Daily Forex Fundamentals | Written by Crown Forex | Sep 10 08 15:05 GMT |
Lehman Brothers the U.S. fourth biggest securities firm reported today its biggest loss ever, yet the firm announced procedures in order to help restore their capital which provided hope for investors and encouraged them into continuing their carry trades transactions and accordingly helped the U.S. dollar maintain its gains against majors.
The Euro rose today at the start of the Asian session to set a high of 1.4178 but declined after comments from Mr. Trichet that showed that downside risks to growth prevails while upside risks to inflation persist, while the EU Commission said today that the 15-nation economy would probably grow by 1.3% this year down from their previous estimate of 1.7%, the Euro declined as a result to set a low of 1.4074 and now trading around the 1.4130s levels.
The Pound is still weak against the U.S. dollar as the U.K. released today their trade balance which showed the deficit widened beyond expectations, the pound against the U.S. dollar recorded a low of 1.7550 and a high of 1.7676.
The U.S. dollar managed to rise today against the Japanese Yen as investors are indulging carry trade bets so far, the USD/JPY pair recorded a low of 106.58 and rose to set a high of 107.73, yet the pair is still not able to breach the 107.63 resistance level which would open the way back to the 108 levels.
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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Wednesday, September 10, 2008
Juncker Backed by France to Remain Eurogroup Head
By Sandrine Rastello and Simon Kennedy
Sept. 10 (Bloomberg) -- Luxembourg's Jean-Claude Juncker will be nominated by France to represent finance ministers from the 15- nation euro area for a third term, a French official said.
Juncker, 53, who doubles as his nation's premier and finance minister, will be proposed by French Finance Minister Christine Lagarde when European policy makers convene on Sept. 12 in Nice, France, an official from the French Finance Ministry told reporters in Paris today on condition he not be identified. France currently holds the rotating presidency of the European Union.
Juncker has served two terms as head of the so-called eurogroup since 2005, initially using the post to demand the European Central Bank and its president, Jean-Claude Trichet, do more to boost economic growth before more recently backing the ECB's inflation fight as consumer prices jumped by the most in 16 years.
``If all 15 finance ministers agree to extend my term, I won't say no,'' Juncker told the Luxemburger Wort newspaper on Sept. 3. It ``isn't a personal decision.''
Finance ministers from the euro region convene almost every month and their chairman represents them at international meetings, such as those of the Group of Seven, and at press conferences. He also is entitled to attend meetings of the ECB's governing council, with Juncker last doing so in July.
Longest-Serving Leader
Juncker is Europe's longest-serving leader and his new term may come as a personal disappointment after he emerged as a candidate to become the first president of the EU. That position would have been created from Jan. 1, 2009, under the Lisbon Treaty, until it was derailed by Irish voters in a June referendum. France may suggest Juncker serves less than a two-year term as chair of the eurogroup and that the position will cease to exist if the treaty is eventually passed, the official said.
The gatherings of the eurogroup have been a source of tension ever since the French called for EU finance ministers to act as a ``counterweight'' to the ECB in the 1990s. Germany, keen to preserve the ECB's independence, agreed to set up the panel as long as it remained informal.
At first, the job of leading the panel rotated every six months. Juncker, like Trichet one of the negotiators of the 1992 Maastricht Treaty that paved the way to the euro, took over as the first two-year chairman in 2005 to give the panel a stronger voice.
ECB Criticism
He first used the bully pulpit to criticize the ECB, urging it to have a closer relationship with governments and to cut interest rates to spur growth. He was usually rebuffed. In November 2005 he warned a ``fragile economic recovery in the EU mustn't be threatened by un-thought-out interest-rate steps,'' only for the ECB to raise rates days later for the first time since October 2000.
Trichet also ignored Juncker's push for closer links between politicians and the independent central bank and in June 2006 claimed the mantle of ``Mr. Euro'' for himself, noting it was his signature on the region's currency.
More recently, surging inflation persuaded Juncker to increasingly back the ECB even as it raised its benchmark rate to a seven-year high of 4.25 percent in July amid signs of slowing economic growth.
After that shift, Juncker said the Frankfurt-based bank ``was right to stress'' the importance of anchoring inflation expectations.
`Outstanding Job'
``Let's avoid putting the ECB on trial,'' he said in February. ``From the start it has done an outstanding job, also in the way it dealt with the market volatility during the summer of 2007.''
In May he called inflation a ``major concern'' because ``ordinary people are suffering more and more from increases in oil prices.'' A month earlier he noted ``those living on 300, 400, 500, 600, 700 euros can't live with runaway inflation.''
Trichet has welcomed the support, acknowledging in April that he felt less ``isolated'' in his effort to tame prices.
Still, Juncker has continued to highlighted the weakness in the European economy, telling the European Parliament's economic and monetary affairs committee today that there is a ``risk of a technical recession in Europe'' in which the economy contracts for two straight quarters.
``Economic activity has slowed down considerably,'' he said in Brussels.
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net.
Read more...
Sept. 10 (Bloomberg) -- Luxembourg's Jean-Claude Juncker will be nominated by France to represent finance ministers from the 15- nation euro area for a third term, a French official said.
Juncker, 53, who doubles as his nation's premier and finance minister, will be proposed by French Finance Minister Christine Lagarde when European policy makers convene on Sept. 12 in Nice, France, an official from the French Finance Ministry told reporters in Paris today on condition he not be identified. France currently holds the rotating presidency of the European Union.
Juncker has served two terms as head of the so-called eurogroup since 2005, initially using the post to demand the European Central Bank and its president, Jean-Claude Trichet, do more to boost economic growth before more recently backing the ECB's inflation fight as consumer prices jumped by the most in 16 years.
``If all 15 finance ministers agree to extend my term, I won't say no,'' Juncker told the Luxemburger Wort newspaper on Sept. 3. It ``isn't a personal decision.''
Finance ministers from the euro region convene almost every month and their chairman represents them at international meetings, such as those of the Group of Seven, and at press conferences. He also is entitled to attend meetings of the ECB's governing council, with Juncker last doing so in July.
Longest-Serving Leader
Juncker is Europe's longest-serving leader and his new term may come as a personal disappointment after he emerged as a candidate to become the first president of the EU. That position would have been created from Jan. 1, 2009, under the Lisbon Treaty, until it was derailed by Irish voters in a June referendum. France may suggest Juncker serves less than a two-year term as chair of the eurogroup and that the position will cease to exist if the treaty is eventually passed, the official said.
The gatherings of the eurogroup have been a source of tension ever since the French called for EU finance ministers to act as a ``counterweight'' to the ECB in the 1990s. Germany, keen to preserve the ECB's independence, agreed to set up the panel as long as it remained informal.
At first, the job of leading the panel rotated every six months. Juncker, like Trichet one of the negotiators of the 1992 Maastricht Treaty that paved the way to the euro, took over as the first two-year chairman in 2005 to give the panel a stronger voice.
ECB Criticism
He first used the bully pulpit to criticize the ECB, urging it to have a closer relationship with governments and to cut interest rates to spur growth. He was usually rebuffed. In November 2005 he warned a ``fragile economic recovery in the EU mustn't be threatened by un-thought-out interest-rate steps,'' only for the ECB to raise rates days later for the first time since October 2000.
Trichet also ignored Juncker's push for closer links between politicians and the independent central bank and in June 2006 claimed the mantle of ``Mr. Euro'' for himself, noting it was his signature on the region's currency.
More recently, surging inflation persuaded Juncker to increasingly back the ECB even as it raised its benchmark rate to a seven-year high of 4.25 percent in July amid signs of slowing economic growth.
After that shift, Juncker said the Frankfurt-based bank ``was right to stress'' the importance of anchoring inflation expectations.
`Outstanding Job'
``Let's avoid putting the ECB on trial,'' he said in February. ``From the start it has done an outstanding job, also in the way it dealt with the market volatility during the summer of 2007.''
In May he called inflation a ``major concern'' because ``ordinary people are suffering more and more from increases in oil prices.'' A month earlier he noted ``those living on 300, 400, 500, 600, 700 euros can't live with runaway inflation.''
Trichet has welcomed the support, acknowledging in April that he felt less ``isolated'' in his effort to tame prices.
Still, Juncker has continued to highlighted the weakness in the European economy, telling the European Parliament's economic and monetary affairs committee today that there is a ``risk of a technical recession in Europe'' in which the economy contracts for two straight quarters.
``Economic activity has slowed down considerably,'' he said in Brussels.
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net.
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BBA's Knight Says Brown Shouldn't Guarantee Mortgage Securities
By John Fraher and Nigel Stevenson
Sept. 10 (Bloomberg) -- British banks' top lobbyist said Prime Minister Gordon Brown shouldn't guarantee mortgage-backed securities to help the country's housing market, lending support to Bank of England Governor Mervyn King.
``It's the money market we should be looking at, not that sort of government guarantee,'' Angela Knight, chief executive officer of the British Bankers' Association, said in an interview on Bloomberg Television in London today. ``I don't think it's for the government to intervene. Once you start, where do you stop?''
Brown and the Bank of England are struggling to unfreeze the U.K.'s mortgage market as the yearlong credit rout exacerbates the housing slump. The government is considering proposals that include guaranteeing securities linked to home loans. At the same time, the central bank must decide what to do when its own program to help money markets expires in October.
Chancellor of the Exchequer Alistair Darling will decide in coming weeks what steps, if any, the government should take when former HBOS Plc Chief Executive Officer James Crosby submits his final proposals. Brown's spokesman said this week that the Treasury is still waiting for the recommendations.
While Brown and Darling have given no indication of their own preferences, the worst house-price slump since the early 1990s and the ruling Labour Party's falling popularity are increasing pressure on them to act.
Mortgage Squeeze
Steps taken to date have so far failed to free up the mortgage market. Banks are holding onto their cash even after the Bank of England in April started a program allowing them to swap securities damaged by the credit rout for government bonds. That's making it harder for potential buyers to get loans and mortgage approvals fell to the lowest since at least 1999 in July.
Measures announced last week to cut taxes on home purchases and help first-time buyers have also been dismissed by estate agents as well as by former policy makers such as Willem Buiter, who said they have ``no macroeconomic significance.''
Crosby's initial report in July said the government could consider guaranteeing mortgage-backed securities or the Bank of England could extend its so-called Special Liquidity Scheme.
At the same time, Crosby said that a guarantee could create moral hazard. King said last month ``the last thing we want to do is to tell lenders it doesn't matter if they monitor the riskiness, the government will guarantee it.''
U.S. Treasury Secretary Henry Paulson was forced on Sept. 7 to seize control of Fannie Mae and Freddie Mac after the housing slump threatened to topple the companies making up almost half of the U.S. home-loan market.
Knight said the Bank of England should instead consider extending its Special Liquidity Scheme which allows banks to swap securities damaged by the credit rout for government bonds.
While the program, which expires in October, may look different in a future form ``we think that is the way to go,'' said Knight. ``That is enhancing what a central bank does. It's not government intervention.''
Buiter, who spoke on the same show as Knight, agreed that the government shouldn't openly back mortgage-related securities. The central bank may nevertheless extend the terms of its Special Liquidity Scheme to accept bonds issued this year, he said.
To contact the reporters on this story: John Fraher in London at jfraher@bloomberg.net; Nigel Stevenson in London at nstevenson@bloomberg.net.
Read more...
Sept. 10 (Bloomberg) -- British banks' top lobbyist said Prime Minister Gordon Brown shouldn't guarantee mortgage-backed securities to help the country's housing market, lending support to Bank of England Governor Mervyn King.
``It's the money market we should be looking at, not that sort of government guarantee,'' Angela Knight, chief executive officer of the British Bankers' Association, said in an interview on Bloomberg Television in London today. ``I don't think it's for the government to intervene. Once you start, where do you stop?''
Brown and the Bank of England are struggling to unfreeze the U.K.'s mortgage market as the yearlong credit rout exacerbates the housing slump. The government is considering proposals that include guaranteeing securities linked to home loans. At the same time, the central bank must decide what to do when its own program to help money markets expires in October.
Chancellor of the Exchequer Alistair Darling will decide in coming weeks what steps, if any, the government should take when former HBOS Plc Chief Executive Officer James Crosby submits his final proposals. Brown's spokesman said this week that the Treasury is still waiting for the recommendations.
While Brown and Darling have given no indication of their own preferences, the worst house-price slump since the early 1990s and the ruling Labour Party's falling popularity are increasing pressure on them to act.
Mortgage Squeeze
Steps taken to date have so far failed to free up the mortgage market. Banks are holding onto their cash even after the Bank of England in April started a program allowing them to swap securities damaged by the credit rout for government bonds. That's making it harder for potential buyers to get loans and mortgage approvals fell to the lowest since at least 1999 in July.
Measures announced last week to cut taxes on home purchases and help first-time buyers have also been dismissed by estate agents as well as by former policy makers such as Willem Buiter, who said they have ``no macroeconomic significance.''
Crosby's initial report in July said the government could consider guaranteeing mortgage-backed securities or the Bank of England could extend its so-called Special Liquidity Scheme.
At the same time, Crosby said that a guarantee could create moral hazard. King said last month ``the last thing we want to do is to tell lenders it doesn't matter if they monitor the riskiness, the government will guarantee it.''
U.S. Treasury Secretary Henry Paulson was forced on Sept. 7 to seize control of Fannie Mae and Freddie Mac after the housing slump threatened to topple the companies making up almost half of the U.S. home-loan market.
Knight said the Bank of England should instead consider extending its Special Liquidity Scheme which allows banks to swap securities damaged by the credit rout for government bonds.
While the program, which expires in October, may look different in a future form ``we think that is the way to go,'' said Knight. ``That is enhancing what a central bank does. It's not government intervention.''
Buiter, who spoke on the same show as Knight, agreed that the government shouldn't openly back mortgage-related securities. The central bank may nevertheless extend the terms of its Special Liquidity Scheme to accept bonds issued this year, he said.
To contact the reporters on this story: John Fraher in London at jfraher@bloomberg.net; Nigel Stevenson in London at nstevenson@bloomberg.net.
Read more...
Paulson Sends Message to Freddie, Fannie Employees: Don't Leave
By Dawn Kopecki and Bryan Keogh
Sept. 10 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson is meeting with employees of Fannie Mae and Freddie Mac to ward off a tide of defections after the government seized control of the beleaguered finance companies.
Paulson spoke in a town hall meeting at Freddie's McLean, Virginia, headquarters yesterday and will talk to Fannie workers in Washington today, Treasury spokeswoman Jennifer Zuccarelli said. Shares of the companies have declined more than 97 percent this year and are trading at less than $1.
``Maintaining and keeping that talent base is going to be a challenge for them,'' said Moshe Orenbuch, an analyst at Credit Suisse Group in New York. ``That's something they're going to be wrestling with much sooner rather than later in terms of retaining and attracting talent.''
After replacing the two chief executive officers of Fannie and Freddie, Paulson and the Federal Finance Housing Agency now are turning their attention to the 10,000 people left behind. FHFA, the regulator that assumed control of the companies, hired a consulting firm to work with the human resource teams on a new employee-retention program, FHFA Director James Lockhart said in an interview.
``Employee retention is very important,'' Lockhart said. ``We still need people to run the companies.''
Lockhart ousted Fannie CEO Daniel Mudd and inserted Herb Allison, former CEO of TIAA-CREF, and replaced Freddie's Richard Syron with David Moffett, an executive at the Carlyle Group. Paulson shared the stage with Moffett yesterday and will stand beside Allison today.
`Important Work'
At the meetings, Paulson ``wanted to let them know how important these companies are to our markets and to getting through the housing correction,'' Zuccarelli said. ``He also encouraged them to continue their important work.''
Government-chartered Fannie and Freddie own or guarantee almost half the $12 trillion of U.S. residential mortgages. Fannie dates back to 1938, when it was created as part of Franklin D. Roosevelt's New Deal. Freddie was formed in 1970 to compete with Fannie.
