Asian Market Kick Off 2010 with Modest Gain

HONG KONG (AP) – Most Asian markets started off 2010 with moderate gains Monday as investors weighed mixed signs from the region's economies. European shares opened higher.

Major benchmarks in Europe gained a little less than 1 percent in early trade after Japan led Asia's advance. Crude oil prices punched through $80 a barrel, and the dollar slipped against the yen.

Investors were encouraged by a report showing China's manufacturing expanded at its fastest rate in 20 months in December, the latest sign the world's third-largest economy was continuing to grow strongly, aided by government stimulus measures.

But the mood was offset by worries about another recession in Singapore after the government said the local economy shrank last quarter for the first time since early 2009.

"We'll still see improvements in Asia in 2010, but a strong rebound isn't certain everywhere in the region because global demand may not pick up quickly," said Belle Liang, head of research at Core Pacific-Yamaichi International in Hong Kong.

As trading started in Europe, Britain's FTSE 100 gained 0.7 percent, Germany's DAX rose 0.8 percent and France's CAC-40 added 0.9 percent. Wall Street futures pointed to a stronger open on Wall Street Monday. Dow futures were up 59, or 0.6 percent, to 10,424 and S&P futures gained 7.7, or 0.7 percent, to 1,118.40.

In Tokyo, the Nikkei 225 stock average advanced 108.35 points, or 1 percent, to 10,654.79, with Japan Airlines surging 31 percent after the government said it was readying additional financing to the troubled airline.

South Korea's Kospi added 0.8 percent to 1,696.14. Australia's main index was up 0.1 percent and India's benchmark gained 0.5 percent.

Other markets slipped, with Hong Kong's Hang Seng off 0.2 percent at 21,823.28 and Shanghai's index down 1 percent to 3,243.76. Singapore's market lost 0.1 percent.

This week, investors will be watching for signs of improvement in a key US jobs report due out Friday. Economists generally expect the data to show the American economy shed more jobs in December. A stronger-than-expected report, however, might also rattle the market by prompting speculation the US central bank will raise interest rates sooner than thought.

Last week in the US, the Dow Jones industrial average closed out the year shedding 120.46, or 1.1 percent, to 10,428.05. For the year, the Dow rose 1,651.66, or 18.8 percent.

The broader Standard & Poor's 500 index, considered to be the market's best barometer, fell 11.32, or 1 percent, to 1,115.10. The S&P ended the year with a gain of 211.85, or 23.5 percent.
Oil prices rose in Asia, with benchmark crude for February delivery up $1.12 at $80.48

The dollar fell to 92.90 yen from 93 yen, and the euro was higher at $1.4325 from $1.4323.

Champagne in Economic Recession

PARIS (AP) — Partygoers worldwide have at least one good reason to forget the economic pain, job fears and mortgage woes of 2009: unusually cheap Champagne for New Year's.

Champagne houses and retailers have had a tough year, forcing some to make aggressive price cuts. But the discounting is causing divisions among vintners, and analysts warn the move could threaten the bubbly's premium reputation.

In supermarket chains such as Carrefour SA and Auchan, French shoppers were snapping up real Champagne for less than €10 ($14) a bottle, as even high-end producers such as Laurent Perrier compete with cheaper bubbly such as Italian prosecco and Spanish cava.

With Champagne exports plunging, some producers are cutting prices to sell more in France. Large retailers are also taking advantage of the decline to woo recession-weary shoppers during the festive season.

Carrefour, Europe's largest retailer, has stocked 450,000 bottles of Hubert de Claminger Champagne on its French shelves , which it is selling for €8.90 ($12.80). It is also offering up-market brands at a discount — Moet & Chandon Imperial now retails with a €3 reduction for €22 ($31.60).

"It's fine to do some discounting but if you do it too steeply you can really damage the brand," said Ann Gilpin, an analyst with the Chicago-based research firm Morningstar. "Once you start to lower the price you run the risk of destroying the idea of it being a premium brand."

The discounting is being driven by some of the cash-poor smaller Champagne houses who need to boost flagging sales, but some of the bigger houses are also seeking to sell off stocks and boost volumes.

That marks a change in strategy for Champagne growers, who have been raising prices to cultivate the prestige of the sparkling wine that can only be made in a specific region of France.
Laetitia Delaye, an analyst Kepler Equities in Paris, says most of the big houses are wary of cutting prices on top-end wines because it will be difficult to persuade consumers to pay more when the economy recovers.

"This year they are trying to preserve the premium brands," she said. "It took them time to increase prices."

She said it's probably the retailers who are driving the promotions of premium-brand Champagnes, not the producers.

Laurent Perrier spokeswoman Marie-Clotilde Debieuvre-Patoz says prices are not being cut for the house's premium brands. Grand Siecle La Cuvee, which retails for around €150 ($215), is being sold in a fancy case.

"In a crisis, you have to adapt," she said. "Our policy is to have a complete portfolio of brands, each of which is adapted to its clientele and the economic climate. We don't want to touch prices on the (premium) Laurent Perrier brand."

Other Champagne houses that can afford to let volumes tumble are also resisting cutting prices.
Remy Cointreau CEO Jean-Marie Laborde vowed last month not to cut prices on brands such as Piper-Heidsieck so that when the recovery comes he won't be stuck with lower-priced bubbly.
Champagne is Remy Cointreau's smallest division and losses are made up for by profits in its liqueurs and spirits division. But for companies whose sole product is Champagne, times are tougher.

Champagne exports in the first half of the year plunged 45 percent, according to the Federation of French Exporters of Wines and Spirits.

France accounts for just over half of all Champagne sales, around 50 percent of which are made by cooperatives and small growers that offer cheaper Champagnes.

