By Feiwen Rong
June 24 (Bloomberg) -- Gold rose as crude oil traded above $137 a barrel for a second day, spurring demand for the precious metal as a hedge against inflation. Silver also gained.
Crude oil futures rose for a third day in New York amid signs that an increase in output by Saudi Arabia may not boost supply enough to make up for disruptions in Nigeria. Gold has gained 6.2 percent this year as crude oil soared 43 percent. Investors usually buy gold to preserve buying power amid rising inflation.
``Gold is supported by the inflation scare, especially in emerging markets such as China and India,'' Wei Yanan, an analyst at Jingyi Futures Co., said today by phone from Shanghai.
Bullion for immediate delivery climbed 0.2 percent to $885.75 an ounce at 10:24 a.m. in Singapore, paring yesterday's 2.1 percent decline that was driven by the dollar's gain against the euro. Silver rose 0.3 percent to $16.845 an ounce.
An agreement yesterday by Baosteel Group Corp., China's largest steelmaker, to pay about 80 percent more for iron ore from Rio Tinto Group further stoked inflationary concern as manufacturers will try to pass cost increases, Wei said.
China's producer prices accelerated 8.2 percent last month, their fastest pace in more than three years. Consumer prices in the world's largest consumer of commodities gained 7.7 percent in May, beating the government's annual target of 4.8 percent.
Fed Decision
Still, gold's gains may be limited amid expectations that the dollar may rise before Federal Reserve policy makers agree this week to keep the benchmark interest rate on hold at 2 percent, Wei added. The Fed is scheduled to convene for a two-day meeting today.
The dollar was little changed today against the euro before an industry survey that may show U.S. consumer confidence slumped to the lowest since 1992 amid a housing recession. The dollar traded at $1.5519 against the euro at 9:00 a.m. in Singapore.
Gold for August delivery was little changed at $888 an ounce in after-hours electronic trading on Comex at 9:44 a.m. Singapore time.
Gold for April 2009 delivery fell 46 yen, or 1.5 percent, to 3,103 yen a gram ($894 an ounce) on the Tokyo Commodity Exchange at 10:45 a.m. local time. Gold for December traded in Shanghai fell 2 percent to 196.61 yuan a gram ($890 an ounce).
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Tuesday, June 24, 2008
Oil Rises as Nigeria Supply Disruptions Outweigh Saudi Pledge
By Christian Schmollinger
June 24 (Bloomberg) -- Crude oil rose for a third day in New York as disruptions in Nigeria have removed more supply from the market than Saudi Arabia's promised output increase.
Attacks on a Royal Dutch Shell Plc platform and a Chevron Corp. pipeline last week halted 300,000 barrels a day of Nigerian output. The country's white-collar oil union began a strike against Chevron today that may stop up to 350,000 barrels a day. Saudi Arabia will pump an extra 200,000 barrels a day next month, Oil Minister Ali al-Naimi said June 22.
``When you have so many short-termed focused traders in the market, something like what's happening in Nigeria has a big influence,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne.
Crude oil for August delivery climbed as much as 74 cents, or 0.5 percent, to $137.48 a barrel on the New York Mercantile Exchange. The contract was trading at $136.94 a barrel at 9:40 a.m. in Singapore.
Prices touched a record $139.89 on June 16 and are up 99 percent in the past year. Yesterday, oil rose $1.38, or 1 percent, to settle at $136.74 a barrel.
An attack on Shell's Bonga platform, off the coast of Nigeria, on June 19 may halt deliveries for as long as six weeks, the company said last week. The field produces about 190,000 barrels a day. Chevron halted 120,000 barrels a day of onshore production after its pipeline was blown up last week.
After the latest round of attacks, the Movement for the Emancipation of the Niger Delta said it will declare a cease- fire starting today to ``give peace and dialogue another chance.'' Action against foreign oil companies in Nigeria will end at midnight local time today, the group said.
Low-Sulfur Oil
Brent crude oil for August settlement was at $136.02 a barrel, up 11 cents, on London's ICE Futures Europe exchange at 9:26 a.m. Singapore time. It rose $1.05, or 0.8 percent, to settle at $135.91 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
Nigeria produces low-sulfur, or sweet, oils prized by refiners because of the high proportion of gasoline and distillate fuels it yields. Distillate fuel is a category that includes heating oil and diesel.
``The employees belonging to the Petroleum and Natural Gas Senior Staff Association of Nigeria have declared a work stoppage,'' Chevron spokeswoman Margaret Cooper said yesterday in a statement.
Cooper said it's too early to comment on the impact of the strike on operations. Chevron in 2007 produced about 350,000 barrels of oil a day from its 32 fields in Nigeria, according to the company's Web site.
Full-Scale Strike
Jonathan Omare, secretary of the local Chevron union, said a full-scale strike had begun, though production was not yet affected. ``The strike is everywhere,'' Omare said by telephone. `Nobody's working apart from the guys in the field.''
Saudi Arabia first pledged to raise output by 200,000 barrels a day after King Abdullah met with United Nations Secretary-General Ban Ki-Moon on June 15.
``People were expecting an increase of about this size, so it's a minor element in the market today,'' Lynch said. ``There would have had to be an increase of 1 million barrels to have a major impact.''
The kingdom will offer more oil if there is demand and also plans to increase its production capacity to 12.5 million barrels a day by the end of next year, Al-Naimi said June 22 at a summit in Jeddah. Capacity may eventually rise to 15 million if necessary, using oil from five ``mega'' fields that could potentially start up within three years, Al-Naimi said.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
Read more...
June 24 (Bloomberg) -- Crude oil rose for a third day in New York as disruptions in Nigeria have removed more supply from the market than Saudi Arabia's promised output increase.
Attacks on a Royal Dutch Shell Plc platform and a Chevron Corp. pipeline last week halted 300,000 barrels a day of Nigerian output. The country's white-collar oil union began a strike against Chevron today that may stop up to 350,000 barrels a day. Saudi Arabia will pump an extra 200,000 barrels a day next month, Oil Minister Ali al-Naimi said June 22.
``When you have so many short-termed focused traders in the market, something like what's happening in Nigeria has a big influence,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne.
Crude oil for August delivery climbed as much as 74 cents, or 0.5 percent, to $137.48 a barrel on the New York Mercantile Exchange. The contract was trading at $136.94 a barrel at 9:40 a.m. in Singapore.
Prices touched a record $139.89 on June 16 and are up 99 percent in the past year. Yesterday, oil rose $1.38, or 1 percent, to settle at $136.74 a barrel.
An attack on Shell's Bonga platform, off the coast of Nigeria, on June 19 may halt deliveries for as long as six weeks, the company said last week. The field produces about 190,000 barrels a day. Chevron halted 120,000 barrels a day of onshore production after its pipeline was blown up last week.
After the latest round of attacks, the Movement for the Emancipation of the Niger Delta said it will declare a cease- fire starting today to ``give peace and dialogue another chance.'' Action against foreign oil companies in Nigeria will end at midnight local time today, the group said.
Low-Sulfur Oil
Brent crude oil for August settlement was at $136.02 a barrel, up 11 cents, on London's ICE Futures Europe exchange at 9:26 a.m. Singapore time. It rose $1.05, or 0.8 percent, to settle at $135.91 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
Nigeria produces low-sulfur, or sweet, oils prized by refiners because of the high proportion of gasoline and distillate fuels it yields. Distillate fuel is a category that includes heating oil and diesel.
``The employees belonging to the Petroleum and Natural Gas Senior Staff Association of Nigeria have declared a work stoppage,'' Chevron spokeswoman Margaret Cooper said yesterday in a statement.
Cooper said it's too early to comment on the impact of the strike on operations. Chevron in 2007 produced about 350,000 barrels of oil a day from its 32 fields in Nigeria, according to the company's Web site.
Full-Scale Strike
Jonathan Omare, secretary of the local Chevron union, said a full-scale strike had begun, though production was not yet affected. ``The strike is everywhere,'' Omare said by telephone. `Nobody's working apart from the guys in the field.''
Saudi Arabia first pledged to raise output by 200,000 barrels a day after King Abdullah met with United Nations Secretary-General Ban Ki-Moon on June 15.
``People were expecting an increase of about this size, so it's a minor element in the market today,'' Lynch said. ``There would have had to be an increase of 1 million barrels to have a major impact.''
The kingdom will offer more oil if there is demand and also plans to increase its production capacity to 12.5 million barrels a day by the end of next year, Al-Naimi said June 22 at a summit in Jeddah. Capacity may eventually rise to 15 million if necessary, using oil from five ``mega'' fields that could potentially start up within three years, Al-Naimi said.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
Read more...
Dollar Is Little Changed Before Confidence Data, Fed Meeting
By Stanley White and Kosuke Goto
June 24 (Bloomberg) -- The dollar was little changed against the euro before an industry survey that may show consumer confidence in the U.S. slumped to the lowest since 1992 as a housing recession weighs on the economy.
Federal Reserve policy makers start a two-day meeting later today at which they will probably keep the benchmark interest rate on hold at 2 percent. The yen may weaken on speculation Japanese individuals due to receive summer bonuses in June will plow cash into investment trusts targeting higher yields overseas.
``Weak consumer confidence could ripple through the currency market and keep pressure on the dollar,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co., a unit of Japan's largest brokerage. ``Expectations for a Fed rate increase later this year are slowly peeling away.''
The dollar traded at $1.5507 against the euro at 10:52 a.m. in Tokyo, little changed from last yesterday. It touched an all- time low of $1.6019 on April 22. The greenback held at 107.99 yen while the euro bought 167.47 yen from 167.35. The dollar may fall to 107.60 yen today, Amikura forecast.
The Australian dollar bought 95.02 U.S. cents, near a two- week high of 95.67 cents, after Rio Tinto Group said China had agreed to pay a record price increase for iron ore, Australia's largest export. The South Korean won rose to 1,037.65 per dollar from 1,039.15, snapping two days of losses, on speculation South Korean officials will buy the currency to lower import prices.
Fund Raising
Japanese asset management companies and banks will market more than 1 trillion yen ($9.2 billion) of funds focused on foreign securities by the end of the month, according to data compiled by Bloomberg. T&D Asset Management Co. will seek to raise 500 billion yen for a fund focused on Chinese environment- related business on June 27. Daiwa Asset Management Co. will seek 20 billion yen for commodity funds.
``Sales of investment trusts are not so bad,'' said Kei Katayama, who helps oversee the equivalent of about $1 billion at Daiwa SB Investments Ltd. in Tokyo. ``This is supportive for foreign currencies against the yen.''
Japan's currency may weaken to 110 per dollar in a month, Katayama said.
U.S. Economy
The Conference Board's confidence index declined to 56 in June, the lowest since December 1992, from 57.2 in May, according to a Bloomberg News survey of economists. The research group will release the data at 10 a.m. in New York. The S&P/Case-Shiller home-price index fell 16 percent in April from a year earlier, according to a separate survey. The report is due an hour before the confidence survey.
