Daily Forex Fundamentals | Written by GCI Financial | Sep 01 08 14:49 GMT |
€
The euro weakened vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4595 level and was capped around the $1.4720 level. Technically, today's intraday high was right around the 76.4% retracement of the move from $1.4315 to $1.6040. The common currency moved lower after hurricane Gustav weakened in strength as it approaches the Gulf of Mexico, resulting in a pullback in crude oil prices to the $112 handle. There has been a strong positive correlation between the euro and the price of oil over the last several weeks. Data released in the eurozone today saw German July retail sales fall 1.5% m/m and was unchanged y/y. Also, EMU-15 manufacturing activity contracted for the third consecutive month in August, improving to 47.6 from 47.4 in July but still below the 50 level that denotes growth in the sector. European Central Bank policymakers convene Thursday and are expected to keep interest rates unchanged. Liquidity is expected to be light during the North American session on account of the U.S. Labour Day holiday. Euro bids are cited around the US$ 1.4315 level.
¥/ CNY
The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the ¥107.60 level and was capped around the ¥108.65 level. The pair traded at its lowest level since 4 August as long positions built-up from the ¥103 handle in mid-July continue to unwind. Prime Minister Fukuda resigned overnight and will likely step down in the coming months. Early speculation suggests that Foreign Minister Taro Aso could assume the top position. An election was due by late 2009 but today's announcement suggests there could be a change in leadership before the end of the year. The Nikkei 225 stock index lost 1.83% to close at ¥12,834.18. Dollar bids are cited around the ¥106.40 level. The euro came off vis-Ã -vis the yen as the single currency tested bids around the ¥157.55 level and was capped around the ¥159.60 level. The British pound and Swiss franc moved lower vis-Ã -vis the yen as the crosses tested bids around the ¥194.15 and ¥97.95 levels, respectively. The Chinese yuan appreciated vis-Ã -vis the U.S. dollar as the greenback closed at CNY 6.8256 in the over-the-counter market, down from CNY 6.8350. Data released in China overnight saw the CFLP August manufacturing PMI survey remain unchanged at 48.4 while the CLSA August manufacturing PMI survey fell to 49.2.
₤
The British pound fell sharply vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.7990 level and was capped around the $1.8150 level. Technically, today's intraday low was just below the 76.4% retracement of the move from $1.7045 to $2.1160. Sterling continued its move lower after U.K. economic data were released that continued to evidence a weakening economy. Chancellor of the Exchequer Darling reported the U.K.'s economic difficulties are the worst the country has encountered in 60 years. Data released in the U.K. today saw Bank of England July mortgage approvals sink to 33,000, the lowest reading since April 1993. Also, the U.K. August CIPS manufacturing survey climbed to 45.9 from 44.1 in July but remained in a contractionary reading below the "boom-or-bust" 50.0 level. These data suggest the U.K. economy will recede in Q3. Bank of England's Monetary Policy Committee meets on Wednesday and Thursday to deliberate interest rates and is unlikely to change rates at this time on account of elevated inflation pressures. Many traders, however, believe the MPC will be forced to reduce interest rates before the end of the year. Other data released today saw Hometrack August house prices of 5.3% y/y while U.K. July net consumer credit increased to ₤1.1 billion. Cable bids are cited around the $1.7420 level. The euro gained ground vis-Ã -vis the British pound as the single currency tested offers around the ₤0.8140 level and was supported around the ₤0.8090 level.
CHF
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.1045 level and was supported around the CHF 1.0945 level. Data released in Switzerland today saw the August manufacturing PMI survey slow to its lowest level in three years, dropping to 52.5 from 54.1 in July. Notably, cost pressures eased from July's thirteen-year high. Most traders believe Swiss National Bank's next interest rate move will be lower, possibly before the end of the year. U.S. dollar offers are cited around the CHF 1.1135 level. The euro and British pound came off vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6055 and CHF 1.9760 levels, respectively.
GCI Financial
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DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
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Monday, September 1, 2008
Colombia's peso rises after gov't lifts controls
BOGOTA, Sept 1 (Reuters) - Colombia's peso rose 0.84 percent to 1,921 pesos versus the U.S. dollar on Monday after the government lifted temporary restrictions placed on foreign portfolio investments in stocks, traders said.
Colombia's government had introduced measures in May calling for a required deposit and a two-year minimum residency on some investments in an attempt to curb the local currency's rise against the greenback. (Reporting by Patrick Markey; Editing by Maureen Bavdek)
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Colombia's government had introduced measures in May calling for a required deposit and a two-year minimum residency on some investments in an attempt to curb the local currency's rise against the greenback. (Reporting by Patrick Markey; Editing by Maureen Bavdek)
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U.S. natgas futures tumble 5 percent as Gustav weakens
NEW YORK (Reuters) - U.S. natural gas futures fell more than 5 percent in electronic trading on Monday as Hurricane Gustav weakened to a Category 2 storm.
Gustav, which is expected to make landfall later Monday on the Louisiana coast, had been forecast to be as strong as a Category 4 storm earlier.
(Reporting by Robert Campbell; Editing by John Picinich)
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Gustav, which is expected to make landfall later Monday on the Louisiana coast, had been forecast to be as strong as a Category 4 storm earlier.
(Reporting by Robert Campbell; Editing by John Picinich)
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Copper down as LME stocks rise, nickel off 3.5 pct
* Copper hits two-week low, down 2.1 percent
* Hurricane Gustav potential threat to LME zinc in warehouse
* Nickel dips more than 3 percent on rising inventories
(Updates prices to mid-session, adds comment)
By Anna Stablum
LONDON, Sept 1 (Reuters) - Copper futures fell 2.1 percent on Monday under pressure from gains in the dollar, rising London Metal Exchange stocks and worries about demand.
Zinc eased but Hurricane Gustav was seen as a potential threat to LME warehouses, analysts said. [ID:nL1329617]
Volumes were low with the U.S. market shut for Labor Day.
"The stronger dollar is troubling prices," Commerzbank analyst Eugen Weinberg said. "We cannot expect large moves today as the U.S. is closed."
London Metal Exchange three-month copper MCU3 fell 2.1 percent, or $155, to $7,355/7,360 per tonne by mid-session.
Earlier, it hit an intraday low of $7,330, the lowest price since Aug. 19.
Nickel MNI3 fell 3.5 percent to a two-week low of $19,550 against Friday's close of $20,250.
Stocks rose 1,206 tonnes to a four-month high of 48,228 and the metal is down 24 percent this year as demand from stainless steel producers, accounting for two-thirds of nickel off-take, has fallen short of expectations.
The dollar approached an eight-month high against a trade-weighted basket of currencies .DXY, and a fall in the euro to below $1.4570 would take the single currency to its lowest level since mid-February. [ID:nL1710526]
A firm U.S. currency makes dollar-priced metals more expensive for holders of other currencies.
RISING COPPER STOCKS
LME copper stocks are at their highest since February, at 173,725 tonnes, although the latest release from the International Copper Study Group said the copper market was in deficit by 155,000 tonnes in the first five months of the year.
Rising stocks have pulled down the backwardation -- the premium for cash material MCU0 over three-months prices -- to $27 per tonne. On July 17, the premium hit the year's high, at $241, with a dominant position capturing most of the market.
Copper dropped 8 percent in value during the past month and in the near term there is a risk of further commodity price correction as global economic and demand growth continue to slow, RBC Capital Markets said in a report.
"Global leading economic indicators continue to point to slowing growth in the U.S., Europe, Japan and other parts of Asia, and China has recently reported lower GDP growth," the report said.
Three-month aluminium MAL3 was down $16 at $2,698.
Aluminium has been forecast to trade at an average of $1.30 a pound ($2,866 a tonne) in 2008 and copper is seen at $3.55/lb ($7,826/t), falling to $3.25 ($7,165/t) in 2009, RBC said.
The 2008 forecast for lead was revised down from the previous quarter at $1.05 per pound or $2,315 per tonne, nickel was cut to $11/lb ($24,251/t) and zinc was seen lower at $0.95/lb ($2,094/t).
HURRICANE GUSTAV
The market cast a worried eye over weather forecasts, which suggested Hurricane Gustav could hit New Orleans, where the London Metal Exchange warehouses are located.
Zinc has risen more than 10 percent since dipping to a 33-month low in mid-August, but the metal mainly used to galvanise steel is down by about 25 percent so far this year.
With almost 40 percent, or 61,000 tonnes, of world LME zinc stocks in New Orleans, some traders feared a repeat of Hurricane Katrina in 2005, which cut off access to about one-half of the available LME stock of zinc for months.
"This location could trigger some short-covering if the LME warehouses are flooded as happened in 2005," said analyst John Reade at UBS.
When Katrina struck in September 2005, LME zinc was trading between $1,300 and $1,400 a tonne. It doubled in price by May 2006. New Orleans also houses about 13,000 tonnes of copper.
Zinc MZN3 shed 1.4 percent or $26 to $1,785, while lead MPB3 was down at $1,965/1,970 versus $1,980 at Friday's close. Tin MSN3, LME's best performer so far this year up by 23 percent, fell 4.5 percent to a low of $19,100 -- the lowest since Aug. 18. At mid-session tin traded at $19,400 against $20,000 on Friday. (Additional reporting by Nick Trevethan; editing by Peter Blackburn)
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U.K. July Lending to Individuals: Summary (Table)
By Mark Evans
Sept. 1 (Bloomberg) -- Following is a summary of lending to individuals for July from the Bank of England in London:
=============================================================================
July June May April March
2008 2008 2008 2008 2008
=============================================================================
Total Net Lending to Individuals 4,321 4,049 5,209 6,991 7,633
Mortgage Lending 3,231 3,143 3,787 5,944 6,385
Total Value of Approvals 14,572 16,575 18,203 22,411 23,345
No. of Applications (000's) 33 35 40 55 60
Consumer Credit 1,090 906 1,422 1,047 1,248
------------- Growth rates -----------------
Total Net Lending to Individuals
1 month 0.3% 0.3% 0.4% 0.5% 0.5%
3 month annualized 3.8% 4.6% 5.7% 6.9% 7.3%
12 month 6.9% 7.4% 8.0% 8.4% 8.7%
=============================================================================
July June May April March
2008 2008 2008 2008 2008
=============================================================================
Mortgage Lending
1 month 0.3% 0.3% 0.3% 0.5% 0.5%
3 month annualized 3.4% 4.4% 5.5% 6.7% 7.2%
12 month 6.9% 7.5% 8.2% 8.7% 9.1%
Consumer Credit
1 month 0.5% 0.4% 0.6% 0.5% 0.5%
3 month annualized 6.1% 6.0% 6.6% 8.1% 7.9%
12 month 6.8% 6.9% 7.1% 6.9% 7.0%
=============================================================================
Note: All levels (except approvals 000's) are in millions of pounds.
To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net
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U.K. Mortgage Approvals Drop, Manufacturing Contracts
By Brian Swint and Jennifer Ryan
Sept. 1 (Bloomberg) -- U.K. mortgage approvals dropped to the lowest since at least 1999 and manufacturing contracted for a fourth month as the economy staggered toward a recession.
Banks granted 33,000 loans for house purchases in July, the fewest since comparable data began nine years ago, the Bank of England said in London today. An index based on a survey of factories by the Chartered Institute of Purchasing and Supply stayed below 50 in August, indicating contraction.
Prime Minister Gordon Brown will announce measures this week to shore up the economy as the Bank of England battles the fastest inflation in more than a decade, which may prevent it from cutting the main interest rate on Sept. 4. The squeeze on lending stalled economic growth in the second quarter and damaged the housing market, where prices are falling by the most since at least 2001.
``We're in for a prolonged period of weak growth that will likely go into a recession,'' said Amit Kara, an economist at UBS AG in London who formerly worked at the central bank. ``There's an argument for cutting rates this week but I don't think they will because of increasing inflation pressures.''
The pound fell to the lowest level since April 2006 against the dollar today and traded at $1.8033 as of 11:48 a.m. in London. The currency dropped to a record low against the euro and traded at 81.19 pence per euro. U.K. stocks declined for the first time in four days.
The Bank of England reported that the value of home loans rose to 3.23 billion pounds ($5.83 billion) in July from 3.14 billion pounds in June. The figure is down from 9.35 billion pounds in July 2007.
Housing Decline
Hometrack Ltd. said today the average cost of a residential property in England and Wales slipped 5.3 percent from a year earlier in August. A recovery in prices is ``still some way off,'' said Richard Donnell, director of research.
The slump has led to a collapse in support for Brown since he took over from Tony Blair 15 months ago and reduced the popularity of the ruling Labour Party to the lowest since it took office. Labour trailed behind the opposition Conservative Party, led by David Cameron, by 20 percentage points in recent opinion polls.
Brown will hand U.K. local government authorities money to buy homes, a person familiar with the plan said last week, as part of a package to prevent the economy entering its first recession since 1991. Chancellor of the Exchequer Alistair Darling said in a Guardian newspaper interview Aug. 30 that the U.K. is facing ``arguably the worst'' economic crisis for the last 60 years.
Darling's comments contrast with those of Prime Minister Gordon Brown, who said Britain is better placed to weather global economic storms now than in the late 1970s and in the early 1990s.
Credit Squeeze
``After a massive debt-fuelled boom in asset prices and spending over recent years, the hangover of high debt levels among households and companies are now likely to trigger an extended period of falling asset prices,'' Michael Saunders, chief western European economist at Citigroup Inc. in London, wrote in a note today. ``The erosion of real incomes and profits from high commodity prices just adds to the pain.''
Financial institutions are reluctant to lend to one another almost a year after a freeze in interbank lending. Bank losses from the collapse of the U.S. subprime mortgage market now exceed $500 billion.
Oil prices, which surged to a record in July, are damping demand for manufactured goods and squeezing factories' margins. The euro area, Britain's biggest export market, contracted 0.2 percent in the second quarter. The U.K. failed to grow for the first time since 1992.
