Mellanox Technologies Ltd. (MLNX) dropped the most since December, narrowing the gap with New York-traded shares after Stifel Nicolaus & Co. cut its recommendation on the stock and Intel Corp. reduced its sales forecast.
The maker of technology used to transfer and store data plunged 7.5 percent to 442.9 shekels, or the equivalent of $111.44, at 1:23 p.m. in Tel Aviv. The New York shares closed at $110.85 Sept. 7. Mellanox was the worst performer on the TA-25 benchmark index after leading declines on the Bloomberg Israel- US Equity Index (ISRA25BN) in New York.
Stifel cut its recommendation on Mellanox to hold from buy, saying the Yokneam Elit, Israel-based company may see slower demand for its products. The current price reflects a fair valuation, it said. Intel Corp. (INTC), the world’s largest semiconductor maker, reduced its third-quarter sales forecast, citing declining demand for personal computers from corporate customers in a weakening economy.
“The big move is because of the compounding effect of the Stifel downgrade and news from Intel,” Brian Freed, an analyst at Wunderlich Securities Inc., said by phone from Denver on Sept. 7. “Intel is a bellwether in the semiconductor industry and you probably have people wanting to trim their exposure in the sector.”

Intel Outlook 

Intel agreed to buy QLogic Corp. (QLGC)’s InfiniBand business for $125 million on Jan. 23 and in April said it will spend $140 million to acquire Cray Inc. (CRAY)’s technology to connect server chips. The California company accounts for 2 percent of Mellanox revenues, according to data compiled by Bloomberg.
Sales in the third quarter will reach $12.9 billion to $13.5 billion, down from a prior projection of $13.8 billion to $14.8 billion, Intel said in a Sept. 7 statement. Analysts had estimated sales of $14.2 billion on average, according to data compiled by Bloomberg.
Mellanox’s Israeli shares, which reached a record on Sept. 5, have more than tripled this year, surging 257 percent, the biggest jump in the TA-25 Index. The company has a market value 17.6 billion shekels ($4.4 billion). Mellanox’s reported revenue beat analysts’ estimates in each quarter since it went public in 2007.
“The current valuation reflects an interesting entry point,” said Jonathan Kreizman, an analyst at Clal Finance Batucha Brokerage Ltd. in Tel Aviv.
Mellanox has benefited from demand for its InfiniBand technology, which is used in high-end computing and data centers.
News

Payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down by Americans leaving the labor force, boosting the odds of additional Federal Reserve easing to spur a faltering recovery.
The economy added 96,000 workers after a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. The jobless rate fell to 8.1 percent.
Treasuries and gold rose on bets the figures make it more likely Fed policy makers will expand record monetary stimulus next week after Chairman Ben S. Bernanke called unemployment a “grave concern.” The report dealt a blow to President Barack Obama one day after he accepted the Democratic Party’s nomination for a second term.
“This is definitely a setback for the labor market and the economy,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and former economist for the Fed. “This clearly validates Bernanke’s concern. We have Europe, the fiscal cliff, and it is a generally cautious business environment.”
The yield on the 10-year Treasury note, which moves inversely to price, fell one basis point to 1.67 percent. Gold futures for December delivery climbed 2 percent to $1,740.50 an ounce, a six-month high. The Standard & Poor’s 500 Index advanced 0.4 percent to 1,437.92 at the close of trading in New York, its highest level since January 2008.
 News

The euro rose against most of its 16 major peers after two central bank officials said European Central Bank President Mario Draghi will announce unlimited sterilized bond buying to quell the region’s debt crisis.
The 17-nation currency climbed to a two-month high against the dollar last week amid optimism Draghi would announce additional monetary stimulus at tomorrow’s ECB meeting. Australia’s currency dropped to a seven-week low after the economy expanded less than forecast. Norway’s krone fell after manufacturing contracted for a third month amid dwindling demand from Europe. Canada’s dollar remained lower after the nation’s central bank kept its interest-rate target unchanged.
“Unlimited and sterilized sounds good because it shows they’re willing to support these sovereigns,” said Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York. “Draghi talked about bond buying at the last meeting, so there has been a lot of optimism priced in and the euro has already moved higher. It could be buy-the-rumor, sell- the-fact.”
The euro rose 0.3 percent to $1.2598 at 9:13 a.m. New York time, after falling as much as 0.5 percent. It reached $1.2638 on Aug. 31, the strongest since July 2. The shared currency gained 0.3 percent to 98.82 yen. Japan’s currency was little changed at 78.42 per dollar.
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That’s because trading on Wall Street relies on borrowed money, or leverage, that can be obtained cheaply as long as the traders belong to a conglomerate such as Bank of America Corp., JPMorgan Chase & Co.  or Citigroup that gets federally insured deposits. Jefferies Group Inc. (JEF), a securities firm that isn’t part of a bank and can’t turn to the Federal Reserve for help, currently is charged more to borrow in the credit markets.
“If you divorce them from the mother ship, you’d also be divorcing them from the government at the same time, and that’s where the subsidy is,” Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said in a telephone interview. “The funding advantage is the key.”
With stock prices at or below liquidation value, Wall Street’s biggest banks are fending off calls to break up from stockholders, analysts and industry veterans including Weill. The firms are too complex to manage, over-burdened by regulation, and a risk to taxpayers, their critics say.
Financial companies have sold or spun off units to improve shareholder returns. Under Weill’s leadership, Citigroup sold shares of Travelers Property Casualty Corp. (TRV) to the public in 2002. American Express Co. (AXP) divested most of Shearson in 1993 and spun off Lehman Brothers a year later. What’s different today is that securities firms, such as Bank of America’s Merrill Lynch, are benefiting from a funding discount.

