Today's Financial News Courtesy of the Financial Times

Today's Financial News Courtesy of the Financial Times


Rise in US private sector jobs raises hope
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: September 3 2010 13:59 | Last updated: September 3 2010 15:36
http://www.ft.com/cms/s/0/3443bfec-b6df-11df-b3dd-00144feabdc0.html


The US shed 54,000 jobs in August as the government dismissed more temporary census workers, but a rise in private sector employment offered hope that the economy could fend off a second recession.

August was the third month running that the US shed jobs, however revisions to the prior two months showed that the losses were not as severe as previously thought. Last month, the US unemployment rate ticked up to 9.6 per cent from 9.5 per cent in July, as the size of the labour force grew.

Labour department figures showed on Friday that the US managed to add 67,000 workers in the private sector, stronger than the 40,000 that Wall Street analysts had predicted. Economists expected a drop in non-farm payrolls resulting from the drop-off in census employment, predicting a decline of 105,000 workers from July to August.

The data comes as the Obama administration is under pressure to help the faltering economy regain momentum. On Friday, Barack Obama, US president, criticised Republicans for obstructionism and called for an extension of tax cuts for the middle-class and for more investment in sectors with potential for job growth.

“There’s no quick fix to the worst recession we’ve seen since the Great Depression,” Mr Obama said. “The economy is moving in a positive direction, jobs are being created, they’re just not being created fast enough given the big hole that we’ve experienced.”

But investors were heartened by the better-than-expected data. Less than an hour after the opening bell, the S&P 500 was up 1.3 per cent at 1,104.23, the Dow Jones Industrial Average had gained 1.2 per cent to 10,439.08 and the Nasdaq Composite was 1.5 per cent higher at 2,233.69.

“This report makes it unlikely that the Fed will implement new monetary stimulus measures at the September FOMC meeting,” said David Greenlaw, economist at Morgan Stanley. “But, such action remains a possibility at some point during the next several months if the incoming data suggest that the underlying pace of economic growth is slipping.”

Last week, Ben Bernanke, chairman of the Federal Reserve, said firms have been attributing this reticence to “slow growth of sales and elevated economic and regulatory uncertainty”. The commerce department revised its second-quarter growth estimate to show that output grew by a tepid 1.6 per cent, adding to concerns that output is not accelerating fast enough to create jobs.

“The fact that the growth of private sector payrolls is below the level needed to keep up with normal growth of the labor force is obviously unacceptable,” said Christina Romer, the outgoing chairman of the Obama administration’s Council of Economic Advisers.

Friday’s report did reveal some signs of hope for struggling US workers, as average hourly earnings increased by 6 cents to $22.66 last month and the number of workers unemployed for more than 27 weeks eased. The length of the average work week held steady at 34.2 hours.

The labour market, which began a slow recovery from January until June, has suffered during the summer as the US housing market slowed down and companies remained reticent to hire new employees.

Although analysts were surprised by the strength of the data, several noted that the labour market faces stiff headwinds. Excluding census workers, the economy has added an average of just 55,000 workers a month in the last four months and 14.9m Americans remain unemployed.

“State and local governments have been resisting hiring and construction has been in the dumps,” said Brian Bethune, US economist at IHS Global Insight.

However, construction employment actually increased by 19,000 in August as 10,000 workers who were on strike went back to work. Hiring of temporary workers and employees in the education and healthcare sectors also increased, while manufacturers cut 27,000 jobs and retailers cut 4,900 jobs.





HP to buy 3Par as Dell pulls out of race
By Joseph Menn in San Francisco
Copyright The Financial Times Limited 2010
Published: September 2 2010 16:26 | Last updated: September 3 2010 00:22
http://www.ft.com/cms/s/2/00aaa88a-b69e-11df-86ca-00144feabdc0.html


Hewlett-Packard won the bidding battle for data storage company 3Par on Thursday after rival computer maker Dell balked at raising its offer again.

3Par accepted HP’s latest bid of $33 a share, or about $2.4bn, and paid Dell a $72m fee to break their standing merger agreement.

HP, the world’s biggest technology company by sales, said it expected the deal to close by the end of December.

The contest, which began before 3Par publicly accepted a Dell offer at $18 last month, provided further evidence that the two largest US computer makers are stepping up their rivalry as they branch into new areas.

HP had bid less before it learnt that Dell was the other suitor, according to a person familiar with the process.

