Market Outlook 16th Sep 2009

INTRADAY calls for 16th Sep 2009
+ve sector , scripts : Bank, Siemens, ArevaT&D, Maxwell,Nitco
BUY HDFCBank-1514 for 1565-1599-1608+ with sl 1500
BUY ABB-764 for 834+ with sl 755
BUY KOTAKBank-749 for 776-793+ with sl 733

Breakout Calls
BUY Welguj-256 for 268-276+ with sl 250
BUY Hoteleela-35 for 40-43+ with sl 34

Positional Calls
BUY IDBI-113 for 123-140+ with sl 109
BUY KOTAKBank-749 for 776-793+ with sl 733

 

NIFTY FUTURES LEVELS
RESISTANCE
4903
4919
4947
4973
SUPPORT
4890
4881
4853
4827
4783
4757
Buy LAKSHMI VILAS BK;Buy ALLAHABAD BANK

 

stocks that are in news today:
-RIL (Reliance Industries) sets September 29 as record date for RPL's (Reliance Petroleum) merger with company
-Elder Pharma in talks with US based PE player TA Associates to dilute minority stake – FE
-Jet fuel price reduced by an average Rs 1,285/kl: PTI
-Air India cuts fares by 46% for next 3 days to counter Jet's offer, other airlines follow suit
-From NW18: Marico Bangladesh arm IPO to list today: Official
-Ex-split: IL&FS Investment Managers from Rs 10 to Rs 2

Strong & Weak  futures
This is list of 10 strong futures:

Jindal Saw, IOB, Allahabad Bank, Orient Bank, Bhushan steel, Indian Bank, Bank Of India, Chennai Petro, Dena Bank & Sesa Goa Ltd.

And this is list of 10 Weak futures:

Container Co, IDEA, India Cements, FinanTech,  Triveni, ACC, PTC, BEL, Hind Uni Lvr & Ultratech Cemco.
Nifty is in Up trend

 

NIFTY FUTURES (F & O): 
 Above 4901-4903 zone, rally may continue up to 4919 level by non-stop.

Support at 4881 & 4890 levels. Below these levels, expect profit booking up to 4853-4855 zone and thereafter slide may continue up to 4827-4829 zone by non-stop.

Buy if touches 4783-4785 zone. Stop Loss at 4757-4759 zone.

On Positive Side, cross above 4945-4947 zone, can take it up to 4971-4973 zone. If crosses & sustains this zone then uptrend may continue.
 
Short-Term Investors:
Bullish Trend. 3 closes above 4780.25 level, it can zoom up to 4999.55 level by non-stop. 

BSE SENSEX:
Higher opening expected. Uptrend should continue. 
Short-Term Investors:
 
Short-Term trend is Bullish and target at around 16824.77 level on upper side.
Maintain a Stop Loss at 16044.77 level for your long positions too.

 

POSITIONAL BUY:
Buy LAKSHMI VILAS BK (NSE Cash) 
Expect uptrend in this scrip.

Profit booking up to 118 level will be healthy. Keep a Stop Loss at 111 level for your long positions too.

Expect a target of 127 level on upper side. If crosses & sustains above 133 level then uptrend may continue.
 
Buy ALLAHABAD BANK (NSE Cash) 
Expect uptrend in this scrip.

Profit booking up to 111 level will be healthy. Keep a Stop Loss at 107 level for your long positions too.

Expect a target of 117 level on upper side. If crosses & sustains above 122 level then uptrend may continue.
 

  FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	15-Sep-2009	2856.46	2080.36	776.1

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	15-Sep-2009	1541.45	1408.01	133.44

 

SPOT LEVELS TODAY

	4892.10	( 1.74 %)	83.50
		1	2	3
Resistance		4924.92	4957.73	5016.02
Support		4833.82	4775.53	4742.72

	16454.45		( 1.48 %)	240.26
			1	2	3
Resistance			16535.98	16617.51	16757.79
Support			16314.17	16173.89	16092.36

Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,683.41. Up by 56.61 points.
The Broader S&P 500 closed at 1,052.63. Up by 3.29 points.

The Nasdaq Composite Index closed at 2,102.64. Up by 10.86 points.

The partially convertible rupee INR=IN closed at 48.65/66 per dollar on yesterday, stronger than Monday's close of 48.74/75.
 
 Interesting findings on web:
Better news on retail sales and manufacturing helped send stocks higher Tuesday, as did comments from Federal Reserve Chairman Ben Bernanke that the recession was probably over.

Stocks got a boost from Federal Reserve Chairman Ben Bernanke, who said the U.S. economic recession was probably over but the recovery would be slow and take time to create new jobs.

"From a technical perspective, the recession is very likely over," Bernanke said at a Brookings Institution conference, but he cautioned it may not feel like it's over.

Market pros said the market's rally will likely continue as money from the sidelines is now flowing into the market.

Jim Swanson, chief investment strategist at MFS Investment Management, said the real catalyst will be profits.

"This profit story in Q2 is very impressive ... low job costs are actually boosting corporate profits and we're gonna see 2 or 3 more quarters of very good profits," Swanson said on CNBC this afternoon. "This is gonna be a business led recovery, not a consumer recovery."

Retail sales jumped in August by the biggest amount in three years, but inflation at the wholesale level rose at double the rate analysts expected.

Investors are looking for signs that a six-month stock market rally of more than 50 percent is justified.

Stocks on Wall Street have risen for a seventh time in eight days after growth in retail sales and New York manufacturing topped economists' estimates.

Billionaire investor Warren Buffett said his company is buying equities.

Industrials including Alcoa [AA  13.99    1.05  (+8.11%)   ], DuPont [DD  33.15    0.87  (+2.7%)   ] and Caterpillar [CAT  51.70    2.93  (+6.01%)   ] led today's rally.

General Electric [GE  16.00    0.65  (+4.23%)   ] was again among the biggest advancers on the Dow, climbing 4.2 percent to close at $16. Bernstein Research raised its price target on the stock to $17, saying they expect improved margins from the company's NBC Universal unit, the parent of CNBC, late next year and beyond.

Hopes for a rebound grew after the government reported that retail sales jumped in August by the biggest amount in three years. The Fed's index of manufacturing in the New York region rose to its best level since late 2007.

That upbeat economic news helped allay concerns about a separate government report finding that inflation at the wholesale level rose last month at double the rate analysts expected.

Meanwhile, Bernanke cheered investors by saying that the worst recession since the 1930s has "very likely" ended, though he cautioned that problems like high unemployment will remain.

Investors have been betting on a recovery. The Standard & Poor's 500 index, the benchmark for many mutual funds, has surged 55.6 percent since skidding to a 12-year low in March.

Stocks zigzagged in morning trading before gaining steam in the afternoon, similar to the way trading played out Monday. Analysts say the slow-building advances are a sign that investors are pouncing on dips to get into the rally.

The short bouts of selling have meant the market has risen without the sizable break, which many analysts still say is overdue. Even when the news isn't good, market sentiment seems immune to developments that would have punctured the rally only months ago.

Investors shrugged off news that wholesale prices rose 1.7 percent last month, and disappointing earnings from two major retailers, Best Buy Co. and Kroger Co., also failed to push the stock market off course.

Electronics retailer Best Buy [BBY  38.32    -2.09  (-5.17%)   ] missed its target for the current quarter as store sales lagged but raised its outlook for the full year, citing stabilizing customer traffic. Its shares fell.

Shares of Kroger [KR  20.46    -1.65  (-7.46%)   ] also skidded after the grocery chain reported its profit fell and slashed its full-year earnings forecast as price cuts, a response to Wal-Mart's [WMT  49.93    -0.45  (-0.89%)   ] push into the grocery business, cut into margins.

"It's a little bit of conflicting things going on. Best Buy misses the quarter but raises guidance, suggesting things are getting better the second half of the year. Then Kroger comes out and lays an egg," Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets, told Reuters. "It's still a minefield out there," he said.

Businesses continued to pare inventories, which  fell 1 percent in July to their lowest level since March 2006. Sales ticked up 0.1 percent. And producer prices climbed 1.7 percent last month, double the expected rate, as gasoline prices rose at their fastest clip in a decade. Plus, the New York Fed branch reported its "Empire State" manufacturing index hit its highest level in two years.

"You want to say that the market is a little bit tired after the run we've had yet we continue to grind higher," said Ryan Larson, senior equity trader at Voyageur Asset Management.

The Dow rose 56.61, or 0.6 percent, to 9,683.41, its highest close since Oct. 6, when it finished at 9,956.

The S&P 500 index rose 3.29, or 0.3 percent, to 1,052.63, while the Nasdaq composite index rose 10.86, or 0.5 percent, to 2,102.64. All three indicators are at their highest levels for 2009.

The Russell 2000 index of smaller companies rose 4.81, or 0.8 percent, to 604.84.

Even after stripping out the sizable gains from the government's popular Cash for Clunkers program, sales rose 1.1 percent, well beyond the rise of 0.4 percent expected by analysts.

Commodity and industrial stocks rose as a weaker dollar pushed up materials prices. Alcoa Inc. added $1.05, or 8.1 percent, to $13.99. Caterpillar Inc. rose $2.93, or 6 percent, to $51.70.

Gregg S. Fisher, chief investment officer at financial advisory firm Gerstein Fisher in New York, said that despite the recent gains investors could still run into trouble.

"Investors are always following the herd. I think investors should sort of catch themselves now and not get overconfident," he said.

The market's latest gains came one year after the Dow tumbled 500 points following the collapse of Lehman Brothers Holdings Inc., which deepened the recession.

Yahoo! and EBay rallied as analysts recommended buying the shares. Freeport- McMoRan Copper & Gold, the world's largest publicly traded copper producer, added 1.1% as copper rebounded.

And Yahoo shares [YHOO  16.41    0.84  (+5.39%)   ] jumped 5.4 percent after the Internet portal sold its stake in China's top e-commerce company Alibaba.com.

Adobe Systems [ADBE  35.61    0.42  (+1.19%)   ] rose 1.2 percent ahead of earnings from the software maker, due out after the bell today.

Citigroup [C  4.12    -0.40  (-8.85%)   ] proposed a plan for the government to unload some of its 34-percent stake in the company. But shares tumbled nearly 9 percent amid published reports that Citi is also considering a $5 billion secondary offering.

Well-known banking analyst Meredith Whitney said on CNBC this morning that the economy remains weak and will face a big test next month when the government starts to wind down its support programs.

