The logo of ArcelorMittal company is seen at the entrance of its headquarters in Luxembourg in this picture taken on November 20, 2012.

BRUSSELS | Fri Dec 21, 2012 8:09am EST

BRUSSELS (Reuters) - ArcelorMittal (ISPA.AS), the world's biggest steelmaker, is to write down the value of its European business by $4.3 billion, underscoring gloom about prospects for the region's recession-hit manufacturers.

The group, formed in 2006 when India-born Lakshmi Mittal's steel business bought European peer Arcelor for $33 billion, said on Friday demand had fallen about 8 percent in Europe this year and there was no sign of a quick recovery.

As a result, it will write down the goodwill - the value of intangible assets such as brands rather than physical assets such as machinery - of its European operations by 87 percent.

"It is negative, but it should not really be a big surprise that the book value of its European business was too high," said a London-based analyst who asked not to be named.

ArcelorMittal shares were down 2.7 percent at 12.85 euros at 8 a.m. ET, one of the biggest falls by a European blue-chip stock .FTEU3 and reversing gains made earlier this week.

Credit agency Fitch cut ArcelorMittal's long-term issuer default rating to BB+, just below investment grade, due to the challenging outlook for Western European steel markets in 2013.

The $500-billion-a-year steel industry, a gauge of the global economy, has slowed sharply this year as a moderation in China's economic growth has compounded weak demand from austerity-ravaged Europe.

The World Steel Association in October forecast steel demand would rise 2.1 percent in 2012, down from 6.2 percent in 2011. It had forecast 3.6 percent growth in April.

Last month, Moody's cut the company's senior unsecured notes to Ba1 from Baa3, joining Standard & Poor's in rating ArcelorMittal one notch below investment grade.

Other steelmakers are hurting too. Earlier this month, Germany group ThyssenKrupp (TKAG.DE) posted a full-year net loss of 4.7 billion euros ($6.2 billion).

WEAK POINT

Europe is a particular weak point, as austerity drives aimed at tackling a sovereign debt crisis have cut demand for cars and construction - steel's largest markets. Euro zone manufacturing has contracted for 17 straight months.

ArcelorMittal, which makes about 6-7 percent of the world's steel, said demand in Europe had fallen 29 percent since 2007 when the financial crisis started.

It highlighted better trends in the United States where, it said, demand was up 8 percent this year and is now 10 percent lower than in 2007.

ArcelorMittal, whose output is more than double that of its nearest rival, has already announced the closure of blast furnaces in Belgium and France, with other operations temporarily idled due to overcapacity.

The write-down represents over a third of ArcelorMittal's overall goodwill of $12.5 billion as of end-2012. The group, around 40-percent owned by the Mittal family, took on $6.6 billion goodwill when it bought Arcelor.

It said the write-down would be a non-cash charge in fourth-quarter results and would not affect net debt or core profit.

Before the write-down, analysts had, on average, forecast the group would make $529.5 million net profit this year, and $7.1 billion core profit, according to StarMine.

(Additional reporting by Philip Blenkinsop; Editing by Mark Potter and Dan Lalor)

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n">(Reuters) - Shares of Herbalife (HLF.N) plunged again Friday, feeling the brunt of heavy selling in a week where prominent short-seller Bill Ackman called the company a "pyramid scheme."

The stock closed 19 percent down at $27.27, its lowest in nearly two years.

The selling continues a bad run for the stock, which has been hit hard in recent days as Ackman said he was shorting the stock, giving a three-hour presentation Thursday where he called the weight management company's model unsustainable.

Pershing Square Capital Management said on Friday it had launched a website that provides information about the company, including source data that was used in the presentation.

Shares have fallen 36 percent in the last three days and have lost nearly two-thirds of their value since hitting a life-high in April.

Ackman, known for agitating for management change at companies his fund invests in, has targeted Herbalife via one of his biggest short positions in years.

