Daily Forex Fundamentals | Written by FX Solutions | Aug 07 08 15:00 GMT |
The currency debate between the euro and the US dollar has shifted topic. It is no longer about the rate policy of the ECB and the Federal Reserve, both banks are on long term hiatus. It is not primarily about the US economy which though weak has not collapsed and has been a story for many months. The debate is now about the economic health of the Eurozone and it is brought to the market courtesy of Jean Claude Trichet the President of the European Central Bank. It is a debate the Eurozone and the euro will lose. The ECB's inflation focus is well established in rate policy and rhetoric. Mr. Trichet's admission that, "We are identifying downside risks since a number of months... the information we have which are very, very clear for some of them suggest the materialization of those risks," is the crux. His elaboration that the latest data confirmed a trough in growth in quarters two and three is clear. Mr. Trichet does not like to surprise the markets. Eurozone second quarter GDP will be very poor; barring external events the euro will fall, the dollar will rise.
Joseph Trevisani
FX Solutions
IMPORTANT NOTICE: These comments are for information purposes only. Past results are not necessarily indicative of future results. Trading Futures, Options on Futures, and Foreign Exchange involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. The information contained on this email does not constitute a solicitation to buy or sell by FX Solutions,LLC., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law.
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Thursday, August 7, 2008
Nothing Can Stop the Dollar Now!!!
Daily Forex Fundamentals | Written by Crown Forex | Aug 07 08 14:58 GMT |
The base is solid and strong and seemingly nothing is to stand in the face of the dollar those days as the gains just continue to expand; any seen upside potential for majors is doing nothing but adding to the dollar's momentum and as Trichet weakened the euro and offset the weak labor number the unexpected strong gain in pending home sales set the dollar to rumble.
The euro bared heavy losses as Trichet stressed on weakening growth in the euro nation while fearing price stability at the same time still Trichet confirmed ongoing "NO BIAS" for the ECB's governing council and that only set higher uncertainty for the euro outlook. The euro was able to break major support levels after it failed to manage the 1.55 extending the bearish wave to hit the low of 1.5355 while now the two major levels seen at 1.5360 and 1.5380 shall closing fail above the latter extensive losses is for the euro to acquire and the break point is now at 1.5320s and a breach to that shall take us till 1.5280s.
The pound is on the bearish ride and no support level is capable of slowing it till now the BoE reserved their comments as they announced steady rates while the pressure is pilling upon next week's Inflation Report. The pair neared 1.94 as it set the low of 1.9419 after rising in the morning to set the high at 1.9537; if the pair breaches 1.94 levels then its heading towards 161.8% levels which are also areas of solid support levels among 1.9350-30 and today's closing below 1.9460s shall flag those targets near to be acquired.
The USDJPY was holding solid building the base above 109 levels setting the lowest at 109.12 as the breach to 108.40s and then 108.70s is validating the pair with strong bullish momentum to achieve its targets above 110 levels to race then to following seen targets now at 111.20s.
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.
Read more...
The base is solid and strong and seemingly nothing is to stand in the face of the dollar those days as the gains just continue to expand; any seen upside potential for majors is doing nothing but adding to the dollar's momentum and as Trichet weakened the euro and offset the weak labor number the unexpected strong gain in pending home sales set the dollar to rumble.
The euro bared heavy losses as Trichet stressed on weakening growth in the euro nation while fearing price stability at the same time still Trichet confirmed ongoing "NO BIAS" for the ECB's governing council and that only set higher uncertainty for the euro outlook. The euro was able to break major support levels after it failed to manage the 1.55 extending the bearish wave to hit the low of 1.5355 while now the two major levels seen at 1.5360 and 1.5380 shall closing fail above the latter extensive losses is for the euro to acquire and the break point is now at 1.5320s and a breach to that shall take us till 1.5280s.
The pound is on the bearish ride and no support level is capable of slowing it till now the BoE reserved their comments as they announced steady rates while the pressure is pilling upon next week's Inflation Report. The pair neared 1.94 as it set the low of 1.9419 after rising in the morning to set the high at 1.9537; if the pair breaches 1.94 levels then its heading towards 161.8% levels which are also areas of solid support levels among 1.9350-30 and today's closing below 1.9460s shall flag those targets near to be acquired.
The USDJPY was holding solid building the base above 109 levels setting the lowest at 109.12 as the breach to 108.40s and then 108.70s is validating the pair with strong bullish momentum to achieve its targets above 110 levels to race then to following seen targets now at 111.20s.
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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Pending Home Sales (June)
Daily Forex Fundamentals | Written by The LFB-Forex.com | Aug 07 08 14:28 GMT |
Actual 5.3%, Expected -1.0%, Previous -4.9% (Revised down from 4.7%)
Release Explanation: The index measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. Important since the housing market is included in most economic forecasts. Retail Sales, CPI, and PCE in the US. A happy householder will usually lead to a strong economic outlook. A miss here, either way, and the Markets gets to see the real confidence of the US consumer. There is a very strong impact on the sentiment towards the US Dollar from this report.
Trade Desk Thoughts: At this point, any good news on housing will come as a relief despite the fact that May was revised down slightly. June pending home sales is at the highest level since October 2007. Economists consider this index to be a leading indicator, because it is based on contract signings that lead to closing one to two months in the future.
Forex Technical Reaction: The dollar strengthened against the euro after the ECB press conference and continued to do so after the pending home sales index was released. Surprisingly, the Yen has not appreciated against the dollar even as equity markets remain in negative territory on the day.
The LFB-Forex.com
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Actual 5.3%, Expected -1.0%, Previous -4.9% (Revised down from 4.7%)
Release Explanation: The index measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. Important since the housing market is included in most economic forecasts. Retail Sales, CPI, and PCE in the US. A happy householder will usually lead to a strong economic outlook. A miss here, either way, and the Markets gets to see the real confidence of the US consumer. There is a very strong impact on the sentiment towards the US Dollar from this report.
Trade Desk Thoughts: At this point, any good news on housing will come as a relief despite the fact that May was revised down slightly. June pending home sales is at the highest level since October 2007. Economists consider this index to be a leading indicator, because it is based on contract signings that lead to closing one to two months in the future.
Forex Technical Reaction: The dollar strengthened against the euro after the ECB press conference and continued to do so after the pending home sales index was released. Surprisingly, the Yen has not appreciated against the dollar even as equity markets remain in negative territory on the day.
The LFB-Forex.com
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US weekly jobless claims rise 7,000 to 455,000, highest level in over six years
Thu, Aug 7 2008, 12:51 GMT
WASHINGTON (Thomson Financial) - The number of individuals filing new claims for unemployment insurance in the latest week rose unexpectedly to a level not seen in over six years, while the number of individuals continuing to file claims for unemployment rose to an over four-year high, the Labor Department said today.
The number of first-time claims filed in the week ending August 2 rose by 7,000 to 455,000, the highest level since March 2002. Economists polled by Thomson Reuters IFR Markets were expecting claims to fall in the week to 430,000.
The Labor Department said today that claims are still being influenced by an indirect response to the Emergency Unemployment Compensation (EUC) program. Many individuals who were contacted about the program in recent weeks learned they were actually qualified for regular unemployment insurance instead.
The four-week moving average for initial claims, which economists prefer because it smoothes out fluctuations in weekly data, rose by 26,750 to 419,500. That is the highest level since July 2003.
Meanwhile, the number of people continuing to receive unemployment insurance in the week ending July 26 rose by 31,000 to 3.311 mln, the highest level since December 2003. Economists were expecting continuing claims to fall to 3.225 mln.
The four-week moving average for continuing unemployment claims increased by 27,000 to 3.201 mln, the highest level since January 2004.
tessa.moran@thomsonreuters.com
tlm/wash/rw
COPYRIGHT
Copyright Thomson Financial News Limited 2007. All rights reserved.
The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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WASHINGTON (Thomson Financial) - The number of individuals filing new claims for unemployment insurance in the latest week rose unexpectedly to a level not seen in over six years, while the number of individuals continuing to file claims for unemployment rose to an over four-year high, the Labor Department said today.
The number of first-time claims filed in the week ending August 2 rose by 7,000 to 455,000, the highest level since March 2002. Economists polled by Thomson Reuters IFR Markets were expecting claims to fall in the week to 430,000.
The Labor Department said today that claims are still being influenced by an indirect response to the Emergency Unemployment Compensation (EUC) program. Many individuals who were contacted about the program in recent weeks learned they were actually qualified for regular unemployment insurance instead.
The four-week moving average for initial claims, which economists prefer because it smoothes out fluctuations in weekly data, rose by 26,750 to 419,500. That is the highest level since July 2003.
Meanwhile, the number of people continuing to receive unemployment insurance in the week ending July 26 rose by 31,000 to 3.311 mln, the highest level since December 2003. Economists were expecting continuing claims to fall to 3.225 mln.
The four-week moving average for continuing unemployment claims increased by 27,000 to 3.201 mln, the highest level since January 2004.
tessa.moran@thomsonreuters.com
tlm/wash/rw
COPYRIGHT
Copyright Thomson Financial News Limited 2007. All rights reserved.
The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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Hank the Great? Paulson Copies Frederick With Bonds
By Sebastian Boyd and Jody Shenn
More Photos/Details
Aug. 7 (Bloomberg) -- In 1769, short of funds to rebuild Prussia after attacks by Russia, Sweden and Austria, Frederick the Great let aristocrats, churches and monasteries raise money by pledging their estates as security to investors.
From those beginnings emerged what today is Europe's $3 trillion market for covered bonds -- securities backed by assets such as mortgages as well as the seller's promise to pay. Now U.S. Treasury Secretary Henry Paulson, faced with carnage in the housing market that led to $480 billion of losses and writedowns at the world's top financial institutions, is using a similar strategy to help America's banks turn assets into cash.
While the European market has grown for 250 years, Paulson's plan confronts obstacles Frederick never faced: Besides competition from the biggest U.S. housing-finance companies, the debt would be tied to mortgages and banks that are sliding in value with America's homes and economy.
``Not every bank is going to be able to do this,'' said William Isaac, the chairman of the Federal Deposit Insurance Corp. from 1981 until 1985. ``Even the banks people are not concerned about are probably only going to be able to do it in a limited amount right now.''
Covered bonds get higher ratings than notes sold by banks and pay less in interest because they augment the issuer's repayment pledge with assets that can be sold in a default.
Paulson's blueprint, unveiled last month, allows banks to sell bonds backed by mortgages made to homeowners who provide down payments of 20 percent and are current on their loans. U.S. covered-bonds might yield as much as 0.75 percentage point less than unsecured bank debt over time, according to analysts at New York-based JPMorgan Chase & Co.
Relative Yields
European investors have snapped up pfandbriefe, as they are known in Germany, because they're considered almost risk free. No bank has missed a payment on the securities in at least 100 years, according to Germany's Pfandbrief Association.
While elements of covered bonds have been used in the U.S., the market has yet to catch on. Seattle-based Washington Mutual Inc. started the first U.S. program two years ago, followed by Bank of America Corp. in Charlotte, North Carolina. The two companies have issued a combined $20 billion of covered bonds.
Sales in the U.S. may total $10 billion this year, rising to $20 billion in 2009, according to Dan Markaity, head of agency debt at New York-based Merrill Lynch & Co. The potential is between $180 billion and $228 billion, according to Morgan Stanley, also based in New York.
``It's an idea whose time has come,'' said John Cerra, a managing director and fixed-income fund manager at New York-based TIAA-CREF. Cerra, who helps manage $15 billion, has owned covered bonds sold by Bank of America.
`Time Has Come'
The bonds are Paulson's latest initiative to revive lending among banks and boost the housing market, stuck in the worst slump since the Great Depression. The S&P/Case-Shiller home-price index that tracks 20 metropolitan areas dropped 15.8 percent from a year earlier, the biggest decline since records began seven years ago.
Paulson's plan for a ``SuperSIV'' to bail out the $400 billion market for structured investment vehicles failed last year after Wall Street firms rescued the credit funds independently.
On July 13 he unveiled a plan to buy unlimited equity stakes in Fannie Mae and Freddie Mac if needed, while the Federal Reserve agreed to lend directly to the companies. Congress included Paulson's proposals in a broader housing bill that President George W. Bush signed into law last week.
Little Use
Banks have had little use for the securities partly because they can sell mortgages to Washington-based Fannie and Freddie of McLean, Virginia, the U.S. government-chartered companies created to provide financing to banks and promote home ownership. There is no comparable system in Europe. By keeping the loans on their balance sheets, banks are unable to free up capital.
Until last year, covered bonds also were crowded out in the U.S. by sales of so-called private-label, or non-agency, mortgage securities. Demand for that debt, whose outstanding amount rose almost four-fold between the end of 2001 and this year to $2.1 trillion, boomed with the housing market earlier this decade.
Federal Deposit Insurance Corp. Chairman Sheila Bair has said that the U.S. needs covered bonds because the ``originate- to-sell'' model led to a market bubble that now is collapsing. By keeping loans with lenders, covered bonds provide incentives for banks to improve their standards on loans that don't meet the guidelines to be purchased by Fannie or Freddie or insured under U.S. government programs. Other types of lending have ground to a near halt, fueling the crisis.
Regional Cooperatives
The U.S. system dates back to President Franklin Delano Roosevelt's administration, and also includes the 12 Federal Home Loan Banks, or FHLBs. The regional cooperatives extend loans secured by mortgages to banks, thrifts, insurers and credit unions. Those loans are cheaper for the financial institutions than they could get by selling covered bonds.
The FHLB of New York offered four-year fixed-rate loans secured by mortgages at 4.4 percent last week. Bank of America's $2 billion of covered bonds maturing in June 2012 were trading at yields of 5.03 percent, according to data complied by Bloomberg. The company's $1 billion of unsecured notes due in September 2012 yielded 5.42 percent.
Any Open Market
``The covered bond has been a very useful and widely accepted vehicle in Europe, but in the U.S. it remains an expensive financing mechanism versus home-loan banks and it doesn't offer the same capital relief as a true sale,'' said Richard Dorfman, chief executive officer of FHLBank Atlanta, the Georgia Federal Home Loan Bank, which has $150 billion of loans.
While the costs of covered bonds look worse to banks than financing options, such as deposits and FHLB loans, that may change if Paulson's ``initiative is successful,'' Morgan Stanley strategists George Goncalves and Michelle Bradley wrote in an Aug. 1 report.
No matter the costs, banks ``recognize, having lived through the shutdown of the structured finance market, that there are times that any markets that are open are useful, even if the pricing isn't always what you want,'' said James Tanenbaum, a partner in New York at law firm Morrison & Foerster, which worked on Bank of America's deals.
The FHLBs have ``unwritten rules'' about how much a member bank can borrow as a percentage of overall liabilities, often looking to cap the amount at about 50 percent, according to Robert Pardes, the former chief lending officer at OceanFirst Financial Corp. in Toms River, New Jersey.
`Unwritten Rules'
For investors, a pledge this month by 13 banks and securities firms including Bank of America, London-based Barclays Plc and Goldman Sachs Group Inc. of New York to appoint dedicated traders, provide pricing information and make a market in the bonds may be the most important development, said TIAA-Cref's Cerra. The ability to easily trade and value the debt falls short of what's available in Europe, he said.
Another hurdle is that so-called risk-based capital rules require banks to hold more than twice as much in reserves to issue covered bonds than if they worked with Fannie to create mortgage securities, and kept the bonds on their balance sheets.
Frederick the Great's financing plan worked so well that Denmark followed suit in 1797 after a fire destroyed much of Copenhagen. By 1850, France had joined in. Whether the idea catches on in the U.S. is another question, said Richard Kemmish, head of covered bond origination at Credit Suisse Group in London and member of the European Covered Bond Council's steering committee.
``The jury is still out on whether this is going to make economic sense,'' he said.
To contact the reporters on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net.
Read more...
More Photos/Details
Aug. 7 (Bloomberg) -- In 1769, short of funds to rebuild Prussia after attacks by Russia, Sweden and Austria, Frederick the Great let aristocrats, churches and monasteries raise money by pledging their estates as security to investors.
From those beginnings emerged what today is Europe's $3 trillion market for covered bonds -- securities backed by assets such as mortgages as well as the seller's promise to pay. Now U.S. Treasury Secretary Henry Paulson, faced with carnage in the housing market that led to $480 billion of losses and writedowns at the world's top financial institutions, is using a similar strategy to help America's banks turn assets into cash.
While the European market has grown for 250 years, Paulson's plan confronts obstacles Frederick never faced: Besides competition from the biggest U.S. housing-finance companies, the debt would be tied to mortgages and banks that are sliding in value with America's homes and economy.
``Not every bank is going to be able to do this,'' said William Isaac, the chairman of the Federal Deposit Insurance Corp. from 1981 until 1985. ``Even the banks people are not concerned about are probably only going to be able to do it in a limited amount right now.''
Covered bonds get higher ratings than notes sold by banks and pay less in interest because they augment the issuer's repayment pledge with assets that can be sold in a default.
Paulson's blueprint, unveiled last month, allows banks to sell bonds backed by mortgages made to homeowners who provide down payments of 20 percent and are current on their loans. U.S. covered-bonds might yield as much as 0.75 percentage point less than unsecured bank debt over time, according to analysts at New York-based JPMorgan Chase & Co.
Relative Yields
European investors have snapped up pfandbriefe, as they are known in Germany, because they're considered almost risk free. No bank has missed a payment on the securities in at least 100 years, according to Germany's Pfandbrief Association.
While elements of covered bonds have been used in the U.S., the market has yet to catch on. Seattle-based Washington Mutual Inc. started the first U.S. program two years ago, followed by Bank of America Corp. in Charlotte, North Carolina. The two companies have issued a combined $20 billion of covered bonds.
Sales in the U.S. may total $10 billion this year, rising to $20 billion in 2009, according to Dan Markaity, head of agency debt at New York-based Merrill Lynch & Co. The potential is between $180 billion and $228 billion, according to Morgan Stanley, also based in New York.
``It's an idea whose time has come,'' said John Cerra, a managing director and fixed-income fund manager at New York-based TIAA-CREF. Cerra, who helps manage $15 billion, has owned covered bonds sold by Bank of America.
`Time Has Come'
The bonds are Paulson's latest initiative to revive lending among banks and boost the housing market, stuck in the worst slump since the Great Depression. The S&P/Case-Shiller home-price index that tracks 20 metropolitan areas dropped 15.8 percent from a year earlier, the biggest decline since records began seven years ago.
Paulson's plan for a ``SuperSIV'' to bail out the $400 billion market for structured investment vehicles failed last year after Wall Street firms rescued the credit funds independently.
On July 13 he unveiled a plan to buy unlimited equity stakes in Fannie Mae and Freddie Mac if needed, while the Federal Reserve agreed to lend directly to the companies. Congress included Paulson's proposals in a broader housing bill that President George W. Bush signed into law last week.
Little Use
Banks have had little use for the securities partly because they can sell mortgages to Washington-based Fannie and Freddie of McLean, Virginia, the U.S. government-chartered companies created to provide financing to banks and promote home ownership. There is no comparable system in Europe. By keeping the loans on their balance sheets, banks are unable to free up capital.
Until last year, covered bonds also were crowded out in the U.S. by sales of so-called private-label, or non-agency, mortgage securities. Demand for that debt, whose outstanding amount rose almost four-fold between the end of 2001 and this year to $2.1 trillion, boomed with the housing market earlier this decade.
Federal Deposit Insurance Corp. Chairman Sheila Bair has said that the U.S. needs covered bonds because the ``originate- to-sell'' model led to a market bubble that now is collapsing. By keeping loans with lenders, covered bonds provide incentives for banks to improve their standards on loans that don't meet the guidelines to be purchased by Fannie or Freddie or insured under U.S. government programs. Other types of lending have ground to a near halt, fueling the crisis.
Regional Cooperatives
The U.S. system dates back to President Franklin Delano Roosevelt's administration, and also includes the 12 Federal Home Loan Banks, or FHLBs. The regional cooperatives extend loans secured by mortgages to banks, thrifts, insurers and credit unions. Those loans are cheaper for the financial institutions than they could get by selling covered bonds.