Bank of America [BAC  16.79    -0.20  (-1.18%)   ] shares slipped 1.2 percent following news that a federal judge has rejected a $33 million settlement between the bank and the SEC over Merrill Lynch bonuses and that executives may face charges — and a trial — over their handling of the merger.

An interesting approach overseas: The UK plans to make banks draw up "living wills" that would allow them to be dismantled easily, the Financial Times Reported.

Shares of Capital One [COF  37.42    -0.90  (-2.35%)   ] skidded 2.4 percent, even after the credit-card provider reported that defaults on card payments fell in August.

MasterCard and Visa gained after both companies reported processed volume declined less in July and August than in the second quarter, supporting the fact that the industry is stabilizing.

In tech land, Intel [INTC  19.55    0.19  (+0.98%)   ] rose 1 percent as the chip maker said it is shaking up its management team, setting up a three-way race for CEO, according to the Wall Street Journal.

There are concerns that the markets have already forgotten some of the lessons of the crisis. Rochdale Securities Bank Analyst Dick Bove told "Squawk Box Asia" that investors only need to look to yields on junk bonds to see that "greed" has returned to the markets.

This is a quadruple witching week, meaning four key expirations — stock index futures and options, and stock futures and options — which is likely to put some volatility into the market. For today, the CBOE volatility index managed to hold below 24.

Oil,Gold & Currencies:

Crude oil rose $2.07 to settle at $70.93 a barrel on the New York Mercantile Exchange.

Gold also rose after the report on inflation. The metal is often used as a hedge against rising prices.

The dollar struck a one-year low against a basket of currencies on Wednesday, staying vulnerable as investors moved to riskier assets such as stocks and commodities on growing signs of an economic recovery.

The dollar traded near the weakest level this year against the euro before a report forecast to show U.S. manufacturers boosted output, reducing demand for the relative safety of the greenback.

The Australian and New Zealand currencies were near this year's highs against the dollar as Asian stocks extended a global equity rally after the biggest gain in U.S. retail sales for three years encouraged investors to buy riskier assets. Federal Reserve Chairman Ben S. Bernanke said the worst U.S. recession since the 1930s has probably ended and billionaire investor Warren Buffett said his company is buying equities.

"Higher-yielding currencies and riskier assets are in demand as risk appetite returns," said Masashi Hashimoto, senior foreign exchange analyst at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan's biggest banking group. "Funding currencies like the yen and dollar will weaken."

The dollar dropped to $1.4669 per euro as of 10:34 a.m. in Tokyo from $1.4658 yesterday in New York, when it reached $1.4686, the highest since Dec. 18. Japan's currency traded at 133.46 per euro from 133.47 yesterday in New York. It was at 90.97 per dollar from 91.05 yen.

Australia's currency bought 86.49 U.S. cents, close to its strongest since August 2008, from 86.34 cents yesterday in New York. New Zealand's dollar fetched 70.53 U.S. cents from 70.50 cents, near its highest since August 2008.

Retail Sales

Benchmark interest rates of 3 percent in Australia and 2.5 percent in New Zealand attract investors who invest in the countries' assets using loans from nations with lower costs such as the 0.1 percent benchmark in Japan and the U.S. rate which is as low as zero. The risk in such carry trades is that exchange- rate changes can erase profits.

The Dollar Index traded near the lowest in one year after a Commerce Department report showed U.S. retail sales increased 2.7 percent last month after a revised 0.2 percent drop in July, adding to signs the recession is ending.

The Federal Reserve Board's measure of U.S. production, due for release today, probably rose 0.6 percent, the most since October, according to a Bloomberg News survey of economists. The report may also show the proportion of plant capacity in use climbed to 69 percent, the highest in five months.

The Nikkei 225 Stock Averaged gained 1.2 percent and the MSCI Asia Pacific Index of regional shares advanced 1.3 percent.

Buffett Buying Stocks

Berkshire Hathaway Inc. is "buying stocks right as we speak," Buffett told a conference in California, adding that he's getting a "lot for my money" in equities.

The Dollar Index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell to 76.481 from 76.520 yesterday. It earlier hit 76.406, the lowest level since September 2008.

The yen rose for the first time in three days against the dollar on speculation foreign investors may shift their focus to Japanese assets from the rest of Asia.

"The Japanese stock market, which has lagged behind the recent bull-run of the regional market, is gradually catching up thanks to buying by foreign investors," said Takao Yahata, senior manager of foreign exchange and financial-products trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's largest banking group. "This capital inflow into Japan buoys the yen."

Japanese Politics

Foreign investors bought 180.8 billion yen ($2 billion) in Japanese bonds and 132.4 billion yen in stocks, and sold 26.3 billion yen in short-term securities during the week ended Sept. 5, according to figures based on reports from designated major investors released by the Ministry of Finance in Tokyo.

Prime Minister Taro Aso and his Cabinet resigned this morning, paving the way for Yukio Hatoyama to lead the first change of Japan's government in 15 years.

Hatoyama is set to be elected prime minister by parliament this afternoon. His Democratic Party of Japan won a landslide victory last month, securing 308 of the 480 seats in the Lower House and ousting Aso's Liberal Democratic Party, which had governed for 54 of the past 55 years.

The euro was close to a four-month high versus the pound on speculation a European Central Bank official will reiterate that policy makers plan to reduce lending to banks amid signs the recession in the 16-nation region is abating.

ECB Executive Board member Jose Manuel Gonzalez-Paramo speaks today on "Awakening from the financial and economic crisis" in Brussels.

European Rates

Executive Board member Juergen Stark said yesterday the ECB will probably begin scaling back its lending to banks next year, and Governing Council member Guy Quaden said he is "reasonably optimistic" on the economic outlook. The ECB has used "non- standard measures" including lending banks as much cash as they want and buying 60 billion euros ($88 billion) of covered bonds to get credit flowing again.

"Risk-taking sentiment is growing," said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France's third-largest bank. "This benefits the euro, which is likely to strengthen" to the Dec. 18, 2008, high of $1.4719 this week, he said.

Europe posted a trade surplus for a fourth straight month in July, widening to 1.2 billion euros from 1 billion euros in June, according to a Bloomberg News survey of economists. The European Union's statistics office will release the report in Luxembourg tomorrow.

The pound fell to 88.925 pence per euro after touching 88.975, the weakest since May 15.

Bonds:

Bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.46 percent from 3.43 percent late Monday.

What to expect:

WEDNESDAY: Weekly mortgage applications; CPI; current account; industrial production; weekly crude inventories; earnings from Oracle

THURSDAY: Housing starts; weekly jobless claims; Philly Fed; Earnings from FedEx

FRIDAY: Quadruple witching

Asia:

Asian stocks rose, led by electronics and mining companies, after U.S. retail sales and New York manufacturing reports beat economist estimates and commodity prices advanced.

Canon Inc., which gets 28 percent of its revenue in the Americas, climbed 5.1 percent in Tokyo as Nomura Holdings Inc. recommended buying the shares. BHP Billiton Ltd., the world's biggest mining company, gained 1.8 percent after metal prices rose for the first time in five days. National Australia Bank Ltd., the nation's largest by assets, rose 2.8 percent, as an index of the country's leading economic indicators climbed.

"Asia and other emerging markets have strong domestic economies that will benefit further from a global recovery," said Paul Joseph Garcia, who helps manage about $1.45 billion as chief investment officer at the Philippine unit of ING Investment Management Ltd. "Trade will pick up and that's good for Asia's export-oriented industries."

The MSCI Asia Pacific Index gained 1.3 percent to 117.31 as of 11:41 a.m. in Tokyo. The gauge has climbed 66 percent from a more than five-year low on March 9 as stimulus measures around the world pulled economies out of recession. Stocks on the gauge are priced at an average 24 times estimated earnings, up from 15 times at the March low.

Australia's S&P/ASX 200 Index climbed 2 percent, leading gains in the region, with Telstra Corp. surging 3.2 percent on optimism it will get access to a new national Internet network.

Nikkei, Hang Seng

Japan's Nikkei 225 Stock Average rose 1.2 percent. Nippon Steel Corp. gained 2.7 percent after JPMorgan Chase & Co. rated the stock "overweight." South Korea's Kospi Index advanced 1.6 percent and Hong Kong's Hang Seng Index rose 0.7 percent.

Futures on the U.S. Standard & Poor's 500 Index were little changed. The gauge increased 0.3 percent yesterday after a government report showed retail sales excluding automobiles gained 1.1 percent last month, while the Federal Reserve Bank of New York said its general economic index rose to 18.9 in September. Both reports surpassed economist estimates.

Billionaire investor Warren Buffett said yesterday his company is buying equities, while Federal Reserve Chairman Ben S. Bernanke said the U.S. recession is "very likely" over.

Canon, which makes digital cameras and office equipment, climbed 5.1 percent to 3,730 yen as Nomura raised its rating on the stock to "buy." Sony Corp., which gets 24 percent of its revenue in the U.S., gained 2.7 percent to 2,485 yen.

"Signs of a recovery in the global economy are boosting investor confidence that stocks will stay solid or go up," said Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc.

Leading Indicators

A gauge of Australian leading indicators, which focuses on future economic growth, gained 1.1 percent to 248.5 points in July from June as shares and dwelling approvals climbed, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index shrank at an annualized rate of 1.8 percent in July after contracting 4.6 percent the previous month.

National Australia Bank added 2.8 percent to A$28.95. Rival Commonwealth Bank of Australia advanced 2.8 percent to A$47.81.

Telstra, the nation's biggest telephone company, gained 3.2 percent to A$3.20. Stephen Conroy, the country's communications minister, told national radio the government may give Telstra a stake in its Internet network.

The company's shares fell 3.2 percent yesterday after Conroy said Telstra must separate its fixed-line assets from its consumer business or face curbs on mobile-services expansion.

Oil, Metals Prices

BHP added 1.8 percent to A$38.93. Rio Tinto Group, the world's third-largest mining company, gained 1.8 percent to A$60.02. Inpex Corp., Japan's largest oil explorer, climbed 2.3 percent to 796,000 yen.

A measure of six metals in London advanced 1.1 percent, rising for the first time in five sessions. Crude oil climbed 3 percent to $70.93 a barrel in New York yesterday, the biggest increase since Sept. 8.

Nippon Steel gained 2.7 percent to 344 yen, while JFE Holdings Inc. rose 1.9 percent to 3,260 yen after JPMorgan rated both companies "overweight" in new coverage. Smaller rival Kobe Steel Ltd., which was rated "neutral," added 1.2 percent to 163 yen.

