Wed Jul 9, 2008 3:42am EDT
By Kate Holton
LONDON (Reuters) - WPP Group , the world's second-largest advertising company, launched on Wednesday a hostile bid worth 1.08 billion pounds ($2.13 billion) for British market research firm Taylor Nelson Sofres.
TNS, which rejected an approach at the same price from Martin Sorrell's WPP last week, has planned a merger instead with German group GfK Holdings AG .
WPP is offering 173 pence in cash and 0.1889 of a new WPP share for each TNS share which, based on Tuesday's closing WPP price of 464p, values each TNS share at 260.6p.
TNS shares traded at 260.25 pence on Wednesday. WPP was down 0.75 percent at 466 pence.
Many analysts say WPP could return with a higher bid but they still expect TNS shareholders to be tempted by the offer, which has a high cash component at a time of economic and stock market uncertainty.
The Financial Times newspaper also reported that GfK could make a counter-offer to head off WPP.
"With this offer you are getting a healthy premium on the undisturbed share price back in April, a large portion of which is in cash," Numis analyst Richard Hitchcock said.
"So the more nervous you are about the environment and about TNS's ability to deliver synergies (with GfK), the more attractive WPP's offer is."
The offer represents a premium of 52 percent to where TNS shares stood before news of its planned merger with GfK in late April.
WPP Chief Executive Martin Sorrell wants to combine TNS with WPP's Kantar market research business to create the world's second-largest insight, information and consultancy group in a market that has grown at around 5 percent in recent years.
Winning TNS would diversify WPP's revenue stream, leaving it better placed to weather any global economic downturn.
"We believe that the offer for TNS generates value for WPP share owners and offers TNS share owners both cash certainty and equity upside," Sorrell said in a statement, adding that WPP had waived its earlier pre-condition for TNS to recommend the offer.
"Although our offer may be characterized by some as a 'hostile bid', we believe that it is in no way hostile to TNS share owners nor to TNS's clients and people," Sorrell added.
TNS, which is the world's third-biggest market research company with clients such as Procter & Gamble , previously rejected three earlier proposals from WPP, at 230 pence, 242 pence and then 260 pence last week.
TNS said all three offers substantially undervalued the company. Its shareholders are due to vote on the merger with GfK on July 18 while GfK's investors will vote on July 21.
(Reporting by Mike Elliott; Editing by Erica Billingham)
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Wednesday, July 9, 2008
European shares advance in early trading
By Sarah Turner, MarketWatch
Last update: 3:51 a.m. EDT July 9, 2008
LONDON (MarketWatch) - European shares gained on Wednesday, continuing a week of see-saw action for equity markets, with financials recouping a bit to lead the advance.
The pan-European Dow Jones Stoxx 600 index climbed 0.9% to 281.53 as shares in British lender Royal Bank of Scotland rose 4% and shares in French bank Credit Agricole climbed 3.6%.
European closed with sharp losses on Tuesday amid further worries about the financial sector's health and how slowing economic growth will affect company profits.
Results from U.S. aluminum giant Alcoa Inc. late Tuesday went some way to allaying fears on earnings progress, after the firm's second-quarter profit decline wasn't as bad as Wall Street had expected, thanks to price hikes and increased demand. See full story.
Meanwhile, the Federal Reserve offered a line to the battered financial sector on Tuesday, helping U.S. stocks to close decisively higher. See Tuesday's Market Snapshot.
On a national level, the U.K. FTSE 100 index rose 0.6% to 5,471.60, the German DAX 30 index advanced 0.6% to 6,344.28 and the French CAC-40 index rose 0.7% to 4,305.86.
Crude prices ticked higher again in electronic trading on Wednesday, with the contract up $1.20 at $137.25.
Still, oil prices stayed off recent highs of more than $145 a barrel and oil-price-sensitive firms such as automakers and airlines managed to move higher on Wednesday.
Shares in Fiat rose 1.2%.
Shares in the London Stock Exchange also rebounded a bit from recent losses on Wednesday, moving up 6%.
The exchange said Wednesday that revenue grew 8% in the first quarter to 178 million pounds and that while market conditions are likely to remain uncertain, the issuer market remains active and its integration of Borsa Italiana is on track.
Advertising giant WPP fell 2.5%.
The company will offer 173 pence in cash plus 0.1889 share to buy media firm Taylor Nelson Sofres , valuing TNS at 1.1 billion pounds ($2.2 billion) in total.
TNS has already agreed to merge with Germany's GfK. WPP said its offer provides "superior value and greater certainty" than the proposed TNS-GfK merger. Taylor Nelson Sofres shares rose 4.8% to 260 pence a share, while GfK shares edged up 0.6%. End of Story
Sarah Turner is a markets reporter for MarketWatch in London.
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Last update: 3:51 a.m. EDT July 9, 2008
LONDON (MarketWatch) - European shares gained on Wednesday, continuing a week of see-saw action for equity markets, with financials recouping a bit to lead the advance.
The pan-European Dow Jones Stoxx 600 index climbed 0.9% to 281.53 as shares in British lender Royal Bank of Scotland rose 4% and shares in French bank Credit Agricole climbed 3.6%.
European closed with sharp losses on Tuesday amid further worries about the financial sector's health and how slowing economic growth will affect company profits.
Results from U.S. aluminum giant Alcoa Inc. late Tuesday went some way to allaying fears on earnings progress, after the firm's second-quarter profit decline wasn't as bad as Wall Street had expected, thanks to price hikes and increased demand. See full story.
Meanwhile, the Federal Reserve offered a line to the battered financial sector on Tuesday, helping U.S. stocks to close decisively higher. See Tuesday's Market Snapshot.
On a national level, the U.K. FTSE 100 index rose 0.6% to 5,471.60, the German DAX 30 index advanced 0.6% to 6,344.28 and the French CAC-40 index rose 0.7% to 4,305.86.
Crude prices ticked higher again in electronic trading on Wednesday, with the contract up $1.20 at $137.25.
Still, oil prices stayed off recent highs of more than $145 a barrel and oil-price-sensitive firms such as automakers and airlines managed to move higher on Wednesday.
Shares in Fiat rose 1.2%.
Shares in the London Stock Exchange also rebounded a bit from recent losses on Wednesday, moving up 6%.
The exchange said Wednesday that revenue grew 8% in the first quarter to 178 million pounds and that while market conditions are likely to remain uncertain, the issuer market remains active and its integration of Borsa Italiana is on track.
Advertising giant WPP fell 2.5%.
The company will offer 173 pence in cash plus 0.1889 share to buy media firm Taylor Nelson Sofres , valuing TNS at 1.1 billion pounds ($2.2 billion) in total.
TNS has already agreed to merge with Germany's GfK. WPP said its offer provides "superior value and greater certainty" than the proposed TNS-GfK merger. Taylor Nelson Sofres shares rose 4.8% to 260 pence a share, while GfK shares edged up 0.6%. End of Story
Sarah Turner is a markets reporter for MarketWatch in London.
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Today's Key Points
Daily Forex Fundamentals | Written by Danske Bank | Jul 09 08 07:25 GMT |
* Fears for US GSEs have been alleviated. The stock markets are up, bond yields are up, and oil is down
* Very light data schedule today
Markets Overnight
It's a rollercoaster market out there and we are still torn between hope and despair. The stock market ended on a bullish note yesterday, and has continued up in Asia this morning, as fears for the fate of the US mortgage giants Freddie Mac and Fannie Mae calmed.
The big issue that triggered the big drop in the GSEs' equity value on Monday was whether or not they would lose their regulatory exemption from bringing on SIVs to their balance sheets and thus be forced to raise new capital. Yesterday the stocks rebounded after regulators stated that they would not have to raise more capital.
Moreover, the drop in oil prices down to 135 USD/barrel certainly helped the stock markets on their way. The S&P 500 ended the day up by 1.7% and the Nasdaq index rose by 2.3%. As we write the Nikkei index has gained 1.8%.
As the financial jitters have receded Treasury yields have risen somewhat. The 2yr Treasury has come back from its sub-2.40% level to 2.50% this morning, and the US yield curve has flattened a bit. On the FX market the EUR/USD came down along with the oil price yesterday afternoon and has stayed relatively stable around 156.6. The rebounding equity market has lent some support to the SEK, and EUR/SEK has come down a bit to 942. The EUR/NOK has remained very stable at 804.
Global Daily
Yesterday proved to be as gloomy as one could fear in terms of new data. US pending home sales continued to drop in every region. The past two days we have heard Fed statements from both the dovish Yellen and the hawkish Lacker. While Lacker has seen signs of improvement in the economy since the beginning of the year and argues in favour of higher rates, Yellen has underlined that she is ready to act if a wage-inflation spiral becomes an issue. Here we must side with Yellen, as we do not see any signs of macro economic or financial improvement in the US.
A notable development is the continued surge in credit tightness in the Federal loan officer survey to new highs. Moreover, the recent turmoil around US mortgage providers has brought up mortgage lending rates substantially. In fact, 30yr mortgage rates are as high as they were a year ago before the credit crisis started, and the 1yr ARM rate is 60bp higher. This should not be overlooked as the stimulus from lowered Fed funds rate should be channelled through lower mortgage and C&I lending rates - something that is obviously not happening as desired. We thus remain bond bullish in our basic outlook.
Today is yet another day with a very light data schedule. There is no market moving data due out in the US or Euroland, but we will see the publication of consumer confidence data and possibly new home price data out of the UK.
Danske Bank
http://www.danskebank.com/danskeresearch
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* Fears for US GSEs have been alleviated. The stock markets are up, bond yields are up, and oil is down
* Very light data schedule today
Markets Overnight
It's a rollercoaster market out there and we are still torn between hope and despair. The stock market ended on a bullish note yesterday, and has continued up in Asia this morning, as fears for the fate of the US mortgage giants Freddie Mac and Fannie Mae calmed.
The big issue that triggered the big drop in the GSEs' equity value on Monday was whether or not they would lose their regulatory exemption from bringing on SIVs to their balance sheets and thus be forced to raise new capital. Yesterday the stocks rebounded after regulators stated that they would not have to raise more capital.
Moreover, the drop in oil prices down to 135 USD/barrel certainly helped the stock markets on their way. The S&P 500 ended the day up by 1.7% and the Nasdaq index rose by 2.3%. As we write the Nikkei index has gained 1.8%.
As the financial jitters have receded Treasury yields have risen somewhat. The 2yr Treasury has come back from its sub-2.40% level to 2.50% this morning, and the US yield curve has flattened a bit. On the FX market the EUR/USD came down along with the oil price yesterday afternoon and has stayed relatively stable around 156.6. The rebounding equity market has lent some support to the SEK, and EUR/SEK has come down a bit to 942. The EUR/NOK has remained very stable at 804.
Global Daily
Yesterday proved to be as gloomy as one could fear in terms of new data. US pending home sales continued to drop in every region. The past two days we have heard Fed statements from both the dovish Yellen and the hawkish Lacker. While Lacker has seen signs of improvement in the economy since the beginning of the year and argues in favour of higher rates, Yellen has underlined that she is ready to act if a wage-inflation spiral becomes an issue. Here we must side with Yellen, as we do not see any signs of macro economic or financial improvement in the US.
A notable development is the continued surge in credit tightness in the Federal loan officer survey to new highs. Moreover, the recent turmoil around US mortgage providers has brought up mortgage lending rates substantially. In fact, 30yr mortgage rates are as high as they were a year ago before the credit crisis started, and the 1yr ARM rate is 60bp higher. This should not be overlooked as the stimulus from lowered Fed funds rate should be channelled through lower mortgage and C&I lending rates - something that is obviously not happening as desired. We thus remain bond bullish in our basic outlook.
Today is yet another day with a very light data schedule. There is no market moving data due out in the US or Euroland, but we will see the publication of consumer confidence data and possibly new home price data out of the UK.
Danske Bank
http://www.danskebank.com/danskeresearch
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Daily Report: Dollar Softens Mildly but Still in Tight Range
Market Overview | Written by ActionForex.com | Jul 09 08 07:33 GMT |
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The forex markets remains mixed without a clear direction today. Go-political risk was the main driver in the markets overnight. Dollar was sent lower after Iran's state television said the nation test-fired a long-range missile capable of reaching Israel. Swiss and oil spikes higher on worry that tensions between US and Iran will keep escalating. Though, the impact to the markets was brief with most majors still bounded in familiar ranges.
Data released today saw UK nationwide consumer confidence tumbled further from 69 to 63 in Jun, missing consensus of 65. Japan machine orders rose 10.4% mom, 5.1% yoy in May. Australia Westpac consumer confidence dropped -6.7% in Jul. Germany Trade surplus was at 14.6B in May, lower than expectation of 16.5B on sharper than expected drop in exports by -3.2% mom. Import rose 0.7% mom.
UK Trade balance will be released later today and is expected to show -4.1B deficit in May. Eurozone Q1 GDP is expected to be unrevised at 0.8% qoq, 2.2% yoy. Canadian housing starts is the major economic release in the US session and is expected to drop slightly from 221.3k to 218.0k.
USD/JPY Daily Outlook
Daily Pivots: (S1) 106.65; (P) 107.10; (R1) 107.94; More.
