N. Korea May Adopt China-Style Economic Reforms, Mobius Says

December 22, 2011, 9:54 PM EST By Saeromi Shin

(Adds comments from Mobius in fourth paragraph, S&P’s ratings outlook in sixth paragraph. See {EXT2 } for more on North Korea and Kim Jong Il’s death.)

Dec. 23 (Bloomberg) -- North Korea’s leadership transition will probably be smooth and its new rulers may be willing to embrace economic reforms similar to those in China, said Franklin Templeton Investments’ Mark Mobius.

A regime change in the communist nation is unlikely to have “immediate substantive impact” on other North Asian financial markets, Mobius, executive chairman of Templeton Emerging Markets Group, wrote in his blog. The company is still holding on to South Korean equities, he said in an interview with Bloomberg Television today.

South Korea’s Kospi slumped 3.4 percent on Dec. 19 after the death of North Korean leader Kim Jong Il sparked concerns over succession in the totalitarian nation. The gauge has risen 5.1 percent since then. The focus now is on his son Kim Jong Un, who is thought to be in his late 20s and was named to senior military and party posts last year.

“In some ways, the break from the past could be a good signal so I’m more optimistic than pessimistic,” Mobius said in the TV interview. “I think the transition is going to be rather smooth.”

Franklin maintained its holdings of South Korean equities this week, Mobius said.

S&P Outlook

Standard & Poor’s said the ratings outlook for South Korea is stable and reflects expectations that political risk in North Korea won’t deteriorate markedly from current levels during period of leadership transition.

North Korea’s state media called for citizens to “loyally follow” Kim Jong Un, according to a Dec. 19 statement. The country will become more open under the new leader compared with the rule of his late father, according to almost half of South Koreans who responded to an opinion poll.

South Korean President Lee Myung Bak today lifted an emergency duty decree for all government workers except those working on diplomacy, security and public safety, said his spokesman, Choe Guem Nak.

--Editors: Darren Boey, Brett Miller

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net;

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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Asian Stocks Fall on Economic Data, Before European Debt Summit

December 08, 2011, 6:53 AM EST By Kana Nishizawa and Norie Kuboyama

Dec. 8 (Bloomberg) -- Asian stocks dropped ahead of a European summit on the region’s sovereign debt crisis, and after economic data from Japan and Australia signaled the global economy is slowing.

Tokyo Electric Power Co., the operator of the power plant at the center of the biggest nuclear disaster in 25 years, sank 11 percent after the Mainichi newspaper reported it may be effectively nationalized. LG Electronics Inc., a home appliances maker that gets more than a fifth of its revenue from Europe, fell 1.3 percent in Seoul. City Developments Ltd., Singapore’s second-biggest real-estate company, led declines among the city’s property developers after the government imposed extra taxes on purchases of residential property.

“As the European meetings get closer investors have turned cautious,” said Masaru Hamasaki, who helps oversee the equivalent of $24 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “There’s been a switch from a feeling that we were going to get some visibility on the situation to a cooler stance, where people are in a wait-and-see mood.”

The MSCI Asia Pacific Index slid 0.5 percent to 117.56 as of 8:28 p.m. in Tokyo. All but one of 10 industry groups on the measure dropped, with more than twice as many stocks falling as rising.

Japan’s Nikkei 225 Stock Average retreated 0.7 percent after machinery orders fell 6.9 percent in October from September, missing the median forecast of a 0.5 percent gain by 27 economists surveyed by Bloomberg News.

Australia’s S&P/ASX 200 index fell 0.3 percent as the nation’s employers cut 6,300 workers in November from the previous month, missing the 10,000 extra jobs forecast in a Bloomberg survey of 22 economists.

Interest Rates

New Zealand’s NZX 50 Index dropped 0.4 percent after the central bank left interest rates at a record low of 2.5 percent today and cut its economic growth predictions. South Korea’s Kospi Index declined 0.4 percent as the central bank refrained from raising borrowing costs for a sixth straight month amid a global slowdown. Hong Kong’s Hang Seng Index fell 0.7 percent, while Singapore’s Straits Times Index lost 2 percent.