The Chartered Institute of Purchasing and Supply's index of manufacturing stood at 45.9 after 44.1 in July, the lowest since December 1998. Economists predicted 44, the median of 31 forecasts in a Bloomberg News survey showed. Readings below 50 signal contraction.
All 61 economists in a Bloomberg News survey predict the central bank will leave the key rate at 5 percent for a fifth month on Sept. 4.
To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Jennifer Ryan in London at jryan13@bloomberg.net.
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Denmark's Economy Expands 0.6%, Ending Recession
By Christian Wienberg
Sept. 1 (Bloomberg) -- Denmark's economy expanded in the second quarter as a pick up in household spending ended the first recession within the European Union since the credit crunch started last year.
The economy grew 0.6 percent, after contracting a revised 0.8 percent in the first quarter, Copenhagen-based Statistics Denmark said on its Web site today. Growth was in line with the median estimate of six economists surveyed by Bloomberg. Annual growth was 1.2 percent, compared with a 0.7 percent contraction in the first quarter.
Household spending, which accounts for half of Denmark's $340 billion economy, picked up in the second quarter as the lowest level of unemployment in 35 years helped push wage growth to the fastest pace in seven years. That compensated for higher borrowing costs, a decline in property values and accelerating inflation.
``The labor market is the only bright spot in the Danish economy,'' Niels Roenholt, an economist with Silkeborg, Denmark- based Jyske Bank A/S, said today in an e-mail. ``Today's numbers are somewhat encouraging compared with the previous data, but there can be no doubt that 2008 will be a year of limited economic growth.''
The unemployment rate held at 1.6 percent in July, the lowest since 1973, the statistics agency said last week. Wage growth accelerated to an annual 4.9 percent in the second quarter, the most since 2001, according to the Confederation of Danish Employers.
Household Spending
Household spending grew 0.3 percent in the second quarter from the previous three months, the agency said, after contracting 1.1 percent in the first quarter.
``Private consumption returned to the positive, but isn't growing at a very impressive speed,'' Jes Asmussen, an economist with Handelsbanken in Copenhagen, said in a note.
With Denmark emerging from recession, Estonia is now the only EU country with two consecutive quarters of economic contraction.
Denmark's government last week cut its forecast for expansion this year to 1.1 percent from 1.2 percent and to 0.5 percent from 0.7 percent for 2009. The economy grew 1.7 percent in 2007.
House prices will drop as much as 10 percent this year and next as rising interest rates undermine demand, Svenska Handelsbanken AB, Denmark's second-largest bank by market value, estimates. Homeowner foreclosures rose in July to the highest since 2003, Statistics Denmark said.
The central bank took over regional lender Roskilde Bank A/S on Aug. 24 after it failed to meet solvency requirements following writedowns on bad loans from the slowing real estate market. It was the first time in 15 years the bank had bailed out a financial company.
The inflation rate reached an 18 1/2-year high of 4 percent in July, according to Statistics Denmark.
The central bank doesn't target price stability as its sole mandate is to keep the krone pegged to the euro in a 2.25 percent band. It last raised the key lending rate on May 16 by 0.1 of a percentage point to 4.35 percent to defend the currency peg.
To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net
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Sept. 1 (Bloomberg) -- Denmark's economy expanded in the second quarter as a pick up in household spending ended the first recession within the European Union since the credit crunch started last year.
The economy grew 0.6 percent, after contracting a revised 0.8 percent in the first quarter, Copenhagen-based Statistics Denmark said on its Web site today. Growth was in line with the median estimate of six economists surveyed by Bloomberg. Annual growth was 1.2 percent, compared with a 0.7 percent contraction in the first quarter.
Household spending, which accounts for half of Denmark's $340 billion economy, picked up in the second quarter as the lowest level of unemployment in 35 years helped push wage growth to the fastest pace in seven years. That compensated for higher borrowing costs, a decline in property values and accelerating inflation.
``The labor market is the only bright spot in the Danish economy,'' Niels Roenholt, an economist with Silkeborg, Denmark- based Jyske Bank A/S, said today in an e-mail. ``Today's numbers are somewhat encouraging compared with the previous data, but there can be no doubt that 2008 will be a year of limited economic growth.''
The unemployment rate held at 1.6 percent in July, the lowest since 1973, the statistics agency said last week. Wage growth accelerated to an annual 4.9 percent in the second quarter, the most since 2001, according to the Confederation of Danish Employers.
Household Spending
Household spending grew 0.3 percent in the second quarter from the previous three months, the agency said, after contracting 1.1 percent in the first quarter.
``Private consumption returned to the positive, but isn't growing at a very impressive speed,'' Jes Asmussen, an economist with Handelsbanken in Copenhagen, said in a note.
With Denmark emerging from recession, Estonia is now the only EU country with two consecutive quarters of economic contraction.
Denmark's government last week cut its forecast for expansion this year to 1.1 percent from 1.2 percent and to 0.5 percent from 0.7 percent for 2009. The economy grew 1.7 percent in 2007.
House prices will drop as much as 10 percent this year and next as rising interest rates undermine demand, Svenska Handelsbanken AB, Denmark's second-largest bank by market value, estimates. Homeowner foreclosures rose in July to the highest since 2003, Statistics Denmark said.
The central bank took over regional lender Roskilde Bank A/S on Aug. 24 after it failed to meet solvency requirements following writedowns on bad loans from the slowing real estate market. It was the first time in 15 years the bank had bailed out a financial company.
The inflation rate reached an 18 1/2-year high of 4 percent in July, according to Statistics Denmark.
The central bank doesn't target price stability as its sole mandate is to keep the krone pegged to the euro in a 2.25 percent band. It last raised the key lending rate on May 16 by 0.1 of a percentage point to 4.35 percent to defend the currency peg.
To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net
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Brazil Aug trade surplus narrows as exports drop
(Recasts, adds exports and imports)
SAO PAULO, Sept 1 (Reuters) - Brazil's trade surplus narrowed in August from July as exports dropped from a record the previous month, while imports edged higher, government data showed on Monday.
The surplus narrowed to $2.26 billion in August from $3.3 billion in July and compared with the $2 billion median estimate of 11 economists in a Reuters survey. The estimates ranged from $1.7 billion to $3.5 billion.
Brazil had a $3.54 billion trade surplus in August 2007.
Exports fell 3.4 percent month-on-month to $19.75 billion, while imports grew 1.9 percent to $17.48 billion, the trade ministry said. (Reporting by Elzio Barreto, editing by Maureen Bavdek)
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SAO PAULO, Sept 1 (Reuters) - Brazil's trade surplus narrowed in August from July as exports dropped from a record the previous month, while imports edged higher, government data showed on Monday.
The surplus
Brazil had a $3.54 billion trade surplus in August 2007.
Exports fell 3.4 percent month-on-month to $19.75 billion, while imports grew 1.9 percent to $17.48 billion, the trade ministry said. (Reporting by Elzio Barreto, editing by Maureen Bavdek)
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Russian Manufacturing Eases for First Time Since 2004
By Alex Nicholson
Sept. 1 (Bloomberg) -- Russian manufacturing contracted in August for the first time in almost four years as businesses won fewer new orders and companies cut jobs.
VTB Bank Europe's Purchasing Managers' Index fell to 49.4 from 50.4 in July, the fifth consecutive monthly decline and the first contraction since November 2004, the bank said in an e- mailed statement today. A figure above 50 indicates growth. The bank surveyed 300 purchasing executives.
``The major factor underpinning the weakening in activity has been a decrease in new orders, which fell for the first time in almost 10 years,'' Dmitri Fedotkin, an economist at VTB Bank Europe Research, said in the statement.
Growth this year may miss the Economy Ministry's forecast of 7.8 percent as foreign investors pull money out and corporate borrowing costs rise as a result of international tension over Georgia, Alexander Morozov, chief economist at HSBC Bank in Moscow, said on Aug. 29. Industrial output rose an annual 3.2 percent in July, a slower pace than economists expected.
``With output requirements set to fall in light of the drop in new work received during the month, Russian manufacturers shed staff on average in August,'' the report said without giving details. The workforce shrank for the fourth consecutive month, it said.
Affecting Demand
New orders placed in August could have fallen because of a drop in the pace of wage growth and high inflation, at an annual rate of 14.7 in July.
``It may have got to the point where this is affecting demand,'' Fedotkin said by telephone from Moscow.
OAO GMK Norilsk Nickel, the world's largest producer of the metal, has said it may halve the 11,400 member workforce at one of its two largest Russian units to cut costs. Russia's biggest steelmaker, OAO Severstal, has also said it will eliminate as many as 3,000 jobs after costs climbed 23 percent last year.
``This could be a very negative indictor of the future trend,'' said Vladimir Tikhomirov, chief economist at UralSib Financial Corp. While there is a ``broad consensus between government and the market'' that economic growth will slow this year, ``new factors'' have emerged, he said.
``We've seen a correction on global energy and raw- materials markets, and we've also seen political problems, which have led to an outflow of short-term investment,'' Tikhomirov said. ``This has put some investment projects on hold.''
GDP Contribution
Manufacturing accounted for 16.2 percent of gross domestic production in the first quarter, he said, compared with 18.3 percent for retail and wholesale trade, the largest contributor. The natural resources industry directly contributes 9.4 percent, though the industry indirectly drives 30 percent of the country's economic activity, Tikhomirov said.
Finance Minister Alexei Kudrin said on Aug. 17 that investors pulled $7 billion out the country between Aug. 8 and Aug. 11 after Russia's military incursion into Georgia.
The war was sparked by Georgian attempts to retake its breakaway province of South Ossetia, where most citizens have Russian passports. Russia sent troops, tanks and warplanes into the former Soviet republic before President Dmitry Medvedev ended military operations on Aug. 12. He subsequently recognized the independence of South Ossetia and Abkhazia, another separatist region, a step that angered the U.S. and Europe.
EU Summit
EU leaders are holding an emergency summit in Brussels today to consider a joint response to Russia's recognition of the two regions. Their options are limited, as Europe gets a quarter of its natural gas from Russia, and some leaders have played down the threat of sanctions.
Still, businesses in the PMI survey said costs eased in August even as transport, energy and metals prices rose.
``Input price inflation slowed more sharply than in any period in the 11-year survey history,'' the report said.
The cost of goods leaving factories and mines surged an annual 33.7 percent in July, the fastest pace in 3 1/2 years, led by fuel and coking coal prices, the Federal Statistics Service said on Aug. 21.
The PMI is derived from indexes which measure changes in output, orders, employment, suppliers' delivery times and stocks, according to VTB.
To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net.
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Sept. 1 (Bloomberg) -- Russian manufacturing contracted in August for the first time in almost four years as businesses won fewer new orders and companies cut jobs.
VTB Bank Europe's Purchasing Managers' Index fell to 49.4 from 50.4 in July, the fifth consecutive monthly decline and the first contraction since November 2004, the bank said in an e- mailed statement today. A figure above 50 indicates growth. The bank surveyed 300 purchasing executives.
``The major factor underpinning the weakening in activity has been a decrease in new orders, which fell for the first time in almost 10 years,'' Dmitri Fedotkin, an economist at VTB Bank Europe Research, said in the statement.
Growth this year may miss the Economy Ministry's forecast of 7.8 percent as foreign investors pull money out and corporate borrowing costs rise as a result of international tension over Georgia, Alexander Morozov, chief economist at HSBC Bank in Moscow, said on Aug. 29. Industrial output rose an annual 3.2 percent in July, a slower pace than economists expected.
``With output requirements set to fall in light of the drop in new work received during the month, Russian manufacturers shed staff on average in August,'' the report said without giving details. The workforce shrank for the fourth consecutive month, it said.
Affecting Demand
New orders placed in August could have fallen because of a drop in the pace of wage growth and high inflation, at an annual rate of 14.7 in July.
``It may have got to the point where this is affecting demand,'' Fedotkin said by telephone from Moscow.
OAO GMK Norilsk Nickel, the world's largest producer of the metal, has said it may halve the 11,400 member workforce at one of its two largest Russian units to cut costs. Russia's biggest steelmaker, OAO Severstal, has also said it will eliminate as many as 3,000 jobs after costs climbed 23 percent last year.
``This could be a very negative indictor of the future trend,'' said Vladimir Tikhomirov, chief economist at UralSib Financial Corp. While there is a ``broad consensus between government and the market'' that economic growth will slow this year, ``new factors'' have emerged, he said.
``We've seen a correction on global energy and raw- materials markets, and we've also seen political problems, which have led to an outflow of short-term investment,'' Tikhomirov said. ``This has put some investment projects on hold.''
GDP Contribution
Manufacturing accounted for 16.2 percent of gross domestic production in the first quarter, he said, compared with 18.3 percent for retail and wholesale trade, the largest contributor. The natural resources industry directly contributes 9.4 percent, though the industry indirectly drives 30 percent of the country's economic activity, Tikhomirov said.
Finance Minister Alexei Kudrin said on Aug. 17 that investors pulled $7 billion out the country between Aug. 8 and Aug. 11 after Russia's military incursion into Georgia.
The war was sparked by Georgian attempts to retake its breakaway province of South Ossetia, where most citizens have Russian passports. Russia sent troops, tanks and warplanes into the former Soviet republic before President Dmitry Medvedev ended military operations on Aug. 12. He subsequently recognized the independence of South Ossetia and Abkhazia, another separatist region, a step that angered the U.S. and Europe.
EU Summit
EU leaders are holding an emergency summit in Brussels today to consider a joint response to Russia's recognition of the two regions. Their options are limited, as Europe gets a quarter of its natural gas from Russia, and some leaders have played down the threat of sanctions.
Still, businesses in the PMI survey said costs eased in August even as transport, energy and metals prices rose.
``Input price inflation slowed more sharply than in any period in the 11-year survey history,'' the report said.
