Mid-Morning Market Recap: Equities Up, Treasuries Down After ADP and TAF

Market Updates | Written by CEP News | Jul 30 08 14:28 GMT |

(CEP News) - Equities, the U.S. dollar and Treasury yields are continuing their two-day surge after a report on U.S. private employment was much stronger than expected and the Federal Reserve announced new measures to support market liquidity. Payroll company ADP said the U.S. added 9k jobs in July, while economists were expecting job losses of 60k. Economists dismissed the figures as overly optimistic, but markets embraced the positive news. Dow futures jumped 35 points and Treasury yields rose 2-4 basis points across the curve. The U.S. dollar rose 0.2% against the euro, yen and pound sterling. Later, those gains were extended when the Federal Reserve announced it will be conducting a $25 billion, 84-day Term Auction Facility in addition to the $75 billion 28-day facility. The Fed said it is hoping to address the ongoing "fragility" of the financial system. U.S. two-year yields are up 6.5 bps to 2.69%, with five-year yields up 6.5 bps to 3.43%, 10-year yields up 6.5 bps to 4.10% and 30-year yields up 6.4 bps to 4.69%. The Eurodollar March 09 contract is down 3.0 ticks to 96.80. The yield curve is steeper, with the 10/2-year spread up 0.4 bps to 142.03 bps. "The lending facility has hurt the [Treasury] market. The feeling is that it reduces the risk of flight-to-quality but we think that's a mistake. To us, it points out that the problems are going to persist and we take that as a positive for bonds," a Treasury trader in New York said. Yields on two-year Canadian government bonds are up 3.7 bps to 3.10%, with five-year yields up 3.4 bps to 3.39%, 10-year yields up 3.1 bps to 3.82% and 30-year yields up 2.6 bps to 4.17%. The December 08 BAX contract is down 3.0 ticks to 96.85. The Canadian 10-year note is yielding 28.2 bps less than the U.S. 10-year note. In Germany, returns on two-year German bonds are down 0.8 bps to 4.34%, with five-year yields down 2.7 bps to 4.38%, 10-year yields down 3.7 bps to 4.44% and 30-year yields down 3.8 bps to 4.73%. Yields on UK two-year bonds are down 1.5 bps to 4.86%, with five-year yields down 1.7 bps to 4.84%, 10-year yields down 2.4 bps to 4.87% and 30-year yields flat at 4.56%. Toronto's S&P/TSX composite index is up 94 points to 13437, the Dow Jones industrial average is up 142 points to 11540, the S&P 500 is up 14 points to 1278 and the Nasdaq is up 17 points to 2337. European stock markets are also higher, with the Eurostoxx up 49 points to 2889, the UK FTSE 100 up 104 points to 5424 and the German DAX up 88 points to 6486. The Canadian dollar is down 0.0014 to 0.9757 against the U.S. dollar (1.0251 USD/CAD) and up 0.01 to 105.62 against the yen. The U.S. dollar is up 0.16 to 108.26 against the yen and the Dollar Index is up 0.224 to 73.533. The euro is down 0.0039 to 1.5550 against the U.S. dollar, down 0.0019 to 1.5940 against the Canadian dollar, down 0.0016 to 0.7862 against the pound sterling and is lower by 0.17 to 168.35 against the yen. The pound sterling is down 0.0010 to 1.9779 against the U.S. dollar and up 0.0020 to 2.0277 against the Canadian dollar. WTI crude oil is down $0.92 to $121.27. The front month gold contract at the Chicago Board of Trade is down $20.20 to $896.50 per ounce. All data taken at 10:12 a.m. EDT. By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.

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Today's Market Outlook

Daily Forex Technicals | Written by Windsor Brokers Ltd | Jul 30 08 15:12 GMT |

EURUSD Rallied to 1.6040, 15 July all-time high, before reversal. Confirmation of 1.5945, 22 July lower top secondary and losing 1.5710 support, underpinned latest attempt higher that stalled at 1.5772. The following weakness collapsed to 1.5553 ahead of consolidation. Fresh weakness followed, extending losses to 1.5522 today. Oversold studies signal correction towards 1.5585, 61.8% retracement of 1.5303/1.6040 advance, before heading lower. Res: 1.5587, 1.5600, 1.5617, 1.5630 Sup: 1.5522, 1.5505, 1.5460, 1.5436 GBPUSD Left a lower top at 2.0075 on 22 July, against 2.0162, 15 July peak, from where a choppy retreat reached 1.9817 on 24 July, before bouncing to 1.9978. A choppy consolidation was followed by a breakdown through 1.9817, reaching 1.9760, ahead of consolidation. Early signs of fresh weakness emerging, latest dip under 1.9768/60 raises fears of an extension to 1.9712/1.9667, possibly 1.9666/50 on a break. Res: 1.9823, 1.9854, 1.9863, 1.9890 Sup: 1.9712, 1.9697, 1.9675, 1.9666 USDJPY Declined to 95.77, 2008 low on 17 Mar, ahead of a steady advance to 108.59, 2008 high, posted 16 June. The failure to clear the 200-day MA underpinned a three-legged correction that found support at 103.77 on 16 July. Subsequent rally cleared 107.04, 200-day MA, now looking for 108.59 test. Only a loss of 107.00/106 would question bulls. Res: 108.44, 108.59, 108.97, 109.22 Sup: 108.00, 107.71, 107.45, 107.30 USDCHF Recovered from 1.0010, 15 July 3 month low, to 1.0406 on 25 July, interrupted by a dip to 1.0314. A swing lower almost retested 1.0316, leaving a slightly higher low at 1.0318, ahead of an upside break through 1.0406, to reach 1.0479. Consolidation over 1.0440/43 now being followed by fresh gains towards 1.0494/1.0541, next target area. Res: 1.0541, 1.0573, 1.0589, 1.0600 Sup: 1.0479, 1.0450, 1.0440, 1.0406 Windsor Brokers Ltd http://www.windsorbrokers.biz The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

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Fed Support Markets to Favor the Federal Star!

