By Bob Willis
Oct. 3 (Bloomberg) -- Service industries in the U.S. expanded at a slower pace in September as companies cut back on hiring.
The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, decreased to 50.2, higher than forecast, from 50.6 in August, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction.
A three-year housing slump that triggered the recent credit meltdown is reverberating across the economy, prompting increased job losses and declines in spending. Earlier today, the Labor Department reported the economy last month lost the most jobs in five years.
``With domestic demand weak, as export demand falls, that will soften the economy,'' Anna Piretti, a senior economist at BNP Paribas in New York, said before the report.
Economists forecast the index would decline to 50, the dividing line between growth and contraction, according to the median of 67 projections in a Bloomberg News survey. Estimates ranged from 42 to 51.9.
Another report from the ISM earlier this week showed manufacturing shrank in September at the fastest pace since the last recession in 2001. The ISM's factory index fell to 43.5, for a sixth reading of contraction in the last nine months, from 49.9 in August.
Payrolls Drop
The economy lost 159,000 jobs last month, for a total of 760,000 job cuts so far this year, the Labor Department said earlier today. Service industries subtracted 82,000 workers in September and financial firms cut payrolls by 17,000, Labor said.
The financial industry has been especially battered as the current credit crisis prompted the Bush administration to ask Congress for $700 billion to shore up the banking industry. Barclays Plc, the U.K. bank that bought parts of Lehman Brothers U.S. businesses, may cut as many as 5,000 jobs at the bankrupt company, Wall Street recruiters said last week.
The ISM's employment index dropped to 44.2 from 45.4 in August. The institute's business activity index declined to 52.1 from 51.6, while its new orders gauge rose to 50.8 from 49.7.
The ISM's measure for backorders dropped to 46.5 from 49. The group's measure of prices paid by non-manufacturing businesses fell to 70 from 72.9 a month earlier.
Energy costs in September continued to recede from July's record highs. The average price for a barrel of crude oil last month was $103.76, compared with $116.69 a month earlier.
Slowing growth abroad is also affecting U.S. service companies from banks, to business services and hotel chains.
Marriott International Inc., the biggest U.S. hotel chain, forecast a steeper drop in 2009 earnings than analysts estimated as withering economies around the globe erode travel budgets.
``In 2009, at a minimum, the company expects the business environment to remain unusually challenging,'' the company said this week.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Read more...
Friday, October 3, 2008
Europe Retail Sales Fell in August From Year Earlier
By Fergal O'Brien
Oct. 3 (Bloomberg) -- European retail sales declined in August as the economy extended its slump and the global financial crisis intensified, undermining consumer confidence.
Sales fell 1.8 percent in August from a year earlier, matching the pace of decline recorded in July, the European Union's statistics office in Luxembourg said today. From the previous month, sales rose 0.3 percent. A separate report showed services activity contracted for a fourth month in September.
With the outlook for the economy deteriorating and unemployment rising, consumer sentiment is waning even as oil prices decline. As the credit squeeze intensifies, European Central Bank President Jean-Claude Trichet yesterday opened the door to the first interest-rate cut in five years and said ``upside risks to price stability have diminished somewhat.''
``The latest data, together with recent weak industrial- production figures, suggest that euro-zone GDP might well have fallen again in the third quarter,'' said Jennifer McKeown, an economist at Capital Economics in London. ``There is nothing here to prevent ECB interest-rate cuts in the future.''
Europe's economy contracted in the second quarter for the first time in a decade and will probably stagnate for the remainder of this year, according to the European Commission.
French President Nicolas Sarkozy will host a meeting in Paris tomorrow of leaders from Britain, Italy and Germany, as well as Trichet, to prepare a European position on the financial crisis, which forced the U.K. government to seize Bradford & Bingley Plc and prompted state-backed rescues of Fortis and Dexia SA.
Consumer Confidence
An EU index of consumer confidence held at minus 19 in September, close to the 14-year low of minus 20 reached in July. Hennes & Mauritz AB, Europe's second-biggest clothes retailer, this week reported its weakest profit growth since 2003 on slowing demand in German, U.K. and Swedish markets. Gruppo Coin SpA, Italy's largest department-store chain, last month said second-quarter profit fell 75 percent.
A survey of purchasing managers at retailers published this week indicated that the slump in sales continued into last month. The measure of sales in the index fell to 46.2 from 47.7 in August, where a reading below 50 indicates contraction.
Economists had forecast a 2.4 percent decline in annual euro-area retail sales in August, according to the median of 19 estimates in a Bloomberg News survey.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- European retail sales declined in August as the economy extended its slump and the global financial crisis intensified, undermining consumer confidence.
Sales fell 1.8 percent in August from a year earlier, matching the pace of decline recorded in July, the European Union's statistics office in Luxembourg said today. From the previous month, sales rose 0.3 percent. A separate report showed services activity contracted for a fourth month in September.
With the outlook for the economy deteriorating and unemployment rising, consumer sentiment is waning even as oil prices decline. As the credit squeeze intensifies, European Central Bank President Jean-Claude Trichet yesterday opened the door to the first interest-rate cut in five years and said ``upside risks to price stability have diminished somewhat.''
``The latest data, together with recent weak industrial- production figures, suggest that euro-zone GDP might well have fallen again in the third quarter,'' said Jennifer McKeown, an economist at Capital Economics in London. ``There is nothing here to prevent ECB interest-rate cuts in the future.''
Europe's economy contracted in the second quarter for the first time in a decade and will probably stagnate for the remainder of this year, according to the European Commission.
French President Nicolas Sarkozy will host a meeting in Paris tomorrow of leaders from Britain, Italy and Germany, as well as Trichet, to prepare a European position on the financial crisis, which forced the U.K. government to seize Bradford & Bingley Plc and prompted state-backed rescues of Fortis and Dexia SA.
Consumer Confidence
An EU index of consumer confidence held at minus 19 in September, close to the 14-year low of minus 20 reached in July. Hennes & Mauritz AB, Europe's second-biggest clothes retailer, this week reported its weakest profit growth since 2003 on slowing demand in German, U.K. and Swedish markets. Gruppo Coin SpA, Italy's largest department-store chain, last month said second-quarter profit fell 75 percent.
A survey of purchasing managers at retailers published this week indicated that the slump in sales continued into last month. The measure of sales in the index fell to 46.2 from 47.7 in August, where a reading below 50 indicates contraction.
Economists had forecast a 2.4 percent decline in annual euro-area retail sales in August, according to the median of 19 estimates in a Bloomberg News survey.
To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
On the Seventh Day, They Worked, Amid Finance Crisis
By Oshrat Carmiel and Demian McLean
Oct. 3 (Bloomberg) -- Sunday is the new Monday.
From Wall Street to Washington, the U.S. credit crisis has claimed the leisurely weekend along with Lehman Brothers Holdings Inc. and Washington Mutual Inc.
``The news cycle is ruining everyone's weekend,'' Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ in New York, said in an e-mail. In addition to working more at the office, he's tethered to his BlackBerry on Saturdays and Sundays ``waiting for the next shoe to drop.''
Every weekend since Labor Day, the meltdown has forced U.S. Treasury and Federal Reserve officials, members of Congress and Wall Street executives to huddle under pressure to react before Asian markets reopened.
On Saturday, Sept. 6, Treasury Secretary Henry Paulson gathered with the chief executive officers of Fannie Mae and Freddie Mac. On Sunday, Sept. 7, the government seized control of the mortgage-finance companies.
The following weekend, New York Fed President Timothy Geithner summoned Wall Street leaders to discuss the possible sale of Lehman Brothers. By Sunday night, Lehman was preparing bankruptcy papers and Merrill Lynch & Co. was selling itself to Bank of America Corp.
Forget Fishing
The next two weekends, government officials met in Washington to discuss a proposed $700 billion bailout of the financial-services industry.
The Senate approved the rescue on Oct. 1 and the House of Representatives is scheduled to vote on it today, setting up another weekend of work to study and implement details if the measure passes, or come up with something else if it fails.
``Every weekend, there's been a crisis,'' said David Kotok, chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey, which manages $1 billion in assets.
Kotok said he had planned to spend his September weekends on a fishing boat. Instead, he's been on his computer and phone, trying to translate details of the latest news to worried clients.
``I've been here the last three Sundays, and I'll be here this Sunday,'' John Silvia, chief economist at Wachovia Corp., said on Sept. 26, referring to the bank's Charlotte, North Carolina, headquarters. ``A lot of people are here.''
Wachovia's What-If
Sundays at Wachovia were more like strategy sessions rather than actual workdays, Silvia said. He and his colleagues followed the news and came up with ``what-if'' scenarios, he said.
The what-if for Wachovia came on the morning of Monday, Sept. 29, when the company agreed in principle to sell its consumer banking business to Citigroup Inc. The deal, triggered by Wachovia's mounting mortgage losses, was brokered by the Federal Deposit Insurance Corp. over the weekend.
Citigroup had more than 200 people ``working on this nonstop'' for the 72 hours before the deal was announced, Citigroup Chief Executive Officer Vikram Pandit said in a Sept. 29 teleconference. Wells Fargo & Co. said today it had agreed to buy Wachovia for $15.1 billion in stock without federal assistance, ending the Citigroup deal.
Wachovia's Silvia said he'll be working again this weekend, studying the continued fallout from the crisis.
``It's almost most like the bubonic plague in Europe,'' Silvia said. ``It just goes from one town to the other town and you wipe out the entire population fast.''
The Treasury Department sent Paulson and a team of aides to Capitol Hill at noon on Saturday, Sept. 27, spokeswoman Michele Davis said. Some worked with lawmakers until 3 a.m. on the rescue package, she said.
Sunday Buffets
That team was replaced the next day with one that also toiled overnight, this time on the Wachovia sale.
``Working weekends has become so normal here that we now have a buffet breakfast and lunch each day,'' Davis said. ``Sunday was a spread more common on a day of watching football -- wings, cheese sticks, hot dogs and chili.''
In New York on the weekend of Sept. 13, Shai Waisman, a partner at Weil Gotshal & Manges LLP, missed a planned dinner with friends from Texas who were on a layover at John F. Kennedy International Airport. He had to prepare papers for the Lehman bankruptcy, which his firm is handling.
That Sunday, a cousin from Israel arrived for a visit and let herself into his apartment. She stayed for seven days, Waisman said, and he never saw her once.
``I've never seen so many New Yorkers with the same ashen, exhausted look at the same obscene hours,'' Waisman said.
His firm is also handling the Washington Mutual bankruptcy. ``I will be working this and every coming weekend for the foreseeable future,'' Waisman said in an e-mail yesterday.
`Days Run Together'
In Congress, the crisis has forced committees to schedule votes on other matters to late on weekend nights. The House Committee on Rules voted on tax-relief and energy-related bills at 10 p.m. on Sunday, Sept. 28, a ``highly unusual'' time slot, said Emily Davis, a spokeswoman for Representative Pete Sessions, a Texas Republican who sits on the committee.
``The last time I had a day off was a couple weekends ago,'' Davis said. ``The days just run together.''
The past several weekends, U.S. Representative Eric Cantor and his aides have dined on pizza, Popeyes fried chicken and ``a couple nights of bad Chinese,'' said Rob Collins, chief of staff for the Republican from Virginia, who is deputy minority whip. About 10 Cantor staffers have been working weekends, Collins said.
Collins's wife, at home with their 10-month-old child, joined the social-networking site Facebook.com one weekend night as he worked until 11 p.m., Collins said.
The first message posted to her profile: ``I wish Congress would pass this bill so my son could see his father for once.''
Paulson's Rest
Takeout Taxi, a Falls Church, Virginia, company that delivers food from Washington restaurants, has seen orders more than double to as many as 150 the last three Sundays from the typical 50 to 70, said call representative Jenna Burrows.
``Sundays are usually pretty slow, but we've had a dinner rush each night that lasts till 10 o'clock,'' Burrows said Sept. 29. ``They want chicken tikka masala and kabobs.''
The long hours may be taking a toll on Treasury Secretary Paulson as well. During the marathon negotiating session Sept. 28 on Capitol Hill, he leaned back in his chair at one point and closed his eyes, sparking worries that he might need a doctor.
It wasn't a health crisis, just fatigue, said a person familiar with the deliberations.
To contact the reporters on this story: Oshrat Carmiel in New York ocarmiel1@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Sunday is the new Monday.
From Wall Street to Washington, the U.S. credit crisis has claimed the leisurely weekend along with Lehman Brothers Holdings Inc. and Washington Mutual Inc.
``The news cycle is ruining everyone's weekend,'' Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ in New York, said in an e-mail. In addition to working more at the office, he's tethered to his BlackBerry on Saturdays and Sundays ``waiting for the next shoe to drop.''
Every weekend since Labor Day, the meltdown has forced U.S. Treasury and Federal Reserve officials, members of Congress and Wall Street executives to huddle under pressure to react before Asian markets reopened.
On Saturday, Sept. 6, Treasury Secretary Henry Paulson gathered with the chief executive officers of Fannie Mae and Freddie Mac. On Sunday, Sept. 7, the government seized control of the mortgage-finance companies.
The following weekend, New York Fed President Timothy Geithner summoned Wall Street leaders to discuss the possible sale of Lehman Brothers. By Sunday night, Lehman was preparing bankruptcy papers and Merrill Lynch & Co. was selling itself to Bank of America Corp.
Forget Fishing
The next two weekends, government officials met in Washington to discuss a proposed $700 billion bailout of the financial-services industry.
The Senate approved the rescue on Oct. 1 and the House of Representatives is scheduled to vote on it today, setting up another weekend of work to study and implement details if the measure passes, or come up with something else if it fails.
``Every weekend, there's been a crisis,'' said David Kotok, chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey, which manages $1 billion in assets.
Kotok said he had planned to spend his September weekends on a fishing boat. Instead, he's been on his computer and phone, trying to translate details of the latest news to worried clients.
``I've been here the last three Sundays, and I'll be here this Sunday,'' John Silvia, chief economist at Wachovia Corp., said on Sept. 26, referring to the bank's Charlotte, North Carolina, headquarters. ``A lot of people are here.''
Wachovia's What-If
Sundays at Wachovia were more like strategy sessions rather than actual workdays, Silvia said. He and his colleagues followed the news and came up with ``what-if'' scenarios, he said.
The what-if for Wachovia came on the morning of Monday, Sept. 29, when the company agreed in principle to sell its consumer banking business to Citigroup Inc. The deal, triggered by Wachovia's mounting mortgage losses, was brokered by the Federal Deposit Insurance Corp. over the weekend.
Citigroup had more than 200 people ``working on this nonstop'' for the 72 hours before the deal was announced, Citigroup Chief Executive Officer Vikram Pandit said in a Sept. 29 teleconference. Wells Fargo & Co. said today it had agreed to buy Wachovia for $15.1 billion in stock without federal assistance, ending the Citigroup deal.
Wachovia's Silvia said he'll be working again this weekend, studying the continued fallout from the crisis.
``It's almost most like the bubonic plague in Europe,'' Silvia said. ``It just goes from one town to the other town and you wipe out the entire population fast.''
The Treasury Department sent Paulson and a team of aides to Capitol Hill at noon on Saturday, Sept. 27, spokeswoman Michele Davis said. Some worked with lawmakers until 3 a.m. on the rescue package, she said.
Sunday Buffets
That team was replaced the next day with one that also toiled overnight, this time on the Wachovia sale.
``Working weekends has become so normal here that we now have a buffet breakfast and lunch each day,'' Davis said. ``Sunday was a spread more common on a day of watching football -- wings, cheese sticks, hot dogs and chili.''
In New York on the weekend of Sept. 13, Shai Waisman, a partner at Weil Gotshal & Manges LLP, missed a planned dinner with friends from Texas who were on a layover at John F. Kennedy International Airport. He had to prepare papers for the Lehman bankruptcy, which his firm is handling.
That Sunday, a cousin from Israel arrived for a visit and let herself into his apartment. She stayed for seven days, Waisman said, and he never saw her once.
``I've never seen so many New Yorkers with the same ashen, exhausted look at the same obscene hours,'' Waisman said.
His firm is also handling the Washington Mutual bankruptcy. ``I will be working this and every coming weekend for the foreseeable future,'' Waisman said in an e-mail yesterday.
`Days Run Together'
In Congress, the crisis has forced committees to schedule votes on other matters to late on weekend nights. The House Committee on Rules voted on tax-relief and energy-related bills at 10 p.m. on Sunday, Sept. 28, a ``highly unusual'' time slot, said Emily Davis, a spokeswoman for Representative Pete Sessions, a Texas Republican who sits on the committee.
``The last time I had a day off was a couple weekends ago,'' Davis said. ``The days just run together.''
The past several weekends, U.S. Representative Eric Cantor and his aides have dined on pizza, Popeyes fried chicken and ``a couple nights of bad Chinese,'' said Rob Collins, chief of staff for the Republican from Virginia, who is deputy minority whip. About 10 Cantor staffers have been working weekends, Collins said.
Collins's wife, at home with their 10-month-old child, joined the social-networking site Facebook.com one weekend night as he worked until 11 p.m., Collins said.
The first message posted to her profile: ``I wish Congress would pass this bill so my son could see his father for once.''
Paulson's Rest
Takeout Taxi, a Falls Church, Virginia, company that delivers food from Washington restaurants, has seen orders more than double to as many as 150 the last three Sundays from the typical 50 to 70, said call representative Jenna Burrows.
``Sundays are usually pretty slow, but we've had a dinner rush each night that lasts till 10 o'clock,'' Burrows said Sept. 29. ``They want chicken tikka masala and kabobs.''
The long hours may be taking a toll on Treasury Secretary Paulson as well. During the marathon negotiating session Sept. 28 on Capitol Hill, he leaned back in his chair at one point and closed his eyes, sparking worries that he might need a doctor.
It wasn't a health crisis, just fatigue, said a person familiar with the deliberations.
To contact the reporters on this story: Oshrat Carmiel in New York ocarmiel1@bloomberg.net; Demian McLean in Washington at dmclean8@bloomberg.net.
Read more...
U.S. House Clears Way to Pass New $700 Billion Plan
By Laura Litvan and Brian Faler
Oct. 3 (Bloomberg) -- The U.S. House of Representatives cleared the way to complete action on a Senate-passed $700 billion financial-market rescue package that was refashioned to entice enough votes for passage.
By a vote of 223-205, the House prevented members from offering amendments that could snarl the proceedings. The tally signaled the plan has enough support to clear Congress and be sent to President George W. Bush to be signed into law.
At least 20 House members said they will drop their opposition to the plan and support it. The measure failed by a dozen votes earlier this week. The House roll call was scheduled for early this afternoon.
``I don't like this at all,'' said Tennessee Republican Zach Wamp, who is dropping his opposition. ``As a matter of fact I hate it. But we're out of options. Congress has to act.''
Representative James Clyburn of South Carolina, the vote- counting whip for Democrats, said more Democrats will support the bill than the 140 who backed it earlier this week.
The Bush administration issued a statement today saying it ``strongly supports and urges swift House passage'' of the bill.
The legislation lets the government buy troubled assets from financial institutions rocked by record home foreclosures. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank-deposit insurance and changes in securities law.
It also restates securities regulators' authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis. The Senate approved the bill Wednesday 74-25.