Intraday outlook in USD/JPY remains neutral as the pair continues to stay in tight range between 106.25 and 107.75. On the upside, further rally could not be ruled out but still, note that sustained break of 108.59 key medium term resistance is needed to confirm whole rebound from 95.77 has resumed. Otherwise, risk of another fall remains. On the downside, below 106.25 will argue that rebound from 104.98 has completed and will put focus back to 104.98 low.
In the bigger picture, USD/JPY has made a medium term bottom after down trend from 124.13 has just met 76.4% retracement of 79.75 to 147.68 at 95.78. Failure of 108.59 resistance was taken as the first signal that rebound from 95.77 has completed. Further break of 102.73 support will confirm this case.At this moment, it's premature to conclude whether rise from 95.77 represent whole correction pattern to fall from 124.13 or just part of it. But in either case, deeper fall should be seen to 61.8% retracement of 95.77 to 108.59 at 100.66. On the upside, while strong rebound could be seen, short term risks will remain on the downside as long as long 108.59 key medium term resistance holds.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:01 | GBP | U.K. N'wide Consumer Confi. Jun | 63 | 65 | 69 | |
| 23:50 | JPY | Japan Machine orders M/M May | 10.40% | 1.10% | 5.50% | |
| 23:50 | JPY | Japan Machine orders Y/Y May | 5.10% | -3.70% | 0.50% | |
| 0:30 | AUD | Australia W'pac consumer confi. Jul | -6.70% | N/A | -5.60% | |
| 6:00 | EUR | Germany Trade balance (euro) May | 14.6B | 16.5B | 17.7B | 17.8B |
| 6:00 | EUR | Germany Current account May | 7.5B | 12.5B | 14.5B | 15.5B |
| 6:00 | EUR | Germany Import M/M May | 0.70% | 1.40% | -2.30% | |
| 6:00 | EUR | Germany Export M/M May | -3.20% | 0.00% | 1.10% | |
| 8:00 | GBP | U.K. Trade balance (gbp) May | -4.1B | -4.3B | ||
| 9:00 | EUR | Eurozone GDP Q/Q Rev. Q1 F | 0.80% | 0.80% | ||
| 9:00 | EUR | Eurozone GDP Y/Y Rev. Q1 F | 2.20% | 2.20% | ||
| 12:15 | CAD | Canada Housing starts Jun | 218.0K | 221.3K |
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Today's Market Outlook
Daily Forex Technicals | Written by Windsor Brokers Ltd | Jul 09 08 08:01 GMT |
EURUSD
Marks a minor swing top failure on the hourly chart Tuesday at 1.5740 before the ensuing pullback to retrace Monday's 1.5611 upleg. Focus is set back at the latter with break resuming the decline off 1.5910, 03 Jul high, towards 1.5537, 25 June, approx 61.8% of 1.5303/1.5910 upleg. A final thrust back at 1.5754/78 resistance zone may be seen before bears reassert.
Res: 1.5728, 1.5740 1.5754, 1.5778
Sup: 1.5674, 1.5650, 1.5635, 1.5521
USDJPY
Marks lower touch-point of an 8-day rising trendline support after Tuesday's slide at 106.25. Subsequent sharp rebound resets focus back at Monday's 107.75 weekly high with break favoring test of congestive tops at 108.59/62. Waning intraday momentum studies however warn immediate exhaustive risk while a pullback seeks a swing low over 106.25. Loss there weakens.
Res: 107.59, 107.75, 108.00, 108.19
Sup: 106.93, 106.65, 106.25, 106.04
GBPUSD
Shall resume 61.8% retracement of 1.9409/2.0008 rise at 1.9638 following Monday- Tuesday's 1.9649/1.9797 bounce. However, sellers should exercise caution on close proximity to 1.9580/85, 19/23 June lows, owing to bullish implication from 14-day RSI positive reversal signal. For now, hourly technicals favour a fresh upswing into 1.9708/49. Consolidation may trace out a bear pennant.
Res: 1.9749, 1.9863, 1.9797, 1.9828
Sup: 1.9675, 1.9666, 1.9649, 1.9638
USDCHF
Returns to strength after Tuesday's dip at 1.0219, rejecting Monday's 1.0226 low to set up latest upswing and extending recovery phase from 1.0112, 03 July low. Immediate rise may stretch towards 1.0377, 61.8% retrace of 1.0541/ 1.0112 fall, and 1.0391, 26 June high, region. Hourly over-extended conditions however may delay and pullback seeks a low over 1.0219.
Res: 1.0350,1.0377, 1.0391, 1.0419
Sup: 1.0270, 1.0246, 1.0219, 1.0196
Windsor Brokers Ltd
http://www.windsorbrokers.biz
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EURUSD
Marks a minor swing top failure on the hourly chart Tuesday at 1.5740 before the ensuing pullback to retrace Monday's 1.5611 upleg. Focus is set back at the latter with break resuming the decline off 1.5910, 03 Jul high, towards 1.5537, 25 June, approx 61.8% of 1.5303/1.5910 upleg. A final thrust back at 1.5754/78 resistance zone may be seen before bears reassert.
Res: 1.5728, 1.5740 1.5754, 1.5778
Sup: 1.5674, 1.5650, 1.5635, 1.5521
USDJPY
Marks lower touch-point of an 8-day rising trendline support after Tuesday's slide at 106.25. Subsequent sharp rebound resets focus back at Monday's 107.75 weekly high with break favoring test of congestive tops at 108.59/62. Waning intraday momentum studies however warn immediate exhaustive risk while a pullback seeks a swing low over 106.25. Loss there weakens.
Res: 107.59, 107.75, 108.00, 108.19
Sup: 106.93, 106.65, 106.25, 106.04
GBPUSD
Shall resume 61.8% retracement of 1.9409/2.0008 rise at 1.9638 following Monday- Tuesday's 1.9649/1.9797 bounce. However, sellers should exercise caution on close proximity to 1.9580/85, 19/23 June lows, owing to bullish implication from 14-day RSI positive reversal signal. For now, hourly technicals favour a fresh upswing into 1.9708/49. Consolidation may trace out a bear pennant.
Res: 1.9749, 1.9863, 1.9797, 1.9828
Sup: 1.9675, 1.9666, 1.9649, 1.9638
USDCHF
Returns to strength after Tuesday's dip at 1.0219, rejecting Monday's 1.0226 low to set up latest upswing and extending recovery phase from 1.0112, 03 July low. Immediate rise may stretch towards 1.0377, 61.8% retrace of 1.0541/ 1.0112 fall, and 1.0391, 26 June high, region. Hourly over-extended conditions however may delay and pullback seeks a low over 1.0219.
Res: 1.0350,1.0377, 1.0391, 1.0419
Sup: 1.0270, 1.0246, 1.0219, 1.0196
Windsor Brokers Ltd
http://www.windsorbrokers.biz
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Forex Technical Update
Daily Forex Technicals | Written by Rcpl Forex | Jul 09 08 07:37 GMT |
Euro: Euro dipped to touch 1.5634 levels where it was supported by the upward trendline in yesterday's session. The daily and 4-hourly stochastic are in the oversold region while the hourly shows some buying pressure. A further downside can be seen till the levels 1.5640 (trendline support and 200 4-hrly EMA). Cautious longs can be initiated at those levels targeting 50- 60 pips. (Eur/Usd : 1.5700).
Pound: Pound remained volatile as it traded within 132 pips as it touched an intra day high of 1.9797 and closed weaker at 1.9693. The daily and 4-hourly stochastic oversold indicating slight buying pressure hence an upmove upto 1.9780 (100 daily EMA and 38.2% retracement daily charts) can be expected. Shorts can be initiated at those levels targeting 50-60 pips (Gbp/Usd: 1.9701)
Yen: USD/JPY pair scaled to touch a high of 107.75 (200 daily EMA) and later closed weaker at 107.13. All major stochastic are indicating a downside thus a retracement till 106.85 (55 4-hrly & 200 hrly EMA) could be expected. The pair continues to trade in an upward price channel with strong resistance coming at 107.77 (trendline resistance and 200 daily EMA) and a decisive break of this would revive the bullish momentum for the pair else it will remain range-bound. (Usd/Jpy: 107.10)
Rupee: Rupee appreciated marginally against the dollar on Tuesday after the stock markets recovered some of the initial losses. The wide fluctuations in the rupee could also be attributed to political uncertainty. It opened at 43.33/34 and touched an intra day low of 43.41/42. In the forward market, the 6-month premium closed at 4.23 per cent the 6-month premium closed at 4.23 per cent (4.52) and the 12-month ended at 3.75 per cent (3.95). (Usd/Inr: 43.13)
Swiss Franc: USD/CHF pair surged 130 pips on Tuesday to touch a high 1.0348 (55 daily EMA & 61.8% retracement of recent fall). The hourly stochastic is in oversold region while the daily and 4-hourly stochastic show selling pressure which can lead the pair to 1.0230 levels (50% Retracement of recent rise). Look for opportunities to initiate shorts at current levels (Usd/Chf-1.0325)
Australian Dollar: AUD/USD pair remained under pressure on the back of weak commodity prices as it fell 66 pips from the day's high of 0.9567. The hourly stochastic are in the oversold region while the 4-hourly and daily continue to show selling pressure. The pair is currently taking support at 0.9480 (55 daily EMA) a decisive break of which can pull the pair down to 0.9400 mark (21 Weekly EMA). (Aud/Usd: 0.9502)
Gold: Gold traded within $21 in yesterday's session as it dipped to a low of $912 before gaining some strength in the U.S. session to close at $919. The 4-Hourly & daily stochastic show room for further downmove. Immediate support comes in at $912 levels. (21 daily EMA) on breaking which $900 mark can be witnessed (61.8% Retracement of recent rise). (Gold: $919.25)
Dollar index: Dollar index is currently at 73.27, 22 points higher than previous levels of 73.05. The stochastic are at 49 % and indicate a room for a further upmove. Medium term target 75.00.
RCPL FOREX
www.rcplforex.com
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Euro: Euro dipped to touch 1.5634 levels where it was supported by the upward trendline in yesterday's session. The daily and 4-hourly stochastic are in the oversold region while the hourly shows some buying pressure. A further downside can be seen till the levels 1.5640 (trendline support and 200 4-hrly EMA). Cautious longs can be initiated at those levels targeting 50- 60 pips. (Eur/Usd : 1.5700).
Pound: Pound remained volatile as it traded within 132 pips as it touched an intra day high of 1.9797 and closed weaker at 1.9693. The daily and 4-hourly stochastic oversold indicating slight buying pressure hence an upmove upto 1.9780 (100 daily EMA and 38.2% retracement daily charts) can be expected. Shorts can be initiated at those levels targeting 50-60 pips (Gbp/Usd: 1.9701)
Yen: USD/JPY pair scaled to touch a high of 107.75 (200 daily EMA) and later closed weaker at 107.13. All major stochastic are indicating a downside thus a retracement till 106.85 (55 4-hrly & 200 hrly EMA) could be expected. The pair continues to trade in an upward price channel with strong resistance coming at 107.77 (trendline resistance and 200 daily EMA) and a decisive break of this would revive the bullish momentum for the pair else it will remain range-bound. (Usd/Jpy: 107.10)
Rupee: Rupee appreciated marginally against the dollar on Tuesday after the stock markets recovered some of the initial losses. The wide fluctuations in the rupee could also be attributed to political uncertainty. It opened at 43.33/34 and touched an intra day low of 43.41/42. In the forward market, the 6-month premium closed at 4.23 per cent the 6-month premium closed at 4.23 per cent (4.52) and the 12-month ended at 3.75 per cent (3.95). (Usd/Inr: 43.13)
Swiss Franc: USD/CHF pair surged 130 pips on Tuesday to touch a high 1.0348 (55 daily EMA & 61.8% retracement of recent fall). The hourly stochastic is in oversold region while the daily and 4-hourly stochastic show selling pressure which can lead the pair to 1.0230 levels (50% Retracement of recent rise). Look for opportunities to initiate shorts at current levels (Usd/Chf-1.0325)
Australian Dollar: AUD/USD pair remained under pressure on the back of weak commodity prices as it fell 66 pips from the day's high of 0.9567. The hourly stochastic are in the oversold region while the 4-hourly and daily continue to show selling pressure. The pair is currently taking support at 0.9480 (55 daily EMA) a decisive break of which can pull the pair down to 0.9400 mark (21 Weekly EMA). (Aud/Usd: 0.9502)
Gold: Gold traded within $21 in yesterday's session as it dipped to a low of $912 before gaining some strength in the U.S. session to close at $919. The 4-Hourly & daily stochastic show room for further downmove. Immediate support comes in at $912 levels. (21 daily EMA) on breaking which $900 mark can be witnessed (61.8% Retracement of recent rise). (Gold: $919.25)
Dollar index: Dollar index is currently at 73.27, 22 points higher than previous levels of 73.05. The stochastic are at 49 % and indicate a room for a further upmove. Medium term target 75.00.
RCPL FOREX
www.rcplforex.com
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Australian Confidence Slump, Loan Drop Show Economy Is Slowing
By Victoria Batchelor
July 9 (Bloomberg) -- Australian consumer confidence fell to a 16-year low and home-loan approvals dropped by the most in eight years, pushing down the nation's currency on speculation the central bank won't raise interest rates again this year.
