(Adds detail)
OTTAWA, Sept 3 (Reuters) - The Bank of Canada held its key interest rate steady on Wednesday, and while it gave no indication of future interest rate moves, it was more downbeat on the prospects for U.S. and Canadian economic growth.
"The bank judges that the current level of the target for the overnight rate remains appropriately accommodative," it said in a statement outlining its decision to keep the overnight rate at 3 percent.
The move was widely expected. All but one of Canada's primary securities dealers had forecast the bank would hold rates steady.
Also as expected, the bank was slightly more dovish in its tone, possibly leaving the door open to resume a rate-cutting cycle later this year after staying on the sidelines since April. It highlighted a concern that the U.S. economy could perform worse than the 1.5 percent growth it had projected for next year.
"There is an increased risk of a more pronounced interplay between weakness in the U.S. economy and tightness in credit conditions that could affect the U.S. outlook for 2009," it said.
Canada's economy has fared worse than the U.S. economy so far this year but typically feels the fallout from any economic trouble south of the border.
Domestic growth in July was below its expectations but that it remained near the economy's production potential. The bank had projected third-quarter growth in Canada of 1.3 percent.
On the other hand, it said the U.S. economy and global financial markets have so far evolved roughly in line with expectations.
The recent decline in commodity prices, triggered by a slowdown in global growth, has been a major factor driving the Canadian dollar lower versus the U.S. currency.
The global weakness and the weaker currency will have "opposing effects" on Canadian growth.
Growth in July is slightly lower than expected but is still near production potential, and domestic demand remains strong, the bank said.
It repeated its view that total and core inflation would converge at the 2 percent target in the second half of 2009 and that the temporary spike in total inflation between now and early 2009 would be lower than projected. (Reporting by Louise Egan; Editing by Frank McGurty)
Read more...
Wednesday, September 3, 2008
Oil falls below $109 on demand, Gustav threat eases
By Matthew Robinson
LONDON (Reuters) - Oil fell below $109 a barrel on Wednesday, weighed down by slowing demand in the United States and other consuming nations and signs the U.S. oil sector would recover quickly from Hurricane Gustav.
U.S. crude traded down $1.44 to $108.27 a barrel by 8:20 a.m. EDT after settling below its 200-day moving average, a key technical level, for the first time since May 2007 on Tuesday.
London Brent crude fell $1.20 to $107.14 a barrel.
Prices have fallen by more than $7 from Friday after Hurricane Gustav proved to be less devastating than feared.
Initial checks on U.S. Gulf of Mexico energy installations showed little damage, and the Louisiana Offshore Oil Port (LOOP) -- the nation's only deepwater port -- expects to resume operations in the next couple of days.
Companies had closed 13 refineries and shut in all of the 1.3 million barrels per day (bpd) of oil production in the Gulf and 95.4 percent of the region's natural gas output.
Now the storm has passed, analysts said slowing oil demand in the United States and other consumer nations would continue to depress oil prices, which have dropped from a record of $147.27 on July 11.
DEMAND DESTRUCTION
"It's the economy, economy, economy. Everyone's worried about demand destruction," said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp.
Surging oil demand in emerging economies such as China and India underpinned a six-year rally in crude prices that sent prices up sevenfold at their peak.
Further strength this year came from a rush of cash from investors buying commodities as a hedge against inflation and the weak U.S. dollar. But the dollar has since rallied, hitting an 11-month high against a basket of major currencies on Wednesday.
The rapid changes on the commodities market have been bruising for some.
On Tuesday, Ospraie Management LLC said it would close down a flagship fund, although it still manages $4 billion in other investment funds.
Traders said the closure could have added to losses on commodity markets this week, but they did not expect the impact to continue.
"I don't think one hedge fund will have much impact, though it probably helped the market to come down," said Christopher Bellew of Bache Commodities, adding the market remained bearish in the short term.
"We have a strong dollar and weak hurricanes," he said.
More storms were brewing in the Atlantic but so far were not threatening the U.S. Gulf of Mexico.
Tropical Storm Hanna could strike the U.S. East Coast, while Hurricane Ike continued westward across the Atlantic and was projected to be in the vicinity of the Bahamas by Sunday.
Any disruption caused by Gustav will not be fully reflected in U.S. inventory data until next week. The latest set of data will be released on Thursday, a day later than usual because of a public holiday in the United States on Monday.
A Reuters poll of analysts forecast stockpiles of crude rose 100,000 barrels last week, a 1.3 million-barrel drawdown in gasoline supplies and a 500,000-barrel build in distillates.
(Additional reporting by Barbara Lewis in London and Chua Baizhen in Singapore; editing by James Jukwey)
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LONDON (Reuters) - Oil fell below $109 a barrel on Wednesday, weighed down by slowing demand in the United States and other consuming nations and signs the U.S. oil sector would recover quickly from Hurricane Gustav.
U.S. crude traded down $1.44 to $108.27 a barrel by 8:20 a.m. EDT after settling below its 200-day moving average, a key technical level, for the first time since May 2007 on Tuesday.
London Brent crude fell $1.20 to $107.14 a barrel.
Prices have fallen by more than $7 from Friday after Hurricane Gustav proved to be less devastating than feared.
Initial checks on U.S. Gulf of Mexico energy installations showed little damage, and the Louisiana Offshore Oil Port (LOOP) -- the nation's only deepwater port -- expects to resume operations in the next couple of days.
Companies had closed 13 refineries and shut in all of the 1.3 million barrels per day (bpd) of oil production in the Gulf and 95.4 percent of the region's natural gas output.
Now the storm has passed, analysts said slowing oil demand in the United States and other consumer nations would continue to depress oil prices, which have dropped from a record of $147.27 on July 11.
DEMAND DESTRUCTION
"It's the economy, economy, economy. Everyone's worried about demand destruction," said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp.
Surging oil demand in emerging economies such as China and India underpinned a six-year rally in crude prices that sent prices up sevenfold at their peak.
Further strength this year came from a rush of cash from investors buying commodities as a hedge against inflation and the weak U.S. dollar. But the dollar has since rallied, hitting an 11-month high against a basket of major currencies on Wednesday.
The rapid changes on the commodities market have been bruising for some.
On Tuesday, Ospraie Management LLC said it would close down a flagship fund, although it still manages $4 billion in other investment funds.
Traders said the closure could have added to losses on commodity markets this week, but they did not expect the impact to continue.
"I don't think one hedge fund will have much impact, though it probably helped the market to come down," said Christopher Bellew of Bache Commodities, adding the market remained bearish in the short term.
"We have a strong dollar and weak hurricanes," he said.
More storms were brewing in the Atlantic but so far were not threatening the U.S. Gulf of Mexico.
Tropical Storm Hanna could strike the U.S. East Coast, while Hurricane Ike continued westward across the Atlantic and was projected to be in the vicinity of the Bahamas by Sunday.
Any disruption caused by Gustav will not be fully reflected in U.S. inventory data until next week. The latest set of data will be released on Thursday, a day later than usual because of a public holiday in the United States on Monday.
A Reuters poll of analysts forecast stockpiles of crude rose 100,000 barrels last week, a 1.3 million-barrel drawdown in gasoline supplies and a 500,000-barrel build in distillates.
(Additional reporting by Barbara Lewis in London and Chua Baizhen in Singapore; editing by James Jukwey)
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Ecuador says OPEC should maintain output levels
(Recasts, adds oil minister's comments)
QUITO, Sept 3 (Reuters) - Ecuador will propose that OPEC keep current output levels unchanged in the cartel's next meeting, unlike ally Venezuela which wants to lower world production, Oil Minister Galo Chiriboga said Wednesday.
He said the oil cartel wants to stabilize world crude prices amid a sharp drop in prices.
"I will say that today's prices respond to the market's reality," Chiriboga told a local radio station.
"The Venezuelan (oil) minister has made a proposal for a reduction in world oil production, but we don't share that opinion... we will propose to maintain (output levels) to stabilize prices." (Reporting by Alonso Soto; editing by Matthew Lewis)
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QUITO, Sept 3 (Reuters) - Ecuador will propose that OPEC keep current output levels unchanged in the cartel's next meeting, unlike ally Venezuela which wants to lower world production, Oil Minister Galo Chiriboga said Wednesday.
He said the oil cartel wants to stabilize world crude prices amid a sharp drop in prices.
"I will say that today's prices respond to the market's reality," Chiriboga told a local radio station.
"The Venezuelan (oil) minister has made a proposal for a reduction in world oil production, but we don't share that opinion... we will propose to maintain (output levels) to stabilize prices." (Reporting by Alonso Soto; editing by Matthew Lewis)
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Deals of the day -- mergers and acquisitions
(Adds Lehman, GM, H&R)
Sept 3 (Reuters) - The following bids, mergers, acquisitions and disposals involving European, U.S. and Asian companies were reported by 0900 GMT on Wednesday.
** Coca-Cola Co (KO.N: Quote, Profile, Research, Stock Buzz), the world's leading drinks maker, agreed to pay $2.5 billion for Chinese juice maker Huiyuan (1886.HK: Quote, Profile, Research, Stock Buzz), three times its value, in China's biggest takeover by a foreign company. To read more, please double click on [nHKG153943]
** State-controlled Korea Development Bank (KDB) proposed buying 25 percent of Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) for up to $5.3 billion, a newspaper reported, but other Korean banks rumoured to be joining a KDB bid consortium denied they were involved. [ID:nSEO152269]
** South Korea's military savings fund would consider joining Korea Development Bank in a bid for Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) if KDB made such an offer, as now appears a good time for U.S. investments, the fund's chairman said. [ID:nSEO16029]
** General Motors (GM.N: Quote, Profile, Research, Stock Buzz) expects to sell its Hummer brand by the end of this year or early in 2009, as it shores up capital to survive a deep industry slump amid record losses, its chief operating officer said. [ID:nBOM183228]
** Friends Provident (FP.L: Quote, Profile, Research, Stock Buzz), Britain's smallest blue-chip life insurer, will not sell its Lombard and F&C units if it cannot get a good price, recently appointed chief executive Trevor Matthews said. [ID:nSIN220103]
** H&R Block Inc (HRB.N: Quote, Profile, Research, Stock Buzz), the largest U.S. tax preparer, said it agreed to buy the operator of its Texas, Arkansas and Oklahoma franchised units for $278 million in cash. [ID:nN03494010]
** Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) will likely fold one of its small consumer finance units into affiliate Acom Co (8572.T: Quote, Profile, Research, Stock Buzz), a newspaper said, the latest move by a Japanese bank to strengthen its position in the struggling consumer lending market. Mitsubishi UFJ, Japan's largest bank, will seek to merge unlisted DC Cash One with Acom, the Nikkei newspaper said. [ID:nT151912]
** Irish supermarket group Superquinn has received six expressions of interest from potential bidders, including Britain's Asda (WMT.N: Quote, Profile, Research, Stock Buzz) and J Sainsbury (SBRY.L: Quote, Profile, Research, Stock Buzz), the Irish Times newspaper said.[ID:nL3343566] (Compiled by Tina Kwan in Singapore, Aftab Ahmed in Bangalore)
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Eurozone Second Quarter GDP First Estimate: Summary
By Kristian Siedenburg
Sept. 3 (Bloomberg) -- Following is the summary of the second quarter GDP estimate from Eurostat in Luxembourg:
=========================================================================
2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q
2008 2008 2007 2007 2008 2008 2007 2007
=========================================================================
------------------- Eurozone---------------------
----------QoQ--------- ---------YoY-----------
GDP first estimate -0.2% 0.7% 0.4% 0.6% 1.4% 2.1% 2.1% 2.6%
revised from
GDP flash estimate -0.2% 0.7% 0.4% 0.6% 1.5% 2.1% 2.2% 2.7%
=========================================================================
H'hold spending -0.2% 0.0% 0.2% 0.4% 0.4% 1.2% 1.2% 1.8%
Govt spending 0.5% 0.3% 0.3% 0.5% 1.7% 1.3% 2.1% 2.5%
Gross fixed
capital form. -1.2% 1.5% 1.1% 0.9% 2.4% 3.7% 3.2% 3.7%
Exports -0.4% 1.8% 0.4% 1.8% 3.6% 5.4% 4.1% 7.3%
Imports -0.4% 1.9% -0.4% 2.2% 3.4% 4.7% 4.0% 6.5%
=========================================================================
2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q
2008 2008 2007 2007 2008 2008 2007 2007
=========================================================================
------------------- EU27-------------------------
----------QoQ--------- ----------YoY----------
GDP first estimate -0.1% 0.6% 0.5% 0.6% 1.6% 2.3% 2.5% 2.9%
revised from
GDP flash estimate -0.1% 0.7% 0.7% 0.5% 1.7% 2.3% 2.9% 2.5%
=========================================================================
H'hold spending -0.1% 0.2% 0.3% 0.6% 1.0% 1.7% 1.8% 2.4%
Govt spending 0.5% 0.3% 0.4% 0.5% 1.6% 1.4% 2.1% 2.4%
Gross fixed
capital form. -1.6% 0.9% 1.4% 1.4% 2.0% 3.6% 4.1% 4.5%
Exports -0.4% 1.8% 0.7% 1.8% 3.9% 5.4% 4.3% 6.9%
Imports -0.5% 1.6% -0.3% 2.7% 3.6% 4.7% 4.7% 7.1%
=========================================================================
Notes:
Percentage change compared to the same quarter of the
previous quarter is calculated from seasonally adjusted data.