Halex Holdings Bhd., a Malaysian agricultural chemicals manufacturer, jumped 15 percent to 90 sen on its debut on the Kuala Lumpur stock exchange today. The company sold shares at 78 sen in its initial share sale. 

Nikkei 225 10,339.43     +121.81 ( +1.19%).(08.07 AM IST).

Japan's Nikkei average rose 1.2 percent on Wednesday, buoyed by exporters such as Canon Inc (7751.T) after retail sales data helped boost investor confidence and lifted U.S. stocks to highs for the year.

But analysts said gains were likely to be limited as investors carefully monitor policies of Japan's incoming government.

HSI 20972.03 +105.66 +0.51%. (08.08 AM IST).

Hong Kong shares rebounded Wednesday after two days of losses, with energy producers like Cnooc Ltd. and export plays such as Li & Fung Ltd. rising after U.S. stocks ended at 2009 highs and Federal Reserve Chairman Ben Bernanke said the recession was likely over. The Hang Seng Index rose 0.8% to 21,039.44 in early action, with Li & Fung /quotes/comstock/22h!e:494 (HK:494 28.15, +0.70, +2.55%) advancing 2.7% and Cnooc /quotes/comstock/22h!e:883 (HK:883 10.74, +0.08, +0.75%) /quotes/comstock/13*!ceo/quotes/nls/ceo (CEO 139.34, -1.82, -1.29%) climbing 0.9%. The Hang Seng China Enterprises Index gained 0.9%, although mainland Chinese stocks declined after rising in 10 of the last 11 sessions. The Shanghai Composite Index recently slid 0.6%. 

SSE Composite  2968.44   -2.15.(08.11 AM IST).

China's key stock index opened down 0.2 percent on Wednesday, with China Vanke firmer after shareholders approved its $1.6 billion share offer.

The Shanghai Composite Index .SSEC opened at 3,027.506 points, after edging up 0.23 percent on Tuesday.

China Vanke (000002.SZ: Quote, Profile, Research), the country's second-biggest property developer, rose 0.42 percent to 12 yuan after the shares were suspended on Tuesday. It said its shareholders approved a new public share offer to raise up to 11.2 billion yuan ($1.6 billion).

Investors often worry that such fund raising plans drain money from the stock market and hurt sentiment but analysts said the situation with Vanke was different.

Shareholders' approval of Vanke's fund-raising plans suggests underlying confidence towards the property sector through next year, so its impact on the overall market may be limited. ($1 = 6.83 yuan)   

Chinese stocks open 0.21% lower on Wed

Chinese stocks opened lower on Wednesday morning.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 3,027.51 points, down 0.21% or 6.22 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.34% or 41.75 points lower at 12,396.5 points.

Taiwan's Mega ICBC approved to set up office in Suzhou.

Wynn Resorts approved to list Macau unit in HK.

BMW's China sales up 63.2% in Aug.

China Mobile still in talks with Apple on iPhone.

NSSF cuts shareholding in Dalian Port to 4.99%.

China's import, export value falls 20.6% to US$191.7 bln in Aug.

China Mobile kicks off domestic listing.

Tencent mulls overseas M&A.

Henderson Land's Beverly Hills earns HK$8.38 mln.

Haier to set up distribution affiliate in Shanghai.

Ping An earns RMB 118.88 bln in premiums in Jan-Aug.     

U.S. economic recession "very likely over": Bernanke

U.S. Federal Reserve Chairman Ben Bernanke said Tuesday that the country's economic recession is very likely over at this point.

More and more data showed that the world largest economy is pulling out of the worst recession since the 1930s. Bernanke admitted that in responding to questions at the Washington based think-tank Brookings Institution.

    The central bank chief also expressed his confidence that the Congress will enact a revamp of the nation's financial rule book to prevent future crisis from happening.

    "I feel quite confident that a comprehensive reform will be forthcoming," Bernanke said.

    In a speech delivered Monday in New York to rethink the one year anniversary of the collapse of Lehman Brothers, President Barack Obama urged the Congress to enact legislation this year.

U.S. Treasury Secretary Tim Geither also said recently that it is essential that the financial overhaul should be implemented to avoid future crisis. 

Warren Buffett to CNBC: No Regrets From Crisis Weekend One Year Ago

Warren Buffett tells CNBC he has no regrets about any of the decisions he made over the weekend one year ago in September, 2008, when the financial crisis was at its worst.

In a taped interview with Squawk Box's Becky Quick airing tonight, Buffett says he "looked hard" at a telephoned offer that Friday night to buy AIG's property casualty operation in the range of $20 billion to $25 billion, but decided against it. 

He recalls telling AIG CEO Bob Willumstad that night, "Unfortunately, I can't do this deal.  And don't waste your time with me, so go someplace else."

He also recalls that he got a phone call Saturday night from Barclay Capital's Bob Diamond, asking about a complicated reinsurance deal that might have convinced the British government to allow Barclay's to come to Lehman's rescue.

About to go to a social event in Edmonton, he asked for a fax with details of the proposal. But when he got back to his hotel at midnight, there was no fax and he assumed the idea hadn't worked out.

Today, in a on-stage appearance with Fortune's Carol Loomis (the editor of his annual letter to shareholders) at the magazine's Most Powerful Women Summit in California, Buffett reveals that 10 months later, with the help of his tech-savvy daughter Susan, he discovered a number of voice-mail messages on his cell phone from that weekend, including one from Diamond.

Did his inability to work his cell phone send Lehman to its doom?  Probably not.  There was a lot going on that night, and it seems unlikely that one connection could have made everything go right when everything was going wrong.

Here's the video clip and transcript of part one of Becky's conversation with Buffett.  (Part two airs tomorrow morning at 6a ET on CNBC's Squawk Box.)

She started by asking Buffett if he agrees with those who say Lehman had to fail to save the rest of the financial system:

WARREN BUFFETT:  Well, I think -- I think Lehman was destined to fail unless the government came in big time.  And -- you know, for one reason or another the -- they generally said they didn't have the authority.  My experience usually as it -- whenever the government wants it they find the authority, but if -- if -- listen, if Merrill Lynch hadn't gotten sold on -- on -- on -- on Sunday -- what would have happened Monday would have been off the charts.

BECKY QUICK: So the --

BUFFETT:  We'll --

BECKY:  -- more important --

BUFFETT:  -- we're --

BECKY:  -- one to save?

BUFFETT:  Lehman -- Lehman probably should have been -- not saved isn't the right world -- word, but transferred in some kind of an orderly manner.  I mean it was -- it was the chaos that came after the fact that it just -- it just happened and there was total disorder.  And I think the trustee for Lehman has said between $50 and $75 billion at Lehman itself was lost unnecessarily because of the disorderly way that the liquidation took place.

BECKY: Obviously there were a lot of calls that were going on behind the scenes at that point.  Were you a part of any of those calls?

BUFFETT: Oh, I -- I got a call.  I was in Edmonton -- at a social event that -- I was at the hotel about 6:00 or so Edmonton time.  And I did get a call from -- from -- the head of -- the head of Barclay's -- Bob Diamond and -- and Michael Klein, who was an investment banker.  And they had just learned apparently that the British authorities would not allow them to take over all of Lehman.  This was not just the part that they took over later.  But they were -- they were talking about -- about coming in and taking over Lehman.  And the British authorities had said if -- if it involved more than three billion pounds, as I remember, it needed the vote of shareholders and that couldn't take place 'til sometime later so they were asking if we would write an insurance contract that would protect everybody on the other side of trades until they got that shareholder approval.  So they were looking for a solution I can tell you at about 8:00 on —

BECKY: On Saturday?

BUFFETT:  -- on Saturday.  And -- 8:00 in the evening.  And -- they didn't find one.

BECKY:  Were you surprised?  I mean it -- what happened?  Did you turn down this offer?  What happened?

BUFFETT:  Well, what happened is they described the transaction to me that I really couldn't grasp -- quickly.  And so I asked them to send me a fax at the hotel.  I was gonna go to the social affair that would break up around midnight.  Send me a fax, but explain the fax action in detail so I could understand it.  Tell me how much of a limit they needed and -- how much of a premium they would pay.  And then I would get back to them promptly.  I'd call 'em that night.  And -- 'cause it was a complicated transaction they were describing.  I didn' t -- I didn't fully understand it and people were waiting for me downstairs.  (CHUCKLES)  Anyway -- well, I got back to the hotel that night around midnight, but there was no fax.  Apparently it blew up at some point in that period.

BECKY:  What -- what did you hear afterwards?  That -- did they explain to you why or what?

BUFFETT:  Well, I -- no, I -- I don't know why they felt the transaction was unfeasible or I don't know if for some other reason that Barclay's decided they couldn't go ahead with Lehman at that point.  And as you know, a few days later they actually made a transaction with the broker-dealer arrangement.  But -- the way I understood it on Saturday at 8:00 New York time or so was that -- that -- one of the authorities in -- in England had ruled essentially that if it involved more than, I think, three billion pounds that they couldn't do it without shareholder approval.

BECKY:  Did you get other phone calls that weekend?

BUFFETT:  I (LAUGHS) got a lot of phone calls.  I had a phone call on Friday night -- the Friday -- late Friday afternoon -- on AIG.  And they -- they were gonna need many, many billions of dollars by the following Wednesday, so I went down to the office on Friday night and looked hard at whether we might possibly buy a very large property casualty operation from them.  And -- spent a few hours then.  And then I called (AIG CEO) Bob Willumstad and I said, "Unfortunately -- I can't do this deal.  And don't waste your time with me, so go someplace else."  Then on Sunday after I got back from Edmonton, AIG was in the picture again and they were looking for an insurance policy in connection with an offer that was being made for AIG.  I think it was by Chris Flowers and perhaps KKR, a few people.

BECKY:  Right.

BUFFETT:  A few people.  And they said they were gonna get goin' to a board meeting and decide whether they were going to accept this.  But if they did accept it would we be good on a certain type of reinsurance transaction.  I said I thought we would.  But then that blew up on Sunday night, so it was -- a lot of action.

BECKY:  Is this different than any time you'd ever experienced before?

BUFFETT:  It was --

BECKY:  That were --

BUFFETT:  -- it was -- except for the Solomon experience I had in 1991, when I was more directly involved.  This was a very extraordinary weekend.  I mean the--

BECKY: What did you see in the AIG deal, in the offer there that you -- that you thought, "Forget about it.  This is not gonna work?"

BUFFETT:  I just -- we were talking about buying a property casualty operation that might have sold in the two -- $25 billion range.  And then I saw -- and, again, if it was me I wouldn't have wanted to pay that in the first place.  And beyond that it would have required New York State Insurance Department approval and who knows was else.  And I just -- there was no way to hand over all that money by Wednesday the next -- the next week.