The Treasury and FHFA took control of Fannie and Freddie last weekend after a team of federal examiners found their capital reserves were too thin to weather the worst housing market since the Great Depression.
`Difficult Times'
Paulson and the FHFA eliminated the companies' common and preferred dividends and the Treasury said it would buy as much as $200 billion of preferred stock in the companies to bolster their capital as needed. The decision sent Fannie shares down 90 percent to 73 cents the next day. They rose to 99 cents yesterday. Freddie slumped 82 percent to 88 cents and was little changed yesterday.
The declines have left the stock options and restricted share grants that both companies used to reward employees virtually worthless. FHFA's Lockhart said the agency is seeking new incentives to attract and retain talent.
After seizing the companies, the FHFA sent in a team of about 60 examiners to shadow top executives, including Allison and Moffett.
``These are difficult times,'' Allison, 65, told hundreds of Fannie's 5,000 employees gathered in the company's Great Hall at its colonial-style Washington campus on his first day as CEO Sept. 8, according to employees who attended the meeting and declined to be identified because they weren't authorized to speak.
Allison was CEO of TIAA-CREF until April and before that was President of Merrill Lynch & Co. Moffett, 56 was chief financial officer of U.S. Bancorp in Minneapolis from 2001 until early 2007 before joining Carlyle, the Washington-based private- equity firm.
Seeking Sneakers
A chief concern among Fannie employees on Sept. 8 was whether the company would still sponsor its Help the Homeless Walkathon, an annual event scheduled for Nov. 22 and anticipated to attract 12,000 participants in Washington, according to its Web site.
Allison, who lives in New York and said he has been living out of a suitcase the past few weeks, assured the assembly the event would go ahead as planned, and that he would attend.
``I may have to get someone to send me my sneakers,'' he said.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Read more...
Sept. 10 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson is meeting with employees of Fannie Mae and Freddie Mac to ward off a tide of defections after the government seized control of the beleaguered finance companies.
Paulson spoke in a town hall meeting at Freddie's McLean, Virginia, headquarters yesterday and will talk to Fannie workers in Washington today, Treasury spokeswoman Jennifer Zuccarelli said. Shares of the companies have declined more than 97 percent this year and are trading at less than $1.
``Maintaining and keeping that talent base is going to be a challenge for them,'' said Moshe Orenbuch, an analyst at Credit Suisse Group in New York. ``That's something they're going to be wrestling with much sooner rather than later in terms of retaining and attracting talent.''
After replacing the two chief executive officers of Fannie and Freddie, Paulson and the Federal Finance Housing Agency now are turning their attention to the 10,000 people left behind. FHFA, the regulator that assumed control of the companies, hired a consulting firm to work with the human resource teams on a new employee-retention program, FHFA Director James Lockhart said in an interview.
``Employee retention is very important,'' Lockhart said. ``We still need people to run the companies.''
Lockhart ousted Fannie CEO Daniel Mudd and inserted Herb Allison, former CEO of TIAA-CREF, and replaced Freddie's Richard Syron with David Moffett, an executive at the Carlyle Group. Paulson shared the stage with Moffett yesterday and will stand beside Allison today.
`Important Work'
At the meetings, Paulson ``wanted to let them know how important these companies are to our markets and to getting through the housing correction,'' Zuccarelli said. ``He also encouraged them to continue their important work.''
Government-chartered Fannie and Freddie own or guarantee almost half the $12 trillion of U.S. residential mortgages. Fannie dates back to 1938, when it was created as part of Franklin D. Roosevelt's New Deal. Freddie was formed in 1970 to compete with Fannie.
The Treasury and FHFA took control of Fannie and Freddie last weekend after a team of federal examiners found their capital reserves were too thin to weather the worst housing market since the Great Depression.
`Difficult Times'
Paulson and the FHFA eliminated the companies' common and preferred dividends and the Treasury said it would buy as much as $200 billion of preferred stock in the companies to bolster their capital as needed. The decision sent Fannie shares down 90 percent to 73 cents the next day. They rose to 99 cents yesterday. Freddie slumped 82 percent to 88 cents and was little changed yesterday.
The declines have left the stock options and restricted share grants that both companies used to reward employees virtually worthless. FHFA's Lockhart said the agency is seeking new incentives to attract and retain talent.
After seizing the companies, the FHFA sent in a team of about 60 examiners to shadow top executives, including Allison and Moffett.
``These are difficult times,'' Allison, 65, told hundreds of Fannie's 5,000 employees gathered in the company's Great Hall at its colonial-style Washington campus on his first day as CEO Sept. 8, according to employees who attended the meeting and declined to be identified because they weren't authorized to speak.
Allison was CEO of TIAA-CREF until April and before that was President of Merrill Lynch & Co. Moffett, 56 was chief financial officer of U.S. Bancorp in Minneapolis from 2001 until early 2007 before joining Carlyle, the Washington-based private- equity firm.
Seeking Sneakers
A chief concern among Fannie employees on Sept. 8 was whether the company would still sponsor its Help the Homeless Walkathon, an annual event scheduled for Nov. 22 and anticipated to attract 12,000 participants in Washington, according to its Web site.
Allison, who lives in New York and said he has been living out of a suitcase the past few weeks, assured the assembly the event would go ahead as planned, and that he would attend.
``I may have to get someone to send me my sneakers,'' he said.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
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Fed Loans May Give Lehman Breathing Room Bear Lacked
By Scott Lanman and Steve Matthews
Sept. 10 (Bloomberg) -- Access to Federal Reserve loans means Lehman Brothers Holdings Inc., which has plunged this week on concern about its capital, may have breathing room that Bear Stearns Cos. lacked before its abrupt collapse.
The program instituted in the aftermath of the Bear Stearns debacle, the Primary Dealer Credit Facility, could be used for funding while officials, regulators and executives find alternative sources of cash, Fed watchers said.
``The PDCF could be used to keep Lehman operating until a broader solution was found,'' said Brian Sack, a former Fed research manager who's now senior economist at Macroeconomic Advisers LLC in Washington. ``The challenge is figuring out what the broader solution is.''
Lehman can borrow overnight from the central bank, with escalating costs if it keeps using the program. Because it's a stopgap, speculation may mount that the government will again intervene to prevent a large financial company from failing, after the Bear Stearns rescue and takeovers of Fannie Mae and Freddie Mac.
``Given what was done with Freddie and Fannie and Bear Stearns, it's hard to distinguish why Lehman is not too big to fail as well,'' said Robert Eisenbeis, chief monetary economist at Cumberland Advisors, and a former research director at the Atlanta Fed. ``My guess is that everyone will blink again and Lehman too will be saved. We are in for a rough ride.''
Talking to Officials
The Fed is getting updates on Lehman's capital and leverage positions from its examiners, who have been reviewing the company's finances and those of other major investment banks since the formation of the PDCF in March. Treasury officials are ``in regular contact with market participants,'' spokeswoman Jennifer Zuccarelli said.
Lehman today reported a $3.9 billion third-quarter loss and said it plans to sell a majority stake in its investment- management unit. Company officials didn't mention any use of the PDCF in a conference call with analysts today.
Fed spokeswoman Michelle Smith in Washington declined to comment yesterday.
New York-based Lehman, the fourth-biggest U.S. securities firm, tumbled 45 percent yesterday in New York trading after talks about a capital infusion from Korea Development Bank ended. The shares, which had lost 88 percent this year, rose 50 cents to $8.29 at 9:55 a.m. today.
The cost of buying protection against default on Lehman debt surged 1.5 percentage points to 4.75 percentage points, credit-default swaps showed, according to broker Phoenix Partners Group.
No Repeat
Fed Chairman Ben S. Bernanke said he wanted to avoid an episode similar to the Bear Stearns rescue in March, when the central bank agreed to lend $29 billion to secure the investment bank's takeover by JPMorgan Chase & Co. That was part of an agreement crafted in part by New York Fed President Timothy Geithner, after consultations with Treasury Secretary Henry Paulson.
``The financing we did for Bear Stearns is a one-time event,'' Bernanke said in April. ``It's never happened before and I hope it never happens again.''
The PDCF offers the 19 primary dealers that trade Treasuries with the New York Fed access to direct loans at the same rate as commercial banks, now 2.25 percent. Dealers can submit collateral including Treasuries and asset-backed debt, corporate bonds and municipal bonds with investment grades.
For seven of the past nine weeks there has been no borrowing from the PDCF, with average weekly balances of $3 million and $9 million for the other two. The Fed releases its weekly borrowing statistics each Thursday at 4:30 p.m. New York time.
In July, the Fed extended the PDCF through Jan. 30 because of ``continued fragile circumstances in financial markets.'' It was originally set to end as soon as this month.
`Help a Lot'
The PDCF ``should help a lot'' for Lehman, former Fed Governor Lyle Gramley said. If Bear Stearns had had access to the funding, it's ``conceivable'' the firm might not have been pushed into its acquisition by JPMorgan, said Gramley, now senior economic adviser at Stanford Group Co. in Washington.
Both Bear Stearns and Lehman suffered from the collapse of the mortgage-backed securities market in the wake of a record surge of delinquencies on U.S. home loans. The crisis then spread to other markets, including for some types of student- loan and municipal debt.
Lehman is trying to raise capital and dump devalued real- estate assets after $8.2 billion in writedowns and credit losses in the past year.
For the Fed, the Bear Stearns and PDCF lending marked the first extension of credit to nonbanks since the Great Depression, using emergency authority to act in ``unusual and exigent circumstances.''
Fed Discontent
Any Fed rescue of Lehman may deepen criticism among some current and former central bankers about the danger of moral hazard -- where firms take on more risk in anticipation of government aid if their bets go wrong. Richmond Fed President Jeffrey Lacker and his Philadelphia counterpart Charles Plosser both raised those concerns in June.
``The Fed has shown a willingness to lend liberally,'' said Gerald O'Driscoll, a former vice president of the Dallas Fed and now a scholar at the Cato Institute in Washington. The Bear Stearns lending ``left markets unsure what the Fed would do in the future. Each time you do it, you reinforce the view that it will be done again,'' he said.
To contact the reporters on this story: Scott Lanman in Washington at slanman@bloomberg.net; Steve Matthews in Atlanta at smatthews@bloomberg.net.
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EU Cuts Growth Forecasts, Sees Recession in Germany
By Fergal O'Brien
Sept. 10 (Bloomberg) -- The European Commission cut its growth outlook for the euro area for the rest of this year and predicted a recession for Germany, the region's largest economy.
The 15-nation euro region's economy will probably stagnate this quarter after shrinking in the previous three months for the first time since the euro was introduced in 1999, the Brussels-based commission said today. The commission lowered its full-year growth forecast to 1.3 percent, from 1.7 percent earlier, and signaled the 2009 outlook may also be cut.
With recessions forecast for Germany and Spain, Jean-Claude Juncker, who leads a group of euro-area finance ministers, today said there is a ``risk of a technical recession'' for the euro area as a whole. The region's manufacturing and services industries contracted in August and confidence fell to the lowest in more than five years. The EU also forecast a recession in the U.K., which is outside the euro area.
``We expect economic activity to be essentially stagnant across the region in the second half of 2008,'' said Howard Archer, chief European economist at Global Insight in London. He sees growth slowing to 0.8 percent next year from 1.2 percent this year.
The EU forecast the euro-area economy will expand 0.1 percent in the final three months of 2008 after an estimate of no growth this quarter. Both projections are down from earlier forecasts of 0.4 percent growth for both periods. The German economy will probably shrink 0.2 percent in the current quarter after contracting 0.5 percent in the previous three months, and Spain's economy will also shrink in the third and fourth quarters, according to today's projections.
`Contracting Slightly'
Outside the euro area, the commission sees U.K. output ``contracting slightly'' in the second half of the year.
``Economic activity has slowed down considerably'' in recent months, Juncker, who is Luxembourg's premier and finance minister, said in Brussels today. A technical recession is defined as two consecutive quarters of economic contraction.
While the commission raised its inflation forecast for 2008 to 3.6 percent from 3.1 percent, it said consumer-price growth ``may be at a turning point'' after oil prices fell from a record and as past increases in food and energy costs ``gradually fade in the coming months.'' The recent declines in commodity prices and the euro also ``have provided some relief,'' Almunia said.
Oil Prices
Since reaching a record $1.6038 against the dollar on July 15, the currency has dropped around 12 percent. Oil prices have fallen almost 30 percent in the last two months to $103.84 a barrel. The euro slipped 0.1 percent to $1.4115 as of 1:44 p.m. in London. Bonds fell, with the yield on the 10-year bund, Europe's benchmark government security, increasing 5 basis points to 4.09 percent.
Still, the euro's advance over the past year and the surge in energy prices have already taken a toll. Paris-based L'Oreal SA, the world's largest cosmetics maker, on Aug. 29 reported the slowest profit growth in three years. Stora Enso Oyj and UPM- Kymmene Oyj, Europe's largest papermakers, today said they will close unprofitable production lines as raw-material and energy costs have outpaced their ability to raise prices.
Banks including Amsterdam- and Brussels-based Fortis and Irish Life & Permanent Plc of Ireland have suffered due to writedowns, losses or increased funding costs related to the credit crisis. Credit Agricole SA, France's third-largest bank, today said it will eliminate about 500 jobs at its Calyon corporate- and investment-banking unit to rein in costs following three consecutive quarterly losses.
`Marked Deceleration'
``The continuation of the turmoil in the financial markets one year on, the near doubling of energy prices over the same period and the correction in some housing markets have had an impact on the economy,'' Economic and Monetary Affairs Commissioner Joaquin Almunia said in today's report.
The commission said it expects a ``marked deceleration'' in most Asian economies and predicts the effect of a U.S. tax rebate that boosted second-quarter growth there will fade.
The ECB last week lowered its euro-region growth outlook and raised its inflation projections for this year and next. ECB President Jean-Claude Trichet said today in Brussels that inflation ``is likely to remain high for quite some time, moderating only gradually during the course of 2009.''
Some companies have tried to offset falling European and U.S. orders by expanding in Asia and oil-exporting countries. Volkswagen AG, Europe's biggest carmaker, on Sept. 8 said emerging markets will provide the fastest growth in worldwide sales over the next 10 years, led by economic expansion in Asia and Russia.
``The deceleration of growth will gain momentum in the second part of the year,'' Almunia said. ``The way the European economies will start'' next year ``will not be very good.''
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net
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U.K. Economy Contracts, Lurches Toward a Recession
By Brian Swint
Sept. 10 (Bloomberg) -- The U.K. economy is contracting for the first time in at least a decade and will go through a recession this year, two reports showed today.
Gross domestic product dropped 0.2 percent in the June to August period and fell 0.1 percent in the three months through July, the National Institute for Economic and Social Research said in an e-mailed statement. The European Commission, the European Union's executive arm, predicted that the U.K. economy will shrink in the second half for two consecutive quarters.
The recession would be Britain's first since 1991 and comes as house prices plummet and financial services reel from the global credit squeeze that has already cost more than $500 billion in writedowns and losses. The Bank of England hasn't cut interest rates since April on concerns about inflation, which reached more than double the 2 percent target in July.
``Growth is weaker than we thought just a month ago,'' Martin Weale, director of Niesr, said in a Bloomberg Television interview. ``It's not practical for the Bank of England to cut interest rates with inflation so far above its target already. But once it turns down, I could see them able to cut.''
U.K. growth stalled in the second quarter, ending the country's longest stretch of expansion in more than a century, the statistics office said Aug. 22. Niesr's May-to-July estimate, revised today, was the first decline since the group started its calculation in April 1996.
The Brussels-based commission predicted today that the U.K. economy will contract 0.2 percent in the third and fourth quarters. It lowered its forecast for full-year growth to 1.1 percent from a 1.7 percent estimate in April.
