Daily Forex Fundamentals | Written by Crown Forex | Sep 04 08 14:39 GMT |
A set of data was released from all around the planet today, where the ECB and the BOE left interest rates steady at 4.25% and 5.00% respectively, while the U.S. economy as well had its share of the news, starting with the ADP employment report and ending with the ISM services report!!!
The Euro was still weak against the U.S. dollar as Mr. Trichet still held his neutral bias as the ECB decided to maintain interest rates steady at 4.25%, the Euro dropped below the critical support level at 1.4450 which provided the pair with further downside momentum to set today's low at 1.4417 after recording a high of 1.4543 earlier today.
The Pound as well was not able to gain against the U.S. dollar as the BOE decided to maintain interest rates steady at 5.00%, the Pound declined today from a high of 1.8758 breaching the 1.8700 level on the way to trade now around the 1.7760s level, the pair managed to rebound from today's low at 1.7704 which provided the pair with strong upside momentum.
The U.S. dollar however remained rather settled against the Japanese Yen with a slight tendency towards the downside as investors continued to reduce their carry trades bets, the USD/JPY pair is still trading within the 108 levels, not being able to breach the 38.2% correctional level at 107.99 nor break the 108.40 resistance level, the pair is now trading around the 108.20s level.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
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Thursday, September 4, 2008
Daily Technical Strategist
Daily Forex Technicals | Written by FXTechstrategy | Sep 04 08 14:34 GMT |
EURUSD: Continues To Print Lower Prices, Maintains Its Bearish Broader Bias.
EURUSD: EUR weakened further lower Wednesday testing a low of 1.4386 before recovering to close higher at 1.4515.Although the formation of a hammer candle (reversal signal) on the back of the said intra day recovery is now in place and the pair now holds above its LT rising trendline suggesting nearer term corrective strength, broader bias remains to the downside as long as the 1.4967/51 zone (its range highs from Nov'07 and Jan'08/.618 Ret) remains unbroken. Immediate resistance levels are seen at the 1.4571 level, its Aug 26'08 low and its Aug 19'08 low at 1.4630.Above here will open up risks towards the 1.4811 level, marking its Aug 28'08 high with a break through there setting up the pair for a run at its Aug 21'08 high at 1.4909.However,breaking and closing back below its LT rising trendline could yield further weakness towards its Sept 03'08/Jan 22'08 lows at 1.4386/64 with a trade below there putting the pair in position to target the 1.4309 level, its Dec'07 high and then its Oct'07 low at 1.4015.On thw whole,higher time frame momentum indicators continue to trend lower suggesting further downside losses.
Support Comments
1.4386/64 Sept 03'08/Jan 22'08 low
1.4309 Dec'07 low
1.4015 Oct'07 low
Resistance Comments
1.4595/65 LT Rising trendline/Aug 26'08 low/Range Break Price Target
1.4630 Aug 19'08 low
1.4728 .786 Ret
1.4811 August 12'08 low
GBPUSD: Higher Time Frame Charts Suggest Weakness Towards April'06 Low,
GBPUSD: Following continued weakness since breaking below the 1.9337 low,GBP now looks to head towards its long term support at 1.7251(April'06 low) though nearby support is located at the 1.7623 level, its Mar'06 high while distant one resides at the 1.7129 level, its Dec'05 low. Weekly and monthly studies remain supportive of this view. If a recovery higher is triggered though not yet seen, GBP should trade higher towards its Jan'06 high at 1.7935 and the 1.8090 level, its Jun'06 low. Further strength should push it towards the 1.8176 level, its July 16'06 low. This recovery scenario if it occurs is corrective of the pair's recent decline. All in all, GBP continues to be pressured to the downside leaving it vulnerable to additional weakness.
Support Comments
1.7623 Mar'06 high
1.7251 April'06 low
1.7129 Dec'05 low
1.7049 Nov'05 low
Resistance Comments
1.7935 Jan'06 high
1.8090 Jun'06 low
1.8176 July 16'06 low
1.8283/74 Aug 27'08 low/Descending triangle breakout price target
Mohammed Isah
Market Analyst
www.fxtechstrategy.com
This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report
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EURUSD: Continues To Print Lower Prices, Maintains Its Bearish Broader Bias.
EURUSD: EUR weakened further lower Wednesday testing a low of 1.4386 before recovering to close higher at 1.4515.Although the formation of a hammer candle (reversal signal) on the back of the said intra day recovery is now in place and the pair now holds above its LT rising trendline suggesting nearer term corrective strength, broader bias remains to the downside as long as the 1.4967/51 zone (its range highs from Nov'07 and Jan'08/.618 Ret) remains unbroken. Immediate resistance levels are seen at the 1.4571 level, its Aug 26'08 low and its Aug 19'08 low at 1.4630.Above here will open up risks towards the 1.4811 level, marking its Aug 28'08 high with a break through there setting up the pair for a run at its Aug 21'08 high at 1.4909.However,breaking and closing back below its LT rising trendline could yield further weakness towards its Sept 03'08/Jan 22'08 lows at 1.4386/64 with a trade below there putting the pair in position to target the 1.4309 level, its Dec'07 high and then its Oct'07 low at 1.4015.On thw whole,higher time frame momentum indicators continue to trend lower suggesting further downside losses.
Support Comments
1.4386/64 Sept 03'08/Jan 22'08 low
1.4309 Dec'07 low
1.4015 Oct'07 low
Resistance Comments
1.4595/65 LT Rising trendline/Aug 26'08 low/Range Break Price Target
1.4630 Aug 19'08 low
1.4728 .786 Ret
1.4811 August 12'08 low
GBPUSD: Higher Time Frame Charts Suggest Weakness Towards April'06 Low,
GBPUSD: Following continued weakness since breaking below the 1.9337 low,GBP now looks to head towards its long term support at 1.7251(April'06 low) though nearby support is located at the 1.7623 level, its Mar'06 high while distant one resides at the 1.7129 level, its Dec'05 low. Weekly and monthly studies remain supportive of this view. If a recovery higher is triggered though not yet seen, GBP should trade higher towards its Jan'06 high at 1.7935 and the 1.8090 level, its Jun'06 low. Further strength should push it towards the 1.8176 level, its July 16'06 low. This recovery scenario if it occurs is corrective of the pair's recent decline. All in all, GBP continues to be pressured to the downside leaving it vulnerable to additional weakness.
Support Comments
1.7623 Mar'06 high
1.7251 April'06 low
1.7129 Dec'05 low
1.7049 Nov'05 low
Resistance Comments
1.7935 Jan'06 high
1.8090 Jun'06 low
1.8176 July 16'06 low
1.8283/74 Aug 27'08 low/Descending triangle breakout price target
Mohammed Isah
Market Analyst
www.fxtechstrategy.com
This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report
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Trichet Retains Hawkish Tone
Daily Forex Fundamentals | Written by CurrencyThoughts | Sep 04 08 14:15 GMT |
The ECB's balancing act goes on. However, whereas the August press conference dwelled on the weakness of growth more than had been anticipated, today's press conference and statement returned the source of greatest concern to the unacceptably poor inflation outlook. A restoration of price stability, that is below but close to 2.0%, is not expected by officials until 2010. The range for projected CPI inflation next year shows a higher mid-point of 2.6% versus 2.4% in the previous forecast made in June, and it is entirely above 2.0% at 2.3-2.9% versus the old band of 1.8-3.0%. Language used to describe unit labor costs (”sharp increases”) reflects increasing ECB concern and protest. Related to this, Trichet concedes that selected second-order inflation effects have surfaced. This is the development that officials have dreaded openly about for more than a year. So far, second-order effects have not become broad-based, but Trichet served notice in tougher terms than before that “we are resolute in our determination to keep medium and long-term inflation expectations firmly anchored.” In Q&A, the ECB president kept the message from August that officials do not have a bias about future policy but added that it has been only since July that rates were hiked, a move felt to be necessary to bolster credibility.
It seems premature of markets to anticipate an ECB rate cut later this year or even in early 2009. The baseline CPI ranged that the ECB envisages for next year lies entirely above the target ceiling of 2.0%, and risks surrounding that prediction are skewed to the upside based on both the bank's analysis of economic data and monetary and credit growth trends and levels. To be sure, those risks could moderate in time. Commodity prices may not turn back upward. Moderation seen already in money and credit growth could pick up speed. Gauges of expected inflation based on traded futures and other data may settle back, and wage awards could develop in a more acceptable way than officials fear. That's a lot of ifs that will take time to verify. To be sure, Trichet and his colleagues expect inflation to dip back under 2.0% by 2010, but that is too long an interval to merit policy action at this time.
A month ago in August, ECB officials admitted that real GDP had weakened in mid-2008, which was a downgraded assessment from July's assertion that activity “remains broadly in line with our expectation of moderate ongoing growth.” The assessment was downgraded again today to “experiencing an episode of weak activity..” Without using the R-for-recession word, new growth forecasts clearly embody that possibility. Projected 2008 growth was cut 0.4 percentage points (ppts) to 1.1 - 1.7% from 1.5 - 2.1%, and the predicted range of outcomes in 2009 was sliced by 0.3 ppts to 0.6 - 1.8% from 1.0 - 2.0%. Moreover, risks surrounding these baseline ranges are still skewed to the downside, meaning a sub-zero average rate of growth is not out of the realm of possibility.
The ECB will not wait until CPI inflation is 2.5% or less before cutting interest rates. I believe officials will hold their fire at least until 2009 and not act until they are confident that core inflation is on a sustainable downward course. They already have resisted any urge to act at the first sign of recession. Odds of back-to-back quarters of negative growth climb day by day. July's Euro-zone volume of retail sales was already 0.8% lower than the 2Q level, which nearly matches the 2Q-over-1Q drop. The composite PMI has moved below 50. Consumer confidence is very depressed, business sentiment is worsening more sharply, construction is in full crisis in several members of the bloc, and export demand is being depressed. The declines in the euro and oil are not yet far enough to deliver relief. Real German orders slumped 3.8% (14.4% saar) in 2Q and were another 3.8% lower in July than the 2Q mean, and domestic orders for capital goods, a harbinger of German business spending in coming months, posted monthly drops of 1.8% in June followed by 3.9% in July. Only an eternal optimist would think Euroland will avoid recession. The ECB policymakers are not eternal optimists. Sometimes a recession is what it takes to restore stable prices. Sometimes a recession is exactly what monetary officials believe is what needs to be engineered. Former Fed Chairman Volcker waited a full 12 months into a very deep recession before starting to loosen America's extraordinarily tight monetary policy in mid-1982, and that's not the only example that proves this point.
Many market pundits have been critical of the ECB, comparing its inertia to Bernanke's quick and aggressive easing, which averted negative U.S. growth in 1H08. Such pundits assert that currency markets are now punishing the euro in response, and that is fine with ECB officials. Monetary restraint, in their opinion, had been too heavily concentrated in an overvalued euro and not sufficiently represented in the level of interest rates. The euro's slide since mid-July helps reorder that imbalance.
Larry Greenberg
CurrencyThoughts
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The ECB's balancing act goes on. However, whereas the August press conference dwelled on the weakness of growth more than had been anticipated, today's press conference and statement returned the source of greatest concern to the unacceptably poor inflation outlook. A restoration of price stability, that is below but close to 2.0%, is not expected by officials until 2010. The range for projected CPI inflation next year shows a higher mid-point of 2.6% versus 2.4% in the previous forecast made in June, and it is entirely above 2.0% at 2.3-2.9% versus the old band of 1.8-3.0%. Language used to describe unit labor costs (”sharp increases”) reflects increasing ECB concern and protest. Related to this, Trichet concedes that selected second-order inflation effects have surfaced. This is the development that officials have dreaded openly about for more than a year. So far, second-order effects have not become broad-based, but Trichet served notice in tougher terms than before that “we are resolute in our determination to keep medium and long-term inflation expectations firmly anchored.” In Q&A, the ECB president kept the message from August that officials do not have a bias about future policy but added that it has been only since July that rates were hiked, a move felt to be necessary to bolster credibility.
It seems premature of markets to anticipate an ECB rate cut later this year or even in early 2009. The baseline CPI ranged that the ECB envisages for next year lies entirely above the target ceiling of 2.0%, and risks surrounding that prediction are skewed to the upside based on both the bank's analysis of economic data and monetary and credit growth trends and levels. To be sure, those risks could moderate in time. Commodity prices may not turn back upward. Moderation seen already in money and credit growth could pick up speed. Gauges of expected inflation based on traded futures and other data may settle back, and wage awards could develop in a more acceptable way than officials fear. That's a lot of ifs that will take time to verify. To be sure, Trichet and his colleagues expect inflation to dip back under 2.0% by 2010, but that is too long an interval to merit policy action at this time.
A month ago in August, ECB officials admitted that real GDP had weakened in mid-2008, which was a downgraded assessment from July's assertion that activity “remains broadly in line with our expectation of moderate ongoing growth.” The assessment was downgraded again today to “experiencing an episode of weak activity..” Without using the R-for-recession word, new growth forecasts clearly embody that possibility. Projected 2008 growth was cut 0.4 percentage points (ppts) to 1.1 - 1.7% from 1.5 - 2.1%, and the predicted range of outcomes in 2009 was sliced by 0.3 ppts to 0.6 - 1.8% from 1.0 - 2.0%. Moreover, risks surrounding these baseline ranges are still skewed to the downside, meaning a sub-zero average rate of growth is not out of the realm of possibility.
The ECB will not wait until CPI inflation is 2.5% or less before cutting interest rates. I believe officials will hold their fire at least until 2009 and not act until they are confident that core inflation is on a sustainable downward course. They already have resisted any urge to act at the first sign of recession. Odds of back-to-back quarters of negative growth climb day by day. July's Euro-zone volume of retail sales was already 0.8% lower than the 2Q level, which nearly matches the 2Q-over-1Q drop. The composite PMI has moved below 50. Consumer confidence is very depressed, business sentiment is worsening more sharply, construction is in full crisis in several members of the bloc, and export demand is being depressed. The declines in the euro and oil are not yet far enough to deliver relief. Real German orders slumped 3.8% (14.4% saar) in 2Q and were another 3.8% lower in July than the 2Q mean, and domestic orders for capital goods, a harbinger of German business spending in coming months, posted monthly drops of 1.8% in June followed by 3.9% in July. Only an eternal optimist would think Euroland will avoid recession. The ECB policymakers are not eternal optimists. Sometimes a recession is what it takes to restore stable prices. Sometimes a recession is exactly what monetary officials believe is what needs to be engineered. Former Fed Chairman Volcker waited a full 12 months into a very deep recession before starting to loosen America's extraordinarily tight monetary policy in mid-1982, and that's not the only example that proves this point.
Many market pundits have been critical of the ECB, comparing its inertia to Bernanke's quick and aggressive easing, which averted negative U.S. growth in 1H08. Such pundits assert that currency markets are now punishing the euro in response, and that is fine with ECB officials. Monetary restraint, in their opinion, had been too heavily concentrated in an overvalued euro and not sufficiently represented in the level of interest rates. The euro's slide since mid-July helps reorder that imbalance.
Larry Greenberg
CurrencyThoughts
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U.S. Second Quarter Productivity and Costs: Summary (Table)
By Kristy Scheuble
Sept. 4 (Bloomberg) -- Following is a summary of the second quarter productivity report from the Labor Department.