Sweetening the Pot
The add-ons may help sway lawmakers such as Jim Gerlach, as did phone calls from his suburban Philadelphia constituents. Many of his supporters shifted to backing the bailout following the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the bill.
The Dow rose 205.49 points, or 2 percent, to 10,688.34 at 11:22 a.m. in New York.
Among those abandoning their opposition were Democrats Shelley Berkley of Nevada and Gabrielle Giffords of Arizona and Republicans Ileana Ros-Lehtinen of Florida, John Shadegg of Arizona and Jim Ramstad of Minnesota. At least three other Republicans, Gerlach and Tim Murphy of Pennsylvania and Patrick Tiberi of Ohio, and Democrat Bill Pascrell of New Jersey, may vote yes on the measure.
Signaling Confidence
House Majority Leader Steny Hoyer and the Republican leadership signaled their confidence in advance that the measure would pass.
``There is a broad feeling that the economy is at risk and that average Americans will be badly hurt if the economy continues to go downhill, and that action is necessary,'' Hoyer said.
Minority Leader John Boehner had said the plan wouldn't come up for a vote until leaders were assured of passage and today predicted approval. Republicans cited the economy as the main reason they were switching.
Shadegg said on Bloomberg Television that he would support the measure, citing a ``breakdown'' in credit markets that makes it difficult for small businesses to pay employees. Ros-Lehtinen said in a statement she would back the bailout because it boosts Federal Deposit Insurance Corp. limits and adds tax breaks for families.
Company Support
Companies are also pushing Congress to pass the measure, saying the curtailment of credit may result in job cuts.
Automakers said tougher loan standards partly accounted for a 27 percent plunge in U.S. auto sales last month.
The market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said yesterday. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6 percent, during the week ended Oct. 1.
Yet the addition of the tax cuts and special breaks for companies such as an Oregon-based maker of wooden arrows and Virgin Islands rum-makers may turn off some deficit-wary Democrats.
Representative Mike Ross, an Arkansas Democrat who supported the original bailout bill, said he didn't know how the so-called Blue Dog coalition of fiscally conservative Democrats would vote on the version with the Senate's add-ons.
``I don't even know what I'll do,'' Ross said.
The extra spending on federal projects is also repelling some Republicans.
Still Opposed
Representative Spencer Bachus, an Alabama Republican who supported the earlier bailout plan, called the Senate version ``a travesty,'' saying in an interview that he is ``strongly considering'' voting against it.
California Democrat Brad Sherman called the measure a ``pork-laden, earmark-laden bailout bill.''
As the House prepared to approve the rescue plan, the rate banks charge each other to borrow dollars overnight dropped to 1.996 percent after soaring to 6.875 percent on Sept. 30, the day after the House vote rejecting the earlier bailout proposal.
The London interbank offered rate for three-month loans in dollars, however, rose to 4.33 percent, the highest since January. The Libor rate for three-month euro loans rose to a record 5.33 percent.
The Labor Department reported today that the U.S. lost 159,000 jobs in September, the biggest monthly drop since March 2003. For the second straight month, the unemployment rate was 6.1 percent -- the highest level since September 2003.
Yesterday, the department said 497,000 people filed first- time applications for jobless benefits during the week ended Sept. 27, the highest level in seven years.
To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Brian Faler in Washington at faler@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- The U.S. House of Representatives cleared the way to complete action on a Senate-passed $700 billion financial-market rescue package that was refashioned to entice enough votes for passage.
By a vote of 223-205, the House prevented members from offering amendments that could snarl the proceedings. The tally signaled the plan has enough support to clear Congress and be sent to President George W. Bush to be signed into law.
At least 20 House members said they will drop their opposition to the plan and support it. The measure failed by a dozen votes earlier this week. The House roll call was scheduled for early this afternoon.
``I don't like this at all,'' said Tennessee Republican Zach Wamp, who is dropping his opposition. ``As a matter of fact I hate it. But we're out of options. Congress has to act.''
Representative James Clyburn of South Carolina, the vote- counting whip for Democrats, said more Democrats will support the bill than the 140 who backed it earlier this week.
The Bush administration issued a statement today saying it ``strongly supports and urges swift House passage'' of the bill.
The legislation lets the government buy troubled assets from financial institutions rocked by record home foreclosures. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank-deposit insurance and changes in securities law.
It also restates securities regulators' authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis. The Senate approved the bill Wednesday 74-25.
Sweetening the Pot
The add-ons may help sway lawmakers such as Jim Gerlach, as did phone calls from his suburban Philadelphia constituents. Many of his supporters shifted to backing the bailout following the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the bill.
The Dow rose 205.49 points, or 2 percent, to 10,688.34 at 11:22 a.m. in New York.
Among those abandoning their opposition were Democrats Shelley Berkley of Nevada and Gabrielle Giffords of Arizona and Republicans Ileana Ros-Lehtinen of Florida, John Shadegg of Arizona and Jim Ramstad of Minnesota. At least three other Republicans, Gerlach and Tim Murphy of Pennsylvania and Patrick Tiberi of Ohio, and Democrat Bill Pascrell of New Jersey, may vote yes on the measure.
Signaling Confidence
House Majority Leader Steny Hoyer and the Republican leadership signaled their confidence in advance that the measure would pass.
``There is a broad feeling that the economy is at risk and that average Americans will be badly hurt if the economy continues to go downhill, and that action is necessary,'' Hoyer said.
Minority Leader John Boehner had said the plan wouldn't come up for a vote until leaders were assured of passage and today predicted approval. Republicans cited the economy as the main reason they were switching.
Shadegg said on Bloomberg Television that he would support the measure, citing a ``breakdown'' in credit markets that makes it difficult for small businesses to pay employees. Ros-Lehtinen said in a statement she would back the bailout because it boosts Federal Deposit Insurance Corp. limits and adds tax breaks for families.
Company Support
Companies are also pushing Congress to pass the measure, saying the curtailment of credit may result in job cuts.
Automakers said tougher loan standards partly accounted for a 27 percent plunge in U.S. auto sales last month.
The market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said yesterday. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6 percent, during the week ended Oct. 1.
Yet the addition of the tax cuts and special breaks for companies such as an Oregon-based maker of wooden arrows and Virgin Islands rum-makers may turn off some deficit-wary Democrats.
Representative Mike Ross, an Arkansas Democrat who supported the original bailout bill, said he didn't know how the so-called Blue Dog coalition of fiscally conservative Democrats would vote on the version with the Senate's add-ons.
``I don't even know what I'll do,'' Ross said.
The extra spending on federal projects is also repelling some Republicans.
Still Opposed
Representative Spencer Bachus, an Alabama Republican who supported the earlier bailout plan, called the Senate version ``a travesty,'' saying in an interview that he is ``strongly considering'' voting against it.
California Democrat Brad Sherman called the measure a ``pork-laden, earmark-laden bailout bill.''
As the House prepared to approve the rescue plan, the rate banks charge each other to borrow dollars overnight dropped to 1.996 percent after soaring to 6.875 percent on Sept. 30, the day after the House vote rejecting the earlier bailout proposal.
The London interbank offered rate for three-month loans in dollars, however, rose to 4.33 percent, the highest since January. The Libor rate for three-month euro loans rose to a record 5.33 percent.
The Labor Department reported today that the U.S. lost 159,000 jobs in September, the biggest monthly drop since March 2003. For the second straight month, the unemployment rate was 6.1 percent -- the highest level since September 2003.
Yesterday, the department said 497,000 people filed first- time applications for jobless benefits during the week ended Sept. 27, the highest level in seven years.
To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Brian Faler in Washington at faler@bloomberg.net.
Read more...
US STOCKS-Wall St rises on Wachovia deal, bailout hopes
* Financials rise on Wachovia deal, bank bailout hope
* House starts debate on $700 billion rescue
* Credit market tightness persists worldwide
* Market unruffled by weak Sept jobs report
* Dow up 1.6 pct, S&P 500 up 2.2 pct, Nasdaq up 2.3 pct (Updates to midmorning)
By Ellis Mnyandu
NEW YORK, Oct 3 (Reuters) - U.S. stocks rose on Friday as Wells Fargo's proposed takeover of troubled U.S. bank Wachovia Corp lifted financial shares and the House of Representatives began deliberations on a plan to stabilize financial markets.
Investors bet the House, which earlier this week rejected the legislation, would pass a revised version of a $700 billion bailout to stabilize the U.S. financial sector. A top Republican leader was optimistic the deal would pass. A vote is expected later on Friday.
The deal between Wells-Fargo, one of the strongest U.S. banks left, and Wachovia was a stock transaction valued at more than $16 billion. It scuppered a deal announced on Monday and backed by the government for Citigroup to buy parts of Wachovia.
"The Wachovia deal I think gave some optimism to the market that someone is stepping in to buy Wachovia," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois. "I also think the bailout is going to go through. It could be a very big embarrassment if the House votes it down twice."
The Dow Jones industrial average .DJI climbed 165.11 points, or 1.58 percent, to 10,647.96. The Standard & Poor's 500 Index .SPX gained 24.78 points, or 2.22 percent, to 1,139.06. The Nasdaq Composite Index .IXIC shot up 46.14 points, or 2.33 percent, to 2,022.86.
The market was unfazed by a government report showing the number of U.S. jobs lost in September was the greatest in 5-1/2 years. Signs in another report that growth in the vast services sector held up in September offered encouragement.
Shares of Wachovia, which had been hit with mortgage-related losses, jumped 74.2 percent to $6.81 on the New York Stock Exchange, while the S&P financial index climbed 2.5 percent.
Other standouts on the financial front were Goldman Sachs , up 5.6 percent at $138.94 and Bank of America , up 4.2 percent at $37.91. But shares of Citigroup declined almost 10 percent to $20.25.
On Nasdaq shares of Apple Inc jumped more than 4 percent to $104.69, making the stock a top boost, after the iPod and iPhone maker denied an Internet report claiming that Chief Executive Steve Jobs had a heart attack. Earlier, Apple had dropped as much as 5 percent.
The Labor Department said employers cut payrolls, slashing an unexpectedly large 159,000 jobs as employment contracted for a ninth straight month.
The Institute for Supply Management said its non-manufacturing index rose slightly to 50.2.
The $700 billion financial sector bailout is designed to mop up bad mortgage debts on the banks' balance sheets in a bid to loosen up lending to boost economic growth. (Editing by Kenneth Barry)
Read more...
* House starts debate on $700 billion rescue
* Credit market tightness persists worldwide
* Market unruffled by weak Sept jobs report
* Dow up 1.6 pct, S&P 500 up 2.2 pct, Nasdaq up 2.3 pct (Updates to midmorning)
By Ellis Mnyandu
NEW YORK, Oct 3 (Reuters) - U.S. stocks rose on Friday as Wells Fargo's proposed takeover of troubled U.S. bank Wachovia Corp lifted financial shares and the House of Representatives began deliberations on a plan to stabilize financial markets.
Investors bet the House, which earlier this week rejected the legislation, would pass a revised version of a $700 billion bailout to stabilize the U.S. financial sector. A top Republican leader was optimistic the deal would pass. A vote is expected later on Friday.
The deal between Wells-Fargo, one of the strongest U.S. banks left, and Wachovia was a stock transaction valued at more than $16 billion. It scuppered a deal announced on Monday and backed by the government for Citigroup to buy parts of Wachovia.
"The Wachovia deal I think gave some optimism to the market that someone is stepping in to buy Wachovia," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois. "I also think the bailout is going to go through. It could be a very big embarrassment if the House votes it down twice."
The Dow Jones industrial average .DJI climbed 165.11 points, or 1.58 percent, to 10,647.96. The Standard & Poor's 500 Index .SPX gained 24.78 points, or 2.22 percent, to 1,139.06. The Nasdaq Composite Index .IXIC shot up 46.14 points, or 2.33 percent, to 2,022.86.
The market was unfazed by a government report showing the number of U.S. jobs lost in September was the greatest in 5-1/2 years. Signs in another report that growth in the vast services sector held up in September offered encouragement.
Shares of Wachovia, which had been hit with mortgage-related losses, jumped 74.2 percent to $6.81 on the New York Stock Exchange, while the S&P financial index climbed 2.5 percent.
Other standouts on the financial front were Goldman Sachs , up 5.6 percent at $138.94 and Bank of America , up 4.2 percent at $37.91. But shares of Citigroup declined almost 10 percent to $20.25.
On Nasdaq shares of Apple Inc jumped more than 4 percent to $104.69, making the stock a top boost, after the iPod and iPhone maker denied an Internet report claiming that Chief Executive Steve Jobs had a heart attack. Earlier, Apple had dropped as much as 5 percent.
The Labor Department said employers cut payrolls, slashing an unexpectedly large 159,000 jobs as employment contracted for a ninth straight month.
The Institute for Supply Management said its non-manufacturing index rose slightly to 50.2.
The $700 billion financial sector bailout is designed to mop up bad mortgage debts on the banks' balance sheets in a bid to loosen up lending to boost economic growth. (Editing by Kenneth Barry)
Read more...
HEADLINE STOCKS-U.S. stocks on the move on Oct 3
NEW YORK, Oct 3 (Reuters) -U.S. stocks on the move on
Friday:
WACHOVIA CORP
WELLS FARGO & CO
Wachovia shares soared more than 70 percent on news that it
approved a merger proposal from Wells Fargo. Wells Fargo shares
gained 7.8 percent to trade at $37.81 while Wachovia shares
advanced 74 percent to $6.81. For details, see
CITIGROUP
Shares of the Dow component fell after a merger deal was
announced between Wachovia Corp and Wells Fargo & Co that
scupper a previously announced deal in which Citigroup, backed
by the government, was to buy parts of Wachovia. Citigroup
shares lost 11 percent to trade at $19.98. For more, see
AMERICAN INTERNATIONAL GROUP
Company intends to refocus on core property and casualty
insurance businesses.
Shares gained 18 percent to $4.72.
The casino and racetrack operator warned of a third-quarter
shortfall and was downgraded to hold from buy at Deutsche Bank.
Penn National shares fell 15 percent to $19.82.
MAGNA INTERNATIONAL
Oleg Deripaska divests his 20 percent stake in the auto
parts manufacturer.
Shares dropped 14 percent to $39.11
Sees fair value derivatives loss of $951 million at current
market prices.
Shares fell 17 percent to $29.53.
MORGAN STANLEY
Mitsubishi UFJ Financial Group will consider
merging its securities arm with Morgan Stanley's Japan
business, as Tokyo's biggest lender looks to capitalize on its
$9 billion Wall Street investment.
Morgan Stanley shares advanced 11 percent to $25.74.
FIRST INDUSTRIAL FR.N
Company updates 2008 outlook and sees 2009 earnings well
below estimates.
Shares plunged 20 percent to $21.99 on the NYSE.
TLC VISION
The provider of laser vision-correction services expects
third-quarter procedure volume to drop on reduced demand for
Lasik surgery.
AGILYSYS INC agys.o
Sets a quarterly dividend of 3 cents
Shares rose 16 percent to $6.97. The shares fell steeply on
Thursday after the company reduced its 2009 revenue outlook.
Read more...
Friday:
WACHOVIA CORP
WELLS FARGO & CO
Wachovia shares soared more than 70 percent on news that it
approved a merger proposal from Wells Fargo. Wells Fargo shares
gained 7.8 percent to trade at $37.81 while Wachovia shares
advanced 74 percent to $6.81. For details, see
CITIGROUP
Shares of the Dow component fell after a merger deal was
announced between Wachovia Corp and Wells Fargo & Co that
scupper a previously announced deal in which Citigroup, backed
by the government, was to buy parts of Wachovia. Citigroup
shares lost 11 percent to trade at $19.98. For more, see
AMERICAN INTERNATIONAL GROUP
Company intends to refocus on core property and casualty
insurance businesses.
Shares gained 18 percent to $4.72.
The casino and racetrack operator warned of a third-quarter
shortfall and was downgraded to hold from buy at Deutsche Bank.
Penn National shares fell 15 percent to $19.82.
MAGNA INTERNATIONAL
Oleg Deripaska divests his 20 percent stake in the auto
parts manufacturer.
Shares dropped 14 percent to $39.11
Sees fair value derivatives loss of $951 million at current
market prices.
Shares fell 17 percent to $29.53.
MORGAN STANLEY
Mitsubishi UFJ Financial Group will consider
merging its securities arm with Morgan Stanley's Japan
business, as Tokyo's biggest lender looks to capitalize on its
$9 billion Wall Street investment.
Morgan Stanley shares advanced 11 percent to $25.74.
FIRST INDUSTRIAL FR.N
Company updates 2008 outlook and sees 2009 earnings well
below estimates.
Shares plunged 20 percent to $21.99 on the NYSE.
TLC VISION
The provider of laser vision-correction services expects
third-quarter procedure volume to drop on reduced demand for
Lasik surgery.
AGILYSYS INC agys.o
Sets a quarterly dividend of 3 cents
Shares rose 16 percent to $6.97. The shares fell steeply on
Thursday after the company reduced its 2009 revenue outlook.
Read more...
U.S. ISM Non Manufacturing Index In Line With Expectations
Daily Forex Fundamentals | Written by TD Bank Financial Group | Oct 03 08 15:28 GMT |
* The US Non Manufacturing Index was 50.2 in September which is largely in line with expectations and only modestly lower than in August.
* The components did not reveal any massive deterioration, which was in contrast to what we saw earlier in the week with the ISM manufacturing index.
The US non manufacturing index was 50.2 in September, which was the second consecutive month where the index was a tad higher than the 50-threshold delineating expansion and contraction. The 6-month average of the composite index is 50.4. In terms of the underlying components, there were no massive declines in any one category. On balance, it shows a lacklustre tone in the non manufacturing sector.
The employment sub index remains under pressure, suggesting the labour market for non manufacturing remains weak. At 44.2 in September, the employment sub index is the lowest since June and still two points below the 6 month average in the index. However, the order pipeline remains decent. New export orders perked back up above 50 for the first time since June and was 50.5 in September. Moreover, the new orders index was 50.8 in September, which was the first above-50 reading since May. That suggests the order pipeline has not completely imploded, which is a modest plus in an environment where most of the economic data this week has been disappointing.
Prices paid continues to moderate and that sub index was 70 in September, and is clearly scaling back after peaking at 84.5 in June. But in conjunction with tepid demand, and the global correction in commodity prices, this result is not particularly surprising.
Against the backdrop of current economic conditions, the lacklustre tone in the non manufacturing sector seems to be as good as it gets. How long the ISM non manufacturing activity index stays above 50 remains to be seen, especially given the slowdown in the global economy. But for now, the fact that the data was in line with expectations should be seen as a positive.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
Read more...
* The US Non Manufacturing Index was 50.2 in September which is largely in line with expectations and only modestly lower than in August.
* The components did not reveal any massive deterioration, which was in contrast to what we saw earlier in the week with the ISM manufacturing index.
The US non manufacturing index was 50.2 in September, which was the second consecutive month where the index was a tad higher than the 50-threshold delineating expansion and contraction. The 6-month average of the composite index is 50.4. In terms of the underlying components, there were no massive declines in any one category. On balance, it shows a lacklustre tone in the non manufacturing sector.
