• World Bank President Robert Zoellick warned in a letter to the Group of Eight nations that the global economy is not out of the woods yet and they should be cautious about pulling back on stimulus programs.  Dated July 1, the letter was addressed to G8 host Italian Prime Minister Silvio Berlusconi and said interventions by central banks and governments appeared to have “broken the fall in the global economy” by stabilizing financial markets and boosting demand. “Yet 2009 remains a dangerous year. Recent gains could be reversed easily, and the pace of recovery in 2010 is far from certain,” Zoellick wrote in the letter obtained byReuters on Monday.  The G8 heads of government are expected to issue a statement on the situation of the world economy during their meeting in the central Italian city of L’Aquila.

• The Institute for Supply Management’s index of U.S. service industries contracted last month at the slowest pace in nine months, as measures of new orders and employment improved.  The survey of non-manufacturing firms, which make up almost 90% of the economy, rose to 47 — higher than forecast — from 44 in May, according to data from the Tempe, Ariz.-based group. Readings of less than 50 signal contraction.  The index’s third straight monthly improvement reflects signs of stabilization in housing and consumer spending. That combined with leaner inventories means companies may start expanding output again in coming months, Bloomberg News reported.

• Anglo-Australian mining company Rio Tinto PLC (ADR NYSE: RTP) has agreed to sell its U.S. packaging business to Wisconsin-basedBemis Co. Inc. (NYSE: BMS) for $1.2 billion in cash and stock.   Bemis, a food-and-beverage packager, will acquire 23 operations spread across the U.S., Canada, Mexico, South America and New Zealand that package and wrap such things as meats, cheese, bagged lettuce and snack foods, the Wall Street Journalreported.  The deal should push its sales from $3.8 billion to $5.3 billion annually and significantly boosts Bemis’s role in many foods and beverages purchased in U.S. grocery stores.

• Economic worries pushed crude oil prices below $65 a barrel Monday for the first time since May 27 as investor doubts over a potential rebound in the global economy increased, Reutersreported.  Prices fell more than 3% to $64 a barrel, after touching a five-week low of $63.40 in overnight trading.  London Brent crude fell $1.29 from Friday’s close to trade at $64.32 a barrel.  Crude has fallen more than 13% after reaching nearly $74 a barrel on June 11 on optimism that an economic recovery could bolster demand.  But recent weak economic data — including a poor U.S. jobs report last week — has weighed on markets.

• Writeoffs for Bank of America Corp. (NYSE: BAC) may rise as much as 10% to $7.6 billion when it reports its second quarter results on July 17, according to a Credit Suisse Group AG (NYSE ADR: CS) report obtained by Bloomberg News. Among the bad debts was $1.9 billion related to home equities, and 10.4% of credit card loans. Stress tests conducted by the U.S. government in May estimated the lender may face $136 billion in loan losses through next year.

• Moody’s Investors Service put Brazil’s credit ratings on review for an increase to investment grade, citing the country’s “demonstrated resilience to shocks” in the global economy, Bloomberg News reported. “Confronted with a wide array of adverse conditions, the Brazilian authorities’ policy response has been effective in containing the impact of the global crisis, thus providing evidence of increased resilience to shocks, a characteristic integral to an investment-grade credit profile,” Moody’s said.

• Justice Department officials have begun an initial review of the largest telecom companies such as Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) are anti-competitive,The Wall Street Journal reports. While no company is being singled out at this point, the investigation could explore whether wireless carriers hurt smaller competitors by signing exclusivity deals with phone handset makers, such as AT&T’s deal with Apple Inc. (Nasdaq: AAPL) that makes it the sole carrier of Apple’s popular iPhone. Together, Verizon and AT&T control 60% of the 270 million wireless subscribers.

• Marc Andreessen, co-author of the first web browser, has started a venture capital fund with longtime business associate Ben Horowitz for new companies with new technology ideas, The New York Times reported. The duo’s company, called Andreessen Horowitz, has raised $300 million for tech-related investments, and will risk as little as $50,000 on new ideas. Any successful ideas will get up to $50 million for the companies to grow globally. Five-year returns in the venture capital industry were just 6% last year, a far cry from 2000’s 48% at the dot-com bubble’s peak. Andreessen is a director at Facebook Inc., which started with just $500,000 but has since raised $600 million.

Investment News Briefs Tuesday, July 7, 2009

• President Barack Obama has appointed Former Federal Reserve Chairman Paul Volcker to close tax loopholes and streamline tax laws. The top-to-bottom overhaul of the 96-year-old tax code will reduce tax evasion and “corporate welfare,” budget Director Peter Orszag told Bloomberg.

• Kenneth Lewis, Bank of America Corp.’s (BAC) chief executive, told The Los Angeles Times he wants to begin repaying the $45 billion his company owes the U.S. government next month. He also said that a variety of financial indicators “leads me to think we’re starting to see the bottom” of the recession.

• In a message to its Volvo employees, Ford Motor Co. (F) said it is moving closer to selling the Swedish brand, which has been losing money. “We’ve had contact with a number of parties who’ve expressed interest concerning the future of Volvo. Ford’s been pleased with the number and quality of those parties,” John Gardiner, Ford’s European director of strategic communications, told Reuters.

• Romania became the sixth eastern European country to receive a bailout from the International Monetary Fund. Despite being the European Union’s fastest-growing economy last year, the country received a $27 billion (20 billion-euro) loan from the IMF, Bloomberg reported.