==============================================================================
2Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q
2008 Prev. 2008 2007 2007 2007 2007 2006
==============================================================================
------------Quarterly Annualized Percent------------
Nonfarm output per hour 4.3% 2.2% 2.6% 0.8% 5.8% 4.1% 0.0% 0.2%
Output 3.4% 1.7% 0.9% -0.7% 5.5% 5.8% -0.9% 1.4%
Employee hours -0.8% -0.5% -1.7% -1.6% -0.3% 1.6% -0.8% 1.2%
Compensation per hour 3.7% 3.6% 3.8% 5.3% 3.3% 0.8% 4.9% 9.3%
Real compensation -1.3% -1.4% -0.4% 0.3% 0.5% -3.6% 1.2% 11.0%
Unit labor costs -0.5% 1.3% 1.2% 4.5% -2.4% -3.2% 4.9% 9.1%
Unit non-labor costs 3.3% -0.9% 3.6% -1.5% 6.3% 9.4% 0.9% -9.5%
Price deflator 0.9% 0.5% 2.1% 2.1% 0.9% 1.5% 3.4% 1.5%
---------------Year Over Year Percent---------------
Nonfarm output per hour 3.4% 2.8% 3.3% 2.7% 2.5% 0.5% 0.0% 0.6%
Output 2.2% 1.8% 2.8% 2.4% 2.9% 1.6% 0.9% 2.6%
==============================================================================
2Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q
2008 Prev. 2008 2007 2007 2007 2007 2006
==============================================================================
Employee hours -1.1% -1.0% -0.5% -0.3% 0.4% 1.1% 1.0% 2.0%
Compensation per hour 4.0% 4.3% 3.3% 3.6% 4.5% 4.2% 4.2% 4.3%
Real compensation -0.2% 0.1% -0.8% -0.4% 2.1% 1.5% 1.7% 2.2%
Unit labor costs 0.6% 1.5% 0.0% 0.9% 2.0% 3.7% 4.2% 3.6%
Unit non-labor costs 2.9% 1.3% 4.3% 3.7% 1.5% -0.2% -0.2% 0.5%
Price deflator 1.5% 1.4% 1.6% 2.0% 1.8% 2.1% 2.5% 2.4%
==============================================================================
NOTE: Figures are seasonally adjusted.
To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net
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Trichet Focused on Inflation Even as Growth Slows
By Fergal O'Brien
Sept. 4 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the central bank remains focused on fighting inflation even after cutting its economic growth forecasts for this year and next.
``Upside risks to price stability prevail,'' Trichet told reporters in Frankfurt today after keeping the benchmark rate at 4.25 percent, a seven-year high. ``We're resolute in our determination to keep inflation expectations in line with price stability.''
The ECB, which raised rates in July, wants to prevent a wage- price spiral as workers demand compensation for higher food and energy costs that pushed inflation to a 16-year high. While the economy contracted in the second quarter as consumer spending, investment and exports fell, ECB council members Axel Weber and Lucas Papademos said last week another rate increase may be necessary if the inflation outlook deteriorates.
``The uncertainty surrounding this outlook for economic activity is particularly high at the current juncture,'' Trichet said. ``Downside risks prevail'' and risks stem from the potential impact on investment and consumer spending from higher prices, he said.
The ECB today lowered its 2008 economic growth forecast to about 1.4 percent from 1.8 percent and its 2009 prediction to 1.2 percent from 1.5 percent. It raised the inflation forecast for this year and next to about 3.5 percent and 2.6 percent from 3.4 percent and 2.4 percent respectively.
The ECB forecasts for growth and inflation are staff projections and are published as a range around a mid-point. Trichet said the Governing Council does not ``underwrite'' the forecasts.
While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Producer-price inflation accelerated to 9 percent in July, the highest in at least 18 years.
Inflation in the euro area slowed to 3.8 percent last month from 4 percent in July. The ECB aims to keep the rate below 2 percent. Some labor unions are already pushing through bigger wage increases to compensate workers for the higher cost of living.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
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U.S. Must Buy Assets to Prevent `Tsunami,' Gross Says
By Jody Shenn
Sept. 4 (Bloomberg) -- The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund.
Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in commentary posted on the firm's Web site today. Since financial markets seized up a year ago as the subprime-mortgage market collapsed, the Standard & Poor's 500 Index has fallen 13 percent and home prices are down more than 15 percent.
``Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,'' Gross said. ``If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.''
The government needs to replace private investors who either don't have the money to buy new assets or have been burned by losses, Gross said. Pimco, sovereign wealth funds and central banks are growing reluctant to fund financial firms after losses on investments they made to support the companies, Gross said. The world's biggest banks and brokers are retreating after more than $500 billion in writedowns and credit losses since the start of 2007 and have raised $364.4 billion in new capital.
Yields on investment-grade corporate bonds, debt backed by commercial mortgages as well as credit cards reached record highs last month relative to benchmark rates.
`Mom and Pop'
Treasury should support not only mortgage finance providers Fannie Mae and Freddie Mac, but also ``Mom and Pop on Main Street U.S.A.,'' by subsidizing rates on home loans guaranteed by the Federal Housing Administration and other government institutions, Gross said. A new version of the Resolution Trust Corp., which bought assets from failing institutions during the savings-and-loan crisis of the 1980s, may also work, he said.
U.S. Treasury Secretary Henry Paulson arranged a rescue package for Washington-based Fannie and Freddie of McLean, Virginia as concern escalated the government-chartered companies didn't have capital to withstand the housing slump. Treasury pledged to pump unlimited debt or equity into the companies should they need it.
`Anorexic' Appetite
As Fannie and Freddie, banks, securities firms and hedge funds shrink, yields on all debt assets will rise compared with benchmark rates and volatility will increase, Gross said. The declines will end once sellers have depleted their assets and sufficient capital has been raised, Gross said. Unless ``new balance sheets'' emerge, prices of almost all assets will drop, even those of ``impeccable'' quality, he said.
``There is an increasing reluctance on the part of the private market to risk any more of its own capital,'' Gross said. ``Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning.''
The extra yield demanded on Ginnie Mae's 30-year, current- coupon mortgage-backed securities over 10-year Treasuries has climbed to 1.75 percentage points, from 0.87 percentage points at the start of last year, according to data compiled by Bloomberg. Bonds guaranteed by the U.S. agency are backed by the U.S. government. Spreads on 2-year AAA rated bonds composed of federally backed student loans have climbed to 0.95 percentage points over benchmark rates, from 0.01 percentage points below, Deutsche Bank AG data show.
Home Prices
Pimco, a unit of Munich-based Allianz SE, is seeking to take advantage of declines in home-loan bonds. The firm is raising as much as $5 billion to buy mortgage-backed debt that has plunged in value, according to two investors with knowledge of the matter. The Distressed Senior Credit Opportunities Fund will invest in securities backed by commercial and residential mortgages, said the people, who asked not to be identified because the fund is private.
The decline in home prices hasn't been seen since the Great Depression, Gross said. That drop translates to an even bigger decline in overall wealth as the effects ripple through markets, Gross said. Home prices in 20 of the largest U.S. metropolitan areas fell 15.9 percent in June from a year earlier, according to an S&P/Case-Shiller index.
`Rare Diamonds'
Fannie and Freddie 30-year fixed-rate mortgage bond yields, which influence the rates on most new home loans, have probably risen 75 basis points because of the waning demand, Gross said. A basis point is 0.01 percentage point.
About 61 percent of the holdings of Gross's Pimco Total Return Fund were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or Ginnie Mae, according to data on Pimco's Web site.
The fund returned 9.8 percent in the past 12 months, beating 97 percent of its peers in the government and corporate bond fund category as of Sept. 3, according to Bloomberg data. The returns are 5.76 percent annually over five years. Pimco has about $830 billion of assets under management.
``In a global financial marketplace in the process of delevering, assets that go up in price are rare diamonds as opposed to grains of sand,'' Gross said.
To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund.
Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in commentary posted on the firm's Web site today. Since financial markets seized up a year ago as the subprime-mortgage market collapsed, the Standard & Poor's 500 Index has fallen 13 percent and home prices are down more than 15 percent.
``Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,'' Gross said. ``If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.''
The government needs to replace private investors who either don't have the money to buy new assets or have been burned by losses, Gross said. Pimco, sovereign wealth funds and central banks are growing reluctant to fund financial firms after losses on investments they made to support the companies, Gross said. The world's biggest banks and brokers are retreating after more than $500 billion in writedowns and credit losses since the start of 2007 and have raised $364.4 billion in new capital.
Yields on investment-grade corporate bonds, debt backed by commercial mortgages as well as credit cards reached record highs last month relative to benchmark rates.
`Mom and Pop'
Treasury should support not only mortgage finance providers Fannie Mae and Freddie Mac, but also ``Mom and Pop on Main Street U.S.A.,'' by subsidizing rates on home loans guaranteed by the Federal Housing Administration and other government institutions, Gross said. A new version of the Resolution Trust Corp., which bought assets from failing institutions during the savings-and-loan crisis of the 1980s, may also work, he said.
U.S. Treasury Secretary Henry Paulson arranged a rescue package for Washington-based Fannie and Freddie of McLean, Virginia as concern escalated the government-chartered companies didn't have capital to withstand the housing slump. Treasury pledged to pump unlimited debt or equity into the companies should they need it.
`Anorexic' Appetite
As Fannie and Freddie, banks, securities firms and hedge funds shrink, yields on all debt assets will rise compared with benchmark rates and volatility will increase, Gross said. The declines will end once sellers have depleted their assets and sufficient capital has been raised, Gross said. Unless ``new balance sheets'' emerge, prices of almost all assets will drop, even those of ``impeccable'' quality, he said.
``There is an increasing reluctance on the part of the private market to risk any more of its own capital,'' Gross said. ``Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning.''
The extra yield demanded on Ginnie Mae's 30-year, current- coupon mortgage-backed securities over 10-year Treasuries has climbed to 1.75 percentage points, from 0.87 percentage points at the start of last year, according to data compiled by Bloomberg. Bonds guaranteed by the U.S. agency are backed by the U.S. government. Spreads on 2-year AAA rated bonds composed of federally backed student loans have climbed to 0.95 percentage points over benchmark rates, from 0.01 percentage points below, Deutsche Bank AG data show.
Home Prices
Pimco, a unit of Munich-based Allianz SE, is seeking to take advantage of declines in home-loan bonds. The firm is raising as much as $5 billion to buy mortgage-backed debt that has plunged in value, according to two investors with knowledge of the matter. The Distressed Senior Credit Opportunities Fund will invest in securities backed by commercial and residential mortgages, said the people, who asked not to be identified because the fund is private.
The decline in home prices hasn't been seen since the Great Depression, Gross said. That drop translates to an even bigger decline in overall wealth as the effects ripple through markets, Gross said. Home prices in 20 of the largest U.S. metropolitan areas fell 15.9 percent in June from a year earlier, according to an S&P/Case-Shiller index.
`Rare Diamonds'
Fannie and Freddie 30-year fixed-rate mortgage bond yields, which influence the rates on most new home loans, have probably risen 75 basis points because of the waning demand, Gross said. A basis point is 0.01 percentage point.
About 61 percent of the holdings of Gross's Pimco Total Return Fund were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or Ginnie Mae, according to data on Pimco's Web site.
The fund returned 9.8 percent in the past 12 months, beating 97 percent of its peers in the government and corporate bond fund category as of Sept. 3, according to Bloomberg data. The returns are 5.76 percent annually over five years. Pimco has about $830 billion of assets under management.
``In a global financial marketplace in the process of delevering, assets that go up in price are rare diamonds as opposed to grains of sand,'' Gross said.
To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net
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ECB, Bank of England Keep Rates Unchanged on Inflation Concern
By Svenja O'Donnell and Simone Meier
Sept. 4 (Bloomberg) -- The European Central Bank and the Bank of England kept interest rates unchanged to fight inflation as their economies teetered on the brink of a recession.
ECB policy makers meeting in Frankfurt kept the benchmark lending rate at 4.25 percent, a seven-year high. The U.K. central bank's Monetary Policy Committee left the bank rate at 5 percent today in London.
The euro-region economy contracted in the second quarter. Growth stalled in Britain, which may face the worst conditions since World War II, according to U.K. Chancellor of the Exchequer Alistair Darling. The Bank of England has still refrained from cutting borrowing costs and the ECB raised its rate in July on concern higher pay demands may entrench faster inflation.
``They're both inflation-fighting central banks and inflation is well above their targets,'' said Stewart Robertson, an economist at Morley Fund Management in London, which manages the equivalent of $271 billion. ``Growth has weakened a lot and is likely to stay weak. The Bank of England seems to have owned up to this but the ECB hasn't quite yet.''
ECB President Jean-Claude Trichet began a press conference at 2:30 p.m. in Frankfurt to explain today's decision.
Inflation Risks
The ECB decision today was predicted by all but one of 53 economists in a Bloomberg News survey. ECB council members Axel Weber and Lucas Papademos said last week that another rate increase may be necessary if inflation risks increase.
While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in July. The ECB aims to keep the rate below 2 percent.
Some labor unions are already pushing through bigger wage increases to compensate workers for the higher cost of living. IG Metall, Germany's biggest union, starts wage negotiations this month for 3.2 million metal, electronics and car workers. The union has said it will demand a bigger pay increase than the 6.5 percent it asked for last year.
``IG Metall usually sets a benchmark for wage demands in other industries,'' said Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich. ``It's too early to give the all clear on inflation.''
King's Forecast
In Britain, inflation reached 4.4 percent in July, the fastest in at least a decade. While the bank aims to get the rate down to 2 percent, Governor Mervyn King said on Aug. 13 it will reach about 5 percent later this year and ``a reasonable person'' would expect price increases to stay high ``for a while.''
``Until there is some indication of relief on the inflation front, they are stuck,'' said Neil Mackinnon, chief economist at ECU Group Plc in London and a former U.K. Treasury official. ``But the economy is already in recession and interest rates will have to come down. It's purely a matter of timing.''
The pound fell to a record low against the euro this week after Darling said in an interview with the Guardian newspaper that the U.K. economy may face the worst crisis for 60 years. Gross domestic product was unchanged in the second quarter from the first three months of the year, ending the nation's longest stretch of growth in more than a century.
Difficult `Challenges'
``Looking at it in terms of the challenges facing the authorities, it is as difficult as at any time I can remember,'' former Bank of England Governor Edward George said at an event in London yesterday. He said that Britain and other industrialized nations may face a ``technical recession,'' meaning two consecutive quarters of economic contraction.
U.K. mortgage approvals dropped to the lowest since at least 1999 in July, while surveys by the Chartered Institute of Purchasing and Supply show that services and manufacturing industries contracted for a fourth month in August. House prices dropped 12.7 percent in August from a year earlier, the most since at least 1983, HBOS Plc said today.
In the euro region, confidence in the economic outlook plunged to a five-year low and the manufacturing and service industries contracted for a third consecutive month, indicating the economy may have entered a recession.
While the euro-region economy is weakening, ``it may take the ECB longer to accept that inflation problems have dissipated,'' said Morley's Robertson, who predicts the bank will cut its benchmark rate by 1 percentage point next year. ``They may need to do more,'' he said.
To contact the reporters on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.
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Sept. 4 (Bloomberg) -- The European Central Bank and the Bank of England kept interest rates unchanged to fight inflation as their economies teetered on the brink of a recession.
ECB policy makers meeting in Frankfurt kept the benchmark lending rate at 4.25 percent, a seven-year high. The U.K. central bank's Monetary Policy Committee left the bank rate at 5 percent today in London.
The euro-region economy contracted in the second quarter. Growth stalled in Britain, which may face the worst conditions since World War II, according to U.K. Chancellor of the Exchequer Alistair Darling. The Bank of England has still refrained from cutting borrowing costs and the ECB raised its rate in July on concern higher pay demands may entrench faster inflation.