The MSCI Asia Pacific Index declined 14 percent this year through yesterday, compared with a gain of 0.3 percent by the Standard & Poor’s 500 and a 12 percent slump by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.9 times estimated earnings on average, compared with 12.7 times for the S&P 500 and 10.6 times for the Stoxx 600.

Pressure Intensifies

LG Electronics fell 1.3 percent to 74,000 won in Seoul, while Hutchison Whampoa Ltd., an owner of ports in Germany, Italy and Spain, retreated 0.4 percent to HK$68 in Hong Kong.

Pressure on Europe’s leaders to halt the spread of the region’s debt crisis at a summit in Brussels this week intensified as the European Union had its AAA long-term rating put on “creditwatch negative” by S&P following a similar action on 15 euro-area governments.

German Chancellor Angela Merkel and French President Nicolas Sarkozy are expected to argue for rewriting European Union treaties to tighten control of national budgets at the meeting of euro zone leaders tonight and tomorrow.

“Investors can’t buy or sell until they see the results of the European meetings,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Stocks have been rising on expectations the European Union and the European Central Bank may take some action, but now investors need to see whether the results meet or beat expectations.”

Tepco Action

Tokyo Electric Power, known as Tepco, dropped 11 percent to 244 yen after the Mainichi newspaper said the government’s Nuclear Damage Liability Facilitation Fund may buy preferred shares worth at least 1 trillion yen ($12.9 billion) from the utility by next summer, without saying where the information came from. Most of Tokyo Electric’s management will be replaced, the report said.

City Developments sank 8.3 percent to S$9.19 in Singapore, the second-biggest drop in the MSCI Asia Pacific Index after Tepco. CapitaLand Ltd., an operator in residential and commercial properties, dropped 7.3 percent to S$2.42. Keppel Land Ltd., the real-estate unit of Keppel Corp., retreated 8 percent to S$2.42.

Singapore developers declined after the government required foreigners and corporate entities to pay an additional 10 percent stamp duty when they buy homes in the city. Permanent residents purchasing a second home as well as citizens buying their third residential property also need to pay an additional tax of 3 percent, the government said in a statement yesterday.

--With assistance from Jonathan Burgos in Singapore and Toshiro Hasegawa in Tokyo. Editors: Nick Gentle, John McCluskey

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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U.S. Stocks Decline on Economic Reports, Greece Aid Concerns

May 26, 2011, 12:24 PM EDT By Rita Nazareth

May 26 (Bloomberg) -- U.S. stocks declined for the fourth time in five days as reports showed the economy expanded at a slower rate than forecast and jobless claims unexpectedly rose, while concern grew about Europe’s debt crisis.

Dow Chemical Co., the largest U.S. chemical maker, slumped 1.4 percent, pacing declines in raw material producers as commodities fell on concern about lower demand. Walgreen Co. dropped 1.6 percent after Goldman Sachs Group Inc. cut the largest U.S. drugstore chain from its “conviction buy” list. Big Lots Inc. declined 2 percent as the discount retailer forecast earnings that fell short of analysts’ estimates.

The Standard & Poor’s 500 Index lost 0.1 percent to 1,318.57 at 12 p.m. in New York. The Dow Jones Industrial Average fell 37.92 points, or 0.3 percent, to 12,356.74. Both benchmark gauges yesterday snapped a three-day drop.

“We’ve leveled off and softened somewhat,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $53 billion. “We’ve begun to see more moderating growth. We’re not seeing a significant deterioration or acceleration in economic data. Unless we see get some resolve to the European situation, unless we get some settlement with regards to our fiscal issues here, I don’t see any imminent catalysts to power up equity prices.”

Europe Crisis

The S&P 500 fell 3.2 percent from an almost three-year high on April 29 through yesterday amid concern about Europe’s debt crisis and weaker-than-forecast economic data. Still, the benchmark gauge rose 5 percent from the end of 2010 through yesterday on government stimulus measures and higher-than- forecast corporate profits.

