last year, institutional investors made up 19% of all sales in Las Vegas, 21% in Charlotte, 23% in Phoenix, and 30% in Miami….”

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“DEERFIELD, Ill. (AP) — Walgreen is expanding its supply agreement with AmerisourceBergenthrough a 10-year deal that gives the nation’s largest drugstore chain an ownership stake in thepharmaceutical wholesaler.

Walgreen Co. says AmerisourceBergen Corp. will replace primarily Cardinal Health Inc. in supplying it with pharmaceuticals. Previously, AmerisourceBergen had supplied only some specialty drugs for Walgreen, which operates more than 8,000 drugstores….”

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$WAG’s Earnings rise 11% 

“DSW earned $0.69 a share in the fourth quarter, missing the $0.72 average analyst forecast. Revenue of $594.3 million also lagged the $601.88 million consensus estimate. DSW drops 11 percent before the bell on my tradeMONSTER platform.

Lululemon Sees Yoga Pants Shortage…”

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“Treasuries advanced for a third day before the Federal Reserve starts a two-day meeting today amid speculation policy makers will decide to keep buying bonds to support economic growth.

Benchmark 10-year yields approached the lowest level in almost two weeks as Cyprus’s Defence Minister Fotis Fotiou said parliament may not vote today on a tax on bank depositsneeded to secure financial aid, fueling concern the region’s debt crisis will worsen. Fed Chairman Ben S. Bernanke said this month “premature” interest-rate increases would stifle the economy.

“Bernanke is leading the charge and continues to water down any hawkish talk,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “U.S. data has been uniformly strong but the risk looking forward is that it takes a downturn. If that’s the case, yields could dip towards 1.80 percent.”

The 10-year yield dropped two basis points, or 0.02 percentage point, to 1.93 percent at 7:01 a.m. in New York, according to Bloomberg Bond Trader prices. The 2 percent note due February 2023 rose 7/32, or $2.19 per $1,000 face amount, to 100 5/8. The yield fell to 1.90 percent yesterday, the lowest since March 6.

The Fed will issue a statement and economic projections after concluding its two-day policy meeting tomorrow, and Bernanke will brief reporters.

“Premature rate increases would carry a high risk of short-circuiting the recovery, possibly leading — ironically enough — to an even longer period of low long-term rates,” Bernanke said in a speech in San Francisco on March 1.

Fed Buying…”

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“John Riccitiello was ousted as chief executive officer of video-game maker Electronic Arts Inc. (EA), a casualty of shrinking sales as the industry gears up for new consoles no one is sure shoppers want.

Chairman Larry Probst, 63, who ran Electronic Arts until 2007, becomes executive chairman and will lead management as the board seeks a new CEO, according to a statement yesterday. The Redwood City, California-based company, the second-largest U.S. game publisher, rose as much as 7.9 percent after saying Riccitiello, 53, will leave at the end of this month.

“He lasted a pretty long time given that the company hasn’t really performed that well,” said Edward Woo, an analyst at Ascendiant Capital Markets in Irvine, California. “The fact that their stock is up on the news goes to show investors weren’t that big a fan.”

Sales have fallen in three of the past four quarters Bloomberg data show, and the company said yesterday that fourth- quarter results will miss its previous forecast, which had already beenlowered in January….”

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“Ryanair Holdings Plc (RYA) agreed to buy 175 Boeing Co. (BA) 737 jets worth $15.6 billion at list price to offer discount flights in markets vacated by full-service rivals and said it may opt to add 200 more by the end of the year.

Ryanair will initially take the existing 737-800 version of the single-aisle aircraft, and is evaluating the re-engined Max model for the follow-on requirement, Europe’s biggest low-cost carrier said today in a statement.

Chief Executive Officer Michael O’Leary last placed a major order in 2005 and has been contemplating a new deal for more than three years with deliveries from Boeing having ended in December. The carrier got a heavy discount on the last purchase and the new accord has similar terms, he said in an interview.

“We needed this order to fill the gaps left by the likes of Iberia in Spain and SAS in Scandinavia as the network airlines concentrate on long-haul and feeder services,” the CEO said by telephone. “We could be looking at 100 or 200 more when we decide on the Max, depending on how much the market opens up.”

Ryanair rose as much as 1.9 percent and was trading 1.7 percent higher at 5.90 euros as of 10:15 a.m. in Dublin, where the company is based. The stock has advanced 25 percent in 2013.

‘Growth Track’….”

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“Gold fell, ending a three-day advance in New York, as a strengthening dollar curbed demand for an alternative investment.