``They're both inflation-fighting central banks and inflation is well above their targets,'' said Stewart Robertson, an economist at Morley Fund Management in London, which manages the equivalent of $271 billion. ``Growth has weakened a lot and is likely to stay weak. The Bank of England seems to have owned up to this but the ECB hasn't quite yet.''
ECB President Jean-Claude Trichet began a press conference at 2:30 p.m. in Frankfurt to explain today's decision.
Inflation Risks
The ECB decision today was predicted by all but one of 53 economists in a Bloomberg News survey. ECB council members Axel Weber and Lucas Papademos said last week that another rate increase may be necessary if inflation risks increase.
While crude oil prices have retreated 26 percent from a record $147.27 a barrel on July 11, they're still up 46 percent over the past year. Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in July. The ECB aims to keep the rate below 2 percent.
Some labor unions are already pushing through bigger wage increases to compensate workers for the higher cost of living. IG Metall, Germany's biggest union, starts wage negotiations this month for 3.2 million metal, electronics and car workers. The union has said it will demand a bigger pay increase than the 6.5 percent it asked for last year.
``IG Metall usually sets a benchmark for wage demands in other industries,'' said Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich. ``It's too early to give the all clear on inflation.''
King's Forecast
In Britain, inflation reached 4.4 percent in July, the fastest in at least a decade. While the bank aims to get the rate down to 2 percent, Governor Mervyn King said on Aug. 13 it will reach about 5 percent later this year and ``a reasonable person'' would expect price increases to stay high ``for a while.''
``Until there is some indication of relief on the inflation front, they are stuck,'' said Neil Mackinnon, chief economist at ECU Group Plc in London and a former U.K. Treasury official. ``But the economy is already in recession and interest rates will have to come down. It's purely a matter of timing.''
The pound fell to a record low against the euro this week after Darling said in an interview with the Guardian newspaper that the U.K. economy may face the worst crisis for 60 years. Gross domestic product was unchanged in the second quarter from the first three months of the year, ending the nation's longest stretch of growth in more than a century.
Difficult `Challenges'
``Looking at it in terms of the challenges facing the authorities, it is as difficult as at any time I can remember,'' former Bank of England Governor Edward George said at an event in London yesterday. He said that Britain and other industrialized nations may face a ``technical recession,'' meaning two consecutive quarters of economic contraction.
U.K. mortgage approvals dropped to the lowest since at least 1999 in July, while surveys by the Chartered Institute of Purchasing and Supply show that services and manufacturing industries contracted for a fourth month in August. House prices dropped 12.7 percent in August from a year earlier, the most since at least 1983, HBOS Plc said today.
In the euro region, confidence in the economic outlook plunged to a five-year low and the manufacturing and service industries contracted for a third consecutive month, indicating the economy may have entered a recession.
While the euro-region economy is weakening, ``it may take the ECB longer to accept that inflation problems have dissipated,'' said Morley's Robertson, who predicts the bank will cut its benchmark rate by 1 percentage point next year. ``They may need to do more,'' he said.
To contact the reporters on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.
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German Orders Unexpectedly Drop, Extend Losing Streak
By Gabi Thesing
Sept. 4 (Bloomberg) -- German factory orders unexpectedly fell in July, extending their longest-ever declining streak and increasing the likelihood that Europe's largest economy is heading for a recession.
Orders, adjusted for seasonal swings and inflation, slid 1.7 percent from June, the Economy Ministry in Berlin said today. Economists expected a gain of 0.3 percent, the median of 35 forecasts in a Bloomberg News survey showed. Orders slid 0.7 percent from a year earlier.
Germany's economy contracted 0.5 percent in the second quarter and may not recover in the third as exports falter and consumer spending slumps. Even though oil prices have retreated 24 percent since a July record, business confidence declined to a three-year low last month and consumer optimism fell to the lowest level in five years.
``Orders declining for eight straight months is unprecedented and a frightening prospect,'' said Sebastian Wanke, an economist at Dekabank AG in Frankfurt. ``We expect that the economy will contract in the third quarter as Germany's main export markets are slowing and consumer spending is unlikely to pick up.'' Wanke expects a ``marginal'' recovery in the fourth quarter.
Defying Expectations
The euro fell as low as $1.4466 from $1.4529 before the report was released. It's the sixth month in a row that orders defied economists' expectations of a gain. The ministry revised June's decline to 2.6 percent from an initially reported 2.9 percent.
This month's drop was led by a 3.6 percent slump in domestic orders. Foreign sales increased 0.3 percent, with orders from the euro area rising 8.1 percent. Demand from outside the region fell 5.7 percent.
The ministry said there was ``an unusually large volume of big ticket orders'' in the month.
European Aeronautic, Defense & Space Co. the German-French aerospace manufacturer, said July 30 it won 60 percent of $64 billion in orders at the U.K.'s Farnborough air show that month, including an order of five freighters form Italy's cargo startup Alis Aerolinee Italiane.
The VDMA lobby said last week that plant and machine orders declined for a third straight month in July, as a stronger euro and slowing global economic growth curbed demand for exports.
Party's Over
``The party in Germany's industrial sector is over,'' said Aline Schuiling, an economist at Fortis Bank in Amsterdam. ``In fairness, it has come down from unusually high levels. But still, there is now a danger that companies will start cutting jobs.''
The price of oil rose to a record $147.27 a barrel on July 11, pushing inflation in the euro area to a 16-year high of 4 percent and sapping consumer's purchasing power and boosting company's bills.
Car sales declined 10 percent in August from a month earlier, Germany's Federal Vehicle Administration organization said earlier this week. German retail sales fell in July and August, data from the Federal Statistics Office and the Bloomberg Retail PMI showed last week.
Automakers are not only hit by weakening domestic demand. Bayerische Motoren Werke AG Chief Executive Officer Norbert Reithofer said on Aug. 1 that 2009 would be ``another difficult year'' for the world's largest maker of luxury cars as falling U.S. sales, the stronger euro and rising costs for plastics, steel and oil hurt profit.
Still High
While the price of oil and the euro's exchange rate against the dollar have both fallen from their peak, they are still up 46 percent and 6 percent respectively from a year ago.
Adding to the pressures on companies, the cost of borrowing is likely to remain at a seven-year high and may even increase.
European Central Bank Governing Council member Axel Weber, who also heads Germany's Bundesbank, said last week he doesn't ``expect inflation to come down necessarily just with weaker growth'' and that once the ``economic outlook brightens somewhat,'' interest borrowing costs may have to be increased.
The ECB kept the benchmark lending rate at 4.25 percent at its monthly policy meeting in Frankfurt today.
Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in the previous month. That's still almost twice the ECB's 2 percent limit.
The 15-nation euro area, which takes just over 40 percent of Germany's exports, is also teetering on the brink of a recession after contracting 0.2 percent between April and June.
Some German companies seek to cushion the decline in orders from Europe by expanding in emerging markets. Hochtief AG, Germany's largest builder, reported a jump in second quarter profit on Aug. 14 and increased its full-year forecasts on rising demand for construction and mining work in Australia and Asia.
Earlier this week, the company said it secured orders worth 221 million euros ($320 million) in Australia.
German consumer spending may also receive a boost as oil prices decline and the country's labor market holds up. German unemployment fell more than economists expected in August, pushing the jobless rate to the lowest level in 16 years.
Still, the ``peak in economic growth is likely to be behind us,'' Weber told Bloomberg News in an interview published Aug. 27.
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
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Sept. 4 (Bloomberg) -- German factory orders unexpectedly fell in July, extending their longest-ever declining streak and increasing the likelihood that Europe's largest economy is heading for a recession.
Orders, adjusted for seasonal swings and inflation, slid 1.7 percent from June, the Economy Ministry in Berlin said today. Economists expected a gain of 0.3 percent, the median of 35 forecasts in a Bloomberg News survey showed. Orders slid 0.7 percent from a year earlier.
Germany's economy contracted 0.5 percent in the second quarter and may not recover in the third as exports falter and consumer spending slumps. Even though oil prices have retreated 24 percent since a July record, business confidence declined to a three-year low last month and consumer optimism fell to the lowest level in five years.
``Orders declining for eight straight months is unprecedented and a frightening prospect,'' said Sebastian Wanke, an economist at Dekabank AG in Frankfurt. ``We expect that the economy will contract in the third quarter as Germany's main export markets are slowing and consumer spending is unlikely to pick up.'' Wanke expects a ``marginal'' recovery in the fourth quarter.
Defying Expectations
The euro fell as low as $1.4466 from $1.4529 before the report was released. It's the sixth month in a row that orders defied economists' expectations of a gain. The ministry revised June's decline to 2.6 percent from an initially reported 2.9 percent.
This month's drop was led by a 3.6 percent slump in domestic orders. Foreign sales increased 0.3 percent, with orders from the euro area rising 8.1 percent. Demand from outside the region fell 5.7 percent.
The ministry said there was ``an unusually large volume of big ticket orders'' in the month.
European Aeronautic, Defense & Space Co. the German-French aerospace manufacturer, said July 30 it won 60 percent of $64 billion in orders at the U.K.'s Farnborough air show that month, including an order of five freighters form Italy's cargo startup Alis Aerolinee Italiane.
The VDMA lobby said last week that plant and machine orders declined for a third straight month in July, as a stronger euro and slowing global economic growth curbed demand for exports.
Party's Over
``The party in Germany's industrial sector is over,'' said Aline Schuiling, an economist at Fortis Bank in Amsterdam. ``In fairness, it has come down from unusually high levels. But still, there is now a danger that companies will start cutting jobs.''
The price of oil rose to a record $147.27 a barrel on July 11, pushing inflation in the euro area to a 16-year high of 4 percent and sapping consumer's purchasing power and boosting company's bills.
Car sales declined 10 percent in August from a month earlier, Germany's Federal Vehicle Administration organization said earlier this week. German retail sales fell in July and August, data from the Federal Statistics Office and the Bloomberg Retail PMI showed last week.
Automakers are not only hit by weakening domestic demand. Bayerische Motoren Werke AG Chief Executive Officer Norbert Reithofer said on Aug. 1 that 2009 would be ``another difficult year'' for the world's largest maker of luxury cars as falling U.S. sales, the stronger euro and rising costs for plastics, steel and oil hurt profit.
Still High
While the price of oil and the euro's exchange rate against the dollar have both fallen from their peak, they are still up 46 percent and 6 percent respectively from a year ago.
Adding to the pressures on companies, the cost of borrowing is likely to remain at a seven-year high and may even increase.
European Central Bank Governing Council member Axel Weber, who also heads Germany's Bundesbank, said last week he doesn't ``expect inflation to come down necessarily just with weaker growth'' and that once the ``economic outlook brightens somewhat,'' interest borrowing costs may have to be increased.
The ECB kept the benchmark lending rate at 4.25 percent at its monthly policy meeting in Frankfurt today.
Euro-region inflation slowed to 3.8 percent in August from a 16-year high of 4 percent in the previous month. That's still almost twice the ECB's 2 percent limit.
The 15-nation euro area, which takes just over 40 percent of Germany's exports, is also teetering on the brink of a recession after contracting 0.2 percent between April and June.
Some German companies seek to cushion the decline in orders from Europe by expanding in emerging markets. Hochtief AG, Germany's largest builder, reported a jump in second quarter profit on Aug. 14 and increased its full-year forecasts on rising demand for construction and mining work in Australia and Asia.
Earlier this week, the company said it secured orders worth 221 million euros ($320 million) in Australia.
German consumer spending may also receive a boost as oil prices decline and the country's labor market holds up. German unemployment fell more than economists expected in August, pushing the jobless rate to the lowest level in 16 years.
Still, the ``peak in economic growth is likely to be behind us,'' Weber told Bloomberg News in an interview published Aug. 27.
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
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U.S. Initial Jobless Claims Climb More Than Forecast
By Bob Willis and Shobhana Chandra
Sept. 4 (Bloomberg) -- First-time claims for unemployment insurance climbed more than forecast, and benefit rolls reached a five-year high, underscoring a deteriorating job market that threatens to erode consumer spending.
Initial jobless claims rose to 444,000 in the week ended Aug. 30, while the number of Americans continuing to collect benefits increased to 3.435 million in the prior week, the Labor Department said today in Washington. A private report indicated separately that U.S. companies cut 33,000 jobs in August.
The figures reinforce projections for tomorrow's August employment report from the Labor Department to show an eighth straight month of payroll declines. Households may cut spending as employment prospects dim, property values decline and credit becomes harder to get.
``We're continuing to get sort of a grinding slackening in the labor markets,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. ``Businesses are becoming more cautious about hiring and layoffs continue. At some point this begins to weigh increasingly heavily on the consumer.''
ADP Employer Services said the 33,000 decline in private payrolls followed a revised gain of 1,000 for the prior month that was lower than previously estimated.
Treasuries, Stocks
Treasuries rose, sending benchmark 10-year note yields to 3.68 percent at 9:37 a.m. in New York, from 3.70 percent late yesterday. The Standard & Poor's 500 Stock Index dropped 0.6 percent to 1,266.81.
Economists had forecast initial claims would fall to 420,000 from a previously reported 425,000 in the prior week, according to the median of 40 projections in a Bloomberg News survey. Estimates ranged from 405,000 to 435,000.
``We're still in an uncomfortable situation with respect to job growth,'' Richard DeKaser, chief economist at National City Corp. in Cleveland, said in a Bloomberg Television interview. ``The underlying trend here is not a good one for August.''
Economists forecast the Labor Department will report tomorrow that nonfarm payrolls fell by 75,000 in August, following a drop of 51,000 the prior month, bringing the total decline this year to 538,000. The jobless rate stayed at 5.7 percent, the survey indicates.
Four-Week Average
The four-week moving average of initial claims, a less volatile measure than the weekly figure, fell to 438,000 from 441,250, today's report showed.
So far this year, weekly claims have averaged 378,000, compared with 321,000 for all of 2007, when the economy generated 91,000 new jobs each month on average. Monthly job losses have averaged 66,000 in 2008, according to Labor data. Monthly payrolls tend to fall as claims rise.
The surge in claims that began in the middle of July can be at least partly attributed to the government's extension of jobless benefits under legislation signed by President George W. Bush in June. The government hasn't been able to quantify the program's impact on initial claims.
``The claims data has been clouded over the past month by the extension of unemployment benefits,'' said Ellen Zentner, U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, was unchanged at 2.6 percent. Thirty states and territories reported an increase in claims, while 23 had a decrease. These data are reported with a one-week lag.
Automakers, homebuilders and banks have been leading the cutbacks in employment.
GM Incentives
General Motors Corp., the largest U.S. automaker, is offering early retirement incentives to about 9,000 U.S. salaried employees, or 28 percent of that workforce, people familiar with the plan said last week.
Superior Industries International Inc., the world's second- largest maker of automotive wheels, plans to trim 29 percent of its U.S. workforce and shut a Kansas plant because of lower sales of pickups and sport-utility vehicles.
The Pittsburg, Kansas, factory will close in December, accounting for about 600 job cuts, the Van Nuys, California- based company said Aug. 19.
Companies in the oil and mining industries continue to hire after prices surged to records.
Halliburton Co., the second-largest U.S. provider of oilfield services, said it will hire 13,000 to 14,000 workers this year to meet rising demand from customers seeking to tap new sources of petroleum production.
To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.netBob Willis in Washington at bwillis@bloomberg.net
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ECB Revamps Money Market Rules, Will Raise Collateral Charge
By Christian Vits
Sept. 4 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the ECB will charge financial institutions more for some of the collateral it accepts in return for funds in its money-market operations.
