LUK's 4Q Gains on Tax Benefits - Analyst Blog

Leucadia National Corporation (LUK - Analyst Report) reported its financial results for the fourth quarter and the fiscal year 2010 on February 25, 2011. In the fourth quarter, the company generated a net income (from continuing operations) of $6.77 per share, up compared with a net loss of 34 cents per share in the year-ago quarter.

In the fiscal year 2010, net income from continuing operations was $1,891.4 million or $7.66 per share, up compared with $533.7 million or $2.18 per share in the previous year. The improvement can be attributed to significant revenue growth and tax benefits, offset partially by higher expenses in the year.

Revenue

In the fourth quarter 2010, revenue jumped significantly year over year to $585.6 million from $192.8 million in the year-ago comparable quarter. Revenue in the fiscal year 2010 was $1,320.0 million, up compared with $575.2 million in the previous year. The improvement was attributed to strong performances across all segments.

In the fiscal year 2010, revenue from the Manufacturing segment was $260 million, up 15.7% year over year and accounted for 19.7% of total revenue. Oil and Gas Drilling segment accounted for 8.8% of revenue and totaled $116.6 million.

Revenue generated from Gaming Entertainment operationswas roughly 8.7% of total revenue, and increased 10.8% to $114.8 million, while revenue of $17.1 million from Domestic Real Estate segment accounted for 1.3% of total revenue.

Revenue from Medical Product Development segment slipped to $0.1 million from $5.1 million in the year 2009. Proceeds from Other operations were $67.1 million, up from $51.8 million in 2009 and accounted for about 5.1% of total revenue, while corporate segment revenue of $744.3 million accounted for 56.4% of revenue.

Margins

Expenses in the fiscal year 2010 increased 16.5% year over year to $951.0 million from $816.4 million in the year 2009. In relation to revenue, expenses dipped to 72% from 142% in the earlier year.

Balance Sheet

Exiting the fourth quarter, Leucadia’s cash and cash equivalents went up 36.5% sequentially to $441.3 million, while its long-term debt dipped by 3.7% to $1,548.5 million compared with $1,608.4 million in the previous quarter.

Cash Flow

Cash flow from operating activities was a net inflow of $431.3 million in 2010 compared with a net outflow of $133.4 million in the previous year. Spending on property, equipment and leasehold improvements increased in the year to $44.3 million compared with $23.6 million in the previous year.

In the fiscal year 2010, the company paid dividends totaling $61.0 million and issued common shares worth $11.3 million.

Leucadia is engaged in manufacturing, telecommunications, oil and gas drilling services, property management and services, gaming entertainment, real estate activities, medical product development operations and various other investment activities in the United States. We currently maintain our Neutral recommendation on Leucadia.

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Forex – AUD/USD Up On Economic Data

Forex Pros – The Australian Dollar was higher against the U.S. Dollar on Tuesday after the release of Australian data on Retail Sales.

AUD/USD was trading at 1.0189, up 0.03% at time of writing.

The pair was likely to find support at 1.0003, Thursday’s low, and resistance at 1.0202, today’s high.

Earlier in the day, official data showed that Retail sales in Australia rose more-than-expected to a seasonally adjusted 0.40% last month from 0.20% in the preceding month.

Analysts had expected Australian retail sales to rise 0.30% last month.

Meanwhile, the Australian Dollar was down against the Euro and up against the Japanese Yen, with EUR/AUD gaining 0.04% to hit 1.3561 and AUD/JPY rising 0.23% to hit 83.49.

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Higher commodity exports for Australia--study

Sales from Australia's commodity exports are seen growing to $255 billion in the next 12 months to be driven by growing world demand, a report of the Bureau of Agricultural & Resource Economics & Sciences (ABARES) said today.

Australia, still world's largest commodity exporter especially of steel grade coal, wool and other iron ore materials, is seen advancing 14 percent in the next fiscal year beginning 30 June 2011.

However, the Canberra-based statistics and research government agency, has adjusted its estimates of commodity earnings for the current fiscal year by 4.5 percent to A$220.6 billion from $211.1 billion announced in December.

The continuing global demand to fill up requirements for energy and food from Brazil to China are seen to give top Australian exports more boost in the near term, the research bureau said.

In a related Bloomberg report, Paul Morris, deputy executive director at the bureau, was quoted: "On the minerals and energy side we are seeing very good prices for iron ore, coal, oil,

Top Australian mining companies BHP Billiton and Rio Tinto have announced that higher output may be needed to fulfil the export demand from importers China and Brazil, among others.

The ABARES also noted that agriculture exports of the county have been estimated to grow A$32.5 billion in the next fiscal year. The tight supply situation globally, on the other hand, lessened the impact of the typhoons that damaged local crops in Queensland. The government agency ABARES, estimated that export sales of agricultural commodities would be higher by another A$1 billion to A$31.2 billion.

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Chunghwa Delivers Impressive 4Q - Analyst Blog

Chunghwa Telecom Co. Ltd. (CHT - Analyst Report) declared impressive financial results for the fourth quarter of 2010 with net income increasing 1.6% year over year. This was primarily attributable to massive reduction in income tax rate from 25% in the year-ago quarter to just 17%. Chunghwa is now more confident regarding fiscal 2011 and projected yearly total revenue to rise by approximately 1.94%.

Quarterly, GAAP net income was approximately $354.8 million, up 1.6% year over year.  Net earnings per ADR were 38 cents, up 1.6% year over year. Total revenue, in the fourth quarter of 2010, was approximately $1,727.5 million, up 2.4% year over year. This encouraging performance was the combined result of higher broadband access revenue and continuously growing revenue from both mobile value-added services (VAS) and Internet services.

Quarterly operating income was $433.3 million, down 0.3% year over year. Operating margin was 25.1% compared with 25.7% in the year-ago quarter. Fourth-quarter 2010 EBITDA was $708.2 million, down 3% year over year. Quarterly EBITDA margin came in at 41% compared with 43.3% in the prior-year quarter.

During fiscal 2010, Chunghwa generated around $2,791.5 million cash from operation, up 9.5% year over year. Capital expenditure during fiscal 2010 was around $808.5 million, down 3.8% year over year.  

At the end of fiscal 2010, Chunghwa had approximately $3,000 million of cash & marketable securities and around $112.7 million of outstanding debt on its balance sheet compared with $2,341.2 million of cash & marketable securities and $33.5 million of outstanding debt at the end of fiscal 2009.

Segment wise Revenue

Mobile Communications segment accounted for $740 million of the total fourth-quarter 2010 revenue, up 2.3% year over year. Internet segment accounted for $203.6 million, up 4.3% year over year. Domestic Fixed-line Communications segment generated $615 million, up 0.6% year over year. International Fixed-line Communications segment accounted for $130.4 million, up 6.1% year over year. Non-telecom Business segment generated the remaining $38.6 million, up 10% year over year.

In fiscal 2010, Broadband access (including ADSL and FTTX) revenue was around $670.6 million, up 2.1% year over year. In the same year, mobile-VAS revenue was $364.6 million, up 30.8% year over year.

Subscriber Statistics as of December 31, 2010

Total Broadband subscriber base was 4.4 million. Out of this, FTTx subscriber base was 2.06 million, which accounted for 46.7% of total broadband subscriber base. HiNet subscriber base was 3.59 million. Mobile subscriber base was 9.68 million, up 4.4% year over year. Out of this 3G wireless subscriber base was 5.43 million, comprising an impressive 56.1% of total mobile subscriber base. International /Domestic Fixed-line subscriber base was 12.31 million.

Recommendation

Chunghwa competes in a tough environment with Taiwan Mobile Company and Far EasTone Telecommunications Co. Ltd. We expect fierce competition going forward as the Chinese giant China Mobile Ltd. (CHL - Snapshot Report) has purchased a significant stake in Far EasTone Telecommunications.

We, therefore, maintain our long-term Underperform recommendation on Chunghwa. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock. We believe this was mainly attributable to the company’s solid fourth-quarter 2010 financial results.

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Watch for iPad 2 Surprise from Apple Wednesday

Is Apple Releasing IPad 2 Early?

On one hand, we have reports from the media, creating doubt about the ability of Apple to launch the iPad 2 on a short-term release date. Meanwhile, the other hand is indicating that users could have the new Tablet following the press event next Wednesday.

Now without being too cynical about people in the “know”; according to “people familiar” with the matter, Apple is getting ready for at least one version of the iPad 2 to be in transit to retail outlets during the press briefing next week.

The reports provide words of wisdom with the warning that until Apple release a statement confirming this issue, nothing is definite! However, it was emphasized that these same people have previously provided consistent, accurate information regarding future Apple plans. This forecast is in direct contradiction to reports during the past weeks, intimating that Apple for various reasons would be unable to ship the iPad 2 for an unspecified time.

Within one year, the IPad has developed from a presumed “niche product” to an asset with the potential of generating 20% of the Apple business, on a quarter-to-quarter basis. Therefore, creating a situation, which could be described as a “Teaser”, with a new iPad 2 could be considered counter-productive. If the new device were unable to be shipped for over four weeks, the sales of existing models would decline drastically, resulting in a major financial loss to the company.

The viewed position expects Apple to present the iPad 2 in three variations. Adding to this will be models targeted at AT&T and a wide range for the European 3G providers. Indications are that a CDMA version, applicable to Verizon and selected Far East providers is also under scrutiny.

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Invites Have Gone Out for iPad 2 Release Event in San Fransisco

Invitations finally went out to reporters on Wednesday to come to the Yerba Buena Center for the Arts in San Francisco to witness the iPad 2 Release. This is the same place that apple introduced the original iPad to the world. The invites have an iCal like image with the number 2 on the front with the unmistakeable image of an iPad showing from a peeled up corner. The tagline for the event is ‘Come see what 2011 will be the year of.’ Brave words, as ever from apple, as they prepare to face a very different tablet market than they did a year ago.

