Sept. 7 (Bloomberg) — European and Asian shares rose for a third day as a resurgence of merger speculation boosted food and beverage stocks and mining companies and the Group of 20 nations agreed on steps to shore up the global financial system.

Cadbury Plc, the world’s largest confectioner, jumped 40 percent after rejecting a 10.2 billion-pound ($16.7 billion) offer from Kraft Foods Inc. Lonmin Plc rallied 4.4 percent as the Observer said Xstrata Plc is considering a takeover bid. Deutsche Telekom AG advanced 2 percent after a person involved in the discussions said Europe’s biggest phone company is close to deciding whether to sell its U.K. unit.

Europe’s Dow Jones Stoxx 600 Index added 1.4 percent to 237.21 at 1:11 p.m. in London. Mergers and acquisitions are recovering amid signs the worst recession since World War II is easing. Last week, Baker Hughes Inc., the world’s third-largest oilfield-services provider, agreed to buy BJ Services Co. for $5.5 billion and Walt Disney Co. agreed to purchase Marvel Entertainment Inc. for about $4 billion.

“Once we get to grips with the reality that we will see growth in 2010 we’ll be back to mergers and acquisitions again,” Thomas Tilse, Frankfurt-based head of portfolio strategy at Cominvest Asset Management GmbH, which oversees about $65 billion, said in a Bloomberg Television interview. “In basic resources and food and beverages, these long-term themes, there will be a lot of mergers and acquisitions.”

Asian, U.S. Shares

The MSCI Asia Pacific Index climbed 1.3 percent as Abu Dhabi agreed to buy Singapore’s state-controlled Chartered Semiconductor Manufacturing Ltd. for S$2.5 billion ($1.8 billion) to create a challenger to the world’s second-biggest maker of customized chips. Futures on the Standard & Poor’s 500 Index added 0.4 percent today, with U.S. markets closed for the Labor Day holiday.

The Stoxx 600 fell 1.5 percent last week on concern that a six-month rally has outpaced the prospects for earnings and economic growth. The European gauge is valued at 45.4 times profit, near the highest level since September 2003, according to data compiled by Bloomberg.

Finance chiefs from the G-20 nations concluded weekend talks in London with an agreement on a regulatory blueprint aimed at avoiding a repeat of the global financial crisis that spurred $1.6 trillion of credit-market losses and writedowns since 2007. The G-20 measures include forcing banks to curb leverage and raise the amount and quality of assets they keep in reserve once growth takes hold.

‘Global Governance’

“The G-20 has shown once again that governments from around the world can come together to agree on the global governance the new global economy needs,” U.K. Prime Minister Gordon Brown said.

The panel that oversees the Basel Committee on Banking Supervision, meeting after the G-20 sought to extend their reach into banks’ pay and profits, yesterday agreed lenders should raise the quality of their capital by including more stock. Financial firms also will have to introduce a leverage ratio and devise ways to boost reserves when the economy is robust.

European investor confidence increased for the second month in September as the euro-area economy starts to recover. An index measuring euro-region sentiment rose to minus 14.6, the highest since July 2008, from minus 17 in August, the Limburg, Germany-based Sentix research institute said today.

German factory orders advanced for a fifth month in July, helping the recovery in Europe’s largest economy gain traction.

Cadbury Offer

Cadbury rallied 40 percent to 798 pence, the biggest jump in at least 21 years, after saying Kraft’s offer “fundamentally undervalues the group.”

Kraft declined 1 percent to $27.83 in German trading. The world’s second-largest foodmaker said the merger would create “a global powerhouse in snacks, confectionery and quick meals.” Analysts said Kraft’s 745 pence-a-share proposal may trigger rival offers from Nestle SA and Hershey Co. for Cadbury’s Trident gum and Dairy Milk chocolate.

A gauge of food and beverage companies in the Stoxx 600 soared 3 percent, the steepest advance among 19 industry groups. Group Danone SA, the world’s largest yogurt maker, rose 3.7 percent to 38.91 euros. Tate & Lyle Plc, the maker of low- calorie sweetener Splenda, added 3.7 percent to 417 pence.

Associated British Foods Plc advanced 4.3 percent to 847 pence after saying it expects sales at its Primark clothing stores to grow as better weather than last year lures customers.

