Hong Kong will spend nearly HK$80 billion ($10.3 billion) to bolster growth as the government forecasts the weakest expansion since 2009 on a
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Germany’s controversial suggestion of a European debt regulator with direct control over Greece’s spending turned out to be such a touchy subject that Chancellor Angela didn’t even mention the idea to the leaders at Monday’s European Union summit in Brussels.
In what was seen as a blow for Germany’s push for tighter European integration, national sovereignty appeared to have won the argument Monday.
Over the weekend, Germany had made a pre-summit call to give a powerful European debt watchdog direct control over Greece’s budget decisions. Despite often stinging criticism over how Greece runs it financial affairs, having a foreigner directly run a nation’s budget found no takers among the other leaders.
Even Merkel’s staunch ally, Nicolas Sarkozy, who is so close that they have morphed into the diplomatic couple “Merkozy”, could not back her.
“We cannot put a country under trusteeship and run it from abroad. It would not be reasonable, not democratic, and, in short, not efficient,” Sarkozy said after the summit.
Going into the summit, German Economics Minister Philipp Roesler had suggested the EU should take over the “leadership and supervision” of Greece’s budget.
Athens is teetering on the brink of a disorderly default and is seeking a key agreement to get a second euro130 billion ($170.43 billion) bailout. The country has been surviving since May 2010 on an initial euro110 billion package of rescue loans from other eurozone countries and the International Monetary Fund.
Greece must also cut its deficit further and push through painful public sector layoffs and sell off several state companies, and its partners are unhappy with the pace of action.
Still, a “Sparkommissar” in German_ or “savings Czar” _ was beyond the pale for Greece.
“Our partners do know that European integration is based on … the respect of their national identity and dignity,” Greek Finance Minister Evangelos Venizelos wrote in an angry retort.
“I am certain that the political leaderships of all European nations _ particularly bigger nations that bear increased responsibility for the course of Europe _ are aware of how friends and partners, who have joined their historical destinies, raise questions,” he wrote on Sunday.
Merkel got the message.
“I believe that we are having a discussion that we shouldn’t be having,” she said entering the summit.
Other European leaders have said that the Commission, the EU’s executive, needed the power to block bad spending decisions, but not only in Greece but also other highly indebted countries.
But taking over the leadership of budget went too far.
“It can only be put in place by the Greeks, in a democratic way,” said Sarkozy.
Ever since Greece threw the eurozone into financial turmoil in 2009 when it admitted previous governments had played down the amount of debt, it has been criticized as a profligate nation living off the wealthy northern nations.
It has since committed itself, under often intense pressure, to slowly move back toward a degree of fiscal discipline.
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The stock market has had an impressive January. The staid companies that make up the Dow Jones industrial average have gained 4 percent in three weeks, and the broader market has done even better.
But the Nasdaq composite _ a collection of technology stocks whose dot-com heyday was more than a decade ago _ has left them both in the dust.
That’s no surprise when you consider tech stocks took a licking last year. Tech companies tend to carry more risk _ a problem for the Nasdaq during last year’s market gyrations. As investors regain confidence in the economy, riskier plays are doing well.
But experts say the Nasdaq’s gains reflect long-term currents that could lift tech stocks through 2012 and beyond. Many companies put off replacing worn-out technology during the recession. To compete and survive, they need to invest in tech.
There’s also a growing global market for technology as more nations try to reduce labor costs by automating everything from factories to cash registers.
And the biggest tech companies face less competition these days when they try to acquire smaller companies. Many of their mid-sized rivals for those deals were weeded out after the dot-com bust and the financial crisis.
In the market for mergers and acquisitions, established players like IBM and Oracle can be picky about buying only those companies that will increase their earnings _ and probably their stock prices.
In other words, it’s not all about Microsoft-style titans and trendy social media companies like LinkedIn and Zynga. The Nasdaq contains more than 3,000 companies, many of them relative startups compared with the companies in the Standard & Poor’s 500 index.
For the year _ just 13 trading days old _ the Nasdaq composite is up 7 percent, compared with 4.6 percent for the S&P 500 and 4.1 percent for the Dow.
“It looks like it’s going to be their year, or at least their month,” says Michael Vogelzang, chief investment officer at Boston Advisors LLC.
The Nasdaq sank 1.8 percent last year, while the Dow rose 5.5 percent and the S&P was flat. That left tech stocks relatively cheap, giving them more space to rise as the broader market rallied. Oracle is up 11.9 percent this year, Microsoft 14.5 percent.
Vogelzang and others say the tech rally has further to go.
“If you want to make your company more productive, you have to turn to the world of technology for that,” says Kim Caughey Forrest, senior analyst with Fort Pitt Capital Group.
She expects the S&P 500’s tech sector to outperform the broader market because of strong demand from U.S. companies, developing nations such as China and even cash-strapped European governments. As China’s banking system exploded to serve a growing middle class, banks there spent big on IBM technology, she noted.
