Tue Jul 1, 2008 11:04am EDT
LONDON, July 1 (Reuters) - Oil major BP Plc (BP.L: Quote, Profile, Research, Stock Buzz) said on Tuesday it had agreed to buy the Whiting Clean Energy power plant in Indiana in the United States for $210 million from Nisource Inc (NI.N: Quote, Profile, Research, Stock Buzz).
The 525 megawatt natural-gas fired combined-cycle cogeneration power plant provides steam for BP's Whiting refinery, and gives BP the opportunity to sell lower-carbon power into the local power market, BP said in a statement. (Reporting by Mike Elliott; Editing by David Cowell)
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Tuesday, July 1, 2008
OPEC Leader Khelil Says Dollar Will Drive Oil to $170
POSTED: Saturday, June 28, 2008
FROM BLOG: DigitalJournal.com - DigitalJournal.com is a news network powered by citizen journalists. Every area of news is covered in a steady stream of news articles and breaking stories each day.
The following blog post is from an independent writer and is not connected with Reuters News. The opinions and views expressed herein are those of the author and are not endorsed by Reuters.com.
Chakib Khelil is the president of OPEC and he has predicted that the price of oil will climb to $170 a barrel before the end of the year because of the dollar's decline and political conflicts.
This should have been expected because every single day something causes oil prices to go up and this time they are expected to reach $170 as demand for fuel is growing in the u.S. during the summer period and the dollar continues to weaken against the Euro, according to Khelil. Khelil is not only the leader of the Organization of Petroleum Exporting Countries but he also serves as Algeria's oil minister.
khelil also said that political pressure on Iran and the deprecation of the U.S. currency have cause a surge in oil prices. Oil prices also touched a record price of $142.99 a barrel yesterday on the New York Mercantile Exchange.
OPEC ministers usually say that oil output is sufficient even as Saudi Arabia pledged to pump an extra 200,000 barrels a day next month to calm the market. Venezuelan Oil Minister Rafael Ramirez says that the market is completely supplied and Libya might make possible production cuts because they think that the market is oversupplied.
Khelil spoke today and said that the rising cost of crude is not linked to supply and he says that there is enough oil in the market to meet international demand.
Oil prices are up 38 percent this quarter and they are heading for the biggest quarterly gain since the first three months of 1999, when oil traded between $11 and $17.
Khelil goes on and says that the decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar and that pushed up oil prices as well.
Here we go again, ever little excuse there is to use will be used. A few months ago it was because of supply and demand and now it's because of a million other things. This is not going to stop unless people come together and protest by not driving vehicles for awhile.
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FROM BLOG: DigitalJournal.com - DigitalJournal.com is a news network powered by citizen journalists. Every area of news is covered in a steady stream of news articles and breaking stories each day.
The following blog post is from an independent writer and is not connected with Reuters News. The opinions and views expressed herein are those of the author and are not endorsed by Reuters.com.
Chakib Khelil is the president of OPEC and he has predicted that the price of oil will climb to $170 a barrel before the end of the year because of the dollar's decline and political conflicts.
This should have been expected because every single day something causes oil prices to go up and this time they are expected to reach $170 as demand for fuel is growing in the u.S. during the summer period and the dollar continues to weaken against the Euro, according to Khelil. Khelil is not only the leader of the Organization of Petroleum Exporting Countries but he also serves as Algeria's oil minister.
khelil also said that political pressure on Iran and the deprecation of the U.S. currency have cause a surge in oil prices. Oil prices also touched a record price of $142.99 a barrel yesterday on the New York Mercantile Exchange.
OPEC ministers usually say that oil output is sufficient even as Saudi Arabia pledged to pump an extra 200,000 barrels a day next month to calm the market. Venezuelan Oil Minister Rafael Ramirez says that the market is completely supplied and Libya might make possible production cuts because they think that the market is oversupplied.
Khelil spoke today and said that the rising cost of crude is not linked to supply and he says that there is enough oil in the market to meet international demand.
Oil prices are up 38 percent this quarter and they are heading for the biggest quarterly gain since the first three months of 1999, when oil traded between $11 and $17.
Khelil goes on and says that the decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar and that pushed up oil prices as well.
Here we go again, ever little excuse there is to use will be used. A few months ago it was because of supply and demand and now it's because of a million other things. This is not going to stop unless people come together and protest by not driving vehicles for awhile.
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Stocks pare losses after factory data
Tue Jul 1, 2008 10:08am EDT
NEW YORK (Reuters) - Stocks pared losses on Tuesday after the release of stronger-than-expected manufacturing data for June by the Institute for Supply Management.
The Dow Jones industrial average .DJI was down 27.43 points, or 0.24 percent, at 11,322.58. The Standard & Poor's 500 Index .SPX was down 3.23 points, or 0.25 percent, at 1,276.77. The Nasdaq Composite Index .IXIC was down 5.05 points, or 0.22 percent, at 2,287.93.
(Reporting by Walker Simon, Editing by Kenneth Barry)
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NEW YORK (Reuters) - Stocks pared losses on Tuesday after the release of stronger-than-expected manufacturing data for June by the Institute for Supply Management.
The Dow Jones industrial average .DJI was down 27.43 points, or 0.24 percent, at 11,322.58. The Standard & Poor's 500 Index .SPX was down 3.23 points, or 0.25 percent, at 1,276.77. The Nasdaq Composite Index .IXIC was down 5.05 points, or 0.22 percent, at 2,287.93.
(Reporting by Walker Simon, Editing by Kenneth Barry)
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Manufacturing data beats expectations
Tue Jul 1, 2008 10:31am EDT
NEW YORK (Reuters) - U.S. factory activity expanded unexpectedly in June but inflation pressures soared, according to a report released on Tuesday.
The Institute for Supply Management said its index of national factory activity rose in June to 50.2 from 49.6 in May after four straight months of contraction.
Economists' median forecast was for a result of 48.6, according to a Reuters poll. The 81 forecasts in the survey ranged from 46.0 to 50.5.
A reading below 50 represents contraction in the factory sector. June's reading was the first above 50 since January.
The index of prices paid jumped to 91.5 from 87.0 in May, for the highest reading since 1979.
(Reporting by Burton Frierson; Editing by James Dalgleish)
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NEW YORK (Reuters) - U.S. factory activity expanded unexpectedly in June but inflation pressures soared, according to a report released on Tuesday.
The Institute for Supply Management said its index of national factory activity rose in June to 50.2 from 49.6 in May after four straight months of contraction.
Economists' median forecast was for a result of 48.6, according to a Reuters poll. The 81 forecasts in the survey ranged from 46.0 to 50.5.
A reading below 50 represents contraction in the factory sector. June's reading was the first above 50 since January.
The index of prices paid jumped to 91.5 from 87.0 in May, for the highest reading since 1979.
(Reporting by Burton Frierson; Editing by James Dalgleish)
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AUD - the Pinocchio of the FX market
Daily Forex Fundamentals | Written by Jyske Bank | Jul 01 08 11:32 GMT |
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'I've got no strings .........' If the Australian dollar could sing, it would probably sing this Pinocchio song right now. The dollar is dangling like it was controlled by a puppeteer, no longer attached to previously good macroeconomic and financial correlations.
The global slowdown has so far not affected the otherwise very growth-dependent currency. The AUD/USD rate is thus in an odd vacuum relative to the IMF's growth estimates for the next two years, apparently no longer attached to the otherwise good correlation between these two.
In our view, the resistance of the Australian dollar to falling global growth can mainly be ascribed to the currency's inherent commodity element. As one of the most well-known commodity currencies, AUD is currently benefiting from the historically high commodity prices. In fact, this is one of the only previously good correlations which still exists. This correlation is so strong that the other good correlations have been forgotten by investors.
Given our expectation of a coming correction in the commodity complex as a whole - and oil in particular - it is highly likely that the commodity-based bubble which AUD/USD is currently in will burst with resultant large price falls when the forgotten good financial/macroeconomic correlations begin to work again. In relation to the purchasing power parity, AUD is extremely overvalued against USD. The expected dollar appreciation and the adjusted commodity prices risk hitting the Australian dollar like a 'double whammy'.
Financially, speculative AUD positions indicate that professional investors have smelled the rate. They have quietly begun to reduce their long positions which have by the way not supported the large rise in the AUD/USD rate since last summer. The high AUD/USD has thus not been supported by unhampered appetite from speculative investors. This is in itself a warning of a market without much weight, which may be strongly destabilising for a currency pair over time.
Technically, the AUD/USD uptrend is still intact according to our long-term monthly model, although the trend has moderated lately. If the long-term moving average currently at 92.40 is breached, it will be the first signal that after all the law of gravitation also applies to AUD/USD, and that a new downtrend may be in the making.
Due to the above, the invisible puppeteer may not be so invisible after all. To equate high commodity prices - whether driven by financial greed or fundamental demand - with a strong/stronger AUD is the same as having blind faith in Stromboli!
Speculative AUD positions lose momentum
- The rising AUD/USD rate has since mid-March not been supported by a rising number of long AUD/USD speculative positions (in terms of exchange-traded FX futures)
- Such 'disagreement' between the actual price development and speculative positions is to be labelled divergence
- Such divergence is a signal that the price development is not well-founded and that the market may quickly be short of weight with resultant high price declines if investors try to get out of the 'door' at the same time
Rising AUD/USD NOT supported by growth
- It is quite odd that the rise in AUD/USD is not on level with the global growth estimates by the IMF
- Expected lower global growth for both 2008 and 2009 should realistically have driven the growth-dependent AUD lower, but this has not been the case yet
- As a commodity currency the correlation between global growth and thus the demand for commodities has been an important parameter for the price development of AUD
AUD/USD hovers above the purchasing power parity
- AUD/USD is currently hovering above the purchasing power parity
- I.e. domestic macroeconomics do not support the vehement rise in AUD/USD, which is why AUD is currently very overvalued against the historically low USD
- Although early in this decade, AUD was undervalued against USD for a long period, it is worth noting the current extreme situation
- Extreme situations tend to be corrected all of a sudden
Jyske Markets - FX Research http://www.jyskebank.dk/finansnyt
The analysis is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the analysis. The estimates and recommendation of the analysis may be changed without notice. The analysis is for personal use of Jyske Bank's customers and may not be copied.
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Ahead of ISM Manufacturing as USD Resumes its Fall...
Daily Forex Fundamentals | Written by Crown Forex | Jul 01 08 11:06 GMT |
Ahead of ISM Manufacturing as USD Resumes its Fall...
The negative sentiment for the greenback continues as still investors lack confidence in the U.S economy as they feel that it not performing any better. Today the U.S is releasing fundamentals concerning the manufacturing sector as it is expected to show that the economy is still contracting since costs of raw materials and energy rally are eating through the pockets of businesses and consumers.
The Euro Zone today released its PMI manufacturing for the month of June final reading coming in at 49.2 slightly higher than the prior and projected reading of 49.1 respectively, since the reading is below the 50.0 level the economy is considered to be contracting. As for Germany they released their retail sales showing a great jump for both the annual reading and the monthly reading so this is helping support the EU slightly. There are expectations that the ECB will hike interest rates on Thursday by 25 points as Jean-Claude Trichet is taking a hawkish tone. Today the euro is struggling to break the major support of 1.5730 while trading under a resistance of 1.5775 at 1.5766. The EUR/USD pair recorded a high of 1.5777 and a low of 1.5722.
Despite the U.K economy releasing their PMI manufacturing showing a slip by 4.2 to 45.8 the royal currency is still gaining on the back of the weak greenback. The British pound hit a major support at 1.9896 as it started to form a strong bullish wave working its way upside to reach the psychological level of 2.0000. The GBP/USD is currently trading at 1.9980 while recording a high of 2.0002 and a low of 1.9887 so far.
The unwinding of carry trades still continue in the markets as investors are risk averse in which they sell high yielding currencies and buy low yielding currencies like the yen while stock markets remain to record losses. Using the Stochastic Oscillators on a daily basis we see that the yen in trading in an oversold area as the USD/JPY broke the support of 105.70 successfully and if the downtrend continues, it will hit the next support at the level of 105.00. The pair is currently trading at 105.44 while recording a high of 106.37 and a low of 105.32.
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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Ahead of ISM Manufacturing as USD Resumes its Fall...
The negative sentiment for the greenback continues as still investors lack confidence in the U.S economy as they feel that it not performing any better. Today the U.S is releasing fundamentals concerning the manufacturing sector as it is expected to show that the economy is still contracting since costs of raw materials and energy rally are eating through the pockets of businesses and consumers.
The Euro Zone today released its PMI manufacturing for the month of June final reading coming in at 49.2 slightly higher than the prior and projected reading of 49.1 respectively, since the reading is below the 50.0 level the economy is considered to be contracting. As for Germany they released their retail sales showing a great jump for both the annual reading and the monthly reading so this is helping support the EU slightly. There are expectations that the ECB will hike interest rates on Thursday by 25 points as Jean-Claude Trichet is taking a hawkish tone. Today the euro is struggling to break the major support of 1.5730 while trading under a resistance of 1.5775 at 1.5766. The EUR/USD pair recorded a high of 1.5777 and a low of 1.5722.
Despite the U.K economy releasing their PMI manufacturing showing a slip by 4.2 to 45.8 the royal currency is still gaining on the back of the weak greenback. The British pound hit a major support at 1.9896 as it started to form a strong bullish wave working its way upside to reach the psychological level of 2.0000. The GBP/USD is currently trading at 1.9980 while recording a high of 2.0002 and a low of 1.9887 so far.
The unwinding of carry trades still continue in the markets as investors are risk averse in which they sell high yielding currencies and buy low yielding currencies like the yen while stock markets remain to record losses. Using the Stochastic Oscillators on a daily basis we see that the yen in trading in an oversold area as the USD/JPY broke the support of 105.70 successfully and if the downtrend continues, it will hit the next support at the level of 105.00. The pair is currently trading at 105.44 while recording a high of 106.37 and a low of 105.32.
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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Economy Fears Hamper Sterling
Daily Forex Fundamentals | Written by Investica | Jul 01 08 10:36 GMT |
Sterling will gain some further support form a reduction in short positions, but he economic outlook will limit gains
The UK currency found support on dips during Monday with support close to 1.99 against the dollar and 0.7940 against the Euro with the currency still proving to be resilient.
The latest Nationwide house-price index recorded a further 0.9% decline in prices for June to give a 6.3% annual decline, although this was marginally stronger than expected. The data will maintain fears over the UK housing sector and economy as a whole which will curb short-term currency support.
The PMI index for the manufacturing sector weakened sharply to 45.8 in June from a revised 49.5 the previous month which was the weakest reading sine 2001 and will increase fears over the UK economic trends. The UK currency dipped weaker following the data after a strong start in Europe, but again proved to be resilient with a renewed push towards the 2.00 level against the dollar.
Investica
http://www.investica.co.uk
Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.
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Sterling will gain some further support form a reduction in short positions, but he economic outlook will limit gains
The UK currency found support on dips during Monday with support close to 1.99 against the dollar and 0.7940 against the Euro with the currency still proving to be resilient.
The latest Nationwide house-price index recorded a further 0.9% decline in prices for June to give a 6.3% annual decline, although this was marginally stronger than expected. The data will maintain fears over the UK housing sector and economy as a whole which will curb short-term currency support.