Whitbread Plc rallied 16 percent to 1,188 pence as sales at its Costa Coffee unit increased, and the company said it would meet profit estimates.

Mining Companies

Lonmin surged 4.4 percent to 1,647 pence, extending last week’s 8 percent increase. Xstrata’s Chief Executive Officer Mick Davis asked JPMorgan Chase & Co. and Deutsche Bank AG to conduct a feasibility study on a potential bid for the platinum producer, the Observer reported, citing no one.

Rio Tinto Group gained 1.3 percent to 2,447 pence in London, while BHP Billiton Ltd. added 2.2 percent to 1,620 pence. The world’s No. 1 and No. 3 mining companies are considering a A$1 billion ($853 million) merger of their Canadian diamond operations, the Australian reported, without saying where it got the information.

Metal prices have surged this year, prompting Bank of America Merrill Lynch and Standard Bank Plc to flag more mining acquisitions. Takeovers in the industry are up almost a fifth this quarter from the previous three months as Canada’s Eldorado Gold Corp. and China’s Yanzhou Coal Mining Co. agreed to buy rivals in Australia.

Deutsche Telekom

Deutsche Telekom increased 2 percent to 9.59 euros. The company has been studying options for its T-Mobile UK unit since February and plans a decision soon, said the person, who declined to be identified because the talks are private. Vodafone Group Plc and Telefonica SA made informal offers to buy it for about 4 billion pounds, and Deutsche Telekom is in talks with France Telecom SA for a possible joint venture of their U.K. assets, the Financial Times said today.

Separately, Telefonica, Europe’s second-biggest phone company, said it will pay $1 billion to boost its stake in China Unicom (Hong Kong) Ltd., raising its investment in the world’s biggest communications market. Telefonica added 2.1 percent to 17.75 euros.

European phone stocks were raised to “bullish” from “neutral” at Nomura Holdings Inc. The brokerage also upgraded the pharmaceutical industry to “bullish” from “bearish” and advised investors to reduce holdings of shares most sensitive to economic growth.

Bayer AG rose 3.8 percent to 44.11 euros after the German drug and chemical maker was added to Bank of America Corp.’s “Europe 1” list.

Fortis Gains

Fortis, the insurer that sold all its banking businesses in October to avert a collapse, advanced 3.4 percent to 3.11 euros. RSA Insurance Group Plc may bid for distressed businesses owned by American International Group Inc. and Fortis, the Sunday Telegraph reported, without saying where it got the information.

Groupe Eurotunnel SA rose 8 percent to 4.57 euros. The operator of the Channel Tunnel rail link between England and France said a Goldman Sachs Group Inc. fund will become its biggest shareholder by swapping deferred equity securities for stock.

By Daniela Silberstein

The market share of the state-run Life Insurance Corporation (LIC) has gone up to 64 percent in the first four months of financial year 2010 (FY10), even as the private sector insurance firms continue to suffer.

According to the Insurance Regulatory and Development Authority (Irda), LIC’s first year premium collection on insurance policies during first four months of the current fiscal rose by 32 percent to Rs. 14,265 crore.

In order to increase its market share further by diversifying its services to all segments of the society, LIC has introduced a micro-insurance policy. The policy called Jeevan Mangal is meant for the people living below the poverty line (BPL).

The policy is a term assurance of premiums on maturity, in which the policy holder can pay the premium either as a total sum or on yearly, half yearly, quarterly, monthly, fortnightly and weekly basis. “The policy is basically for the poor people and we hope that many BPL families will come forward to take this new policy as the premium amount is very less and there are multiple modes of premium payment ranging from weekly to yearly,” said CH Jakkappanava, Senior Divisional Manager of LIC’s Berhampur division.

After the slowdown affected the launch of its initial public offering (IPO) last year, Reliance Infratel, the telecoms tower unit of Reliance Communications has revived its IPO plan and would hit the primary market soon, reports Business Standard.

The company plans to raise up to $1 billion (Rs. 5000 crore) through the IPO, while it would file the draft prospectus within a week. In February last year, the company had filed a prospectus with the regulator seeking to offer 10.05 percent of the post-issue capital and was looking to raise up to Rs. 6000 crore. However, a fall in equity markets worldwide, including in India, forced Reliance Infratel to drop the plan.

