By Abigail Moses
Aug. 31 (Bloomberg) -- Virgin Atlantic Airways Ltd. owner Richard Branson sees ``considerable logic'' in his airline merging with rival U.K. carrier BMI, he said in an interview with the Sunday Telegraph.
The combined airlines would create a more formidable competitor to British Airways, he said in the report. Virgin isn't currently in talks with BMI or BMI's second-biggest shareholder Lufthansa, the paper said, citing unidentified people close to the company.
Virgin has hired Credit Suisse Group AG to prepare the company for its role in an expected consolidation of the airline industry, the paper said, citing the people close to the company.
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
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Sunday, August 31, 2008
Taylor Wimpey Seeks New Institutional Investors, Telegraph Says
By Abigail Moses
Aug. 31 (Bloomberg) -- Taylor Wimpey Plc will this week launch a campaign among institutional investors to broaden its shareholder base in order to raise capital, the Sunday Telegraphreported, without saying where it got the information.
The London-based homebuilder, which last week reported a 1.5 billion-pound ($2.73 billion) pretax loss and in July failed to raise 500 million pounds, has lined up meetings with new institutions to persuade them to invest, the newspaper said. Taylor Wimpey was told by current investors it needed new shareholders to complete potential fundraising, the newspaper reported.
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
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Aug. 31 (Bloomberg) -- Taylor Wimpey Plc will this week launch a campaign among institutional investors to broaden its shareholder base in order to raise capital, the Sunday Telegraphreported, without saying where it got the information.
The London-based homebuilder, which last week reported a 1.5 billion-pound ($2.73 billion) pretax loss and in July failed to raise 500 million pounds, has lined up meetings with new institutions to persuade them to invest, the newspaper said. Taylor Wimpey was told by current investors it needed new shareholders to complete potential fundraising, the newspaper reported.
To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net
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Abu Dhabi Commercial Bank to Offer Islamic Banking Services
By Arif Sharif
Aug. 31 (Bloomberg) -- Abu Dhabi Commercial Bank PJSC, the United Arab Emirates' third-biggest bank by assets, said it had begun offering Islamic banking services to customers.
The services that comply with Islam's ban on interest will be offered through ADCB Meethaq, its new Islamic banking unit, the Abu Dhabi-based bank said in an e-mail statement today.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Aug. 31 (Bloomberg) -- Abu Dhabi Commercial Bank PJSC, the United Arab Emirates' third-biggest bank by assets, said it had begun offering Islamic banking services to customers.
The services that comply with Islam's ban on interest will be offered through ADCB Meethaq, its new Islamic banking unit, the Abu Dhabi-based bank said in an e-mail statement today.
To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net
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Global Investment House Seeks Buyout in London, Malaysia Permit
By Zainab Fattah and Arif Sharif
Aug. 31 (Bloomberg) -- Global Investment House KSCC, Kuwait's biggest investment bank, is seeking to buy wealth management and brokerage companies in London and plans to apply for an investment banking license in Malaysia.
The acquisitions in London may range in size from $200 million to $250 million and help it broaden its services, Maha Khalid Al-Ghunaim, Global's chairwoman and managing director, said in a phone interview from Kuwait today.
London and Malaysia ``are very important markets for us to consider today'' and the company is already ``taking the first steps to apply'' for an investment banking and asset management license in Malaysia, she added.
Global announced last week it may buy 20 percent of National Bank of Umm Al Qaiwain PSC to expand into the United Arab Emirates by purchasing 2.36 billion dirhams ($643 million) of convertible bonds. Global raised $1.15 billion by selling global depositary receipts in May.
Global has just started a hedge fund to invest in India and is in the process of closing the second part of a Gulf real-estate fund, Al-Ghunaim said. It will open a fifth part of a private equity fund by the end of the year.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net. Arif Sharif in Dubai at asharif2@bloomberg.net
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Aug. 31 (Bloomberg) -- Global Investment House KSCC, Kuwait's biggest investment bank, is seeking to buy wealth management and brokerage companies in London and plans to apply for an investment banking license in Malaysia.
The acquisitions in London may range in size from $200 million to $250 million and help it broaden its services, Maha Khalid Al-Ghunaim, Global's chairwoman and managing director, said in a phone interview from Kuwait today.
London and Malaysia ``are very important markets for us to consider today'' and the company is already ``taking the first steps to apply'' for an investment banking and asset management license in Malaysia, she added.
Global announced last week it may buy 20 percent of National Bank of Umm Al Qaiwain PSC to expand into the United Arab Emirates by purchasing 2.36 billion dirhams ($643 million) of convertible bonds. Global raised $1.15 billion by selling global depositary receipts in May.
Global has just started a hedge fund to invest in India and is in the process of closing the second part of a Gulf real-estate fund, Al-Ghunaim said. It will open a fifth part of a private equity fund by the end of the year.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net. Arif Sharif in Dubai at asharif2@bloomberg.net
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Persian Gulf Shares Fall, Led by National Bank of Oman, Emaar
By Zainab Fattah
Aug. 31 (Bloomberg) -- Persian Gulf shares declined on speculation foreign investors are pulling out of regional markets, including Dubai and Oman.
National Bank of Oman Ltd., Oman's second-biggest bank by market value, dropped to its lowest in almost a year. Emaar Properties PJSC fell the most in three weeks. Oman's Muscat Securities Market 30 Index lost 2.3 percent to 9,493.75, its lowest close since Feb. 12. The Dubai Financial Market General Index decreased 0.6 percent, while the Kuwait Stock Exchange Index slipped 0.4 percent, falling for a fifth day.
``Foreign investors have affected emerging markets because they are selling everywhere they can exit to protect their home domain,'' Maha al-Ghunaim, Managing Director at Global Investment House KSCC, said in the telephone interview today. ``Ultimately things can only get brighter since the fundamentals of the Gulf region remain positive.''
Foreign investors were net sellers of 549 million dirhams ($149 million) of securities on the Dubai Financial Market PJSC, in the week ending Aug. 28. Non-citizens of the United Arab Emirates bought 1.11 billion dirhams of stocks on the exchange and sold 1.66 billion dirhams of securities, the exchange said in an e-mailed statement yesterday.
National Bank of Oman slid 3.9 percent to 0.537 rials, its lowest close since Sept. 25. The lender's shares dropped 15 percent this month.
Emaar Drops
Emaar slid 3.4 percent to 9.11 dirhams. The Middle East's largest real-estate developer had its biggest one-day drop since Aug. 11. The stock has lost 39 percent of its value since the start of the year. Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, retreated 2.3 percent today to 1,720 fils.
The Abu Dhabi Securities Exchange General Index decreased less than 0.1 percent, while the Bahrain All Share Index retreated 0.2 percent.
In Qatar, the Doha Securities Market Index gained 1.4 percent, while Saudi Arabia's Tadawul All Share Index rose for the first time in three days, adding 0.5 percent.
``Valuations in the Gulf are extremely attractive and domestic investors are taking this period of relative calm to build positions,'' Rami Sidani, head of Middle East and North Africa investments at Schroders Investment Management Ltd. in Dubai, said in a telephone interview. ``Also I expect foreign liquidity to start flowing into Saudi Arabia's market.''
Qatar
Qatar's measure trades at 14 times estimated profit, while Dubai's index trades at an average of 11 times estimated earnings, according to Bloomberg data. That compares with a multiple of 15 for the Standard and Poor's 500 Index.
Saudi Arabia's Capital Market Authority on Aug. 20 granted foreign investors indirect access to Saudi stocks by allowing them to buy local shares through Saudi partners. The measure, known as swap agreements, is aimed at transferring the economic benefits of Saudi companies, while the local resident retains legal ownership of the shares.
Samba Financial Group, Saudi Arabia's second-largest bank by market value, gained 1.3 percent to 77 riyals. Industries Qatar jumped 4.5 percent to 168.5 riyals, its biggest gain since April 17.
Hayat Communications Co. advanced 3.5 percent to 445 fils. The construction company that builds telecom infrastructure plans to start a new company in Saudi Arabia with capital of 10 million riyals ($2.67 million), according to a filing to the Kuwaiti bourse today. Hayat will own 50 percent of the new company's stock.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
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Aug. 31 (Bloomberg) -- Persian Gulf shares declined on speculation foreign investors are pulling out of regional markets, including Dubai and Oman.
National Bank of Oman Ltd., Oman's second-biggest bank by market value, dropped to its lowest in almost a year. Emaar Properties PJSC fell the most in three weeks. Oman's Muscat Securities Market 30 Index lost 2.3 percent to 9,493.75, its lowest close since Feb. 12. The Dubai Financial Market General Index decreased 0.6 percent, while the Kuwait Stock Exchange Index slipped 0.4 percent, falling for a fifth day.
``Foreign investors have affected emerging markets because they are selling everywhere they can exit to protect their home domain,'' Maha al-Ghunaim, Managing Director at Global Investment House KSCC, said in the telephone interview today. ``Ultimately things can only get brighter since the fundamentals of the Gulf region remain positive.''
Foreign investors were net sellers of 549 million dirhams ($149 million) of securities on the Dubai Financial Market PJSC, in the week ending Aug. 28. Non-citizens of the United Arab Emirates bought 1.11 billion dirhams of stocks on the exchange and sold 1.66 billion dirhams of securities, the exchange said in an e-mailed statement yesterday.
National Bank of Oman slid 3.9 percent to 0.537 rials, its lowest close since Sept. 25. The lender's shares dropped 15 percent this month.
Emaar Drops
Emaar slid 3.4 percent to 9.11 dirhams. The Middle East's largest real-estate developer had its biggest one-day drop since Aug. 11. The stock has lost 39 percent of its value since the start of the year. Zain, the Kuwaiti phone company with operations in 22 Middle Eastern and African countries, retreated 2.3 percent today to 1,720 fils.
The Abu Dhabi Securities Exchange General Index decreased less than 0.1 percent, while the Bahrain All Share Index retreated 0.2 percent.
In Qatar, the Doha Securities Market Index gained 1.4 percent, while Saudi Arabia's Tadawul All Share Index rose for the first time in three days, adding 0.5 percent.
``Valuations in the Gulf are extremely attractive and domestic investors are taking this period of relative calm to build positions,'' Rami Sidani, head of Middle East and North Africa investments at Schroders Investment Management Ltd. in Dubai, said in a telephone interview. ``Also I expect foreign liquidity to start flowing into Saudi Arabia's market.''
Qatar
Qatar's measure trades at 14 times estimated profit, while Dubai's index trades at an average of 11 times estimated earnings, according to Bloomberg data. That compares with a multiple of 15 for the Standard and Poor's 500 Index.
Saudi Arabia's Capital Market Authority on Aug. 20 granted foreign investors indirect access to Saudi stocks by allowing them to buy local shares through Saudi partners. The measure, known as swap agreements, is aimed at transferring the economic benefits of Saudi companies, while the local resident retains legal ownership of the shares.
Samba Financial Group, Saudi Arabia's second-largest bank by market value, gained 1.3 percent to 77 riyals. Industries Qatar jumped 4.5 percent to 168.5 riyals, its biggest gain since April 17.
Hayat Communications Co. advanced 3.5 percent to 445 fils. The construction company that builds telecom infrastructure plans to start a new company in Saudi Arabia with capital of 10 million riyals ($2.67 million), according to a filing to the Kuwaiti bourse today. Hayat will own 50 percent of the new company's stock.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
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OPEC Unlikely to Change Quotas, Libyan Minister Says
By Ayesha Daya and Ladane Nasseri
Aug. 31 (Bloomberg) -- OPEC, supplier of about 40 percent of the world's oil, probably will leave production quotas unchanged when it meets Sept. 9 even if crude markets look ``oversupplied,'' Libya's oil minister said.
``If things stay as they are, with oil at $115, $116 a barrel, I don't think much will be done in the meeting,'' Shokri Ghanem said in a telephone interview today from Tripoli. ``If the market continues as it is, well-supplied, if not oversupplied, no action is needed.''
Crude oil, down 22 percent since it touched a record July 11, closed Friday at $115.46 a barrel on the New York Mercantile Exchange. Twelve nations in the 13-member Organization of Petroleum Exporting Countries have maintained an official output limit of 29.67 million barrels a day this year, and the group's meeting next month will review production levels before an increase in demand for winter heating fuel.
OPEC production surpassed its official quota as the group tried to temper a surge in prices, which still are up 57 percent in the past year and reached a peak of $147.27 a barrel on July 11. The 13 OPEC members produced 30.37 million barrels a day of oil in July, according to Bloomberg data, as the group's largest producer and de facto leader Saudi Arabia unilaterally raised output in June and July by 500,000 barrels a day.
Winter Demand
Oil prices may rise later this year because of the expected increase in demand during the Northern Hemisphere winter, Ghanem said. ``I don't think the economy will slow,'' he said. ``I think prices will go up this year as demand rises.''
The ``minimum'' suitable level for crude oil prices is $100 a barrel and prices will rise as demand increases during the winter months, Iran's Oil Minister Gholamhossein Nozari said today, according to the ministry's official news agency.
``Iran hopes that OPEC will defend the balance of the market,'' Mohammad Ali Khatibi, Iran's OPEC governor, told Bloomberg News in an interview in Tehran today. ``When oil prices are attractive, investment takes place, and if prices are on a decreasing course, investors will be hesitant.''
OPEC should leave production unchanged as there is plenty of oil in the market, Ecuador's Oil Minister Galo Chiriboga said Aug. 29. Venezuelan Oil and Energy Minister Rafael Ramirez said the day before that the group shouldn't increase production and is studying whether it will recommend an output cut.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Aug. 31 (Bloomberg) -- OPEC, supplier of about 40 percent of the world's oil, probably will leave production quotas unchanged when it meets Sept. 9 even if crude markets look ``oversupplied,'' Libya's oil minister said.
``If things stay as they are, with oil at $115, $116 a barrel, I don't think much will be done in the meeting,'' Shokri Ghanem said in a telephone interview today from Tripoli. ``If the market continues as it is, well-supplied, if not oversupplied, no action is needed.''
Crude oil, down 22 percent since it touched a record July 11, closed Friday at $115.46 a barrel on the New York Mercantile Exchange. Twelve nations in the 13-member Organization of Petroleum Exporting Countries have maintained an official output limit of 29.67 million barrels a day this year, and the group's meeting next month will review production levels before an increase in demand for winter heating fuel.
OPEC production surpassed its official quota as the group tried to temper a surge in prices, which still are up 57 percent in the past year and reached a peak of $147.27 a barrel on July 11. The 13 OPEC members produced 30.37 million barrels a day of oil in July, according to Bloomberg data, as the group's largest producer and de facto leader Saudi Arabia unilaterally raised output in June and July by 500,000 barrels a day.
Winter Demand
Oil prices may rise later this year because of the expected increase in demand during the Northern Hemisphere winter, Ghanem said. ``I don't think the economy will slow,'' he said. ``I think prices will go up this year as demand rises.''
The ``minimum'' suitable level for crude oil prices is $100 a barrel and prices will rise as demand increases during the winter months, Iran's Oil Minister Gholamhossein Nozari said today, according to the ministry's official news agency.
``Iran hopes that OPEC will defend the balance of the market,'' Mohammad Ali Khatibi, Iran's OPEC governor, told Bloomberg News in an interview in Tehran today. ``When oil prices are attractive, investment takes place, and if prices are on a decreasing course, investors will be hesitant.''
OPEC should leave production unchanged as there is plenty of oil in the market, Ecuador's Oil Minister Galo Chiriboga said Aug. 29. Venezuelan Oil and Energy Minister Rafael Ramirez said the day before that the group shouldn't increase production and is studying whether it will recommend an output cut.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Tosoh to Reduce Caustic Soda Output as Costs Rise, Nikkei Says
By Keiko Ujikane
Aug. 31 (Bloomberg) -- Tosoh Corp., a Japanese petrochemical maker, will cut production of caustic soda for the first time in 10 years to reduce costs, the Nikkei newspaper reported, without saying where it got the information.
The company will reduce output of the chemical, also known as sodium hydroxide and used as a base in manufacturing, from September, the newspaper said. Tosoh will cut its domestic production 15 percent from 1.37 million ton a year, Nikkei said.
The output reduction will help profits eroded by rising raw- material costs and declining shipments of by-products to China, the report said.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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Aug. 31 (Bloomberg) -- Tosoh Corp., a Japanese petrochemical maker, will cut production of caustic soda for the first time in 10 years to reduce costs, the Nikkei newspaper reported, without saying where it got the information.
The company will reduce output of the chemical, also known as sodium hydroxide and used as a base in manufacturing, from September, the newspaper said. Tosoh will cut its domestic production 15 percent from 1.37 million ton a year, Nikkei said.
The output reduction will help profits eroded by rising raw- material costs and declining shipments of by-products to China, the report said.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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Reliance Scraps Plan to Transfer Stake in Gas Field, Times Says
By Pratik Parija
Aug. 31 (Bloomberg) -- Reliance Industries Ltd. scraped a plan to transfer 80 percent of its share in its biggest gas field to four wholly owned units, the Economic Times reported, citing a letter sent to the oil ministry.
Reliance withdrew its application that sought permission to transfer the stake after raising funds required to develop the field, the report from Mumbai said. Reliance spokesman confirmed the development, the report said.
Reliance plans to spend $8 billion on the gas field, which may begin production by December.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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Aug. 31 (Bloomberg) -- Reliance Industries Ltd. scraped a plan to transfer 80 percent of its share in its biggest gas field to four wholly owned units, the Economic Times reported, citing a letter sent to the oil ministry.
Reliance withdrew its application that sought permission to transfer the stake after raising funds required to develop the field, the report from Mumbai said. Reliance spokesman confirmed the development, the report said.
Reliance plans to spend $8 billion on the gas field, which may begin production by December.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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Anil Ambani Gets Almost Same Pay as Brother Mukesh, PTI Reports
By Pratik Parija
Aug. 31 (Bloomberg) -- Anil Ambani, India's second-richest man, got total remuneration of 434.4 million rupees ($10 million) in the year ended March, compared with the 440 million rupees earned by elder brother Mukesh, Press Trust of India said.
Anil's compensation, received from his five group companies, including Reliance Communications Ltd., is 18 times the 24 million rupees he earned in 2007, the report said, citing annual reports of the companies.
Mukesh, India's richest man, received 304.6 million rupees in 2007 from Reliance Industries Ltd. and 247.7 million rupees in 2006. He didn't take any pay from the group's Reliance Petroleum Ltd. and Reliance Industrial Infrastructure Ltd., the report said.
Both got an equal salary of 210 million rupees from Reliance Industries before parting ways, Press Trust said.
The brothers split the Reliance Group in June 2005 after an ownership dispute in an agreement brokered by their mother, widow of founder Dhirubhai Ambani.
Mukesh is chairman of Reliance Industries Ltd., the nation's biggest company, and Anil is chairman of Reliance Communications, India's second-largest cellular phone operator. Anil also heads Reliance Infrastructure Ltd., the third-biggest utility, Reliance Capital Ltd., Reliance Power Ltd. and Reliance Natural Resources.
Mukesh Ambani, 51, is the world's fifth-richest man, with a personal fortune of $43 billion, according to Forbes. Anil, 49, is ranked sixth by the magazine, with $42 billion.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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Aug. 31 (Bloomberg) -- Anil Ambani, India's second-richest man, got total remuneration of 434.4 million rupees ($10 million) in the year ended March, compared with the 440 million rupees earned by elder brother Mukesh, Press Trust of India said.