Daily Forex Fundamentals | Written by Crown Forex | Jul 30 08 15:00 GMT |

The Fed announced extra measures to alleviate stressed markets and extended two of their lending facilities into January 30 while expanding their loans and enhancing their swap lines and the ECB and SNB extended the period inline with the Feds as well. The ADP came strong and Wall Street is surly on the run and that is all adding to the dollar's favor as is allocates further gains against majors. The euro after it attempted to consolidate 1.5580s in attempts to trade solidly above then all efforts went a waste as the euro reversed to the downside to set the low at 1.5521 where if the euro was to breach 1.5510s will head through till 1.5480s. The pair is oversold on short-term basis and in need to momentum adjustment, while the strong dollar is still withholding the currency back. Sterling has surely set targets in the downside as it solidly trades below 1.9840s where it failed to exceed today content with only setting the intraday high at the level. The pair extended the downside to strike the low of 1.9745, while shall the pair continue to trade below 1.9760s extending the south headings to below 1.9720s targets are to be at 1.9640s once more though still the pair lacks enough bearish momentum to withhold the headings south. The USDJPY is shy off our target at 108.40s where it set the high at 108.32 after it did find support from today's lows set at 107.60s; still though the pair is still lingering among overbought areas and that solid resistance level might hold the pair and trigger the correction while if the pair breaches the level will head to 108.60-80 ahead of 109 levels while again momentum is weak to see the pair withhold those levels. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Natural Gas Falls to 4-Month Low on Outlook Inventories Gained

By Reg Curren

July 30 (Bloomberg) -- Natural gas in New York fell to the lowest in more than four months amid speculation inventories expanded as demand dropped and domestic production increased.

Inventories gained 71 billion cubic feet in the week ended July 25, according to the median of 11 analyst estimates complied by Bloomberg News. The average change for this time of year over the last five is an increase of 55 billion.

``The supply side is outperforming, while the demand side is underperforming,'' said George Hopley, an analyst at Barclays Capital Inc. in New York. ``Demand hit a plateau when we didn't get a heat wave in July.''

Natural gas for September delivery fell 8 cents, or 0.9 percent, to $9.05 per million British thermal unit at 10:52 a.m. on the New York Mercantile Exchange. Futures earlier touched $8.81, the lowest intraday price since $8.664 per million Btu on March 20.

Gas has fallen 32 percent this month and is below its 200- day moving average of $9.517 per million Btu. The fuel is 40 percent higher in the past year and on this day in 2007 closed at $6.499 per million Btu.

``People are giving up on natural gas, believing the highs are over,'' said Stephen Briggs, a partner at Intermarket Management LLC in Verona, New Jersey.

Higher prices have prompted increased exploration and production of natural gas in the U.S., countering a reduction in shipments from Canada and lower imports of liquefied natural gas.

Onshore production in the U.S. is expected to increase 8 percent this year, the Energy Department said in its monthly Short-Term Energy Outlook released July 8. Higher output may prompt lower prices.

More Rigs

The number of onshore rigs exploring for gas and oil in the U.S. reached 1,957 for the week ended July 25, 10 percent more than the same week a year earlier, according to data from Baker Hughes Inc., the world's third-largest oilfield-services provider.

The price rise has put more rigs to work in the U.S. and Canada, which will bring on additional output in the coming months, said Kyle Cooper, an analyst at IAF Advisors in Houston. Even as gas falls below $9, ``that's not going to prohibit drilling,'' he said.

Forecasts call for lower temperatures in the Northeast in the weeks ahead, prompting sale of some gas contracts amid an outlook supplies will expand as demand declined, said Hopley.

``The overnight models are showing heat falling away from the Northeast in the two-week outlook,'' he said.

No Storms

Higher temperatures typically curb storage gains by increasing demand from gas-fired power plants for electricity to run air conditioners. Storms or hurricanes can enter the Gulf of Mexico and pare production from offshore rigs and platforms.

``Traders are more concerned about tropical storm activity this time of year and there's just nothing out there, aside from a little wave off Africa,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``We're seeing more storm premium being pushed out of the market.''

An area of low pressure has formed off the coast of western Africa and may develop into a tropical depression, the National Hurricane Center in Miami said today. No other storm formation is expected in the next 48 hours.

Inventories may end the summer near 3.4 trillion cubic feet, providing adequate supplies for heating needs next winter, analysts have said.

Supplies are 2.396 trillion cubic feet, or 0.9 percent, below the five-year average of 2.418 trillion for this time of year, the Energy Department said July 24.

The department is scheduled to release its weekly inventory report tomorrow at 10:35 a.m. in Washington.

To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.

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Iraq's Oil Output Is Highest Since U.S.-Led Invasion

By Tony Capaccio

July 30 (Bloomberg) -- Iraq's daily oil production is at its highest level since the March 2003 U.S. invasion, in large part thanks to improved security, according to a Pentagon audit.

``Iraqi oil production set new records this quarter, with output reaching 2.43 million barrels per day, the highest quarterly average since the invasion,'' Stuart Bowen, the Defense Department's inspector general for Iraq reconstruction, wrote in his 18th quarterly report to Congress on the expenditure of $50 billion in U.S. economic aid. Production fell to 1.3 million barrels a day during 2003.

A $34 million security system of ditches, fences and concertina wire has stopped attacks since July 2007 on the pipeline from Kirkuk in the north to a major refinery in Baiji, central Iraq, according to the report, which was released today. The result has been a substantial rise in crude oil exports from the north, Bowen said

``Iraq's burgeoning oil windfall, which has yielded more than $33 billion in revenues to date in 2008,'' may result in another $7 billion that could be spent on reconstruction as U.S. spending winds down, Bowen said. Analysts say Iraq has the world's third-largest reservoir of untapped crude oil.

Contributing to Iraq's improved security was the so-called surge of almost 30,000 U.S. military personnel that ended this month plus operations of the Iraq Security Forces, who cleared Muslim militias from Basra, Baghdad's Sadr City, Mosul and Amara, said Bowen, who for the third time this year reported increasing improvements in Iraq's security and economy.

`Year of Transfer'

These operations have been followed by Iraqi government commitments to spend more than $100 million in each of these cities, he said.

The Iraqi government is spending more money on reconstruction in this ``year of transfer,'' Bowen said, up to an estimated $13 billion this year compared with $4.2 billion in U.S. funds.

An indication of improved security is the reduction in U.S. combat deaths, with four so far this month, plus another five non-combat deaths, according to the Pentagon. The four combat deaths is the lowest number since May 2003.

``As heartening as that is, it is not the metric by which we measure success but it is certainly an encouraging sign,'' spokesman Geoff Morrell said yesterday at a Pentagon briefing.

Since the March 2003 invasion, 4,117 U.S. members of the U.S. military have died in combat in Iraq, according to Pentagon figures.

Increased Exports

Iraq's increased production between July 2007 and May was especially noticeable in the north, where exports rose by about 91.3 million barrels, or about $8.2 billion, Bowen said.

In addition to expanded exports, the uninterrupted growth in supplies of refined petroleum products ``has contributed to the increase in electricity production and improved living conditions of the Iraqi people, making fuel available for heating, cooking and transportation,'' he wrote.

In contrast, Bowen wrote in January 2007 that at least some of the oil storage facilities at Baiji were under insurgent control.