Failed Model

The 2008 collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc., as well as last year’s bankruptcy of MF Global Holdings Ltd., taught investors that securities firms not attached to banks are riskier than they once acknowledged. Merrill Lynch & Co. agreed to sell itself to Bank of America the same day Lehman declared bankruptcy. A week later Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) converted to bank holding companies that are regulated by the Fed.
Breaking up today’s banking conglomerates would mean restoring the old model of financing securities firms in the bond markets, which failed in 2008. Without Bank of America’s $1.04 trillion of deposits -- about 80 percent of them federally insured, according to Jerry Dubrowski, a company spokesman -- Merrill Lynch would have to depend again on capital markets to fund trading and back up derivatives
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The BAK Basel Institute, Bank Sarasin, Zuercher Kantonalbank,  and the State Secretariat for Economic Affairs might lower their 2012 forecasts after a government report today showed that GDP fell 0.1 percent from the first quarter, when it rose 0.5 percent, less than the 0.7 percent previously reported. That’s the first drop since the third quarter of 2011, when the Swiss National Bank imposed a franc ceiling to help protect the economy.
SNB President Thomas Jordan yesterday reiterated his commitment to defend the franc ceiling with the “utmost determination” amid signs the economy is faltering as the euro area’s deepening slump and waning global growth erode export demand. Bruno Parnisari, head of the state secretariat’s economic policy, said in an interview the government may need to cut its 2012 outlook in new projections on Sept. 18.
“The risk for the full-year forecast has increased,” Parnisari said by telephone from Bern. The June forecast of 1.4 percent growth “seems a little bit optimistic at this stage. Up to August, we don’t have any clear signs of economic improvement.”

SNB Ceiling

The franc traded at 1.2010 against the euro at 11:52 a.m. in Zurich, little changed on the day. It was at 95.31 centimes versus the dollar. The benchmark Swiss Market Index dropped for the first time in three days, declining 0.7 percent.
Economists had forecast growth of 0.2 percent in the second quarter, the median of 16 estimates in a Bloomberg News survey showed. From a year earlier, GDP rose 0.5 percent, less than the 1.6 percent economists had expected. First-quarter annual GDP growth was revised to 1.2 percent from 2 percent.
The third quarter of 2011 was also revised lower to show a contraction, followed by an expansion of 0.4 percent in the subsequent three months, suggesting the franc ceiling of 1.20 versus the euro introduced in September to stem a surge in the currency to a record helped stabilize the economy.
“Switzerland has weathered the crisis relatively well, but not as well as previously thought,” said Alexis Koerber, a senior economist at the BAK Basel Institute, which will lower its 2012 growth forecast from 1.5 percent. “It could be difficult” to reach growth of more than 1 percent, he said.

European Confidence

Swiss gross fixed capital formation including construction spending stalled in the second quarter after rising 0.2 percent in the previous three months, the GDP data showed. Exports of goods excluding precious metals, jewelry and antiques dropped 0.7 percent after falling 0.5 percent in the first quarter.
In the 17-member euro area, the destination for about two thirds of Swiss exports, the economic slump is deepening with at least five nations in recession and Germany showing increasing signs of slowdown. Euro-area manufacturing output shrank more than initially estimated in August, economic confidence slumped and German unemployment increased.
The European Central Bank forecast in June that the euro- area economy will shrink 0.1 percent this year. The central bank will publish new forecasts after a meeting of policy makers on Sept

he performance of Santander’s Mexican bank contrasts with Spain. Photographer: Susana Gonzalez/Bloomberg
Potential investors must consider the future capital needs of Santander as it absorbs mounting real estate losses in Spain and meets tougher regulatory requirements, said Bill Rudman, who helps manage about $250 million of emerging market shares at Blackfriars Asset Management in London. One risk is that Santander will sell more shares in Mexico as it did in Chile last November.
“Santander’s problems in Spain are absolutely an issue for holders of stock in its units overseas,” said Rudman, who already holds shares in the bank’s Brazilian (SANB11) unit. “The question of when they might sell the next 10 percent is always going to be on people’s minds.”

