US gas prices climb to record $4.10; could be peak

NEW YORK: Gasoline is costing U.S. drivers a record $4.10 per gallon on average, but pump prices may be at a peak and could start to come down, an industry analyst said on Sunday. That optimism is linked to a pledge by Saudi Arabia to pump more oil in response to consumer countries' requests, according to Trilby Lundberg, editor of the nationwide Lundberg survey of about 7,000 gas stations.

"I suspect that oil prices have peaked and will flip further because of this news and the physical addition of more oil on the market in July," Lundberg said. "This gives a strong chance that pump prices are peaking now, or may already have done so." A barrel of oil has doubled in price over the past year, stoking inflation, triggering protests from Asia to Europe, and compounding the financial pain of U.S. consumers already grappling with a sagging housing market, job uncertainty and soaring food costs.

Top officials, policy makers and oil company executives met on Sunday in Jeddah, Saudi Arabia, for emergency talks on how to bring prices down. "Crude oil prices may spike at any moment from existing trouble in areas including Nigeria, or from some unforeseen hit to global supply," Lundberg said.

"This may sound optimistic, (but) it seems likely at this moment as the meeting in Jeddah, Saudi Arabia is being concluded, that oil prices may have peaked and may drift down." One common reason cited for the rise of oil prices is soaring demand from developing economies such as India and China, whose emerging middle classes are gobbling up more oil. Lundberg said it was unclear whether other countries with fuel subsidies would follow China's lead and cut them in efforts to cap demand.

Demand in the United States has fallen about 1 percent year-to-date, though it is closer to 2 percent lower in recent weeks, Lundberg said. Prices at the pump vary across the country. The luckiest drivers live in Tulsa, Oklahoma, where the city average was $3.76 per gallon, the nation's lowest. At the other end, Los Angeles and Fresno, California, were tied for the nation's most expensive gasoline, with the city averages reaching $4.59 per gallon of regular grade gasoline. On June 20, U.S. crude closed at $134.71 per barrel, up from $68.19 a year ago.

Taken From : http://economictimes.indiatimes.com

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Saudi moves on oil pressure

Saudi Arabia moved last night to ease oil-price pressure saying it will hike its output to 9.7 million barrels a day the highest level in 27 years.

The statement came during a hastily arranged oil summit in Jeddah, which called for more investment in oil production and greater financial market transparency.

Leaders of 35 nations attending the summit agreed current record high oil prices are hammering the world economy.

Current prices and their volatility are detrimental to the global economy, and in particular the economies of least developed countries," the final communique of the summit said.

Though host Saudi Arabia, the world's biggest oil exporter, vowed to pump more oil in response to consumer countries' requests, it noted that an output boost will not suffice to calm a market driven by an array of factors.

Saudi Oil Minister Ali al-Nuaimi said the country's production capacity will rise to 12.5 million barrels per day by the end of next year and another 2.5 million bpd could be added if demand warranted.

Saudi King Abdullah promised US$500 million (HK$3.9 billion) in soft loans and called for a US$1 billion OPEC fund to help the world's poor cope with soaring prices that nearly hit US$140 a barrel last week.

The cost of crude has doubled in a year fueling inflation around the globe and sparking protests from Asia to Western Europe.

To curb the rising cost of fuel and food, the world's major central banks may start raising interest rates.

Concrete measures were unlikely to emerge from major producers, consumers and leading oil company executives gathered in Jeddah to reverse what some see as the world's third oil shock.

Recent efforts to slow oil's ascent have had little impact.

Saudi Arabia has vowed to raise production to 9.7 million barrels per day next month, its highest rate in decades.

King Abdullah said Riyadh was willing to provide all necessary oil supplies needed in the future, and blamed high prices on speculation and taxes.

Joining the chorus, Kuwaiti Oil Minister Mohammed al-Olaim said that OPEC members "will not hesitate" to increase production if the market needs it. But Algeria's Oil Minister Chakib Khelil insisted this was not necessary.

The meeting also highlighted the divide between those who say high oil prices are the result of soaring demand and slower growth in production and those, including most in OPEC, who see speculators as the primary force behind the rally.

Investment funds have pumped billions of dollars into oil and other commodities as they seek to diversify holdings and flee poorly performing asset classes, but US Energy Secretary Sam Bodman said the focus on speculation was misplaced.

"There's no evidence we can find that speculators are driving futures prices," he said.

US regulators, under political pressure from lawmakers, have stepped up oversight of futures markets.

Major oil consumers in Asia, including the world's No 2 user China, have recently raised cheap domestic fuel prices that analysts say aided rapid demand growth.

Fresh ideas appeared in short supply, with focus put on the importance of greater transparency in oil markets and more investment into renewable energy sources.

"There is the danger the markets will be disappointed and the price will increase again," said German Economy Minister Michael Glos. AGENCIES

Taken From :http://www.thestandard.com.hk





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Euro Zone Economy Shows Weakness, ECB Cornered

By Reuters

Euro zone services and manufacturing activity both fell unexpectedly into contraction in June, a key survey showed on Monday, although the weakness may not be pronounced enough to deter an ECB rate hike in July.

