The M Hotel in Singapore’s business district once struggled to fill its rooms on weekends as visiting executives tended to leave by Friday. Now it enjoys 90 percent-plus occupancy even on Saturdays and Sundays.

A prime destination mainly for bankers and businessmen, Singapore also has started drawing tourists with a slew of new attractions, the most popular being two casino-complexes built at a cost of over $10 billion that opened earlier this year.

The two casinos and their related attractions represent the new face of a city that wants to transform itself from regional trade and financial centre into a place for both work and play.

“I’m looking out of my window at the new skyline. What has developed over the last five years has been amazing,” Hanspeter Brummer, CEO for Asia at Swiss private bank BSI, said from his office which overlooks the new Marina Bay financial district.

“Singapore is more than just Monte Carlo, which is a bit artificial. Singapore doesn’t just have one industry but a number of industries. People really have good reasons to come here,” said Brummer, a Swiss national who worked in the city-state from 1997 to 2000 and returned in 2006.

Unlike the existing central business district, Marina Bay, built on reclaimed land around the mouth of the Singapore River, comprises not just office skyscrapers but also shops, residences, theatres and the towering $5.5 billion Marina Bay Sands built by U.S. casino giant Las Vegas Sands.

Marina Bay is also home to the world’s biggest ferris wheel, restaurants fronted by Michelin-starred celebrity chefs and the world’s first night-time Formula One circuit.

Over at Sentosa, to the west of the central business district, Genting Singapore’s Resorts World casino and its Universal Studios theme park opened in February. The $4.8 billion complex earned S$503.5 million ($369.9 million) before interest, tax and depreciation in the three months ended June 2010.

Should Resorts World continue to rake in similar amount of money in subsequent quarters, it would surpass all rivals in Las Vegas and Macau in terms of profitability, analysts say.

Las Vegas Sands has not yet reported earnings for the June quarter but CEO Sheldon Adelson has said he expects Marina Bay Sands to generate gross earnings of over $1 billion annually.

TOURISTS AND TAXIS

Although both casinos have yet to complete all their attractions, which include what will be the world’s largest oceanarium, they have already created new business for hoteliers and taxi drivers.

Visitors to the city-state of 5.1 million people rose by over a-fifth to around 6.5 million in the seven months to July from a year ago. Hotel occupancy hit 90 percent in July, up 10.2 percentage points, while room rates rose 20 percent on average from a year earlier.

Taxi drivers say their takings are up by as much as 30 percent, helped by increased business in the wee hours of the morning from casino patrons.

“The integrated resorts are a catalyst to bigger and brighter things. We are seeing more entertainment centres popping up… We are in the incipient stages of what we call a change in the structural demand for such services in Singapore,” said Vincent Yeo, CEO of CDL Hospitality Trusts which owns M Hotel.

“There are still many attractions that are not opened yet,” he added, citing the two casinos’ unfinished projects as well as government initiatives such as new landscaped gardens, a river safari and an area for motorsports.

CDL’s Yeo said the 90 percent occupancy levels will continue for several months until new hotels open, meaning visitors may have difficulty finding rooms from time to time.

PROBLEM GAMBLING

Singapore’s transformation began in 2005 when the government legalised casinos as part of a plan to double visitor arrivals to 17 million by 2015. Singapore attracted 9.7 million visitors last year, and the number could rise to just under 12 million this year if the growth pace continues.

The figures do not include the thousands who cross over from Malaysia daily by land. In the past, many came to work and returned the same day but a growing number are here to gamble as seen from the large number of Malaysian-registered cars in casino carparks.

Tourism currently accounts for about 7 percent of Singapore’s economy but could grow to around 12 percent by 2015 based on government projections on visitor spending, economists’ estimate.

The transformation has detractors though — from Singaporeans unhappy about the large influx of foreigners who have contributed to soaring property prices and crowded roads to those who fear the casinos will bring with them crime and other vices.

The tiny city-state has long been a centre of trans-shipment and regional finance, coupled with strict government control over its people. It has near-zero crime and sparkling clean streets but also flogging, the death penalty, and a ban on chewing gum.

While Singapore appears to have successfully prevented a rise in prostitution and loan sharking, there has been an increase in problem gambling.

According to local TV station Channel NewsAsia, Singapore’s National Council for Problem Gambling has seen almost as many problem gambling cases in the first half of 2010 as it did for the whole of 2009.

JOBS, OPPORTUNITIES

Economists such as Citigroup ’s Kit said Singapore had little choice but to develop tourism, as it needs to create relatively low-skilled hotel, restaurant and retail jobs to replace those lost at factories that move to China and other cheaper places.

“Rebranding Singapore as a global city and tourism hub fits in very well with its natural advantage, which is its strategic location in the centre of Southeast Asia and good transportation links,” said Kit.

“If well managed, services can be a more sustainable source of competitive advantage than manufacturing, which is footloose and very price-sensitive,” he said.

Singapore’s manufacturing sector, which accounts for one quarter of the economy, shed jobs in the second quarter of 2010 despite expanding at a 44.5 percent year-on-year pace. The services industries, in contrast, continued to create jobs despite growing at a much slower pace of 11.2 percent.

The government has warned manufacturing will slow in the second half, although growth for the full year will come in at 13-15 percent, which will make Singapore the world’s fastest-growing economy.

“Manufacturing is going to slow down, but you’ll see stronger contributions from services in the second half as the integrated resorts ramp up,” said Endre Pedersen, who helps manage $16 billion in fixed income assets at MFC Global, the asset management arm of Canadian insurer Manulife.

Pedersen is betting on Singapore dollar-denominated bonds as he sees the local currency rising faster than most other Asian currencies against the dollar.

DTZ, meanwhile, says Singapore commercial property are undervalued by 9-12 percent, given the strong demand for offices and mall space that has arisen as Singapore attracts more banks and tourists. It ranks Singapore as the third most attractive city for investments in retail and number eight for offices on a risk-adjusted basis.

As for stocks, most analysts see few opportunities, noting the share prices of Genting and hoteliers such as CDL have already rallied this year.

Nomura analyst Tony Darwell warns of potential downside arising from slowing visitor growth as the novelty factor of two casinos wear off. CDL’s Yeo argued, however, that casinos are more likely to attract repeat visitations than other attractions.

To Citi ’s Kit, the risks facing Singapore’s shift to services and tourism are more long-term.

“We’ve developed the hardware but we’ve not got the software yet. At the lower level, Singapore still needs to develop a more service-oriented culture,” he said, referring to high turnover of staff at hotels and restaurants.

