By Lilian Karunungan and Kim Kyoungwha
Sept. 20 (Bloomberg) -- South Korea's won and the Philippine peso were among Asian currencies to advance yesterday after the U.S. government stepped up efforts to stem losses in the credit markets, helping revive demand for regional stocks.
Taiwan's dollar and the Indonesian rupiah also rose as Asian shares climbed from a three-year low following the biggest rally in U.S. equities in six years on Sept. 18. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke sought legislation to remove troubled assets from banks and alleviate a credit squeeze.
``It's predominantly a confidence issue and what we are seeing is probably a temporary reprieve in the market,'' said Wan Murezani Mohamad, a senior analyst at Malaysian Rating Corp. in Kuala Lumpur. ``There may be value in Asian stocks and currencies'' after the recent sell-off, he said.
Korea's currency rose 1.2 percent to 1,139.70 against the dollar as of the 3 p.m. close in Seoul yesterday, according to Seoul Money Brokerage Services Ltd. The won fell 2.7 percent on the week. The Philippine peso gained 0.9 percent to 46.552 in Manila, according to Tullett Prebon Plc. The peso gained 0.7 percent from a week ago.
``The won got an early boost from the good news from the U.S.,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``Whether the gains can be sustained is still in doubt.''
The won's advance reduced this year's loss to 18 percent, the worst among the 10 most-active Asian currencies. The currency will trade between 1,100 and 1,160 in the coming week, according to 10 strategists and traders surveyed by Bloomberg.
Blow to Won
Gains in the won may be curbed after HSBC Holdings Plc, Europe's largest bank, abandoned the $6 billion purchase of Korea Exchange Bank from Lone Star Funds.
``The withdrawal of the deal is a blow to a market that was expecting some inflows of dollar supplies from the sale of the bank to foreign investors,'' Hong said.
The Bank of Korea is ready to take action when necessary to calm concerns about the global turmoil, including adding liquidity to the financial system, Governor Lee Seong Tae said yesterday.
Central banks in Japan and Australia pumped $113 billion into money markets this week, pushing down borrowing costs to revive confidence among banks.
`Risk Aversion'
The Philippine peso snapped a seven-week slide as central banks in the world's biggest economies made $180 billion available to the global financial system.
``The joint effort of central banks to pump liquidity into the market lessened risk aversion and is positive for Asian currencies including the peso,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.
India's rupee climbed from more than a two-year low on speculation stock gains will help stem capital outflows.
``The rupee fell victim to panic reaction, and now, like other assets, is recovering lost ground,'' said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. ``The rupee should be at levels much higher than at present.''
The local currency rose 1.4 percent to 45.83 a dollar, according to data compiled by Bloomberg. The rupee dropped 0.3 percent this week.
Overseas funds have sold $8.9 billion more Indian equities than they bought this year, driving the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, to its first annual loss since 2001. The gauge has slumped 31 percent this year.
Indonesia Intervention
Indonesia's rupiah rose for a fourth day yesterday as Deputy Governor Hartadi Sarwono said Sept. 17 that Bank Indonesia has been intervening to boost the currency.
There is ``some respite from the risk-aversion sentiment because overnight there was some positive developments on Wall Street,'' said Joanna Tan, a regional economist and market analyst at Forecast Singapore Pte Ltd. ``Bank Indonesia is always in the market to support the rupiah.''
The rupiah traded at 9,375 in Jakarta, from 9,400 on Sept. 18, according to data compiled by Bloomberg. The currency rose 0.6 percent this week.
Elsewhere, the Singapore dollar fell 0.5 percent to S$1.4362 against the U.S. currency yesterday. Malaysia's ringgit rose 0.5 percent to 3.4527 and the Taiwan dollar gained 0.2 percent to NTS32.158. The Thai baht declined 0.1 percent to 34.17, while Vietnam's dong dropped 0.5 percent to 16,715.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
Read more...
Friday, September 19, 2008
S&P 500 Is Unchanged, Wall Street Forever Altered: Chart of Day
By Nick Baker and Jeff Kearns
Sept. 20 (Bloomberg) -- U.S. stocks were little changed this week.
The CHART OF THE DAY shows the swings in the Standard & Poor's 500 Index that left the equity benchmark up 0.3 percent since Sept. 12. That's the smallest weekly move for the S&P 500 in a month, even as it posted the biggest daily plunges in seven years and the steepest two-day surge since the aftermath of the October 1987 stock-market crash.
The index tumbled more than 4.7 percent twice after Lehman Brothers Holdings Inc.'s bankruptcy, Bank of America Corp.'s takeover of Merrill Lynch & Co. and the government seizure of American International Group Inc. The S&P 500 ended the week by jumping 8.5 percent in two days on the government's plan to purge banks of bad assets and crack down on short sellers.
``We moved around a lot to get nowhere,'' said Douglas Peta, a New York-based market strategist at J&W Seligman & Co., which manages about $20 billion. ``If you were away for a week and just came back and looked at the indexes, you'd say to the person next to you, `nothing happened while I was gone, huh?'''
The S&P 500 added 3.38 points to 1,255.08 this week.
To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
Sept. 20 (Bloomberg) -- U.S. stocks were little changed this week.
The CHART OF THE DAY shows the swings in the Standard & Poor's 500 Index that left the equity benchmark up 0.3 percent since Sept. 12. That's the smallest weekly move for the S&P 500 in a month, even as it posted the biggest daily plunges in seven years and the steepest two-day surge since the aftermath of the October 1987 stock-market crash.
The index tumbled more than 4.7 percent twice after Lehman Brothers Holdings Inc.'s bankruptcy, Bank of America Corp.'s takeover of Merrill Lynch & Co. and the government seizure of American International Group Inc. The S&P 500 ended the week by jumping 8.5 percent in two days on the government's plan to purge banks of bad assets and crack down on short sellers.
``We moved around a lot to get nowhere,'' said Douglas Peta, a New York-based market strategist at J&W Seligman & Co., which manages about $20 billion. ``If you were away for a week and just came back and looked at the indexes, you'd say to the person next to you, `nothing happened while I was gone, huh?'''
The S&P 500 added 3.38 points to 1,255.08 this week.
To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
FX Thoughts for the Day
| Daily Forex Technicals | Written by Kshitij Consultancy Services | Sep 19 08 12:53 GMT | | |
USD-CHF @ 1.1241/45... Could remain calmR: 1.1235 / 1.1260 / 1.1290 / 1.1330 The pair has seen a sharp rise towards 1.1280 during the day. However, facing Resistance there the pair has slipped towards 1.12 since then. The day ahead might see calm trading between 1.1180 and 1.1280 as its a Friday with no economic data scheduled for release. Early next week the pair could see some volatility that could lead to a rise towards 1.1430. However, a break of Support at 1.1100 instead would mean that the pair could slip towards 1.09 once again. A test of Support at 1.09 might not hold this time round. To see the chart click on: http://www.kshitij.com/graphgallery/chfcandle.shtml GBP-USD @ 1.8024/28.... Potential to riseR: 1.8050 / 1.8095 / 1.8135 / 1.8160 Cable has broken below the Support at 1.80, only to find Support on a dip to 1.79. Since then a rise towards 1.8040 has been seen. The day ahead could see a rise towards 1.81, if the Resistance at 1.8050 gives way. If however, 1.8050 holds and a dip is seen instead, the pair could slide towards 1.79, possibly even to 1.7850. To see the chart of the pair click on: http://www.kshitij.com/graphgallery/gbpma.shtml Overall the pair is bullish above 1.78 and could rise towards 1.83-84 over the next week if a close above 1.8050 is seen today. AUD-USD @ 0.8103/07... Immediate Resistance at 0.81R: 0.8100 / 0.8165 / 0.8184-8200 / 0.8235 The pair is unable to rise beyond 0.8140 after testing it a couple of times over. In the day ahead, if the Resistance is broken past, look for a sharp rise towards 0.82. A breakout above 0.8140 remains preferred during the day as long as the Support at 0.8060 holds. A break of Support at 0.8060 would be bearish for the pair in the near term and could lead to further decline towards 0.80. The US session could remain quite unless the credit crisis throws a fresh surprise in the face of the market. Happy Trading! Kshitij Consultancy Service Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved. | |
Read more...
Daily Technical Strategist
| Daily Forex Technicals | Written by FXTechstrategy | Sep 19 08 13:03 GMT | | |||||||||||||||||||||||||||||||||||||||
| Today's Focus: EURUSD & GBPUSD
EURUSDEUR's follow-through to the upside on the back of its Wednesday upmove failed to hold above its Sept 15'08 high at 1.4481 and its invalidated LT rising trendline currently at 1.4510 turning the pair lower and printing a hammer candle pattern. This brings to two the number of failures recorded at that zone with the first one occurring in mid-Sept'08 and this has now increased the odds of downside losses targeting its major support at the 1.3882/52 area, its Sept 11'08/July'07 lows at 1.3882/52.While other support levels line up before this zone, price action at this levels could create two scenarios with a hold at that level drawing a double bottom or a failure of that level triggering the resumption of the pair's medium term decline off the 1.6038 level towards the 1.3361 level, its Aug'07 low. Upside targets are now seen at the 1.4366/10 area, its Jan'08/Dec'07 lows where a break could set up the pair aiming at the 1.4429 level, its Sept 08'08 high with scope for price extension towards the 1.4481 level and then its eroded LT rising trendline/Sept 18'08 high at 1.4510/42.Momentum indicators remain suggestive of more strength. On the whole, having failed to sustain gains above 1.4481/1.4542 area, EUR now runs the risk of pushing towards its key support at 1.3882/52.
GBPUSDGBP gave back its intra day gains Thursday collapsing off the 1.8277 high and printing a doji candle at the end of the session. A follow-through lower was seen in early trading today pushing it back below the 1.8123 level, its Sept 15'08 high and opening up further risk towards the 1 .7976 level, its Sept 08'08 high ahead of the 1.7766 level, its Sept 15'08 low. If more losses are triggered below here, its key support residing at the 1.7447 level, its Sept 11'08 low will be targeted.However,on any recovery from here, GBP should aim at the 1.8090 level, its Jun'06 low at first and then the 1.8123 level with a clearance of there setting the stage for additional upside gains towards its Sept 18'08 high at 1.8277.Beyond there will put the pair on the path to the 1.8482/1.8513 zone, its .382 Ret(2.0157-1.7447 decline)/Aug 15'08.Daily studies are bullish and trending up suggesting that further upside gains could still be seen. All in all, while the current failure and weakness continue to suggest lower prices in line with our medium term outlook, decisively breaking and closing below the 1.7447 level is required to trigger that trend.
Mohammed Isah This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report | |||||||||||||||||||||||||||||||||||||||
Read more...
London Session Recap
| Daily Forex Fundamentals | Written by Forex.com | Sep 19 08 12:13 GMT | | |
| The buck saw a mixed performance against the majors in London trading as markets continued to digest the latest US bailout. The proposal by the US Treasury and Federal Reserve to shift distressed mortgage assets from bank balance sheets to a new government institution (details still upcoming) coupled with the SEC’s ban on short selling of roughly 800 US financial companies sent global stock markets soaring. Equity marts in Asia jumped more than 4%, and nearly 10% in some cases. Europe meanwhile has added about 7% thus far. The flight to risk assets helped the JPY crosses accelerate gains in the London session. USD/JPY added another 50 pips to a close near 107.50 while EUR/JPY popped another 120 pips into the 152.90/95 zone. Also helping the matter was the massive selling in bonds. This was most evident in the reversal in US 2-year yields which have jumped more than 35 bps thus far into 2.05% -- after falling as low as 1.35% yesterday. EUR/USD sat on the sidelines for the most part and ended the session up roughly 40 pips near the 1.4230/35 area. GBP/USD meanwhile shed about -40 pips towards a close near the 1.7990 mark. The focus in the NY session will once again be on the goings on in equity markets and further details of the proposed government bailout. JPY crosses are likely to see most of the price action again as Europe and the US remain on the same boat in terms of credit market turmoil and as such the direction in EUR/USD is likely to be mostly sideways. Upcoming Economic Data Releases (NY Session) Prior Estimate
Forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. | |
Read more...
