BOJ's Kuroda: have taken all steps needed for inflation goal

By Leika Kihara and Stanley White

TOKYO | Fri Apr 12, 2013 4:31am EDT

(Reuters) - The Bank of Japan has taken all necessary steps to meet its 2 percent inflation target in two years and will try to minimize the market disruption from its massive bond buying, Governor Haruhiko Kuroda said on Friday.
Kuroda conceded that some people doubted the BOJ could meet its inflation goal and said unexpected events could mean it would take longer than planned, but said the BOJ would maintain its new policy framework for as long as needed.
"We feel we've taken all necessary steps to achieve 2 pct inflation in two years, but it's not appropriate to limit our policy to two years," Kuroda said in a speech.
"We will not hesitate to adjust policy in the future as the economy is like a living thing and there are both upside and downside risks."
The BOJ stunned global financial markets last week, promising to inject about $1.4 trillion into the economy in less than two years by buying government debt and risk assets.
Kuroda acknowledged the scale of purchases was so large that it could affect bond markets, but was confident the BOJ could smoothly buy the debt it needs.
The BOJ would also monitor consumer spending, capital expenditure and exports to gauge the impact of its policy and make adjustments when needed.
Kuroda last week committed the BOJ to open-ended asset buying and said the monetary base would nearly double to 270 trillion yen ($2.71 trillion) by the end of 2014 in a shock therapy to end two decades of stagnation.
($1 = 99.5500 Japanese yen)

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Cyprus not asking for more bailout money, mulls early EU structural funds: officials

Cyprus not asking for more bailout money, mulls early EU structural funds: officials

Cyprus is not asking for a bigger bailout from the euro zone and the International Monetary Fund above the agreed 10 billion euros, but is considering putting the EU structural funds to earlier use to help the country's growth, EU officials said.
Euro zone finance ministers gave political backing to 10 billion euros of loans for the Mediterranean island on Friday and said there were no plans or requests to raise that amount.
Cypriot President Nicos Anastasiades told reporters in Nicosia on Friday that he would send a letter to European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy to give it extra assistance given the bad economic situation of the island.
Euro zone officials in Dublin said Cyprus had not asked for more money in emergency loans, but was most likely considering a request front load the payment of EU structural funds that come from the EU's long-term budget

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Analysis: Yuan speculators muddle China's exports, complicating reform

By Pete Sweeney

SHANGHAI | Fri Apr 12, 2013 3:01am EDT

(Reuters) - Companies gambling on yuan appreciation are distorting Chinese trade statistics, creating a monetary policy headache for Beijing officials and complicating government plans to liberalize the capital account.
Speculative inflows disguised as trade are causing concern because they aggravate a recent trend - the sudden resurgence of hot money inflows. Some $125 billion poured into China in January and February after nine consecutive months of outflows, exclusive of hot money masquerading as trade.
Companies that cannot legally move money into the country for the purpose of currency speculation often try to circumvent China's capital controls by overstating trade invoices, thereby disguising investment funds as payments for goods and services sold overseas, according to economists.
These firms are betting on an extended rally of China's currency, which has gained more than 3 percent against the dollar since the third quarter of 2012 to hit a record high on Friday morning. Now that is even distorting trade data.
To keep the exchange rate from appreciating too quickly in the face of such bullishness, the People's Bank of China (PBOC) has stepped up its meddling in the domestic forex market, despite repeated public promises from regulators to stay on the sidelines.
This intervention has caused Chinese foreign exchange reserves to rise by over $128 billion in the first quarter of 2013, compared with $130 billion for all of 2012, by extension pouring a tide of yuan into China's interbank market and applying downward pressure to short-term interest rates.
The central bank, aiming to keep rates under control, has been forced to adapt the way it manages liquidity, which has rattled the country's equity and money markets.
"If this trend is sustained, it complicates monetary policy; it adds liquidity to the economy which then inflates money and credit growth and property," said Robert Subbaraman, economist at Nomura in Hong Kong.
"The risks are that it might get authorities to think twice about how fast they open up the capital account."
CAMOUFLAGED INVESTMENT
Official trade data on Wednesday showed that China's exports grew by an annual 10 percent in March, appearing to stabilize after two months of strong performance, but economists were quick to question the credibility of the figures.
"Compared to the rest of Asia, China stood out like a sore thumb," said Subbaraman. He said that while East Asian countries' exports usually rise and fall at similar rates, in recent months China's 10 percent annual growth rate far exceeded neighbors such as Taiwan (3.3 percent) and South Korea (0.3 percent).
Most skeptics took particular note of the apparent explosive growth (over 90 percent) in exports to Hong Kong and 300-plus percent growth to bonded customs zones, despite the fact that export demand from the United States and Europe - ordinarily the ultimate destination for such exports - remained tepid.
Statistics from Hong Kong and Chinese customs have also fallen out of sync, with Chinese customs reporting more exports to Hong Kong than Hong Kong customs is reporting imports from China. (See graphic: link.reuters.com/beg37t)
Lu Ting, economist at Bank of America-Merrill Lynch, pointed out in a research note distributed to clients that the growth of exports in high-value integrated circuits was particularly suspicious since such products are cheap to ship and their value is "easily manipulated".
"There are no exogenous factors that help to explain why the fluctuations have been so large in China-Hong Kong trade in February and March," said Fredrik Erixon, director of the European Centre for International Political Economy, a think-tank in Brussels.
"The transactions between China and Hong Kong are just the symptom of a larger problem."
Zheng Yuesheng, spokesman of China's General Administration of Customs, said officials were investigating "abnormal trade growth with Hong Kong" and would take regulatory steps if needed.
CONTROLLING SPECULATION
What those measures might be is an open question.
Historically, regulators have struggled to prevent the opening of China's capital account from becoming a channel for exchange rate speculation. Destabilizing speculative flows would put China's macroeconomic stability at risk and discourage the increased usage of the yuan in trade, a key policy goal.
"If RMB is accepted in international transactions due to reasons which are not related with speculation and arbitrage, the internationalization of the RMB should be welcome," said Yu Yongding, an economist at the China Academy of Social Sciences, in an email to Reuters.
"Otherwise, the internationalization is false, is something else, and is not sustainable. As soon as expectations change, unwinding will begin."
In Hong Kong, offshore yuan (CNH) continues to trade at a premium to the onshore spot market, implying offshore investors expect it to keep rising. But dealers in China's interbank market question the sustainability of those expectations, given the country's economic recovery remains tenuous, being very dependent on a sustained recovery in genuine export demand.
Several money dealers in Shanghai, who spoke on condition of anonymity because they are not authorized to speak to the media, told Reuters they are already seeing signs that speculative inflows are slowing.
"The more money can come in, the more it can go out as well," said Subbaraman of Nomura.
"If China slows down more than people expect, it could cause capital flight."