The PMI index for the manufacturing sector weakened sharply to 45.8 in June from a revised 49.5 the previous month which was the weakest reading sine 2001 and will increase fears over the UK economic trends. The UK currency dipped weaker following the data after a strong start in Europe, but again proved to be resilient with a renewed push towards the 2.00 level against the dollar.
Investica
http://www.investica.co.uk
Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.
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Japanese Tankan Survey Rises Slightly Above Expectations in Q2
Asian Economy | Written by CEP News | Jul 01 08 10:55 GMT |
(CEP News) - Confidence amongst Japan's business leaders were slightly more optimistic than expected in the second quarter of 2008, according to the results of the Bank of Japan's closely-watched Tankan survey.
The headline large manufacturer's index fell to 5 in the second quarter from a previous reading of 11 and below the consensus forecast of 3.
The outlook amongst large manufacturers was slightly upbeat, coming in at a reading of 4, above the 2 economists had expected but well below the previous quarter's reading of 15.
The non-manufacturing index fell to a reading of 10, but was above what economists had expected. The previous reading was 12. The outlook amongst non-manufacturing firms fell to 8 from a previous reading of 13 but was higher than the consensus forecast of 7.
The Tankan all-industries Capex index, which measures capital expenditures by all Japanese industries except for the financial sector, showed large manufacturers and non-manufacturers plan to increase business investment by 2.4% in fiscal 2008. Economists had expected that figure to come in at +2.0%.
In the previous quarter, manufacturers and non-manufacturers had expected to decrease spending by 1.6%
The indexes are tallied by taking the percentage of firms experiencing favourable business conditions minus the percentage of those seeing unfavourable conditions.
"June's Tankan survey confirmed that Japanese business conditions are deteriorating, but not as far as most had feared," Julian Jessop, chief international economist at Capital Economics, wrote in a research note.
"Unlike previous downturns, the detail shows little sign of the excess capacity or labour hoarding that might lead to a recession," Jessop continued. "Indeed, the employment components show that labour shortages are still the dominant concern.
By Steve Secyk, sstecyk@economcnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
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(CEP News) - Confidence amongst Japan's business leaders were slightly more optimistic than expected in the second quarter of 2008, according to the results of the Bank of Japan's closely-watched Tankan survey.
The headline large manufacturer's index fell to 5 in the second quarter from a previous reading of 11 and below the consensus forecast of 3.
The outlook amongst large manufacturers was slightly upbeat, coming in at a reading of 4, above the 2 economists had expected but well below the previous quarter's reading of 15.
The non-manufacturing index fell to a reading of 10, but was above what economists had expected. The previous reading was 12. The outlook amongst non-manufacturing firms fell to 8 from a previous reading of 13 but was higher than the consensus forecast of 7.
The Tankan all-industries Capex index, which measures capital expenditures by all Japanese industries except for the financial sector, showed large manufacturers and non-manufacturers plan to increase business investment by 2.4% in fiscal 2008. Economists had expected that figure to come in at +2.0%.
In the previous quarter, manufacturers and non-manufacturers had expected to decrease spending by 1.6%
The indexes are tallied by taking the percentage of firms experiencing favourable business conditions minus the percentage of those seeing unfavourable conditions.
"June's Tankan survey confirmed that Japanese business conditions are deteriorating, but not as far as most had feared," Julian Jessop, chief international economist at Capital Economics, wrote in a research note.
"Unlike previous downturns, the detail shows little sign of the excess capacity or labour hoarding that might lead to a recession," Jessop continued. "Indeed, the employment components show that labour shortages are still the dominant concern.
By Steve Secyk, sstecyk@economcnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
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Asia-Pacific Market Recap: Asian Fixed Income Markets & Equities Fall
Market Updates | Written by CEP News | Jul 01 08 10:15 GMT |
(CEP News) - Asia-Pacific fixed income markets are declining and equities closed lower with yields on Australian 10-year bonds up 4.7 bps to 6.49% and Japanese 10-year government bonds up 7.9 bps to 1.68%.
Sydney's S&P ASX 200 closed down 76.40 points to 5138.9.
The Japanese Nikkei closed down 18.18 points to 13463.2 and the Hang Seng up 59.66 points to 22102.01 .
Yields on three-year Australian bonds were down 4.8 bps to 7.78 and the Australian 90-day September 08 contract was up 2.0 ticks to 92.13.
The Euroyen September 08 contract was flat at 99.13.
The Australian dollar was down 0.19 cents to 0.9567 against the USD and down 0.71 cents to 0.9719 against the Canadian dollar.
Against the yen, the U.S. dollar was down 0.76 points to 105.46 and the Canadian dollar was down 0.17 points to 103.82.
The euro was up 0.20 cents to 1.5780 USD.
All data taken at 6 a.m. EDT.
Generated by CEP Newswires, edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) - Asia-Pacific fixed income markets are declining and equities closed lower with yields on Australian 10-year bonds up 4.7 bps to 6.49% and Japanese 10-year government bonds up 7.9 bps to 1.68%.
Sydney's S&P ASX 200 closed down 76.40 points to 5138.9.
The Japanese Nikkei closed down 18.18 points to 13463.2 and the Hang Seng up 59.66 points to 22102.01 .
Yields on three-year Australian bonds were down 4.8 bps to 7.78 and the Australian 90-day September 08 contract was up 2.0 ticks to 92.13.
The Euroyen September 08 contract was flat at 99.13.
The Australian dollar was down 0.19 cents to 0.9567 against the USD and down 0.71 cents to 0.9719 against the Canadian dollar.
Against the yen, the U.S. dollar was down 0.76 points to 105.46 and the Canadian dollar was down 0.17 points to 103.82.
The euro was up 0.20 cents to 1.5780 USD.
All data taken at 6 a.m. EDT.
Generated by CEP Newswires, edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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Euro Zone Unemployment Rate Holds Steady at 7.2% in May
European Economy | Written by CEP News | Jul 01 08 09:34 GMT |
(CEP News) Frankfurt - Despite expectations for a decline the euro zone unemployment, the rate held firm at 7.2% in May, Eurostat reported on Tuesday. Economists had forecast that the unemployment rate would to fall to 7.1%. Meanwhile, April's unemployment figure was revised up to 7.2% from 7.1%.
According to Eurostat, the number of people unemployed who consider the euro zone to be their primary place of residence increased by 42,000 in May.
Looking at the individual euro zone states for which data is available, the lowest unemployment rate was observed in Denmark, which posted a rate of 2.7%, and the Netherlands, which came in at 2.9%. Conversely, Slovakia had the highest rate of unemployment in May at 10.5%, followed by Spain, where 9.9% of the labour force is actively looking for work.
By Todd Wailoo, twailoo@economcnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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(CEP News) Frankfurt - Despite expectations for a decline the euro zone unemployment, the rate held firm at 7.2% in May, Eurostat reported on Tuesday. Economists had forecast that the unemployment rate would to fall to 7.1%. Meanwhile, April's unemployment figure was revised up to 7.2% from 7.1%.
According to Eurostat, the number of people unemployed who consider the euro zone to be their primary place of residence increased by 42,000 in May.
Looking at the individual euro zone states for which data is available, the lowest unemployment rate was observed in Denmark, which posted a rate of 2.7%, and the Netherlands, which came in at 2.9%. Conversely, Slovakia had the highest rate of unemployment in May at 10.5%, followed by Spain, where 9.9% of the labour force is actively looking for work.
By Todd Wailoo, twailoo@economcnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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German Unemployment Rate Falls to 7.8%, 38,000 Less Unemployed in June
European Economy | Written by CEP News | Jul 01 08 08:25 GMT |
(CEP News) Frankfurt - The German unemployment rate for June fell to 7.8%, reflecting a 38,000 person fall in the number of unemployed in Germany, the Federal Labour Agency reported on Tuesday. Economists had expected the unemployment rate to stay at 7.9%, with only 14,000 individuals removing themselves from the list of unemployed.
May had seen a 2,000 person increase in the unemployment ranks, revised down from a 4,000 person rise.
By Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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(CEP News) Frankfurt - The German unemployment rate for June fell to 7.8%, reflecting a 38,000 person fall in the number of unemployed in Germany, the Federal Labour Agency reported on Tuesday. Economists had expected the unemployment rate to stay at 7.9%, with only 14,000 individuals removing themselves from the list of unemployed.
May had seen a 2,000 person increase in the unemployment ranks, revised down from a 4,000 person rise.
By Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
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Euro Zone Manufacturing PMI Falls to Lowest Level in Three Years
European Economy | Written by CEP News | Jul 01 08 09:05 GMT |
(CEP News) Frankfurt - According to data published by Markit Economics, the euro zone purchasing managers index for manufacturing fell further to 49.2 in June following May's slip to 50.6. June's reading is the lowest since May 2005. However, economists had expected an even stronger fall to 49.1 for the month.
The PMI figure was dragged down principally be the deteriorating new orders levels, the indicator for which fell to its lowest level since June 2003.
While most of the components of the index showed marked declines in June, average raw material prices saw the largest monthly gains since July 2006, while average output prices showed stronger-than-expected increases as firms hoped to pass on their costs to consumers.
Looking at the individual euro zone states: the manufacturing PMI for Italy fell to 46.9 in June, its weakest reading since December 2001. Spain's manufacturing PMI continued its decline, slipping to 40.6 in June from May's 43.8 reading. The French manufacturing PMI fell to its lowest level since May 2005 with a reading of 49.2 following May's rebound to 51.5, while Germany's manufacturing indicator declined to 52.6 after holding firm at 53.6 in May.
"The ECB's policy dilemma has intensified with the publication of national PMI data within the euro area, "RBS Economic Head Jacques Cailloux said in a press release. "France is clearly heading in the same direction as Spain and Italy, which are both contracting at alarming rates. Higher interest rates will hit hardest those countries that have slowed most and accentuate country divergence."
By Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) Frankfurt - According to data published by Markit Economics, the euro zone purchasing managers index for manufacturing fell further to 49.2 in June following May's slip to 50.6. June's reading is the lowest since May 2005. However, economists had expected an even stronger fall to 49.1 for the month.
The PMI figure was dragged down principally be the deteriorating new orders levels, the indicator for which fell to its lowest level since June 2003.
While most of the components of the index showed marked declines in June, average raw material prices saw the largest monthly gains since July 2006, while average output prices showed stronger-than-expected increases as firms hoped to pass on their costs to consumers.
Looking at the individual euro zone states: the manufacturing PMI for Italy fell to 46.9 in June, its weakest reading since December 2001. Spain's manufacturing PMI continued its decline, slipping to 40.6 in June from May's 43.8 reading. The French manufacturing PMI fell to its lowest level since May 2005 with a reading of 49.2 following May's rebound to 51.5, while Germany's manufacturing indicator declined to 52.6 after holding firm at 53.6 in May.
"The ECB's policy dilemma has intensified with the publication of national PMI data within the euro area, "RBS Economic Head Jacques Cailloux said in a press release. "France is clearly heading in the same direction as Spain and Italy, which are both contracting at alarming rates. Higher interest rates will hit hardest those countries that have slowed most and accentuate country divergence."
By Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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Asia stocks slip, oil rises, stagflation lingers
Tue Jul 1, 2008 3:31am EDT
By Kevin Plumberg
HONG KONG (Reuters) - Most Asian stock markets were down on Tuesday as oil and food prices showed no signs of defusing stagflation fears, particularly with soybean prices at a record and oil above $141 a barrel.
European stocks were expected to open broadly lower, with investors focused on euro zone and U.S. manufacturing data due later in the day.
Bookmakers expected Britain's FTSE to open down 5-7 points, Germany's DAX down 3-7 points, and France's CAC down 1-6 points.
Crude climbed to an all-time high of $143.67 overnight, causing investors to grow increasingly intolerant of risk in their portfolios and seek relative safety in the yen.
The 40 percent surge in oil prices this year, even though global economic growth has slipped below its long-term trend, has made stagflation -- increased inflation combined with slowing growth -- a top fear for investors and a major headache for policymakers.
After a five-year bull market, Asian equities have fallen sharply this year on concerns that the credit crisis will sap demand for exports and inflation will erode returns. As a result, valuations have dropped from 17.7 times expected earnings in the next year to around 13 times, according to Standard & Poor's.
"One positive thing, if you could call it positive, is that shares have gotten significantly cheaper. But I am not sure if this alone would be enough to trigger foreign buying," said Kim Joong-hyun, a market analyst at Goodmorning Shinhan Securities in Seoul.
Japan's Nikkei share average finished 0.1 percent lower to record its longest losing streak in four years, as global growth worries weighed on exporters such as Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz).
Automakers had provided an early boost to the index, which on Monday posted its largest first-half decline since 1995, after a report that Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) plans to sell a hybrid version of its Camry in China in 2010.
Asia-Pacific shares traded outside of Japan dipped 0.8 percent to a three-month low, according to an MSCI index. The pan-Asia index was largely unchanged.
In the last six months, the Asia index chalked up its biggest first-half decline in 16 years mainly because of heavy losses in China and Vietnam.
CAPITULATION, ANYONE?
Korea's KOSPI fell 0.5 percent, down for a fourth consecutive session after a Bank of Korea official said inflation could stay above target for longer.
Chinese shares fell 1.8 percent on the Shanghai composite index as investors reacted negatively to news of yet more IPOs coming to market, anticipating a glut of fresh equity.
Hong Kong's market was closed because of a public holiday.
Some analysts believe that the next three months, smack dab in the thick of stagflation, is a good time to sift through the markets for good buys.
"The third quarter is going to be a time to go back and revisit the Asian markets because, by then, we'll have seen a real capitulation phase," said Nomura chief Asia strategist Sean Darby at a briefing in New York.
"Equities will probably be back to some of the lows we've seen in the last 10 years, but there won't be much financial distress, because the balance sheets are pretty good," said Darby, who is bullish on Korea, Malaysia, Thailand and Hong Kong, and would look to acquire Taiwan and Australia toward the end of the third quarter.
The bond market entered the second half on a downbeat note after a volatile past few months. The benchmark 10-year Japanese government bond yield, which moves inversely to the price, has declined around 20 basis points in the last two weeks to the lowest in nearly two months.
The yield rose 8 basis points to 1.67 percent on news that the June tankan's headline figure for big manufacturers was higher than the median market forecast.
South Korean government bond yields also rose after the country's central bank raised its inflation forecast.
The U.S. dollar rebounded slightly after slipping to a three-week low against the euro on Monday.
The euro was essentially unchanged against the dollar at $1.5767 ahead of a widely expected interest rate rise by the European Central Bank on Thursday. The dollar was down 0.4 percent at 105.63 yen.
U.S. light crude for August delivery was up $1.09 at $141.08 a barrel, after posting its largest first-half increase since 1999.
The blame for who is responsible for the surging cost of oil continued to be passed freely around the world.
Saudi Arabia's King Abdullah said even if production is raised oil prices will not go down, because speculators and taxes are what is behind the run up, according to the Arab Times.
Read more...
By Kevin Plumberg
HONG KONG (Reuters) - Most Asian stock markets were down on Tuesday as oil and food prices showed no signs of defusing stagflation fears, particularly with soybean prices at a record and oil above $141 a barrel.
