Daily Forex Fundamentals | Written by Danske Bank | Jul 14 08 11:38 GMT |
Overview:
Late last night both the Federal Reserve and the Treasury issued statements granting more explicit support for Fannie Mae and Freddie Mac. The initiatives involve extended liquidity provision by the Fed and the Treasury, as well as a temporary authority for the Treasury to inject capital into either of the two Government Sponsored Enterprises (GSEs) if needed.
The action comes on the back of a period of increasing uncertainty about the access to liquidity and the capital adequacy of the two largest mortgage lenders in the US. Generally, the action should be seen as a move to avoid a liquidity squeeze for the two lenders, which would have a further destabilising effect on the financial markets and more generally on the US housing market. Further, yesterday's move proves the de facto government guarantee extended to the GSEs.
Details: The main initiatives are:
1) The Federal Reserve has opened the Discount Window for Freddie Mac and Fannie Mae. Through the Discount Window, the GSEs can access liquidity for up 90 days by pledging eligible collateral.
Federal Reserve press release
2) The Treasury has proposed a three-step plan:
a. As a liquidity backstop, the plan includes a temporary increase in the GSEs' line of credit with the US Treasury. The Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn.
b. To ensure the GSEs have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for the Treasury to purchase equity in either of the two GSEs if needed
c. To protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards.
The plan is expected to be fast-tracked through Congress later this week to take immediate effect.
Paulson's statement on GSE initiatives
Assessment & Outlook:
With yesterday's action, the US government has shown its determination to prevent a failure of any of the two GSEs. Fannie Mae and Freddie Mac together hold or guarantee around half of the outstanding mortgage debt in the US and have been key players in the Government's recent efforts to stabilise the housing market.
If the GSEs were to fail or lose their triple A ratings, it would have large ramifications for the US housing market and financial markets in general. That said, the latest move by the Federal Reserve and the Treasury does little but confirm the well-known implicit guarantee extended to the GSEs. Given that the GSEs are now more explicitly backed by the US government and the Federal Reserve, they should be able to access sufficient capital to continue their usual operations. Hence, yesterday's move should not impact much on he general outlook for the US housing market.
Financial markets:
In the US bond markets, yields jumped sharply already Friday night in anticipation of a move by the Treasury. Over the weekend, 2Y and 10Y Treasury yields touched highs of 2.69% and 4.03%, respectively, before edging slightly lower this morning. The jump in Government bond yields seems to be driven partly by a short-term knee-jerk reaction reflecting relief in other parts of the market over the Government action and partly by a more long-term concern that the Treasury's involvement could lead to an extension of Government debt. If the Treasury were to inject a substantial amount of capital into the GSEs, this could in turn add a higher risk premium to Treasury bonds.
If anything, the recent turmoil has made expectations of an imminent Fed hike look even more stretched. The market is currently pricing a full 25bp hike by December. While day-to-day volatility in the bond market will remain high, we continue to see a potential for lower bond yields and a steeper curve over the coming months.
In the currency markets, the dollar has been pushed weaker. The greenback is hypersensitive to financial distress, and with oil prices still setting new records, this combination is certainly not helping the already stretched currency. EUR/USD was trading around 1.57 before nervousness on Fannie Mae and Freddie Mac struck the market but took off by the end of last week. In the Asian session this morning, the pair has reached a new local high of 1.5971, reminding the markets of the April 22 all-time high of 1.6018. The pair has, however, fallen a little in European trading. We do not see any quick solutions to the dollar decline. The US is still the main provider of the flow of bad news, although European markets are starting to show worrying signs as well. The financial crisis is still weighing mostly on the dollar relatively to the euro, and the economic slowdown is unfolding at a faster pace across the Atlantic. Furthermore, risks of diversifying international reserves away from dollars and rumours of dollar de-pegging persist in the market. We expect EUR/USD to remain at elevated levels over the coming months. Our 3M forecast of 1.60 underlines the continued pressure on the dollar due to the US economic slowdown and continuing financial turmoil.
Danske Bank
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Monday, July 14, 2008
M&A, US mortgage rescue boost Europe shares
Mon Jul 14, 2008 7:28am EDT
* FTSEurofirst 300 gains 1.4 pct, boosted by banks
* U.S. plan for Freddie Mac and Fannie Mae offers support
* M&A boosts Alliance & Leicester, InBev, Continental, TNT
(Adds Kazakhmys)
By Patrizia Kokot
LONDON, July 14 (Reuters) - European shares jumped by midday on Monday, with banks rising on a U.S. plan to rescue mortgage finance groups Fannie Mae and Freddie Mac , while acquisition activity buoyed sectors from brewers to banks.
By 1032 GMT, the FTSEurofirst 300 index of top European shares was up 1.4 percent at 1,142.40 points, recovering from Friday's three-year low.
Banks took a cautious step towards recovery with the DJStoxx European banks index adding 2 percent.
Fannie Mae and Freddie Mac jumped 23 and 40 percent respectively in Frankfurt after a U.S. Treasury and Federal Reserve plan called for sweeping measures to lend money and buy equity if needed in the government-sponsored enterprises.
Banks also gained after Spain's Santander said it had reached a deal to buy British bank Alliance & Leicester . Alliance & Leicester shot up 50 percent, while Santander rose 0.5 percent.
Barclays added 5 percent, Lloyds TSB rallied 6.5 percent and UBS gained 2 percent.
"The fact that the U.S. institutions and congress are bailing out the U.S. institutions Freddie Mac and Fannie Mae draws a line under the financial system and shows that anything really important to the system will not be allowed to fail," said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe.
"The market has taken good heart from that and what we see now is that the money that was kept out of the market for a long time is back," Pope said, adding that it appeared that some of the money was being employed in M&A.
GOOD PRICE
"It is a positive deal for Santander because it allows them to gain market share in the UK for a very good price," analyst Sandra Neumann at WestLB said. "They were in discussion before but no price was settled on. Now the UK banks are of course very cheap."
InBev gained 1.2 percent after U.S. brewer Anheuser-Busch accepted a sweetened $52 billion takeover bid from the Belgian beermaker, with analysts voicing relief that a bidding war could be avoided.
In reaction, Cheuvreux upgraded Inbev to "outperform" and said the cost energies along were higher than anticipated at $1.5 billion.
Dutch mail group TNT rallied 26 percent on the back of a newspaper report that U.S. peer FedEx was in early talks to acquire the group.
TNT and FedEx declined to comment.
Merrill Lynch upgraded the stock, which also gained from market speculation of a counterbid from UPS .
German tyre and automotive systems maker Continental jumped 25 percent amid talk of bid interest from Schaeffler Group. The speculation lifted sector peers Michelin , up 3.7 percent, and Sweden's Autoliv , up 6 percent.
Continental said it had held talks with Schaeffler.
Other gainers included Philips , which rallied 7.3 percent after beating consensus forecasts with its second-quarter earnings.
And Spanish construction group Ferrovial spiked 8.6 percent after it announced a key step in its long-awaited refinancing plans for its British unit BAA.
London-listed mining group Kazakhmys soared more than 7 percent after a Financial Times website said the group was in merger talks with Russia's Metalloinvest. Kazakhmys said it would comment later on Monday.
Monday's casualty list featured oil and gas producers, which fell after crude eased more than $2 a barrel to $143. Shares in Total , Shell and BP lost between 0.7 and 1 percent.
Norsk Hydro dragged industrial metal groups lower after the Norwegian aluminium company issued a profit warning on its second quarter, pointing to increases in costs.
Shares in the group fell 13 percent.
Dutch maritime engineering group SBM Offshore shed 25 percent after it warned on full-year profit after Friday's market close.
Dutch broker Petercam downgraded the stock to "reduce" in and said: "This setback underlines that SBM is in a high-risk business with limited pricing power". (Editing by David Holmes)
Read more...
* FTSEurofirst 300 gains 1.4 pct, boosted by banks
* U.S. plan for Freddie Mac and Fannie Mae offers support
* M&A boosts Alliance & Leicester, InBev, Continental, TNT
(Adds Kazakhmys)
By Patrizia Kokot
LONDON, July 14 (Reuters) - European shares jumped by midday on Monday, with banks rising on a U.S. plan to rescue mortgage finance groups Fannie Mae and Freddie Mac , while acquisition activity buoyed sectors from brewers to banks.
By 1032 GMT, the FTSEurofirst 300 index of top European shares was up 1.4 percent at 1,142.40 points, recovering from Friday's three-year low.
Banks took a cautious step towards recovery with the DJStoxx European banks index adding 2 percent.
Fannie Mae and Freddie Mac jumped 23 and 40 percent respectively in Frankfurt after a U.S. Treasury and Federal Reserve plan called for sweeping measures to lend money and buy equity if needed in the government-sponsored enterprises.
Banks also gained after Spain's Santander said it had reached a deal to buy British bank Alliance & Leicester . Alliance & Leicester shot up 50 percent, while Santander rose 0.5 percent.
Barclays added 5 percent, Lloyds TSB rallied 6.5 percent and UBS gained 2 percent.
"The fact that the U.S. institutions and congress are bailing out the U.S. institutions Freddie Mac and Fannie Mae draws a line under the financial system and shows that anything really important to the system will not be allowed to fail," said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe.
"The market has taken good heart from that and what we see now is that the money that was kept out of the market for a long time is back," Pope said, adding that it appeared that some of the money was being employed in M&A.
GOOD PRICE
"It is a positive deal for Santander because it allows them to gain market share in the UK for a very good price," analyst Sandra Neumann at WestLB said. "They were in discussion before but no price was settled on. Now the UK banks are of course very cheap."
InBev gained 1.2 percent after U.S. brewer Anheuser-Busch accepted a sweetened $52 billion takeover bid from the Belgian beermaker, with analysts voicing relief that a bidding war could be avoided.
In reaction, Cheuvreux upgraded Inbev to "outperform" and said the cost energies along were higher than anticipated at $1.5 billion.
Dutch mail group TNT rallied 26 percent on the back of a newspaper report that U.S. peer FedEx was in early talks to acquire the group.
TNT and FedEx declined to comment.
Merrill Lynch upgraded the stock, which also gained from market speculation of a counterbid from UPS .
German tyre and automotive systems maker Continental jumped 25 percent amid talk of bid interest from Schaeffler Group. The speculation lifted sector peers Michelin , up 3.7 percent, and Sweden's Autoliv , up 6 percent.
Continental said it had held talks with Schaeffler.
Other gainers included Philips , which rallied 7.3 percent after beating consensus forecasts with its second-quarter earnings.
And Spanish construction group Ferrovial spiked 8.6 percent after it announced a key step in its long-awaited refinancing plans for its British unit BAA.
London-listed mining group Kazakhmys soared more than 7 percent after a Financial Times website said the group was in merger talks with Russia's Metalloinvest. Kazakhmys said it would comment later on Monday.
Monday's casualty list featured oil and gas producers, which fell after crude eased more than $2 a barrel to $143. Shares in Total , Shell and BP lost between 0.7 and 1 percent.
Norsk Hydro dragged industrial metal groups lower after the Norwegian aluminium company issued a profit warning on its second quarter, pointing to increases in costs.
Shares in the group fell 13 percent.
Dutch maritime engineering group SBM Offshore shed 25 percent after it warned on full-year profit after Friday's market close.
Dutch broker Petercam downgraded the stock to "reduce" in and said: "This setback underlines that SBM is in a high-risk business with limited pricing power". (Editing by David Holmes)
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Nikkei abandons early gains, eyes turn to Wall St
Mon Jul 14, 2008 2:31am EDT
(Adding stocks, details) *Nikkei abandons gains on U.S. rescue plan, nervousness grows *Steelmakers firm after JFE says may raise prices *Automakers dip on lagging economy, trading houses solid By Elaine Lies
TOKYO, July 14 (Reuters) - Japan's Nikkei stock average abandoned early gains to slip 0.2 percent on Monday to its lowest close in three months as the impact of emergency U.S. moves to help troubled home financing providers faded and lenders such as Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) fell back.
But falls were limited by gains from steelmakers such as JFE Holdings , which said it may raise prices, while trading houses were solid on continuing high oil prices.
Another strong gainer was Nisshinbo Industries Inc , which climbed after a newspaper reported the firm developed a technology to use carbon instead of platinum as the electrode catalyst for fuel cells , a move to save costs.
Mitsubishi UFJ and other banks initially rose sharply after the U.S. Treasury and Federal Reserve unveiled sweeping measures to support Fannie Mae and Freddie Mac if needed, to bolster confidence in the troubled mortgage financing giants. , but investors locked in profits on banks later before stepping to the sidelines to wait for U.S. trade.
"This news was completely fresh when it broke during Asian time, and U.S. markets haven't had a chance to factor it in yet," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
"The real question is how Wall Street will respond, and ahead of this nobody can really buy actively," he said.
Others said the rescue plan alone is hardly enough to completely erase long-term worries about the economy and inflation, particularly with oil prices remaining relatively high.
Oil had slipped a bit, with U.S. light crude for August delivery CLc1 down to $144.52 by 0606 GMT, but it still remained high enough to be a worry for the long-term economy.
"Without some sort of good factor for the economy in the long-term, the market focuses on things like this situation, and nobody's taking risks," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.
The benchmark Nikkei .N225 finished at 13,010.16, having lost 29.53 points, its lowest since April 15. The broader Topix was down 0.4 percent at 1,280.72.
STEEL STRONG, AUTOS ANXIOUS
Steel climbed to support the market after JFE Holdings, the world's third-largest steelmaker, said it may raise steel prices to offset soaring raw materials costs
A spokesman for JFE Steel said confirmed a Nikkei business daily report on Sunday about the possible price hike.
He said the company does not have a specific plan as to when or how much of its soaring costs it will transfer to clients, but he said a possible price hike could come as early as for the October-December quarter.
JFE Holdings was the biggest contributor by percentage to the Nikkei 225, rising 5.6 percent to 5,470 yen. It was followed closely by Nippon Steel with a rise of 3.6 percent to 582 yen and Kobe Steel which gained 3.1 percent to 296 yen.
The iron and steel subindex was the biggest gainer among the subindices, rising 3.3 percent.
Automakers slipped, worried less about higher steel costs and oil than about the overall economic picture in the United States, said Shinkin Asset's Yamashita.
Honda Motor Co slid 1.9 percent to 3,530 yen and Toyota Motor Co was down 1.8 percent at 4,800 yen, among the top 10 drags on the Nikkei by volume weight.
Trading companies were holding firm, with Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) up 1.9 percent at 3,280 yen and Itochu Corp up 1 percent at 1,043 yen, while banks fell back.
Mitsubishi UFJ slipped 1.4 percent to 3,280 yen and Mizuho Financial Group was up 0.6 percent at 538,000 yen compared with a high of 552,000 yen in morning trade.
Nisshinbo Industries gained 5.4 percent to 1,299 yen.
Trade was moderage, with 1.93 billion shares changing hands, compared with last week's daily average of 2 billion.
Declining shares beat advancing ones by 938 to 653. (Reporting by Elaine Lies;)
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(Adding stocks, details) *Nikkei abandons gains on U.S. rescue plan, nervousness grows *Steelmakers firm after JFE says may raise prices *Automakers dip on lagging economy, trading houses solid By Elaine Lies
TOKYO, July 14 (Reuters) - Japan's Nikkei stock average abandoned early gains to slip 0.2 percent on Monday to its lowest close in three months as the impact of emergency U.S. moves to help troubled home financing providers faded and lenders such as Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) fell back.
But falls were limited by gains from steelmakers such as JFE Holdings , which said it may raise prices, while trading houses were solid on continuing high oil prices.
Another strong gainer was Nisshinbo Industries Inc , which climbed after a newspaper reported the firm developed a technology to use carbon instead of platinum as the electrode catalyst for fuel cells , a move to save costs.
Mitsubishi UFJ and other banks initially rose sharply after the U.S. Treasury and Federal Reserve unveiled sweeping measures to support Fannie Mae and Freddie Mac if needed, to bolster confidence in the troubled mortgage financing giants. , but investors locked in profits on banks later before stepping to the sidelines to wait for U.S. trade.
"This news was completely fresh when it broke during Asian time, and U.S. markets haven't had a chance to factor it in yet," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
"The real question is how Wall Street will respond, and ahead of this nobody can really buy actively," he said.
Others said the rescue plan alone is hardly enough to completely erase long-term worries about the economy and inflation, particularly with oil prices remaining relatively high.
Oil had slipped a bit, with U.S. light crude for August delivery CLc1 down to $144.52 by 0606 GMT, but it still remained high enough to be a worry for the long-term economy.
"Without some sort of good factor for the economy in the long-term, the market focuses on things like this situation, and nobody's taking risks," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.
The benchmark Nikkei .N225 finished at 13,010.16, having lost 29.53 points, its lowest since April 15. The broader Topix was down 0.4 percent at 1,280.72.
STEEL STRONG, AUTOS ANXIOUS
Steel climbed to support the market after JFE Holdings, the world's third-largest steelmaker, said it may raise steel prices to offset soaring raw materials costs
A spokesman for JFE Steel said confirmed a Nikkei business daily report on Sunday about the possible price hike.
He said the company does not have a specific plan as to when or how much of its soaring costs it will transfer to clients, but he said a possible price hike could come as early as for the October-December quarter.
JFE Holdings was the biggest contributor by percentage to the Nikkei 225, rising 5.6 percent to 5,470 yen. It was followed closely by Nippon Steel with a rise of 3.6 percent to 582 yen and Kobe Steel which gained 3.1 percent to 296 yen.
The iron and steel subindex was the biggest gainer among the subindices, rising 3.3 percent.
Automakers slipped, worried less about higher steel costs and oil than about the overall economic picture in the United States, said Shinkin Asset's Yamashita.
Honda Motor Co slid 1.9 percent to 3,530 yen and Toyota Motor Co was down 1.8 percent at 4,800 yen, among the top 10 drags on the Nikkei by volume weight.
Trading companies were holding firm, with Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) up 1.9 percent at 3,280 yen and Itochu Corp up 1 percent at 1,043 yen, while banks fell back.
Mitsubishi UFJ slipped 1.4 percent to 3,280 yen and Mizuho Financial Group was up 0.6 percent at 538,000 yen compared with a high of 552,000 yen in morning trade.
Nisshinbo Industries gained 5.4 percent to 1,299 yen.
Trade was moderage, with 1.93 billion shares changing hands, compared with last week's daily average of 2 billion.
Declining shares beat advancing ones by 938 to 653. (Reporting by Elaine Lies;)
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FTSE rises as M&A, US plan buoy financials; ITV up
Mon Jul 14, 2008 7:06am EDT
* FTSE 100 up 1.8 percent, bounces fron near 3-year low
* M&A, plan to shore up U.S. mortgage firms boost financials
* Broadcaster ITV up on Endemol bid speculation
By Michael Taylor
LONDON, July 14 (Reuters) - The FTSE 100 .FTSE rose 1.8 percent on Monday as a combination of a U.S. plan to rescue mortgage finance firms and merger and acquisition (M&A) activity buoyed financials, while broadcaster ITV led individual gainers.
At 1054 GMT the UK's blue-chip index gained 95.32 points to 5,356.9, after falling 2.7 percent on Friday to its lowest closing level in nearly three years.
Beaten-down banks and financials rose after the U.S. Treasury and Federal Reserve announced a plan on Sunday evening which called for sweeping measures to lend money and buy equity, if necessary, in Freddie Mac and Fannie Mae.
Alliance & Leicester soared nearly 50 percent after Spain's Santander said it had reached a takeover deal with the British bank.