The U.S. economy grew at a 1.8 percent annual rate in the first quarter, less than forecast, reflecting a smaller gain in consumer spending than previously calculated. The revised rise in gross domestic product was the same as estimated last month and compared with a 3.1 percent gain in the prior quarter, Commerce Department figures showed. The median forecast of economists surveyed by Bloomberg News called for a 2.2 percent increase.

More Americans unexpectedly filed applications for unemployment benefits last week, a sign the labor market is struggling to gain momentum. Jobless claims increased by 10,000 to 424,000, Labor Department figures showed. The median estimate of economists was for a drop to 404,000.

Aid Payment

Stocks extended declines after Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said the International Monetary Fund may not release its portion of a 12 billion-euro ($17 billion) aid payment to Greece next month.

“There are specific IMF rules and one of those rules says that IMF can only take action when the refinancing guarantee is given over 12 months,” Juncker said today at a conference in Luxembourg. “I don’t think that the troika will come to the conclusion that this is given,” he said.

A gauge of raw material shares in the S&P 500 fell 0.4 percent. The Thomson Reuters/Jefferies CRB Index of 19 raw materials slumped 0.4 percent. Dow Chemical slid 1.4 percent $35.68.

Walgreen slumped 1.6 percent to $43.44. The stock is still a “buy” at Goldman Sachs.

Big Lots Slump

Big Lots declined 2 percent to $31.70. The discount retailer forecast second-quarter earnings of 38 cents to 48 cents a share, falling short of the average analyst estimate of 52 cents, according to Bloomberg data.

Computer Sciences Corp. lost 15 percent, the most in the S&P 500, to $37.59. The provider of computer services to companies and U.S. government agencies said profit for fiscal 2012 will be as much as $4.80 a share. Analysts projected $5.07, according to the average of estimates compiled by Bloomberg.

Goldman Sachs Group Inc. lowered its year-end forecast for the Standard & Poor’s 500 Index to 1,450 from 1,500 and reduced its 2012 earnings projection, citing weakening economic estimates. S&P 500 companies will post combined profit of $104 a share next year, compared with Goldman Sachs’s prior estimate of $106, according to David Kostin, the New York-based equity strategist. He maintained his 2011 earnings forecast for the S&P 500 of $96 a share.

“Our adjustments reflect a combination of developments including recently lowered GDP growth estimates by our economists in the U.S. and Asia and a significant increase in our Brent oil price forecast,” Kostin wrote today in a note to clients.

Microsoft Rallies

Microsoft Corp. rose the most in the Dow, adding 2.7 percent to $24.85. Shares of the world’s biggest software maker are “statistically” cheap, Mario Gabelli, chairman of Gamco Investors Inc., said in an interview on Bloomberg TV. Separately, Greenlight Capital Inc. President David Einhorn called for Microsoft’s board to replace Chief Executive Officer Steve Ballmer, saying the company suffers from “Charlie Brown management.”

Tiffany & Co. increased 9.5 percent to $76.66, the biggest gain in the S&P 500 Index. The world’s second-largest luxury jewelry retailer posted first-quarter profit that beat analysts’ estimates and raised its full-year forecast as sales did better in Japan than expected after the earthquake.

NetApp Inc. rose 7.4 percent to $55.54. The data-management company forecast adjusted earnings of as much as 57 cents a share for the first quarter, compared with the average estimate of analysts surveyed by Bloomberg of 50 cents a share.

Dividend Payers Outperform

Companies in the S&P 500 that raised dividends for at least 25 years are beating the benchmark gauge, reversing a trend started in August when the Federal Reserve signaled additional economic stimulus.

The S&P 500 Dividend Aristocrats Index is again beating the S&P 500 after an almost six-month period of underperformance. Since the middle of February, the index of dividend payers rose 3.1 percent through yesterday and the S&P 500 fell 0.9 percent. The ratio between the two gauges rebounded to 0.41 from a one- year low of 0.39 on Feb. 14. It had fallen from a record of 0.42 on Aug. 26 through mid-February. During that period, the “aristocrats” surged 18 percent as a group, trailing a 27 percent gain for the S&P 500.

