PRO 19-08-2012_Layout 1 8/19/2012 4:52 AM Page 1
Sunday, 19 August, 2012
Spain wants to have the cake,
EAT IT AND YET ASK FOR MORE ‘There must be no limit set on ECB bond buying’ MADRID AGENCIES
There can be no limit set or at least (the ECB) can’t say how much they will use or for how long,” when it buys bonds in the secondary markets, Luis de Guindos told Spanish news agency EFE. The Spanish government will study the details of the ECB’s debt-buying program, which are likely to be outlined before the Eurogroup meeting mid-September, before making a decision on applying for more European aid, de Guindos said. Spain is at the centre of the euro zone debt crisis on concerns it may need a full bailout, which could stretch euro funds to breaking point, on top of up to 100 billion euros ($122.97 billion) it has already requested for its struggling banks. Prime Minister Mariano Rajoy has said his government would study any measures by the ECB and the potential conditions attached to any EU aid before deciding whether to apply for help. In response to a renewed intensification of the debt crisis, ECB President Mario Draghi said on August 2 the ECB may buy more government bonds, but only once countries had turned to the bloc’s rescue funds for help and agreed to strict conditions. “I believe Spain has presented its budget adjustment program and its structural reforms, which from a general point of view, have been accepted as sufficient and appropriate,” de Guindos said.
Rajoy has introduced austerity measures worth around 10 percent of GDP to reduce the public deficit to within EUguidelines of below 3 percent of GDP by end-2014 as well as reforms to the financial system and labor markets. The yield on Spain’s benchmark 10year bond fell to its lowest level since early July on Friday after German Chancellor Angela Merkel voiced support for the ECB’s crisis-fighting strategy, reinforcing expectations of ECB interventions. The central banks has barely used its existing bond-buy plan this year and has bought no bonds for 22 weeks despite an intensification of the euro zone debt crisis. REGIONAL AID: Spain’s public deficit leapt to 8.9 percent of gross domestic product in 2011 due, in part, to overspending by its 17 politically autonomous regions and spooking investors which have since virtually priced the regions out of debt markets. Madrid passed an 18-billion-euro program mid-July to help the regions which, together with the country’s local authorities, account for around half of all public spending and face debt redemptions of some 36 billion euros this year. The state lottery would raise 6 billion euros via a syndicated loan in the next few days to feed in to the liquidity program, de Guindos said in the interview. The government of the Mediterranean region of Murcia became the second authority ask Madrid for help on Friday, saying it may need as much as
GREECE GOES GUNG-HO
THE SIMMERING APPLE PIE
‘Budget breather for Greece would spur economic recovery’
‘Apple fires closing shots at Samsung in patents battle’
ATHENS AGENCIES
The estimate chimes with the view of Greek Prime Minister Antonis Samaras who has tried, unsuccessfully, to win such an extension in the past and is expected to refloat the proposal next week with the leaders of France and Germany as well as with JeanClaude Juncker, the Eurogroup chief. Under the terms of its European Union/International Monetary Fund bailout, Greece is bound to implement painful austerity measures to bring its budget deficit below 3 percent of GDP by the end of 2014, from an expected 9.3 percent of GDP this year. But with the country in its fifth consecutive year of recession and social and political discontent rising, Samaras is keen to soften the impact of budget cuts on society by extending the deadline international lenders set it. The latest estimate, reported by the Imerisia newspaper, cited calculations by finance ministry officials it did not name, saying they had worked out that a two-year extension would help the economy shrink at a slower pace in 2013 and rebound quicker from 2014. Under such a scenario, the economy would shrink by 1.5 percent in 2013 and grow by 2 percent in 2014, the newspaper said. If no extension was granted, the economy would contract by up to 4.5 percent next year and not recover before 2015, it said. Greece’s ability to service its debt is seen by its politicians as something that can only be facilitated by growth as its lenders will only continue bankrolling it if it makes all the necessary budget cuts and reform measures to reduce its debt to 120 percent of GDP by 2020 from 165 percent in 2013.