Mid-Day Report: Massive Carry Trade Comeback on Stock Rally
| Market Overview | Written by ActionForex.com | Sep 19 08 13:52 GMT | | |
| Carry trades finally make a massive come back on another as stock markets soars for another day. DOW opens sharply higher and reaches as high gain more than 400 pts following announcement of US Government's market rescue plan and banning of short selling of nearly 800 financial stocks. Yen crosses finally get out of hesitation and surged sharply across the board, confirming a short term reversal. While the greenback maintains strength in USD/JPY, it gives back earlier gains against other majors currencies as Euro, Sterling, Aussie and Canadian dollar are boosted in yen crosses. USD/JPY Mid-Day OutlookDaily Pivots: (S1) 104.36; (P) 105.07; (R1) 106.12; More. USD/JPY's rally from 103.54 extends further to as high as 108.02 in early US session and is now pressing 107.97 resistance. At this point, intraday bias remains on the upside as long as 106.63 minor support holds. Decisive break of 107.97 will confirm that decline from 110.66 has completed at 103.54 after drawing support form 103.76 support. In other wise, whole medium term rebound is possibly in still force and further rally should be seen to retest 110.66 high first. On the downside, below 106.63 will turn intraday outlook neutral. In the bigger picture, the failure to sustain below 103.76 support and subsequent strong rebound from there argues that fall from 110.66 is corrective in nature. In other words, medium term rebound from 95.77 might still be in progress. Break of 107.79 will affirm this case and bring retest of 110.66 high first. Break will confirm medium term rebound from 95.77 has resumed. However, once again, note bearish divergence condition in daily MACD and USD/JPY is still limited below 55 days EMA. Break of 103.76 will revive the case that medium term rebound from 95.77 has completed at 110.66. The three wave structure of the rise from 95.77 to 110.66 argues that it's merely a correction in the larger down trend. Hence, in such case, deeper medium term decline should be seen to retest this 95.77 low.
| |
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand Current account (nzd) Q2 | -3.19B | -3.50B | -2.16B | -2.11B |
| 5:00 | JPY | Japan Leading indicators Jul F | 91.4 | 91.6 | 91.6 | |
| 6:00 | EUR | Germany PPI M/M Aug | -0.60% | -0.40% | 2.00% | |
| 6:00 | EUR | Germany PPI Y/Y Aug | 8.10% | 8.40% | 8.90% |
Read more...
Brown Faces Mutiny as His Cabinet Members Jostle
By Mark Deen and Gonzalo Vina
Sept. 19 (Bloomberg) -- As U.K. Prime Minister Gordon Brown tries to put down a mutiny, 15,000 Labour Party activists and lawmakers gather in Manchester tomorrow with their eyes on potential successors.
Calls by more than a dozen Labour lawmakers this week for a vote to replace Brown have put Cabinet newcomers David Miliband and Ed Balls on the spot as they jostle with Jack Straw, Alan Johnson and other leadership elders for backing should Brown be forced out.
``These relatively young ministers are well regarded by their colleagues, though the public find it quite hard to pick out any of them from the pack,'' said Andrew Cooper, chief executive officer of pollster Populus Ltd. ``They need to start changing that now because time will rapidly catch up with them.''
At the five-day annual conference, the ministers will walk a tightrope. They have to display loyalty to Brown, 57, while signaling readiness to take his job as David Cameron's Conservative Party enjoys its highest popularity ratings since Margaret Thatcher's third term 20 years ago.
Ministers who stray from their assigned policy areas to articulate a wider vision in speeches and back-room wrangling may be seen as challenging Brown.
``There are huge dangers,'' said Andrew Hawkins of pollster ComRes. ``We know what happens to the person who wields the knife.''
Heseltine's Lesson
In 1990, after Conservative minister Michael Heseltine orchestrated Thatcher's exit, he was portrayed as a hatchet man in the press, and the Conservatives picked John Major to replace her.
Rising unemployment, collapsing home prices and this month's worldwide market turmoil have complicated things for successor hopefuls. Brown helped broker the takeover of HBOS Plc by Lloyds TSB Plc to avert the collapse of Britain's largest mortgage lender in the wake of Lehman Brothers Holdings Inc.'s bankruptcy.
Brown says his decade as finance minister makes him the best person to lead Britain through the slump, and today pledged to coordinate action with other countries to restore stability to world markets.
``The government appears to be imploding just when bold leadership is needed,'' said Ben Read, senior economist at the Centre for Economics and Business Research in London. ``Any talk of replacing the prime minister will be taken very badly.''
Labour Concerns
Cabinet members are under pressure from lawmakers who are concerned that they'll lose their seats in the next election, which must be called by 2010, unless Brown is replaced. Brown this week fired three lawmakers from government posts after they called for a leadership vote.
A survey published in today's Independent newspaper showed 54 percent of 788 Labour members want Brown to quit, and 45 percent said a change of leader would improve the party's chances.
Striking the right tone will be trickiest for Foreign Secretary Miliband, 43, because he wrote in the Guardian newspaper July 30 that the Labour Party must offer ``real change.'' The piece, which didn't mention Brown, was interpreted by lawmakers as an attempt to test the waters for a leadership bid.
``Miliband has got to be very careful,'' said Wyn Grant, a professor of politics at Warwick University. ``Anyone who wants to be prime minister will have to appear very loyal at the conference and not rock the boat.''
Miliband's Rise
The son of an academic who started his career in a research institute, Miliband obtained his degree at Oxford University. He served as an adviser to Tony Blair when he was prime minister and Miliband joined his Cabinet in 2006. Brown appointed him to his current position last year, making him Britain's youngest foreign secretary since the 1970s.
Miliband has said he doesn't favor a leadership contest, though he didn't rule out running if there is one. The minister was favored by the biggest percentage of adults surveyed by the Independent, 24.6 percent, in the event that Brown stands down.
A premiership bid by Miliband would expose divisions between Labour's old guard -- including the unions that provide most of its funding and are pushing to raise taxes on the wealthy -- and its intellectuals, who want to keep Britain attractive for investors.
`Crazy, Destructive'
``Why should we elect a young fresh face when we have already got one in Cameron with policies that are not dissimilar,'' Derek Simpson, joint general secretary of Unite, Britain's largest union, said Sept. 7.
Balls, 41, another potential successor, last year became schools secretary. Also an Oxford graduate, he wrote for the Financial Times' before entering politics. On Sept. 1, he said ousting Brown would be ``crazy, destructive and divisive.''
A divided party could turn to Health Secretary Johnson, 58, or to Justice Secretary Straw, 62, who has been in politics since the 1970s.
``Straw is seen as a safe pair of hands,'' said Mark Wichham-Jones, a Bristol University professor and author of a book on the Labour Party. ``Johnson is an old union man.''
The potential successors barely register on the public's radar. Among the 2,144 voters surveyed by YouGov Plc, Straw was seen as the best next leader, with 14 percent support. Miliband got 12 percent.
``A large minority of people have a vague sense of the name David Miliband,'' Cooper said. ``Do they have an informed view of what he's like? No, let alone the more remote figures.''
To contact the reporters on this story: Mark Deen in London at markdeen@bloomberg.net; Gonzalo Vina in London at gvina@bloomberg.net
Read more...
Japan Says Economy `Weakening,' Keeps View Unchanged
By Toru Fujioka
Sept. 19 (Bloomberg) -- Japan's government said the world's second-largest economy is ``weakening,'' language it introduced last month for the first time since the country was in a recession seven years ago.
``The economy has been weakening recently,'' the Cabinet Office said in a statement in Tokyo today. The government cut its assessment of capital spending and imports and said it's watching how global financial-market turmoil might affect Japan.
The economy's longest postwar expansion may be over as rising commodity costs discourage spending at home and the world slowdown reduces demand for exports. The Bank of Japan and central banks in North America and Europe yesterday agreed to pump $180 billion into the global financial system to revive confidence in markets battered by the U.S. banking crisis.
``This uncertainty in financial markets will naturally have an impact on the Japanese economy, which depends on foreign demand,'' Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo. ``The economy will remain weak for a while.''
The Bank of Japan agreed to swap currencies with the Federal Reserve, supplying dollars for the first time after the cost of borrowing in the currency soared to a seven-year high following Lehman Brothers Holdings Inc.'s bankruptcy and the U.S. government's takeover of American International Group Inc.
Central bank Governor Masaaki Shirakawa today said there's no end in sight to the market tumult, even as global shares rallied after the U.S. government said it's planning new laws to halt the credit-market meltdown. Shirakawa this week said risks for Japan's economy have intensified since the crisis deepened.
``Attention should be given to further downside risks that stem from growing financial uncertainty in the U.S. and movement of the stock and foreign-exchange markets,'' the government said in today's report.
The Cabinet Office removed the word ``recovery'' from its evaluation of the global economy for the first time since June 2002 and downgraded its view of Europe.
Last month was the first time since May 2001 that the government described Japan's economy as weakening.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- Japan's government said the world's second-largest economy is ``weakening,'' language it introduced last month for the first time since the country was in a recession seven years ago.
``The economy has been weakening recently,'' the Cabinet Office said in a statement in Tokyo today. The government cut its assessment of capital spending and imports and said it's watching how global financial-market turmoil might affect Japan.
The economy's longest postwar expansion may be over as rising commodity costs discourage spending at home and the world slowdown reduces demand for exports. The Bank of Japan and central banks in North America and Europe yesterday agreed to pump $180 billion into the global financial system to revive confidence in markets battered by the U.S. banking crisis.
``This uncertainty in financial markets will naturally have an impact on the Japanese economy, which depends on foreign demand,'' Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo. ``The economy will remain weak for a while.''
The Bank of Japan agreed to swap currencies with the Federal Reserve, supplying dollars for the first time after the cost of borrowing in the currency soared to a seven-year high following Lehman Brothers Holdings Inc.'s bankruptcy and the U.S. government's takeover of American International Group Inc.
Central bank Governor Masaaki Shirakawa today said there's no end in sight to the market tumult, even as global shares rallied after the U.S. government said it's planning new laws to halt the credit-market meltdown. Shirakawa this week said risks for Japan's economy have intensified since the crisis deepened.
``Attention should be given to further downside risks that stem from growing financial uncertainty in the U.S. and movement of the stock and foreign-exchange markets,'' the government said in today's report.
The Cabinet Office removed the word ``recovery'' from its evaluation of the global economy for the first time since June 2002 and downgraded its view of Europe.
Last month was the first time since May 2001 that the government described Japan's economy as weakening.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
Read more...
King's Handling of Crisis Provokes Renewed Criticism of BOE
By John Fraher
Sept. 19 (Bloomberg) -- Bank of England Governor Mervyn King's handling of the financial-market crisis is drawing renewed criticism from investors and economists.
King waited too long to extend an emergency lending program for banks roiled by worsening market conditions, said Keith Skeoch, chief executive officer of Standard Life Investments Ltd. Former Bank of England policy maker Charles Goodhart wrote in the Financial Times today that it was an ``error'' for the central bank to put a new deadline on the program in the first place.
``King unfortunately must shoulder some of the blame'' for the market turmoil that led to the near-collapse of HBOS Plc this week, Skeoch, whose company manages $256 billion in assets, said on BBC Radio 4's Today program. ``The bank needs to act much more like a central bank than a monetary policy authority.''
King, lauded last year by Alan Greenspan as one of the world's foremost central bankers, has struggled to earn as much praise for his crisis management as he has for fighting inflation. As central banks focus more on their role as backstops to the financial system, King has repeatedly warned that officials shouldn't be too lenient on banks that made bad bets.
A Bank of England official declined to comment today on the remarks by Goodhart and Skeoch.
As recently as Sept. 11, King said the central bank wouldn't extend its ``exceptionally generous'' emergency program after October. He performed a U-turn six days later when the collapse of Lehman Brothers Holdings Inc. derailed financial markets, provoked a loss of confidence among HBOS's investors and led the mortgage lender to agree to a takeover by Lloyds TSB Group Plc.