European stocks were expected to open broadly lower, with investors focused on euro zone and U.S. manufacturing data due later in the day.
Bookmakers expected Britain's FTSE to open down 5-7 points, Germany's DAX down 3-7 points, and France's CAC down 1-6 points.
Crude climbed to an all-time high of $143.67 overnight, causing investors to grow increasingly intolerant of risk in their portfolios and seek relative safety in the yen.
The 40 percent surge in oil prices this year, even though global economic growth has slipped below its long-term trend, has made stagflation -- increased inflation combined with slowing growth -- a top fear for investors and a major headache for policymakers.
After a five-year bull market, Asian equities have fallen sharply this year on concerns that the credit crisis will sap demand for exports and inflation will erode returns. As a result, valuations have dropped from 17.7 times expected earnings in the next year to around 13 times, according to Standard & Poor's.
"One positive thing, if you could call it positive, is that shares have gotten significantly cheaper. But I am not sure if this alone would be enough to trigger foreign buying," said Kim Joong-hyun, a market analyst at Goodmorning Shinhan Securities in Seoul.
Japan's Nikkei share average finished 0.1 percent lower to record its longest losing streak in four years, as global growth worries weighed on exporters such as Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz).
Automakers had provided an early boost to the index, which on Monday posted its largest first-half decline since 1995, after a report that Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) plans to sell a hybrid version of its Camry in China in 2010.
Asia-Pacific shares traded outside of Japan dipped 0.8 percent to a three-month low, according to an MSCI index. The pan-Asia index was largely unchanged.
In the last six months, the Asia index chalked up its biggest first-half decline in 16 years mainly because of heavy losses in China and Vietnam.
CAPITULATION, ANYONE?
Korea's KOSPI fell 0.5 percent, down for a fourth consecutive session after a Bank of Korea official said inflation could stay above target for longer.
Chinese shares fell 1.8 percent on the Shanghai composite index as investors reacted negatively to news of yet more IPOs coming to market, anticipating a glut of fresh equity.
Hong Kong's market was closed because of a public holiday.
Some analysts believe that the next three months, smack dab in the thick of stagflation, is a good time to sift through the markets for good buys.
"The third quarter is going to be a time to go back and revisit the Asian markets because, by then, we'll have seen a real capitulation phase," said Nomura chief Asia strategist Sean Darby at a briefing in New York.
"Equities will probably be back to some of the lows we've seen in the last 10 years, but there won't be much financial distress, because the balance sheets are pretty good," said Darby, who is bullish on Korea, Malaysia, Thailand and Hong Kong, and would look to acquire Taiwan and Australia toward the end of the third quarter.
The bond market entered the second half on a downbeat note after a volatile past few months. The benchmark 10-year Japanese government bond yield, which moves inversely to the price, has declined around 20 basis points in the last two weeks to the lowest in nearly two months.
The yield rose 8 basis points to 1.67 percent on news that the June tankan's headline figure for big manufacturers was higher than the median market forecast.
South Korean government bond yields also rose after the country's central bank raised its inflation forecast.
The U.S. dollar rebounded slightly after slipping to a three-week low against the euro on Monday.
The euro was essentially unchanged against the dollar at $1.5767 ahead of a widely expected interest rate rise by the European Central Bank on Thursday. The dollar was down 0.4 percent at 105.63 yen.
U.S. light crude for August delivery was up $1.09 at $141.08 a barrel, after posting its largest first-half increase since 1999.
The blame for who is responsible for the surging cost of oil continued to be passed freely around the world.
Saudi Arabia's King Abdullah said even if production is raised oil prices will not go down, because speculators and taxes are what is behind the run up, according to the Arab Times.
Read more...
HMV Drops on Delayed Cost-Saving Program at Waterstone's Chain
By Loveday Morris
July 1 (Bloomberg) -- HMV Group Plc, the largest U.K. music retailer, slid in London trading after saying a cost-saving program at its Waterstone's book store chain will be delayed.
HMV fell as much as 6.2 percent in the U.K. capital after the retailer said savings from a new book warehouse won't start until fiscal 2010. Chief Executive Officer Simon Fox also said he was ``mindful'' of the ``challenging economic outlook going forward'' after the retailer reported a gain in annual profit.
``The top end of market expectation may possibly come back on the back of this,'' said Investec Securities analyst David Jeary, who has a ``hold'' rating on the stock. Analysts expect pretax profit of 68.6 million pounds ($137 million) for fiscal 2009, the average of 19 estimates compiled by Bloomberg shows.
HMV declined as much as 8 pence to 121.5 pence in London and traded down 5.6 percent at 123.25 pence as of 8:52 a.m. local time, the steepest drop since June 11.
``Having improved by 5 percent yesterday, we think there is little to push the shares further,'' Merrill Lynch & Co. analyst Jonathan Hogan wrote in a note to clients today. He has an ``underperform'' rating on the stock.
Net income climbed to 89 million pounds ($177.3 million), or 22 pence a share, in the year through April 26, from 16.1 million pounds, or 4 pence, a year earlier, the Maidenhead, England-based company said today. HMV booked a gain of 51.8 million pounds on last year's sale of its Japanese unit.
Second-half profit rose to 63.1 million pounds from 42.2 million pounds a year earlier, according to calculations based on the annual figures, helped by surging video games sales.
The retailer has installed downloading terminals in some stores and is dedicating more space to video games, which now make up 21 percent of sales, as demand soars for Nintendo Co.'s Wii, Sony Corp.'s PlayStation 3 and Microsoft Corp.'s Xbox.
To contact the reporter on this story: Loveday Morris in London at lmorris7@bloomberg.net
Last Updated: July 1, 2008 04:05 EDT
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July 1 (Bloomberg) -- HMV Group Plc, the largest U.K. music retailer, slid in London trading after saying a cost-saving program at its Waterstone's book store chain will be delayed.
HMV fell as much as 6.2 percent in the U.K. capital after the retailer said savings from a new book warehouse won't start until fiscal 2010. Chief Executive Officer Simon Fox also said he was ``mindful'' of the ``challenging economic outlook going forward'' after the retailer reported a gain in annual profit.
``The top end of market expectation may possibly come back on the back of this,'' said Investec Securities analyst David Jeary, who has a ``hold'' rating on the stock. Analysts expect pretax profit of 68.6 million pounds ($137 million) for fiscal 2009, the average of 19 estimates compiled by Bloomberg shows.
HMV declined as much as 8 pence to 121.5 pence in London and traded down 5.6 percent at 123.25 pence as of 8:52 a.m. local time, the steepest drop since June 11.
``Having improved by 5 percent yesterday, we think there is little to push the shares further,'' Merrill Lynch & Co. analyst Jonathan Hogan wrote in a note to clients today. He has an ``underperform'' rating on the stock.
Net income climbed to 89 million pounds ($177.3 million), or 22 pence a share, in the year through April 26, from 16.1 million pounds, or 4 pence, a year earlier, the Maidenhead, England-based company said today. HMV booked a gain of 51.8 million pounds on last year's sale of its Japanese unit.
Second-half profit rose to 63.1 million pounds from 42.2 million pounds a year earlier, according to calculations based on the annual figures, helped by surging video games sales.
The retailer has installed downloading terminals in some stores and is dedicating more space to video games, which now make up 21 percent of sales, as demand soars for Nintendo Co.'s Wii, Sony Corp.'s PlayStation 3 and Microsoft Corp.'s Xbox.
To contact the reporter on this story: Loveday Morris in London at lmorris7@bloomberg.net
Last Updated: July 1, 2008 04:05 EDT
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InBev Remains Committed to $46.3 Billion Anheuser Bid
By Loveday Morris
July 1 (Bloomberg) -- InBev NV, the Belgian brewer trying to buy Anheuser-Busch Cos., repeated that it's committed to its offer of $65 a share and would prefer a friendly takeover.
The bid reflects the ``full and fair'' value of the company, InBev Chief Executive Officer Carlos Brito said in an e-mailed statement today. The Leuven, Belgium-based brewer will pursue ``all available avenues'' to allow Anheuser shareholders to vote directly on the offer.
Anheuser-Busch on June 27 rejected InBev's $46.3 billion takeover offer three hours after the Belgian brewer made its bid hostile and announced plans to fire the St. Louis-based brewer's directors. The U.S. maker of Budweiser beer instead unveiled plans to boost its stock by cutting as much as $1 billion in annual costs and buying back more shares.
``It's a bit of strategic play,'' KBC Securities analyst Wim Hoste said by phone today. ``They want to keep pressure on Anheuser-Busch's board and remind them that they can still go hostile but on the other hand, they indicate that they want friendly talks. A friendly combination isn't going to happen at $65.''
InBev secured at least $40 billion in debt arranged by banks including Banco Santander SA to fund the initial offer. The founding family, who do not own enough stock to block a bid, were split over the first approach. A takeover would unite Budweiser with InBev's Stella Artois, Bass and more than 200 other brands.
``The proposal is backed by fully committed financing, and provides immediate certainty of value in a weakened stock market environment,'' Brito said in the statement.
Hoste, who rates InBev ``accumulate,'' expects the brewer to raise its offer to between $70 and $75 a share, a level which he still sees as an ``acceptable'' price.
InBev fell 8 cents, or 0.2 percent, to 44 euros at 9 a.m. in Brussels trading. Anheuser-Busch closed at $62.12 on the New York Stock Exchange yesterday.
To contact the reporter on this story: Loveday Morris in London at lmorris7@bloomberg.net
Last Updated: July 1, 2008 03:05 EDT
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July 1 (Bloomberg) -- InBev NV, the Belgian brewer trying to buy Anheuser-Busch Cos., repeated that it's committed to its offer of $65 a share and would prefer a friendly takeover.
The bid reflects the ``full and fair'' value of the company, InBev Chief Executive Officer Carlos Brito said in an e-mailed statement today. The Leuven, Belgium-based brewer will pursue ``all available avenues'' to allow Anheuser shareholders to vote directly on the offer.
Anheuser-Busch on June 27 rejected InBev's $46.3 billion takeover offer three hours after the Belgian brewer made its bid hostile and announced plans to fire the St. Louis-based brewer's directors. The U.S. maker of Budweiser beer instead unveiled plans to boost its stock by cutting as much as $1 billion in annual costs and buying back more shares.
``It's a bit of strategic play,'' KBC Securities analyst Wim Hoste said by phone today. ``They want to keep pressure on Anheuser-Busch's board and remind them that they can still go hostile but on the other hand, they indicate that they want friendly talks. A friendly combination isn't going to happen at $65.''
InBev secured at least $40 billion in debt arranged by banks including Banco Santander SA to fund the initial offer. The founding family, who do not own enough stock to block a bid, were split over the first approach. A takeover would unite Budweiser with InBev's Stella Artois, Bass and more than 200 other brands.
``The proposal is backed by fully committed financing, and provides immediate certainty of value in a weakened stock market environment,'' Brito said in the statement.
Hoste, who rates InBev ``accumulate,'' expects the brewer to raise its offer to between $70 and $75 a share, a level which he still sees as an ``acceptable'' price.
InBev fell 8 cents, or 0.2 percent, to 44 euros at 9 a.m. in Brussels trading. Anheuser-Busch closed at $62.12 on the New York Stock Exchange yesterday.
To contact the reporter on this story: Loveday Morris in London at lmorris7@bloomberg.net
Last Updated: July 1, 2008 03:05 EDT
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Telecinco says H2 advertising outlook unclear
Tue Jul 1, 2008 4:32am EDT
MADRID, July 1 (Reuters) - Spain's Telecinco (TL5.MC: Quote, Profile, Research, Stock Buzz) said on Tuesday the outlook for the second half for advertising was unclear.
Speaking at a conference in Madrid, the firm's chief executive Giuseppe Tringali said the advertising market had slowed up until June and the Euro 2000, which Spain won, had disappointed.
(Reporting by Robert Hetz)
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MADRID, July 1 (Reuters) - Spain's Telecinco (TL5.MC: Quote, Profile, Research, Stock Buzz) said on Tuesday the outlook for the second half for advertising was unclear.
Speaking at a conference in Madrid, the firm's chief executive Giuseppe Tringali said the advertising market had slowed up until June and the Euro 2000, which Spain won, had disappointed.
(Reporting by Robert Hetz)
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German Retail Sales Rose More Than Economists Expected in May
By Simone Meier
July 1 (Bloomberg) -- Retail sales in Germany, Europe's largest economy, increased more than economists expected in May, even as faster inflation sapped households' purchasing power.
Sales, adjusted for inflation and seasonal swings, rose 1.3 percent from April, when they dropped 0.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.8 percent, the median of 33 estimates in a Bloomberg News survey shows. In the year, sales increased 0.7 percent.
German households may cut back spending after surging food and oil prices pushed inflation to 3.4 percent last month. The European Central Bank has already said it may raise borrowing costs this week, suggesting it's more concerned about faster inflation than slowing economic growth and rising unemployment.
``It's more of a counter-reaction after two very negative months,'' said Carsten Klude, head of investment strategy at M.M. Warburg & Co. in Hamburg. ``We have to bury any hope for a revival in consumption this year. There's no room for an improvement as long as inflation remains at such a high level.''
In the year's first five months, sales declined 0.4 percent from the year earlier period when adjusted for inflation, while rising a nominal 2.2 percent, today's report showed.
Praktiker AG, Germany's second-largest home-improvement retailer, said May 30 that business was ``clearly better'' in the second quarter, following price cuts. Revenue growth will increase by a ``mid single-digit'' this year.
Oil Prices
Crude oil prices have increased 47 percent this year, breaching $140 a barrel for the first time last week. Rising energy costs were the main reason why German inflation accelerated in June to the fastest since European Union records began in 1996.
German consumer confidence fell to the lowest in more than two years in July, Nuremberg-based market-research company GfK said on June 24. GfK on that day also cut its forecast for consumer spending this year to 0.5 percent from 1 percent.
The pace of German growth may slow by half next year partly because of weaker consumer demand, the IMK economic research institute said on June 26. Growth in the economy may cool to 0.9 percent from 1.8 percent in 2008, Dusseldorf-based IMK said.
The economy is already losing momentum. Unemployment unexpectedly rose in May for the first time in more than two years and retail sales shrank last month. Investors and executives also grew more pessimistic in June.
Still, the ECB on July 3 will probably increase its key rate by a quarter-point to 4.25 percent, according to all but two out of 57 economists in a Bloomberg survey. The Frankfurt-based bank last raised borrowing costs in June 2007.
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
Last Updated: July 1, 2008 02:21 EDT
Read more...
July 1 (Bloomberg) -- Retail sales in Germany, Europe's largest economy, increased more than economists expected in May, even as faster inflation sapped households' purchasing power.
Sales, adjusted for inflation and seasonal swings, rose 1.3 percent from April, when they dropped 0.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.8 percent, the median of 33 estimates in a Bloomberg News survey shows. In the year, sales increased 0.7 percent.
German households may cut back spending after surging food and oil prices pushed inflation to 3.4 percent last month. The European Central Bank has already said it may raise borrowing costs this week, suggesting it's more concerned about faster inflation than slowing economic growth and rising unemployment.