The data from around 5,000 companies, combined with weaker than expected data from Germany's Ifo survey, will add to fears of stagflation in the euro zone as growth cools quickly in the second quarter while oil prices stoke inflationary pressure.

Business weakness will complicate the European Central Bank's efforts to ready markets for a rate hike in July.

The RBS/Markit Eurozone Purchasing Managers Index for services companies, which range from cafes to banks, fell to 49.5 in June from 50.6 in May, the first time it has sunk below the 50.0 mark dividing growth from contraction since June 2003.

Only three of 36 economists had forecast a move below 50.0, with the lowest prediction being 49.7 and the median 50.5.

Euro zone manufacturing also suffered a bruising month. The RBS/Markit Eurozone PMI for the sector fell to 49.1 from 50.6, its lowest level since May 2005 as new orders slipped further. Economists had forecast a dip to 50.2.

Meanwhile, German business morale fell more than forecast in June to its lowest level since December 2005 with the Ifo index at 101.3 from 103.5 in May.

The euro hit session lows after the data to around $1.5501 to the dollar from $1.5559, while bund futures also rallied to session highs.

"The falls are probably not sharp enough to stop the ECB hiking in July ... But the data today will cause some intense debate about rate-setting," said Juergen Michels at Citi.

Earlier Flash data showed French growth in both manufacturing and services contracted in June, but remained above the 50.0 level in Germany.

The data showed inflation putting services companies under intense pressure as their input costs rose at the fastest pace since September 2000.

ECB Executive Board member Lorenzo Bini Smaghi said on Friday the bank would have to raise rates unless services sector productivity picks up to counter higher commodity prices.

Although companies responded to higher costs by raising their charges in June at the steepest rate since November 2000, they lagged the rate of cost increase by the widest margin since November 2004.

And the service sector's optimism about future business is waning sharply.

The business expectations index eased to 54.9 in June, its lowest level since the survey began in 1998, and lower even than after the attacks on the United States in September 2001.

Falls in the services and manufacturing PMIs took the Composite index down to 49.5, its lowest since June 2003.

Factory Slide

Manufacturing was also hit by weakening demand across the region. The output index for the sector slipped to 49.5 from 51.9, its lowest since July 2003.

Meanwhile, new orders for the sector remained in contraction territory for the third month running. Firms saw weaker conditions as a good opportunity to reduce hiring.

The employment index slipped to 49.7, the first time it has gone below the 50.0 point since February 2006.

"Both the services and manufacturing sectors are prone to further falls in coming months," said Chris Williamson, chief euro area economist at Markit, which compiles the data.

Reflecting weak demand, stocks of finished goods rose in June to 50.9, the highest in the survey's history, from 50.3.
Copyright 2008 Reuters.




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.Thomson Financial Europe AM at a glance share guide: Shares lower, oil surges

LONDON (Thomson Financial) - US SUMMARY: Stocks dip, oil shoots up Index Change Percent change *DJIA 11842.69 -220.40 -1.83 *Nasdaq 2406.09 -55.97 -2.27 *S&P 500 1317.93 -24.90 -1.85 Nymex crude for July $134.62 +$2.69 10 year US *Friday's close STOCKS: Stocks capped a difficult week with steep losses Friday amid escalating worries about the financial and automotive sectors and a rebound in oil prices. The major indexes fell by more than 1 1/2 percent on the day, and the Dow Jones industrial average gave up more than 200 points to end at its lowest level in three months.

A Merrill Lynch downgrade of regional banks added to the market's initial anxiety, which ballooned Thursday when Citigroup Inc. warned of significant debt markdowns for the second quarter, Washington Mutual Inc. announced 1,200 job cuts and Moody's Investors Service decided late in the day to downgrade the two biggest bond insurers.

FOREX: The dollar fell on Friday as oil futures rebounded and downgrades of automakers and the financial sector underscored troubles challenging the nation's economy.

The euro bought $1.5625 in late New York trading, up from its level of $1.5499 on Thursday. The British pound rose to $1.9771 from $1.9739.

OIL: Oil futures rebounded Friday on unease over Middle East stability and a growing doubt that China's government will be able to curb the country's appetite for fuel by pushing prices higher.

METALS: In precious metals, gold futures fell 50 cents to settle at $903.70 an ounce on the Nymex. Other metals traded mixed. July silver added 7.3 cents to settle at $17.397 a pound on the Nymex, while July copper rose 5.25 cents to settle at $3.832 a pound.

Events: May Chicago Fed National Activity Index ASIA SUMMARY: Stocks lower after Wall Street fall, oil higher Index Change Pct change Nikkei 225 13853.90 -88.18 -0.63 (0335 GMT) Straits Times 2974.61 -27.20 -0.91 (0355 GMT) Hang Seng 22609.09 -136.51 -0.60 (0341 GMT) Seoul Composite 1711.37 -19.63 -1.13 (0355 GMT) BSE Sensex 14423.05 -148.24 -1.02 (0430 GMT) usd-yen 107.28 (Intra-day trade) 10-year JGBs 4.17 percent -0.04 (Intra-day trade) Brent North Sea crude for August $135.08 usd +22 cents (Intra-day trade) STOCKS: Asia shares were lower in early trade on Monday after Wall Street's Friday fall.