“Nobody questions whether they need the latest and greatest technology anymore. They know they need to keep up their technology spending,” says Eric Gebaide, managing director of Innovation Advisors, a tech-focused investment bank and strategic advisory firm.
Gebaide and others mentioned many companies’ efforts to move their computing and data storage off-site _ trends known as “cloud computing” and “virtualization.” Long-distance computing is cheaper, but it requires technology.
But why are tech stocks rallying now? The cloud computing transition has been under way for years, and spending by companies has driven much of the U.S. recovery since the economy emerged from recession in June 2009.
It’s all about the investment cycle, says Jack Ablin, chief investment officer with Harris Private Bank. He says investors are finally willing to “flex their speculative muscles in a market that isn’t falling apart in the way they feared last year.”
Last year, some of the best-performing stocks were consumer staples and utilities _ lower-risk industries where demand is consistent even the economy is slow. This year, utilities in the S&P are down 3.7 percent, while tech companies are up 6 percent.
The move out of so-called defensive stocks, the ones you want to own in a slow economy, is a sign that investors are willing to embrace risk again.
“You’re getting this big market rotation,” Vogelzang says. “People made money last year in the boring, stable industries, and they’re saying, `Hey, I better get on this economy train while I can.’”
Tech companies learned hard lessons from the dot-com bust of the early 2000s and the 2008 financial crisis, says Gebaide of Innovation Advisors. They hold more cash than most types of companies and carry less debt. That leaves them less vulnerable to bankruptcy or a loss of investor confidence.
Given its twice-stung discipline, tech is positioned to drive the economy _ “perhaps the best it has been as a sector in the past 20 years,” Gebaide says.
The biggest threat to the industry, Gebaide says, is a slowdown in the early investment that helps startups grow into viable companies. Those early dollars used to offer massive returns to savvy investors when a good pick went public.
Today, the upside for venture capitalists is limited because far fewer companies are going public in big stock offerings. The bar is much higher after dot-com era debacles like Pets.com. Before underwriting a deal or buying chunks of stock, banks and investors want to see millions in annual revenue and established customer bases. It’s tough for younger tech companies to meet those standards.
Peter Falvey, managing director of Morgan Keegan Technology Group, says there’s plenty of capital, entrepreneurship and good ideas to keep companies’ bottom lines _ and stock prices _ rising.
Falvey’s group specializes in tech mergers and acquisitions _ the kinds of deals that allow IBM or Oracle to bring a small competitor’s product to a wider audience and add to their own earnings. Last year was the best for M&A in his group’s 11-year history, and this year’s deal pipeline already is stronger than last year’s was at this time, he says.
A company like IBM “has huge amounts of capital and a global customer base, plus complete hardware-software services,” Falvey says. “Once you put a small company into that machine, IBM can do really well with it.”
The industry’s earlier downturns also helped big companies by weeding out smaller players. The number of publicly traded tech companies has decreased by a third since 2000, Gebaide says. Now the big dogs can pick and choose more carefully, acquiring only businesses that are almost certain to increase their profits.
To be sure, high-tech companies are higher-risk investments, and they could lose value quickly if the market tanks because of a debt catastrophe in Europe or something unforeseen.
“People love tech until we get an economic shock, or negative economic statistics start to come out,” Vogelzang says. “Then all of a sudden, people will say, `Whoa, I need to go buy some utilities again.”
But investors should take tech’s success at this stage as a promising sign, says Ryan Detrick, senior technical strategist with Schaeffer’s Investment Research. He says higher-risk bets like tech stocks tend to rise as the market enters a phase of long-term growth.
Housing, tech and small-company stocks all have risen faster than broad indexes since October, Detrick says. Those sectors are sensitive to improving economic data, he says.
“When you start to see tech taking charge, that’s definitely a potential step in the right direction for future gains, potentially for the whole year,” Detrick says. “Those are the sectors you want to see lead a bull market.”
J.C. Penney Co. named board member Thomas J. Engibous, former head of Texas Instruments, as the department store chain’s new chairman. He succeeds Myron E. Ullman III, former chief executive and chairman, who is finishing up his reign at Penney’s.
The announcement adds the finishing touches to a major management transformation at the mid-price retailer.
Ullman, who became Penney’s CEO in 2004, gave up that title Nov. 1 to Ron Johnson, a former executive at Apple Inc. who took over merchandising and marketing responsibilities and then planned to assume the rest of the responsibilities Feb. 1. During the three-month transition period, Ullman served as executive chairman.
The company said that Engibous will become chairman Jan. 28, which marks the end of Penney’s fiscal year.
Under Ullman, J.C. Penney added popular brands like European clothing line MNG by Mango and Sephora cosmetics. But the department store chain is still struggling to be more inviting. The department store chain posted disappointing holiday sales as it has faced stiff competition from Macy’s Inc. and other clothing sellers.
