Disney, GM, Goodyear, Varian Medical: U.S. Equity Preview

Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses and prices are as of 7:45 a.m. in New York.

Constellation Energy Group Inc. (CEG:US): The U.S. power- marketing company named Michael J. Wallace, 61, as chief operating officer, according to a regulatory filing. The company also said in a report to the U.S. Nuclear Regulatory Commission that it increased its Ginna reactor’s output in New York to full capacity from 58 percent.

General Motors Corp. (GM:US): The world’s largest carmaker until its 77-year reign ended last year, filed for bankruptcy protection in the U.S. with a plan to create a 21st-century company that can compete in world markets. Trading in the shares was halted.

Goodyear Tire & Rubber Co. (GT:US): The largest U.S. tiremaker said it sold some of its Akron, Ohio, properties to Industrial Realty, part of a plan to develop a new headquarters in Akron. Goodyear said it will record a non-cash, after-tax charge of as much as $45 million in the second quarter in connection with the property sales.

Green Mountain Coffee Roasters Inc. (GMCR:US): The Waterbury, Vermont-based roaster may be able to “manage” earnings by buying its own product from licensees, generating royalties that may obscure the business’s true profitability, Barron’s reported, citing its own analysis.

Varian Medical Systems Inc. (VAR:US): The supplier for more than half the global demand for radiation equipment used to treat cancer may see demand for its X-ray scanners rise at border-security agencies and hospitals in emerging markets, Barron’s said, citing analysts.

Walt Disney Co.’s (DIS:US): The entertainment company’s 3-D feature film “Up” opened as the top movie over the weekend, taking in $68.2 million at theaters in the U.S. and Canada.

Prudential passes on TARP funding to issue stock

Prudential Financial Inc. said Monday it will not take funds from the government's financial rescue program, but it is planning to raise $1.25 billion on its own through a common stock offering.

The Newark, N.J.-based life insurance and financial services firm said it will not participate in the Treasury Department's Troubled Asset Relief Program. Last month, the government said it would allow Prudential and five other major insurers to tap the program for additional capital. The other insurers included Hartford Financial Services Group Inc., Allstate Corp., Lincoln National Corp., Ameriprise Financial Inc. and Principal Financial Group Inc.

Both Allstate and Ameriprise have already declined to accept the funds.

As hundreds of banks accepted billions in government bailout funds last fall, some life insurers aggressively lobbied for their own piece of the federal aid program. The insurers were worried about their balance sheets, which have been hammered by hefty investment losses from declines in the stock market and other investments. The government approved those requests last month.

Prudential Financial lost $5 million during the first quarter, though it did record an operating profit of $436 million. As of March 31, Prudential's unrealized losses on investments totaled $11.25 billion. The unrealized losses were mostly tied to a decline in value of investment-grade securities the firm still holds. The value of many investments, such as mortgage-backed securities, has plummeted since the middle of 2007.

Instead of using the government to improve its financial position and help offset losses, Prudential will launch a public stock offering to raise $1.25 billion in new cash to bolster its reserves. It will use the additional funds for general corporate purposes, which could include adding capital to its insurance subsidiaries, for the repayment of short-term debt or for potential strategic initiatives.

Underwriters of the offering have been granted a 30-day option to purchase an additional $188 million in shares.

Shares of Prudential fell 86 cents, or 2.2 percent, to $39.05 in premarket trading Monday. Prudential shares closed Friday at $39.91.

Last fall when the government began the program, financial firms were unable to raise new cash through stock offerings or other private deals because the mushrooming credit crisis essentially shut down the credit and lending markets. That left the government as one of the few alternatives to get needed cash to help offset mounting losses because of the worsening economy.

Since the market began to rebound in early March, investors have become more receptive to buying new shares of financial firms. Some banks that received TARP funds last fall have already begun repaying the loans or raised new cash through stock offers in advance of repaying the debt.

Oil hits new 6-month high above $66

Oil prices extended a rally to above $66 a barrel Friday to hit a fresh six-month high, after the U.S. reported a fall in oil inventories and further signs of an improving economy.

OPEC oil ministers, who on Thursday agreed to leave production levels unchanged, expected the rally to continue until 2010. "I think that by year end we will see $70 to $75," Abdalla Salem El Badri, secretary general of the Organization of the Petroleum Exporting Countries, said Friday in Vienna.

Benchmark crude for July delivery was up $1.16 cents to $66.24 a barrel by late morning in Europe in electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose $1.63 to settle at $65.08, a six-month high and almost double the lows reached in March, when it fell below $35 a barrel.

The Energy Department's Energy Information Administration on Thursday said U.S. oil supplies dropped unexpectedly by 5.4 million barrels last week. Though crude inventories remain near 19-year highs, it was the third week in a row that supplies have fallen.

Investors were also cheered by signs the U.S. recession may be bottoming out. The government reported Thursday that demand for big-ticket manufactured goods in April had its biggest jump in 16 months, while separate data showed the number of newly laid-off people requesting jobless benefits fell last week.

"We've got a lot more optimism about the economic outlook than we did," said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. "The market is factoring in a recovery in demand by the end of the year."

"But there's no real evidence that demand is picking up at this point."

OPEC's announcement to keep output levels unchanged was widely expected and did not weigh on prices. It had made production cuts totaling 4.2 million barrels a day between September and January, but has kept output steady since then.

El Badri, speaking to reporters a day after the meeting, said OPEC would be careful "not to take any negative decision" to hurt the chances of economic recovery. He even held out hope of output increases "if the price goes high" and if stockpiles diminish too much -- but declined to specify what a "high" price would be.

Analysts at JBC Energy noted in a report, however, that "supply is still exceeding demand with oil inventories around the world close to record highs" and that a further output cut is still possible.

In other Nymex trading, gasoline for June delivery rose 1.8 cents to $1.93 a gallon and heating oil gained 3.45 cents to $1.64 a gallon. Natural gas for June delivery was up 12.9 cents at $4.09 per 1,000 cubic feet.

In London, Brent prices rose 92 cents to $65.31 a barrel on the ICE Futures exchange.

Starbucks Pushing Landlords for 25% Cut in Cafe Rents

Starbucks Corp., the world’s largest coffee-shop operator, is pushing some U.S. landlords for as much as a 25 percent reduction in lease rates, taking advantage of a declining real estate market to save on rent.

Faith Hope Consolo, chairman of New York-based Prudential Douglas Elliman’s retail leasing, marketing and sales division, is generally advising about a dozen landlords to work with Starbucks after they received letters seeking rent reductions of 20 percent to 25 percent. She hasn’t seen the correspondence.

Separately, two other letters were confirmed by two property managers, who declined to be named because the negotiations are still under way.

“In this environment, what we’ve seen in general is the landlords and the retailers really have to work together more closely to prevail,” Consolo, 50, said in a May 27 telephone interview. “We’re talking a lot about tenant retention.”

Starbucks began rent-reduction efforts in January as part of a plan to trim overall expenses, according to Tara Darrow, a spokeswoman for the Seattle-based company. The same month, the company said it would close about 300 cafes this year and cut as many as 6,700 jobs after first-quarter profit plunged 69 percent, hurt by an economy in which cost-conscious consumers cut back on premium coffee.

Labor, Food Costs

Starbucks is looking to trim labor, food and other costs, and had cut $195 million through the first half of fiscal 2009. In April, the company said it was on pace to lower total costs by $500 million in the fiscal year that ends in September.

