Today's Financial News Courtesy of the Financial Times

Today's Financial News Courtesy of the Financial Times

Weak US retail sales take juice out of Intel bounce
Copyright The Financial Times Limited 2010
Published: July 14 2010 08:29 | Last updated: July 14 2010 16:44
http://www.ft.com/cms/s/0/df9227fa-8f05-11df-a4de-00144feab49a.html


Wednesday 15:10 BST. The Intel chip implanted in the bulls appears to be losing some juice.

Barnstorming results and upbeat forecasts from the chip bellwether had lit up the global tech sector and convinced many traders that the US second-quarter earnings season can help banish fears of an economic slowdown.

In addition, record growth in Singapore lifted hopes that Asia will continue to provide the impetus for global expansion.

Unfortunately, another weak US retail sales report has reinvigorated US double-dip concerns and tempered some of the ebullience prevalent during the six-day risk rally, which has seen the S&P 500 gain 7 per cent and core bond yields hit three-week highs.

The FTSE All-Word equity index is up 0.5 per cent, but much of this is the result of a strong session in Asia. European bourses are lower as banks come under pressure and the S&P 500 on Wall Street is up just 0.1 per cent.

“Today’s US economic releases only served to underline the tepid, and probably stalling, nature of the US recovery,” said Nick Beecroft, at Saxo Bank.

☼ Factors to Watch. The US reporting season takes a rest day in terms of market-moving corporations, so after the retail numbers the next catalyst may be the minutes of the Federal Reserve’s June monetary policy-setting meeting. Overnight, China will reveal its second-quarter GDP data and this may set the early tone for Thursday’s session. ☼

● Asia. The Intel results and forecasts provided a particular boost to the more tech-heavy centres, such as Japan and South Korea. The Nikkei 225 in Tokyo and the Kospi in Seoul rose 2.7 per cent and 1.3 per cent, respectively, helping to push the FTSE Asia-Pacific index up 1.4 per cent.

Singapore added 0.7 per cent following news the city state grew at a record 18.1 per cent year on year in the first half of 2010. The Shanghai Composite advanced 0.8 per cent and Hong Kong climbed 0.6 per cent, as growth hopes trump fears of a clampdown on property speculation.

● Europe. Bourses initially gained good ground on the back of the strong Asian session and higher US stock futures, with the Intel news pushing the FTSE Eurofirst Technology Hardware index up 1.2 per cent.

However, profit taking in some banks has left the Eurofirst 300 regional benchmark down 0.2 per cent. Traders noted that the three-month Euribor rate, which tracks how much banks charge to borrow from each other in euros, has risen to an 11-month high. Some feel this is a sign that banks are becoming more reluctant to lend.

But with the Euribor-OIS spread, a better gauge of fear in the sector, still settled around the 31 basis point mark, Euribor’s move higher more likely reflects the required move to the ECB’s 1 per cent benchmark rate and thus the normalisation of interbank lending conditions. The FTSE Eurofirst Banks index is down 0.7 per cent, nevertheless.

Meanwhile, London’s FTSE 100, which is relatively tech-lite, closed well off its lows but down 0.3 per cent as miners also weighed and BP had an off day.

● Debt. It’s a very busy day for sovereign debt issuance, with Portugal, Italy, Germany, the UK and the US all looking for lenders. The biggest is the $13bn of 30-year notes to be sold by the US, although perhaps the more important in terms of their impact on market sentiment were the €1.5bn and €7.3bn sales out of Lisbon and Rome, respectively.

In the event, Portugal got away €1.7bn of notes and Italy only €6.8bn. Portuguese benchmark 10-year yields are down 9 basis points in response to 5.59 per cent, while their Italian counterparts are up 5 basis points at 4.13 per cent.

In core debt, US benchmark yields had pushed to a three-week high on Tuesday as equity markets rallied and a calming of nerves surrounding the eurozone fiscal and banking system reduced demand for havens. However, today’s soft US retail data have encouraged more buying and the yield on the 10-year note is down 3 basis points at 3.09 per cent.

● Forex. A relatively quiet session picked up after the US retail numbers, with the dollar choosing to fall on soft domestic data, rather than rallying as a haven play. The buck is down 0.3 per cent on a trade-weighted basis

The euro has taken advantage and hit a fresh two-month high versus the dollar, up 0.3 per cent at $1.2760. The Italian and Portuguese debt auctions appear to have had little impact on the single currency, as is the case with news that eurozone industrial production grew by less than expected in May.