Peers that benefited from the positive sentiment included Standard Chartered , Bradford & Bingley , Barclays , Lloyds TSB and HBOS , which were all up between 2.6 and 13.7 percent.
But the FTSE 100 has fallen more than 17 percent this year and many market participants doubted the sustainability of any upturn.
"We saw this last week. It's too early to call any sort of recovery," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers. "It's almost a mini-relief rally, as much as the Fed doing what they can to help Fannie and Freddie so to speak."
"Certainly in terms of the UK and Europe, there are still concerns on the banking front on whether there are more credit writedowns to come," he added.
TOP GAINER
ITV climbed 14.9 percent to top the FTSE 100 leaderboard after the Financial Times quoted the co-founder of producer Endemol as saying a combination of the two companies "could make sense, depending on the numbers".
ITV Executive Chairman Michael Grade has been approached by "interested parties" over the possible sale of BSkyB's stake in the British free-to-air broadcaster, a source familiar with the matter also told Reuters.
Among other individual shares, Rexam gained 7.2 percent to feature among leading FTSE 100 advancers, after Goldman Sachs raised its rating to "buy" from "neutral" and added the world's biggest drinks can maker to its pan-Europe buy list.
Further on the upside, shares in Diageo and SABMiller rose between 1.9 and 2.5 percent after U.S. brewer Anheuser-Busch accepted a sweetened $52 billion takeover bid from Belgium-based InBev to create the world's largest beer maker.
With U.S. crude CLc1 drifting away from record-levels at below $144 a barrel, Shell slipped 0.7 percent.
Russia-focused oil company Imperial Energy jumped 20.1 percent, however, after saying it had received a bid approach from a party it did not name but which industry sources identified as Indian state-controlled ONGC.
Among the few FTSE 100 decliners, Reed Elsevier dipped 0.9 percent as Deutsche Bank cut its target on the Anglo-Dutch publisher to "hold" from "buy".
Dealers kept a close watch on the British share index.
"The UK's FTSE 100 managed to rebound twice in the last two weeks at 5,370," said David Scott, senior stockbroker at Redmayne-Bentley Stockbrokers.
"If the commodity stocks, which have helped support the FTSE 100 over recent times do head sharply southwards, then this will almost certainly breach this support level ... Worryingly the market closed below this level on Friday but managed to climb back above it this morning -- 5,000 looks to be the next target." (Additional reporting by Dominic Lau; Editing by David Holmes)
Read more...
* FTSE 100 up 1.8 percent, bounces fron near 3-year low
* M&A, plan to shore up U.S. mortgage firms boost financials
* Broadcaster ITV up on Endemol bid speculation
By Michael Taylor
LONDON, July 14 (Reuters) - The FTSE 100 .FTSE rose 1.8 percent on Monday as a combination of a U.S. plan to rescue mortgage finance firms and merger and acquisition (M&A) activity buoyed financials, while broadcaster ITV led individual gainers.
At 1054 GMT the UK's blue-chip index gained 95.32 points to 5,356.9, after falling 2.7 percent on Friday to its lowest closing level in nearly three years.
Beaten-down banks and financials rose after the U.S. Treasury and Federal Reserve announced a plan on Sunday evening which called for sweeping measures to lend money and buy equity, if necessary, in Freddie Mac and Fannie Mae.
Alliance & Leicester soared nearly 50 percent after Spain's Santander said it had reached a takeover deal with the British bank.
Peers that benefited from the positive sentiment included Standard Chartered , Bradford & Bingley , Barclays , Lloyds TSB and HBOS , which were all up between 2.6 and 13.7 percent.
But the FTSE 100 has fallen more than 17 percent this year and many market participants doubted the sustainability of any upturn.
"We saw this last week. It's too early to call any sort of recovery," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers. "It's almost a mini-relief rally, as much as the Fed doing what they can to help Fannie and Freddie so to speak."
"Certainly in terms of the UK and Europe, there are still concerns on the banking front on whether there are more credit writedowns to come," he added.
TOP GAINER
ITV climbed 14.9 percent to top the FTSE 100 leaderboard after the Financial Times quoted the co-founder of producer Endemol as saying a combination of the two companies "could make sense, depending on the numbers".
ITV Executive Chairman Michael Grade has been approached by "interested parties" over the possible sale of BSkyB's stake in the British free-to-air broadcaster, a source familiar with the matter also told Reuters.
Among other individual shares, Rexam gained 7.2 percent to feature among leading FTSE 100 advancers, after Goldman Sachs raised its rating to "buy" from "neutral" and added the world's biggest drinks can maker to its pan-Europe buy list.
Further on the upside, shares in Diageo and SABMiller rose between 1.9 and 2.5 percent after U.S. brewer Anheuser-Busch accepted a sweetened $52 billion takeover bid from Belgium-based InBev to create the world's largest beer maker.
With U.S. crude CLc1 drifting away from record-levels at below $144 a barrel, Shell slipped 0.7 percent.
Russia-focused oil company Imperial Energy jumped 20.1 percent, however, after saying it had received a bid approach from a party it did not name but which industry sources identified as Indian state-controlled ONGC.
Among the few FTSE 100 decliners, Reed Elsevier dipped 0.9 percent as Deutsche Bank cut its target on the Anglo-Dutch publisher to "hold" from "buy".
Dealers kept a close watch on the British share index.
"The UK's FTSE 100 managed to rebound twice in the last two weeks at 5,370," said David Scott, senior stockbroker at Redmayne-Bentley Stockbrokers.
"If the commodity stocks, which have helped support the FTSE 100 over recent times do head sharply southwards, then this will almost certainly breach this support level ... Worryingly the market closed below this level on Friday but managed to climb back above it this morning -- 5,000 looks to be the next target." (Additional reporting by Dominic Lau; Editing by David Holmes)
Read more...
India's Monsoon Oilseeds Output May Decline on Deficient Rains
By Pratik Parija and Thomas Kutty Abraham
July 14 (Bloomberg) -- India, the world's biggest vegetable oil buyer after China, may produce less oilseeds as dry weather in the biggest growing regions reduced planting, likely boosting overseas purchases of cooking oils.
Output may be less than 16.8 million metric tons produced last year, Govindlal G. Patel, director of Dipak Enterprises, said in an interview today. Patel, 69, has been trading the commodity for more than four decades.
India, battling the fastest inflation in 13 years, needs to bolster cooking oil supplies to cool prices before next year's general election. Increased imports by the country may support prices of palm and soybean oils which reached records this year.
``As on today, the picture as far as oilseeds are concerned cannot be considered satisfactory,'' Patel said by phone from the western Indian city of Rajkot. ``This may affect production.''
India's edible oil imports rose 13 percent to 3.09 million tons in the eight months ended June from a year ago, the Solvent Extractors' Association said today. Average monthly purchases may total 550,000 tons in the July-October period, compared with 300,000 tons bought in April and May, Patel said on July 4.
Rains have been below average so far in Maharashtra, India's second-biggest soybean-grower, and in southern states of Andhra Pradesh, Karnataka and Tamil Nadu, the main producers of peanuts, according to the India Meteorological Department.
``We don't see any chances of monsoon's revival at least in the next four to five days'' over the western and southern areas, A.B. Mazumdar, deputy director general at the state-owned weather office, said in a telephone interview from Pune.
Sowing for the monsoon crop, which provides more than 60 percent of oilseed output, begins in June. Harvesting starts in mid-September.
Deficient Rains
The June-September monsoon rains, which account for four- fifths of the nation's annual rainfall, was 20 percent less than normal in the week ended July 9, with showers being deficient in 22 of 36 weather divisions, the weather office said last week.
Rainfall in July, which accounts for a third of the four- month season, will be 98 percent of the average 293 millimeters, the agency said June 30.
Peanuts were sown on 2.45 million hectares so far, less than the 2.6 million hectares, the farm ministry said July 11. Soybean has been sowed across 5.4 million hectares, compared with 4.4 million hectares a year earlier.
``We're keeping our fingers crossed as far as peanut output is concerned,'' said Davish Jain, president of the Central Organization for Oil Industry and Trade, India's biggest grouping of oilseed processors. ``Even if there's a bit of delayed sowing because of less rains, overall acreage may still be higher than last year because of good prices that farmers received.''
To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net; Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.
Read more...
July 14 (Bloomberg) -- India, the world's biggest vegetable oil buyer after China, may produce less oilseeds as dry weather in the biggest growing regions reduced planting, likely boosting overseas purchases of cooking oils.
Output may be less than 16.8 million metric tons produced last year, Govindlal G. Patel, director of Dipak Enterprises, said in an interview today. Patel, 69, has been trading the commodity for more than four decades.
India, battling the fastest inflation in 13 years, needs to bolster cooking oil supplies to cool prices before next year's general election. Increased imports by the country may support prices of palm and soybean oils which reached records this year.
``As on today, the picture as far as oilseeds are concerned cannot be considered satisfactory,'' Patel said by phone from the western Indian city of Rajkot. ``This may affect production.''
India's edible oil imports rose 13 percent to 3.09 million tons in the eight months ended June from a year ago, the Solvent Extractors' Association said today. Average monthly purchases may total 550,000 tons in the July-October period, compared with 300,000 tons bought in April and May, Patel said on July 4.
Rains have been below average so far in Maharashtra, India's second-biggest soybean-grower, and in southern states of Andhra Pradesh, Karnataka and Tamil Nadu, the main producers of peanuts, according to the India Meteorological Department.
``We don't see any chances of monsoon's revival at least in the next four to five days'' over the western and southern areas, A.B. Mazumdar, deputy director general at the state-owned weather office, said in a telephone interview from Pune.
Sowing for the monsoon crop, which provides more than 60 percent of oilseed output, begins in June. Harvesting starts in mid-September.
Deficient Rains
The June-September monsoon rains, which account for four- fifths of the nation's annual rainfall, was 20 percent less than normal in the week ended July 9, with showers being deficient in 22 of 36 weather divisions, the weather office said last week.
Rainfall in July, which accounts for a third of the four- month season, will be 98 percent of the average 293 millimeters, the agency said June 30.
Peanuts were sown on 2.45 million hectares so far, less than the 2.6 million hectares, the farm ministry said July 11. Soybean has been sowed across 5.4 million hectares, compared with 4.4 million hectares a year earlier.
``We're keeping our fingers crossed as far as peanut output is concerned,'' said Davish Jain, president of the Central Organization for Oil Industry and Trade, India's biggest grouping of oilseed processors. ``Even if there's a bit of delayed sowing because of less rains, overall acreage may still be higher than last year because of good prices that farmers received.''
To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net; Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.
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Soybeans, Corn May Rise as Hot, Dry Weather Threatens U.S. Crop
By Jeff Wilson
July 14 (Bloomberg) -- Soybeans may rise to a record and corn may gain on speculation a shift to hot, dry weather will reduce yields after record Midwest rains last month stunted root development, leaving U.S. crops vulnerable to heat stress.
Twenty-seven of 35 traders, advisers and grain merchants surveyed on July 11 from Beijing to Chicago expected soybeans to rise, and 17 of 32 said to buy corn.
Soybeans fell 2.1 percent to $15.96 a bushel last week in Chicago after reaching an all-time high of $16.3675 on July 3. Corn tumbled 8.7 percent to $7.0925 a bushel, the biggest weekly drop since March. The price rose to a record $7.9925 on June 27.
Most respondents surveyed last week were surprised by the decline in soybeans and corn. Since 2004, the surveys have been right 60 percent of the time on corn and 63 percent on soybeans.
Weekly results: Bullish on corn: 17 Bullish on soybeans: 27 Bearish on corn: 15 Bearish on soybeans: 8
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.
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July 14 (Bloomberg) -- Soybeans may rise to a record and corn may gain on speculation a shift to hot, dry weather will reduce yields after record Midwest rains last month stunted root development, leaving U.S. crops vulnerable to heat stress.
Twenty-seven of 35 traders, advisers and grain merchants surveyed on July 11 from Beijing to Chicago expected soybeans to rise, and 17 of 32 said to buy corn.
Soybeans fell 2.1 percent to $15.96 a bushel last week in Chicago after reaching an all-time high of $16.3675 on July 3. Corn tumbled 8.7 percent to $7.0925 a bushel, the biggest weekly drop since March. The price rose to a record $7.9925 on June 27.
Most respondents surveyed last week were surprised by the decline in soybeans and corn. Since 2004, the surveys have been right 60 percent of the time on corn and 63 percent on soybeans.
Weekly results: Bullish on corn: 17 Bullish on soybeans: 27 Bearish on corn: 15 Bearish on soybeans: 8
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.
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Gold Drops in London as Dollar Strengthens, Crude Oil Declines
By Marianne Stigset
July 14 (Bloomberg) -- Gold declined for the first day in four in London, as a stronger dollar and weaker energy prices reduced the appeal of commodities as a hedge against inflation.
Gold has had a correlation of 0.69 to the euro-dollar exchange rate this year, up from 0.58 last year, Bloomberg data show. A figure of 1 would mean the two move in lockstep. The dollar rose for the first time in four days against the euro after U.S. Treasury Secretary asked to buy stakes in Freddie Mac and Fannie Mae to restore confidence in financial markets.
``What policy makers like the Treasury and the Federal Reserve don't want to see is a sharp and disorderly drop in the dollar,'' said Mario Innecco, a futures broker at MF Global Ltd. in London, adding that gold also fell because ``oil is down.''
Gold for immediate delivery dropped $5.95, or 0.6 percent, to $958.25 an ounce by 10:39 a.m. in London. Futures for August delivery fell $1.40, or 0.2 percent, to $959.20 on the Comex division of the New York Mercantile Exchange.
Bullion gained 3.3 percent last week, and has advanced 15 percent so far this year.
``After posting strong gains last week the yellow metal may look to carry out some consolidation at the start of this week,'' James Moore, an analyst at TheBullionDesk.com in London, wrote in a report today.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by gold, advanced to a record 705.9 metric tons on July 10. Holdings in the fund rose from 659.91 tons, according to data posted on the company's Web site July 11.
Exchange-Traded Funds
``The moves in ETF holdings is evidence that investors have become much more worried about systemic risk'' in financial markets and are seeking a haven in gold, UBS AG said in a note to investors today. The bank raised its one-month forecast to $1,000 an ounce, from $900, and its three-month estimate to $1,050, from $850.
Crude oil slipped 1.3 percent after rallying to a record of $147.27 a barrel last week.
``Given the backdrop of record oil, rising tensions in the Middle East and deepening financial market woes, we could soon see gold establish a base above $1,000 an ounce,'' Moore wrote.
Gold may climb for a fifth straight week on speculation slumping equities will spark demand for a haven, according to a Bloomberg survey. Eighteen of 25 traders, investors and analysts from Mumbai to Chicago on July 10 and July 11 advised buying gold. Five said to sell, and two were neutral.
A majority of analysts surveyed July 3 and July 4 anticipated gold's gain last week. The survey has forecast prices accurately in 134 of 219 weeks, or 61 percent of the time.
Among other metals for immediate delivery, platinum dropped $16.50, or 0.8 percent, to $2,016.50 an ounce, palladium declined $2.25, or 0.5 percent, to $451 an ounce and silver fell 12.5 cents, or 0.7 percent, to $18.69 an ounce.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
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July 14 (Bloomberg) -- Gold declined for the first day in four in London, as a stronger dollar and weaker energy prices reduced the appeal of commodities as a hedge against inflation.
Gold has had a correlation of 0.69 to the euro-dollar exchange rate this year, up from 0.58 last year, Bloomberg data show. A figure of 1 would mean the two move in lockstep. The dollar rose for the first time in four days against the euro after U.S. Treasury Secretary asked to buy stakes in Freddie Mac and Fannie Mae to restore confidence in financial markets.
``What policy makers like the Treasury and the Federal Reserve don't want to see is a sharp and disorderly drop in the dollar,'' said Mario Innecco, a futures broker at MF Global Ltd. in London, adding that gold also fell because ``oil is down.''
Gold for immediate delivery dropped $5.95, or 0.6 percent, to $958.25 an ounce by 10:39 a.m. in London. Futures for August delivery fell $1.40, or 0.2 percent, to $959.20 on the Comex division of the New York Mercantile Exchange.
Bullion gained 3.3 percent last week, and has advanced 15 percent so far this year.
``After posting strong gains last week the yellow metal may look to carry out some consolidation at the start of this week,'' James Moore, an analyst at TheBullionDesk.com in London, wrote in a report today.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by gold, advanced to a record 705.9 metric tons on July 10. Holdings in the fund rose from 659.91 tons, according to data posted on the company's Web site July 11.
Exchange-Traded Funds
``The moves in ETF holdings is evidence that investors have become much more worried about systemic risk'' in financial markets and are seeking a haven in gold, UBS AG said in a note to investors today. The bank raised its one-month forecast to $1,000 an ounce, from $900, and its three-month estimate to $1,050, from $850.
Crude oil slipped 1.3 percent after rallying to a record of $147.27 a barrel last week.
``Given the backdrop of record oil, rising tensions in the Middle East and deepening financial market woes, we could soon see gold establish a base above $1,000 an ounce,'' Moore wrote.
Gold may climb for a fifth straight week on speculation slumping equities will spark demand for a haven, according to a Bloomberg survey. Eighteen of 25 traders, investors and analysts from Mumbai to Chicago on July 10 and July 11 advised buying gold. Five said to sell, and two were neutral.
A majority of analysts surveyed July 3 and July 4 anticipated gold's gain last week. The survey has forecast prices accurately in 134 of 219 weeks, or 61 percent of the time.
Among other metals for immediate delivery, platinum dropped $16.50, or 0.8 percent, to $2,016.50 an ounce, palladium declined $2.25, or 0.5 percent, to $451 an ounce and silver fell 12.5 cents, or 0.7 percent, to $18.69 an ounce.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
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Sugar Declines in London as Crude Oil Weakens; Cocoa Falls
By Rachel Graham
July 14 (Bloomberg) -- Sugar fell in London on expectations that a decline in crude-oil prices will weaken demand for alternative fuels, including ethanol derived from cane. Cocoa declined and robusta coffee advanced.
Sugar has risen 22 percent this year, buoyed by speculation that ethanol demand would accelerate. That helped mitigate for an expected supply surplus. Refined sugar production will probably exceed demand by 2 million metric tons in the 12 months through March 2009, Swiss-based researcher Kingsman SA estimates.
Sugar has fallen ``because of the stronger dollar and weaker oil,'' said David Sadler, manager of the sugar desk at Sucden (U.K.) Ltd. in London. ``Fundamentally, there is still a lot of sugar around.''
White, or refined, sugar for October delivery fell $2.60, or 0.7 percent, to $387.20 a ton as of 11:15 a.m. on the Liffe exchange in London. Raw sugar for October delivery in New York declined 0.19 cent, or 1.4 percent, to 13.8 cents a pound.
Three of seven traders, analysts and brokers surveyed last week forecast a gain in raw sugar traded in New York. Two expected a decline and two forecast little change. Three of seven traders, analysts and brokers surveyed said white, or refined, sugar traded in London would climb this week. Two said it would fall, and two predicted little change.
Cocoa for July delivery declined for a second trading session, falling 5 pounds, or 0.3 percent, to 1,604 pounds ($3,183) a ton on Liffe.
Hedge-fund managers and other large speculators decreased their net-long position in New York cocoa futures in the week ended July 8, according to U.S. Commodity Futures Trading Commission data.
Price Bets
Speculative long positions, or bets prices will rise, outnumbered short positions by 32,824 contracts on ICE Futures U.S., formerly known as the New York Board of Trade, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 6,040 contracts, or 16 percent, from a week earlier.
