Societe Generale Shares Rise on Takeover Report

(Bloomberg) -- Societe Generale SA, France's second-biggest bank, rose the most in five years in Paris trading on speculation that BNP Paribas SA is considering a takeover.

BNP, the country's largest bank, is holding preliminary internal discussions about a possible bid after Societe Generale's announcement last week of 4.9 billion euros ($7.2 billion) of losses from unauthorized bets, the Wall Street Journal reported. BNP said it does not comment on market rumors.

Traders speculated that President Nicolas Sarkozy's government is seeking a French partner for the bank to ward off any potential foreign bids. Prime Minister Francois Fillon told Parliament today that the government will ensure that Societe Generale remains in French hands.

``There's rumor of a bid by BNP on Societe Generale for 92 euros,'' said Constantin Salagaras, a trader at Aurel Leven Securities in Paris. ``The market is speculating on the will of Sarkozy to create a national champion.''

Societe Generale rose 10 percent to 78.45 euros in Paris, marking its biggest gain since Dec. 16, 2002 and valuing the bank at 36.3 billion euros. Societe Generale shares, down 21 percent since the start of the year, yesterday had a lower market value than Credit Agricole SA before rebounding today.

``Societe Generale is a great French bank and Societe Generale will remain a great French bank,'' Fillon told lawmakers in Paris today.

Trading Losses

Societe Generale's employee Jerome Kerviel, 31, was charged yesterday with falsifying documents, computer hacking and breach of trust by French judges.

Kerviel's unauthorized bets led to the biggest trading losses in banking history. Societe Generale said Kerviel amassed 50 billion euros in positions in European stock index futures, an amount that exceeded the company's market value.

``A takeover of Societe Generale is not impossible,'' Guillaume Tiberghien, an analyst at Credit Suisse, said in a report to clients. ``Any potential bidder would have to assess Societe Generale's risk control, assess the risk that the equity derivatives business might be damaged for the long term, assess the political and regulatory consequences of recent events for the entire banking sector.''

 

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U.S. Stocks Rise After Earnings, Durable Goods Top Forecasts

(Bloomberg) -- U.S. stocks rose for a second day, led by telephone companies and utilities, on better-than- forecast durable goods orders and earnings that topped estimates at two dozen members of the Standard & Poor's 500 Index.

Dow Chemical Co., American Electric Power Co. and Valero Energy Corp. led gains among the 30 companies in the S&P 500 that reported results since markets closed yesterday. Boeing Co. and Caterpillar Inc. climbed after the Commerce Department said orders for U.S. durable goods rose the most since July.

The S&P 500 added 1, or 0.1 percent, to 1,354.97 at 1:06 p.m. in New York. The benchmark for U.S. equities is still down 7.6 percent in 2008 on concern the collapse of the subprime mortgage market will drag the economy into recession. The Dow Jones Industrial Average rose 25.04, or 0.2 percent, to 12,408.93. The Nasdaq Composite Index decreased 6.52, or 0.3 percent, to 2,343.39, dragged down by a 2.1 percent drop in Google Inc.

``When you see a durable goods number like this and then earnings outside of the financial sector doing quite well, people are beginning to realize that perhaps the contagion effect may be somewhat limited,'' said Damon Barglow, who helps oversee $1.9 billion at Eastern Investment Advisors in Boston, in an interview with Bloomberg Radio.

Durable Goods

Index futures doubled their advances after the 5.2 percent gain in durable goods orders last month highlighted how growing overseas demand may spur manufacturing as the U.S. economy slows. The Federal Reserve is to expected to cut interest rates tomorrow in an effort to spur growth.

The S&P 500 has gained 3.5 percent from its 16-month low on January 22 after falling as much as 15 percent from its Oct. 31 record.

Fourth quarter earnings advanced 20 percent on average for the 155 non-financial companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Analysts expect the entire index to post an 18 percent average decline in profit.

Dow Chemical rose 43 cents to $38.02. The maker of 3,200 products ranging from synthetic latex to pesticides posted profit excluding some restructuring costs and other items of 84 cents, topping the 80-cent average estimate of 14 analysts surveyed by Bloomberg.

Valero, American Electric

Valero Energy Corp. climbed $5.22 to $60.12. The largest U.S. refiner posted fourth-quarter profit of $1.02 a share, topping the 59-cent average analysts' estimates compiled by Bloomberg. Earnings were buttressed by a cut in Valero's tax rate and increased use of low-grade crude oil.

Sunoco Inc., the largest oil refiner in the U.S. East, added $2.20 to $63.35. Tesoro Corp., the largest refiner in the U.S. West, gained $2.90 to $41.29. ConocoPhillips, the nation's second-biggest refiner, increased $1.18 to $77.59.

American Electric Power Co. gained 59 cents to $42.82. The biggest U.S. producer of electricity from coal said fourth- quarter profit rose 28 percent on higher power sales and a gain from the sale of a stake in a power plant. Sales rose 10 percent to $3.3 billion on higher utility rates and colder weather that increased use of electricity for heating.

Boeing, the world's second-biggest commercial airplane maker, climbed $2.34, or 3 percent, to $79.94. Caterpillar, the largest maker of bulldozers and excavators, added 72 cents to $68.93.

The dollar strengthened and yields on Treasury notes rose after the durable-goods report. Economists had forecast orders would increase 1.6 percent in December, according to the median of 64 estimates in a Bloomberg News survey.

Eli Lilly & Co. rallied 94 cents to $52.34. Excluding certain items, Lilly earned 90 cents a share, a penny higher than the average estimate of 17 analysts surveyed by Bloomberg.

 

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Durable goods orders jump, house prices slump

(Reuters) - Stronger-than-expected orders for U.S.-made durable goods in December suggested the economy retained some life and might not need a heavy dose of interest-rate cuts, even though house prices fell a record amount in November.

New orders for long-lasting goods rose 5.2 percent last month, a Commerce Department report showed on Tuesday, well above the 1.5 percent increase forecast by economists in a Reuters poll.

The surprise surge in durable goods orders helped offset a report that showed home prices in 10 major metropolitan areas fell a record 8.4 percent in the year through November.

U.S. Treasuries fell after the durables report, which contradicted weakness in other areas of the economy and undermined the argument for more aggressive interest rate cuts by the Federal Reserve. Stocks rose.

A consumer sentiment survey, meanwhile, showed confidence fell in January but by slightly less than economists had expected. The Conference Board's index of consumer sentiment fell to 87.9 from an upwardly revised 90.6 in December.

"Consumers are on the edge but haven't packed it in yet. They are worried about the up-and-down stock market, falling house value and high gasoline prices. But they still have jobs," said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania.

 

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IMF to world economy: no one escapes U.S. slowdown

(Reuters) - When the U.S. coughs, the whole world still catches cold.

"No one is exempt from a global slowdown. That is why you call it global," International Monetary Fund chief economist Simon Johnson said on Tuesday as he updated the IMF's World Economic Outlook.

"It will be very hard for even the most effective counter-cyclical policy to keep any country from having some slowdown in these circumstances," he said.

The IMF has trimmed its estimate for world growth this year to 4.1 percent from its prior outlook of 4.4 percent, with still-resilient emerging economies seen growing at a rate of 6.9 percent from 7.8 percent last year. Even growth in China will moderate from a thumping 11.4 percent in 2007 to 10 percent.

"There are obviously linkages. I think that reports of decoupling have been greatly exaggerated. It is a question of what kind of linkages," Johnson told a media briefing.

World stock markets have swung wildly since problems in the U.S. subprime mortgage market surfaced in August, sparking a global credit crunch that has yet to fully abate. Investors have bet heavily that the United States will tip into recession and drag other economies in its wake.

 

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Wal-Mart cuts prices to lure Super Bowl shoppers

(Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) said on Tuesday it is cutting prices on thousands of items by 10 percent to 30 percent this week to win sales from cash-strapped shoppers ahead of the Super Bowl.

A Wal-Mart spokeswoman did not have an exact figure on the number of items included in the price cuts but said the world's largest retailer was reducing prices on groceries, popular electronics and other items that shoppers might buy before the Super Bowl football championship game on Sunday.

Wal-Mart typically announces such widespread price cuts during the ultra-competitive holiday shopping season.

But with 2008 U.S. retail sales forecast to rise at the slowest pace in six years, retailers are turning to promotions to lure shoppers into their stores to spend their limited budgets.

Ahead of the Super Bowl weekend, Best Buy Co Inc's (BBY.N: Quote, Profile, Research) Web site is advertising no interest for three years on all Samsung flat panel TVs $999 and up, while in a similar move, Circuit City Stores Inc (CC.N: Quote, Profile, Research) is offering no interest for 36 months on TVs $999 and higher.

Wal-Mart said it is charging no interest for 18 months on purchases of $250 or more with a Wal-Mart credit card.

 

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Corn, Soybeans, Wheat Fall as Slumping U.S. Economy Cuts Demand

(Bloomberg) -- Corn and soybeans and wheat fell on speculation the U.S. economy will slide into recession, triggering a global slump and damping demand for grains and other commodities.

The Federal Reserve today cut its benchmark interest rate the most in 23 years in an effort to prevent a recession. Even after the move, U.S. equities and commodities fell. Before today, wheat prices had doubled in the past year and corn and soybean futures reached records last week.

``The projected growth in consumption of grains is in question,'' said Darrell Holaday, president of Advanced Market Concepts in Manhattan, Kansas. ``World economies are going to retract. We thought this could happen, but some thought that the rest of the world is insulated from the U.S. economy. It was a nice theory, but today, you can say that's not true.''