Percentage change compared to the same quarter of the
previous year is calculated from non-seasonally adjusted data.
SOURCE: Eurostat
To contact the reporter on this story: Kristian Siedenburg in Budapest at ksiedenburg@bloomberg.net
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U.S. Factory Orders Probably Rose on Exports, Oil
By Timothy R. Homan
Sept. 3 (Bloomberg) -- Factory orders in the U.S. probably increased in July, reflecting overseas demand and a rise in oil prices that kept refineries busy, economists said before a report today.
Orders advanced 1 percent after a 1.7 percent gain in June, according to the median forecast in a Bloomberg News survey of 59 economists ahead of the Commerce Department's report.
Energy prices have receded since mid-July, with the price of crude oil down 25 percent from its record on July 11, and exports may also slow after economies in Japan and Europe started shrinking. The Organization for Economic Cooperation and Development said yesterday both the euro region and Japan will expand more slowly than the U.S. this year.
``Manufacturing's treading water, but more challenging times are on the horizon,'' said Ryan Sweet, an economist at Moody's Economy.com in West Chester, Pennsylvania. ``The key support from trade is going to fade as the downturn in the global economy continues to play out.''
The Commerce Department's report is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 0.1 percent to an increase of 1.7 percent.
U.S. job cuts surged 12 percent last month from a year earlier as rising layoffs at automakers and the government overwhelmed a reduction in losses at financial firms, according to a report by a private placement firm.
Job Cuts
Firing announcements increased to 88,736 last month from 79,459 in August 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today.
Orders for durable goods, which comprise about half of factory orders, rose 1.3 percent in July, matching the previous month's gain, Commerce Department figures showed last week. Excluding transportation equipment, orders rose 0.7 percent after a 2.4 percent increase in June.
A private report yesterday showed U.S. manufacturing shrank in August for the first time in three months as companies cut back on production and trimmed payrolls to offset weakening consumer spending. The Institute for Supply Management's factory index slipped to 49.9 from 50 in July. Fifty is the dividing line between expansion and contraction.
Meanwhile, Commerce Department data showed that construction spending fell more than forecast in July as activity slowed at power plants and factories. Private residential construction projects declined to the lowest level since March 2001, when the country slipped into the start of the last recession.
Export Boost
Overseas demand has helped the U.S. avoid a deeper economic downturn so far. The American trade deficit narrowed to a $376.6 billion annual pace in the second quarter, the smallest gap in eight years. Excluding trade, the economy would have expanded at a 0.2 percent pace from April through June, instead of the overall 3.3 percent annualized increase.
Federal Reserve staff economists are among those anticipating that growth will weaken from last quarter's pace. They ``marked down'' the central bank's forecast for the second half of 2008 and for 2009, according to minutes of the Federal Open Market Committee's Aug. 5 meeting released last week. Fed policy makers also judged that recent reports pointed to ``softer'' demand for U.S. exports.
The Fed's regional report on the U.S. economy, called the Beige Book, is scheduled to be released today at 2 p.m. in Washington.
Business spending on new equipment and software dropped at a 3.2 percent annual pace last quarter, the second consecutive decline, the government said last week.
Dell Inc., the world's second-biggest personal-computer maker, plunged the most since September 2001 in Nasdaq trading last week after saying the U.S. slump in technology spending is spreading abroad.
The Round Rock, Texas-based company's second-quarter sales to commercial clients in Asia grew at a slower pace than the previous three months, as did sales to corporate customers in Europe, the Middle East and Africa.
====================================
Factory
Orders
MOM%
====================================
Date of Release 09/03
Observation Period Jan.
------------------------------------
Median 1.0%
Average 1.0%
High Forecast 1.7%
Low Forecast -0.1%
Number of Participants 63
Previous 1.7%
------------------------------------
4CAST Ltd. 1.1%
Action Economics 1.0%
Aletti Gestielle SGR 1.5%
Argus Research Corp. 1.7%
Banc of America Securitie 0.5%
Bank of Tokyo- Mitsubishi 0.8%
Bantleon Bank AG 0.7%
Barclays Capital 1.4%
BBVA 0.8%
BMO Capital Markets 0.7%
BNP Paribas -0.1%
Briefing.com 0.5%
CIBC World Markets 1.3%
ClearView Economics 1.2%
Commerzbank AG 0.0%
Credit Suisse 1.5%
Daiwa Securities America 0.3%
DekaBank 1.0%
Desjardins Group 1.5%
Deutsche Postbank AG 1.0%
Dresdner Kleinwort 1.7%
DZ Bank 0.5%
First Trust Advisors 0.5%
Goldman, Sachs & Co. 0.9%
H&R Block Financial Advis 0.5%
Helaba 1.0%
High Frequency Economics 1.0%
HSBC Markets 0.8%
IDEAglobal 0.5%
Informa Global Markets 0.8%
ING Financial Markets 1.1%
Insight Economics 1.2%
J.P. Morgan Chase 1.5%
Janney Montgomery Scott L 1.3%
JPMorgan Private Client 1.0%
Landesbank BW 1.0%
Lehman Brothers 0.9%
Lloyds TSB 0.7%
Maria Fiorini Ramirez Inc 0.5%
Merk Investments 1.0%
Merrill Lynch 1.0%
MFC Global Investment Man 1.0%
Moody's Economy.com 0.5%
Morgan Stanley & Co. 1.2%
National City Corporation 0.6%
Newedge 0.7%
Nomura Securities Intl. 0.6%
Nord/LB 1.0%
PNC Bank 1.2%
RBS Greenwich Capital 0.9%
Ried, Thunberg & Co. 0.5%
Schneider Trading Associa 1.2%
Scotia Capital 1.7%
Societe Generale 1.0%
Stone & McCarthy Research 1.7%
Thomson Financial/IFR 1.6%
Tullett Prebon 1.0%
University of Maryland 1.1%
Wachovia Corp. 1.0%
Wells Fargo & Co. 1.0%
WestLB AG 1.0%
Westpac Banking Co. 1.1%
Wrightson Associates 0.5%
====================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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European Investment, Spending Drop as Economy Shrinks
By Fergal O'Brien
Sept. 3 (Bloomberg) -- European company investment, consumer spending and exports declined in the second quarter, dragging the economy into a 0.2 percent contraction and pushing it to the brink of a recession.
Investment by companies fell 1.2 percent, the first decline in five years, and household expenditure dropped 0.2 percent after stagnating in the previous three months, the European Union statistics office in Luxembourg said today. The 0.2 percent decline in overall gross domestic product matched an initial estimate published on Aug. 14.
The euro fell today, extending its 7 percent decline over the past month as evidence of Europe's economic slump mounts. Separate figures today show retail sales unexpectedly fell in July and services contracted for a third month in August. The downturn has yet to prompt the European Central Bank to drop its inflation-fighting stance and policy makers will probably keep interest rates at a seven-year high tomorrow.
``The ECB did the minimum last month and it would make sense for them to acknowledge the downturn a bit more this week,'' said Laurent Bilke, an economist at Lehman Brothers in London, who expects the economy to shrink again in the current quarter. ``But I think they can claim they need a bit more insurance that the price of oil will drop more for them to say inflationary pressures have eased.''
Company Investment
The overall contraction in the economy is the first since the introduction of the euro almost a decade ago. The decline in company investment followed a 1.5 percent surge in the first quarter, when mild weather prompted the construction industry to bring forward building projects.
``If an abrupt GDP slowdown in second quarter had to be expected, the most recent developments certainly suggest that growth weakness goes beyond a technical correction,'' said Aurelio Maccario, chief euro-zone economist at Unicredit MIB in Milan. ``Growth momentum has virtually come to a halt.''
The euro fell as much as 0.9 percent to $1.4385 today, its lowest since Jan. 22, and was at $1.4432 as of 12:50 p.m. in London. European government bonds advanced. The yield on the two-year note fell 2 basis points to 4.07 percent and the yield on the 10-year German bund, the region's benchmark government security, also declined 2 basis points, to 4.11 percent.
The 0.4 percent drop in retail sales followed a 0.9 percent fall in June. Economists had forecast a 0.1 percent increase, based on the median of 25 estimates in a Bloomberg News survey.
Government Spending
Government spending rose 0.5 percent in the three months through June after a 0.3 percent gain in the previous quarter, according to today's report. Exports fell 0.4 percent. From a year earlier, the economy expanded 1.4 percent, less than the 1.5 percent initial estimate.
Bertelsmann AG, Europe's largest media company, on Aug. 28 cut its 2008 profit forecast after advertisers slashed marketing budgets to reduce costs amid the slowdown. L'Oreal SA, the world's largest cosmetics maker, a day later reported the slowest profit growth in three years.
The economic backdrop ``remains difficult across Europe,'' said John Browett, chief executive officer of U.K. consumer- electronics retailer DSG International Plc, which has operations in countries including France, Spain and Germany. Its sales fell 7 percent in the 16 weeks through Aug. 23, DSG said today.
Even with the weaker economic growth, the ECB in July raised its key rate to 4.25 percent to curb price growth. While inflation eased in August to 3.8 percent from 4 percent, it remains almost twice the ECB's 2 percent limit. The ECB staff projections for inflation in 2008 and 2009 may be raised tomorrow after the governing council meeting, according to Lehman's Bilke.
Benchmark Rate
All but one of 53 economists surveyed by Bloomberg News predict the Frankfurt-based central bank will leave the benchmark rate on hold tomorrow and only five expect a cut this year.
The economic slowdown isn't confined to the euro area. The U.K. economy unexpectedly stagnated in the second quarter, ending the nation's longest stretch of expansion in more than a century, and Japan's economy contracted on an annualized basis. While the U.S., the world's largest economy, grew faster than forecast in the second quarter, the nation's leading economic indicators suggest growth is likely to weaken this quarter.
While the stronger euro against the dollar and record oil prices threatened growth this year, those pressures may be fading. The euro, whose gains eroded export competitiveness, has fallen 7.5 percent versus the dollar in the last month, while crude oil has dropped around 25 percent since reaching a record $147.27 a barrel on July 11.
Still, an index of consumer and executive confidence in the economy dropped more than forecast last month, according to the European Commission. Europe's manufacturing and service industries contracted for a third month in August, according to reports this week.
``The euro-zone economies are continuing to struggle in the third quarter,'' said Howard Archer, chief European economist at Global Insight in London. ``We expect this to remain the case for some time to come.''
To contact the reporters on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
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U.K. Consumer Confidence at Four-Year Low, Services Contract
By Brian Swint and Jennifer Ryan
Sept. 3 (Bloomberg) -- U.K. consumer confidence stayed at a four-year low in August and services from banks to recruiters shrank as the country edged closer to a recession.
An index of shoppers' sentiment held at 52, the lowest since the survey began in May 2004, Nationwide Building Society said today. While the Chartered Institute of Purchasing and Supply's index of services growth unexpectedly increased today, it still held below 50 for a fourth month, indicating contraction.
The economy stagnated in the second quarter as banks pared lending and higher oil prices forced Britons to spend more on fuel, choking off households' spending. The Bank of England will probably still keep the key interest rate unchanged tomorrow after inflation accelerated to the fastest in a decade.
``Sometime in the middle of the year the economy went into recession,'' said Willem Buiter, a former Bank of England policy maker, in a Bloomberg Television interview today. ``The uncertainty'' about the economy and inflation ``is so great that there is no compelling case for raising or cutting rates.''
The pound was little changed today, trading at $1.7728 as of 10:39 a.m. in London. The U.K. currency has fallen 12 percent since July 15 after Britain's economy stalled in the second quarter, ending the nation's longest stretch of expansion in more than a century.
Chancellor of the Exchequer Alistair Darling said in an interview with the Guardian on Aug. 30 that the downturn would be more ``profound and long-lasting'' than he previously expected.
Services Outlook
Today's CIPS report nevertheless contained some positive signs. The main gauge of services activity rose for a second month, climbing to 49.2 from 47.4 in July, and exceeded the median forecast of 47 in a Bloomberg survey of 30 economists.
A sub-index of business expectations increased for the first time since February and employment shrank at a slower pace than in July, the report said.
``Output in the services sector is contracting only modestly now,'' said George Buckley, chief U.K. economist at Deutsche Bank AG in London. At the same time, ``we would be surprised to see this recovery continue, particularly given that it has been the banking and real estate sectors that have been badly hit.''