BECKY:  And in hindsight do you have any regrets about any of the decisions you made that weekend?

BUFFETT:  No.  I -- I mean the -- the -- I should have been probably doing other things too.  No, I -- I'm -- I am -- I am glad we didn't buy that particular insurance operation.  I would have done the reinsurance transaction that was involved on Sunday night.  The Lehman thing I still don't understand, even (CHUCKLES) to this day, exactly what the transaction was.  No, it was -- it was -- it was a movie to see but not to -- participate in.  (LAUGHS)

Current Berkshire stock prices:

Class A: [BRK.A  100000.00    1250.00  (+1.27%)   ]

Class B: [BRK.B  3299.50    42.50  (+1.3%)   ]

Adobe to Buy Omniture for $1.8 Billion, Beats Profit Forecasts

Adobe Systems announced a definitive agreement to acquire software firm Omniture as the company reported stronger-than-expected earnings Tuesday, but Adobe's shares fell in late trading.

Adobe said it will acquire Omniture in a transaction valued at about $1.8 billion. Adobe will commence a tender offer to acquire all of the outstanding common stock of Omniture for $21.50 per share in cash.

Under terms of the deal, Omniture will become a unit of Adobe, headed by its current chief executive Josh James. Adobe said the deal should close in the fourth quarter of fiscal 2009, and would add to Adobe's per-share earnings in fiscal 2010.

Omniture shares [OMTR  17.32    0.32  (+1.88%)   ] closed at $17.32 and jumped around 25 percent after the bell.

Omniture's software, which the company hosts and delivers as a subscription service, is designed to let business customers analyze information generated by their Web sites.

Excluding one-time items, Adobe earned 35 cents a share in its third quarter on sales of $698 million, compared with 50 cents a share on sales of $887 million in the same period last year.

Analysts who follow Adobe expected the company to turn in a gain of 34 cents a share on sales of $686 million, according to a consensus from Thomson Reuters.

Adobe shares [ADBE  35.61    0.42  (+1.19%)   ], which closed Tuesday at $35.61, fell more than 4 percent in extended trading. 

The recession has slowed demand for San Jose, Calif.-based Adobe's Creative Suite 4, the most recent version of the software package that brings in the bulk of the company's revenue.

Adobe's software products include Photoshop Illustrator, Flash, Acrobat and the Web design software Dreamweaver.

Still, analysts say they are seeing stabilization in technology spending among businesses and corporations. And fewer companies buying CS4 will likely mean more pent-up demand for the next software package, Creative Suite 5.

Obama Gets 56% Job Approval Amid Deficit Concerns, Poll Shows

President Barack Obama earns high marks for his performance even as Americans express anxiety about his domestic policies. One possible reason: Republicans aren't offering an alternative.

A Bloomberg News poll gives Obama a job-approval rating of 56 percent and 61 percent say they feel favorably about him. Still, respondents are divided over the president's handling of health care and the economy, while giving him a negative grade on the growth of the budget deficit.

"Americans are despairing of the federal deficit in the wake of several huge government spending programs," says J. Ann Selzer, the president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the poll. "Health care is one more big- ticket item and taxpayers appear to believe at some point they, or their children, will hold the bag."

Republicans aren't benefiting from the negative sentiment toward the economic policies, the poll shows. The survey finds that by about a 2-to-1 margin, Americans say Obama is doing a better job on the economy than his predecessor, George W. Bush.

"He's got good ideas," says poll respondent Donna Lawrence, a 55-year-old corrections administrator from Richmond, Virginia, said of Obama.

'Hornets' Nest'

She says some of the public is too impatient and Obama has kept the economy from getting worse. "He walked into a hornets' nest when he came into office," and the stimulus and the bailouts of the auto and financial industries have helped, she says.

Respondents also say by 40 percent to 32 percent that they would vote for a Democratic candidate for Congress in 2010. A slight plurality, 48 percent to 44 percent, has a favorable opinion of the Democratic Party. The Republican Party, by 52 percent to 38 percent, gets an unfavorable rating.

The survey finds that even as Obama has tried in recent months to stress the urgency of overhauling health care, for almost half of Americans, the economy is the most important issue facing the country. Health care comes second, with 23 percent.

Slightly more Americans are pessimistic than optimistic about the U.S. government's economic plan. Americans are divided over the president's handling of the issue as well as over whether his stimulus program will create jobs. They are also about evenly divided over his handling of health care.

The Bloomberg Poll is based on interviews with 1,004 U.S. adults ages 18 or older from Sept. 10-14. The margin of error is plus or minus 3.1 percentage points.

Deficit Concerns

Pessimism over Obama's handling of the budget deficit is a major factor behind the negative attitudes.

Americans consider the deficit such a problem that a majority, 62 percent, say they would be willing to risk a longer-lasting recession to avoid more government spending. Just 28 percent say they thought more spending would do the most good to help the economy.

Poll respondent Bruce Varholy, a 60-year-old builder from York, Pennsylvania who is an independent voter, is among the 52 percent of Americans who say the country is on the wrong track.

"The amount of money that is being squandered right now by the government is going to really hurt us down the road," he says. "I just view the government as so totally corrupt I don't even know how it functions."

Tab for Grandchildren

Even some who support Obama say they are concerned about spending. "I don't want to see my grandchildren and great grandchildren have to have this on their backs when they become adults," says Lawrence, the poll respondent from Virginia.

While they express anxiety about spending, home values, retirement savings and household income, just 33 percent of respondents say they have no confidence Obama's team will be able to fix the problems that caused the nation's financial crisis.

More than half, 54 percent, say they are also mostly optimistic about the ability of the government to ultimately help the economy recover.

"A year ago we were really standing at the edge of the cliff," says poll respondent Mike Dole, a 64-year-old Veterans Affairs employee in Bethesda, Maryland. "Something needed to be done very, very severely, and he did it."

Some differences in impressions of the U.S. economic policy appear when answers are broken down by demographic groups. Fifty-eight percent of women say they are mostly optimistic about the ability of the government to help the economy recover and grow, compared with 49 percent of men.

Optimism Among Blacks

In a sign that Obama's support from black voters during the election is carrying over to his presidency, blacks are also far more optimistic than whites, with 83 percent expressing optimism compared with 48 percent of whites.

While Americans are about equally divided over Obama's record on health care, when it comes to foreign policy he enjoys solid approval.

Sixty percent of poll respondents approve of the job Obama is doing in managing relations with other countries, and 51 percent approve of his policies on the wars in Iraq and Afghanistan.

Obama's 61 percent favorable rating is matched by Secretary of State Hillary Clinton, his former competitor for the 2008 Democratic presidential nomination, who scores 62 percent.

Both fare better than some other major political figures, including Democratic Speaker of the House Nancy Pelosi, who gets an unfavorable rating of 48 percent, and former Alaska Governor Sarah Palin, the former Republican vice presidential candidate, who has the highest unfavorable numbers of all, at 55 percent. Former Republican House Speaker Newt Gingrich gets 39 percent.

The poll also probes attitudes on climate change, finding that 40 percent of Americans view it as a major threat, compared with 31 percent who say it's a minor threat and just 27 percent who say it's no real threat at all.
 
MARKET BUZZ:
 
(May not be useful for day-traders.)

Gujarat Gas: Likely To Quote Rs 225-250 Ex-Bonus
 
 
 
Gujarat Gas Company Ltd, a subsidiary of the BG Group, is the largest consumer gas distributor operator in India. It has strong presence in the highly industrialized parts in Gujarat namely, Surat, Bharuch and Ankleshwar and has strong pipeline network of 2700 km. Company which supplies about 3 mmscmd natural gas is planning to expand in other areas such as Vapi. It sources gas mainly from GAIL, Niko, GSPL, Cairn and PMT consortium. Moreover, it is set to get natural gas from Reliance's KGD6 fields which will further boost the top line visibility of the company. 

The company announced better numbers in Q2CY09. Higher volume & marketing margin coupled with lower other expenditures boost profitability for the Gujarat Gas reported Q2CY09 at Rs 47.6crore up 30.2% q-o-q. Sales and volume were inline with our expectations. Volume improved 7.3% q-o-q to 249mmscm on account of 0.7mmscmd of spot purchase from Petronet in June. However the volume declined 5.7% y-o-y due to lower level of supply from PMT & Cairn gas field. Volume is growth is back on the track after last few quarters growth was hampered due to lower availability of domestic gas. 

Key Developments 

Gujarat Gas fixes September 19, 2009 as Record Date for Bonus Issue The company has announced Bonus Equity Shares in the ratio of one equity share of the Company of Rs. 2/- each for every one equity share of the Company held and fixed September 19, 2009 as the Record Date for determining the eligibility of the Shareholders entitled to the bonus shares. 

GAIL supplies to Gujarat Gas restored Thanks to reduction in the volume of PMT gas supplied by GAIL to the company it could supply only 68% of the daily contracted volume in July to its over 800 industrial gas customers. Further, company was also forced to buy gas from the spot market at higher rates and charge more for the quantity supplied beyond the RSL (Restricted Supply Level). The volume of gas supplied by GAIL to the Company from the PMT fields, however, have been restored approximately to the levels of gas supplies prior to the notification of the Force Majeure event at the oil evacuation system of the Panna and Mukta fields.

 

Operating margins expand: 

Company has started sourcing LNG due to lower global LNG prices and expects higher spot gas purchase to meet the requirement. Current volume is ~3.2mmscmd and expects to remain at the same level for the next quarter also. It has not yet allocated gas from KG D6 basin whereas CGD players in Maharashtra and Delhi are getting 0.3mmscmd of KG D6 gas. It could be due to the MoPNG's view to allocate initial gas to PNG and CNG customers compared to Industrial retail customers which constitute 85% of sales volumes for Gujarat Gas. However, the issue is being under discussion with PNGRB, which believes customers using up to 50,000scmd are eligible for KG D6 gas.

 

We estimate Gujarat Gas to report strong earnings (CAGR of 15%) over CY2009-10 primarily driven by the higher gas volume, lower global LNG prices and hike in tariff revision. Demand in the Surat-Bharuch belt is increasing and management has already indicated that they can distribute 4.5mmscmd without incurring significant additional capex. Company is awaiting authorization letter from PNGRB on its EoI filled for Bhavanagar and Kutchh region. 

