Oil seen heading higher after topping $100

(Reuters) - Rampant oil prices are likely to continue to rise for a while yet as supply worries and investor demand for commodities outweigh concerns of economic slowdown.

Crude hit a record high of $101.32 on Wednesday and was trading at $98.64 at 9:45 a.m. EST on Thursday.

The price has climbed from below $50 at the start of 2007 and below $20 in early 2002.

"From here, we think that the next stage may well be a period of consolidation in the high $90s, and that could include increasingly frequent moves above $100," said Paul Horsnell of Barclays Capital.

Prices have risen in part because of expectations that the Organization of the Petroleum Exporting Countries, rather than increase oil output, will maintain or even cut supply at a meeting on March 5.

OPEC argues that factors beyond its control, such as speculation, are boosting prices. One OPEC minister made clear on Thursday that oil's push into triple digits would not bounce the group into changing supplies.

"We will not just react to $100 oil," Qatar's oil minister, Abdullah al-Attiyah, told Reuters by telephone. "OPEC will move when it sees physical demand for its oil."

 

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UBS to Shorten Ospel Term to One Year at Re-election

(Bloomberg) -- UBS AG said it would reduce Chairman Marcel Ospel's next term of office to one year from three after Europe's largest bank by assets reported a record loss.

Ospel, 58, was a force behind the merger of Swiss Bank Corp. and Union Bank of Switzerland that created UBS in 1998 and has been chairman for seven years. UBS posted a 12.5 billion-franc ($11.4 billion) fourth-quarter loss after an expansion into debt trading led to writedowns when the U.S. housing market slumped.

``Shareholders have a lack of confidence and that is linked to Ospel's name,'' said Vinzenz Mathys, an analyst at the Ethos Foundation, an investor in UBS calling for a special audit of the bank's risk controls. ``We are disappointed because UBS could have proposed new candidates.''

Shareholders will vote on re-electing Ospel and two other board members to shortened terms at the annual general meeting on April 23, Zurich-based UBS said in an e-mailed statement today. Sergio Marchionne, Fiat SpA's chief executive officer, was named a non-executive vice chairman.

UBS's losses already led to the departures of former CEO Peter Wuffli, 50, his finance chief Clive Standish, 54, and Huw Jenkins, 50, who ran the investment bank.

``It will take at least a year, if not longer, to clean up things at UBS and Ospel being around means there will be no clean cut with mistakes of the past,'' said Ralf Rybarczyk, who manages 1.5 billion francs at DWS Investment GmbH, including UBS shares.

`Current Challenges'

Peter Voser, finance director at Royal Dutch Shell Plc, and Larry Weinbach, the former chairman of Unisys Corp., will also stand for re-election to one-year board terms at the annual meeting, UBS said. Voser, 49, will take over from Weinbach, 68, as chairman of the audit committee. In subsequent elections, all board members will be elected for one year, the company said.

Marchionne, 55, was named non-executive vice chairman to replace Marco Suter, 49, who was an executive vice chairman before taking on the role of chief financial officer in October. Italian newspaper MF reported on Feb. 15 that Marchionne was a possible replacement for Ospel, which the Fiat executive denied. He said in a statement today his new role is ``absolutely compatible'' with running Fiat.

``With these moves we have strengthened the leadership structure in order to manage UBS's current challenges,'' Ospel said in the statement. ``I proposed the new tenure rule to the board, and am prepared, pursuant to their request, to stand for re-election for one year.''

UBS rose 48 centimes, or 1.3 percent, to 36.80 francs by 2:08 p.m. in Swiss trading. The stock has fallen 30 percent this year, the fourth-worst performance on the 60-member Bloomberg Europe Banks and Financial Services Index.

 

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Morgan Stanley Hires Kenneth deRegt to New Role Overseeing Risk

(Bloomberg) -- Morgan Stanley, the second-biggest U.S. securities firm by market value, hired Kenneth deRegt to a new position in the office of the chairman, where he will oversee risk management and internal controls.

 

DeRegt, who worked at Morgan Stanley for 20 years before joining Aetos Capital in 2002, will start on Feb. 25 and join the firm's management committee, according to an internal memo today from John Mack, Morgan Stanley's chief executive officer. The contents of the memo were confirmed by Mark Lake, a spokesman in New York.

