Business News: Google or Bust On Pay Raises

Business News: Google or Bust On Pay Raises

Google or Bust On Pay Raises

Posted: 30 Nov 2010 06:01 PM PST

Twenty Billionaires Who Started with Nothing

Posted: 23 Nov 2010 01:25 PM PST

China Takes Aim at Boeing and Airbus

Posted: 24 Nov 2010 08:00 AM PST

Obama, GOP Talk Tax Cuts

Posted: 30 Nov 2010 01:50 PM PST

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By Roger Runningen and Ryan J. Donmoyer

(Updates with issues being negotiated, timing of vote in 10th-17th paragraphs. See a primer of tax-cut issues.)

Nov. 30 (Bloomberg) -- President Barack Obama directed Treasury Secretary Timothy Geithner and budget office director Jack Lew to lead negotiations with congressional Republicans to break a stalemate on extending Bush-era tax cuts.

After meeting for almost two hours with Republican and Democratic congressional leaders at the White House, Obama said that both sides agree action is needed to extend tax cuts to middle-income families before the end of the year even as they remain divided on tax rates for the wealthiest Americans.

“There must be some sensible common ground” to resolve differences on taxes, Obama said. He said he appointed Geithner and Lew “to break through this logjam.”

Senator Jon Kyl of Arizona will represent Senate Republicans in the talks and Representative Dave Camp of Michigan, who will be Ways and Means chairman in the next session of Congress, will represent House Republicans.

Senate Finance Committee Chairman Max Baucus of Montana will represent Senate Democrats in the negotiations, Senate Majority Leader Harry Reid said. Maryland Representative Chris Van Hollen will negotiate for House Democrats.

Post-Midterm Meeting

The White House session was Obama’s first meeting with Republican and Democratic leaders since the midterm elections that put Republicans in control of the House starting in January and narrowed the Democratic majority in the Senate.

“The American people did not vote for gridlock,” Obama said. “They’re demanding cooperation and they’re demanding progress.”

The president said he expects to hold more such meetings to help create a less partisan atmosphere in Washington and address issues beyond the tax debate.

The benchmark Standard & Poor’s 500 Index fell 0.6 percent at 4 p.m. in New York, paring a larger slide after Obama announced he was assigning Geithner and Lew to lead negotiations from the White House side. The Dow Jones Industrial Average slumped 46.47 points to 11,006.02.

House Republican leader John Boehner said at the Capitol that he expects the talks with Geithner and Lew to begin today.

Negotiators must confront six pieces of a tax puzzle to complete their work. They face choices over extending lower income tax rates across-the-board or just on the first $250,000 of income. They also must decide whether to keep the 15 percent tax rate on most dividends and long-term capital gains or let them revert to higher levels and resolve a decade-long dispute over the appropriate level of taxation on million-dollar estates.

Expiring Provisions

Soon-to-expire tax incentives for parents, married couples and low-income workers also are in the mix, as is action to roll back a $66 billion alternative minimum tax increase in place for this year. Lawmakers also are struggling to restore dozens of business-related tax breaks that expired at the end of 2009, including a research credit claimed by more than 6,000 companies.

Obama and many Democrats want to retain tax cuts passed in 2001 and 2003 only on the first $200,000 annually earned by individuals and the first $250,000 earned by married couples filing jointly.

Obama has repeatedly said that the U.S. can’t afford to permanently extend the lower tax rates for those with incomes above those figures -- about 3 percent of taxpayers, or 4.5 million households.

Criticism of Priorities

Republicans want tax cuts extended permanently for all income levels, saying that raising taxes during a fragile economic recovery is a bad idea. Without action by Congress, all of the Bush-era tax cuts will expire on Dec. 31, resulting in more tax withholding from paychecks in January for millions of Americans.

After the White House meeting, lawmakers said they were discussing whether to go ahead with plans this week to hold votes on a proposal to only extend the tax cuts for the first $250,000 of income. House Speaker Nancy Pelosi earlier this month said that vote would occur this week.

“That’s not clear whether we’ll take that vote this week,” Representative John Larson, the fourth-ranking Democrat in the House, said before a meeting of House Democratic leaders. Afterward, House Majority Leader Steny Hoyer of Maryland said he hopes the House would go ahead with the vote.

In the Senate, Budget Committee Chairman Kent Conrad said he expects Senate leaders to delay a planned vote next week on the same issue. “I would give this thing a chance to work,” the North Dakota Democrat said, referring to the talks with Lew and Geithner.

Opening Positions

Both sides began the formal talks by sticking to their long-held positions. Representative Eric Cantor of Virginia, the second-ranking Republican in the House, said he will urge his party to oppose a partial extension.

“We don’t feel that there should be anyone suffering a tax-rate increase right now while we’ve got nearly 10 percent unemployment,” he said on Bloomberg Television.

Even before going to the White House, Senate Republican leader Mitch McConnell was attacking Democrats, accusing them of “clinging to the wrong priorities” after the election.

“Instead of preventing a tax hike, they want to focus on immigration” and gays in the military, McConnell said.

The Democrats’ “entire legislative plan” for the next several weeks is focused “on anything except jobs, which is astonishing when you consider the election we just had,” he said.