``It's a good-news story, but the cloud in the silver lining is that the actual production capacity has been barely sustained and hardly expanded,'' Yahia Khairi Said, director of Middle East Revenue Watch at the London School of Economics, said today in a telephone interview. ``It was in a bad shape to begin with and during the war. Iraq has not succeeded in properly maintaining the fields or expanding their capacity.''

Cheney Comments

At the start of the Iraq war more than five years ago, Vice President Dick Cheney said Iraq might be able to increase oil production to 2.5 million to 3 million barrels daily by the end of 2003. Iraq pumped 2.48 million barrels a day in February that year, the last full month before the war began. Production fell 44 percent the following month, to 1.4 million barrels a day. It decreased to 1.3 million barrels during 2003, according to data from the U.S. Department of Energy's Information Administration.

The department said in an August 2007 report that the Baiji refinery ``has been subject to repeated disruptions and power loss and generally operates at around 75 percent capacity.''

Bowen said the turnaround in the north ``stems in part from the improved security across Iraq and the success of the Pipeline Exclusion Zone,'' barriers that protect oil pipelines.

The Iraqi government plans to build similar protection systems for the pipelines between Baghdad and Karbala and between Baiji and Baghdad, the Pentagon said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net.

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Noble Energy Posts Second-Quarter Loss on Hedging

By Joe Carroll

July 30 (Bloomberg) -- Noble Energy Inc., the oil producer that's expanding in the Rocky Mountains and Africa, posted its first quarterly loss in two years because of a drop in the value of contracts that lock in prices on future petroleum sales.

The loss was $144 million, or 84 cents a share, compared with profit of $209 million, or $1.21, a year earlier, Houston- based Noble said today in a statement. Excluding the change in contract valuations, profit was $1.93 a share, 12 cents lower than the average of 18 analyst estimates compiled by Bloomberg.

The company fell short of estimates because of an almost 10-fold increase in expenses related to a deferred-compensation program, said Michael Jacobs, an analyst at Tudor, Pickering, Holt & Co. in Houston. Revenue jumped 52 percent to $1.21 billion and output rose 9 percent, Noble said.

``They continue to run the company exceptionally well,'' said Darren Peers, who helps manage $30 billion at NWQ Investment Management in Los Angeles. ``They had some higher compensation expense, but that's always a bit of a moving target. Operationally, they were quite good.''

Noble also announced the $291 million acquisition of 15,500 acres in western Oklahoma with production equivalent to 25 million cubic feet of gas a day. The company plans to drill 70 wells on the properties in the next two years to double output.

Shares Fall

Noble fell 11 cents to $74.51 at 9:40 a.m. in New York Stock Exchange composite trading. The stock has dropped 6.3 percent this year, the third-worst performance in the 10-member index of independent oil and gas producers in the Standard & Poor's 500.

U.S. accounting rules require oil and gas producers that use forward sales to record costs or gains to reflect changes in the valuation of their hedging contracts based on current market prices. Such costs, which don't affect cash flow or the amount of money a producer is paid for oil and gas, reduced Noble's net income by $481 million, according to the statement.

The contracts locked in prices before crude surged to a record and natural-gas futures rose to their highest level since 2005. Noble put many of its hedges in place late last year, after oil prices jumped 57 percent and surpassed $99 a barrel for the first time.

So-called market-to-market adjustments represent ``money left on the table'' as prices continued to rise this year, Kenneth Carroll, an analyst at Johnson Rice & Co. in New Orleans, said in a July 16 interview. Carroll said he expected Noble to earn $2.13 a share, excluding the hedging loss.

Production Rises

The company pumped the equivalent of 218,000 barrels of oil a day during the quarter, up from 200,000 a year earlier. Rising gas output in West Africa and Israel more than made up for a drop in crude production in every region where Noble has operations.

Noble was paid an average of $105.46 per barrel of crude, a 46 percent increase. The company's average gas price was $5.86 per thousand cubic feet, up 11 percent from a year earlier.

Chief Executive Officer Charles Davidson is expanding the search for untapped oil and gas fields to the coastal waters of Equatorial Guinea, deeper areas of the Gulf of Mexico and the North Sea.

Noble's 28 percent profit margin is fourth-highest in the company's U.S.-based peer group, behind Fort Worth, Texas-based Quicksilver Resources Inc., Ultra Petroleum Corp. and CNX Gas Corp., according to data compiled by Bloomberg.

(Noble is scheduled to hold an earnings conference call for investors and analysts, starting at 10 a.m. New York time. To listen, access a broadcast at http://www.nobleenergyinc.com.)

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.

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Hess Earnings Rise 62% on Higher Prices, Production

By Dan Lonkevich

July 30 (Bloomberg) -- Hess Corp., the fifth-largest U.S. oil company, said second-quarter profit rose 62 percent on higher production and prices.

Net income gained to $900 million, or $2.76 a share, from $557 million, or $1.75, after payment of dividends on preferred stock, a year earlier, the New York-based company said in a statement today. Hess was expected to post earnings of $2.74 a share, according to 14 analyst estimates compiled by Bloomberg.

Hess was paid 74 percent more for its oil in the quarter and 60 percent more for its natural gas. Profit from production, which climbed to 393,000 barrels of oil equivalent per day from 378,000, more than doubled to $1.03 billion.

``Exploration and production exceeded everybody's expectations,'' said Fadel Gheit, an analyst at Oppenheimer & Co. in New York, who rates Hess share `` market perform'' and doesn't own any. ``The only downside was refining. The refinery picture is not getting any better.''

Refining and marketing had a loss of $52 million, compared with a profit of $122 million a year earlier. Hess attributed the refinery loss to the disparity between the cost of purchasing oil and the price of refined products such as gasoline and diesel, which hasn't kept pace with the rising cost of oil. Gasoline demand fell as prices rose above $4 per gallon.

Hess has two refineries, one in Port Reading, New Jersey, and another in the U.S. Virgin Islands, where the St. Croix site is a joint venture with Petroleos de Venezuela SA. The company also sells gasoline through a network of about 1,350 service stations in 14 states on the U.S. East Coast.

Oil, Gas Prices

The company's oil fetched $104.29 per barrel, up from $60.05 a year earlier. Its natural gas earned $7.81 per million British thermal units, up from $4.88. Second-quarter revenue climbed 56 percent to $11.7 billion.

Oil futures on the New York Mercantile Exchange averaged $123.80 in the quarter, a gain of 90 percent from a year earlier. Gas averaged $11.47 per million Btu, up 50 percent.

Chief Executive Officer John Hess has been refocusing the company's capital on regions with the biggest potential reserves such as offshore Gulf of Mexico, Brazil, Australia, Libya and West Africa.