``We don't think it would hamper the way the system is functioning,'' Trichet said in Frankfurt today. ``It's a small fraction in the present total amount of collateral. I prefer to use the term refining.''
The ECB is concerned banks may be packaging risky assets into securities it accepts as collateral, allowing them to borrow money at a cheaper rate than they would get in the market. Europe's banks stepped up their borrowing from the ECB, whose lending rules are looser than the Bank of England's, after the credit crisis sapped demand from investors a year ago.
Trichet said he hopes that ``we will have a positive impact on helping the market being more active.''
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
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Sept. 4 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the ECB will charge financial institutions more for some of the collateral it accepts in return for funds in its money-market operations.
``We don't think it would hamper the way the system is functioning,'' Trichet said in Frankfurt today. ``It's a small fraction in the present total amount of collateral. I prefer to use the term refining.''
The ECB is concerned banks may be packaging risky assets into securities it accepts as collateral, allowing them to borrow money at a cheaper rate than they would get in the market. Europe's banks stepped up their borrowing from the ECB, whose lending rules are looser than the Bank of England's, after the credit crisis sapped demand from investors a year ago.
Trichet said he hopes that ``we will have a positive impact on helping the market being more active.''
To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net
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U.S. Service Industries Unexpectedly Grew in August
By Timothy R. Homan
Sept. 4 (Bloomberg) -- Service industries in the U.S. unexpectedly expanded in August, spurred by the biggest drop in prices in almost two years.
The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, increased to 50.6 from 49.5 in July, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction.
Some companies are benefiting from the dollar's past decline that helped export demand and a retreat in oil prices. Still, Federal Reserve officials said yesterday that growth and consumer spending across most of the U.S. was slow last month, preventing most services firms from expanding further.
``Companies are going to have to see a trend of upward movement in business activity and new orders to really feel comfortable with hiring in any kind of sustained fashion,'' Anthony Nieves, chairman of ISM's non-manufacturing survey, told reporters on a conference call. ``It looks like a mixed bag.''
Economists forecast the index would remain unchanged at 49.5, according to the median of 68 projections in a Bloomberg News survey. Estimates ranged from 48.5 to 52.
Inflation Signs
The institute's measure of prices paid by non-manufacturing businesses fell to 72.9, the second straight drop from a record high reached in June, from 80.8 a month earlier, the report showed. New orders climbed to 49.7 from 47.9 in July.
Energy costs in August receded from record highs in July. The average price for a barrel of crude oil last month was $117.02, compared with $133.77 a month earlier, when a barrel reached $147.27 on July 11.
The ISM's measure for backorders dropped to 49, from 52. Supplier deliveries increased to 55.5 from 53.5 a month earlier. The ISM's inventory measure for non-manufacturers declined to 53.5 from 54.5.
The ISM employment measure weakened to 45.4, the fourth straight month of contraction, from 47.1.
The ISM report ``is consistent with very slow growth in the economy,'' said Brian Bethune, chief financial economist at Global Insight Inc. in Lexington, Massachusetts, in an interview with Bloomberg Television. The decline in the employment gauge is ``an indication that services sector employment, particularly in the private sector, is still declining.''
Other reports released today showed the labor market is deteriorating.
Job Market
Companies in the U.S. cut an estimated 33,000 jobs in August, the ADP Employer Services survey showed.
The Labor Department said total unemployment rolls in the U.S. rose to the highest level in almost five years, and last week's initial claims for jobless benefits exceeded forecasts.
The number of Americans filing first-time claims for unemployment benefits increased by 15,000 to 444,000 in the week ended Aug. 30, the Labor Department said. The number of people staying on rolls rose to 3.435 million, the highest since November 2003, in the prior week.
An ISM report earlier on manufacturing showed a contraction in August for the first time in three months as companies slowed production and trimmed payrolls. The report's employment index dropped to 49.7 from 51.9 in July.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Sept. 4 (Bloomberg) -- Service industries in the U.S. unexpectedly expanded in August, spurred by the biggest drop in prices in almost two years.
The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, increased to 50.6 from 49.5 in July, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction.
Some companies are benefiting from the dollar's past decline that helped export demand and a retreat in oil prices. Still, Federal Reserve officials said yesterday that growth and consumer spending across most of the U.S. was slow last month, preventing most services firms from expanding further.
``Companies are going to have to see a trend of upward movement in business activity and new orders to really feel comfortable with hiring in any kind of sustained fashion,'' Anthony Nieves, chairman of ISM's non-manufacturing survey, told reporters on a conference call. ``It looks like a mixed bag.''
Economists forecast the index would remain unchanged at 49.5, according to the median of 68 projections in a Bloomberg News survey. Estimates ranged from 48.5 to 52.
Inflation Signs
The institute's measure of prices paid by non-manufacturing businesses fell to 72.9, the second straight drop from a record high reached in June, from 80.8 a month earlier, the report showed. New orders climbed to 49.7 from 47.9 in July.
Energy costs in August receded from record highs in July. The average price for a barrel of crude oil last month was $117.02, compared with $133.77 a month earlier, when a barrel reached $147.27 on July 11.
The ISM's measure for backorders dropped to 49, from 52. Supplier deliveries increased to 55.5 from 53.5 a month earlier. The ISM's inventory measure for non-manufacturers declined to 53.5 from 54.5.
The ISM employment measure weakened to 45.4, the fourth straight month of contraction, from 47.1.
The ISM report ``is consistent with very slow growth in the economy,'' said Brian Bethune, chief financial economist at Global Insight Inc. in Lexington, Massachusetts, in an interview with Bloomberg Television. The decline in the employment gauge is ``an indication that services sector employment, particularly in the private sector, is still declining.''
Other reports released today showed the labor market is deteriorating.
Job Market
Companies in the U.S. cut an estimated 33,000 jobs in August, the ADP Employer Services survey showed.
The Labor Department said total unemployment rolls in the U.S. rose to the highest level in almost five years, and last week's initial claims for jobless benefits exceeded forecasts.
The number of Americans filing first-time claims for unemployment benefits increased by 15,000 to 444,000 in the week ended Aug. 30, the Labor Department said. The number of people staying on rolls rose to 3.435 million, the highest since November 2003, in the prior week.
An ISM report earlier on manufacturing showed a contraction in August for the first time in three months as companies slowed production and trimmed payrolls. The report's employment index dropped to 49.7 from 51.9 in July.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Natural Gas Falls on Forecasts for Above-Average Storage Gain
By Reg Curren
Sept. 4 (Bloomberg) -- Natural gas futures declined on forecasts a government report today will show U.S. supplies gained more than average last week.
Stockpiles rose 90 billion cubic feet in the week ended Aug. 29, according to the median of 19 analyst estimates compiled by Bloomberg. Stockpiles in the same week over the past five years advanced an average 59 billion cubic feet, according to the Energy Department, which reports on inventories today.
``The demand side of the equation has been obliterated and that's making the oversupply look even more abundant,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``With Gustav we probably lost more demand than supply. With all of those customers being down,'' it cuts power usage.
Natural gas for October delivery fell 8.1 cents, or 1.1 percent, to $7.183 per million British thermal units at 9:06 a.m. on the New York Mercantile Exchange. Gas yesterday touched $7.028 per million Btu, the lowest since Dec. 27 and has fallen 47 percent since reaching a 30-month closing high on July 3.
Analysts expect U.S. winter inventories to approach last year's record of 3.545 trillion cubic feet by early November.
Louisiana's power grid is still under repair after Gustav ripped through the state on Sept. 1, cutting demand for gas to run power plants. The storm caused offshore gas and oil production to be shut, though platforms in the Gulf of Mexico sustained little or no damage and output is being restored.
More than 620,000 homes and businesses in Louisiana were without power last night, down from almost 743,000 yesterday morning, Entergy Corp. said today on its Web site. Including utilities in Arkansas and Louisiana, Entergy has more than 701,000 customers still without electricity.
Atlantic Storms
Three storms are being tracked by National Hurricane Center in Miami. Tropical Storm Hanna just east of the Bahamas, will move near the southeast coast of the U.S. by late Friday.
Hurricane Ike, located about 550 miles (890 kilometers) northeast of the Leeward Islands, may take a path toward Florida. Ike is a Category 4 storm on the 5-step Saffir-Simpson intensity scale. A third system, Tropical Storm Josephine, is moving through open waters in the eastern Atlantic.
``We'd have lower prices without those storms,'' said Flynn. ``It's still too early'' to put any risk premium on for Ike.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
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Sept. 4 (Bloomberg) -- Natural gas futures declined on forecasts a government report today will show U.S. supplies gained more than average last week.
Stockpiles rose 90 billion cubic feet in the week ended Aug. 29, according to the median of 19 analyst estimates compiled by Bloomberg. Stockpiles in the same week over the past five years advanced an average 59 billion cubic feet, according to the Energy Department, which reports on inventories today.
``The demand side of the equation has been obliterated and that's making the oversupply look even more abundant,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``With Gustav we probably lost more demand than supply. With all of those customers being down,'' it cuts power usage.
Natural gas for October delivery fell 8.1 cents, or 1.1 percent, to $7.183 per million British thermal units at 9:06 a.m. on the New York Mercantile Exchange. Gas yesterday touched $7.028 per million Btu, the lowest since Dec. 27 and has fallen 47 percent since reaching a 30-month closing high on July 3.
Analysts expect U.S. winter inventories to approach last year's record of 3.545 trillion cubic feet by early November.
Louisiana's power grid is still under repair after Gustav ripped through the state on Sept. 1, cutting demand for gas to run power plants. The storm caused offshore gas and oil production to be shut, though platforms in the Gulf of Mexico sustained little or no damage and output is being restored.
More than 620,000 homes and businesses in Louisiana were without power last night, down from almost 743,000 yesterday morning, Entergy Corp. said today on its Web site. Including utilities in Arkansas and Louisiana, Entergy has more than 701,000 customers still without electricity.
Atlantic Storms
Three storms are being tracked by National Hurricane Center in Miami. Tropical Storm Hanna just east of the Bahamas, will move near the southeast coast of the U.S. by late Friday.
Hurricane Ike, located about 550 miles (890 kilometers) northeast of the Leeward Islands, may take a path toward Florida. Ike is a Category 4 storm on the 5-step Saffir-Simpson intensity scale. A third system, Tropical Storm Josephine, is moving through open waters in the eastern Atlantic.
``We'd have lower prices without those storms,'' said Flynn. ``It's still too early'' to put any risk premium on for Ike.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
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Petrofac Helicopter Crash Kills 7 at Rashid Field Off Dubai
By Ayesha Daya
Sept. 4 (Bloomberg) -- Petrofac Ltd., a U.K. company with projects in the Middle East and North Sea, said a helicopter crash at the Rashid oil field off Dubai killed seven contractors yesterday.
The Aerogulf Bell 212 helicopter used by Petrofac, which provides oilfield services for the offshore assets of Dubai Petroleum Establishment, crashed during take-off onto the deck of the drilling rig at 8:20 p.m. local time yesterday and there were no survivors, Petrofac said today in a statement distributed on Regulatory News Service.
All field operations have been suspended and the platform and drilling rig have been secured, the statement said.
One American, one Briton, two Indians, one Pakistani, one Filipino and one Venezuelan were killed, according to an e- mailed statement from the United Arab Emirates General Civil Aviation Authority.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Sept. 4 (Bloomberg) -- Petrofac Ltd., a U.K. company with projects in the Middle East and North Sea, said a helicopter crash at the Rashid oil field off Dubai killed seven contractors yesterday.
The Aerogulf Bell 212 helicopter used by Petrofac, which provides oilfield services for the offshore assets of Dubai Petroleum Establishment, crashed during take-off onto the deck of the drilling rig at 8:20 p.m. local time yesterday and there were no survivors, Petrofac said today in a statement distributed on Regulatory News Service.
All field operations have been suspended and the platform and drilling rig have been secured, the statement said.
One American, one Briton, two Indians, one Pakistani, one Filipino and one Venezuelan were killed, according to an e- mailed statement from the United Arab Emirates General Civil Aviation Authority.
To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net
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Crude Oil Is Steady Before U.S. Supply Report; Ike Strengthens
By Mark Shenk
Sept. 4 (Bloomberg) -- Crude oil was little changed as analysts were split over whether a U.S. government report will show an inventory increase or drop, and as Hurricane Ike gained strength over the Atlantic.
Eight analysts surveyed by Bloomberg News expect today's supply report to show an increase, and six expected a drop. Ike, the third major hurricane of the Atlantic season, strengthened into a Category 4 storm and may head for the Gulf of Mexico, home to more than one-fifth of U.S. oil production.
``There are a lot of different expectations ahead of the report later today,'' said Peter Beutel, president of New Canaan, Connecticut-based Cameron Hanover Inc. ``It's unusual to see such a divergence in views.''
Crude oil for October delivery fell 10 cents to $109.25 a barrel at 9:27 a.m. on the New York Mercantile Exchange. Futures are down 26 percent from the record $147.27 reached on July 11. Prices are up 46 percent from a year ago.
The Energy Department is scheduled to release its weekly report today at 11 a.m. in Washington, a day later than usual because of the Labor Day holiday on Sept. 1.
Tropical Storm Hanna lashed the Bahamas after killing dozens in Haiti and may strike the U.S. Southeast as a hurricane, according to the U.S. National Hurricane Center. Ike is a Category 4 storm, the second-strongest on the five-step Saffir- Simpson scale, the center said. The hurricane's eye was 550 miles northeast of the Leeward Islands and moving west-northwest.
``We've got a conveyer belt of storms, which is cause for concern,'' Beutel said. ``One has to be worried that one of these will be worse than what we've seen so far. Ike especially bears watching.''
Brent crude oil for October settlement fell 23 cents to $107.83 a barrel on London's ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- Crude oil was little changed as analysts were split over whether a U.S. government report will show an inventory increase or drop, and as Hurricane Ike gained strength over the Atlantic.
Eight analysts surveyed by Bloomberg News expect today's supply report to show an increase, and six expected a drop. Ike, the third major hurricane of the Atlantic season, strengthened into a Category 4 storm and may head for the Gulf of Mexico, home to more than one-fifth of U.S. oil production.
``There are a lot of different expectations ahead of the report later today,'' said Peter Beutel, president of New Canaan, Connecticut-based Cameron Hanover Inc. ``It's unusual to see such a divergence in views.''
Crude oil for October delivery fell 10 cents to $109.25 a barrel at 9:27 a.m. on the New York Mercantile Exchange. Futures are down 26 percent from the record $147.27 reached on July 11. Prices are up 46 percent from a year ago.
The Energy Department is scheduled to release its weekly report today at 11 a.m. in Washington, a day later than usual because of the Labor Day holiday on Sept. 1.
Tropical Storm Hanna lashed the Bahamas after killing dozens in Haiti and may strike the U.S. Southeast as a hurricane, according to the U.S. National Hurricane Center. Ike is a Category 4 storm, the second-strongest on the five-step Saffir- Simpson scale, the center said. The hurricane's eye was 550 miles northeast of the Leeward Islands and moving west-northwest.
``We've got a conveyer belt of storms, which is cause for concern,'' Beutel said. ``One has to be worried that one of these will be worse than what we've seen so far. Ike especially bears watching.''
Brent crude oil for October settlement fell 23 cents to $107.83 a barrel on London's ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Hanna May Become Hurricane Before Hitting U.S. Coast
By Thomas Penny and Demian McLean
Sept. 4 (Bloomberg) -- Tropical Storm Hanna lashed the Bahamas after killing dozens in Haiti and may strike the U.S. Southeast as a hurricane.