Anil's compensation, received from his five group companies, including Reliance Communications Ltd., is 18 times the 24 million rupees he earned in 2007, the report said, citing annual reports of the companies.
Mukesh, India's richest man, received 304.6 million rupees in 2007 from Reliance Industries Ltd. and 247.7 million rupees in 2006. He didn't take any pay from the group's Reliance Petroleum Ltd. and Reliance Industrial Infrastructure Ltd., the report said.
Both got an equal salary of 210 million rupees from Reliance Industries before parting ways, Press Trust said.
The brothers split the Reliance Group in June 2005 after an ownership dispute in an agreement brokered by their mother, widow of founder Dhirubhai Ambani.
Mukesh is chairman of Reliance Industries Ltd., the nation's biggest company, and Anil is chairman of Reliance Communications, India's second-largest cellular phone operator. Anil also heads Reliance Infrastructure Ltd., the third-biggest utility, Reliance Capital Ltd., Reliance Power Ltd. and Reliance Natural Resources.
Mukesh Ambani, 51, is the world's fifth-richest man, with a personal fortune of $43 billion, according to Forbes. Anil, 49, is ranked sixth by the magazine, with $42 billion.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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Steel Authority to Quadruple Output by 2020, Press Trust Says
By Pratik Parija
Aug. 31 (Bloomberg) -- Steel Authority of India Ltd. plans to raise its annual hot metal production to 26.2 million metric tons by March 31, 2011, from 14.6 million tons currently, Press Trust of India said.
Output will be raised further to 60 million tons by 2020, the news agency said, citing from the company's annual report.
Steel Authority, the nation's second-biggest producer, spent 21.81 billion rupees ($496 million) of its own cash during the year ended March to enhance capacity, the report said.
The company has formed a joint venture for a 2.2 million ton cement plant that will use slag from the Bokaro steel mill as raw material. Production will begin by March 2010, the report said.
Steel Authority is looking for a partner for another cement plant at its facilities in Rourkela, the report said.
Slag, separated from metals in the process of smelting, is often used in the construction of roads.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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Aug. 31 (Bloomberg) -- Steel Authority of India Ltd. plans to raise its annual hot metal production to 26.2 million metric tons by March 31, 2011, from 14.6 million tons currently, Press Trust of India said.
Output will be raised further to 60 million tons by 2020, the news agency said, citing from the company's annual report.
Steel Authority, the nation's second-biggest producer, spent 21.81 billion rupees ($496 million) of its own cash during the year ended March to enhance capacity, the report said.
The company has formed a joint venture for a 2.2 million ton cement plant that will use slag from the Bokaro steel mill as raw material. Production will begin by March 2010, the report said.
Steel Authority is looking for a partner for another cement plant at its facilities in Rourkela, the report said.
Slag, separated from metals in the process of smelting, is often used in the construction of roads.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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ArcelorMittal, U.S. Steelworkers Reach Four-Year Pact
By [bn:PRSN=1] Nancy Kercheval []
Aug. 31 (Bloomberg) -- ArcelorMittal, the world's biggest steelmaker, and the union representing steelworkers at the company's U.S. plants reached a tentative four-year agreement yesterday after four months of talks.
About 14,000 production, maintenance and clerical employees represented by United Steelworkers at 14 ArcelorMittal plants in eight states voted Aug. 28 to authorize a strike if a contract wasn't reached by Sept. 1, the union said in an e-mail. The workers make up 4.5 percent of the global workforce of ArcelorMittal, according to the company's Web site.
``We believe that ratification of the proposed agreement is a major step toward raising the industry standard in wages, benefits and other contractual protections without sacrificing the long-term viability of ArcelorMittal in a competitive market,'' Steelworkers District 1 Director David McCall said in a statement issued by PR Newswire. The union declined to disclose provisions of the contract.
The agreement remains subject to ratification by the USW, which is expected to take about 30 days, ArcelorMittal spokesman Haroon Hassan in London said in an email.
``We believe that we have reached a positive outcome for all parties involved without disruption to our business operations,'' Michael Rippey, ArcelorMittal's president and chief executive officer of U.S. operations, in an e-mail.
The two sides have been negotiating since April. Points of disagreement included a proposed 39 percent increase in health- care premiums for retirees, the union said in an Aug. 26 letter urging members to approve a strike.
U.S. steel prices fell 2 percent in August, from a record the previous month, as customers rejected increased charges proposed by larger producers and opted for lower-priced metal from smaller mills, Purchasing magazine said.
Record prices for raw materials like scrap metal, coal, iron ore and energy allowed steel prices to almost double this year and prompted larger companies including ArcelorMittal to add special surcharges.
To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net.
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Aug. 31 (Bloomberg) -- ArcelorMittal, the world's biggest steelmaker, and the union representing steelworkers at the company's U.S. plants reached a tentative four-year agreement yesterday after four months of talks.
About 14,000 production, maintenance and clerical employees represented by United Steelworkers at 14 ArcelorMittal plants in eight states voted Aug. 28 to authorize a strike if a contract wasn't reached by Sept. 1, the union said in an e-mail. The workers make up 4.5 percent of the global workforce of ArcelorMittal, according to the company's Web site.
``We believe that ratification of the proposed agreement is a major step toward raising the industry standard in wages, benefits and other contractual protections without sacrificing the long-term viability of ArcelorMittal in a competitive market,'' Steelworkers District 1 Director David McCall said in a statement issued by PR Newswire. The union declined to disclose provisions of the contract.
The agreement remains subject to ratification by the USW, which is expected to take about 30 days, ArcelorMittal spokesman Haroon Hassan in London said in an email.
``We believe that we have reached a positive outcome for all parties involved without disruption to our business operations,'' Michael Rippey, ArcelorMittal's president and chief executive officer of U.S. operations, in an e-mail.
The two sides have been negotiating since April. Points of disagreement included a proposed 39 percent increase in health- care premiums for retirees, the union said in an Aug. 26 letter urging members to approve a strike.
U.S. steel prices fell 2 percent in August, from a record the previous month, as customers rejected increased charges proposed by larger producers and opted for lower-priced metal from smaller mills, Purchasing magazine said.
Record prices for raw materials like scrap metal, coal, iron ore and energy allowed steel prices to almost double this year and prompted larger companies including ArcelorMittal to add special surcharges.
To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net.
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Commerzbank, Allianz Supervisory Boards Meet for Dresdner Sale
By Aaron Kirchfeld and Jann Bettinga
Aug. 31 (Bloomberg) -- Commerzbank AG, Germany's second- biggest bank, and Allianz SE are holding supervisory board meetings today to decide on the sale of Dresdner Bank.
Commerzbank may acquire Dresdner for about 9 billion euros ($13.3 billion), according to two people with knowledge of the matter, helping the Frankfurt-based bank leapfrog Deutsche Bank AG as Germany's largest lender by customers and branches. Commerzbank and Allianz, Europe's biggest insurer, agreed in principle on a deal earlier this week, the people said Aug. 29.
A deal would double Commerzbank's retail clients to 12 million and branches to 1,900 in Germany, and save costs by shedding jobs and closing locations. For Munich-based Allianz, Europe's largest insurer, the sale would unwind the 23.5 billion-euro acquisition of Dresdner, which has dragged on its profit and stock since 2001.
``A combined Commerzbank and Dresdner could significantly boost efficiency,'' said Konrad Becker, a Munich-based analyst at Merck Finck & Co. The banks could save as much as 800 million euros in personnel costs by slashing about 8,500 jobs in areas such as administration and information technology, he said.
Munich-based Allianz on Aug. 29 confirmed that it's in ``advanced talks'' about its Dresdner Bank unit that ``may or may not lead to a deal.'' The sale still could unravel over unresolved questions such as how much of any future losses at Dresdner's securities unit Allianz is willing to shoulder, said the two people, who declined to be identified because they weren't permitted to comment on negotiations.
Allianz's Decline
Spokespeople at Allianz and Commerzbank, who confirmed that members of the supervisory boards were meeting today, declined to comment further on a possible agreement. A spokesman at Dresdner Bank also declined to comment.
Commerzbank fell 37 cents, or 1.8 percent, to 20.09 euros in Frankfurt trading on Friday, valuing the bank at 13.3 billion euros. Allianz gained 60 cents, or 0.5 percent, to 114.10 euros, giving the insurer a market value of 51.6 billion euros.
The German insurer has fallen about 61 percent since the Dresdner acquisition was announced April 1, 2001, more than the 49 percent drop in the Bloomberg Europe 500 Insurance Index.
Commerzbank plans initially to buy 51 percent of Dresdner and acquire the remainder next year, according to two people close to the matter. The bank might also swap its Cominvest asset management unit as partial payment for Dresdner and Allianz may keep a stake of less than 30 percent in the combined bank, one of the people said.
Blessing, Diekmann
Commerzbank Chief Executive Officer Martin Blessing, 45, took over in May from Klaus-Peter Mueller, who revived Commerzbank's profit by scaling back investment banking, cutting jobs and focusing on lending to mid-sized German companies and retail banking.
Allianz CEO Michael Diekmann, 53, put Frankfurt-based Dresdner up for sale this year after subprime-related losses at the Dresdner Kleinwort securities unit eroded profit. Allianz has also been in discussions with state-owned China Development Bank, which finances the nation's public works projects.
A hurdle to any agreement will be the investment bank, which amassed more than 3 billion euros in writedowns tied to the global credit crisis through the second quarter. Dresdner posted its fourth straight quarterly loss on Aug. 7, following writedowns at the investment bank. The so-called risk shield offered by Allianz may be about 1 billion euros, two people close to the matter said.
K2 Risks
Allianz and Commerzbank are also in discussions over risks from K2 Corp., the 8.8 billion-euro structured investment vehicle bailed out by Dresdner. Possible writedowns related to Commerzbank's 83 billion-euro commercial real-estate book may also prove a sticking point, one person said.
The combined group would have worldwide more than 72,000 employees, compared with 80,000 at Deutsche Bank. Commerzbank may shed about 9,000 jobs mainly by offering early retirement and through natural personnel fluctuations, one person said.
The acquisition would be the largest among financial- services companies in Europe this year and the third banking takeover in Germany in the last two months as rivals vie for a larger slice of the nation's consumer market, which remains dominated by state-owned lenders.
Citigroup Inc. announced on July 11 the sale of its German consumer unit to France's Credit Mutuel Group for 4.9 billion euros in cash. Lone Star Funds, the Dallas-based private equity firm, agreed to buy IKB Deutsche Industriebank AG, the first German subprime casualty, on Aug. 21.
Market Shakeup
Takeovers will shake up financial services in a market still dominated by public lenders and where ``tooth-and-claw'' competition has sapped profitability, Citigroup analysts said in a February report. Deutsche Bank, Commerzbank, Dresdner, HVB Group and Deutsche Postbank AG control about 11 percent of savings deposits, compared with 51 percent at the savings banks and 30 percent at cooperative lenders, according to the German association of private banks.
Commerzbank and Dresdner together have about 1.1 trillion euros in assets, compared with Deutsche Bank's 2 trillion euros. Deutsche Bank CEO Josef Ackermann has said he would consider acquisitions to boost consumer banking. The company was outbid for New York-based Citigroup's German unit.
Deutsche Post AG, Europe's biggest postal service, reiterated on Aug. 19 that it's still holding talks with ``various potential partners'' about a possible sale of Postbank, which has 14.5 million customers and 850 branches.
To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jann Bettinga in Frankfurt at jbettinga@bloomberg.net
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Aug. 31 (Bloomberg) -- Commerzbank AG, Germany's second- biggest bank, and Allianz SE are holding supervisory board meetings today to decide on the sale of Dresdner Bank.
Commerzbank may acquire Dresdner for about 9 billion euros ($13.3 billion), according to two people with knowledge of the matter, helping the Frankfurt-based bank leapfrog Deutsche Bank AG as Germany's largest lender by customers and branches. Commerzbank and Allianz, Europe's biggest insurer, agreed in principle on a deal earlier this week, the people said Aug. 29.
A deal would double Commerzbank's retail clients to 12 million and branches to 1,900 in Germany, and save costs by shedding jobs and closing locations. For Munich-based Allianz, Europe's largest insurer, the sale would unwind the 23.5 billion-euro acquisition of Dresdner, which has dragged on its profit and stock since 2001.
``A combined Commerzbank and Dresdner could significantly boost efficiency,'' said Konrad Becker, a Munich-based analyst at Merck Finck & Co. The banks could save as much as 800 million euros in personnel costs by slashing about 8,500 jobs in areas such as administration and information technology, he said.
Munich-based Allianz on Aug. 29 confirmed that it's in ``advanced talks'' about its Dresdner Bank unit that ``may or may not lead to a deal.'' The sale still could unravel over unresolved questions such as how much of any future losses at Dresdner's securities unit Allianz is willing to shoulder, said the two people, who declined to be identified because they weren't permitted to comment on negotiations.
Allianz's Decline
Spokespeople at Allianz and Commerzbank, who confirmed that members of the supervisory boards were meeting today, declined to comment further on a possible agreement. A spokesman at Dresdner Bank also declined to comment.
Commerzbank fell 37 cents, or 1.8 percent, to 20.09 euros in Frankfurt trading on Friday, valuing the bank at 13.3 billion euros. Allianz gained 60 cents, or 0.5 percent, to 114.10 euros, giving the insurer a market value of 51.6 billion euros.
The German insurer has fallen about 61 percent since the Dresdner acquisition was announced April 1, 2001, more than the 49 percent drop in the Bloomberg Europe 500 Insurance Index.
Commerzbank plans initially to buy 51 percent of Dresdner and acquire the remainder next year, according to two people close to the matter. The bank might also swap its Cominvest asset management unit as partial payment for Dresdner and Allianz may keep a stake of less than 30 percent in the combined bank, one of the people said.
Blessing, Diekmann
Commerzbank Chief Executive Officer Martin Blessing, 45, took over in May from Klaus-Peter Mueller, who revived Commerzbank's profit by scaling back investment banking, cutting jobs and focusing on lending to mid-sized German companies and retail banking.
Allianz CEO Michael Diekmann, 53, put Frankfurt-based Dresdner up for sale this year after subprime-related losses at the Dresdner Kleinwort securities unit eroded profit. Allianz has also been in discussions with state-owned China Development Bank, which finances the nation's public works projects.
A hurdle to any agreement will be the investment bank, which amassed more than 3 billion euros in writedowns tied to the global credit crisis through the second quarter. Dresdner posted its fourth straight quarterly loss on Aug. 7, following writedowns at the investment bank. The so-called risk shield offered by Allianz may be about 1 billion euros, two people close to the matter said.
K2 Risks
Allianz and Commerzbank are also in discussions over risks from K2 Corp., the 8.8 billion-euro structured investment vehicle bailed out by Dresdner. Possible writedowns related to Commerzbank's 83 billion-euro commercial real-estate book may also prove a sticking point, one person said.
The combined group would have worldwide more than 72,000 employees, compared with 80,000 at Deutsche Bank. Commerzbank may shed about 9,000 jobs mainly by offering early retirement and through natural personnel fluctuations, one person said.
The acquisition would be the largest among financial- services companies in Europe this year and the third banking takeover in Germany in the last two months as rivals vie for a larger slice of the nation's consumer market, which remains dominated by state-owned lenders.
Citigroup Inc. announced on July 11 the sale of its German consumer unit to France's Credit Mutuel Group for 4.9 billion euros in cash. Lone Star Funds, the Dallas-based private equity firm, agreed to buy IKB Deutsche Industriebank AG, the first German subprime casualty, on Aug. 21.
Market Shakeup
Takeovers will shake up financial services in a market still dominated by public lenders and where ``tooth-and-claw'' competition has sapped profitability, Citigroup analysts said in a February report. Deutsche Bank, Commerzbank, Dresdner, HVB Group and Deutsche Postbank AG control about 11 percent of savings deposits, compared with 51 percent at the savings banks and 30 percent at cooperative lenders, according to the German association of private banks.
Commerzbank and Dresdner together have about 1.1 trillion euros in assets, compared with Deutsche Bank's 2 trillion euros. Deutsche Bank CEO Josef Ackermann has said he would consider acquisitions to boost consumer banking. The company was outbid for New York-based Citigroup's German unit.
Deutsche Post AG, Europe's biggest postal service, reiterated on Aug. 19 that it's still holding talks with ``various potential partners'' about a possible sale of Postbank, which has 14.5 million customers and 850 branches.
To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jann Bettinga in Frankfurt at jbettinga@bloomberg.net
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LG Electronics Targets Display Sales of $20 Billion by 2010
By William Sim
Aug. 31 (Bloomberg) -- LG Electronics Inc., the world's third-largest television maker, said it aims to increase its display sales by 30 percent to $20 billion by 2010.
To achieve the goal, LG plans to invest $500 million in marketing targeting the Americas, China, the Middle East, Africa and Russia, the company said in an e-mailed statement today.
LG is betting more expensive models and sales in emerging markets will help sustain revenue growth at the display division. The loss from the division, which sells plasma screens and televisions, narrowed in the second quarter on higher sales of flat-panel TVs.
Seoul-based LG will also invest $1 billion on research and development for displays by 2010, according to the statement.
To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net
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Aug. 31 (Bloomberg) -- LG Electronics Inc., the world's third-largest television maker, said it aims to increase its display sales by 30 percent to $20 billion by 2010.
To achieve the goal, LG plans to invest $500 million in marketing targeting the Americas, China, the Middle East, Africa and Russia, the company said in an e-mailed statement today.
LG is betting more expensive models and sales in emerging markets will help sustain revenue growth at the display division. The loss from the division, which sells plasma screens and televisions, narrowed in the second quarter on higher sales of flat-panel TVs.
Seoul-based LG will also invest $1 billion on research and development for displays by 2010, according to the statement.
To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net
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China Investment Fund to Buy Japanese Stocks, Mainichi Reports
By Keiko Ujikane
Aug. 31 (Bloomberg) -- China Investment Corp., which manages that nation's $200 billion sovereign wealth fund, will start investing in Japanese stocks as early as the current fiscal year, the Mainichi newspaper said.
The Beijing-based sovereign fund, also known as CIC, plans to invest about $67 billion, a third of its assets, in overseas markets including Japan, the paper reported without saying where it obtained the information.
CIC is preparing to open bank and brokerage accounts and set up a settlement system in Japan, the newspaper said. Investment targets may include natural resources and environmental technology, the paper said. The fund won't seek management takeovers in Japan, it said.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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Aug. 31 (Bloomberg) -- China Investment Corp., which manages that nation's $200 billion sovereign wealth fund, will start investing in Japanese stocks as early as the current fiscal year, the Mainichi newspaper said.
The Beijing-based sovereign fund, also known as CIC, plans to invest about $67 billion, a third of its assets, in overseas markets including Japan, the paper reported without saying where it obtained the information.
CIC is preparing to open bank and brokerage accounts and set up a settlement system in Japan, the newspaper said. Investment targets may include natural resources and environmental technology, the paper said. The fund won't seek management takeovers in Japan, it said.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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Iran May Urge OPEC to Cut Supply to Defend `$100' Oil
By Ladane Nasseri and Ayesha Daya
Aug. 31 (Bloomberg) -- Iran, OPEC's second-largest oil producer, may urge the crude exporting group to restrain output when it meets Sept. 9 to ensure the market doesn't become over supplied and push prices below $100.
``Iran hopes that OPEC will defend the balance of the market,'' Mohammad Ali Khatibi, Iran's OPEC governor, told Bloomberg in an interview in Tehran today. ``When oil prices are attractive investment takes place, and if prices are on a decreasing course investors will be hesitant,'' he said.