“Once the Fed signaled QE2, we had a resumption of the risk rally,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., which oversees $3.65 trillion as the world’s largest asset manager. “Now that we’re coming to an end of QE2 and there’s concern about a slower pace of economic growth, investors are turning more defensive. These more stable, higher- dividend paying companies are the beneficiaries of that.”

--Editors: Joanna Ossinger, Michael Regan

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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U.S. Index of Leading Economic Indicators Falls 0.3%

May 19, 2011, 11:05 AM EDT By Alex Kowalski

(Updates with economist comment in fourth paragraph.)

May 19 (Bloomberg) -- The index of U.S. leading indicators fell in April after nine months of gains, depressed by a pickup in jobless claims that reflects temporary setbacks including auto-plant shutdowns.

The Conference Board’s gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg News survey.

A jump in firings that moved opposite to increased hiring last month indicated unevenness in the labor market. At the same time, Federal Reserve policy makers noted during their April meeting that job prospects “continued to improve gradually” and economic growth will persist at a “moderate pace.”

“We’re probably not going to see the same pace of contraction as the first quarter, but the economy certainly has throttled back a little bit,” said Charmaine Buskas, chief strategist at 4Cast Inc. in New York. “The leading indicators are not only giving back some of the gains that we’ve seen over the last months, but we’re also seeing temporary setbacks, partly as a result of some shutdowns from the auto sector.”

Estimates of 58 economists in the Bloomberg survey ranged from a 0.2 percent decrease to a 2.0 percent increase.

Six of the 10 indicators in the leading index subtracted from the total, led by jobless claims, which took away 0.33 percentage point.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,342.75 at 10:02 a.m., after the report was released. The yield on the benchmark 10-year note, which moves inversely to prices, rose to 3.22 percent from 3.18 late yesterday.

Jobless Claims

In April, the four-week moving average of jobless claims rose four out of the five weeks. The Labor Department attributed the gains to unusual events that seasonal variations failed to take into account, including a spring break holiday in New York, a new emergency benefits program in Oregon and auto-plant shutdowns caused by the disaster in Japan.

A report today showed fewer Americans than forecast filed applications for unemployment benefits last week, adding to evidence that temporary events caused last month’s surge.

Jobless claims declined by 29,000 to 409,000 in the week ended May 14, according to Labor Department figures. Economists in a Bloomberg News survey projected a drop to 420,000.

The gauge of supplier deliveries and the number of building permits also subtracted from the Conference Board index total.

The spread, or difference between the overnight federal funds rate and the yield on the 10-year Treasury note, boosted the index by 0.35 point.

Seven of 10

Seven of the 10 indicators that make up the Conference Board’s leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times.

The Conference Board estimates new orders for consumer goods, bookings for capital goods and the money supply adjusted for inflation.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.1 percent after a 0.2 percent gain the prior month.

The coincident index tracks payrolls, incomes, sales and production -- the measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions.

The gauge of lagging indicators increased 0.5 percent last month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.

U.S. Economy

The U.S. economy grew less than forecast in the first quarter as government spending declined by the most since 1983 and household purchases cooled. Gross domestic product rose at a 1.8 percent annual rate from January through March after a 3.1 percent pace in the final three months of 2010, the Commerce Department said April 28.

Target, the second-largest U.S. discount retailer, posted a 2.7 percent gain in first-quarter profit that beat analysts’ projections, bolstered by the credit-card business. Still, Chief Executive Officer Gregg Steinhafel said a faster expansion would help boost consumer purchases.

“While the U.S. economy is showing some signs of improvement, we expect the recovery will continue to be slow and uneven, particularly for more moderate-income households,” Steinhafel said May 18 in a call with analysts. Those households “need to see further improvements in housing and income growth before they’ll have the capacity to meaningfully increase the discretionary spending.”