The employment sub index remains under pressure, suggesting the labour market for non manufacturing remains weak. At 44.2 in September, the employment sub index is the lowest since June and still two points below the 6 month average in the index. However, the order pipeline remains decent. New export orders perked back up above 50 for the first time since June and was 50.5 in September. Moreover, the new orders index was 50.8 in September, which was the first above-50 reading since May. That suggests the order pipeline has not completely imploded, which is a modest plus in an environment where most of the economic data this week has been disappointing.
Prices paid continues to moderate and that sub index was 70 in September, and is clearly scaling back after peaking at 84.5 in June. But in conjunction with tepid demand, and the global correction in commodity prices, this result is not particularly surprising.
Against the backdrop of current economic conditions, the lacklustre tone in the non manufacturing sector seems to be as good as it gets. How long the ISM non manufacturing activity index stays above 50 remains to be seen, especially given the slowdown in the global economy. But for now, the fact that the data was in line with expectations should be seen as a positive.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
Read more...
BOE May Cut Rate by Most Since 2001, Economists Say
By Brian Swint
Oct. 3 (Bloomberg) -- Bank of England policy makers may cut the benchmark interest rate next week by the most since 2001 as the British economy hurtles toward a recession, economists say.
Citigroup Inc., BNP Paribas SA, JPMorgan Chase & Co. and Royal London Asset Management today changed their forecasts to predict a half-point reduction from the current 5 percent on Oct. 9. Investec Securities, Bank of America Corp., Deutsche Bank AG and UBS AG this week forecast a quarter-point cut.
``We've got a severe financial crisis that has worsened in the past week and clear signs the economy is falling off a cliff,'' Michael Saunders, chief western European economist at Citigroup, said in an interview. ``The balance of risks has shifted decisively to the downside.''
Services industries from banks to hotels shrank by the most on record in September as the global financial crisis threatened to throw the economy into the first recession since 1991. The Bank of England, which has provided extra funds to the market as banks hoard cash, hasn't lowered interest rates since April on concern about the fastest inflation in a decade.
The last time the U.K. central bank lowered the rate by a half-point was in November 2001, in the aftermath of the Sept. 11 terrorist attacks.
The pound fell as much as 0.4 percent today, trading at $1.7565 as of 2 p.m. in London. The currency has fallen 12 percent since the start of July.
Bloomberg Survey
The main U.K. rate will fall to 4.75 percent on Oct. 9, the median of 61 forecasts in a Bloomberg News survey showed today. Four economists predict a half-point cut, 42 forecast a quarter- point reduction and 15 said the rate won't change.
The nine-member Monetary Policy Committee voted 8-1 to keep the rate unchanged last month, with David Blanchflower supporting a half-point cut. Blanchflower said he'll argue for a cut again next week, in a newspaper interview published today.
Citigroup's Saunders said Blanchflower may want an even bigger reduction than half a point.
``Things have changed dramatically,'' Ian Kernohan, an economist at Royal London Asset Management in London, said in an interview. ``This morning's data from the U.K., plus the run of data we've had elsewhere and events in financial markets, just heighten the risk of a much more severe slowdown.''
The U.K. central bank today announced a wider range of collateral in its three-month money auctions to assist banks. The three-month interbank lending rate surged to 6.31 percent on Oct. 1, the highest this year. It was at 6.27 percent today.
`All Actions Necessary'
``In these extraordinary market conditions, the Bank of England will take all actions necessary to ensure that the banking system has access to sufficient liquidity,'' Governor Mervyn King said in a statement.
``They're nervous, understandably,'' said Grant Lewis, an economist at Daiwa Securities SMBC Europe in London and a former U.K. Treasury official. ``The less collateral you can use in the private repo, the tighter the liquidity position of financial institutions.'' He predicts a quarter-point reduction.
Higher money market rates are curbing demand for loans to households and consumers. House prices had the biggest annual drop since at least 1991 in September, Nationwide Building Society said yesterday. British banks plan to scale back loans further in the final quarter of the year, a Bank of England report showed.
``The fallout from the credit crisis is clear,'' said JPMorgan economist Malcolm Barr in a note. ``With the data deteriorating rapidly and prompting a quicker MPC response, we are lowering the forecast for the low in policy rates to 3 percent.''
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Bank of England policy makers may cut the benchmark interest rate next week by the most since 2001 as the British economy hurtles toward a recession, economists say.
Citigroup Inc., BNP Paribas SA, JPMorgan Chase & Co. and Royal London Asset Management today changed their forecasts to predict a half-point reduction from the current 5 percent on Oct. 9. Investec Securities, Bank of America Corp., Deutsche Bank AG and UBS AG this week forecast a quarter-point cut.
``We've got a severe financial crisis that has worsened in the past week and clear signs the economy is falling off a cliff,'' Michael Saunders, chief western European economist at Citigroup, said in an interview. ``The balance of risks has shifted decisively to the downside.''
Services industries from banks to hotels shrank by the most on record in September as the global financial crisis threatened to throw the economy into the first recession since 1991. The Bank of England, which has provided extra funds to the market as banks hoard cash, hasn't lowered interest rates since April on concern about the fastest inflation in a decade.
The last time the U.K. central bank lowered the rate by a half-point was in November 2001, in the aftermath of the Sept. 11 terrorist attacks.
The pound fell as much as 0.4 percent today, trading at $1.7565 as of 2 p.m. in London. The currency has fallen 12 percent since the start of July.
Bloomberg Survey
The main U.K. rate will fall to 4.75 percent on Oct. 9, the median of 61 forecasts in a Bloomberg News survey showed today. Four economists predict a half-point cut, 42 forecast a quarter- point reduction and 15 said the rate won't change.
The nine-member Monetary Policy Committee voted 8-1 to keep the rate unchanged last month, with David Blanchflower supporting a half-point cut. Blanchflower said he'll argue for a cut again next week, in a newspaper interview published today.
Citigroup's Saunders said Blanchflower may want an even bigger reduction than half a point.
``Things have changed dramatically,'' Ian Kernohan, an economist at Royal London Asset Management in London, said in an interview. ``This morning's data from the U.K., plus the run of data we've had elsewhere and events in financial markets, just heighten the risk of a much more severe slowdown.''
The U.K. central bank today announced a wider range of collateral in its three-month money auctions to assist banks. The three-month interbank lending rate surged to 6.31 percent on Oct. 1, the highest this year. It was at 6.27 percent today.
`All Actions Necessary'
``In these extraordinary market conditions, the Bank of England will take all actions necessary to ensure that the banking system has access to sufficient liquidity,'' Governor Mervyn King said in a statement.
``They're nervous, understandably,'' said Grant Lewis, an economist at Daiwa Securities SMBC Europe in London and a former U.K. Treasury official. ``The less collateral you can use in the private repo, the tighter the liquidity position of financial institutions.'' He predicts a quarter-point reduction.
Higher money market rates are curbing demand for loans to households and consumers. House prices had the biggest annual drop since at least 1991 in September, Nationwide Building Society said yesterday. British banks plan to scale back loans further in the final quarter of the year, a Bank of England report showed.
``The fallout from the credit crisis is clear,'' said JPMorgan economist Malcolm Barr in a note. ``With the data deteriorating rapidly and prompting a quicker MPC response, we are lowering the forecast for the low in policy rates to 3 percent.''
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
Read more...
Unlike Manufacturing, Service Sector Activity Holds Up In September
Daily Forex Fundamentals | Written by Wachovia Corporation | Oct 03 08 15:00 GMT |
Earlier this week, the Institute for Supply Management's manufacturing index plunged to recession territory. Today's report on the non-manufacturing sector (NMI), where the headline index remained relatively steady at 50.2, suggests that service sector activity is holding up much better than the manufacturing sector.
Activity Holds On
* The subcomponents supported the NMI. The employment index was the only subcomponent signaling contraction.
* The price index slipped again in September; energy prices in particular have moderated from recent highs. This downward trend in inflation should continue as growth here and abroad slows.
Outlook Still Challenging
* The forward looking new orders index climbed into expansionary territory last month.
* However, service sector activity should continue to slow as the overall economy struggles with transition of the correcting housing market, tighter credit conditions and a deteriorating labor market
Wachovia Corporation
http://www.wachovia.com
Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.
Read more...
Earlier this week, the Institute for Supply Management's manufacturing index plunged to recession territory. Today's report on the non-manufacturing sector (NMI), where the headline index remained relatively steady at 50.2, suggests that service sector activity is holding up much better than the manufacturing sector.
Activity Holds On
* The subcomponents supported the NMI. The employment index was the only subcomponent signaling contraction.
* The price index slipped again in September; energy prices in particular have moderated from recent highs. This downward trend in inflation should continue as growth here and abroad slows.
Outlook Still Challenging
* The forward looking new orders index climbed into expansionary territory last month.
* However, service sector activity should continue to slow as the overall economy struggles with transition of the correcting housing market, tighter credit conditions and a deteriorating labor market
Wachovia Corporation
http://www.wachovia.com
Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.
Read more...
Crisis Hits Main Street as Employers Cut More Jobs
By Shobhana Chandra and Rich Miller
Oct. 3 (Bloomberg) -- U.S. payrolls plunged in September, signaling the economy may be heading for its worst recession in at least a quarter century as the 13-month-old credit crisis on Wall Street finally hits home on Main Street.
Employers cut the most jobs in five years in September as cash-squeezed companies pulled back in an effort to bolster pinched profits. In its last employment report before Americans choose their next president, the Labor Department said the unemployment rate was 6.1 percent, a climb of 1.4 percentage points from a year before.
``If credit markets remain dysfunctional, the current recession could turn out to be as severe as any in the postwar period,'' said former Federal Reserve governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington.
The spreading crisis is also having reverberations on the campaign trail, as polls show anxious voters increasingly see Democrat Barack Obama as the candidate best placed to see the U.S. through its economic travails. The unemployment rate has only risen twice in the year leading up to elections since World War II, and in each case the incumbent party lost.
`This country can't afford Senator McCain's plan to give America four more years of the same policies that have devastated our middle class and our economy for the last eight,'' Obama, 47, said in a statement.
McCain's Reaction
Arizona Senator John McCain, 72, took the opportunity to paint his opponent as a tax-and-spend liberal, whose prescriptions would exacerbate the crisis.
``Unlike Senator Obama, I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets,'' McCain said in a statement. ``Our nation cannot afford Senator Obama's higher taxes.''
Job losses accelerated as the credit crisis deepened last month, forcing the failure or government takeovers of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group Inc.
The figures came hours before a scheduled vote in the House of Representatives on a $700 billion rescue plan for the U.S. financial industry pushed by Treasury Secretary Henry Paulson. The Senate approved the legislation two days ago after the House rejected an initial version of the bill Sept. 29.
Market Reaction
Stocks rose and Treasury securities fell on optimism the rescue plan would pass the House. The Standard & Poor's 500 index rose 2.9 percent to 1,146.1 at 11:08 a.m. in New York. The yield on the benchmark 10-year note rose to 3.72 percent from 3.63 percent late yesterday.
Today's report showed that hours worked -- considered a good proxy for the state of the overall economy -- matched the lowest level since records began in 1964. That indicates the likely current recession may be at least as severe as the 1981-82 slump, during which gross domestic product shrank by 2.7 percent.
Payrolls fell by 159,000 in September, the Labor Department said in Washington. Aside from a 9,000 gain in government payrolls, all major categories showed declines except education and healthcare.
``The really bad news here is that job losses are now widespread,'' said Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. ``The problems in housing and manufacturing are now spreading everywhere. We are in a recession, there is no debate about that.''
Health Services
Even the vibrant health-services industry is showing signs of succumbing to the economy's troubles. Health care employment rose 17,000, about half the average monthly gain for the prior 12 months.
Walgreen Co., the largest U.S. drugstore chain, reported Sept. 29 that its profits rose less than analysts estimated after it posted its smallest sales increase in a decade.
A private report today showed that services-industry growth remained stagnant in September. The Institute of Supply Management's non-manufacturing index slipped to 50.2 from 50.6 the month before. Fifty is the dividing line between growth and expansion.
Total payrolls were forecast to drop 105,000 after declining by a previously estimated 84,000 in August, according to the median of 76 economists surveyed by Bloomberg News. The jobless rate was projected to remain at 6.1 percent.
Rate Forecasts
Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said the unemployment rate may eventually rise to more than 7 percent as the credit crunch takes its toll on the economy. If that happens, that would make the overall rise in unemployment the biggest since the early 1980's.
Workers' average hourly wages rose 3 cents, or 0.2 percent, to $18.17 from the prior month. Hourly earnings were 3.4 percent higher than September 2007. Economists surveyed by Bloomberg had forecast a 0.3 percent increase from August and a 3.6 percent gain for the 12-month period.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007.
Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.
`Angry' Voters
``Voters are extremely angry, and they want someone to blame,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.
Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington- based Pew had shown the candidates were in a statistical tie.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.
Factory payrolls fell 51,000 after decreasing 56,000 in August. Economists had forecast a drop of 57,000.
Today's report also reflected the housing slump. Payrolls at builders declined 35,000 after falling 13,000. Financial firms decreased payrolls by 17,000, the most since November last year.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 82,000 workers after eliminating 16,000 in the previous month. Retail payrolls slid by 40,100 after a 25,400 drop.
Hewlett-Packard
In the past month, Hewlett-Packard Co., the world's largest personal-computer maker, announced it will cut 24,600 jobs, and auto-parts maker Federal-Mogul Corp. said it would eliminate 4,000 positions globally.
Marriott International Inc., the world's largest hotel chain, yesterday reported third-quarter profit fell 28 percent as U.S. companies and consumers cut back on travel.
Without action from Congress, ``the resulting credit squeeze could threaten businesses,'' Chief Financial Officer Arne Sorenson said on a conference call. There are ``tens of thousands of jobs at stake in our company alone, and we are typical.''
Mounting job cuts will further limit consumer spending, which accounts for more than two-thirds of the economy. A Bloomberg survey in September predicted spending will be unchanged this quarter, the weakest performance since 1991.
The ISM on Oct. 1 said manufacturing shrank in September at the fastest pace since the last recession in 2001. The odds the central bank will lower its benchmark rate by a half percentage point, to 1.5 percent, were almost 100 percent today, up from 32 percent a week ago.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- U.S. payrolls plunged in September, signaling the economy may be heading for its worst recession in at least a quarter century as the 13-month-old credit crisis on Wall Street finally hits home on Main Street.
Employers cut the most jobs in five years in September as cash-squeezed companies pulled back in an effort to bolster pinched profits. In its last employment report before Americans choose their next president, the Labor Department said the unemployment rate was 6.1 percent, a climb of 1.4 percentage points from a year before.
``If credit markets remain dysfunctional, the current recession could turn out to be as severe as any in the postwar period,'' said former Federal Reserve governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington.
The spreading crisis is also having reverberations on the campaign trail, as polls show anxious voters increasingly see Democrat Barack Obama as the candidate best placed to see the U.S. through its economic travails. The unemployment rate has only risen twice in the year leading up to elections since World War II, and in each case the incumbent party lost.
`This country can't afford Senator McCain's plan to give America four more years of the same policies that have devastated our middle class and our economy for the last eight,'' Obama, 47, said in a statement.
McCain's Reaction
Arizona Senator John McCain, 72, took the opportunity to paint his opponent as a tax-and-spend liberal, whose prescriptions would exacerbate the crisis.
``Unlike Senator Obama, I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets,'' McCain said in a statement. ``Our nation cannot afford Senator Obama's higher taxes.''
Job losses accelerated as the credit crisis deepened last month, forcing the failure or government takeovers of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group Inc.
The figures came hours before a scheduled vote in the House of Representatives on a $700 billion rescue plan for the U.S. financial industry pushed by Treasury Secretary Henry Paulson. The Senate approved the legislation two days ago after the House rejected an initial version of the bill Sept. 29.
Market Reaction
Stocks rose and Treasury securities fell on optimism the rescue plan would pass the House. The Standard & Poor's 500 index rose 2.9 percent to 1,146.1 at 11:08 a.m. in New York. The yield on the benchmark 10-year note rose to 3.72 percent from 3.63 percent late yesterday.
Today's report showed that hours worked -- considered a good proxy for the state of the overall economy -- matched the lowest level since records began in 1964. That indicates the likely current recession may be at least as severe as the 1981-82 slump, during which gross domestic product shrank by 2.7 percent.
Payrolls fell by 159,000 in September, the Labor Department said in Washington. Aside from a 9,000 gain in government payrolls, all major categories showed declines except education and healthcare.
``The really bad news here is that job losses are now widespread,'' said Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. ``The problems in housing and manufacturing are now spreading everywhere. We are in a recession, there is no debate about that.''
Health Services
Even the vibrant health-services industry is showing signs of succumbing to the economy's troubles. Health care employment rose 17,000, about half the average monthly gain for the prior 12 months.
Walgreen Co., the largest U.S. drugstore chain, reported Sept. 29 that its profits rose less than analysts estimated after it posted its smallest sales increase in a decade.
A private report today showed that services-industry growth remained stagnant in September. The Institute of Supply Management's non-manufacturing index slipped to 50.2 from 50.6 the month before. Fifty is the dividing line between growth and expansion.
Total payrolls were forecast to drop 105,000 after declining by a previously estimated 84,000 in August, according to the median of 76 economists surveyed by Bloomberg News. The jobless rate was projected to remain at 6.1 percent.
Rate Forecasts
Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said the unemployment rate may eventually rise to more than 7 percent as the credit crunch takes its toll on the economy. If that happens, that would make the overall rise in unemployment the biggest since the early 1980's.
Workers' average hourly wages rose 3 cents, or 0.2 percent, to $18.17 from the prior month. Hourly earnings were 3.4 percent higher than September 2007. Economists surveyed by Bloomberg had forecast a 0.3 percent increase from August and a 3.6 percent gain for the 12-month period.
After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007.
Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.
`Angry' Voters
``Voters are extremely angry, and they want someone to blame,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.
Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington- based Pew had shown the candidates were in a statistical tie.
Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.
Factory payrolls fell 51,000 after decreasing 56,000 in August. Economists had forecast a drop of 57,000.
Today's report also reflected the housing slump. Payrolls at builders declined 35,000 after falling 13,000. Financial firms decreased payrolls by 17,000, the most since November last year.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 82,000 workers after eliminating 16,000 in the previous month. Retail payrolls slid by 40,100 after a 25,400 drop.
Hewlett-Packard
In the past month, Hewlett-Packard Co., the world's largest personal-computer maker, announced it will cut 24,600 jobs, and auto-parts maker Federal-Mogul Corp. said it would eliminate 4,000 positions globally.
Marriott International Inc., the world's largest hotel chain, yesterday reported third-quarter profit fell 28 percent as U.S. companies and consumers cut back on travel.
Without action from Congress, ``the resulting credit squeeze could threaten businesses,'' Chief Financial Officer Arne Sorenson said on a conference call. There are ``tens of thousands of jobs at stake in our company alone, and we are typical.''
Mounting job cuts will further limit consumer spending, which accounts for more than two-thirds of the economy. A Bloomberg survey in September predicted spending will be unchanged this quarter, the weakest performance since 1991.
The ISM on Oct. 1 said manufacturing shrank in September at the fastest pace since the last recession in 2001. The odds the central bank will lower its benchmark rate by a half percentage point, to 1.5 percent, were almost 100 percent today, up from 32 percent a week ago.
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
Read more...