--With assistance from Richard Rubin, Nicholas Johnston, James Rowley, Catherine Dodge, Pete Cohn, and Traci McMillan in Washington. Editors: Joe Sobczyk, Jim Rubin.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Nicholas Johnston in Washington at njonhnston6bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

U.S. Debt Plan May Not Get Enough Votes

Posted: 30 Nov 2010 09:02 PM PST

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By Heidi Przybyla and Brian Faler

Dec. 1 (Bloomberg) -- A new plan by the co-chairmen of President Barack Obama’s deficit-reduction commission will keep their recommendation to cut Social Security and is likely to include a payroll tax holiday, according to a person knowledgeable about the panel’s work.

The proposal, to be released today, will aim to cut at least $3.8 trillion from the deficit, the target set in a Nov. 10 draft proposal, co-chairman Erskine Bowles said at a news conference yesterday. A panel vote on whether to approve a plan, which had been set for today, was delayed until Dec. 3 and Bowles said he didn’t know if members will reach agreement.

Representative Paul Ryan of Wisconsin, a Republican member of the commission, said he probably won’t support the proposal. Ryan said in an interview, “I don’t think there’s 14” votes -- the number needed among the panel’s 18 members for a plan to be sent to Congress. “And I don’t think I’ll be one of those 14,” he said.

The revised proposal may include a payroll tax holiday to win support from Democrats pressing for measures to create jobs, said the person knowledgeable about the plan. A tax holiday was proposed by an outside group led by commission member Alice Rivlin, a Democrat and former director of the nonpartisan Congressional Budget Office.

Social Security Ages

Under the earlier proposal by Bowles and panel co-chairman Alan Simpson, a Republican former senator from Wyoming, the Social Security retirement age would rise to 68 in about 2050 and 69 in about 2075.

The new plan will retain various options for eliminating tax breaks, such as the home-mortgage interest deduction, while lowering income-tax rates, the person said. The co-chairmen still were working yesterday on how deeply to cut defense spending and Medicare, the person said.

Bowles, the White House chief of staff under President Bill Clinton, said the revised plan won’t be a “watered-down” version of the Nov. 10 draft that drew criticism from Democrats and Republicans.

“The era of deficit denial in Washington is over,” Bowles said. “I don’t think there’s a soul left in American who doesn’t understand this deficit and this debt is like a cancer and it’s going to destroy our country from within.”

Ryan said the revised plan didn’t include “huge” changes from the panel leaders’ earlier draft.

Representative Jan Schakowsky of Illinois and Senate Budget Committee Chairman Kent Conrad of North Dakota, both Democrats on the panel, agreed with Ryan’s assessment that the outlook for agreement was dim.

‘Extremely Difficult’

“It appears to be true given my experience in the commission meetings thus far,” said Schakowsky. “Trying to accommodate the Democrats means that a number of things would have to be changed that would further alienate the Republicans.” Conrad said it will be “extremely difficult” to get 14 votes.

Senator Judd Gregg, a New Hampshire Republican on the panel, suggested he may support the plan. “I haven’t formally announced what I’m going to do, but I’m very impressed with the product,” Gregg said. “Obviously there are warts on everything, but anything that is bipartisan is going to have warts and this has to be bipartisan.”

He said of the panel’s leaders: “I think they’ve done an excellent job.”

The panel’s vote was delayed to give members more time to consider the revised proposal. “It’s tough to ask anybody to support something that they just got that’s this big,” said Ryan.

Bowles and Simpson spent much of yesterday meeting privately with individual lawmakers and also had lunch with Vice President Joe Biden. Bowles said they briefed him on the revised plan.

Initial Proposal

On Nov. 10, Simpson and Bowles proposed a $3.8 trillion deficit-cutting plan that would trim Social Security and Medicare, reduce income-tax rates and eliminate tax breaks including the mortgage-interest deduction. It would reduce the annual federal deficit from $1.3 trillion this year to about $400 billion by 2015 and start reducing the $13.7 trillion national debt.

The plan would raise the gas tax, slash defense spending and farm subsidies and bring down health-care costs by clamping down on medical malpractice suits.

Its release sparked instant opposition from Democrats, some Republicans and groups such as the Mortgage Bankers Association and the Aerospace Industries Association. Democratic House Speaker Nancy Pelosi of California called the targeting of Social Security and Medicare “simply unacceptable.”

Even if the panel is unable to agree on a plan, Bowles and Simpson have “made a great contribution to the debate, they’ve advanced it, they’ve sobered up Congress and the country,” Ryan said. “This was not a wasted exercise.”

The current deficit figure was 9 percent of gross domestic product, according to the CBO. Economists such as former White House budget director Peter Orszag say policy makers should aim to reduce the deficit to no more than 3 percent of GDP.

--With assistance from Peter Cook in Washington. Editors: Laurie Asseo, Don Frederick.

To contact the reporters on this story: Brian Faler in Washington at bfaler@bloomberg.net; Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva@bloomberg.net

Global Warming Skeptics Ascend in Congress

Posted: 24 Nov 2010 02:00 PM PST

States May Cap-and-Trade On Their Own

Posted: 29 Nov 2010 09:15 PM PST

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By Simon Lomax

Nov. 30 (Bloomberg) -- California, New Mexico and 10 U.S. Northeastern states may try to create a North American carbon market on their own now that President Barack Obama has given up on cap-and-trade legislation that stalled in Congress.

The emissions-trading system would be based on a planned carbon market in California, the most populous state, and an existing regional cap-and-trade program for power plants in the Northeast, according to state environmental officials. Three Canadian provinces have also shown interest in a cross-border carbon-trading system, the officials said.

“The key is to have as large and as liquid a market as possible,” John Yap, British Columbia’s climate-change minister, said in a telephone interview. Under cap-and-trade, the government creates a market for pollution rights by issuing a limited number of carbon-dioxide permits, which companies can buy and sell.