Westpac Banking Corp.'s sentiment index slumped 6.7 percent to 79 points in July, the sixth straight reading of less than 100, showing pessimists outnumber optimists. The number of loans granted to build or buy homes and apartments dropped 7.9 percent from April, the statistics bureau said in Sydney today.
Consumers, grappling with record fuel prices and the highest borrowing costs in 12 years, are shunning property purchases and paring spending at retailers Just Group Ltd. and David Jones Ltd. The reports underline evidence the central bank's rate increases this year are slowing the economy, which will cool the fastest inflation in almost two decades.
``Significantly higher interest rates are really biting,'' said Andrew Hanlan, senior economist at Westpac Bank in Sydney. ``That will start to slow inflation, suggesting that rate increases are behind us and the central bank is firmly on hold.''
Confidence among consumers globally is declining as spiraling food and fuel prices erode their purchasing power.
U.K. consumer confidence fell to the lowest level since at least 2004, a report today showed. Japanese household confidence slumped to the second-lowest level on record in May. Sentiment among New Zealanders dropped to an all-time low in June.
Dollar Drops
Australia's dollar fell to 95.06 U.S. cents at 12:57 p.m. in Sydney from 95.47 cents just before the confidence index was released. The two-year bond yield dropped 2 basis points, or 0.02 percentage point, to 6.68 percent.
``Consumer spending has been weaker than was anticipated,'' because of soaring fuel and food costs, Ian Pollard, chairman of clothing retailer Just Group, said on July 2. ``The recent softening in the retail market is being felt by most market participants.''
The nation's S&P/ASX 200 index of shares has slumped 21 percent this year, outpacing declines in benchmark indexes in the U.K., Japan and the U.S. Australia's stock index rose 1.8 percent today, in line with moves in global markets.
Shares in James Hardie Industries NV, which manufactures building products, fell 2.6 percent to A$4.09. Billabong International Ltd., which makes sports clothes, dropped 1.3 percent to A$10.72.
`Hit Hard'
``Australian consumers' sentiment and cash flow have been hit hard by rising interest rates, rents, and food and fuel prices,'' said Paul Braddick, head of property analysis at Australia & New Zealand Banking Group Ltd. in Melbourne.
Westpac's confidence survey of 1,200 households was conducted from June 30 to July 6.
Since the previous month's poll, the price of crude oil has risen 11.5 percent and the cost of gasoline in Australia has climbed 3.4 percent. Crude oil reached a record $145.85 a barrel in New York on July 3.
The decline in mortgage approvals was the biggest monthly drop since June 2000, according to the statistics bureau. Home- loan permits are at the lowest level since October 2004.
An index measuring construction work contracted for the first time in four years, according to a separate survey by Master Builders Australia, released in Canberra today.
``The housing industry is officially in the doldrums,'' said Brian Seidler, an executive director of Master Builders' New South Wales branch.
Mortgage Rates
The Reserve Bank of Australia raised its benchmark interest rate to 7.25 percent in March. It has boosted borrowing costs four times since August 2007 to cool the fastest inflation since 1991.
Rate increases by the central bank and commercial lenders since August have added about A$210 ($200) to the monthly repayments on an average A$250,000 home loan.
St. George Bank Ltd. boosted its variable home-loan rate a further 0.2 percentage point to 9.67 percent, effective from yesterday. That will add about A$40 to monthly repayments on an average mortgage.
``Today's data further supports expectations the Reserve Bank is on hold for the rest of 2008,'' said Spiros Papadopoulos, an economist at National Australia Bank Ltd. in Melbourne.
Eighteen of 25 economists surveyed on June 30 said the central bank will keep the benchmark rate unchanged for the rest of 2008, six forecast an increase and one a cut.
To contact the reporter on this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.
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U.K. June Consumer Confidence Slumps to Lowest in Four Years
By Brian Swint
July 9 (Bloomberg) -- U.K. consumer confidence declined to the lowest level since at least 2004 in June as inflation accelerated and the economic slowdown deepened, Nationwide Building Society said.
Nationwide's index of sentiment, taken from the responses of 1,000 people, declined 6 points to 63, the lowest since the survey began in May 2004, Britain's fourth-biggest mortgage lender said today in an e-mailed statement.
The U.K. is skirting a recession as house prices fall, banks roll back credit and oil costs increase. Bank of England Governor Mervyn King, who votes in an interest-rate decision tomorrow, has said that the inflation rate may jump to 4 percent, double the target, and that the economy may contract.
Consumers ``are recognizing that the economy is weakening, and that's going to affect them,'' said Fionnuala Earley, chief economist at Nationwide, in an interview on Bloomberg Television. ``The next move in rates will be down, but it will be much later this year or next year.''
All but one of 49 economists in a Bloomberg News survey predict the Bank of England will keep the key rate unchanged at 5 percent tomorrow. Nationwide said there is a 20 percent chance that the bank will raise interest rates.
Faster Inflation
Inflation climbed to 3.3 percent in May, the fastest pace since at least 1997, and King said last month that the rate may exceed 4 percent later this year. In May, King said the economy may see the ``odd quarter or two'' of contraction as consumers pare spending.
More than half the respondents in the Nationwide survey expect the economic outlook to worsen over the next six months, and around 70 percent predict their incomes will stay the same in that period, the report showed.
The U.K.'s benchmark FTSE 100 Index yesterday extended its decline from last year's high to 20 percent, the common definition of a bear market.
House prices fell the most since 1992 in June as banks increased mortgage rates and made few loans available, Nationwide said July 1. Persimmon Plc, the U.K.'s second-biggest homebuilder, said yesterday it plans to cut 1,100 jobs to lower costs amid the worst British housing slump in 30 years.
``Very few people so far are affected by unemployment, but with more bad news coming through from homebuilders, that may start to change their perceptions,'' Earley said.
Unemployment may rise 58 percent to 1.3 million by the middle of 2010, the Center for Economic and Social Inclusion, a government-supported research group, predicted this week.
Nationwide started publishing seasonally adjusted figures with this report for the first time since the survey started. That reading showed the main confidence index falling to 61 from 65. The survey was conducted between May 19 and June 22.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
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G-8's Climate Demands Set Up Showdown With Emerging Economies
By James G. Neuger and Dune Lawrence
July 9 (Bloomberg) -- By pressing developing countries to do more to combat global warming, the Group of Eight has set the stage for a broader showdown pitting most of the world's biggest economies against poorer-but-faster-growing ones.
The G-8 yesterday conditioned a promise to reduce greenhouse gas pollution at least 50 percent by 2050 on China, India and other emerging economies taking part in a ``global response.'' The two sides will square off today in Toyako, on Japan's northern island of Hokkaido, to air their differences.
``Responsibility shouldn't fall on developing countries for what is an unavoidable responsibility of developed nations,'' said Mexican President Felipe Calderon, who met with counterparts from Brazil, China, India and South Africa on the island before heading to Toyako.
Dubbed the G-5, those countries said the G-8's climate- change demands, inspired by U.S. President George W. Bush, reflected rich-world policies that would shackle their economies.
Climate change is one of several G-8 summit agenda items that divide the two sides. The G-8 leaders also said some poorer states are profiting from unfairly undervalued currencies, hoarding food surpluses and subsidizing energy prices.
Meeting in Sapporo, a three-hour drive from the G-8 site, the G-5 leaders signaled their desire to become a competing power bloc by issuing their first-ever joint declaration.
Vague Goals
That statement said it was ``essential that developed countries take the lead in achieving ambitious and absolute greenhouse gas emissions reduction.'' They pressed for cuts of 25 percent to 40 percent by 2020 instead of the G-8's vaguely worded ``mid-term goals.''
Marthinus van Schalkwyk, South Africa's environment minister, called the G-8's road map ``an empty slogan without substance.''
The five nations first met informally before last year's G- 8 summit in Germany. They announced plans yesterday to gather two months before next year's G-8 session in Italy.
The G-5 accounts for 42 percent of the world's population and 11 percent of the global economy, measured by real exchange rates, according to a June 2007 estimate by the University of Toronto's G8 Research Group.
The Group of Eight industrialized nations -- the U.S., Japan, Germany, Italy, Britain, France, Canada and Russia -- makes up about 13 percent of the world's population and 62 percent of its economy.
`The Main Culprit'
The wealthy economies also generate 62 percent of the world's greenhouse gases, making them ``the main culprit of climate change and the biggest part of the problem,'' said Kim Carstensen, director of the World Wide Fund For Nature's climate initiative.
Industrial world criticism extended to moves by developing nations to halt the export of some foods, stockpiling domestic supplies in the face of soaring prices for basic commodities. India, with an economy that expanded 9 percent in the year ended March 31, banned corn exports last week as it moved to cool the fastest inflation in 13 years. India already had curbed exports of rice, wheat and cooking oil.
The G-8's criticism of food policies drew a rebuke from President Hu Jintao of China, the world's fastest-growing major economy, with an expansion of 10.6 percent in the first quarter from a year earlier. China now ranks behind the U.S., Japan and Germany in economic size.
``Big developing countries'' aren't responsible for food price increases, Hu said in Sapporo. ``This is not a responsible attitude.''
Backtracking
Meanwhile, the European Union backtracked on a day-old promise to donate 1 billion euros ($1.6 billion) over two years to promote food production in developing countries when German Chancellor Angela Merkel said the funds have not yet been budgeted.
``The last word on this has not yet been spoken,'' Merkel said.
China was the main target of G-8 criticism of trade imbalances, facing accusations that it is keeping its currency at an artificially low level to gain a competitive advantage.
In language French President Nicolas Sarkozy said was aimed at China, the G-8 called for a ``necessary adjustment'' in exchange rates ``in some emerging economies with large and growing current-account surpluses.''
The surplus in China's current account, the widest measure of trade, increased 49 percent in 2007 to $371.8 billion.
While the U.S. has benefited from the Chinese yuan's 20.7 percent advance against the dollar since it was freed to float in July 2005, Europe has lost out. The yuan has cheapened 7.2 percent against the euro during that time.
As a result, Sarkozy said, China's exchange rate doesn't ``correspond to economic reality.''
To contact the reporters on this story: James G. Neuger in Toyako, Japan at jneuger@bloomberg.net; Dune Lawrence in Toyako, Japan at dlawrence6@bloomberg.net
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Fannie, Freddie Downgraded by Derivatives Traders Over Capital
By Shannon D. Harrington and Dawn Kopecki
July 9 (Bloomberg) -- Fannie Mae and Freddie Mac, ranked Aaa by the world's largest credit-rating companies, are being treated by derivatives traders as if they are rated five levels lower.
Credit-default swaps tied to $1.45 trillion of debt sold by the two biggest U.S. mortgage finance companies are trading at levels that imply the bonds should be rated A2 by Moody's Investors Service, according to data compiled by the firm's credit strategy group. The price of contracts used to speculate on the creditworthiness of Fannie Mae and Freddie Mac and to protect against a default doubled in the past two months.
Traders are overlooking the government's tacit guarantee of the debt as credit losses grow and concern rises that the companies don't have enough capital to weather the biggest housing slump since the Great Depression. Even an implied guarantee isn't enough to convince credit investors that there's little risk to owning Fannie Mae and Freddie Mac debt, said Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California.
``Investors are viewing even an implicit guarantee from the government as potentially troublesome,'' Backshall said.
Worries that Fannie Mae and Freddie Mac may need more capital were heightened this week after Lehman Brothers Holdings Inc. released a report saying a new accounting rule may require them to raise $75 billion. Freddie Mac dropped 18 percent June 7 in New York Stock Exchange composite trading and Fannie Mae dropped 16 percent.
The companies' congressional charters provide exemption from state and local corporate income taxes and give the Treasury the authority to buy as much as $2.25 billion in each of their securities in the event of possible default. Fannie Mae spokesman Brian Faith and Freddie Mac spokesman Michael Cosgrove declined to comment.
Gap Widens
Credit-default swaps tied to Washington-based Fannie Mae's senior debt climbed 39 basis points to 74 basis points since May 1, while contracts on McLean, Virginia-based Freddie Mac's senior debt increased 40 basis points to 75, according to London-based CMA Datavision. A basis point is 0.01 percentage point.
The cost to protect the companies' subordinated debt from default has risen at a faster rate amid concern the government may not honor the subordinated debt, Backshall said. The subordinated debt of both companies is rated Aa2 by Moody's because the owners would be paid after the senior bond investors.
Credit-default swaps tied to Fannie Mae's subordinated debt have jumped 108 basis points to 195 basis points since May 1. Contracts on Freddie Mac's subordinated debt have risen 105 basis points to 193 basis points.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They were conceived to protect bondholders against default and pay the buyer face value in exchange for the underlying securities or the cash equivalent should the company fail to adhere to its debt agreements.
A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Combined Losses
Fannie Mae and Freddie Mac, which reported combined losses of more than $11 billion, have raised more than $20 billion since December. Merrill Lynch & Co. analyst Kenneth Bruce said in a report yesterday the ``highly levered financial institutions'' will have pretax credit-related losses of $45 billion.