Corn futures for March delivery fell 4.5 cents, or 0.9 percent, to $4.9375 a bushel at 10:58 a.m. on the Chicago Board of Trade, the fifth-straight drop since the most-active futures rose to a record $5.1925 on Jan. 15. Corn gained 17 percent in 2007 after rising 81 percent in 2006 on record demand to produce ethanol and feed livestock.

Soybean futures for March delivery fell 15.75 cents, or 1.3 percent, to $12.4825 a bushel in Chicago, after last week falling for the first time in seven weeks. The price on Jan. 14 reached a record $13.415. Futures gained 78 percent last year after U.S. farmers planted the fewest acres in 12 years to sow the most corn since 1944.

Wheat futures for March delivery fell 7.5 cents, or 0.8 percent, to $9.55 a bushel in Chicago. Even with today's decline, the price has doubled in a year. Wheat reached a record $10.095 a bushel on Dec. 17 as global demand outpaced supply.

Hedge-Fund Bets

Since the end of November, hedge funds as of Jan. 16 increased bets by 44 percent that corn futures would rise, data from the Commodity Futures Trading Commission show. Funds that buy commodities in indexes raised bets 14 percent. Open interest has climbed 8.9 percent to almost 1.41 million contracts since the start of the year, the highest in more than nine months.

Funds that track commodity indexes cut bets on higher soybeans to 176,461 contracts as of Jan. 16, down 5.8 percent from a record net long position a week earlier, according to the CFTC report.

 

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Motorola May Face Razr 2 Flop as IPhone Sales Surge

(Bloomberg) -- Motorola Inc.'s Greg Brown, in his first earnings report as chief executive officer, may post disappointing sales of the Razr 2 phone after holiday shoppers flocked to Apple Inc.'s iPhone.

Motorola probably sold 2 million Razr 2s, the slimmer camera phones Brown is relying on to revive revenue, in the fourth quarter, said Lawrence Harris, a former Oppenheimer & Co. analyst in New York. Steve Jobs's Apple may have sold 2.4 million iPhones.

Harris estimated Motorola sold half as many Razr 2s over a similar period compared with the original model, whose 2004 debut started a craze for ever-thinner phones. Motorola, which fell to third place among global phone makers last year, may drop to fourth in 2008.

``The Razr 2 didn't set the world on fire and it won't be a phenomenon like the original one,'' Harris said.

Motorola, based in Schaumburg, Illinois, may say tomorrow that net income fell 59 percent to $257.9 million in the fourth quarter, according to the average of nine estimates compiled by Bloomberg. Sales probably slid 18 percent to $9.65 billion, the survey showed.

Jennifer Erickson, a spokeswoman for Motorola, declined to comment on sales or earnings before the report.

Motorola shares dropped 22 percent last year on the New York Stock Exchange, while Apple more than doubled. Motorola fell $1.48, or 11 percent, to $11.85 at 9:34 a.m. New York time, the lowest in more than four years. The Standard & Poor's 500 Information Technology Index dropped 4.3 percent.

No. 1 No Longer

The fading popularity of the original Razr probably cost Motorola its position as the top-selling handset at AT&T Inc., the biggest U.S. phone-service company, for the first time since 2004, said Piper Jaffray & Co. analyst Michael Walkley. Motorola probably ceded that spot to Samsung Electronics Co.'s Sync video and camera phone last quarter, he said.

The 47-year-old Brown, who took over as CEO after Ed Zander's Nov. 30 resignation, has to improve marketing to show consumers the new phone is a step up, Walkley said. The $300 Razr 2 is too similar to the first, which is available for free with a contract, said Minneapolis-based Walkley, who called Razr 2 holiday sales ``disappointing.''

Motorola probably sold about 3 million Razr 2s since the debut in the second quarter, Harris said. The original sold almost 6 million over a similar span after its release, and 12 million in the first year, he said.

Too Similar

The Razr 2 is thinner, has a better camera and can store more songs than the original. Consumers haven't bought the phones as quickly as Motorola shipped them, building inventories at carriers and retailers, Walkley said.

``The Razr 2 doesn't stand out the way the original did,'' said Brad Williams, who helps manage $11 billion as an analyst at MTB Investment Advisors in Baltimore. His firm sold its Motorola shares last year. ``You go to a store and there are less-expensive products that look strikingly similar to the Razr 2.''

The $399 iPhone, which blends Apple's best-selling iPod music player with an e-mail-equipped handset, is stealing sales from Motorola. The iPhone broke AT&T's opening-weekend records and sold more in three days after its June 29 debut than the original Razr did in its first month.

Last week, Jobs, 52, said Apple has sold more than 4 million of the phones. Analysts including UBS AG's Benjamin Reitzes in New York said Apple probably sold 2.4 million last quarter.

Nokia Oyj, Samsung and Sony Ericsson Mobile Communications Ltd. also introduced phones superior to the Razr 2 in features, according to a Jan. 4 analysis by Cowen & Co. That may help Sony Ericsson overtake Motorola as the No. 3 handset maker in the world this year, according to Cowen analysts including Matthew Hoffman in Boston.

 

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UBS, Bank of America Recommend Buying U.S. Stocks

(Bloomberg) -- Investors should buy U.S. stocks in the ongoing market selloff, according to UBS AG and Bank of America Corp. strategists, because share prices already reflect a slowdown in earnings growth.

``We understand the macro challenges facing the economy and many uncertainties, but we believe this level of pessimism is unwarranted,'' UBS equity strategist David Bianco wrote in a note to investors today. ``The market is panicked over a substantial and secular drop in earnings power.''

More than half of the world's biggest stock indexes fell into a bear market this week on mounting concern the U.S. is headed for a recession. The Standard & Poor's 500 Index fell 0.7 percent to 1,316.01 as of 11:06 a.m. in New York today, even after the Federal Reserve lowered its benchmark rate in its first emergency move since 2001.

The U.S. index has fallen 16 percent from a record reached on Oct. 9.

``It makes sense for investors to consider increasing their exposure to equities'' after declines in the past 12 months, wrote Thomas McManus, chief investment strategist at Bank of America's securities unit, in a report today. He advised buying ``gingerly or aggressively,'' depending on each investor's goals.

 

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Bank of America, Wachovia Profits Slump on Writedowns

(Bloomberg) -- Bank of America Corp. and Wachovia Corp., the second- and fourth-largest U.S. banks, said earnings plummeted after more than $6 billion of combined mortgage- related writedowns.

Bank of America's fourth-quarter profit dropped 95 percent to $268 million, while net income at Wachovia was almost wiped out, plunging 98 percent to $51 million. Bank of America gained 15 cents to $36.12 at 10:25 a.m. in New York trading. Wachovia declined $1, or 3.3 percent, to $29.78 after the Federal Reserve lowered its benchmark interest rate in an emergency move for the first time since 2001.

Kenneth Lewis, Bank of America's chief executive officer, and Kennedy Thompson, his counterpart at Wachovia, said in separate statements today that the companies were battered by the fixed-income markets. Lewis said he expects economic growth to ``be anemic at best in the first half.'' Bank of America's reserve to cover losses from loans and debt securities doubled to $3.3 billion in the fourth quarter.

Bank of America and Wachovia, both based in Charlotte, North Carolina, reported the lowest quarterly profits in at least six years during the country's worst housing slump in more than two decades. The world's biggest banks and brokerages have disclosed more than $120 billion of writedowns and credit losses since June, mostly caused by the collapse of the subprime mortgage market.

``The revaluation of assets that initially looked like a very exclusive subprime problem is emerging to be something much more,'' Kevin Fitzsimmons, analyst at Sandler O'Neill & Partners in New York, said today in an interview.

Missed Estimates

Bank of America earned 5 cents a share in the fourth quarter, excluding merger and restructuring costs and a gain from the sale of Marsico Capital Management LLC, falling short of the 21-cent average estimate from 21 analysts surveyed by Bloomberg. Wachovia's profit of 8 cents a share, excluding takeover-related costs, also missed analysts' estimates.

National City Corp., Ohio's largest bank, reported a loss, and Fifth Third Bancorp and KeyCorp, the state's No. 2 and No 3 lenders, said profit declined.

``Our fourth-quarter results were severely impacted by ongoing dislocations in capital markets and the slowing economy,'' Lewis said in today's statement. He added that the company is ``cautiously optimistic about 2008.''

Bank of America increased its bet on the faltering U.S. economy earlier this month by agreeing to acquire Countrywide Financial Corp., the largest U.S. mortgage lender, for about $4 billion in stock.

Countrywide Financial

Countrywide would give Bank of America a 25 percent share of U.S. mortgage originations, Lehman Brothers Holdings Inc. analyst Jason Goldberg wrote in a Jan. 11 report to clients. Almost two-thirds of Countrywide's loan originations in 2007 came from mortgage brokers and other third parties, a practice that Lewis has said Bank of America expects to curtail.

The corporate and investment bank lost $2.76 billion, compared with a profit of $1.4 billion a year earlier, and earnings at the consumer and small-business banking unit declined 28 percent to $1.87 billion. Lewis has scaled back investment banking by cutting 1,150 jobs since October and putting the hedge-fund brokerage unit up for sale.

First Drop Since 2001

``Investment banking isn't Ken Lewis's core competency and he doesn't need it,'' said Bruce Foerster, a former Lehman Brothers managing director who's now president of the South Beach Capital Markets advisory firm in Miami.

Bank of America's total fourth-quarter revenue fell 31 percent to $12.7 billion, while non-interest costs rose 15 percent to $10.1 billion. Return on equity, a gauge of how effectively the company reinvests profit, declined to 11.1 percent for the year from 16.3 percent in 2006.