Most recent figures have suggested the outlook for the U.K. is worsening. The Organization for Economic Cooperation and Development yesterday cut its forecast for U.K. growth and said the country may fall into a recession. The number of workers placed in permanent jobs fell the most since November 2001 last month, a separate report today by the Recruitment and Employment Confederation and KPMG showed today.
Prime Minister Gordon Brown's government today suspended a tax on some home purchases to reverse the worst housing slump since the early 1990s and pledged to accelerate 1 billion pounds ($1.8 billion) of spending yesterday.
The Bank of England has little scope to cut its benchmark interest rate after inflation accelerated to 4.4 percent in July, more than double its 2 percent target. All 61 economists surveyed by Bloomberg News expect the central bank to keep its main rate at 5 percent.
U.K. shops raised prices 3.8 percent last month from a year earlier, the most since comparable records began in 2006, the British Retail Consortium reported today.
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.netBrian Swint in London at bswint@bloomberg.net.
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Sept. 3 (Bloomberg) -- U.K. consumer confidence stayed at a four-year low in August and services from banks to recruiters shrank as the country edged closer to a recession.
An index of shoppers' sentiment held at 52, the lowest since the survey began in May 2004, Nationwide Building Society said today. While the Chartered Institute of Purchasing and Supply's index of services growth unexpectedly increased today, it still held below 50 for a fourth month, indicating contraction.
The economy stagnated in the second quarter as banks pared lending and higher oil prices forced Britons to spend more on fuel, choking off households' spending. The Bank of England will probably still keep the key interest rate unchanged tomorrow after inflation accelerated to the fastest in a decade.
``Sometime in the middle of the year the economy went into recession,'' said Willem Buiter, a former Bank of England policy maker, in a Bloomberg Television interview today. ``The uncertainty'' about the economy and inflation ``is so great that there is no compelling case for raising or cutting rates.''
The pound was little changed today, trading at $1.7728 as of 10:39 a.m. in London. The U.K. currency has fallen 12 percent since July 15 after Britain's economy stalled in the second quarter, ending the nation's longest stretch of expansion in more than a century.
Chancellor of the Exchequer Alistair Darling said in an interview with the Guardian on Aug. 30 that the downturn would be more ``profound and long-lasting'' than he previously expected.
Services Outlook
Today's CIPS report nevertheless contained some positive signs. The main gauge of services activity rose for a second month, climbing to 49.2 from 47.4 in July, and exceeded the median forecast of 47 in a Bloomberg survey of 30 economists.
A sub-index of business expectations increased for the first time since February and employment shrank at a slower pace than in July, the report said.
``Output in the services sector is contracting only modestly now,'' said George Buckley, chief U.K. economist at Deutsche Bank AG in London. At the same time, ``we would be surprised to see this recovery continue, particularly given that it has been the banking and real estate sectors that have been badly hit.''
Most recent figures have suggested the outlook for the U.K. is worsening. The Organization for Economic Cooperation and Development yesterday cut its forecast for U.K. growth and said the country may fall into a recession. The number of workers placed in permanent jobs fell the most since November 2001 last month, a separate report today by the Recruitment and Employment Confederation and KPMG showed today.
Prime Minister Gordon Brown's government today suspended a tax on some home purchases to reverse the worst housing slump since the early 1990s and pledged to accelerate 1 billion pounds ($1.8 billion) of spending yesterday.
The Bank of England has little scope to cut its benchmark interest rate after inflation accelerated to 4.4 percent in July, more than double its 2 percent target. All 61 economists surveyed by Bloomberg News expect the central bank to keep its main rate at 5 percent.
U.K. shops raised prices 3.8 percent last month from a year earlier, the most since comparable records began in 2006, the British Retail Consortium reported today.
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.netBrian Swint in London at bswint@bloomberg.net.
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Kuwait's Al-Ahmadi Refinery Fire Is Extinguished
By Fiona MacDonald
Sept. 3 (Bloomberg) -- A fire on a crane performing maintenance at Kuwait's Mina Al-Ahmadi refinery has been put out, an official at Kuwait National Petroleum Co. said. Output wasn't disrupted at the 466,000 barrel-a-day site.
``The fire was put out a few minutes ago,'' Ahmed al- Muzaiel said today in a telephone interview from the refinery, south of Kuwait City. ``There are no casualties.''
The crane was carrying out maintenance on feeding pipelines between two storage tanks when it caught fire. ``The crane was trying to isolate valves in a pipeline when there was a leak of liquid products,'' he said.
None of the surrounding storage tanks were ablaze at any time but turned black as a result of the intense heat, al- Muzaiel said.
Around 50 firemen and 12 fire engines worked to extinguish the blaze, he said.
``The fire was not that big but there was a lot of heavy dark smoke. It started small but expanded because of the flammable liquids,'' according to al-Muzaiel.
Operations and output at Kuwait's largest refinery weren't affected, al-Muzaiel said. Kuwait is the fourth-largest oil producer in the Organization of Petroleum Exporting Countries.
To contact the reporter on this story: Fiona MacDonald in Kuwait FmacDonald4@bloomberg.net
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Sept. 3 (Bloomberg) -- A fire on a crane performing maintenance at Kuwait's Mina Al-Ahmadi refinery has been put out, an official at Kuwait National Petroleum Co. said. Output wasn't disrupted at the 466,000 barrel-a-day site.
``The fire was put out a few minutes ago,'' Ahmed al- Muzaiel said today in a telephone interview from the refinery, south of Kuwait City. ``There are no casualties.''
The crane was carrying out maintenance on feeding pipelines between two storage tanks when it caught fire. ``The crane was trying to isolate valves in a pipeline when there was a leak of liquid products,'' he said.
None of the surrounding storage tanks were ablaze at any time but turned black as a result of the intense heat, al- Muzaiel said.
Around 50 firemen and 12 fire engines worked to extinguish the blaze, he said.
``The fire was not that big but there was a lot of heavy dark smoke. It started small but expanded because of the flammable liquids,'' according to al-Muzaiel.
Operations and output at Kuwait's largest refinery weren't affected, al-Muzaiel said. Kuwait is the fourth-largest oil producer in the Organization of Petroleum Exporting Countries.
To contact the reporter on this story: Fiona MacDonald in Kuwait FmacDonald4@bloomberg.net
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Canada Leaves Key Rate at 3%, Saying It Remains `Appropriate'
By Greg Quinn
Sept. 3 (Bloomberg) -- The Bank of Canada left its key lending rate unchanged, saying it remains ``appropriately accommodative'' amid slower-than-expected economic growth.
Governor Mark Carney and his five deputies kept the target rate on overnight loans between commercial banks at 3 percent for a third straight meeting, a decision predicted by 27 of 28 economists surveyed by Bloomberg.
Carney and his counterparts from the Group of Seven industrialized nations are struggling to sustain growth as high energy costs propel inflation and curb demand. Canada's economy grew at a 0.3 percent annualized pace in the second quarter, avoiding what most economists would have dubbed the first recession since 1991. Inflation surged to 3.4 percent in July, outside the bank's 1 to 3 percent target range.
``Economic activity is slightly lower than expected,'' the central bank said today in a statement, referring to its July quarterly forecast, ``but still close to the economy's production capacity.''
The statement dropped a reference from the bank's July 15 decision that said inflation risks were ``balanced.'' While saying this time that growth will be slower than expected, policy makers also said the consumer price index won't ``spike'' as high as projected in July because energy costs have waned, and inflation will return to the bank's 2 percent target next year as expected.
``Their internal thinking is they are on hold for a long time, through 2008,'' Don Drummond, chief economist at Toronto- Dominion Bank, said last week. ``You are talking about moving a really big rock and I don't think there's much that would move that one.''
Rate Cuts
The bank may cut rates in the first quarter of next year, according to the weighted average of eight economists surveyed by Bloomberg. Today, policy makers said ``the current level of the target for the overnight rate remains appropriately accommodative.''
While the bank said a drop in Canada's currency will help Canadian goods and services, policy makers also said the country's products will be hurt by ``weaker global growth.''
Also, there's little sign slumping exports to the U.S. will rebound. Sales to Canada's main trading partner were behind Carney's assertion in July that the economy will grow just 1 percent this year, the slowest since 1992.
The U.S. economy grew at a 0.2 percent annualized pace in the second quarter excluding trade, indicating there's been little growth in American domestic demand as that country recovers from the subprime mortgage meltdown.
Exports
Canada's total shipments abroad fell 1.5 percent in the second quarter, the fourth straight three-month period that saw a decline. Exporters were also hurt by the Canadian dollar's appreciation to a record last year.
Deere & Co., the world's largest maker of farm equipment, said yesterday it will close an 800-worker utility-vehicle manufacturing plant in Welland, Ontario. The work will be transferred to Wisconsin and Mexico.
Canadian factories laid off 32,300 people in July, mostly in Ontario, where the struggling automotive industry is based. Total Canadian employment fell by a net 55,200 workers, the biggest decline in 17 years.
The layoffs, coupled with high gasoline prices, are crimping the spending Carney and Conservative Party Prime Minister Stephen Harper need to sustain growth.
Harper, 49, may call elections this week because he says Canada's minority-led Parliament isn't working. Liberal Party Leader Stephane Dion, head of the biggest opposition bloc, says Harper wants a vote now to try and win a fresh mandate before the economy worsens.
Household Spending
Already, growth in spending by households slowed for a second straight quarter from April to June to 0.6 percent on lower car and truck purchases, Statistics Canada said Aug. 29.
The central bank's mandate is to keep inflation at 2 percent as often as possible and always between 1 percent and 3 percent. July's rate was the fastest since 2003, and the bank says inflation will peak at 4.3 percent in the first quarter of 2009 before returning to 2 percent later that year.
Retail gasoline prices though have eased from a peak of C$1.39 per liter in mid-July to C$1.28 last week. Crude oil fell to a five-month low yesterday as energy firms prepared to resume production after Hurricane Gustav caused less damage than anticipated.
Inflation could recede faster than forecast, such as in 2003 when energy pushed the rate above 4 percent and it slowed to the bank's target within six months.
Elsewhere in the G-7, Japan's economy, the world's second- largest, shrank at a 2.4 percent pace in the second quarter. The European Union's shrank 0.2 percent, the first contraction since the introduction of the euro almost a decade ago.
The European Central Bank and Bank of England have rate decisions tomorrow. Economists say both will stay on hold.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.
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Sept. 3 (Bloomberg) -- The Bank of Canada left its key lending rate unchanged, saying it remains ``appropriately accommodative'' amid slower-than-expected economic growth.
Governor Mark Carney and his five deputies kept the target rate on overnight loans between commercial banks at 3 percent for a third straight meeting, a decision predicted by 27 of 28 economists surveyed by Bloomberg.
Carney and his counterparts from the Group of Seven industrialized nations are struggling to sustain growth as high energy costs propel inflation and curb demand. Canada's economy grew at a 0.3 percent annualized pace in the second quarter, avoiding what most economists would have dubbed the first recession since 1991. Inflation surged to 3.4 percent in July, outside the bank's 1 to 3 percent target range.
``Economic activity is slightly lower than expected,'' the central bank said today in a statement, referring to its July quarterly forecast, ``but still close to the economy's production capacity.''
The statement dropped a reference from the bank's July 15 decision that said inflation risks were ``balanced.'' While saying this time that growth will be slower than expected, policy makers also said the consumer price index won't ``spike'' as high as projected in July because energy costs have waned, and inflation will return to the bank's 2 percent target next year as expected.
``Their internal thinking is they are on hold for a long time, through 2008,'' Don Drummond, chief economist at Toronto- Dominion Bank, said last week. ``You are talking about moving a really big rock and I don't think there's much that would move that one.''
Rate Cuts
The bank may cut rates in the first quarter of next year, according to the weighted average of eight economists surveyed by Bloomberg. Today, policy makers said ``the current level of the target for the overnight rate remains appropriately accommodative.''
While the bank said a drop in Canada's currency will help Canadian goods and services, policy makers also said the country's products will be hurt by ``weaker global growth.''
Also, there's little sign slumping exports to the U.S. will rebound. Sales to Canada's main trading partner were behind Carney's assertion in July that the economy will grow just 1 percent this year, the slowest since 1992.
The U.S. economy grew at a 0.2 percent annualized pace in the second quarter excluding trade, indicating there's been little growth in American domestic demand as that country recovers from the subprime mortgage meltdown.
Exports
Canada's total shipments abroad fell 1.5 percent in the second quarter, the fourth straight three-month period that saw a decline. Exporters were also hurt by the Canadian dollar's appreciation to a record last year.
Deere & Co., the world's largest maker of farm equipment, said yesterday it will close an 800-worker utility-vehicle manufacturing plant in Welland, Ontario. The work will be transferred to Wisconsin and Mexico.
Canadian factories laid off 32,300 people in July, mostly in Ontario, where the struggling automotive industry is based. Total Canadian employment fell by a net 55,200 workers, the biggest decline in 17 years.