``Fannie and Freddie are going to have to raise more capital and nobody thinks they're going to be able to raise capital when they need to,'' said Paul Miller, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia. ``It's going to be very expensive.''
Recouping Losses
Fannie Mae rose 12 percent and Freddie Mac gained 13 percent yesterday, recouping some losses from a day earlier, after the companies' regulator said they were adequately capitalized and Treasury Secretary Henry Paulson said they can still be a ``constructive force,'' in the economy.
The companies own or guarantee about 46 percent of the $12 trillion U.S. mortgage market.
``It concerns me that people sort of extrapolate well beyond what the facts are,'' James Lockhart, the director of the Office of Federal Housing Enterprise Oversight, said in an interview with Bloomberg Television yesterday.
The government is leaning on the companies to help revive the mortgage market. Congress lifted growth restrictions on the companies, eased their capital requirements and allowed them to buy bigger, so-called jumbo mortgages to spur demand for home loans as competitors fled the market.
Their share of new conforming mortgages, or loans of $417,000 or less, almost doubled to 81 percent in the first quarter, Ofheo said.
The bailout of Bear Stearns Cos. arranged by the Federal Reserve in March shows the government won't allow the companies to fail, Robert Millikan, who manages $5 billion as director of fixed income at BB&T Asset Management in Raleigh, North Carolina.
``We're looking at it from a standpoint of, if the Fed is not going to allow a problem with Bear Stearns, they're certainly not going to allow a problem with Fannie and Freddie,'' Millikan said. ``With all the exposure that banks have to Fannie and Freddie, the ripple effect through the whole financial system would be unbelievable if they were allowed to fail,'' he said.
To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net; Dawn Kopecki in Washington at dkopecki@bloomberg.net.
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Malaysian Inflation Exceeded 6% in June, Zeti Says
By Soraya Permatasari
``While domestic inflation is expected to remain elevated for the remaining part of this year and early next year, it is expected to moderate in the second half of 2009,'' Governor ZetiAkhtar Aziz said in a speech in Kuala Lumpur today.
Record crude prices forced Prime Minister Abdullah Ahmad Badawi to announce a 41 percent increase in petrol prices and 63 percent jump in diesel costs in June, and allow higher electricity rates this month. Surging food and oil prices have already prompted neighboring Indonesia and the Philippines to raise borrowing costs this year to tame inflation.
``There's little that they can do but to increase rates,'' said Gundy Cahyadi, an economist at Ideaglobal in Singapore. ``The concern is if they don't do that, the market's confidence on Malaysian inflation is going to be hurt.''
The central bank had estimated last month that the fuel price increases would cause inflation to accelerate to 5 percent in June. The last time the inflation rate was above 6 percent was June 1998, when the central bank's then benchmark three- month intervention rate was 11 percent.
Bank Negara Malaysia, which kept its overnight policy rate at 3.5 percent for a 17th straight meeting on May 26, next meets on July 25.
Lasting Impact
The impact of higher fuel prices on inflation will be ``quite lasting'' and may not ease until the later part of 2009, said Cahyadi, who expects the central bank to raise its benchmark rate by half a percentage point to 4 percent this year.
The ringgit climbed to 3.2490 per dollar as of 12.22 p.m. in Kuala Lumpur from 3.2615 late yesterday, according to data compiled by Bloomberg.
``We have to evaluate the risks to inflation,'' Zeti told reporters after her speech. ``We will look for signs of second- round effects and these are whether there are pressures for wage adjustments to take place and whether there are other secondary price increases.''
The central bank will also evaluate the risks to growth from a potential further slowdown in the external environment, and watch for a ``deflationary impact arising from higher energy prices on the economy,'' she said.
The central bank may not raise borrowing costs if inflation stayed below 7.5 percent in June, said Alvin Liew, an economist at Standard Chartered Plc in Singapore, who expects Bank Negara to keep interest rates on hold this year to avoid hurting domestic demand and investment.
``If we see inflation in June going up towards double digits, then the risk is that they might have to hike rates,'' Liew said. ``However, the probability for that is very low.''
To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net
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German May Exports Decline Most in Almost Four Years
By Gabi Thesing
July 9 (Bloomberg) -- Exports from Germany, Europe's largest economy, declined the most in almost four years in May, as a cooling global economy and a stronger euro curbed demand.
Sales abroad, adjusted for working days and seasonal changes, decreased 3.2 percent from April, the Federal Statistics Office in Wiesbaden said today. That's the biggest drop since June 2004. Economists expected a gain of 0.5 percent, the median of 11 forecasts in a Bloomberg News survey showed.
Exporters are grappling with the euro's 15 percent appreciation against the dollar and an 18 percent gain against sterling in the past year. That's eroding competitiveness just as a U.S.-led global slowdown and record oil prices cool the world economy. In China, export growth probably slowed in June.
``We can't expect much support from the export side,'' said Matthias Rubisch, an economist at Commerzbank AG in Frankfurt. ``We will only see slight gains in the coming months. Over the past few weeks, the economic outlook has considerably worsened.''
From a year earlier, exports rose 2.5 percent, today's report showed. The trade surplus narrowed to 14.4 billion euros ($23 billion) from 18.8 billion euros in April. Economists forecast a surplus of 17.3 billion euros. The surplus in the current account, the measure of all exports including services, narrowed to 7.5 billion euros from 15.5 billion euros in April.
Production Drops
Manufacturing orders in Germany unexpectedly fell for the sixth month in succession and industrial production declined for a third, reports showed over the past week.
German consumer, business and investor confidence fell last month. Plant and machinery orders fell the most in three years in May, the VDMA machine makers association said last week.
``The stronger euro is starting to hurt,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. ``Foreign orders have seriously dropped in recent months and with weak domestic demand not offsetting the shortfall, economic growth in the second quarter may contract.''
Growth is slowing globally after the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit. The International Monetary Fund in April forecast world growth would slow to 3.7 percent this year from 4.9 percent in 2007.
Australia, Dubai
Oil prices above $135 a barrel are fanning inflation and eroding demand. About 50 countries now have inflation of more than 10 percent, a Morgan Stanley study showed last month.
Some companies are trying to offset falling European and U.S. orders by expanding in oil-exporting countries. Lanxess AG, Germany's biggest publicly traded specialty-chemicals maker, is sticking to its full-year profit targets on demand from Asia.
Hochtief AG, Germany's biggest construction company, won three orders valued at more than 340 million euros ($540 million) to maintain roads and build apartment towers in New Zealand, Australia and Dubai.
Shipments to countries outside the European Union rose 4.2 percent from a year earlier. Exports to EU member states increased 1.5 percent, while imports gained 5.7 percent.
Still, after the fastest economic expansion in 12 years in the first quarter, Europe's largest economy may shrink in the second quarter, Germany's Deputy Economy Minister Walther Otremba said June 24.
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
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July 9 (Bloomberg) -- Exports from Germany, Europe's largest economy, declined the most in almost four years in May, as a cooling global economy and a stronger euro curbed demand.
Sales abroad, adjusted for working days and seasonal changes, decreased 3.2 percent from April, the Federal Statistics Office in Wiesbaden said today. That's the biggest drop since June 2004. Economists expected a gain of 0.5 percent, the median of 11 forecasts in a Bloomberg News survey showed.
Exporters are grappling with the euro's 15 percent appreciation against the dollar and an 18 percent gain against sterling in the past year. That's eroding competitiveness just as a U.S.-led global slowdown and record oil prices cool the world economy. In China, export growth probably slowed in June.
``We can't expect much support from the export side,'' said Matthias Rubisch, an economist at Commerzbank AG in Frankfurt. ``We will only see slight gains in the coming months. Over the past few weeks, the economic outlook has considerably worsened.''
From a year earlier, exports rose 2.5 percent, today's report showed. The trade surplus narrowed to 14.4 billion euros ($23 billion) from 18.8 billion euros in April. Economists forecast a surplus of 17.3 billion euros. The surplus in the current account, the measure of all exports including services, narrowed to 7.5 billion euros from 15.5 billion euros in April.
Production Drops
Manufacturing orders in Germany unexpectedly fell for the sixth month in succession and industrial production declined for a third, reports showed over the past week.
German consumer, business and investor confidence fell last month. Plant and machinery orders fell the most in three years in May, the VDMA machine makers association said last week.
``The stronger euro is starting to hurt,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. ``Foreign orders have seriously dropped in recent months and with weak domestic demand not offsetting the shortfall, economic growth in the second quarter may contract.''
Growth is slowing globally after the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit. The International Monetary Fund in April forecast world growth would slow to 3.7 percent this year from 4.9 percent in 2007.
Australia, Dubai
Oil prices above $135 a barrel are fanning inflation and eroding demand. About 50 countries now have inflation of more than 10 percent, a Morgan Stanley study showed last month.
Some companies are trying to offset falling European and U.S. orders by expanding in oil-exporting countries. Lanxess AG, Germany's biggest publicly traded specialty-chemicals maker, is sticking to its full-year profit targets on demand from Asia.
Hochtief AG, Germany's biggest construction company, won three orders valued at more than 340 million euros ($540 million) to maintain roads and build apartment towers in New Zealand, Australia and Dubai.
Shipments to countries outside the European Union rose 4.2 percent from a year earlier. Exports to EU member states increased 1.5 percent, while imports gained 5.7 percent.
Still, after the fastest economic expansion in 12 years in the first quarter, Europe's largest economy may shrink in the second quarter, Germany's Deputy Economy Minister Walther Otremba said June 24.
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
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French Trade Deficit Widens to Record EU4.7 Billion
By Helene Fouquet
July 9 (Bloomberg) -- France's tradedeficit widened in May to a record as the stronger euro and slowing economic growth led to a decline in exports.
The deficit rose to 4.74 billion euros ($7.45 billion) from a revised 3.74 billion euros in April, the Trade Ministry in Paris said today. Economists expected a shortfall of 4 billion euros, according to the median of 12 forecasts in a Bloomberg News survey
Slowing growth across Europe in the second quarter is hurting demand for French exports, already suffering from the 7.3 percent increase in the euro this year. Manufacturers are also suffering from the fallout of the doubling in crude oil prices in the past year that is raising production costs and leaving French consumers with less to spend.
Europe's third-biggest economy will grow 0.2 percent in the second quarter, the least in almost two years and a third of the pace in the first three months, Paris-based statistics office Insee predicted. The economy will stagnate in the third quarter and grow 0.2 percent in the final three months of 2008, Insee said.
Exports in May fell to 34.7 billion euros from a revised 35.3 billion euros, with the U.S. leading the decline. Imports rose to 39.5 billion euros from a revised 39.1 billion euros in April.
Airbus Sales
German exports also declined, falling 3.2 in May from the previous month, the biggest decline in almost four years in May, a separate report said today.
Airbus SAS, the world's largest planemaker, said on May 28 orders for its A380 superjumbo may be one-third lower than previously predicted this year as higher fuel costs and the economic slowdown dent demand for travel. Airbus sold 20 aircrafts in May for 831 million euros, down from 22 planes in April for 1.1 billion euros.
Crude oil has gained 48 percent this year, reaching a record $145.85 a barrel on July 3, fueling the fastest inflation in France in 12 years. The surge in prices is sapping consumer confidence and economic growth.
French Finance Minister Christine Lagarde, who said Insee's growth forecasts were ``on the pessimistic side,'' expects the economy to expand between 1.7 percent and 2 percent this year, down from 2.2 percent in 2007.
To contact the reporters on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net.
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July 9 (Bloomberg) -- France's tradedeficit widened in May to a record as the stronger euro and slowing economic growth led to a decline in exports.
The deficit rose to 4.74 billion euros ($7.45 billion) from a revised 3.74 billion euros in April, the Trade Ministry in Paris said today. Economists expected a shortfall of 4 billion euros, according to the median of 12 forecasts in a Bloomberg News survey
Slowing growth across Europe in the second quarter is hurting demand for French exports, already suffering from the 7.3 percent increase in the euro this year. Manufacturers are also suffering from the fallout of the doubling in crude oil prices in the past year that is raising production costs and leaving French consumers with less to spend.
Europe's third-biggest economy will grow 0.2 percent in the second quarter, the least in almost two years and a third of the pace in the first three months, Paris-based statistics office Insee predicted. The economy will stagnate in the third quarter and grow 0.2 percent in the final three months of 2008, Insee said.
Exports in May fell to 34.7 billion euros from a revised 35.3 billion euros, with the U.S. leading the decline. Imports rose to 39.5 billion euros from a revised 39.1 billion euros in April.
Airbus Sales
German exports also declined, falling 3.2 in May from the previous month, the biggest decline in almost four years in May, a separate report said today.
Airbus SAS, the world's largest planemaker, said on May 28 orders for its A380 superjumbo may be one-third lower than previously predicted this year as higher fuel costs and the economic slowdown dent demand for travel. Airbus sold 20 aircrafts in May for 831 million euros, down from 22 planes in April for 1.1 billion euros.
Crude oil has gained 48 percent this year, reaching a record $145.85 a barrel on July 3, fueling the fastest inflation in France in 12 years. The surge in prices is sapping consumer confidence and economic growth.
