By Garth Theunissen
June 26 (Bloomberg) -- South Africa's currency dropped on speculation the country's importers sold it to buy the dollar after the rand rose to the highest level in more than two weeks yesterday.
The rand snapped a two-day gain versus the dollar, and was the worst performer of the 16 major currencies, as traders bet importers used its 2 percent advance yesterday to buy dollars, euro and yen at cheaper rates. The rand fell even as economists forecast producer inflation would stay at 12.4 percent in May, according the median estimate of 16 analysts surveyed by Bloomberg News.
``We've seen strong importer demand for dollars this morning,'' said David Gracey, head of currency trading in Johannesburg at Nedbank Capital. ``Importers usually try to shore up foreign-exchange purchases following a rand rally.''
The rand slipped as much as 0.7 percent to 7.9095 per dollar, and was at 7.8898 by 11 a.m. in Johannesburg, from 7.8547 yesterday. Against the euro the rand fell 0.6 percent to 12.3787.
``Importers are finding current levels attractive to increase dollar holdings,'' said George Glynos, managing director in Johannesburg at Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions. ``They need to do business daily so they tend to jump in and buy after a rand rebound.''
The rand gained by the most since March 18 yesterday after stronger-than-expected inflation data raised the likelihood policy makers will lift interest rates, spurring demand for so- called carry-trade purchases of the currency.
Carry Trade
In these transactions, investors borrow a currency at a low interest rate, convert the proceeds into one they can lend out for a higher return, such as the rand. They earn the spread between the borrowing and lending rates, taking the risk currency moves will erase their profit.
South Africa's 12 percent main lending rate compares with borrowing costs of 0.5 percent in Japan, 2 percent in the U.S. and 2.75 percent in Switzerland.
Inflation in Africa's largest economy accelerated to an annual 10.9 percent in May, exceeding the 10.8 median estimate of 20 economists surveyed by Bloomberg, a report yesterday showed.
The South African Reserve Bank, led by Governor Tito Mboweni, raised the benchmark rate a half-point on June 12 and forecast price-growth will exceed its 3 percent to 6 percent target until the third quarter of 2010.
``After yesterday's inflation number we revised our inflation forecast,'' said Glynos. ``We see inflation peaking at around 13.1 percent in August.''
Government bonds fell, with the yield on South Africa's benchmark 13.5 percent security due September 2015 rising 3 basis points to 10.63 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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Thursday, June 26, 2008
Ruble Band May Be Widened 5%, Korishchenko Says
By Emma O'Brien and Alex Nicholson
June 26 (Bloomberg) -- Russia may expand the ruble's trading band by as much as 5 percent at each end to deter speculation and force the currency lower, said Konstantin Korishchenko, deputy chairman of the country's central bank.
``The corridor will get wider,'' Bank Rossii's Korishchenko said yesterday in an interview in Moscow. ``That would mean adequate volatility would be achieved. It could create a massive unwinding of positions that will effectively implement this depreciation.'' He didn't give a timeframe for widening the range.
The ruble is kept within a trading band versus a basket of euros and dollars to prevent gains that would hurt the competitiveness of Russian exports. That policy has come under strain as rising oil and gas prices and 10 years of economic growth drove inflation to 15.1 percent in May. Investors have been lured to the currency on speculation the central bank will have to let it rise to reduce prices on imported goods.
The Russian currency strengthened about 0.6 percent this year to as high as 29.4835 against the basket, which is made up of 55 percent dollars and 45 percent euros. It gained 4.8 percent against the dollar and fell 2.5 percent versus the euro.
After keeping the ruble little changed at 29.61 versus the basket since the beginning of March, Bank Rossii widened the range by 0.5 percent, or 10 kopeks, on June 10 as part of a new foreign-exchange policy announced the previous month. It will buy and sell the currency at different and unpublicized levels within that corridor to make it a two-way bet for speculators, it said.
Wrong Bets
The wider band will make it harder to predict the point at which the central bank will intervene. That will make it costlier for traders to limit losses should bets go the wrong way, Korishchenko, 49, said. Before Russia announced the new policy on May 14, the ruble's band was 15 kopeks on either side of the basket rate.
Banks including Merrill Lynch & Co., BNP Paribas SA and Dresdner Kleinwort predict spiraling inflation in Russia will force the central bank to let the ruble rise as much as 5 percent against the basket this year. They advised investors to put so-called long positions on the ruble. A long position is a bet the currency is going to rise.
Bank Rossii plans to ``definitely increase'' the amount of dollars it purchases to weaken the ruble and boost volatility, Korishchenko said. ``We've just started the process, we've just put our toe in the water.''
`Encourages Inflows'
To stifle consumer-price growth, the central bank has raised Russia's main interest rates three times this year and increased reserve requirements for local banks.
The bank will use ruble appreciation, interest rates and reserve levels to help bring down inflation this year, Korishchenko said. ``There is no one tool preferable and favorite and there should not just be one tool,'' he said.
Bank Rossii let the currency rise as much as 1.3 percent against the basket last year as annual inflation accelerated to 11.9 percent. A 1 percentage-point increase in the ruble versus the basket cuts inflation by 0.3 percentage point, according to the central bank.
While letting the ruble strengthen helps cut import prices, it can also boost inflation as it ``encourages inflows,'' Korishchenko said.
Net capital flows into Russia rose to a record $82 billion last year, according to central bank figures.
``Number one in our thinking are the risks associated with ruble appreciation,'' Korishchenko said. ``The effect on inflation is number two.''
The central bank calculates the ruble's rate against the basket by multiplying its price versus the dollar by 0.55 and its rate against the euro by 0.45, then adding the two figures together.
To contact the reporters on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net; Alex Nicholson in Moscow at anicholson6@bloomberg.net
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Fed Sounds Inflation Alarm, Moves Toward Rate Rise
By Scott Lanman
June 26 (Bloomberg) -- The Federal Reserve is sounding the alarm on inflation without committing to raise interest rates.
The Federal Open Market Committee left its benchmark rate at 2 percent yesterday and said ``upside risks'' to prices have picked up. The statement also said consumer spending is ``firming,'' while acknowledging that rising energy prices will curb growth into 2009.
The FOMC cited ``the elevated state'' of some measures of inflation expectations and dropped an April forecast of a ``leveling out'' in commodity prices. The officials want to keep their options open on rate changes in case the credit crisis worsens and the economy deteriorates after consumers spend their tax rebates, Fed watchers said.
``It is a baby step in the direction of raising rates,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut. The central bankers signaled ``they are not expecting to tighten in the near term. That is as far as they are willing to go,'' he said.
Two-year Treasury yields, more sensitive to Fed rate expectations than longer-dated debt, initially rose after the central bank's announcement, before dropping later. The notes yielded 2.78 percent at 8:08 a.m. in New York, from 2.81 percent late yesterday.
The FOMC said employment had weakened and financial markets remained under ``considerable stress,'' even as growth risks ``diminished somewhat.''
Pledge to Act
Chairman Ben S. Bernanke and his colleagues stopped short of specifying that inflation was a greater concern than growth. They reiterated language from their April meeting that the Fed will ``act as needed'' to promote both economic expansion and stable prices.
Traders trimmed bets on a rate increase in the next three months after the announcement. Odds that the Fed will keep its benchmark at 2 percent in September rose to 23 percent today from 2 percent a week ago, according to futures contracts quoted on the Chicago Board of Trade.
``I don't think they are signaling a rate hike as a possibility at the next meeting,'' said Cary Leahey, senior economist at Decision Economics Inc. in New York. ``Before they would tighten credit, they would have a statement that would say `we do have a tightening bias' and they would say that as clearly as they can.''
Bernanke Message
Yesterday's statement reflected Fed officials' comments this month that the central bank must keep price expectations in check to avoid a spiraling in inflation. Bernanke said June 9 that officials would ``strongly resist'' a jump in those expectations.
The FOMC cited ``the elevated state'' of some measures of inflation expectations, and dropped an April forecast of a ``leveling out'' in commodity prices.
The decision wasn't unanimous, with Dallas Fed President Richard Fisher dissenting for a fourth straight time, favoring the first rate increase in two years.
Oil prices touched a record $139.89 June 16, extending a rally that helped push the consumer price index up 4.2 percent in the 12 months to May compared with an average of 2.7 percent over the past decade.
Dow Chemical Co. said two days ago that higher raw materials costs will cause the company to raise prices by as much as 25 percent in July, following an increase of as much as 20 percent. United Parcel Service Inc. cut its second-quarter profit forecast June 23 because of rising fuel costs and slowing U.S. growth.
`Tentative Signs'
``Higher headline rates of inflation have shown only a few tentative signs of embedding themselves in core inflation or in longer-term inflation expectations,'' Fed Vice Chairman Donald Kohn said in a speech to a conference today in Frankfurt.
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey. The five-year outlook among investors has been more stable, at 2.43 percent, up from 2.31 percent in January, according to a measure derived from inflation-linked Treasuries.
``What they're saying is, we have a duty to price stability, and we want you to know that we are mindful of that duty, but we may not think it's appropriate to act on that duty in the short run,'' said Neal Soss, chief economist at Credit Suisse in New York, who used to work as an aide to former Fed chief Paul Volcker.
Financial Stress
Credit markets have yet to normalize and bank losses are mounting as the economic slowdown adds to stresses from the subprime mortgage collapse. The gap between investors' expectations for the Fed's main rate and the rate that banks charge each other for funds increased this month, a sign of continued turmoil.
The difference between the three-month London Interbank Offered Rate and the overnight index swap rate widened to 0.73 percentage point yesterday from 0.68 point at the end of May. Former Fed chairman Alan Greenspan said this month the credit crisis will be over when the spread narrows past 0.25 point.
The worst housing recession in a quarter century is showing few signs of ending. Reports this week showed sales of new homes extended their decline in May, consumer confidence dropped to a 16-year low and orders for durable goods stagnated.
Yesterday's statement contained no mention of the contraction in gross domestic product that many officials judged likely at their April meeting. The Commerce Department today lifted its estimate of GDP growth for the first quarter to a 1 percent annual pace, from a previous estimate of 0.9 percent.
``I hope we'll be in good enough shape by later in the year'' that the Fed could raise rates, House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in an interview with Bloomberg Television. Frank added he was ``skeptical'' there will be sufficient improvement by then.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
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Gold Futures Climb as Fed Keeps Rates Steady; Silver Advances
By Pham-Duy Nguyen
June 26 (Bloomberg) -- Gold surged the most in seven months on speculation the Federal Reserve won't rush to raise borrowing costs to curb inflation. Silver also gained.
The Fed yesterday kept its benchmark interest rate at 2 percent, even as policy makers acknowledged heightening inflationary expectations. Gold reached an all-time high of $1,033.90 an ounce in March as fuel, corn and other commodities soared and the dollar fell to a record against the euro.
``The Fed said that inflation is a major concern, but they're not going to do anything about it, which made gold go ballistic,'' said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. ``The dollar is going to get slammed again.''
Gold futures for August delivery jumped $27.40, or 3.1 percent, to $907.70 an ounce at 8:52 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for a most-active contract since Nov. 23.
Silver futures for September delivery soared 73.3 cents, or 4.4 percent, to $17.34 an ounce. A close at that price would mark the biggest increase since March 5.
Before today, silver advanced 11 percent this year, while gold climbed 5.3 percent.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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June 26 (Bloomberg) -- Gold surged the most in seven months on speculation the Federal Reserve won't rush to raise borrowing costs to curb inflation. Silver also gained.
The Fed yesterday kept its benchmark interest rate at 2 percent, even as policy makers acknowledged heightening inflationary expectations. Gold reached an all-time high of $1,033.90 an ounce in March as fuel, corn and other commodities soared and the dollar fell to a record against the euro.
``The Fed said that inflation is a major concern, but they're not going to do anything about it, which made gold go ballistic,'' said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. ``The dollar is going to get slammed again.''
Gold futures for August delivery jumped $27.40, or 3.1 percent, to $907.70 an ounce at 8:52 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for a most-active contract since Nov. 23.
Silver futures for September delivery soared 73.3 cents, or 4.4 percent, to $17.34 an ounce. A close at that price would mark the biggest increase since March 5.
Before today, silver advanced 11 percent this year, while gold climbed 5.3 percent.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Crude Oil Rises on Lower Dollar, Possible Libya Production Cut
By Mark Shenk
June 26 (Bloomberg) -- Crude oil rose more than $3 a barrel as a lower U.S. dollar spurred investors to purchase commodities as a hedge and Libya said it may cut production.
Oil has more than doubled over the past year as the dollar dropped against the euro. The U.S. currency weakened after the Federal Reserve gave no signal of higher interest rates yesterday. The head of Libya's national oil company said the country may reduce output because the market is oversupplied.
``Commodities are rallying because there's a lack of confidence that the Fed will raise rates,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``They didn't raise rates yesterday and it doesn't look like they will raise them soon. Their statement yesterday was too wishy-washy.''
Crude oil for August delivery rose $3.78, or 2.8 percent, to $138.33 a barrel at 9:10 a.m. on the New York Mercantile Exchange, after rising as much as $4.40 a barrel. Prices reached a record $139.89 on June 16.
The dollar is also down on a forecast that the European Central Bank will boost interest rates. The dollar's drop against the euro made commodities cheaper for buyers outside the U.S. The dollar was at $1.5727 per euro as of 9:20 a.m. New York time, compared with $1.5574 earlier.
``There's no reason for prices to rise $4 in 10 minutes,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``Things are very unsettled and now the worry is that the European central bank may raise rates, which would be the same as another Fed cut.''
Benchmark Rate
The Federal Reserve yesterday left its benchmark interest rate at 2 percent and said ``uncertainty about the inflation outlook remains high'' as energy and commodity prices continue to rise. Leaving the interest rate unchanged ended the most aggressive series of rate cuts in two decades.
Libya's National Oil Corp. Chairman Shokri Ghanem declined to say when a decision would be made on whether to lower Libyan production or give any indication of the size of the cut under consideration.
He said the reductions may also be made because of threats of sanctions against Iran and U.S. legislation allowing lawsuits against the Organization of Petroleum Exporting Countries.
Brent crude oil for August settlement rose $3.37, or 2.5 percent, to $137.70 a barrel on London's ICE Futures Europe exchange. Prices climbed to a record $139.32 on June 16.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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June 26 (Bloomberg) -- Crude oil rose more than $3 a barrel as a lower U.S. dollar spurred investors to purchase commodities as a hedge and Libya said it may cut production.
Oil has more than doubled over the past year as the dollar dropped against the euro. The U.S. currency weakened after the Federal Reserve gave no signal of higher interest rates yesterday. The head of Libya's national oil company said the country may reduce output because the market is oversupplied.