A year ago apple were very much out on their own in the tablet market and since then all the other manufacturers have played catch up, and catch up they have. The iPad 2 will enter a market that now has literally dozens of significant players many of which pose a significant challenge to the iPad 2. With the iPad 2 Release, apple will have to compete in form, function and price in order to stay ahead of the competition.

The rumour mill believes that the new iPad 2 with be thinner, lighter, faster and have a front facing camera for video chat. It is also likely that a chip will be added to allow use of the iPad 2 on CDMA networks such as used by Verizon, the new player in the iPhone market.

One thing that is not known is who will make the keynote presentation and the iPad 2 Release event. The master of understatement and leader of apple, Steve Jobs would normally be odds on favourite to front the event but he is again on medical leave so this is very unlikely. More likely front men are COO time Cook or the head of marketing Phil Schiller.

At least all the question about the new device will be answered at this iPad 2 Release event.

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Stock Markets Remain Mixed – Stay Alert

We are starting the week with the same issues, higher oil prices, inflation, lack luster growth in the economy, jobs and the spend-o-holics in Washington. As we discussed, the Friday bounce was just that, a bounce. There is no indication in either direction that is overly convincing. The catalyst will be investor sentiment or belief. It is easy to buy into the rhetoric of Wall Street and believe everything is okay. There are two key issues facing this market in the foreseeable future, higher interest rates and inflation. By the way both are rally killers.

With the global turmoil heating up the focus has shifted from food inflation to higher oil prices due to production disruption. Some soothing words from Saudi Arabia that they will make up the supply shortage from Libya sent oil back near $98 a barrel. Nice to know that Saudi Arabia is willing to sell us more oil at $98 which two weeks ago they were selling for $82. The recent distraction has taken the focus off agriculture prices hitting record highs. It has also lessened the pressure on interest rates which were inching towards the 5% level on the 30 year Treasury bond. They receded 27 basis point last week to 4.51%.

Economic data last week was mixed, but one report was lost in the Mideast strife, inventories fell. One of the definitions of inflation is too much money, chasing too few goods. I am not saying we are at that level, but the inflation picture continues be painted and when it is finished it will be too late to stop the impact with anything other than raising interest rates. I refer you to the two rally killers mentioned above (inflation and higher interest rares).

I am not trying to be Debbie Downer, but we do have to take note of the risks relative to the market and, more importantly, our money. Thus, as we have done over the last week, we will maintain higher levels of cash, take what the market gives in the short term and keep our eyes open to the developing risks. “Bull Markets” don’t die easy. It takes investors time to come to the conclusion they should sell and protect principle. We continue to believe the buy the dip theory Wall Street so eloquently proliferates will keep the bull running for now.

If last week’s selling turns to buying, take the gains and then get out of the way. The chart below shows the progression of the current trend from the 2009 low. We have essentially completed the first two stages of the rally. There is likely to be a third based on the current data and events. The height and length of the final stage will be determined by the breadth and depth of the current pullback. It could go through the end of the year or it may end in the summer. Time will tell, but as an investor we have to be prepared to understand the events versus blindly following the herd.

It is important to manage risk every day and as a trend matures it is vital to understand the developing events that will ultimately bring the trend to an end. Those events are in play, it is just how long it will take them to mature. Thus, take what the market gives, but keep your stops in place and manage the risk.

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City HR managers pocket bumper bonuses

The Square Mile’s human resources (HR) professionals received bonuses worth 18pc of their salary on average in 2010, nearly double the previous year, according to new figures from HR recruiter Ortus.

The payout, worth £9,980 per City HR professional, outstrips expectations set in mid-2010 when HR managers were hoping for bonuses worth 13.5pc.

The generous perk comes despite major City institutions, including Lloyds and RBS, cutting thousands of jobs last year as the fallout from the economic crisis continued.

The HR bonus increase stretched nationwide, the survey of 900 HR employees revealed. The total bonus pot paid to the UK’s 148,000 HR professionals last year was £1.5bn, more than double the £680m paid out in 2009.

HR workers total pay was 12pc higher in 2010 than the previous year, the research published on Monday found.

Stephen Menko, UK director at Ortus, said the majority of City firms had started to hire again, causing a demand for HR workers. “As companies have returned to hiring following the end of the recession, they recognise the need for HR workers to put hiring strategies into action. This meant that during 2010 there was a sharp increase in demand for HR professionals and this has put upward pressure on bonuses.”

He added: “Bonus expectations have been modest since the beginning of the recession, as many professionals were concerned more about job security than pay, but these figures show that this is changing.”

RBS faced criticism last week when it revealed more than 100 staff at the state-owned bank earned £1m or more last year. The bonus pot was £950m, down from £1.3bn the previous year, with chief executive Stephen Hester admitting he would accept his own £2m bonus.

HR and Recruitment vacancies at Telegraph Jobs

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DIARY: Local Rates, Growth, US Jobs, Oil, Ireland

The economy dominates Australia this week, with the Reserve Bank board meeting tomorrow, the fourth quarter economic growth figures out on Wednesday, after the current account figures and other data today and tomorrow.

In the US there's some important economic data, with the February jobs figures on Friday night, our time, dominating.

The events in the Middle East will be watched closely for signs of resolution or further deterioration, especially their impact on increasingly volatile oil prices.

The American government could shut down this weekend if there's no agreement between the Administration and the House of Representative on extending the debt ceiling.

We will also have the usual surveys looking at the performance of manufacturing industry.

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CHF, CAD, Oil Jumped on MENA; EUR/USD Facing Resistance ahead of an Important Week

Geopolitical development in Middle East and North Africa was the main theme in financial markets last week as violence in Libya escalated. Swiss Franc strengthened across the board and jumped to new record high against dollar. Crude oil breached 100 level briefly on worry of supply disruption and, in a somewhat delayed manner, sent Canadian dollar to three year high against dollar. Australian dollar also managed to strengthen on strength in commodity prices. Euro and Sterling were supported by rate speculations initial. But Euro gave way after failing key near term resistance while Sterling dropped after renewed worry on growth. Dollar received no support from risk aversion. However, the dollar index seemed to stabilizing ahead of 76.88 key near term support level and we would probably see some recovery this week as oil consolidates around 100 level.

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The strength in oil price was a major drive in dollar's weakness last week. In addition, markets worried that US will eventually be dragged into the picture of the turmoil in MENA. The greenback is also pressured as Fed is expected to lag behind other major central banks in policy stimulus removal. Economic data were not supportive neither with Q4 GDP growth revised down to 2.8% annualized, ex-transport durables dropped sharply by -3.6% in January. Nevertheless, there were some brighter spots as consumer confidence jumped to three year high while initial jobless claims continued to improve. Dollar's near term fate will very much depend on this week's testimony of Bernanke and the non-farm payroll report.

Euro was supported by speculation that ECB will toughen up its language on inflation this week. money markets are now pricing in that ECB will fully normalize liquidity by end of first half and that would push Eonia rate up from current 0.66% to above 1%, just slightly above ECB's main finance rate of 1%, back to normal condition. However, Euro lost steam against dollar ahead of key near term resistance of 1.3860 as focus turned to Ireland's election. Note that the main opposition party claimed a historical victory on Saturday. PM-elect Enda Kenny would now re-negotiate the terms of the bail-out package from EU/IMF and created some uncertainties in the markets.

Sterling soared initially as BOE minutes for the February meeting revealed policymakers are facing higher pressures to tighten monetary policies. Spencer Dale, after Andrew Sentance and Martin Weale, voted for increasing interest rates amid heightened inflationary pressures. Among the remaining 6 voting members, 5 voted to keep the Bank rate at 0.5% and the asset-purchase program at 200B pound while 1 favored extending the size of the program. More in BOE's Minutes Unveils One More Member Favors Tightening. However, the pound lost steam and was sold off in cross after surprised downward revision in Q4 GDP. Markets pared some of the aggressive rate hike bet after the data, expect only two BoE rate increase this year, with the third one pushed forward to Q1 2012.

Swiss Franc, Yen, and Canadian dollar were the three major winners last week as risk aversion dominated. While USD/CHF dropped to new record low, the swissy also looked strong in European crosses. We'd probably see EUR/CHF and GBP/CHF head towards record low in near term. USD/JPY was dragged down further by fall in US treasury yield. Canadian dollar followed crude oil higher and rose to three year high against dollar. This week's development in the Loonie will be important in determining whether the Loonie is building up momentum again, or was is just part of the choppy rise that started last may.

New Zealand dollar was the worst performer last week as the country's second-largest city Christchurch was devastated by a 6.3 magnitude earthquake. There were speculations that RBNZ would have a rate cut in next meeting in March even though the speculations cooled towards the end of the week. There was also some mild support after S&P assured that the country's credit ratings were not "immediately affected" by this week's deadly earthquake. Moody's also said earlier this week that it saw no immediate impact on the nation's credit rating following the earthquake.

Technical Highlights

After a week of volatile actions, financial markets are now facing some important levels. Dollar index formed a temporary low at 76.94, ahead of 76.88 key near term support. Bias is turned neutral and focus is now on 77.53 minor resistance. Break there will indicate that fall from 78.87 is over and consolidations from 76.88 is still in progress with rise from 76.94 as the third leg. In such case, dollar index should start a rebound in near term towards 78.87 resistance. Though, sustained break of 78.87 is still needed to confirm near term reversal. Or we'd still favor another fall through 76.88 towards 75.63 key support eventually.

S&P 500 posted its biggest weekly decline in three months. Indeed, the index faced strong resistance from medium term projection target of 61.8% projection of 666.79 to 1219.80 from 1010.91 and the development raised the prospect of near term reversal. Focus will be turned to 55 days EMA (now at 1283.87) this week. And is this support failed, we'd probably see deeper decline back to 1010.91/1219.8 support zone. And such development would be important to whether dollar could have a sustainable rebound.

The CRB commodity index should also be facing strong resistance at 100% projection of 262.07 to 320.35 from 293.95 at 354.10. Note that while crude oil built up strong momentum last week, the sharp retreat after breaching 100 psychological is taken as a sign that traders would possibly be taking profit above 100, which would in turn limit upside in near term. That is, we'd probably see crude oil consolidates around 100 for a while. Gold should also face strong resistance from 1432 record high and have a near term reversal.