The large houses dominate the export market, accounting for 86 percent of volume, and analysts fear discounting among premium brands risks making consumers question why they are paying more for a sparkling just because it is made in France.

In Britain, where prosecco is roughly a third of the price of Champagne, bargain hunters are being treated to some of the deepest discounts this decade.

Trevor Stirling, a beverages analyst at Sanford Bernstein in London, said prices have been slashed by as much as 50 percent, with even premium brands such as Moet & Chandon and Bollinger selling for as little as 14.39 pounds (€16; $23).

Stirling said Champagne houses are stuck with a difficult choice in Britain, which accounts for a quarter of exports.

Given competition from other sparkling wines "there is a danger that people start to realize they can get something almost as good for half the price and Champagne isolates itself as something that you only pay the premium for very special occasions," he said.

At the same time, Champagne wants to preserve its prestige. Gilpin said Champagne has also been discounted in the US, where it is a flagging status symbol.

"People don't really know what brand of Champagne you drink at home, or at a wedding when you receive a glass of Champagne, you don't really know what kind of champagne is in there," she said. "It's a lot more difficult to flaunt that status symbol."

Even the usually recession-proof Swiss are turning away from Champagne.

Figures from the Swiss federal customs office for September to November show an 11.7 percent year-on-year rise in imports of Italian prosecco while imports of French Champagne fell 4.1 percent.

Reports from 2010 Associated Press

Dubai Economic Crisis Looms

DUBAI (AP) – Dubai's leader tried to calm panicky investors yesterday as regional markets tumbled for a second day on news that the city-state's chief conglomerate needs to delay payments on its $60 billion debt for six months.

Government-owned investment company Dubai World — the United Arab Emirates' main engine of growth — gave anxious investors the first bit of clarity they were hoping for on how it might meet its debt obligations. It said it had begun discussions with creditors on $26 billion of its debt that would include restructuring about $6 billion.

The conglomerate is involved in international projects from Gulf banks and ports in 50 countries to luxury retailer Barney's New York and a grandiose six-tower hotel-entertainment complex in Las Vegas. Its potential for a debt default sent jitters through world markets on concerns of new setbacks for Dubai World's large international bank creditors just as they are recovering from the global financial crisis.

Dubai is one of seven highly autonomous statelets that make up the United Arab Emirates and the crisis has sent the UAE's two biggest markets into a tailspin. The Dubai Financial Market sank another 5.61 percent on yesterday after plunging 7.3 percent on Monday and Abu Dhabi's bourse closed down 3.57 percent following an 8 percent slide a day earlier.

Dubai's ruler, Sheik Mohammed bin Rashid Al Maktoum, tried to reassure investors in his first public statement about Dubai World's debt crisis.

"Our economy is strong and solid and consistent," he told Al-Arabiya satellite television, adding markets were overreacting because of "a lack of understanding about what is happening in Dubai." He did not elaborate.

UAE President Sheik Khalifa bin Zayed Al Nahyan also maintained his country's economy was healthy.

However, analysts say Dubai World's debt crisis is a symptom of a broader malaise in the city-state. Dubai has no oil resources. But for the past decade, it has been the freewheeling boomtown, racking up debt as it built extravagant artificial residential islands, malls complete with indoor ski slopes and the world's tallest tower.

The troubles raised concerns in international markets that the large international banks that extended credit to the conglomerate could now face a new setback if it defaults just as those big banks are starting to emerge from the global financial crisis. The big fear is that Dubai's problems could be indicative that the global recovery is not on as solid a footing as many had hoped and there could be other toxic debt problems still to come in developing countries.

World stock markets rose sharply yesterday on the announcement that Dubai World was in talks to restructure a large chunk of its business. Investors were eagerly awaiting clarity on how it would deal with its debts, specifically reassurances that the company was sitting down with creditors to refinance its debt.

Saurabh Dhall, an independent broker in Dubai, said there is a lot of uncertainty about how the debt crisis will play out. He said it was raising credibility concerns both about Dubai's ability to stand behind its debt obligations and the possibility, however, remote, that the crisis could impact broader government debt in the UAE.

"The major concern is not so much the dollar amount ... of the payments, it's the concern about how this will affect credibility," he said.

Investors were not reassured on Monday when Dubai officials indicated they had washed their hands of Dubai World's debts, arguing that it was an independent company that happened to be owned by the emirate.

The news rattled investors and raised more questions about whether neighboring Abu Dhabi, the oil-rich seat of the UAE's federal government, would step in with a bailout of sort and what such a step would mean for Dubai.

Dubai World said yesterday in a statement the restructuring would include about $6 billion in Islamic bonds issued by its real estate arm, Nakheel PJSC, the company behind Dubai's iconic, palm-shaped artificial islands. About $3.5 billion of the bonds come due on Dec. 14, and Nakheel was viewed as the litmus test for how Dubai World will deal with its debt woes.

It did not deal with the broader issue of how it would meet its entire crushing debt burden.

Dubai World's statement yesterday said the restructuring would include Dubai World and certain subsidiaries, including Nakheel World and Limitless World. Excluded from the talks are debts from Infinity World Holding, Istithmar World and Ports & Free Zone World, which includes ports and terminal operator DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone.

The conglomerate said all those subsidiaries are on "stable financial footing," and in a statement posted on the Nasdaq Dubai Web site, Jebel Ali Free Zone said it paid a roughly $2 billion Islamic bond, or sukuk, on time yesterday.

Other UAE markets also felt the weight of Dubai's problems. Qatar's bourse fell 8.27 percent while Kuwait's was off 2.71 percent on yesterday.

Markets in the Emirates will be closed Wednesday and Thursday for a national holiday and will reopen Sunday after the weekend.