``It's more of a counter-reaction after two very negative months,'' said Carsten Klude, head of investment strategy at M.M. Warburg & Co. in Hamburg. ``We have to bury any hope for a revival in consumption this year. There's no room for an improvement as long as inflation remains at such a high level.''
In the year's first five months, sales declined 0.4 percent from the year earlier period when adjusted for inflation, while rising a nominal 2.2 percent, today's report showed.
Praktiker AG, Germany's second-largest home-improvement retailer, said May 30 that business was ``clearly better'' in the second quarter, following price cuts. Revenue growth will increase by a ``mid single-digit'' this year.
Oil Prices
Crude oil prices have increased 47 percent this year, breaching $140 a barrel for the first time last week. Rising energy costs were the main reason why German inflation accelerated in June to the fastest since European Union records began in 1996.
German consumer confidence fell to the lowest in more than two years in July, Nuremberg-based market-research company GfK said on June 24. GfK on that day also cut its forecast for consumer spending this year to 0.5 percent from 1 percent.
The pace of German growth may slow by half next year partly because of weaker consumer demand, the IMK economic research institute said on June 26. Growth in the economy may cool to 0.9 percent from 1.8 percent in 2008, Dusseldorf-based IMK said.
The economy is already losing momentum. Unemployment unexpectedly rose in May for the first time in more than two years and retail sales shrank last month. Investors and executives also grew more pessimistic in June.
Still, the ECB on July 3 will probably increase its key rate by a quarter-point to 4.25 percent, according to all but two out of 57 economists in a Bloomberg survey. The Frankfurt-based bank last raised borrowing costs in June 2007.
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net
Last Updated: July 1, 2008 02:21 EDT
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Japan: Tankan Weaker but Not as Bad as Feared
Daily Forex Fundamentals | Written by Danske Bank | Jul 01 08 07:18 GMT |
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The Q2 Tankan survey released by Bank of Japan (BoJ) weakened but not as much as expected and does in the details paint a more positive view of the Japanese economy than other recent business surveys like yesterdays Nomura/Reuters PMI. Overall however the Tankan survey is still consistent with over view that GDP growth will slow below potential (we estimate potential growth at 1.5% q/q AR) in Q2 and Q3 on the back of slower private consumption and slower growth in both export and business investment demand (see chart 1). While overnights Tankan survey has not materially changed our view of the Japanese economy it does give us some assurance that the economy is not in free fall: Overseas demand remain relative robust (see chart 9), Japanese companies still plan to increase capital spending in the current fiscal year (see chart 7), inventories are manageable and there are no signs of a major impact on credit conditions from the recent global credit crisis (see chart 8).
Looking into the details the Tankan diffusion index (current conditions) for large manufacturers in Q2 08 declined to 5 (Consensus: 3, DB: 1) from 11 in Q1 08 and the actual development in business conditions in Q2 has been slightly worse than expected in Q4 08 (see chart 2) For large manufacturers business conditions are expected to weaken slightly to 4 in Q3 (Consensus: 2, DB 0). Outside manufacturing business conditions in Q2 only deteriorated slightly to 10 (Consensus: 8, DB: 5) for large enterprises and is only expected to decline slightly to 8. Although enterprises report that the development in Q2 overall has been slightly worse than expected, the comparatively small back between the current conditions and outlook for Q3 does indicate some stabilization in business conditions (see chart 2 and chart 3).
For large enterprises planned capital expenditures (including land purchase) is expected to decline 2.4% for fiscal year (FY) 2008 relative to capex expenditures in FY 2007. It should be noted that these figures are budgeted capital expenditure and usually this figure is revised up through the year as new projects are added to the Capex (see chart 7). Still the planned increase in capex is weaker than last year and there certainly is downside risk to Investments.
With headline inflation possible jumping just outside the 0%-2% Bank of Japan price stability range there will probably be increased focus on price behavior and expectations. According to Tankan more Japanese enterprises are indeed planning to increase finished good prices (see chart 10). However, the main message continues to be, that Japanese enterprises are having difficulties passing higher input prices unto customers.
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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Carpetright Posts Profit Drop, Says Sales Will Worsen
By Amy Wilson
July 1 (Bloomberg) -- Carpetright Plc, the U.K.'s largest carpet retailer, posted a 7.6 percent drop in annual profit as costs related to acquisitions increased, and said sales will worsen this year as Britons spend less refurbishing their homes.
Net income fell to 42.8 million pounds ($85.3 million), or 63.2 pence a share, in the year ended May 3, from 46.3 million pounds, or 68.2 pence, a year earlier, the Rainham, England-based company said today. Sales rose 9.6 percent to 521.5 million pounds.
``I believe that the next year will be one of the most difficult I have seen,'' Chairman and founder Philip Harris, who has been selling carpets for 50 years, said in the statement.
Carpetright fell to a five-year low in London trading. Home- furnishings and electronics retailers are reporting slower sales as higher living costs and falling house prices deter shoppers from refurbishing their properties. The retailer bought the 30- outlet Storey Carpets chain last year to shore up sales.
Carpetright declined 35.5 pence, or 5.4 percent, to 624.5 pence at 8:28 a.m. in London trading. A close at that price would be the lowest since June 30, 2003. The shares have fallen 27 percent this year, less than the 33 percent decline by the 18-member FTSE 350 General Retailers Index.
Finance Director Jason Grover said today he expects analysts to cut earnings estimates for this year, in light of falling house prices and fewer mortgage approvals. Before today's results, brokerage KBC Peel Hunt had estimated profit before tax and one- off costs of 55 million pounds for the year ending May 2009.
Netherlands, Belgium
Sales at U.K. and Irish stores open at least a year fell 2.7 percent in the year, Carpetright said. In the Netherlands and Belgium, revenue on that basis rose 6.7 percent. Grover declined to comment on sales since the fiscal year-end.
Business in the Netherlands isn't being hurt by a slowing economy, the finance director said. Carpetright yesterday acquired Dutch carpet and blinds retailer Ben de Graaff Tapijt.
Gross margins widened by 1.4 percentage points in Belgium and the Netherlands last year as Carpetright negotiated better terms with suppliers, Grover said.
Carpetright said in April it had increased the size of its network to 675 stores. The retailer also sells laminate and vinyl flooring, and has stores in Poland as well as the Netherlands, Belgium, the U.K. and Ireland.
Managers led by Harris scrapped a 630 million-pound plan to buy the company in December. Credit market turmoil hampered the executives' ability to secure funding, Harris said at the time.
Carpetright, started in 1988 with one store in London's East End district, said in April it would spend $27 million acquiring businesses to add 13 stores in Britain and 11 in the Netherlands.
The full-year earnings beat the 42.2 million-pound average estimate of three analysts compiled by Bloomberg.
Shareholders will receive a final dividend of 30 pence a share, raising the annual total by 4 percent to 52 pence.
To contact the reporter on this story: Amy Wilson in London at awilson23@bloomberg.net.
Last Updated: July 1, 2008 03:31 EDT
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July 1 (Bloomberg) -- Carpetright Plc, the U.K.'s largest carpet retailer, posted a 7.6 percent drop in annual profit as costs related to acquisitions increased, and said sales will worsen this year as Britons spend less refurbishing their homes.
Net income fell to 42.8 million pounds ($85.3 million), or 63.2 pence a share, in the year ended May 3, from 46.3 million pounds, or 68.2 pence, a year earlier, the Rainham, England-based company said today. Sales rose 9.6 percent to 521.5 million pounds.
``I believe that the next year will be one of the most difficult I have seen,'' Chairman and founder Philip Harris, who has been selling carpets for 50 years, said in the statement.
Carpetright fell to a five-year low in London trading. Home- furnishings and electronics retailers are reporting slower sales as higher living costs and falling house prices deter shoppers from refurbishing their properties. The retailer bought the 30- outlet Storey Carpets chain last year to shore up sales.
Carpetright declined 35.5 pence, or 5.4 percent, to 624.5 pence at 8:28 a.m. in London trading. A close at that price would be the lowest since June 30, 2003. The shares have fallen 27 percent this year, less than the 33 percent decline by the 18-member FTSE 350 General Retailers Index.
Finance Director Jason Grover said today he expects analysts to cut earnings estimates for this year, in light of falling house prices and fewer mortgage approvals. Before today's results, brokerage KBC Peel Hunt had estimated profit before tax and one- off costs of 55 million pounds for the year ending May 2009.
Netherlands, Belgium
Sales at U.K. and Irish stores open at least a year fell 2.7 percent in the year, Carpetright said. In the Netherlands and Belgium, revenue on that basis rose 6.7 percent. Grover declined to comment on sales since the fiscal year-end.
Business in the Netherlands isn't being hurt by a slowing economy, the finance director said. Carpetright yesterday acquired Dutch carpet and blinds retailer Ben de Graaff Tapijt.
Gross margins widened by 1.4 percentage points in Belgium and the Netherlands last year as Carpetright negotiated better terms with suppliers, Grover said.
Carpetright said in April it had increased the size of its network to 675 stores. The retailer also sells laminate and vinyl flooring, and has stores in Poland as well as the Netherlands, Belgium, the U.K. and Ireland.
Managers led by Harris scrapped a 630 million-pound plan to buy the company in December. Credit market turmoil hampered the executives' ability to secure funding, Harris said at the time.
Carpetright, started in 1988 with one store in London's East End district, said in April it would spend $27 million acquiring businesses to add 13 stores in Britain and 11 in the Netherlands.
The full-year earnings beat the 42.2 million-pound average estimate of three analysts compiled by Bloomberg.
Shareholders will receive a final dividend of 30 pence a share, raising the annual total by 4 percent to 52 pence.
To contact the reporter on this story: Amy Wilson in London at awilson23@bloomberg.net.
Last Updated: July 1, 2008 03:31 EDT
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U.K. Annual House Prices Declined by Most Since 1992
By Svenja O'Donnell
July 1 (Bloomberg) -- U.K. house prices fell in June by the most since the end of the last recession as banks starved the property market of loans, Nationwide Building Society said.
The price of an average home declined 6.3 percent from a year earlier to 172,415 pounds ($343,278), the biggest drop since November 1992, Britain's fourth-biggest mortgage lender said today in a statement. Prices dropped 0.9 percent from May.
Real-estate stocks had their worst performance in more than 20 years in the second quarter and Bank of England Governor Mervyn King predicts ``extremely weak activity'' in the housing market. Mortgage approvals fell to the lowest in at least nine years in May and consumer confidence deteriorated to the lowest level in 18 years last month, reports showed yesterday.
``I can't see this price decline coming to an end any time soon,'' said George Buckley, an economist at Deutsche Bank AG in London who predicts values may fall at least 10 percent this year. ``The biggest driver in prices tends to be approvals and yesterday's figure was quite shocking.''
House prices fell for the eighth consecutive month, according to Nationwide. The pace of decline on the month was slower than the 2.5 percent drop in May, the most since Nationwide's index started in January 1991.
Property stocks extended their slide today. Shares of Taylor Wimpey Plc, the U.K.'s largest homebuilder, declined 4 percent and U.K. building materials distributor Travis Perkins Plc, which has lost almost three fifths of its value this year, fell 3.5 percent.
`Hand in hand'
Falling house prices risk pushing the U.K. economy into recession, as slowing growth and falling confidence curbs Britons' spending. King said June 19 that ``lower demand in the high street will go hand in hand with lower demand in the property market.''
Banks granted 42,000 loans for house purchase in May, compared with 57,000 in April, Bank of England data showed yesterday. An index of consumer confidence fell to minus 34 in June, the lowest since the London riots in 1990 before Margaret Thatcher's downfall as prime minister.
``The tightening of credit conditions over previous months, along with changing expectations of house price growth and a general weakening in consumer confidence in the economy have hit mortgage demand and led to a severe slowing in the levels of housing market activity,'' Fionnuala Earley, Nationwide's chief economist, said.
King told lawmakers on June 26 that there may be ``big movements'' in house prices as the property market goes through a ``period of adjustment.'' The Bank of England predicted in May that the annual rate of economic expansion will drop to around 1 percent, the lowest since 1992.
Still, accelerating inflation makes it more difficult for policy makers to kick-start economic growth by cutting rates. Consumer prices jumped 3.3 percent in May from a year earlier, the most in more than a decade.
Policy makers John Gieve, Timothy Besley, Paul Tucker and Kate Barker, who testified with King on June 26, all said they had considered a vote for higher interest rates last month. The panel kept the benchmark rate at 5 percent for a second month.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
Last Updated: July 1, 2008 03:54 EDT
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July 1 (Bloomberg) -- U.K. house prices fell in June by the most since the end of the last recession as banks starved the property market of loans, Nationwide Building Society said.
The price of an average home declined 6.3 percent from a year earlier to 172,415 pounds ($343,278), the biggest drop since November 1992, Britain's fourth-biggest mortgage lender said today in a statement. Prices dropped 0.9 percent from May.
Real-estate stocks had their worst performance in more than 20 years in the second quarter and Bank of England Governor Mervyn King predicts ``extremely weak activity'' in the housing market. Mortgage approvals fell to the lowest in at least nine years in May and consumer confidence deteriorated to the lowest level in 18 years last month, reports showed yesterday.
``I can't see this price decline coming to an end any time soon,'' said George Buckley, an economist at Deutsche Bank AG in London who predicts values may fall at least 10 percent this year. ``The biggest driver in prices tends to be approvals and yesterday's figure was quite shocking.''
House prices fell for the eighth consecutive month, according to Nationwide. The pace of decline on the month was slower than the 2.5 percent drop in May, the most since Nationwide's index started in January 1991.
Property stocks extended their slide today. Shares of Taylor Wimpey Plc, the U.K.'s largest homebuilder, declined 4 percent and U.K. building materials distributor Travis Perkins Plc, which has lost almost three fifths of its value this year, fell 3.5 percent.
`Hand in hand'
Falling house prices risk pushing the U.K. economy into recession, as slowing growth and falling confidence curbs Britons' spending. King said June 19 that ``lower demand in the high street will go hand in hand with lower demand in the property market.''
Banks granted 42,000 loans for house purchase in May, compared with 57,000 in April, Bank of England data showed yesterday. An index of consumer confidence fell to minus 34 in June, the lowest since the London riots in 1990 before Margaret Thatcher's downfall as prime minister.
``The tightening of credit conditions over previous months, along with changing expectations of house price growth and a general weakening in consumer confidence in the economy have hit mortgage demand and led to a severe slowing in the levels of housing market activity,'' Fionnuala Earley, Nationwide's chief economist, said.
King told lawmakers on June 26 that there may be ``big movements'' in house prices as the property market goes through a ``period of adjustment.'' The Bank of England predicted in May that the annual rate of economic expansion will drop to around 1 percent, the lowest since 1992.
Still, accelerating inflation makes it more difficult for policy makers to kick-start economic growth by cutting rates. Consumer prices jumped 3.3 percent in May from a year earlier, the most in more than a decade.
Policy makers John Gieve, Timothy Besley, Paul Tucker and Kate Barker, who testified with King on June 26, all said they had considered a vote for higher interest rates last month. The panel kept the benchmark rate at 5 percent for a second month.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
Last Updated: July 1, 2008 03:54 EDT
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Japan's Tankan Sentiment Falls; Profits to Drop 7%
By Jason Clenfield
July 1 (Bloomberg) -- Confidence among Japan's largest manufacturers fell to a four-year low and companies expect earnings to decline for the first time since the 2001 recession.
