By Simone Meier
July 29 (Bloomberg) -- The inflation rate in Germany, Europe's largest economy, held at a 12-year high in July, led by surging costs for energy and package holidays.
Consumer prices rose 3.4 percent from a year earlier, the Federal Statistics Office said today. That matches the median expectation in a Bloomberg News survey of 23 economists' forecasts and is fastest pace since Germany started calculating inflation using a harmonized European Union method in 1996.
Faster inflation may deepen an economic slowdown by eroding the purchasing power of companies and households. German consumer confidence is already at the lowest in more than five years. Still, European Central Bank council member Klaus Liebscher said he sees room to raise borrowing costs further.
``The pipeline pressures for consumer prices remain high in the short term,'' said Alexander Koch, an economist at UniCredit Markets & Investment Banking in Munich in an e-mailed note. ``Assuming no further big moves in commodity prices, we expect the headline rate to move down only slightly in coming months.''
From June, harmonized consumer prices rose 0.6 percent. Under a national measure, prices rose 3.3 percent in the year and 0.6 percent from the previous month. Core inflation, which excludes heating oil and fuel costs, was at 2.2 percent.
Prices of package holidays increased 14 percent in the month and holiday apartments were 27 percent more expensive. Food prices increased around 0.3 percent from June.
ECB Rates
In the euro region, inflation probably accelerated to 4.1 percent on July 3, more than double the ECB's 2 percent limit, a Bloomberg survey shows. The European Union's statistics office in Luxembourg will release an initial estimate on July 31.
The ECB raised its key rate by 25 basis points to 4.25 percent on July 3 to fight so-called second-round effects, or consumers and companies seeking compensation for higher costs by pushing up salaries and prices. Liebscher said in an interview on July 24 he's ``very much concerned'' about inflation rates.
Borrowing costs are at ``a good level for the moment,'' said Liebscher, who is also head of Austria's central bank. ``We don't know what will happen next month or in two months' time. We haven't exhausted our room for maneuver.''
The ECB said last month it expects inflation to average about 3.4 percent this year and 2.4 percent in 2009. Euro-region growth may weaken to 1.5 percent next year from 1.8 percent.
Rising Wages
In Germany, the Ver.di labor union is staging strikes for a second day to seek 9.8 percent more pay for some 52,000 ground workers and flight crew at Deutsche Lufthansa AG. The Cologne, Germany-based carrier offered 6.7 percent more pay in two steps.
German negotiated wages rose 3.5 percent in the year through April 2008, exceeding inflation averaging 2.4 percent over that period, the statistics office said in a separate statement today. That's the biggest gain in 12 years.
Germany's unemployment rate probably held at 7.8 percent in July when adjusted for seasonal swings, a Bloomberg survey shows. That's the lowest since August 1992.
``High wage growth entails the risk that core inflation will pick up in the months ahead,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt, in an e-mailed note today. ``Particularly since it is easier to pass on higher input costs to consumers in a high-inflation environment.''
`Near A Peak'
With the economy cooling, companies may struggle to pass on higher costs. German business confidence fell more than economists expected in July. European manufacturing and service industries shrank this month.
Crude oil prices have declined 14 percent from a July 11 record of $147.27 a barrel, helping ease price pressures. European money-supply growth, which the ECB uses as a gauge of future inflation, slowed for a second month in June.
``With oil prices falling, the likelihood that German inflation is at or near a peak has risen,'' said Gareth Claase, an economist at Royal Bank of Scotland Group Plc in London in an e- mailed note. Still, ``our forecast remains for inflation to end the year only just under 3 percent.''
The statistics office is scheduled to release final inflation figures for July on Aug. 14.
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net.
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Tuesday, July 29, 2008
WTO Dispute Leaves Talks on Global Trade at Impasse
By Jennifer M. Freedman
July 29 (Bloomberg) -- World Trade Organization talks entered their ninth day as a standoff between India and China on one side and the U.S. on the other threatened to derail efforts to reach a global accord liberalizing commerce.
Progress in the Geneva negotiations ground to a halt yesterday as the U.S. accused the two nations of refusing to open their fast-growing markets to foreign competition and snubbing a compromise on agriculture and industrial goods. One of the main sticking points is the trigger for special safeguards, which would enable developing countries to raise agricultural tariffs to protect their farmers in case of a surge in imports.
WTO chief Pascal Lamy and trade ministers from seven governments, which together represent 80 percent of global commerce, resumed discussions today in a bid to resolve the impasse. Ministers from some three dozen key nations met earlier today and delegates from all 153 WTO members will meet informally later in the day.
``Many ministers'' have already left Geneva, said Samiha Fawzy, first assistant to Egypt's trade minister. ``This is not a good sign.''
There is ``a delicate balance that we achieved on Friday night, and I'm very concerned'' that the positions taken by China and India'' will jeopardize the outcome of this round,'' U.S. Trade Representative Susan Schwab said in Geneva yesterday. ``There's a real risk because those countries are advocating selectively reopening the package.''
New Proposal
India and China refuse to accept key elements of a compromise put forth by Lamy four days ago and refined by ministers over the weekend, according to the U.S. India never endorsed the proposal and China is now ``backtracking'' in its support, Schwab said.
Yesterday, India accepted a revised proposal by Lamy on the safeguard measures. The U.S. has yet to endorse the change.
Under Lamy's initial compromise, when imports of an agricultural product rise 40 percent, duties can be imposed -- a level India argued was too high to protect its farmers. The latest proposal removes the threshold and permits a developing nation to apply the measure to any farm imports if the product is shipped in quantities or at prices that cause ``demonstrable harm'' to a country's ``food security, livelihood security and rural development needs.''
China, the world's fourth-biggest economy, dismissed the U.S. criticism, saying concessions have been made that demonstrate its commitment to a global trade deal and willingness to compromise.
`Tried Very Hard'
``We have tried very hard to contribute to the success of the round,'' WTO Ambassador Sun Zhenyu said yesterday. It's U.S. rigidity in areas such as sensitive products and trade-distorting farm subsidies that is impeding the talks, he said.
Relations between developing nations have also deteriorated in the last week, Egypt's Fawzy said. Groupings such as the G-20 alliance of farm commodity-exporting countries have crumpled as governments focus on their own national interests, she said.
``Developing countries are not as homogenous as before,'' she said. ``The differences and the gaps between the different developing countries are huge. Each country is looking for its own national interests, not the collective interests of the group.''
Industrialized nations' negotiating strategy now is designed to protect domestic industries from Chinese exports, Fawzy said.
``It's not China that's going to lose, it's the other developing countries,'' she said.
To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net
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July 29 (Bloomberg) -- World Trade Organization talks entered their ninth day as a standoff between India and China on one side and the U.S. on the other threatened to derail efforts to reach a global accord liberalizing commerce.
Progress in the Geneva negotiations ground to a halt yesterday as the U.S. accused the two nations of refusing to open their fast-growing markets to foreign competition and snubbing a compromise on agriculture and industrial goods. One of the main sticking points is the trigger for special safeguards, which would enable developing countries to raise agricultural tariffs to protect their farmers in case of a surge in imports.
WTO chief Pascal Lamy and trade ministers from seven governments, which together represent 80 percent of global commerce, resumed discussions today in a bid to resolve the impasse. Ministers from some three dozen key nations met earlier today and delegates from all 153 WTO members will meet informally later in the day.
``Many ministers'' have already left Geneva, said Samiha Fawzy, first assistant to Egypt's trade minister. ``This is not a good sign.''
There is ``a delicate balance that we achieved on Friday night, and I'm very concerned'' that the positions taken by China and India'' will jeopardize the outcome of this round,'' U.S. Trade Representative Susan Schwab said in Geneva yesterday. ``There's a real risk because those countries are advocating selectively reopening the package.''
New Proposal
India and China refuse to accept key elements of a compromise put forth by Lamy four days ago and refined by ministers over the weekend, according to the U.S. India never endorsed the proposal and China is now ``backtracking'' in its support, Schwab said.
Yesterday, India accepted a revised proposal by Lamy on the safeguard measures. The U.S. has yet to endorse the change.
Under Lamy's initial compromise, when imports of an agricultural product rise 40 percent, duties can be imposed -- a level India argued was too high to protect its farmers. The latest proposal removes the threshold and permits a developing nation to apply the measure to any farm imports if the product is shipped in quantities or at prices that cause ``demonstrable harm'' to a country's ``food security, livelihood security and rural development needs.''
China, the world's fourth-biggest economy, dismissed the U.S. criticism, saying concessions have been made that demonstrate its commitment to a global trade deal and willingness to compromise.
`Tried Very Hard'
``We have tried very hard to contribute to the success of the round,'' WTO Ambassador Sun Zhenyu said yesterday. It's U.S. rigidity in areas such as sensitive products and trade-distorting farm subsidies that is impeding the talks, he said.
Relations between developing nations have also deteriorated in the last week, Egypt's Fawzy said. Groupings such as the G-20 alliance of farm commodity-exporting countries have crumpled as governments focus on their own national interests, she said.
``Developing countries are not as homogenous as before,'' she said. ``The differences and the gaps between the different developing countries are huge. Each country is looking for its own national interests, not the collective interests of the group.''
Industrialized nations' negotiating strategy now is designed to protect domestic industries from Chinese exports, Fawzy said.
``It's not China that's going to lose, it's the other developing countries,'' she said.
To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net
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Dollar Advances Versus Euro as U.S. Stocks Gain, Oil Declines
By Ye Xie and Kim-Mai Cutler
July 29 (Bloomberg) -- The dollar rose against the euro for the first time in three days as U.S. stocks increased and crude oil prices dropped, reducing concern the world's largest economy may fall into a recession.
``Equities are slightly up after yesterday's sharp sell- off,'' said Matthew Strauss, senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``The market started the day with a slightly positive tone. That's translating into broad dollar strength.''
The dollar increased 0.3 percent to $1.5689 per euro at 9:32 a.m. in New York, from $1.5741 yesterday. The U.S. currency appreciated 0.3 percent to 107.81 yen, from 107.46. The euro traded at 169.14 yen, compared with 169.17.
Sterling weakened 0.4 percent to $1.9853 after the Confederation of British Industry said its survey of 82 retailers showed 25 percent sold more goods than a year earlier and 61 percent sold fewer. The net rounded balance of minus 36 percentage points was the lowest since the survey began in 1983.
A gauge of French consumer sentiment dropped to minus 48 in July, the lowest level since the index was introduced in 1987, from minus 46 in June, according to Insee, the national statistics office in Paris.
``The euro-zone economy's outlook has really become more bleak,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``Ultimately, that means the upside for the euro-dollar is becoming more capped at the moment.'' Rabobank forecasts the euro will decline to $1.55 by year-end, Lambregts said.
ECB Rate Outlook
Traders reduced bets the ECB will raise its 4.25 percent main refinancing rate this year. The implied yield on the December Euribor futures contract dropped to 5.09 percent, from 5.12 percent yesterday.
China's yuan increased versus the dollar after central bank Governor Zhou Xiaochuan underscored policy ``continuity,'' spurring speculation China will let the currency rise further to stem inflation. The yuan rose 0.1 percent to 6.8256 per dollar.
The yen declined earlier against the dollar after government reports for June showed Japan's unemployment rate rose to the highest level in almost two years and household spending fell, adding to signs the economy's longest postwar expansion may be ending.
The Standard & Poor's 500 Index increased 0.4 percent after dropping 1.9 percent yesterday.
Crude oil for September delivery dropped as much as 1.2 percent to $123.25 a barrel. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.
U.S. home prices in the S&P/Case-Shiller index decreased 15.8 percent in May from a year earlier. The median forecast of 25 economists surveyed by Bloomberg News was for a drop of 16 percent.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net.
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July 29 (Bloomberg) -- The dollar rose against the euro for the first time in three days as U.S. stocks increased and crude oil prices dropped, reducing concern the world's largest economy may fall into a recession.
``Equities are slightly up after yesterday's sharp sell- off,'' said Matthew Strauss, senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``The market started the day with a slightly positive tone. That's translating into broad dollar strength.''
The dollar increased 0.3 percent to $1.5689 per euro at 9:32 a.m. in New York, from $1.5741 yesterday. The U.S. currency appreciated 0.3 percent to 107.81 yen, from 107.46. The euro traded at 169.14 yen, compared with 169.17.
Sterling weakened 0.4 percent to $1.9853 after the Confederation of British Industry said its survey of 82 retailers showed 25 percent sold more goods than a year earlier and 61 percent sold fewer. The net rounded balance of minus 36 percentage points was the lowest since the survey began in 1983.
A gauge of French consumer sentiment dropped to minus 48 in July, the lowest level since the index was introduced in 1987, from minus 46 in June, according to Insee, the national statistics office in Paris.
``The euro-zone economy's outlook has really become more bleak,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. ``Ultimately, that means the upside for the euro-dollar is becoming more capped at the moment.'' Rabobank forecasts the euro will decline to $1.55 by year-end, Lambregts said.
ECB Rate Outlook
Traders reduced bets the ECB will raise its 4.25 percent main refinancing rate this year. The implied yield on the December Euribor futures contract dropped to 5.09 percent, from 5.12 percent yesterday.
China's yuan increased versus the dollar after central bank Governor Zhou Xiaochuan underscored policy ``continuity,'' spurring speculation China will let the currency rise further to stem inflation. The yuan rose 0.1 percent to 6.8256 per dollar.
The yen declined earlier against the dollar after government reports for June showed Japan's unemployment rate rose to the highest level in almost two years and household spending fell, adding to signs the economy's longest postwar expansion may be ending.
The Standard & Poor's 500 Index increased 0.4 percent after dropping 1.9 percent yesterday.
Crude oil for September delivery dropped as much as 1.2 percent to $123.25 a barrel. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.
U.S. home prices in the S&P/Case-Shiller index decreased 15.8 percent in May from a year earlier. The median forecast of 25 economists surveyed by Bloomberg News was for a drop of 16 percent.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net.
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Pakistan Increases Key Rate to 13% to Slow Inflation
By Khalid Qayum and Farhan Sharif
July 29 (Bloomberg) -- Pakistan's central bank increased its benchmark interest rate for a third time this year to tame inflation running at the fastest pace in three decades.
The State Bank of Pakistan raised the discount rate at which it lends to commercial banks to 13 percent from 12 percent, Governor Shamshad Akhtar told reporters today in Karachi. The move was predicted by six of seven analysts in a Bloomberg News survey, with one expecting an increase of 150 basis points.