SAN JOSE
patents, which are related to wireless communications for smartphones and are broadly licensed to Intel Corp and Richard Donaldson, a former lead other technology corporations. Apple, patents attorney for Texas Instruments meanwhile, accuses Samsung of copying Inc, told the court on Friday a 2.4 percent the design and some features of its iPad royalty Samsung wanted on the price of and iPhone. The former Texas Instruments execthe iPhone was discriminatory because the patents in question enabled just a utive joined a string of rebuttal expert witnesses that Apple presented in court fraction of the smartphone’ s features. Later, New York University profes- in the closing hours of the U.S. legal batsor Janusz Ordover likened that rate - tle with its South Korean rival. Closing arguments and jury deliberequivalent to $14 per $600 iPhone - to a “holdup.” “Samsung’s conduct distorted ations are set to begin next week. The court battle is a facet of a bigthe decision making process” in setting standards, said Ordover, a former ger war for supremacy in the mobile deputy assistant attorney general for the market between the two corporations, Justice Department’s antitrust division. which sell more than half the world’s smartphones. The mobile market is “It enabled Samsung’s technology to one of fastest growing and most lucrabe introduced, to become part of tive in technology sector. “If other the standard. They have accompanies were to determine that this quired holdup power.” is a reasonable royalty, then the total Samsung accuses Apple royalty on the iPhone would be someof infringing thing like 50 percent,” Donthose aldson testified. “It’s Samsung Electronics Co neither fair nor reasonable because you could Ltd abused its “monopoly not be successful in the market.” power” and demanded Other expert witnesses inan unreasonable royalty cluded Michael Walker, a former senior Vodafone Group Plc refrom Apple Inc for the search executive, who from use of wireless patents 2008 to 2011 chaired the European telecoms stanin the iPhone, hurting dards authority. He said Samsung failed to disthe device’s commercial close in a timely fashion prospects, Apple the patents referred to by Donaldson. experts testified During cross examination, Samsung lawyer Charles VerhoAGENCIES
even probed the idea that trade secrets and confid e n t i a l information were exempt from a requirement for full and timely disclosure. In any case, the South Korean company had never come u n d e r scrutiny from the standardssetting agency on that issue, he said. The courtroom battle has transfixed insiders since July. Apple is demanding more than $2.5 billion in damages and a sales ban, while its rival is demanding licensing fees. Samsung also says Apple’s damages should be calculated not on gross margins, but after all other costs - such as marketing - are factored in. The trial in San Jose in the heart of Silicon Valley has offered glimpses into the two huge corporate machines - from their design and marketing processes to the profits they make on devices. MONOPOLY POWER? Standing on the sidelines is Google Inc, whose Android software powers
The European Central Bank must take forceful and unlimited steps to buy sovereign debt to help Spain reduce its refinancing costs and eliminate doubts over the euro zone’s future, Spain’s economy minister said in comments published on Saturday 700 million euros in 2012. Murcia follows Valencia, which said at the end of July it will need to apply to the fund. Spain’s largest region of Catalonia has also said it was studying whether apply for cash from the fund. Murcia will soon ask for around 85 million euros to cover debt redemptions and 225 million euros to finance its firsthalf deficit, though could request another 400 million before the end of the year, they said on Friday.
most of Samsung’s phones and is said by analysts to be an indirect target of Apple’s legal assault against the South Korean company in a multiple of countries. Tensions have run high with so much at stake, but the trial has offered some levity. Judge Lucy Koh asked whether Apple lawyer Bill Lee was “smoking crack” after he presented a 75-page list of witnesses, a quip that came up again to much good-natured chuckling - including from Lee himself - on Friday. Friday’s testimony centered on the concept of standards or essential patents - intellectual property built into a commonly agreed set of specifications - and in this case, the UMTS wireless communications standard used worldwide by mobile devices. Professor Ordover testified that standards essential patents - a point of contention in a global market where corporations constantly seek an edge - have enormous benefits to consumers and manufacturers. But they also have “potential risk” and can be abused. Ordover argued that Samsung unfairly wielded its two patents against Apple. Apple’s lawyers argue that Samsung - a member of the body that crafted UMTS standards in 2005 - is charging an unfairly high licensing fee for those patents, in effect trying to stymie market advances. Samsung says the patents are intellectual property for which it rightly requires compensation.
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Business 02
EuropEan SharES
Where’s the sizzle? “Oracle, Google disclosures on paid bloggers lack sizzle” SAN FRANCISCO AGENCIES
But while the post-trial order from U.S. District Judge William Alsup earlier this month had riveted tech and legal circles, the companies’ responses contained no bombshells. “Neither Google nor its counsel has paid an author, journalist, commentator or blogger to report or comment on any issues in this case,” the Internet search company said in its court filing. Alsup’s highly unusual order came months after the companies had squared off at trial, which featured testimony from high-profile technology executives including Oracle Chief Executive Larry Ellison and Google CEO Larry Page. The case attracted heavy media coverage from the mainstream press and technologyfocused blogs. In his order, Alsup said he was “concerned” about relationships between commentators and the companies, but the judge did not reveal what specifically prompted him to act. Oracle on Friday said it had hired blogger Florian Mueller, who often comments on patent issues, as a consultant on “competition related matters.” However, Oracle said it retained Mueller after he began writing about the litigation. “He was not retained to write about the case,” Oracle said. In an email to Reuters, Mueller noted he had previously disclosed the Oracle connection on his blog. “It’s a consulting relationship, not a pay-for-blog relationship,” he said on Friday. In its court filing on Friday, Oracle also said some employees might have blogged about the case, but said it did not ask for or approve such posts. Oracle sued Google in federal court in 2010, claiming the latter’s Android mobile platform violated its patents and copyright to the Java programming language. It sought roughly $1 billion on the copyright claims. Earlier this year, after the jury decided in Google’s favor, Alsup ruled Oracle could not claim copyright protection on most of the Java material that Oracle took to trial. Oracle has said it will appeal.