Investor Criticism
Lloyds TSB denied that it insisted on an extension of the central bank's emergency funding program before agreeing to the HBOS deal, the Daily Telegraph reported today. The newspaper cited an unidentified investor who criticized the central bank for a lack of pragmatism in handling financial institutions.
The central bank hasn't shown ``enough credibility on how they will stand behind the banking entities,'' Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit, said in an interview. He manages $7 billion in assets.
``The real way to avoid the speculative attack on the banks was to extend the Special Liquidity Scheme facility'' on Sept. 15, Skeoch said today. ``The reason the stocks were being sold was because they thought there was a liquidity problem.''
Goodhart said the program ``should not be given a terminal date until we are out of the woods.'' He told Bloomberg Television yesterday that the banks are in ``real trouble'' and ``in these cases what you do is stuff them, it's like stuffing a goose.''
BOE `Backtracking'
The central bank is ``doing a little bit of backtracking,'' George Magnus, economic adviser at UBS AG in London, said in an interview. ``I didn't understand why they introduced the termination of the SLS in the first place.'' Still, ``if you end up doing the right thing, all is forgiven,'' he said.
Some economists argue that King's decision to extend emergency lending shows he has learned the lessons from last year's collapse of Northern Rock Plc. While he initially refused to follow the European Central Bank and the Federal Reserve in helping markets when they first seized up last year, his response this time has been faster.
The Bank of England has also joined the Fed and other central banks around the world in pledging an additional $180 billion for the financial system in an attempt to unfreeze markets.
``They've been more fleet of foot this time,'' said Brian Hilliard, director of economic research at Societe Generale in London, who used to work at the Bank of England. ``They had a rocky start, but everyone is learning on the job.''
The Bank of England must still avoid giving the impression that it's being too restrictive as the financial crisis persists, Goodhart said.
``Worrying about moral hazard in current circumstances is rather like refusing to sell fire insurance just after the Great Fire of London for fear of adversely affecting future behavior,'' Goodhart wrote today.
To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- Bank of England Governor Mervyn King's handling of the financial-market crisis is drawing renewed criticism from investors and economists.
King waited too long to extend an emergency lending program for banks roiled by worsening market conditions, said Keith Skeoch, chief executive officer of Standard Life Investments Ltd. Former Bank of England policy maker Charles Goodhart wrote in the Financial Times today that it was an ``error'' for the central bank to put a new deadline on the program in the first place.
``King unfortunately must shoulder some of the blame'' for the market turmoil that led to the near-collapse of HBOS Plc this week, Skeoch, whose company manages $256 billion in assets, said on BBC Radio 4's Today program. ``The bank needs to act much more like a central bank than a monetary policy authority.''
King, lauded last year by Alan Greenspan as one of the world's foremost central bankers, has struggled to earn as much praise for his crisis management as he has for fighting inflation. As central banks focus more on their role as backstops to the financial system, King has repeatedly warned that officials shouldn't be too lenient on banks that made bad bets.
A Bank of England official declined to comment today on the remarks by Goodhart and Skeoch.
As recently as Sept. 11, King said the central bank wouldn't extend its ``exceptionally generous'' emergency program after October. He performed a U-turn six days later when the collapse of Lehman Brothers Holdings Inc. derailed financial markets, provoked a loss of confidence among HBOS's investors and led the mortgage lender to agree to a takeover by Lloyds TSB Group Plc.
Investor Criticism
Lloyds TSB denied that it insisted on an extension of the central bank's emergency funding program before agreeing to the HBOS deal, the Daily Telegraph reported today. The newspaper cited an unidentified investor who criticized the central bank for a lack of pragmatism in handling financial institutions.
The central bank hasn't shown ``enough credibility on how they will stand behind the banking entities,'' Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit, said in an interview. He manages $7 billion in assets.
``The real way to avoid the speculative attack on the banks was to extend the Special Liquidity Scheme facility'' on Sept. 15, Skeoch said today. ``The reason the stocks were being sold was because they thought there was a liquidity problem.''
Goodhart said the program ``should not be given a terminal date until we are out of the woods.'' He told Bloomberg Television yesterday that the banks are in ``real trouble'' and ``in these cases what you do is stuff them, it's like stuffing a goose.''
BOE `Backtracking'
The central bank is ``doing a little bit of backtracking,'' George Magnus, economic adviser at UBS AG in London, said in an interview. ``I didn't understand why they introduced the termination of the SLS in the first place.'' Still, ``if you end up doing the right thing, all is forgiven,'' he said.
Some economists argue that King's decision to extend emergency lending shows he has learned the lessons from last year's collapse of Northern Rock Plc. While he initially refused to follow the European Central Bank and the Federal Reserve in helping markets when they first seized up last year, his response this time has been faster.
The Bank of England has also joined the Fed and other central banks around the world in pledging an additional $180 billion for the financial system in an attempt to unfreeze markets.
``They've been more fleet of foot this time,'' said Brian Hilliard, director of economic research at Societe Generale in London, who used to work at the Bank of England. ``They had a rocky start, but everyone is learning on the job.''
The Bank of England must still avoid giving the impression that it's being too restrictive as the financial crisis persists, Goodhart said.
``Worrying about moral hazard in current circumstances is rather like refusing to sell fire insurance just after the Great Fire of London for fear of adversely affecting future behavior,'' Goodhart wrote today.
To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net
Read more...
Central Banks Add $71 Billion to Ease Credit Squeeze
By Gabi Thesing
Sept. 19 (Bloomberg) -- Europe's main central banks lent $71 billion as part of a coordinated effort with the U.S. Federal Reserve to ease a credit squeeze.
The European Central Bank poured $40 billion dollars into the markets while the Bank of England allotted $20.8 billion out of $40 billion offered and the Swiss National Bank added $10bn. The ECB's and the SNB's auctions were oversubscribed. The Fed yesterday almost quadrupled to $247 billion the amount of dollars central banks can auction around the world.
Stocks from London to Shanghai recouped some of the losses from four straight days of declines after the U.S. government started planning new laws to halt the credit-market meltdown and financial regulators cracked down on short sellers.
The U.S. government's ``proposals finally address the root cause of the problem,'' said James Nixon, an economist at Societe Generale SA in London. ``The economic impact at this stage is difficult to gauge, but the boost in sentiment, as seen by the stocks rallies this morning, cannot be overstated.''
Europe's Dow Jones Stoxx 600 Index rose the most since data for the index began in 1987. Russia's RTS Index jumped 16 percent after a two-day suspension and President Dmitry Medvedev's pledge of $20 billion to prop up the market. The MSCI Asia-Pacific Index rebounded from a three-year low.
Cheaper Money
Money-market rates tumbled today on the coordinated efforts between central banks and lawmakers. The London interbank offered rate, or Libor, for overnight dollar loans fell 59 basis points to 3.25 percent today, after sliding 119 basis points yesterday, according to British Bankers' Association data.
When Lehman Brothers Holdings Inc. filed for bankruptcy this week it was the latest casualty in the yearlong credit crisis sparked by record loan defaults on mortgages to U.S. households with a poor credit history. More than $19 trillion was wiped off global stock-market value since Oct. 31 as more than $500 billion in credit losses and writedowns at banks pushed the world economy toward a recession.
U.S. Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke yesterday proposed moving troubled assets from the balance sheets of American financial companies into a new institution. The initiative is aimed at removing the devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression. The Treasury said today it will use as much as $50 billion to insure money-market mutual holdings.
Against Short Selling
Financial regulators in the U.S. and U.K., attorneys general in New York, Texas and Connecticut, and the three largest U.S. pension funds began cracking down on short sellers this week.
Short sellers try to profit by betting stock prices will fall. In a short sale, traders borrow shares from their broker that they then sell. If the price drops, they buy back the stock, return it to their broker and pocket the difference.
The ECB offered commercial banks extra euro funding overnight three times this week after the cost of borrowing in euros rose. The Bank of England and the SNB also held additional liquidity rounds in their own currencies this week. Central banks in Japan and Australia have pumped some $113 billion into money markets this week.
Dollar swap lines between the Fed and other central banks were first established in December when officials joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending. The Fed increased its link with the ECB in July.
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- Europe's main central banks lent $71 billion as part of a coordinated effort with the U.S. Federal Reserve to ease a credit squeeze.
The European Central Bank poured $40 billion dollars into the markets while the Bank of England allotted $20.8 billion out of $40 billion offered and the Swiss National Bank added $10bn. The ECB's and the SNB's auctions were oversubscribed. The Fed yesterday almost quadrupled to $247 billion the amount of dollars central banks can auction around the world.
Stocks from London to Shanghai recouped some of the losses from four straight days of declines after the U.S. government started planning new laws to halt the credit-market meltdown and financial regulators cracked down on short sellers.
The U.S. government's ``proposals finally address the root cause of the problem,'' said James Nixon, an economist at Societe Generale SA in London. ``The economic impact at this stage is difficult to gauge, but the boost in sentiment, as seen by the stocks rallies this morning, cannot be overstated.''
Europe's Dow Jones Stoxx 600 Index rose the most since data for the index began in 1987. Russia's RTS Index jumped 16 percent after a two-day suspension and President Dmitry Medvedev's pledge of $20 billion to prop up the market. The MSCI Asia-Pacific Index rebounded from a three-year low.
Cheaper Money
Money-market rates tumbled today on the coordinated efforts between central banks and lawmakers. The London interbank offered rate, or Libor, for overnight dollar loans fell 59 basis points to 3.25 percent today, after sliding 119 basis points yesterday, according to British Bankers' Association data.
When Lehman Brothers Holdings Inc. filed for bankruptcy this week it was the latest casualty in the yearlong credit crisis sparked by record loan defaults on mortgages to U.S. households with a poor credit history. More than $19 trillion was wiped off global stock-market value since Oct. 31 as more than $500 billion in credit losses and writedowns at banks pushed the world economy toward a recession.
U.S. Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke yesterday proposed moving troubled assets from the balance sheets of American financial companies into a new institution. The initiative is aimed at removing the devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression. The Treasury said today it will use as much as $50 billion to insure money-market mutual holdings.
Against Short Selling
Financial regulators in the U.S. and U.K., attorneys general in New York, Texas and Connecticut, and the three largest U.S. pension funds began cracking down on short sellers this week.
Short sellers try to profit by betting stock prices will fall. In a short sale, traders borrow shares from their broker that they then sell. If the price drops, they buy back the stock, return it to their broker and pocket the difference.
The ECB offered commercial banks extra euro funding overnight three times this week after the cost of borrowing in euros rose. The Bank of England and the SNB also held additional liquidity rounds in their own currencies this week. Central banks in Japan and Australia have pumped some $113 billion into money markets this week.
Dollar swap lines between the Fed and other central banks were first established in December when officials joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending. The Fed increased its link with the ECB in July.
To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net
Read more...
Fed to Help Meet Fund Redemptions, Buy Agency Debt
By Scott Lanman
Sept. 19 (Bloomberg) -- The Federal Reserve said it will lend to banks to meet demands for redemptions from money-market mutual funds and plans to buy agency debt from primary dealers to aid financial-market liquidity.
The Fed will extend loans to banks to purchase ``high- quality'' asset-backed commercial paper from money market funds, the Fed said in a statement in Washington. The loans will be at the discount rate, the Fed said. The rate is currently 2.25 percent. The Fed didn't provide a size for either initiative.
Investors pulled a record $89.2 billion from money-market funds on Sept. 17, according to data compiled by the Money Fund Report, a newsletter based in Westborough, Massachusetts. The U.S. Treasury separately said today it will use as much as $50 billion from the government's Exchange Stabilization Fund to temporarily protect investors from losses on money-market funds.
The central bank said it will buy short-term discount notes issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks ``to further support market functioning.'' The New York Fed will conduct the purchases of debt through ``competitive auctions'' over the ``next several weeks,'' the district bank said in a statement.
The actions came a day after Treasury Secretary Henry Paulson and Fed Chairman Ben S. Bernanke proposed moving troubled assets from the balance sheets of U.S. financial companies into a new institution, the most sweeping action aimed at ending the crisis.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- The Federal Reserve said it will lend to banks to meet demands for redemptions from money-market mutual funds and plans to buy agency debt from primary dealers to aid financial-market liquidity.