The Week Ahead

On-going development in MENA will continue to be a main focus in the markets. In addition to that, there are a couple of market moving events. Reactions to Ireland election will be watched initially this week and focus will then turn to whether Trichet would step up the inflation rhetoric after ECB meeting as markets expected. RBA and BoC will also meet and attention will be on the post meeting statement as usual. From US, there will be Bernanke's semi-annual testimony plus a number of key economic data including the ISM indices as well as non-farm payroll. UK growth data will be watched for rate expectation adjustments.

Monday: New Zealand trade balance; Japan industrial production, retail sales, housing starts; Eurozone CPI final; Canada GDP; US Personal income and spending, Chicago PMI, pending home sales

Tuesday: Japan household spending, unemployment rate; Australia RBA rate decision, retail sales; China manufacturing PMI; Swiss GDP, SVME PMI; German unemployment, Eurozone CPI flash; UK manufacturing PMI; BoC rate decision; Bernanke testimony, ISM manufacturing

Wednesday: Australia GDP; UK construction PMI; US ADP employment, Fed Beige Book

Thursday: Australia trade balance; Swiss retail sales; UK PMI services; Eurozone retail sales, GDP, ECB rate decision; US jobless claims; ISM non-manufacturing

Friday: US Non-farm payroll; Canada Ivey PMI

EUR/USD Weekly Outlook

EUR/USD rose further to 1.3837 last week but faced some resistance ahead of 1.3860 and retreated. A temporary top is at least formed and initial bias is neutral this week. As noted before, we're favoring the case that consolidations from 1.3860 is not over yet. That is, rise from 1.3427 is possibly the second leg of the consolidation. Hence, even in case of another rise, the pair would face strong resistance at 1.3860 and bring another fall. Below 1.3704 minor support will flip bias back to the downside for 1.3427 as the third leg consolidations. But after all, outlook in EUR/USD will remain cautiously bullish with 1.3253 cluster support (61.8% retracement of 1.2873 to 1.3860 at 1.3250) intact. Rise from 1.2873 is still expected to resume sooner or later. Meanwhile, decisive break of 1.3860 will confirm that rise from 1.2873 has resumed and should target 1.4281 high next.

In the bigger picture, main question remains on whether medium term correction from 1.6039 has finished with three waves down to 1.1875. The firm break above 1.35 psychological level again affirm the case that fall from 1.4281 was merely a correction only and whole rise from 1.1875 is still in progress. Also, note that break of 1.4281 will revive the case that medium term correction from 1.6039 was completed with three waves down to 1.1875 and the long term up trend might be resuming. On the downside, though, below 1.2873 will turn focus back to 1.1875 low.

In the long term picture, considering the five wave impulsive structure of the long term up trend from 2000 low of 0.8223 to 2008 high of 1.6039, price actions from 1.6039 are viewed as a correction only. Hence, firstly, we'd expect strong support between 61.8% retracement of 0.8223 to 1.6039 at 1.1209 and 1.1639 to contain downside. Secondly, we'd expect another high above 1.6039 eventually, after correction from 1.6039 is confirmed to be finished.

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Forex – EUR/CHF Up In Asian Trading Hours

Forex Pros – The Euro was higher against the Swiss Franc on Friday.

EUR/CHF was trading at 1.2793, up 0.06% at time of writing.

The pair was likely to find support at 1.2707, Thursday’s low, and resistance at 1.2977, Monday’s high.

Meanwhile, the Euro was up against the U.S. Dollar and the Japanese Yen, with EUR/USD gaining 0.22% to hit 1.3830 and EUR/JPY rising 0.28% to hit 113.32.

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Canadian Dollar: The Downside Prevails

Update on supports and resistances.

Resistance3:

108.5

Resistance2:

104

Resistance1:

101.5

Last:

98.1

Pivot:

101.5

Support1:

97

Support2:

95.65

Support3:

94.85

Pivot: 101.5

Our preference: Short positions below 101.5 with targets @ 97 & 95.65 in extension.

Alternative scenario: Above 101.5 look for further upside with 104 & 108.5 as targets.

Comment: the RSI is capped by a bearish trend line.

108.5

104

101.5

98.1 (last)

97

95.65

94.85

*USD/CAD Index: the ISE Exchange measures the strength and weakness of the US DOLLAR versus the CANADIAN DOLLAR. For details go to www.ise.com

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Aegon Posts Mixed Results

Dutch insurer Aegon NV (NYSE:AEG) reported fourth quarter net income of €318 million (US$438 million), which was substantially below the net income of €393 million (US$541 million) in the year-ago quarter. In fiscal 2010, net income jumped to €1.76 billion as opposed to €204 million in 2009.

The momentous swing was primarily due to improved underlying earnings and lower impairments. These were partially offset by lower realized gains and restructuring charges in U.S.

Aegon’s underlying earnings before tax amounted to €489 million compared with €478 in the year-ago quarter. This was primarily driven by improved financial markets and strengthening of the U.S. dollar. Net underlying earnings increased year over year with growth witnessed across the U.S. and New Markets, partially offset by decline in The Netherlands and U.K.

Operating expenses increased by 8% year over year to €909 million as a result of strengthening of the dollar and pound sterling against the euro. However, operating expenses declined 2% during 2010, excluding currency effects, restructuring and U.S. employee benefit plan charges.

New life sales marginally increased to €558 million in the quarter from €557 million in the prior-year quarter. However, new life sales climbed 5% year over year to €2.21 billion in 2010 as against €2.10 billion in 2009.

Value of new business in the reported quarter declined 35% year over year to €141 million, and 28% year over year to €555 million in 2010 primarily as a result of the strategic shift from spread to fee business. Low margins in U.S. and U.K. also contributed to the decline, whereas the lower margins in The Netherlands were offset by the positive effect of higher pension sales. 

Revenue-generating investments rose to €413 million at the end of December 31, 2010, from €405 million in the prior quarter, primarily as a result of higher equity markets. Gross deposits, excluding run-off businesses, totaled €7.8 billion, up 16% year over year driven by U.S. pensions, variable annuities and Aegon Asset Management.

Financial Update

At the end of the fourth quarter, core capital, excluding the revaluation reserves, amounted to €17.8 billion or 75% of the total capital base, well above Aegon’s self-imposed minimum target of 70%. Management aims to increase this minimum target to at least 75% by the end of 2012.

The revaluation reserves amounted to €1.0 billion, which declined from the prior-year quarter due to increase in risk-free interest rates negatively effecting the value of fixed income securities.

As of December 31, 2010, shareholders’ equity decreased to €17.2 billion compared to €18.0 billion in the prior quarter, while the Insurance Group Directive’s solvency ratio was 198%. Return on equity improved to 9.9% from 9.4% in the reported quarter, with 2010 return on equity of 9.8% as compared with 5.7% in the year-ago period.

These factors reflect a strong excess capital position, which improved to €3.8 billion, with excess capital in the holding of €1.7 billion.

Repurchases

Aegon completed a 10% equity issue via an accelerated book-built offering on February 24. The issue was conducted under Aegon’s U.S. Shelf Registration through the sale of 173,604,912 new common shares of the company with a nominal value of €0.12. The shares were sold at a price of €5.20 per share.

The proceeds of €903 million will be used to fund part of the repurchase of 375 million convertible core capital securities provided by the Dutch State.

Application has been made to list the new shares on Euronext Amsterdam, the principal market for Aegon’s shares. The issue is expected to be settled on March 1, 2011 and the new shares are expected to be admitted to trading as of that date.

Dutch Loan Update

In August 2010, Aegon received the European Commission’s final assent to the terms relating to Aegon’s participation in the capital support program and also paid back €500 million to the Dutch State. Aegon received state aid of €3 billion during the peak of the financial crisis and has so far repaid €1.5 billion.

As a result, the company is aiming to maintain a substantial cash buffer. Aegon has agreed with its regulator, the Dutch Central Bank, that in the current environment it will maintain a capital buffer of 1.5 times its annual holding expenses.

Restructuring Update

Consolidation of Aegon’s asset management operations led to a €12 million restructuring charge. A restructuring program is ongoing in the U.K. to achieve a 25% cost reduction by the end of 2011. This led to a charge of €6 million in the fourth quarter.

In Hungary, unfavorable pension legislation changes resulted in a write-down of intangibles of €18 million and a €5 million restructuring charge related to the Hungarian pension operations. In addition, a bank tax in Hungary led to a charge of €5 million.

Overall, Aegon is attempting to harness its operating efficiency by focusing on its core operations such as life insurance, pension and asset management. In addition, Aegon is well on track with its transformational process and aims to deliver sustainable earnings growth with an improved risk-return profile.

The company thus expects to grow underlying earnings before tax on average by 7%-10% per annum and achieve a return on equity of 10%-12% in the medium term. Aegon also expects to increase fee businesses to 30% to 35% of underlying earnings before tax by 2015.

In addition, the company expects to increase normalized operational free cash flow with 30% by 2015 and intends to resume dividend payments with a dividend of €0.10 per share related to 2H11 in May 2012.

Also, Aegon continues to work on its long-term strategic priorities to reallocate capital toward business with higher growth and good return prospects, to improve growth and returns from its existing businesses and to reduce financial market risk.

 
AEGON N V (AEG): Free Stock Analysis Report
 

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Forex – EUR/USD Down Toward The End Of U.S. Session

Forex Pros – The Euro was lower against the U.S. Dollar on Friday.

EUR/USD was trading at 1.3745, down 0.39% at time of writing.

The pair was likely to find support at 1.3526, Tuesday’s low, and resistance at 1.3838, today’s high.

Meanwhile, the Euro was down against the British Pound and the Japanese Yen, with EUR/GBP shedding 0.22% to hit 0.8533 and EUR/JPY falling 0.67% to hit 112.25.

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William Hill's Topping land Ј900m windfall

Ralph Topping also received a £237,500 payment in lieu of pension, according to the firm's annual report, which is in addition to share awards.