``Commodities are rallying because there's a lack of confidence that the Fed will raise rates,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``They didn't raise rates yesterday and it doesn't look like they will raise them soon. Their statement yesterday was too wishy-washy.''
Crude oil for August delivery rose $3.78, or 2.8 percent, to $138.33 a barrel at 9:10 a.m. on the New York Mercantile Exchange, after rising as much as $4.40 a barrel. Prices reached a record $139.89 on June 16.
The dollar is also down on a forecast that the European Central Bank will boost interest rates. The dollar's drop against the euro made commodities cheaper for buyers outside the U.S. The dollar was at $1.5727 per euro as of 9:20 a.m. New York time, compared with $1.5574 earlier.
``There's no reason for prices to rise $4 in 10 minutes,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``Things are very unsettled and now the worry is that the European central bank may raise rates, which would be the same as another Fed cut.''
Benchmark Rate
The Federal Reserve yesterday left its benchmark interest rate at 2 percent and said ``uncertainty about the inflation outlook remains high'' as energy and commodity prices continue to rise. Leaving the interest rate unchanged ended the most aggressive series of rate cuts in two decades.
Libya's National Oil Corp. Chairman Shokri Ghanem declined to say when a decision would be made on whether to lower Libyan production or give any indication of the size of the cut under consideration.
He said the reductions may also be made because of threats of sanctions against Iran and U.S. legislation allowing lawsuits against the Organization of Petroleum Exporting Countries.
Brent crude oil for August settlement rose $3.37, or 2.5 percent, to $137.70 a barrel on London's ICE Futures Europe exchange. Prices climbed to a record $139.32 on June 16.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Goldman Says Buy GAZ, Sollers, in New Russian Mid-Cap Coverage
By Paul Abelsky
June 26 (Bloomberg) -- Carmakers including OAO GAZ and OAO Sollers received a ``buy'' recommendation in Goldman Sachs Group Inc.'s new coverage of 23 Russian small- and mid-cap stocks from cement makers to a warplane manufacturer.
GAZ, Russia's second-biggest carmaker owned by billionaire Oleg Deripaska, and Sollers, formerly called OAO Severstal-Avto, are among the companies that will provide ``super-normal growth opportunities at attractive valuations'' and ``may have been overlooked by the market,'' analysts including Sergei Arsenyev in Moscow wrote in a note to investors today.
Goldman named GAZ, Sollers and Krasnyi Kotelschik, a manufacturer of industrial steam boilers, as its ``top picks'' in in seven industries.
Sibirsky Cement, Russia's second-biggest cement maker, was recommended ``buy.''
Goldman said it's taking a ``neutral view'' on whether small and mid-cap stocks will outperform large caps.
Aerospace is the least preferred industry of the seven as the companies may struggle to become profitable even with government orders, according to the note.
OAO AvtoVAZ, Russia's biggest carmaker, OAO KamAZ, the country's largest truck manufacturer, and warplane maker OAO Irkut Corp. received ``neutral'' recommendations.
OAO Novoil, and OAO Ufaneftekhim, oil companies in the Republic of Bashkortostan, were rated ``buy.'' Goldman said refineries in the republic are ``extremely undervalued.''
Goldman initiated NPO Saturn, which manufactures engines for use in military and civilian aircraft, with a ``sell'' recommendation.
To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net
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June 26 (Bloomberg) -- Carmakers including OAO GAZ and OAO Sollers received a ``buy'' recommendation in Goldman Sachs Group Inc.'s new coverage of 23 Russian small- and mid-cap stocks from cement makers to a warplane manufacturer.
GAZ, Russia's second-biggest carmaker owned by billionaire Oleg Deripaska, and Sollers, formerly called OAO Severstal-Avto, are among the companies that will provide ``super-normal growth opportunities at attractive valuations'' and ``may have been overlooked by the market,'' analysts including Sergei Arsenyev in Moscow wrote in a note to investors today.
Goldman named GAZ, Sollers and Krasnyi Kotelschik, a manufacturer of industrial steam boilers, as its ``top picks'' in in seven industries.
Sibirsky Cement, Russia's second-biggest cement maker, was recommended ``buy.''
Goldman said it's taking a ``neutral view'' on whether small and mid-cap stocks will outperform large caps.
Aerospace is the least preferred industry of the seven as the companies may struggle to become profitable even with government orders, according to the note.
OAO AvtoVAZ, Russia's biggest carmaker, OAO KamAZ, the country's largest truck manufacturer, and warplane maker OAO Irkut Corp. received ``neutral'' recommendations.
OAO Novoil, and OAO Ufaneftekhim, oil companies in the Republic of Bashkortostan, were rated ``buy.'' Goldman said refineries in the republic are ``extremely undervalued.''
Goldman initiated NPO Saturn, which manufactures engines for use in military and civilian aircraft, with a ``sell'' recommendation.
To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net
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U.K. Stocks Decline, Led by BSkyB and ITV; Lloyds TSB Retreats
By Sarah Jones
June 26 (Bloomberg) -- U.K. stocks dropped, led by media companies after JPMorgan Chase & Co. recommended investors sell holdings in British Sky Broadcasting Group Plc and Morgan Stanley cut its price estimate for Thomson Reuters Corp.
Lloyds TSB Group Plc led a retreat by banks as Goldman Sachs Group Inc. warned of additional writedowns at Citigroup Inc.
The FTSE 100 Index fell 68.8, or 1.2 percent, to 5,597.30 at 12:31 p.m. in London. The FTSE All-Share Index lost 1.2 percent and Ireland's ISEQ Index declined 1.5 percent.
BSkyB retreated 3.8 percent to 476 pence, the lowest since January 2004. JPMorgan downgraded the U.K.'s biggest pay- television provider to ``underweight'' from ``overweight.''
``High-margin advertising revenues could slow given the deteriorating macro environment,'' London-based analyst Mark O'Donnell wrote in a note to investors. ``High-margin revenue streams are underperforming.''
ITV Plc, the U.K.'s largest commercial broadcaster, lost 4.1 percent to 50.3 pence.
Thomson Reuters, formed by Thomson Corp.'s $15.9 billion purchase of Reuters Group Plc, lost 5.1 percent to 1,366 pence.
Morgan Stanley reduced its price estimate 9.9 percent to 1,280 pence and maintained its ``underweight'' recommendation on the shares.
``Our negative growth forecast is predicted on the ongoing retrenchment in investment bank headcount and market data spend,'' London-based analyst Patrick Wellington wrote in a note.
Bloomberg LP competes with Thomson Reuters in selling information and trading systems to the financial-services industry.
Lloyds TSB, the biggest provider of checking accounts in the U.K., declined 5.5 percent to 310.5 pence. HSBC Holdings Plc, Europe's largest bank by market value, fell 2.2 percent to 796.5 pence.
Goldman Sachs downgraded Citigroup to ``neutral'' saying the U.S. bank may take an additional $8.9 billion in net writedowns in the second quarter.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Avesco Group Plc (AVS LN) lost 7.5 pence, or 9.8 percent, to 69, the steepest decline since 2003. The U.K. provider of large video screens for concerts posted a first-half loss.
Regent Inns Plc (REG LN) dropped 1.5 pence, or 23 percent, to 5, the lowest since at least 1993. The U.K. owner of the Walkabout pub chain said talks on a potential offer for the company have ended after suitors were unable to obtain funding because of the credit crunch.
The company also said pretax profit will be ``minimal'' before one-time items for the fiscal year ending June 28 because of a ``substantial'' drop in same-outlet sales at its entertainment unit.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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June 26 (Bloomberg) -- U.K. stocks dropped, led by media companies after JPMorgan Chase & Co. recommended investors sell holdings in British Sky Broadcasting Group Plc and Morgan Stanley cut its price estimate for Thomson Reuters Corp.
Lloyds TSB Group Plc led a retreat by banks as Goldman Sachs Group Inc. warned of additional writedowns at Citigroup Inc.
The FTSE 100 Index fell 68.8, or 1.2 percent, to 5,597.30 at 12:31 p.m. in London. The FTSE All-Share Index lost 1.2 percent and Ireland's ISEQ Index declined 1.5 percent.
BSkyB retreated 3.8 percent to 476 pence, the lowest since January 2004. JPMorgan downgraded the U.K.'s biggest pay- television provider to ``underweight'' from ``overweight.''
``High-margin advertising revenues could slow given the deteriorating macro environment,'' London-based analyst Mark O'Donnell wrote in a note to investors. ``High-margin revenue streams are underperforming.''
ITV Plc, the U.K.'s largest commercial broadcaster, lost 4.1 percent to 50.3 pence.
Thomson Reuters, formed by Thomson Corp.'s $15.9 billion purchase of Reuters Group Plc, lost 5.1 percent to 1,366 pence.
Morgan Stanley reduced its price estimate 9.9 percent to 1,280 pence and maintained its ``underweight'' recommendation on the shares.
``Our negative growth forecast is predicted on the ongoing retrenchment in investment bank headcount and market data spend,'' London-based analyst Patrick Wellington wrote in a note.
Bloomberg LP competes with Thomson Reuters in selling information and trading systems to the financial-services industry.
Lloyds TSB, the biggest provider of checking accounts in the U.K., declined 5.5 percent to 310.5 pence. HSBC Holdings Plc, Europe's largest bank by market value, fell 2.2 percent to 796.5 pence.
Goldman Sachs downgraded Citigroup to ``neutral'' saying the U.S. bank may take an additional $8.9 billion in net writedowns in the second quarter.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Avesco Group Plc (AVS LN) lost 7.5 pence, or 9.8 percent, to 69, the steepest decline since 2003. The U.K. provider of large video screens for concerts posted a first-half loss.
Regent Inns Plc (REG LN) dropped 1.5 pence, or 23 percent, to 5, the lowest since at least 1993. The U.K. owner of the Walkabout pub chain said talks on a potential offer for the company have ended after suitors were unable to obtain funding because of the credit crunch.
The company also said pretax profit will be ``minimal'' before one-time items for the fiscal year ending June 28 because of a ``substantial'' drop in same-outlet sales at its entertainment unit.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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European Stocks, U.S. Futures Drop; Fortis, Oracle, BSkyB Fall
By Adam Haigh
June 26 (Bloomberg) -- European stocks and U.S. index futures fell on concern credit losses will reduce bank earnings, while slowing economic growth curbs profits for broadcasters and technology companies. Asian shares advanced.
Fortis tumbled 15 percent on plans to raise $2.4 billion of equity and cancel a dividend to boost solvency, while Citigroup Inc. declined after Goldman Sachs Group Inc. recommended selling the shares, predicting $8.9 billion more in writedowns for the bank. Oracle Corp. dropped after its forecast signaled a slowdown in growth. British Sky Broadcasting Group Plc retreated to the lowest in almost four years after JPMorgan Chase & Co. downgraded the stock, citing a ``poor'' economic environment.
Europe's Dow Jones Stoxx 600 Index lost 1.9 percent to 290.44, the lowest since 2005, bringing this year's decline to 20 percent at 2:23 p.m. in London. Futures on the Standard & Poor's 500 Index fell 1.2 percent. The MSCI Asia Pacific Index increased 0.5 percent.
``There is still a lot of nervousness out there,'' said Peter Jarvis, a London-based director of European equities at F&C Asset Management, which has about $200 billion. ``Losses are going to continue. We still haven't seen the hit to earnings downgrades that we would expect.''
The Stoxx 600 has tumbled 9.8 percent this month, headed for the worst June since at least 1987. Record oil prices and rising inflation have stoked speculation central banks will keep borrowing costs high or raise them as credit losses and writedowns approaching $400 billion stifle economic and profit growth.
European Central Bank President Jean-Claude Trichet reiterated yesterday policy makers may raise their key rate from a six-year high next month to curb price increases. The Federal Reserve kept rates unchanged yesterday, after a series of seven reductions, saying ``upside risks'' to prices have increased.
National Markets
National indexes declined in all 18 western European markets. The U.K.'s FTSE 100 slipped 1.5 percent, and France's CAC 40 lost 1.7 percent. Germany's DAX sank 1.8 percent.
Fortis dropped 1.93 euros to 10.72. The company will raise 1.5 billion euros ($2.4 billion) of equity. The measures will increase solvency by 8 billion euros, the company said.
Citigroup lost 4.1 percent to $18.11 in Germany. The bank that's posted the biggest losses from the collapse of the U.S. mortgage market may take an additional $8.9 billion in net writedowns in the second quarter, Goldman said in a report.
The brokerage lowered its recommendation on U.S. investment banks to ``neutral'' from ``attractive,'' and added Citigroup to its ``conviction sell'' list.
``We are hard pressed to find a catalyst that will move the group significantly higher over the next few months as fundamentals continue to deteriorate,'' the brokerage said in a note to clients.
World's Worst
The MSCI World Financials Index has lost 21 percent this year, the worst performance among the 10 industry groups in the index, as banks cut their workforce and sell shares to shore up their balance sheets. Financial firms have raised a total of $314 billion in the past year and have announced plans to trim more than 83,000 jobs since last July, according to figures compiled by Bloomberg.
BSkyB declined 4.9 percent to 470.75 pence. JPMorgan lowered the stock to ``underweight'' from ``overweight'' saying it's at risk from a slowdown in sales and a ``poor'' economic environment, according to a note to clients.
Oracle
Oracle, the biggest software maker, fell 3.9 percent to $21.67 after a forecast of a possible slowdown in growth in the current quarter.
Excluding some costs, profit will be 26 cents to 27 cents a share, the U.S. company said yesterday. Analysts had estimated 27 cents, according to a Bloomberg survey. Sales will rise between 18 percent and 20 percent, which would be the slowest growth since 2006.
Nike Inc., the world's biggest athletic-shoe maker, tumbled 3.9 percent to $63.39 in Germany after reporting a 10 percent drop in U.S. pretax income. Adidas AG, the world's second-largest sporting-goods maker, dropped 3.9 percent to 41.15 euros.
Carrefour SA, the world's second-biggest food retailer, fell 8.8 percent to 37.90 euros, leading a retreat among retail shares in Europe. JPMorgan cut its recommendation to ``neutral'' from ``overweight,'' while Merrill Lynch & Co. lowered its rating to ``neutral'' from ``buy.''
DSG International Plc lost 1.1 percent to 44.5 pence as the largest U.K. consumer-electronics retailer reported its first annual loss since 1994 after writing down the value of its money-losing Italian unit.
Consumer confidence in France declined to a record low in June as the fastest inflation in 12 years eroded households' purchasing power. A gauge of Italian business confidence slumped to the lowest in almost three years this month as orders were curbed by slowing economic growth, rising energy costs and a stronger euro.