China A-shares finished the morning lower as profit-taking hit oil refiners following Friday's surge on the government's snap decision to hike gasoline and diesel prices. Australian shares were trading lower though losses had been pared as investors bought oversold stocks across sectors.

BONDS: Japanese government bonds finished the morning session higher on Monday as investors shifted funds back to safe haven government bonds due to emerging uncertainties about the global stock market, stemming from renewed uncertainties about the U.S. financial sector and economy.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.17 percent from 4.21 percent late Thursday.

FOREX: The U.S. dollar was trading mixed against major currencies in Sydney on Monday, with market attention clearly fixed on this week's Federal Open Market Committee meeting.

While the two-day meeting, which starts Tuesday, is not expected to result in any change to the Federal Reserve's funds target rate, now at just 2.0 percent, the market will be looking for hints in the accompanying statement on Wednesday about the possibility of a return to interest rate hikes later in the year.

At 0030 GMT the dollar was at 107.34 yen from 107.28 late in New York on Friday while the euro was at $1.5613 from $1.5605.

OIL: World oil prices rose in Asian trading on Monday after Saudi Arabia said at a weekend summit that it had raised output,and said speculators were partly to blame for higher prices.

New York's main oil futures contract, light sweet crude for August delivery,was 29 cents higher at $135.65 per barrel. on Friday. Brent North Sea crude for August was 22 cents higher at $135.08 a barrel after rising $2.86 to settle at $134.86 per barrel on Friday in London.

METALS: Copper rose to a month high in London on Friday after inventories fell and the dollar weakened, encouraging fund buying of the red metal. At 11:58 a.m. Friday, London Metal Exchange (LME) copper for three-month delivery was at $8,415 a tonne, up from $8,330 at the close on Thursday.

Gold steadied near $900 per ounce on Friday as rising inflation fears and renewed weakness in the U.S. dollar kept the precious metal supported near the key psychological level.

EVENTS: Japan April-June corporate outlook survey Japan May supermarket sales Singapore May CPI Hong Kong Q1 current account Hong Kong's Dickson Concepts yr to March results Taiwan May unemployment India's Tata Power FY results E.U. rules on proposed acquisition by E.ON of Endesa Europa, Enel's Viesgo E.U. rules on acquisition by Rewe of ADEG stake increase U.S. May Chicago Fed National Activity Index EUROPE SUMMARY: Shares lower, oil surges Index Change Percent change *FTSE 5620.80 -87.60 -1.53 *DAX 6578.44 -142.73 -2.12 *CAC 4509.27 -82.12 -1.79 pound-dollar 1.9752 +0.0021 (Intra-day) euro-dollar 1.5607 +0.0119 (Intra-day) Brent crude(August) $135.95 +$3.95 (Intra-day) *Friday's close STOCKS: UK blue chips closed lower Friday, having extended losses in afternoon deals as Wall Street fell on the back of escalating worries about the financial sector and a rally in oil prices, with weakness seen among banks in London.

German shares plummeted to their lowest level since April, mainly impacted by higher oil prices and the expiration of stock options, index options and index futures as well as a lower performance on Wall Street.

Paris share prices ended lower Friday after hesitant morning trade gave way to a sharp afternoon drop in line with Wall Street, where investors grew nervous about a renewed rally on oil prices and more gloomy signs about the financial sector.

FOREX: The dollar remained weak, particularly against the euro, after ratings agency Moody's downgraded the bond insurers Ambac and MBIA, and after the emergence of fresh geopolitical tensions in the Middle East.

The euro received a boost on views that the European Central Bank will go ahead and raise interest rates by a quarter point to 4.25 percent.

Meanwhile, pound was somewhat stronger, riding on the positive momentum from strong retail sales figures released on Thursday. These showed sales rose 3.5 percent in May from April, the fastest rate of growth since records began in 1986.

BONDS: European government bonds continued to build on Friday morning's gains, benefiting from a rise in safe haven flows as market players sought to divert funds away from falling equity markets.

In the UK, gilts were outperforming their European counterparts, reversing Thursday's losses on flight-to-safety flows and as market players pared back expectations for interest rate rises.

OIL: Oil prices stormed higher on Friday as OPEC members hit out at consumer demands for more crude ahead of a high-level weekend meeting in the Saudi city of Jeddah to discuss rocketing fuel costs.

News that China would hike domestic oil prices added considerable weight to the downward pressure, on the initial view that Beijing's move would curtail demand in its booming economy.

London's Brent North Sea crude for August jumped $3.95 to $135.95 per barrel, compared with its record peak of $139.32 on Monday.

METALS: Gold steadied near $900 per ounce on Friday as rising inflation fears and renewed weakness in the U.S. dollar kept the precious metal supported near the key psychological level. At 9:44 a.m., spot gold was trading at $899.25 per ounce against $902.20 per ounce Thursday.

Among other precious metals, platinum was trading up at $2,052 per ounce against $2,048 per ounce Thursday. Palladium slipped to $467 per ounce from $473 per ounce.