``Inflationary pressures are more alarming than ever before,'' Akhtar said while releasing the central bank's semi- annual monetary policy statement. ``Global crude and commodity prices have induced recessionary trends in global economies. Pakistan is no exception.''
Pakistan joins neighboring India in increasing rates today, as central banks across Asia grapple with soaring prices and slowing economic growth. Higher borrowing costs in Pakistan may further weaken South Asia's second-largest economy, where last year's growth of 5.8 percent was the weakest since 2003.
``The inflationary pressures are mainly caused by high food and oil prices so the increase in interest rates may not help in controlling inflation effectively,'' said Habib-ur-Rehman, who manages the equivalent of $83 million in stocks and bonds at Atlas Asset Management Co. in Karachi. ``But it will slow down the economy.''
Consumer prices in Pakistan jumped 21.53 percent in June from a year earlier, after gaining 19.27 percent in May. The central bank is aiming to keep average inflation at 12 percent in the fiscal year that started July 1, the same as the previous 12-month period.
Declining Stocks
Pakistan's stocks fell for a second day today on fears an increase in interest rates may hurt company profitability. The benchmark Karachi Stock Exchange 100 index dropped 1.2 percent to 10,448.19 at the 2:15 p.m. local time close.
Inflation may accelerate further after the government raised domestic fuel prices by as much as 15.2 percent on July 21, the sixth increase in five months, in line with global oil costs. Crude reached a record $147.27 a barrel on July 11.
The central bank unexpectedly increased the benchmark rate by 1.5 percentage points to 12 percent on May 23, also raising the cash reserve requirement for commercial lenders to 9 percent of deposits from 8 percent.
Central banks in Indonesia, Thailand and the Philippines have all increased interest rates in the past month. Neighboring India today raised its benchmark repurchase rate for a third time in less than two months to 9 percent.
`Totally Unsustainable'
Pakistan's inflation rate is also being stoked by government borrowings from the central bank, estimated at 9 percent of gross domestic product last fiscal year.
``Government borrowing is totally unsustainable,'' Akhtar said. ``It had never reached the level it has reached today.''
The central bank has advised the government to retire 21 billion rupees ($290 million) of debt every quarter this fiscal year, she said.
The budget deficit widened to 8.3 percent of GDP in the 12 months to June 30, the central bank said today. That's the highest since 1991 when it reached 8.8 percent, according to finance ministry web site.
Pakistan's first civilian government since a 1999 military coup says it wants to narrow the gap to 4.7 percent of GDP next fiscal year.
That target ``has already come under stress,'' Akhtar said, adding that the government has already borrowed 32.9 billion rupees from the central bank in the 25 days to July 25. ``The government tends to underestimate expenditures and overestimate revenue,'' she said.
Standard & Poor's and Moody's Investors Service in May lowered their ratings on Pakistan's foreign-currency debt, citing widening budget and current-account deficits and political instability.
To contact the reporters on this story: Khalid Qayum in Islamabad, Pakistan at kqayum@bloomberg.net. Farhan Sharif in Karachi, Pakistan at Fsharif2@bloomberg.net.
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July 29 (Bloomberg) -- Pakistan's central bank increased its benchmark interest rate for a third time this year to tame inflation running at the fastest pace in three decades.
The State Bank of Pakistan raised the discount rate at which it lends to commercial banks to 13 percent from 12 percent, Governor Shamshad Akhtar told reporters today in Karachi. The move was predicted by six of seven analysts in a Bloomberg News survey, with one expecting an increase of 150 basis points.
``Inflationary pressures are more alarming than ever before,'' Akhtar said while releasing the central bank's semi- annual monetary policy statement. ``Global crude and commodity prices have induced recessionary trends in global economies. Pakistan is no exception.''
Pakistan joins neighboring India in increasing rates today, as central banks across Asia grapple with soaring prices and slowing economic growth. Higher borrowing costs in Pakistan may further weaken South Asia's second-largest economy, where last year's growth of 5.8 percent was the weakest since 2003.
``The inflationary pressures are mainly caused by high food and oil prices so the increase in interest rates may not help in controlling inflation effectively,'' said Habib-ur-Rehman, who manages the equivalent of $83 million in stocks and bonds at Atlas Asset Management Co. in Karachi. ``But it will slow down the economy.''
Consumer prices in Pakistan jumped 21.53 percent in June from a year earlier, after gaining 19.27 percent in May. The central bank is aiming to keep average inflation at 12 percent in the fiscal year that started July 1, the same as the previous 12-month period.
Declining Stocks
Pakistan's stocks fell for a second day today on fears an increase in interest rates may hurt company profitability. The benchmark Karachi Stock Exchange 100 index dropped 1.2 percent to 10,448.19 at the 2:15 p.m. local time close.
Inflation may accelerate further after the government raised domestic fuel prices by as much as 15.2 percent on July 21, the sixth increase in five months, in line with global oil costs. Crude reached a record $147.27 a barrel on July 11.
The central bank unexpectedly increased the benchmark rate by 1.5 percentage points to 12 percent on May 23, also raising the cash reserve requirement for commercial lenders to 9 percent of deposits from 8 percent.
Central banks in Indonesia, Thailand and the Philippines have all increased interest rates in the past month. Neighboring India today raised its benchmark repurchase rate for a third time in less than two months to 9 percent.
`Totally Unsustainable'
Pakistan's inflation rate is also being stoked by government borrowings from the central bank, estimated at 9 percent of gross domestic product last fiscal year.
``Government borrowing is totally unsustainable,'' Akhtar said. ``It had never reached the level it has reached today.''
The central bank has advised the government to retire 21 billion rupees ($290 million) of debt every quarter this fiscal year, she said.
The budget deficit widened to 8.3 percent of GDP in the 12 months to June 30, the central bank said today. That's the highest since 1991 when it reached 8.8 percent, according to finance ministry web site.
Pakistan's first civilian government since a 1999 military coup says it wants to narrow the gap to 4.7 percent of GDP next fiscal year.
That target ``has already come under stress,'' Akhtar said, adding that the government has already borrowed 32.9 billion rupees from the central bank in the 25 days to July 25. ``The government tends to underestimate expenditures and overestimate revenue,'' she said.
Standard & Poor's and Moody's Investors Service in May lowered their ratings on Pakistan's foreign-currency debt, citing widening budget and current-account deficits and political instability.
To contact the reporters on this story: Khalid Qayum in Islamabad, Pakistan at kqayum@bloomberg.net. Farhan Sharif in Karachi, Pakistan at Fsharif2@bloomberg.net.
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German Exports to Slow on Euro, Cooling World Growth
By Andreas Cremer
July 29 (Bloomberg) -- Companies in Germany, the world's biggest exporter, face slowing sales abroad this year and next as the stronger euro and a cooling global economy curb demand, the DIHK chambers of industry and commerce said.
Export growth will slow to 7 percent in 2008 and to 6 percent in 2009 from 8.5 percent last year, the Berlin-based DIHK said today in an e-mailed statement, citing a survey of German companies operating in more than 80 countries.
``The weakening world economy and the strong euro will take their toll'' on German exports, Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt, said by phone. Bielmeier said he expects sales abroad to slow to 4.4 percent next year.
Exporters are grappling with the euro's 15 percent appreciation against the dollar in the past 12 months which is eroding competitiveness just as a U.S.-led slowdown and record oil prices cool the world economy. German sales abroad fell the most in almost four years in May, the Federal Statistics Office reported July 9.
The U.S. will further lose importance as a destination for German exports, said the DIHK, which represents about 3.6 million companies. U.S.-bound German sales as a share of total exports will probably shrink to 6.7 percent by 2009 compared with 8.8 percent in 2005, it said.
``The U.K. may surpass the U.S. next year as the second most important market for German exports'' behind France, the DIHK said. It would be the first time since 1997 that the U.S. relinquished that position, Axel Nitschke, head of the DIHK's foreign trade department, told reporters in Berlin today.
Trade Surplus
Germany's foreign trade surplus may rise to above 200 billion euros ($315 billion) this year and to 215 billion euros by 2009, compared with 197 billion euros last year, Nitschke said.
World trade growth may slow to 6.3 percent this year and 6.6 percent in 2009 from 7.1 percent last year, the DIHK said. Imports to Germany may increase 7.5 percent this year compared with 5.2 percent in 2007 as the stronger euro makes goods sold to Germany cheaper. Import growth may slow to 6.5 percent next year.
The DIHK company survey, conducted in May and June, forecasts the world economy will expand 4.8 percent in 2008, the same pace as last year. Global economic growth may weaken to 4.6 percent in 2009, it said.
To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net.
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July 29 (Bloomberg) -- Companies in Germany, the world's biggest exporter, face slowing sales abroad this year and next as the stronger euro and a cooling global economy curb demand, the DIHK chambers of industry and commerce said.
Export growth will slow to 7 percent in 2008 and to 6 percent in 2009 from 8.5 percent last year, the Berlin-based DIHK said today in an e-mailed statement, citing a survey of German companies operating in more than 80 countries.
``The weakening world economy and the strong euro will take their toll'' on German exports, Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt, said by phone. Bielmeier said he expects sales abroad to slow to 4.4 percent next year.
Exporters are grappling with the euro's 15 percent appreciation against the dollar in the past 12 months which is eroding competitiveness just as a U.S.-led slowdown and record oil prices cool the world economy. German sales abroad fell the most in almost four years in May, the Federal Statistics Office reported July 9.
The U.S. will further lose importance as a destination for German exports, said the DIHK, which represents about 3.6 million companies. U.S.-bound German sales as a share of total exports will probably shrink to 6.7 percent by 2009 compared with 8.8 percent in 2005, it said.
``The U.K. may surpass the U.S. next year as the second most important market for German exports'' behind France, the DIHK said. It would be the first time since 1997 that the U.S. relinquished that position, Axel Nitschke, head of the DIHK's foreign trade department, told reporters in Berlin today.
Trade Surplus
Germany's foreign trade surplus may rise to above 200 billion euros ($315 billion) this year and to 215 billion euros by 2009, compared with 197 billion euros last year, Nitschke said.
World trade growth may slow to 6.3 percent this year and 6.6 percent in 2009 from 7.1 percent last year, the DIHK said. Imports to Germany may increase 7.5 percent this year compared with 5.2 percent in 2007 as the stronger euro makes goods sold to Germany cheaper. Import growth may slow to 6.5 percent next year.
The DIHK company survey, conducted in May and June, forecasts the world economy will expand 4.8 percent in 2008, the same pace as last year. Global economic growth may weaken to 4.6 percent in 2009, it said.
To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net.
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India Raises Rate More Than Expected to Tame Prices
By Cherian Thomas
July 29 (Bloomberg) -- India's central bank increased its benchmark interest rate by a half point, more than economists predicted, and forecast slowing economic growth as inflation at a 13-year high erodes spending by consumers and companies.
The Reserve Bank of India raised its repurchase rate to 9 percent from 8.5 percent, the third increase in two months, according to a statement in Mumbai today. Only one of the 22 economists in a Bloomberg News survey expected today's decision, with 16 predicting a quarter-percentage point gain.
Governor Yaga Venugopal Reddy, due to retire in September, also raised the cash reserve ratio to 9 percent from 8.75 percent and indicated that monetary policy may need to be tightened further amid an ``accentuation'' in inflation pressures. India's move today was the sixth rate increase by a central bank in Asia since late June as policy makers in the region grapple with soaring food and energy prices.
``India has kept open the option of more hikes in interest rates,'' said Vishnu Varathan, an economist at Forecast Singapore Pte Ltd. ``Higher borrowing costs are fast becoming an Asian phenomenon.''
India's benchmark stock index fell 3.9 percent to 13,791.54 at the 3:30 p.m. close in Mumbai, while the yield on the benchmark 10-year bond yield rose to 9.40 percent, the highest in two weeks. The rupee gained to 42.665 against the dollar from 42.545 yesterday.
Stocks and bonds declined 30 minutes before the scheduled release after the central bank's web manager ``erroneously'' sent an e-mail showing the decision.
Stocks Fall
Reddy today increased this year's inflation forecast to 7 percent from a range of 5 percent to 5.5 percent.
Inflation in India has accelerated even after the government cut import duties on edible oils, steel products and gasoline, foregoing revenue. The government also banned the export of corn, rice and edible oil to spur local supplies.
Wholesale prices in India jumped 11.89 percent in the second week of July, making life tougher for the 500 million people in India who survive on less than $2 a day and draining support for Prime Minister Manmohan Singh as he braces for elections due by May.
Credit Rating
Standard & Poor's said this month that India's BBB- credit rating, the lowest investment grade, may be cut to junk if faster inflation and higher government spending ahead of the election widens the budget deficit. The government has waived $17 billion of farm debt and kept oil subsidies, estimated to be $42.5 billion this year, outside its accounts.
``Growing off-budget liabilities and enhanced expenditures on subsidies, loan waivers and salaries'' need to be watched, today's statement said. The government's evolving financial position ``pose severe challenges to monetary management.''
Faster inflation is prompting other Asian central banks to increase interest rates. The Philippine central bank has raised rates at its last two meetings, while Bank Indonesia has boosted borrowing costs for three straight months. Thailand raised its benchmark for the first time in two years this month and Pakistan followed suit today.
Reddy, who has been tightening monetary policy since 2004, was caught wrong-footed as inflation in India surged in the past two months after the government was forced to increase energy prices by as much as 17 percent to cut losses at refiners.
Bank Lending
Since June, Reddy has raised rates by 125 basis points and the cash reserve ratio by three-quarters of a percentage point. The governor is trying to discourage lending from banks that could stoke consumer demand and add to inflation fanned mainly by higher prices of oil. Money supply is growing at about 21 percent, more than the central bank's 17 percent target.
Today's rate increase was ``a signal to the banks that credit growth must be moderated,'' India's finance ministry said in a statement. Measures adopted by the central bank and the government over the last two months will help in ``containing'' inflation, it said.
India's $912 billion economy may expand 8 percent this year, the weakest pace since 2004 and lower than the central bank's previous forecast of between 8 percent and 8.5 percent, Reddy said today.
``Slowing growth is a concern, but controlling inflation will take precedence in an election year,'' said D. H. Pai Panandiker, president, RPG Foundation, an economic policy group in New Delhi. ``The bank will tighten rates further.''