The FHLB of New York offered four-year fixed-rate loans secured by mortgages at 4.4 percent last week. Bank of America's $2 billion of covered bonds maturing in June 2012 were trading at yields of 5.03 percent, according to data complied by Bloomberg. The company's $1 billion of unsecured notes due in September 2012 yielded 5.42 percent.
Any Open Market
``The covered bond has been a very useful and widely accepted vehicle in Europe, but in the U.S. it remains an expensive financing mechanism versus home-loan banks and it doesn't offer the same capital relief as a true sale,'' said Richard Dorfman, chief executive officer of FHLBank Atlanta, the Georgia Federal Home Loan Bank, which has $150 billion of loans.
While the costs of covered bonds look worse to banks than financing options, such as deposits and FHLB loans, that may change if Paulson's ``initiative is successful,'' Morgan Stanley strategists George Goncalves and Michelle Bradley wrote in an Aug. 1 report.
No matter the costs, banks ``recognize, having lived through the shutdown of the structured finance market, that there are times that any markets that are open are useful, even if the pricing isn't always what you want,'' said James Tanenbaum, a partner in New York at law firm Morrison & Foerster, which worked on Bank of America's deals.
The FHLBs have ``unwritten rules'' about how much a member bank can borrow as a percentage of overall liabilities, often looking to cap the amount at about 50 percent, according to Robert Pardes, the former chief lending officer at OceanFirst Financial Corp. in Toms River, New Jersey.
`Unwritten Rules'
For investors, a pledge this month by 13 banks and securities firms including Bank of America, London-based Barclays Plc and Goldman Sachs Group Inc. of New York to appoint dedicated traders, provide pricing information and make a market in the bonds may be the most important development, said TIAA-Cref's Cerra. The ability to easily trade and value the debt falls short of what's available in Europe, he said.
Another hurdle is that so-called risk-based capital rules require banks to hold more than twice as much in reserves to issue covered bonds than if they worked with Fannie to create mortgage securities, and kept the bonds on their balance sheets.
Frederick the Great's financing plan worked so well that Denmark followed suit in 1797 after a fire destroyed much of Copenhagen. By 1850, France had joined in. Whether the idea catches on in the U.S. is another question, said Richard Kemmish, head of covered bond origination at Credit Suisse Group in London and member of the European Covered Bond Council's steering committee.
``The jury is still out on whether this is going to make economic sense,'' he said.
To contact the reporters on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net.
Read more...
Pending Home Resales in U.S. Unexpectedly Rose 5.3%
By Timothy R. Homan
Aug. 7 (Bloomberg) -- More Americans unexpectedly signed contracts to purchase previously owned homes in June, a sign that lower prices are drawing some buyers back into the market.
The index of pending home resales rose 5.3 percent after a revised 4.9 percent decline in May, the National Association of Realtors said today in Washington. The gain is the third this year.
Plummeting property values, spurred by mounting foreclosures, may be helping to stabilize the market by making houses more affordable. Still, repossessions may keep growing as stricter lending rules make it harder for owners to refinance their mortgages.
``What we're getting is a little bit of foreclosures thrown in with voluntary home sales,'' John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said in an interview with Bloomberg Television. ``Although foreclosures are up, there seems to be enough of a price decline that buyers are starting to look for bargains and they're willing to purchase.''
Economists had projected the index would fall 1 percent after a previously reported 4.7 percent decrease in May, according to the median of 37 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3 percent to a 3.5 percent gain.
A separate report today from the Labor Department showed initial jobless claims for the week ended Aug. 2 unexpectedly rose to the highest level in six years, signaling the labor market continues to weaken. Initial jobless claims increased by 7,000 to 455,000, the most since March 2002.
Market Reaction
Stocks trimmed losses following the housing report. The Standard & Poor's 500 index fell 0.7 percent to 1,280.3 at 10:06 a.m. in New York. Treasuries maintained earlier gains with the yield on the benchmark 10-year note at 4 percent compared with 4.05 percent late yesterday.
Pending resales were down 12 percent from June 2007, today's housing report showed.
The measure last month increased in all four regions of the country from May, led by a 9.3 percent gain in the South.
Purchase contracts also rose 4.6 percent in the West, 3.4 percent in the Northeast and 1.3 percent in the Midwest. Compared with a year ago, contract signings remained down in all four regions.
`Floor on Prices'
``Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices,'' Lawrence Yun, the agents' group chief economist, said in a statement. ``In addition, rising commodity prices and higher construction costs have resulted in a very unusual market today with existing-home prices being less than replacement building costs in some areas.''
The pending resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors.
The group's figures on July existing home sales are due Aug. 25. Purchases in June fell 2.6 percent to a 4.86 million annual pace, the lowest level in a decade, from a 4.99 million rate the prior month. At the June sales rate, it would take 11.1 months to sell all the houses on the market, about twice the supply that reflects a balanced market, according to the agents' group.
``As long as housing is a negative portion of the economy, and I think that could well happen and continue to happen until say the beginning of 2009, it's hard for me to get really optimistic about a pickup'' in growth, Robert Parry, former president of the Federal Reserve Bank of San Francisco, said in an Aug. 5 Bloomberg Radio interview.
Drop in Applications
Other measures are still signaling sales may keep dropping. The Mortgage Bankers Association's index of applications for loans to purchase a house reached a five-year low at the end of July.
Home prices in 20 U.S. metropolitan areas fell in May by 15.8 percent from a year earlier, the most on record, the S&P/Case-Shiller home-price index showed on July 29.
A surge in bank repossessions is contributing to the drop in property values. Foreclosure filings in the second quarter jumped 121 percent from a year earlier, RealtyTrac Inc., a seller of default data, said last month. Almost 740,000 properties were in some stage of foreclosure, the most since the Irvine, California- based company began reporting in January 2005.
Homebuilders are struggling as sales drop. D.R. Horton Inc., the largest U.S. homebuilder, this week reported its fifth straight quarterly loss. The Fort Worth, Texas-based company recorded $330.4 million in pretax expenses to write down property value and abandon scheduled land purchases.
``We're continuing to cut at all levels,'' Chief Executive Officer Donald Tomnitz said during an Aug. 5 conference call with analysts. Foreclosures continue to ``cloud'' the housing market, he said.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Read more...
Aug. 7 (Bloomberg) -- More Americans unexpectedly signed contracts to purchase previously owned homes in June, a sign that lower prices are drawing some buyers back into the market.
The index of pending home resales rose 5.3 percent after a revised 4.9 percent decline in May, the National Association of Realtors said today in Washington. The gain is the third this year.
Plummeting property values, spurred by mounting foreclosures, may be helping to stabilize the market by making houses more affordable. Still, repossessions may keep growing as stricter lending rules make it harder for owners to refinance their mortgages.
``What we're getting is a little bit of foreclosures thrown in with voluntary home sales,'' John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said in an interview with Bloomberg Television. ``Although foreclosures are up, there seems to be enough of a price decline that buyers are starting to look for bargains and they're willing to purchase.''
Economists had projected the index would fall 1 percent after a previously reported 4.7 percent decrease in May, according to the median of 37 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3 percent to a 3.5 percent gain.
A separate report today from the Labor Department showed initial jobless claims for the week ended Aug. 2 unexpectedly rose to the highest level in six years, signaling the labor market continues to weaken. Initial jobless claims increased by 7,000 to 455,000, the most since March 2002.
Market Reaction
Stocks trimmed losses following the housing report. The Standard & Poor's 500 index fell 0.7 percent to 1,280.3 at 10:06 a.m. in New York. Treasuries maintained earlier gains with the yield on the benchmark 10-year note at 4 percent compared with 4.05 percent late yesterday.
Pending resales were down 12 percent from June 2007, today's housing report showed.
The measure last month increased in all four regions of the country from May, led by a 9.3 percent gain in the South.
Purchase contracts also rose 4.6 percent in the West, 3.4 percent in the Northeast and 1.3 percent in the Midwest. Compared with a year ago, contract signings remained down in all four regions.
`Floor on Prices'
``Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices,'' Lawrence Yun, the agents' group chief economist, said in a statement. ``In addition, rising commodity prices and higher construction costs have resulted in a very unusual market today with existing-home prices being less than replacement building costs in some areas.''
The pending resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors.
The group's figures on July existing home sales are due Aug. 25. Purchases in June fell 2.6 percent to a 4.86 million annual pace, the lowest level in a decade, from a 4.99 million rate the prior month. At the June sales rate, it would take 11.1 months to sell all the houses on the market, about twice the supply that reflects a balanced market, according to the agents' group.
``As long as housing is a negative portion of the economy, and I think that could well happen and continue to happen until say the beginning of 2009, it's hard for me to get really optimistic about a pickup'' in growth, Robert Parry, former president of the Federal Reserve Bank of San Francisco, said in an Aug. 5 Bloomberg Radio interview.
Drop in Applications
Other measures are still signaling sales may keep dropping. The Mortgage Bankers Association's index of applications for loans to purchase a house reached a five-year low at the end of July.
Home prices in 20 U.S. metropolitan areas fell in May by 15.8 percent from a year earlier, the most on record, the S&P/Case-Shiller home-price index showed on July 29.
A surge in bank repossessions is contributing to the drop in property values. Foreclosure filings in the second quarter jumped 121 percent from a year earlier, RealtyTrac Inc., a seller of default data, said last month. Almost 740,000 properties were in some stage of foreclosure, the most since the Irvine, California- based company began reporting in January 2005.
Homebuilders are struggling as sales drop. D.R. Horton Inc., the largest U.S. homebuilder, this week reported its fifth straight quarterly loss. The Fort Worth, Texas-based company recorded $330.4 million in pretax expenses to write down property value and abandon scheduled land purchases.
``We're continuing to cut at all levels,'' Chief Executive Officer Donald Tomnitz said during an Aug. 5 conference call with analysts. Foreclosures continue to ``cloud'' the housing market, he said.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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U.S. Jobless Claims Rose Last Week to Six-Year High
By Courtney Schlisserman
Aug. 7 (Bloomberg) -- The number of Americans filing first- time claims for unemployment benefits unexpectedly rose last week to the highest level in six years, signaling the labor market continues to weaken.
Initial jobless claims increased by 7,000 to 455,000 in the week ended Aug. 2, the most since March 2002, from 448,000 the prior week. The number of continuing claims increased to a four- year high.
Companies are reducing staff as demand slows and raw- material costs surge. Rising unemployment adds to concerns that consumer spending will falter in coming months after the effects of the government's tax rebate checks wane.
``The labor market is slackening,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. ``The underlying trend for jobs has got recession written all over it.''
Treasuries rose after the report, pushing yields lower. The benchmark 10-year note yielded 3.99 percent as of 8:42 a.m. in New York, down 7 basis points from yesterday.
Economists had forecast claims would fall to 425,000, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from 390,000 to 463,000.
Extended Benefits
Some workers filing for extended benefits under a government-spending bill that was signed by President George W. Bush in June were deemed eligible to enter the program as first- time claimants, according to a Labor Department spokesman. That may have contributed to the jump in applications over the last few weeks, he said.
The government hasn't been able to quantify the impact on claims and applications may remain elevated for a few more weeks, according to the spokesman.
The four-week moving average, a less volatile measure, climbed to 419,500 from 392,750, today's report showed.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.5 percent. Fifteen states and territories reported an increase in new claims, while 38 reported a decrease. These data are reported with a one-week lag.
Decline in Payrolls
The government reported last week that payrolls declined by 51,000 workers in July, the seventh straight monthly drop. The unemployment rate rose to 5.7 percent.
Initial jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly non-farm payrolls report -- slows. Weekly claims have averaged 369,600 so far this year compared with an average 321,000 for all of 2007.
The recent increase in claims brings the figures closer to losses seen in previous economic downturns. During the last recession, in 2001, about 415,000 workers a week on average filed new applications for benefits.
``Labor markets have softened further and financial markets remain under considerable stress,'' Federal Reserve policy makers said earlier this week in announcing that the benchmark interest rate would remain at 2 percent. It was the second straight meeting at which the Federal Open Market Committee kept the rate unchanged.
Economic weakness is spreading. The Institute for Supply Management said Aug. 5 that its index of non-manufacturing businesses, which make up almost 90 percent of the economy, contracted for a second straight month.
Ameristar Casinos Inc. said Aug. 4 it has fired 244 people as a result of ``weak economic conditions'' and plans to reduce the workforce by an additional 150 full-time positions through both attrition and changes in scheduling and staffing practices.
``We expect current difficult business conditions to continue at least through the second half of 2008, reflecting the impact of the general economic slowdown and higher fuel prices on the gaming industry,'' Chief Executive Officer Gordon Kanofsky said.
The San Francisco Chronicle said Aug. 2 it will offer buyouts to at least 125 employees by the end of the year. If not enough people accept, firings are likely, the newspaper said. Chief Executive Officer Frank Vega said the offer was made because of shrinking ad sales.
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
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Aug. 7 (Bloomberg) -- The number of Americans filing first- time claims for unemployment benefits unexpectedly rose last week to the highest level in six years, signaling the labor market continues to weaken.
Initial jobless claims increased by 7,000 to 455,000 in the week ended Aug. 2, the most since March 2002, from 448,000 the prior week. The number of continuing claims increased to a four- year high.
Companies are reducing staff as demand slows and raw- material costs surge. Rising unemployment adds to concerns that consumer spending will falter in coming months after the effects of the government's tax rebate checks wane.
``The labor market is slackening,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. ``The underlying trend for jobs has got recession written all over it.''
Treasuries rose after the report, pushing yields lower. The benchmark 10-year note yielded 3.99 percent as of 8:42 a.m. in New York, down 7 basis points from yesterday.
Economists had forecast claims would fall to 425,000, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from 390,000 to 463,000.
Extended Benefits
Some workers filing for extended benefits under a government-spending bill that was signed by President George W. Bush in June were deemed eligible to enter the program as first- time claimants, according to a Labor Department spokesman. That may have contributed to the jump in applications over the last few weeks, he said.
The government hasn't been able to quantify the impact on claims and applications may remain elevated for a few more weeks, according to the spokesman.
The four-week moving average, a less volatile measure, climbed to 419,500 from 392,750, today's report showed.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.5 percent. Fifteen states and territories reported an increase in new claims, while 38 reported a decrease. These data are reported with a one-week lag.
Decline in Payrolls
The government reported last week that payrolls declined by 51,000 workers in July, the seventh straight monthly drop. The unemployment rate rose to 5.7 percent.
Initial jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly non-farm payrolls report -- slows. Weekly claims have averaged 369,600 so far this year compared with an average 321,000 for all of 2007.
The recent increase in claims brings the figures closer to losses seen in previous economic downturns. During the last recession, in 2001, about 415,000 workers a week on average filed new applications for benefits.
``Labor markets have softened further and financial markets remain under considerable stress,'' Federal Reserve policy makers said earlier this week in announcing that the benchmark interest rate would remain at 2 percent. It was the second straight meeting at which the Federal Open Market Committee kept the rate unchanged.
Economic weakness is spreading. The Institute for Supply Management said Aug. 5 that its index of non-manufacturing businesses, which make up almost 90 percent of the economy, contracted for a second straight month.
Ameristar Casinos Inc. said Aug. 4 it has fired 244 people as a result of ``weak economic conditions'' and plans to reduce the workforce by an additional 150 full-time positions through both attrition and changes in scheduling and staffing practices.
``We expect current difficult business conditions to continue at least through the second half of 2008, reflecting the impact of the general economic slowdown and higher fuel prices on the gaming industry,'' Chief Executive Officer Gordon Kanofsky said.
The San Francisco Chronicle said Aug. 2 it will offer buyouts to at least 125 employees by the end of the year. If not enough people accept, firings are likely, the newspaper said. Chief Executive Officer Frank Vega said the offer was made because of shrinking ad sales.
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
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BOE Keeps Rate at 5% as Economy Slumps, Prices Rise
By Brian Swint and Jennifer Ryan
Aug. 7 (Bloomberg) -- The Bank of England kept the main interest rate unchanged for a fourth month after inflation accelerated and the economy teetered on the brink of a recession.
The Monetary Policy Committee, led by Governor Mervyn King, left the bank rate unchanged at 5 percent today, the central bank said in London. The decision was predicted by all 60 economists in a Bloomberg News survey.
U.K. services, manufacturing and construction shrank in July and house prices dropped the most in a quarter-century, while King predicts inflation will soon quicken to more than double the 2 percent target. Policy makers split three ways last month on which direction interest rates should move, and they may have disagreed again in today's decision.
``They're in a terrible position,'' Paul Mortimer-Lee, head of market economics at BNP Paribas SA in London, said in an interview on Bloomberg Television. ``They're torn between a disastrous growth outlook and a disastrous inflation outlook. In that case, they're doing nothing.''
The pound stayed close to a seven-week low against the euro after the Bank of England's decision, trading at 79.22 pence per euro as of 12:48 p.m. in London.
The bank, which cut the benchmark rate three times since December, will publish new forecasts on Aug. 13 and will release minutes of today's meeting, showing how each of the nine policy makers voted, a week later.
G-7 Rates
The U.K.'s main rate is the highest in the Group of Seven countries. The U.S. Federal Reserve this week kept the benchmark at 2 percent. The European Central Bank raised its rate to 4.25 percent last month and kept it at that level today, as predicted by all 60 economists in a Bloomberg survey. The Czech central bank cut its benchmark rate by a quarter-point to 3.5 percent today.
With the British central bank standing pat, Prime Minister Gordon Brown may try to shore up the economy with tax changes to benefit consumers. Brown's popularity has plunged after 13 months in office, with his ruling Labour Party attracting 24 percent support in a BPIX Ltd. poll between July 31 and Aug. 2, compared with 47 percent for the Conservative opposition.
Nationwide Building Society's index of consumer confidence dropped by the most in four years, and HBOS Plc said today that house prices fell an annual 8.8 percent, the biggest drop since it started measuring the property market in 1983.
Barclays Plc, the U.K.'s third-biggest bank, said today that first-half profit fell 34 percent as securities trading declined and credit writedowns increased. Global losses and writedowns at financial institutions from the U.S. subprime-mortgage market collapse now total more than $493 billion.
IMF Forecasts
The International Monetary Fund yesterday slashed its forecast for British economic growth to 1.4 percent in 2008 from the 1.8 percent it predicted in May, and to 1.1 percent in 2009, down from 1.7 percent.
The Washington-based lender also predicted that inflation may accelerate to almost 5 percent, from 3.8 percent in June, which was the fastest pace since at least 1997. King predicted on July 14 that it will exceed 3 percent ``until well into next year.''
Record oil prices and rising utility bills have fanned inflation. Centrica Plc, Britain's biggest energy supplier, and Electricite de France SA's U.K. unit announced price increases of as much as 35 percent in the last month. While crude oil costs have dropped 18 percent since the record high on July 11, they are still up 66 percent from a year ago.
Inflation Risk
``Cutting rates to soften the landing doesn't make sense when inflation is so high,'' said Peter Dixon, an economist at Commerzbank AG in London. ``The peak in inflation may be above 4 percent, and what will be interesting is how quickly they predict it will fall back to 2 percent.''
Last month, policy maker Timothy Besley favored a rate increase, arguing that faster inflation risks eroding the bank's credibility. David Blanchflower supported a reduction, saying that the economy is likely ``to contract sharply in the near term, possibly for several quarters.'' The majority voted for no change.
The central bank's decision today defied calls from unions and companies for a rate cut. Adam Lent, head of economics and social affairs at the Trades Union Congress, which represents 7 million workers, said in a statement that the bank ``must prioritize economic growth now rather than waiting until the economy has stalled.''
``It's a particularly uncomfortable decision'' for policy makers, Investec's Shaw said. ``You'd love to be a fly on the wall.''
To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Jennifer Ryan in London at Jryan13@bloomberg.net.
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Aug. 7 (Bloomberg) -- The Bank of England kept the main interest rate unchanged for a fourth month after inflation accelerated and the economy teetered on the brink of a recession.