All of the 102 economists surveyed by Bloomberg News predict the central bank will leave rates unchanged tomorrow. The dollar has traded in a range of $1.5303 to $1.5843 per euro since Fed Chairman Ben S. Bernanke said on June 9 that economic risk has faded, prompting investors to bet the central bank will increase the target lending rate later this year after seven reductions beginning in September.
Traders have since reduced bets on a rate increase. Futures contracts show a 38.9 percent chance the Fed will raise rates by at least a quarter of percent at its meeting in August, down from 68.5 percent odds a week ago.
Slowdown in Europe
Any gains in the euro may be limited before a survey forecast by economists to show German consumer confidence will fall in July, reducing speculation the European Central Bank will increase borrowing costs.
The dollar has gained 1.7 percent against the euro this quarter as traders bet the economic slowdown sparked by the collapse of the subprime-mortgage market will spread to Europe as the U.S. recovers. The greenback is down 7 percent this year.
``Economic data point to a slowdown in Europe and make it hard for the ECB to raise rates beyond its July policy meeting,'' said Masaki Fukui, a senior economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded financial group. ``The euro may move between $1.53 and $1.58 against the dollar in one month.''
The Nuremberg-based GfK AG's index for July, based on a survey of about 2,000 people, will probably fall to 4.6, from 4.9 in June, according to the median forecast of 28 economists surveyed by Bloomberg News.
ECB Rates
Investors reduced bets yesterday on rate increases by the ECB, futures contracts showed. The implied yield on the March Euribor futures contract dropped 2 basis points, or 0.02 percentage point, to 5.31 percent. The contract has gained 55 basis points in the past month.
ECB President Jean-Claude Trichet speaks later today. He said on June 5 that the bank may increase the 4 percent main refinancing rate by a quarter-percentage point next month. The central bank will make such an increase by the end of September, while the Fed will hold its target unchanged, according to the median forecast of economists in Bloomberg News surveys.
``There's still an expectation that the ECB will tighten quicker than the Fed,'' said Alan Ruskin, head of international currency strategy, at RBS Greenwich Capital Markets in Greenwich, Connecticut. ``But if they're tightening into weakening data,'' the ECB may be more cautious.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netKosuke Goto in Tokyo at kgoto2@bloomberg.net
Read more...
June 24 (Bloomberg) -- The dollar was little changed against the euro before an industry survey that may show consumer confidence in the U.S. slumped to the lowest since 1992 as a housing recession weighs on the economy.
Federal Reserve policy makers start a two-day meeting later today at which they will probably keep the benchmark interest rate on hold at 2 percent. The yen may weaken on speculation Japanese individuals due to receive summer bonuses in June will plow cash into investment trusts targeting higher yields overseas.
``Weak consumer confidence could ripple through the currency market and keep pressure on the dollar,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co., a unit of Japan's largest brokerage. ``Expectations for a Fed rate increase later this year are slowly peeling away.''
The dollar traded at $1.5507 against the euro at 10:52 a.m. in Tokyo, little changed from last yesterday. It touched an all- time low of $1.6019 on April 22. The greenback held at 107.99 yen while the euro bought 167.47 yen from 167.35. The dollar may fall to 107.60 yen today, Amikura forecast.
The Australian dollar bought 95.02 U.S. cents, near a two- week high of 95.67 cents, after Rio Tinto Group said China had agreed to pay a record price increase for iron ore, Australia's largest export. The South Korean won rose to 1,037.65 per dollar from 1,039.15, snapping two days of losses, on speculation South Korean officials will buy the currency to lower import prices.
Fund Raising
Japanese asset management companies and banks will market more than 1 trillion yen ($9.2 billion) of funds focused on foreign securities by the end of the month, according to data compiled by Bloomberg. T&D Asset Management Co. will seek to raise 500 billion yen for a fund focused on Chinese environment- related business on June 27. Daiwa Asset Management Co. will seek 20 billion yen for commodity funds.
``Sales of investment trusts are not so bad,'' said Kei Katayama, who helps oversee the equivalent of about $1 billion at Daiwa SB Investments Ltd. in Tokyo. ``This is supportive for foreign currencies against the yen.''
Japan's currency may weaken to 110 per dollar in a month, Katayama said.
U.S. Economy
The Conference Board's confidence index declined to 56 in June, the lowest since December 1992, from 57.2 in May, according to a Bloomberg News survey of economists. The research group will release the data at 10 a.m. in New York. The S&P/Case-Shiller home-price index fell 16 percent in April from a year earlier, according to a separate survey. The report is due an hour before the confidence survey.
All of the 102 economists surveyed by Bloomberg News predict the central bank will leave rates unchanged tomorrow. The dollar has traded in a range of $1.5303 to $1.5843 per euro since Fed Chairman Ben S. Bernanke said on June 9 that economic risk has faded, prompting investors to bet the central bank will increase the target lending rate later this year after seven reductions beginning in September.
Traders have since reduced bets on a rate increase. Futures contracts show a 38.9 percent chance the Fed will raise rates by at least a quarter of percent at its meeting in August, down from 68.5 percent odds a week ago.
Slowdown in Europe
Any gains in the euro may be limited before a survey forecast by economists to show German consumer confidence will fall in July, reducing speculation the European Central Bank will increase borrowing costs.
The dollar has gained 1.7 percent against the euro this quarter as traders bet the economic slowdown sparked by the collapse of the subprime-mortgage market will spread to Europe as the U.S. recovers. The greenback is down 7 percent this year.
``Economic data point to a slowdown in Europe and make it hard for the ECB to raise rates beyond its July policy meeting,'' said Masaki Fukui, a senior economist and currency analyst in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded financial group. ``The euro may move between $1.53 and $1.58 against the dollar in one month.''
The Nuremberg-based GfK AG's index for July, based on a survey of about 2,000 people, will probably fall to 4.6, from 4.9 in June, according to the median forecast of 28 economists surveyed by Bloomberg News.
ECB Rates
Investors reduced bets yesterday on rate increases by the ECB, futures contracts showed. The implied yield on the March Euribor futures contract dropped 2 basis points, or 0.02 percentage point, to 5.31 percent. The contract has gained 55 basis points in the past month.
ECB President Jean-Claude Trichet speaks later today. He said on June 5 that the bank may increase the 4 percent main refinancing rate by a quarter-percentage point next month. The central bank will make such an increase by the end of September, while the Fed will hold its target unchanged, according to the median forecast of economists in Bloomberg News surveys.
``There's still an expectation that the ECB will tighten quicker than the Fed,'' said Alan Ruskin, head of international currency strategy, at RBS Greenwich Capital Markets in Greenwich, Connecticut. ``But if they're tightening into weakening data,'' the ECB may be more cautious.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netKosuke Goto in Tokyo at kgoto2@bloomberg.net
Read more...
Korean Won Advances on Speculation Central Bank May Purchase It
By Kim Kyoungwha
June 24 (Bloomberg) -- South Korea's won rose on speculation the nation's foreign-exchange authorities will purchase the currency to help strengthen it and limit inflation caused by rising import prices. Bonds were little changed.
The won snapped a two-day loss as government officials have shifted their focus in recent months to curbing inflation that quickened to the fastest pace in seven years in May. Finance Minister Kang Man Soo said last week the government will ``put utmost priority on stabilizing prices and looking after the lives of the people.''
``It's hard for market players to take positions either way given that the dollar is trading near the 1,040 level where authorities last intervened to stem the won's loss,'' said Kim Hee, a currency dealer with state-run Korea Development Bank. ``Some export deals flew in, propping up the won as well.''
The won rose 0.2 percent to 1,037.20 against the dollar as of 10:16 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency has weakened 9.8 percent this year, the second worst performer of the 10 most-active currencies in Asia outside of Japan, according to data compiled by Bloomberg.
Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
Gains in the won may be tempered on concern a four-day decline in the benchmark Kospi stock index will spur overseas investors to cut their holdings of the nation's assets.
`Intervention Fears'
``A weak stock market and foreign sales of equities all point to demand for the dollar,'' said Ko Yun Jin, a currency dealer at Kookmin Bank in Seoul. ``Still, intervention fears will keep investors on their toes.''
South Korea's government bond yields stayed near the highest level since January on concern that rising inflation will erode the value of the fixed payments of debt.
``The inflation concern is unnerving debt investors,'' said Kim Do Sung, a futures trader with PB Futures Co. in Seoul. ``Trading is also very limited as few in the market are willing to take positions.''
The yield on the 5.25 note due March 2013 was little changed at 5.92 percent, according to Korea Exchange. The price held at about 98.76. A basis point is 0.01 percentage point.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Australian Dollar Little Changed on Ore; N.Z. Dollar Falls
By Ron Harui and Tracy Withers
June 24 (Bloomberg) -- Australia's dollar was little changed as Rio Tinto Group said China agreed to pay a record price for iron ore, the nation's largest export. The New Zealand dollar fell before a report on economic growth.
The Australian currency headed for a second quarterly gain as Rio said Baosteel Group Corp., China's biggest steelmaker, will pay 80 percent more for ore. That could bolster Australia's overseas earnings and support the nation's economic expansion. The New Zealand currency was poised to snap a two-quarter winning stretch as a government report this week is forecast by economists to show the economy contracted.
``News that Rio Tinto had achieved an average 85 percent increase in iron ore contract prices helped the Australian dollar gain,'' said John Kyriakopoulos, a currency strategist at National Australia Bank Ltd. in Sydney, in a client note today. ``Traders believe the boost from commodity prices could see economic growth re-accelerate in the second half of the year.''
The Australian dollar traded at 95.17 U.S. cents at 11:07 a.m. in Sydney from 95.14 cents late in Asia yesterday. It has risen 4.2 percent this quarter and 8.7 percent this year. The currency advanced to 102.71 yen from 102.49 yen.
The New Zealand dollar fell to 75.73 U.S. cents from 75.84 cents late in Asia yesterday. It has lost 3.6 percent this quarter and 1.1 percent this year. The currency traded at 81.79 yen from 81.69 yen.
Commodity Exports
China's Baosteel will pay $144.66 a dry metric ton for so- called Pilbara blend fines in the year that began April 1, Rio said yesterday in a statement. The contract marks the first time Chinese buyers agreed to pay more for Australian ore than supplies from Brazil, which are costlier to ship.
The Australian Bureau of Agricultural and Resource Economics said yesterday commodity exports may rise to a record A$212 billion ($202 billion) in the year ending June 30, 2009. That compares with its March forecast of A$189 billion and estimated 2008 sales of A$151 billion. Exports of raw materials contribute 17 percent to Australia's economy.
The New Zealand dollar was set for a monthly decline on concern that slowing economic growth may spur Reserve Bank of New Zealand Governor Alan Bollard to lower interest rates.
``Market pricing for a Reserve Bank easing sticks out like a sore thumb against a backdrop of expected rate hikes elsewhere,'' said Michael Gordon, a currency strategist at Westpac Banking Corp. in Wellington. ``There seems to be little appetite to hold the currency.''
New Zealand's Economy
A government report on June 27 will show the economy contracted 0.3 percent in the first three months of the year, according to the median forecast of 13 economists surveyed by Bloomberg. Seven of the economists said gross domestic product may also shrink in the second quarter, pushing New Zealand into its first recession since 1998.
