NEW YORK, Aug 13 (Reuters) - An arm of the U.S. Justice Department is seeking the appointment of an examiner to investigate claims that fraudulent trading may have caused the multibillion dollar collapse of energy trader SemGroup, according to court papers filed on Tuesday.
SemGroup filed for bankruptcy on July 22, citing $3.2 billion in losses on energy futures and derivatives trades.
SemGroup lender RZB Finance LLC has said in court documents that SemGroup's restructuring advisers at the Blackstone Group have admitted that improper trading caused the collapse. (Reporting by Robert Campbell)
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Wednesday, August 13, 2008
Retail sales dip in July as autos weaken
WASHINGTON (Reuters) - Total sales at U.S. retailers edged down 0.1 percent in July on another big drop in auto sales, according to a Commerce Department report on Wednesday that indicated consumers were straining to keep spending up amid rising prices.
The decline in total July sales was in line with forecasts made by Wall Street economists. Auto and auto parts sales fell 2.4 percent, their biggest drop since April, after a revised 2.1 percent drop in June and were off a whopping 10.5 percent from year-ago levels.
Excluding autos, retail sales were up 0.4 percent in July, which was roughly in line with forecasts, following a 0.9 percent rise in June.
Economists said before the report was issued that spending has been supported by government stimulus checks but that was waning in July because most of the checks already have been issued. Meanwhile, prices for many food items are on the rise and there was only a slight moderation in gasoline prices during the month.
Commerce said gasoline sales in July were up 0.8 percent after a 4 percent June jump. But reflecting higher prices, gasoline sales were 24.6 percent higher than in July last year.
Excluding gasoline, retail sales in July fell 0.2 percent after a 0.1 percent June decline.
(Reporting by Glenn Somerville, editing by Neil Stempleman)
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The decline in total July sales was in line with forecasts made by Wall Street economists. Auto and auto parts sales fell 2.4 percent, their biggest drop since April, after a revised 2.1 percent drop in June and were off a whopping 10.5 percent from year-ago levels.
Excluding autos, retail sales were up 0.4 percent in July, which was roughly in line with forecasts, following a 0.9 percent rise in June.
Economists said before the report was issued that spending has been supported by government stimulus checks but that was waning in July because most of the checks already have been issued. Meanwhile, prices for many food items are on the rise and there was only a slight moderation in gasoline prices during the month.
Commerce said gasoline sales in July were up 0.8 percent after a 4 percent June jump. But reflecting higher prices, gasoline sales were 24.6 percent higher than in July last year.
Excluding gasoline, retail sales in July fell 0.2 percent after a 0.1 percent June decline.
(Reporting by Glenn Somerville, editing by Neil Stempleman)
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Warner Music's Cohen sells 23 percent of his stake
NEW YORK (Reuters) - Warner Music Group's top U.S. executive for recorded music, Lyor Cohen, sold 23 percent of his shares in the company earlier this week, according to a U.S. regulatory filing.
The move comes after Warner's shares have climbed nearly 80 percent from all-time lows in January, as long-held concern about the company's prospects in the beleaguered music industry appears to be abating.
Cohen, responsible for artists like Red Hot Chili Peppers and Green Day, sold 800,000 shares on Monday at $8.45 each for around $6.8 million, according to the filing with the U.S. Securities and Exchange Commission on Tuesday. He retains ownership of another 2.6 million shares.
One Wall Street analyst said the sale by Cohen, chairman and chief executive of Warner Recorded Music North America, contradicted management's contention that the company's shares were undervalued.
"While Warner Music Group's (organic) revenues continue to decline, we are quite surprised to see Mr. Cohen selling such a large block of stock at these levels," said Pali Research analyst Richard Greenfield, a long-time critic of the company's management.
In a statement, Cohen said his confidence in Warner's future prospects remained as strong as ever.
"This sale reflects nothing more than a normal need for liquid assets for personal expenses, as well as my financial adviser's recommendation that I diversify my portfolio for tax and estate planning," he said.
Cohen renewed his contract in March and extended his employment until March 2013. The agreement gave him an annual base salary of $3 million, with potential bonuses of up to $5 million.
The amended contract also granted Cohen 1.5 million stock options with an exercise price of $5.29 as well as 1.75 million performance-based restricted shares.
(Reporting by Yinka Adegoke; Editing by Lisa Von Ahn)
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The move comes after Warner's shares have climbed nearly 80 percent from all-time lows in January, as long-held concern about the company's prospects in the beleaguered music industry appears to be abating.
Cohen, responsible for artists like Red Hot Chili Peppers and Green Day, sold 800,000 shares on Monday at $8.45 each for around $6.8 million, according to the filing with the U.S. Securities and Exchange Commission on Tuesday. He retains ownership of another 2.6 million shares.
One Wall Street analyst said the sale by Cohen, chairman and chief executive of Warner Recorded Music North America, contradicted management's contention that the company's shares were undervalued.
"While Warner Music Group's (organic) revenues continue to decline, we are quite surprised to see Mr. Cohen selling such a large block of stock at these levels," said Pali Research analyst Richard Greenfield, a long-time critic of the company's management.
In a statement, Cohen said his confidence in Warner's future prospects remained as strong as ever.
"This sale reflects nothing more than a normal need for liquid assets for personal expenses, as well as my financial adviser's recommendation that I diversify my portfolio for tax and estate planning," he said.
Cohen renewed his contract in March and extended his employment until March 2013. The agreement gave him an annual base salary of $3 million, with potential bonuses of up to $5 million.
The amended contract also granted Cohen 1.5 million stock options with an exercise price of $5.29 as well as 1.75 million performance-based restricted shares.
(Reporting by Yinka Adegoke; Editing by Lisa Von Ahn)
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Marathon says oil pipeline to KY refinery restarted
NEW YORK, Aug 13 (Reuters) - Marathon Oil Corp's (MRO.N: Quote, Profile, Research, Stock Buzz) crude oil pipeline from Patoka, Illinois, to Owensboro, Kentucky, was in full operation on Tuesday night and the company's Catlettsburg refinery was transitioning back to full rates, a company spokesman said on Wednesday.
The pipeline ruptured on Sunday morning and rates at the Catlettsburg refinery, which is supplied by the pipeline, were reduced. (Reporting by Rebekah Kebede)
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The pipeline ruptured on Sunday morning and rates at the Catlettsburg refinery, which is supplied by the pipeline, were reduced. (Reporting by Rebekah Kebede)
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Spanish Core Inflation Accelerates to Five-Year High
By Emma Ross-Thomas and Esteban Duarte
Aug. 13 (Bloomberg) -- Spanish core inflation accelerated in July to the fastest pace in more than five years as rising food and oil prices filtered through to other goods.
Consumer prices, excluding energy and fresh food, rose 3.5 percent from a year earlier, the most since December 2002, compared with 3.3 percent in June, the National Statistics Institute in Madrid said today in a statement. Economists expected prices to rise 3.4 percent, according to the median of 4 forecasts in a Bloomberg News survey.
Even with the economy stagnating because of a housing market collapse, Spain has one of the highest inflation rates in the euro zone. Spanish economic growth, which has outpaced the euro-region rate for more than a decade, likely slowed to 0.1 percent in the second quarter, according to economists surveyed by Bloomberg.
``Core inflation is going take much longer to moderate than the overall inflation rate,'' said Diego Fernandez, an economist at Fortis in Madrid. ``It's no longer just a problem of oil prices. Companies have started to pass on to consumers their higher costs.''
Spanish transportation costs gained 10.6 percent in July from a year earlier on higher fuel prices. Housing prices jumped 8.4 percent from the previous year as surging oil boosted electricity costs, the statistics institute said.
Energy Costs
Oil prices have risen 59 percent in the last year and reached a record $147.27 a barrel on July 11, boosting manufacturing and transport costs. Crude has fallen almost 23 percent from the July record, signaling that inflation may be reaching a peak.
``Oil permitting, we could see a change in the inflation trend in August,'' Deputy Finance Minister David Vegara told reporters today in Madrid.
Faced with rising inflation and slowing growth, the government is breaking off its traditional August vacation for an extraordinary cabinet meeting tomorrow to focus on the economy. In preparation, Prime Minister Jose Luis Rodriguez Zapatero will gather Finance Minister Pedro Solbes and six other ministers later today to discuss the economy.
Interest Rates
Prices have been rising across Europe. Inflation in the U.K. accelerated to the highest in more than a decade in July, while in France headline inflation remained at its highest for at least 12 years. The European Central Bank last month lifted its benchmark rate to 4.25 percent, the highest in seven years, to try to prevent rising oil prices from fueling broader price increases and wage demands.
In Spain some 68 percent of private-sector employees are covered by wage agreements that adjust for higher-than-expected inflation, according to ECB data. The Frankfurt-based bank warns against such deals, saying they further fuel price rises as inflation accelerates.
``The most surprising thing is that the core index has risen 0.2 percentage points,'' said Antonio Zamora, economist at Banco Urquijo in Madrid. ``This poses a certain risk that the second-round effects feared by the European Central Bank are starting to materialize.''
Spain's headline inflation rate, including food and energy costs and calculated by Spain's national standards, rose to 5.3 percent from 5 percent in June, the report said. Based on EU methodology, Spain's inflation rate for the month was also 5.3 percent, the highest in more than a decade. The number matched a preliminary report on prices released July 31.
While prices are rising, economists predict that the Spanish economy grew at the slowest pace since a 1993 recession in the second quarter. Growth may have slowed to 0.1 percent from 0.3 percent in the first three months, according to the median of 10 forecasts in a Bloomberg survey. Three of the economists predict a contraction.
Vegara said the government was not expecting the economy to shrink, according to the available data. The growth report will be released tomorrow at 9 a.m. in Madrid.
To contact the reporter on this story: Emma Ross-Thomas in Madrid erossthomas@bloomberg.net
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Aug. 13 (Bloomberg) -- Spanish core inflation accelerated in July to the fastest pace in more than five years as rising food and oil prices filtered through to other goods.
Consumer prices, excluding energy and fresh food, rose 3.5 percent from a year earlier, the most since December 2002, compared with 3.3 percent in June, the National Statistics Institute in Madrid said today in a statement. Economists expected prices to rise 3.4 percent, according to the median of 4 forecasts in a Bloomberg News survey.
Even with the economy stagnating because of a housing market collapse, Spain has one of the highest inflation rates in the euro zone. Spanish economic growth, which has outpaced the euro-region rate for more than a decade, likely slowed to 0.1 percent in the second quarter, according to economists surveyed by Bloomberg.
``Core inflation is going take much longer to moderate than the overall inflation rate,'' said Diego Fernandez, an economist at Fortis in Madrid. ``It's no longer just a problem of oil prices. Companies have started to pass on to consumers their higher costs.''
Spanish transportation costs gained 10.6 percent in July from a year earlier on higher fuel prices. Housing prices jumped 8.4 percent from the previous year as surging oil boosted electricity costs, the statistics institute said.
Energy Costs
Oil prices have risen 59 percent in the last year and reached a record $147.27 a barrel on July 11, boosting manufacturing and transport costs. Crude has fallen almost 23 percent from the July record, signaling that inflation may be reaching a peak.
``Oil permitting, we could see a change in the inflation trend in August,'' Deputy Finance Minister David Vegara told reporters today in Madrid.
Faced with rising inflation and slowing growth, the government is breaking off its traditional August vacation for an extraordinary cabinet meeting tomorrow to focus on the economy. In preparation, Prime Minister Jose Luis Rodriguez Zapatero will gather Finance Minister Pedro Solbes and six other ministers later today to discuss the economy.
Interest Rates
Prices have been rising across Europe. Inflation in the U.K. accelerated to the highest in more than a decade in July, while in France headline inflation remained at its highest for at least 12 years. The European Central Bank last month lifted its benchmark rate to 4.25 percent, the highest in seven years, to try to prevent rising oil prices from fueling broader price increases and wage demands.
In Spain some 68 percent of private-sector employees are covered by wage agreements that adjust for higher-than-expected inflation, according to ECB data. The Frankfurt-based bank warns against such deals, saying they further fuel price rises as inflation accelerates.
``The most surprising thing is that the core index has risen 0.2 percentage points,'' said Antonio Zamora, economist at Banco Urquijo in Madrid. ``This poses a certain risk that the second-round effects feared by the European Central Bank are starting to materialize.''
Spain's headline inflation rate, including food and energy costs and calculated by Spain's national standards, rose to 5.3 percent from 5 percent in June, the report said. Based on EU methodology, Spain's inflation rate for the month was also 5.3 percent, the highest in more than a decade. The number matched a preliminary report on prices released July 31.
While prices are rising, economists predict that the Spanish economy grew at the slowest pace since a 1993 recession in the second quarter. Growth may have slowed to 0.1 percent from 0.3 percent in the first three months, according to the median of 10 forecasts in a Bloomberg survey. Three of the economists predict a contraction.
Vegara said the government was not expecting the economy to shrink, according to the available data. The growth report will be released tomorrow at 9 a.m. in Madrid.
To contact the reporter on this story: Emma Ross-Thomas in Madrid erossthomas@bloomberg.net
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U.S. Retail Sales Fall for First Time in Five Months
By Bob Willis
Aug. 13 (Bloomberg) -- Sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices and tighter credit reduced automobile purchases.
The 0.1 percent drop followed a 0.3 percent gain the prior month that was larger than previously reported, the Commerce Department said today in Washington. Sales excluding automobiles rose 0.4 percent, less than anticipated.
The sales drop came even as the Treasury distributed tax rebates as part of the government's fiscal stimulus plan. Consumer spending, which accounts for more than two-thirds of the economy, is likely to keep fading, hurt by rising unemployment, falling property values and elevated fuel costs.
``With the tax-rebate effects dissipating and the labor market weakening, we should see consumer spending slow through the remainder of the year,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York, which correctly forecast sales excluding autos.
The Labor Department reported separately that prices of imported goods rose 1.7 percent in July from the previous month, after a 2.9 percent increase in June.
Treasuries were little changed after the reports, with benchmark 10-year notes yielding 3.89 percent at 9:21 a.m. in New York, from 3.90 percent late yesterday.
Retail sales excluding gasoline fell 0.2 percent, the Commerce Department said.
Economists' Forecasts
The drop in total sales matched the median estimate of 75 economists surveyed by Bloomberg. Forecasts ranged from a drop of 1 percent to a gain of 0.6 percent. June sales were previously reported as having increased 0.1 percent. The median projection for sales excluding autos was for a 0.5 percent gain.
Americans are buying fewer cars as gasoline prices soar. Today's report showed sales at automobile dealerships and parts stores dropped 2.4 percent.
That's consistent with industry figures that indicated Americans are shunning big-ticket purchases. Cars and light trucks sold in July at a 12.5 million annual pace, the weakest since 1993, according to data issued earlier this month.
Filling station sales rose 0.8 percent in July after jumping 4 percent the prior month, today's report showed.
Gas Prices
Regular unleaded gasoline reached an average monthly record of $4.06 a gallon in July, a cent higher than in June, according to AAA. Prices have since declined. Food prices also rose, sending shoppers to discount stores in search of bargains.
Banks are making it harder for consumers to get credit after posting billions of dollars of losses amid the slide in securities tied to mortgages.
Most U.S. lenders ``reported having tightened their lending standards and terms on all major loan categories over the previous three months,'' the Fed said Aug. 11 in its quarterly Senior Loan Officer Survey.
Today's Commerce report indicated Americans spent the cash from tax rebates on more than just gasoline. Sales at furniture stores rose 1 percent, the most since January 2007, and climbed 0.8 percent at electronics outlets.
Purchases at general merchandise retailers increased 0.3 percent.
Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales gained 0.3 percent, after a 0.5 percent increase in June. The government uses data from other sources to calculate the contribution from the three categories excluded.
Wal-Mart Outlook
Wal-Mart Stores Inc. last week said same-store sales will probably slow this month after rising 3 percent in July because most shoppers have already received their tax rebates.