The Monetary Policy Committee, led by Governor Mervyn King, left the bank rate unchanged at 5 percent today, the central bank said in London. The decision was predicted by all 60 economists in a Bloomberg News survey.
U.K. services, manufacturing and construction shrank in July and house prices dropped the most in a quarter-century, while King predicts inflation will soon quicken to more than double the 2 percent target. Policy makers split three ways last month on which direction interest rates should move, and they may have disagreed again in today's decision.
``They're in a terrible position,'' Paul Mortimer-Lee, head of market economics at BNP Paribas SA in London, said in an interview on Bloomberg Television. ``They're torn between a disastrous growth outlook and a disastrous inflation outlook. In that case, they're doing nothing.''
The pound stayed close to a seven-week low against the euro after the Bank of England's decision, trading at 79.22 pence per euro as of 12:48 p.m. in London.
The bank, which cut the benchmark rate three times since December, will publish new forecasts on Aug. 13 and will release minutes of today's meeting, showing how each of the nine policy makers voted, a week later.
G-7 Rates
The U.K.'s main rate is the highest in the Group of Seven countries. The U.S. Federal Reserve this week kept the benchmark at 2 percent. The European Central Bank raised its rate to 4.25 percent last month and kept it at that level today, as predicted by all 60 economists in a Bloomberg survey. The Czech central bank cut its benchmark rate by a quarter-point to 3.5 percent today.
With the British central bank standing pat, Prime Minister Gordon Brown may try to shore up the economy with tax changes to benefit consumers. Brown's popularity has plunged after 13 months in office, with his ruling Labour Party attracting 24 percent support in a BPIX Ltd. poll between July 31 and Aug. 2, compared with 47 percent for the Conservative opposition.
Nationwide Building Society's index of consumer confidence dropped by the most in four years, and HBOS Plc said today that house prices fell an annual 8.8 percent, the biggest drop since it started measuring the property market in 1983.
Barclays Plc, the U.K.'s third-biggest bank, said today that first-half profit fell 34 percent as securities trading declined and credit writedowns increased. Global losses and writedowns at financial institutions from the U.S. subprime-mortgage market collapse now total more than $493 billion.
IMF Forecasts
The International Monetary Fund yesterday slashed its forecast for British economic growth to 1.4 percent in 2008 from the 1.8 percent it predicted in May, and to 1.1 percent in 2009, down from 1.7 percent.
The Washington-based lender also predicted that inflation may accelerate to almost 5 percent, from 3.8 percent in June, which was the fastest pace since at least 1997. King predicted on July 14 that it will exceed 3 percent ``until well into next year.''
Record oil prices and rising utility bills have fanned inflation. Centrica Plc, Britain's biggest energy supplier, and Electricite de France SA's U.K. unit announced price increases of as much as 35 percent in the last month. While crude oil costs have dropped 18 percent since the record high on July 11, they are still up 66 percent from a year ago.
Inflation Risk
``Cutting rates to soften the landing doesn't make sense when inflation is so high,'' said Peter Dixon, an economist at Commerzbank AG in London. ``The peak in inflation may be above 4 percent, and what will be interesting is how quickly they predict it will fall back to 2 percent.''
Last month, policy maker Timothy Besley favored a rate increase, arguing that faster inflation risks eroding the bank's credibility. David Blanchflower supported a reduction, saying that the economy is likely ``to contract sharply in the near term, possibly for several quarters.'' The majority voted for no change.
The central bank's decision today defied calls from unions and companies for a rate cut. Adam Lent, head of economics and social affairs at the Trades Union Congress, which represents 7 million workers, said in a statement that the bank ``must prioritize economic growth now rather than waiting until the economy has stalled.''
``It's a particularly uncomfortable decision'' for policy makers, Investec's Shaw said. ``You'd love to be a fly on the wall.''
To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Jennifer Ryan in London at Jryan13@bloomberg.net.
Read more...
Petroplus Coryton Gasoline Unit Shut for Maintenance
By Nidaa Bakhsh
Aug. 7 (Bloomberg) -- Petroplus Holdings AG, Europe's largest independent oil refiner by capacity, is carrying out maintenance on a gasoline-making unit at its Coryton plant in the U.K. after a power failure last month.
Work is under way on the refinery's fluid catalytic cracker and associated units following a July 19 power cut, Chief Executive Officer Robert Lavinia said today in an earnings statement. Lavinia expects the cracker, which processes gasoil into lighter refined products, to resume operations in mid- August.
Maintenance at the unit had been scheduled for the first quarter of 2009 and will now be postponed until the third quarter because some equipment inspections can be carried out during the current shutdown, Lavinia said.
The Coryton refinery can process 172,000 barrels of oil a day, according to data compiled by Bloomberg.
Petroplus's 110,000 barrel-a-day BRC Antwerp refinery in Belgium is running at close to 65 percent of capacity after scheduled and unplanned maintenance, Lavinia said. Operating rates will be increased next week, he said.
The plant had been idled in the middle of the second quarter for a month of maintenance, Lavinia said. On July 9, a fire in a visbreaker caused minor damage to adjacent units resulting in the processing units remaining shut into the third quarter, he said. A visbreaker increases the amount of diesel and heating oil that can be processed from a barrel of crude.
``There are no other planned major maintenance projects for the remainder of 2008,'' Lavinia said in the statement.
Cressier Refinery
Petroplus said in a presentation on its Web site that it will shut its 68,000 barrel-a-day Cressier refinery in Switzerland for up to a month next year to carry out planned maintenance.
In 2010, Petroplus will perform maintenance for 35 to 40 days at its refineries in Ingolstadt, Germany, Petit Couronne in France, and Teesside in the U.K. and will shut its Reichstett facility in France for up to 45 days during the year. The four plants have a total combined processing capacity of 446,000 barrels of oil a day, according to Bloomberg data.
Petroplus completed the purchase of the two French refineries from Royal Dutch Shell Plc in April.
To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net
Read more...
Aug. 7 (Bloomberg) -- Petroplus Holdings AG, Europe's largest independent oil refiner by capacity, is carrying out maintenance on a gasoline-making unit at its Coryton plant in the U.K. after a power failure last month.
Work is under way on the refinery's fluid catalytic cracker and associated units following a July 19 power cut, Chief Executive Officer Robert Lavinia said today in an earnings statement. Lavinia expects the cracker, which processes gasoil into lighter refined products, to resume operations in mid- August.
Maintenance at the unit had been scheduled for the first quarter of 2009 and will now be postponed until the third quarter because some equipment inspections can be carried out during the current shutdown, Lavinia said.
The Coryton refinery can process 172,000 barrels of oil a day, according to data compiled by Bloomberg.
Petroplus's 110,000 barrel-a-day BRC Antwerp refinery in Belgium is running at close to 65 percent of capacity after scheduled and unplanned maintenance, Lavinia said. Operating rates will be increased next week, he said.
The plant had been idled in the middle of the second quarter for a month of maintenance, Lavinia said. On July 9, a fire in a visbreaker caused minor damage to adjacent units resulting in the processing units remaining shut into the third quarter, he said. A visbreaker increases the amount of diesel and heating oil that can be processed from a barrel of crude.
``There are no other planned major maintenance projects for the remainder of 2008,'' Lavinia said in the statement.
Cressier Refinery
Petroplus said in a presentation on its Web site that it will shut its 68,000 barrel-a-day Cressier refinery in Switzerland for up to a month next year to carry out planned maintenance.
In 2010, Petroplus will perform maintenance for 35 to 40 days at its refineries in Ingolstadt, Germany, Petit Couronne in France, and Teesside in the U.K. and will shut its Reichstett facility in France for up to 45 days during the year. The four plants have a total combined processing capacity of 446,000 barrels of oil a day, according to Bloomberg data.
Petroplus completed the purchase of the two French refineries from Royal Dutch Shell Plc in April.
To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net
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French Trade Deficit Expands to Record on Oil Costs
By Helene Fouquet
Aug. 7 (Bloomberg) -- France's tradedeficit expanded to a record in June as increased oil prices pushed imports to an all- time high while the euro's gains and a cooling global economy weighed on exports.
The deficit increased to 5.6 billion euros ($8.7 billion) from a revised 4.7 billion euros in May, the Trade Ministry in Paris said today. The June figure was higher than the 4.6 billion-euro median estimate of seven economists in a Bloomberg News survey.
The euro's 12 percent advance against the dollar in the past year has made French goods less competitive abroad, while a 65 percent jump in oil prices in that time boosted the cost of imported energy. Overall imports rose 2.8 percent in June to 40.5 billion euros, with 1 billion euros of that due to higher crude oil, the ministry said.
``France is suffering directly from the very high oil prices in June, which it did not prepare itself for,'' Caroline Newhouse-Cohen, an economist at BNP Paribas SA in Paris, said in an interview with Bloomberg Television today. ``These results show the weaknesses of French trade, especially looking at Germany's performance.''
Germany had a record trade surplus in June as exports defied the euro's advance and jumped 4.2 percent, more than economists expected, data released today showed. Demand from emerging markets like China and Russia has helped German exporters cope with the global slowdown and stronger currency.
`Macroeconomic Evolutions'
``Trade figures only reflect global macroeconomic evolutions,'' French Trade Minister Anne-Marie Idrac told Les Echos in an interview published today.
Global economic expansion is slowing after the U.S. subprime mortgage market collapsed last year, making banks reluctant to lend and driving up the cost of credit. The International Monetary Fund last month forecast world growth would slow to 4.1 percent this year from 4.9 percent in 2007.
French exports increased 0.6 percent to 34.9 billion euros in June, with shipments to the U.S. and the Middle East declining, the ministry in Paris said today. French business confidence fell to the lowest in more than three years last month as surging inflation and the stronger euro further dimmed the economic-growth outlook.
Tom Enders, chief executive officer of Airbus SAS, the world's biggest planemaker, last month called the euro's appreciation against the dollar a ``deep, substantial problem.''
Airbus Orders
Airbus sold 27 aircraft in June for 1.35 billion euros, up from 20 planes in May for 831 million euros, according to today's report. Louis Gallois, chief executive officer of Airbus's Paris- and Munich-based parent, on July 30 stuck to a target of 850 Airbus orders this year and 470 deliveries as the company outpaces Boeing Co. in both categories.
Expansion in the French economy slowed to 0.2 percent in the second quarter, the least in almost two years and less than half the pace in the first three months of the year, Paris-based statistics office Insee estimates. The economy will stagnate in the third quarter and grow 0.2 percent in the final three months of 2008, Insee projects.
French Finance Minister Christine Lagarde last month said expansion in 2008 would be at the lower end of the government's forecast of between 1.7 percent and 2 percent, down from 2.2 percent in 2007.
To contact the reporters on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net.
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Aug. 7 (Bloomberg) -- France's tradedeficit expanded to a record in June as increased oil prices pushed imports to an all- time high while the euro's gains and a cooling global economy weighed on exports.
The deficit increased to 5.6 billion euros ($8.7 billion) from a revised 4.7 billion euros in May, the Trade Ministry in Paris said today. The June figure was higher than the 4.6 billion-euro median estimate of seven economists in a Bloomberg News survey.
The euro's 12 percent advance against the dollar in the past year has made French goods less competitive abroad, while a 65 percent jump in oil prices in that time boosted the cost of imported energy. Overall imports rose 2.8 percent in June to 40.5 billion euros, with 1 billion euros of that due to higher crude oil, the ministry said.
``France is suffering directly from the very high oil prices in June, which it did not prepare itself for,'' Caroline Newhouse-Cohen, an economist at BNP Paribas SA in Paris, said in an interview with Bloomberg Television today. ``These results show the weaknesses of French trade, especially looking at Germany's performance.''
Germany had a record trade surplus in June as exports defied the euro's advance and jumped 4.2 percent, more than economists expected, data released today showed. Demand from emerging markets like China and Russia has helped German exporters cope with the global slowdown and stronger currency.
`Macroeconomic Evolutions'
``Trade figures only reflect global macroeconomic evolutions,'' French Trade Minister Anne-Marie Idrac told Les Echos in an interview published today.
Global economic expansion is slowing after the U.S. subprime mortgage market collapsed last year, making banks reluctant to lend and driving up the cost of credit. The International Monetary Fund last month forecast world growth would slow to 4.1 percent this year from 4.9 percent in 2007.
French exports increased 0.6 percent to 34.9 billion euros in June, with shipments to the U.S. and the Middle East declining, the ministry in Paris said today. French business confidence fell to the lowest in more than three years last month as surging inflation and the stronger euro further dimmed the economic-growth outlook.
Tom Enders, chief executive officer of Airbus SAS, the world's biggest planemaker, last month called the euro's appreciation against the dollar a ``deep, substantial problem.''
Airbus Orders
Airbus sold 27 aircraft in June for 1.35 billion euros, up from 20 planes in May for 831 million euros, according to today's report. Louis Gallois, chief executive officer of Airbus's Paris- and Munich-based parent, on July 30 stuck to a target of 850 Airbus orders this year and 470 deliveries as the company outpaces Boeing Co. in both categories.
Expansion in the French economy slowed to 0.2 percent in the second quarter, the least in almost two years and less than half the pace in the first three months of the year, Paris-based statistics office Insee estimates. The economy will stagnate in the third quarter and grow 0.2 percent in the final three months of 2008, Insee projects.
French Finance Minister Christine Lagarde last month said expansion in 2008 would be at the lower end of the government's forecast of between 1.7 percent and 2 percent, down from 2.2 percent in 2007.
To contact the reporters on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net.
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Abu Dhabi to Invest $20 Billion to Raise Oil Output
By Ayesha Daya
Aug. 7 (Bloomberg) -- Abu Dhabi, the largest sheikhdom in the United Arab Emirates and owner of the world's fifth-biggest oil reserves, will spend $20 billion to raise crude production by 30 percent in the next two years.
``Forecasts of strong global demand for oil in the long run coupled with diminishing supplies has prompted the emirate to allocate investments of up to $20 billion to raise its oil production capacity to 3.5 million barrels a day by 2010, up from 2.7 million barrels a day at present,'' the Abu Dhabi Department of Planning and Economy said in an e-mailed report today.
The oil industry accounted for 241 billion dirhams ($65.6 billion) of Abu Dhabi's 400 billion-dirham national income last year. Oil sales represented 92 percent of government revenue, the report said, without giving a monetary value.
It is unlikely that the U.A.E., the third-largest member of the Organization of Petroleum Exporting Countries, will be able to raise oil output by some 800,000 barrels a day in such a short time even with its budget, said Ross Cassidy, a Middle East research analyst at Wood Mackenzie Consultants Ltd.
``I don't think it is possible -- a good few oil projects would have to contribute to such a target and with the shortage of materials and labor, the whole industry is suffering from delays,'' Cassidy said in a phone interview from Edinburgh. ``We predict a slight increase of maybe 100,000 barrels a day by 2010.''
The U.A.E. produced 2.65 million barrels a day in July, according to Bloomberg estimates.
IEA Estimate
The International Energy Agency, the energy adviser to 27 nations, expects the U.A.E.'s production capacity to reach 2.82 million barrels a day in 2010, according to its Medium-Term Oil Market Report published last month. The country won't reach 3.5 million barrels a day until 2019 at the earliest as field expansion costs double and supplies of natural gas, which the U.A.E. uses to re-inject into ageing oil reservoirs to push more oil out, fall, the IEA said.
Abu Dhabi will continue to base its economic development on the hydrocarbons industry, the report said, even as it acknowledged that price fluctuations leave little financial control in the hands of the government. Oil prices touched a record $147.27 on July 11, more than doubling from a year earlier. It has fallen 17 percent since then, and was trading at $120.92 a barrel at 1:04 p.m. London time.
The manufacturing industry, consisting mainly of oil and gas-related activities such as petrochemicals production, was the second-largest contributor to Abu Dhabi's gross domestic product, representing 10 percent of national income in 2007, the report said.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Aug. 7 (Bloomberg) -- Abu Dhabi, the largest sheikhdom in the United Arab Emirates and owner of the world's fifth-biggest oil reserves, will spend $20 billion to raise crude production by 30 percent in the next two years.
``Forecasts of strong global demand for oil in the long run coupled with diminishing supplies has prompted the emirate to allocate investments of up to $20 billion to raise its oil production capacity to 3.5 million barrels a day by 2010, up from 2.7 million barrels a day at present,'' the Abu Dhabi Department of Planning and Economy said in an e-mailed report today.
The oil industry accounted for 241 billion dirhams ($65.6 billion) of Abu Dhabi's 400 billion-dirham national income last year. Oil sales represented 92 percent of government revenue, the report said, without giving a monetary value.
It is unlikely that the U.A.E., the third-largest member of the Organization of Petroleum Exporting Countries, will be able to raise oil output by some 800,000 barrels a day in such a short time even with its budget, said Ross Cassidy, a Middle East research analyst at Wood Mackenzie Consultants Ltd.
``I don't think it is possible -- a good few oil projects would have to contribute to such a target and with the shortage of materials and labor, the whole industry is suffering from delays,'' Cassidy said in a phone interview from Edinburgh. ``We predict a slight increase of maybe 100,000 barrels a day by 2010.''
The U.A.E. produced 2.65 million barrels a day in July, according to Bloomberg estimates.
IEA Estimate
The International Energy Agency, the energy adviser to 27 nations, expects the U.A.E.'s production capacity to reach 2.82 million barrels a day in 2010, according to its Medium-Term Oil Market Report published last month. The country won't reach 3.5 million barrels a day until 2019 at the earliest as field expansion costs double and supplies of natural gas, which the U.A.E. uses to re-inject into ageing oil reservoirs to push more oil out, fall, the IEA said.
Abu Dhabi will continue to base its economic development on the hydrocarbons industry, the report said, even as it acknowledged that price fluctuations leave little financial control in the hands of the government. Oil prices touched a record $147.27 on July 11, more than doubling from a year earlier. It has fallen 17 percent since then, and was trading at $120.92 a barrel at 1:04 p.m. London time.
The manufacturing industry, consisting mainly of oil and gas-related activities such as petrochemicals production, was the second-largest contributor to Abu Dhabi's gross domestic product, representing 10 percent of national income in 2007, the report said.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Petroplus Chairman Expects Oil Price Near $115 in Coming Months
By Nicholas Larkin
Aug. 7 (Bloomberg) -- Oil may trade near $115 a barrel in coming months as demand slows and supply increases, according to Thomas D. O'Malley, chairman of Petroplus Holdings AG, Europe's biggest independent refiner by capacity.
Crude prices will settle around that level, plus or minus $10, over the next two to three months, O'Malley said today in the Swiss company's second-quarter earnings statement.
``High crude oil prices and extreme volatility are causing demand destruction, primarily in the U.S. If we get a period of stability around these numbers, demand destruction will be limited,'' he said.
Crude oil traded in New York was at $119.03 a barrel, up 0.4 percent, at 7:47 a.m. U.K. time today.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
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Aug. 7 (Bloomberg) -- Oil may trade near $115 a barrel in coming months as demand slows and supply increases, according to Thomas D. O'Malley, chairman of Petroplus Holdings AG, Europe's biggest independent refiner by capacity.
Crude prices will settle around that level, plus or minus $10, over the next two to three months, O'Malley said today in the Swiss company's second-quarter earnings statement.
``High crude oil prices and extreme volatility are causing demand destruction, primarily in the U.S. If we get a period of stability around these numbers, demand destruction will be limited,'' he said.
Crude oil traded in New York was at $119.03 a barrel, up 0.4 percent, at 7:47 a.m. U.K. time today.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
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Natural Gas Rises as Crude Gains, Lower Price Attracts Buyers
By Reg Curren
Aug. 7 (Bloomberg) -- Natural gas in New York advanced as crude oil climbed and as speculators who had sold contracts on a bet that prices would fall bought the positions back to protect gains or limit losses.
Oil gained for the first time in four days after a pipeline explosion halted shipments from Azerbaijan to the Mediterranean. Gas tumbled 34 percent since June 30 amid increasing supply and lower crude prices.