Reliance Infratel is 95 percent owned by Reliance Communications and aims to sell at least 10 percent stake to help fund its expansion plans, said sources close to the development. The Business Standard said the revived IPO would help ease pressure on the company to raise funds from private equity firms, with whom it is in talks. Indian firms have raised nearly $10 billion in share sales in 2009, surpassing last year’s volumes, mainly guided by a 62 percent rally in the Sensex this year.

Bangalore: Shares of Sun Pharmaceuticals plunged by 12 percent on a relatively good day for the markets when it finished 419 points in the green. The decision by U.S. Food and Drug Administration (FDA) to seize 33 drugs by Caraco Pharmaceutical Laboratories, a subsidiary of Sun Pharma forced the stock to fall by 12.17 percent to end at Rs 1,140.45. After starting the day at Rs 1,199, the shares dropped to an intra-day low of Rs 1,070 after 580,489 shares were traded. The one year stock chart is on the left.

The FDA had seized the drugs from the company’s Michigan facilities in Detroit, Farmington Hills, and Wixom. The drugs were found to be contaminated, even after the company had conducted an internal investigation to determine the cause and taken corrective measures. This is not the first time the company has come under the regulator’s scanner. Last October, the FDA had conducted inspection of its facilities and found “significant deviations from Current Good Manufacturing Practice (CGMP) regulations.”

Sun Pharma is the second Indian company this year to have faced FDA’s wrath. In February, the U.S. drug watchdog had taken regulatory action against Ranbaxy’s Paonta Sahib facility in Himachal Pradesh on the ground it had falsified test results. Out of the 28 analysts following the stock, the consensus recommendation is outperform with 15 analysts recommending to buy the stock.

The Swiss government has agreed to loosen its banking secrecy laws and share data on tax evasion cases that India may be pursuing, as part of a renegotiation of the Double Taxation Avoidance Agreement (DTAA) that the two countries signed in 1995.

Such a reformulated tax agreement will help tighten the legal noose on tax evaders secreting their money abroad. Under present Swiss law, foreign-held accounts are protected unless there is evidence of proceeds from drugs or bribes.

Confirming that they have received the request to renegotiate the DTAA, Swiss Ambassador Philippe Welti, however, told Business Standard that his government would share tax evasion data “on specific request by the government”.

This means India will be able to seek details of bank accounts kept by citizens who are believed to have evaded taxes in India and deposited the money in overseas bank accounts. A “roving” or “fishing” enquiry is not possible.

In the past, Swiss authorities refused to share bank details under the DTAA, saying that such information concerned the enforcement of India’s tax laws and not Switzerland’s. For example, when the income tax department sought to verify the contents of bank documents seized from racehorse owner Hassan Ali Khan, who has been accused of depositing tax-evaded money in UBS, the Swiss authorities declined to provide the information.

Countries like Switzerland and other known tax havens finally agreed to comply with OECD’s tax convention after a group of 20 nations which constitute more than 85 per cent of the world’s output (G 20), threatened to take action against uncooperative nations.

“In Switzerland, tax evasion is also illegal but is normally only punishable as an offence, ie with a fine,” Welti said, reiterating that Swiss laws remain tough on cases like criminal and terrorist money.

Microsoft is pulling the plug on its personal finance management tool Money Plus. The move comes as a range of similar tools available from banks, brokerage firms, and websites have made Money Plus redundant.

Microsoft had already stopped annual updates to Money in 2008, it will now stop selling the product post June 30, 2009. The software giant said all purchased Money products must be activated prior to January 31, 2011.

The Money Plus portfolio consists of Microsoft Money Essentials, Microsoft Money Plus Deluxe, Microsoft Money Plus Premium, and Microsoft Money Plus Home & Business. Current Money Plus users can continue using the product (except for Money Essentials) though online services will no longer be available.

Microsoft however said its MSN Money website will continue to function as before, with enhancements and new features planned for the coming months.

For Money Plus users:

Additional information can be found at the Microsoft Money Plus FAQ site

NEW YORK: Investors are back to worrying about banks.

Long-present unease about soured loans bubbled over on Monday after Bank of America Corp. said it set aside $13.4 billion to cover lending losses, even as it posted a profit for the first quarter, and as anxiety grew about the results of the government’s “stress tests” to determine if banks will need more government bailout money.