 

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Philadelphia Fed February Factory Index Falls to -24

(Bloomberg) -- Manufacturing in the Philadelphia region unexpectedly contracted the most since February 2001, the eve of the last recession, as measures of new orders and shipments reflected weakening demand.

The Federal Reserve Bank of Philadelphia's general economic index declined to a minus 24 from minus 20.9 in January, the bank said today. Readings less than zero signal contraction. The Philadelphia Fed's general economic index averaged 5.1 in 2007.

A two-year housing slump, exacerbated by tighter credit conditions, is spilling over to other industries, pushing the economy to the brink of recession. The Fed, after cutting interest rates at the fastest pace since 1990 last month, has said it is ready to move in a ``timely'' manner to avert a downturn.

``The Philadelphia Fed survey is sending clear signals that the U.S. economy is heading for a recession,'' said Lena Komileva, chief economist at Tullett Prebon in London, who forecast a minus 25 reading. ``The speed and magnitude of the recent decline in the series signals a very sharp deterioration.''

Economists had forecast the Philadelphia manufacturing index would rise to minus 10.0, according to the median of 54 estimates in a Bloomberg News survey. Projections ranged from 0 to minus 25.0.

New Orders

The Philadelphia Fed's measure of new orders rose to minus 10.9 from minus 15.2 the prior month, and a measure of shipments fell to minus 12.2 from minus 2.3 the prior month.

A gauge of unfilled orders dropped to minus 10.9 from minus 6.2, while the index of inventories declined to minus 13 from minus 11.7 the prior month.

The employment index gained to 2.5 from minus 1.5 a month earlier, the Philadelphia Fed said. An index of prices paid dropped to 46.6 from 49.8, while a gauge of prices received weakened to 24.3 from 32.

The report provides one of the month's earliest clues to the state of manufacturing nationwide. Similar data from the New York Fed released last week showed manufacturing contracted in the New York region in February for the first time in almost three years.

The Philadelphia Fed region, which comprises eastern Pennsylvania, southern New Jersey and Delaware, is more vulnerable to the auto slump and less exposed to financial services and trade than the New York region, economists said.

Nationwide Measure

Nationwide, manufacturing grew in January after contracting in December by the most in almost five years, according to a Feb. 1 survey from the Institute for Supply Management. The ISM survey on manufacturing in February is due out March 3.

The index measuring the manufacturing outlook for six months from now fell to minus 16.9 from 5.2, today's report showed.

The Fed's January rate cuts came as rising subprime defaults led to a global tightening of credit standards and declines in equity prices. Investors are betting on a half-point rate reduction, to 2.5 percent, at the March 18 Fed meeting.

The U.S. economy will probably grow at a 0.5 percent pace in the first quarter and a 1 percent rate in the following three months, according to the median forecast in a Bloomberg survey of economists taken the first week of February. Economists surveyed said a recession this year was an even bet.

 

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U.S. Stocks Climb, Erasing Earlier Drop; Hewlett-Packard Gains

 (Bloomberg) -- U.S. stocks rose, led by technology and bank shares, after Hewlett-Packard Co.'s profit topped estimates and investor William Ackman proposed a restructuring of bond insurers in an effort to minimize credit losses.

Hewlett-Packard, the biggest maker of personal computers, climbed the most in two years and helped the Dow Jones Industrial Average erase a 109-point drop. Wells Fargo & Co. and Citigroup Inc. led financial shares to their steepest gain in a week on Ackman's plan. TJX Cos., owner of the T.J. Maxx and Marshalls discount chains, led a rally in retailers after posting profit that topped analysts' estimates.

The Standard & Poor's 500 Index gained 2.41 points, or 0.2 percent, to 1,351.19 at 12:57 p.m. in New York. The Dow Jones Industrial Average rose 12.45, or 0.1 percent, to 12,349.67. The Nasdaq Composite Index increased 6.9, or 0.3 percent, to 2,313.1. About four stocks rose for every three that fell on the New York Stock Exchange.

Stocks dropped earlier in the day on concern competition will reduce profits among wireless networks and faster inflation will keep the Federal Reserve from cutting interest rates.