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Analysts discuss paradigm shift: breaking up banks

Thu Apr 11, 2013 9:44pm EDT

(Reuters) - At least three Wall Street analysts this week have written reports about the possibility of the biggest banks breaking themselves up to boost profitability, signaling that investors may be more willing to embrace an idea that is still toxic to some lawmakers in Washington.
New regulations in areas like capital requirements are imposing higher costs on the biggest investment banks, raising doubts about their future profitability. These questions make the biggest global investment banks "un-investable," wrote analyst Kian Abouhossein, who himself works at JPMorgan, one of the biggest global investment banks.
Breaking up large "universal banks," could unlock value for shareholders, Wells Fargo analyst Matthew Burnell wrote in a report on Wednesday. These "financial supermarkets" typically house investment banking, consumer banking and wealth management operations under one roof.
If these banks broke up into smaller companies, the value of the parts would likely be greater than the current whole, Burnell wrote. He estimated that universal banks currently trade at 25 to 30 percent below publicly traded financial firms that focus on just one business.
CLSA analyst Mike Mayo, a long-time critic of big banks, wrote on Tuesday: "Almost every investor that we speak with indicates that a breakup would be bullish for the stocks."

 

"While there is skepticism as to whether a full breakup will occur, there is an undercurrent of shareholders who would support such a move," he added.
The 2010 Dodd-Frank financial reform law was designed to end government bailouts of too-big-to-fail banks by creating mechanisms for winding down large financial institutions.
But some U.S. legislators are looking to add rules that would impose extra costs on the biggest banks, to reflect the fact that these companies could still end up being bailed out in the next crisis.
Under a proposal from senators David Vitter, a Louisiana Republican, and Sherrod Brown, an Ohio Democrat, banks with more than $400 billion in total assets would face an additional capital surcharge. The bill would also prevent banks' riskier affiliates from accessing government support such as deposit insurance.
JPMorgan's Abouhossein said the risk of these types of rules being imposed by lawmakers and regulators around the world makes it difficult to buy shares of the biggest investment banks.

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Tough road ahead for India carmakers as boom market crashes

By Henry Foy and Devidutta Tripathy

MUMBAI/NEW DELHI | Wed Apr 10, 2013 2:42am EDT

(Reuters) - India's annual car sales fell for the first time in a decade in the financial year just ended and are expected to post subdued growth this year, calling into question bullish expectations that fuelled billion-dollar bets from global manufacturers.
Carmakers in India, two years ago the world's hottest growth market after China, have seen high interest rates, rising fuel prices and prolonged economic gloom turn an industry recently growing at 30 percent a year into one plagued by huge discounts, showrooms full of unsold cars, and chronic overcapacity.
Quitting India is not an option for global majors such as Ford Motor Co (F.N) and Volkswagen AG (VOWG_p.DE), given its huge population, rising incomes and long-term potential.
But manufacturers that have sunk huge amounts of cash into the country are likely to pare back expansion plans as economic troubles persist, and the industry braces for another year of disappointing sales.

 

"The industry, like the rest of the economy, has slowed down very substantially," R.C. Bhargava, chairman of market leader Maruti Suzuki (MRTI.NS), told Reuters.
While surging sales of SUVs have been a bright spot for some manufacturers, sales of the smaller cars that account for most of the passenger vehicle market have crashed this year.
"Everything has slowed down by two to three years," Bhargava said. "Everybody has to consolidate their operations, look how to manage with less, do more with less ... This recessionary period will force people to be more efficient."
Car sales in the financial year that ended March 31 fell an annual 6.7 percent, according to data from the Society of Indian Automobile Manufacturers (SIAM) released on Wednesday, after sales in March fell an annual 22.5 percent.
The drop is the worst since the financial year that ended in 2001, when sales fell 7.7 percent, according to SIAM. Last year, India's car sales grew 2.2 percent.
The immediate future looks mostly gloomy for an industry that experts had expected to ring up annual car sales of 9 million by 2020 from a current 1.9 million, but looks set to significantly undershoot that target.
"I don't think those goals are going to happen in that timeframe," said Bhargava. "Conditions have changed a lot"
Car sales are likely to grow by 3-5 percent in the financial year that began on April 1, SIAM said. SIAM initially estimated 10-12 percent growth for the last financial year, but was forced to slash that forecast three times in the face of actual sales figures.
The market will continue to remain weak, executives said, until a substantial cut in interest rates and sustained improvement in the country's economic growth, which in the last financial year fell to its lowest in a decade.
"In the absence of any positive stimulus and sentiments ... We foresee the pressure on volumes to continue until there is significant improvement in macro-economic factors," said Rakesh Srivastava, senior vice president of Hyundai Motor Co's (005380.KS) Indian unit, which like Maruti specializes in small cars.
Hyundai, India's No. 2 carmaker, has weathered the storm better than others, registering flat growth. Global rivals such as General Motors Co (GM.N), Ford, Toyota Motor Corp (7203.T) and Volkswagen have seen already underwhelming sales volumes fall by as much as 20 percent.
CAPACITY GLUT
In 2011, when sales were rising 30 percent a year, Ford and Maruti wrote cheques for around $1 billion each to build plants in the western state of Gujarat.
Last month, Tata Motors Ltd's (TAMO.NS) factory in Gujarat, built solely to manufacture its much-vaunted low-cost Nano, cranked out just 1,282 cars, a miserly 6 percent of total possible capacity at the 250,000 cars a year plant.
Tata has been India's worst-performing major carmaker this year, with car sales plunging almost 30 percent, but its capacity utilization woes are mirrored across the industry, where a race to ramp up in recent years has created a glut.
India's total passenger vehicle production capacity stands at around 4.9 million, meaning the average industry utilization level stands at around 55 percent. Total capacity is slated to hit 5.5 million by the end of 2015.
"I suspect everybody will re-evaluate the time when they need new capacity," said Bhargava, adding that his company, controlled by Japan's Suzuki Motor Corp (7269.T), would likely open its new plant in Gujarat in late 2015, later than planned.
India's automobile sector stocks have fallen 15.4 percent so far this year, the steepest drop among global peers, while over the last 60 days, analysts have slashed their forward 12-month earnings per share estimates on the sector by 4.2 percent, the harshest in the Asia-Pacific region.
The only bright spot has been a surge in demand for sport utility vehicles (SUVs). Sales of off-road and crossover models grew by over 50 percent over the past 12 months, providing incremental growth for some manufacturers.
Mahindra and Mahindra Ltd (MAHM.NS), a domestic SUV specialist, grew its passenger vehicle sales by 27 percent in the last fiscal year, while Renault SA (RENA.PA) sold almost 40,000 of its budget SUV Dusters, which it launched in July.
Sales of SUVs and vans are not counted as part of the car data released by SIAM. Including SUVs and vans, overall passenger vehicle sales rose 2.2 percent in the financial year, down from a rise of 4.7 percent in the previous year.
Even SUV sales, helped by cheap diesel, are starting to show signs of slowing growth as the government moves to reduce its subsidy on the fuel, while a recent rise in tax on the vehicles may curb demand.
"Any meaningful growth recovery will likely happen only in FY15E," Macquarie wrote in a recent research report, referring to the financial year that ends in March 2015.