Darrow wouldn’t confirm the size of the reduction the company is asking. She also wouldn’t specify how many leases the company is trying to renegotiate or how many landlords have agreed to reductions. Starbucks isn’t asking for a blanket rate reduction from the landlords it has approached, Darrow said.

Starbucks rose 11 cents to $13.82 at 9:38 a.m. New York time on the Nasdaq Stock Market. The shares advanced 45 percent this year before today.

“We’re taking advantage of the opportunity in as many cases as we can,” Darrow said. “We feel like it’s a positive program for us. Most of the landlords we’ve worked with have felt it is a mutually beneficial situation.”

The rent-reduction program covers the U.S. stores operated by Starbucks, a number that totaled 7,035 as of March 29. The effort doesn’t include the more than 4,400 U.S. stores in airports, supermarkets and other licensed locations, Darrow said.

Consolo said she’s generally advising landlords to give Starbucks a break in the rent, in the hope that the retailer remains a tenant. Doing so may make sense even in cases where the retailer would be required to continue paying rent if it closed a store.

Longer Leases

“The owner or developer doesn’t want a dark store,” Consolo said. “It reduces the traffic.”

Rising vacancy rates and falling property values are spurring landlords to offer lower rents in exchange for longer lease terms, said Hudson Riehle, senior vice president of research at the Washington-based National Restaurant Association.

“In this recession, compared with the last one, we do see developers and owners being much more willing to work with the operators to make sure the restaurant remains where it is,” Riehle said. “It’s much more of a partnership than it used to be.”

Commercial real estate values dropped 22.8 percent through March from their October 2007 peak, according to a May 19 report from Moody’s Investors Service. Property prices have fallen 21 percent from a year ago, and Moody’s expects further declines.

Landlords are hoping lower lease rates will allow tenants to remain open, Riehle said. Vacancies at malls and shopping centers climbed to 9.5 percent in the first quarter, the most in a decade, as stores and restaurants closed, according to Reis Inc., a New York-based real estate research firm.

Prime Sites

Quiznos Corp., the closely held toasted-sandwich chain, has been able to reduce rents by 15 percent to 20 percent, often in exchange for signing longer leases, Chief Executive Officer Rick Schaden said in an interview. The Denver-based company has renegotiated as many as 90 leases, including 40 using a team of three outside consulting firms. Quiznos also has grabbed more attractive sites at better prices, including an “A+” site in Denver that hasn’t been available for 25 years, Schaden said.

The phenomenon isn’t limited to the U.S. Brinker International Inc., the Dallas-based owner of Chili’s Grill & Bar, has seen lease rates fall as much as 30 percent in Beijing, John Reale, president of international operations, said in an interview.

S&P places Coeur d'Alene Mines on CreditWatch

Standard & Poor's Ratings Services on Monday placed Coeur d'Alene Mines Corp. on CreditWatch with positive implications, but warned that the mining company may require more funding for its capital spending plan

The ratings, including Standard & Poor's "CCC" corporate credit rating, reflects its assessment that near-term operating cash flow generation will likely increase due to higher metal volumes and continued favorable gold and silver prices, it said.

The Coeur D'Alene, Idaho, company's construction of its Palmarejo mine and start of operation in the first quarter of 2009 are increasing volumes.

"Still, the company's liquidity position remains somewhat thin because its near-term capital spending plan of approximately $70 million will likely necessitate additional external funding," Standard & Poor's said.

The ratings agency said it expects Coeur d'Alene will seek to raise capital through sale leasebacks, gold leases, and other sources over the next several months.

Mitchell Krebs, Coeur d'Alene's chief financial officer, said the company believes its liquidity is adequate going forward. He said the company ended March with over $38 million in cash and expects to generate $100 million in operating cash flow in 2009.

"These combined sources of cash are expected to more than satisfy remaining capital expenditures during the year," he said.

S&P said that if it upgrades the company, "we currently expect it would likely be limited to one notch" because the improvement in its liquidity will likely be marginal until it benefits from increased output and favorable metal prices over time.

Coeur D'Alene's shares ended Monday unchanged at $1.37.

Yahoo CEO: Deal or No Deal, I Can Reignite Growth & Stock

By firmly declaring her willingness to do a deal on search, Yahoo CEO Carol Bartz provided some of the biggest headlines of the first full day of the AllThingsD conference here.

But there was more to the story.

Bartz sat down with me this afternoon. Highlights of our conversation:

* Talks not on fast track: "Negotiations always ebb and flow and right now they¹re in an ebb position. There’s not that much going on,” she said.
* Why a deal hasn't happened to date: "The boatload [of money] hasn't driven to the dock."
* What about her relationship with Steve Ballmer? Been strong for 15+ years, she says.
* The slide in Yahoo's search market share is over: Bartz says Yahoo can certainly hold 20%, possibly grow it.
* Outlook for Yahoo stock and growth: Bartz wouldn't directly address a question about what happens to Yahoo stock if no deal materializes, but she did express extreme confidence she can repeat her performance at Autodesk, whose stock rose more than eightfold during her 14-year tenure and delivered compounded annual sales growth of 13%.

"Given enough time, absolutely Yahoo can match that," she said.

Stay tuned for part II of the interview where Bartz and I discuss her vision for the company and her strategy to meet those ambitious long-term targets.

Lehman Bankruptcy Haunts Stocks With S&P 500 Cheapest to Bonds

By almost any measure, credit markets have recovered most of the losses caused by September’s collapse of Lehman Brothers Holdings Inc. Not U.S. stocks.

The Standard & Poor’s 500 Index, while up 31 percent from its lows, must rise 41 percent to reach its last closing price before Sept. 15, when Lehman filed for the biggest bankruptcy in history, freezing financial markets. Since then, 10-year Treasury notes have climbed 4.6 percent and investment-grade company bonds, which plunged as much as 14 percent, are now down 1.2 percent, according to Merrill Lynch & Co. bond indexes.

The disparity shows that while the U.S. government succeeded in calming markets, stock investors aren’t convinced that the economy and profits will grow fast enough to sustain a bigger advance. Investors are paying the lowest prices on record for equities compared with corporate bonds, based on the earnings yield on the S&P 500.

“Equity investors are still scarred,” said James Dunigan, chief investment officer at PNC Financial Services Group Inc.’s wealth-management unit, which oversees $96 billion in Philadelphia. “Those scars aren’t as easy to heal as they are in the fixed-income market.”

Earnings yield, calculated by dividing the total profit of companies in the S&P 500 by the index’s price, equaled 8.2 percent last week, based on analysts’ earnings estimates for next year. That exceeded yields on U.S. investment-grade bonds by 1.36 percentage points, the widest margin on record when compared with historic profits, monthly data compiled by Bloomberg and Merrill Lynch show.

Stocks Versus Bonds

A stock that pays more in earnings than corporate bonds yield in interest is judged to be cheap by some investors who view profits as the main gauge of returns in equities. Comparing earnings yields to bond payments is a valuation technique used by Warren Buffett, the chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc. and the world’s most successful investor.

Stocks have become even cheaper than debt during the S&P 500’s two-month rebound as corporate bond yields fell by 1.5 percentage points. The gap has widened 0.15 percentage point since the start of March, data compiled by Bloomberg and New York-based Merrill show.