More than 90 percent of the estimated $100 billion in rebate checks forecast to go out this year had been sent as of mid-July, with another $10 billion from revised returns forecast for next year, the Treasury Department said.
Customers bought groceries, flat-panel televisions and video games, while apparel and home goods were ``slightly negative,'' Wal-Mart said. Consumers are spending ``more cautiously'' as stimulus checks end, Eduardo Castro-Wright, the Bentonville, Arkansas-based retailer's head of U.S. stores, said in a statement.
Spending, which has grown every quarter since 1992, may stall in the last three months of this year after growing at a 0.6 percent annual pace from July to September, according to the median estimate of economists surveyed by Bloomberg from Aug. 1 to Aug. 8. Figures from Commerce on July 31 showed spending grew at a 1.5 percent pace in the second quarter.
The world's largest economy will expand at an average 0.7 percent annual pace from July through December, half the gain in the first six months of the year, according to economists surveyed.
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
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Aug. 13 (Bloomberg) -- Sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices and tighter credit reduced automobile purchases.
The 0.1 percent drop followed a 0.3 percent gain the prior month that was larger than previously reported, the Commerce Department said today in Washington. Sales excluding automobiles rose 0.4 percent, less than anticipated.
The sales drop came even as the Treasury distributed tax rebates as part of the government's fiscal stimulus plan. Consumer spending, which accounts for more than two-thirds of the economy, is likely to keep fading, hurt by rising unemployment, falling property values and elevated fuel costs.
``With the tax-rebate effects dissipating and the labor market weakening, we should see consumer spending slow through the remainder of the year,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York, which correctly forecast sales excluding autos.
The Labor Department reported separately that prices of imported goods rose 1.7 percent in July from the previous month, after a 2.9 percent increase in June.
Treasuries were little changed after the reports, with benchmark 10-year notes yielding 3.89 percent at 9:21 a.m. in New York, from 3.90 percent late yesterday.
Retail sales excluding gasoline fell 0.2 percent, the Commerce Department said.
Economists' Forecasts
The drop in total sales matched the median estimate of 75 economists surveyed by Bloomberg. Forecasts ranged from a drop of 1 percent to a gain of 0.6 percent. June sales were previously reported as having increased 0.1 percent. The median projection for sales excluding autos was for a 0.5 percent gain.
Americans are buying fewer cars as gasoline prices soar. Today's report showed sales at automobile dealerships and parts stores dropped 2.4 percent.
That's consistent with industry figures that indicated Americans are shunning big-ticket purchases. Cars and light trucks sold in July at a 12.5 million annual pace, the weakest since 1993, according to data issued earlier this month.
Filling station sales rose 0.8 percent in July after jumping 4 percent the prior month, today's report showed.
Gas Prices
Regular unleaded gasoline reached an average monthly record of $4.06 a gallon in July, a cent higher than in June, according to AAA. Prices have since declined. Food prices also rose, sending shoppers to discount stores in search of bargains.
Banks are making it harder for consumers to get credit after posting billions of dollars of losses amid the slide in securities tied to mortgages.
Most U.S. lenders ``reported having tightened their lending standards and terms on all major loan categories over the previous three months,'' the Fed said Aug. 11 in its quarterly Senior Loan Officer Survey.
Today's Commerce report indicated Americans spent the cash from tax rebates on more than just gasoline. Sales at furniture stores rose 1 percent, the most since January 2007, and climbed 0.8 percent at electronics outlets.
Purchases at general merchandise retailers increased 0.3 percent.
Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales gained 0.3 percent, after a 0.5 percent increase in June. The government uses data from other sources to calculate the contribution from the three categories excluded.
Wal-Mart Outlook
Wal-Mart Stores Inc. last week said same-store sales will probably slow this month after rising 3 percent in July because most shoppers have already received their tax rebates.
More than 90 percent of the estimated $100 billion in rebate checks forecast to go out this year had been sent as of mid-July, with another $10 billion from revised returns forecast for next year, the Treasury Department said.
Customers bought groceries, flat-panel televisions and video games, while apparel and home goods were ``slightly negative,'' Wal-Mart said. Consumers are spending ``more cautiously'' as stimulus checks end, Eduardo Castro-Wright, the Bentonville, Arkansas-based retailer's head of U.S. stores, said in a statement.
Spending, which has grown every quarter since 1992, may stall in the last three months of this year after growing at a 0.6 percent annual pace from July to September, according to the median estimate of economists surveyed by Bloomberg from Aug. 1 to Aug. 8. Figures from Commerce on July 31 showed spending grew at a 1.5 percent pace in the second quarter.
The world's largest economy will expand at an average 0.7 percent annual pace from July through December, half the gain in the first six months of the year, according to economists surveyed.
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
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Auto insurer Progressive July net drops 31 percent
(Adds financial details)
NEW YORK, Aug 13 (Reuters) - Progressive Corp , the No. 3 U.S. auto insurer, said on Wednesday that monthly earnings fell 31 percent as it lost money on investments.
Net income in July dropped to $81.8 million, or 12 cents a share, from $118.5 million, or 16 cents a share, a year earlier.
The company recorded pretax net realized losses of $16.1 million on investments in July, compared with a year-earlier gain of $13.2 million.
Net premiums written were flat at $1.38 billion, while net premiums earned were 2 percent lower at $1.31 billion. (Reporting by Lilla Zuill; Editing by Lisa Von Ahn)
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NEW YORK, Aug 13 (Reuters) - Progressive Corp , the No. 3 U.S. auto insurer, said on Wednesday that monthly earnings fell 31 percent as it lost money on investments.
Net income in July dropped to $81.8 million, or 12 cents a share, from $118.5 million, or 16 cents a share, a year earlier.
The company recorded pretax net realized losses of $16.1 million on investments in July, compared with a year-earlier gain of $13.2 million.
Net premiums written were flat at $1.38 billion, while net premiums earned were 2 percent lower at $1.31 billion. (Reporting by Lilla Zuill; Editing by Lisa Von Ahn)
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Global Confidence Climbs From 10-Month Low as Crude Oil Slides
By Fergal O'Brien and Shobhana Chandra
Aug. 13 (Bloomberg) -- Confidence in the global economy rose from a 10-month low in August as oil prices retreated from record levels, a survey of Bloomberg users on five continents showed.
The Bloomberg Professional Global Confidence Index climbed to 14.1, from 10.3 in July, which was the lowest reading since the survey began in November. This increase was led by a 5.5-point increase to 18.2 among U.S. respondents, while the Western European measure rose 3.4 points to 12.9. A reading below 50 indicates negative sentiment.
The $30 drop in crude-oil prices in the past month is easing pressure on the Federal Reserve to raise interest rates and leaving Americans with more cash just as the impact of tax rebates fades. But the outlook for the global economy remains bleak as expansions in Europe and Japan stall.
``Lower oil prices are usually good news for the U.S., relative to the European economy,'' said Martin van Vliet, an economist at ING Group in Amsterdam, who took part in the survey. In Europe, ``the numbers have taken a turn for the worse recently; in the U.S., the economic news has been bad for a while.''
The survey, conducted between Aug. 4 and Aug. 8, collated the responses of about 3,000 Bloomberg users around the world. It included questions about the outlook for participants' own economies and their regions, as well as for bonds, currencies, stocks and interest rates over the next six months.
Spanish Housing Slump
Respondents in Japan were the most pessimistic about the global outlook. Participants in Spain, where second-quarter growth was the weakest in 15 years because of a housing slump, were the gloomiest about their economy, with a reading of 2.4, followed by the U.K. Participants in Brazil remained the most optimistic about their economy, at 60.4.
Faltering economic growth in Europe has prompted participants in the region to erase expectations of an interest-rate increase. The gauge in Germany fell to 42.7 from 61.6, signaling respondents in Europe's biggest economy now anticipate that the European Central Bank may cut its key rate in the coming six months. The gauges also declined in France, Italy and Spain.
By contrast, users in the U.S. say the Federal Reserve's next move is more likely to be an increase than a cut, with the index unchanged at 57.3.
European Central Bank President Jean-Claude Trichet said last week that euro-area growth will be ``particularly weak'' through the third quarter. The economy probably contracted in the second quarter for the first time since the creation of the euro, according to a separate survey of economists.
In the U.K., the index for the Bank of England's benchmark rate fell to 46 from 51.2, also indicating participants expect a reduction in interest rates there.
U.S. Slump
The U.S. slowdown is aggravated by the credit crisis triggered by the worst homebuilding slump in a quarter century. More banks made it harder for businesses and consumers to borrow money as defaults and delinquencies on home loans soared, the Fed's quarterly Senior Loan Officer Survey showed this week.
Fed policy makers, who kept the benchmark rate at 2 percent Aug. 5 after cutting it at a record pace between September and April, said ``financial markets remain under considerable stress.''
A separate Bloomberg survey of 50 economists published on Aug. 11 forecast U.S. growth will average an annual 0.7 percent from July through December, half the pace of the first six months.
Dollar Gains
As the outlook for ECB rates changes, participants in the U.S. and Europe reversed their predictions of a dollar decline. In the U.S., the index rose to 57.5, while the euro gauge dropped below the 50 breakeven point in Germany and France.
The euro has fallen 6 percent in the last three weeks and declined below $1.50 this week for the first time in more than five months.
``It's no longer the case that the U.S. is slowing down in isolation,'' said Paresh Upadhyaya, who helps oversee about $50 billion in currencies as a senior vice president at Putnam Investments in Boston. ``Markets are pricing in weaker global growth and the possibility of other central banks joining the Fed in the easing cycle. The fundamentals are in place for a gradual improvement in the dollar.''
The index of Asian confidence in the world economy was little changed at 8 this month after 7 in July. In Japan, respondents became more pessimistic about their own economy.
Japan, the world's second-largest economy, contracted in the second quarter, bringing the country to the brink of its first recession in six years, the Cabinet Office in Tokyo said today. The government this month said the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended.
``While the Americans may be doing the dance of joy around a cheaper tank of oil, the rest of the world has a lot more to worry about,'' said Song Seng Wun, an economist at CIMB-GK Securities Pte. in Singapore. ``Asian policy makers are more concerned that weakening energy and commodity prices are a reflection of slower economic growth momentum, implying a deteriorating outlook.''
The next survey will be conducted Sept. 8 to Sept. 12.
To contact the reporters on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net.
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Aug. 13 (Bloomberg) -- Confidence in the global economy rose from a 10-month low in August as oil prices retreated from record levels, a survey of Bloomberg users on five continents showed.
The Bloomberg Professional Global Confidence Index climbed to 14.1, from 10.3 in July, which was the lowest reading since the survey began in November. This increase was led by a 5.5-point increase to 18.2 among U.S. respondents, while the Western European measure rose 3.4 points to 12.9. A reading below 50 indicates negative sentiment.
The $30 drop in crude-oil prices in the past month is easing pressure on the Federal Reserve to raise interest rates and leaving Americans with more cash just as the impact of tax rebates fades. But the outlook for the global economy remains bleak as expansions in Europe and Japan stall.
``Lower oil prices are usually good news for the U.S., relative to the European economy,'' said Martin van Vliet, an economist at ING Group in Amsterdam, who took part in the survey. In Europe, ``the numbers have taken a turn for the worse recently; in the U.S., the economic news has been bad for a while.''
The survey, conducted between Aug. 4 and Aug. 8, collated the responses of about 3,000 Bloomberg users around the world. It included questions about the outlook for participants' own economies and their regions, as well as for bonds, currencies, stocks and interest rates over the next six months.
Spanish Housing Slump
Respondents in Japan were the most pessimistic about the global outlook. Participants in Spain, where second-quarter growth was the weakest in 15 years because of a housing slump, were the gloomiest about their economy, with a reading of 2.4, followed by the U.K. Participants in Brazil remained the most optimistic about their economy, at 60.4.
Faltering economic growth in Europe has prompted participants in the region to erase expectations of an interest-rate increase. The gauge in Germany fell to 42.7 from 61.6, signaling respondents in Europe's biggest economy now anticipate that the European Central Bank may cut its key rate in the coming six months. The gauges also declined in France, Italy and Spain.
By contrast, users in the U.S. say the Federal Reserve's next move is more likely to be an increase than a cut, with the index unchanged at 57.3.
European Central Bank President Jean-Claude Trichet said last week that euro-area growth will be ``particularly weak'' through the third quarter. The economy probably contracted in the second quarter for the first time since the creation of the euro, according to a separate survey of economists.
In the U.K., the index for the Bank of England's benchmark rate fell to 46 from 51.2, also indicating participants expect a reduction in interest rates there.
U.S. Slump
The U.S. slowdown is aggravated by the credit crisis triggered by the worst homebuilding slump in a quarter century. More banks made it harder for businesses and consumers to borrow money as defaults and delinquencies on home loans soared, the Fed's quarterly Senior Loan Officer Survey showed this week.
Fed policy makers, who kept the benchmark rate at 2 percent Aug. 5 after cutting it at a record pace between September and April, said ``financial markets remain under considerable stress.''
A separate Bloomberg survey of 50 economists published on Aug. 11 forecast U.S. growth will average an annual 0.7 percent from July through December, half the pace of the first six months.
Dollar Gains
As the outlook for ECB rates changes, participants in the U.S. and Europe reversed their predictions of a dollar decline. In the U.S., the index rose to 57.5, while the euro gauge dropped below the 50 breakeven point in Germany and France.
The euro has fallen 6 percent in the last three weeks and declined below $1.50 this week for the first time in more than five months.
``It's no longer the case that the U.S. is slowing down in isolation,'' said Paresh Upadhyaya, who helps oversee about $50 billion in currencies as a senior vice president at Putnam Investments in Boston. ``Markets are pricing in weaker global growth and the possibility of other central banks joining the Fed in the easing cycle. The fundamentals are in place for a gradual improvement in the dollar.''
The index of Asian confidence in the world economy was little changed at 8 this month after 7 in July. In Japan, respondents became more pessimistic about their own economy.
Japan, the world's second-largest economy, contracted in the second quarter, bringing the country to the brink of its first recession in six years, the Cabinet Office in Tokyo said today. The government this month said the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended.
``While the Americans may be doing the dance of joy around a cheaper tank of oil, the rest of the world has a lot more to worry about,'' said Song Seng Wun, an economist at CIMB-GK Securities Pte. in Singapore. ``Asian policy makers are more concerned that weakening energy and commodity prices are a reflection of slower economic growth momentum, implying a deteriorating outlook.''
The next survey will be conducted Sept. 8 to Sept. 12.
To contact the reporters on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net.
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Bank of England Cuts Growth Forecasts, Jobless Climbs
By Jennifer Ryan and Brian Swint
Aug. 13 (Bloomberg) -- The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
Governor Mervyn King said the inflation rate will fall below the 2 percent target in two years if policy makers keep the benchmark interest rate at 5 percent. Claims for jobless benefits climbed 20,100 in July to 864,700, the biggest increase since December 1992, a government report showed.
``It may still be summer but there is a feeling of chill in the economic air,'' King said at a press conference in London today. ``The British economy is going through a difficult and painful adjustment'' that ``cannot be avoided,'' he said.
The pound and government bond yields fell after the reports, which suggested the central bank may have room to lower interest rates as the economy heads toward a recession. Higher unemployment may prompt consumers to curtail spending and exacerbate the worst housing market slump since the early 1990s.
The pound fell to a 21-month low against the dollar. The British currency dropped to $1.8784 at 1:59 p.m. in London from $1.8968 yesterday. Two-year gilts jumped, cutting their yield 18 basis points to 4.471 percent.
Economists at BNP Paribas SA and JPMorgan Chase & Co. changed their forecasts and said the Bank of England may reduce its benchmark rate in November, not in the first quarter of 2009 as they previously predicted.
Sixth Increase
The economy will grow about 0.1 percent on a year-on-year basis in the first quarter of 2009, compared with a previous forecast of 1 percent, the Bank of England projections show.