More than half of the 51 economists in a Bloomberg News survey from Aug. 29 said the benchmark interest rate will fall by a quarter-point to 4.75 percent from the current 5 percent by the end of the year.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
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BP Shutting Gulf of Mexico Output, Evacuating Offshore Crews
By Joe Carroll
Sept. 10 (Bloomberg) -- BP Plc, Europe's second-largest oil company, began shutting production from oil and natural-gas platforms in the Gulf of Mexico today in anticipation of Hurricane Ike.
The London-based company plans to finish evacuating all offshore workers in the region today, BP said in a recorded telephone message.
As of 8 a.m. Miami time, Ike was a Category 1 hurricane, the weakest on the five-tier Saffir-Simpson scale, the U.S. National Hurricane Center said. The storm is expected to strike the coast of south-central Texas on Sept. 13.
The Hague-based Royal Dutch Shell Plc is Europe's largest oil company.
To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net
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Sept. 10 (Bloomberg) -- BP Plc, Europe's second-largest oil company, began shutting production from oil and natural-gas platforms in the Gulf of Mexico today in anticipation of Hurricane Ike.
The London-based company plans to finish evacuating all offshore workers in the region today, BP said in a recorded telephone message.
As of 8 a.m. Miami time, Ike was a Category 1 hurricane, the weakest on the five-tier Saffir-Simpson scale, the U.S. National Hurricane Center said. The storm is expected to strike the coast of south-central Texas on Sept. 13.
The Hague-based Royal Dutch Shell Plc is Europe's largest oil company.
To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net
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Bandar Abbas Refinery `Intact' After Iran Quake, Official Says
By Ladane Nasseri
Sept. 10 (Bloomberg) -- The Bandar Abbas oil refinery wasn't damaged by an earthquake with a magnitude of 6.1 which struck Iran's southern Hormozgan province, an official said.
``There no problem, the refinery is intact,'' Habib Bejeli, director of operations at the Bandar Abbas refinery, said in a phone interview today.
The earthquake took place at 3:30 p.m. local time and was centered 46 kilometers (29 miles) west of the Iranian city of Bandar Abbas, state-run Fars news agency said.
To contact the reporter on this story: Ladane Nasseri in Tehran at lnasseri@bloomberg.net.
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Sept. 10 (Bloomberg) -- The Bandar Abbas oil refinery wasn't damaged by an earthquake with a magnitude of 6.1 which struck Iran's southern Hormozgan province, an official said.
``There no problem, the refinery is intact,'' Habib Bejeli, director of operations at the Bandar Abbas refinery, said in a phone interview today.
The earthquake took place at 3:30 p.m. local time and was centered 46 kilometers (29 miles) west of the Iranian city of Bandar Abbas, state-run Fars news agency said.
To contact the reporter on this story: Ladane Nasseri in Tehran at lnasseri@bloomberg.net.
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Natural Gas Falls as Ike to Move South of Gulf Production Areas
By Reg Curren
Sept. 10 (Bloomberg) -- Natural gas futures fell as Hurricane Ike moved into the Gulf of Mexico on a course that will likely take it south of offshore production platforms.
``There's really not much to drive gas right now,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``It doesn't look like Ike is going to be as bad as people thought.''
Ike's projected path takes it to south Texas, though its possible strike area envelopes most of the state's coast and a small portion of Mexico, the National Hurricane Center said. About 65 percent of offshore gas production is still shut because of Hurricane Gustav, which moved through the region last week.
Natural gas for October delivery dropped 5.9 cents, or 0.8 percent, to $7.476 per million British thermal units at 9:23 a.m. on the New York Mercantile Exchange. The heating and industrial fuel has declined 45 percent from a 30-month closing high of $13.577 on July 3.
``Prices are under pressure as Ike's path moves away from the energy area,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.
Anadarko Petroleum Corp. said yesterday it planned to have all of its workers removed from Gulf platforms by today. Royal Dutch Shell Plc expected to evacuate about 240 workers by tomorrow. The Gulf offshore region produces about 14 percent of U.S. gas supplies.
Workers were removed from 167 production platforms, or about 24 percent of manned operations in the Gulf, the Minerals Management Service said yesterday.
Ike was a Category 1 storm on the 5 step Saffir-Simpson scale of intensity, with sustained winds of 85 miles (140 kilometers) per hour, the Miami-based Hurricane Center said in an 8 a.m. bulletin. Ike was about 430 miles southeast of the mouth of the Mississippi River and may become a major storm as it reaches the central Gulf.
Hurricanes Katrina and Rita damaged offshore production and pipelines in August and September 2005, sending gas futures to a record $15.78 per million Btu the following December.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
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Sept. 10 (Bloomberg) -- Natural gas futures fell as Hurricane Ike moved into the Gulf of Mexico on a course that will likely take it south of offshore production platforms.
``There's really not much to drive gas right now,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``It doesn't look like Ike is going to be as bad as people thought.''
Ike's projected path takes it to south Texas, though its possible strike area envelopes most of the state's coast and a small portion of Mexico, the National Hurricane Center said. About 65 percent of offshore gas production is still shut because of Hurricane Gustav, which moved through the region last week.
Natural gas for October delivery dropped 5.9 cents, or 0.8 percent, to $7.476 per million British thermal units at 9:23 a.m. on the New York Mercantile Exchange. The heating and industrial fuel has declined 45 percent from a 30-month closing high of $13.577 on July 3.
``Prices are under pressure as Ike's path moves away from the energy area,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.
Anadarko Petroleum Corp. said yesterday it planned to have all of its workers removed from Gulf platforms by today. Royal Dutch Shell Plc expected to evacuate about 240 workers by tomorrow. The Gulf offshore region produces about 14 percent of U.S. gas supplies.
Workers were removed from 167 production platforms, or about 24 percent of manned operations in the Gulf, the Minerals Management Service said yesterday.
Ike was a Category 1 storm on the 5 step Saffir-Simpson scale of intensity, with sustained winds of 85 miles (140 kilometers) per hour, the Miami-based Hurricane Center said in an 8 a.m. bulletin. Ike was about 430 miles southeast of the mouth of the Mississippi River and may become a major storm as it reaches the central Gulf.
Hurricanes Katrina and Rita damaged offshore production and pipelines in August and September 2005, sending gas futures to a record $15.78 per million Btu the following December.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
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Total Expects Output Growth From African Fields, LNG
By Tara Patel
Sept. 10 (Bloomberg) -- Total SA, Europe's third-largest oil company, said production growth over the next decade will come from deep offshore fields in Africa, heavy-oil ventures in Canada and liquefied natural-gas projects.
The projection is based on crude prices of $100 a barrel, the company said today in a slide presentation on its Web site. Paris-based Total didn't give a forecast for average output growth from 2006 through 2010, which was targeted at 4 percent a year ago assuming oil prices at $60 a barrel.
``Total is reassuring on growth prospects,'' said Chicuong Dang, an analyst at Richelieu Finance in Paris, which has about $6.2 billion under management including Total stock. ``They seem to have good visibility on projects with oil at $100 a barrel,'' Dang said today by telephone.
Total rose as much as 1.5 percent to 44.84 euros in Paris trading and was at 44.37 euros as of 12:23 p.m. local time. The shares have lost about 22 percent since the beginning of the year.
Chief Executive Officer Christophe de Margerie is relying on projects in Angola and Canada's oil sands to raise output as Kazakhstan and Venezuela restrict access to reserves. The company has increased spending on exploration and production amid rising costs and started selling non-energy assets including a stake in drugmaker Sanofi-Aventis SA and a rubber unit.
Angola Growth
Total said it expects to pump more oil offshore Angola, where its Dalia field in Block 17 reached peak output of 240,000 barrels a day in April, 2007. The nearby Rosa field -- connected to the Girassol floating production platform -- will maintain production at 250,000 barrels a day until early next decade, according to Total.
The company forecast its share of production from all projects at almost 3 million barrels of oil equivalent a day by 2016, based on a ``$100-a-barrel scenario,'' according to the presentation. The company estimates its share in 2010 at about 2.5 million barrels a day.
That compares with second-quarter output of an average 2.353 million barrels a day. Production was 2.322 million barrels a day in the year-earlier period and 2.426 million barrels a day in the previous quarter.
Total's plan to invest $19 billion this year is ``on track,'' the company said. Spending on exploration will rise 10 percent to $2 billion annually in ``coming years.''
LNG Output
Total said almost a fifth of production will come from LNG ventures by the middle of the next decade, with growth led by nine liquefaction projects already operating or under construction. A further five are being studied, it said.
Total plans to triple LNG output to 30 million tons a year by 2016, surpassing Exxon Mobil Corp. and remaining behind Royal Dutch Shell Plc, it said.
The company's LNG assets include stakes in projects in Yemen, Qatar and Angola. Total is also counting on a share of future output from the Shtokman gas field in the Arctic Ocean. The deposit is being developed by OAO Gazprom along with Total and Norway's StatoilHydro ASA.
Total's Joslyn and Surmont heavy-oil ventures in Canada are among the ``building blocks'' for boosting output from 2016, the company said. The oil sands will provide the company with almost 300,000 barrels a day of production capacity by 2020.
Total started output at its Jura gas and condensate discovery off Scotland's northeast coast in May. In the Republic of Congo, it's studying a ``second development in the northern part'' of the deep offshore Moho-Bilondo block, it said today.
Project Delays
Global oil production will ``remain below 100 million barrels of oil a day through 2030'' as geopolitical and ``local constraints'' delay new projects, the company said.
Total, Eni SpA and their partners in Kazakhstan's Kashagan field agreed to cede a greater stake in the development to the government in January. Total also cut its holding in Venezuela's Sincor project last year after the state oil company took a controlling interest.
Total put its glove and condom-making unit up for sale in August and plans to sell its 13 percent stake in Sanofi-Aventis, having sold 0.4 percent last year for 316 million euros ($445.4 million).
The company's board has approved a 14 percent increase in its dividend, reflecting the earnings outlook, Total said today. The 2008 interim dividend will be 1.14 euros a share.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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Sept. 10 (Bloomberg) -- Total SA, Europe's third-largest oil company, said production growth over the next decade will come from deep offshore fields in Africa, heavy-oil ventures in Canada and liquefied natural-gas projects.
The projection is based on crude prices of $100 a barrel, the company said today in a slide presentation on its Web site. Paris-based Total didn't give a forecast for average output growth from 2006 through 2010, which was targeted at 4 percent a year ago assuming oil prices at $60 a barrel.
``Total is reassuring on growth prospects,'' said Chicuong Dang, an analyst at Richelieu Finance in Paris, which has about $6.2 billion under management including Total stock. ``They seem to have good visibility on projects with oil at $100 a barrel,'' Dang said today by telephone.
Total rose as much as 1.5 percent to 44.84 euros in Paris trading and was at 44.37 euros as of 12:23 p.m. local time. The shares have lost about 22 percent since the beginning of the year.
Chief Executive Officer Christophe de Margerie is relying on projects in Angola and Canada's oil sands to raise output as Kazakhstan and Venezuela restrict access to reserves. The company has increased spending on exploration and production amid rising costs and started selling non-energy assets including a stake in drugmaker Sanofi-Aventis SA and a rubber unit.
Angola Growth
Total said it expects to pump more oil offshore Angola, where its Dalia field in Block 17 reached peak output of 240,000 barrels a day in April, 2007. The nearby Rosa field -- connected to the Girassol floating production platform -- will maintain production at 250,000 barrels a day until early next decade, according to Total.
The company forecast its share of production from all projects at almost 3 million barrels of oil equivalent a day by 2016, based on a ``$100-a-barrel scenario,'' according to the presentation. The company estimates its share in 2010 at about 2.5 million barrels a day.
That compares with second-quarter output of an average 2.353 million barrels a day. Production was 2.322 million barrels a day in the year-earlier period and 2.426 million barrels a day in the previous quarter.
Total's plan to invest $19 billion this year is ``on track,'' the company said. Spending on exploration will rise 10 percent to $2 billion annually in ``coming years.''
LNG Output
Total said almost a fifth of production will come from LNG ventures by the middle of the next decade, with growth led by nine liquefaction projects already operating or under construction. A further five are being studied, it said.
Total plans to triple LNG output to 30 million tons a year by 2016, surpassing Exxon Mobil Corp. and remaining behind Royal Dutch Shell Plc, it said.
The company's LNG assets include stakes in projects in Yemen, Qatar and Angola. Total is also counting on a share of future output from the Shtokman gas field in the Arctic Ocean. The deposit is being developed by OAO Gazprom along with Total and Norway's StatoilHydro ASA.
Total's Joslyn and Surmont heavy-oil ventures in Canada are among the ``building blocks'' for boosting output from 2016, the company said. The oil sands will provide the company with almost 300,000 barrels a day of production capacity by 2020.
Total started output at its Jura gas and condensate discovery off Scotland's northeast coast in May. In the Republic of Congo, it's studying a ``second development in the northern part'' of the deep offshore Moho-Bilondo block, it said today.
Project Delays
Global oil production will ``remain below 100 million barrels of oil a day through 2030'' as geopolitical and ``local constraints'' delay new projects, the company said.
Total, Eni SpA and their partners in Kazakhstan's Kashagan field agreed to cede a greater stake in the development to the government in January. Total also cut its holding in Venezuela's Sincor project last year after the state oil company took a controlling interest.
Total put its glove and condom-making unit up for sale in August and plans to sell its 13 percent stake in Sanofi-Aventis, having sold 0.4 percent last year for 316 million euros ($445.4 million).
The company's board has approved a 14 percent increase in its dividend, reflecting the earnings outlook, Total said today. The 2008 interim dividend will be 1.14 euros a share.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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Saudi Policy Remains Unchanged After OPEC Decision
By Ayesha Daya
Sept. 10 (Bloomberg) -- Saudi Arabia isn't planning to reduce its oil production even as OPEC urged members to lower output and return to their official targets, a Saudi oil official said today.
There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an official from the world's biggest oil producer said today, speaking on condition of anonymity.
The Organization of Petroleum Exporting Countries, whose members supply more than 40 percent of the world's oil, urged members to adhere more strictly to production quotas after prices for Brent crude fell below $100 a barrel yesterday for the first time in five months.
Iran, Venezuela and Libya were among members that pressured OPEC to take action to support prices that have fallen more than 30 percent from July's record as slower global economic growth curbs demand.
OPEC agreed at a meeting in Vienna to a total production limit for 11 members of 28.8 million barrels a day, some 500,000 barrels a day lower than the group's actual July production. The target excludes Indonesia which has suspended its membership of the organization, and Iraq.
Most of the excess oil has come from Saudi Arabia, which raised output by 500,000 barrels a day in June and July to calm prices that doubled from a year earlier to reach a record $147.27 a barrel on July 11. It hosted an emergency meeting of global oil producers and consumers in Jeddah in June to discuss how to stabilize markets.
Under Producers
``Saudi Arabia may not have to bear the brunt of the production cut,'' said OPEC research head Hasan Qabazard after the OPEC meeting. ``There are countries that are under-producing, such as Nigeria, so the Saudis can take part of their quota.''
Crude oil in New York traded at $104 a barrel, up 74 cents, or 0.7 percent, on the New York Mercantile Exchange at 12:57 p.m. London time. It earlier rose as much as $1.56, or 1.5 percent, to $104.82 a barrel.
``The market is in a very healthy position,'' Saudi Arabian Oil Minister Ali al-Naimi said before the closed- door meeting began yesterday at OPEC's headquarters. ``Demand for Saudi crude is very healthy.''
To contact the reporter on this story: Ayesha Daya in Vienna at adaya1@bloomberg.net.
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Sept. 10 (Bloomberg) -- Saudi Arabia isn't planning to reduce its oil production even as OPEC urged members to lower output and return to their official targets, a Saudi oil official said today.