The Stoxx Retail Index tumbled 3.5 percent today, its biggest drop in three months and the steepest decline among the 18 groups in the index after banks and automakers.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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Citigroup May Write Down $8.9 Billion, Goldman Says
By Cathy Chan
June 26 (Bloomberg) -- Citigroup Inc., the bank that's posted the biggest losses from the collapse of the U.S. mortgage market, may take an additional $8.9 billion in net writedowns in the second quarter, Goldman Sachs Group Inc. said.
Goldman also lowered its rating on U.S. brokerages to ``neutral'' from ``attractive,'' saying the pace of deterioration in the industry ``appears to be far worse than'' it originally anticipated, according to a June 25 note.
``The turnaround in business trends that we had been expecting in the second half of 2008 may not occur as quickly as we should have thought,'' Goldman said. ``We see multiple headwinds for Citigroup,'' such as risks of further writedowns, higher consumer provisions, and the potential need for additional capital raisings, dividend cuts or asset sales, Goldman said.
Goldman joined UBS AG and Merrill Lynch & Co. in predicting more writedowns for New York-based Citigroup, already reeling from $42.9 billion of credit-related losses. Citigroup Chief Executive Officer Vikram Pandit has announced 13,000 job cuts this year, and the bank this month forecast ``substantial'' additional writedowns and more losses on consumer loans.
Citigroup may write down $7.1 billion of collateralized debt obligations and associated hedges, and $1.2 billion for other asset classes, Goldman said. It may need to post a $600 million loss to reflect the mark-to-market value of its own structured note liabilities, New York-based Goldman said.
Payouts in Doubt
Goldman cut its six-month price target for Citigroup to $16 and put the New York-based investment bank on its ``conviction sell'' list. Citigroup closed at $18.85 in New York trading yesterday, having dropped 36 percent this year.
Citigroup probably won't be able to keep its current 7 percent dividend yield and may need to raise more capital, according to the report. Goldman estimated Citigroup could generate $3.5 billion in capital a year by cutting payouts in half.
``Given the firm's current level of earnings power, we do not believe the dividend is safe,'' it said. ``We believe any additional capital raises will be in the form of common equity, dividend cuts and or additional asset sales.''
Citigroup is more exposed to hedges on its leveraged loan and commercial mortgage-backed securities portfolios than Merrill and JPMorgan Chase & Co., indicating higher potential losses, Goldman said.
Merrill analyst Guy Moszkowski this week said Citigroup may post another $8 billion of writedowns this year. UBS analyst Glenn Schorr on June 20 said Citigroup probably will post a second-quarter loss of 40 cents a share after $8.7 billion of asset writedowns.
To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net
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June 26 (Bloomberg) -- Citigroup Inc., the bank that's posted the biggest losses from the collapse of the U.S. mortgage market, may take an additional $8.9 billion in net writedowns in the second quarter, Goldman Sachs Group Inc. said.
Goldman also lowered its rating on U.S. brokerages to ``neutral'' from ``attractive,'' saying the pace of deterioration in the industry ``appears to be far worse than'' it originally anticipated, according to a June 25 note.
``The turnaround in business trends that we had been expecting in the second half of 2008 may not occur as quickly as we should have thought,'' Goldman said. ``We see multiple headwinds for Citigroup,'' such as risks of further writedowns, higher consumer provisions, and the potential need for additional capital raisings, dividend cuts or asset sales, Goldman said.
Goldman joined UBS AG and Merrill Lynch & Co. in predicting more writedowns for New York-based Citigroup, already reeling from $42.9 billion of credit-related losses. Citigroup Chief Executive Officer Vikram Pandit has announced 13,000 job cuts this year, and the bank this month forecast ``substantial'' additional writedowns and more losses on consumer loans.
Citigroup may write down $7.1 billion of collateralized debt obligations and associated hedges, and $1.2 billion for other asset classes, Goldman said. It may need to post a $600 million loss to reflect the mark-to-market value of its own structured note liabilities, New York-based Goldman said.
Payouts in Doubt
Goldman cut its six-month price target for Citigroup to $16 and put the New York-based investment bank on its ``conviction sell'' list. Citigroup closed at $18.85 in New York trading yesterday, having dropped 36 percent this year.
Citigroup probably won't be able to keep its current 7 percent dividend yield and may need to raise more capital, according to the report. Goldman estimated Citigroup could generate $3.5 billion in capital a year by cutting payouts in half.
``Given the firm's current level of earnings power, we do not believe the dividend is safe,'' it said. ``We believe any additional capital raises will be in the form of common equity, dividend cuts and or additional asset sales.''
Citigroup is more exposed to hedges on its leveraged loan and commercial mortgage-backed securities portfolios than Merrill and JPMorgan Chase & Co., indicating higher potential losses, Goldman said.
Merrill analyst Guy Moszkowski this week said Citigroup may post another $8 billion of writedowns this year. UBS analyst Glenn Schorr on June 20 said Citigroup probably will post a second-quarter loss of 40 cents a share after $8.7 billion of asset writedowns.
To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net
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Arawak, BCE, Research In Motion, WestJet: Canada Equity Preview
By John Kipphoff
June 26 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading today. Stock symbols are in parentheses, and share prices are from the yesterday's close in Toronto.
The Standard & Poor's/TSX Composite Index gained 0.2 percent to 14,441.13.
Arawak Energy Corp. (ABG CN): The Canadian company exploring for oil and gas in Kazakhstan, Russia and Azerbaijan, said it plans to list its shares on the London Stock Exchange. Arawak will maintain its Toronto Stock Exchange listing, the Jersey, U.K.-based company said today in a statement distributed by the Regulatory News Service. The shares fell 3.9 percent to C$2.50.
BCE Inc. (BCE CN): BCE is being told by investors to skip its quarterly dividend payment, in the hope that retaining the C$294 million ($290.84 million) cash will persuade banks to keep to their loan commitment for the buyout of Canada's largest phone company, the Globe and Mail reported., without naming the investors.
BCE has agreed to a C$42.75-a-share takeover offer from a group led by the Ontario Teachers' Pension Plan. The deal depends on a C$32 billion ($31.7 billion) debt package being negotiated by banks including Citigroup Inc. and Toronto- Dominion Bank, the newspaper said. BCE's board is expected to make a decision on the 36.5 cent-a-share payout it by June 30. The shares rose 0.9 to C$37.55.
Compton Petroleum Corp. (CMT CN): The natural gas producer that's seeking a buyer said it agreed to sell four groups of assets for $218 million. Compton, based in Calgary, agreed to sell properties with production of the equivalent of 3,700 barrels of oil a day. The shares fell 2.3 percent to C$12.61.
Husky Energy Inc. (HSE CN): The oil and gas producer controlled by Hong Kong billionaire Li Ka-shing said it signed an accord with the China National Offshore Oil Corp. for an exploration block in China's South China Sea. Cnooc, as the Beijing-based company is known, is China's biggest offshore oil producer. Husky fell 0.4 percent to C$47.94.
Jean Coutu Group Inc. (PJC/A CN): Rite Aid Corp., the U.S. drugstore chain 30 percent owned by Jean Coutu, posted its fourth straight quarterly loss after integrating the 1,800 Brooks and Eckerd locations it bought last year. Rite Aid reported a net loss of $156.6 million, compared with profit of $27.6 million a year earlier. Sales rose to $6.61 billion from $4.43 billion. Jean Coutu fell 0.9 percent to C$8.63.
Magna International Inc. (MG/A CN): An Austrian unit of Magna, North America's biggest car-parts maker, will produce Porsche SE's Boxster and Cayman models, the German carmaker said. Magna will replace Metso Oyj's Valmet Automotive division from 2012, Porsche said. Magna gained 2.5 percent to C$65.99.
Research In Motion Ltd. (RIM CN): The maker of the BlackBerry e-mail phone missed analysts' profit estimates for the first time in five quarters and gave a disappointing forecast amid higher spending to take on Apple Inc.'s new iPhone.
Second-quarter profit will be as low as 84 cents a share, the Waterloo, Ontario-based company said yesterday. That missed the average prediction by analysts of 92 cents, according to a Bloomberg survey. The stock dropped 9.4 percent in early U.S. trading, and 0.6 percent to C$141 during regular trading in Toronto yesterday.
Talisman Energy Inc. (TLM CN): Talisman's Norwegian unit discovered a ``small oil column'' in a wildcat well near the Varg Field the North Sea, Norway's Petroleum Safety Authority said. The find is between 100,000 and 250,000 standard cubic meters of recoverable oil, which will be produced through Varg starting on July 5, the regulator said. Talisman fell 2.3 percent to C$22.31.
WestJet Airlines Ltd. (WJA CN): Canada's second-biggest airline was raised to ``buy'' from ``neutral'' by Fadi Chamoun at UBS. The Toronto-based analyst set a 12-month share-price target of C$19. WestJet added 1.1 percent to C$14.26.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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June 26 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading today. Stock symbols are in parentheses, and share prices are from the yesterday's close in Toronto.
The Standard & Poor's/TSX Composite Index gained 0.2 percent to 14,441.13.
Arawak Energy Corp. (ABG CN): The Canadian company exploring for oil and gas in Kazakhstan, Russia and Azerbaijan, said it plans to list its shares on the London Stock Exchange. Arawak will maintain its Toronto Stock Exchange listing, the Jersey, U.K.-based company said today in a statement distributed by the Regulatory News Service. The shares fell 3.9 percent to C$2.50.
BCE Inc. (BCE CN): BCE is being told by investors to skip its quarterly dividend payment, in the hope that retaining the C$294 million ($290.84 million) cash will persuade banks to keep to their loan commitment for the buyout of Canada's largest phone company, the Globe and Mail reported., without naming the investors.
BCE has agreed to a C$42.75-a-share takeover offer from a group led by the Ontario Teachers' Pension Plan. The deal depends on a C$32 billion ($31.7 billion) debt package being negotiated by banks including Citigroup Inc. and Toronto- Dominion Bank, the newspaper said. BCE's board is expected to make a decision on the 36.5 cent-a-share payout it by June 30. The shares rose 0.9 to C$37.55.
Compton Petroleum Corp. (CMT CN): The natural gas producer that's seeking a buyer said it agreed to sell four groups of assets for $218 million. Compton, based in Calgary, agreed to sell properties with production of the equivalent of 3,700 barrels of oil a day. The shares fell 2.3 percent to C$12.61.
Husky Energy Inc. (HSE CN): The oil and gas producer controlled by Hong Kong billionaire Li Ka-shing said it signed an accord with the China National Offshore Oil Corp. for an exploration block in China's South China Sea. Cnooc, as the Beijing-based company is known, is China's biggest offshore oil producer. Husky fell 0.4 percent to C$47.94.
Jean Coutu Group Inc. (PJC/A CN): Rite Aid Corp., the U.S. drugstore chain 30 percent owned by Jean Coutu, posted its fourth straight quarterly loss after integrating the 1,800 Brooks and Eckerd locations it bought last year. Rite Aid reported a net loss of $156.6 million, compared with profit of $27.6 million a year earlier. Sales rose to $6.61 billion from $4.43 billion. Jean Coutu fell 0.9 percent to C$8.63.
Magna International Inc. (MG/A CN): An Austrian unit of Magna, North America's biggest car-parts maker, will produce Porsche SE's Boxster and Cayman models, the German carmaker said. Magna will replace Metso Oyj's Valmet Automotive division from 2012, Porsche said. Magna gained 2.5 percent to C$65.99.
Research In Motion Ltd. (RIM CN): The maker of the BlackBerry e-mail phone missed analysts' profit estimates for the first time in five quarters and gave a disappointing forecast amid higher spending to take on Apple Inc.'s new iPhone.
Second-quarter profit will be as low as 84 cents a share, the Waterloo, Ontario-based company said yesterday. That missed the average prediction by analysts of 92 cents, according to a Bloomberg survey. The stock dropped 9.4 percent in early U.S. trading, and 0.6 percent to C$141 during regular trading in Toronto yesterday.
Talisman Energy Inc. (TLM CN): Talisman's Norwegian unit discovered a ``small oil column'' in a wildcat well near the Varg Field the North Sea, Norway's Petroleum Safety Authority said. The find is between 100,000 and 250,000 standard cubic meters of recoverable oil, which will be produced through Varg starting on July 5, the regulator said. Talisman fell 2.3 percent to C$22.31.
WestJet Airlines Ltd. (WJA CN): Canada's second-biggest airline was raised to ``buy'' from ``neutral'' by Fadi Chamoun at UBS. The Toronto-based analyst set a 12-month share-price target of C$19. WestJet added 1.1 percent to C$14.26.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
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Gol, Grupo Modelo, Marcopolo, Socotherm: Latin Equity Preview
By Paulo Winterstein and Alexander Ragir
June 26 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares rose 2.3 percent to 4,784.55 yesterday. In Brazil, preferred shares are the most commonly traded class of stock.
Argentina
Socotherm Americas SA (STHE AR): The maker of steel pipe coatings won a $14.2 million contract to treat a gas pipeline between Tierra del Fuego and the South American mainland, it wrote in a regulatory filing yesterday. Socotherm rose 1.3 percent to 15.80 pesos in Buenos Aires trading.
Brazil
Cia. de Bebidas das Americas (AMBV4 BS): Anheuser-Busch Cos. is prepared to reject a $46.3 billion takeover offer by InBev NV, parent of AmBev, as Latin America's biggest brewer is known, the Wall Street Journal reported, citing people familiar with the matter. Anheuser-Busch believes the offer of $65 a share undervalues the company, the Journal said in a story on its Web site. AmBev added 0.4 percent to 104.80 reais.
Gol Linhas Aereas Inteligentes SA (GOLL4 BS): Brazil's second-biggest airline had its purchase of rival Varig authorized by the country's antitrust regulator, on the condition that Gol modify a contract with Varig's sellers. Gol, based in Sao Paulo, must remove a clause stipulating that the sellers of Varig wouldn't be able to operate their cargo transport business for three years after the purchase, Brazil's antitrust regulator said today in an e-mailed statement. Gol was unchanged at 19.96 reais.
JBS SA (JBSS3 BS): The world's biggest beef producer and two Brazilian rivals said shipments to Russia won't be halted by Brazil's suspension of exports from the state of Goias. The Agriculture Ministry today suspended beef exports to Russia from Goias after finding cattle with gall-bladder infections in the central state. Marfrig Frigorificos & Comercio de Alimentos SA (MRFG3 BS), the world's fourth-biggest beef producer, and Minerva SA (BEEF3 BS) also said in separate filings on Brazil's regulator Web site that they will continue to ship to Russia from plants in other Brazilian states. JBS was unchanged at 8.20 reais. Marfrig fell 1.4 percent to 21.50 reais. Minerva fell 4.1 percent to 9.40 reais.