The Tankan index of manufacturer sentiment slid to 5 points in June from 11 in March, a third quarterly decline, the Bank of Japan said today in Tokyo. Large companies said profits will drop 7 percent in the year ending March 31, compared with a 0.3 percent increase predicted three months ago.
Record energy and commodity prices are eroding profits at Nissan Motor Co. and Canon Inc., and the U.S. slowdown is rippling through Europe and Asia, stifling demand for Japanese cars and electronics. The economy probably shrank for the first time in a year last quarter as export growth slowed and households cut spending because of costlier food and fuel.
The yen traded at 105.81 per dollar as of 4:57 p.m. in Tokyo from 106.15 before the report. Japan's currency has weakened 3.8 percent since the previous Tankan on April 1. Large manufacturers see the yen trading at 102.74 on average this year.
The Nikkei 225 Stock Average fell 0.1 percent. The yield on Japan's 10-year bond rose 6.5 basis points to 1.675 percent. Economists predicted large-manufacturer confidence to slide to 3.
Slowdown Underway
``The Tankan figures weren't as bad as anticipated, but they indicated an economic slowdown is surely underway,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. ``Rising raw-material costs are squeezing corporate profits, posing downside risks to the economy.''
Large companies said they plan to increase capital spending 2.4 percent this fiscal year, the worst reading for a June survey since 2002, when Japan emerged from its last recession.
Confidence at big service-sector companies fell to a four- year low of 10 points in June from 12 in March, less than economists' expectations for a drop to 8.
The nation's largest manufacturers and non-manufacturers both expect to be less confident three months from now, with their outlook indexes at 4 and 8 respectively. A positive number means optimists outnumber pessimists.
The world's second-largest economy probably contracted at an annual 0.4 percent pace in the second quarter, according to the median estimate of economists surveyed last month.
Bank of Japan
Slower growth is likely to prevent the Bank of Japan from raising its key interest rate from 0.5 percent this year, even as inflation runs at the fastest pace in a decade, according to economists surveyed by Bloomberg News.
Costlier raw-materials caused companies' first-quarter profits to fall at the fastest pace since 2002. Nissan's Chief Executive Officer Carlos Ghosn last week said higher steel and rubber costs have become ``practically impossible to absorb.''
Canon will probably report its earnings fell 18 percent in the first half of the year, the Nikkei newspaper reported last month. Crude oil prices have doubled in the past year and reached a record $143.67 a barrel yesterday.
``One of our biggest concerns is the crazy crude-oil prices,'' Shoju Kobayashi, president of Kansai Paint Co., Japan's largest maker of automotive paints, said today in an interview on Bloomberg Television.
Costlier materials will push large manufacturers' profit margins down to 5.6 percent this fiscal year from 6.4 percent for the year ended March, according to today's survey.
`Less to Fear'
That's still almost double that during the past six recessions, and some economists say Japan's businesses may be better able to withstand the current slowdown than before because they have shed excess debt, labor and capacity.
``Companies are much more profitable than they were,'' said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. ``They have much less to fear from a short-term margin squeeze. It's not going to threaten their survival.''
Kobayashi said Kansai Paint forecasts record profit this year as demand from China and India makes up for slower sales in Japan and the U.S.
Nikkei 225 companies' debt-to-equity ratio has dropped an average of 7 percent annually over the past five years to 1.15 times, Bloomberg data show.
Businesses have managed to control costs by trimming staff and keeping wages down, said Tetsuro Sugiura, chief economist at Mizuho Research Institute Ltd. in Tokyo. ``Companies are better prepared to handle external shocks than before,'' he said.
The large manufacturer index, while the lowest since September 2003, is still above the negative numbers recorded during Japan's decade of economic stagnation in the 1990s. The survey plunged to minus 51 in 1998, when Asia was in the throes of a currency crisis and the government had to buy failed lenders including Long-Term Credit Bank of Japan Ltd.
The Tankan survey was conducted from May 28 to June 30 and covered 10,579 companies.
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
Last Updated: July 1, 2008 03:59 EDT
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Australia's Economy Will Slow on Rates, Fuel, Central Bank Says
By Jacob Greber
July 1 (Bloomberg) -- Australia's economic growth rate will slow as the highest borrowing costs in 12 years and record gasoline prices force households to cut spending, central bank Governor Glenn Stevens said. The nation's currency fell.
``While the inflation outlook remains concerning, the board's assessment continues to be that demand growth will be moderate this year,'' Stevens said today in Sydney.
The Reserve Bank left its benchmark interest rate at 7.25 percent for a fourth month as slumping stock markets, surging fuel prices and a drop in employment erode consumer confidence. The currency fell by the most in two weeks after Stevens said four rate increases between August and March should cool inflation ``over time'' from the fastest pace in almost 17 years.
``The Reserve Bank is signaling that it has done enough,'' said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. ``Slower growth will lead to slower inflation outcomes, but the process takes time.''
The Australian dollar fell to 95.60 U.S. cents at 4:37 p.m. in Sydney from 95.78 cents just before the decision was announced. The two-year government bond yield declined 3 basis points to 6.85 percent. A basis point is 0.01 percentage point.
``The board's judgment is that the current stance of monetary policy remains appropriate,'' Stevens said today. The bank's decision to leave the cash rate at 7.25 percent was forecast by all 25 economists surveyed by Bloomberg News.
Global Inflation
``Inflation is likely to remain relatively high in the short term and the consumer price index will be further boosted in coming quarters by the recent rises in global oil prices,'' Stevens said. ``Looking further ahead, inflation in both CPI and underlying terms should decline over time, provided demand continues to evolve as expected.''
The governor's concern about price increases is being echoed by central banks around the world. The U.S. Federal Reserve kept its benchmark rate at 2 percent last week and warned faster inflation may accompany some strengthening of the economy. European Central Bank President Jean-Claude Trichet has left open the option of raising interest rates after July.
Surging fuel, food and housing costs pushed Australia's annual core inflation to 4.4 percent in the first quarter, the highest rate in almost 17 years. The central bank aims to keep price increases between 2 percent and 3 percent on average.
The government is due to publish second-quarter inflation figures on July 23.
Consumer Confidence
``The central bank seem to be preparing people for some pretty bad inflation numbers,'' said Matthew Hassan, a senior economist at Westpac Banking Corp. in Sydney. ``And they're implying that they would look through any short-term spike in inflation as long as demand continues to fall.''
Reports published since the bank's June meeting support Steven's view that the economy is slowing. Employment fell in May for the first time in 18 months, ending the longest run of monthly job gains since 1978, consumer confidence dropped in June and businesses remained pessimistic for a fifth month.
The economy, which has been expanding for 17 years, grew 0.6 percent in the first quarter from the previous three months, the slowest pace in almost two years.
Goodyear Tire & Rubber Co, the U.S.-based tire maker, said last week it will close a Melbourne factory and fire 600 workers. Qantas Airways Ltd. the nation's largest carrier, announced plans last month to scrap regional routes and cut hundreds of jobs.
Lending to consumers and businesses by banks and other financial institutions rose in May at the slowest annual pace since November 2005, and borrowing for home loans grew by the least in 16 years, the central bank said yesterday.
Retail Sales
Home-building approvals fell 3.4 percent in May, the fourth decline this year, and retail sales rose just 0.1 percent, according to the median estimates of economists surveyed by Bloomberg. The housing and retail sales figures will be published tomorrow at 11:30 a.m. in Sydney.
Consumer and investor sentiment is also being battered by crude oil prices, which hit a record $143.67 a barrel yesterday, and tumbling stock markets.
Australia's benchmark S&P/ASX 200 Index has slumped 19 percent this year, and the Dow Jones Industrial Average had its worst June since the Great Depression.
A mining boom that is forecast to boost Australia's terms of trade, a measure of export earnings, by 20 percent this year is propping up economic growth. Demand from China has pushed prices for coal, iron ore and crude oil to records, bolstering profits for miners such as BHP Billiton Ltd. and Rio Tinto Group.
``There is still a fairly big question mark over whether demand will get a second wind from the terms of trade boost,'' Westpac's Hassan said. ``It's yet to be seen how much impetus that will impart on the economy late this year and into 2009.
``There is enough uncertainty to leave rates on hold.''
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Last Updated: July 1, 2008 02:46 EDT
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Broad Says U.S. Economy in Worst Recession Since World War II
By Anthony Massucci and Erik Holm
July 1 (Bloomberg) -- Billionaire investor Eli Broad said the U.S. economy is in the `worst period' of his adult life as a housing market recovery remains ``several years'' away.
``This is worse than any recession we've had since World War II,'' Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient ``safety nets.''
The economy expanded at an annual rate of 1 percent in the first quarter, the Commerce Department said last week. That caps the weakest six months of growth in five years. The U.S. lost 49,000 jobs in May, when the unemployment rate rose to 5.5 percent, the fifth straight month with a drop in payrolls and the biggest jump in the jobless rate in more than two decades.
``This is the worst period of my adult lifetime,'' Broad said, speaking about the U.S. economy. ``I do not think things are going to get any better'' before the next president takes office in January.
The banking industry may need additional capital to protect against bad loans, Broad said. U.S. banks may have to raise $65 billion as losses and writedowns extend into the first quarter of 2009, Goldman Sachs Group Inc. analysts said last month.
The world's biggest financial firms have posted about $400 billion in writedowns and credit losses tied to the U.S. housing slump, according to data compiled by Bloomberg.
Selling off vacant, unsold homes could take ``several years,'' Broad said.
Waiting for a Bottom
``The problem is, people don't believe prices have bottomed out,'' he said. ``You've got to induce people to buy houses'' with federal policies including tax incentives.
Broad, whose main focus is his $2.63 billion philanthropic organization, last month joined investors in pushing for the ouster of Martin Sullivan as chief executive officer of American International Group Inc., after the world's largest insurer posted record losses.
AIG, where Broad served as a director from 1999 until 2003, lost half its market value in the past year and has posted $13 billion in losses tied to the subprime mortgage market collapse over two quarters.
``It will turn around in due time,'' Broad said of New York- based AIG. ``It's not going to be overnight.''
Broad said in a television interview that consumer confidence and home sales won't improve this year, while unemployment will rise.
U.S. borrowers will continue to default on home, auto and credit-card loans, he said. More than 100 mortgage companies have suspended operations, closed or sold themselves since the start of 2007. American Express Co. CEO Kenneth Chenault said last week that credit indicators including late payments have worsened beyond the company's expectations.
`Corrosive Effect'
The U.S. government stimulus checks helped support economic growth and more federal help is needed to fuel growth, he said.
``I think housing is going to continue to have a corrosive effect on consumer psychology and the economy in general to a far greater extent than people think, or even far greater than I thought about a month or two ago,'' he said.
The number of Americans in danger of losing their homes to foreclosure rose to the highest in at least three decades during the first quarter, according to data from the Washington-based Mortgage Bankers Association.
Sales of new and existing homes in the U.S. began to drop in mid-2005, bringing the five-year housing boom to a close. Prices for existing homes finished last year below 2006 levels, according to the National Association of Realtors in Chicago.
Repairing the damage to the U.S. economy will require political leadership on U.S. energy, health care and education policies, Broad said. Those areas are the focus of his foundation.
``I worry about the future of America,'' said Broad. ``It's time to regroup and redefine our place as a country and that's tough to do.''
-- With reporting by Michael McKee, Timothy Homan and Hugh Son in New York. Editors: Rob Urban, Dan Kraut
To contact the reporters on this story: Anthony Massucci in New York at amassucc@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net
Last Updated: July 1, 2008 00:01 EDT
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July 1 (Bloomberg) -- Billionaire investor Eli Broad said the U.S. economy is in the `worst period' of his adult life as a housing market recovery remains ``several years'' away.
``This is worse than any recession we've had since World War II,'' Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient ``safety nets.''
The economy expanded at an annual rate of 1 percent in the first quarter, the Commerce Department said last week. That caps the weakest six months of growth in five years. The U.S. lost 49,000 jobs in May, when the unemployment rate rose to 5.5 percent, the fifth straight month with a drop in payrolls and the biggest jump in the jobless rate in more than two decades.
``This is the worst period of my adult lifetime,'' Broad said, speaking about the U.S. economy. ``I do not think things are going to get any better'' before the next president takes office in January.
The banking industry may need additional capital to protect against bad loans, Broad said. U.S. banks may have to raise $65 billion as losses and writedowns extend into the first quarter of 2009, Goldman Sachs Group Inc. analysts said last month.
The world's biggest financial firms have posted about $400 billion in writedowns and credit losses tied to the U.S. housing slump, according to data compiled by Bloomberg.
Selling off vacant, unsold homes could take ``several years,'' Broad said.
Waiting for a Bottom
``The problem is, people don't believe prices have bottomed out,'' he said. ``You've got to induce people to buy houses'' with federal policies including tax incentives.
Broad, whose main focus is his $2.63 billion philanthropic organization, last month joined investors in pushing for the ouster of Martin Sullivan as chief executive officer of American International Group Inc., after the world's largest insurer posted record losses.
AIG, where Broad served as a director from 1999 until 2003, lost half its market value in the past year and has posted $13 billion in losses tied to the subprime mortgage market collapse over two quarters.
``It will turn around in due time,'' Broad said of New York- based AIG. ``It's not going to be overnight.''
Broad said in a television interview that consumer confidence and home sales won't improve this year, while unemployment will rise.
U.S. borrowers will continue to default on home, auto and credit-card loans, he said. More than 100 mortgage companies have suspended operations, closed or sold themselves since the start of 2007. American Express Co. CEO Kenneth Chenault said last week that credit indicators including late payments have worsened beyond the company's expectations.
`Corrosive Effect'
The U.S. government stimulus checks helped support economic growth and more federal help is needed to fuel growth, he said.
``I think housing is going to continue to have a corrosive effect on consumer psychology and the economy in general to a far greater extent than people think, or even far greater than I thought about a month or two ago,'' he said.
The number of Americans in danger of losing their homes to foreclosure rose to the highest in at least three decades during the first quarter, according to data from the Washington-based Mortgage Bankers Association.
Sales of new and existing homes in the U.S. began to drop in mid-2005, bringing the five-year housing boom to a close. Prices for existing homes finished last year below 2006 levels, according to the National Association of Realtors in Chicago.
Repairing the damage to the U.S. economy will require political leadership on U.S. energy, health care and education policies, Broad said. Those areas are the focus of his foundation.
``I worry about the future of America,'' said Broad. ``It's time to regroup and redefine our place as a country and that's tough to do.''
-- With reporting by Michael McKee, Timothy Homan and Hugh Son in New York. Editors: Rob Urban, Dan Kraut
To contact the reporters on this story: Anthony Massucci in New York at amassucc@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net
Last Updated: July 1, 2008 00:01 EDT
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German June Unemployment Falls to Lowest in 16 Years
By Rainer Buergin
July 1 (Bloomberg) -- German unemployment declined in June, pushing the jobless rate to the lowest level in almost 16 years, as Europe's largest economy resists a global slowdown.
