Financial life in a big town

An Israeli billionaire at the center of a recent scandal involving trade with Iran has died at age 89.

Shipping magnate and philanthropist Sammy Ofer was listed last year by Forbes as Israel’s richest man, and appeared as number 109 on the magazine’s global list of billionaires.

Ofer’s family released a statement saying he died Friday morning at his Tel Aviv home after a long illness.

Ofer’s name had been in the news after the U.S. government sanctioned one of his companies last month for selling an oil tanker to Iran’s national shipping company through a Singapore subsidiary.

That embarrassed Israel because it has long pushed for tighter sanctions on Iran.

Along with his brother, Yuli, Sammy Ofer owned Zim Integrated Shipping Services, one of the world’s biggest container shipping companies faxless pay day loans. The Ofer brothers also controlled The Israel Corp., with assets in shipping, chemicals, energy and transportation, and had holdings in real estate and banking.

The Ofer brothers did not comment publicly on the U.S. charge. A spokesman said the $8.5 million deal, small for the massive conglomerate, was conducted unwittingly with an Iranian shell company. Nonetheless, the company said it was embarrassed.

There have been mounting calls for a legal probe of the company’s activities.

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U.S. stock futures are slightly lower ahead of updates on the health of the job market and manufacturing industry.

Economic reports have often been discouraging since the spring, and weak data helped knock the S&P 500 index down by 1.4 percent last month.

Later Wednesday, payroll processor ADP will give an update on how many jobs private companies added last month. It may offer a preview of the government’s more comprehensive report on Friday.

Economists expect another report from the Institute for Supply Management to show the manufacturing industry is still growing, but at a slower pace.

Ahead of the opening bell, Dow Jones industrial average futures are down 13 at 12,545. S&P 500 futures are down 1.10 points at 1,342.80. Nasdaq 100 futures are down 3 at 2,368.75.

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The average U.S. price of a gallon of gasoline has dropped about 9 cents over the past two weeks.

The Lundberg Survey of fuel prices puts the average price for a gallon of regular at $3.91.

Analyst Trilby Lundberg said Sunday that the national average for a gallon of mid-grade is $4.05. For premium it’s $4.16 a gallon.

Lundberg says diesel prices fell about 8 cents a gallon over the past two weeks, to $4 payday loans in 1 hour.14.

Jackson, Miss., had the nation’s lowest average price for gas at $3.60. Chicago had the highest at $4.38.

In California, the lowest average price was $4.03 in Fresno, while San Franciscans paid the highest price at $4.17.

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The biggest Internet IPO since Google combined with a drop in oil prices to send the broad stock market higher.

Shares of social networking company LinkedIn jumped 109 percent to $94.25 on the first day they began trading on the New York Stock Exchange under the ticker symbol “LNKD.” The debut is seen as a preview of other social networking sites that are expected to start trading during the next year. The list of candidates includes the online messaging service Twitter, game maker Zynga, and the biggest social network of all, Facebook.

“LinkedIn represents the first opportunity for the average investor to participate in what looks like a lasting, powerful trend of social media,” said Lawrence Creatura, a portfolio manager at Federated Investors. “They’re frothy with excitement, and that’s being imputed into the share price.”

LinkedIn finished the day with a gigantic price-to-earnings ratio of 554, a valuation reminiscent of Internet stocks during the late 1990s tech bubble. By comparison, the average price-to-earnings ratio of technology companies in the S&P 500 index like Apple Inc. and Google Inc. is 15.

Sumeet Jain, a principal with venture investing firm CMEA Capital, said LinkedIn’s IPO suggests that the number of mergers and acquisitions will increase this year as social networking companies grow, a potential boon for the stock market.

LinkedIn is “going to have to be quite aggressive” to meet investors’ lofty expectations, Jain said. “All the rest of the companies in the pipeline, when they’re all public companies they will be extraordinarily active acquirers as well.”

The Dow Jones industrial average rose 45.14, or 0.4 percent, to close at 12,605.32. The S&P 500 gained 2.92, or 0.2 percent, to 1,343.60. The Nasdaq composite index rose 8.31, or 0.3 percent, to 2,823.31.