“To be a global city also requires a more open mindset and willingness to accept alternative views even if they are poorly formed.”

singapore stock market,singapore stock market news

Stock futures surged Wednesday after upbeat signs of growth in China and Australia lessened worries about a global economic slowdown.

Overseas markets rose sharply after reports showed the pace of growth in China’s manufacturing sector rose in August for the first time in four months and Australia economy grew by the fastest pace in three years during the second quarter.

The sharp jump in U.S. stock futures is surprising given the domestic economic reports due out later in the morning. Traders in the U.S. are waiting for the Institute for Supply Management’s monthly manufacturing report and payroll company ADP’s report on private employment.

Often investors don’t make big bets heading into key economic reports, particularly in recent weeks as data has consistently showed growth is slowing. Both the ISM manufacturing and payroll reports are expected to follow that trend.

Stocks have been volatile over the past month because traders are unsure about the direction of the economy. Data continues to point to meager growth, but exactly where the pace of growth settles remains a major question. By sending stocks lower throughout August though, traders were betting that weak growth will eventually be a drag on corporate earnings.

Ahead of the opening bell, Dow Jones industrial average futures rose 98, or 1 percent, to 10,104. Standard & Poor’s 500 index futures rose 12.50, or 1.2 percent, to 1,060.80, while Nasdaq 100 index futures rose 24.50, or 1.4 percent, to 1,791.00.

With stock markets rising worldwide, U.S. Treasury prices dropped and interest rates rose. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.52 percent from 2.47 percent late Tuesday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans.

Economists polled by Thomson Reuters forecast the ISM manufacturing index slipped to 53.0 in August from 55.5 a month earlier. Any reading above 50 indicates expansion in the sector.

Regional surveys of manufacturing activity in recent weeks also pointed to slowing growth in the sector, which had been among the strongest during the first half of the year.

Economists expect the ADP report will show private employers added just 19,000 jobs last month after hiring 42,000 new workers in July. The slowdown in hiring during August is further evidence that the jobs market remains weak.

Employers are avoiding making any new hires in large numbers because of the uncertain direction of the economy. They are also worried about the potential impact of government health care and financial regulation reforms as well as possible increases in taxes.

With unemployment still high, people concerned about their jobs have cut back on spending, which has further slowed growth.

The ADP report is often considered a gauge for the government’s monthly employment report, which is due out Friday. The Labor Department’s data also includes government employment so it is a broader reading on the jobs market.

Economists expect the government report to show 100,000 jobs were cut last month, but that was largely due to laying off temporary census workers. Private employers likely added just 41,000 jobs last month.

Overall, the unemployment rate is expected to have climbed to 9.6 percent last month from 9.5 percent in July.

Australia’s S&P/ASX 200 index jumped 2.1 percent on the upbeat growth report. Hong Kong’s Hang Seng index rose 0.4 percent, while Japan’s Nikkei stock average rose 1.2 percent.

European markets followed Asian markets higher. Britain’s FTSE 100 rose 1.5 percent, Germany’s DAX index gained 1.1 percent, and France’s CAC-40 climbed 1.8 percent.

Singapore 25th most expensive city for travellers

Singapore has been ranked as the world’s 25th most expensive city for business travellers from the United Kingdom, up from 44th spot last year, according to the Global Hotel Market Survey.

The leap in Singapore’s ranking is in line with reports from the Ministry of Trade and Industry saying that the average room rates in the country have increased 20 percent this year.

Hong Kong leapt seven places to become the world’s third most expensive city for UK travellers, posting a 13 percent growth in the local currency because of increased demand from the banking and finance sector.

Among the cities surveyed, Hong Kong saw the highest growth, with an 11 percent and 17 percent increase in Q1 and Q2, respectively.

Moscow remained the most expensive city for UK travellers despite a weaker rouble.

Abu Dhabi dropped six places to rank eight this year from second spot last year. It recorded the highest average room rate decline of 25 percent in the local currency.

Construction costs may rise, say experts

Singapore’s construction costs may climb by as much as 6 percent in 2011 when government rules that restrict foreign workers set in, according to several property experts.

Among the manpower constraints that will start this month include a rise in the foreign worker levy and a reduction of man-year entitlement, restricting the number of foreign workers on a site. A new rule that will limit noise in construction sites will also be implemented in September.

Experts claimed that the changes may drive up overall costs and prolong the duration of projects. Several industry players are also concerned about the rising cost of crude oil and volatility in commodity prices.

“For this year, we think there’ll be an increase in the order of 3 percent. For next year, we expect it to be a little higher, probably in the range of 5 to 6 percent. Construction demand is the key driver in terms of price escalation, tender price escalation,” said Winston Hauw, managing partner of consultancy firm Rider Levett Bucknall.

The latest quarterly Real Estate Sentiment Index indicated that 9 out of 10 respondents, which include market watchers and developers, are concerned about increasing land prices.

Meanwhile, 76 percent are worried about the increase in labour costs and building material.

The index is jointly developed by the Department of Real Estate at NUS and the Real Estate Developer’s Association of Singapore (Redas). Redas hopes the index will become a forward indicator for the sector and an authoritative quarterly index, said Steven Choo, chief executive of Redas.

“It will provide the market with an idea of how the real estate development players perceive the market, so it will benefit the investors and guide them in their decisions,” he said.

Mr. Choo added that the index could influence policy directions, as well as provide insight to developers on industry trends.

Rule #1: Latour and Lafite-Rothschild Are Not the Only Worthy Wines

Relative to all wine that exists, only an exceedingly limited number of wines are considered investment-worthy.

And that universe largely spins around the very top end of the Bordeaux market.

Atop the list are the five Premier Cru (first growth wines) that always have big demand globally: Lafite Rothschild, Margaux, Latour, Haut-Brion and Mouton Rothschild. Chateau d’Yquem is the first growth Sauterne.

For historical reasons I won’t bore you with, several of the most-sought-after, most-expensive, most-collectible Bordeaux are not on the official first-growth list, which dates to 1855. That includes names like Petrus, Ausone and Cheval Blanc. They command big dollars, big respect, and tend to be some of the best investments over time because of the huge demand among oenophiles.

But that doesn’t mean investors must shop only at the top of the pile. Just as Wall Street has Blue Chips and then a bunch of other worthy investments, so, too, does wine.

Many second- through fifth-growth wines make excellent investments. And the reason is practicality.

Restaurant-goers can’t always afford a bottle of Latour or Ausone, but many do afford bottles of Léoville-Las Cases, Calon-Ségur, Troplong Mondot and Lynch-Bages. For investors, those names and others offer excellent profit opportunity.