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Analysis: How Goldman's dollar-store bet reaped a fortune

By Lauren Tara LaCapra and Carrick Mollenkamp

Wed Apr 10, 2013 12:05am EDT

(Reuters) - Goldman Sachs Group Inc has likely generated around $1.2 billion of revenue over six years from its dealings with discount retailer Dollar General Corp, a Reuters review shows. Just don't expect the investment bank to boast about it.
Much of the revenue stems from an equity investment that is lumped into a catchall earnings segment called "Investing and Lending." Goldman created the segment in 2011 to shine some light on how much money it makes from investing its own money, but it still confounds analysts and investors because the bank does not provide details on the performance of individual assets.

 

The segment can have a large impact on Goldman's results in any given quarter. In the fourth quarter, Goldman reported nearly $2 billion in revenue from Investing and Lending, or 21 percent of overall revenue. Analysts expect the area to boost profits again when Goldman reports first-quarter results next week. Forecasts for the segment's revenue differ widely, from $1 billion to $2.2 billion.
"When you look at investment banking, it's very easy to break out how they will do quarter to quarter," said Rick Scott, chief investment officer at wealth-management firm L&S Advisors, which has about $25 million invested in Goldman shares. "But when it comes to Investing and Lending, what can you say? You certainly don't have the transparency."
The revenue the bank has earned from Dollar General also helps explain why Goldman, perhaps more than rivals, is aggressively looking for ways to continue its principal investing activities without running afoul of regulations such as the Volcker rule, which restricts how much of their own money banks can put at risk. It has lobbied regulators to preserve its merchant banking business and has come up with new structures for investments that are exempt from the rule's provisions.
Goldman is not required to provide details on individual investments when it reports earnings, and the bank declined to confirm or deny Reuters' calculations.
Unlike many of Goldman's investments, Dollar General is a publicly traded company, which means both the bank and the retailer have to disclose more information. A Reuters review of six years of filings with the U.S. Securities and Exchange Commission offers a rare - albeit limited - window into how Goldman profits from betting its own money.
The review shows that Goldman affiliates have nearly quintupled an initial $605 million cash investment in Dollar General, which peddles everything from $1 packs of Snickers bars to $5 packs of toilet paper. The investment was made as part of a $7.3 billion KKR & Co LP-led buyout in 2007.
Goldman has not only helped to turn around the retailer and sell most of its affiliates' holdings at a profit but has also earned money from serving as Dollar General's banker.
The broader KKR-led private-equity group - dubbed "Buck Holdings" in a nod to Dollar General's bargain-basement brand - took the retailer public again in November 2009 for $21 a share.
Since then, Goldman affiliates have generated roughly $2.5 billion of proceeds from stock sales and $77 million in management fees as private-equity sponsors, the analysis shows.
It is impossible from the outside to calculate precisely how much money Goldman itself has made from its Dollar General dealings, because some information is not public. While Goldman earned money from lending to Dollar General, for instance, it is unclear if it held onto that debt or sold it, and whether it booked gains or losses related to such sales.
Publicly available information on its Dollar General dealings nevertheless adds up to $1.2 billion in revenue.
Goldman earned money on Dollar General stock sales through a private equity fund called GS Capital Partners VI, which invests a mix of client money, employee money and Goldman's own money.
The investment bank represents about 25 percent of that fund - meaning that for the Dollar General buyout, Goldman contributed about $151 million in capital and has generated about $650 million in revenue from stock sales and management fees. Goldman's share of the fund's remaining stake in Dollar General amounts to about $70.6 million.
In addition, Goldman has also received at least $58 million of investment banking and underwriting fees for taking the company private and then public again; $479 million of interest payments and repurchase commissions from making a loan to the company; and $56 million for a derivatives trade pegged to that loan, according to filings. It has also earned fees from clients for managing the private equity fund.
"In this transaction, Goldman kind of nailed it - they've done it all," said Michael Driscoll, a former Bear Stearns executive who now teaches finance at Adelphi University.
UNPREDICTABLE SWINGS
Goldman does not run the Investing and Lending segment as a single operation. Businesses whose earnings flow into the segment do not share a common management team, and their investment strategies vary widely.
The segment holds standard financial investments like corporate bonds and stocks but has also made a slew of more unusual investments, from a coal mine in Cesar, Colombia, to a 50 percent stake in the crime drama television series "CSI," which it sold in March.
Profits from an elite team called the Special Situations Group also flow into Investing and Lending. That group has a history of making big, profitable bets on troubled assets, including a Japanese golf course and the pizza chain Sbarro Inc.
Not all investments have been a success. Goldman was a sponsor of the $45 billion buyout of Texas utility TXU, which turned into a terrific flop.
Over the long run, Goldman's principal investment has been a big moneymaker, but it also causes unpredictable swings in its fortunes from one year to the next because the bank marks its assets to market. Over the past five years, Investing and Lending has ranged from a pretax loss of $13.5 billion in 2008 to a pretax profit of $4.2 billion in 2010.
"Obviously it brings more volatility to earnings, and that causes some investors and regulators and politicians to be concerned," said David Stowell, a former Goldman executive who teaches finance at the Kellogg School of Management. "But, on balance, I think that Goldman has some talented people - I know them quite well - who run that, and I expect that they are making generally wise decisions."
The opacity of the segment has made the job of analysts and investors harder.
The only investment Goldman details is an equity stake in the Chinese lender Industrial and Commercial Bank of China Ltd, which is big enough to warrant disclosure. The rest of Investing and Lending revenue goes into three buckets: equities, debt and the vague category "other."
In raising estimates for Goldman's first-quarter profits over the past week, analysts have cited Investing and Lending as a big driver. JMP Securities' David Trone said he doubled his estimate for those gains, to $2.2 billion, based on broad market trends, not any specific investments.
On a January 16 conference call to discuss fourth-quarter earnings, six analysts asked Chief Financial Officer Harvey Schwartz for clarity on the segment.
Schwartz said the "idiosyncratic nature" of different portfolios can affect how they are managed but gave few other details.
"In some quarters (the segment) will perform well; in some quarters, we won't perform as well, relative to the marketplace," he said. "But the market will drive that."
Adding to confusion are Investing and Lending's expenses, which typically run $2 billion to $3 billion a year, even though Goldman says it has few employees. Dane Holmes, head of investor relations, said in an March interview that those expenses come from paying people as well as from operating expenses of investments like power plants and mines.
As for Dollar General, it has grown since its leveraged buyout.
It has hired new management, closed 400 unprofitable locations, kept tighter controls on inventory and changed the layout at stores to encourage customers to spend more, turning the company around. Earnings have soared from $138 million in 2006 to $953 million last year, while sales have climbed from $9.2 billion to $16 billion.
And the stock is up 137 percent since its relisting.