It came as the bookie saw pre-tax profit leap to £193.3m from £120.9m for the 52 weeks to December 28, boosted by new gaming machines and wagers made during football games. William Hill (up 7.4p to 190.9p) posted a total dividend of 8.3p a share up from 7.5p.

Separately Mecca Bingo owner Rank said the number of players had increased for the first time in a decade after a revamp of the brand brought in younger customers.

Rank (up 6.6p to 131.6p) topped forecasts posting pre-tax profit of £73.5m from £52m for the year to December 31. It announced a dividend of 2.4p a share up from 1.35p.

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China CCB eyeing stake in Malaysia's EON Capital-paper

China Construction Bank (CCB) is keen to acquire a stake in Malaysian lender EON Capital Bhd , The Edge weekly newspaper reported on Saturday.

China's No.2 lender may seek Malaysian central bank approval to begin negotiations with EON Capital soon, said the report, citing an industry source.

"It is possible that CCB will be given the nod to start negotiations with EONCap under a government-to-government initiative," the unnamed source said.

EON Capital is the subject of a takeover battle involving its largest shareholder, Hong Kong-based private equity fund Primus Pacific Partners, and other shareholders, over a plan by Hong Leong Bank to acquire the smaller lender.

Primus filed a lawsuit to stop Hong Leong Bank, Malaysia's sixth largest lender, from taking over EON Capital last year.

The case is ongoing.

The Edge report, which could not be immediately confirmed, said it is not known how big a stake CCB is seeking.

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Momentum Stock Picks-Feb. 25, 2011 - Zacks Rank Buys

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Goldcorp Beats Estimates - Analyst Blog

Goldcorp Inc. (GG - Analyst Report) reported solid fourth-quarter 2010 results. Reported net earnings in the quarter were $331.8 million compared with $66.7 million in the fourth quarter of 2009. Adjusted net earnings were $417.1 million, or 57 cents per share compared with $182.7 million, or 25 cents per share in the fourth quarter of 2009. Results exceeded the Zacks Consensus Estimate of 49 cents.

The increase was driven by higher gold and silver prices and increased bullion production.

Net earnings in 2010 were a record $1.6 billion or $2.14 per share compared with $240.2 million or $0.33 per share in the prior year. Adjusted net earnings totaled $1.0 billion, or $1.37 per share compared with $588.2 million or 80 cents per share in 2009.

Revenue

In the fourth quarter of 2010, revenues increased 70% year over year to $1,319.4 million, on gold sales of 678,600 ounces. The increase was driven by strong performance at its Red Lake mine in northern Ontario and the first full quarter of commercial production at its Penasquito gold-silver mine in Mexico. In fiscal 2010, revenues jumped 40% year over year to $3.8 billion on gold sales of 2.4 million ounces.

In the fourth quarter of 2010, gold production was 689,600 ounces at a total cash cost of $164 per ounce versus production of 601,300 ounces in the fourth quarter of 2009. The increase was driven primarily by RedLake, Musselwhite and record production at both Marlin in Guatemala and Los Filos in Mexico.

Financial Position

At the end of December 31, 2010, cash and cash equivalents was $596.1 million versus $699.5 million at the end of December 31, 2009. Long-term debt was $747.1 million versus $719.0 million at the end of December 31, 2009.

In the fourth quarter of 2010, operating cash flows before working capital totaled $646.1 million or 87 cents per share. Cash flow from operations before changes in working capital increased 45% to $1.7 billion or $2.33 per share in 2010 from $1.2 billion in 2009.

Project Pipeline

PuebloViejo: Construction of Pueblo Viejo in the Dominican Republic continues to advance with its first production expected in the first quarter of 2012. Overall construction is nearly 50% complete, approximately 75% of the capital has been committed and all four autoclaves are on site and have been placed on their foundations. Pre-production capital estimate is now expected to be $3.3–$3.5 billion (100% basis) a 10–15% increase from the previous estimate largely due to higher labor, power supply, freight and steel product related costs as well as general inflation.

Cerro Negro: The Cerro Negro project is anticipated to be completed at the end of the first quarter of 2011. The company is deploying ten exploration drill rigs to further delineate and extend these large new vein zones and test new vein targets in an effort to further expand the overall gold resources in 2011.

Camino Rojo and Noche Buena: Exploration and development work continued at Camino Rojo and Noche Buena, the two advanced-stage satellite exploration projects near Penasquito. At Camino Rojo, exploration activities have commenced with drilling and airborne geophysics now underway. At Noche Buena, drilling will continue during 2011 with the objective of adding further oxide resources and expanding the sulphide zones.

El Morro: At the El Morro project, approval of the Environmental Impact Assessment (EIA) is anticipated in the first quarter of 2011. Once the EIA has been approved, condemnation drilling will commence, focusing on selected areas of plant, mine waste, tailing and camp.

We maintain our Neutral recommendation on Goldcorp. Currently, it holds a Zacks #3 Rank (Hold) on the stock.

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UK economy contracts faster than first estimated

The figures may make Bank of England policymakers think twice about raising interest rates, although there have been recent signs that activity picked up at the start of this year following December's snow-related disruption.

Analysts had expected an unchanged reading of -0.5pc. The Office for National Statistics (ONS) added that its “best estimate” for the impact of cold weather on the data remained at 0.5pc.

A breakdown of the figures showed that households were tightening their belts even before the rise in VAT sales tax at the start of this year, as household spending fell 0.1pc, the first fall in 18 months.

The ONS said the downgrade was mainly due to lower production and services output than it estimated last month.

Output in the services sector was revised down to show a fall of 0.7pc from 0.5pc previously. Industrial output was revised down to show a rise of 0.7pc compared with 0.9pc.

Howard Archer, chief economist at Global Insight, said: "The downward revision to show GDP contraction of 0.6pc quarter-on-quarter in the fourth quarter of 2010 reinforces concerns over the underlying strength of the economy – particularly as the fiscal squeeze had not even really started to bite."

The revised figures highlight the dilemma facing the Bank of England, which is tasked with steering inflation back to target. It has so far been reluctant to raise interest rates when a sustained recovery is far from assured.

Bank of England minutes for this month's Monetary Policy Committee meeting showed Bank of England chief economist Spencer Dale joining Martin Weale and Andrew Sentance in calling for an interest rate rise.

However, Vicky Redwood, of Capital Economics, on Friday said that the latest GDP data might give "more hawkishly inclined members of the MPC reason to pause for thought".

"Given that the ONS kept its estimate of the weather impact at 0.5pc, underlying growth was marginally weaker than previously thought," she added. "Indeed, the other economic news of late has not been very reassuring – including the weak consumer confidence figures released overnight. We still think that the economic recovery will struggle this year and expect growth of just 1.5pc or so."

Speaking in London on Thursday before the latest ONS statistics were released, Mr Sentance said: "In my view, the time [to raise rates] is overdue.

"We should increase them gradually and slowly if we can. But the risk of delaying interest rate rises too long is that this gradual approach may cease to be an option."

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Become A Teacher? 10 Examples That Show Why Becoming A Teacher Is A Dead End In This Economy

Today budget cutters are on the rampage from coast to coast and often one of their first targets is public school teachers. What we have witnessed recently in Wisconsin is just one example of this. The truth is that you do not want to become a teacher if you want to have financial security in America today. Teacher salaries are being slashed from sea to shining sea. But to a certain extent the teachers that are having their wages cut are the fortunate ones. There are thousands upon thousands of teachers that have already been laid off, and there are tens of thousands more that are about to be laid off. It is absolutely brutal out there right now. So if you are thinking about becoming a teacher you might want to think twice. Not that there are a whole lot of other jobs that are more secure right now. The truth is that there is no such thing as a “safe job” in America today.

It is very unfortunate that what is going on right now is going to scare so many young people away from becoming a teacher because the next generation could definitely use some quality teachers.

But the truth is that it is getting really hard to honestly recommend that anyone become a teacher at this point. Just consider some of the following news stories that we have seen around the nation recently….

#1 In Providence, Rhode Island the school district plans to send out dismissal notices to every single one of its 1,926 teachers.

#2 Michigan has just approved a plan to shut down nearly half of the public schools in Detroit.  Under the plan, 70 schools will be closed and 72 will continue operating.

#3 In New Jersey, Governor Chris Christie has laid off thousands of teachers and he cut a billion dollars from the state education budget.

#4 Bills in Wisconsin, Ohio, Tennessee, Indiana and Idaho would either significantly alter or completely take away the collective bargaining rights of public school teachers.

#5 The eyes of the whole country are on Wisconsin right now.  Teachers there are very alarmed about the $900 million in cuts to school funding over the next two years that are being proposed.

#6 Clay Robison, a spokesman for the Texas State Teachers Association, recently said that his organization is projecting that 100,000 school employees in the state of Texas could lose their jobs.

#7 The current plan is for more than 4,500 New York City school teachers to be laid off after this current school years ends.  This will be the most significant teacher layoffs in New York since the 1970s.

#8 In Los Angeles, more than 5,000 teachers will be receiving preliminary layoff notices due to budget cuts.

#9 Nevada Governor Brian Sandoval is being deeply criticized for the teacher pay cuts that he is proposing.

#10 StudentsFirst.org is projecting that 161,000 teachers across the United States are in danger of losing their jobs this year alone.

So in light of the facts above, should we advise any of our young people to try to become a teacher?

The worst thing about all this for young teachers is that in many areas of the country there is a rule that says the last teachers hired are the first ones that get laid off.

That is another huge incentive for young people not to choose teaching as a profession.

So why are so many teacher layoffs happening?

Well, the truth is that most of our state and local governments are very deep in debt and have run out of money.

State and local government debt has reached at an all-time high of 22 percent of U.S. GDP, and hordes of state and local governments are teetering on the brink of insolvency at this point.

When there is no more money, the cuts have to come from somewhere.  It is just really unfortunate that so many teachers are going to be put out onto the street.

People that have gone into the teaching profession have all spent a lot of time and money to get the education that they need to teach.  If they are told that they can’t do that anymore, what are they supposed to do?