Gold jumped yesterday after Cypriot President Nicos Anastasiades bowed to demands to raise 5.8 billion euros ($7.5 billion) through a proposed tax on bank deposits. Defence Minister Fotis Fotiou said Cyprus’s parliament may not vote on a levy again today. The dollar was little changed versus the euro after yesterday reaching the highest since December. The Federal Reserve begins a two-day policy meeting today.

“The U.S. dollar is firming, which is a bit negative for precious metals,” Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “There’s still good reasons to hold gold.”

Gold futures for April delivery fell 0.1 percent to $1,602.50 an ounce by 7:47 a.m. on the Comex in New York. Prices fell as much as 0.3 percent today after reaching $1,610.40 yesterday, the highest since Feb. 27. Futures trading volume was 34 percent below the average in the past 100 days for this time of day. Gold for immediate delivery declined 0.1 percent at $1,603.69 in London.

The proposed bank-deposit levy, announced March 16, sparked concern among investors about setting a precedent by breaking the taboo against raiding bank accounts. Fotiou said the government was working on a “Plan B” if the vote isn’t passed in parliament. Banks and stock markets in Cyprus are closed today and tomorrow.

Gold’s Drop

Gold is down 4.4 percent this year amid signs the U.S. economy is improving and as Fed policy makers remain divided on the pace of stimulus that helped prices rally for a 12th straight year last year. Holdings in the SPDR Gold Trust, the biggest bullion ETP, fell to 1,219.5 metric tons yesterday, the lowest since July 2011, data on its website show….”

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Permits rise 4,6%

“Brent crude fell, shrinking its premium to U.S. oil to less than $15 a barrel for the first time since January, as Cyprus prepared to vote on a bank levy amid renewed concern that Europe’s debt crisis will worsen.

Futures lost as much as 0.8 percent in a second daily decline, narrowing the premium to West Texas Intermediate to the least since Jan. 18. Cypriot lawmakers are scheduled to vote today on how to spread the burden of raising 5.8 billion euros ($7.5 billion) from bank depositors to unlock emergency loans. A report today may show U.S. crude supplies rose to the highest level since June.

“The number one story in the markets is still about an island in the Mediterranean with approximately 1 million inhabitants,” said Michael Poulsen, an analyst at Global Risk Management in Middelfart, Denmark, adding that oil prices will probably remain “fairly balanced.”

Brent for May settlement slid as much as 88 cents to $108.63 a barrel on the London-based ICE Futures Europe exchange, trading for $109.15 at 12:04 p.m. local time. Volumes were 17 percent below the 100-day average. The European benchmark was at a premium of $14.75 to WTI for the same month.

WTI for April delivery, which expires tomorrow, was at $94.02 a barrel, up 28 cents, in electronic trading on the New York Mercantile Exchange. The more-active May future gained 30 cents to $94.41. The volume of all futures traded was 7 percent above the 100-day average. The front-month contract climbed 29 cents to $93.74 yesterday, the highest close since Feb. 20.

Price Rebound…”

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“Blackstone Group LP (BX) and Goldman Sachs Group Inc. (GS) are among private-equity investors selling the most German housing assets since they plowed into the market in 2005, a sign that price gains may have peaked.

Investors plan to sell at least 5 billion euros ($6.5 billion) of apartments and shares of property companies this year, according to company statements and people with knowledge of the deals. Private-equity firms divested about 3.8 billion euros of housing in 2007, when there were no share sales, data from broker Jones Lang LaSalle Inc. show.

“We’re using the attractive market to clean out and reposition our portfolio,” said Olaf Claessen, director of asset management at London-based Round Hill Capital LLC, which owns about 2.5 billion euros of German homes. “We don’t think there’s an urgent need to exit, but certain properties have gained in value and could make sensible exit scenarios.”

The German housing market has changed since private-equity firms started investing at the beginning of the last decade, creating opportunities for buyers with different objectives. Investors like Blackstone, the world’s largest buyout firm, and Goldman initially struggled to make good on bets that they could buy apartments in bulk and then raise rents or resell at a profit to individuals….”

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“German investor confidence unexpectedly rose to a three-year high in March, suggestingEurope’s largest economy will return to growth.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 48.5 from 48.2 in February. That’s the highest since April 2010. Economists forecast a decline to 48.1, according to the median of 40 estimates in a Bloomberg News survey.

The Bundesbank predicts the economy will expand in the current quarter after contracting 0.6 percent in the final three months of last year. Business confidence improved for a fourth month in February. Still, political turmoil in Italy and the specter of a bank run in Cyprus are spooking financial markets and threatening to derail an economic recovery in the euro area,Germany’s biggest export market….”