Full-year earnings dropped for the first time in Lewis's tenure since the 60-year-old CEO succeeded Hugh McColl Jr. in 2001, with net income sliding 29 percent to $15 billion.

Wachovia's fourth-quarter earnings were the lowest since 2001 after $1.7 billion of writedowns, including $1 billion for subprime mortgage-related holdings. The company's corporate and investment bank had a loss of $596 million after the costs.

``The continued turmoil in the capital markets and the dramatic change in the credit environment diminished our fourth- quarter results substantially,'' Thompson said in the statement.

Fourth-quarter revenue fell 17 percent to $7.2 billion. Return on equity was 0.28 percent, down from 13.1 percent a year earlier. The net interest margin, the difference between what Wachovia pays for deposits and what it charges on loans, narrowed to 2.88 percent from 2.92 percent on Sept. 30.

 

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U.S. Stocks Pare Declines; Exxon Retreats, Financials Gain

(Bloomberg) -- U.S. stocks fell for a fifth day, the longest streak of declines in 11 months, as growing concern about the slowing economy prompted the Federal Reserve to cut interest rates by the most in two decades.

The Standard & Poor's 500 Index pared its worst loss in five years after some investors were persuaded the Fed would continue cutting rates after its emergency reduction today. Exxon Mobil Corp., Microsoft Corp. and AT&T Inc. led declines. Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. helped carry financial shares higher for the first time in three days after the Fed cut its benchmark rate by 0.75 percentage point.

``It shows that they're trying to stem the negative sentiment that's out there that there's a recession under way,'' said Ed Peters, chief investment officer at PanAgora Asset Management in Boston, which manages $25 billion.

The S&P 500 retreated 23, or 1.7 percent, to 1,302.19 at 12 p.m. in New York. The Dow Jones Industrial Average decreased 179, or 1.5 percent, to 11,920.3. The Nasdaq Composite Index lost 56.66, or 2.4 percent, to 2, 283.36. About three stocks fell for every two that rose on the New York Stock Exchange.

Growing evidence that the U.S. economy is slowing has dragged more than half of the world's biggest stock indexes into a bear market and wiped out $7.3 trillion in global stock-market value this year.

`Increasing Downside Risks'

The Fed cited ``a weakening of the economic outlook and increasing downside risks to growth'' for its first emergency cut since 2001. Policy makers weren't scheduled to gather on rates until Jan. 29-30.

The U.S. market was closed for Martin Luther King Day yesterday. Stocks posted the steepest weekly drop since July 2002 last week after lower-than-estimated home construction, retail sales and manufacturing reinforced speculation that the economy is contracting.

Exxon, the largest U.S. crude producer, decreased $2.48 to $82.60. Chevron Corp., the second biggest, lost $2.96 to $80.50. Crude oil dropped to a six-week low, falling $2.39 to $88.18 a barrel in New York, on concern demand will diminish in an economic slowdown.

Microsoft, the biggest software company, retreated $1.04 to $31.87. AT&T slid 78 cents to $35.33.

Bank of America

Bank of America gained 87 cents, or 2.4 percent, to $36.84 even after reporting earnings that fell 97 percent. Fourth- quarter net income slumped to $268 million, or 5 cents a share, from $5.26 billion, or $1.16, a year earlier the bank said in a statement. Excluding merger and restructuring costs and a gain from the sale of Marsico Capital Management LLC, the company earned 5 cents a share, missing the 21-cent average estimate of analysts surveyed by Bloomberg.

Wells Fargo, the biggest bank on the West Coast, rose $1.35 to $26.83. JPMorgan, the third-largest U.S. bank, increased $1.30 to $40.89.

The MSCI World Index fell 0.6 percent. The Dow Jones Stoxx 600 Index of European shares added 2.4 percent.

The Nasdaq Composite today entered a so-called bear market, marked by a decline of at least 20 percent from a high. The S&P 500 and Dow average have both lost about 16 percent from their Oct. 9 records. The Nasdaq reached an almost seven-year high on Oct. 31.

Wachovia Corp., the fourth-largest U.S. bank, said profit fell 98 percent after writedowns for bad loans and mortgage- backed securities. Its shares added 15 cents to $30.95.

 

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Fed Cuts Rate 0.75 Percentage Point in Emergency Move

(Bloomberg) -- The Federal Reserve cut the benchmark interest rate by three quarters of a percentage point, its first emergency reduction since 2001, after stock markets tumbled from Hong Kong to London amid increasing signs of a U.S. recession.

The central bank cut the target overnight lending rate to 3.5 percent from 4.25 percent, the Federal Open Market Committee said in a statement in Washington. Policy makers weren't scheduled to gather until next week. It's the biggest single reduction since the Fed began using the rate as the principal tool of monetary policy around 1990.

``Broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households,'' the Fed said in a statement in Washington. The FOMC took the action ``in view of a weakening of the economic outlook and increasing downside risks to growth.''

Policy makers set aside concerns about inflation to lower borrowing costs for the fourth time since September after the unemployment rate rose, retail sales fell and stocks slumped. Chairman Ben S. Bernanke shifted the Fed's stance to a more aggressive approach in remarks this month citing a need for ``decisive and timely'' action.

The dollar slid and Treasury securities rallied after the announcement. Stocks slumped as some investors questioned whether the Fed would be able to avert a recession, and then recouped more than half the losses. The Standard & Poor's 500 Index fell 0.5 percent to 1,318.28 at 11:15 a.m. in New York, after dropping as much as 3.8 percent earlier.

Bear Market

Yesterday, almost half of the world's biggest stock indexes fell into a bear market as mounting concern about a U.S. recession dragged down banking and retail shares across Asia, Europe and Latin America.

``The bottom line was that financial conditions were tightening sharply'' and affecting the economic outlook, said former Fed economist Brian Sack, who is now with Macroeconomic Advisers LLC in Washington. ``The view so far has been that they're somewhat behind the curve and needed to adopt a somewhat more aggressive approach.''

The Bank of Canada, in a scheduled meeting, lowered its main interest rate by a quarter point today to 4 percent and signaled it will act again to shield Canada from the U.S. slowdown. The Bank of England said it has no plans to change the date of its next rate decision. The bank's policy makers are due to begin a two-day meeting in London on Feb. 7.

Paulson Reaction

Treasury Secretary Henry Paulson called the Fed's move ``very constructive'' and a ``confidence builder,'' when asked about the Fed decision after a speech in Washington. He also said it was a sign to the rest of the world that the U.S. central bank is ``nimble.''

Paulson, charged by President George W. Bush last week with negotiating a fiscal stimulus plan with lawmakers, said a package ``must be enacted quickly.'' White House spokeswoman Dana Perino told reporters that the administration hasn't ruled out a proposal exceeding $150 billion.

The Fed Board of Governors, in a related move, lowered the so-called discount rate on direct loans to commercial banks by a 0.75 percentage point to 4 percent. The Chicago and Minneapolis district banks had requested the reduction, the Fed said.

``Appreciable downside risks to growth remain,'' the Fed statement said. ``The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.''

Futures Contracts

Traders had anticipated 75 basis points of rate cuts this month, according to futures prices on the Chicago Board of Trade.

The FOMC vote was 8-1, with St. Louis Fed President William Poole preferring to wait until the regularly scheduled meeting. Fed Governor Frederic Mishkin was absent and not voting.

Fed officials met by video conference at about 6 p.m. yesterday, spokeswoman Michelle Smith said. Mishkin was traveling and unable to participate, she said. The voting members were the same as in 2007 because the presidents don't rotate in until the first regular meeting, Smith said.

Today's so-called inter-meeting rate cut is the first since Sept. 17, 2001, when the Fed lowered borrowing costs in the aftermath of the terrorist attacks six days before. That was the third emergency reduction in a year which saw the last U.S. recession.

 

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Blackouts a worry: Lehman

(Fin24) - Global analysts Lehman Brothers has expressed concern over the effect of Eskom's blackouts on infrastructure-related work in South Africa.

Wide-scale blackouts continued over the weekend as Eskom could not keep up with demand.

"Of concern are reports in the local press that the power cuts are now affecting infrastructure work related to the World Cup and industry in general," said the analysts in a research note.   

According to the energy supplier, the country needs to reduce its load demand by about 20%.
 

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Business asked to cut power use

(Fin24) - Eskom has requested that business cut its energy usage by 10% to 15%, the energy supplier said on Monday.

Speaking to reporters after meeting in Midrand with top business leaders about the energy crisis in SA, Eskom CEO Jacob Maroga said "the biggest lever we can pull is reducing demand and the discussion this morning with the key customers is how we can collaborate in reducing demand".

Maroga said "voluntary saving targets" had been discussed with the 131 executives representing 38 companies present at the meeting.

He said Eskom had been talking with business about voluntarily reductions for some time.

"In some cases we've had some support where they've voluntarily reduced where they can"

He said: "We've put to them that where it's possible they can help us in reducing voluntarily.

"The quantum we are looking at is between 10% to 15%."

Maroga said he would aspire to a 20% reduction; "but anything between 10% and 15% is something we need to aspire to in terms of reduction.

"That reduction will relieve and reduce the probability of loadshedding."

 

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Europe Starts to Feel Pinch as U.S. Slowdown Spreads

(Bloomberg) -- The European economy may be starting to suffer collateral damage from the U.S. subprime mortgage slump.