• International Business Machines Corp. (IBM), the world’s biggest computer-services provider, plans to inform a large number of U.S. employees in its global-business services unit that their jobs are being transferred to IBM employees in India, reported the Wall Street Journal, citing people familiar with the situation. IBM had already cut at least 4,000 positions since January, joining technology bellwethers Microsoft Corp. (MSFT) and Intel Corp. (INTC) in trimming payrolls to cope with the recession.  The global division accounts for about one-fifth of sales.

• Orders for U.S. durable goods unexpectedly rose by 3.4% in February, the biggest gain in more than a year, the Commerce Department said yesterday (Wednesday). Increasing demand for machinery, computers and defense equipment, highlighed the figures and indicate the economy is stabilizing after shrinking last quarter at the fastest pace in a quarter century, Bloomberg reported.  Stepped-up efforts by the Obama administration and Federal Reserve to ease the credit crunch may help revive growth later this year.

• Brazil’s stock index climbed to a six-week high on speculation government efforts to bolster the housing industry and reductions in interest rates will boost economic growth, Bloomberg reported. The Bovespa index increased 2.4%, erasing yesterday’s 2.3% decline. The gauge has gained 13% this year on speculation government measures, falling interest rates and a recovery in commodity prices will boost growth.

• Chief Executive Officer Kenneth Lewis said Bank of America Corp (BAC) wants to start repaying $45 billion of federal bailout money next month, after completing a government stress test, the Los Angeles Times reported on Wednesday. Lewis had previously said he hoped to pay back all of the money the largest U.S. bank took from the $700 billion Troubled Asset Relief Program as soon as later this year.

Source: Global Investment News Briefs Thursday March 26, 2009

In the past year, it rained pretty hard on Brazil’s burgeoning economy. Its Bovespa stock index is been halved since hitting a record high in May. During that fall, Brazil’s currency, the real, tumbled more than one-third from its nine-year high.

In the fourth quarter, commodity prices and consumer demand continued falling, leading to a loss of 654,946 government-registered jobs in December – the worse monthly loss since the government began tracking jobs data in 1999.
With the interest rate cut – a moved allowed by falling inflation – the central bank hopes the $1.9 trillion economy can keep pace with President Lula’s 2% economic growth target for 2009, a small figure compared to the 6.8% expansion registered by the Brazilian economy in the third quarter of 2008, Bloomberg reported.

Inflation cooled to 5.9% in December, falling within the bank’s target of 2.5% to 6.5%.

“We have a good macroeconomic situation to cut interest rates,” Alexandre Lintz, chief economist at Banco BNP Paribas Brasil SA, told Bloomberg.

Brazil Outlook

In the next three years, China, alone will invest as much as $725 billion in infrastructure, while Brazil will invest $225 billion with very similar goals:

• Strengthen fiscal stimulus, allowing a drop in the value of the real currency (a decline that’s already been substantial) in order to cushion exports.
• Easing capital requirements to Brazil’s strong banking system, which will spur housing and car loans.
• Export financing.
• Begin huge local infrastructure projects.

There is another little-understood phenomenon that cushions the blows for emerging economies: Intra-emerging market trade has become increasingly important.  By now everybody understands that iron ore from Brazil and coal and oil from other emerging markets is flowing into China in order to fuel China’s massive infrastructure buildup and growing consumer demand.

Money Morning Contributing Editor and emerging market specialist, Horaocio Marquez feels Brazil will pull itself through the financial crisis because historically and presently, the Central Bank of Brazil and the Brazilian government have acted very quickly to backstop the liquidity effects against their banks.

Both are run by a superb team of experienced managers, especially adept at controlling the till in rough economic waters, Marquez said.

“The policies, run day to day by a sophisticated technocracy led by top economists and international bankers, many of which held top positions in leading international banks, have allowed Brazil to move forward,” Marquez said. “Hence, Brazil is by far my favorite Latin American play for 2009.”

Source: Brazil Cuts Interest Rates for First Time in 16 Months

Felipe Reis, an analyst for Banco Santander SA (ADR: STD), yesterday (Monday) slashed his target price for the U.S.-listed shares by more than half, stating that the worldwide outlook has become “more challenging.”

Reis, who previously had placed a year-end 2009 price target of $40 a share Vale’s U.S.-listed American Depository Receipts (ADRs), now says the shares of the Rio De Janeiro-based mining-and-metals heavyweight will trade at $18 at next year’s close. If you’re keeping score, that’s a reduction of 55% from his prior target. But it still represents a 59% gain from yesterday’s closing price of $11.32 a share.

”We are adjusting our estimates for Vale in order to reflect the more challenging scenario in the commodities market,” Reis wrote in a research missive, noting that the reduced target price takes into account “the significant global economic slowdown.”

In related news yesterday, Merrill Lynch & Co. Inc. (MER) cut its 2009 economic-growth forecast for Brazil to 2.9%, from a previous estimate of 3.1%, as the lagging effect of scarcer credit may be deeper than thought.

The Brazil exchange-traded fund, theiShares MSCI Brazil Index (NYSE: EWZ), was the focus of a recent Money Morning “Buy, Sell or Hold” column, and soared as much as 42% in six days after it was recommended as a “Buy.”

Source: Hot Stocks: Despite Lowered Target, Vale Still Poses Potential 59% Gain, Analyst Says

Editors Note: “Hot Stocks” is a new Money Morning feature that analyzes the investment outlook of global companies that are in the news. This is the sixth installment of this ongoing investment series.