The Fed will extend loans to banks to purchase ``high- quality'' asset-backed commercial paper from money market funds, the Fed said in a statement in Washington. The loans will be at the discount rate, the Fed said. The rate is currently 2.25 percent. The Fed didn't provide a size for either initiative.
Investors pulled a record $89.2 billion from money-market funds on Sept. 17, according to data compiled by the Money Fund Report, a newsletter based in Westborough, Massachusetts. The U.S. Treasury separately said today it will use as much as $50 billion from the government's Exchange Stabilization Fund to temporarily protect investors from losses on money-market funds.
The central bank said it will buy short-term discount notes issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks ``to further support market functioning.'' The New York Fed will conduct the purchases of debt through ``competitive auctions'' over the ``next several weeks,'' the district bank said in a statement.
The actions came a day after Treasury Secretary Henry Paulson and Fed Chairman Ben S. Bernanke proposed moving troubled assets from the balance sheets of U.S. financial companies into a new institution, the most sweeping action aimed at ending the crisis.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
Read more...
Total to Shut La Mede Refinery for Upgrade, Usine Nouvelle Says
By Nidaa Bakhsh
Sept. 19 (Bloomberg) -- Total SA, Europe's largest oil refiner, will shut its La Mede plant in Provence next month for a 100 million-euro ($142 million) upgrade, Usine Nouvelle reported.
The refinery will shut Oct. 6 for about two months and will have as many as 2,000 workers on site at the height of the project, the magazine said on its Web site, citing plant manager Daniel Aussenac.
Total will install a new catalytic cracker, which reduces sulfur dioxide and carbon dioxide emissions, and carry out inspections and routine maintenance, according to the article.
The refinery can process 158,000 barrels of oil a day, according to Total's 2007 Factbook.
To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- Total SA, Europe's largest oil refiner, will shut its La Mede plant in Provence next month for a 100 million-euro ($142 million) upgrade, Usine Nouvelle reported.
The refinery will shut Oct. 6 for about two months and will have as many as 2,000 workers on site at the height of the project, the magazine said on its Web site, citing plant manager Daniel Aussenac.
Total will install a new catalytic cracker, which reduces sulfur dioxide and carbon dioxide emissions, and carry out inspections and routine maintenance, according to the article.
The refinery can process 158,000 barrels of oil a day, according to Total's 2007 Factbook.
To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net
Read more...
Gazprom, Total Agree to Develop Gas Fields in Bolivia
By Lucian Kim and Torrey Clark
Sept. 19 (Bloomberg) -- OAO Gazprom agreed to explore for natural gas in Bolivia with France's Total SA as Russia strives to regain influence in Latin America.
The two companies may spend as much as $4.5 billion developing deposits with Bolivia's national energy producer YPF Bolivianos, Russian state broadcaster Vesti-24 reported today.
Russia, which lost its global influence after the fall of the Soviet Union, is keen to reestablish itself as an energy superpower. A high-ranking Russian delegation visited Cuba, Venezuela and Nicaragua earlier this week in an effort to shore up allies opposed to U.S. dominance in the western hemisphere.
``This is primarily about Russia's ambition to be the dominant force in global gas,'' said Chris Weafer, chief strategist at UralSib Financial Corp. ``It can also be seen as a Kremlin reaction to what it regards as U.S. interference in its `backyard.'''
The U.S. is pushing former Soviet republics such as Kazakhstan, Azerbaijan and Turkmenistan to seek energy export routes bypassing Russia, while supporting the aspirations of Ukraine and Georgia to join the North Atlantic Treaty Organization.
Joint Venture
The Bolivian accord, signed in La Paz yesterday, is ``one more step toward forming a joint venture,'' state-run Gazprom said in an e-mailed statement. Bolivia has the second-largest gas reserves in South America after Venezuela, Russia's closest ally in the region.
The agreement is for the exploration of the Azero block in the Andes foothills in southeastern Bolivia, next to the Ipati and Aquio blocks where Total found natural gas in 2004, the French company said in a statement.
The deal shows Total's ``commitment to working with national oil companies,'' the statement said. Company spokesman Kevin Church declined to say how much investment the project will require or Total's contribution.
Gazprom, which is also seeking projects beyond Eurasia in North America and Africa, has already signed a number of memoranda with Bolivia. Total, which has been working in the country since 1996, is a minority partner in Gazprom's Arctic Shtokman development, which holds enough reserves to meet world gas demand for more than a year.
Presidential Talks
YPF Bolivianos will own 51 percent of the planned joint venture, with Total and Gazprom holding equal stakes of 24.5 percent, Vesti-24 reported. The deal was signed by Gazprom Deputy Chief Executive Officer Alexander Medvedev and YPF Bolivianos chief Santos Ramirez following talks with Bolivian President Evo Morales.
Venezuelan President Hugo Chavez, who last week welcomed two Russian Tu-160 bombers for training exercises, expelled the U.S. ambassador on Sept. 12 in a show of solidarity with Morales. Two days earlier, Morales ejected the top American diplomat in Bolivia, accusing him of meddling in domestic politics.
The Bolivian government has since announced it will turn to Russia to replace U.S. funding for its anti-narcotics program.
To contact the reporters on this story: Lucian Kim in Moscow at lkim3@bloomberg.net; Torrey Clark in Moscow at tclark8@bloomberg.netTara Patel in Paris at tpatel2@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- OAO Gazprom agreed to explore for natural gas in Bolivia with France's Total SA as Russia strives to regain influence in Latin America.
The two companies may spend as much as $4.5 billion developing deposits with Bolivia's national energy producer YPF Bolivianos, Russian state broadcaster Vesti-24 reported today.
Russia, which lost its global influence after the fall of the Soviet Union, is keen to reestablish itself as an energy superpower. A high-ranking Russian delegation visited Cuba, Venezuela and Nicaragua earlier this week in an effort to shore up allies opposed to U.S. dominance in the western hemisphere.
``This is primarily about Russia's ambition to be the dominant force in global gas,'' said Chris Weafer, chief strategist at UralSib Financial Corp. ``It can also be seen as a Kremlin reaction to what it regards as U.S. interference in its `backyard.'''
The U.S. is pushing former Soviet republics such as Kazakhstan, Azerbaijan and Turkmenistan to seek energy export routes bypassing Russia, while supporting the aspirations of Ukraine and Georgia to join the North Atlantic Treaty Organization.
Joint Venture
The Bolivian accord, signed in La Paz yesterday, is ``one more step toward forming a joint venture,'' state-run Gazprom said in an e-mailed statement. Bolivia has the second-largest gas reserves in South America after Venezuela, Russia's closest ally in the region.
The agreement is for the exploration of the Azero block in the Andes foothills in southeastern Bolivia, next to the Ipati and Aquio blocks where Total found natural gas in 2004, the French company said in a statement.
The deal shows Total's ``commitment to working with national oil companies,'' the statement said. Company spokesman Kevin Church declined to say how much investment the project will require or Total's contribution.
Gazprom, which is also seeking projects beyond Eurasia in North America and Africa, has already signed a number of memoranda with Bolivia. Total, which has been working in the country since 1996, is a minority partner in Gazprom's Arctic Shtokman development, which holds enough reserves to meet world gas demand for more than a year.
Presidential Talks
YPF Bolivianos will own 51 percent of the planned joint venture, with Total and Gazprom holding equal stakes of 24.5 percent, Vesti-24 reported. The deal was signed by Gazprom Deputy Chief Executive Officer Alexander Medvedev and YPF Bolivianos chief Santos Ramirez following talks with Bolivian President Evo Morales.
Venezuelan President Hugo Chavez, who last week welcomed two Russian Tu-160 bombers for training exercises, expelled the U.S. ambassador on Sept. 12 in a show of solidarity with Morales. Two days earlier, Morales ejected the top American diplomat in Bolivia, accusing him of meddling in domestic politics.
The Bolivian government has since announced it will turn to Russia to replace U.S. funding for its anti-narcotics program.
To contact the reporters on this story: Lucian Kim in Moscow at lkim3@bloomberg.net; Torrey Clark in Moscow at tclark8@bloomberg.netTara Patel in Paris at tpatel2@bloomberg.net
Read more...
Iraq Resumes Normal Crude Pumping to Persian Gulf, Shippers Say
By Alaric Nightingale
Sept. 19 (Bloomberg) -- Iraq resumed normal crude pumping to Basra Oil terminal, its facility in the Persian Gulf that handles most of the nation's oil exports, two people involved in the loading of cargo onto tankers said.
Pumping returned to about 72,000 barrels an hour, or 1.7 million barrels a day, yesterday after dropping to about 36,000 barrels an hour earlier this week, said the people, who declined to be identified because the information is private.
Neither knew the exact reason for the earlier reduction. A third official said equipment that is used for maintenance or checking for leaks had been sent through at least one of two pipelines.
The Basra resumption comes two days after Iraq again began pumping Kirkuk crude oil via a separate pipeline system in the north to Ceyhan, an export terminal on Turkey's Mediterranean coast.
Iraq produced an average 2.31 million barrels of crude a day in August, most of which is destined for export markets, according to Bloomberg estimates. Shipments through the northern pipeline are often intermittent and sometimes restricted by insurgent attacks.
To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- Iraq resumed normal crude pumping to Basra Oil terminal, its facility in the Persian Gulf that handles most of the nation's oil exports, two people involved in the loading of cargo onto tankers said.
Pumping returned to about 72,000 barrels an hour, or 1.7 million barrels a day, yesterday after dropping to about 36,000 barrels an hour earlier this week, said the people, who declined to be identified because the information is private.
Neither knew the exact reason for the earlier reduction. A third official said equipment that is used for maintenance or checking for leaks had been sent through at least one of two pipelines.
The Basra resumption comes two days after Iraq again began pumping Kirkuk crude oil via a separate pipeline system in the north to Ceyhan, an export terminal on Turkey's Mediterranean coast.
Iraq produced an average 2.31 million barrels of crude a day in August, most of which is destined for export markets, according to Bloomberg estimates. Shipments through the northern pipeline are often intermittent and sometimes restricted by insurgent attacks.
To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net
Read more...
Oil Gains a Third Day as Bank-Bailout Plan Boosts Stock Market
By Grant Smith
Sept. 19 (Bloomberg) -- Crude oil rose for a third day, following equities higher as government measures to resolve the bank crisis drew investors back to financial markets.
Oil advanced above $100 and stock markets surged worldwide after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they're putting together plans to halt the credit-market seizure. Output disruptions from rebel attacks in Nigeria and hurricane shutdowns in the U.S. have raised concern that oil supplies are constrained.
``Oil has been drawing strength from other markets like stocks, where central banks have helped restore confidence,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``This level of violence in Nigeria would be sending prices even higher if demand fundamentals weren't so bearish.''
Crude for October delivery gained as much as $2.88, or 2.9 percent, $100.76 a barrel on the New York Mercantile Exchange. It was at $100.26 at 12:27 p.m. London time.
In Nigeria, Royal Dutch Shell Plc warned that this week's escalation in rebel attacks would hurt earnings. The country has lost about 280,000 barrels a day from recent attacks on top of production already shut-in, an official with the state-owned oil company said Sept. 17.
The latest raids ``will ultimately add up to increased equipment downtime, repair and remediation cost and deferred earnings,'' Shell spokesman Rainer Winzenried said in an e- mailed statement today.
`Obvious Impact'
``Oil has gotten support from the supply-side issues,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``There is the obvious impact of the hurricane activity on U.S. production and inventories. Nigeria remains an area of potential risk.''
While the supply disruption in Nigeria intensified, Iraq restored normal crude pumping to its Basra Oil terminal after an unspecified malfunction cut loadings in half, two people involved in shipping the crude said. The facility on the Persian Gulf handles most of the nation's exports.
U.S. energy companies in the Gulf of Mexico have about 1.2 million barrels a day, or 93 percent of oil production, and 5.7 billion cubic feet a day of natural gas, or 78 percent, idled after Hurricanes Gustav and Ike, the U.S. Minerals Management Service, said yesterday on its Web site.