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U.S. says Okada's Universal is target of criminal bribery probe

TOKYO | Wed Apr 10, 2013 4:32am EDT

(Reuters) - Japanese billionaire Kazuo Okada and his companies are being investigated in the United States for potential violations of anti-bribery laws in relation to a $2 billion casino project in the Philippines, according to a court filing.
In a Nevada state court filing, U.S. federal prosecutors sought permission to intervene in a lawsuit brought by Wynn Resorts Ltd against Okada to prevent disrupting an ongoing criminal probe into the bribery allegations.
It was the first time U.S. authorities publicly acknowledged a criminal investigation of Okada and his companies - Japan's Universal Entertainment Corp and Nevada-based Aruze USA Inc - for possible violations of the Foreign Corrupt Practices Act, an anti-bribery statute dating to the 1970s.
The government also noted in the filing that it has been conducting a criminal investigation into Wynn's donation in 2011 to the University of Macau Development Foundation. Okada has said Wynn's board turned against him for opposing the donation.

 

For more than a year Okada has been locked in a legal battle with Wynn Resorts CEO Steve Wynn, during which the former business partners have exchanged allegations of illegal conduct.
Shares of Universal Entertainment, which generates the bulk of its profits from making pachinko gaming machines for the Japanese market, tumbled 15.7 percent to 1,666 yen on Wednesday - their biggest one-day drop in almost 14 months.
The U.S. Department of Justice is seeking a temporary stay on discovery in the civil proceedings to allow for the criminal case to be developed. Wynn would consent to the motion while Okada would likely oppose it, according to the filing.
"Universal is cooperating fully with all investigations," said Eric Andrus, a spokesman for the Japanese company at RLM Finsbury. Kim Sinatra, general counsel for Wynn Resorts, said the company would continue to cooperate with the government.
Reuters has reported that the Federal Bureau of Investigation was probing $40 million in payments from Universal to a close associate of the former head of the Philippine gaming authority in 2010 around the time the company was granted concessions for its Manila Bay casino.
Universal said in December it filed a defamation suit against Reuters in Tokyo for its reporting on the payments.

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FBI probes trading as KPMG quits Herbalife, Skechers audits

By Martinne Geller and Emily Flitter

Tue Apr 9, 2013 7:10pm EDT

(Reuters) - In a blow to one of the world's largest accounting firms, KPMG said it resigned as auditor of two U.S. corporations amid an FBI investigation into insider trading allegations involving leaked information and a former senior partner.
The two California-based companies - nutritional products group Herbalife Ltd and footwear maker Skechers USA Inc - said separately on Tuesday that KPMG had quit as their auditor in connection with the leaks.

 

The FBI's Los Angeles office is investigating the matter, according to a source familiar with the situation.
Skechers Chief Financial Officer David Weinberg told Reuters in an interview that Scott London had been the lead auditor for Skechers and had resigned after the leaks. Weinberg said that London had admitted to sharing inside information.
A KPMG spokesman confirmed that London was the partner who had resigned from the firm.
London was not immediately available for comment. The 50-year-old California native worked at KPMG for 29 years. A baseball lover, London became chairman of the L.A. Sports Council in 2011. He is also listed as a 2012 director on the board of the Los Angeles Chamber of Commerce.
Shares of Herbalife closed down 3.8 percent at $36.95, while Skechers shares were up 1.9 percent at $21.91 on Tuesday on moderately bullish New York Stock Exchange trading.
ANALYST DOWNGRADES HERBALIFE
"This is and will be disruptive to the stock, but hopefully not the company," said Timothy Ramey, an analyst at investment services firm D.A. Davidson & Co. in a report on Herbalife.
Ramey downgraded Herbalife shares to "neutral" from "buy."
Herbalife said in a statement that KPMG's resignation had nothing to do with the company's accounting practices or the integrity of its management - issues called into question by the high-stakes drama between hedge fund titans Bill Ackman and Carl Icahn over the company.
KPMG said in a statement late on Monday that it had resigned as the outside auditor for two clients due to the actions of a senior partner, who was in charge of the audit practice in its Los Angeles business unit.
Monday's announcement did not identify the partner or the companies involved. It said the unidentified partner provided inside information about its clients to someone who had used that information in stock trading.
"The partner was immediately separated from the firm," KPMG said in its statement. "This individual violated the firm's rigorous policies and protections, betrayed the trust of clients as well as colleagues, and acted with deliberate disregard for KPMG's long-standing culture of professionalism and integrity."
CALLS FOR MORE TRANSPARENCY
When the KPMG resignations became known late on Monday, the identity of the senior partner involved was initially unknown. London's name did not emerge until late on Tuesday.
The Public Company Accounting Oversight Board (PCAOB), which polices audit firms, proposed in 2011 that the firms be required to disclose the names of individual engagement partners in audit reports, as they must in some other countries.
That proposal has not been made a U.S. rule. Some audit critics said it should be to make auditing more transparent, though audit firms have resisted this idea for a variety of reasons.
A PCAOB spokeswoman declined to comment.
KPMG is the smallest of the Big Four global accounting and audit firms. It reported 2012 revenue of $23 billion, up 1.4 percent from the year before.
The other three firms are PricewaterhouseCoopers, Deloitte and Ernst & Young. All are U.S.-based and operate affiliate networks around the world.
Ackman and Icahn were not immediately available for comment.
Any controversy over KPMG's dealings could hurt the firm's reputation. In 2005, KPMG narrowly avoided a criminal indictment by agreeing to pay $456 million in a deferred prosecution settlement with U.S. authorities over its sale of tax shelters. Three years earlier, smaller rival Arthur Andersen collapsed over its auditing work for energy company Enron Corp.
In addition, KPMG partners were the only ones so far to have been sued by the U.S. Securities and Exchange Commission in connection with the global financial crisis.