Hess fell $1.78, or 1.9 percent, to $92.47 at 9:37 a.m. in New York Stock Exchange composite trading. Before today, the stock had risen 6.6 percent this year.

Exxon Mobil Corp. is the largest U.S. oil company, followed by Chevron Corp., ConocoPhillips and Marathon Oil Corp.

(Hess will conduct a conference call beginning at 10 a.m. New York time, accessible on the company's Web site at http://www.hess.com.)

To contact the reporter on this story: Dan Lonkevich in New York at dlonkevich@bloomberg.net.

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Enterprise Shuts Independence Pipeline for Four Days

By Jordan Burke

July 30 (Bloomberg) -- Enterprise Products Partners LP, the second-biggest U.S. pipeline partnership by market value, shut its Independence Trail natural-gas pipeline for about four days to evaluate previous repairs.

The pipeline was shut yesterday at about 9 p.m. local time, Rick Rainey, a company spokesman said today in an e-mail. The Houston-based company is reviewing repairs completed in June that closed the line for 55 days.

A leak on the $286 million Independence Trail pipe, which connects to the Independence Hub, was detected April 9, shutting the line. Service resumed on June 3. Natural-gas futures traded in New York dropped as much as 1.6 percent when Enterprise said it was resuming service.

The Independence Hub, located in 8,000 feet (2,438 meters) of water, gathers gas from 15 wells in the eastern-most producing area of the Gulf of Mexico. At full daily production of 1 billion cubic feet, the hub accounts for 2 percent of U.S. gas supplies and represents 10 percent of deliveries from the Gulf, according to the Enterprise Products Web site.

The leak originated in an O-ring gasket on a pipeline flex joint in about 85 feet of water, Enterprise has said. Independence Trail is a 134-mile, 24-inch diameter conduit that connects offshore production with the Tennessee Gas system.

The company initially said repairs on the line would be completed within a month. Enterprise later said more extensive repairs were needed after workers encountered problems.

Anadarko, Helix

Enterprise owns the pipeline and 80 percent of the Independence Hub, which is operated by The Woodlands, Texas- based Anadarko Petroleum Corp., one of the producers the pipeline serves. Houston-based Helix Energy Solutions Group Inc. owns the remaining 20 percent of the processing platform.

Enterprise transports oil, natural gas and gas liquids through more than 35,000 miles of pipelines. Houston-based Kinder Morgan Energy Partners LP is the largest U.S. pipeline partnership by market value.

Enterprise fell 7 cents, or 0.2 percent, to $28.72 at 10:09 a.m. in New York Stock Exchange composite trading. The units have dropped 9.9 percent this year.

To contact the reporters on this story: Jordan Burke in New York at jburke29@bloomberg.net;

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Southern Co.'s Profit Declines 3% on Tax Liability

By Jim Polson

July 30 (Bloomberg) -- Southern Co., the largest U.S. electricity producer, said second-quarter profit fell 3 percent on costs related to court rulings on tax liabilities for overseas projects.

Net income dropped to $416.4 million, or 54 cents a share, from $429.2 million, or 56 cents, a year earlier, Atlanta-based Southern said today in a statement. Excluding the tax costs and another one-time item, the results beat by 6 cents the average of 11 analyst estimates compiled by Bloomberg.

Sales jumped 12 percent to $4.22 billion as more people moved into its utility territories and electricity rates rose. Southern supplies power to 4.4 million homes and businesses in Georgia, Alabama, Mississippi and Florida and sells electricity under long-term contracts to other utilities in the Southeast.

``Their retail utility business benefited strongly from higher rates that resulted from increased investment in power lines and environmental controls,'' said Nathan Judge, an analyst at Atlantic Equities in London who rates Southern shares ``overweight'' and owns none.

Southern rose 22 cents to $35.95 at 9:54 a.m. in New York Stock Exchange composite trading. The stock, which has 7 buy recommendations from analysts and 11 holds, has fallen 7.2 percent this year, compared with the 11 percent decline in the 20-company Philadelphia Stock Exchange Utility Index.

Beats Estimates

The results included costs of $67 million related to taxes that may be owed on so-called sale-in, lease-out arrangements at foreign projects as a result of rulings against other companies. The costs were reported by Southern on June 26.

Excluding the tax costs and a loss on investment in synthetic fuel production, a business Southern exited, profit was 63 cents a share. On that basis, the analysts whose estimates were compiled by Bloomberg expected profit of 57 cents.

Higher revenue at its utilities added 17 cents to second- quarter profit, Southern said. The company's largest utility, Georgia Power, won a $321.7 million rate increase, effective Jan. 1, to pay for system improvements and emissions cuts from coal-fueled plants.

Higher rates and the addition of 40,000 utility accounts companywide outweighed a 1.2 percent decline in retail power deliveries as cooler weather reduced demand for electricity to run air conditioners, Southern said.

Industrial Sales

``Market-based rates to some of our industrial customers have begun to produce significant revenues,'' Chief Executive Officer David Ratcliffe, 59, said in an interview. ``As prices go up in the fuel part of our business, those rates go up pretty significantly.''

Southern is the second-largest U.S. consumer of coal behind American Electric Power Co. Its plants can produce 42,000 megawatts, enough to supply 33.6 million average U.S. homes, based on an estimate by the Energy Department in Washington.

The price of eastern U.S. coal more than doubled during the quarter to $103.23 a ton. Western coal, also burned in Southern's plants, rose 63 percent, to $63 a ton.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.

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Fed Extends Emergency Loan Programs Through January

By Scott Lanman

July 30 (Bloomberg) -- The Federal Reserve extended its emergency lending programs to Wall Street firms through January after policy makers judged that markets are still too weak to go without a backstop from the central bank.

The Fed also plans to give securities dealers options for tapping one of the loan programs to ensure financing through the ends of quarters, when funding needs can jump. Commercial lenders will be able to borrow from the central bank for a longer period, and the Fed boosted its swap line with the European Central Bank.

Today's announcement reflects continued turmoil in financial markets, after three U.S. banks failed in as many weeks. It's the latest step in officials' efforts to combat the yearlong credit crisis, after the Fed's rescue of Bear Stearns Cos. in March and the Treasury's backstop plan for Fannie Mae and Freddie Mac this month.

``The U.S. is pulling out all the stops here to make sure we don't have a terrible downturn or a collapse in the financial system,'' said Allen Sinai, chief global economist at Decision Economics in Boston. ``There isn't anything else the Federal Reserve can do but to keep pumping liquidity into the system.''