Emergency Stockpiles
The International Energy Agency's Executive Director Nobuo Tanaka said today the agency will decide soon on releasing emergency stockpiles because of hurricane damage.
Oil, which fell more than $10 a barrel earlier this week as Lehman Brothers Holdings Inc. filed for bankruptcy, has since recouped most of its losses and is headed for a weekly decline of 1.8 percent. It's down 33 percent from a record $147.27 a barrel reached on July 11.
Brent crude oil for November settlement rose as much as $2.73, or 2.9 percent, to $97.92 a barrel on London's ICE Futures Europe exchange. It was trading at $97.39 a barrel at 12:26 p.m. London time.
``There was a positive reaction to the talk of increasing liquidity from the U.S. Fed and also the central banks in Europe and Asia,'' Gerard Burg, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``That kind of coordinated approach gave some confidence to the markets.''
The Dow Jones Stoxx 600 Index rose the most since data for the index began in 1987, adding 6.4 percent to 273.31 at 11:49 a.m. in London. U.S. stocks rallied the most in six years yesterday on the prospects for the government plan to shore up financial markets, while regulators and pension funds took steps to curb bets against banks and brokerages.
The Dow Jones Industrial Average jumped 617 points from its low of the day and the Standard & Poor's 500 Index climbed 4.3 percent.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- Crude oil rose for a third day, following equities higher as government measures to resolve the bank crisis drew investors back to financial markets.
Oil advanced above $100 and stock markets surged worldwide after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they're putting together plans to halt the credit-market seizure. Output disruptions from rebel attacks in Nigeria and hurricane shutdowns in the U.S. have raised concern that oil supplies are constrained.
``Oil has been drawing strength from other markets like stocks, where central banks have helped restore confidence,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``This level of violence in Nigeria would be sending prices even higher if demand fundamentals weren't so bearish.''
Crude for October delivery gained as much as $2.88, or 2.9 percent, $100.76 a barrel on the New York Mercantile Exchange. It was at $100.26 at 12:27 p.m. London time.
In Nigeria, Royal Dutch Shell Plc warned that this week's escalation in rebel attacks would hurt earnings. The country has lost about 280,000 barrels a day from recent attacks on top of production already shut-in, an official with the state-owned oil company said Sept. 17.
The latest raids ``will ultimately add up to increased equipment downtime, repair and remediation cost and deferred earnings,'' Shell spokesman Rainer Winzenried said in an e- mailed statement today.
`Obvious Impact'
``Oil has gotten support from the supply-side issues,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``There is the obvious impact of the hurricane activity on U.S. production and inventories. Nigeria remains an area of potential risk.''
While the supply disruption in Nigeria intensified, Iraq restored normal crude pumping to its Basra Oil terminal after an unspecified malfunction cut loadings in half, two people involved in shipping the crude said. The facility on the Persian Gulf handles most of the nation's exports.
U.S. energy companies in the Gulf of Mexico have about 1.2 million barrels a day, or 93 percent of oil production, and 5.7 billion cubic feet a day of natural gas, or 78 percent, idled after Hurricanes Gustav and Ike, the U.S. Minerals Management Service, said yesterday on its Web site.
Emergency Stockpiles
The International Energy Agency's Executive Director Nobuo Tanaka said today the agency will decide soon on releasing emergency stockpiles because of hurricane damage.
Oil, which fell more than $10 a barrel earlier this week as Lehman Brothers Holdings Inc. filed for bankruptcy, has since recouped most of its losses and is headed for a weekly decline of 1.8 percent. It's down 33 percent from a record $147.27 a barrel reached on July 11.
Brent crude oil for November settlement rose as much as $2.73, or 2.9 percent, to $97.92 a barrel on London's ICE Futures Europe exchange. It was trading at $97.39 a barrel at 12:26 p.m. London time.
``There was a positive reaction to the talk of increasing liquidity from the U.S. Fed and also the central banks in Europe and Asia,'' Gerard Burg, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``That kind of coordinated approach gave some confidence to the markets.''
The Dow Jones Stoxx 600 Index rose the most since data for the index began in 1987, adding 6.4 percent to 273.31 at 11:49 a.m. in London. U.S. stocks rallied the most in six years yesterday on the prospects for the government plan to shore up financial markets, while regulators and pension funds took steps to curb bets against banks and brokerages.
The Dow Jones Industrial Average jumped 617 points from its low of the day and the Standard & Poor's 500 Index climbed 4.3 percent.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
Read more...
Rosneft Jumps Most Since IPO on Report Kremlin Will Boost Stake
By William Mauldin
Sept. 19 (Bloomberg) -- OAO Rosneft climbed the most since its initial public offering two years ago on reports the Russian state will increase its majority stake in the country's biggest oil producer.
Rosneft soared 66.20 rubles, or 55 percent, to 186.60 rubles at 2:17 p.m. in Moscow. The government plans to buy shares in state-run Rosneft, OAO Gazprom and VTB Group, Interfax reported, citing Finance Minister Alexei Kudrin.
The government will set aside 250 billion rubles ($9.8 billion) rubles this year and a similar amount next year to purchase stock in the country's best companies, Kudrin said today, according to the news service.
Gazprom, the state-controlled gas export monopoly, added 52.88 rubles, or 33 percent, to 212.90 rubles, while VTB, the country's second-biggest bank, surged 1.63 kopeks, or 60 percent, to 4.35 kopeks.
Russia's Micex Index and RTS Index are both headed for their biggest gains since their inceptions following two days of closure for Russia's two biggest stock exchanges. The Micex surged as much as 28 percent today and the RTS as much as 20 percent.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
Read more...
Sept. 19 (Bloomberg) -- OAO Rosneft climbed the most since its initial public offering two years ago on reports the Russian state will increase its majority stake in the country's biggest oil producer.
Rosneft soared 66.20 rubles, or 55 percent, to 186.60 rubles at 2:17 p.m. in Moscow. The government plans to buy shares in state-run Rosneft, OAO Gazprom and VTB Group, Interfax reported, citing Finance Minister Alexei Kudrin.
The government will set aside 250 billion rubles ($9.8 billion) rubles this year and a similar amount next year to purchase stock in the country's best companies, Kudrin said today, according to the news service.
Gazprom, the state-controlled gas export monopoly, added 52.88 rubles, or 33 percent, to 212.90 rubles, while VTB, the country's second-biggest bank, surged 1.63 kopeks, or 60 percent, to 4.35 kopeks.
Russia's Micex Index and RTS Index are both headed for their biggest gains since their inceptions following two days of closure for Russia's two biggest stock exchanges. The Micex surged as much as 28 percent today and the RTS as much as 20 percent.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.
Read more...
South African Rand Rises on U.S. Plan to Calm Financial Markets
By Garth Theunissen
Sept. 19 (Bloomberg) -- South Africa's rand rose against the dollar for a second day as global stocks rallied after the U.S. government announced plans to avert further turmoil in financial markets, stoking demand for higher-yielding assets.
The rand pared a fourth weekly decline after the U.S. Treasury said it would use as much as $50 billion from the country's Exchange Stabilization fund to insure money-market mutual fund holdings against collapse. It also proposed a coordinated plan with the Federal Reserve to implement legislation to help banks clear their balance sheets of illiquid assets.
``The fact central banks have indicated they're ready to bail out troubled financial institutions justifies an improvement in market sentiment,'' said Shahin Vallee, an emerging-markets currency strategist in London at BNP Paribas SA, France's largest bank. ``It makes investors more willing to rebuild positions in South African equities, which is positive for the rand.''
The rand rose as much as 2.9 percent to 7.9350 per dollar, the highest since Sept. 10, and traded at 7.9475 by 2:27 p.m. in Johannesburg, compared with 8.1744 yesterday.
``The interventions announced by authorities has reduced some of the near-term risk in financial markets,'' said Jeff Gable, head of Barclays Plc-owned Absa Capital Research in Johannesburg. ``That's having a positive impact on risky assets and the rand is a prime example.''
Stocks soared around the world after Treasury Secretary Henry Paulson and Fed Chairman Ben S. Bernanke yesterday proposed taking troubled assets away from banks to calm markets. The U.S. Securities and Exchange Commission and the U.K. Financial Services Authority stiffened regulations against short selling of financial shares. Short sellers try to profit by betting stock prices will fall.
Stocks Rally
Europe's Dow Jones Stoxx 600 Index snapped a four-day loss, surging 7 percent, the biggest gain since December 1986 as investors bet efforts to prop up credit markets and curb short selling would halt a slump in equities. The U.K.'s FTSE 100 Index rallied the most since January 1984, adding more than 8 percent in London trading while futures on the Standard & Poor's 500 Index futures gained 3.9 percent.
South Africa's main stock index rallied the most in seven months with the FTSE/JSE Africa All Share Index climbing 5.2 percent, the steepest gain since Feb. 1.
South African government bonds gained, with the yield on the 13.5 percent security due in September 2015 dropping 4 basis points to 9.03 percent, increasing its weekly decrease to 7 basis points. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- South Africa's rand rose against the dollar for a second day as global stocks rallied after the U.S. government announced plans to avert further turmoil in financial markets, stoking demand for higher-yielding assets.
The rand pared a fourth weekly decline after the U.S. Treasury said it would use as much as $50 billion from the country's Exchange Stabilization fund to insure money-market mutual fund holdings against collapse. It also proposed a coordinated plan with the Federal Reserve to implement legislation to help banks clear their balance sheets of illiquid assets.
``The fact central banks have indicated they're ready to bail out troubled financial institutions justifies an improvement in market sentiment,'' said Shahin Vallee, an emerging-markets currency strategist in London at BNP Paribas SA, France's largest bank. ``It makes investors more willing to rebuild positions in South African equities, which is positive for the rand.''
The rand rose as much as 2.9 percent to 7.9350 per dollar, the highest since Sept. 10, and traded at 7.9475 by 2:27 p.m. in Johannesburg, compared with 8.1744 yesterday.
``The interventions announced by authorities has reduced some of the near-term risk in financial markets,'' said Jeff Gable, head of Barclays Plc-owned Absa Capital Research in Johannesburg. ``That's having a positive impact on risky assets and the rand is a prime example.''
Stocks soared around the world after Treasury Secretary Henry Paulson and Fed Chairman Ben S. Bernanke yesterday proposed taking troubled assets away from banks to calm markets. The U.S. Securities and Exchange Commission and the U.K. Financial Services Authority stiffened regulations against short selling of financial shares. Short sellers try to profit by betting stock prices will fall.
Stocks Rally
Europe's Dow Jones Stoxx 600 Index snapped a four-day loss, surging 7 percent, the biggest gain since December 1986 as investors bet efforts to prop up credit markets and curb short selling would halt a slump in equities. The U.K.'s FTSE 100 Index rallied the most since January 1984, adding more than 8 percent in London trading while futures on the Standard & Poor's 500 Index futures gained 3.9 percent.
South Africa's main stock index rallied the most in seven months with the FTSE/JSE Africa All Share Index climbing 5.2 percent, the steepest gain since Feb. 1.
South African government bonds gained, with the yield on the 13.5 percent security due in September 2015 dropping 4 basis points to 9.03 percent, increasing its weekly decrease to 7 basis points. Yields move inversely to bond prices.
To contact the reporter on this story: Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net
Read more...
Shell Says Nigeria Militant Attacks to Hurt Earnings
By Alexander Kwiatkowski and Fred Pals
Sept. 19 (Bloomberg) -- Royal Dutch Shell Plc, Europe's biggest oil company, said the escalation in rebel attacks against its oil and gas facilities in Nigeria will hurt earnings from its local unit.
The Movement for the Emancipation of the Niger Delta, the main militant group in the region, intensified its ``oil war'' against foreign companies this week, attacking oil and gas production facilities owned by Shell and Chevron Corp. Nigeria's crude exports have declined more than 20 percent since 2006 when rebels began their campaign in earnest.
``Barrels produced in Nigeria aren't the most profitable,'' said Dirk Hoozemans, who helps manage the equivalent of $23.8 billion at Rotterdam-based Robeco. ``The impact on earnings will be relatively small.''