``Broadly flat output means there is a possibility of a quarter or two of negative growth,'' King said, when asked about the risk of the first recession since 1991. ``There are clearly downside risks.''
The FTSE 100 Index slid 65.9, or 1.2 percent, to 5,468.60. The FTSE All-Share Index fell 1.2 percent.
``The tone is clearly dovish,'' Jonathan Loynes, chief European economist at Capital Economics in London, said of the inflation report. ``We stick to the view that interest rates will eventually fall very sharply once inflation pressures finally recede.''
Job Losses
Unemployment rose for a sixth straight month, with the jobless rate climbing to 2.7 percent from 2.6 percent in June. Wages grew at the slowest pace in five years.
Banks and homebuilders are bearing the brunt of job losses as the housing slump deepens. Royal Bank of Scotland Group Plc said Aug. 8 it may shed as many as 7,000 jobs by 2010. Builders including Redrow Plc and Bovis Homes Group Plc have announced more than 4,000 job cuts since the start of July.
Redundancies threaten to deepen the unpopularity of Prime Minister Gordon Brown, whose Labour Party trails behind the opposition Conservatives by 20 points in opinion polls.
Brown has until June 2010 to hold the next election, and government hopes of an economic rebound before then are dimming. The International Monetary Fund last week slashed its forecasts for U.K. growth, and the Ernst & Young Item Club said in July that unemployment as measured by International Labor Organization standards may rise by a quarter to more than 2 million by 2010.
`Double Disaster'
``It is now clear that a prolonged slowdown is going to reproduce many of the bad conditions of the early 1990s,'' said Vince Cable, economics spokesman for the opposition Liberal Democrats. ``The government needs to move quickly to make sure people who lose their jobs don't face the double disaster of losing their homes as well.''
The Bank of England has left its benchmark rate unchanged since April to deter workers from demanding more pay to keep pace with living costs and fueling higher inflation, which reached a decade-high of 4.4 percent in July. Today's figures suggest the policy may be working.
Growth in average earnings fell to 3.4 percent in the three months through June, the lowest since August 2003 and down from 3.8 percent in the quarter through May. Excluding bonuses, the pace slowed 0.1 point to 3.7 percent, the least since January.
ILO-based unemployment rose to 5.4 percent in the three months through June, the highest since September last year. It compares with 7.3 percent in the euro region, 5.7 percent in the U.S. and 4.1 percent in Japan, the statistics office said.
Unemployment in the second quarter rose 60,000 to 1.67 million, the most since February-April, 2007. Employment increased 20,000 to 29.6 million. Vacancies at job centers in the three months through July fell 47,400 to 634,900, the lowest since December 2006.
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.
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U.S. Import Prices Rise More Than Forecast in July
By Timothy R. Homan
Aug. 13 (Bloomberg) -- Prices of goods imported into the U.S. rose more than forecast in July as a weaker dollar and higher fuel and food costs made foreign purchases more expensive.
The import price index increased 1.7 percent after rising a revised 2.9 percent in June, the Labor Department said today in Washington. The index rose 21.6 percent from a year ago, the biggest year-over-year jump since the report was started in 1982. Prices excluding petroleum rose 0.9 percent last month from June and were 8 percent higher than a year earlier, the biggest annual increase in 20 years.
The rising cost of imports may add to concern that American companies will follow their competitors abroad in raising prices. The Federal Reserve has held its benchmark interest rate at 2 percent as policy makers weigh the risks of inflation and slow growth.
``We have a global environment that's inflationary,'' said Joe Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California, who forecasted a 1.8 percent increase for July. ``While the temporary increase in the value of the dollar will help on the margin, we are in the midst of a long-term trend in inflation.''
Another report from the Commerce Department showed sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
The 0.1 percent decrease matched the median forecast and followed a 0.3 percent gain the prior month that was larger than previously reported. Purchases excluding gasoline fell 0.2 percent.
Import prices were projected to rise 1 percent, according to the median estimate of 51 economists surveyed by Bloomberg News, after an initially reported 2.6 percent gain in June. Forecasts ranged from no change to a gain of 2 percent.
Food prices rose 1.5 percent in July and were up 15.7 percent from a year earlier, the largest annual increase since the index started in September 1977. Capital goods increased 0.3 percent after a decline of 0.1 percent in June, and industrial supplies were 3.3 percent more costly last month, the report showed.
Trade Balance
The import-price index is the first of three monthly price gauges from the Labor Department. Government reports are due tomorrow for the consumer price index and Aug. 19 for producer prices.
A report yesterday from the Commerce Department said the U.S. trade deficit in June unexpectedly shrank 4.1 percent to $56.8 billion. Imports rose 0.8 percent to $221.2 billion, reflecting a record $44.5 billion in purchases of foreign petroleum, as well as record increased demand for foreign-made autos and parts.
Nissan Motor Co., Japan's third largest carmaker, posted an 8.5 percent gain in U.S. auto sales last month.
Today's Labor Department report showed prices of imported automobiles, parts and engines last month rose 0.1 percent, and costs for imported consumer goods excluding autos increased 0.3 percent.
The price of imported petroleum and petroleum products gained 4 percent after an 8.9 percent increase in June. Prices were 79.2 percent higher than a year earlier.
Oil Prices
Crude oil futures have increased 58 percent in the past year. Oil futures today rose 23 cents, to $113.24 a barrel, on the New York Mercantile Exchange at 7:48 a.m. in Washington. Prices are down 23 percent from a record $147.27 a barrel reached on July 11.
Fed officials foresee inflation moderating through the second half of the year and into 2009. Still, the outlook for prices is ``highly uncertain,'' the Federal Open Market Committee said in a statement last week.
Imports are also becoming costlier because the dollar weakened 6.9 percent in the 12 months through July against a trade-weighted basket of currencies of major U.S. trading partners.
Prices of goods from China were up 0.9 percent, those from Latin America rose 2.4 percent and imports from the European Union cost 0.7 percent more in July.
U.S. exports prices increased 1.4 percent after rising 1 percent the prior month. Prices of farm exports increased 6.7 percent, while those of non-farm exports were up 0.8 percent.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Aug. 13 (Bloomberg) -- Prices of goods imported into the U.S. rose more than forecast in July as a weaker dollar and higher fuel and food costs made foreign purchases more expensive.
The import price index increased 1.7 percent after rising a revised 2.9 percent in June, the Labor Department said today in Washington. The index rose 21.6 percent from a year ago, the biggest year-over-year jump since the report was started in 1982. Prices excluding petroleum rose 0.9 percent last month from June and were 8 percent higher than a year earlier, the biggest annual increase in 20 years.
The rising cost of imports may add to concern that American companies will follow their competitors abroad in raising prices. The Federal Reserve has held its benchmark interest rate at 2 percent as policy makers weigh the risks of inflation and slow growth.
``We have a global environment that's inflationary,'' said Joe Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California, who forecasted a 1.8 percent increase for July. ``While the temporary increase in the value of the dollar will help on the margin, we are in the midst of a long-term trend in inflation.''
Another report from the Commerce Department showed sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
The 0.1 percent decrease matched the median forecast and followed a 0.3 percent gain the prior month that was larger than previously reported. Purchases excluding gasoline fell 0.2 percent.
Import prices were projected to rise 1 percent, according to the median estimate of 51 economists surveyed by Bloomberg News, after an initially reported 2.6 percent gain in June. Forecasts ranged from no change to a gain of 2 percent.
Food prices rose 1.5 percent in July and were up 15.7 percent from a year earlier, the largest annual increase since the index started in September 1977. Capital goods increased 0.3 percent after a decline of 0.1 percent in June, and industrial supplies were 3.3 percent more costly last month, the report showed.
Trade Balance
The import-price index is the first of three monthly price gauges from the Labor Department. Government reports are due tomorrow for the consumer price index and Aug. 19 for producer prices.
A report yesterday from the Commerce Department said the U.S. trade deficit in June unexpectedly shrank 4.1 percent to $56.8 billion. Imports rose 0.8 percent to $221.2 billion, reflecting a record $44.5 billion in purchases of foreign petroleum, as well as record increased demand for foreign-made autos and parts.
Nissan Motor Co., Japan's third largest carmaker, posted an 8.5 percent gain in U.S. auto sales last month.
Today's Labor Department report showed prices of imported automobiles, parts and engines last month rose 0.1 percent, and costs for imported consumer goods excluding autos increased 0.3 percent.
The price of imported petroleum and petroleum products gained 4 percent after an 8.9 percent increase in June. Prices were 79.2 percent higher than a year earlier.
Oil Prices
Crude oil futures have increased 58 percent in the past year. Oil futures today rose 23 cents, to $113.24 a barrel, on the New York Mercantile Exchange at 7:48 a.m. in Washington. Prices are down 23 percent from a record $147.27 a barrel reached on July 11.
Fed officials foresee inflation moderating through the second half of the year and into 2009. Still, the outlook for prices is ``highly uncertain,'' the Federal Open Market Committee said in a statement last week.
Imports are also becoming costlier because the dollar weakened 6.9 percent in the 12 months through July against a trade-weighted basket of currencies of major U.S. trading partners.
Prices of goods from China were up 0.9 percent, those from Latin America rose 2.4 percent and imports from the European Union cost 0.7 percent more in July.
U.S. exports prices increased 1.4 percent after rising 1 percent the prior month. Prices of farm exports increased 6.7 percent, while those of non-farm exports were up 0.8 percent.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Borealis, GIC Group to Buy Stake in Oncor for $1.25 Billion
By Kim Jordan
Aug. 13 (Bloomberg) -- A group led by Borealis Infrastructure Management and GIC Special Investments agreed to buy a 20 percent stake in Oncor Electric Delivery Co. from Energy Future Holdings Corp. for $1.25 billion.
The investor group will have the right to add two directors to Oncor's board, Energy Future said today in a Business Wire statement.
To contact the reporter on this story: Kim Jordan in Houston at kjordan2@bloomberg.net.
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Aug. 13 (Bloomberg) -- A group led by Borealis Infrastructure Management and GIC Special Investments agreed to buy a 20 percent stake in Oncor Electric Delivery Co. from Energy Future Holdings Corp. for $1.25 billion.
The investor group will have the right to add two directors to Oncor's board, Energy Future said today in a Business Wire statement.
To contact the reporter on this story: Kim Jordan in Houston at kjordan2@bloomberg.net.
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BP Starts BTC Assessment After Pipeline Cools Down
By Eduard Gismatullin
Aug. 13 (Bloomberg) -- BP Plc and Botas International Ltd., a Turkish operating company, started damage assessment at an oil pipeline in eastern Turkey following a fire.
BP, Europe's second-biggest oil company, is now able to access the Baku-Tbilisi-Ceyhan, or BTC, pipeline after it cooled down, company spokesman Toby Odone said today. The assessment will take ``a week or so,'' he said. BP's venture declared force majeure on exports from the Baku-Supsa oil link, which runs to the Georgian Black Sea coast, he said.
``It'll take quite a while to work out what has happened,'' Odone said by phone from London. Turkish authorities are also investigating the cause of the explosion, he said.
The fire on the link, which has a 1 million barrel-a-day capacity, broke out on Aug. 5 following an explosion in the Erzincan province. The Kurdistan Workers' Party, or PKK, claimed responsibility for the attack.
The fire on the 1,768-kilometer (1,100-mile) pipeline, which links Azerbaijan through Georgia with the Turkish port of Ceyhan, was extinguished on Aug. 11.
BP, StatoilHydro ASA and partners had to cut production at the Shah Deniz gas and Azeri-Chirag-Gunashli oil fields in the Azeri part of the Caspian Sea because of the disruption.
Azerbaijan International Operating Co., which operates the Azeri-Chirag-Gunashli project and the Baku-Supsa pipeline, announced force majeure on cargo loading at the port of Supsa in Georgia until further notice, Odone said.
Force Majeure
Last week, force majeure was also declared on shipping oil through the BTC. Force majeure is a legal clause allowing suppliers to suspend contractual obligations because of events beyond their control.
Shipments of natural gas from Shah Deniz through the South Caucasus pipeline are also suspended on security concerns in Georgia, said Tamam Bayatly, a BP spokeswoman in Baku, today by phone. ``Shah Deniz production continues at a lower rate,'' she said, adding that supplies are only being delivered to the Azeri domestic market.
Georgia and Turkey are still being supplied with gas that had accumulated in the South Caucasus pipeline before the link was shut, BP said.
Russian President Dmitry Medvedev yesterday ordered a halt to Russia's offensive in Georgia after six days of fighting.
The Baku-Supsa oil pipeline from Azerbaijan through Georgia to the Black Sea was closed for a second day as a precaution.
No Damage
BP hasn't verified any damage to pipelines in Georgia to date, Bayatly said. ``We continue to assess the situation to see when we can restart'' the Baku-Supsa link, she said.
The Baku-Supsa pipeline, with a capacity of more than 100,000 barrels a day, was started last week after 19 months of repairs. As of yesterday, no tankers have been loaded from the pipeline at Supsa, according to Garsevan Jorbenadze, a Batumi- based ship agent at TeRo Co. Ltd., who arranges for vessels to dock and load.
The Baku-Supsa line ``shutdown adds to already lower supplies in the Black Sea and Mediterranean due to lower Russian exports and the outage on the BTC pipeline,'' Vienna-based consultants at JBC Energy GmbH said today in an e-mailed report.
Georgia's Black Sea ports resumed ``normal operations'' after the conflict with Russia halted, Zviad Jakeli, a chief agent at TeRo, said today by phone. Ships have been instructed to return to the Batumi, Kulevi, Supsa and other facilities from nearby anchorage areas.
The Port of Poti, which was shut because of bombings, has also resumed operations, Jakeli said.
Oil is now only being transported from Azerbaijan through the Baku-Novorossiysk link to the Russian Black Sea coast and in rail cars across Georgia to the Black Sea ports.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
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Aug. 13 (Bloomberg) -- BP Plc and Botas International Ltd., a Turkish operating company, started damage assessment at an oil pipeline in eastern Turkey following a fire.
BP, Europe's second-biggest oil company, is now able to access the Baku-Tbilisi-Ceyhan, or BTC, pipeline after it cooled down, company spokesman Toby Odone said today. The assessment will take ``a week or so,'' he said. BP's venture declared force majeure on exports from the Baku-Supsa oil link, which runs to the Georgian Black Sea coast, he said.
``It'll take quite a while to work out what has happened,'' Odone said by phone from London. Turkish authorities are also investigating the cause of the explosion, he said.
The fire on the link, which has a 1 million barrel-a-day capacity, broke out on Aug. 5 following an explosion in the Erzincan province. The Kurdistan Workers' Party, or PKK, claimed responsibility for the attack.
The fire on the 1,768-kilometer (1,100-mile) pipeline, which links Azerbaijan through Georgia with the Turkish port of Ceyhan, was extinguished on Aug. 11.
BP, StatoilHydro ASA and partners had to cut production at the Shah Deniz gas and Azeri-Chirag-Gunashli oil fields in the Azeri part of the Caspian Sea because of the disruption.
Azerbaijan International Operating Co., which operates the Azeri-Chirag-Gunashli project and the Baku-Supsa pipeline, announced force majeure on cargo loading at the port of Supsa in Georgia until further notice, Odone said.
Force Majeure
Last week, force majeure was also declared on shipping oil through the BTC. Force majeure is a legal clause allowing suppliers to suspend contractual obligations because of events beyond their control.
Shipments of natural gas from Shah Deniz through the South Caucasus pipeline are also suspended on security concerns in Georgia, said Tamam Bayatly, a BP spokeswoman in Baku, today by phone. ``Shah Deniz production continues at a lower rate,'' she said, adding that supplies are only being delivered to the Azeri domestic market.
Georgia and Turkey are still being supplied with gas that had accumulated in the South Caucasus pipeline before the link was shut, BP said.
Russian President Dmitry Medvedev yesterday ordered a halt to Russia's offensive in Georgia after six days of fighting.