Crude oil, down 22 percent since it touched a record July 11, closed on Friday at $115.46 a barrel on the New York Mercantile Exchange. The 13 members of the Organization of Petroleum Exporting Countries, which will meet early next month to review production targets, has maintained an official output limit of 29.67 million barrels a day this year.
OPEC's daily shipments of oil will fall 1.5 percent in the four weeks to Sept. 13, according to industry consultant Oil Movements as refiners trim imports while undertaking seasonal maintenance. The 13-member group will load 24.2 million barrels a day in the period, compared with 24.58 million barrels a day shipped in the four weeks ended Aug. 16, the Halifax, England- based consultant said Aug. 28 in a report.
Iran's Oil Minister Gholamhossein Nozari said $100 a barrel is the ``minimum'' suitable level for crude, the Oil Ministry's official news agency Shana reported today. The Iranian official said he expected crude prices to rise because of the expected increase in demand for fuel oil during the Northern Hemisphere winter.
To contact the reporter on this story: Ladane Nasseri in Tehran at lnasseri@bloomberg.net.
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Aug. 31 (Bloomberg) -- Iran, OPEC's second-largest oil producer, may urge the crude exporting group to restrain output when it meets Sept. 9 to ensure the market doesn't become over supplied and push prices below $100.
``Iran hopes that OPEC will defend the balance of the market,'' Mohammad Ali Khatibi, Iran's OPEC governor, told Bloomberg in an interview in Tehran today. ``When oil prices are attractive investment takes place, and if prices are on a decreasing course investors will be hesitant,'' he said.
Crude oil, down 22 percent since it touched a record July 11, closed on Friday at $115.46 a barrel on the New York Mercantile Exchange. The 13 members of the Organization of Petroleum Exporting Countries, which will meet early next month to review production targets, has maintained an official output limit of 29.67 million barrels a day this year.
OPEC's daily shipments of oil will fall 1.5 percent in the four weeks to Sept. 13, according to industry consultant Oil Movements as refiners trim imports while undertaking seasonal maintenance. The 13-member group will load 24.2 million barrels a day in the period, compared with 24.58 million barrels a day shipped in the four weeks ended Aug. 16, the Halifax, England- based consultant said Aug. 28 in a report.
Iran's Oil Minister Gholamhossein Nozari said $100 a barrel is the ``minimum'' suitable level for crude, the Oil Ministry's official news agency Shana reported today. The Iranian official said he expected crude prices to rise because of the expected increase in demand for fuel oil during the Northern Hemisphere winter.
To contact the reporter on this story: Ladane Nasseri in Tehran at lnasseri@bloomberg.net.
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Payrolls Probably Fell, Factories Stalled: U.S. Economy Preview
By Shobhana Chandra
Aug. 31 (Bloomberg) -- Payrolls in the U.S. probably fell in August for an eighth month and manufacturing stalled, signaling growth faltered, economists said before reports this week.
Employers probably cut 75,000 jobs this month, according to the median estimate in a Bloomberg News survey ahead of a Labor Department report Sept. 5. A private poll in two days may show factory activity stagnated for a second month.
Mounting job losses, sliding home values, reduced access to credit and rising prices have given Americans reason to pull back. Gripped by this vicious circle of firings and spending cuts, the economy may weaken again in coming months.
``The deterioration will be quite noticeable,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``We'll see job cuts continuing as businesses are under a lot of pressure. The manufacturing sector is getting support from exports, but being held back by weak domestic activity.''
The employment report may also show the jobless rate was unchanged this month at a four-year high of 5.7 percent, according to the Bloomberg survey median. Factory payrolls probably fell by 35,000.
Soaring costs and slowing sales are pushing carmakers and airlines to cut staff. UAL Corp.'s United Airlines, the world's second-largest carrier, last week said it'll eliminate 1,550 flight-attendant jobs to help stem losses.
Job Cuts
General Motors Corp., the largest U.S. automaker, is offering early-retirement incentives to about 9,000 U.S. salaried workers, people familiar with the plan said on Aug. 29. Earlier this month, GM Chief Executive Officer Rick Wagoner said he's not yet seeing signs of a recovery in the economy or vehicle sales.
Other industries are also hurting. Marvell Technology Group Ltd., the maker of chips for phones such as the BlackBerry, last week provided sales projections that missed analysts' estimates for this quarter.
``If you look at the housing situation, the debt situation and gas prices, it adds up to something unfavorable,'' Clyde Hosein, chief financial officer of Marvel, which is based in Hamilton, Bermuda, and is run from Santa Clara, California, said in an interview on Aug. 28.
The projected drop in payrolls this month would bring the total decline in employment so far this year to more than half a million. The economy created 1.1 million jobs in 2007.
Employment is among the indicators tracked by the National Bureau of Economic Research, the official arbiter of U.S. economic cycles, in making the recession call. The others are sales, incomes, production and gross domestic product.
Recession Definition
The group defines downturns as a ``significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.
Consumer spending, which accounts for more than two-thirds of the economy, fell in each of the past two months after adjusting for inflation, reflecting the weakening job market.
Companies are focusing on getting more out of remaining employees to cut expenses as sales slow. Productivity, a measure of worker efficiency, probably grew at a 3.4 percent annual pace in the second quarter, a Sept. 4 report from the Labor Department is forecast to show.
Declining demand is also prompting manufacturers to cut back. The Institute for Supply Management's factory index was probably unchanged at 50 in August for a second month, the survey median shows. A reading of 50 is the dividing line between expansion and contraction. The report is due on Sept. 2.
Commerce Department figures that same day may show spending on construction projects dropped in July for the fifth time in seven months, according to the survey.
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
ISM Manu Index 9/2 Aug. 50.0 50.0
ISM Prices Index 9/2 Aug. 88.5 82.0
Construct Spending MOM% 9/2 July -0.4% -0.4%
Factory Orders MOM% 9/3 Jan. 1.7% 1.0%
Productivity QOQ% 9/4 2Q 2.2% 3.4%
Labor Costs QOQ% 9/4 2Q F 1.3% 0.1%
Initial Claims ,000's 9/4 Aug. 30 425 420
Cont. Claims ,000's 9/4 Aug. 23 3423 3420
ISM NonManu Index 9/4 Aug. 49.5 49.5
Nonfarm Payrolls ,000's 9/5 Aug. -51 -75
Unemploy Rate % 9/5 Aug. 5.7% 5.7%
Manu Payrolls ,000's 9/5 Aug. -35 -35
Hourly Earnings MOM% 9/5 Aug. 0.3% 0.3%
Hourly Earnings YOY% 9/5 Aug. 3.4% 3.4%
Avg Weekly Hours 9/5 Aug. 33.6 33.6
================================================================
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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Gustav May Hit Gulf Platforms Harder Than Katrina
By Jim Polson
Aug. 31 (Bloomberg) -- Hurricane Gustav threatens to hurt U.S. oil and natural-gas production and refining more severely than hurricanes Katrina and Rita did three years ago.
Gustav, downgraded to a Category 3 storm by the National Hurricane Center in Miami this morning, may strengthen to Category 4 later today and will make landfall as a ``major'' hurricane. The storm shut three-quarters of oil output in the region and refineries operated by Valero Energy Corp., the largest U.S. refiner, ConocoPhillips, Marathon Oil Corp. and Exxon Mobil Corp. There will be a special trading session today at the New York Mercantile Exchange.
``This storm will prove to be a worst-case scenario for the production region,'' Jim Rouiller, senior energy meteorologist for Planalytics.com, said yesterday in an e-mailed message. ``This storm will be more dangerous than Katrina.''
The center issued a hurricane watch from High Island, Texas, to Florida at 2 a.m. today. Gustav's winds were estimated at 150 miles (240 kilometers) per hour as it made landfall in western Cuba. While they slowed to 125 miles per hour this morning, the storm is forecast to gain strength as it passes into the central gulf today. Gustav was 425 miles southeast of the Mississippi River's mouth and traveling northwest at about 15 mph at 4 a.m.
BP, Exxon, Shell
BP Plc, Exxon Mobil and Royal Dutch Shell Plc, Europe's largest oil company, led producers shutting wells and whisking staff ashore. About 77 percent of Gulf oil output and 37 percent of natural-gas production was shut, the U.S. Minerals Management Service said in a statement yesterday. The Louisiana Offshore Oil Port, the nation's largest crude-oil terminal, closed yesterday.
The New York Mercantile Exchange announced an extended trading session beginning at 2:30 p.m. today because of Gustav.
Fields in the Gulf produce 1.3 million barrels a day of oil, about a quarter of U.S. production, and 7.4 billion cubic feet a day of natural gas, 14 percent of the total, government data show. Hurricane Katrina in 2005 closed 95 percent of regional offshore output and, along with Hurricane Rita, idled about 19 percent of U.S. refining capacity.
Exxon Mobil is shutting its Chalmette, Louisiana, refinery. Nonessential employees have been released so they can evacuate as requested by local officials, Irving, Texas-based Exxon Mobil said in a notice posted on its Web site yesterday.
Refineries Shut
The refinery, which can process 192,000 barrels a day, is run by Chalmette Refining LLC, a joint venture between Exxon and state oil company Petroleos de Venezuela SA.
Marathon Oil Corp. began closing its 256,000-barrel-a-day Garyville, Louisiana, refinery, yesterday, according to a statement posted on its Web site. Valero was shutting its St. Charles refinery west of New Orleans and may decide today whether to shut its Port Arthur, Texas, refinery, spokesman Bill Day said in an e-mailed message.
Three Louisiana parishes with refineries have ordered mandatory evacuations.
Refinery production slowed at some complexes owned by Shell and Motiva Enterprises LLC, its venture with Saudi Arabian Oil Co., Shell said in a statement on its Web site.
``The big question for the market is going to be how quickly after Gustav passes will the industry be able to recover and get back online,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC.
Pipelines Closed
Enbridge Inc., Canada's largest pipeline company, and its U.S. affiliate closed conduits capable of bringing ashore 6.7 billion cubic feet a day of natural gas. Evacuation of Terrebonne Parish shut 550 million cubic feet a day of gas flow into the 10,500-mile (16,900-kilometer) Transco line to the U.S. northeast, owner Williams Cos. said in a statement.
Exxon Mobil said yesterday it had shut platforms producing 5,000 barrels of oil and 50 million cubic feet of natural gas.
BP, Europe's second-largest oil company, said it shut Gulf production and evacuated all staff by noon local time yesterday. Its normal production is equivalent to 290,000 barrels a day from the region.
Anadarko Petroleum Corp., the second-largest U.S. independent oil producer, said in a statement on its Web site yesterday that it had shut the equivalent of 105,000 barrels a day of production, with all of it to be closed tonight.
Shell said it would shut daily production equivalent to 510,000 barrels of oil yesterday. Marathon Oil Corp. and ConocoPhillips said they have shut and evacuated all Gulf production platforms.
Workers Evacuated
Workers from 45 rigs and 223 production platforms were evacuated as of 12:30 p.m. yesterday, the Minerals Management Service said in a statement on its Web site. About 998,000 barrels of daily oil production have been halted in preparation for the storm, as well as 2.75 billion cubic feet of gas.
Crude oil futures on the Nymex fell 13 cents to $115.46 a barrel on Aug. 29 on speculation supplies will be adequate to meet demand after the storm passes. Natural gas futures fell 10.7 cents to $7.943 per million British thermal units.
Most U.S. financial markets are closed until Sept. 2 for the Labor Day holiday. Nymex said in an Aug. 29 statement that electronic trading will begin at 2:30 p.m. New York time today with trades dated Sept. 2.
The Louisiana Offshore Oil Port shut at 9:30 a.m. local time yesterday.
``It's time to get our people off the offshore platform,'' spokeswoman Barbara Hestermann said yesterday in an interview.
Shipments to customers continue from the port's 53 million barrels of storage on shore, she said.
Katrina, Rita
Hurricanes Katrina and Rita in 2005 cut supplies for months. About 27 percent of Gulf oil production and 19 percent of gas output was still shut in January 2006, the Minerals Management Service reported.
Rising waters from a Category 4 storm can cut escape routes as early as five hours before landfall, with flooding as much as six miles inland. The coastal storm surge may reach 18 feet, and the winds can rip away roofs and walls of homes, according to the National Hurricane Center.
A Category 5 storm can destroy the roofs of industrial buildings, flatten all trees and homes, and drive a storm surge above 18 feet. Only three Category 5 storms, Andrew in 1992, Camille in 1969, and the Labor Day Hurricane of 1935, have made landfall in the U.S. since record-keeping began.
At its forecast track and intensity, Gustav would drive a 20- foot storm surge topped by heavy waves across southeastern Louisiana, Rouiller of Planalytics.com said. ``The untested levees at New Orleans will be overwhelmed and may fail.''
A second Atlantic cyclone, Tropical Storm Hanna, was moving west-northwest to the Turks and Caicos Islands of the Caribbean without intensifying, the National Hurricane Center said.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
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Aug. 31 (Bloomberg) -- Hurricane Gustav threatens to hurt U.S. oil and natural-gas production and refining more severely than hurricanes Katrina and Rita did three years ago.
Gustav, downgraded to a Category 3 storm by the National Hurricane Center in Miami this morning, may strengthen to Category 4 later today and will make landfall as a ``major'' hurricane. The storm shut three-quarters of oil output in the region and refineries operated by Valero Energy Corp., the largest U.S. refiner, ConocoPhillips, Marathon Oil Corp. and Exxon Mobil Corp. There will be a special trading session today at the New York Mercantile Exchange.
``This storm will prove to be a worst-case scenario for the production region,'' Jim Rouiller, senior energy meteorologist for Planalytics.com, said yesterday in an e-mailed message. ``This storm will be more dangerous than Katrina.''
The center issued a hurricane watch from High Island, Texas, to Florida at 2 a.m. today. Gustav's winds were estimated at 150 miles (240 kilometers) per hour as it made landfall in western Cuba. While they slowed to 125 miles per hour this morning, the storm is forecast to gain strength as it passes into the central gulf today. Gustav was 425 miles southeast of the Mississippi River's mouth and traveling northwest at about 15 mph at 4 a.m.
BP, Exxon, Shell
BP Plc, Exxon Mobil and Royal Dutch Shell Plc, Europe's largest oil company, led producers shutting wells and whisking staff ashore. About 77 percent of Gulf oil output and 37 percent of natural-gas production was shut, the U.S. Minerals Management Service said in a statement yesterday. The Louisiana Offshore Oil Port, the nation's largest crude-oil terminal, closed yesterday.
The New York Mercantile Exchange announced an extended trading session beginning at 2:30 p.m. today because of Gustav.
Fields in the Gulf produce 1.3 million barrels a day of oil, about a quarter of U.S. production, and 7.4 billion cubic feet a day of natural gas, 14 percent of the total, government data show. Hurricane Katrina in 2005 closed 95 percent of regional offshore output and, along with Hurricane Rita, idled about 19 percent of U.S. refining capacity.
Exxon Mobil is shutting its Chalmette, Louisiana, refinery. Nonessential employees have been released so they can evacuate as requested by local officials, Irving, Texas-based Exxon Mobil said in a notice posted on its Web site yesterday.
Refineries Shut
The refinery, which can process 192,000 barrels a day, is run by Chalmette Refining LLC, a joint venture between Exxon and state oil company Petroleos de Venezuela SA.
Marathon Oil Corp. began closing its 256,000-barrel-a-day Garyville, Louisiana, refinery, yesterday, according to a statement posted on its Web site. Valero was shutting its St. Charles refinery west of New Orleans and may decide today whether to shut its Port Arthur, Texas, refinery, spokesman Bill Day said in an e-mailed message.
Three Louisiana parishes with refineries have ordered mandatory evacuations.
Refinery production slowed at some complexes owned by Shell and Motiva Enterprises LLC, its venture with Saudi Arabian Oil Co., Shell said in a statement on its Web site.
``The big question for the market is going to be how quickly after Gustav passes will the industry be able to recover and get back online,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC.
Pipelines Closed
Enbridge Inc., Canada's largest pipeline company, and its U.S. affiliate closed conduits capable of bringing ashore 6.7 billion cubic feet a day of natural gas. Evacuation of Terrebonne Parish shut 550 million cubic feet a day of gas flow into the 10,500-mile (16,900-kilometer) Transco line to the U.S. northeast, owner Williams Cos. said in a statement.
Exxon Mobil said yesterday it had shut platforms producing 5,000 barrels of oil and 50 million cubic feet of natural gas.
BP, Europe's second-largest oil company, said it shut Gulf production and evacuated all staff by noon local time yesterday. Its normal production is equivalent to 290,000 barrels a day from the region.
Anadarko Petroleum Corp., the second-largest U.S. independent oil producer, said in a statement on its Web site yesterday that it had shut the equivalent of 105,000 barrels a day of production, with all of it to be closed tonight.
Shell said it would shut daily production equivalent to 510,000 barrels of oil yesterday. Marathon Oil Corp. and ConocoPhillips said they have shut and evacuated all Gulf production platforms.
Workers Evacuated
Workers from 45 rigs and 223 production platforms were evacuated as of 12:30 p.m. yesterday, the Minerals Management Service said in a statement on its Web site. About 998,000 barrels of daily oil production have been halted in preparation for the storm, as well as 2.75 billion cubic feet of gas.
Crude oil futures on the Nymex fell 13 cents to $115.46 a barrel on Aug. 29 on speculation supplies will be adequate to meet demand after the storm passes. Natural gas futures fell 10.7 cents to $7.943 per million British thermal units.
Most U.S. financial markets are closed until Sept. 2 for the Labor Day holiday. Nymex said in an Aug. 29 statement that electronic trading will begin at 2:30 p.m. New York time today with trades dated Sept. 2.
The Louisiana Offshore Oil Port shut at 9:30 a.m. local time yesterday.
``It's time to get our people off the offshore platform,'' spokeswoman Barbara Hestermann said yesterday in an interview.
Shipments to customers continue from the port's 53 million barrels of storage on shore, she said.
Katrina, Rita
Hurricanes Katrina and Rita in 2005 cut supplies for months. About 27 percent of Gulf oil production and 19 percent of gas output was still shut in January 2006, the Minerals Management Service reported.
Rising waters from a Category 4 storm can cut escape routes as early as five hours before landfall, with flooding as much as six miles inland. The coastal storm surge may reach 18 feet, and the winds can rip away roofs and walls of homes, according to the National Hurricane Center.
A Category 5 storm can destroy the roofs of industrial buildings, flatten all trees and homes, and drive a storm surge above 18 feet. Only three Category 5 storms, Andrew in 1992, Camille in 1969, and the Labor Day Hurricane of 1935, have made landfall in the U.S. since record-keeping began.
At its forecast track and intensity, Gustav would drive a 20- foot storm surge topped by heavy waves across southeastern Louisiana, Rouiller of Planalytics.com said. ``The untested levees at New Orleans will be overwhelmed and may fail.''
A second Atlantic cyclone, Tropical Storm Hanna, was moving west-northwest to the Turks and Caicos Islands of the Caribbean without intensifying, the National Hurricane Center said.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
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Bush Says Stimulus Helping Economy Start to `Improve'
By Holly Rosenkrantz and Nadine Elsibai
Aug. 30 (Bloomberg) -- President George W. Bush said the U.S. economy is ``beginning to improve,'' and he credited the $168 billion stimulus this year with helping to ward off a recession.