While Bank of America and other big banks like Citigroup Inc. have fared better so far this year than many believed they would, nervousness is growing now over the massive losses from defaulting loans that are yet to come. On Sunday, White House chief of staff Rahm Emanuel said some banks will need help.

Financial stocks suffered some of the day’s worst declines: Bank of America plunged 24.3 percent and Citigroup fell 19 percent. Those two components of the Dow Jones industrial average contributed to a daily loss in the index of 290 points, or 3.6 percent. That was the biggest Dow drop since early March, before the market’s big rally from nearly 12-year lows.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said traders are skeptical about bank earnings and believe the better-than-expected profit reports may be disguising problems.

“They’re looking at bank numbers and are saying they are not that great,” Saluzzi said.

Traders have been looking for some pullback ever since the Dow jumped 24 percent from its early March lows. But that pullback could end up being more significant than a mere correction if the market cannot shake its concerns about banks. With the stress test results expected in early May, the market is likely to see more volatility.

Worries about banks’ debt problems were aggravated by news reports that their lending remains tight and that the government may swap its debt in banks for ownership stakes as its $700 billion bailout fund runs down.

Because of the central role lending plays in keeping businesses of all kinds going, investors have been hunting for signs of a recovery in banks before they get more optimistic about the broader economy.

The market has been encouraged by early indications that a government drive for lower interest rates has been helping banks step up lending, but investors are still sensitive to any signs of trouble — including the comments from Emanuel and senior White House adviser David Axelrod, who said some banks “are going to have very serious problems.”

Energy and materials companies also fell along with the prices of key commodities they rely on, such as crude oil.

The market declines were broad and deep, outweighing what would otherwise be positive news about a step-up in deal activity. After a deal with IBM Corp. didn’t work out, troubled technology company Sun Microsystems found a buyer in Oracle, a leading maker of business software, while PepsiCo Inc. said it would bid $6 billion to buy its two biggest bottlers.

The Dow fell 289.60, or 3.6 percent, to 7,841.73.

Broader stock indicators also lost ground. The Standard & Poor’s 500 index fell 37.21, or 4.3 percent, to 832.39, and the Nasdaq composite index fell 64.86, or 3.9 percent, to 1,608.21.

About 10 stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 6.79 billion shares, down from 7.1 billion shares on Friday.

Concerns about the sustainability of bank earnings weighed on financial stocks. Citigroup Inc. lost 71 cents to $2.94; JPMorgan Chase & Co. fell $3.57 or 10.7 percent to $29.69 and American Express Co. fell $2.83 or 13 percent to $18.98.

Jeffrey Frankel, president of Stuart Frankel & Co. in New York, said the retreat in financial stocks is welcome after their massive gains from early March - he said too sharp a rise could endanger a long-term advance. Many bank stocks have doubled in only weeks.

“These banks have had a tremendous run,” Frankel said. “Now you’re hearing the bearish camp speak up a little bit.”

Investors are also cautious about financial after The New York Times reported that the government might be forced to find ways to stretch the $700 billion allocated for the government’s bank rescue fund by converting the government’s loans into common stock. Such a move would give the government a controlling stake in banks and hurt existing shareholders by reducing the value of their shares.

Separately, The Wall Street Journal reported that banks receiving government bailout money are having a hard time making loans.

Wall Street was more upbeat about the Oracle deal, which carries a 42 percent premium to Sun’s Friday closing stock price of $6.69. Sun jumped $2.46 or 36.8 percent to $9.15, Oracle slipped 24 cents or 1.3 percent to $18.82.

Beverage and snack maker PepsiCo offered to acquire Pepsi Bottling Group and PepsiAmericas in a move to cut costs. Pepsi lost $2.27 or 4.4 percent to $49.86 while Pepsi Bottling jumped $5.53 or 22 percent to $30.73 and PepsiAmericas surged $5.16 or 26 percent $25.04.

In earnings news, drug maker Eli Lilly & Co.’s first-quarter earnings rose 24 percent on higher sales of the antidepressant Cymbalta and as costs for Humalog, a form of insulin Lilly makes, remained flat. Shares slipped 76 cents or 2.3 percent to $32.99.

