Bloomberg News

Top Stories: Business and Finance

January 03, 2012

Jan. 3 (Bloomberg) -- The following are the day's top business stories:

1. Fed Officials Will Make Public Own Forecasts for Key Rate at Next Meeting 2. Stocks, Commodities Gain on Outlook for Global Manufacturing; Dollar Drops 3. World's Biggest Economies Face $7.6 Trillion Bond Tab as Rally Seen Fading 4. El-Erian Says There's No Appetite to Raise Global Rates in 2012: Tom Keene 5. Regulators Fleeing Ratings Dodd-Frank Banned Embrace No-Risk Greek Bonds 6. Buffett Playing `Defense' No Match for S&P 500 Index's Flat Line in 2011 7. Sears Debt Distressed as Investors Reject Cost-Cut Plan: Corporate Finance 8. Intel Confronts Qualcomm in Las Vegas for Future of Mobile Computing: Tech 9. Tiffany Most at Risk to Luxury Slowdown With Exposure Outside U.S.: Retail 10.GE Leads $620 Billion in 2012 Maturing Debt as Yields Rise: Credit Markets 11.Smallest S&P 500 Gain Since '05 Seen by Strategists After U.S. Beats World 12.Federal Reserve Open Market Committee Meeting Minutes for Dec. 13 (Text)

1. Fed Officials Will Make Public Own Forecasts for Key Rate at Next Meeting

Federal Reserve officials will for the first time make

public their own forecasts for the federal funds rate at their

Jan. 24-25 meeting, according to minutes from last month´s

Federal Open Market Committee released today. FOMC

"participants decided to incorporate information about their

projections of appropriate monetary policy" into their Summary

of Economic Projections starting with their next meeting, the

minutes said. The move marks another stride toward greater

transparency under the chairmanship of Ben S. Bernanke. By

releasing their forecasts, central bankers are likely to alter

expectations for the timing of the first increase in their

benchmark rate, which has been kept near zero since December

2008. Last month, Fed officials repeated their view that

economic conditions would warrant "exceptionally low levels for

the federal funds rate at least through mid-2013." "A number of

members indicated that current and prospective economic

conditions could well warrant additional policy accommodation,"

the minutes said. Those members also decided that "any

additional actions would be more effective if accompanied by

enhanced communication" about the FOMC´s longer- run economic

goals and policy framework.

2. Stocks, Commodities Gain on Outlook for Global Manufacturing; Dollar Drops

Stocks surged, driving the Standard & Poor´s 500 Index to a

two-month high, and commodities climbed on signs of increasing

manufacturing output around the world. The dollar weakened and

U.S. Treasuries fell. The S&P 500 rallied 1.7 percent to

1,278.42 at 2:15 p.m. in New York and reached the highest level

since the end of October. The Stoxx Europe 600 Index added 1.percent and closed at a five-month high. The Dollar Index fell

0.8 percent, while 10- year Treasury yields increased six basis

points to 1.94 percent. Oil rose to a six-week high above $hird

straight day. Financial, industrial and commodity shares led

the S&P 500´s gain as the Institute for Supply Management´s

factory index topped estimates and government data showed

construction spending grew at more than twice the forecast

rate. Factory output in Australia grew for the first time in

six months and reports in the past two days showed a pickup in

Chinese and Indian manufacturing. "You´re starting to see

people want to take more risks," Frank Ingarra, who helps

manage the Can Slim Select Growth Fund at Greenwich,

Connecticut-based NorthCoast Asset Management LLC, said in a

telephone interview. His firm oversees $1.4 billion.

"Manufacturing data has been pretty decent."

3. World's Biggest Economies Face $7.6 Trillion Bond Tab as Rally Seen Fading

Governments of the world´s leading economies have more than

$7.6 trillion of debt maturing this year, with most facing a

rise in borrowing costs. Led by Japan´s $3 trillion and the

U.S.´s $2.8 trillion, the amount coming due for the Group of

Seven nations and Brazil, Russia, India and China is up from

$7.4 trillion at this time last year, according to data

compiled by Bloomberg. Ten-year bond yields will be higher by

year-end for at least seven of the countries, forecasts show.

Investors may demand higher compensation to lend to countries

that struggle to finance increasing debt burdens as the global

economy slows, surveys show. The International Monetary Fund

cut its forecast for growth this year to 4 percent from a prior

estimate of 4.5 percent as Europe´s debt crisis spreads, the

U.S. struggles to reduce a budget deficit exceeding $1 trillion

and China´s property market cools. "The weight of supply may be

a concern," Stuart Thomson, a money manager in Glasgow at Ignis

Asset Management Ltd., which oversees $121 billion, said in a

Dec. 28 telephone interview. "Rather than the start of the year

being the problem, it´s the middle part of the year that

becomes the problem. That´s when we see the slowdown in the

global economy having its biggest impact."