-- With reporting by Kartik Goyal in New Delhi, Anil Varma and Anoop Agrawal in Mumbai. Editors: Michael Dwyer, Margo Towie
To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net
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U.K. Retail Sales, Mortgages Drop as Recession Threat Looms
By Svenja O'Donnell and Brian Swint
July 29 (Bloomberg) -- A U.K. retail sales index dropped to a 25-year low in July and banks granted the fewest mortgages in at least nine years last month as the economy edged closer to a recession.
A gauge of retail sales showed a balance of minus 36, the lowest since the survey began in 1983, the Confederation of British Industry said today. Banks approved 36,000 loans for house purchase in June, the least since comparable data began nine years ago, the Bank of England said in a separate report.
``People will have to tighten their belts and will be doing so over a long period,'' said Nick Kounis, chief European economist at Fortis Bank NV in Amsterdam. ``This is not going to be over anytime soon. We predict the U.K. will experience a recession in the second half of this year.''
The pound fell after the reports, which signal weakening consumer spending as the housing market slump deepens. That may add to dissatisfaction with Prime Minister Gordon Brown, whose ruling Labour Party had the lowest support since the early 1980s in a Populus Ltd. poll published today, after he lost three special elections for Parliament seats since May.
The British currency slipped as much as 0.3 percent against the euro after the release of the CBI report and traded at 79.06 pence as of 12:26 p.m. in London.
The CBI's survey of 82 retailers showed 25 percent sold more goods than a year earlier and 61 percent sold fewer, the nation's biggest business lobby said today. The net rounded balance dropped from minus 9 in June.
Woolworths Drop
Shares in Woolworths Group Plc, the U.K. discount retailer of goods from DVDs to candy, fell to a seven-year low today after it said sales declined in the first half.
``It is turning out to be a very grim summer for many retailers,'' said Andy Clarke, retail director at Wal-Mart Inc.'s Asda chain and chairman of the panel overseeing the CBI's survey. ``Pressure from higher fuel and food prices is prompting many people to rein in their spending.''
Britons, laden with 1.4 trillion ($2.8 trillion) of debt, are paring their spending. Retail sales dropped the most since 1986 last month. The Bank of England predicts that economic growth will be the weakest since the early 1990s and that inflation will accelerate to double its 2 percent target.
The popularity of Britain's governing Labour party has fallen to 27 percent, its lowest level since the early 1980s, as economic confidence crumbles, a Populus poll in the London-based Times newspaper showed today.
Subprime Losses
Banks have cut back on lending to shore up balance sheets after the collapse of the U.S. subprime mortgage market, which has cost more than $468 billion in losses and writedowns worldwide.
The value of net home loans fell to 3.1 billion pounds in June, the least since October 2000, the Bank of England said today. The value of all mortgages dropped to 16.8 billion pounds, the lowest amount since 2001.
The Monetary Policy Committee said at its July 10 decision that ``the housing market downturn had gathered momentum'' while ``the financial sector remained fragile,'' minutes of the meeting published on July 23 showed. The average cost of a home in England and Wales fell 4.4 percent from a year earlier in July and will drop further in coming months, Hometrack said yesterday.
``There's so much uncertainty about where prices are going, I think that's one reason why the level of transactions in the housing market is so low,'' former Bank of England Deputy Governor Rachel Lomax said in an interview on BBC Radio 4 today. She ended her five-year term last month.
The Bank of England has kept the benchmark interest rate unchanged at 5 percent for the past three months as policy makers struggle to control inflation while trying to steer the economy away from a recession. Policy makers will take their next decision on Aug. 7.
To contact the reporters on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.
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July 29 (Bloomberg) -- A U.K. retail sales index dropped to a 25-year low in July and banks granted the fewest mortgages in at least nine years last month as the economy edged closer to a recession.
A gauge of retail sales showed a balance of minus 36, the lowest since the survey began in 1983, the Confederation of British Industry said today. Banks approved 36,000 loans for house purchase in June, the least since comparable data began nine years ago, the Bank of England said in a separate report.
``People will have to tighten their belts and will be doing so over a long period,'' said Nick Kounis, chief European economist at Fortis Bank NV in Amsterdam. ``This is not going to be over anytime soon. We predict the U.K. will experience a recession in the second half of this year.''
The pound fell after the reports, which signal weakening consumer spending as the housing market slump deepens. That may add to dissatisfaction with Prime Minister Gordon Brown, whose ruling Labour Party had the lowest support since the early 1980s in a Populus Ltd. poll published today, after he lost three special elections for Parliament seats since May.
The British currency slipped as much as 0.3 percent against the euro after the release of the CBI report and traded at 79.06 pence as of 12:26 p.m. in London.
The CBI's survey of 82 retailers showed 25 percent sold more goods than a year earlier and 61 percent sold fewer, the nation's biggest business lobby said today. The net rounded balance dropped from minus 9 in June.
Woolworths Drop
Shares in Woolworths Group Plc, the U.K. discount retailer of goods from DVDs to candy, fell to a seven-year low today after it said sales declined in the first half.
``It is turning out to be a very grim summer for many retailers,'' said Andy Clarke, retail director at Wal-Mart Inc.'s Asda chain and chairman of the panel overseeing the CBI's survey. ``Pressure from higher fuel and food prices is prompting many people to rein in their spending.''
Britons, laden with 1.4 trillion ($2.8 trillion) of debt, are paring their spending. Retail sales dropped the most since 1986 last month. The Bank of England predicts that economic growth will be the weakest since the early 1990s and that inflation will accelerate to double its 2 percent target.
The popularity of Britain's governing Labour party has fallen to 27 percent, its lowest level since the early 1980s, as economic confidence crumbles, a Populus poll in the London-based Times newspaper showed today.
Subprime Losses
Banks have cut back on lending to shore up balance sheets after the collapse of the U.S. subprime mortgage market, which has cost more than $468 billion in losses and writedowns worldwide.
The value of net home loans fell to 3.1 billion pounds in June, the least since October 2000, the Bank of England said today. The value of all mortgages dropped to 16.8 billion pounds, the lowest amount since 2001.
The Monetary Policy Committee said at its July 10 decision that ``the housing market downturn had gathered momentum'' while ``the financial sector remained fragile,'' minutes of the meeting published on July 23 showed. The average cost of a home in England and Wales fell 4.4 percent from a year earlier in July and will drop further in coming months, Hometrack said yesterday.
``There's so much uncertainty about where prices are going, I think that's one reason why the level of transactions in the housing market is so low,'' former Bank of England Deputy Governor Rachel Lomax said in an interview on BBC Radio 4 today. She ended her five-year term last month.
The Bank of England has kept the benchmark interest rate unchanged at 5 percent for the past three months as policy makers struggle to control inflation while trying to steer the economy away from a recession. Policy makers will take their next decision on Aug. 7.
To contact the reporters on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.
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Canadian Dollar Drops to Six Week Low as Crude Oil Declines
By Jamie McGee
July 29 (Bloomberg) -- The Canadian dollar fell to a six- week low as crude oil traded near a two-month low, increasing concern that weakening commodity prices are signaling slowing economic growth.
The currency slumped for a sixth consecutive day as crude oil touched $124.45 a barrel. Oil has dropped 14 percent since hitting a record high of $147.27 a barrel on July 11. Alberta has the largest crude reserves outside the Middle East.
``The Canadian dollar has underperformed,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``It's a reflection of the oil prices coming off. That's taken a bit of the edge off the currency.''
Canada's dollar dropped 0.1 percent to C$1.0236 per U.S. dollar at 8:31 a.m. in Toronto, from C$1.0226 yesterday. The currency touched C$1.0254, the weakest since June 16. One Canadian dollar buys 97.69 U.S. cents.
The loonie will decline to C$1.06 by the end of the first quarter of 2009, according to the median forecast of 28 analysts surveyed by Bloomberg News.
The yield on the two-year bond was little changed at 3.06 percent. The price of the 3.75 percent security due in June 2010 was C$101.22. The 10-year bond's yield rose 1 basis point to 3.79 percent.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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July 29 (Bloomberg) -- The Canadian dollar fell to a six- week low as crude oil traded near a two-month low, increasing concern that weakening commodity prices are signaling slowing economic growth.
The currency slumped for a sixth consecutive day as crude oil touched $124.45 a barrel. Oil has dropped 14 percent since hitting a record high of $147.27 a barrel on July 11. Alberta has the largest crude reserves outside the Middle East.
``The Canadian dollar has underperformed,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``It's a reflection of the oil prices coming off. That's taken a bit of the edge off the currency.''
Canada's dollar dropped 0.1 percent to C$1.0236 per U.S. dollar at 8:31 a.m. in Toronto, from C$1.0226 yesterday. The currency touched C$1.0254, the weakest since June 16. One Canadian dollar buys 97.69 U.S. cents.
The loonie will decline to C$1.06 by the end of the first quarter of 2009, according to the median forecast of 28 analysts surveyed by Bloomberg News.
The yield on the two-year bond was little changed at 3.06 percent. The price of the 3.75 percent security due in June 2010 was C$101.22. The 10-year bond's yield rose 1 basis point to 3.79 percent.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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U.K. Pound Slides, Gilts Advance as Retail Sales Index Plunges
By Andrew MacAskill and Agnes Lovasz
July 29 (Bloomberg) -- The pound fell and gilts rose after an index of U.K. retail sales sank in July to the lowest level in a quarter-century and mortgage approvals slid, the latest indications the economy may be tilting toward a recession.
The pound retreated against 15 of its 16 major currency counterparts after the Confederation of British Industry said its survey of 82 retailers showed 61 percent sold fewer goods than a year earlier. Loans granted for house purchases dropped to 36,000 last month, the weakest level since at least 1999, the Bank of England said today. Gilts advanced for a second day.
``U.K. economic prospects have been bleak for a while and are getting worse,'' said Paul Robinson, a currency strategist in London at Barclays Plc and a former Bank of England economist. ``This report is another indication of that. It adds to the evidence the U.K. economy is flirting with recession.''
The British currency declined to 79.07 pence per euro as of 12:43 p.m. in London, from 78.95 yesterday. It was at $1.9878, from $1.9939.
The index for durable household goods such as refrigerators, furniture and booksellers slumped to minus 100, the CBI said. Grocers and footwear stores were the only outlets to report a positive sales balance.
U.K. government bonds rose, erasing declines, with the yield on the 10-year gilt losing 4 basis points to 4.91 percent. The price of the 5 percent security due March 2018 rose 0.29, or 2.9 pounds per 1,000-pound ($1,987) face amount, to 100.65. The yield on the two-year gilt declined 4 basis points to 4.89 percent. Bond yields move inversely to prices.
The government sold 2.5 billion pounds of 10-year notes at an average yield of 5.01 percent, according to the U.K. Debt Management Office. Investors sought a record 2.47 times the amount of securities offered, the so-called bid-to-cover ratio.
Traders pared bets the central bank will cut interest rates for a third time this year, with the implied yield on the December short-sterling futures contract at 5.75 percent, down from 5.79 percent yesterday and 6.23 percent on June 30.
To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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July 29 (Bloomberg) -- The pound fell and gilts rose after an index of U.K. retail sales sank in July to the lowest level in a quarter-century and mortgage approvals slid, the latest indications the economy may be tilting toward a recession.
The pound retreated against 15 of its 16 major currency counterparts after the Confederation of British Industry said its survey of 82 retailers showed 61 percent sold fewer goods than a year earlier. Loans granted for house purchases dropped to 36,000 last month, the weakest level since at least 1999, the Bank of England said today. Gilts advanced for a second day.
``U.K. economic prospects have been bleak for a while and are getting worse,'' said Paul Robinson, a currency strategist in London at Barclays Plc and a former Bank of England economist. ``This report is another indication of that. It adds to the evidence the U.K. economy is flirting with recession.''
The British currency declined to 79.07 pence per euro as of 12:43 p.m. in London, from 78.95 yesterday. It was at $1.9878, from $1.9939.
The index for durable household goods such as refrigerators, furniture and booksellers slumped to minus 100, the CBI said. Grocers and footwear stores were the only outlets to report a positive sales balance.
U.K. government bonds rose, erasing declines, with the yield on the 10-year gilt losing 4 basis points to 4.91 percent. The price of the 5 percent security due March 2018 rose 0.29, or 2.9 pounds per 1,000-pound ($1,987) face amount, to 100.65. The yield on the two-year gilt declined 4 basis points to 4.89 percent. Bond yields move inversely to prices.
The government sold 2.5 billion pounds of 10-year notes at an average yield of 5.01 percent, according to the U.K. Debt Management Office. Investors sought a record 2.47 times the amount of securities offered, the so-called bid-to-cover ratio.
Traders pared bets the central bank will cut interest rates for a third time this year, with the implied yield on the December short-sterling futures contract at 5.75 percent, down from 5.79 percent yesterday and 6.23 percent on June 30.
To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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South Africa's Rand Rises as Credit Growth Boosts Rate Outlook
By Garth Theunissen
July 29 (Bloomberg) -- South Africa's rand strengthened against the dollar for a third day after a report showed credit growth unexpectedly accelerated, giving the central bank more reason to raise interest rates.
The rand offered the best returns from the so-called carry trade among its 16 most active counterparts after the Pretoria- based central bank said today credit growth in Africa's biggest economy grew 20.3 percent last month. It was forecast to increase 19 percent, according to the median estimate of 16 economists surveyed by Bloomberg.
``The rand has been amazingly resilient and the carry trade is a key factor,'' said Robert Beange, an emerging-markets currency strategist at JPMorgan Chase & Co. in London. ``The higher credit numbers would further encourage carry-trade inflows.''
The rand gained as much as 0.9 percent to 7.4757 per dollar and traded at 7.4927 by 1:42 p.m. in Johannesburg, from 7.5397 yesterday. It strengthened 0.8 percent versus the euro to 11.7712 and was the best performer versus the dollar of the 16 most-actively traded currencies monitored by Bloomberg today.
Growth in borrowing by South African households and companies rose from 19.7 percent in May, the central bank said, as interest rates at their highest in five years failed to curb credit demand. The broad M3 measure of money supply rose an annual 20.1 percent in June, compared with 20.9 percent in May, the central bank said, in line with the median estimate of economists surveyed by Bloomberg.
`Much Debate'
The South African Reserve Bank, led by Governor Tito Mboweni, has increased the key rate 10 times since June 2006 to curb inflation that has exceeded its 3 percent to 6 percent target range for 14 straight months. Policy makers next decide rates on Aug. 14.