The number of people out of work, adjusted for seasonal swings, fell 38,000 from May to 3.27 million, the Nuremberg-based Federal Labor Agency said today. Economists expected a decline of 14,000 in June, according to the median of a Bloomberg News survey of 38 forecasts. The adjusted unemployment rate declined to 7.8 percent from 7.9 percent in May.
``With annual growth above 1.3 percent, companies are still hiring,'' said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. ``We're not facing an abrupt end to employment growth, but maybe a moderation. It's possible that the jobless rate will even decline further.''
Forward-looking economic reports such as the Ifo institute's business confidence measure and manufacturing orders indicate that German growth is set to slow. While unemployment rose last month for the first time in more than two years, overall companies continue to work off order backlogs and export sales, which rose more in April than economists expected, are still providing support.
Slowdown Expected
The median of five forecasts published by economic institutes last month suggests the economy will expand 2.2 percent this year before slowing to growth of 1 percent next. The economy may have shrunk in the second quarter after expanding 1.5 percent in the first three months, the strongest rate in 12 years, Deputy Economy Minister Walther Otremba said June 24.
``The German economy had a very good start into 2009,'' said Eckhart Tuchtfeld, an economist at Commerzbank AG in Frankfurt. Even so, Tuchtfeld said he's ``not as convinced anymore that the positive economic development will boost employment.''
Siemens AG, Europe's biggest engineering company, plans to eliminate 6,400 jobs in Germany, Sueddeutsche Zeitung reported June 27. Wilhelm Karmann GmbH, the auto supplier that builds convertibles for companies such as Volkswagen AG, has already cut 500 of its 5,000 workers and may eliminate another 1,000 jobs, Handelsblatt reported on June 26.
The Exception
Still, companies cutting thousands of jobs are the ``exception,'' Hans-Werner Sinn, president of the Munich-based Ifo economic institute, told Focus magazine in an interview published today. The labor market will continue its ``positive'' trend until September 2009. Sinn expects unemployment to average 3.1 million next year.
In a flash survey of purchasing managers, an index measuring employment fell to 52.8 in June from 54.8 in May and 55.6 at the start of the year. A reading above 50 signals employment is still expanding. Among retailers, the measure fell to 49.8 in June from 51 in May, final PMI figures showed.
Industry is in ``robust shape'' and companies are ``rather confident'' about the near future, BDI industry federation chief Juergen Thumann said June 23 in an interview. For next year, the risks are increasing and there's concern about developments in the U.S., he said.
The prospect of slowing growth pushed business confidence to the lowest since January 2006, according to figures published by the Munich-based Ifo economic institute on June 23. Coupled with rising oil prices and accelerating inflation, a cooling economy poses a dilemma for the European Central Bank.
Oil Record
Oil rose to a record $143.67 per barrel yesterday and German inflation -- harmonized to comply with European Union standards -- accelerated in June to the fastest pace since at least 1996.
That's strengthened the resolve of a majority on the ECB's 21-member governing council to tighten monetary policy. ECB President Jean-Claude Trichet on June 25 reiterated the bank may raise its key interest rate by a quarter-point to 4.25 percent on July 3 to contain inflation.
That's drawn criticism from politicians such as French Finance Minister Christine Lagarde, who's said that a significant rate increase may not be ``prudent.'' German Finance Minister Peer Steinbrueck told Spiegel magazine this week that higher borrowing costs may send ``a wrong signal.''
The inflation rate in the euro area rose to 4 percent, the highest in more than 16 years, from 3.7 percent in May, the European Union statistics office in Luxembourg said yesterday. The ECB seeks to keep inflation just below 2 percent.
According to the latest comparable data from the Organization for Economic Cooperation and Development, Germany's jobless rate was 7.4 percent in April, compared with 7.8 percent in France, 4 percent in Japan and 5 percent in the U.S. The OECD average that month was 5.5 percent.
In western Germany, the number of people out of work fell by a seasonally adjusted 21,000 to 2.14 million in June, while the number in eastern Germany declined by 17,000 to 1.13 million.
To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.
Last Updated: July 1, 2008 04:11 EDT
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July 1 (Bloomberg) -- German unemployment declined in June, pushing the jobless rate to the lowest level in almost 16 years, as Europe's largest economy resists a global slowdown.
The number of people out of work, adjusted for seasonal swings, fell 38,000 from May to 3.27 million, the Nuremberg-based Federal Labor Agency said today. Economists expected a decline of 14,000 in June, according to the median of a Bloomberg News survey of 38 forecasts. The adjusted unemployment rate declined to 7.8 percent from 7.9 percent in May.
``With annual growth above 1.3 percent, companies are still hiring,'' said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. ``We're not facing an abrupt end to employment growth, but maybe a moderation. It's possible that the jobless rate will even decline further.''
Forward-looking economic reports such as the Ifo institute's business confidence measure and manufacturing orders indicate that German growth is set to slow. While unemployment rose last month for the first time in more than two years, overall companies continue to work off order backlogs and export sales, which rose more in April than economists expected, are still providing support.
Slowdown Expected
The median of five forecasts published by economic institutes last month suggests the economy will expand 2.2 percent this year before slowing to growth of 1 percent next. The economy may have shrunk in the second quarter after expanding 1.5 percent in the first three months, the strongest rate in 12 years, Deputy Economy Minister Walther Otremba said June 24.
``The German economy had a very good start into 2009,'' said Eckhart Tuchtfeld, an economist at Commerzbank AG in Frankfurt. Even so, Tuchtfeld said he's ``not as convinced anymore that the positive economic development will boost employment.''
Siemens AG, Europe's biggest engineering company, plans to eliminate 6,400 jobs in Germany, Sueddeutsche Zeitung reported June 27. Wilhelm Karmann GmbH, the auto supplier that builds convertibles for companies such as Volkswagen AG, has already cut 500 of its 5,000 workers and may eliminate another 1,000 jobs, Handelsblatt reported on June 26.
The Exception
Still, companies cutting thousands of jobs are the ``exception,'' Hans-Werner Sinn, president of the Munich-based Ifo economic institute, told Focus magazine in an interview published today. The labor market will continue its ``positive'' trend until September 2009. Sinn expects unemployment to average 3.1 million next year.
In a flash survey of purchasing managers, an index measuring employment fell to 52.8 in June from 54.8 in May and 55.6 at the start of the year. A reading above 50 signals employment is still expanding. Among retailers, the measure fell to 49.8 in June from 51 in May, final PMI figures showed.
Industry is in ``robust shape'' and companies are ``rather confident'' about the near future, BDI industry federation chief Juergen Thumann said June 23 in an interview. For next year, the risks are increasing and there's concern about developments in the U.S., he said.
The prospect of slowing growth pushed business confidence to the lowest since January 2006, according to figures published by the Munich-based Ifo economic institute on June 23. Coupled with rising oil prices and accelerating inflation, a cooling economy poses a dilemma for the European Central Bank.
Oil Record
Oil rose to a record $143.67 per barrel yesterday and German inflation -- harmonized to comply with European Union standards -- accelerated in June to the fastest pace since at least 1996.
That's strengthened the resolve of a majority on the ECB's 21-member governing council to tighten monetary policy. ECB President Jean-Claude Trichet on June 25 reiterated the bank may raise its key interest rate by a quarter-point to 4.25 percent on July 3 to contain inflation.
That's drawn criticism from politicians such as French Finance Minister Christine Lagarde, who's said that a significant rate increase may not be ``prudent.'' German Finance Minister Peer Steinbrueck told Spiegel magazine this week that higher borrowing costs may send ``a wrong signal.''
The inflation rate in the euro area rose to 4 percent, the highest in more than 16 years, from 3.7 percent in May, the European Union statistics office in Luxembourg said yesterday. The ECB seeks to keep inflation just below 2 percent.
According to the latest comparable data from the Organization for Economic Cooperation and Development, Germany's jobless rate was 7.4 percent in April, compared with 7.8 percent in France, 4 percent in Japan and 5 percent in the U.S. The OECD average that month was 5.5 percent.
In western Germany, the number of people out of work fell by a seasonally adjusted 21,000 to 2.14 million in June, while the number in eastern Germany declined by 17,000 to 1.13 million.
To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.
Last Updated: July 1, 2008 04:11 EDT
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Yen Advances as Growth Concerns Damp Demand for Higher Yields
By Kosuke Goto and Stanley White
July 1 (Bloomberg) -- The yen rose against the euro and dollar after Australia's central bank said it expects economic growth to slow, eroding demand for higher-yielding assets funded in Japan.
Japan's currency advanced the most against the Australian and New Zealand dollars as speculation UBS AG is likely to incur further asset writedowns in the second quarter reduced demand for so-called carry trades. The dollar traded near a three-week low against the euro on speculation an industry report today will show U.S. manufacturing shrank, adding to pressure on the Federal Reverse to delay raising interest rates.
``People who love yen carry trades against the Aussie are unwinding their positions,'' said Kimihiko Tomita, head of foreign exchange in Tokyo at State Street Bank & Trust Co., a unit of the world's largest money manager. ``The RBA is a little dovish and the trend for rates isn't going higher. People are more selective about carry trades. I'm bullish on the yen.''
The yen rose to 105.94 per dollar as of 8:20 a.m. in London compared with 106.21 late in New York trading. It reached 104.99 yesterday, the highest since June 9. The currency gained to 166.80 per euro from 167.32 yesterday. The dollar was at $1.5748 per euro from $1.5755.
Japan's currency may fall to 103 against the U.S. dollar by the end of this month, Tomita forecast.
Japan's currency climbed to 101.15 against the Australian dollar from 101.81 in New York after the Reserve Bank kept interest rates unchanged at 7.25 percent as it said ``demand growth will be moderate this year.'' The yen climbed against all 16 of the most-traded currencies, rising to 80.59 against the New Zealand dollar from 80.95 and 0.5 percent to 13.4936 per South African rand.
`Across the Board'
``The Australian dollar's sharp decline against the yen triggered yen-buying across the board,'' said Takeshi Tokita, vice president of foreign-exchange sales at Mizuho Corporate Bank in Tokyo, a unit of Japan's second-largest publicly traded lender by assets. Japan's currency may rise to 105 per dollar today, Tokita said.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency- market moves erase those profits.
Japan's benchmark borrowing cost of 0.5 percent compares with 2 percent in the U.S., 8.25 percent in New Zealand and 7.25 percent in Australia. The European Central Bank's key rate is 4 percent.
UBS, the European bank hardest hit by the subprime contagion, yesterday fell to the lowest since October 1998 in Swiss trading amid analysts' estimates for a second-quarter loss on further asset writedowns.
Manufacturing Report
The dollar weakened against the yen before government data this week that may show U.S. manufacturing contracted and employers cut jobs for a sixth consecutive month.
``The dollar has downside risks with upcoming manufacturing data,'' said Masaki Fukui, a senior economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded financial group. ``With the U.S. economy slowing, we do not expect any rate hike this year.''
The dollar may fall to 98 yen by year-end, Fukui forecast.
Fed Futures
The Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, traded at 72.378 from 72.463 yesterday. It fell 0.6 percent last month and gained 0.9 percent in the second quarter. The U.S. currency traded at $1.9944 against the British pound from $1.9923, and was at 1.0186 versus the Swiss franc from 1.0210.
Futures on the Chicago Board of Trade show a 25 percent chance that the Fed will raise the 2 percent target rate for overnight lending between banks by a quarter-percentage point on Aug. 5, compared with 40 percent odds a week ago.
Economists predict the ECB will increase its 4 percent main refinancing rate by a quarter-point on July 3, the same day a U.S. report will show nonfarm payrolls shrank by 60,000 workers last month, according to separate Bloomberg News surveys. That would follow a drop of 49,000 in May.
The U.S. Institute for Supply Management's factory index fell to 48.5 in June, from 49.6 in May, a Bloomberg News survey showed. A reading below 50 indicates contraction. The report is due at 10 a.m. New York time.
Tankan Survey
The yen also gained against the dollar and euro as the Bank of Japan's quarterly Tankan survey showed business confidence among large manufacturers fell less than economists estimated.
The Tankan index of manufacturer sentiment slid to 5 points in June from 11 points in March, a third quarterly decline, the Bank of Japan said today in Tokyo. The median estimate of 32 economists surveyed by Bloomberg was for a drop to 3 points.
``We saw some gains in the yen as the Tankan data support the view that the Japanese economy is doing better than the U.S.,'' said Takuma Kurosawa, global markets treasurer in Tokyo at HSBC Bank, a unit of Europe's biggest lender. ``It's premature to say this will have an impact on the Bank of Japan's thinking on monetary policy.''
Japan's currency may rise to 105.70 against the dollar today, Kurosawa forecast.
Investors see a 33 percent chance Japan's central bank will raise its benchmark interest rate to 0.75 percent by December, according to calculations by JPMorgan Chase & Co. using interest-rate swaps. The odds are down from 34 percent before the Tankan report.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net.
Last Updated: July 1, 2008 03:21 EDT
Read more...
July 1 (Bloomberg) -- The yen rose against the euro and dollar after Australia's central bank said it expects economic growth to slow, eroding demand for higher-yielding assets funded in Japan.
Japan's currency advanced the most against the Australian and New Zealand dollars as speculation UBS AG is likely to incur further asset writedowns in the second quarter reduced demand for so-called carry trades. The dollar traded near a three-week low against the euro on speculation an industry report today will show U.S. manufacturing shrank, adding to pressure on the Federal Reverse to delay raising interest rates.
``People who love yen carry trades against the Aussie are unwinding their positions,'' said Kimihiko Tomita, head of foreign exchange in Tokyo at State Street Bank & Trust Co., a unit of the world's largest money manager. ``The RBA is a little dovish and the trend for rates isn't going higher. People are more selective about carry trades. I'm bullish on the yen.''
The yen rose to 105.94 per dollar as of 8:20 a.m. in London compared with 106.21 late in New York trading. It reached 104.99 yesterday, the highest since June 9. The currency gained to 166.80 per euro from 167.32 yesterday. The dollar was at $1.5748 per euro from $1.5755.
Japan's currency may fall to 103 against the U.S. dollar by the end of this month, Tomita forecast.
Japan's currency climbed to 101.15 against the Australian dollar from 101.81 in New York after the Reserve Bank kept interest rates unchanged at 7.25 percent as it said ``demand growth will be moderate this year.'' The yen climbed against all 16 of the most-traded currencies, rising to 80.59 against the New Zealand dollar from 80.95 and 0.5 percent to 13.4936 per South African rand.
`Across the Board'
``The Australian dollar's sharp decline against the yen triggered yen-buying across the board,'' said Takeshi Tokita, vice president of foreign-exchange sales at Mizuho Corporate Bank in Tokyo, a unit of Japan's second-largest publicly traded lender by assets. Japan's currency may rise to 105 per dollar today, Tokita said.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency- market moves erase those profits.
Japan's benchmark borrowing cost of 0.5 percent compares with 2 percent in the U.S., 8.25 percent in New Zealand and 7.25 percent in Australia. The European Central Bank's key rate is 4 percent.
UBS, the European bank hardest hit by the subprime contagion, yesterday fell to the lowest since October 1998 in Swiss trading amid analysts' estimates for a second-quarter loss on further asset writedowns.