Oil prices fell back below $100 a barrel after an international agency said there is an “urgent need” for refineries to produce more gasoline and bring down pump prices in order to prevent a downturn in the global economy. Delta Air Lines Inc. rose 4.1 percent and JetBlue Airways Corp. rose 1.4 percent on expectations that their fuel costs would decrease.

Oil prices have fallen about 13 percent since the beginning of May as part of a broad-sell off in commodities due to fears that the economy is slowing. Despite LinkedIn’s gains, concerns about the economy weighed on the market again Thursday.

The National Association of Realtors said fewer people purchased previously occupied homes in April. The Conference Board’s outlook for future economic activity decreased for the first time since June 2010. And the Philadelphia Federal Reserve said that its measure of manufacturing activity slumped to its lowest reading since October.

The mixed news confirmed investors’ belief that economic growth could be slow in the coming months. The yield on the benchmark 10-year Treasury note had risen as high as 3.24 percent following the positive jobs news but was back down to 3.17 percent, just below the rate it was trading at late Wednesday. Bond yields tend to rise when investors anticipate stronger economic growth.

“The fact that yields are still up today, even after this relatively weak set of data, tells me that people have factored in” expectations that the economy will grow more slowly this quarter, said Paul Zemsky, chief investment officer of multi-asset strategies for ING Investment Management.

With little fresh economic or corporate data expected in the next two weeks, the market will be “pretty much trading sideways unless something happens to throw people for a loop again,” Zemsky said.

Stocks opened higher after the Department of Labor reported that applications for unemployment dropped more than expected. Indexes gave up those early gains after three negative reports on the economy came out at midmorning.

In a sign that the U.S. consumer recovery remains uneven, Big Lots Inc. fell nearly 11 percent after news reports that it decided not to sell itself. The Wall Street Journal said late Wednesday that the company received bids from two private-equity groups that were lower than it had hoped.

Sears Holding Corp. reported softer sales at its Kmart and Sears stores, causing a first-quarter loss of $1.58 per share, worse than analysts expected. The stock fell 2.6 percent.

Two stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume came to 3.3 billion shares.

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Australian employers unexpectedly cut workers in February for the first time in 18 months as floods and a cyclone disrupted hiring in the nation’s northeast.

The number of people employed fell by 10,100 from January, led by a drop in part-time jobs, the statistics bureau said in Sydney today. That compares with the median forecast for a 20,000 increase in a Bloomberg News survey of 20 economists. The jobless rate held at 5 percent.

Reserve Bank of Australia Governor Glenn Stevens said last month a deluge in January and cyclone in February in Queensland may cut 1 percentage point from growth this quarter. Recent reports showed building approvals declined by the most in eight years, consumer confidence slid and retail sales are slower, suggesting the central bank may have scope to extend a pause in interest-rate increases.

“Today’s weaker than expected labor market report means” rate increases “could be slightly later in the year than previously anticipated,” said Paul Bloxham, chief economist at HSBC Holdings Plc in Sydney and a former RBA official. “The key issue of timing will depend not only on the dataflow but also on the extent to which the RBA seeks to move ahead of this, versus waiting for further evidence of building inflationary pressures.”

The Australian dollar fell after the report before rebounding as a surge in full-time employment signaled setbacks in the job market may be temporary. It traded at $1.0100 as of 1:36 p.m. in Sydney, from $1.0110 before the data.

Full-Time Jobs

The number of full-time jobs advanced by 47,600 in February and part-time employment fell by 57,700, today’s report showed. Australia’s participation rate, which measures the labor force as a percentage of the population over 15 years old, dropped to 65.7 percent in February from 65.8 percent a month earlier, it showed.

Queensland, where torrential rains in January and December affected about 30,000 properties, shut coal mines, cut rail lines and damaged crops, shed 22,100 jobs last month, today’s report showed. The state’s unemployment rate held at 5.6 percent as fewer workers sought jobs, cutting the participation rate 0.7 percentage point to 67. Queensland was hit early last month by a cyclone stronger than Hurricane Katrina.

No ‘Smoking Gun’

“Floods may have distorted the numbers,” said Adam Carr a senior economist at ICAP Australia Ltd. in Sydney, referring to the reduction in total employment even as full-time jobs surged. “But the data is probably not a smoking gun for the RBA.”

