news blog from Annabelle

* Biggest shift for Morgan Stanley Smith Barney since 2009By Jessica ToonkelOct 11 (Reuters) - Clients of some big Wall Street firms have probably missed out on sharp increases in stocks over the last few days. Firms that were cautiously optimistic or bullish through the summer selloff have turned bearish just as the market seems to be clawing back.Between Sept. 18 and Oct. 6, several Wall Street firms who mostly stood pat through months of market volatility finally decided enough is enough.Morgan Stanley Smith Barney, Wells Fargo Advisors and UBS have scaled back their portfolios’ exposure to equities in the past three-and-a-half weeks, shifting away from more unpredictable stocks and into the safety of fixed income and cash.Meanwhile, the S&P 500 Index had its biggest rally in nearly six weeks on Monday.But that hasn’t swayed investment officers at the firms. They don’t believe governments in Europe and the U.S. are doing enough to address the crushing debt threatening their financial systems.Investment managers said they believe the ongoing uncertainty and wild market swings caused by the expanding euro zone debt crisis and a U.S. debt downgrade are here to stay. What’s more, the volatility suggests to some investment gurus that another recession is increasingly likely.European leaders have been meeting for months to address the debt crisis plaguing the continent. What little progress there has been is not happening fast enough, said Jeff Applegate, chief investment officer at Morgan Stanley Smith Barney, the brokerage arm of Morgan Stanley .European Central Bank president Jean-Claude Trichet warned on Tuesday that the crisis had “reached a systemic dimension.”At the same time, in the U.S. the government has been unable to get much accomplished, Applegate said. For example, it’s been weeks since President Obama submitted his fiscal stimulus package, and there hasn’t been any action in Congress.”You have seen a lot of change since August,” Applegate said. “And the policy responses have not been been swift enough or large enough.”On Oct. 6, MSSB shifted the allocation of its portfolios from overweight on global equities, commodities and REITs to underweight and from underweight on global cash to overweight. The firm also shifted its allocation on global bonds from underweight to overweight.”This is a big shift for us, the biggest we have made since April 2009,” Applegate said. At that time MSSB shifted to overweight equities as the markets rebounded after the financial crisis.One major factor in MSSB’s decision to cut back on risk was a Sept. 21 report by the Economic Cycle Research Institute predicting a recession. ECRI has successfully predicted the last four U.S. recessions.On Oct. 1, Wells Fargo Advisors, the brokerage arm of Wells Fargo & Co. went from neutral to underweight on its equity exposure in its cyclical asset allocation portfolios.Wells, which reevaluates its portfolios on a quarterly basis, first reduced its equity exposure slightly in April, but cut exposure even further this month due to fears about the European debt crisis, said Stuart Freeman, chief equity strategist at Wells Fargo Advisors.The firm in April shifted its moderate growth & income portfolio to 58 percent in equities from 63 percent. This month, the fund decreased its share of equities again, to 45 percent.Wells Fargo Advisors now predicts a 35 percent chance for a U.S. recession, up from a 20 percent chance four months ago, Freeman said. The chances of a recession in Europe, according to the firm: 40 percent, up from 25 percent a few months ago.Similarly, UBS shifted its portfolios from neutral to underweight equities on Sept. 18.”We felt that the fundamental issues affecting the markets had not been resolved,” said Mike Ryan, head of research for wealth management at UBS. Ryan doesn’t think the United States is necessarily headed for a recession.”We think you will see choppy, sluggish growth,” he said.Of course, not every firm is scaling back on equities. Equity strategists at Bank of America Merrill Lynch — whose well-known logo is a bull — are maintaining their overweight position on equities, albeit a “moderate” overweight position, said Kate Moore, global equity strategist at Bank of America Merrill Lynch.She said that too many investors have held too small a position in equities since the market crash of 2008 and missed the rally. She believes Europe is closer to coming up with a solution for its problems.”We are seeing a willingness of policy makers in Europe to put things together,” she said.Bank of America Merrill Lynch’s economists forecast U.S. GDP growth of 2.5 percent for the third quarter, she said.”That’s a far cry from the two quarters of negative GDP growth that define a recession,” Moore said.

“We anticipate there is a high possibility of finding deposits in the area, which is why Noble is there,” Energy Minister Praxoulla Antoniadou said.Turkey, the only country to recognize the breakaway Turkish Cypriot state in northern Cyprus, says the internationally recognized Greek Cypriot government has no authority to explore for hydrocarbons until the island’s division has been resolved.Noble started its deepwater drilling some 100 miles south of Cyprus in September and aims to reach a depth of 4,000 metres beneath the sea bed. By Tuesday, it was at a depth of 2,200 metres.Ankara sent a research vessel with a military escort to the region last month, saying it too planned to launch exploratory work unless the Greek Cypriots stopped.Antoniadou was non-committal on reports that drilling had already shown significant signs of gas. Even if traces of gas were detected, it did not mean a deposit had been found, she said.”At the moment we are only halfway to meeting our drilling target; we are now at 2,200 metres below the seabed, our target is to reach 4,000 metres, which is where we have expectations that there could possibly be hydrocarbon deposits,” said Antoniadou, who is commerce, industry and tourism minister.The Phileleftheros daily reported that gas had already emerged, and that the deposit was expected to exceed Cypriot officials’ initial estimate of up to 10 trillion cubic feet (tcf) of natural gas.Leviathan, an Israeli field close to the Cypriot prospect, holds reserves estimated at 16 tcf and has been described as the world’s biggest find of the last decade.Cyprus has been divided since Turkey invaded the northeast in 1974 in reaction to a Greek-inspired coup.Turkey says the Greek Cypriots, who are a signatory to the U.N. Convention of the Law of the Sea and are carrying out research in a designated maritime zone in accordance with the accord, have no jurisdiction to search for hydrocarbon reserves as long as the island’s division remains unresolved.

The group has always denied the suggestion, and its ‘FT in education’ initiative announced on Tuesday could make a sale even less likely.Pearson’s educational publishers will be able to search and republish more than 100,000 FT articles, special reports and features, the company said.The FT’s Chief Executive John Ridding said the newspaper’s coverage of global business, finance and politics had been long valued by leading business schools and universities.”This new approach widens Pearson’s access to our quality journalism so it reaches additional educators and students, opening the FT up to new readers and subscribers and creating unique value for Pearson’s customers across the globe,” he said.The new licence and database will initially be used by Pearson’s UK education units, the company said.Pearson, which also owns book publisher Penguin, has focused on growing its education businesses, both in North America and internationally, in the last 10 years.The businesses accounted for 75 percent of the group’s operating profit in 2010, up from 35 percent in 1999, whereas the contribution of the Financial Times fell to 7 percent from 25 percent over the same period.