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“South African bonds face the risk of a sell-off by foreign investors as the rand’s plunge dims the allure of the nation’s debt, according to Societe Generale SA. (GLE)

The rand’s 8.2 percent fall against the dollar this year is the worst of 25 emerging marketsmonitored by Bloomberg. South African 10-year yields have climbed 12 basis points this month, compared with a 13 basis-point drop for similarly-rated Mexico.

Risks for foreign investors have increased as South Africa posted a current-account deficit close to a four-year high in the fourth quarter after mining strikes and slower growth in Europecut exports from Africa’s largest economy. A widening shortfall requires more foreign inflows to fund imports, a source of funds that has dwindled after record 2012 purchases.

“There is trouble brewing in South African markets,” Benoit Anne, the London-based head of emerging-markets strategy at SocGen, said in an e-mailed response to questions yesterday. “We may be getting closer to a real-money investor capitulation, the market equivalent of a volcano eruption.”

SocGen is underweight South African bonds in its Emerging- Market Optimal Local Bond Portfolio. The nation’s debt of all maturities longer than one year has lost 7.4 percent for dollar investors this year, the third-worst after Japan and the U.K. among 26 sovereign markets tracked by the European Federation of Financial Analysts Societies and Bloomberg….”

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“U.K. inflation accelerated to the fastest pace in nine months in February and factory-gate prices increased twice as much as forecast as energy costs surged.

Consumer prices rose 2.8 percent from a year earlier, compared with 2.7 percent in January, the Office for National Statistics said in London today. That matched the median of 35 estimates in a Bloomberg News survey. Producer prices increased 0.8 percent from the previous month, the most since April 2011.

Higher energy bills and a weaker pound have fueled price pressures in recent months. That’s adding to the squeeze on consumers as they brace for another austerity budget by Chancellor of the Exchequer George Osborne tomorrow. With price gains above the Bank of England’s 2 percent target, Osborne may also flag changes to the central bank’s mandate to give policy makers more flexibility to stimulate growth.

“The economy is going nowhere fast and the BOE has said it will essentially look through above-target inflation,” said Rob Wood, an economist at Berenberg Bank in London. “Whether of its own volition, or because the chancellor tweaks its inflation remit in the budget, we continue to expect the BOE to add more monetary stimulus this year.”

The pound erased its decline against the dollar after the data were published. It was trading at $1.5125 as of 11:28 a.m. inLondon, up 0.1 percent from yesterday….”

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“Euro-area finance ministers told Cyprus to raise 5.8 billion euros ($7.5 billion) from bank depositors to unlock emergency loans, maintaining the revenue target while suggesting sparing small-scale savers.

The finance chiefs from the 17 euro countries kept the pressure on Cyprus as they signaled flexibility in applying the tax announced three days ago. The levy sparked outrage in the island nation and concern among investors about setting a precedent by breaking the taboo against raiding bank accounts.

“Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on March 16, provided that it continues yielding the targeted reduction of the financing envelope and, hence, not impact the overall amount of financial assistance,” the ministers said in a statement following a teleconference late yesterday.

With Cypriot lawmakers voting today on how to spread the burden among account-holders and the proposed bank tax roiling markets, the U.S. called for a “responsible and fair” resolution to the financial crisis in Cyprus, the fifth euro country to seek a bailout since 2010. The euro slipped in early European trading on concern that Parliament will reject the deal.

Euro Slips

The euro traded at $1.2942 as of 8:40 a.m. Frankfurt time, falling from as high as $1.2970. Futures on the Euro Stoxx 50 Index fell 0.4 percent….”

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“Cyprus’s passage of an unprecedented levy on bank deposits was in doubt as euro-area finance ministers responded to criticism of the measure by loosening their stance on how the money is raised.

Cypriot President Nicos Anastasiades warned German Chancellor Angela Merkel in a call yesterday that he may not be able to win passage, said a Cypriot government official. Finance chiefs from the 17-member euro area meanwhile urged Cyprus to spare small-scale savers, while maintaining their demand that 5.8 billion euros ($7.5 billion) be drawn from bank accounts in exchange for a 10 billion-euro bailout.

“I don’t think about plan Bs,” French Finance Minister Pierre Moscovici said in Paris today. “We’re in a plan A. Everyone has to assume his responsibilities.”

The Mediterranean island nation’s banks and stock exchange will remain closed at least until March 21 amid speculation lawmakers may postpone the vote that’s planned for later today. The raid on bank accounts sparked outrage when Cypriots woke March 16 after the marathon talks in Brussels to find bank transfers blocked.

Finance ministers backtracked on the levy’s structure, which initially called for a 6.75 percent tax on deposits under 100,000 euros and 9.9 percent over that amount. The levy should now be more progressive, though must yield the same amount.

“Things were confused” after the measures was announced, Moscovici said. “The perception was confused. Once this confusion was born, we had to revisit the decision.”