The 2000 vintage of Ducru-Beaucaillou, a popular second-growth chateau from one the few top-notch vintages of the past 10 years, has generated a 9% annual gain since its release early last decade. Had you grabbed cases of this wine at the height of the global financial panic, you’d be sitting on rebound returns of about 35% annually since November 2008.

Lynch-Bages, perhaps the most-popular fifth growth, has seen a similar trajectory, as has second-growth Pichon-Lalande and many others.

Outside of Bordeaux, numerous Burgundies are investment-worthy. Particularly, prized names such as Domaine Romanée-Conti, or just DRC.

Also worthy are some Italian Super Tuscans (Sassicaia, Gaja, Solaia); Champagnes (certain Dom Perignons, Krugs, Louis Roederers); Spanish reds (Alvaro Palacios L’ermita, Dominio de Pingus) and vintage ports from Portugal (Fonseca, Quinta do Noval Nacional).

California has a selection of über-elite “cult” cabernets and pinot noirs that soar in value. But most are mailing-list wines — meaning, you can only buy them if you’re on the wineries’ mailing list.

And getting on the mailing list is often a years-long process … and even then you’re typically only allowed to buy between three and six bottles because production is so small and demand so high.

This limits profit opportunities in California cult wines because the wine market wants liquidity, no pun intended.

Rule #2: Buy Great Vintages over Good Vintages

In any given year, some producer in Bordeaux or Burgundy or wherever will produce a stunning wine that earns major plaudits.

But that’s not good enough as an investor.

Consumers of fine wine know little about the 2008 Bordeaux vintage or the Napa Valley cabernets circa 2003 and ‘04. Those vintages were pretty good. But they weren’t great.

Wine lovers know a lot, however, about the 2003 and 2005 Bordeaux, and the 2007 Napa cabs. Burgundy lovers know a great deal about the 2005 vintage, and Champagne fans can rattle off all sorts of information about 1997.

All were classic vintages, some of the greatest in recent history.

As an investor, you want to put your money on the vintages investors and the media know and write about.

That’s where the demand exists.

It’s also where the quality exists. The chateaux in Bordeaux across the board produced amazing wines in 2005, giving investors a greater selection of wines to invest in at all price levels from about $75 a bottle on up past the four-figure mark.

As such, restaurants in 2014 will be clamoring to buy 2005s across the spectrum. But they will consider very few 2004 offerings. They know customers will see “2005” on the menu and will quickly recall what a great vintage that was, and want that wine.

As I mentioned last week, I encourage new wine investors to start their effort with cases of highly rated 2005 Bordeaux, available for between $2,000 and $4,000 a case … names like Ducru-Beaucaillou, Pape Clement, Pavie-Macquin and others.

Based on the historical performance of wines of this caliber, I would expect these cases to fetch between $6,000 at the low end and upward of $12,000 to $16,000 at the high end by the time 2015 rolls around.

That would mark annualized returns of 12% to 15% for the decade from 2005 to 2015, but returns of 20% or more for investors buying now.

The returns won’t come in a static, straight line. Wine prices bounce around … and I would use any meaningful bounces to the downside to grab a few cases here and there at attractive prices.

Rule #3: Where You Buy is as Important as What You Buy

Even if your local mini-mart, through some magic, ends up with a case of Chateau Le Pin, the ultimate Bordeaux cult wine, the resale value at auction will be marred by the “provenance,” or the wine’s history. (More on that in a moment.)

Auction houses and collectors want to see that your wine comes from reputable dealers or, preferably, from the winery directly.

That way they know the wine is authentic. Specifically, they want you to prove the wine’s provenance.

With Bordeaux, you’ll be buying from wine merchants, since the chateaux don’t generally deal directly with consumers.

California’s most collectable/investment-worthy wineries work on a direct-to-consumer model, though you can also find some of the more-sought-after cult wines in high-end wine shops online or in major American cities. Sorry, but the average wine retailer or, worse, grocery store is generally not the place you want to be buying wine for investment purposes.

Rule #4: Keep Meticulous Records and Store Wines Properly

This goes hand-in-hand with provenance and buying from reputable sources.

You absolutely must keep good records on your wine purchases, and you absolutely must keep wine properly stored.

Wine is a living creature. It evolves over time. Indeed, high-end Bordeaux, Burgundy and California cabernet makers build their wines to age. You can drink them early, sure. And they’ll be darn good.

But the best a fine wine can be won’t appear for many years.

Yet you can’t just stick your bottles in a cheap wooden wine-rack on top of the refrigerator or in a bedroom closet and go about your day.

Hot wine matures too rapidly and spoils. And the relatively dry conditions in a typical home cause corks to dry and shrink. That lets oxygen seep into the bottle, oxidizing the wine, or making it “skunky.”

Skunky is bad. No one will buy that wine.

And buyers know when a collector has improperly stored wine. Because a shrunken cork allows some wine to evaporate out of the bottle, the missing wine is obvious when a bottle is held up to a light.

Optimal conditions: A custom-built cellar or a pre-made wine cabinet that keeps bottles around 55° to 58° with a relative humidity of 60% to 75%.

You can buy an environmentally controlled wine cabinet for a couple thousand dollars that will hold 100 or so bottles, though much bigger units also exist. A custom-made, closet-sized cellar starts at about $5,000 if you have someone build it … and can run many thousands more, depending on your wants.

Or, in bigger cities you will increasingly find wine-storage facilities that make a market in maintaining proper cellar conditions for investors/collectors. Google “wine storage” and your city and you’ll likely come up with a few. Heck, I even have one here in South Louisiana, attached to a self-storage center.

As for records, keep receipts on every bottle you buy from wineries or dealers. They are proof of provenance. This is your way of showing a buyer or an auction house where your bottles originated.

That goes a long way in alleviating concerns that a wine is a forgery, which is a big concern with wine collecting/investing.

Plus, it offers greater assurances that the wine has been properly cared for.

Perfect provenance: Proof that you are the wine’s only owner and that the bottles came from the winery directly or through a respected merchant who bought them directly from the winery (generally the case for Bordeaux).

Directors at Sotheby’s auction house have told me that without the proper paperwork – without provenance – a case of wine can lose 20% to 30% of its true value.

Rule #5: High Ratings are a Must! … Though Exceptions Exist

Rightly or wrongly, ratings issued by widely followed wine critics affect the perception of a wine’s value.

That’s because ratings have become the great equalizer and a de facto standard by which investors/collectors trade wines.