The prospects for a North American market got a boost Nov. 2 when voters in California rejected a ballot measure that would have delayed that state’s global-warming laws. Talks that began last year, as cap-and-trade legislation backed by Obama faltered in the U.S. Congress, will resume when state environmental officials meet in Washington this week.

The states and provinces weighing a unified carbon market represent about one-third of the combined $15.5 trillion U.S. and Canadian economy, according to government statistics and the International Monetary Fund.

After Republicans won control of the House and narrowed the Democrats’ Senate majority in the Nov. 2 midterm elections, Obama said cap-and-trade “was just one way of skinning the cat” and that he doubts it could pass Congress until 2013 at the earliest. In Canada, the national government has said it won’t set up its own cap-and-trade program unless the U.S. does.

Close to the Coasts

A carbon market established without the support of the U.S. and Canadian governments would probably “stick pretty close to the Atlantic and Pacific coasts and not venture too far inland,” Ethan Zindler, a Washington-based analyst with Bloomberg New Energy Finance, said in an interview.

Such a cap-and-trade system may cover more than 800 million metric tons of carbon dioxide a year, making it about one-third the size of Europe’s cap-and-trade program, according to New Energy Finance estimates.

California plans to start a cap-and-trade program in 2012. It may be joined by New Mexico and the Canadian provinces of British Columbia, Ontario and Quebec, which also have cap-and- trade laws, according to California officials. Links to the Regional Greenhouse Gas Initiative, a trading program covering 10 states in the Northeast, are also being explored, according to Mary Nichols, chairman of California’s Air Resources Board.

Not Being Alone

“Nobody, including us, wants to be alone in implementing a cap-and-trade program,” Nichols said on a conference call after the defeat of the ballot measure.

The 10 states in the Northeast have been auctioning carbon- dioxide permits, or allowances, since 2008. The Regional Greenhouse Gas Initiative’s quarterly auctions have raised $729 million so far. The next auction is scheduled for tomorrow, with results to be released Dec. 3.

Revenue from the auctions is falling because power plants are producing less electricity in the weak economy and need fewer carbon allowances. Auction revenue from the first three quarters of this year fell 18 percent and some allowances have gone unsold, according to data from the regional cap-and-trade program.

Budget Shortfalls

While most of the money from the Northeast auctions is set aside for renewable-electricity generation and energy-saving projects, New York, New Jersey and New Hampshire have used some of it to help close budget shortfalls.

The rules of the Northeast’s cap-and-trade market are scheduled for review in 2012 and “some discussions” have been held about aligning the program with the California-led system, James Brooks, air-quality director of the Maine Department of the Environment, said in a telephone interview.

Linking the regional cap-and-trade programs to function as a single carbon market would require complex negotiations on “a whole litany of issues,” Brooks said. The minimum bid for an allowance in the Northeast’s cap-and-trade program is $1.86, while California wants to set the price floor for carbon permits at $10, he said.

State officials must also weigh the support such a North American carbon market would get from newly elected governors, he said.

“Many of us will have to go back and check in with the new administrations,” Brooks said.

Republican Governors

In the U.S. Midwest, where six states have been debating whether to create their own carbon market, this month’s election will probably prevent the region from joining cap-and-trade systems on the coasts, Mike Robertson, an environmental-policy consultant with the Minnesota Chamber of Commerce, said in a telephone interview.

Of the six states in the Midwestern Greenhouse Gas Reduction Accord -- Iowa, Illinois, Kansas, Michigan, Minnesota and Wisconsin -- Democrats lost the governor’s race or control of the legislature to Republicans in five, according to data from the National Conference of State Legislatures. Many Republicans in national and state politics have opposed cap-and- trade, which they say is an energy tax in disguise.

“I don’t think the new leaders in the legislatures or in the governors’ offices will be interested in pursuing a regional cap-and-trade program,” said Robertson, who served on an advisory panel for the proposed Midwest system.

While debating the technical aspects of a North American carbon market, the state officials meeting this week are also likely to review the election results and “what they think that means within their individual states,” Doug Scott, director of the Illinois Environmental Protection Agency, said in a telephone interview.

--Editors: Larry Liebert, Steve Geimann

To contact the reporter on this story: Simon Lomax in Washington at slomax@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at LLiebert@bloomberg.net.

Cameron Backs King as WikiLeaks Cites Concern Over Inexperience

Posted: 01 Dec 2010 05:11 AM PST

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By Jennifer Ryan and Thomas Penny

Dec. 1 (Bloomberg) -- Prime Minister David Cameron backed Bank of England Governor Mervyn King today after WikiLeaks published a cable by the U.S. ambassador citing the central bank chief’s concerns that the U.K. premier lacked experience.

Cameron “thinks he’s doing a good job,” his spokesman, Steve Field, told reporters today in London. “The issue of confidence simply does not arise. My experience is the Bank of England governor makes lots of statements on economic policy. That’s what you’d expect.”

The support for King caps a week of scrutiny of the governor’s role in Britain’s political system. Policy maker Adam Posen said on Nov. 25 he was “uncomfortable” with the bank’s support for Cameron’s deficit reduction plans and former finance minister Alistair Darling cautioned the bank this week against getting too close to any political party. Former central bank policy maker David Blanchflower today called on King to quit.