``The Reserve Bank would ideally want to see a much more convincing slowdown in credit demand in order to be comfortable with leaving rates unchanged in August,'' Kevin Lings, chief economist at Stanlib Asset Management, wrote in a note to clients today. ``There is likely to be much debate at the monetary policy committee meeting.''
South Africa's currency has risen for six straight weeks, climbing 8.4 percent since June 12, when the central bank raised its benchmark interest rate by a half-point to 12 percent. It has offered the best carry-trade return of all major currencies against the dollar, euro and yen over that period, according to data compiled by Bloomberg.
Inflation Report
In carry trades, investors borrow lower-yielding currencies such as the Swiss franc to buy higher-yielding assets, such as those denominated in rand, typically sending the target higher and earning the spread between the two. Traders take the risk currency moves will erase the profit. When carry trades diminish, investors would sell the rand to repurchase so-called safe-haven assets, such as the franc.
South Africa's main interest rate is 1,150 basis points above Japan's and 925 basis points higher than Switzerland's.
South African inflation will quicken to 11.3 percent in June from 10.9 percent the month before, according to the median estimate of 18 analysts surveyed by Bloomberg. Statistics South Africa will release its report on price growth tomorrow.
The rand rose even as South African stocks fell with the prices of gold and platinum, the country's biggest export earners. Gold dropped 0.6 percent to $925.41 an ounce and platinum declined 0.5 percent to $1,766.50 an ounce.
Government bonds fell, with the yield on South Africa's benchmark 13.5 percent security due September 2015 rising 3 basis points to 9.57 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net.
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July 29 (Bloomberg) -- South Africa's rand strengthened against the dollar for a third day after a report showed credit growth unexpectedly accelerated, giving the central bank more reason to raise interest rates.
The rand offered the best returns from the so-called carry trade among its 16 most active counterparts after the Pretoria- based central bank said today credit growth in Africa's biggest economy grew 20.3 percent last month. It was forecast to increase 19 percent, according to the median estimate of 16 economists surveyed by Bloomberg.
``The rand has been amazingly resilient and the carry trade is a key factor,'' said Robert Beange, an emerging-markets currency strategist at JPMorgan Chase & Co. in London. ``The higher credit numbers would further encourage carry-trade inflows.''
The rand gained as much as 0.9 percent to 7.4757 per dollar and traded at 7.4927 by 1:42 p.m. in Johannesburg, from 7.5397 yesterday. It strengthened 0.8 percent versus the euro to 11.7712 and was the best performer versus the dollar of the 16 most-actively traded currencies monitored by Bloomberg today.
Growth in borrowing by South African households and companies rose from 19.7 percent in May, the central bank said, as interest rates at their highest in five years failed to curb credit demand. The broad M3 measure of money supply rose an annual 20.1 percent in June, compared with 20.9 percent in May, the central bank said, in line with the median estimate of economists surveyed by Bloomberg.
`Much Debate'
The South African Reserve Bank, led by Governor Tito Mboweni, has increased the key rate 10 times since June 2006 to curb inflation that has exceeded its 3 percent to 6 percent target range for 14 straight months. Policy makers next decide rates on Aug. 14.
``The Reserve Bank would ideally want to see a much more convincing slowdown in credit demand in order to be comfortable with leaving rates unchanged in August,'' Kevin Lings, chief economist at Stanlib Asset Management, wrote in a note to clients today. ``There is likely to be much debate at the monetary policy committee meeting.''
South Africa's currency has risen for six straight weeks, climbing 8.4 percent since June 12, when the central bank raised its benchmark interest rate by a half-point to 12 percent. It has offered the best carry-trade return of all major currencies against the dollar, euro and yen over that period, according to data compiled by Bloomberg.
Inflation Report
In carry trades, investors borrow lower-yielding currencies such as the Swiss franc to buy higher-yielding assets, such as those denominated in rand, typically sending the target higher and earning the spread between the two. Traders take the risk currency moves will erase the profit. When carry trades diminish, investors would sell the rand to repurchase so-called safe-haven assets, such as the franc.
South Africa's main interest rate is 1,150 basis points above Japan's and 925 basis points higher than Switzerland's.
South African inflation will quicken to 11.3 percent in June from 10.9 percent the month before, according to the median estimate of 18 analysts surveyed by Bloomberg. Statistics South Africa will release its report on price growth tomorrow.
The rand rose even as South African stocks fell with the prices of gold and platinum, the country's biggest export earners. Gold dropped 0.6 percent to $925.41 an ounce and platinum declined 0.5 percent to $1,766.50 an ounce.
Government bonds fell, with the yield on South Africa's benchmark 13.5 percent security due September 2015 rising 3 basis points to 9.57 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net.
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S&P/Case-Shiller May 20-City Home-Prices Fall 15.8%
By Timothy R. Homan
July 29 (Bloomberg) -- Home prices in 20 U.S. metropolitan areas fell at a faster pace in May, indicating the three-year housing slump has not stabilized, a private survey showed today.
The S&P/Case-Shiller home-price index dropped 15.8 percent from a year earlier, the biggest decline since records began in 2001, after decreasing 15.2 percent in April. The gauge has fallen every month since January 2007.
Stricter loan rules, rising mortgage rates and an increase in foreclosures are making it more difficult for prospective buyers to get financing, hurting home sales. The prolonged real-estate slump, along with higher fuel prices a shrinking job market, is weighing on consumers and the economy.
``We're going to see continued declines in house prices, much more so in problem areas,'' Mickey Levy, chief economist at Bank of America Corp. in New York, said in an interview with Bloomberg Television. ``The decline in home prices, while necessary to clear the inventories, is building in expectations of more house-price declines, which is keeping potential buyers on the sidelines.''
Home prices decreased 0.9 percent in May from the prior month after declining 1 percent in April, the report showed. The figures aren't adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month to month.
Forecast
The index was forecast to fall 16 percent from a year earlier, after a previously reported 15.3 percent drop in the 12 months ended in April, according to the median forecast of 25 economists surveyed by Bloomberg News. Estimates ranged from declines of 14.8 percent to 17 percent.
For an economic recovery to take place, ``you've got to see a bottom in the housing market,'' Richard Clarida, global strategic adviser at Pacific Investment Management Co. and a professor at Columbia University in New York, said yesterday in an interview with Bloomberg Radio. ``At minimum, the housing market needs to stabilize, and we're not there yet.''
For the second consecutive month, all of the 20 cities in the index showed a year-over-year decrease in prices for May, led by 28 percent slumps in Las Vegas and Miami.
On a month-to-month basis, 13 of the 20 areas covered showed a drop in home prices. The same two cities led the month-over-month decreases.
Regional Differences
``Regional patterns stand out,'' David Blitzer, chairman of the index committee at S&P, said in a statement. The areas that once boomed, such as Miami and Las Vegas, are now showing the biggest declines, he said. Areas in the Midwest, including Detroit and Cleveland, are showing signs of economic stress.
The pickup in the pace of overall price decreases from last year contrasts with other private and government measures that indicated values were declining at a slower pace.
The median price of existing houses fell 6.1 percent in June from the same month last year, compared with an 8.5 percent decrease registered in the 12 months ended in April, according a report from the National Association of Realtors last week.
The cost of new homes, as reported by the Commerce Department, dropped 2 percent last month from June 2007. In the year ended in March, the decrease was 13 percent, the biggest in almost four decades.
Regional Mix
The gauges from Commerce and the Realtors group can be influenced by changes in the regional composition or types of homes sold. Purchases in areas with more expensive homes relative to cheaper properties will bias the figures up.
In contrast, the S&P/Case-Shiller index, and another by the Office of Federal Housing Enterprise Oversight, track the same houses over time and more accurately reflect price trends, economists said.
Reports last week showed home sales remained weak. Purchases of existing homes, which account for about 85 percent of the U.S. housing market, fell 2.6 percent in June to a 4.86 million annual rate, the lowest level in a decade, the National Association of Realtors said July 24.
New-home sales for June decreased 0.6 percent to a 530,000 pace, the Commerce Department said July 25. The same report showed the number of new properties on the market dropped by the most in 45 years, a sign that builders are making progress in clearing out inventories.
1980s Research
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
Residential construction companies are struggling to maintain profits. Pulte Homes Inc., the third-largest U.S. homebuilder, reported a second-quarter loss of $158.4 million last week.
``We see no immediate signs of this housing downturn relenting,'' Pulte Chief Executive Officer Richard Dugas said in a conference call with analysts.
Congress last week passed legislation designed to bolster market confidence in Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, while stemming foreclosures for 400,000 homeowners. President George W. Bush is expected to sign the bill into law this week.
One in every 171 households was in some stage of the foreclosure process, an increase of 121 percent from a year earlier, RealtyTrac Inc., a real estate database firm, said last week in a statement.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Iceland's Krona Rises Most in Month as Bank Increases Revenue
By Emma O'Brien
July 29 (Bloomberg) -- Iceland's krona rose the most against the dollar in more than a month and advanced versus the euro after the country's second-largest bank reported a 27 percent jump in revenue.
The currency advanced for the first time in six days versus the dollar, increasing as much as 3 percent to 80.09 at 11:34 a.m. in Reykjavik, from 82.57 yesterday. It was the biggest gain since June 25. The krona appreciated 3.1 percent to 127.93 per euro, from 129.97, after weakening the past three days.
Revenue at Reykjavik-based Landsbanki Islands HF, the largest bank after Kaupthing Bank HF, rose to 36.97 billion kronur ($454 million) in the three months to June 30, while net income fell 3 percent to 11.88 billion kronur.
The krona tumbled 24 percent against the dollar and 34 percent versus the euro over the past year as the reduction in available credit worldwide made it difficult for Iceland's banks to refinance debt, deterring investors.
Sedlabanki, Iceland's central bank, said today it still plans to sell 75 billion kronur of short-term debt this year. It sold 3.7 billion kronur of Treasury notes in an auction July 24, compared with the 10 billion kronur on offer.
In other trading, Sweden's krona advanced against the euro after retail sales growth accelerated for a second month in June. The Riksbank has raised interest rates twice this year to 4.5 percent to contain the fastest inflation in 15 years.
The krona increased 0.2 percent to 9.4485 per euro, from 9.4627 yesterday, and rose 0.1 percent to 6.0035 per dollar, from 6.0111.
Norway's krone was little changed versus the euro for a second day, trading at 8.0721, compared with 8.0780. It was at 5.1300 per dollar, compared with 5.1316.
The yield on Sweden's 5.25 percent note maturing in March 2011 held at 4.62 percent. The yield on Norway's 6 percent note due in May 2011 fell 3 basis points to 5.05 percent, the lowest since May 21. Bond yields move inversely to prices.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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July 29 (Bloomberg) -- Iceland's krona rose the most against the dollar in more than a month and advanced versus the euro after the country's second-largest bank reported a 27 percent jump in revenue.
The currency advanced for the first time in six days versus the dollar, increasing as much as 3 percent to 80.09 at 11:34 a.m. in Reykjavik, from 82.57 yesterday. It was the biggest gain since June 25. The krona appreciated 3.1 percent to 127.93 per euro, from 129.97, after weakening the past three days.
Revenue at Reykjavik-based Landsbanki Islands HF, the largest bank after Kaupthing Bank HF, rose to 36.97 billion kronur ($454 million) in the three months to June 30, while net income fell 3 percent to 11.88 billion kronur.
The krona tumbled 24 percent against the dollar and 34 percent versus the euro over the past year as the reduction in available credit worldwide made it difficult for Iceland's banks to refinance debt, deterring investors.
Sedlabanki, Iceland's central bank, said today it still plans to sell 75 billion kronur of short-term debt this year. It sold 3.7 billion kronur of Treasury notes in an auction July 24, compared with the 10 billion kronur on offer.
In other trading, Sweden's krona advanced against the euro after retail sales growth accelerated for a second month in June. The Riksbank has raised interest rates twice this year to 4.5 percent to contain the fastest inflation in 15 years.
The krona increased 0.2 percent to 9.4485 per euro, from 9.4627 yesterday, and rose 0.1 percent to 6.0035 per dollar, from 6.0111.
Norway's krone was little changed versus the euro for a second day, trading at 8.0721, compared with 8.0780. It was at 5.1300 per dollar, compared with 5.1316.
The yield on Sweden's 5.25 percent note maturing in March 2011 held at 4.62 percent. The yield on Norway's 6 percent note due in May 2011 fell 3 basis points to 5.05 percent, the lowest since May 21. Bond yields move inversely to prices.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Russian Options Volatility Jumps on Mechel Probe, Troika Says
By William Mauldin
July 29 (Bloomberg) -- Option prices on Russia's RTS Index reached the highest since March, indicating investors are more concerned about risk after the government began an investigation into steel and coal producer OAO Mechel, Troika Dialog said.
Implied volatility, which measures the cost of using options as insurance against declines, on RTS Index options expiring in September gained 10 percent to 31.7, according to Troika Dialog.
``Volatility has increased markedly, spurred by a reassessment of the country's risk by many investors,'' Moscow- based Troika wrote in a report today. ``The negative sentiment was greatly exacerbated by the developments surrounding Mechel'' and implied volatility could ``spike if panic continues.''
Mechel sold raw materials at twice the price in Russia as it did abroad, and the company also ``avoided taxes'' using a scheme that reduced its taxable income using offshore traders, Prime Minister Vladimir Putin said in comments broadcast yesterday and on July 24 on state television. Mechel, whose shares trade mostly in the U.S. as American depositary receipts, has lost two-thirds of its value since its May 30 record high.
Calls give the right to buy a security for a certain amount, the strike price, by a given date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they already own, make leveraged bets on shares or wager that volatility, or stock-price swings, will increase or decrease.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
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July 29 (Bloomberg) -- Option prices on Russia's RTS Index reached the highest since March, indicating investors are more concerned about risk after the government began an investigation into steel and coal producer OAO Mechel, Troika Dialog said.
Implied volatility, which measures the cost of using options as insurance against declines, on RTS Index options expiring in September gained 10 percent to 31.7, according to Troika Dialog.
``Volatility has increased markedly, spurred by a reassessment of the country's risk by many investors,'' Moscow- based Troika wrote in a report today. ``The negative sentiment was greatly exacerbated by the developments surrounding Mechel'' and implied volatility could ``spike if panic continues.''
Mechel sold raw materials at twice the price in Russia as it did abroad, and the company also ``avoided taxes'' using a scheme that reduced its taxable income using offshore traders, Prime Minister Vladimir Putin said in comments broadcast yesterday and on July 24 on state television. Mechel, whose shares trade mostly in the U.S. as American depositary receipts, has lost two-thirds of its value since its May 30 record high.