Light, sweet crude fell $4.45 to $45.88 a barrel on the New York Mercantile Exchange. That helped send Occidental Petroleum Corp. down $3.76 or 6.3 percent to $55.88, while Dow Chemical Co. fell $1.12 or 8.9 percent to $11.48.

In other market moves, the Russell 2000 index of smaller companies fell 26.88, or 5.6 percent, to 452.49.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.84 percent from 2.95 percent late Friday. The yield on the three-month T-bill fell to 0.12 percent from 0.13 percent.

The dollar was mostly higher against other major currencies. Gold prices rose.

Overseas, Japan’s Nikkei stock average rose 0.19 percent. Britain’s FTSE 100 fell 2.5 percent, Germany’s DAX index fell 4.1 percent, and France’s CAC-40 fell 4 percent.

SHANGHAI: Chinese stocks slipped 1.24 per cent in heavy trade on Tuesday, knocked by a drop in financial, energy and metals shares as renewed concerns about the financial crisis weighed on stock and commodities prices overseas.

The Shanghai Composite Index ended the morning at 2,525.638 points after rising to an eight-month closing high on Monday.

Losing Shanghai A shares outnumbered gainers by 573 to 319, while turnover in Shanghai A shares rose to 85.8 billion yuan ($12.6 billion) from Monday morning’s 68.2 billion yuan.

A jump in bad loans at Bank of America, the largest US bank, rekindled fears about the state of the banking sector globally and pushed prices of industrial commodities such as oil and copper sharply lower.

US stocks slid more than 3 per cent on Monday while Hong Kong’s Hang Seng Index fell 3.5 per cent.

Bhavin Shah, global technology research of JPMorgan, is of the opinion that IT companies will cut budgets by at least 15-20%. He however said there would be no material impact on the IT sector because of the cut in service tax.

“We expect significant budget pressure across the corporate space on a global basis. So, I think IT budgets could be down easily by at least 15-20% year-on-year for some of the major companies on a global basis,” Shah said.

He said customers will ask for 20% price cuts and the IT sector might see single-digit growth in FY10. IT stocks may see a further downside from the current levels.

The Lok Sabha yesterday approved External Affairs Minister Pranab Mukherjee’s plan for reducing the CENVAT (excise duty/CVD) rate by 2% and service tax by 2.5%. Mukherjee had proposed these steps in the VOA announced earlier this month.
Industry bodies like MAIT, CII, FICCI, etc. have welcomed the move, which it sees as a positive move by the government to lift the economy.

How does the reduction in CENVAT rates and service tax help Indian manufacturers? For one, it is expected to bring some degree of price stability. Reduction in service tax could also see a reduction in prices of IT solutions and services. Vinnie Mehta, executive director of MAIT, opined that the reduction in excise and service tax would help bring down the prices of IT products other than computers. Of course, as K. Vaitheeswaran, co-founder of Indiaplaza.in, points out, whether price of IT products and services actually comes down will depend on the manufacturer and if he is willing to pass on the benefit to the consumer.

Hiranya Ashar, CFO of Rolta India, a developer of IT-based GIS and engineering design services, however does not expect any major impact on Indian IT companies. “More than 90% of their (IT companies) revenues are exports and exempt from these taxes. There might be minor gains in terms of reduction in cost for items which attract service tax such as lease of premises, telecom expenses etc,” he said.

Harinder Salwan, secretary of Infotech Software Dealers Association (ISODA), also echoed this view. According to him, the confusion over interpretation of applicability of service tax on packaged software still continues. He further said that telecom users will be the biggest beneficiaries of this announcement as their phone bills will be reduced by 2% across the board.

Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII) said, “The announcement would stimulate demand. The further reductions in excise, service tax by 2% and extension of reduction in excise duty will go a long way in stimulating consumption.”

As Sudhindra Mokhasi, founder & CEO of BPO e-Sutra, points out - the IT industry is on the cusp of transition from STPI and SEZ, hence the proposal to bring on par the IT exemption for separate entities and subsidiaries in an SEZ is a good move. (However this will be brought into effect only after the formal budget).

In today’s scenario, most companies are looking to either defer annual increments or give nominal increases. Overall easing of tax rates can be viewed as higher effective net income for employees and hence the reduced annual increments may look more palatable and acceptable to employees.