``Natural gas has been taking its cue from crude and oil is up pretty good,'' said Lannie Cohen, president of Capitol Commodity Services Inc., a brokerage in Indianapolis. ``The higher crude goes the more talk you hear about using natural gas as a replacement.''
Natural gas for September delivery rose 6.6 cents, or 0.8 percent, to $8.839 per million British thermal unit at 9:28 a.m. on the New York Mercantile Exchange. Gas is below its 200-day moving average of $9.568 per million Btu. The fuel is 42 percent higher in the past year and on this day in 2007 closed at $6.201 per million Btu. Gas rose to $13.577 on July 3, the highest since December 2005.
Crude oil for September delivery jumped $2.02, or 1.7 percent, to $120.60 a barrel in New York. Oil yesterday fell as low as $117.11 a barrel amid signs of a global economic slowdown likely to curtail already weakening demand. Futures touched a record $147.27 in New York on July 11.
Gas slipped to a ``seasonal low and now we'll be up for the next month through the hurricane season,'' said Cohen.
Storm Season
The most active portion of the Atlantic storm season runs from mid August to late September, according to the National Hurricane Center in Miami. Storms can spur prices by threatening energy-producing areas of the Gulf of Mexico and disrupting oil and gas output.
Gas also rose before a government report today that may show inventories expanded last week more than average for this time of year. Supplies gained 62 billion cubic feet in the week ended Aug. 1, according to the median of 18 analyst estimates compiled by Bloomberg News. The average change for this time of year over the past five is an increase of 50 billion.
Inventories may end the summer around 3.4 trillion cubic feet, adequate for heating needs next winter, analysts have said.
Supplies are 2.461 trillion cubic feet, or 0.5 percent, below the five-year average of 2.473 trillion for this time of year, the Energy Department said July 31.
The department is scheduled to release its weekly natural gas inventory report 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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Aug. 7 (Bloomberg) -- Natural gas in New York advanced as crude oil climbed and as speculators who had sold contracts on a bet that prices would fall bought the positions back to protect gains or limit losses.
Oil gained for the first time in four days after a pipeline explosion halted shipments from Azerbaijan to the Mediterranean. Gas tumbled 34 percent since June 30 amid increasing supply and lower crude prices.
``Natural gas has been taking its cue from crude and oil is up pretty good,'' said Lannie Cohen, president of Capitol Commodity Services Inc., a brokerage in Indianapolis. ``The higher crude goes the more talk you hear about using natural gas as a replacement.''
Natural gas for September delivery rose 6.6 cents, or 0.8 percent, to $8.839 per million British thermal unit at 9:28 a.m. on the New York Mercantile Exchange. Gas is below its 200-day moving average of $9.568 per million Btu. The fuel is 42 percent higher in the past year and on this day in 2007 closed at $6.201 per million Btu. Gas rose to $13.577 on July 3, the highest since December 2005.
Crude oil for September delivery jumped $2.02, or 1.7 percent, to $120.60 a barrel in New York. Oil yesterday fell as low as $117.11 a barrel amid signs of a global economic slowdown likely to curtail already weakening demand. Futures touched a record $147.27 in New York on July 11.
Gas slipped to a ``seasonal low and now we'll be up for the next month through the hurricane season,'' said Cohen.
Storm Season
The most active portion of the Atlantic storm season runs from mid August to late September, according to the National Hurricane Center in Miami. Storms can spur prices by threatening energy-producing areas of the Gulf of Mexico and disrupting oil and gas output.
Gas also rose before a government report today that may show inventories expanded last week more than average for this time of year. Supplies gained 62 billion cubic feet in the week ended Aug. 1, according to the median of 18 analyst estimates compiled by Bloomberg News. The average change for this time of year over the past five is an increase of 50 billion.
Inventories may end the summer around 3.4 trillion cubic feet, adequate for heating needs next winter, analysts have said.
Supplies are 2.461 trillion cubic feet, or 0.5 percent, below the five-year average of 2.473 trillion for this time of year, the Energy Department said July 31.
The department is scheduled to release its weekly natural gas inventory report 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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Taqa Second-Quarter Net More Than Doubles on High Oil
By Ayesha Daya
Aug. 7 (Bloomberg) -- Abu Dhabi National Energy Co., the state-controlled energy company known as Taqa, said second- quarter profit more than doubled on acquisitions and higher oil and gas prices.
Net income jumped to 471 million dirhams ($128.2 million), or 11 fils a share, from 186 million dirhams, or 4 fils, a year earlier, the company said today in a statement. Revenue rose to 4.6 billion dirhams from 1.8 billion dirhams.
Revenue from oil and gas soared to 2.3 billion dirhams from 77 million dirhams on acquisitions of exploration, production and processing assets in North America and Europe.
``The results show the significant change in the nature of our business compared to just 12 months ago,'' Chief Executive Officer Peter Barker-Homek said in the statement. ``While our domestic power generation and water desalination assets have continued to deliver solid performance, we are now seeing the full impact of the acquisitions made in the past year on Taqa's results.''
Oil prices have soared 64 percent in the past year. Crude oil for September delivery traded 30 cents, or 0.3 percent higher, at $118.88 a barrel at 2:06 p.m. Singapore time on the New York Mercantile Exchange.
Shares Fall
Taqa shares fell 2.4 percent to 2.9 dirhams in Abu Dhabi trading at 11:02 a.m. local time, valuing the company at 12 billion dirhams.
Taqa, which supplies 90 percent of the water and electricity needs of the capital city of the United Arab Emirates, aims to triple its assets to $60 billion by 2012. The company's assets at the end of the second quarter reached 85.9 billion dirhams.
Second-quarter oil and gas production averaged 119,000 barrels of oil equivalent daily. Its Canadian unit known as Taqa North contributed 96,700 barrels, while European assets, including gas production in the Netherlands known as Taqa Energy, produced 7,400 barrels of oil equivalent daily, and Aberdeen-based Taqa Bratani produced 15,100 barrels a day.
Upstream and midstream businesses contributed 55 percent of total revenue, while the rest came from power generation and water desalination. Revenue from the electricity and water business rose 16.7 percent to 1.4 billion dirhams. Its power generation capacity is 9,423 megawatts.
Financing Plans
Taqa has raised money to fund its acquisition plans several times this year. In July, it sold $1.5 billion of senior unsecured long-term notes and said it planned to raise more than $1 billion in a sale of convertible bonds. It hired banks in June to help borrow $3 billion in a three-year loan, and secured a one-year, $3.1 billion revolving credit facility in January.
The company may invest some $4.5 billion in power plants in Saudi Arabia and the U.S. and plans to bid for a Moroccan wind-farm project with Theolia SA. Taqa on July 30 said it plans to borrow as much as $3.5 billion to finance future acquisitions in Japan.
The company will convert 4.15 billion dirhams of bonds into shares on Sept. 1, for the equivalent of 2 dirhams a share, it said in the statement.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Aug. 7 (Bloomberg) -- Abu Dhabi National Energy Co., the state-controlled energy company known as Taqa, said second- quarter profit more than doubled on acquisitions and higher oil and gas prices.
Net income jumped to 471 million dirhams ($128.2 million), or 11 fils a share, from 186 million dirhams, or 4 fils, a year earlier, the company said today in a statement. Revenue rose to 4.6 billion dirhams from 1.8 billion dirhams.
Revenue from oil and gas soared to 2.3 billion dirhams from 77 million dirhams on acquisitions of exploration, production and processing assets in North America and Europe.
``The results show the significant change in the nature of our business compared to just 12 months ago,'' Chief Executive Officer Peter Barker-Homek said in the statement. ``While our domestic power generation and water desalination assets have continued to deliver solid performance, we are now seeing the full impact of the acquisitions made in the past year on Taqa's results.''
Oil prices have soared 64 percent in the past year. Crude oil for September delivery traded 30 cents, or 0.3 percent higher, at $118.88 a barrel at 2:06 p.m. Singapore time on the New York Mercantile Exchange.
Shares Fall
Taqa shares fell 2.4 percent to 2.9 dirhams in Abu Dhabi trading at 11:02 a.m. local time, valuing the company at 12 billion dirhams.
Taqa, which supplies 90 percent of the water and electricity needs of the capital city of the United Arab Emirates, aims to triple its assets to $60 billion by 2012. The company's assets at the end of the second quarter reached 85.9 billion dirhams.
Second-quarter oil and gas production averaged 119,000 barrels of oil equivalent daily. Its Canadian unit known as Taqa North contributed 96,700 barrels, while European assets, including gas production in the Netherlands known as Taqa Energy, produced 7,400 barrels of oil equivalent daily, and Aberdeen-based Taqa Bratani produced 15,100 barrels a day.
Upstream and midstream businesses contributed 55 percent of total revenue, while the rest came from power generation and water desalination. Revenue from the electricity and water business rose 16.7 percent to 1.4 billion dirhams. Its power generation capacity is 9,423 megawatts.
Financing Plans
Taqa has raised money to fund its acquisition plans several times this year. In July, it sold $1.5 billion of senior unsecured long-term notes and said it planned to raise more than $1 billion in a sale of convertible bonds. It hired banks in June to help borrow $3 billion in a three-year loan, and secured a one-year, $3.1 billion revolving credit facility in January.
The company may invest some $4.5 billion in power plants in Saudi Arabia and the U.S. and plans to bid for a Moroccan wind-farm project with Theolia SA. Taqa on July 30 said it plans to borrow as much as $3.5 billion to finance future acquisitions in Japan.
The company will convert 4.15 billion dirhams of bonds into shares on Sept. 1, for the equivalent of 2 dirhams a share, it said in the statement.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Veolia Soars on Plan to Cut Costs, Sell Assets
By Tara Patel
Aug. 7 (Bloomberg) -- Veolia Environnement SA, the world's biggest water company, rose the most in more than 18 months after announcing a plan to reduce investment, cut costs and sell assets to boost profit growth.
The company today reduced its 2008 growth target and pledged to dispose of businesses after the dollar's decline and higher energy prices curbed first-half profit. It will raise its 2008 dividend by 10 percent.
Veolia gained as much as 9.8 percent to 36.50 euros and was 2.79 euros, or 8.4 percent, higher at 36.04 euros at 12:47 p.m. in Paris trading. The shares have slumped 43 percent this year on concern earnings growth will be restricted by record oil prices and a lower U.S. currency.
``The plans to cut costs and restructure look very investor-friendly,'' Verity Mitchell, a London-based analyst at HSBC Holdings Plc said in an e-mail. ``Dividend growth shows management is confident it can deliver them.''
Net income was 500.5 million euros ($772.2 million) compared with 493 million euros a year earlier, Paris-based Veolia said today in a statement. That missed the 520 million- euro median estimate of analysts surveyed by Bloomberg News.
Boost Profitability
``The results weren't satisfactory,'' Chief Executive Officer Henri Proglio said during a conference call with reporters. The company will implement a ``robust'' plan to cut costs by 400 million euros and sell 1.5 billion euros worth of assets by the end of next year, he said. On May 6 Jerome Contamine, a senior executive vice-president, told analysts the company was aiming to save 200 million euros by the end of 2010.
The asset sales mark a turnaround after Veolia spent about 4 billion euros in the past two years on acquisitions. The company is also facing competition for investors from rival Suez Environnement SA after its spinoff and listing last month as part of Suez SA's merger with Gaz de France SA.
Veolia said full-year cash flow from operations would be 6 percent, lower than the target announced March 7 for 2008 growth of ``at least 10 percent in our revenue, cash flow from operations and net income.'' Revenue will grow in 2008 by more than 12 percent, the company said.
Cutting Costs
The company said it would cut structural and head office costs and sell assets ``with the aim of improving profitability of the businesses'' and achieve after-tax return on capital employed targeted at over 10 percent by 2010. Veolia also plans to reduce investment this year to 5 billion euros from a planned 5.5 billion euros, Proglio said.
Veolia said it plans to cut purchasing, operational and support function costs, and will aim to restore profit margins in regions where they are insufficient.
Earnings before interest and tax advanced to 1.30 billion euros in the first half from 1.27 billion euros, missing the 1.32 billion-euro median estimate in the Bloomberg survey. The weaker dollar shaved 30 million euros off operating income while rising fuel costs took off 36 million euros, Veolia said.
Sales gained 17 percent to 18.1 billion euros, the company said. Revenue was boosted by acquisitions including German trash-handler Sulo Group and TMT, the waste-management unit of Italy's Termomeccanica Ecologia.
The asset sales will be ``small and medium-sized'' and mostly in non-strategic countries, Proglio said. That move would also be accompanied by a management reorganization across geographic regions, he said.
Waste Management
Net financial debt was 16.3 billion euros as of June 30, compared with 15.2 billion euros a year earlier.
Revenue at Veolia's water division rose 15 percent in the first half to 5.99 billion euros, with organic growth at 3.3 percent in France and 19 percent elsewhere, in part because of non-regulated operations in the U.K. and the start of new contracts in China, according to the statement.
At the waste-management division, sales advanced 21 percent to 5.09 billion euros, mainly because of acquisitions including Bartin Recycling Group in France, which was completed in February.
German paper and plastics recycler Sulo is the ``only real disappointment on external growth,'' Proglio said. Contract renewals by the German waste collection authority led to a fall in market share and earnings, executives said.
Veolia plans to change top management at the unit by the end of the year at the unit which will have a 40 million euro shortfall in ebitda this year compared to the target, the company said.
Energy Services
Revenue growth at the energy-services division was up 22 percent at 4.05 billion euros following an increase in energy prices and the acquisition of Thermal North America Inc. in the U.S., Veolia said.
Sales at the transport division rose 9 percent to 2.97 billion euros, the company said.
Veolia supplies water to about 110 million people worldwide and collects and manages trash for 50 million. It provides public transportation in 27 countries and is also developing airplane and ship dismantling and recycling businesses in France.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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Aug. 7 (Bloomberg) -- Veolia Environnement SA, the world's biggest water company, rose the most in more than 18 months after announcing a plan to reduce investment, cut costs and sell assets to boost profit growth.
The company today reduced its 2008 growth target and pledged to dispose of businesses after the dollar's decline and higher energy prices curbed first-half profit. It will raise its 2008 dividend by 10 percent.
Veolia gained as much as 9.8 percent to 36.50 euros and was 2.79 euros, or 8.4 percent, higher at 36.04 euros at 12:47 p.m. in Paris trading. The shares have slumped 43 percent this year on concern earnings growth will be restricted by record oil prices and a lower U.S. currency.
``The plans to cut costs and restructure look very investor-friendly,'' Verity Mitchell, a London-based analyst at HSBC Holdings Plc said in an e-mail. ``Dividend growth shows management is confident it can deliver them.''
Net income was 500.5 million euros ($772.2 million) compared with 493 million euros a year earlier, Paris-based Veolia said today in a statement. That missed the 520 million- euro median estimate of analysts surveyed by Bloomberg News.
Boost Profitability
``The results weren't satisfactory,'' Chief Executive Officer Henri Proglio said during a conference call with reporters. The company will implement a ``robust'' plan to cut costs by 400 million euros and sell 1.5 billion euros worth of assets by the end of next year, he said. On May 6 Jerome Contamine, a senior executive vice-president, told analysts the company was aiming to save 200 million euros by the end of 2010.
The asset sales mark a turnaround after Veolia spent about 4 billion euros in the past two years on acquisitions. The company is also facing competition for investors from rival Suez Environnement SA after its spinoff and listing last month as part of Suez SA's merger with Gaz de France SA.
Veolia said full-year cash flow from operations would be 6 percent, lower than the target announced March 7 for 2008 growth of ``at least 10 percent in our revenue, cash flow from operations and net income.'' Revenue will grow in 2008 by more than 12 percent, the company said.
Cutting Costs
The company said it would cut structural and head office costs and sell assets ``with the aim of improving profitability of the businesses'' and achieve after-tax return on capital employed targeted at over 10 percent by 2010. Veolia also plans to reduce investment this year to 5 billion euros from a planned 5.5 billion euros, Proglio said.
Veolia said it plans to cut purchasing, operational and support function costs, and will aim to restore profit margins in regions where they are insufficient.
Earnings before interest and tax advanced to 1.30 billion euros in the first half from 1.27 billion euros, missing the 1.32 billion-euro median estimate in the Bloomberg survey. The weaker dollar shaved 30 million euros off operating income while rising fuel costs took off 36 million euros, Veolia said.
Sales gained 17 percent to 18.1 billion euros, the company said. Revenue was boosted by acquisitions including German trash-handler Sulo Group and TMT, the waste-management unit of Italy's Termomeccanica Ecologia.
The asset sales will be ``small and medium-sized'' and mostly in non-strategic countries, Proglio said. That move would also be accompanied by a management reorganization across geographic regions, he said.
Waste Management
Net financial debt was 16.3 billion euros as of June 30, compared with 15.2 billion euros a year earlier.
Revenue at Veolia's water division rose 15 percent in the first half to 5.99 billion euros, with organic growth at 3.3 percent in France and 19 percent elsewhere, in part because of non-regulated operations in the U.K. and the start of new contracts in China, according to the statement.
At the waste-management division, sales advanced 21 percent to 5.09 billion euros, mainly because of acquisitions including Bartin Recycling Group in France, which was completed in February.
German paper and plastics recycler Sulo is the ``only real disappointment on external growth,'' Proglio said. Contract renewals by the German waste collection authority led to a fall in market share and earnings, executives said.
Veolia plans to change top management at the unit by the end of the year at the unit which will have a 40 million euro shortfall in ebitda this year compared to the target, the company said.
Energy Services
Revenue growth at the energy-services division was up 22 percent at 4.05 billion euros following an increase in energy prices and the acquisition of Thermal North America Inc. in the U.S., Veolia said.
Sales at the transport division rose 9 percent to 2.97 billion euros, the company said.
Veolia supplies water to about 110 million people worldwide and collects and manages trash for 50 million. It provides public transportation in 27 countries and is also developing airplane and ship dismantling and recycling businesses in France.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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International Power Falls on Impact of Plant Shutdown
By Paul Dobson
Aug. 7 (Bloomberg) -- International Power Plc, the U.K. utility that generates electricity in 20 countries, fell the most in a year in London trading after saying second-half results will be ``adversely impacted'' by an extended power-station shutdown.
International Power slid as much as 30 pence, or 7.1 percent, to 391 pence, the steepest one-day decline since Aug. 10 last year. The stock traded at 400 pence as of 10:43 a.m. local time, valuing the London-based company at 6.04 billion pounds ($11.8 billion).
The utility owns regulated and market-based projects in Europe, the U.S., Asia and Australia, to spread the risk of its portfolio. A prolonged halt at its Rugeley plant in the U.K. will cost International Power 45 million pounds, it said today in a statement. First-half earnings also missed analysts' estimates.
``The market may be disappointed by the issues at Rugeley,'' Edmund Reid, an analyst at JPMorgan Cazenove Ltd., wrote in a note to investors today.
One of two power-generation units at the coal-fired Rugeley plant in central England will be offline for another nine weeks because of a component failure, Chief Executive Officer Philip Cox said in a Bloomberg Television interview. The plant's two 500-megawatt units won't be ready to comply with rules on emissions of some poisonous gases until the end of this year or early 2009, further limiting operating hours.
Miss Estimates
International Power earlier today reported first-half earnings per share excluding one-time items of 14.2 pence, below the 14.8-pence median estimate of five analysts surveyed by Bloomberg News. Earnings were curbed by an unplanned production halt at three units of its Hazelwood plant in Australia.
``These one-offs are very frustrating,'' Cox said in the interview. ``The underlying business is strongly profitable'' and there's ``plenty of optimism that we can keep growing.''
Cox is adding generation facilities from Pakistan to Portugal. The utility reached a 30-year agreement this week with Indonesia's PT Perusahaan Listrik Negara on power sales from a coal-fired plant it's building in the Southeast Asian country.
``We've announced just over 3,100 megawatts of new capacity since the start of the year,'' Cox said on a call with reporters today. ``All our markets provide growth opportunities.''
The company will target acquisitions and plans to build more plants in the Middle East and Southeast Asia, where demand for power generation is ``strong,'' according to Cox. He also expects ``improved returns from our merchant markets,'' including the U.K., where profits for plants are widening.