In industrial metals, copper rose to a month high in London on Friday after inventories fell and the dollar weakened, encouraging fund buying of the red metal.

EVENTS: UNITED KINGDOM Rightmove June house price index Aggreko trading statement BENELUX Belgian June business confidence indicator. Forecast -2.5 versus -1.6 Deadline for ASMI to reach compromise with shareholders Colruyt FY results FRANCE Provisional June manufacturing PMI. Forecast 51.0 versus 51.5 Provisional June services PMI. Forecast 51.0 versus 50.5 GERMANY Provisional June manufacturing PMI. Forecast 53.2 versus 53.6 Provisional June services PMI. Forecast 53.3 versus 53.8 Bundesbank Monthly report Ifo June business climate index. Forecast 102.5 versus 103.5 Ifo June business assessment index. Forecast 109.1 versus 110.1 Ifo June business expectations index. Forecast 96.3 versus 97.3 Siemens Media summit with CEO Loescher, London (day 1 of 2) GREECE Coca-Cola HBC AGM Terna Energy AGM ITALY Review of S&P/Mib index SWITZERLAND Swiss govt June economic forecast Swiss KOF spring economic forecast EASTERN EUROPE Hungary Central bank to set interest rates Conference on euro (1130 GMT, Czech central bank governor Tuma, Slovak central bank governor Sramko to attend) EUROPEAN UNION/EURO ZONE Euro zone provisional June manufacturing PMIs. Forecast 50.2 versus 50.6 Euro zone provisional June services PMI. Forecast 50.5 versus 50.6 Euro zone provisional June composite PMI. Forecast 50.7 versus 51.1 EU rules on proposed acquisition by E.ON of Endesa Europa, Enel's Viesgo EU rules on acquisition by Rewe of ADEG stake increase

TFN.newsdesk@thomson.com jro/vsr/pvi/jro COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved.



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Euro Hit by Ifo, PMIs, Dollar Looks Ahead to Fed

By Reuters

The euro was hit on Monday by contraction in the euro zone's manufacturing and service sectors, while the dollar benefited as some investors bet on a hawkish
The euro fell versus the yen, over a yen below the 11-month struck on Friday.

The dollar rose against the Japanese currency.

Data Dent

The euro zone services PMI, which covers companies from cafes to banks, fell to 49.5 in June, while its manufacturing equivalent hit 49.1 -- with both indices slipping into contraction territory below the 50.0 watermark.

At the same time, the German Ifo business climate index fell more than expected to 101.3 in June -- its lowest since December 2005.

Ifo's current conditions and expectations indices also came in below consensus.

Although analysts said it was probably too late for the ECB to abandon its plans for a July rate hike to 4.25 percent, they admitted the data further reduced the chances of any follow on tightening.

"The falls are probably not sharp enough to stop the ECB hiking in July. It would take more data on the downside for inflation for them to wait. But the data today will cause some intense debate about rate-setting," said Juergen Michels, economist at Citi.

Currency markets paid little attention to the oil price, which rose despite Saudi Arabia promising to pump more oil.

Copyright 2008 Reuters.


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Tokyo, Hong Kong drop for 3rd straight session

Japanese and Hong Kong indexes declined for a third straight session on Monday, with exporters such as Toyota Motor Corp. reacting to a strengthened yen in Tokyo, while China Petroleum & Chemical Corp. retreated in Hong Kong on a rebound in crude -oil prices.
The Nikkei 225 Average lost 1.2% to 13,779.81, on top of the 1.3% drop Friday, and the broader Topix index gave up 1.2% to 1,341.14.

In Hong Kong, the Hang Seng Index fell 1.1% to 22,504.96, after slipping 0.2% in the previous session, while the Hang Seng China Enterprises Index shed 1.6% to 12,142.47.
"The fuel price increase in China has been a disappointment to local investors. But on the other hand, the market's losses could narrow later in the day as the mainland markets seem to be more stable," said Conita Hung, head of equity markets at Delta Asia Financial Group in Hong Kong.
China's Shanghai Composite, which jumped 3% Friday on oil retailers after Beijing allowed the companies to raise prices of motor fuels by as much as 18%, surrendered some of those gains. The benchmark index, which has lost more than 46% so far in 2008, was recently down 1.5% at 2,788.47.
Hung said reports that Chinese stock market regulators were making efforts to stabilize the mainland stock markets, and likely buying activity by institutional investors in Hong Kong to shore up the value of their portfolios by the end of June, could provide support to the Hang Seng Index in the near-term.
She was referring to a Xinhua news service report that the Chinese stock market regulator, China Securities Regulatory Commission, planned to control the pace at which listed companies raise funds and clamp down on market rumors to bring stability to a market that ranks among the worst performers in Asia in 2008 to date.

Elsewhere, South Korea's Kospi shed 1.1% to 1,712.08 and Australia's S&P/ASX 200 lost 0.9% to 5,241.90, while New Zealand's NZX 50 index slipped 0.4% to 3,270.34. Singapore's Straits Times Index declined 0.9% to 2,975.89 and Taiwan's Weighted index fell 0.5% to 7,864.93.