Robusta coffee for September delivery climbed $1, or 0.3 percent, to $2,228 a ton.
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net.
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July 14 (Bloomberg) -- Sugar fell in London on expectations that a decline in crude-oil prices will weaken demand for alternative fuels, including ethanol derived from cane. Cocoa declined and robusta coffee advanced.
Sugar has risen 22 percent this year, buoyed by speculation that ethanol demand would accelerate. That helped mitigate for an expected supply surplus. Refined sugar production will probably exceed demand by 2 million metric tons in the 12 months through March 2009, Swiss-based researcher Kingsman SA estimates.
Sugar has fallen ``because of the stronger dollar and weaker oil,'' said David Sadler, manager of the sugar desk at Sucden (U.K.) Ltd. in London. ``Fundamentally, there is still a lot of sugar around.''
White, or refined, sugar for October delivery fell $2.60, or 0.7 percent, to $387.20 a ton as of 11:15 a.m. on the Liffe exchange in London. Raw sugar for October delivery in New York declined 0.19 cent, or 1.4 percent, to 13.8 cents a pound.
Three of seven traders, analysts and brokers surveyed last week forecast a gain in raw sugar traded in New York. Two expected a decline and two forecast little change. Three of seven traders, analysts and brokers surveyed said white, or refined, sugar traded in London would climb this week. Two said it would fall, and two predicted little change.
Cocoa for July delivery declined for a second trading session, falling 5 pounds, or 0.3 percent, to 1,604 pounds ($3,183) a ton on Liffe.
Hedge-fund managers and other large speculators decreased their net-long position in New York cocoa futures in the week ended July 8, according to U.S. Commodity Futures Trading Commission data.
Price Bets
Speculative long positions, or bets prices will rise, outnumbered short positions by 32,824 contracts on ICE Futures U.S., formerly known as the New York Board of Trade, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 6,040 contracts, or 16 percent, from a week earlier.
Robusta coffee for September delivery climbed $1, or 0.3 percent, to $2,228 a ton.
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net.
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Platinum Futures Drop as Rising Tokyo Gold Contract Lures Money
By Dave McCombs
July 14 (Bloomberg) -- Platinum futures fell for the first time in three days as some investors sold the metal to buy gold, which soared to an almost 25-year high on the Tokyo Commodity Exchange.
The most-active contract for platinum traded at 3,521 yen more than benchmark gold futures at the close in Tokyo, 698 yen wider than the one-year average.
``Many traders like the spread between gold and platinum, so they're buying gold and selling platinum,'' Kazuhiko Saito, a commodity strategist at Interes Capital Management, said today in Tokyo by telephone.
Platinum for June delivery in Tokyo fell 97 yen, or 1.4 percent, to close at 6,837 yen a gram ($1,996 an ounce) on the Tokyo Commodity Exchange.
Gold for June delivery gained as much as 50 yen to 3,340 yen a gram, the highest since September 1983. The most-active closed at 3,316 yen a gram.
Metal for immediate delivery dropped $5.50 to $2,027.50 an ounce at 5:55 p.m. in Tokyo, 0.3 percent lower than July 11 in New York.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net
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July 14 (Bloomberg) -- Platinum futures fell for the first time in three days as some investors sold the metal to buy gold, which soared to an almost 25-year high on the Tokyo Commodity Exchange.
The most-active contract for platinum traded at 3,521 yen more than benchmark gold futures at the close in Tokyo, 698 yen wider than the one-year average.
``Many traders like the spread between gold and platinum, so they're buying gold and selling platinum,'' Kazuhiko Saito, a commodity strategist at Interes Capital Management, said today in Tokyo by telephone.
Platinum for June delivery in Tokyo fell 97 yen, or 1.4 percent, to close at 6,837 yen a gram ($1,996 an ounce) on the Tokyo Commodity Exchange.
Gold for June delivery gained as much as 50 yen to 3,340 yen a gram, the highest since September 1983. The most-active closed at 3,316 yen a gram.
Metal for immediate delivery dropped $5.50 to $2,027.50 an ounce at 5:55 p.m. in Tokyo, 0.3 percent lower than July 11 in New York.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net
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U.S. Stock-Index Futures Gain; Fannie Mae, Freddie Mac Advance
By Henrietta Rumberger
July 14 (Bloomberg) -- U.S. stock-index futures rose after Treasury Secretary Henry Paulson said he would seek approval from Congress to shore up Fannie Mae and Freddie Mac and investors speculated takeovers will increase.
Fannie Mae and Freddie Mac climbed more than 11 percent in Germany after Paulson asked Congress for authority to buy unlimited stakes in and lend to the companies to stem a collapse in confidence. Anheuser-Busch Cos. gained as InBev NV agreed to buy the maker of Budweiser beer for $52 billion.
Futures indicated the Standard & Poor's 500 Index would rebound after the benchmark for American equities posted its sixth straight weekly decline and fell into a bear market.
``The promise to bail out Freddie Mac and Fannie Mae is supporting the market,'' Carsten Klude, Hamburg-based chief investment strategist at M.M. Warburg & Co., which has the equivalent of $25 billion, said in a Bloomberg Television interview.
S&P 500 futures expiring in September added 14.4, or 1.2 percent, to 1,254.20 at 11:30 a.m. in London. Dow Jones Industrial Average futures gained 97 to 11,193 and Nasdaq-100 Index futures increased 21.25 to 1,841.75.
Fannie Mae slid 45 percent last week, while Freddie Mac sank 47 percent on concern the two companies, which own or guarantee about half of the $12 trillion of U.S. mortgages, may require a bailout that would wipe out shareholders. Last week's slump left the S&P 500 and the Dow average down 16 percent for the year as earnings season enters its second week.
Explicit Guarantee
Freddie Mac today rose 90 cents to $8.65 in Germany, while Fannie Mae added $1.25 to $11.50. Paulson's proposal, which the Treasury anticipates will be incorporated into an existing congressional bill and approved this week, signals a shift toward an explicit guarantee of Fannie Mae and Freddie Mac debt.
The Federal Reserve separately authorized the firms to borrow directly from the central bank.
Freddie Mac is scheduled to sell $3 billion in short-term notes today, and Paulson's comments indicate a concern about a collapse in private investors' willingness to fund the firms. The companies issue debt to raise money for their purchases of mortgage securities.
Lehman Brothers Holdings Inc., once the biggest U.S. underwriter of mortgage bonds, gained 62 cents to $15.05. Lehman on July 11 fell the most since Bear Stearns Cos. collapsed in March on speculation Freddie Mac and Fannie Mae might fail.
Budweiser Beer, Belgians
Anheuser-Busch rose $1.53 to $68.03 in Germany. InBev will put the maker of Budweiser beer under Belgian control after almost 156 years as a family-run company.
The $70-a-share transaction ends a month of court fights and public denunciations as InBev tried to acquire the St. Louis-based beermaker in a hostile takeover. Leuven, Belgium- based InBev sweetened its initial offer by 7.7 percent and agreed to rename itself Anheuser-Busch InBev, the brewers said.
``A takeover such as InBev-Anheuser one is a positive sign,'' Thomas Tilse, head of portfolio strategy for private clients at Cominvest in Frankfurt, which has the equivalent of $101 billion under management, said in a Bloomberg television interview. ``Such mergers and acquisitions show that stocks are still very attractive and cheap at their current levels.''
FedEx Corp. may be active. The second-largest U.S. package- shipping company is in preliminary talks to take over TNT NV, the Financial Times reported. Buying the Dutch operator would make FedEx the No. 2 express-delivery service in Europe. FedEx shares didn't trade in Europe.
Pieter Schaffels, a spokesman for TNT, and Jess Bunn of FedEx both declined to comment on the Financial Times report when contacted by telephone and e-mail on July 12.
Genzyme Corp. climbed $1.26 to $76.93 in Germany. Citigroup Inc. raised its recommendation on shares of the world's largest maker of enzyme therapies for rare genetic disorders to ``buy'' from ``hold.''
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net
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July 14 (Bloomberg) -- U.S. stock-index futures rose after Treasury Secretary Henry Paulson said he would seek approval from Congress to shore up Fannie Mae and Freddie Mac and investors speculated takeovers will increase.
Fannie Mae and Freddie Mac climbed more than 11 percent in Germany after Paulson asked Congress for authority to buy unlimited stakes in and lend to the companies to stem a collapse in confidence. Anheuser-Busch Cos. gained as InBev NV agreed to buy the maker of Budweiser beer for $52 billion.
Futures indicated the Standard & Poor's 500 Index would rebound after the benchmark for American equities posted its sixth straight weekly decline and fell into a bear market.
``The promise to bail out Freddie Mac and Fannie Mae is supporting the market,'' Carsten Klude, Hamburg-based chief investment strategist at M.M. Warburg & Co., which has the equivalent of $25 billion, said in a Bloomberg Television interview.
S&P 500 futures expiring in September added 14.4, or 1.2 percent, to 1,254.20 at 11:30 a.m. in London. Dow Jones Industrial Average futures gained 97 to 11,193 and Nasdaq-100 Index futures increased 21.25 to 1,841.75.
Fannie Mae slid 45 percent last week, while Freddie Mac sank 47 percent on concern the two companies, which own or guarantee about half of the $12 trillion of U.S. mortgages, may require a bailout that would wipe out shareholders. Last week's slump left the S&P 500 and the Dow average down 16 percent for the year as earnings season enters its second week.
Explicit Guarantee
Freddie Mac today rose 90 cents to $8.65 in Germany, while Fannie Mae added $1.25 to $11.50. Paulson's proposal, which the Treasury anticipates will be incorporated into an existing congressional bill and approved this week, signals a shift toward an explicit guarantee of Fannie Mae and Freddie Mac debt.
The Federal Reserve separately authorized the firms to borrow directly from the central bank.
Freddie Mac is scheduled to sell $3 billion in short-term notes today, and Paulson's comments indicate a concern about a collapse in private investors' willingness to fund the firms. The companies issue debt to raise money for their purchases of mortgage securities.
Lehman Brothers Holdings Inc., once the biggest U.S. underwriter of mortgage bonds, gained 62 cents to $15.05. Lehman on July 11 fell the most since Bear Stearns Cos. collapsed in March on speculation Freddie Mac and Fannie Mae might fail.
Budweiser Beer, Belgians
Anheuser-Busch rose $1.53 to $68.03 in Germany. InBev will put the maker of Budweiser beer under Belgian control after almost 156 years as a family-run company.
The $70-a-share transaction ends a month of court fights and public denunciations as InBev tried to acquire the St. Louis-based beermaker in a hostile takeover. Leuven, Belgium- based InBev sweetened its initial offer by 7.7 percent and agreed to rename itself Anheuser-Busch InBev, the brewers said.
``A takeover such as InBev-Anheuser one is a positive sign,'' Thomas Tilse, head of portfolio strategy for private clients at Cominvest in Frankfurt, which has the equivalent of $101 billion under management, said in a Bloomberg television interview. ``Such mergers and acquisitions show that stocks are still very attractive and cheap at their current levels.''
FedEx Corp. may be active. The second-largest U.S. package- shipping company is in preliminary talks to take over TNT NV, the Financial Times reported. Buying the Dutch operator would make FedEx the No. 2 express-delivery service in Europe. FedEx shares didn't trade in Europe.
Pieter Schaffels, a spokesman for TNT, and Jess Bunn of FedEx both declined to comment on the Financial Times report when contacted by telephone and e-mail on July 12.
Genzyme Corp. climbed $1.26 to $76.93 in Germany. Citigroup Inc. raised its recommendation on shares of the world's largest maker of enzyme therapies for rare genetic disorders to ``buy'' from ``hold.''
To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net
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Lead, Zinc Rise in London as China Output Cuts May Erode Supply
By Claudia Carpenter
July 14 (Bloomberg) -- Lead and zinc gained in London on expectations that output cuts in China, the world's largest producer, may erode inventories. Aluminum and copper declined.
China's smaller zinc and lead smelters will cut output by 10 percent for three months, the Shanghai Nonferrous Metals Trade Association said. Zinc supplies will exceed demand by 215,000 metric tons this year compared with a surplus of 26,000 tons for lead, the International Lead and Zinc Study Group says.
``A three-month cut in output would go pretty close to wiping out the lead surplus,'' said David Thurtell, an analyst at BNP Paribas SA in London. ``It's widely agreed the zinc surplus is well above that.''
Lead for delivery in three months gained $17, or 0.9 percent, to $1,982 a ton as of 10:29 a.m. on the London Metal Exchange. Zinc rose $8, or 0.4 percent, to $2,033 a ton.
Lead, mostly used in car batteries, is the biggest decliner on the exchange this year, down 22 percent. Zinc, used to galvanize steel, is down 14 percent. Mines may be forced to close because prices are below production costs, Donald Lindsay, chief executive officer of Teck Cominco Ltd., said May 23.
Inventories of lead in warehouses monitored by the London Metal Exchange dropped 3,175 tons, or 3.2 percent, to 95,775 tons, the biggest decline since August 2007. Zinc stockpiles increased 1,175 tons to 152,175 tons, the exchange said.
The owners of the largest zinc smelters will meet in two days to consider their own production cuts, said Han Minzhi, general manager of marketing and sales at producer Shenzhen Zhongjin Lingnan Nonfemet Co. ``This meeting will have a more significant impact'' than the agreement by smaller producers, Everbright Securities Co. analyst Wang Feng said.
Zinc Outlook
Increased zinc supplies will push average prices from 95.3 cents a pound ($2,101 a ton) this year down to 90 cents next year, Macquarie Group Ltd. analysts including Jim Lennon wrote in a report today. The forecasts were lowered from $1.076 a pound this year and $1 a pound next year. The average for the three- month zinc contract is $2,272.55 a ton so far in 2008.
Lead will average 96.5 cents a pound this year, down from a previous forecast of $1.316 a pound, and 85 cents next year, down 29 percent from the previous forecast, according to the report.
Macquarie raised its copper forecast to $3.841 a pound from $3.634 in 2008, and kept its forecast at $3.25 a pound in 2009. Copper rose $25 to $8,295 a ton in London. Copper inventories gained 600 tons to 124,725 tons.
Aluminum fell $21.75 to $3,295.25 a ton in London. Aluminum stockpiles rose 2,050 tons to 1.09 million tons. Norsk Hydro ASA, the world's fourth-largest aluminum producer, slumped the most on record in Oslo trading after saying rising costs and power derivatives eroded second-quarter profit.
Tin was unchanged at $22,900 a ton and nickel dropped $100 to $21,500 a ton. Nickel may average $11.008 a pound this year, down 19 percent from a previous forecast, Macquarie said. The bank lowered its 2009 forecast 13 percent to $9.625 a pound.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
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July 14 (Bloomberg) -- Lead and zinc gained in London on expectations that output cuts in China, the world's largest producer, may erode inventories. Aluminum and copper declined.
China's smaller zinc and lead smelters will cut output by 10 percent for three months, the Shanghai Nonferrous Metals Trade Association said. Zinc supplies will exceed demand by 215,000 metric tons this year compared with a surplus of 26,000 tons for lead, the International Lead and Zinc Study Group says.
``A three-month cut in output would go pretty close to wiping out the lead surplus,'' said David Thurtell, an analyst at BNP Paribas SA in London. ``It's widely agreed the zinc surplus is well above that.''
Lead for delivery in three months gained $17, or 0.9 percent, to $1,982 a ton as of 10:29 a.m. on the London Metal Exchange. Zinc rose $8, or 0.4 percent, to $2,033 a ton.
Lead, mostly used in car batteries, is the biggest decliner on the exchange this year, down 22 percent. Zinc, used to galvanize steel, is down 14 percent. Mines may be forced to close because prices are below production costs, Donald Lindsay, chief executive officer of Teck Cominco Ltd., said May 23.
Inventories of lead in warehouses monitored by the London Metal Exchange dropped 3,175 tons, or 3.2 percent, to 95,775 tons, the biggest decline since August 2007. Zinc stockpiles increased 1,175 tons to 152,175 tons, the exchange said.
The owners of the largest zinc smelters will meet in two days to consider their own production cuts, said Han Minzhi, general manager of marketing and sales at producer Shenzhen Zhongjin Lingnan Nonfemet Co. ``This meeting will have a more significant impact'' than the agreement by smaller producers, Everbright Securities Co. analyst Wang Feng said.
Zinc Outlook
Increased zinc supplies will push average prices from 95.3 cents a pound ($2,101 a ton) this year down to 90 cents next year, Macquarie Group Ltd. analysts including Jim Lennon wrote in a report today. The forecasts were lowered from $1.076 a pound this year and $1 a pound next year. The average for the three- month zinc contract is $2,272.55 a ton so far in 2008.
Lead will average 96.5 cents a pound this year, down from a previous forecast of $1.316 a pound, and 85 cents next year, down 29 percent from the previous forecast, according to the report.
Macquarie raised its copper forecast to $3.841 a pound from $3.634 in 2008, and kept its forecast at $3.25 a pound in 2009. Copper rose $25 to $8,295 a ton in London. Copper inventories gained 600 tons to 124,725 tons.
Aluminum fell $21.75 to $3,295.25 a ton in London. Aluminum stockpiles rose 2,050 tons to 1.09 million tons. Norsk Hydro ASA, the world's fourth-largest aluminum producer, slumped the most on record in Oslo trading after saying rising costs and power derivatives eroded second-quarter profit.
Tin was unchanged at $22,900 a ton and nickel dropped $100 to $21,500 a ton. Nickel may average $11.008 a pound this year, down 19 percent from a previous forecast, Macquarie said. The bank lowered its 2009 forecast 13 percent to $9.625 a pound.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
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Goldman Leads Wall Street in Regret of New Nifty 50
By Michael Tsang and Michael Patterson
July 14 (Bloomberg) -- Goldman Sachs Group Inc. called international sales a ``life saver'' in April for companies like 3M Co. UBS AG predicted at the end of last year that global growth would boost Cisco Systems Inc. Morgan Stanley said in January that emerging markets would fuel gains in General Electric Co.
All of them were wrong.
3M, Cisco and GE tumbled more than the Standard & Poor's 500 Index this year, sending Morgan Stanley's ``New Nifty Fifty'' index of companies that depend on overseas sales down 18 percent, the worst start in six years. The money-losing advice is the latest misstep by Wall Street, which overestimated fourth-quarter profits by the largest margin ever and failed to anticipate that rising inflation and more than $400 billion of bank losses would spur the biggest sell-off in global equities since 1970, according to data compiled by Bloomberg.
``It's not as easy as saying, `Just buy global and you'll be fine,''' said Dan Veru, a principal at Fort Lee, New Jersey- based Palisade Capital Management, which oversees about $3 billion. ``None of these places have been great places to hide.''
Goldman, the world's largest securities firm, told clients last week to quit the trade it advocated three months ago -- buying a basket of companies with the most overseas sales and selling a group with the least -- after it lost 1.3 percent.
Global Bear Market
David Kostin, Goldman's New York-based U.S. investment strategist, wrote that ``the market is not currently trading the long-term effects of international growth, focusing instead on inflationary pressures and the weak consumer.''
Almost $13 trillion has been erased from equity markets around the world since October, as the worst U.S. housing slump since the Great Depression left the economy on the brink of a recession while record commodity prices stoked global inflation.
The S&P 500, the benchmark for American equities, slumped last week into a so-called bear market, or a decline of 20 percent from a recent peak. Among the 23 industrialized nations in the MSCI World Index, only Canada averted such a sell-off. The MSCI World has dropped 15 percent in 2008, the worst start to a year since 1970, Bloomberg data show.