We maintain our positive view on Gujarat Gas as it will be beneficiary in the gas chain of additional volumes and less concern on gas supply in near term. It is one of our preferred pick in CGD space given its robust business model (focused on Industrial Customers compared to CNG and PNG customers), technical leverage from parent British Gas and expansion opportunities within Gujarat.  

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 

--
Arvind Parekh
+ 91 98432 32381

Market Outlook for 15th Sep 2009

INTRADAY calls for 15th Sep 2009
+ve sector , scripts : Hydrabadind, Repro
BUY TATASTEEL-478 for 499-507+ with sl 470
BUY Prakash-153 for 160-167+ with sl 150

BUY Aartidrugs-82 for 88+ with sl 80
BUY Subex-79 for 88+ with sl76
BUY Eastsilk-16 for 20+ with sl 14.50

 

NIFTY FUTURE LEVELS
RESISTANCE
4836
4844
4862
4880
4898
SUPPORT
4812
4808
4804
4790
4772
4754
Buy DHUNSERI TEA & INDS;PNBGILTS

 

Strong & Weak  futures  

This is list of 10 strong futures:

Bhushan steel, Orient Bank, Jindal Saw, Chennai Petro, IOB, Allahabad Bank, Tata Motors, Patel Engineering, Hindalco & Aban Off shore.

And this is list of 10 Weak futures:

McDowell, TV-18, IDEA, Dish TV, ACC, FinanTech, India Cements, Tata Comm, TTML & Container Co.

Nifty is in Up trend

 

NIFTY FUTURES (F & O):
Above 4836 level, expect short covering up to 4842-4844 zone and thereafter expect a jump up to 4860-4862 zone by non-stop.

Multiple Support at 4808-4810 zone & at 4812 level. Below these levels, selling may continue up to 4804 level and thereafter slide may continue up to 4790-4792 zone by non-stop.

Below 4772-4774 zone, expect panic up to 4754-4756 zone by non-stop.

On Positive Side, cross above 4878-4880 zone can take it up to 4896-4898 zone by non-stop. Supply expected at around this zone and have caution.
 
Short-Term Investors:
Bullish Trend. 3 closes above 4780.25 level, it can zoom up to 4999.55 level by non-stop. 

 

BSE SENSEX:
Higher opening expected. Profit Booking should happen. 

Short-Term Investors:
Short-Term trend is Bullish and target at around 16824.77 level on upper side.
Maintain a Stop Loss at 16044.77 level for your long positions too.

 

POSITIONAL BUY:
Buy DHUNSERI TEA & INDS (NSE Cash) 
Uptrend may continue.

Support at 164 level and correction up to this level is possible. Traders can expect uptrend up to 167 level. If crosses 169 level then it will zoom.

Keep a Stop Loss at 162 level for your long positions.
 
Buy PNB GILTS (NSE Cash) 
Uptrend may continue.

Support at 29 level and correction up to this level is possible. Traders can expect uptrend up to 32 level. If crosses 33 level then it will zoom.

Keep a Stop Loss at 28 level for your long positions.

Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,626.80. Up by 21.39 points.
The Broader S&P 500 closed at 1,049.34. Up by 6.61 points.

The Nasdaq Composite Index closed at 2,091.78. Up by 10.88 points.

The partially convertible rupee INR=IN closed at 48.74/75 per dollar on yesterday, weaker than Friday's close of 48.48/49.
 

FII DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	14-Sep-2009	1621.53	1665.93	-44.4

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	14-Sep-2009	1168.69	1174.8	-6.11

 

 Interesting findings on web:
The Dow rose 21.39, or 0.2 percent, to 9,626.80. The broader Standard & Poor's 500 index rose 6.61, or 0.6 percent, to 1,049.34, an 11-month high. The Nasdaq composite index rose 10.88, or 0.5 percent, to 2,091.78.

The Russell 2000 index of smaller companies rose 6.44, or 1.1 percent, to 600.03.

Major market indexes ended at their highest levels in nearly a year.

For the year:

The Dow is up 850.41, or 9.7 percent.

The S&P is up 146.09, or 16.2 percent.

The Nasdaq is up 514.75, or 32.6 percent.

U.S. stocks ended higher on Monday after gains in utilities and industrial shares offset concerns about the potential trade war between U.S and China.

Stocks retreated in early trading after China, the world's fastest growing major economy, said it's probing U.S. sales of chicken and auto products for "unfair trade practices," after the U.S. imposed tariffs on Chinese tires last Friday. Traders worried about the growing tension coming ahead of the G-20 summit later this month in Pittsburgh.

Stocks had started the day lower as a trade dispute between the US and China rattled the market. The rift started on Friday, when President Obama announced tariffs against tires from China, which followed up Monday by asking the World Trade Organization to intervene. The tariffs came on the heels of a union complaint that a surge of imports of the Chinese tires were taking away American jobs.

"You don't want to be messing with your biggest trading partner who holds most of your debt," Joe Saluzzi, co-manager of trading at Themis Trading, told Reuters. The economy "is still teetering on all sorts of edges here. Something like this could be the spark that sends us lower."

Shares of AES [AES  14.79    0.64  (+4.52%)   ] shot up 4.5 percent, while the S&P utilities index gained 1.4 percent after the Wall Street Journal reported that China and AES were in talks. AES owns 14 utilities, has 11 million customers and $16 billion in annual revenue.

This was just the latest buzz about M&A activity.

Stocks have clawed back from early losses to post moderate gains as traders push into utilities and industrial companies.

The day's early losses are tied to fears that a trade war could erupt between the U.S. and China. The U.S. has imposed trade penalties on tires coming from that country.

Utilities have pulled the market higher following a report of a takeover in the industry.

Investors funneled money into utilities and industrial stocks, helping the market carve out modest gains after early losses.

Stocks rose after zigzagging in a tight range for much of trading Monday. Stocks recovered from steep losses at the open that came on worries about a trade dispute between the U.S. and China.

The Dow Jones industrial average, which had been down more than 100 points in the early going, rose slightly in the final hour of trading. Other major indexes also rose.

The U.S. government late Friday imposed trade penalties on tires coming from China. The Chinese government filed a complaint with the World Trade Organization. Investors had worried it would erupt into a tariff war that could damage an economic recovery.

Traders reacted coolly to a speech from President Barack Obama, who warned the financial industry against the type of recklessness that led to the collapse of the brokerage Lehman Brothers Holdings Inc. one year ago. That event sent the Dow down 500 points in one day and led to a freeze in the credit markets that power the world's economies. The Dow is still down 12 percent from that time.

In sharp contrast to the tumult of a year ago, traders made only modest moves on Monday. Traders withdrew money from tech stocks, which have posted sharp gains this year, and moved it into areas that have lagged, like industrial stocks.

Richard Ross, global technical strategist at Auerbach Grayson in New York, said the economy still faces obstacles but that the market could extend its recovery because investors are more optimistic than when major stock indicators plunged to 12-year lows in early March.

"Questions remain but a lot of the uncertainty has largely been removed. That sort of doomsday scenario has been taken off the table," he said. "We're striking a much healthier balance between greed and fear."

Randy Cass, founder of financial services research group First Coverage in Boston, said stocks could push higher as year-end approaches because many investors are looking past weak economic numbers toward an eventual recovery.

"They have made their bets and the chips have been on the table since the first part of March," he said, referring to the start of the rally.

Student lender Sallie Mae weighed on financial stocks after Fitch Ratings downgraded the corporate ratings of SLM Corp., the company's formal name, and said the outlook is negative.

Analysts drew encouragement by the market's ability to hold the strong gains of last week and a six-month run in stocks that has left the Standard & Poor's 500 index up more than 50 percent.

Adam Gould, senior portfolio manager at Direxion Funds in New York, is encouraged to see investors step in to buy when the market dips.

"We open lower and buyers seem to chip away, and we climb higher," he said. "It's somewhat healthy that we're rallying this way — slowly."

Investors have little economic news to provide insight into whether they have been right to bet on an economic recovery since stocks tumbled to 12-year lows in March. Reports on retail sales, inflation, industrial production and housing are due later in the week.

Improvements in consumer spending and the housing market are considered crucial to allowing the economy to mount a strong rebound.

Gould would like to see the market make steady gains and not rocket higher the way it did in March, at the start of the six-month rally.

"If we're up one to two percent every week — that's pretty good as opposed to being up four percent and down six percent," he said.

In downturns in the past 60 years, the S&P 500 index has hit bottom an average of four months before a recession ended and about nine months before unemployment reached its peak.

Shares of Sprint Nextel [S  4.15    0.38  (+10.08%)   ] jumped 10 percent following a report in Britain's Sunday Telegraph newspaper that Deutsche Telekom was considering making a bid for the phone carrier. Sources told CNBC that Sprint is not aware of any Deutsche Telekom bid.

Fallout also continued from Kraft's [KFT  26.11    0.01  (+0.04%)   ] failed bid for Cadbury. The British chocolatier released a letter saying the offer failed to reflect the company's true value, and also said Kraft's low-growth conglomerate business model didn't fit in with Cadbury's strategy.

And Johnson & Johnson [JNJ  60.34    -0.08  (-0.13%)   ] is in talks to cut the price of its $1.5 billion merger with Irish drugmaker Elan for an 18.4-percent stake in the company and its drug pipeline.

General Electric [GE  15.35    0.68  (+4.64%)   ] was the biggest gainer on the Dow, followed by JPMorgan [JPM  43.75    1.25  (+2.94%)   ] and DuPont [DD  32.28    0.47  (+1.48%)   ].

GE shot up more than 4 percent, topping $15 for the first time since January. After breaking through that level, the pace of buying accelerated further.

Banks, including JPMorgan, advanced as they are typically among the biggest beneficiaries of M&A deals.

But Bank of America's [BAC  16.99    0.02  (+0.12%)   ] gain was modest following news that a judge hasrejected its $33 million settlement with the SEC over Merrill Lynch bonuses and several BofA executives face charges over their handling of the deal.

Drug stocks were higher from the getgo as investors took some defensive positions.

Eli Lilly [LLY  33.13    0.31  (+0.94%)   ] rose 1 percent after the drug maker announced plans to cut $1 billion in costs and 5,500 jobs over the next two years. Lilly also backed its full-year non-GAAP forecast of $4.20 to $4.30 a share.

Shares of Salix Pharmaceuticals [SLXP  20.2201    6.8401  (+51.12%)   ] surged more than 50 percent after the drug maker said its Rifaximin irritable bowl syndrome had met the main goals of late-stage studies.

And Dendreon [DNDN  27.46    3.62  (+15.18%)   ] shares soared 15 percent amid speculation that the company, which is working on a prostate cancer vaccine, is a takeover target.