Marcopolo SA (POMO4 BS): Latin America's biggest maker of bus parts and chassis will invest $50 million over the next three years in a newly formed joint venture with Egyptian bus maker GB Auto SAE and begin building vehicles in the African country by July 2009, Marcopolo said in a filing yesterday. GB Auto will control 51 percent of the new company and Marcopolo will own the remaining 49 percent. Marcopolo rose 0.3 percent to 6.71 reais.
SLC Agricola SA (SLCE3 BS): The Brazilian agricultural company and its stockholders are raising 369.2 million reais ($232 million) in an additional sale of shares in Brazil. The company is selling about 9.4 million shares for 27.50 reais each, while shareholders are selling more than 4 million shares at the same price, according to a statement posted yesterday on Brazil's securities regulator Web site. That includes a possible supplemental offering of as much as 15 percent. SLC fell 1 percent to 27.80 reais.
Cia. Vale do Rio Doce (VALE5 BS): The world's biggest iron- ore producer was rated ``overweight'' in initial coverage by Lehman Brothers Holdings Inc. because of rising steel demand from emerging economies. The company may also revive its takeover offer for Xstrata Plc because it is the ``best fit,'' Lehman said. Vale rose 2.7 percent to 49.48 reais.
Colombia
Bolsa de Valores de Colombia (BVC CB): Colombia's main securities exchange was downgraded to ``hold'' from ``buy'' at Interbolsa SA. Analyst Andres Jimenez reduced BVC's year-end price estimate to 32.10 pesos from 41.21 pesos in a note to clients yesterday, citing lower fixed-income volumes. BVC fell 1.4 percent to 28.9 pesos.
Mexico
Grupo Modelo SAB (GMODELOC MM): Anheuser Busch, which owns a non-controlling 50 percent stake in Mexico's largest brewer, will present its own strategic plan to increase the company's share price after it rejects an unsolicited bid, the Wall Street Journal reported. Modelo rose 1.4 percent to 54.23 pesos.
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;
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June 26 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares rose 2.3 percent to 4,784.55 yesterday. In Brazil, preferred shares are the most commonly traded class of stock.
Argentina
Socotherm Americas SA (STHE AR): The maker of steel pipe coatings won a $14.2 million contract to treat a gas pipeline between Tierra del Fuego and the South American mainland, it wrote in a regulatory filing yesterday. Socotherm rose 1.3 percent to 15.80 pesos in Buenos Aires trading.
Brazil
Cia. de Bebidas das Americas (AMBV4 BS): Anheuser-Busch Cos. is prepared to reject a $46.3 billion takeover offer by InBev NV, parent of AmBev, as Latin America's biggest brewer is known, the Wall Street Journal reported, citing people familiar with the matter. Anheuser-Busch believes the offer of $65 a share undervalues the company, the Journal said in a story on its Web site. AmBev added 0.4 percent to 104.80 reais.
Gol Linhas Aereas Inteligentes SA (GOLL4 BS): Brazil's second-biggest airline had its purchase of rival Varig authorized by the country's antitrust regulator, on the condition that Gol modify a contract with Varig's sellers. Gol, based in Sao Paulo, must remove a clause stipulating that the sellers of Varig wouldn't be able to operate their cargo transport business for three years after the purchase, Brazil's antitrust regulator said today in an e-mailed statement. Gol was unchanged at 19.96 reais.
JBS SA (JBSS3 BS): The world's biggest beef producer and two Brazilian rivals said shipments to Russia won't be halted by Brazil's suspension of exports from the state of Goias. The Agriculture Ministry today suspended beef exports to Russia from Goias after finding cattle with gall-bladder infections in the central state. Marfrig Frigorificos & Comercio de Alimentos SA (MRFG3 BS), the world's fourth-biggest beef producer, and Minerva SA (BEEF3 BS) also said in separate filings on Brazil's regulator Web site that they will continue to ship to Russia from plants in other Brazilian states. JBS was unchanged at 8.20 reais. Marfrig fell 1.4 percent to 21.50 reais. Minerva fell 4.1 percent to 9.40 reais.
Marcopolo SA (POMO4 BS): Latin America's biggest maker of bus parts and chassis will invest $50 million over the next three years in a newly formed joint venture with Egyptian bus maker GB Auto SAE and begin building vehicles in the African country by July 2009, Marcopolo said in a filing yesterday. GB Auto will control 51 percent of the new company and Marcopolo will own the remaining 49 percent. Marcopolo rose 0.3 percent to 6.71 reais.
SLC Agricola SA (SLCE3 BS): The Brazilian agricultural company and its stockholders are raising 369.2 million reais ($232 million) in an additional sale of shares in Brazil. The company is selling about 9.4 million shares for 27.50 reais each, while shareholders are selling more than 4 million shares at the same price, according to a statement posted yesterday on Brazil's securities regulator Web site. That includes a possible supplemental offering of as much as 15 percent. SLC fell 1 percent to 27.80 reais.
Cia. Vale do Rio Doce (VALE5 BS): The world's biggest iron- ore producer was rated ``overweight'' in initial coverage by Lehman Brothers Holdings Inc. because of rising steel demand from emerging economies. The company may also revive its takeover offer for Xstrata Plc because it is the ``best fit,'' Lehman said. Vale rose 2.7 percent to 49.48 reais.
Colombia
Bolsa de Valores de Colombia (BVC CB): Colombia's main securities exchange was downgraded to ``hold'' from ``buy'' at Interbolsa SA. Analyst Andres Jimenez reduced BVC's year-end price estimate to 32.10 pesos from 41.21 pesos in a note to clients yesterday, citing lower fixed-income volumes. BVC fell 1.4 percent to 28.9 pesos.
Mexico
Grupo Modelo SAB (GMODELOC MM): Anheuser Busch, which owns a non-controlling 50 percent stake in Mexico's largest brewer, will present its own strategic plan to increase the company's share price after it rejects an unsolicited bid, the Wall Street Journal reported. Modelo rose 1.4 percent to 54.23 pesos.
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;
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Anheuser-Busch, Citigroup, General Motors: U.S. Equity Preview
By Katherine Greene
June 26 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets. Stock symbols are in parentheses after company names, and prices are as of 7:44 a.m. in New York, unless stated otherwise.
Anheuser-Busch Cos. (BUD US) fell 0.8 percent to $61.25. The maker of Budweiser may reject InBev NV's $46.3 billion takeover bid and announce plans to lower costs and sell off divisions to increase its stock price, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter.
Autodesk Inc. (ADSK US) lost 4.5 percent to $34.71 in extended trading yesterday. The biggest maker of engineering- design software cut its second-quarter forecast for adjusted earnings per share to as low as 50 cents a share. Analysts had expected 53 cents, the average of 17 estimates in a Bloomberg survey, for the quarter ending July 31.
Bed Bath & Beyond Inc. (BBBY US) added 8 percent to $30.84 in extended trading yesterday. The largest U.S. home-furnishings retailer reported profit that fell less than analysts estimated on higher sales. First-quarter net income declined to 30 cents a share from 38 cents a year earlier, the company said in a statement. Analysts had forecast 27 cents, the average of 20 estimates in a Bloomberg survey.
Citigroup Inc. (C US) fell 4.5 percent to $18. The bank that's posted the biggest losses from the collapse of the U.S. mortgage market may take an additional $8.9 billion in net writedowns in the second quarter, Goldman Sachs Group Inc. said.
General Motors Corp. (GM US) dropped 5.5 percent to $12.10. The world's largest automaker was downgraded to ``sell'' from ``neutral'' at Goldman, Sachs & Co., which said the shares will continue to slide as the sales outlook worsens, citing soaring gas prices, falling consumer confidence and tighter credit conditions.
Ford Motor Co. (F US), GM's smaller rival, fell 3 percent to $5.08.
Merrill Lynch & Co. (MER US) slid 3.3 percent to $34.40. The third-biggest U.S. securities firm is likely to post losses in the second quarter and 2008 after writing down the value of mortgage-related assets, according to Sanford C. Bernstein & Co.'s Brad Hintz.
Oracle Corp. (ORCL US) lost 3.3 percent to $21.81. The second-largest software maker said it expects first-quarter profit before some items of 26 cents to 27 cents a share. Analysts had expected 27 cents, the average of 16 analyst estimates in a Bloomberg survey.
Research In Motion Ltd. (RIMM US) lost 9.6 percent to $128.62. The maker of the BlackBerry e-mail phone missed profit and sales estimates for the first time in five quarters and gave a disappointing forecast amid heightened competition with Apple Inc.'s iPhone. The company reported first-quarter profit of 84 cents a share. That trailed the 85 cents predicted by analysts in a Bloomberg survey.
-- With reporting by Jeff Kearns. Editor: Allen Wan
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net.
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June 26 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets. Stock symbols are in parentheses after company names, and prices are as of 7:44 a.m. in New York, unless stated otherwise.
Anheuser-Busch Cos. (BUD US) fell 0.8 percent to $61.25. The maker of Budweiser may reject InBev NV's $46.3 billion takeover bid and announce plans to lower costs and sell off divisions to increase its stock price, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter.
Autodesk Inc. (ADSK US) lost 4.5 percent to $34.71 in extended trading yesterday. The biggest maker of engineering- design software cut its second-quarter forecast for adjusted earnings per share to as low as 50 cents a share. Analysts had expected 53 cents, the average of 17 estimates in a Bloomberg survey, for the quarter ending July 31.
Bed Bath & Beyond Inc. (BBBY US) added 8 percent to $30.84 in extended trading yesterday. The largest U.S. home-furnishings retailer reported profit that fell less than analysts estimated on higher sales. First-quarter net income declined to 30 cents a share from 38 cents a year earlier, the company said in a statement. Analysts had forecast 27 cents, the average of 20 estimates in a Bloomberg survey.
Citigroup Inc. (C US) fell 4.5 percent to $18. The bank that's posted the biggest losses from the collapse of the U.S. mortgage market may take an additional $8.9 billion in net writedowns in the second quarter, Goldman Sachs Group Inc. said.
General Motors Corp. (GM US) dropped 5.5 percent to $12.10. The world's largest automaker was downgraded to ``sell'' from ``neutral'' at Goldman, Sachs & Co., which said the shares will continue to slide as the sales outlook worsens, citing soaring gas prices, falling consumer confidence and tighter credit conditions.
Ford Motor Co. (F US), GM's smaller rival, fell 3 percent to $5.08.
Merrill Lynch & Co. (MER US) slid 3.3 percent to $34.40. The third-biggest U.S. securities firm is likely to post losses in the second quarter and 2008 after writing down the value of mortgage-related assets, according to Sanford C. Bernstein & Co.'s Brad Hintz.
Oracle Corp. (ORCL US) lost 3.3 percent to $21.81. The second-largest software maker said it expects first-quarter profit before some items of 26 cents to 27 cents a share. Analysts had expected 27 cents, the average of 16 analyst estimates in a Bloomberg survey.
Research In Motion Ltd. (RIMM US) lost 9.6 percent to $128.62. The maker of the BlackBerry e-mail phone missed profit and sales estimates for the first time in five quarters and gave a disappointing forecast amid heightened competition with Apple Inc.'s iPhone. The company reported first-quarter profit of 84 cents a share. That trailed the 85 cents predicted by analysts in a Bloomberg survey.
-- With reporting by Jeff Kearns. Editor: Allen Wan
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net.
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U.S. Stocks Drop on Earnings Concern; Citigroup, RIM Retreat
By Michael Patterson
June 26 (Bloomberg) -- U.S. stocks tumbled, sending the Dow Jones Industrial Average to its lowest since October 2006, after analysts said Citigroup Inc. will post more writedowns and Research In Motion Ltd. forecast earnings that trailed estimates.
Citigroup led bank and brokerage stocks to a five-year low as Goldman analysts said the lender may report an $8.9 billion second-quarter charge and cut its dividend. Research In Motion, maker of the BlackBerry e-mail phone, posted its biggest drop since 2004 on concern competition with Apple Inc.'s iPhone is reducing earnings. Oracle Corp., the world's second-largest software maker, declined the most since April after predicting the slowest sales growth since 2006.
Standard & Poor's 500 Index lost 13.92, or 1.1 percent, to 1,308.05 at 9:35 a.m. in New York, extending its 2008 retreat to 11 percent. The Dow decreased 109.68, or 0.9 percent, to 11,702.15. The Nasdaq Composite Index sank 40.03 to 2,361.23. Six stocks fell for each that rose on the New York Stock Exchange.
``Most investors are going to sit on the sidelines until they're more certain the sharks have left the waters and it's safe to go back in,'' said Bruce McCain, the Cleveland-based head of investment strategy at Key Private Bank, which oversees about $30 billion. ``The writeoffs have been far worse than anyone would have imagined.''
Nine of 10 industry groups retreated as higher-than-forecast initial jobless claims also weighed on the market. The Commerce Department said the U.S. economy expanded at an annual rate of 1 percent in the first quarter, capping the weakest six months of growth in five years, as measures of inflation accelerated more than previously projected. Energy shares posted the only advance as oil climbed more than $3 a barrel.
European stocks fell after Belgium-based lender Fortis scrapped its dividend and said it will sell shares. Asian stocks advanced.
To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.
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June 26 (Bloomberg) -- U.S. stocks tumbled, sending the Dow Jones Industrial Average to its lowest since October 2006, after analysts said Citigroup Inc. will post more writedowns and Research In Motion Ltd. forecast earnings that trailed estimates.
Citigroup led bank and brokerage stocks to a five-year low as Goldman analysts said the lender may report an $8.9 billion second-quarter charge and cut its dividend. Research In Motion, maker of the BlackBerry e-mail phone, posted its biggest drop since 2004 on concern competition with Apple Inc.'s iPhone is reducing earnings. Oracle Corp., the world's second-largest software maker, declined the most since April after predicting the slowest sales growth since 2006.
Standard & Poor's 500 Index lost 13.92, or 1.1 percent, to 1,308.05 at 9:35 a.m. in New York, extending its 2008 retreat to 11 percent. The Dow decreased 109.68, or 0.9 percent, to 11,702.15. The Nasdaq Composite Index sank 40.03 to 2,361.23. Six stocks fell for each that rose on the New York Stock Exchange.
``Most investors are going to sit on the sidelines until they're more certain the sharks have left the waters and it's safe to go back in,'' said Bruce McCain, the Cleveland-based head of investment strategy at Key Private Bank, which oversees about $30 billion. ``The writeoffs have been far worse than anyone would have imagined.''
Nine of 10 industry groups retreated as higher-than-forecast initial jobless claims also weighed on the market. The Commerce Department said the U.S. economy expanded at an annual rate of 1 percent in the first quarter, capping the weakest six months of growth in five years, as measures of inflation accelerated more than previously projected. Energy shares posted the only advance as oil climbed more than $3 a barrel.
