Daily Forex Fundamentals | Written by Crown Forex | Jun 27 08 10:16 GMT |
The greenback is continuing its fall from yesterday although the fundamental data released from the U.S economy should have helped support the dollar slightly, but the negative sentiment in the market now has currently more affect than anything. Credit conditions are still tight while the financial market turmoil continues. Later on this afternoon we are expecting economic data concerning inflation from the U.S.
The EU economy today released its current account showing that the deficit narrowed but still the consumer confidence came in showing a fall of 17 worse than the expected -16 and the prior -15 as inflation continued to rise. The ECB's Chairman Jean-Claude Trichet is signaling for an interest rate hike which could be a seven-year high up to 4.25% in order to battle inflation. The euro is gaining on the back of the weak greenback as the pair is currently trading at 1.5768 while recording a high of 1.5782 and a low of 1.5719.
The UK economy released its GDP annual first quarter final reading showing that the economy contracted to 2.3% while the preliminary reading was 2.5%. We kind of saw of hint of this yesterday as BoE Governor Mervyn King said that growth need to become a little sluggish in order to contain inflation which they believed might pass the 4% way above the banks 2% target. Currently the sterling is trading between the support of 1.9825 and the resistance of 1.9895 at 1.9865 while the pair continues to gain recording a high of 1.9900 and a low of 1.9805.
As for the yen it is gaining as consumers fear the market as they buy low yielding currencies and sell high yielding currencies in which we call unwinding of carry trades. The USD/JPY is currently trading at 106.24 while recording a high of 107.20 and a low of 106.15.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
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Friday, June 27, 2008
Gold above $920/oz on record oil prices, weaker dollar
(AFX UK Focus) 2008-06-27 10:14
LONDON (Thomson Financial) - Gold continued to edge higher above $920 per ounce on Friday following strong gains in the previous session, with oil prices at record levels and weakness in the U.S. dollar boosting the precious metal.
At 9.45 a.m., spot gold was trading at $922.10 per ounce against $913.50 per ounce in late New York trades on Thursday. Gold has risen by around $45 since Wednesday's intraday low.
"The speed of the move and the combination of new highs in crude, renewed dollar weakness and further risk aversion make the risks biased to the upside for now," said UBS analyst John Reade.
With oil prices hitting new record highs above $142 a barrel, and weakness in the U.S. dollar, traders said investors were buying into gold as a hedge against the decline of the world's predominant form of currency reserves, and runaway inflation concerns.
Gold is also used as a store of wealth during times of economic turmoil, with investors turning to the precious metal for its safe-haven properties.
Other precious metals have tracked gold higher. Platinum was trading at $2,079 per ounce against $2,068 per ounce in late New York trades on Thursday. Palladium edged up to $471 per ounce against $468.50 per ounce, while silver climbed to $17.38 per ounce against $17.12 per ounce. d.sheppard@thomsonreuters.com ds1/cml/wj
COPYRIGHT
Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
Commodities
Gold and precious metals
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LONDON (Thomson Financial) - Gold continued to edge higher above $920 per ounce on Friday following strong gains in the previous session, with oil prices at record levels and weakness in the U.S. dollar boosting the precious metal.
At 9.45 a.m., spot gold was trading at $922.10 per ounce against $913.50 per ounce in late New York trades on Thursday. Gold has risen by around $45 since Wednesday's intraday low.
"The speed of the move and the combination of new highs in crude, renewed dollar weakness and further risk aversion make the risks biased to the upside for now," said UBS analyst John Reade.
With oil prices hitting new record highs above $142 a barrel, and weakness in the U.S. dollar, traders said investors were buying into gold as a hedge against the decline of the world's predominant form of currency reserves, and runaway inflation concerns.
Gold is also used as a store of wealth during times of economic turmoil, with investors turning to the precious metal for its safe-haven properties.
Other precious metals have tracked gold higher. Platinum was trading at $2,079 per ounce against $2,068 per ounce in late New York trades on Thursday. Palladium edged up to $471 per ounce against $468.50 per ounce, while silver climbed to $17.38 per ounce against $17.12 per ounce. d.sheppard@thomsonreuters.com ds1/cml/wj
COPYRIGHT
Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
Commodities
Gold and precious metals
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Today's Key Points
Daily Forex Fundamentals | Written by Danske Bank | Jun 27 08 07:12 GMT |
Danske Daily
Today's Key Points
* US stocks tumble and the Dow Jones fell to the lowest level this year, making it the worst June for the index since the Great Depression. Asian equity markets are also down this morning.
* The oil price reached a new record-high at USD 140 per barrel yesterday, but has retreated slightly overnight.
* Focus today will be on more German CPI and Euroland consumer confidence. In the US, inflation data takes centre stage along with the revised University of Michigan consumer confidence.
Markets Overnight
US stocks tumbled in yesterday's trade and the Dow Jones fell to the lowest level this year, making it the worst June for the index since the Great Depression. Following a weak European close US markets had opened at a lower level and losses were only extended during the day causing an even greater decline in prices than on the European markets. The S&P500 lost 2.9%, while the Dow Jones and Nasdaq indices both shed more than 3%. The decline in the S&P500 was led by financials, info tech, and industrials, but almost nine in ten stocks fell on the New York Stock Exchange.
Yesterday also saw the release of a series of US data. Final Q1 GDP was revised up to an annualized 1% q/q and also the core PCE deflator was revised up. Claims data were soft, as continuing claims revised the entire decline from last week, jumping back to its previous upward trend. In total this data is consistent with continued - but moderate - declines in non-farm payrolls. Finally, existing home sales came out slightly better than expected, but the housing market is generally still bleeding.
US Treasuries are little changed overnight, after rallying yesterday as stocks fell. 2-year notes dropped 15bp yesterday, while 10-year notes went 6bp lower. However, it is worth noting that 2-year notes are still more than one percentage points higher than the low in mid-March.
The oil price retreated somewhat overnight from yesterday's record-high of USD 140 per barrel, as the US House of Representatives approved a bill aimed to restrain energy market speculation.
In Asia, equity markets came under renewed pressure and were not helped by somewhat weak Japanese macroeconomic data released overnight. The Nikkei225 index is currently down by more than 2 percent.
On the FX market, EUR/USD has drifted slightly lower overnight following a decent rise yesterday. The pair is currently trading in the 1.570 - 1.575 range. USD/JPY is trading slightly higher after falling close to 1% yesterday and is now just above 107. The Scandies have been broadly flat overnight, while NZD/USD has gained this morning, trading above 0.76, despite the GDP report released overnight showing that the New Zealand economy actually backpedalled in Q1.
Global Daily
Focus today should continue to be on the financial jitters. Hence equity and credit market performance is once again becoming a key driver in the bond market. Worryingly, oil prices stay high and keep the inflation scare in the game as well - not a nice cocktail. We see some scope for further declines in yields in the short term as growth fears are rising and risk appetite falling. But watch closely the inflation expectations released with the University of Michigan consumer confidence at 16.00 CET (see below)
On the agenda in Europe today is more German CPI. Länder CPI has been in line with consensus pointing to a rise from 3.0% in May to 3.3% in June for overall German inflation. This will likely push up the overall Euroland CPI (Flash CPI released Monday) to 3.9% adding to the inflation concern. The high oil price could push up CPI even higher in coming months. Also watch the consumer confidence numbers today which include the very important inflation expectations measure for consumers (price expectations next 12 months). It has been going sideways for some time and hence not pointed to rising inflation expectations like in many other countries, but the risk is that we will start to see it come through in Euroland as well.
We also have US inflation data out today as well as the revised University of Michigan consumer confidence which includes one of the most important measures of inflation expectations - the expectation for inflation 5 years ahead. This was unchanged at 3.4% in the preliminary release from June 13 - the highest level in almost 15 years. It shall be interesting to see if there is any upward revision in the final number. This would clearly worry the Fed. On the inflation front we also have the PCE deflator. The core deflator is important to gauge if inflation pressures are broadening,but the headline is also attracting more interest as it has stayed elevated for so long now.
The EUR seems to mainly draw its strength from relative interest rate movements at present, although the high oil price is indirectly having an effect. EUR/USD should be able to go up further in the coming week and a potential break of 1.585 would give rise to promises of a new record-igh around 1.63.
Scandi Daily
Today we receive retail sales data and the National Debt Office's forecast in Sweden. On retail sales we expect a recoil after last month's very weak reading, but apparently we are more optimistic on this issue than market consensus suggests. Bearing in mind that this is indeed a rather volatile series our advise is however to refrain from taking any major bets on this particular outcome. The SNDO data shall be interesting since the actual outcomes point toward an excess fiscal balance surplus of SEK 20bn compared to the SNDO's latest forecast. In spite of this we do not expect any major revisions, since this would also entail making a forecast on possible privatisation flows in conjunction to TeliaSonera and France Telecom.
Danske Bank
http://www.danskebank.com/danskeresearch
Disclaimer
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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Danske Daily
Today's Key Points
* US stocks tumble and the Dow Jones fell to the lowest level this year, making it the worst June for the index since the Great Depression. Asian equity markets are also down this morning.
* The oil price reached a new record-high at USD 140 per barrel yesterday, but has retreated slightly overnight.
* Focus today will be on more German CPI and Euroland consumer confidence. In the US, inflation data takes centre stage along with the revised University of Michigan consumer confidence.
Markets Overnight
US stocks tumbled in yesterday's trade and the Dow Jones fell to the lowest level this year, making it the worst June for the index since the Great Depression. Following a weak European close US markets had opened at a lower level and losses were only extended during the day causing an even greater decline in prices than on the European markets. The S&P500 lost 2.9%, while the Dow Jones and Nasdaq indices both shed more than 3%. The decline in the S&P500 was led by financials, info tech, and industrials, but almost nine in ten stocks fell on the New York Stock Exchange.
Yesterday also saw the release of a series of US data. Final Q1 GDP was revised up to an annualized 1% q/q and also the core PCE deflator was revised up. Claims data were soft, as continuing claims revised the entire decline from last week, jumping back to its previous upward trend. In total this data is consistent with continued - but moderate - declines in non-farm payrolls. Finally, existing home sales came out slightly better than expected, but the housing market is generally still bleeding.
US Treasuries are little changed overnight, after rallying yesterday as stocks fell. 2-year notes dropped 15bp yesterday, while 10-year notes went 6bp lower. However, it is worth noting that 2-year notes are still more than one percentage points higher than the low in mid-March.
The oil price retreated somewhat overnight from yesterday's record-high of USD 140 per barrel, as the US House of Representatives approved a bill aimed to restrain energy market speculation.
In Asia, equity markets came under renewed pressure and were not helped by somewhat weak Japanese macroeconomic data released overnight. The Nikkei225 index is currently down by more than 2 percent.
On the FX market, EUR/USD has drifted slightly lower overnight following a decent rise yesterday. The pair is currently trading in the 1.570 - 1.575 range. USD/JPY is trading slightly higher after falling close to 1% yesterday and is now just above 107. The Scandies have been broadly flat overnight, while NZD/USD has gained this morning, trading above 0.76, despite the GDP report released overnight showing that the New Zealand economy actually backpedalled in Q1.
Global Daily
Focus today should continue to be on the financial jitters. Hence equity and credit market performance is once again becoming a key driver in the bond market. Worryingly, oil prices stay high and keep the inflation scare in the game as well - not a nice cocktail. We see some scope for further declines in yields in the short term as growth fears are rising and risk appetite falling. But watch closely the inflation expectations released with the University of Michigan consumer confidence at 16.00 CET (see below)
On the agenda in Europe today is more German CPI. Länder CPI has been in line with consensus pointing to a rise from 3.0% in May to 3.3% in June for overall German inflation. This will likely push up the overall Euroland CPI (Flash CPI released Monday) to 3.9% adding to the inflation concern. The high oil price could push up CPI even higher in coming months. Also watch the consumer confidence numbers today which include the very important inflation expectations measure for consumers (price expectations next 12 months). It has been going sideways for some time and hence not pointed to rising inflation expectations like in many other countries, but the risk is that we will start to see it come through in Euroland as well.
We also have US inflation data out today as well as the revised University of Michigan consumer confidence which includes one of the most important measures of inflation expectations - the expectation for inflation 5 years ahead. This was unchanged at 3.4% in the preliminary release from June 13 - the highest level in almost 15 years. It shall be interesting to see if there is any upward revision in the final number. This would clearly worry the Fed. On the inflation front we also have the PCE deflator. The core deflator is important to gauge if inflation pressures are broadening,but the headline is also attracting more interest as it has stayed elevated for so long now.
The EUR seems to mainly draw its strength from relative interest rate movements at present, although the high oil price is indirectly having an effect. EUR/USD should be able to go up further in the coming week and a potential break of 1.585 would give rise to promises of a new record-igh around 1.63.
Scandi Daily
Today we receive retail sales data and the National Debt Office's forecast in Sweden. On retail sales we expect a recoil after last month's very weak reading, but apparently we are more optimistic on this issue than market consensus suggests. Bearing in mind that this is indeed a rather volatile series our advise is however to refrain from taking any major bets on this particular outcome. The SNDO data shall be interesting since the actual outcomes point toward an excess fiscal balance surplus of SEK 20bn compared to the SNDO's latest forecast. In spite of this we do not expect any major revisions, since this would also entail making a forecast on possible privatisation flows in conjunction to TeliaSonera and France Telecom.
Danske Bank
http://www.danskebank.com/danskeresearch
Disclaimer
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
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The same old story - higher gold on strong oil and weak dollar
The price of gold still seems inextricably linked in the mind of investors to dollar weakness and oil price strength as it remains in positive territory after a big rise the previous day.
Author: Lewa Pardomuan
Posted: Friday , 27 Jun 2008
SINGAPORE (Reuters) -
Gold steadied above $912 an ounce on Friday after rallying to its strongest level in a month the previous day on record oil prices and a weaker U.S. dollar that boosted the metal's safe-haven appeal.
Gold has risen nearly 7 percent since falling to its lowest level in nearly 6 weeks at $856.80 on June 12, with a weaker equities markets also encouraging funds to shift some of their money back to the precious metal.
Gold was at $912.30/913.20 an ounce, barely changed from $912.60/913.60 late in New York on Thursday, when it rallied to $917.20 an ounce -- its highest level since May 27.
Despite the gains, gold was still well below a lifetime high of $1,030.80 an ounce hit in March. Dealers noted buying interest from dealers in Singapore as well as light buying from Japanese investors.
"We will try to consolidate above the $908 level. I'd expect gold to try the main resistance around $925, provided that oil stands at these high levels," said Louis Lok, a dealer at Bank of China in Hong Kong.