hit 13-month high on euro action hopes FTSEurofirst 300 up 0.5 percent, Euro STOXX 50 up 0.6 pct g Indexes hit 13-mth highs g Germany’s Merkel sounds supportive of ECB’s Draghi g Spanish, Italian indexes lead rally
S&P 500 up for sixth week; fear index hits five-year low The S&P 500 held near a four-year high, and the market’s key gauge of anxiety sank to its lowest since 2007, suggesting a belief that the problems stressing investors might be closer to a resolution.
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LONDON
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AGENCIES
UROPE’S top shares closed at 13month highs on Friday, extending their longest weekly winning streak in seven years on hopes policy makers were inching closer to concerted action to tackle the region’s debt crisis. A late boost from upbeat economic data from the United States pushed the FTSEurofirst 300 index to 1,110.16 points, its highest since July 2011 and up half a percent on the day. Spain’s Ibex 35 and Italy’s MIB led local market gains, up 1.9 and 1.3 percent after German Chancellor Angela Merkel voiced support for European Central Bank chief Mario Draghi’s promise to do all it took to defend the euro. Draghi has put forward plans for the bank and the euro zone’s rescue fund to buy government bonds to bring down the borrowing costs of debtladen countries; markets are on tenterhooks as to whether Merkel will agree to the scheme next month. “The political discussion has become stronger and more constructive,” Francesco Curto, head of the CROCI investment strategy & valuation group at Deutsche Bank, said. “We know that we are going to get a recession but we’re not going to get a disorderly adjustment in Europe. This is the view that the market is taking.” The U.S. Conference Board said on Friday its Leading Economic Index climbed 0.4 percent to 95.8, beating analyst estimates for a 0.2 percent rise. The preliminary reading of the index on consumer sentiment rose to 73.6 from 72.3 last month, topping economists’ forecasts for a slight uptick to 72.4. The FTSEurofirst 300 index is up about 9 percent since late July when Draghi said the ECB was ready to do whatever it takes to preserve the euro. This week was its eleventh consecutive weekly gain, matching the longest winning run in 2005. Traders said August’s low volumes had magnified the move up and warned investors may await concrete steps from policy makers before committing more money to the rally. The ECB holds a monthly policy meeting on Sept 6, when it could spell out exactly how it could intervene in the bond market if asked. Six days later, Germany’s constitutional court will deliver a
ruling on the euro zone’s permanent ESM rescue fund before which Berlin cannot ratify it. “This has been a short covering rally and people now want to see the actual money on the table,” a Milan-based broker said. ITALIAN BANK SHORTS: Shares in Italy’s No. 3 lender, struggling Banca Monte dei Paschi di Siena, rose 17.6 percent after remarks by its chairman that its main shareholder should sell down more of its stake. The move was likely fuelled by players closing losing bets on the shares falling, given that the bank had 5.4 percent of its shares out on loan, or 64 percent of those available to be borrowed, as of the close on Thursday, making it the stock with the highest utilitisation rate among Italian blue chips. The euro zone’s blue chip Euro STOXX 50 index rose 0.6 percent to 2,471.53 points, showing technical strength after breaking out of a consolidation range between 2,405 and 2,440 that had trapped the gauge since last week, hourly charts showed. “The upside breakout of the upper end of range at 2,450 have opened the way to further advance towards 2,494, the March 23 low.” Nicolas Suiffet, a technical analyst with Trading Central in Paris said. “From a chartist point of view, the validation of a classical flag pattern has reinstated a positive bias (and) although intraday momentum oscillators are highly overbought, a continuation of the rise is more likely.” He cautioned that a breach of the 2,433 support, while not invalidating the short-term bullish sentiment, could see consolidation towards 2,376, the Aug 2 high.