The cost of goods leaving factories and mines surged an annual 33.7 percent in July, the fastest pace in 3 1/2 years, led by fuel and coking coal prices, the Federal Statistics Service said on Aug. 21.
The PMI is derived from indexes which measure changes in output, orders, employment, suppliers' delivery times and stocks, according to VTB.
To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net.
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BP Expects to Resume Exports From Plutonio in October
By Eduard Gismatullin
Sept. 1 (Bloomberg) -- BP Plc, Europe's second-biggest oil company, expects to resume exports from its Greater Plutonio oil fields in Angola in October following a shutdown last month.
It's ``completely shut'' and there is no oil loading, Robert Wine, a London-based spokesman at BP, said by phone today.
Nobody was injured when gas equipment had a malfunction on the fields' floating, production, storage and offloading vessel on Aug. 16. He declined to say when production would start.
The vessel can process as much as 240,000 barrels of crude a day and 400 million standard cubic feet of natural gas, according to BP. The company started pumping from the Greater Plutonio in October last year.
Great Plutonio is one of the projects BP Chief Executive Officer Tony Hayward is relying on to maintain and increase production. BP and partners have started pumping oil and gas at Angola's Kizomba C field along with exports from the Atlantis platform in the Gulf of Mexico in the past 11 months. BP plans to have four wells open at the long-delayed Thunder Horse field in the U.S. Gulf by the end of the year.
``They had this trip with the gas plant and they've been investigating it, working on what fixes are required,'' Wine said. ``It'll be down for as long as it needs to be to fix it safely.''
The Greater Plutonio fields -- Galio, Cromio, Paladio, Plutonio, Cobalto and Platina -- were discovered from 1999 to 2001 and are located in water 1,200 meters (3,950 feet) to 1,450 meters deep off Angola's coast.
Greater Plutonio is located in Angola's block 18. BP holds a 50 percent stake in the project. The rest is held by Sonangol Sinopec International, a joint venture between Angola's state oil company and China's biggest refiner.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
Read more...
Sept. 1 (Bloomberg) -- BP Plc, Europe's second-biggest oil company, expects to resume exports from its Greater Plutonio oil fields in Angola in October following a shutdown last month.
It's ``completely shut'' and there is no oil loading, Robert Wine, a London-based spokesman at BP, said by phone today.
Nobody was injured when gas equipment had a malfunction on the fields' floating, production, storage and offloading vessel on Aug. 16. He declined to say when production would start.
The vessel can process as much as 240,000 barrels of crude a day and 400 million standard cubic feet of natural gas, according to BP. The company started pumping from the Greater Plutonio in October last year.
Great Plutonio is one of the projects BP Chief Executive Officer Tony Hayward is relying on to maintain and increase production. BP and partners have started pumping oil and gas at Angola's Kizomba C field along with exports from the Atlantis platform in the Gulf of Mexico in the past 11 months. BP plans to have four wells open at the long-delayed Thunder Horse field in the U.S. Gulf by the end of the year.
``They had this trip with the gas plant and they've been investigating it, working on what fixes are required,'' Wine said. ``It'll be down for as long as it needs to be to fix it safely.''
The Greater Plutonio fields -- Galio, Cromio, Paladio, Plutonio, Cobalto and Platina -- were discovered from 1999 to 2001 and are located in water 1,200 meters (3,950 feet) to 1,450 meters deep off Angola's coast.
Greater Plutonio is located in Angola's block 18. BP holds a 50 percent stake in the project. The rest is held by Sonangol Sinopec International, a joint venture between Angola's state oil company and China's biggest refiner.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
Read more...
Houston Ship Channel Closed to Inbound Traffic as Gustav Nears
By Andres R. Martinez
Sept. 1 (Bloomberg) -- The Houston Ship Channel, which serves the largest U.S. petroleum port, was shut to inbound traffic as Hurricane Gustav pounded the Gulf Coast.
Ships and tankers already in the port may leave if they wish, said Albert Hernandez, the watch supervisor for the U.S. Coast Guard Vessel Traffic Service. The captain of the port does not expect to close the channel to outbound traffic unless conditions change, Hernandez said.
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
Read more...
Sept. 1 (Bloomberg) -- The Houston Ship Channel, which serves the largest U.S. petroleum port, was shut to inbound traffic as Hurricane Gustav pounded the Gulf Coast.
Ships and tankers already in the port may leave if they wish, said Albert Hernandez, the watch supervisor for the U.S. Coast Guard Vessel Traffic Service. The captain of the port does not expect to close the channel to outbound traffic unless conditions change, Hernandez said.
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
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U.K. Interbank Lending Fell 68% in July From Year Ago
By Jennifer Ryan and Gavin Finch
Enlarge Image/Details
Sept. 1 (Bloomberg) -- Lending between U.K. banks slumped 68 percent in July as financial institutions hoarded cash to shore up their balance sheets, signaling Bank of England efforts to revive money markets aren't working.
The volume of interbank lending in the British currency fell to 205 billion pounds ($370 billion), from 635 billion pounds in July last year, according to central bank data published today. Lending averaged 269 billion pounds a month since the credit crunch started in August 2007.
Banks are curtailing lending while losses from the collapse of the U.S. subprime-mortgage market climb above $500 billion. Interbank lending rates are little lower now than they were in April, when the Bank of England offered to take on damaged mortgage-backed bonds in an effort to unfreeze lending. The strains in global money markets will probably persist ``for some time,'' the Bank for International Settlements said today.
``We're in the same position we were in last year, with banks hoarding cash to refinance their own beleaguered balance sheets,'' said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. ``The Special Liquidity Scheme has helped individual banks by preventing them from becoming illiquid, but it hasn't helped money markets return to normal.''
The July figure, which excludes central bank transactions, is up from 195 billion pounds in June. The total peaked at 656 billion pounds in February last year, and has averaged 270 billion pound since the data began in 1997.
Brink of Recession
The central bank program allows commercial banks to swap mortgage-backed securities harmed by the credit squeeze for government bonds. The lending freeze led to the collapse of mortgage lender Northern Rock Plc in September, triggering the first run on a U.K. bank in more than 140 years.
The credit famine and the fastest inflation in at least a decade have brought the U.K. to the brink of a recession. Gross domestic product stagnated in the second quarter, ending the nation's longest stretch of economic growth in more than a century, according to government data.
Bank of England Governor Mervyn King said in June he will unveil a new money-market system this year to cope with both ``normal'' and ``stressed'' conditions. He hasn't said when or whether banks will reveal their participation in the April plan.
``It's significant that lending volumes have stopped falling, but what's worrying is the level where they've stabilized,'' said Lena Komileva, an economist at Tullett Prebon Plc in London. ``This new order reflects weak confidence in credit quality as a result of banks struggling to refinance their loan books. It's a striking illustration of a crisis at its height.''
Pressures `Continue'
Interest-rate derivatives imply that banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens.
The premiums banks charge each other for three-month cash relative to the overnight indexed swap rate widened to 78 basis points today from 12 basis points on July 31, 2007, before the credit crunch took hold in the U.K. It has averaged 69 basis points in the past 12 months, up from an average of 11 basis points in the preceding year.
``The term structure of Libor-OIS spreads suggests the interbank market pressures are expected to continue for some time,'' Ingo Fender and Jacob Gyntelberg, analysts at the BIS, wrote in the Basle-based bank's quarterly report.
The increase in short-term borrowing costs triggered questions over the accuracy of the London interbank offered rate, the benchmark interest rate administered by the British Bankers' Association and used to calculate rates on $360 trillion of financial products worldwide.
The BIS said in March some banks may have understated their borrowing costs to avoid being seen as having difficulty raising financing.
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.netGavin Finch in London at gfinch@bloomberg.net
Read more...
Enlarge Image/Details
Sept. 1 (Bloomberg) -- Lending between U.K. banks slumped 68 percent in July as financial institutions hoarded cash to shore up their balance sheets, signaling Bank of England efforts to revive money markets aren't working.
The volume of interbank lending in the British currency fell to 205 billion pounds ($370 billion), from 635 billion pounds in July last year, according to central bank data published today. Lending averaged 269 billion pounds a month since the credit crunch started in August 2007.
Banks are curtailing lending while losses from the collapse of the U.S. subprime-mortgage market climb above $500 billion. Interbank lending rates are little lower now than they were in April, when the Bank of England offered to take on damaged mortgage-backed bonds in an effort to unfreeze lending. The strains in global money markets will probably persist ``for some time,'' the Bank for International Settlements said today.
``We're in the same position we were in last year, with banks hoarding cash to refinance their own beleaguered balance sheets,'' said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. ``The Special Liquidity Scheme has helped individual banks by preventing them from becoming illiquid, but it hasn't helped money markets return to normal.''
The July figure, which excludes central bank transactions, is up from 195 billion pounds in June. The total peaked at 656 billion pounds in February last year, and has averaged 270 billion pound since the data began in 1997.
Brink of Recession
The central bank program allows commercial banks to swap mortgage-backed securities harmed by the credit squeeze for government bonds. The lending freeze led to the collapse of mortgage lender Northern Rock Plc in September, triggering the first run on a U.K. bank in more than 140 years.
The credit famine and the fastest inflation in at least a decade have brought the U.K. to the brink of a recession. Gross domestic product stagnated in the second quarter, ending the nation's longest stretch of economic growth in more than a century, according to government data.
Bank of England Governor Mervyn King said in June he will unveil a new money-market system this year to cope with both ``normal'' and ``stressed'' conditions. He hasn't said when or whether banks will reveal their participation in the April plan.
``It's significant that lending volumes have stopped falling, but what's worrying is the level where they've stabilized,'' said Lena Komileva, an economist at Tullett Prebon Plc in London. ``This new order reflects weak confidence in credit quality as a result of banks struggling to refinance their loan books. It's a striking illustration of a crisis at its height.''
Pressures `Continue'
Interest-rate derivatives imply that banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens.
The premiums banks charge each other for three-month cash relative to the overnight indexed swap rate widened to 78 basis points today from 12 basis points on July 31, 2007, before the credit crunch took hold in the U.K. It has averaged 69 basis points in the past 12 months, up from an average of 11 basis points in the preceding year.
``The term structure of Libor-OIS spreads suggests the interbank market pressures are expected to continue for some time,'' Ingo Fender and Jacob Gyntelberg, analysts at the BIS, wrote in the Basle-based bank's quarterly report.
The increase in short-term borrowing costs triggered questions over the accuracy of the London interbank offered rate, the benchmark interest rate administered by the British Bankers' Association and used to calculate rates on $360 trillion of financial products worldwide.
The BIS said in March some banks may have understated their borrowing costs to avoid being seen as having difficulty raising financing.
To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.netGavin Finch in London at gfinch@bloomberg.net
Read more...
McCain Offers Voters Contradictions, Conundrums: Albert R. Hunt
Commentary by Albert R. Hunt
Sept. 1 (Bloomberg) -- Republicans are gathering in St. Paul, Minnesota, this week to nominate their greatest hero since Dwight D. Eisenhower, and the least-popular nominee with the party faithful since well before Ike.
There is little about John Sidney McCain III that is conventional, so why should this convention be any different?
McCain has performed brave acts as a U.S. Navy pilot, prisoner of war and legislative risk-taker that the current president and even the hero of modern Republicanism, Ronald Reagan, just talked about.
Yet his party's conservative base despises the Arizona Republican for offenses ranging from championing campaign- finance reform to his fight against George W. Bush for the presidential nomination eight years ago -- it was the Bush forces that did the sleazy stuff -- to his penchant for forming alliances with Democrats.
Unlike most politicians, he can't be easily categorized. ``There is no question that John has a deeper commitment to service and to a cause greater than any particular ideology,'' says New Hampshire Republican Senator John Sununu.
McCain's selection of the inexperienced Alaska governor, Sarah Palin, which stunned many politicians, reaffirms his maverick image. It was also impulsive: He'd only met her once, briefly, before last week. Most of his advisers wanted him to pick someone more seasoned as his running mate.
With McCain, contradictions abound. He has a lengthy conservative voting record in Congress; his literary hero is Robert Jordan, the American leftist-sympathizer in Ernest Hemingway's ``For Whom The Bell Tolls,'' who died while fighting Spanish fascists. He often cites Reagan, though his political hero is President Teddy Roosevelt, a big-government activist.
Shared Sacrifice
He speaks passionately and sincerely about shared sacrifice, drawing on the generations of service his family has given America. And then he just as passionately supports a costly war and asks no sacrifice of the wealthy.
He, far more than Bush, is a genuine internationalist who has traveled widely and is intimately familiar with major players in the world scene. Yet he is given to careless asides -- declaring ``we are all Georgians'' after the Russian invasion a few weeks ago.
There is a side that is touchingly tender. He spent countless hours in a hospital room with a dying and comatose Morris K. Udall, the former Arizona Democratic congressman. He comforted the family of the late David Ifshin, a close friend who as an antiwar demonstrator protested in Hanoi while McCain was nearby in a prison. McCain family affairs in Sedona, Arizona, are the Western version of the Kennedy family on Cape Cod.
Fiery Temper
Yet he has a volatile temper that some congressional colleagues, including Democratic Senate Majority Leader Harry Reid, say make him unfit for president. He has been known to lash out at his own wife.
There is no one in American political life more courageous -- he was a recipient of the John F. Kennedy Library's Profile in Courage award several years ago -- or who reacts more admirably to adversity.
He was brutally tortured by the North Vietnamese for 5 1/2 years. Still, he led the effort to normalize relations with that country decades later, providing cover for President Bill Clinton, a draft evader during that war.
He foolishly cavorted with savings-and-loan crook, Charles Keating; later he led almost every campaign-finance and ethics measure in the Senate.
Left for Dead
Of course, he was written off as politically dead as recently as last fall and bounced back to capture the nomination.
What does all this suggest about what sort of president McCain would be? The contradictions and conundrums continue.
