World Business

From Standard & Poor’s Equity Research

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MERRILL DOWNGRADES LEHMAN BROTHERS TO NEUTRAL FROM BUY

Merrill Lynch algebraist Guy Moszkowski says he clearly doesn’t probably removing his buy rating from Lehman Brothers (LEH) just a week after putting it in place, at a price 10% lower, moreover seems clear to him now that change place to buy was unseasonable.

Moszkowski says the magnitude of pre-announced second quarter loss and associated capital raising (both considerably greater than his expectations) designate weaker ROE potential, and after careful renewed consideration of Lehman’s various exposures and hedging issues, he has less confidence than he would need for buy rating.

He expects Lehman to survive because its liquidity profile is strong and the Fed abatement window is open. But he thinks its current business and asset mix are just not well positioned for the current environment.

JP MORGAN DOWNGRADES ALCOA TO NEUTRAL FROM OVERWEIGHT

JP Morgan algebraist Michael Gambardella says he downgrades Alcoa (AA) as he believes the market will be disappointed with both the strategic aim from the new CEO, Klaus Kleinfeld, and the company’s near-term earnings due to higher-than-expected input costs.

He says, while the market appears to be discounting a sale of the social meeting or at smallest some join of spinoff to separate its upstream from its downstream businesses, he believes one as well as the other of these assumptions are faulty. Instead, he thinks AA will not only remain a conglomerate but that it is also in a fair way to grow both its upstream and downstream businesses organically and even end acquisitions.

JP MORGAN DOWNGRADES MICROCHIP TECHNOLOGY TO NEUTRAL FROM OVERWEIGHT

JP Morgan analyst Christopher Danely says he’s downgrading Microchip Technology (MCHP) due to a slowdown in the Chinese consumer end market and the stock’s high valuation.

Danely notes the slowdown stems from the earthquake centered in the Szechwan province, and is affecting nearly each company in every part the technology supply chain that he’s visited during his trip to Asia this week. He says most companies are hopeful demand will stabilize and improve just before the Olympic Games in late July/early August.

He recommends taking profits on MCHP, as the stock has appreciated 14% year to era.

He lowers $1.63 fiscal year 2009 (March) EPS estimate to $1.58, $1.85 fiscal year 2010 to $1.77; $1.12 billion fiscal year 2009 revenue to $1.10 billion, and $1.24 billion financial year 2010 to $1.20 billion.

ST ROBINSON HUMPHREY DOWNGRADES CENTRAL GARDEN & PET

ST Robinson Humphrey analyst William Chappell says he downgrades Central Garden & Pet (CENT ) due to: headwinds impeding the company’s turnaround and his reduced belief in its stability to pass off timely price increases to offset margin compression.

Chappel notes that the crew said it has low confidence in exceeding in conclusion year’s EPS of $0.45 in fiscal year 2008 (September) due to raw momentous over-issue. He says he had thought his $0.53 fiscal year 2008 EPS estimate was in a great degree attainable, only spiking grain and other oil related production costs be the subject of continued to embarrassment the company.

He says it now appears the company is having trouble keeping pace with inflation from one side price increases, a concerning trend. He cuts financial year 2008 EPS estimate to $0.42 and fiscal year 2009 to $0.60.

CAIRO, Egypt Egypt’s Coptic Church says its pope has been flown to Cleveland for treatment in the rear of rupture his thigh in an mishap.

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Pope Shenouda III, 84, fell in his bedroom on Monday decline of day.

The official Middle East News Agency says Egyptian President Hosni Mubarak ordered his government to provide a special ambulance plane for the patriarch.

In 2006 the pope had spinal surgery at the Cleveland Clinic and he also is known to own outer part problems.

He made several trips to the U.S. last year for back surgery.

HARTFORD, Conn. Doctors say the victim of a hit-and-run that was caught on videotape and viewed by a national audience order never breathe again exclusively of a respirator.

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Angel Arce Torres, who is at Hartford Hospital, also will never go home, a family head said.

Torres was paralyzed from the neck down in the May 30 incident. He was struck by one of two cars that crossed the center line.

Angel Arce, the son of 78-year-old Torres, said his father’s lung collapsed and he developed inflammation of the lungs.

Hartford officials say they received four cell phone calls within a minute of the incident. Police Chief Daryl Roberts initially said the city had lost its ethical compass, noting that not one of the witnesses appeared to advance to Torres’ aid.

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On the Net: http://www.hartford.gov/Police/

CHICAGO Cubs fans are talking World Series, and meaning it. On the South Side, the city’s other first-place baseball team, the White Sox, are using the expression. “boast” in an ad campaign.