Farther east in the Atlantic Ocean, Category-4 Hurricane Ike strengthened and headed for the Caribbean as an ``extremely dangerous'' system, the U.S. National Hurricane Center said. The threat of the storm pushed oil prices higher.
Hanna's eye was about 280 miles (451 kilometers) east- southeast of Nassau in the Bahamas and 760 miles south-southeast of Wilmington, North Carolina, the NHC said just before 8 a.m. Miami time. Hanna was moving northwest with sustained winds of almost 70 miles per hour.
``We expect Hanna to make landfall along the Carolina coast early Saturday morning and expect some strengthening as it moves over the warm Gulf Stream waters,'' AccuWeather Inc. senior meteorologist Paul Walker said today in a telephone interview.
The hurricane center's five-day forecast shows Hanna passing just east of the Bahamas today and near the Southeast coast of the U.S. tomorrow, possibly with hurricane-force winds, of at least 74 mph. The system is ``sprawling,'' the center said, with tropical-storm force winds, from 39 to 73 mph, extending 290 miles from the eye.
Hanna roared off Hispaniola's northern coast for two days, flooding the island, which is shared by Haiti and the Dominican Republic. Haiti, the Western Hemisphere's poorest nation, and the Dominican Republic have been hit by Tropical Storm Fay and Hurricane Gustav in the past three weeks.
Haitian City Flooded
Hanna has already killed at least 61 people in Haiti, where rains inundated Gonaives, a city of 300,000 north of the Haitian capital Port-au-Prince, according to Agence France-Presse.
A hurricane watch was issued for the U.S. East Coast from Surf City, North Carolina, to the vicinity of Edisto Beach, South Carolina. A tropical-storm watch stretched southward from Edisto Beach to Altamaha Sound, Georgia.
``Swells from Hanna are expected to increase the risk of dangerous rip currents along portions of the southeastern United States coast during the next couple of days,'' the hurricane center said in its advisory.
Residents in Florida, Georgia, South Carolina and North Carolina should develop emergency plans and prepare emergency kits including medicine, food, water and batteries to support themselves for 72 hours, the Federal Emergency Management Agency said in a statement on its Web Site.
Ike Boosts Crude
Ike strengthened into the third major hurricane of the June 1-Nov. 1 Atlantic season. The system had sustained winds near 145 mph, the center said just before 5 a.m. Miami time.
Crude oil rose for the first time in five days as Ike gained force. Crude for October delivery rose as much as $1.25, or 1.1 percent, to $110.60 a barrel on the New York Mercantile Exchange.
Ike is a Category 4 storm, the second-strongest on the five-step Saffir-Simpson scale, the center said. The hurricane's eye was 550 miles northeast of the Leeward Islands and moving west-northwest at about 17 mph. It's forecast to fluctuate in intensity over the next day or two.
``It is too early to determine what land areas might eventually be affected by Ike,'' the center said.
To the east of Ike, Tropical Storm Josephine strengthened slightly, with sustained winds at 60 mph. It was 465 miles west of the southernmost Cape Verde islands and moving west-northwest at 10 mph.
Colorado State University forecasters this week predicted ``well above-average'' tropical activity in the Atlantic for September, with four of five named storms becoming hurricanes.
To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
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Sept. 4 (Bloomberg) -- Tropical Storm Hanna lashed the Bahamas after killing dozens in Haiti and may strike the U.S. Southeast as a hurricane.
Farther east in the Atlantic Ocean, Category-4 Hurricane Ike strengthened and headed for the Caribbean as an ``extremely dangerous'' system, the U.S. National Hurricane Center said. The threat of the storm pushed oil prices higher.
Hanna's eye was about 280 miles (451 kilometers) east- southeast of Nassau in the Bahamas and 760 miles south-southeast of Wilmington, North Carolina, the NHC said just before 8 a.m. Miami time. Hanna was moving northwest with sustained winds of almost 70 miles per hour.
``We expect Hanna to make landfall along the Carolina coast early Saturday morning and expect some strengthening as it moves over the warm Gulf Stream waters,'' AccuWeather Inc. senior meteorologist Paul Walker said today in a telephone interview.
The hurricane center's five-day forecast shows Hanna passing just east of the Bahamas today and near the Southeast coast of the U.S. tomorrow, possibly with hurricane-force winds, of at least 74 mph. The system is ``sprawling,'' the center said, with tropical-storm force winds, from 39 to 73 mph, extending 290 miles from the eye.
Hanna roared off Hispaniola's northern coast for two days, flooding the island, which is shared by Haiti and the Dominican Republic. Haiti, the Western Hemisphere's poorest nation, and the Dominican Republic have been hit by Tropical Storm Fay and Hurricane Gustav in the past three weeks.
Haitian City Flooded
Hanna has already killed at least 61 people in Haiti, where rains inundated Gonaives, a city of 300,000 north of the Haitian capital Port-au-Prince, according to Agence France-Presse.
A hurricane watch was issued for the U.S. East Coast from Surf City, North Carolina, to the vicinity of Edisto Beach, South Carolina. A tropical-storm watch stretched southward from Edisto Beach to Altamaha Sound, Georgia.
``Swells from Hanna are expected to increase the risk of dangerous rip currents along portions of the southeastern United States coast during the next couple of days,'' the hurricane center said in its advisory.
Residents in Florida, Georgia, South Carolina and North Carolina should develop emergency plans and prepare emergency kits including medicine, food, water and batteries to support themselves for 72 hours, the Federal Emergency Management Agency said in a statement on its Web Site.
Ike Boosts Crude
Ike strengthened into the third major hurricane of the June 1-Nov. 1 Atlantic season. The system had sustained winds near 145 mph, the center said just before 5 a.m. Miami time.
Crude oil rose for the first time in five days as Ike gained force. Crude for October delivery rose as much as $1.25, or 1.1 percent, to $110.60 a barrel on the New York Mercantile Exchange.
Ike is a Category 4 storm, the second-strongest on the five-step Saffir-Simpson scale, the center said. The hurricane's eye was 550 miles northeast of the Leeward Islands and moving west-northwest at about 17 mph. It's forecast to fluctuate in intensity over the next day or two.
``It is too early to determine what land areas might eventually be affected by Ike,'' the center said.
To the east of Ike, Tropical Storm Josephine strengthened slightly, with sustained winds at 60 mph. It was 465 miles west of the southernmost Cape Verde islands and moving west-northwest at 10 mph.
Colorado State University forecasters this week predicted ``well above-average'' tropical activity in the Atlantic for September, with four of five named storms becoming hurricanes.
To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
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Indonesia Approves Chevron's $7 Billion Gas Project
By Bambang Dwi Djanuarto and Leony Aurora
Sept. 4 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, won approval for a $7 billion project from the Indonesian government to pump natural gas in the southeast Asian country's first deep-sea drilling venture.
Chevron and Rome-based Eni SpA may spend $2.19 billion on development wells and the rest to build a floating processing unit and other facilities, Edy Hermantoro, upstream director at the energy ministry, said by telephone today. Energy Minister Purnomo Yusgiantoro signed the approval Aug. 29, he said.
The project would boost supply to a liquefied natural gas plant at Bontang in East Kalimantan province and may allow the world's third-biggest exporter of LNG to sell more of the fuel overseas than initially planned. The field may pump close to 1 billion cubic feet a day of gas at its peak, equivalent to 13 percent of Indonesia's current output.
``It's pretty expensive gas to produce'' as Chevron will have to drill on the seabed that's about 3,000 feet (914 meters) deep, said Andy Flower, an industry consultant and a former executive at BP Plc's LNG business.
Production of 1 billion cubic feet a day is equivalent to about 6 million tons of LNG a year, Flower said.
PT Pertamina, Indonesia's state-run oil company, estimates LNG shipments to a group of Japanese utilities will fall by 75 percent to 3 million tons a year after current contracts expire by March 2011, as output from some existing fields drops and fuel is allocated to local buyers.
LNG Exports
``Most of the LNG produced from the gas from these fields will be exported,'' Hermantoro said. ``We will allocate at least 25 percent of the output for the domestic market.''
Indonesia wants to boost LNG exports to benefit from rising LNG prices, which have doubled in the last three years as the price of crude oil surged to a record.
Korea Gas Corp., the world's biggest buyer of liquefied natural gas, has agreed to pay $20 per million British thermal units, based on a Japan Crude Cocktail oil price of $120 a barrel, for LNG supplied by the Tangguh project in Papua, Eddy Purwanto, deputy of operations at BPMigas, said on July 23. Korea Gas may buy ``nearly'' 1 million tons a year of the fuel that was initially earmarked for Sempra Energy's terminal in Mexico.
``We're looking at a sellers market out to 2015 and beyond'' where demand will outstrip supply, Flower said. ``There's a lot of potential demand in Asia.''
It will take six to eight years to develop the fields before they can start pumping gas, Steve Green, managing director of Chevron's IndoAsia Business Unit, said in a May 28 interview. At that rate, production may start by 2016.
No Word
Chevron said it hasn't yet had word from Indonesian authorities that the venture can proceed.
``Chevron is waiting on the official government approval of the Gehem-Gendalo deepwater gas project,'' Santi Manuhutu, spokeswoman for Chevron's Indonesian and Philippine operations, said in an e-mailed statement today.
Chevron owns an 80 percent stake in the Ganal area, where the Gehem and Gendalo fields lie, and Eni SpA the rest.
LNG is natural gas that has been cooled for transport by ship. Import terminals return the fuel to gas form so that it can be sent through pipelines to customers such as factories, power stations and households.
To contact the reporters on this story: Leony Aurora in Jakarta at laurora@bloomberg.net; Bambang Dwi Djanuarto in Jakarta at bbjakarta@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, won approval for a $7 billion project from the Indonesian government to pump natural gas in the southeast Asian country's first deep-sea drilling venture.
Chevron and Rome-based Eni SpA may spend $2.19 billion on development wells and the rest to build a floating processing unit and other facilities, Edy Hermantoro, upstream director at the energy ministry, said by telephone today. Energy Minister Purnomo Yusgiantoro signed the approval Aug. 29, he said.
The project would boost supply to a liquefied natural gas plant at Bontang in East Kalimantan province and may allow the world's third-biggest exporter of LNG to sell more of the fuel overseas than initially planned. The field may pump close to 1 billion cubic feet a day of gas at its peak, equivalent to 13 percent of Indonesia's current output.
``It's pretty expensive gas to produce'' as Chevron will have to drill on the seabed that's about 3,000 feet (914 meters) deep, said Andy Flower, an industry consultant and a former executive at BP Plc's LNG business.
Production of 1 billion cubic feet a day is equivalent to about 6 million tons of LNG a year, Flower said.
PT Pertamina, Indonesia's state-run oil company, estimates LNG shipments to a group of Japanese utilities will fall by 75 percent to 3 million tons a year after current contracts expire by March 2011, as output from some existing fields drops and fuel is allocated to local buyers.
LNG Exports
``Most of the LNG produced from the gas from these fields will be exported,'' Hermantoro said. ``We will allocate at least 25 percent of the output for the domestic market.''
Indonesia wants to boost LNG exports to benefit from rising LNG prices, which have doubled in the last three years as the price of crude oil surged to a record.
Korea Gas Corp., the world's biggest buyer of liquefied natural gas, has agreed to pay $20 per million British thermal units, based on a Japan Crude Cocktail oil price of $120 a barrel, for LNG supplied by the Tangguh project in Papua, Eddy Purwanto, deputy of operations at BPMigas, said on July 23. Korea Gas may buy ``nearly'' 1 million tons a year of the fuel that was initially earmarked for Sempra Energy's terminal in Mexico.
``We're looking at a sellers market out to 2015 and beyond'' where demand will outstrip supply, Flower said. ``There's a lot of potential demand in Asia.''
It will take six to eight years to develop the fields before they can start pumping gas, Steve Green, managing director of Chevron's IndoAsia Business Unit, said in a May 28 interview. At that rate, production may start by 2016.
No Word
Chevron said it hasn't yet had word from Indonesian authorities that the venture can proceed.
``Chevron is waiting on the official government approval of the Gehem-Gendalo deepwater gas project,'' Santi Manuhutu, spokeswoman for Chevron's Indonesian and Philippine operations, said in an e-mailed statement today.
Chevron owns an 80 percent stake in the Ganal area, where the Gehem and Gendalo fields lie, and Eni SpA the rest.
LNG is natural gas that has been cooled for transport by ship. Import terminals return the fuel to gas form so that it can be sent through pipelines to customers such as factories, power stations and households.
To contact the reporters on this story: Leony Aurora in Jakarta at laurora@bloomberg.net; Bambang Dwi Djanuarto in Jakarta at bbjakarta@bloomberg.net.
Read more...
Kashagan May Delay Oil Again, Presidential Aide Says
By Nariman Gizitdinov and Adam L. Freeman
Sept. 4 (Bloomberg) -- Production at the Eni SpA-led Kashagan oil project in Kazakhstan may be delayed until 2014, almost a decade behind the original start date, an aide to the Central Asian nation's president said.
Difficult technical conditions for drilling and shipments mean the field may come on stream a year later than the current target of 2013, Nurlan Balgimbayev, an adviser to President Nursultan Nazarbayev, told reporters on the sidelines of an energy conference in the capital, Astana, today.
Production is scheduled to begin in 2013, already eight years behind the original start-up date of 2005, after state-run KazMunaiGaz National Co. took a greater share in the project in January. By the end of 2013 all facilities must be ready and transportation issues resolved, Timur Kulibayev, chairman of the KazEnergy association, told a press conference.
The venture ``will not be able to produce oil in winter, so the start date will be 2014,'' said Kulibayev, whose group unites producers in Kazakhstan including Chevron Corp. and BG Group Plc. ``The point is to make the project work in time as the more we delay the start to production, the higher the costs are.''
The venture, whose partners also include Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA, should produce 450,000 barrels a day in 2014, said Kulibayev, who is married to Nazarbayev's daughter. Eni earlier estimated output reaching 370,000 barrels of oil a day in the year after the start to production, before rising to a peak of about 1.5 million barrels a day.
An Eni official declined to comment when contacted by Bloomberg News today. Total spokesman Kevin Church said he couldn't provide immediate comment.
Under terms of the deal struck earlier this year, Kashagan partners are slated to run the field jointly with current sole operator Eni when oil starts flowing.
To contact the reporters on this story: Nariman Gizitdinov in Almaty, through the Moscow newsroom at ngizitdinov@bloomberg.net; Adam L. Freeman in Rome at afreeman5@bloomberg.net
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Sept. 4 (Bloomberg) -- Production at the Eni SpA-led Kashagan oil project in Kazakhstan may be delayed until 2014, almost a decade behind the original start date, an aide to the Central Asian nation's president said.
Difficult technical conditions for drilling and shipments mean the field may come on stream a year later than the current target of 2013, Nurlan Balgimbayev, an adviser to President Nursultan Nazarbayev, told reporters on the sidelines of an energy conference in the capital, Astana, today.
Production is scheduled to begin in 2013, already eight years behind the original start-up date of 2005, after state-run KazMunaiGaz National Co. took a greater share in the project in January. By the end of 2013 all facilities must be ready and transportation issues resolved, Timur Kulibayev, chairman of the KazEnergy association, told a press conference.
The venture ``will not be able to produce oil in winter, so the start date will be 2014,'' said Kulibayev, whose group unites producers in Kazakhstan including Chevron Corp. and BG Group Plc. ``The point is to make the project work in time as the more we delay the start to production, the higher the costs are.''