Manufacturing Report
The dollar weakened against the yen before government data this week that may show U.S. manufacturing contracted and employers cut jobs for a sixth consecutive month.
``The dollar has downside risks with upcoming manufacturing data,'' said Masaki Fukui, a senior economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded financial group. ``With the U.S. economy slowing, we do not expect any rate hike this year.''
The dollar may fall to 98 yen by year-end, Fukui forecast.
Fed Futures
The Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, traded at 72.378 from 72.463 yesterday. It fell 0.6 percent last month and gained 0.9 percent in the second quarter. The U.S. currency traded at $1.9944 against the British pound from $1.9923, and was at 1.0186 versus the Swiss franc from 1.0210.
Futures on the Chicago Board of Trade show a 25 percent chance that the Fed will raise the 2 percent target rate for overnight lending between banks by a quarter-percentage point on Aug. 5, compared with 40 percent odds a week ago.
Economists predict the ECB will increase its 4 percent main refinancing rate by a quarter-point on July 3, the same day a U.S. report will show nonfarm payrolls shrank by 60,000 workers last month, according to separate Bloomberg News surveys. That would follow a drop of 49,000 in May.
The U.S. Institute for Supply Management's factory index fell to 48.5 in June, from 49.6 in May, a Bloomberg News survey showed. A reading below 50 indicates contraction. The report is due at 10 a.m. New York time.
Tankan Survey
The yen also gained against the dollar and euro as the Bank of Japan's quarterly Tankan survey showed business confidence among large manufacturers fell less than economists estimated.
The Tankan index of manufacturer sentiment slid to 5 points in June from 11 points in March, a third quarterly decline, the Bank of Japan said today in Tokyo. The median estimate of 32 economists surveyed by Bloomberg was for a drop to 3 points.
``We saw some gains in the yen as the Tankan data support the view that the Japanese economy is doing better than the U.S.,'' said Takuma Kurosawa, global markets treasurer in Tokyo at HSBC Bank, a unit of Europe's biggest lender. ``It's premature to say this will have an impact on the Bank of Japan's thinking on monetary policy.''
Japan's currency may rise to 105.70 against the dollar today, Kurosawa forecast.
Investors see a 33 percent chance Japan's central bank will raise its benchmark interest rate to 0.75 percent by December, according to calculations by JPMorgan Chase & Co. using interest-rate swaps. The odds are down from 34 percent before the Tankan report.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net.
Last Updated: July 1, 2008 03:21 EDT
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Broad Says U.S. Economy in Worst Recession Since World War II
By Anthony Massucci and Erik Holm
July 1 (Bloomberg) -- Billionaire investor Eli Broad said the U.S. economy is in the `worst period' of his adult life as a housing market recovery remains ``several years'' away.
``This is worse than any recession we've had since World War II,'' Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient ``safety nets.''
The economy expanded at an annual rate of 1 percent in the first quarter, the Commerce Department said last week. That caps the weakest six months of growth in five years. The U.S. lost 49,000 jobs in May, when the unemployment rate rose to 5.5 percent, the fifth straight month with a drop in payrolls and the biggest jump in the jobless rate in more than two decades.
``This is the worst period of my adult lifetime,'' Broad said, speaking about the U.S. economy. ``I do not think things are going to get any better'' before the next president takes office in January.
The banking industry may need additional capital to protect against bad loans, Broad said. U.S. banks may have to raise $65 billion as losses and writedowns extend into the first quarter of 2009, Goldman Sachs Group Inc. analysts said last month.
The world's biggest financial firms have posted about $400 billion in writedowns and credit losses tied to the U.S. housing slump, according to data compiled by Bloomberg.
Selling off vacant, unsold homes could take ``several years,'' Broad said.
Waiting for a Bottom
``The problem is, people don't believe prices have bottomed out,'' he said. ``You've got to induce people to buy houses'' with federal policies including tax incentives.
Broad, whose main focus is his $2.63 billion philanthropic organization, last month joined investors in pushing for the ouster of Martin Sullivan as chief executive officer of American International Group Inc., after the world's largest insurer posted record losses.
AIG, where Broad served as a director from 1999 until 2003, lost half its market value in the past year and has posted $13 billion in losses tied to the subprime mortgage market collapse over two quarters.
``It will turn around in due time,'' Broad said of New York- based AIG. ``It's not going to be overnight.''
Broad said in a television interview that consumer confidence and home sales won't improve this year, while unemployment will rise.
U.S. borrowers will continue to default on home, auto and credit-card loans, he said. More than 100 mortgage companies have suspended operations, closed or sold themselves since the start of 2007. American Express Co. CEO Kenneth Chenault said last week that credit indicators including late payments have worsened beyond the company's expectations.
`Corrosive Effect'
The U.S. government stimulus checks helped support economic growth and more federal help is needed to fuel growth, he said.
``I think housing is going to continue to have a corrosive effect on consumer psychology and the economy in general to a far greater extent than people think, or even far greater than I thought about a month or two ago,'' he said.
The number of Americans in danger of losing their homes to foreclosure rose to the highest in at least three decades during the first quarter, according to data from the Washington-based Mortgage Bankers Association.
Sales of new and existing homes in the U.S. began to drop in mid-2005, bringing the five-year housing boom to a close. Prices for existing homes finished last year below 2006 levels, according to the National Association of Realtors in Chicago.
Repairing the damage to the U.S. economy will require political leadership on U.S. energy, health care and education policies, Broad said. Those areas are the focus of his foundation.
``I worry about the future of America,'' said Broad. ``It's time to regroup and redefine our place as a country and that's tough to do.''
-- With reporting by Michael McKee, Timothy Homan and Hugh Son in New York. Editors: Rob Urban, Dan Kraut
To contact the reporters on this story: Anthony Massucci in New York at amassucc@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net
Last Updated: July 1, 2008 00:01 EDT
Read more...
July 1 (Bloomberg) -- Billionaire investor Eli Broad said the U.S. economy is in the `worst period' of his adult life as a housing market recovery remains ``several years'' away.
``This is worse than any recession we've had since World War II,'' Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient ``safety nets.''
The economy expanded at an annual rate of 1 percent in the first quarter, the Commerce Department said last week. That caps the weakest six months of growth in five years. The U.S. lost 49,000 jobs in May, when the unemployment rate rose to 5.5 percent, the fifth straight month with a drop in payrolls and the biggest jump in the jobless rate in more than two decades.
``This is the worst period of my adult lifetime,'' Broad said, speaking about the U.S. economy. ``I do not think things are going to get any better'' before the next president takes office in January.
The banking industry may need additional capital to protect against bad loans, Broad said. U.S. banks may have to raise $65 billion as losses and writedowns extend into the first quarter of 2009, Goldman Sachs Group Inc. analysts said last month.
The world's biggest financial firms have posted about $400 billion in writedowns and credit losses tied to the U.S. housing slump, according to data compiled by Bloomberg.
Selling off vacant, unsold homes could take ``several years,'' Broad said.
Waiting for a Bottom
``The problem is, people don't believe prices have bottomed out,'' he said. ``You've got to induce people to buy houses'' with federal policies including tax incentives.
Broad, whose main focus is his $2.63 billion philanthropic organization, last month joined investors in pushing for the ouster of Martin Sullivan as chief executive officer of American International Group Inc., after the world's largest insurer posted record losses.
AIG, where Broad served as a director from 1999 until 2003, lost half its market value in the past year and has posted $13 billion in losses tied to the subprime mortgage market collapse over two quarters.
``It will turn around in due time,'' Broad said of New York- based AIG. ``It's not going to be overnight.''
Broad said in a television interview that consumer confidence and home sales won't improve this year, while unemployment will rise.
U.S. borrowers will continue to default on home, auto and credit-card loans, he said. More than 100 mortgage companies have suspended operations, closed or sold themselves since the start of 2007. American Express Co. CEO Kenneth Chenault said last week that credit indicators including late payments have worsened beyond the company's expectations.
`Corrosive Effect'
The U.S. government stimulus checks helped support economic growth and more federal help is needed to fuel growth, he said.
``I think housing is going to continue to have a corrosive effect on consumer psychology and the economy in general to a far greater extent than people think, or even far greater than I thought about a month or two ago,'' he said.
The number of Americans in danger of losing their homes to foreclosure rose to the highest in at least three decades during the first quarter, according to data from the Washington-based Mortgage Bankers Association.
Sales of new and existing homes in the U.S. began to drop in mid-2005, bringing the five-year housing boom to a close. Prices for existing homes finished last year below 2006 levels, according to the National Association of Realtors in Chicago.
Repairing the damage to the U.S. economy will require political leadership on U.S. energy, health care and education policies, Broad said. Those areas are the focus of his foundation.
``I worry about the future of America,'' said Broad. ``It's time to regroup and redefine our place as a country and that's tough to do.''
-- With reporting by Michael McKee, Timothy Homan and Hugh Son in New York. Editors: Rob Urban, Dan Kraut
To contact the reporters on this story: Anthony Massucci in New York at amassucc@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net
Last Updated: July 1, 2008 00:01 EDT
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U.S. Manufacturing Probably Contracted in June for Fifth Month
By Courtney Schlisserman
July 1 (Bloomberg) -- Manufacturing in the U.S. probably contracted in June for a fifth straight month as raw-material costs surged and companies prepared for a slowdown in spending, economists said ahead of a report today.
The Institute for Supply Management's factory index fell to 48.5 from 49.6 in May, according to the median forecast of 77 economists surveyed by Bloomberg News. A reading of 50 is the dividing line between expansion and contraction.
A 42 percent jump in the cost of crude goods in the 12 months to May has prompted companies to cut back on purchases of new equipment, causing output to slow. Growing demand from overseas has helped stave off a deeper factory contraction as the biggest housing slump in a quarter century, stricter credit and record gasoline prices threaten consumer spending.
``Manufacturing is deteriorating,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York. ``The increase in exports appears to not be countering the slowdown in domestic demand.''
The Tempe, Arizona-based institute is scheduled to release the report at 10 a.m. Washington time. Survey forecasts ranged from 46.6 to 50.5.
Another report due at the same time is projected to show construction spending fell 0.6 percent in May, according to the survey median. It would be the seventh decline in eight months.
Gains in Spending
The $78.3 billion in tax-rebate checks sent by the government through June 27 has given Americans the means to overcome the jump in fuel costs for now. Consumer spending, which accounts for more than two-thirds of the economy, rose 0.8 percent in May, the most since November, the Commerce Department said on June 27.
While spending has held up so far, the outlook has dimmed as gasoline prices soar and confidence plummets. Sales of expensive items, like automobiles, have been hardest hit as Americans try to stretch their paychecks.
Auto-industry figures, also due today, are forecast to show purchases of cars and light trucks fell to a 14 million annual rate in June, the fewest since April 1995, according to the median estimate.
General Motors Corp. announced plans on June 23 to reduce North American truck production by 170,000 vehicles after U.S. sales fell. The company is heading toward its ninth straight annual U.S. sales decline and has had three consecutive yearly losses.
Concern Ahead
The rebate-induced boost to spending will be short-lived, according to economists such as RBS Greenwich Capital's Stephen Stanley. After almost all of the tax rebates are sent out by mid July, consumers will still be confronting job losses and higher food and energy costs.
The U.S. has lost 324,000 jobs in the first five months of 2008. Economists anticipate a Labor Department report on July 3 will show payrolls dropped again last month.
Manufacturers also are being hurt by rising prices. Crude oil rose to a record of more than $143 a barrel yesterday, completing the biggest quarterly increase in nine years. Prices have climbed 47 percent this year.
The purchasers' index of prices paid for raw materials probably held at 87 last month, matching May's reading as the highest in four years.
Gains in exports have helped offset slower U.S. spending and rising costs. A weaker dollar has made American-made goods cheaper and more attractive for foreign buyers.
Asian Demand
General Electric Co., the world's biggest maker of locomotives and power-plant turbines, said last month that sales of such equipment may rise 15 percent to 20 percent this year as Asia's emerging nations increase investment in infrastructure.
Demand ``will be significant for decades,'' Vice Chairman John Rice, who runs the GE Infrastructure unit, told reporters on June 23 outside Kuala Lumpur, the Malaysian capital. Growth in Asia will be at the top end of that forecast, he said.
GE Infrastructure, the largest of six main businesses at the Fairfield, Connecticut-based company, expects overseas sales to account for 60 percent of total revenue this year, a 5 percentage-point increase from 2007.
``The one bright spot for manufacturers has been exports, and we see that subcomponent of the index remaining strong,'' Lehman Brothers Holdings Inc. economists Michael Hanson, Michelle Meyer and Zach Pandl said in a note to clients about the purchasers' gauge.
Bloomberg Survey
================================================================
ISM ISMConstruct
Manu Prices Spending
Index Index MOM%
================================================================
Date of Release 07/01 07/01 07/01
Observation Period June June May
----------------------------------------------------------------
Median 48.5 87.0 -0.6%
Average 48.5 87.1 -0.6%
High Forecast 50.5 89.0 0.7%
Low Forecast 46.6 85.0 -1.5%
Number of Participants 77 13 54
Previous 49.6 87.0 -0.4%
----------------------------------------------------------------
4CAST Ltd. 48.6 --- -0.6%
Action Economics 49.0 88.0 -0.8%
AIG Investments 50.0 --- -0.2%
Aletti Gestielle SGR 49.2 87.0 ---
Allianz Dresdner Economic 47.5 --- ---
Argus Research Corp. 50.5 --- 0.2%
Banc of America Securities 48.5 --- -0.6%
Bank of Tokyo- Mitsubishi 48.0 --- -0.4%
Bantleon Bank AG 48.0 --- ---
Barclays Capital 49.0 --- -0.5%
BBVA 49.0 --- -0.6%
BMO Capital Markets 48.0 88.0 -1.0%
BNP Paribas 48.6 --- -0.8%
Briefing.com 49.6 --- -0.5%
Calyon 48.8 --- ---
CFC Group 48.8 88.0 -0.6%
CIBC World Markets 49.0 --- -0.6%
Citi 47.5 88.0 -0.4%
ClearView Economics 48.5 --- -0.7%
Commerzbank AG 49.0 --- ---
Credit Suisse 48.0 86.0 -0.4%
Daiwa Securities America 48.0 88.0 -0.5%
Danske Bank 48.0 --- ---
DekaBank 48.5 --- -0.6%
Desjardins Group 48.8 --- -0.7%
Deutsche Bank Securities 49.0 --- -0.2%
Deutsche Postbank AG 49.0 --- ---
Dresdner Kleinwort 48.5 87.0 ---
DZ Bank 49.2 --- ---
First Trust Advisors 49.7 --- -1.0%
Fortis 49.5 --- ---
FTN Financial 48.5 --- ---
Global Insight Inc. 48.0 --- -0.2%
Goldman, Sachs & Co. 48.0 --- -0.6%
H&R Block Financial Advis 48.5 85.0 -0.6%
Helaba 47.8 --- -0.4%
High Frequency Economics 48.0 --- -1.5%
Horizon Investments 49.0 --- -0.2%
HSBC Markets 47.0 --- -0.1%
IDEAglobal 48.5 85.0 -0.8%
Informa Global Markets 48.0 --- -0.8%
ING Financial Markets 48.8 --- -0.7%
Insight Economics 48.5 --- 0.7%
J.P. Morgan Chase 48.5 --- -0.7%
Janney Montgomery Scott L 46.9 --- -0.8%
JPMorgan Private Client 49.0 --- -0.4%
Landesbank Berlin 47.5 --- -1.0%
Landesbank BW 46.6 --- -0.5%
Lehman Brothers 48.0 --- -0.4%
Lloyds TSB 50.0 --- -0.3%
Maria Fiorini Ramirez Inc 49.0 --- ---
Merk Investments 48.0 86.0 -0.6%
Merrill Lynch 48.7 --- -1.0%
Moody's Economy.com 48.0 --- -0.8%
Morgan Stanley & Co. 48.0 --- -1.4%
National Bank Financial 49.5 --- ---
National City Corporation 49.1 --- -0.5%
Natixis 48.6 --- ---
Newedge 48.9 --- ---
PNC Bank 49.0 --- -0.4%
RBS Greenwich Capital 49.0 --- ---
Ried, Thunberg & Co. 48.5 --- ---
Schneider Trading Associa 47.4 89.0 ---
Scotia Capital 48.5 --- -0.4%
Societe Generale 48.0 --- ---
Stone & McCarthy Research 48.0 --- -0.7%
TD Securities 48.0 --- ---
Thomson Financial/IFR 48.9 --- -0.5%
Tullett Prebon 49.0 --- ---
UBS Securities LLC 47.5 --- -1.0%
Unicredit MIB 48.0 --- -0.4%
University of Maryland 49.5 87.0 -0.6%
Wachovia Corp. 48.6 --- -0.2%
Wells Fargo & Co. 49.0 --- ---
WestLB AG 49.0 --- -0.5%
Westpac Banking Co. 49.0 --- -0.8%
Wrightson Associates 48.5 --- ---
================================================================
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net.