Even so, Rudman said investors may welcome the sale because of a scarcity of listed banks in Mexico since Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA) bought out shareholders of Grupo Financiero Bancomer SA in 2004 and New York-based Citigroup Inc. (C) acquired Grupo Financiero Banamex Accival SA in 2001.
“From my point of view, Mexico certainly needs more bank listings,” said Rudman, who owns shares in Grupo Financiero Banorte SAB, the No. 3 Mexican bank by outstanding loans.
Santander Chairman Emilio Botin will discuss the sale plans at a news conference at 9.30 a.m. in Mexico City.
“I am sure this transaction will mark a new stage in the history of our bank in Mexico and will strengthen our plans for growth and development in the country,” Botin, 77, said in a statement today.
Santander already has units in countries including Brazil, Chile and Poland that trade on the stock market, as well as its Banco Espanol de Credito SA consumer bank in Spain. The bank plans to have all its major subsidiaries traded within five years, Botin said today.
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With the euro facing one of the most pivotal months in its 13-year history, traders and strategists are more divided than at any time since 2011 over whether officials will be able to keep the currency from tumbling.
At about $1.26, the 17-nation euro is 3.3 percent above the $1.22 median year-end estimate of more than 50 analysts compiled by Bloomberg, after the gap expanded to 3.8 percent last week. The last time the euro exceeded the consensus by that much was in July 2011, and it tumbled 9.4 percent in the next 10 weeks.
While traders are optimistic that European Central Bank President Mario Draghi will bolster confidence in the euro with his plan to buy bonds of Spain and Italy, analysts said those same measures are more likely to debase the currency. After the ECB meets this week, Germany’s Constitutional Court will rule on the legality of a bailout fund, Greece’s institutional creditors will decide if the country merits access to aid that would help it stay in the European Union, and Dutch citizens get to vote on parties including a group that wants to exit the bloc.
“The ECB’s approach is obviously an easing approach,” Hans Redeker, head of currency strategy at Morgan Stanley in London, said in a telephone interview on Aug. 28. “The central bank is printing money and increasing the supply of euros, and this implies that the currency will stay weak.”

Rising Euro

Redeker said the euro will probably drop 5.6 percent to $1.19 by year-end. An advance to between $1.27 and $1.30 would provide a good level at which to sell, he said.
The euro rose 0.1 percent to $1.2603 at 10:32 a.m. London time after reaching $1.2638 on Aug. 31, the strongest level since July 2. Against a basket of developed market peers, Europe’s shared currency appreciated 0.4 percent last week, according to Bloomberg Correlation-Weighted Indexes, bringing the monthly gain for August to 1 percent, its first advance since March.
Not since July 26, 2011, when the difference was 5.6 U.S. cents, has the euro exceeded year-end 2012 estimates by as much as it did on Aug. 28. The currency declined from a close at $1.4511 that day to a low of $1.3146 on Oct 4. As recently as Aug. 2, traders were more bearish than strategists.
“The longer-term forces acting on the euro still suggest it is probably going to remain an underperformer,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in a telephone interview on Aug. 29. “We are still looking at a euro-zone economy that is in recession, compared with the U.S., which is growing slowly.”

Diverging Economies

The euro may climb to as high as $1.30 in late October as Draghi’s bond-purchase program stabilizes Europe’s financial markets, and then depreciate to $1.20 in a year as investors focus more on the economic underperformance relative to the U.S. and the need for more economic stimulus to boost growth, said Bennenbroek, whose company was the most-accurate forecaster in a Bloomberg Rankings survey for the six quarters through June.
U.S. gross domestic product will expand 2.2 percent this year, according to the median of 79 estimates compiled by Bloomberg. The euro-area economy will contract 0.4 percent, a separate set of forecasts shows.
Draghi gave the currency a boost on July 26 when he said he would do “whatever it takes” to preserve the monetary union. He backed that up on Aug. 2, saying the central bank may buy short-maturity notes issued by euro-area nations, as long as the region’s bailout fund makes purchases directly from the countries’ treasuries and ties the aid to conditions.
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The euro fluctuated versus the dollar and the yen amid speculation European Central Bank President Mario Draghi will announce measures as soon as this week to ease the region’s debt crisis.
The 17-nation currency traded at almost the strongest in two months versus the dollar before erasing gains as global stocks declined. A member of the European Parliament said yesterday Draghi told lawmakers he’d be comfortable purchasing debt with maturities as longs as about three years. Australia’s dollar climbed from a six-week low against the greenback after the Reserve Bank of Australia refrained from cutting the developed world’s highest benchmark rate.
“There is still hesitance in the market about how much the ECB can actually announce, which is why the euro is fighting these rallies,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “The example of the Draghi story, or leak from a closed meeting with EU lawmakers, shows there is still scope for rumors, so the market is trying to position ahead of Thursday.”
The euro fell 0.2 percent to $1.2573 at 9:24 a.m. New York time, after climbing to $1.2638 on Aug. 31, the strongest since July 2. The shared currency was little changed at 98.55 yen, after appreciating to 99.03 yen on Aug. 31, the strongest since Aug. 21. The yen fell 0.1 percent to 78.37 per dollar.

Risk Markets

The Stoxx Europe 600 Index of shares fell 0.6 percent while futures on the Standard & Poor’s 500 Index (SXXP) declined 0.1 percent.
The euro has dropped 4.1 percent this year, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen declined 3.1 percent, and the dollar
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