Ackman said he had been building his short position in the company's stock for several months and that he was so sure of his position that he believed the company's stock price would eventually go to zero.

More than 42.2 million Herbalife shares had changed hands on Friday, far surpassing the 2.8 million shares traded on average over the past 50 days.

Similar stocks in the space were also down. Nu Skin Enterprises Inc (NUS.N), a skin products company, closed 14 percent lower at $34.51. Blyth Inc (BTH.N), which sells nutritional supplements through its ViSalus unit, closed down 8 percent at $14.75.

Herbalife said on Friday it would hold an analyst day in the week of January 7 to respond to Ackman's claims.

Option volume on Herbalife hit an all-time high on Friday, a day that also marks the expiration of December equity options. Herbalife traders exchanged 136,000 puts and 85,000 calls, or 11 times the combined daily average, according to options analytics firm Trade Alert.

Out of that volume, 41 percent were December contracts that expire after market close. The most popular contracts are the December $27.50 strike put followed by the May $22.50 strike put.

(Reporting By David Gaffen, Doris Frankel and Maria Ajit Thomas; Editing by M.D. Golan and Saumyadeb Chakrabarty)

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FRANKFURT | Fri Dec 21, 2012 8:01am EST

FRANKFURT (Reuters) - Shares in SMA Solar (S92G.DE), Germany's top solar company, rose on Friday after an acquisition gave it access to China, seen as overtaking Germany next year as the world's No.1 solar market.

SMA Solar late on Thursday announced the acquisition of a 72.5 percent stake in Jiangsu Zeversolar, a move that drove its shares up as much as 7.6 percent on Friday. At 7:39 a.m. ET, they were still up 3 percent.

"SMA Solar so far had no access to the Chinese market. Thus, the acquisition makes clear strategic sense," said a trader.

Plunging subsidies for solar power in Europe have driven the local solar industry to the brink of collapse, forcing many players to file for insolvency or look for growth in foreign markets to remain profitable.

China, however, has been a tough nut to crack, usually favoring local suppliers. In addition, Western solar firms have alleged price dumping by Chinese peers, triggering a trade war that reached the WTO last month.

China is spending 13 billion yuan ($2.1 billion) on its solar industry this year and, said SMA Solar Chief Executive Pierre-Pascal Urbon, is expected to install 2-3 gigawatts (GW) of solar power this year, a figure which could soar to 8 GW next year.

"We hope for very strong growth in sales next year," Urbon told Reuters on Friday.

He added Zeversolar's sales for 2012 would remain largely stable compared with the 30 million euros ($40 million) generated in 2011. SMA aims for sales of 1.3-1.5 billion euros this year.

Urbon said SMA had an option to secure the remaining stake in Zeversolar, which is expected to generate positive earnings per share (EPS) from 2014, but added the group currently had no plans to do so.

(Reporting by Christoph Steitz; Editing by Mike Nesbit)

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Fri Dec 21, 2012 12:24pm EST

n">(Reuters) - Walgreen Co (WAG.N) posted an unexpected decline in quarterly profit on Friday as the largest U.S. drugstore chain worked on winning back former customers and changed how it accounts for its first international acquisition.

The company stands to get a bit of a sales lift in the current quarter as a strong flu season brings shoppers in for flu shots and medications.

Walgreen lost millions of customers due to a contract dispute with pharmacy benefits manager Express Scripts Holding Co (ESRX.O) and is trying to lure them back with offers such as $25 gift cards. It is seeing an increasing pace of Express Scripts patients returning to its stores.

Earnings in the latest quarter were hurt by a decision to report results from Walgreen's stake in Europe's Alliance Boots Holding Ltd ABN.UL on a one-quarter lag rather than a one-month lag. The decision was based on regulatory, audit and business concerns, the company said.

Shares of Walgreen, which has 8,000 U.S. drugstores, fell 3.75 percent to $36.14 in midday trading.

