WRAPUP 4-French credit review threatens euro zone rescues
* Greece braces for strike, protests over more austerity* Merkel seeks permanent troika in Athens, deficit sinners
to courtBy Paul Taylor and Daniel FlynnPARIS, Oct 18 (Reuters) - Doubt cast on France’s triple-A
credit rating by Moody’s raised uncertainty over Europe’s hopes
of drawing a line under its sovereign debt crisis, five days
before a crucial EU summit.German Chancellor Angela Merkel said Sunday’s meeting would
be an important step but warned one summit would not be enough
to resolve the crisis, while the EU’s trade chief said the
currency zone could unravel unless tough action was taken.Moody’s said late on Monday it may slap a negative outlook
on France’s Aaa rating in the next three months if slower growth
and the costs of helping bail out banks and other euro zone
members stretch its budget too much.”The deterioration in debt metrics and the potential for
further contingent liabilities to emerge are exerting pressure
on the stable outlook of the government’s Aaa debt rating,” the
U.S. ratings agency said in its annual report on France.The warning, which sent the risk premium on French
government bonds shooting up to a euro lifetime high, came as
European Union leaders prepared measures to protect the region’s
financial system from a potential Greek debt default.That strategy includes new steps to reduce Greece’s debt,
strengthening the capital of banks with exposure to troubled
euro zone countries and leveraging the euro zone’s rescue fund
to prevent market contagion to bigger economies.Merkel told a news conference in Berlin that “further steps”
would be needed after Sunday’s summit to overcome the sovereign
debt crisis.”These sovereign debts have been built up over decades and
therefore one cannot resolve them with one summit but it will
take difficult, long-term work. Nonetheless, I do think we will
also be able to take relevant, important decisions,” she
said.The summit is likely to agree to leverage the bailout fund
by allowing it to underwrite a portion of newly issued euro zone
debt, euro zone officials said.With about 300 billion euros of its 440 billion-euro
capacity still available, by guaranteeing the first 20-30
percent of any losses, the European Financial Stability Facility
(EFSF) could stretch three to five times further.”This idea is the main contender,” one official said.Economy Minister Francois Baroin insisted that France’s AAA
status was not at risk but acknowledged that the 1.75 percent
growth forecast on which the government has based its 2012
budget was over-optimistic and would have to be revised down.”The triple-A is not in danger because we will be even ahead
of schedule on passing deficit reduction measures,” Baroin said
on France 2 television.”We will do everything to avoid being downgraded.”Asked if next year’s outlook would have to be reduced in
light of weak growth prospects, he added: “We will adapt it,
that much is clear.”France and Germany, the two strongest economies among the 17
euro zone members, form the backbone of the EFSF rescue fund and
are drafting a crisis-fighting strategy for Sunday’s summit.Without France’s triple-A rating, the whole edifice of
rescue measures for troubled peripheral euro zone states would
begin to crumble, putting more weight on Germany, where there is
a strong public backlash against bailouts.German leaders on Monday doused market hopes of a miracle
cure at Sunday’s Brussels summit, saying no one should expect a
“definitive solution”.Merkel told a closed-door meeting of her Christian Democrats
she favoured having a permanent presence of the so-called
“troika” of international inspectors in Greece to supervise its
public finances if there were doubts about fiscal management,
party sources said.She also expected agreement on proposals to send euro zone
countries that repeatedly breached EU deficit rules to the
European Court of Justice, the sources said.FRENCH SPREAD HITS RECORDSpeaking in Berlin, European Trade Commissioner Karel De
Gucht blamed political dithering and failure to enforce euro
zone rules for the problems, urging governments to act as one.”If Europe’s political class is unable to take unpopular
decisions on deficits, haircuts, the size of the European
Financial Stability Facility and bank recapitalisation, the
monetary union may well unravel with truly incalculable economic
and political costs,” he said.Analysts said Moody’s move was unusual, since it had not put
France on ratings watch, but it was a signal to the government
that it needed to adopt a more realistic growth assumption and
adjust its budget measures accordingly.Monday’s review was only a preliminary step, but a negative
outlook would be a sign that Moody’s could downgrade its rating
on France in the next couple of years. It placed the United
States’s Aaa rating on negative outlook in August.The spread on French 10-year bonds over benchmark German
bonds jumped to a 19-year high of 114 basis points, the first
time it had breached 1 percentage point in more than a decade.