Bush, in his weekly radio address today, cited several economic indicators that he said show signs of improvement: the decline in home sales has leveled off and sales are rising in some parts of the country. Orders for some durable goods are increasing, and the economy grew at an annual rate of 3.3 percent in the second quarter, he added.
``There are signs that the stimulus package will continue to have a beneficial impact on the economy in the second half of the year,'' Bush said.
Bush's comments drew criticism from the campaign of Democratic Presidential nominee Barack Obama, who has sought to make the economy a central focus of the election and has tied his presumptive Republican opponent, Senator John McCain of Arizona, to Bush's policies.
``When it comes to being out of touch with what middle- class Americans are going through, George Bush and John McCain are two of a kind,'' Obama campaign spokesman Bill Burton said in a statement.
House Speaker Nancy Pelosi and other Democrats in Congress have endorsed a plan for an additional $50 billion in economic stimulus from the government to help overcome the effects of the biggest housing slump since the Great Depression and near-record gasoline prices. Bush's top economic adviser, Edward Lazear, said in an interview on Bloomberg Television this week that the economy doesn't need it.
Domestic Drilling
Instead, Bush pressed Congress in his radio address to focus on increasing domestic oil and natural gas exploration, passing free-trade deals with Colombia, Panama and South Korea, and making his tax cuts permanent. Lawmakers return to Washington from a summer recess the week of Sept. 8.
Bush said the ``election season'' may make it challenging for Congress to focus on the legislative agenda.
``We still have time to accomplish important goals for our country,'' he said.
Burton cited seven months of job losses, declining weekly wages and home values and rising inflation as evidence that Americans are worse off under President Bush.
A Commerce Department report yesterday showed that personal spending growth slowed to 0.2 percent in July from 0.6 percent in June, underscoring economists' forecasts for a weaker economy in the second half of the year.
Adjusted for inflation, personal spending dropped 0.4 percent, the biggest drop in four years. The report showed that the department's gauge of consumer prices tied to spending patterns rose 4.5 percent from a year earlier in July, the biggest gain in 17 years.
Incomes Decline
Incomes dropped 0.7 percent, the first decrease since August 2005, reflecting the end of the tax rebates, after a 0.1 percent gain the prior month, the report showed.
Economic growth will slow to an annual pace of 1.2 percent in the third quarter and 0.45 percent in the fourth quarter, according to the median forecasts in a Bloomberg survey of 78 economists.
Senator Hillary Clinton, giving the Democratic radio address today, said McCain would continue Bush administration policies that she described as failures.
``With Barack Obama in the White House and Democrats leading in Congress, we will lead the charge to revitalize the economy, create jobs, make college affordable again, and enable hard-working Americans to pay for gas, food, utilities and cover the monthly bills,'' Clinton said.
To contact the reporters on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net; Nadine Elsibai in Washington at nelsibai@bloomberg.net
Read more...
Aug. 30 (Bloomberg) -- President George W. Bush said the U.S. economy is ``beginning to improve,'' and he credited the $168 billion stimulus this year with helping to ward off a recession.
Bush, in his weekly radio address today, cited several economic indicators that he said show signs of improvement: the decline in home sales has leveled off and sales are rising in some parts of the country. Orders for some durable goods are increasing, and the economy grew at an annual rate of 3.3 percent in the second quarter, he added.
``There are signs that the stimulus package will continue to have a beneficial impact on the economy in the second half of the year,'' Bush said.
Bush's comments drew criticism from the campaign of Democratic Presidential nominee Barack Obama, who has sought to make the economy a central focus of the election and has tied his presumptive Republican opponent, Senator John McCain of Arizona, to Bush's policies.
``When it comes to being out of touch with what middle- class Americans are going through, George Bush and John McCain are two of a kind,'' Obama campaign spokesman Bill Burton said in a statement.
House Speaker Nancy Pelosi and other Democrats in Congress have endorsed a plan for an additional $50 billion in economic stimulus from the government to help overcome the effects of the biggest housing slump since the Great Depression and near-record gasoline prices. Bush's top economic adviser, Edward Lazear, said in an interview on Bloomberg Television this week that the economy doesn't need it.
Domestic Drilling
Instead, Bush pressed Congress in his radio address to focus on increasing domestic oil and natural gas exploration, passing free-trade deals with Colombia, Panama and South Korea, and making his tax cuts permanent. Lawmakers return to Washington from a summer recess the week of Sept. 8.
Bush said the ``election season'' may make it challenging for Congress to focus on the legislative agenda.
``We still have time to accomplish important goals for our country,'' he said.
Burton cited seven months of job losses, declining weekly wages and home values and rising inflation as evidence that Americans are worse off under President Bush.
A Commerce Department report yesterday showed that personal spending growth slowed to 0.2 percent in July from 0.6 percent in June, underscoring economists' forecasts for a weaker economy in the second half of the year.
Adjusted for inflation, personal spending dropped 0.4 percent, the biggest drop in four years. The report showed that the department's gauge of consumer prices tied to spending patterns rose 4.5 percent from a year earlier in July, the biggest gain in 17 years.
Incomes Decline
Incomes dropped 0.7 percent, the first decrease since August 2005, reflecting the end of the tax rebates, after a 0.1 percent gain the prior month, the report showed.
Economic growth will slow to an annual pace of 1.2 percent in the third quarter and 0.45 percent in the fourth quarter, according to the median forecasts in a Bloomberg survey of 78 economists.
Senator Hillary Clinton, giving the Democratic radio address today, said McCain would continue Bush administration policies that she described as failures.
``With Barack Obama in the White House and Democrats leading in Congress, we will lead the charge to revitalize the economy, create jobs, make college affordable again, and enable hard-working Americans to pay for gas, food, utilities and cover the monthly bills,'' Clinton said.
To contact the reporters on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net; Nadine Elsibai in Washington at nelsibai@bloomberg.net
Read more...
Britain Faces Worst Slump in 60 Years, Darling Tells Guardian
By Caroline Binham
Aug. 30 (Bloomberg) -- The U.K. is facing ``arguably the worst'' economic crisis for 60 years, according to Chancellor of the Exchequer Alistair Darling.
In comments that contrast with those of Prime Minister Gordon Brown, Darling told the Guardian newspaper in an interview the downturn would be ``profound and long-lasting,'' and said he had no idea how serious the credit crunch would become. Brown has said he will unveil measures next month to prevent the U.K. economy from tipping into recession and bolster support for his ruling Labour Party. The Treasury confirmed the chancellor's comments
Official data this month showed the British economy recorded zero growth in the second quarter, while Bank of England policymaker David Blanchflower this week forecast two million people could be unemployed by the end of the year. U.K. consumer confidence stayed near a record low in August as the fastest inflation in a decade and falling house prices discouraged shopping, London-based research group GfK NOP said yesterday.
Brown has said Britain is better placed to weather global economic storms now than in the late 1970s, when it was bailed out by the International Monetary Fund, and in the early 1990s, when the pound was forced out of the Exchange Rate Mechanism that tied its value to other European currencies.
The government now has its ``work cut out'' to persuade voters that it deserves another term in power, Darling told the newspaper. He said ministers had ``patently'' failed to explain problems to the public.
`Huge Problem'
``This coming 12 months will be the most difficult 12 months the Labour Party has had in a generation,'' Darling told the Guardian. ``We've got to rediscover that zeal which won three elections, and that is a huge problem for us.''
The opposition Conservative Party's lead over Labour widened to 22 points in a YouGov Plc poll finished on Aug. 21, from 8 points at the beginning of the year.
The Bank of England kept the benchmark interest rate unchanged at 5 percent this month on concerns about inflation after the economy stagnated in the second quarter. Retail sales slumped to the lowest since 1983 this month, and house prices fell by the most in three decades, reports showed Aug. 28.
An index of confidence, based on a survey of 2,001 people, rose 3 points from July's minus 39, which was the lowest since the data began in 1974, GfK said. While sentiment was lifted by the Olympic Games in Beijing this month, the U.K. index has declined from minus 4 a year ago, the report said.
Blanchflower, who has voted to reduce interest rates at every meeting of the Monetary Policy Committee since October, has called for ``a substantial fall'' in borrowing costs, ``probably quite quickly.''
``I certainly think we are in negative growth now and I expect several further quarters,'' Blanchflower said in an interview with Reuters on Aug. 28.
Darling's comments on the economy ``are entirely consistent with his previous statements about the challenging times the U.K. is currently facing,'' the Treasury said in an e-mailed statement today. ``These are the same difficult economic circumstances that every other country in the world is having to deal with.''
To contact the reporters on this story: Caroline Binham in London at cbinham@bloomberg.net
Read more...
Aug. 30 (Bloomberg) -- The U.K. is facing ``arguably the worst'' economic crisis for 60 years, according to Chancellor of the Exchequer Alistair Darling.
In comments that contrast with those of Prime Minister Gordon Brown, Darling told the Guardian newspaper in an interview the downturn would be ``profound and long-lasting,'' and said he had no idea how serious the credit crunch would become. Brown has said he will unveil measures next month to prevent the U.K. economy from tipping into recession and bolster support for his ruling Labour Party. The Treasury confirmed the chancellor's comments
Official data this month showed the British economy recorded zero growth in the second quarter, while Bank of England policymaker David Blanchflower this week forecast two million people could be unemployed by the end of the year. U.K. consumer confidence stayed near a record low in August as the fastest inflation in a decade and falling house prices discouraged shopping, London-based research group GfK NOP said yesterday.
Brown has said Britain is better placed to weather global economic storms now than in the late 1970s, when it was bailed out by the International Monetary Fund, and in the early 1990s, when the pound was forced out of the Exchange Rate Mechanism that tied its value to other European currencies.
The government now has its ``work cut out'' to persuade voters that it deserves another term in power, Darling told the newspaper. He said ministers had ``patently'' failed to explain problems to the public.
`Huge Problem'
``This coming 12 months will be the most difficult 12 months the Labour Party has had in a generation,'' Darling told the Guardian. ``We've got to rediscover that zeal which won three elections, and that is a huge problem for us.''
The opposition Conservative Party's lead over Labour widened to 22 points in a YouGov Plc poll finished on Aug. 21, from 8 points at the beginning of the year.
The Bank of England kept the benchmark interest rate unchanged at 5 percent this month on concerns about inflation after the economy stagnated in the second quarter. Retail sales slumped to the lowest since 1983 this month, and house prices fell by the most in three decades, reports showed Aug. 28.
An index of confidence, based on a survey of 2,001 people, rose 3 points from July's minus 39, which was the lowest since the data began in 1974, GfK said. While sentiment was lifted by the Olympic Games in Beijing this month, the U.K. index has declined from minus 4 a year ago, the report said.
Blanchflower, who has voted to reduce interest rates at every meeting of the Monetary Policy Committee since October, has called for ``a substantial fall'' in borrowing costs, ``probably quite quickly.''
``I certainly think we are in negative growth now and I expect several further quarters,'' Blanchflower said in an interview with Reuters on Aug. 28.
Darling's comments on the economy ``are entirely consistent with his previous statements about the challenging times the U.K. is currently facing,'' the Treasury said in an e-mailed statement today. ``These are the same difficult economic circumstances that every other country in the world is having to deal with.''
To contact the reporters on this story: Caroline Binham in London at cbinham@bloomberg.net
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Valero Cuts Production at Gulf Coast Refineries Ahead of Gustav
By Jim Polson
Aug. 30 (Bloomberg) -- Valero Energy Corp., the largest U.S. refiner, reduced production at four refineries in Texas and Louisiana as Hurricane Gustav intensified before a forecast strike in Louisiana in two days.
Refineries in St. Charles, Louisiana, as well as Port Arthur, Texas City and Houston in Texas are operating at reduced rates, spokesman Bill Day said today in an e-mailed message. Output at two refineries in Corpus Christi, Texas, isn't curtailed, he said.
Valero expects to decide later today whether to shut down units and evacuate staff, Day said. The company has shut service stations in southern Louisiana parishes because of evacuation orders, he said.
``Devastating storm-surge flooding'' is possible based on forecasts, St. Charles Parish officials said in a statement. Levees guarding the parish to the east may be breached, it said. Officials urged residents to leave before a planned mandatory evacuation at noon local time.
Valero's refinery in the parish can process 186,000 barrels a day of crude oil, according to the U.S. Energy Department. Daily capacity is 210,000 barrels at Texas City and 85,000 barrels at Houston, according to the department. Port Arthur's capacity is 325,000 barrels a day, according to Valero.
Gustav, now a Category 3 hurricane with winds of almost 125 miles (205 kilometers) per hour, picked up speed as it headed toward western Cuba and the U.S. Gulf Coast, the National Hurricane Center said in a bulletin. The storm was about 185 miles east of the western tip of Cuba at 11 a.m. New York time. A storm surge of 19 feet is possible at landfall in Cuba.
Gustav may strengthen before reaching the northern Gulf of Mexico in two days, the forecast said. Tropical storm-force winds extend as far as 160 miles from the center.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
Read more...
Aug. 30 (Bloomberg) -- Valero Energy Corp., the largest U.S. refiner, reduced production at four refineries in Texas and Louisiana as Hurricane Gustav intensified before a forecast strike in Louisiana in two days.
Refineries in St. Charles, Louisiana, as well as Port Arthur, Texas City and Houston in Texas are operating at reduced rates, spokesman Bill Day said today in an e-mailed message. Output at two refineries in Corpus Christi, Texas, isn't curtailed, he said.
Valero expects to decide later today whether to shut down units and evacuate staff, Day said. The company has shut service stations in southern Louisiana parishes because of evacuation orders, he said.
``Devastating storm-surge flooding'' is possible based on forecasts, St. Charles Parish officials said in a statement. Levees guarding the parish to the east may be breached, it said. Officials urged residents to leave before a planned mandatory evacuation at noon local time.
Valero's refinery in the parish can process 186,000 barrels a day of crude oil, according to the U.S. Energy Department. Daily capacity is 210,000 barrels at Texas City and 85,000 barrels at Houston, according to the department. Port Arthur's capacity is 325,000 barrels a day, according to Valero.
Gustav, now a Category 3 hurricane with winds of almost 125 miles (205 kilometers) per hour, picked up speed as it headed toward western Cuba and the U.S. Gulf Coast, the National Hurricane Center said in a bulletin. The storm was about 185 miles east of the western tip of Cuba at 11 a.m. New York time. A storm surge of 19 feet is possible at landfall in Cuba.
Gustav may strengthen before reaching the northern Gulf of Mexico in two days, the forecast said. Tropical storm-force winds extend as far as 160 miles from the center.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
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Louisiana Offshore Oil Port Is Closed as Gustav Approaches Cuba
By Jim Polson
Aug. 30 (Bloomberg) -- The Louisiana Offshore Oil Port, the biggest U.S. oil import terminal, shut at 9:30 a.m. local time today and staff are evacuating ahead of Hurricane Gustav, expected to reach the area in about two days.
``It's time to get our people off the offshore platform,'' spokeswoman Barbara Hestermann said today in an interview. Shipments to customers continue from the port's 53 million barrels of storage on shore, she said.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
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Aug. 30 (Bloomberg) -- The Louisiana Offshore Oil Port, the biggest U.S. oil import terminal, shut at 9:30 a.m. local time today and staff are evacuating ahead of Hurricane Gustav, expected to reach the area in about two days.
``It's time to get our people off the offshore platform,'' spokeswoman Barbara Hestermann said today in an interview. Shipments to customers continue from the port's 53 million barrels of storage on shore, she said.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
Read more...
Louisiana Begins Evacuation as Gustav Gains Strength
By Jerry Hart and Brian K. Sullivan
Aug. 30 (Bloomberg) -- Louisiana began voluntary evacuations as Hurricane Gustav strengthened off western Cuba and threatened to become the biggest storm to strike the U.S. Gulf Coast since Katrina and Rita three years ago.
New Orleans evacuated about 1,200 people by bus and 1,500 more by train, Mayor C. Ray Nagin said today at a press conference. The storm may reach Louisiana as early as Sept. 1 before moving into eastern Texas, the National Hurricane Center in Miami said.
``My wife is panicked,'' 40-year-old Kurt Wells said as he packed his family's two cars in front of their St. Roch Avenue home in New Orleans. ``She says she doesn't want to die here.''
Governor Bobby Jindal said the state may make highways one way leaving the area as early as today. Traffic was bumper-to- bumper leading away from the city.
The U.S. National Hurricane Center declared Gustav an ``extremely dangerous'' Category 4 hurricane after maximum winds reached 145 miles (230 kilometers) an hour as of 2 p.m. Miami time. The storm is moving northwest at 14 mph and will pass over Cuba today before it emerges into the southern Gulf of Mexico tomorrow. It will strengthen and reach the Louisiana coast the night of Sept. 1, the hurricane center said.
``Gustav has the potential to generate much more damage than Katrina did,'' said Jim Rouiller, a meteorologist with Planalytics Inc., a forecaster in Wayne, Pennsylvania.
Deaths
Gustav led to the deaths of 51 people in Haiti, Agence France-Presse reported, and at least 11 in Jamaica. In the Dominican Republic, eight people died in a landslide, the country's Center of Emergency Operations said on its Web site.
In New Orleans, 13 city buses lined up across from City Hall, a block away from the Louisiana Superdome, where people took shelter in 2005.
Valerie Arnold, 40, sat on the sidewalk smoking a cigarette before her bus left. She had three sets of clothes and her state- issued identification card. She didn't know where the bus was headed. What worried her was whether the city will bring her back, said Arnold, a hairdresser.
``Everyone who is transported will have a ride back to the city,'' Nagin said. Evacuees are going to Shreveport and Alexandria, the mayor said.
On Canal Street, usually thick with tourists, few pedestrians are out. Some businesses are boarded up with sheets of plywood.
`The Plague'
``It's starting to look like the plague here,'' a passing bicyclist yells.
Ace Hardware Corp. stocked an Alabama warehouse with 120 days' worth of batteries, generators, flashlights and other emergency supplies for its 173 stores in Gustav's path, said Joe McMahon, an inventory manager.
``I don't know if people are having flashbacks to Katrina,'' McMahon said. ``But we're seeing really large demand.''
At a Wal-Mart Supercenter on College Drive in Baton Rouge, the state capital about 60 miles northwest of New Orleans, Bernadette McLeod was stocking up.
``I am a Katrina survivor,'' said McLeod, who used to live in New Orleans. She was preparing to leave for Dallas to stay with her daughter. ``I am going to let Gustav have his way, and Bernadette is on her way.''
The Louisiana evacuations are voluntary so far. Residents will be required to leave coastal areas late today, and Alabama, Mississippi and Texas will follow tomorrow, Harvey Johnson, FEMA's deputy administrator, said in Washington yesterday.
Mandatory Evacuation
If the storm continues on its current path, New Orleans will order a mandatory evacuation, Nagin said today. People who don't leave after that must stay on their property, he said.
``Get out. And the next time you hear from us it is going to be `Get the heck out,''' Nagin said. He encouraged tourists to leave right away.
The parishes of St. Charles and St. Bernard expect to order mandatory evacuations today, they said on their Web sites. Calcasieu Parish expects mandatory relocations tomorrow.
Oil companies including Royal Dutch Shell Plc and BP Plc are evacuating workers and shutting offshore platforms and refineries along the coast. The Gulf produces about a quarter of U.S. oil and 14 percent of natural gas, government data show.
The Federal Emergency Management Administration assembled 2.4 million liters of water, 4 million meals and 267 truckloads of bedding earlier this week. It's working with state and local officials to avoid the criticism it got for being unprepared in 2005, when Katrina flooded New Orleans and killed 1,800 people.