The Primary Dealer Credit Facility for direct loans to securities firms and the Term Securities Lending Facility for loans of Treasuries, both begun in March, will now extend through Jan. 30. They would then be canceled if the Fed judges that markets ``are no longer unusual and exigent,'' the Fed said in a statement today in Washington.

Outlook for Rates

``These facilities do indicate strains that are part of the risks in the economic outlook,'' said Brian Sack, a former Fed research manager who is now senior economist at Macroeconomic Advisers LLC in Washington. Sack added that today's decision bolstered his expectation for the Fed to hold off on raising interest rates until next year.

The Fed made today's announcement ``in light of continued fragile circumstances in financial markets,'' the central bank said today.

Policy makers are forecast to keep their benchmark rate at 2 percent when they next meet on Aug. 5. Traders still see a 71 percent chance of at least a quarter-point increase by year-end, futures prices show.

Chairman Ben S. Bernanke and New York Fed President Timothy Geithner spearheaded the introduction of three lending programs since December as the credit crisis engulfed Wall Street.

Bernanke Message

Bernanke flagged the likelihood of the extension in a July 8 speech, saying the Fed is ``strongly committed'' to financial stability. The programs represent a provision of Fed credit to nonbanks unprecedented since the Great Depression.

The Fed will start auctions of options of as much as $50 billion in the TSLF on top of the $200 billion program, which loans Treasuries to securities firms in exchange for asset-backed securities and other collateral.

New York Fed officials plan to consult with the primary dealers of U.S. government bonds on the TSLF options program, the district bank said in a separate statement. The options plan is aimed at providing liquidity for two weeks or less surrounding key financing periods to be identified. Further details are planned on or before Aug. 8, the New York Fed said.

The central bank also will start selling 84-day loans to commercial banks under the Term Auction Facility beginning next month, in addition to the sales of 28-day loans that have occurred since the program began in December. The biweekly sales will alternate between auctions of $75 billion in 28-day loans, and $25 billion in 84-day loans.

$150 Billion

The Fed plans to keep the TAF program at $150 billion and released a schedule indicating it will remain at that size through November.

In related moves, the European Central Bank and Swiss National Bank are also extending their operations to include auctions of 84-day funds, the Fed said in a press release. The Federal Open Market Committee authorized an increase in the ECB's swap line with the Fed to $55 billion from $50 billion; the SNB's swap line is unchanged at $12 billion. The swaps are authorized through Jan. 30.

The Fed started the lending programs for investment banks under its authority to lend to nonbanks in ``unusual and exigent circumstances.'' Officials said at the time the Primary Dealer Credit Facility, which provides direct loans, would last for ``at least'' six months. The central bank had not previously given an end date for the TSLF.

The PDCF has shown a zero balance for four straight weeks. The loans, once as high as $37 billion, fell to zero after the Fed took on a portfolio of assets in June as part of a March agreement to ease Bear Stearns's acquisition by JPMorgan Chase & Co.

Crunch `Spreading'

``I would be surprised if Jan. 30 marks the end of the measures,'' said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina. ``The credit crunch is very much with us and, if anything, spreading a bit to consumer borrowing.''

Regulators took over IndyMac Bancorp Inc., a California lender, on July 11 after a run on deposits. First National Bank of Nevada and California-based First Heritage Bank were shuttered July 25.

Today, President George W. Bush signed into law a housing bill that provides Treasury Secretary Henry Paulson the power to make equity purchases in Fannie Mae and Freddie Mac. Paulson asked for the authority July 13 after the shares of the firms, which own or guarantee almost half of the $12 trillion of U.S. mortgages, slid to the lowest level in more than 17 years.

The Fed provides loans to commercial banks of as long as 90 days through the traditional discount window, which carries an interest rate of 2.25 percent, a quarter-point higher than the Fed's benchmark rate. Lending rose to a record daily average of $16.4 billion in the week ended July 23.

Economists compared the TSLF options program to a Fed initiative aimed at potential money shortages during the 2000 computer-system changeover. The Fed sold options on almost $500 billion of repurchase agreements for standby financing. None were exercised.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net

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Belgium's Growth Slows to Lowest Rate in Three Years

By Jurjen van de Pol and Fergal O'Brien

July 30 (Bloomberg) -- Economic growth in Belgium weakened to the slowest pace in more than three years in the second quarter as soaring inflation sapped consumers' purchasing power and foreign demand cooled.

The Belgian economy, the sixth-largest in the euro region, expanded 0.3 percent from the prior quarter, the lowest rate since the first three months of 2005, the nation's central bank in Brussels said today. From a year earlier, growth eased to 2 percent from 2.2 percent.

The weaker growth in Belgium may be repeated across the 15 nations that share the euro as surging oil and food prices lift costs and erode demand. The Bank of Spain today said the Spanish economy grew the least in 15 years in the April-June period, while economists at Citigroup Inc. and Barclays Capital forecast that the overall euro-area economy probably contracted in the latest quarter.

``Consumer confidence has declined in the second quarter, also business sentiment, so consumption was rather weak,'' said Peter Vanden Houte, chief economist at ING Belgium in Brussels. ``It will be the same elsewhere. We think German growth will be negative in the second quarter and all in all, euro-area growth will be close to zero.''

Belgian consumer sentiment fell to the lowest in almost three years this month and business confidence also declined. Brussels-based Delhaize Group on July 18 cut its annual profit and sales forecasts and now expects its operating margin to contract for the first time in six years.

Fastest Pace

Inflation accelerated in July to 5.9 percent, the fastest pace in almost a quarter-century, the Ministry of Economic Affairs in Brussels said in a separate report today. A 58 percent jump in crude oil in the past year has pushed up gasoline prices and home heating costs across the euro region.

Adding to pressure on Belgium's economy, the four-month-old government collapsed in mid-June after failing to heal a rift between French- and Dutch-speaking parties that threatens to split the country. King Albert II last week urged Prime Minister Yves Leterme to overcome linguistic and economic differences between the Dutch-speaking region of Flanders in the north and French-speaking Wallonia in the south.

The Belgian central bank last month cut its economic-growth forecast for this year to 1.6 percent from 1.9 percent, which would be the slowest expansion since 2003. Growth is expected to cool further to 1.5 percent next year, according to the bank, compared with 2.7 percent in 2007.

Economic Activity

``Economic activity is going to be lower than what we have known in the last years,'' Guy Quaden, head of the central bank, said in making the forecasts.

The central bank also raised its inflation outlook for this year to 4.1 percent, which would be more than twice the 2007 rate. Euro-area inflation is expected to accelerate to 4.1 percent this month, according to a Bloomberg News survey of economists. The euro-area price data will be published tomorrow.

To contact the reporters on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net; Fergal O'Brien in Dublin at fobrien@bloomberg.net.