Calls give the right to buy a security for a certain amount, the strike price, by a given date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they already own, make leveraged bets on shares or wager that volatility, or stock-price swings, will increase or decrease.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
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German Stocks Fall a Fourth Day, Led by Banks; SAP Shares Gain
By Stefanie Haxel
July 29 (Bloomberg) -- German stocks fell for a fourth day on concern the credit crunch may widen after Merrill Lynch & Co. said it will sell $8.5 billion of stock and liquidate some bonds to shore up credit ratings imperiled by mortgage losses.
Deutsche Bank AG, Germany's largest, and Commerzbank led financial shares lower. Deutsche Lufthansa AG, Europe's second- largest airline, fell as employees widened protests on the second day of a walkout over pay.
SAP AG, the world's largest maker of business-management software, climbed to a seven-month high after raising its sales and profit margin forecasts.
The DAX Index fell 42.76, or 0.7 percent, to 6,308.39 as of 1:14 p.m. in Frankfurt. DAX futures expiring in September declined 0.6 percent to 6,349. The HDAX Index of the country's 110 biggest companies lost 0.8 percent to 3,198.98.
``Merrill Lynch is weighing on the market sentiment,'' said Gerhard Schwarz, an equity strategist at UniCredit Markets & Investment Banking in Munich. ``It reminds investors of the risk factors and that the financial crisis isn't over yet.''
Merrill Lynch, the third-biggest U.S. securities firm, also plans to liquidate $30.6 billions of bonds at a fifth of their face value.
Deutsche Bank lost 1.79 euros, or 3.1 percent, to 56.57, the lowest in almost two weeks. Commerzbank, Germany's second-largest bank, dropped 50 cents, or 2.4 percent, to 20.16 euros. Hypo Real Estate Holding AG, the country's second-biggest commercial- property lender, sank 40 cents, or 2.3 percent, to 16.75 euros.
Eroding Spending
Consumer prices in five German states rose in July, led by surging energy costs. Rising food and oil prices are eroding the spending power of companies and households, pushing consumer confidence to the lowest in more than five years.
Henkel AG fell 74 cents, or 2.8 percent, to 25.41 euros. The maker of Loctite glue and Persil detergent snapped a nine-day advance. Metro AG, Germany's largest retailer, lost 95 cents, or 2.5 percent, to 36.62 euros.
Deutsche Lufthansa slid for a fourth day, losing 20 cents, or 1.3 percent, to 14.79 euros. The carrier canceled 70 flights and grounded 9 planes today, representing about 3 percent of its air traffic, Lufthansa spokesman Jan Baerwalde said in a telephone interview. The Ver.di labor union is seeking a pay increase of 9.8 percent, compared with Lufthansa's offer of 6.7 percent in two steps.
Separately, crude oil for September delivery rose for a second day in New York, trading near $125 a barrel on concern that attack on a Royal Dutch Shell Plc pipeline in Nigeria signaled a renewed campaign by militants.
Bayerische Motoren Werke AG, the world's biggest luxury carmaker, lost 86 cents, or 2.9 percent, to 28.89 euros. MAN AG, Europe's third-largest truckmaker, declined 1.52 euros, or 2.3 percent, to 63.69.
SAP gained 2.47 euros, or 7.3 percent, to 36.42, the highest since December 2007. The software maker said revenue and margins will be at the upper end of its forecast ranges this year after second-quarter license sales beat analyst's estimates.
The following stocks also rose or fell in German markets. Symbols are in parentheses.
Hugo Boss AG (BOS3 GY) plunged for a third day, losing 1.37 euros, or 5.6 percent, to 23.07. Bankhaus Lampe cut its share- price estimate for Germany's largest clothing company 26 percent to 26 euros, saying the market environment deteriorated and Hugo Boss is struggling with headwinds from currency exchange rates.
IDS Scheer AG (IDS GY) rallied 57 cents, or 7.1 percent, to 8.55 euros, the largest gain in almost a week. The software maker reported a 23 percent decline in second-quarter profit that was ``better than consensus expectations,'' according to Sal. Oppenheim Jr. & Cie.
``Close ties to SAP make us confident that IDS Scheer will survive its current turmoil,'' Frankfurt-based analyst Henning Steinbrink wrote in a note to clients today. He has a ``neutral'' recommendation on the stock.
Pfeiffer Vacuum Technology AG (PFV GY) fell 78 cents, or 1.4 percent, to 55.22 euros, the lowest in more than four months. The maker of vacuum pumps used in the production of DVDs and instant coffee reported quarterly profit after tax declined 14 percent to 8.4 million euros ($13.2 million) after sales in the U.S. slumped.
R. Stahl AG (RSL1 GY) climbed for a first time in four days, adding 1 euro, or 3.2 percent, to 32.50 euros. The world's second-largest maker of fireproof electrical equipment for factories reported first-half pretax profit increased on sales outside its home market in Germany.
Sartorius AG (SRT GY) lost 53 cents, or 2.5 percent, to 20.47 euros, the lowest in a week. The maker of laboratory scales and filtering equipment founded in 1870 said is won't reach its full-year forecasts.
Singulus Technologies AG (SNG GY) plunged 60 cents, or 9.2 percent, to 5.96 euros, the lowest in 10 years. HSBC Holdings Plc issued cut its share price estimate for the maker of machines that replicate compact discs 7.7 percent to 6 euros, citing lower demand.
To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net or
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July 29 (Bloomberg) -- German stocks fell for a fourth day on concern the credit crunch may widen after Merrill Lynch & Co. said it will sell $8.5 billion of stock and liquidate some bonds to shore up credit ratings imperiled by mortgage losses.
Deutsche Bank AG, Germany's largest, and Commerzbank led financial shares lower. Deutsche Lufthansa AG, Europe's second- largest airline, fell as employees widened protests on the second day of a walkout over pay.
SAP AG, the world's largest maker of business-management software, climbed to a seven-month high after raising its sales and profit margin forecasts.
The DAX Index fell 42.76, or 0.7 percent, to 6,308.39 as of 1:14 p.m. in Frankfurt. DAX futures expiring in September declined 0.6 percent to 6,349. The HDAX Index of the country's 110 biggest companies lost 0.8 percent to 3,198.98.
``Merrill Lynch is weighing on the market sentiment,'' said Gerhard Schwarz, an equity strategist at UniCredit Markets & Investment Banking in Munich. ``It reminds investors of the risk factors and that the financial crisis isn't over yet.''
Merrill Lynch, the third-biggest U.S. securities firm, also plans to liquidate $30.6 billions of bonds at a fifth of their face value.
Deutsche Bank lost 1.79 euros, or 3.1 percent, to 56.57, the lowest in almost two weeks. Commerzbank, Germany's second-largest bank, dropped 50 cents, or 2.4 percent, to 20.16 euros. Hypo Real Estate Holding AG, the country's second-biggest commercial- property lender, sank 40 cents, or 2.3 percent, to 16.75 euros.
Eroding Spending
Consumer prices in five German states rose in July, led by surging energy costs. Rising food and oil prices are eroding the spending power of companies and households, pushing consumer confidence to the lowest in more than five years.
Henkel AG fell 74 cents, or 2.8 percent, to 25.41 euros. The maker of Loctite glue and Persil detergent snapped a nine-day advance. Metro AG, Germany's largest retailer, lost 95 cents, or 2.5 percent, to 36.62 euros.
Deutsche Lufthansa slid for a fourth day, losing 20 cents, or 1.3 percent, to 14.79 euros. The carrier canceled 70 flights and grounded 9 planes today, representing about 3 percent of its air traffic, Lufthansa spokesman Jan Baerwalde said in a telephone interview. The Ver.di labor union is seeking a pay increase of 9.8 percent, compared with Lufthansa's offer of 6.7 percent in two steps.
Separately, crude oil for September delivery rose for a second day in New York, trading near $125 a barrel on concern that attack on a Royal Dutch Shell Plc pipeline in Nigeria signaled a renewed campaign by militants.
Bayerische Motoren Werke AG, the world's biggest luxury carmaker, lost 86 cents, or 2.9 percent, to 28.89 euros. MAN AG, Europe's third-largest truckmaker, declined 1.52 euros, or 2.3 percent, to 63.69.
SAP gained 2.47 euros, or 7.3 percent, to 36.42, the highest since December 2007. The software maker said revenue and margins will be at the upper end of its forecast ranges this year after second-quarter license sales beat analyst's estimates.
The following stocks also rose or fell in German markets. Symbols are in parentheses.
Hugo Boss AG (BOS3 GY) plunged for a third day, losing 1.37 euros, or 5.6 percent, to 23.07. Bankhaus Lampe cut its share- price estimate for Germany's largest clothing company 26 percent to 26 euros, saying the market environment deteriorated and Hugo Boss is struggling with headwinds from currency exchange rates.
IDS Scheer AG (IDS GY) rallied 57 cents, or 7.1 percent, to 8.55 euros, the largest gain in almost a week. The software maker reported a 23 percent decline in second-quarter profit that was ``better than consensus expectations,'' according to Sal. Oppenheim Jr. & Cie.
``Close ties to SAP make us confident that IDS Scheer will survive its current turmoil,'' Frankfurt-based analyst Henning Steinbrink wrote in a note to clients today. He has a ``neutral'' recommendation on the stock.
Pfeiffer Vacuum Technology AG (PFV GY) fell 78 cents, or 1.4 percent, to 55.22 euros, the lowest in more than four months. The maker of vacuum pumps used in the production of DVDs and instant coffee reported quarterly profit after tax declined 14 percent to 8.4 million euros ($13.2 million) after sales in the U.S. slumped.
R. Stahl AG (RSL1 GY) climbed for a first time in four days, adding 1 euro, or 3.2 percent, to 32.50 euros. The world's second-largest maker of fireproof electrical equipment for factories reported first-half pretax profit increased on sales outside its home market in Germany.
Sartorius AG (SRT GY) lost 53 cents, or 2.5 percent, to 20.47 euros, the lowest in a week. The maker of laboratory scales and filtering equipment founded in 1870 said is won't reach its full-year forecasts.
Singulus Technologies AG (SNG GY) plunged 60 cents, or 9.2 percent, to 5.96 euros, the lowest in 10 years. HSBC Holdings Plc issued cut its share price estimate for the maker of machines that replicate compact discs 7.7 percent to 6 euros, citing lower demand.
To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net or
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U.K. Stocks Climb, Led by Commodity Producers; BP, Vedanta Rise
By Sarah Jones
July 29 (Bloomberg) -- U.K. stocks climbed after a rally in commodity producers offset concerns banks will be forced to liquidate credit assets.
BP Plc, Europe's second-largest oil producer, and Vedanta Resources Plc gained after the companies reported higher earnings. British Airways Plc rallied after the airline said it was in merger discussions with Iberia Lineas Aereas de Espana SA.
Barclays Plc led a retreat by banks, falling the most in fourth months, after Merrill Lynch & Co.'s liquidation of credit assets sparked concern other lenders may have similar risks.
The benchmark FTSE 100 Index added 20.6, or 0.4 percent, to 5,333.1 at 1:53 p.m. in London, even as almost two stocks fell for every one that rose. The FTSE All-Share Index increased 0.3 percent while Ireland's ISEQ Index fell 1.8 percent.
BP added 1.2 percent to 525.75 pence after the company said second-quarter earnings rose 28 percent to $9.47 billion as crude surged to a record. Excluding inventory changes and one-time items, earnings beat analysts' estimates. The shares
``The defensive nature of this cash generating machine gives investors hope for the future,'' said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers. ``These are another set of exceptionally strong numbers.''
Royal Dutch Shell Plc, Europe's biggest oil producer, added 1.3 percent to 1,856 pence. Cairn Energy Plc, a U.K. explorer, advanced 4.1 percent to 2,799 pence.
Cairn India Ltd., the Indian unit of Cairn Energy, reported a second-quarter profit of 1.39 billion rupees ($33 million) and said revenue rose 66 percent.
Vedanta Rallies
Vedanta Resources rallied 5 percent to 1,944 pence after India's largest zinc and copper producer said first-quarter profit rose 6.3 percent on record iron ore output. The company also said charges levied by smelters to process metal will be a third lower than previously estimated because of a shortage of raw material from mining companies.
Antofagasta Plc, owner of copper mines in Chile, added 4.7 percent to 565.5 pence. Kazakhmys Plc, Kazakhstan's biggest copper producer, added 3.3 percent to 1,408 pence.
British Airways Plc jumped 3.6 percent to 243 pence after Europe's third-largest carrier said it's holding talks with Spain's Iberia to lower expenses as slower economies and higher fuel costs wipe out earnings.
Barclays, the U.K.'s third-biggest bank which has written down $6.5 billion of credit assets in the past year, lost 7.3 percent to 314 pence. Royal Bank of Scotland Group Plc, Britain's second-largest bank, declined 4.6 percent to 196.7 pence.
``Fears of further writedowns in the financial sector'' have resurged, said Paul Webb, chief dealer at CMC Markets in London. ``The fact that many had been starting to convince themselves that the worst of this was behind us is clearly foolhardy.''
The FTSE 350 Bank Index dropped 3.1 percent to a two-week low after Merrill Lynch, the third-biggest U.S. securities firm, said it will book more writedowns and sell $8.5 billion of stock and liquidate $30.6 billion of bonds at a fifth of their face value to shore up credit ratings.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Inchcape Plc (INCH LN) dropped 36 pence, or 12 percent, to 259.75. The global operator of car dealerships fell the most in more than eight years after saying 2008 earnings will be flat as a consumer spending slowdown hits European car sales. Pendragon Plc (PDG LN), Britain's biggest car dealership chain, dropped 17 percent to 9.1 pence.
St James's Place Plc (STJ LN) lost 7.5 pence, or 3.5 percent, 202 after the financial adviser said ``challenging market conditions'' had trimmed first-half profit. The company reported net income dropped 22 percent to 22.2 million pounds.
Wolfson Microelectronics Plc (WLF LN) tumbled 12 pence, or 9.8 percent, to 110 after the maker of semiconductors used to power mobile phones said second-quarter profit fell to $4.34 million because of acquisition-related costs.
Woolworths Group Plc (WLW LN) plunged 96 cents, or 15 percent, to 5.53. The retailer which sells goods from appliances to candy said group sales in the 25 weeks to July 26 declined 3.1 percent. Revenue at stores open for at least a year dropped 6.7 percent in the last six weeks.