Hospital Staff
Tulane Medical Center Chief Executive Officer Robert Lynch said the hospital in New Orleans will retain about 325 doctors, nurses and staff during the storm. He said it rebuilt generators after Katrina and could function for a week on its own.
``We are much better prepared to deal with a hurricane than we were before Katrina,'' Lynch said.
The Army Corps of Engineers stockpiled 400 sandbags weighing as much as 7,000 pounds (3,175 kilograms) each to repair any New Orleans levees that are breached by Gustav, said Bill Irwin, the Corps's FEMA liaison.
Katrina damaged the ring of barriers surrounding the below- sea-level city in 2005, flooded 80 percent of the area and forced 250,000 residents to flee. It was the most destructive storm in U.S. history, causing $80 billion of damage.
George W. Bush declared a state of emergency for Louisiana yesterday and ordered federal aid to supplement state and local efforts. Texas, Mississippi and Louisiana issued state emergency and disaster declarations and alerted National Guard units.
The hurricane center also is monitoring Tropical Storm Hanna, which was about 265 miles east of Grand Turk and moving west at 8 mph as of 2 p.m. Miami time. The system had maximum sustained winds of 50 mph, the center said.
In Baton Rouge, today's football game between Louisiana State University and Appalachian State University was rescheduled to 10 a.m. from 4 p.m. Back at the Wal-Mart Supercenter, Pam Calhoun was helping Arnie Hook load his SUV before the game.
``A lot of people are coming up from New Orleans and going to the game and then staying,'' Calhoun said. ``It's part of the evacuation plan.''
To contact the reporter on this story: Jerry Hart in Miami at jhart@bloomberg.net; Brian K. Sullivan in New Orleans at bsullivan10@bloomberg.net.
Read more...
Aug. 30 (Bloomberg) -- Louisiana began voluntary evacuations as Hurricane Gustav strengthened off western Cuba and threatened to become the biggest storm to strike the U.S. Gulf Coast since Katrina and Rita three years ago.
New Orleans evacuated about 1,200 people by bus and 1,500 more by train, Mayor C. Ray Nagin said today at a press conference. The storm may reach Louisiana as early as Sept. 1 before moving into eastern Texas, the National Hurricane Center in Miami said.
``My wife is panicked,'' 40-year-old Kurt Wells said as he packed his family's two cars in front of their St. Roch Avenue home in New Orleans. ``She says she doesn't want to die here.''
Governor Bobby Jindal said the state may make highways one way leaving the area as early as today. Traffic was bumper-to- bumper leading away from the city.
The U.S. National Hurricane Center declared Gustav an ``extremely dangerous'' Category 4 hurricane after maximum winds reached 145 miles (230 kilometers) an hour as of 2 p.m. Miami time. The storm is moving northwest at 14 mph and will pass over Cuba today before it emerges into the southern Gulf of Mexico tomorrow. It will strengthen and reach the Louisiana coast the night of Sept. 1, the hurricane center said.
``Gustav has the potential to generate much more damage than Katrina did,'' said Jim Rouiller, a meteorologist with Planalytics Inc., a forecaster in Wayne, Pennsylvania.
Deaths
Gustav led to the deaths of 51 people in Haiti, Agence France-Presse reported, and at least 11 in Jamaica. In the Dominican Republic, eight people died in a landslide, the country's Center of Emergency Operations said on its Web site.
In New Orleans, 13 city buses lined up across from City Hall, a block away from the Louisiana Superdome, where people took shelter in 2005.
Valerie Arnold, 40, sat on the sidewalk smoking a cigarette before her bus left. She had three sets of clothes and her state- issued identification card. She didn't know where the bus was headed. What worried her was whether the city will bring her back, said Arnold, a hairdresser.
``Everyone who is transported will have a ride back to the city,'' Nagin said. Evacuees are going to Shreveport and Alexandria, the mayor said.
On Canal Street, usually thick with tourists, few pedestrians are out. Some businesses are boarded up with sheets of plywood.
`The Plague'
``It's starting to look like the plague here,'' a passing bicyclist yells.
Ace Hardware Corp. stocked an Alabama warehouse with 120 days' worth of batteries, generators, flashlights and other emergency supplies for its 173 stores in Gustav's path, said Joe McMahon, an inventory manager.
``I don't know if people are having flashbacks to Katrina,'' McMahon said. ``But we're seeing really large demand.''
At a Wal-Mart Supercenter on College Drive in Baton Rouge, the state capital about 60 miles northwest of New Orleans, Bernadette McLeod was stocking up.
``I am a Katrina survivor,'' said McLeod, who used to live in New Orleans. She was preparing to leave for Dallas to stay with her daughter. ``I am going to let Gustav have his way, and Bernadette is on her way.''
The Louisiana evacuations are voluntary so far. Residents will be required to leave coastal areas late today, and Alabama, Mississippi and Texas will follow tomorrow, Harvey Johnson, FEMA's deputy administrator, said in Washington yesterday.
Mandatory Evacuation
If the storm continues on its current path, New Orleans will order a mandatory evacuation, Nagin said today. People who don't leave after that must stay on their property, he said.
``Get out. And the next time you hear from us it is going to be `Get the heck out,''' Nagin said. He encouraged tourists to leave right away.
The parishes of St. Charles and St. Bernard expect to order mandatory evacuations today, they said on their Web sites. Calcasieu Parish expects mandatory relocations tomorrow.
Oil companies including Royal Dutch Shell Plc and BP Plc are evacuating workers and shutting offshore platforms and refineries along the coast. The Gulf produces about a quarter of U.S. oil and 14 percent of natural gas, government data show.
The Federal Emergency Management Administration assembled 2.4 million liters of water, 4 million meals and 267 truckloads of bedding earlier this week. It's working with state and local officials to avoid the criticism it got for being unprepared in 2005, when Katrina flooded New Orleans and killed 1,800 people.
Hospital Staff
Tulane Medical Center Chief Executive Officer Robert Lynch said the hospital in New Orleans will retain about 325 doctors, nurses and staff during the storm. He said it rebuilt generators after Katrina and could function for a week on its own.
``We are much better prepared to deal with a hurricane than we were before Katrina,'' Lynch said.
The Army Corps of Engineers stockpiled 400 sandbags weighing as much as 7,000 pounds (3,175 kilograms) each to repair any New Orleans levees that are breached by Gustav, said Bill Irwin, the Corps's FEMA liaison.
Katrina damaged the ring of barriers surrounding the below- sea-level city in 2005, flooded 80 percent of the area and forced 250,000 residents to flee. It was the most destructive storm in U.S. history, causing $80 billion of damage.
George W. Bush declared a state of emergency for Louisiana yesterday and ordered federal aid to supplement state and local efforts. Texas, Mississippi and Louisiana issued state emergency and disaster declarations and alerted National Guard units.
The hurricane center also is monitoring Tropical Storm Hanna, which was about 265 miles east of Grand Turk and moving west at 8 mph as of 2 p.m. Miami time. The system had maximum sustained winds of 50 mph, the center said.
In Baton Rouge, today's football game between Louisiana State University and Appalachian State University was rescheduled to 10 a.m. from 4 p.m. Back at the Wal-Mart Supercenter, Pam Calhoun was helping Arnie Hook load his SUV before the game.
``A lot of people are coming up from New Orleans and going to the game and then staying,'' Calhoun said. ``It's part of the evacuation plan.''
To contact the reporter on this story: Jerry Hart in Miami at jhart@bloomberg.net; Brian K. Sullivan in New Orleans at bsullivan10@bloomberg.net.
Read more...
Gustav Cuts Gulf Oil, Gas Output; Refining Curtailed
By Jim Polson
Aug. 30 (Bloomberg) -- Crude-oil and natural-gas shipments from the Gulf of Mexico plummeted, and Valero Energy Corp. and Royal Dutch Shell Plc cut refinery operations as Hurricane Gustav strengthened to a Category 4 storm on a course to strike Louisiana in two days.
BP Plc, Exxon Mobil Corp. and Shell, Europe's largest oil company, led producers shutting wells and whisking staff ashore. About 77 percent of Gulf oil production and 37 percent of natural-gas output was shut, the U.S. Minerals Management Service said in a statement today. The Louisiana Oil Port, the nation's largest crude-oil terminal, closed this morning.
The National Hurricane Center issued a hurricane watch from Texas to Florida, including Louisiana and New Orleans, at 5 p.m. New York time, adding that Gustav, an ``extremely dangerous'' storm, may intensify into a Category 5 hurricane within 24 hours. Gustav's winds were estimated at 150 miles (240 kilometers) per hour, and it is expected to pass through western Cuba into the Gulf overnight.
The New York Mercantile Exchange announced an extended trading session beginning at 2:30 p.m. tomorrow because of Gustav.
`Worst-Case' Scenario
``This storm will prove to be a worst-case scenario for the production region,'' Jim Rouiller, senior energy meteorologist for Planalytics.com, said today in an e-mailed message. ``This storm will be more dangerous than Katrina.''
Fields in the Gulf produce 1.3 million barrels a day of oil, about a quarter of U.S. production, and 7.4 billion cubic feet a day of natural gas, 14 percent of the total, government data show. Hurricane Katrina in 2005 closed 95 percent of regional offshore output and, along with Hurricane Rita, idled about 19 percent of U.S. refining capacity.
Valero, the largest U.S. refiner, slowed production at four refineries in Louisiana and Texas and said it may decide later today whether to shut units and evacuate staff. Three Louisiana parishes with refineries ordered mandatory evacuations today.
Refinery production slowed at some complexes owned by Shell and Motiva Enterprises LLC, its joint venture with Saudi Arabian Oil Co., Shell said in a statement on its Web site.
``The big question for the market is going to be how quickly after Gustav passes will the industry be able to recover and get back online,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC.
Pipelines Shut
Enbridge Inc., Canada's largest pipeline company, and its U.S. affiliate began closing conduits capable of bringing ashore 6.7 billion cubic feet a day of natural gas. Evacuation of Terrebonne Parish shut 550 million cubic feet a day of gas flow into the 10,500-mile (16,900-kilometer) Transco line to the U.S. northeast, owner Williams Cos. said in a statement.
Exxon Mobil, the largest publicly traded oil company, said today it had shut platforms producing 5,000 barrels of oil and 50 million cubic feet of natural gas.
BP, Europe's second-largest oil company, said it shut Gulf production and evacuated all staff by noon local time today. Its normal production is equivalent to 290,000 barrels a day from the region.
Anadarko Petroleum Corp., the second-largest U.S. independent oil producer, said in a statement on its Web site today that it had shut the equivalent of 105,000 barrels a day of production, with all of it to be closed tomorrow night.
Shell said it would shut daily production equivalent to 510,000 barrels of oil today. Marathon Oil Corp. and ConocoPhillips said they have shut and evacuated all Gulf production platforms.
Worker Evacuations
Workers from 45 rigs and 223 production platforms were evacuated as of 12:30 p.m. today, the Minerals Management Service said in a statement on its Web site. About 998,000 barrels of daily oil production have been shutdown in preparation for the storm, as well as 2.75 billion cubic feet of gas.
Crude oil futures on the Nymex fell 13 cents to $115.46 a barrel yesterday on speculation supplies will be adequate to meet demand after the storm passes. Natural gas futures fell 10.7 cents to $7.943 per million British thermal units.
Most U.S. financial markets are closed until Sept. 2 for the Labor Day holiday. Nymex said in a statement late yesterday that electronic trading will begin at 2:30 p.m. New York time tomorrow with trades dated Sept. 2.
Valero refineries in St. Charles, Louisiana, as well as Port Arthur, Texas City and Houston in Texas are operating at reduced rates, spokesman Bill Day said today in an e-mailed message.
LOOP Shut
The Louisiana Offshore Oil Port shut at 9:30 a.m. local time today.
``It's time to get our people off the offshore platform,'' spokeswoman Barbara Hestermann said today in an interview.
Shipments to customers continue from the port's 53 million barrels of storage on shore, she said.
Hurricanes Katrina and Rita in 2005 cut supplies for months. About 27 percent of Gulf oil production and 19 percent of gas output was still shut in January 2006, the Minerals Management Service reported.
Rising waters from a Category 4 storm can cut escape routes as early as five hours before landfall, with flooding as much as six miles inland. The coastal storm surge may reach 18 feet, and the winds can rip away roofs and walls of homes, according to the National Hurricane Center.
Category 5
A Category 5 storm can destroy the roofs of industrial buildings, flatten all trees and homes, and drive a storm surge above 18 feet. Only three Category 5 storms, Andrew in 1992, Camille in 1969, and the Labor Day Hurricane of 1935, have made landfall in the U.S. since records began.
At its forecast track and intensity, Gustav would drive a 20-foot storm surge topped by heavy waves across southeastern Louisiana, Rouiller of Planalytics.com said. ``The untested levees at New Orleans will be overwhelmed and may fail.''
A second Atlantic cyclone, Tropical Storm Hanna, was moving west-northwest to the Turks and Caicos Islands of the Caribbean without intensifying, the National Hurricane Center said.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
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Aug. 30 (Bloomberg) -- Crude-oil and natural-gas shipments from the Gulf of Mexico plummeted, and Valero Energy Corp. and Royal Dutch Shell Plc cut refinery operations as Hurricane Gustav strengthened to a Category 4 storm on a course to strike Louisiana in two days.
BP Plc, Exxon Mobil Corp. and Shell, Europe's largest oil company, led producers shutting wells and whisking staff ashore. About 77 percent of Gulf oil production and 37 percent of natural-gas output was shut, the U.S. Minerals Management Service said in a statement today. The Louisiana Oil Port, the nation's largest crude-oil terminal, closed this morning.
The National Hurricane Center issued a hurricane watch from Texas to Florida, including Louisiana and New Orleans, at 5 p.m. New York time, adding that Gustav, an ``extremely dangerous'' storm, may intensify into a Category 5 hurricane within 24 hours. Gustav's winds were estimated at 150 miles (240 kilometers) per hour, and it is expected to pass through western Cuba into the Gulf overnight.
The New York Mercantile Exchange announced an extended trading session beginning at 2:30 p.m. tomorrow because of Gustav.
`Worst-Case' Scenario
``This storm will prove to be a worst-case scenario for the production region,'' Jim Rouiller, senior energy meteorologist for Planalytics.com, said today in an e-mailed message. ``This storm will be more dangerous than Katrina.''
Fields in the Gulf produce 1.3 million barrels a day of oil, about a quarter of U.S. production, and 7.4 billion cubic feet a day of natural gas, 14 percent of the total, government data show. Hurricane Katrina in 2005 closed 95 percent of regional offshore output and, along with Hurricane Rita, idled about 19 percent of U.S. refining capacity.
Valero, the largest U.S. refiner, slowed production at four refineries in Louisiana and Texas and said it may decide later today whether to shut units and evacuate staff. Three Louisiana parishes with refineries ordered mandatory evacuations today.
Refinery production slowed at some complexes owned by Shell and Motiva Enterprises LLC, its joint venture with Saudi Arabian Oil Co., Shell said in a statement on its Web site.
``The big question for the market is going to be how quickly after Gustav passes will the industry be able to recover and get back online,'' said Andy Lipow, president of Houston-based Lipow Oil Associates LLC.
Pipelines Shut
Enbridge Inc., Canada's largest pipeline company, and its U.S. affiliate began closing conduits capable of bringing ashore 6.7 billion cubic feet a day of natural gas. Evacuation of Terrebonne Parish shut 550 million cubic feet a day of gas flow into the 10,500-mile (16,900-kilometer) Transco line to the U.S. northeast, owner Williams Cos. said in a statement.
Exxon Mobil, the largest publicly traded oil company, said today it had shut platforms producing 5,000 barrels of oil and 50 million cubic feet of natural gas.
BP, Europe's second-largest oil company, said it shut Gulf production and evacuated all staff by noon local time today. Its normal production is equivalent to 290,000 barrels a day from the region.
Anadarko Petroleum Corp., the second-largest U.S. independent oil producer, said in a statement on its Web site today that it had shut the equivalent of 105,000 barrels a day of production, with all of it to be closed tomorrow night.
Shell said it would shut daily production equivalent to 510,000 barrels of oil today. Marathon Oil Corp. and ConocoPhillips said they have shut and evacuated all Gulf production platforms.
Worker Evacuations
Workers from 45 rigs and 223 production platforms were evacuated as of 12:30 p.m. today, the Minerals Management Service said in a statement on its Web site. About 998,000 barrels of daily oil production have been shutdown in preparation for the storm, as well as 2.75 billion cubic feet of gas.
Crude oil futures on the Nymex fell 13 cents to $115.46 a barrel yesterday on speculation supplies will be adequate to meet demand after the storm passes. Natural gas futures fell 10.7 cents to $7.943 per million British thermal units.
Most U.S. financial markets are closed until Sept. 2 for the Labor Day holiday. Nymex said in a statement late yesterday that electronic trading will begin at 2:30 p.m. New York time tomorrow with trades dated Sept. 2.
Valero refineries in St. Charles, Louisiana, as well as Port Arthur, Texas City and Houston in Texas are operating at reduced rates, spokesman Bill Day said today in an e-mailed message.
LOOP Shut
The Louisiana Offshore Oil Port shut at 9:30 a.m. local time today.
``It's time to get our people off the offshore platform,'' spokeswoman Barbara Hestermann said today in an interview.
Shipments to customers continue from the port's 53 million barrels of storage on shore, she said.
Hurricanes Katrina and Rita in 2005 cut supplies for months. About 27 percent of Gulf oil production and 19 percent of gas output was still shut in January 2006, the Minerals Management Service reported.
Rising waters from a Category 4 storm can cut escape routes as early as five hours before landfall, with flooding as much as six miles inland. The coastal storm surge may reach 18 feet, and the winds can rip away roofs and walls of homes, according to the National Hurricane Center.
Category 5
A Category 5 storm can destroy the roofs of industrial buildings, flatten all trees and homes, and drive a storm surge above 18 feet. Only three Category 5 storms, Andrew in 1992, Camille in 1969, and the Labor Day Hurricane of 1935, have made landfall in the U.S. since records began.
At its forecast track and intensity, Gustav would drive a 20-foot storm surge topped by heavy waves across southeastern Louisiana, Rouiller of Planalytics.com said. ``The untested levees at New Orleans will be overwhelmed and may fail.''
A second Atlantic cyclone, Tropical Storm Hanna, was moving west-northwest to the Turks and Caicos Islands of the Caribbean without intensifying, the National Hurricane Center said.
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
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Dollar Posts Biggest Monthly Gain Since Euro Debuted in 1999
By Ye Xie
Aug. 30 (Bloomberg) -- The dollar posted its biggest monthly advance against the euro since the European currency's 1999 debut on evidence economic weakness that began in the U.S. spread and as crude oil prices declined.
The greenback increased against all of the other major currencies in August, climbing for a fifth straight month versus the yen. The pound depreciated the most against dollar since 1992, when financier George Soros made $1 billion breaking the Bank of England's defense of the British currency.
``The situation in the rest of the world is deteriorating much faster than the market was expecting,'' said MatthewStrauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets, in an interview on Bloomberg Television. ``The gains in the U.S. dollar were more by default.''
The dollar climbed 6.3 percent to $1.4673 per euro yesterday, from $1.5603 on July 31. It touched $1.4571 on Aug. 26, the strongest level since Feb. 14. The U.S. currency advanced 0.8 percent to 108.80 yen, from 107.91, in the longest stretch of monthly gains since January 2002. The euro fell 5.2 percent to 159.40 yen, from 168.39, the biggest monthly drop since March 2004.