Most of the time when teachers are forced out of the profession they end up having to take jobs that pay much less.  In this economy, many ex-teachers will not be able to find jobs at all.  Today, one out of every seven Americans is on food stamps, and sadly many teachers may soon be joining them.

So why don’t we just raise taxes so that all of these teachers can keep their jobs?  Well, the truth is that middle class Americans are already being taxed into oblivion.  When you add up the dozens and dozens of different taxes that Americans pay each year the overall tax burden is absolutely frightening.  There is only so much that you can squeeze out of the American people.

No, the truth is that the American people are taxed way too much already, and the big corporations and the ultra-wealthy have become experts at avoiding taxation.  Our current tax system needs to be completely scrapped and replaced with something entirely new.

If our state and local governments had not been so addicted to debt, and if our economy had been managed correctly and if about a hundred other things had been done differently we would not be having these problems.

But here we are.

Unfortunately, there does not seem to be any easy answers.

Or are there some solutions that most of us have been overlooking?  What do you all think?  What should be done about all of the teacher layoffs that are taking place all over the country?  Please feel free to leave a comment with your thoughts below….

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Indexed Annuities Can Yield Surprises

When Helen Siswein, a retired teacher, heard about an investment that might earn as much as 8 percent a year and never lose money, she was sold. "I thought, 'Boy, if the market surges, I could make a lot,'" says Siswein, 82. In the summer of 2003, she put about $1 million into four annuities linked to stock market indexes on the advice of an insurance agent who visited the widow at her former home in Bucks County, Pa.

Siswein says the agent didn't tell her she would be locking up most of her money until her 87th birthday. Or that there were caps on how much the investments could earn. Siswein was charged fees as high as 15 percent of her account balances to cash out early, in 2008, the contracts show. She says one annuity earned an average of about 3 percent a year after the penalties. The index it tracked, the Standard & Poor's 500-stock index, returned 6.3 percent including dividends in the same period.

Equity-indexed annuities have been around since 1995, and their popularity has spiked in the wake of the market rout of 2008. Insurers led by Allianz Life (AZ) and Aviva sold a record $32.1 billion of indexed annuities last year, up 7 percent from 2009, according to trade group Limra, in Windsor, Conn.

The contracts, which earn money based on the performance of stock indexes, don't decline in value if held to maturity, which appeals to conservative investors. Their terms are complex, however, and often include caps on returns that insurers can change at will, as well as lockup periods that can stretch to 16 years. Then there are the embedded fees, which do not have to be disclosed as they must with mutual funds. Salespeople, who earn commissions as high as 12 percent, typically downplay such factors when pitching the annuities. Barbara Roper, director of investor protection for the Consumer Federation of America, a lobbying group based in Washington, D.C., calls them "one of the most abusively sold products on the market today."

Eric Thomes, senior vice-president of sales at Allianz Life Insurance Company of North America in Minneapolis, the largest seller of indexed annuities in the U.S., acknowledges there's a trade-off for investors. "You will never get all of the upside" of the stock market because returns are capped, he says. "You also don't need to worry about the downside, and with what happened in 2008, this type of benefit will no doubt interest a lot of people." Allianz Life is the target of a class action in which investors allege that the firm misled them into buying indexed annuities. Siswein, who bought an annuity from Allianz, joined the suit after she closed her accounts. Allianz Life denies the allegations of the case, company spokeswoman Laurie Bauer said in an e-mail. Bauer said she could not comment on Siswein's contract because Siswein wouldn't sign a release.

MetLife (MET) and Prudential (PRU), the two largest insurers in the U.S., don't offer indexed annuities but do permit agents to sell contracts issued by third parties. TIAA-CREF, the retirement company that manages more than $400 billion, doesn't offer them. "Very few people understand what the product is," says Dan Keady, the company's director of financial planning.

Unlike the stocks they track, indexed annuities generally aren't subject to securities laws and are regulated by state insurance departments. An amendment introduced by Senator Tom Harkin (D-Iowa) to the Dodd-Frank financial overhaul law passed by Congress in July blocked the U.S. Securities and Exchange Commission from regulating the market. State insurance regulations aren't strict enough to prevent salespeople from taking advantage of the elderly with indexed annuities, says Roper of the Consumer Federation. Jim Mumford, first deputy commissioner for Iowa's insurance division, maintains that oversight of the industry is adequate. In Iowa, which is home to several insurance firms, agents have to gather information from buyers such as their income and age to ensure the product is suitable for them.

Not all buyers of indexed annuities have soured on them. Ron Smythe, a former chief executive officer of Meineke Car Care Centers who's now retired and living in Longboat Key, Fla., says he started moving money into indexed annuities about a year ago. Smythe, 76, bought a contract from Allianz Life because of the principal protection and potential for higher yields than other annuities. He says he's unconcerned about the early withdrawal penalties because he's holding them "for the long range."

The bottom line: Some investors are buying annuities whose performance is linked to stock market indexes. Many do not grasp their complexity.

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Forex – GBP/USD Down During The U.S. Session

Forex Pros – The British Pound was lower against the U.S. Dollar on Friday.

GBP/USD was trading at 1.6103, down 0.22% at time of writing.

The pair was likely to find support at 1.6032, today’s low, and resistance at 1.6274, Wednesday’s high.

Meanwhile, the British Pound was up against the Euro and down against the Japanese Yen, with EUR/GBP shedding 0.19% to hit 0.8536 and GBP/JPY falling 0.48% to hit 131.52.

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Saudi Arabia increases oil production to cover Libya loss

The International Energy Agency confirmed on Friday that Saudi Arabia was stepping in to cover the fact that many platforms producing high-grade oil from Libya have been completely shut down because of the unrest.

A source told Reuters that the Saudi state oil company increased its production to more than 9m barrels per day – a rise of more than 700,000 barrels.

The worsening situation in Libya has seen about 1.2m barrels of production out of Libya's 1.6m barrels daily output lost.

European refineries have been particularly worried about a shortage of high-grade crude, of which Libya is a key supplier.

However, the news of Saudi Arabia's intervention calmed the spot price of oil, which had risen to a two-and-a-half year high above $119 at one point on Thursday.

On Friday, Brent crude dropped down to $111 per barrel. However, it still closed up 9pc for the week, reflecting continuing unrest in the wider oil producing region. Riots have spread from Tunisia to Algeria, Egypt, Bahrain and Yemen in recent weeks.

Analysts from ICAP Shipping said on Friday: "In terms of pure volumes there are ample supplies of crude that can be brought to the market if there is a major and prolonged disruption of exports [from Libya].

"However, with the lion's hare of Libyan crude comprised of light, sweet grades, it is also not entirely clear how global trade flows will be affected."

IEA figures show that Saudi Arabia has 3.5m barrels a day of spare capacity, while the United Arab Emirates could add 330,000 barrels, Qatar could put on 180,000, and Kuwait 230,000. While not all of this would be likely to come on stream at once, Middle East production is still 1.7m barrels per day lower than it was at the height oil price spike in mid-2008.

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Income-seeker boost as 5-year bonds jump

Barclays, Aldermore and Principality Building Society have all launched top deals within the last week, paying a monthly 4.65%, 4.7% and 4.75%, respectively.

It's part of a growing trend for banks to target income-seeking savers with longer-term bonds that pay a little extra.

But with consumer prices rising 4% a year, not one account keeps pace with the cost of living after tax is deducted.

Principality's best buy pays 3.80% after basic rate tax is factored in. Higher rate taxpayers receive just 2.85%.

Savers need to find an account offering 5% before tax just to maintain their spending power. No other taxable account comes near.

The good news is banks are waking up to the fact that savers who rely on income from their bonds – often pensioners with sizable nest eggs – are desperate for solid returns.

Many pay gas, electricity and other essential bills using the interest they earn.

With energy bills soaring - all of the 'big six' firms have hiked prices by around 7% since November - they can ill-afford a return of 2% or 3% available on shorter-term bonds.

Now speculation that the Bank of England will raise base rate 0.5% as early as May is spurring banks and building societies into action.

Andy Gray, head of savings at Barclays, isn't ruling out another spate of five-year bond deals arriving shortly.

'February is usually quite a quiet month for fixed bonds maturing, but inflation fears have forced many savers to look for longer-term bonds to secure income.'

'The five-year bond market has never really a space where Barclays has been, and I think you'll see other providers coming in.'

Andrew Hagger, of comparison site Moneynet, says despite the uncertainty surrounding base rate, fixing for five years might actually be right thing for those who pay bills with their monthly interest.

'You could opt for a shorter term, but you might lose 1% from your rate – some people won't be able to afford that if they're on a tight budget.'

'Of course, you might live to regret your decision as interest rates are likely to be higher in 18 months' time. But it's a case of needs must, especially for pensioners struggling to pay bills.'

›› Find the best savings rates for monthly income

There's a strong mathematical argument for locking in, says Gray, who is understandably keen to promote the virtues of fixing over five years.

He says: 'You'll have to see very rapid base rate rises to beat the return on a five-year bond. For example, if base rate rose a quarter of a percent every other month for five years – which would be extreme – the average over the period would still be just 4.25%. And we're talking about the base rate being up at 8% by that point, which is very unlikely - the market suggests it'll average 2.8% over the period.'

'Don't assume that just because of the speculation around interest rates going up it's a one-way stretch. If you wait a year hoping for better rates to emerge, you might find that inflation has dropped and the base rate has come back down again.'

Gray is an inflation optimist – he says 4% a year average price rises (Consumer Prices Index) doesn't have much to do with the low Bank of England base rate. He sees the impact of the VAT hike to 20% and surging oil and food prices as key.

Governor of the Bank of England, Mervyn King, says inflation is likely to remain high above its 2% target for this year, before falling back in 2012.

James Knightley, an economist at ING bank, says: 'With fuel and food prices continuing to head higher we still suspect headline CPI will push above 4.5% in the next few months. This will intensify pressure for an interest rate rise.'

Andrew Hagger reckons there is still room for improvement in the five-year market.