As the market started to turn around, techs, banks and retail also gained.

Volatility began to subside in the market: The CBOE volatility index settled below 24.

President Obama's speech on financial reform had little impact on the market.

The president said there is still a need for government help to stabilize the financial system but the need is waning. He also said that taxpayers have earned a 17-percent return on the taxpayer-funded bailout measures.

Volume was below average, with 1.21 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 2 to 1.

Oil,Gold & Currencies:

Oil prices fell as the dollar, which has hit a succession of 12-month lows in recent days, firmed a bit. US light, sweet crude [US@CL.1  68.83    -0.03  (-0.04%)   ] dropped below $69 a barrel.

Gold prices fell.

The dollar traded mixed against other major currencies.

The dollar traded near the weakest level this year against the euro as record-low borrowing costs encouraged investors to sell the greenback and buy higher- yielding assets outside the world's largest economy.

The euro was near a nine-month high against the dollar before a German report economists said will show investor confidence rose to the highest in more than three years. The dollar slid to the lowest in more than a year against the Swiss franc after Federal Reserve Bank of San Francisco President Janet Yellen said policy makers must guard against inflation becoming too low rather than too high.

"The bulk of the liquidity created in the dollar is now shifting into non-U.S. assets amid signs of an easing of the recession," said Akira Takeuchi, a Tokyo-based currency dealer at Chuo Mitsui Trust & Banking Co., a unit of Japan's seventh- largest banking group. "Without some signal that the U.S. is ready to pull back on monetary easing, the dollar will continue to weaken."

The dollar traded at $1.4607 per euro as of 10:42 a.m. in Tokyo from $1.4618 yesterday in New York when it fell to $1.4653, the weakest level since Dec. 18. The yen was at 91.01 per dollar from 90.94 yesterday when it rose to 90.21, the strongest level since Feb. 12. The yen bought 133.30 per euro from 132.94.

The U.S. currency was at 1.0352 francs from 1.0345 francs yesterday after declining to 1.0323, the lowest since July 2008.

Record Low

The cost of three-month loans in dollars between banks dropped yesterday to a record low of 0.295 percent, according to the British Bankers' Association. The London interbank offered rate, or Libor, slid below that of the Swiss franc on Sept. 8 for the first time since November.

The Dollar Index traded near the lowest level in almost a year after Yellen said there's a "fear," which is "real, growing and disruptive," that the Fed will be unable to withdraw its $1 trillion expansion of credit.

"We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation," Yellen said yesterday in a speech in San Francisco. Until the time comes to raise interest rates, "we need to defend our price stability goal on the low side and promote full employment," she said.

Dollar Index

The Dollar Index, which ICE uses to track the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell to 76.626 from 76.653. It dropped to 76.457 on Sept. 11, the lowest since Sept. 25, 2008.

The U.S. target lending rate of zero to 0.25 percent compares with 8.75 percent in Brazil and 1.25 percent in Norway.

The euro may strengthen before the ZEW Center for European Economic Research releases its index of investor and analyst expectations today. The index increased to 60 in September from 56.1 in August, according to a Bloomberg News survey of economists.

A reading of 60 would be the highest since April 2006. Europe's economy probably returned to growth in the current quarter after governments spent billions of euros to pull the region out of recession, the European Union said yesterday.

"The outlook for the euro-zone economy is improving," said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. "A good ZEW report would likely send the euro to a new high."

The European Central Bank on Sept. 3 kept its key rate at 1 percent to boost spending. The Frankfurt-based central bank is providing lenders with unlimited cash for 12 months and is buying covered bonds to counter the slump.

Adding to signs the global recession is easing, U.S. retail sales likely advanced 1.9 percent in August, after declining 0.1 percent in the previous month, according to a separate Bloomberg survey of economists.

U.K. Housing Market

The pound gained for the first time in three days against the yen after a U.K. report today showed more surveyors reported a gain in British home values than a drop for the first time in two years.

The number of U.K. respondents saying prices rose in August exceeded those reporting declines by 11 percentage points, the first positive reading since July 2007, the London-based Royal Institution of Chartered Surveyors said.

"The RICS data indicates the U.K. housing market may have stabilized, suggesting the economy is on the mend," said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo. "This is likely to be positive for risk appetite, thereby leading to selling of the yen and buying of the pound."

The Bank of England last week said it won't expand its 175 billion pound ($291 billion) asset-purchase program and kept its benchmark interest rate at 0.5 percent.

The pound rose to 151.17 yen from 150.81 yen, and the U.K. currency climbed to $1.6607 from $1.6583 in New York yesterday.

Bonds:

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.43 percent from 3.35 percent late Friday.

What to expect:

TUESDAY: PPI; retail sales; Empire State survey; business inventories; earnings from Best Buy, Adobe

WEDNESDAY: Weekly mortgage applications; CPI; current account; industrial production; weekly crude inventories; earnings from Oracle

THURSDAY: Housing starts; weekly jobless claims; Philly Fed; Earnings from FedEx

FRIDAY: Quadruple witching

Asia:

Stocks in Asia fluctuated as phone and finance companies dropped, while mining shares advanced, leaving the MSCI Asia Pacific Index little changed a year after the collapse of Lehman Brothers Holdings Inc.

Telstra Corp., Australia's largest phone operator, sank 4.6 percent after the government said the company should split its retail and wholesale businesses. Consumer lender Aiful Corp. slumped 7.9 percent in Tokyo, falling for a second day after Standard & Poor's said it may cut its credit rating. Rio Tinto Group, the world's No. 3 mining company, rose 1.1 percent after agreeing to sell a stake in a cable division.

The MSCI Asia Pacific Index was little changed at 115.82 as of 11:12 a.m. in Tokyo. The gauge has recovered all its losses in the past year as the panic caused by the collapse of Lehman and American International Group Inc. abated.

"The worst is behind us, but we aren't sure how well or badly the economy will fare next year," said Hiroshi Morikawa, a strategist at MU Investments Co., which manages the equivalent of $14 billion in Tokyo. "What's changed after Lehman was that financial companies have reduced leverage using debts, but there are still lots of things off their books, which keeps investors nervous." 

Nikkei 225 10,213.70     +11.64 ( +0.11%). (08.29 AM IST)

Japan's Nikkei stock average eked out gains of 0.1 percent on Tuesday, buoyed by Toyota Motor Corp (7203.T) and other exporters as the yen fell against the dollar, but worries that it may only be a brief respite limited gains.

Hong Kong typhoon cancels morning trading

Morning trading in Hong Kong financial markets was cancelled Tuesday as Typhoon Koppu brought heavy rains and wind to the city, reportedly causing minor injuries to at least 28 people. At 8 a.m. local time (8 p.m. U.S. Eastern time), the typhoon was centered around 220 kilometers (137.5 miles) west of Hong Kong and forecast to move west-northwest at about 20 kilometers per hour, according to the Hong Kong Observatory. The HKO hoisted the No. 8 storm signal, the level which prompts market and government office closures, but said it may be lowered to a No. 3 storm signal around 10 a.m. local time. Stock markets will open for afternoon trading if the signal is lifted before noon. The Hang Seng Index ended down 1.1% at 20,932.20 Monday.

SSE Composite  3009.94   -0.55.(08.33 AM IST)

China's key stock index opened up 0.08 percent on Tuesday, as China's top tourist agency prepares to launch a Shanghai IPO while most tyremakers were mixed after saying the impact of the U.S. decision to impose special duties on Chinese tyre exports would be limited.

The Shanghai Composite Index .SSEC opened at 3,029.097 points after crossing key resistance at 3,000 points the previous day, and rising 1.24 percent to a one-month closing high.

China International Travel Service Corp (CITS) said on Tuesday it would launch an IPO this week that is worth about 1.7 billion yuan ($249 million) to fund expansion, including setting up new tourist agencies.

But analysts said the size of the IPO was not large and would not have greatly affect sentiment. ($1 = 6.83 yuan) 

Acer PC shipment soars in Q2.

Sanlian Group eyes 100 more outlets.

Guangzhou Hengyun to invest RMB 1.18 bln in 2 power plants.

Volkswagen to invest EUR 4 bln in China by 2011.

Shenzhen OCT, China Merchants Property buy land in Shenzhen.

Konka to sell 3 mln flat panel TVs in H2.

Brilliance Auto may sign with Daimler, Toyota.

China's iron ore imports down 14.5% in Aug.

China's fiscal revenue up 36.1% in Aug.

Hubei Yihua Chemical to invest RMB 1.4 bln in PVC project.

Kunshan TFT-LCD production line project starts construction.

Sun Hung Kai sells property to Yeland for RMB 882 mln.

Yanlord Riverside City dominates sales in China in H1.

Steel market poised for losses as China output hits record

Coming off this year's highs, steel-maker shares in Asia are unlikely to revisit their peak levels from 2007 anytime soon, with steel output in China at a record pace and prices for the metal on the decline, analysts said.

China's monthly steel production hit a fresh high in August at 51.65 million tons, up 21% year on year to represent a record daily production of 1.67 million tons, according to a Morgan Stanley research note Monday.

China's "steel inventories are now over 11 million tons, similar to the last peak in March 2009 -- which suggests industry over-production," the analysts said.

Earlier this year, steel prices were "depressed" but "we were at the onset of the Chinese buying spree," said Marcus Hudson, president of Hudson & Associates, a commodity-hedging advisory firm.

The moves in steel prices have reflected onto steel producer shares across Asia, many of which reached their lowest levels of the year around March but went on to tap year-to-date highs in August.

"In short, the steel sector -- globally and in most regions -- had a decent summer, but now things look iffy again," said Joseph Innace, managing editor, Platts Steel Markets Daily.

By the close of morning trading Tuesday in Tokyo, Nippon Steel Corp. /quotes/comstock/11i!nisty (NIST.Y 37.80, -0.95, -2.45%) /quotes/comstock/!5401 (JP:5401 339.00, -9.00, -2.59%) and Kobe Steel Ltd. /quotes/comstock/11i!kbsty (KBST.Y 9.44, +0.24, +2.61%) /quotes/comstock/!5406 (JP:5406 165.00, -3.00, -1.79%) had each lost 1.8%, while JFE Holdings Inc. /quotes/comstock/!5411 (JP:5411 3,220, -10.00, -0.31%) fell 0.6%. On the other hand, South Korea's largest steel maker Posco /quotes/comstock/13*!pkx/quotes/nls/pkx (PKX 99.44, +0.53, +0.54%) tacked on 2.5% and Angang Steel Co. was up 0.8% in Shenzhen trading.