Sterling is up 0.3 per cent against the euro to 83.55p after labour data showed a bigger than expected fall in unemployment claims. Sterling is up 0.6 per cent to $1.5270, also a fresh two-month high.

● Commodities. The complex had relapsed after US equities took an early turn for the worse. However, with Wall Street eking out a gain some risk appetite is returning to the resources sector and the Reuters-Jefferies CRB index is up 0.3 per cent. Oil is up 0.3 per cent to $77.39 a barrel, despite a supposedly bearish inventory report.

Gold is up 0.4 per cent at $1,215 an ounce.

Wednesday’s Market Menu
What’s

affecting risk appetite

Risk on

● Intel: upbeat forecasts add to good earnings mood.

● Singapore: Asia’s commerce hub in fine fettle.

● UK: jobless claims fall.

Risk off

● Earnings euphoria: danger investors’ expectations now too rosy.

● Technicals: despite sharp S&P 500 rally, benchmark has not broken downtrend. Back above 50-day moving average, but below 200-day.

● US: second consecutive monthly fall for retail sales




Record quarter for Intel lifts tech sector
By Chris Nuttall in San Francisco
Copyright The Financial Times Limited 2010
Published: July 13 2010 21:58 | Last updated: July 14 2010 01:13
http://www.ft.com/cms/s/2/44f218ae-8eb5-11df-8a67-00144feab49a.html


Intel reported the best quarter in its history as corporate customers increased information technology spending, boosting hopes that businesses are engaged in a long-awaited “refresh” of both hardware and software in the aftermath of the financial crisis.

The results from the world’s biggest chipmaker boosted the technology sector at the start of the second-quarter earnings season. Intel’s shares rose more than 8 per cent to $22.74 in extended trading in New York, after it reported revenues of $10.8bn, gross margins of 67 per cent and earnings per share of 51 cents.

All were records for the Silicon Valley company, coming in well ahead of analyst expectations of $10.25bn in sales and 43 cents per share in profits, according to a Thomson Reuters survey. The results are likely to fuel investor optimism at the start of the crucial US earnings season.

Paul Otellini, chief executive, said Intel was running ahead of a global economic recovery because of a fundamental shift towards working on the internet. This included companies hosting applications and services in the “clouds” of remote data centres, where server chip sales were up 170 per cent on a year earlier.

“As internet traffic continues to boom, the cloud build-out is accelerating in order to keep pace,” said Mr Otellini.

The company expects a “robust” and “seasonal” second half, with sales of about $11.6bn in the current quarter – ahead of analyst forecasts of $10.9bn forecast in a Bloomberg survey. An extra $400m announced in capital spending is aimed at bringing forward its next generation of processors.

Intel said companies were reducing the number of servers and replacing them with hardware that was more powerful and energy efficient, thereby reducing electricity bills.

“The return on investment that our new server offerings deliver is extremely compelling and is a major reason for the strong demand we are experiencing,” Mr Otellini said.

Companies, including small businesses, were refreshing their desktop computers in broad-based buying, Intel said. All markets round the world had performed better than the seasonal average.

At the other end of the scale, netbooks appeared to be performing well. After an inventory correction in the first quarter led to speculation that the category was on the wane, Intel reported that sales of its Atom processor for netbooks had increased by 16 per cent, amid strong sales of the latest dual-core version.

Mr Otellini said he expected about 40m netbooks to ship this year and agreed with forecasts that PC units would grow by about 20 per cent overall. Sales had been driven by consumer purchases, particularly of notebooks, in previous quarters, but there had been a return of corporate purchases in the second quarter.










US consumer fears hit retail sales
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: July 14 2010 14:35 | Last updated: July 14 2010 16:37
http://www.ft.com/cms/s/0/03a5ac98-8f42-11df-a4de-00144feab49a.html


US retail sales fell for the second month running in June and businesses slowed their build-up of inventories, signalling that the fragile consumer recovery could sputter through the summer.

The figures follow a string of disappointing data on housing, employment and trade that has led many economists to downgrade their economic growth forecasts for the second quarter. Retail sales are viewed as a key indicator of consumer spending, which accounts for about 70 per cent of economic activity in the US, and analysts say that the stubborn unemployment rate is hindering spending.