'There has been an awful lot of movement in five-year swap rates [which are used to price five-year bonds and mortgages] but this hasn't been fully passed on to savings rates. So there's maybe a bit more to come there.'

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Google Reportedly Launching YouTube Movie Service in UK

Google is planning to launch an unlimited subscription of its YouTube movie service in UK, according to a report from NewYork Post.

Google's move would be putting it in direct competition with Amazon, which recently bought London-based online video rental firm Lovefilm for $200 million and launched unlimited streaming service for its Prime members.

California-based Google, which has been in talks with Hollywood studios for months, is planning to launch the streaming service first in Europe before expanding to the US, the report said.

The report also said Google has allocated $100 million to sign content deals with studios and other content providers.

Google's move comes at a time when rivals such as Amazon and Netflix are set to expand aggressively in the European market.

Recently, Washington-based Amazon said its Prime members can now stream unlimited, commercial-free, instant streaming of more than 5,000 movies and TV shows at no additional cost. Prime membership will continue to be $79 per year. The online retailer could leverage its acquisition of London-based Lovefilm to expand in UK.

Meanwhile, California-based rival Netflix, which has nearly 17 million subscribers, is also said to be targeting the European market.

"We're now talking about other regions in the world," a company spokesman told the Canadian Broadcasting Corp in December. "Based on the early success of Netflix Canada, we're going to continue our international expansion next year and we're going to allocate significant dollars to it."

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Forex – USD/JPY Down During Asian Trade

Forex Pros – The U.S. Dollar was lower against the Japanese Yen on Thursday.

USD/JPY was trading at 82.17, down 0.43% at time of writing.

The pair was likely to find support at 82.12, today’s low, and resistance at 83.53, Monday’s high.

Meanwhile, the U.S. Dollar was down against the Euro and the British Pound, with EUR/USD gaining 0.20% to hit 1.3775 and GBP/USD rising 0.19% to hit 1.6242.

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Post-slump Sales Rejuvenate GM - Analyst Blog

General Motors Company (GM) posted a profit of 52 cents per share in the fourth quarter of 2010, exceeding the Zacks Consensus Estimate by 5 cents per share. The results excluded net charges of $0.4 billion due to the previously disclosed $0.7 billion loss on the purchase of U.S. Treasury preferred shares.

In absolute terms, the company turned a profit of $510 million during the quarter in sharp contrast to a loss of $3.52 billion in the comparable quarter of 2009 driven by the recovery in the North American and European automotive markets.

The automaker generated revenues of $36.9 billion during the quarter, which was higher than the Zacks Consensus Estimate of $34.9 billion. Unit sales escalated 11% to 2,173 vehicles from 1,952 vehicles in the fourth quarter of 2009. The automaker occupied a market share of 11.5% during the quarter, up from 11.4% in the year-ago quarter.

GM North America (GMNA) reported earnings before interest and taxes (EBIT) of $813 million compared with a huge loss of $3.44 billion in the fourth quarter of 2009. GM Europe (GME) posted a narrower loss before interest and taxes of $568 million compared with $799 million a year ago.

GM International Operations (GMIO) reported a fall in EBIT to $334 million from $428 million in the fourth quarter of 2009. GM South America (GMSA) had EBIT of $195 million, down from $291 million in the comparable quarter a year ago. GM began considering GMSA as an operating segment from the fourth quarter.

Annual Results

For full year 2010, depicted a profit of $4.9 billion (excluding the net charges related to the purchase of U.S. Treasury preferred shares) compared with $104.69 billion (combining the Old GM results for the period January 1 to July 9) in the previous year. On per share basis, the profit of $2.89 inched past the Zacks Consensus Estimate by 2 cents per share.

Revenues in the year soared 30% to $135.59 billion on the back of increased worldwide automotive sales. It was higher than the Zacks Consensus Estimate of $132.97 billion. Unit sales increased 12% to 8,390 vehicles from 7,477 vehicles (combining Old GM and New GM) in 2009. The improvement in unit sales was primarily seen on the back of higher sales at GMIO and GMSA. The company occupied a market share of 11.4% during the year.

Financial Position

GM had cash and cash equivalents of $21.06 billion as of December 31, 2010 compared with $22.68 billion at the end of 2009. Total debt reduced significantly to $4.63 billion as of the above date from $15.78 billion. This translated into a debt-to-capitalization ratio of 11%, down from 43% in the year-ago period.

At the end of the year, net cash flow was $6.59 billion. After deducting $4.20 billion of capital expenditures, the company generated a free cash flow of $2.39 billion from its automotive operations.

The strong results led the company to make a profit sharing payment to its nearly 45,000 eligible hourly employees in the U.S. and approximately 3,000 eligible GM Components Holdings (GMCH) employees. The average payout per employee is estimated at $4,300 for GM employees and $3,200 for GMCH employees.

GM, a Zacks #3 Rank (Hold) stock, had to seek bankruptcy protection in 2009 due to unfavorable economic conditions and a rapid decline in sales. However, the automaker recouped its sales by banking on the emerging markets and the economic recovery. Through its recently completed IPO, it has repaid up to $23.1 billion to the U.S. government.

The company’s hometown rival, Ford Motor Co. (F - Analyst Report), posted a 24% fall in profit to $1.2 billion or 30 cents per share (before special items) in the fourth quarter of 2010 from $1.58 billion or 43 cents per share (before special items) in the same quarter of 2009. With this, the automaker has missed the Zacks Consensus Estimate by 19 cents per share.

The decline in Ford’s profit was attributable to lower year-over-year revenues generated by the company’s automotive operations as well as the financial arm. Total revenue during the quarter ebbed 7% to $32.5 billion. However, excluding revenues from Volvo, sales improved by $1.6 billion or 5% from the fourth quarter of 2009.

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Unrest Boosts Bonds

Today’s Idea

Bond fundamentals have quickly turned. Equities suffered their first two-day decline in months, and the unrest in North Africa and the Middle East has many traders thinking defensively rather than offensively, putting a premium on safe haven investments. Technically, the June futures contract is coming up on a very important resistance level. Some traders may wish to enter into a June Bond contract on a close above 120-16, with an upside target of 123-16 and a protective stop at 119-00. The trade risks roughly $1,500 and has a possible maximum profit of $3,000.

Fundamentals

The tumultuous political situations in North Africa and the Middle East have many equity traders on edge. Equity prices suffered their second day of heavy losses in a row yesterday, amid the turmoil. Many traders are now heading to higher ground and have been searching for safer investments in the form of Gold and Bonds. Bond prices have been on the slide since October due to rosier economic outlooks and concern that central banks around the globe may have a difficult time staving-off inflation in the not too distant future. In addition to profit-taking in the form of short-covering, the unrest has provided a much needed reprieve for Bond bulls. There are concerns that further unrest in the region could slow economic activity, thus curbing inflation without central bank intervention. This may be a very short-sighted view in light of the fact that the region produces much of the world’s petroleum. Initially, traders had thought that the unrest was isolated to Tunisia and Egypt, but recent events have proven this assessment to be incorrect. There is genuine concern over whether Saudi Arabia’s regime can maintain its hold of government, and the Saud family is attempting to quell unrest by increasing government aid and spending. If some semblance of stability materializes, Bond fundamentals once again look bearish, whereas enduring turmoil may continue to support treasury prices.

Technical Notes

Turning to the chart, we see the June Bond contract coming up to test resistance at the 120-16 level. This can be viewed as a tough test for Bonds, as the level was tested repeatedly in December and January without a bullish breakout. A breakout above 120-16 suggests prices could test resistance at the 123-16 level. Failure to take-out the upper end of the price band suggests sideways trading between 117-16 and 123-16.

Rob Kurzatkowski, Senior Commodity Analyst

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USD/CAD Forms Another Descending Triangle

Previous: Forex Notes (2/23)

USD/CAD

- As expected the USD/CAD continues to be choppy, but retains the bearish bias. The daily chart shows that previously, we had a descending triangle with the base just below 1.0, parity. Now, after some sideways action, we are developing lower highs, but the base is at 0.9820 area. It is not a perfect descending triangle, but the important thing is the dynamics of lower highs, and relatively flat support.
- The bearish targets remain near 0.9710 area, and below that near 0.9360 area. The bullish scenario remains locked away until at least a break above 1.0050.
- The 4H chart chart shows the market hammering at this 0.9820/0.9815 support. The RSI should break back below 40, and below 30 if the bearish scenario is to materialize. As our highs have been lower and lower by increments of about 50 pips, we might expect resistance near 0.90 for the next bullish attempt.

Will the USD/CAD crack below the current descending triangle? We would love to hear what you think.

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European Markets Close Lower; Dax Down 0.89%

Forex Pros – European stocks were down after the closing bell on Thursday.

At the close of European trade, Germany’s DAX fell 0.89%, London’s FTSE 100 shed 0.06%, France’s CAC 40 declined 0.09% and the EURO STOXX 50 was down 0.20%.

Earlier in the day, official data showed that new home sales in the U.S. fell more-than-expected to a seasonally adjusted annual rate of 284.00K last month from 325.00K in the preceding month whose figure was revised down from 329.00K.

Analysts had expected new home sales to fall to 310.00K last month.

Meanwhile, on Wall Street, equity markets were mixed after the open. The Dow Jones Industrial Average was down 0.50%; the S&P 500 index shed 0.38%, while the Nasdaq 100 index climbed 0.05%.

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Safeway Ahead Of Estimates

Safeway Inc. (NYSE:SWY) reported fourth quarter fiscal 2010 earnings per share of 62 cents, beating the Zacks Consensus Estimate of 58 cents. The company had reported an adjusted EPS of 53 cents in the year-ago quarter.

The adjusted EPS in the fourth quarter of 2009 excludes a $1.9 billion of goodwill impairment charges due to the company’s reduced market capitalization and a weak economy. For the full year, the EPS was $1.55, surpassing the Zacks Consensus Estimate of $1.51, although lower than the previous year’s $1.74.  