"It was messy," Gabelli & Co research analyst Jeff Jonas said of the quarterly results, noting they included items such as the change in reporting results from Alliance Boots as well as a charge for costs stemming from Hurricane Sandy.

"If you give them credit for everything, it was actually a good quarter," he said.

FLU UP, PROFIT DOWN

The Centers For Disease Control is projecting the worst flu season in 10 years, and Walgreen has seen strong demand for flu shots and other immunizations continue into December, Chief Executive Greg Wasson said.

Through the end of its fiscal first quarter on November 30, Walgreen had given more than 5 million flu shots, up from a year earlier. It has also seen sales of cough and cold medications pick up.

A strong flu season should help the industry in December and likely for the next couple of months, said Jonas.

Walgreen earned $413 million, or 43 cents per share, in the first quarter, down from $554 million, or 63 cents per share, a year earlier.

Earnings before unusual items fell to 58 cents per share from 71 cents a year earlier, missing analysts' average forecast of 70 cents, according to Thomson Reuters I/B/E/S.

Unusual items in the latest quarter included costs related to acquisitions, an inventory provision, and the effects of Hurricane Sandy.

Results from Alliance Boots cut adjusted earnings per share by 7 cents, rather than adding 3 cents as was expected if results had been reported using a one-month lag.

Walgreen paid $7 billion in cash and stock for a 45 percent stake in the European pharmacy operator in August and has an option to buy the rest of the company in about three years.

Walgreen's first-quarter sales fell 4.6 percent to $17.32 billion, with sales at stores open at least a year, or same-store sales, down 8 percent.

The sales performance was slightly worse than Walgreen reported earlier this month. At that time, it said sales fell 4.5 percent to $17.34 billion and same-store sales declined 7.7 percent.

Since settling its dispute with Express Scripts, Walgreen has stepped up its marketing to bring back Express Scripts patients and also has been promoting a new loyalty card, signing up more than 45 million shoppers in a few months.

Rivals CVS Caremark Corp (CVS.N) and Rite Aid Corp (RAD.N) are trying to hold onto the customers they gained when Walgreen lost its Express Scripts patients.

On December 13, CVS said it still expected to retain at least 60 percent of the Walgreen patrons that switched to its chain, which should boost CVS' fourth-quarter earnings by at least 12.5 cents per share.

On Thursday, Rite Aid said it has retained "the lion's share" of patients it gained during the dispute.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe and John Wallace)

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A logo of the Blackberry maker's Research in Motion is seen on a building at the RIM Technology Park in Waterloo April 18, 2012.

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Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009.

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Washers and dryers are seen on display at a store in New York July 28, 2010.

WASHINGTON | Fri Dec 21, 2012 8:38am EST

WASHINGTON (Reuters) - A gauge of planned U.S. business spending rose much more than expected in November, a hint that worries over tighter fiscal policy may not be holding back the factory sector as much as feared.

The Commerce Department said on Friday that non-defense capital goods orders excluding aircraft, a closely watched proxy for investment plans, jumped 2.7 percent last month, the second straight month of solid gains.

Economists had expected so-called core capital goods orders to rise just 0.3 percent. The reading for October was upwardly revised to a 3.2 percent gain from a previously reported 2.9 percent increase.

Shipments of non-defense capital goods orders excluding aircraft, used to calculate equipment and software spending in the gross domestic product report, gained 1.8 percent.

The Commerce Department gave no indication that Superstorm Sandy, which lashed the East Coast in late October, had any impact on the data.

Many economists believe businesses are cutting back on capital spending, wary of automatic government spending cuts and tax increases scheduled to kick in early next year unless the U.S. Congress and the Obama administration can agree on a plan to avert this so-called "fiscal cliff."

Going over the cliff could drain about $600 billion from an already fragile economy.

Overall durable goods orders rose 0.7 percent in November, with increases posted for machinery, fabricated metal products, and computer and electronic products offsetting a drag from aircraft.