Banks are making borrowing harder, industrial production is shrinking and investor confidence is waning just as the U.S. skirts recession. With the euro's appreciation to a record hurting exports, more economists are betting the European Central Bank will be forced to lower interest rates.

``There is a clear downtrend in the economy now,'' said Michael Schubert, an economist at Commerzbank AG in Frankfurt. He revised his ECB forecast last week and predicts two cuts by October after previously projecting one in the final quarter.

The ECB has so far refused to follow the Federal Reserve and the Bank of England in lowering borrowing costs as contagion from the U.S. housing recession spreads, arguing that inflation pressures are too strong. Government and industry surveys this week may nevertheless show growth risks are mounting and finance ministers meet in Brussels today to discuss the outlook.

Europe's manufacturing and services industries probably expanded at the slowest pace since June 2005 and German business confidence fell to the lowest in two years, according to surveys of economists by Bloomberg News.

Europe's Stoxx 600 index today extended its decline to 20 percent since its 6 1/2-year high on June 1, satisfying the definition of a bear market. The euro fell to a five-month low against the yen after ECB council member Nout Wellink said yesterday that growth may slow more than officials had expected.

Credit Costs

The slowdown is undermining policy makers' hopes that the region will avoid the fallout from the subprime mortgage collapse, which drove up global credit costs.

Luxembourg Finance Minister Jean-Claude Juncker, who will chair today's talks, said Jan. 14 the European Commission may lower its growth projection for this year to 1.8 percent from 2.2 percent previously. That would be the slowest pace since 2005.

Industrial output fell enough in November for economists at Royal Bank of Scotland Group Plc to declare that manufacturing has slipped into its first recession since 2001, while investor confidence in Germany crumbled to the lowest since 1992.

European banks will make it harder for companies and consumers to get loans in the next three months, an ECB survey showed on Jan. 18.

``The days of easy credit appear to be over,'' said Martin van Vliet, an economist at ING Bank in Amsterdam. Royal Bank of Scotland publishes the manufacturing and services reports on Jan. 23 and the Munich-based Ifo institute releases business confidence figures a day later.

 

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Stark Says Growth Will Hold Up, ECB Ready to Act on Inflation

(Bloomberg) -- European Central Bank Executive Board member Juergen Stark said the bank still expects the economy to expand around 2 percent this year and remains ready to raise interest rates to counter inflation.

``We're sticking to our assessment that, based on current data, growth will be around potential in 2008,'' Stark said in an interview in Viernheim, Germany, today. ``I want to repeat that we have said that we will do what is needed to avoid so-called second-round effects. We are ready to act.''

ECB President Jean-Claude Trichet threatened to raise rates on Jan. 10 if unions push through bigger wage demands to compensate for faster inflation. Since then, several ECB policy makers have expressed concern that economic growth may slow more markedly as the U.S. economy teeters on the brink of recession.

Stark said while risks to the growth outlook ``are pointing downward,'' even a more pronounced slowdown wouldn't necessarily damp inflation.

``Price and wage stickiness in Europe is considerably more pronounced than in other regions, for example the U.S., so that a possible growth slowdown does not automatically lead to a drop in the inflation rate.''

 

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ACA Customers Allow More Time to Unwind Default Swaps

(Bloomberg) -- ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month's grace to unwind $60 billion of credit-default swap contracts that it can't pay.

ACA, under the control of the Maryland Insurance Administration, extended an agreement that waives collateral requirements, policy claims and termination rights until Feb. 19, the New York-based company said in a statement on Business Wire late yesterday.

The insurer is working with its trading partners ``to develop a permanent solution to stabilize its capital position,'' according to the statement.

Standard & Poor's cut ACA's rating 12 levels to CCC last month, casting doubt on the company's guarantees and triggering collateral requirements. ACA, which lost 97 percent of its market value in the past 12 months, caused Merrill Lynch & Co. to write down $1.9 billion of securities last week and Canadian Imperial Bank of Commerce to sell more than C$2.75 billion ($2.7 billion) in stock to cover writedowns.

Bond insurer shares plunged last week and credit-default swaps rose to a record on concern the companies may be unable to meet their obligations as the subprime-mortgage securities and collateralized debt obligations they guarantee slump in value.

Ambac Financial Group Inc., the second-largest bond insurer, had its AAA credit ranking cut to AA by Fitch Ratings. Both Ambac and its larger rival, MBIA Inc., are under threat of losing the top grades from Moody's Investors Service and S&P, a move that would throw doubt on the ratings of $2.4 trillion of securities.

An after-hours call to ACA last night by Bloomberg News wasn't immediately returned.

Derivative Contracts

``ACA is an important case to follow because it shows how the banks' react to fast-deteriorating counterparty creditworthiness,'' said Toby Nangle, who helps oversee $37 billion as head of global aggregate business at Baring Asset Management in London.

The bond insurers, also known as monolines, guaranteed $127 billion of CDOs backed by subprime-mortgage securities as of June 30, according to S&P. CDOs are created by packaging debt or derivatives into new securities with varying ratings.

Most of those guarantees are in the form of derivatives. Unlike insurance, these contracts are required to be valued at market rates. Derivatives are contracts whose value is derived from assets including stocks, bonds, currencies and commodities, or from events such as the weather or changes in interest rates.

South Dakota Bonds

ACA was founded in 1997 by former Fitch executive H. Russell Fraser, who left the ratings company in 2001 as it shifted focus to structured finance from municipal bonds.

Fraser said his idea was to start an A rated municipal bond insurance company to guarantee a new crop of borrowers he sometimes called ``the cream of the crap.'' ACA's larger competitors such as Ambac and MBIA had enough cash to get the top AAA ratings on their insured bonds.

ACA backed $51.5 million of bonds sold to finance the construction of a jail in Pinal County, Arizona, and $4.7 million of bonds for the city of Deadwood, South Dakota.

CDOs were created by Wall Street by repackaging assets such as mortgage bonds and buyout loans into new obligations for sale to institutional investors. The insurers agreed to pay CDO holders, many of them banks that created the securities, in the event of a default.

CDO Downgrades

The tipping point came last year when the three major rating companies downgraded thousands of CDOs. Ratings on more than 2,000 CDOs were cut in November alone, according to a Dec. 13 UBS AG research report.

Maryland Insurance Administration held off filing delinquency proceedings last month while ACA sought capital. ACA was required under its credit-default swap contracts to post collateral if its rating fell below A-.

ACA gained 2 cents, or 4 percent, to 48 cents in over-the- counter trading on Jan. 18 in New York.

``The monolines are dead, their business model is dead,'' said David Roche, head of investment consultancy Independent Strategy in London. ``The government is going to have to recapitalize this industry or there will be communities in the U.S. where they can't even flush their toilets'' because they can't afford the services.

 

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Crude Oil Falls as Equities Tumble on U.S. Recession Concerns

(Bloomberg) -- Crude oil fell to a one-month low as stock markets tumbled in Asia and Europe on concern the U.S. will lead a global economic slowdown.

Oil, down more than 11 percent from its $100.09 a barrel record on Jan. 3, led a decline across commodities markets as gold and copper also fell. The MSCI World Index, a measure of global stock prices, slipped 1.6 percent today. Slower growth may cut demand for energy and metals.

``The market is concerned about a recession,'' Thina Saltvedt, an analyst at Nordea Bank AB in Oslo, said today in a telephone interview. ``You will see an effect on demand in the first half of the year.''

Crude oil for February delivery declined as much as $1.90, or 2.1 percent, to $88.67 a barrel in electronic trading on the New York Mercantile Exchange. That's the lowest since Dec. 12. It was at $88.85 at 1:46 p.m . London time. The contract expires tomorrow.

The more active March contract fell $1.49, or 1.7 percent, to $88.43 a barrel at 1:50 p.m. London time. There will be no settlement prices today as the exchange's floor trading session is closed for the Martin Luther King Day holiday.

``Oil prices have lost ground this morning as Asian stock markets plunge lower,'' said Robert Laughlin, a senior broker at MF Global Ltd. in London.

Brent crude for March settlement fell as much as $1.68, or 1.9 percent, to $87.55 a barrel on the ICE Futures Europe exchange. The contract traded at $87.96 in London at 1:51 p.m. local time.

OPEC Waits

OPEC, the producer of more than 40 percent of the world's oil, hasn't yet made a decision on whether to raise output at its Feb. 1 meeting, the United Arab Emirates oil minister told reporters in Abu Dhabi today.

``We are going to meet in February and we will have so many options available,'' Minister Mohammed al-Hamli said. ``We will explore all options. There is a disconnect between the fundamentals and the price.''

Prices advanced earlier after Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said yesterday there is no need for the Organization of Petroleum Exporting Countries to raise output when it meets Feb. 1.

OPEC is ``reluctant to open its taps too wide, especially with a weakening U.S. economic outlook,'' the London-based Centre for Global Energy Studies said in a monthly report today. ``Ministers might veer in the opposite direction and cut production.''

Mexico, the third-largest supplier of crude to the U.S. in 2006, stopped shipments yesterday morning after strong winds and heavy rains shut terminals.

 

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Vale in Xstrata Talks, Says No `Concrete Results'

(Bloomberg) -- Cia. Vale do Rio Doce, the world's largest iron-ore producer, confirmed it's in talks with Xstrata Plc.

No ``concrete results'' have been reached, Vale said today in a statement. The Rio de Janeiro-based company said it's also studying other possible acquisitions. Vale is prepared to bid as much as $90 billion in cash and stock to buy Zug, Switzerland- based Xstrata, Valor Economico newspaper reported today.