Australia’s labor market, which had record job creation last year, has gone through its worst three-month period since mid-2009. The economy has lost a net 2,300 jobs from December through February after gaining 362,800 during the first 11 months of 2010, according to statistics bureau figures.

The local currency last year surpassed parity with its U.S. counterpart and on Dec. 31 touched the highest level since being floated in 1983.

The RBA this month kept rates unchanged at 4.75 percent for a third straight meeting after increasing it by 175 basis points since the global financial crisis. In contrast, the U.S. Federal Reserve has held its benchmark rate near zero since December 2008. That divergence contributed to a 10.5 percent increase in the local dollar versus the U.S. currency in the past 12 months.

Traders are betting there is a better-than-even chance Stevens will keep rates on hold until October, according to Bloomberg News calculations based on interbank futures on the Sydney Futures Exchange.

Hiring

Australian job advertisements rose in February for a 10th straight month, advancing 1.2 percent from January, when they increased a revised 3 percent, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne this week.

Westpac Banking Corp. (WBC), Australia’s second-biggest lender, said today it will create as many as 800 jobs in Victoria when it revives its Bank of Melbourne unit in the southern state.

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Prime Minister Julia Gillard highlighted risks posed by the nation’s ties to a global commodity boom, with a patchwork economy emerging from export gains accompanied by subdued domestic spending.

“I’m very conscious that a strong Australian dollar has benefits and it has burdens,” Gillard said in an interview yesterday in Canberra, citing stresses posed by currency gains for the manufacturing and tourism industries. The local dollar, spurred by revenue from shipments of coal and iron ore to China, has reached levels unseen since 1982 in recent weeks.

Gillard’s comments reflect a challenge faced by policy makers from Brazil to China, where strengthening exchange rates risk undermining exports unconnected to the climb in global commodity prices. While emerging markets have taken steps to stem currency gains, such as through limits on capital inflows, Australia has refrained from such measures and Gillard said she favors letting the market set the so-called aussie.

“The domestic economy is probably weaker than expected and that reflects the fine balancing act for policy makers,” said Tom Vosa, director of economic research at National Australia Bank Ltd. in London. “There is a risk of a Dutch disease effect,” he added, referring to the Netherlands’s experience of a surge in growth in its energy industry that drove up the currency and hurt manufacturing.

Highest Since Float

Australia’s dollar, the world’s fifth-most traded currency, in December reached its highest level against its U.S. counterpart since before it was floated in 1983, and has climbed 12 percent in the past year. It fell as much as 0.2 percent after Gillard’s comments, before recouping losses to trade little changed at $1.0169 as of 11:10 a.m. yesterday in London. It touched $1.0256 on Dec. 31.

“I’m concerned about the burdens that this places on some industries and some parts of the country,” Gillard said. At the same time, Australia accepts the implications of a freely floating currency and chooses to “live with the disciplines that come from that,” she said when asked whether her government would consider intervening to weaken the dollar.

The currency’s advance has been propelled by demand from China for iron ore and coal, which have helped make Australia the world’s biggest shipper of the two commodities.

“For this current resources boom, we anticipate that it will be sustained,” Gillard, 49, said two days before departing on her first visit to the U.S. as prime minister. “We have very strong demand from growing economies like China for our resources. We anticipate there will be strong demand and good prices for a long period of time to come.”

U.S. Trip

Gillard said she will discuss the global economic recovery and strategic developments in Asia during her nine-day visit to Washington and New York. Gillard is scheduled to meet President Barack Obama, Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner. She will address Congress March 9, the first Australian leader to do so since John Howard in 2002.

Australia’s economic growth accelerated to a quarterly pace of 0.7 percent in the final three months of last year, a government report showed two days ago guaranteed payday loan. The nation is benefitting from its strongest terms of trade, a measure of income from exports, since the early 1950s, according to the central bank.

Outside of mining, the economy is doing less well. Australia’s services industry contracted in February, a survey showed yesterday. The performance of services index was 48.7 from 45.5 in January, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney. A figure below 50 indicates contraction.