The latest spate of attacks began on Sept. 13 when Nigerian soldiers clashed with militants south of Port Harcourt, the hub of Nigeria's oil industry. The militants said troops launched an offensive against its positions and declared an ``oil war'' in the region, which produces almost all of Nigeria's crude.
`Deferred Earnings'
The raids ``will ultimately add up to increased equipment downtime, repair and remediation cost and deferred earnings,'' for the company's local unit, spokesman Rainer Winzenried said in an e-mailed statement today. Four Shell installations have been targeted since Sept. 13, he said, declining to say how much production has been lost.
Two people were killed in an attack on Shell's Alakiri flowstation and gas plant on Sept. 15, while the Greater Port Harcourt Swamp Line, Orubiri flowstation and Rumuekepe pipeline were also attacked, according to Shell's Winzenried.
MEND, as the group is known, has since claimed as many as six attacks on Shell oil pipelines and flowstations and two on facilities owned by Chevron Corp. MEND says it's fighting on behalf of the inhabitants of the Niger Delta, who have yet to share in the oil wealth of the region.
Shell's Nigerian joint venture ``is closely monitoring the situation and continues to take all necessary measures to ensure the safety of staff and contractors,'' he said. The company is ``concerned about the resultant damage to oil and gas facilities and possible environmental damage.''
Lost Production
Nigeria has lost 280,000 barrels daily of its crude output to attacks in the Niger Delta oil region since Sept 13., bringing shut output to about 1 million barrels a day, the state-run oil company said earlier this week. Crude exports have fallen 22 percent to 1.9 million barrels a day since the end of 2005 when the country was pumping about 2.5 million barrels a day, according to Bloomberg estimates.
``It is not the most pleasant environment to work in but Shell has to stay, given the enormous potential in resources,'' Hoozemans said, adding that offshore operations no longer are without risk following an attack by militants on Shell's Bonga platform in June.
The Shell Petroleum Development Company of Nigeria (SPDC) is the operator of the joint venture formed by the Nigerian National Petroleum Corporation (55%), Shell (30%), Total (10%) and Agip (5%) and is the country's biggest tax and royalty payer. In 2007, Shell-operated ventures in Nigeria produced an average of almost 934,000 barrels of oil equivalent a day with just over 700,000 coming from SPDC.
Shell took a $716 million charge in the fourth quarter last year because of Nigeria's onshore assets, including impairments and provisions arising from the funding and the security situation.
To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netFred Pals in Amsterdam at fpals@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- Royal Dutch Shell Plc, Europe's biggest oil company, said the escalation in rebel attacks against its oil and gas facilities in Nigeria will hurt earnings from its local unit.
The Movement for the Emancipation of the Niger Delta, the main militant group in the region, intensified its ``oil war'' against foreign companies this week, attacking oil and gas production facilities owned by Shell and Chevron Corp. Nigeria's crude exports have declined more than 20 percent since 2006 when rebels began their campaign in earnest.
``Barrels produced in Nigeria aren't the most profitable,'' said Dirk Hoozemans, who helps manage the equivalent of $23.8 billion at Rotterdam-based Robeco. ``The impact on earnings will be relatively small.''
The latest spate of attacks began on Sept. 13 when Nigerian soldiers clashed with militants south of Port Harcourt, the hub of Nigeria's oil industry. The militants said troops launched an offensive against its positions and declared an ``oil war'' in the region, which produces almost all of Nigeria's crude.
`Deferred Earnings'
The raids ``will ultimately add up to increased equipment downtime, repair and remediation cost and deferred earnings,'' for the company's local unit, spokesman Rainer Winzenried said in an e-mailed statement today. Four Shell installations have been targeted since Sept. 13, he said, declining to say how much production has been lost.
Two people were killed in an attack on Shell's Alakiri flowstation and gas plant on Sept. 15, while the Greater Port Harcourt Swamp Line, Orubiri flowstation and Rumuekepe pipeline were also attacked, according to Shell's Winzenried.
MEND, as the group is known, has since claimed as many as six attacks on Shell oil pipelines and flowstations and two on facilities owned by Chevron Corp. MEND says it's fighting on behalf of the inhabitants of the Niger Delta, who have yet to share in the oil wealth of the region.
Shell's Nigerian joint venture ``is closely monitoring the situation and continues to take all necessary measures to ensure the safety of staff and contractors,'' he said. The company is ``concerned about the resultant damage to oil and gas facilities and possible environmental damage.''
Lost Production
Nigeria has lost 280,000 barrels daily of its crude output to attacks in the Niger Delta oil region since Sept 13., bringing shut output to about 1 million barrels a day, the state-run oil company said earlier this week. Crude exports have fallen 22 percent to 1.9 million barrels a day since the end of 2005 when the country was pumping about 2.5 million barrels a day, according to Bloomberg estimates.
``It is not the most pleasant environment to work in but Shell has to stay, given the enormous potential in resources,'' Hoozemans said, adding that offshore operations no longer are without risk following an attack by militants on Shell's Bonga platform in June.
The Shell Petroleum Development Company of Nigeria (SPDC) is the operator of the joint venture formed by the Nigerian National Petroleum Corporation (55%), Shell (30%), Total (10%) and Agip (5%) and is the country's biggest tax and royalty payer. In 2007, Shell-operated ventures in Nigeria produced an average of almost 934,000 barrels of oil equivalent a day with just over 700,000 coming from SPDC.
Shell took a $716 million charge in the fourth quarter last year because of Nigeria's onshore assets, including impairments and provisions arising from the funding and the security situation.
To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netFred Pals in Amsterdam at fpals@bloomberg.net
Read more...
Asian Currencies: Won, Peso Gain on U.S. Plans to Calm Markets
By Lilian Karunungan and Kim Kyoungwha
Sept. 19 (Bloomberg) -- South Korea's won and the Philippine peso were among Asian currencies to advance today after the U.S. government stepped up efforts to stem losses in the credit markets, helping revive demand for regional stocks.
Taiwan's dollar and the Indonesian rupiah also rose as Asian shares climbed from a three-year low following the biggest rally in U.S. equities in six years. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke sought legislation to remove troubled assets from banks and alleviate a credit squeeze.
``It's predominantly a confidence issue and what we are seeing is probably a temporary reprieve in the market,'' said Wan Murezani Mohamad, a senior analyst at Malaysian Rating Corp. in Kuala Lumpur. ``There may be value in Asian stocks and currencies'' after the recent sell-off, he said.
Korea's currency rose 1.2 percent to 1,139.70 against the dollar as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The won fell 2.7 percent on the week. The Philippine peso gained 0.9 percent to 46.552 in Manila, according to Tullett Prebon Plc. The peso gained 0.7 percent from a week ago.
``The won got an early boost from the good news from the U.S.,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``Whether the gains can be sustained is still in doubt.''
The won's advance reduced this year's loss to 18 percent, the worst among the 10 most-active Asian currencies. The currency will trade between 1,100 and 1,160 next week, according to 10 strategists and traders surveyed by Bloomberg News.
Blow to Won
Gains in the won may be curbed after HSBC Holdings Plc, Europe's largest bank, abandoned the $6 billion purchase of Korea Exchange Bank from Lone Star Funds.
``The withdrawal of the deal is a blow to a market that was expecting some inflows of dollar supplies from the sale of the bank to foreign investors,'' Hong said.
The Bank of Korea is ready to take action when necessary to calm concerns about the global turmoil, including adding liquidity to the financial system, Governor Lee Seong Tae said today.
Central banks in Japan and Australia pumped $113 billion into money markets this week, pushing down borrowing costs to revive confidence among banks.
`Risk Aversion'
The Philippine peso snapped a seven-week slide as central banks in the world's biggest economies made $180 billion available to the global financial system.
``The joint effort of central banks to pump liquidity into the market lessened risk aversion and is positive for Asian currencies including the peso,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.
India's rupee climbed from more than a two-year low on speculation gains in Asian stocks will help stem capital outflows.
``The rupee fell victim to panic reaction, and now, like other assets, is recovering lost ground,'' said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. ``The rupee should be at levels much higher than at present.''
The local currency rose 0.4 percent to 46.31, according to data compiled by Bloomberg. The rupee, which dropped 1.3 percent this week, may strengthen to 46 in coming days, Chiney said.
Overseas funds have sold $8.9 billion more Indian equities than they bought this year, driving the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, to its first annual loss since 2001. The gauge has slumped 32 percent this year.
Indonesia Intervention
Indonesia's rupiah rose for a fourth day as Deputy Governor Hartadi Sarwono said Sept. 17 that Bank Indonesia has been intervening to boost the currency.
There is ``some respite from the risk-aversion sentiment because overnight there was some positive developments on Wall Street,'' said Joanna Tan, a regional economist and market analyst at Forecast Singapore Pte Ltd. ``Bank Indonesia is always in the market to support the rupiah.''
The rupiah traded at 9,370 in Jakarta, from 9,400 late yesterday, according to data compiled by Bloomberg. The currency rose 0.7 percent this week.
Elsewhere, the Singapore dollar fell 0.4 percent to S$1.4358 against the U.S. currency. Malaysia's ringgit rose 0.1 percent to 3.4636. Taiwan's dollar gained 0.2 percent to NTS32.158. The Thai baht traded at 34.15 compared with 34.14 yesterday. Vietnam's dong dropped 0.5 percent to 16,715.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- South Korea's won and the Philippine peso were among Asian currencies to advance today after the U.S. government stepped up efforts to stem losses in the credit markets, helping revive demand for regional stocks.
Taiwan's dollar and the Indonesian rupiah also rose as Asian shares climbed from a three-year low following the biggest rally in U.S. equities in six years. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke sought legislation to remove troubled assets from banks and alleviate a credit squeeze.
``It's predominantly a confidence issue and what we are seeing is probably a temporary reprieve in the market,'' said Wan Murezani Mohamad, a senior analyst at Malaysian Rating Corp. in Kuala Lumpur. ``There may be value in Asian stocks and currencies'' after the recent sell-off, he said.
Korea's currency rose 1.2 percent to 1,139.70 against the dollar as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The won fell 2.7 percent on the week. The Philippine peso gained 0.9 percent to 46.552 in Manila, according to Tullett Prebon Plc. The peso gained 0.7 percent from a week ago.
``The won got an early boost from the good news from the U.S.,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. ``Whether the gains can be sustained is still in doubt.''
The won's advance reduced this year's loss to 18 percent, the worst among the 10 most-active Asian currencies. The currency will trade between 1,100 and 1,160 next week, according to 10 strategists and traders surveyed by Bloomberg News.
Blow to Won
Gains in the won may be curbed after HSBC Holdings Plc, Europe's largest bank, abandoned the $6 billion purchase of Korea Exchange Bank from Lone Star Funds.
``The withdrawal of the deal is a blow to a market that was expecting some inflows of dollar supplies from the sale of the bank to foreign investors,'' Hong said.
The Bank of Korea is ready to take action when necessary to calm concerns about the global turmoil, including adding liquidity to the financial system, Governor Lee Seong Tae said today.
Central banks in Japan and Australia pumped $113 billion into money markets this week, pushing down borrowing costs to revive confidence among banks.
`Risk Aversion'
The Philippine peso snapped a seven-week slide as central banks in the world's biggest economies made $180 billion available to the global financial system.
``The joint effort of central banks to pump liquidity into the market lessened risk aversion and is positive for Asian currencies including the peso,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.
India's rupee climbed from more than a two-year low on speculation gains in Asian stocks will help stem capital outflows.
``The rupee fell victim to panic reaction, and now, like other assets, is recovering lost ground,'' said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. ``The rupee should be at levels much higher than at present.''
The local currency rose 0.4 percent to 46.31, according to data compiled by Bloomberg. The rupee, which dropped 1.3 percent this week, may strengthen to 46 in coming days, Chiney said.
Overseas funds have sold $8.9 billion more Indian equities than they bought this year, driving the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, to its first annual loss since 2001. The gauge has slumped 32 percent this year.
Indonesia Intervention
Indonesia's rupiah rose for a fourth day as Deputy Governor Hartadi Sarwono said Sept. 17 that Bank Indonesia has been intervening to boost the currency.