The S&P 500 also trades below its average price-earnings ratio of 16.3 over the past 128 years, the period tracked by Yale University professor Robert Shiller. Based on analysts’ estimates for combined earnings of $72.59 per share for S&P 500 companies next year, the measure would have to increase 33 percent to 1,183.22 to match the historic valuation, according to share-weighted data compiled by Bloomberg.

Lehman, Libor

Unraveling credit markets sparked by the collapse of bonds tied to subprime mortgages triggered bank losses that have grown to almost $1.5 trillion, causing the economy to contract by more than 6 percent in each of the last two quarters, the most since 1958, Bloomberg data show. The recession deepened when New York- based Lehman, then the fourth-biggest securities firm, filed for bankruptcy.

Banks hoarded cash on concern more lenders would fail, causing the London interbank offered rate that banks charge each other for overnight loans to more than triple in a month, while the interest for 3-month loans jumped 71 percent. The difference between Libor and the Federal Reserve’s target rate for overnight lending among financial institutions climbed to 3.32 percent on Oct. 10, the highest since at least 1984.

Investment-grade U.S. corporate debt fell 6.8 percent last year, high-yield bonds lost 26 percent and the S&P 500 plunged 37 percent, including dividends. Ten-year Treasuries returned 20 percent. Securities rated below BBB- by S&P or Baa3 by Moody’s Investors Service are considered below investment grade.

European Stocks Decline; Most Asian Shares Fall on North Korea

European stocks fell on speculation that share prices have outpaced corporate profits after the Dow Jones Stoxx 600 Index traded at the most expensive level in five years. Most Asian shares slid on concern North Korea will step up missile tests.

Danone SA declined 5.8 percent after Europe’s biggest maker of baby food said it is seeking to raise 3 billion euros ($4.2 billion) in a rights offer. Porsche SE slipped 2.4 percent amid speculation the automaker is in danger of losing profits recorded from holding Volkswagen AG options.

The Stoxx 600 slipped 0.6 percent at 8:10 a.m. in London. The gauge has rebounded 31 percent from a 12-year low on March 9, driving valuations for the measure to 24 times the earnings of its companies yesterday, the highest since March 2004.

“We are now in a normal consolidation phase after this very sharp upward movement,” said Petra Kerssenbrock, an equity strategist at Commerzbank AG in Frankfurt. “We are digesting this clearly overbought situation,” she said in a Bloomberg Television interview.

The MSCI Asia Pacific Index slipped 0.1 percent as about four stocks fell for every three that rose.

Futures on the Standard & Poor’s 500 Index were little changed before U.S. markets resume trading after the Memorial Day holiday. Economists project the S&P/Case-Shiller home-price index will show property values in 20 of the largest metropolitan areas dropped 18.4 percent in March from a year earlier, compared with an 18.6 percent decline in February.

Shadow of Lehman

The S&P 500 must rise 41 percent to reach its last closing price before the collapse of Lehman Brothers Holdings Inc. in September, even after a 31 percent rally since March 9.

Danone declined 5.8 percent to 37.33 euros as it raises capital to cut debt and increase financial flexibility. The planned rights offer will be its first in 22 years, according to Chief Financial Officer Pierre-Andre Terisse.

Porsche lost 2.4 percent to 42.70 euros. The automaker that is struggling to combine with VW is also in danger of losing some of the 17.3 billion euros in profits recorded from holding VW options because it may not have the money to exercise them.

Porsche bought options and Volkswagen stock for more than three years and controls more than 70 percent of Europe’s biggest automaker. Now, Porsche may be unable to raise the money needed to cash in the options, according to Sanford C. Bernstein & Co., Sal. Oppenheim jr. & Cie. and FAIResearch GmbH & Co.

Arcandor, LG Electronics

Arcandor AG dropped 4 percent to 1.70 euros after the Financial Times Deutschland reported that the company has shelved talks with Metro AG about a combination of their department-store divisions.

LG Electronics Inc., the world’s third-largest liquid crystal display television maker, lost 1.8 percent in Seoul after Yonhap News reported North Korea may fire more short-range missiles.

President Barack Obama told reporters in Washington that the U.S. “will work with our friends and allies to stand up” to North Korea. The United Nations Security Council agreed to pursue new measures against the communist regime.

North Korea’s first nuclear weapons test on Oct. 9, 2006, sent MSCI’s Asia index down 0.5 percent. The gauge rebounded 0.1 percent the next day and finished the month up 2.9 percent. It rose 3.1 percent in both November and December of that year.

AAA Rating

Rising debt may jeopardize the AAA credit rating of the U.S. in the next three years, New York University economist Nouriel Roubini told Il Sole 24 Ore in an interview.

By this time next year, “the market will realize that potential growth for the U.S. is no longer 3 percent, but is 2 percent or under,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview with Bloomberg Radio.

Separately, Germany’s financial regulator said debts of the country’s banks will blow up “like a grenade” unless the lenders participate in the government’s plan to help them prepare for the credit crunch’s next stage, the Telegraph newspaper reported, citing BaFin President Jochen Sanio.

Honda overtakes Toyota in parts supplier survey

Honda Motor Co. overtook Toyota Motor Corp. as the top company that auto parts suppliers prefer to do business with, according to an annual survey.

Toyota has been the No. 1 automaker among the parts suppliers since 2002, but its ratings have fallen steadily over the last two years, according to a study by Planning Perspectives Inc., a Birmingham, Mich.-based company that surveys manufacturing and service industries. Honda's marks declined from last year as well, though not by as much.

Japanese automakers continued to boast the best relations with their suppliers, with Nissan Motor Co. coming in third among the six automakers ranked. Ford Motor Co.'s supplier relations improved dramatically for the second year in a row, coming in fourth, followed by General Motors Corp. then Chrysler LLC.

"While Ford still has a lot of work to do, what they're doing with their suppliers is working," said John W. Henke, president and chief executive of Planning Perspectives, in a written statement.

Suppliers who work with Toyota complained of a younger, less experienced staff at the Japanese automaker's purchasing group, Henke said. It said Ford's improvement was due to its recent decision to transfer its top European purchasing executive to the U.S.

Ford remains the only automaker among the Detroit Three that has not accepted government aid. Crosstown rival Chrysler is in the midst of bankruptcy protection and many of its biggest creditors are parts suppliers waiting to be paid.

GM, meanwhile, is holding out hope for an out-of-court restructuring. If faces a deadline at the end of the month to get its bondholders -- who hold $27 billion in debt -- to take a 10 percent equity stake in the company. If it is unsuccessful, it will likely file for bankruptcy protection.

Automakers rely on parts suppliers to meet quality standards, provide new technology and make investments to fulfill supply contracts. But another bankruptcy is likely to be highly disruptive to the supply base, which is already reeling as automakers cut production and idle their factories to cope with falling sales.

A total of 231 first-tier parts suppliers representing 52 percent of automakers' annual purchases responded to the survey, which was conducted over three weeks in April. The survey ranked the automakers based on degree of trust, open and honest communication, amount of help given to suppliers to reduce costs, and supplier profit opportunities, the company said.

AOL turns to ex-Google exec for fresh start

Shortly before taking over as head of AOL in April, Tim Armstrong ripped out some office doors.

The doors — made of glass and requiring a company key card to pass through — stood in AOL's New York headquarters, separating the offices of executives like former CEO Randy Falco and his No. 2, Ron Grant, from the rank and file.