‘Very Optimistic’

“High commodity prices, record terms of trade, a strong dollar, puts some pressure on other sections of the economy,” she said, declining to comment on the outlook for interest rates. “The fundamentals are strong and consequently I am very optimistic for our economic outlook.”

Reserve Bank of Australia Governor Glenn Stevens gave no indication this week that he’s ready to resume increasing the benchmark overnight cash rate target, now at 4.75 percent, in coming months. Bond investors have raised bets on higher inflation as the mining-investment boom holds down unemployment.

The nation recorded its biggest annual gain in employment on record in 2010 as resource and energy companies boosted hiring to meet demand from China in what the RBA has called a once-in-a-century mining boom. The jobless rate was 5 percent in January, compared with 9 percent in the U.S.

Mining Investment

BG Group Plc, based in Reading, U.K., said Oct. 31 it will begin work on a $15 billion liquefied natural gas venture in Queensland, generating 5,000 jobs. BG, Chevron Corp. (CVX), Royal Dutch Shell Plc (RDSA) and ConocoPhillips are among companies investing about A$200 billion in proposed LNG projects in Australia.

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Treasuries rose, with two-year notes climbing the most since September, as concern of spreading unrest in the Middle East boosted demand for the relative safety of U.S. government debt.

Ten-year note yields fell as Egypt approved a request from Iran to send two naval ships through the Suez Canal on their way to Syria, which ratcheted up regional tensions and drove oil prices higher as Israel called it a “provocation.” The Federal Reserve purchased $24 billion of Treasuries and TIPS during the week, as part of its efforts to sustain the economic expansion. The Treasury will sell $99 billion of notes next week.

“Geopolitical risk remains and there is a lot of uncertainty about the possibility of it spreading, which has given Treasuries a bid,” said Suvrat Prakash, an interest-rate strategist in New York at BNP Paribas, one of the 20 primary dealers required to bid at Treasury auctions. “With Fed purchases continuing and global unrest, Treasuries have support.”

Two-year note yields fell nine basis points to 0.75 percent in New York, according to BGCantor Data, the most since the week ending on Sept. 17, from 0.84 percent on Feb. 11. The price of the 0.625 percent securities maturing in January 2013 was 99 24/32. Ten-year note yields dropped five basis points to 3.58 percent from 3.63 percent.

Flight to Bills

Three-month bill rates traded as low as 0.0821 percent yesterday, the least since June 17. One-month bill rates were little changed at 0.0659 percent.

“Anytime there is civil unrest anywhere people will flock to Treasury bills,” said Michael Franzese, head of Treasury trading at Wunderlich Securities Inc. in New York. “Investors feel they can wait out in bills the uncertainty with regard to what is going on with Federal Reserve monetary policy and the direction of long-term Treasury yields.”

Treasuries pared a weekly gain yesterday after a European Central Bank official said it may need to raise interest rates as global inflation pressures mount while the Fed maintains its target of almost-zero short-term rates. ECB Executive Board member Lorenzo Bini Smaghi said the “degree of accommodation of monetary policy has to be monitored and, if needed, corrected,” in an interview with the daily newsletter Bloomberg Brief: Economics.

Fed Chairman Ben S. Bernanke’s speech text in Paris yesterday didn’t address the U.S. monetary policy that central bank policy makers maintained last month along with plans to buy $600 billion of Treasuries through June. Paris is hosting the Group of 20 meetings of central bankers and finance ministers this weekend.

Fed Views

Minutes of the Fed’s meeting last month showed policy makers regarded the U.S. recovery as being on a “firmer footing.” The central bank raised projections for economic growth this year and made little change to forecasts after 2011 or for unemployment and inflation. They were divided about whether further evidence of a strengthening recovery would warrant slowing or reducing the Treasuries buying.

“People were expecting the minutes to mention some sort of exit plan, but the Fed signaled that they are more concerned about growth, which lets the market know that they are inclined to stay accommodative,” BNP Paribas’s Prakash said.

The difference between yields on two-year notes and Treasury Inflation Protected Securities, which tracks the outlook for consumer prices during the life of the debt, expanded to 2.04 percentage points, the widest gap since July 2008.