European stocks fell after Belgium-based lender Fortis scrapped its dividend and said it will sell shares. Asian stocks advanced.
To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.
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U.S. Preview: Existing Home Sales Expected to Bump Up to 4.95 Million in May (Repeat)
US Economy | Written by CEP News | Jun 26 08 13:09 GMT |
(CEP News) - Existing home sales for May, which will be released Thursday by the National Association of Realtors (NAR), are expected to see a 1.2% rise to an annual pace of 4.95 million units following April's 1.0% decline to 4.89 million. The pace has been below the 5 million mark for two months.
The previous report saw single-family unit sales come in at 4.34 million, decreasing from a rate of 4.36 million in the previous month, while the national median existing home price was $202,300, up from the previous month but marking an 8% decline from the same time a year ago.
Lehman Brothers economists expect a 2.5% increase to 5.00 million in May based on the unexpected gain in pending home sales in April, which suggests "an increase in closed contracts in May and June."
U.S. pending home sales have been declining in five of the past six months, yet in the most recent report they jumped 6.3% to reach their highest level in six months. The index tracks home sales that have been signed but not finalized, a process that takes another month or two, thereby offering a forecast for existing home sales.
In the longer-term, however, Lehman analysts said the expected gain in existing home sales will be "a fleeting gain" as sales should continue to decline through the rest of the summer, "bottoming in September."
By contrast, Dawn Desjardins, assistant chief economist at RBC Capital Markets, is looking for sales to stabilize, "albeit at a very low level." She said the housing market "remains in deep depression and, for the time being, the main concern is the glut of homes for sale."
Total housing inventories came in with an 11.2-month supply in April, up from the 10-month supply in March.
Desjardins said "persistent price concessions will likely bolster activity but we haven't seen any clear signs of improvement yet."
A third view comes from BBVA economists, who expect housing demand to keep weakening as deflation plagues the housing market. "In our view, the housing market will deteriorate - each time at a slower pace - throughout the rest of the year and will not start to recover until the beginning of 2009."
Other forecasters are looking for a gain of up to 5.3% in the month, which would put the annual pace at 5.15 million units, while the lowest forecasts expect a 2.9% decline to a pace of 4.75 million units.
Earlier in the week, the S&P Case-Shiller U.S. home price index continued to deteriorate in April as the 20-city composite index posted a record annual decline of 15.3%. Meanwhile, the Office of Federal Housing Enterprise Oversight (OFHEO) reported a 0.8% monthly decline in house prices in April.
By Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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(CEP News) - Existing home sales for May, which will be released Thursday by the National Association of Realtors (NAR), are expected to see a 1.2% rise to an annual pace of 4.95 million units following April's 1.0% decline to 4.89 million. The pace has been below the 5 million mark for two months.
The previous report saw single-family unit sales come in at 4.34 million, decreasing from a rate of 4.36 million in the previous month, while the national median existing home price was $202,300, up from the previous month but marking an 8% decline from the same time a year ago.
Lehman Brothers economists expect a 2.5% increase to 5.00 million in May based on the unexpected gain in pending home sales in April, which suggests "an increase in closed contracts in May and June."
U.S. pending home sales have been declining in five of the past six months, yet in the most recent report they jumped 6.3% to reach their highest level in six months. The index tracks home sales that have been signed but not finalized, a process that takes another month or two, thereby offering a forecast for existing home sales.
In the longer-term, however, Lehman analysts said the expected gain in existing home sales will be "a fleeting gain" as sales should continue to decline through the rest of the summer, "bottoming in September."
By contrast, Dawn Desjardins, assistant chief economist at RBC Capital Markets, is looking for sales to stabilize, "albeit at a very low level." She said the housing market "remains in deep depression and, for the time being, the main concern is the glut of homes for sale."
Total housing inventories came in with an 11.2-month supply in April, up from the 10-month supply in March.
Desjardins said "persistent price concessions will likely bolster activity but we haven't seen any clear signs of improvement yet."
A third view comes from BBVA economists, who expect housing demand to keep weakening as deflation plagues the housing market. "In our view, the housing market will deteriorate - each time at a slower pace - throughout the rest of the year and will not start to recover until the beginning of 2009."
Other forecasters are looking for a gain of up to 5.3% in the month, which would put the annual pace at 5.15 million units, while the lowest forecasts expect a 2.9% decline to a pace of 4.75 million units.
Earlier in the week, the S&P Case-Shiller U.S. home price index continued to deteriorate in April as the 20-city composite index posted a record annual decline of 15.3%. Meanwhile, the Office of Federal Housing Enterprise Oversight (OFHEO) reported a 0.8% monthly decline in house prices in April.
By Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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European Market Recap: German Bonds Move Higher, UK Bonds Lower
Market Updates | Written by CEP News | Jun 26 08 11:32 GMT |
(CEP News) - European equity markets are trading lower with the Eurostoxx losing 38.23 points on the day and the UK FTSE 100 down 66.90 points to 5599.199. In Germany, the bund was up 3.0 ticks to 110.48 with yields down 0.2 bps to 4.61% while the 10-year gilt was down 13.0 ticks to 104.29 with yields up 1.9 bps to 5.14%.
The five-year Bobl was up 4.0 ticks to 105.87, the two-year Schatz up 4.0 ticks to 102.39 and the June 2008 Euribor contract trading up 5.5 ticks to 94.94.
The spread between the 10-year Bund and 10-year U.S. Treasury notes widened 1.962 bps to -48.80.
Yields on the UK's 30-year bond were up 2.3 bps to 4.67%, the five-year bond up 0.8 bps to 5.19% and the two-year bond up 0.4 bps to 5.25%.
The September 2008 Short Sterling contract was up 6.0 ticks to 93.92.
Yields on U.S. 10-year Treasury notes are up 2.4 bps to 4.123%.
European stock markets are declining with the Eurostoxx down 38.23 points to 2920.04, the UK FTSE 100 down 66.90 points to 5599.199 and the German DAX down 88.75 points to 6529.09.
The Japanese Nikkei was trading down 7.60 points to 13822.32.
The Canadian dollar was down 0.02 cents to 0.9907 against the USD (1.0099 USD/CAD). Against the euro, the loonie was down 0.17 cents to 0.6305 (1.5859 CAD/EUR).
The U.S. dollar was down 0.07 to 107.75 and the euro was up 0.35 to 169.24, both against the yen.
The euro was up 0.38 cents to 1.5705 while the pound sterling was up 0.69 cents to 1.9820, both against the USD.
The euro was down 0.08 cents to 0.7924 pounds.
The Swiss franc was up 0.39 cents to 1.0311 against the USD and up 0.19 cents to 1.6196 against the euro.
All data taken at 7:30 a.m. EDT.
Generated by CEP Newswires, edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
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The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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(CEP News) - European equity markets are trading lower with the Eurostoxx losing 38.23 points on the day and the UK FTSE 100 down 66.90 points to 5599.199. In Germany, the bund was up 3.0 ticks to 110.48 with yields down 0.2 bps to 4.61% while the 10-year gilt was down 13.0 ticks to 104.29 with yields up 1.9 bps to 5.14%.
The five-year Bobl was up 4.0 ticks to 105.87, the two-year Schatz up 4.0 ticks to 102.39 and the June 2008 Euribor contract trading up 5.5 ticks to 94.94.
The spread between the 10-year Bund and 10-year U.S. Treasury notes widened 1.962 bps to -48.80.
Yields on the UK's 30-year bond were up 2.3 bps to 4.67%, the five-year bond up 0.8 bps to 5.19% and the two-year bond up 0.4 bps to 5.25%.
The September 2008 Short Sterling contract was up 6.0 ticks to 93.92.
Yields on U.S. 10-year Treasury notes are up 2.4 bps to 4.123%.
European stock markets are declining with the Eurostoxx down 38.23 points to 2920.04, the UK FTSE 100 down 66.90 points to 5599.199 and the German DAX down 88.75 points to 6529.09.
The Japanese Nikkei was trading down 7.60 points to 13822.32.
The Canadian dollar was down 0.02 cents to 0.9907 against the USD (1.0099 USD/CAD). Against the euro, the loonie was down 0.17 cents to 0.6305 (1.5859 CAD/EUR).
The U.S. dollar was down 0.07 to 107.75 and the euro was up 0.35 to 169.24, both against the yen.
The euro was up 0.38 cents to 1.5705 while the pound sterling was up 0.69 cents to 1.9820, both against the USD.
The euro was down 0.08 cents to 0.7924 pounds.
The Swiss franc was up 0.39 cents to 1.0311 against the USD and up 0.19 cents to 1.6196 against the euro.
All data taken at 7:30 a.m. EDT.
Generated by CEP Newswires, edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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German Import Prices Have Biggest Gain in 18 Years
By Simone Meier
June 26 (Bloomberg) -- German import prices rose the most in almost 18 years in May, adding to signs of increasing inflation pressure in Europe's largest economy.
Prices gained 2.4 percent from April, when they climbed 0.9 percent, the Federal Statistics Office in Wiesbaden said today. That's the biggest gain since September 1990. Economists expected an increase of 1.5 percent, according to the median of 16 forecasts in a Bloomberg News survey.
A surge in oil prices to a record $139.89 a barrel on June 16 has pushed up inflation and increased pressure on companies to pass on higher costs, even as a stronger euro makes imports more affordable. The European Central Bank has said it is ready to raise borrowing costs from a six-year high next month.
``Inflation pressures are much stronger than expected,'' said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. ``It's mainly due to developments on commodity markets. Prices will continue to rise.''
From a year earlier, import prices increased 7.9 percent after rising 5.7 percent in April, the statistics office said today. That's the strongest annual increase since November 2000. Energy costs increased 10.1 percent in the month and imported crude oil was 13.3 percent more expensive, today's report showed.
The price of oil has increased 43 percent this year, draining the purchasing power of companies and consumers. The euro has gained 6.6 percent against the dollar over the same period.
Faster Inflation
In Germany, inflation probably accelerated to 3.3 percent in June from 3 percent in the previous month, a Bloomberg survey of economists shows. That would be the fastest since harmonized records began in 1996. The statistics office will release the data tomorrow.
The ECB is concerned that faster inflation will feed into wage demands and prompt companies to pass on higher costs. ECB President Jean-Claude Trichet reiterated yesterday that the bank is in a state of ``heightened alertness'' and may raise the key rate from 4 percent in July.
Adding to signs of cost pressures, German producer-price inflation accelerated to the fastest pace in almost two years in May and wholesale prices jumped the most in 26 years. Export-price inflation accelerated to 2.3 percent in May from 2.2 percent in the previous month, today's report showed.
`Readiness to Act'
Lanxess AG, Germany's biggest publicly traded specialty- chemicals maker, said on May 29 it is passing on rising raw- material costs. Continental AG, Europe's second-largest tire maker, said last month it will raise car tire prices in the region by up to 4 percent to counter rising oil costs.
The ECB forecasts inflation in the economy of the 15 euro nations will average about 3.4 percent this year and around 2.4 percent in 2009. The Frankfurt-based bank aims to keep annual gains in consumer prices just below 2 percent.
``Financial markets should by now have understood our readiness to act,'' ECB council member Axel Weber, who is also head of Germany's Bundesbank, said yesterday. ``It is our strong determination to secure a firm anchoring of medium and long-term inflation expectations in line with price stability.''
Investors expect the ECB to raise its key rate twice this year, Eonia forwards show.
Still, with the economy losing momentum and households holding back spending, companies may find it more difficult to raise prices. In Germany, consumer confidence dropped to the lowest in more than two years, GfK AG's index for July showed.
German companies ``are able to pass on higher input prices to consumers,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. ``However, in view of the deterioration in consumer sentiment, this elbowroom can diminish rapidly.''
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
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June 26 (Bloomberg) -- German import prices rose the most in almost 18 years in May, adding to signs of increasing inflation pressure in Europe's largest economy.
Prices gained 2.4 percent from April, when they climbed 0.9 percent, the Federal Statistics Office in Wiesbaden said today. That's the biggest gain since September 1990. Economists expected an increase of 1.5 percent, according to the median of 16 forecasts in a Bloomberg News survey.
A surge in oil prices to a record $139.89 a barrel on June 16 has pushed up inflation and increased pressure on companies to pass on higher costs, even as a stronger euro makes imports more affordable. The European Central Bank has said it is ready to raise borrowing costs from a six-year high next month.
``Inflation pressures are much stronger than expected,'' said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. ``It's mainly due to developments on commodity markets. Prices will continue to rise.''
From a year earlier, import prices increased 7.9 percent after rising 5.7 percent in April, the statistics office said today. That's the strongest annual increase since November 2000. Energy costs increased 10.1 percent in the month and imported crude oil was 13.3 percent more expensive, today's report showed.
The price of oil has increased 43 percent this year, draining the purchasing power of companies and consumers. The euro has gained 6.6 percent against the dollar over the same period.
Faster Inflation
In Germany, inflation probably accelerated to 3.3 percent in June from 3 percent in the previous month, a Bloomberg survey of economists shows. That would be the fastest since harmonized records began in 1996. The statistics office will release the data tomorrow.
The ECB is concerned that faster inflation will feed into wage demands and prompt companies to pass on higher costs. ECB President Jean-Claude Trichet reiterated yesterday that the bank is in a state of ``heightened alertness'' and may raise the key rate from 4 percent in July.
Adding to signs of cost pressures, German producer-price inflation accelerated to the fastest pace in almost two years in May and wholesale prices jumped the most in 26 years. Export-price inflation accelerated to 2.3 percent in May from 2.2 percent in the previous month, today's report showed.
`Readiness to Act'
Lanxess AG, Germany's biggest publicly traded specialty- chemicals maker, said on May 29 it is passing on rising raw- material costs. Continental AG, Europe's second-largest tire maker, said last month it will raise car tire prices in the region by up to 4 percent to counter rising oil costs.
The ECB forecasts inflation in the economy of the 15 euro nations will average about 3.4 percent this year and around 2.4 percent in 2009. The Frankfurt-based bank aims to keep annual gains in consumer prices just below 2 percent.
``Financial markets should by now have understood our readiness to act,'' ECB council member Axel Weber, who is also head of Germany's Bundesbank, said yesterday. ``It is our strong determination to secure a firm anchoring of medium and long-term inflation expectations in line with price stability.''
Investors expect the ECB to raise its key rate twice this year, Eonia forwards show.
Still, with the economy losing momentum and households holding back spending, companies may find it more difficult to raise prices. In Germany, consumer confidence dropped to the lowest in more than two years, GfK AG's index for July showed.