The Baku-Supsa oil pipeline from Azerbaijan through Georgia to the Black Sea was closed for a second day as a precaution.
No Damage
BP hasn't verified any damage to pipelines in Georgia to date, Bayatly said. ``We continue to assess the situation to see when we can restart'' the Baku-Supsa link, she said.
The Baku-Supsa pipeline, with a capacity of more than 100,000 barrels a day, was started last week after 19 months of repairs. As of yesterday, no tankers have been loaded from the pipeline at Supsa, according to Garsevan Jorbenadze, a Batumi- based ship agent at TeRo Co. Ltd., who arranges for vessels to dock and load.
The Baku-Supsa line ``shutdown adds to already lower supplies in the Black Sea and Mediterranean due to lower Russian exports and the outage on the BTC pipeline,'' Vienna-based consultants at JBC Energy GmbH said today in an e-mailed report.
Georgia's Black Sea ports resumed ``normal operations'' after the conflict with Russia halted, Zviad Jakeli, a chief agent at TeRo, said today by phone. Ships have been instructed to return to the Batumi, Kulevi, Supsa and other facilities from nearby anchorage areas.
The Port of Poti, which was shut because of bombings, has also resumed operations, Jakeli said.
Oil is now only being transported from Azerbaijan through the Baku-Novorossiysk link to the Russian Black Sea coast and in rail cars across Georgia to the Black Sea ports.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
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British Energy Earnings Fall Less Than Estimated
By Paul Dobson
Aug. 13 (Bloomberg) -- British Energy Group Plc, the nuclear power producer that rejected a bid from Electricite de France SA, reported a smaller decline in profit for the first quarter than analysts estimated.
Earnings before interest, tax, depreciation and amortization for the three months through June fell 49 percent to 129 million pounds ($245 million), beating the 88.5 million- pound median estimate of four analysts surveyed by Bloomberg. The company sold electricity from its coal-fed Eggborough plant at higher rates.
Production was hit by the shutdowns at the Heysham-1 and Hartlepool plants since late last year following the discovery of corroded wires. The repairs are on schedule, Chief Executive Officer Bill Coley said on a conference call today. He declined to comment on the takeover offer.
East Kilbride, Scotland-based British Energy spurned a 12 billion-pound bid from Electricite de France on Aug. 1, two people with knowledge of the talks said. Rivals want to buy the utility to capture rising power prices and build reactors adjacent to its eight nuclear plants. Atomic energy avoids rising fossil fuel costs and penalties for carbon dioxide emissions.
The company left the door open for more talks with Electricite de France after U.K. Business Secretary John Hutton backed the French utility's approach. It's not in discussions about alternative arrangements, Coley, 65, said on a conference call with analysts.
Shares Gain
British Energy rose as much as 10 pence, or 1.4 percent, to 715 pence in London trading and was at 711 pence as of 10:21 a.m. local time.
Net income for the three months through June fell to 62 million pounds, or 6 pence a share, from 179 million pounds, or 25.4 pence a year ago, the company said today in a statement. Its reactors produced 27 percent less power in the quarter compared with the year-earlier period.
``We have been able to benefit from the higher power prices prevailing during the period through the sales of previously uncontracted volumes,'' and wider profit margins from the coal- fired Eggborough power plant, the company said.
British Energy revised up cost estimates for repairs to the Heysham-1 and Hartlepool reactors to 115 million pounds from 50 million pounds and said it plans to start all four reactors in the third quarter of its financial year, the three months from October.
Average Prices
The company's average realized price was 45.70 pounds a megawatt hour, up from 40.80 pounds a megawatt hour the year earlier. It's sold 42.2 terawatt-hours of power for the current year at an average 47 pounds a megawatt hour and 33.3 terawatt- hours for the next year at an average 42 pounds a megawatt hour. It may sell more power at higher prices after completing repairs to its power plants.
U.K. power for delivery this winter, when prices are highest, has more than doubled in the past year to 85.35 pounds a megawatt hour, boosted by higher fuel costs and reduced volumes of spare production capacity.
The U.K. government, which owns 35.6 percent of British Energy, supports the building of new reactors that will replace older plants without increasing carbon-dioxide emissions. The U.K. said it was disappointed by the failure to reach a deal with Paris-based Electricite de France. There was a big difference between the offer price and the price some shareholders wanted, Hutton said.
Centrica Plc, the U.K.'s biggest electricity and gas supplier, has said it would consider merging with British Energy should its attempt to acquire a minority stake in the nuclear power producer fail.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
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E.ON Gains After Raising Profit Outlook on Prices, Acquisitions
By Nicholas Comfort
Aug. 13 (Bloomberg) -- E.ON AG, Germany's biggest utility, climbed the most in a month in Frankfurt trading after raising its full-year profit forecast on higher power prices and acquisitions in Italy, Spain and France.
E.ON added as much as 3.5 percent, the steepest one-day gain since July 7, and traded at 39.75 euros as of 1:05 p.m. local time. Earnings before interest and tax will rise by between 5 and 10 percent compared with 2007 and adjusted net income will increase by the same degree, the Dusseldorf-based company said today in a statement.
``It's a positive surprise,'' said Karin Brinkmann, an analyst at UniCredit Markets & Investment Banking in Munich, who has a ``hold'' rating on the stock. ``The market had been expecting some weaker figures, so it's quite a relief.''
E.ON boosted its generating capacity by 10.7 gigawatts, or about 20 percent, after buying Endesa SA and Enel SpA plants in countries including Spain, where power consumption is expected to grow faster than the European Union average. Higher power prices at E.ON's central European unit more than made up for lower earnings in the U.K. in the second quarter.
The company reported a 2.1 percent drop in second-quarter profit because of losses from derivatives hedging and as book gains were lower than a year ago. Net income fell to 882 million euros ($1.31 billion) from 901 million euros a year earlier, missing the 1.27 billion-euro median estimate of seven analysts surveyed by Bloomberg.
Ahead of Schedule
The acquisition of power assets from Endesa, taken over by Enel and Acciona SA last year, closed ahead of schedule.
Chief Financial Officer Marcus Schenck said in March that the acquisition would be delayed until the third quarter, The utility beat that schedule after completing the 11.5 billion-euro purchase of power plants in Spain and other European companies on June 26.
German electricity for delivery the next day sold for an average of 71.63 euros a megawatt-hour in the second quarter, double its year-earlier level, according to broker GFI Group Inc. Europe's largest power market accounts for 54 percent of E.ON's revenue, Bloomberg data show.
E.ON has fallen 18 percent in Frankfurt trading so far this year, compared with a 22 percent decline for smaller German rival RWE AG. E.ON is covered by 41 analysts, of whom 35 recommend buying the stock, four say ``hold'' and two advise selling.
Gas Demand
RWE may report a 30 percent slide in second-quarter earnings tomorrow, according to a separate Bloomberg survey of analysts, because of higher emissions costs.
German natural gas demand gained 9.5 percent in the first half, outstripping the country's 3 percent overall gain in energy consumption, Berlin-based statistics group Arbeitsgemeinschaft Energiebilanzen said earlier this month.
The average German day-ahead natural gas price in the quarter more than doubled to 26.57 euros from last year, according to energy broker Spectron Group Ltd. That's less than the almost threefold jump to 60.77 pence a therm for U.K. prices, data from broker ICAP show.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
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Aug. 13 (Bloomberg) -- E.ON AG, Germany's biggest utility, climbed the most in a month in Frankfurt trading after raising its full-year profit forecast on higher power prices and acquisitions in Italy, Spain and France.
E.ON added as much as 3.5 percent, the steepest one-day gain since July 7, and traded at 39.75 euros as of 1:05 p.m. local time. Earnings before interest and tax will rise by between 5 and 10 percent compared with 2007 and adjusted net income will increase by the same degree, the Dusseldorf-based company said today in a statement.
``It's a positive surprise,'' said Karin Brinkmann, an analyst at UniCredit Markets & Investment Banking in Munich, who has a ``hold'' rating on the stock. ``The market had been expecting some weaker figures, so it's quite a relief.''
E.ON boosted its generating capacity by 10.7 gigawatts, or about 20 percent, after buying Endesa SA and Enel SpA plants in countries including Spain, where power consumption is expected to grow faster than the European Union average. Higher power prices at E.ON's central European unit more than made up for lower earnings in the U.K. in the second quarter.
The company reported a 2.1 percent drop in second-quarter profit because of losses from derivatives hedging and as book gains were lower than a year ago. Net income fell to 882 million euros ($1.31 billion) from 901 million euros a year earlier, missing the 1.27 billion-euro median estimate of seven analysts surveyed by Bloomberg.
Ahead of Schedule
The acquisition of power assets from Endesa, taken over by Enel and Acciona SA last year, closed ahead of schedule.
Chief Financial Officer Marcus Schenck said in March that the acquisition would be delayed until the third quarter, The utility beat that schedule after completing the 11.5 billion-euro purchase of power plants in Spain and other European companies on June 26.
German electricity for delivery the next day sold for an average of 71.63 euros a megawatt-hour in the second quarter, double its year-earlier level, according to broker GFI Group Inc. Europe's largest power market accounts for 54 percent of E.ON's revenue, Bloomberg data show.
E.ON has fallen 18 percent in Frankfurt trading so far this year, compared with a 22 percent decline for smaller German rival RWE AG. E.ON is covered by 41 analysts, of whom 35 recommend buying the stock, four say ``hold'' and two advise selling.
Gas Demand
RWE may report a 30 percent slide in second-quarter earnings tomorrow, according to a separate Bloomberg survey of analysts, because of higher emissions costs.
German natural gas demand gained 9.5 percent in the first half, outstripping the country's 3 percent overall gain in energy consumption, Berlin-based statistics group Arbeitsgemeinschaft Energiebilanzen said earlier this month.
The average German day-ahead natural gas price in the quarter more than doubled to 26.57 euros from last year, according to energy broker Spectron Group Ltd. That's less than the almost threefold jump to 60.77 pence a therm for U.K. prices, data from broker ICAP show.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
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Orlen and Lotos, Polish Oil Refiners, Boost Profit
By Katarzyna Klimasinska
Aug. 13 (Bloomberg) -- PKN Orlen SA and Grupa Lotos SA, Poland's only oil refiners, increased second-quarter profit more than analysts had estimated after margins on diesel rose.
Net income increased 47 percent to 1.67 billion zloty ($762 million) from 1.14 billion zloty a year earlier, the Plock-based company said today. Analysts expected profit of 1.34 billion zloty, according to the median estimate of eight brokerages surveyed by Bloomberg News by phone and e-mail. Lotos's profit rose 66 percent.
``Both companies improved their margins,'' Kamil Kliszcz, an analyst at BRE Bank SA in Warsaw, said by phone today.
Orlen, which sells fuel in Poland, the Czech Republic, Germany and Lithuania, said earnings from producing diesel rose 146 percent to $278.4 a ton in the quarter. The company also boosted production 22 percent as its Lithuanian unit, AB Mazeikiu Nafta, returned to full capacity for the first time since Orlen bought it in 2006.
Net income at Lotos advanced to 396.5 million zloty from 239.5 million zloty a year earlier, the Gdansk-based company said today in a statement. That exceeded the 288 million-zloty median estimate of seven analysts surveyed by Bloomberg News by phone and e-mail.
Both companies also benefited from the higher value of oil in their tanks, as U.S. oil futures traded 90 percent higher in the second quarter than a year earlier and climbed above $140 a barrel for the first time in June. Crude prices have since fallen more than 20 percent.
Orlen may book a loss on inventories revaluation in the third quarter, should oil prices continue to decline, Chief Financial Officer Slawomir Jedrzejczyk said at a press conference in Warsaw today.
Chief Executive Officer Wojciech Heydel said Orlen's margins on petrochemical products improved ``slightly'' in third quarter. Lotos CFO Mariusz Machajewski told reporters today his company's refining margins have dropped slightly since June.
To contact the reporter on this story: Katarzyna Klimasinska in Warsaw at kklimasinska@bloomberg.net
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Aug. 13 (Bloomberg) -- PKN Orlen SA and Grupa Lotos SA, Poland's only oil refiners, increased second-quarter profit more than analysts had estimated after margins on diesel rose.
Net income increased 47 percent to 1.67 billion zloty ($762 million) from 1.14 billion zloty a year earlier, the Plock-based company said today. Analysts expected profit of 1.34 billion zloty, according to the median estimate of eight brokerages surveyed by Bloomberg News by phone and e-mail. Lotos's profit rose 66 percent.
``Both companies improved their margins,'' Kamil Kliszcz, an analyst at BRE Bank SA in Warsaw, said by phone today.
Orlen, which sells fuel in Poland, the Czech Republic, Germany and Lithuania, said earnings from producing diesel rose 146 percent to $278.4 a ton in the quarter. The company also boosted production 22 percent as its Lithuanian unit, AB Mazeikiu Nafta, returned to full capacity for the first time since Orlen bought it in 2006.
Net income at Lotos advanced to 396.5 million zloty from 239.5 million zloty a year earlier, the Gdansk-based company said today in a statement. That exceeded the 288 million-zloty median estimate of seven analysts surveyed by Bloomberg News by phone and e-mail.
Both companies also benefited from the higher value of oil in their tanks, as U.S. oil futures traded 90 percent higher in the second quarter than a year earlier and climbed above $140 a barrel for the first time in June. Crude prices have since fallen more than 20 percent.
Orlen may book a loss on inventories revaluation in the third quarter, should oil prices continue to decline, Chief Financial Officer Slawomir Jedrzejczyk said at a press conference in Warsaw today.
Chief Executive Officer Wojciech Heydel said Orlen's margins on petrochemical products improved ``slightly'' in third quarter. Lotos CFO Mariusz Machajewski told reporters today his company's refining margins have dropped slightly since June.
To contact the reporter on this story: Katarzyna Klimasinska in Warsaw at kklimasinska@bloomberg.net
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U.K. Pound Falls to 22-Month Low as BOE Slashes Growth Forecast
By Kim-Mai Cutler and Andrew MacAskill
Aug. 13 (Bloomberg) -- The U.K. pound fell to a 22-month low against the dollar and government bonds advanced after the Bank of England cut its growth forecast and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
The pound weakened for a ninth day versus the U.S. currency as Bank of England Governor Mervyn King said he saw a ``chill in the economic air.'' The economy will grow about 0.1 percent on a year-on-year basis in the first quarter of 2009, compared with a previous prediction of 1 percent, according to bank forecasts published today. U.K. unemployment rose in July by the most since December 1992 and wage growth slowed, reports showed.
``King has been a bit more dovish than the market expected,'' said John Hardy, the head of foreign-exchange strategy at Saxo Bank A/S, a Copenhagen-based bank specializing in currencies, stocks, bonds and derivatives. ``The consensus was he was going to be a bit more handcuffed by inflation. So for sterling there is going to be some downside.''
The British currency fell to $1.8777 by 1:46 p.m. in London, from $1.8968 yesterday. It fell as low as $1.8736, or the lowest since October 2006. The pound also declined to 79.45 pence per euro, from 78.69 pence.
The pound hasn't dropped for nine consecutive days against the dollar since July 2005, when slowing economic growth and falling house prices presaged a cut in U.K. interest rates the following month. The currency's 7.6 percent decline since July 31 is its largest since February 1993. In the past five days, it's fallen more than any other currency versus the dollar except the South African rand and Australian dollar.
`Chill in Air'
The weakening currency underlines concern that a slumping housing market is pushing Europe's second-biggest economy toward a recession. The pound was as high as $2.0157 three weeks ago.
``It may still be summer but there is a feeling of chill in the economic air,'' King said at a press conference in London following the release of the central bank's quarterly inflation report. The economy faces a ``difficult and painful adjustment'' that ``cannot be avoided. As a result inflation is rising and growth is slowing.''
Inflation may accelerate above 5 percent before slowing to just below the central bank's 2 percent ceiling in two years if interest rates stay on hold, as investors predict, according to the central bank.