The maverick independent has made political concessions over the past year. He believes that Bush's guru, Karl Rove, who orchestrated the personal attacks on McCain in the 2000 Republican presidential primary, lacks character. Today his campaign is staffed with Rove acolytes.
A major uncertainty would be economic policy. McCain has never bought into the supply-side school, which argues that tax reductions solve every problem. His espousal of huge tax cuts, principally for the wealthy, in this campaign is more of a political calculation than a personal conviction.
As a naval officer, politician and the son and grandson of admirals, honor and duty are deeply ingrained in McCain; the notion of getting fabulously rich or being paid 500-fold more than the average worker is not.
Populist
There is a gut populism in the Republican nominee. He saw Bush in 2000 and Mitt Romney in 2008 as men of unearned privilege.
It isn't clear how this would be resolved in a McCain administration. He really has little interest in matters economic, so appointments would be crucial. Some of his top economic advisers like Douglas Holtz-Eakin and Kevin Hassett (a Bloomberg columnist) are sensible conservatives who would adjust to changing economic or political realities.
If, however, he taps as Treasury secretary former Senator Phil Gramm -- who in July condescendingly dismissed economically strapped Americans as ``whiners'' -- economic policy will have a hard edge.
On foreign policy, he's a fervent believer in the Iraq mission, yet this Vietnam veteran also knows that a democracy can't wage war when it lacks popular support. My hunch is he would look for a faster exit strategy in his first year.
Appointments Matter
Appointments will matter a great deal in any McCain presidency; loyalty will be a byword. He wears his emotions up front and has a strong sense of who is properly motivated and who is not.
He'll always be resilient. Sununu recalls standing on the Senate floor with him in mid-July 2007 when his campaign was in tatters, running well behind Rudy Giuliani and Romney and even Fred Thompson in the polls.
``John was as confident as I've ever seen him,'' the lawmaker remembers. ``John is at his best when they say there's something he can't accomplish.''
(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)
To contact the writer of this column: Albert R. Hunt in Washington at ahunt1@bloomberg.net
Read more...
Sept. 1 (Bloomberg) -- Republicans are gathering in St. Paul, Minnesota, this week to nominate their greatest hero since Dwight D. Eisenhower, and the least-popular nominee with the party faithful since well before Ike.
There is little about John Sidney McCain III that is conventional, so why should this convention be any different?
McCain has performed brave acts as a U.S. Navy pilot, prisoner of war and legislative risk-taker that the current president and even the hero of modern Republicanism, Ronald Reagan, just talked about.
Yet his party's conservative base despises the Arizona Republican for offenses ranging from championing campaign- finance reform to his fight against George W. Bush for the presidential nomination eight years ago -- it was the Bush forces that did the sleazy stuff -- to his penchant for forming alliances with Democrats.
Unlike most politicians, he can't be easily categorized. ``There is no question that John has a deeper commitment to service and to a cause greater than any particular ideology,'' says New Hampshire Republican Senator John Sununu.
McCain's selection of the inexperienced Alaska governor, Sarah Palin, which stunned many politicians, reaffirms his maverick image. It was also impulsive: He'd only met her once, briefly, before last week. Most of his advisers wanted him to pick someone more seasoned as his running mate.
With McCain, contradictions abound. He has a lengthy conservative voting record in Congress; his literary hero is Robert Jordan, the American leftist-sympathizer in Ernest Hemingway's ``For Whom The Bell Tolls,'' who died while fighting Spanish fascists. He often cites Reagan, though his political hero is President Teddy Roosevelt, a big-government activist.
Shared Sacrifice
He speaks passionately and sincerely about shared sacrifice, drawing on the generations of service his family has given America. And then he just as passionately supports a costly war and asks no sacrifice of the wealthy.
He, far more than Bush, is a genuine internationalist who has traveled widely and is intimately familiar with major players in the world scene. Yet he is given to careless asides -- declaring ``we are all Georgians'' after the Russian invasion a few weeks ago.
There is a side that is touchingly tender. He spent countless hours in a hospital room with a dying and comatose Morris K. Udall, the former Arizona Democratic congressman. He comforted the family of the late David Ifshin, a close friend who as an antiwar demonstrator protested in Hanoi while McCain was nearby in a prison. McCain family affairs in Sedona, Arizona, are the Western version of the Kennedy family on Cape Cod.
Fiery Temper
Yet he has a volatile temper that some congressional colleagues, including Democratic Senate Majority Leader Harry Reid, say make him unfit for president. He has been known to lash out at his own wife.
There is no one in American political life more courageous -- he was a recipient of the John F. Kennedy Library's Profile in Courage award several years ago -- or who reacts more admirably to adversity.
He was brutally tortured by the North Vietnamese for 5 1/2 years. Still, he led the effort to normalize relations with that country decades later, providing cover for President Bill Clinton, a draft evader during that war.
He foolishly cavorted with savings-and-loan crook, Charles Keating; later he led almost every campaign-finance and ethics measure in the Senate.
Left for Dead
Of course, he was written off as politically dead as recently as last fall and bounced back to capture the nomination.
What does all this suggest about what sort of president McCain would be? The contradictions and conundrums continue.
The maverick independent has made political concessions over the past year. He believes that Bush's guru, Karl Rove, who orchestrated the personal attacks on McCain in the 2000 Republican presidential primary, lacks character. Today his campaign is staffed with Rove acolytes.
A major uncertainty would be economic policy. McCain has never bought into the supply-side school, which argues that tax reductions solve every problem. His espousal of huge tax cuts, principally for the wealthy, in this campaign is more of a political calculation than a personal conviction.
As a naval officer, politician and the son and grandson of admirals, honor and duty are deeply ingrained in McCain; the notion of getting fabulously rich or being paid 500-fold more than the average worker is not.
Populist
There is a gut populism in the Republican nominee. He saw Bush in 2000 and Mitt Romney in 2008 as men of unearned privilege.
It isn't clear how this would be resolved in a McCain administration. He really has little interest in matters economic, so appointments would be crucial. Some of his top economic advisers like Douglas Holtz-Eakin and Kevin Hassett (a Bloomberg columnist) are sensible conservatives who would adjust to changing economic or political realities.
If, however, he taps as Treasury secretary former Senator Phil Gramm -- who in July condescendingly dismissed economically strapped Americans as ``whiners'' -- economic policy will have a hard edge.
On foreign policy, he's a fervent believer in the Iraq mission, yet this Vietnam veteran also knows that a democracy can't wage war when it lacks popular support. My hunch is he would look for a faster exit strategy in his first year.
Appointments Matter
Appointments will matter a great deal in any McCain presidency; loyalty will be a byword. He wears his emotions up front and has a strong sense of who is properly motivated and who is not.
He'll always be resilient. Sununu recalls standing on the Senate floor with him in mid-July 2007 when his campaign was in tatters, running well behind Rudy Giuliani and Romney and even Fred Thompson in the polls.
``John was as confident as I've ever seen him,'' the lawmaker remembers. ``John is at his best when they say there's something he can't accomplish.''
(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)
To contact the writer of this column: Albert R. Hunt in Washington at ahunt1@bloomberg.net
Read more...
Hurricane Hammers Louisiana; New Orleans Empties
By Brian K. Sullivan and Alex Morales
Sept. 1 (Bloomberg) -- Gustav buffeted the Gulf Coast with hurricane-force winds, threatening devastation to rival Katrina, after the largest evacuation in Louisiana history turned New Orleans into what its mayor called a ``ghost town.''
``Let's prepare for the worst, pray for the best,'' state Governor Bobby Jindal said in a televised news conference yesterday. He said 1.9 million people fled coastal areas on jammed roads and mass transit, leaving behind only 10,000 of New Orleans' 300,000 residents. The city's population decreased 40 percent since Katrina hit in 2005.
Gustav's eye was 80 miles (129 kilometers) south-southwest of New Orleans and about 20 miles southwest of Port Fouchon along the coast at 8 a.m. local time, the National Hurricane Center said on its Web site. The system, which was moving northwest at 16 mph, weakened to a Category 2 on the Saffir- Simpson scale, with maximum sustained winds of about 110 mph, the center said. Katrina was a Category 3 storm at landfall, with 120 mph winds.
Mayor Ray Nagin ordered a sundown curfew to prevent looting in the city and said a storm surge may flood the West Bank area, which was largely spared by Katrina. The surge was forecast by AccuWeather Inc. meteorologist Dan Pydynowski to reach up to 15 feet along parts of the coast.
``It's a totally empty city'' other than police in patrol vehicles, said Wesley Shrum, a sociology professor at Louisiana State University who planned to ride Gustav out in a French Quarter condominium. ``We picked a 200-year-old building, so we thought we'd be all right,'' he said, ignoring Nagin's earlier admonition ``to get your butts moving out of New Orleans.''
Hurricane-Force Winds
The storm's eyewall was moving onto the southeastern Louisiana coast, and hurricane-force winds extended as much as 70 miles from the center, the NHC said.
``The worst of the storm is going to go to the west'' of New Orleans, Pydynowski said. ``They're still getting hit by a hurricane'' that will cause flood damage.
Gustav has prompted energy companies to shut down 82 percent of the natural gas production and 96 percent of the oil output in U.S. areas of the Gulf of Mexico. The storm killed dozens of people in the Caribbean.
President George W. Bush declared a state of emergency for Louisiana, Mississippi and Alabama and canceled plans to travel to the Republican National Convention in St. Paul, Minnesota. Presumptive party presidential nominee John McCain scrapped most of today's opening events so the nation could focus on the storm, while Democratic presidential nominee Senator Barack Obama called on the public to ``take the evacuation seriously.''
First Test
Gustav marks Louisiana's first test of evacuation plans that were put in place after Katrina struck in 2005 and overwhelmed flood defenses, inundating 80 percent of the city. Katrina killed 1,800 people in Louisiana and Mississippi and caused more than $80 billion in damage.
Thousands of people were forced to take shelter from Katrina at the New Orleans Superdome and Convention Center. This time, those buildings are closed and authorities pressed buses and Amtrak trains into service to help evacuate people who lacked their own transportation.
``We did well this time on the evacuation front,'' Nagin said.
Highways were clogged with traffic as people fled the approaching storm. Mario and Laura Hernandez of Metairie, just west of New Orleans, bundled their two children into a trailer and headed to the state capital, Baton Rouge, for the second time in three years.
``I knew the time would come,'' said Mario, 25. ``I didn't know it would come so soon.''
Baton Rouge
In Baton Rouge, about 80 miles from New Orleans, residents lined up outside a fire station for sandbags to protect their homes from possible flooding.
``I am considering getting out of the state altogether,'' said Joe Martin, 36, who moved to the city after his home was destroyed by Katrina. ``I am tired of starting over.''
Help was pouring in to Louisiana from as far away as Los Angeles, which is sending water-rescue teams, said Jindal. Authorities mobilized 7,000 National Guard personnel and are preparing 1,800 more.
As the outer bands of Gustav began to fill the sky with rain late yesterday, 60 ambulances from across Pennsylvania arrived in Baton Rouge to help the state cope.
U.S. Secretary of Health and Human Services Michael Leavitt declared a public health emergency so that people in Gulf coast states don't encounter obstacles to receiving care if they leave their home communities.
New Orleans Levees
The Army Corps of Engineers has stockpiled sandbags to repair any breaches in the New Orleans levees, said spokesman Bill Irwin. The Corps has worked since Katrina to strengthen the levees, which form a ring of barriers surrounding the below-sea- level city. Work isn't scheduled to be complete until 2011.
Jindal said most refineries would conduct ``warm shutdowns'' so they can reopen quickly after Gustav passes. Oil companies evacuated workers from more than 600 rigs and production platforms in the Gulf, where fields account for about a quarter of U.S. oil production.
Oil companies including Royal Dutch Shell Plc and BP Plc evacuated workers from 86 rigs and 518 production platforms along the coast.
Fields in the Gulf produce 1.3 million barrels a day of oil, about a quarter of U.S. production, and 7.4 billion cubic feet a day of natural gas, 14 percent of the total, according to government data. Katrina closed 95 percent of regional offshore output and, along with Hurricane Rita, idled about 19 percent of U.S. refining capacity.
Tornadoes Spotted
The hurricane center forecast isolated tornadoes for parts of the central Gulf coast today. A tornado was spotted in Gulfport, Mississippi, at 5:08 a.m. local time today, the National Weather Service said on its Web site. Thunderstorms capable of producing tornadoes were also detected near Myrtle Grove, Louisiana, and Weeks Bay, Alabama.
Gustav swept over Cuba's Isle of Youth at the weekend as a Category 4 hurricane, with 145 mph winds, before crossing the western mainland. No deaths have been reported, and 18 were injured, the official Communist daily Granma said today on its Web site. More than 86,000 homes were damaged, and hundreds of telephone and electrical poles were downed, Granma reported.
The storm killed at least 12 people in Jamaica, the country's Office of Disaster Preparedness and Emergency Management said late yesterday in an e-mailed statement. The storm caused agricultural losses estimated at 1.7 billion Jamaican dollars ($24 million) it said.
Food Aid
In Haiti, where the storm killed at least 51 people, the United Nations World Food Program said it began distributing rice, beans and oil to 2,000 families. In the neighboring Dominican Republic, eight people were killed, the country's Center of Emergency Operations said on its Web site.
In the Caribbean, Tropical Storm Hanna was almost stationary north of the Caicos Islands, the hurricane center said in an advisory at 8 a.m. Miami time. The system was on a westward track and the eye will move near or over the southeastern Bahamas during the next day or two. Hanna had sustained winds of almost 50 mph, the center said.
To contact the reporter on this story: Brian K. Sullivan in New Orleans at bsullivan10@bloomberg.net; Alex Morales in London at amorales2@bloomberg.net.