The doors' departure is emblematic of a shift under way at AOL. Armstrong, 38, was recently hired away from Google Inc. and asked to give the long-suffering Internet unit of Time Warner Inc. yet another shot at salvaging its future after what seems like a lost decade.
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If nothing else, Armstrong's arrival has thrilled employees who were unhappy under his predecessors, who were widely considered out of touch and out of place.

But Armstrong's more approachable style won't be enough to restore AOL's luster. AOL's legacy business, its dial-up Internet service, continues to dwindle while its newer online advertising service is not yet picking up all the slack. AOL's operations still make money, but that profit has been falling.

Armstrong's ability to find the right formula could be especially put to the test if Time Warner formally separates itself from AOL by spinning the Internet division off into a standalone business, as the company is exploring. That move would finally undo the $147 billion deal in which AOL bought Time Warner in 2001, which became one of the worst corporate combinations in history.

AOL would not make Armstrong available for comment. But current and former employees said his open management style, which he tried to show by taking out the doors, already has marked a stark change from Falco and Grant, who had snippy nicknames at AOL like "Rondy," a combination of their first names.

Falco and Grant joined AOL in late 2006 as part of a surprising management change by Time Warner that ousted AOL's then-CEO, Jonathan Miller. Falco had been president and chief operating officer at NBC Universal Television Group, while Grant came from Time Warner, where he was senior vice president of operations.

Falco was a terrific media executive but he didn't have Internet experience, and Grant was talented but had not managed large teams of people, said Ted Leonsis, an executive who retired from AOL in late 2006.

Yen Falls as Report Says N. Korea Launched Short-Range Missile

“This is not a pretty picture, especially with this kind of external issue and the North’s stern stance,” said Kim Yong Tae, who helps oversee the equivalent of $1.2 billion in assets as a fund manager in Seoul at Yurie Asset Management Inc. “Investor sentiment will be negatively impacted and it’s going to be difficult to expect big gains” in the short-term.

The won fell 0.1 percent to 1,248.82 per dollar at the close of trading in Seoul after earlier dropping as much as 1.7 percent. The MSCI Asia Pacific excluding Japan index of regional shares fell 0.2 percent.

Eight-Month Low

The yen slumped to an eight-month low against the dollar on Oct. 9, 2006, when the North Korea government said it had detonated its first nuclear bomb. A nuclear test is a threat to Japan, as Tokyo is 809 miles (1,295 kilometers) from North Korea’s capital of Pyongyang.

U.S. President Barack Obama said North Korea’s claim it conducted a nuclear test is of “grave concern,” according to an e-mailed statement from the White House. The test is in “blatant defiance“ of a United Nations Security Council resolution, Obama said.

Losses in the yen against the dollar may be tempered after credit-default swaps for Japan fell last week while those for the U.S. advanced, indicating an improving perception of the Asian nation’s credit quality relative to that of the world’s largest economy.

The cost to protect buyers of Japanese sovereign bonds for five years declined to 45.97 on May 22, the lowest since Jan. 28, according to CMA DataVision. The price for the U.S. climbed to 42.51, the highest since April 28, from 37.75 the previous day.

Credit-default swaps, contracts to protect against or speculate on default, pay the buyer face value if a borrower fails to adhere to its debt agreements.

Most Asian Stocks Rise; Mitsubishi, BHP Gain as Oil Advances

Most Asian stocks rose as the Japanese economy shrank less than economists estimated and oil prices rose to a six-month high. Finance companies declined.

Mitsubishi Corp., a Japanese trading company that gets more than half its profit from commodities, climbed 3.4 percent after Goldman, Sachs & Co. recommended buying the stock. BHP Billiton Ltd., Australia’s biggest oil producer, rose 0.6 percent. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 1.8 percent as commodity shipping rates gained for a 13th- straight session.

“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.

The MSCI Asia Pacific Index rose 0.2 percent to 99.53 at 10:07 a.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Stocks on the measure traded at an average 22.4 times estimated profit, compared with 15.6 times for the MSCI World Index.

Japan’s Nikkei 225 Stock Average advanced 0.3 percent to 9,315.78. Gross domestic product contracted an annualized 15.2 percent in the three months ended March 31, the Cabinet Office said today in Tokyo. Economists predicted the economy would shrink 16.1 percent.

Australia’s S&P/ASX 200 Index lost 0.2 percent and South Korea’s Kospi index was little changed.

Brokerage Upgrade

Futures on the Standard & Poor’s 500 Index slipped 0.4 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.

Mitsubishi Corp. jumped 3.4 percent to 1,718 in Tokyo after Goldman upgraded its rating to “buy” from “neutral.” BHP Billiton gained 0.6 percent to A$34.07. Inpex Corp., Japan’s largest oil explorer, gained 1.6 percent to 718,000 yen.

Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.

Kawasaki Kisen Kaisha added 1.8 percent to 393 yen. The Baltic Dry Index, a measure of shipping costs for commodities jumped for a 13th straight session to a level not seen in seven months.

Nike to Cut About 1,750 Jobs, or 5% of Workforce

Shoe and apparel company Nike said Thursday that it will cut about 1,750 jobs worldwide, or 5 percent of its global work force.

About 500 of the jobs lost will be at Nike's world headquarters in Beaverton, Ore. The company did not specify what departments the cuts would be in.

Shares of Nike [NKE 50.95 1.43 (+2.89%) ] were up $1.43 to close at $50.95 Thursday. They were little changed in after-hours trading following the announcement.

Nike had announced in February that it would cut jobs as part of a realignment of its business. In March, it said it was reducing layers of management, among other organizational changes.

Like many companies, Nike has seen demand for its products slow as the global economic meltdown hurt consumer spending. The company plans to complete the reductions in the coming weeks. "Our new structure sharpens our consumer focus globally to drive continued growth while positioning Nike competitively in today's marketplace," Chief Executive Mark Parker said in a statement. "We remain a growth company and we know these changes have created a stronger organization that will enable us to invest in our most significant opportunities."

The company, whose other brands include Converse, Cole Haan and Umbro, remains the industry leader. But Nike saw its profit drop in the most recent quarter, largely on one-time items, and its revenue fell 2 percent as the economic downturn dragged on.

Euro Drops, Government Bonds Climb as Region’s Economy Shrinks

The euro fell and European government bonds rose after the region’s economy shrank the most in 13 years, increasing investor concern the pace of recovery from the first global recession since World War II is flagging.

The euro weakened 1.2 percent against the yen and 0.5 percent versus the dollar at 9:45 a.m. in London, while the yield on the 10-year German bund dropped three basis points. The MSCI World Index of stocks climbed 0.6 percent, trimming its first weekly drop in two months, as Barclays Plc led a rally in financial shares. Futures on the Standard & Poor’s 500 Index advanced 0.2 percent.

“Almost without exception, the markets seem to be suggesting a real danger that we are about to see a six- to eight-week period that is very risk-negative,” Citigroup Inc. currency strategists Tom Fitzpatrick in New York and London- based Shyam Devani wrote in a note to clients.

The euro is having its worst week against the yen in four months as concern grows that the slump in the 16-nation region is deepening and European Central Bank policy makers differ over the measures needed to spark a recovery. ECB Vice President Lucas Papademos said yesterday the rebound may come sooner than previously thought, while Dutch council member Nout Wellink said economists shouldn’t get too optimistic.

Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, the European Union’s statistics office in Luxembourg said today. That’s the biggest drop since the euro-area GDP data were first compiled in 1995 and exceeded the 2 percent decline economists forecast in a Bloomberg News survey.

Dollar Advances

The dollar had its biggest gain against the euro in almost two weeks, strengthening to $1.3575, before reports today that may show U.S. industrial production declined in April at the slowest pace in six months and consumer sentiment climbed to the highest level since September.

New Zealand’s dollar fell 1.6 percent versus the yen and 1.1 percent against the dollar after the nation’s statistics office said retail sales declined for a record sixth quarter.

“The New Zealand dollar is an accident waiting to happen,” Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney, wrote in a report today.

Russia’s ruble strengthened for a 12th week against a basket of currencies, the longest stretch since 2005. The currency, which is managed against the basket to limit swings that hurt exporters, appreciated 0.2 percent to 37.3043, bringing its five-day advance to 0.6 percent.

Emerging Markets

Emerging-market stocks climbed, trimming the first weekly drop in two months, after the U.S. government’s bailout of insurers bolstered confidence in financial companies. The MSCI Emerging Markets Index gained 1.1 percent as Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, and OAO Sberbank, Russia’s biggest lender, rose.

The Dow Jones Stoxx 600 Index of European shares climbed 0.6 percent, reducing its weekly decline to 3.1 percent. London- based Barclays rose 8.5 percent to 274.5 pence after people with knowledge of the matter said the U.K.’s third-biggest bank is in talks to sell Barclays Global Investors.

Hartford Financial Services Group Inc. rose 10 percent to $16.24 in German trading. The Hartford, Connecticut-based company was among six insurers granted access to U.S. aid as the government moves to shore up an industry battered by investment losses.

Copper fell 0.2 percent to $4,438 a metric ton on the London Metal Exchange, heading for its first weekly drop in three. Crude oil rose 0.2 percent to $58.71 a barrel on the New York Mercantile Exchange, having retreated from a six-month high of $60 a barrel this week.

“This bear market rally will end soon,” said Charles Morris, head of absolute return at HSBC Global Asset Management, which manages $2 billion of assets in London. “I’d stick to high-quality investment: gold and good stocks.”

Microsoft, China's Hangzhou set 'model city' pact

Microsoft Corp. announced a partnership aimed at helping make the eastern Chinese city of Hangzhou a model for innovation and protection of intellectual property, in the company's latest attempt to combat rampant software piracy.

A three-year agreement signed Friday calls for setting up two new centers in Hangzhou to focus on developing the local technology industry. Microsoft will provide curriculum support, technology and training for teachers at Hangzhou Normal University through an institute set up to nurture local innovation.

"Partnering with leading IT companies like Microsoft will greatly boost Hangzhou's innovative capabilities and help us build a model information technology city in China," Cai Qi, Hangzhou's mayor, said in a statement.

No dollar figure was announced for the plan. Spending will be above the roughly $1 billion the company pledged in November to spend on research and development in China over the following three years.

The deal came after Hangzhou pledged to improve its enforcement of anti-piracy laws and promote the use of legitimate, non-pirated software by individuals, government offices and companies based in the city, which is west of Shanghai.

Software, movie and music makers, among many industries, say they lose billions of dollars each year to counterfeited and pirated products.

The deal calls for the two sides to set up a working team from both sides that will hold regular meetings to assess progress in that area, Alec Cooper, general manager of Microsoft Greater China's "Genuine Software Initiative," told reporters in a conference call.

"There is some degree of piracy in virtually every country around the world. We said, here's what we think are the best practices and here's what we think will work in China, and make it a more positive approach," Cooper said.

He said the partnership will focus on educating local people and businesses on the importance of fighting piracy of software and other intellectual property to their own economic future.

"We think it's an approach that addresses the root of the problem," he said.

Raising consumer awareness was the motivation behind Microsoft's Windows Genuine Advantage program, which turns the wallpaper of computers using pirated Windows software black and notifies users, urging them to get a legitimate copy.

That effort continues, Cooper said, despite complaints from some Chinese computer users.

Software piracy is still rampant despite individual countries' attempts at cracking down. Research commissioned by the Business Software Alliance, an industry trade group, found that 82 percent of the software used in China in 2007 was not legitimately purchased, more than double the worldwide piracy rate of 38 percent.

But Hangzhou, one of China's wealthiest cities, is seeking to build up its technology industries as it shifts away from textile making and other traditional manufacturing.

"They understand that to get the best companies in the world to be located in Hangzhou ... companies need to feel comfortable about their intellectual property," Cooper said, adding that Microsoft may seek such arrangements with other cities in the future.

Wal-Mart reports flat 1st-quarter profit

With plenty going wrong in the global economy, Wal-Mart Stores Inc. is seeing indications that it will hang onto customers it has picked up during the recession.

The world's largest retailer reported flat earnings for the first quarter on Thursday, hurt on international transactions because of a strong dollar. The year-ago comparison was affected because there was one more day in the quarter last year. Also, with fuel prices coming back to earth, Wal-Mart has lowered prices on some food items.

Wal-Mart Vice Chairman Eduardo Castro-Wright, who runs Wal-Mart's U.S. stores, said that as food prices moderated and consumers found their dollars going farther, some sales have crossed into discretionary items. And new customers who have switched to Wal-Mart because of the economic climate are doing some of that buying.

Singapore’s Temasek Sells Stake in Bank of America

Temasek Holdings Pte, a Singapore state-owned investment company that bought stakes in Merrill Lynch & Co. and Barclays Plc amid the global financial crisis, sold its stake in Bank of America Corp.

Temasek received shares in Bank of America after the biggest U.S. bank by assets bought Merrill Lynch this year. The investment company had paid about $5.9 billion for a 14 percent stake in Merrill Lynch since December 2007, which was converted into Bank of America stock following the completion of the acquisition.

“We have divested our shares in Bank of America,” Temasek said in an e-mailed response to Bloomberg News queries. The company declined to say how much it sold the stake for or when the sale was conducted.

Temasek had 31 percent wiped from the value of its global portfolio in the eight months through November amid the slump in financial markets. The company had sold assets including power generators and Singapore Food Industries Ltd. over the past year while increasing its investments in companies such as CapitaLand Ltd. and DBS Group Holdings Ltd. through rights offers.

A Form 13F filing to the U.S. Securities and Exchange Commission indicates that Temasek no longer held shares in Bank of America or Merrill Lynch as of March 31.

Bank of America rose 2.7 percent to $11.31 in New York trading yesterday. The shares have tumbled 69 percent in the past year, outpacing the 36 percent decline in the Standard & Poor’s 500 Index.

Temasek will cut its holdings in the Organization for Economic Cooperation and Development countries to 20 percent as it expands in Asia and emerging markets from Latin America to Africa, Chief Executive Officer Ho Ching said according to a speech posted on Temasek’s Web site yesterday.

The investment company had earlier said the more developed OECD countries will make up about a third of its investment portfolio.

GM Bankruptcy Looms, Congress Faces Pressure

With General Motors planning to end production of Saturns and Pontiacs at its Delaware plant which employs more than 1,000 people, state leaders are scrambling to win new work at the facility or persuade the company to move other operations to the region."This would appear on the surface to leave us in bleak circumstances," said U.S. Sen. Thomas Carper, a Democrat and former governor who helped save the 62-year-old Wilmington plant from closure in the early 1990s.