U.S. Ambassador Louis Susman wrote to Secretary of State Hillary Clinton that in a Feb. 16 meeting with the governor, before the U.K. election in May, “King expressed great concern about Conservative leaders’ lack of experience,” the Guardian reported on its website yesterday, publishing the memo obtained by the WikiLeaks

website. Cameron was leader of the opposition at the time.

A Bank of England spokesman said in a telephone interview today that the governor has a very effective working relationship with both the prime minister and Chancellor of the Exchequer George Osborne.

Confidential Cable

King “opined that party leader David Cameron and Shadow Chancellor George Osborne have not fully grasped the pressures they will face from different groups when attempting to cut spending,” the Guardian cited Susman’s confidential diplomatic cable as saying.

Before the election, King lobbied publicly for a “credible” plan to curb the U.K.’s biggest peacetime deficit. On May 12, after Cameron’s Conservatives formed their coalition with the Liberal Democrats, the governor said he was “very pleased” with the new government’s budget-cutting proposals.

Posen told a panel of lawmakers led by Conservative Andrew Tyrie that he was uncomfortable with the central bank’s backing of government spending cuts in its Inflation Report in May. He said the support was “too political, too much of a statement.”

“The bank must think long and hard about what it says,” Darling wrote in the Financial Times on Nov. 29. “To become identified with one political party would be fatal to its reputation. It is imperative that the independence of the bank remain absolute.”

Bank’s Autonomy

The central bank won autonomy in setting monetary policy in 1997. Bank and government officials tended to refrain since then from commenting on each others’ policies. The bank’s authority has become entangled with government funding plans since policy makers began a program in March last year to buy gilts to stoke economic recovery.

Blanchflower wrote today on the Guardian’s website that King should resign over his remarks on the public finances. Blanchflower is a columnist for Bloomberg News and was on the bank’s rate-setting panel from June 2006 to May 2009.

King “committed the unforgivable sin of compromising the independence of the Bank of England by involving himself in the economic policy of the coalition,” Blanchflower wrote. “He is expected to be politically neutral but has shown himself to be politically biased and as a result is now in an untenable position. King must go.”

The Bank of England spokesman declined to comment on Blanchflower’s remarks.

--Editors: Craig Stirling, Eddie Buckle

To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net; Thomas Penny in London at tpenny@bloomberg.net

To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net; James Hertling in Paris at jhertling@bloomberg.net

E.ON Said to Agree Sale of 3.5% Gazprom Stake to Russia’s VEB

Posted: 01 Dec 2010 05:00 AM PST

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By Anna Shiryaevskaya and Stephen Bierman

Dec. 1 (Bloomberg) -- E.ON AG reached an agreement in principle to sell its 3.5 percent stake in OAO Gazprom to VEB, Russia’s development bank, said two people familiar with the talks.

The deal may be announced as soon as today, the two people said, declining to be identified because the talks are confidential and aren’t yet complete.

Gazprom News: {GAZP RM <Equity> CN <GO>}

--Editor: Torrey Clark, Will Kennedy.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

Dollar Defying Skeptics as Best-Returning Asset

Posted: 01 Dec 2010 04:50 AM PST

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By Wes Goodman

(Updates dollar trading in seventh paragraph.)

Dec. 1 (Bloomberg) -- The dollar proved to be last month’s best investment, beating stocks, bonds and commodities, confounding officials around the world who said Federal Reserve policies would debase the U.S. currency.

The U.S. Dollar Index, which tracks the currency against those of six major U.S. trading partners including the euro, yen and pound, rose 5.2 percent in November. The Thomson Reuters/Jefferies CRB Index of 19 commodities was little changed. The MSCI All Country World Index of stocks fell 2.2 percent after accounting for reinvested dividends. Bonds lost 1.1 percent including reinvested interest as measured by Bank of America Merrill Lynch’s Global Broad Market Index.

While German Finance Minister Wolfgang Schaeuble said Fed Chairman Ben S. Bernanke’s decision to pump $600 billion into the world’s largest economy by purchasing Treasuries was “clueless,” rising bond yields and signs of economic recovery increased the allure of U.S. assets. The gain in the Dollar Index brought its advance for the year to 4.4 percent, trailing the 5.3 percent rally in bonds, 5.5 percent for stocks and 6.4 percent jump in commodities prices.

“Strong U.S. economic figures have helped the dollar,” said Masataka Horii, one of four managers for the $35.9 billion Kokusai Global Sovereign Open fund in Tokyo, Asia’s biggest bond fund. Global Sovereign Open’s dollar-denominated holdings account for 22 percent of its total, the second-biggest position behind the 28 percent devoted to euro assets, he said.

Job Growth

U.S. central bank policy also revived speculation that inflation will accelerate at the same time that growing concerns about Europe’s sovereign debt damped demand for bonds and equities. The Labor Department may say in two days that American employers added jobs for a second month in November, according to the median estimate of economists surveyed by Bloomberg.

“The U.S. and the European economies will recover next year,” Horii said in an interview. “The dollar and the euro will start getting more attractive.”

Intercontinental Exchange Inc.’s Dollar Index rose to 81.290 yesterday from 77.266 at the end of October. Last month’s gain was the biggest since the measure jumped 5.8 percent in May. The index declined 0.4 percent at 7:43 a.m. in New York, the first drop in four days, amid speculation European Central Bank policy makers meeting tomorrow may signal their willingness to act to prevent the spread of the region’s debt crisis.

Of the 16 most-traded currencies, the greenback had its steepest gain against the euro, strengthening 7.43 percent, followed by a 7.37 percent gain versus Denmark’s krone and 6.17 percent to Norway’s krone, data compiled by Bloomberg show.