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Repsol Said to Hire BNP Paribas, Goldman for Unit Stake Sale
By Juan Pablo Spinetto and Esteban Duarte
Sept. 1 (Bloomberg) -- Repsol YPF SA, Spain's largest oil company, hired BNP Paribas SA to coordinate the initial public offering of a stake in its Argentinian unit, working with banks including Goldman Sachs Group Inc. and Credit Suisse Group AG, two people with knowledge of the appointment said.
UBS AG, Banco Santander SA, Raymond James & Associates Inc. and Banco Itau BBA SA are also managing the sale of a 20 percent stake of YPF SA, as the subsidiary is known, said the people, who declined to be named before a public announcement. The sale of the stake could generate between 2 billion euros ($2.9 billion) and 3 billion euros in cash for Repsol, Deutsche Bank AG analyst James Hubbard wrote in a report in March.
Madrid-based Repsol is raising money to invest in Libya, Brazil and the Gulf of Mexico while reducing ties to Argentina, where it gets 64 percent of its oil and gas output. Repsol paid $15.5 billion for more than 80 percent of YPF in 1999.
In February, Repsol completed the sale of a 15 percent stake in YPF to Argentinian investor Enrique Eskenazi for $2.2 billion. He has an option to buy another 10 percent of the unit.
Repsol plans to carry out the offering in the second half of this year, Chief Operating Officer Miguel Martinez said on a conference call July 31.
BNP Paribas will play a global co-ordinating role while other banks will manage orders for the stock, the people said. The banks are not underwriting the offer, they added.
Transaction Banks
A Madrid-based spokesman at Repsol declined to comment. Pascal Henisse, a media officer for BNP Paribas, said that the French bank is a financial advisor to Repsol, declining to elaborate.
Joanna Carss, spokeswoman at Goldman, Anthea Penrose, a press official for Raymond James, Rowan Staines, spokeswoman at UBS, Marcia Leal, press officer at Banco Itau, and a Santander spokesman in Madrid declined to comment. Credit Suisse's press officer Carly Shearer didn't return calls asking for a comment.
To contact the reporters on this story: Juan Pablo Spinetto in London at jspinetto@bloomberg.netEsteban Duarte en Madrid eduarterubia@bloomberg.net
Read more...
Sept. 1 (Bloomberg) -- Repsol YPF SA, Spain's largest oil company, hired BNP Paribas SA to coordinate the initial public offering of a stake in its Argentinian unit, working with banks including Goldman Sachs Group Inc. and Credit Suisse Group AG, two people with knowledge of the appointment said.
UBS AG, Banco Santander SA, Raymond James & Associates Inc. and Banco Itau BBA SA are also managing the sale of a 20 percent stake of YPF SA, as the subsidiary is known, said the people, who declined to be named before a public announcement. The sale of the stake could generate between 2 billion euros ($2.9 billion) and 3 billion euros in cash for Repsol, Deutsche Bank AG analyst James Hubbard wrote in a report in March.
Madrid-based Repsol is raising money to invest in Libya, Brazil and the Gulf of Mexico while reducing ties to Argentina, where it gets 64 percent of its oil and gas output. Repsol paid $15.5 billion for more than 80 percent of YPF in 1999.
In February, Repsol completed the sale of a 15 percent stake in YPF to Argentinian investor Enrique Eskenazi for $2.2 billion. He has an option to buy another 10 percent of the unit.
Repsol plans to carry out the offering in the second half of this year, Chief Operating Officer Miguel Martinez said on a conference call July 31.
BNP Paribas will play a global co-ordinating role while other banks will manage orders for the stock, the people said. The banks are not underwriting the offer, they added.
Transaction Banks
A Madrid-based spokesman at Repsol declined to comment. Pascal Henisse, a media officer for BNP Paribas, said that the French bank is a financial advisor to Repsol, declining to elaborate.
Joanna Carss, spokeswoman at Goldman, Anthea Penrose, a press official for Raymond James, Rowan Staines, spokeswoman at UBS, Marcia Leal, press officer at Banco Itau, and a Santander spokesman in Madrid declined to comment. Credit Suisse's press officer Carly Shearer didn't return calls asking for a comment.
To contact the reporters on this story: Juan Pablo Spinetto in London at jspinetto@bloomberg.netEsteban Duarte en Madrid eduarterubia@bloomberg.net
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GDF Suez Posts Higher First-Half Net; Seeks Nuclear Expansion
By Tara Patel
Sept. 1 (Bloomberg) -- GDF Suez SA, the world's second- biggest utility, reported first-half profit that beat analysts' estimates on higher power and natural-gas prices and said it wants to expand in nuclear energy production in Europe.
Net income rose 14 percent to 3.38 billion euros ($5 billion) from 2.96 billion euros last year, the Paris-based company said today in a statement. That exceeded the 3.16 billion-euro median forecast of 10 analysts surveyed by Bloomberg.
The results are the first since the merger of Gaz de France SA and Suez SA last month. The combined company, which is seeking to challenge Electricite de France SA by gaining more power customers in the domestic market, has said it may unveil plans for a so-called future generation nuclear reactor in Western Europe next year.
``The earnings report was very good, with profitability better than expected,'' Salah Seddik, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion, said in a television interview.
GDF Suez is vying to build and operate an atomic reactor in Bulgaria and is also considering a new project in the western part of the continent, including France. A French plant would be designed for industrial customers in need of large power volumes, Chief Executive Officer Gerard Mestrallet said in an interview today. ``We are interested in all countries'' in Western Europe, he said.
Confirm Targets
The company confirmed financial targets and announced an interim dividend of 0.8 euro a share. It plans to buy back 1 billion euros of shares before the end of the year.
GDF Suez added 1.9 percent to 40.15 euros as of 2:50 p.m. in Paris. The shares have dropped 4.5 percent since their trading debut July 22.
The utility said its average number of shares in the first half of 2008 was 2.17 billion, giving earnings per share of 1.56 euros, according to Bloomberg calculations. It didn't provide its own figures.
Earnings before interest, taxes, depreciation and amortization, or Ebitda, climbed 20 percent to 8.1 billion euros. The median forecast in the survey was for profit of 7.76 billion euros on this basis.
Vice Chairman Jean-Francois Cirelli said five out of nine wells drilled at the exploration and production division were ``successful.''
Higher Production
GDF Suez reported a 24 percent increase in production to 25.7 million barrels of oil equivalent after commissioning new fields in Norway, the U.K. and the Netherlands.
``The exploration and production division exceeded all expectations, related to a much higher achieved price and sound production growth,'' Steven de Proost, an analyst at Dexia NV, wrote in a note.
Gaz de France's net profit rose 13 percent to 1.7 billion euros, while that of Suez increased 11 percent to 2.05 billion euros, the statement said.
Overall sales rose 17 percent to 43.1 billion euros due in part to ``growing energy sales in Europe,'' the statement said.
Power sales volumes increased 6.8 percent in Europe outside the Benelux region with prices rising to 62 euros a megawatt from 52 euros a megawatt, Chief Finance Officer Gerard Lamarche told analysts.
Regulated Rates
French utilities' earnings are capped by regulated household power rates that are among the lowest in Europe. The Finance Ministry last month allowed regulated power rates for households to rise by as much as 2 percent. Charges were allowed to climb by 2 percent for small companies, 6 percent for mid- sized businesses and 8 percent for large consumers. Natural-gas tariffs were allowed by climb by an average of 5 percent.
Gaz de France, which has 10 million household customers in France, said French regulated prices cost the company 179 million euros in lost revenue during the first half due to higher supply costs.
It lost 148,000 natural gas customers to rivals in the French market, which was opened to competition in July, 2007, in the first half. GDF Suez has gained 300,000 electricity customers since the market was opened up.
The ability to offer customers both fuels ``is the motor of of the energy sector,'' Mestrallet said in an interview. ``We want to offer this flexibility.''
The French government has a 36 percent stake in GDF Suez, compared with a controlling interest in Gaz de France.
Ebitda Target
GDF Suez expects growth of more than 10 percent this year for Ebitda, which is expected to reach about 17 billion euros in 2010. The company has said it will make 1 billion euros in cost savings annually by 2013 and invest 10 billion euros a year through 2010.
The company is seeking to double gas reserves to 1.5 billion barrels of oil equivalent from 2006 levels, mainly through external growth, as well as boosting European gas- storage capacity by more than 35 percent by 2013. It also wants to gain as much as a fifth of the French power market by pushing dual gas and electricity supply to clients.
Suez has long signaled its interest in investing in so- called third-generation nuclear reactors. Suez's Electrabel SA unit is Belgium's biggest power company and the owner of the seven atomic generators at the country's two nuclear plants. It's competing with RWE AG to build and run a nuclear plant in Bulgaria at an estimated cost of at least 4 billion euros.
The availability of Electrabel's reactors dropped to less than 85 percent because of planned maintenance that lasted for longer than anticipated, Electrabel Chief Executive Officer Jean-Pierre Hansen said. The reactor availability will improve in the second half, he said.
GDF Suez still backs the building of so-called third generation nuclear reactors along the lines of the European Pressurized Reactor model developed by Areva SA, Mestrallet said. The company is also targeting the Middle East for nuclear energy and is bidding to build a plant in Abu Dhabi with Areva and Total SA.
To contact the reporter on this story: Tara Patel in Paris at Tpatel2@bloomberg.net
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Sept. 1 (Bloomberg) -- GDF Suez SA, the world's second- biggest utility, reported first-half profit that beat analysts' estimates on higher power and natural-gas prices and said it wants to expand in nuclear energy production in Europe.
Net income rose 14 percent to 3.38 billion euros ($5 billion) from 2.96 billion euros last year, the Paris-based company said today in a statement. That exceeded the 3.16 billion-euro median forecast of 10 analysts surveyed by Bloomberg.
The results are the first since the merger of Gaz de France SA and Suez SA last month. The combined company, which is seeking to challenge Electricite de France SA by gaining more power customers in the domestic market, has said it may unveil plans for a so-called future generation nuclear reactor in Western Europe next year.
``The earnings report was very good, with profitability better than expected,'' Salah Seddik, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion, said in a television interview.
GDF Suez is vying to build and operate an atomic reactor in Bulgaria and is also considering a new project in the western part of the continent, including France. A French plant would be designed for industrial customers in need of large power volumes, Chief Executive Officer Gerard Mestrallet said in an interview today. ``We are interested in all countries'' in Western Europe, he said.
Confirm Targets
The company confirmed financial targets and announced an interim dividend of 0.8 euro a share. It plans to buy back 1 billion euros of shares before the end of the year.
GDF Suez added 1.9 percent to 40.15 euros as of 2:50 p.m. in Paris. The shares have dropped 4.5 percent since their trading debut July 22.
The utility said its average number of shares in the first half of 2008 was 2.17 billion, giving earnings per share of 1.56 euros, according to Bloomberg calculations. It didn't provide its own figures.
Earnings before interest, taxes, depreciation and amortization, or Ebitda, climbed 20 percent to 8.1 billion euros. The median forecast in the survey was for profit of 7.76 billion euros on this basis.
Vice Chairman Jean-Francois Cirelli said five out of nine wells drilled at the exploration and production division were ``successful.''
Higher Production
GDF Suez reported a 24 percent increase in production to 25.7 million barrels of oil equivalent after commissioning new fields in Norway, the U.K. and the Netherlands.
``The exploration and production division exceeded all expectations, related to a much higher achieved price and sound production growth,'' Steven de Proost, an analyst at Dexia NV, wrote in a note.
Gaz de France's net profit rose 13 percent to 1.7 billion euros, while that of Suez increased 11 percent to 2.05 billion euros, the statement said.
Overall sales rose 17 percent to 43.1 billion euros due in part to ``growing energy sales in Europe,'' the statement said.
Power sales volumes increased 6.8 percent in Europe outside the Benelux region with prices rising to 62 euros a megawatt from 52 euros a megawatt, Chief Finance Officer Gerard Lamarche told analysts.
Regulated Rates
French utilities' earnings are capped by regulated household power rates that are among the lowest in Europe. The Finance Ministry last month allowed regulated power rates for households to rise by as much as 2 percent. Charges were allowed to climb by 2 percent for small companies, 6 percent for mid- sized businesses and 8 percent for large consumers. Natural-gas tariffs were allowed by climb by an average of 5 percent.
Gaz de France, which has 10 million household customers in France, said French regulated prices cost the company 179 million euros in lost revenue during the first half due to higher supply costs.
It lost 148,000 natural gas customers to rivals in the French market, which was opened to competition in July, 2007, in the first half. GDF Suez has gained 300,000 electricity customers since the market was opened up.
The ability to offer customers both fuels ``is the motor of of the energy sector,'' Mestrallet said in an interview. ``We want to offer this flexibility.''
The French government has a 36 percent stake in GDF Suez, compared with a controlling interest in Gaz de France.
Ebitda Target
GDF Suez expects growth of more than 10 percent this year for Ebitda, which is expected to reach about 17 billion euros in 2010. The company has said it will make 1 billion euros in cost savings annually by 2013 and invest 10 billion euros a year through 2010.
The company is seeking to double gas reserves to 1.5 billion barrels of oil equivalent from 2006 levels, mainly through external growth, as well as boosting European gas- storage capacity by more than 35 percent by 2013. It also wants to gain as much as a fifth of the French power market by pushing dual gas and electricity supply to clients.
Suez has long signaled its interest in investing in so- called third-generation nuclear reactors. Suez's Electrabel SA unit is Belgium's biggest power company and the owner of the seven atomic generators at the country's two nuclear plants. It's competing with RWE AG to build and run a nuclear plant in Bulgaria at an estimated cost of at least 4 billion euros.
The availability of Electrabel's reactors dropped to less than 85 percent because of planned maintenance that lasted for longer than anticipated, Electrabel Chief Executive Officer Jean-Pierre Hansen said. The reactor availability will improve in the second half, he said.