4. El-Erian Says There's No Appetite to Raise Global Rates in 2012: Tom Keene

Policy makers are unlikely to raise borrowing costs in

2012, with benchmark rates to stay at or close to zero in the

U.S. and Europe, according to Pacific Investment Management

Co.´s Mohamed A. El-Erian. Pimco advises investors stay in the

five- to nine-year range in bonds for safety and to earn

income, El-Erian, chief executive and co-chief investment

officer of the world´s biggest manager of bond funds, said in a

radio interview today on "Bloomberg Surveillance" with Tom

Keene and Ken Prewitt. "You´ll see policy rates in the U.S. and

Europe floored at or near zero," Newport Beach,

California-based El-Erian said in the interview. "I don´t think

there will be any appetite or need to raise interest rates in

the U.S. and Europe." The Federal Reserve has said it will keep

its target rate for overnight loans between banks between zero

and 0.25 percent through mid-2013, and is now selling $billion of its short- term Treasuries and reinvesting the

proceeds into longer-term government debt in a program traders

dubbed Operation Twist.

5. Regulators Fleeing Ratings Dodd-Frank Banned Embrace No-Risk Greek Bonds

U.S. regulators, required by Congress to remove credit

ratings from banking rules, have devised a plan anchored in a

Paris-based group´s rankings that assign zero risk to most

European government debt. The Federal Reserve, the Federal

Deposit Insurance Corp. and the Office of the Comptroller of

the Currency proposed rules last month to set bank capital

levels using classifications made by the Organisation for

Economic Co-operation and Development. The intergovernmental

group, two-thirds of whose members are European Union

countries, considers most EU sovereign bonds risk-free,

including those of Greece and Portugal. The proposal undermines

the intent of the 2010 Dodd-Frank Act, which sought to

eliminate the use of ratings by companies such as Standard &

Poor´s and Moody´s Investors Service that are paid by the

entities they rate, said Luigi De Ghenghi, a partner at law

firm Davis Polk & Wardwell LLP in New York. Regulators are just

replacing one set of conflicts with another, he said. "The OECD

represents the member governments, so there´s an inherent

conflict of interest there, too," said De Ghenghi, a member of

the firm´s financial-institutions group. "The regulators were

dealt bad cards when they were asked to come up with

alternatives to credit ratings. It´s almost impossible to find

something where there are no conflicts of any kind."

6. Buffett Playing `Defense' No Match for S&P 500 Index's Flat Line in Warren Buffett, the billionaire investor who has

highlighted his record of beating the market when stocks

languish, oversaw a decline last year as the Standard & Poor´s

500 Index ended unchanged. Buffett´s Berkshire Hathaway Inc.

slipped 4.7 percent in 2011. It was the second time since Omaha, Nebraska-based firm underperformed an S&P either declined for the year or rose less than percent. Berkshire gained about 17-fold in the 21-year period,

while the index has nearly quadrupled. "There´s going to be a

big asterisk by this year," said David Rolfe, chief investment

officer of Berkshire investor Wedgewood Partners Inc. "In tough

markets it´s a strong performer. There´s no doubt it has broken

the mold this year," he said in an interview last month.

Buffett´s personal holdings of Berkshire lost about $2 billion

last year. In September, the 81-year-old Buffett initiated the

first share-repurchase program in four decades as Berkshire´s

chief executive officer. On a quarterly average basis, the

stock price slipped in the three months ended Sept. 30 to the

lowest relative to book value in more than 20 years.

7. Sears Debt Distressed as Investors Reject Cost-Cut Plan: Corporate Finance

Sears Holdings Corp.´s bonds have crossed into distressed

territory as its plan to close as many as 120 locations may

fail to stem more than four years of declining sales and

prevent it from using up cash as profitability wanes. The extra

yield investors demand to hold Sears´ debt instead of

Treasuries has breached the 10 percentage-point level traders

consider as distressed, double the spread at the end of 2010.

Credit-default swaps on its finance unit are at about the

highest level since 2008, as Fitch Ratings cut Sears´ rating

and Standard & Poor´s gave the retailer a "negative" outlook.

The Hoffman Estates, Illinois-based company, which sells goods

from cosmetics to washing machines at Sears and Kmart stores,

is struggling to create a plan to restore profitability. Shares

of the largest U.S department-store chain fell 31 percent last

week after Chief Executive Officer Edward Lampert announced the

cost-cutting plan Dec. 27. "The way the business is being run

now is not sustainable," Bonnie Baha, the head of the global

developed credit group at DoubleLine Capital LP, which oversees

$21 billion, said in a telephone interview from Los Angeles.

Sears has put itself "in a precarious position, especially

absent a focused business plan, about what sort of a retail

operation they want to be," she said.