Futures on the S&P 500 expiring in September added 1 percent to 1,252.70 as of 9:18 a.m. today in London after U.S. Treasury Secretary Henry Paulson asked Congress for authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac.
Central Banks
Michael Aronstein, chief investment strategist at Oscar Gruss & Son Inc., says U.S. companies that rely on Europe and emerging markets for a large portion of sales may keep trailing the broader market as the countries' central banks raise interest rates to combat accelerating consumer prices.
The European Central Bank boosted its benchmark lending rate this month to a seven-year high. Policy makers in Brazil, Russia, and India have also raised borrowing costs this year as crude oil, corn, soybeans and copper climbed to records.
U.S. central bankers lowered interest rates seven times since September, the most aggressive cuts in two decades. The Federal Reserve held its target overnight lending rate between banks at 2 percent last month, the lowest since 2004.
``There's a great deal of economic vulnerability in the developing world and in Europe,'' said Aronstein. His New York- based Marketfield Fund beat the S&P 500 by 18 percentage points, including dividends, since it began Oct. 12, three days after the index rose to a record.
Brazil, China
U.S. economic growth may accelerate to a 1.8 percent rate next year from 1.5 percent in 2008, according to a Bloomberg survey of economists. Growth in the Euro region, Brazil, Russia and China may slow, the survey shows.
Even so, emerging-market economies are forecast to expand at a faster rate than the U.S., with China growing by 9.5 percent and Brazil increasing by 4 percent. Equity investors should purchase companies with sales in those countries, says Peter Schiff, who helps oversee $1 billion as president of Darien, Connecticut-based Euro Pacific Capital.
``Global companies with global income streams -- those are the only stocks people should buy,'' he said. ``You don't want to own any stocks that are going to be dragged down by the slumping domestic economy.''
Companies that reported higher revenue because the falling U.S. currency boosted overseas sales may lose that source of growth, said Charles Bobrinskoy, who helps manage about $13 billion as vice chairman of Ariel Investments in Chicago.
3M Declines
3M fell 1.9 percent on April 24 even after the St. Paul, Minnesota-based maker of 50,000 products from Scotch-brand tape to electronic signs posted better-than-estimated first-quarter sales. The shares have since extended their 2008 decline to 19 percent as analysts said currency translations inflated revenue.
``People are worried that a lot of that growth has come from the weakening dollar and that foreign exchange profits have improved earnings,'' said Bobrinskoy, whose Ariel Focus Fund is beating 85 percent of its rivals this year. ``At some point you've got to have real earnings growth.''
GE, which has businesses ranging from jet engines to turbines for power plants, lost 25 percent this year. Abhijit Chakrabortti, Morgan Stanley's global equity strategist in New York, called the Fairfield, Connecticut-based company a ``top pick'' in a Jan. 6 note to clients.
Cisco, the San Jose, California-based maker of computer- networking equipment that gets about half its revenue from abroad, slumped 19 percent. UBS's David Bianco said in a December report that Cisco's overseas sales put the shares in a ``sweet spot.'' He predicted the S&P 500 would climb to a record 1,700. Bianco has since cut his year-end target to over 1,600.
Nifty Fifty
The term Nifty Fifty was used in the early 1970s to describe a group of the largest U.S. companies, including Anheuser-Busch Cos. and Eastman Kodak Co., that purportedly guaranteed profits for investors who bought and held the shares.
The ``New Nifty Fifty'' was created in 1995 by Thomas McManus, a former investment strategist at Bank of America Corp. and Wall Street's best stock forecaster in 2007, when he worked at Morgan Stanley. Formally the Morgan Stanley Multinational Index, McManus used the term to reflect U.S. companies that didn't depend on any one country for their growth.
The index beat the S&P 500 in 2006 and 2007 and has posted declines in just three years since it was created.
``Opinion follows prices,'' said Aronstein. ``People get carried away looking at the immediate past.''
To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Michael Patterson in New York at mpatterson10@bloomberg.net.
Read more...
July 14 (Bloomberg) -- Goldman Sachs Group Inc. called international sales a ``life saver'' in April for companies like 3M Co. UBS AG predicted at the end of last year that global growth would boost Cisco Systems Inc. Morgan Stanley said in January that emerging markets would fuel gains in General Electric Co.
All of them were wrong.
3M, Cisco and GE tumbled more than the Standard & Poor's 500 Index this year, sending Morgan Stanley's ``New Nifty Fifty'' index of companies that depend on overseas sales down 18 percent, the worst start in six years. The money-losing advice is the latest misstep by Wall Street, which overestimated fourth-quarter profits by the largest margin ever and failed to anticipate that rising inflation and more than $400 billion of bank losses would spur the biggest sell-off in global equities since 1970, according to data compiled by Bloomberg.
``It's not as easy as saying, `Just buy global and you'll be fine,''' said Dan Veru, a principal at Fort Lee, New Jersey- based Palisade Capital Management, which oversees about $3 billion. ``None of these places have been great places to hide.''
Goldman, the world's largest securities firm, told clients last week to quit the trade it advocated three months ago -- buying a basket of companies with the most overseas sales and selling a group with the least -- after it lost 1.3 percent.
Global Bear Market
David Kostin, Goldman's New York-based U.S. investment strategist, wrote that ``the market is not currently trading the long-term effects of international growth, focusing instead on inflationary pressures and the weak consumer.''
Almost $13 trillion has been erased from equity markets around the world since October, as the worst U.S. housing slump since the Great Depression left the economy on the brink of a recession while record commodity prices stoked global inflation.
The S&P 500, the benchmark for American equities, slumped last week into a so-called bear market, or a decline of 20 percent from a recent peak. Among the 23 industrialized nations in the MSCI World Index, only Canada averted such a sell-off. The MSCI World has dropped 15 percent in 2008, the worst start to a year since 1970, Bloomberg data show.
Futures on the S&P 500 expiring in September added 1 percent to 1,252.70 as of 9:18 a.m. today in London after U.S. Treasury Secretary Henry Paulson asked Congress for authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac.
Central Banks
Michael Aronstein, chief investment strategist at Oscar Gruss & Son Inc., says U.S. companies that rely on Europe and emerging markets for a large portion of sales may keep trailing the broader market as the countries' central banks raise interest rates to combat accelerating consumer prices.
The European Central Bank boosted its benchmark lending rate this month to a seven-year high. Policy makers in Brazil, Russia, and India have also raised borrowing costs this year as crude oil, corn, soybeans and copper climbed to records.
U.S. central bankers lowered interest rates seven times since September, the most aggressive cuts in two decades. The Federal Reserve held its target overnight lending rate between banks at 2 percent last month, the lowest since 2004.
``There's a great deal of economic vulnerability in the developing world and in Europe,'' said Aronstein. His New York- based Marketfield Fund beat the S&P 500 by 18 percentage points, including dividends, since it began Oct. 12, three days after the index rose to a record.
Brazil, China
U.S. economic growth may accelerate to a 1.8 percent rate next year from 1.5 percent in 2008, according to a Bloomberg survey of economists. Growth in the Euro region, Brazil, Russia and China may slow, the survey shows.
Even so, emerging-market economies are forecast to expand at a faster rate than the U.S., with China growing by 9.5 percent and Brazil increasing by 4 percent. Equity investors should purchase companies with sales in those countries, says Peter Schiff, who helps oversee $1 billion as president of Darien, Connecticut-based Euro Pacific Capital.
``Global companies with global income streams -- those are the only stocks people should buy,'' he said. ``You don't want to own any stocks that are going to be dragged down by the slumping domestic economy.''
Companies that reported higher revenue because the falling U.S. currency boosted overseas sales may lose that source of growth, said Charles Bobrinskoy, who helps manage about $13 billion as vice chairman of Ariel Investments in Chicago.
3M Declines
3M fell 1.9 percent on April 24 even after the St. Paul, Minnesota-based maker of 50,000 products from Scotch-brand tape to electronic signs posted better-than-estimated first-quarter sales. The shares have since extended their 2008 decline to 19 percent as analysts said currency translations inflated revenue.
``People are worried that a lot of that growth has come from the weakening dollar and that foreign exchange profits have improved earnings,'' said Bobrinskoy, whose Ariel Focus Fund is beating 85 percent of its rivals this year. ``At some point you've got to have real earnings growth.''
GE, which has businesses ranging from jet engines to turbines for power plants, lost 25 percent this year. Abhijit Chakrabortti, Morgan Stanley's global equity strategist in New York, called the Fairfield, Connecticut-based company a ``top pick'' in a Jan. 6 note to clients.
Cisco, the San Jose, California-based maker of computer- networking equipment that gets about half its revenue from abroad, slumped 19 percent. UBS's David Bianco said in a December report that Cisco's overseas sales put the shares in a ``sweet spot.'' He predicted the S&P 500 would climb to a record 1,700. Bianco has since cut his year-end target to over 1,600.
Nifty Fifty
The term Nifty Fifty was used in the early 1970s to describe a group of the largest U.S. companies, including Anheuser-Busch Cos. and Eastman Kodak Co., that purportedly guaranteed profits for investors who bought and held the shares.
The ``New Nifty Fifty'' was created in 1995 by Thomas McManus, a former investment strategist at Bank of America Corp. and Wall Street's best stock forecaster in 2007, when he worked at Morgan Stanley. Formally the Morgan Stanley Multinational Index, McManus used the term to reflect U.S. companies that didn't depend on any one country for their growth.
The index beat the S&P 500 in 2006 and 2007 and has posted declines in just three years since it was created.
``Opinion follows prices,'' said Aronstein. ``People get carried away looking at the immediate past.''
To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Michael Patterson in New York at mpatterson10@bloomberg.net.
Read more...
U.K. Stocks Climb; Alliance & Leicester, ITV Rally on Bid Talk
By Sarah Jones
July 14 (Bloomberg) -- U.K. stocks rallied, boosted by bid hopes, after Alliance & Leicester Plc said it is in takeover talks and on speculation Endemol NV may make an offer for ITV Plc.
Alliance & Leicester surged by a record 48 percent as people with knowledge of the matter said Spain's Banco Santander SA is in discussions to buy the lender. ITV jumped the most in more than 2 years after the Financial Times reported Endemol has not ruled out an offer for the U.K.'s biggest commercial television broadcaster. Shares of Petrofac Ltd. advanced after the oil and gas services provider won a $3.88 billion contract in Algeria.
The FTSE 100 Index gained 90.2, or 1.7 percent, to 5,351.8 in London at 9:49 a.m. as all but five stocks rose. The benchmark has fallen 22 percent since a June 2007 high, the common definition of a bear market, amid global credit losses and the worst U.K. housing slump in 30 years.
The FTSE All-Share Index added 1.8 percent. Ireland's ISEQ Index increased 3.6 percent. Indexes also climbed after the U.S. government said it would support Fannie Mae and Freddie Mac of the U.S. to shore up confidence in the financial markets.
Alliance & Leicester soared 48 percent to 324.75 pence after the mortgage lender said it is in ``advanced'' talks about a 1.3 billion-pound ($2.6 billion) takeover bid.
Two people with knowledge of the matter said Santander, Spain's biggest bank, is in discussions to acquire the U.K. mortgage lender.
``Alliance & Leicester confirms that it is at an advanced stage of discussions regarding a possible offer at an offer price of 299 pence a share,'' the bank said.
Barclays Plc, the U.K.'s fourth-biggest bank, increased 3.9 percent to 278.25 pence. HBOS Plc, Britain's biggest mortgage lender, advanced 2.6 percent to 273.5.
ITV Jumps
ITV leapt 8.4 percent to 41.5 pence, the steepest advance since March 2006. Endemol co-founder John de Mol said he wouldn't exclude making a bid for the British broadcaster, the FT reported. The newspaper cited an interview with de Mol.
Separately, Morgan Stanley upgraded ITV shares to ``equal- weight'' from ``underweight,'' citing valuations.
The company ``trades at its lowest multiple of the last 10 years on depressed earnings assumptions,'' London-based analyst Patrick Wellington wrote in a note to investors. ``We think recent underperformance has gone far enough.''
Petrofac climbed 3.4 percent to 671.5 pence after the U.K.- based oil and gas services provider and its Indonesian partner IKPT won a 241 billion-dinar ($3.88 billion) contract to build a liquefied natural gas facility in Algeria.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Emerald Energy Plc (EEN LN) advanced 15 pence, or 4.5 percent, to 346 after the U.K. oil explorer operating in Colombia and the Middle East said first-half profit tripled to $12.4 million as energy prices advanced.
Imperial Energy Plc (IEC LN) soared 174 pence, or 23 percent, to 950 after the Times of India reported Oil & Natural Gas Corp. is planning to buy a stake in the oil and gas explorer with operations in Siberia.
Imperial confirmed it has ``received an approach which may or may not lead to an offer being made for the company,'' the company said. The statement didn't name the possible buyer.
Johnson Matthey Plc (JMAT LN) gained 53 pence, or 3.2 percent, to 1,670 after UBS AG upgraded the metals refiner and auto catalyst maker to ``neutral'' from ``sell.''
National Express Group Plc (NEX LN) rallied 39 pence, or 4 percent, to 1,004 after JPMorgan Chase & Co. upgraded the long- distance coach operator to ``overweight'' from ``neutral.''
Wolseley Plc (WOS LN) added 8.5 pence, or 2.9 percent, to 305.5. The company plans to cut hundreds of jobs after a decline in the U.K. and U.S. housing markets, the Sunday Telegraph reported, without saying where it got the information.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
Read more...
July 14 (Bloomberg) -- U.K. stocks rallied, boosted by bid hopes, after Alliance & Leicester Plc said it is in takeover talks and on speculation Endemol NV may make an offer for ITV Plc.
Alliance & Leicester surged by a record 48 percent as people with knowledge of the matter said Spain's Banco Santander SA is in discussions to buy the lender. ITV jumped the most in more than 2 years after the Financial Times reported Endemol has not ruled out an offer for the U.K.'s biggest commercial television broadcaster. Shares of Petrofac Ltd. advanced after the oil and gas services provider won a $3.88 billion contract in Algeria.
The FTSE 100 Index gained 90.2, or 1.7 percent, to 5,351.8 in London at 9:49 a.m. as all but five stocks rose. The benchmark has fallen 22 percent since a June 2007 high, the common definition of a bear market, amid global credit losses and the worst U.K. housing slump in 30 years.
The FTSE All-Share Index added 1.8 percent. Ireland's ISEQ Index increased 3.6 percent. Indexes also climbed after the U.S. government said it would support Fannie Mae and Freddie Mac of the U.S. to shore up confidence in the financial markets.
Alliance & Leicester soared 48 percent to 324.75 pence after the mortgage lender said it is in ``advanced'' talks about a 1.3 billion-pound ($2.6 billion) takeover bid.
Two people with knowledge of the matter said Santander, Spain's biggest bank, is in discussions to acquire the U.K. mortgage lender.
``Alliance & Leicester confirms that it is at an advanced stage of discussions regarding a possible offer at an offer price of 299 pence a share,'' the bank said.
Barclays Plc, the U.K.'s fourth-biggest bank, increased 3.9 percent to 278.25 pence. HBOS Plc, Britain's biggest mortgage lender, advanced 2.6 percent to 273.5.
ITV Jumps
ITV leapt 8.4 percent to 41.5 pence, the steepest advance since March 2006. Endemol co-founder John de Mol said he wouldn't exclude making a bid for the British broadcaster, the FT reported. The newspaper cited an interview with de Mol.
Separately, Morgan Stanley upgraded ITV shares to ``equal- weight'' from ``underweight,'' citing valuations.
The company ``trades at its lowest multiple of the last 10 years on depressed earnings assumptions,'' London-based analyst Patrick Wellington wrote in a note to investors. ``We think recent underperformance has gone far enough.''
Petrofac climbed 3.4 percent to 671.5 pence after the U.K.- based oil and gas services provider and its Indonesian partner IKPT won a 241 billion-dinar ($3.88 billion) contract to build a liquefied natural gas facility in Algeria.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Emerald Energy Plc (EEN LN) advanced 15 pence, or 4.5 percent, to 346 after the U.K. oil explorer operating in Colombia and the Middle East said first-half profit tripled to $12.4 million as energy prices advanced.
Imperial Energy Plc (IEC LN) soared 174 pence, or 23 percent, to 950 after the Times of India reported Oil & Natural Gas Corp. is planning to buy a stake in the oil and gas explorer with operations in Siberia.
Imperial confirmed it has ``received an approach which may or may not lead to an offer being made for the company,'' the company said. The statement didn't name the possible buyer.
Johnson Matthey Plc (JMAT LN) gained 53 pence, or 3.2 percent, to 1,670 after UBS AG upgraded the metals refiner and auto catalyst maker to ``neutral'' from ``sell.''
National Express Group Plc (NEX LN) rallied 39 pence, or 4 percent, to 1,004 after JPMorgan Chase & Co. upgraded the long- distance coach operator to ``overweight'' from ``neutral.''
Wolseley Plc (WOS LN) added 8.5 pence, or 2.9 percent, to 305.5. The company plans to cut hundreds of jobs after a decline in the U.K. and U.S. housing markets, the Sunday Telegraph reported, without saying where it got the information.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
Read more...
European Stocks, U.S. Futures Climb; A&L, Freddie Mac Advance
By Sarah Thompson
July 14 (Bloomberg) -- European stocks and U.S. index futures rose after the U.S. government put its support behind Fannie Mae and Freddie Mac and takeovers increased. Asian shares declined.
Alliance & Leicester Plc surged 49 percent after Banco Santander SA agreed to buy the U.K. bank, while InBev NV and Anheuser-Busch Cos. climbed on plans for the Belgian company to pay $52 billion for the brewer of Budweiser. Continental AG, Europe's second-biggest tiremaker, jumped on talks with Schaeffler Group. Fannie Mae and Freddie Mac gained more than 11 percent in Germany.
Europe's Dow Jones Stoxx 600 Index advanced 1.5 percent to 274.31 at 11:19 a.m. in London, while futures on the Standard & Poor's 500 Index rose 1 percent. The Stoxx 600 last week closed at its cheapest relative to earnings in at least six years as record oil prices hurt automakers and airlines and concern deepened Fannie Mae and Freddie Mac were short of capital.
``Attractive valuations have become hard to resist,'' said Peter Jarvis, a London-based director of European equities at F&C Asset Management, which has about $200 billion. ``The corporate sector clearly believes assets are now at the wrong price. The fact that recent high-profile deals are being done with cash adds further weight to the argument.''
More than $11 trillion has been erased from global equities this year as rising oil prices, accelerating inflation and more than $400 billion in credit-related losses threatened to push the U.S. into recession and stifle profit growth.
Three-Year Low
The Stoxx 600 closed last week at a three-year low. The index is valued at 10.8 times profit.
The S&P 500, the benchmark for American equities, and the MSCI World Index slumped last week into a so-called bear market, or a decline of 20 percent from a recent peak. Among the 23 industrialized nations in the MSCI World, only Canada has averted such a sell-off.
``The market washed down good and bad assets rather indiscriminately,'' said Bernhard Maeder, a portfolio manager at Credit Suisse Asset Management in Zurich. ``The market is not expensive.''
The MSCI Asia Pacific Index decreased 1 percent.
Lehman Brothers Holdings Inc., once the biggest U.S. underwriter of mortgage bonds, gained in Germany. TNT NV rallied on a report it's in preliminary talks with FedEx Corp., while ITV Plc gained after Endemol NV's co-founder John de Mol said he wouldn't exclude making a bid for broadcaster.