Overall, stock trading in Japan was mixed, with the Nikkei 225 Average up 0.1% and the broader Topix 1000 down 0.2%. South Korea's Kospi fell 0.6%. Trading in Hong Kong was closed for morning trading due to a typhoon.

"Ongoing weakness in Asian steel prices is likely to weigh against sentiment towards steel stocks in the near term," analysts at Goldman Sachs JBWere wrote in a recent note to clients.

On the other hand, "this may provide a good opportunity for longer-term investors to increase their exposure to the sector," they said.

Price cut

Steel company stocks were particularly weak in Japan Tuesday after the Nikkei reported Tuesday that steel makers agreed to cut prices for plates used to build ships by about 30% for this fiscal year. The move was due to lower costs for steel-making materials and weaker demand for the material in Asia, and in South Korea particularly.

In mid-May, the export price of Chinese hot-rolled coil, also known as HRC -- a bellwether product often shipped to key Southeast Asian markets -- was at $495 per metric ton (on an free-on-board Shanghai basis). But by early June, HRC was down to $465 per metric ton, according to Innace.

Prices then surged 29% to peak at $600 per metric ton on Aug. 6, only to drop again, this time by about 14%, to its recent price at $515, said Innace.

The initial steel-price recovery in May was "largely due to country economic stimulus program[s]" in China, Japan and elsewhere, Innace said. But "such programs allowed economies, especially Japan's, to help liquidate steel inventories and generate some restocking."

"End-user 'real' demand for steel has been elusive in Japan, the U.S. and Europe," he said.

Over in China, the buying spree seen earlier in the year "seemed to be more stockpiling and less demand-driven," said Hudson.

And taking a look at what China is producing versus actual demand, "it is apparent that they won't be supporting the global steel markets anytime soon," he said.

"Couple that with slow demand recovery in the U.S., and you get an outlook that is not too bright for steel," Hudson said.

Even so, analysts at Morgan Stanley said that after a slowing of production growth in China near the end of August and the concurrent drop in steel prices, the metal should begin to stabilize soon, with "improving news flow to support regional steel shares." 

Warren Buffett 'Suits Up' .. and a Chinese Stock Soars

Warren Buffett's enthusiastic praise of his Chinese business suits and the company that made them may have given the mensware manufacturer's stock a big boost.

In Shanghai trading, shares of Dalian Dayang Trands are up almost 19 percent over a few days to a high for the year, after China Daily highlighted Buffett's endorsement.

The state-run English-language newspaper says it has an average daily circulation of over 300,000 around the world.

The effusive September 10 article includes a photo of Buffett hugging Dayang Trands chairwoman Li Guilian, who was invited by Buffett to this year's Berkshire Hathaway shareholders meeting in Omaha .. where he wore only tailor-made suits from her company.

It describes a video tape made by Buffett to mark Dayang Trand's 30th anniversary, in which the billionaire says he has nine suits made in China that "fit perfectly" and has thrown everything else away.  Buffett adds that his friend, Microsoft Chairman Bill Gates, is also wearing Trands suits, at Buffett's recommendation.

In the tape, Buffett describes his visit to Dayang Trands as a "highlight" of his stop in Dalian, part of a 2007 tour of China and South Korea.

While he doesn't say anything about buying a stake in the company, Buffett does joke in the tape that he and Gates might start a clothing store to sell Trands suits.  "We will be great salesmen, because we love them so much."

Buffett's Berkshire has taken a 10 percent stake in BYD, a Chinese company producing an all-electric-car.

No word from Buffett on how he feels about Chinese-made tires.

Current Berkshire stock prices:

Class A: [BRK.A  98750.00  ---  UNCH  (0)   ]

Class B: [BRK.B  3257.00    -7.00  (-0.21%)   ]

Obama to Wall Street: More Oversight Coming

Oversight of the financial system is going to be much more rigorous and will include steps such as higher capital requirements for large institutions, which are so deeply interconnected that the failure of one could bring about a failure of the entire financial system, President Barack Obama told CNBC Monday.

"We want to create some circuit breakers here," Obama said. "What we want to do is position our rules in such a way that you don't end up in a situation where your only choice is either financial meltdown on the one hand, or taxpayers having to engage in these huge bailouts."

Obama stressed that oversight is important to the financial system, despite the returned sense of normalcy that has surfaced lately. He worries, he said, that this normalcy could turn into complacency.

"If Washington does not provide the kind of regulatory oversight that's needed to make sure that we've got transparency, accountablity, clear rules of the road, then ironically what you may end up with is the government being even more meddlesome in the markets than it otherwise would have been."

In addition to speaking on the financial markets, Obama touched on a series of other topics:

Health Care: The president said that two-thirds of the price tag associated with health care reform will be accounted for by cutting waste out of the system.

No More Stimulus Funds: The stimulus program was designed to span two years, and he has a "strong inclination" not to create a second plan.

China Trade Dispute: Obama stressed the importance of countries abiding by trade agreements and said he's confident the China dispute won't lead to a trade war.

Afghanistan is Not Vietnam: The war against Al-Qaeda and other terrorist groups remains a top priority, but he will monitor the dangers of overreach.

Earlier Monday — the one year anniversary of the Lehman Brothers failure — Obama addressed Wall Street on his plans for financial reform, and how big banks will no longer participate in "reckless behavior." He once again stressed his belief in the free market, saying he has "absolutely no interest in having the government maintaining the levels of intervention that we have right now in the financial markets."

On the issue of health care, Obama said that with expanded coverage, hospitals will be able to lower bills, as they'll no longer have to inflate costs to cover uninsured patients, he said.

Obama added that nothing else adds to the deficit as much as the rising cost of health care, and reforming the sector could have an immediate impact on lowering the country's debt.

The president said he will do everything in his power to avoid a second stimulus. He added that his administration developed the first plan to span two years because it knew the consumer would continue to be pinched, and he pointed to the positive signs that a recovery is close.

"Most folks believe that we've now turned the corner where we might actually start seeing some economic growth," he said. "We are focused on [the question of] how do we create jobs in this environment without adding to the deficit."

On the recent trade dispute with China, Obama said he still believes in trade agrements, but he also believes in enforcing the rules in these agreements.

While Obama said he wasn't surprised that China was upset, he said the two countries continue to have a strong relationship, and that he's confident that this misstep won't lead to a trade war.

As for the war in Afghanistan, Obama said it's still one of his primary goals to dismantle Al-Qaeda and other terrorist groups that pose a threat to the US. Despite the war's unpopularity with many Americans, he said it's not fair to compare the situation to Vietnam.

"You have to learn lessons from history. On the other hand, each historical moment is different," he said. "The dangers of overreach and not having clear goals and not having strong support from the American people — those are all issues that I think about all the time."

Bank reforms going down wrong road: Fed's Lacker

A proposal designed to prevent another failure like that of Lehman Brothers could just make matters worse, Jeffrey Lacker, the president of the Richmond Federal Reserve Bank, said Monday.

If not carefully crafted, establishing a procedure for the government to take over and wind down a failed, big financial firm without forcing it into bankruptcy could create new moral hazards that could weaken market discipline and could lead to more, not less, volatility, he said.

Without mentioning President Barack Obama by name, Lacker's speech pushed back at a central idea in Obama's proposal to revamp regulation for the financial system. The president gave a speech in New York earlier Monday urging Congress to move forward on his ideas, including creating a government resolution authority to deal with firms that are considered "too big to fail." See full story.

After investment-banking giant Lehman filed for bankruptcy a year ago, the repercussions rippled around the globe. Financial markets panicked, credit dried up and the global economy went into a tailspin from which it is just now recovering.

U.S. regulators have said they had no authority at the time to bail out Lehman, as they did earlier with Bear Stearns and later with American International Group Inc.

Treasury Secretary Timothy Geithner has proposed that the government be given the power to "resolve" financial firms that are failing by seizing them, restructuring them and selling off what's left.

The new resolution authority -- which would be similar to the authority the Federal Deposit Insurance Corp. now has over depository banks -- "would have the discretion to use public funds to shield creditors from losses, a feature that I believe will severely limit the benefit from reforming the resolution process," Lacker said.

"The leading proposals before Congress concentrate almost exclusively on expanding government protection and regulation, but I believe we would be better off placing greater reliance on market-based incentives for prudent risk management.

"A widespread belief that public funds will soften the blow to private creditors would weaken market discipline and further complicate the task of regulators," he added.

Lacker also said research at the Richmond Fed has concluded that 45% of financial-sector liabilities in 1999 had some type of implicit or explicit government backing. It seems only logical that this safety net has risen over the past decade, he commented.

"I have a hard time believing that we really need a publicly funded financial-institution support system covering nearly half of the liabilities in our credit markets."

Lacker said he realized the transition to a "narrower" safety net would be quite difficult politically. Because actions speak louder than words, Washington will have to demonstrate its tough commitment by imposing sharp losses on creditors.

That may be why the resolution-authority proposal is so popular, according to the Richmond Fed president. But this could only cast the safety net wider, encouraging more risky behavior and more financial market turbulence.

S.F. Fed's Yellen says recovery still at risk of shocks

She's worried more about threat of falling prices than inflation

San Francisco Federal Reserve Bank President Janet Yellen said Monday she expects the economic recovery in the U.S. to be "tepid" and slow, suggesting that a debilitating and sustained drop in prices poses a greater threat than runaway inflation.

In a speech to a group of financial analysts here, Yellen said that this summer probably marked the end of the U.S. recession, and that the economy is on track to expand in the second half of this year.

But the expansion that's already started to gather steam "will remain vulnerable to shocks," and the unemployment rate will remain "elevated for a few more years," she said in a speech, delivered 10 minutes before the close of stock-market trading.

Yellen said she is forecasting a recovery that is far less robust than those following past recessions, and expects it to look more like the letter U than a V.

Even a growth rate of 3% to 4% in the gross domestic product would be considered "tepid," she told reporters after the speech.

An expansion at those levels "will leave us with an unemployment rate that's way too high for far too long," she said.

Economists surveyed by the Blue Chip forecasting survey in late August found most economists expected U.S. real GDP to increase at an annual rate of 2.3% in both third and fourth quarters of this year.

Yellen, a voting member of the Fed's Federal Open Market Committee this year, has emerged as one of the more vocal advocates of the Fed's continuing its ultraloose monetary policy even as the economy starts to claw its way out of the worst recession in generations. She has said she fears the Fed could act too fast in taking away its monetary stimulus if it responds to market and political pressures, and that a too-hasty exit could usher in another credit crunch and recession.