J.C. Penney reported that revenue at stores open at least a year rose 0.3 percent in December, missing the company’s expectations. This figure is a key indicator of a retailer’s health because it excludes results from stores recently opened or closed. The company also said on Thursday that it expects to lose money in the fourth quarter personal loans for people with bad credit.
Engibous said in a statement on Tuesday that he will help J.C. Penney as it looks to lure more shoppers to its stores.
Engibous is a retired chairman and former CEO of Texas Instruments Inc. He has been a J.C. Penney board member since 1999 and has served as lead independent director and presiding director since 2008.
Johnson said in prepared remarks that Engibous has been invaluable to him in his early days leading the retailer and expects him to assist in the company’s quest to build itself into “America’s Favorite Store.”
The company took one step toward revitalizing itself last month when it announced that it is buying a 16.6 percent stake in Martha Stewart Living Omnimedia Inc. for $38.5 million. Starting in February 2013, mini-Martha Stewart shops will appear inside most of J.C. Penney stores, and the companies will operate a joint website. Later this month, Johnson is expected to unveil plans on a new pricing strategy and other broad-sweeping intitiatives.
J.C. Penney runs more than 1,100 stores in the U.S. and Puerto Rico.
Shares slipped 8 cents to $34.49 in morning trading.
After four leaderless months, Yahoo named Scott Thompson as its new CEO on Wednesday — choosing an outsider to take over the helm despite shareholders’ calls to sell the company.
Thompson was previously the president of PayPal, an eBay (, Fortune 500) subsidiary. His appointment, which becomes official January 9, follows the ouster of former CEO Carol Bartz — who was unceremoniously fired by the company’s board via phone in September.
Shares of Yahoo (, Fortune 500) closed 3.1% lower Wednesday.
In a prepared statement, Thompson called Yahoo "an industry icon" with a "rich history." Although that’s true, Yahoo has struggled mightily in recent years. The company gave up on search two years ago, a market that it once led. It is also losing ground with its other cash cow, display advertising, to new entrants to the market such as Google (, Fortune 500) and Facebook.
On a conference call following the announcement, journalists and analysts hammered Thompson on those points. He said he needs time on the job to develop strong answers.
"It’s too early for me to have any informed opinion as to the display space, what’s going on there and what’s happening next," Thompson said on the call. "I have a lot to learn, and it’s still very early days … but down in that data we’re going to find ways to innovate and compete."
Roy Bostock, chairman of Yahoo’s board of directors, was also on the call and jumped in to answer many of the hardball questions.
"What we’re doing at Yahoo, you can call it a turnaround, but it’s really building on strong assets," Bostock said.
Will Yahoo sell itself? Despite Bostock’s insistence Yahoo can stand alone, the company’s weakness has attracted buyout interest from a long list of both private equity firms and tech titans. Reports in late October said Google was preparing a bid, in addition to Microsoft (, Fortune 500), which offered to buy Yahoo for more than $47 billion in 2008 and was turned down no checking account payday advance. Reports last month said Chinese Internet company Alibaba, of which Yahoo owns a stake, is preparing a takeover bid.
Yahoo co-founder Jerry Yang and other board members have privately told four major private equity firms that the board would not support a takeover offer for the entire company, Fortune reported on Wednesday.
Several groups of activist shareholders had pushed Yahoo’s board to sell the company, but bringing in an outside CEO makes that possibility more remote.
An analyst on the conference call asked Thompson whether he "see[s] Yahoo as public or private" in the future.
Thompson got out half a word before Bostock jumped in: "We are a public company, with roughly a $20 billion market cap. We don’t see that changing right now."
But earlier in the call, Bostock said Yahoo is "considering a wide range of business investments" and other options. He stressed several times during the call that "the primary focus will be on core business."
That leaves Yahoo room to shed more of its vast product portfolio. It began winnowing in late 2010, killing off struggling services like its Buzz community news site and aging AltaVista search engine. Yahoo also thinned its blogs and sold off bookmarking service Delicious.
Thompson said his aim is "to return this business to one of the great iconic brands. I have a core belief that what happens in the next five years, and the next ten, is almost impossible to imagine."
He closed the call by saying, "I’m genuinely excited to be here. I would not be here if I didn’t think the future of this brand could be spectacular."
Yahoo chief financial officer Tim Morse had been serving as interim CEO, and he will return to his former position once Thompson takes the helm. Morse will also join the company’s board.
Iran’s navy said Sunday it test-fired an advanced surface-to-air missile during a drill in international waters near the strategic Strait of Hormuz, the passageway for one-sixth of the world’s oil supply.
Iran’s state TV said the missile, named Mehrab, or Altar, is designed to evade radar and was developed by Iranian scientists. The report said the missile was tested Sunday but provided no further details.