Alliance & Leicester added 108.5 pence to 327.75 pence. Spain's biggest bank said it agreed to acquire the beleaguered U.K. mortgage lender for 1.26 billion pounds ($2.6 billion).
Santander fell 0.3 percent to 11.20 euros.
Mergers
Mergers have slumped worldwide from last year's record pace as banks curtail lending for deals following the collapse of the U.S. subprime-mortgage market. Takeovers have fallen to $1.63 trillion so far this year from $2.60 trillion a year earlier, data compiled by Bloomberg show. Mergers reached $4.1 trillion last year.
InBev gained 1.1 percent to 45 euros. The $70-a-share transaction ends a month of court fights and public denunciations as InBev tried to acquire the St. Louis-based beermaker in a hostile takeover. Leuven, Belgium-based InBev sweetened its initial offer by 7.7 percent and agreed to rename itself Anheuser-Busch InBev, the brewers said.
Anheuser-Busch gained $1.72 to $68.22 in Germany.
Continental advanced 24 percent to 66.87 euros. The company said it discussed a ``possible engagement'' by ball-bearing maker Schaeffler.
``One brief conversation'' took place between the two companies at the end of last week, Hanover, Germany-based Continental said today. ``As soon as Schaeffler Group has substantiated its plans, the management board of Continental AG will evaluate these and communicate its views in due course.''
Freddie, Fannie
Freddie Mac rose 90 cents to $8.65 in German trading. The company is scheduled to sell $3 billion in short-term notes today. Fannie Mae added $1.25 to $11.50.
Paulson asked Congress for authority to buy unlimited stakes in and lend to the companies that buy or finance almost half of the $12 trillion of U.S. mortgages. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
``What they have done is probably quite helpful,'' said Roger Nightingale, global strategist at Pointon York Ltd. in London, which manages about $1.5 billion. ``It is a great deal better than it otherwise would have been.''
The steps would bring the U.S. closer to giving an explicit guarantee for the debt sold by the shareholder-owned, federally chartered companies. That reflects a need for the government to bail out an economy that's been rocked by the worst housing recession in 25 years, the credit crisis, and soaring energy costs.
Lehman, TNT
Lehman gained 50 cents, or 3.5 percent, to $14.93 in Germany.
TNT climbed 25 percent to 23.14 euros. Rising fuel costs and an economic decline revived merger discussion between FedEx and TNT, the FT said July 12, without citing anyone. Pieter Schaffels, a spokesman for TNT, and Jess Bunn of FedEx both declined to comment when contacted by telephone and e-mail.
A buyout ``makes sense,'' said Philip Scholte, an analyst at Rabo Securities in Amsterdam. ``You just link the two networks together.''
ITV rallied 8.9 percent to 41.7 pence. Endemol's co-founder John de Mol said he wouldn't exclude making a bid for U.K. commercial television broadcaster ITV, the Financial Times reported, citing an interview with de Mol. Separately, Morgan Stanley raised its recommendation on ITV to ``equal-weight'' from ``underweight.''
Norsk Hydro ASA, the world's fourth-largest aluminum producer, slumped by the most on record in Oslo trading as rising costs hurt second-quarter profit. The shares declined 13 percent to 65.5 euros.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Read more...
July 14 (Bloomberg) -- European stocks and U.S. index futures rose after the U.S. government put its support behind Fannie Mae and Freddie Mac and takeovers increased. Asian shares declined.
Alliance & Leicester Plc surged 49 percent after Banco Santander SA agreed to buy the U.K. bank, while InBev NV and Anheuser-Busch Cos. climbed on plans for the Belgian company to pay $52 billion for the brewer of Budweiser. Continental AG, Europe's second-biggest tiremaker, jumped on talks with Schaeffler Group. Fannie Mae and Freddie Mac gained more than 11 percent in Germany.
Europe's Dow Jones Stoxx 600 Index advanced 1.5 percent to 274.31 at 11:19 a.m. in London, while futures on the Standard & Poor's 500 Index rose 1 percent. The Stoxx 600 last week closed at its cheapest relative to earnings in at least six years as record oil prices hurt automakers and airlines and concern deepened Fannie Mae and Freddie Mac were short of capital.
``Attractive valuations have become hard to resist,'' said Peter Jarvis, a London-based director of European equities at F&C Asset Management, which has about $200 billion. ``The corporate sector clearly believes assets are now at the wrong price. The fact that recent high-profile deals are being done with cash adds further weight to the argument.''
More than $11 trillion has been erased from global equities this year as rising oil prices, accelerating inflation and more than $400 billion in credit-related losses threatened to push the U.S. into recession and stifle profit growth.
Three-Year Low
The Stoxx 600 closed last week at a three-year low. The index is valued at 10.8 times profit.
The S&P 500, the benchmark for American equities, and the MSCI World Index slumped last week into a so-called bear market, or a decline of 20 percent from a recent peak. Among the 23 industrialized nations in the MSCI World, only Canada has averted such a sell-off.
``The market washed down good and bad assets rather indiscriminately,'' said Bernhard Maeder, a portfolio manager at Credit Suisse Asset Management in Zurich. ``The market is not expensive.''
The MSCI Asia Pacific Index decreased 1 percent.
Lehman Brothers Holdings Inc., once the biggest U.S. underwriter of mortgage bonds, gained in Germany. TNT NV rallied on a report it's in preliminary talks with FedEx Corp., while ITV Plc gained after Endemol NV's co-founder John de Mol said he wouldn't exclude making a bid for broadcaster.
Alliance & Leicester added 108.5 pence to 327.75 pence. Spain's biggest bank said it agreed to acquire the beleaguered U.K. mortgage lender for 1.26 billion pounds ($2.6 billion).
Santander fell 0.3 percent to 11.20 euros.
Mergers
Mergers have slumped worldwide from last year's record pace as banks curtail lending for deals following the collapse of the U.S. subprime-mortgage market. Takeovers have fallen to $1.63 trillion so far this year from $2.60 trillion a year earlier, data compiled by Bloomberg show. Mergers reached $4.1 trillion last year.
InBev gained 1.1 percent to 45 euros. The $70-a-share transaction ends a month of court fights and public denunciations as InBev tried to acquire the St. Louis-based beermaker in a hostile takeover. Leuven, Belgium-based InBev sweetened its initial offer by 7.7 percent and agreed to rename itself Anheuser-Busch InBev, the brewers said.
Anheuser-Busch gained $1.72 to $68.22 in Germany.
Continental advanced 24 percent to 66.87 euros. The company said it discussed a ``possible engagement'' by ball-bearing maker Schaeffler.
``One brief conversation'' took place between the two companies at the end of last week, Hanover, Germany-based Continental said today. ``As soon as Schaeffler Group has substantiated its plans, the management board of Continental AG will evaluate these and communicate its views in due course.''
Freddie, Fannie
Freddie Mac rose 90 cents to $8.65 in German trading. The company is scheduled to sell $3 billion in short-term notes today. Fannie Mae added $1.25 to $11.50.
Paulson asked Congress for authority to buy unlimited stakes in and lend to the companies that buy or finance almost half of the $12 trillion of U.S. mortgages. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
``What they have done is probably quite helpful,'' said Roger Nightingale, global strategist at Pointon York Ltd. in London, which manages about $1.5 billion. ``It is a great deal better than it otherwise would have been.''
The steps would bring the U.S. closer to giving an explicit guarantee for the debt sold by the shareholder-owned, federally chartered companies. That reflects a need for the government to bail out an economy that's been rocked by the worst housing recession in 25 years, the credit crisis, and soaring energy costs.
Lehman, TNT
Lehman gained 50 cents, or 3.5 percent, to $14.93 in Germany.
TNT climbed 25 percent to 23.14 euros. Rising fuel costs and an economic decline revived merger discussion between FedEx and TNT, the FT said July 12, without citing anyone. Pieter Schaffels, a spokesman for TNT, and Jess Bunn of FedEx both declined to comment when contacted by telephone and e-mail.
A buyout ``makes sense,'' said Philip Scholte, an analyst at Rabo Securities in Amsterdam. ``You just link the two networks together.''
ITV rallied 8.9 percent to 41.7 pence. Endemol's co-founder John de Mol said he wouldn't exclude making a bid for U.K. commercial television broadcaster ITV, the Financial Times reported, citing an interview with de Mol. Separately, Morgan Stanley raised its recommendation on ITV to ``equal-weight'' from ``underweight.''
Norsk Hydro ASA, the world's fourth-largest aluminum producer, slumped by the most on record in Oslo trading as rising costs hurt second-quarter profit. The shares declined 13 percent to 65.5 euros.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
Read more...
Johannesburg Stock Exchange's System Fails Due to Network Error
By Garth Theunissen
July 14 (Bloomberg) -- A network problem at the Johannesburg stock exchange is preventing the dissemination of data, including the Stock Exchange News Service, or SENS, according to the operator JSE Ltd.
``No data is currently being disseminated,'' Peshen Reddy, a JSE customer support official, said today in an interview from Johannesburg. ``A problem with our network is preventing data from going out and that includes all updates and SENS.''
The exchange, Africa's largest, couldn't say when the problem will be resolved, Reddy said.
There is currently no trading taking place on the exchange.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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July 14 (Bloomberg) -- A network problem at the Johannesburg stock exchange is preventing the dissemination of data, including the Stock Exchange News Service, or SENS, according to the operator JSE Ltd.
``No data is currently being disseminated,'' Peshen Reddy, a JSE customer support official, said today in an interview from Johannesburg. ``A problem with our network is preventing data from going out and that includes all updates and SENS.''
The exchange, Africa's largest, couldn't say when the problem will be resolved, Reddy said.
There is currently no trading taking place on the exchange.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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Forex Technical Analytics
Daily Forex Technicals | Written by FOREX Ltd | Jul 14 08 09:55 GMT |
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CHF
The pre-planned breakout variant for sells has been realized with attainment of minimal assumed target. OsMA trend indicator having marked the progress of bearish activity preserves the priority of attendant planning for today. Hence and because of ascending direction of indicator chart with the feature of strengthening of bullish counteraction, we assume a possibility of pair return to resistance range 1.0220/40, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For sells on condition of formation of topping signals the targets will be 1.0160/80, 1.0100/20 and/or further breakout variant up to 1.0040/60, 1.0000/20. An alternative for buyers will be above 1.0260 with the targets 1.0300/20, 1.0340/60.
GBP
The pre-planned breakout variant for buyers has been realized with overlap of minimal assumed target. OsMA trend indicator having marked the high level of buyers' activity gives grounds to choose bullish planning priorities for today but after a period of completion of rate correction by the relative strengthening of bearish counteraction. Hence we assume a possibility of pair return to supports 1.9790/1.9810, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.9860/80, 1.9940/60, 2.0000/20 and/or further breakout variant up to 2.0060/80, 2.0100/20. An alternative for sells will be below 1.9700 with the targets 1.9640/60, 1.9580/1.9600.
JPY
The pre-planned breakout variant for sells has been realized with attainment of assumed targets. OsMA trend indicator having marked the considerable rise of bearish activity gives grounds to change planning priorities in favor of sells. Hence and because of bullish character of indicator chart, we assume a possibility of pair return to the nearest resistance range 106.65/75, where it is recommended to evaluate the activity development according to the charts of shorter time intervals. For sells on condition of formation of topping signals the targets will be 106.10/30, 105.60/70 and/or further breakout variant up to 105.00/20, 104.40/60. An alternative for buyers will be above 107.20 with the targets 107.60/80, 108.00/20.
EUR
The pre-planned breakout variant for buyers has been realized with overlap of assumed targets. OsMA trend indicator having marked the relative rise of bullish activity gives grounds to preserve buyers' planning priorities for today but after completion of rate correction period for which the key support will be the nearest levels of channel line '1' at 1.5850/70, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.5920/40, 1.5980/1.6000 and/or further breakout variant above 1.6020 with the targets 1.6060/80, 1.6100/20. An alternative for sells will be below 1.5800 with the targets 1.5740/60, 1.5700/20.
FOREX Ltd
www.forexltd.co.uk
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Currency Technical Report
Daily Forex Technicals | Written by FX Greece | Jul 14 08 10:12 GMT |
EUR/USD
Resistance :1,5925/ 1,5950-55/ 1,5975/ 1,6020/ 1,6050/ 1,6080
Support : 1,5675-80/ 1,5635/ 1,5580/ 1,5525
Comment: After oil reaching new all time highs, and market's fears that US banking sector may collapse due to Freddie Mac's and Fannie Mae's liquidity problems, euro rallied during Friday's US Session, within a panic environment.
The way and the time that the move was formed may have had this purpose; to cause panic and hit stops set above the technical resistance of 1.5900-10. Let's not forget that stops above 1.5900 protect sell positions, so they are buy orders. Probably buy positions close to all time highs were important for 'some people', and if this is the reason for Friday's extensive move, it will be confirmed in the near future.
First support level for today is found at 1.5850-60, followed by 1.5780-00 and 1.5825-35 will be an interim support. A move below 1.5850 will give the first signs that Friday's move was extensive on purpose, while below 1.5825-30, we will have many reversal signs.If the decline that started in Asia's session does not breach the area of 1.5850-60 and bulls lead euro above 1.5930, a sideways consolidation may be formed and lead us back to previous tops.
Bears may appear in the first resistance level at 1.5950-70, followed by the area of 1.6020 and 1.6050.
A clear break of the last one would indicate that bulls dominate and 1.6500-6700 scenarios will be back in the game. The area of 1,6130 is the first target, followed by 1.6250. We will now see the week's start and the market's intentions...
TRADING EUR/USD
SWING TRADING : The upward break of 1,5835 led us to a reduction in the positions that were opened again at 1.5910 and 1.5950-70 area, according to our basic scenario. We keep our stops above 1.6080 area. If resistance levels are breached and the move reaches new tops, we will change our view completely ...
INTRADAY TRADING : Sell positions for the short term could be tried at the retracements of 1.5940-60, with stops above yesterday's tops. The area of 1.6050-60 could give this opportunity...
Buy positions could be tried at 1.5825-35 and 1.5795-00, with stops below 1.5780.
Support that would be difficult to be breached today should be at 1.5760 and 1.5700-10 area...
GBP/USD
Resistance :1,9850/ 1,9880/ 1,9900-10/ 1,9950
Support : 1,9810/ 1,9790-00/ 1,9750/ 1,9690
Comment : The pound profited from market's panic and rose until the area of 1,9960-70. Resistance at 1.9850 and 1.9900 were easily breached but bulls were not able to keep their positions above these levels.
This reaction seems extensive on purpose to take advantage of the panic and hit stops.
First important support for today is found at 1.9790-9810, followed by the area of 1.9750-70. Below those levels a reversal would be confirmed and a retracement to 1.9650-00 is possible.
If support at 1.9830 holds and move continues above 1.9880, the area of 1.9920-30 may be tested again.
Next resistance is found at 1,9980-00. The area of 2,0000 is a strong resistance and will be not easily breached...
TRADING GBP/USD
SWING TRADING: Friday's upward move closed open positions at the opening price (1,9830-50), according to our scenario. We will use retracements towards 1,9930-50 and 1,9990-2,0020 for new sell positions, with stops above 2,0060. Our target will be at 1,9730-20.
INTRADAY TRADING : Sell positions could be tried at 1,9920-30 (stop 1,9970, target 1,9870). Quick sell positions could be tried at 1.9700-10 area...
Buy opportunities would emerge at 1.9790-9810 (target 1,9850 and stop 1,9770).
The area of 1.9700-10 is offered for quick buy positions...
USD/JPY
USD/CHF
FX Greece
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EUR/USD
Resistance :1,5925/ 1,5950-55/ 1,5975/ 1,6020/ 1,6050/ 1,6080
Support : 1,5675-80/ 1,5635/ 1,5580/ 1,5525
Comment: After oil reaching new all time highs, and market's fears that US banking sector may collapse due to Freddie Mac's and Fannie Mae's liquidity problems, euro rallied during Friday's US Session, within a panic environment.
The way and the time that the move was formed may have had this purpose; to cause panic and hit stops set above the technical resistance of 1.5900-10. Let's not forget that stops above 1.5900 protect sell positions, so they are buy orders. Probably buy positions close to all time highs were important for 'some people', and if this is the reason for Friday's extensive move, it will be confirmed in the near future.
First support level for today is found at 1.5850-60, followed by 1.5780-00 and 1.5825-35 will be an interim support. A move below 1.5850 will give the first signs that Friday's move was extensive on purpose, while below 1.5825-30, we will have many reversal signs.If the decline that started in Asia's session does not breach the area of 1.5850-60 and bulls lead euro above 1.5930, a sideways consolidation may be formed and lead us back to previous tops.
Bears may appear in the first resistance level at 1.5950-70, followed by the area of 1.6020 and 1.6050.
A clear break of the last one would indicate that bulls dominate and 1.6500-6700 scenarios will be back in the game. The area of 1,6130 is the first target, followed by 1.6250. We will now see the week's start and the market's intentions...
TRADING EUR/USD
SWING TRADING : The upward break of 1,5835 led us to a reduction in the positions that were opened again at 1.5910 and 1.5950-70 area, according to our basic scenario. We keep our stops above 1.6080 area. If resistance levels are breached and the move reaches new tops, we will change our view completely ...
INTRADAY TRADING : Sell positions for the short term could be tried at the retracements of 1.5940-60, with stops above yesterday's tops. The area of 1.6050-60 could give this opportunity...
Buy positions could be tried at 1.5825-35 and 1.5795-00, with stops below 1.5780.
Support that would be difficult to be breached today should be at 1.5760 and 1.5700-10 area...
GBP/USD
Resistance :1,9850/ 1,9880/ 1,9900-10/ 1,9950
Support : 1,9810/ 1,9790-00/ 1,9750/ 1,9690
Comment : The pound profited from market's panic and rose until the area of 1,9960-70. Resistance at 1.9850 and 1.9900 were easily breached but bulls were not able to keep their positions above these levels.
This reaction seems extensive on purpose to take advantage of the panic and hit stops.
First important support for today is found at 1.9790-9810, followed by the area of 1.9750-70. Below those levels a reversal would be confirmed and a retracement to 1.9650-00 is possible.
If support at 1.9830 holds and move continues above 1.9880, the area of 1.9920-30 may be tested again.
Next resistance is found at 1,9980-00. The area of 2,0000 is a strong resistance and will be not easily breached...
TRADING GBP/USD
SWING TRADING: Friday's upward move closed open positions at the opening price (1,9830-50), according to our scenario. We will use retracements towards 1,9930-50 and 1,9990-2,0020 for new sell positions, with stops above 2,0060. Our target will be at 1,9730-20.
INTRADAY TRADING : Sell positions could be tried at 1,9920-30 (stop 1,9970, target 1,9870). Quick sell positions could be tried at 1.9700-10 area...
Buy opportunities would emerge at 1.9790-9810 (target 1,9850 and stop 1,9770).
The area of 1.9700-10 is offered for quick buy positions...