The venture, whose partners also include Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA, should produce 450,000 barrels a day in 2014, said Kulibayev, who is married to Nazarbayev's daughter. Eni earlier estimated output reaching 370,000 barrels of oil a day in the year after the start to production, before rising to a peak of about 1.5 million barrels a day.
An Eni official declined to comment when contacted by Bloomberg News today. Total spokesman Kevin Church said he couldn't provide immediate comment.
Under terms of the deal struck earlier this year, Kashagan partners are slated to run the field jointly with current sole operator Eni when oil starts flowing.
To contact the reporters on this story: Nariman Gizitdinov in Almaty, through the Moscow newsroom at ngizitdinov@bloomberg.net; Adam L. Freeman in Rome at afreeman5@bloomberg.net
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BP, Billionaires Settle TNK-BP Fight; Dudley to Quit
By Torrey Clark and Eduard Gismatullin
Sept. 4 (Bloomberg) -- BP Plc and its billionaire partners in TNK-BP, Russia's third-largest oil company, agreed to oust the chief executive officer and expand the board to resolve an eight-month dispute that threatened the British company's future in the country.
TNK-BP CEO Robert Dudley will step down by the end of the year, the partners said today in e-mailed statements. The shareholders will also examine selling shares in a unit of TNK- BP Ltd., to boost the company's market value, and will bring three independent directors onto the board. BP rose as much as 4.9 percent in London trading, the biggest gain since April 29.
The accord leaves BP with its stake in the 50-50 venture intact while acceding to demands by the Russian billionaires for a more independent board. TNK-BP accounts for almost a quarter of BP's global output and reserves and Russia is the world's second-largest oil exporter. The dispute hit TNK-BP's output and discouraged investors in the Russian stock market, contributing to a 30 percent decline in the Micex index this year.
It's ``certainly positive to see a plan for cessation of hostilities, with BP preserving its 50 percent stake and an opportunity to release part of the value via an initial public offering,'' Ivor Pether, who helps oversee about $17 billion at Royal London Asset Management, said today. ``But it's hard to envisage who would qualify as an independent director,'' given how polarized the dispute was, he said.
Billionaires' Demands
Russian investors Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik made removing Dudley, who has headed the venture since it was formed in 2003, central to negotiations, saying he favored BP's interests over theirs. The American executive and London-based BP both denied that.
The shareholders agreed to expand the board of TNK-BP Ltd. to 11 directors, four from each side and three independents. The current board has 10 members, split evenly between BP and AAR, which represents the Russian billionaires, the companies said.
The Kremlin has emerged as the winner in previous squabbles in the Russian energy industry, as then-President Vladimir Putin sought to strengthen the state's control over assets. Last year, Royal Dutch Shell Plc sold a controlling interest in its $22 billion Sakhalin Island oil and natural gas project to OAO Gazprom, the state-controlled energy company. Shell's move came after a government environmental watchdog threatened to revoke permits and stop work at the project.
Medvedev's Challenge
OAO Yukos Oil Co. was bankrupted after the government claimed more than $30 billion in back taxes. The company's founder, Mikhail Khodorkovsky, is serving eight years in a Siberian labor camp. Rosneft, under Sechin's watch, acquired many of Yukos's assets in government auctions to pay the tax claims.
For President Dmitry Medvedev, who took office in May, TNK- BP was the first big test of his energy policies. Medvedev was chairman of Gazprom for six years as the gas producer and pipeline owner grew to be the third-largest company in the world by market capitalization. The TNK-BP dispute is part of a wider global trend in which state-controlled energy companies are battling international rivals for access to oil and gas.
Clashes with foreign investors may hobble Russia's ability to tap its energy. The country's oil output has begun to fall this year -- to 9.8 million barrels a day in August from a peak of 9.9 million in late 2007. For much of the past decade, Russia was among the biggest contributors of new global supply.
Government Support
``We're glad that the situation was resolved and the participants in the talks reached'' the agreement ``without bringing in third parties including the government,'' Deputy Prime Minister Igor Sechin said in the AAR statement. ``We support the development of TNK-BP and believe that this company shows excellent long-term potential.''
BP traded 16.5 pence, or 3.3 percent, higher at 522.5 at 12:56 p.m. London time. OAO TNK-BP Holding, a unit whose shares trade in Moscow, rose 18 cents, or 11 percent, to $1.78. About 5 percent of the stock is publicly traded, while the British-Russian venture holds the rest.
Dudley left Russia July 24, citing ``sustained harassment'' amid court battles and labor and tax inspections that led to him being disqualified from his post in Russia for two years. TNK-BP has appealed the disqualification decision.
The agreement will free the venture of ``this significant distraction and the uncertainties around the company's business plan and capital expenditure,'' Dudley said today in a statement e-mailed by TNK-BP.
New CEO
A new TNK-BP CEO will be nominated by BP and will require the board's unanimous approval. The executive will have the right to decide on the number of foreigners and employees contracted from BP at the venture.
``Bob is going to work through the transition; he is then going to go off on a decent break,'' BP Chief Executive Officer Tony Hayward said today in telephone interview. ``My expectation is that he will return in a senior role for BP.'' Hayward said BP has ``half a dozen'' candidates short-listed to replace him.
TNK-BP lost almost half its foreign staff after clashes between BP and the billionaires over visas and work permits earlier this year. BP had to withdraw about 150 secondees at TNK-BP who hadn't been allowed to work at the venture since March.
Bonds of TNK-BP rose to the highest in a month. That reduced the yield on TNK-BP's $1.1 billion of 10-year 7.875 percent bonds to 9.05 percent from close to a record-high of 9.51 percent, according to prices on Bloomberg at 1:20 p.m. in Moscow.
Investment Proposals
AAR has pushed for TNK-BP to expand internationally and has proposed investments in Poland, Germany, northern Iraq and elsewhere. BP's directors have shot down most of these proposals, according to AAR.
In July, TNK-BP signed an agreement with Venezuela to study a possible joint project in the Latin American country's Orinoco region, where heavy oil is produced. TNK-BP also plans now to expand in Turkmenistan and possibly compete with BP for the central Asian nation's fields.
``We are interested in developing large projects with the active participation of foreign investors,'' Arkady Dvorkovich, an aide to Medvedev, said today in the AAR statement. ``TNK-BP is one of the most ambitious and promising projects of this type.''
To contact the reporters on this story: Torrey Clark in Moscow at tclark8@bloomberg.net. Eduard Gismatullin in London at egismatullin@bloomberg.net
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Korea, Pakistan, Thai Currencies May Fall, Morgan Stanley Says
By Bob Chen
Sept. 4 (Bloomberg) -- Slides in foreign-exchange reserves in South Korea, Pakistan and Thailand reflect the ``negative fundamental outlook'' for those nations' currencies, Morgan Stanley said.
The Bank of Korea sold 8 percent of its dollar reserves, or $21 billion, in the five months through August as the won declined 9.1 percent versus the dollar, according to data compiled by Bloomberg. Pakistan's rupee slumped 11 percent from end-October through June as its foreign-exchange holdings tumbled 39 percent and Thailand's baht lost 5.2 percent in the four months through July as reserves declined 4.9 percent.
``All these central banks have intervened consistently in each of the past five months and have depleted more than 5 percent of their reserves,'' Stewart Newnham, an analyst at Morgan Stanley in Hong Kong, wrote in a research note sent to clients today. The declines ``confirm our negative fundamental outlook on the respective currencies,'' he said.
The Korean won, which yesterday reached a four-year low of 1,159 per dollar, climbed 1.7 percent today to 1,129. The Pakistan rupee was little changed at 76.975 a dollar, having yesterday touched a record low of 77.050. The baht rose 0.1 percent to 34.44 against the U.S. currency, near a one-year low of 34.54 set this week.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
Read more...
Sept. 4 (Bloomberg) -- Slides in foreign-exchange reserves in South Korea, Pakistan and Thailand reflect the ``negative fundamental outlook'' for those nations' currencies, Morgan Stanley said.
The Bank of Korea sold 8 percent of its dollar reserves, or $21 billion, in the five months through August as the won declined 9.1 percent versus the dollar, according to data compiled by Bloomberg. Pakistan's rupee slumped 11 percent from end-October through June as its foreign-exchange holdings tumbled 39 percent and Thailand's baht lost 5.2 percent in the four months through July as reserves declined 4.9 percent.
``All these central banks have intervened consistently in each of the past five months and have depleted more than 5 percent of their reserves,'' Stewart Newnham, an analyst at Morgan Stanley in Hong Kong, wrote in a research note sent to clients today. The declines ``confirm our negative fundamental outlook on the respective currencies,'' he said.
The Korean won, which yesterday reached a four-year low of 1,159 per dollar, climbed 1.7 percent today to 1,129. The Pakistan rupee was little changed at 76.975 a dollar, having yesterday touched a record low of 77.050. The baht rose 0.1 percent to 34.44 against the U.S. currency, near a one-year low of 34.54 set this week.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.
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Ruble Holds at One-Year Low Versus Dollar on Political Tensions
By Emma O'Brien
Sept. 4 (Bloomberg) -- The ruble fell to the lowest level in almost a year against the dollar as concern about Russia's intentions in the region spurred investors to sell the country's assets.
Investors have taken about $30 billion out of Russia since the start of its five-day war with Georgia on Aug. 8, with concern heightened by U.S. and European condemnation of the invasion and this week's split in nearby Ukraine's ruling coalition. Russian government bonds have fallen with the ruble as oil, the nation's biggest export, slipped 4.4 percent this week.
``Six weeks ago Russia was touted as a safe haven; now it's a pariah state,'' said Ian McCall, London-based director of Argo Capital Management, where he helps manage about $1 billion in emerging-market, including Russian, debt. ``When the bullets start flying people would rather head for the sidelines.''
The ruble headed for its biggest weekly drop against the dollar since the second week of August, slipping to 25.3012 per dollar by 1:50 p.m. in Moscow, the weakest since Sept. 18, 2007. It dropped to 36.6458 per euro, from 36.4287, and is set to slip 1.4 percent this week.
Bank Rossii, the central bank, keeps the ruble within a trading band against a currency basket to limit the impact of fluctuations on the competitiveness of Russian exports. It has been widening the band since mid-May to introduce volatility into the currency and prepare it for a free float by 2011. The basket rate is calculated by multiplying the ruble's rate to the dollar by 0.55, the euro rate by 0.45, then adding them.
Troops in Georgia
The ruble slid 0.6 percent to 30.3815 against the basket today, after weakening 1.3 percent yesterday, its biggest one-day fall since the mechanism was introduced in February 2005.
Russian peacekeepers are still in parts of Georgia, maintaining what the government describes as a buffer zone around South Ossetia and Abkhazia, the two Georgian separatist regions whose independence Russia recognized last month. The U.S. and the European Union have demanded Russian soldiers withdraw to their pre-war positions.
U.S. Vice President Dick Cheney met Georgian President Mikheil Saakashvili in the capital, Tbilisi, today. He said Russia's actions posed ``grave doubts'' about its intentions in the Caucasus and that the U.S. is still ``fully committed'' to Georgia's bid to join the North Atlantic Treaty Organization. Russia opposes Georgia's and Ukraine's NATO membership bids.
`Confidence Shaken'
The government alliance of Ukrainian President Viktor Yushchenko's party and Prime Minister Yulia Timoshenko split Sept. 2, amid allegations Timoshenko didn't condemn the Georgian invasion because she is seeking Russian support for a run at the presidency. French Foreign Minister Bernard Kouchner said last month Ukraine may be Russia's next ``target.''
``Confidence in Russian assets will remain shaken for some time,'' said Gaelle Blanchard, an emerging-markets currency strategist in London with Societe Generale. ``We don't expect a dramatic recovery in the ruble.''
Russian bonds fell. The yield on the benchmark 7.5 percent note due 2030 climbed 3 basis points to 5.77 percent. The 20-year bond yield rose 2 points to 5.64 percent. Yields move inversely to prices. The cost of protecting Russian sovereign debt from default rose 2 basis points to 148 today, the highest since March, according to CMA Datavision in London.
Crude oil is headed for its second straight weekly drop this week. It recently added 0.6 percent to $110.04 a barrel.
The ruble's decline is an ``echo of the large oil fall of the past couple of days,'' said Shahin Vallee, an emerging- markets currency strategist with BNP Paribas in London.
Traders said central bank bought the ruble when it fell to as low as 30.1084 against the basket on Aug. 11, the day before Russian President Dmitry Medvedev called off the Georgian offensive. The ruble's decline has been magnified by the triggering of stop losses on investor's long positions on the ruble, Argo's McCall said.
Bank Rossii has a policy of not commenting on day-to-day market operations, according to spokesman Vladimir Lavrov.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- The ruble fell to the lowest level in almost a year against the dollar as concern about Russia's intentions in the region spurred investors to sell the country's assets.
Investors have taken about $30 billion out of Russia since the start of its five-day war with Georgia on Aug. 8, with concern heightened by U.S. and European condemnation of the invasion and this week's split in nearby Ukraine's ruling coalition. Russian government bonds have fallen with the ruble as oil, the nation's biggest export, slipped 4.4 percent this week.
``Six weeks ago Russia was touted as a safe haven; now it's a pariah state,'' said Ian McCall, London-based director of Argo Capital Management, where he helps manage about $1 billion in emerging-market, including Russian, debt. ``When the bullets start flying people would rather head for the sidelines.''
The ruble headed for its biggest weekly drop against the dollar since the second week of August, slipping to 25.3012 per dollar by 1:50 p.m. in Moscow, the weakest since Sept. 18, 2007. It dropped to 36.6458 per euro, from 36.4287, and is set to slip 1.4 percent this week.
Bank Rossii, the central bank, keeps the ruble within a trading band against a currency basket to limit the impact of fluctuations on the competitiveness of Russian exports. It has been widening the band since mid-May to introduce volatility into the currency and prepare it for a free float by 2011. The basket rate is calculated by multiplying the ruble's rate to the dollar by 0.55, the euro rate by 0.45, then adding them.
Troops in Georgia
The ruble slid 0.6 percent to 30.3815 against the basket today, after weakening 1.3 percent yesterday, its biggest one-day fall since the mechanism was introduced in February 2005.
Russian peacekeepers are still in parts of Georgia, maintaining what the government describes as a buffer zone around South Ossetia and Abkhazia, the two Georgian separatist regions whose independence Russia recognized last month. The U.S. and the European Union have demanded Russian soldiers withdraw to their pre-war positions.
U.S. Vice President Dick Cheney met Georgian President Mikheil Saakashvili in the capital, Tbilisi, today. He said Russia's actions posed ``grave doubts'' about its intentions in the Caucasus and that the U.S. is still ``fully committed'' to Georgia's bid to join the North Atlantic Treaty Organization. Russia opposes Georgia's and Ukraine's NATO membership bids.
`Confidence Shaken'
The government alliance of Ukrainian President Viktor Yushchenko's party and Prime Minister Yulia Timoshenko split Sept. 2, amid allegations Timoshenko didn't condemn the Georgian invasion because she is seeking Russian support for a run at the presidency. French Foreign Minister Bernard Kouchner said last month Ukraine may be Russia's next ``target.''
``Confidence in Russian assets will remain shaken for some time,'' said Gaelle Blanchard, an emerging-markets currency strategist in London with Societe Generale. ``We don't expect a dramatic recovery in the ruble.''
Russian bonds fell. The yield on the benchmark 7.5 percent note due 2030 climbed 3 basis points to 5.77 percent. The 20-year bond yield rose 2 points to 5.64 percent. Yields move inversely to prices. The cost of protecting Russian sovereign debt from default rose 2 basis points to 148 today, the highest since March, according to CMA Datavision in London.