"It may not easy for the U.S. dollar to try to fight back," he said.
Oil fell 59 cents to $139.06 a barrel on Friday, having hit a record high of $140.39 after Libya said it was studying possible options to cut output in response to potential U.S. actions against OPEC countries.
The euro was steady at $1.5754 after rising to a 3-week high around $1.5770 on Thursday. The dollar had dropped as investors reduced their expectations for a Federal Reserve rate hike this year, and as U.S. stocks tumbled.
In theory, rising energy prices boost gold's appeal as a hedge against inflation, while a weaker dollar makes the metal an attractive alternative investment.
"I think there's an increasing view that the U.S. dollar in the near term might be in for some more weakness," said Mark Pervan, senior commodities analyst with ANZ in Melbourne.
"I think at the moment it is sort of consolidating. It's watching what the dollar is doing. You can sort of sense that it could move towards $950 pretty quickly. But $930 is the next resistance level, I think," said Pervan.
Gold futures for August delivery on the COMEX division of the New York Mercantile Exchange fell $0.6 to $914.5 an ounce, having risen nearly 4 percent on Thursday.
Spot platinum rose to $2,070.00/2,080.00 an ounce from $2,057.50/2,077.50 late in New York. Spot palladium rose to $465.00/473.00 an ounce from $464.00/472.00 an ounce.
Silver dipped to $17.15/17.21 an ounce from $17.22/17.28 late in New York.
The most active Tokyo platinum contract for June 2009c delivery on the Tokyo Commodity Exchange ended the morning session 82 yen per gram higher at 7,020 yen
The contract hit an intraday high of 7,038 yen, its highest level since June 19, reflecting a firm cash market.
© Thomson Reuters 2008. All rights reserved
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Author: Lewa Pardomuan
Posted: Friday , 27 Jun 2008
SINGAPORE (Reuters) -
Gold steadied above $912 an ounce on Friday after rallying to its strongest level in a month the previous day on record oil prices and a weaker U.S. dollar that boosted the metal's safe-haven appeal.
Gold has risen nearly 7 percent since falling to its lowest level in nearly 6 weeks at $856.80 on June 12, with a weaker equities markets also encouraging funds to shift some of their money back to the precious metal.
Gold was at $912.30/913.20 an ounce, barely changed from $912.60/913.60 late in New York on Thursday, when it rallied to $917.20 an ounce -- its highest level since May 27.
Despite the gains, gold was still well below a lifetime high of $1,030.80 an ounce hit in March. Dealers noted buying interest from dealers in Singapore as well as light buying from Japanese investors.
"We will try to consolidate above the $908 level. I'd expect gold to try the main resistance around $925, provided that oil stands at these high levels," said Louis Lok, a dealer at Bank of China in Hong Kong.
"It may not easy for the U.S. dollar to try to fight back," he said.
Oil fell 59 cents to $139.06 a barrel on Friday, having hit a record high of $140.39 after Libya said it was studying possible options to cut output in response to potential U.S. actions against OPEC countries.
The euro was steady at $1.5754 after rising to a 3-week high around $1.5770 on Thursday. The dollar had dropped as investors reduced their expectations for a Federal Reserve rate hike this year, and as U.S. stocks tumbled.
In theory, rising energy prices boost gold's appeal as a hedge against inflation, while a weaker dollar makes the metal an attractive alternative investment.
"I think there's an increasing view that the U.S. dollar in the near term might be in for some more weakness," said Mark Pervan, senior commodities analyst with ANZ in Melbourne.
"I think at the moment it is sort of consolidating. It's watching what the dollar is doing. You can sort of sense that it could move towards $950 pretty quickly. But $930 is the next resistance level, I think," said Pervan.
Gold futures for August delivery on the COMEX division of the New York Mercantile Exchange fell $0.6 to $914.5 an ounce, having risen nearly 4 percent on Thursday.
Spot platinum rose to $2,070.00/2,080.00 an ounce from $2,057.50/2,077.50 late in New York. Spot palladium rose to $465.00/473.00 an ounce from $464.00/472.00 an ounce.
Silver dipped to $17.15/17.21 an ounce from $17.22/17.28 late in New York.
The most active Tokyo platinum contract for June 2009c delivery on the Tokyo Commodity Exchange ended the morning session 82 yen per gram higher at 7,020 yen
The contract hit an intraday high of 7,038 yen, its highest level since June 19, reflecting a firm cash market.
© Thomson Reuters 2008. All rights reserved
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Daily Financial Market Outlook
Daily Forex Fundamentals | Written by Lloyds TSB | Jun 27 08 07:25 GMT |
Overview & economic commentary
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Overview & economic commentary
Although cloaked by the shadow of the credit crisis, we expect data this morning to confirm UK economic growth was a respectable 0.4% in the first quarter, buoyed by robust consumer spending. Despite the sharp fall in consumer confidence indices and tighter credit market conditions, the previous estimate showed consumer spending rebounded by 1.3%, from just 0.1% growth in Q4. There was also a strong positive contribution from net trade, though mainly reflecting fewer imports rather than increased exports, however gross fixed investment was down by a sharp 1.6%. The data this morning will also provide the first official estimate of the saving ratio, which was just 2.9% last year, compared to 4.8% in 2006 and the lowest since 1959. However, we expect it to be even lower in Q1 than in Q4 2007 and for the average this year to also be below that in 2007, helping to support spending activity as incomes get squeezed. The chart below shows rising wealth has been the key factor behind the continued decline in the UK’s saving ratio. Other data released at the same time are forecast to show the UK’s external deficit rose sharply in Q1 2008, possibly twice as large as in Q4 2007. The current account deficit was a record £57.8bn in 2007, equivalent to 4.2% of gdp, indicating a high risk of further currency weakness. In the US, we expect strong personal spending data for May to contrast with the negativity of the Michigan consumer confidence index, which is at levels last seen in 1980. We believe the core PCE deflator may surprise to the upside, reflecting the revision to Q1figures yesterday.
Currency commentary
A brutal sell-off in stocks around the world pulled the rug from carry trade plays and put the safe haven plays back in focus in fx and bond markets. Yen and Swiss franc were bid up and an aggressive steepening move in bonds triggered a sharp fall in short dated yields. $/Chf could eye a test of 1.0200 support if equities stay under pressure and US data for personal spending disappoints this afternoon. A break below 106.62 support in $/Y would threaten a broader pullback towards 105.0. Equity futures are pointing to a slightly weaker start in the UK and Eurpe but US futures are pointing to some stabilisation this afternoon. A surge in Nymex crude above $140 added to the gloom in equities and is likely to cause further gyrations in commodity currencies like the C$ and Nok. The A$ and rand are attracting good demad after the surge in gold above $900. UK Q1 current account and final gdp data are due this morning but are unlikely to impact sterling crosses unless gdp is revised.
Major data and events today
- French producer prices (07:45)
Apr +0.7% Y-O-Y +5.4%
May (f'cast) +0.8% Y-O-Y +6.0%
Median +0.6% Range +0.6%:+1.0% - French GDP (07:45) (final)
Q1 (prel) +0.4% Y-O-Y +2.1%
Q1 (f'cast) +0.6% Y-O-Y +2.2%
Median +0.6% Range +0.4%:+0.6% - EU-15 current account (sa) (09.00) (Apr)
Mar -€15.3bn - UK GDP (final) (09:30)
Q1 (prel) +0.4% Y-O-Y +2.5%
Q1 (f'cast) +0.4% Y-O-Y +2.5%
Median +0.4% Range +0.4%:+0.6% - UK current account (09:30)
Q4 -£8.5bn
Q1 (f'cast) -£15.4bn
Median -£12.1bn Range -£17.4bn:-£6.8bn - US personal income (13:30)
Apr +0.2% Y-O-Y +4.8%
May (f'cast) +0.5% Y-O-Y +5.0%
Median +0.4% Range +0.2%+1.9% - US personal spending (13:30)
Apr +0.2% Y-O-Y +4.8%
May (f'cast) +0.6% Y-O-Y +4.9%
Median +0.6% Range +0.1%:+0.9% - US PCE deflator (13:30) (May)
Apr Y-O-Y +3.2% - US Core PCE deflator (13:30)
Apr +0.1% Y-O-Y +2.1%
May (f'cast) +0.2% Y-O-Y +2.1%
Median +0.2% Range +0.1%:+0.5% - Canada IPPI (13:30)
Apr +1.4%
May (f'cast) +1.1%
Median +1.1% Range +0.3%:+2.5% - Canada RMPI (13:30)
Apr +5.1%
May (f'cast) +4.0%
Median +4.0% Range +4.0%:+5.0% - US Uni. of Michigan confidence (final) (15:00)
Jun (prel) 56.7
Jun (f'cast) 57.0
Median 56.8 Range 55.9:58.0
Chart of the day: The UK savings ratio has fallen sharply in recent years in line with the steep climb in household assets
Lloyds TSB Bank
http://www.lloydstsbfinancialmarkets.com
Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.
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Asian Currencies Post Weekly Decline on Stock Sales, Record Oil
By Aaron Pan and Lilian Karunungan
June 27 (Bloomberg) -- Asian currencies, led by South Korea's won, declined this week as overseas investors increased sales of local shares following the biggest loss in U.S. stocks in almost three weeks.
The won slumped 5.5 percent this quarter, the most since the period ended December 2000, on concern that record oil prices will slow the nation's economic growth. The MSCI Asia Pacific index of equities fell, sending the benchmark to its worst first half since 1992. Thailand's baht dropped for a fifth week.
``There's a big tumble in stocks out there, sapping appetite for the won,'' said Jay Won, a currency dealer at Korea Exchange Bank in Seoul. ``Month-end export deals and the government's intervention may put some brake on the loss.''
The won fell 1.3 percent this week to 1,041.80 against the dollar as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The currency has declined 11.3 percent this year, the second-worst performer of the 10 most-active currencies in Asia outside Japan.
Overseas funds sold more Korean shares than they bought on every day this month except for two, according to data from Korea Exchange. The nation's Kospi index of equities declined 1.9 percent, logging a fourth weekly loss. Investors dumped Thai stocks on all but two days this month through yesterday.
Thailand's baht lost 0.5 percent to 33.57 a dollar this week, Vietnam's dong fell 1.4 percent to 16,843 and Taiwan's dollar was little changed at NT$30.388. Singapore's dollar added 0.2 percent this week to S$1.3621.
`Blessing in Disguise'
Record oil prices are ``a blessing in disguise'' for Asian economies and currencies as high transport costs will coerce the region to become less reliant on exports and more on local demand, Morgan Stanley said.
Surging oil prices that are raising Asian exporters' costs to ship everything from cars to clothes to the West will encourage them to rely on domestic customers and this will help reduce global imbalances, according to Stephen Jen, chief currency strategist at Morgan Stanley in London.
Malaysia's ringgit fell on concern that crude oil prices will spur inflation, slow growth and prompt investors to sell assets in the region.
The currency headed for its first quarterly loss since the period ended September 2006 after oil rose to a record. Malaysia raised fuel prices on June 5, the seventh increase in four years, to trim its subsidies and ease some pressure on the budget deficit.
Ringgit Suffers
``Oil news and the inflation theme have been causing the biggest impact on the ringgit,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``It's been a poor quarter and people have probably closed their positions for the month by now.''
The ringgit traded at 3.2625 per dollar versus 3.2535 late yesterday and 3.2560 a week ago, according to data compiled by Bloomberg.
The Philippine peso posted a weekly loss after crude oil reached a record $141.71 a barrel today, more than doubling in the past year.
The Philippine trade deficit may widen to $11.5 billion this year, from $8.6 billion in 2007, due to rising oil and rice prices, central bank Director Iluminada Sicat said yesterday.
Pressure on Peso
``Higher oil prices raise inflation and growth concern and also widen the trade deficit, putting pressure on the peso,'' said Rafael Algarra, a treasurer at Security Bank Corp. ``Oil importers may also be funding their requirements.''
The currency fell to 44.802 per dollar, according to data compiled by Bloomberg from 44.35 at the end of last week, according to the Bankers Association of the Philippines. The peso may drop to around 46 next quarter, Manila-based Algarra said.
Indonesia's rupiah gained this week on speculation the central bank will raise interest rates on July 3, increasing the extra yield offered by the nation's assets.
The rupiah is headed for its first monthly advance since February after central bank Deputy Governor Budi Mulya said yesterday in Rome that policy makers will use all instruments to stabilize the currency and fight inflation. Bank Indonesia will increase its benchmark rate for the third time this year, according to a Bloomberg News survey.
``The market is pretty confident that Bank Indonesia will actually raise rates gradually to deal with rising inflation,'' said Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore. ``They have been quite early in raising rates and also they show a very clear commitment to stabilize the currency. A widening differential between Indonesia and the U.S. is a positive for the rupiah.''
The currency rose as high as 9,193, the strongest level since May 1, before trading at 9,215 per dollar compared with 9,202 late yesterday, according to data compiled by Bloomberg. The rupiah, which gained 0.5 percent over the five days, may strengthen to 9,180 next week, Harr said.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
Last Updated: June 27, 2008 05:36 EDT
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June 27 (Bloomberg) -- Asian currencies, led by South Korea's won, declined this week as overseas investors increased sales of local shares following the biggest loss in U.S. stocks in almost three weeks.
The won slumped 5.5 percent this quarter, the most since the period ended December 2000, on concern that record oil prices will slow the nation's economic growth. The MSCI Asia Pacific index of equities fell, sending the benchmark to its worst first half since 1992. Thailand's baht dropped for a fifth week.
``There's a big tumble in stocks out there, sapping appetite for the won,'' said Jay Won, a currency dealer at Korea Exchange Bank in Seoul. ``Month-end export deals and the government's intervention may put some brake on the loss.''
The won fell 1.3 percent this week to 1,041.80 against the dollar as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The currency has declined 11.3 percent this year, the second-worst performer of the 10 most-active currencies in Asia outside Japan.
Overseas funds sold more Korean shares than they bought on every day this month except for two, according to data from Korea Exchange. The nation's Kospi index of equities declined 1.9 percent, logging a fourth weekly loss. Investors dumped Thai stocks on all but two days this month through yesterday.
Thailand's baht lost 0.5 percent to 33.57 a dollar this week, Vietnam's dong fell 1.4 percent to 16,843 and Taiwan's dollar was little changed at NT$30.388. Singapore's dollar added 0.2 percent this week to S$1.3621.
`Blessing in Disguise'
Record oil prices are ``a blessing in disguise'' for Asian economies and currencies as high transport costs will coerce the region to become less reliant on exports and more on local demand, Morgan Stanley said.