Economists polled by Reuters had forecast orders for durable goods, items from toasters to aircraft that are meant to last at least three years, rising 0.2 percent last month.

Excluding transportation, orders rose 1.6 percent in November. Transport orders were down 1.1 percent. Previously, U.S. manufacturer Boeing reported new orders for its aircraft fell in November to 124 from 152 in the prior month.

New orders for autos jumped 3.5 percent. U.S. auto sales in November raced to a five-year high for that month on a rebound from storm-ravaged October and the need to replace aging vehicles.

(Reporting by Jason Lange; Editing by Andrea Ricci)

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1 of 3. U.S. President Barack Obama speaks about the fiscal cliff at the White House in Washington December 21, 2012.

WASHINGTON | Fri Dec 21, 2012 11:43pm EST

WASHINGTON (Reuters) - The White House on Friday tried to rescue stalled talks on a fiscal crisis after a Republican plan imploded in Congress, but there was little headway as lawmakers and President Barack Obama abandoned Washington for Christmas.

In remarks before flying to Hawaii for a break, Obama suggested reaching a short-term deal on taxes and extending unemployment insurance to avoid the worst effects of the "fiscal cliff" on ordinary Americans at the start of the New Year.

"We've only got 10 days to do it. So I hope that every member of Congress is thinking about that. Nobody can get 100 percent of what they want," said Obama.

Obama said he wanted to sign legislation extending Bush-era tax cuts for 98 percent of Americans in the coming days.

The Democrat appeared to be offering bickering lawmakers a way to fix the most pressing challenge - tax cuts that expire soon - while leaving thorny topics such as automatic spending cuts or extending the debt ceiling for later.

Obama called on lawmakers to use the holiday break to cool off frayed nerves, "drink some eggnog, have some Christmas cookies, sing some Christmas carols," and come back next week ready to make a deal.

Negotiations were thrown into disarray on Thursday when House of Representatives Speaker John Boehner failed to convince his fellow Republicans to accept tax cuts for even the wealthiest of Americans as part of a possible agreement with Obama.

"How we get there, God only knows," Boehner told reporters on Friday when asked about a possible comprehensive fiscal cliff solution.

If there is no agreement, taxes would go up on all Americans and hundreds of billions of dollars in automatic government spending cuts would kick in next month - actions that could plunge the U.S. economy back into recession.

Obama spoke to Boehner on Friday and held a face-to-face White House meeting with the top Democrat in Congress, Senate Majority Leader Harry Reid.

Before his defeat in Congress, Boehner had extracted a compromise from Obama to raise taxes on Americans making more than $400,000 a year, instead of the president's preference of those with income of $250,000 a year.

But with talks stalled on the level of spending cuts to which Obama would agree, Boehner attempted a backup plan to raise taxes only on those making more than $1 million a year - amounting to just 0.18 percent of Americans.

BAD DEFEAT FOR BOEHNER

Boehner's reverse in the House was worse than first thought. A key Republican lawmaker said Boehner scrapped the vote when he realized that between 40 and 50 of the 241 Republicans in the House would not back him.

Obama and his fellow Democrats in Congress are insisting that the wealthiest Americans pay more in taxes in order to help reduce federal budget deficits and avoid deep spending cuts. Republicans control the House and Democrats control the Senate.

Stocks dropped sharply early Friday on fears that the United States could go fall back into recession if politicians do not prevent it.

But major indexes lost less than 1 percent, suggesting investors still held out hope that an agreement will be brokered in Washington.

"I think if you get into mid-January and (the talks) keep going like this, you get worried, but I don't think we're going to get there," said Mark Lehmann, president of JMP Securities, in San Francisco.

Boehner, joined by his No. 2, Eric Cantor, at a Capitol Hill news conference, said the ultimate fault rests with Obama for refusing to agree to more spending reductions that would bring down America's $1 trillion annual deficit and rising $16 trillion debt.