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There’s a chance the next president will subsist a Chicagoan. And Sen. Barack Obama is already talking about ending his SECOND White House term by welcoming the world to his hometown in quest of the 2016 Olympic Games.

Talk about “The Audacity of Hope.” Anybody who reads the newspaper - pick a section - knows there’s nothing Second City near to Chicago these days.

From the pastime page comes news that “August: Osage County,” the hit dramatic literature for Chicago’s Steppenwolf Theatre Company and a 2008 Pulitzer Prize winner, is the odds-on pet to win the Tony Award for best play.

On the food page is the news that Grant Achatz of Chicago’s Alinea eating-house has been named the country’s crop chef by the James Beard Foundation.

“When you think of great moments in Chicago decoration, this certainly is one of them,” declared Tim Samuelson, the city’s cultural historian.

For perspective, consider these numbers: 148, 104, 102 and 100. That’s in what way many years it has been since, respectively, an Illinois lawmaker (Abraham Lincoln) was elected president; the Olympics were in the Midwest (St. Louis); the White Sox and Cubs played each other in the World Series (the Sox pulled it out in six games); and the Cubs won the World Series.

So, how does Chicago handle all this possible good fortune?

Deny it, of course.

“It hasn’t kicked in,” related Bill Kurtis, a longtime Chicago news anchor who now hosts A&E’s “American Justice” and “Cold Case Files.” “I contemplate we are just stunned.”

Jim Bodman, president of the Chicago-based Vienna Beef, agrees. Bodman said he’s not firm anybody believes that all of the good things that might happen actually will happen.

But, he said, it could.

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Spending on gasoline has been stoked by a sharp ear in fuel costs.

Core retail sales, which strip out vehicle sales, increased by 1.2 percent, the Commerce Department said in its monthly supervise.

The readings are likely to bolster the positions of some economists who believe that the US plan testament not slump into a recession this year. Total retail sales rang up 385.4 billion dollars during the month.

Other analysts believe a nagging housing downturn, a related credit oppress and skyrocketing energy costs will pitch the world's largest economy into a downturn.

Although the headline affix a number to is buoyant, it furthermore suggests that Americans' wallets are being stretched by rising gasoline costs which could crimp other spending.

The report's headline and core readings were stronger-than-expected. Most economists had predicted that retail sales rose 0.6 percent and that core sales increased 0.7 percent last month.

The gain in overall sales was the strongest before this November.

The surge in retail sales comes as a 168-billion-dollar economic stimulus delivered put a tax upon rebates to millions of Americans. The administration of US President George W. Bush believes the goad will fire up consumer spending, a vital motor of economic growth.

Breaking down the report, gasoline sales jumped 2.6 percent last month compared with April. Sales have boomed 13.8 percent compared with a year ago.

Building and garden equipment sales rose a stout 2.4 percent concerning the period of the month while general merchandise stores saying sales increase 1.2 percent.

Americans are being buffeted by strong economic headwinds, but the Federal Reserve has slit borrowing costs in a bid to boost relating to housekeeping momentum.

Although spending on many categories showed improvements last month, recent reports from large US automakers have been depressed. Demand for large sport benefit vehicles has slumped sharply as gasoline prices have soared higher.

Average gasoline prices have struck 4.00 dollars a four quarts in many areas across the United States.

The management oversee also showed that Americans wish lost none of their legendary appetite for eating out, while restaurant and obstruct sales increased 0.8 percent.

Clothing and clothing confederate. sales improved 0.5 percent in which case electronics and exercise stores reported a 0.7 increase in turnover.

The government revised its readings for April retail sales to reflect a stronger picture, saying sales had risen 0.4 percent compared with an initial estimate that they had declined 0.2 percent.

Original text: http://us.rd.yahoo.com/dailynews/rss/business/*http://advice.yahoo.com/s/afp/20080612/bs_afp/useconomyretailsales

DENVER Colorado led the nation with a 73 percent increase in the number of children living in poverty over six years, according to a new statement.

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Megan Ferland, president of the Colorado Children’s Campaign, said the number of children under 18 in poverty soared from 104,000 to 180,000 between 2000 and 2006. The national average was an increase of 9 percent.

Ferland cited trends in various areas that are affecting the overall poverty rate increase, including the reach the number of of children living in single-parent households; the availability of jobs paying a lively wage for low-skilled workers; the changing demographics of the situation; and the number of students who drop out of loftily school.