The layoffs, coupled with high gasoline prices, are crimping the spending Carney and Conservative Party Prime Minister Stephen Harper need to sustain growth.
Harper, 49, may call elections this week because he says Canada's minority-led Parliament isn't working. Liberal Party Leader Stephane Dion, head of the biggest opposition bloc, says Harper wants a vote now to try and win a fresh mandate before the economy worsens.
Household Spending
Already, growth in spending by households slowed for a second straight quarter from April to June to 0.6 percent on lower car and truck purchases, Statistics Canada said Aug. 29.
The central bank's mandate is to keep inflation at 2 percent as often as possible and always between 1 percent and 3 percent. July's rate was the fastest since 2003, and the bank says inflation will peak at 4.3 percent in the first quarter of 2009 before returning to 2 percent later that year.
Retail gasoline prices though have eased from a peak of C$1.39 per liter in mid-July to C$1.28 last week. Crude oil fell to a five-month low yesterday as energy firms prepared to resume production after Hurricane Gustav caused less damage than anticipated.
Inflation could recede faster than forecast, such as in 2003 when energy pushed the rate above 4 percent and it slowed to the bank's target within six months.
Elsewhere in the G-7, Japan's economy, the world's second- largest, shrank at a 2.4 percent pace in the second quarter. The European Union's shrank 0.2 percent, the first contraction since the introduction of the euro almost a decade ago.
The European Central Bank and Bank of England have rate decisions tomorrow. Economists say both will stay on hold.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.
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Storm Hanna Lashes Haiti, Takes Aim at South Carolina
By Alex Morales and Demian McLean
Sept. 3 (Bloomberg) -- Tropical Storm Hanna lashed Haiti, the Dominican Republic and the Bahamas with torrential rains and is forecast to strengthen into a hurricane before possible landfall in South Carolina in two days.
Hanna was located near Haiti's northern coast, 105 miles (170 kilometers) southeast of Grand Inagua in the Bahamas, as of 8 a.m. Miami time, the U.S. National Hurricane Center said on its Web site. The system had 60 mph winds and was moving eastward at 5 mph, with a gradual turn northwest forecast.
``Hanna is expected to move across the southeastern Bahamas later today, and move near or over central Bahamas tomorrow,'' the center said. Rainfall of up to 15 inches (38 centimeters) in Haiti and the Dominican Republic could cause life-threatening mudslides and flash flooding, it said.
The storm killed at least 19 people in Haiti, Agence France- Presse reported. The western hemisphere's poorest nation and the neighboring Dominican Republic have been hit by Tropical Storm Fay and Hurricane Gustav in the past three weeks.
Florida declared an emergency as Hanna approached, and residents of Georgia were advised to monitor the storm's progress.
To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
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Sept. 3 (Bloomberg) -- Tropical Storm Hanna lashed Haiti, the Dominican Republic and the Bahamas with torrential rains and is forecast to strengthen into a hurricane before possible landfall in South Carolina in two days.
Hanna was located near Haiti's northern coast, 105 miles (170 kilometers) southeast of Grand Inagua in the Bahamas, as of 8 a.m. Miami time, the U.S. National Hurricane Center said on its Web site. The system had 60 mph winds and was moving eastward at 5 mph, with a gradual turn northwest forecast.
``Hanna is expected to move across the southeastern Bahamas later today, and move near or over central Bahamas tomorrow,'' the center said. Rainfall of up to 15 inches (38 centimeters) in Haiti and the Dominican Republic could cause life-threatening mudslides and flash flooding, it said.
The storm killed at least 19 people in Haiti, Agence France- Presse reported. The western hemisphere's poorest nation and the neighboring Dominican Republic have been hit by Tropical Storm Fay and Hurricane Gustav in the past three weeks.
Florida declared an emergency as Hanna approached, and residents of Georgia were advised to monitor the storm's progress.
To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
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Theolia Falls After Cutting Wind-Power Sales Target
By Tara Patel
Sept. 3 (Bloomberg) -- Theolia SA, the French wind-power company part-owned by General Electric Co., plunged after reporting a first-half loss on higher costs and cutting a target for full-year operating profit.
Theolia, based in Aix-en-Provence, fell as much as 1.94 euros, or 14 percent, to 12.11 euros in Paris trading, its lowest since December 2006, and declined 7 percent to 13.09 euros at 2:32 p.m. The net loss was 25.3 million euros ($36.6 million), compared with a profit of 6.2 million euros a year earlier.
The company, which had planned to sell about half its wind- energy capacity, now intends to retain installations to take advantage of higher demand for power from renewable-energy sources. Debt-financing costs increased, and Theolia may have to raise cash in the market or develop partnerships with utilities to pay for wind-farm development.
``Sell the stock on the back of a poor pipeline and strong cost inflation,'' Exane BNP Paribas analyst Yohann Terry wrote in a report today. ``Small wind-park developers are squeezed because of skyrocketing wind-turbine prices.''
Theolia's debt rose to 398 million euros from 216 million euros at the end of 2007. Earnings before interest, tax, depreciation and amortization rose to 8.6 million euros, compared with a 3.3 million euros loss a year earlier.
``As long as we have enough money we will continue as we are, otherwise we will go to the market or seek a partnership,'' Chief Executive Officer Jean-Marie Santander, 57, told reporters. ``We would lean toward going to the market.''
Higher Debt
Theolia cut its 2008 Ebitda outlook to ``a minimum'' of 20 million euros from a forecast of 55 million euros to 65 million euros, saying it would sell less wind capacity.
Theolia co-founder Santander will relinquish his CEO role, which he has held since 2004, and remain as chairman, the company also said. It is seeking a new chief executive.
``We will gain long-term visibility by keeping our megawatts,'' Santander said in an interview today, adding that the change was promoted by a rise in wind-power rates in many countries, including Germany. Theolia ``is interested and continues to hold talks'' on acquisitions, he added.
Interest in electricity production from renewable-energy sources has gained as power companies seek to burn fewer fossil fuels such as coal and natural gas, blamed for global warming.
Greenhouse Gas
Alternative-energy generation has also been boosted by a European Union target to cut greenhouse-gas emissions 20 percent by 2020 from 1990 levels. Theolia has long been the subject of speculation that it's a takeover target by utilities seeking to increase their renewable-power capacity.
General Electric, which has a 17 percent stake in the company, ``voted in favour of the change in our strategy,'' he said.
Theolia is also planning asset sales such as a waste management unit at Beaucaire in southern France and maybe its 27 percent stake in waste-to-energy company Thenergo NV, Santander said.
``The markets are difficult so this is on hold,'' he said of the Thenergo sale.
Theolia's wind-power capacity in operation totaled 661 megawatts at the end of June, with 474 megawatts of projects to be commissioned by the end of 2009, the company said.
New Capacity
Last year, Theolia acquired 165 megawatts at seven wind farms in Germany from GE Energy Financial Services and 50 megawatts in Morocco from Cie. Eolienne du Detroit. It bought the GE Energy assets with cash and shares.
Theolia had 2,796 megawatts in development at the end of June, including 199 megawatts under construction. The company maintained plans to boost the capacity it operates to 2,000 megawatts by 2011 and said it has secured the supply of 1,000 megawatts of turbines.
``We will try to keep a maximum of wind capacity for our own operations depending on our ability to do this and regulations,'' Santander said. The company will be obliged to sell some capacity in certain cases, he said.
Of the 11 analysts tracked by Bloomberg who follow Theolia, five recommend selling the stock, five suggest holding it and one says to buy the shares.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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China May Raise Retail Power Prices, Official Says
By Helen Yuan and Wang Ying
Sept. 3 (Bloomberg) -- China may raise retail electricity prices by 4.5 percent, the second increase this year, to help narrow losses at power producers and ease a nationwide shortage.
Prices may be raised by 0.025 yuan per kilowatt-hour, Zhang Zengchan, secretary general of China Ferroalloys Industry Association, said today, citing talks with government officials.
Higher tariffs would help electricity generators cope with record coal costs, encouraging them to expand output as the government combats a sixth year of power shortages. China's inflation has cooled for three months since reaching a 12-year high in February, giving the government room to increase prices.
``If power prices are raised in the near term, it would be a big surprise,'' Martin Wang, an analyst with Guotai Junan Securities HK Ltd., said by phone from Hong Kong. ``We had forecast the next price hike at the beginning of next year when contractual coal prices are set to rise further.''
China raised retail prices by 0.025 yuan, or 4.7 percent, in July, as record coal costs slashed profits at power generators and distributors. The second gain being considered would represent about a 4.5 percent gain based on Bloomberg's calculations derived from figures provided by the National Development and Reform Commission then.
Huaneng Power International Inc., a unit of China's biggest power producer by capacity, and Huadian Power International Corp. reported first-half losses because of higher fuel costs.
Higher Costs
``They need to raise power rates by 0.20 yuan to break even,'' said Ferroalloys' Zhang at a conference in Xiamen. ``But of course they can't do that. The tariff hike will lead to higher costs for ferroalloy producers.''
He didn't say when prices will be raised.
Power shortages in China have forced the largest aluminum smelters to cut output by more than 10 percent. Some zinc smelters have also reduced production.
The price gain being considered comes as the government loosens loan policies to sustain the world's fourth-largest economy after four quarters of slowing growth. Industrial production grew in July at the weakest pace in 16 months amid faltering orders for Chinese exports.
State Grid Corp. of China, the larger of two distributors in China, said Aug. 20 the government needs a system that allows retail and on-grid prices to rise at the same time because it is struggling to raise funds for its network.
State-owned State Grid said in August it shoulders the ``social responsibility'' to expand its network even as profit slumped 80 percent between January and May because of damages from snowstorms and earthquakes.
The grid operator will need 73.6 billion yuan ($10.7 billion) to restore power lines after the natural disasters, it said. The Beijing-based company needs to invest more than 1.2 trillion yuan in the five years ending 2010, it said.
As much as 3 percent of China's coal-fired generating capacity was forced to shut down in July as fuel supplies dwindled, State Grid said.
-- Editors: Tan Hwee Ann, Amit Prakash
To contact the reporters on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net; Wang Ying in Beijing at wang30@bloomberg.net;
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Asian Currencies: Won Extends Loss, Baht Holds at One-Year Low
By Anil Varma and Kim Kyoungwha
Sept. 3 (Bloomberg) -- Asian currencies fell, with South Korea's won extending its slide to the lowest since October 2004, on speculation investors are pulling out of emerging markets amid a global economic slump.
The won, Asia's worst-performer this year, slumped for a fourth day as ABN Amro Bank NV and UBS AG predicted overseas investors will keep selling the nation's assets as government intervention fails to halt the drop. The economy grew 4.8 percent in the second quarter from a year earlier, the slowest pace in more than a year and 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.
``There is more downside to Asian currencies from a re-flow of capital out of Asia,'' said Irene Cheung, a Singapore-based strategist at ABN Amro Bank. ``The decline could accelerate in the next two months because banks in the U.S. and Europe are pulling out. They are short of cash and need to recapitalize toward year-end.''
Korea's won dropped 1.3 percent to 1,148.50 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The won has slumped 19 percent this year, the worst performance among major Asian currencies, according to data compiled by Bloomberg.
The won will weaken to 1,200 per dollar by year's end, the weakest since 2003, amid ``further sell-offs'' of Korean stocks, ABN's Cheung forecasts.
`Stern Action'
South Korea will take ``stern action'' to stem the won's slide and concerns the nation is facing a financial crisis are ``groundless,'' the nation's Vice Finance Minister Kim Dong Soo said in Gwacheon yesterday.
The Singapore dollar fell for a third day after a central bank survey forecast the economy will expand at the slowest pace in five years in 2008. Growth will slow to 4.2 percent as manufacturing eases and exports decline, according to a survey of 20 economists by the Monetary Authority of Singapore released today.
``There's no doubt the economy is slowing down,'' said Thomas Harr, Singapore-based currency strategist at Standard Chartered Plc. ``There's no reason why Singapore should have a strong currency anymore.''
Singapore's currency weakened 0.5 percent to S$1.4394 at 4:30 p.m. local time, according to data compiled by Bloomberg. The currency will slide to S$1.49 per U.S. dollar by the end of June, Standard Chartered predicts.
`Dollar Strength'
Malaysia's ringgit fell for a fifth day after a slide in oil prices and a slump in regional stocks boosted demand for the U.S. currency. The Kuala Lumpur Composite Index dropped for a second day.
``The dollar strength is quite overwhelming not only against the ringgit but across the region,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``Asian growth is also slowing down and there appears to be little support from the central bank for the ringgit.''
The ringgit fell as much as 0.5 percent to 3.4430 per dollar, the weakest since Sept. 21, 2007, according to data compiled by Bloomberg. It was at 3.4425 in late trading.
Crude oil settled at $109.71 a barrel yesterday on the New York Mercantile Exchange, the lowest close since April 8. The commodity has fallen almost 27 percent from a record high of $147.27 touched in July.