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Gas Natural Suspended as Board Meets on Fenosa Bid

By Paul Tobin

July 30 (Bloomberg) -- Gas Natural SDG SA was suspended from Madrid trading before a board meeting to discuss the purchase of a 45 percent stake in Union Fenosa SA, Spain's third-largest utility, that would trigger a bid for the company.

Gas Natural, the nation's largest gas supplier, will offer 16.8 billion euros ($26.2 billion), or 18.33 euros per Fenosa share, El Mundo reported on is Web site, without identifying who provided the information.

The Barcelona-based gas company previously tried and failed to buy Spain's top two power producers, Endesa SA and Iberdrola SA. By acquiring Fenosa, the third-largest, it would be able to expand in electricity generation and distribution as power producers encroach on its dominance in the domestic gas market.

``Gas Natural in the past has made the mistake of making offers that weren't attractive enough,'' said Francisco Salvador, a director at Venture Finanzas SA. ``What the press is reporting now this time sounds credible.''

Gas Natural scheduled a board meeting today at 4 p.m. local time to discuss purchasing Actividades de Construccion y Servicios SA's stake in Fenosa, it said in a filing. A bid at 18.33 euros per share would be 57 percent higher than Fenosa's closing price on July 16, the day before ACS said it was considering selling its holding.

Union Fenosa's market value is 14.6 billion euros. Today the shares of all three companies were suspended from trading. Officials at ACS and Gas Natural declined to comment on the possible bid price.

Endesa Purchase

The deal would the biggest takeover of a utility since Enel SpA's joint bid with Acciona SA for Endesa last year, which valued the Spanish utility at 45.2 billion euros. The price paid for Endesa was six times the Spanish power producer's earnings before interest, tax, depreciation and amortization in 2007. At 18.33 euros per share, Gas Natural would be paying 7.5 times Fenosa's estimated Ebtida for this year, according to Bloomberg data.

Gas Natural will proceed with a 3.5 billion-euro capital increase to help finance the bid, El Mundo said.

ACS has said it wants to sell its holding in Fenosa to ``consolidate'' its position in Iberdrola, the world's largest owner of wind parks, according to a July 17 filing. ACS held 7.8 percent of Iberdrola in May 2007, and in June this year said it had contracts in place to purchase an additional 5.2 percent.

Prompt Decision

Gas Natural Chief Executive Officer Rafael Villaseca said yesterday that he wanted a prompt decision on Fenosa and that the company was not working on a joint offer.

Gas Natural sells gas in countries including Argentina, Brazil, Colombia, Mexico, Italy and Spain. It also owns a gas distributor in Boston and has power plants at home, in Mexico and in Puerto Rico.

The company's acquisition drive accelerated after it lost about 30 percent of its home market when Spain allowed customers to choose fuel suppliers in 1999.

Gas Natural's 25 billion-euro hostile bid for Iberdrola in 2003 was blocked by the nation's regulator. It abandoned a 23 billion-euro offer for Endesa, made in September 2005, after the bid was topped by Germany's E.ON AG. E.ON's Endesa offer was later beaten by Enel and Spanish partner Acciona.

European utility takeovers gathered pace as national markets opened to full competition last year. Before the Endesa takeover was completed in October 2007, Iberdrola acquired Scottish Power for 14.4 billion pounds ($28.5 billion). Electricite de France SA is now in talks to acquire British Energy Group Plc, three people with knowledge of the discussions said.

Enel, E.ON and other European power producers want to expand in Spain, where growth in energy demand is outpacing the European average. In 2006 energy consumption in Spain increased 3.2 percent, compared with 2.4 percent in the euro region, according to the most recent data published by Eurostat.

To contact the reporter on this story: Paul Tobin in Madrid at ptobin@bloomberg.net

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U.S. to Sell $27 Billion in Long-Term Debt Next Week

By Rebecca Christie and John Brinsley

July 30 (Bloomberg) -- The U.S. Treasury said it plans to increase sales of long-term government debt this quarter and may add auctions of notes and bonds to cope with a widening budget deficit.

The Treasury plans to auction $17 billion in 10-year notes Aug. 6 and $10 billion in 29 3/4-year bonds Aug. 7, the department said today in Washington. The total was higher than analysts forecast and exceeded the $21 billion in notes and bonds sold in May.

The Treasury said it is considering additional debt sales, including a second reopening of the 10-year note and moving to quarterly new issues of 30-year bonds. A budget shortfall that the Bush administration this week predicted will swell to a record next year is increasing the need to borrow.

``If budget deficits remain large past next year, we'll see more additions to the auction calendar,'' said Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm. ``They've already done so much borrowing in short and intermediate maturities that it makes sense at this point to shift their sights to a longer-dated part of the curve.''

In a Bloomberg News survey of seven analysts, the median estimate predicted $16 billion in 10-year-note sales and $10 billion in bond sales.

Boosting Auction Sizes

Three months ago, the Treasury's quarterly sales of 10-year notes totaled $15 billion and bond auctions totaled $6 billion. The department also said in April that it would resume monthly sales of 52-week bills after suspending them in 2001.

The Treasury today opted to hold off on adding to its auction calendar. Some analysts said the department might consider expanding its 10-year note sales and perhaps bring back the three-year note, last sold in May 2007.

``Over the course of the fiscal year, changes in economic conditions, financial markets and fiscal policy as well as nonmarketable debt issuance have caused an increase in Treasury's marketable borrowing needs,'' the Treasury said in a statement.

After improving for three straight years, the U.S. budget is deteriorating as a slowing economy hurts tax revenue and spending increases. The Bush administration, which entered office in 2001 with a $127 billion budget surplus, earlier today predicted the next president faces a record deficit totaling $482 billion in 2009.

Short-Term Debt

The department also plans to sell cash management bills ``on a monthly basis during the quarter.''

``Treasury will continue to monitor projected financing needs and make adjustments as necessary, including, but not limited to, considering a second reopening of the 10-year note in the month following the first reopening and moving to quarterly new issue 30-year bond auctions,'' Treasury Assistant Secretary Anthony Ryan said in the statement.

A decision about the additional issuance will be made at the November refunding, Ryan said.

The Treasury predicted two days ago that it will need to borrow $171 billion in debt this quarter, $59 billion more than its previous estimate. That total, if realized, would be the second-largest ever after a record $244 billion was borrowed in the first three months of this year.

The government sells debt to finance the excess of spending over revenue. The Treasury also sells shorter-term debt on a monthly and weekly basis to manage the government's finances.