Traders raised bets the bank will cut interest rates this year, with the implied yield on the December sterling interest- rate futures contract tumbling 23 basis points to 5.51 percent. The bank's benchmark interest rate is 5 percent.
Relative Strength Index
Technical indicators suggested the pound may be poised to rebound, with the currency's 14-day relative strength index versus the dollar falling to 17.91. A level below 30 typically signals a change in price direction.
Government bonds rose, with the yield on the 10-year gilt falling 5 basis points to 4.58 percent. The price of the 5 percent security due March 2018 climbed 0.41, or 4.1 pounds per 1,000-pound ($1,877) face amount, to 103.22. The yield on the two-year gilt, which is more sensitive to the outlook for interest rates, dropped 18 basis points to 4.48 percent. Bond yields move inversely to prices.
``Gilts are flying on the back of a much more-dovish-than- expected inflation report,'' said Nick Stamenkovic, a fixed- income strategist at RIA Capital Markets in Edinburgh. ``This implies the next move in rates will be down, possibly as early as November.''
Employment Report
U.K. claims for jobless benefits climbed 20,100 from June to 864,700, the biggest increase since December 1992, the Office for National Statistics said today in London. Incomes rose the least in five years.
``Overall the market will be looking through this peak of inflation and at the deteriorating growth prospects,'' said Ian Stannard, a London-based currency strategist for BNP Paribas SA. ``That is going to be enough to put sterling under pressure.'' The pound may fall to $1.85 by year-end, Stannard said.
The pound's decline against the dollar has driven it below the level at which analysts expect it to end the year. The pound will be at $1.91 and 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.
The pound fell 7.5 percent against the euro this year. It's down 5.4 percent versus the dollar, after being little changed against the U.S. currency as recently as July 31.
To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
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South African Rand Pares Gains Against Dollar, Trades at 7.8188
By Garth Theunissen
Aug. 13 (Bloomberg) -- South Africa's rand pared gains against the dollar.
The rand was little changed at 7.8188 by 1:05 p.m. in Johannesburg, after rising as much as 0.4 percent to 7.7855. Against the euro, the rand climbed 0.2 percent to 11.6273.
South Africa's currency slipped even as gold and platinum, the nation's biggest exports, rebounded from their lowest levels in more than seven months. Gold climbed as much as 2.3 percent to $826.15 an ounce, and platinum rose 2.9 percent to $1,519 an ounce.
South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, meaning the rand often moves in tandem with the metals' prices. The FTSE/JSE Africa All Share Index climbed 0.4 percent, led by mining companies including Anglo American Plc and Impala Platinum Holdings Ltd.
The rand had its biggest weekly drop versus the dollar in more than two years last week as weaker precious metals prices damped the outlook for export revenue. The rand weakened more than 12 percent against the dollar in 2008, making it the worst performer of the 16 major currencies monitored by Bloomberg.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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Aug. 13 (Bloomberg) -- South Africa's rand pared gains against the dollar.
The rand was little changed at 7.8188 by 1:05 p.m. in Johannesburg, after rising as much as 0.4 percent to 7.7855. Against the euro, the rand climbed 0.2 percent to 11.6273.
South Africa's currency slipped even as gold and platinum, the nation's biggest exports, rebounded from their lowest levels in more than seven months. Gold climbed as much as 2.3 percent to $826.15 an ounce, and platinum rose 2.9 percent to $1,519 an ounce.
South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, meaning the rand often moves in tandem with the metals' prices. The FTSE/JSE Africa All Share Index climbed 0.4 percent, led by mining companies including Anglo American Plc and Impala Platinum Holdings Ltd.
The rand had its biggest weekly drop versus the dollar in more than two years last week as weaker precious metals prices damped the outlook for export revenue. The rand weakened more than 12 percent against the dollar in 2008, making it the worst performer of the 16 major currencies monitored by Bloomberg.
To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net
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Dollar Optimists Return as Slowdown Spreads to Europe, Japan
By Lester Pimentel
Aug. 13 (Bloomberg) -- The dollar will appreciate against the euro, yen, pound and Swiss franc in the next six months as economies in Europe and Asia falter, a survey of Bloomberg users showed.
U.S. investors turned bullish on the greenback after incorrectly forecasting a decline last month, according to respondents in the monthly Bloomberg Professional Global Confidence Index, which questioned 2,969 users from Los Angeles to Paris to Tokyo. Participants became bearish on the franc and yen while growing more pessimistic about the British pound.
``It's not that people are more optimistic about the U.S. economy,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York and a survey participant. ``The rest of the world is catching up with the U.S.''
European Central Bank President Jean-Claude Trichet said Aug. 7 that the region's economy will be ``particularly weak'' through the third quarter. The Federal Reserve said Aug. 5 that a shrinking labor market and banking strains will hinder U.S. growth. Japan's government said Aug. 6 the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended.
The index of expectations on the dollar for U.S. users rose to 57.48 for August from 45.44 in July. A reading above 50 indicates participants expect the currency to appreciate.
Dollar Index
The U.S. Dollar Index, which tracks the currency against six trading partners, yesterday touched 76.616, the highest level since Feb. 12. The index has advanced 3.9 percent since July 31. Last week's 3.3 percent gain was the biggest since January 2005.
``We continue to remain bullish on the dollar,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, and a survey participant. ``There are still significant hurdles ahead for the U.S. economy. But we see increasing deterioration for the rest of the world.''
He expects the euro will weaken to $1.38 by the end of the year from $1.49 yesterday and the record high of $1.6038 on July 15. Against the yen, the dollar ended yesterday at 109.54, up 14 percent from the low this year of 95.76 yen on March 17.
Gains may prove temporary, based on trading patterns and the U.S. current account deficit, according to strategists from Charlotte, North Carolina-based Bank of America Corp. to Morgan Stanley in New York.
Relative Strength
The 14-day relative strength index measuring the pace of the euro's decline fell to 20.05 on Aug. 11, the lowest level since the currency's debut in 1999. A reading below 30 suggests a currency's drop is extreme and a reversal may be imminent.
The current account deficit, the broadest measure of trade, was $176.4 billion in the first quarter, compared with the average shortfall of $100 billon since 1993, the Commerce Department's most recent data show.
In Switzerland, the outlook for the franc tumbled to 42.50 from 59.37. The index for the yen declined to 49.19 from 55.08, while U.K. users increased bets against the pound, with the index falling to 37.73 from 42.41.
The dollar is getting a boost from speculation that lower commodities prices will boost consumer spending. The UBS Bloomberg Constant Maturity Commodity Index fell 18 percent to 1,406.104 yesterday from a record 1,714.362 on July 2. It rose 50 percent in the prior 12 months.
Fed Forecast
Users in the U.S. forecast the Fed will increase its target interest rate for overnight loans between banks from 2 percent. The index measuring the outlook for the federal funds rate was 57.33 for August, compared with 57.35 in July. Their views on the economy became less bearish, with the index climbing to 16.74 from 8.77.
Higher short-term deposit rates can make a country's fixed- income holdings more attractive for international investors, bolstering demand for the currency. The dollar depreciated 12 percent against the euro between Sept. 18 and April 30 as the Fed cut the fed funds rate to 2 percent from 5.25 percent and the ECB kept its equivalent unchanged at 4 percent.
Users became less certain 10-year Treasury yields will rise as the sentiment index fell to 65.26 from 66.72 in July. The yield on the benchmark 10-year note declined 9 basis points, or 0.09 percentage point, yesterday to 3.91 percent in New York, according to BGCantor Market Data.
Yields increased from this year's low of 3.28 percent on March 17 on speculation the combination of Fed rate cuts and rising commodity prices would spark inflation.
In Germany, the index measuring bund yields dropped to 53.85 from 60.83. Users in Japan cut their outlook for higher yields, as the index declined to 50.41 from 56.64.
U.K. users turned bullish on gilts, with the index falling to 48.93 from 53.83. Property values fell the most in at least a quarter of a century in July, HBOS Plc reported on Aug. 7.
Participants in Switzerland became less certain the Swiss National Bank will raise its benchmark rate from 2.75 percent. The index that measures expectations for short-term borrowing costs fell to 55.42 in August from 65.11.
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
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Aug. 13 (Bloomberg) -- The dollar will appreciate against the euro, yen, pound and Swiss franc in the next six months as economies in Europe and Asia falter, a survey of Bloomberg users showed.
U.S. investors turned bullish on the greenback after incorrectly forecasting a decline last month, according to respondents in the monthly Bloomberg Professional Global Confidence Index, which questioned 2,969 users from Los Angeles to Paris to Tokyo. Participants became bearish on the franc and yen while growing more pessimistic about the British pound.
``It's not that people are more optimistic about the U.S. economy,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York and a survey participant. ``The rest of the world is catching up with the U.S.''
European Central Bank President Jean-Claude Trichet said Aug. 7 that the region's economy will be ``particularly weak'' through the third quarter. The Federal Reserve said Aug. 5 that a shrinking labor market and banking strains will hinder U.S. growth. Japan's government said Aug. 6 the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended.
The index of expectations on the dollar for U.S. users rose to 57.48 for August from 45.44 in July. A reading above 50 indicates participants expect the currency to appreciate.
Dollar Index
The U.S. Dollar Index, which tracks the currency against six trading partners, yesterday touched 76.616, the highest level since Feb. 12. The index has advanced 3.9 percent since July 31. Last week's 3.3 percent gain was the biggest since January 2005.
``We continue to remain bullish on the dollar,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, and a survey participant. ``There are still significant hurdles ahead for the U.S. economy. But we see increasing deterioration for the rest of the world.''
He expects the euro will weaken to $1.38 by the end of the year from $1.49 yesterday and the record high of $1.6038 on July 15. Against the yen, the dollar ended yesterday at 109.54, up 14 percent from the low this year of 95.76 yen on March 17.
Gains may prove temporary, based on trading patterns and the U.S. current account deficit, according to strategists from Charlotte, North Carolina-based Bank of America Corp. to Morgan Stanley in New York.
Relative Strength
The 14-day relative strength index measuring the pace of the euro's decline fell to 20.05 on Aug. 11, the lowest level since the currency's debut in 1999. A reading below 30 suggests a currency's drop is extreme and a reversal may be imminent.
The current account deficit, the broadest measure of trade, was $176.4 billion in the first quarter, compared with the average shortfall of $100 billon since 1993, the Commerce Department's most recent data show.
In Switzerland, the outlook for the franc tumbled to 42.50 from 59.37. The index for the yen declined to 49.19 from 55.08, while U.K. users increased bets against the pound, with the index falling to 37.73 from 42.41.
The dollar is getting a boost from speculation that lower commodities prices will boost consumer spending. The UBS Bloomberg Constant Maturity Commodity Index fell 18 percent to 1,406.104 yesterday from a record 1,714.362 on July 2. It rose 50 percent in the prior 12 months.
Fed Forecast
Users in the U.S. forecast the Fed will increase its target interest rate for overnight loans between banks from 2 percent. The index measuring the outlook for the federal funds rate was 57.33 for August, compared with 57.35 in July. Their views on the economy became less bearish, with the index climbing to 16.74 from 8.77.
Higher short-term deposit rates can make a country's fixed- income holdings more attractive for international investors, bolstering demand for the currency. The dollar depreciated 12 percent against the euro between Sept. 18 and April 30 as the Fed cut the fed funds rate to 2 percent from 5.25 percent and the ECB kept its equivalent unchanged at 4 percent.
Users became less certain 10-year Treasury yields will rise as the sentiment index fell to 65.26 from 66.72 in July. The yield on the benchmark 10-year note declined 9 basis points, or 0.09 percentage point, yesterday to 3.91 percent in New York, according to BGCantor Market Data.
Yields increased from this year's low of 3.28 percent on March 17 on speculation the combination of Fed rate cuts and rising commodity prices would spark inflation.
In Germany, the index measuring bund yields dropped to 53.85 from 60.83. Users in Japan cut their outlook for higher yields, as the index declined to 50.41 from 56.64.
U.K. users turned bullish on gilts, with the index falling to 48.93 from 53.83. Property values fell the most in at least a quarter of a century in July, HBOS Plc reported on Aug. 7.
Participants in Switzerland became less certain the Swiss National Bank will raise its benchmark rate from 2.75 percent. The index that measures expectations for short-term borrowing costs fell to 55.42 in August from 65.11.
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
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Canadian Dollar Depreciates Amid a Rally in the U.S. Currency
By Chris Fournier and Cordell Eddings
Aug. 13 (Bloomberg) -- Canada's dollar fell, trading near the lowest in almost a year, as the U.S. dollar strengthened against most major currencies.
The Canadian dollar has weakened in nine of the last 10 trading days as economic growth slows. The currency has declined 5.5 percent since July 11 when oil reached a record $147.27 a barrel. It traded at $113.62 today. Commodities account for about half of the nation's exports, while the U.S. is Canada's biggest trading partner.
``You don't need to look further than the U.S. dollar,'' said Mathew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto. ``We saw broad-based U.S. dollar strength overnight, putting pressure on the Canadian dollar.''
The currency fell 0.3 percent to C$1.0670 per U.S. dollar at 8:38 a.m. in Toronto, from $1.0637 yesterday. It touched as low as C$1.0728 yesterday, the weakest since Aug. 17, 2007. One Canadian dollar buys 93.69 U.S. cents.
The Canadian dollar weakened versus 13 of the 16 most- actively traded currencies.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net
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Aug. 13 (Bloomberg) -- Canada's dollar fell, trading near the lowest in almost a year, as the U.S. dollar strengthened against most major currencies.
The Canadian dollar has weakened in nine of the last 10 trading days as economic growth slows. The currency has declined 5.5 percent since July 11 when oil reached a record $147.27 a barrel. It traded at $113.62 today. Commodities account for about half of the nation's exports, while the U.S. is Canada's biggest trading partner.
``You don't need to look further than the U.S. dollar,'' said Mathew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto. ``We saw broad-based U.S. dollar strength overnight, putting pressure on the Canadian dollar.''
The currency fell 0.3 percent to C$1.0670 per U.S. dollar at 8:38 a.m. in Toronto, from $1.0637 yesterday. It touched as low as C$1.0728 yesterday, the weakest since Aug. 17, 2007. One Canadian dollar buys 93.69 U.S. cents.
The Canadian dollar weakened versus 13 of the 16 most- actively traded currencies.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net
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India to Import Record Vegetable Oil to Meet Demand, Group Says
By Thomas Kutty Abraham
Aug. 13 (Bloomberg) -- India, the world's biggest buyer of vegetable oils after China, may boost purchases to a record 6 million metric tons this year as domestic supplies lag demand.
Imports may total 600,000 tons a month in August to October period, compared with 565,124 tons in July, Mumbai-based Solvent Extractors' Association said in a statement today. Purchases were 5.6 million tons last year.
Prices of palm oil in Malaysia, the global benchmark, have tumbled 43 percent from a March record of 4,486 ringgit ($1,352) a ton. The slump may cut import costs for the South Asian nation that's battling the fastest inflation in 13 years.
``The recent decline in prices has come as a big relief to Indian consumers,'' said B.V. Mehta, executive director at the extractor's association. ``We have a big shortfall in domestic supplies and import remains the only option.''
India, which relies on purchases abroad to meet almost half its edible oil demand, in March scrapped the import tax on crude soybean and palm oils, and cut the levy on refined edible oil, to bolster domestic supplies. The government banned futures trading in soybean oils in May to rein in prices of the commodity.
Spiraling food prices have caused Prime Minister Manmohan Singh's Congress party to lose ground in nine of 11 state polls since January 2007. Singh faces elections in six more states this year and a general election by May 2009.
India's edible oil imports in July fell 3 percent to 532,456 tons from a year ago, while purchases in the nine months to July climbed 10 percent to 3.63 million tons, the association said.