"We're encouraging them not to close the plant. At some point, GM will need more capacity," Carper said in an interview with Reuters just weeks ahead of a June 1 deadline for GM to show a White House/Treasury task force overseeing industry restructuring that it can be viable without government aid.Failure to satisfy the task force would trigger bankruptcy where GM [GM 1.21 0.06 (+5.22%) ] could try to finalize concessions.

It is seeking givebacks from debtholders and the United Auto Workers and wants to more than halve its network of 6,000 dealers. GM plans to cut 21,000 factory jobs. Lawmakers deferred to the task force as smaller Chrysler spiraled into a bankruptcy court.

But there has been a broader political response to GM over the past week since a second carmaker bankruptcy would compound Detroit's uncertainty and likely radiate economic anxiety beyond the industry's Midwest core.

GM A Bellwether

Autos has one of the heaviest economic multipliers of any U.S. industry. For every job loss in auto assembly, another nine disappear elsewhere, Mark Zandi, chief economist and co-founder of Moody's Economy.com, has told Congress.

GM employs 88,000 factory and salaried workers in the United States. It has also been a bellwether for industries like steel, plastics, warehousing, software, healthcare, trucking and makers of glossy paper for car catalogs.

Michigan State University economist Charles Ballard believes GM's reach is vast enough to affect U.S. GDP "if the whole thing were to implode," which he believes is remote.

Still, the possibility of bankruptcy is rattling Washington, which has extended GM $15.4 billion since January.

The Treasury likely will be on the hook for more GM financing before month's end as well as in any court restructuring. GM's restructuring would wipe out half the current debt to taxpayers.

Lawmakers are under pressure from constituents and interest groups like labor, car dealers, and suppliers to intervene as the Obama administration reviews the GM business plan and prepares the company for a possible bankruptcy filing.

In meetings last week on Capitol Hill, GM Chief Executive Fritz Henderson fielded concerns of lawmakers from the primary auto states of Michigan, Ohio and Indiana.

He also met with officials from Missouri, California, New York, Minnesota, Texas, Georgia, Illinois and Colorado.

Options Discussed

Carper said he suggested to GM North American operations chief Troy Clarke that the company locate research work on batteries and other technologies to the mid-Atlantic.

Creating a business center close to Washington where key funding and other decisions on advanced technology programs will be made in coming years would make sense for Detroit, Carper said, noting that GM, Chrysler and Ford [F 4.96 -0.05 (-1%) ] have lost political clout as they have contracted. Ford is restructuring but has not sought government aid.

Sen. Robert Corker, a Tennessee Republican, discussed with Henderson the fate of the Spring Hill assembly, storage and powertrain operation that employs 3,200 people in his state. "We want those plants to stay open," Corker said in an interview.

"We realize the the company has got to be restructured and tough decisions have to be made." Related businesses are also feeling pressure and gaining attention from Congress.

Last week, Democratic Sen. Charles Schumer pressed GM and bankrupt Delphi Corp to reach a deal for GM to buy back four of the supplier's production plants.

Two of the plants are located in Schumer's home state of New York. "I will continue to do whatever is necessary to see this purchase through," Schumer said.

Suppliers want Congress to authorize new assistance programs and encourage banks to resume lending to the sector once restructuring is completed at GM and Chrysler.

Congress is also considering legislation that would accelerate federal aid to communities facing sharp job losses. Michigan tops the nation in unemployment, with joblessness above 12 percent.

Stocks take a thumping

Stocks tumbled Wednesday, with the Nasdaq and S&P 500 falling for a third straight session, after a weaker-than-expected retail sales report gave investors a reason to retreat.

The Dow Jones industrial average (INDU) lost 184 points, or 2.2%. The S&P 500 (SPX) index fell 24 points, or 2.7%. The Nasdaq composite (COMP) dropped 52 points, or 3%.

The worse-than-expected retail sales dragged on stocks, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. He said investors were also a little jittery about the bevy of banks rushing to raise capital to pay back the government bailout money they received.

"We were due for a pause here and with questions about the consumer and the banks, investors are finding an excuse to take some profits," he said.

Stocks seesawed Tuesday as investors showed caution after a roughly 2-month rally that propelled all the major stock gauges by at least 30%. That hesitation remained in place Wednesday.

Stocks have risen since early March on bets that the economy is close to turning a corner.

"I think the momentum has gotten a little ahead of itself," said Robert Loest, portfolio manager at Integrity Funds. "We've run out of good news for the time being."

He said that later in the year, there will be more positives for investors to key off of, as fourth-quarter earnings are bound to show improvement versus abysmal results a year earlier. Additionally, the impact of the government putting trillions of dollars into the economy will have an impact.

Thursday brings the government's April Producer Price index and the weekly jobless claims index. Also Thursday, Wal-Mart Stores (WMT, Fortune 500) is due to report quarterly results before the start of trade. Wal-Mart is expected to have earned 77 cents per share versus 76 cents a year earlier.

Economy: Retail sales fell 0.4% in April, according to a report from the Commerce Department released before the market open. Sales were expected to hold steady, according to a consensus of economists surveyed by Briefing.com. Sales fell a revised 1.3% in March.

Sales excluding volatile autos fell 0.5% in April, after dropping 1.2% in the previous month. Economists forecasts had called for a rise of 0.2%.

The number of U.S. households facing foreclosure jumped 32% in April versus a year ago, according to RealtyTrac. More than 342,000 homes received notices of default in the month, up 1% from March.

In other economic news, March business inventories fell 1% after slipping 1.4% in the previous month. Economists expected inventories to have dropped 1.1%.

Company news: AIG (AIG, Fortune 500) shares declined as the company's CEO discussed restructuring plans at a House hearing about how the company plans to pay back billions in government loans. Shares rose 11.6%.

In other news, Intel (INTC, Fortune 500) was fined a record $1.45 billion by the European Union for allegedly anti competitive practices, a decision the chipmaker plans to appeal. Shares fell.

Freddie Mac (FRE, Fortune 500) posted a $9.9 billion quarterly loss after the market close Tuesday and also asked the government for another $6.1 billion in aid. Shares fell 7%.

GM (GM, Fortune 500) shares started the day with another drop on concerns that it will have to file for bankruptcy, with the stock touching $1 per share, the lowest level since 1933. But GM rallied in the afternoon to finish 6 cents higher at $1.21.

Market breadth was negative. On the New York Stock Exchange, losers topped winners eight to one on volume of 1.76 billion shares. On the New York Stock Exchange, decliners beat advancers by almost six to one on volume of 2.42 billion shares.

Japan Economy Probably Shrank by Record Last Quarter

Japan’s economy shrank by a record last quarter amid an unprecedented collapse in exports and a drawdown of inventories that could pave the way for a recovery later this year, a report next week may show.

Gross domestic product contracted an annualized 16.1 percent in the three months ended March 31, following a fourth- quarter drop of 12.1 percent, according to the median estimate of economists surveyed by Bloomberg News. The Cabinet Office will release the GDP report on May 20 at 8:50 a.m. in Tokyo.

Japan’s worst recession since World War II probably reached its bottom last quarter, as a pullback in business and consumer spending compounded the damage done by the export crash that began in October. World markets have shown signs of stabilizing in recent weeks and Prime Minister Taro Aso’s record 15.4 trillion yen ($160 billion) stimulus package has buoyed domestic confidence.