Chinese Yuan
The Chinese yuan dropped against the dollar for a second day on speculation cheaper crude oil will bolster economic growth in the U.S., the world's No. 1 energy user.
Traders pared bets since mid-July on how far the yuan will rise in the next 12 months as the dollar rebounds. The People's Bank of China has managed the yuan's exchange rate against a basket of currencies, including the euro, the yen and the British pound, since a peg to the dollar was abolished in 2005.
``The dollar is rising so fast against major currencies,'' said Wen Li, a Beijing-based dealer at Bank of China Ltd., the country's biggest foreign currency trader. ``Traders have turned more cautious and refrained from betting on the yuan's one-way appreciation.''
The yuan dropped 0.1 percent to 6.8430 a dollar, according to the China Foreign Exchange Trade System.
Thailand's baht held near the lowest in more than a year on speculation the central bank will support the currency after Prime Minister Samak Sundaravej declared a state of emergency.
Thailand Intervenes
The currency yesterday fell to the weakest since August 2007 after clashes in Bangkok between thousands of pro- and anti-government protesters left one dead and 43 injured. The central bank ``intervened'' to support the baht, Deputy Governor Atchana Waiquamdee said yesterday.
``I don't think the currency has stabilized,'' said Tetsuo Yoshikoshi, a Singapore-based market analyst at Sumitomo Mitsui Banking Corp. ``With general fears that Asian economies are slowing, the exacerbated political turmoil in Thailand is just adding coal to the fire.''
The baht was little changed at 34.47 against the dollar, compared with 34.46 yesterday, according to data compiled by Bloomberg. The currency may fall to 35 over the next two weeks, Yoshikoshi said.
Elsewhere, the Philippine peso weakened 0.3 percent to 46.730 against the dollar. Vietnam's dong fell 0.3 percent to 16,610. India's financial markets in Mumbai were closed for a local holiday.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
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Sept. 3 (Bloomberg) -- Asian currencies fell, with South Korea's won extending its slide to the lowest since October 2004, on speculation investors are pulling out of emerging markets amid a global economic slump.
The won, Asia's worst-performer this year, slumped for a fourth day as ABN Amro Bank NV and UBS AG predicted overseas investors will keep selling the nation's assets as government intervention fails to halt the drop. The economy grew 4.8 percent in the second quarter from a year earlier, the slowest pace in more than a year and 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.
``There is more downside to Asian currencies from a re-flow of capital out of Asia,'' said Irene Cheung, a Singapore-based strategist at ABN Amro Bank. ``The decline could accelerate in the next two months because banks in the U.S. and Europe are pulling out. They are short of cash and need to recapitalize toward year-end.''
Korea's won dropped 1.3 percent to 1,148.50 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The won has slumped 19 percent this year, the worst performance among major Asian currencies, according to data compiled by Bloomberg.
The won will weaken to 1,200 per dollar by year's end, the weakest since 2003, amid ``further sell-offs'' of Korean stocks, ABN's Cheung forecasts.
`Stern Action'
South Korea will take ``stern action'' to stem the won's slide and concerns the nation is facing a financial crisis are ``groundless,'' the nation's Vice Finance Minister Kim Dong Soo said in Gwacheon yesterday.
The Singapore dollar fell for a third day after a central bank survey forecast the economy will expand at the slowest pace in five years in 2008. Growth will slow to 4.2 percent as manufacturing eases and exports decline, according to a survey of 20 economists by the Monetary Authority of Singapore released today.
``There's no doubt the economy is slowing down,'' said Thomas Harr, Singapore-based currency strategist at Standard Chartered Plc. ``There's no reason why Singapore should have a strong currency anymore.''
Singapore's currency weakened 0.5 percent to S$1.4394 at 4:30 p.m. local time, according to data compiled by Bloomberg. The currency will slide to S$1.49 per U.S. dollar by the end of June, Standard Chartered predicts.
`Dollar Strength'
Malaysia's ringgit fell for a fifth day after a slide in oil prices and a slump in regional stocks boosted demand for the U.S. currency. The Kuala Lumpur Composite Index dropped for a second day.
``The dollar strength is quite overwhelming not only against the ringgit but across the region,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``Asian growth is also slowing down and there appears to be little support from the central bank for the ringgit.''
The ringgit fell as much as 0.5 percent to 3.4430 per dollar, the weakest since Sept. 21, 2007, according to data compiled by Bloomberg. It was at 3.4425 in late trading.
Crude oil settled at $109.71 a barrel yesterday on the New York Mercantile Exchange, the lowest close since April 8. The commodity has fallen almost 27 percent from a record high of $147.27 touched in July.
Chinese Yuan
The Chinese yuan dropped against the dollar for a second day on speculation cheaper crude oil will bolster economic growth in the U.S., the world's No. 1 energy user.
Traders pared bets since mid-July on how far the yuan will rise in the next 12 months as the dollar rebounds. The People's Bank of China has managed the yuan's exchange rate against a basket of currencies, including the euro, the yen and the British pound, since a peg to the dollar was abolished in 2005.
``The dollar is rising so fast against major currencies,'' said Wen Li, a Beijing-based dealer at Bank of China Ltd., the country's biggest foreign currency trader. ``Traders have turned more cautious and refrained from betting on the yuan's one-way appreciation.''
The yuan dropped 0.1 percent to 6.8430 a dollar, according to the China Foreign Exchange Trade System.
Thailand's baht held near the lowest in more than a year on speculation the central bank will support the currency after Prime Minister Samak Sundaravej declared a state of emergency.
Thailand Intervenes
The currency yesterday fell to the weakest since August 2007 after clashes in Bangkok between thousands of pro- and anti-government protesters left one dead and 43 injured. The central bank ``intervened'' to support the baht, Deputy Governor Atchana Waiquamdee said yesterday.
``I don't think the currency has stabilized,'' said Tetsuo Yoshikoshi, a Singapore-based market analyst at Sumitomo Mitsui Banking Corp. ``With general fears that Asian economies are slowing, the exacerbated political turmoil in Thailand is just adding coal to the fire.''
The baht was little changed at 34.47 against the dollar, compared with 34.46 yesterday, according to data compiled by Bloomberg. The currency may fall to 35 over the next two weeks, Yoshikoshi said.
Elsewhere, the Philippine peso weakened 0.3 percent to 46.730 against the dollar. Vietnam's dong fell 0.3 percent to 16,610. India's financial markets in Mumbai were closed for a local holiday.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
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South African Rand Drops Most in Two Weeks as Commodities Slip
By Garth Theunissen
Sept. 3 (Bloomberg) -- South Africa's rand fell the most in two weeks against the dollar as stocks around the world dropped on concern slower global economic growth will sap demand for commodities and erode company earnings.
The rand declined for a third day as the Reuters/Jeffries CRB Index of 19 commodities slumped to a 6 1/2-month low after oil and metals prices fell. Commodities account for more than half of South Africa's exports, according to data from the Department of Minerals and Energy.
``Negative sentiment towards commodities is certainly acting as a drag on the rand,'' said Ulrich Leuchtmann, an emerging- markets currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``A drop in commodity prices puts pressure on South Africa's ability to fund its current account deficit.''
The rand dropped as much as 1.6 percent to 7.9001 per dollar, the weakest level since Aug. 18, and was at 7.8832 by 1 p.m. in Johannesburg, from 7.7755 yesterday. It slipped versus 15 of the 16 major currencies monitored by Bloomberg, losing 0.5 percent against the euro to 11.3499, from 11.2897 yesterday.
``Commodities have dropped on a resurgent dollar and expectations of slower global growth,'' said Chris du Bois, chief dealer in Cape Town at Master Currency, which runs a chain of money changers. ``That's knocked confidence in global equity markets and sparked further softening sentiment toward emerging- market currencies.''
Shares, Metals Decline
South Africa's FTSE/JSE Africa All Share Index fell for a fourth day, losing as much as 1.3 percent, led by a slide in mining stocks as gold dropped below $800 an ounce.
Gold lost as much as 2 percent as lower oil prices and a stronger dollar eroded the appeal of the metal as a hedge against inflation. Platinum fell as much as 2.1 percent. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with their prices.
South Africa needs foreign purchases of stocks and bonds to finance its current-account gap, which swelled to 9 percent of gross domestic product in the first quarter, the most in 26 years.
The MSCI Asia Pacific Index fell to a two-year low while Europe's Dow Jones Stoxx 600 Index lost as much as 1.1 percent.
Government bonds fell, with the yield on the benchmark 13.5 percent security due September 2015 adding 1 basis point to 9.25 percent. The yield on the 13 percent note maturing in August 2010, which is more sensitive to interest-rate expectations than longer-dated debt, climbed 7 basis points to 9.94 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net
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Sept. 3 (Bloomberg) -- South Africa's rand fell the most in two weeks against the dollar as stocks around the world dropped on concern slower global economic growth will sap demand for commodities and erode company earnings.
The rand declined for a third day as the Reuters/Jeffries CRB Index of 19 commodities slumped to a 6 1/2-month low after oil and metals prices fell. Commodities account for more than half of South Africa's exports, according to data from the Department of Minerals and Energy.
``Negative sentiment towards commodities is certainly acting as a drag on the rand,'' said Ulrich Leuchtmann, an emerging- markets currency strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``A drop in commodity prices puts pressure on South Africa's ability to fund its current account deficit.''
The rand dropped as much as 1.6 percent to 7.9001 per dollar, the weakest level since Aug. 18, and was at 7.8832 by 1 p.m. in Johannesburg, from 7.7755 yesterday. It slipped versus 15 of the 16 major currencies monitored by Bloomberg, losing 0.5 percent against the euro to 11.3499, from 11.2897 yesterday.
``Commodities have dropped on a resurgent dollar and expectations of slower global growth,'' said Chris du Bois, chief dealer in Cape Town at Master Currency, which runs a chain of money changers. ``That's knocked confidence in global equity markets and sparked further softening sentiment toward emerging- market currencies.''
Shares, Metals Decline
South Africa's FTSE/JSE Africa All Share Index fell for a fourth day, losing as much as 1.3 percent, led by a slide in mining stocks as gold dropped below $800 an ounce.
Gold lost as much as 2 percent as lower oil prices and a stronger dollar eroded the appeal of the metal as a hedge against inflation. Platinum fell as much as 2.1 percent. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with their prices.
South Africa needs foreign purchases of stocks and bonds to finance its current-account gap, which swelled to 9 percent of gross domestic product in the first quarter, the most in 26 years.
The MSCI Asia Pacific Index fell to a two-year low while Europe's Dow Jones Stoxx 600 Index lost as much as 1.1 percent.
Government bonds fell, with the yield on the benchmark 13.5 percent security due September 2015 adding 1 basis point to 9.25 percent. The yield on the 13 percent note maturing in August 2010, which is more sensitive to interest-rate expectations than longer-dated debt, climbed 7 basis points to 9.94 percent. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net
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U.K. Pound Drops as Confidence Stays at Lowest in Four Years
By Lukanyo Mnyanda and Andrew MacAskill
Sept. 3 (Bloomberg) -- The pound fell to the lowest level since April 2006 against the dollar after a private report showed confidence among consumers stayed at the weakest in at least four years, adding to the case for interest-rate cuts.
The U.K. currency also traded near a record low against the euro after Nationwide Building Society said its index of consumer sentiment in August stayed at the weakest since the survey began in May 2004. Britain's services industry shrank last month, separate data showed today, reinforcing evidence the economy is headed toward a recession.
``This will add to the growing pressure on sterling and we can see it falling further,'' said Christian Lawrence, a strategist in London at Royal Bank of Canada. The currency will drop to $1.73 by year-end, according to Lawrence. The median forecast of analysts and strategists surveyed by Bloomberg is for the currency to end the year at $1.87.
The pound fell as much as 1 percent to $1.7668, the lowest level in 2 1/2 years, and was at $1.7758 by 1:32 p.m. in London, from $1.7839 yesterday. The U.K. currency traded at 81.35 pence per euro, after falling yesterday to 81.64 pence, the lowest level since the single currency's debut in 1999.
Nationwide's consumer index, based on the responses of 1,000 people, stayed at 52, the country's second-largest mortgage lender said today. The Chartered Institute of Purchasing and Supply said in a separate report an index based on a survey of about 700 service companies rose to 49.2 points last month, from 47.4 in July. That was the fourth consecutive reading below the 50 level that indicates expansion.
Below $1.78
The pound yesterday traded below $1.78 for the first time since April 2006 even as Prime Minister Gordon Brown announced measures to reverse a plunge in property values. It also fell to a record low against the euro on bets the Bank of England will resist cutting interest rates at a policy meeting tomorrow, delaying an economic recovery.
Brown yesterday proposed spending 1 billion pounds ($1.79 billion) sooner than planned to help the housing market recover from its worst slump in at least 18 years. Britain's building industry contracted last month, a survey showed yesterday.