Safe-haven German Bunds rose on ebbing hopes of a quick solution
to the debt crisis.The ratings review was a potential embarrassment for
conservative President Nicolas Sarkozy, who is expected to run
for re-election next April and May and faces a strong challenge
from Socialist candidate Francois Hollande, who won a primary
election run-off on Sunday.Prime Minister Francois Fillon made clear in a television
interview that if growth fell short of official forecasts, Paris
would take further austerity measures, though analysts say that
will be difficult with presidential and parliamentary elections
due next year.In Greece, unions representing around half of Greece’s 4
million-strong workforce have called a 48 hour general strike
for Wednesday and Thursday in protest at a sweeping package of
austerity measures due to be passed in parliament this week.Meanwhile Portugal, which has also received an EU/IMF
bailout, announced a draconian 2012 budget that risks a severe
recession. The European Commission called it “courageous”.Greece’s overall debt is forecast to climb to 357 billion
euros ($491.4 billion) this year, or 162 percent of annual
economic output — a level economists agree is unsustainable.To reduce this mountain, euro zone leaders are racing to
convince banks to accept “voluntary” writedowns of up to 50
percent on their sovereign holdings. At the same time, they are
trying to agree on a blueprint for recapitalising financial
institutions at risk from the deepening crisis.Negotiations with the Institute of International Finance,
representing the banks, were continuing in Brussels after
diplomats said Deutsche Bank chief Josef Ackermann,
who is also chairman of the IIF, met EU Council President Herman
Van Rompuy to discuss write-downs and recapitalisation.Ackermann has objected to efforts to force banks to raise
more capital and IIF lead negotiator Charles Dallara told
Reuters on Monday that bigger writedowns on Greek bonds could
only happen if policymakers addressed broader sovereign debt
issues in Europe.
Apple’s iPhone draws hordes again, powers shares
Shares of Apple leapt 3 percent to close at a record after people thronged stores in Sydney, Tokyo, London, Paris, New York and San Francisco to get their hands on the iPhone 4S, ignoring criticism about the lack of a design revolution and reports of software glitches.Fans in Sydney, Tokyo, Frankfurt and London made sure Jobs, who died last week, remained part of the iPhone 4S launch, with flower, candle and photo shrines erected outside stores. A black-and-white picture of the visionary leader in Covent Garden carried the line: “Let’s make a dent in the universe.”In New York and San Francisco, hundreds showed up as expected but the mood proved more subdued than was typical on an iPhone launch day.”I have a lot of respect for how he led the company and so the turnout, and especially the preorder sales, is a mark of appreciation for him,” insisted Chris Centers, who was one of the people who has lined up outside the store.One of the buyers had also stopped by to lay flowers at the San Francisco store’s glass wall in honor of Jobs.The new model looks similar to the previous iPhone 4 but has an upgraded camera, faster processor, enhanced security and voice-activated software, which lets users ask the phone questions. The voice software drew glowing reviews.Unveiled just a day before Jobs died, it was initially dubbed a disappointment, partly because it looked identical to its predecessor. But anticipation of the “Siri” voice software helped it set an online record in orders on October 7.Rivals’ woes may have provided a boost. Research in Motion struggled for days to fix an international outage of its email and messaging services.Also, about one in four people who thronged Apple stores from Tokyo to San Francisco told Reuters they were ditching BlackBerries, discarding Nokias or even giving up Google Android-based phones, hoping for something better.Apple CEO Tim Cook and his executive team hope the first device sold without Jobs at Apple’s helm will protect the company against a growing challenge from the likes of arch-rival Samsung Electronics.Analysts believe the South Korean company, which powers its phones with Google’s Android