Crude oil is headed for its second straight weekly drop this week. It recently added 0.6 percent to $110.04 a barrel.
The ruble's decline is an ``echo of the large oil fall of the past couple of days,'' said Shahin Vallee, an emerging- markets currency strategist with BNP Paribas in London.
Traders said central bank bought the ruble when it fell to as low as 30.1084 against the basket on Aug. 11, the day before Russian President Dmitry Medvedev called off the Georgian offensive. The ruble's decline has been magnified by the triggering of stop losses on investor's long positions on the ruble, Argo's McCall said.
Bank Rossii has a policy of not commenting on day-to-day market operations, according to spokesman Vladimir Lavrov.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Sweden's Krona Falls as Riksbank Lowers Forecasts, Lifts Rates
By Bo Nielsen
Sept. 4 (Bloomberg) -- Sweden's krona fell against the dollar after the central bank said growth and inflation will slow in Scandinavia's largest economy, suggesting its next move will be a reduction in interest rates.
The Stockholm-based Riksbank today raised interest rates by a quarter-point to 4.75 percent, as forecast by 15 of 23 economists surveyed by Bloomberg, and said it expects to keep borrowing costs steady for the rest of 2008 as the economy falters. It expects the main rate to average 4.5 percent in the fourth quarter of next year, indicating it will cut the rate 25 basis points by the end of 2009.
``Despite the rate hike, the market is taking the downward revisions to the forecasts as confirmation the next step will be a cut,'' said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt. ``The Swedish krona can't benefit from that.''
The Swedish currency fell 0.4 percent to 6.5616 against the dollar by 3:10 p.m. in Stockholm, from 9.4792 yesterday. It also traded at 9.4800 per euro, compared with 9.4792.
The Riksbank lifted rates to a 12-year high to head off inflation after the rate of price growth climbed to 4.4 percent in July, the highest in 15 years and more than double the 2 percent central bank target. The economy grew an annual 0.7 percent in the three months through June, the slowest pace in seven years.
`Increase is Necessary'
``Inflation has continued to rise in Sweden and the rate increase is necessary to prevent high inflation from becoming entrenched,'' the Riksbank said in a statement on its Web site. ``Economic activity will continue to slow and the labor market situation will slacken.''
The central bank kept this year's inflation forecast at 3.9 percent. It changed its forecast for 2009 to 3.2 percent from 3.5 percent. Consumer-price growth won't reach its target until 2010, it said.
Policy makers also cut their economic-growth forecast to 1.4 percent this year from 2.1 percent, and to 0.8 percent in 2009 from 1.2 percent.
Looking ahead ``Riksbank expectations for slower growth and weaker labor markets suggest this hike marks the peak of the tightening cycle,'' Thomas Stolper, a London-based Goldman Sachs Group Inc. analyst, wrote in a note to clients.
The European Central Bank and the Bank of England kept interest rates at 4.25 percent and 5 percent respectively to curb inflation even as growth in their economies slowed.
Swedish government bonds rose, with the yield on Sweden's 5.25 percent note due March 2011 losing 1 basis point to 4.21 percent. Yields move inversely to bond prices.
In other trading, Norway's krone fell to 5.5438 per dollar, from 5.5299 yesterday, and was at 8.0153 per euro, from 8.0175. A report tomorrow is forecast to show industrial production grew at an unadjusted annual rate of 4 percent in July, according to the median estimate of a Bloomberg survey of seven economists.
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- Sweden's krona fell against the dollar after the central bank said growth and inflation will slow in Scandinavia's largest economy, suggesting its next move will be a reduction in interest rates.
The Stockholm-based Riksbank today raised interest rates by a quarter-point to 4.75 percent, as forecast by 15 of 23 economists surveyed by Bloomberg, and said it expects to keep borrowing costs steady for the rest of 2008 as the economy falters. It expects the main rate to average 4.5 percent in the fourth quarter of next year, indicating it will cut the rate 25 basis points by the end of 2009.
``Despite the rate hike, the market is taking the downward revisions to the forecasts as confirmation the next step will be a cut,'' said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt. ``The Swedish krona can't benefit from that.''
The Swedish currency fell 0.4 percent to 6.5616 against the dollar by 3:10 p.m. in Stockholm, from 9.4792 yesterday. It also traded at 9.4800 per euro, compared with 9.4792.
The Riksbank lifted rates to a 12-year high to head off inflation after the rate of price growth climbed to 4.4 percent in July, the highest in 15 years and more than double the 2 percent central bank target. The economy grew an annual 0.7 percent in the three months through June, the slowest pace in seven years.
`Increase is Necessary'
``Inflation has continued to rise in Sweden and the rate increase is necessary to prevent high inflation from becoming entrenched,'' the Riksbank said in a statement on its Web site. ``Economic activity will continue to slow and the labor market situation will slacken.''
The central bank kept this year's inflation forecast at 3.9 percent. It changed its forecast for 2009 to 3.2 percent from 3.5 percent. Consumer-price growth won't reach its target until 2010, it said.
Policy makers also cut their economic-growth forecast to 1.4 percent this year from 2.1 percent, and to 0.8 percent in 2009 from 1.2 percent.
Looking ahead ``Riksbank expectations for slower growth and weaker labor markets suggest this hike marks the peak of the tightening cycle,'' Thomas Stolper, a London-based Goldman Sachs Group Inc. analyst, wrote in a note to clients.
The European Central Bank and the Bank of England kept interest rates at 4.25 percent and 5 percent respectively to curb inflation even as growth in their economies slowed.
Swedish government bonds rose, with the yield on Sweden's 5.25 percent note due March 2011 losing 1 basis point to 4.21 percent. Yields move inversely to bond prices.
In other trading, Norway's krone fell to 5.5438 per dollar, from 5.5299 yesterday, and was at 8.0153 per euro, from 8.0175. A report tomorrow is forecast to show industrial production grew at an unadjusted annual rate of 4 percent in July, according to the median estimate of a Bloomberg survey of seven economists.
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
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Pound Rises Against Dollar, Euro as Bank of England Holds Rate
By Lukanyo Mnyanda
Sept. 4 (Bloomberg) -- The pound rose, rebounding from near the lowest level in 2 1/2 years against the dollar, after the Bank of England kept its main interest rate unchanged.
The nine-member Monetary Policy Committee, led by Governor Mervyn King, held the benchmark rate at 5 percent, matching the forecast of all 61 economists surveyed by Bloomberg, as it seeks to balance the risk of a recession with the fastest inflation in more than a decade. The pound rose against the euro after the European Central Bank also kept interest rates unchanged and its president, Jean-Claude Trichet, said the region is undergoing an ``episode of weak activity.''
``They're not willing to ease monetary policy yet given the elevated levels of inflation,'' said Lee Hardman, a currency strategist in London at the Bank of Tokyo-Mitsubishi Ltd. ``The pound got an initial boost, but we're still looking for it to trend lower.''
The pound was at $1.7817 by 2:38 p.m. in London, from $1.7768 yesterday, when it fell as much as 1 percent to $1.7668, the lowest level in almost 2 1/2 years. It was at 81.23 pence per euro, from 81.60 yesterday. Earlier, it slipped to 81.88 pence, the weakest level since the single European currency debuted in 1999.
The pound's trade-weighted index, a broader gauge of the currency's performance against Britain's major trade partners, rose for the first time since Aug. 15, climbing to 85.22, from 84.99, according to Deutsche Bank AG. The measure slid to the lowest level since at least 2000 yesterday.
Deepening Slowdown
Before today, the pound fell for seven days as reports showing the economic slowdown is deepening prompted investors to reduce bets the central bank will cut rates. House prices declined for a fifth month, HBOS Plc said today. The pound is still 8.5 percent lower against the dollar in the past month, the second-worst performance of the 16 most actively-traded currencies. It has fallen 2.9 percent versus the euro.
The currency's slide accelerated after Chancellor of the Exchequer Alistair Darling told the Guardian newspaper on Aug. 30 the U.K. faces its biggest economic slowdown in 60 years. He later said he was referring to the world economy.
``If you've made money shorting the pound, it's probably a good idea to make sure your profit isn't eaten away,'' said Divyang Shah, chief strategist in London at CBA Europe Ltd., a unit of Commonwealth Bank of Australia. A short position is a bet the price of an asset or currency will drop.
Britain's central bank is seeking to bring inflation, which accelerated to 4.4 percent in July, below its 2 percent target. It has cut the benchmark rate three times since the end of November.
House Prices Slip
Government bonds were little changed, with the 10-year yield at 4.49 percent. The price of the 5 percent security due March 2018 fell 0.02, or 20 pence per 1,000-pound face amount, to 103.88. The yield on the two-year note was at 4.41 percent. Yields move inversely to bond prices.
The pound pared gains after HBOS said British house prices fell a more-than-expected 10.9 percent in August, further evidence of the nation's worst housing slump since the early 1990s. Prices were forecast to decline 10.7 percent, according to the median forecast of 13 economists surveyed by Bloomberg.
``Sterling is still in over-valued territory,'' David Bloom, the London-based global head of currency strategy at HSBC Plc, Europe's biggest bank by market value, said in an interview on Bloomberg Television. ``Everyone is expecting rates to come down and the economy is in a terrible position.''
Traders have increased bets the Bank of England will cut rates. The implied yield on the March short-sterling futures contract dropped 12 basis points since the end of August to 5.07 percent today.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- The pound rose, rebounding from near the lowest level in 2 1/2 years against the dollar, after the Bank of England kept its main interest rate unchanged.
The nine-member Monetary Policy Committee, led by Governor Mervyn King, held the benchmark rate at 5 percent, matching the forecast of all 61 economists surveyed by Bloomberg, as it seeks to balance the risk of a recession with the fastest inflation in more than a decade. The pound rose against the euro after the European Central Bank also kept interest rates unchanged and its president, Jean-Claude Trichet, said the region is undergoing an ``episode of weak activity.''
``They're not willing to ease monetary policy yet given the elevated levels of inflation,'' said Lee Hardman, a currency strategist in London at the Bank of Tokyo-Mitsubishi Ltd. ``The pound got an initial boost, but we're still looking for it to trend lower.''
The pound was at $1.7817 by 2:38 p.m. in London, from $1.7768 yesterday, when it fell as much as 1 percent to $1.7668, the lowest level in almost 2 1/2 years. It was at 81.23 pence per euro, from 81.60 yesterday. Earlier, it slipped to 81.88 pence, the weakest level since the single European currency debuted in 1999.
The pound's trade-weighted index, a broader gauge of the currency's performance against Britain's major trade partners, rose for the first time since Aug. 15, climbing to 85.22, from 84.99, according to Deutsche Bank AG. The measure slid to the lowest level since at least 2000 yesterday.
Deepening Slowdown
Before today, the pound fell for seven days as reports showing the economic slowdown is deepening prompted investors to reduce bets the central bank will cut rates. House prices declined for a fifth month, HBOS Plc said today. The pound is still 8.5 percent lower against the dollar in the past month, the second-worst performance of the 16 most actively-traded currencies. It has fallen 2.9 percent versus the euro.
The currency's slide accelerated after Chancellor of the Exchequer Alistair Darling told the Guardian newspaper on Aug. 30 the U.K. faces its biggest economic slowdown in 60 years. He later said he was referring to the world economy.
``If you've made money shorting the pound, it's probably a good idea to make sure your profit isn't eaten away,'' said Divyang Shah, chief strategist in London at CBA Europe Ltd., a unit of Commonwealth Bank of Australia. A short position is a bet the price of an asset or currency will drop.
Britain's central bank is seeking to bring inflation, which accelerated to 4.4 percent in July, below its 2 percent target. It has cut the benchmark rate three times since the end of November.
House Prices Slip
Government bonds were little changed, with the 10-year yield at 4.49 percent. The price of the 5 percent security due March 2018 fell 0.02, or 20 pence per 1,000-pound face amount, to 103.88. The yield on the two-year note was at 4.41 percent. Yields move inversely to bond prices.
The pound pared gains after HBOS said British house prices fell a more-than-expected 10.9 percent in August, further evidence of the nation's worst housing slump since the early 1990s. Prices were forecast to decline 10.7 percent, according to the median forecast of 13 economists surveyed by Bloomberg.
``Sterling is still in over-valued territory,'' David Bloom, the London-based global head of currency strategy at HSBC Plc, Europe's biggest bank by market value, said in an interview on Bloomberg Television. ``Everyone is expecting rates to come down and the economy is in a terrible position.''
Traders have increased bets the Bank of England will cut rates. The implied yield on the March short-sterling futures contract dropped 12 basis points since the end of August to 5.07 percent today.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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Canadian Dollar Gains for Second Day as Crude Oil Increases
By Cordell Eddings
Sept. 4 (Bloomberg) -- Canada's currency advanced for a second day after crude oil rose as Hurricane Ike gained force in the Atlantic, spurring concern it may disrupt U.S. oil supplies.
``Oil and commodities in general are going to be the main driver going forward today and in the next few months,'' said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto.
The Canadian dollar appreciated 0.3 percent to C$1.0595 per U.S. dollar at 8:37 a.m. in Toronto, from C$1.0627 yesterday. One Canadian dollar buys 94.38 U.S. cents.
Crude oil rose as much as $1.25 today, or 1.1 percent, touching $110.60 a barrel. The price reached a record $147.27 a barrel on July 11.
The Bank of Canada left its benchmark interest rate unchanged yesterday at 3 percent. The rate is ``appropriately accommodative,'' while inflationary pressures ``remain elevated,'' the central bank said. It didn't hint that slow growth may lead to a rate reduction.
``The less dovish remarks yesterday gave'' Canada's currency ``a big lift when it seemed to be on a one-way streak down,'' Porter said. ``Now it's managing to hold on to its gains.''
Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.11 against the U.S. dollar by the end of 2009, according to the median forecast of economists surveyed by Bloomberg News.
To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- Canada's currency advanced for a second day after crude oil rose as Hurricane Ike gained force in the Atlantic, spurring concern it may disrupt U.S. oil supplies.
``Oil and commodities in general are going to be the main driver going forward today and in the next few months,'' said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto.
The Canadian dollar appreciated 0.3 percent to C$1.0595 per U.S. dollar at 8:37 a.m. in Toronto, from C$1.0627 yesterday. One Canadian dollar buys 94.38 U.S. cents.
Crude oil rose as much as $1.25 today, or 1.1 percent, touching $110.60 a barrel. The price reached a record $147.27 a barrel on July 11.
The Bank of Canada left its benchmark interest rate unchanged yesterday at 3 percent. The rate is ``appropriately accommodative,'' while inflationary pressures ``remain elevated,'' the central bank said. It didn't hint that slow growth may lead to a rate reduction.
``The less dovish remarks yesterday gave'' Canada's currency ``a big lift when it seemed to be on a one-way streak down,'' Porter said. ``Now it's managing to hold on to its gains.''
Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.11 against the U.S. dollar by the end of 2009, according to the median forecast of economists surveyed by Bloomberg News.
To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net
Read more...
Euro Drops Against Dollar as ECB Says Economic Activity `Weak'
By Agnes Lovasz
Sept. 4 (Bloomberg) -- The euro fell against the dollar after European Central Bank President Jean-Claude Trichet said the region is undergoing an ``episode of weak activity,'' signaling policy makers aren't inclined to lift interest rates soon.
The European single currency dropped for a sixth day as Trichet said downside risks to growth prevail. The ECB kept its main rate at a seven-year high of 4.25 percent today. The central bank cut its own economic growth projection for 2008 and 2009, according to staff forecasts.