The company reported sales of $12.8 billion during the quarter, marginally exceeding both the Zacks Consensus Estimate and the previous quarter’s $12.7 billion. The effect of a higher Canadian exchange rate and higher fuel sales were partially offset by a 0.8% decline in identical-store sales (excluding fuel) and reduced sales due to store closures. Safeway recorded $41 billion in sales in 2011, marginally ahead of the Zacks Consensus Estimate and the previous year.

Gross margin of 28.08% for the quarter was 56 basis points lower than the fourth quarter of 2009. However, excluding the 60 basis-point impact from fuel sales, gross profit increased four basis points due to improved shrink, partially offset by reduction in prices that the company experienced in the second half of 2009.

Safeway opened 7 new stores, completed 25 Lifestyle remodels and closed 15 stores during the quarter. The company achieved the target of 60 Lifestyle remodels in 2010. During the quarter, $282 million was spent on capital expenditure.

During the year, Safeway generated operating cash flow of $1.8 billion, lower than $2.5 billion in the previous year. The company repurchased 7.5 million shares of its common stock for a total cost of $170 million during the quarter. Subsequent to the announcement of a $1 billion of stock repurchase authorization in the fourth quarter, Safeway was left with $1.7 billion of authorization at the end of 2010.

Safeway did not provide any guidance for 2011. The company will release guidance on March 8, 2011 during its annual investor conference.

Recommendation

Safeway had been expecting the situation to improve over time banking on better volume and pricing. Result of the fourth quarter shows some light in this parlance. In addition, Safeway has completed the Lifestyle remodels, which should increase revenues in future. With a strong cash balance, the company rewards shareholders in the form of dividends and buybacks.

We are currently Neutral on the stock.

 
SAFEWAY INC (SWY): Free Stock Analysis Report
 

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Volcano Beats on Revenues - Analyst Blog

Volcano Corporation (VOLC - Analyst Report) reported net loss per share of 3 cents in the fourth quarter of fiscal 2010 compared to the year-ago quarter’s net loss  of 25 cents. However, on an adjusted basis (excluding one-time items and considering stock-based compensation as a regular item), the company reported break-even earnings during the quarter, compared to an EPS of 3 cents, according to the Zacks Consensus Estimate.

The adjusted EPS in the year-ago quarter was 9 cents. For 2010, the adjusted EPS was 14 cents, missing the Zacks Consensus Estimate of 16 cents. Volcano had reported loss per share of 23 cents in the previous year.

Revenues increased 14.4% annually to reach $81.2 million during the quarter with strong growth in Intravascular Ultrasound (IVUS) and Functional Measurement (FM) single-procedure disposables. Revenues were higher than the Zacks Consensus Estimate of $78 million. For the full year, revenues increased 29.1% to $294.2 million, beating the Zacks Consensus Estimate of $291 million.

Medical segment’s revenue grew 15% to $76.1 million during the quarter driven by increased penetration of the IVUS and FM markets. Barring revenues derived from Consoles ($13 million), which remained unchanged, sales from IVUS single-procedure disposables ($44.9 million), FM single-procedure disposables ($13.9 million) and Other business ($4.3 million) witnessed a growth of 15%, 36% and 15%, respectively. Industrial segment recorded a 2% growth in revenues to $5.1 million.

Growth in the Japanese market for IVUS disposables jumped 17% year over year. Japan is the largest IVUS market in the world and the establishment of a direct sales force should allow the company to provide more focused service and support to the market.

Meanwhile, the US market recorded a growth of 15% in IVUS disposable sales.  Europe and ROW countries posted growth rates of 7% and 21%, respectively. In Japan, FM sales saw a whopping increase of 57% to $0.9 million, with strong growth recorded in other regions, barring ROW.

Gross margin of Volcano Corporation was 64.1% in the quarter, compared with 62.6% in the third quarter of 2009. This was primarily due to a 9.8% rise in cost of revenues, much lower than 14% revenue growth. Excluding one-time items, operating expenses increased 28.9% to $53.3 million due to a 27.2% rise in selling, general and administrative expenses coupled with a 34.9% increase in research and development expenses.

Apart from higher operating expenses, another factor that led to a decline in the company’s bottom line was higher interest expense, which was $1.9 million in the quarter compared to $1,000 in the year-ago period. This is due to the huge increase in its long-term debt level to $91.2 million in the quarter, compared to $0.1 million in the corresponding period of 2009.

Earlier, in September 2010, Volcano had raised $100 million through  the issuance of $115 million of 2.875% convertible senior notes due September 1, 2015. Apart from working capital and general corporate purposes, a portion of the proceeds (approximately $35-$40 million) was to be spent to expand the company’s manufacturing capacity in Costa Rica.

Moreover, the quarter witnessed $269 million of exchange rate loss compared to a $166 million gain in the previous quarter. Last month, Volcano received a favorable court ruling regarding trademark infringement against LightLab Imaging, a subsidiary of St. Jude Medical (STJ - Analyst Report).

Outlook

Volcano Corporation expects $347–$352 million of revenues in fiscal 2011 (representing growth of 18-20%) with gross margin of 64%-65%. The Zacks Consensus Estimate of $349 million is within this range. Moreover, the company expects to report GAAP EPS of 22-24 cents.

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ProAssurance Exceeds on Top-Line - Analyst Blog

ProAssurance Corporation (PRA - Analyst Report) reported its fourth-quarter operating earnings of $96.1 million or $3.08 per share, surpassing the Zacks Consensus Estimate of $1.35. This also compares favorably with earnings of $79.5 million or $2.42 per share in the prior-year quarter.

In fiscal 2010, ProAssurance also posted strong operating earnings of $219.5 million or $6.82 per share, which exceeded both the Zacks Consensus Estimate of $5.16 and the prior year earnings of $215.2 million or $6.49 per share.

Operating income excludes the after-tax effects of gains or losses on the extinguishment of debt, net realized investment gains or losses and guaranty fund assessments or recoupments.

During the reported quarter, the beneficial effect of adjustment to net income was 20 cents per share, compared with 16 cents in the year-ago quarter. The one-time gain in fiscal 2010 was 38 cents, compared with 21 cents per share.

Including these items, net income in the quarter was $102.1 million or $3.28 per share, compared with $84.6 million or $2.58 in the prior-year quarter. Net income was $231.6 million or $7.20 per share, compared with $222.0 million or $6.70.

ProAssurance’s strong results were attributable to its ability to enhance shareholders' value and execute strategic transactions such as the acquisition of American Physicians Service Group (APS).

Quarter in Detail

Total revenue of ProAssurance increased slightly by 0.9% year over year to $185.5 million, exceeding the Zacks Consensus Estimate of $157.0 million. Revenue in fiscal 2010 also increased 2.9% year over year to $692.1 million, exceeding the Zacks Consensus Estimate of $647.0 million.

Gross written premiums for the quarter decreased marginally from $119.2 million to $118.5 million in the reported quarter, whereas it plummeted 3.7% year over year to $533.2 million from $553.9 million.

ProAssurance’s retention in its consolidated medical professional liability physician book was 92% in the reported quarter, as opposed to 90% in the prior-year quarter. However, the retention was 90% for the year, unchanged from last year.

ProAssurance experienced $138.0 million of net favorable reserve development in the reported quarter, compared with $109.0 million a year ago. In fiscal 2010, ProAssurance had $234 million of net favorable loss reserve development, compared with $207 million a year ago.

Net investment income for the quarter dipped 5.4% year over year to $36.0 million, while it declined 3.0% year over year to $146.4 million in 2010. ProAssurance’s net investment income plus net income from the company’s investment in unconsolidated subsidiaries resulted in a 3% decrease in 2010 to $147.6 million compared with $152.4 million in 2009, primarily resulting from lower yields in the fixed income portfolio.

Financial Ratios

ProAssurance’s net loss ratio for the reported quarter came in at negative 4.2%, compared with 18.9% in the prior-year quarter. The net loss ratio also declined to 42.6% in 2010 from 46.4% in 2009. Expense ratio, on the other hand, jumped to 28.4% in the fourth quarter from 23.3% in the prior-year quarter.

Expense ratio increased to 25.4% in 2010 from 22.7% in 2009. Combined ratio fell to 24.2% from 42.2% in the prior-year quarter, while it dipped to 68.0% in 2010 from 69.1% in 2009.

However, return on equity (ROE) slightly improved in the quarter to 22.2% from 20.2% in the prior-year quarter. ROE plummeted to 13.0% in 2010 from 14.2% in 2009. Book value of ProAssurance increased to $60.35 per share as of December 31, 2010 compared with $52.59 as of December 31, 2009.

Acquisition Update

ProAssurance completed the acquisition of APS on November 30, which was announced in September in an all-cash transaction. As a result of the merger, APS is now a wholly-owned subsidiary of ProAssurance.

Under the terms of the merger, each share of APS stock was redeemed for $32.50 in cash. Shareholders whose stock is held by a broker or in direct registration will be paid automatically. Those APS shareholders with stock certificates will receive instructions by mail for surrendering their shares in order to receive payment.

Capital Management

During the reported quarter, ProAssurance purchased 205,775 shares of its common stock for about $11.9 million, while it purchased 1.9 million shares on the open market for $106.0 million during the year 2010. In the first quarter of 2011, ProAssurance has purchased 251,849 shares for about $15.0 million.

The company has approximately $194 million left under its $200 million authorization granted by the Board of Directors in November 2010 and has fully utilized the share repurchase authorization of September 2009.

ProAssurance has been purchasing shares in the open market since 2005 and has purchased 6.0 million shares for $315 million.

We believe that the strong capital position of ProAssurance has helped in optimizing shareholder value through comprehensive capital management strategies of prudently repurchasing shares, executing appropriate acquisitions and supporting strategic business expansion.

However, there are inherent threats associated with the medical professional liability insurance sector as a whole, stemming from price competition, legislative reform, loss cost trends and regulatory challenges.

Nevertheless, we anticipate the acquisition will offer superior quality insurance protection for the policyholders of APS. ProAssurance also believes that this will prove to be a strategic expansion that will help grow both the business and top line in 2011.