There was ``a marked worsening of conditions in June and July in an increasingly competitive market,'' Richard North, Chairman of Woolworths, said in the statement.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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July 29 (Bloomberg) -- U.K. stocks climbed after a rally in commodity producers offset concerns banks will be forced to liquidate credit assets.
BP Plc, Europe's second-largest oil producer, and Vedanta Resources Plc gained after the companies reported higher earnings. British Airways Plc rallied after the airline said it was in merger discussions with Iberia Lineas Aereas de Espana SA.
Barclays Plc led a retreat by banks, falling the most in fourth months, after Merrill Lynch & Co.'s liquidation of credit assets sparked concern other lenders may have similar risks.
The benchmark FTSE 100 Index added 20.6, or 0.4 percent, to 5,333.1 at 1:53 p.m. in London, even as almost two stocks fell for every one that rose. The FTSE All-Share Index increased 0.3 percent while Ireland's ISEQ Index fell 1.8 percent.
BP added 1.2 percent to 525.75 pence after the company said second-quarter earnings rose 28 percent to $9.47 billion as crude surged to a record. Excluding inventory changes and one-time items, earnings beat analysts' estimates. The shares
``The defensive nature of this cash generating machine gives investors hope for the future,'' said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers. ``These are another set of exceptionally strong numbers.''
Royal Dutch Shell Plc, Europe's biggest oil producer, added 1.3 percent to 1,856 pence. Cairn Energy Plc, a U.K. explorer, advanced 4.1 percent to 2,799 pence.
Cairn India Ltd., the Indian unit of Cairn Energy, reported a second-quarter profit of 1.39 billion rupees ($33 million) and said revenue rose 66 percent.
Vedanta Rallies
Vedanta Resources rallied 5 percent to 1,944 pence after India's largest zinc and copper producer said first-quarter profit rose 6.3 percent on record iron ore output. The company also said charges levied by smelters to process metal will be a third lower than previously estimated because of a shortage of raw material from mining companies.
Antofagasta Plc, owner of copper mines in Chile, added 4.7 percent to 565.5 pence. Kazakhmys Plc, Kazakhstan's biggest copper producer, added 3.3 percent to 1,408 pence.
British Airways Plc jumped 3.6 percent to 243 pence after Europe's third-largest carrier said it's holding talks with Spain's Iberia to lower expenses as slower economies and higher fuel costs wipe out earnings.
Barclays, the U.K.'s third-biggest bank which has written down $6.5 billion of credit assets in the past year, lost 7.3 percent to 314 pence. Royal Bank of Scotland Group Plc, Britain's second-largest bank, declined 4.6 percent to 196.7 pence.
``Fears of further writedowns in the financial sector'' have resurged, said Paul Webb, chief dealer at CMC Markets in London. ``The fact that many had been starting to convince themselves that the worst of this was behind us is clearly foolhardy.''
The FTSE 350 Bank Index dropped 3.1 percent to a two-week low after Merrill Lynch, the third-biggest U.S. securities firm, said it will book more writedowns and sell $8.5 billion of stock and liquidate $30.6 billion of bonds at a fifth of their face value to shore up credit ratings.
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
Inchcape Plc (INCH LN) dropped 36 pence, or 12 percent, to 259.75. The global operator of car dealerships fell the most in more than eight years after saying 2008 earnings will be flat as a consumer spending slowdown hits European car sales. Pendragon Plc (PDG LN), Britain's biggest car dealership chain, dropped 17 percent to 9.1 pence.
St James's Place Plc (STJ LN) lost 7.5 pence, or 3.5 percent, 202 after the financial adviser said ``challenging market conditions'' had trimmed first-half profit. The company reported net income dropped 22 percent to 22.2 million pounds.
Wolfson Microelectronics Plc (WLF LN) tumbled 12 pence, or 9.8 percent, to 110 after the maker of semiconductors used to power mobile phones said second-quarter profit fell to $4.34 million because of acquisition-related costs.
Woolworths Group Plc (WLW LN) plunged 96 cents, or 15 percent, to 5.53. The retailer which sells goods from appliances to candy said group sales in the 25 weeks to July 26 declined 3.1 percent. Revenue at stores open for at least a year dropped 6.7 percent in the last six weeks.
There was ``a marked worsening of conditions in June and July in an increasingly competitive market,'' Richard North, Chairman of Woolworths, said in the statement.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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Stocks in Europe, Asia Fall, Led by Banks; U.S. Futures Rise
By Sarah Thompson
July 29 (Bloomberg) -- Stocks in Europe and Asia fell on concern credit losses will worsen and the economic slowdown will cut earnings. U.S. index futures advanced as oil prices declined and Amgen Inc. reported earnings that beat analysts' estimates.
UBS AG, the European bank hardest hit by the subprime contagion, and Barclays Plc sank after Merrill Lynch & Co. said it will book more writedowns and sell $8.5 billion of stock. Nomura Holdings Inc. fell in Germany on an unexpected first-quarter loss. Akzo Nobel NV tumbled 11 percent in Amsterdam as the world's biggest paint maker predicted lower earnings after higher costs and a slump in U.S. demand hurt profit.
The MSCI World lost 0.4 percent to 1,339.94 at 1:30 p.m. in London, declining for a fourth day. Oil's retreat helped push futures on the Standard & Poor's 500 Index up 0.4 percent and trim the decline in Europe's Dow Jones Stoxx 600 Index to 0.4 percent from as much as 1.3 percent.
``Life is still very difficult for the financials,'' said Andy Lynch, a London-based fund manager at Schroder Investment Management, which has about $10 billion. ``What's particularly surprising is that Merrill had their second-quarter numbers only a few days ago. It shows there is a complete lack of transparency on how these things are valued.''
About $11 trillion has been erased from global equities in 2008 as more than $460 billion in credit-related losses and accelerating inflation damp the outlook for economic and profit growth.
U.S. stocks fell yesterday and the Dow Jones Industrial Average lost more than 200 points for the second time in three days after the International Monetary Fund said there is no end in sight to the housing slump.
Bear Markets
All of the 23 developed nations in the MSCI World Index except for Canada have experienced bear-market plunges of 20 percent or more since September as credit losses surged and record commodity prices stoked inflation.
Declines today in Europe were limited by gains in mining, oil and technology shares after Vedanta Resources Plc and BP Plc reporter higher earnings and SAP AG raised it revenue forecast.
The MSCI Asia Pacific Index decreased 1.8 percent. Sony Corp. fell in Germany after the world's second-largest consumer- electronics maker cut its profit forecast.
India's Sensitive Index dropped 3.9 percent, the biggest retreat among 87 indexes tracked by Bloomberg worldwide, after the central bank raised interest rates for a third time in two months and cut its growth forecast for this year.
UBS dropped 6.3 percent to 19.13 Swiss francs. Barclays, the U.K.'s third-biggest bank, slipped 7.3 percent to 314 pence. ING Groep NV, the largest Dutch financial-services company, declined 2 percent to 20.135 euros.
$5.7 Billion
Merrill will book $5.7 billion of writedowns in the third quarter. Almost $19 billion of net losses in the past year forced Merrill Chief Executive Officer John Thain to backtrack from assurances that the firm had enough capital to weather the credit crisis.
Temasek Holdings Pte., the Singapore-owned fund that became Merrill's biggest investor by acquiring shares in December, will buy $3.4 billion of the new stock, Merrill said yesterday in a statement. The New York-based company is paying Temasek $2.5 billion to offset losses on its earlier investment.
Merrill added 17 cents to $24.50 in pre-market trading.
Oppenheimer & Co. analyst Meredith Whitney said Merrill's shares are trading closer to ``fair value.''
``We applaud this purging of assets as an attempt to cut its losses and focus on stabilizing its platform and righting the franchise toward growth,'' Whitney wrote in a note to clients today.
Nomura, Toyota
Nomura Holdings dropped 1.2 percent to 1,525 yen in German trading. Japan's largest brokerage posted the loss after setting aside 63.1 billion yen ($586 million) for potential costs related to bond insurers. The net loss was 76.6 billion yen for the three months ended June 30. The median estimate among five analysts surveyed by Bloomberg was for profit of 30 billion yen.
Toyota Motor Corp. sank for a third day, declining 3.3 percent to 4,720 yen in Tokyo. The company cut its forecast for worldwide vehicle sales this year by 350,000 units to 9.5 million, as it sold fewer trucks and sport-utility vehicles.
Sony slipped 4.2 percent to 4,035 yen in Germany. The world's second-largest consumer-electronics maker cut its profit forecast by 17 percent as lower camera prices caused first- quarter earnings to decline more than analysts estimated.
Akzo Nobel sank 12 percent to 37.85 euros. The company said second-quarter net income declined 18 percent to 184 million euros ($290 million) and lowered its full-year target after a U.S. housing slump hurt demand and record oil prices drove up costs. Analysts predicted profit of 242 million euros.
BP, SAP
BP rose 1.2 percent to 525.5 pence. Europe's second-biggest oil company said second-quarter earnings jumped 28 percent as crude surged to a record and natural-gas prices increased. Excluding inventory changes and one-time items, earnings beat analysts' estimates.
Vedanta rallied 4.1 percent to 1,928 pence after India's largest zinc and copper producer said first-quarter profit rose 6.3 percent on record iron ore output.
SAP gained 7.5 percent to 36.51 euros. The world's biggest maker of business-management software said it sees full-year revenue increasing to the top end of the target range between 24 percent and 27 percent.
Wolfson Microelectronics Plc lost 10 percent to 109.5 pence after the U.K. producer of semiconductors used to power mobile phones said second-quarter profit fell 27 percent because of acquisition-related costs.
Klepierre SA slid 8.3 percent to 26.75 euros. The French property company that agreed to buy most of Scandinavia's largest shopping-center owner yesterday may sell some of the malls to raise money for other developments in the region, Chief Executive Officer Michel Clair said in an interview.
British Airways, Iberia
British Airways Plc added 4.3 percent to 244.5 pence. Europe's third-biggest carrier said it's holding talks with Spain's Iberia Lineas Aereas de Espana SA about a merger. Shares in Iberia climbed 4.3 percent to 1.71 euros.
Smiths Group Plc fell 1 percent to 1,035 pence. The world's biggest maker of airport-security scanners was downgraded to ``neutral'' from ``buy'' at Merrill due to a delay in prospective cost saving plans and unit sales.
``We do not expect a breakup in the near term,'' London- based analysts Charles Armitage, Celine Fornaro and Andrew Crispin wrote in a note dated today.
Royal DSM NV advanced 8.6 percent to 38.78 euros. The world's largest maker of vitamins said second-quarter profit quadrupled, beating estimates, after it increased prices for vitamin C.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
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July 29 (Bloomberg) -- Stocks in Europe and Asia fell on concern credit losses will worsen and the economic slowdown will cut earnings. U.S. index futures advanced as oil prices declined and Amgen Inc. reported earnings that beat analysts' estimates.
UBS AG, the European bank hardest hit by the subprime contagion, and Barclays Plc sank after Merrill Lynch & Co. said it will book more writedowns and sell $8.5 billion of stock. Nomura Holdings Inc. fell in Germany on an unexpected first-quarter loss. Akzo Nobel NV tumbled 11 percent in Amsterdam as the world's biggest paint maker predicted lower earnings after higher costs and a slump in U.S. demand hurt profit.
The MSCI World lost 0.4 percent to 1,339.94 at 1:30 p.m. in London, declining for a fourth day. Oil's retreat helped push futures on the Standard & Poor's 500 Index up 0.4 percent and trim the decline in Europe's Dow Jones Stoxx 600 Index to 0.4 percent from as much as 1.3 percent.
``Life is still very difficult for the financials,'' said Andy Lynch, a London-based fund manager at Schroder Investment Management, which has about $10 billion. ``What's particularly surprising is that Merrill had their second-quarter numbers only a few days ago. It shows there is a complete lack of transparency on how these things are valued.''
About $11 trillion has been erased from global equities in 2008 as more than $460 billion in credit-related losses and accelerating inflation damp the outlook for economic and profit growth.
U.S. stocks fell yesterday and the Dow Jones Industrial Average lost more than 200 points for the second time in three days after the International Monetary Fund said there is no end in sight to the housing slump.
Bear Markets
All of the 23 developed nations in the MSCI World Index except for Canada have experienced bear-market plunges of 20 percent or more since September as credit losses surged and record commodity prices stoked inflation.
Declines today in Europe were limited by gains in mining, oil and technology shares after Vedanta Resources Plc and BP Plc reporter higher earnings and SAP AG raised it revenue forecast.
The MSCI Asia Pacific Index decreased 1.8 percent. Sony Corp. fell in Germany after the world's second-largest consumer- electronics maker cut its profit forecast.
India's Sensitive Index dropped 3.9 percent, the biggest retreat among 87 indexes tracked by Bloomberg worldwide, after the central bank raised interest rates for a third time in two months and cut its growth forecast for this year.
UBS dropped 6.3 percent to 19.13 Swiss francs. Barclays, the U.K.'s third-biggest bank, slipped 7.3 percent to 314 pence. ING Groep NV, the largest Dutch financial-services company, declined 2 percent to 20.135 euros.
$5.7 Billion
Merrill will book $5.7 billion of writedowns in the third quarter. Almost $19 billion of net losses in the past year forced Merrill Chief Executive Officer John Thain to backtrack from assurances that the firm had enough capital to weather the credit crisis.
Temasek Holdings Pte., the Singapore-owned fund that became Merrill's biggest investor by acquiring shares in December, will buy $3.4 billion of the new stock, Merrill said yesterday in a statement. The New York-based company is paying Temasek $2.5 billion to offset losses on its earlier investment.
Merrill added 17 cents to $24.50 in pre-market trading.
Oppenheimer & Co. analyst Meredith Whitney said Merrill's shares are trading closer to ``fair value.''
``We applaud this purging of assets as an attempt to cut its losses and focus on stabilizing its platform and righting the franchise toward growth,'' Whitney wrote in a note to clients today.
Nomura, Toyota
Nomura Holdings dropped 1.2 percent to 1,525 yen in German trading. Japan's largest brokerage posted the loss after setting aside 63.1 billion yen ($586 million) for potential costs related to bond insurers. The net loss was 76.6 billion yen for the three months ended June 30. The median estimate among five analysts surveyed by Bloomberg was for profit of 30 billion yen.