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Toyota denies report that Ford Focus topped 2012 sales

Toyota Motor Corp (7203.T) said on Wednesday its Corolla was the world's top selling car of 2012, contradicting rival Ford (F.N) which claimed top spot for its Focus model.

Ford said on Tuesday it sold 1.02 million Focus compact cars last year, citing data from automotive consulting firm Polk.
It did not detail Corolla sales in a press release on its website, but various media reports have cited the U.S. carmaker as saying Toyota sold 872,774 Corollas last year.

 

Toyota's Tokyo-based spokesman Ryo Sakai said the Japanese carmaker sold 1.16 million Corollas in 2012 and that "Toyota still sees the Corolla as the world's most popular car".
"The sales figure includes Corolla Sedan, which is over 90 percent of the total volume, and the Corolla Altis, Corolla Axio, Corolla Wagon, Corolla Fielder and Corolla Rumion," he said.
It does not include Corolla derivatives like the Auris, Auris Hybrid, Verso, E'z, Matrix, Scion xB and Rukus, which do not share the 'Corolla' name.
Polk could not immediately be reached for comment.

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Important to pursue sustainable fiscal policy: Japan's Abe

It is important for the Japanese government to pursue sustainable fiscal policy to ensure trust in the government bond market, Prime Minister Shinzo Abe said on Tuesday.
Abe, speaking at the lower house of parliament's budget committee, also said the government was always monitoring moves in the bond market.

 

Abe was answering questions about the Bank of Japan's decision last week to double the monetary base by ramping up purchases of government debt in a bold gamble to end 15 years of deflation.

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China March CPI eases, factory deflation stubborn

China's annual consumer inflation eased to 2.1 percent in March from February's 3.2 percent while producer price deflation deepened, data showed on Tuesday, leaving policymakers room to keep monetary conditions easy and nurture a nascent recovery.

The National Bureau of Statistics said China's producer prices dropped 1.9 percent in March, faster than February's annual drop of 1.6 percent.

 

"Lower inflation will greatly ease investors' concerns that the policymakers would begin to tighten monetary conditions," Haibin Zhu, chief China economist at JP Morgan in Hong Kong, told Reuters.

Economists polled by Reuters had forecast March inflation to ease to 2.4 percent and factory gate prices to fall 1.8 percent from a year earlier.

Month-on-month consumer prices versus the market consensus of a 0.6 percent drop.

Much of the drop in the headline CPI was explained by a drop in food prices which economists say are normalizing after a seasonal spike in February caused by the Lunar New Year holiday.

The data is likely to reduce the anxiety building among some investors that China's policymakers may begin tightening monetary conditions at an early stage in the recovery cycle.

"We think the inflation outlook remains benign. If you look at the overall demand picture, China is recovering but the pace is still very gradual which means inflation is not a near-term concern," said Sun Junwei, China economist at HSBC in Beijing.

China's economy suffered its slowest year of growth for 13 years in 2012, expanding by 7.8 percent, though a fourth quarter bounce to 7.9 percent year-on-year was taken as the starting point of what is widely described as a modest recovery.

Investors expect GDP data due next week to confirm that the economy gained further traction in the first three months of 2013, with analysts in the Reuters poll forecasting that growth nudged up to 8.0 percent year-on-year.

China's central bank said last week the country's economic growth was stabilizing and that inflation was "basically stable". The bank made the remarks after holding its first-quarter monetary policy committee meeting.

But the central bank noted that future price trends bear a level of uncertainty, and that it would keep monetary conditions "stable".

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Wall Street closes higher, Alcoa volatile after results

Wall Street closes higher, Alcoa volatile after results

Stocks ended a volatile session higher on Monday as investors looked ahead to an earnings season expected to show modest growth despite concerns about the economy's health.

Wall Street fluctuated between positive and negative territory for much of the day before climbing in the final hour of trading, ending near its session highs. However, volume was light and the Dow's gains were limited by a selloff of Johnson & Johnson (JNJ.N) shares.


Forecasts for first-quarter earnings have been scaled back in 2013, with profits seen rising just 1.6 percent from the year-ago quarter, according to Thomson Reuters data. In January, earnings were seen rising 4.3 percent.

The drop in expectations has come as economic figures suggest the recovery could be less robust than some had thought. Weak corporate results could give investors further reasons to sell, pushing both the Dow and the S&P 500 back from recent all-time closing highs.

"We're waiting for earnings for evidence that the market can be supported at these levels," said Jim Dunigan, chief investment officer at PNC Wealth Management in Philadelphia. "We will see growth in earnings, but clearing the expectations bar could be difficult, which could give us reason to pause."

The season unofficially started after the market closed with results from Alcoa Inc (AA.N). The aluminum company reported adjusted earnings that beat expectations, but revenue was down from the year-ago quarter. After initially rising in extended-hours trading, Alcoa's stock slid 1.1 percent to $8.30.

As the first Dow component to report, Alcoa is informally viewed as setting the initial tone for the season, though many more bellwether companies' earnings won't come out until next week. The S&P materials index .SPSMCM ended Monday's session up 0.4 percent.