There is ``some respite from the risk-aversion sentiment because overnight there was some positive developments on Wall Street,'' said Joanna Tan, a regional economist and market analyst at Forecast Singapore Pte Ltd. ``Bank Indonesia is always in the market to support the rupiah.''
The rupiah traded at 9,370 in Jakarta, from 9,400 late yesterday, according to data compiled by Bloomberg. The currency rose 0.7 percent this week.
Elsewhere, the Singapore dollar fell 0.4 percent to S$1.4358 against the U.S. currency. Malaysia's ringgit rose 0.1 percent to 3.4636. Taiwan's dollar gained 0.2 percent to NTS32.158. The Thai baht traded at 34.15 compared with 34.14 yesterday. Vietnam's dong dropped 0.5 percent to 16,715.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net
Read more...
U.K. Pound Falls Against Dollar on U.S. Plan to Avert Collapse
By Lukanyo Mnyanda and Andrew MacAskill
Sept. 19 (Bloomberg) -- The U.K. pound fell against the dollar as U.S. government plans to take tainted assets off banks' balance sheets boosted demand for the U.S. currency.
The pound also climbed versus the yen as investors bought higher-yielding assets after Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke pledged a ``comprehensive approach'' to revive the market for mortgage- related debt. The government today announced a $50 billion program to insure the holdings of money-market mutual funds for a year.
``Sterling is caught up in a logjam here. To a large extent it's a dollar story,'' Gerry Celaya, chief strategist at RedTower Inc. in Aberdeen, said in a Bloomberg Television interview. ``The risk is that the pound will languish'' around $1.80 and then decline to $1.75.
The British currency dropped as much as 1.5 percent to $1.7917 and was at $1.8077 by 1:48 p.m. in London, from $1.8181 yesterday, when it traded at the highest level since Aug. 29. Against the euro, the pound was at 79.07 pence, from 78.92 yesterday and 79.32 a week ago. It gained 1.8 percent to 195.09 yen, the highest level since Sept. 8.
The pound's trade-weighted index, a gauge of the currency's performance against Britain's major trade partners, was little changed at 87.55, according to Deutsche Bank AG. The measure is down 7.5 percent this year.
Recession Threat
The U.K. currency dropped as mounting evidence the second- largest economy in Europe is headed for a recession prompted investors to increase bets on lower interest rates. The odds on the Bank of England cutting them at its next policy meeting were 45 percent, from 28 percent a week ago, according to a Credit Suisse derivatives index.
The drop in Britain's house prices will be ``painful'' for many households, the central bank's Chief Economist Spencer Dale told business leaders in Dover, southern England, yesterday.
``The prospect of the Bank of England cutting as early as October suggests playing shorts is attractive,'' Divyang Shah, chief strategist in London at CBA Europe Ltd., a unit of Commonwealth Bank of Australia, wrote in a note to clients.
Paulson and Bernanke late yesterday proposed moving troubled assets from the balance sheets of American financial companies into a new institution. The world's major central banks also pumped $247 billion into the money markets in an attempt to stabilize the financial system.
A deepening credit crunch sparked by the implosion of Lehman Brothers Holdings Inc. fueled concern that U.S. securities firms wouldn't be able to fund themselves.
Bank of England policy makers kept the benchmark interest rate at 5 percent on Sept. 4, as they weighed the risk of accelerating inflation with the danger that mounting bank losses will drive the economy into a recession.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- The U.K. pound fell against the dollar as U.S. government plans to take tainted assets off banks' balance sheets boosted demand for the U.S. currency.
The pound also climbed versus the yen as investors bought higher-yielding assets after Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke pledged a ``comprehensive approach'' to revive the market for mortgage- related debt. The government today announced a $50 billion program to insure the holdings of money-market mutual funds for a year.
``Sterling is caught up in a logjam here. To a large extent it's a dollar story,'' Gerry Celaya, chief strategist at RedTower Inc. in Aberdeen, said in a Bloomberg Television interview. ``The risk is that the pound will languish'' around $1.80 and then decline to $1.75.
The British currency dropped as much as 1.5 percent to $1.7917 and was at $1.8077 by 1:48 p.m. in London, from $1.8181 yesterday, when it traded at the highest level since Aug. 29. Against the euro, the pound was at 79.07 pence, from 78.92 yesterday and 79.32 a week ago. It gained 1.8 percent to 195.09 yen, the highest level since Sept. 8.
The pound's trade-weighted index, a gauge of the currency's performance against Britain's major trade partners, was little changed at 87.55, according to Deutsche Bank AG. The measure is down 7.5 percent this year.
Recession Threat
The U.K. currency dropped as mounting evidence the second- largest economy in Europe is headed for a recession prompted investors to increase bets on lower interest rates. The odds on the Bank of England cutting them at its next policy meeting were 45 percent, from 28 percent a week ago, according to a Credit Suisse derivatives index.
The drop in Britain's house prices will be ``painful'' for many households, the central bank's Chief Economist Spencer Dale told business leaders in Dover, southern England, yesterday.
``The prospect of the Bank of England cutting as early as October suggests playing shorts is attractive,'' Divyang Shah, chief strategist in London at CBA Europe Ltd., a unit of Commonwealth Bank of Australia, wrote in a note to clients.
Paulson and Bernanke late yesterday proposed moving troubled assets from the balance sheets of American financial companies into a new institution. The world's major central banks also pumped $247 billion into the money markets in an attempt to stabilize the financial system.
A deepening credit crunch sparked by the implosion of Lehman Brothers Holdings Inc. fueled concern that U.S. securities firms wouldn't be able to fund themselves.
Bank of England policy makers kept the benchmark interest rate at 5 percent on Sept. 4, as they weighed the risk of accelerating inflation with the danger that mounting bank losses will drive the economy into a recession.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net
Read more...
Dollar Gains on U.S. Government Plan to Revive Credit Markets
By Bo Nielsen
Sept. 19 (Bloomberg) -- The dollar rose the most in more than five months against the yen after U.S. officials said they are working on a plan to stop financial institutions from failing.
The currency also gained for the first time in three days versus the euro as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed moving troubled assets from the balance sheets of American financial companies into a new institution. The yen tumbled for a second day against the Australian and New Zealand dollars as investors bought high- yielding assets funded in the Japanese currency.
``This will put an end to the banking crisis,'' said David Woo, London-based head of foreign-exchange strategy at Barclays Capital, the third-biggest currency trader. ``But people underestimate how long it will take to get this thing through Congress.''
The dollar rose 2.3 percent versus the Japanese currency, the largest gain since April 1, to 107 as of 7:38 a.m. in New York, paring this week's drop to 0.3 percent. The U.S. currency climbed 1.1 percent to $1.4196 per euro. The euro advanced 1.1 percent to 152.91 yen from 151.28 yen, following a 0.9 percent gain yesterday.
U.S. regulators met with lawmakers late yesterday to discuss a plan to clean up the devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression. Congressional leaders said they intend to pass legislation within days.
The U.S. currency extended its gains after the Treasury today announced plans to use as much as $50 billion from the country's Exchange Stabilization Fund to insure money-market mutual fund holdings against a collapse in financial markets.
Stocks, Bonds
Stocks rose and bonds fell. Europe's Dow Jones Stoxx 600 Index surged 7 percent, the most since it was inaugurated in 1987. Futures on the Standard & Poor's 500 Index climbed 3.8 percent, and the MSCI Asia Pacific Index rebounded 4.9 percent from a three-year low. The yield on the two-year U.S. Treasury note rose 33 basis points to 2.05 percent.
Investors are gaining confidence after the Fed agreed with global central banks yesterday to almost quadruple the amount of dollars they can provide to money markets to $247 billion. The cost of borrowing in dollars overnight surged the most in its history on Sept. 16 after Lehman Brothers Holdings Inc. filed the biggest bankruptcy in history and the U.S. government took control of American International Group Inc. It fell for a second day today to 3.25 percent. That's still 125 basis points above the Fed's target rate.
Forecasts Changed
``I fear this issue is not going to be resolved within the timetable that the market is looking for,'' London-based David Simmonds, head of currency research at Royal Bank of Scotland Group Plc, wrote in a note to clients today. It's only ``conceivable'' a plan could be enacted before the inauguration of the new U.S. president in January, he added.
Banks have raised their forecasts for the dollar. The median estimate in a Bloomberg News survey of 41 analysts is for the U.S. currency to end the year at $1.44 against the euro. It was $1.50 per euro a month ago.
The dollar still headed for a weekly decline versus the Japanese currency.
``I wouldn't have too much confidence in U.S. assets yet, because we don't know how the situation is going to play out,'' said Naomi Fink, a Tokyo-based strategist at Bank of Tokyo- Mitsubishi UFJ Ltd., in a Bloomberg television interview.
As of June 30, Citigroup Inc., JPMorgan Chase Co., Bank of America Corp., Goldman Sachs Group Inc., Merrill Lynch & Co. and Lehman had more than $500 billion of so-called Level 3 assets, or ones whose values they say can only be determined through internal models because of illiquid markets, according to New York-based bond research firm CreditSights Inc.
Carry Trades
The yen dropped against higher-yielding currencies today as appetite for carry trades rebounded. It fell 2.7 percent to 87.14 versus Australia's dollar, the most since March 11, and 2.1 percent to 72.78 against New Zealand's dollar.
The South Korean won and the Indian rupee were the biggest gainers among Asian currencies today as the U.S. government proposals helped revive demand for the region's stocks. The won rose 1.3 percent to 1,139.40 per dollar and the rupee increased 1.4 percent to 45.830.
The yen may strengthen to 100 per dollar this year as traders cut holdings of higher-yielding overseas assets funded with Japan's currency, known as carry trades, Eisuke Sakakibara, a former currency-policy official in Japan, said in a Bloomberg television interview. There is ``no quick fix'' for the credit- market turmoil, he said.
`Mr. Yen'
Sakakibara, 67, currently a professor at Tokyo's Waseda University, was dubbed ``Mr. Yen'' because of his ability to influence the foreign-exchange market during his 1997-1999 tenure at the Finance Ministry.
The benchmark interest rate is 0.5 percent in Japan, compared with 7 percent in Australia and 7.5 percent in New Zealand. The risk in carry trades is that currency-market moves erase profits.
``The last 12 to 18 hours have been an unambiguous good for the financial world and the global economy,'' said Peter Pontikis, a treasury strategist at Suncorp-Metway Ltd. in Brisbane, Australia. ``The first response is the yen isn't an attractive asset now.''
To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net;
Read more...
Putnam, Mellon Spur `Oh, My God' Withdrawals From Money Market
By Michael Janofsky
Sept. 19 (Bloomberg) -- Before yesterday, Shiela Bialka, a retired dance and drama teacher in Laguna Woods, California, said she hadn't thought about shifting money out of her money- market account.
Then she learned that Boston-based Putnam Investments LLC closed its $12.3 billion institutional Putnam Prime Money Market Fund and a similar fund run by Bank of New York Mellon Corp. had fallen to less than $1 a share. It mostly recovered amid a broad stock market rally yesterday.
``Oh, my God,'' said Bialka, 74, whose money is with Fidelity Investments. ``Now I think I will move it. I wasn't concerned before. Now, I am.''
Advisers say larger companies, such as Boston-based Fidelity, have more resources to prop up their money-market funds. Still, fears over potential losses in the low-risk investment accounts have become the latest source of angst for investors as they adjust their portfolios and lifestyles to the tremors of Wall Street.
Investors pulled a record $89.2 billion from money-market funds on Sept. 17, according to data compiled by the Money Fund Report, a newsletter based in Westborough, Massachusetts. The withdrawals totaled a decline of 2.6 percent in money-market assets.
The redemptions were an abrupt departure from a trend that had seen assets in money-market funds increase nearly 14 percent, to $3.58 trillion, from January to the beginning of September, according to data compiled by IMoneyNet Inc., the research firm that publishes the Money Fund Report.
First in 14 Years
``Your typical day doesn't include outflows,'' said Peter Crane, president of Crane Data LLC, which tracks money-market funds.
This week, shareholders pulled more than 60 percent of the assets from Reserve Primary Fund, which on Wednesday became the first money-market fund in 14 years to expose investors to losses.