"What the president has proposed so far simply won't do anything to solve our spending problem. He wants more spending and more tax hikes that will hurt our economy," Boehner said.

Democrats responded with incredulity.

House members, heading to their home states for the holidays, were instructed to be available on 48 hours notice if necessary.

"They went from 'Plan B' to 'plan see-you-later,'" Obama adviser David Axelrod said on MSNBC on Friday morning.

The crumbling of Boehner's plan highlights his struggle to lead some House Republicans who flatly reject any deal that would increase taxes on anyone.

Republican Representative Tim Huelskamp criticized Boehner's handling of the negotiations, saying the speaker had "caved" to Obama opening the door to tax hikes. Huelskamp, a dissident first-term congressman from Kansas, said he was not willing to compromise on taxes even if they are coupled with cuts to government spending sought by conservatives.

Fiscal conservatives "are so frustrated that the leader in the House right now, the speaker, has been talking about tax increases. That's all he's been talking about," Huelskamp said on MSNBC on Friday morning.

(Additional reporting by Roberta Rampton, Richard Cowan, Rachelle Younglai, Thomas Ferraro and Matt Spetalnick; Writing by Steve Holland; Editing by Alistair Bell and Lisa Shumaker)

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A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo.

NEW YORK | Fri Dec 21, 2012 10:21am EST

NEW YORK (Reuters) - Consumer sentiment slumped in December as Americans were rattled by on-going negotiations to avert the tax hikes and spending cuts set to come into effect in the new year, data showed on Friday.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment tumbled to 72.9 from 82.7 in November, worse than forecasts for 74.7.

It was the lowest level since July and also came in under December's preliminary figure of 74.5.

Talks to avoid the so-called fiscal cliff were thrown into disarray on Thursday evening when Republican lawmakers failed to back an effort by House of Representatives Speaker John Boehner that was designed to extract concessions from President Barack Obama.

Economists say the economy could fall back into recession next year if the changes are allowed to go into full effect.

Record numbers of consumers spontaneously mentioned their concerns that no resolution would be reached before year-end, the survey said.

"Even if something is passed in the next week, unless it includes an extension of the payroll tax holiday, as well as no increase in income taxes except for the wealthy, consumers are likely to be disappointed," survey director Richard Curtin said in a statement.

Of those surveyed, 27 percent said they were concerned about higher taxes, topping the prior high of 26 percent seen in August 2011 in the wake of the drawn-out debt ceiling debate.

U.S. stocks as measured by the SP500 index were down about 1.0 percent in morning trading as hopes faded that a fiscal deal would be reached soon.

Consumers were also less upbeat about the economic outlook, with 35 percent expecting unemployment to rise during 2013, up from 19 percent in October. Only one-third expected an uninterrupted economic expansion over the next five years.

The barometer of current economic conditions slipped to 87.0 from November's 90.7, while the gauge of consumer expectations fell to 63.8 from 77.6.

The survey's one-year inflation expectation edged up to 3.2 percent from 3.1 percent, while the survey's five-to-10-year inflation outlook rose to 2.9 percent from 2.8 percent.

(Reporting by Leah Schnurr)

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The U.S. Capitol Building stands in Washington December 17, 2012.

LONDON | Fri Dec 21, 2012 7:28am EST

LONDON (Reuters) - Global investors are betting Washington will overcome its budget deadlock despite an apparently serious setback.

If they are wrong, there could be a sharp market reaction and the U.S. dollar and Treasury bonds would be among the main beneficiaries, making for a very different dynamic to the euro zone crisis, where bond market pressure was instrumental in forcing policymakers to act.

Republican lawmakers rejected a proposal on Thursday by their leader, House of Representatives Speaker John Boehner, designed to extract concessions from President Barack Obama.

It threw into disarray attempts to head off $600 billion worth of tax hikes and spending cuts that could push the U.S. economy into recession.