Surging oil prices that are raising Asian exporters' costs to ship everything from cars to clothes to the West will encourage them to rely on domestic customers and this will help reduce global imbalances, according to Stephen Jen, chief currency strategist at Morgan Stanley in London.
Malaysia's ringgit fell on concern that crude oil prices will spur inflation, slow growth and prompt investors to sell assets in the region.
The currency headed for its first quarterly loss since the period ended September 2006 after oil rose to a record. Malaysia raised fuel prices on June 5, the seventh increase in four years, to trim its subsidies and ease some pressure on the budget deficit.
Ringgit Suffers
``Oil news and the inflation theme have been causing the biggest impact on the ringgit,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``It's been a poor quarter and people have probably closed their positions for the month by now.''
The ringgit traded at 3.2625 per dollar versus 3.2535 late yesterday and 3.2560 a week ago, according to data compiled by Bloomberg.
The Philippine peso posted a weekly loss after crude oil reached a record $141.71 a barrel today, more than doubling in the past year.
The Philippine trade deficit may widen to $11.5 billion this year, from $8.6 billion in 2007, due to rising oil and rice prices, central bank Director Iluminada Sicat said yesterday.
Pressure on Peso
``Higher oil prices raise inflation and growth concern and also widen the trade deficit, putting pressure on the peso,'' said Rafael Algarra, a treasurer at Security Bank Corp. ``Oil importers may also be funding their requirements.''
The currency fell to 44.802 per dollar, according to data compiled by Bloomberg from 44.35 at the end of last week, according to the Bankers Association of the Philippines. The peso may drop to around 46 next quarter, Manila-based Algarra said.
Indonesia's rupiah gained this week on speculation the central bank will raise interest rates on July 3, increasing the extra yield offered by the nation's assets.
The rupiah is headed for its first monthly advance since February after central bank Deputy Governor Budi Mulya said yesterday in Rome that policy makers will use all instruments to stabilize the currency and fight inflation. Bank Indonesia will increase its benchmark rate for the third time this year, according to a Bloomberg News survey.
``The market is pretty confident that Bank Indonesia will actually raise rates gradually to deal with rising inflation,'' said Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore. ``They have been quite early in raising rates and also they show a very clear commitment to stabilize the currency. A widening differential between Indonesia and the U.S. is a positive for the rupiah.''
The currency rose as high as 9,193, the strongest level since May 1, before trading at 9,215 per dollar compared with 9,202 late yesterday, according to data compiled by Bloomberg. The rupiah, which gained 0.5 percent over the five days, may strengthen to 9,180 next week, Harr said.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
Last Updated: June 27, 2008 05:36 EDT
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Russia's Ruble Is Headed for Second Weekly Drop Against Euro
By Emma O'Brien
June 27 (Bloomberg) -- Russia's ruble headed for its second weekly decline against the euro and rose versus the dollar, leaving the currency little changed for a second straight week against the central bank's dollar-euro basket.
The ruble was at 36.9120 per euro by 10:35 a.m. in Moscow, from 36.9507 late yesterday, taking its decline against the common currency this week to 0.4 percent. It traded at 23.4590 per dollar, from 23.4358, leaving it 0.5 percent stronger versus the U.S. currency on the week. That left it little changed at 29.5149 against the basket.
Bank Rossii buys and sells rubles daily to keep it within a trading band against the basket, limiting gains that can hurt the competitiveness of Russian exports. The central bank may expand the band by as much as 5 percent on each side and intervene at varied levels to boost volatility and deter speculators, Deputy Chairman Konstantin Korishchenko said in an interview June 25.
Banks including Merrill Lynch & Co. have predicted the ruble will be allowed to strengthen by as much as 4 percent this year after inflation accelerated to 15.1 percent in May. While a strengthening ruble reduces prices on imported goods it also encourages inflows into Russia which may stoke inflation, Korishchenko said.
The currency basket is calculated by multiplying the ruble's rate against the dollar by 0.55 and versus the euro by 0.45, then adding the two numbers together. It was at 29.5177 to the basket on June 20, and 29.5175 yesterday.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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June 27 (Bloomberg) -- Russia's ruble headed for its second weekly decline against the euro and rose versus the dollar, leaving the currency little changed for a second straight week against the central bank's dollar-euro basket.
The ruble was at 36.9120 per euro by 10:35 a.m. in Moscow, from 36.9507 late yesterday, taking its decline against the common currency this week to 0.4 percent. It traded at 23.4590 per dollar, from 23.4358, leaving it 0.5 percent stronger versus the U.S. currency on the week. That left it little changed at 29.5149 against the basket.
Bank Rossii buys and sells rubles daily to keep it within a trading band against the basket, limiting gains that can hurt the competitiveness of Russian exports. The central bank may expand the band by as much as 5 percent on each side and intervene at varied levels to boost volatility and deter speculators, Deputy Chairman Konstantin Korishchenko said in an interview June 25.
Banks including Merrill Lynch & Co. have predicted the ruble will be allowed to strengthen by as much as 4 percent this year after inflation accelerated to 15.1 percent in May. While a strengthening ruble reduces prices on imported goods it also encourages inflows into Russia which may stoke inflation, Korishchenko said.
The currency basket is calculated by multiplying the ruble's rate against the dollar by 0.55 and versus the euro by 0.45, then adding the two numbers together. It was at 29.5177 to the basket on June 20, and 29.5175 yesterday.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Pound Stays Lower Against Euro as Economic Growth Revised Down
By Gavin Finch
June 27 (Bloomberg) -- The pound stayed lower against the euro after a government report showed the U.K. economy grew less than previously estimated in the first quarter.
The U.K. currency fell 0.1 percent to 79.26 pence per euro by 9:44 a.m. in London, from 79.21 pence late yesterday. It was at $1.9900, from $1.9890.
Gross domestic product rose 0.3 percent in the three months through March, the least in three years, the Office for National Statistics said today. The result was lower than the 0.4 percent reported on May 23, which was the median forecast of 32 economists in a Bloomberg News survey. The economy expanded 2.3 percent from a year earlier.
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
Last Updated: June 27, 2008 04:47 EDT
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June 27 (Bloomberg) -- The pound stayed lower against the euro after a government report showed the U.K. economy grew less than previously estimated in the first quarter.
The U.K. currency fell 0.1 percent to 79.26 pence per euro by 9:44 a.m. in London, from 79.21 pence late yesterday. It was at $1.9900, from $1.9890.
Gross domestic product rose 0.3 percent in the three months through March, the least in three years, the Office for National Statistics said today. The result was lower than the 0.4 percent reported on May 23, which was the median forecast of 32 economists in a Bloomberg News survey. The economy expanded 2.3 percent from a year earlier.
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
Last Updated: June 27, 2008 04:47 EDT
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Vietnamese Dong Weakens 1.4% After Central Bank Widens Band
By Van Nguyen
June 27 (Bloomberg) -- The Vietnamese dong fell 1.4 percent after the central bank doubled the daily trading limit to 2 percent, responding to pressures to weaken the currency.
The dong declined to the lowest since at least 1993, taking losses this quarter to 4.4 percent, the most since the period ended September 1998. The widening in the currency's band reduced the risk among onshore investors about uncontrolled depreciation, said Richard Yetsenga at HSBC Holdings Plc.
The currency dropped to 16,843 against the dollar as of 11:35 a.m. local time, according to prices compiled by Bloomberg, from 16,615 yesterday. The State Bank of Vietnam set a weaker reference rate of 16,516, compared with 16,451 yesterday, according to its Web site.
``Unfortunately, turnover in the onshore market today is very low,'' said Yetsenga, a foreign-exchange strategist at HSBC in Hong Kong.
Vietnam's inflation rate accelerated to 26.8 percent in June from the same month a year earlier, the highest in 16 years, the General Statistics Office in Hanoi reported yesterday. The Southeast Asian nation's inflation has quickened for 17 months to the fastest in Asia.
The yield on Vietnam's benchmark five-year government bond was unchanged at 20 percent yesterday, according to a daily fixing price from 10 banks compiled by Bloomberg. Yields have more than doubled this quarter from 8.71 percent on March 31.
Vietnam's State Treasury will auction 300 billion dong ($17.8 million) of two-year bonds this afternoon, the Hanoi Securities Trading Center said in a statement.
To contact the reporter on this story: Van Nguyen in Hanoi at Vnguyen23@bloomberg.net
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June 27 (Bloomberg) -- The Vietnamese dong fell 1.4 percent after the central bank doubled the daily trading limit to 2 percent, responding to pressures to weaken the currency.
The dong declined to the lowest since at least 1993, taking losses this quarter to 4.4 percent, the most since the period ended September 1998. The widening in the currency's band reduced the risk among onshore investors about uncontrolled depreciation, said Richard Yetsenga at HSBC Holdings Plc.
The currency dropped to 16,843 against the dollar as of 11:35 a.m. local time, according to prices compiled by Bloomberg, from 16,615 yesterday. The State Bank of Vietnam set a weaker reference rate of 16,516, compared with 16,451 yesterday, according to its Web site.
``Unfortunately, turnover in the onshore market today is very low,'' said Yetsenga, a foreign-exchange strategist at HSBC in Hong Kong.
Vietnam's inflation rate accelerated to 26.8 percent in June from the same month a year earlier, the highest in 16 years, the General Statistics Office in Hanoi reported yesterday. The Southeast Asian nation's inflation has quickened for 17 months to the fastest in Asia.
The yield on Vietnam's benchmark five-year government bond was unchanged at 20 percent yesterday, according to a daily fixing price from 10 banks compiled by Bloomberg. Yields have more than doubled this quarter from 8.71 percent on March 31.
Vietnam's State Treasury will auction 300 billion dong ($17.8 million) of two-year bonds this afternoon, the Hanoi Securities Trading Center said in a statement.
To contact the reporter on this story: Van Nguyen in Hanoi at Vnguyen23@bloomberg.net
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Japanese Yen Rises as Stock-Market Losses Boost Risk Aversion
By Lukanyo Mnyanda
June 27 (Bloomberg) -- The yen rose against the euro and the dollar, erasing earlier losses, as a decline in stock markets around the world reduced demand for higher-yielding assets funded in Japan.
The Japanese currency also erased a weekly decline against the euro after European Central Bank council member Miguel Angel Fernandez Ordonez said an interest-rate increase next month ``is not certain'' and the Bloomberg purchasing managers index showed European retail sales plunged in June. The Swiss franc gained for a third day against the dollar.
``We're finally seeing some catch-up in terms of the rising risk aversion in other markets feeding into currencies,'' said Adam Cole, global head of currency strategy in London at Royal Bank of Canada, the nation's largest lender. ``That's leading to strengthening in the safe-haven currencies and the yen has been the main beneficiary so far.''
Japan's currency gained as much as 0.6 percent, its biggest advance since June 16, to 167.23 per euro and was at 167.51 as of 9:49 a.m. in London, from 168.30 yesterday in New York, when it touched a record low of 169.46. It traded at 106.26 against the dollar, from 106.81. The euro traded at $1.5764, from $1.5757 yesterday and $1.5606 a week ago. The dollar fell to 1.0190 Swiss franc, from 1.0238.
The MSCI World Index of stocks dropped for a second day, losing 0.5 percent, while Europe's Dow Jones Stoxx 600 Index sank 1.1 percent. The decline in Asian and European stocks came after the Dow Jones Industrial Average yesterday plunged more than 3 percent amid concern rising oil prices and credit-market writedowns will curb company profits.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Last Updated: June 27, 2008 04:54 EDT
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June 27 (Bloomberg) -- The yen rose against the euro and the dollar, erasing earlier losses, as a decline in stock markets around the world reduced demand for higher-yielding assets funded in Japan.
The Japanese currency also erased a weekly decline against the euro after European Central Bank council member Miguel Angel Fernandez Ordonez said an interest-rate increase next month ``is not certain'' and the Bloomberg purchasing managers index showed European retail sales plunged in June. The Swiss franc gained for a third day against the dollar.
``We're finally seeing some catch-up in terms of the rising risk aversion in other markets feeding into currencies,'' said Adam Cole, global head of currency strategy in London at Royal Bank of Canada, the nation's largest lender. ``That's leading to strengthening in the safe-haven currencies and the yen has been the main beneficiary so far.''
Japan's currency gained as much as 0.6 percent, its biggest advance since June 16, to 167.23 per euro and was at 167.51 as of 9:49 a.m. in London, from 168.30 yesterday in New York, when it touched a record low of 169.46. It traded at 106.26 against the dollar, from 106.81. The euro traded at $1.5764, from $1.5757 yesterday and $1.5606 a week ago. The dollar fell to 1.0190 Swiss franc, from 1.0238.
The MSCI World Index of stocks dropped for a second day, losing 0.5 percent, while Europe's Dow Jones Stoxx 600 Index sank 1.1 percent. The decline in Asian and European stocks came after the Dow Jones Industrial Average yesterday plunged more than 3 percent amid concern rising oil prices and credit-market writedowns will curb company profits.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Last Updated: June 27, 2008 04:54 EDT
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Oil Rises to Record Above $141 as Investors Buy Commodities
By Grant Smith
June 27 (Bloomberg) -- Crude oil rose to a record above $141 a barrel in New York and gold advanced as falling stock markets spurred investment in commodities.
Oil prices have gained almost 50 percent this year and gold 10 percent as recession concerns have pushed the MSCI World Index of global equity markets down 12 percent. Oil may rise further if the European Central Bank boosts interest rates on July 3, further weakening the U.S. dollar, traders said.
``It's a combination of equities underperforming and pricing in some further risk on what the ECB will do next week,'' said Oliver Jakob, managing director of Petromatrix GmbH in Zug, Switzerland. Trading volumes are so low that price movements are being exaggerated, he said.
Crude oil for August delivery rose as much as $2.07 a barrel, or 1.5 percent, to $141.71 in electronic trading on the New York Mercantile Exchange. It was at $141.47 at 9:53 a.m. London time.
Yesterday, the contract rose $5.09, or 3.8 percent, to $139.64 a barrel, a record settlement price, as Libya threatened to cut output and OPEC's president said prices may reach $170 by the summer.
Gold headed for a second weekly gain as the dollar weakened, boosting the appeal of the metal as a hedge against inflation and an alternative investment to the U.S. currency. Gold for immediate delivery rose $2.01, or 0.2 percent, to $919.31 an ounce as of 9:08 a.m. in London.
The MSCI World Index lost 0.5 percent to 1,396.9 at 8:33 a.m. in London as 8 of the 10 industry groups retreated.
European Central Bank President Jean-Claude Trichet reiterated in a June 25 speech that policy makers may increase the main refinancing rate by a quarter-percentage point next month to contain inflation.