French Finance Minister Christine Lagarde, who said Insee's growth forecasts were ``on the pessimistic side,'' expects the economy to expand between 1.7 percent and 2 percent this year, down from 2.2 percent in 2007.
To contact the reporters on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net.
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Australia May Have Added Jobs in June on Mining Boom
By Victoria Batchelor
July 9 (Bloomberg) -- Australian employment probably rebounded in June from the first jobs decline in 19 months, a sign the nation's mining boom is underpinning economic growth as domestic demand slows.
The number of people employed rose 10,000 last month after a 19,700 drop in May, according to the median estimate of 25 economists surveyed by Bloomberg News. The jobless rate held at 4.3 percent, the survey showed. The statistics bureau report is due at 11:30 a.m. in Sydney tomorrow.
China and India's growing appetite for commodities has prompted miners and energy companies, led by BHP Billiton Ltd. and Rio Tinto Group, to expand and hire workers. Exports rose to a record in May, bolstering the $1 trillion economy as slower consumer spending and rising costs prompt manufacturers, airlines and retailers to shed staff.
``Australia has a two-speed economy with a very strong resources sector but weakening household spending,'' said Stephen Roberts, director of research at Lehman Brothers Holdings Inc. in Sydney. ``We see employment rebounding in June as mining is helping to support the economy, ensuring the slowdown hasn't been too dramatic.''
Prior to the jobs decline in May, Australian employers had added extra workers every month from October 2006, the longest run of gains since the government began publishing monthly figures in 1978. The unemployment rate fell to 4 percent in February, the lowest in more than three decades.
Exports Increase
Australia's dollar, which was little changed at 95.43 U.S. cents at 10:30 a.m. in Sydney, has risen 8.7 percent this year. The nation's S&P/ASX 200 index of shares, which rose today, has fallen 21 percent this year.
Exports climbed to a record A$21.9 billion ($20.9 billion) in May, stoked by rising sales to China, the statistics bureau said last week.
BHP Billiton, the world's largest mining company, approved a $1.9 billion expansion in May of its Worsley alumina project in Western Australia. Rio Tinto plans to boost output by 26 percent at its Queensland Alumina Ltd. refinery.
``The economy retains enough momentum to keep generating jobs,'' said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney.
Australia, the world's largest shipper of coal, iron ore and wool, may earn 12 percent more from commodity exports this financial year than forecast three months earlier because of higher prices, the government said on June 23.
Domestic Slowdown
As the mining boom supports the economy's 17-year expansion, higher interest rates are buffeting household spending and spiraling costs are hurting airlines and manufacturers.
Consumer confidence declined 6.7 percent in June to the lowest level since 1992, Westpac Banking Corp. reported today.
The Reserve Bank of Australia raised its benchmark interest rate to a 12-year high of 7.25 percent in March. The bank has boosted borrowing costs four times since August 2007 to cool inflation that is running at the fastest pace in almost two decades.
Six economists in the Bloomberg survey forecast the jobs report will show either no employment growth in June or the second consecutive monthly decline as higher interest rates and rising fuel prices damp the economy.
``Business confidence is very weak, so firms have probably reined in, or postponed, their hiring plans,'' said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. ``We expect no jobs growth in June, given the recent string of soft domestic economic data.''
Bloomberg Survey
Business sentiment fell to a seven-year low, construction work declined and the number of job vacancies advertised on the Internet and in newspapers dropped by the most in almost two years in June, according to reports this week.
Goodyear Tire & Rubber Co., the U.S.-based tire maker, said last month it will close a Melbourne factory and fire 600 workers. Qantas Airways Ltd., the nation's largest carrier, announced plans in June to scrap regional routes and cut hundreds of jobs.
Following is a table of economists' estimates for the change in employment, the jobless rate and the participation rate in June:
Jobless Part.
Employment Rate Rate
---------------------------------------------------
Median 10,000 4.3% 65.3%
High 25,000 4.5% 65.4%
Low Forecast -10,000 4.2% 65.2%
No of replies 25 25 22
---------------------------------------------------
4Cast 25,000 4.3% 65.4%
ABN Amro 0 4.4% --
AMP Capital 0 4.4% 65.2%
ANZ Bank 25,000 4.2% 65.2%
Ausbil Dexia -5,000 4.5% 65.3%
Barclays Capital 12,300 4.4% 65.3%
BT Financial 10,000 4.3% --
Citigroup 5,000 4.3% 65.2%
Commonwealth Bank 20,000 4.2% 65.2%
Deutsche Bank 5,000 4.3% 65.2%
GCI Capital 8,800 4.2% --
Goldman Sachs 10,000 4.3% 65.2%
ICAP Australia 15,000 4.3% 65.3%
JPMorgan Chase 0 4.3% 65.2%
Lehman Brothers 20,000 4.4% 65.4%
Macquarie 10,000 4.4% 65.3%
Merrill Lynch 10,000 4.4% 65.3%
National Australia 0 4.3% 65.2%
Nomura Australia 15,000 4.3% 65.3%
St. George Bank 10,000 4.2% 65.2%
Suncorp Banking -10,000 4.3% 65.2%
TD Securities 2,500 4.4% 65.3%
Thomson 25,000 4.2% 65.3%
UBS Australia 10,000 4.4% 65.3%
Westpac Bank 25,000 4.3% 65.4%
===================================================
To contact the reporter on this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.
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China Exports May Slow, Fueling Calls to Limit Yuan
By Li Yanping
July 9 (Bloomberg) -- China's export growth probably slowed last month, giving more ammunition to manufacturers calling for the government to slow the pace of the yuan's gains.
Overseas shipments climbed 22 percent from a year earlier after gaining 28.1 percent in May, according to the median estimate of 23 economists surveyed by Bloomberg News. The data may be released as early as today.
Rising raw-material, energy and labor costs and a 6.6 percent gain in the yuan versus the dollar this year have squeezed profits, just as the outlook for demand abroad weakens, exporters say. More than 2,000 shoemakers closed in Guangdong province, the world's largest footwear production center, in the five months through May, according to the customs bureau.
``Slowing exports will cool economic growth and hit some exporters hard, so the political pressure on the government to stop the yuan's appreciation will increase,'' said Stephen Green, the Shanghai-based head of China research for Standard Chartered Bank Plc.
Any effort to restrain the yuan may provoke China's biggest trading partners. The nation was a target of criticism on trade imbalances from the Group of Eight leaders, meeting in Japan this week.
In language that French President Nicolas Sarkozy said was aimed at China, the G-8 called for a ``necessary adjustment'' in exchange rates ``in some emerging economies with large and growing current-account surpluses.''
Smaller Surplus
China's trade surplus likely narrowed to $22.7 billion from $26.89 billion a year earlier as rising prices for oil, coal and iron ore boosted import costs. Imports probably climbed 36.2 percent, easing from a 40 percent gain in May.
Almost a third of 70,000 Hong Kong-invested factories in China's Pearl River Delta may close or move out this year as higher costs and cuts to export incentives bite, according to Danny Lau, chairman of the Hong Kong Small and Medium Enterprises Association.
``Conditions are extremely difficult,'' Lau said yesterday. ``The renminbi's appreciation is the major factor,'' he said, using another name for China's currency.
Growth in overseas shipments eased to 22.9 percent in the first five months, from 25.7 percent in all of last year, as demand in the U.S., China's second-largest export market, weakened. May's surge in exports may have been because a shortened holiday added three working days to the month compared with a year earlier.
Touring Exporters
Premier Wen Jiabao and Vice Premier Wang Qishan last week visited exporters in Jiangsu, Shanghai and Shandong, listening to their concerns and urging them to become more competitive, the state-run Xinhua News Agency said.
China aims to use currency appreciation to purge exporters who add little value to the economy, Andy Rothman, a Shanghai- based China strategist at CLSA Ltd., said in a report in May. Standard Chartered's Green said yesterday that while exporters highlighted yuan appreciation, weaker overseas demand was the key reason for slower export gains.
This year's appreciation in the yuan has been faster than the 7 percent pace in 2007, cutting import costs and helping government efforts to tame inflation that jumped to a 12-year high of 8.7 percent in February.
The yuan has climbed 20.7 percent versus the dollar since a fixed exchange rate was scrapped in July 2005.
To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net
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Asian Currencies: Won Paces Gain, Thai Baht Falls on Politics
By David Yong and Judy Chen
July 9 (Bloomberg) -- South Korea's won rose the most since March, leading gains in Asia, on speculation the authorities bought the currency to slow inflation at a decade high.
The won climbed to the strongest level in more than two months after the government reversed its stance for a weaker won as inflation quickened to 5.5 percent in June. Thailand's baht slumped to a six-month low on political turmoil.
``The government spent about $1 billion to $2 billion yesterday to support the won,'' said Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second- biggest financial group. ``The intervening power came from the coordination between the finance ministry and the central bank. They may come out one or two more times this week.''
Korea's currency climbed 2 percent to 1,012.75 against the dollar as of 1:22 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency reached 996.50, the strongest level since April 28.
The baht fell 0.2 percent to 33.74 per dollar, taking its loss to 1.3 percent in the past four days.
South Korea will allow state-run companies to borrow money from overseas ``and let them exchange the dollar into won from the local market,'' Choi Jong Ku, director general of the finance ministry's international finance bureau, said in a phone interview today.
The Ministry of Finance and Bank of Korea said on July 7 they will take steps to support the currency, which has fallen 8 percent against the dollar in the past year, making it the worst performer among the 10 most-traded in Asia excluding the yen.
Central banks intervene in currency markets by buying or selling foreign exchange.
Thai Politics
The baht declined on speculation a court verdict against a government official may delay Prime Minister Samak Sundaravej's plans to boost spending and economic growth, prompting overseas investors to sell assets.
The Supreme Court yesterday convicted Yongyuth Tiyapairath, a senior member of the ruling People Power Party, of buying votes in the Dec. 23 elections. The verdict may force Samak to disband the party under constitutional rules.
``Foreign investors are selling stocks,'' damping demand for the baht, said Apichart Suratanasurang, a foreign-exchange trader at BankThai Pcl in Bangkok. ``Political instability and the splits in the government are the main risk. People are worried if this develops into violence. The central bank has been protecting the baht, not wanting it to weaken too much.''
The benchmark SET Index of stocks has dropped 15.8 percent this year. Overseas investors sold 3.2 billion baht ($42 million) more Thai shares than they bought yesterday, according to stock exchange data.
Ringgit, Peso Advance
Malaysia's ringgit climbed by the most in three weeks while the Philippine peso gained the most since early June on optimism a decline in crude oil prices will ease inflation, boosting the appetite for local-currency assets.
Crude oil fell by 3.8 percent yesterday to $136.04 a barrel, the biggest drop since March, extending the slide from a record $145.85 reached July 3. Traders raised bets the ringgit's appreciation will quicken in 12 months, according to non- deliverable forward contracts.
`Big Support'
``Lower oil prices are a big support for the ringgit and there's some confidence coming back in the forward market,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``The market is also seeing some official support'' from central bank buying, he said.
The ringgit climbed for a fifth day, rising to 3.2505 per dollar in Kuala Lumpur versus 3.2615 late yesterday, according to data compiled by Bloomberg. The peso strengthened 0.4 percent to 45.715 in Manila, according to Tullett Prebon Plc. It was headed for its biggest one-day gain since June 2.
The Philippines imports almost all its local fuel requirements, which rose 58 percent in the first four months of the year and stoked inflation to a 14-year high of 11.4 percent last month, government data show.
``The drop in oil eases some of the concern on inflation, a slowing economy and improves the value of peso assets,'' said Rafael Algarra, a treasurer at Security Bank Corp. in Manila. ``In terms of demand, lower oil costs means less dollars needed to buy it.''
Elsewhere, China's yuan fell 0.1 percent to 6.8584 in Shanghai and the Indonesian rupiah gained 0.2 percent to 9,192 against the dollar. Singapore's dollar was little changed at S$1.3630 while Taiwan's dollar held at NT$30.40.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.
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July 9 (Bloomberg) -- South Korea's won rose the most since March, leading gains in Asia, on speculation the authorities bought the currency to slow inflation at a decade high.
The won climbed to the strongest level in more than two months after the government reversed its stance for a weaker won as inflation quickened to 5.5 percent in June. Thailand's baht slumped to a six-month low on political turmoil.
``The government spent about $1 billion to $2 billion yesterday to support the won,'' said Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second- biggest financial group. ``The intervening power came from the coordination between the finance ministry and the central bank. They may come out one or two more times this week.''
Korea's currency climbed 2 percent to 1,012.75 against the dollar as of 1:22 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency reached 996.50, the strongest level since April 28.
The baht fell 0.2 percent to 33.74 per dollar, taking its loss to 1.3 percent in the past four days.
South Korea will allow state-run companies to borrow money from overseas ``and let them exchange the dollar into won from the local market,'' Choi Jong Ku, director general of the finance ministry's international finance bureau, said in a phone interview today.
The Ministry of Finance and Bank of Korea said on July 7 they will take steps to support the currency, which has fallen 8 percent against the dollar in the past year, making it the worst performer among the 10 most-traded in Asia excluding the yen.
Central banks intervene in currency markets by buying or selling foreign exchange.