There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an official from the world's biggest oil producer said today, speaking on condition of anonymity.
The Organization of Petroleum Exporting Countries, whose members supply more than 40 percent of the world's oil, urged members to adhere more strictly to production quotas after prices for Brent crude fell below $100 a barrel yesterday for the first time in five months.
Iran, Venezuela and Libya were among members that pressured OPEC to take action to support prices that have fallen more than 30 percent from July's record as slower global economic growth curbs demand.
OPEC agreed at a meeting in Vienna to a total production limit for 11 members of 28.8 million barrels a day, some 500,000 barrels a day lower than the group's actual July production. The target excludes Indonesia which has suspended its membership of the organization, and Iraq.
Most of the excess oil has come from Saudi Arabia, which raised output by 500,000 barrels a day in June and July to calm prices that doubled from a year earlier to reach a record $147.27 a barrel on July 11. It hosted an emergency meeting of global oil producers and consumers in Jeddah in June to discuss how to stabilize markets.
Under Producers
``Saudi Arabia may not have to bear the brunt of the production cut,'' said OPEC research head Hasan Qabazard after the OPEC meeting. ``There are countries that are under-producing, such as Nigeria, so the Saudis can take part of their quota.''
Crude oil in New York traded at $104 a barrel, up 74 cents, or 0.7 percent, on the New York Mercantile Exchange at 12:57 p.m. London time. It earlier rose as much as $1.56, or 1.5 percent, to $104.82 a barrel.
``The market is in a very healthy position,'' Saudi Arabian Oil Minister Ali al-Naimi said before the closed- door meeting began yesterday at OPEC's headquarters. ``Demand for Saudi crude is very healthy.''
To contact the reporter on this story: Ayesha Daya in Vienna at adaya1@bloomberg.net.
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OPEC Calls on Members to Cut Output to Reduce `Huge Oversupply'
By Fred Pals and Ayesha Daya
More Photos/Details
Sept. 10 (Bloomberg) -- OPEC, which supplies more than 40 percent of the world's oil, urged members to cut production to comply with output quotas after prices fell to a five-month low.
The Organization of Petroleum Exporting Countries agreed at a meeting in Vienna earlier today to a total production limit for 11 members of 28.8 million barrels a day, unchanged from their previous targets. OPEC Secretary-General Abdalla El-Badri said an output cut of about 500,000 barrels a day would reduce a ``huge oversupply'' of oil on the market.
Iran and Venezuela were among members that called on OPEC to take action to support prices that slid 29 percent from July's record as slower global economic growth curbed demand. Brent, a benchmark to price two-thirds of the world's crude oil, fell below $100 a barrel in London for the first time in five months yesterday.
``They will do whatever they can to maintain prices above this $80-$100 range,'' Johannes Benigni, managing director of JBC Energy in Vienna, said in a Bloomberg television interview today. ``If the market slides lower you will hear more from them.''
Oil prices rallied after OPEC's announcement, rising as much as 1.5 percent to $104.82 in electronic trading on the New York Mercantile Exchange. Crude for October delivery traded at $104.40 a barrel as of 12:34 p.m. London time.
Indonesia Withdraws
OPEC's quota was adjusted after Indonesia withdrew from the group. The target, set in September 2007, had been 29.673 million barrels a day including Indonesia's production target of 865,000 barrels a day, according to Bloomberg data.
OPEC's decision to remove barrels from the market could prove to be ``counterproductive,'' according to David Fyfe, who heads the oil industry and markets division at the International Energy Agency.
The IEA, an adviser to 27 nations, cut its forecast for global oil demand next year by 140,000 barrels to 87.6 million barrels a day because of slower U.S. consumption.
``High oil prices are still hurting,'' Fyfe said in a telephone interview from Paris.
Before the cut, OPEC was producing 900,000 barrels a day above its quota, El-Badri told a press conference in Vienna today.
Oil rose to a record $147.27 a barrel in July. Most analysts polled by Bloomberg had expected the group to keep production quotas unchanged and production near record levels.
No Change
Saudi Arabia isn't planning to reduce its own production even after OPEC told members to return to their official targets, a Saudi oil official said today.
There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an oil official of the country said today.
Airlines, including Canada's Zoom Airlines and Oasis Hong Kong Airlines Ltd., went out of business and many cut back on routes as oil prices surged to records and inflation accelerated, prompting people to drive less, lowering demand for gasoline.
The global economy may slow to about 3 percent in late 2008 from 5 percent in the previous year before re-accelerating toward 4 percent in 2009, said John Lipsky, first deputy managing director of the Washington-based International Monetary Fund, on Sept. 9.
The global economy is cooling after the U.S. housing slump sparked a lending squeeze while a surge in food and oil prices eroded the spending power of companies and consumers.
`Defensive Measure'
OPEC's decision is ``definitely a defensive measure to keep prices above $100,'' said Jonathan Kornafel, a director for Asia at Hudson Capital Energy. ``They don't want to see us go back to $140 or $150 but they want us over $100. It's a bit of a shock to the market and that's why we're up.''
OPEC members have increased production this year as Saudi Arabia, the world's largest producer, sold more barrels to balance shortfalls elsewhere and slake the developing world's growing thirst for crude. That pushed output above the group's agreed targets.
``Since the market is oversupplied, the conference agreed to abide by September 2007 production allocation (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq) totaling 28.8 million barrels a day,'' OPEC's communiqué said. ``Levels with which members committed to strictly comply.''
``We should do what we can to keep prices at the level of around $100 a barrel,'' Venezuelan Oil Minister Rafael Ramirez told reporters yesterday. ``We are concerned about the drop of demand by the end of the year.''
Stabilize Markets
Most of the increase in OPEC production in the past few months has come from Saudi Arabia, which pledged to raise output by 500,000 barrels a day through June and July to calm prices. It hosted an emergency meeting of global oil producers and consumers in Jeddah in June to discuss how to stabilize markets.
The market is ``well supplied'' and ``the market is in a very healthy position,'' Saudi Arabian Oil Minister Ali al- Naimi, who sets policy for the world's largest oil producer, told reporters before ministers started closed-door talks at OPEC's Vienna headquarters yesterday.
The opinion of Saudi Arabia, OPEC's biggest and most influential producer, differed from that of Iran and Venezuela, who wanted production to be trimmed to official quota levels as they said the market was oversupplied.
To contact the reporter on this story: Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.net; Fred Pals in Vienna at fpals@bloomberg.net
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More Photos/Details
Sept. 10 (Bloomberg) -- OPEC, which supplies more than 40 percent of the world's oil, urged members to cut production to comply with output quotas after prices fell to a five-month low.
The Organization of Petroleum Exporting Countries agreed at a meeting in Vienna earlier today to a total production limit for 11 members of 28.8 million barrels a day, unchanged from their previous targets. OPEC Secretary-General Abdalla El-Badri said an output cut of about 500,000 barrels a day would reduce a ``huge oversupply'' of oil on the market.
Iran and Venezuela were among members that called on OPEC to take action to support prices that slid 29 percent from July's record as slower global economic growth curbed demand. Brent, a benchmark to price two-thirds of the world's crude oil, fell below $100 a barrel in London for the first time in five months yesterday.
``They will do whatever they can to maintain prices above this $80-$100 range,'' Johannes Benigni, managing director of JBC Energy in Vienna, said in a Bloomberg television interview today. ``If the market slides lower you will hear more from them.''
Oil prices rallied after OPEC's announcement, rising as much as 1.5 percent to $104.82 in electronic trading on the New York Mercantile Exchange. Crude for October delivery traded at $104.40 a barrel as of 12:34 p.m. London time.
Indonesia Withdraws
OPEC's quota was adjusted after Indonesia withdrew from the group. The target, set in September 2007, had been 29.673 million barrels a day including Indonesia's production target of 865,000 barrels a day, according to Bloomberg data.
OPEC's decision to remove barrels from the market could prove to be ``counterproductive,'' according to David Fyfe, who heads the oil industry and markets division at the International Energy Agency.
The IEA, an adviser to 27 nations, cut its forecast for global oil demand next year by 140,000 barrels to 87.6 million barrels a day because of slower U.S. consumption.
``High oil prices are still hurting,'' Fyfe said in a telephone interview from Paris.
Before the cut, OPEC was producing 900,000 barrels a day above its quota, El-Badri told a press conference in Vienna today.
Oil rose to a record $147.27 a barrel in July. Most analysts polled by Bloomberg had expected the group to keep production quotas unchanged and production near record levels.
No Change
Saudi Arabia isn't planning to reduce its own production even after OPEC told members to return to their official targets, a Saudi oil official said today.
There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an oil official of the country said today.
Airlines, including Canada's Zoom Airlines and Oasis Hong Kong Airlines Ltd., went out of business and many cut back on routes as oil prices surged to records and inflation accelerated, prompting people to drive less, lowering demand for gasoline.
The global economy may slow to about 3 percent in late 2008 from 5 percent in the previous year before re-accelerating toward 4 percent in 2009, said John Lipsky, first deputy managing director of the Washington-based International Monetary Fund, on Sept. 9.
The global economy is cooling after the U.S. housing slump sparked a lending squeeze while a surge in food and oil prices eroded the spending power of companies and consumers.
`Defensive Measure'
OPEC's decision is ``definitely a defensive measure to keep prices above $100,'' said Jonathan Kornafel, a director for Asia at Hudson Capital Energy. ``They don't want to see us go back to $140 or $150 but they want us over $100. It's a bit of a shock to the market and that's why we're up.''
OPEC members have increased production this year as Saudi Arabia, the world's largest producer, sold more barrels to balance shortfalls elsewhere and slake the developing world's growing thirst for crude. That pushed output above the group's agreed targets.
``Since the market is oversupplied, the conference agreed to abide by September 2007 production allocation (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq) totaling 28.8 million barrels a day,'' OPEC's communiqué said. ``Levels with which members committed to strictly comply.''
``We should do what we can to keep prices at the level of around $100 a barrel,'' Venezuelan Oil Minister Rafael Ramirez told reporters yesterday. ``We are concerned about the drop of demand by the end of the year.''
Stabilize Markets
Most of the increase in OPEC production in the past few months has come from Saudi Arabia, which pledged to raise output by 500,000 barrels a day through June and July to calm prices. It hosted an emergency meeting of global oil producers and consumers in Jeddah in June to discuss how to stabilize markets.
The market is ``well supplied'' and ``the market is in a very healthy position,'' Saudi Arabian Oil Minister Ali al- Naimi, who sets policy for the world's largest oil producer, told reporters before ministers started closed-door talks at OPEC's Vienna headquarters yesterday.
The opinion of Saudi Arabia, OPEC's biggest and most influential producer, differed from that of Iran and Venezuela, who wanted production to be trimmed to official quota levels as they said the market was oversupplied.
To contact the reporter on this story: Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.net; Fred Pals in Vienna at fpals@bloomberg.net
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Hungarian Forint Rises Against Euro After Poland Sets Euro Date
By Yon Pulkrabek
Sept. 10 (Bloomberg) -- The Hungarian forint rose against the euro, tracking gains by the zloty, after Polish Prime Minister Donald Tusk said the government's goal is to adopt Europe's common currency in 2011.
The forint climbed as much as 0.9 percent to 238.07 per euro and was at 239.83 as of 3:25 p.m. in Budapest, from 240.20 yesterday.
To contact the reporters on this story: Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net;
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Sept. 10 (Bloomberg) -- The Hungarian forint rose against the euro, tracking gains by the zloty, after Polish Prime Minister Donald Tusk said the government's goal is to adopt Europe's common currency in 2011.
The forint climbed as much as 0.9 percent to 238.07 per euro and was at 239.83 as of 3:25 p.m. in Budapest, from 240.20 yesterday.
To contact the reporters on this story: Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net;
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Ruble Drops to One-Year Low Against Dollar as Stocks Decline
By Emma O'Brien
Sept. 10 (Bloomberg) -- The ruble dropped to its lowest level in more than a year against the dollar as stocks dropped for a second day after a report showed economic growth slowed in the second quarter.
The currency weakened as the Micex stock index slid 5.3 percent. Investors pulled about $113 million out of Russia in the two weeks to Sept. 3 following oil's slump from a record and the country's five-day war with Georgia, according to Alfa Bank. Economic growth slowed to 7.5 percent in the three months through June, from 8.5 percent in the first quarter, the Federal Statistics Service said today.
``The world has changed the way it looks at Russia and that's resulting in a stock market under pressure and the flow side of the story not being as positive as it used to be,'' said Lars Rasmussen, an emerging-markets analyst in Copenhagen at Danske Bank A/S, whose subsidiary the Helsinki-based Sampo Bank Plc is among the top five traders of the ruble in the world. ``The prospects for the ruble have deteriorated.''
Russia's currency dropped to 25.6423 per dollar, the lowest level since Sept. 7, 2007, before trading at 25.6321 by 2:22 p.m. in Moscow. It was little changed at 36.1572 per euro, from 36.1597 yesterday.
Bank Rossii, Russia's central bank, buys and sells the ruble regularly to keep it within a trading band against a basket made up of dollars and euros to limit fluctuations that hurt the competitiveness of Russian exports.
The ruble held at 30.3723 versus the basket today, from 30.3431 yesterday. The basket rate is calculated by multiplying the rate to the dollar by 0.55 and the euro rate by 0.45, then adding the two together.
Central Bank Sales
The currency has weakened about 2.3 percent against the basket since Russia invaded Georgia on Aug. 8, sliding to 30.4045, its lowest closing price in more than two years, on Sept. 4. Bank Rossii First Deputy Chairman Alexei Ulyukayev said a day later that the bank sold a ``significant'' amount of foreign currency to arrest the ruble's slide.
``Worries over Russia's domestic economy'' will dog equities, analysts led by Peter Weston at JPMorgan Chase & Co. in Moscow wrote in a note today, reiterating its ``underweight'' recommendation on the country's stocks.
The dollar-denominated RTS index slid 4.5 percent today, after dropping 7.5 percent yesterday.
Bank Rossii has been expanding the ruble's trading band to the basket since mid-May to deter speculators from betting above-target inflation will force them to let the ruble appreciate this year. The central bank has no plans to expand the ruble's current trading band to the basket ``over the coming months,'' Ulyukayev said two days ago.
Credit Suisse Goes Long
Investors should reinstate long positions on the ruble, or bets it's going to rise, because of Ulyukayev's comments, Credit Suisse Group analysts led by Kasper Bartholdy in London wrote in a client note yesterday. ``The downside for the ruble is limited,'' the analysts wrote.
Russian bonds dropped, with the yield on the benchmark 7.5 percent note due 2030 gaining 6 basis points to 5.89 percent. The two-year note yield advanced 14 basis points, to 6.16 percent, the biggest jump since Aug. 8. The difference in yield between Russian and U.S. two-year debt was at 392 basis points today, the widest since March.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Sept. 10 (Bloomberg) -- The ruble dropped to its lowest level in more than a year against the dollar as stocks dropped for a second day after a report showed economic growth slowed in the second quarter.
The currency weakened as the Micex stock index slid 5.3 percent. Investors pulled about $113 million out of Russia in the two weeks to Sept. 3 following oil's slump from a record and the country's five-day war with Georgia, according to Alfa Bank. Economic growth slowed to 7.5 percent in the three months through June, from 8.5 percent in the first quarter, the Federal Statistics Service said today.
``The world has changed the way it looks at Russia and that's resulting in a stock market under pressure and the flow side of the story not being as positive as it used to be,'' said Lars Rasmussen, an emerging-markets analyst in Copenhagen at Danske Bank A/S, whose subsidiary the Helsinki-based Sampo Bank Plc is among the top five traders of the ruble in the world. ``The prospects for the ruble have deteriorated.''