EU Panel May Slow Push for More UN Emission Credits
By Jonathan Stearns
Oct. 3 (Bloomberg) -- The European Parliament's environment committee may scale back a plan to let energy and manufacturing companies import more emission credits through 2020, highlighting concerns about flooding the market.
Compromise proposals by leading members of the panel would allow carbon-dioxide emitters to cover up to 4 percent of their discharges annually through 2020 with credits gained from energy-efficient projects outside the European Union. An earlier proposal by Avril Doyle, an Irish member steering the draft law through the EU Parliament, would set the limit at 5 percent.
The compromise amendment, seen today by Bloomberg News and backed by Doyle, would translate into about 1.65 billion metric tons of emissions in 2008-2020 compared with 1.69 billion tons under the original Doyle plan, according to her office in Brussels. Those figures compare with 1.4 billion tons over the period under the draft legislation presented in January by the European Commission, which opposes raising the limit.
The inflow of credits ``needs to be managed very carefully to ensure that substantial domestic emission reductions will happen within the EU,'' the commission said in an unofficial position paper sent to members of the 27-nation Parliament. The United Nations-backed credits are generated under the Kyoto Protocol's clean development mechanism.
Oct. 7 Vote
The Parliament's environment panel is due to vote Oct. 7 on the new EU law, which would also reduce CO2 quotas on electricity, steel, paper and other industries now in the European emissions-trading system by 11 percent on average in 2013-2020 compared with 2008-2012.
The legislation is part of EU plans to reduce greenhouse gases including CO2, the main such pollutant, by a fifth in 2020 from 1990. The European emissions-trading system, the world's biggest greenhouse-gas market, requires companies that exceed their allowance-based quotas for CO2 to buy permits from businesses that emit less.
Access to imported credits reduces costs for European factories and power plants because UN permits are cheaper than EU allowances and can be used as an alternative for compliance under the emissions-trading program. Industry and traders are pressing the EU to be more flexible with foreign credits beginning in 2013.
Global Accord
The commission proposed on Jan. 23 to limit the use of imported credits to unexhausted quotas fixed for 2008-2012 as long as no global accord is reached to succeed the Kyoto Protocol after 2012, saying looser rules could open the ``floodgates'' for extra supply.
The commission, the EU's regulatory arm, also says any greater use of imported credits should be tied to a new international accord being reached so that developing countries including China and India have an incentive to sign up.
``Giving too much access to credits in the absence of an international agreement would take away this leverage on this key issue,'' the commission said in its position paper.
The environment committee's plan to let companies use imported credits to cover up to 4 percent of their discharges would be an alternative to carrying over into 2013-2020 unused import quotas already set for 2008-2012. The new option would be conditional on companies having used such credits in 2008-2012 for less than 6.5 percent of their emissions.
One-Third or 45 Percent?
The commission has said that, under its proposal, UN credits would probably meet a third of the EU's greenhouse-gas reduction effort planned through the emissions-trading system and has called that level ``enormous.''
In its paper for Parliament members, the commission says the 1.4 billion tons of emissions that would be covered by imported credits under its proposal would represent 45 percent of the reduction effort.
The commission's environment spokeswoman, Barbara Helfferich, declined to comment on the 45 percent figure when reached today by telephone. She said the paper for Parliament members isn't official and the commission stands by the original one-third estimate.
An aide to Doyle said the environment committee members used the commission's unofficial paper to draw up the compromise amendments. The draft EU legislation ultimately needs the support of the full 785-seat EU Parliament and national governments.
To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- The European Parliament's environment committee may scale back a plan to let energy and manufacturing companies import more emission credits through 2020, highlighting concerns about flooding the market.
Compromise proposals by leading members of the panel would allow carbon-dioxide emitters to cover up to 4 percent of their discharges annually through 2020 with credits gained from energy-efficient projects outside the European Union. An earlier proposal by Avril Doyle, an Irish member steering the draft law through the EU Parliament, would set the limit at 5 percent.
The compromise amendment, seen today by Bloomberg News and backed by Doyle, would translate into about 1.65 billion metric tons of emissions in 2008-2020 compared with 1.69 billion tons under the original Doyle plan, according to her office in Brussels. Those figures compare with 1.4 billion tons over the period under the draft legislation presented in January by the European Commission, which opposes raising the limit.
The inflow of credits ``needs to be managed very carefully to ensure that substantial domestic emission reductions will happen within the EU,'' the commission said in an unofficial position paper sent to members of the 27-nation Parliament. The United Nations-backed credits are generated under the Kyoto Protocol's clean development mechanism.
Oct. 7 Vote
The Parliament's environment panel is due to vote Oct. 7 on the new EU law, which would also reduce CO2 quotas on electricity, steel, paper and other industries now in the European emissions-trading system by 11 percent on average in 2013-2020 compared with 2008-2012.
The legislation is part of EU plans to reduce greenhouse gases including CO2, the main such pollutant, by a fifth in 2020 from 1990. The European emissions-trading system, the world's biggest greenhouse-gas market, requires companies that exceed their allowance-based quotas for CO2 to buy permits from businesses that emit less.
Access to imported credits reduces costs for European factories and power plants because UN permits are cheaper than EU allowances and can be used as an alternative for compliance under the emissions-trading program. Industry and traders are pressing the EU to be more flexible with foreign credits beginning in 2013.
Global Accord
The commission proposed on Jan. 23 to limit the use of imported credits to unexhausted quotas fixed for 2008-2012 as long as no global accord is reached to succeed the Kyoto Protocol after 2012, saying looser rules could open the ``floodgates'' for extra supply.
The commission, the EU's regulatory arm, also says any greater use of imported credits should be tied to a new international accord being reached so that developing countries including China and India have an incentive to sign up.
``Giving too much access to credits in the absence of an international agreement would take away this leverage on this key issue,'' the commission said in its position paper.
The environment committee's plan to let companies use imported credits to cover up to 4 percent of their discharges would be an alternative to carrying over into 2013-2020 unused import quotas already set for 2008-2012. The new option would be conditional on companies having used such credits in 2008-2012 for less than 6.5 percent of their emissions.
One-Third or 45 Percent?
The commission has said that, under its proposal, UN credits would probably meet a third of the EU's greenhouse-gas reduction effort planned through the emissions-trading system and has called that level ``enormous.''
In its paper for Parliament members, the commission says the 1.4 billion tons of emissions that would be covered by imported credits under its proposal would represent 45 percent of the reduction effort.
The commission's environment spokeswoman, Barbara Helfferich, declined to comment on the 45 percent figure when reached today by telephone. She said the paper for Parliament members isn't official and the commission stands by the original one-third estimate.
An aide to Doyle said the environment committee members used the commission's unofficial paper to draw up the compromise amendments. The draft EU legislation ultimately needs the support of the full 785-seat EU Parliament and national governments.
To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net
Read more...
Billionaire Akhmetov's DTEK to Borrow for Purchases
By Yuriy Humber
Oct. 3 (Bloomberg) -- Donbass Fuel & Energy Co., Ukraine's largest non-state coal and power producer, plans to borrow to fund acquisition opportunities, even amid ``crazy'' interest rates, Chief Financial Officer Yuriy Ryzhenkov said.
The Kiev-based company, also known as DTEK and controlled by the nation's richest man Rinat Akhmetov, is targeting companies worth between $50 million and $500 million in Ukraine's coal and electricity industries and coal assets in Russia, Ryzhenkov said in a Moscow interview.
DTEK, formed in 2002, wants to further bolster businesses that have helped it boost net income more than fivefold to $236 million in the last four years. Buying more coal mines and power plants may be more expensive than ever for the company as banks hoard cash, concerned that financial institutions will collapse.
``You might say that rates are pretty crazy at the moment, but at the same time the projects that we have have very high IRRs,'' Ryzhenkov said yesterday, in a reference to internal rates of return. ``It's still worth doing them now rather than waiting for financial markets to improve.''
The cost of borrowing in dollars for three months, reflected in the London interbank offered rate, climbed 6 basis points to 4.21 percent yesterday, the highest since January, according to the British Bankers' Association. Libor is used to set rates on $360 trillion of financial products worldwide, from home loans to derivatives.
Ukraine Assets
Germany's E.ON AG and Electricite de France SA may act as partners in power plant acquisitions in Ukraine as the country auctions state assets, Ryzhenkov said. E.ON spokesman Mirko Kahre and EDF spokeswoman Carole Trivi declined to comment.
The global financial crisis and next year's presidential elections in Ukraine spurred President Viktor Yushchenko on Oct. 1 to lift a ban on auctioning more state enterprises in an attempt to improve the budget.
The state's need for cash could lead to the sale of power generators in the first six months of next year, and coal mining enterprises later in 2009 or 2010, Ryzhenkov said. State-owned coal operations first need to be incorporated, which would take at least six months, he said.
``DTEK knows all the mines and what to expect, so they have lots of advantages in coal mine auctions,'' Andriy Bespyatov, an analyst at Dragon Capital, said by phone from Kiev today. He said auctions probably won't take place until the political situation in Ukraine became more stable.
Bond-Sale Challenge
Ukraine's government said in March it plans to reap at least 8.92 billion hryvnia ($1.75 billion) from asset sales to cover a budget deficit this year. Disputes among state agencies have already delayed the disposals for a decade.
The financing that DTEK is considering, including dollar- denominated bonds, will also be a challenge this year because investors are ignoring new bond sales, said Mikhail Galkin, head of fixed-income research at MDM Bank in Moscow.
``When investment-grade names trade at 12 to 13 percent, and Ukraine sovereign bonds approaches those levels, no market- based deal appears to be possible,'' Galkin said. A bond sale ``window'' may not appear until the end of the year, he said.
The extra yield investors demand on developing-nation bonds over Treasuries increased 14 basis points to 4.45 percentage points, the highest level since 2004, JPMorgan Chase & Co.'s EMBI+ Index shows.
DTEK fully owns three power plants, which use 9 million of the 17 million metric tons of coal it produces each year. The company also has a 47 percent stake in state-run utility Dniproenergo, which also consumes about 9 million tons.
``If you look at both companies, we're not fully self- sufficient in coal,'' Ryzhenkov said, adding that DTEK sells as much as 3 million tons annually to steelmakers.
New coal resources may come from Russia as well as Ukraine. DTEK is looking at fields in the Rostov region, which neighbors Ukraine, and in the Kemerovo area of Siberia, Ryzhenkov said.
To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Donbass Fuel & Energy Co., Ukraine's largest non-state coal and power producer, plans to borrow to fund acquisition opportunities, even amid ``crazy'' interest rates, Chief Financial Officer Yuriy Ryzhenkov said.
The Kiev-based company, also known as DTEK and controlled by the nation's richest man Rinat Akhmetov, is targeting companies worth between $50 million and $500 million in Ukraine's coal and electricity industries and coal assets in Russia, Ryzhenkov said in a Moscow interview.
DTEK, formed in 2002, wants to further bolster businesses that have helped it boost net income more than fivefold to $236 million in the last four years. Buying more coal mines and power plants may be more expensive than ever for the company as banks hoard cash, concerned that financial institutions will collapse.
``You might say that rates are pretty crazy at the moment, but at the same time the projects that we have have very high IRRs,'' Ryzhenkov said yesterday, in a reference to internal rates of return. ``It's still worth doing them now rather than waiting for financial markets to improve.''
The cost of borrowing in dollars for three months, reflected in the London interbank offered rate, climbed 6 basis points to 4.21 percent yesterday, the highest since January, according to the British Bankers' Association. Libor is used to set rates on $360 trillion of financial products worldwide, from home loans to derivatives.
Ukraine Assets
Germany's E.ON AG and Electricite de France SA may act as partners in power plant acquisitions in Ukraine as the country auctions state assets, Ryzhenkov said. E.ON spokesman Mirko Kahre and EDF spokeswoman Carole Trivi declined to comment.
The global financial crisis and next year's presidential elections in Ukraine spurred President Viktor Yushchenko on Oct. 1 to lift a ban on auctioning more state enterprises in an attempt to improve the budget.
The state's need for cash could lead to the sale of power generators in the first six months of next year, and coal mining enterprises later in 2009 or 2010, Ryzhenkov said. State-owned coal operations first need to be incorporated, which would take at least six months, he said.
``DTEK knows all the mines and what to expect, so they have lots of advantages in coal mine auctions,'' Andriy Bespyatov, an analyst at Dragon Capital, said by phone from Kiev today. He said auctions probably won't take place until the political situation in Ukraine became more stable.
Bond-Sale Challenge
Ukraine's government said in March it plans to reap at least 8.92 billion hryvnia ($1.75 billion) from asset sales to cover a budget deficit this year. Disputes among state agencies have already delayed the disposals for a decade.
The financing that DTEK is considering, including dollar- denominated bonds, will also be a challenge this year because investors are ignoring new bond sales, said Mikhail Galkin, head of fixed-income research at MDM Bank in Moscow.
``When investment-grade names trade at 12 to 13 percent, and Ukraine sovereign bonds approaches those levels, no market- based deal appears to be possible,'' Galkin said. A bond sale ``window'' may not appear until the end of the year, he said.
The extra yield investors demand on developing-nation bonds over Treasuries increased 14 basis points to 4.45 percentage points, the highest level since 2004, JPMorgan Chase & Co.'s EMBI+ Index shows.
DTEK fully owns three power plants, which use 9 million of the 17 million metric tons of coal it produces each year. The company also has a 47 percent stake in state-run utility Dniproenergo, which also consumes about 9 million tons.
``If you look at both companies, we're not fully self- sufficient in coal,'' Ryzhenkov said, adding that DTEK sells as much as 3 million tons annually to steelmakers.
New coal resources may come from Russia as well as Ukraine. DTEK is looking at fields in the Rostov region, which neighbors Ukraine, and in the Kemerovo area of Siberia, Ryzhenkov said.
To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net
Read more...
Natural Gas Falls as Investors Dump Commodities, Supply Rises
By Reg Curren
Oct. 3 (Bloomberg) -- Natural gas in New York fell for a second day as investors sold commodities on concern a financial- industry crisis will send the U.S. economy into recession.
A slowing economy would trim industrial demand for gas supplies which, after an increase last week, are 1.6 percent above the five-year average. Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 10 percent this week, the most since at least 1956.
``Commodities are weak in general,'' said Carl Neill, an energy analyst at Risk Management Inc. in Chicago. ``The overwhelming factor in the market is the big build in supplies.''
Natural gas for November delivery fell 16.5 cents, or 2.2 percent, to $7.316 per million British thermal units at 9:16 a.m. on the New York Mercantile Exchange after shedding 3.2 percent yesterday.
Inventories gained 87 billion cubic feet in the week ended Sept. 26 to 3.11 trillion cubic feet, the U.S. Energy Department said yesterday. Analysts had forecast a 73 billion-cubic-foot advance.
The rise kept supplies on a pace to be above the five-year average of 3.327 trillion cubic feet at next month's start of the peak-demand heating season in the U.S. Stockpiles were 50 billion cubic feet higher than average for this time of year, up from 35 billion in last week's report.
Hurricanes Ike and Gustav left millions of people without electricity last month, reducing demand for gas as a fuel at power plants.
U.S. electricity output decreased 3.4 percent in the week ended Sept. 25, according to an analysis by Genscape Inc. Output was down 11 percent from a year earlier.
Gas production companies in the Gulf of Mexico have restored more than half of the offshore region's daily output of 7.4 billion cubic feet, according to the U.S. Minerals Management Service.
To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Natural gas in New York fell for a second day as investors sold commodities on concern a financial- industry crisis will send the U.S. economy into recession.
A slowing economy would trim industrial demand for gas supplies which, after an increase last week, are 1.6 percent above the five-year average. Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 10 percent this week, the most since at least 1956.
``Commodities are weak in general,'' said Carl Neill, an energy analyst at Risk Management Inc. in Chicago. ``The overwhelming factor in the market is the big build in supplies.''
Natural gas for November delivery fell 16.5 cents, or 2.2 percent, to $7.316 per million British thermal units at 9:16 a.m. on the New York Mercantile Exchange after shedding 3.2 percent yesterday.
Inventories gained 87 billion cubic feet in the week ended Sept. 26 to 3.11 trillion cubic feet, the U.S. Energy Department said yesterday. Analysts had forecast a 73 billion-cubic-foot advance.
The rise kept supplies on a pace to be above the five-year average of 3.327 trillion cubic feet at next month's start of the peak-demand heating season in the U.S. Stockpiles were 50 billion cubic feet higher than average for this time of year, up from 35 billion in last week's report.
Hurricanes Ike and Gustav left millions of people without electricity last month, reducing demand for gas as a fuel at power plants.
U.S. electricity output decreased 3.4 percent in the week ended Sept. 25, according to an analysis by Genscape Inc. Output was down 11 percent from a year earlier.
Gas production companies in the Gulf of Mexico have restored more than half of the offshore region's daily output of 7.4 billion cubic feet, according to the U.S. Minerals Management Service.
To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.
Read more...
Dollar Heads for Biggest Weekly Gain on Currency Funding Demand
By Ye Xie and Daniel Kruger
Oct. 3 (Bloomberg) -- The dollar rose against the euro, heading for its biggest weekly gain ever, on a surge in demand for U.S. currency funding amid a global credit crunch.
The greenback was poised for a third weekly drop versus the yen after the government's payroll report showed the U.S. lost the most jobs in five years in September. The U.S. House of Representatives prepared to vote on a revised $700 billion financial bailout after rejecting a plan Sept. 29.
``Very strong demand for dollars is still evident,'' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. Traders waited until after the payroll data to buy dollars against the euro because they wanted to ``clear the event risk.''
The dollar increased 0.6 percent to $1.3732 per euro at 10:14 a.m. in New York, from $1.3819 yesterday. It touched $1.3703, the strongest level since September 2007. It has increased 6 percent this week, the most since the 15-nation currency made its debut in 1999. The dollar traded at 105.49 yen, compared with 105.33, and was headed for a 0.5 percent weekly decline. The euro decreased 0.5 percent to 144.90 yen, from 145.55.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars increased to 4.33 percent, the most since January, the British Bankers' Association said. The Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record.
U.S. payrolls shrank by 159,000 last month, following a revised decline of 73,000 in August, the Labor Department said today in Washington. The median forecast of 76 economists surveyed by Bloomberg News was for a reduction of 105,000. The jobless rate stayed at 6.1 percent.
Jobless Rolls
The number of people staying on jobless rolls rose to 3.591 million, the highest since September 2003, in the week ended Sept. 20, the Labor Department reported yesterday.
``The U.S. economy is nowhere near recovery,'' said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets under administration.
The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, decreased to 50.2, higher than forecast, from 50.6 in August, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction.
The euro was headed for a record weekly drop against the dollar after European Central Bank President Jean-Claude Trichet said yesterday policy makers discussed cutting the main refinancing rate. European economies face ``increasing downside risks,'' he said at a press conference following the decision to keep borrowing costs at a seven-year high of 4.25 percent.
Euribor Futures
The implied yield on the Euribor futures contract expiring in March fell to 4.10 percent, from 4.77 percent a month ago. The Euribor contract has averaged 44 basis points, or 0.44 percentage point, higher than the ECB's overnight target during the past two years, Bloomberg data show.
Investors should sell the euro at 145 yen with a target of 135 yen after the ECB signaled it may lower borrowing costs for the first time in five years, according to Morgan Stanley.