The U.S. dollar was little changed at $1.5740 against the euro at 9:32 a.m. London time, and 0.5 percent weaker versus the Japanese currency at 106.36 per yen.
Brent crude oil rose as much $2.15, or 1.5 percent, to a record $141.98 on London's ICE Futures Europe exchange. The contract traded at $141.61 a barrel at 9:55 a.m.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
Last Updated: June 27, 2008 04:57 EDT
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June 27 (Bloomberg) -- Crude oil rose to a record above $141 a barrel in New York and gold advanced as falling stock markets spurred investment in commodities.
Oil prices have gained almost 50 percent this year and gold 10 percent as recession concerns have pushed the MSCI World Index of global equity markets down 12 percent. Oil may rise further if the European Central Bank boosts interest rates on July 3, further weakening the U.S. dollar, traders said.
``It's a combination of equities underperforming and pricing in some further risk on what the ECB will do next week,'' said Oliver Jakob, managing director of Petromatrix GmbH in Zug, Switzerland. Trading volumes are so low that price movements are being exaggerated, he said.
Crude oil for August delivery rose as much as $2.07 a barrel, or 1.5 percent, to $141.71 in electronic trading on the New York Mercantile Exchange. It was at $141.47 at 9:53 a.m. London time.
Yesterday, the contract rose $5.09, or 3.8 percent, to $139.64 a barrel, a record settlement price, as Libya threatened to cut output and OPEC's president said prices may reach $170 by the summer.
Gold headed for a second weekly gain as the dollar weakened, boosting the appeal of the metal as a hedge against inflation and an alternative investment to the U.S. currency. Gold for immediate delivery rose $2.01, or 0.2 percent, to $919.31 an ounce as of 9:08 a.m. in London.
The MSCI World Index lost 0.5 percent to 1,396.9 at 8:33 a.m. in London as 8 of the 10 industry groups retreated.
European Central Bank President Jean-Claude Trichet reiterated in a June 25 speech that policy makers may increase the main refinancing rate by a quarter-percentage point next month to contain inflation.
The U.S. dollar was little changed at $1.5740 against the euro at 9:32 a.m. London time, and 0.5 percent weaker versus the Japanese currency at 106.36 per yen.
Brent crude oil rose as much $2.15, or 1.5 percent, to a record $141.98 on London's ICE Futures Europe exchange. The contract traded at $141.61 a barrel at 9:55 a.m.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
Last Updated: June 27, 2008 04:57 EDT
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Zinc Resumes Weekly Slide on Concerns Supply May Outpace Demand
By Glenys Sim
June 27 (Bloomberg) -- Zinc headed for the fifth weekly decline in six weeks on concerns that supply may outpace demand as production increases amid high global inventories.
The International Lead and Zinc Study Group forecasts the metal used to galvanize steel will have a surplus of 215,000 metric tons this year as global output expands.
``Yesterday's short-covering rally wasn't sustainable as fundamentally zinc isn't looking too good, especially longer term because expectations are for China's output to increase much more,'' Li Rong, chief analyst at Great Wall Futures Co. in Shanghai, said today.
Zinc for delivery in three months on the London Metal Exchange fell as much as $47, or 2.4 percent, to $1,943 a metric ton, and traded at $1,950 at 10:10 a.m. Singapore time. Zinc has fallen 18 percent this year as global stockpiles rose.
Zinc inventories tracked by the London Metal Exchange stood at 149,700 tons yesterday. Stockpiles have more than doubled in the past year.
Zinc for delivery in September, the most-active contract, added 2.3 percent to 16,115 yuan ($2,348) a ton on the Shanghai Futures Exchange, at 10:15 a.m. local time.
China's switch from being a net exporter of zinc last year to a net importer this year ``has not prevented a large rise in London Metal Exchange inventories, in part because demand in ex- China has been relatively subdued'', Lehman Brothers Holdings Ltd. analyst Michael Widmer wrote in a report e-mailed June 24.
China Earthquake
``Zinc production was not significantly affected by the earthquake in Sichuan province,'' Widmer said. ``The zinc market has, in our view, the weakest fundamentals of all the base metals.''
Zinc output in China was 339,000 metric tons in May, up 4.2 percent from a year earlier, according to data issued by the country's statistics bureau. Output in the first five months of this year rose 4.1 percent to 1.55 million tons.
Among other LME-traded metals, copper fell 0.1 percent to $8,440 a ton, aluminum was little changed at $3,104, and lead rose 0.6 percent to $1,820. Nickel and tin had not traded as of 10:27 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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June 27 (Bloomberg) -- Zinc headed for the fifth weekly decline in six weeks on concerns that supply may outpace demand as production increases amid high global inventories.
The International Lead and Zinc Study Group forecasts the metal used to galvanize steel will have a surplus of 215,000 metric tons this year as global output expands.
``Yesterday's short-covering rally wasn't sustainable as fundamentally zinc isn't looking too good, especially longer term because expectations are for China's output to increase much more,'' Li Rong, chief analyst at Great Wall Futures Co. in Shanghai, said today.
Zinc for delivery in three months on the London Metal Exchange fell as much as $47, or 2.4 percent, to $1,943 a metric ton, and traded at $1,950 at 10:10 a.m. Singapore time. Zinc has fallen 18 percent this year as global stockpiles rose.
Zinc inventories tracked by the London Metal Exchange stood at 149,700 tons yesterday. Stockpiles have more than doubled in the past year.
Zinc for delivery in September, the most-active contract, added 2.3 percent to 16,115 yuan ($2,348) a ton on the Shanghai Futures Exchange, at 10:15 a.m. local time.
China's switch from being a net exporter of zinc last year to a net importer this year ``has not prevented a large rise in London Metal Exchange inventories, in part because demand in ex- China has been relatively subdued'', Lehman Brothers Holdings Ltd. analyst Michael Widmer wrote in a report e-mailed June 24.
China Earthquake
``Zinc production was not significantly affected by the earthquake in Sichuan province,'' Widmer said. ``The zinc market has, in our view, the weakest fundamentals of all the base metals.''
Zinc output in China was 339,000 metric tons in May, up 4.2 percent from a year earlier, according to data issued by the country's statistics bureau. Output in the first five months of this year rose 4.1 percent to 1.55 million tons.
Among other LME-traded metals, copper fell 0.1 percent to $8,440 a ton, aluminum was little changed at $3,104, and lead rose 0.6 percent to $1,820. Nickel and tin had not traded as of 10:27 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Gold Heads for Second Weekly Gain on Demand for Inflation Hedge
By Rachel Graham
June 27 (Bloomberg) -- Gold headed for a second weekly gain as crude oil rose to a record and the dollar weakened, boosting the appeal of the metal as a hedge against inflation and an alternative investment to the U.S. currency.
Crude traded at a record $141.71 a barrel today, adding to expectations inflation will quicken. The dollar has weakened against the euro for two weeks, extending losses after the U.S. Federal Reserve on June 25 gave no indication at its policy meeting that it would resume interest-rate increases.
``Inflation fears, dollar weakness, that's what has pushed gold higher,'' Peter Fertig, a consultant for Dresdner Kleinwort, said by phone from Hainburg in Germany.
Gold for immediate delivery rose $2.01, or 0.2 percent, to $919.31 an ounce as of 9:08 a.m. in London. Gold futures rose $6.40, or 0.7 percent, to $921.50 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
Among other metals for immediate delivery, silver rose 20.49 cents, or 1.2 percent, to $17.37 an ounce. Platinum added $12.50, or 0.6 percent, to $2,077.50 an ounce and palladium rose $3, or 0.6 percent, to $471.50 an ounce.
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
Last Updated: June 27, 2008 04:14 EDT
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June 27 (Bloomberg) -- Gold headed for a second weekly gain as crude oil rose to a record and the dollar weakened, boosting the appeal of the metal as a hedge against inflation and an alternative investment to the U.S. currency.
Crude traded at a record $141.71 a barrel today, adding to expectations inflation will quicken. The dollar has weakened against the euro for two weeks, extending losses after the U.S. Federal Reserve on June 25 gave no indication at its policy meeting that it would resume interest-rate increases.
``Inflation fears, dollar weakness, that's what has pushed gold higher,'' Peter Fertig, a consultant for Dresdner Kleinwort, said by phone from Hainburg in Germany.
Gold for immediate delivery rose $2.01, or 0.2 percent, to $919.31 an ounce as of 9:08 a.m. in London. Gold futures rose $6.40, or 0.7 percent, to $921.50 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
Among other metals for immediate delivery, silver rose 20.49 cents, or 1.2 percent, to $17.37 an ounce. Platinum added $12.50, or 0.6 percent, to $2,077.50 an ounce and palladium rose $3, or 0.6 percent, to $471.50 an ounce.
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
Last Updated: June 27, 2008 04:14 EDT
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Rate Hike in July Possible, But Not Certain, Says ECB's Ordóñez
European Economy | Written by CEP News | Jun 27 08 08:21 GMT |
(CEP News) Frankfurt - European Central Bank Governing Council member Miguel Ãngel Fernández Ordóñez reiterated to reporters in Rome, Italy on Friday that, while a rate increase in July was possible, it was not a certainty.
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(CEP News) Frankfurt - European Central Bank Governing Council member Miguel Ãngel Fernández Ordóñez reiterated to reporters in Rome, Italy on Friday that, while a rate increase in July was possible, it was not a certainty.
Ordóñez also emphasized that no signals were given regarding rate increases after the July 3 Council meeting.
"We said nothing beyond July. The only thing we said was referring to the next meeting," Ordóñez said. "We've said that crystal clear.''
By Todd Wailoo, twailoo@economicnews.ca
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Sell Deutsche Bank Calls on Capital `Pressure,' Citigroup Says
By Alexis Xydias
June 27 (Bloomberg) -- Investors in Deutsche Bank AG should create and sell call options on the shares because the stock is likely to dip in the next three months as pressure grows on the German bank to raise money, Citigroup Inc. analysts said.
In a report today, Citigroup London-based analysts Jeremy Sigee, Kiri Vijayarajah and Stuart MacDonnell, recommended selling Sept. 19 calls on Deutsche Bank with a strike price of 58 euros. The shares closed at 57.16 euros yesterday.
Calls give holders the right to buy a stock at a given price and date. Selling a call is a bet the stock won't rise enough by a specific date to make exercising the contract profitable.
Shares in Fortis, Belgium's biggest financial-services company, tumbled 19 percent yesterday after the company sold new shares worth 1.5 billion euros ($2.36 billion) as the earnings outlook deteriorates.
``Moves by Fortis to raise capital suggest growing pressure for over-leveraged banks to re-build capital ratios through equity issuance,'' the analysts wrote. ``We expect this to increase the prospects that regulators, rating agencies and investors intensify pressure on Deutsche Bank to raise capital.''
Citigroup has a ``sell'' recommendation on Deutsche Bank shares and a price estimate of 68 euros.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
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June 27 (Bloomberg) -- Investors in Deutsche Bank AG should create and sell call options on the shares because the stock is likely to dip in the next three months as pressure grows on the German bank to raise money, Citigroup Inc. analysts said.
In a report today, Citigroup London-based analysts Jeremy Sigee, Kiri Vijayarajah and Stuart MacDonnell, recommended selling Sept. 19 calls on Deutsche Bank with a strike price of 58 euros. The shares closed at 57.16 euros yesterday.
Calls give holders the right to buy a stock at a given price and date. Selling a call is a bet the stock won't rise enough by a specific date to make exercising the contract profitable.
Shares in Fortis, Belgium's biggest financial-services company, tumbled 19 percent yesterday after the company sold new shares worth 1.5 billion euros ($2.36 billion) as the earnings outlook deteriorates.
``Moves by Fortis to raise capital suggest growing pressure for over-leveraged banks to re-build capital ratios through equity issuance,'' the analysts wrote. ``We expect this to increase the prospects that regulators, rating agencies and investors intensify pressure on Deutsche Bank to raise capital.''
Citigroup has a ``sell'' recommendation on Deutsche Bank shares and a price estimate of 68 euros.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
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Stocks Decline in Europe and Asia; U.S. Index Futures Advance
By Adam Haigh
June 27 (Bloomberg) -- Stocks fell in Europe and Asia as oil climbed to a record, Carrefour SA cut its profit forecast and analysts said banks may need to raise more capital. U.S. index futures advanced.
Daimler AG and Ryanair Holdings Plc retreated after crude topped $141 a barrel yesterday. Carrefour declined as Europe's biggest retailer said operating profit will increase by less than previously forecast. Barclays Plc slipped after Citigroup Inc. said the bank may have to raise $18 billion. Nokia Oyj slumped as Credit Suisse Group AG downgraded shares of the world's largest mobile-phone maker.
``It could get worse before it gets better,'' Lucy MacDonald, London-based chief investment officer of global equities at RCM Ltd., said in a Bloomberg Television interview. ``There is more concern about growth generally, inflation and no help from interest rates. Weakness is going to be more widespread.''
The MSCI World Index lost 0.5 percent to 1,396.9 at 8:33 a.m. in London as eight of the 10 industry groups retreated. Futures on the Standard & Poor's 500 Index rose 0.2 percent.
Europe's Dow Jones Stoxx 600 Index sank 1.1 percent. The MSCI Asia Pacific Index decreased 1.9 percent, while China's CSI 300 Index tumbled 5.5 percent on speculation the central bank will boost borrowing costs.
U.S. stocks tumbled yesterday, sending the Dow Jones Industrial Average to its worst June since the Great Depression, as rising oil prices, credit-market writedowns and a slowing economy threatened to extend a yearlong profit slump.
Daimler, the world's second-largest maker of luxury cars, slipped 3 percent to 39.87 euros. Bayerische Motoren Werke AG dropped 2.8 percent to 29.69 euros.
Ryanair, Europe's biggest discount airline, slipped 5.2 percent to 2.67 euros.
Record Oil
Oil climbed as much as $2.07, or 1.5 percent, to $141.71, after jumping more than $5 yesterday.
Carrefour dropped 5.4 percent to 35.85 euros as it said operating profit will increase at about the same pace as sales this year, six weeks after saying earnings by that measure would exceed the pace of revenue growth.
Deutsche Bank downgraded the stock to ``hold'' from ``buy.'' Citigroup lowered its price estimate on the shares, while JPMorgan Chase & Co. removed the stock from its ``analyst focus list.''
Barclays slid 4.1 percent to 291.25 pence. Britain's fourth-biggest bank may need to raise a further 9 billion pounds ($18 billion), Citigroup wrote in a note to clients today. The brokerage cut its price estimate to 275 pence from 350 pence.
Deutsche Bank
Deutsche Bank lost 2.7 percent to 56.57 euros as Citigroup said Germany's biggest bank may face ``pressure to raise capital,'' according to a note to clients.