Among the day's most active names, Advanced Micro Devices (AMD.N) jumped 13 percent to $2.59 as the S&P 500's biggest percentage gainer, while Monster Beverage (MNST.O) rose 4.7 percent to $52.01, helping boost the S&P consumer staples sector index .SPLRCS, which rose 1.1 percent.

On the downside, J&J fell 1.1 percent to $81.11 after JPMorgan downgraded the healthcare company's stock to "neutral" from "overweight," saying it faced "a messy first quarter and a likely downward revision to 2013 guidance."

The Dow Jones industrial average .DJI rose 48.23 points, or 0.33 percent, to 14,613.48 at the close. The Standard & Poor's 500 Index .SPX gained 9.79 points, or 0.63 percent, to 1,563.07. The Nasdaq Composite Index .IXIC advanced 18.39 points, or 0.57 percent, to close at 3,222.25.

Both the Dow and the S&P 500 finished Monday's trading at their session highs, while the Nasdaq was just below its intraday peak.

During the session, the Dow made a swing of 115.68 points - falling 67.45 points to its intraday low before it rebounded to end the day up 48.23 points at its session high.

Stocks have rallied strongly this year with major indexes hitting record highs, helped in part by the Federal Reserve's stimulus program. The S&P 500 is up 9.6 percent for the year so far, while the Dow has gained 11.5 percent.

Despite that, major indexes posted their worst weekly loss for 2013 last week, with the payroll report fueling concerns about economic growth.

"A lot of the momentum we had in the first quarter was based on improving economic news, and the jobs report really took the wind out of our sails," said Dunigan, who helps oversee $116 billion in assets. "We're still trying to sift through what that means for our prospects going forward."

Volume was light, with about 5.11 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, well below the daily average so far this year of about 6.48 billion shares.

Two-thirds of the stocks traded on the New York Stock Exchange closed in positive territory, while about 60 percent of Nasdaq-listed shares ended higher.

Loose monetary policy from central banks around the world is expected to keep equities attractive. Recently investors have been using market declines as buying opportunities.

The Bank of Japan started its bond purchases on Monday after it announced last week that it will inject about $1.4 trillion into the economy in less than two years.

Fed Chairman Ben Bernanke will give a speech later on Monday after markets are closed. Investors have been watching for any insight into the Fed's thinking on how long the central bank will keep its asset purchase program in place as it tries to boost the economic recovery.

General Electric Co (GE.N) said it will buy oilfield pump maker Lufkin Industries Inc (LUFK.O) for about $2.98 billion, driving Lufkin shares up 37.6 percent to $87.96. GE, a Dow component, rose 0.8 percent to $23.12.

The news lifted energy names, with WPX Energy Inc (WPX.N) up 5.3 percent at $17.01.

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Yen hits 47-month low vs dollar, focus on 100 threshold

Yen hits 47-month low vs dollar, focus on 100 threshold

(Reuters) - The yen pushed deeper into multi-year lows versus the dollar and euro on Tuesday as the market saw every reason to sell the currency with the Japanese central bank on a warpath to battle deflation.

The dollar rose to as high as 99.67 yen on trading platform EBS, the greenback's strongest level versus the yen since May 2009. The dollar later pulled back a bit on profit-taking and last stood at 99.25 yen, down 0.1 percent on the day.

The euro hit its highest since January 2010 against the yen of 129.935 yen. The euro last changed hands at about 129.59 yen, up 0.3 percent from late U.S. trade on Monday.

Since the Bank of Japan (BOJ) unveiled a massive stimulus program last Thursday, the dollar has climbed roughly 7 percent against the yen.

"For USD/JPY, upside momentum remains strong and an eventual test of 100.00 seems in the cards, though there are likely to be a number of barriers between 99.50 and 100.00," said Vassili Serebriakov, strategist at BNP Paribas.


"Markets are increasingly focused on the notion that larger JGB purchases at longer maturities by the BOJ could push Japanese domestic long-term investors elsewhere."

Speculation that Japanese investors might start increasing overseas investment in search of higher yields has helped trigger a rally in some European bond markets in recent sessions, with French 10-year bond yields hitting a record low on Monday.

Some market players sold the dollar on Tuesday to lock in profits, and there was talk of dollar offers in the 99.80 yen to 100.00 yen area, a trader for a U.S. bank in Singapore said.

One possible technical resistance for the dollar lies at about 99.73 yen, which is the 50 percent retracement of the dollar's drop from a June 2007 high of 124.14 yen down to a record low of 75.311 yen set in October 2011.

Underscoring the Japanese currency's weakness, commodity currencies touched multi-year highs against the yen on Tuesday, with the Australian dollar hitting its highest since July 2008 at about 103.80 yen and the New Zealand dollar rising to its highest since February 2008 at about 84.49 yen.

The Australian dollar gained a quarter of a cent against the U.S. dollar after data showed China's annual consumer inflation eased to 2.1 percent in March from February's 3.2 percent, leaving Chinese policymakers room to keep monetary policy loose to support an economic recovery.

The Aussie dollar hit an intraday high of $1.0448 after the Chinese inflation data and last fetched $1.0432, up 0.2 percent from late U.S. trade on Monday.

Elsewhere, the euro rose 0.4 percent to $1.3059, having triggered some stop-loss buying at levels near $1.3050.

(Additional reporting by Reuters FX analyst Rick Lloyd in SINGAPORE; Editing by Richard Borsuk)

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Yen still in focus, Asian shares rise on Wall Street

(Reuters) - The yen fell to fresh multi-year lows and Japanese stocks extended gains on Tuesday as effects of the Bank of Japan's aggressive reflationary campaign reverberated through markets, while Asian equities drew support from a solid start to the U.S. quarterly earnings season.

Benign Chinese inflation data also boosted sentiment as it kept hopes that an expansive monetary stimulus will stay in place to support the world's second-largest economy, but escalating tensions in the Korean peninsula took a toll on South Korean shares and its currency.

 

The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.8 percent, led by Australian shares .AXJO which gained 1.3 percent on rises in blue chip financials and miners.

"It's hard to say which direction the market will go but I think near term the biggest catalysts will be the results from the U.S. earnings season," said Haris Khaliqi, research analyst at Foster Stockbroking.

Alcoa Inc (AA.N), the largest U.S. aluminum producer, kicked off U.S. earnings on Monday, reporting an increase in quarterly profit on Monday and easing concerns about corporate results in the first three months of 2013.