``Growth prospects in the euro zone are dimming quickly and may force the ECB's easing hand sooner rather than later,'' New York-based strategists Sophia Drossos and Yilin Nie wrote in a research note yesterday.
Five European banks including Dexia SA, the world's biggest lender to local governments, and Fortis, Belgium's largest financial-services firm, accepted government-backed bailouts this week.
Fed Rate Outlook
Traders raised bets that the Federal Reserve will reduce the target lending rate by as much as three-quarters of a percentage point this month. Futures on the Chicago Board of Trade showed a 92 percent chance that the central bank will cut its 2 percent benchmark by a half-percentage point at its Oct. 29 meeting, with the balance of bets on a reduction of 0.75 percentage point. Futures showed no chance of lower borrowing costs a month ago.
The U.S. House will vote on the latest version of the financial bailout at about 12:30 p.m. in Washington. The Senate voted 74-25 on Oct. 1 in favor of legislation that links the rescue to an increase in bank-deposit insurance limits and tax breaks after the House rejected an earlier version of the bill.
Wells Fargo & Co., the biggest U.S. bank on the West Coast, agreed to buy all of Wachovia Corp. for about $15.1 billion in stock, trumping Citigroup Inc.'s offer four days ago for part of the embattled North Carolina lender.
The U.S. currency surged 12 percent versus the euro last quarter, its biggest gain since the European currency started trading, as the credit crisis that began in the U.S. with rising delinquency rates for subprime mortgages spread to continental Europe and the U.K.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- The dollar rose against the euro, heading for its biggest weekly gain ever, on a surge in demand for U.S. currency funding amid a global credit crunch.
The greenback was poised for a third weekly drop versus the yen after the government's payroll report showed the U.S. lost the most jobs in five years in September. The U.S. House of Representatives prepared to vote on a revised $700 billion financial bailout after rejecting a plan Sept. 29.
``Very strong demand for dollars is still evident,'' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. Traders waited until after the payroll data to buy dollars against the euro because they wanted to ``clear the event risk.''
The dollar increased 0.6 percent to $1.3732 per euro at 10:14 a.m. in New York, from $1.3819 yesterday. It touched $1.3703, the strongest level since September 2007. It has increased 6 percent this week, the most since the 15-nation currency made its debut in 1999. The dollar traded at 105.49 yen, compared with 105.33, and was headed for a 0.5 percent weekly decline. The euro decreased 0.5 percent to 144.90 yen, from 145.55.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars increased to 4.33 percent, the most since January, the British Bankers' Association said. The Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record.
U.S. payrolls shrank by 159,000 last month, following a revised decline of 73,000 in August, the Labor Department said today in Washington. The median forecast of 76 economists surveyed by Bloomberg News was for a reduction of 105,000. The jobless rate stayed at 6.1 percent.
Jobless Rolls
The number of people staying on jobless rolls rose to 3.591 million, the highest since September 2003, in the week ended Sept. 20, the Labor Department reported yesterday.
``The U.S. economy is nowhere near recovery,'' said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets under administration.
The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90 percent of the economy, decreased to 50.2, higher than forecast, from 50.6 in August, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction.
The euro was headed for a record weekly drop against the dollar after European Central Bank President Jean-Claude Trichet said yesterday policy makers discussed cutting the main refinancing rate. European economies face ``increasing downside risks,'' he said at a press conference following the decision to keep borrowing costs at a seven-year high of 4.25 percent.
Euribor Futures
The implied yield on the Euribor futures contract expiring in March fell to 4.10 percent, from 4.77 percent a month ago. The Euribor contract has averaged 44 basis points, or 0.44 percentage point, higher than the ECB's overnight target during the past two years, Bloomberg data show.
Investors should sell the euro at 145 yen with a target of 135 yen after the ECB signaled it may lower borrowing costs for the first time in five years, according to Morgan Stanley.
``Growth prospects in the euro zone are dimming quickly and may force the ECB's easing hand sooner rather than later,'' New York-based strategists Sophia Drossos and Yilin Nie wrote in a research note yesterday.
Five European banks including Dexia SA, the world's biggest lender to local governments, and Fortis, Belgium's largest financial-services firm, accepted government-backed bailouts this week.
Fed Rate Outlook
Traders raised bets that the Federal Reserve will reduce the target lending rate by as much as three-quarters of a percentage point this month. Futures on the Chicago Board of Trade showed a 92 percent chance that the central bank will cut its 2 percent benchmark by a half-percentage point at its Oct. 29 meeting, with the balance of bets on a reduction of 0.75 percentage point. Futures showed no chance of lower borrowing costs a month ago.
The U.S. House will vote on the latest version of the financial bailout at about 12:30 p.m. in Washington. The Senate voted 74-25 on Oct. 1 in favor of legislation that links the rescue to an increase in bank-deposit insurance limits and tax breaks after the House rejected an earlier version of the bill.
Wells Fargo & Co., the biggest U.S. bank on the West Coast, agreed to buy all of Wachovia Corp. for about $15.1 billion in stock, trumping Citigroup Inc.'s offer four days ago for part of the embattled North Carolina lender.
The U.S. currency surged 12 percent versus the euro last quarter, its biggest gain since the European currency started trading, as the credit crisis that began in the U.S. with rising delinquency rates for subprime mortgages spread to continental Europe and the U.K.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net
Read more...
Angola Adds Two Dalia Crude Cargoes in November, Drops a Hungo
By Alexander Kwiatkowski
Oct. 3 (Bloomberg) -- Angola, vying with Nigeria to be Africa's biggest producer, will export two more Dalia crude cargoes than originally scheduled in November, and one fewer Hungo shipment.
Revised loading schedules show eight Dalia cargoes, totaling 7.6 million barrels, or 253,333 barrels a day, will be shipped in November. Original schedules included six cargoes.
Seven shipments of Hungo crude will now load, totaling 6.7 million barrels or 221,667 barrels a day, according to the new schedule. A cargo loading on Nov. 29 belonging to state-run Sonangol SA was dropped from the original program.
The revisions boost Angola's forecast exports in November to 1.79 million barrels a day from 1.76 million barrels a day. That is 10.3 percent lower than October.
Oil from Angola accounted for about 5 percent of total U.S. crude imports in 2007, or 496,000 barrels a day, according to the Energy Information Administration.
To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net;
Read more...
Oct. 3 (Bloomberg) -- Angola, vying with Nigeria to be Africa's biggest producer, will export two more Dalia crude cargoes than originally scheduled in November, and one fewer Hungo shipment.
Revised loading schedules show eight Dalia cargoes, totaling 7.6 million barrels, or 253,333 barrels a day, will be shipped in November. Original schedules included six cargoes.
Seven shipments of Hungo crude will now load, totaling 6.7 million barrels or 221,667 barrels a day, according to the new schedule. A cargo loading on Nov. 29 belonging to state-run Sonangol SA was dropped from the original program.
The revisions boost Angola's forecast exports in November to 1.79 million barrels a day from 1.76 million barrels a day. That is 10.3 percent lower than October.
Oil from Angola accounted for about 5 percent of total U.S. crude imports in 2007, or 496,000 barrels a day, according to the Energy Information Administration.
To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net;
Read more...
Palm Oil Declines to 18-Month Low Amid Worsening Demand Outlook
By Claire Leow
Oct. 3 (Bloomberg) -- Palm oil futures plunged to a 18-month low on concern a proposed $700 million U.S. financial rescue plan won't stimulate economic growth and demand for commodities.
December-delivery palm oil fell 4.3 percent to 2,000 ringgit ($577) a metric ton on the Malaysia Derivatives Exchange. Futures earlier dropped below 2,000 ringgit for a second time this week.
The Reuters/Jefferies CRB Index of 19 commodities has fallen 9.9 percent this week, the largest drop since at least 1956, as a worsening global growth outlook sent prices for crude oil, corn, soybeans, nickel and gold tumbling from peaks reached this year.
``Recent Malaysian export data and a revision in EU biofuels policy amid falling crude oil prices suggest that the pressure on crude palm oil prices is likely to persist,'' Sunaina Dhanuka, an analyst at Macquarie in Kuala Lumpur said today.
On Sept. 11, the EU Industry & Energy Committee lowered its target for 5.75 percent of renewable energy sources in transport fuel by 2010 to 5 percent by 2015, a move that may crimp demand for palm oil for use in biofuels by 2 million tons a year for the next two years, Dhanuka said.
Vegetable oils made from soybeans, corn, rapeseeds and oil palms, used mostly in cooking, often track crude oil prices as they can be used to make alternative fuels. Oil futures in New York have slumped 13 percent this week to $93.29 a barrel.
Malaysia's palm oil exports fell 19 percent in September to 1.2 million tons compared with the previous month, independent surveyor Intertek said today. Indonesia and Malaysia account for 90 percent of the world's palm oil production.
Plantation Stocks
Stocks of plantation companies and edible-oil refiners fell.
Wilmar International Ltd., the world's top palm oil trader which supplies almost half of China's edible oils, dropped 5.1 percent to S$2.4 in Singapore. The stock has lost 12 percent of its value this week.
Indofood Agri Resources Ltd., the Singapore-listed palm oil unit of Indonesia's biggest noodle maker, dropped 6 percent to 72 Singapore cents, extending this week's loss to 12 percent.
Golden Agri Resources Ltd., owner of the world's second- largest oil-palm plantation, fell 7.6 percent to 30.5 cents, extending this week's loss to 16.4 percent.
To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Palm oil futures plunged to a 18-month low on concern a proposed $700 million U.S. financial rescue plan won't stimulate economic growth and demand for commodities.
December-delivery palm oil fell 4.3 percent to 2,000 ringgit ($577) a metric ton on the Malaysia Derivatives Exchange. Futures earlier dropped below 2,000 ringgit for a second time this week.
The Reuters/Jefferies CRB Index of 19 commodities has fallen 9.9 percent this week, the largest drop since at least 1956, as a worsening global growth outlook sent prices for crude oil, corn, soybeans, nickel and gold tumbling from peaks reached this year.
``Recent Malaysian export data and a revision in EU biofuels policy amid falling crude oil prices suggest that the pressure on crude palm oil prices is likely to persist,'' Sunaina Dhanuka, an analyst at Macquarie in Kuala Lumpur said today.
On Sept. 11, the EU Industry & Energy Committee lowered its target for 5.75 percent of renewable energy sources in transport fuel by 2010 to 5 percent by 2015, a move that may crimp demand for palm oil for use in biofuels by 2 million tons a year for the next two years, Dhanuka said.
Vegetable oils made from soybeans, corn, rapeseeds and oil palms, used mostly in cooking, often track crude oil prices as they can be used to make alternative fuels. Oil futures in New York have slumped 13 percent this week to $93.29 a barrel.
Malaysia's palm oil exports fell 19 percent in September to 1.2 million tons compared with the previous month, independent surveyor Intertek said today. Indonesia and Malaysia account for 90 percent of the world's palm oil production.
Plantation Stocks
Stocks of plantation companies and edible-oil refiners fell.
Wilmar International Ltd., the world's top palm oil trader which supplies almost half of China's edible oils, dropped 5.1 percent to S$2.4 in Singapore. The stock has lost 12 percent of its value this week.
Indofood Agri Resources Ltd., the Singapore-listed palm oil unit of Indonesia's biggest noodle maker, dropped 6 percent to 72 Singapore cents, extending this week's loss to 12 percent.
Golden Agri Resources Ltd., owner of the world's second- largest oil-palm plantation, fell 7.6 percent to 30.5 cents, extending this week's loss to 16.4 percent.
To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net
Read more...
Pound Set for Biggest Weekly Drop in 16 Years on Economic Slump
By Agnes Lovasz
Oct. 3 (Bloomberg) -- The pound headed for its biggest weekly drop versus the dollar since 1992 after a report showed U.K. services contracted the most in at least 12 years, fueling speculation the economy may already be in a recession and the Bank of England will cut interest rates soon.
The U.K. currency lost about 5 percent against the Japanese yen this week, the most since August 2007, as manufacturing contracted, home values plunged and banks planned to scale back loans. The government seized mortgage lender Bradford & Bingley Plc this week as the world's financial system ground to a halt amid a cash shortage. The central bank will cut its key rate next week, economists surveyed by Bloomberg News predicted.
``We've been pretty negative on the U.K. economy for a while and we think we're not just in for one or two quarters of negative growth,'' Robert Minikin, a senior currency strategist at Standard Chartered Plc in London, said in a Bloomberg Television interview. ``That could stretch to a year, maybe 18 months. The lack of policy response has left the pound in a powerless position.''
The U.K. currency was little changed at $1.7641 at 2:30 p.m., showing a loss of 4.6 percent in the week, the biggest since September 1992. The pound traded at 185.23 yen, from 185.80 yesterday, and 195.54 at the end of last week. Against the euro, it rose to 77.92 pence, from 78.34 yesterday, gaining 1.6 percent since Sept. 26.
The pound stayed little changed against the dollar and gilts stayed higher after a report showed the U.S. economy lost the most jobs in five years in September. Payrolls fell 159,000 more than economists predicted, the Labor Department said today.
Services Shrink
An index based on a survey of about 700 service companies fell more than forecast to 46 in September, from 49.2 a month earlier, the Chartered Institute of Purchasing and Supply said today. Manufacturing contracted at the fastest pace in 16 years amid a credit squeeze that has crippled bank lending, the group said earlier in the week.
The pound slipped to a three-week low against the dollar yesterday after U.K. house prices slid in September by the most since at least 1991, giving the Bank of England added reason to lower interest rates in an effort to revive the economy.
Policy makers will cut the 5 percent benchmark rate by a quarter point when they meet Oct. 9, according to the median estimate in a Bloomberg survey of 35 economists. Two days ago they predicted no change in rates.
The bank will lower it by a half point next week, the biggest reduction since 2001, Citigroup Inc. Chief Western European Economist Michael Saunders said. BNP Paribas SA also changed its forecast today to a half-point reduction next week.
Currency Forecast
The British currency will weaken to $1.70 in early 2009 and to $1.60 later next year ``as the Bank of England finally starts cutting interest rates aggressively,'' Minikin said.
The implied yield on the March short-sterling futures contract fell 6 basis points to 4.63 percent as traders added to bets borrowing costs will fall. The rate was at 5.07 percent a week ago.
U.K. government bonds rose for a third day. The gains drove the yield on the 10-year gilt 4 basis points lower to 4.33 percent, a drop of 21 basis points in the week. The 5 percent security maturing March 2018 gained 0.27, or 2.7 pounds per 1,000-pound ($1,764) face amount, to 105.42. The yield on the two-year gilt was little changed at 3.95 percent, down 28 basis points this week. Bond yields move inversely to prices.
Britain entered a recession in July, according to the European Commission and the Confederation of British Industry, the country's biggest business lobby.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- The pound headed for its biggest weekly drop versus the dollar since 1992 after a report showed U.K. services contracted the most in at least 12 years, fueling speculation the economy may already be in a recession and the Bank of England will cut interest rates soon.
The U.K. currency lost about 5 percent against the Japanese yen this week, the most since August 2007, as manufacturing contracted, home values plunged and banks planned to scale back loans. The government seized mortgage lender Bradford & Bingley Plc this week as the world's financial system ground to a halt amid a cash shortage. The central bank will cut its key rate next week, economists surveyed by Bloomberg News predicted.
``We've been pretty negative on the U.K. economy for a while and we think we're not just in for one or two quarters of negative growth,'' Robert Minikin, a senior currency strategist at Standard Chartered Plc in London, said in a Bloomberg Television interview. ``That could stretch to a year, maybe 18 months. The lack of policy response has left the pound in a powerless position.''
The U.K. currency was little changed at $1.7641 at 2:30 p.m., showing a loss of 4.6 percent in the week, the biggest since September 1992. The pound traded at 185.23 yen, from 185.80 yesterday, and 195.54 at the end of last week. Against the euro, it rose to 77.92 pence, from 78.34 yesterday, gaining 1.6 percent since Sept. 26.
The pound stayed little changed against the dollar and gilts stayed higher after a report showed the U.S. economy lost the most jobs in five years in September. Payrolls fell 159,000 more than economists predicted, the Labor Department said today.
Services Shrink
An index based on a survey of about 700 service companies fell more than forecast to 46 in September, from 49.2 a month earlier, the Chartered Institute of Purchasing and Supply said today. Manufacturing contracted at the fastest pace in 16 years amid a credit squeeze that has crippled bank lending, the group said earlier in the week.
The pound slipped to a three-week low against the dollar yesterday after U.K. house prices slid in September by the most since at least 1991, giving the Bank of England added reason to lower interest rates in an effort to revive the economy.
Policy makers will cut the 5 percent benchmark rate by a quarter point when they meet Oct. 9, according to the median estimate in a Bloomberg survey of 35 economists. Two days ago they predicted no change in rates.
The bank will lower it by a half point next week, the biggest reduction since 2001, Citigroup Inc. Chief Western European Economist Michael Saunders said. BNP Paribas SA also changed its forecast today to a half-point reduction next week.
Currency Forecast
The British currency will weaken to $1.70 in early 2009 and to $1.60 later next year ``as the Bank of England finally starts cutting interest rates aggressively,'' Minikin said.
The implied yield on the March short-sterling futures contract fell 6 basis points to 4.63 percent as traders added to bets borrowing costs will fall. The rate was at 5.07 percent a week ago.
U.K. government bonds rose for a third day. The gains drove the yield on the 10-year gilt 4 basis points lower to 4.33 percent, a drop of 21 basis points in the week. The 5 percent security maturing March 2018 gained 0.27, or 2.7 pounds per 1,000-pound ($1,764) face amount, to 105.42. The yield on the two-year gilt was little changed at 3.95 percent, down 28 basis points this week. Bond yields move inversely to prices.
Britain entered a recession in July, according to the European Commission and the Confederation of British Industry, the country's biggest business lobby.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
Read more...
Platinum Heads for Biggest Weekly Decline in at Least 21 Years
By Marianne Stigset
Oct. 3 (Bloomberg) -- Platinum headed for its biggest weekly drop in at least 21 years in London as a plunge in U.S. auto sales sapped demand for the metal used in autocatalysts. Gold and silver advanced as the dollar weakened against the euro.
U.S. September car sales were the worst since 1991, with Ford Motor Co.'s sales falling 35 percent. Autocatalysts, used to reduce tailpipe emissions, account for 47 percent of platinum demand, according to Johnson Matthey Plc. The figures take into account recycling.
``There's been large concerns over sales in the auto industry since August, and we've also seen changes in people's attitude towards driving,'' said Rory McVeigh, a senior platinum trader at Commerzbank AG in Luxembourg.
Platinum for immediate delivery fell $15, or 1.5 percent, to $959.50 an ounce as of 1:13 p.m. in London. The precious metal has plunged 15 percent in a week, the steepest drop since at least 1987. Platinum for August delivery dropped as much as 5 percent on the Tokyo Commodity Exchange.
China's passenger car sales fell 6.2 percent in August, the first decline in more than three years. Sales may fall short of a forecast 10 million this year as slowing economic growth and a slumping stock market undermine consumers' purchasing power, according to the China Association of Automobile Manufacturers.
Platinum fell to $962 an ounce in the morning ``fixing'' in London from $995 at the previous afternoon fixing. Palladium declined to $203.00 an ounce, from $205.00.