The ICE futures exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, rose 5.3 percent this month. It reached 77.619 on Aug. 26, the highest this year.
Europe's GDP
Europe's gross domestic product shrank 0.2 percent in the second quarter, the first contraction since the 15-nation common currency was introduced in 1999, the European Union's statistics office said this month. Annual inflation eased to 3.8 percent in August, from 4 percent the prior month. The ECB tries to keep inflation just below 2 percent.
``There's clearly a downward trend for growth and inflation,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``That argues for the euro to stay under pressure.''
Traders stepped up bets that the European Central Bank will reduce borrowing costs next year. The implied yield on the September 2009 Euribor futures contract fell to 4.48 percent yesterday from 4.63 percent at the end of July. The yield averaged 18 basis points above the ECB's benchmark from 1999 to August 2007.
The ECB will hold its main refinancing rate at a seven-year high of 4.25 percent at its meeting Sept. 4, according to all but one of the 53 analysts surveyed by Bloomberg News. Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, forecasts a quarter-point reduction.
Weaker Sterling
Sterling fell 8.2 percent to $1.8209 in August as a Nationwide Building Society report showed this week that the average value of a home in the U.K. fell 10.5 percent in August to 164,654 pounds ($301,500), the biggest drop since the last quarter of 1990. The pound dropped 2.3 percent to 80.52 pence per euro.
All of the 61 analysts surveyed by Bloomberg News forecast that the Bank of England will hold its target lending rate at 5 percent on Sept. 4.
Federal funds futures on the Chicago Board of Trade show a 19 percent chance that the Federal Reserve will increase its 2 percent benchmark by at least a quarter-percentage point by its Dec. 16 meeting. The odds were 73 percent a month ago. Policy makers next meet Sept. 16.
Fed Minutes
Policy makers agreed this month that their next change in interest rates will be to raise them, while reaching no conclusion on the timing of such a decision, said minutes of their Aug. 5 meeting released this week.
U.S. payrolls fell by 75,000 in August after a drop of 51,000 in the previous month, according to the median forecast of 61 economists surveyed by Bloomberg News. The unemployment rate is forecast to hold at 5.7 percent. The Labor Department is scheduled to release its report Sept. 5.
Crude oil for October delivery fell 7.6 percent this month to $115.55 a barrel. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations.
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
Read more...
Aug. 30 (Bloomberg) -- The dollar posted its biggest monthly advance against the euro since the European currency's 1999 debut on evidence economic weakness that began in the U.S. spread and as crude oil prices declined.
The greenback increased against all of the other major currencies in August, climbing for a fifth straight month versus the yen. The pound depreciated the most against dollar since 1992, when financier George Soros made $1 billion breaking the Bank of England's defense of the British currency.
``The situation in the rest of the world is deteriorating much faster than the market was expecting,'' said MatthewStrauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets, in an interview on Bloomberg Television. ``The gains in the U.S. dollar were more by default.''
The dollar climbed 6.3 percent to $1.4673 per euro yesterday, from $1.5603 on July 31. It touched $1.4571 on Aug. 26, the strongest level since Feb. 14. The U.S. currency advanced 0.8 percent to 108.80 yen, from 107.91, in the longest stretch of monthly gains since January 2002. The euro fell 5.2 percent to 159.40 yen, from 168.39, the biggest monthly drop since March 2004.
The ICE futures exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, rose 5.3 percent this month. It reached 77.619 on Aug. 26, the highest this year.
Europe's GDP
Europe's gross domestic product shrank 0.2 percent in the second quarter, the first contraction since the 15-nation common currency was introduced in 1999, the European Union's statistics office said this month. Annual inflation eased to 3.8 percent in August, from 4 percent the prior month. The ECB tries to keep inflation just below 2 percent.
``There's clearly a downward trend for growth and inflation,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``That argues for the euro to stay under pressure.''
Traders stepped up bets that the European Central Bank will reduce borrowing costs next year. The implied yield on the September 2009 Euribor futures contract fell to 4.48 percent yesterday from 4.63 percent at the end of July. The yield averaged 18 basis points above the ECB's benchmark from 1999 to August 2007.
The ECB will hold its main refinancing rate at a seven-year high of 4.25 percent at its meeting Sept. 4, according to all but one of the 53 analysts surveyed by Bloomberg News. Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, forecasts a quarter-point reduction.
Weaker Sterling
Sterling fell 8.2 percent to $1.8209 in August as a Nationwide Building Society report showed this week that the average value of a home in the U.K. fell 10.5 percent in August to 164,654 pounds ($301,500), the biggest drop since the last quarter of 1990. The pound dropped 2.3 percent to 80.52 pence per euro.
All of the 61 analysts surveyed by Bloomberg News forecast that the Bank of England will hold its target lending rate at 5 percent on Sept. 4.
Federal funds futures on the Chicago Board of Trade show a 19 percent chance that the Federal Reserve will increase its 2 percent benchmark by at least a quarter-percentage point by its Dec. 16 meeting. The odds were 73 percent a month ago. Policy makers next meet Sept. 16.
Fed Minutes
Policy makers agreed this month that their next change in interest rates will be to raise them, while reaching no conclusion on the timing of such a decision, said minutes of their Aug. 5 meeting released this week.
U.S. payrolls fell by 75,000 in August after a drop of 51,000 in the previous month, according to the median forecast of 61 economists surveyed by Bloomberg News. The unemployment rate is forecast to hold at 5.7 percent. The Labor Department is scheduled to release its report Sept. 5.
Crude oil for October delivery fell 7.6 percent this month to $115.55 a barrel. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations.
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
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European Stocks Snap Two-Week Drop; Credit Agricole, CRH Climb
By Henrietta Rumberger
Aug. 30 (Bloomberg) -- European stocks climbed for the first time in three weeks after a government report showed the U.S. economy expanded more than previously estimated last quarter and concern eased that banks need more capital.
CRH Plc, the world's second-biggest distributor of building materials, paced an advance among companies that depend on sales in North America. Credit Agricole SA led banks higher after reporting that a measure of financial strength held steady. Royal BAM Groep NV, the largest Dutch construction company, rallied 13 percent after posting second-quarter earnings that beat analysts' estimates and raising its profit forecast.
Europe's Dow Jones Stoxx 600 Index added 1.5 percent to 288.18, bringing the gain in August to 1.6 percent. The measure is still down 21 percent this year after asset writedowns and credit losses at banks topped $500 billion worldwide, threatening to push the U.S. economy into recession.
``Investors seem to be relieved that the worst-case scenario for the U.S. economy so far hasn't come true,'' said Carsten Klude, an investment strategist at M.M. Warburg & Co. in Hamburg, which oversees the equivalent of $25 billion. ``The GDP data triggered a stocks rally.''
National benchmark indexes advanced in all 18 western European markets, except Greece and Iceland. France's CAC 40 gained 1.9 percent. The U.K.'s FTSE 100 added 2.4 percent, while Germany's DAX climbed 1.3 percent.
Economic Growth
The U.S. economy grew at a 3.3 percent annual rate in the second quarter, surpassing last month's estimate of 1.9 percent, the Commerce Department said Aug. 28. Record exports and a smaller decline in inventories helped boost growth. Economists had predicted a 2.7 percent rate, according to the median estimate in a Bloomberg News survey.
``The U.S. data supported the market, implying that the world's largest economy may not fall into as deep a recession as some investors feared,'' Thomas Koerfgen, a money manager at SEB Asset Management in Frankfurt, said in a Bloomberg Television interview.
Gains in the Stoxx 600 were limited by carmakers including Renault SA and Bayerische Motoren Werke AG as crude climbed above $117 a barrel. Oil producers evacuated rigs before the arrival of Gustav, forecast to be the largest hurricane in the Gulf of Mexico since Katrina.
CRH increased 4.6 percent. The company gets about 49 percent of its revenue in the Americas, according to Bloomberg data.
Farm Profits
Syngenta AG rose 3.7 percent. The world's largest maker of agricultural chemicals generates 34 percent of its sales in the North American Free Trade Agreement zone, Bloomberg data shows. K+S AG, Europe's biggest producer of potash used in fertilizers, rallied 7.8 percent.
The U.S. Department of Agriculture said farm profits in 2008 will be the highest ever on record corn, wheat and soybean prices. Higher grain prices tend to prompt farmers to increase spending on crop protection. Pesticides, fungicides, herbicides and other chemicals account for about 80 percent of Syngenta's annual revenue.
Credit Agricole advanced 7 percent. France's third-biggest bank, which raised 5.9 billion euros ($8.7 billion) last month, said it's ``financially well-armed'' after lifting its Tier 1 capital ratio above its target at the end of the quarter.
Barclays Plc, the U.K.'s third-largest bank, climbed 8 percent. UBS AG, the European bank hardest hit by the U.S. subprime mortgage contagion, added 5.6 percent.
Worst Performers
The Stoxx 600 Banks Index is down 30 percent this year, the worst performance among 18 industry groups, as financial firms worldwide raised more than $353 billion to replenish capital. Analysts estimate banks' earnings will decline 24 percent in 2008, according to data compiled by Bloomberg News.
BAM climbed 13 percent. Second-quarter profit increased 14 percent to 79.4 million euros, exceeding the average estimate of 64.8 million euros in a Bloomberg survey. BAM also lifted its full-year profit forecast 4 percent to at least 260 million euros as governments in the U.K. and the Netherlands increase spending on schools and hospitals.
Kingspan Plc gained 6.9 percent. Europe's largest maker of flooring and insulation panels reported first-half profit and sales on Aug. 27 that beat projections and analysts said full- year earnings may decline less than predicted.
Taylor Wimpey Plc, the U.K.'s biggest homebuilder, jumped 19 percent as Building magazine reported that lenders have agreed to relax loan conditions without requiring the company to raise new capital first.
Swiss Life Holding plunged 12 percent, the steepest decline in the Stoxx 600. Switzerland's largest life insurer said Aug. 28 it will miss 2008 profit targets and reiterated its interest in Germany's MLP AG.
Renault, France's second-biggest carmaker, lost 3.2 percent. BMW, the world's largest luxury carmaker, retreated 2.2 percent. Carmakers were the only industry group in the Stoxx 600 to decline, dropping 1.2 percent as crude oil headed for its biggest weekly gain in almost two months.
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.
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Aug. 30 (Bloomberg) -- European stocks climbed for the first time in three weeks after a government report showed the U.S. economy expanded more than previously estimated last quarter and concern eased that banks need more capital.
CRH Plc, the world's second-biggest distributor of building materials, paced an advance among companies that depend on sales in North America. Credit Agricole SA led banks higher after reporting that a measure of financial strength held steady. Royal BAM Groep NV, the largest Dutch construction company, rallied 13 percent after posting second-quarter earnings that beat analysts' estimates and raising its profit forecast.
Europe's Dow Jones Stoxx 600 Index added 1.5 percent to 288.18, bringing the gain in August to 1.6 percent. The measure is still down 21 percent this year after asset writedowns and credit losses at banks topped $500 billion worldwide, threatening to push the U.S. economy into recession.
``Investors seem to be relieved that the worst-case scenario for the U.S. economy so far hasn't come true,'' said Carsten Klude, an investment strategist at M.M. Warburg & Co. in Hamburg, which oversees the equivalent of $25 billion. ``The GDP data triggered a stocks rally.''
National benchmark indexes advanced in all 18 western European markets, except Greece and Iceland. France's CAC 40 gained 1.9 percent. The U.K.'s FTSE 100 added 2.4 percent, while Germany's DAX climbed 1.3 percent.
Economic Growth
The U.S. economy grew at a 3.3 percent annual rate in the second quarter, surpassing last month's estimate of 1.9 percent, the Commerce Department said Aug. 28. Record exports and a smaller decline in inventories helped boost growth. Economists had predicted a 2.7 percent rate, according to the median estimate in a Bloomberg News survey.
``The U.S. data supported the market, implying that the world's largest economy may not fall into as deep a recession as some investors feared,'' Thomas Koerfgen, a money manager at SEB Asset Management in Frankfurt, said in a Bloomberg Television interview.
Gains in the Stoxx 600 were limited by carmakers including Renault SA and Bayerische Motoren Werke AG as crude climbed above $117 a barrel. Oil producers evacuated rigs before the arrival of Gustav, forecast to be the largest hurricane in the Gulf of Mexico since Katrina.
CRH increased 4.6 percent. The company gets about 49 percent of its revenue in the Americas, according to Bloomberg data.
Farm Profits
Syngenta AG rose 3.7 percent. The world's largest maker of agricultural chemicals generates 34 percent of its sales in the North American Free Trade Agreement zone, Bloomberg data shows. K+S AG, Europe's biggest producer of potash used in fertilizers, rallied 7.8 percent.
The U.S. Department of Agriculture said farm profits in 2008 will be the highest ever on record corn, wheat and soybean prices. Higher grain prices tend to prompt farmers to increase spending on crop protection. Pesticides, fungicides, herbicides and other chemicals account for about 80 percent of Syngenta's annual revenue.
Credit Agricole advanced 7 percent. France's third-biggest bank, which raised 5.9 billion euros ($8.7 billion) last month, said it's ``financially well-armed'' after lifting its Tier 1 capital ratio above its target at the end of the quarter.
Barclays Plc, the U.K.'s third-largest bank, climbed 8 percent. UBS AG, the European bank hardest hit by the U.S. subprime mortgage contagion, added 5.6 percent.
Worst Performers
The Stoxx 600 Banks Index is down 30 percent this year, the worst performance among 18 industry groups, as financial firms worldwide raised more than $353 billion to replenish capital. Analysts estimate banks' earnings will decline 24 percent in 2008, according to data compiled by Bloomberg News.
BAM climbed 13 percent. Second-quarter profit increased 14 percent to 79.4 million euros, exceeding the average estimate of 64.8 million euros in a Bloomberg survey. BAM also lifted its full-year profit forecast 4 percent to at least 260 million euros as governments in the U.K. and the Netherlands increase spending on schools and hospitals.
Kingspan Plc gained 6.9 percent. Europe's largest maker of flooring and insulation panels reported first-half profit and sales on Aug. 27 that beat projections and analysts said full- year earnings may decline less than predicted.
Taylor Wimpey Plc, the U.K.'s biggest homebuilder, jumped 19 percent as Building magazine reported that lenders have agreed to relax loan conditions without requiring the company to raise new capital first.
Swiss Life Holding plunged 12 percent, the steepest decline in the Stoxx 600. Switzerland's largest life insurer said Aug. 28 it will miss 2008 profit targets and reiterated its interest in Germany's MLP AG.
Renault, France's second-biggest carmaker, lost 3.2 percent. BMW, the world's largest luxury carmaker, retreated 2.2 percent. Carmakers were the only industry group in the Stoxx 600 to decline, dropping 1.2 percent as crude oil headed for its biggest weekly gain in almost two months.
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.
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Pound Posts Monthly Loss as U.K. Consumer Confidence Stays Weak
By Lukanyo Mnyanda and Andrew MacAskill
Aug. 30 (Bloomberg) -- The pound fell to the lowest level in more than four months against the euro after a report showed consumer confidence held near a record low in August, strengthening the case for lower interest rates.
The pound also had its biggest monthly drop in almost 16 years versus the dollar yesterday after London-based research firm GfK NOP said a confidence index based on a survey of 2,001 people rose 3 points from July's minus 39, which was the weakest since the data began in 1974. Gilts rose, pushing the yield on the 10-year bond to near the lowest level since April.
``This is more bad news for sterling,'' said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``It underlines the picture we have that the U.K. economy is heading for a recession.'' The pound may drop to 81 pence per euro by year-end, he forecast.
The U.K. currency fell as much as 0.4 percent to 80.69 pence per euro, the weakest level since April 16. It dropped 2.3 percent in August, the steepest monthly decline since March. The pound fell to $1.8190, posting its biggest one-month drop since sinking 12 percent in October 1992.
Gilts rose for a second month, with the 10-year note yield falling 1 basis point to 4.48 percent, down from 4.81 percent July 31. The yield on the two-year gilt, which is more sensitive to interest-rate expectations, fell 2 basis points to 4.51 percent, taking its decline in the past month to 38 basis points. Yields move inversely to bond prices.
Higher Rates
The confidence data, together with a report showing luxury- home values registered their first annual fall in five years this month, reinforce speculation economic growth may slow enough for the Bank of England to cut its 5 percent benchmark interest rate.
The average value of houses and apartments in London's nine most-expensive neighborhoods dropped 1.6 percent from August 2007, broker Knight Frank LLP said yesterday in a statement. Values fell 1.3 percent from July, a fourth monthly decline.
A report on Aug. 28 showed U.K. house prices had their biggest annual drop in almost two decades.
``All the data points to a slowdown greater than previously anticipated,'' said Grant Lewis, the London-based head of fixed- income research at Daiwa Securities SMBC Europe Ltd. ``This is providing a lift to gilts.''
Investors have been paring bets on higher rates, with the implied yield on the March short-sterling futures contract dropping 32 basis points in the past month to 5.19 percent. That's helped gilts outperform Treasuries and European bonds in the past two months.
Gilts have returned 3.9 percent since June 27, compared with 2.7 percent on European bonds and 1.9 percent on Treasuries, according to Merrill Lynch & Co.'s EMU Direct Government, U.K. Gilts and U.S. Treasury Master indexes.
Ten-year gilts yielded 66 basis points more than Treasuries of a similar maturity yesterday, compared with 117 basis points on Aug. 2, which was the most this year. The U.K. notes yielded 30 basis points more than similar-maturity German bunds. That gap has narrowed from 69 basis points on Feb. 25.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
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Aug. 30 (Bloomberg) -- The pound fell to the lowest level in more than four months against the euro after a report showed consumer confidence held near a record low in August, strengthening the case for lower interest rates.
The pound also had its biggest monthly drop in almost 16 years versus the dollar yesterday after London-based research firm GfK NOP said a confidence index based on a survey of 2,001 people rose 3 points from July's minus 39, which was the weakest since the data began in 1974. Gilts rose, pushing the yield on the 10-year bond to near the lowest level since April.
``This is more bad news for sterling,'' said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``It underlines the picture we have that the U.K. economy is heading for a recession.'' The pound may drop to 81 pence per euro by year-end, he forecast.
The U.K. currency fell as much as 0.4 percent to 80.69 pence per euro, the weakest level since April 16. It dropped 2.3 percent in August, the steepest monthly decline since March. The pound fell to $1.8190, posting its biggest one-month drop since sinking 12 percent in October 1992.
Gilts rose for a second month, with the 10-year note yield falling 1 basis point to 4.48 percent, down from 4.81 percent July 31. The yield on the two-year gilt, which is more sensitive to interest-rate expectations, fell 2 basis points to 4.51 percent, taking its decline in the past month to 38 basis points. Yields move inversely to bond prices.
Higher Rates
The confidence data, together with a report showing luxury- home values registered their first annual fall in five years this month, reinforce speculation economic growth may slow enough for the Bank of England to cut its 5 percent benchmark interest rate.
The average value of houses and apartments in London's nine most-expensive neighborhoods dropped 1.6 percent from August 2007, broker Knight Frank LLP said yesterday in a statement. Values fell 1.3 percent from July, a fourth monthly decline.
A report on Aug. 28 showed U.K. house prices had their biggest annual drop in almost two decades.
``All the data points to a slowdown greater than previously anticipated,'' said Grant Lewis, the London-based head of fixed- income research at Daiwa Securities SMBC Europe Ltd. ``This is providing a lift to gilts.''