Toyota Motor Corp. sank for a third day, declining 3.3 percent to 4,720 yen in Tokyo. The company cut its forecast for worldwide vehicle sales this year by 350,000 units to 9.5 million, as it sold fewer trucks and sport-utility vehicles.
Sony slipped 4.2 percent to 4,035 yen in Germany. The world's second-largest consumer-electronics maker cut its profit forecast by 17 percent as lower camera prices caused first- quarter earnings to decline more than analysts estimated.
Akzo Nobel sank 12 percent to 37.85 euros. The company said second-quarter net income declined 18 percent to 184 million euros ($290 million) and lowered its full-year target after a U.S. housing slump hurt demand and record oil prices drove up costs. Analysts predicted profit of 242 million euros.
BP, SAP
BP rose 1.2 percent to 525.5 pence. Europe's second-biggest oil company said second-quarter earnings jumped 28 percent as crude surged to a record and natural-gas prices increased. Excluding inventory changes and one-time items, earnings beat analysts' estimates.
Vedanta rallied 4.1 percent to 1,928 pence after India's largest zinc and copper producer said first-quarter profit rose 6.3 percent on record iron ore output.
SAP gained 7.5 percent to 36.51 euros. The world's biggest maker of business-management software said it sees full-year revenue increasing to the top end of the target range between 24 percent and 27 percent.
Wolfson Microelectronics Plc lost 10 percent to 109.5 pence after the U.K. producer of semiconductors used to power mobile phones said second-quarter profit fell 27 percent because of acquisition-related costs.
Klepierre SA slid 8.3 percent to 26.75 euros. The French property company that agreed to buy most of Scandinavia's largest shopping-center owner yesterday may sell some of the malls to raise money for other developments in the region, Chief Executive Officer Michel Clair said in an interview.
British Airways, Iberia
British Airways Plc added 4.3 percent to 244.5 pence. Europe's third-biggest carrier said it's holding talks with Spain's Iberia Lineas Aereas de Espana SA about a merger. Shares in Iberia climbed 4.3 percent to 1.71 euros.
Smiths Group Plc fell 1 percent to 1,035 pence. The world's biggest maker of airport-security scanners was downgraded to ``neutral'' from ``buy'' at Merrill due to a delay in prospective cost saving plans and unit sales.
``We do not expect a breakup in the near term,'' London- based analysts Charles Armitage, Celine Fornaro and Andrew Crispin wrote in a note dated today.
Royal DSM NV advanced 8.6 percent to 38.78 euros. The world's largest maker of vitamins said second-quarter profit quadrupled, beating estimates, after it increased prices for vitamin C.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net
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Fording May Rise on Sale, Talisman May Gain; Weston May Fall
By John Kipphoff
July 29 (Bloomberg) -- Fording Canadian Coal Trust may surge, bids on the Toronto Stock Exchange indicated, after Teck Cominco Ltd. offered C$14.1 ($13.9 billion) for the second- largest exporter of coal used to make steel.
Talisman Energy Inc. may rise on better-than-expected earnings even as crude-oil prices fall. George Weston Ltd., the parent company of Canada's biggest supermarket chain, may decline after posting a drop in profit.
The Standard & Poor's/TSX Composite Index fell 0.6 percent to 13,303.96 yesterday in Toronto, led lower by financial stocks. Canada's main stock index has retreated 12 percent from its June 18 record of 15,073.13 on declining crude-oil prices and concern that the U.S. housing and mortgage crisis threatens global economic growth.
Fording Coal may jump C$5.46 to C$89.26, bids already submitted in Toronto indicated. Fording Canadian investors will receive $82 in cash and 0.245 of a class B Teck share for each unit they hold, Vancouver-based Teck Cominco, Canada's biggest diversified mining company, said.
Fording owns 60 percent of the Elk Valley Coal Partnership, which operates mines in British Columbia and Alberta. Teck, which owns the rest, may fall C$1.51 to C438.90, bids showed.
Talisman Energy may gain 23 cents to C$18.37, based on bids. The oil and natural-gas producer with about two-thirds of its reserves in North America or the North Sea, earned 81 cents a share in the second quarter excluding one-time items, according to Bloomberg data. That beat the 72 cent average estimate of analysts polled by Bloomberg.
Crude oil futures declined in New York as the U.S. dollar strengthened from a one-week low against the euro, limiting the appeal of commodities as an inflation hedge.
George Weston may drop C$1.32 to C442.95, bids showed. The company that controls Loblaw Cos. said second-quarter profit fell 8.5 percent to C$118 million, or 84 cents a share, from C$129 million, on costs related to job cuts at Loblaws and hedging on commodities. The average analyst estimate in a Bloomberg survey was 97 cents excluding some one-time items.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
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July 29 (Bloomberg) -- Fording Canadian Coal Trust may surge, bids on the Toronto Stock Exchange indicated, after Teck Cominco Ltd. offered C$14.1 ($13.9 billion) for the second- largest exporter of coal used to make steel.
Talisman Energy Inc. may rise on better-than-expected earnings even as crude-oil prices fall. George Weston Ltd., the parent company of Canada's biggest supermarket chain, may decline after posting a drop in profit.
The Standard & Poor's/TSX Composite Index fell 0.6 percent to 13,303.96 yesterday in Toronto, led lower by financial stocks. Canada's main stock index has retreated 12 percent from its June 18 record of 15,073.13 on declining crude-oil prices and concern that the U.S. housing and mortgage crisis threatens global economic growth.
Fording Coal may jump C$5.46 to C$89.26, bids already submitted in Toronto indicated. Fording Canadian investors will receive $82 in cash and 0.245 of a class B Teck share for each unit they hold, Vancouver-based Teck Cominco, Canada's biggest diversified mining company, said.
Fording owns 60 percent of the Elk Valley Coal Partnership, which operates mines in British Columbia and Alberta. Teck, which owns the rest, may fall C$1.51 to C438.90, bids showed.
Talisman Energy may gain 23 cents to C$18.37, based on bids. The oil and natural-gas producer with about two-thirds of its reserves in North America or the North Sea, earned 81 cents a share in the second quarter excluding one-time items, according to Bloomberg data. That beat the 72 cent average estimate of analysts polled by Bloomberg.
Crude oil futures declined in New York as the U.S. dollar strengthened from a one-week low against the euro, limiting the appeal of commodities as an inflation hedge.
George Weston may drop C$1.32 to C442.95, bids showed. The company that controls Loblaw Cos. said second-quarter profit fell 8.5 percent to C$118 million, or 84 cents a share, from C$129 million, on costs related to job cuts at Loblaws and hedging on commodities. The average analyst estimate in a Bloomberg survey was 97 cents excluding some one-time items.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
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B2W Varejo, Hypermarcas, Lan, Perdigao: Latin Equity Preview
By Alexander Ragir and William Freebairn
July 29 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares fell 0.5 percent to 4,146.66 yesterday. Markets in Peru are closed today for a holiday. In Brazil, preferred shares are the most commonly traded class of stock.
Brazil
B2W Companhia Global do Varejo (BTOW3 BS): Brazil's biggest online retailer became UBS AG's ``top pick'' among Brazilian retailers, replacing Lojas Americanas SA, the country's biggest retailer. B2W Varejo's earnings were ``distorted'' by one time items and its underlying earnings growth is faster than what was reported, UBS analysts Jander Medeiros and Guilherme Arruda wrote in a note to clients. B2W fell 0.5 percent to 57.99 reais. Lojas Americanas fell 2.6 percent to 11.20 reais.
Brasil Brokers Participacoes SA (BBRK3 BS): The Brazilian provider of real estate brokerage services plans a 100-for-1 stock split. The transaction will be voted on by stockholders at a meeting scheduled for Aug. 6, according to a regulatory filing posted on Brazil's securities regulator Web site yesterday. Brasil Brokers dropped 1.6 percent to 1,220 reais.
Hypermarcas SA (HYPE3 BS): The Brazilian maker of cleaning, hygiene, medical and food products bought Revlon Inc. unit Bozzano, a maker of men's shaving and hair-care products, for $104 million, Revlon said yesterday in a statement. Sao Paulo- based Hypermarcas rose 3.5 percent to 19.45 reais.
Perdigao SA (PRGA3 BS): Brazil's biggest food company yesterday reported a second-quarter loss of 881.8 million reais ($560 million) after taking a one-time charge for the purchase of Eleva Alimentos SA and other assets. Excluding the one-time charge, profit was 102.5 million reais, topping the 68.9 million reais average of five estimates compiled by Bloomberg. Perdigao fell 2.1 percent to 41.60 reais.
Chile
Banco de Chile SA (CHILE CC): The country's No. 2 bank reported June profit that trailed Deutsche Bank AG's estimate because of higher expenses and provision charges, analysts including Tito Labarta wrote in a note to clients yesterday. Banco de Chile closed little changed at 37.39 pesos.
Lan Airlines SA (LAN CC): Chile's biggest air carrier may report a 4.5 percent increase in second-quarter profit today. The Santiago-based airline's net income probably rose to $44.5 million from $42.6 million a year earlier, according to the average estimate of five analysts surveyed by Bloomberg. Lan fell 0.8 percent to 5,399.90 pesos.
Mexico
Empresas ICA SAB (ICA* MM): Mexico's largest construction company said second-quarter profit fell 47 percent to 64 million pesos ($6.4 million), or 13 centavos a share, from a year earlier as material costs rose. Sales rose 10 percent to 6.23 billion pesos, the company said in a statement e-mailed yesterday. ICA was predicted to earn 41 centavos a share, the average of three estimates in a Bloomberg survey. ICA fell 2.4 percent to 61.85 pesos.
Grupo Mexico SAB (GMEXICOB MM): Mexico's biggest mining company said second-quarter net income fell 14 percent to $451.7 million. Sales decreased 16 percent to $1.76 billion as copper production dropped. Grupo Mexico shares fell 3.3 percent to 16.96 pesos.
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.
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July 29 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares fell 0.5 percent to 4,146.66 yesterday. Markets in Peru are closed today for a holiday. In Brazil, preferred shares are the most commonly traded class of stock.
Brazil
B2W Companhia Global do Varejo (BTOW3 BS): Brazil's biggest online retailer became UBS AG's ``top pick'' among Brazilian retailers, replacing Lojas Americanas SA, the country's biggest retailer. B2W Varejo's earnings were ``distorted'' by one time items and its underlying earnings growth is faster than what was reported, UBS analysts Jander Medeiros and Guilherme Arruda wrote in a note to clients. B2W fell 0.5 percent to 57.99 reais. Lojas Americanas fell 2.6 percent to 11.20 reais.
Brasil Brokers Participacoes SA (BBRK3 BS): The Brazilian provider of real estate brokerage services plans a 100-for-1 stock split. The transaction will be voted on by stockholders at a meeting scheduled for Aug. 6, according to a regulatory filing posted on Brazil's securities regulator Web site yesterday. Brasil Brokers dropped 1.6 percent to 1,220 reais.
Hypermarcas SA (HYPE3 BS): The Brazilian maker of cleaning, hygiene, medical and food products bought Revlon Inc. unit Bozzano, a maker of men's shaving and hair-care products, for $104 million, Revlon said yesterday in a statement. Sao Paulo- based Hypermarcas rose 3.5 percent to 19.45 reais.
Perdigao SA (PRGA3 BS): Brazil's biggest food company yesterday reported a second-quarter loss of 881.8 million reais ($560 million) after taking a one-time charge for the purchase of Eleva Alimentos SA and other assets. Excluding the one-time charge, profit was 102.5 million reais, topping the 68.9 million reais average of five estimates compiled by Bloomberg. Perdigao fell 2.1 percent to 41.60 reais.
Chile
Banco de Chile SA (CHILE CC): The country's No. 2 bank reported June profit that trailed Deutsche Bank AG's estimate because of higher expenses and provision charges, analysts including Tito Labarta wrote in a note to clients yesterday. Banco de Chile closed little changed at 37.39 pesos.
Lan Airlines SA (LAN CC): Chile's biggest air carrier may report a 4.5 percent increase in second-quarter profit today. The Santiago-based airline's net income probably rose to $44.5 million from $42.6 million a year earlier, according to the average estimate of five analysts surveyed by Bloomberg. Lan fell 0.8 percent to 5,399.90 pesos.
Mexico
Empresas ICA SAB (ICA* MM): Mexico's largest construction company said second-quarter profit fell 47 percent to 64 million pesos ($6.4 million), or 13 centavos a share, from a year earlier as material costs rose. Sales rose 10 percent to 6.23 billion pesos, the company said in a statement e-mailed yesterday. ICA was predicted to earn 41 centavos a share, the average of three estimates in a Bloomberg survey. ICA fell 2.4 percent to 61.85 pesos.
Grupo Mexico SAB (GMEXICOB MM): Mexico's biggest mining company said second-quarter net income fell 14 percent to $451.7 million. Sales decreased 16 percent to $1.76 billion as copper production dropped. Grupo Mexico shares fell 3.3 percent to 16.96 pesos.
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.
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U.S. Stock-Index Futures Advance on Earnings, Merrill's Plan
By Henrietta Rumberger and Eric Martin
July 29 (Bloomberg) -- U.S. stock futures rose as Amgen Inc. and U.S. Steel Corp. posted better-than-estimated profits and Merrill Lynch & Co.'s sale of mortgage bonds spurred speculation that banks will overcome failed investments.
Amgen, the world's largest biotechnology company, advanced after raising its 2008 forecast and saying an experimental osteoporosis drug prevented fractures. U.S. Steel rallied on second-quarter earnings that more than doubled because of higher prices. Financial companies climbed on Merrill's plans to sell $8.5 billion of stock and liquidate $30.6 billion of bonds at a fifth of their face value to shore up credit ratings.
Futures on the Standard & Poor's 500 Index expiring in September added 4.5 to 1,239.6 at 9:15 a.m. in New York. Dow Jones Industrial Average futures gained 25 to 11,161 and Nasdaq- 100 Index futures climbed 6.5 to 1,820.25.
``Financials have underperformed significantly this year, yet we still have them in our portfolio with the anticipation that things will improve,'' Michael Koskuba, who helps oversee $62 billion as a portfolio manager at Victory Capital Management, said in an interview with Bloomberg Television.
U.S. stocks tumbled yesterday and the Dow average lost more than 200 points for the second time in three days after the International Monetary Fund said there is no end in sight to the housing slump.
Amgen rallied $2.52 to $63. The company said second-quarter net income fell 7.7 percent to $941 million as sales of the anemia medicines Aranesp and Epogen declined. Profit excluding certain costs was $1.14 a share, exceeding the $1.03 average estimate of 19 analysts surveyed by Bloomberg.