German companies ``are able to pass on higher input prices to consumers,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. ``However, in view of the deterioration in consumer sentiment, this elbowroom can diminish rapidly.''
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
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Sales of Existing Homes in the U.S. Probably Increased in May
By Courtney Schlisserman
June 26 (Bloomberg) -- Sales of U.S. previously owned houses probably rose in May from a record low as depressed prices lured some buyers into the market, economists said before a report today.
Resales rose 1.2 percent to a 4.95 million annual rate, according to the median forecast of 72 economists surveyed by Bloomberg News ahead of a report by the National Association of Realtors. April's sales pace of 4.89 million matched the lowest level since records began in 1999.
A drop in property values may have spurred demand in some of the most depressed areas, such as California and the Midwest. Even so, rising mortgage rates, a glut of unsold homes, and stricter borrowing rules indicate the real estate recession will persist for most of the year.
``We're not quite convinced we've reached a bottom yet,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts.
The Realtors group is scheduled to release the report at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from 4.75 million to 5.15 million.
Other reports today may show that firings eased last week and the economy grew in the first quarter at a faster pace than previously estimated.
Initial jobless claims fell to 375,000 last week, from 381,000 a week earlier, according to the Bloomberg survey median. While down, the level of applications still indicates the job market is soft.
Economic Growth
Gross domestic product rose at a 1 percent annual rate for the first three months of the year, compared with the 0.9 percent pace estimated last month, according to the survey median. Following the fourth quarter's 0.6 percent growth rate, the economic expansion for the six months ended in March was the weakest in five years.
Federal Reserve policy makers yesterday left the benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, and said growth risks had diminished while higher energy costs boosted the threat of inflation.
The ``ongoing housing contraction,'' stricter lending rules and the jump in fuel costs were among the factors the central bankers predicted would hurt economic growth for at least the rest of the year.
Declines in residential construction have been a drag on growth since the first quarter of 2006. In addition, demand for furniture and building materials has sagged and home prices and consumer confidence have fallen.
Prices Drop
The S&P/Case-Shiller index earlier this week showed prices in 20 U.S. metropolitan areas fell 15.3 percent in April from a year earlier, the steepest decline since records began in 2001.
Rising rates of defaults and foreclosures may bring more homes onto the market and put even more pressure on prices. Banks repossessed twice as many homes in May as they did a year ago and foreclosure filings rose 48 percent, according to RealtyTrac Inc., a real estate database in Irvine, California.
The California Association of Realtors yesterday said sales in that state rose 18 percent in May from the same month last year as median prices dropped 35 percent.
The increase was due to a high number of ``distressed sales,'' the group said.
Recent reports suggest the housing slump will continue. The Mortgage Bankers Association's index of loan applications to purchase homes fell last week to the lowest level in more than five years.
The Commerce Department said yesterday that sales of new homes fell to a 512,000 pace last month, the second-lowest reading since 1991. At that pace, it would take 10.9 months to sell all the houses currently on the market.
Timelier Gauge
While sales of previously owned homes account for about 85 percent of the market, new home sales are considered to be a timelier indicator because they are based on contract signings. Resales are tabulated once a transaction is closed, which typically occurs a month or two later.
``It feels to us as though we're pretty much on the bottom, but that doesn't make you feel too good,'' Robert Toll, chief executive officer of Toll Brothers Inc., the largest U.S. luxury-home builder, said in a Bloomberg Television interview June 24. ``We have noticed some good times coming back in some markets, but in other markets, there's no sign of recovery.''
On June 3, Horsham, Pennsylvania-based Toll reported a loss for the third straight quarter.
Bloomberg Survey
================================================================
GDP Initial Exist
Annual Claims Homes
QOQ% ,000's Mlns
================================================================
Date of Release 06/26 06/26 06/26
Observation Period 1Q F 22-Jun May
----------------------------------------------------------------
Median 1.0% 375 4.95
Average 1.0% 377 4.95
High Forecast 1.3% 388 5.15
Low Forecast 0.9% 370 4.75
Number of Participants 70 37 72
Previous 0.9% 381 4.89
----------------------------------------------------------------
4CAST Ltd. 1.0% --- 4.90
Action Economics 1.2% 375 4.90
Aletti Gestielle SGR 1.0% 378 4.95
Argus Research Corp. 0.9% --- 5.00
Banc of America Securitie 0.9% --- 4.96
Bank of Tokyo- Mitsubishi 1.1% --- 5.00
Bantleon Bank AG --- --- 4.85
Barclays Capital 1.2% 375 5.00
BBVA 1.0% --- 4.80
BMO Capital Markets 1.0% 388 4.94
BNP Paribas 1.0% 386 5.15
Briefing.com 1.0% --- 5.05
Calyon 1.1% --- 4.93
CFC Group 1.0% 373 5.01
CIBC World Markets 1.0% --- 4.95
Citi 1.2% 380 4.95
ClearView Economics 1.0% --- 4.75
Commerzbank AG 1.0% 370 5.00
Commonwealth Bank of Aust --- 370 ---
Credit Suisse 1.1% 380 5.00
Daiwa Securities America 1.0% --- 4.90
DekaBank 1.0% --- 5.00
Desjardins Group 0.9% 378 4.93
Deutsche Bank Securities 0.9% 375 4.75
Deutsche Postbank AG 1.0% --- ---
Dresdner Kleinwort 1.1% --- 4.94
DZ Bank 0.9% --- 4.95
First Trust Advisors 0.9% 376 4.96
Fortis 1.0% --- 5.00
FTN Financial --- --- 4.85
Global Insight Inc. 1.2% --- 4.99
Goldman, Sachs & Co. 1.0% --- 4.96
H&R Block Financial Advis 1.0% 380 4.90
Helaba 1.0% --- 4.90
High Frequency Economics 1.0% --- 5.00
Horizon Investments 1.0% --- 4.90
HSBC Markets 0.9% 375 5.05
IDEAglobal 1.0% 385 5.01
Informa Global Markets 1.2% 375 5.00
ING Financial Markets 1.0% 380 5.05
Insight Economics 1.0% 375 4.85
Intesa-SanPaulo 1.0% --- 4.90
J.P. Morgan Chase 1.3% --- 5.01
Janney Montgomery Scott L 0.9% --- 4.80
JPMorgan Private Client 1.1% 375 4.92
Landesbank Berlin 0.9% 375 4.95
Landesbank BW 1.0% --- 4.95
Lehman Brothers 1.0% 380 5.00
Maria Fiorini Ramirez Inc 1.0% 370 4.90
Merk Investments 1.0% 375 5.04
Merrill Lynch 1.1% --- 4.84
Moody's Economy.com 1.1% 385 5.00
Morgan Stanley & Co. 1.2% --- 4.95
National Bank Financial --- --- 4.85
National City Corporation 1.1% --- 4.93
Newedge 1.1% --- ---
Nomura Securities Intl. 0.9% --- 4.90
Nord/LB --- 370 ---
PNC Bank 1.0% --- 5.00
RBS Greenwich Capital 1.2% --- 4.95
Ried, Thunberg & Co. 1.2% 380 5.00
Schneider Trading Associa 0.9% 370 5.01
Scotia Capital 1.0% --- 4.98
Standard Chartered 0.9% --- 4.90
Stone & McCarthy Research 1.0% 375 5.08
TD Securities 1.0% 380 4.90
Thomson Financial/IFR 1.0% 385 4.88
Tullett Prebon 1.0% 375 4.95
UBS Securities LLC 1.1% 375 5.01
Unicredit MIB --- 370 4.80
University of Maryland 1.0% --- 5.06
Wachovia Corp. 1.1% --- 4.75
Wells Fargo & Co. 1.2% 375 4.90
WestLB AG 0.9% --- 4.93
Westpac Banking Co. 1.0% 385 5.01
Wrightson Associates 1.2% 380 5.00
================================================================
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
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BOJ Is Concerned Rising Costs May Crimp Spending, Nakamura Says
By Lily Nonomiya
June 26 (Bloomberg) -- The Bank of Japan is concerned that rising energy and raw-materials costs may force the nation's companies and consumers to spend less, policy board member Seiji Nakamura said.
``Even though capital spending and personal consumption remain solid, we need to carefully watch whether weakening of the spending mechanism will hurt domestic demand,'' Nakamura, 66, said in a speech in Asahikawa, northern Japan.
Nakamura said the central bank is also watching whether rising inflationary pressures worldwide will spread to Japan. ``Rising uncertainty'' over the economic outlook makes it inappropriate to predetermine the policy direction, he added, reinforcing that the bank has no bias toward raising or lowering the benchmark interest rate from 0.5 percent.
``Nakamura's speech indicates that unlike in the U.S. and Europe, rising commodity prices are only intensifying the risk of Japan's economic deterioration,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. ``There's no chance for the central bank to raise interest rates this year at least.''
The yield on Japan's five-year note fell 1.5 basis points to 1.24 percent, the lowest in three weeks. The odds that the Bank of Japan will lift borrowing costs by year-end slid to 36 percent from 50 percent at the start of the week, interest-rate swaps show, according to JPMorgan Chase & Co. calculations.
Faster Inflation
Higher prices of oil and food are spurring the fastest inflation in a decade, crimping profits and forcing companies in the world's second-largest economy to pare spending plans.
``Uncertainty concerning the outlook is rising because of trends in overseas economies, inflationary pressures resulting from surging energy and raw-materials prices, as well as volatility in global financial markets,'' Nakamura said. ``It's important to be flexible in implementing monetary policy in accordance with developments in the economy and prices.''
Only three of 34 economists surveyed by Bloomberg News this month said the bank will increase rates this year. The remaining 31 expect no change in the benchmark rate, the lowest in the industrialized world, which was last raised in February 2007.
Still, Nakamura said Japan's interest rates are lower than the inflation rate and may stimulate demand in the world's second-largest economy.
``Real short-term rates are negative and in relation to the potential growth rate, they are very low,'' Nakamura said. ``I think that this accommodative monetary environment amid such low interest-rate levels will support private demand.''
Consumer Prices
A report tomorrow will probably show that consumer prices excluding fresh food climbed 1.4 percent in May, the fastest pace in a decade. Wholesale inflation surged 4.7 percent last month, the quickest in 27 years, increasing pressure on companies to pass record commodities costs to households.
Given that food and energy costs are rising ``it is expected that gains will remain around the mid-1 percent range for some time,'' Nakamura said. ``There is a need to keep an eye on changes in consumers' inflationary expectations, companies' price-setting behavior as well as whether rising inflationary pressures overseas will spread to Japan.''
Sentiment at the nation's largest manufacturers fell at the fastest pace in four years this quarter, a government survey this week showed, and companies said they plan to cut capital outlays 0.9 percent in the year ending March 31. Data yesterday showed growth in exports slowed to 3.7 percent last month as sales to Europe fell for the first time in more than two years.
Nakamura headed MOL Ferry Co., a subsidiary of Mitsui O.S.K. Lines Ltd., before joining the policy board in April 2007.
To contact the reporter on this story: Lily Nonomiya in Asahikawa City lnonomiya@bloomberg.net
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June 26 (Bloomberg) -- The Bank of Japan is concerned that rising energy and raw-materials costs may force the nation's companies and consumers to spend less, policy board member Seiji Nakamura said.
``Even though capital spending and personal consumption remain solid, we need to carefully watch whether weakening of the spending mechanism will hurt domestic demand,'' Nakamura, 66, said in a speech in Asahikawa, northern Japan.
Nakamura said the central bank is also watching whether rising inflationary pressures worldwide will spread to Japan. ``Rising uncertainty'' over the economic outlook makes it inappropriate to predetermine the policy direction, he added, reinforcing that the bank has no bias toward raising or lowering the benchmark interest rate from 0.5 percent.
``Nakamura's speech indicates that unlike in the U.S. and Europe, rising commodity prices are only intensifying the risk of Japan's economic deterioration,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. ``There's no chance for the central bank to raise interest rates this year at least.''
The yield on Japan's five-year note fell 1.5 basis points to 1.24 percent, the lowest in three weeks. The odds that the Bank of Japan will lift borrowing costs by year-end slid to 36 percent from 50 percent at the start of the week, interest-rate swaps show, according to JPMorgan Chase & Co. calculations.
Faster Inflation
Higher prices of oil and food are spurring the fastest inflation in a decade, crimping profits and forcing companies in the world's second-largest economy to pare spending plans.
``Uncertainty concerning the outlook is rising because of trends in overseas economies, inflationary pressures resulting from surging energy and raw-materials prices, as well as volatility in global financial markets,'' Nakamura said. ``It's important to be flexible in implementing monetary policy in accordance with developments in the economy and prices.''
Only three of 34 economists surveyed by Bloomberg News this month said the bank will increase rates this year. The remaining 31 expect no change in the benchmark rate, the lowest in the industrialized world, which was last raised in February 2007.
Still, Nakamura said Japan's interest rates are lower than the inflation rate and may stimulate demand in the world's second-largest economy.
``Real short-term rates are negative and in relation to the potential growth rate, they are very low,'' Nakamura said. ``I think that this accommodative monetary environment amid such low interest-rate levels will support private demand.''
Consumer Prices
A report tomorrow will probably show that consumer prices excluding fresh food climbed 1.4 percent in May, the fastest pace in a decade. Wholesale inflation surged 4.7 percent last month, the quickest in 27 years, increasing pressure on companies to pass record commodities costs to households.
Given that food and energy costs are rising ``it is expected that gains will remain around the mid-1 percent range for some time,'' Nakamura said. ``There is a need to keep an eye on changes in consumers' inflationary expectations, companies' price-setting behavior as well as whether rising inflationary pressures overseas will spread to Japan.''
Sentiment at the nation's largest manufacturers fell at the fastest pace in four years this quarter, a government survey this week showed, and companies said they plan to cut capital outlays 0.9 percent in the year ending March 31. Data yesterday showed growth in exports slowed to 3.7 percent last month as sales to Europe fell for the first time in more than two years.
Nakamura headed MOL Ferry Co., a subsidiary of Mitsui O.S.K. Lines Ltd., before joining the policy board in April 2007.
To contact the reporter on this story: Lily Nonomiya in Asahikawa City lnonomiya@bloomberg.net
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Fed Sounds Inflation Alarm, Moves Toward Rate Rise
By Scott Lanman
June 26 (Bloomberg) -- The Federal Reserve is sounding the alarm on inflation without committing to raise interest rates.
The Federal Open Market Committee left its benchmark rate at 2 percent yesterday and said ``upside risks'' to prices have picked up. The statement also said consumer spending is ``firming,'' while acknowledging that rising energy prices will curb growth into 2009.