Last Updated: July 1, 2008 00:01 EDT
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Pound Snaps Three-Day Advance Against Euro, Falls Versus Dollar
By Gavin Finch
July 1 (Bloomberg) -- The pound snapped three days of gains against the euro and fell for a second day versus the dollar.
The U.K. currency dropped to 79.16 pence per euro as of 6:42 a.m. in London, from 79.08 pence yesterday. It weakened to $1.9901, from $1.9923.
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
Last Updated: July 1, 2008 01:48 EDT
Read more...
July 1 (Bloomberg) -- The pound snapped three days of gains against the euro and fell for a second day versus the dollar.
The U.K. currency dropped to 79.16 pence per euro as of 6:42 a.m. in London, from 79.08 pence yesterday. It weakened to $1.9901, from $1.9923.
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
Last Updated: July 1, 2008 01:48 EDT
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Junk Bond Borrowers Squeezed in Europe After Year-Long Shutdown
By John Glover
July 1 (Bloomberg) -- The junk bond market is shut in Europe, forcing the neediest borrowers to rely on banks for credit and increasing the chance of defaults.
The only company to sell high-yield, high-risk bonds in euros in the past 11 months was Vienna-based builder Strabag SE, which raised 75 million euros ($118 million) in June. Borrowers sold $32 billion of the securities in the first half of 2007.
The first closure since European companies began selling bonds with below investment-grade ratings a decade ago may contribute to a fivefold increase in defaults within a year, according to Moody's Investors Service. The debt yields 705 basis points more than similar-maturity government notes on average, triple the so-called spread of 236 basis points a year ago, according to Merrill Lynch & Co.'s Euro High Yield Constrained index.
``Spreads are going wider, sentiment is weak and defaults are going to pick up,'' said Alex Moss, who oversees the equivalent of about $1.55 billion as head of high-yield bonds and leveraged loans at Insight Investment Management in London. ``Defaults are the soft underbelly of the high-yield market.''
Investors in junk bonds lost 4.35 percent on average in the first half, the worst start since 2002, Merrill's index data show. The debt is rated below Baa3 by Moody's and BBB- by Standard & Poor's.
Bondholders are avoiding riskier companies after the collapse of U.S. subprime mortgages sent European stocks to the worst declines in two decades and consumer confidence in France and Spain to the lowest on record. Companies are relying on loans at a time when banks are reducing their debt risk after $203 billion of credit losses and writedowns in Europe, more than the cost in America and Asia combined.
First Defaults
Royal Bank of Scotland Group Plc and Deutsche Bank AG led banks providing $54 billion in high-yield loans in Europe this year, down from $299 billion in the first half of last year, data compiled by Bloomberg show.
``The longer this goes on, the more companies are going to need to raise cash,'' said Chris Higham, who manages the equivalent of about $1.6 billion of junk bonds as a portfolio manager at Morley Fund Management in London, and is holding 10 percent of his assets in cash to reduce the risk of losses. ``Things aren't looking good for the second half.''
Kremikovtzi AD, the Sofia-based steelmaker owned by Pramod Mittal, became the first European company to default on junk bonds this year when it failed to pay interest in May on 325 million euros of 12 percent notes due 2013.
Too Expensive
Melrose Financial Resources Plc, the Scottish oil and natural-gas explorer in the U.S., North Africa and eastern Europe, canceled a plan for 250 million euros of bonds in November because yields were too high, said Chief Executive Officer David Thomas in an interview.
The Edinburgh-based company instead has $510 million of loans due 2014 at 3.2 percentage points above the London interbank offered rate from banks led by HBOS Plc's Bank of Scotland unit, Bloomberg data show. The bonds would have cost as much as 2 percentage points more in interest than the company was paying on its loans, Thomas said.
``It's hard to see the advantage of going with a bond in today's climate,'' said Thomas. ``The bond market was demanding more than we were prepared to pay.''
Europe's high-yield market is less than a tenth of the size in the U.S., drawing fewer investors and borrowers. U.S. companies owe at least $730 billion in junk bonds compared with $65 billion in Europe, based on Merrill indexes.
Central Role
While bonds make up 60 percent of debt for U.S. speculative-grade companies, the proportion in Europe is nearer 40 percent, with most corporate borrowing coming from bank loans, said James Ward, head of European high-yield debt at Axa Investment Managers and a professor of finance at the American University of Paris.
``High-yield is a more central part of a company's capital structure in the U.S. than in Europe, meaning companies are readier to issue,'' said Ward.
Sales of junk bonds in the U.S. are down 53 percent from the first half of 2007, Bloomberg data show. In Asia, first-half sales totaled $1.75 billion, compared with $4.9 billion last year.
To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net
Last Updated: June 30, 2008 19:01 EDT
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July 1 (Bloomberg) -- The junk bond market is shut in Europe, forcing the neediest borrowers to rely on banks for credit and increasing the chance of defaults.
The only company to sell high-yield, high-risk bonds in euros in the past 11 months was Vienna-based builder Strabag SE, which raised 75 million euros ($118 million) in June. Borrowers sold $32 billion of the securities in the first half of 2007.
The first closure since European companies began selling bonds with below investment-grade ratings a decade ago may contribute to a fivefold increase in defaults within a year, according to Moody's Investors Service. The debt yields 705 basis points more than similar-maturity government notes on average, triple the so-called spread of 236 basis points a year ago, according to Merrill Lynch & Co.'s Euro High Yield Constrained index.
``Spreads are going wider, sentiment is weak and defaults are going to pick up,'' said Alex Moss, who oversees the equivalent of about $1.55 billion as head of high-yield bonds and leveraged loans at Insight Investment Management in London. ``Defaults are the soft underbelly of the high-yield market.''
Investors in junk bonds lost 4.35 percent on average in the first half, the worst start since 2002, Merrill's index data show. The debt is rated below Baa3 by Moody's and BBB- by Standard & Poor's.
Bondholders are avoiding riskier companies after the collapse of U.S. subprime mortgages sent European stocks to the worst declines in two decades and consumer confidence in France and Spain to the lowest on record. Companies are relying on loans at a time when banks are reducing their debt risk after $203 billion of credit losses and writedowns in Europe, more than the cost in America and Asia combined.
First Defaults
Royal Bank of Scotland Group Plc and Deutsche Bank AG led banks providing $54 billion in high-yield loans in Europe this year, down from $299 billion in the first half of last year, data compiled by Bloomberg show.
``The longer this goes on, the more companies are going to need to raise cash,'' said Chris Higham, who manages the equivalent of about $1.6 billion of junk bonds as a portfolio manager at Morley Fund Management in London, and is holding 10 percent of his assets in cash to reduce the risk of losses. ``Things aren't looking good for the second half.''
Kremikovtzi AD, the Sofia-based steelmaker owned by Pramod Mittal, became the first European company to default on junk bonds this year when it failed to pay interest in May on 325 million euros of 12 percent notes due 2013.
Too Expensive
Melrose Financial Resources Plc, the Scottish oil and natural-gas explorer in the U.S., North Africa and eastern Europe, canceled a plan for 250 million euros of bonds in November because yields were too high, said Chief Executive Officer David Thomas in an interview.
The Edinburgh-based company instead has $510 million of loans due 2014 at 3.2 percentage points above the London interbank offered rate from banks led by HBOS Plc's Bank of Scotland unit, Bloomberg data show. The bonds would have cost as much as 2 percentage points more in interest than the company was paying on its loans, Thomas said.
``It's hard to see the advantage of going with a bond in today's climate,'' said Thomas. ``The bond market was demanding more than we were prepared to pay.''
Europe's high-yield market is less than a tenth of the size in the U.S., drawing fewer investors and borrowers. U.S. companies owe at least $730 billion in junk bonds compared with $65 billion in Europe, based on Merrill indexes.
Central Role
While bonds make up 60 percent of debt for U.S. speculative-grade companies, the proportion in Europe is nearer 40 percent, with most corporate borrowing coming from bank loans, said James Ward, head of European high-yield debt at Axa Investment Managers and a professor of finance at the American University of Paris.
``High-yield is a more central part of a company's capital structure in the U.S. than in Europe, meaning companies are readier to issue,'' said Ward.
Sales of junk bonds in the U.S. are down 53 percent from the first half of 2007, Bloomberg data show. In Asia, first-half sales totaled $1.75 billion, compared with $4.9 billion last year.
To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net
Last Updated: June 30, 2008 19:01 EDT
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Korea's Won Falls as Growth May Cool; Bonds Are Little Changed
By Kim Kyoungwha
July 1 (Bloomberg) -- South Korea's won fell for a third day after the central bank said economic growth this year will cool to the slowest pace since 2005 and as global funds dumped local stocks. Bonds were little changed.
The currency traded near the lowest in more than one month as the Bank of Korea said in its semiannual outlook today that the nation's current-account deficit, the broadest measure of international trade, will widen to $9 billion this year from a previous forecast of $3 billion on oil prices. Inflation will quicken to 4.8 percent in 2008, the fastest pace in a decade, while growth will ease to 4.6 percent this year, the central bank said in the report.
``Currency players took a cautious approach till toward the close when some bid for dollars as the authorities stayed out of the market,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``The pressure is for the dollar to rise given rising oil prices and a stock market fall.''
The won fell 0.1 percent to 1,047 against the dollar as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The currency has declined 11 percent this year, the second-worst performer among the 10 most-active currencies in Asia outside Japan.
The won's losses were tempered by speculation the Bank of Korea will allow gains in the currency to cool import prices. South Korea has bought won worth about $7 billion since the end of May to bolster the local currency and slow inflation, JoongAng Ilbo newspaper reported today.
Fears of Intervention
``The market is stuck between fears of intervention and demand for the dollar from oil-related bidders,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``The caution is high as the dollar nears 1,050 level.''
The government seems to have intervened in the currency market six times since the end of May including $1 billion of purchases of won on May 24 and an additional $1.5 billion on May 27, the Korean-language newspaper reported, without saying where it obtained the information.
Overseas investors sold $145.8 million more Korean shares than they bought yesterday, taking net sales in June to almost $5 billion, according to data compiled by Bloomberg.
Five-year government bonds were little changed, keeping the benchmark yield near the highest since January, on concern the central bank will raise interest rates to tackle inflation. Consumer prices rose 5.5 percent in June from a year earlier, the most in 10 years, a government report showed today.
`Turn for Worse'
``The inflation outlook is taking a turn for the worse, raising the risk that the central bank may raise borrowing costs,'' said Kim Jong Sung, a bond fund manager with Daishin Securities Co. in Seoul. ``There's little buying interest in debt market.''
The yield on the 5.25 percent note due March 2013 was little changed at 5.96 percent, according to Korea Exchange. The price rose 0.02, or 2 won per 10,000 won face amount, to 98.74. A basis point is 0.01 percentage point.
Bank of Korea Governor Lee Seong Tae left the benchmark interest rate unchanged at a seven-year high of 5 percent in June. Policy makers will meet next on July 10.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
Last Updated: July 1, 2008 03:00 EDT
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July 1 (Bloomberg) -- South Korea's won fell for a third day after the central bank said economic growth this year will cool to the slowest pace since 2005 and as global funds dumped local stocks. Bonds were little changed.
The currency traded near the lowest in more than one month as the Bank of Korea said in its semiannual outlook today that the nation's current-account deficit, the broadest measure of international trade, will widen to $9 billion this year from a previous forecast of $3 billion on oil prices. Inflation will quicken to 4.8 percent in 2008, the fastest pace in a decade, while growth will ease to 4.6 percent this year, the central bank said in the report.
``Currency players took a cautious approach till toward the close when some bid for dollars as the authorities stayed out of the market,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``The pressure is for the dollar to rise given rising oil prices and a stock market fall.''
The won fell 0.1 percent to 1,047 against the dollar as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The currency has declined 11 percent this year, the second-worst performer among the 10 most-active currencies in Asia outside Japan.
The won's losses were tempered by speculation the Bank of Korea will allow gains in the currency to cool import prices. South Korea has bought won worth about $7 billion since the end of May to bolster the local currency and slow inflation, JoongAng Ilbo newspaper reported today.
Fears of Intervention
``The market is stuck between fears of intervention and demand for the dollar from oil-related bidders,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``The caution is high as the dollar nears 1,050 level.''
The government seems to have intervened in the currency market six times since the end of May including $1 billion of purchases of won on May 24 and an additional $1.5 billion on May 27, the Korean-language newspaper reported, without saying where it obtained the information.
Overseas investors sold $145.8 million more Korean shares than they bought yesterday, taking net sales in June to almost $5 billion, according to data compiled by Bloomberg.
Five-year government bonds were little changed, keeping the benchmark yield near the highest since January, on concern the central bank will raise interest rates to tackle inflation. Consumer prices rose 5.5 percent in June from a year earlier, the most in 10 years, a government report showed today.
`Turn for Worse'
``The inflation outlook is taking a turn for the worse, raising the risk that the central bank may raise borrowing costs,'' said Kim Jong Sung, a bond fund manager with Daishin Securities Co. in Seoul. ``There's little buying interest in debt market.''
The yield on the 5.25 percent note due March 2013 was little changed at 5.96 percent, according to Korea Exchange. The price rose 0.02, or 2 won per 10,000 won face amount, to 98.74. A basis point is 0.01 percentage point.
Bank of Korea Governor Lee Seong Tae left the benchmark interest rate unchanged at a seven-year high of 5 percent in June. Policy makers will meet next on July 10.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
Last Updated: July 1, 2008 03:00 EDT
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