New Crop
Vegetable oil imports, including hydrogenated fats, totaled 4.14 million tons between November and July, 9 percent more from a year earlier. Imports included 2.9 million tons of crude palm oil and 418,899 tons of crude soybean oil, the association said.
``Imports will slow only from November with the arrival of the local crop,'' Mehta said. ``The crop conditions have improved because of recent rains in Gujarat and Maharashtra.''
Farmers planted monsoon oilseeds, which make up more than 60 percent of India's production, to 15.6 million hectares, little changed from a year earlier, the farm ministry said last week.
India buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil.
To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.
Read more...
Aug. 13 (Bloomberg) -- India, the world's biggest buyer of vegetable oils after China, may boost purchases to a record 6 million metric tons this year as domestic supplies lag demand.
Imports may total 600,000 tons a month in August to October period, compared with 565,124 tons in July, Mumbai-based Solvent Extractors' Association said in a statement today. Purchases were 5.6 million tons last year.
Prices of palm oil in Malaysia, the global benchmark, have tumbled 43 percent from a March record of 4,486 ringgit ($1,352) a ton. The slump may cut import costs for the South Asian nation that's battling the fastest inflation in 13 years.
``The recent decline in prices has come as a big relief to Indian consumers,'' said B.V. Mehta, executive director at the extractor's association. ``We have a big shortfall in domestic supplies and import remains the only option.''
India, which relies on purchases abroad to meet almost half its edible oil demand, in March scrapped the import tax on crude soybean and palm oils, and cut the levy on refined edible oil, to bolster domestic supplies. The government banned futures trading in soybean oils in May to rein in prices of the commodity.
Spiraling food prices have caused Prime Minister Manmohan Singh's Congress party to lose ground in nine of 11 state polls since January 2007. Singh faces elections in six more states this year and a general election by May 2009.
India's edible oil imports in July fell 3 percent to 532,456 tons from a year ago, while purchases in the nine months to July climbed 10 percent to 3.63 million tons, the association said.
New Crop
Vegetable oil imports, including hydrogenated fats, totaled 4.14 million tons between November and July, 9 percent more from a year earlier. Imports included 2.9 million tons of crude palm oil and 418,899 tons of crude soybean oil, the association said.
``Imports will slow only from November with the arrival of the local crop,'' Mehta said. ``The crop conditions have improved because of recent rains in Gujarat and Maharashtra.''
Farmers planted monsoon oilseeds, which make up more than 60 percent of India's production, to 15.6 million hectares, little changed from a year earlier, the farm ministry said last week.
India buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil.
To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.
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U.S. June Motor Vehicle Travel Miles: Summary (Table)
By Alex Tanzi
Aug. 13 (Bloomberg) -- U.S. motorists drove less in June, according to the Department of Transportation.
Travel on all public roads fell 4.7 percent in June from the same month last year. Travel totaled 250.2 billion miles in June.
=============================================================================
June May April March Feb. Jan. June
2008 2008 2008 2008 2008 2008 2007
=============================================================================
-------------Billions of Traffic Miles-------------
Total 250.2 254.7 245.9 246.2 215.8 226.9 262.5
-----------------------------------------------------------------------------
Rural Interstate 21.3 22.0 20.5 20.7 17.4 18.4 22.8
Rural Other Arterial 33.0 33.5 31.3 31.4 27.3 28.2 35.1
Other Rural 32.3 32.4 31.4 30.5 26.1 27.8 34.2
Urban Interstate 40.6 41.0 39.6 39.6 34.8 36.8 42.1
Urban Other Arterial 86.8 88.8 87.1 88.1 78.2 81.8 90.9
Other Urban 36.1 36.9 36.1 35.9 32.1 33.8 37.4
=============================================================================
June May April March Feb. Jan. June
2008 2008 2008 2008 2008 2008 2007
=============================================================================
--------------------YoY% Change--------------------
Total -4.7% -3.6% -1.8% -4.3% -0.5% -1.6% -4.0%
-----------------------------------------------------------------------------
Rural Interstate -6.6% -3.9% -5.2% -2.6% -1.2% -2.1% -4.6%
Rural Other Arterial -6.0% -4.0% -2.9% -4.8% -0.3% -1.9% -4.0%
Other Rural -5.6% -4.7% -2.2% -6.4% -1.2% -2.1% -5.4%
Urban Interstate -3.6% -2.8% -1.1% -3.0% -0.6% -1.1% -3.6%
Urban Other Arterial -4.5% -3.4% -1.0% -4.4% -0.4% -1.8% -3.7%
Other Urban -3.5% -3.9% -1.1% -4.4% -85.2% -1.0% -3.4%
=============================================================================
NOTE: Totals in billions of miles. Total may not add due to rounding.
SOURCE: Department of Transportation
To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net
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Copper Climbs, Ending Biggest Selloff in Nine Months, on China
By Claudia Carpenter
Aug. 13 (Bloomberg) -- Copper climbed in London, ending the biggest selloff in nine months, on speculation Chinese growth will spur demand for the metal used in pipes and wires.
Copper for delivery in three months rose $105, or 1.5 percent, to $7,255 a metric ton as of 12:24 p.m. on the London Metal Exchange. Prices dropped 6.7 percent the previous three sessions, the most since the three days ended Nov. 21.
Commodities demand from China, the largest metals buyer, will rally in the next quarter, Goldman Sachs JBWere Pty said. Buyers in China bought copper in the past four or five months when it dipped below $7,800 a ton, said Max Layton, an analyst at Macquarie Bank Ltd. in London.
``We would expect consumer interest from China at these levels,'' Layton said.
The price of copper on the Shanghai Futures Exchange has fallen less than the LME price in the past month, possibly leading to more imports by China, according to Macquarie.
The metal's 14-day relative strength index held below 30 this week, a chart signal that prices may gain.
``There's a bit of a technical rebound,'' said Michael Widmer, an analyst in London at Lehman Brothers Holdings Ltd. ``What we need is that China continues to expand at a healthy rate.''
Nickel, the only metal on the LME that rose yesterday, dropped $19 to $18,081 a ton and lead fell another $55, or 3.2 percent, to $1,685 a ton on top of yesterday's 9.6 percent decline. Zinc advanced $28.20 to $1,643.20 a ton, aluminum added $3.50 to $2,775.50 a ton and tin climbed $50 to $17,550 a ton
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net
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Aug. 13 (Bloomberg) -- Copper climbed in London, ending the biggest selloff in nine months, on speculation Chinese growth will spur demand for the metal used in pipes and wires.
Copper for delivery in three months rose $105, or 1.5 percent, to $7,255 a metric ton as of 12:24 p.m. on the London Metal Exchange. Prices dropped 6.7 percent the previous three sessions, the most since the three days ended Nov. 21.
Commodities demand from China, the largest metals buyer, will rally in the next quarter, Goldman Sachs JBWere Pty said. Buyers in China bought copper in the past four or five months when it dipped below $7,800 a ton, said Max Layton, an analyst at Macquarie Bank Ltd. in London.
``We would expect consumer interest from China at these levels,'' Layton said.
The price of copper on the Shanghai Futures Exchange has fallen less than the LME price in the past month, possibly leading to more imports by China, according to Macquarie.
The metal's 14-day relative strength index held below 30 this week, a chart signal that prices may gain.
``There's a bit of a technical rebound,'' said Michael Widmer, an analyst in London at Lehman Brothers Holdings Ltd. ``What we need is that China continues to expand at a healthy rate.''
Nickel, the only metal on the LME that rose yesterday, dropped $19 to $18,081 a ton and lead fell another $55, or 3.2 percent, to $1,685 a ton on top of yesterday's 9.6 percent decline. Zinc advanced $28.20 to $1,643.20 a ton, aluminum added $3.50 to $2,775.50 a ton and tin climbed $50 to $17,550 a ton
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net
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Gold Rallies From Seven-Month Low on Jewelry, Investment Demand
By Chanyaporn Chanjaroen
Aug. 13 (Bloomberg) -- Gold rebounded in London as jewelry and investment demand revived after the price of the metal declined to a seven-month low. Platinum and silver also gained.
Gold for immediate delivery added $6.03, or 0.7 percent, to $818.35 an ounce as of 11:20 a.m. London time. It fell to $802.34 yesterday, the lowest since December as the dollar strengthened to the highest in 5 1/2 months. The metal has lost 21 percent from its March 17 record of $1,032.70 an ounce.
There has been ``a lot of demand'' for gold from jewelers and investors after prices fell close to $800, Afshin Nabavi, a senior vice president at MKS Finance SA in Geneva, said today by phone. ``That probably saved gold from collapsing.''
India, the world's biggest buyer of bullion, may increase imports for the first time in 11 months as jewelers rebuild inventories before the festival season starts this month, said Suresh Hundia, president of the Bombay Bullion Association Ltd. Imports fell by more than half in the 10 months ended July 31 from a year ago.
``Demand has been so much in the last couple of days that banks and other importers have run out of supplies,'' Hundia said yesterday in a phone interview in Mumbai, where the grouping of 230 trading companies is based. ``If the price keeps falling, there's no reason why people won't continue to buy.''
The worsening global economic outlook is likely to make gold a safe-haven asset for investors, Nabavi said. Estonia became the second European Union economy to enter a recession after Denmark. Japan's economy, the world's second-largest, contracted last quarter, bringing the country to the brink of its first recession in six years.
Buyers Deterred
Near record prices in the first half depressed global consumption of gold. Demand slid 19 percent in the second quarter to 735.6 metric tons from 905.7 tons a year earlier, the London- based World Gold Council said yesterday in a statement. Purchases for jewelry fell 24 percent and sales to India, the world's largest gold consumer and jewelry buyer, plunged 45 percent, the group said.
Bullion supply rose 1 percent from 797 tons to 802 tons, the council said. Central bank sales fell 43 percent to 88 tons and gold producers bought back 131 tons to eliminate hedge positions.
Pan American Silver Corp., the Vancouver-based company operating mines in the Americas and Russia, said today that second-quarter output rose 11 percent and forecast full-year production of 18.8 million ounces. Output will expand another 33 percent next year to 25 million ounces, it said in a statement.
Silver added 28.50 cents to $14.7850 an ounce.
Platinum increased $34, or 2.3 percent, to $1,511 an ounce and palladium advanced $7.25, or 2.3 percent, to $317.50.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
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Aug. 13 (Bloomberg) -- Gold rebounded in London as jewelry and investment demand revived after the price of the metal declined to a seven-month low. Platinum and silver also gained.
Gold for immediate delivery added $6.03, or 0.7 percent, to $818.35 an ounce as of 11:20 a.m. London time. It fell to $802.34 yesterday, the lowest since December as the dollar strengthened to the highest in 5 1/2 months. The metal has lost 21 percent from its March 17 record of $1,032.70 an ounce.
There has been ``a lot of demand'' for gold from jewelers and investors after prices fell close to $800, Afshin Nabavi, a senior vice president at MKS Finance SA in Geneva, said today by phone. ``That probably saved gold from collapsing.''
India, the world's biggest buyer of bullion, may increase imports for the first time in 11 months as jewelers rebuild inventories before the festival season starts this month, said Suresh Hundia, president of the Bombay Bullion Association Ltd. Imports fell by more than half in the 10 months ended July 31 from a year ago.
``Demand has been so much in the last couple of days that banks and other importers have run out of supplies,'' Hundia said yesterday in a phone interview in Mumbai, where the grouping of 230 trading companies is based. ``If the price keeps falling, there's no reason why people won't continue to buy.''
The worsening global economic outlook is likely to make gold a safe-haven asset for investors, Nabavi said. Estonia became the second European Union economy to enter a recession after Denmark. Japan's economy, the world's second-largest, contracted last quarter, bringing the country to the brink of its first recession in six years.
Buyers Deterred
Near record prices in the first half depressed global consumption of gold. Demand slid 19 percent in the second quarter to 735.6 metric tons from 905.7 tons a year earlier, the London- based World Gold Council said yesterday in a statement. Purchases for jewelry fell 24 percent and sales to India, the world's largest gold consumer and jewelry buyer, plunged 45 percent, the group said.
Bullion supply rose 1 percent from 797 tons to 802 tons, the council said. Central bank sales fell 43 percent to 88 tons and gold producers bought back 131 tons to eliminate hedge positions.
Pan American Silver Corp., the Vancouver-based company operating mines in the Americas and Russia, said today that second-quarter output rose 11 percent and forecast full-year production of 18.8 million ounces. Output will expand another 33 percent next year to 25 million ounces, it said in a statement.
Silver added 28.50 cents to $14.7850 an ounce.
Platinum increased $34, or 2.3 percent, to $1,511 an ounce and palladium advanced $7.25, or 2.3 percent, to $317.50.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
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Oil Rises for the First Day in Four Before U.S. Supply Report
By Grant Smith
Aug. 13 (Bloomberg) -- Crude oil rose for the first day in four before a report forecast to show that U.S. gasoline supplies fell for a third week.
The U.S. Energy Department will probably say in a report today that gasoline stockpiles fell 2.15 million barrels last week from 209.2 million barrels the week before, according to a Bloomberg survey.
``There's some short-covering taking place before this afternoon's inventory data,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``But the market is unrelentingly weak in the face of flagging demand, and I think Brent may test $110.50 again in due course.''
Crude oil for September rose as much as 99 cents, or 0.9 percent, to $114 a barrel, on the New York Mercantile Exchange, trading for $113.61 at 1:10 p.m. London time. Yesterday, futures declined $1.44, or 1.3 percent, to settle at $113.01 a barrel, the lowest close since May 1.
Oil has slipped 23 percent from a record $147.27 on July 11. Prices are still 58 percent higher than a year earlier.
Brent crude oil for September settlement was at $111.70 a barrel, up 55 cents, on London's ICE Futures Europe exchange at 1:12 p.m. London time. It dropped $1.52, or 1.4 percent, to settle at $111.15 a barrel yesterday, the lowest since May 1.
The Energy Department is scheduled to release its weekly report at 10:35 a.m. in Washington. Analysts are split over whether U.S. crude-oil inventories fell or rose last week because of the impact of Tropical Storm Edouard, according to a Bloomberg News survey.
Inventories of crude oil probably rose 300,000 barrels in the week ended Aug. 8 from 296.9 million the week before, according to the median of responses by 13 analysts.
``In the short-term, the focus will remain on weakening demand for oil and oil products in the U.S.,'' Barbara Lambrecht, an analyst at Commerzbank AG in Frankfurt. ``If crude inventories have increased more than envisaged, or gasoline stocks fallen less than predicted, a further retreat in oil prices could be triggered.''
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Aug. 13 (Bloomberg) -- Crude oil rose for the first day in four before a report forecast to show that U.S. gasoline supplies fell for a third week.
The U.S. Energy Department will probably say in a report today that gasoline stockpiles fell 2.15 million barrels last week from 209.2 million barrels the week before, according to a Bloomberg survey.
``There's some short-covering taking place before this afternoon's inventory data,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``But the market is unrelentingly weak in the face of flagging demand, and I think Brent may test $110.50 again in due course.''
Crude oil for September rose as much as 99 cents, or 0.9 percent, to $114 a barrel, on the New York Mercantile Exchange, trading for $113.61 at 1:10 p.m. London time. Yesterday, futures declined $1.44, or 1.3 percent, to settle at $113.01 a barrel, the lowest close since May 1.
Oil has slipped 23 percent from a record $147.27 on July 11. Prices are still 58 percent higher than a year earlier.
Brent crude oil for September settlement was at $111.70 a barrel, up 55 cents, on London's ICE Futures Europe exchange at 1:12 p.m. London time. It dropped $1.52, or 1.4 percent, to settle at $111.15 a barrel yesterday, the lowest since May 1.
The Energy Department is scheduled to release its weekly report at 10:35 a.m. in Washington. Analysts are split over whether U.S. crude-oil inventories fell or rose last week because of the impact of Tropical Storm Edouard, according to a Bloomberg News survey.
Inventories of crude oil probably rose 300,000 barrels in the week ended Aug. 8 from 296.9 million the week before, according to the median of responses by 13 analysts.