Slower Growth
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week. Manufacturing declined to a 7-year low in the U.S. and contracted at the fastest pace in 16 years in the U.K. last month. Initial jobless claims rose to the highest since 2001, the U.S. Labor Department said yesterday.
``Markets seem to be pricing in a much slower growth forecast for the global economy,'' Hussein Allidina, a commodity research analyst at Morgan Stanley, said in an e-mail today.
Platinum will move from a deficit to the largest surplus in 10 years as demand declines, Paul Walker, chief executive officer of London-based researcher GFMS Ltd., said this week.
Gold for immediate delivery rose $2.6, or 3.2 percent, to $839.58 an ounce in London. Futures for December fell $1.50, or 0.2 percent, to $842.80 in electronic trading on the Comex division of the New York Mercantile Exchange.
`Under Pressure'
``Against the backdrop of the slowdown in real economic activity globally, commodities will stay under pressure,'' Walter de Wet, head of commodities research at Standard Bank Group Ltd. in Johannesburg, said in a report. ``These conditions would favor the U.S. dollar and, because of little liquidity, gold could battle to rise much higher.''
Gold fell to $842.5 an ounce in the morning fixing in London, used by some mining companies to sell production, from $852 at the previous afternoon fixing.
Among other metals for immediate delivery, silver climbed 36.51 cents, or 3.4 percent, to $11.21 an ounce and palladium gained $5.50, or 2.8 percent, to $201 an ounce.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Platinum headed for its biggest weekly drop in at least 21 years in London as a plunge in U.S. auto sales sapped demand for the metal used in autocatalysts. Gold and silver advanced as the dollar weakened against the euro.
U.S. September car sales were the worst since 1991, with Ford Motor Co.'s sales falling 35 percent. Autocatalysts, used to reduce tailpipe emissions, account for 47 percent of platinum demand, according to Johnson Matthey Plc. The figures take into account recycling.
``There's been large concerns over sales in the auto industry since August, and we've also seen changes in people's attitude towards driving,'' said Rory McVeigh, a senior platinum trader at Commerzbank AG in Luxembourg.
Platinum for immediate delivery fell $15, or 1.5 percent, to $959.50 an ounce as of 1:13 p.m. in London. The precious metal has plunged 15 percent in a week, the steepest drop since at least 1987. Platinum for August delivery dropped as much as 5 percent on the Tokyo Commodity Exchange.
China's passenger car sales fell 6.2 percent in August, the first decline in more than three years. Sales may fall short of a forecast 10 million this year as slowing economic growth and a slumping stock market undermine consumers' purchasing power, according to the China Association of Automobile Manufacturers.
Platinum fell to $962 an ounce in the morning ``fixing'' in London from $995 at the previous afternoon fixing. Palladium declined to $203.00 an ounce, from $205.00.
Slower Growth
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week. Manufacturing declined to a 7-year low in the U.S. and contracted at the fastest pace in 16 years in the U.K. last month. Initial jobless claims rose to the highest since 2001, the U.S. Labor Department said yesterday.
``Markets seem to be pricing in a much slower growth forecast for the global economy,'' Hussein Allidina, a commodity research analyst at Morgan Stanley, said in an e-mail today.
Platinum will move from a deficit to the largest surplus in 10 years as demand declines, Paul Walker, chief executive officer of London-based researcher GFMS Ltd., said this week.
Gold for immediate delivery rose $2.6, or 3.2 percent, to $839.58 an ounce in London. Futures for December fell $1.50, or 0.2 percent, to $842.80 in electronic trading on the Comex division of the New York Mercantile Exchange.
`Under Pressure'
``Against the backdrop of the slowdown in real economic activity globally, commodities will stay under pressure,'' Walter de Wet, head of commodities research at Standard Bank Group Ltd. in Johannesburg, said in a report. ``These conditions would favor the U.S. dollar and, because of little liquidity, gold could battle to rise much higher.''
Gold fell to $842.5 an ounce in the morning fixing in London, used by some mining companies to sell production, from $852 at the previous afternoon fixing.
Among other metals for immediate delivery, silver climbed 36.51 cents, or 3.4 percent, to $11.21 an ounce and palladium gained $5.50, or 2.8 percent, to $201 an ounce.
To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net
Read more...
Cocoa Heads for Weekly Drop in London as Industry Demand Sags
By Rachel Graham
Oct. 3 (Bloomberg) -- Cocoa headed for a weekly decline, adding to the largest quarterly drop in five years, as industry and investor demand stagnated.
There is ``little evidence of any significant industry interest,'' Stephanie Garner, a trader at Sucden (U.K.) Ltd. in London, wrote in a report today.
Barry Callebaut AG, a Zurich-based chocolate maker, said this week that economic conditions are ``particularly gloomy'' and that there are ``big uncertainties'' about consumer demand. A report by the Chartered Institute of Purchasing and Supply today showed the U.K. service industry contracted the most in at least 12 years in September as the country moved closer to a recession.
Cocoa for December fell 15 pounds, or 1 percent, to 1,425 pounds ($2,518) a ton on the Liffe exchange in London as of 1:21 p.m. local time. A close at that price would make for a 7 percent drop this week. Cocoa slid 16 percent in the three months through September, the biggest decline since the second quarter of 2003.
Cocoa, used in confectionary and cosmetics, averaged 1,048 pounds a ton in 2007.
``Industrial buyers remain relatively quiet, with many hoping for prices to break soon toward lower levels with the start of the West African main crops,'' Barry Callebaut said this week in the report, posted on its Web site.
Ivory Coast and Ghana are the two largest suppliers of cocoa worldwide.
Grindings Slow
Third-quarter processing figures will be released in the next two weeks, according to Barry Callebaut.
Cocoa-bean processing in the U.S. fell 16 percent in the second quarter, the Chocolate Manufacturers Association said July 18. European grindings rose 1.7 percent in the quarter, the slowest growth in that period in four years, according to the European Cocoa Association.
Cocoa has also fallen as the strengthening dollar diminished the appeal of commodities as an alternative investment.
The dollar gained 7.4 percent against the euro in the third quarter. The UBS Bloomberg Constant Maturity Commodity Index fell 14 percent in the same period.
``With the current market, speculative positions are being unwound,'' Yann Gindraux, a food and beverage analyst at Vontobel Holding AG, said by phone from Zurich. ``That's had a negative effect on the price.''
Cocoa reached 1,800 pounds a ton on July 1 in London, the highest since at least 1989.
Among other agricultural commodities traded in London, white, or refined, sugar for December fell $13.80, or 3.7 percent, to $361.50 a ton and robusta coffee for November fell $20, or 1 percent, to $1,911 a ton.
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- Cocoa headed for a weekly decline, adding to the largest quarterly drop in five years, as industry and investor demand stagnated.
There is ``little evidence of any significant industry interest,'' Stephanie Garner, a trader at Sucden (U.K.) Ltd. in London, wrote in a report today.
Barry Callebaut AG, a Zurich-based chocolate maker, said this week that economic conditions are ``particularly gloomy'' and that there are ``big uncertainties'' about consumer demand. A report by the Chartered Institute of Purchasing and Supply today showed the U.K. service industry contracted the most in at least 12 years in September as the country moved closer to a recession.
Cocoa for December fell 15 pounds, or 1 percent, to 1,425 pounds ($2,518) a ton on the Liffe exchange in London as of 1:21 p.m. local time. A close at that price would make for a 7 percent drop this week. Cocoa slid 16 percent in the three months through September, the biggest decline since the second quarter of 2003.
Cocoa, used in confectionary and cosmetics, averaged 1,048 pounds a ton in 2007.
``Industrial buyers remain relatively quiet, with many hoping for prices to break soon toward lower levels with the start of the West African main crops,'' Barry Callebaut said this week in the report, posted on its Web site.
Ivory Coast and Ghana are the two largest suppliers of cocoa worldwide.
Grindings Slow
Third-quarter processing figures will be released in the next two weeks, according to Barry Callebaut.
Cocoa-bean processing in the U.S. fell 16 percent in the second quarter, the Chocolate Manufacturers Association said July 18. European grindings rose 1.7 percent in the quarter, the slowest growth in that period in four years, according to the European Cocoa Association.
Cocoa has also fallen as the strengthening dollar diminished the appeal of commodities as an alternative investment.
The dollar gained 7.4 percent against the euro in the third quarter. The UBS Bloomberg Constant Maturity Commodity Index fell 14 percent in the same period.
``With the current market, speculative positions are being unwound,'' Yann Gindraux, a food and beverage analyst at Vontobel Holding AG, said by phone from Zurich. ``That's had a negative effect on the price.''
Cocoa reached 1,800 pounds a ton on July 1 in London, the highest since at least 1989.
Among other agricultural commodities traded in London, white, or refined, sugar for December fell $13.80, or 3.7 percent, to $361.50 a ton and robusta coffee for November fell $20, or 1 percent, to $1,911 a ton.
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net.
Read more...
Oil Heads for Biggest Weekly Drop Since 2004 After Jobs Report
By Grant Smith
Oct. 3 (Bloomberg) -- Crude oil was little changed in New York, poised for the biggest weekly drop since 2004, after a U.S. employment report reinforced concerns over a recession in the world's biggest energy user.
Oil has declined 12 percent this week as higher borrowing costs and reports showing a worsening economy spurred skepticism that the U.S. government's $700 billion bank-bailout plan will stimulate growth. U.S. payrolls fell by 159,000 in September, the most in five years, the Labor Department said today.
``Risk aversion and liquidation of contracts are characterizing the oil market as well as many other markets at the moment,'' said Thina Saltvedt, a Nordea Bank AB analyst in Oslo. ``Prices are not only being set by fundamentals, but fears of how crises in the financial sector may spread to other parts of the economy.''
Crude oil for November delivery traded at $94.92 a barrel, 45 cents higher, on the New York Mercantile Exchange as of 1:56 p.m. London time, after falling as much as $1.16 to $92.81 a barrel.
Yesterday, futures dropped $4.56, or 4.6 percent, to $93.97 a barrel in New York. Oil has declined 37 percent from its record $147.27 on July 11. The weekly drop is the biggest since Dec. 3, 2004.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956. The index has slumped 31 percent from a record on July 3.
House Vote
U.S. fuel use during the past four weeks averaged 19 million barrels a day, the weakest since October 2001, an Energy Department report showed earlier this week. U.S. payrolls fell by 159,000, more than anticipated, after a 73,000 decline in August, the Labor Department said today in Washington.
The House of Representatives will today reconsider a revised $700 billion financial rescue package submitted by the Senate, after rejecting a previous version on Sept. 29.
The U.S. may fall into a recession as the financial rout deepens, the International Monetary Fund said in its most pessimistic outlook for the world's largest economy since the credit crisis began last year.
Brent crude oil for November settlement rose 43 cents, or 0.5 percent, to $90.99 a barrel on London's ICE Futures Europe exchange as of 1:59 p.m. London time, after declining as much as 90 cents to $89.66 a barrel.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Crude oil was little changed in New York, poised for the biggest weekly drop since 2004, after a U.S. employment report reinforced concerns over a recession in the world's biggest energy user.
Oil has declined 12 percent this week as higher borrowing costs and reports showing a worsening economy spurred skepticism that the U.S. government's $700 billion bank-bailout plan will stimulate growth. U.S. payrolls fell by 159,000 in September, the most in five years, the Labor Department said today.
``Risk aversion and liquidation of contracts are characterizing the oil market as well as many other markets at the moment,'' said Thina Saltvedt, a Nordea Bank AB analyst in Oslo. ``Prices are not only being set by fundamentals, but fears of how crises in the financial sector may spread to other parts of the economy.''
Crude oil for November delivery traded at $94.92 a barrel, 45 cents higher, on the New York Mercantile Exchange as of 1:56 p.m. London time, after falling as much as $1.16 to $92.81 a barrel.
Yesterday, futures dropped $4.56, or 4.6 percent, to $93.97 a barrel in New York. Oil has declined 37 percent from its record $147.27 on July 11. The weekly drop is the biggest since Dec. 3, 2004.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956. The index has slumped 31 percent from a record on July 3.
House Vote
U.S. fuel use during the past four weeks averaged 19 million barrels a day, the weakest since October 2001, an Energy Department report showed earlier this week. U.S. payrolls fell by 159,000, more than anticipated, after a 73,000 decline in August, the Labor Department said today in Washington.
The House of Representatives will today reconsider a revised $700 billion financial rescue package submitted by the Senate, after rejecting a previous version on Sept. 29.
The U.S. may fall into a recession as the financial rout deepens, the International Monetary Fund said in its most pessimistic outlook for the world's largest economy since the credit crisis began last year.
Brent crude oil for November settlement rose 43 cents, or 0.5 percent, to $90.99 a barrel on London's ICE Futures Europe exchange as of 1:59 p.m. London time, after declining as much as 90 cents to $89.66 a barrel.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
Read more...
U.K. Stocks Fall, Head for Third Weekly Loss; LSE Declines
By Alexis Xydias
Oct. 3 (Bloomberg) -- U.K. stocks fell, headed for their third weekly loss. London Stock Exchange Group Plc retreated after Credit Suisse Group analysts advised clients to pare holdings in the bourse as rivals take market share.
Blacks Leisure Group Plc, the U.K.'s largest retailer of outdoor gear, and John Menzies Plc, a handler of cargo at airports including London Heathrow, dropped after saying their earnings may disappoint. Regal Petroleum Plc surged after the Daily Telegraph reported Royal Dutch Shell Plc proposed a $1.2 billion takeover of the oil-and-gas company.
The FTSE 100 Index retreated 14.50, or 0.3 percent, to 4,855.84 at 1:11 p.m. in London, heading for a 4.6 percent loss this week. The FTSE All-Share Index slipped 0.4 percent. Ireland's ISEQ Overall Index fell 0.3 percent.
The FTSE 100 has lost about a quarter of its value this year as the cost of borrowing money for banks surged, at least two lenders had to be nationalized, and companies faced slowing consumer demand. The British benchmark slumped 13 percent in the third quarter, a fifth consecutive quarterly decline and its poorest showing since the same period in 2002.
We do not ``expect equities to move sharply in the fourth quarter,'' wrote Darren Winder and Robert Griffiths, strategists at Cazenove in London, in a note today. ``However, persisting liquidity pressures in the financial sector coupled with the possibility of increased levels of capital raising will probably continue to hinder equity market performance.''
LSE, Black Leisure
LSE declined 2.7 percent to 834.5 pence. The stock was cut to ``underperform'' from ``neutral'' by Credit Suisse analysts, who said Europe's oldest independent exchange faces ``mixed volumes and competitive threats.''
Blacks Leisure tumbled 13 percent to 78.25 pence. The retailer said its first-half loss will widen after ``difficult'' trading in August.
John Menzies sank 17 percent to 223 pence, leading declines in the All-Share, after saying its aviation unit will probably fail to meet analysts' profit estimates for the year amid slowing demand for air freight.
Regal Petroleum jumped 42 percent to 117.5 pence. Shell, which faced rejection when it tried to reach a deal with Regal last year, has written to the company's chairman in the last few days with a possible bid proposal of 300 pence a share, the newspaper said, without saying where it got the information.
Regal denied the report. Shell, Europe's largest oil company, slipped 1.2 percent to 1,564 pence.
Old Mutual Plc rose 3.3 percent to 75 pence, rebounding form yesterday's 9.6 percent decline. The insurer that replaced its chief executive officer last month said its Skandia unit settled an arbitration proceeding with an insurance subsidiary.
HBOS, Lloyds
HBOS Plc and Lloyds TSB Group Plc rallied as economists changed forecasts, predicting the Bank of England will cut its key rate by the most since 2001 next week.
HBOS, the mortgage lender that agreed to be bought by Lloyds TSB, increased 14 percent to 193.5 pence. Lloyds TSB rallied 11 percent to 291 pence.
Royal Bank of Scotland Group Plc jumped 11 percent to 194.5 pence.
Economists at Citigroup Inc., BNP Paribas SA, JPMorgan Chase & CO. have changed their forecasts to predict a half-point reduction from the current 5 percent on Oct. 9.
The following stocks also rose or fell in U.K. and Irish markets. Company symbols are in parentheses.
U.K. companies:
DTZ Holdings Plc (DTZ LN) fell 12.75 pence, or 10 percent, to 114.25. The U.K. real estate broker has asked JPMorgan Cazenove Ltd. to work on an equity fundraising that may involve either a placing or a rights offering, the Daily Telegraph reported, adding that the idea is still in the very early stages of planning.
Woolworths Group Plc (WLW LN) fell 0.25 pence, or 6 percent, to 3.95. Woolworths' unit Bertrams and its parent company EUK are in discussions with some distributors and publishers over reduced credit terms, the Bookseller said on its Web site, citing unidentified publishers.
To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- U.K. stocks fell, headed for their third weekly loss. London Stock Exchange Group Plc retreated after Credit Suisse Group analysts advised clients to pare holdings in the bourse as rivals take market share.
Blacks Leisure Group Plc, the U.K.'s largest retailer of outdoor gear, and John Menzies Plc, a handler of cargo at airports including London Heathrow, dropped after saying their earnings may disappoint. Regal Petroleum Plc surged after the Daily Telegraph reported Royal Dutch Shell Plc proposed a $1.2 billion takeover of the oil-and-gas company.
The FTSE 100 Index retreated 14.50, or 0.3 percent, to 4,855.84 at 1:11 p.m. in London, heading for a 4.6 percent loss this week. The FTSE All-Share Index slipped 0.4 percent. Ireland's ISEQ Overall Index fell 0.3 percent.
The FTSE 100 has lost about a quarter of its value this year as the cost of borrowing money for banks surged, at least two lenders had to be nationalized, and companies faced slowing consumer demand. The British benchmark slumped 13 percent in the third quarter, a fifth consecutive quarterly decline and its poorest showing since the same period in 2002.
We do not ``expect equities to move sharply in the fourth quarter,'' wrote Darren Winder and Robert Griffiths, strategists at Cazenove in London, in a note today. ``However, persisting liquidity pressures in the financial sector coupled with the possibility of increased levels of capital raising will probably continue to hinder equity market performance.''
LSE, Black Leisure
LSE declined 2.7 percent to 834.5 pence. The stock was cut to ``underperform'' from ``neutral'' by Credit Suisse analysts, who said Europe's oldest independent exchange faces ``mixed volumes and competitive threats.''
Blacks Leisure tumbled 13 percent to 78.25 pence. The retailer said its first-half loss will widen after ``difficult'' trading in August.
John Menzies sank 17 percent to 223 pence, leading declines in the All-Share, after saying its aviation unit will probably fail to meet analysts' profit estimates for the year amid slowing demand for air freight.
Regal Petroleum jumped 42 percent to 117.5 pence. Shell, which faced rejection when it tried to reach a deal with Regal last year, has written to the company's chairman in the last few days with a possible bid proposal of 300 pence a share, the newspaper said, without saying where it got the information.
Regal denied the report. Shell, Europe's largest oil company, slipped 1.2 percent to 1,564 pence.
Old Mutual Plc rose 3.3 percent to 75 pence, rebounding form yesterday's 9.6 percent decline. The insurer that replaced its chief executive officer last month said its Skandia unit settled an arbitration proceeding with an insurance subsidiary.
HBOS, Lloyds
HBOS Plc and Lloyds TSB Group Plc rallied as economists changed forecasts, predicting the Bank of England will cut its key rate by the most since 2001 next week.