Higher Costs
Engineering and construction costs are driving up expenses for new electricity stations, and International Power may cut the size of a future plant in Botswana after the preferred contractor for the project declined to take on undisclosed risks.
``We have to factor in higher costs and longer delivery dates,'' as well as persuading customers of the increased prices, Cox said. It isn't a competitive disadvantage, because it affects all power producers, he added.
International Power raised its interim dividend 29 percent to 3.56 pence a share.
The company posted a first-half net loss of 2 million pounds, including a deduction of 217 million pounds attributable to one- time items and traded-market positions, compared with a profit of 196 million pounds a year earlier.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
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Aug. 7 (Bloomberg) -- International Power Plc, the U.K. utility that generates electricity in 20 countries, fell the most in a year in London trading after saying second-half results will be ``adversely impacted'' by an extended power-station shutdown.
International Power slid as much as 30 pence, or 7.1 percent, to 391 pence, the steepest one-day decline since Aug. 10 last year. The stock traded at 400 pence as of 10:43 a.m. local time, valuing the London-based company at 6.04 billion pounds ($11.8 billion).
The utility owns regulated and market-based projects in Europe, the U.S., Asia and Australia, to spread the risk of its portfolio. A prolonged halt at its Rugeley plant in the U.K. will cost International Power 45 million pounds, it said today in a statement. First-half earnings also missed analysts' estimates.
``The market may be disappointed by the issues at Rugeley,'' Edmund Reid, an analyst at JPMorgan Cazenove Ltd., wrote in a note to investors today.
One of two power-generation units at the coal-fired Rugeley plant in central England will be offline for another nine weeks because of a component failure, Chief Executive Officer Philip Cox said in a Bloomberg Television interview. The plant's two 500-megawatt units won't be ready to comply with rules on emissions of some poisonous gases until the end of this year or early 2009, further limiting operating hours.
Miss Estimates
International Power earlier today reported first-half earnings per share excluding one-time items of 14.2 pence, below the 14.8-pence median estimate of five analysts surveyed by Bloomberg News. Earnings were curbed by an unplanned production halt at three units of its Hazelwood plant in Australia.
``These one-offs are very frustrating,'' Cox said in the interview. ``The underlying business is strongly profitable'' and there's ``plenty of optimism that we can keep growing.''
Cox is adding generation facilities from Pakistan to Portugal. The utility reached a 30-year agreement this week with Indonesia's PT Perusahaan Listrik Negara on power sales from a coal-fired plant it's building in the Southeast Asian country.
``We've announced just over 3,100 megawatts of new capacity since the start of the year,'' Cox said on a call with reporters today. ``All our markets provide growth opportunities.''
The company will target acquisitions and plans to build more plants in the Middle East and Southeast Asia, where demand for power generation is ``strong,'' according to Cox. He also expects ``improved returns from our merchant markets,'' including the U.K., where profits for plants are widening.
Higher Costs
Engineering and construction costs are driving up expenses for new electricity stations, and International Power may cut the size of a future plant in Botswana after the preferred contractor for the project declined to take on undisclosed risks.
``We have to factor in higher costs and longer delivery dates,'' as well as persuading customers of the increased prices, Cox said. It isn't a competitive disadvantage, because it affects all power producers, he added.
International Power raised its interim dividend 29 percent to 3.56 pence a share.
The company posted a first-half net loss of 2 million pounds, including a deduction of 217 million pounds attributable to one- time items and traded-market positions, compared with a profit of 196 million pounds a year earlier.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
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Dynegy Posts Loss on Energy Contracts, Cuts Forecast
By Edward Klump
Aug. 7 (Bloomberg) -- Dynegy Inc., owner of power plants in 11 U.S. states, posted a second-quarter loss and cut its full- year forecast after energy contracts declined in value and transmission-line failures and flooding slowed Midwest sales.
The net loss was $272 million, or 32 cents a share, compared with profit of $76 million, or 9 cents, a year earlier, Houston-based Dynegy said today in a statement. Excluding one- time costs and gains, Dynegy said it expects full-year earnings before interest, taxes and depreciation and amortization of $955 million, down from a previous target of $1.04 billion.
Dynegy records costs and gains each quarter to reflect the value of power-sales contracts relative to market prices. As power rose in the second quarter, Dynegy's contracts locking in prices at lower levels dropped in value, reducing net income by $293 million. Dynegy couldn't take full advantage of price gains because the worst Midwest flooding in 15 years and a utility's power-line failure disrupted sales.
``It doesn't look like there's a lot of redeeming qualities,'' said Gordon Howald, an analyst with Calyon Securities in New York who rates Dynegy shares ``neutral'' and owns none. ``This is pretty much a disappointing quarter.''
Dynegy fell 44 cents, or 6.9 percent, to $5.90 at 9:30 a.m. in New York Stock Exchange composite trading. The stock, which has 10 buy and four hold ratings from analysts, has dropped 17 percent this year.
Mark to Market
So-called mark-to-market adjustments each quarter show what losses or gains would be if the company were to immediately liquidate its contracts that lock in prices rather than continue to sell power. Benchmark power prices in PJM Interconnection LLC, the biggest U.S. wholesale power market, rose 35 percent from a year earlier to a second-quarter average of $100.77 per megawatt-hour, according to data compiled by Bloomberg.
Per-share profit excluding the mark-to-market costs was about 3 cents, matching the average of 10 analyst estimates compiled by Bloomberg.
Second-quarter earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 14 percent to $185 million, excluding such items as mark-to-market costs.
Dynegy gained about 8,000 megawatts of generation with its acquisition of plants from closely held LS Power Group in April 2007. On Aug. 1, Dynegy said it completed the sale of a power plant in Ohio to a company managed by Tenaska Capital Management for $368 million.
Dynegy has the capacity to produce almost 18,000 megawatts of electricity. That's enough for more than 14 million average U.S. homes, based on an estimate by the Energy Department in Washington.
(Dynegy began an earnings conference call for investors and analysts at 9 a.m. New York time. To listen, access a broadcast at http://www.dynegy.com.)
To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.
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Aug. 7 (Bloomberg) -- Dynegy Inc., owner of power plants in 11 U.S. states, posted a second-quarter loss and cut its full- year forecast after energy contracts declined in value and transmission-line failures and flooding slowed Midwest sales.
The net loss was $272 million, or 32 cents a share, compared with profit of $76 million, or 9 cents, a year earlier, Houston-based Dynegy said today in a statement. Excluding one- time costs and gains, Dynegy said it expects full-year earnings before interest, taxes and depreciation and amortization of $955 million, down from a previous target of $1.04 billion.
Dynegy records costs and gains each quarter to reflect the value of power-sales contracts relative to market prices. As power rose in the second quarter, Dynegy's contracts locking in prices at lower levels dropped in value, reducing net income by $293 million. Dynegy couldn't take full advantage of price gains because the worst Midwest flooding in 15 years and a utility's power-line failure disrupted sales.
``It doesn't look like there's a lot of redeeming qualities,'' said Gordon Howald, an analyst with Calyon Securities in New York who rates Dynegy shares ``neutral'' and owns none. ``This is pretty much a disappointing quarter.''
Dynegy fell 44 cents, or 6.9 percent, to $5.90 at 9:30 a.m. in New York Stock Exchange composite trading. The stock, which has 10 buy and four hold ratings from analysts, has dropped 17 percent this year.
Mark to Market
So-called mark-to-market adjustments each quarter show what losses or gains would be if the company were to immediately liquidate its contracts that lock in prices rather than continue to sell power. Benchmark power prices in PJM Interconnection LLC, the biggest U.S. wholesale power market, rose 35 percent from a year earlier to a second-quarter average of $100.77 per megawatt-hour, according to data compiled by Bloomberg.
Per-share profit excluding the mark-to-market costs was about 3 cents, matching the average of 10 analyst estimates compiled by Bloomberg.
Second-quarter earnings before interest, taxes, depreciation and amortization, or EBITDA, fell 14 percent to $185 million, excluding such items as mark-to-market costs.
Dynegy gained about 8,000 megawatts of generation with its acquisition of plants from closely held LS Power Group in April 2007. On Aug. 1, Dynegy said it completed the sale of a power plant in Ohio to a company managed by Tenaska Capital Management for $368 million.
Dynegy has the capacity to produce almost 18,000 megawatts of electricity. That's enough for more than 14 million average U.S. homes, based on an estimate by the Energy Department in Washington.
(Dynegy began an earnings conference call for investors and analysts at 9 a.m. New York time. To listen, access a broadcast at http://www.dynegy.com.)
To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.
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Canadian Natural Reports Quarterly Loss on Contracts
By [bn:PRSN=1] Ian McKinnon [] and Nicholas Larkin
Aug. 7 (Bloomberg) -- Canadian Natural Resources Ltd., whose C$9.27 billion ($8.85 billion) oil-sands project is behind schedule and over budget, posted a second-quarter loss on lower values for contracts used to lock in commodity prices. The company cut its oil-output forecast.
The net loss was C$347 million, or 65 cents a share, compared with a profit of C$841 million, or C$1.56, a year earlier, the Calgary-based company said today in a statement. Excluding one-time items, the company exceeded the average estimate of 14 analysts compiled by Bloomberg by 34 cents.
The company beat expectations on high oil prices and lower- than-expected taxes, said Ben Dell, an analyst with Sanford C. Bernstein & Co. in New York. Canadian Natural boosted capital spending by as much as 20 percent while output fell, he said in a telephone interview.
``It was a pretty unimpressive quarter because of weaker production, higher costs and increasing capital expenditures,'' said Dell, who rates the company's shares as ``market perform'' and owns none. His estimate for per-share earnings was C$1.49.
Canadian Natural rose C$1.74, or 2.2 percent, to C$81.02 as of 9:51 a.m. on the Toronto Stock Exchange. The stock, which has 19 `buy' recommendations from analysts, 6 `holds' and 1 `sell,' gained 9.2 percent this year before today.
Costs for the company's Horizon oil-sands development have risen an additional 8 percent and the northern Alberta development is 36 percent higher than originally budgeted, the company said late yesterday in a statement. The 110,000-barrel-a day project will start producing refinery-ready crude in the fourth quarter instead of the third.
Horizon Project
President Steve Laut, 50, is boosting oil production to capitalize on New York prices that rose 90 percent in the quarter from a year earlier. Horizon includes a mine and an upgrader, a plant that processes extra-heavy crude extracted from tar-like deposits into synthetic oil. The oil will be sold to refiners and made into fuels such as gasoline and diesel.
Revenue at Canadian Natural, which produces oil and gas in North America, the U.K. and Africa, increased 62 percent to C$5.11 billion.
Excluding one-time costs such as hedging and stock-based compensation, Canadian Natural said it earned C$1.78 per share. On that basis, it exceeded analyst expectations of C$1.44.
The company said it has a 20-year agreement to sell 100,000 barrels a day of heavy sour crude to an unidentified U.S. refiner.
It has also committed to ship 120,000 barrels a day for 20 years to the proposed Keystone Pipeline project. Canadian Natural has an option to purchase a 10 percent stake in Keystone, Laut said today in a conference call with analysts.
Keystone Stages
Calgary-based TransCanada Corp. and partner ConocoPhillips, based in Houston, are spending $5.2 billion to build the initial stage of Keystone, which will transport 590,000 barrels a day of Canadian oil to Midwest refiners by 2010. A second stage, estimated at $7 billion, will boost capacity to as much as 1.1 million barrels a day and enable Canadian oil to reach Gulf Coast refiners.
Canadian Natural's gas, excluding hedging, sold for an average of C$9.89 per 1,000 cubic feet, up 33 percent as futures in New York rose. Gas production fell 11 percent to 1.53 billion cubic feet a day. The company ranks behind only Calgary-based EnCana Corp. for Canadian gas output.
Production of oil fell 2.6 percent to 319,077 barrels a day, the company said. Before hedging, Canadian Natural's oil sold for an average of C$103.73 a barrel, almost double the year-earlier price.
The company expects 2008 daily production will average 308,000 to 350,000 barrels of oil, down from a May forecast of 316,000 to 366,000 barrels a day.
The company's capital spending forecast was boosted C$6.97 billion, up from the May prediction of C$5.79 billion to C$5.99 billion.
(Canadian Natural started a conference call at 9 a.m. New York time, accessible on the company's Web site at http://www.cnrl.com)
To contact the reporters on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net
Read more...
Aug. 7 (Bloomberg) -- Canadian Natural Resources Ltd., whose C$9.27 billion ($8.85 billion) oil-sands project is behind schedule and over budget, posted a second-quarter loss on lower values for contracts used to lock in commodity prices. The company cut its oil-output forecast.
The net loss was C$347 million, or 65 cents a share, compared with a profit of C$841 million, or C$1.56, a year earlier, the Calgary-based company said today in a statement. Excluding one-time items, the company exceeded the average estimate of 14 analysts compiled by Bloomberg by 34 cents.
The company beat expectations on high oil prices and lower- than-expected taxes, said Ben Dell, an analyst with Sanford C. Bernstein & Co. in New York. Canadian Natural boosted capital spending by as much as 20 percent while output fell, he said in a telephone interview.
``It was a pretty unimpressive quarter because of weaker production, higher costs and increasing capital expenditures,'' said Dell, who rates the company's shares as ``market perform'' and owns none. His estimate for per-share earnings was C$1.49.
Canadian Natural rose C$1.74, or 2.2 percent, to C$81.02 as of 9:51 a.m. on the Toronto Stock Exchange. The stock, which has 19 `buy' recommendations from analysts, 6 `holds' and 1 `sell,' gained 9.2 percent this year before today.
Costs for the company's Horizon oil-sands development have risen an additional 8 percent and the northern Alberta development is 36 percent higher than originally budgeted, the company said late yesterday in a statement. The 110,000-barrel-a day project will start producing refinery-ready crude in the fourth quarter instead of the third.
Horizon Project
President Steve Laut, 50, is boosting oil production to capitalize on New York prices that rose 90 percent in the quarter from a year earlier. Horizon includes a mine and an upgrader, a plant that processes extra-heavy crude extracted from tar-like deposits into synthetic oil. The oil will be sold to refiners and made into fuels such as gasoline and diesel.
Revenue at Canadian Natural, which produces oil and gas in North America, the U.K. and Africa, increased 62 percent to C$5.11 billion.
Excluding one-time costs such as hedging and stock-based compensation, Canadian Natural said it earned C$1.78 per share. On that basis, it exceeded analyst expectations of C$1.44.
The company said it has a 20-year agreement to sell 100,000 barrels a day of heavy sour crude to an unidentified U.S. refiner.
It has also committed to ship 120,000 barrels a day for 20 years to the proposed Keystone Pipeline project. Canadian Natural has an option to purchase a 10 percent stake in Keystone, Laut said today in a conference call with analysts.
Keystone Stages
Calgary-based TransCanada Corp. and partner ConocoPhillips, based in Houston, are spending $5.2 billion to build the initial stage of Keystone, which will transport 590,000 barrels a day of Canadian oil to Midwest refiners by 2010. A second stage, estimated at $7 billion, will boost capacity to as much as 1.1 million barrels a day and enable Canadian oil to reach Gulf Coast refiners.
Canadian Natural's gas, excluding hedging, sold for an average of C$9.89 per 1,000 cubic feet, up 33 percent as futures in New York rose. Gas production fell 11 percent to 1.53 billion cubic feet a day. The company ranks behind only Calgary-based EnCana Corp. for Canadian gas output.
Production of oil fell 2.6 percent to 319,077 barrels a day, the company said. Before hedging, Canadian Natural's oil sold for an average of C$103.73 a barrel, almost double the year-earlier price.
The company expects 2008 daily production will average 308,000 to 350,000 barrels of oil, down from a May forecast of 316,000 to 366,000 barrels a day.
The company's capital spending forecast was boosted C$6.97 billion, up from the May prediction of C$5.79 billion to C$5.99 billion.
(Canadian Natural started a conference call at 9 a.m. New York time, accessible on the company's Web site at http://www.cnrl.com)
To contact the reporters on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net
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BP Halts BTC Oil Loading, Pipe Shutdown to Last Weeks
By Eduard Gismatullin and Ayla Jean Yackley
Aug. 7 (Bloomberg) -- BP Plc and partners are likely to stop crude oil exports from a Turkish port tomorrow because of the explosion at a pipeline from Azerbaijan, which may take weeks to repair, officials at Turkey's pipeline operator said.
The Mediterranean port of Ceyhan loaded the last two tankers and no new vessels are scheduled for cargoes, Ebru Akdogan, a spokeswoman for BTC Co., said by phone today. The remaining oil in the port's tanks won't be exported, she said.
The Baku-Tbilisi-Ceyhan pipeline, or BTC, may be shut for as long as two weeks after the blast and fire halted shipments, Ali Gungor, the governor of Turkey's Erzincan province where the blast occurred, said in a phone interview today, citing information from a repair team that's studying the extent of the damage.
BP and partners have cut crude extraction at the Azeri- Chirag-Gunashli fields in the Azeri portion of the Caspian Sea, Tamam Bayatly, a Baku-based spokeswoman at BP, said by phone today. BTC was pumping about 800,000 barrels of oil a day before the fire, she said.
Natural gas production was also reduced at the BP and StatoilHydro ASA-led Shah Deniz field in the Caspian Sea, because of limited export capacity, Bayatly said today. The Shah Deniz venture had to stop gas condensate supplies into the BTC pipeline after the accident, she said.
The BTC pipeline may be shut down for as long as five weeks, Dow Jones news service reported today, citing an unidentified spokesman at Turkish pipeline company Botas International Ltd. Huseyin Sagir, a spokesman at Botas International, told Bloomberg that it's impossible to say at this point how long the pipeline will be shut. The fire is still burning, in a ``controlled manner,'' he said.
Alternative Routes
Crude loading from Ceyhan, the Turkish Mediterranean port, is continuing ``for the time being,'' Bayatly said. ``We've reduced our production as a precautionary measure to manage our stock levels and are using alternative routes'' to export oil.
BP together with Exxon Mobil Corp. Chevron Corp., StatoilHydro, Inpex Holdings Inc. and some other partners are pumping crude into the Sangachal oil reservoir nearby Baku and into the Baku-Supsa pipeline to a Georgian port on the Black Sea coast. The companies are also sending crude through the Baku- Novorossiysk link to the Russian Black Sea coast and may use rail cars as well, Bayatly said.
PKK Fighting
The BTC pipeline was shut on Aug. 5 after an explosion sparked a fire at the stretch of the link in northeastern Turkey. The Kurdistan Workers' Party, or PKK, said it carried out a bomb attack on the pipeline, Firat news agency reported on its Web site today. The PKK has been fighting for autonomy in largely Kurdish southeast Turkey for two decades.
Repairs and tests may be complete between Aug. 12 and Aug. 14, Botas officials said earlier today.
The pipeline declared force majeure on pumping through crude, David Nicholas, a London-based spokesman at BP, also said today. Force majeure is a legal clause allowing suppliers to suspend contractual obligations because of events beyond their control.
The BTC pipeline is 1,768 kilometers (1,100 miles) long. Most of that is in Turkey, where four pumping stations and two metering stations are located. The port of Ceyhan has the capacity to hold up to 7 million barrels of crude and has a 2.5 kilometer-long jetty to allow the simultaneous loading of two tankers, according to BP.
To contact the reporters on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net; Ali Berat Meric in Ankara at and Ayla Jean Yackley in Istanbul at ayackley@bloomberg.net.
Read more...
Aug. 7 (Bloomberg) -- BP Plc and partners are likely to stop crude oil exports from a Turkish port tomorrow because of the explosion at a pipeline from Azerbaijan, which may take weeks to repair, officials at Turkey's pipeline operator said.
The Mediterranean port of Ceyhan loaded the last two tankers and no new vessels are scheduled for cargoes, Ebru Akdogan, a spokeswoman for BTC Co., said by phone today. The remaining oil in the port's tanks won't be exported, she said.