Barclays economist Michelle Meyer termed her the most "dovish" member of the FOMC in a report Friday. Meyer noted officials recently have "shown a divergence in views about the strength of the nascent recovery."

The so-called hawks, notably Richmond Fed President Jeffrey Lacker, have voiced more concern about the threat of inflation. Read more about the Fed and its 'exit strategy' dilemma.

Inflation hawks are worried that the Fed's near-zero interest rates and the trillions in U.S. dollars dumped into the economy via unusual stimulus programs, plus burgeoning federal deficits, will lead to dangerous inflation in coming years.

On the other side of the spectrum, some policy makers and economists fret that economic slack and pressure on wages raise the specter of deflation, or a sustained drop in prices.

Yellen commented on the bifurcation of views about inflation that has emerged lately, saying that "in my career, I have never witnessed a situation like the one that exists now, when views about inflation risks have coalesced into two diametrically opposed camps."

She placed herself in the camp that worries more about falling, rather than accelerating, prices. "My personal belief is that the more significant threat to price stability over the next several years stems from the disinflationary forces unleashed by the enormous slack in the economy," she said.

The current high level of unemployment, combined with relatively idle factories, "threatens to push inflation lower," Yellen said.

Core PCE price inflation, a popular metric for inflation at the Fed, has averaged just under 1.5% over the past 12 months. That's already below the level that most members of the Federal Reserve's interest-rate-setting panel think best promotes price stability, which is about 2%, she said.

But she acknowledged that some of the concerns over inflation stem from a doubt that the Fed will be able to reduce its special lending and securities-buying programs when it wants to, because of political pressures.

"This fear is real, it's growing and I believe it's disruptive," she said.

"That's why it's so important for me to say the following loud and clear: We at the Fed are ready, willing, and able to tighten policy when it's necessary to maintain price stability, " she said.

Exit strategies

When the Fed decides to increase its target rates, now near zero percent, one possible route will be to raise rates on reserves that banks hold at the Fed, she said.

Encouraging banks to keep more of their deposits at the Fed, rather then lending them out, would tighten monetary policy even before the Fed's balance sheet shrinks.

The central bank is likely to start tightening monetary policy well before employment and inflation reach healthy levels.

"We don't want to wait until we're at 5% unemployment and 2% inflation because if we wait that long, given the lags in monetary policy, we'd clearly overshoot," she told reporters.

But with unemployment at 9.7% and consumer prices, depending on the measure, either falling year-over-year or increasing at very low levels, both indicators are far from those levels.

On Wednesday, economists anticipate the Labor Department will show consumer prices dropped again last month from August a year-ago.

"We have our foot on the accelerator, I think we need to leave it there," she said. "It will go when it's the right time for it to go."

Citi seeks to lower government's stake: WSJ

Executives at Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.40, -0.12, -2.66%) have been working on a plan to cut the U.S. government's 34% stake in the firm through a multibillion-dollar stock offering, The Wall Street Journal reported Tuesday, citing people familiar with the matter. Under the plan, Citigroup would issue new shares to the public and the Treasury Department would sell at least a portion of its Citigroup holdings, the report said. 

U.S. Said to Explore Selling Off Its Citigroup Stock

The U.S. Treasury Department and Citigroup Inc. have begun discussing how to sell the 34 percent stake that the government acquired in the rescue of the bank, people familiar with the matter said.

The Treasury, which owns about 7.69 billion common shares after a recent stock conversion designed to shore up the bank's capital, may start unloading the stake as soon as October, said one of the people. It aims to sell the holdings over the next six to eight months, the person said.

While the Treasury hasn't developed a formal plan for the sale, it is considering options, the people said. Under one scenario, the shares would be sold to public investors in blocks over six to eight months. Or the government may sell a small amount of stock daily or weekly, said the people, who declined to be identified because the talks are private. Under a third option, the shares would be sold at once in a managed offering.

The Obama administration has begun efforts to wind down the government's $700 billion financial rescue program. The Treasury purchased the stock at $3.25 a share, giving U.S. taxpayers a paper profit of about $9.77 billion based on today's closing stock price of $4.52.

Citigroup's bailout last year was valued at $52 billion. Even after a share sale, the government would retain a $27 billion investment. That stake is denominated in trust-preferred shares -- a class of securities that ranks senior to common stock and junior to most debt.

Treasury spokesman Andrew Williams and Susan Thomson, a spokeswoman for New York-based Citigroup, declined to comment. 

Obama Sees Job Losses Ending, Vows to Push on Wall Street Rules

President Barack Obama said job losses are "bottoming out" and the U.S. economy looks to be growing again even as he warned against cutting off government aid "so soon that the recovery doesn't take flight."

Obama, speaking to Bloomberg News one year after the bankruptcy of Lehman Brothers Holdings Inc. crippled the economy, voiced confidence that his plan to overhaul regulation to forestall another crisis would pass Congress this year.

He vowed "to do everything I can" to fight banking industry efforts to kill his proposal for a financial products safety agency and stuck by his call to make the Federal Reserve responsible for ensuring the stability of the overall system.

"I'm very optimistic about us getting a set of rules in place that prevent the kind of crisis that we're seeing from happening again," Obama said in a White House interview yesterday.

He opposed setting limits on pay to financial industry executives, even in the face of public outrage over some of the multimillion-dollar bonuses and salaries Wall Street companies are still handing out.

"Why is it that we're going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or NFL football players?" he said.

On trade, Obama brushed aside concerns that his Sept. 11 imposition of 35 percent tariffs on $1.8 billion in imported tires from China would trigger a cycle of retaliation.

"We're not going to see a trade war," he said. "There are some tensions around this, no doubt about it. But my message is very simple: We have rules on the books."

Growth in Exports

The president ticked off a number of signs the economy is on the mend, including stronger exports and a pickup in manufacturing. Payroll cuts have also tapered off, he said, adding that "we could start seeing some positive job growth."

Since the recession began in December 2007, the U.S. has lost 6.9 million jobs. Payroll cuts peaked at 741,000 in January and have since subsided, with 216,000 job losses in August, according to the Labor Department.

The 48-year-old president said the economy was still fragile and cautioned against prematurely removing government programs aimed at supporting financial markets and boosting demand.

"I don't think we're out of the woods yet," he said. "What we have to be careful about is taking the crutches away from the patient too early." He said that was the mistake the U.S. made during the Great Depression.

No Second Stimulus

Still, Obama told CNBC television in a separate interview that he had a "strong inclination" against a second stimulus package on top of the $787 billion program passed by Congress in February.

The world's largest economy contracted 1 percent from April through June, according to the Commerce Department. The drop was the fourth in a row, making it the longest contraction since quarterly records began in 1947.

On health care, Obama was less forthcoming, especially about how to pay for his initiatives. Although he reiterated that two-thirds of the estimated $900 billion cost would come from eliminating waste, fraud and abuse within the system, he wouldn't commit to sending Congress a bill laying out how to achieve this. He said he would let the Senate Finance Committee "work its way through" the cost-savings process.

He also declined to specify what additional revenue measures might be needed other than his earlier endorsement of a fee on insurers for the most-expensive policies. He did pledge "to use my office and my own time and energy anywhere that's appropriate" to enact the legislation.

'Common-Sense Rules'

The president's comments followed an earlier speech in New York where he pushed for a new regime of "common-sense" regulations to avoid another market meltdown. Speaking at Federal Hall on Wall Street, Obama chastised the industry for still engaging in "reckless behavior," "quick kills," and "bloated bonuses."

He declined during the interview to identify any of the abusers, saying the tendency to "take exorbitant risks that were unsustainable for the system" was widespread.

"And that's the culture I think that we've got to reverse, not to squelch innovation or creativity, but to make sure that we don't get into what's called a moral hazard problem, where people assume that government's there as a backstop," Obama said.

Wall Street Compensation

Obama said what's needed is a change in Wall Street compensation so long-term performance rather than short-term profit is rewarded.

"Those principles are ones that I want enshrined in Wall Street's practices," he said. "But this has been a country where, as a general proposition, we don't go around saying, 'You can't pay people whatever the market will bear in the private sector.'"

Obama's plan for a consumer financial protection agency has run into opposition from the banking industry and Republicans, who say such a body would limit consumer choice and access to credit.

While not promising to veto a bill that lacked such an agency, Obama pledged that he would work to stop opponents from defeating it.

"I don't think they're going to succeed in killing it, and I'm going to do everything I can to stop them from killing it," he said. "We need a consumer financial protection agency that consolidates the tasks of all these different agencies right now."

Rewarding Good Practices

"That will help the American consumer and ultimately will allow, you know, good, solid business practices to be rewarded in ways that right now they're not always rewarded," Obama said.

Obama defended his proposal to make the Fed the regulator of systemic risks -- a plan that has drawn skepticism from Democrats including House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd, who are reluctant to expand the central bank's power. They back Federal Deposit Insurance Corp. chief Sheila Bair's preference for a regulatory council to monitor firms for risk.

"What you ultimately have to have is one person or one institution or entity that is making clear decisions at the end of the day, that the buck has to stop with somebody," Obama said. "And I think that the Fed is best equipped to do this."

'Best Representative'

Obama also said he won't be going to Denmark next month to make a final pitch for Chicago's bid for the 2016 Summer Olympic Games because of the demands of the health-care and financial-regulation deliberations.

He said that while he's "deeply invested" in winning the Olympics for his hometown, "I'm in the middle of some very important decisions."

The administration announced last week that first lady Michelle Obama will travel to Copenhagen for the Oct. 2 meeting of the International Olympic Committee where the host city will be chosen. Chicago is competing against Madrid, Rio de Janeiro and Tokyo.

"Michelle's our best representative," Obama said.
 

INVESTMENT VIEW
Abbott Labs-Emerging As A Major Player In Cardiac Care

Drug and medical device maker Abbott Laboratories will buy heart device maker Evalve Inc. in a deal worth as much as $410 million.
 

Abbott said it will pay $320 million upfront for the Menlo Park, Calif., heart device maker, and another $90 million based on approvals for potential products. Evalve makes devices that are used to repair the mitral valve of the heart, which controls blood flow from the left atrium, or upper chamber, to the left ventricle.

 

Evalve said its MitraClip system can treat mitral regurgitation - a condition in which the mitral valve does not close completely - without open heart surgery. The device is approved for sale in Europe and is being tested in the U.S.

 

Abbott, of North Chicago, said it expects the deal to close in the fourth quarter and said it will not change the company's annual guidance.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 
--

Arvind Parekh

+ 91 98432 32381