Russia's currency dropped to 25.6423 per dollar, the lowest level since Sept. 7, 2007, before trading at 25.6321 by 2:22 p.m. in Moscow. It was little changed at 36.1572 per euro, from 36.1597 yesterday.
Bank Rossii, Russia's central bank, buys and sells the ruble regularly to keep it within a trading band against a basket made up of dollars and euros to limit fluctuations that hurt the competitiveness of Russian exports.
The ruble held at 30.3723 versus the basket today, from 30.3431 yesterday. The basket rate is calculated by multiplying the rate to the dollar by 0.55 and the euro rate by 0.45, then adding the two together.
Central Bank Sales
The currency has weakened about 2.3 percent against the basket since Russia invaded Georgia on Aug. 8, sliding to 30.4045, its lowest closing price in more than two years, on Sept. 4. Bank Rossii First Deputy Chairman Alexei Ulyukayev said a day later that the bank sold a ``significant'' amount of foreign currency to arrest the ruble's slide.
``Worries over Russia's domestic economy'' will dog equities, analysts led by Peter Weston at JPMorgan Chase & Co. in Moscow wrote in a note today, reiterating its ``underweight'' recommendation on the country's stocks.
The dollar-denominated RTS index slid 4.5 percent today, after dropping 7.5 percent yesterday.
Bank Rossii has been expanding the ruble's trading band to the basket since mid-May to deter speculators from betting above-target inflation will force them to let the ruble appreciate this year. The central bank has no plans to expand the ruble's current trading band to the basket ``over the coming months,'' Ulyukayev said two days ago.
Credit Suisse Goes Long
Investors should reinstate long positions on the ruble, or bets it's going to rise, because of Ulyukayev's comments, Credit Suisse Group analysts led by Kasper Bartholdy in London wrote in a client note yesterday. ``The downside for the ruble is limited,'' the analysts wrote.
Russian bonds dropped, with the yield on the benchmark 7.5 percent note due 2030 gaining 6 basis points to 5.89 percent. The two-year note yield advanced 14 basis points, to 6.16 percent, the biggest jump since Aug. 8. The difference in yield between Russian and U.S. two-year debt was at 392 basis points today, the widest since March.
To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net
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Canadian Dollar Strengthens as Commodity Currencies Advance
By Daniel Kruger
Sept. 10 (Bloomberg) -- The Canadian dollar gained as an increase in risk appetite and rising prices for natural resources including crude oil helped boost commodity currencies.
Canada's currency advanced along with the Australian dollar and the New Zealand dollar as traders sold low-yielding currencies including the Japanese yen and the Swiss franc. Crude oil rose after the Organization of Petroleum Exporting Countries announced it would cut oil production.
``It's a combination of a small rebound in commodity prices and broad-based dollar weakness that's helping the Canadian dollar,'' said Matthew Strauss, a currency strategist at RBC Capital Markets in Toronto. ``The link between increasing risk appetite and the Canadian dollar is through commodities.''
The Canadian currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, rose 0.3 percent to C$1.0686 per U.S. dollar at 9:49 a.m. in Toronto, from C$1.0713 yesterday. One Canadian dollar buys 93.58 U.S. cents.
Crude oil futures rose 1.2 percent on the New York Mercantile Exchange to $104.47 after falling as low as $101.74 yesterday.
Canadian labor productivity fell for a third consecutive quarter as falling exports curbed production, a report showed. Productivity, a measure of how much an employee produces in an hour of work, dropped 0.2 percent between April and June, Statistics Canada said today in Ottawa. Economists anticipated a 0.3 percent gain, the median of 12 estimates. The agency also doubled the estimated first-quarter decrease to 0.6 percent.
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
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Sept. 10 (Bloomberg) -- The Canadian dollar gained as an increase in risk appetite and rising prices for natural resources including crude oil helped boost commodity currencies.
Canada's currency advanced along with the Australian dollar and the New Zealand dollar as traders sold low-yielding currencies including the Japanese yen and the Swiss franc. Crude oil rose after the Organization of Petroleum Exporting Countries announced it would cut oil production.
``It's a combination of a small rebound in commodity prices and broad-based dollar weakness that's helping the Canadian dollar,'' said Matthew Strauss, a currency strategist at RBC Capital Markets in Toronto. ``The link between increasing risk appetite and the Canadian dollar is through commodities.''
The Canadian currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, rose 0.3 percent to C$1.0686 per U.S. dollar at 9:49 a.m. in Toronto, from C$1.0713 yesterday. One Canadian dollar buys 93.58 U.S. cents.
Crude oil futures rose 1.2 percent on the New York Mercantile Exchange to $104.47 after falling as low as $101.74 yesterday.
Canadian labor productivity fell for a third consecutive quarter as falling exports curbed production, a report showed. Productivity, a measure of how much an employee produces in an hour of work, dropped 0.2 percent between April and June, Statistics Canada said today in Ottawa. Economists anticipated a 0.3 percent gain, the median of 12 estimates. The agency also doubled the estimated first-quarter decrease to 0.6 percent.
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
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Oil Investors Pulled $39 Billion in Futures Contracts
By Daniel Whitten
(Corrects proper name of analyst's company in sixth paragraph.)
Sept. 10 (Bloomberg) -- Commodity index investors, blamed for record oil prices, sold $39 billion worth of oil futures between their July record and Sept. 2, causing crude to plunge, according to a report to be released today.
The work by Michael Masters, president of the Masters Capital Management hedge fund, blames investors who buy and hold an index of commodities for driving prices to records, and for their subsequent drop. It comes a day before the U.S. Commodity Futures Trading Commission is set to discuss its own study of energy trading with a congressional committee.
Masters testified three times before Congress this year, arguing that limits on traders would cut oil prices to $65 to $70 a barrel. He has been cited by lawmakers who introduced at least 20 measures to curb speculation. Congressional pressure on the CFTC to step up enforcement and restrict anonymous trades has pushed index traders out of their positions, Masters said.
``I don't think it's just coincidence that the money came out after the pressure was put on these folks,'' Masters, who wants legislation that would set limits on index commodity holdings, said in an interview.
Crude oil futures surged to a record $147.27 on July 11, an increase of 53 percent for the year, on the New York Mercantile Exchange, then fell 26 percent to $109.71 on Sept. 2. Oil dropped $3.08 to $103.26 yesterday on the Nymex.
``The speculators that drove prices up basically deflated the bubble,'' said Fadel Gheit, director of oil and gas research at Oppenheimer & Co. in New York. ``They said, `That's it, the game is over. We are going to bet on another horse.'''
CFTC Report
The commission is expected to release a report tomorrow that will lay out its findings on the impact of index investors and over-the-counter trading on commodities. Regulators may require Wall Street banks to regularly disclose their energy futures positions connected to the unregulated swaps market, according to people familiar with the discussions.
JPMorgan Chase and Co., Goldman Sachs Group Inc., Barclays Plc and Morgan Stanley control 70 percent of the commodities swaps positions, and swaps dealers are the largest holders of Nymex crude oil futures contracts, Masters said.
Representatives for all four banks declined to comment. Banks enter into swaps with airlines and hedge funds to profit from moves in crude prices and then offset some of that risk in futures markets such as the Nymex.
``These large financial players have become the primary source of the recent dramatic and damaging price volatility,'' Masters said in the report.
The commission has put out special requests for information from traders and imposed limits on the number of U.S. oil futures contracts a trader can hold on Intercontinental Exchange Inc.'s London-based ICE Futures Europe market.
Masters's Critics
Critics of Masters's earlier work said he lacks access to the data needed to draw his conclusions. His hedge fund is based in the U.S. Virgin Islands.
Walter Lukken, the acting chairman of the commission, is among those who question the validity of Masters's data.
``Just as weather forecasters have no effect on the weather, energy speculators have no effect on the price of oil,'' said Scott Talbott, a lobbyist for the Financial Services Roundtable, which represents investors. ``His fallacy is that he ignores the laws of supply and demand, which determine the price of oil.''
Masters earlier this year reported that index speculators such as those that trade on Standard & Poor's GSCI accounted for $260 billion of assets, up from $13 billion in 2003. As of Sept. 2 that number was down to $223 billion, Masters said.
``For the supply and demand people, what I would like for them to explain is how from the supply-and-demand rationale you could have oil at $95 in January, at $150 in June and back to $100 in September,'' Masters said.
Hedge Fund Holdings
Masters's hedge fund held shares in the four major U.S. airlines, AMR Corp., Delta Air Lines Inc., US Airways Group Inc. and UAL Corp, according to a June 30 regulatory filing. Airlines hedge oil and have been hurt by commodity price fluctuations.
He said he extrapolates his numbers from agricultural data, which is publicly available, to arrive at overall numbers that include oil futures investments.
In arguing for legislation, lawmakers, primarily Democrats will point to the Masters report and a Massachusetts Institute of Technology report released in June alleging that speculation caused the rise in energy prices.
``Why did so much money come into these markets and why is it leaving,'' asked Senator Maria Cantwell, a Washington Democrat, in an interview. If Congress reduces scrutiny, ``do we see the run-ups happening again?''
CFTC data show that speculative net long positions in crude oil for non-commercial traders dropped from 115,145 for the week ended March 11, to a net short position, or a bet that prices would drop, for the week ended July 22, when prices started to plunge. For the week ended Sept. 2, net long speculative positions were 14,331.
To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net
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(Corrects proper name of analyst's company in sixth paragraph.)
Sept. 10 (Bloomberg) -- Commodity index investors, blamed for record oil prices, sold $39 billion worth of oil futures between their July record and Sept. 2, causing crude to plunge, according to a report to be released today.
The work by Michael Masters, president of the Masters Capital Management hedge fund, blames investors who buy and hold an index of commodities for driving prices to records, and for their subsequent drop. It comes a day before the U.S. Commodity Futures Trading Commission is set to discuss its own study of energy trading with a congressional committee.
Masters testified three times before Congress this year, arguing that limits on traders would cut oil prices to $65 to $70 a barrel. He has been cited by lawmakers who introduced at least 20 measures to curb speculation. Congressional pressure on the CFTC to step up enforcement and restrict anonymous trades has pushed index traders out of their positions, Masters said.
``I don't think it's just coincidence that the money came out after the pressure was put on these folks,'' Masters, who wants legislation that would set limits on index commodity holdings, said in an interview.
Crude oil futures surged to a record $147.27 on July 11, an increase of 53 percent for the year, on the New York Mercantile Exchange, then fell 26 percent to $109.71 on Sept. 2. Oil dropped $3.08 to $103.26 yesterday on the Nymex.
``The speculators that drove prices up basically deflated the bubble,'' said Fadel Gheit, director of oil and gas research at Oppenheimer & Co. in New York. ``They said, `That's it, the game is over. We are going to bet on another horse.'''
CFTC Report
The commission is expected to release a report tomorrow that will lay out its findings on the impact of index investors and over-the-counter trading on commodities. Regulators may require Wall Street banks to regularly disclose their energy futures positions connected to the unregulated swaps market, according to people familiar with the discussions.
JPMorgan Chase and Co., Goldman Sachs Group Inc., Barclays Plc and Morgan Stanley control 70 percent of the commodities swaps positions, and swaps dealers are the largest holders of Nymex crude oil futures contracts, Masters said.
Representatives for all four banks declined to comment. Banks enter into swaps with airlines and hedge funds to profit from moves in crude prices and then offset some of that risk in futures markets such as the Nymex.
``These large financial players have become the primary source of the recent dramatic and damaging price volatility,'' Masters said in the report.
The commission has put out special requests for information from traders and imposed limits on the number of U.S. oil futures contracts a trader can hold on Intercontinental Exchange Inc.'s London-based ICE Futures Europe market.
Masters's Critics
Critics of Masters's earlier work said he lacks access to the data needed to draw his conclusions. His hedge fund is based in the U.S. Virgin Islands.
Walter Lukken, the acting chairman of the commission, is among those who question the validity of Masters's data.
``Just as weather forecasters have no effect on the weather, energy speculators have no effect on the price of oil,'' said Scott Talbott, a lobbyist for the Financial Services Roundtable, which represents investors. ``His fallacy is that he ignores the laws of supply and demand, which determine the price of oil.''
Masters earlier this year reported that index speculators such as those that trade on Standard & Poor's GSCI accounted for $260 billion of assets, up from $13 billion in 2003. As of Sept. 2 that number was down to $223 billion, Masters said.
``For the supply and demand people, what I would like for them to explain is how from the supply-and-demand rationale you could have oil at $95 in January, at $150 in June and back to $100 in September,'' Masters said.
Hedge Fund Holdings
Masters's hedge fund held shares in the four major U.S. airlines, AMR Corp., Delta Air Lines Inc., US Airways Group Inc. and UAL Corp, according to a June 30 regulatory filing. Airlines hedge oil and have been hurt by commodity price fluctuations.
He said he extrapolates his numbers from agricultural data, which is publicly available, to arrive at overall numbers that include oil futures investments.
In arguing for legislation, lawmakers, primarily Democrats will point to the Masters report and a Massachusetts Institute of Technology report released in June alleging that speculation caused the rise in energy prices.
``Why did so much money come into these markets and why is it leaving,'' asked Senator Maria Cantwell, a Washington Democrat, in an interview. If Congress reduces scrutiny, ``do we see the run-ups happening again?''
CFTC data show that speculative net long positions in crude oil for non-commercial traders dropped from 115,145 for the week ended March 11, to a net short position, or a bet that prices would drop, for the week ended July 22, when prices started to plunge. For the week ended Sept. 2, net long speculative positions were 14,331.
To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net
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Yen Falls as Advance in Stocks Boosts Demand for Higher Yields
By Ye Xie
Sept. 10 (Bloomberg) -- The yen fell the most in more than two weeks against the euro and the dollar as an increase in U.S. stocks encouraged investors to take out low-cost loans in Japan and buy higher-yielding assets elsewhere.
Japan's currency also decreased versus the Australian and New Zealand dollars on speculation carry trades will resume. The yen earlier touched a 13-month high against the euro as stock futures dropped after Lehman Brothers Holdings Inc. reported a $3.9 billion loss that was worse than analysts forecast.
``The currency market is taking its cue from equities,'' said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. ``The equity market is going back and forth after the knee-jerk sell-off.''
The yen declined 0.7 percent to 151.97 per euro at 10:02 a.m. in New York, from 150.94 yesterday. It earlier touched 150.16, the strongest level since August 2007. The yen dropped 0.8 percent to 107.62 per dollar, from 106.81. The dollar traded at $1.4122 per euro, compared with $1.4133 yesterday, when it reached $1.4047, the highest since October 2007.
Japan's currency dropped 1.4 percent to 86.88 against the Australian dollar and 0.8 percent to 71.94 versus the New Zealand dollar on bets investors will conduct trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.5 percent compares with 7 percent in Australia and 8 percent in New Zealand.
Stock Gains
Lehman advanced 12 percent, rebounding from yesterday's record plunge, on plans to sell a majority stake in its asset- management unit, spin off commercial real estate and slash its annual dividend 93 percent.
The Standard & Poor's 500 Index increased 0.4 percent. Futures initially fell 0.5 percent after Lehman posted writedowns of $5.6 billion. The New York firm moved its third- quarter earnings announcement up a week after talks with state- owned Korea Development Bank about a possible investment ended.
The yen has gained almost 10 percent versus the euro this quarter on concern credit market losses are deepening and the global economy is slowing.
``The broad story of risk aversion is here to stay,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The yen will benefit from this on a more sustainable basis than it has before.''
The euro's 14-day relative strength index against the yen, a comparison of the magnitude of gains and losses, was 20.38. A reading below 30 typically signals a change in price direction is imminent.
``People have been wondering when the markets were going to take a break,'' said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo. ``A bout of risk aversion led to a massive reversal in many trades that pushed down the euro and caused the yen to rise. This move has clearly gone too far.''
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
Read more...