London-based analysts Jeremy Sigee, Kiri Vijayarajah and Stuart MacDonnell, recommended selling call options on the shares because the stock is likely to dip in the next three months as pressure grows on the bank to raise funds.
HBOS Plc dropped 3.5 percent to 266 pence. National Australia Bank Ltd., the nation's largest bank, might bid for the Australian unit of the U.K's biggest mortgage lender, said two people with knowledge of the matter. HBOS is currently seeking 4 billion pounds in a rights offering to replenish capital depleted by writedowns on assets related to the subprime-mortgage crisis and rising loan delinquencies.
Nokia slipped 2.5 percent to 15.71 euros after Credit Suisse cut its recommendation on shares to ``neutral'' from ``outperform'' and removed the stock from its ``focus list.'' The brokerage slashed its price estimate on the stock 38 percent to 18.5 euros.
Nestle SA declined 1.1 percent to 461.25 francs. Societe Generale SA cut its recommendation on shares of the world's largest foodmaker to ``sell'' from ``buy,'' saying the market has not priced in ``weak'' earnings-per-share growth.
InBev NV, the Belgian brewer trying to take over Anheuser- Busch Cos., lost 1.8 percent to 44.21 euros after the U.S. maker of Budweiser beer rejected its $46.3 billion takeover offer.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Last Updated: June 27, 2008 03:43 EDT
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June 27 (Bloomberg) -- Stocks fell in Europe and Asia as oil climbed to a record, Carrefour SA cut its profit forecast and analysts said banks may need to raise more capital. U.S. index futures advanced.
Daimler AG and Ryanair Holdings Plc retreated after crude topped $141 a barrel yesterday. Carrefour declined as Europe's biggest retailer said operating profit will increase by less than previously forecast. Barclays Plc slipped after Citigroup Inc. said the bank may have to raise $18 billion. Nokia Oyj slumped as Credit Suisse Group AG downgraded shares of the world's largest mobile-phone maker.
``It could get worse before it gets better,'' Lucy MacDonald, London-based chief investment officer of global equities at RCM Ltd., said in a Bloomberg Television interview. ``There is more concern about growth generally, inflation and no help from interest rates. Weakness is going to be more widespread.''
The MSCI World Index lost 0.5 percent to 1,396.9 at 8:33 a.m. in London as eight of the 10 industry groups retreated. Futures on the Standard & Poor's 500 Index rose 0.2 percent.
Europe's Dow Jones Stoxx 600 Index sank 1.1 percent. The MSCI Asia Pacific Index decreased 1.9 percent, while China's CSI 300 Index tumbled 5.5 percent on speculation the central bank will boost borrowing costs.
U.S. stocks tumbled yesterday, sending the Dow Jones Industrial Average to its worst June since the Great Depression, as rising oil prices, credit-market writedowns and a slowing economy threatened to extend a yearlong profit slump.
Daimler, the world's second-largest maker of luxury cars, slipped 3 percent to 39.87 euros. Bayerische Motoren Werke AG dropped 2.8 percent to 29.69 euros.
Ryanair, Europe's biggest discount airline, slipped 5.2 percent to 2.67 euros.
Record Oil
Oil climbed as much as $2.07, or 1.5 percent, to $141.71, after jumping more than $5 yesterday.
Carrefour dropped 5.4 percent to 35.85 euros as it said operating profit will increase at about the same pace as sales this year, six weeks after saying earnings by that measure would exceed the pace of revenue growth.
Deutsche Bank downgraded the stock to ``hold'' from ``buy.'' Citigroup lowered its price estimate on the shares, while JPMorgan Chase & Co. removed the stock from its ``analyst focus list.''
Barclays slid 4.1 percent to 291.25 pence. Britain's fourth-biggest bank may need to raise a further 9 billion pounds ($18 billion), Citigroup wrote in a note to clients today. The brokerage cut its price estimate to 275 pence from 350 pence.
Deutsche Bank
Deutsche Bank lost 2.7 percent to 56.57 euros as Citigroup said Germany's biggest bank may face ``pressure to raise capital,'' according to a note to clients.
London-based analysts Jeremy Sigee, Kiri Vijayarajah and Stuart MacDonnell, recommended selling call options on the shares because the stock is likely to dip in the next three months as pressure grows on the bank to raise funds.
HBOS Plc dropped 3.5 percent to 266 pence. National Australia Bank Ltd., the nation's largest bank, might bid for the Australian unit of the U.K's biggest mortgage lender, said two people with knowledge of the matter. HBOS is currently seeking 4 billion pounds in a rights offering to replenish capital depleted by writedowns on assets related to the subprime-mortgage crisis and rising loan delinquencies.
Nokia slipped 2.5 percent to 15.71 euros after Credit Suisse cut its recommendation on shares to ``neutral'' from ``outperform'' and removed the stock from its ``focus list.'' The brokerage slashed its price estimate on the stock 38 percent to 18.5 euros.
Nestle SA declined 1.1 percent to 461.25 francs. Societe Generale SA cut its recommendation on shares of the world's largest foodmaker to ``sell'' from ``buy,'' saying the market has not priced in ``weak'' earnings-per-share growth.
InBev NV, the Belgian brewer trying to take over Anheuser- Busch Cos., lost 1.8 percent to 44.21 euros after the U.S. maker of Budweiser beer rejected its $46.3 billion takeover offer.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Last Updated: June 27, 2008 03:43 EDT
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Philippine Rates Can Rise Further, Guinigundo Says
By Nipa Piboontanasawat and Clarissa Batino
June 27 (Bloomberg) -- The Philippine central bank has scope to raise interest rates further without endangering economic expansion, Deputy Governor Diwa Guinigundo said.
Bangko Sentral ng Pilipinas ``is prepared to undertake whatever is necessary to make sure inflation expectations can be anchored,'' Guinigundo said in an interview in Rome today. ``We don't expect an increase in interest rates to have a significant impact on economic growth.''
The Philippines this month raised its benchmark rate for the first time since October 2005 after record oil and rice costs pushed inflation to a nine-year high of 9.6 percent in May. The Southeast Asian nation may have to join neighbors Indonesia and Vietnam in increasing borrowing costs more than once this year as prices soar.
``With the continuing risk of rising prices, there might be a need to do another quarter-point increase,'' said Jonathan Ravelas, an economist at Banco de Oro Unibank in Manila. ``It has to be a measured response because raising too much could also hurt the economy.''
Price gains may accelerate to 10.3 percent this month from a year earlier, Ravelas estimates.
Inflation may peak in the third quarter before easing to an average of 7 percent to 9 percent this year, Guinigundo reiterated today. It may slow to 4 percent to 6 percent in 2009, he said.
``Inflation continues to be broadly anchored to the central bank's inflation forecast,'' Guinigundo said. The central bank is ``broadly'' comfortable with the current interest rate level, he added.
Typhoon Fengshen
Philippine policy makers next meet to review rates on July 17. Bangko Sentral increased the rate it pays banks for overnight deposits by 25 basis points to 5.25 percent on June 5.
Still, slowing growth may stay the central bank's hand, said Song Seng-Wun, an economist at CIMB-GK Securities Pte in Singapore. Weather disruptions may affect farm output and drag growth down to as low as 4.6 percent this year, Song said.
Typhoon Fengshen, which slammed into the central and southern Philippines last weekend, may have damaged at least 4.8 billion pesos ($107 million) worth of crops and fishery products and sugar output may fall, the agriculture department said this week.
``The Philippines appears to be posting more risks to growth'' said Song. ``Against that backdrop, it warrants a no- change in rates to give the economy some breathing space.''
The Philippine government expects economic growth of 5.7 percent to 6.5 percent this year, easing from 7.2 percent in 2007, which was the fastest annual pace in 31 years. The International Monetary Fund expects expansion in the $118 billion economy to slow to 5.2 percent in 2008.
To contact the reporter on this story: Nipa Piboontanasawat in Rome at npiboontanas@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
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June 27 (Bloomberg) -- The Philippine central bank has scope to raise interest rates further without endangering economic expansion, Deputy Governor Diwa Guinigundo said.
Bangko Sentral ng Pilipinas ``is prepared to undertake whatever is necessary to make sure inflation expectations can be anchored,'' Guinigundo said in an interview in Rome today. ``We don't expect an increase in interest rates to have a significant impact on economic growth.''
The Philippines this month raised its benchmark rate for the first time since October 2005 after record oil and rice costs pushed inflation to a nine-year high of 9.6 percent in May. The Southeast Asian nation may have to join neighbors Indonesia and Vietnam in increasing borrowing costs more than once this year as prices soar.
``With the continuing risk of rising prices, there might be a need to do another quarter-point increase,'' said Jonathan Ravelas, an economist at Banco de Oro Unibank in Manila. ``It has to be a measured response because raising too much could also hurt the economy.''
Price gains may accelerate to 10.3 percent this month from a year earlier, Ravelas estimates.
Inflation may peak in the third quarter before easing to an average of 7 percent to 9 percent this year, Guinigundo reiterated today. It may slow to 4 percent to 6 percent in 2009, he said.
``Inflation continues to be broadly anchored to the central bank's inflation forecast,'' Guinigundo said. The central bank is ``broadly'' comfortable with the current interest rate level, he added.
Typhoon Fengshen
Philippine policy makers next meet to review rates on July 17. Bangko Sentral increased the rate it pays banks for overnight deposits by 25 basis points to 5.25 percent on June 5.
Still, slowing growth may stay the central bank's hand, said Song Seng-Wun, an economist at CIMB-GK Securities Pte in Singapore. Weather disruptions may affect farm output and drag growth down to as low as 4.6 percent this year, Song said.
Typhoon Fengshen, which slammed into the central and southern Philippines last weekend, may have damaged at least 4.8 billion pesos ($107 million) worth of crops and fishery products and sugar output may fall, the agriculture department said this week.
``The Philippines appears to be posting more risks to growth'' said Song. ``Against that backdrop, it warrants a no- change in rates to give the economy some breathing space.''
The Philippine government expects economic growth of 5.7 percent to 6.5 percent this year, easing from 7.2 percent in 2007, which was the fastest annual pace in 31 years. The International Monetary Fund expects expansion in the $118 billion economy to slow to 5.2 percent in 2008.
To contact the reporter on this story: Nipa Piboontanasawat in Rome at npiboontanas@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
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Fed Reviews Bank Investment Rules to Channel Capital to Lenders
By Craig Torres
June 27 (Bloomberg) -- Federal Reserve officials are reviewing regulations that limit investment firms' stakes in banks, aiming to channel more capital into the U.S. banking system.
``We are looking at ways we can make those things more workable and gain from the experience we have had over the past few years,'' said Fed spokesman David Skidmore, citing a statement by the central bank's general counsel, Scott Alvarez.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson have urged lenders to raise capital to compensate for almost $400 billion in writedowns and credit losses from the collapse of the subprime-mortgage market. Concern about rising loan losses has sent the Standard & Poor's 500 Banks Index into a 21 percent dive this month, putting it on course for its worst monthly return in almost a decade.
``The biggest ingredient that is missing in the banking system is capital,'' said David Kotok, chairman and chief investment officer of Cumberland Advisors Inc., a Vineland, New Jersey firm that manages $1 billion. ``The more they liberalize, the more they attract'' capital, he said.
Currently, Fed guidelines limit funds to a 9.9 percent voting stake in banks, and funds or individuals have to commit to the Fed that they will remain passive investors if they go above that level, up to a cap of 24.9 percent. If they don't make that commitment, they then would have to form a bank holding company.
Seeking Clarity
More than 100 mortgage companies have been forced to close, halt operations or sell themselves since the beginning of last year. Among larger firms, Citigroup Inc. and Merrill Lynch & Co. had their second-quarter earnings estimates cut by analysts at Goldman Sachs Group Inc. yesterday, spurring declines in their shares.
Fed officials are reviewing the history of their legal interpretations and responses to investors to see if they can summarize their views into a clear set of guidelines. Regional lenders would benefit most from any change, said Kotok.
The central bank ``is taking a look at these rules with an eye toward whether there are any provisions that can be modernized,'' said Mark Tenhundfeld, senior vice president of regulatory policy at the American Bankers Association in Washington. ``We would certainly favor the Fed looking at its control regulations to see if there are any barriers to investment.''
Carlyle Meeting
Fed officials have met with Washington-based buyout fund Carlyle Group, said Ellen Gonda, a spokeswoman for the firm. ``There is an ongoing dialogue,'' she said. ``It's not unusual for regulators to seek private-sector input on policy.''
Central bankers have also spoken with J.C. Flowers & Co., Kohlberg Kravis Roberts & Co. and Warburg Pincus, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter. KKR spokeswoman Ruth Pachman declined to comment.
Lifting the legal cap on non-banks' purchases of bank shares ``would be a very major step,'' Fed Vice Chairman Donald Kohn said in answer to questions at a June 5 Senate Banking Committee hearing. ``It would be a huge change from where we are today and I'm not sure it's necessary in order to get capital.''
Defaults and delinquencies on mortgage loans and related credit products have hit the financial system with $400 billion of losses and writedowns since the start of last year and resulted in tighter credit conditions for consumers. Financial institutions have raised more than $321 billion of capital over the same period, including through sales of stock and stakes to sovereign wealth funds.
`Important Role'
``In the last few recapitalizations where balance sheets have been strengthened for financial institutions, private equity has played an important role,'' Treasury Undersecretary Robert Steel said in an April interview. Changes to the current limits on bank capital purchases is ``certainly something worth considering and looking at,'' he said.
Fifth Third Bancorp, Ohio's second-biggest bank, said June 18 most of its quarterly profit will evaporate after already posting nine consecutive declines.
Cleveland-based KeyCorp doubled its forecast last month for charges on debts unlikely to be repaid to as much as 1.3 percent. The bank, whose profit fell 38 percent in the first quarter, cited its effort to reduce vulnerability to homebuilders and ``elevated'' net charge-offs for education and home loans.
``At the very least the rules need to be simplified and probably can be liberalized,'' said Bill Isaac, chairman of the Federal Deposit Insurance Corp. between 1981 and 1985, and now head of the Secura Group LLC, a financial consulting firm in Vienna, Virginia.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
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China's Industrial-Profit Growth Halves on Fuel Costs
By Li Yanping
June 27 (Bloomberg) -- Chinese industrial companies' profits grew at half the pace of a year earlier on record oil and coal prices, increasing the likelihood that economic growth will continue to slow.
Combined net income rose 20.9 percent to 1.09 trillion yuan ($160 billion) through May, the statistics bureau said today. That was less than the 42.1 percent gain in the first five months of last year.