USD/JPY
USD/CHF
FX Greece
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European Market Update
Daily Forex Fundamentals | Written by Trade The News | Jul 14 08 09:53 GMT |
UK PPI Continues its Ascent
ECONOMIC DATA
UK June PPI Input: M/M 2.1% v 2.6%e || Prior revised form 3.8% to 3.9% |||| Y/Y 30.3% v 29.0% || Prior revised form 27.9% to 28.7%
UK June PPI Output: M/M 0.9% v 1.2%e || Prior revised from 1.6% to 1.9% |||| Y/Y 10.0% v 9.9%e || Prior revised from 8.9% to 9.3%
UK June PPI Output Core: M/M 0.3% v 0.8%e || Prior revised from 1.2% to 1.4% |||| Y/Y 6.4% v 6.5%e || Prior revised from 5.9% to 6.1%
EU May Industrial Production: M/M -1.9% v -2.3%e || Prior revised from 0.9% to 1.0% |||| Y/Y -0.6% v 0.3%e |||| Prior revised from 3.9% to 4.0%e
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
InBev [INB.BE] and Anheuser-Busch (BUD) formally agreed to merge overnight. InBev will acquire Anheuser for $700/share in a deal valued at $52B. The combined company will be called Anheuser-Busch InBev. The combination will yield cost synergies of at least $1.5 billion annually by 2011 phased in equally over three years. The transaction will be financed with $45 billion in debt, including a $7 billion bridge financing for divestitures of non-core assets from both companies. In addition, InBev has received commitments for up to $9.8 billion in equity bridge financing which will allow the company flexibility in deciding upon the timing and form of equity financing for a period of up to six months after closing. Alliance & Leicester [AL.UK] confirmed overnight that they are in advanced talks on a takeover offer with total value of 317p/share. The company noted that the offer would be 299p/share pus an 18p/share dividend. There is no certainty that offer will be made. The offer represents an 44.5% premium to Friday's closing price NorskHydro [NHY.NO] guided Q2 EBIT at NOK1.6B overnight, well below the NOK2.25B estimate. The company expects a decline in EBIT due to higher aluminum prices and related commodities prices. BAA [FER.SP] commented on successful talks with bondholders, announcing that it plans to exchange $9.6B in bonds for new secured instruments as part of refi plan. Imperial Energy [IEC.UK] confirmed the receipt of an approach overnight, noting that the approach may or may not lead to an offer. The news follows a report in the Times of India noting that India's ONGC was seeking to acquire a stake in the company. Continental [CON.GE] confirmed overnight the receipt of an approach from Schaeffler Group. The Financial Times had reported overnight that company discussed a possible merger. The newspaper article speculated that a possible deal could be worth over €10B.
In the newspapers overnight the Financial Times noted that Endemol's [END.NV] co-founder, John de Mol, refused to rule out a bid for ITV [ITV.UK] The Financial Times wrote overnight that RBS [RBS.UK] does not plan to sell its 5% stake in Bank of China [3988.HK], which is worth $4.7B. According to the Telegraph Wolseley [WOS.UK] may seek to cut hundreds of jobs. The Telegraph reported overnight that the FSA is poised to broker a takeover of Bradford and Bingley [BB.UK] once the company completes it capital raise. According to the Times Scottish & Southern [SSE.UK] is mulling a bid for Ireland's Energia. The Telegraph wrote overnight that SkyePharma [SKP.UK] is in talks regarding a debt for equity swap agreement. The plans reportedly involves around £89M in bonds. The Times wrote overnight that, according to analysts, over $100B of aircraft orders could be cancelled or delayed over the next couple of years due to high fuel prices and the condition of the airline industry. Some analysts believe that 20-30% of the $530B order backlog of Boeing (BA) and Airbus [EAD.FR] could be at risk.
In energy related news overnight the Times reported overnight that that President Bush told the government of Israel that he may be prepared to approve a future military strike on Iranian nuclear facilities if negotiations fail. The report cited a senior pentagon official. Iran's OPEC Governor said overnight that oil shipments from the whole gulf region would be at risk if Iran faces a threat. The OPEC governor reiterated that he sees no need for OPEC to boost production at Sept meeting.
In new supply overnight Italy sold €3.0B in 4.25% 2013 bonds with an average yield of 3.90% and a bid-to-cover of 1.39x, as well as €1.5B in 4.75% 2023 bonds with an average yield of 5.24%, and a bid-to-cover of 1.50x. The Wall Street Journal reported overnight that the Treasury will discuss giving credit lines to Fannie Mae (FNM) and Freddie Mac (FRE). The Treasury may also indicate that it will acquire equity capital in both Government Sponsored Enterprises. The Treasury is also expected to reaffirm that it has no plan to takeover either companies. The Financial Times noted overnight that the SEC is in talks with various US banks regarding plans to aid liquidity in the auction-rate market. The SEC has been in contract with Citigroup (C), Merrill (MER), and Morgan Stanley (MS).
The USD was modestly firmer during the European session aided by the US Treasury's Paulson's weekend commitment to back GSEs. Dealers were also attributing USD strength to M&A related flows after InBev and Bud agreed to merge in a $52B transaction. The EUR/USD is around 1.5860, lower by 45 pips from opening levels in Asia. The JPY was modestly softer after the government lowered its view on business sentiment in its monthly report adding that the Japanese economy was at a standstill with some weakness evident. The EUR/JPY tested all-time highs in Asia for the second straight session. Price action in the cross is shrugging off dealer chatter from Friday of potential intervention being ripe in this pair. The GBP was mixed following June PPI data. The GBP/USD is around 1.9840, off by 15 pips from opening levels in Asia. The EUR/GBP is straddling the 0.80 level throughout the session.
On the speaker front the Bank of England's Barker said in an interview with the Financial Times overnight that the BOE's worst mistake would be losing control of CPI. Barker noted that the BOE must not keep rates high for too long. Barker noted that Q2 retail sales may have some life, and added that a fall in UK house prices 'probably very sharp'.
NOTES
The session was rather quiet overnight, however the press was dead on with merger/offer speculation in Europe overnight. While InBev's acquisition of Anheuser Busch was the only official merger announced overnight many bids were confirmed, while others remain pure speculation. On the data front the PPI input in the US rose to its highest y/y level since records began in January of 1975. Similarly, PPI output was the highest since March of 1982, in line with last month's new high as producers attempt to pass on the effect of rising energy prices. In the Euro-Zone May industrial production declined to its lowest m/m level since December of 1992, while the y/y reading was the lowest since September of 2003. Analysts have attributed the decline to waning demand in the face of perpetuated Euro strength.
Trade The News Staff
Trade The News, Inc.
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UK PPI Continues its Ascent
ECONOMIC DATA
UK June PPI Input: M/M 2.1% v 2.6%e || Prior revised form 3.8% to 3.9% |||| Y/Y 30.3% v 29.0% || Prior revised form 27.9% to 28.7%
UK June PPI Output: M/M 0.9% v 1.2%e || Prior revised from 1.6% to 1.9% |||| Y/Y 10.0% v 9.9%e || Prior revised from 8.9% to 9.3%
UK June PPI Output Core: M/M 0.3% v 0.8%e || Prior revised from 1.2% to 1.4% |||| Y/Y 6.4% v 6.5%e || Prior revised from 5.9% to 6.1%
EU May Industrial Production: M/M -1.9% v -2.3%e || Prior revised from 0.9% to 1.0% |||| Y/Y -0.6% v 0.3%e |||| Prior revised from 3.9% to 4.0%e
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
InBev [INB.BE] and Anheuser-Busch (BUD) formally agreed to merge overnight. InBev will acquire Anheuser for $700/share in a deal valued at $52B. The combined company will be called Anheuser-Busch InBev. The combination will yield cost synergies of at least $1.5 billion annually by 2011 phased in equally over three years. The transaction will be financed with $45 billion in debt, including a $7 billion bridge financing for divestitures of non-core assets from both companies. In addition, InBev has received commitments for up to $9.8 billion in equity bridge financing which will allow the company flexibility in deciding upon the timing and form of equity financing for a period of up to six months after closing. Alliance & Leicester [AL.UK] confirmed overnight that they are in advanced talks on a takeover offer with total value of 317p/share. The company noted that the offer would be 299p/share pus an 18p/share dividend. There is no certainty that offer will be made. The offer represents an 44.5% premium to Friday's closing price NorskHydro [NHY.NO] guided Q2 EBIT at NOK1.6B overnight, well below the NOK2.25B estimate. The company expects a decline in EBIT due to higher aluminum prices and related commodities prices. BAA [FER.SP] commented on successful talks with bondholders, announcing that it plans to exchange $9.6B in bonds for new secured instruments as part of refi plan. Imperial Energy [IEC.UK] confirmed the receipt of an approach overnight, noting that the approach may or may not lead to an offer. The news follows a report in the Times of India noting that India's ONGC was seeking to acquire a stake in the company. Continental [CON.GE] confirmed overnight the receipt of an approach from Schaeffler Group. The Financial Times had reported overnight that company discussed a possible merger. The newspaper article speculated that a possible deal could be worth over €10B.
In the newspapers overnight the Financial Times noted that Endemol's [END.NV] co-founder, John de Mol, refused to rule out a bid for ITV [ITV.UK] The Financial Times wrote overnight that RBS [RBS.UK] does not plan to sell its 5% stake in Bank of China [3988.HK], which is worth $4.7B. According to the Telegraph Wolseley [WOS.UK] may seek to cut hundreds of jobs. The Telegraph reported overnight that the FSA is poised to broker a takeover of Bradford and Bingley [BB.UK] once the company completes it capital raise. According to the Times Scottish & Southern [SSE.UK] is mulling a bid for Ireland's Energia. The Telegraph wrote overnight that SkyePharma [SKP.UK] is in talks regarding a debt for equity swap agreement. The plans reportedly involves around £89M in bonds. The Times wrote overnight that, according to analysts, over $100B of aircraft orders could be cancelled or delayed over the next couple of years due to high fuel prices and the condition of the airline industry. Some analysts believe that 20-30% of the $530B order backlog of Boeing (BA) and Airbus [EAD.FR] could be at risk.
In energy related news overnight the Times reported overnight that that President Bush told the government of Israel that he may be prepared to approve a future military strike on Iranian nuclear facilities if negotiations fail. The report cited a senior pentagon official. Iran's OPEC Governor said overnight that oil shipments from the whole gulf region would be at risk if Iran faces a threat. The OPEC governor reiterated that he sees no need for OPEC to boost production at Sept meeting.
In new supply overnight Italy sold €3.0B in 4.25% 2013 bonds with an average yield of 3.90% and a bid-to-cover of 1.39x, as well as €1.5B in 4.75% 2023 bonds with an average yield of 5.24%, and a bid-to-cover of 1.50x. The Wall Street Journal reported overnight that the Treasury will discuss giving credit lines to Fannie Mae (FNM) and Freddie Mac (FRE). The Treasury may also indicate that it will acquire equity capital in both Government Sponsored Enterprises. The Treasury is also expected to reaffirm that it has no plan to takeover either companies. The Financial Times noted overnight that the SEC is in talks with various US banks regarding plans to aid liquidity in the auction-rate market. The SEC has been in contract with Citigroup (C), Merrill (MER), and Morgan Stanley (MS).
The USD was modestly firmer during the European session aided by the US Treasury's Paulson's weekend commitment to back GSEs. Dealers were also attributing USD strength to M&A related flows after InBev and Bud agreed to merge in a $52B transaction. The EUR/USD is around 1.5860, lower by 45 pips from opening levels in Asia. The JPY was modestly softer after the government lowered its view on business sentiment in its monthly report adding that the Japanese economy was at a standstill with some weakness evident. The EUR/JPY tested all-time highs in Asia for the second straight session. Price action in the cross is shrugging off dealer chatter from Friday of potential intervention being ripe in this pair. The GBP was mixed following June PPI data. The GBP/USD is around 1.9840, off by 15 pips from opening levels in Asia. The EUR/GBP is straddling the 0.80 level throughout the session.
On the speaker front the Bank of England's Barker said in an interview with the Financial Times overnight that the BOE's worst mistake would be losing control of CPI. Barker noted that the BOE must not keep rates high for too long. Barker noted that Q2 retail sales may have some life, and added that a fall in UK house prices 'probably very sharp'.
NOTES
The session was rather quiet overnight, however the press was dead on with merger/offer speculation in Europe overnight. While InBev's acquisition of Anheuser Busch was the only official merger announced overnight many bids were confirmed, while others remain pure speculation. On the data front the PPI input in the US rose to its highest y/y level since records began in January of 1975. Similarly, PPI output was the highest since March of 1982, in line with last month's new high as producers attempt to pass on the effect of rising energy prices. In the Euro-Zone May industrial production declined to its lowest m/m level since December of 1992, while the y/y reading was the lowest since September of 2003. Analysts have attributed the decline to waning demand in the face of perpetuated Euro strength.
Trade The News Staff
Trade The News, Inc.
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U.K. Factory Gate Prices Rise At Fastest Pace in 22 Years
Daily Forex Fundamentals | Written by DailyFX | Jul 14 08 09:22 GMT |
U.K. Prices at the factory gate in June rose 10% from 9.3% the month prior, which was the fastest pace since 1986. Manufacturers are passing on the increased costs of oil and raw materials to consumers, which should keep inflation above the BoE's 3% threshold for the remainder of the year. Core prices rose 6.4% from 6.1%, showing that the effects of increasing energy costs are filtering through to other sectors. Rising prices are making it prohibitive for the central bank to lower interest rates in order to stave off a recession. The country is in the midst of the worst housing slump in at least a decade and by some measures the great depression. However, as Governor King has to write letters explaining the breach of the inflation threshold to Chancellor Darling he will be reluctant to continue the MPC's recent easing policy. The only good news for the committee was that the pace of input prices slowed to 2.1% from 3.9% the month prior, which may signal that prices may ease in the future.
DailyFX
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U.K. Prices at the factory gate in June rose 10% from 9.3% the month prior, which was the fastest pace since 1986. Manufacturers are passing on the increased costs of oil and raw materials to consumers, which should keep inflation above the BoE's 3% threshold for the remainder of the year. Core prices rose 6.4% from 6.1%, showing that the effects of increasing energy costs are filtering through to other sectors. Rising prices are making it prohibitive for the central bank to lower interest rates in order to stave off a recession. The country is in the midst of the worst housing slump in at least a decade and by some measures the great depression. However, as Governor King has to write letters explaining the breach of the inflation threshold to Chancellor Darling he will be reluctant to continue the MPC's recent easing policy. The only good news for the committee was that the pace of input prices slowed to 2.1% from 3.9% the month prior, which may signal that prices may ease in the future.
DailyFX
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Today's Key Points
Daily Forex Fundamentals | Written by Danske Bank | Jul 14 08 08:03 GMT |
Danske Daily
* US treasury Secretary Paulson yesterday announced a new plan to support the GSEs. This should be supportive for the auction of short-term notes expected to be issued today by Freddie Mac, scheduled to sell USD 3bn in short-term notes.
* Mixed session in the Asian stock market where most indices are following the negative trend from the US market with modest losses. However, Nikkei is up 0.7%
* Dollar is still trading on the weak side, but rebounds modestly in Asian trade.
* Key events today - EUR industrial production data
Markets Overnight
Freddie Mac is likely to find buyers for USD 3bn of notes that it plans to sell after US Treasury Secretary Paulson announced steps to help shore up the beleaguered mortgage finance company. Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
Freddie Mac tumbled 47% in the New York Stock Exchange composite trading last week and Washingtonbased Fannie Mae lost 45% of its value, forcing Treasury Secretary Paulson to issue a statement of support last week, and now he has come up with a plan to recapitalise both GSEs. Fannie Mae and Freddie Mac are critical for the housing market because they guarantee almost half the USD 12 trillion in outstanding US mortgages.
These problems together with higher energy costs have led to a general decline in US equity prices, where American stocks fell for a sixth week. S&P500 declined some 1.1% on Friday and has lost 16% since the beginning of the year. However, the VIX vol continues to increase and rose to a three-month high. Energy costs continue to rise as the crude oil futures rose to a record USD 147.27 a barrel on speculation that Israel may attack Iran, leading to disruption in Persian Gulf petroleum shipments.
The Asian stock markets have followed the negative sentiment in the US market with modest losses in most major indices. However, Nikkei is up 0.7% this morning led by steelmakers as one South Korean steel producer posted record profits. In the world of beer, InBev is buying AnheuserBusch for some USD 49.9bn.
The bond market reacted negatively to the statements from President George W. Bush, Treasury Secretary Henry Paulson, and Senate Banking Committee Chairman Christopher Dodd damped talk of a US takeover of the two largest mortgage finance companies. 2Y yields ended up 19bp, while 10Y yields ended up 16bp on Friday.
The dollar has been under pressure against other major currencies, but got some relief from the government support to the GSEs this morning. EUR/USD and USD/JPY is trading at 159 and 106.5 this morning. No major movements in Scandinavian currencies against the Euro this morning. EUR/NOK has stabilised at the 805-level, while EUR/SEK is trading at the 946-level.
Global Daily
An otherwise busy week begins with a light agenda. At 11:00 CET today's only major data release is due; Euroland industrial production data for May. In line with consensus we look for a steep 2.3% m/m decline, which will serve to confirm the deteriorating state of the Euroland economy.
Later this week, the market will have plenty of important events to guide its direction. In the US, Bernanke will deliver his semi-annual monetary policy testimony (Humphrey Hawkins) to the Congress Tuesday and Wednesday afternoon. The Minutes of the June 24-25 FOMC meeting is due Wednesday night. The economic calendar will be dominated by US PPI and retail sales on Tuesday, CPI on Wednesday and building permits/ housing starts on Thursday. Only major release out of Euroland is the ZEW indicator, which is published Tuesday. In Japan and Canada central banks will announce rate decisions on Tuesday.
On top of a heavy loaded calendar, markets should remain focused on last week's nasty cocktail; the evolving drama surrounding the GSEs, new highs for the oil price, and a strengthening bear market sentiment, which has driven US equity markets to fresh lows.
Given the significance of the events due later this week, we expect bond markets to be in a wait-and-see mode today. If anything the sentiment should be governed by the news flow from commodity markets, the GSE story and equity market sentiment.
Danske Bank
http://www.danskebank.com/danskeresearch
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Danske Daily
* US treasury Secretary Paulson yesterday announced a new plan to support the GSEs. This should be supportive for the auction of short-term notes expected to be issued today by Freddie Mac, scheduled to sell USD 3bn in short-term notes.
* Mixed session in the Asian stock market where most indices are following the negative trend from the US market with modest losses. However, Nikkei is up 0.7%
* Dollar is still trading on the weak side, but rebounds modestly in Asian trade.
* Key events today - EUR industrial production data
Markets Overnight
Freddie Mac is likely to find buyers for USD 3bn of notes that it plans to sell after US Treasury Secretary Paulson announced steps to help shore up the beleaguered mortgage finance company. Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank.
Freddie Mac tumbled 47% in the New York Stock Exchange composite trading last week and Washingtonbased Fannie Mae lost 45% of its value, forcing Treasury Secretary Paulson to issue a statement of support last week, and now he has come up with a plan to recapitalise both GSEs. Fannie Mae and Freddie Mac are critical for the housing market because they guarantee almost half the USD 12 trillion in outstanding US mortgages.
These problems together with higher energy costs have led to a general decline in US equity prices, where American stocks fell for a sixth week. S&P500 declined some 1.1% on Friday and has lost 16% since the beginning of the year. However, the VIX vol continues to increase and rose to a three-month high. Energy costs continue to rise as the crude oil futures rose to a record USD 147.27 a barrel on speculation that Israel may attack Iran, leading to disruption in Persian Gulf petroleum shipments.
The Asian stock markets have followed the negative sentiment in the US market with modest losses in most major indices. However, Nikkei is up 0.7% this morning led by steelmakers as one South Korean steel producer posted record profits. In the world of beer, InBev is buying AnheuserBusch for some USD 49.9bn.