“This is a trend our children, and our state, cannot afford,” she said. “Kids growing up in poverty often struggle by educational, soundness, emotional and behavioral difficulties, and a command of other challenges that lower their chances of success and often take from them of hope at an early stage of life.”

Gov. Bill Ritter said his dispensation has launched a number of initiatives to tackle the problem since taking service in 2007, including programs to help struggling children in sect, provide better health care and prevent family violence, which all have roots in poverty.

“As adults, we gain an urgent obligation to ensure that poverty does not determine our children’s future,” Ritter said.

The campaign said the report released Tuesday also contains good news: The statewide teen birth rate has declined, immunizations are increasing, and smoking and remedy use has declined.

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On the Net:

Colorado Children’s Campaign: http://www.coloradokids.org

The International Energy Agency’s monthly Oil Market Report predicts no indemnification, of the same kind with OPEC nations cannot or power of determination not keep up by demand

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Trucks rank up on June 10, 2008 in Le Perthus, France, during a blockade by trade drivers of the French-Spanish border to protest against the government’s measures over soaring fuel prices. Raymond Roig/AFP/Getty Images

by Stanley Reed

Don’t expect any relief from today’s sky-high oil prices. That was in essence the tough message from the International Energy Agency’s monthly Oil Market Report, released June 10. The Paris-based energy watchdog was doubting of the current tendency to blame speculators for oil’s sharp surge saying, "Abnormally full prices are largely explained by fundamentals." While it cut its world-demand growth forecast to suitable 800,000 barrels per day against 2008, the lowest since 2002, it also reduced its expectations of renovated stores from non-OPEC countries by about 200,000 barrels per day, to about 445,000 barrels per day this year.

That means the balance of growth has to reach from OPEC, which has been unable and/or unwilling to increase capacity fast enough in recent years to keep up with increases in demand. In fact, OPEC’s spare capacity—the extra crude it could manufacture if necessary—has dwindled back below 2 million barrels per day with regard to the earliest time considering the third share of 2006, the IEA says.

That resoluteness well-suited make the hair-trigger markets even more sensitive to potential outages that could be caused by hurricanes without ceasing the U.S. or Mexican Gulf Coast, or political tensions from Iran to Nigeria. "Higher prices are needed to choke most distant demand to balance the market," the IEA said. On cue, U.S. crude, which had declined on June 9 following the June 6 record of $139.12, rose by 2.26%, to $137.00 by means of barrel, Reuters reported.

Today’s oil market is really the story of brace different worlds: the industrialized West and Japan—where soaring prices are killing off demand; and the OPEC countries, China, and some other emerging markets—where still-rapid economic growth is outweighing any press close together of higher prices. In many of these regions, including China and the Middle East, fuel is sold at a fraction of its terraqueous globe price, which encourages atrophy. In Venezuela, for case, gasoline goes for about 12¢ a gallon (BusinessWeek.com, 5/23/08).

In addition, the increasingly wealthy populations of these countries are just at once buying cars and other energy-consuming machines and appliances. The IEA expects a sharp 494,000-barrel-per-day fall in North American oil consumption like airlines cancel flights and mothball planes, and car owners cut back on their driving. But this drop will have being counterbalance, the IEA thinks, by increases of 332,000 barrels per day in the Middle East—where a youthful driving culture is thriving adhering giveaway gasoline—and by 581,000 barrels per day in Asia. Latin America, too, is growing rapidly as a consumer, with an expected increase of 241,000 barrels per day. The agency doesn’t foresee China or OPEC countries, which have power to afford to supply with a subsidy prices, initiating more than token compensation increases in the near future. One exception is Iran, which has reduced gasoline gradual wasting through a rationing scheme.

Some respected analysts are predicting a fall in prices. Longtime bull Edward Morse of Lehman Bros. (LEH) has compared the current oil dash forward to the dot-com era of the late 1990s. "We are seeing the classic ingredients of an asset bubble," he wrote in a latter note.

But the emporium fragments very hot and there are stop lots of experts predicting ever higher prices. Gazprom (GAZP.RTS) Chief Executive Officer Alexei Miller said put on June 10 he expected oil at $250 through barrel in 2009. The tension between the damage that of great altitude prices are doing to a wide range of economies and the continued strong consumption in oil-producing countries and China seems well-adapted to continue for at least several months.

Russian companies are on a global buying spree

by dint of. Jason Bush

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A “surprise bid.” That’s the way abundant of the world press described the decision by Russian national airline Aeroflot to connect in the pursuit of Italian carrier Alitalia. Europeans were in addition surprised last September when Moscow-based Vneshtorgbank spent $1 billion for a 5% stake in European aerospace concern EADS. The same goes for the $2.3 billion cash buyout last November of Oregon Steel Mills Inc. by Russian steelmaker Evraz—the country’s largest overseas deal in addition.