“The first-quarter numbers are awful, but what’s more important are the signs of recovery,” said Julian Jessop, chief economist at Capital Economics Ltd. in London. “Growth might turn positive again in the second quarter,” he said, citing recent rebounds in overseas shipments and production.

Exports plunged a record 26.8 percent last quarter from the previous three months, economists predict the report will show. Consumer spending probably fell 0.9 percent, as companies including Toyota Motor Corp., Toshiba Corp. and NEC Corp. slashed pay and fired thousands of workers to offset losses.

Spending Slump

The drop in private consumption would be the biggest since 1974, excluding the second quarter of 1997 when consumers cut spending 3.5 percent after an increase in the sales tax. Business investment is likely to have fallen 9 percent, the worst retrenchment on record.

“The good news is that the production cycle has hit bottom,” said Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo. “The bad news is that the second-round effects from the initial export shock are starting to hit,” he said, referring to the recession’s spread to the job market. The unemployment rate surged to 4.8 percent in March from 4.4 percent the previous month, the biggest jump in four decades.

Japan’s first-quarter contraction was probably the most severe since records started in 1955, eclipsing a 13.1 percent plunge that came during the 1974 oil crisis. The drop would also be more than twice as bad as the U.S.’s 6.1 percent slide.

BOJ’s Shirakawa

Reports in the past month suggest the world’s second- largest economy may resume growth this quarter, albeit from a low level. Exports gained in March on a month-on-month basis, the first uptick since May. Factory production also rose, a fact that Bank of Japan Governor Masaaki Shirakawa cited yesterday as a reason for cautious optimism.

“We expect the pace of deterioration in economic conditions to moderate gradually and the economy to start to level out towards the end of this year,” Shirakawa said in a speech at the London Stock Exchange.

Gains in the stock market and earnings projections for the current year add to signs the worst may be over. The Nikkei 225 Stock Average has risen 29 percent from a 26-year low set on March 10. Japanese companies that reported fiscal 2008 results say profits will rise 26 percent in the current business year, according to Tokyo-based Shinko Research Institute Co.

Confidence in the Japanese economy climbed to an 18-month high in May, the Bloomberg Professional Global Confidence Index showed yesterday. Sentiment among Bloomberg users around the world surged the most since the survey began in November 2007.

Replenishing Inventories

Stabilizing demand from Japan’s biggest overseas markets, combined with aggressive inventory cuts, has given companies including Honda Motor Corp. room to raise production. Executive Vice President Koichi Kondo said last month the U.S. has probably bottomed. The automaker plans to boost output at domestic factories this quarter as dealerships clear inventories, the Wall Street Journal reported this week.

The stock adjustment at Honda is part of larger trend among manufacturers that may have exacerbated Japan’s first- quarter contraction, while also setting the stage for recovery. Falling inventories at Japanese companies probably accounted for 0.8 percentage point, almost a fifth, of the economy’s estimated 4.3 percent decline versus the previous three months.

“Firms cut production below the low of final demand. That’s what happened in the first quarter and that’s why the contraction was so severe,” said BNP’s Shiraishi. “Now that the adjustment is coming to an end firms can start to increase production. The rebound could potentially be fairly large.”

Still, the failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery, said Jessop at Capital Economics.

“The best you can hope for is a long period of sub-par growth,” he said. “It’s not going to be a strong recovery but at least it’ll be a recovery.”

Nissan Reports Its First Annual Loss Under Ghosn

Nissan Motor Co. on Tuesday booked its first annual net loss since President and Chief Executive Carlos Ghosn took the helm of the Japanese auto maker in 1999, and warned that the red ink would continue this year.

But Mr. Ghosn said relief is in sight, predicting the company will return to profitability by the finish of its fiscal year 2010, which ends in March 2011 -- or sooner if incentives for Americans to scrap old cars are approved, boosting sales; and if the Japanese yen weakens, raising the value of overseas earnings.

"We are preparing ourselves to go back to profitability, in the worst case, in [fiscal] 2010," said Mr. Ghosn.

Japan's third-biggest auto maker by sales volume, citing the world-wide slump in demand for cars and the strong yen, reported a net loss of 276.9 billion yen ($2.84 billion) in the three months ended March 31, compared with 137.6 billion yen net profit in the same period a year earlier.

Nissan, in which Renault SA of France owns a 44% stake, logged an operating loss of 230.4 billion yen in the quarter, compared with operating profit of 211.7 billion yen a year earlier. Sales tumbled 41% to 1.751 trillion yen.

For the full fiscal year ended March 31, the company's net loss was 233.71 billion yen compared with a 482.26 billion yen net profit the previous year.

For the current fiscal year, the maker of the Altima sedan and the Qashqai crossover sport-utility vehicle projected a net loss of 170 billion yen, an operating loss of 100 billion yen and sales of 6.950 trillion yen. It said it expects global sales of 3.08 million units, down 9.7% from 3.41 million units for the just-ended year.

The dismal results and bleak projection for the current fiscal year are a setback for Mr. Ghosn, one of the industry's top managers, who rescued Nissan from bankruptcy a decade ago and forged its alliance with Renault. Known for setting and meeting his management commitments, Mr. Ghosn in February suspended his key goal of 5% annual revenue growth through 2012 because of the global recession and steep drop in world-wide auto sales.

Nissan, meanwhile, beat its projected 265 billion yen loss for the year. Mr. Ghosn credited the smaller-than-expected loss to the company's aggressive cost cutting and recovery efforts, including slashing 20,000 jobs world-wide, scaling back the number of new car models it plans to release during the next four years to 48 from 60, and reducing production.

"The measures in the recovery plan have been swiftly deployed even if some of the measures were harsh," Mr. Ghosn said. "We have been challenged of our very existence by this crisis."

Mr. Ghosn said his next effort will be to reduce Nissan's exposure to the strong yen, which erodes overseas earnings. Nissan said it is assuming the dollar will average 95 yen and the euro 125 yen for the current fiscal year.

Mr. Ghosn said he is eager to source more parts and components outside Japan, such as from China, South Korea and the U.S. Some 55% of the company's expenses in yen go to suppliers based in Japan, he said, a fact that needs to change if the company wants to recover.

Sourcing more parts outside Japan will make Nissan more competitive and allow it to keep more car assembly in Japan, he said. Nissan has already announced plans to shift production of the new compact March/Micra from Japan to Thailand in the fiscal year ending in March 2011, part of an effort to move production of 130,000 vehicles and 120,000 powertrain units outside Japan over the next two years.

Nissan said it plans to achieve new savings this year by using more common parts, such as door handles, windshield wipers and seat belts, that that be shared among different models. The company is also aiming to develop more synergies with its partner Renault

U.S. Median House Price Declines 14%

The median price for a single-family house fell 14% to $169,000 in the first quarter from a year earlier, the National Association of Realtors reported.

The trade group said first-time home buyers accounted for half of all purchases in the quarter, and many of them zeroed in on foreclosed homes. That dragged down the median, the Realtors said.

The median price for the latest quarter is down 26% from a peak of $227,600 in the third quarter of 2005. The latest median price was down from a year earlier in 134 of the 152 metro areas included in the survey.

The biggest increase was in the Cumberland area of Maryland and West Virginia, where the median price climbed 21% to $114,900. Debbie Grimm, manager of the Long & Foster real-estate brokerage in Cumberland, Md., said the area is attracting retirees and second-home buyers, particularly from Washington and Baltimore.