Investors have been paring bets on higher rates, with the implied yield on the March short-sterling futures contract dropping 32 basis points in the past month to 5.19 percent. That's helped gilts outperform Treasuries and European bonds in the past two months.
Gilts have returned 3.9 percent since June 27, compared with 2.7 percent on European bonds and 1.9 percent on Treasuries, according to Merrill Lynch & Co.'s EMU Direct Government, U.K. Gilts and U.S. Treasury Master indexes.
Ten-year gilts yielded 66 basis points more than Treasuries of a similar maturity yesterday, compared with 117 basis points on Aug. 2, which was the most this year. The U.K. notes yielded 30 basis points more than similar-maturity German bunds. That gap has narrowed from 69 basis points on Feb. 25.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
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U.S. Stocks Drop for 2nd Week on Concern About Company Profits
By Jeff Kearns
Aug. 30 (Bloomberg) -- U.S. stocks fell for a second week as an advance in oil prices and lower-than-estimated earnings at Dell Inc. spurred concern a yearlong drop in profits isn't over.
Technology stocks in the Standard & Poor's 500 Index posted their biggest weekly loss since June after consumer spending slowed and Dell's earnings trailed forecasts. Makers of food and household goods dropped for a second week after Credit Suisse Group AG said it expects slower growth from Coca-Cola Co., while quarterly profit declined more than analysts projected at Brown- Forman Corp., the maker of Jack Daniel's whiskey.
``The profit picture doesn't look that good,'' said Brett Hammond, who helps oversee $420 billion as chief investment strategist for TIAA-CREF in New York. ``Optimistic earnings estimates may prove to be disappointing as we move into the third and fourth quarters, so we don't see evidence of a sustained equity rally.''
The S&P 500 lost 0.7 percent to 1,282.83, extending this year's retreat to 13 percent. The Dow Jones Industrial Average decreased 0.7 percent to 11,543.55. The Russell 2000 Index of small-cap stocks added 0.3 percent to 739.50, advancing for the seventh time in eight weeks.
Profits among S&P 500 companies may slip 1.1 percent in the third quarter from a year ago before rising 42 percent in the fourth, according to analyst estimates compiled by Bloomberg.
Technology Spending
Dell, the world's second-biggest personal-computer maker, slid the most in the S&P 500, losing 14 percent to $21.73, after it said the U.S. slump in technology spending moved abroad. Dell said ``continued conservatism'' from some U.S. clients is spreading to Europe and Asia, and at least four analysts cut their targets for Dell's stock price.
Technology companies lost 3 percent for the week's biggest decline among 10 industry groups in the S&P 500. The Nasdaq Composite Index, which gets 43 percent of its market value from computer stocks, lost 2 percent to 2,367.52, the most in two months.
Crude oil advanced a second week, adding 0.8 percent to $115.46 a barrel, as Hurricane Gustav approached the Gulf of Mexico and oil producers shut at least 6.6 percent of output in the region. Futures are up 57 percent from a year ago.
Spending by U.S. consumers slowed in July as the impact of the tax rebates faded and a pickup in inflation eroded Americans' buying power. Purchases rose 0.2 percent, one-third the pace in June, the Commerce Department said yesterday, while prices surged the most in 17 years.
McDonald's, Starbucks
McDonald's Corp., the world's largest restaurant company, fell 2.2 percent to $62, declining for a third week, the longest losing streak since January. Starbucks Corp., the biggest coffee- shop chain, slipped 3 percent at $15.56.
``Are there still going to be challenges on the economic front? Absolutely,'' Michael Strauss, who helps oversee $43 billion at Commonfund in Wilton, Connecticut. ``There's still severe macroeconomic risk.''
Consumer staples companies in the S&P 500 dropped 2 percent for the second-biggest decline in the broader index. Brown-Forman posted the second-steepest loss after profit trailed analysts' estimates because it wrote down the value of dead agave plants used for making tequila. The shares declined 6.1 percent to $72.01.
Coca-Cola slid 4.2 percent to $52.07 for the biggest retreat in the Dow average after Credit Suisse downgraded the stock and said a stronger dollar may hurt profit growth. The world's biggest soft-drink maker faces increased competition from rival PepsiCo Inc. while an appreciating dollar will slow sales in Europe, Credit Suisse said.
Freddie, Fannie
Financial stocks rose for the first time in three weeks after Freddie Mac and Fannie Mae, the biggest backers of mortgage loans, rallied and Lehman Brothers Holdings Inc. climbed on a report it may cut 1,000 jobs and form a new company to buy securities linked to home loans.
``Financials have started to stabilize,'' said John Wilson, co-director of equity strategy at Morgan Keegan & Co., which manages $120 billion in Memphis, Tennessee. ``The market's been encouraged by the fact that they've held up. If they were breaking down, we'd be a lot more nervous.''
Fannie Mae jumped 37 percent to $6.84 after Chief Executive Officer Daniel Mudd replaced three top deputies in an effort to restore investor confidence after record losses and a 90 percent drop in the shares. Freddie rose the most in the S&P 500, adding 61 percent to $4.51, as the pace of mortgage-related purchases slowed and Citigroup Inc. said the firm has enough capital to last through the year. Lehman added 12 percent to $16.09.
MBIA Inc. had the second biggest gain among S&P 500 stocks, jumping 59 percent to $16.22. The world's largest bond insurer agreed to reinsure $184 billion in municipal bonds for Financial Guaranty Insurance Co., winning new business after losing its top AAA rating.
Small Stocks Outperform
The Russell 2000 added 3.5 percent in August, outperforming other U.S. stock benchmarks. Ambac Financial Group Inc. led the advance, almost tripling from July, followed by R.H. Donnelley Corp. and Radian Group Inc.
The S&P 500 and the Dow average both had their best month since April, rising 1.6 percent and 1.3 percent, respectively. The Nasdaq climbed the most since May, adding 2.1 percent.
The benchmark index for U.S. stock options snapped a six- week losing streak, the longest in five years. The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 9.8 percent to 20.65. The index measures the cost of using options as insurance against declines in the S&P 500.
Economic Growth
The U.S. economy expanded at a faster pace than previously estimated in the second quarter, boosted by surging exports and a smaller decline in inventories. The 3.3 percent annualized increase in gross domestic product was higher than forecast and compares with an advance estimate of 1.9 percent last month, the Commerce Department said Aug. 28.
``The economy is holding up better than feared,'' said Jim Paulsen, who helps oversee about $220 billion as chief investment strategist at Wells Capital Management in Minneapolis. ``It's hard to keep scaring people to death over a recession that's just not happening.'' U.S. unemployment was probably unchanged at a four-year high of 5.7 percent as initial jobless claims slipped for a fifth month to 420,000, according to economist estimates in a Bloomberg survey before government reports due next week.
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
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Aug. 30 (Bloomberg) -- U.S. stocks fell for a second week as an advance in oil prices and lower-than-estimated earnings at Dell Inc. spurred concern a yearlong drop in profits isn't over.
Technology stocks in the Standard & Poor's 500 Index posted their biggest weekly loss since June after consumer spending slowed and Dell's earnings trailed forecasts. Makers of food and household goods dropped for a second week after Credit Suisse Group AG said it expects slower growth from Coca-Cola Co., while quarterly profit declined more than analysts projected at Brown- Forman Corp., the maker of Jack Daniel's whiskey.
``The profit picture doesn't look that good,'' said Brett Hammond, who helps oversee $420 billion as chief investment strategist for TIAA-CREF in New York. ``Optimistic earnings estimates may prove to be disappointing as we move into the third and fourth quarters, so we don't see evidence of a sustained equity rally.''
The S&P 500 lost 0.7 percent to 1,282.83, extending this year's retreat to 13 percent. The Dow Jones Industrial Average decreased 0.7 percent to 11,543.55. The Russell 2000 Index of small-cap stocks added 0.3 percent to 739.50, advancing for the seventh time in eight weeks.
Profits among S&P 500 companies may slip 1.1 percent in the third quarter from a year ago before rising 42 percent in the fourth, according to analyst estimates compiled by Bloomberg.
Technology Spending
Dell, the world's second-biggest personal-computer maker, slid the most in the S&P 500, losing 14 percent to $21.73, after it said the U.S. slump in technology spending moved abroad. Dell said ``continued conservatism'' from some U.S. clients is spreading to Europe and Asia, and at least four analysts cut their targets for Dell's stock price.
Technology companies lost 3 percent for the week's biggest decline among 10 industry groups in the S&P 500. The Nasdaq Composite Index, which gets 43 percent of its market value from computer stocks, lost 2 percent to 2,367.52, the most in two months.
Crude oil advanced a second week, adding 0.8 percent to $115.46 a barrel, as Hurricane Gustav approached the Gulf of Mexico and oil producers shut at least 6.6 percent of output in the region. Futures are up 57 percent from a year ago.
Spending by U.S. consumers slowed in July as the impact of the tax rebates faded and a pickup in inflation eroded Americans' buying power. Purchases rose 0.2 percent, one-third the pace in June, the Commerce Department said yesterday, while prices surged the most in 17 years.
McDonald's, Starbucks
McDonald's Corp., the world's largest restaurant company, fell 2.2 percent to $62, declining for a third week, the longest losing streak since January. Starbucks Corp., the biggest coffee- shop chain, slipped 3 percent at $15.56.
``Are there still going to be challenges on the economic front? Absolutely,'' Michael Strauss, who helps oversee $43 billion at Commonfund in Wilton, Connecticut. ``There's still severe macroeconomic risk.''
Consumer staples companies in the S&P 500 dropped 2 percent for the second-biggest decline in the broader index. Brown-Forman posted the second-steepest loss after profit trailed analysts' estimates because it wrote down the value of dead agave plants used for making tequila. The shares declined 6.1 percent to $72.01.
Coca-Cola slid 4.2 percent to $52.07 for the biggest retreat in the Dow average after Credit Suisse downgraded the stock and said a stronger dollar may hurt profit growth. The world's biggest soft-drink maker faces increased competition from rival PepsiCo Inc. while an appreciating dollar will slow sales in Europe, Credit Suisse said.
Freddie, Fannie
Financial stocks rose for the first time in three weeks after Freddie Mac and Fannie Mae, the biggest backers of mortgage loans, rallied and Lehman Brothers Holdings Inc. climbed on a report it may cut 1,000 jobs and form a new company to buy securities linked to home loans.
``Financials have started to stabilize,'' said John Wilson, co-director of equity strategy at Morgan Keegan & Co., which manages $120 billion in Memphis, Tennessee. ``The market's been encouraged by the fact that they've held up. If they were breaking down, we'd be a lot more nervous.''
Fannie Mae jumped 37 percent to $6.84 after Chief Executive Officer Daniel Mudd replaced three top deputies in an effort to restore investor confidence after record losses and a 90 percent drop in the shares. Freddie rose the most in the S&P 500, adding 61 percent to $4.51, as the pace of mortgage-related purchases slowed and Citigroup Inc. said the firm has enough capital to last through the year. Lehman added 12 percent to $16.09.
MBIA Inc. had the second biggest gain among S&P 500 stocks, jumping 59 percent to $16.22. The world's largest bond insurer agreed to reinsure $184 billion in municipal bonds for Financial Guaranty Insurance Co., winning new business after losing its top AAA rating.
Small Stocks Outperform
The Russell 2000 added 3.5 percent in August, outperforming other U.S. stock benchmarks. Ambac Financial Group Inc. led the advance, almost tripling from July, followed by R.H. Donnelley Corp. and Radian Group Inc.
The S&P 500 and the Dow average both had their best month since April, rising 1.6 percent and 1.3 percent, respectively. The Nasdaq climbed the most since May, adding 2.1 percent.
The benchmark index for U.S. stock options snapped a six- week losing streak, the longest in five years. The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 9.8 percent to 20.65. The index measures the cost of using options as insurance against declines in the S&P 500.
Economic Growth
The U.S. economy expanded at a faster pace than previously estimated in the second quarter, boosted by surging exports and a smaller decline in inventories. The 3.3 percent annualized increase in gross domestic product was higher than forecast and compares with an advance estimate of 1.9 percent last month, the Commerce Department said Aug. 28.
``The economy is holding up better than feared,'' said Jim Paulsen, who helps oversee about $220 billion as chief investment strategist at Wells Capital Management in Minneapolis. ``It's hard to keep scaring people to death over a recession that's just not happening.'' U.S. unemployment was probably unchanged at a four-year high of 5.7 percent as initial jobless claims slipped for a fifth month to 420,000, according to economist estimates in a Bloomberg survey before government reports due next week.
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
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Saturday, August 30, 2008
Asian Stocks Gain This Week as Economy, Profit Concerns Ease
By Chua Kong Ho and Shani Raja
Aug. 30 (Bloomberg) -- Asian stocks rose this week, snapping a four-week losing streak, after the U.S. economy grew faster than estimated and commodity producers reported higher profits.
Toyota Motor Corp., which gets more than a third of its sales from North America, and Honda Motor Co. advanced more than 3 percent after the U.S. economy grew an annualized 3.3 percent in the second quarter, more than economists expected. Cnooc, China's largest offshore oil explorer, climbed 13 percent while Woodside Petroleum Ltd. advanced 11 percent after they both posted earnings that beat analyst estimates.
``The U.S. economy just refuses to roll over, despite the most dire predictions,'' said Prasad Patkar, who helps manage the equivalent of about $1.8 billion at Platypus Asset Management in Sydney. ``Such a strong performance from the world's largest economy is a big positive.''
The MSCI Asia Pacific Index gained 3 percent to 125.30, the first weekly gain since five days ended July 25. All 10 industry groups advanced this week.
The measure has dropped 21 percent this year as soaring fuel prices damped consumer spending and eroded corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion.
Japan's Nikkei 200 Stock Average had the biggest weekly advance since July 25, gaining 3.2 percent. Benchmark indexes rose in most other Asian markets.
U.S. Economy
Toyota Motor gained 3.4 percent to 4,930 yen, while rival Honda, which depends on North America for more than half of its sales, climbed 4.1 percent to 3,580 yen. Nintendo Co. soared 5.3 percent to 518,000 yen after raising its full-year profit forecast by 26 percent, citing a weaker yen and sales of its DS and Wii players.
The U.S. government's initial estimate of economic growth was 1.9 percent last month and economists in a Bloomberg survey on average projected 2.7 percent. The data follows an unexpected advance in durable goods orders that helped boost U.S. stocks this week. Japan's factory output increased 0.9 percent in July from the previous month, beating the median estimate for a 0.3 percent decline in a Bloomberg survey.
Cnooc surged 13 percent to HK$12.06, after the Hong Kong- listed oil explorer said first-half profit jumped 89 percent to a record 27.54 billion yuan ($4 billion). That topped the median profit estimate of 22.1 billion yuan in a Bloomberg survey of analysts. Australia's Woodside, the country's second-largest oil and gas explorer, rallied 11 percent to A$63.05, as profit for the first six months climbed to A$1.02 billion, higher than the A$939.3 million median analyst forecast in a Bloomberg survey.
`Solid Results'
Sinofert Holdings Ltd., China's largest fertilizer importer, surged 23 percent to HK$5.11, the biggest weekly gain since January 2004. First-half profit more than doubled to 1.24 billion yuan ($181 million) as record food prices spurred farmers to increase plantings and helped it raise product prices, the Beijing-based company said Aug. 28.
``We're positive on commodities companies in the longer term as emerging-market usage of raw materials continues to grow,'' said Michael Foo, Singapore-based head of Asian portfolio management at Clariden Leu AG, which manages the equivalent of $126 billion in assets globally.
Cosco Pacific Ltd., Asia's third-largest container terminal operator, jumped 17 percent to HK$11.96, after boosting its first-half profit by 11 percent, as China's exports of toys, furniture and clothes drove sea-cargo traffic.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net
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Aug. 30 (Bloomberg) -- Asian stocks rose this week, snapping a four-week losing streak, after the U.S. economy grew faster than estimated and commodity producers reported higher profits.
Toyota Motor Corp., which gets more than a third of its sales from North America, and Honda Motor Co. advanced more than 3 percent after the U.S. economy grew an annualized 3.3 percent in the second quarter, more than economists expected. Cnooc, China's largest offshore oil explorer, climbed 13 percent while Woodside Petroleum Ltd. advanced 11 percent after they both posted earnings that beat analyst estimates.
``The U.S. economy just refuses to roll over, despite the most dire predictions,'' said Prasad Patkar, who helps manage the equivalent of about $1.8 billion at Platypus Asset Management in Sydney. ``Such a strong performance from the world's largest economy is a big positive.''
The MSCI Asia Pacific Index gained 3 percent to 125.30, the first weekly gain since five days ended July 25. All 10 industry groups advanced this week.
The measure has dropped 21 percent this year as soaring fuel prices damped consumer spending and eroded corporate profits, while writedowns and credit losses at the world's largest financial companies topped $500 billion.
Japan's Nikkei 200 Stock Average had the biggest weekly advance since July 25, gaining 3.2 percent. Benchmark indexes rose in most other Asian markets.
U.S. Economy
Toyota Motor gained 3.4 percent to 4,930 yen, while rival Honda, which depends on North America for more than half of its sales, climbed 4.1 percent to 3,580 yen. Nintendo Co. soared 5.3 percent to 518,000 yen after raising its full-year profit forecast by 26 percent, citing a weaker yen and sales of its DS and Wii players.
The U.S. government's initial estimate of economic growth was 1.9 percent last month and economists in a Bloomberg survey on average projected 2.7 percent. The data follows an unexpected advance in durable goods orders that helped boost U.S. stocks this week. Japan's factory output increased 0.9 percent in July from the previous month, beating the median estimate for a 0.3 percent decline in a Bloomberg survey.
Cnooc surged 13 percent to HK$12.06, after the Hong Kong- listed oil explorer said first-half profit jumped 89 percent to a record 27.54 billion yuan ($4 billion). That topped the median profit estimate of 22.1 billion yuan in a Bloomberg survey of analysts. Australia's Woodside, the country's second-largest oil and gas explorer, rallied 11 percent to A$63.05, as profit for the first six months climbed to A$1.02 billion, higher than the A$939.3 million median analyst forecast in a Bloomberg survey.
`Solid Results'
Sinofert Holdings Ltd., China's largest fertilizer importer, surged 23 percent to HK$5.11, the biggest weekly gain since January 2004. First-half profit more than doubled to 1.24 billion yuan ($181 million) as record food prices spurred farmers to increase plantings and helped it raise product prices, the Beijing-based company said Aug. 28.
``We're positive on commodities companies in the longer term as emerging-market usage of raw materials continues to grow,'' said Michael Foo, Singapore-based head of Asian portfolio management at Clariden Leu AG, which manages the equivalent of $126 billion in assets globally.
Cosco Pacific Ltd., Asia's third-largest container terminal operator, jumped 17 percent to HK$11.96, after boosting its first-half profit by 11 percent, as China's exports of toys, furniture and clothes drove sea-cargo traffic.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net
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Asian Currencies Decline in Month as Funds Dump Local Assets
By Aaron Pan and Kim Kyoungwha
Aug. 30 (Bloomberg) -- Asian currencies declined this month, led by South Korea's won, as overseas funds dumped stocks on concern that slowing global growth will damp demand for Asian exports just as central banks grapple with quickening inflation.