The Baku-Tbilisi-Ceyhan pipeline, or BTC, may be shut for as long as two weeks after the blast and fire halted shipments, Ali Gungor, the governor of Turkey's Erzincan province where the blast occurred, said in a phone interview today, citing information from a repair team that's studying the extent of the damage.
BP and partners have cut crude extraction at the Azeri- Chirag-Gunashli fields in the Azeri portion of the Caspian Sea, Tamam Bayatly, a Baku-based spokeswoman at BP, said by phone today. BTC was pumping about 800,000 barrels of oil a day before the fire, she said.
Natural gas production was also reduced at the BP and StatoilHydro ASA-led Shah Deniz field in the Caspian Sea, because of limited export capacity, Bayatly said today. The Shah Deniz venture had to stop gas condensate supplies into the BTC pipeline after the accident, she said.
The BTC pipeline may be shut down for as long as five weeks, Dow Jones news service reported today, citing an unidentified spokesman at Turkish pipeline company Botas International Ltd. Huseyin Sagir, a spokesman at Botas International, told Bloomberg that it's impossible to say at this point how long the pipeline will be shut. The fire is still burning, in a ``controlled manner,'' he said.
Alternative Routes
Crude loading from Ceyhan, the Turkish Mediterranean port, is continuing ``for the time being,'' Bayatly said. ``We've reduced our production as a precautionary measure to manage our stock levels and are using alternative routes'' to export oil.
BP together with Exxon Mobil Corp. Chevron Corp., StatoilHydro, Inpex Holdings Inc. and some other partners are pumping crude into the Sangachal oil reservoir nearby Baku and into the Baku-Supsa pipeline to a Georgian port on the Black Sea coast. The companies are also sending crude through the Baku- Novorossiysk link to the Russian Black Sea coast and may use rail cars as well, Bayatly said.
PKK Fighting
The BTC pipeline was shut on Aug. 5 after an explosion sparked a fire at the stretch of the link in northeastern Turkey. The Kurdistan Workers' Party, or PKK, said it carried out a bomb attack on the pipeline, Firat news agency reported on its Web site today. The PKK has been fighting for autonomy in largely Kurdish southeast Turkey for two decades.
Repairs and tests may be complete between Aug. 12 and Aug. 14, Botas officials said earlier today.
The pipeline declared force majeure on pumping through crude, David Nicholas, a London-based spokesman at BP, also said today. Force majeure is a legal clause allowing suppliers to suspend contractual obligations because of events beyond their control.
The BTC pipeline is 1,768 kilometers (1,100 miles) long. Most of that is in Turkey, where four pumping stations and two metering stations are located. The port of Ceyhan has the capacity to hold up to 7 million barrels of crude and has a 2.5 kilometer-long jetty to allow the simultaneous loading of two tankers, according to BP.
To contact the reporters on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net; Ali Berat Meric in Ankara at and Ayla Jean Yackley in Istanbul at ayackley@bloomberg.net.
Read more...
Imperial Oil Delays Decision on C$8 Billion Oil-Sands Project
By Ian McKinnon
Aug. 7 (Bloomberg) -- Imperial Oil Ltd., Canada's largest oil company, is postponing until next year a decision to proceed with a proposed C$8 billion ($7.64 billion) oil-sands mine after legal delays.
The board won't decide on the Kearl project until the first quarter of 2009 because of an environmental legal battle and design revisions to curb cost increases, Chief Executive Officer Bruce March said yesterday. Initial output of 100,000 barrels of oil a day may not start until early 2012, he said.
The slower pace will result in a ``better starting point and a better-developed project than we ever had,'' March said in an interview at Imperial's headquarters in Calgary. ``We think that's critical to do in this market because your risks and exposure on cost growth is enormous.''
Producers such as Royal Dutch Shell Plc and Canadian Natural Resources Ltd. are seeing costs surge in Alberta's oil- soaked sands as record energy prices increase competition for workers and equipment. Costs for Canadian Natural's Horizon oil- sands project jumped as much as 36 percent to C$9.27 billion, the company said yesterday in a statement.
March, 51, who took the helm at Imperial in April when Tim Hearn retired, previously said a funding decision on Kearl could be made this year and output may start in late 2011. A revised cost estimate and schedule will be issued once the board authorizes the mine. Imperial is owned 70 percent by Exxon Mobil Corp., the world's largest oil company.
The mine's cost won't be ``considerably higher'' than the estimate of C$8 billion, March said. ``I don't anticipate that we won't go ahead at this stage.''
`Very, Very Good' Economics
While higher costs have blunted the impacts of rising oil prices, Kearl's economics look ``very, very good,'' said March, who joined an Exxon Mobil predecessor in 1980. Imperial owns 70 percent of Kearl, which may produce as much as 300,000 barrels of heavy oil a day, and an Exxon Mobil unit owns the rest.
The project was delayed by about two months by a court fight over water permits to drain the mine's marshy site in northern Alberta, March said. The company is spending extra time on scheduling and other construction planning to blunt costs.
Imperial owns oil and gas wells in western Canada and has a 25 percent stake in oil-sands miner Syncrude Canada Ltd. The company also owns four refineries and operates about 2,000 Esso- branded fuel stations across Canada.
Imperial plans to boost its natural-gas output by drilling for deposits in shale formations of northeastern British Columbia.
Shale Developments
``We're moving quickly to do this development work this winter,'' March said, without elaborating. ``If it looks good, which we certainly hope and expect that it will, we'd be trying to move as rapidly as we can to more stable commercial development.''
Imperial owns about 115,000 acres in the Horn River area of northeast British Columbia, the company said in April. The region's shale formations could contain gas reserves in the trillions of cubic feet, companies including Canada's Nexen Inc. and Houston-based Apache Corp. have said.
Increased exploration and development spending would help Imperial stem declining output, said Charles Maxwell, senior energy analyst at Weeden & Co., who doesn't rate the company's shares and owns none. He made his comments in an Aug. 5 telephone interview.
``Imperial has been sitting there chewing comfortably on its cud for the past 35 years,'' Maxwell said. ``They are maybe getting a little uncomfortable because they aren't growing any more and everyone is coming up around them. All the flowers are becoming a jungle of vines that look like they are going to overwhelm Imperial.''
`Low Priority'
Production of gas, which comprised about 17 percent of second-quarter output, fell 37 percent from a year earlier to 310 million cubic feet a day. Gas has been a ``low priority'' for oil-focused Imperial, and the company lags behind rivals including EnCana Corp. and Devon Energy Corp. in production of the heating and power-plant fuel, Maxwell said.
Daily production at EnCana, Canada's largest gas producer, rose 7 percent in the second quarter from a year earlier, according to the company's Web site.
Devon, the biggest so-called independent oil and gas producer in the U.S., yesterday said second-quarter output rose 4 percent.
Imperial's shares have fallen about 10 percent this year, the second-worst after Petro-Canada among Canada's oil companies with market values exceeding C$16 billion that trade on the Toronto Stock Exchange.
``It's still a great investment for the long term,'' March said. ``I'm still acquiring shares, so I still like it.''
To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net.
Read more...
Aug. 7 (Bloomberg) -- Imperial Oil Ltd., Canada's largest oil company, is postponing until next year a decision to proceed with a proposed C$8 billion ($7.64 billion) oil-sands mine after legal delays.
The board won't decide on the Kearl project until the first quarter of 2009 because of an environmental legal battle and design revisions to curb cost increases, Chief Executive Officer Bruce March said yesterday. Initial output of 100,000 barrels of oil a day may not start until early 2012, he said.
The slower pace will result in a ``better starting point and a better-developed project than we ever had,'' March said in an interview at Imperial's headquarters in Calgary. ``We think that's critical to do in this market because your risks and exposure on cost growth is enormous.''
Producers such as Royal Dutch Shell Plc and Canadian Natural Resources Ltd. are seeing costs surge in Alberta's oil- soaked sands as record energy prices increase competition for workers and equipment. Costs for Canadian Natural's Horizon oil- sands project jumped as much as 36 percent to C$9.27 billion, the company said yesterday in a statement.
March, 51, who took the helm at Imperial in April when Tim Hearn retired, previously said a funding decision on Kearl could be made this year and output may start in late 2011. A revised cost estimate and schedule will be issued once the board authorizes the mine. Imperial is owned 70 percent by Exxon Mobil Corp., the world's largest oil company.
The mine's cost won't be ``considerably higher'' than the estimate of C$8 billion, March said. ``I don't anticipate that we won't go ahead at this stage.''
`Very, Very Good' Economics
While higher costs have blunted the impacts of rising oil prices, Kearl's economics look ``very, very good,'' said March, who joined an Exxon Mobil predecessor in 1980. Imperial owns 70 percent of Kearl, which may produce as much as 300,000 barrels of heavy oil a day, and an Exxon Mobil unit owns the rest.
The project was delayed by about two months by a court fight over water permits to drain the mine's marshy site in northern Alberta, March said. The company is spending extra time on scheduling and other construction planning to blunt costs.
Imperial owns oil and gas wells in western Canada and has a 25 percent stake in oil-sands miner Syncrude Canada Ltd. The company also owns four refineries and operates about 2,000 Esso- branded fuel stations across Canada.
Imperial plans to boost its natural-gas output by drilling for deposits in shale formations of northeastern British Columbia.
Shale Developments
``We're moving quickly to do this development work this winter,'' March said, without elaborating. ``If it looks good, which we certainly hope and expect that it will, we'd be trying to move as rapidly as we can to more stable commercial development.''
Imperial owns about 115,000 acres in the Horn River area of northeast British Columbia, the company said in April. The region's shale formations could contain gas reserves in the trillions of cubic feet, companies including Canada's Nexen Inc. and Houston-based Apache Corp. have said.
Increased exploration and development spending would help Imperial stem declining output, said Charles Maxwell, senior energy analyst at Weeden & Co., who doesn't rate the company's shares and owns none. He made his comments in an Aug. 5 telephone interview.
``Imperial has been sitting there chewing comfortably on its cud for the past 35 years,'' Maxwell said. ``They are maybe getting a little uncomfortable because they aren't growing any more and everyone is coming up around them. All the flowers are becoming a jungle of vines that look like they are going to overwhelm Imperial.''
`Low Priority'
Production of gas, which comprised about 17 percent of second-quarter output, fell 37 percent from a year earlier to 310 million cubic feet a day. Gas has been a ``low priority'' for oil-focused Imperial, and the company lags behind rivals including EnCana Corp. and Devon Energy Corp. in production of the heating and power-plant fuel, Maxwell said.
Daily production at EnCana, Canada's largest gas producer, rose 7 percent in the second quarter from a year earlier, according to the company's Web site.
Devon, the biggest so-called independent oil and gas producer in the U.S., yesterday said second-quarter output rose 4 percent.
Imperial's shares have fallen about 10 percent this year, the second-worst after Petro-Canada among Canada's oil companies with market values exceeding C$16 billion that trade on the Toronto Stock Exchange.
``It's still a great investment for the long term,'' March said. ``I'm still acquiring shares, so I still like it.''
To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net.
Read more...
Taiwan Dollar Slides Most in Three Months as Exports Slump
By Bob Chen and Yu-huay Sun
Aug. 7 (Bloomberg) -- Taiwan's dollar dropped the most in three months, sliding as a government report showed exports rose in July at less than half the pace forecast by economists. Bonds advanced on speculation lower oil prices will damp inflation.
The currency slid for an eighth day, the longest losing streak since May 2007, as export growth slumped to 8 percent in July from 21.3 percent the previous month. Economists forecast overseas sales, which account for about half of the island's gross domestic product, would increase 17.1 percent, a Bloomberg survey showed.
``The immediate risk for the economy is the slowdown in exports,'' said Irene Cheung, strategist at ABN Amro Bank NV in Singapore. ``The risk is still toward a higher dollar-Taiwan.''
Taiwan's dollar fell 0.4 percent to NT$30.870 against the U.S. currency as of the 4 p.m. close in Taipei, according to Taipei Forex Inc. That's the biggest one-day decline since May 12. It earlier touched NT$30.948, the lowest since May 15.
Taiwan's economy may expand 4.78 percent this year, the slowest since 2005, according to a statistics bureau forecast released in May.
``Taiwan's economy isn't doing great and it's spurring some fund outflows,'' said Henry Lin, a currency trader at Shing Kong Commercial Bank in Taipei. ``Foreign investors are sending funds out of Taiwan.''
Cheaper Crude
Taiwan's bonds advanced on speculation falling oil prices will help tame the fastest inflation in 14 years. Rising consumer prices erode the purchasing power of debt's fixed- income payments.
Five-year notes rose for a third day as state-run refiner CPC Corp. may announce a cut in gasoline and diesel prices tomorrow, because Dubai crude oil, a benchmark for Asian refiners, has fallen 6.3 percent this month. The company will adjust fuel prices every week, linking them to crude oil costs, the Ministry of Economic Affairs said on its Web site yesterday.
``With oil prices falling, concern over inflation is easing for now,'' said Chen Hung-hsiu, a debt trader at Grand Cathay Securities Corp. in Taipei. ``Bond bulls think there's not big room for yields to climb.''
The yield on the benchmark 2 percent bond maturing July 2013 fell 2.6 basis points to 2.361 percent as of the 1:30 p.m. close in Taipei, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. The price climbed 0.1222, or NT$122.2 per NT$100,000 face amount, to 98.3344. A basis point is 0.01 percentage point.
To contact the reporters on this story: Yu-huay Sun in Taipei ysun7@bloomberg.net; Bob Chen in Hong Kong at bchen45@bloomberg.net.
Read more...
Aug. 7 (Bloomberg) -- Taiwan's dollar dropped the most in three months, sliding as a government report showed exports rose in July at less than half the pace forecast by economists. Bonds advanced on speculation lower oil prices will damp inflation.
The currency slid for an eighth day, the longest losing streak since May 2007, as export growth slumped to 8 percent in July from 21.3 percent the previous month. Economists forecast overseas sales, which account for about half of the island's gross domestic product, would increase 17.1 percent, a Bloomberg survey showed.
``The immediate risk for the economy is the slowdown in exports,'' said Irene Cheung, strategist at ABN Amro Bank NV in Singapore. ``The risk is still toward a higher dollar-Taiwan.''
Taiwan's dollar fell 0.4 percent to NT$30.870 against the U.S. currency as of the 4 p.m. close in Taipei, according to Taipei Forex Inc. That's the biggest one-day decline since May 12. It earlier touched NT$30.948, the lowest since May 15.
Taiwan's economy may expand 4.78 percent this year, the slowest since 2005, according to a statistics bureau forecast released in May.
``Taiwan's economy isn't doing great and it's spurring some fund outflows,'' said Henry Lin, a currency trader at Shing Kong Commercial Bank in Taipei. ``Foreign investors are sending funds out of Taiwan.''
Cheaper Crude
Taiwan's bonds advanced on speculation falling oil prices will help tame the fastest inflation in 14 years. Rising consumer prices erode the purchasing power of debt's fixed- income payments.
Five-year notes rose for a third day as state-run refiner CPC Corp. may announce a cut in gasoline and diesel prices tomorrow, because Dubai crude oil, a benchmark for Asian refiners, has fallen 6.3 percent this month. The company will adjust fuel prices every week, linking them to crude oil costs, the Ministry of Economic Affairs said on its Web site yesterday.
``With oil prices falling, concern over inflation is easing for now,'' said Chen Hung-hsiu, a debt trader at Grand Cathay Securities Corp. in Taipei. ``Bond bulls think there's not big room for yields to climb.''
The yield on the benchmark 2 percent bond maturing July 2013 fell 2.6 basis points to 2.361 percent as of the 1:30 p.m. close in Taipei, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. The price climbed 0.1222, or NT$122.2 per NT$100,000 face amount, to 98.3344. A basis point is 0.01 percentage point.
To contact the reporters on this story: Yu-huay Sun in Taipei ysun7@bloomberg.net; Bob Chen in Hong Kong at bchen45@bloomberg.net.
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Sempra Profit Falls 12% After Sale of Commodities-Trading Unit
By Jim Polson
Aug. 7 (Bloomberg) -- Sempra Energy, owner of the largest U.S. natural-gas utility, said second-quarter profit fell 12 percent after the sale of a majority stake in its commodities- trading business to Royal Bank of Scotland Group Plc.
Net income fell to $244 million, or 98 cents a share, from $277 million, or $1.05, a year earlier, the San Diego-based company said today in a statement.
Sempra on April 2 said it would buy back as much as $1 billion of its shares this year after completing the sale of the majority stake in the trading business for $1.35 billion, creating the RBS Sempra Commodities LLP joint venture with Edinburgh-based Royal Bank. The transaction freed up another $1 billion in cash used by Sempra to cover trades.
The trading unit accounted for 26 percent of sales and 54 percent of net income second quarter of 2007, according to information compiled by Bloomberg from company filings.
Sempra's Southern California Gas is the larges U.S. gas utility. The company is expanding with investments in liquefied- natural-gas, or LNG, import terminals in Mexico and Louisiana and gas pipeline and storage projects.
The company's LNG terminal in Mexico's Baja California Peninsula received its first two cargoes in May. The facility, the first such LNG site on the West Coast of North America, can process 1 billion cubic feet of gas per day for use in the U.S. Southwest and Mexico. Sempra expects to complete a second terminal, in Cameron Parish, Louisiana, by year-end.
Rockies Express
It's joining Kinder Morgan Energy Partners LP and ConocoPhillips in building the $5.6 billion Rockies Express pipeline to transport gas from the Rocky Mountains to markets in the U.S. East. On July 28, the company agreed to buy Mobile, Alabama-based gas distributor EnergySouth Inc. for $510 million to add storage capacity near Gulf Coast supply hubs.
The statement was issued before the start of regular trading on U.S. stock markets. Sempra rose 28 cents to $55.98 yesterday in New York Stock Exchange composite trading. The stock, which has 11 buy recommendations from analysts and 2 holds, has dropped 9.5 percent this year.
(Sempra will hold an earnings conference call for investors and analysts, starting at 1 p.m. New York time. To listen, access a broadcast at http://www.sempra.com.)
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
Read more...
Aug. 7 (Bloomberg) -- Sempra Energy, owner of the largest U.S. natural-gas utility, said second-quarter profit fell 12 percent after the sale of a majority stake in its commodities- trading business to Royal Bank of Scotland Group Plc.
Net income fell to $244 million, or 98 cents a share, from $277 million, or $1.05, a year earlier, the San Diego-based company said today in a statement.
Sempra on April 2 said it would buy back as much as $1 billion of its shares this year after completing the sale of the majority stake in the trading business for $1.35 billion, creating the RBS Sempra Commodities LLP joint venture with Edinburgh-based Royal Bank. The transaction freed up another $1 billion in cash used by Sempra to cover trades.
The trading unit accounted for 26 percent of sales and 54 percent of net income second quarter of 2007, according to information compiled by Bloomberg from company filings.
Sempra's Southern California Gas is the larges U.S. gas utility. The company is expanding with investments in liquefied- natural-gas, or LNG, import terminals in Mexico and Louisiana and gas pipeline and storage projects.
The company's LNG terminal in Mexico's Baja California Peninsula received its first two cargoes in May. The facility, the first such LNG site on the West Coast of North America, can process 1 billion cubic feet of gas per day for use in the U.S. Southwest and Mexico. Sempra expects to complete a second terminal, in Cameron Parish, Louisiana, by year-end.
Rockies Express
It's joining Kinder Morgan Energy Partners LP and ConocoPhillips in building the $5.6 billion Rockies Express pipeline to transport gas from the Rocky Mountains to markets in the U.S. East. On July 28, the company agreed to buy Mobile, Alabama-based gas distributor EnergySouth Inc. for $510 million to add storage capacity near Gulf Coast supply hubs.
The statement was issued before the start of regular trading on U.S. stock markets. Sempra rose 28 cents to $55.98 yesterday in New York Stock Exchange composite trading. The stock, which has 11 buy recommendations from analysts and 2 holds, has dropped 9.5 percent this year.
(Sempra will hold an earnings conference call for investors and analysts, starting at 1 p.m. New York time. To listen, access a broadcast at http://www.sempra.com.)
To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.