Sept. 10 (Bloomberg) -- The yen fell the most in more than two weeks against the euro and the dollar as an increase in U.S. stocks encouraged investors to take out low-cost loans in Japan and buy higher-yielding assets elsewhere.
Japan's currency also decreased versus the Australian and New Zealand dollars on speculation carry trades will resume. The yen earlier touched a 13-month high against the euro as stock futures dropped after Lehman Brothers Holdings Inc. reported a $3.9 billion loss that was worse than analysts forecast.
``The currency market is taking its cue from equities,'' said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. ``The equity market is going back and forth after the knee-jerk sell-off.''
The yen declined 0.7 percent to 151.97 per euro at 10:02 a.m. in New York, from 150.94 yesterday. It earlier touched 150.16, the strongest level since August 2007. The yen dropped 0.8 percent to 107.62 per dollar, from 106.81. The dollar traded at $1.4122 per euro, compared with $1.4133 yesterday, when it reached $1.4047, the highest since October 2007.
Japan's currency dropped 1.4 percent to 86.88 against the Australian dollar and 0.8 percent to 71.94 versus the New Zealand dollar on bets investors will conduct trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.5 percent compares with 7 percent in Australia and 8 percent in New Zealand.
Stock Gains
Lehman advanced 12 percent, rebounding from yesterday's record plunge, on plans to sell a majority stake in its asset- management unit, spin off commercial real estate and slash its annual dividend 93 percent.
The Standard & Poor's 500 Index increased 0.4 percent. Futures initially fell 0.5 percent after Lehman posted writedowns of $5.6 billion. The New York firm moved its third- quarter earnings announcement up a week after talks with state- owned Korea Development Bank about a possible investment ended.
The yen has gained almost 10 percent versus the euro this quarter on concern credit market losses are deepening and the global economy is slowing.
``The broad story of risk aversion is here to stay,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The yen will benefit from this on a more sustainable basis than it has before.''
The euro's 14-day relative strength index against the yen, a comparison of the magnitude of gains and losses, was 20.38. A reading below 30 typically signals a change in price direction is imminent.
``People have been wondering when the markets were going to take a break,'' said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo. ``A bout of risk aversion led to a massive reversal in many trades that pushed down the euro and caused the yen to rise. This move has clearly gone too far.''
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
Read more...
Crude Oil Rises After OPEC Agrees to Trim Excess Production
By Margot Habiby and Alexander Kwiatkowski
Sept. 10 (Bloomberg) -- Crude oil rose after OPEC urged its members to comply with output quotas, a move that would reduce supplies by 500,000 barrels a day.
The Organization of Petroleum Exporting Countries agreed at a meeting in Vienna to a total production limit for 11 members of 28.8 million barrels a day, unchanged from previous targets. OPEC Secretary-General Abdalla El-Badri said this means it will trim ``oversupply'' by about 500,000 barrels a day.
``The OPEC announcement is kind of bullish,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``On the other hand, I'm waiting to see if the Saudis make a comment. If the Saudis cut back, that will certainly be bullish.''
Crude oil for October delivery rose 66 cents, or 0.6 percent, to $103.92 a barrel at 9:30 a.m. on the New York Mercantile Exchange.
Oil has fallen about 30 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduced demand for fuels. Crude in New York yesterday reached its lowest level since April 2, while Brent oil traded in London fell as low as $99 a barrel.
``They will do whatever they can to maintain prices above this $80-$100 range,'' Johannes Benigni, managing director of JBC Energy, said of OPEC in a Bloomberg television interview today. ``If the market slides lower, you will hear more from them.''
OPEC Sentiment
Brent crude oil for October settlement rose 84 cents, or 0.8 percent, to $101.18 a barrel.
OPEC said a declining global economy and resultant falloff in oil demand along with more crude supply and the gains in the U.S. dollar had lowered prices. This means ``a shift in market sentiment causing downside risks,'' according to their statement after the meeting.
``Since the market is oversupplied, the conference agreed to abide by September 2007 production allocation (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq) totaling 28.8 million barrels a day,'' OPEC said. These are levels ``with which members committed to strictly comply.''
OPEC has increased production this year, taking output above its agreed targets, to balance shortfalls elsewhere and satisfy the developing world's thirst for crude. Most of the increase has come from Saudi Arabia, which pledged to raise output by 500,000 barrels a day through June and July to calm prices.
OPEC's decision ``took the market by surprise,'' said Andrey Kryuchenkov, an analyst at London-based Sucden (U.K.) Ltd. ``OPEC was already oversupplying the market this summer after oil futures reached record highs.''
`Huge Oversupply'
The group's secretary-general, Abdalla El-Badri, said its decision to adhere to production quotas means it is cutting output by about 500,000 barrels a day.
OPEC members are reducing a ``huge oversupply'' of oil on the market, El-Badri said today during a press briefing at OPEC headquarters in Vienna. Before the cut, the group was producing 900,000 barrels a day above its quota, he said.
Saudi Arabia is not planning to reduce its oil production even as the group urged members to lower output, a Saudi oil official said today.
There is no change in its oil policy and Saudi Arabia will supply whatever customers demand, an oil official of the country said today.
The International Energy Agency, an adviser to 27 nations, cut its forecast for global oil demand in 2008 and 2009 as high prices and the economic slowdown reduce U.S. consumption.
`Weak Economic Prospects'
The International Energy Agency lowered its 2008 forecast by 100,000 barrels to 86.8 million barrels a day, and the 2009 estimate by 140,000 barrels to 87.6 million barrels a day, the Paris-based agency said today in its monthly report.
``A combination of weak economic prospects and persistently high prices appears to be having an impact on consumer behavior and choices,'' David Fyfe, the head of the IEA's oil industry and markets division, said in a telephone interview today.
OPEC's decision to curb supply may be ``counterproductive,'' Fyfe said. ``High oil prices are still hurting.''
Hurricane Ike started to strengthen as it entered the Gulf of Mexico and headed in the direction of Texas, after leaving more than 170 people dead when it lashed Cuba and Haiti.
Ike's eye was 145 miles (230 kilometers) north of the western tip of Cuba and moving west-northwest at 8 miles per hour at about 8 a.m. Miami time today, according to the U.S. National Hurricane Center. Ike's winds strengthened to 85 miles per hour from 80 mph earlier.
The storm is forecast to make landfall between Corpus Christi, Texas, and Houston, according to a chart from the Hurricane Center.
To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
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Sugar Declines as Dollar Resumes Rally, Curbs Commodity Demand
By Ron Day
Sept. 10 (Bloomberg) -- Sugar fell for a fourth straight day as the dollar resumed a rally that began in July, damping demand for raw materials priced in the U.S. currency.
The dollar gained against the euro for the ninth day out of 10, boosting the costs of commodities for buyers using the European currency. The euro slid after the European Commission cut its growth estimate for this year and predicted a recession for the German economy, the region's largest.
Raw-sugar futures for March delivery, which became the most-active contract today, fell 0.07 cent, or 0.5 percent, to 13.78 cents a pound at 8:50 a.m. on ICE Futures U.S., the former New York Board of Trade.
Sugar for October delivery, previously the most-active contract, fell 0.01 cent, or 0.1 percent, to 12.09 cents a pound, after earlier reaching 11.98 cents, the contract's lowest price since July 24.
To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.
Read more...
Sept. 10 (Bloomberg) -- Sugar fell for a fourth straight day as the dollar resumed a rally that began in July, damping demand for raw materials priced in the U.S. currency.
The dollar gained against the euro for the ninth day out of 10, boosting the costs of commodities for buyers using the European currency. The euro slid after the European Commission cut its growth estimate for this year and predicted a recession for the German economy, the region's largest.
Raw-sugar futures for March delivery, which became the most-active contract today, fell 0.07 cent, or 0.5 percent, to 13.78 cents a pound at 8:50 a.m. on ICE Futures U.S., the former New York Board of Trade.
Sugar for October delivery, previously the most-active contract, fell 0.01 cent, or 0.1 percent, to 12.09 cents a pound, after earlier reaching 11.98 cents, the contract's lowest price since July 24.
To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.
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Gold Falls on Reduced Demand for Inflation Hedge; Silver Drops
By Pham-Duy Nguyen
Sept. 10 (Bloomberg) -- Gold fell, touching the lowest price since October, on speculation a drop in commodity prices and a stronger dollar will reduce demand for the precious metal as a hedge against inflation. Silver also declined.
The Reuters/Jefferies CRB Index of 19 raw materials tumbled for a ninth straight day and is down as much as 24 percent from a record reached in July. Gold has declined 24 percent from an all-time high in March and the euro is trading 12 percent below its July peak against the dollar.
``Gold's diseased,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. ``A lot of the inflationary fear has eased because we've seen energy prices and commodity prices come spiraling down. The dollar has not given up a lot of its gains. That's leaving traders up in the air about what to do with gold. I wouldn't want to touch it with at 10-foot pole.''
Gold futures for December delivery fell $8.90, or 1.1 percent, to $783.10 an ounce at 9:06 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $766.80, the lowest for a most-active contract since Oct. 25.
Silver futures for December delivery fell 22 cents, or 1.9 percent, to $11.495 an ounce on the Comex.
Before today, silver fell 21 percent this year, while gold dropped 5.5 percent.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Sept. 10 (Bloomberg) -- Gold fell, touching the lowest price since October, on speculation a drop in commodity prices and a stronger dollar will reduce demand for the precious metal as a hedge against inflation. Silver also declined.
The Reuters/Jefferies CRB Index of 19 raw materials tumbled for a ninth straight day and is down as much as 24 percent from a record reached in July. Gold has declined 24 percent from an all-time high in March and the euro is trading 12 percent below its July peak against the dollar.
``Gold's diseased,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. ``A lot of the inflationary fear has eased because we've seen energy prices and commodity prices come spiraling down. The dollar has not given up a lot of its gains. That's leaving traders up in the air about what to do with gold. I wouldn't want to touch it with at 10-foot pole.''
Gold futures for December delivery fell $8.90, or 1.1 percent, to $783.10 an ounce at 9:06 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $766.80, the lowest for a most-active contract since Oct. 25.
Silver futures for December delivery fell 22 cents, or 1.9 percent, to $11.495 an ounce on the Comex.
Before today, silver fell 21 percent this year, while gold dropped 5.5 percent.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Soybeans Fall After Oil Decline; Wheat, Corn Rebound From Lows
By Jae Hur and Sungwoo Park
Sept. 10 (Bloomberg) -- Soybeans dropped after a tumble in crude oil yesterday reduced demand prospects for biofuels made from the crop, while wheat gained after touching a one-year low. Corn also gained from a four-week low.
Oil plunged as much as 4.3 percent yesterday to the lowest since April 2. Before today, oil had fallen 30 percent from its record on July 11, while corn dropped 32 percent from an all- time high in June and soybeans fell 27 percent from a July record.
``A weaker crude oil price has put pressure on corn and soybeans today,'' Hiroyuki Kikukawa, general manager of research at IDO Securities Co., said from Tokyo. ``Fundamentals for the two U.S. crops have not changed much as they are close to harvest, but external factors such as the dollar and crude oil are dictating their direction in recent trading.''
Soybeans for November delivery declined as much as 18.75 cents, or 1.6 percent, to $11.8225 a bushel, before trading at at $11.9975 at 5:10 p.m. in Singapore. The contract touched $11.57 yesterday, the lowest since April 1.
Corn for December delivery lost as much as 6.75 cents, or 1.2 percent, to $5.3775 a bushel in after-hours electronic trading on the Chicago Board of Trade before rebounding 0.6 percent to $5.4775. The contract yesterday touched $5.31, the lowest since Aug. 13.
U.S. Forecast
``Most investors will stay on the sidelines before the U.S. Department of Agriculture's monthly report on Friday,'' Kikukawa said. The U.S. government is to release its second survey-based production forecasts for corn and soybeans on Sept. 12.
The dollar traded at $1.4151 per euro at 5:13 p.m. in Singapore after reaching $1.4047 yesterday, the strongest since Oct. 9. Crude oil for October delivery traded up 0.7 percent at $103.95 a barrel after falling as low as $101.74 yesterday.
Wheat for December delivery rose 1.1 percent to $7.385 a bushel after earlier falling by the same amount to $7.2275. Yesterday it fell as low as $7.19, the lowest for a most-active contract since Aug. 29, 2007.
In the physical market, Egypt plans to buy at least 55,000 metric tons of wheat today and Japan is seeking 107,000 tons of U.S. milling wheat at a tender tomorrow.
To contact the reporters responsible for this story: Jae Hur in Singapore at jhur1@bloomberg.net; Sungwoo Park at spark47@bloomberg.net
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Sept. 10 (Bloomberg) -- Soybeans dropped after a tumble in crude oil yesterday reduced demand prospects for biofuels made from the crop, while wheat gained after touching a one-year low. Corn also gained from a four-week low.
Oil plunged as much as 4.3 percent yesterday to the lowest since April 2. Before today, oil had fallen 30 percent from its record on July 11, while corn dropped 32 percent from an all- time high in June and soybeans fell 27 percent from a July record.
``A weaker crude oil price has put pressure on corn and soybeans today,'' Hiroyuki Kikukawa, general manager of research at IDO Securities Co., said from Tokyo. ``Fundamentals for the two U.S. crops have not changed much as they are close to harvest, but external factors such as the dollar and crude oil are dictating their direction in recent trading.''
Soybeans for November delivery declined as much as 18.75 cents, or 1.6 percent, to $11.8225 a bushel, before trading at at $11.9975 at 5:10 p.m. in Singapore. The contract touched $11.57 yesterday, the lowest since April 1.
Corn for December delivery lost as much as 6.75 cents, or 1.2 percent, to $5.3775 a bushel in after-hours electronic trading on the Chicago Board of Trade before rebounding 0.6 percent to $5.4775. The contract yesterday touched $5.31, the lowest since Aug. 13.
U.S. Forecast
``Most investors will stay on the sidelines before the U.S. Department of Agriculture's monthly report on Friday,'' Kikukawa said. The U.S. government is to release its second survey-based production forecasts for corn and soybeans on Sept. 12.
The dollar traded at $1.4151 per euro at 5:13 p.m. in Singapore after reaching $1.4047 yesterday, the strongest since Oct. 9. Crude oil for October delivery traded up 0.7 percent at $103.95 a barrel after falling as low as $101.74 yesterday.
Wheat for December delivery rose 1.1 percent to $7.385 a bushel after earlier falling by the same amount to $7.2275. Yesterday it fell as low as $7.19, the lowest for a most-active contract since Aug. 29, 2007.
In the physical market, Egypt plans to buy at least 55,000 metric tons of wheat today and Japan is seeking 107,000 tons of U.S. milling wheat at a tender tomorrow.
To contact the reporters responsible for this story: Jae Hur in Singapore at jhur1@bloomberg.net; Sungwoo Park at spark47@bloomberg.net
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Copper Rises in N.Y. After Freeport Failure at Indonesian Mine
By Millie Munshi
Sept. 10 (Bloomberg) -- Copper rose after Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded producer of the metal, reported a mining disruption in Indonesia.
Freeport, based in Phoenix, lowered its near-term sales outlook, citing a ``small-scale failure'' at Grasberg, the world's second-largest copper mine. The price of the metal has more than tripled in the past five years partly because of supply disruptions.
``The fear premium over supplies will support prices,'' said Matthew Zeman, a metals trader at LaSalle Futures Group in Chicago. ``We could see a small bounce in copper.''
Copper futures for December delivery climbed 0.9 cent, or 0.3 percent, to $3.096 a pound at 9:28 a.m. on the Comex division of the New York Mercantile Exchange. Before today, the metal gained 1.5 percent this year.
On the London Metal Exchange, copper for delivery in three months rose $50.25, or 0.7 percent, to $6,880.25 a metric ton ($3.12 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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Sept. 10 (Bloomberg) -- Copper rose after Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly traded producer of the metal, reported a mining disruption in Indonesia.