Thai Politics
The baht declined on speculation a court verdict against a government official may delay Prime Minister Samak Sundaravej's plans to boost spending and economic growth, prompting overseas investors to sell assets.
The Supreme Court yesterday convicted Yongyuth Tiyapairath, a senior member of the ruling People Power Party, of buying votes in the Dec. 23 elections. The verdict may force Samak to disband the party under constitutional rules.
``Foreign investors are selling stocks,'' damping demand for the baht, said Apichart Suratanasurang, a foreign-exchange trader at BankThai Pcl in Bangkok. ``Political instability and the splits in the government are the main risk. People are worried if this develops into violence. The central bank has been protecting the baht, not wanting it to weaken too much.''
The benchmark SET Index of stocks has dropped 15.8 percent this year. Overseas investors sold 3.2 billion baht ($42 million) more Thai shares than they bought yesterday, according to stock exchange data.
Ringgit, Peso Advance
Malaysia's ringgit climbed by the most in three weeks while the Philippine peso gained the most since early June on optimism a decline in crude oil prices will ease inflation, boosting the appetite for local-currency assets.
Crude oil fell by 3.8 percent yesterday to $136.04 a barrel, the biggest drop since March, extending the slide from a record $145.85 reached July 3. Traders raised bets the ringgit's appreciation will quicken in 12 months, according to non- deliverable forward contracts.
`Big Support'
``Lower oil prices are a big support for the ringgit and there's some confidence coming back in the forward market,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``The market is also seeing some official support'' from central bank buying, he said.
The ringgit climbed for a fifth day, rising to 3.2505 per dollar in Kuala Lumpur versus 3.2615 late yesterday, according to data compiled by Bloomberg. The peso strengthened 0.4 percent to 45.715 in Manila, according to Tullett Prebon Plc. It was headed for its biggest one-day gain since June 2.
The Philippines imports almost all its local fuel requirements, which rose 58 percent in the first four months of the year and stoked inflation to a 14-year high of 11.4 percent last month, government data show.
``The drop in oil eases some of the concern on inflation, a slowing economy and improves the value of peso assets,'' said Rafael Algarra, a treasurer at Security Bank Corp. in Manila. ``In terms of demand, lower oil costs means less dollars needed to buy it.''
Elsewhere, China's yuan fell 0.1 percent to 6.8584 in Shanghai and the Indonesian rupiah gained 0.2 percent to 9,192 against the dollar. Singapore's dollar was little changed at S$1.3630 while Taiwan's dollar held at NT$30.40.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.
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Korean Won Surges 2.7% on Speculation Government Intervened
By Judy Chen and William Sim
July 9 (Bloomberg) -- South Korea's won rose to the strongest two months, the world's best performing currency this week, on speculation the government intervened to strengthen the foreign-exchange rate and curb inflation.
Korea's currency touched 996 today, rising above 1,000 for the first time since April 29, as Choi Jong Ku, director general of the finance ministry's international finance bureau, reiterated the government's pledge to stabilize the won. The Ministry of Finance and central bank signaled on July 7 that they will halt the currency's 11-percent fall with the nation's $258 billion foreign-exchange reserves.
``It seems clear the government made an intervention to show its commitment'' said Jung Chan Ho, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second-biggest financial group. ``The intervention today was maybe more than $2 billion.''
Korea's currency climbed 2.7 percent to 1,004.9 against the dollar as of the 3 p.m. close of trading, according to Seoul Money Brokerage Services Ltd. The won's three-day gain of 4.3 percent is the biggest since 1998, according to data complied by Bloomberg.
``The foreign exchange authorities' efforts to stabilize the foreign currency won't stop at this level,'' Choi said in a statement in Gwacheon. ``We will continue to take extra steps until a one-sided expectation for the currency disappears.''
Stance Switch
The financial authorities have changed their stance on foreign-exchange policy as a weaker won has made imported goods more expensive, raising living costs for consumers and production expenses for businesses. Inflation quickened to 5.5 percent in June, the fastest since 1998. Central banks intervene in currency markets by buying or selling foreign exchange.
Choi said earlier today that South Korea will allow state- run companies to borrow money from overseas to and let them exchange dollars for won in the local currency market, in an effort to stem the won's slide.
``In the past, we prevented companies from borrowing overseas because that would allow the won to strengthen,'' Choi said in a phone interview.
Fund managers outside the nation have sold more local shares than they bought every day since June 5. President Lee Myung Bak said on July 6 he may lower his economic growth target for the next two years. The Kospi index of shares has slumped 18 percent in 2008.
`Support the Won'
``The interventions will help slow the won's move, but the country's fundamentals have clearly deteriorated,'' said Yen Ping Ho, a currency strategist at JPMorgan Chase & Co. in Singapore. ``We expect the won to remain weak.''
Government bonds advanced on speculation the central bank will refrain from raising interest rates after oil prices dropped below $140 today.
``Investors seem less concerned about inflation as oil prices fell and the won gained,'' said Chang Jae Heuck, a Seoul-based fund manager at Hana Bank, a unit of South Korea's fourth-largest financial services company. ``They're betting the central bank will keep rates on hold tomorrow.''
The yield on the 5.25 percent note due March 2013 fell 5.2 basis points to 6.07 percent, according to Korea Exchange. The price climbed 0.22, or 22 won per 10,000 won face amount, to 98.42. A basis point is 0.01 percentage point.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net.
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Singapore Dollar to Fall, Reverse Gains Since April, DBS Says
By Patricia Lui
July 9 (Bloomberg) -- Singapore's dollar will fall as the economy slows, reversing the gains made since the central bank in April sought a stronger currency to curb inflation at a 26- year high, said DBS Group Holdings Ltd.
The island's currency eased to a 1.4 percent gain last quarter, the slowest pace in a year, as economists forecast a report tomorrow will show the economy grew at the slowest pace since 2003. The Monetary Authority of Singapore conducts its monetary policy using the currency, guiding it within a trading range against an undisclosed basket of its major trade partners.
``It will be hard to ignore the growth risks,'' said Philip Wee, a senior currency economist at Singapore's largest local bank. ``A further currency policy tightening is unlikely.''
The Singapore dollar will decline to $1.38, said Wee, without specifying a time frame. It was at S$1.3628 to the U.S. dollar as at 12:54 p.m. local time, according to data compiled by Bloomberg. The currency rose 1.7 percent on April 10 as the central bank unexpectedly set a stronger trading range.
``Back in April, the central bank was in a more comfortable position to worry about inflation rather than growth,'' said Wee.
A stronger currency reduces the cost of imports, whilst a weakening foreign-exchange rate may boost exports by lowering the prices of goods sent overseas.
Gross domestic product expanded 4.7 percent from a year earlier, said DBS, after growing 6.7 percent in the previous three months. The median estimate of 18 economists in a Bloomberg survey is 3.2 percent growth. May consumer prices rose 7.5 percent, matching April's 26-year high as record global crude oil and food prices fueled inflationary pressures.
To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net
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July 9 (Bloomberg) -- Singapore's dollar will fall as the economy slows, reversing the gains made since the central bank in April sought a stronger currency to curb inflation at a 26- year high, said DBS Group Holdings Ltd.
The island's currency eased to a 1.4 percent gain last quarter, the slowest pace in a year, as economists forecast a report tomorrow will show the economy grew at the slowest pace since 2003. The Monetary Authority of Singapore conducts its monetary policy using the currency, guiding it within a trading range against an undisclosed basket of its major trade partners.
``It will be hard to ignore the growth risks,'' said Philip Wee, a senior currency economist at Singapore's largest local bank. ``A further currency policy tightening is unlikely.''
The Singapore dollar will decline to $1.38, said Wee, without specifying a time frame. It was at S$1.3628 to the U.S. dollar as at 12:54 p.m. local time, according to data compiled by Bloomberg. The currency rose 1.7 percent on April 10 as the central bank unexpectedly set a stronger trading range.
``Back in April, the central bank was in a more comfortable position to worry about inflation rather than growth,'' said Wee.
A stronger currency reduces the cost of imports, whilst a weakening foreign-exchange rate may boost exports by lowering the prices of goods sent overseas.
Gross domestic product expanded 4.7 percent from a year earlier, said DBS, after growing 6.7 percent in the previous three months. The median estimate of 18 economists in a Bloomberg survey is 3.2 percent growth. May consumer prices rose 7.5 percent, matching April's 26-year high as record global crude oil and food prices fueled inflationary pressures.
To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net
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Ruble Advances on Speculation Central Bank Is Avoiding Sales
By Emma O'Brien
July 9 (Bloomberg) -- Russia's ruble strengthened against the euro and the dollar on speculation the central bank is avoiding sales of the currency, allowing it to appreciate in an attempt to curb inflation.
The currency advanced 0.5 percent to 23.4024 per dollar and 0.2 percent to 36.7816 per euro by 10:16 a.m. in Moscow. Against the dollar-euro basket the central bank uses to control currency fluctuations, the ruble gained 0.3 percent to 29.4301.
To contact the reporter on this story: Emma O'Brien in Moscow on eobrien6@bloomberg.net
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July 9 (Bloomberg) -- Russia's ruble strengthened against the euro and the dollar on speculation the central bank is avoiding sales of the currency, allowing it to appreciate in an attempt to curb inflation.
The currency advanced 0.5 percent to 23.4024 per dollar and 0.2 percent to 36.7816 per euro by 10:16 a.m. in Moscow. Against the dollar-euro basket the central bank uses to control currency fluctuations, the ruble gained 0.3 percent to 29.4301.
To contact the reporter on this story: Emma O'Brien in Moscow on eobrien6@bloomberg.net
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Pound Falls Against Euro, Snaps Five-Day Decline Versus Dollar
By Anchalee Worrachate
July 9 (Bloomberg) -- The pound fell against the euro and snapped five days of declines versus the dollar.
The U.K. currency dropped to 79.67 pence per euro as of 6:46 a.m. in London, from 79.57 yesterday. It rose to $1.9724, from $1.9695.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@blommberg.net
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July 9 (Bloomberg) -- The pound fell against the euro and snapped five days of declines versus the dollar.
The U.K. currency dropped to 79.67 pence per euro as of 6:46 a.m. in London, from 79.57 yesterday. It rose to $1.9724, from $1.9695.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@blommberg.net
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U.K. Pound Rises as Concern Over Iran's Missiles Weakens Dollar
By Anchalee Worrachate
July 9 (Bloomberg) -- The British pound rose against the dollar, snapping five days of losses, after an Iranian missile test sent oil prices higher.
The missile, capable of reaching Israel, was fired during war games today, state television said. Oil prices rose for the first time this week, after declining the most in three months, on concern supply from the Middle Ease may be disrupted.
``The pound rebounded against the dollar as the news on Iran pushed the U.S. currency lower via higher oil prices,'' said Hans-Guenter Redeker, global head of currency strategy in London at BNP Paribas SA, France's biggest bank. ``This is a dollar story more than a pound story. In the longer term, we will see the pound as overvalued.''
The pound traded at $1.9720 by 7:45 a.m. in London, from $1.9695 yesterday in New York. Against the euro, it fell to 79.69 pence from 79.57 pence, and to 211.51 yen from 211.73 yen.
Sterling will fall to $1.65 in the next three months, a level representing ``fair value,'' Redeker predicted.
Crude oil for August delivery rose as much as $1.03, or 0.8 percent, to $137.07 a barrel on the New York Mercantile Exchange and was at $136.75. Yesterday, prices tumbled 3.8 percent, the biggest drop since March 31.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@blommberg.net
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July 9 (Bloomberg) -- The British pound rose against the dollar, snapping five days of losses, after an Iranian missile test sent oil prices higher.
The missile, capable of reaching Israel, was fired during war games today, state television said. Oil prices rose for the first time this week, after declining the most in three months, on concern supply from the Middle Ease may be disrupted.
``The pound rebounded against the dollar as the news on Iran pushed the U.S. currency lower via higher oil prices,'' said Hans-Guenter Redeker, global head of currency strategy in London at BNP Paribas SA, France's biggest bank. ``This is a dollar story more than a pound story. In the longer term, we will see the pound as overvalued.''
The pound traded at $1.9720 by 7:45 a.m. in London, from $1.9695 yesterday in New York. Against the euro, it fell to 79.69 pence from 79.57 pence, and to 211.51 yen from 211.73 yen.
Sterling will fall to $1.65 in the next three months, a level representing ``fair value,'' Redeker predicted.
Crude oil for August delivery rose as much as $1.03, or 0.8 percent, to $137.07 a barrel on the New York Mercantile Exchange and was at $136.75. Yesterday, prices tumbled 3.8 percent, the biggest drop since March 31.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@blommberg.net
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BOJ on Hold as Oil Hurts Japan Economy, Morgan Stanley, BNP Say
By Shigeki Nozawa and Kosuke Goto
July 9 (Bloomberg) -- The Bank of Japan will keep interest rates on hold because record oil and food prices are hurting the world's second-largest economy, Morgan Stanley, BNP Paribas SA and Lehman Brothers Holdings Inc. said.
Higher raw material prices reduced Japan's national income by $200 billion, or 1 percent, between 2000 and 2007, a semi- annual government report showed on June 30 in Tokyo. That was the most among major industrialized economies. Costlier raw materials have also curbed consumer spending, data from the statistics bureau show.