No two palates are the same. I might think the 2001 Chateau d’Yquem I mentioned last week is the greatest liquid I’ve ever tasted.

Someone else will say it’s cough syrup unworthy of the price.

But because the wine market puts its faith in the palates of a tiny lot of critics, buyers know what to expect from a 95-point wine … or an 80-point wine. That provides a measure of comparability that lets wine trade like a standardized commodity.

Las Vegas Sands tops estimates as Asia outperforms

Adjusted EPS 17 cents vs estimate 9 cents

* Revenue up nearly 51 pct

* To amend $5 billion US credit facility

* Shares up 2.3 percent

By Deena Beasley

LOS ANGELES, July 28 - Las Vegas Sands Corp <LVS.N>, the casino operator run by billionaire Sheldon Adelson, posted a better-than-expected quarterly profit on Wednesday, aided by strong performances at its new Singapore resort and in Macau.

Sands, whose shares rose 2.3 percent in morning trading, earned 17 cents a share in the second quarter after adjusting for one-time items. Analysts on average expected 9 cents a share, according to Thomson Reuters I/B/E/S.

Net revenue rose nearly 51 percent to $1.59 billion.

“They had a monster quarter,” said Sanford Bernstein analyst Janet Brashear, adding that much of the outperformance was driven by better-than-expected profit margins.

Gambling revenue in Macau, the world’s largest gambling center and the only place in China where gambling is legal, has soared this year, most recently rising 65 percent year-over-year in June.

Sands said second-quarter net revenue at its three Macau properties rose 41 percent from a year earlier to $1.03 billion, while adjusted earnings before interest, taxes, depreciation and amortization increased 74 percent to $307 million.

Singapore’s Marina Bay Sands generated $94 million in EBITDA in its first 65 days of operation. The $5.7 billion casino resort began operating in April.

In Las Vegas, where a glut of hotel rooms has led to rate discounting, EBITDA fell to $66 million in the second quarter from $78 million a year earlier.

“With property performance better than our expectations in Macau and Singapore, and with the Las Vegas Strip weaker than expected, we believe Asia will be the key driver of the story, and the report is bullish for the shares,” Jefferies and Co analyst David Katz said in a research note.

HIGH HOPES

Chairman and Chief Executive Officer Adelson said during a conference call that he still expects the Singapore resort to bring in $1 billion in EBITDA next year, due in part to a broader-than-expected customer base.

“There are so many people that are coming from different countries in Asia … We have a group of Koreans flying in every week,” he said. “I think that the outer reaches of our marketing radius is wider than what we thought before.”

The company has lined up financing for development of two sites in a section of Macau known as the Cotai Strip, but construction has not yet started due to government requirements for the hiring of local workers.

Company officials said they are confident the Macau government will not let the project continue to stall, but they reported no tangible progress on a construction start date.

Chief Financial Officer Kenneth Kay said highly-leveraged Sands plans to launch later this week an “amend and extend” transaction for its $5 billion U.S. credit facility.

“The transaction contemplates a paydown of our term loans and a reduction of a revolving credit facility commitment in exchange for the extension of maturities and other modifications to the credit agreement intended to increase the company’s financial flexibility,” he said.

After payment of preferred stock dividends, Sands had a second-quarter net loss of $4.7 million, or 1 cent a share, compared with a net loss of $222.2 million, or 34 cents a share, a year earlier.

In addition to Singapore’s Marina Bay Sands, Sands owns the Palazzo and Venetian resorts on the Las Vegas Strip, three casinos in Macau and a casino in Pennsylvania. 

Earnings to drive U.S. stocks after ugly data

NEW YORK (Reuters) - After ugly economic data and an unexpected downturn in sentiment on quarterly earnings, Wall Street will face a tough time battling back from the latest sell-off.

Technology and banking results will once again shape investor mindset in the week ahead. But it’ll be a tough job to shift back into a positive mode after stocks dropped nearly 3 percent drop on Friday.

Minutes of the Federal Reserve ’s June meeting got the market seriously worried this week after officials said they were more concerned with the pace of the economic recovery.

A raft of disappointing data didn’t help, prompting questions this week on whether the economy had merely hit a soft patch or was primed for a double-dip recession.

“It doesn’t mean the market can’t rally, but the structural problems are there and there is no doubt about it,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

From a technical perspective, the picture is even less certain. The Standard & Poor’s 500 Index is stuck in a tight range after it failed to hold its 50-day moving average, now near 1,090, after closing above it for two days.

The Nasdaq Composite, meanwhile, failed in its attempt to break its 200-day moving average, but has support around its 14-day moving average at 2,171.

At Friday’s close, the three major U.S. stock indexes were each down about 1 percent for the week: The Dow Jones industrial average lost 1 percent, while the S&P 500 slid 1.2 percent and the Nasdaq shed 0.8 percent.

The coming week’s earnings will include results from 12 Dow components, as well as earnings from financial powerhouses Goldman Sachs Group Inc and Morgan Stanley along with tech bellwethers Apple Inc, Texas Instruments Inc and Qualcomm Inc.

For the second quarter, earnings are expected to increase 28 percent from the year-ago period, according to Thomson Reuters data.

DOUBLE SHOT OF HOUSING DATA

The week’s major economic indicators will zero in on the housing sector, which is still struggling in the wake of the worst recession since the 1930s. In the second quarter, banks repossessed a record number of U.S. homes as U.S. unemployment stayed high, according to RealtyTrac, a real estate data company.

On Tuesday, Wall Street will get data on housing starts for June, which are expected to show a slight decline to a seasonally adjusted annual pace of 580,000 units from 593,000 in May, according to economists polled by Reuters.

Another snapshot of the housing market will be provided on Thursday with existing home sales for June. The forecast calls for a drop of 8.1 percent in June existing home sales versus the 2.2 percent decline in May, the Reuters poll showed.

REVENUES UNDER THE MICROSCOPE

But investors will focus on earnings next week. Close attention will be paid to revenue for signs of improvement, in light of the contrasting results from Intel Corp and Google Inc.

“That’s been the problem. They’ve been meeting or exceeding on cost cutting and not on demand for their products,” said Terry Morris, senior vice president and senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.

“That has got to end pretty soon because the market was expecting sales to start improving and it’s not materializing.”

According to Thomson Reuters data through July 16, 48 companies in the S&P 500 Index have reported earnings for the second quarter, with 75 percent having topped analysts estimates, 13 percent in line with expectations and 13 percent below expectations.