Bollard said on June 5 it is ``likely'' he will reduce the 8.25 percent benchmark interest rate this year because weak growth is slowing inflation. He forecast the economy will rebound in the second quarter after shrinking in the three months ended March 31.
There is a 28 percent chance of a quarter-point cut next month, according to an index calculated by Credit Suisse Group based on trading in overnight interest-rate swaps.
Australian government debt gained for a second day, pushing the yield on the 10-year security down 1 basis point to 6.53 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.081, or A$0.81 per A$1,000 face amount, to 90.211. A basis point is 0.01 percentage point.
New Zealand's government bonds were little changed. The yield on the 6 percent note due December 2017 was unchanged from yesterday at 6.44 percent, and the three-year yield held at 6.50 percent. Yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net
Read more...
June 24 (Bloomberg) -- Australia's dollar was little changed as Rio Tinto Group said China agreed to pay a record price for iron ore, the nation's largest export. The New Zealand dollar fell before a report on economic growth.
The Australian currency headed for a second quarterly gain as Rio said Baosteel Group Corp., China's biggest steelmaker, will pay 80 percent more for ore. That could bolster Australia's overseas earnings and support the nation's economic expansion. The New Zealand currency was poised to snap a two-quarter winning stretch as a government report this week is forecast by economists to show the economy contracted.
``News that Rio Tinto had achieved an average 85 percent increase in iron ore contract prices helped the Australian dollar gain,'' said John Kyriakopoulos, a currency strategist at National Australia Bank Ltd. in Sydney, in a client note today. ``Traders believe the boost from commodity prices could see economic growth re-accelerate in the second half of the year.''
The Australian dollar traded at 95.17 U.S. cents at 11:07 a.m. in Sydney from 95.14 cents late in Asia yesterday. It has risen 4.2 percent this quarter and 8.7 percent this year. The currency advanced to 102.71 yen from 102.49 yen.
The New Zealand dollar fell to 75.73 U.S. cents from 75.84 cents late in Asia yesterday. It has lost 3.6 percent this quarter and 1.1 percent this year. The currency traded at 81.79 yen from 81.69 yen.
Commodity Exports
China's Baosteel will pay $144.66 a dry metric ton for so- called Pilbara blend fines in the year that began April 1, Rio said yesterday in a statement. The contract marks the first time Chinese buyers agreed to pay more for Australian ore than supplies from Brazil, which are costlier to ship.
The Australian Bureau of Agricultural and Resource Economics said yesterday commodity exports may rise to a record A$212 billion ($202 billion) in the year ending June 30, 2009. That compares with its March forecast of A$189 billion and estimated 2008 sales of A$151 billion. Exports of raw materials contribute 17 percent to Australia's economy.
The New Zealand dollar was set for a monthly decline on concern that slowing economic growth may spur Reserve Bank of New Zealand Governor Alan Bollard to lower interest rates.
``Market pricing for a Reserve Bank easing sticks out like a sore thumb against a backdrop of expected rate hikes elsewhere,'' said Michael Gordon, a currency strategist at Westpac Banking Corp. in Wellington. ``There seems to be little appetite to hold the currency.''
New Zealand's Economy
A government report on June 27 will show the economy contracted 0.3 percent in the first three months of the year, according to the median forecast of 13 economists surveyed by Bloomberg. Seven of the economists said gross domestic product may also shrink in the second quarter, pushing New Zealand into its first recession since 1998.
Bollard said on June 5 it is ``likely'' he will reduce the 8.25 percent benchmark interest rate this year because weak growth is slowing inflation. He forecast the economy will rebound in the second quarter after shrinking in the three months ended March 31.
There is a 28 percent chance of a quarter-point cut next month, according to an index calculated by Credit Suisse Group based on trading in overnight interest-rate swaps.
Australian government debt gained for a second day, pushing the yield on the 10-year security down 1 basis point to 6.53 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.081, or A$0.81 per A$1,000 face amount, to 90.211. A basis point is 0.01 percentage point.
New Zealand's government bonds were little changed. The yield on the 6 percent note due December 2017 was unchanged from yesterday at 6.44 percent, and the three-year yield held at 6.50 percent. Yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net
Read more...
Nikkei down 0.4 pct on US, Japan economy worries
TOKYO, June 24 (Reuters) - Japan's Nikkei stock average fell 0.4 percent on Tuesday, led lower by blue chips such as Fast Retailing Co (9983.T: Quote, Profile, Research, Stock Buzz) and Fanuc Ltd (6954.T: Quote, Profile, Research, Stock Buzz) on worries about the economic outlook in the United States and Japan.
The persistent strength of oil prices pushed up energy shares such as oil and gas field developer Inpex Holdings Inc (1605.T: Quote, Profile, Research, Stock Buzz).
"Yesterday, Wall Street ended virtually flat. But if you take a closer look, it's a lot worse than that. Auto and financial sectors were a damper in investors' minds," said Katsuhiko Kodama, senior strategist at Toyo Securities.
"Japan's not good either. Recent economic data points to weak fundamentals."
Government data showed on Monday that big Japanese firms were more pessimistic about business conditions in the three months to June, signalling that gloom was spreading across the economy. [ID:nT183666]
As of 0059 GMT, the benchmark Nikkei .N225 fell 52.34 points to 13,805.13. The broader Topix lost 0.1 percent to 1,346.83.
Trade is expected to remain thin, as investors hold off making bets ahead of the U.S. Federal Reserve meeting.
The Fed is expected to leave rates unchanged in its decision due out on Wednesday, and the market will focus on the accompanying statement for clues on the future course of monetary policy.
Apparel retailer Fast Retailing fell 2.1 percent to 10,050 yen and industrial robot maker Fanuc lost 1.8 percent to 11,590 yen, the two biggest drags on the Nikkei.
Inpex gained 1.6 percent to 1.31 million yen and Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) rose 2.1 percent to 3,490 yen. Mitsubishi and rival trading houses have stakes in overseas natural resources.
Drug maker Daiichi Sankyo (4568.T: Quote, Profile, Research, Stock Buzz) slid 3.2 percent to 2,745 yen after it and Eli Lilly and Co (LLY.N: Quote, Profile, Research, Stock Buzz) said on Tuesday the U.S. Food and Drug Administration has extended the review period for its blood thinner prasugrel by three months. (Reporting by Taiga Uranaka; Editing by Brent Kininmont)
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The persistent strength of oil prices pushed up energy shares such as oil and gas field developer Inpex Holdings Inc (1605.T: Quote, Profile, Research, Stock Buzz).
"Yesterday, Wall Street ended virtually flat. But if you take a closer look, it's a lot worse than that. Auto and financial sectors were a damper in investors' minds," said Katsuhiko Kodama, senior strategist at Toyo Securities.
"Japan's not good either. Recent economic data points to weak fundamentals."
Government data showed on Monday that big Japanese firms were more pessimistic about business conditions in the three months to June, signalling that gloom was spreading across the economy. [ID:nT183666]
As of 0059 GMT, the benchmark Nikkei .N225 fell 52.34 points to 13,805.13. The broader Topix lost 0.1 percent to 1,346.83.
Trade is expected to remain thin, as investors hold off making bets ahead of the U.S. Federal Reserve meeting.
The Fed is expected to leave rates unchanged in its decision due out on Wednesday, and the market will focus on the accompanying statement for clues on the future course of monetary policy.
Apparel retailer Fast Retailing fell 2.1 percent to 10,050 yen and industrial robot maker Fanuc lost 1.8 percent to 11,590 yen, the two biggest drags on the Nikkei.
Inpex gained 1.6 percent to 1.31 million yen and Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) rose 2.1 percent to 3,490 yen. Mitsubishi and rival trading houses have stakes in overseas natural resources.
Drug maker Daiichi Sankyo (4568.T: Quote, Profile, Research, Stock Buzz) slid 3.2 percent to 2,745 yen after it and Eli Lilly and Co (LLY.N: Quote, Profile, Research, Stock Buzz) said on Tuesday the U.S. Food and Drug Administration has extended the review period for its blood thinner prasugrel by three months. (Reporting by Taiga Uranaka; Editing by Brent Kininmont)
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Most Asian Stocks Drop, Led by Banks, Carmakers; Woodside Gains
By Chua Kong Ho
June 24 (Bloomberg) -- Most Asian stocks fell for a fourth day, led by financials and automakers, after Goldman Sachs Group Inc. advised selling banks as credit losses continue and oil prices rose.
Mizuho Financial Group Inc., which recorded the biggest losses in Japan from subprime-related securities, and Commonwealth Bank of Australia retreated on speculation financial institutions will have to write down more assets. Toyota Motor Corp., Japan's largest automaker, dropped on concern higher oil prices will cut demand for cars. Inpex Holdings Inc. and Woodside Petroleum Ltd. advanced as oil rose for a third day.
``There is a heightening sense of alarm as crude prices continue their climb,'' Mamoru Shimode, Tokyo-based chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.
The MSCI Asia Pacific Index was little changed at 138.61 as of 9:31 a.m. in Tokyo. About three stocks fell for every two that rose, with financial shares contributing the most to declines.
Japan's Nikkei 225 Stock Average fell 0.6 percent to 13,776. South Korea's Kospi Index declined 0.5 percent. Posco, Asia's largest stainless-steel maker, slid after saying it will cut production of the metal in July because of lower demand.
More than $8 trillion in global stock market value has been wiped out this year as a 43 percent jump in oil raises costs for consumers and businesses. Oil rose for a third day in New York amid signs an increase in output from Saudi Arabia may not boost supply enough to make up for production disruptions in Nigeria.
About $398 billion in asset writedowns and credit losses stem from the collapse of the U.S. subprime-mortgage market, according to data compiled by Bloomberg.
To contact the reporter for this story: Chua Kong Ho at kchua6@bloomberg.net
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Monday, June 23, 2008
US gas prices climb to record $4.10; could be peak
NEW YORK: Gasoline is costing U.S. drivers a record $4.10 per gallon on average, but pump prices may be at a peak and could start to come down, an industry analyst said on Sunday. That optimism is linked to a pledge by Saudi Arabia to pump more oil in response to consumer countries' requests, according to Trilby Lundberg, editor of the nationwide Lundberg survey of about 7,000 gas stations.
"I suspect that oil prices have peaked and will flip further because of this news and the physical addition of more oil on the market in July," Lundberg said. "This gives a strong chance that pump prices are peaking now, or may already have done so." A barrel of oil has doubled in price over the past year, stoking inflation, triggering protests from Asia to Europe, and compounding the financial pain of U.S. consumers already grappling with a sagging housing market, job uncertainty and soaring food costs.
Top officials, policy makers and oil company executives met on Sunday in Jeddah, Saudi Arabia, for emergency talks on how to bring prices down. "Crude oil prices may spike at any moment from existing trouble in areas including Nigeria, or from some unforeseen hit to global supply," Lundberg said.
"This may sound optimistic, (but) it seems likely at this moment as the meeting in Jeddah, Saudi Arabia is being concluded, that oil prices may have peaked and may drift down." One common reason cited for the rise of oil prices is soaring demand from developing economies such as India and China, whose emerging middle classes are gobbling up more oil. Lundberg said it was unclear whether other countries with fuel subsidies would follow China's lead and cut them in efforts to cap demand.