Investors' Panel

The Treasury's borrowing advisory committee of bond dealers and fund managers said in their July 29 report that the economic slowdown, and the department's need for additional funds to support the Federal Deposit Insurance Corp. due to the failure of several U.S. banks, ``has created a marked deterioration in the U.S. budget outlook.''

Given those factors and the likelihood of further deterioration in the budget, ``the Treasury should increase the size and frequency of its current issuance calendar and consider adding additional issues over the near and intermediate term,'' the advisory panel said.

The Treasury has room to make ``modest'' increases in two- and five-year notes, and should the fiscal situation further weaken, could reintroduce three-year notes or other similar securities, the panel said.

To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.netJohn Brinsley in Washington at jbrinsley@bloomberg.net

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World Trade Likely to Grow Even as WTO Talks Sputter

By Mark Drajem and Jennifer M. Freedman

July 30 (Bloomberg) -- The collapse of global trade talks for the third time in as many years may be only a bump in the road for world commerce, which continued to expand while negotiations sputtered.

A nine-day summit at the World Trade Organization ended yesterday in Geneva without an agreement on a plan to cut agriculture subsidies and open trade in industrial goods. The sticking point was a clash between the U.S. and India over how poor nations could raise tariffs when farm imports surge.

While negotiators depicted the breakdown as a setback for the global economy, the lowering of trade barriers and signing of bilateral deals suggest such predictions may be overstated. The value of an accord narrowed to as little as $50 billion annually from as much as $850 billion when the Doha Round of talks began in 2001, a rounding error in a world economy of $54 trillion.

``World trade will be the same as it was before,'' said Andrew Freris, chief Asia economist at BNP Paribas SA in Hong Kong. ``The talks aren't going anywhere. There's always going to be an issue of subsidies from the U.S. and European sides.''

The average tariff on manufactured goods among developed nations dropped to less than 5 percent today from 40 percent in 1947, according to the International Monetary Fund.

Global Output

Trade grew by almost 6 percent a year over the past decade, exceeding global output by 2 percentage points, according to the WTO. The rate of trade growth will probably fall to 4.5 percent this year, not because of the impasse in trade talks but because of ``financial-market turbulence,'' the WTO said in April.

``In the short and medium term, this won't have any impact at all on trade volumes,'' said Claude Barfield, a scholar at the American Enterprise Institute, a research organization in Washington that supports free markets.

The Doha talks tripped up over triggers for safeguards that would enable developing countries to increase tariffs to protect their farmers should agriculture imports surge and prices fall. The U.S. accused China and India of refusing to open their markets to foreign competition and snubbing a compromise on agriculture and industrial goods.

The failure ``will have a major impact on the fragile multilateral trading system,'' Chinese Commerce Minister Chen Deming said yesterday. It added to a ``world economic downturn, serious inflation and imminent financial risks,'' he said.

Insurance Policy

On top of that, the lack of an agreement may lead to higher import duties rather than lower ones, European Union Trade Commissioner Peter Mandelson told Bloomberg Television today.

``This deal would have very much restricted the ability to put up tariffs in the future,'' he said. ``That is an essential insurance policy which we have now lost. That is a great regret for the global economy and the international trading system.''

No deal may come now before the U.S. presidential election in November. Japanese Prime Minister Yasuo Fukuda said the collapse ``has pushed back the possibility of an agreement within the year.'' WTO Director-General Pascal Lamy said before the negotiations that there was no ``Plan B.''

Reaching a consensus probably wouldn't have eased prices of commodities such as wheat and soybeans, which have soared to records this year, said Freris of BNP Paribas.

``Had the talks been successful, could the recent jump in food prices be avoided? Unlikely,'' he said. ``Liberalization of trade of agricultural products doesn't necessarily increase the supply of food.''

Emerging Powers

The deadlock also reflects the growing economic and negotiating might of emerging nations including Brazil, Russia, India and China.

``BRIC countries have acquired strength in the global stage because of their rapid economic growth,'' said Tapan K. Bhaumik, chairman of economic affairs at the New Delhi-based Associated Chambers of Commerce and Industry. ``The emergence of regional trade blocs will be the way forward.''

Negotiators in Geneva said the collapse may unnerve an already shaky global economy, set back the world's poorest farmers and undermine the WTO's credibility.

``The impact on our farmers will be very grave,'' Mamadou Sanou, Burkina Faso's trade minister, said today. ``There is a risk that the whole system will collapse in our countries.''

The breakdown is ``a very bad sign to give at this time to the world economy,'' said Shada Islam, a trade specialist at the European Policy Centre in Brussels. ``People had been looking to the WTO for a sign of confidence at this very critical time.''

Financial markets were unmoved by the collapse. The Standard & Poor's 500 Index yesterday added 28.83, or 2.3 percent, to 1,263.2. The MSCI Asia Pacific Index gained 1.7 percent to 132.31 as of 5:30 p.m. in Tokyo today while the MSCI World Index advanced 0.6 percent to 1,361.6 at 11:34 a.m. in London.

Bilateral Deals

One result of the failure of the Geneva talks may be more bilateral trade agreements. Countries from China to Chile are already pursuing their own paths.

When the Uruguay Round of trade talks ended in 1994 there were 80 bilateral free-trade acts. Since then, that number has more than doubled and will reach 400 by 2010, the WTO predicts.

``If Doha doesn't work, bilateral deals matter even more,'' Jagdish Bhagwati, a senior fellow at the Council on Foreign Relations, who published a book critical of such free-trade deals. ``What they do is cut up so many markets, so you get a huge chaotic mess.''

In the U.S., Democrats have refused to renew President George W. Bush's fast-track trade negotiating authority, leaving the nation on the sidelines for bilateral deals. Congress won't approve pending deals with Colombia, South Korea and Panama.

New Faces

``We're not going to do anything until after this session is over,'' Kansas Republican Senator Pat Roberts said at a Senate Finance Committee hearing yesterday. ``Then we're back next year at square one with a new president.''

Along with a new president, many of the key negotiators will be gone when diplomats return to pick up the pieces.

U.S. Trade Representative Susan Schwab will go in January, when the U.S. administration leaves office. Mandelson's term as EU trade chief ends next November while Indian Commerce Minister Kamal Nath's tenure is up in May. Lamy will be out of office next September unless he seeks a second term.

Still, the U.S. isn't suffering. U.S. exports climbed more than 18 percent in the first five months of this year, and that's a key to avoiding a recession, said Jim O'Neill, global head of economic research at Goldman Sachs Group Inc.

The Doha Round collapse may not really mean it's all over. Ministers from many countries including the U.S., India and Brazil said a new effort should follow. ``We would like to see a resumption as soon as possible,'' Kenyan Commerce Minister Uhuru Kenyatta said today.