``Rate cuts are approaching,'' Marco Valli, an economist at Unicredit MIB in Milan, wrote in a client note. ``Worsening domestic demand prospects and increasing weakness in the major export markets mean a manufacturing recovery isn't in the cards for the foreseeable future.''
Gilts rose, with the yield on the 10-year note falling 2 basis points to 4.47 percent. The 5 percent security due March 2018 gained 0.21, or 2.1 pounds per 1,000-pound face amount, to 104.10. The yield on the two-year note, more sensitive to interest-rate changes, fell 5 basis points to 4.39 percent.
Darling Comment
The pound's depreciation accelerated and bonds rose after Chancellor of the Exchequer Alistair Darling told the Guardian newspaper Aug. 30 the U.K. faces its biggest economic slowdown in 60 years. He said later he was referring to the global economy.
``We face a unique set of circumstances that we have not seen in a generation,'' Darling said in an interview broadcast on U.K. television channels yesterday. ``I remain optimistic that we can get through it. We will get through it.''
BNP Paribas SA, the most accurate currency forecaster in a 2007 Bloomberg survey, yesterday changed its year-end forecast for the pound against the dollar to $1.71, from a previous prediction of $1.88.
Traders pared bets on higher borrowing costs in the U.K., with the implied yield on the March short-sterling futures contract falling 2 basis points to 5.05 percent today. It was 5.50 percent on Aug. 1.
U.K. bonds outperformed their German counterparts in the past month, with the difference in yield between 10-year gilts and similar-maturity bunds narrowing 15 basis points to 33 basis points today. The spread with Treasuries was 73 basis points today, from 85 basis points Aug. 4.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
Read more...
Sept. 3 (Bloomberg) -- The pound fell to the lowest level since April 2006 against the dollar after a private report showed confidence among consumers stayed at the weakest in at least four years, adding to the case for interest-rate cuts.
The U.K. currency also traded near a record low against the euro after Nationwide Building Society said its index of consumer sentiment in August stayed at the weakest since the survey began in May 2004. Britain's services industry shrank last month, separate data showed today, reinforcing evidence the economy is headed toward a recession.
``This will add to the growing pressure on sterling and we can see it falling further,'' said Christian Lawrence, a strategist in London at Royal Bank of Canada. The currency will drop to $1.73 by year-end, according to Lawrence. The median forecast of analysts and strategists surveyed by Bloomberg is for the currency to end the year at $1.87.
The pound fell as much as 1 percent to $1.7668, the lowest level in 2 1/2 years, and was at $1.7758 by 1:32 p.m. in London, from $1.7839 yesterday. The U.K. currency traded at 81.35 pence per euro, after falling yesterday to 81.64 pence, the lowest level since the single currency's debut in 1999.
Nationwide's consumer index, based on the responses of 1,000 people, stayed at 52, the country's second-largest mortgage lender said today. The Chartered Institute of Purchasing and Supply said in a separate report an index based on a survey of about 700 service companies rose to 49.2 points last month, from 47.4 in July. That was the fourth consecutive reading below the 50 level that indicates expansion.
Below $1.78
The pound yesterday traded below $1.78 for the first time since April 2006 even as Prime Minister Gordon Brown announced measures to reverse a plunge in property values. It also fell to a record low against the euro on bets the Bank of England will resist cutting interest rates at a policy meeting tomorrow, delaying an economic recovery.
Brown yesterday proposed spending 1 billion pounds ($1.79 billion) sooner than planned to help the housing market recover from its worst slump in at least 18 years. Britain's building industry contracted last month, a survey showed yesterday.
``Rate cuts are approaching,'' Marco Valli, an economist at Unicredit MIB in Milan, wrote in a client note. ``Worsening domestic demand prospects and increasing weakness in the major export markets mean a manufacturing recovery isn't in the cards for the foreseeable future.''
Gilts rose, with the yield on the 10-year note falling 2 basis points to 4.47 percent. The 5 percent security due March 2018 gained 0.21, or 2.1 pounds per 1,000-pound face amount, to 104.10. The yield on the two-year note, more sensitive to interest-rate changes, fell 5 basis points to 4.39 percent.
Darling Comment
The pound's depreciation accelerated and bonds rose after Chancellor of the Exchequer Alistair Darling told the Guardian newspaper Aug. 30 the U.K. faces its biggest economic slowdown in 60 years. He said later he was referring to the global economy.
``We face a unique set of circumstances that we have not seen in a generation,'' Darling said in an interview broadcast on U.K. television channels yesterday. ``I remain optimistic that we can get through it. We will get through it.''
BNP Paribas SA, the most accurate currency forecaster in a 2007 Bloomberg survey, yesterday changed its year-end forecast for the pound against the dollar to $1.71, from a previous prediction of $1.88.
Traders pared bets on higher borrowing costs in the U.K., with the implied yield on the March short-sterling futures contract falling 2 basis points to 5.05 percent today. It was 5.50 percent on Aug. 1.
U.K. bonds outperformed their German counterparts in the past month, with the difference in yield between 10-year gilts and similar-maturity bunds narrowing 15 basis points to 33 basis points today. The spread with Treasuries was 73 basis points today, from 85 basis points Aug. 4.
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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Canada's Dollar Falls to Year Low Before Bank of Canada Meeting
By Chris Fournier
Sept. 3 (Bloomberg) -- Canada's dollar dropped to the lowest in more than a year before policy makers announce a decision on the nation's borrowing costs.
The Canadian dollar has depreciated versus 12 of the 16 most-actively traded currencies. The Bank of Canada will leave the key interest rate unchanged at 3 percent, according to the median forecast of 28 economists surveyed by Bloomberg News.
``The market is realizing the risk to the Bank of Canada meeting this morning is a one-quarter point ease,'' said Steve Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto. ``That's not fully priced in. The softening economic climate has been enhanced with commodity prices finally easing, giving the governor the opportunity to get ahead of the curve this morning.''
The Canadian currency fell 0.8 percent to C$1.0760 per U.S. dollar at 7:56 a.m. in Toronto, from C$1.0672 yesterday, the fifth consecutive daily decline. It earlier weakened to C$1.0777, the lowest since August 2007. One Canadian dollar buys 92.93 U.S. cents.
Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.10 against the U.S. dollar by the end of 2009, according to the median forecast in a Bloomberg News survey of economists.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
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Sept. 3 (Bloomberg) -- Canada's dollar dropped to the lowest in more than a year before policy makers announce a decision on the nation's borrowing costs.
The Canadian dollar has depreciated versus 12 of the 16 most-actively traded currencies. The Bank of Canada will leave the key interest rate unchanged at 3 percent, according to the median forecast of 28 economists surveyed by Bloomberg News.
``The market is realizing the risk to the Bank of Canada meeting this morning is a one-quarter point ease,'' said Steve Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto. ``That's not fully priced in. The softening economic climate has been enhanced with commodity prices finally easing, giving the governor the opportunity to get ahead of the curve this morning.''
The Canadian currency fell 0.8 percent to C$1.0760 per U.S. dollar at 7:56 a.m. in Toronto, from C$1.0672 yesterday, the fifth consecutive daily decline. It earlier weakened to C$1.0777, the lowest since August 2007. One Canadian dollar buys 92.93 U.S. cents.
Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.10 against the U.S. dollar by the end of 2009, according to the median forecast in a Bloomberg News survey of economists.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
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Euro Falls Against Dollar on Concern Economy Headed for Slump
By Agnes Lovasz and Stanley White
Enlarge Image/Details
Sept. 3 (Bloomberg) -- The euro fell to the lowest in more than seven months against the dollar after reports showed business investment, exports and retail sales declined, adding to evidence of an economic slump in the single-currency region.
The 15-nation currency also dropped to a five-month low versus the yen on speculation the European Central Bank will signal concern tomorrow the economic outlook in the region is deteriorating. The pound traded near a two-year low against the dollar on concern the U.K. is headed for a recession. The South Korean won was at the weakest in four years on speculation international investors are selling the country's assets.
``We're getting a fairly consistent picture of downside surprises in the euro zone and upside surprises in U.S. data,'' said Adam Cole, head of global currency strategy at RBC Capital Markets in London. ``The euro will remain a net loser as the dollar continues to appreciate.''
The euro declined to $1.4385, the lowest since Jan. 22, before trading at $1.4426 as of 7:37 a.m. in New York, from $1.4520 yesterday. The dollar was little changed at 108.49 yen. The pound dropped to $1.7668, the lowest level since April 2006. The euro declined to 156.26 yen, the weakest since the end of March, from 157.68 yen, before trading at 156.52 yen.
European retail sales fell 0.4 percent in July from June, the European Union's statistics office said from Luxembourg today. They were forecast to rise 0.1 percent, according to the median forecast of 25 economists surveyed by Bloomberg News.
Investment by companies slid 1.2 percent, the first decline in five years, and household spending dropped 0.2 percent after stagnating in the previous three months, separate EU data showed today. Overall gross domestic product fell 0.2 percent, matching an initial estimate published on Aug. 14.
Dollar's Surge
The U.S. currency surged 6 percent versus the euro in August, its biggest monthly gain since the European currency started trading in 1999. The economies of Europe and Japan shrank in the second quarter, while U.S. gross domestic product expanded at a 3.3 percent annual pace.
The European Central Bank will hold its main refinancing rate at a seven-year high of 4.25 percent at its meeting tomorrow, according to all but one of the 53 analysts surveyed by Bloomberg News.
``The euro seems poised to grind lower,'' said Mitsuru Sahara, senior currency sales manager in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly listed lender. ``Higher-yielding currencies are losing their luster because the economic outlook suggests interest rates in several countries are going to start falling.''
The euro may decline to $1.4430 today, he said.
Forecast Change
Standard Chartered Plc and BNP Paribas SA raised their forecasts for the U.S. currency yesterday. London-based Standard Chartered predicts the dollar will rise to $1.44 per euro by year-end and $1.36 by March 31, compared with previous forecasts of $1.49 and $1.42. BNP, based in Paris, forecasts the dollar will gain to $1.42 versus the euro and $1.71 against the pound by year-end, stronger than the old forecasts of $1.45 and $1.88.
``There is no reason to buy the euro from a cyclical perspective,'' Hans-Guenter Redeker, global head of currency strategy at BNP Paribas SA, the most accurate currency forecaster in a 2007 Bloomberg survey, said in a research note.
The dollar rose against the yen earlier on speculation a decline in oil prices will support economic growth in the world's largest energy consumer. Crude oil for October delivery fell 1.3 percent to $108.32 a barrel, near a five-month low of $105.46 reached yesterday.
``The dropping commodity prices tend to benefit the dollar,'' said Magnus Prim, chief foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``Even without that, focus has shifted to the weakness in the euro area. That hasn't fully been priced in yet.''
`Sterling Struggling'
The pound was at 81.34 pence per euro, near a record low of 81.64 pence reached yesterday. British consumer confidence stayed at a four-year low in August, according to a survey published today by Nationwide Building Society, the nation's second-biggest mortgage lender. The Bank of England will keep its target lending rate at 5 percent tomorrow, according to all 61 economists surveyed by Bloomberg News.
U.K. inflation will accelerate to about 5 percent in coming months before slowing to below the central bank's 2 percent target in two years if the benchmark rate remains unchanged, BOE Governor Mervyn King said Aug. 13.
``Sterling is struggling to shore up support ahead of the BOE meeting,'' analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist at UBS AG, the world's second-largest currency trader, wrote in a research note yesterday. ``Sterling weakness will continue while the BOE remains trapped by above- target inflation.''
Won Loss
The South Korean won declined to a four-year low of 1,159.05 per dollar before closing at 1,148.55, from 1,133.75 yesterday. UBS AG and ABN Amro Bank NV predicted further declines in the currency, Asia's worst performer, as overseas investors will keep selling the nation's assets.
Gains in the dollar may be limited by speculation a weakening U.S. labor market will damp consumer spending.
U.S. nonfarm payrolls fell by 75,000 jobs in August, faster than the previous month's decline of 51,000, according to the median estimate in a Bloomberg News survey before the Labor Department releases the report Sept. 5.
``I don't think the U.S. fundamentals at all support the idea of a stronger U.S. dollar going into next year,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd., in an interview with Bloomberg Television. ``The dollar is going to turn around at some point.''
The euro's decline through $1.4555, an extension of a decline from a ``double top,'' signaled the European currency may fall to $1.4310, a level last reached in December, wrote Kevin Edgeley, an analyst at Goldman Sachs Group Inc. in London who uses charts to predict currency movements, in a research note yesterday.
A double top occurs when a currency makes two successive peaks, often indicating a trend's reversal. The euro reached $1.6019 on April 22, dropped to a two-month low of $1.5285 on May 8, and rose to the record of $1.6038 on July 15.
To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net
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Enlarge Image/Details
Sept. 3 (Bloomberg) -- The euro fell to the lowest in more than seven months against the dollar after reports showed business investment, exports and retail sales declined, adding to evidence of an economic slump in the single-currency region.