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Trichet Says ECB Focused on Prices, Growth Will Slow
By Brian Swint and Christian Vits
Aug. 7 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the bank remains focused on bringing down inflation even as economic growth slows.
Inflation is ``likely to remain well above levels consistent with price stability for a protracted period of time,'' Trichet said at a press conference today in Frankfurt, after the bank kept its benchmark rate at 4.25 percent. ``Risks to price stability over the medium term remain on the upside,'' while economic growth risks ``are materializing.''
The ECB raised interest rates last month to discourage unions from lifting wage demands and companies from raising prices in response to the fastest inflation in 16 years. Policy makers are balancing that concern against weakening economic growth after confidence dropped the most since the Sept. 11 terrorist attacks.
The euro fell as much as 0.7 percent to $1.5408 as of 3:07 p.m. in Frankfurt.
Trichet said that growth will be ``particularly weak'' in the second and third quarters. While the bank has ``no bias'' on the direction of interest rates, policy makers still have ``very strong concern'' about wages, he said.
``We're never pre-committed and we always do what is needed to deliver price stability,'' he said.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net. Christian Vits in Frankfurt at cvits@bloomberg.net
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Aug. 7 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the bank remains focused on bringing down inflation even as economic growth slows.
Inflation is ``likely to remain well above levels consistent with price stability for a protracted period of time,'' Trichet said at a press conference today in Frankfurt, after the bank kept its benchmark rate at 4.25 percent. ``Risks to price stability over the medium term remain on the upside,'' while economic growth risks ``are materializing.''
The ECB raised interest rates last month to discourage unions from lifting wage demands and companies from raising prices in response to the fastest inflation in 16 years. Policy makers are balancing that concern against weakening economic growth after confidence dropped the most since the Sept. 11 terrorist attacks.
The euro fell as much as 0.7 percent to $1.5408 as of 3:07 p.m. in Frankfurt.
Trichet said that growth will be ``particularly weak'' in the second and third quarters. While the bank has ``no bias'' on the direction of interest rates, policy makers still have ``very strong concern'' about wages, he said.
``We're never pre-committed and we always do what is needed to deliver price stability,'' he said.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net. Christian Vits in Frankfurt at cvits@bloomberg.net
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China's Yuan Forwards Offer `Clear Value,' Says HSBC
By Judy Chen and Kim Kyoungwha
Aug. 7 (Bloomberg) -- Yuan forward contracts offer ``clear value'' after adjustments to China's currency policy prompted traders to rein in their expectations for further appreciation, said HSBC Holdings Plc.
The government has in the past two weeks said supporting economic growth is as important as fighting inflation, fueling speculation currency gains will be kept in check to aid exporters. The State Administration of Foreign Exchange, China's top currency regulator, yesterday announced new rules to clamp down on inflows of so-called hot money, speculative capital brought in to the country to profit from currency gains.
Non-deliverable forwards show the yuan will reach an implied rate of 6.5952 per dollar in the next 12 months, a gain of 4 percent from the current exchange rate. Two weeks ago the contracts, which are settled in dollars and allow traders to bet on the future value of China's currency, were predicting a 5.3 percent advance and at the start of last month they were pricing in a 6.4 percent strengthening.
``We expect that improved clarity about the policy stance, which may not be available until after the Olympics in China, will see the momentum in the forwards turn towards re-pricing yuan appreciation,'' wrote Richard Yetsenga, a Hong Kong-based currency strategist at HSBC Holdings Plc. in a research note today.
`Necessary' Appreciation
The yuan fell 0.17 percent to 6.8601 versus the dollar as of 5:02 p.m. in Shanghai, extending its drop since the start of last week to 0.6 percent, according to China Foreign Exchange Trade System. It climbed 6.5 percent this year, the biggest gain among Asia's 10 most-traded currencies outside of Japan.
The commerce ministry asked China's cabinet to slow the pace of yuan appreciation to help exporters weather a global economic slowdown. The nation's trade surplus, which reached a record $262 billion last year, shrank 12 percent from a year earlier to $99 billion in the first half.
``The pace of appreciation may slow temporarily, but the currency is too cheap, judging by the size of the trade surplus,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong, in an interview today. ``Further appreciation is necessary.''
The rule changes announced yesterday by the currency regulator, designed to hamper inflows and make it easier to send money overseas, mark the first major reforms to China's currency policy since 1997, the economist said. Yuan gains since a peg to the dollar was scrapped in July 2005 have drawn speculators, helping boost the nation's foreign-exchange reserves to a record $1.8 trillion at the end of June.
Hot Money Crackdown
``On balance, these measures could reduce demand for the yuan from legitimate business needs, which could probably ease pressure for appreciation on the margin,'' Ken Peng, an economist with Citigroup Inc. in Shanghai, wrote in a report today. ``But the expectation for later appreciation should not be much affected.''
The government may take ``necessary safeguarding and control'' measures to cope with an imbalance in international payments or economic crisis, the regulator said yesterday. China started a crackdown on hot money last month by setting up an electronic network to monitor export income and prevent capital flowing in through bogus contracts.
Yesterday's announced rule changes granted companies and individuals more flexibility in outbound investments, easing control on capital outflows, said the regulator. The new rules also canceled a previous requirement for companies to repatriate and sell foreign-currency earnings to local banks, according to SAFE.
The yuan will end this year at 6.63 against the dollar, according to the median estimate in a survey of 26 analysts by Bloomberg News. It has depreciated 0.1 percent since the end of June, following gains of 4.2 percent and 2.3 percent in the first and second quarters.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Aug. 7 (Bloomberg) -- Yuan forward contracts offer ``clear value'' after adjustments to China's currency policy prompted traders to rein in their expectations for further appreciation, said HSBC Holdings Plc.
The government has in the past two weeks said supporting economic growth is as important as fighting inflation, fueling speculation currency gains will be kept in check to aid exporters. The State Administration of Foreign Exchange, China's top currency regulator, yesterday announced new rules to clamp down on inflows of so-called hot money, speculative capital brought in to the country to profit from currency gains.
Non-deliverable forwards show the yuan will reach an implied rate of 6.5952 per dollar in the next 12 months, a gain of 4 percent from the current exchange rate. Two weeks ago the contracts, which are settled in dollars and allow traders to bet on the future value of China's currency, were predicting a 5.3 percent advance and at the start of last month they were pricing in a 6.4 percent strengthening.
``We expect that improved clarity about the policy stance, which may not be available until after the Olympics in China, will see the momentum in the forwards turn towards re-pricing yuan appreciation,'' wrote Richard Yetsenga, a Hong Kong-based currency strategist at HSBC Holdings Plc. in a research note today.
`Necessary' Appreciation
The yuan fell 0.17 percent to 6.8601 versus the dollar as of 5:02 p.m. in Shanghai, extending its drop since the start of last week to 0.6 percent, according to China Foreign Exchange Trade System. It climbed 6.5 percent this year, the biggest gain among Asia's 10 most-traded currencies outside of Japan.
The commerce ministry asked China's cabinet to slow the pace of yuan appreciation to help exporters weather a global economic slowdown. The nation's trade surplus, which reached a record $262 billion last year, shrank 12 percent from a year earlier to $99 billion in the first half.
``The pace of appreciation may slow temporarily, but the currency is too cheap, judging by the size of the trade surplus,'' said Ben Simpfendorfer, an economist with Royal Bank of Scotland Plc in Hong Kong, in an interview today. ``Further appreciation is necessary.''
The rule changes announced yesterday by the currency regulator, designed to hamper inflows and make it easier to send money overseas, mark the first major reforms to China's currency policy since 1997, the economist said. Yuan gains since a peg to the dollar was scrapped in July 2005 have drawn speculators, helping boost the nation's foreign-exchange reserves to a record $1.8 trillion at the end of June.
Hot Money Crackdown
``On balance, these measures could reduce demand for the yuan from legitimate business needs, which could probably ease pressure for appreciation on the margin,'' Ken Peng, an economist with Citigroup Inc. in Shanghai, wrote in a report today. ``But the expectation for later appreciation should not be much affected.''
The government may take ``necessary safeguarding and control'' measures to cope with an imbalance in international payments or economic crisis, the regulator said yesterday. China started a crackdown on hot money last month by setting up an electronic network to monitor export income and prevent capital flowing in through bogus contracts.
Yesterday's announced rule changes granted companies and individuals more flexibility in outbound investments, easing control on capital outflows, said the regulator. The new rules also canceled a previous requirement for companies to repatriate and sell foreign-currency earnings to local banks, according to SAFE.
The yuan will end this year at 6.63 against the dollar, according to the median estimate in a survey of 26 analysts by Bloomberg News. It has depreciated 0.1 percent since the end of June, following gains of 4.2 percent and 2.3 percent in the first and second quarters.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Pound Falls Against Euro as Bank of England Keeps Rate on Hold
By Kim-Mai Cutler and Andrew MacAskill
Aug. 7 (Bloomberg) -- The pound stayed near a seven-week low against the euro after the Bank of England left its benchmark interest rate unchanged.
The nine-member Monetary Policy Committee, facing the threat of a recession and the fastest inflation in more than a decade, kept U.K. borrowing costs at 5 percent for a fourth month today, matching the forecasts of all 60 economists in a Bloomberg News survey. The bank, led by Governor Mervyn King, will publish new quarterly inflation forecasts on Aug. 13.
``It's highly unlikely we'll hear from the Bank of England today,'' said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp., before the decision was announced. ``The pound is going to continue to be under some fairly consistent pressure.''
Against the euro, the pound weakened to 79.28 pence per euro by 12:02 p.m. in London, from 79.11 pence yesterday. It was also at $1.9508, from $1.9477 yesterday, when it slipped to $1.9467, the lowest level since June 16.
The U.K. currency may fall to $1.90 and to 80 pence per euro within the next month, Derrick predicted.
The pound slipped earlier after an industry survey showed house prices in the U.K. dropped the most in at least a quarter of a century in July as banks starved the property market of credit, and pessimism about the economy grew.
The average cost of a home in the U.K. fell 8.8 percent in the year to 177,351 pounds ($345,825), HBOS Plc, the country's biggest mortgage lender said today. Prices slipped 1.7 percent from June.
Housing Slump
The worst housing-market slump in more than two decades deepened after mortgage approvals fell to the lowest since at least 1999 and consumer sentiment dropped the most since 2004.
Barclays Plc, the U.K.'s third-biggest bank, said first-half profit fell 34 percent as securities trading declined and credit writedowns increased.
Britain's faltering economy will weaken the currency to $1.90 and to 80 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg. The yield on the 10-year note will end the year at 4.87 percent, according to a separate survey.
Government bonds gained, pushing two-year yields down to the lowest level in almost three months. The yield on the two-year gilt fell 3 basis points to 4.66 percent. The price of the 4.75 percent security due June 2010 climbed 0.06, or 60 pence per 1,000-pound ($1,948) face amount, to 100.15. The 10-year gilt yield slipped 5 basis points to 4.71 percent. Yields move inversely to bond prices.
The European Central Bank also meets on interest rates today. Policy makers are expected to keep the main refinancing rate at 4.25 percent, according to all 60 economists in a Bloomberg survey.
To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
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Aug. 7 (Bloomberg) -- The pound stayed near a seven-week low against the euro after the Bank of England left its benchmark interest rate unchanged.
The nine-member Monetary Policy Committee, facing the threat of a recession and the fastest inflation in more than a decade, kept U.K. borrowing costs at 5 percent for a fourth month today, matching the forecasts of all 60 economists in a Bloomberg News survey. The bank, led by Governor Mervyn King, will publish new quarterly inflation forecasts on Aug. 13.
``It's highly unlikely we'll hear from the Bank of England today,'' said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp., before the decision was announced. ``The pound is going to continue to be under some fairly consistent pressure.''
Against the euro, the pound weakened to 79.28 pence per euro by 12:02 p.m. in London, from 79.11 pence yesterday. It was also at $1.9508, from $1.9477 yesterday, when it slipped to $1.9467, the lowest level since June 16.
The U.K. currency may fall to $1.90 and to 80 pence per euro within the next month, Derrick predicted.
The pound slipped earlier after an industry survey showed house prices in the U.K. dropped the most in at least a quarter of a century in July as banks starved the property market of credit, and pessimism about the economy grew.
The average cost of a home in the U.K. fell 8.8 percent in the year to 177,351 pounds ($345,825), HBOS Plc, the country's biggest mortgage lender said today. Prices slipped 1.7 percent from June.
Housing Slump
The worst housing-market slump in more than two decades deepened after mortgage approvals fell to the lowest since at least 1999 and consumer sentiment dropped the most since 2004.
Barclays Plc, the U.K.'s third-biggest bank, said first-half profit fell 34 percent as securities trading declined and credit writedowns increased.
Britain's faltering economy will weaken the currency to $1.90 and to 80 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg. The yield on the 10-year note will end the year at 4.87 percent, according to a separate survey.
Government bonds gained, pushing two-year yields down to the lowest level in almost three months. The yield on the two-year gilt fell 3 basis points to 4.66 percent. The price of the 4.75 percent security due June 2010 climbed 0.06, or 60 pence per 1,000-pound ($1,948) face amount, to 100.15. The 10-year gilt yield slipped 5 basis points to 4.71 percent. Yields move inversely to bond prices.
The European Central Bank also meets on interest rates today. Policy makers are expected to keep the main refinancing rate at 4.25 percent, according to all 60 economists in a Bloomberg survey.
To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net
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Chile, Mexico, Peru: Latin America Bond, Currency Preview
By Jamie McGee
Aug. 7 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from a previous session.
Chile: The trade surplus widened to $2 billion in July from $1.3 billion in June, according to the median estimate of 15 economists in a Bloomberg survey.
The central bank is scheduled to release the data at 8:30 a.m. New York time.
The peso weakened 0.2 percent to 513.67 per dollar.
The yield for a basket of five-year peso bonds in inflation- linked currency units rose 1 basis point, or 0.01 percentage point, to 2.88 percent, according to Bloomberg composite prices.
Mexico: Consumer prices rose 0.52 percent in July, compared with a 0.41 percent increase in June, according to the median estimate of 24 economists in a Bloomberg survey.
The central bank is scheduled to release the data at 10 a.m. New York time.
The peso fell 0.3 percent to 9.9459 per dollar.
The yield on Mexico's benchmark 10 percent bonds due December 2024 fell 8 basis points to 8.78 percent, according to Banco Santander SA.
Peru: The central bank will raise its overnight lending rate to 6.25 percent today from 6 percent, according to 15 of 16 economists surveyed by Bloomberg.
The sol fell 0.2 percent to 2.7925 per U.S. dollar.
The yield on the nation's 8.6 percent sol-denominated bonds due in August 2017 was 7.85 percent, according to Citigroup Inc.'s local unit.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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Aug. 7 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from a previous session.
Chile: The trade surplus widened to $2 billion in July from $1.3 billion in June, according to the median estimate of 15 economists in a Bloomberg survey.
The central bank is scheduled to release the data at 8:30 a.m. New York time.
The peso weakened 0.2 percent to 513.67 per dollar.
The yield for a basket of five-year peso bonds in inflation- linked currency units rose 1 basis point, or 0.01 percentage point, to 2.88 percent, according to Bloomberg composite prices.
Mexico: Consumer prices rose 0.52 percent in July, compared with a 0.41 percent increase in June, according to the median estimate of 24 economists in a Bloomberg survey.
The central bank is scheduled to release the data at 10 a.m. New York time.
The peso fell 0.3 percent to 9.9459 per dollar.
The yield on Mexico's benchmark 10 percent bonds due December 2024 fell 8 basis points to 8.78 percent, according to Banco Santander SA.
Peru: The central bank will raise its overnight lending rate to 6.25 percent today from 6 percent, according to 15 of 16 economists surveyed by Bloomberg.
The sol fell 0.2 percent to 2.7925 per U.S. dollar.
The yield on the nation's 8.6 percent sol-denominated bonds due in August 2017 was 7.85 percent, according to Citigroup Inc.'s local unit.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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Highest Unsold Home Supply Since '82 Seen Needing 50% Reduction
By Brian Louis
Aug. 7 (Bloomberg) -- Hovnanian Enterprises Inc., New Jersey's largest homebuilder, cut the number of unsold houses by more than 50 percent over the past two years after lowering prices and still had 1,500 on its books as of April.
``We pretty much start a home these days when we have a contract from a buyer wanting to purchase one,'' Chief Financial Officer Larry Sorsby said in an interview from his office in Red Bank, New Jersey. The company's sales price in the northeast for homes under contract dropped 7.4 percent in April from a year earlier. ``We don't build them and hope they come,'' he said.
There are 3.9 million unsold existing single-family homes, the most since at least 1982, when the Chicago-based National Association of Realtors started compiling the data. The inventory of existing houses and condominiums must fall by almost 50 percent for prices to stabilize, said William Wheaton, an economics professor at the Massachusetts Institute of Technology in Cambridge. There is an 11.1 month supply of existing unsold homes at the current sales pace, up from 4.6 months in September 2005, according to the National Association of Realtors data.
It now takes 10 weeks to 12 weeks on average to sell a house, compared with four weeks or five weeks at the height of the five-year housing boom, said Walter Molony, a spokesman for the Realtors group.
`Fifth Inning'
Homebuilders are facing record foreclosures, waning consumer confidence and stricter mortgage standards. Almost one of every 10 U.S. mortgages was in trouble during the first quarter, the highest in records dating to 1979, according to the Washington-based Mortgage Bankers Association. Delinquencies, or home loans with payments 30 days or more overdue, rose to 6.35 percent of outstanding mortgages and the share of homes in foreclosure rose to 2.47 percent.
``It's going to take several years to get rid of all this inventory,'' Eli Broad, the philanthropist who co-founded Los Angeles-based KB Home, said in an Aug. 1 interview. Homebuilders have no choice but to sell at ``discounted prices,'' he said.
Broad, who got his start by selling homes to World War II veterans, said the U.S. housing recession is in the ``fifth inning, not the eighth inning or not the second inning.''
Builders are contending with the fallout of a housing boom fueled by a ``grand social experiment'' where the barriers to buying a house were lowered and mortgage products for people with bad credit were widely available, said Mark Dotzour, chief economist of the Real Estate Center at Texas A&M University in College Station.
Loan Standards
Mortgage originations for purchase peaked during 2005 at $1.5 trillion, 67 percent higher than 2000, the Mortgage Bankers said.
Housing unraveled as consumers started missing mortgage payments and put their homes on the market or lost them to foreclosure, increasing the supply of properties for sale and spurring losses for financial firms. Homebuilders were then stuck with inventory they built on expectations demand would continue.
Now stricter lending standards are constraining consumers' ability to obtain mortgages and falling home prices are cutting purchases. Sixty percent of lenders said they made it more difficult for the most qualified prospective buyers to secure financing in the first quarter, a Federal Reserve survey shows.
The 18 percent drop in U.S. prices since July 2006 is creating a silver lining for some buyers and increasing sales in markets such as California.
Eager Buyers
Augustine Noronha, 38, and his wife Barbara started looking to buy about two years ago in the Cleveland area, eager to become first-time homeowners. New homes they looked at were too expensive.
Last month, they purchased a three-bedroom, 2,209-square- foot house from DB Homes, a closely held builder in Mayfield Heights, at almost 25 percent off the original list of $370,000.
``Previously it was out of my price range,'' said Noronha, who bought for $285,000. ``This fell right into place.''
The 11-month supply of existing single-family homes on the market is the highest since 1985 and there's a 10-month supply for new homes, data from the Realtors and the U.S. Commerce Department show.
Six months' supply of homes at the current sales pace would reflect a balanced market for existing homes, according to the Realtors.
New homes ``should be around four or five months at the most,'' Dotzour said.
Excess Supply
Reducing inventory will take longer because foreclosures alone may add 2.5 million homes to the market this year, according to mortgage-default data compiled by RealtyTrac Inc. in Irvine, California. New homes also are being built. The annual pace of housing starts was 1.066 million in June, data compiled by the Commerce Department show.
That total, down 53 percent from the peak in 2006, may decline as much as 34 percent more before bottoming, Dotzour said. Housing starts may fall to as low as 700,000 before reaching their nadir, Dotzour said.