``The current surge in raw materials costs won't cause Japan's economy to overheat or fuel inflationary pressures,'' said Takehiro Sato, chief Japan economist in Tokyo at Morgan Stanley, the second-biggest U.S. securities firm. ``There are even possibilities of a rate cut.''
Bank of Japan Governor Masaaki Shirakawa has left interest rates unchanged at 0.5 percent since February 2007, even as consumer price increases accelerated to 1.5 percent in May, the fastest pace in a decade. Confidence among Japan's companies and consumers is falling as crude oil prices reduce the spending power of a nation that imports more than 99 percent of its oil.
Japan's benchmark interest rates should be around 3 percent, according to a monetary policy rule used by central banks to gauge the adequate level of interest rates, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo. When the effect of costlier oil on inflation and corporate profits is taken into account, the adequate rate level falls to 0.5 percent, Morgan Stanley's Sato said.
Taylor Rule
``With the economy slowing, the BOJ is not in a situation where it can hike rates,'' said Kono, who forecast the central bank will keep borrowing costs on hold until the end of 2009.
The monetary policy rule was developed by Stanford University economist John Taylor in 1993. The so-called ``Taylor Rule'' is a short-hand formula that suggests how a central bank should set interest rates if inflation or growth veers from goals. It includes, in most cases, the potential growth rates, inflation, the gap between supply and demand and business confidence.
Profits at Japanese companies fell at the fastest pace in six years in the first quarter, prompting companies to pare spending and hiring plans, government data show. Japan's wages grew at the slowest pace in five months in May, indicating households will keep reducing spending as inflation rises faster than workers' paychecks, according to data released by the Labor Ministry on July 1.
``Although Japanese people are industrious, their income doesn't go up much,'' said Kenichi Kawasaki, chief economist at Lehman Brothers Holdings Inc. in Tokyo. ``There are no prospects for BOJ rate increases'' for the time being.
To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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July 9 (Bloomberg) -- The Bank of Japan will keep interest rates on hold because record oil and food prices are hurting the world's second-largest economy, Morgan Stanley, BNP Paribas SA and Lehman Brothers Holdings Inc. said.
Higher raw material prices reduced Japan's national income by $200 billion, or 1 percent, between 2000 and 2007, a semi- annual government report showed on June 30 in Tokyo. That was the most among major industrialized economies. Costlier raw materials have also curbed consumer spending, data from the statistics bureau show.
``The current surge in raw materials costs won't cause Japan's economy to overheat or fuel inflationary pressures,'' said Takehiro Sato, chief Japan economist in Tokyo at Morgan Stanley, the second-biggest U.S. securities firm. ``There are even possibilities of a rate cut.''
Bank of Japan Governor Masaaki Shirakawa has left interest rates unchanged at 0.5 percent since February 2007, even as consumer price increases accelerated to 1.5 percent in May, the fastest pace in a decade. Confidence among Japan's companies and consumers is falling as crude oil prices reduce the spending power of a nation that imports more than 99 percent of its oil.
Japan's benchmark interest rates should be around 3 percent, according to a monetary policy rule used by central banks to gauge the adequate level of interest rates, according to Ryutaro Kono, chief economist at BNP Paribas in Tokyo. When the effect of costlier oil on inflation and corporate profits is taken into account, the adequate rate level falls to 0.5 percent, Morgan Stanley's Sato said.
Taylor Rule
``With the economy slowing, the BOJ is not in a situation where it can hike rates,'' said Kono, who forecast the central bank will keep borrowing costs on hold until the end of 2009.
The monetary policy rule was developed by Stanford University economist John Taylor in 1993. The so-called ``Taylor Rule'' is a short-hand formula that suggests how a central bank should set interest rates if inflation or growth veers from goals. It includes, in most cases, the potential growth rates, inflation, the gap between supply and demand and business confidence.
Profits at Japanese companies fell at the fastest pace in six years in the first quarter, prompting companies to pare spending and hiring plans, government data show. Japan's wages grew at the slowest pace in five months in May, indicating households will keep reducing spending as inflation rises faster than workers' paychecks, according to data released by the Labor Ministry on July 1.
``Although Japanese people are industrious, their income doesn't go up much,'' said Kenichi Kawasaki, chief economist at Lehman Brothers Holdings Inc. in Tokyo. ``There are no prospects for BOJ rate increases'' for the time being.
To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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Dollar Falls After Iran Says It Test-Fired Long-Range Missile
By Kosuke Goto and Stanley White
July 9 (Bloomberg) -- The dollar fell against the yen, euro and Swiss franc after Iran's state television said the nation test-fired a long-range missile capable of reaching Israel.
The Swiss franc strengthened and oil rose on speculation the test signals tension between the U.S. and Iran will keep escalating. Ali Shirazi, an aide to Iran's Supreme Leader Ayatollah Ali Khamenei, said yesterday his nation would strike Israel and the U.S. Navy in the Persian Gulf in response to any attack on its nuclear facilities.
``The news of Iran's missile launch is causing the dollar to fall,'' said Masahiro Sato, joint general manager of the treasury division at Mizuho Trust & Banking Co. in Tokyo. ``It's also boosting the Swiss franc in a flight to safety. It's difficult to judge Iran's intentions regarding its nuclear capabilities, and that is a significant geopolitical risk.''
The dollar fell to 107.34 yen as of 7:43 a.m. in London from 107.50 yen late in New York yesterday. It also weakened to $1.5705 versus the euro compared with $1.5670 yesterday.
The dollar may decline to 106.70 yen today, Sato said.
Iran ``test-fired successfully the Shahab 3 missile with a 2,000-kilometer (1,240-mile) range and a one-ton weight at 8 a.m. local time today,'' the Al-Alam television channel said in a report on its Web site.
``In this holiday-thinned market period, geopolitical news like Iran's test firing will see safe-haven currencies like the yen benefit,'' said Robert Rennie, chief currency strategist based in Sydney at Westpac Banking Corp., Australia's fourth- biggest lender.
Swiss Franc
The Swiss franc advanced to 1.0307 versus the dollar from 1.0337 late yesterday in New York.
South Korea's won surged for a third day on speculation the government intervened to strengthen the currency and curb inflation. The currency climbed 2.7 percent to 1,004.90 against the dollar, from 1,033 yesterday, according to Seoul Money Brokerage Services Ltd. It climbed above 1,000 for the first time since April 29.
The British pound weakened against the euro after an industry report showed U.K. consumer confidence slid to the lowest level since at least 2004. Britain's currency declined to 79.66 pence per euro from 79.56. The Nationwide Building Society index of consumer confidence declined 6 points to 63, the lowest since the survey began in May 2004.
Fed's Bernanke
The dollar earlier today approached the strongest in two weeks versus the yen after Fed Chairman Ben S. Bernanke said he may extend an emergency-loan program for securities firms into next year.
The dollar climbed 0.4 percent against the euro yesterday after Bernanke said in a speech in Arlington, Virginia, that the Fed is committed to financial stability and may extend the duration of funding to dealers obliged to bid at U.S. government debt auctions.
The Fed's Primary Dealer Credit Facility, which provides direct loans, and the Term Securities Lending Facility, which auctions as much as $200 billion in Treasuries, were created in March in response to the credit crisis.
``Bernanke's comments actually represented how bad the situation is in the U.S. financial sector,'' said Yuji Kameoka, a senior economist and currency analyst in Tokyo at Daiwa Institute of Research, a unit of Japan's second-largest brokerage. ``It's true his comments helped dispel fears about a credit crunch, but investors won't be able to buy the dollar aggressively on his comments.''
Seven Rate Cuts
The dollar has fallen 11 percent against the euro since September, when the Fed made the first of seven reductions in the target lending rate, now 2 percent, to prevent a housing slump from plunging the U.S. economy into a recession. Bernanke and U.S. Treasury Secretary Henry Paulson are scheduled to testify before Congress tomorrow.
Crude oil for August delivery gained 0.5 percent to $136.75 a barrel after tumbling 3.8 percent yesterday. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.
Any gains in the euro may be limited by speculation European Central Bank President Jean-Claude Trichet will reiterate that he has no plans to raise interest rates further. The ECB said it has ``no bias'' for monetary policy after increasing borrowing costs a quarter percentage point to 4.25 percent on July 3.
Trichet presents the central bank's annual report to the European Parliament at 9 a.m. in Strasbourg today. ECB board member Jose Manuel Gonzalez-Paramo will speak at a conference in Madrid at 9:30 a.m. local time.
``The chance of the euro breaking new record highs is receding,'' said Akifumi Uchida, deputy general manager of the marketing unit at Sumitomo Trust & Banking Co. in Tokyo. ``Trichet won't go out of his way to talk about raising rates. He's pretty comfortable with where rates are now, and that takes the energy out of the euro.''
The 15-nation currency may fall to $1.56 today, he said.
To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net
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Crude Oil Rises as Iran Test-Fires Missile, Dollar Declines
By Nesa Subrahmaniyan
July 9 (Bloomberg) -- Crude oil rose for the first time this week, rebounding from its biggest decline in three months, after Iran test-fired a long-range missile capable of reaching Israel and the dollar fell.
The missile fired by Iran's Revolutionary Guards Corps as part of war games was ``a Shahab 3 with a conventional warhead weighing 1 ton and a 2,000-kilometer (1,240-mile) range,'' state television Al-Alam said. Israeli military last month was reported to have conducted exercises month for a strike on Iran, OPEC's second-biggest oil producer, raising concern that supply from the Middle East may be disrupted.
``It's an escalation of tensions and it's going to stay for a while until clear signals are sent or until someone starts firing at each other,'' said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. ``Iran is flexing its muscles and Israel's exercise stepped up the fear and also sent a message to the U.S. and Europe that something has to be done about Iran.''
Crude oil for August delivery rose as much as $1.12, or 0.8 percent, to $137.16 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $136.83 at 3 p.m. Singapore time. Yesterday, prices tumbled 3.8 percent, the biggest decline since March 31.
Futures reached a record $145.85 on July 3. Prices have surged 90 percent in the past year.
Iran's move comes a day after Ali Shirazi, an aide to Iran's Supreme Leader Ayatollah Ali Khamenei, warned that the Middle Eastern nation would strike Israel and the U.S. Navy in the Persian Gulf as a first response to any American attack on its nuclear program. The U.S. has accused Iran of uranium enrichment to develop nuclear weapons, while the Persian Gulf nation has said it's for electricity production.
Hormuz Blockade
Iran has said it may blockade the Strait of Hormuz, the shipping lane for a fifth of the world's crude, if its nuclear facilities are attacked. The country has the second-biggest proved oil reserves and is the second-biggest producer in the Organization of Petroleum Exporting Countries.
Iranian President Mahmoud Ahmadinejad yesterday dismissed the possibility of a war with the U.S. and Israel over the issue, saying his country seeks to avoid clashes.
``We're making the utmost effort for providing peace and security at the world level,'' he said in Kuala Lumpur, where he attended a summit of the Eight Islamic Developing Countries.
The dollar traded at $1.5717 against the euro at 2:01 p.m. in Singapore from $1.5670 in New York yesterday. It reached $1.5611 on July 7, the highest level since June 25. The dollar fell to 107.14 yen as of 2:01 p.m. in Singapore from 107.50 yen late in New York yesterday.
Brent Gains
Brent crude oil for August settlement climbed as much as $1.16, or 0.9 percent, to $137.59 a barrel on London's ICE Futures Europe exchange, and traded at $137.26 at 3:01 p.m. Singapore time. Yesterday, it declined $5.44, or 3.8 percent, to settle at $136.43 a barrel, the biggest drop since March 19. Prices climbed to a record $146.69 on July 3.
U.S. crude-oil inventories probably extended declines last week as refineries delayed deliveries because of high prices, a Bloomberg News survey indicated.
Crude-oil stockpiles probably fell 2.05 million barrels in the week ended July 4 from 299.8 million barrels, according to the median of responses by 12 analysts before an Energy Department report today.
Refineries probably operated at 89.2 percent of capacity last week, unchanged from the week before, according to the median of responses.
Analysts were split over whether gasoline stockpiles rose or fell. Supplies probably increased 50,000 barrels from 210.9 million barrels the prior week, according to the median of responses.
Supplies of distillate fuel, a category that includes heating oil and diesel, probably rose 1.95 million barrels from 120.7 million barrels the prior week, according to the survey. It would be the ninth-straight rise.
The Department of Energy report will be out at 10:35 a.m. local time in Washington D.C.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
Read more...
July 9 (Bloomberg) -- Crude oil rose for the first time this week, rebounding from its biggest decline in three months, after Iran test-fired a long-range missile capable of reaching Israel and the dollar fell.
The missile fired by Iran's Revolutionary Guards Corps as part of war games was ``a Shahab 3 with a conventional warhead weighing 1 ton and a 2,000-kilometer (1,240-mile) range,'' state television Al-Alam said. Israeli military last month was reported to have conducted exercises month for a strike on Iran, OPEC's second-biggest oil producer, raising concern that supply from the Middle East may be disrupted.