Get used to the surprises: There’s a modern breed of corporate dealmakers hailing from the east. Russian companies last year spent $13 billion forward overseas acquisitions, up from $1 billion in 2002, according to market tracker Dealogic. Including expenditure on existing ventures, the Russian Central Bank says foreign direct investing. from Russia last year totaled $18 billion, five general condition of affairs the level in 2002.

Russian companies can supply to splurge. The country is awash in cash from exports of oil, gas, and metals, which helped boost its current-account surplus to $94 billion the last time year. That is flowing into all corners of the arrangement, in the same state even companies far removed from the energy sector have plenty of expenditure standard of value. “It’s hardly surprising that companies are looking for the sake of opportunities abroad,” says Roland Nash, head of research at Moscow investing. bank Renaissance Capital.

Russian money, yet, doesn’t always get a warm welcome. Gas giant Gazprom (OGZPY) sparked a media furor in Britain be unconsumed year when it uttered it might bid for Centrica PLC, Britain’s No. 1 gas supplier. Russian companies lost international deals worth $50 billion in 2006, in part because of political attitudes, Foreign Minister Sergei Lavrov told a meeting of business leaders in Moscow in February. As a result, Gazprom and others be in possession of hired Western public-relations consultants to polish their image.

Despite such obstacles, there’s little uncertainty the Russian acquisition trend testament intensify. Many big Russian companies see expansion into international markets as a necessary step in their development. Energy and metals groups want to move beyond unfinished materials into higher-profit areas such to the degree that refining and manufacturing. Steelmaker Evraz, controlled by tycoons Roman Abramovich and Alexander Abramov, is rumored to be taking into account a bid for Ipsco Inc. (IPS), a pipemaker in Illinois. (Evraz had not any comment.) Russia’s telecommunications companies are on the prowl, too. Altimo, a holding company that owns mobile-phone operator VimpelCom, has taken out a $1.5 billion loan to fund acquisitions in India, Indonesia, and Vietnam. “The saturation of the market means we are looking beyond Russia’s borders,” says Altimo Vice-President Kirill Babaev. These days, any similar deal out should come as no surprise.

Chinese companies spent $31.1 billion on overseas deals as of May 27— more than all of 2007—and the pace isn’t likely to slow

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China Petroleum Chemical Corp (Sinopec), the realm’s largest refiner, said 10 April its 2006 net profit rose 30.1 percent to 53.9 billion yuan (7 billion dollars) under international accounting standards. Teh Eng Koon/AFP/Getty Images

by the agency of Chi-Chu Tschang

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In the second-largest acquisition eternally by a Chinese bank, Shenzhen-based China Merchants Bank on June 3 won the desperately endeavor. \ for Hong Kong’s Wing Lung Bank. The country’s sixth-largest lender, China Merchants paid $4.7 billion, or 2.9 state of things Wing Lung’s 2007 main division value, to escape victorious in addition rival bidders Industrial & Commercial Bank of China (ICBC) and Australia & New Zealand Banking Group.

Lots of other Chinese companies are in dealmaking mode, too. Chinese metals trader Sinosteel, for instance, is in a prolonged, drawn-out hostile takeover battle for control of Australian iron ore prospector Midwest. Chinese mining company Shenzhen Zhongjin Lingnan Nonfemet is similarly engaged in a bidding war to buy Australian base metals miner Herald Resources.

As the disconcert of activity shows, China Inc. is on a shopping spree. Having built up sizeable war chests thanks to recent public offerings, Chinese companies have already spent $31.1 billion on overseas mergers and acquisitions as of May 27, or more than they spent in all of 2007, according to Dealogic. "Chinese companies are larger, they’re more ambitious, and they have more cash at this point," says David Michael, a senior partner at Boston Consulting Group. "They also realize that they are increasingly playing in global markets, to what to have viable position in the long be fusible, you may need to achieve global scale."

Unlike Japan Inc.’s overseas buying in the 1980s, China Inc. has taken a more strategic draw near. Instead of going for sexy, high-profile assets, such as Pebble Beach golf run after or Rockefeller Center, Chinese state-owned enterprises and sovereign property funds are targeting mining companies, power companies, and financial institutions at proceeds prices. "So hostile, state-owned enterprises are the primordial driving force behind China’s overseas acquisitions," says Wang Wei, chairman of China M&A Assn., a nonprofit trade club on this account that lawyers, bankers, and accountants.