Demand in the United States has fallen about 1 percent year-to-date, though it is closer to 2 percent lower in recent weeks, Lundberg said. Prices at the pump vary across the country. The luckiest drivers live in Tulsa, Oklahoma, where the city average was $3.76 per gallon, the nation's lowest. At the other end, Los Angeles and Fresno, California, were tied for the nation's most expensive gasoline, with the city averages reaching $4.59 per gallon of regular grade gasoline. On June 20, U.S. crude closed at $134.71 per barrel, up from $68.19 a year ago.
Taken From : http://economictimes.indiatimes.com
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Saudi moves on oil pressure
Saudi Arabia moved last night to ease oil-price pressure saying it will hike its output to 9.7 million barrels a day the highest level in 27 years.
The statement came during a hastily arranged oil summit in Jeddah, which called for more investment in oil production and greater financial market transparency.
Leaders of 35 nations attending the summit agreed current record high oil prices are hammering the world economy.
Current prices and their volatility are detrimental to the global economy, and in particular the economies of least developed countries," the final communique of the summit said.
Though host Saudi Arabia, the world's biggest oil exporter, vowed to pump more oil in response to consumer countries' requests, it noted that an output boost will not suffice to calm a market driven by an array of factors.
Saudi Oil Minister Ali al-Nuaimi said the country's production capacity will rise to 12.5 million barrels per day by the end of next year and another 2.5 million bpd could be added if demand warranted.
Saudi King Abdullah promised US$500 million (HK$3.9 billion) in soft loans and called for a US$1 billion OPEC fund to help the world's poor cope with soaring prices that nearly hit US$140 a barrel last week.
The cost of crude has doubled in a year fueling inflation around the globe and sparking protests from Asia to Western Europe.
To curb the rising cost of fuel and food, the world's major central banks may start raising interest rates.
Concrete measures were unlikely to emerge from major producers, consumers and leading oil company executives gathered in Jeddah to reverse what some see as the world's third oil shock.
Recent efforts to slow oil's ascent have had little impact.
Saudi Arabia has vowed to raise production to 9.7 million barrels per day next month, its highest rate in decades.
King Abdullah said Riyadh was willing to provide all necessary oil supplies needed in the future, and blamed high prices on speculation and taxes.
Joining the chorus, Kuwaiti Oil Minister Mohammed al-Olaim said that OPEC members "will not hesitate" to increase production if the market needs it. But Algeria's Oil Minister Chakib Khelil insisted this was not necessary.
The meeting also highlighted the divide between those who say high oil prices are the result of soaring demand and slower growth in production and those, including most in OPEC, who see speculators as the primary force behind the rally.
Investment funds have pumped billions of dollars into oil and other commodities as they seek to diversify holdings and flee poorly performing asset classes, but US Energy Secretary Sam Bodman said the focus on speculation was misplaced.
"There's no evidence we can find that speculators are driving futures prices," he said.
US regulators, under political pressure from lawmakers, have stepped up oversight of futures markets.
Major oil consumers in Asia, including the world's No 2 user China, have recently raised cheap domestic fuel prices that analysts say aided rapid demand growth.
Fresh ideas appeared in short supply, with focus put on the importance of greater transparency in oil markets and more investment into renewable energy sources.
"There is the danger the markets will be disappointed and the price will increase again," said German Economy Minister Michael Glos. AGENCIES
Taken From :http://www.thestandard.com.hk
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Euro Zone Economy Shows Weakness, ECB Cornered
By Reuters
Euro zone services and manufacturing activity both fell unexpectedly into contraction in June, a key survey showed on Monday, although the weakness may not be pronounced enough to deter an ECB rate hike in July.
The data from around 5,000 companies, combined with weaker than expected data from Germany's Ifo survey, will add to fears of stagflation in the euro zone as growth cools quickly in the second quarter while oil prices stoke inflationary pressure.
Business weakness will complicate the European Central Bank's efforts to ready markets for a rate hike in July.
The RBS/Markit Eurozone Purchasing Managers Index for services companies, which range from cafes to banks, fell to 49.5 in June from 50.6 in May, the first time it has sunk below the 50.0 mark dividing growth from contraction since June 2003.
Only three of 36 economists had forecast a move below 50.0, with the lowest prediction being 49.7 and the median 50.5.
Euro zone manufacturing also suffered a bruising month. The RBS/Markit Eurozone PMI for the sector fell to 49.1 from 50.6, its lowest level since May 2005 as new orders slipped further. Economists had forecast a dip to 50.2.
Meanwhile, German business morale fell more than forecast in June to its lowest level since December 2005 with the Ifo index at 101.3 from 103.5 in May.
The euro hit session lows after the data to around $1.5501 to the dollar from $1.5559, while bund futures also rallied to session highs.
"The falls are probably not sharp enough to stop the ECB hiking in July ... But the data today will cause some intense debate about rate-setting," said Juergen Michels at Citi.
Earlier Flash data showed French growth in both manufacturing and services contracted in June, but remained above the 50.0 level in Germany.
The data showed inflation putting services companies under intense pressure as their input costs rose at the fastest pace since September 2000.
ECB Executive Board member Lorenzo Bini Smaghi said on Friday the bank would have to raise rates unless services sector productivity picks up to counter higher commodity prices.
Although companies responded to higher costs by raising their charges in June at the steepest rate since November 2000, they lagged the rate of cost increase by the widest margin since November 2004.
And the service sector's optimism about future business is waning sharply.
The business expectations index eased to 54.9 in June, its lowest level since the survey began in 1998, and lower even than after the attacks on the United States in September 2001.
Falls in the services and manufacturing PMIs took the Composite index down to 49.5, its lowest since June 2003.
Factory Slide
Manufacturing was also hit by weakening demand across the region. The output index for the sector slipped to 49.5 from 51.9, its lowest since July 2003.
Meanwhile, new orders for the sector remained in contraction territory for the third month running. Firms saw weaker conditions as a good opportunity to reduce hiring.
The employment index slipped to 49.7, the first time it has gone below the 50.0 point since February 2006.
"Both the services and manufacturing sectors are prone to further falls in coming months," said Chris Williamson, chief euro area economist at Markit, which compiles the data.
Reflecting weak demand, stocks of finished goods rose in June to 50.9, the highest in the survey's history, from 50.3.
Copyright 2008 Reuters.
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.Thomson Financial Europe AM at a glance share guide: Shares lower, oil surges
LONDON (Thomson Financial) - US SUMMARY: Stocks dip, oil shoots up Index Change Percent change *DJIA 11842.69 -220.40 -1.83 *Nasdaq 2406.09 -55.97 -2.27 *S&P 500 1317.93 -24.90 -1.85 Nymex crude for July $134.62 +$2.69 10 year US *Friday's close STOCKS: Stocks capped a difficult week with steep losses Friday amid escalating worries about the financial and automotive sectors and a rebound in oil prices. The major indexes fell by more than 1 1/2 percent on the day, and the Dow Jones industrial average gave up more than 200 points to end at its lowest level in three months.
A Merrill Lynch downgrade of regional banks added to the market's initial anxiety, which ballooned Thursday when Citigroup Inc. warned of significant debt markdowns for the second quarter, Washington Mutual Inc. announced 1,200 job cuts and Moody's Investors Service decided late in the day to downgrade the two biggest bond insurers.
FOREX: The dollar fell on Friday as oil futures rebounded and downgrades of automakers and the financial sector underscored troubles challenging the nation's economy.
The euro bought $1.5625 in late New York trading, up from its level of $1.5499 on Thursday. The British pound rose to $1.9771 from $1.9739.
OIL: Oil futures rebounded Friday on unease over Middle East stability and a growing doubt that China's government will be able to curb the country's appetite for fuel by pushing prices higher.
METALS: In precious metals, gold futures fell 50 cents to settle at $903.70 an ounce on the Nymex. Other metals traded mixed. July silver added 7.3 cents to settle at $17.397 a pound on the Nymex, while July copper rose 5.25 cents to settle at $3.832 a pound.
Events: May Chicago Fed National Activity Index ASIA SUMMARY: Stocks lower after Wall Street fall, oil higher Index Change Pct change Nikkei 225 13853.90 -88.18 -0.63 (0335 GMT) Straits Times 2974.61 -27.20 -0.91 (0355 GMT) Hang Seng 22609.09 -136.51 -0.60 (0341 GMT) Seoul Composite 1711.37 -19.63 -1.13 (0355 GMT) BSE Sensex 14423.05 -148.24 -1.02 (0430 GMT) usd-yen 107.28 (Intra-day trade) 10-year JGBs 4.17 percent -0.04 (Intra-day trade) Brent North Sea crude for August $135.08 usd +22 cents (Intra-day trade) STOCKS: Asia shares were lower in early trade on Monday after Wall Street's Friday fall.
China A-shares finished the morning lower as profit-taking hit oil refiners following Friday's surge on the government's snap decision to hike gasoline and diesel prices. Australian shares were trading lower though losses had been pared as investors bought oversold stocks across sectors.
BONDS: Japanese government bonds finished the morning session higher on Monday as investors shifted funds back to safe haven government bonds due to emerging uncertainties about the global stock market, stemming from renewed uncertainties about the U.S. financial sector and economy.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.17 percent from 4.21 percent late Thursday.
FOREX: The U.S. dollar was trading mixed against major currencies in Sydney on Monday, with market attention clearly fixed on this week's Federal Open Market Committee meeting.
While the two-day meeting, which starts Tuesday, is not expected to result in any change to the Federal Reserve's funds target rate, now at just 2.0 percent, the market will be looking for hints in the accompanying statement on Wednesday about the possibility of a return to interest rate hikes later in the year.
At 0030 GMT the dollar was at 107.34 yen from 107.28 late in New York on Friday while the euro was at $1.5613 from $1.5605.
OIL: World oil prices rose in Asian trading on Monday after Saudi Arabia said at a weekend summit that it had raised output,and said speculators were partly to blame for higher prices.
New York's main oil futures contract, light sweet crude for August delivery,was 29 cents higher at $135.65 per barrel. on Friday. Brent North Sea crude for August was 22 cents higher at $135.08 a barrel after rising $2.86 to settle at $134.86 per barrel on Friday in London.
METALS: Copper rose to a month high in London on Friday after inventories fell and the dollar weakened, encouraging fund buying of the red metal. At 11:58 a.m. Friday, London Metal Exchange (LME) copper for three-month delivery was at $8,415 a tonne, up from $8,330 at the close on Thursday.
Gold steadied near $900 per ounce on Friday as rising inflation fears and renewed weakness in the U.S. dollar kept the precious metal supported near the key psychological level.