The FOMC cited ``the elevated state'' of some measures of inflation expectations and dropped an April forecast of a ``leveling out'' in commodity prices. The officials want to keep their options open on rate changes in case the credit crisis worsens and the economy deteriorates after consumers spend their tax rebates, Fed watchers said.
``It is a baby step in the direction of raising rates,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut. The central bankers signaled ``they are not expecting to tighten in the near term. That is as far as they are willing to go,'' he said.
Treasuries fell, with the yield on the benchmark 10-year note rising 3 basis points to 4.12 percent as of 7:27 a.m. in London.
The FOMC also said employment had weakened and financial markets remained under ``considerable stress,'' even as growth risks ``diminished somewhat.''
Chairman Ben S. Bernanke and his colleagues stopped short of specifying that inflation was a greater concern than growth. They reiterated language from their April meeting that the Fed will ``act as needed'' to promote both economic expansion and stable prices.
Rate Outlook
Traders trimmed bets on a rate increase in the next three months after the announcement. Odds that the Fed will keep its benchmark at 2 percent in September jumped to 66 percent from 10 percent a day earlier, according to futures contracts quoted on the Chicago Board of Trade.
``I don't think they are signaling a rate hike as a possibility at the next meeting,'' said Cary Leahey, senior economist at Decision Economics Inc. in New York. ``Before they would tighten credit, they would have a statement that would say `we do have a tightening bias' and they would say that as clearly as they can.''
Yesterday's statement reflected Fed officials' comments this month that the central bank must keep price expectations in check to avoid a spiraling in inflation. Bernanke said June 9 that officials would ``strongly resist'' a jump in those expectations.
The decision wasn't unanimous, with Dallas Fed President Richard Fisher dissenting for a fourth straight time, favoring the first rate increase in two years.
Inflation Climbs
Oil prices touched a record $139.89 June 16, extending a rally that helped push the consumer price index up 4.2 percent in the 12 months to May compared with an average of 2.7 percent over the past decade.
Dow Chemical Co. said two days ago that higher raw materials costs will cause the company to raise prices by as much as 25 percent in July, following an increase of as much as 20 percent. United Parcel Service Inc. cut its second-quarter profit forecast June 23 because of rising fuel costs and slowing U.S. growth.
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey.
Fed's `Duty'
``What they're saying is, we have a duty to price stability, and we want you to know that we are mindful of that duty, but we may not think it's appropriate to act on that duty in the short run,'' said Neal Soss, chief economist at Credit Suisse in New York, who used to work as an aide to former Fed chief Paul Volcker.
Credit markets have yet to normalize and bank losses are mounting as the economic slowdown adds to stresses from the subprime mortgage collapse. The gap between investors' expectations for the Fed's main rate and the rate that banks charge each other for funds increased this month, a sign of continued turmoil.
The difference between the three-month London Interbank Offered Rate and the overnight index swap rate widened to 0.73 percentage point yesterday from 0.68 point at the end of May. Former Fed chairman Alan Greenspan said this month the credit crisis will be over when the spread narrows past 0.25 point.
The worst housing recession in a quarter century is showing few signs of ending. Reports this week showed sales of new homes extended their decline in May, consumer confidence dropped to a 16-year low and orders for durable goods stagnated.
Growth Rate
Yesterday's statement contained no mention of the contraction in gross domestic product that many officials judged likely at their April meeting. The Commerce Department today will probably lift its estimate of GDP growth for the first quarter to a 1 percent annual pace, from a previous estimate of 0.9 percent, according to a Bloomberg News survey of economists.
``I hope we'll be in good enough shape by later in the year'' that the Fed could raise rates, House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in an interview with Bloomberg Television. Frank added he was ``skeptical'' there will be sufficient improvement by then.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
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London Bourse Extends Contracts Including Aluminum
By Jae Hur and Stuart Wallace
June 26 (Bloomberg) -- The London Metal Exchange, the world's largest marketplace for copper, lengthened the maturity of some futures contracts to as much as 10 years.
High-grade aluminum and copper contracts were extended to 123 months, from 63, and zinc and nickel to 63 months from 27, the bourse said in an e-mailed statement today. Lead was extended to 63 months, from 15. The changes take place Sept. 29.
``There has been some growing demand from investment banks and metal companies for longer prompt dates as a mine development project normally takes 4-5 years to complete and they need a benchmark forward price for financing and other purposes,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul.
The exchange handled a record $9.5 trillion of futures and options in 2007, a third consecutive year of higher volumes. The LME is facing increased competition as other commodity bourses including the New York Mercantile Exchange plan to increase the number of metals they handle.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.netStuart Wallace at swallace6@bloombe
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June 26 (Bloomberg) -- The London Metal Exchange, the world's largest marketplace for copper, lengthened the maturity of some futures contracts to as much as 10 years.
High-grade aluminum and copper contracts were extended to 123 months, from 63, and zinc and nickel to 63 months from 27, the bourse said in an e-mailed statement today. Lead was extended to 63 months, from 15. The changes take place Sept. 29.
``There has been some growing demand from investment banks and metal companies for longer prompt dates as a mine development project normally takes 4-5 years to complete and they need a benchmark forward price for financing and other purposes,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul.
The exchange handled a record $9.5 trillion of futures and options in 2007, a third consecutive year of higher volumes. The LME is facing increased competition as other commodity bourses including the New York Mercantile Exchange plan to increase the number of metals they handle.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.netStuart Wallace at swallace6@bloombe
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Gold Rises as Euro Holds Gains Versus Dollar After Fed Decision
By Feiwen Rong
June 26 (Bloomberg) -- Gold rose in Asia as the euro traded near the highest against the dollar in more than two weeks, boosting the appeal of the precious metal as an alternative asset.
The dollar fell yesterday after the Federal Reserve gave no indication it will start reversing the most aggressive series of interest-rate cuts in two decades. Gold has gained 6.5 percent this year while the dollar has fallen 6.9 percent versus the euro.
``Gold could firm on a stronger euro,'' Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a report yesterday.
Bullion for immediate delivery was up 0.2 percent to $887.74 an ounce at 10:32 a.m. in Singapore. Silver was little changed at $16.79 an ounce at the same time.
``A choppy to weak oil price will hold back stronger gains,'' Pervan said. Crude oil in New York was little changed at $134.47 a barrel at 10:21 a.m. in Singapore. It fell yesterday on unexpected rise in the U.S. inventories which gained for the first time in six weeks because record fuel prices cut demand.
The dollar traded at $1.5666 against the euro at 10:33 a.m. in Singapore, after falling to $1.5686 yesterday, the weakest since June 9.
European Central Bank President Jean-Claude Trichet told the European Parliament in Brussels yesterday that he's leaving open the option of raising interest rates again after July to contain accelerating inflation.
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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June 26 (Bloomberg) -- Gold rose in Asia as the euro traded near the highest against the dollar in more than two weeks, boosting the appeal of the precious metal as an alternative asset.
The dollar fell yesterday after the Federal Reserve gave no indication it will start reversing the most aggressive series of interest-rate cuts in two decades. Gold has gained 6.5 percent this year while the dollar has fallen 6.9 percent versus the euro.
``Gold could firm on a stronger euro,'' Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a report yesterday.
Bullion for immediate delivery was up 0.2 percent to $887.74 an ounce at 10:32 a.m. in Singapore. Silver was little changed at $16.79 an ounce at the same time.
``A choppy to weak oil price will hold back stronger gains,'' Pervan said. Crude oil in New York was little changed at $134.47 a barrel at 10:21 a.m. in Singapore. It fell yesterday on unexpected rise in the U.S. inventories which gained for the first time in six weeks because record fuel prices cut demand.
The dollar traded at $1.5666 against the euro at 10:33 a.m. in Singapore, after falling to $1.5686 yesterday, the weakest since June 9.
European Central Bank President Jean-Claude Trichet told the European Parliament in Brussels yesterday that he's leaving open the option of raising interest rates again after July to contain accelerating inflation.
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Copper Gains After Federal Reserve Gives No Rate-Rise Signal
By Glenys Sim
June 26 (Bloomberg) -- Copper rose for the first time in four days in Asia as the dollar fell after the Federal Reserve gave no indication that it will increase interest rates, raising the investment appeal of raw materials.
The Fed kept its benchmark rate at 2 percent yesterday and said risks to growth have diminished in the world's largest economy. Copper rallied 26 percent this year as cuts to borrowing costs drove a decline in the dollar and prompted investors to buy commodities.
``The rebound, which we're seeing across the whole metals complex, mainly has to do with the dollar's move after last night's Fed statement,'' Liang Lijuan, analyst at Yide Futures Brokerage Co., said today.
Copper for delivery in three months rose as much as $110, or 1.3 percent, to $8,425 a metric ton on the London Metal Exchange, erasing most of the 1.4 percent decline in the past three days. The contract traded at $8,420 at 10:40 a.m. Singapore time.
``The market already priced expectations of a rate hike at the next meeting but it's less certain now so we're seeing some short-covering taking place,'' said Liang.
Copper for September delivery on the Shanghai Futures Exchange added as much as 410 yuan, or 0.7 percent, to 62,690 yuan ($9,134) a ton, and stood at 62,630 yuan at 10:12 a.m. local time.
``Chinese investors are reluctant chasers of this rally,'' said Zeng Chao, chief metals analyst at Everbright Futures Co. ``Domestic stockpiles are declining and starting to get tight. However, this being the slow consumption season, it's not getting reflected in the prices.''
Among other LME-traded metals, aluminum was up 1 percent at $3,087 a ton, zinc added 2.3 percent to $1,915, lead gained 0.7 percent to $1,795, and tin rose 1.3 percent to $23,000. Nickel had not traded as of 10:40 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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June 26 (Bloomberg) -- Copper rose for the first time in four days in Asia as the dollar fell after the Federal Reserve gave no indication that it will increase interest rates, raising the investment appeal of raw materials.
The Fed kept its benchmark rate at 2 percent yesterday and said risks to growth have diminished in the world's largest economy. Copper rallied 26 percent this year as cuts to borrowing costs drove a decline in the dollar and prompted investors to buy commodities.
``The rebound, which we're seeing across the whole metals complex, mainly has to do with the dollar's move after last night's Fed statement,'' Liang Lijuan, analyst at Yide Futures Brokerage Co., said today.
Copper for delivery in three months rose as much as $110, or 1.3 percent, to $8,425 a metric ton on the London Metal Exchange, erasing most of the 1.4 percent decline in the past three days. The contract traded at $8,420 at 10:40 a.m. Singapore time.
``The market already priced expectations of a rate hike at the next meeting but it's less certain now so we're seeing some short-covering taking place,'' said Liang.
Copper for September delivery on the Shanghai Futures Exchange added as much as 410 yuan, or 0.7 percent, to 62,690 yuan ($9,134) a ton, and stood at 62,630 yuan at 10:12 a.m. local time.
``Chinese investors are reluctant chasers of this rally,'' said Zeng Chao, chief metals analyst at Everbright Futures Co. ``Domestic stockpiles are declining and starting to get tight. However, this being the slow consumption season, it's not getting reflected in the prices.''
Among other LME-traded metals, aluminum was up 1 percent at $3,087 a ton, zinc added 2.3 percent to $1,915, lead gained 0.7 percent to $1,795, and tin rose 1.3 percent to $23,000. Nickel had not traded as of 10:40 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Crude Oil Falls for a Second Day as U.S. Fuel Demand Falters
By Christian Schmollinger
June 26 (Bloomberg) -- Crude oil fell for a second day in New York after a report yesterday showed U.S. fuel demand dropped to the lowest level since January 2007 as record prices limited purchases.
The upward price trend of oil could ease in the years ahead as U.S. gasoline use may have peaked in 2007, Daniel Yergin, chairman of Cambridge Energy Research Associates, told a congressional panel yesterday. Consumption for the week to June 20 has slipped 5 percent this year from its peak of 21.3 million barrels a day on Jan. 4, data from the Energy Department shows.
``With demand noticeably down that's a bit more of a story,'' said Gerard Burg, the energy economist at National Australia Bank Ltd. in Melbourne. ``Overall demand is declining.''
Crude oil for August delivery fell as much as 81 cents, or 0.6 percent, to $133.74 a barrel in after-hours electronic trade on the New York Mercantile Exchange. It was at $133.81 a barrel at 2:43 p.m. Singapore time. Yesterday, futures dropped $2.45, or 1.8 percent, to settle at $134.55 a barrel. Oil touched a record $139.89 on June 16.
Brent crude oil for August settlement declined as much as 76 cents, or 0.6 percent, to $133.57 a barrel on London's ICE Futures Europe exchange. It was at $133.71 a barrel at 2:43 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
The average retail unleaded gasoline price in the U.S. has climbed 33 percent this year, reaching a record $4.08 a gallon on June 15.
Gasoline
Gasoline consumption has averaged 9.28 million barrels a day for the past four weeks, down 2.1 percent from last year, the department said yesterday. Motor-fuel purchases fell 2.7 percent last week in the ninth consecutive decline, MasterCard Inc. said in a June 25 report.
``The Energy Department numbers have been lagging some of the other indicators of fuel demand for the past few months such as the MasterCard announcements,'' said National Australia's Burg. ``So this potentially just brings them in line.''
Gasoline for July delivery rose 1.09 cents, or 0.3 percent, to $3.4050 a gallon in New York. Yesterday, it fell 6.94 cents, or 2 percent, to settle at $3.3941 a gallon. Futures reached a record $3.5762 a gallon on June 16.
Brent crude oil for August settlement was at $133.91 a barrel, down 42 cents, on London's ICE Futures Europe exchange at 12:19 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
Nigerian Strike
A strike by Nigerian white-collar oil workers against Chevron Corp.'s local unit entered a third day, a union official said. Production remained unaffected.
The union and management will hold talks with Petroleum Minister H. Odein Ajumogobia tomorrow and with Abubakar Yar'Adua, head of the state-owned oil company, on June 27.
The strike will continue through the talks ``as long as we are not getting what we want,'' Jonathan Omare, secretary of the Chevron branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said by telephone.
``It's possible the strike may linger but it's more an accumulation of news in Nigeria,'' Burg said. ``With the number of other outages there, it's just one more concern.''
Crude oil also fell as U.S. crude oil inventories unexpectedly increased for the first time in six weeks.
Crude stockpiles gained 803,000 barrels to 301.8 million last week, the Energy Department said. A 1.1 million-barrel drop was forecast by analysts in a Bloomberg News survey.
Fuel Inventories
Gasoline stockpiles fell 153,000 barrels to 208.8 million barrels, the department said. Analysts surveyed before the report were split over whether supplies would rise or fall.
Distillate-fuel inventories rose 2.82 million barrels to 119.4 million barrels in the week ended June 20, the seventh- straight increase, the report showed. A 2 million-barrel gain was forecast. Stockpiles last week were 1.1 percent higher than the five-year average, the department said.