Economic Reading

Government economic reports showed housing starts climbed 15 percent in January to a 596,000 annual rate and the consumer price index increased 0.4 percent in January, exceeding the 0.3 percent median estimate of economists surveyed by Bloomberg News, figures from the Labor Department showed. Year-on-year inflation accelerated to 1.6 percent, the highest since May.

“The fundamentals look good, and are bearish for Treasuries, but the market can’t ignore geopolitical risk like this,” said James Caron, head of U.S. interest-rate strategy at Morgan Stanley in New York, a primary dealer.

President Barack Obama sent Congress a $3.7 trillion budget that projects the federal deficit will exceed $1 trillion for the fourth consecutive year in 2012 before falling to more “sustainable” levels by the middle of the decade.

Deficit Politics

The deficit for the current fiscal year is forecast to hit a record $1.6 trillion — 10.9 percent of gross domestic product — up from the $1.4 trillion the administration estimated previously. It would be $1.1 trillion in 2012, 7 percent of GDP. By 2015 it would decline to $607 billion, or 3.2 percent of GDP.

The U.S. plans to sell $35 billion in two-year notes on Feb. 22, the same amount of five-year debt the following day and $29 billion in seven-year securities on Feb. 24.

Treasuries have handed investors a 1 percent loss in 2011, while inflation-linked Treasuries decreased 0.8 percent, according to indexes compiled by Bank of America Merrill Lynch.

“No one wants to be short going into a long weekend that could expose the market to a lot of event risk,” said Thomas Tucci, managing director and head of rates trading at Royal Bank of Canada in New York. “Any selloff will be limited given the potential for more geopolitical headlines.”

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Employees and their families who enter Centene Corp’s new health clinic in downtown Clayton encounter a decorative rock fountain in the waiting area and a medical assistant behind the reception desk.

The muted décor, in soft hues of green, brown and orange, provides patients a spa-like setting. Three client “care suites”

Air New Zealand said Friday it has bought 14.9 percent of Australia’s Virgin Blue for $143 million, a decade after the national flag carrier was bailed out by the government following an investment gone bad in another Australian airline.

The airline had notified stock exchanges in New Zealand and Australia on Thursday it planned to take a shareholding of 10 percent to 14.99 percent in Virgin Blue, a cut price carrier. Virgin Group, the U.K.-based company founded by Sir Richard Branson, has a 26 percent stake in Virgin Blue.

The Virgin Blue shares were bought for Australian cents 44 each for a total cost of AU$145 million ($143 million).

“The investment in Virgin Blue is part of Air New Zealand’s strategy to develop scale and reach in this region,” Air New Zealand chief executive Rob Fyfe said in a statement.

A recently signed alliance with Virgin Blue on routes between Australia and New Zealand was the first step in this strategy, he said.

Fyfe said the airline has “no intention” of increasing its stake above 14.99 percent, which would trigger a requirement to make a takeover offer to all Virgin Blue shareholders. Nor does Air New Zealand intend to enter Australia’s domestic air travel market in its own right.

News of Air New Zealand’s plans sent Virgin Blue shares soaring 10 percent on the Australian stock market Thursday.

The New Zealand government owns 75 percent of Air New Zealand after a bailout in 2001, under which it injected 1 billion New Zealand dollars ($770 million) to keep the national carrier afloat.

The bailout followed Air New Zealand’s disastrous investment in Australian airline Ansett, which collapsed after years of stiff competition and poor management.

The acquisition of the Virgin Blue stake was funded by Air New Zealand’s existing cash pile, it said.

Last year Air New Zealand and Virgin Blue got approval from New Zealand’s competition regulator to cooperate on routes across the Tasman Sea that separates Australia and New Zealand. The decision followed approval from Australia’s antitrust regulator, which reversed its preliminary objections after the two airlines gave guarantees to boost seats on certain routes.

The airline said it has obtained Australian Foreign Investment Review Board approval to purchase up to 14.99 percent of Virgin Blue, a shareholding which would keep total foreign ownership of Virgin Blue within the statutory limit of 49 percent.

Air New Zealand last week signed a code share agreement with Branson’s Virgin Atlantic that will allow its passengers to book on many Virgin Atlantic services.

Air New Zealand plans to seek representation on Virgin Blue’s board in about six months.