``In the short-term, the focus will remain on weakening demand for oil and oil products in the U.S.,'' Barbara Lambrecht, an analyst at Commerzbank AG in Frankfurt. ``If crude inventories have increased more than envisaged, or gasoline stocks fallen less than predicted, a further retreat in oil prices could be triggered.''
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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Yen Rises to 12-Week High Against Euro as Carry Trades Pared
By Ye Xie and Anchalee Worrachate
Aug. 13 (Bloomberg) -- The yen rose to a 12-week high against the euro and its strongest in two months versus the British pound as Japanese investors cut bets on higher-yielding assets abroad.
Investors pared so-called carry trades on concern the global economy is slowing after a report showed Japan's economy contracted last quarter. The yen climbed to a two-year high against New Zealand's dollar and the strongest in four months versus Australia's as prices of commodities the nations export extended declines.
``The yen is being driven higher by liquidation of carry trades,'' said Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets. ``We are still in a risk- aversion type environment. Also, it's a seasonal story. Japanese investors tend to stop buying foreign currencies at this time of the year, which is a holiday season.''
The yen, which gained against all 16 major currencies tracked by Bloomberg, rose 0.9 percent to 161.62 per euro, the strongest since May 21, before trading at 162.07 at 9 a.m. in New York, compared with 163.11 yesterday. Against the dollar, the yen climbed 0.6 percent to 108.61, from 109.27. The U.S. currency was at $1.4928 per euro, compared with $1.4926 yesterday, when it reached a 5 1/2-month high of $1.4816.
Japan's economy, the world's largest after the U.S., shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The U.S. economy contracted in the fourth quarter of last year, official figures show.
Weaker Pound
The pound extended losses after the Bank of England slashed its economic-growth forecast and said inflation will peak in the third quarter. The British currency fell to $1.8744, the lowest since October 2006, before trading at $1.8752, and to 79.28 pence per euro, from 78.69. Against the yen, it traded at 204.30, from 207.28.
In carry trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher. The Bank of Japan's target lending rate is 0.5 percent, the lowest among major economies. Benchmark rates are 4.25 percent in Europe, 7.25 percent in Australia and 8 percent in New Zealand.
Japan's currency advanced to 95.01 per Australian dollar from 96.29, after earlier reaching 93.15, the highest level since April 14. It also rose to 76.07 versus the New Zealand dollar from 75.20, climbing as high as 73.98, the strongest since Aug. 25, 2006.
Japanese Investors
Japanese individual investors have reduced their holdings of the Australian and New Zealand dollars against the yen, Tokyo Financial Exchange data show. So-called net-long positions, speculating on a gain in the Aussie, fell to 89,663 contracts yesterday from 89,908 on Aug. 11, while there were 182,006 similar contracts on the kiwi, down from 187,293. The contracts are denominated in 10,000 units of the foreign currency.
The yen may rise to 160 per euro in the next few weeks, said Masafumi Yamamoto, Tokyo-based head of foreign-exchange strategy for Japan at Royal Bank of Scotland Plc and a former Bank of Japan currency trader.
Crude oil traded at $113.35 a barrel after falling yesterday to a 14-week low of $112.31. Gold fell for an eighth straight session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are Australia's third and fourth most-valuable commodity exports.
UBS AG, the world's second-largest currency trader, raised its dollar forecasts on speculation economic expansion outside the U.S. will slow, prompting interest-rate cuts by central banks.
Dollar `to Firm'
``As growth and rate expectations outside the U.S. continue to worsen, we believe the dollar will continue to firm,'' UBS currency strategists led by Zurich-based Mansoor Mohi-uddin wrote in a research note yesterday.
The dollar may trade at $1.51 per euro in one month and $1.47 in three months, compared with previous forecasts of $1.60 and $1.53, the strategists wrote. The greenback also may buy 110 yen in one month and 111 yen in three months, versus an earlier estimate of 105 yen for both periods, they said.
Sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
The 0.1 percent decrease matched the median forecast and followed a 0.3 percent gain the prior month that was larger than previously reported, the Commerce Department said today in Washington.
Fed's Fisher
Federal Reserve Bank of Dallas President Richard Fisher said the economy will ``broach zero growth'' in the second half of the year, the Dallas Morning News reported yesterday. U.S. gross domestic product rose at an annual rate of 1.9 percent in the second quarter, the Commerce Department said July 31. It fell 0.2 percent in the final three months of last year.
The euro's decline may accelerate on speculation gross domestic product in the 15 countries that share the currency is contracting.
Europe's economy shrank 0.2 percent in the second quarter, following 0.7 percent growth in the previous three months, according to a Bloomberg News survey. The European Union's statistics office in Luxembourg will release the data tomorrow.
The euro's 4.2 percent decline against the U.S. currency since last week may be excessive, Merrill Lynch & Co. said.
``We expected the euro to moderate versus the dollar, but present moves are perhaps extended a step too far in the near term,'' a team of strategists led by New York-based Daniel Tenengauzer wrote in a report.
Merrill said it's holding on to its view that the dollar will strengthen to $1.40 per euro, though not before the first half of 2009.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net;
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Aug. 13 (Bloomberg) -- The yen rose to a 12-week high against the euro and its strongest in two months versus the British pound as Japanese investors cut bets on higher-yielding assets abroad.
Investors pared so-called carry trades on concern the global economy is slowing after a report showed Japan's economy contracted last quarter. The yen climbed to a two-year high against New Zealand's dollar and the strongest in four months versus Australia's as prices of commodities the nations export extended declines.
``The yen is being driven higher by liquidation of carry trades,'' said Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets. ``We are still in a risk- aversion type environment. Also, it's a seasonal story. Japanese investors tend to stop buying foreign currencies at this time of the year, which is a holiday season.''
The yen, which gained against all 16 major currencies tracked by Bloomberg, rose 0.9 percent to 161.62 per euro, the strongest since May 21, before trading at 162.07 at 9 a.m. in New York, compared with 163.11 yesterday. Against the dollar, the yen climbed 0.6 percent to 108.61, from 109.27. The U.S. currency was at $1.4928 per euro, compared with $1.4926 yesterday, when it reached a 5 1/2-month high of $1.4816.
Japan's economy, the world's largest after the U.S., shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The U.S. economy contracted in the fourth quarter of last year, official figures show.
Weaker Pound
The pound extended losses after the Bank of England slashed its economic-growth forecast and said inflation will peak in the third quarter. The British currency fell to $1.8744, the lowest since October 2006, before trading at $1.8752, and to 79.28 pence per euro, from 78.69. Against the yen, it traded at 204.30, from 207.28.
In carry trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher. The Bank of Japan's target lending rate is 0.5 percent, the lowest among major economies. Benchmark rates are 4.25 percent in Europe, 7.25 percent in Australia and 8 percent in New Zealand.
Japan's currency advanced to 95.01 per Australian dollar from 96.29, after earlier reaching 93.15, the highest level since April 14. It also rose to 76.07 versus the New Zealand dollar from 75.20, climbing as high as 73.98, the strongest since Aug. 25, 2006.
Japanese Investors
Japanese individual investors have reduced their holdings of the Australian and New Zealand dollars against the yen, Tokyo Financial Exchange data show. So-called net-long positions, speculating on a gain in the Aussie, fell to 89,663 contracts yesterday from 89,908 on Aug. 11, while there were 182,006 similar contracts on the kiwi, down from 187,293. The contracts are denominated in 10,000 units of the foreign currency.
The yen may rise to 160 per euro in the next few weeks, said Masafumi Yamamoto, Tokyo-based head of foreign-exchange strategy for Japan at Royal Bank of Scotland Plc and a former Bank of Japan currency trader.
Crude oil traded at $113.35 a barrel after falling yesterday to a 14-week low of $112.31. Gold fell for an eighth straight session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are Australia's third and fourth most-valuable commodity exports.
UBS AG, the world's second-largest currency trader, raised its dollar forecasts on speculation economic expansion outside the U.S. will slow, prompting interest-rate cuts by central banks.
Dollar `to Firm'
``As growth and rate expectations outside the U.S. continue to worsen, we believe the dollar will continue to firm,'' UBS currency strategists led by Zurich-based Mansoor Mohi-uddin wrote in a research note yesterday.
The dollar may trade at $1.51 per euro in one month and $1.47 in three months, compared with previous forecasts of $1.60 and $1.53, the strategists wrote. The greenback also may buy 110 yen in one month and 111 yen in three months, versus an earlier estimate of 105 yen for both periods, they said.
Sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.
The 0.1 percent decrease matched the median forecast and followed a 0.3 percent gain the prior month that was larger than previously reported, the Commerce Department said today in Washington.
Fed's Fisher
Federal Reserve Bank of Dallas President Richard Fisher said the economy will ``broach zero growth'' in the second half of the year, the Dallas Morning News reported yesterday. U.S. gross domestic product rose at an annual rate of 1.9 percent in the second quarter, the Commerce Department said July 31. It fell 0.2 percent in the final three months of last year.
The euro's decline may accelerate on speculation gross domestic product in the 15 countries that share the currency is contracting.
Europe's economy shrank 0.2 percent in the second quarter, following 0.7 percent growth in the previous three months, according to a Bloomberg News survey. The European Union's statistics office in Luxembourg will release the data tomorrow.
The euro's 4.2 percent decline against the U.S. currency since last week may be excessive, Merrill Lynch & Co. said.
``We expected the euro to moderate versus the dollar, but present moves are perhaps extended a step too far in the near term,'' a team of strategists led by New York-based Daniel Tenengauzer wrote in a report.
Merrill said it's holding on to its view that the dollar will strengthen to $1.40 per euro, though not before the first half of 2009.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net;
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Sugar Rises in London on Smaller Crop Forecasts for Next Year
By Rachel Graham
Aug. 13 (Bloomberg) -- Sugar rose for a second day in London on forecasts for smaller harvests next year from India to the Philippines that will help reduce a global surplus. Cocoa gained and coffee declined.
Global sugar production in the year to September 2009 is expected to exceed demand by less than 1 million metric tons, down from a projected 9.2 million-ton surplus this season, according to Barclays Capital in London.
``The whole market is looking a long way forward,'' James Kirkup, a sugar broker at Fortis Bank, said by phone from London today. ``It's glossing over some of the short-term problems, like a sugar surplus.''
White, or refined, sugar for October delivery gained $2.60, or 0.7 percent, to $391.10 a ton on the Liffe exchange as of 12 p.m. in London. Raw sugar for October delivery gained 6 cents, or 0.4 percent, to 13.67 cents a pound in New York.
Sugar output in India, the world's biggest producer after Brazil, may total 21.7 million tons next year compared with 26.3 million estimated this year, Prakash Naiknavare, managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd., said yesterday.
Sugar exports from the Philippines, Southeast Asia's second-biggest exporter after Thailand, may drop 40 percent next year as production falls on lower fertilizer use, according to Sugar Regulatory Administrator Rafael Coscolluela.
Overseas sales, including those to the U.S., may fall to about 207,000 tons, Coscolluela said in an interview. Exports from the Philippines, which consumes about 1.95 million tons a year, may reach 345,000 tons in 2008, the highest since 1985.
Philippine sugar output may drop to 2.2 million tons in 2009 from an estimated 2.45 million tons this year, Coscolluela said.
Among other agricultural commodities traded in London, cocoa for September delivery gained 4 pounds, or 0.3 percent, to 1,477 ($2,768) pounds a ton and robusta coffee for September fell $17 to $2,257 a ton.
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net.
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Aug. 13 (Bloomberg) -- Sugar rose for a second day in London on forecasts for smaller harvests next year from India to the Philippines that will help reduce a global surplus. Cocoa gained and coffee declined.
Global sugar production in the year to September 2009 is expected to exceed demand by less than 1 million metric tons, down from a projected 9.2 million-ton surplus this season, according to Barclays Capital in London.
``The whole market is looking a long way forward,'' James Kirkup, a sugar broker at Fortis Bank, said by phone from London today. ``It's glossing over some of the short-term problems, like a sugar surplus.''
White, or refined, sugar for October delivery gained $2.60, or 0.7 percent, to $391.10 a ton on the Liffe exchange as of 12 p.m. in London. Raw sugar for October delivery gained 6 cents, or 0.4 percent, to 13.67 cents a pound in New York.
Sugar output in India, the world's biggest producer after Brazil, may total 21.7 million tons next year compared with 26.3 million estimated this year, Prakash Naiknavare, managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd., said yesterday.
Sugar exports from the Philippines, Southeast Asia's second-biggest exporter after Thailand, may drop 40 percent next year as production falls on lower fertilizer use, according to Sugar Regulatory Administrator Rafael Coscolluela.
Overseas sales, including those to the U.S., may fall to about 207,000 tons, Coscolluela said in an interview. Exports from the Philippines, which consumes about 1.95 million tons a year, may reach 345,000 tons in 2008, the highest since 1985.
Philippine sugar output may drop to 2.2 million tons in 2009 from an estimated 2.45 million tons this year, Coscolluela said.
Among other agricultural commodities traded in London, cocoa for September delivery gained 4 pounds, or 0.3 percent, to 1,477 ($2,768) pounds a ton and robusta coffee for September fell $17 to $2,257 a ton.
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net.
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Stocks in Europe, Asia Drop, Led by Banks; U.S. Futures Fall
By Adria Cimino
Aug. 13 (Bloomberg) -- Stocks in Europe and Asia declined for a second day as concern deepened that banks will report more losses and the economic slowdown will drag down earnings. U.S. index futures dropped after Deere & Co.'s profit trailed analysts' estimates.
Hypo Real Estate Holding AG, Germany's second-biggest commercial-property lender, fell 4.1 percent after profit tumbled 95 percent on writedowns. UBS AG, under investigation in a U.S. probe of tax evasion, slid 5.6 percent after saying it examined complaints by former banker Bradley Birkenfeld about working practices at the bank's cross-border business in 2006. Mitsui Fudosan Co. dropped 3.5 percent, leading developers lower in Tokyo as Japan's economy contracted. Deere, the largest maker of farm equipment, declined 8.4 percent.
The MSCI World Index lost 0.8 percent to 1,345.64 at 1:25 p.m. in London as nine of the 10 industry groups fell. Japan's Nikkei 225 Stock Average tumbled 2.1 percent after the nation's economy shrank for the first time in a year.
Banks ``still have a way to go with writedowns,'' Philippe Gijsels, Brussels-based senior equity strategist at Fortis Global Markets with $62 billion under management, said in a Bloomberg Television interview. ``The economic slowdown worldwide will impact banks' earnings.''
Europe's Dow Jones Stoxx 600 Index slid 1.7 percent. DSG International Plc fell the most in seven months in London as JPMorgan Chase & Co. recommended selling the retailer's shares, while OC Oerlikon Corp. dropped after cutting its forecast.
The MSCI Asia Pacific Index decreased 1.3 percent, Telstra Corp., Australia's biggest phone company, sinking the most since March as earnings missed estimates. Futures on the Standard & Poor's 500 Index fell 0.24 percent.
Cutting Forecast
A report today showed U.K. unemployment rose the most in almost 16 years in July as the deepening slowdown pushed companies to cut jobs. The Bank of England lowered its growth forecast for the economy to about 0.1 percent on a year-on-year basis in the first quarter of 2009, down from 1 percent earlier.
``Worries linked to the credit crisis are justified,'' said Oumkaltoum El Ouarti, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion. ``Provisions may increase in the second half.''
U.S. stocks pulled ahead of Brazil, Russia, India and China this week for the first time in 2008, spurred by the Federal Reserve's efforts to cut borrowing costs even as the biggest developing countries are raising theirs, Bloomberg data show.
Less Pessimistic
The S&P 500's 12 percent decline this year is the second- best performance among benchmark indexes in the world's 20 biggest equity markets, according to Bloomberg data. The gauge has rallied 6.2 percent from an almost three-year low last month as crude prices sank 23 percent from a record.