HBOS, the mortgage lender that agreed to be bought by Lloyds TSB, increased 14 percent to 193.5 pence. Lloyds TSB rallied 11 percent to 291 pence.
Royal Bank of Scotland Group Plc jumped 11 percent to 194.5 pence.
Economists at Citigroup Inc., BNP Paribas SA, JPMorgan Chase & CO. have changed their forecasts to predict a half-point reduction from the current 5 percent on Oct. 9.
The following stocks also rose or fell in U.K. and Irish markets. Company symbols are in parentheses.
U.K. companies:
DTZ Holdings Plc (DTZ LN) fell 12.75 pence, or 10 percent, to 114.25. The U.K. real estate broker has asked JPMorgan Cazenove Ltd. to work on an equity fundraising that may involve either a placing or a rights offering, the Daily Telegraph reported, adding that the idea is still in the very early stages of planning.
Woolworths Group Plc (WLW LN) fell 0.25 pence, or 6 percent, to 3.95. Woolworths' unit Bertrams and its parent company EUK are in discussions with some distributors and publishers over reduced credit terms, the Bookseller said on its Web site, citing unidentified publishers.
To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net.
Read more...
European Stocks Advance, Led by Banks; U.S. Index Futures Rise
By Sarah Jones
Oct. 3 (Bloomberg) -- European stocks advanced and U.S. index futures climbed on growing speculation central banks will lower interest rates and more U.S. lawmakers will support a $700 billion bank-rescue package.
HBOS Plc and Lloyds TSB Group Plc rallied more than 8 percent as economists changed forecasts, predicting the Bank of England will cut its key rate by the most since 2001 next week. Hypo Real Estate Holding AG surged 47 percent after European Union regulators approved the German government's proposed rescue aid for the bank. Wachovia Corp. jumped 71 percent after Wells Fargo & Co. agreed to buy the company.
Europe's Dow Jones Stoxx 600 Index added 0.5 percent to 255.6 as of 2:22 p.m. in London, trimming this week's decline to 3.9 percent. Futures on the Standard & Poor's 500 Index rose 1 percent, while the MSCI Asia Pacific Index fell 2 percent.
Central banks ``are probably getting ready to slash rates,'' said Marino Valensise, chief investment officer at Baring Asset Management Ltd. in London. ``I definitely expect the Bank of England to do something. Inflation will fall like a stone in next three to six months. Central banks should act sooner rather than later.''
Investors raised bets the Federal Reserve will cut interest rates after a report showed the U.S. lost the most jobs in five years in September and earnings rose less than forecast as the credit crisis deepened the economic slowdown.
The data also may also increase pressure on lawmakers to approve the bailout plan to support the economy.
Raising Bets
Futures on the Chicago Board of Trade show an 94 percent chance the Fed will reduce its target rate for overnight bank loans by a half-percentage point to 1.5 percent at its Oct. 29 meeting and 6 percent odds of a 0.75 percentage-point cut. Yesterday, no one was predicting a reduction to 1.25 percent.
At least eight lawmakers in the House of Representatives who voted against the rescue plan this week said they now support the measure. Four others said they may switch their ballots on the bill, which failed on Sept. 29. A vote on the rescue plan is expected today.
The MSCI World Index tumbled 28 percent this year as bailouts of financial companies worldwide accelerated and bank credit losses and writedowns approached $600 billion. The index for 23 developed countries is valued at 13.6 times the earnings of its companies, the lowest since at least 1995, according to data compiled by Bloomberg. Europe's Stoxx 600 trades at 10.7 times earnings, near the lowest since at least 2002, while the S&P 500 is valued at 21.2 times earnings.
HBOS, Lloyds
HBOS, the mortgage lender that agreed to be bought by Lloyds TSB, increased 14 percent to 193.5 pence. Lloyds TSB rallied 8.8 percent to 285.25 pence.
Royal Bank of Scotland Group Plc jumped 11 percent to 194.5 pence.
Economists at Citigroup Inc., BNP Paribas SA, JPMorgan Chase & CO. have changed their forecasts to predict a half-point reduction from the current 5 percent on Oct. 9.
Hypo Real Estate surged 2.52 euros to 7.83 euros. The European Commission said in an e-mailed statement that the German government's proposed rescue aid for the bank, which involves 35 billion euros ($48.3 billion) in loan guarantees for the Munich-based commercial-property lender, complies with competition rules on rescue aid.
Wachovia jumped 71 percent to $6.70. Wells Fargo, the biggest U.S. bank on the west coast, agreed to buy the Charlotte, North Carolina-based lender in a deal valued at about $15.1 billion. Wachovia shares had tumbled 90 percent this year through yesterday as mortgage-related losses eroded its capital.
Regal Petroleum
Regal Petroleum Plc surged 23 percent to 102.25 pence after the Daily Telegraph reported Royal Dutch Shell Plc, Europe's largest oil company, has proposed a $1.2 billion takeover of the oil-and-gas explorer.
The Financial Times reported that Regal Petroleum confirmed it has been approached by a number of groups ``about possible takeovers or asset deals.'' It also cited one person familiar with the company as saying Shell had made an approach valuing Regal at $1.2 billion.
Total SA led energy companies lower as crude fell for a third day in New York, poised for the biggest weekly drop since 2004, on concern a recession will reduced fuel demand in the world's largest energy user.
Europe's third-largest oil company fell 1.7 percent to 40.67 euros. Royal Dutch Shell Plc, the region's biggest energy producer, declined 1.2 percent to 1,564 pence. Tullow Oil Plc lost 2.7 percent to 621.5 pence.
Commodities Tumble
Japan's Mitsubishi Corp., which generates more than half of its profit from commodities dealing, lost 5.2 percent to 1,938 yen. JSW Steel Ltd. dropped 7 percent to 424.20 rupees. India's third-biggest steelmaker said it may cut prices for a second month because of declining global prices for the alloy.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956.
InBev NV, the brewer that's buying Anheuser-Busch Cos. for $52 billion, declined 4.2 percent to 39.91 euros as the company said demand is slowing in Russia and Ukraine ``contrary to the market's original expectations of strong growth.''
InBev forecast a ``low, single-digit'' percentage gain in third-quarter beer shipments and announced plans to raise $9.8 billion in a rights offer, which will run from Oct. 16 to Oct. 30.
Tandberg ASA sank 10 percent to 63.9 kroner as the world's biggest maker of videoconferencing equipment ended takeover talks to be bought by a private-equity investor amid financial market turmoil.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- European stocks advanced and U.S. index futures climbed on growing speculation central banks will lower interest rates and more U.S. lawmakers will support a $700 billion bank-rescue package.
HBOS Plc and Lloyds TSB Group Plc rallied more than 8 percent as economists changed forecasts, predicting the Bank of England will cut its key rate by the most since 2001 next week. Hypo Real Estate Holding AG surged 47 percent after European Union regulators approved the German government's proposed rescue aid for the bank. Wachovia Corp. jumped 71 percent after Wells Fargo & Co. agreed to buy the company.
Europe's Dow Jones Stoxx 600 Index added 0.5 percent to 255.6 as of 2:22 p.m. in London, trimming this week's decline to 3.9 percent. Futures on the Standard & Poor's 500 Index rose 1 percent, while the MSCI Asia Pacific Index fell 2 percent.
Central banks ``are probably getting ready to slash rates,'' said Marino Valensise, chief investment officer at Baring Asset Management Ltd. in London. ``I definitely expect the Bank of England to do something. Inflation will fall like a stone in next three to six months. Central banks should act sooner rather than later.''
Investors raised bets the Federal Reserve will cut interest rates after a report showed the U.S. lost the most jobs in five years in September and earnings rose less than forecast as the credit crisis deepened the economic slowdown.
The data also may also increase pressure on lawmakers to approve the bailout plan to support the economy.
Raising Bets
Futures on the Chicago Board of Trade show an 94 percent chance the Fed will reduce its target rate for overnight bank loans by a half-percentage point to 1.5 percent at its Oct. 29 meeting and 6 percent odds of a 0.75 percentage-point cut. Yesterday, no one was predicting a reduction to 1.25 percent.
At least eight lawmakers in the House of Representatives who voted against the rescue plan this week said they now support the measure. Four others said they may switch their ballots on the bill, which failed on Sept. 29. A vote on the rescue plan is expected today.
The MSCI World Index tumbled 28 percent this year as bailouts of financial companies worldwide accelerated and bank credit losses and writedowns approached $600 billion. The index for 23 developed countries is valued at 13.6 times the earnings of its companies, the lowest since at least 1995, according to data compiled by Bloomberg. Europe's Stoxx 600 trades at 10.7 times earnings, near the lowest since at least 2002, while the S&P 500 is valued at 21.2 times earnings.
HBOS, Lloyds
HBOS, the mortgage lender that agreed to be bought by Lloyds TSB, increased 14 percent to 193.5 pence. Lloyds TSB rallied 8.8 percent to 285.25 pence.
Royal Bank of Scotland Group Plc jumped 11 percent to 194.5 pence.
Economists at Citigroup Inc., BNP Paribas SA, JPMorgan Chase & CO. have changed their forecasts to predict a half-point reduction from the current 5 percent on Oct. 9.
Hypo Real Estate surged 2.52 euros to 7.83 euros. The European Commission said in an e-mailed statement that the German government's proposed rescue aid for the bank, which involves 35 billion euros ($48.3 billion) in loan guarantees for the Munich-based commercial-property lender, complies with competition rules on rescue aid.
Wachovia jumped 71 percent to $6.70. Wells Fargo, the biggest U.S. bank on the west coast, agreed to buy the Charlotte, North Carolina-based lender in a deal valued at about $15.1 billion. Wachovia shares had tumbled 90 percent this year through yesterday as mortgage-related losses eroded its capital.
Regal Petroleum
Regal Petroleum Plc surged 23 percent to 102.25 pence after the Daily Telegraph reported Royal Dutch Shell Plc, Europe's largest oil company, has proposed a $1.2 billion takeover of the oil-and-gas explorer.
The Financial Times reported that Regal Petroleum confirmed it has been approached by a number of groups ``about possible takeovers or asset deals.'' It also cited one person familiar with the company as saying Shell had made an approach valuing Regal at $1.2 billion.
Total SA led energy companies lower as crude fell for a third day in New York, poised for the biggest weekly drop since 2004, on concern a recession will reduced fuel demand in the world's largest energy user.
Europe's third-largest oil company fell 1.7 percent to 40.67 euros. Royal Dutch Shell Plc, the region's biggest energy producer, declined 1.2 percent to 1,564 pence. Tullow Oil Plc lost 2.7 percent to 621.5 pence.
Commodities Tumble
Japan's Mitsubishi Corp., which generates more than half of its profit from commodities dealing, lost 5.2 percent to 1,938 yen. JSW Steel Ltd. dropped 7 percent to 424.20 rupees. India's third-biggest steelmaker said it may cut prices for a second month because of declining global prices for the alloy.
Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956.
InBev NV, the brewer that's buying Anheuser-Busch Cos. for $52 billion, declined 4.2 percent to 39.91 euros as the company said demand is slowing in Russia and Ukraine ``contrary to the market's original expectations of strong growth.''
InBev forecast a ``low, single-digit'' percentage gain in third-quarter beer shipments and announced plans to raise $9.8 billion in a rights offer, which will run from Oct. 16 to Oct. 30.
Tandberg ASA sank 10 percent to 63.9 kroner as the world's biggest maker of videoconferencing equipment ended takeover talks to be bought by a private-equity investor amid financial market turmoil.
To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.
Read more...
Canada's Dollar Poised for Biggest Weekly Decline Since 1971
By Chris Fournier
Oct. 3 (Bloomberg) -- Canada's currency is headed for the biggest weekly slump since at least 1971 as commodity prices plummet in the wake of the global financial crisis and investors scramble to buy U.S. dollars.
The Canadian currency has plunged 4.6 percent against its U.S. counterpart since Sept. 26, the biggest weekly loss since Bloomberg began keeping records of the currency in January 1971. Today it reached the weakest since August 2007.
``There's been a lot of selling of resource sectors, and the commodity currencies are taking it on the chin,'' said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. ``It looks more and more like the entire global economy is going to slow down.''
Canada's dollar fell as much as 0.5 percent to C$1.0843 per U.S. dollar, the weakest since Aug. 16, 2007, from C$1.0791 yesterday and C$1.0336 a week ago. It last traded at C$1.0838 at 9:22 a.m. in Toronto. One Canadian dollar buys 92.27 U.S. cents.
Crude oil for November delivery was poised for the biggest weekly drop since 2004. The contract has declined from its record of $147.27 per barrel on July 11. Oil fell 2.5 percent today to $91.70. The currency has weakened 6.8 percent since then. Canada relies on commodities for about half of its export revenue. The U.S. is Canada's largest trading partner.
``This is all a function of the credit crisis,'' said Gencher, who predicts the Canadian dollar will trade at C$1.0750 to C$1.0830 by year-end. ``Funding the balance sheets is getting tougher and tougher. Everyone needs U.S. dollars. That's why the U.S. dollar is better bid.''
Canadian Dollar Weakened
After surging 17 percent in 2007 as commodity prices soared, the Canadian dollar weakened 7.8 percent so far this year as the U.S. economy cooled and oil prices fell. Crude accounts for 21 percent of the weighting in the Bank of Canada Commodity Price Index, the largest single component.
``The support from commodities is definitely gone and will continue to hinder the Canadian dollar,'' said Steven Barrow, a currency strategist at Standard Bank Plc in London. The currency will slip against the U.S. dollar, ``but it won't slip as much as many other currencies.'' Barrow forecasts the Canadian dollar will fall to C$1.20 against the U.S. currency in 12 months.
Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.13 against the U.S. dollar by the end of 2009, according to the median forecast in a Bloomberg News survey of economists.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Canada's currency is headed for the biggest weekly slump since at least 1971 as commodity prices plummet in the wake of the global financial crisis and investors scramble to buy U.S. dollars.
The Canadian currency has plunged 4.6 percent against its U.S. counterpart since Sept. 26, the biggest weekly loss since Bloomberg began keeping records of the currency in January 1971. Today it reached the weakest since August 2007.
``There's been a lot of selling of resource sectors, and the commodity currencies are taking it on the chin,'' said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. ``It looks more and more like the entire global economy is going to slow down.''
Canada's dollar fell as much as 0.5 percent to C$1.0843 per U.S. dollar, the weakest since Aug. 16, 2007, from C$1.0791 yesterday and C$1.0336 a week ago. It last traded at C$1.0838 at 9:22 a.m. in Toronto. One Canadian dollar buys 92.27 U.S. cents.
Crude oil for November delivery was poised for the biggest weekly drop since 2004. The contract has declined from its record of $147.27 per barrel on July 11. Oil fell 2.5 percent today to $91.70. The currency has weakened 6.8 percent since then. Canada relies on commodities for about half of its export revenue. The U.S. is Canada's largest trading partner.
``This is all a function of the credit crisis,'' said Gencher, who predicts the Canadian dollar will trade at C$1.0750 to C$1.0830 by year-end. ``Funding the balance sheets is getting tougher and tougher. Everyone needs U.S. dollars. That's why the U.S. dollar is better bid.''
Canadian Dollar Weakened
After surging 17 percent in 2007 as commodity prices soared, the Canadian dollar weakened 7.8 percent so far this year as the U.S. economy cooled and oil prices fell. Crude accounts for 21 percent of the weighting in the Bank of Canada Commodity Price Index, the largest single component.
``The support from commodities is definitely gone and will continue to hinder the Canadian dollar,'' said Steven Barrow, a currency strategist at Standard Bank Plc in London. The currency will slip against the U.S. dollar, ``but it won't slip as much as many other currencies.'' Barrow forecasts the Canadian dollar will fall to C$1.20 against the U.S. currency in 12 months.
Canada's currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, will slip to C$1.13 against the U.S. dollar by the end of 2009, according to the median forecast in a Bloomberg News survey of economists.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
Read more...
U.S. Stock-Index Futures Rise on Bailout, Rate-Cut Speculation
By Eric Martin
Oct. 3 (Bloomberg) -- U.S. stock futures rose after a bigger-than-forecast decrease in jobs bolstered expectations Congress will pass a bank-bailout plan and the Federal Reserve will cut interest rates to boost the economy.
General Motors Corp., United Technologies Corp. and Alcoa Inc. led gains in Dow Jones Industrial Average stocks as futures traders bet the Fed will cut its benchmark rate by as much as 0.75 percent at its October meeting. Wachovia Corp. rallied 74 percent after Wells Fargo & Co., the biggest West Coast bank, agreed to buy the lender for about $15.1 billion.
``This economic report is putting a gun to Congress's head that they've got to do something,'' said Peter Jankovskis, the Lisle, Illinois-based co-chief investment officer at Oakbrook Investments LLC, which manages $1.4 billion. ``There's no wiggle room for Congress, and that makes it very likely the bailout package will be passed soon.''
Futures on the Standard & Poor's 500 Index expiring in December gained 8.9, or 0.8 percent, to 1,133.3 at 9:15 a.m. in New York. Dow Jones Industrial Average futures added 37, or 0.4 percent, to 10,594. Nasdaq-100 Index futures rose 11.5, or 0.8 percent, to 1,522.
The S&P 500 has dropped 8.1 percent over the past four days, poised for the steepest weekly loss since after the Sept. 11, 2001, terrorist attacks. The benchmark index for U.S. stocks tumbled 4 percent yesterday as reports on jobless claims and factory orders reignited concern the economy is sinking into a recession.
GM climbed 15 cents to $9.18. United Technologies, maker of Otis elevators, added $1.02 to $56. Alcoa, the largest U.S. aluminum maker, climbed 44 cents to $19.72.
Wachovia Rallies
Wachovia rallied $2.91 to $6.82 before the official open on the New York Stock Exchange. The deal values the Charlotte-based bank at $7 a share, the companies said in a joint statement today.
Citigroup Inc., which had agreed four days ago to buy Wachovia's banking operations, declined $3.35, or 15 percent, to $19.15.
Goldman Sachs Group Inc., which converted into a bank holding company after short-term lending markets froze, increased 1.1 percent to $133.
Equities retreated from Sao Paulo to London to Tokyo this week, sending the MSCI All-Country World Index to an 8.9 percent decline, as an increase in bank failures exacerbated the credit freeze that pushed up borrowing costs for companies and consumers around the globe.
S&P 500 Valuation
The S&P 500, down 24 percent this year, still trades for 21.2 times profit from the past 12 months. Only four of 48 developed and emerging nations tracked by MSCI Inc. -- Switzerland, Jordan, Colombia and Morocco -- have a higher price-to-earnings ratio, according to data compiled by Bloomberg yesterday.
Europe's Dow Jones Stoxx 600 Index trades at 10.7 times earnings, near the lowest since at least 2002.
The House is scheduled to vote again on the rescue plan at about 12:30 p.m. Washington time. The legislation allows the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank-deposit insurance and changes in securities law.
It also reiterates securities regulators' authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis. The Senate on Oct. 1 approved the $700 billion bill, in a 74-25 vote.
At least eight lawmakers in the House of Representatives who voted against the rescue plan earlier this week said they now support the measure.
Fed Rate Cut
Futures on the Chicago Board of Trade show a 98 percent chance the Fed will reduce its target rate for overnight bank loans by a half-percentage point to 1.5 percent at its Oct. 29 meeting and 2 percent odds of a 0.75 percentage-point cut.