A leading Iranian lawmaker said the sea maneuvers serve as practice for closing the Strait of Hormuz if the West blocks Iran’s oil sales. After top Iranian officials made the same threat a week ago, military commanders emphasized that Iran has no intention of blocking the waterway now.
The exercise covers a 1,250-mile (2,000-kilometer) stretch of water beyond the Strait of Hormuz, including parts of the Indian Ocean and the Gulf of Aden.
The drill, which could bring Iranian ships into proximity with U.S. Navy vessels that operate in the same area, is Iran’s latest show of strength in the face of mounting international criticism over its nuclear program. The West fears Iran’s program aims to develop atomic weapons _ a charge Tehran denies, insisting it’s for peaceful purposes only.
The 10-day exercise drew significant attention after the Iranian warnings about closing the strait. Iranian military officials later appeared to back away from that threat.
A spokesman for the exercise, Rear Adm. Mahmoud Mousavi, made a similar conciliatory comment on Sunday.
“We won’t disrupt traffic through the Strait of Hormuz. We are not after this,” the semiofficial ISNA news agency quoted him as saying.
Prominent lawmaker Ismail Kowsari offered a different view. He said the war games are part of Iran’s preparations to close the vital waterway if sanctions are imposed.
“Iran’s armed forces have practiced operations to close the Strait of Hormuz several times,” the semiofficial Fars news agency quoted Kowsari as saying Sunday.
“If we feel that the enemies want to prevent our oil exports, definitely we will close the Strait of Hormuz,” he said.
Mousavi said the missile that was tested Sunday is one of the newest in the navy’s arsenal.
“It’s equipped with state-of-the-art technology and a built-in system that enables it to thwart jammers,” Mousavi told state TV. One way to deflect surface-to-air missiles is to confuse their guidance systems.
Nissan’s quarterly profit dropped 20 percent as Japanese automakers took a battering from the quake and tsunami disaster that disrupted car production and destroyed dealerships.
A soaring yen and rising material costs also helped drag net profit for the fiscal first quarter down to 85 billion yen ($1 billion) from 106.6 billion yen in the April-June quarter last year, Nissan Motor Co. said Wednesday.
But Nissan Chief Executive Carlos Ghosn said the numbers show the maker of the Leaf electric car and Infiniti luxury models is holding up despite the huge odds.
The magnitude-9.0 earthquake on March 11 in northeastern Japan destroyed key suppliers of components, disrupting production for all Japanese automakers.
But Nissan’s production has been recovering faster than its rivals _ and Nissan officials acknowledge faster than they had expected themselves.
The result also outdid forecasts. A FactSet survey of analysts forecast a profit of 55 billion yen ($705 million).
Nissan sold 1.056 million vehicles in the quarter, up 10.6 percent from a year earlier. Quarterly sales edged up 1.6 percent to 2.08 trillion yen ($26.7 billion).
“Our rapid recovery from the natural disasters in March once again shows the power of Nissan in responding effectively and decisively to crisis,” Ghosn said.
Last month, Ghosn disclosed a six-year growth plan, his most ambitious since the revival plan for Nissan that he set in motion in 1999. At that time, Nissan was on the verge of collapse, and Ghosn was sent in by alliance partner Renault SA to turn it around.
The nameplate outside George Paz’s windlowless office, no bigger than any other at Express Scripts, carries his name, but no title.
The mustachioed chairman and chief executive eats in the company cafeteria, and parks his Audi sedan in an unreserved, lower-level spot. He knows a surprising number of his employees on a first-name basis, stopping occasionally to chat them up.
Even with Thursday’s announcement that Express Scripts plans to buy a leading rival, Medco Health Solutions, Paz eschews the spotlight
Fitch ratings agency said Friday that it will put a default rating on Greece’s government bonds as a result of the eurozone’s new plan to get banks to share the burden of helping the country.
The eurozone plan says banks will be asked to contribute billions to Greece by rolling over debt, swapping bonds or selling them back at low prices.
As expected, Fitch said that because that would mean a loss for those banks, it will lower Greece’s rating to “restricted rating.” That rating could be lifted, however, as soon as Greece issues new bonds to the banks.
Those new bonds would be guaranteed by eurozone governments.
The banks’ contribution is part of a broad deal to help Greece.
The country will get euro109 billion ($156 billion) in new financing in a complex package that includes new loans, buybacks of Greek debt, and credit guarantees under the deal agreed Thursday by the leaders of the 17 countries that use the euro.
The European plan will help ease Greece’s burden by cutting interest rates and extending repayment on bailout loans, and by asking Greek bondholders such as banks and investment and pension funds to accept less than the full value of their investments through bond swaps and rollovers. Those transactions will give them bonds that pay less interest _ around 4.5 percent on average _ over a much longer period of 30 years.