EVENTS: Japan April-June corporate outlook survey Japan May supermarket sales Singapore May CPI Hong Kong Q1 current account Hong Kong's Dickson Concepts yr to March results Taiwan May unemployment India's Tata Power FY results E.U. rules on proposed acquisition by E.ON of Endesa Europa, Enel's Viesgo E.U. rules on acquisition by Rewe of ADEG stake increase U.S. May Chicago Fed National Activity Index EUROPE SUMMARY: Shares lower, oil surges Index Change Percent change *FTSE 5620.80 -87.60 -1.53 *DAX 6578.44 -142.73 -2.12 *CAC 4509.27 -82.12 -1.79 pound-dollar 1.9752 +0.0021 (Intra-day) euro-dollar 1.5607 +0.0119 (Intra-day) Brent crude(August) $135.95 +$3.95 (Intra-day) *Friday's close STOCKS: UK blue chips closed lower Friday, having extended losses in afternoon deals as Wall Street fell on the back of escalating worries about the financial sector and a rally in oil prices, with weakness seen among banks in London.
German shares plummeted to their lowest level since April, mainly impacted by higher oil prices and the expiration of stock options, index options and index futures as well as a lower performance on Wall Street.
Paris share prices ended lower Friday after hesitant morning trade gave way to a sharp afternoon drop in line with Wall Street, where investors grew nervous about a renewed rally on oil prices and more gloomy signs about the financial sector.
FOREX: The dollar remained weak, particularly against the euro, after ratings agency Moody's downgraded the bond insurers Ambac and MBIA, and after the emergence of fresh geopolitical tensions in the Middle East.
The euro received a boost on views that the European Central Bank will go ahead and raise interest rates by a quarter point to 4.25 percent.
Meanwhile, pound was somewhat stronger, riding on the positive momentum from strong retail sales figures released on Thursday. These showed sales rose 3.5 percent in May from April, the fastest rate of growth since records began in 1986.
BONDS: European government bonds continued to build on Friday morning's gains, benefiting from a rise in safe haven flows as market players sought to divert funds away from falling equity markets.
In the UK, gilts were outperforming their European counterparts, reversing Thursday's losses on flight-to-safety flows and as market players pared back expectations for interest rate rises.
OIL: Oil prices stormed higher on Friday as OPEC members hit out at consumer demands for more crude ahead of a high-level weekend meeting in the Saudi city of Jeddah to discuss rocketing fuel costs.
News that China would hike domestic oil prices added considerable weight to the downward pressure, on the initial view that Beijing's move would curtail demand in its booming economy.
London's Brent North Sea crude for August jumped $3.95 to $135.95 per barrel, compared with its record peak of $139.32 on Monday.
METALS: Gold steadied near $900 per ounce on Friday as rising inflation fears and renewed weakness in the U.S. dollar kept the precious metal supported near the key psychological level. At 9:44 a.m., spot gold was trading at $899.25 per ounce against $902.20 per ounce Thursday.
Among other precious metals, platinum was trading up at $2,052 per ounce against $2,048 per ounce Thursday. Palladium slipped to $467 per ounce from $473 per ounce.
In industrial metals, copper rose to a month high in London on Friday after inventories fell and the dollar weakened, encouraging fund buying of the red metal.
EVENTS: UNITED KINGDOM Rightmove June house price index Aggreko trading statement BENELUX Belgian June business confidence indicator. Forecast -2.5 versus -1.6 Deadline for ASMI to reach compromise with shareholders Colruyt FY results FRANCE Provisional June manufacturing PMI. Forecast 51.0 versus 51.5 Provisional June services PMI. Forecast 51.0 versus 50.5 GERMANY Provisional June manufacturing PMI. Forecast 53.2 versus 53.6 Provisional June services PMI. Forecast 53.3 versus 53.8 Bundesbank Monthly report Ifo June business climate index. Forecast 102.5 versus 103.5 Ifo June business assessment index. Forecast 109.1 versus 110.1 Ifo June business expectations index. Forecast 96.3 versus 97.3 Siemens Media summit with CEO Loescher, London (day 1 of 2) GREECE Coca-Cola HBC AGM Terna Energy AGM ITALY Review of S&P/Mib index SWITZERLAND Swiss govt June economic forecast Swiss KOF spring economic forecast EASTERN EUROPE Hungary Central bank to set interest rates Conference on euro (1130 GMT, Czech central bank governor Tuma, Slovak central bank governor Sramko to attend) EUROPEAN UNION/EURO ZONE Euro zone provisional June manufacturing PMIs. Forecast 50.2 versus 50.6 Euro zone provisional June services PMI. Forecast 50.5 versus 50.6 Euro zone provisional June composite PMI. Forecast 50.7 versus 51.1 EU rules on proposed acquisition by E.ON of Endesa Europa, Enel's Viesgo EU rules on acquisition by Rewe of ADEG stake increase
TFN.newsdesk@thomson.com jro/vsr/pvi/jro COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved.
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A Merrill Lynch downgrade of regional banks added to the market's initial anxiety, which ballooned Thursday when Citigroup Inc. warned of significant debt markdowns for the second quarter, Washington Mutual Inc. announced 1,200 job cuts and Moody's Investors Service decided late in the day to downgrade the two biggest bond insurers.
FOREX: The dollar fell on Friday as oil futures rebounded and downgrades of automakers and the financial sector underscored troubles challenging the nation's economy.
The euro bought $1.5625 in late New York trading, up from its level of $1.5499 on Thursday. The British pound rose to $1.9771 from $1.9739.
OIL: Oil futures rebounded Friday on unease over Middle East stability and a growing doubt that China's government will be able to curb the country's appetite for fuel by pushing prices higher.
METALS: In precious metals, gold futures fell 50 cents to settle at $903.70 an ounce on the Nymex. Other metals traded mixed. July silver added 7.3 cents to settle at $17.397 a pound on the Nymex, while July copper rose 5.25 cents to settle at $3.832 a pound.
Events: May Chicago Fed National Activity Index ASIA SUMMARY: Stocks lower after Wall Street fall, oil higher Index Change Pct change Nikkei 225 13853.90 -88.18 -0.63 (0335 GMT) Straits Times 2974.61 -27.20 -0.91 (0355 GMT) Hang Seng 22609.09 -136.51 -0.60 (0341 GMT) Seoul Composite 1711.37 -19.63 -1.13 (0355 GMT) BSE Sensex 14423.05 -148.24 -1.02 (0430 GMT) usd-yen 107.28 (Intra-day trade) 10-year JGBs 4.17 percent -0.04 (Intra-day trade) Brent North Sea crude for August $135.08 usd +22 cents (Intra-day trade) STOCKS: Asia shares were lower in early trade on Monday after Wall Street's Friday fall.
China A-shares finished the morning lower as profit-taking hit oil refiners following Friday's surge on the government's snap decision to hike gasoline and diesel prices. Australian shares were trading lower though losses had been pared as investors bought oversold stocks across sectors.
BONDS: Japanese government bonds finished the morning session higher on Monday as investors shifted funds back to safe haven government bonds due to emerging uncertainties about the global stock market, stemming from renewed uncertainties about the U.S. financial sector and economy.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.17 percent from 4.21 percent late Thursday.
FOREX: The U.S. dollar was trading mixed against major currencies in Sydney on Monday, with market attention clearly fixed on this week's Federal Open Market Committee meeting.
While the two-day meeting, which starts Tuesday, is not expected to result in any change to the Federal Reserve's funds target rate, now at just 2.0 percent, the market will be looking for hints in the accompanying statement on Wednesday about the possibility of a return to interest rate hikes later in the year.
At 0030 GMT the dollar was at 107.34 yen from 107.28 late in New York on Friday while the euro was at $1.5613 from $1.5605.
OIL: World oil prices rose in Asian trading on Monday after Saudi Arabia said at a weekend summit that it had raised output,and said speculators were partly to blame for higher prices.
New York's main oil futures contract, light sweet crude for August delivery,was 29 cents higher at $135.65 per barrel. on Friday. Brent North Sea crude for August was 22 cents higher at $135.08 a barrel after rising $2.86 to settle at $134.86 per barrel on Friday in London.
METALS: Copper rose to a month high in London on Friday after inventories fell and the dollar weakened, encouraging fund buying of the red metal. At 11:58 a.m. Friday, London Metal Exchange (LME) copper for three-month delivery was at $8,415 a tonne, up from $8,330 at the close on Thursday.
Gold steadied near $900 per ounce on Friday as rising inflation fears and renewed weakness in the U.S. dollar kept the precious metal supported near the key psychological level.
EVENTS: Japan April-June corporate outlook survey Japan May supermarket sales Singapore May CPI Hong Kong Q1 current account Hong Kong's Dickson Concepts yr to March results Taiwan May unemployment India's Tata Power FY results E.U. rules on proposed acquisition by E.ON of Endesa Europa, Enel's Viesgo E.U. rules on acquisition by Rewe of ADEG stake increase U.S. May Chicago Fed National Activity Index EUROPE SUMMARY: Shares lower, oil surges Index Change Percent change *FTSE 5620.80 -87.60 -1.53 *DAX 6578.44 -142.73 -2.12 *CAC 4509.27 -82.12 -1.79 pound-dollar 1.9752 +0.0021 (Intra-day) euro-dollar 1.5607 +0.0119 (Intra-day) Brent crude(August) $135.95 +$3.95 (Intra-day) *Friday's close STOCKS: UK blue chips closed lower Friday, having extended losses in afternoon deals as Wall Street fell on the back of escalating worries about the financial sector and a rally in oil prices, with weakness seen among banks in London.
German shares plummeted to their lowest level since April, mainly impacted by higher oil prices and the expiration of stock options, index options and index futures as well as a lower performance on Wall Street.
Paris share prices ended lower Friday after hesitant morning trade gave way to a sharp afternoon drop in line with Wall Street, where investors grew nervous about a renewed rally on oil prices and more gloomy signs about the financial sector.
FOREX: The dollar remained weak, particularly against the euro, after ratings agency Moody's downgraded the bond insurers Ambac and MBIA, and after the emergence of fresh geopolitical tensions in the Middle East.
The euro received a boost on views that the European Central Bank will go ahead and raise interest rates by a quarter point to 4.25 percent.
Meanwhile, pound was somewhat stronger, riding on the positive momentum from strong retail sales figures released on Thursday. These showed sales rose 3.5 percent in May from April, the fastest rate of growth since records began in 1986.
BONDS: European government bonds continued to build on Friday morning's gains, benefiting from a rise in safe haven flows as market players sought to divert funds away from falling equity markets.
In the UK, gilts were outperforming their European counterparts, reversing Thursday's losses on flight-to-safety flows and as market players pared back expectations for interest rate rises.
OIL: Oil prices stormed higher on Friday as OPEC members hit out at consumer demands for more crude ahead of a high-level weekend meeting in the Saudi city of Jeddah to discuss rocketing fuel costs.
News that China would hike domestic oil prices added considerable weight to the downward pressure, on the initial view that Beijing's move would curtail demand in its booming economy.
London's Brent North Sea crude for August jumped $3.95 to $135.95 per barrel, compared with its record peak of $139.32 on Monday.
METALS: Gold steadied near $900 per ounce on Friday as rising inflation fears and renewed weakness in the U.S. dollar kept the precious metal supported near the key psychological level. At 9:44 a.m., spot gold was trading at $899.25 per ounce against $902.20 per ounce Thursday.