Money Printing

America’s currency rose even as Japan Prime Minister Naoto Kan said Nov. 4 the U.S. was pursuing a “weak-dollar policy” through its plan to buy Treasuries. Chinese central bank adviser Xia Bin said the same day the Fed’s policy amounted to “uncontrolled” money printing.

Speculation the Fed’s purchases of Treasuries would succeed in avoiding deflation and bolstering the recovery pushed U.S. government bonds lower, driving the 10-year yield to as high as 2.96 percent on Nov. 16 from 2.6 percent at the end of October.

The average yield to maturity on the more than 19,400 bonds in the Bank of America Merrill Lynch index rose to 2.54 percent from 2.27 percent on Oct. 31. Last month’s decline was the biggest since the index tumbled 1.5 percent in April 2004.

German bunds lost 0.2 percent, U.S. government bonds fell 0.7 percent and Japanese debt dropped 1.2 percent.

Irish Bonds

Ireland’s bonds slumped 11 percent, the biggest monthly decline since the Bank of America Merrill Lynch indexes began in 1988. The nation sought an 85 billion euro ($110 billion) bailout from the European Union and International Monetary Fund, becoming the second country after Greece to seek aid.

Corporate fixed-income securities from the U.S. to Europe and Asia declined 1 percent on average. The extra yield investors demand to own the debt instead of benchmark government bonds widened to 1.77 percentage points from 1.64 on Oct. 31.

“The euro-zone problem is an issue causing risk aversion,” said Walter De Wet, head of commodity research at Standard Bank Plc in London, a unit of South Africa’s largest lender.

The Thomson Reuters/Jefferies commodities index ended November at 301.41, after reaching a 25-month high of 320.38 on Nov. 9. Wheat was the worst performer, declining 9.3 percent, followed by a 8.9 percent drop in corn and a decline of 7.1 percent for orange juice.

Cheaper Alternative

Silver futures traded in New York led commodity gains in November, rallying 14 percent because the metal is a cheaper alternative to gold for investors and jewelers, De Wet said. Gold rose to a record $1,424.60 on Nov. 9, before ending the month at $1,386.02.

“The downside is likely to be limited from here” for commodities, De Wet said, forecasting the Fed’s stimulus package and Chinese demand will boost prices into next year. He favors gold, copper and palladium for the next 6 to 12 months.

Stocks around the world snapped a two-month gain as Europe’s debt crisis and China’s anti-inflation measures curbed demand for equities. The People’s Bank of China raised its benchmark lending and deposit rates in October for the first time since 2007.

The MSCI All Country World Index fell after returning 3.6 percent in October and 9.6 percent in September, the biggest back-to-back monthly gains since soaring 23 percent in April and May 2009.

Growth Outlook

“We should get some recovery in share markets,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages about $93 billion and is a unit of AMP Ltd., Australia’s second-largest asset manager. “There’s nothing I see to indicate a return to recession.”

The Organization for Economic Cooperation and Development said Nov. 18 the global economy will expand 4.2 percent next year instead of the 4.5 percent predicted in May. Growth will recover to 4.6 percent in 2012, the Paris-based group said in its semi-annual Economic Outlook.

Japan’s Nikkei 225 Stock Average returned 8 percent in November to 9937.04, the best gain among the world’s biggest equity markets, based on data compiled by Bloomberg. Shares advanced as the yen at a two-month low against the dollar improved the outlook for export earnings.

Komatsu Ltd., the world’s second-largest maker of construction equipment, Fast Retailing Co., Japan’s biggest clothing chain operator, and TDK Corp., the world’s largest manufacturer of magnetic heads for disk drives, each returned more than 17 percent.

Global Equities

The Euro Stoxx 50 Index, a measure of equities in nations using the euro, slumped 6.4 percent including reinvested dividends as Ireland accepted the bailout of its banking industry. Concern the debt crisis will spread to other countries sent Spain’s IBEX 35 Index down 14 percent and the FTSE/ASE 20 Index of Greek stocks to an 10.2 percent loss.

China’s Shanghai Composite Index fell for the first time in five months, losing 5.3 percent. The Standard & Poor’s 500 Index of U.S. shares returned 0.01 percent, after rising for two month.

--With assistance from Chanyaporn Chanjaroen in Singapore, Lynn Thomasson in Hong Kong, Shani Raja in Sydney and Laurie Meisler in New York. Editors: Nicholas Reynolds, Dave Liedtka

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

Japan Says &lsquo;No&rsquo; to Kyoto Extension, Wants World Treaty

Posted: 01 Dec 2010 04:37 AM PST

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By Alex Morales and Stuart Biggs

(Updates with UN carbon price in eighth paragraph.)

Dec. 1 (Bloomberg) -- Japan said it won’t help extend the Kyoto Protocol accord to curb greenhouse-gas emissions after it expires in 2012, saying instead that a new global agreement is necessary to combat climate change.

The Kyoto treaty is “outdated” because it only regulates 27 percent of global emissions, Kuni Shimada, special adviser to Japanese Environment Minister Ryu Matsumoto, said yesterday in an interview at United Nations climate talks in Cancun, Mexico.

Failing to extend Kyoto through a UN-brokered agreement may put the world’s second-biggest market for emissions credits at risk of collapse. The organization’s Clean Development Mechanism, worth $2.7 billion last year, is defined in the Kyoto accord and the credits are generated to help polluters around the world meet emissions targets laid down in the 1997 treaty.

