Friday, January 11, 2008

Euro stocks dive to 13-month low

(Fin24) - European stocks fell to their lowest since December 2006 by midday on Friday, tracking a drop in US futures on renewed worries over the troubled subprime mortgage market, with consumer product shares hurt by brokerage downgrades.


Unilever sank 5% after Morgan Stanley cut its recommendation to "underweight". France's L'Oreal, the world's largest cosmetics group, tumbled 4.8% after Deutsche Bank lowered its rating to "sell", citing mounting pressure on margins from rising commodity prices and risks of a slowdown in consumer spending.


At 1255 GMT, the FTSEurofirst 300 index of top European shares was down 0.5% to 1 429.15, after falling to as low as 1 420.90 - retreating for the sixth time in eight sessions.


After posting a thin 1.6% gain in 2007, its worst annual performance since 2002, the index has already lost 5.1% in 2008, hammered by mounting worries over the prospect of a US recession.


"The market is in the process of pricing in a US recession, turning into bear mode, with more forecast downgrades looming," said Jean-Luc Buchalet, strategist at FactSet in Paris.


"Defensive stocks have been showing some resilience, such as telecoms and pharmaceuticals, while all the other sectors are just sinking," he said.
 
 

Mine go ahead for Uranium One

(FIN24) - Uranium One, the Canada-based uranium producer with a secondary listing on the JSE, on Friday received Australian governmental approval to proceed with the establishment of a new uranium mine.


The mine will be developed at Uranium One's Honeymoon Uranium Project, near Broken Hill in South Australia, at a capital cost of A$66m or R401m.


"Construction work on infrastructure at the Honeymoon site will be carried out according to our schedule of commencing production later this year," the company was quoted as saying by the Australian Associated Press (AAP).


The mine, which was rubber-stamped by the Uranium One board in August 2006, is expected to produce up to 400 tonnes of uranium oxide annually and generate about A$40m or R243m a year in exports.


Australia's fourth uranium mine will have a life of up to seven years. With nearly 40% of the world's uranium, Australia has the potential to make a major contribution to security in global energy supplies.


"Our industry remains optimistic that, over time, it will be able to expand operations to help meet the world's clean energy needs and, at the same time, help offset the cost of structural adjustment that may accompany Australia's own efforts to deal with its greenhouse emissions," Australian Uranium Association executive director Michael Angwin told AAP.


The Australian government's approval of the Honeymoon uranium mine comes after last year's decision by Australia's new federal government to ban the construction of nuclear power reactors, but allow additional exports of uranium to other countries.


Uranium One originally expected to start off production at Honeymoon in the first quarter of 2008, but in August said this would be delayed to the second quarter after a decision to modify the technology used in the treatment plant.
 

China, U.S. Make Plans for North Korea Collapse, Reports Say

(Bloomberg) -- China and the U.S.-South Korean alliance have begun planning for military intervention in case the Kim Jong Il regime in North Korea collapses, according to two newly published studies -- one of which foresees a race to occupy and control the impoverished communist country.

``If the international community did not react in a timely manner as internal order in North Korea deteriorated rapidly, China would seek to take the initiative in restoring stability,'' says a Jan. 3 report by Washington's Center for Strategic and International Studies and the U.S. Institute of Peace.

The report says its unnamed Chinese sources see North Korea as stable for the moment, ``but they worry that the potential for instability may grow.''

Meanwhile, U.S. and South Korean military planners were scheduled to complete by the end of 2007 a contingency plan for controlling the spread of weapons of mass destruction and dealing with refugees fleeing North Korea in the event of a collapse, according to an article in the January/February issue of the U.S. Army journal Military Review.

To beat China to the punch, joint planners should go farther and prepare for a South Korean occupation of the North, argues the author, Army Capt. Jonathan Stafford.

``A failure to prepare for this monumental task risks losing the Korean dream of reunification to Chinese hegemony,'' he writes. ``If South Korea cannot occupy the DPRK immediately and effectively, China will.''

DPRK stands for Democratic People's Republic of Korea, North Korea's official name.

Multilateral Approach

The authors of the CSIS-USIP report said Chinese specialists in North Korean affairs they interviewed hoped for a multilateral approach to North Korea rather than a contest for hegemony.

``In the event of instability in North Korea, China's priority will be to prevent refugees from flooding across the border,'' says the report, entitled ``Keeping an Eye on an Unruly Neighbor.'' If Chinese troops need to go into North Korea, ``China's strong preference is to receive formal authorization and coordinate closely with the United Nations,'' it says.

China's People's Liberation Army has contingency plans for at least three possible missions in the country, the report says. One is humanitarian: refugee assistance, or helping with the aftermath of a natural disaster. The second is policing the country to maintain order. The third is to secure North Korea's nuclear weapons and fissile material, or clean up nuclear contamination in the event of a strike -- the report does not specify by whom -- on North Korean nuclear facilities near the border.

China's Reaction

A Chinese foreign ministry spokeswoman on Jan. 8 denied knowledge of the plan, according to Agence France Press. ``I have never heard of nor seen the so-called plan mentioned in the report,'' AFP cited the spokeswoman saying.

Regarding nuclear-related contingencies, ``some Chinese experts say explicitly that they favor holding a discussion on stability in North Korea in official channels with the United States,'' the report says.

China is the organizer and host of ongoing talks with the U.S., North and South Korea, Japan and Russia on denuclearizing the North.

Stafford in his article argues that ``the Chinese have been busy laying the political, diplomatic and historical foundations for an occupation and perhaps even an annexation of North Korea.''
 

Merrill seen suffering $15 billion loss: report

(Reuters) - Merrill Lynch (MER.N: Quote, Profile, Research) is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost twice the company's original estimate, the New York Times reported on Friday.

The losses were prompting the company to raise additional capital from an outside investor, the newspaper said in a report on its Web site. Merrill is expected to disclose the huge write-down when it reports earnings next week, the New York Times said, citing people who had been briefed on the company's plans.

The loss exceeds the $12 billion hit that many Wall Street analysts had forecast, the newspaper said.