The dollar climbed versus the euro, stocks slid from Tokyo to London and safe haven government bonds rose but in only muted fashion, indicating a continued belief that a deal will be done.

Is this sensible or complacent?

Jeffrey Rosenberg, chief investment strategist for fixed income at BlackRock, said the only approach was to "hope for the best, but plan for the worst".

"Given the much greater downside from a fiscal cliff failure than upside from success, we continue to maintain our tactical defensive positioning," Rosenberg said.

If differences between Republicans and Democrats cannot be bridged, the dollar -- counter intuitively to the layman's eye -- would attract safe haven flows as the world's reserve currency. The yen could do even better despite the new Japanese government's intent on more forceful monetary and fiscal easing.

"The dollar goes up when people get more nervous because the reflex in the market is to assume it's a safe haven, there's very little consideration given to the nature of the crisis," said Daragh Maher, FX strategist at HSBC.

"If the U.S. is heading towards recession it's not good for anyone, therefore if I have to hold something I may as well hold the dollar. That's how the sequence of logic goes."

Obama and Boehner aim to reach a deal before the New Year, when taxes will automatically rise for nearly all Americans and the government will have to scale back spending on domestic and military programs. The politicians are now in recess until at least December 27.

"The time left to seal a deal is limited," said Kit Juckes at Societe Generale in London.

There is, however, good reason not to panic since the term "fiscal cliff" is somewhat misleading. America will not crash off it on January 1. The tightening process will be more gradual.

The head of G10 FX Strategy at one bank in London said it was much more of a slope than a cliff. "The market's working assumption has been all along that it's going to go right down to the wire, and then they're going to cut a deal."

Hong Hao, Bank of Communications International Securities' chief equity strategist in Hong Kong, said: "If I were a fund manager, I would be looking to lock in gains and going off for the holidays. The U.S. will eventually come to a deal, maybe just not by their self-imposed deadline."

NO BOND PRESSURE

As with the euro debt crisis, the markets could offer a natural check and balance -- if their reaction turns savage, it might pressure a divided Washington to come together.

The difference is that, as with the dollar, U.S. government bonds are viewed as a harbor from risk, so the bond market pressure brought to bear on the euro zone is unlikely to be replicated in this case.

"Although trading at all-time lows, treasury yields could benefit both from renewed equity volatility and the short-term economics after any resolution," said Edward Smith, global strategist at Collins Stewart Wealth Management.

Unlike the euro zone periphery, shunning U.S. assets is not really an option, not least because global markets tend to correlate closely with Wall Street anyway.

For Juckes, the latest standoff in Washington could go two ways: The weakening of Boehner's position could strengthen Obama's hand, particularly since he has already given ground. Alternatively, the Republicans may now be so divided that they cannot back any sort of deal that raises taxes on the wealthier.

The optimists would buy equities and the euro on any dip, he said. "(They) will look at the improving tone to U.S. data and at the vast amount of money that needs investing."

If the glass-half-full view prevails and the world economy starts looking up, Reuters asset allocation polls show major investors are looking to areas that underperformed this year -- notably the Chinese stock market, one of the few major bourses in the red for 2012.

After two years in which the stock markets of the emerging giants underperformed, Russia and Brazil also have backers.

For now, most investors seem to be hoping for the best rather than altering their strategies.

"If it turns out that there's a poor agreement delaying a number of issues until the spring but skating away from the immediate catastrophe of January, or no agreement at all, that clearly is not priced into market expectations," said Andrew Milligan, head of global strategy at Standard Life Investments, which has 163.4 billion pounds of assets under management.

"I think (a lack of agreement) would encourage people even more to go into the dividend yield type stocks ... And clearly the stocks that are more associated with global trade would be the ones that investors would be pulling back from," he said.

(Reporting by Sinead Cruise, Sujata Rao, Nia Williams, Tricia Wright, Richard Hubbard and Clement Tan. Editing by Jeremy Gaunt.)

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