The euro, which tumbled 0.9 percent yesterday, traded little changed today at $1.2930 as of 10:50 a.m. Frankfurt time. European stocks fell for a third day, while Spanish bond yields rose.

Merkel’s Advice…”

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“Europe’s car-sales contraction accelerated in February as a steepening decline in Germany, the region’s biggest market, hurt previously resilient Volkswagen AG (VOW), Bayerische Motoren Werke AG and Daimler AG.

Registrations dropped 10 percent to 829,359 vehicles last month from 923,553 a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Two-month sales fell 9.3 percent to 1.75 million cars. The decline in January amounted to 8.5 percent.
Unemployment is rising as a recession deepens in the 17 countries using the euro. General Motors Co., Fiat SpA (F) and PSA Peugeot Citroen (UG) posted the biggest sales drops in Europe last month. Declines were exacerbated in Italy, the region’s third- biggest car market, by an inconclusive parliamentary election, while government incentives in Spain failed to stem a slide in that country’s deliveries.

“This is as lousy as expected,” Gaetan Toulemonde, an analyst at Deutsche Bank AG in Paris, said by phone. “We won’t see any sign of recovery before the second half.”

The ACEA reports figures for the 27-nation European Union plus Switzerland, Norway and Iceland. Deliveries in western Europe, which excludes countries that have joined the EU since mid-2004, plunged 10 percent to 774,415 vehicles in February.
‘Mixed Picture’ ….”

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“China’s foreign direct investment rose for the first time in nine months in February, a sign confidence in the world’s second-biggest economy is improving amid optimism growth will keep rebounding.

Inbound investment gained 6.3 percent from a year earlier to $8.21 billion, the Ministry of Commerce said in a statement today in Beijing. Non-financial outbound investment in the first two months of the year surged 147 percent to $18.4 billion, exceeding inbound spending of $17.5 billion.

Newly appointed Premier Li Keqiang’s pledge to spread the wealth from the nation’s economic expansion and increase the number of middle-income citizens may support government efforts to rely more on domestic demand for expansion. Li vowed to open the economy to more market forces and strip power from the government to achieve 7.5 percent annual growth through 2020.

“China’s attractiveness remain for foreign investors, from its relatively-developed infrastructure to stable macroeconomic growth,” said Sun Junwei, a Beijing-based economist with HSBC Holdings Plc. “As the global economy recovers, China may continue to see a steady inflow of investments this year, helping the overall China recovery story.”

The benchmark Shanghai Composite Index (SHCOMP) rose 0.1 percent as of 11:04 a.m. local time. China’s money-market rate dropped to the lowest level in more than a week on speculation increased investment from abroad will boost cash in the financial system.

Global Economy

Data today on investor sentiment in Germany, industrial production in Italy and U.S. housing starts will be among the latest readings on the strength of the global economy as European officials seek to contain a financial crisis in Cyprus….”

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“Australia’s dollar traded 0.3 percent from a five-week high after central bank Deputy Governor Philip Lowe defended a higher exchange rate and savings level, saying they helped stabilize the economy.

The so-called Aussie rose against the yen after minutes of the Reserve Bank of Australia’s March 5 meeting said there are signs the economy is responding to low interest rates. New Zealand’s currency slid against most major peers after Finance Minister Bill English said the currency is overvalued and he expects interest rates to stay lower for longer.

“The deputy governor is sounding the victory bell on inflation in the mining boom,” said Andrew Salter, a currency strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “We managed to come through the boom without an excessively high level of inflation. It’s hard to see a long- term short position in the Australian dollar bearing any fruit,” he said referring to bets that an asset will decline.

The Australian currency fetched $1.0386 as of 4:50 p.m. in Sydney from $1.0402 yesterday. It touched $1.0415 on March 15, the highest since Feb. 5. The Aussie added 0.3 percent to 99.28 yen. New Zealand’s kiwi weakened 0.2 percent to 82.55 U.S. cents. It gained 0.3 percent to 78.91 yen.

The RBA’s Lowe said a stronger currency and higher savings rate have helped contain inflation and allowed lower interest rates even as the mining industry boomed.

“These factors have helped Australia to digest a huge investment boom without generating substantial imbalances in the economy,” he said today in Sydney.

RBA Policy

“The market will certainly interpret the comments in a positive light,” said ANZ’s Salter. “They will encourage the market to continue pricing in a normalization of policy in Australia.” ANZ expects the RBA to hold benchmark borrowing costs unchanged in April.

Interest-rate swaps data compiled by Bloomberg show traders see a 18 percent chance the RBA will cut the benchmark rate at the next meeting on April 2….”

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