Chief Executive Officer Roger Agnelli, who wants Vale to overtake BHP as the world's biggest mining company, is already spending $59 billion over five years to expand in Canada, Mozambique, Australia and China. Rio Tinto Group rejected a takeover bid by BHP last month that threatens to match Vale's iron-ore output.

BHP's three-for-one share offer for Rio added ``momentum'' to mining mergers, and Xstrata is ``perfectly positioned'' to benefit, Xstrata Chief Executive Officer Mick Davis said Dec. 6. Davis has developed the company's copper and nickel mining capacity through acquisitions including the $16.2 billion purchase of Canada's Falconbridge Ltd. in 2006.

Vale is also expanding into nickel, coal, copper and fertilizers. The company bought Canadian nickel producer Inco Ltd. for $17.4 billion in 2006 to become the second-largest producer of the stainless-steel ingredient. Vale has operations adjacent to Xstrata in Canada's Sudbury basin and on the French- controlled Pacific island of New Caledonia.

 

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U.K. to Back Northern Rock Debt in Plan to Spur Sale

(Bloomberg) -- The U.K. government, struggling to find a buyer for Northern Rock Plc, said it will guarantee a sale of bonds backed by the bank's home loans and gave bidders two weeks to come forward with proposals.

The mortgages, consumer loans and some investment-grade securities of the Newcastle, England-based bank would be packaged as debt and sold to investors, the Treasury said today. Bids based on the new funding plan must be submitted by Feb. 4.

Northern Rock rose as much as 55 percent in London trading on speculation the proposal will revive interest among potential buyers such as Richard Branson's Virgin Group Ltd. Northern Rock sparked the first run on a U.K. bank in a century when it sought aid from the Bank of England in September. Borrowings have since swollen to about 24 billion pounds ($47 billion), hampering a sale and forcing the government to consider nationalization.

``It seems a very reasonable solution for Northern Rock,'' said Simon Maughan, an analyst at MF Global Securities Ltd. in London who has a ``neutral'' rating on the stock. ``The problem comes when the competition cries foul.''

Northern Rock rose 21.75 pence, or 34 percent, to 86.25 pence by 12:35 p.m., valuing the bank at 363 million pounds.

Brown, Darling

U.K. Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling have been accused of ``dithering'' by opposition lawmakers for failing to prevent the run on Northern Rock. The U.K. regulatory framework, designed while Brown was running the Treasury, hampered the central bank's ability to head off the bank run, lawmakers, economists and the Bank of England's governor, Mervyn King, have said.

Brown's government has also been criticized for not making a decision earlier on the future of the bank. Darling will make a statement today on the plan and possibilities for a private sale.

``It's precisely because Gordon Brown and Alistair Darling couldn't make a decision that we are looking at public subsidy for five years to come, with no guarantee the government is going to get its money back,'' George Osborne, who speaks on finance for Britain's Conservative Party, said in an interview on BBC Radio 4's Today program.

Northern Rock, a formerly customer-owned building society whose roots date to 1850, is the U.K.'s third-biggest mortgage lender. The company, which sold shares in 1997, has 76 branches and relied mainly on money markets to finance mortgage lending.

The bank sought the government's help after the U.S. subprime mortgage crash rattled credit markets, choking off its financing. The government guaranteed the bank's customer deposits and will also back the bond sale.

Weighing Options

Northern Rock is weighing private solutions, including a bid by Virgin and a reorganization plan of its own. At the same time, concern has grown the bank may have to be nationalized as bidders struggle to secure financing to repay the Bank of England debt.

Northern Rock welcomed the authorities' preference ``to reach agreement on a private sector solution for the company,'' the bank said in a statement today. The lender said it would work with bidders and the government to develop their proposals and its own standalone plan.

A sale will have to be agreed upon in time to enable a restructuring plan to be submitted for approval to the European Union by March 17, the government said. Pending approval by the EU, the Bank of England's loans would be repaid under the plan, which was devised by Goldman Sachs Group Inc.

 

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Stocks Plummet in Germany, Hong Kong, India, Brazil in Rout

(Bloomberg) -- Stocks plunged in Germany, Hong Kong, India and Brazil, and U.S. index futures dropped on mounting speculation that the global economy is slowing and company defaults will rise.

Europe's Dow Jones Stoxx 600 Index fell the most since the Sept. 11 terrorist attacks and sank into a bear market, as Allianz SE and BNP Paribas SA slid. Hong Kong's Hang Seng Index had its biggest drop in six years after BNP Paribas said Bank of China Ltd. may write down overseas securities by $4.8 billion because of losses from U.S. subprime mortgages. Citigroup Inc. retreated in Frankfurt.

The MSCI World Index slipped 2.3 percent to 1,405.27 at 1:53 p.m. in London, extending its decline from an Oct. 31 record to 16 percent. India's Sensitive Index lost the most since 2004, while Germany's DAX slid the most since March 2003. Futures on the Standard & Poor's 500 Index sank 3.5 percent. Trading in the U.S. is closed today for Martin Luther King Day.

``It's the worst I've ever seen,'' said Johan Stein, who helps manage the equivalent of about $14 billion at Nordea Asset Management in Stockholm. ``The financial system is in terrible shape, and no one knows where this will end.''

Today's declines follow the worst week for U.S. stocks in five years after President George W. Bush's $150 billion plan to revive the economy and expectations of interest-rate cuts failed to allay recession concerns.

The risk of European companies defaulting soared to a record today on speculation credit-rating cuts at bond insurers including Ambac Financial Group Inc. may trigger forced asset sales. European Central Bank council member Nout Wellink said economic growth in the region may slow more than policy makers had expected.

Market Crisis

``This is a stock-market crisis,'' said Alberto Roldan, head of research at Inverseguros SVB in Madrid. ``Investors believe that neither a government package nor a huge rate cut is going to help evade a recession in the U.S.''

The Stoxx 600 slid 4.2 percent, extending its drop from a 6 1/2-year high on June 1 to 22 percent. A decline of more than 20 percent is the common definition of a bear market. The gauge earlier fell as much as 5.8 percent, which would have been the biggest drop in six years. France's CAC 40 lost 5.1 percent. The U.K.'s FTSE 100 sank 4 percent, and Germany's DAX slid 5.9 percent.

The VDAX-New Index, a benchmark gauge of European stock- market volatility, surged as much as 39 percent, the most since 2001. The measure of expected price swings for stocks is derived from prices paid for options on Germany's DAX.

The MSCI Asia Pacific Index lost 3.7 percent. Australia's S&P/ASX 200 Index slumped for an 11th day. Hong Kong's Hang Seng Index lost 5.5 percent. Japan's Nikkei 225 Stock Average dropped 3.9 percent as the Finance Ministry cut its evaluation of five of 11 regional economies as housing investment fell and employment worsened.

`Sharp Contraction'

The MSCI Emerging Markets Index, a global benchmark, sank 5.1 percent, extending its retreat from an October record to 19 percent.

Brazil's Bovespa index slid 6 percent, the most since February 2007. Russia's Micex Index declined 5.9 percent, the biggest drop in a year.

Allianz, Europe's biggest insurer, tumbled 8.4 percent to 122.01 euros. BNP Paribas, France's second-biggest bank, sank 6.1 percent to 65.15 euros. ING Groep NV, the biggest Dutch investment bank, declined 7.6 percent to 21.66 euros.

``The market is finally catching on to the fact that a recession will lead to a sharp contraction in earnings,'' said Jane Coffey, head of equities at Royal London Asset Management, where she helps oversee about $11 billion. ``We need to see more aggressive changes to forecasts before investors become more positive about looking through the downturn.''

Swiss Reinsurance Co. decreased 8.5 percent to 69.9 Swiss francs. UBS AG cut its share-price estimate for the world's largest reinsurer to 80 francs from 88, citing the probability of more investment losses related to credit-market problems.

Earnings Risk

``We see on-going downside risk to earnings and stock performance until we have better visibility,'' London-based analysts including Ben Cohen wrote in a report to investors.

Bank of China, which has the largest holdings among Asian banks of U.S. subprime mortgages, slid 4.7 percent to HK$3.43. The bank may write down 17.5 billion yuan ($2.4 billion) for the fourth quarter of 2007, and an equal amount for this year, Dorris Chen, a Shanghai-based analyst at BNP Paribas wrote in a note on Jan. 18.

Commonwealth Bank of Australia, the country's second largest, dropped 2.5 percent to A$51.89. National Australia Bank Ltd., the nation's largest, declined 2 percent to A$35.55.

Morgan Stanley raised its 2008 forecast for loan-loss charges at the country's major banks by 26 percent, analyst Richard Wiles wrote in a note today, citing a deteriorating global economy and ``the difficulty faced by some companies in refinancing maturing debt.''

 

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Murdoch, Packer offer $2.9 bln for Consolidated Media

(Reuters) - Lachlan Murdoch, son of media tycoon Rupert Murdoch, and Australian gaming magnate James Packer launched a joint A$3.3 billion ($2.9 billion) offer on Monday to buy out the Packer-backed publishing company Consolidated Media Holdings CMJ.AX.

The deal would mark Lachlan's first big business move since quitting his father's business in 2005, and is the second major effort by the two rival media empires to forge a venture, after backing One.Tel, a telecommunications company that collapsed in 2001 owing A$600 million.

The move comes less than three months since Packer separated his late father Kerry Packer's media business from gaming to better focus on building up the gambling operations.

The sons of the media moguls are each expected to take a 50 percent stake in the joint venture vehicle Consolidated Media, which was formed from the split late last year.

The indicative offer, which represents a 24.4 percent premium to Consolidated's last traded price, has the blessing of Consolidated's biggest shareholder -- the James Packer-backed Consolidated Press Holdings (CPH).