Among other precious metals, platinum was trading up at $2,052 per ounce against $2,048 per ounce Thursday. Palladium slipped to $467 per ounce from $473 per ounce.
In industrial metals, copper rose to a month high in London on Friday after inventories fell and the dollar weakened, encouraging fund buying of the red metal.
EVENTS: UNITED KINGDOM Rightmove June house price index Aggreko trading statement BENELUX Belgian June business confidence indicator. Forecast -2.5 versus -1.6 Deadline for ASMI to reach compromise with shareholders Colruyt FY results FRANCE Provisional June manufacturing PMI. Forecast 51.0 versus 51.5 Provisional June services PMI. Forecast 51.0 versus 50.5 GERMANY Provisional June manufacturing PMI. Forecast 53.2 versus 53.6 Provisional June services PMI. Forecast 53.3 versus 53.8 Bundesbank Monthly report Ifo June business climate index. Forecast 102.5 versus 103.5 Ifo June business assessment index. Forecast 109.1 versus 110.1 Ifo June business expectations index. Forecast 96.3 versus 97.3 Siemens Media summit with CEO Loescher, London (day 1 of 2) GREECE Coca-Cola HBC AGM Terna Energy AGM ITALY Review of S&P/Mib index SWITZERLAND Swiss govt June economic forecast Swiss KOF spring economic forecast EASTERN EUROPE Hungary Central bank to set interest rates Conference on euro (1130 GMT, Czech central bank governor Tuma, Slovak central bank governor Sramko to attend) EUROPEAN UNION/EURO ZONE Euro zone provisional June manufacturing PMIs. Forecast 50.2 versus 50.6 Euro zone provisional June services PMI. Forecast 50.5 versus 50.6 Euro zone provisional June composite PMI. Forecast 50.7 versus 51.1 EU rules on proposed acquisition by E.ON of Endesa Europa, Enel's Viesgo EU rules on acquisition by Rewe of ADEG stake increase
TFN.newsdesk@thomson.com jro/vsr/pvi/jro COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved.
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Euro Hit by Ifo, PMIs, Dollar Looks Ahead to Fed
By Reuters
The euro was hit on Monday by contraction in the euro zone's manufacturing and service sectors, while the dollar benefited as some investors bet on a hawkish
The euro fell versus the yen, over a yen below the 11-month struck on Friday.
The dollar rose against the Japanese currency.
Data Dent
The euro zone services PMI, which covers companies from cafes to banks, fell to 49.5 in June, while its manufacturing equivalent hit 49.1 -- with both indices slipping into contraction territory below the 50.0 watermark.
At the same time, the German Ifo business climate index fell more than expected to 101.3 in June -- its lowest since December 2005.
Ifo's current conditions and expectations indices also came in below consensus.
Although analysts said it was probably too late for the ECB to abandon its plans for a July rate hike to 4.25 percent, they admitted the data further reduced the chances of any follow on tightening.
"The falls are probably not sharp enough to stop the ECB hiking in July. It would take more data on the downside for inflation for them to wait. But the data today will cause some intense debate about rate-setting," said Juergen Michels, economist at Citi.
Currency markets paid little attention to the oil price, which rose despite Saudi Arabia promising to pump more oil.
Copyright 2008 Reuters.
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The euro was hit on Monday by contraction in the euro zone's manufacturing and service sectors, while the dollar benefited as some investors bet on a hawkish
The euro fell versus the yen, over a yen below the 11-month struck on Friday.
The dollar rose against the Japanese currency.
Data Dent
The euro zone services PMI, which covers companies from cafes to banks, fell to 49.5 in June, while its manufacturing equivalent hit 49.1 -- with both indices slipping into contraction territory below the 50.0 watermark.
At the same time, the German Ifo business climate index fell more than expected to 101.3 in June -- its lowest since December 2005.
Ifo's current conditions and expectations indices also came in below consensus.
Although analysts said it was probably too late for the ECB to abandon its plans for a July rate hike to 4.25 percent, they admitted the data further reduced the chances of any follow on tightening.
"The falls are probably not sharp enough to stop the ECB hiking in July. It would take more data on the downside for inflation for them to wait. But the data today will cause some intense debate about rate-setting," said Juergen Michels, economist at Citi.
Currency markets paid little attention to the oil price, which rose despite Saudi Arabia promising to pump more oil.
Copyright 2008 Reuters.
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Tokyo, Hong Kong drop for 3rd straight session
Japanese and Hong Kong indexes declined for a third straight session on Monday, with exporters such as Toyota Motor Corp. reacting to a strengthened yen in Tokyo, while China Petroleum & Chemical Corp. retreated in Hong Kong on a rebound in crude -oil prices.
The Nikkei 225 Average lost 1.2% to 13,779.81, on top of the 1.3% drop Friday, and the broader Topix index gave up 1.2% to 1,341.14.
In Hong Kong, the Hang Seng Index fell 1.1% to 22,504.96, after slipping 0.2% in the previous session, while the Hang Seng China Enterprises Index shed 1.6% to 12,142.47.
"The fuel price increase in China has been a disappointment to local investors. But on the other hand, the market's losses could narrow later in the day as the mainland markets seem to be more stable," said Conita Hung, head of equity markets at Delta Asia Financial Group in Hong Kong.
China's Shanghai Composite, which jumped 3% Friday on oil retailers after Beijing allowed the companies to raise prices of motor fuels by as much as 18%, surrendered some of those gains. The benchmark index, which has lost more than 46% so far in 2008, was recently down 1.5% at 2,788.47.
Hung said reports that Chinese stock market regulators were making efforts to stabilize the mainland stock markets, and likely buying activity by institutional investors in Hong Kong to shore up the value of their portfolios by the end of June, could provide support to the Hang Seng Index in the near-term.
She was referring to a Xinhua news service report that the Chinese stock market regulator, China Securities Regulatory Commission, planned to control the pace at which listed companies raise funds and clamp down on market rumors to bring stability to a market that ranks among the worst performers in Asia in 2008 to date.
Elsewhere, South Korea's Kospi shed 1.1% to 1,712.08 and Australia's S&P/ASX 200 lost 0.9% to 5,241.90, while New Zealand's NZX 50 index slipped 0.4% to 3,270.34. Singapore's Straits Times Index declined 0.9% to 2,975.89 and Taiwan's Weighted index fell 0.5% to 7,864.93.
Taken From : http://www.marketwatch.com
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The Nikkei 225 Average lost 1.2% to 13,779.81, on top of the 1.3% drop Friday, and the broader Topix index gave up 1.2% to 1,341.14.
In Hong Kong, the Hang Seng Index fell 1.1% to 22,504.96, after slipping 0.2% in the previous session, while the Hang Seng China Enterprises Index shed 1.6% to 12,142.47.
"The fuel price increase in China has been a disappointment to local investors. But on the other hand, the market's losses could narrow later in the day as the mainland markets seem to be more stable," said Conita Hung, head of equity markets at Delta Asia Financial Group in Hong Kong.
China's Shanghai Composite, which jumped 3% Friday on oil retailers after Beijing allowed the companies to raise prices of motor fuels by as much as 18%, surrendered some of those gains. The benchmark index, which has lost more than 46% so far in 2008, was recently down 1.5% at 2,788.47.
Hung said reports that Chinese stock market regulators were making efforts to stabilize the mainland stock markets, and likely buying activity by institutional investors in Hong Kong to shore up the value of their portfolios by the end of June, could provide support to the Hang Seng Index in the near-term.
She was referring to a Xinhua news service report that the Chinese stock market regulator, China Securities Regulatory Commission, planned to control the pace at which listed companies raise funds and clamp down on market rumors to bring stability to a market that ranks among the worst performers in Asia in 2008 to date.
Elsewhere, South Korea's Kospi shed 1.1% to 1,712.08 and Australia's S&P/ASX 200 lost 0.9% to 5,241.90, while New Zealand's NZX 50 index slipped 0.4% to 3,270.34. Singapore's Straits Times Index declined 0.9% to 2,975.89 and Taiwan's Weighted index fell 0.5% to 7,864.93.
Taken From : http://www.marketwatch.com
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U.K. House Prices Drop the Most This Year, Rightmove Says
By Svenja O'Donnell
U.K. house prices declined by the most this year in June as buyers shunned the market, deepening Britain's property slump, Rightmove Plc said.
The average asking price for a home dropped 1.2 percent from May to 239,564 pounds ($473,000), Britain's most-used property Web site said in a statement today. Prices in London declined 1.4 percent. On the year, the cost of a U.K. home rose 0.1 percent.
``New sellers are now taking some proactive steps to price more realistically from the outset, to attract increasingly hard-pressed buyers,'' Miles Shipside, commercial director of Rightmove, said in a statement.
HBOS Plc, the U.K.'s biggest mortgage lender, predicted last week that house prices will fall as much as 9 percent this year, raising loan defaults, and Bank of England Deputy Governor John Gieve said the drop is hurting consumer confidence. The downturn has deepened after the worldwide jump in credit costs forced banks to curb lending and make mortgages more expensive.
The ratio of available properties to potential buyers doubled on the year, reaching 15 to one, the report showed. Home values fell on the month in every region except the North, the West Midlands, and Wales. Properties in the South East led declines, falling 2.4 percent.
In the capital, Hounslow, near Heathrow airport, led the drop, falling 4.4 percent. Only five out of 32 areas in London rose, with the biggest gain in Islington.
`Stretched' Affordability
The declines ``should go some way to helping buyers whose affordability is being stretched still further by rising inflation and mortgage rates,'' Shipside said.
Record oil and food prices, falling house prices and a dearth of credit are pushing the U.K. economy toward a recession. Gieve said on June 19 that house prices have now dropped 7 percent from their peak and will fall further, threatening consumer sentiment.
Consumer confidence fell to the lowest level since Margaret Thatcher was ousted as prime minister in 1990, a GfK NOP survey showed on May 30.
Bank of England Governor Mervyn King said on June 18 that curbing inflation will require economic growth to slow and living standards to drop. King wrote a letter of explanation to the government last week after consumer-price increases exceeded the 3 percent limit in May. He predicted inflation may exceed 4 percent this year.
The central bank has kept its benchmark interest rate on hold after reducing it to 5 percent in April, the third cut since December. JPMorgan Chase & Co. economists forecast last week that the next move will be an increase in August.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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U.K. house prices declined by the most this year in June as buyers shunned the market, deepening Britain's property slump, Rightmove Plc said.
The average asking price for a home dropped 1.2 percent from May to 239,564 pounds ($473,000), Britain's most-used property Web site said in a statement today. Prices in London declined 1.4 percent. On the year, the cost of a U.K. home rose 0.1 percent.
``New sellers are now taking some proactive steps to price more realistically from the outset, to attract increasingly hard-pressed buyers,'' Miles Shipside, commercial director of Rightmove, said in a statement.
HBOS Plc, the U.K.'s biggest mortgage lender, predicted last week that house prices will fall as much as 9 percent this year, raising loan defaults, and Bank of England Deputy Governor John Gieve said the drop is hurting consumer confidence. The downturn has deepened after the worldwide jump in credit costs forced banks to curb lending and make mortgages more expensive.