Taken From : http://www.marketwatch.com





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U.K. House Prices Drop the Most This Year, Rightmove Says

By Svenja O'Donnell

U.K. house prices declined by the most this year in June as buyers shunned the market, deepening Britain's property slump, Rightmove Plc said.

The average asking price for a home dropped 1.2 percent from May to 239,564 pounds ($473,000), Britain's most-used property Web site said in a statement today. Prices in London declined 1.4 percent. On the year, the cost of a U.K. home rose 0.1 percent.

``New sellers are now taking some proactive steps to price more realistically from the outset, to attract increasingly hard-pressed buyers,'' Miles Shipside, commercial director of Rightmove, said in a statement.

HBOS Plc, the U.K.'s biggest mortgage lender, predicted last week that house prices will fall as much as 9 percent this year, raising loan defaults, and Bank of England Deputy Governor John Gieve said the drop is hurting consumer confidence. The downturn has deepened after the worldwide jump in credit costs forced banks to curb lending and make mortgages more expensive.

The ratio of available properties to potential buyers doubled on the year, reaching 15 to one, the report showed. Home values fell on the month in every region except the North, the West Midlands, and Wales. Properties in the South East led declines, falling 2.4 percent.

In the capital, Hounslow, near Heathrow airport, led the drop, falling 4.4 percent. Only five out of 32 areas in London rose, with the biggest gain in Islington.

`Stretched' Affordability

The declines ``should go some way to helping buyers whose affordability is being stretched still further by rising inflation and mortgage rates,'' Shipside said.

Record oil and food prices, falling house prices and a dearth of credit are pushing the U.K. economy toward a recession. Gieve said on June 19 that house prices have now dropped 7 percent from their peak and will fall further, threatening consumer sentiment.

Consumer confidence fell to the lowest level since Margaret Thatcher was ousted as prime minister in 1990, a GfK NOP survey showed on May 30.

Bank of England Governor Mervyn King said on June 18 that curbing inflation will require economic growth to slow and living standards to drop. King wrote a letter of explanation to the government last week after consumer-price increases exceeded the 3 percent limit in May. He predicted inflation may exceed 4 percent this year.

The central bank has kept its benchmark interest rate on hold after reducing it to 5 percent in April, the third cut since December. JPMorgan Chase & Co. economists forecast last week that the next move will be an increase in August.

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.





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Gold Rallies in Asia as Dollar Near Two-Week Low Against Euro

By Feiwen Rong

Gold rose in Asia for the seventh day as the dollar traded near a two-week low against the euro, boosting the appeal of the metal as an alternative investment.

Bullion, headed for its longest winning streak in almost 19 months, rose as traders increased bets the Federal Reserve will delay increasing interest rates to prevent further credit-market writedowns. U.S. reports tomorrow may show falling house prices are eroding confidence among consumers. Crude oil also climbed to more than $135 a barrel, boosting the appeal of the precious metal as a hedge against inflation.

Investors noted that the euro is trading above $1.56 against the U.S. dollar again, said William Kwan, Singapore-based bullion director at Gold Capital Management. Also, inflation in some Asian nations ``is getting a bit out of hand and this is a very bullish factor for gold'' as an inflation hedge, he said.

Bullion for immediate delivery was up 0.3 percent at $905.24 an ounce at 11:15 a.m. in Singapore from $902.30 in New York on June 20. Gold rose to as high as $907.84 an ounce on June 20 when the euro rallied above $1.56 for the first time since June 10. Silver was up 0.4 percent at $17.4375 an ounce at the same time.

Gold has gained 8.6 percent this year while the dollar has fallen by 6.6 percent against the euro. The dollar traded at $1.5612 against the euro at 11:15 a.m. in Singapore, from $1.5606 in New York on June 20.

The dollar bought 107.28 yen, close to the weakest level since June 12, from 107.33 late last week. Crude oil futures advanced 0.9 percent to $135.78 a barrel.

A S&P/Case-Shiller report tomorrow may show home prices in 20 U.S. metropolitan areas dropped 15.9 percent in April from a year earlier, the most since records were first published in 2001, a Bloomberg News survey of economists shows. The Conference Board's consumer confidence index probably fell to 56.4 in June, the lowest since October 1992, from 57.2 in May, according to a separate survey.

Gold for August delivery gained 0.4 percent to $907.30 an ounce in after-hours electronic trading on Comex at 10:15 a.m. Singapore time.

Gold for April 2009 delivery was little changed at 3,149 yen a gram ($913 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net




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Dollar Trades Near 2-Week Low Versus Euro Before U.S. Reports

By Kosuke Goto and Stanley White

The dollar traded near a two-week low against the euro on speculation U.S. reports tomorrow will show falling house prices are eroding confidence among consumers.

The U.S. currency approached a one-week low versus the yen as traders raised bets that the Federal Reserve will delay increasing interest rates to prevent further credit-market writedowns. The British pound fell against the euro after an industry report showed U.K. house prices declined by the most this year in June.

``Weaker data will push down the dollar further, raising concern about the spread of credit losses,'' said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``Weak indicators make the Fed's job far more difficult amid inflation worries.''