``We wouldn't be surprised to see the Fed cut rates 50 points even before the next scheduled meeting,'' James Shugg, a senior economist at Westpac Banking Corp. in London, said in an interview on Bloomberg Television. ``It actually helps boost, to some extent, bank profitability. An interest-rate cut is an important part of the solution to the current serious problems confronting the U.S. economy.''
CSX Corp. jumped 79 cents to $48. JPMorgan Chase & Co. upgraded shares of the Jacksonville, Florida-based railroad to ``overweight'' from ``neutral,'' saying an 11 percent tumble yesterday left the stock at a ``compelling valuation'' given its ``strong visibility'' for earnings growth next year.
Burlington Northern Santa Fe Corp., also raised to ``overweight'' from ``neutral'' by JPMorgan, climbed 95 cents to $83.95. The Fort Worth, Texas-based railroad whose largest investor is billionaire Warren Buffett dropped 7.3 percent yesterday on concern falling commodities and factory orders may foreshadow a decline in freight volume.
The ISM's index of non-manufacturing businesses, which make up almost 90 percent of the economy, probably slipped to 50 from 50.6, according to the survey median. A reading of 50 is the dividing line between growth and contraction.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- U.S. stock futures rose after a bigger-than-forecast decrease in jobs bolstered expectations Congress will pass a bank-bailout plan and the Federal Reserve will cut interest rates to boost the economy.
General Motors Corp., United Technologies Corp. and Alcoa Inc. led gains in Dow Jones Industrial Average stocks as futures traders bet the Fed will cut its benchmark rate by as much as 0.75 percent at its October meeting. Wachovia Corp. rallied 74 percent after Wells Fargo & Co., the biggest West Coast bank, agreed to buy the lender for about $15.1 billion.
``This economic report is putting a gun to Congress's head that they've got to do something,'' said Peter Jankovskis, the Lisle, Illinois-based co-chief investment officer at Oakbrook Investments LLC, which manages $1.4 billion. ``There's no wiggle room for Congress, and that makes it very likely the bailout package will be passed soon.''
Futures on the Standard & Poor's 500 Index expiring in December gained 8.9, or 0.8 percent, to 1,133.3 at 9:15 a.m. in New York. Dow Jones Industrial Average futures added 37, or 0.4 percent, to 10,594. Nasdaq-100 Index futures rose 11.5, or 0.8 percent, to 1,522.
The S&P 500 has dropped 8.1 percent over the past four days, poised for the steepest weekly loss since after the Sept. 11, 2001, terrorist attacks. The benchmark index for U.S. stocks tumbled 4 percent yesterday as reports on jobless claims and factory orders reignited concern the economy is sinking into a recession.
GM climbed 15 cents to $9.18. United Technologies, maker of Otis elevators, added $1.02 to $56. Alcoa, the largest U.S. aluminum maker, climbed 44 cents to $19.72.
Wachovia Rallies
Wachovia rallied $2.91 to $6.82 before the official open on the New York Stock Exchange. The deal values the Charlotte-based bank at $7 a share, the companies said in a joint statement today.
Citigroup Inc., which had agreed four days ago to buy Wachovia's banking operations, declined $3.35, or 15 percent, to $19.15.
Goldman Sachs Group Inc., which converted into a bank holding company after short-term lending markets froze, increased 1.1 percent to $133.
Equities retreated from Sao Paulo to London to Tokyo this week, sending the MSCI All-Country World Index to an 8.9 percent decline, as an increase in bank failures exacerbated the credit freeze that pushed up borrowing costs for companies and consumers around the globe.
S&P 500 Valuation
The S&P 500, down 24 percent this year, still trades for 21.2 times profit from the past 12 months. Only four of 48 developed and emerging nations tracked by MSCI Inc. -- Switzerland, Jordan, Colombia and Morocco -- have a higher price-to-earnings ratio, according to data compiled by Bloomberg yesterday.
Europe's Dow Jones Stoxx 600 Index trades at 10.7 times earnings, near the lowest since at least 2002.
The House is scheduled to vote again on the rescue plan at about 12:30 p.m. Washington time. The legislation allows the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank-deposit insurance and changes in securities law.
It also reiterates securities regulators' authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis. The Senate on Oct. 1 approved the $700 billion bill, in a 74-25 vote.
At least eight lawmakers in the House of Representatives who voted against the rescue plan earlier this week said they now support the measure.
Fed Rate Cut
Futures on the Chicago Board of Trade show a 98 percent chance the Fed will reduce its target rate for overnight bank loans by a half-percentage point to 1.5 percent at its Oct. 29 meeting and 2 percent odds of a 0.75 percentage-point cut.
``We wouldn't be surprised to see the Fed cut rates 50 points even before the next scheduled meeting,'' James Shugg, a senior economist at Westpac Banking Corp. in London, said in an interview on Bloomberg Television. ``It actually helps boost, to some extent, bank profitability. An interest-rate cut is an important part of the solution to the current serious problems confronting the U.S. economy.''
CSX Corp. jumped 79 cents to $48. JPMorgan Chase & Co. upgraded shares of the Jacksonville, Florida-based railroad to ``overweight'' from ``neutral,'' saying an 11 percent tumble yesterday left the stock at a ``compelling valuation'' given its ``strong visibility'' for earnings growth next year.
Burlington Northern Santa Fe Corp., also raised to ``overweight'' from ``neutral'' by JPMorgan, climbed 95 cents to $83.95. The Fort Worth, Texas-based railroad whose largest investor is billionaire Warren Buffett dropped 7.3 percent yesterday on concern falling commodities and factory orders may foreshadow a decline in freight volume.
The ISM's index of non-manufacturing businesses, which make up almost 90 percent of the economy, probably slipped to 50 from 50.6, according to the survey median. A reading of 50 is the dividing line between growth and contraction.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
Read more...
Emerging Market Borrowing Costs Reach 4-Year High, Stocks Slump
By Denis Maternovsky and William Mauldin
Oct. 3 (Bloomberg) -- Developing nations' borrowing costs jumped to the highest in four years compared with U.S. rates while stocks headed for the worst week since 2002, as the global banking crisis drives investors from emerging markets.
Turkey's benchmark stock index tumbled 6.2 percent and Russia's Micex lost 6.1 percent, sending the MSCI Emerging Markets Index to an 8.8 percent loss this week. The extra yield investors demand on developing-nation bonds over Treasuries increased 16 basis points to 4.47 percentage points, the highest level since 2004, JPMorgan Chase & Co.'s EMBI+ Index shows.
``Markets are being driven by pre-emptive emergency measures rather than fundamentals,'' said Ralph Sueppel, chief economist at BlueCrest Capital Management Ltd. in London, which manages $2 billion in emerging-market assets. ``It's all about risk management at present and everyone's trading with a pessimistic outlook.''
Emerging-market governments are under pressure to spend reserves on supporting falling currencies and rescuing banks, at a time when reduced commodity prices and tourism are cutting revenue. The Seychelles became the first government to renege on debt obligations in two years after saying it will miss interest payments due today on $230 million of bonds as its currency reserves head toward ``near-exhaustion.''
Ukraine's central bank is supporting the hryvnia after it dropped as much as 2.5 percent against the dollar this week, Martin Blum, head of emerging-markets economic and currency strategy at UniCredit SpA in Vienna, said today, citing the Milan-based bank's foreign-exchange traders.
Default Swaps
The cost of protecting against a default by Ukraine is higher than for any of the 14 European developing nations with credit-default swaps tracked by Bloomberg, after doubling since August to a record 810 basis points today, according to CMA Datavision in London.
Ukraine is becoming the ``whipping boy'' for investors betting on declines in Europe's emerging markets as its government teeters toward collapse, Ian McCall, a director of London-based hedge fund Argo Capital Management, said this week. The ruling coalition led by Prime Minister Yulia Timoshenko and President Viktor Yushchenko formally fell apart Sept. 16 after disagreement on its response to Europe's highest inflation and Russia's five-day war with neighboring Georgia.
Russia credit-default swaps rose 10 basis points to 270 today, after soaring 123 basis points in September, the biggest monthly increase in at least four years.
Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in credit quality. A basis point is 0.01 percentage point.
Job Losses
The yield on the Russian government's 30-year dollar bonds increased 3 basis points to 7.2 percent, the highest level since September 2004, Bloomberg prices show.
Investors are seeking only the safest assets on concern the U.S. is heading toward a recession, triggered by the worst financial meltdown since the Great Depression. The world's largest economy probably lost 105,000 jobs last month, the biggest decline for payrolls in five years, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department report due today.
Interest rates on three-month dollar loans increased to the highest since January as financial institutions hoard cash to meet future funding needs. Crude oil is poised for its biggest weekly drop in New York trading since 2004 while commodities fell the most since at least 1956, according to the Reuters/Jefferies CRB Index of 19 raw materials.
Turkey to India
The MSCI Emerging Markets Index of shares dropped 1.7 percent to 746.52, the lowest level since July 2006, as of 12:03 p.m. in London trading, after a 3.4 percent decline yesterday.
``Temporarily, investors seem to have forgotten fundamentals,'' said Jonathan Garner, chief emerging-markets strategist at Morgan Stanley in London. ``Even though emerging markets growth is going to slow next year, it's going to be far away from a recession.''
Turkey's benchmark index headed for its biggest decline since March as it reopened for the first time since Sept. 29. Russia's Micex Index extended its loss this year to 52 percent. India's Sensex index slid 4.1 percent and the Philippine Stock Exchange Index fell 2 percent.
Nickel, Potash
OAO GMK Norilsk Nickel, Russia's biggest mining company, dropped 14 percent to 2,882, its biggest decline since listing. Norilsk's first-half profit fell to $2.7 billion from $4 billion a year earlier on lower nickel prices and higher costs.
VTB Group, Russia's second-biggest lender, fell 6.2 percent on the Micex Stock Exchange after the bank said it biggest unit lost 9.31 billion rubles ($360 million) in September.
Russia suspended trading for two days and pledged more than $100 billion in emergency funding last month as the seizure in capital markets, falling oil and the war in Georgia triggered at least $58.9 billion in investor withdrawals from Russia since Aug. 8, according to BNP Paribas SA.
OAO Uralkali, Russia's second-biggest potash producer, tumbled 12 percent to 113 rubles after sinking 14 percent yesterday. OAO Gazprom, the stock with the biggest weighting in the emerging-markets benchmark, fell 5.6 percent and OAO Lukoil, Russia's second-biggest oil producer, dropped 6 percent.
-- With reporting by Emma O'Brien in Moscow. Editors: Gavin Serkin, Daniel Hauck
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net
Read more...
Oct. 3 (Bloomberg) -- Developing nations' borrowing costs jumped to the highest in four years compared with U.S. rates while stocks headed for the worst week since 2002, as the global banking crisis drives investors from emerging markets.
Turkey's benchmark stock index tumbled 6.2 percent and Russia's Micex lost 6.1 percent, sending the MSCI Emerging Markets Index to an 8.8 percent loss this week. The extra yield investors demand on developing-nation bonds over Treasuries increased 16 basis points to 4.47 percentage points, the highest level since 2004, JPMorgan Chase & Co.'s EMBI+ Index shows.
``Markets are being driven by pre-emptive emergency measures rather than fundamentals,'' said Ralph Sueppel, chief economist at BlueCrest Capital Management Ltd. in London, which manages $2 billion in emerging-market assets. ``It's all about risk management at present and everyone's trading with a pessimistic outlook.''
Emerging-market governments are under pressure to spend reserves on supporting falling currencies and rescuing banks, at a time when reduced commodity prices and tourism are cutting revenue. The Seychelles became the first government to renege on debt obligations in two years after saying it will miss interest payments due today on $230 million of bonds as its currency reserves head toward ``near-exhaustion.''
Ukraine's central bank is supporting the hryvnia after it dropped as much as 2.5 percent against the dollar this week, Martin Blum, head of emerging-markets economic and currency strategy at UniCredit SpA in Vienna, said today, citing the Milan-based bank's foreign-exchange traders.
Default Swaps
The cost of protecting against a default by Ukraine is higher than for any of the 14 European developing nations with credit-default swaps tracked by Bloomberg, after doubling since August to a record 810 basis points today, according to CMA Datavision in London.
Ukraine is becoming the ``whipping boy'' for investors betting on declines in Europe's emerging markets as its government teeters toward collapse, Ian McCall, a director of London-based hedge fund Argo Capital Management, said this week. The ruling coalition led by Prime Minister Yulia Timoshenko and President Viktor Yushchenko formally fell apart Sept. 16 after disagreement on its response to Europe's highest inflation and Russia's five-day war with neighboring Georgia.
Russia credit-default swaps rose 10 basis points to 270 today, after soaring 123 basis points in September, the biggest monthly increase in at least four years.
Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in credit quality. A basis point is 0.01 percentage point.
Job Losses
The yield on the Russian government's 30-year dollar bonds increased 3 basis points to 7.2 percent, the highest level since September 2004, Bloomberg prices show.
Investors are seeking only the safest assets on concern the U.S. is heading toward a recession, triggered by the worst financial meltdown since the Great Depression. The world's largest economy probably lost 105,000 jobs last month, the biggest decline for payrolls in five years, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department report due today.
Interest rates on three-month dollar loans increased to the highest since January as financial institutions hoard cash to meet future funding needs. Crude oil is poised for its biggest weekly drop in New York trading since 2004 while commodities fell the most since at least 1956, according to the Reuters/Jefferies CRB Index of 19 raw materials.
Turkey to India
The MSCI Emerging Markets Index of shares dropped 1.7 percent to 746.52, the lowest level since July 2006, as of 12:03 p.m. in London trading, after a 3.4 percent decline yesterday.
``Temporarily, investors seem to have forgotten fundamentals,'' said Jonathan Garner, chief emerging-markets strategist at Morgan Stanley in London. ``Even though emerging markets growth is going to slow next year, it's going to be far away from a recession.''
Turkey's benchmark index headed for its biggest decline since March as it reopened for the first time since Sept. 29. Russia's Micex Index extended its loss this year to 52 percent. India's Sensex index slid 4.1 percent and the Philippine Stock Exchange Index fell 2 percent.
Nickel, Potash
OAO GMK Norilsk Nickel, Russia's biggest mining company, dropped 14 percent to 2,882, its biggest decline since listing. Norilsk's first-half profit fell to $2.7 billion from $4 billion a year earlier on lower nickel prices and higher costs.
VTB Group, Russia's second-biggest lender, fell 6.2 percent on the Micex Stock Exchange after the bank said it biggest unit lost 9.31 billion rubles ($360 million) in September.
Russia suspended trading for two days and pledged more than $100 billion in emergency funding last month as the seizure in capital markets, falling oil and the war in Georgia triggered at least $58.9 billion in investor withdrawals from Russia since Aug. 8, according to BNP Paribas SA.
OAO Uralkali, Russia's second-biggest potash producer, tumbled 12 percent to 113 rubles after sinking 14 percent yesterday. OAO Gazprom, the stock with the biggest weighting in the emerging-markets benchmark, fell 5.6 percent and OAO Lukoil, Russia's second-biggest oil producer, dropped 6 percent.
-- With reporting by Emma O'Brien in Moscow. Editors: Gavin Serkin, Daniel Hauck
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net
Read more...
CIBC, IGM, Magna, Royal Bank, TD Bank: Canadian Equity Preview
By John Kipphoff
Oct. 3 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading today. Stock symbols are in parentheses, and share prices are from the previous close.
The Standard & Poor's/TSX Composite Index dropped 7 percent to 10,900.54 yesterday in Toronto. The main Canadian stock benchmark has dropped 10 percent in four days, poised for its biggest weekly decline since an 11 percent slide in the week ended Oct. 27, 2000.
Canadian Imperial Bank of Commerce (CM CN): Canada's fifth- biggest bank said Cerberus Capital Management LP will invest $1.05 billion in its U.S. residential real estate portfolio. The move will ``significantly limit'' CIBC's investment in U.S. real estate, the Toronto-based bank said. The shares fell 3.6 percent to C$57.82.
IGM Financial Inc. (IGM CN): Canada's biggest mutual fund company said mutual fund assets under management dropped 11.6 percent to C$98 billion ($90.8 billion) in September from a year earlier. The shares fell 3.1 percent to C$38.
Magna International Inc. (MG/A CN): North America's biggest car-parts maker said Russian billionaire Oleg Deripaska ceded 20 million Magna shares to the bank that financed the purchase. The bank, which wasn't named, will dispose of the Class A voting shares in Magna at its discretion, the Aurora, Ontario-based company said. The shares fell 7.3 percent to C$49.24.
NuVista Energy Ltd. (NVA CN): The oil and gas producer increased its 2008 capital expenditure budget. Spending on land acquisitions and drilling will total C$205 million, up 17 percent from a previous budget of C$175 million, the Calgary- based company said in a statement distributed by Marketwire. The shares dropped 8.9 percent to C$11.16.
Royal Bank of Canada (RY CN): The company's RBC Asset Management unit said investors withdrew a net C$1.2 billion, mostly from money market funds, last month. The shares fell 3.8 percent to C$48.95.
Toronto-Dominion Bank (TD CN): Canada's second-biggest bank by assets reported net redemptions of C$1.15 billion in September. The shares dropped 3.5 percent to C$60.50.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
Read more...
Oct. 3 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading today. Stock symbols are in parentheses, and share prices are from the previous close.
The Standard & Poor's/TSX Composite Index dropped 7 percent to 10,900.54 yesterday in Toronto. The main Canadian stock benchmark has dropped 10 percent in four days, poised for its biggest weekly decline since an 11 percent slide in the week ended Oct. 27, 2000.
Canadian Imperial Bank of Commerce (CM CN): Canada's fifth- biggest bank said Cerberus Capital Management LP will invest $1.05 billion in its U.S. residential real estate portfolio. The move will ``significantly limit'' CIBC's investment in U.S. real estate, the Toronto-based bank said. The shares fell 3.6 percent to C$57.82.
IGM Financial Inc. (IGM CN): Canada's biggest mutual fund company said mutual fund assets under management dropped 11.6 percent to C$98 billion ($90.8 billion) in September from a year earlier. The shares fell 3.1 percent to C$38.
Magna International Inc. (MG/A CN): North America's biggest car-parts maker said Russian billionaire Oleg Deripaska ceded 20 million Magna shares to the bank that financed the purchase. The bank, which wasn't named, will dispose of the Class A voting shares in Magna at its discretion, the Aurora, Ontario-based company said. The shares fell 7.3 percent to C$49.24.
NuVista Energy Ltd. (NVA CN): The oil and gas producer increased its 2008 capital expenditure budget. Spending on land acquisitions and drilling will total C$205 million, up 17 percent from a previous budget of C$175 million, the Calgary- based company said in a statement distributed by Marketwire. The shares dropped 8.9 percent to C$11.16.
Royal Bank of Canada (RY CN): The company's RBC Asset Management unit said investors withdrew a net C$1.2 billion, mostly from money market funds, last month. The shares fell 3.8 percent to C$48.95.
Toronto-Dominion Bank (TD CN): Canada's second-biggest bank by assets reported net redemptions of C$1.15 billion in September. The shares dropped 3.5 percent to C$60.50.
To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.
Read more...
Subscribe to:
Posts (Atom)
Posts