``There's a lot of places in America that don't need any homes being built right now,'' Dotzour said. ``If we have this final capitulation in the homebuilders next summer, that will be the beginning of the absorption process needed to soak up the excess supply, and that could be several years.''
Market Glut
The lowest that housing starts fell since the Commerce Department began collecting the data in 1959 was in January 1991, when total starts declined to an annual pace of 798,000. To reach that point again, starts would have to drop another 25 percent.
The lowest that new-home sales got was in September 1981 -- an annual rate of 338,000. That's 36 percent less than the June pace of 530,000.
Home construction companies are still building as new orders come in, but more than 25 percent of those homes are coming back on the market when customers cancel. The average cancellation rate in the spring of 2008 was 29 percent, according to a report from New York-based Moody's Investors Service.
The glut of new and existing houses and the dearth of demand have forced U.S. homebuilders to file for bankruptcy protection, including WCI Communities Inc., the Florida builder whose chairman is Carl Icahn.
Prices Sink
The average price for a Centex Corp. home, the fourth- largest builder, fell 10 percent to $262,044 in the three months ended June 30. The average price for a Lennar Corp. house, the second-largest builder, fell 8 percent to $274,000 in the quarter ended May 31.
Hovnanian and competitors are selling or writing down land and clearing inventory. Over the past year, publicly traded homebuilders reduced unsold inventory by 39 percent to 23,400 from 38,200, Hovnanian's Sorsby said. The average price of a house in the northeast region in Hovnanian's backlog, or homes under contract and not yet sold, was $479,908 at the end of April.
Hovnanian, a home seller in 19 states, reduced its unsold houses by 46 percent at the end of April from a year earlier and the company has put expansion plans on hold, Sorsby said.
``We're not buying any new land,'' Sorsby said. ``We're not starting any new communities.''
No `Imminent Bottom'
A Standard & Poor's measure of U.S. homebuilders fell 37 percent in the past year. Home construction shares sometimes rise six months to nine months before business conditions improve, said Ken Leon, an analyst at Standard & Poor's in New York.
``They will bottom well before the fundamentals bottom, whenever that is,'' said Eric Landry, an analyst at Morningstar Inc. in Chicago. ``The evidence on the surface does not appear to be pointing to an imminent bottom.''
The housing bill signed by President Bush last week will help boost demand, Richard Dugas, the chief executive officer of Pulte Homes Inc., said in an interview. The legislation includes a $7,500 tax credit for first-time buyers.
``This is the first bit of good news we've had, in, candidly, two or three years for housing,'' Dugas said. Pulte, based in Bloomfield Hills, Michigan, is the third-largest U.S. homebuilder by revenue.
Dugas said housing legislation won't cure all the market's woes. Broad, the former homebuilding executive, agreed.
``It's of some help,'' Broad said. ``Is it a major help? No.''
To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.
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Aug. 7 (Bloomberg) -- Hovnanian Enterprises Inc., New Jersey's largest homebuilder, cut the number of unsold houses by more than 50 percent over the past two years after lowering prices and still had 1,500 on its books as of April.
``We pretty much start a home these days when we have a contract from a buyer wanting to purchase one,'' Chief Financial Officer Larry Sorsby said in an interview from his office in Red Bank, New Jersey. The company's sales price in the northeast for homes under contract dropped 7.4 percent in April from a year earlier. ``We don't build them and hope they come,'' he said.
There are 3.9 million unsold existing single-family homes, the most since at least 1982, when the Chicago-based National Association of Realtors started compiling the data. The inventory of existing houses and condominiums must fall by almost 50 percent for prices to stabilize, said William Wheaton, an economics professor at the Massachusetts Institute of Technology in Cambridge. There is an 11.1 month supply of existing unsold homes at the current sales pace, up from 4.6 months in September 2005, according to the National Association of Realtors data.
It now takes 10 weeks to 12 weeks on average to sell a house, compared with four weeks or five weeks at the height of the five-year housing boom, said Walter Molony, a spokesman for the Realtors group.
`Fifth Inning'
Homebuilders are facing record foreclosures, waning consumer confidence and stricter mortgage standards. Almost one of every 10 U.S. mortgages was in trouble during the first quarter, the highest in records dating to 1979, according to the Washington-based Mortgage Bankers Association. Delinquencies, or home loans with payments 30 days or more overdue, rose to 6.35 percent of outstanding mortgages and the share of homes in foreclosure rose to 2.47 percent.
``It's going to take several years to get rid of all this inventory,'' Eli Broad, the philanthropist who co-founded Los Angeles-based KB Home, said in an Aug. 1 interview. Homebuilders have no choice but to sell at ``discounted prices,'' he said.
Broad, who got his start by selling homes to World War II veterans, said the U.S. housing recession is in the ``fifth inning, not the eighth inning or not the second inning.''
Builders are contending with the fallout of a housing boom fueled by a ``grand social experiment'' where the barriers to buying a house were lowered and mortgage products for people with bad credit were widely available, said Mark Dotzour, chief economist of the Real Estate Center at Texas A&M University in College Station.
Loan Standards
Mortgage originations for purchase peaked during 2005 at $1.5 trillion, 67 percent higher than 2000, the Mortgage Bankers said.
Housing unraveled as consumers started missing mortgage payments and put their homes on the market or lost them to foreclosure, increasing the supply of properties for sale and spurring losses for financial firms. Homebuilders were then stuck with inventory they built on expectations demand would continue.
Now stricter lending standards are constraining consumers' ability to obtain mortgages and falling home prices are cutting purchases. Sixty percent of lenders said they made it more difficult for the most qualified prospective buyers to secure financing in the first quarter, a Federal Reserve survey shows.
The 18 percent drop in U.S. prices since July 2006 is creating a silver lining for some buyers and increasing sales in markets such as California.
Eager Buyers
Augustine Noronha, 38, and his wife Barbara started looking to buy about two years ago in the Cleveland area, eager to become first-time homeowners. New homes they looked at were too expensive.
Last month, they purchased a three-bedroom, 2,209-square- foot house from DB Homes, a closely held builder in Mayfield Heights, at almost 25 percent off the original list of $370,000.
``Previously it was out of my price range,'' said Noronha, who bought for $285,000. ``This fell right into place.''
The 11-month supply of existing single-family homes on the market is the highest since 1985 and there's a 10-month supply for new homes, data from the Realtors and the U.S. Commerce Department show.
Six months' supply of homes at the current sales pace would reflect a balanced market for existing homes, according to the Realtors.
New homes ``should be around four or five months at the most,'' Dotzour said.
Excess Supply
Reducing inventory will take longer because foreclosures alone may add 2.5 million homes to the market this year, according to mortgage-default data compiled by RealtyTrac Inc. in Irvine, California. New homes also are being built. The annual pace of housing starts was 1.066 million in June, data compiled by the Commerce Department show.
That total, down 53 percent from the peak in 2006, may decline as much as 34 percent more before bottoming, Dotzour said. Housing starts may fall to as low as 700,000 before reaching their nadir, Dotzour said.
``There's a lot of places in America that don't need any homes being built right now,'' Dotzour said. ``If we have this final capitulation in the homebuilders next summer, that will be the beginning of the absorption process needed to soak up the excess supply, and that could be several years.''
Market Glut
The lowest that housing starts fell since the Commerce Department began collecting the data in 1959 was in January 1991, when total starts declined to an annual pace of 798,000. To reach that point again, starts would have to drop another 25 percent.
The lowest that new-home sales got was in September 1981 -- an annual rate of 338,000. That's 36 percent less than the June pace of 530,000.
Home construction companies are still building as new orders come in, but more than 25 percent of those homes are coming back on the market when customers cancel. The average cancellation rate in the spring of 2008 was 29 percent, according to a report from New York-based Moody's Investors Service.
The glut of new and existing houses and the dearth of demand have forced U.S. homebuilders to file for bankruptcy protection, including WCI Communities Inc., the Florida builder whose chairman is Carl Icahn.
Prices Sink
The average price for a Centex Corp. home, the fourth- largest builder, fell 10 percent to $262,044 in the three months ended June 30. The average price for a Lennar Corp. house, the second-largest builder, fell 8 percent to $274,000 in the quarter ended May 31.
Hovnanian and competitors are selling or writing down land and clearing inventory. Over the past year, publicly traded homebuilders reduced unsold inventory by 39 percent to 23,400 from 38,200, Hovnanian's Sorsby said. The average price of a house in the northeast region in Hovnanian's backlog, or homes under contract and not yet sold, was $479,908 at the end of April.
Hovnanian, a home seller in 19 states, reduced its unsold houses by 46 percent at the end of April from a year earlier and the company has put expansion plans on hold, Sorsby said.
``We're not buying any new land,'' Sorsby said. ``We're not starting any new communities.''
No `Imminent Bottom'
A Standard & Poor's measure of U.S. homebuilders fell 37 percent in the past year. Home construction shares sometimes rise six months to nine months before business conditions improve, said Ken Leon, an analyst at Standard & Poor's in New York.
``They will bottom well before the fundamentals bottom, whenever that is,'' said Eric Landry, an analyst at Morningstar Inc. in Chicago. ``The evidence on the surface does not appear to be pointing to an imminent bottom.''
The housing bill signed by President Bush last week will help boost demand, Richard Dugas, the chief executive officer of Pulte Homes Inc., said in an interview. The legislation includes a $7,500 tax credit for first-time buyers.
``This is the first bit of good news we've had, in, candidly, two or three years for housing,'' Dugas said. Pulte, based in Bloomfield Hills, Michigan, is the third-largest U.S. homebuilder by revenue.
Dugas said housing legislation won't cure all the market's woes. Broad, the former homebuilding executive, agreed.
``It's of some help,'' Broad said. ``Is it a major help? No.''
To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.
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Canadian Dollar Rises For First Time in Six Days as Oil Gains
By Cordell Eddings
Aug. 7 (Bloomberg) -- Canada's dollar rose for the first time in six days as the price of crude oil climbed and the U.S. currency weakened.
The dollar has traded near a year low as economic growth slows and gold and oil drop from record highs. Commodities account for about half of the nation's exports, while the U.S. is Canada's biggest trading partner.
The dollar rose 0.2 percent to C$1.0469 per U.S. dollar at 8:26 a.m. in Toronto, from $1.0492 yesterday. One Canadian dollar buys 95.51 U.S. cents.
``Oil is up, so Canadian dollar has responded, reversing what had been a persistent and unusual trend,'' said Eric Lascelles, chief economist at TD Securities Inc. in Toronto. ``It may hold onto its gains, but it probably will continue to be soft as commodities have probably flattened a bit and the U.S. dollar has managed to hang on, and even make some gains against Canada and other currencies.''
Crude oil for September delivery rose as much as $1.80, or 1.5 percent, to $120.38 a barrel on the New York Mercantile Exchange.
The currency has traded near parity with its U.S. counterpart since September. It touched a 2008 low of C$1.0495 on Aug. 6, and a high of 97.12 cents per U.S. dollar on Feb. 28.
The Canadian dollar will weaken to C$1.05 in the first quarter of 2009, according to the median estimate of 29 economists surveyed by Bloomberg News.
To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net
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Aug. 7 (Bloomberg) -- Canada's dollar rose for the first time in six days as the price of crude oil climbed and the U.S. currency weakened.
The dollar has traded near a year low as economic growth slows and gold and oil drop from record highs. Commodities account for about half of the nation's exports, while the U.S. is Canada's biggest trading partner.
The dollar rose 0.2 percent to C$1.0469 per U.S. dollar at 8:26 a.m. in Toronto, from $1.0492 yesterday. One Canadian dollar buys 95.51 U.S. cents.
``Oil is up, so Canadian dollar has responded, reversing what had been a persistent and unusual trend,'' said Eric Lascelles, chief economist at TD Securities Inc. in Toronto. ``It may hold onto its gains, but it probably will continue to be soft as commodities have probably flattened a bit and the U.S. dollar has managed to hang on, and even make some gains against Canada and other currencies.''
Crude oil for September delivery rose as much as $1.80, or 1.5 percent, to $120.38 a barrel on the New York Mercantile Exchange.
The currency has traded near parity with its U.S. counterpart since September. It touched a 2008 low of C$1.0495 on Aug. 6, and a high of 97.12 cents per U.S. dollar on Feb. 28.
The Canadian dollar will weaken to C$1.05 in the first quarter of 2009, according to the median estimate of 29 economists surveyed by Bloomberg News.
To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net
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Euro Falls Against Dollar as ECB Cites Economic Growth Concern
By Anchalee Worrachate
Aug. 7 (Bloomberg) -- The euro weakened against the dollar after European Central Bank President Jean-Claude Trichet said second-half economic growth will slow, reducing expectations the ECB will raise interest rates again this year.
The European single currency earlier rose as high as $1.5502 after Trichet said inflation risks remain elevated. The ECB kept its main rate at 4.25 percent, a seven-year high.
``It's pretty clear the market is reacting very strongly to his comments about growth,'' said Michael Metcalfe, head of macro strategy at State Street Global Markets in London. ``But the inflation concern is there, and needs to be outweighed by growth concerns, or dissipate before the ECB can really do a U-turn on policy.''
The euro traded at $1.5394 at 2:38 p.m. in London, from $1.5408 yesterday. It fell 0.5 percent against the yen, to 168.25, from 169.16.
Inflation in the euro region accelerated to 4.1 percent in July, the fastest pace in more than 16 years and more than double the ECB's 2 percent ceiling.
Trichet said today he has ``no bias'' or ``pre-commitment'' toward future rate movements, repeating what he said July 3 after policy makers increased the main refinancing rate a quarter- percentage point. Since then, government reports including retail sales and consumer confidence showed economic growth is flagging.
``We're identifying downside risks on growth since a number of months,'' Trichet said at a press conference in Frankfurt. ``There's some materialization of risks that we had identified.''
Economic Malaise
European retail sales dropped by the most in at least 13 years in June as a surge in oil and food costs left consumers with less money to spend on other goods, the European Union said on Aug. 5. Consumer confidence slid in July by the most since the Sept. 11, 2001, terrorist attacks, the EU said July 30.
``We think that the council is unlikely to sign up to a further policy rate increase given the sharp deterioration in the business climate,'' a team of Barclays Capital currency strategists, led by David Woo, wrote in an investor note today.
The euro may decline to $1.5224 against the dollar in the next two weeks, said Pak Lai Ng, a technical analyst at Forecast Pte in Singapore, citing charts traders use to predict price movements.
Support at $1.5224 is the single European currency's average price for the past 200 days. The euro is likely to decline as its weekly stochastic and moving average convergence/divergence charts are showing sell signals, Ng said.
Dollar Index
The inflation rate for the euro region rose to 4.1 percent in July, the fastest pace in more than 16 years and more than double the ECB ceiling.
Traders pared bets the ECB will raise the main refinancing rate for a second time this year. The implied yield for the three- month Euribor contract for December was at 4.97 percent today, down from 5.03 percent yesterday and 5.07 percent at the end of last week.
The Dollar Index on the ICE futures exchange, which tracks the dollar against the currencies of six U.S. trading partners, was at 74.279, and rose to 74.322, the highest since Feb. 28.
A report from the National Association of Realtors today may show its index of U.S. pending home sales fell 1 percent in June, after a 4.7 percent drop the prior month, according to the survey median.
The Federal Reserve left borrowing costs unchanged on Aug. 5 at 2 percent, saying ``downside risks'' to growth remain, while inflation is a ``significant concern.''
Japanese Yen
Japan's currency strengthened against the dollar on speculation Japanese exporters took advantage of its recent weakness to repatriate overseas earnings at a more favorable rate than they initially assumed.
Large Japanese manufacturers forecast the yen would average 102.74 per dollar in the fiscal year started April 1, according to the Bank of Japan's quarterly Tankan business sentiment survey released on July 1.
The yen held gains after a government report showed orders for Japanese machinery fell less than economists estimated in June. Orders, indicative of capital spending in the next three to six months, slid 2.6 percent from May, when they climbed 10.4 percent. Economists predicted a 9.9 percent drop, a Bloomberg survey showed.
The South Korean won was little changed after the central bank raised the benchmark rate to 5.25 percent, the highest in eight years, to curb inflation. The currency traded at 1,016.45 against the dollar, compared with 1,015.90 yesterday.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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Aug. 7 (Bloomberg) -- The euro weakened against the dollar after European Central Bank President Jean-Claude Trichet said second-half economic growth will slow, reducing expectations the ECB will raise interest rates again this year.
The European single currency earlier rose as high as $1.5502 after Trichet said inflation risks remain elevated. The ECB kept its main rate at 4.25 percent, a seven-year high.
``It's pretty clear the market is reacting very strongly to his comments about growth,'' said Michael Metcalfe, head of macro strategy at State Street Global Markets in London. ``But the inflation concern is there, and needs to be outweighed by growth concerns, or dissipate before the ECB can really do a U-turn on policy.''
The euro traded at $1.5394 at 2:38 p.m. in London, from $1.5408 yesterday. It fell 0.5 percent against the yen, to 168.25, from 169.16.
Inflation in the euro region accelerated to 4.1 percent in July, the fastest pace in more than 16 years and more than double the ECB's 2 percent ceiling.
Trichet said today he has ``no bias'' or ``pre-commitment'' toward future rate movements, repeating what he said July 3 after policy makers increased the main refinancing rate a quarter- percentage point. Since then, government reports including retail sales and consumer confidence showed economic growth is flagging.
``We're identifying downside risks on growth since a number of months,'' Trichet said at a press conference in Frankfurt. ``There's some materialization of risks that we had identified.''
Economic Malaise
European retail sales dropped by the most in at least 13 years in June as a surge in oil and food costs left consumers with less money to spend on other goods, the European Union said on Aug. 5. Consumer confidence slid in July by the most since the Sept. 11, 2001, terrorist attacks, the EU said July 30.
``We think that the council is unlikely to sign up to a further policy rate increase given the sharp deterioration in the business climate,'' a team of Barclays Capital currency strategists, led by David Woo, wrote in an investor note today.
The euro may decline to $1.5224 against the dollar in the next two weeks, said Pak Lai Ng, a technical analyst at Forecast Pte in Singapore, citing charts traders use to predict price movements.
Support at $1.5224 is the single European currency's average price for the past 200 days. The euro is likely to decline as its weekly stochastic and moving average convergence/divergence charts are showing sell signals, Ng said.
Dollar Index
The inflation rate for the euro region rose to 4.1 percent in July, the fastest pace in more than 16 years and more than double the ECB ceiling.
Traders pared bets the ECB will raise the main refinancing rate for a second time this year. The implied yield for the three- month Euribor contract for December was at 4.97 percent today, down from 5.03 percent yesterday and 5.07 percent at the end of last week.
The Dollar Index on the ICE futures exchange, which tracks the dollar against the currencies of six U.S. trading partners, was at 74.279, and rose to 74.322, the highest since Feb. 28.
A report from the National Association of Realtors today may show its index of U.S. pending home sales fell 1 percent in June, after a 4.7 percent drop the prior month, according to the survey median.
The Federal Reserve left borrowing costs unchanged on Aug. 5 at 2 percent, saying ``downside risks'' to growth remain, while inflation is a ``significant concern.''
Japanese Yen
Japan's currency strengthened against the dollar on speculation Japanese exporters took advantage of its recent weakness to repatriate overseas earnings at a more favorable rate than they initially assumed.
Large Japanese manufacturers forecast the yen would average 102.74 per dollar in the fiscal year started April 1, according to the Bank of Japan's quarterly Tankan business sentiment survey released on July 1.
The yen held gains after a government report showed orders for Japanese machinery fell less than economists estimated in June. Orders, indicative of capital spending in the next three to six months, slid 2.6 percent from May, when they climbed 10.4 percent. Economists predicted a 9.9 percent drop, a Bloomberg survey showed.
The South Korean won was little changed after the central bank raised the benchmark rate to 5.25 percent, the highest in eight years, to curb inflation. The currency traded at 1,016.45 against the dollar, compared with 1,015.90 yesterday.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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