The ratio of available properties to potential buyers doubled on the year, reaching 15 to one, the report showed. Home values fell on the month in every region except the North, the West Midlands, and Wales. Properties in the South East led declines, falling 2.4 percent.
In the capital, Hounslow, near Heathrow airport, led the drop, falling 4.4 percent. Only five out of 32 areas in London rose, with the biggest gain in Islington.
`Stretched' Affordability
The declines ``should go some way to helping buyers whose affordability is being stretched still further by rising inflation and mortgage rates,'' Shipside said.
Record oil and food prices, falling house prices and a dearth of credit are pushing the U.K. economy toward a recession. Gieve said on June 19 that house prices have now dropped 7 percent from their peak and will fall further, threatening consumer sentiment.
Consumer confidence fell to the lowest level since Margaret Thatcher was ousted as prime minister in 1990, a GfK NOP survey showed on May 30.
Bank of England Governor Mervyn King said on June 18 that curbing inflation will require economic growth to slow and living standards to drop. King wrote a letter of explanation to the government last week after consumer-price increases exceeded the 3 percent limit in May. He predicted inflation may exceed 4 percent this year.
The central bank has kept its benchmark interest rate on hold after reducing it to 5 percent in April, the third cut since December. JPMorgan Chase & Co. economists forecast last week that the next move will be an increase in August.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Gold Rallies in Asia as Dollar Near Two-Week Low Against Euro
By Feiwen Rong
Gold rose in Asia for the seventh day as the dollar traded near a two-week low against the euro, boosting the appeal of the metal as an alternative investment.
Bullion, headed for its longest winning streak in almost 19 months, rose as traders increased bets the Federal Reserve will delay increasing interest rates to prevent further credit-market writedowns. U.S. reports tomorrow may show falling house prices are eroding confidence among consumers. Crude oil also climbed to more than $135 a barrel, boosting the appeal of the precious metal as a hedge against inflation.
Investors noted that the euro is trading above $1.56 against the U.S. dollar again, said William Kwan, Singapore-based bullion director at Gold Capital Management. Also, inflation in some Asian nations ``is getting a bit out of hand and this is a very bullish factor for gold'' as an inflation hedge, he said.
Bullion for immediate delivery was up 0.3 percent at $905.24 an ounce at 11:15 a.m. in Singapore from $902.30 in New York on June 20. Gold rose to as high as $907.84 an ounce on June 20 when the euro rallied above $1.56 for the first time since June 10. Silver was up 0.4 percent at $17.4375 an ounce at the same time.
Gold has gained 8.6 percent this year while the dollar has fallen by 6.6 percent against the euro. The dollar traded at $1.5612 against the euro at 11:15 a.m. in Singapore, from $1.5606 in New York on June 20.
The dollar bought 107.28 yen, close to the weakest level since June 12, from 107.33 late last week. Crude oil futures advanced 0.9 percent to $135.78 a barrel.
A S&P/Case-Shiller report tomorrow may show home prices in 20 U.S. metropolitan areas dropped 15.9 percent in April from a year earlier, the most since records were first published in 2001, a Bloomberg News survey of economists shows. The Conference Board's consumer confidence index probably fell to 56.4 in June, the lowest since October 1992, from 57.2 in May, according to a separate survey.
Gold for August delivery gained 0.4 percent to $907.30 an ounce in after-hours electronic trading on Comex at 10:15 a.m. Singapore time.
Gold for April 2009 delivery was little changed at 3,149 yen a gram ($913 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break.
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Gold rose in Asia for the seventh day as the dollar traded near a two-week low against the euro, boosting the appeal of the metal as an alternative investment.
Bullion, headed for its longest winning streak in almost 19 months, rose as traders increased bets the Federal Reserve will delay increasing interest rates to prevent further credit-market writedowns. U.S. reports tomorrow may show falling house prices are eroding confidence among consumers. Crude oil also climbed to more than $135 a barrel, boosting the appeal of the precious metal as a hedge against inflation.
Investors noted that the euro is trading above $1.56 against the U.S. dollar again, said William Kwan, Singapore-based bullion director at Gold Capital Management. Also, inflation in some Asian nations ``is getting a bit out of hand and this is a very bullish factor for gold'' as an inflation hedge, he said.
Bullion for immediate delivery was up 0.3 percent at $905.24 an ounce at 11:15 a.m. in Singapore from $902.30 in New York on June 20. Gold rose to as high as $907.84 an ounce on June 20 when the euro rallied above $1.56 for the first time since June 10. Silver was up 0.4 percent at $17.4375 an ounce at the same time.
Gold has gained 8.6 percent this year while the dollar has fallen by 6.6 percent against the euro. The dollar traded at $1.5612 against the euro at 11:15 a.m. in Singapore, from $1.5606 in New York on June 20.
The dollar bought 107.28 yen, close to the weakest level since June 12, from 107.33 late last week. Crude oil futures advanced 0.9 percent to $135.78 a barrel.
A S&P/Case-Shiller report tomorrow may show home prices in 20 U.S. metropolitan areas dropped 15.9 percent in April from a year earlier, the most since records were first published in 2001, a Bloomberg News survey of economists shows. The Conference Board's consumer confidence index probably fell to 56.4 in June, the lowest since October 1992, from 57.2 in May, according to a separate survey.
Gold for August delivery gained 0.4 percent to $907.30 an ounce in after-hours electronic trading on Comex at 10:15 a.m. Singapore time.
Gold for April 2009 delivery was little changed at 3,149 yen a gram ($913 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break.
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Dollar Trades Near 2-Week Low Versus Euro Before U.S. Reports
By Kosuke Goto and Stanley White
The dollar traded near a two-week low against the euro on speculation U.S. reports tomorrow will show falling house prices are eroding confidence among consumers.
The U.S. currency approached a one-week low versus the yen as traders raised bets that the Federal Reserve will delay increasing interest rates to prevent further credit-market writedowns. The British pound fell against the euro after an industry report showed U.K. house prices declined by the most this year in June.
``Weaker data will push down the dollar further, raising concern about the spread of credit losses,'' said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``Weak indicators make the Fed's job far more difficult amid inflation worries.''
The dollar traded at $1.5602 against the euro at 12:02 p.m. in Tokyo near the lowest level since June 10, compared with $1.5606 in New York on June 20. The dollar bought 107.34 yen, close to the weakest level since June 12, from 107.33 late last week. The euro traded at 167.45 yen from 167.54 yen.
The U.S. currency may move between $1.5550 and $1.5670 a euro, and 106.80 yen and 107.80 yen today, Saito forecast.
The British pound slipped to 79.05 pence per euro from 78.98 pence on June 20, and to $1.9751 against the dollar from $1.9761, after Rightmove Plc said the average asking price for a U.K. home dropped 1.2 percent from May as buyers shunned the market, deepening Britain's property slump.
Yuan, Won
China's yuan rose to 6.8680 per dollar, the strongest since a dollar link was scrapped in 2005, from 6.8801, as the central bank seeks tougher policies to combat inflation. The South Korean won, the second-worst performer this year of the 10 most- active currencies in Asia outside Japan, fell for a second day to 1,031.55 per dollar on speculation overseas investors will sell the currency as they reduce holdings of the nation's assets.
The Australian and New Zealand dollars rose as the price of commodities that the nations export increased, supporting the outlook for the two economies. Australia's currency advanced to 95.48 U.S. cents from 95.33 cents on June 20. The New Zealand dollar rose to 76.27 U.S. cents from 76.11 cents.
The U.S. currency has risen 1.1 percent against the euro and 7.6 percent versus the yen this quarter, as Fed Chairman Ben S. Bernanke said earlier this month economic risks had faded, prompting investors to bet the central bank will raise interest rates later this year after seven decreases since September.
Housing, Confidence
A S&P/Case-Shiller report tomorrow will show home prices in 20 U.S. metropolitan areas dropped 15.9 percent in April from a year earlier, the most since records were first published in 2001, a Bloomberg News survey of economists shows. The Conference Board consumer confidence index probably fell to 56.4 in June, the lowest since October 1992, from 57.2 in May, according to a separate survey.
Futures on the Chicago Board of Trade showed a 10 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks by a quarter-percentage point on June 25, compared with 22 percent odds a week ago.
The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp.
The currency stayed below its 200-day moving average for a second day on June 20, signaling further losses, said Tokyo- based Fujii. The dollar may now fall to the next level of so- called support around 105.72 yen, where it will meet a trend- line connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, she said.
Futures Bets
Futures traders decreased their bets that the yen will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on June 20.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 5,857 on June 17, the least since Jan. 4, compared with net longs of 7,716 a week earlier. The number is sometimes seen as a contrary indicator.
The yen was little changed after Japanese manufacturers said they are pessimistic on surging commodity costs and the risk of a U.S. recession, according to a survey by the Cabinet Office and Finance Ministry released today.
Gains in the euro may be limited by speculation an industry report today will show German business confidence fell in June as record oil prices and the prospect of higher interest rates dimmed the outlook for growth in Europe's largest economy.
The Ifo institute will say its business climate index declined to 102.5 from 103.5 in May, according to the median of 42 forecasts in a Bloomberg News survey. Ifo will release the report, based on a survey of 7,000 executives, in Munich today.
``Should data due today prove to be weaker ones, that will highly likely lead to a decline in the euro on dwindling expectations of the ECB's rate hikes,'' Tohru Sasaki and Junya Tanase, currency strategists in Tokyo at JPMorgan Chase & Co., wrote in a research note today.
To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net;
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The dollar traded near a two-week low against the euro on speculation U.S. reports tomorrow will show falling house prices are eroding confidence among consumers.
The U.S. currency approached a one-week low versus the yen as traders raised bets that the Federal Reserve will delay increasing interest rates to prevent further credit-market writedowns. The British pound fell against the euro after an industry report showed U.K. house prices declined by the most this year in June.
``Weaker data will push down the dollar further, raising concern about the spread of credit losses,'' said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``Weak indicators make the Fed's job far more difficult amid inflation worries.''
The dollar traded at $1.5602 against the euro at 12:02 p.m. in Tokyo near the lowest level since June 10, compared with $1.5606 in New York on June 20. The dollar bought 107.34 yen, close to the weakest level since June 12, from 107.33 late last week. The euro traded at 167.45 yen from 167.54 yen.
The U.S. currency may move between $1.5550 and $1.5670 a euro, and 106.80 yen and 107.80 yen today, Saito forecast.
The British pound slipped to 79.05 pence per euro from 78.98 pence on June 20, and to $1.9751 against the dollar from $1.9761, after Rightmove Plc said the average asking price for a U.K. home dropped 1.2 percent from May as buyers shunned the market, deepening Britain's property slump.
Yuan, Won
China's yuan rose to 6.8680 per dollar, the strongest since a dollar link was scrapped in 2005, from 6.8801, as the central bank seeks tougher policies to combat inflation. The South Korean won, the second-worst performer this year of the 10 most- active currencies in Asia outside Japan, fell for a second day to 1,031.55 per dollar on speculation overseas investors will sell the currency as they reduce holdings of the nation's assets.