China Petroleum & Chemical Corp., Asia's largest refiner, reported a record first-quarter profit drop and today's figures show a loss for oil refiners and processors of coking coal. Slower profit gains may cool investment, one of the main drivers of the world's fastest-growing major economy, as weakening global growth also dims the outlook for exports.
``Profits will be squeezed by higher raw-material and fuel costs throughout this year,'' said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. He forecasts economic growth will slow to 10.3 percent this year from 11.9 percent in 2007.
The CSI 300 Index of stocks has tumbled 47 percent this year on concern that weaker export demand and measures to tame inflation will also cut profits. It fell 4.7 percent as of 11:30 a.m. in Shanghai.
Oil refiners and the coking industry had a loss of 44.3 billion yuan over the five months, compared with a profit of 35.2 billion yuan a year earlier, the statistics bureau said. Power generators' profits fell 74 percent.
Fuel Prices Rise
Industrial companies' sales rose 29.3 percent to 18.4 trillion yuan through May from a year earlier. That's more than Italy's economic output for a year.
China last week raised state-controlled fuel and electricity prices, easing the burden on refiners and power generators. Thermal coal at Australia's Newcastle port, a benchmark for Asia, rose last week to a record for the fourth week.
The government has handed billions of dollars in subsidies to refiners, with China Petroleum & Chemical Corp., or Sinopec, getting $1 billion for April alone, according to a company official. Its shares were down 6.9 percent in Shanghai today after crude oil reached a record yesterday.
China's economy expanded 10.6 percent in the first quarter as export growth cooled and blizzards disrupted production by businesses such as Aluminum Corp. of China Ltd., the nation's largest producer of the metal. Chalco, as the company is known, says first-half profit will more than halve.
Snowstorms, Wages
Industrial profits rose 16.5 percent in the first two months from a year earlier.
Faster growth for the five months through May partly reflected the recovery after the snowstorms, said Shen Minggao, an economist at Citigroup Inc. in Beijing. Raw-material and wage costs ``will be a greater drag on profits in the second half,'' he said.
Coal-extraction industry profits climbed 98 percent. For oil and gas extraction, the gain was 54 percent. Iron and steel industry profits rose 26 percent.
China's demand for coal is increasing more quickly than its ability to produce it, ``resulting in a tight coal market and constantly rising prices,'' Macquarie Group Ltd. analysts led by Jim Lennon said in a report on June 23. Eight cities in central Henan province are having blackouts to limit power use because of coal shortages, the state-run Xinhua News Agency said today.
Earthquake Reconstruction
Reconstruction work after the May 12 earthquake that devastated parts of Sichuan province will increase demand for cement, steel, copper, aluminum and other materials, according to the central bank.
``Energy and raw-material prices have risen too fast and inflation pressures are continuing to build,'' it said in a report released this week.
Baosteel Group Corp., China's largest steelmaker, has agreed to a record price increase for iron ore and will pay at least 80 percent more for the steelmaking ingredient, Australia's Rio Tinto Group said this week.
Producer-price inflation accelerated to 8.2 percent last month, the fastest pace in more than three years, even as consumer-price inflation eased to 7.7 percent. The average urban wage was up 18.3 percent in the first quarter from a year earlier.
To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net;
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June 27 (Bloomberg) -- Chinese industrial companies' profits grew at half the pace of a year earlier on record oil and coal prices, increasing the likelihood that economic growth will continue to slow.
Combined net income rose 20.9 percent to 1.09 trillion yuan ($160 billion) through May, the statistics bureau said today. That was less than the 42.1 percent gain in the first five months of last year.
China Petroleum & Chemical Corp., Asia's largest refiner, reported a record first-quarter profit drop and today's figures show a loss for oil refiners and processors of coking coal. Slower profit gains may cool investment, one of the main drivers of the world's fastest-growing major economy, as weakening global growth also dims the outlook for exports.
``Profits will be squeezed by higher raw-material and fuel costs throughout this year,'' said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. He forecasts economic growth will slow to 10.3 percent this year from 11.9 percent in 2007.
The CSI 300 Index of stocks has tumbled 47 percent this year on concern that weaker export demand and measures to tame inflation will also cut profits. It fell 4.7 percent as of 11:30 a.m. in Shanghai.
Oil refiners and the coking industry had a loss of 44.3 billion yuan over the five months, compared with a profit of 35.2 billion yuan a year earlier, the statistics bureau said. Power generators' profits fell 74 percent.
Fuel Prices Rise
Industrial companies' sales rose 29.3 percent to 18.4 trillion yuan through May from a year earlier. That's more than Italy's economic output for a year.
China last week raised state-controlled fuel and electricity prices, easing the burden on refiners and power generators. Thermal coal at Australia's Newcastle port, a benchmark for Asia, rose last week to a record for the fourth week.
The government has handed billions of dollars in subsidies to refiners, with China Petroleum & Chemical Corp., or Sinopec, getting $1 billion for April alone, according to a company official. Its shares were down 6.9 percent in Shanghai today after crude oil reached a record yesterday.
China's economy expanded 10.6 percent in the first quarter as export growth cooled and blizzards disrupted production by businesses such as Aluminum Corp. of China Ltd., the nation's largest producer of the metal. Chalco, as the company is known, says first-half profit will more than halve.
Snowstorms, Wages
Industrial profits rose 16.5 percent in the first two months from a year earlier.
Faster growth for the five months through May partly reflected the recovery after the snowstorms, said Shen Minggao, an economist at Citigroup Inc. in Beijing. Raw-material and wage costs ``will be a greater drag on profits in the second half,'' he said.
Coal-extraction industry profits climbed 98 percent. For oil and gas extraction, the gain was 54 percent. Iron and steel industry profits rose 26 percent.
China's demand for coal is increasing more quickly than its ability to produce it, ``resulting in a tight coal market and constantly rising prices,'' Macquarie Group Ltd. analysts led by Jim Lennon said in a report on June 23. Eight cities in central Henan province are having blackouts to limit power use because of coal shortages, the state-run Xinhua News Agency said today.
Earthquake Reconstruction
Reconstruction work after the May 12 earthquake that devastated parts of Sichuan province will increase demand for cement, steel, copper, aluminum and other materials, according to the central bank.
``Energy and raw-material prices have risen too fast and inflation pressures are continuing to build,'' it said in a report released this week.
Baosteel Group Corp., China's largest steelmaker, has agreed to a record price increase for iron ore and will pay at least 80 percent more for the steelmaking ingredient, Australia's Rio Tinto Group said this week.
Producer-price inflation accelerated to 8.2 percent last month, the fastest pace in more than three years, even as consumer-price inflation eased to 7.7 percent. The average urban wage was up 18.3 percent in the first quarter from a year earlier.
To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net;
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U.S. Consumer Spending Probably Rose in May, Spurred by Rebates
By Shobhana Chandra
June 27 (Bloomberg) -- Consumer spending probably rose in May by the most in six months as tax rebates enabled households to overcome soaring fuel bills, economists said before a report today.
The 0.7 percent increase followed a 0.2 percent rise in April, according to the median forecast of 72 economists surveyed by Bloomberg News. Another report may show consumer sentiment this month plunged to the lowest level since 1980.
After filling up their autos' gas tanks, Americans used the stimulus checks to buy electronics, clothes and furniture last month, helping to keep the economy expanding. At the same time, the slump in confidence, a loss of jobs and tighter credit raise the risk that growth will falter once the rebates' effect fades.
``Consumer spending will suffer around the turn of the year as the influence of fiscal stimulus disappears,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut. The economy ``may not accelerate much until early 2009.''
The Commerce Department's report is due at 8:30 a.m. in Washington. Estimates of the spending gain in the Bloomberg survey ranged from 0.1 percent to 1 percent. Incomes likely rose 0.4 percent in May after a 0.2 percent increase the prior month.
A report due at 10 a.m. from Reuters/University of Michigan may show the index of consumer sentiment fell to 56.7 in June, the weakest level since 1980, according to the survey median. The forecast matches a preliminary estimate issued on June 13 and would follow a reading of 59.8 in May.
Prices Rise
The spending report may also show that inflation accelerated. The Federal Reserve's preferred price gauge, known as the core measure because it excludes food and fuel, probably rose 0.2 percent last month after a 0.1 percent April gain, the median forecast showed.
Core prices in the 12 months ended in May probably climbed 2.2 percent, the biggest year-over-year increase since December.
Fed policy makers this week kept the benchmark rate unchanged at 2 percent, ending a series of rate cuts, and said higher energy costs threatened to boost inflation. Still, they maintained a forecast that prices would ``moderate'' later this year, according to their statement.
Policy makers also said that ``although downside risks to growth remain, they appear to have diminished somewhat,'' partly as a result of ``some firming in household spending.''
A Commerce report earlier this month showed retail sales rose more than twice as much as forecast in May. Private surveys indicate the spending splurge continued this month as discounters, including Wal-Mart Stores Inc. and Costco Wholesale Corp., offered rebate-linked promotions.
Rebate Total
About $70.8 billion worth of tax rebate checks were distributed through June 20, according to the Treasury Department.
There are signs the boost will not last. American Express Co. Chief Executive Officer Kenneth Chenault said this week that credit indicators have deteriorated beyond the company's expectations.
The rebates aren't large enough to benefit manufacturers like Brunswick Corp., the maker of Sea Ray yachts and Boston Whaler fishing boats. The Lake Forest, Illinois-based company said yesterday it plans to close four more North American plants and may fire as much as 10 percent of its workforce after U.S. powerboat sales fell to the lowest in more than 40 years.
Conditions in the energy, housing and labor markets ``continue to erode U.S. consumers' confidence and are reducing their ability and desire to purchase discretionary items,'' Chief Executive Officer Dustan McCoy said in a statement.
Record gasoline prices are also causing Americans to scale back travel plans. The number of travelers over the U.S. Fourth of July holiday will decline for the first time this decade, motoring group AAA said yesterday.
Bloomberg Survey
================================================================
Pers Pers Core PCE U of Mich
Inc Spend Prices Conf.
MOM% MOM% MOM% Index
================================================================
Date of Release 06/27 06/27 06/27 06/27
Observation Period May May May June F
----------------------------------------------------------------
Median 0.4% 0.7% 0.2% 56.7
Average 0.7% 0.6% 0.2% 56.8
High Forecast 2.0% 1.0% 0.5% 60.0
Low Forecast 0.2% 0.1% 0.1% 55.9
Number of Participants 70 72 53 55
Previous 0.2% 0.2% 0.1% 56.7
----------------------------------------------------------------
4CAST Ltd. 1.9% 0.7% 0.5% 57.0
Action Economics 2.0% 0.7% 0.2% ---
Aletti Gestielle SGR 0.4% 0.7% 0.2% 56.8
Argus Research Corp. 0.7% 0.6% --- 58.0
Banc of America Securitie 0.5% 0.8% 0.2% ---
Bank of Tokyo- Mitsubishi 2.0% 0.5% 0.2% ---
Bantleon Bank AG 0.6% 0.7% 0.2% 57.0
Barclays Capital 1.9% 0.6% 0.2% 56.5
BBVA 0.5% 0.2% --- ---
BMO Capital Markets 0.3% 1.0% 0.2% 56.0
BNP Paribas 0.2% 0.8% --- 55.9
Briefing.com 0.4% 0.7% 0.2% ---
Calyon 0.4% 0.6% 0.2% 57.0
CFC Group 0.7% 0.2% --- 57.1
CIBC World Markets 0.4% 0.9% --- 60.0
Citi 0.4% 0.9% --- 56.0
ClearView Economics 0.3% 0.7% 0.2% ---
Commerzbank AG 0.3% 0.6% 0.1% 56.0
Credit Suisse 1.5% 0.6% 0.2% 56.5
Daiwa Securities America 0.2% 0.5% 0.2% 56.7
DekaBank 0.5% 0.7% --- 56.5
Desjardins Group 0.3% 0.5% 0.2% 56.7
Deutsche Bank Securities 0.2% 0.1% 0.2% 56.3
Deutsche Postbank AG --- 0.6% --- 56.5
Dresdner Kleinwort 0.8% 0.2% --- 56.7
DZ Bank 0.2% 0.3% 0.2% 56.7
First Trust Advisors 0.4% 0.8% --- 57.0
FTN Financial 0.2% 0.2% 0.2% 56.5
Global Insight Inc. 1.7% 0.8% 0.2% 56.7
Goldman, Sachs & Co. 0.4% 0.8% 0.2% ---
H&R Block Financial Advis 0.5% 0.5% 0.2% 56.0
Helaba 0.4% 0.7% 0.2% 56.7
High Frequency Economics 0.3% 0.8% 0.2% 56.8
Horizon Investments 0.3% 0.6% --- 56.6
HSBC Markets 0.2% 0.7% 0.2% 58.0
IDEAglobal 0.5% 0.7% 0.2% ---
Informa Global Markets 0.5% 0.8% 0.4% 56.5
ING Financial Markets 0.4% 0.6% 0.2% 57.0
Insight Economics 0.3% 0.5% 0.2% 56.0
Intesa-SanPaulo 1.5% 0.7% 0.2% 57.0
J.P. Morgan Asset Managem --- --- 0.2% ---
J.P. Morgan Chase 0.9% 0.5% 0.2% 56.0
Janney Montgomery Scott L 0.2% 0.7% 0.2% ---
JPMorgan Private Client 1.5% 0.7% 0.2% 58.0
Landesbank Berlin 2.0% 0.8% --- 56.7
Landesbank BW 0.3% 0.5% --- 56.8
Lehman Brothers 1.9% 0.7% 0.2% 56.5
Maria Fiorini Ramirez Inc 1.7% 0.6% 0.2% ---
Merk Investments 0.2% 0.6% 0.2% 56.0
Merrill Lynch 0.3% 0.7% --- ---
Moody's Economy.com 1.6% 0.6% 0.2% 57.0
Morgan Keegan & Co. 0.5% 0.6% --- ---
Morgan Stanley & Co. 0.3% 0.4% 0.2% ---
National Bank Financial --- --- --- 56.5
National City Corporation 2.0% 0.6% --- 57.5
Newedge 0.3% 0.5% 0.2% ---
Nomura Securities Intl. 0.9% 0.7% 0.2% ---
Nord/LB 0.3% 0.6% 0.2% 57.0
PNC Bank 0.2% 0.8% 0.2% ---
RBS Greenwich Capital 1.9% 0.7% 0.2% 56.7
Ried, Thunberg & Co. --- --- --- 57.5
Schneider Trading Associa 0.4% 0.6% 0.2% 57.4
Scotia Capital 0.2% 0.8% --- ---
Stone & McCarthy Research 0.4% 0.8% --- 57.8
TD Securities 0.5% 0.9% 0.2% 56.7
Thomson Financial/IFR 0.9% 0.7% 0.2% 56.0
Tullett Prebon 0.4% 0.6% --- 56.8
UBS Securities LLC 0.9% 0.5% 0.1% 56.0
Unicredit MIB 0.3% 0.4% 0.1% 57.0
University of Maryland 0.2% 0.3% 0.2% 57.0
Wachovia Corp. 0.4% 0.7% 0.2% ---
Wells Fargo & Co. 0.4% 0.7% --- ---
WestLB AG 0.4% 0.6% 0.2% 56.7
Westpac Banking Co. 0.3% 0.8% 0.2% 57.0
Wrightson Associates --- 0.5% 0.2% 57.5
================================================================
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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European June Retail Sales Slump, Confidence Slips, PMI Shows
By Fergal O'Brien
June 27 (Bloomberg) -- European retail sales plunged in June as soaring fuel and food prices hit consumers' budgets, prompting stores to cut jobs and lose confidence about their prospects, the Bloomberg purchasing managers index showed.