Hewlett-Packard rose $3.33 to $47.28 First-quarter net income increased 38 percent to $2.13 billion, or 80 cents a share, from $1.55 billion, or 55 cents, a year ago. Excluding expenses for acquisitions, profit was 86 cents a share, five cents more than the average analyst estimate in a Bloomberg survey. The company also raised its annual sales forecast on increasing demand overseas.

Tech Rally

Technology companies in the S&P 500 added 1.3 percent as a group, the steepest advance among 10 industries.

Wells Fargo, the biggest bank on the West coast, climbed 67 cents to $30.53. Citigroup added 39 cents to $25.71.

Ackman distributed a plan to restructure bond insurers that may prevent dividends from being paid to the parent companies and minimize losses for holders of asset-backed securities.

 

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Wal-Mart Profit Climbs on Grocery, Electronics Sales

(Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, said fourth-quarter profit rose more than analysts estimated after it stepped up U.S. holiday discounts and boosted sales in Asia and Latin America.

Full-year earnings will be at most $3.43 a share, less than analysts' projections, the retailer said today. Wal-Mart gained 1 percent in New York trading.

International sales advanced 19 percent, led by China, Brazil and Argentina. In the U.S., Wal-Mart drew cash-strapped customers with an expanded consumer-electronics section and more discounts on groceries. Quarterly sales at stores open at least a year outpaced Target Corp. for the first time in 3 1/2 years.

``Nobody gets rich selling groceries, unfortunately, but I do think it's a great way to drive traffic,'' Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, said in a Bloomberg Television interview. ``In this economic environment, if the consumer's shifting down in terms of the way they're spending their dollars, that benefits Wal-Mart.''

Sorrentino helps oversee $12 billion in assets including Wal-Mart shares.

Net income climbed 4 percent to $4.1 billion, or $1.02 a share, from $3.94 billion, or 95 cents, a year earlier, the Bentonville, Arkansas-based company said today in a statement. Excluding one-time items, profit beat estimates by 2 cents.

Wal-Mart said it expects to earn between 70 cents and 74 cents a share in the current quarter and between $3.30 and $3.43 for the year that ends in early 2009. Analysts surveyed by Bloomberg projected profit of 74 cents for the quarter and $3.44 for the year.

Share Performance

Wal-Mart rose 51 cents to $49.95 at 9:34 a.m. in New York Stock Exchange composite trading. The shares increased 4 percent this year before today, compared with an 8.1 percent decrease in the Standard & Poor's 500 index.

Revenue for the three months that ended Jan. 31 climbed 8.4 percent to $107.4 billion, the first time it exceeded $100 billion, Wal-Mart said.

Excluding costs including a writedown at its Japan unit, Wal-Mart earned $1.04 a share. Nineteen analysts surveyed by Bloomberg projected average profit of $1.02.

``Clearly our underlying operational performance exceeded the expectations we had at the beginning of the quarter,'' Chief Executive Officer H. Lee Scott said on a recorded call. The performance of the U.S. economy ``will be a critical factor'' this year, he said.

Consumer Spending

Consumers have curtailed outlays on extras as they find themselves spending more for food, fuel and housing. Before the holiday season, Wal-Mart made price cuts earlier and on 20 percent more items. Last month, the retailer introduced its own ``economic stimulus'' package, marking down groceries, medicines, fitness equipment and electronics as much as 30 percent.

While Wal-Mart has suffered from a slowing U.S. economy because many of its customers live paycheck to paycheck, the retailer has also gained because of its appeal as a destination for cost-conscious shoppers, said David Abella, an analyst at Rochdale Investment Management in New York with $2.5 billion in assets including Wal-Mart shares.

``They are benefiting from it at the expense of competitors,'' said Abella. ``The low-price effort, which is working especially well because of the slowdown, probably helped get some market share back from Target.''

 

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Banks "quietly" borrow $50 billion from Fed: report

(Reuters) - Banks in the United States have been quietly borrowing "massive amounts" from the U.S. Federal Reserve in recent weeks, using a new measure the Fed introduced two months ago to help ease the credit crunch, according to a report on the web site of The Financial Times.

The newspaper said the use of the Fed's Term Auction Facility (TAF), which allows banks to borrow at relatively attractive rates against a wide range of their assets, saw borrowing of nearly $50 billion of one-month funds from the Fed by mid-February.

 

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