The dollar traded at $1.5602 against the euro at 12:02 p.m. in Tokyo near the lowest level since June 10, compared with $1.5606 in New York on June 20. The dollar bought 107.34 yen, close to the weakest level since June 12, from 107.33 late last week. The euro traded at 167.45 yen from 167.54 yen.

The U.S. currency may move between $1.5550 and $1.5670 a euro, and 106.80 yen and 107.80 yen today, Saito forecast.

The British pound slipped to 79.05 pence per euro from 78.98 pence on June 20, and to $1.9751 against the dollar from $1.9761, after Rightmove Plc said the average asking price for a U.K. home dropped 1.2 percent from May as buyers shunned the market, deepening Britain's property slump.

Yuan, Won

China's yuan rose to 6.8680 per dollar, the strongest since a dollar link was scrapped in 2005, from 6.8801, as the central bank seeks tougher policies to combat inflation. The South Korean won, the second-worst performer this year of the 10 most- active currencies in Asia outside Japan, fell for a second day to 1,031.55 per dollar on speculation overseas investors will sell the currency as they reduce holdings of the nation's assets.

The Australian and New Zealand dollars rose as the price of commodities that the nations export increased, supporting the outlook for the two economies. Australia's currency advanced to 95.48 U.S. cents from 95.33 cents on June 20. The New Zealand dollar rose to 76.27 U.S. cents from 76.11 cents.

The U.S. currency has risen 1.1 percent against the euro and 7.6 percent versus the yen this quarter, as Fed Chairman Ben S. Bernanke said earlier this month economic risks had faded, prompting investors to bet the central bank will raise interest rates later this year after seven decreases since September.

Housing, Confidence

A S&P/Case-Shiller report tomorrow will show home prices in 20 U.S. metropolitan areas dropped 15.9 percent in April from a year earlier, the most since records were first published in 2001, a Bloomberg News survey of economists shows. The Conference Board consumer confidence index probably fell to 56.4 in June, the lowest since October 1992, from 57.2 in May, according to a separate survey.

Futures on the Chicago Board of Trade showed a 10 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks by a quarter-percentage point on June 25, compared with 22 percent odds a week ago.

The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp.

The currency stayed below its 200-day moving average for a second day on June 20, signaling further losses, said Tokyo- based Fujii. The dollar may now fall to the next level of so- called support around 105.72 yen, where it will meet a trend- line connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, she said.

Futures Bets

Futures traders decreased their bets that the yen will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on June 20.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 5,857 on June 17, the least since Jan. 4, compared with net longs of 7,716 a week earlier. The number is sometimes seen as a contrary indicator.

The yen was little changed after Japanese manufacturers said they are pessimistic on surging commodity costs and the risk of a U.S. recession, according to a survey by the Cabinet Office and Finance Ministry released today.

Gains in the euro may be limited by speculation an industry report today will show German business confidence fell in June as record oil prices and the prospect of higher interest rates dimmed the outlook for growth in Europe's largest economy.

The Ifo institute will say its business climate index declined to 102.5 from 103.5 in May, according to the median of 42 forecasts in a Bloomberg News survey. Ifo will release the report, based on a survey of 7,000 executives, in Munich today.

``Should data due today prove to be weaker ones, that will highly likely lead to a decline in the euro on dwindling expectations of the ECB's rate hikes,'' Tohru Sasaki and Junya Tanase, currency strategists in Tokyo at JPMorgan Chase & Co., wrote in a research note today.

To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net;




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Corn May Rise as Floods Threaten U.S. Crop; Soybeans May Fall

By Jeff Wilson

Corn may rise on expectations that Midwest floods will cut yields of the biggest U.S. crop. Soybeans may fall as drier weather should accelerate seeding.

Seventeen of 33 traders, advisers and grain merchants surveyed on June 20 from Beijing to Chicago expected corn to rise; 19 of 35 respondents said to sell soybeans.

Corn fell 1.2 percent to $7.555 a bushel in Chicago last week, after reaching a record $7.915 on June 16. Soybeans dropped 3.3 percent to $15.09 a bushel, after rising 7 percent a week earlier. The price is up 80 percent in the past year, reaching a record $15.865 on March 3.


Last week's declines in corn and soybeans surprised most respondents surveyed June 13. Since 2004, the surveys have been right 61 percent of the time on corn, 64 percent on soybeans.

Weekly results: Bullish on corn: 17 Bullish on soybeans: 19 Bearish on corn: 16 Bearish on soybeans: 16

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.



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Dollar May Fall to 105.72 Yen, Bank of America's Fujii Says

By Kosuke Goto

The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp.

The currency has stayed below its 200-day moving average after rising above it from June 13 to June 18 for the first time since August, signaling further losses. The dollar may now fall to the next level of so-called support around 105.72 yen, where an ascending trend-line, connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, extends to, she said.

``Technically, it seems the dollar-yen is heading for a weaker-dollar and a stronger-yen direction,'' Tokyo-based Fujii, at the second-largest U.S. bank, wrote in a research note today.

The U.S. currency traded at 107.36 yen as of 9:55 a.m. in Tokyo, close to the weakest level since June 12, from 107.33 in New York on June 20. The dollar's 200-day moving average was at 108.08 yen.