Financial advisers around the country said they are fielding more calls from clients buffeted by events including the failure of Lehman Brothers Holdings Inc. and the sale of Merrill Lynch & Co. to Bank of America Corp. Now, brokers, say, clients are worried about their funds in money-market accounts, traditional safe havens.
``People are asking if their cash is safe,'' said Cary Carbonaro, president and founder of Family Financial Research, an advisory service based in Huntington, New York and Clermont, Florida. ``I've been telling them yes, but they're still scared. It's bad out there. Really bad.''
Rattled Nerves
Investors have already started withdrawing funds from money markets in the Phoenix area, said Rich Kerr, branch manager of the Charles Schwab Corp. office in Chandler, Arizona. The experience of Reserve Primary, he said, ``has stimulated a greater degree of conversation.''
Though stocks rallied the most in six years Thursday as the Dow Jones Industrial Average jumped 617 points from its low of the day, investors remained jittery over the recent volatility.
Marci Fenske, an air resources technician for the state of California, said she overheard a woman in a restaurant tell her friends that she redeemed all her assets and buried the money in her backyard.
Carl Mueller, 48, an actor in Los Angeles, said he has begun shopping at a 99-cent store to save money. Chris Calle, 27, a project manager for a concrete company in Dallas, said he has started buying off-label goods at the grocery store.
Ruth May, 75, a retired travel agent in Laguna Woods, said whenever she feels panicky, she calls her financial adviser.
`Walk the Cat'
``He tells me to calm down and take a walk with the cat,'' she said.
Mark Berg, president of Timothy Financial Counsel, Inc. in Wheaton, Illinois, said one of his customers, a single mother, decided to trade houses for vacations rather than spend on a traditional getaway.
``People are beginning to be a little more creative in how to moderate the way they live,'' Berg said. ``So, her vacation is essentially free.''
Carbonaro said, ``The biggest question I hear from my clients is, `Should we liquidate everything?''' She said she has been so shaken by recent events on Wall Street that she wakes up in the middle of the night to check foreign markets.
``This is way more than anyone expected,'' she said. ``It's incredibly taxing, psychologically and emotionally.''
Changing Their Lifestyles
Bialka said she has already altered her routines to accommodate the worsening economy. She said she cooks at home more, rather than go to restaurants, and worries that any future bad news might require bigger changes.
``Next thing, I'll have to stop going to the theater and wearing the latest styles,'' she said. ``I might have to start shopping at thrift shops.''
Fenske, 64, said she was sitting alone at Carol's Restaurant in West Sacramento, California, when a group of elderly women at a nearby table were discussing how much money they had been losing in the financial markets.
She said she heard one woman, whom she didn't know, complain that she ``can't take any more hits'' and told her friends, ``I turned everything I had into cash, put it in a lock box and buried it under the shed near the sewer line.''
``I was horrified that somebody else might have heard her,'' Fenske said. ``The placed was crammed. I told her to go home and move it.''
To contact the reporter on this story: Michael Janofsky in Los Angeles at mjanofsky@bloomberg.net
Read more...
Argentina, Brazil: Latin America Bond and Currency Preview
By Lester Pimentel
Sept. 19 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.
Argentina: The economy expanded 7.5 percent in the second quarter from a year earlier, the National Statistics Institute said in a statement in Buenos Aires yesterday.
The economy grew 2.1 percent from the first quarter, according to the institute.
The peso fell 0.5 percent to 3.1186 per dollar.
The yield on Argentina's inflation-linked peso bonds due in February 2033 fell 66 basis points, or 0.66 percentage point, to 11.38 percent, according to Citigroup Inc.'s local unit.
Brazil: The central bank plans to sell U.S. dollars in the currency market for the first time since February 2003, seeking to inject liquidity amid a global credit crunch that sent the real to a one-year low.
Banco Central do Brasil President Henrique Meirelles said yesterday that the action will also include purchases of dollar futures contracts.
The real fell 0.4 percent to 1.8965 per dollar.
The yield on the zero-coupon, real-denominated bond due in January 2010 rose 45 basis points to 15.39 percent, according to Banco Votorantim.
Mexico: The government may reduce its estimate for the price of oil in next year's budget by as much as $4 a barrel after crude slumped to a seven-month low this week, Deputy Finance Minister Alejandro Werner told lawmakers yesterday.
The government's budget proposal sent to legislators on Sept. 8 assumes Mexican oil exports, which typically trade below benchmark crude futures, will sell for $80.30 a barrel in 2009. The government may cut the estimate to ``a range that would be three of four dollars below'' the previous estimate, Werner said today in response to a question from a lower-house legislator.
The peso was little changed at 10.7509 per dollar.
The yield on the 10 percent bond due December 2024 rose 12 basis points to 8.87 percent. The bond's price fell 1.08 centavos to 109.67 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
Read more...
Sept. 19 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.
Argentina: The economy expanded 7.5 percent in the second quarter from a year earlier, the National Statistics Institute said in a statement in Buenos Aires yesterday.
The economy grew 2.1 percent from the first quarter, according to the institute.
The peso fell 0.5 percent to 3.1186 per dollar.
The yield on Argentina's inflation-linked peso bonds due in February 2033 fell 66 basis points, or 0.66 percentage point, to 11.38 percent, according to Citigroup Inc.'s local unit.
Brazil: The central bank plans to sell U.S. dollars in the currency market for the first time since February 2003, seeking to inject liquidity amid a global credit crunch that sent the real to a one-year low.
Banco Central do Brasil President Henrique Meirelles said yesterday that the action will also include purchases of dollar futures contracts.
The real fell 0.4 percent to 1.8965 per dollar.
The yield on the zero-coupon, real-denominated bond due in January 2010 rose 45 basis points to 15.39 percent, according to Banco Votorantim.
Mexico: The government may reduce its estimate for the price of oil in next year's budget by as much as $4 a barrel after crude slumped to a seven-month low this week, Deputy Finance Minister Alejandro Werner told lawmakers yesterday.
The government's budget proposal sent to legislators on Sept. 8 assumes Mexican oil exports, which typically trade below benchmark crude futures, will sell for $80.30 a barrel in 2009. The government may cut the estimate to ``a range that would be three of four dollars below'' the previous estimate, Werner said today in response to a question from a lower-house legislator.
The peso was little changed at 10.7509 per dollar.
The yield on the 10 percent bond due December 2024 rose 12 basis points to 8.87 percent. The bond's price fell 1.08 centavos to 109.67 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
Read more...
Paulson, Bernanke Push New Plan to Cleanse Books
By Alison Vekshin and Dawn Kopecki
Sept. 19 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed moving troubled assets from the balance sheets of American financial companies into a new institution.
Congressional leaders who met with Paulson and Bernanke late yesterday in Washington said they aim to pass legislation soon. The initiative is aimed at removing the devalued mortgage- linked assets at the root of the worst credit crisis since the Great Depression. Today, the Treasury announced a $50 billion program to insure the holdings of money-market mutual funds for a year.
The effort is a recognition that Paulson's and Bernanke's earlier efforts failed to revive financial and housing markets. The government took over American International Group Inc., Fannie Mae and Freddie Mac in the past 12 days, a period when Lehman Brothers Holdings Inc. filed for bankruptcy and Americans pulled a record $89 billion from money-market funds.
``They were just worn out and weary from the one-off situations they had to deal with, and finally came to the realization that it's a much more pervasive problem,'' said Marilyn Cohen, who manages $185 million in bonds as president and chief executive officer of Envision Capital Management in Los Angeles. ``Hopefully, this will give the trading desks the confidence to start making markets again.''
Securities and Exchange Commission Chairman Christopher Cox, who attended the gathering with lawmakers, said the SEC planned to consider more rules to guarantee market liquidity. Today, the SEC temporarily banned short-selling of financial companies' shares until Oct. 2 after Morgan Stanley fell 39 percent earlier this week. The U.K. took a similar step yesterday.
Stocks Rally
Stocks surged around the world after a three-day slide earlier this week wiped about $1.9 trillion in market value from the MSCI World Index. The U.K.'s benchmark FTSE 100 index rose 7.9 percent, the most since it started in 1984, futures on the Standard & Poor's 500 Index climbed 2.8 percent and Japan's Nikkei 225 Stock Average climbed 5 percent.
At the same time, investors are still seeking the safety of government debt. The yield on the U.S. three-month Treasury bill, which has tumbled almost 1.5 percentage points this week, was little changed at 0.07 percent today.
While the two-year note yield rose 21 basis points to 1.94 percent today, it's still below the Fed's 2 percent target rate for overnight loans between banks. Yields on 10-year notes increased 6 basis points to 3.63 percent, near the lowest in 12 months.
Government Options
Options that U.S. officials are considering include establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corp. to insure investors in money-market funds, said two people briefed by congressional staff. They spoke on condition of anonymity because the plans may change.
Another possibility is using Fannie and Freddie, the federally chartered mortgage-finance companies seized by the government last week, to buy assets, one of the people said.
``We will try to put a bill together and do it fairly quickly,'' House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said after the meeting. ``We are not in a position to give you any specifics right now'' on the proposals, he said when asked about the potential cost.
The likelihood of the government taking on yet more devalued assets, after the seizures of Fannie, Freddie and AIG and the earlier assumption by the Fed of $29 billion of Bear Stearns Cos. investments, may spur concern about its own balance sheet.
Debt Concern
The Treasury has pledged to buy up to $200 billion of Fannie and Freddie stock to keep them solvent, while the Fed agreed Sept. 16 to an $85 billion bridge loan to AIG. The Treasury also plans to buy $5 billion of mortgage-backed debt this month under an emergency program.
``It sounds like there's going to be a giant dumpster for illiquid assets,'' said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, which oversees $22 billion in assets. ``It brings up the more troubling question of whether the U.S. government is big enough to take on this whole problem, relative'' to the size of the American economy, he said.
Senator Richard Shelby of Alabama and some other Republicans have criticized the takeovers of AIG, Fannie and Freddie for imposing a potentially high cost on taxpayers.
Shelby Skeptical
``We cannot protect all risk in the market, and we shouldn't do it at the risk of the taxpayer,'' Shelby, the ranking Republican on the Senate Banking Committee, said in an interview with Bloomberg Television this week.
Still, Representative John Boehner, the head of the Republicans in the House, told reporters after the meeting with Paulson and Bernanke that he was ``hopeful that in the coming days we'll have a proposal that will pass this Congress.''
Senator Charles Schumer of New York, a Democrat who chairs the congressional Joint Economic Committee, warned yesterday against leaving the Fed with an expanding role for addressing the credit crisis.
``It's hard for them to do monetary policy, which is their primary task, and then run all these businesses,'' Schumer said yesterday in Washington.
Record Lending
The Treasury the past two days announced $200 billion in special bill sales to help the Fed expand its balance sheet. The U.S. central bank extended a record $59.8 billion in loans to investment banks and $33.4 billion to commercial banks as of Sept. 17. The Fed yesterday also joined its counterparts from around the world to pump $180 billion into global money markets.
An increasing number of lawmakers are advocating a stronger response to the crisis sparked by record homeowner defaults.
Schumer proposed an agency to inject capital into troubled financial companies in exchange for rewriting mortgages to make them more affordable. It would be modeled on the Great Depression-era Reconstruction Finance Corp., he said. Others have floated a type of Resolution Trust Corp., which was a 1990s fund to manage devalued assets from failed savings and loans.
Citigroup Inc., JPMorgan, Bank of America Corp., Goldman Sachs Group Inc., Merrill Lynch & Co. and Lehman Brothers alone had more than $500 billion of so-called Level 3 assets as of June 30, according to data in a Sept. 15 report from New York- based bond research firm CreditSights Inc. The holders of these assets say their values can only be determined through internal models because of illiquid markets.
Senator Christopher Dodd, who chairs the Senate Banking Committee, said it was a ``sober'' gathering. The plan would likely come from the Treasury and Fed this weekend and ``nothing is more important than this,'' Dodd said.
To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net; Dawn Kopecki in Washington at dkopecki@bloomberg.net
Read more...
Subscribe to:
Posts (Atom)
Posts