``It's an escalation of tensions and it's going to stay for a while until clear signals are sent or until someone starts firing at each other,'' said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. ``Iran is flexing its muscles and Israel's exercise stepped up the fear and also sent a message to the U.S. and Europe that something has to be done about Iran.''
Crude oil for August delivery rose as much as $1.12, or 0.8 percent, to $137.16 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $136.83 at 3 p.m. Singapore time. Yesterday, prices tumbled 3.8 percent, the biggest decline since March 31.
Futures reached a record $145.85 on July 3. Prices have surged 90 percent in the past year.
Iran's move comes a day after Ali Shirazi, an aide to Iran's Supreme Leader Ayatollah Ali Khamenei, warned that the Middle Eastern nation would strike Israel and the U.S. Navy in the Persian Gulf as a first response to any American attack on its nuclear program. The U.S. has accused Iran of uranium enrichment to develop nuclear weapons, while the Persian Gulf nation has said it's for electricity production.
Hormuz Blockade
Iran has said it may blockade the Strait of Hormuz, the shipping lane for a fifth of the world's crude, if its nuclear facilities are attacked. The country has the second-biggest proved oil reserves and is the second-biggest producer in the Organization of Petroleum Exporting Countries.
Iranian President Mahmoud Ahmadinejad yesterday dismissed the possibility of a war with the U.S. and Israel over the issue, saying his country seeks to avoid clashes.
``We're making the utmost effort for providing peace and security at the world level,'' he said in Kuala Lumpur, where he attended a summit of the Eight Islamic Developing Countries.
The dollar traded at $1.5717 against the euro at 2:01 p.m. in Singapore from $1.5670 in New York yesterday. It reached $1.5611 on July 7, the highest level since June 25. The dollar fell to 107.14 yen as of 2:01 p.m. in Singapore from 107.50 yen late in New York yesterday.
Brent Gains
Brent crude oil for August settlement climbed as much as $1.16, or 0.9 percent, to $137.59 a barrel on London's ICE Futures Europe exchange, and traded at $137.26 at 3:01 p.m. Singapore time. Yesterday, it declined $5.44, or 3.8 percent, to settle at $136.43 a barrel, the biggest drop since March 19. Prices climbed to a record $146.69 on July 3.
U.S. crude-oil inventories probably extended declines last week as refineries delayed deliveries because of high prices, a Bloomberg News survey indicated.
Crude-oil stockpiles probably fell 2.05 million barrels in the week ended July 4 from 299.8 million barrels, according to the median of responses by 12 analysts before an Energy Department report today.
Refineries probably operated at 89.2 percent of capacity last week, unchanged from the week before, according to the median of responses.
Analysts were split over whether gasoline stockpiles rose or fell. Supplies probably increased 50,000 barrels from 210.9 million barrels the prior week, according to the median of responses.
Supplies of distillate fuel, a category that includes heating oil and diesel, probably rose 1.95 million barrels from 120.7 million barrels the prior week, according to the survey. It would be the ninth-straight rise.
The Department of Energy report will be out at 10:35 a.m. local time in Washington D.C.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
Read more...
Shanghai Aluminum Declines After London Erases Gain to Record
By Li Xiaowei
July 9 (Bloomberg) -- Shanghai aluminum fell after London prices erased a more than 5 percent gain to a record as rising global supplies eased concerns about output cuts in China.
Inventories tracked by the London Metal Exchange rose to 1.09 million tons yesterday, near the highest in more than four years. The price contango between London cash and three-month prices widened to $49.25 a ton. Contango, a situation when cash prices are lower than futures prices, usually indicates supplies exceed demand.
``Chinese output cut due to power issues could be too small to alleviate a global surplus,'' Wang Zhouyi, an analyst at China International Futures (Shanghai) Co., said today by phone from Shanghai. ``Before any noticeable change in London's contango market, further price gains will be capped.''
September-delivery aluminum on the Shanghai Futures Exchange fell as much as 1.8 percent to 19,380 yuan ($2,826) a ton, and traded at 19,540 yuan at the midday break. The metal has gained 9.7 percent this year.
Aluminum for delivery in three months on the London Metal Exchange rose 0.6 percent to $3,165 a metric ton at 12:21 p.m. in Shanghai. The contract fell as much as 5.7 percent yesterday, giving up all of its gains to a record $3,327 a ton July 7 after CRU International Ltd. said it estimated output cuts because of power outages in China's Shanxi province were only 100,000 tons.
The fact that Shanghai aluminum was relatively unmoved compared with the LME gains on July 7 could mean the reaction in London to the Chinese cut-backs was not justified, John Reade, an analyst at UBS AG, said in an e-mailed report.
No Scarcity
``We don't see any immediate scarcity of aluminum nor any shortage of smelting capacity,'' said Reade. Any production interruptions ``would have to be protracted to lead to genuine tightness and scarcity of this metal, especially with demand currently soggy.''
Aluminum, used in construction and cars, has rallied 31 percent this year after power shortages in China, the world's largest producer, and South Africa curbed output. Power accounts for between 30 and 40 percent of operating costs for smelters.
The metal would be ``balanced'' in 2008 because of rising demand, compared with a previous forecast for a surplus of about 700,000 tons, according to Rio Tinto Group's aluminum unit.
The Shanxi provincial government ordered smelters to pare capacity to ensure power supplies for farming, Wang Suomin, a manager at the Shanxi Huaze Aluminum & Power Co., said July 7. The venture has an annual capacity of 280,000 metric tons.
Among other LME-traded metals, zinc gained 1.4 percent to $1,790, lead advanced 1.8 percent to $1,660, copper rose 0.3 percent to $8,225 a ton, nickel rose 0.7 percent to $20,750, and tin was untraded in Asia after settling at $22,450 yesterday.
Expectations for more Chinese imports of zinc and lead on price differences would support the London market in a near term, said China International's Wang.
To contact the reporter for this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net
Read more...
July 9 (Bloomberg) -- Shanghai aluminum fell after London prices erased a more than 5 percent gain to a record as rising global supplies eased concerns about output cuts in China.
Inventories tracked by the London Metal Exchange rose to 1.09 million tons yesterday, near the highest in more than four years. The price contango between London cash and three-month prices widened to $49.25 a ton. Contango, a situation when cash prices are lower than futures prices, usually indicates supplies exceed demand.
``Chinese output cut due to power issues could be too small to alleviate a global surplus,'' Wang Zhouyi, an analyst at China International Futures (Shanghai) Co., said today by phone from Shanghai. ``Before any noticeable change in London's contango market, further price gains will be capped.''
September-delivery aluminum on the Shanghai Futures Exchange fell as much as 1.8 percent to 19,380 yuan ($2,826) a ton, and traded at 19,540 yuan at the midday break. The metal has gained 9.7 percent this year.
Aluminum for delivery in three months on the London Metal Exchange rose 0.6 percent to $3,165 a metric ton at 12:21 p.m. in Shanghai. The contract fell as much as 5.7 percent yesterday, giving up all of its gains to a record $3,327 a ton July 7 after CRU International Ltd. said it estimated output cuts because of power outages in China's Shanxi province were only 100,000 tons.
The fact that Shanghai aluminum was relatively unmoved compared with the LME gains on July 7 could mean the reaction in London to the Chinese cut-backs was not justified, John Reade, an analyst at UBS AG, said in an e-mailed report.
No Scarcity
``We don't see any immediate scarcity of aluminum nor any shortage of smelting capacity,'' said Reade. Any production interruptions ``would have to be protracted to lead to genuine tightness and scarcity of this metal, especially with demand currently soggy.''
Aluminum, used in construction and cars, has rallied 31 percent this year after power shortages in China, the world's largest producer, and South Africa curbed output. Power accounts for between 30 and 40 percent of operating costs for smelters.
The metal would be ``balanced'' in 2008 because of rising demand, compared with a previous forecast for a surplus of about 700,000 tons, according to Rio Tinto Group's aluminum unit.
The Shanxi provincial government ordered smelters to pare capacity to ensure power supplies for farming, Wang Suomin, a manager at the Shanxi Huaze Aluminum & Power Co., said July 7. The venture has an annual capacity of 280,000 metric tons.
Among other LME-traded metals, zinc gained 1.4 percent to $1,790, lead advanced 1.8 percent to $1,660, copper rose 0.3 percent to $8,225 a ton, nickel rose 0.7 percent to $20,750, and tin was untraded in Asia after settling at $22,450 yesterday.
Expectations for more Chinese imports of zinc and lead on price differences would support the London market in a near term, said China International's Wang.
To contact the reporter for this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net
Read more...
Sugar May Rise on Less Supply From India, EU, ISO's Rocha Says
By Feiwen Rong and Claire Leow
July 9 (Bloomberg) -- Sugar may extend gains on expectation that farmers in India and the European Union may switch to other crops, paring global supply and helping narrow a surplus which depressed prices for the past two years.
India, the world's second largest producer, may cut output by up to 4 million metric tons to 22 million tons next season ``as a result of less cane availability,'' Leonardo Rocha, an economist at the International Sugar Organization, said in an interview yesterday in Singapore. The European Union may reduce output by about 2 million tons next year, he said.
Raw sugar futures traded in New York were the worst performer after zinc in the past two years on the UBS Bloomberg Constant Maturity Commodity Index as growers from Brazil to India boosted output after prices rose to a 25-year high. The sweetener gained 41 percent in the past month.
``I see sugar prices going up,'' Rocha said. ``The surplus being talked about in the sugar market is estimated at 8 million tons now, and that surplus could disappear next year if you remove up to 6 million tons from the supply while consumption is growing at a rate of 3 million tons every year,'' he said.
Raw sugar futures traded on ICE Futures U.S., the former New York Board of Trade, rose 1.7 percent to 13.75 cents a pound yesterday. The most-active contract closed at a 25-year high of 19.3 cents a pound on Feb. 3, 2006.
India may grow less sugar cane this year, farm secretary P.K. Mishra said yesterday in New Delhi. The crop was planted on 4.3 million hectares (10.6 million acres) by July 4, 17 percent less than a year earlier, the ministry has said.
Ethanol Demand
Sugar prices can ``easily go up to 15 cents a pound'' without causing excessive supply from Brazil, the world's largest cane grower, Rocha said.
Brazil is using about 60 percent of its cane production for ethanol, up from 50 percent two years ago, as crude oil's rally to a record increases demand for the fuel, Rocha said.
``They might start looking at making more sugar'' if prices for the sweetener rose above 15 cents, shifting the global supply and demand balance, he said.
Brazil boosted its cane output by 70 million tons a year in the past two seasons, equal to the annual output from Thailand, the world's sixth largest cane producer, Rocha said. Most of the harvest has been turned into ethanol to fuel Brazil's cars.
``The sugar prices can't go up too much because if Brazil were to use all of its cane for sugar, you'd have an additional 40 million tons of sugar output,'' Rocha said, adding that global production is now 170 million tons.
To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Feiwen Rong in Singapore at frong2@bloomberg.net
Read more...
July 9 (Bloomberg) -- Sugar may extend gains on expectation that farmers in India and the European Union may switch to other crops, paring global supply and helping narrow a surplus which depressed prices for the past two years.
India, the world's second largest producer, may cut output by up to 4 million metric tons to 22 million tons next season ``as a result of less cane availability,'' Leonardo Rocha, an economist at the International Sugar Organization, said in an interview yesterday in Singapore. The European Union may reduce output by about 2 million tons next year, he said.
Raw sugar futures traded in New York were the worst performer after zinc in the past two years on the UBS Bloomberg Constant Maturity Commodity Index as growers from Brazil to India boosted output after prices rose to a 25-year high. The sweetener gained 41 percent in the past month.
``I see sugar prices going up,'' Rocha said. ``The surplus being talked about in the sugar market is estimated at 8 million tons now, and that surplus could disappear next year if you remove up to 6 million tons from the supply while consumption is growing at a rate of 3 million tons every year,'' he said.
Raw sugar futures traded on ICE Futures U.S., the former New York Board of Trade, rose 1.7 percent to 13.75 cents a pound yesterday. The most-active contract closed at a 25-year high of 19.3 cents a pound on Feb. 3, 2006.
India may grow less sugar cane this year, farm secretary P.K. Mishra said yesterday in New Delhi. The crop was planted on 4.3 million hectares (10.6 million acres) by July 4, 17 percent less than a year earlier, the ministry has said.
Ethanol Demand
Sugar prices can ``easily go up to 15 cents a pound'' without causing excessive supply from Brazil, the world's largest cane grower, Rocha said.
Brazil is using about 60 percent of its cane production for ethanol, up from 50 percent two years ago, as crude oil's rally to a record increases demand for the fuel, Rocha said.
``They might start looking at making more sugar'' if prices for the sweetener rose above 15 cents, shifting the global supply and demand balance, he said.
Brazil boosted its cane output by 70 million tons a year in the past two seasons, equal to the annual output from Thailand, the world's sixth largest cane producer, Rocha said. Most of the harvest has been turned into ethanol to fuel Brazil's cars.
``The sugar prices can't go up too much because if Brazil were to use all of its cane for sugar, you'd have an additional 40 million tons of sugar output,'' Rocha said, adding that global production is now 170 million tons.
To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Feiwen Rong in Singapore at frong2@bloomberg.net
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