The measure of sales activity in the euro region declined to 44 from 53.1 in May. A reading below 50 indicates contraction. The index, which is based on a survey of more than 1,000 executives compiled for Bloomberg News by Markit Economics, is at the second-lowest level since its introduction in January 2004. Sales also fell from a year earlier.
Higher bills and the fastest inflation in 16 years are eating into household income and sapping consumer confidence. Gruppo Coin SpA, Italy's largest department-store chain, said this month that first-quarter profit fell 61 percent after consumer demand weakened.
``In the near term, what we're seeing is rising food and energy prices and that's really hitting household purchasing power,'' Nick Kounis, an economist at Fortis Bank in Amsterdam. ``It's having an impact on confidence and the evidence we have in the second quarter suggests growth was very weak.''
Sales fell across Germany, France and Italy -- the largest economies in the euro zone -- led by Italy, where retail spending dropped at the fastest rate in the survey's history. A measure of employment fell to 48.6 in June from 49.9 in May, the report showed, staying below 50 for a third month.
Consumer confidence in France fell to a record low in June, according to figures published yesterday. Sentiment has also declined in Germany and Italy, separate data this week showed.
Higher Prices
Crude-oil prices have doubled in the last 12 months and touched a record above $140 a barrel today. Euro-area food-price inflation accelerated to 6.4 percent last month on higher prices for milk, cheese, bread and fruit.
``We are seeing a continuing decline in consumer confidence and we anticipate further difficult trading conditions ahead,'' Jean-Noel Labroue, chief executive officer of Kesa Electricals Plc, said on June 24. Kesa has electronics stores in France and Italy.
At the same time, the credit-market turmoil and cooling economic growth are threatening employment, which may further undermine consumer sentiment and spending. UniCredit SpA, Italy's biggest bank, yesterday said it plans to cut 9,000 jobs, or 5 percent of its workforce.
Some retailers appear to be coping with the downturn. Hornbach Holding AG, the German operator of home-improvement stores in nine countries, said first-quarter sales rose 6.1 percent, helped by growth outside Germany. It sees sales rising by a ``medium single-digit'' percentage this year.
`Extremely Confident'
PPR SA, owner of the Gucci luxury-goods brand, earlier this month said it's ``extremely confident'' about its performance this year.
``Wage growth is accelerating and employment growth holding up, but rising prices are undoing that stimulus,'' Kounis said. ``If commodity prices do stabilize, then the outlook for spending would improve.''
Still, today's report showed that retailers' gross margins declined at the second-fastest rate in the survey's history as purchasing prices rose ``rapidly'' and sales missed targets, Markit Economics said.
German retailers expect to miss their targets again in July, while Italian and French retailers became less confident about meeting their goals, according to Markit Economics. Inditex SA, Europe's largest clothes retailer, reported its smallest profit gain in four years this month after sales growth slowed at the Zara chain.
For the Bloomberg retail indicator, Markit Economics recruited a panel of companies in Germany, France and Italy, which together make up around 80 percent of total euro-area retail sales by value. The panel includes large chain retailers as well as smaller stores.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
June 27 (Bloomberg) -- European retail sales plunged in June as soaring fuel and food prices hit consumers' budgets, prompting stores to cut jobs and lose confidence about their prospects, the Bloomberg purchasing managers index showed.
The measure of sales activity in the euro region declined to 44 from 53.1 in May. A reading below 50 indicates contraction. The index, which is based on a survey of more than 1,000 executives compiled for Bloomberg News by Markit Economics, is at the second-lowest level since its introduction in January 2004. Sales also fell from a year earlier.
Higher bills and the fastest inflation in 16 years are eating into household income and sapping consumer confidence. Gruppo Coin SpA, Italy's largest department-store chain, said this month that first-quarter profit fell 61 percent after consumer demand weakened.
``In the near term, what we're seeing is rising food and energy prices and that's really hitting household purchasing power,'' Nick Kounis, an economist at Fortis Bank in Amsterdam. ``It's having an impact on confidence and the evidence we have in the second quarter suggests growth was very weak.''
Sales fell across Germany, France and Italy -- the largest economies in the euro zone -- led by Italy, where retail spending dropped at the fastest rate in the survey's history. A measure of employment fell to 48.6 in June from 49.9 in May, the report showed, staying below 50 for a third month.
Consumer confidence in France fell to a record low in June, according to figures published yesterday. Sentiment has also declined in Germany and Italy, separate data this week showed.
Higher Prices
Crude-oil prices have doubled in the last 12 months and touched a record above $140 a barrel today. Euro-area food-price inflation accelerated to 6.4 percent last month on higher prices for milk, cheese, bread and fruit.
``We are seeing a continuing decline in consumer confidence and we anticipate further difficult trading conditions ahead,'' Jean-Noel Labroue, chief executive officer of Kesa Electricals Plc, said on June 24. Kesa has electronics stores in France and Italy.
At the same time, the credit-market turmoil and cooling economic growth are threatening employment, which may further undermine consumer sentiment and spending. UniCredit SpA, Italy's biggest bank, yesterday said it plans to cut 9,000 jobs, or 5 percent of its workforce.
Some retailers appear to be coping with the downturn. Hornbach Holding AG, the German operator of home-improvement stores in nine countries, said first-quarter sales rose 6.1 percent, helped by growth outside Germany. It sees sales rising by a ``medium single-digit'' percentage this year.
`Extremely Confident'
PPR SA, owner of the Gucci luxury-goods brand, earlier this month said it's ``extremely confident'' about its performance this year.
``Wage growth is accelerating and employment growth holding up, but rising prices are undoing that stimulus,'' Kounis said. ``If commodity prices do stabilize, then the outlook for spending would improve.''
Still, today's report showed that retailers' gross margins declined at the second-fastest rate in the survey's history as purchasing prices rose ``rapidly'' and sales missed targets, Markit Economics said.
German retailers expect to miss their targets again in July, while Italian and French retailers became less confident about meeting their goals, according to Markit Economics. Inditex SA, Europe's largest clothes retailer, reported its smallest profit gain in four years this month after sales growth slowed at the Zara chain.
For the Bloomberg retail indicator, Markit Economics recruited a panel of companies in Germany, France and Italy, which together make up around 80 percent of total euro-area retail sales by value. The panel includes large chain retailers as well as smaller stores.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
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U.K. Wage Bargainers Clinch Bigger Pay Increases, Survey Shows
By Jennifer Ryan
June 27 (Bloomberg) -- U.K. wage negotiators won bigger pay increases in the three months through May compared with a year earlier to compensate for a higher cost of living, a survey by Industrial Relations Services showed.
Pay bargainers agreed to increases of a median 3.3 percent, up from 3.2 percent in the three months through April and 3 percent in the same period a year earlier, the London-based researcher said in a statement today. The result is based on 188 wage deals affecting 707,606 employees.
Bank of England policy makers told lawmakers yesterday that they are watching pay settlements to gauge whether faster inflation is getting squeezed out of the economy as growth slows. The consumer price index climbed to 3.3 percent in May, the highest since at least 1997. Retail price inflation, used in wage deals, reached 4.4 percent, the most since November.
``While employees continue to look for pay deals to match RPI inflation, employers are finding their ability to pay constrained,'' Sheila Attwood, editor of IRS Pay and Benefits, said in the statement.
Central bank policy makers said yesterday in Parliament that they're focused on bringing consumer-price inflation back to the 2 percent target after it quickened on higher food and energy costs.
``What matters to the economy is what settlements are made for pay and prices,'' Bank of England Deputy Governor John Gieve said yesterday. ``When workers are worried about employment prospects they press less hard for pay increases if they think that will put their employers in more difficulties.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
Read more...
June 27 (Bloomberg) -- U.K. wage negotiators won bigger pay increases in the three months through May compared with a year earlier to compensate for a higher cost of living, a survey by Industrial Relations Services showed.
Pay bargainers agreed to increases of a median 3.3 percent, up from 3.2 percent in the three months through April and 3 percent in the same period a year earlier, the London-based researcher said in a statement today. The result is based on 188 wage deals affecting 707,606 employees.
Bank of England policy makers told lawmakers yesterday that they are watching pay settlements to gauge whether faster inflation is getting squeezed out of the economy as growth slows. The consumer price index climbed to 3.3 percent in May, the highest since at least 1997. Retail price inflation, used in wage deals, reached 4.4 percent, the most since November.
``While employees continue to look for pay deals to match RPI inflation, employers are finding their ability to pay constrained,'' Sheila Attwood, editor of IRS Pay and Benefits, said in the statement.
Central bank policy makers said yesterday in Parliament that they're focused on bringing consumer-price inflation back to the 2 percent target after it quickened on higher food and energy costs.
``What matters to the economy is what settlements are made for pay and prices,'' Bank of England Deputy Governor John Gieve said yesterday. ``When workers are worried about employment prospects they press less hard for pay increases if they think that will put their employers in more difficulties.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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India Inflation Accelerates to 13-Year High of 11.42%
By Kartik Goyal
June 27 (Bloomberg) -- India's inflation accelerated more than estimated to the fastest pace in 13 years, suggesting the central bank may add to this month's two interest rate increases.
Wholesale prices rose 11.42 percent in the week to June 14, after gaining 11.05 percent in the previous week, the government said in a statement in New Delhi today. Economists surveyed by Bloomberg News predicted an 11.22 percent increase.
The Reserve Bank of India this week increased its key rate to a six-year high of 8.5 percent, joining central banks across Asia in raising borrowing costs as soaring fuel and commodity prices stoke inflation. Governor Yaga Venugopal Reddy may lift the Indian benchmark by a further 100 basis points before the end of the year, according to HSBC Holdings Plc.
``Policy authorities are clearly becoming more and more concerned about the inflationary situation,'' said Robert Prior- Wandesforde, an economist at HSBC in Singapore. ``We expect inflation to remain in double-digits for about nine months.''
Reddy on June 24 raised the repurchase rate by 0.5 percentage point and lifted the cash reserve ratio to 8.75 percent from 8.25 percent, to prevent money in the banking system from fanning inflation. The move followed a quarter-point increase in the benchmark interest rate to 8 percent on June 11.
Money supply in India's banking system grew 21.4 percent from a year earlier to 41 trillion rupees ($953.5 billion) in the week ended June 6, more than the Reserve Bank's target of 16.5 percent to 17 percent for the fiscal year ending March.
Taiwan, Indonesia
The Bombay Stock Exchange's Sensitive Index has declined 31 percent this year on concern faster inflation and higher borrowing costs will hurt growth. The index fell 3.37 percent as of 12:09 p.m. in Mumbai. The yield on the 8.24 percent note due April 2018 dropped 2 basis points to 8.62 percent.
Taiwan yesterday raised its key rate to a seven-year high to help curb inflation. Indonesia and the Philippines lifted borrowing costs this month and China increased its cash reserve ratio for the fifth time this year to a record 17.5 percent.
Inflation is accelerating elsewhere in Asia, almost doubling in Japan to 1.5 percent in May. South Korean consumer prices in June probably rose more than 5 percent for the first time since 1998, according to a Bloomberg survey.
The increase in Indian borrowing costs came a month before the next monetary policy meeting scheduled on July 29, as an increase in retail fuel prices pushed inflation to more than double the central bank's year-end target of 5.5 percent.
Bread, Tea
Soaring food prices are also stoking inflation in India, where more than half the population of 1.1 billion survive on less than $2 a day. Food product costs, including bread, salt, cooking oil and tea, jumped 14 percent in the week to June 14 from a year earlier, according to today's report.
``With rising cost pressures, inflation is likely to remain in double digits for most of 2008,'' said Sonal Varma, an economist at Lehman Brothers Holdings Inc. in Mumbai. ``The Reserve Bank is expected to follow up with another 25 basis points increase in the repurchase rate and 50 basis points increase in the cash reserve ratio.''
The central bank in April twice lifted the cash reserve ratio to curtail the availability of money in the system. Higher borrowing costs forced State Bank of India, the nation's largest lender, to raise lending rates by 50 basis points. ICICI Bank said it hasn't yet decided to increase interest rates.
Slower Growth
Faster inflation, fuelled by surging food and energy prices, may slow the pace of growth in Asia's emerging economies this year, Asian Development Bank President Haruhiko Kuroda said in a June 25 interview. Asian economies excluding Japan and Australia may expand about 7 percent in 2008, lower than the ADB's April estimate of 7.6 percent, and last year's 8.7 percent expansion.
India's central bank expects growth to slow to 8.5 percent in the fiscal year that started April 1 from 9 percent in the previous 12-month period.
``Cost-push inflation, interest rate hikes and tighter financial conditions will slow growth even further,'' said Varma, who expects India's economy to expand 7.3 percent in the current fiscal year.
Inflation is likely to remain in double-digits at least for two more months before slowing as measures taken by the government start impacting prices, Indian Trade Minister Kamal Nath said yesterday.
Crude oil prices touched an all-time high of $140.39 a barrel on June 26, raising concern India's import costs will surge. The South Asian nation relies on crude oil from overseas to meet three-quarters of its energy needs.
The government may revise today's preliminary wholesale- price estimate in two months after receiving additional data. The commerce ministry today raised its inflation estimate for the week ended April 19 to 8.23 percent from 7.57 percent.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.
Read more...
June 27 (Bloomberg) -- India's inflation accelerated more than estimated to the fastest pace in 13 years, suggesting the central bank may add to this month's two interest rate increases.
Wholesale prices rose 11.42 percent in the week to June 14, after gaining 11.05 percent in the previous week, the government said in a statement in New Delhi today. Economists surveyed by Bloomberg News predicted an 11.22 percent increase.