--With assistance from Chris Middleton in Washington. Editor: Kevin Costelloe

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Treasuries Drop Amid Mixed Economic Data, $72 Billion Debt Sales

May 14, 2011, 12:49 AM EDT By Susanne Walker

May 14 (Bloomberg) -- Treasuries fell for the first time in five weeks as mixed economic data and a rebound in commodities cooled demand for the safety of U.S. debt.

U.S. 10-year note yields touched the lowest since December yesterday on speculation that inflation may have peaked after the Labor Department reported the consumer price index rose 0.4 percent in April, matching economists’ forecast. The U.S. sold $72 billion in notes and bonds this week and will auction $11 billion in Treasury Inflation Protected Securities next week. The Federal Reserve will release minutes of last month’s policy meeting on May 18.

“Yields being low is because the economy is not generating enough forward momentum to suggest rising commodity prices will be passed through the underlying rate of inflation,” said Steven Ricchiuto, chief economist in New York at Mizuho Securities USA Inc. “There’s a lot of mixed data and mixed signals and it’s creating a very choppy trading environment.”

Yields on 10-year notes rose two basis points to 3.17 percent in New York, according to Bloomberg Bond Trader prices, from 3.15 percent on May 6. The yield yesterday reached 3.13 percent, the least since Dec. 8. It touched a 2011 high of 3.77 percent in February.

Yield Data

The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt known as the break- even rate, narrowed yesterday to 2.39 percentage points from 2.67 percentage points on April 11, which was the widest in three years.

“As we look back at the week and forward to the next, one begins to get the feeling that the U.S. economy is not about to run away from anyone,” Kevin Giddis, president of fixed-income capital markets at the brokerage firm Morgan Keegan Inc. in Memphis, Tennessee, wrote yesterday in a note to clients. “Some of the major issues like housing and jobs are slow to get better.”

The Standard & Poor’s GSCI Index of 24 raw materials moved up by 1.4 percent this week after dropping 11 percent last week. The Standard & Poor’s 500 Index trimmed weekly gains, dropping by 0.8 percent yesterday. The Index dropped 1.1 percent this month through May 12 as gauges of energy and raw-materials producers slumped with metal and oil prices.

Jobs Trend

A report on May 12 showed the number of Americans filing first-time claims for unemployment insurance payments fell less than forecast last week, indicating recovery in the labor market is taking time to accelerate. Applications for jobless benefits decreased 44,000 in the week ended May 7 to 434,000, Labor Department figures showed. Economists forecast 430,000 claims, according to the median estimate in a Bloomberg News survey.

A separate report on May 12 showed sales at U.S. retailers rose in April and the March gain was revised higher, sending Treasury yields higher that day.

“The consumer is still in the game,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York. “It’s not telling you the consumer is retrenching or buying everything off the shelf.”

Off the Shelf

Sales at U.S. retailers April reflected gains at service stations and grocery stores as fuel and food prices climbed.

The 0.5 percent increase was the smallest since July and followed a 0.9 percent March gain that was more than double the previous estimate, Commerce Department figures showed in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.6 percent rise. Sales excluding automobiles and gasoline increased 0.2 percent.

The consumer price index increased 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News and following a 0.5 percent advance in March, figures from the Labor Department showed in Washington. Excluding volatile food and energy, the core gauge rose 0.2 percent, also as projected.

“The inflation data was not great, but not too bad,” said Ray Remy, head of fixed income in New York at Daiwa Capital Markets America Inc., one of 20 primary dealers that trade directly with the Fed. “Most people think the economy is showing signs of life, but it’s also showing signs of troubles. It’s very mixed.”

The Fed has held its target rate for overnight lending between banks at zero to 0.25 percent since December 2008. Policy makers affirmed at their April 27 meeting the plan to buy Treasuries through June in an effort to foster faster economic growth and jobs expansion.

The U.S. sold $32 billion in three-year notes, $24 billion in 10-year debt and $16 billion in 30-year bonds this week.

--Editors: Paul Cox, Greg Storey

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net;

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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