The bond market reacted negatively to the statements from President George W. Bush, Treasury Secretary Henry Paulson, and Senate Banking Committee Chairman Christopher Dodd damped talk of a US takeover of the two largest mortgage finance companies. 2Y yields ended up 19bp, while 10Y yields ended up 16bp on Friday.
The dollar has been under pressure against other major currencies, but got some relief from the government support to the GSEs this morning. EUR/USD and USD/JPY is trading at 159 and 106.5 this morning. No major movements in Scandinavian currencies against the Euro this morning. EUR/NOK has stabilised at the 805-level, while EUR/SEK is trading at the 946-level.
Global Daily
An otherwise busy week begins with a light agenda. At 11:00 CET today's only major data release is due; Euroland industrial production data for May. In line with consensus we look for a steep 2.3% m/m decline, which will serve to confirm the deteriorating state of the Euroland economy.
Later this week, the market will have plenty of important events to guide its direction. In the US, Bernanke will deliver his semi-annual monetary policy testimony (Humphrey Hawkins) to the Congress Tuesday and Wednesday afternoon. The Minutes of the June 24-25 FOMC meeting is due Wednesday night. The economic calendar will be dominated by US PPI and retail sales on Tuesday, CPI on Wednesday and building permits/ housing starts on Thursday. Only major release out of Euroland is the ZEW indicator, which is published Tuesday. In Japan and Canada central banks will announce rate decisions on Tuesday.
On top of a heavy loaded calendar, markets should remain focused on last week's nasty cocktail; the evolving drama surrounding the GSEs, new highs for the oil price, and a strengthening bear market sentiment, which has driven US equity markets to fresh lows.
Given the significance of the events due later this week, we expect bond markets to be in a wait-and-see mode today. If anything the sentiment should be governed by the news flow from commodity markets, the GSE story and equity market sentiment.
Danske Bank
http://www.danskebank.com/danskeresearch
Read more...
Daily Forex Analysis
Daily Forex Technicals | Written by FOREXYARD | Jul 14 08 08:43 GMT |
Headlines
Upcoming High Volatility For the USD This Week
Economic News
USD
During the previous week the dollar underwent a volatile session against its major currency rivals, which ended up with a sharp bearish momentum.
The USD began last week with some unfavorable news, as the Pending Home Sales index fell by 4.7% in May. However, a batch of subsequently positive data contributed to the Dollar's volatility. The U.S unemployment Claims dropped from 404K to 346K. The Trade Balance showed that the U.S deficit has fallen by 1.2% from -60.5B to -59.8B, and the Prelim University of Michigan Consumer Sentiment had slightly risen from 56.4 in June to 56.6 in early July, terminating 5 straight months of declines. However, on Friday, the unfortunate news regarding the stability of two U.S mortgage giants, Freddie Mac and Fannie Mae, had led to a sharp bearish trend for the USD. The news also connected these worries with the Fed's avoidance to raise Interest Rates until now, enhancing the bearish move.
The week ahead will deliver many financial indicators that forex traders cannot afford overlook. On Tuesday, U.S Retails Sales, Core Retail Sales and the Producer Price Index will be published; all of them are forecasted to show disturbing figures for the U.S economy. On Wednesday, a bundle of data is due. The U.S Consumer Price index is expected to preserve its current figures and the TIC Net Long-Term Transactions are expected to suffer a deep slide. This week, traders have an excellent opportunity to gain significant profits as it promises to be extremely intriguing week for the US dollar.
EUR
During last week's trading session the EUR saw rising trends against all its major currency counterparts as it has appreciated against the USD, the JPY and the GBP.
The EUR appreciated despite the fact that almost no market moving data was published from the Euro-zone during the previous week. The only significant financial indicators were the French Industrial Production, which went down by 2.6% in May from April, and the bulletin published by the European Central Bank (ECB) on Thursday. The ECB mentioned that the Euro-zone currency is supported by growing demand from oil-exporting countries, further raising its inflation. Therefore, the ECB Governing Council emphasizes that maintaining price stability in the medium term is its primary objective. According to the ECB, the current level of the European Interest Rate, 4.25%, is designed to achieve its medium-term price stability goal.
As for the week ahead, the European and the German ZEW Economic Sentiment will be published on Tuesday, and both are expected to deliver negative figures. On Wednesday the Consumer Price index is forecasted to remain intact. While on Friday, the German Producer Price Index is expected to slightly descend from 1.0% to 0.7%. If analysts' expectation on this week's data will be ratified, the EUR might depreciate, mainly vs. the USD, giving traders a great chance to profit by timing the market correctly.
JPY
The JPY saw mixed results last week, as it underwent volatile sessions against the USD and the GBP. The Japanese currency also depreciated vs. the EUR.
The JPY was mainly influenced by its counterpart currencies as relatively few financial indicators were published during the previous week from the Japanese markets. At the beginning of last week the Bank of Japan (BOJ) Governor Shirakawa delivered a speech, saying that Japan's economic growth is slowing, mainly due to the effects of high energy and material prices, emphasizing that falling trend was imminent. Later during the week, an extremely positive result of Core Machinery Orders had managed to bounce the JPY back. The survey rose by 10.4% in May, well above expectations of a 1.1% rise. Yet, if it wasn't the USD with its major downfall on Friday, the JPY could have ended last week with predominantly falling trends.
Looking ahead to this week, the Japanese Interest Rate will be the determined on the Overnight Call Rate. The announcement will be followed by the BOJ Monthly Report. Japan's Interest Rate is expected to remain at 0.5%, however any change that may occur will most likely generate turmoil in the market. Later on this week, the Tertiary Industry Activity Index is forecasted to show a 0.0% growth, after last month's positive results. On Thursday night, the BOJ Monetary Policy Meeting Minutes will take place, and should also contribute to the JPY's volatility. As further deterioration for the JPY is projected, traders should follow and analyze the economic calendar before entering the market.
Crude Oil
The stock markets may witness a sharp fall if the prices of Crude Oil will touch the psychological mark of $150 a barrel on the New York Mercantile Exchange. Crude hit a life-time high of $147.9 a barrel last Friday. The prices have jumped by more than $10 a barrel since July 9. Iran has threatened to cut Oil shipments through the Strait of Hormuz - through which 40% of the world's oil passes - if it is attacked by Isreal over its suspected nuclear weapons program. Meanwhile, a Brazilian oil workers union is planning a five-day strike. Oil also rose due to the weakening dollar, which bolstered the appeal of commodities as a hedge against the US currency's drop. The dollar declined to an all-time low against the euro on concerns that US government may be forced to take over mortgage lenders Fannie Mae and Freddie Mac.
Technical News
EUR/USD
The strong bullish momentum is calming and the pair is finding consolidation at 1.5900. The Slow Stochastic on the 4 hour chart is showing a bearish cross, which indicates that a corrective move might be quite imminent. Going short with tight stops might be a good decision today.
GBP/USD
On the hourly chart the pair consolidates around 1.9800 with the RSI now floating around the 50 level with no signs of a possible breach. On the daily chart the Cable continues to trade within quite a wide range, however the Bollinger Bands are getting tighter indicating that possible breach out of range might be imminent. By now, it would probably be recommended to stay out of this pair until a strong and distinctive signal will appear.
USD/JPY
The pair is showing local bullish momentum on the hourly level after a very violent drop to the 105.63 level. The daily chart is still bearish which means that it might be preferable to sell on highs today when the moderate corrective move ends.
USD/CHF
The moderate bearish price movement continues within the bearish channel which still has yet to be breached. The daily chart is showing a strong bearish cross, and the 4 hour chart is also joining to that notion with the Slow Stochastic pointing to the continuation of the bearish movement. Next testing point should be around 1.0135. Going short appears to be preferable today.
The Wild Card
Silver
The violent bullish trend continues as all technical indicators on the daily and the 4 hour charts are showing that the direction is up and the momentum is high. This provides forex forex traders with a great chance of enjoying the additional momentum still left for the commodity.
Read more...
Headlines
Upcoming High Volatility For the USD This Week
Economic News
USD
During the previous week the dollar underwent a volatile session against its major currency rivals, which ended up with a sharp bearish momentum.
The USD began last week with some unfavorable news, as the Pending Home Sales index fell by 4.7% in May. However, a batch of subsequently positive data contributed to the Dollar's volatility. The U.S unemployment Claims dropped from 404K to 346K. The Trade Balance showed that the U.S deficit has fallen by 1.2% from -60.5B to -59.8B, and the Prelim University of Michigan Consumer Sentiment had slightly risen from 56.4 in June to 56.6 in early July, terminating 5 straight months of declines. However, on Friday, the unfortunate news regarding the stability of two U.S mortgage giants, Freddie Mac and Fannie Mae, had led to a sharp bearish trend for the USD. The news also connected these worries with the Fed's avoidance to raise Interest Rates until now, enhancing the bearish move.
The week ahead will deliver many financial indicators that forex traders cannot afford overlook. On Tuesday, U.S Retails Sales, Core Retail Sales and the Producer Price Index will be published; all of them are forecasted to show disturbing figures for the U.S economy. On Wednesday, a bundle of data is due. The U.S Consumer Price index is expected to preserve its current figures and the TIC Net Long-Term Transactions are expected to suffer a deep slide. This week, traders have an excellent opportunity to gain significant profits as it promises to be extremely intriguing week for the US dollar.
EUR
During last week's trading session the EUR saw rising trends against all its major currency counterparts as it has appreciated against the USD, the JPY and the GBP.
The EUR appreciated despite the fact that almost no market moving data was published from the Euro-zone during the previous week. The only significant financial indicators were the French Industrial Production, which went down by 2.6% in May from April, and the bulletin published by the European Central Bank (ECB) on Thursday. The ECB mentioned that the Euro-zone currency is supported by growing demand from oil-exporting countries, further raising its inflation. Therefore, the ECB Governing Council emphasizes that maintaining price stability in the medium term is its primary objective. According to the ECB, the current level of the European Interest Rate, 4.25%, is designed to achieve its medium-term price stability goal.
As for the week ahead, the European and the German ZEW Economic Sentiment will be published on Tuesday, and both are expected to deliver negative figures. On Wednesday the Consumer Price index is forecasted to remain intact. While on Friday, the German Producer Price Index is expected to slightly descend from 1.0% to 0.7%. If analysts' expectation on this week's data will be ratified, the EUR might depreciate, mainly vs. the USD, giving traders a great chance to profit by timing the market correctly.
JPY
The JPY saw mixed results last week, as it underwent volatile sessions against the USD and the GBP. The Japanese currency also depreciated vs. the EUR.
The JPY was mainly influenced by its counterpart currencies as relatively few financial indicators were published during the previous week from the Japanese markets. At the beginning of last week the Bank of Japan (BOJ) Governor Shirakawa delivered a speech, saying that Japan's economic growth is slowing, mainly due to the effects of high energy and material prices, emphasizing that falling trend was imminent. Later during the week, an extremely positive result of Core Machinery Orders had managed to bounce the JPY back. The survey rose by 10.4% in May, well above expectations of a 1.1% rise. Yet, if it wasn't the USD with its major downfall on Friday, the JPY could have ended last week with predominantly falling trends.
Looking ahead to this week, the Japanese Interest Rate will be the determined on the Overnight Call Rate. The announcement will be followed by the BOJ Monthly Report. Japan's Interest Rate is expected to remain at 0.5%, however any change that may occur will most likely generate turmoil in the market. Later on this week, the Tertiary Industry Activity Index is forecasted to show a 0.0% growth, after last month's positive results. On Thursday night, the BOJ Monetary Policy Meeting Minutes will take place, and should also contribute to the JPY's volatility. As further deterioration for the JPY is projected, traders should follow and analyze the economic calendar before entering the market.
Crude Oil
The stock markets may witness a sharp fall if the prices of Crude Oil will touch the psychological mark of $150 a barrel on the New York Mercantile Exchange. Crude hit a life-time high of $147.9 a barrel last Friday. The prices have jumped by more than $10 a barrel since July 9. Iran has threatened to cut Oil shipments through the Strait of Hormuz - through which 40% of the world's oil passes - if it is attacked by Isreal over its suspected nuclear weapons program. Meanwhile, a Brazilian oil workers union is planning a five-day strike. Oil also rose due to the weakening dollar, which bolstered the appeal of commodities as a hedge against the US currency's drop. The dollar declined to an all-time low against the euro on concerns that US government may be forced to take over mortgage lenders Fannie Mae and Freddie Mac.
Technical News
EUR/USD
The strong bullish momentum is calming and the pair is finding consolidation at 1.5900. The Slow Stochastic on the 4 hour chart is showing a bearish cross, which indicates that a corrective move might be quite imminent. Going short with tight stops might be a good decision today.
GBP/USD
On the hourly chart the pair consolidates around 1.9800 with the RSI now floating around the 50 level with no signs of a possible breach. On the daily chart the Cable continues to trade within quite a wide range, however the Bollinger Bands are getting tighter indicating that possible breach out of range might be imminent. By now, it would probably be recommended to stay out of this pair until a strong and distinctive signal will appear.
USD/JPY
The pair is showing local bullish momentum on the hourly level after a very violent drop to the 105.63 level. The daily chart is still bearish which means that it might be preferable to sell on highs today when the moderate corrective move ends.
USD/CHF
The moderate bearish price movement continues within the bearish channel which still has yet to be breached. The daily chart is showing a strong bearish cross, and the 4 hour chart is also joining to that notion with the Slow Stochastic pointing to the continuation of the bearish movement. Next testing point should be around 1.0135. Going short appears to be preferable today.
The Wild Card
Silver
The violent bullish trend continues as all technical indicators on the daily and the 4 hour charts are showing that the direction is up and the momentum is high. This provides forex forex traders with a great chance of enjoying the additional momentum still left for the commodity.
Read more...
Paulson To The Resue
Daily Forex Fundamentals | Written by AC-Markets | Jul 14 08 08:37 GMT |
Market Brief
The Usd continued to come under significant selling pressure in Asian session as the bearish dollar sentiment carried over the weekend. EurUsd gapped at the open, quickly trading to 1.5971, however Gbp/Usd which rallied at the open was unable to sustain the upwards moment and traded lower from 1.9914 to 1.9823. Commodity currencies traded basically sideways with Aud/Usd jumping between 0.9670 to 0.9711 and Usd/Cad moving slightly upward from 1.0070 to 1.0118. Jpy fueled carry trades performed slightly better as the Jpy had a weak tone. Aud/Jpy trade up to 103.21 and Try/Jpy moved to 87.624.
In a massive move to restore the markets confidence in Fannie and Freddie Trsy Sec. Paulson said that the US Federal government would buy or finance almost half of the $12 trillion of U.S mortgages. Specifically Pauslon suggested he would ask the Fed to increase the line credit extended to the GSEs, seek Congressional approval to buy equity in the GSE's and expand the Feds role in defining the regulatory structure for the GSEs (specifically their future capital requirements). While the markets are still digesting the statement, a change of policy towards clear 'bailout' by the government should help the equity market and risk appetite intraday.
The BoJ began is two day monetary policy meeting today and are expect to hold rates at 0.50%.
New Zealand reported a dismal retail sales figure (m/m) at -1.2% vs. -0.1% exp. but grew Ex Autos 0.7% vs. 0.5% exp (likely lifted by food price inflation). Clearly higher energy cost, deteriorating economic expectations and weak labor market has wrecked consumer confidence and this downward trend doesn't seem to be ending near term. Today's poor growth figure will now place the emphasis on tomorrow CPI figure as a key factor to when the RBNZ begins cutting rates. Should the figure come in softer then the q/q 1.4% expected reading, we could see a decline unwinding of long NZD positions.
In a light calendar day markets will be watching UK Junes producer prices. It will be interesting to see if the decline in business activity has halted producer's ability to pass on their increased costs. But we don't with so especially given the fact that energy have continued to move up and have sustained these elevated levels of an extended period of time. It most likely that producers price increases are being pass to the consumer which the MPC won't be happy about
ACM FOREX
Read more...
Market Brief
The Usd continued to come under significant selling pressure in Asian session as the bearish dollar sentiment carried over the weekend. EurUsd gapped at the open, quickly trading to 1.5971, however Gbp/Usd which rallied at the open was unable to sustain the upwards moment and traded lower from 1.9914 to 1.9823. Commodity currencies traded basically sideways with Aud/Usd jumping between 0.9670 to 0.9711 and Usd/Cad moving slightly upward from 1.0070 to 1.0118. Jpy fueled carry trades performed slightly better as the Jpy had a weak tone. Aud/Jpy trade up to 103.21 and Try/Jpy moved to 87.624.
In a massive move to restore the markets confidence in Fannie and Freddie Trsy Sec. Paulson said that the US Federal government would buy or finance almost half of the $12 trillion of U.S mortgages. Specifically Pauslon suggested he would ask the Fed to increase the line credit extended to the GSEs, seek Congressional approval to buy equity in the GSE's and expand the Feds role in defining the regulatory structure for the GSEs (specifically their future capital requirements). While the markets are still digesting the statement, a change of policy towards clear 'bailout' by the government should help the equity market and risk appetite intraday.
The BoJ began is two day monetary policy meeting today and are expect to hold rates at 0.50%.
New Zealand reported a dismal retail sales figure (m/m) at -1.2% vs. -0.1% exp. but grew Ex Autos 0.7% vs. 0.5% exp (likely lifted by food price inflation). Clearly higher energy cost, deteriorating economic expectations and weak labor market has wrecked consumer confidence and this downward trend doesn't seem to be ending near term. Today's poor growth figure will now place the emphasis on tomorrow CPI figure as a key factor to when the RBNZ begins cutting rates. Should the figure come in softer then the q/q 1.4% expected reading, we could see a decline unwinding of long NZD positions.
In a light calendar day markets will be watching UK Junes producer prices. It will be interesting to see if the decline in business activity has halted producer's ability to pass on their increased costs. But we don't with so especially given the fact that energy have continued to move up and have sustained these elevated levels of an extended period of time. It most likely that producers price increases are being pass to the consumer which the MPC won't be happy about
ACM FOREX
Read more...
Daily FX Report
Daily Forex Technicals | Written by Varengold Bank | Jul 14 08 08:35 GMT |
Good morning from Hamburg. At the end of last week, large US mortgage lenders Fannie Mae and Freddie Mac shocked the equity markets, as well as the Forex market, with higher than expected losses. With upcoming US elections, it is a good opportunity for politicians to use it in their own election campaigns. This is very dangerous for the fight against the inflation. It is still unsure how the interest rates will move in the next month.
Markets review
The USD lost on Friday after the Fed and the US Treasury offered to help prop up the embattled mortgage lenders Fannie Mae and Freddie Mac. Traders covered short positions on Friday when worries about the stability of the two mortgage lending giants were seen as a major threat to financial markets, which would constrain the Fed's ability to raise the interest rates. As a result, the EUR reached a 2 ½ month high of 1.5970 against the USD. The AUD even broke a high from March of 1984, of 0.9717. The GBP tried to attack the magic 2 USD mark, but fell short at 1.9912.
In New Zealand, retail sales fell 1.2% in May, much worse than the forecasted 0.1% increase; however, excluding autos, sales were up 0.7%. The NZD lost 0.7% against the USD with a session low of 0.7560. Against the JPY, the NZD lost a whole 1.12% and closed last week at 80.88.
The Canadian trade surplus widened more than expected in May to 5.54 billion CAD, from a previous level of 5.43 billion CAD, as high energy prices helped lift exports, especially outside the predominant US market. The USD lost 1.1 % against the CAD on Friday, and closed at 1.0159.