The 15-nation currency also dropped to a five-month low versus the yen on speculation the European Central Bank will signal concern tomorrow the economic outlook in the region is deteriorating. The pound traded near a two-year low against the dollar on concern the U.K. is headed for a recession. The South Korean won was at the weakest in four years on speculation international investors are selling the country's assets.
``We're getting a fairly consistent picture of downside surprises in the euro zone and upside surprises in U.S. data,'' said Adam Cole, head of global currency strategy at RBC Capital Markets in London. ``The euro will remain a net loser as the dollar continues to appreciate.''
The euro declined to $1.4385, the lowest since Jan. 22, before trading at $1.4426 as of 7:37 a.m. in New York, from $1.4520 yesterday. The dollar was little changed at 108.49 yen. The pound dropped to $1.7668, the lowest level since April 2006. The euro declined to 156.26 yen, the weakest since the end of March, from 157.68 yen, before trading at 156.52 yen.
European retail sales fell 0.4 percent in July from June, the European Union's statistics office said from Luxembourg today. They were forecast to rise 0.1 percent, according to the median forecast of 25 economists surveyed by Bloomberg News.
Investment by companies slid 1.2 percent, the first decline in five years, and household spending dropped 0.2 percent after stagnating in the previous three months, separate EU data showed today. Overall gross domestic product fell 0.2 percent, matching an initial estimate published on Aug. 14.
Dollar's Surge
The U.S. currency surged 6 percent versus the euro in August, its biggest monthly gain since the European currency started trading in 1999. The economies of Europe and Japan shrank in the second quarter, while U.S. gross domestic product expanded at a 3.3 percent annual pace.
The European Central Bank will hold its main refinancing rate at a seven-year high of 4.25 percent at its meeting tomorrow, according to all but one of the 53 analysts surveyed by Bloomberg News.
``The euro seems poised to grind lower,'' said Mitsuru Sahara, senior currency sales manager in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly listed lender. ``Higher-yielding currencies are losing their luster because the economic outlook suggests interest rates in several countries are going to start falling.''
The euro may decline to $1.4430 today, he said.
Forecast Change
Standard Chartered Plc and BNP Paribas SA raised their forecasts for the U.S. currency yesterday. London-based Standard Chartered predicts the dollar will rise to $1.44 per euro by year-end and $1.36 by March 31, compared with previous forecasts of $1.49 and $1.42. BNP, based in Paris, forecasts the dollar will gain to $1.42 versus the euro and $1.71 against the pound by year-end, stronger than the old forecasts of $1.45 and $1.88.
``There is no reason to buy the euro from a cyclical perspective,'' Hans-Guenter Redeker, global head of currency strategy at BNP Paribas SA, the most accurate currency forecaster in a 2007 Bloomberg survey, said in a research note.
The dollar rose against the yen earlier on speculation a decline in oil prices will support economic growth in the world's largest energy consumer. Crude oil for October delivery fell 1.3 percent to $108.32 a barrel, near a five-month low of $105.46 reached yesterday.
``The dropping commodity prices tend to benefit the dollar,'' said Magnus Prim, chief foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``Even without that, focus has shifted to the weakness in the euro area. That hasn't fully been priced in yet.''
`Sterling Struggling'
The pound was at 81.34 pence per euro, near a record low of 81.64 pence reached yesterday. British consumer confidence stayed at a four-year low in August, according to a survey published today by Nationwide Building Society, the nation's second-biggest mortgage lender. The Bank of England will keep its target lending rate at 5 percent tomorrow, according to all 61 economists surveyed by Bloomberg News.
U.K. inflation will accelerate to about 5 percent in coming months before slowing to below the central bank's 2 percent target in two years if the benchmark rate remains unchanged, BOE Governor Mervyn King said Aug. 13.
``Sterling is struggling to shore up support ahead of the BOE meeting,'' analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist at UBS AG, the world's second-largest currency trader, wrote in a research note yesterday. ``Sterling weakness will continue while the BOE remains trapped by above- target inflation.''
Won Loss
The South Korean won declined to a four-year low of 1,159.05 per dollar before closing at 1,148.55, from 1,133.75 yesterday. UBS AG and ABN Amro Bank NV predicted further declines in the currency, Asia's worst performer, as overseas investors will keep selling the nation's assets.
Gains in the dollar may be limited by speculation a weakening U.S. labor market will damp consumer spending.
U.S. nonfarm payrolls fell by 75,000 jobs in August, faster than the previous month's decline of 51,000, according to the median estimate in a Bloomberg News survey before the Labor Department releases the report Sept. 5.
``I don't think the U.S. fundamentals at all support the idea of a stronger U.S. dollar going into next year,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd., in an interview with Bloomberg Television. ``The dollar is going to turn around at some point.''
The euro's decline through $1.4555, an extension of a decline from a ``double top,'' signaled the European currency may fall to $1.4310, a level last reached in December, wrote Kevin Edgeley, an analyst at Goldman Sachs Group Inc. in London who uses charts to predict currency movements, in a research note yesterday.
A double top occurs when a currency makes two successive peaks, often indicating a trend's reversal. The euro reached $1.6019 on April 22, dropped to a two-month low of $1.5285 on May 8, and rose to the record of $1.6038 on July 15.
To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net
Read more...
Ivory Coast's Main Cocoa Crop May Decline Because of Disease
By Pauline Bax
Sept. 3 (Bloomberg) -- Ivory Coast, the world's largest cocoa producer, may harvest a smaller crop this year because of the spread of black-pod disease, according to the head of the nation's cocoa and coffee exchange.
The fungus spread in the West African country because of a lack of sunshine, said Angoua Edoukou, interim president of the Bourse du Café et du Cacao, by phone from the commercial capital, Abidjan. Signs of the disease are showing in growing regions including the southwestern zone of Soubre, the central area of Daloa and the border with neighboring Ghana.
``The information we are currently receiving from several cocoa-growing regions makes us think that because of black-pod rot, it will be difficult for this year's main crop to reach the quantity we had last year,'' Edoukou said.
A drop in cocoa supplies from the 1.07 million tons produced in the main harvest last year may raise cocoa prices and increase costs for candymakers Hershey Co. and Nestle SA. Cocoa futures in New York jumped 30 percent this year to $2,664 a metric ton, after falling $220, or 7.6 percent, yesterday on ICE Futures U.S., the former New York Board of Trade. Prices peaked at $3,275 on July 1.
Ivory Coast produces 37 percent of the world's cocoa, according to International Cocoa Organization statistics. The nation reaped an estimated 1.39 million metric tons of beans in the 2007-08 season, compared with 1.23 million tons a year earlier, the ICCO said.
Two Crops
Ivorian growers collect a larger main crop from October to March, while a smaller mid-crop is harvested from April to September. Last season's main crop totaled 1.07 million tons, according to BCC statistics.
The 2008-2009 main crop may not surpass 1 million metric tons because of the spread of black-pod rot, said a crop analyst who declined to be named because the estimate isn't public. The analyst recently completed a trip through Ivory Coast inspecting plantations.
Black pod is a fungus that causes cocoa pods to turn black and rot. The disease spreads during persistent wet, overcast days, according to the Web site of the Food and Agriculture Organization.
There are early signs of black pod almost everywhere, compared with last year, when the disease was mainly concentrated in the southwestern region of Soubre, said the analyst.
To contact the reporters on this story: Pauline Bax in Abidjan via Johannesburg at pmrichardson@bloomberg.net.
Read more...
Sept. 3 (Bloomberg) -- Ivory Coast, the world's largest cocoa producer, may harvest a smaller crop this year because of the spread of black-pod disease, according to the head of the nation's cocoa and coffee exchange.
The fungus spread in the West African country because of a lack of sunshine, said Angoua Edoukou, interim president of the Bourse du Café et du Cacao, by phone from the commercial capital, Abidjan. Signs of the disease are showing in growing regions including the southwestern zone of Soubre, the central area of Daloa and the border with neighboring Ghana.
``The information we are currently receiving from several cocoa-growing regions makes us think that because of black-pod rot, it will be difficult for this year's main crop to reach the quantity we had last year,'' Edoukou said.
A drop in cocoa supplies from the 1.07 million tons produced in the main harvest last year may raise cocoa prices and increase costs for candymakers Hershey Co. and Nestle SA. Cocoa futures in New York jumped 30 percent this year to $2,664 a metric ton, after falling $220, or 7.6 percent, yesterday on ICE Futures U.S., the former New York Board of Trade. Prices peaked at $3,275 on July 1.
Ivory Coast produces 37 percent of the world's cocoa, according to International Cocoa Organization statistics. The nation reaped an estimated 1.39 million metric tons of beans in the 2007-08 season, compared with 1.23 million tons a year earlier, the ICCO said.
Two Crops
Ivorian growers collect a larger main crop from October to March, while a smaller mid-crop is harvested from April to September. Last season's main crop totaled 1.07 million tons, according to BCC statistics.
The 2008-2009 main crop may not surpass 1 million metric tons because of the spread of black-pod rot, said a crop analyst who declined to be named because the estimate isn't public. The analyst recently completed a trip through Ivory Coast inspecting plantations.
Black pod is a fungus that causes cocoa pods to turn black and rot. The disease spreads during persistent wet, overcast days, according to the Web site of the Food and Agriculture Organization.
There are early signs of black pod almost everywhere, compared with last year, when the disease was mainly concentrated in the southwestern region of Soubre, said the analyst.
To contact the reporters on this story: Pauline Bax in Abidjan via Johannesburg at pmrichardson@bloomberg.net.
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Palm Oil in Malaysia Falls for Second Day on Lower Crude Prices
By Glenys Sim and Claire Leow
Sept. 3 (Bloomberg) -- Palm oil futures in Malaysia fell for a second day, erasing earlier gains, as the fourth day of declines in crude oil prices reduced the appeal of the tropical commodity as feedstock for alternative energy.
``Palm oil prices are currently undervalued,'' Thomas Mielke, chief editor of OilWorld, the trade publication, said from Siem Reap, Cambodia. ``At this level, palm oil consumption for energy is set to rise sharply. This will be supportive for palm oil unless mineral oil prices decline.''
Palm oil, the world's most consumed vegetable oil, can be mixed with regular diesel to stretch fossil fuel supplies. The futures contract has tumbled 45 percent from a record 4,486 ringgit a metric ton in March amid concerns that global supply may exceed demand, and as funds cut commodity investments.
Palm oil for November fell 33 ringgit, or 1.3 percent, to close at 2,451 ringgit ($712) a ton on the Malaysia Derivatives Exchange at 6:00 p.m. local time. The contract also slumped yesterday as crude oil prices fell.
Still, ``palm oil prices will rebound in the fourth quarter,'' Tan Ting Min, a research analyst at Credit Suisse Group, wrote in a report today. ``Malaysian palm oil exports in August grew to hit an all-time high, driven primarily by a strong pick-up in exports to India and Pakistan ahead of the festive seasons.''
Exports
Malaysia's palm oil exports rose 6.6 percent in August from July, Societe Generale de Surveillance, an independent cargo surveyor, estimated yesterday. Intertek, a rival surveyor, said in a separate report that exports gained 8 percent in August.
Consumption of palm oil, the world's most-traded vegetable oil, typically picks up during the Muslim holy month of Ramadan, which started this month, and during China's week-long Mid-Autumn Festival, also due this month.
``We expect a pick-up in September,'' wrote Tan. ``Palm oil exports to the Middle Eastern countries should also be higher ahead of the festive season.''
OilWorld's Mielke forecast that the price of palm oil may rise to average $1,120 a ton in the year ending June 2009. That compares with an average of $1,041 a ton the previous year.
Increased demand for the tropical oil as feedstock for biofuel would support palm oil prices unless crude oil prices declined, he said.
To contact the reporters for this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Claire Leow in Siem Reap at cleow@bloomberg.net
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Sept. 3 (Bloomberg) -- Palm oil futures in Malaysia fell for a second day, erasing earlier gains, as the fourth day of declines in crude oil prices reduced the appeal of the tropical commodity as feedstock for alternative energy.
``Palm oil prices are currently undervalued,'' Thomas Mielke, chief editor of OilWorld, the trade publication, said from Siem Reap, Cambodia. ``At this level, palm oil consumption for energy is set to rise sharply. This will be supportive for palm oil unless mineral oil prices decline.''
Palm oil, the world's most consumed vegetable oil, can be mixed with regular diesel to stretch fossil fuel supplies. The futures contract has tumbled 45 percent from a record 4,486 ringgit a metric ton in March amid concerns that global supply may exceed demand, and as funds cut commodity investments.
Palm oil for November fell 33 ringgit, or 1.3 percent, to close at 2,451 ringgit ($712) a ton on the Malaysia Derivatives Exchange at 6:00 p.m. local time. The contract also slumped yesterday as crude oil prices fell.