The lowest median price among the metro areas was $30,300 in Saginaw, Mich., and the highest was $570,000 in Honolulu. Most of the areas with the lowest prices are in troubled parts of the industrial Midwest. But a glut of homes in Cape Coral-Fort Myers, Fla., pushed the median down 59% from a year earlier to $87,300 -- ranking it just below Gary, Ind., which, at $92,000, was down 26%.

Sales of single-family homes and condominiums declined 6.8% from a year earlier to a seasonally adjusted annual rate of 4.6 million units. But sales were up sharply in some areas hardest hit by the housing bust, largely because bargain hunters were out in force. States with big sales increases from the depressed levels of a year before included Nevada (up 117%), California (81%) and Arizona (50%) and Florida (25%).

Rising unemployment and fears of more job losses are deterring many potential buyers. But others are encouraged by the lowest mortgage rates since the 1950s. In addition, the U.S. government is offering tax credits for certain home buyers before Dec. 1.

Asian stocks advance but caution lingers in wake of huge rally

Asian stock markets rose moderately Wednesday, led by oil companies on stronger crude prices, but investors remained cautious as an enormous spring rally showed signs of fatigue.

Shanghai and Hong Kong shares gained on news that China's aggressive stimulus spending was starting to filter through the economy in the form of higher consumer spending. The dollar was higher against the yen.

Investors, encouraged by hints of an economic turnaround, have rushed into global stock markets over the last nine weeks, pushing major benchmarks 30 percent and higher.

While some analysts see more upside in the short-term as investors look to spend their cash and worry about missing the rally, confidence remains fragile with economic conditions and company earnings outlooks still lackluster.

"The market has already gone too far too fast, so we're expecting some profit taking," said Alex Tang, head of research at Core Pacific-Yamaichi International in Hong Kong, "Shares are starting to be overbought."

Japan's Nikkei 225 stock average rose 60.41 points, or 0.7 percent, to 9,359.02, while South Korea's Kospi added 0.4 percent to 1,408.68.

In China, Hong Kong's Hang Seng rose 0.7 percent to 17,264.90 and Shanghai's benchmark gained 1.2 percent to 2,649.35.

Investors there were comforted by news China's retail sales jumped 14.8 percent in April from a year earlier as stimulus spending helped support domestic demand. Dampening sentiment, though, were other data showing industrial output rising only 7.3 percent, lower than expected.

Elsewhere, Taiwan shares gained 0.8 percent. Australian and Indian indexes fell.

Lifting the broader market were shares in oil companies like Chinese offshore producer CNOOC and Japan's Inpex Corp.

Crude prices gained more ground as an unexpected fall in U.S. crude inventories suggested demand may be picking up. Benchmark crude for June delivery was up 72 cents to $59.57 in Asia.

Overnight in New York, Wall Street ended largely mixed. The Dow rose 50.34, or 0.6 percent, to 8,469.11. The S&P 500 index slipped 0.89, or 0.1 percent, to 908.35.

Wall Street futures augured a mixed opening in the U.S. Dow futures were down 10 points, or 0.1 percent, at 8,426 while S&P 500 futures gained 2.1, or 0.2 percent, to 908.90.

In currencies, the dollar climbed to 96.57 yen from 96.14 yen. The euro was little changed against the dollar.

IDX new system ready July

The Indonesia Stock Exchange (IDX) is set to launch its Investor Area system, with real-time access to investors' balance sheets by July: Most securities houses will be ready then.
IDX president director Erry Firmansyah said on Monday that 100 securities firms had confirmed they would be ready for the new system, leaving only 19 companies that were not yet in ready to match its technical requirements. It aims to promote more transparency in securities transactions in the market.

"This should not fail because of the small number *of securities companies which* are not yet ready. We expect to start operating the new system in the next one or two months," Erry said.
The number of securities firms covered by the IDX system has now grown to 119.
The IDX has delayed the launching of the new on-line system several times.
Initial technical problems and adequate time needed to integrate regulatory organizations like the KPEI (the Indonesian Stock Market Clearing House), and the KSEI (the Indonesia Central Securities Depository) helped explain the delays in starting up the new system since February.
Furthermore, lack of promotion and poor disssemination of information about the system helped lead to some unpreparedness on the part of participating securities houses, said to be one of the main reasons for the delay in starting the new system.

So far the investment cost needed to get the new IT system off the ground has not been disclosed.
The stock market authorities have introduced the Investor Area system into the dialogue with its clients since last January, after an embezzlement scandal involving one of the largest securities firms in Indonesia, PT Sarijaya Permana Sekuritas raised questions and led to increased media scrutiny.
Sarijaya president commissioner Herman Ramli had earlier allegedly missappropriated Rp 240 billion (US$23.28 million) of client's funds.
Sarijaya was suspended from trading since Jan. 6 and Herman was arrested and detained by the police in December, but Sarijaya customers are still in the dark about the future of their cash deposits and whether or not they can recover them.
The stock market society welcomes the new IT system as it will protect investors from fraud by insiders within securities companies and will help avoid another Sarijaya saga in the future.
Under the new system, investors get direct on-line access to check the balance of their assets.
Currently, investors who want to monitor their portfolio and assets should first ask permission from their brokers to do so.

IDX director for equity trading MS Sembiring said under the new system, investors would be given a single password so as to be able to access all type of transactions.
Currently, investors have different passwords for each type of investment, be it securities or bonds.

Citigroup: TARP loans near $45 billion mark

NEW YORK (AP) -- Citigroup Inc. is using its $45 billion in government capital to make nearly that much in new loans.

Citigroup said its committee overseeing the use of taxpayer money approved $44.75 billion in lending initiatives as of March 31. That is up from the $36.5 billion in lending initiatives announced in February, and now includes $5 billion in loans to municipalities.

The loans being offered by Citigroup to state and local governments, municipal agencies, universities and non-profit hospitals would not likely have been made had the bank not received money from the Troubled Assets Relief Program, or TARP.

David Brownstein, Citigroup's managing director and co-head of public finance, said in an interview with The Associated Press that these municipal borrowers are still very secure, but their borrowing costs have shot higher because of turbulence in the credit markets.

In Citigroup's report, reviewed by the AP and scheduled for release Tuesday morning, the bank also said it is spending $2 billion more to finance suppliers, $1 billion more in residential mortgages, and $250 million more in auto loans.

In total, Citigroup has extended more than $200 billion in new credit in the United States since last October -- when the bank got its first $25 billion injection of bailout money from the government. Last fall, Congress approved the $700 billion TARP fund, which got handed out to hundreds of financial institutions in an effort to stabilize the financial system and revive lending.

Banks like Citigroup do not lend the TARP money directly to borrowers. Instead, the banks keep the extra capital on their books, which allows them to borrow more money from funding sources. Then, they lend that borrowed money to others. A bank makes money by borrowing cheaply for the short-term and lending at higher rates for the long-term; if a bank has no capital, other institutions and investors won't lend to it.

In November, Citigroup got an additional $20 billion, bringing its TARP total to $45 billion. In February, it agreed to convert a portion of the TARP investment from preferred stock to common stock.

After the government's funding and other capital raising efforts, the Federal Reserve found last week in its "stress test" of the country's 19 largest banks that Citigroup has a capital shortfall of $5.5 billion. Citigroup said last week it plans to make up that shortfall by converting more preferred stock into common stock.