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Germany may soften its opposition to expanding the region’s 750 billion-euro ($966 billion) rescue facility as Belgium’s political deadlock sent borrowing costs surging and the European Central Bank bought Portuguese bonds.

The cost of insuring against default on European sovereign debt climbed to records and European stocks fell amid concern Portugal is next in line for a bailout. Portuguese securities reversed declines after three traders with knowledge of the deals said the ECB purchased the government’s bonds.

With European governments including Portugal and Spain due to borrow at least $43 billion this week, attention is shifting to whether Europe is doing enough to stem the crisis. For the first time, investors view western European government bonds as riskier than emerging-market debt, the Markit iTraxx SovX Western Europe Index of credit-default swaps showed last week.

“Markets won’t stay at these levels because that’s just not sustainable and if they widen much further, then we’ll soon have rescue packages for Spain and Portugal,” Erik Nielsen, chief European economist at Goldman Sachs Group Inc., said in a research note yesterday.

Chancellor Angela Merkel’s chief spokesman, Steffen Seibert, declined to repeat German objections to restocking the rescue fund after the Handelsblatt newspaper reported European Union leaders may discuss the matter in February.

“No decision has been taken about widening the rescue fund,” Seibert said by telephone yesterday. “We should note that only a small part of the available funds has been tapped.”

Merkel has up to now opposed expanding government-funded help for debt-plagued euro nations, saying as recently as Dec. 6 that she sees no need for additional aid.

Bonds Rebound

Portuguese 10-year bonds rose, reversing declines, with the yield falling seven basis points to 7.32 percent as of 10:39 a.m. in London. The yield on the equivalent-maturity Irish security was little changed at 9.27 percent, with Greek yields declining six basis points to 12.68 percent.

The yield on Belgian 10-year notes climbed 11 basis points to 4.26 percent, the highest since 2009.

The benchmark Stoxx Europe 600 Index lost 0.8 percent to 278.85.

Credit-default swaps on Portugal jumped 14 basis points to a peak of 552 basis points, Ireland soared 21.5 to an all-time high 677 and Belgium was 3 higher at a record 251. That helped push the Markit iTraxx SovX Western Europe Index of swaps on 15 governments to a record 220.5 basis points.

EU leaders may discuss expanding the temporary rescue fund when they next meet for a summit in February, Handelsblatt reported, citing German government officials it didn’t identify. The EU could time such a pledge to coincide with granting aid to Portugal, Der Spiegel magazine reported in this week’s edition.

‘No Talks’

There are “no talks going on, nor envisaged to begin” about Portugal tapping the EU’s crisis-resolution facility, Amadeu Altafaj, spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn, said today in an e-mailed statement.

The euro has dropped 11 percent against the dollar over the past 12 months as investor concern over the debt levels in some euro-area states drove bond yields to records. The euro fell to $1.2867 today, the weakest level since Sept. 14, before rising 0.2 percent to $1.2933.

France and Germany will push Portugal to accept aid as officials in the two countries doubt the Lisbon government can raise money on capital markets much longer, Der Spiegel said.

Aid for Portugal should coincide with an agreement by the euro-area countries to provide all means necessary to safeguard the monetary union, including unlimited funds to expand the bailout facility if required, the Hamburg-based weekly said.

Merkel Aim

Seibert denied that Merkel is pressing Portugal to tap the rescue fund, saying Germany’s aim is to ensure that Prime Minister Jose Socrates persuades markets he is pursuing budget discipline.

In Brussels, King Albert II postponed until tomorrow a planned meeting with Johan Vande Lanotte, author of a constitutional compromise that last week failed to jump-start seven-party coalition talks almost seven months after inconclusive federal elections.

Vande Lanotte, a Socialist from the richer Flanders region, awaits a royal response to his plea to be relieved of the job of trying to shepherd the four Flemish and three French-speaking parties back to negotiations that were broken off on Sept. 3.

“Financial markets will be merciless if the country doesn’t extricate itself from this unprecedented hell as soon as possible,” billionaire financier Albert Frere told Le Soir newspaper.

Greece, which triggered the crisis, reported today that its central budget deficit contracted 36.5 percent in 2010. While that beat the target reduction of 33.2 percent, the 5.5 percent increase in net revenue fell short of the 6 percent target.

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