Freeport, based in Phoenix, lowered its near-term sales outlook, citing a ``small-scale failure'' at Grasberg, the world's second-largest copper mine. The price of the metal has more than tripled in the past five years partly because of supply disruptions.
``The fear premium over supplies will support prices,'' said Matthew Zeman, a metals trader at LaSalle Futures Group in Chicago. ``We could see a small bounce in copper.''
Copper futures for December delivery climbed 0.9 cent, or 0.3 percent, to $3.096 a pound at 9:28 a.m. on the Comex division of the New York Mercantile Exchange. Before today, the metal gained 1.5 percent this year.
On the London Metal Exchange, copper for delivery in three months rose $50.25, or 0.7 percent, to $6,880.25 a metric ton ($3.12 a pound).
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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German Stocks Pare Losses; Postbank, Deutsche Boerse Advance
By Daniela Silberstein
Sept. 10 (Bloomberg) -- German stocks pared earlier declines, led by Deutsche Postbank AG as Deutsche Bank AG's Chief Executive Officer Josef Ackermann said Germany's biggest consumer bank by clients would fit ``strategically.''
Deutsche Post AG, Europe's biggest postal service, and Deutsche Boerse AG also advanced.
The DAX Index slipped 4.25, or 0.1 percent, to 6,229.16 at 1:23 p.m. in Frankfurt after dropping as much as 0.9 percent. DAX Index futures expiring in June lost 0.1 percent to 6,230. The HDAX Index of Germany's 110 biggest companies fell 0.1 percent.
Postbank climbed 1.31 euros, or 2.9 percent, to 46.01. Ackermann said the company would strengthen Germany's largest bank. Such an acquisition would depend on the price and strategy, Ackermann said at a banking conference in Frankfurt today.
Deutsche Post, the owner of Postbank, added 22 cents, or 1.4 percent, to 15.98 euros. FedEx Corp., the largest air-parcel shipper, said it will report a profit of $1.23 a share for the quarter ended Aug. 31, exceeding an earlier forecast.
Deutsche Boerse rallied 2.05 euros, or 3.3 percent, to 63.80. The operator of the Frankfurt stock exchange said it will ask its board to rebuff pressure from the company's two biggest investors to sell the equities unit, or merge with another European exchange.
To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.
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Sept. 10 (Bloomberg) -- German stocks pared earlier declines, led by Deutsche Postbank AG as Deutsche Bank AG's Chief Executive Officer Josef Ackermann said Germany's biggest consumer bank by clients would fit ``strategically.''
Deutsche Post AG, Europe's biggest postal service, and Deutsche Boerse AG also advanced.
The DAX Index slipped 4.25, or 0.1 percent, to 6,229.16 at 1:23 p.m. in Frankfurt after dropping as much as 0.9 percent. DAX Index futures expiring in June lost 0.1 percent to 6,230. The HDAX Index of Germany's 110 biggest companies fell 0.1 percent.
Postbank climbed 1.31 euros, or 2.9 percent, to 46.01. Ackermann said the company would strengthen Germany's largest bank. Such an acquisition would depend on the price and strategy, Ackermann said at a banking conference in Frankfurt today.
Deutsche Post, the owner of Postbank, added 22 cents, or 1.4 percent, to 15.98 euros. FedEx Corp., the largest air-parcel shipper, said it will report a profit of $1.23 a share for the quarter ended Aug. 31, exceeding an earlier forecast.
Deutsche Boerse rallied 2.05 euros, or 3.3 percent, to 63.80. The operator of the Frankfurt stock exchange said it will ask its board to rebuff pressure from the company's two biggest investors to sell the equities unit, or merge with another European exchange.
To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.
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U.K. Stocks Decline; Barclays, Alliance & Leicester Retreat
By Sarah Thompson
Sept. 10 (Bloomberg) -- U.K. stocks fell for a second day after Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, reported a $3.9 billion third-quarter loss.
Barclays Plc, the U.K.'s third-biggest bank, slid 6.8 percent. Alliance & Leicester retreated 4 percent. Old Mutual Plc plunged 4.4 percent after South Africa's biggest insurer said it will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac.
The FTSE 100 Index retreated 48.7, or 0.9 percent, to 5,366.9 at 1:48 p.m. in London. The FTSE All-Share Index lost 1 percent, while Ireland's ISEQ Index decreased 2.6 percent.
Lehman said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence. The company also said it would cut its dividend.
Barclays sank 24.75 pence to 341. Alliance & Leicester, the bank that agreed to a takeover by Banco Santander SA, dropped 13.25 pence to 297.25.
Stocks in Europe extended declines after the European Commission cut its growth estimate for the euro area this year and signaled it may also lower its 2009 forecast as the U.S. and Asian economies cool.
The U.K. economy is contracting for the first time in at least a decade, the National Institute for Economic and Social Research said.
Gross domestic product dropped 0.2 percent in the June to August period and fell 0.1 percent in the three months through July, the group, whose clients include the Bank of England and the U.K. Treasury, said in an e-mailed statement today.
Old Mutual decreased 4 pence to 96.9. The company will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac and increase reserves by $155 million for guarantees on policies in the U.S. Old Mutual will also set aside $250 million to support its operation in Bermuda, it said.
The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.
U.K. companies:
EasyJet Plc (EZJ LN) lost 10.25 pence, or 2.7 percent, to 365.25. Europe's second-biggest discount airline had its share recommendation downgraded by UBS AG, which said gains in the stock don't reflect challenges it faces next year.
Enterprise Inns Plc (ETI LN) lost 29 pence, or 11 percent, to 236. Britain's second-biggest pub landlord fell to its lowest price since 2003 after the Financial Times said the stock is poised to exit the FTSE 100 Index and Morgan Stanley downgraded the shares.
Kesa Electricals Plc (KESA LN) plunged 13.4 pence, or 8.7 percent, to 141. The owner of Darty electronics shops in France and the U.K. Comet chain said first-quarter sales dropped after higher living costs hurt demand for flat-screen televisions and laptop computers.
Next Plc (NXT LN) decreased 12 pence, or 1.1 percent, to 1,131. The U.K.'s second-largest clothes retailer said first-half profit fell 13 percent as higher living costs left Britons with less to spend on fashions.
RSA Insurance Group Plc (RSA LN) slipped 9.4 pence, or 5.8 percent, to 152.9. The U.K.'s second-largest non-life insurer was cut to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which said M&A is ``unlikely at current levels.''
Thorntons Plc (THT LN) gained 4 pence, or 3.6 percent, to 116. The U.K. chocolate maker founded in 1911 said full-year profit rose 15 percent on commercial sales.
Irish companies:
Ryanair Holdings Plc (RYA ID) decreased 10.1 cents, or 3.6 percent, to 2.70 euros. Europe's biggest discount airline postponed the opening of its Edinburgh base after a strike by Boeing Co. machinists delayed the delivery of planes.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
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Sept. 10 (Bloomberg) -- U.K. stocks fell for a second day after Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, reported a $3.9 billion third-quarter loss.
Barclays Plc, the U.K.'s third-biggest bank, slid 6.8 percent. Alliance & Leicester retreated 4 percent. Old Mutual Plc plunged 4.4 percent after South Africa's biggest insurer said it will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac.
The FTSE 100 Index retreated 48.7, or 0.9 percent, to 5,366.9 at 1:48 p.m. in London. The FTSE All-Share Index lost 1 percent, while Ireland's ISEQ Index decreased 2.6 percent.
Lehman said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence. The company also said it would cut its dividend.
Barclays sank 24.75 pence to 341. Alliance & Leicester, the bank that agreed to a takeover by Banco Santander SA, dropped 13.25 pence to 297.25.
Stocks in Europe extended declines after the European Commission cut its growth estimate for the euro area this year and signaled it may also lower its 2009 forecast as the U.S. and Asian economies cool.
The U.K. economy is contracting for the first time in at least a decade, the National Institute for Economic and Social Research said.
Gross domestic product dropped 0.2 percent in the June to August period and fell 0.1 percent in the three months through July, the group, whose clients include the Bank of England and the U.K. Treasury, said in an e-mailed statement today.
Old Mutual decreased 4 pence to 96.9. The company will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac and increase reserves by $155 million for guarantees on policies in the U.S. Old Mutual will also set aside $250 million to support its operation in Bermuda, it said.
The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.
U.K. companies:
EasyJet Plc (EZJ LN) lost 10.25 pence, or 2.7 percent, to 365.25. Europe's second-biggest discount airline had its share recommendation downgraded by UBS AG, which said gains in the stock don't reflect challenges it faces next year.
Enterprise Inns Plc (ETI LN) lost 29 pence, or 11 percent, to 236. Britain's second-biggest pub landlord fell to its lowest price since 2003 after the Financial Times said the stock is poised to exit the FTSE 100 Index and Morgan Stanley downgraded the shares.
Kesa Electricals Plc (KESA LN) plunged 13.4 pence, or 8.7 percent, to 141. The owner of Darty electronics shops in France and the U.K. Comet chain said first-quarter sales dropped after higher living costs hurt demand for flat-screen televisions and laptop computers.
Next Plc (NXT LN) decreased 12 pence, or 1.1 percent, to 1,131. The U.K.'s second-largest clothes retailer said first-half profit fell 13 percent as higher living costs left Britons with less to spend on fashions.
RSA Insurance Group Plc (RSA LN) slipped 9.4 pence, or 5.8 percent, to 152.9. The U.K.'s second-largest non-life insurer was cut to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which said M&A is ``unlikely at current levels.''
Thorntons Plc (THT LN) gained 4 pence, or 3.6 percent, to 116. The U.K. chocolate maker founded in 1911 said full-year profit rose 15 percent on commercial sales.
Irish companies:
Ryanair Holdings Plc (RYA ID) decreased 10.1 cents, or 3.6 percent, to 2.70 euros. Europe's biggest discount airline postponed the opening of its Edinburgh base after a strike by Boeing Co. machinists delayed the delivery of planes.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
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Research In Motion, Suncor May Rise; Goldcorp, Transat May Fall
By John Kipphoff
Sept. 10 (Bloomberg) -- Research In Motion Ltd. may rise, based on bids on the Toronto Stock Exchange, after the maker of the BlackBerry e-mail phone introduced a new ``flip'' handset.
Suncor Energy Inc. may gain as crude oil prices held steady above a five-month low. WestJet Airlines Ltd. may decline for a second day following a report that its workers are in talks with the Canadian Auto Workers union about organizing employees at the company.
The Standard & Poor's/TSX Composite Index declined 3.9 percent to 12,146.76 yesterday in Toronto, the most since Jan. 21. Canada's main equity benchmark, which derives more than three-quarters of its value from energy, materials and financial stocks, has lost $142.1 billion (C$152.24 billion) of its value in six trading days this month. It has fallen 19 percent from its June 18 peak.
Research In Motion may gain C$4.24 to C$110.27, bids already submitted in Toronto indicated. The company, which is seeking to dent Nokia Oyj's dominance of the market for e-mail phones, introduced a version of the BlackBerry Pearl with a flip cover. The phone will be available later this year, Co-Chief Executive Officer Jim Balsillie said yesterday in an interview.
The announcement will be viewed as a positive for the stocks, Citigroup Inc. analyst Jim Suva wrote in a note today.
Crude oil rose 84 cents to $104.10 a barrel in electronic trading in New York. Oil pared an earlier gain of as much as $1.56, on concerns slowing economic growth will trim demand.
Suncor, the world's second-biggest oil-sands producer, may gain C$1.01 to C$46.68, bids showed.
WestJet may fall 35 cents to c$13.65. Canada's second- biggest airline said it hasn't had any discussions with the Canadian Auto Workers and isn't aware of any employees doing so, following reports the union has approached its workers. The CAW is in preliminary talks with WestJet workers, a Canadian Press news service article in the Globe and Mail reported yesterday, citing comments by union president Ken Lewenza.
U.S. stock-index futures advanced as forecasts from FedEx Corp. and Texas Instruments Inc. allayed concern earnings will keep slowing, overshadowing Lehman Brothers Holdings Inc.'s larger-than-estimated $3.9 billion loss.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
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Sept. 10 (Bloomberg) -- Research In Motion Ltd. may rise, based on bids on the Toronto Stock Exchange, after the maker of the BlackBerry e-mail phone introduced a new ``flip'' handset.
Suncor Energy Inc. may gain as crude oil prices held steady above a five-month low. WestJet Airlines Ltd. may decline for a second day following a report that its workers are in talks with the Canadian Auto Workers union about organizing employees at the company.
The Standard & Poor's/TSX Composite Index declined 3.9 percent to 12,146.76 yesterday in Toronto, the most since Jan. 21. Canada's main equity benchmark, which derives more than three-quarters of its value from energy, materials and financial stocks, has lost $142.1 billion (C$152.24 billion) of its value in six trading days this month. It has fallen 19 percent from its June 18 peak.
Research In Motion may gain C$4.24 to C$110.27, bids already submitted in Toronto indicated. The company, which is seeking to dent Nokia Oyj's dominance of the market for e-mail phones, introduced a version of the BlackBerry Pearl with a flip cover. The phone will be available later this year, Co-Chief Executive Officer Jim Balsillie said yesterday in an interview.
The announcement will be viewed as a positive for the stocks, Citigroup Inc. analyst Jim Suva wrote in a note today.
Crude oil rose 84 cents to $104.10 a barrel in electronic trading in New York. Oil pared an earlier gain of as much as $1.56, on concerns slowing economic growth will trim demand.
Suncor, the world's second-biggest oil-sands producer, may gain C$1.01 to C$46.68, bids showed.
WestJet may fall 35 cents to c$13.65. Canada's second- biggest airline said it hasn't had any discussions with the Canadian Auto Workers and isn't aware of any employees doing so, following reports the union has approached its workers. The CAW is in preliminary talks with WestJet workers, a Canadian Press news service article in the Globe and Mail reported yesterday, citing comments by union president Ken Lewenza.
U.S. stock-index futures advanced as forecasts from FedEx Corp. and Texas Instruments Inc. allayed concern earnings will keep slowing, overshadowing Lehman Brothers Holdings Inc.'s larger-than-estimated $3.9 billion loss.
To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.
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European Stocks Fall on Growth Concern; U.S. Futures Advance
By Sarah Jones
Sept. 10 (Bloomberg) -- European stocks fell for a second day as the European Commission cut its forecast for the region's economic growth and concern deepened bank losses will increase. U.S. index futures advanced, while Asian shares retreated.
BHP Billiton Ltd., the world's largest mining company, sank 2.3 percent and PPR SA, the retailer that owns Gucci, lost 3.1 percent after the commission said the euro-area economy will expand 1.3 percent this year, down from an earlier forecast of 1.7 percent. Credit Agricole SA dropped 3.6 percent and UBS AG declined 2.4 percent. Lehman Brothers Holdings Inc. reported a $3.9 billion loss in the third quarter.
Europe's Dow Jones Stoxx 600 Index slipped 1 percent to 276.84 at 1:38 p.m. in London, extending this year's decline to 24 percent. More than $15 trillion has been erased from global equities in 2008 as accelerating inflation and $507 billion in bank writedowns and losses threaten economic growth.
``The worries are multiple,'' said Sebastien Korchia, a fund manager at Meeschaert Asset Management in Paris, which oversees about $2.8 billion. ``There's the problem of growth coupled with inflation. The market also has other worries about the rest of the banking system.''
Futures on the Standard & Poor's 500 Index rose 0.2 percent. The MSCI Asia Pacific Index lost 0.7 percent, led by materials companies.
RSA Insurance Group Plc slumped 3.8 percent after JPMorgan Chase & Co. recommended selling shares of the U.K's second- largest non-life insurer, saying takeover prospects were limited.