On a revenue basis, of the 48 companies in the S&P 500 that have reported results so far, 71 percent have topped analysts’ expectations and 29 percent have fallen below estimates.

TAMER OUTLOOK FOR TECHS

Options investors appear to be expecting less volatility in the technology sector than the broader market next week.

Implied volatility on the at-the-money options for the SPDR S&P 500 ETF, an exchange-traded fund that tracks the benchmark S&P 500 , was slightly higher than on the PowerShares QQQ Trust ETF that tracks the performance of the Nasdaq 100, according to Steve Claussen, chief investment strategist at online brokerage OptionsHouse.com.

Implied volatility, a key component of options prices, measures the expected movement in stocks calculated by options prices. It is also seen as a barometer of anxiety.

“It’s notable that QQQQ is showing less implied volatility, which suggests more movements in the broader market than the straight technology sector. The tech sector will be a less exciting place in terms of movements next week,” he said.

Implied volatility on August options for the S&P 500 ETF was 25.5 percent, slightly higher than 25.25 percent for the Nasdaq ETF. Usually, the Nasdaq ETF has an implied volatility that’s 5 percent to 10 percent above that of the S&P 500 ETF.

The most actively traded options on the S&P 500 ETF were the August $100 and $105 puts, excluding July options that expire at the end of the day. Late Friday, the SPDR S&P 500 ETF was down 2.8 percent at $106.63.

For the QQQQ, the highest volume was on the August $44 put and August $45 call options. On Friday, the ETF was down 2.78 percent at $44.34.

Sometimes it becomes a little too easy to attack the Fed, and we have to hold back, because well, you may get a little sick of hearing our constant ‘ranting’ at their ridiculous policies.

Okay, that one just slipped out.

However, you have to congratulate the Fed for their repeated attempts to kick start the American economy to get things moving along again. They haven’t given up.

That’s because it’s been well documented that they’re desperate to get the recovery ‘happening’, or ‘back on track’. You know, like in the in the good old days.

When credit was easy, debt was not only normal but encouraged and it didn’t matter whether you could pay for the product, as long as you had the ‘assets’ to back up the purchase.

Let’s be honest, where is all the fiddling around with the economy getting the American people small business? Nowhere. Even when the government steps in with tax incentives to buy houses and cars to entice people, it only makes it appear that things are ‘working’.

And then the next batch of economic ‘numbers’ come out and you can see that effects of whatever the stimulus - or bribe - was, were short lived.

But no matter what the Fed does, it just can’t ‘fix’ this. In fact, it was only Wednesday Fed officials admitted that the recovery in the US could take as long as six years.

And yet, just the day before the Fed were blasting the banks for not lending to small businesses. Yep, you have to admire their persistence. They are trying to step in again to fix things again, convinced that one more ‘tweak’ will make everything okay.

However, you must be starting to wonder if the tweaking is being ignored by the very economy the Fed are trying to save.

See right now, banks in the US have returned to one of the more traditional methods of lending. And that is relying on cash flow to determine businesses suitability for a loan, rather than the pre GFC lending practice of using collateral.

So you can imagine how this process is slowing down the recovery that the Fed is desperately seeking. When real estate prices were at an all time high only a few years ago and credit was applied on that basis, cash flow was a second thought.

After all, if you had strong assets - like an overpriced home maybe - the bank didn’t need to worry about your ability to pay back the loan. I’m sure they thought the worst case scenario was ‘Well, if it all goes to pot, we can sell the client’s assets and we still make money.’ This would have been a fine assumption in an every rising property market.

But in a depressed real estate market like the US has now, these methods can’t be relied on anymore.

And quite simply, the lender and private sector businesses have more an idea on what will drive the US recovery. Right now, both of these parties have a very different idea on what the recovery should be instead of what the Fed is hoping for.

It doesn’t matter how many times Dr Ben Bernanke chairmen of Fed, has insisted that banks ought to lend to credit worthy business, the banks are pretty much ignoring him.

Rather than let the Fed determine what a credit worthy business is, the banks taking the actual risk of lending are deciding who, or who isn’t suitable for finance. And that’s how it should be.

Private businesses in America have decided that they don’t want to return to ‘old ways’, or how life was during the credit boom. They have no interest in the recovery the Fed sees. These small businesses are far more wary of protecting their own interests.

It’s a similar story for lenders too. Thanks to the recent crisis, banks and financiers have seen just how a credit binge can completely destroy a company. And if those lending practices are applied in multiple circumstances, it can destroy an economy. You know, like what the US are trying to pull themselves out of right now…

Now, you couldn’t call the US an entirely free market, but this current situation where lenders and business decide what is best for their own interests, is what happens in a free market.

The actual market participants - the banks and the businesses - are choosing how they want to move forward from the recession. Rather than let themselves be led - or dictated - too, they’ve come to realise they way forward isn’t about getting life back to how it was before the crisis.

The market has decided that it doesn’t want to go back to the way it was before. It’s finally worked out that it wasn’t sustainable.

Finally, it may appear that no matter how much tweaking or meddling the Fed try use to get banks lending and private businesses spending again, the market’s decided that this time it’s not going to work.

These market participants will recover when they want too. Not because they’re told too.

Safe Haven Shines Light Brightly

Gold is regarded by many as a safe haven when the going in the world gets tough.  It can be a brightly shining lighthouse.  Let’s look at the chart:

click to enlarge

Gold is one of the few charts that show a bullish five wave pattern at the moment – with maybe 7% move up to the second wave five.

And if we look at the weekly we see the prospect of an even bigger move higher:

click to enlarge

This suggests the prospect of a rise of over 20% by end 2010!  Nice move if you can get it!

As much as I am a huge fan of Elliott I know not to get too attached to an outcome – and especially a second wave five!

But with the prospect of even a 10% move does that mean you should buy gold stocks when everything else is falling?  Not necessarily.  Just look at the NCM chart:

click to enlarge

NCM is like most equities – there is every chance it is also heading south!

When a market is falling it can be a tough game trying to pick contrarian sectors and I reckon one is better off getting behind the move down and go short!

Brutal jobs report leaves a worried Wall Street

Wall Street limited its losses over the past week amid worries about economies in Europe and China, but Friday’s weak US job numbers hit home, leaving shaken investors in need of a tonic.

“This is a headline-driven market environment,” said Frederic Dickson, chief market strategist at DA Davidson & Co.

“Positive headline news can drive instant upward market moves just as easily as negative headline news drives sudden market sell-offs.”

All three major indices capped the holiday-shortened week Friday with plunges of more than three percent in response to the worse-than-expected jobs report. The markets were closed Monday.