Traders often look for signs of a currency's short-term trend by viewing the five-day moving average and aim to forecast longer-term trends with the 21-, 65- and 200-day moving averages.

They use moving averages to identify levels of support, where buying is expected, or resistance, where selling is predicted.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.

To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net




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Asian Stocks Fall to a Three-Month Low on Oil; Toyota Declines

By Patrick Rial and Kyung Bok Cho

June 23 (Bloomberg) -- Asian stocks slumped to the lowest in three months after a rebound in oil prices and renewed predictions of asset writedowns rekindled concern economic growth will slow.

Bridgestone Corp., the world's largest tiremaker by sales, dropped for a third day. Australia & New Zealand Banking Group Ltd. led financials lower as Citigroup Inc. prepared to cut jobs and UBS AG forecast the U.S. bank will write down more assets. Toyota Motor Corp. tumbled to the lowest in a month as the dollar weakened and the U.S. auto market showed further signs of deteriorating.

``People's fears about inflation are materializing as commodity prices rise,'' said Yang Jeung Won, chief investment officer in Seoul at Samsung Investment Trust Management Co., which oversees the equivalent of $7.8 billion in equities. ``Financials are going to teeter on shaky ground for a while to come.''

The MSCI Asia Pacific Index lost 1.1 percent to 138.52 as of 11:30 a.m. in Tokyo, the lowest since March 24. Japan's Nikkei 225 Stock Average fell 1.2 percent to 13,779.81. Indexes declined throughout the region, except in Vietnam.

More than $8 trillion in stock market value has been wiped out this year as a 41 percent jump in oil raises costs for consumers and businesses. Higher commodities prices are also hampering central bank efforts to keep interest rates low as financial institutions' access to credit dries up.

Valad Property Group led Australian shares lower after the company cut its earnings forecast amid the U.S. housing recession. Valad joins Mirvac Group and APN/UKA European Retail Property Group, who last week cut forecasts in the wake of the U.S. subprime rout.

More than $398 billion in asset writedowns and credit losses stem from the collapse of the U.S. subprime-mortgage market, according to data compiled by Bloomberg.

Citigroup Job Cuts

Oil rebounded from the lowest in a week, climbing 2 percent to $134.62 in New York on June 20 and recently traded at $135.70. The weakening dollar has spurred a flight to commodities and other assets that will retain their value in an inflationary environment.

Benchmarks in the U.S. and Europe fell to the lowest in three months on June 20, dragged down by the gain in oil and after analysts predicted banks will post more credit-market losses.

Australia & New Zealand Banking declined 1.9 percent to A$18.43. Mitsubishi UFJ Financial Group Inc., the biggest publicly traded lender in Japan, lost 1.5 percent to 990 yen. T&D Holdings Inc., the nation's largest publicly traded life insurer, dropped 6 percent to 6,590 yen.

Citigroup may add another $8.7 billion in asset writedowns this quarter to the $42 billion it has already announced, according to UBS AG. Citigroup may also begin a round of previously announced job cuts this week, a person familiar with the situation said.

Elsewhere, Lehman Brothers Holdings Inc. predicted UBS and Deutsche Bank AG could produce a total of $8.5 billion in asset write-offs for the second quarter.

Banks, Bridgestone

``The resurgence of risks related to the credit crunch is the most important factor in the market,'' Tomochika Kitaoka, a Tokyo- based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.

Bridgestone, which loses almost $250 million in operating profit for every $10 gain in the price of oil according to Nikko Citigroup Ltd., declined 3.1 percent to 1,801 yen. Bridgestone expects net income to fall 32 percent this fiscal year on surging costs for petroleum-based materials and rubber. About 60 percent of materials used in tires are oil based, according to the Japan Automobile Tyre Manufacturers Association.

LG Electronics Inc., Asia's second-largest mobile-phone maker, dropped 2.7 percent to 124,500 won. Mitsui Chemicals Inc., Japan's largest chemical maker by sales, slumped 3.3 percent to 566 yen.

Tumbling Sales

Toyota, the world's largest automaker by value, led a drop by automakers, falling 2.4 percent to 5,280 yen. Denso Corp., Japan's largest auto-parts maker, slid 3.6 percent to 3,750 yen. Hyundai Motor Co., South Korea's largest automaker, fell 2.1 percent to 76,600 won.

Prices in the U.S. for used large pickups and sports utility vehicles tumbled at least 21 percent in May, according to Atlanta- based Manheim Consulting estimates, lowering the attractiveness of new vehicles as well. Toyota generates over half of its profit from the U.S.

Auto shares also slumped after Standard & Poor's said it may lower credit ratings on the three largest U.S. auto producers due to the effect higher fuel prices are having on the industry.

The dollar dropped to as low as 107.11 against the yen in trading today, a level not seen since June 11. The weaker dollar reduces the value of sales generated in the world's largest economy.

Valad, an Australian real estate investment trust, lost 4.2 percent to 80 cents. The company cut its earnings forecast for this quarter by 11 percent, citing ``challenging'' conditions created by the U.S. subprime crisis.