That provided extra motivation because HP wanted to block Dell’s move to gain ground in data storage, where HP is weak and both companies need to expand their product lines to become one-stop shops for large customers’ technology needs.

Storage and analysis tools are vital as businesses shift towards cloud computing, in which data are housed remotely rather than on users’ PCs. The amount of data being amassed is doubling every 18 months, analysts say, and companies need cost-effective access to it from an increasing variety of devices.

HP and Dell exchanged rapid-fire bids until Dell paused last week and prepared a restructured final offer at $32 a share that 3Par felt would have tied its hands too tightly.

Dell wanted the right to resell 3Par’s products at set prices even if HP ended up owning 3Par.

The premium for 3Par gave HP investors – and Dell’s board – cause for concern.

3Par has yet to turn a profit and just before Dell unveiled its original offer, its stock had closed at $9.65, less than a third of the $33 a share now on the table.

Steve Schuckenbrock, Dell president for enterprise customers, said on Tuesday: “You have to think through the valuations ... There is a point when winning and losing blur.”

HP shares fell as it bid up the price for the data storage concern, but have since recovered.

Dell made its last offer conditional on a long-term deal for it to resell 3Par products at set prices no matter which bidder prevailed.

Dell’s shares gained 2 per cent to $12.36 in New York after the company’s exit. HP closed up 47 cents at $39.68.






Fears grow over global food supply
By Javier Blas and Jack Farchy in London, Courtney Weaver in Moscow and Simon Mundy in Johannesburg
Copyright The Financial Times Limited 2010
Published: September 2 2010 19:25 | Last updated: September 3 2010 12:22
http://www.ft.com/cms/s/0/5f6f94ac-b6bc-11df-b3dd-00144feabdc0.html


Wheat prices rose further on Friday in the wake of Russia’s decision to extend its grain export ban by 12 months, raising fears about a return to the food shortages and riots of 2007-08.

In Mozambique, where a 30 per cent rise in bread prices triggered riots on Wednesday and Thursday, the government said seven people had been killed and 288 wounded.

Vladimir Putin’s announcement on Thursday extended an export ban first introduced last month until late December 2011, sending wheat and other cereals prices to a near two-year high. It came as the UN’s Food and Agriculture Organisation called an emergency meeting to discuss the wheat shortage.

In Maputo, trade and industry minister Antonio Fernandes told a national radio station on Friday that the riots had caused 122m meticais ($3.3m) of damage. Police opened fire on demonstrators after thousands turned out to protest against the price hikes, burning tyres and looting food warehouses.

Although agricultural officials and traders insist that wheat and other crop supplies are more abundant than in 2007-08, officials fear the food riots could spread.

Wheat prices remained high on Friday morning. Futures in Chicago were up 1.5 per cent at $6.91 a bushel, while European wheat futures remained at historically high levels above €230 a tonne, just shy of last month’s two-year high of €236. Wheat prices have surged nearly 70 per cent since January, and analysts forecast further rises after Russia’s decision and concerns about weather damage to Australia’s crop.

The crop problems in Russia, which suffered its worst drought on record this summer, and elsewhere, have heaped pressure on US farmers to supply the world’s wheat. The US Department of Agriculture has increased its estimates for US wheat exports to $8bn for the current crop year.

The 2007-08 food shortages, the most severe in 30 years, set off riots in countries from Bangladesh to Mexico, and helped to trigger the collapse of governments in Haiti and Madagascar.

The FAO said that “the concern about a possible repeat of the 2007-08 food crisis” had resulted in “an enormous number” of inquiries from member countries. “The purpose of holding this meeting is for exporting and importing countries to engage.”

Russia is traditionally the world’s fourth-largest wheat exporter, and the export ban has already forced importers in the Middle East and North Africa, the biggest buyers, to seek supplies in Europe and the US.

Mr Putin said Moscow could “only consider lifting the export ban after next year’s crop has been harvested and we have clarity on the grain balances”. He added that the decision to extend the ban was intended to “end unnecessary anxiety and to ensure a stable and predict-able business environment for market participants”.

“This is quite serious,” said Abdolreza Abbassian, of the FAO in Rome. “Two years in a row without Russian exports creates quite a disturbance.” Dan Manternach, chief wheat economist at Doane Agricultural Services in St Louis, added: “This is a wake-up call for importing nations about the reliability of Russia.”

Jakkie Cilliers, director of South Africa’s Institute of Security Studies, said there was concern over a repeat of the protests of 2008: “That certainly strengthened a return of the military in politics in Africa.”