Trichet ``sounded a touch more dovish than many in the market expected, and that triggered some sell-offs,'' said Neil Jones, the head of European hedge-fund sales at Mizuho Capital Markets in London. ``People in the market expected a tough stance on inflation, but his emphasis on downside risks on the economy might have surprised some investors.''
The euro fell to $1.4476 at 2:47 p.m. in London, from $1.4498 yesterday. It was at 81.25 British pence per pound, from 81.60 pence. The European currency slipped to 156.41 Japanese yen, from 157.01. The dollar was at 108.04 yen, from 108.29.
The bank's rate decision was predicted by all but one of 53 analysts surveyed by Bloomberg. The euro recovered some of its losses after Trichet said the ECB's current stance on interest rates will help deliver price stability.
The Bank of England kept its target rate at 5 percent today, as predicted by all 61 economists surveyed by Bloomberg.
The euro has dropped 5.5 percent versus the dollar since Aug. 7, when Trichet said growth in the countries using the euro will be ``particularly weak'' through the third quarter.
Factory Orders
The ECB kept its key rate on hold that day to curb inflation running at the fastest pace in more than 16 years even amid signs of a deepening economic slowdown. Inflation eased to 3.8 percent last month from 4.1 percent in July, the European Union's statistics office said Aug. 29. The economy contracted by 0.2 percent in the second quarter, the office said yesterday.
German factory orders unexpectedly fell in July, extending their longest sequence of declines and increasing the likelihood that Europe's largest economy will enter a recession, a report showed today. Orders slid 1.7 percent from June, the Economy Ministry in Berlin said. The median of 35 forecasts in a Bloomberg News survey was for a gain of 0.3 percent.
The ECB today lowered its 2008 economic growth forecast to about 1.4 percent from 1.8 percent, and its 2009 prediction to 1.2 percent from 1.5 percent. It raised the inflation forecast for this year and next to about 3.5 percent and 2.6 percent from 3.4 percent and 2.4 percent, respectively.
Forecast Cut
The bank's forecasts for growth and inflation are staff projections and are published as a range around a mid-point.
``Trichet has been talking about the weakening growth picture,'' said Ian Stannard, a London-based currency strategist for BNP Paribas SA. ``The euro is coming under pressure on the back of the deteriorating growth picture.''
The euro may approach the seven-month low of $1.4385 reached yesterday, Stannard said.
``We're looking at upticks in the euro as a chance to sell,'' Mike Moran, a senior currency strategist at Standard Chartered Plc in New York, said in an interview with Bloomberg Television. ``The rest of the world is catching up with a U.S. slowdown.''
The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, was at 78.093. It touched 78.310 this week, the highest level since October, on speculation a decline in oil prices will support economic growth in the world's largest energy consumer.
Payrolls Report
Gains in the dollar may be limited by speculation a deteriorating labor market will restrain consumer spending.
Companies in the U.S. cut an estimated 33,000 jobs in August, a private report based on payroll data showed today. The decrease followed a revised gain of 1,000 for the prior month that was lower than previously estimated, ADP Employer Services said.
U.S. nonfarm payrolls fell by 75,000 jobs in August, more than the previous month's decline of 51,000, according to a Bloomberg survey before the Labor Department report due tomorrow.
Business across most of the U.S. was ``slow'' last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book.
The South Korean won climbed the most of any currency in the world, rising to 1,129.02 per dollar from 1,148.60 yesterday, when it touched a four-year low of 1,159.05. South Korea doesn't face a crisis similar to the 1997 meltdown, Finance Minister Kang Man Soo said yesterday on KBS TV in Seoul. The won is Asia's worst- performing currency this year.
Technical analysis shows the euro may fall to $1.4360 in the next few days, said Masashi Hashimoto, a currency analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed bank.
The common European currency is poised to decline as its average price over the past 200 days is starting to fall, he said. First support at $1.4360 is a 38.2 percent retracement of the euro's rise from its low of $1.1640 on Nov. 15, 2005, to its record high of $1.6038 reached on July 15, according to a series of numbers known as the Fibonacci sequence.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
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Sept. 4 (Bloomberg) -- The euro fell against the dollar after European Central Bank President Jean-Claude Trichet said the region is undergoing an ``episode of weak activity,'' signaling policy makers aren't inclined to lift interest rates soon.
The European single currency dropped for a sixth day as Trichet said downside risks to growth prevail. The ECB kept its main rate at a seven-year high of 4.25 percent today. The central bank cut its own economic growth projection for 2008 and 2009, according to staff forecasts.
Trichet ``sounded a touch more dovish than many in the market expected, and that triggered some sell-offs,'' said Neil Jones, the head of European hedge-fund sales at Mizuho Capital Markets in London. ``People in the market expected a tough stance on inflation, but his emphasis on downside risks on the economy might have surprised some investors.''
The euro fell to $1.4476 at 2:47 p.m. in London, from $1.4498 yesterday. It was at 81.25 British pence per pound, from 81.60 pence. The European currency slipped to 156.41 Japanese yen, from 157.01. The dollar was at 108.04 yen, from 108.29.
The bank's rate decision was predicted by all but one of 53 analysts surveyed by Bloomberg. The euro recovered some of its losses after Trichet said the ECB's current stance on interest rates will help deliver price stability.
The Bank of England kept its target rate at 5 percent today, as predicted by all 61 economists surveyed by Bloomberg.
The euro has dropped 5.5 percent versus the dollar since Aug. 7, when Trichet said growth in the countries using the euro will be ``particularly weak'' through the third quarter.
Factory Orders
The ECB kept its key rate on hold that day to curb inflation running at the fastest pace in more than 16 years even amid signs of a deepening economic slowdown. Inflation eased to 3.8 percent last month from 4.1 percent in July, the European Union's statistics office said Aug. 29. The economy contracted by 0.2 percent in the second quarter, the office said yesterday.
German factory orders unexpectedly fell in July, extending their longest sequence of declines and increasing the likelihood that Europe's largest economy will enter a recession, a report showed today. Orders slid 1.7 percent from June, the Economy Ministry in Berlin said. The median of 35 forecasts in a Bloomberg News survey was for a gain of 0.3 percent.
The ECB today lowered its 2008 economic growth forecast to about 1.4 percent from 1.8 percent, and its 2009 prediction to 1.2 percent from 1.5 percent. It raised the inflation forecast for this year and next to about 3.5 percent and 2.6 percent from 3.4 percent and 2.4 percent, respectively.
Forecast Cut
The bank's forecasts for growth and inflation are staff projections and are published as a range around a mid-point.
``Trichet has been talking about the weakening growth picture,'' said Ian Stannard, a London-based currency strategist for BNP Paribas SA. ``The euro is coming under pressure on the back of the deteriorating growth picture.''
The euro may approach the seven-month low of $1.4385 reached yesterday, Stannard said.
``We're looking at upticks in the euro as a chance to sell,'' Mike Moran, a senior currency strategist at Standard Chartered Plc in New York, said in an interview with Bloomberg Television. ``The rest of the world is catching up with a U.S. slowdown.''
The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, was at 78.093. It touched 78.310 this week, the highest level since October, on speculation a decline in oil prices will support economic growth in the world's largest energy consumer.
Payrolls Report
Gains in the dollar may be limited by speculation a deteriorating labor market will restrain consumer spending.
Companies in the U.S. cut an estimated 33,000 jobs in August, a private report based on payroll data showed today. The decrease followed a revised gain of 1,000 for the prior month that was lower than previously estimated, ADP Employer Services said.
U.S. nonfarm payrolls fell by 75,000 jobs in August, more than the previous month's decline of 51,000, according to a Bloomberg survey before the Labor Department report due tomorrow.
Business across most of the U.S. was ``slow'' last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book.
The South Korean won climbed the most of any currency in the world, rising to 1,129.02 per dollar from 1,148.60 yesterday, when it touched a four-year low of 1,159.05. South Korea doesn't face a crisis similar to the 1997 meltdown, Finance Minister Kang Man Soo said yesterday on KBS TV in Seoul. The won is Asia's worst- performing currency this year.
Technical analysis shows the euro may fall to $1.4360 in the next few days, said Masashi Hashimoto, a currency analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed bank.
The common European currency is poised to decline as its average price over the past 200 days is starting to fall, he said. First support at $1.4360 is a 38.2 percent retracement of the euro's rise from its low of $1.1640 on Nov. 15, 2005, to its record high of $1.6038 reached on July 15, according to a series of numbers known as the Fibonacci sequence.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
Read more...
Copper Gains for Second Day in New York as Crude Oil Advances
By Millie Munshi
Sept. 4 (Bloomberg) -- Copper rose for a second day in New York as a gain in energy costs renewed demand for commodities as a hedge against inflation.
Crude oil rallied as much as 1.1 percent today, the first advance in five days, on concern Hurricane Ike will disrupt supplies. The Reuters/Jefferies CRB Index of 19 commodities has gained 21 percent in the past year, led by oil prices. Copper rose 8.9 percent this year before today.
``Copper is trying to stabilize today,'' said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. ``With crude coming back up, it's going to give the metals some support.''
Copper futures for December delivery gained 1.45 cents, or 0.4 percent, to $3.3265 a pound at 9:06 a.m. on the Comex division of the New York Mercantile Exchange.
Still, slowing global growth has traders concerned that demand for the metal will decline, limiting price gains, McGhee said.
On the London Metal Exchange, copper for delivery in three months rose $40, or 0.5 percent, to $7,390 a metric ton ($3.35 a pound). Before today, the price gained 10 percent this year.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- Copper rose for a second day in New York as a gain in energy costs renewed demand for commodities as a hedge against inflation.
Crude oil rallied as much as 1.1 percent today, the first advance in five days, on concern Hurricane Ike will disrupt supplies. The Reuters/Jefferies CRB Index of 19 commodities has gained 21 percent in the past year, led by oil prices. Copper rose 8.9 percent this year before today.
``Copper is trying to stabilize today,'' said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. ``With crude coming back up, it's going to give the metals some support.''
Copper futures for December delivery gained 1.45 cents, or 0.4 percent, to $3.3265 a pound at 9:06 a.m. on the Comex division of the New York Mercantile Exchange.
Still, slowing global growth has traders concerned that demand for the metal will decline, limiting price gains, McGhee said.
On the London Metal Exchange, copper for delivery in three months rose $40, or 0.5 percent, to $7,390 a metric ton ($3.35 a pound). Before today, the price gained 10 percent this year.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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South African Gold Production Declines 10% on Power Shortage
By Carli Lourens
Sept. 4 (Bloomberg) -- South Africa, the world's second- biggest gold producer, mined 10 percent less metal in the second quarter after power was rationed, the Chamber of Mines said.
Output fell to 1.83 million ounces from 2.04 million a year earlier, the Johannesburg-based body said in a statement today. Production was 9 percent higher than in the first quarter, when power cuts halted most mines for about five days.
Rationing power from January enabled state-run utility Eskom Holdings Ltd. to stop rolling blackouts in shops, homes and offices throughout Africa's biggest economy. Falling production is exacerbating rising power, electricity and labor costs for miners, contending with record inflation of 13 percent.
Gold mines are operating at 90 to 95 percent of normal electricity use, the chamber said today.
Other power consumers ``have to do more on an urgent basis to create some space for the sectors that have been curtailed since January,'' the chamber said.
China is the world's biggest gold producer, according to London-based GFMS Ltd.
To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net
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Sept. 4 (Bloomberg) -- South Africa, the world's second- biggest gold producer, mined 10 percent less metal in the second quarter after power was rationed, the Chamber of Mines said.
Output fell to 1.83 million ounces from 2.04 million a year earlier, the Johannesburg-based body said in a statement today. Production was 9 percent higher than in the first quarter, when power cuts halted most mines for about five days.
Rationing power from January enabled state-run utility Eskom Holdings Ltd. to stop rolling blackouts in shops, homes and offices throughout Africa's biggest economy. Falling production is exacerbating rising power, electricity and labor costs for miners, contending with record inflation of 13 percent.
Gold mines are operating at 90 to 95 percent of normal electricity use, the chamber said today.
Other power consumers ``have to do more on an urgent basis to create some space for the sectors that have been curtailed since January,'' the chamber said.
China is the world's biggest gold producer, according to London-based GFMS Ltd.
To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net
Read more...
Lead Rises on Signs of Battery Demand; Aluminum Halts Decline
By Claudia Carpenter
Sept. 4 (Bloomberg) -- Lead rose the most in a week on signs of purchases by car battery makers before their busiest time of the year. Aluminum advanced, halting the longest drop since 2001.
U.S. vehicle sales were an annual 13.7 million units in August, Autodata Corp. said yesterday, exceeding economist estimates. Declines in lead inventories since June have accelerated, slumping 14 percent in the past two weeks.
Demand is ``reasonably good'' and ``you can see that in the stockpiles, which would hint at restocking by battery manufacturers,'' said Robin Bhar, an analyst at Calyon in London. ``The fourth and first quarters are seasonally the strongest.''
Lead for delivery in three months climbed $44, or 2.3 percent, to $1,990 a metric ton as of 12:33 p.m. on the London Metal Exchange. Prices rose as much as 3.8 percent after the LME reported another 450-ton decline in inventories, to 78,700 tons, the lowest since June 12.
Global demand will probably exceed supply by 20,000 or 30,000 tons this year as Ivernia Inc.'s Magellan mine in Australia halted exports, Bhar said, citing estimates by Calyon. Supplies from the mine next year will probably put the market into a surplus of about 100,000 tons, he said.
Aluminum rose $15 to $2,690 a ton, the first increase since Aug. 21.
Copper jumped $25 to $7,375 a ton. Even with prices heading for a seventh annual gain, copper mine production declined 2.6 percent this year through June, John Tumazos, founder of U.S.- based Very Independent Research LLC, said.
``The biggest surprise to me this year has been mine output has fallen for a number of commodities,'' with nickel output down 6 percent, he said.
Zinc advanced $42 to $1,830, nickel gained $25 to $19,600 and tin climbed $360 to $19,710 a ton.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net
Read more...
Sept. 4 (Bloomberg) -- Lead rose the most in a week on signs of purchases by car battery makers before their busiest time of the year. Aluminum advanced, halting the longest drop since 2001.
U.S. vehicle sales were an annual 13.7 million units in August, Autodata Corp. said yesterday, exceeding economist estimates. Declines in lead inventories since June have accelerated, slumping 14 percent in the past two weeks.
Demand is ``reasonably good'' and ``you can see that in the stockpiles, which would hint at restocking by battery manufacturers,'' said Robin Bhar, an analyst at Calyon in London. ``The fourth and first quarters are seasonally the strongest.''
Lead for delivery in three months climbed $44, or 2.3 percent, to $1,990 a metric ton as of 12:33 p.m. on the London Metal Exchange. Prices rose as much as 3.8 percent after the LME reported another 450-ton decline in inventories, to 78,700 tons, the lowest since June 12.
Global demand will probably exceed supply by 20,000 or 30,000 tons this year as Ivernia Inc.'s Magellan mine in Australia halted exports, Bhar said, citing estimates by Calyon. Supplies from the mine next year will probably put the market into a surplus of about 100,000 tons, he said.
Aluminum rose $15 to $2,690 a ton, the first increase since Aug. 21.
Copper jumped $25 to $7,375 a ton. Even with prices heading for a seventh annual gain, copper mine production declined 2.6 percent this year through June, John Tumazos, founder of U.S.- based Very Independent Research LLC, said.
``The biggest surprise to me this year has been mine output has fallen for a number of commodities,'' with nickel output down 6 percent, he said.
Zinc advanced $42 to $1,830, nickel gained $25 to $19,600 and tin climbed $360 to $19,710 a ton.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net
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