Stock investors from Mexico City to Madrid are growing less pessimistic, a survey of Bloomberg users showed.
While most investors expect benchmark indexes to decline, fewer predict losses than in July for the S&P 500, the FTSE 100 Index, France's CAC 40 Index, Italy's S&P/MIB Index, the Swiss Market Index, Germany's DAX Index, Spain's IBEX 35 Index and Mexico's Bolsa, according to the Bloomberg Professional Global Confidence Survey. The survey was conducted last week among 2,229 users.
Russia's RTS stock index is the world's worst performer this quarter among the 20 largest markets as lower oil, the war in Georgia and the probe of steel company OAO Mechel raised concern that investing in the former Communist nation can be perilous. Stocks rallied yesterday after President Dmitry Medvedev halted the invasion of Georgia.
$202 Million Loss
Hypo Real Estate fell 4.1 percent to 17.89 euros. The lender said second-quarter pretax profit plunged 95 percent because of writedowns on debt-related investments.
The company said market conditions are ``still uncertain.'' It reported an investment loss of 135 million euros ($202 million) in the quarter, higher than the 46 million euros in a Bloomberg survey of analysts.
UBS, the European bank hardest hit by the subprime contagion, slid 5.6 percent to 21.36 francs.
Chairman Peter Kurer, who was general counsel of the world's largest wealth manager at the time, in a May 2006 letter to Birkenfeld confirmed that an internal investigation of his complaints had been completed, UBS spokesman Serge Steiner said in a telephone interview today. Birkenfeld in June pleaded guilty to helping a billionaire UBS customer evade U.S. taxes.
UBS is being investigated in the U.S. over whether it helped clients dodge American taxes.
$12 Trillion Erased
More than $12 trillion has been erased from global equity markets this year as credit-related losses topping $500 billion and accelerating inflation threaten economic and profit growth.
``As long as the financial crisis is omnipresent, the market will remain fragile,'' said Catherine Huguel, who oversees $239 million as managing director of Hugau Gestion in Paris. ``The crisis is far from over.''
Writedowns and losses have made banks the worst performers worldwide this year and led analysts to cut profit estimates.
Earnings for financial firms in the Stoxx 600 will drop 25 percent this year, more than 10-fold the projected declined for all companies in the measure, according to analysts' estimates compiled by Bloomberg. Analysts predicted profit for the group to fall 3.9 percent at the start of the year.
Europe's Stoxx 600 Banks Index has lost 29 percent this year, the biggest drop among the 18 groups in the broader index.
Mitsui Fudosan, Japan's No. 1 developer, fell 3.5 percent to 2,315 yen. Japan's economy contracted 0.6 percent last quarter, the government said today, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less. The GDP report also showed housing investment dropped 3.4 percent last quarter, compared with expectations for an increase.
Telstra, Deere
Telstra lost 4 percent to A$4.32. Profit rose 13 percent in the six months ended June 30 to A$1.77 billion ($1.5 billion), less than the median estimate in a Bloomberg survey. Its forecast for an 8 percent increase in earnings before interest and taxes this year trailed estimates compiled by Bloomberg.
Deere retreated $5.86 to $63.49 in early New York trading. Third-quarter profit was $1.32 a share, missing the $1.37 average of 17 analyst estimates compiled by Bloomberg.
DSG, the largest consumer-electronics retailer, tumbled 13 percent to 53.5 pence, after subtracting for the effect of its dividend payout.
The ability for the company to improve its finances with asset sales is ``misplaced'' and the economic environment in all of the company's main markets continues to deteriorate, JPMorgan said today, downgrading the stock to ``underweight'' from ``neutral.''
Oerlikon fell 7.2 percent to 258.5 francs after the world's biggest maker of spinning machines for textiles cut its profit forecast for 2008. Oerlikon predicted a 33 percent drop in operating profit, and will book 350 million Swiss francs ($322 million) in writedowns from three units.
Tandberg ASA jumped 18 percent to 115.25 kroner. The Norwegian maker of video-conferencing equipment said it received an approach from a private-equity company and started ``preliminary discussions'' about a possible bid.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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Aug. 13 (Bloomberg) -- Stocks in Europe and Asia declined for a second day as concern deepened that banks will report more losses and the economic slowdown will drag down earnings. U.S. index futures dropped after Deere & Co.'s profit trailed analysts' estimates.
Hypo Real Estate Holding AG, Germany's second-biggest commercial-property lender, fell 4.1 percent after profit tumbled 95 percent on writedowns. UBS AG, under investigation in a U.S. probe of tax evasion, slid 5.6 percent after saying it examined complaints by former banker Bradley Birkenfeld about working practices at the bank's cross-border business in 2006. Mitsui Fudosan Co. dropped 3.5 percent, leading developers lower in Tokyo as Japan's economy contracted. Deere, the largest maker of farm equipment, declined 8.4 percent.
The MSCI World Index lost 0.8 percent to 1,345.64 at 1:25 p.m. in London as nine of the 10 industry groups fell. Japan's Nikkei 225 Stock Average tumbled 2.1 percent after the nation's economy shrank for the first time in a year.
Banks ``still have a way to go with writedowns,'' Philippe Gijsels, Brussels-based senior equity strategist at Fortis Global Markets with $62 billion under management, said in a Bloomberg Television interview. ``The economic slowdown worldwide will impact banks' earnings.''
Europe's Dow Jones Stoxx 600 Index slid 1.7 percent. DSG International Plc fell the most in seven months in London as JPMorgan Chase & Co. recommended selling the retailer's shares, while OC Oerlikon Corp. dropped after cutting its forecast.
The MSCI Asia Pacific Index decreased 1.3 percent, Telstra Corp., Australia's biggest phone company, sinking the most since March as earnings missed estimates. Futures on the Standard & Poor's 500 Index fell 0.24 percent.
Cutting Forecast
A report today showed U.K. unemployment rose the most in almost 16 years in July as the deepening slowdown pushed companies to cut jobs. The Bank of England lowered its growth forecast for the economy to about 0.1 percent on a year-on-year basis in the first quarter of 2009, down from 1 percent earlier.
``Worries linked to the credit crisis are justified,'' said Oumkaltoum El Ouarti, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion. ``Provisions may increase in the second half.''
U.S. stocks pulled ahead of Brazil, Russia, India and China this week for the first time in 2008, spurred by the Federal Reserve's efforts to cut borrowing costs even as the biggest developing countries are raising theirs, Bloomberg data show.
Less Pessimistic
The S&P 500's 12 percent decline this year is the second- best performance among benchmark indexes in the world's 20 biggest equity markets, according to Bloomberg data. The gauge has rallied 6.2 percent from an almost three-year low last month as crude prices sank 23 percent from a record.
Stock investors from Mexico City to Madrid are growing less pessimistic, a survey of Bloomberg users showed.
While most investors expect benchmark indexes to decline, fewer predict losses than in July for the S&P 500, the FTSE 100 Index, France's CAC 40 Index, Italy's S&P/MIB Index, the Swiss Market Index, Germany's DAX Index, Spain's IBEX 35 Index and Mexico's Bolsa, according to the Bloomberg Professional Global Confidence Survey. The survey was conducted last week among 2,229 users.
Russia's RTS stock index is the world's worst performer this quarter among the 20 largest markets as lower oil, the war in Georgia and the probe of steel company OAO Mechel raised concern that investing in the former Communist nation can be perilous. Stocks rallied yesterday after President Dmitry Medvedev halted the invasion of Georgia.
$202 Million Loss
Hypo Real Estate fell 4.1 percent to 17.89 euros. The lender said second-quarter pretax profit plunged 95 percent because of writedowns on debt-related investments.
The company said market conditions are ``still uncertain.'' It reported an investment loss of 135 million euros ($202 million) in the quarter, higher than the 46 million euros in a Bloomberg survey of analysts.
UBS, the European bank hardest hit by the subprime contagion, slid 5.6 percent to 21.36 francs.
Chairman Peter Kurer, who was general counsel of the world's largest wealth manager at the time, in a May 2006 letter to Birkenfeld confirmed that an internal investigation of his complaints had been completed, UBS spokesman Serge Steiner said in a telephone interview today. Birkenfeld in June pleaded guilty to helping a billionaire UBS customer evade U.S. taxes.
UBS is being investigated in the U.S. over whether it helped clients dodge American taxes.
$12 Trillion Erased
More than $12 trillion has been erased from global equity markets this year as credit-related losses topping $500 billion and accelerating inflation threaten economic and profit growth.
``As long as the financial crisis is omnipresent, the market will remain fragile,'' said Catherine Huguel, who oversees $239 million as managing director of Hugau Gestion in Paris. ``The crisis is far from over.''
Writedowns and losses have made banks the worst performers worldwide this year and led analysts to cut profit estimates.
Earnings for financial firms in the Stoxx 600 will drop 25 percent this year, more than 10-fold the projected declined for all companies in the measure, according to analysts' estimates compiled by Bloomberg. Analysts predicted profit for the group to fall 3.9 percent at the start of the year.
Europe's Stoxx 600 Banks Index has lost 29 percent this year, the biggest drop among the 18 groups in the broader index.
Mitsui Fudosan, Japan's No. 1 developer, fell 3.5 percent to 2,315 yen. Japan's economy contracted 0.6 percent last quarter, the government said today, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less. The GDP report also showed housing investment dropped 3.4 percent last quarter, compared with expectations for an increase.
Telstra, Deere
Telstra lost 4 percent to A$4.32. Profit rose 13 percent in the six months ended June 30 to A$1.77 billion ($1.5 billion), less than the median estimate in a Bloomberg survey. Its forecast for an 8 percent increase in earnings before interest and taxes this year trailed estimates compiled by Bloomberg.
Deere retreated $5.86 to $63.49 in early New York trading. Third-quarter profit was $1.32 a share, missing the $1.37 average of 17 analyst estimates compiled by Bloomberg.
DSG, the largest consumer-electronics retailer, tumbled 13 percent to 53.5 pence, after subtracting for the effect of its dividend payout.
The ability for the company to improve its finances with asset sales is ``misplaced'' and the economic environment in all of the company's main markets continues to deteriorate, JPMorgan said today, downgrading the stock to ``underweight'' from ``neutral.''
Oerlikon fell 7.2 percent to 258.5 francs after the world's biggest maker of spinning machines for textiles cut its profit forecast for 2008. Oerlikon predicted a 33 percent drop in operating profit, and will book 350 million Swiss francs ($322 million) in writedowns from three units.
Tandberg ASA jumped 18 percent to 115.25 kroner. The Norwegian maker of video-conferencing equipment said it received an approach from a private-equity company and started ``preliminary discussions'' about a possible bid.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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Optimism on U.S. Stocks at 6-year High, Merrill Survey Shows
By Sarah Jones
Aug. 13 (Bloomberg) -- Optimism on U.S. equities jumped this month to the highest in six years on the outlook for earnings and as a record number of investors said the nation's currency was undervalued, a Merrill Lynch & Co. survey showed.
Even so, money managers, who together oversee $611 billion, grew more pessimistic on global growth as almost one in four said the world economy is now in a recession, reducing concern about inflation to the lowest since 2001.
``People believe that the credit crunch is no longer just U.S.-centric,'' said David Bowers, a consultant to Merrill, at a press briefing in London. ``There is a belief that the U.S. has already discounted a lot of the bearish news and is now starting to look attractive.''
The Standard & Poor's 500 Index has tumbled 12 percent so far this year, outperforming Asia and Europe, spurred by the Federal Reserve's efforts to cut borrowing costs. The MSCI Asia Pacific Index and Europe's Dow Jones Stoxx 600 Index have both lost more than 20 percent, as oil surged past $147 a barrel and global credit losses at banks topped $500 billion.
A net 12 percent of the respondents surveyed in August said they were now ``overweight'' U.S. equities, the highest reading since 2002. That compares with 7 percent in July, the survey showed. An ``overweight'' position means investors should hold more stocks than represented in benchmarks.
The outlook for corporate profits was ``most favorable'' in emerging markets, followed by the U.S., the survey showed. A net 31 percent of respondents said earnings in developing countries were most favorable. Eighteen percent picked the U.S.
`Better Placed'
``There is a strongly held view that U.S. assets are relatively better placed,'' said Bowers. ``The U.S. is moving into positive territory.''
More than half of investors said the U.S. dollar was undervalued, while a net 53 percent expect the currency to appreciate over the next 12 months.
U.K. equities remained the least-preferred market among the five regions, followed by Europe and Japan. A net 35 percent of respondents were underweight the U.K., while 27 percent were underweight European stocks.
The percentage of those believing the global economy is currently in a recession climbed in August to 24 percent, up from 20 percent the previous month. More than half believe the global economy will slow in the next 12 months.
The deterioration in economic growth also prompted investors to reduce the outlook for rising costs. A net 18 percent said global core inflation will fall in 12 months, a level not seen since 2001. That compares with 3 percent last month who expected inflation to rise and 33 percent in June.
``Inflation is yesterday's story,'' said Karen Olney, the London-based head of European equity strategy at Merrill.
The survey was conducted between Aug. 1 and Aug. 7.
Bowers, joint managing director at Absolute Strategy Research Ltd. in London, continues to produce the study after leaving Merrill. He had been chief global strategist at the brokerage.
To contact the reporter for this story: Sarah Jones in London at sjones35@bloomberg.net.
Read more...
Aug. 13 (Bloomberg) -- Optimism on U.S. equities jumped this month to the highest in six years on the outlook for earnings and as a record number of investors said the nation's currency was undervalued, a Merrill Lynch & Co. survey showed.
Even so, money managers, who together oversee $611 billion, grew more pessimistic on global growth as almost one in four said the world economy is now in a recession, reducing concern about inflation to the lowest since 2001.
``People believe that the credit crunch is no longer just U.S.-centric,'' said David Bowers, a consultant to Merrill, at a press briefing in London. ``There is a belief that the U.S. has already discounted a lot of the bearish news and is now starting to look attractive.''
The Standard & Poor's 500 Index has tumbled 12 percent so far this year, outperforming Asia and Europe, spurred by the Federal Reserve's efforts to cut borrowing costs. The MSCI Asia Pacific Index and Europe's Dow Jones Stoxx 600 Index have both lost more than 20 percent, as oil surged past $147 a barrel and global credit losses at banks topped $500 billion.
A net 12 percent of the respondents surveyed in August said they were now ``overweight'' U.S. equities, the highest reading since 2002. That compares with 7 percent in July, the survey showed. An ``overweight'' position means investors should hold more stocks than represented in benchmarks.
The outlook for corporate profits was ``most favorable'' in emerging markets, followed by the U.S., the survey showed. A net 31 percent of respondents said earnings in developing countries were most favorable. Eighteen percent picked the U.S.
`Better Placed'
``There is a strongly held view that U.S. assets are relatively better placed,'' said Bowers. ``The U.S. is moving into positive territory.''
More than half of investors said the U.S. dollar was undervalued, while a net 53 percent expect the currency to appreciate over the next 12 months.
U.K. equities remained the least-preferred market among the five regions, followed by Europe and Japan. A net 35 percent of respondents were underweight the U.K., while 27 percent were underweight European stocks.
The percentage of those believing the global economy is currently in a recession climbed in August to 24 percent, up from 20 percent the previous month. More than half believe the global economy will slow in the next 12 months.
The deterioration in economic growth also prompted investors to reduce the outlook for rising costs. A net 18 percent said global core inflation will fall in 12 months, a level not seen since 2001. That compares with 3 percent last month who expected inflation to rise and 33 percent in June.
``Inflation is yesterday's story,'' said Karen Olney, the London-based head of European equity strategy at Merrill.
The survey was conducted between Aug. 1 and Aug. 7.
Bowers, joint managing director at Absolute Strategy Research Ltd. in London, continues to produce the study after leaving Merrill. He had been chief global strategist at the brokerage.
To contact the reporter for this story: Sarah Jones in London at sjones35@bloomberg.net.
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