National Markets
National benchmark indexes dropped in all 18 western European markets. Germany's DAX declined 0.8 percent, and the U.K.'s FTSE 100 lost 1.2 percent. CAC 40 sank 0.7 percent.
BHP slipped 2.3 percent to 1,373 pence. Xstrata Plc, the world's fourth-largest copper producer, dropped 5.3 percent to 2,233 pence. PPR retreated 3.1 percent to 73.58.
``Developments in the global economy seem to suggest a significant downward revision for 2009,'' the European Commission said today, referring to forecasts it plans to publish in November.
Separately, the National Institute for Economic and Social Research said the U.K. economy is contracting for the first time in at least a decade.
Credit Agricole, France's third-largest bank, fell 3.6 percent to 14.23 euros. UBS, the European bank hardest hit by subprime-related losses, declined 2.4 percent to 23.66 francs. Barclays Plc lost 2.7 percent to 256 pence.
Lehman Report
Lehman reported a loss and said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence. The bank cut its dividend to 5 cents a share from 68 cents.
Lehman shares added 12 percent to $8.75 in pre-market trading in New York, reversing earlier declines.
``In these periods of unprecedented volatility every word by banks or financial institutions is going to be scrutinized,'' said Andy Brough, a fund manager at Schroder Investment Management in London, which has about $12.7 billion.
The fourth-largest U.S. securities firm has been trying to raise capital and shed devalued real-estate assets that saddled the company with $8.2 billion in writedowns and credit losses in the past year.
FedEx climbed 5 percent to $88.96 in German trading after saying first-quarter profit will exceed the company's forecast as fuel spending fell.
Downside Risks
RSA declined 6 percent to 152.6 pence after JPMorgan cut the insurer to ``underweight'' from ``overweight'' as analysts said they see limited prospects for mergers and acquisitions at current levels.
``The risks are now on the downside,'' London-based analyst Andrew Hughes wrote in a note to investors.
Royal Bank of Scotland Group Plc lowered its recommendation for the shares to ``hold'' from ``buy.''
Old Mutual Plc dropped 4.5 percent to 96.4 pence after South Africa's biggest insurer named Julian Roberts as chief executive officer to replace Jim Sutcliffe, who has resigned as the company added to writedowns related to its U.S. business.
EasyJet Plc, Europe's second-biggest discount airline, lost 4.2 percent to 359.75 pence. UBS downgraded the shares to `sell'' from ``neutral,'' which said gains in the stock don't reflect challenges it faces next year.
Sanofi-Aventis SA gained 4.5 percent to 49.63 euros after the drugmaker named GlaxoSmithKline Plc's Chris Viehbacher as chief executive officer. Current chief Gerard Le Fur will continue to advise management.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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Sept. 10 (Bloomberg) -- European stocks fell for a second day as the European Commission cut its forecast for the region's economic growth and concern deepened bank losses will increase. U.S. index futures advanced, while Asian shares retreated.
BHP Billiton Ltd., the world's largest mining company, sank 2.3 percent and PPR SA, the retailer that owns Gucci, lost 3.1 percent after the commission said the euro-area economy will expand 1.3 percent this year, down from an earlier forecast of 1.7 percent. Credit Agricole SA dropped 3.6 percent and UBS AG declined 2.4 percent. Lehman Brothers Holdings Inc. reported a $3.9 billion loss in the third quarter.
Europe's Dow Jones Stoxx 600 Index slipped 1 percent to 276.84 at 1:38 p.m. in London, extending this year's decline to 24 percent. More than $15 trillion has been erased from global equities in 2008 as accelerating inflation and $507 billion in bank writedowns and losses threaten economic growth.
``The worries are multiple,'' said Sebastien Korchia, a fund manager at Meeschaert Asset Management in Paris, which oversees about $2.8 billion. ``There's the problem of growth coupled with inflation. The market also has other worries about the rest of the banking system.''
Futures on the Standard & Poor's 500 Index rose 0.2 percent. The MSCI Asia Pacific Index lost 0.7 percent, led by materials companies.
RSA Insurance Group Plc slumped 3.8 percent after JPMorgan Chase & Co. recommended selling shares of the U.K's second- largest non-life insurer, saying takeover prospects were limited.
National Markets
National benchmark indexes dropped in all 18 western European markets. Germany's DAX declined 0.8 percent, and the U.K.'s FTSE 100 lost 1.2 percent. CAC 40 sank 0.7 percent.
BHP slipped 2.3 percent to 1,373 pence. Xstrata Plc, the world's fourth-largest copper producer, dropped 5.3 percent to 2,233 pence. PPR retreated 3.1 percent to 73.58.
``Developments in the global economy seem to suggest a significant downward revision for 2009,'' the European Commission said today, referring to forecasts it plans to publish in November.
Separately, the National Institute for Economic and Social Research said the U.K. economy is contracting for the first time in at least a decade.
Credit Agricole, France's third-largest bank, fell 3.6 percent to 14.23 euros. UBS, the European bank hardest hit by subprime-related losses, declined 2.4 percent to 23.66 francs. Barclays Plc lost 2.7 percent to 256 pence.
Lehman Report
Lehman reported a loss and said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence. The bank cut its dividend to 5 cents a share from 68 cents.
Lehman shares added 12 percent to $8.75 in pre-market trading in New York, reversing earlier declines.
``In these periods of unprecedented volatility every word by banks or financial institutions is going to be scrutinized,'' said Andy Brough, a fund manager at Schroder Investment Management in London, which has about $12.7 billion.
The fourth-largest U.S. securities firm has been trying to raise capital and shed devalued real-estate assets that saddled the company with $8.2 billion in writedowns and credit losses in the past year.
FedEx climbed 5 percent to $88.96 in German trading after saying first-quarter profit will exceed the company's forecast as fuel spending fell.
Downside Risks
RSA declined 6 percent to 152.6 pence after JPMorgan cut the insurer to ``underweight'' from ``overweight'' as analysts said they see limited prospects for mergers and acquisitions at current levels.
``The risks are now on the downside,'' London-based analyst Andrew Hughes wrote in a note to investors.
Royal Bank of Scotland Group Plc lowered its recommendation for the shares to ``hold'' from ``buy.''
Old Mutual Plc dropped 4.5 percent to 96.4 pence after South Africa's biggest insurer named Julian Roberts as chief executive officer to replace Jim Sutcliffe, who has resigned as the company added to writedowns related to its U.S. business.
EasyJet Plc, Europe's second-biggest discount airline, lost 4.2 percent to 359.75 pence. UBS downgraded the shares to `sell'' from ``neutral,'' which said gains in the stock don't reflect challenges it faces next year.
Sanofi-Aventis SA gained 4.5 percent to 49.63 euros after the drugmaker named GlaxoSmithKline Plc's Chris Viehbacher as chief executive officer. Current chief Gerard Le Fur will continue to advise management.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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U.S. Stocks Advance as Lehman, FedEx, Exxon Mobil Shares Rally
By Elizabeth Stanton
Sept. 10 (Bloomberg) -- U.S. stocks advanced after Lehman Brothers Holdings Inc. said it will shore up capital by selling assets, FedEx Corp. beat profit estimates and energy shares rallied with oil.
Lehman advanced 4.9 percent, rebounding from yesterday's record plunge, on plans to sell a majority stake in its asset- management unit, spin off commercial real estate and slash its annual dividend 93 percent. FedEx climbed 2 percent as the largest air-parcel shipper said lower fuel costs drove quarterly profit above projections. Exxon Mobil Corp. climbed 2.2 percent, leading energy stocks to the biggest advance among 10 Standard & Poor's 500 Index industries, as crude added $1.14 a barrel.
The S&P 500 advanced 12.40, or 1 percent, to 1,236.9i1 at 9:58 a.m. in New York. The Dow Jones Industrial Average added 31.02 to 11,261.75, and the Nasdaq Composite Index rose 15.26 to 2,225.07. Almost four stocks climbed for each that dropped on the New York Stock Exchange.
``The market should take strong reassurance from Lehman's announcement today and that they're objective on what they have to do and they have a plan to do it,'' said Bruce Bent, who manages about $130 billion in assets as chairman of The Reserve Funds in New York. ``The best way to keep it together is to be as candid and conservative as you can possibly be.''
$500 Billion in Losses
The S&P 500 is down 16 percent this year as slowing economic growth and more than $500 billion in credit losses and asset writedowns at the world's largest banks damped the outlook for earnings. Analysts expect profits at companies in the measure to fall 1.7 percent on average in the third quarter and slip 2.1 percent in 2008, according to estimates compiled by Bloomberg.
Stocks tumbled yesterday as concern about Lehman's ability to raise capital rattled the banking industry and a drop in oil prices pushed energy companies down by the most in six years.
Lehman added 38 cents to $8.17. The company said it aims to complete the asset-management sale in an auction, without naming potential bidders. The real-estate spinoff is expected to be completed in the first fiscal quarter of 2009, according to a statement today. Its loss of $3.9 billion was 77 percent more than analysts estimated on average.
``Just having the information is helpful for the market, as bad as it is,'' said Walter Todd, portfolio manager at Greenwood Capital, which manages $750 million in Greenwood, South Carolina. Todd worked at Lehman as a real-estate investment banker from 1999 to 2002. ``Absent the news, the market was going to assume the worst.''
FedEx, Texas Instruments
FedEx added $1.66 to $86.41. Earnings were $1.23 a share for the period ended Aug. 31, eclipsing the outlook of 80 cents to $1, FedEx said yesterday. Analysts expected 95 cents, according to the average of 12 estimates compiled by Bloomberg.
Texas Instruments Inc. added 2 percent to $22.14 after the chipmaker maintained its sales projection despite slower mobile- phone demand. Third-quarter revenue will be between $3.33 billion and $3.47 billion, the Dallas-based company said yesterday. The midpoint, $3.4 billion, matched a previous forecast and the average estimate of analysts in a Bloomberg survey.
``There was some decent news with FedEx upping guidance and Texas Instruments looked pretty good,'' said Ed Laux, head of U.S. trading at Cantor Fitzgerald & Co. in New York. ``FedEx is important because it deals with Main Street issues away from the Wall Street issues. It's one data point that if people are shipping more there's good economic activity.''
Output Quotas
Exxon increased $1.64 to $74.90, driving the S&P 500 Energy Index to a 3.3 percent advance. Chevron Corp. added 2.7 percent to $80.94. Crude oil futures gained 1.1 percent to $104.40 a barrel in New York after OPEC urged its members to comply with output quotas, a move that would reduce supplies by 500,000 barrels a day.
American International Group Inc., the largest U.S. insurer, rose 1.9 percent to $18.71 after falling 19 percent yesterday on concern it will join Lehman in facing obstacles to raising new funds. The company can sell units and scale back insurance underwriting to boost capital, and is ``not similar'' to Lehman, Citigroup Inc. analyst Joshua Shanker wrote in a report.
Salesforce.com Inc., the biggest seller of Internet-based customer-management software, added 6.4 percent to $55.43. Fastenal Co., the largest U.S. retailer of nuts and bolts, gained 3.5 percent to $54. They were picked to replace Fannie Mae and Freddie Mac in the S&P 500.
GFI Group Inc. fell 21 percent to $7.60. Tullett Prebon Plc, the second-biggest broker of transactions between banks, and GFI, the largest interdealer broker of credit derivatives trades, ended merger discussions after failing to reach an agreement on terms.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
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Sept. 10 (Bloomberg) -- U.S. stocks advanced after Lehman Brothers Holdings Inc. said it will shore up capital by selling assets, FedEx Corp. beat profit estimates and energy shares rallied with oil.
Lehman advanced 4.9 percent, rebounding from yesterday's record plunge, on plans to sell a majority stake in its asset- management unit, spin off commercial real estate and slash its annual dividend 93 percent. FedEx climbed 2 percent as the largest air-parcel shipper said lower fuel costs drove quarterly profit above projections. Exxon Mobil Corp. climbed 2.2 percent, leading energy stocks to the biggest advance among 10 Standard & Poor's 500 Index industries, as crude added $1.14 a barrel.
The S&P 500 advanced 12.40, or 1 percent, to 1,236.9i1 at 9:58 a.m. in New York. The Dow Jones Industrial Average added 31.02 to 11,261.75, and the Nasdaq Composite Index rose 15.26 to 2,225.07. Almost four stocks climbed for each that dropped on the New York Stock Exchange.
``The market should take strong reassurance from Lehman's announcement today and that they're objective on what they have to do and they have a plan to do it,'' said Bruce Bent, who manages about $130 billion in assets as chairman of The Reserve Funds in New York. ``The best way to keep it together is to be as candid and conservative as you can possibly be.''
$500 Billion in Losses
The S&P 500 is down 16 percent this year as slowing economic growth and more than $500 billion in credit losses and asset writedowns at the world's largest banks damped the outlook for earnings. Analysts expect profits at companies in the measure to fall 1.7 percent on average in the third quarter and slip 2.1 percent in 2008, according to estimates compiled by Bloomberg.
Stocks tumbled yesterday as concern about Lehman's ability to raise capital rattled the banking industry and a drop in oil prices pushed energy companies down by the most in six years.
Lehman added 38 cents to $8.17. The company said it aims to complete the asset-management sale in an auction, without naming potential bidders. The real-estate spinoff is expected to be completed in the first fiscal quarter of 2009, according to a statement today. Its loss of $3.9 billion was 77 percent more than analysts estimated on average.
``Just having the information is helpful for the market, as bad as it is,'' said Walter Todd, portfolio manager at Greenwood Capital, which manages $750 million in Greenwood, South Carolina. Todd worked at Lehman as a real-estate investment banker from 1999 to 2002. ``Absent the news, the market was going to assume the worst.''
FedEx, Texas Instruments
FedEx added $1.66 to $86.41. Earnings were $1.23 a share for the period ended Aug. 31, eclipsing the outlook of 80 cents to $1, FedEx said yesterday. Analysts expected 95 cents, according to the average of 12 estimates compiled by Bloomberg.
Texas Instruments Inc. added 2 percent to $22.14 after the chipmaker maintained its sales projection despite slower mobile- phone demand. Third-quarter revenue will be between $3.33 billion and $3.47 billion, the Dallas-based company said yesterday. The midpoint, $3.4 billion, matched a previous forecast and the average estimate of analysts in a Bloomberg survey.
``There was some decent news with FedEx upping guidance and Texas Instruments looked pretty good,'' said Ed Laux, head of U.S. trading at Cantor Fitzgerald & Co. in New York. ``FedEx is important because it deals with Main Street issues away from the Wall Street issues. It's one data point that if people are shipping more there's good economic activity.''
Output Quotas
Exxon increased $1.64 to $74.90, driving the S&P 500 Energy Index to a 3.3 percent advance. Chevron Corp. added 2.7 percent to $80.94. Crude oil futures gained 1.1 percent to $104.40 a barrel in New York after OPEC urged its members to comply with output quotas, a move that would reduce supplies by 500,000 barrels a day.
American International Group Inc., the largest U.S. insurer, rose 1.9 percent to $18.71 after falling 19 percent yesterday on concern it will join Lehman in facing obstacles to raising new funds. The company can sell units and scale back insurance underwriting to boost capital, and is ``not similar'' to Lehman, Citigroup Inc. analyst Joshua Shanker wrote in a report.
Salesforce.com Inc., the biggest seller of Internet-based customer-management software, added 6.4 percent to $55.43. Fastenal Co., the largest U.S. retailer of nuts and bolts, gained 3.5 percent to $54. They were picked to replace Fannie Mae and Freddie Mac in the S&P 500.
GFI Group Inc. fell 21 percent to $7.60. Tullett Prebon Plc, the second-biggest broker of transactions between banks, and GFI, the largest interdealer broker of credit derivatives trades, ended merger discussions after failing to reach an agreement on terms.
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
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