Consolidated Media Holdings has appointed UBS as its financial adviser.

Consolidated Media owns 25 percent of pay-TV provider Foxtel, about 27 percent of on-line job site Seek Ltd (SEK.AX: Quote, Profile, Research) and 25 percent of PBL Media. Seek rose 7.4 percent to A$7.15 on Monday.

 

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Across Asia, food is the new oil as prices surge

(Reuters) - From India to Indonesia, governments across Asia are scrambling for solutions as it dawns on them that sky-high food prices might not fall any time soon.

With food accounting for a third of China's consumer price basket and even more in some other countries, the high prices are a ticking time bomb for the region, where fuel increases periodically touch off sometimes violent protests.

"If the inflation problem gets out of hand, it could have devastating implications for not only economic but also political stability," said Yiping Huang, an economist with Citigroup in Hong Kong.

In Pakistan, where the government has blamed a shortage of flour on smugglers and hoarders, paramilitary troops have begun escorting wheat trucks to deter thieves.

Malaysia briefly rationed cooking oil this month before the government boosted supplies of subsidized oil.

In China, where inflation is at an 11-year high, the government has taxed grain exports to boost local supplies and resorted to command economy-style price controls.

 

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"Help Wanted" highlights skills drain in U.S

(Reuters) - Only half the machines are running at precision parts maker Hamill Manufacturing, nestled in the Allegheny Mountains just east of Pittsburgh, once the booming center of the U.S. steel industry.

But the factory's overcapacity is the result not of a shortage of business -- it has more orders than it can fill, despite a slowing U.S. economy -- but because of a shortage of skilled workers.

"I'd hire 10 machinists right now if I could," said John Dalrymple, president of the company, which makes high-end parts for military helicopters and nuclear submarines. "That's eight to 10 percent of our workforce."

While millions of jobs making everything from textiles to steel have moved to new powerhouses like China in recent years, precision manufacturing remains a crucial niche in the United States, one that is overworked and chronically understaffed.

And, in a bad sign for the United States and its declining economic might, that shortage of skilled workers is likely to get worse as Baby Boomers retire -- with no younger generation of manufacturing workers to take the baton.

"Our workforce is an aging workforce," said Chief Executive Jeff Kelly, whose father founded Hamill nearly 60 years ago. "There isn't a queue of people lining up to come into the industry."

Some 20 percent of small to medium-sized manufacturers -- those with up to 2,000 workers -- cited retaining or training employees as their No. 1 concern, according to a survey by the National Association of Manufacturers. The survey was carried out in 2007 but has not been published yet.

 

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Iron ore supply deficit seen in 2008: report

(Reuters) - A worldwide iron ore supply deficit of between 20 million and 25 million tonnes is likely in 2008, Credit Suisse forecast in a report on Monday, on the back of high demand from steel mills.

Iron ore miners are earmarking billions of dollars to expand mines, build new ore freighters and automate operations to dig faster and deeper to satisfy steel mills hungry for more ore.

Credit Suisse also said it expects annual term iron ore prices to rise by 55 percent versus a consensus forecast of a 35 percent hike.

Iron ore prices are set annually by the big three mining companies, Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research), Rio Tinto Ltd./Plc. (RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research) and BHP Billiton Ltd./Plc. (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research), after closed negotiations with big steel producers in Europe, Japan and more recently China.

Demand for iron ore has taken off in recent years, led by rising steel production in China, now the world's top importer.

"Despite the expected slowdowns in the U.S. and credit tightening in China, 2008 will look very similar to 2007," Credit Suisse said in a report.

It said 2007 was one of the tightest markets ever for iron ore, leaving some steel makers short of the raw material.

"We are estimating another deficit of about 20 million-25 million tonnes against seaborne trade of about 870 million tonnes," it said.

 

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Fujitsu reorganizes semiconductor operations

(Reuters) - Japanese electronics firm Fujitsu Ltd (6702.T: Quote, Profile, Research) said on Monday it would put its struggling semiconductor operations into a new unit, in a move that could smooth the way for partnerships with other chip makers.

Fujitsu's business building system chips, used in products ranging from digital cameras to supercomputers, has suffered from falling prices and the high cost of keeping up with the latest technology.

The company also said it would transfer development and test production of state-of-the art system chips to its Mie plant in central Japan from a technology centre in Tokyo, at a cost of some 10 billion yen ($94 million).

 

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Northern Rock bids deadline set

(Reuters) - Britain set a two-week deadline for a private-sector rescue of Northern Rock, as it confirmed plans to convert its almost 25 billions pounds ($49 billion) of loans to the stricken bank into bonds in a bid to smooth a deal.

The financing package will tie the government to Northern Rock, Britain's biggest casualty of the global credit crunch, for years to come.

But it also increases the prospect of a private-sector takeover, which would avoid a politically damaging nationalization for Prime Minister Gordon Brown, who has seen his popularity slump in opinion polls in recent weeks.

Details of the plan sent Northern Rock's battered shares soaring on Monday. By 1105 GMT they were up 40 percent at 90.5 pence, valuing the bank at 380 million pounds ($746 million), still down over 90 percent since the end of May.

The financing package will be available to the three front-runners for a private-sector deal -- Richard Branson's Virgin Group, a rival consortium led by investment firm Olivant, and an in-house solution under new Northern Rock management.

 

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U.S. energy chief pleads for more Saudi, OPEC oil

(Reuters) - U.S. Energy Secretary Sam Bodman repeated his plea on Monday for more oil from top exporter Saudi Arabia, undeterred by OPEC's cautious response to Washington's request so far.

Oil has fallen by more than 10 percent from a record high of $100.09 a barrel hit early this month, easing some of the pressure on OPEC to raise supplies, analysts said.

Bodman told reporters in Abu Dhabi there were short-term concerns about the performance of the U.S. economy and he was hopeful Riyadh would steer a decision to increase oil supplies at OPEC's meeting on February 1 in Vienna.

"I continue to believe in my earlier statement that we are hopeful they will increase supplies," he said. "I am of the view that there needs to be increased supply in order to call the markets of the world well supplied with oil."

Bodman, who met the Saudi oil minister at the weekend, said the United States expected oil inventories to drop in the first half of 2008 but the Saudis held "different views".

The United Arab Emirates Oil Minister Mohammed al-Hamli said OPEC would examine all options when its ministers meet.

"OPEC ... will look then at all the options," Hamli told reporters on the sidelines of a green energy conference. "There is a disconnect between fundamentals and the price."

 

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L.A. Times editor fired, "significant changes" ahead

(Reuters) - The editor of the Los Angeles Times, James O'Shea, has been fired over a budgetary dispute only 14 months after he took over the post, the newspaper said on Sunday.

O'Shea, a veteran of the Chicago Tribune who was hired by the Times in November 2006, was fired by publisher David Hiller after he refused to carry out some $4 million in cuts, said the newspaper on its Web site, citing an unnamed source. The news was first reported by The Wall Street Journal.

In a separate statement late on Sunday, the newspaper said that like all newspaper companies, it was "facing major challenges in charting a course that will be successful for the future".

"In that vein, we will be making several significant organizational changes to put us in the best position to succeed."

It said as a result of these changes, O'Shea would be leaving the newspaper, and did not elaborate further.

O'Shea's firing comes one month after the paper's parent, Tribune Co, completed an $8.2 billion buyout led by Chicago real estate tycoon Sam Zell.

The deal restructured Tribune as an employee-owned company funded largely by debt.

The Times has struggled along with other media companies in an adverse newspaper advertising environment, and has cut staff and editorial resources in recent years.

 

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U.S. Stocks Fall on Intel Forecast, Extending Global Tumble

(Bloomberg) -- U.S. stocks declined after Intel Corp.'s sales forecast stoked concern over technology profits and deepened a decline in global markets that's wiped out $2.58 trillion in value this year.

Intel, the world's largest computer-chip maker, dropped the most in five years in Nasdaq Stock Market trading after saying first-quarter sales will be as much as 6.9 percent below analysts' estimates. Exxon Mobil Corp. and Chevron Corp. led energy shares lower on the New York Stock Exchange as oil prices retreated below $90 a barrel for the first time in four weeks.

The Standard & Poor's 500 Index lost 12.7, or 0.9 percent, to 1,368.25 at 11:04 a.m. in New York, below its Aug. 16 trading low. The Dow Jones Industrial Average slipped 75.43, or 0.6 percent, to 12,425.68. The Nasdaq Composite Index sank 47.9, or 2 percent, to 2,369.69. Asia's regional benchmark fell to its lowest since August, while European shares slid to a 16-month low. Indexes in Russia, Japan and Hong Kong all dropped by more than 3 percent.

``It's obviously treacherous out there, and Intel did no favors with their earnings announcement,'' said Kurt Brunner, who helps manage $1.5 billion at Swarthmore Group Inc. in Philadelphia. ``There's not a whole lot of places to hide, and the consumer looks weak right now.''

The S&P 500 has dropped 6.8 percent so far this year, while the Dow average is down 6.3 percent and the Nasdaq Composite has lost 11 percent. Technology shares, which helped lead the market higher last year, have retreated 12 percent as a group in 2008 for the worst performance among 10 industries.

Losses were limited today as JPMorgan Chase & Co. and Wells Fargo & Co. posted results that topped analysts' estimates and Oracle Corp. agreed to buy BEA Systems. Four stocks retreated for every three that rose on the NYSE.

Consumer prices rose at a slower pace in December, signaling inflation may decelerate after rising in 2007 by the most in 17 years.