Demand for distillate fuel, a category that includes heating oil and diesel, averaged 4.06 million barrels a day, down by 1.1 percent from a year earlier.
Oil was unchanged earlier yesterday after the Federal Reserve left its benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, as record energy prices threaten to increase inflation.
Futures have almost doubled over the past year as investors looking to hedge against the dollar's drop have purchased commodities, helping push oil, gold and corn to records. Rising Asian fuel consumption and falling output in the North Sea, Russia and Mexico have contributed to the rally.
``This might have impacted more of the other commodities such as gold,'' said Burg. ``It was the most likely outcome and was probably factored into the market already.''
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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June 26 (Bloomberg) -- Crude oil fell for a second day in New York after a report yesterday showed U.S. fuel demand dropped to the lowest level since January 2007 as record prices limited purchases.
The upward price trend of oil could ease in the years ahead as U.S. gasoline use may have peaked in 2007, Daniel Yergin, chairman of Cambridge Energy Research Associates, told a congressional panel yesterday. Consumption for the week to June 20 has slipped 5 percent this year from its peak of 21.3 million barrels a day on Jan. 4, data from the Energy Department shows.
``With demand noticeably down that's a bit more of a story,'' said Gerard Burg, the energy economist at National Australia Bank Ltd. in Melbourne. ``Overall demand is declining.''
Crude oil for August delivery fell as much as 81 cents, or 0.6 percent, to $133.74 a barrel in after-hours electronic trade on the New York Mercantile Exchange. It was at $133.81 a barrel at 2:43 p.m. Singapore time. Yesterday, futures dropped $2.45, or 1.8 percent, to settle at $134.55 a barrel. Oil touched a record $139.89 on June 16.
Brent crude oil for August settlement declined as much as 76 cents, or 0.6 percent, to $133.57 a barrel on London's ICE Futures Europe exchange. It was at $133.71 a barrel at 2:43 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
The average retail unleaded gasoline price in the U.S. has climbed 33 percent this year, reaching a record $4.08 a gallon on June 15.
Gasoline
Gasoline consumption has averaged 9.28 million barrels a day for the past four weeks, down 2.1 percent from last year, the department said yesterday. Motor-fuel purchases fell 2.7 percent last week in the ninth consecutive decline, MasterCard Inc. said in a June 25 report.
``The Energy Department numbers have been lagging some of the other indicators of fuel demand for the past few months such as the MasterCard announcements,'' said National Australia's Burg. ``So this potentially just brings them in line.''
Gasoline for July delivery rose 1.09 cents, or 0.3 percent, to $3.4050 a gallon in New York. Yesterday, it fell 6.94 cents, or 2 percent, to settle at $3.3941 a gallon. Futures reached a record $3.5762 a gallon on June 16.
Brent crude oil for August settlement was at $133.91 a barrel, down 42 cents, on London's ICE Futures Europe exchange at 12:19 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
Nigerian Strike
A strike by Nigerian white-collar oil workers against Chevron Corp.'s local unit entered a third day, a union official said. Production remained unaffected.
The union and management will hold talks with Petroleum Minister H. Odein Ajumogobia tomorrow and with Abubakar Yar'Adua, head of the state-owned oil company, on June 27.
The strike will continue through the talks ``as long as we are not getting what we want,'' Jonathan Omare, secretary of the Chevron branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said by telephone.
``It's possible the strike may linger but it's more an accumulation of news in Nigeria,'' Burg said. ``With the number of other outages there, it's just one more concern.''
Crude oil also fell as U.S. crude oil inventories unexpectedly increased for the first time in six weeks.
Crude stockpiles gained 803,000 barrels to 301.8 million last week, the Energy Department said. A 1.1 million-barrel drop was forecast by analysts in a Bloomberg News survey.
Fuel Inventories
Gasoline stockpiles fell 153,000 barrels to 208.8 million barrels, the department said. Analysts surveyed before the report were split over whether supplies would rise or fall.
Distillate-fuel inventories rose 2.82 million barrels to 119.4 million barrels in the week ended June 20, the seventh- straight increase, the report showed. A 2 million-barrel gain was forecast. Stockpiles last week were 1.1 percent higher than the five-year average, the department said.
Demand for distillate fuel, a category that includes heating oil and diesel, averaged 4.06 million barrels a day, down by 1.1 percent from a year earlier.
Oil was unchanged earlier yesterday after the Federal Reserve left its benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, as record energy prices threaten to increase inflation.
Futures have almost doubled over the past year as investors looking to hedge against the dollar's drop have purchased commodities, helping push oil, gold and corn to records. Rising Asian fuel consumption and falling output in the North Sea, Russia and Mexico have contributed to the rally.
``This might have impacted more of the other commodities such as gold,'' said Burg. ``It was the most likely outcome and was probably factored into the market already.''
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Asian Currencies Gain; Fed Growth Outlook May Spur Local Demand
By Aaron Pan and Clarissa Batino
June 26 (Bloomberg) -- Asian currencies gained, led by the Philippine peso, on speculation investors will buy the region's assets after the Federal Reserve said risks to growth in the world's biggest economy have diminished.
The peso, the region's worst performer this quarter, climbed after the main stock index advanced for a second day. Bangko Sentral ng Pilipinas Governor Amando Tetangco today said ``the Fed's emphasis on inflation could be positive for emerging-market economies.'' Eight of the 10 most-traded Asian currencies outside of Japan strengthened today.
The Fed is ``improving the sentiment of investors'' and buoying the peso, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.
The currency appreciated to 44.455 a dollar as of 11:56 a.m. in Manila, according to Tullett Prebon Plc. It closed at 44.59 yesterday, according to Bankers Association of the Philippines. Today's gain is ``just a knee-jerk reaction'' and the peso may weaken to 45.85 next quarter, the East West treasurer said.
The Fed kept its benchmark rate at 2 percent yesterday. ``That gives the Philippine central bank the flexibility not to be aggressive in hiking interest rates,'' Cebrero said.
Elsewhere, the Singapore dollar gained 0.2 percent to S$1.3646, Malaysia's ringgit added 0.2 percent to 3.2561 and Thailand's baht rose 0.1 percent to 33.57.
Bank Indonesia
Indonesia's rupiah climbed to the strongest level in almost seven weeks on speculation overseas investors will buy the nation's bonds as the yield advantage over the U.S. widens.
The currency gained 1.8 percent this year as Bank Indonesia raised its benchmark interest rate to a one-year high this month after inflation accelerated to the fastest pace in 20 months in May. The central bank will next meet to decide interest rates on July 3.
``With the Fed holding the rate and if BI will raise the rate, that's good for rupiah assets,'' said Rio Lanasier, a currency trader at Bank DBS Indonesia in Jakarta. ``Mostly foreign banks sold dollars for the rupiah to get into bonds.''
The currency rose as high as 9,225, the highest level since May 9, before trading at 9,228 per dollar, compared with 9,263 late yesterday, according to data compiled by Bloomberg. The rupiah may strengthen to 9,220 between now and the end of next week, Lanasier forecast.
Rate Increase
The central bank may raise its reference rate for bill sales next week by 25 basis points to 8.75 percent, Lanasier said, pushing Indonesia's benchmark to 6.75 percentage points above the Fed's, the widest gap since 2006.
Indonesia's inflation may have quickened to 12.7 percent in June from a year earlier, compared with 10.4 percent in May, according to the median estimate of 12 economists in a Bloomberg News survey before a government report on July 1.
South Korea's won rallied on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said the same day that the government will take ``solid'' measures to temper inflation.
`Cautious' Mood
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.3 percent to 1,034.5 a dollar, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second-worst performance in the region.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Taiwan's dollar was little changed at NT$30.378, while the Vietnamese dong held at 16,615.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
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June 26 (Bloomberg) -- Asian currencies gained, led by the Philippine peso, on speculation investors will buy the region's assets after the Federal Reserve said risks to growth in the world's biggest economy have diminished.
The peso, the region's worst performer this quarter, climbed after the main stock index advanced for a second day. Bangko Sentral ng Pilipinas Governor Amando Tetangco today said ``the Fed's emphasis on inflation could be positive for emerging-market economies.'' Eight of the 10 most-traded Asian currencies outside of Japan strengthened today.
The Fed is ``improving the sentiment of investors'' and buoying the peso, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.
The currency appreciated to 44.455 a dollar as of 11:56 a.m. in Manila, according to Tullett Prebon Plc. It closed at 44.59 yesterday, according to Bankers Association of the Philippines. Today's gain is ``just a knee-jerk reaction'' and the peso may weaken to 45.85 next quarter, the East West treasurer said.
The Fed kept its benchmark rate at 2 percent yesterday. ``That gives the Philippine central bank the flexibility not to be aggressive in hiking interest rates,'' Cebrero said.
Elsewhere, the Singapore dollar gained 0.2 percent to S$1.3646, Malaysia's ringgit added 0.2 percent to 3.2561 and Thailand's baht rose 0.1 percent to 33.57.
Bank Indonesia
Indonesia's rupiah climbed to the strongest level in almost seven weeks on speculation overseas investors will buy the nation's bonds as the yield advantage over the U.S. widens.
The currency gained 1.8 percent this year as Bank Indonesia raised its benchmark interest rate to a one-year high this month after inflation accelerated to the fastest pace in 20 months in May. The central bank will next meet to decide interest rates on July 3.
``With the Fed holding the rate and if BI will raise the rate, that's good for rupiah assets,'' said Rio Lanasier, a currency trader at Bank DBS Indonesia in Jakarta. ``Mostly foreign banks sold dollars for the rupiah to get into bonds.''
The currency rose as high as 9,225, the highest level since May 9, before trading at 9,228 per dollar, compared with 9,263 late yesterday, according to data compiled by Bloomberg. The rupiah may strengthen to 9,220 between now and the end of next week, Lanasier forecast.
Rate Increase
The central bank may raise its reference rate for bill sales next week by 25 basis points to 8.75 percent, Lanasier said, pushing Indonesia's benchmark to 6.75 percentage points above the Fed's, the widest gap since 2006.
Indonesia's inflation may have quickened to 12.7 percent in June from a year earlier, compared with 10.4 percent in May, according to the median estimate of 12 economists in a Bloomberg News survey before a government report on July 1.
South Korea's won rallied on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said the same day that the government will take ``solid'' measures to temper inflation.
`Cautious' Mood
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.3 percent to 1,034.5 a dollar, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second-worst performance in the region.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Taiwan's dollar was little changed at NT$30.378, while the Vietnamese dong held at 16,615.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
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S.Korea to pave way for Internet-based banks
SEOUL, June 26 (Reuters) - South Korea is considering allowing the introduction of Internet-based banks to encourage competition and product diversity in the banking industry, a regulator said on Thursday.
The Financial Services Commission (FSC) said in a statement that technology development and growing access to the Internet had raised interest in the establishment of Web-based banks for cost savings and service differentiation.
An online bank, which the FSC calls an Internet primary bank, has no or very few operating offices and handles most of its business via the Internet or electronic means such as automated teller machines.
"We are studying the adoption of small specialised banks, in particular Internet primary banks, for consumers' convenience," the statement said.
South Korea is the world's most wired country, with a majority of households having access to broadband Internet.
Conglomerates and small start-ups tried to jointly set up Web-based banks in South Korea between 2001 and 2002, but cancelled the plans because of a lack of legislation supporting the business model.
The regulatory agency said it would work on details such as defining the extent of Internet banking businesses, cutting the amount of initial capital needed to set up Internet banks and how to help them secure customers.
Possible amendments to the law to support the plan would be submitted within this year, it added.
The FSC also is trying to loosen rules on the consumer finance sector, excluding credit card sales, by lowering entry barriers and allowing firms to raise their portion of lending to above half of total operations, while tightening monitoring.
The deregulation steps were one of the key campaign pledges by President Lee Myung-bak, in office for four months, to boost the financial sector and promote the country as a regional financial centre.
Lee also has pledged to speed up the privatisation of state-run banks and institutions, including Korea Development Bank and Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz).
(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner)
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The Financial Services Commission (FSC) said in a statement that technology development and growing access to the Internet had raised interest in the establishment of Web-based banks for cost savings and service differentiation.
An online bank, which the FSC calls an Internet primary bank, has no or very few operating offices and handles most of its business via the Internet or electronic means such as automated teller machines.
"We are studying the adoption of small specialised banks, in particular Internet primary banks, for consumers' convenience," the statement said.
South Korea is the world's most wired country, with a majority of households having access to broadband Internet.
Conglomerates and small start-ups tried to jointly set up Web-based banks in South Korea between 2001 and 2002, but cancelled the plans because of a lack of legislation supporting the business model.
The regulatory agency said it would work on details such as defining the extent of Internet banking businesses, cutting the amount of initial capital needed to set up Internet banks and how to help them secure customers.
Possible amendments to the law to support the plan would be submitted within this year, it added.
The FSC also is trying to loosen rules on the consumer finance sector, excluding credit card sales, by lowering entry barriers and allowing firms to raise their portion of lending to above half of total operations, while tightening monitoring.
The deregulation steps were one of the key campaign pledges by President Lee Myung-bak, in office for four months, to boost the financial sector and promote the country as a regional financial centre.
Lee also has pledged to speed up the privatisation of state-run banks and institutions, including Korea Development Bank and Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz).
(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner)
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South Korean Won Gains as Authorities May Intervene; Bonds Rise
By Kim Kyoungwha
June 26 (Bloomberg) -- South Korea's won rose on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years. Government bonds gained.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said that day the nation's authorities will take ``solid'' measures to temper inflation.
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.4 percent to 1,034.10 per dollar as of 10:55 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second worst performer of the 10 most-active currencies in Asia outside Japan.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Five-year government bonds rose for a second day on optimism yields near the highest since January will lure buyers.
The yield on the 5.25 percent note due March 2013 fell 4 basis points to 5.87 percent, according to Korea Exchange. The price rose 0.18, or 18 won per 10,000 won face amount, to 99.02. A basis point is 0.01 percentage point.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
Read more...
June 26 (Bloomberg) -- South Korea's won rose on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years. Government bonds gained.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said that day the nation's authorities will take ``solid'' measures to temper inflation.
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.4 percent to 1,034.10 per dollar as of 10:55 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second worst performer of the 10 most-active currencies in Asia outside Japan.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Five-year government bonds rose for a second day on optimism yields near the highest since January will lure buyers.
The yield on the 5.25 percent note due March 2013 fell 4 basis points to 5.87 percent, according to Korea Exchange. The price rose 0.18, or 18 won per 10,000 won face amount, to 99.02. A basis point is 0.01 percentage point.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
Read more...
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