Perpetual Ltd., an Australian fund management company, posted the biggest decline among the MSCI Asian index's 990 members, plunging 11 percent to A$42.50. Its rating was downgraded to ``underweight'' from ``equal-weight'' by Morgan Stanley.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net. Kyung Bok Cho in Seoul at kcho7@bloomberg.net

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Inflation: Enemy Number Two

By Bill Bonner

All bubbles end in busts...and the perp walk.

Two hedge fund managers were arrested yesterday. It was claimed that the two Bear Stearns boys deceived customers.

Oh stop it! We're going to break a rib laughing....

Deceived customers? What is a hedge fund anyway? It's a way for Wall Street to take money from investors who can't do math. There's no deception required. In fact, the funds' names – High Grade Structured Credit Strategies Fund and High Grade Structured Credit Strategies Enhanced Leverage Fund – told investors all they needed to know. They practically screamed out: 'SAY GOODBYE TO YOUR MONEY...IF NOT NOW, LATER.'

So, imagine that you have money invested in the fund that advertises itself as offering "enhanced leverage" from "structured credit strategies." Now, imagine that you read in the paper that houses are going down in price...and that subprime mortgages are going belly up. Couldn't you put two and two together? Well...duh... but that's just it, people who invest in hedge funds can't do math. The managers didn't have to deceive them. They just had to keep their mouths shut...which they did.

But this is the way bubbles end...in losses...in anger...and in jail. The losers always think someone else is to blame. It's not long before they have a CEO, a speculator, or a fund manager mounting the scaffold.

Let's leave that thought on the shelf and get on with our reckoning.

Oil lost $4 last Thursday. The Dow rose 34 points. The euro slipped a little. No biggie.

But look at this: "Inflation now enemy #1 for the Fed," says the Wall Street Journal. This sort of thinking sent the price of gold up $10 yesterday; it's now back over the $900 level. And one of the key fellows at Schroder Investment Management told a crowd in Hong Kong that he thought gold could go to $5,000 before this run of inflation is over.

$5,000? Who knows? But, the poor saps at the WSJ are missing the point. No central bank keeps rates 2.2% below the level of consumer price inflation if it is really fighting inflation. Enemy Numero Ono? What are they thinking? Why are all the Fed's guns facing deflation, not inflation? Sure, there's been some blabbing about turning around...about switching sides in the war between inflation and deflation. But so far, it's just talk.

Talk is cheap. It's action that is dear. And the action the Fed needs to take – raising rates – will be so potentially costly for the lame U.S. economy that Bernanke and Co. are afraid to do it. They're hoping inflation will go away so they can continue the battle against the slump, without having to worry about their unprotected flanks. Most likely, they will make a gesture towards raising rates – perhaps a quarter of a point. But then, when the mob starts howling for his head, Ben Bernanke will drop them again.

Henry Paulson has been gurgling about a strong dollar. Yesterday, he gave voice to a contradictory notion – that the Chinese should let their currency rise (and the dollar fall).

The problem for the Chinese is that they have too many dollars, furnished courtesy of the Fed, while Americans have too few. In the United States, the average household barely has enough dollars to fill its gas tank and pay its bills. But the Middle Kingdom is flooded with them.

If you don't watch out, you're going to drown in them, said Paulson – or words to that effect. China's economy continues floating higher and higher. But all these extra dollars are pushing up wages and prices as well as the economy.

And then, wouldn't you know it, Chinese export prices go up too. And pretty soon, prices are up all over the world.

Which is why the WSJ thinks it's the top problem for the Fed too. Of course, it is a problem. But with the official CPI at 4.2% it's not enemy number one. Maybe it's Enemy Number Two. Most likely, it will stay there for a while longer. We still haven't seen a big drop in commercial property...or in consumer spending. Those are probably still ahead...and will give the Fed a reason to continue blasting away at a deflationary slump. Consumer prices will continue to rise, too. Eventually, they will become so high that inflation really does become Enemy Number One.

By that time, the price of gold could be $500 higher.

Bill Bonner
The Daily Reckoning Australia




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Argentina farmers lift roadblocks

The farmers' protests have caused deep divisions in Argentine society Farmers in Argentina have lifted most of the roadblocks they put in place across the country during a three-month dispute with the government. The cause of the dispute - a sharp increase in taxes on soy and other agricultural exports - is now to be debated by the Argentine Congress. But farmers are poised to resume their protest if no progress is made. The protests caused widespread food shortages, travel chaos and hit the export of agricultural goods. The protesting farmers set up and manned more than 300 roadblocks across the country. Truck drivers, inconvenienced by the farmers' blockades, erected their own barricades. The protests made it impossible on some days to travel around Argentina, stopping materials from reaching factories and hitting tourism, with hotels reporting big losses. Sigh of relief The farmers' decision to end the protest came after President Cristina Fernandez said the contentious export tax increases would be sent to Congress for debate. The BBC's Daniel Schweimler, in Buenos Aires, says most Argentines will now be breathing a deep sigh of relief that the dispute, for now at least, is over. The government says it needs to raise taxes to tackle inflation and improve help for the poor. But some farmers fear Congress will merely rubber stamp the tax policy, and are prepared to resume their protest.

Taken From : http://news.bbc.co.uk
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