The Dow Jones Industrial Average closed at 9,931.22, down 2.03 percent from last Friday.

The tech-rich Nasdaq composite fell 1.68 percent over the week, to 2,219.17.

The Standard & Poor’s 500 index, a broad measure of the market, lost 2.25 percent at 1,064.88.

“In the world of risk, it was looking like the US economy was going to turn out to be the more stable, but with a job report that disappoints expectations, it naturally has a pretty profound impact on the market,” said Gina Martin at Wells Fargo Securities.

The market “really was counting on the US to pull through,” she added.

The Labor Department reported 431,000 nonfarm jobs were created in May, well below analyst expectations of 500,000.

Ninety-five percent of the new jobs were due to temporary government hiring for this year’s census, and the private sector created only 41,000 jobs, the majority of them temporary.

Wall Street had spent most of the week with its sights trained abroad, on Europe where fiscal problems are mounting, and on China, whose anti-inflationary moves are stirring fears of slowing growth in the engine driving the global recovery.

Those two sources of risk for the market, as well as the “psychological effect” of BP’s oil spill disaster in the Gulf of Mexico, weighed heavily on investors, said Owen Fitzpatrick at Deutsche Bank.

“The economy is still trending in the right direction but people are generally concerned with measures that have to be taken. We’ll continue to see slower growth in some regions, in particular Europe,” he said.

The euro tumbled along with stock markets Friday, falling below 1.20 dollars for the first time since March 2006.

Investors kept a close eye this week on trading in the currency shared by 16 European nations amid fears of contagion from the Greek debt crisis.

Markets were spooked when a spokesman for the recently elected Hungarian prime minister hinted the country could default.

But the shock US jobs report cast Wall Street’s spotlight on the US recovery from recession, which so far has been supported by massive government stimulus spending.

The May employment report “does not paint a picture of self-sustained growth in the private sector: absent the census hires and private-sector temp worker hires there was essentially no net job creation,” said Heidi Shierholz of the Economic Policy Institute.

The economic calendar next week is relatively light.

Investors will have a chance to digest the Federal Reserve’s latest report on the economy on Wednesday. The Beige Book is published eight times a year and summarizes anecdotal information gathered by the central bank from all 12 Fed districts.

Thursday brings the weekly initial jobless claims and the April trade balance.

On Friday, the government reports May retail sales, an indicator of consumer spending that accounts for about 70 percent of economic activity.

“Retail sales are likely to remain weak for quite a while given the current trends in employment, and the negative wealth impact for depressed prices for homes and stocks,” Briefing.com analysts said in a note to clients.

U.S. stocks tumble after weak May jobs report

U.S. stocks tumbled Friday, with the Dow Jones Industrial Average falling well below the 10,000 level, after a weaker-than-expected jobs report hit investors already on edge over the possibility that a sovereign-debt crisis was spreading across Europe.

Major stock indexes ended the first week of June solidly in the red, despite a big rally on Wednesday and slight gains on Thursday, the first two-day winning streak in more than a month. However, all those gains and then some disappeared on Friday.

The Dow Jones Industrial Average (DJI:^DJI - News) fell 323 points, or 3.2%, to 9,931.97 as the government’s May nonfarm payrolls report showed only a puny rise in private sector jobs, quashing hope that a strong U.S. economy could help counter the pull of negative sentiment from Europe.

The selloff came on strong volume. New York Stock Exchange composite turnover hit 6.3 billion shares, the highest daily tally of the holiday-shortened week but still well below May’s average of nearly 7 billion shares.

Nonfarm payrolls rose by 431,000 last month, short of economists’ expectations for a rise of 515,000 jobs, and only 41,000 private-sector jobs were added. The unemployment rate slipped to 9.7% in May from 9.9% the previous month, in line with expectations.

“This employment number was definitely a disappointment,” said Terry Morris, co-portfolio manager of National Penn Investors Trust. “This really kind of puts the bulls back on their heels.”

The Dow’s move below 10000–its first time below that key number in a little over a week–came after the euro (CUR-EURUSD - News) fell below $1.20 on fresh worries about Hungary’s economy.

A leading official in the ruling Fidesz party said Thursday that Hungary faces a Greek-like sovereign-debt problem. Although Hungary is not part of the euro zone, its travails are fueling the perception of a broadening European banking crisis. Read about worries over Hungary’s sovereign debt.

“Today you got a postcard from Hungary: All is not well, send money. It’s a reminder that the debt issues are still there and they’re serious and significant,” said Karl Mills, manager at Counterpoint Select Fund.

All 30 of the Dow’s components fell, including declines of more than 5% each in economically sensitive stocks Caterpillar (NYSE:CAT - News) and American Express (NYSE:AXP - News) . General Electric (NYSE:GE - News) was close behind, off 5.3%. The blue-chip average suffered its worst one-day drop since May 20 and ended the week down 2%.

The Nasdaq Composite (COMP - News) tumbled 3.6% on Friday to end down 1.7% for the week. The Standard & Poor’s 500-stock index dropped 3.4% to end with a weekly decline of 2.3%. All of its sectors ended lower on Friday, led by a 4.6% slide in industrials as the profitability of many companies in the sector depends on global growth. In addition, the international exposure of many industrials has put them at risk of being hurt by currency translations as the euro continues to weaken against the dollar.

Small-capitalization stocks, which are often perceived as riskier, were hit even harder than their large-cap counterparts. The Russell 2000 index of small-capitalization stocks slid 5%.

The U.S. Dollar Index (DXY - News) , reflecting the U.S. currency against a basket of six others, jumped 1.3%. Other perceived havens also rose, with gold futures and Treasurys climbing, pushing the yield on the 10-year note down to 3.197%. Crude-oil futures slid 4.2%, the worst one-day drop since Feb. 4. The commodity fell $2.46 to end at $71.51 a barrel, off 3.3% for the week.

Stu Schweitzer, a strategist with J.P. Morgan Private Bank, noted that Friday’s jobs report had investors questioning the recovery in the U.S. However, he believes there are still enough economic yardsticks moving in the right direction. He noted that this week’s reports on manufacturing activity, jobless claims and construction spending were all better than expected.

“Even with the disappointing jobs report today, it remains clear that the recovery here is continuing,” Schweitzer said. “There’s a question of sustainability, but for the short term, it’s very much in place.”

singapore stock market ,singapore stock market news,austraklia stock market ,australia stock market news

ADB asks Sri Lanka to reduce size of budget

The Asian Development Bank on Friday asked Sri Lanka to prune the size of its budget to sustain economic stability as the island emerges from decades of ethnic conflict.