Still, ``palm oil prices will rebound in the fourth quarter,'' Tan Ting Min, a research analyst at Credit Suisse Group, wrote in a report today. ``Malaysian palm oil exports in August grew to hit an all-time high, driven primarily by a strong pick-up in exports to India and Pakistan ahead of the festive seasons.''
Exports
Malaysia's palm oil exports rose 6.6 percent in August from July, Societe Generale de Surveillance, an independent cargo surveyor, estimated yesterday. Intertek, a rival surveyor, said in a separate report that exports gained 8 percent in August.
Consumption of palm oil, the world's most-traded vegetable oil, typically picks up during the Muslim holy month of Ramadan, which started this month, and during China's week-long Mid-Autumn Festival, also due this month.
``We expect a pick-up in September,'' wrote Tan. ``Palm oil exports to the Middle Eastern countries should also be higher ahead of the festive season.''
OilWorld's Mielke forecast that the price of palm oil may rise to average $1,120 a ton in the year ending June 2009. That compares with an average of $1,041 a ton the previous year.
Increased demand for the tropical oil as feedstock for biofuel would support palm oil prices unless crude oil prices declined, he said.
To contact the reporters for this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Claire Leow in Siem Reap at cleow@bloomberg.net
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Oil Falls for Fourth Day as Gulf Platforms Escape Storm Damage
By Grant Smith
Sept. 3 (Bloomberg) -- Crude oil declined for a fourth day as companies including Royal Dutch Shell Plc and ConocoPhillips said that Hurricane Gustav caused no structural damage to Gulf of Mexico facilities.
An aerial survey of platforms and rigs in the Gulf found no major damage or oil spills, the U.S. Coast Guard said. Oil has fallen 8.6 percent this week as the dollar neared a seven-month high against the euro, dimming crude's appeal as a currency hedge. Ospraie Management LLC yesterday told investors it was closing its largest hedge fund following losses in commodities.
``With Gustav out the way, investor focus is shifting back to weakening demand for energy and other commodities and the broad strength in the U.S. dollar,'' said Andrey Kryuchenkov, an analyst at London-based Sucden (U.K.) Ltd.
Crude oil for October delivery fell as much as $2.39, or 2.2 percent, to $107.32 a barrel, and traded at $108.01 at 1 p.m. London time on the New York Mercantile Exchange.
Oil is down nearly $40 from its July record. Yesterday, futures lost 5 percent to settle at $109.71 a barrel, the lowest close since April 8.
Shell said in an e-mailed statement yesterday that initial reports indicate no major damage to the oil producer's onshore facilities in Louisiana. ConocoPhillips said there was no ``significant damage'' to its Magnolia platform in the Gulf.
Total SA said it expects its 232,000 barrel-a-day refinery in Port Arthur, Texas, to resume ``quickly.'' Valero Energy Corp., the largest U.S. refiner, said its St. Charles, Louisiana, plant had suffered no significant damage.
Refinery Shutdowns
Thirteen refineries in the Gulf of Mexico area were shut and 10 others ran at reduced operating rates in the wake of Hurricane Gustav, according to the U.S. Energy Department.
The dollar's recovery will cause the decline in oil prices to continue, OPEC President Chakib Khelil said today in a phone interview, adding that he expects supply to outstrip demand by as much as 1 million barrels a day in the first half of 2009.
``The dollar is getting stronger, which led to the decline in oil prices,'' said Khelil, who is also Algeria's oil minister. The Organization of Petroleum Exporting Countries will meet on Sept. 9 in Vienna to review production targets.
Ospraie Management's manager Dwight Anderson notified investors it would close the fund, which lost 38.6 percent this year during a ``substantial sell-off'' in raw materials, in a letter sent yesterday.
Ospraie's Portfolio
``The Ospraie fund closure could have had some influence on prices, but the decline in oil was really driven by sales pressure from macro funds,'' said Hakan Kocayusufpasaoglu, director of commodity derivatives at Credit Suisse Group in London.
``If history is any guide, someone will take over the majority of Ospraie's portfolio after a pre-agreed level of liquidation has taken place,'' Kocayusufpasaoglu said. `` This has happened in the past with other hedge funds faltering.''
Gustav made landfall in Louisiana Sept. 1 as a Category 2 hurricane with winds close to 110 miles (177 kilometers) an hour. It has since been downgraded to a tropical depression by the National Hurricane Center as it heads toward northeastern Texas.
All of the Gulf's 1.3 million barrels a day of oil output and 95 percent of its gas production, or 7.06 billion cubic feet, remained shut, the U.S. government said yesterday.
Stronger Dollar
The dollar traded at $1.4429 per euro at 1:05 p.m. London time from $1.4617 on Sept. 1. It touched $1.4385, the strongest level since Jan. 22.
Brent crude oil for October settlement fell as much as $2.17, or 2 percent, to $106.17 a barrel and traded at $107.21 at 1:05 p.m. London time.
Analysts were split over whether U.S. crude-oil inventories rose or fell last week, a Bloomberg News survey showed. Supplies of crude oil probably rose 450,000 barrels last week from 305.8 million barrels, according to the median of responses by 10 analysts before an Energy Department report this week.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net;
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Cocoa Drops in London on Speculation Ivory Coast Supply to Rise
By Marianne Stigset and Pauline Bax
Sept. 3 (Bloomberg) -- Cocoa fell for a third day in London on speculation supply will increase from Ivory Coast, the world's biggest producer, and as crude oil led other commodities lower.
Bean arrivals at the ports of the West African nation, which accounts for almost 40 percent of global supply, gained 9 percent in the first eight months of the year, Reuters reported this week, citing estimates from unidentified exporters. Sliding oil prices and a stronger dollar curbed the appeal of raw materials from gold to wheat as a hedge against inflation.
Cocoa is falling on ``continued selling across the board of commodities, particularly softs, a weakening in oil values plus indications of upcoming plentiful supplies from the main Ivory Coast crop resulting from heavy rains,'' Ryan Bennett, a trader of the beans at Sucden (U.K.) Ltd., wrote in a report today.
Futures for December delivery fell 10 pounds, or 0.7 percent, to 1,536 pounds ($2,746) a metric ton as of noon on the Liffe exchange in London. The beans have gained 48 percent this year, outperforming the 9.9 percent advance in the UBS Bloomberg CMCI Index of 26 commodities.
Cocoa futures for December slid $24, or 0.9 percent, to $2,640 a ton in after-hours trading on ICE Futures U.S.
Commodities are trading near their lowest in five months, led by oil, on concern slowing global economic growth will crimp demand. The Standard & Poor's GSCI gauge of raw materials yesterday slumped the most since March 19.
Ospraie Management LLC, once the largest commodity hedge fund firm, said yesterday it would close its biggest fund after losing 38.6 percent this year on bad bets on commodity stocks.
Lack of Sun
Cocoa may be supported by prospects for a reduced crop next season. Ivory Coast may harvest a smaller crop because a lack of sunshine has led to black-pod disease outbreaks, Angoua Edoukou, interim president of the Bourse du Café et du Cacao, said by phone from the commercial capital, Abidjan.
Signs of the disease are showing in growing regions including the southwestern zone of Soubre, the central area of Daloa and the border with neighboring Ghana.
Ivorian growers collect a larger main crop from October to March, while a smaller mid-crop is harvested from April to September. Last season's main crop totaled 1.07 million tons, according to BCC statistics.
The 2008-2009 main crop may not surpass 1 million tons because of black-pod rot, said a crop analyst who declined to be named because the estimate isn't public. The analyst recently completed a trip through Ivory Coast inspecting plantations.
The International Cocoa Organization forecasts an 88,000-ton supply shortfall this season, the second annual deficit.
``Periodic scattered thunderstorm activity through key cocoa areas of Ghana and Ivory Coast will maintain soil moisture for cocoa trees and development of the main crop,'' forecaster Meteorlogix LLC said yesterday in a report. ``However, it may also promote pod rot.''
Among other agricultural commodities, robusta for November delivery fell $27, or 1.2 percent, to $2,226 a ton in London. White sugar for October delivery dropped $3.50, or 0.9 percent, to $394 a ton.
-- Editors: Tony Barrett
To contact the reporters on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net; Pauline Bax in Abidjan via Johannesburg at pmrichardson@bloomberg.net.
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Sept. 3 (Bloomberg) -- Cocoa fell for a third day in London on speculation supply will increase from Ivory Coast, the world's biggest producer, and as crude oil led other commodities lower.
Bean arrivals at the ports of the West African nation, which accounts for almost 40 percent of global supply, gained 9 percent in the first eight months of the year, Reuters reported this week, citing estimates from unidentified exporters. Sliding oil prices and a stronger dollar curbed the appeal of raw materials from gold to wheat as a hedge against inflation.
Cocoa is falling on ``continued selling across the board of commodities, particularly softs, a weakening in oil values plus indications of upcoming plentiful supplies from the main Ivory Coast crop resulting from heavy rains,'' Ryan Bennett, a trader of the beans at Sucden (U.K.) Ltd., wrote in a report today.
Futures for December delivery fell 10 pounds, or 0.7 percent, to 1,536 pounds ($2,746) a metric ton as of noon on the Liffe exchange in London. The beans have gained 48 percent this year, outperforming the 9.9 percent advance in the UBS Bloomberg CMCI Index of 26 commodities.
Cocoa futures for December slid $24, or 0.9 percent, to $2,640 a ton in after-hours trading on ICE Futures U.S.
Commodities are trading near their lowest in five months, led by oil, on concern slowing global economic growth will crimp demand. The Standard & Poor's GSCI gauge of raw materials yesterday slumped the most since March 19.
Ospraie Management LLC, once the largest commodity hedge fund firm, said yesterday it would close its biggest fund after losing 38.6 percent this year on bad bets on commodity stocks.
Lack of Sun
Cocoa may be supported by prospects for a reduced crop next season. Ivory Coast may harvest a smaller crop because a lack of sunshine has led to black-pod disease outbreaks, Angoua Edoukou, interim president of the Bourse du Café et du Cacao, said by phone from the commercial capital, Abidjan.
Signs of the disease are showing in growing regions including the southwestern zone of Soubre, the central area of Daloa and the border with neighboring Ghana.
Ivorian growers collect a larger main crop from October to March, while a smaller mid-crop is harvested from April to September. Last season's main crop totaled 1.07 million tons, according to BCC statistics.
The 2008-2009 main crop may not surpass 1 million tons because of black-pod rot, said a crop analyst who declined to be named because the estimate isn't public. The analyst recently completed a trip through Ivory Coast inspecting plantations.
The International Cocoa Organization forecasts an 88,000-ton supply shortfall this season, the second annual deficit.
``Periodic scattered thunderstorm activity through key cocoa areas of Ghana and Ivory Coast will maintain soil moisture for cocoa trees and development of the main crop,'' forecaster Meteorlogix LLC said yesterday in a report. ``However, it may also promote pod rot.''
Among other agricultural commodities, robusta for November delivery fell $27, or 1.2 percent, to $2,226 a ton in London. White sugar for October delivery dropped $3.50, or 0.9 percent, to $394 a ton.
-- Editors: Tony Barrett
To contact the reporters on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net; Pauline Bax in Abidjan via Johannesburg at pmrichardson@bloomberg.net.
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Buy Oil Services Companies, Shun Oil Producers, Fortis Says
By Hanny Wan
Sept. 3 (Bloomberg) -- Investors should buy oil services companies such as rig builders and shun oil producers given recent pullbacks in crude prices, Fortis Investments said.
``You're still going to see people needing to find and extract oil so the oil services companies' services are going to be in demand regardless of the oil price,'' Christian Goldsmith, Hong Kong-based international investment specialist at Fortis, said in an interview. He declined to name specific stocks.
Crude oil futures plunged 5 percent to $109.71 a barrel in New York yesterday, after touching $105.46, the lowest since April 4. Oil is down 26 percent from its July record.
China Oilfield Services Ltd., a unit of the nation's third- largest oil producer, last week said first-half profit rose 40 percent after energy companies increased exploration spending. The stock has plunged 47 percent this year, more than double the 19 percent slide for parent Cnooc Ltd.
``We really don't see a great deal of reason to invest in, say the large oil majors, which to a certain extent would be seen as sectors under attack,'' Goldsmith said.
The Reuters/Jefferies CRB Index of commodities slumped the most since March 19, led by energy prices, as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Commodities also slumped after the U.S. dollar jumped to the highest since October against six major currencies, eroding the appeal of raw materials priced in the U.S. currency.
Still, oil and commodities prices will rebound ``in the long run'' due to factors including rising demand from China, the continued U.S. hurricane season and increasing geopolitical tensions, Goldsmith said.
``All these uncertainties would mean that the oil price could still see further upward pressure, but not to the level we've seen'' of more than $150 a barrel, he said. ``We do still think that for commodities, there is a long-term structural bull story.
``We would expect commodity prices, over the long term, to remain relatively high,'' he added.
To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net.
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