Technical analysis
GBP/CAD
The GBP/CAD lost in the first half of the July and was supported at 1.99. That support line was maintained for all of June. If the pair increases, the first resistance level will be at 2.02 and the second at 2.04, 200 pips up. However, the turn is not safe, as the MACD is still aimed downward.
GBP/CHF
The GBP/CHF held itself to the support at 2.02, has been trying since end of June to break through it. The upper resistance line of the side channel at 2.06 was twice, once in May and once in June, and even broken once at the end of May. The MACD does not indicate any fast moves in the near future, so we have to see if support can anticipate a slide.
Pivot Points - Daily FX Support and Resistance Levels
Daily Calendar & Key FX Events
Varengold Bank
Read more...
Good morning from Hamburg. At the end of last week, large US mortgage lenders Fannie Mae and Freddie Mac shocked the equity markets, as well as the Forex market, with higher than expected losses. With upcoming US elections, it is a good opportunity for politicians to use it in their own election campaigns. This is very dangerous for the fight against the inflation. It is still unsure how the interest rates will move in the next month.
Markets review
The USD lost on Friday after the Fed and the US Treasury offered to help prop up the embattled mortgage lenders Fannie Mae and Freddie Mac. Traders covered short positions on Friday when worries about the stability of the two mortgage lending giants were seen as a major threat to financial markets, which would constrain the Fed's ability to raise the interest rates. As a result, the EUR reached a 2 ½ month high of 1.5970 against the USD. The AUD even broke a high from March of 1984, of 0.9717. The GBP tried to attack the magic 2 USD mark, but fell short at 1.9912.
In New Zealand, retail sales fell 1.2% in May, much worse than the forecasted 0.1% increase; however, excluding autos, sales were up 0.7%. The NZD lost 0.7% against the USD with a session low of 0.7560. Against the JPY, the NZD lost a whole 1.12% and closed last week at 80.88.
The Canadian trade surplus widened more than expected in May to 5.54 billion CAD, from a previous level of 5.43 billion CAD, as high energy prices helped lift exports, especially outside the predominant US market. The USD lost 1.1 % against the CAD on Friday, and closed at 1.0159.
Technical analysis
GBP/CAD
The GBP/CAD lost in the first half of the July and was supported at 1.99. That support line was maintained for all of June. If the pair increases, the first resistance level will be at 2.02 and the second at 2.04, 200 pips up. However, the turn is not safe, as the MACD is still aimed downward.
GBP/CHF
The GBP/CHF held itself to the support at 2.02, has been trying since end of June to break through it. The upper resistance line of the side channel at 2.06 was twice, once in May and once in June, and even broken once at the end of May. The MACD does not indicate any fast moves in the near future, so we have to see if support can anticipate a slide.
Pivot Points - Daily FX Support and Resistance Levels
Daily Calendar & Key FX Events
Varengold Bank
Read more...
Daily Report: Markets Stabilized by FNM/FRE Rescue Package
Market Overview | Written by ActionForex.com | Jul 14 08 07:12 GMT |
Markets are stabilized by US Treasury and Fed's rescue package to save Fannie Mae and Freddie Mac from further troubles and ensure both Government Sponsored Enterprises to continue to be key providers of mortgage credits in the US. Treasury Paulson asked Congress to inject capital into both GSEs trough investments and loans, including buying shares of both of them. Fed also announced it will provide liquidity by allowing effective access to the discount window. The Treasury will also ask that the Federal Reserve have a "consultative role" in setting future capital standards for the GSEs.
Dollar recovers mildly as the week starts on the news but reactions are so far mild. Asian stock markets also responded positively by opening higher but turned red again as the day goes. Markets will probably remain calm until US market opens to see the reactions from investors.
Other focus today include PPI inflation data from UK, which is expected to show input prices accelerated again from 27.6% yoy to 28.9% in Jun. Output price is also expected to climb from 8.9% yoy to 9.8% yoy. Core PPI is expected to be up from 5.9% yoy to 6.5%. Eurozone industrial production is expected to drop -2.3% mom in May, with yoy rate up 0.3%.
New Zealand retail sales released overnight dropped -1.2% mom in May, below expectation of -0.1%.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9599; (P) 0.9657; (R1) 0.9720; More
AUD/USD continues to consolidate below 25 years high of 0.9716 today. Further rally is still in favor but note that near term trend line resistance at 0.9721 which could limit upside initially. Though, as long as 0.9597 support holds, another rise is still expected towards next target of 1.0000 psychological resistance. Below 0.9597 will indicate that a short term top is possibly in place and put focus back to trendline support (now at 0.9466).
In the bigger picture, the whole rally from 0.8512 is still in progress. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity.
However, the upside momentum since making a low at 0.7675 is still far from being convincing, with bearish divergence conditions in daily MACD and RSI. A break below 0.9327 support will be the first alert that rise from 0.9512, as well as that from 0.7675 has completed. This will set the stage for deeper decline back into 0.7675, 0.8870 support zone, with key long term support of 0.8008 lying in between.
Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
22:45 NZD New Zealand Retail sales M/M May -1.20% -0.10% 1.00% 1.20%
8:30 GBP U.K. PPI core M/M Jun 0.80% 1.20%
8:30 GBP U.K. PPI core Y/Y Jun 6.50% 5.90%
8:30 GBP U.K. PPI input M/M Jun 2.50% 3.80%
8:30 GBP U.K. PPI input Y/Y Jun 28.90% 27.60%
8:30 GBP U.K. PPI output M/M Jun 1.20% 1.60%
8:30 GBP U.K. PPI output Y/Y Jun 9.80% 8.90%
9:00 EUR Eurozone Industrial prod'n M/M May -2.30% 0.90%
9:00 EUR Eurozone Industrial prod'n Y/Y May 0.30% 3.90%
14:00 USD Fed Governors Vote on Mortgage Rules in Open Meeting
Read more...
Markets are stabilized by US Treasury and Fed's rescue package to save Fannie Mae and Freddie Mac from further troubles and ensure both Government Sponsored Enterprises to continue to be key providers of mortgage credits in the US. Treasury Paulson asked Congress to inject capital into both GSEs trough investments and loans, including buying shares of both of them. Fed also announced it will provide liquidity by allowing effective access to the discount window. The Treasury will also ask that the Federal Reserve have a "consultative role" in setting future capital standards for the GSEs.
Dollar recovers mildly as the week starts on the news but reactions are so far mild. Asian stock markets also responded positively by opening higher but turned red again as the day goes. Markets will probably remain calm until US market opens to see the reactions from investors.
Other focus today include PPI inflation data from UK, which is expected to show input prices accelerated again from 27.6% yoy to 28.9% in Jun. Output price is also expected to climb from 8.9% yoy to 9.8% yoy. Core PPI is expected to be up from 5.9% yoy to 6.5%. Eurozone industrial production is expected to drop -2.3% mom in May, with yoy rate up 0.3%.
New Zealand retail sales released overnight dropped -1.2% mom in May, below expectation of -0.1%.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9599; (P) 0.9657; (R1) 0.9720; More
AUD/USD continues to consolidate below 25 years high of 0.9716 today. Further rally is still in favor but note that near term trend line resistance at 0.9721 which could limit upside initially. Though, as long as 0.9597 support holds, another rise is still expected towards next target of 1.0000 psychological resistance. Below 0.9597 will indicate that a short term top is possibly in place and put focus back to trendline support (now at 0.9466).
In the bigger picture, the whole rally from 0.8512 is still in progress. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity.
However, the upside momentum since making a low at 0.7675 is still far from being convincing, with bearish divergence conditions in daily MACD and RSI. A break below 0.9327 support will be the first alert that rise from 0.9512, as well as that from 0.7675 has completed. This will set the stage for deeper decline back into 0.7675, 0.8870 support zone, with key long term support of 0.8008 lying in between.
Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
22:45 NZD New Zealand Retail sales M/M May -1.20% -0.10% 1.00% 1.20%
8:30 GBP U.K. PPI core M/M Jun 0.80% 1.20%
8:30 GBP U.K. PPI core Y/Y Jun 6.50% 5.90%
8:30 GBP U.K. PPI input M/M Jun 2.50% 3.80%
8:30 GBP U.K. PPI input Y/Y Jun 28.90% 27.60%
8:30 GBP U.K. PPI output M/M Jun 1.20% 1.60%
8:30 GBP U.K. PPI output Y/Y Jun 9.80% 8.90%
9:00 EUR Eurozone Industrial prod'n M/M May -2.30% 0.90%
9:00 EUR Eurozone Industrial prod'n Y/Y May 0.30% 3.90%
14:00 USD Fed Governors Vote on Mortgage Rules in Open Meeting
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China's Currency Reserves Rise 36% to $1.81 Trillion
By Nipa Piboontanasawat
July 14 (Bloomberg) -- China's foreign-exchange reserves, the world's biggest, climbed to a record $1.81 trillion at the end of June as regulators failed to stem inflows of speculative capital from abroad.
Currency holdings rose 35.7 percent from a year earlier, the People's Bank of China said today on its Web site. The assets grew $126.6 billion from the end of March, after a $153.9 billion gain, the biggest on record, in the first quarter.
Chinese regulators are adding controls this month to limit ``hot money'' inflows from investors betting the yuan will keep appreciating after 25 straight monthly gains. The trade surplus, foreign direct investment and speculative capital have flooded the world's fourth-biggest economy with cash, threatening to stoke inflation that rose to a 12-year high in February.
``A huge amount of money is coming into China and betting on the Chinese currency,'' said Dwyfor Evans, an economist at State Street Global Markets in Hong Kong. ``This is creating an inflation impact and has become a big worry for policy makers.''
The yuan has climbed versus the U.S. dollar every month since May 2006. It rose today to the highest since a peg to the dollar was scrapped in 2005, trading at 6.8310 versus the dollar as of 12:17 p.m. in Shanghai.
Speculative inflows may have reached more than $200 billion in the first five months, according to Michael Pettis, a finance professor at Peking University. The trade surplus narrowed 12 percent to $99 billion in the first half from a year earlier, while foreign direct investment climbed 46 percent, pumping $52.4 billion into the financial system.
Limited Options
The extra cash is limiting policy makers' options. The central bank has kept interest rates unchanged this year, after six increases in 2007, on concern that higher rates would only attract more money from abroad. Instead, it has quickened the yuan's gains versus the dollar to double last year's pace and ordered banks to set aside a record 17.5 percent of deposits as reserves.
Money supply grew at a slower pace last month, the central bank said today. M2, the broadest measure, climbed 17.4 percent, compared with an 18.1 percent gain in May.
More increases in the reserve requirement are likely and the central bank will also keep selling bills to soak up cash, Wang Tao, a Beijing-based economist with UBS AG, said in a July 2 report predicting ``continued rapid accumulation of foreign- exchange reserves'' this year.
The State Administration of Foreign Exchange, China's currency regulator, said this month that it will inspect exporters' foreign-exchange settlements from today to try to prevent sham transactions letting speculative capital in.
China is also drafting regulations to control cross-border payments for services, with the same aim, according to an official at the regulator, who wouldn't be identified.
Besides inflows of money, the currency reserves are swelled by returns on investments and a U.S. dollar slump that increases the value of holdings in other currencies. The government set up last year an investment arm, China Investment Corp., to invest some of the money for bigger returns.
To contact the reporter on this story: Nipa Piboontanasawat in Basel at npiboontanas@bloomberg.net
Read more...
July 14 (Bloomberg) -- China's foreign-exchange reserves, the world's biggest, climbed to a record $1.81 trillion at the end of June as regulators failed to stem inflows of speculative capital from abroad.
Currency holdings rose 35.7 percent from a year earlier, the People's Bank of China said today on its Web site. The assets grew $126.6 billion from the end of March, after a $153.9 billion gain, the biggest on record, in the first quarter.
Chinese regulators are adding controls this month to limit ``hot money'' inflows from investors betting the yuan will keep appreciating after 25 straight monthly gains. The trade surplus, foreign direct investment and speculative capital have flooded the world's fourth-biggest economy with cash, threatening to stoke inflation that rose to a 12-year high in February.
``A huge amount of money is coming into China and betting on the Chinese currency,'' said Dwyfor Evans, an economist at State Street Global Markets in Hong Kong. ``This is creating an inflation impact and has become a big worry for policy makers.''
The yuan has climbed versus the U.S. dollar every month since May 2006. It rose today to the highest since a peg to the dollar was scrapped in 2005, trading at 6.8310 versus the dollar as of 12:17 p.m. in Shanghai.
Speculative inflows may have reached more than $200 billion in the first five months, according to Michael Pettis, a finance professor at Peking University. The trade surplus narrowed 12 percent to $99 billion in the first half from a year earlier, while foreign direct investment climbed 46 percent, pumping $52.4 billion into the financial system.
Limited Options
The extra cash is limiting policy makers' options. The central bank has kept interest rates unchanged this year, after six increases in 2007, on concern that higher rates would only attract more money from abroad. Instead, it has quickened the yuan's gains versus the dollar to double last year's pace and ordered banks to set aside a record 17.5 percent of deposits as reserves.
Money supply grew at a slower pace last month, the central bank said today. M2, the broadest measure, climbed 17.4 percent, compared with an 18.1 percent gain in May.
More increases in the reserve requirement are likely and the central bank will also keep selling bills to soak up cash, Wang Tao, a Beijing-based economist with UBS AG, said in a July 2 report predicting ``continued rapid accumulation of foreign- exchange reserves'' this year.
The State Administration of Foreign Exchange, China's currency regulator, said this month that it will inspect exporters' foreign-exchange settlements from today to try to prevent sham transactions letting speculative capital in.
China is also drafting regulations to control cross-border payments for services, with the same aim, according to an official at the regulator, who wouldn't be identified.
Besides inflows of money, the currency reserves are swelled by returns on investments and a U.S. dollar slump that increases the value of holdings in other currencies. The government set up last year an investment arm, China Investment Corp., to invest some of the money for bigger returns.
To contact the reporter on this story: Nipa Piboontanasawat in Basel at npiboontanas@bloomberg.net
Read more...
Oil Brings Americans Closer to OPEC Debtor Dependence
By Daniel Kruger
July 14 (Bloomberg) -- Petroleum exporting nations from Saudi Arabia to Russia are not only charging Americans record high prices for fuel, they are also poised to become the biggest creditor to the U.S. government.
Holdings of Treasuries by oil producers and institutions such as U.K. banks that are proxies for Middle East nations rose 44 percent this year to $510.8 billion through April, four times faster than the rest of the world, according to the Treasury Department's most recent data. At the current pace, they'll surpass Japan, which holds $592.2 billion, as the largest owner this month.
While the investment of so-called petrodollars into government debt is helping to temper a rise in borrowing costs as the U.S. finances a record budget deficit, it highlights America's dependence on foreign money. New York's Chrysler Building was bought last week by Middle East investors.
``We should be very happy that they're buying U.S. Treasuries because they're keeping interest rates low, and that's a positive for bond investors,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York. ``Whether there's geopolitical risk is something else.''
The benchmark 10-year note's yield fell 2 basis points, or 0.02 percentage point, to 3.96 percent last week, according to BGCantor Market Data. It touched 3.78 percent on July 10, the lowest since May 21. The price of the 3.875 percent security due in May 2018 rose 5/32, or $1.56 per $1,000 face amount, to 99 10/32. The yield climbed to 4.01 percent today as of 12:01 p.m. in Tokyo.
McKinsey Study
Yields on 10-year notes are 21 basis points lower because of the investment by oil-producing nations, New York-based consulting company McKinsey & Co. said in October, when oil was $86 a barrel. Prices touched a record $147.27 on July 11.
Assets held by oil exporters swelled to $4.6 trillion at the end of 2007, according to McKinsey. They're pouring that money into Treasuries as losses on alternatives such as equities and corporate debt mount amid the collapse of the U.S. subprime mortgage market. Merrill Lynch & Co. indexes show Treasuries have returned 2.5 percent this year, while major stock indexes in the U.S., Europe and Asia have tumbled at least 10 percent.
The Organization of Petroleum Exporting Countries held $153.9 billion in Treasuries at the end of April, Russia had $60.2 billion and Norway owned $45.3 billion, according to the Treasury Department. Combined, that represents a 113 percent increase from 12 months earlier.
Oil producers own a majority of the $251.4 billion in Treasuries held in the U.K., an 85 percent increase.
Surpassing China
Since the 1960s the U.K. has acted as a financial center where international investors purchase and hold securities, according to the Bank of International Settlements. Morgan Stanley's chief Treasury strategist, George Goncalves, estimates that only $50 billion of the U.K.'s Treasuries are owned by investors based in the country. The rest belong to investors primarily from OPEC and Russia, as well as China, he said.
The Treasury will release data on May holdings on July 16.
Oil-producing nations have surpassed China, which owns $502 billion of U.S. government debt, and are increasing their holdings as Japan cuts back. The nation reduced its stake in Treasuries by 3.6 percent the past 12 months.
The increase in oil-based economies is reminiscent of the 1980s, when Japan enjoyed an export-fueled boom.
Back to the '80s
Holdings of U.S. long-term securities by the Japanese surged almost sevenfold in the five years ended in 1989 to $180 billion as it reinvested its dollar-based reserves. Purchases of landmarks such as New York's Rockefeller Center and the Pebble Beach golf course in Pebble Beach, California, by the Japanese raised concern that the U.S.'s economic primacy was eroding.
Questions of whether purchases by foreigners are a threat to U.S. economic sovereignty are again being raised. The Chrysler Building was acquired last week by the Abu Dhabi Investment Council for an undisclosed price. Last month a Dubai fund was part of a group that paid $2.8 billion for the General Motors Building in Manhattan.
``It's a net transfer of wealth from the United States to the oil exporting economies on a very, very significant scale,'' said Brad Setser, an economist with the Council on Foreign Relations and former acting director of the Treasury's Office of International Monetary and Financial Policy. ``That is a reality. Anybody who is pursuing a policy with large deficits is implicitly planning on relying on demand from those countries.''
Transfer of Wealth
The United Arab Emirates had $964 billion in foreign assets at the end of 2007, followed by Russia with $811 billion, McKinsey said in a report last week. Soaring oil prices have also given Algeria, Iran, Libya, Nigeria and Venezuela more clout in foreign markets, McKinsey said.
Senators Barack Obama of Illinois and John McCain of Arizona, the presumptive presidential candidates for the Democratic and Republican parties, have taken positions on foreign oil wealth that may be difficult to reconcile with the U.S.'s need to attract $2 billion per day in foreign investment to fund its current-account deficit. The shortfall in the broadest measure of trade totals $653 billion.
``I am concerned if these sovereign wealth funds are motivated by more than just market considerations,'' Obama said in February. ``We are over time transferring wealth to those countries, and that's something I intend to stop as president.''
`Way of Life'
McCain told Germany's Sueddeutsche Zeitung newspaper the same month that Russia's membership in the Group of Eight leading industrial nations should be revoked and the G-8 should revert to a ``club of market-based democracies.'' In May he pledged to work in ``partnership'' with Russia on weapons proliferation.
Compromises may have to be made when it comes to purchase of Treasuries by oil exporters, said Michael Cheah, who manages $2 billion in bonds at AIG SunAmerica Asset Management in Jersey City, New Jersey.
Goldman Sachs Group Inc., BNP Paribas and Societe Generale SA say oil prices are heading higher because of increasing fuel consumption in emerging markets, regardless of a U.S. downturn.
As long as the U.S. continues to borrow and oil exporters continue to lend, Cheah said, ``this is a vindication of the American way of life.''
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
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