software, surpassed Apple as the world’s biggest smartphone vendor in terms of unit sales in the third quarter.Apple does not release sales on launch day, so gauging initial figures is difficult. However, the company took more than 1 million online orders in the first 24 hours after the release of the iPhone 4S, exceeding the 600,000 for the iPhone 4, which was sold in fewer countries initially.Sprint — joining Verizon and AT&T in Apple’s roster for the first time — said on Friday it had chalked up a launch-day sales record for any device — by around noon. AT&T said that by 4:30 pm on the east coast, it had activated a record number of iPhones in one day, and was on track to double the previous record.Jobs “made everything better and the products he released were thought through in such detail,” Duncan Hoare, a foreign exchange trader, said as a loud roar greeted the opening of an Apple store in London. “It was about the beauty of something and the simplicity.”GLITCHES?The iPhone — seen as the gold standard for smartphones — is Apple’s highest-margin product and accounts for 40 percent of its annual revenue. The newest iteration uses chips from Qualcomm Inc, Toshiba and a host of smaller semiconductor companies, according to repair firm iFixit, which cracked the device open on Thursday.Despite the enthusiasm at stores, Friday’s launch was marred somewhat by widespread complaints on the Internet this week about problems downloading iOS 5, the latest version of Apple’s mobile software.There were also problems with iCloud, Apple’s online communications, media storage and backup service formally launched on Wednesday; users reported glitches such as losing their email access.Queues in Paris were smaller than those normally seen for a brand-new iPhone, with some fans there wondering if the somewhat underwhelming introduction had put people off. But in London and elsewhere the lines were as long as ever.”Despite the initial disappointment that this wasn’t an iPhone 5, the reality is we’re still seeing the usual frenzy that we’ve got used to on launch day,” analyst Ben Wood at CCS Insight told Reuters. Analysts expect global sales of a few million phones on the first weekend, he added.Analysts point to several factors in Apple’s favor, including a $199 price that matches up well with rival devices, and availability promised on more than 100 carriers by the end of 2011, far more than its predecessors.Underscoring the enthusiasm for the new phone, Japanese mobile carrier Softbank Corp had to temporarily stop contract applications after its computer system was overwhelmed with more requests than it had expected.Some analysts expect fourth-quarter iPhone shipments to reach 30 million or more, almost twice as many as a year ago.”I am a fan, a big fan. I want something to remember Steve Jobs by,” said Haruko Shiraishi, waiting patiently with her Yorkshire terrier Miu Miu at the end of an eight-block queue in Tokyo’s smart Ginza shopping district.
UPDATE 1-Mitec Telecom Q1 loss widens
The Montreal-based mobile wireless products maker reported a
first-quarter net loss of C$1.7 million, or 1 Canadian cent a
share, compared with a loss of C$ 1.3 million, or 1 Canadian
cent a share, last year.Revenue fell 38 percent to C$1.6 million.Shares of Mitec closed at 2 Canadian cents on Friday on the
Toronto Stock Exchange.
Rio’s Coal & Allied unit Q3 output up 33% vs yr ago
Rio Tinto and Japan’s Mitsubishi Corp
are in the process of mopping up the shares in Coal and
Allied Industries that they don’t already own.Rio Tinto currently owns 75.7 percent of Coal and Allied,
and Mitsubishi 10.2 percent.The companies are offering A$125 a share, valuing the miner
at A$10.8 billion.Coal and Allied operates three mines in New South Wales
state producing coking and thermal coals.
Rio’s Coal & Allied unit Q3 output up 33% vs yr ago
Rio Tinto and Japan’s Mitsubishi Corp
are in the process of mopping up the shares in Coal and
Allied Industries that they don’t already own.Rio Tinto currently owns 75.7 percent of Coal and Allied,
and Mitsubishi 10.2 percent.The companies are offering A$125 a share, valuing the miner
at A$10.8 billion.Coal and Allied operates three mines in New South Wales
state producing coking and thermal coals.