Earnings forecasts have been scaled back heading into the first-quarter reports, with S&P 500 company earnings seen up just 1.6 percent from a year ago, according to Thomson Reuters data, down from a 4.3 percent forecast in January.

South Korean shares .KS11 were the sole exception to the regional equity rally, falling 0.5 percent, while the South Korean won briefly dipped to a fresh 8-month low of 1,145.3 per dollar earlier.

North Korea suspended its sole remaining major project with the South on Monday, the Kaesong industrial park, amid speculation that it will take some sort of provocative action - another nuclear weapons test or missile launch - in what has become one of the most serious crises on the peninsula since the end of the Korean War in 1953.

China's annual consumer inflation eased to 2.1 percent in March from February's 3.2 percent while producer price deflation deepened, data showed on Tuesday.

"The lower inflation will greatly ease investors' concerns that policymakers would begin to tighten monetary conditions," said Haibin Zhu, chief China economist at JPMorgan Chase in Hong Kong.

The Australian dollar rose to a high of $1.0448 from around $1.0424, before drifting back. Australian assets are sensitive to economic indicators out of China, as it is Australia's largest export destination.

JAPAN STILL LEADS

The yen was expected to stay under pressure, while Japanese shares were seen garnering sustained support from the unprecedented scale of the stimulus unveiled late last week by the new BOJ Governor Haruhiko Kuroda.

Japan's Nikkei stock average .N225 rose 0.5 percent, after jumping as much as 3.1 percent to its highest since August 2008 earlier on Monday. .T

"Kuroda's done a commendable job of letting the market know he is not fooling around. He is certainly not shackled by economic theories," said David Baran, co-founder of Tokyo-based hedge fund Symphony Financial Partners.

He expected Japan's markets to perform in a similar way to U.S. markets after the U.S. Federal Reserve first opted for quantitative easing four years ago with an asset buying program. Both the Standard & Poor's Index .SPX and the Dow Jones industrial average .DJI have hit all-time highs during the last couple of weeks.

The Nikkei, currently at around 13,260, remains far below a lifetime high of 38,915.87 notched on December 29, 1989.

Early in Asia on Tuesday, the dollar hit its highest since May 2009 of 99.65 yen while the euro climbed as far as 129.72 yen, its highest since January 2010. The Aussie dollar soared to 103.78 yen, the highest since July 2008.

Traders expect the dollar to trade at 100 yen as soon as this week, as the effects of the BOJ's latest move reverberate through markets.

"Markets are increasingly focused on the notion that larger JGB purchases at longer maturities by the BOJ could push Japanese domestic long-term investors elsewhere," said Vassili Serebriakov, strategist at BNP Paribas.

A sharp decline in Japanese government bond yields across the curve has stirred speculation Japanese investors will turn to higher-yielding assets elsewhere, pushing sovereign bond yields lower in the United States and the euro zone.

Concerns over the euro zone were offset by sharp falls in yields of Spain and Italy due to demand for higher-yielding euro zone bonds from Asia after the BOJ plan.

U.S. crude futures were up 0.2 percent to $93.57 a barrel and Brent rose 0.4 percent to $105.04. <O/R>

Growth in developing Asia is seen gaining momentum this year, powered by rising domestic consumption and intra-regional trade, but authorities need to ward off risks of inflation and asset bubbles arising from strong capital inflows, the Asian Development Bank said in its latest regional outlook report for 2013.

Firmer stocks underpinned risk appetite in Asian credit markets, tightening the spread on the iTraxx Asia ex-Japan investment-grade index by 3 basis points.

(Additional reporting by Ian Chua in Sydney and China Economics Team in Beijing Thuy Ong in Sydney; Editing by Simon Cameron-Moore)

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French finance minister, U.S. Treasury Lew's to meet Tuesday as planned

(Reuters) - French Finance Minister Pierre Moscovici and U.S. Treasury Secretary Jack Lew will meet on Tuesday in Paris as planned, a U.S. Treasury official said on Monday, restoring a get together that had been canceled earlier in the day.
The two will meet at the U.S. embassy in Paris on Tuesday afternoon, and then hold a joint press conference.

 

Lew is in Europe for talks with officials regarding the sagging European economy, which is suffering from a prolonged sovereign debt crisis.
The government of French President Francois Hollande has recently come under pressure after a former budget minister admitted lying about a secret 600,000-euro foreign bank account.
Hollande and Moscovici have spent the past week fending off accusations of a cover-up. A poll on Sunday showed a majority of the French favor a government reshuffle.
A spokesperson from the French Finance Ministry said the meeting was initially canceled due to scheduling conflicts.
The spokesperson said Moscovici would meet with Lew next week when the minister travels to Washington for the semi-annual meeting of the International Monetary Fund.
(Reporting by Anna Yukhananov in Brussels and Catherine Bremer in Paris; Writing by Jason Lange in Washington; Editing by James Dalgleish and Leslie Adler)

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Healthcare sector leads European share bounce

* FTSEurofirst 300 up 0.2 percent
* Novartis boosted by BofA-ML upgrade
* Portugal uncertainty highlights euro zone problems
By Tricia Wright
LONDON, April 8 (Reuters) - European shares were led higher by the healthcare sector on Monday as investors tiptoed back into the market with a cautious focus on the start of the U.S. first-quarter earnings season.

 

The FTSEurofirst 300 closed up 0.2 percent at 1,164.79 points, in the aftermath of Friday's 1.6 percent drop on weak U.S. jobs figures. The euro zone's blue-chip Euro STOXX 50 advanced 0.2 percent to 2,589.25 points.
Traders noted a lack of conviction on Monday - evidenced by low volumes - with some investors apprehensive before the start of the U.S. earnings season, which kicks off with first-quarter results from aluminium producer Alcoa later in the day.
The FTSEurofirst 300 traded 83 percent of its 90-day daily average.
"I think the markets are taking stock and thinking what are company earnings forecasts (going to be like), what is the consensus going to be for forward P/Es (price/earnings ratios)," Michael Hewson, analyst at CMC Markets, said.
Investors who dipped into the market opted for sectors better suited to a low growth environment, such as healthcare , ahead 1 percent.
Swiss drugmaker Novartis, up 1.8 percent, was among the biggest individual points contributors to the FTSEurofirst 300, helped by an upgrade on the stock from BofA Merrill Lynch to "neutral", according to traders.
Some fund managers, however, highlighted that so-called defensive sectors, which have spearheaded the rally since the turn of the year, are now looking expensive.
The healthcare and consumer staples sectors trade on respective 12-month forward P/E ratios of 13.9 times and 16.7 times, according to Thomson Reuters StarMine data.
"Clearly the economic environment isn't as good as it has been... but still there are sound valuation opportunities out there," said Kevin Lilley, who runs Old Mutual's European Equities fund, which has 55 million pounds ($84.1 million) assets under management.
Lilley is "overweight" financials which, according to Thomson Reuters data, trade on a 12-month forward P/E of 9.8 times.