The won posted its biggest monthly decline since August 1998, Malaysia's ringgit had its worst month since the end of a dollar link in 2005 and Taiwan's dollar posted its biggest loss in seven years. Weakening currencies threaten to push up the cost of imports and accelerate inflation while decreasing demand for exports puts pressure on trade and current-account balances.
``It's been a bad environment for stocks with persistent inflation eroding the value of assets and people have been disappointed with the growth numbers coming out of the region,'' said Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney. ``With that comes a fading of confidence in currencies in the region as well.''
South Korea's currency dropped 0.7 percent to 1,089 against the dollar as of the 3 p.m. local close yesterday, according to Seoul Money Brokerage Services Ltd., taking the decline in August to 7.1 percent, Asia's worst performer. The ringgit, the second-biggest loser in the region, fell 4.1 percent this month and Taiwan's dollar 2.6 percent.
Overseas investors sold more stocks than they bought this month in Korea, Thailand, the Philippines, Taiwan and Indonesia, according to data compiled by Bloomberg. Global funds were so- called net sellers of Korean shares yesterday for a ninth day, stock exchange data showed.
Korea Intervention
Korea's central bank said yesterday that the current- account balance returned to a deficit in July as a weaker currency and rising oil prices increased the import bill. Policy makers have intervened in the market to curb losses in the currency, depleting the nation's foreign-exchange reserves.
Attempts by officials to halt the won's slide failed to keep the currency from reaching its lowest since 2004, said Kim Sung Soon, a dealer at Industrial Bank of Korea in Seoul.
``Demand for the dollar from foreign stock sales and importers is still high,'' Kim said. ``The market is on the lookout for the government's intervention.''
Central banks intervene in the currency market by buying or selling foreign exchange.
Malaysia's ringgit fell to near the lowest in 11 months on speculation heightened political turmoil will prompt investors to sell the country's stocks.
Malaysia Politics
The currency declined this week, extending a monthly slump. The Kuala Lumpur Composite Index of shares dropped 6.2 percent in August for a fourth month of losses. Malaysia doesn't reveal numbers on stocks transactions by foreigners.
The ringgit traded at 3.3935 per dollar versus 3.3400 a week ago, according to data compiled by Bloomberg. It reached 3.3975 on Aug. 27, the weakest since October.
Opposition leader Anwar Ibrahim was sworn in as a lawmaker on Aug. 28 after winning a by-election on Aug. 26. He has said defections from ruling lawmakers will unseat Prime Minister Abdullah Ahmad Badawi's government by Sept. 16.
Second Finance Minister Nor Mohamed Yakcop said on Aug. 4 the government won't achieve its target of narrowing its fiscal deficit to 3.2 percent of gross domestic product.
``There are crosswinds in the ringgit market because the political risks could turn for the worse in September,'' said Goh Puay Yeong, a currency strategist at Barclays Capital Plc in Singapore. ``Sentiment is weak and economic policies could come to a standstill'' amid a power struggle, he said.
Thai Protests
Thailand's baht dropped, posting a sixth month of losses. The currency fell as oil climbed for a second week and protesters led by opposition leaders occupied the office of Prime Minister Samak Sundaravej in Bangkok to force his resignation.
A government report yesterday showed the nation posted a current-account deficit in July. Inflation accelerated to 9.2 percent last month, the fastest pace since 1998.
The baht fell 0.5 percent yesterday to 34.20, according to data compiled by Bloomberg. The currency has declined 2.1 percent in August, reaching 34.29 on Aug. 26, the lowest since September 2007.
Taiwan's dollar fell on concern that cooling demand in the U.S. and Europe will hurt the island's exports, which account for half of the gross domestic product. The government cut its economic growth forecast and reported the smallest increase in export orders in five years.
The Taiwan dollar declined 0.1 percent to NT$31.520 per U.S. dollar yesterday, according to Taipei Forex Inc. The currency, which touched a six-month low of NT$31.571 on Aug. 26, has dropped 0.5 percent this week and 2.6 percent since the end of July.
Elsewhere, Singapore's dollar lost 3.4 percent this month, and Indonesia's rupiah dropped 0.6 percent. The Philippine peso declined 3.8 percent. Vietnam's dong gained 1.4 percent in August.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
Read more...
Aug. 30 (Bloomberg) -- Asian currencies declined this month, led by South Korea's won, as overseas funds dumped stocks on concern that slowing global growth will damp demand for Asian exports just as central banks grapple with quickening inflation.
The won posted its biggest monthly decline since August 1998, Malaysia's ringgit had its worst month since the end of a dollar link in 2005 and Taiwan's dollar posted its biggest loss in seven years. Weakening currencies threaten to push up the cost of imports and accelerate inflation while decreasing demand for exports puts pressure on trade and current-account balances.
``It's been a bad environment for stocks with persistent inflation eroding the value of assets and people have been disappointed with the growth numbers coming out of the region,'' said Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney. ``With that comes a fading of confidence in currencies in the region as well.''
South Korea's currency dropped 0.7 percent to 1,089 against the dollar as of the 3 p.m. local close yesterday, according to Seoul Money Brokerage Services Ltd., taking the decline in August to 7.1 percent, Asia's worst performer. The ringgit, the second-biggest loser in the region, fell 4.1 percent this month and Taiwan's dollar 2.6 percent.
Overseas investors sold more stocks than they bought this month in Korea, Thailand, the Philippines, Taiwan and Indonesia, according to data compiled by Bloomberg. Global funds were so- called net sellers of Korean shares yesterday for a ninth day, stock exchange data showed.
Korea Intervention
Korea's central bank said yesterday that the current- account balance returned to a deficit in July as a weaker currency and rising oil prices increased the import bill. Policy makers have intervened in the market to curb losses in the currency, depleting the nation's foreign-exchange reserves.
Attempts by officials to halt the won's slide failed to keep the currency from reaching its lowest since 2004, said Kim Sung Soon, a dealer at Industrial Bank of Korea in Seoul.
``Demand for the dollar from foreign stock sales and importers is still high,'' Kim said. ``The market is on the lookout for the government's intervention.''
Central banks intervene in the currency market by buying or selling foreign exchange.
Malaysia's ringgit fell to near the lowest in 11 months on speculation heightened political turmoil will prompt investors to sell the country's stocks.
Malaysia Politics
The currency declined this week, extending a monthly slump. The Kuala Lumpur Composite Index of shares dropped 6.2 percent in August for a fourth month of losses. Malaysia doesn't reveal numbers on stocks transactions by foreigners.
The ringgit traded at 3.3935 per dollar versus 3.3400 a week ago, according to data compiled by Bloomberg. It reached 3.3975 on Aug. 27, the weakest since October.
Opposition leader Anwar Ibrahim was sworn in as a lawmaker on Aug. 28 after winning a by-election on Aug. 26. He has said defections from ruling lawmakers will unseat Prime Minister Abdullah Ahmad Badawi's government by Sept. 16.
Second Finance Minister Nor Mohamed Yakcop said on Aug. 4 the government won't achieve its target of narrowing its fiscal deficit to 3.2 percent of gross domestic product.
``There are crosswinds in the ringgit market because the political risks could turn for the worse in September,'' said Goh Puay Yeong, a currency strategist at Barclays Capital Plc in Singapore. ``Sentiment is weak and economic policies could come to a standstill'' amid a power struggle, he said.
Thai Protests
Thailand's baht dropped, posting a sixth month of losses. The currency fell as oil climbed for a second week and protesters led by opposition leaders occupied the office of Prime Minister Samak Sundaravej in Bangkok to force his resignation.
A government report yesterday showed the nation posted a current-account deficit in July. Inflation accelerated to 9.2 percent last month, the fastest pace since 1998.
The baht fell 0.5 percent yesterday to 34.20, according to data compiled by Bloomberg. The currency has declined 2.1 percent in August, reaching 34.29 on Aug. 26, the lowest since September 2007.
Taiwan's dollar fell on concern that cooling demand in the U.S. and Europe will hurt the island's exports, which account for half of the gross domestic product. The government cut its economic growth forecast and reported the smallest increase in export orders in five years.
The Taiwan dollar declined 0.1 percent to NT$31.520 per U.S. dollar yesterday, according to Taipei Forex Inc. The currency, which touched a six-month low of NT$31.571 on Aug. 26, has dropped 0.5 percent this week and 2.6 percent since the end of July.
Elsewhere, Singapore's dollar lost 3.4 percent this month, and Indonesia's rupiah dropped 0.6 percent. The Philippine peso declined 3.8 percent. Vietnam's dong gained 1.4 percent in August.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Closing Market Recap: Soft GDP Figures Increase Hopes of Bank of Canada Rate Cut
Closing Market Recap: Soft GDP Figures Increase Hopes of Bank of Canada Rate Cut
30 Agustus 2008 4:04
(CEP News) - Investors made a late push to price in a Bank of Canada rate cut after softer-than-expected GDP figures on Friday, sparking a bond market rally and a Canadian dollar sell-off. In the U.S., equities sold off after an unexpected decline in U.S. incomes. Hurricane Gustav kept energy traders on their toes in a volatile trading session that left prices little changed.
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30 Agustus 2008 4:04
(CEP News) - Investors made a late push to price in a Bank of Canada rate cut after softer-than-expected GDP figures on Friday, sparking a bond market rally and a Canadian dollar sell-off. In the U.S., equities sold off after an unexpected decline in U.S. incomes. Hurricane Gustav kept energy traders on their toes in a volatile trading session that left prices little changed.
Read more...
Friday's News Recap: Canada Avoids Recession in Q2, U.S. Personal Income Falls
Friday's News Recap: Canada Avoids Recession in Q2, U.S. Personal Income Falls
30 Agustus 2008 3:26
(CEP News) - The main releases of the day included Canadian GDP figures, which showed the country managed to skirt a technical recession in the second quarter, and the Personal Consumption and Expenditure report in the U.S., which came mostly in line with expectations. The Chicago Purchasing Managers Index delivered the main surprise of the day, coming in significantly higher than expected in August.
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30 Agustus 2008 3:26
(CEP News) - The main releases of the day included Canadian GDP figures, which showed the country managed to skirt a technical recession in the second quarter, and the Personal Consumption and Expenditure report in the U.S., which came mostly in line with expectations. The Chicago Purchasing Managers Index delivered the main surprise of the day, coming in significantly higher than expected in August.
Read more...
Canada Monetary Policy Monitor
| Daily Forex Fundamentals | Written by TD Bank Financial Group | Aug 29 08 23:18 GMT | | |
| HIGHLIGHTS
Since the Bank of Canada decided to keep rates on hold at 3% at the July 15 Fixed Announcement Date, there has been a rather significant shift not only in the economic data, but also in how the market is pricing in future rate moves by the Bank. The accompanying statement to the July 15 meeting indicated a neutral bias, saying that "the current level of the target for the overnight rate remains appropriate" and risks were balanced. Since then, however, a raft of soft economic data has prompted the market to price in a rate cut.
The economy is unambiguously weak and the slowing economic activity has had some impact on inflation. But in our view, this does not suggests a slam dunk case for a rate cut. In fact, it seems as though the Bank is comfortable with the overnight rate at 3%. Recent comments by Deputy Governor Longworth reinforced a neutral bias when he spoke on August 26. There remains some uncertainly with respect to where inflation will go in the near term and there remain subtle points of strength in the economy and inflation. Moreover, though as a secondary consideration, is the fact that the Bank has already surprised the market once this year with its decision in June to keep rates steady. There is some degree of credibility risk associated with making a move when the market is mostly pricing no change in the overnight rate. As such, by keeping rates on hold on September 3, the Bank gives itself a bit of breathing room to see how conditions unfold and avoid the market's ire. Thus, we maintain the view that the Bank of Canada will remain on the sidelines on September 3, leaving the overnight rate at 3%. Inflation Looks Less Threatening A slowing Canadian economy means the output gap will move further into excess supply. In turn, that will take some of the pressure off inflation, and indeed, there has already been some evidence of that. The recent inflation data has certainly come as a welcome surprise. In July, core CPI was a touch soft, with a 0.1% SA M/M gain, leaving the annual rate at 1.5%. Headline CPI remained somewhat elevated with a 0.35% SA M/M gain. On an annual basis, headline CPI rose to 3.4%, which is the highest of the cycle, as food and energy prices continue to figure in to the calculation in a big way. Food prices were up 0.6% M/M in July, which is slightly softer than the prior three months, but still relatively robust. Energy prices were also up 2.3% M/M in July, and were helped only modestly by the incipient fall in overall commodity prices. But even while headline inflation continues to advance above the top end of the BoC's inflation target band of 3%, it appears to be peaking on an M/M basis, and there has been fortunately little pass through to core prices. That is good news for the Bank of Canada, and points to downside risk in the futures, which the Bank acknowledged, itself.
The breakdown in the inflation data suggests that the slowdown in the Canadian economy is starting to have some impact on prices, and will continue to do so as the economy moderates further. Prices for goods were up only 0.4% M/M in July, after averaging 1.05% M/M in the prior quarter. Moreover, services inflation seems to be moderating as well, with only a 0.25% M/M gain in service prices in July. But both are still elevated when compared to a year ago. Goods inflation rose to 3.2% Y/Y in July, and services remained relatively elevated at 3.5% Y/Y. But continued softening in economic activity should put a lid on goods prices going forward. In turn, that should prevent any significant gains in core inflation.
On the labour market front, any wage pressures that were previously present, have now abated, as the labour market continues to lose steam. Canada has lost 60.2K jobs in June and July and that has taken much of the froth off wage pressures. In this cycle, average hourly wages peaked at 4.9% Y/Y in January, and by July, they were 3.8% Y/Y. As the economy cools further, so too will job growth and workers will ultimately have less bargaining power. In turn, that will further limit wage pressures.
Any business sector price pressures have also moderated recently as well. At 79.8%, capacity utilization is now lower than the last recession in Canada, and only 2.1 percentage points higher than the historical low of 77.7% posted in the 1991 recession. Canadian businesses are obviously well aware of the impact that a weak U.S. economy will have on demand for Canadian goods. As such growing economic slack should keep the reins on inflation. The disconnect between headline and core CPI is expected to narrow going forward, and by the second half of 2009, the Bank expects both to be at 2%. That in itself provides some leeway for the Bank to stand back and assess conditions. Uncertainty Lingers But while the outlook for inflation going forward looks tame, there is still some uncertainty. First, the alternative inflation indicators that the Bank of Canada cares about do not look as tame as the reported inflation data and are trending around the 2-3% range. Second, the Bank has noted some concern about pass through from prior commodity price increases through to headline inflation. Third, energy prices have fallen quite dramatically through August, which suggests that July might be the last time that they factor in to headline inflation so heavily. In July, it was not gasoline prices that drove the energy component of headline inflation, but rather natural gas. The former only rose 1.2% M/M, while the latter rose a massive 8.8% M/M. Gasoline prices have dropped about 5% since July, as demand destruction heats up, which suggests some moderation in the energy price component in upcoming months. Still, energy prices are not governed solely by logic alone, and energy prices could very well begin to rise again, especially if the hurricane season yields some bad storms. This is a risk the Bank must watch for. Fourth, food inflation could be a different story, yet again. Food comprises 17% of the Canadian CPI basket and until recently, Canada has enjoyed a period of relatively subdued food prices. This is particularly true when compared to other developed countries, which have had to content with rapidly rising food prices. This has been the result of a handful of factors like the recent strength of the Canadian dollar, which has now reversed course, and a one time spate of price competition, which have kept prices contained as new grocers fought for market share in Canada. But demand destruction is not really an issue for the food market, and so significant future upside risk remains for food. Fifth, the Canadian dollar has lost just over 4% since July 15, and with the bull market in commodities now largely in the rear view mirror, we expect the Canadian dollar to ease further against the U.S. dollar. This creates an uncertain interplay between the two drivers, and likely leaves the Bank of Canada loathe to act until there is a clear direction in all inflation trends. Canada's Growth Story Winds Down Second quarter GDP was not as bad as feared, but certainly lower than expected and it missed the Bank's forecast by a sizable margin. GDP posted a 0.3% Q/Q, annualized gain, and first quarter GDP figures were revised down significantly to -0.8% Q/Q, annualized (compared to a decline of 0.3%). It is clear growth in Canada has embarked on a softening trend. Fortunately, it has not entered a technical recession, but softness is still prevalent.
The drivers of growth in the second quarter were primarily from consumption, government spending and inventories. Growth is expected to remain lacklustre in the second half of the year, as the headwinds from the recession bound U.S. economy weigh on Canada. But even with slower Canadian growth, given the atrocious productivity performance in Canada, slower growth is unlikely to open up as much slack as one would expect. Thus, it seems unlikely that lacklustre growth will sway the Bank away from the sidelines. It admitted earlier this week that the risks were to the downside, but that it nonetheless retained a neutral bias. As such, this bolsters our case for the Bank to keep rates steady at 3%.
Slow and Steady Wins the Race Although Canadian credit conditions have continued to stage a broad-scale improvement, there are still some lingering signs of stress. One of the best indications that Canadian credit markets are improving is the fact that the Bank of Canada recently ended its Term PRA program in July. The Bank did not renew the $1 billion term PRA citing that "conditions in Canadian markets have improved since the end of April, including funding conditions out to three months." But that is not to say that credit markets are back to where they were before the crunch hit. As Governor Carney said the Q&A following the July Monetary Policy Report Update, current conditions and spreads might be the "new normal". And perhaps the best evidence of this new normal is the fact that the three month CDOR versus OIS spread has remained contained, but it is nowhere near the 10bps that characterized the period prior to the credit troubles last year. But there have been some subtle upside surprises recently, despite much of the economic doom and gloom in Canada. Notably, U.S. GDP has surprised to the upside and has implications for Canadian GDP. Moreover, household credit growth in Canada remains robust. In fact, of the three major developments cited in the last communiqué, the U.S. economy has unfolded better than expected, while commodity prices have fallen quicker than expected. This combination suggests that the Bank does not have much room to make any significant reversals and will need to be sure on the direction of rates before it pulls the trigger. Statement Will Likely Retain Neutral Bias Given that this decision will be in between Monetary Policy Reports, it is unlikely that this statement will offer as much detail as the last one. Moreover, since our expectation is that that the Bank will keep rates steady on September 3, the focus will once again turn to what the Bank says in the communiqué. And on that front, there might be some important nuances, even though fundamentally, the Bank's outlook has probably not materially changed. As such, the statement that "the Bank judges that the current level of the target for the overnight rate remains appropriate" is likely to remain a fixture in the communiqué, in addition to a statement that the risks remain balanced. There perhaps is a risk that the Bank removes the statement about rates being "appropriate", especially if there is growing uncertainty about the direction of rates. But ultimately we think that they will retain it. As such, it is likely that the statement will stick to the broad outline set out in the last statement, and maintain a generally neutral bias. Instead, the distinctions might be in how they present the risks to the outlook. Given that there is still considerable uncertainty about the prospects for Canadian inflation, we think that the Bank will say that inflation risks are "balanced" or "roughly balanced" At the extreme they might temper it by saying that there is a slight tilt to the downside, but all should suggest unchanged rates more likely than not at future decisions. Outlook for Rates Since there are both upside and downside risks to inflation, that argues for the Bank of Canada to stay on the sidelines in the very near term. The risk going forward, however, is that the Canadian economy disappoints, and reveals further moderation in inflation trends. If this were to occur, the Bank's next move could conceivably be a rate cut. But we still think that this still has a relatively small chance of happening and we expect the Bank of Canada to keep rates steady at 3% for the remainder of 2008 and once the economy begins to improve in 2009, the risk will begin tilting towards a normalization of rates.
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability. | |
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