Intel Forecast

Intel tumbled $2.86, or 13 percent, to $19.83. First- quarter sales will rise to as little as $9.4 billion, the chipmaker said yesterday after the close of trading, less than the $10.1 billion estimate of analysts surveyed by Bloomberg. Lehman Brothers slashed its price estimate on the stock by 23 percent to $23.

Advanced Micro Devices Inc., the second-largest maker of computer processors, lost 16 cents to $5.96.

Apple Inc. dropped $10.23 to $158.81. The shares slumped for a second day after new products failed to impress investors yesterday.

Oil fell below $90 a barrel for the first time in four weeks in New York after a Energy Department report showed supplies rose more than expected.

Oil Drops

Exxon, the largest U.S. oil company, declined $2.79 to $86.23. Chevron Corp., the second-biggest, lost $2.74 to $85.53. ConocoPhillips, the second-largest U.S. refiner, retreated $2.66 to $77.95.

Ambac Financial Group Inc. plunged $6.05, or 29 percent, to $15.09. The second-largest bond insurer will slash its dividend 67 percent and raise more than $1 billion in new capital to preserve its AAA credit rating. Ambac and rival MBIA Inc. are under scrutiny by ratings companies and regulators after their guarantees on collateralized debt obligations and bonds linked to subprime mortgages began plunging in value.

Oracle Corp., the world's third-biggest software maker, slid 4 cents to $21.27 after agreeing to buy BEA Systems Inc. for $8.5 billion. Oracle will buy the San Jose, California-based software maker for $19.38 a share in cash, 24 percent above yesterday's closing price. Oracle capitulated to BEA's board's demands for a higher price after BEA rejected a $17 bid in October. BEA added $2.97 to $18.55.

 

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Boeing delays 787 by three more months

(Reuters) - Boeing Co (BA.N: Quote, Profile, Research) said on Wednesday it would push back first test flight and deliveries of its 787 Dreamliner by about three months, as it struggles with production of the new, carbon-fiber airplane.

The delay is the second major setback for the program in three months, after announcing a six-month delay in October.

Only a month ago Boeing's commercial airplane chief assured Wall Street that the plane was on track to meet its revised schedule.

Boeing said on Wednesday the first test flight of the plane would now take place around the end of the second quarter, compared with its previous target of near the end of March.

First deliveries of the plane are now scheduled for early 2009, rather than its previous estimate of late November or December this year.

Chicago-based Boeing said the new delay would not have a significant effect on 2008 results, but it would update its financial forecasts for this year when it reports quarterly earnings on January 30.

It plans to provide financial forecasts for 2009 when it reports first-quarter earnings at the end of April. The new delay is likely to have a greater impact on 2009, as that is when deliveries of the 787 are now scheduled to start.

 

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Consumer prices data open door to rate cut

(Reuters) - Consumer prices rose modestly in December while industrial production was flat, leaving the door open for the Federal Reserve to slash interest rates later this month to shore up an economy that some fear is on the verge of a recession.

The reports released on Wednesday also showed consumer prices shot up last year at the fastest rate in 17 years, driven by soaring energy costs, while manufacturing growth was the weakest since 2003.

The data "underlines our view that we're on the razor's edge here, that we could be headed into recession," said Mike Schenk, senior economist with Credit Union National Association in Madison, Wisconsin.

Stock markets were mixed, with technology shares hurting after a disappointing earnings report from sector bellwether Intel Corp. Bond prices weakened while the dollar's value declined against other major currencies.

The Consumer Price Index, the most broadly used gauge of inflation, rose 0.3 percent in December, slightly ahead of economists' forecasts for a 0.2 percent rise, the Labor Department report showed.

Still, core prices that strip out volatile food and energy items rose 0.2 percent last month - in line with forecasts - following a 0.3 percent November increase.

For the full year, CPI jumped 4.1 percent, well ahead of the 2.5 percent increase posted in 2006 and the largest 12-month rise since a 6.1 percent increase in 1990. Core prices were up 2.4 percent for the full year, following a 2.6 percent pickup in 2006. That was the smallest 12-month rise in core prices since a 2.2 percent increase in 2005.

 

Read more at Reuters

Williams-Sonoma Shares Fall Most in 5 Years on Lower Forecast

(Bloomberg) -- Williams-Sonoma Inc., the U.S. gourmet-cookware retailer, fell the most in five years in New York trading after reducing its fourth-quarter profit forecast on an unexpected decline in holiday sales.

Fourth-quarter earnings per share, excluding some items, will probably be $1.12 to $1.15, compared with an earlier forecast of no less than $1.20, the San Francisco-based retailer said today in a statement. Sales at Williams-Sonoma's stores open more than a year fell 0.4 percent for the nine weeks through Dec. 30, the company said.

Customer visits to home-furnishings stores slowed more than Williams-Sonoma expected, and 2008 may be ``increasingly challenging,'' Chief Executive Officer Howard Lester said in the statement. The retailer cut prices and offered cheaper shipping at its Pottery Barn home-furnishings unit during the holidays to lure shoppers discouraged by falling house prices.

``Home furnishings retailers in general were highly promotional this holiday period,'' Laura Champine, a New York- based analyst with Morgan Keegan Inc. said in an interview Jan. 11.

Williams-Sonoma declined $2.30, or 10 percent, to $19.90 at 9:53 a.m. in New York Stock Exchange trading. It was the biggest decline since July 2002.

Three analysts surveyed by Bloomberg estimated an average gain of about 0.8 percent in comparable-store sales during the November-December period. For the fourth quarter, 21 analysts expected profit of $1.20 a share, on average.

 

Read more at Bloomberg

More power cuts on the cards

(Fin24) - Power cuts resumed on Monday and would continue nationally for the rest of the week, Eskom said.

Eskom's media desk said some areas might experience power cuts up to twice a day, for up to two and a half hours at a time.

Eskom needed to reduce demand for electricity in order to stabilise the electricity system nationally, the power utility's statement said.

Power cuts resumed on Saturday after Eskom experienced technical difficulties at generating units, coupled with a low reserve margin.

The utility called on all consumers to use electricity sparingly to reduce the number of power cuts.
Read more at Fin24

The AltX acquisitors

(Fin24) - Recent listings on the JSE's AltX exchange are taking advantage of their new firepower as listed entities to consolidate the lower end of their respective markets.

Companies ranging from call-centre business Dialogue Group to engineering technology business Ansys, biometrics company Ideco, consumer electronics company Ellies, and managed telecoms player Huge Group have announced acquisitions since late last year.

Meanwhile others, like cellular least-cost router TeleMasters and applications software business Dynamic Visual Technologies are trading under cautionary, the former since January 10, and the latter, since January 3.

Although Vox Telecom is not currently trading under cautionary, it has been highly acquisitive, buying 12 companies in the past 18 months.

Its most recent purchases were of Absa's internet customer base, and complementary business Storm Telecom. Vox is likely to be a player in other sector consolidation opportunities that may arise.

In the most recent of the AltX company acquisitions, Dialogue announced on January 11 that it would pay at least R47.5m in cash and shares for a company called Verge, a consultancy and provider of business process outsourcing services to the public sector, from Simeka Group.

Dialogue said this was in line with its expansion strategy and desire to further penetrate the public sector. Dialogue already owns 50% of one of Verge's businesses, Sibize International, and is buying the other half as part of this transaction. It is also buying various outsourcing contracts, the price of which will be determined at a later stage.
 

Read more at Fin24

Platinum miners soar on JSE

(Fin24) - A record platinum price hit on Monday underpinned a robust performance among platinum mining stocks on the JSE, giving the bourse an extra boost and helping it close 1.61% higher.

By the end of trade, the platinum mining index had advanced 6.97%, and resources collected 2.28%. The gold mining index was only a mere 0.09% in the black though. Banks and financials gained 1.84% and 1.44% respectively, and
industrials recovered 0.85%.

The rand was bid at R6.74 to the dollar from R6.79 when the JSE closed on Friday, while gold was quoted at $902.50 a troy ounce from $891.45/oz at the JSE's last close.

During the day, gold hit a record high of $914.40/oz, while platinum reached new highs of $1,590/oz.

"The JSE is up, but off its best levels. It has been quite an ironic day where the gold price hit an all time high, but there was a fluctuation in gold shares with a disappointing performance by gold shares relative to the huge gain in the gold price," said a Johannesburg-based equities trader.

He added that platinum shares "just exploded" as a result of the new record platinum price, and gains in heavyweights like Anglo American and BHP Billiton lifted the JSE higher.
 

Read more at Fin24

Back in the swing of things

(Fin24) - The festive season has come to an end and it's back to business as usual in the South African corporate world.

For starters, four JSE-listed companies and one AltX-listed company are holding their annual general meetings (AGMs) this week.

JSE-listed financial services company AfroCentric Investment Corporation formerly known as WB Holdings, had mixed results in 2007 as far as its share price was concerned. The share price rose to a high of 445c in April but went down to 220c in August and September after opening the year around 325c. The share price has since recovered and is currently trading around the 275c mark. The recovery should please the directors and the shareholders alike.

At the beginning of the year, Petmin's share price slumped to 390c and according to Numis Securities, the company was ripe for the picking. This is despite an acquisition spree which included a 25% stake in Kermas Group and a 75% stake in the Veremo project in late November. However, the slump hasn't discouraged the directors from anticipating a strong growth for the company until 2012. 

Diversified mid-tier mining group Metorex has been very active of late and its offer to Copper Resources Corporation (CRC) has hogged the business headlines in the first week of the new year.