PORTUGAL UNDERPERFORMS
Traders said that while the long-term outlook for European equities remained positive, with equities offering better returns than cash and bonds, near-term prospects were clouded by uncertainty due to the euro zone's debt crisis.
Concerns over the euro zone - which resurfaced last month after inconclusive elections in Italy - were heightened when Portugal's constitutional court rejected some of the austerity measures introduced as a condition of the country's bailout.
Portugal's benchmark PSI 20 equity index underperformed gains elsewhere in Europe, with the Lisbon market falling 1.4 percent.
Some investors were relatively unfazed by the bouts of political turmoil which have led to jittery trade in recent weeks.
"There's always going to be something out there that goes against the grain but what this crisis has shown... is that there is a real political will for things to continue and for the euro to hold it together and the euro zone to hold it together," Old Mutual's Lilley said.

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UK Stocks-Factors to watch on Monday April 8

UK Stocks-Factors to watch on Monday April 8

(Reuters) - Futures on Britain's top index rose 0.4 percent ahead of market open on Monday. For more on the factors affecting European stocks, please click on

* The UK blue chip FTSE 100 index closed 94.34 points lower on Friday at 6249.78. Britain's top share index posted its worst weekly loss since November after falling for a third straight session on Friday when weak U.S. jobs data dampened expectations of steady recovery in the world's largest economy.

* BANKS - Big bank depositors could take a hit under planned European Union law if a bank fails, the EU's economic affairs chief Olli Rehn said on Saturday, but noted that Cyprus's bailout model was exceptional.

* BP - A U.S. judge's ruling Friday against BP means the company can proceed with its appeal of the way a court-appointed administrator apportions payments for claims related to the 2010 Gulf of Mexico oil spill, some of which BP called "absurd."

* TESCO - The Telegraph reports that the food retailer is facing a bill of about 1 billion pounds ($1.54 billion) to quit its loss-making Fresh & Easy business in the US.

* British businesses expect to increase hiring over the next six months but do not anticipate overall growth in the nation's economy, a survey showed on Monday. An optimism index from accountancy firm BDO, which measures business performance expectations two quarters ahead, rose to 92.2 in March from 90.6 in February.

* CAIRN ENERGY - Bid rumours are mounting in the oil and gas explorer after David Einhorn, who runs the 5 billion pound hedge fund Greenlight Capital, took his stake in the company to 3 percent, fuelling speculation of a 1.6 billion pounds shake-up of the Edinburgh-based firm, according to the Daily Express.

* MECOM - The publisher says that earnings are likely to fall materially short of current market expectations if conditions do no improve.

* GEMFIELDS - The mining company sees a possible ban by the Zambian government on the company's ability to sell its gemstones outside of the country, potentially affecting the Kariba amethyst mine in which Gemfields has a 50 percent interest.

* FINDEL - Findel expects to report full-year results in line with market expectations.

* FAROE PETROLEUM - Faroe Petroleum says that the Darwin exploration well is dry.

* XCITE ENERGY - Xcite Energy reports a significant increase in both reserves at its Bentley field and value attributable to its assets, saying the time is right to seek partners for the project.

* WILLIAM SINCLAIR - The horticulture firm says that the beginning of the important spring selling season has been delayed by bad weather, although it remains confident that the industry is relatively recession resistant.


TODAY'S UK PAPERS
> Financial Times
> Other business headlines Multimedia versions of Reuters Top News are now available for: * 3000 Xtra : visit* BridgeStation: view story .134(Reporting by Alistair Smout)

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The American Manufacturing Renaissance Is A Flop

REUTERS / Brian Snyder

Labor costs are rising overseas and energy costs are falling in America.
These trends have everyone excited that an American manufacturing renaissance is at hand.
Unfortunately, there is no good evidence to suggest this is happening.  In fact, some data suggest the opposite is happening.
"Evidence for a structural renaissance is scant so far," writes Goldman Sachs' Jan Hatzius.
And even if we could bring manufacturing back, is that what we really want?  When manufacturing comes back, so does pollution.
Furthermore, the idea of reindustrialization represents the end of a mega-bullish secular trend for earnings.
The idea of an American manufacturing renaissance is a nice one.  But the charts we looked at suggests its actually a combination of fiction and misfortune.

 

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Greek Bank Stocks Are Collapsing After Big Merger Is Called Off

Getty Images

A big merger of two Greek banks has been called off due to lack of creditor support.
From Ekathimerini:

National Bank of Greece and Eurobank Ergasias will stage their recapitalization separately, Bank of Greece announced late on Sunday, thereby freezing their merger procedure. All signs point to the two banks continuing autonomously.

The process and the timetable of the share capital increases of the two lenders as well as those of Alpha Bank and Piraeus will proceed as planned, BoG said.

...

The creditors have been eager to avoid the creation of such big a group that would not be easy to find a strategic investor in the future.

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Stocks Are In The Middle Of An Back-And-Forth Battle, The Likes Of Which We Haven't Seen In Decades

Check out this chart of the S&P 500.
Notice something about the past several days?

stockcharts.com

You might not, because it's a little hard to read, but we've now had 13 straight days of alternating red and white days, meaning 13 straight days of alternating positive and negative closes.
And while Friday was a negative close, today is looking positive for US futures, so it could be 14.
Last week, when the streak was at 11, that was already a record seen not since the early 80s.
The back-and-forthness of the market represents what's going on in debate, too. The market is at all-time highs, and there's a feeling that the US is close to breaking out of its great malaise from the last few years.
Yet some recent datapoints aren't cooperating, and the overseas news continues to get worse.
The battle between the bulls and the bears is as intense as we've seen it in a long time.

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