NEW YORK AGENCIES
The Nasdaq outperformed the broader market as Apple shares reached an all-time high. The CBOE VIX volatility index .VIX hit a 5-year low of 13.43 before closing down 5.9 percent at 13.45. The S&P 500 made a solid move above the closely watched 1,400 level in the last session, posting its biggest gain in two weeks. But trading volume remained low. “From a sentiment point of view, the market has little to inhibit it from proceeding higher,” said Ralph Edwards, director of derivatives strategy at ITG in New York. “The best rallies are, of course, the broadest, so it makes sense to view, in real-time, the stocks that are propelling the index so as to make sure that the advance is not just being carried on the shoulders of one sector. Here, the news is also good.” Edwards noted that 47 S&P 500 stocks in all industry groups except for utilities have recently hit a 52-week high, among them Home Depot Inc (HD.N), PepsiCo Inc (PEP.N), Chevron Corp (CVX.N), SunTrust Banks Inc (STI.N), Covidien Plc (COV.N), 3M Co (MMM.N), Google Inc (GOOG.O), CF Industries Holdings (CF.N) and Sprint Nextel Corp (S.N). With few news headlines and light participation during summer holidays, traders are increasingly taking their cues from market technicals. The S&P 500 needs to close above 1,419.04, the index’s April high, to make a new four-year high. Shares in Apple Inc (AAPL.O) jumped to an all-time intraday high of $648.19 earlier in the session. The stock ended up 1.8 percent at $648.11. The Broker Jefferies raised its price target on the stock to $900 from $800 and gave it a ‘buy’ rating. But Facebook shares continued to slide after the expiration of a lockup period on some of the company’s stock following its initial public offering. The shares fell as low as $19 a share on Friday. Groupon Inc (GRPN.O) also slumped to a new low on Friday after Evercore Partners analyst Ken Sena downgraded shares of the largest daily deal company and set a $3 price target on the stock. The stock closed down 5 percent at $4.75, after falling as low as $4.51. The Dow Jones industrial average .DJI was up 25.09 points, or 0.19 percent, at 13,275.20. The Standard & Poor’s 500 Index .SPX was up 2.65 points, or 0.19 percent, at 1,418.16. The Nasdaq Composite Index .IXIC was up 14.20 points, or 0.46 percent, at 3,076.59. For the week, the Dow was up 0.5 percent, the S&P 500 was up 0.9 percent and the Nasdaq was up 1.8 percent. The S&P 500 has risen 2.8 percent in August and about 11 percent since a year low in June as traders eye some encouraging U.S. jobs data and highly anticipated policy meetings at the European Central Bank and the Federal Reserve in September. The economic data on Wednesday was mixed, leaving investors wondering if the recovery was real. The Thomson Reuters/University of Michigan consumer sentiment survey for August showed the main index rose to its highest since May to 73.6, buoyed by sales at retailers and low mortgage rates.
Oil, gas prices hog Washington’s drawing board There is a multitude of options on the table for President Barack Obama as he vies to score a triumph on the political and energy fronts CRUDE AWAKENING KUNWAR KHULDUNE SHAHID Oil prices have soared this week to as high as $100 per barrel – a three month high – courtesy the latest episode in Iran-
ian sanctions and owing to the Saudi failure in extricating as much black gold as the West would’ve wanted. And now, the onus is clearly on Washington to conjure up the mechanism to tame the price surge. Also, there is the small matter of gas prices closing in on $4 per barrel,
which makes the aforementioned taming task all more pivotal in this election year for the Obama regime. There are quite a few solutions that the think-tanks can summon, even though they run the wide gamut between being pragmatic and being over-optimistic. The first option for the US obviously is to press the accelerator on oil exploration itself. As far as oil opulent zones are concerned there aren’t many richer regions than Alaska and more specifically the ANWR (Arctic National Wildlife Refuge); but again, exploring the zone or not is an extremely contentious debate in the US. Secondly, and arguably more realistically, opening the Strategic Petroleum Reserve is something that might help Obama counter the hiking gas prices. The US President has also been discussing the idea of selling $500 million worth of oil from the reserve, under the Republican’s pressure of course, and this could somewhat plug the global demand-supply disparity of oil and bring the price of gasoline down to something bordering on affordability. With Keystone XL there is another pretty obvious solution to the predicament in the pipeline – pun intended. The 1700mile pipeline would bring volumes of oil from the Canadian tar sands in Alberta. But this potential move has environmentalists raging as the project is touted as being detrimental to the global climatic conditions. Another option that various states are considering is new tax proposals with
regards to gasoline. These proposals basically are designed to channel the state spending and work as the neutralizer in case the oil prices continue their northward trend. A controversial maneuver – at least for the big guns of the oil game – would be curtailing the tax breaks for the oil giants. The final option, and obviously the most comprehensive one, is the “all-ofthe-above” strategy for Washington, as stated by Senator Barasso. It is pretty evident that the oil prices in the US would obviously fluctuate in synchrony with the global prices and hence, in addition to the “all of the above” stratagem, or even ab-
sence thereof, the go-to play for Washington should be to control excessive oil usage. The more prudent the usage and handling of oil is, the lesser the nation would suffer owing to the pendulum that oil supply can become. Digging the US out of the energy quagmire would not only have the snowball effect and control surging oil prices; it could be the decisive factor during this year’s presidential polls for Obama as well. There is a multitude of options hogging the Washington drawing board; earmarking the right one is crucial for the American and global oil markets.
Sunday, 19 August, 2012