GDF Suez still backs the building of so-called third generation nuclear reactors along the lines of the European Pressurized Reactor model developed by Areva SA, Mestrallet said. The company is also targeting the Middle East for nuclear energy and is bidding to build a plant in Abu Dhabi with Areva and Total SA.
To contact the reporter on this story: Tara Patel in Paris at Tpatel2@bloomberg.net
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Sakakibara Says Japan Needs to Change Weak-Yen Policy
By Stanley White and Shigeki Nozawa
Sept. 1 (Bloomberg) -- Japan should change its weak-yen policy because a stronger exchange rate would help the nation import raw materials and increase investment overseas, said Eisuke Sakakibara, a former top currency-policy official.
``Japan is facing a paradigm shift and needs to change its currency and monetary policy,'' Sakakibara said in a speech at a seminar in Tokyo. ``In the past, Japan's focus was on selling products overseas. Now it must focus more on securing raw materials and commodities, so a stronger yen is clearly in Japan's interest.''
Sakakibara, 67, currently a professor at Tokyo's Waseda University, was dubbed ``Mr. Yen'' because of his ability to influence the foreign-exchange market during his 1997-1999 tenure at the Finance Ministry.
Rapid economic growth in China, India, Brazil and Russia is increasing prices of commodities and leading to greater competition in developing resources overseas, Sakakibara said. The price of oil, gold, corn and rice have all risen to records this year.
Japan lacks companies such as Rio Tinto Group, which is listed in Australia and the U.K., or China National Offshore Oil Corp. that can secure raw materials on a large scale, Sakakibara said. A stronger yen would help Japanese firms invest in mines and raw materials projects in Africa and Brazil, he said.
``Japan needs to change its mindset to a country focused on buying commodities and ensuring there's a stable supply of raw materials,'' Sakakibara said. ``Right now, such a structure is not in place.''
Currency Intervention
The yen is ``extremely'' weak because the Japanese government has regularly intervened by selling the currency to bolster exports and because the Bank of Japan has kept interest rates very low, he said. Japanese authorities sold the currency on all four occasions since 1995 when the yen approached 100 per dollar. Since the BOJ ended its policy of flooding the money market with cash in 2006, it has raised rates twice to 0.5 percent.
The yen rose to 107.66 against the dollar as of 11:03 a.m. in London, from 108.80 late in New York on Aug. 29. It traded at 157.84 yen versus the euro from 159.65. The yen fell to a four- year low versus the dollar and a record low against the euro in June 2007.
Japan's currency is likely to trade in a range of 105 to 110 against the dollar for the time being, Sakakibara said, adding that it may fall as low as 115 if the nation's economy weakens.
Japan should consider selling the euro to try to strengthen the yen, Sakakibara said. That would be easier than selling the dollar as U.S. officials don't want their currency to weaken while the economy struggles with fallout from the collapse of the subprime-mortgage market, he said.
The BOJ should also raise borrowing costs to boost the currency and keep capital from flowing overseas, he said.
Sakakibara is a member of the Asia-Pacific advisory board of Bloomberg LP, the parent of Bloomberg News.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.
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Sept. 1 (Bloomberg) -- Japan should change its weak-yen policy because a stronger exchange rate would help the nation import raw materials and increase investment overseas, said Eisuke Sakakibara, a former top currency-policy official.
``Japan is facing a paradigm shift and needs to change its currency and monetary policy,'' Sakakibara said in a speech at a seminar in Tokyo. ``In the past, Japan's focus was on selling products overseas. Now it must focus more on securing raw materials and commodities, so a stronger yen is clearly in Japan's interest.''
Sakakibara, 67, currently a professor at Tokyo's Waseda University, was dubbed ``Mr. Yen'' because of his ability to influence the foreign-exchange market during his 1997-1999 tenure at the Finance Ministry.
Rapid economic growth in China, India, Brazil and Russia is increasing prices of commodities and leading to greater competition in developing resources overseas, Sakakibara said. The price of oil, gold, corn and rice have all risen to records this year.
Japan lacks companies such as Rio Tinto Group, which is listed in Australia and the U.K., or China National Offshore Oil Corp. that can secure raw materials on a large scale, Sakakibara said. A stronger yen would help Japanese firms invest in mines and raw materials projects in Africa and Brazil, he said.
``Japan needs to change its mindset to a country focused on buying commodities and ensuring there's a stable supply of raw materials,'' Sakakibara said. ``Right now, such a structure is not in place.''
Currency Intervention
The yen is ``extremely'' weak because the Japanese government has regularly intervened by selling the currency to bolster exports and because the Bank of Japan has kept interest rates very low, he said. Japanese authorities sold the currency on all four occasions since 1995 when the yen approached 100 per dollar. Since the BOJ ended its policy of flooding the money market with cash in 2006, it has raised rates twice to 0.5 percent.
The yen rose to 107.66 against the dollar as of 11:03 a.m. in London, from 108.80 late in New York on Aug. 29. It traded at 157.84 yen versus the euro from 159.65. The yen fell to a four- year low versus the dollar and a record low against the euro in June 2007.
Japan's currency is likely to trade in a range of 105 to 110 against the dollar for the time being, Sakakibara said, adding that it may fall as low as 115 if the nation's economy weakens.
Japan should consider selling the euro to try to strengthen the yen, Sakakibara said. That would be easier than selling the dollar as U.S. officials don't want their currency to weaken while the economy struggles with fallout from the collapse of the subprime-mortgage market, he said.
The BOJ should also raise borrowing costs to boost the currency and keep capital from flowing overseas, he said.
Sakakibara is a member of the Asia-Pacific advisory board of Bloomberg LP, the parent of Bloomberg News.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.
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Georgia August Dollar Sales Surge Amid Russia Crisis
By Emma O'Brien
Sept. 1 (Bloomberg) -- Georgia's central bank sold more dollars in August than in any other month in at least nine years as the former Soviet republic sought to support the lari amid its five-day war with neighboring Russia.
The $187.2 million that was sold amounted to almost 13 percent of Georgia's $1.5 billion reserves, according to central bank figures. The sales were the highest since the National Bank of Georgia started to compile data on foreign-exchange interventions on its Web site in January 1999.
Allegations that Georgia attacked Russian peacekeepers and citizens in the breakaway region of South Ossetia spurred Russia to send in forces on Aug. 8. The conflict, condemned by the U.S. and Europe, prompted the National Bank to cut its benchmark interest rate to 11 percent from 12 percent and Standard & Poor's and Fitch Ratings to lower Georgia's credit ratings.
``The ruble tanked during all this, so imagine what would have happened to the lari'' without the dollar sales, said Vladimir Osakovsky, an analyst in Moscow at Milan-based UniCredit SpA, the bank with the largest assets in eastern Europe. ``The stable currency provided an anchor of financial stability amid the crisis.''
The central bank's actions, which included the sale of $12.9 million on the day of Russia's incursion, helped limit the lari's loss against the dollar to 0.1 percent last month, Osakovsky said in an interview.
Stability `Important'
Georgia's stocks and bonds slumped during the conflict. The 7.5 percent 13-year government security slid, pushing the yield 147 basis points higher to 9.94 percent. The yield jumped to a record 10.75 percent on Aug. 11. Bank of Georgia, the only stock listed outside the country, tumbled 32 percent, the biggest monthly drop since it started trading in November 2006.
The dollar sales by the National Bank, led by Governor David Amaglobeli, 32, amounted to about 15 percent of all the currency in circulation in Georgia, according to Osakovsky.
``In Georgia, people look at the exchange rate as an indicator of the whole economy, so it was important to keep it stable,'' said Archil Mestvirishvili, head of the central bank's macroeconomics and statistics department in the capital Tbilisi. ``If the demand for currency was larger than supply we intervened.''
The lari, which is managed by the central bank to limit the impact of its fluctuations on the competitiveness of exports, was little changed at 1.4099 per dollar on Aug. 29.
Russia's ruble, which in August had its worst monthly decline against the dollar since March 1999, fell 0.1 percent to 24.6762 today. The nation's central bank lets the ruble trade freely within a band against a basket made up of dollars and euros. It lost 1.7 percent versus the basket last month.
Georgian economic growth will probably be 9 percent this year, down from 12.4 percent in 2007, Amaglobeli said Aug. 21, nine days after President Dmitry Medvedev called off Russia's military operation. Russian peacekeepers remain in the Georgian port city of Poti and in the separatist regions of South Ossetia and Abkhazia, whose independence Russia has recognized.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Sept. 1 (Bloomberg) -- Georgia's central bank sold more dollars in August than in any other month in at least nine years as the former Soviet republic sought to support the lari amid its five-day war with neighboring Russia.
The $187.2 million that was sold amounted to almost 13 percent of Georgia's $1.5 billion reserves, according to central bank figures. The sales were the highest since the National Bank of Georgia started to compile data on foreign-exchange interventions on its Web site in January 1999.
Allegations that Georgia attacked Russian peacekeepers and citizens in the breakaway region of South Ossetia spurred Russia to send in forces on Aug. 8. The conflict, condemned by the U.S. and Europe, prompted the National Bank to cut its benchmark interest rate to 11 percent from 12 percent and Standard & Poor's and Fitch Ratings to lower Georgia's credit ratings.
``The ruble tanked during all this, so imagine what would have happened to the lari'' without the dollar sales, said Vladimir Osakovsky, an analyst in Moscow at Milan-based UniCredit SpA, the bank with the largest assets in eastern Europe. ``The stable currency provided an anchor of financial stability amid the crisis.''
The central bank's actions, which included the sale of $12.9 million on the day of Russia's incursion, helped limit the lari's loss against the dollar to 0.1 percent last month, Osakovsky said in an interview.
Stability `Important'
Georgia's stocks and bonds slumped during the conflict. The 7.5 percent 13-year government security slid, pushing the yield 147 basis points higher to 9.94 percent. The yield jumped to a record 10.75 percent on Aug. 11. Bank of Georgia, the only stock listed outside the country, tumbled 32 percent, the biggest monthly drop since it started trading in November 2006.
The dollar sales by the National Bank, led by Governor David Amaglobeli, 32, amounted to about 15 percent of all the currency in circulation in Georgia, according to Osakovsky.
``In Georgia, people look at the exchange rate as an indicator of the whole economy, so it was important to keep it stable,'' said Archil Mestvirishvili, head of the central bank's macroeconomics and statistics department in the capital Tbilisi. ``If the demand for currency was larger than supply we intervened.''
The lari, which is managed by the central bank to limit the impact of its fluctuations on the competitiveness of exports, was little changed at 1.4099 per dollar on Aug. 29.
Russia's ruble, which in August had its worst monthly decline against the dollar since March 1999, fell 0.1 percent to 24.6762 today. The nation's central bank lets the ruble trade freely within a band against a basket made up of dollars and euros. It lost 1.7 percent versus the basket last month.
Georgian economic growth will probably be 9 percent this year, down from 12.4 percent in 2007, Amaglobeli said Aug. 21, nine days after President Dmitry Medvedev called off Russia's military operation. Russian peacekeepers remain in the Georgian port city of Poti and in the separatist regions of South Ossetia and Abkhazia, whose independence Russia has recognized.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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U.K. Pound Falls Below $1.80 for First Time Since April 2006
By Lukanyo Mnyanda and Andrew MacAskill
Sept. 1 (Bloomberg) -- The British pound fell below $1.80 for the first time since April 2006 after Chancellor of the Exchequer Alistair Darling said the U.K. faced the worst economic slump in 60 years.
The pound also dropped to a record low versus the euro as investors cut wagers on higher interest rates by the Bank of England. Darling told the Guardian newspaper in an interview on Aug. 30 the economic slowdown would be ``profound and long- lasting.'' U.K. bonds rose, pushing the yield on the two-year gilt to the lowest level since May, as an industry report showed house prices slid last month by the most since at least 2001.
``The U.K. data flow is poor and it's now just a question of which is the straw that breaks sterling's back,'' said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group. ``We're in the process of moving to rate cuts and it's now just a question of when not if.''
The pound fell as much as 1.2 percent to $1.7995, the lowest level since April 2006, before trading at $1.8022 by 2:26 p.m. in London, from $1.8211 last week. Against the euro, the pound slumped to 81.39 pence, the weakest level since the single currency's debut in 1999, before trading at 81.09 pence.
The average cost of a home in England and Wales slipped an annual 5.3 percent, Hometrack Ltd., a London-based research company, said today, while the Bank of England said in a separate report mortgage approvals fell to the lowest level since 1999. The central bank has cut its benchmark lending rate three times since December, to 5 percent.
Bonds Advance
Gilts rose, with the yield on the 10-year bond dropping 2 basis points 4.46 percent. The 5 percent security due March 2018 climbed 0.15 or 1.5 pounds per 1,000-pound face amount, to 104.02. The yield on the two-year gilt, which is more sensitive to interest-rate changes, fell as much as 9 basis points to 4.42 percent, the lowest since May 13, and was at 4.44 percent. Bond yields move inversely to prices.
The U.K. economy, the second-biggest in Europe, faltered after banks choked off credit following the collapse of the U.S. subprime-mortgage market, while an inflation rate at more than twice its 2 percent target has prevented the Bank of England from lowering borrowing costs to boost expansion.
The government now has its ``work cut out'' to persuade voters it deserves another term in power, Darling told the Guardian. He said ministers had ``patently'' failed to explain problems to the public. The Chancellor's comments contrast with those of Prime Minister Gordon Brown, who said Britain is better placed to weather global economic storms now than in the late 1970s and in the early 1990s.
`Split At Top'
``At a time when the survey numbers are coming in at record lows, the last thing you want to hear is there is a split at the top between the prime minister and the guy running the economy,'' said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. ``It does not fill investors with a great deal of confidence, so I don't think it's surprising sterling has collapsed.'' The currency may trade at $1.75 in the next six weeks, London-based Derrick said.