“This is the firmest Japan has been,” Jake Schmidt, international climate policy director in Washington at the Natural Resources Defense Council, said in an interview in Cancun. “The fate of the Kyoto Protocol is going to cast a shadow over what we’re trying to do here on all the other building blocks of a climate agreement.”

The agreement negotiated in Kyoto, Japan, binds 37 developed nations and the European community to cut emissions from 1990 levels by a collective 5.2 percent in the five years through 2012. The U.S. never ratified the treaty, and developing countries such as China aren’t included.

Traders this year have sold UN credits on concern Kyoto may not be extended.

Credit Spread Widening

Credits for 2012 that were created under the UN Clean Development Mechanism, set up after the Kyoto accord, traded at 4.25 euros ($5.56) less than those in the European Union’s cap- and-trade program as of Nov. 30. That compares with a 2.39 euro discount at the start of the year.

Offsets for 2010 gained 0.3 percent today to 11.8 euros a metric ton, paring their decline to 12.5 percent in the past three months. EU permits rose 0.1 percent to 14.78 euros.

The value of credits sold by investors in CDM emissions- reduction projects contracted 59 percent last year to $2.7 billion, according to a World Bank report.

Talks to extend Kyoto’s emission targets to the U.S. and China, the world’s biggest emitters, failed at the 2008 UN climate-protection summit in Poznan, Poland.

In Copenhagen last year, negotiators were hoping to write a global treaty replacing Kyoto. The talks collapsed over differences between the U.S. and China over the scale and monitoring of emissions cuts.

“China and India want to make sure the Kyoto Protocol is not dead, and you’ve got Japan and Russia and Canada saying no chance unless the U.S. and China are onboard,” Schmidt said.

The U.S. isn’t likely to be able to agree to binding targets until at least 2013 because it needs to have domestic legislation in place first, Shimada said.

Depth of Division

“Without the active participation of the two biggest emitters, namely China and the United States, it’s not a global effort,” said Shimada, who was formerly Japan’s lead negotiator at the talks. “Whatever happens, under any kind of conditions we do not accept a second commitment period.”

The comments indicate the depths of divisions that have prevented a new treaty on climate change. UN officials leading the current round of talks are aiming for more incremental progress on protecting forests, channeling funds to poor nations and on verifying reductions in emissions blamed for damaging the Earth’s atmosphere.

Agreeing to an extension for the Kyoto Protocol is a key demand by developing countries including China and the 43-nation Alliance of Small Island States. The 27-nation European Union has said it’s open to a second commitment period, though it also wants action by the U.S. and China.

Pershing, Japan Slammed

Jonathan Pershing, chief of the U.S. delegation, said earlier this week that the Obama administration stands by its commitment to reduce its emissions of heat-trapping gases by 17 percent for the 15 years through 2020. He said President Barack Obama still thinks legislation is the right approach even after Congress this year failed to pass a climate change law and Obama’s Democrats lost control of the House of Representatives.

“We think it may not necessarily only be comprehensive legislation, but perhaps elements in energy or elements in other environmental activities that could also move us in that direction,” Pershing said.

Environmental and non-profit groups slammed Japan’s refusal to accept a second commitment period.

“It’s shocking that at a time when the whole world is seeking to strengthen the climate regime, Japan wants to kill the treaty that bears its name,” Mohamed Adow, senior climate change adviser at Christian Aid, said in an e-mailed statement.

The collapse of the UN-backed CDM carbon offset market would impact the source of funding for renewable energy projects in developing countries in Asia, Haruhiko Kuroda, president of the Asian Development Bank, said at a briefing today in Tokyo.

“The truth is that the carbon trading market has already been impacted,” Kuroda said. If the CDM collapses, “a very important pillar of the financing mechanism for climate change mitigation efforts in developing countries is going to be disappearing.”

--With assistance by Ben Sills in Madrid and Ewa Krukowska in Brussels. Editors: Peter Langan, Alex Devine.

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net; Stuart Biggs in Tokyo at Sbiggs3@bloombereg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

ONGC to Invest in Biggest Oilfield to Stem Decline

Posted: 01 Dec 2010 04:27 AM PST

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By Rakteem Katakey

(Updates with closing share price in eighth paragraph.)

Dec. 1 (Bloomberg) -- Oil & Natural Gas Corp., India’s biggest energy explorer, plans to increase spending on redeveloping its largest oilfield to stem more than two decades of declining output.

“We reached a peak at Mumbai High in 1989,” Sudhir Vasudeva, ONGC’s director for offshore services, said in an interview at his office in New Delhi yesterday. “We won’t reach that level again, but we’re trying to get as much as we can.”

State-controlled ONGC has appointed oil and gas consultant Gaffney, Cline & Associates to advise on redeveloping the oilfield beyond 2012, when a $3.3 billion project is completed, the director said. The next phase may take four years and require higher investment because the cost of services has risen, he said.

ONGC is extending Mumbai High’s life and spending 260 billion rupees to develop smaller fields as it targets a 12 percent output increase in 2013. Oil supply from its domestic fields has stagnated at about 25 million metric tons in the past three years. Bids to acquire assets overseas failed as the Indian company lost out to Chinese rivals, including Cnooc Ltd., in deals worth at least $12.5 billion in the year ended June 30.

“Gaffney will start work next month,” Vasudeva said. “Mumbai High is now declining as the first phase of redevelopment was done in 2001 and the second phase will be completed by 2012. We should have the next dose of investments so we can maintain the plateau.”

Annual Output

A Gaffney spokesman in London confirmed that the oil and gas consultant is working with ONGC on the project.