With nothing concluded on the proposed deal thus far, the offer has again been extended, this time to January 18. The AGM on Wednesday gives shareholders a perfect platform to pose questions they might have on the deal.

Property loan-stock company Redefine Income Fund has had a good run so far and this should boost shareholders' confidence for the year ahead. With Redefine's distributions increasing by 20% late in 2007, the company has outperformed the sector.

 

Read more at Fin24

Rand remains on front foot

(Fin24) - The South African rand remained on the front foot in late trade on Monday on the back of a surging bullion price and a weaker dollar which is being hit by fears over 4Q US bank earnings this week that could show even larger-than-anticipated losses because of subprime exposure.

By 15:55 the rand was bid at R6.7270 to the dollar from its previous close of R6.7400. It was bid at R10.0318 to the euro from a previous R9.9834 and at R13.1909 against sterling from R13.2024 before.

The euro was bid at $1.4884 from $1.4806 overnight, while gold was quoted at $906.80 a troy ounce from its previous close of $897.20/oz.

Gold rose to a fresh all-time high of $914.40 an ounce on Monday following ongoing bullish momentum from a weakening US dollar and concerns over the gloomy outlook for the US economy, traders said.

Meanwhile, Dow Jones reports that fears that fourth-quarter earnings from major US banks will show even greater than anticipated losses were helping to drive the dollar lower in Europe Monday.

The rise in risk aversion is helping to push the yen higher across the board, while the euro is still pushing ahead on the assumption that the European Central Bank will remain hawkish, even in the face of weaker euro- zone data.

The tone for the dollar was initially set by US Federal Reserve chairperson Ben Bernanke late last week when he made it clear that the Fed is willing to cut interest rates by as much as 50 basis points at the end of this month.

New data this week, including retail sales and producer prices, are expected to reinforce this view, with some analysts suggesting that the Fed may even cut rates before the scheduled open market committee meeting January 30.

Read more at Fin24

Pelosi and Bernanke to discuss economy

(Reuters) - Federal Reserve Chairmen Ben Bernanke will meet on Monday with House of Representatives Speaker Nancy Pelosi to discuss how they can work together to boost the U.S. economy, a spokesman for the California Democrat said.

Falling home values, higher oil prices and a decline in the stock market have raised concerns that the United States could slip into recession this year.

Pelosi will meet one-on-one with Bernanke to get his views on what steps Congress should take, as well as to let him know what ideas Democratic leaders are considering, Pelosi spokesman Brendan Daly said on Saturday.

It will be a "mutual exchange," Daly said.

Bernanke, who earlier this week sent a strong signal that the Fed was prepared to cut interest rates further to spur growth, also will speak to House Democrats at their policy retreat later this month, Daly said.

Many prominent economists believe Congress should supplement any Federal Reserve action with a temporary fiscal stimulus package that could include tax breaks.

Pelosi and Senate Majority Leader Henry Reid have asked to discuss the issue with President George W. Bush soon after he returns on Wednesday from a trip to the Middle East.

 

Read more at Reuters

Natural Gas Windfall Seen in Pricey ICE, Cheap Nymex

(Bloomberg) -- The smartest money in natural gas may get its best trade this year by exploiting the difference between London, where prices are the highest in almost two years, and New York, where the market is cheapest.

Investors should sell natural gas in London and buy contracts in New York for the summer, where prices are ``the lowest in the world,'' Goldman Sachs Group Inc. analysts wrote Jan. 11. The opportunity may become more lucrative because London gas will drop 50 percent to $4.88 per million British thermal units as imports rise and demand slows, said Jason Kenney, an energy analyst at ING Wholesale Banking in Edinburgh.

``Towards the end of the month, gas prices will start to come off,'' said John Fahy, managing director at Eras Ltd. in London, which advises energy producers including the United Arab Emirates. He expects a 50 percent decline in U.K. gas prices, similar to last year.

A drop in London would reduce power costs for consumers across Europe, where natural gas represents about one-third of all energy, estimates BP Plc. It would save money for buyers such as Ineos Group Holdings Plc, the world's third-biggest chemical company, while hurting profit at producers including BP, Exxon Mobil Corp. and Royal Dutch Shell Plc.

U.K. summer natural gas, for delivery in the six months through September this year, fell 1.5 percent to 49.75 pence a therm today, according to broker ICAP Plc. That's equivalent to $9.76 a million British thermal units. A therm is 100,000 Btus.

Exxon, BG

Exxon Mobil and BG Group Plc plan to open two liquefied natural gas terminals in the U.K. capable of increasing the nation's supply 15 percent by the end of the year. Norway's StatoilHydro ASA is working to fix the Kvitebjoern and Ormen Lange gas fields to boost shipments to England.

The end of winter will sap demand. The U.K.'s summer consumption of natural gas bottomed at 169 million cubic meters last year, 61 percent lower than the wintertime peak, data from National Grid Plc show. Average London temperatures of 16.8 degrees Celsius (62.2 Fahrenheit) in June do little to spur need for air conditioning.

Futures traders have wrongly expected London's summertime prices to be higher than New York's before. The last time was in 2002, when gas for June delivery instead plunged 39 percent on the ICE Futures Europe exchange to the equivalent of $1.73 per million British thermal units. Natural gas rose 41 percent to $3.623 on the New York Mercantile Exchange in the same period. A $10 million bet against them made a $4 million profit.

British Benchmark

British prices are the benchmark for Europe, the source of one-third of global gas production for Irving, Texas-based Exxon Mobil, the world's largest oil company, and 30 percent of supplies for The Hague-based Shell, Europe's biggest producer. Lower commodity prices reduce earnings from pumping oil and gas, Exxon's most profitable unit. Exxon made $18.3 billion from exploration and production in the first nine months of 2007, or 63 percent of its total.

Centrica Plc, the U.K.'s biggest energy supplier, benefits when falling gas prices lower the cost of generating power at the Windsor-based company. Winners also include Ineos, of Lyndhurst, England, and the British unit of Terra Industries Inc., a fertilizer maker in Sioux City, Iowa. Gas represents more than half of the raw materials used to make chemicals, according to the American Chemistry Council.

By selling gas in London and buying it in New York, investors can speculate on changes in the value of the two contracts. ICE's natural gas futures for June delivery have never expired at prices above comparable contracts in New York, Bloomberg data show. U.K. contracts, introduced in 1997, are now $1.45 per million British thermal units higher than in New York.

LNG Terminals

U.K. gas is ``overvalued,'' said Sam Shoro, a senior analyst in Sittingbourne, England, at McKinnon and Clarke Ltd., which helps advise energy buyers including Microsoft Corp. As summer approaches, the country will get more gas from Norway and Wales, where the two liquefied natural gas terminals are being completed. The plant from Reading, U.K.-based BG is slated to start imports by June 30, taking in natural gas that's been cooled to a liquid and shipped in tankers.

LNG supplies to the U.S. are declining because Asian and European customers are paying higher prices, according to the U.S. Energy Department. Asian buyers are paying more than $15 per million British thermal units this winter for LNG cargoes, Fahy said.

U.S. LNG imports in December were 0.9 billion cubic feet a day, down 47 percent from 1.7 billion a year earlier, according to Stacy Nieuwoudt, an analyst at Tudor, Pickering, Holt & Co. Securities Inc. of Houston.

 

Read more at Bloomberg

Merck, Schering-Plough's Vytorin Misses Study Goal

(Bloomberg) -- Merck & Co. and Schering-Plough Corp. said their combination cholesterol drug Vytorin did no better job of reducing the risk of stroke by clearing arteries of plaque buildup than did Zocor, an older generic medicine that forms part of Vytorin.

The study examined the carotid artery and found ``no statistically significant difference between treatment groups,'' the companies said in a release distributed today by Business Wire. If that artery is blocked, it can cut blood supply to the brain and cause a stroke. The 720-person trial, called Enhance, is looking at the highest possible dose of Vytorin for patients with a genetic predisposition to high cholesterol.

The drugs had similar safety profiles, the companies reported. The results were submitted to the American College of Cardiology for presentation to a meeting in March.

 

Read more at Bloomberg

Mine go ahead for Uranium One

(FIN24) - Uranium One, the Canada-based uranium producer with a secondary listing on the JSE, on Friday received Australian governmental approval to proceed with the establishment of a new uranium mine.

The mine will be developed at Uranium One's Honeymoon Uranium Project, near Broken Hill in South Australia, at a capital cost of A$66m or R401m.

"Construction work on infrastructure at the Honeymoon site will be carried out according to our schedule of commencing production later this year," the company was quoted as saying by the Australian Associated Press (AAP).

The mine, which was rubber-stamped by the Uranium One board in August 2006, is expected to produce up to 400 tonnes of uranium oxide annually and generate about A$40m or R243m a year in exports.

Australia's fourth uranium mine will have a life of up to seven years. With nearly 40% of the world's uranium, Australia has the potential to make a major contribution to security in global energy supplies.

"Our industry remains optimistic that, over time, it will be able to expand operations to help meet the world's clean energy needs and, at the same time, help offset the cost of structural adjustment that may accompany Australia's own efforts to deal with its greenhouse emissions," Australian Uranium Association executive director Michael Angwin told AAP.

The Australian government's approval of the Honeymoon uranium mine comes after last year's decision by Australia's new federal government to ban the construction of nuclear power reactors, but allow additional exports of uranium to other countries.

Uranium One originally expected to start off production at Honeymoon in the first quarter of 2008, but in August said this would be delayed to the second quarter after a decision to modify the technology used in the treatment plant.
 

Read more at FIN24