The difference in yield, or spread, between U.K. government bonds and their German counterparts has narrowed as traders bet the end of a decade-long rally in the nation's housing market will persuade policy makers to cut interest rates. The 10-year gilt yielded 33 basis points more than the German bund, down from 69 basis points on Feb. 25, the widest this year.
Ten-year gilts yielded 3 basis points more than two-year notes today, the first time they have yielded more than the shorter dated notes since Aug. 20.
``The U.K. economy is looking very soft,'' said Mitul Kotecha, global head of currency strategy in Hong Kong at Calyon, the investment banking unit of France's Credit Agricole SA. ``Sterling looks most vulnerable and there's some more scope for weakness against the dollar.''
The implied yield on the March short-sterling futures contract dropped 13 basis points today to 5.06 percent, indicating investors are reducing bets on rate increases.
The nation's bonds have returned 4.8 percent in the past two months, compared with 3.4 percent for their European counterparts, according to Merrill Lynch & Co.'s EMU Direct Government and U.K. Gilts Master indexes.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
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Sept. 1 (Bloomberg) -- The British pound fell below $1.80 for the first time since April 2006 after Chancellor of the Exchequer Alistair Darling said the U.K. faced the worst economic slump in 60 years.
The pound also dropped to a record low versus the euro as investors cut wagers on higher interest rates by the Bank of England. Darling told the Guardian newspaper in an interview on Aug. 30 the economic slowdown would be ``profound and long- lasting.'' U.K. bonds rose, pushing the yield on the two-year gilt to the lowest level since May, as an industry report showed house prices slid last month by the most since at least 2001.
``The U.K. data flow is poor and it's now just a question of which is the straw that breaks sterling's back,'' said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group. ``We're in the process of moving to rate cuts and it's now just a question of when not if.''
The pound fell as much as 1.2 percent to $1.7995, the lowest level since April 2006, before trading at $1.8022 by 2:26 p.m. in London, from $1.8211 last week. Against the euro, the pound slumped to 81.39 pence, the weakest level since the single currency's debut in 1999, before trading at 81.09 pence.
The average cost of a home in England and Wales slipped an annual 5.3 percent, Hometrack Ltd., a London-based research company, said today, while the Bank of England said in a separate report mortgage approvals fell to the lowest level since 1999. The central bank has cut its benchmark lending rate three times since December, to 5 percent.
Bonds Advance
Gilts rose, with the yield on the 10-year bond dropping 2 basis points 4.46 percent. The 5 percent security due March 2018 climbed 0.15 or 1.5 pounds per 1,000-pound face amount, to 104.02. The yield on the two-year gilt, which is more sensitive to interest-rate changes, fell as much as 9 basis points to 4.42 percent, the lowest since May 13, and was at 4.44 percent. Bond yields move inversely to prices.
The U.K. economy, the second-biggest in Europe, faltered after banks choked off credit following the collapse of the U.S. subprime-mortgage market, while an inflation rate at more than twice its 2 percent target has prevented the Bank of England from lowering borrowing costs to boost expansion.
The government now has its ``work cut out'' to persuade voters it deserves another term in power, Darling told the Guardian. He said ministers had ``patently'' failed to explain problems to the public. The Chancellor's comments contrast with those of Prime Minister Gordon Brown, who said Britain is better placed to weather global economic storms now than in the late 1970s and in the early 1990s.
`Split At Top'
``At a time when the survey numbers are coming in at record lows, the last thing you want to hear is there is a split at the top between the prime minister and the guy running the economy,'' said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. ``It does not fill investors with a great deal of confidence, so I don't think it's surprising sterling has collapsed.'' The currency may trade at $1.75 in the next six weeks, London-based Derrick said.
The difference in yield, or spread, between U.K. government bonds and their German counterparts has narrowed as traders bet the end of a decade-long rally in the nation's housing market will persuade policy makers to cut interest rates. The 10-year gilt yielded 33 basis points more than the German bund, down from 69 basis points on Feb. 25, the widest this year.
Ten-year gilts yielded 3 basis points more than two-year notes today, the first time they have yielded more than the shorter dated notes since Aug. 20.
``The U.K. economy is looking very soft,'' said Mitul Kotecha, global head of currency strategy in Hong Kong at Calyon, the investment banking unit of France's Credit Agricole SA. ``Sterling looks most vulnerable and there's some more scope for weakness against the dollar.''
The implied yield on the March short-sterling futures contract dropped 13 basis points today to 5.06 percent, indicating investors are reducing bets on rate increases.
The nation's bonds have returned 4.8 percent in the past two months, compared with 3.4 percent for their European counterparts, according to Merrill Lynch & Co.'s EMU Direct Government and U.K. Gilts Master indexes.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
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Pictet, Aberdeen Sell Korean Won as BOK Fights Drop
By Kim Kyoungwha
Sept. 1 (Bloomberg) -- Pictet Asset Management Ltd. and Aberdeen Asset Management Plc are betting the Bank of Korea will lose the battle to stem the won's drop, thwarting its attempt to curb the fastest inflation in a decade.
The won slumped as much as 3.2 percent against the dollar today, after a 7 percent drop in August, as price increases and a slowing economy prompted bond and stock funds to move money out of the country. Foreign-exchange reserves fell by $16.7 billion in the four months through July as the central bank's won-buying failed to halt the slide. The government is ``seriously concerned'' about the decline, said Choi Jong Ku, the finance ministry's top currency official.
The slump in reserves ``weakens the hand'' of the central bank, said Wee-Ming Ting, head of Asian fixed income in Singapore for Pictet, part of Switzerland's largest privately held bank for the wealthy. ``We are short the won,'' he said, referring to positions that profit from further declines.
The drop surprised strategists, who predicted at the start of the year that the won would climb 5 percent to 890 per dollar, according to a Bloomberg News survey of 22 estimates. The won, which fell 2.5 percent to 1,116 a dollar as of the 3 p.m. close in Seoul, is weaker than the median year-end forecast of 1049. Last month's depreciation was the steepest since 1998, during the Asian financial crisis.
``The government is seriously concerned about the excessive won decline,'' the ministry's Choi said in a statement today. ``We will take necessary steps if the decline continues.''
Stock, Bond Sales
Consumer prices in Asia's fourth-largest economy grew 4.7 percent during the first eight months, the fastest since 1998, increasing pressure on the central bank to raise its benchmark rate from an eight-year high of 5.25 percent. Confidence among consumers in July was the lowest since 2000 and spending by households, saddled with record debt, fell in the second quarter for the first time in four years.
International investors sold a record 25 trillion won ($22 billion) more Korean shares than they bought this year, stock exchange data shows. The Kospi stock index fell 25 percent.
Net sales of the nation's bonds totaled $4.2 billion in June and July, snapping a two-year run of monthly purchases, according to central bank figures. Benchmark five-year yields climbed 103 basis points, or 1.03 percentage points, in the past four months to 5.99 percent.
Including dollar sales in the forwards market, the Bank of Korea has spent about $43.7 billion supporting the won this year, according to Richard Yetsenga, a strategist in Hong Kong with HSBC Holdings Plc.
Finance Minister Kang Man Soo today said the government had tried to stabilize the won's ``drastic'' decline and Goldman Sachs Group Inc. predicts the government will have some success, forecasting an exchange rate of 1,040 in three months.
`One-Way Bet'
The won is ``not a one-way bet,'' said Goohoon Kwon, a Seoul-based economist with Goldman, the world's biggest securities firm. Policy makers could raise rates, helping attract funds seeking higher returns, he said.
Aberdeen Asset, Scotland's largest independent money manager, is betting the Bank of Korea will fail, forecasting the won will be as weak as 1,200 per dollar in a year's time.
``We have been short the won and are generally negative over the next three to six months,'' said Anthony Michael, who oversees the equivalent of $3.7 billion of Asian assets as the firm's regional head of fixed income in Singapore. ``Growth in Korea is going to slow substantially.''
The $970 billion economy expanded 4.8 percent in the second quarter from a year earlier, the slowest since the first three months of 2007, when it grew 4 percent. The trade balance, which swung to a deficit in December for the first time in five years, recorded a shortfall of $3.23 billion in August.
Overseas Borrowings
An increase in South Korea's overseas borrowings is also driving funds out of the country, said Dwyfor Evans, a strategist with State Street Global Markets in Hong Kong.
Short-term overseas debt, external borrowings that mature in a year, almost tripled to $175.65 billion as of June 30 from $65.9 billion at the end of 2005, official figures show.
The increase was mainly caused by exporters' locking in dollar rates for overseas earnings, Bank of Korea Deputy Governor Rhee Gwang-Ju said in a July interview. This year's decline in Asian currencies doesn't signal a repeat of the financial crisis a decade ago because central banks have more reserves, he said.
``Potential difficulties with rolling over the debt may lead to a sharp drawdown of reserves and pressure on the won,'' said Dariusz Kowalczyk, a strategist with CFC Seymour Ltd. in Hong Kong, who has the most bearish estimate in the survey. He predicts the won will end the year at 1,200 per dollar.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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East European Currencies: Romanian Leu Rises as Growth Quickens
By Yon Pulkrabek
Sept. 1 (Bloomberg) -- Romania's leu advanced against the euro and dollar after a report showed the country's economy grew faster than expected in the second quarter. The Hungarian forint fell for the sixth time in seven days.
The leu climbed for a fourth day versus the euro after the Bucharest-based National Statistics Institute said gross domestic product expanded 9.3 percent, from 8.2 percent in the first quarter. That compared with a median estimate of 8.6 percent in a Bloomberg News survey of nine economists.
``Accelerating GDP should help the leu strengthen versus the euro in the short term,'' Nicolaie Alexandru-Chidesciuc, an analyst at ING Group in Bucharest, wrote in a client note after the release of the data. ``We look for leu appreciation versus the euro before the Romanian central bank's rate-setting meeting on Sept. 25.''
The leu advanced to 3.5162 per euro by 11:32 a.m. in Bucharest, from 3.5324 on Aug. 29, and gained 0.2 percent to 2.4026 per dollar.
Romanian central bank Governor Mugur Isarescu last month predicted gross domestic product would increase 9 percent in 2008 and warned the ``overheating'' economy is stoking inflation and deepening the current-account deficit.
Policy makers raised the nation's main interest rate to 10.25 percent in July, the highest level in the European Union, as inflation accelerated to 9 percent, the fastest pace in three years.
In other trading, the forint dropped to 238.06 per euro, from 236.84 on Aug. 29, when it gained by the most in two weeks.
Poland's zloty declined to 3.3360 per euro, from 3.3323 at the end of last week, and the Czech koruna was steady at 24.795 against the European Union's common currency.
The Slovak koruna and Turkish lira were little changed at 30.325 per euro and 1.1838 per dollar, respectively.
To contact the reporter on this story: Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net
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Sept. 1 (Bloomberg) -- Romania's leu advanced against the euro and dollar after a report showed the country's economy grew faster than expected in the second quarter. The Hungarian forint fell for the sixth time in seven days.
The leu climbed for a fourth day versus the euro after the Bucharest-based National Statistics Institute said gross domestic product expanded 9.3 percent, from 8.2 percent in the first quarter. That compared with a median estimate of 8.6 percent in a Bloomberg News survey of nine economists.
``Accelerating GDP should help the leu strengthen versus the euro in the short term,'' Nicolaie Alexandru-Chidesciuc, an analyst at ING Group in Bucharest, wrote in a client note after the release of the data. ``We look for leu appreciation versus the euro before the Romanian central bank's rate-setting meeting on Sept. 25.''
The leu advanced to 3.5162 per euro by 11:32 a.m. in Bucharest, from 3.5324 on Aug. 29, and gained 0.2 percent to 2.4026 per dollar.
Romanian central bank Governor Mugur Isarescu last month predicted gross domestic product would increase 9 percent in 2008 and warned the ``overheating'' economy is stoking inflation and deepening the current-account deficit.
Policy makers raised the nation's main interest rate to 10.25 percent in July, the highest level in the European Union, as inflation accelerated to 9 percent, the fastest pace in three years.
In other trading, the forint dropped to 238.06 per euro, from 236.84 on Aug. 29, when it gained by the most in two weeks.
Poland's zloty declined to 3.3360 per euro, from 3.3323 at the end of last week, and the Czech koruna was steady at 24.795 against the European Union's common currency.
The Slovak koruna and Turkish lira were little changed at 30.325 per euro and 1.1838 per dollar, respectively.
To contact the reporter on this story: Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net
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U.S. Oil Output, Refineries Close as Gustav Nears
By Alexander Kwiatkowski and Nesa Subrahmaniyan
Sept. 1 (Bloomberg) -- Hurricane Gustav shut almost all oil output in the Gulf of Mexico and at least 10 percent of U.S. refinery capacity as Exxon Mobil Corp., Valero Energy Corp., Royal Dutch Shell Plc and other companies took safety measures.
The threat of a repeat of Hurricane Katrina in 2005 closed eight refineries across Louisiana and slowed operations at four in eastern Texas, cutting gasoline supplies as some 2 million people fled the coast. More than 96 percent of Gulf Coast oil production and 82 percent of gas output is shut, the U.S. Minerals Management Service said.
``Flooding is inevitable and so would be power supply cuts even if hurricane damage is minimal,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp in Tokyo. ``If there's a big stoppage, it will depend on how long any shutdown will be for prices to react.''
Crude oil and natural gas reversed earlier gains after the National Hurricane Center said the storm, now a Category 3 hurricane with winds of 115 miles an hour, is unlikely to intensify before striking land today. Hurricane Katrina, which devastated the region's production and refining capacity in 2005, was the same category of storm when it made landfall.
Port Fourchon
As of 7 a.m. local time, the center of the hurricane was about 85 miles (135 kilometers) south of New Orleans and 20 miles off Port Fourchon, Louisiana, the National Hurricane Center said on its Web site.
``It's raining really hard and the wind is now at about 110 miles per hour,'' Ted Falgout, director of Port Fourchon, said over the phone in an interview today at about 7 a.m. local time. ``At the moment I don't have a clue on the damage,'' he said, speaking from his houseboat located 25 miles north of the port.