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The Overnight Report: Rumours Fly

By Greg Peel

The Dow closed down 37 points or 0.3% while the S&P fell only 0.1% to 1306 and the Nasdaq actually closed 0.6% higher after two days of sharp drops.

It was an unusual start to the session on Wall Street last night – unusual because the economic data were poor and that has not been the trend of late. New durable goods orders rose 2.7% in January but only because of lumpy aircraft orders. Ex-aircraft, orders fell 3.6%. Sales of new homes in January fell 12.6% from December but analysts noted the impact of heavy snow. New sales are down 18.6% year on year.

Economic data and lingering earnings reports have nevertheless taken a back seat this week. It's all been about Arab uprisings, and Libya is currently the centre of attention. Given the lack of access to Libya for foreign press, the only source of information has been the flow of Twitter commentary. Welcome to the new world.

The early rumour flowing was that Gaddafi had chemical weapons and was prepared to use them. Brent crude jumped more than US$8 at one point to almost US$120/bbl. The Dow fell over 100 points.

But at 2pm a new rumour circulated that Gaddafi had been shot. Everything spun on a dime. There has been no confirmation of the rumour but Brent ultimately closed up only US$2.45 to US$113.75/bbl and US stocks retraced the bulk of their falls. Precious metals plunged on the news. Having traded slightly higher to that point, gold fell US$12.50 to US$1397.50/oz and the more volatile silver crashed 4.5% or US$1.51 to US$31.97.

The drop in oil continued into the after-market session, sending Brent down on the day to just over US$110/bbl. London base metals nevertheless close at 2pm New York and they were mostly weaker. Copper was down slightly but nickel fell 2.5%. Further fuelling oil's pullback was commentary out of the White House reminding traders that the government held significant strategic reserves which could be released to calm markets if necessary.

The trend in currency movements nevertheless remains largely consistent. The US dollar is falling against the pound and the euro given rate rises are expected in both centres before too long and well before any rate rise is talked about in the US. The Swiss franc continues to play the role of safe haven instead of the dollar and last night the US dollar fell to almost an all time low against the Swissy. The dollar index is down 0.4% to 77.11 and the Aussie is up 0.7% to US$1.0098.

Over in the bond market attention focused on the Treasury US$29bn auction of seven-year notes, following on from Wednesday's weakly received auction of fives. Demand was better for the sevens, but not substantial, and the benchmark ten-year yield fell three basis points to 3.46%.

The VIX volatility index also had a rollercoaster ride last night, finishing the session down 5% to 21.1.

The longer unsubstantiated rumours flow from the Arab world, the more whip saw action we will see in markets which are running mostly blind. As I write, CNBC is maintaining that the rumour of Gaddafi's demise is still the talking point but that there is simply no confirmation either way. In the meantime, it was officially announced last night that the Algerian government has ended its two decade-long state of emergency as a concession to the Opposition and as a step towards implementing social reforms. The decision follows on from Wednesday's news of a US$36bn social package offered by the monarchy in Saudi Arabia. Nervous Arab governments are clearly looking to Egypt and Libya as good cause to be proactive in quelling unrest. Iran is nevertheless still smouldering, and the real swing factor in the global democratic push will be China.

The SPI Overnight fell 14 points or 0.3%.

Today's local profit report highlights include Austar ((AUN)), Transfield ((TSE)) and Woolworths ((WOW)). For the extended list please refer to the FNArena Calendar.

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FTSE in-depth: Carnival sinks on oil price woe

Investors disembarked on hearing that broker Nomura had slashed its target price to 3450p from 3800p and lowered its 2011 earnings per share forecast by 8% on an expected fuel price increase.

Although analyst Nicholas Thomas remains fairly bullish on the stock he says that bunker fuel prices now stand 19pc above Carnival's full-year 2011 guidance level in December, and about 15% above his original assumption.

He estimates that every 10% change in the fuel price in either direction affects earnings per share by 7-8%.

Thomas reckons Carnival will progressively recover the pricing power that was lost in 2008-09 as a result of the recession and from the damage this caused to the booking curve.

Other travel companies were friendless on fears of what affect rising fuel prices will have on margins. TUI Travel closed 2.8p lower at 240.3p and Thomas Cook 3.9p cheaper at 190.6p.

The prospect of further rises in oil prices fanned concerns about global economic growth and prompted sporadic selling of blue chips.

An increase to three in the number of Monetary Policy Committee members who voted for a rise in UK interest rates at the last MPC meeting also prompted fears that the Bank of England could jump the gun and lift rates as early as next month.

The speculation left the Footsie 73.23 points down at 5,923.53 and the FTSE 250 130.5 points lower at 11,521.9. Wall Street lost a further 43 points in early trading.

Interest in part-nationalised UK banks Lloyds Banking Group and Royal Bank of Scotland was enlivened by Qatar prime minister Sheikh Hamad bin Jassim al Thani's comments at a press conference with Prime Minister David Cameron in the Far East that Qatar is very much open to investing in both UK banks.

Lloyds, which reports full-year results tomorrow, touched 69.5p before closing 0.79p cheaper at 65.46p, while RBS eased 0.4p to 47.31p, after 48.4p, ahead of today's annual results. AMEC rose 10p to 1138p on buying ahead of annual results due early next month and following impressive figures from Australian peer Worley Parsons.

The bullish tenor of the chairman's AGM statement lifted electrical equipment company Gooch & Housego 25p to 557.5p. Shareholders were told that trading for the first four months of the year has been ahead of management's expectations.

The group has seen strong demand continue, particularly in the industrial division, but also in aerospace and defence and life sciences. Investec raised its target price to 615p from 540p.

Media group Aegis slipped 3p to 139.45p after broker Charles Stanley Securities reiterated its sell recommendation. Aegis on Tuesday announced there would be a £25m exceptional charge for the full-year 2010.

Exclient, Nueva Rumasa, a Spanish conglomerate, has filed for insolvency protection with debts of 700m. Analyst Richard Nunn says the client agreement Aegis had in place for over 10 years raises serious concerns about how it is managing existing clients if this were to be repeated.

After warning that 2011 profitability will improve at a slower pace than originally anticipated, UK business adviser RSM Tenon plummeted 11.25p, or 21%, to 42.375p.

Interim figures also showed a higher-than-expected net debt figure of £73m. Entrepreneur and chairman Bob Morton was a big buyer on the way down, acquiring 100,000 shares at 46p and 100,000 at 44.84. Morton and family interests now hold just under 7%.

Affordable housebuilder Galliford Try erected a gain of 10p at 367.5p following robust interims.

First-half profits rose 29% to £17m and the dividend per share 36% to 4.5p. The second-half has started well and the company reports a 19% increase in reserved, contracted or completed housing sales, with sales rates since the beginning of January encouraging. Investec's target price is 433p.

Punters piled into Titanium Resources, chasing shares of the Sierra Leone miner up to 20p before they closed 4.75p better at 15.25p on turnover of 2.1m.

Broker Mirabaud Securities placed 113.6m shares at 10p a share, raising £11.4m. Funds raised will help reduce debt, improve financial flexibility and put the company on a firmer footing with the Government of Sierra Leone.

Fears that its North African operations could be affected by the civil unrest sweeping the region dragged Irish oil and gas explorer Petroceltic 1p lower to 11.5p.

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Australian Stock Market - Morning 2/25/2011

US initial jobless claims fell by 22,000 to 391,000 in the last week. US new home sales fell 12.6pct to 284,000 in January. The weakness in sales follows the expiry of the government tax credit in December. US durable goods orders rose by 2.7pct in January. However excluding transportation, orders fell 3.6pct - marking the biggest fall in two years.

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European shares fell for the fourth straight session on Thursday as the sustained rally in oil prices sparked worries about inflation and growth. The FTSEurofirst index fell by 0.5pct, the German Dax lost 0.9pct and the UK FTSE lost 0.1pct.

US blue-chip sharemarkets fell for a third straight session but were off their intra-day lows on Thursday. The surge in the oil price remained the key driver. The S&P500 broke through a key technical support and selling accelerated. However markets partially recovered as Saudi Arabia assured European refiners that they could step in to fill any oil supply shortfalls. The CBOE Volatility index fell 5pct. At the close of trade, the Dow Jones index was lower 37pts or 0.3pct with the S&P 500 lower by 0.1pct, while the Nasdaq rose by 14pts or 0.6pct.

US treasuries rallied on Thursday (yields lower) as the demand for safe-haven assets saw investors switch to bonds. US treasury department sold US$29bn in 7yr notes which found healthy demand. US 2yr yields fell 2pts to 0.73pct while US 10yr yields were lower by 4pts to 3.45pct.

The US dollar tumbled on Thursday, as St. Louis Fed President James Bullard commented that the Fed can ´´never say never´´ to another round of quantitative easing. The Euro rose from early lows near US$1.3705 to highs around US$1.3815, and headed into the US close near US$1.3800. The Aussie dollar rose from US100.00c to US101.25c, and was near US100.95c in late US trade. And the Japanese yen lifted from 82.15 yen per US dollar to around JPY81.60, and was near JPY81.90 in late US trade.

US crude oil prices surged in early trade on Thursday breaching US$103 a barrel. However prices turned negative following Saudi Arabia´s comments. The IEA estimated that the loss in supply would be between 500,000-750,000 barrels a day, less than 1pct of global consumption. US crude stockpiles rose by 822,000 barrels in the past week. The Nymex crude oil contract finished down US82c or 0.8pct to US$97.28 a barrel. And London Brent crude rose by US13c to US$111.38 a barrel.

Base metal prices were mixed on the London Metal Exchange on Thursday. The unrest in North Africa continued to hurt risk appetite. However copper bounced from one-month lows up 1.9pct. And the demand for safe-haven gold remained healthy. The Comex gold futures price was up by US$1.80 an ounce to US$1,415.80.

Ahead: In Australia, no economic data is released. Transfield, Roc Oil, Goodman Fielder and Harvey Norman are amongst those reporting earnings. In the US, December quarter GDP and the University of Michigan confidence index are released.

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