The Manila-based bank’s President Haruhiko Kuroda said Sri Lanka’s top priority now is to rebuild infrastructure in the island’s war-ravaged north and east; and ensure economic stability reaches everyone in the country.

“For that, macro-economic stability, particularly a sustainable budget deficit, is crucial for sustained economic growth,” Kuroda told reporters in Colombo at the end of his three-day visit to the island.

Sri Lanka’s fiscal deficit shot up to 9.7 percent of gross domestic product in 2009, above a seven percent target set by the International Monetary Fund when they released a 2.6 billion dollar bailout package last July.

“Fiscal deficit close to 10 percent of GDP is too large and must be reduced over the medium term,” Kuroda said urging the government to widen its tax net and increase government revenue.

ADB forecasts Sri Lanka’s economy to expand strongly by 6.0 percent this year from 3.5 percent last year, but Kuroda warned the Indian Ocean Island needed to trim its expenses.

“You may be able to increase growth in the short run by increasing spending and reducing taxes. But in the medium to long run if there is no prudent and sound fiscal policy, you cannot have sustained growth,” he said.

ADB Sri Lanka country director Richard Vokes said about 450 million to 500 million dollars has been earmarked to disburse in the tropical island between end 2009 and 2010.

Kuroda said about 50 percent of the project loans will be disbursed in the island’s war-ravaged north and east for reconstruction work and livelihood support.

Sri Lanka is emerging from a 37-year ethnic conflict after government forces last May, crushed the Tamil Tiger rebels who were fighting for an independent homeland for minority Tamils from the majority Sinhalese community.

The United Nations estimates some 100,000 people died in the conflict, while tens of thousands are unable to return to their villages and still live in makeshift homes.

The 588 million dollar Indian offering of Standard Chartered Bank was more than twice oversubscribed by its close Friday, as bids from investors came in just hours before the deadline.

The issue, which opened on Tuesday despite volatile global market conditions, is being viewed by bankers as a success, with investors confident of the bank’s growth strategy, which focuses on emerging markets.

Data at the Mumbai and the National stock exchanges showed the London-based lender’s Indian Depository Receipts (IDR) issue had received about 446 million bids out of 204 million on offer — a 2.19 times oversusbcription.

The issue closed Friday but data is still being collated, the bank said, so the final bid figure could be even higher.

The “high-net worth individual” category was oversubscribed 1.7 times; qualified institutional buyers about three times; and retail investors 0.7 times, a source familiar with the matter told AFP on Friday.

“We are very happy. Initially the markets were nervous due to volatile global conditions and a slow start for the offering,” a banker said, also on condition of anonymity.

The late surge came after Standard Chartered received bids covering just 16 percent of the issue between Tuesday and Thursday.

Foreign companies are not allowed to list shares directly in the country and Standard Chartered, which makes most of its profits in Asia, will become the first foreign company to list in India through the IDR route.

IDRs are rupee-denominated certificates similar to US Depository Receipts that show ownership of shares in an overseas firm.

The issue was open to retail, institutional and overseas investors and corporates, with every 10 IDRs representing one share.

Standard Chartered will now seek to list its IDRs on India’s two leading stock exchanges, the Mumbai and the National stock exchange, in June.

The funds raised will be repatriated to the bank’s London headquarters as capital reserve to be used for growth and expansion plans.

India is the bank’s second largest and fastest-growing market after Hong Kong, with profit in excess of one billion dollars in 2009.

The price band for the offering was 100-115 rupees per IDR. The stock exchange data showed that most bids were at the lower end of the bracket.

The bank is aiming to boost its brand and visibility in India, where it opened its first branch more than 150 years ago.

The bank has hired investment banks including Goldman Sachs, UBS Securities and Bank of America-Merrill Lynch to manage the offering.

Advanced Trading

We left off our story in Issue 359 with Santos (STO:ASX) breaking a triple bottom on the fourth attempt. We were stopped out of our short position, but I suggested that it was a time to be cautious before going long. There were both price and time reasons for this. What did the market do next?

Chart 1 – Angles as Support and Resistance

click to enlarge

You would already be familiar with the concept that bottoms which have been support can, when broken, act as resistance. This chart illustrates how the same thing happens with Gann’s geometric angles. After the low on 7 May, the market exactly touched the angle on 14 May.

How could you trade this? Gann’s rule, taken from his lesson on angles in the Commodities Course, would be to sell the moment the market hit the angle and fell away. He suggests a stop-loss 1-3 cents above the angle. Perhaps you could use 1/3 of the Average Range, which would be approximately 9 cents.

Let’s say you were more conservative. At the end of the day, when you saw the bar, you could place an order to go short the next day, with an entry stop below the day’s low.

Chart 2 – Short Trade

click to enlarge

This would see your trade filled on the Open the next day at 12.95. In this case your stop would go 1c above the swing top at 13.29. Your risk is 13.29 – 12.95 = 0.34 per CFD. If you are following our account balance over these recent trades, our original $20,000 has now ballooned to over $80,000. You could easily take 20,000 CFDs in this trade, and with a bit of imagination you can see how a much tighter entry was possible, allowing an even larger position.

The next day was an outside day, but did not give an Outside Continuation Day trade. This was because of the low Open price. Nevertheless, it did confirm a lower top and you could have added to your position on 19 May at 12.65. You would have taken another 10,000 CFDs and placed all stops above the lower swing top.

I have mentioned before, Gann’s rule that when a market breaks one angle it will fall to the next. On 21 May the market opened below the 1 x 2 angle, which was also right on the mid-point of the total trading range of the history of this stock. You could have used the Openers Rule to exit the position, say, at 11.40. This would have added $43,500, less commission to your account.

Knowledge is Power!

Asia shares rise on Europe, IBM; euro wobbles,asia stock market ,asia stock market news

Asian stocks rose on Thursday as fresh austerity measures promised by Spain and Portugal gave investors hope that Europe’s debt crisis can be contained, while IBM’s strong profit forecast gave a further boost to tech shares.

The euro struggled near 14-month lows, however, on worries that steep government spending cuts in parts of Europe would drag on the region’s already feeble economic growth.

Doubts about the euro’s long-term viability and worries about inflation continued to spur a flight into gold, which shot to a fresh record for a second day in a row. The jump to $1,248.15 an ounce brought gold’s gains to nearly 20 percent since early February.