BP Plc and Royal Dutch Shell Plc are among companies that have halted about 1.25 million barrels a day of oil and 6.09 billion cubic feet of gas output, the U.S. Minerals Management Service said in a report on its Web site yesterday. The U.S. Gulf Coast accounts for 26 percent of U.S. oil and 14 percent of natural-gas production.
At least eight Gulf Coast refineries are closed, accounting for 9.8 percent of the country's capacity, or about 1.56 million barrels a day of crude. Almost half of U.S. refining capacity is located in the region. In 2005, Hurricanes Katrina and Rita idled about 19 percent of the country's refining capacity.
Crude oil for October delivery fell $1.56, or 1.4 percent, to $113.90 a barrel in electronic trading on the New York Mercantile Exchange at 1:03 p.m. London time. Prices earlier gained as much as $2.54, or 2.2 percent, to $118 a barrel.
Evacuations
Workers from 86 offshore rigs and 518 production platforms have been evacuated, the agency said. The Gulf normally produces about 1.3 million barrels of oil and 7.4 billion cubic feet of gas a day.
BHP Billiton Ltd. shut and evacuated staff at the $1.1 billion Neptune oil project in the Gulf of Mexico. Production from the project, located about 120 miles (195 kilometers) off the Louisiana coast, reached 50,000 barrels of oil per day on July 24 after starting last month.
Shell today plans to close its Capline crude oil pipeline system because of dwindling supplies from fields, the company said in a statement. The Louisiana Offshore Oil Port, the biggest U.S. oil import terminal, shut on Aug. 30.
Capline runs 650 miles from St. James, Louisiana, to Patoka, Illinois, and has capacity to transport 1.2 million barrels of oil a day. Shell's Houma, Louisiana-to-Houston oil pipeline has already ceased operations. Other onshore pipelines and tank farms have closed, the company said.
Natural Gas Hub
Chevron Corp.'s Sabine Pipe Line LLC began to shut its pipelines and the Henry Hub natural gas connection point as mandatory evacuations were declared. Henry Hub, in Erath, Louisiana, is the pricing point for Nymex natural-gas futures.
Natural gas for October delivery fell as much as 34 cents, or 4.2 percent, to $7.606 per million British thermal units on Nymex. It was at $7.649 per million Btus at 1:02 p.m. in London.
Refineries in Texas and Louisiana can process 6.44 million barrels a day of oil, turning it into products including gasoline and diesel fuel. About 28 percent, or 2.36 million barrels a day, of the U.S. gasoline supply is produced along the Gulf Coast, according to the Energy Department.
Valero, the largest U.S. refiner, shut down its St. Charles, Louisiana refinery, which can process 185,000 barrels per day. San Antonio-based Valero's Port Arthur, Houston and Texas City, Texas refineries were running at reduced rates. Combined, the plants can process about 572,000 barrels a day.
Motiva Enterprises LLC, a Houston-based joint venture of Shell and Saudi Arabia's state oil company, said it shut its Norco, Louisiana, plant, which can process 236,400 barrels a day. Motiva also reduced rates at its Convent refinery, which can process about 235,000 barrels a day, and its 285,000 barrel- a-day Port Arthur plant.
Lake Charles
ConocoPhillips, based in Houston, closed its Lake Charles, Louisiana, refinery, which can process 239,000 barrels a day, and its Alliance refinery in Belle Chase, Louisiana, which can process about 247,000 barrels per day.
Houston-based Marathon Oil Corp. halted the Garyville, Louisiana, refinery, which can process about 256,000 barrels a day. El Dorado, Arkansas-based Murphy Oil Corp. shut its Meraux, Louisiana, plant located near New Orleans. The refinery can process about 120,000 barrels a day.
Chalmette Refining LLC, a joint venture of Exxon and Petroleos de Venezuela SA, shut its Chalmette, Louisiana, plant. The refinery can process about 193,000 barrels per day.
Exxon also reduced output at its 503,000 barrel-a-day Baton Rouge refinery and its 567,000 barrels-a-day Baytown refinery in Texas, news agency Reuters reported, citing unidentified people with knowledge of operations.
Alon USA Energy Inc. based in Dallas, shut its refinery at Krotz Springs, Louisiana, which can process about 80,000 barrels a day.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netNesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
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Sept. 1 (Bloomberg) -- Hurricane Gustav shut almost all oil output in the Gulf of Mexico and at least 10 percent of U.S. refinery capacity as Exxon Mobil Corp., Valero Energy Corp., Royal Dutch Shell Plc and other companies took safety measures.
The threat of a repeat of Hurricane Katrina in 2005 closed eight refineries across Louisiana and slowed operations at four in eastern Texas, cutting gasoline supplies as some 2 million people fled the coast. More than 96 percent of Gulf Coast oil production and 82 percent of gas output is shut, the U.S. Minerals Management Service said.
``Flooding is inevitable and so would be power supply cuts even if hurricane damage is minimal,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp in Tokyo. ``If there's a big stoppage, it will depend on how long any shutdown will be for prices to react.''
Crude oil and natural gas reversed earlier gains after the National Hurricane Center said the storm, now a Category 3 hurricane with winds of 115 miles an hour, is unlikely to intensify before striking land today. Hurricane Katrina, which devastated the region's production and refining capacity in 2005, was the same category of storm when it made landfall.
Port Fourchon
As of 7 a.m. local time, the center of the hurricane was about 85 miles (135 kilometers) south of New Orleans and 20 miles off Port Fourchon, Louisiana, the National Hurricane Center said on its Web site.
``It's raining really hard and the wind is now at about 110 miles per hour,'' Ted Falgout, director of Port Fourchon, said over the phone in an interview today at about 7 a.m. local time. ``At the moment I don't have a clue on the damage,'' he said, speaking from his houseboat located 25 miles north of the port.
BP Plc and Royal Dutch Shell Plc are among companies that have halted about 1.25 million barrels a day of oil and 6.09 billion cubic feet of gas output, the U.S. Minerals Management Service said in a report on its Web site yesterday. The U.S. Gulf Coast accounts for 26 percent of U.S. oil and 14 percent of natural-gas production.
At least eight Gulf Coast refineries are closed, accounting for 9.8 percent of the country's capacity, or about 1.56 million barrels a day of crude. Almost half of U.S. refining capacity is located in the region. In 2005, Hurricanes Katrina and Rita idled about 19 percent of the country's refining capacity.
Crude oil for October delivery fell $1.56, or 1.4 percent, to $113.90 a barrel in electronic trading on the New York Mercantile Exchange at 1:03 p.m. London time. Prices earlier gained as much as $2.54, or 2.2 percent, to $118 a barrel.
Evacuations
Workers from 86 offshore rigs and 518 production platforms have been evacuated, the agency said. The Gulf normally produces about 1.3 million barrels of oil and 7.4 billion cubic feet of gas a day.
BHP Billiton Ltd. shut and evacuated staff at the $1.1 billion Neptune oil project in the Gulf of Mexico. Production from the project, located about 120 miles (195 kilometers) off the Louisiana coast, reached 50,000 barrels of oil per day on July 24 after starting last month.
Shell today plans to close its Capline crude oil pipeline system because of dwindling supplies from fields, the company said in a statement. The Louisiana Offshore Oil Port, the biggest U.S. oil import terminal, shut on Aug. 30.
Capline runs 650 miles from St. James, Louisiana, to Patoka, Illinois, and has capacity to transport 1.2 million barrels of oil a day. Shell's Houma, Louisiana-to-Houston oil pipeline has already ceased operations. Other onshore pipelines and tank farms have closed, the company said.
Natural Gas Hub
Chevron Corp.'s Sabine Pipe Line LLC began to shut its pipelines and the Henry Hub natural gas connection point as mandatory evacuations were declared. Henry Hub, in Erath, Louisiana, is the pricing point for Nymex natural-gas futures.
Natural gas for October delivery fell as much as 34 cents, or 4.2 percent, to $7.606 per million British thermal units on Nymex. It was at $7.649 per million Btus at 1:02 p.m. in London.
Refineries in Texas and Louisiana can process 6.44 million barrels a day of oil, turning it into products including gasoline and diesel fuel. About 28 percent, or 2.36 million barrels a day, of the U.S. gasoline supply is produced along the Gulf Coast, according to the Energy Department.
Valero, the largest U.S. refiner, shut down its St. Charles, Louisiana refinery, which can process 185,000 barrels per day. San Antonio-based Valero's Port Arthur, Houston and Texas City, Texas refineries were running at reduced rates. Combined, the plants can process about 572,000 barrels a day.
Motiva Enterprises LLC, a Houston-based joint venture of Shell and Saudi Arabia's state oil company, said it shut its Norco, Louisiana, plant, which can process 236,400 barrels a day. Motiva also reduced rates at its Convent refinery, which can process about 235,000 barrels a day, and its 285,000 barrel- a-day Port Arthur plant.
Lake Charles
ConocoPhillips, based in Houston, closed its Lake Charles, Louisiana, refinery, which can process 239,000 barrels a day, and its Alliance refinery in Belle Chase, Louisiana, which can process about 247,000 barrels per day.
Houston-based Marathon Oil Corp. halted the Garyville, Louisiana, refinery, which can process about 256,000 barrels a day. El Dorado, Arkansas-based Murphy Oil Corp. shut its Meraux, Louisiana, plant located near New Orleans. The refinery can process about 120,000 barrels a day.
Chalmette Refining LLC, a joint venture of Exxon and Petroleos de Venezuela SA, shut its Chalmette, Louisiana, plant. The refinery can process about 193,000 barrels per day.
Exxon also reduced output at its 503,000 barrel-a-day Baton Rouge refinery and its 567,000 barrels-a-day Baytown refinery in Texas, news agency Reuters reported, citing unidentified people with knowledge of operations.
Alon USA Energy Inc. based in Dallas, shut its refinery at Krotz Springs, Louisiana, which can process about 80,000 barrels a day.
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netNesa Subrahmaniyan in Singapore at nesas@bloomberg.net.
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Platinum Futures Drop on Speculation Commodity Demand May Wane
By Dave McCombs
Sept. 1 (Bloomberg) -- Platinum futures in Tokyo fell for the first time in five days as crude oil prices gained less-than- expected on Hurricane Gustav, prompting speculation that investor demand for commodities may be fading.
The metal dropped as much as 3.6 percent as the hurricane approached the U.S. Gulf coast, halting most regional oil and gas output. Some traders had expected the shutdowns to cause a bigger surge in oil prices, said Kazuhiko Saito, a strategist at Interes Capital Management.
``Crude oil isn't rallying much, so after the open today, platinum and gold turned down,'' Saito said by phone in Tokyo.
Platinum for August delivery dropped 1.8 percent to close at 4,985 yen a gram ($1,437 an ounce) on the Tokyo Commodity Exchange. The most-active contract fell 16 percent in August, the biggest monthly decline since October 1998.
Metal for immediate delivery sank $27.25 to $1,459.25 an ounce at 5:39 p.m. Tokyo time, 1.8 percent less than in New York on Aug. 29.
Futures are likely to stay at or below 5,000 yen a gram for the rest of the week, Saito said.
Platinum, used in jewelry and vehicle exhaust systems, has dropped 6.6 percent this year in Tokyo on speculation that a spreading slowdown in global economic growth would cut car sales.
As for Gustav, ``the market has taken it in a very calm way,'' said Bob Takai, general manager of financial services at Sumitomo Corp., Japan's third-biggest trading company. `` At the moment, general sentiment is not very positive for the commodities complex.''
Platinum consumption by automakers accounts for more than 60 percent of global platinum demand, according to Johnson Matthey Plc, which makes about one-third of the world's auto catalysts.
Crude has dropped 21 percent from the record high $147.27 a barrel set on July 11, while platinum futures are down 33 percent from the all-time high 7,427 yen a gram set in March. Oil for October delivery rose 54 cents, or 0.5 percent, to $116 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 5:52 p.m. in Tokyo.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net
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Sept. 1 (Bloomberg) -- Platinum futures in Tokyo fell for the first time in five days as crude oil prices gained less-than- expected on Hurricane Gustav, prompting speculation that investor demand for commodities may be fading.
The metal dropped as much as 3.6 percent as the hurricane approached the U.S. Gulf coast, halting most regional oil and gas output. Some traders had expected the shutdowns to cause a bigger surge in oil prices, said Kazuhiko Saito, a strategist at Interes Capital Management.
``Crude oil isn't rallying much, so after the open today, platinum and gold turned down,'' Saito said by phone in Tokyo.
Platinum for August delivery dropped 1.8 percent to close at 4,985 yen a gram ($1,437 an ounce) on the Tokyo Commodity Exchange. The most-active contract fell 16 percent in August, the biggest monthly decline since October 1998.
Metal for immediate delivery sank $27.25 to $1,459.25 an ounce at 5:39 p.m. Tokyo time, 1.8 percent less than in New York on Aug. 29.
Futures are likely to stay at or below 5,000 yen a gram for the rest of the week, Saito said.
Platinum, used in jewelry and vehicle exhaust systems, has dropped 6.6 percent this year in Tokyo on speculation that a spreading slowdown in global economic growth would cut car sales.
As for Gustav, ``the market has taken it in a very calm way,'' said Bob Takai, general manager of financial services at Sumitomo Corp., Japan's third-biggest trading company. `` At the moment, general sentiment is not very positive for the commodities complex.''
Platinum consumption by automakers accounts for more than 60 percent of global platinum demand, according to Johnson Matthey Plc, which makes about one-third of the world's auto catalysts.
Crude has dropped 21 percent from the record high $147.27 a barrel set on July 11, while platinum futures are down 33 percent from the all-time high 7,427 yen a gram set in March. Oil for October delivery rose 54 cents, or 0.5 percent, to $116 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 5:52 p.m. in Tokyo.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net
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