Former U.S. Trade Representative Carla Hills yesterday recalled the words of her former counterpart from Canada, John Crosbie, after Uruguay Round talks fell apart in 1990.

``She's dead, but she won't lie down,'' Crosbie told Hills.

Four years later, the Uruguay Round was completed.

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net; Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

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ADP Says U.S. Companies Increased Payrolls by 9,000

By Shobhana Chandra

July 30 (Bloomberg) -- Companies in the U.S. unexpectedly added an estimated 9,000 jobs in July, a private report based on payroll data showed today.

The increase followed a revised drop of 77,000 for the prior month that was smaller than previously estimated, ADP Employer Services said.

Over the past six months, payrolls have been negative each month while ADP has only 2 negative readings over the past 7 months.

In the first six months of the year, figures from the Labor Department show private payrolls have been negative each month while ADP has only two negative readings over the past seven months. The extended housing slump, record fuel prices and crisis in credit markets have weakened demand, prompting employers to cut staff.

``The trend is toward lower jobs,'' Roger Kubarych, chief U.S. economist at UniCredit Global Research, said in an interview with Bloomberg Television in New York. ``There is still contraction in construction jobs and manufacturing jobs, offset to a great extent, but not entirely, by the services sector and the government.'' ADP has ``been overestimating'' the government's figures ``for many months now,'' he said.

The ADP report was forecast to show a decline of 60,000 jobs, after a drop of 79,000 previously estimated for June, according to the median projection of 29 economists surveyed by Bloomberg News. Estimates ranged from decreases of 115,000 to 4,000.

Survey Differences

ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.

``Employers are being extremely cautious about expanding payrolls,'' Joel Prakken, chairman of Macroeconomic Advisors, said in a telephone interview today. ``In sectors where there were excesses in payrolls, we're still working those off.''

The ADP figures come ahead of the government's Aug. 1 report, which may show total payrolls fell by 75,000 in July, the seventh consecutive months of job losses, according to the median forecast in a Bloomberg survey. The unemployment rate probably increased to 5.6 percent.

Payrolls dropped by an average 94,000 a month from January through June, according to the Labor Department. The ADP estimate shows gains of almost 11,000 on average.

Goods, Services

Today's ADP report showed a decrease of 65,000 jobs in goods-producing industries including manufacturers and construction companies. Service providers added 74,000 workers. Employment in construction fell by 16,000 and financial firms increased jobs by 4,000.

Companies employing more than 499 workers shrank their workforce by 32,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 9,000 jobs and small companies increased payrolls by 50,000.

The ADP report is based on data from 399,000 businesses with about 24 million workers on payrolls.

Further softening in the job market adds to concern that consumer spending, which accounts for more than two-thirds of the economy, will retrench. Recent reports indicate the boost from the government's tax rebates may be starting to fade.

Concerns about the credit crunch have roiled U.S. households, outweighing worries about surging consumer prices, said Larry Kantor, head of research at Barclays Capital Inc. in New York.

``When people are focused on the financial distress, these worries about inflation go to the sidelines,'' Kantor said yesterday in an interview with Bloomberg Radio. Over the next three to six months, `that's going to be the main issue.''

Coca-Cola Bottling Co. Consolidated, the second-biggest U.S. Coke bottler, is among companies cutting staff to offset a surge in the cost of energy and raw materials. The Charlotte, North Carolina-based company said on July 18 it will eliminate 350 positions, about 5 percent of its workforce.

ADP began keeping records in January 2001 and started publishing its numbers in 2006.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Bush Signs Measure for Homeowners, Fannie, Freddie

By Roger Runningen

July 30 (Bloomberg) -- President George W. Bush signed into law legislation that helps 400,000 homeowners facing foreclosure and extends a lifeline to Fannie Mae and Freddie Mac.

Bush signed the measure at the White House shortly after 7 a.m., spokesman Tony Fratto said. Treasury Secretary Henry Paulson, Housing and Urban Development Secretary Steve Preston and Federal Housing Administration Director Brian Montgomery were among those present.

``We look forward to putting in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac,'' Fratto said.

The law is aimed at stemming foreclosures and halting a free-fall in housing prices by providing federal insurance for refinanced 30-year mortgages for homeowners struggling to make their monthly payments.

The measure also is designed to restore confidence in Fannie Mae and Freddie Mac by tightening regulations and authorizing the Treasury secretary to inject capital into the two biggest U.S. providers of mortgage money.

The measure passed the Senate July 26 and the House three days earlier.

The recession in the housing market, the worst since the Depression, along with higher fuel prices and a shrinking job market, is weighing on consumers and the economy.

The White House Office of Management and Budget this week cut its February forecast for economic growth this year to 1.6 percent from 2.7 percent. The OMB said it expected the economy to expand 2.2 percent next year, compared with its earlier forecast of 3 percent growth.

Lead Lobbyist

The foreclosure-prevention measure, unveiled in March, was bolstered after Paulson sought and received temporary authority, through Dec. 31, 2009, to lend money or to buy the stock of Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac. The goal is to avert a collapse of the companies that buy or finance almost half of the $12 trillion of U.S. mortgages.

The Treasury chief, who was the lead lobbyist for the White House, persuaded Bush to back off a threatened veto over a section of the legislation that provides $3.9 billion in grants to states to buy and repair foreclosed properties. Bush said he regarded it as a bailout of lenders. Democrats said it would stabilize neighborhoods.

New Regulator

The law creates a new, independent regulator called the Federal Housing Finance Agency. It would ensure that Fannie Mae and Freddie Mac adhere to minimum capital requirements, limit the size of portfolios and oversee executive pay for the two government-sponsored enterprises.

Under the law, the FHA can now insure higher loan limits, up to $625,500 from $417,000 in high-cost areas. The law also raises the nation's debt limit to $10.6 trillion from $9.816 trillion to accommodate the Paulson plan.

A new FHA program, a unit of the U.S. Department of Housing and Urban Development, would insure up to $300 billion in refinanced 30-year fixed loans for about 400,000 borrowers struggling with their monthly payments after loan holders agree to cut their mortgage balance.

HUD Secretary Preston expressed misgivings when asked in a Bloomberg TV interview if he was confident that money for the program would be spent effectively with no loss to the taxpayer.

``No, I'm not,'' Preston said. ``Roughly a third of the people who get this assistance will end up in foreclosure,'' he said, citing Congress' own estimates, ``and many more, we believe, will be chronic delinquencies.''

The measure would offer $15 billion in tax breaks, including provisions offering the equivalent of interest-free loans worth up to $7,500 for first-time homebuyers. States would be able to offer an additional $11 billion in mortgage revenue bonds to refinance subprime loans.

To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net;

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