Spain said on Wednesday it will slash civil service pay and cut public jobs while Portugal’s finance minister told Reuters his government had identified new austerity measures to reduce its budget deficit, offering investors some reassurances that those countries are addressing their deep-rooted fiscal problems.

While worries remain that Greece and other governments will not be able to deliver on deeply unpopular spending cuts, there were signs that recent strains in global money markets were easing, further buoying investor confidence.

The three-month dollar London interbank offered rate was unchanged after rising steadily during the height of the worries about Europe’s sovereign debt problems. <MMT/>

Those developments, coming just a few days after EU finance ministers approved a 750 billion euro bailout package to keep Greece’s debt crisis from spreading through the region, inspired U.S. stocks to their best three-day run in 10 months, with key indexes gaining up to 2.1 percent. <.N>

U.S. markets were also lifted by a strong outlook from tech bellwether <IBM.N>, which forecast it would roughly double its profit by 2015, fueling bullishness on the sector.

By mid-morning the MSCI Asia ex-Japan index <.MIAPJ0000PUS> was 1.4 percent higher with the technology index <.MIAPJIT00PUS> outperforming the broad market with a 2.1 percent rise.

Tech-heavy stock markets in South Korea <.KS11> and Taiwan <.TWII> rose up to 1.8 percent. Both had seen several days of selling by foreign investors earlier in the week, but data showed overseas buyers were returning to Korean shares on Thursday.

Japan’s Nikkei <.N225> gained 1.5 percent as buyers snapped up tech stocks like Advantest, which makes micro chip testing equipment, and shares of other companies which have recently released upbeat earnings and sales outlooks. Advantest <6857.T> jumped 3.3 percent.

“Worries about southern Europe’s finance problems, which started from Greece, are receding thanks to a series of measures and safety nets to deal with the crisis,” said Mitsuo Shimizu, deputy general manager at Cosmo Securities.

In Taiwan, chipmakers Taiwan Semiconductor Manufacturing Co <2330.TW> and UMC <2303.TW> boosted the main TAIEX share index <.TWII> by 1.4 percent.

“U.S. data and earnings have helped, meaning stocks are moving on news from abroad,” said Chu Yen-min, senior vice-president at KGI Securities in Taiwan. “This market correction is on international factors.”

CURRENCIES

The euro edged up 0.3 percent against the dollar, but traders said any gains were likely to be limited, with investors expected to sell into any rallies such as the one on Monday, when the single currency briefly jumped on news of the massive rescue package.

“Financial markets overall have been returning to calm but the euro remains on a downtrend,” said Kosuke Hanao, head of treasury product sales at HSBC in Tokyo.

“Although the panic sell-off in the euro has eased at the moment, the downside risk still remains,” he said.

Near-term psychological support for the euro is seen at around $1.25, its 14-month low hit last week. But some in the market see the currency falling below $1.2400 as it did in 2008.

Meanwhile, the Australian dollar rose as high as $0.8994 after data showed the domestic economy added 33,700 jobs in April, handily beating forecasts for a 20,000 rise.

Despite the strong growth numbers, there was little impact on Australian rates market since the central bank is expected to hold rates until November because of the European worries.

Crude oil futures eased 25 cents to $75.40 a barrel.

Stock markets around the world slumped Friday after President Barack Obama unveiled plans to limit the size and scope of US banks and financial firms in a fresh offensive against Wall Street excesses.

Markets from New York to Tokyo reacted with barely-restrained panic to Obama’s drive to limit the size of the largest banks and introduce measures to curb “excessive” risk taking.

“Never again will the American taxpayer be held hostage by a bank that is too big to fail,” vowed Obama, flanked by former Federal Reserve chief Paul Volcker who advised the president on the rules.

He promised to “protect” taxpayers by preventing banks or financial institutions from owning, investing in or sponsoring hedge fund or private equity funds.

Wall Street gave an immediate thumbs down to the plans as US stocks plunged, with the blue-chip Dow Jones Industrial Average down more than 200 points or two percent in Thursday trading.

The news then sent shockwaves though Asian stock markets with the region’s financial centers suffering heavy losses in Friday trading. European exchanges later opened under pressure.

Obama’s measures would effectively force financial firms to choose between lucrative proprietary activities — trading in stocks and sometimes risky financial instruments for their own benefit — and traditional activities, like making loans and collecting deposits.

The initiative, which must be approved by Congress, includes a new proposal to limit the consolidation of the finance sector, placing broader limits on “excessive growth of the market share of liabilities” at the largest financial firms.

Obama blamed banks for sparking the worst economic crisis since the Great Depression with “huge reckless risks in pursuit of quick profits and massive bonuses” in a “binge of irresponsibility.”

“My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform and when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low, and cannot refund taxpayers for the bailout,” the president said.

He vowed to enact the reforms in Congress, even if Wall Street deployed an army of lobbyists to kill them.

“If these folks want a fight, it’s a fight I’m ready to have,” he vowed defiantly.

The announcement was the latest attempt by the White House to harness public rage at Wall Street bonuses and the financial crisis.

David Easthope, analyst with Celent, a research and consulting firm, said the effort could hit the banks in one of their most profitable areas.

Proprietary trading “has been the sweet spot for leading investment banks over the last few years, and executives will be concerned that Washington will be taking away the frosting,” he said.

The Financial Services Roundtable, which represents 100 of the largest integrated financial firms, said the proposal would do little to improve risk management or protect consumers from irresponsible loans and trades.

“The proposal will restrict lending, increase risk, decrease stability in the system, and limit our ability to help create jobs,” said Steve Bartlett, president and chief executive for the Roundtable.

The group represents 100 top financial services firms providing banking, insurance, and investment products and services.

Obama’s first year in office was dominated by efforts to rescue a handful of banks that threatened to topple the US economy after being exposed to massive losses on the subprime mortgage market.

According to Treasury officials, about 205 billion dollars was pumped into 707 banks under the government rescue plans.

Obama has sounded a tougher tone towards banks in recent weeks as he faced widespread voter anger at the massive government bailout, which came as Americans faced surging unemployment, home foreclosures and national debt.

Top Obama economic aide Austan Goolsbee sought to counter criticism that the plan is returning to the Depression-era law creating a wall between investment and commercial banks.

“It’s not returning to Glass-Steagall,” Goolsbee said.

While the act repealed in 1999 forbid underwriting securities or investing in securities by any commercial bank, Goolsbee said, “This is not that. This says a bank cannot own a hedge fund, cannot own a private equity fund or do trading for its own account that is not related to its client business.”

He added that the goal is “to get back to the fundamental nature of the bank, which is serving its clients, rather than investing for its own profit.”