But manifold are taking a stake in well-known global blue chips rather than mandate for immediately control. They seem to be wary of setting facing a politic firestorm, as China National Offshore Oil Company did with its short-lived bid during the term of Unocal. "It doesn’t necessarily mean that you tarry doing deals," says Maurice Hoo, partner at Paul, Hastings, Janofsky & Walker.

Some Chinese companies are interested in buying a big-name kind. Lenovo’s 2005 purchase of IBM’s (IBM) PC division is one example. Haier, China’s largest home-appliance maker, could be next. After dropping its $1 billion greet for Maytag in 2005, Haier is now in the running for General Electric’s (GE) home appliance division, according to GE’s chief executive, Jeffrey Immelt. It’s up against rivals from Korea, Mexico, and Turkey (BusinessWeek.com, 5/29/08). "Working with GE’s appliance business, [Haier] might be adroit to extend their global franchise," Immelt told reporters in Beijing on May 28.

Other companies are buying with China’s voracious consumption of wealth and double-digit growth in mind. Higher prices of oil, iron ore, and other commodities are making of that kind deals a smart bet.

Taiwan’s Asustek has produced a global apt expression by shrinking the size, horsepower, and price tag—down to $300

by Bruce Einhorn

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While computer makers have pushed to build faster, in greater numbers forceful laptops in recent years, the executives at Taiwan’s Asustek Computer decided to try a portion different. They pondering more people wanted a simpler computer. And they were right. Since its introduction last October, Asustek’s Eee PC—a mini-laptop that retails for as little as $300—has become a huge win round the world. The company expects to betray 5 million units this year. “We changed the concept,” says Chief Executive Officer Jerry Shen.

He’s changing the public’s perception of Asustek, overmuch. The Taipei-based company has long operated in the obscurity that characterizes the manufacturers of computer components through regard to Western tech vendors. Asustek has never built a brand name that could approach those of similar Asian rivals as Lenovo (LNVGY) or Acer. Now, expressions of gratitude to the success of the little Eee PC and more other innovative designs, Asustek has a opportunity to break into tech’s big leagues. The company, which sells the mini-laptop in the U.S. through retailers like as Amazon.com (AMZN) and Best Buy (BBY), is already the world’s No. 6 producer of notebook computers and aims to crack the top three by 2013. Those spots are currently held by Hewlett-Packard (HPQ), Dell (DELL), and Acer.

To differentiate Asustek from other Taiwanese electronics companies, Shen and his master, Chairman Jonney Shih, have been focusing on design. In January the company spun off its contract manufacturing division, and it’s beefing up Asustek’s design team. Last year Shih appointed Lee Kuo-kun, a professor from a local fine arts school, to subsist a consultant. The two meet every month at Shih’s office for coffee, green tea, and long discussions about aesthetics, philosophy, and technology. “All of life is art,” Lee explains.

Many of Asustek’s designs adorn niche products. The company works through Lamborghini on a line of tinsel computers that feature the same materials used in the Italian automaker’s sports cars. Asustek’s designers boast that they were first to introduce leather-covered notebooks, and in March they unveiled computers with a bamboo exterior to appeal to green-conscious consumers. The goal, says senior designer Jimmy Chu, is “to transform the notebook from a production tool into a in greater numbers personal item.”

Asustek still faces some big challenges before it can join the tech industry’s elite. Some caution that the mini-laptop’s success could erode profitability at Asustek, what one. made $910 the multitude last year on sales of $24.9billion. Daiwa Institute of Research analyst Calvin Huang estimates the Eee PC’s margins are 10% to 15%, compared with gross margins of 21.5% according to the firm company. With Hewlett-Packard, Acer, and Dell gearing up to start selling similar machines, margin pressure is pleasing to grow. “The Eee PC is a significant innovation in the PC toil,” Huang wrote in a report last month, but “its success is unlikely to be sustained.”

Analysts likewise verbal contest whether mainstream consumers will see mini-laptops as too limited. The Eee PC allows users to chitchat, check e-mail, and surf the Net, but not to play the latest online games or upload videos. “It may be just a passing fad,” says analyst Bryan Ma of researcher IDC (IDC).

Shen and the rest of Asustek’s head face understand these concerns. The company has right unveiled a souped-up rendering of the Eee PC, with a wider screen and additional bells and whistles. And faced with the extending competition, the Taiwanese plan to conversion to an act machiavelian design and technological violent departure from established precedent to stay ahead. Says Shen: “We can lead in the market.”