“There are potentially still large untapped resources under the sea in Mumbai High,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. at Kochi in south India. “The returns can be many times more than the investments if they can continue to extract more from the field.”

ONGC shares climbed 3.3 percent, the most since June 25, to 1,286.25 rupees after the Press Trust of India reported the nation’s cabinet may approve proposals to split the stock and give investors free shares at a meeting today, citing unidentified people with knowledge of the matter. The benchmark Sensitive Index rose 1.7 percent.

Oil production at Mumbai High, 100 miles (160 kilometers) off the coast of India’s financial capital, may increase by as much as 10 percent after ONGC completes the 150 billion rupee ($3.3 billion) project in 2012, Vasudeva said. Annual output at the field, discovered in the 1970s, peaked at 20 million tons two decades ago and is currently 11 million tons, he said.

Smaller Fields

The smaller oil and gas fields being developed off India’s west coast may start in the next two years and produce 112,000 barrels a day of oil and 11.2 million cubic meters a day of natural gas, he said. That’s about 15 percent of India’s daily oil output in October.

“This will help us offset some of the natural decline,” Vasudeva said. “The seeds that were sown in the past with fructify soon.”

ONGC may increase annual oil output to 28 million metric tons in the year starting April 2013, Vasudeva said Oct. 28. Gas production may climb 67 percent to 100 million cubic meters a day starting April 2015, he said then.

The explorer’s second-quarter net income rose 6 percent to 53.9 billion rupees, missing analysts’ estimates, after increasing provisions for wells that don’t yield oil or gas.

“We are drilling almost one well a day,” he said. “That increases the number of dry wells we drill.”

The explorer finds oil or gas in every three to 3 1/2 wells drilled, Vasudeva said. Globally, the rate is one discovery in every 2 1/2 to three wells, he said.

--Editors: John Chacko, Amit Prakash.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

Spain to Sell Stake in Lottery, Ax Jobless Benefit

Posted: 01 Dec 2010 04:27 AM PST

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By Emma Ross-Thomas

(Updates with background in seventh paragraph, comment from economist in ninth, European Commission in 12th.)

Dec. 1 (Bloomberg) -- Spain stepped up efforts to fight contagion from Europe’s sovereign debt crisis, saying it will sell a stake in its lottery business and eliminate a one-time jobless benefit.

The government, which said in January it had no plans to sell the lottery, will sell 30 percent of the state-run company, Prime Minister Jose Luis Rodriguez Zapatero told lawmakers in Parliament in Madrid today. It will also allow the Madrid and Barcelona airports to be privately managed as part of a plan to let investors to buy 49 percent of the state’s airport-operation business, he said.

An extraordinary jobless payment of 420 euros ($549) per month, which benefits about 200,000 people whose contributions- based unemployment pay has ended, will be allowed to expire in February, he said. The Socialist government introduced the measure in August 2009 amid a surge in unemployment, which was Europe’s highest in October at 20.7 percent.

Spain is trying to distance itself from other so-called peripheral countries after Ireland’s bailout pushed the extra yield on Spanish debt to the highest since the creation of the euro. The measures will help plug the third-largest budget deficit in the euro region, which was 11 percent of gross domestic product last year and which the government says it will cut to 6 percent in 2011 in an “unconditional” pledge.

‘Unthinkable’

“We’re seeing the government announcing things that, certainly a few months ago, it was unthinkable that they would announce,” Jaime Guardiola, chief executive officer of Banco Sabadell SA, said at a news conference in Madrid today. “This is going to be the day-to-day reality of this country because of this external pressure.”

Spain’s Loterias y Apuestas del Estado had a net profit of 2.99 billion euros in 2009, up 3.5 percent from a year earlier, and channeled 2.92 billion euros to the Treasury, according to its annual report. Sales were 9.84 billion euros.

Zapatero, a Socialist union member who had made social policies a priority since coming to power in 2004, has said he will take whatever measures are necessary to pull Spain out of the worst crisis in six decades “whatever it costs.”

His austerity program, which includes a 5 percent cut to public wages and the deepest budget cuts in at least 30 years, has eroded his popularity and his Socialist Party was defeated in regional elections in Catalonia on Nov. 28.

Market Fears

“It may improve the chances of the government meeting its deficit-reduction goal for 2011, but it seems unlikely to be enough to calm the market’s fears,” said Ben May, an economist at Capital Economics Ltd. in London.

Investors punished Europe’s markets in the two days after Ireland became the second euro nation after Greece to get a European rescue package. Selling extended from Portugal to Italy and Belgium, while the euro fell to a 10-week low versus the dollar and yen yesterday.

The euro rose against the dollar today, trading at $1.3109 at 12:11 p.m. in London, amid speculation that the European Central Bank may signal its willingness after a meeting tomorrow to take steps to stem the crisis. The extra yield on Spanish 10- year bonds compared with German equivalents fell to 257 basis points today from 283 basis points yesterday.

The European Commission welcomed Spain’s “new concrete measures,” spokesman Amadeu Altafaj told reporters in Brussels today.

--With assistance from Charles Penty in Madrid and James G. Neuger in Brussels. Editors: Jeffrey Donovan, Eddie Buckle

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

Stocks, Euro Gain on Trichet Support, China Output; Oil Rises

Posted: 01 Dec 2010 04:25 AM PST

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By Stephen Kirkland

Dec. 1 (Bloomberg) -- Stocks and the euro gained for the first time in four days after European Central Bank President Jean-Claude Trichet signaled that leaders may step up their response to the debt crisis and China’s manufacturing expanded. U.S. index futures advanced and commodities rallied.