8. Intel Confronts Qualcomm in Las Vegas for Future of Mobile Computing: Tech

A looming clash between Intel Corp. and Qualcomm Inc. will

take center stage at the Consumer Electronics Show next week in

Las Vegas, with both chipmakers seeking to control the future

of mobile devices. Qualcomm Chief Executive Officer Paul Jacobs

will demonstrate notebook computers based on his company´s

chips on Jan. 10, highlighting a push into an area dominated by

Intel. Later that day, Intel CEO Paul Otellini will take the

same stage to announce phones featuring his chips, renewing a

decade-long push to get into a market that Qualcomm controls.

The popularity of smartphones and tablets has put the companies

on a collision course. The market for mobile-phone chips will

grow 40 percent to $29.9 billion by 2015, according to the

Linley Group. With more consumers using handheld devices as

their primary access to the Internet, Intel can´t afford to

stay only in the realm of personal computers, said Jim

McGregor, chief technology strategist for research firm

In-Stat. "For Intel, it´s a `we have to be there,´" he said.

"Never bet against a computing device that fits in your pocket.

I do more on my smartphone than any other device."

9. Tiffany Most at Risk to Luxury Slowdown With Exposure Outside U.S.: Retail

With Europeans and Asians buying fewer $65,000 diamond

necklaces and $10,000 amethyst earrings, Tiffany & Co. may be

in for a less-than-glittering 2012. No U.S. luxury merchant is

more exposed internationally. The world´s second largest

jeweler generates almost half its sales outside of the

Americas, up from 38 percent in 2006, according to data

compiled by Bloomberg. Tiffany´s foreign sales are concentrated

in Europe, which is facing a sovereign debt crisis, and Asia,

where China´s growth is slowing. "It´s better to be a little

more conservative for those other parts of the world," said

David Schick, an analyst with Stifel Nicolaus & Co. in

Baltimore who recommends holding the shares. "You are seeing

more volatility in the financial markets. It´s not

confidence-inspiring for bigger-ticket spending. That tells you

not to expect too much in the top line for Tiffany." Tiffany´s

revenue was $3.09 billion in 2010 and is estimated at $3.billion in 2011, according to the average of 20 analysts

surveyed by Bloomberg.

10.GE Leads $620 Billion in 2012 Maturing Debt as Yields Rise: Credit Markets

General Electric Co. and Ally Financial Inc. lead U.S

companies that have $620 billion of bonds and loans coming due

in 2012 as borrowing costs start to rise from record lows with

the economy strengthening. GE, the world´s largest maker of jet

engines, faces $78.7 billion of notes maturing in 2012, the

most of any U.S. company, according to data compiled by

Bloomberg. Detroit-based Ally has $11.7 billion that needs to

be repaid, the largest requirement of any speculative-grade

issuer. Borrowers must refinance $498 billion of debt in billion in 2014, Bloomberg data show. Yields on

company notes are climbing from all-time lows in August as

economists forecast the U.S. economy will accelerate to 2.percent in 2012 from 1.8 percent in 2011. While Europe´s debt

crisis persists, JPMorgan Chase & Co. and Bank of America

Corp., the biggest corporate bond underwriters, predict at

least $900 billion of issuance in 2012 after offerings exceeded

$1 trillion in each of the past three years. "Near-term

refinancing risks are very manageable," said Kevin Cassidy, an

analyst at Moody´s Investors Service in New York who tracks the

amount of debt that companies have to repay. "Although

maturities look to be easily surmountable, Europe is a wild

card," he said in a telephone interview.

11.Smallest S&P 500 Gain Since '05 Seen by Strategists After U.S. Beats World

Forecasters at securities firms are more conservative on

U.S. stocks than any time in seven years, predicting the

Standard & Poor´s 500 Index will rise 6.4 percent in 2012 as

budget deficits around the world limit gains. The benchmark

gauge will climb to 1,338 after it was virtually unchanged in

2011 and the U.S. beat every equity market in the developed

world except Ireland, according to the average forecast of strategists tracked by Bloomberg. That´s the smallest predicted

return since 2005. Adam Parker of Morgan Stanley, whose

estimate for 2011 proved the most accurate among current

analysts, forecast a loss of 7.2 percent as Europe´s debt

crisis will keep volatility above historical levels. Bulls at

Oppenheimer & Co. and Citigroup Inc. say record profits and

improving U.S. economic data will propel stocks after the S&P

500 advanced 86 percent since March 2009. Parker and UBS AG´S

Jonathan Golub say the prospect of a global slowdown will curb

investors´ appetite for equities and keep the rally from

gaining momentum. "The question we pose is, `Do you want to be

buying it now?´" Golub, the New York-based chief U.S. market

strategist at UBS, said in a phone interview on Dec. 29. "A

year is a long time. Will there be better entry points than

right now? We think the answer is yes."

For the complete stories summarized here, and for more of the day's top news, see TOP <Go>.

-0- Jan/03/2012 19:35 GMT


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