U.S. Steel Corp., the second-largest U.S.-based steelmaker by market value, gained $9.66, or 6.5 percent, to $154.99. Excluding certain items, per-share profit was $5.67 in the second quarter, topping the $3.82 average estimate of 14 analysts in a Bloomberg survey.
Merrill's Plan
Merrill swung between gains and losses after saying it agreed to sell $30.6 billion of collateralized debt obligations -- the mortgage-related bonds that have caused most of the firm's losses -- for $6.7 billion. The sale will result in a third-quarter pretax writedown of $4.4 billion, Merrill said.
The shares are trading closer to ``fair value'' after slumping 12 percent yesterday, Oppenheimer's Whitney wrote in a note to clients.
`Applaud This Purging'
``We applaud this purging of assets as an attempt to cut its losses and focus on stabilizing its platform and righting the franchise toward growth,'' Whitney wrote. While the stock ``still sells at a premium to book value and is expensive in our opinion, we believe the stock is getting closer to fairly valued levels as now the hardest work is behind the company.''
Whitney increased her 2008 loss estimate for Merrill to $10.50 a share from $8.37 and maintained her ``underperform'' rating on the stock.
Lehman Brothers Holdings Inc. added 23 cents to $15.27. The XLF, as the Financial Select Sector SPDR Fund is known, increased 1 percent to $20.10. The exchange-traded fund tracks bank and broker stocks.
Colgate-Palmolive Co. gained after the world's biggest toothpaste maker said second-quarter profit rose, topping analysts' estimates, on an increase in prices and higher sales in Latin America and Asia. Excluding one-time costs, earnings beat the average estimate of analysts by 4 cents a share. The shares rose 64 cents to $70.20.
General Motors Corp. climbed 25 cents to $11.25. AMR Corp., parent of American Airlines, added 15 cents to $8.15. Crude oil declined to trade around $124 a barrel in New York, giving up earlier gains driven by concern renewed violence in Nigeria will cut supply.
Housing Slump
Futures maintained gains after a private report said home prices in 20 U.S. metropolitan areas fell at a faster pace in May, indicating the three-year housing slump has not stabilized. The S&P/Case-Shiller home-price index dropped 15.8 percent from a year earlier, the biggest decline since records began in 2001, after decreasing 15.2 percent in April. The gauge has fallen every month since January 2007.
A separate report may show consumer confidence declined in July to a 16-year low. The Conference Board's measure of consumer confidence probably sank to 50.1 this month from 50.4 in June, according to a survey of economists.
The S&P 500 has declined 21 percent from an October record as the collapse of the U.S. subprime mortgage market forced financial institutions worldwide to report $468 billion in writedowns and credit losses since the beginning of 2007. That prompted economists to forecast 1.5 percent growth in the U.S. economy in 2008, the slowest since 2001. Equities also suffered as inflation increased, giving the U.S. consumer price index the steepest gain since 1991.
The second quarter is poised to mark the fourth straight quarter of declining profits for S&P 500 companies. Earnings have decreased 91 percent at financial firms, 36 percent at companies that depend on discretionary consumer spending and an average 1.6 percent at commodities producers.
Indexes of all 10 industry groups in the S&P 500 have fallen this year, led by a 32 percent tumble in financial shares. Commodities companies have fared the best, dropping 7.2 percent.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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Mid-Day Report: Dollar Rebounds Further after House Price Report
| Market Overview | Written by ActionForex.com | Jul 29 08 13:20 GMT | | |
| Dollar rebounds strongly today and remains firm after better than expected house price report. S&P/CaseShiller Composite-20 showed -15.8% yoy drop in May, down from prior -15.3% but was above expectation of -16.0%. Conference Board consumer confidence will be featured next and is expected to continue the down trend and dip further from 50.4 to 50.0. Technically speaking, dollar is still staying in tight range against most major currencies. Though, note that the rebound is EUR/USD, GBP/USD and AUD/USD has been disappointing and it fails far below near term resistance levels. Also, further fall in these pairs will firstly put key near term structure support back into focus. Secondly, it will leave the fall in EUR/USD from 1.6038 and AUD/USD from 0.9849 in five wave structure. In other words, this will argue that both EUR/USD and AUD/USD has already topped out and more downside will be seen in these pairs, at least in short term. This will also put these two pairs inline with the outlook is USD/JPY, USD/CHF and USD/CAD, i.e. more strength in dollar should be seen. Sterling was hit hard against dollar after CBI's industrial trades survey showed that 61% of respondents to the Distributive Trades Survey reported that sales in first half of July were lower than a year ago. Only 25% said sales had increased. That left the balance to -36%, which is the weakest record since the study started 25 years ago. Mortgage approvals dropped to 36k in May, which was also the lest level since at least 1999. Released earlier today Germany Jul CPI prelim was unchanged at 3.3% yoy, HICP prelim was unchanged at 3.5% yoy. Japanese unemployment rate unexpected climbed from 4.0% to 4.1% in Jun. Household spending dropped -1.8% yoy in Jun, better than expectation of -2.8%. Retail sales was flat mom in Jun, climbs 0.3% yoy. EUR/USD Mid-Day OutlookDaily Pivots: (S1) 1.5693; (P) 1.5730; (R1) 1.5777; More EUR/USD's recovery from 1.5628 was limited by 4 hours 55 EMA and dives in early US session. Intraday outlook is turned neutral for the moment and more downside could now be seen to retest 1.5611 support. Note that firstly a break below 1.5611 support will indicate that rise from 1.5302 has completed. Secondly, this will leave the fall from 1.6038 in five wave impulsive structure which in turn reaffirms that 1.6038 is at least a short term top. In such case, it will also open up a few short term bearish scenarios that focuses on 1.5284/5302 support zone. On the upside, though, strong rebound above 1.5611 and break of 1.5797 resistance will reaffirm the case that fall from 1.6038 is merely a correction to rise from 1.5302 and has completed. Stronger rally should then be seen to retest this record high. In the bigger picture, medium term consolidation from 1.6019 should have completed at 1.5302 already. Decisive break of 1.6019 record high will confirm that medium term up trend has resumed and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. However, note that sustained break below 1.5284/5301 support zone will argue that EUR/USD has completed a double top formation with bearish divergence condition in weekly RSI. It also suggests that a medium term top is in place. Deeper decline should then be seen to 1.4309/4966 support zone.
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Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:30 | JPY | Japan Household spending Y/Y Jun | -1.80% | -2.80% | -3.20% | |
| 23:30 | JPY | Japan Unemployment rate Jun | 4.10% | 4.00% | 4.00% | |
| 23:50 | JPY | Japan Retail sales M/M Jun | -0.50% | -0.60% | -0.20% | -0.10% |
| 23:50 | JPY | Japan Retail sales Y/Y Jun | -0.20% | -0.20% | 0.20% | 0.30% |
| 10:00 | GBP | U.K. CBI distribution trade Jul | -36 | -15 | -9 | |
| 12:40 | EUR | German Prelim CPI M/M Jul | 0.60% | 0.50% | 0.30% | |
| 12:40 | EUR | German Prelim CPI Y/Y Jul | 3.30% | 3.20% | 3.30% | |
| 12:40 | EUR | German Prelim HICP M/M Jul | 0.60% | 0.50% | 0.40% | |
| 12:40 | EUR | German Prelim HICP Y/Y Jul | 3.40% | 3.40% | 3.40% | |
| 13:00 | USD | U.S. S&P/CaseShiller Composite-20 Y/Y May | -15.80% | -16.00% | -15.30% | |
| 14:00 | USD | U.S. Consumer confidence Jul | 50 | 50.4 |
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U.K. Heads Towards Recession, As Consumption And Mortgage Approvals Fall To Historic Levels
| Daily Forex Fundamentals | Written by DailyFX | Jul 29 08 11:14 GMT | | |
|
Fundamental Headlines USDJPY - Japanese retail sales rose 0.3% in June from a year earlier, which was the eleventh month in a row of gains. The majority of the gain was due to rising food and fuel prices, which increased 3.6% and 3.0% respectively. Meanwhile, the jobless rate rose to 4.1%, the highest since 2006, which weighed on household spending which fell 1.8%. USDCHF - The UBS consume consumption gauge improved to 2.25 from a revised 1.95 in May. It was the first increase in four months and biggest gain since April 2007. A strong labor market and wage growth have fueled consumer spending. Domestic growth may offset slumping exports and keep the economy from contracting, allowing the SNB to keep interest rates in hold. GBPUSD - The CBI retail trade survey fell sharply to -36 from -9 in June, which was the lowest in 25 years. 61% of respondents said that sales were lower in June and the outlook remains bleak with next month's expected reading of -32. Also, mortgage approvals fell to 36,000 from 41,000 in May, which was the lowest level since at least 1999. The housing slump continues to deteriorate as credit markets remain sticky, which has begun to weigh on the broader economy. As the country approaches a recession the BoE hands remained tied as inflation has risen to 3.8%.
Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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FX Thoughts for the Day
| Daily Forex Technicals | Written by Kshitij Consultancy Services | Jul 29 08 12:58 GMT | | |
USD-CHF @ 1.0380/85.... Headed towards 1.04.R: 1.0400 / 1.0450 / 1.0500 / 1.0550 The sudden dollar bullishness has resulted in the pair changing direction mid-way towards Support at 1.0300, something we were expecting earlier in the day. However, from here the rally is expected to be checked at 1.0400. A break above would be very bullish to the overall momentum which is currently neutral. GBP-USD @ 1.9873/77.... Could rise furtherR: 1.9975 / 2.00 / 2.0050-63 Facing a strong Resistance at 1.9970, Cable has seen a slide in the day. It managed to find Support near 1.9865, however, if it is unable to rise towards 1.9900 and beyond in the day, there could be further slides in the coming days. There is an important Support that needs to be noted at 1.9830, which if broken is expected to change the bias from bullish, currently, to bearish. Yesterday a close above 1.9925 was seen and a follow-up rally was expected today. However, a fall from here, as long as 1.9830 is not broken, will not change the overall momentum. AUD-USD @ 0.9545/48... Could test 0.95R: 0.9600-10 / 0.9640-50 / 0.9700 Aussie has a fall in the day as the Dollar has strengthened since morning. For the remainder of the day, there is an important Support at 0.9550-35, a break of which will test the longer-term trendline at 0.9500. To see the above mentioned trendline click on: http://www.kshitij.com/graphgallery/audcandle.shtml The Support at 0.9500 is a longer term Support and mot expected to break soon. If, however, a break below were seen, it would raise serious threats to the overall bullish momentum. For now, a test of 0.9500, also the Max Low for the day, seems likely over the US session today. Kshitij Consultancy Service Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved. | |
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Morning Market Recap: Treasuries Sell off, Equity Futures Point to Gains
| Market Updates | Written by CEP News | Jul 29 08 13:10 GMT | | |
| (CEP News) - Treasury yields are higher along with equity futures on Tuesday despite further writedowns from Merrill Lynch. The U.S. dollar is broadly stronger, except against the CAD, where it is relatively unchanged. Merrill will raise $8.5 billion in a common equity offering after writing off $5.7 billion due to a sale of asset-backed securities. "Yields drifted higher in Asia despite the U.S. bank news, fell in conjunction with UK yields on the poor UK data, but are rising coming into the U.S. session along with a rise in the US dollar and decline in the price of oil," wrote T.J. Marta, fixed income strategist at RBC Capital Markets. U.S. two-year yields are up 4.0 bps to 2.61%, with five-year yields up 4.8 bps to 3.36%, 10-year yields up 5.3 bps to 4.05% and 30-year yields up 5.3 bps to 4.65%. The Eurodollar March 09 contract is down 4.0 ticks to 96.84. The yield curve is steeper, with the 10/2-year spread up 1.2 bps to 143.78 bps. Yields on two-year Canadian government bonds are down 0.8 bps to 3.06%, with five-year yields up 0.8 bps to 3.36%, 10-year yields up 2.0 bps to 3.80% and 30-year yields up 3.1 bps to 4.16%. The December 08 BAX contract is up 1.0 tick to 96.88. The Canadian 10-year note is yielding 25.67 bps less than the U.S. 10-year note. In Germany, returns on two-year German bonds are down 0.8 bps to 4.35%, with five-year yields down 2.6 bps to 4.42%, 10-year yields down 3.4 bps to 4.49% and 30-year yields down 1.9 bps to 4.79%. Yields on UK two-year bonds are down 4.6 bps to 4.88%, with five-year yields down 5.2 bps to 4.85%, 10-year yields down 5.4 bps to 4.90% and 30-year yields down 2.9 bps to 4.56%. U.S. equity market futures are higher with contracts on the Dow Jones Industrial Average up 26 points to 11162, the S&P 500 up 5 points to 1240 and the Nasdaq up 6 points to 1820. European stock markets are mixed, with the Eurostoxx down 1 point to 2825, the UK FTSE 100 up 21 points to 5333 and the German DAX down 24 points to 6327. Asian markets were lower, with the Japanese Nikkei closing down 194 points to 13159 and the Hang Seng Index down 429 points to 22258. Toronto's S&P/TSX composite index closed flat at 13304, the Dow Jones industrial average down 240 points to 11131, the S&P 500 down 23 points to 1234 and the Nasdaq down 46 points to 2264. European stock markets closed in mixed territory with the Eurostoxx down 1 point to 2825, the UK FTSE 100 up 21 points to 5333 and the German DAX down 24 points to 6327. The Canadian dollar is down 0.0003 to 0.9775 against the U.S. dollar (1.0229 USD/CAD) and up 0.36 to 105.44 against the yen. The U.S. dollar is up 0.40 to 107.85 against the yen and the Dollar Index is up 0.196 to 72.845. The euro is down 0.0050 to 1.5691 against the U.S. dollar, down 0.0047 to 1.6050 against the Canadian dollar, up 0.0004 to 0.7898 against the pound sterling and is higher by 0.05 to 169.22 against the yen. The pound sterling is down 0.0072 to 1.9867 against the U.S. dollar and down 0.0067 to 2.0323 against the Canadian dollar. WTI crude oil is down $1.05 to $123.68. The front month gold contract at the Chicago Board of Trade is down $4.50 to $923.30 per ounce. All data taken at 9:01 a.m. EDT. Generated by CEP Newswires, edited by Stephen Huebl, shuebl@economicnews.ca CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer. | |
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