The MSCI World Index rose 0.7 percent at 7:20 a.m. in New York, while Standard & Poor’s 500 Index futures climbed 1.1 percent. The euro strengthened 1 percent to $1.3113. Spanish 10- year government bonds snapped an 11-day decline, sending the yield down 16 basis points to 5.41 percent. The yield on the U.S. 10-year Treasury note increased six basis points to 2.87 percent. Oil and copper jumped more than 1.5 percent.

Trichet told lawmakers yesterday that he didn’t believe that financial stability in the euro zone “could really be called into question,” stoking speculation policy makers meeting tomorrow may indicate their willingness to curb the spread of the region’s debt crisis. China’s manufacturing expanded at the fastest pace in seven months in November, the country’s logistics federation said. Reports today may show U.S. industrial production and company payrolls grew.

There’s “a calm of sorts returned to financial markets,” Peter Frank, a currency strategist at Societe Generale SA in London, wrote in a report today. “Both equity and commodity prices were resilient to the ongoing European Union sovereign crisis thanks to another bout of solid manufacturing results for China.”

Santander, Carrefour

The Stoxx Europe 600 Index rallied 1.2 percent. Spain’s IBEX 35 led gains by all 18 western European benchmark gauges, surging 2.8 percent as Banco Santander SA, the nation’s largest lender, climbed 5.5 percent. Banco Bilbao Vizcaya Argentaria SA also jumped 5 percent. Basic-resource stocks rose, as silver producer Fresnillo Plc added 3.5 percent and Xstrata Plc advanced 4.6 percent. Carrefour SA tumbled 7.6 percent after the world’s second-largest retailer cut its 2010 profit forecast.

The gain in U.S. futures indicated the S&P 500 may reverse yesterday’s 0.6 percent drop. Manufacturing in the U.S. probably expanded for a 16th consecutive month in November, economists said before a report due at 10 a.m. in New York. Separate data from ADP Employer Services at 8:15 a.m. may show U.S. companies last month added the most jobs since the recession began in December 2007. The Federal Reserve’s report on regional economic activity, known as the Beige Book, will be released at 2 p.m.

Emerging Markets

The MSCI Asia Pacific Index rose 1.2 percent and the MSCI Emerging Markets Index advanced 1.6 percent, climbing the most in almost two weeks. Benchmark equity gauges in 12 of 16 emerging markets open for trading rallied more than 1 percent. China’s Purchasing Managers’ Index climbed to 55.2 last month, beating the 54.8 median estimate of 14 economists surveyed by Bloomberg News. South Korean exports rose 24.6 percent from a year earlier after gaining a revised 27.6 percent in October.

The euro appreciated 1 percent to 109.68 yen, snapping a three-day decline. The Swiss franc slipped against all 16 of its most-traded counterparts, weakening 1.1 percent versus the euro to 1.3170. The Dollar Index, which tracks the U.S. currency against six trading partners, declined for the first time in four days, falling 0.5 percent to 80.824.

The extra yield investors demand to hold Spanish 10-year bonds instead of benchmark German bunds tumbled 27 basis points to 257 basis points. Irish 10-year yields declined 16 basis points to 9.28 percent.

ECB Purchases

Portuguese bonds rose, sending the yield nine basis points lower to 6.98 percent, as the government sold 500 million euros ($655 million) of 12-month bills today. The auction attracted bids for 2.5 times the amount offered, compared with a bid-to- cover ratio of 1.8 in November. S&P said late yesterday it may cut the country’s credit rating on concern the nation may have to seek a bailout. Yields on debt from Italy and Spain climbed to euro-era records relative to bunds this week, while the spread on higher-rated Belgian bonds over bunds increased yesterday to the most since at least 1993.

The ECB bought Irish government bonds today, according to three traders with knowledge of the transactions. The central bank also purchased Portuguese debt, said two people, who asked not to be identified because the deals are confidential. An ECB spokesman in Frankfurt declined to comment.

The cost of insuring against a default on European corporate debt decreased, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies declining 21 basis points to 505, according to Markit Group Ltd. The index surged to a two-month high yesterday. The Markit iTraxx Financial Index linked to banks’ subordinated bonds dropped 19 basis points to 292.5, after yesterday climbing to the highest since April 2009, JPMorgan Chase & Co. prices show.

Bond Risk

Default swaps insuring Belgian bonds lost eight basis points to 197, contracts on Ireland fell 44 basis points to 562 and Italian risk declined 32 basis points to 236, according to CMA. Spain decreased 33 basis points to 331 and Portugal dropped 50 basis points to 492. Swaps on all the nations were at record highs yesterday.

Oil climbed 1.5 percent to $85.39 a barrel in New York, while copper futures jumped 1.6 percent in London. Gold for immediate delivery rose 0.5 percent to $1,393.35 an ounce. The S&P GSCI Index of 24 commodities gained 1.5 percent.

--With assistance from David Merritt, Abigail Moses, Michael Patterson, Dan Tilles and Dan Weeks in London. Editors: Stephen Kirkland, Justin Carrigan

To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net

To contact the editor responsible for this story: Paul Sillitoe in London at psillitoe@bloomberg.net

SAP's Hana Speeds the Database Race

Posted: 30 Nov 2010 03:21 PM PST

Google Said Close to Acquiring Groupon

Posted: 30 Nov 2010 02:06 PM PST