The Reserve Bank of India this week increased its key rate to a six-year high of 8.5 percent, joining central banks across Asia in raising borrowing costs as soaring fuel and commodity prices stoke inflation. Governor Yaga Venugopal Reddy may lift the Indian benchmark by a further 100 basis points before the end of the year, according to HSBC Holdings Plc.
``Policy authorities are clearly becoming more and more concerned about the inflationary situation,'' said Robert Prior- Wandesforde, an economist at HSBC in Singapore. ``We expect inflation to remain in double-digits for about nine months.''
Reddy on June 24 raised the repurchase rate by 0.5 percentage point and lifted the cash reserve ratio to 8.75 percent from 8.25 percent, to prevent money in the banking system from fanning inflation. The move followed a quarter-point increase in the benchmark interest rate to 8 percent on June 11.
Money supply in India's banking system grew 21.4 percent from a year earlier to 41 trillion rupees ($953.5 billion) in the week ended June 6, more than the Reserve Bank's target of 16.5 percent to 17 percent for the fiscal year ending March.
Taiwan, Indonesia
The Bombay Stock Exchange's Sensitive Index has declined 31 percent this year on concern faster inflation and higher borrowing costs will hurt growth. The index fell 3.37 percent as of 12:09 p.m. in Mumbai. The yield on the 8.24 percent note due April 2018 dropped 2 basis points to 8.62 percent.
Taiwan yesterday raised its key rate to a seven-year high to help curb inflation. Indonesia and the Philippines lifted borrowing costs this month and China increased its cash reserve ratio for the fifth time this year to a record 17.5 percent.
Inflation is accelerating elsewhere in Asia, almost doubling in Japan to 1.5 percent in May. South Korean consumer prices in June probably rose more than 5 percent for the first time since 1998, according to a Bloomberg survey.
The increase in Indian borrowing costs came a month before the next monetary policy meeting scheduled on July 29, as an increase in retail fuel prices pushed inflation to more than double the central bank's year-end target of 5.5 percent.
Bread, Tea
Soaring food prices are also stoking inflation in India, where more than half the population of 1.1 billion survive on less than $2 a day. Food product costs, including bread, salt, cooking oil and tea, jumped 14 percent in the week to June 14 from a year earlier, according to today's report.
``With rising cost pressures, inflation is likely to remain in double digits for most of 2008,'' said Sonal Varma, an economist at Lehman Brothers Holdings Inc. in Mumbai. ``The Reserve Bank is expected to follow up with another 25 basis points increase in the repurchase rate and 50 basis points increase in the cash reserve ratio.''
The central bank in April twice lifted the cash reserve ratio to curtail the availability of money in the system. Higher borrowing costs forced State Bank of India, the nation's largest lender, to raise lending rates by 50 basis points. ICICI Bank said it hasn't yet decided to increase interest rates.
Slower Growth
Faster inflation, fuelled by surging food and energy prices, may slow the pace of growth in Asia's emerging economies this year, Asian Development Bank President Haruhiko Kuroda said in a June 25 interview. Asian economies excluding Japan and Australia may expand about 7 percent in 2008, lower than the ADB's April estimate of 7.6 percent, and last year's 8.7 percent expansion.
India's central bank expects growth to slow to 8.5 percent in the fiscal year that started April 1 from 9 percent in the previous 12-month period.
``Cost-push inflation, interest rate hikes and tighter financial conditions will slow growth even further,'' said Varma, who expects India's economy to expand 7.3 percent in the current fiscal year.
Inflation is likely to remain in double-digits at least for two more months before slowing as measures taken by the government start impacting prices, Indian Trade Minister Kamal Nath said yesterday.
Crude oil prices touched an all-time high of $140.39 a barrel on June 26, raising concern India's import costs will surge. The South Asian nation relies on crude oil from overseas to meet three-quarters of its energy needs.
The government may revise today's preliminary wholesale- price estimate in two months after receiving additional data. The commerce ministry today raised its inflation estimate for the week ended April 19 to 8.23 percent from 7.57 percent.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.
Read more...
New Zealand's Economy Shrinks, on Brink of Recession
By Tracy Withers
June 27 (Bloomberg) -- New Zealand's economy contracted last quarter, putting the nation on the brink of its first recession in 10 years as record-high interest rates damp domestic demand and a drought slows exports.
Gross domestic product fell 0.3 percent in the three months ended March 31 from the fourth quarter. Seven of 13 economists surveyed by Bloomberg News forecast the economy will also shrink this quarter.New Zealand's stock market fell 2 percent as the shrinking economy reduces profits at retailers such as Warehouse Group Ltd., which cut its earnings forecast by 10 percent today. Bonds rose as investors bet the contraction will prompt Reserve Bank Governor Alan Bollard to cut the benchmark interest rate from 8.25 percent.
``Current very tight monetary policy is inappropriate,'' said Shamubeel Eaqub, economist at Goldman Sachs JBWere Ltd. in Auckland. ``We expect rate cuts from September, but July cannot be ruled out as the economy sinks into recession.''
The benchmark NZX 50 stock index fell 65.05 points to 3,226.91 at the 5 p.m. market close in Wellington. Earlier the gauge dropped as much as 2.7 percent. The yield on a three-year government bond declined to a six-week low of 6.40 percent.
Bollard on June 5 forecast a 0.3 percent first-quarter contraction followed by 0.2 percent growth in the three months to June 30. He said he couldn't rule out a recession.
Rate Outlook
The contraction matched the median expectation of 13 economists surveyed by Bloomberg News. The economy grew 1.9 percent from a year earlier.
The central bank governor, who has kept the benchmark interest rate unchanged since July last year, said on June 5 it is ``likely'' he will reduce borrowing costs this year because slowing growth will stem inflation.
Ten of 13 economists surveyed by Bloomberg News say Bollard will lower the benchmark lending rate in September. Two expect a cut as early as the next review on July 24, while one predicts a reduction in October.
Adding to signs the economy won't recover quickly, consumer confidence slumped to a 17-year low in the second quarter, and house sales fell in May to a 16-year low.
Warehouse Group, the nation's largest discount retailer, today cut its full-year profit forecast by 10 percent as weaker consumer spending prompted a slowdown in sales since May.
Food, Petrol
``I don't think there's a household in the country that's not under pressure financially from the burden of higher food and petrol costs,'' Chief Executive Officer Ian Morrice said in an interview from Auckland. ``There's been a realization that times have got a lot tougher.''
Briscoe Group Ltd., an Auckland-based sporting goods and home-ware retailer, said yesterday profit in the six months ending July 27 will probably fall 80 percent from a year earlier.
The first contraction in gross domestic product in two years was led by a slump in consumer spending, home building and exports, the statistics agency said.
Household spending, which makes up 60 percent of the economy, fell 0.4 percent from the fourth quarter, the first contraction in four years. Purchases of durable items declined 3.4 percent, led mostly by cars, furniture and household appliances. Spending on alcohol, food and other so-called non- durable goods was unchanged.
Cars, Housing
New Zealanders are cutting back on purchases of cars, computers and appliances as they pay higher interest costs on their mortgages and credit cards. The lending rate on a two-year fixed home loan was 9.6 percent in April compared with 8.8 percent a year earlier.
Spending on new housing fell 5.5 percent in the first quarter, the statistics agency said.
Business investment declined 1.2 percent, led by commercial construction, while spending on plant, machinery and equipment increased. Inventories held by retailers and the distribution industry also rose.
Overseas shipments of goods and services declined 1.8 percent in the quarter as dairy product sales fell. Imports volumes rose 1.2 percent.
Fonterra Cooperative Group Ltd., the world's largest dairy exporter, said in February that farmers were producing less milk than it had forecast because of drought in much of the country. Dairy exports declined 3.8 percent in the first quarter. Sales of butter, cheese and milk powder make up about one-fifth of New Zealand's exports.
Farm Production
Farm production fell 5.6 percent in the first quarter, the biggest decline since 1998, as the drought forced many farmers to stop milking cows. Mining and forestry output also declined. Manufacturing declined 1.2 percent, led by food processing as less milk was supplied to factories. Output from the construction industry slumped 5.2 percent, led by home building.
A second report today showed exports in May rose less than economists expected after dairy sales were the lowest in nine months. The nation's annual trade deficit unexpectedly widened to NZ$4.81 billion ($3.6 billion). Economists expected it would narrow to NZ$4.5 billion.
The GDP deflator was 4.9 percent in the year ended March 31, the statistics agency said.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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French First-Quarter GDP Growth Revised Down to 0.5%
By Francois de Beaupuy and Helene Fouquet
June 27 (Bloomberg) -- France's gross domestic product rebounded less than initially estimated in the first quarter as household spending, the driving force of the economy, failed to grow.
Europe's third-biggest economy expanded 0.5 percent in the quarter from the previous three months, when it grew a revised 0.4 percent, Paris-based government statistics office Insee said in an e-mailed statement today. In its preliminary report on May 15, Insee said GDP grew 0.6 percent in the latest quarter.
The first quarter ``was a bit supernatural,'' said Jean- Christophe Caffet, an economist at Natixis in Paris. ``From there on, growth figures will be particularly bad.''
Soaring energy and food prices are stoking inflation, crimping consumers' spending power across the 15-nation euro region. European Central Bank President Jean-Claude Trichet said June 5 that the ECB may increase its benchmark rate next month to rein in inflation expectations even as economic growth slows.
French inflation, based on a non-EU harmonized method, will peak at a 17-year high of 3.6 percent in the coming months before slowing to 2.8 percent in December, Insee forecast earlier this month. Inflation will average 3.2 percent in 2008, the highest since 1991 and up from 1.5 percent last year, Insee said.
As a result of soaring prices, consumer spending, which has been the main engine of French growth in the past decade, remained flat in the first three months of 2008 after growing 0.5 percent in the fourth quarter, and 0.8 percent in the third, Insee said.
Purchasing Power
French households saved 16 percent of their disposable income in the first quarter, unchanged from the fourth quarter, Insee said. Their gross purchasing power failed to grow after having added 1 percent in the earlier quarter.
France's economy will expand 1.6 percent this year, the slowest pace in five years, as rising prices damp consumer spending and the housing market slumps, Insee said on June 20. Confidence among French consumers fell to a record low in June, a report said yesterday.
Producer prices rose 1.3 percent in May from April and jumped 6.7 percent from a year earlier, Insee said in a separate report today. Economists polled by Bloomberg expected a 0.6 percent increase on the month, according to the median of 15 forecasts.
Consumer Spending
``If consumer spending clearly slows in relation to the faster inflation and the decrease in households' purchasing power, we may hope trade will in turn contribute to growth'' through lower imports and stronger exports to countries such as Germany, said Mathieu Plane, an economist at Paris-based Observatoire Francais des Conjonctures Economiques.
Exports jumped a revised 3.2 percent in the first three months of the year. In a June note, Insee said it expects exports to drop 0.1 percent in the second quarter and show little growth in the second half.
Imports also increased by 2.3 percent in the first three months after having fell 1.1 percent he previous quarter. Trade added 0.3 percentage points to the fist quarter compared with 0.7 percentage points the last three months of 2007, Insee said.
French GDP will grow 0.2 percent in the second quarter, the least in almost two years and a third of the pace of the first three months of 2008, Insee said last week. The economy will stagnate in the third quarter and expand 0.2 percent in the final three months, Insee said.
``The second quarter won't be as solid and strong as the first, but even so I think that Insee's forecasts are very gloomy,'' French Finance Minister Christine Lagarde said in a Bloomberg Television interview on June 19. She cited job creation and falling unemployment as reasons to be optimistic.
To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.
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June 27 (Bloomberg) -- France's gross domestic product rebounded less than initially estimated in the first quarter as household spending, the driving force of the economy, failed to grow.
Europe's third-biggest economy expanded 0.5 percent in the quarter from the previous three months, when it grew a revised 0.4 percent, Paris-based government statistics office Insee said in an e-mailed statement today. In its preliminary report on May 15, Insee said GDP grew 0.6 percent in the latest quarter.
The first quarter ``was a bit supernatural,'' said Jean- Christophe Caffet, an economist at Natixis in Paris. ``From there on, growth figures will be particularly bad.''
Soaring energy and food prices are stoking inflation, crimping consumers' spending power across the 15-nation euro region. European Central Bank President Jean-Claude Trichet said June 5 that the ECB may increase its benchmark rate next month to rein in inflation expectations even as economic growth slows.
French inflation, based on a non-EU harmonized method, will peak at a 17-year high of 3.6 percent in the coming months before slowing to 2.8 percent in December, Insee forecast earlier this month. Inflation will average 3.2 percent in 2008, the highest since 1991 and up from 1.5 percent last year, Insee said.
As a result of soaring prices, consumer spending, which has been the main engine of French growth in the past decade, remained flat in the first three months of 2008 after growing 0.5 percent in the fourth quarter, and 0.8 percent in the third, Insee said.
Purchasing Power
French households saved 16 percent of their disposable income in the first quarter, unchanged from the fourth quarter, Insee said. Their gross purchasing power failed to grow after having added 1 percent in the earlier quarter.
France's economy will expand 1.6 percent this year, the slowest pace in five years, as rising prices damp consumer spending and the housing market slumps, Insee said on June 20. Confidence among French consumers fell to a record low in June, a report said yesterday.
Producer prices rose 1.3 percent in May from April and jumped 6.7 percent from a year earlier, Insee said in a separate report today. Economists polled by Bloomberg expected a 0.6 percent increase on the month, according to the median of 15 forecasts.
Consumer Spending
``If consumer spending clearly slows in relation to the faster inflation and the decrease in households' purchasing power, we may hope trade will in turn contribute to growth'' through lower imports and stronger exports to countries such as Germany, said Mathieu Plane, an economist at Paris-based Observatoire Francais des Conjonctures Economiques.
Exports jumped a revised 3.2 percent in the first three months of the year. In a June note, Insee said it expects exports to drop 0.1 percent in the second quarter and show little growth in the second half.
Imports also increased by 2.3 percent in the first three months after having fell 1.1 percent he previous quarter. Trade added 0.3 percentage points to the fist quarter compared with 0.7 percentage points the last three months of 2007, Insee said.
French GDP will grow 0.2 percent in the second quarter, the least in almost two years and a third of the pace of the first three months of 2008, Insee said last week. The economy will stagnate in the third quarter and expand 0.2 percent in the final three months, Insee said.
``The second quarter won't be as solid and strong as the first, but even so I think that Insee's forecasts are very gloomy,'' French Finance Minister Christine Lagarde said in a Bloomberg Television interview on June 19. She cited job creation and falling unemployment as reasons to be optimistic.
To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.
Read more...
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