“June’s retail sales data add to other evidence suggesting that the economy shifted into a lower gear at the end of the second quarter,” said Paul Dales, US economist at Capital Economics. “While another recession still seems unlikely, it is clear that only a year after it began, the economic recovery is fading.”

Sales fell by 0.5 per cent last month from May, commerce department figures showed on Wednesday. That was weaker than the 0.1 per cent decline that Wall Street analysts had projected and followed a disappointing 1.1 per cent drop in the previous month.

A separate report showed May business inventories ticking up at the slowest rate this year and sales falling for the first time since March 2009.

The figures rattled US investors on Wednesday. Less than an hour after the opening bell on Wall Street, the S&P 500 was down 0.21 per cent at 1,091.07, the Dow Jones Industrial Average lost 0.2 per cent to 10,338.12 and the Nasdaq Composite rose 0.2 per cent to 2,245.36.

June sales were held back by fewer purchases at petrol stations, car dealers, sporting goods shops and furniture stores. But buyers flocked to department stores and showed greater appetite for electronics and clothing.

Excluding cars and parts, which tend to be volatile, retail sales were down by just 0.1 per cent from May to June.

Last week, data revealed strong sales at US department stores and discount chains but spending on discretionary luxury items remained weak as consumers responded to a swoon in the stock market. In spite of recent signs of softness, retail sales have made significant gains in the past year and are up by 5 per cent from June 2009.

“The data is supportive that the consumer has taken a pause to reassess their personal finances," said Brian Sozzi, a retail analyst at Wall Street Strategies.

Meanwhile, commerce department figures showed business inventories rising by a tepid 0.1 per cent in May. That was weaker than expected and left inventories down by 1.5 per cent from the same month a year ago.

Inventories provided a big boost to output as the economy emerged from recession, but businesses are restocking less aggressively as they brace themselves for weaker consumer demand. Sales at manufacturers were also depressed in May, slipping by 0.9 per cent from April.


German prosecutors raid Credit Suisse
By James Wilson in Frankfurt and Haig Simonian in Zurich
Copyright The Financial Times Limited 2010
Published: July 14 2010 15:20 | Last updated: July 14 2010 15:20
http://www.ft.com/cms/s/0/c73920ee-8f4d-11df-a4de-00144feab49a.html


German prosecutors on Wednesday staged raids on more than a dozen Credit Suisse offices in connection with an inquiry into whether employees of the Swiss bank had helped clients to evade taxes.

The raids are the latest stage of an inquiry that prosecutors in Düsseldorf said was based on data stored on CDs and offered this year to authorities in the state of North Rhine-Westphalia. Searches involving 150 prosecutors and tax officials took place in 13 locations across Germany linked to the Swiss bank’s German subsidiary.

A statement from prosecutors said they did not know the names of any Credit Suisse staff who may be involved.

Marc Dosch, a spokesman for Credit Suisse, said: “We can confirm the raids took place. We are working very closely with the German authorities. But as this is an ongoing investigation, we cannot comment further.”

Credit Suisse says it has still not been given official notification that the stolen data on the CD covers its customers or stems from one of its employees.

But the bank noted in its first-quarter results statement last April that, based on client contacts, it had “every reason” to believe it would be affected.

As a result, the group instituted formal legal action via the Swiss authorities to launch investigations into the “unknown party or parties” who had perpetrated the theft.

The Düsseldorf prosecutors’ investigation – which started several months ago and is said to involve more than 1,000 individual cases – is one of a number based upon information allegedly stolen from banks and sold or provided to German authorities. The inquiries have been controversial because they seem to be based on stolen information. Some authorities have refused to purchase data.

In 2008 a data CD from LGT Trust, the then trust subsidiary of LGT, Liechtenstein’s biggest bank, was bought by the German intelligence agency, which resulted in a number of prosecutions for tax evasion. Klaus Zumwinkel, Deutsche Post’s former chief executive, stepped down after he was caught in the inquiry’s net. He later admitted tax evasion and was fined and given a suspended prison sentence.

In many cases, uncertainty over what bank information might be circulating has caused concerned customers to come clean to authorities about their assets held outside Germany to escape possible prosecution.

The inquiries come as authorities round the world have stepped up efforts to curb tax evasion after the financial crisis and have contributed to occasional flare-ups between Germany and its smaller neighbours.