The Australian and New Zealand dollars rose as the price of commodities that the nations export increased, supporting the outlook for the two economies. Australia's currency advanced to 95.48 U.S. cents from 95.33 cents on June 20. The New Zealand dollar rose to 76.27 U.S. cents from 76.11 cents.
The U.S. currency has risen 1.1 percent against the euro and 7.6 percent versus the yen this quarter, as Fed Chairman Ben S. Bernanke said earlier this month economic risks had faded, prompting investors to bet the central bank will raise interest rates later this year after seven decreases since September.
Housing, Confidence
A S&P/Case-Shiller report tomorrow will show home prices in 20 U.S. metropolitan areas dropped 15.9 percent in April from a year earlier, the most since records were first published in 2001, a Bloomberg News survey of economists shows. The Conference Board consumer confidence index probably fell to 56.4 in June, the lowest since October 1992, from 57.2 in May, according to a separate survey.
Futures on the Chicago Board of Trade showed a 10 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks by a quarter-percentage point on June 25, compared with 22 percent odds a week ago.
The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp.
The currency stayed below its 200-day moving average for a second day on June 20, signaling further losses, said Tokyo- based Fujii. The dollar may now fall to the next level of so- called support around 105.72 yen, where it will meet a trend- line connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, she said.
Futures Bets
Futures traders decreased their bets that the yen will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on June 20.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 5,857 on June 17, the least since Jan. 4, compared with net longs of 7,716 a week earlier. The number is sometimes seen as a contrary indicator.
The yen was little changed after Japanese manufacturers said they are pessimistic on surging commodity costs and the risk of a U.S. recession, according to a survey by the Cabinet Office and Finance Ministry released today.
Gains in the euro may be limited by speculation an industry report today will show German business confidence fell in June as record oil prices and the prospect of higher interest rates dimmed the outlook for growth in Europe's largest economy.
The Ifo institute will say its business climate index declined to 102.5 from 103.5 in May, according to the median of 42 forecasts in a Bloomberg News survey. Ifo will release the report, based on a survey of 7,000 executives, in Munich today.
``Should data due today prove to be weaker ones, that will highly likely lead to a decline in the euro on dwindling expectations of the ECB's rate hikes,'' Tohru Sasaki and Junya Tanase, currency strategists in Tokyo at JPMorgan Chase & Co., wrote in a research note today.
To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net;
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Corn May Rise as Floods Threaten U.S. Crop; Soybeans May Fall
By Jeff Wilson
Corn may rise on expectations that Midwest floods will cut yields of the biggest U.S. crop. Soybeans may fall as drier weather should accelerate seeding.
Seventeen of 33 traders, advisers and grain merchants surveyed on June 20 from Beijing to Chicago expected corn to rise; 19 of 35 respondents said to sell soybeans.
Corn fell 1.2 percent to $7.555 a bushel in Chicago last week, after reaching a record $7.915 on June 16. Soybeans dropped 3.3 percent to $15.09 a bushel, after rising 7 percent a week earlier. The price is up 80 percent in the past year, reaching a record $15.865 on March 3.
Last week's declines in corn and soybeans surprised most respondents surveyed June 13. Since 2004, the surveys have been right 61 percent of the time on corn, 64 percent on soybeans.
Weekly results: Bullish on corn: 17 Bullish on soybeans: 19 Bearish on corn: 16 Bearish on soybeans: 16
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.
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Corn may rise on expectations that Midwest floods will cut yields of the biggest U.S. crop. Soybeans may fall as drier weather should accelerate seeding.
Seventeen of 33 traders, advisers and grain merchants surveyed on June 20 from Beijing to Chicago expected corn to rise; 19 of 35 respondents said to sell soybeans.
Corn fell 1.2 percent to $7.555 a bushel in Chicago last week, after reaching a record $7.915 on June 16. Soybeans dropped 3.3 percent to $15.09 a bushel, after rising 7 percent a week earlier. The price is up 80 percent in the past year, reaching a record $15.865 on March 3.
Last week's declines in corn and soybeans surprised most respondents surveyed June 13. Since 2004, the surveys have been right 61 percent of the time on corn, 64 percent on soybeans.
Weekly results: Bullish on corn: 17 Bullish on soybeans: 19 Bearish on corn: 16 Bearish on soybeans: 16
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.
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Dollar May Fall to 105.72 Yen, Bank of America's Fujii Says
By Kosuke Goto
The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp.
The currency has stayed below its 200-day moving average after rising above it from June 13 to June 18 for the first time since August, signaling further losses. The dollar may now fall to the next level of so-called support around 105.72 yen, where an ascending trend-line, connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, extends to, she said.
``Technically, it seems the dollar-yen is heading for a weaker-dollar and a stronger-yen direction,'' Tokyo-based Fujii, at the second-largest U.S. bank, wrote in a research note today.
The U.S. currency traded at 107.36 yen as of 9:55 a.m. in Tokyo, close to the weakest level since June 12, from 107.33 in New York on June 20. The dollar's 200-day moving average was at 108.08 yen.
Traders often look for signs of a currency's short-term trend by viewing the five-day moving average and aim to forecast longer-term trends with the 21-, 65- and 200-day moving averages.
They use moving averages to identify levels of support, where buying is expected, or resistance, where selling is predicted.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp.
The currency has stayed below its 200-day moving average after rising above it from June 13 to June 18 for the first time since August, signaling further losses. The dollar may now fall to the next level of so-called support around 105.72 yen, where an ascending trend-line, connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, extends to, she said.
``Technically, it seems the dollar-yen is heading for a weaker-dollar and a stronger-yen direction,'' Tokyo-based Fujii, at the second-largest U.S. bank, wrote in a research note today.
The U.S. currency traded at 107.36 yen as of 9:55 a.m. in Tokyo, close to the weakest level since June 12, from 107.33 in New York on June 20. The dollar's 200-day moving average was at 108.08 yen.
Traders often look for signs of a currency's short-term trend by viewing the five-day moving average and aim to forecast longer-term trends with the 21-, 65- and 200-day moving averages.
They use moving averages to identify levels of support, where buying is expected, or resistance, where selling is predicted.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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Asian Stocks Fall to a Three-Month Low on Oil; Toyota Declines
By Patrick Rial and Kyung Bok Cho
June 23 (Bloomberg) -- Asian stocks slumped to the lowest in three months after a rebound in oil prices and renewed predictions of asset writedowns rekindled concern economic growth will slow.
Bridgestone Corp., the world's largest tiremaker by sales, dropped for a third day. Australia & New Zealand Banking Group Ltd. led financials lower as Citigroup Inc. prepared to cut jobs and UBS AG forecast the U.S. bank will write down more assets. Toyota Motor Corp. tumbled to the lowest in a month as the dollar weakened and the U.S. auto market showed further signs of deteriorating.
``People's fears about inflation are materializing as commodity prices rise,'' said Yang Jeung Won, chief investment officer in Seoul at Samsung Investment Trust Management Co., which oversees the equivalent of $7.8 billion in equities. ``Financials are going to teeter on shaky ground for a while to come.''
The MSCI Asia Pacific Index lost 1.1 percent to 138.52 as of 11:30 a.m. in Tokyo, the lowest since March 24. Japan's Nikkei 225 Stock Average fell 1.2 percent to 13,779.81. Indexes declined throughout the region, except in Vietnam.
More than $8 trillion in stock market value has been wiped out this year as a 41 percent jump in oil raises costs for consumers and businesses. Higher commodities prices are also hampering central bank efforts to keep interest rates low as financial institutions' access to credit dries up.
Valad Property Group led Australian shares lower after the company cut its earnings forecast amid the U.S. housing recession. Valad joins Mirvac Group and APN/UKA European Retail Property Group, who last week cut forecasts in the wake of the U.S. subprime rout.
More than $398 billion in asset writedowns and credit losses stem from the collapse of the U.S. subprime-mortgage market, according to data compiled by Bloomberg.
Citigroup Job Cuts
Oil rebounded from the lowest in a week, climbing 2 percent to $134.62 in New York on June 20 and recently traded at $135.70. The weakening dollar has spurred a flight to commodities and other assets that will retain their value in an inflationary environment.
Benchmarks in the U.S. and Europe fell to the lowest in three months on June 20, dragged down by the gain in oil and after analysts predicted banks will post more credit-market losses.
Australia & New Zealand Banking declined 1.9 percent to A$18.43. Mitsubishi UFJ Financial Group Inc., the biggest publicly traded lender in Japan, lost 1.5 percent to 990 yen. T&D Holdings Inc., the nation's largest publicly traded life insurer, dropped 6 percent to 6,590 yen.
Citigroup may add another $8.7 billion in asset writedowns this quarter to the $42 billion it has already announced, according to UBS AG. Citigroup may also begin a round of previously announced job cuts this week, a person familiar with the situation said.
Elsewhere, Lehman Brothers Holdings Inc. predicted UBS and Deutsche Bank AG could produce a total of $8.5 billion in asset write-offs for the second quarter.
Banks, Bridgestone
``The resurgence of risks related to the credit crunch is the most important factor in the market,'' Tomochika Kitaoka, a Tokyo- based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.
Bridgestone, which loses almost $250 million in operating profit for every $10 gain in the price of oil according to Nikko Citigroup Ltd., declined 3.1 percent to 1,801 yen. Bridgestone expects net income to fall 32 percent this fiscal year on surging costs for petroleum-based materials and rubber. About 60 percent of materials used in tires are oil based, according to the Japan Automobile Tyre Manufacturers Association.
LG Electronics Inc., Asia's second-largest mobile-phone maker, dropped 2.7 percent to 124,500 won. Mitsui Chemicals Inc., Japan's largest chemical maker by sales, slumped 3.3 percent to 566 yen.
Tumbling Sales
Toyota, the world's largest automaker by value, led a drop by automakers, falling 2.4 percent to 5,280 yen. Denso Corp., Japan's largest auto-parts maker, slid 3.6 percent to 3,750 yen. Hyundai Motor Co., South Korea's largest automaker, fell 2.1 percent to 76,600 won.
Prices in the U.S. for used large pickups and sports utility vehicles tumbled at least 21 percent in May, according to Atlanta- based Manheim Consulting estimates, lowering the attractiveness of new vehicles as well. Toyota generates over half of its profit from the U.S.
Auto shares also slumped after Standard & Poor's said it may lower credit ratings on the three largest U.S. auto producers due to the effect higher fuel prices are having on the industry.
The dollar dropped to as low as 107.11 against the yen in trading today, a level not seen since June 11. The weaker dollar reduces the value of sales generated in the world's largest economy.
Valad, an Australian real estate investment trust, lost 4.2 percent to 80 cents. The company cut its earnings forecast for this quarter by 11 percent, citing ``challenging'' conditions created by the U.S. subprime crisis.
Perpetual Ltd., an Australian fund management company, posted the biggest decline among the MSCI Asian index's 990 members, plunging 11 percent to A$42.50. Its rating was downgraded to ``underweight'' from ``equal-weight'' by Morgan Stanley.
To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net. Kyung Bok Cho in Seoul at kcho7@bloomberg.net
Read more...
Inflation: Enemy Number Two
By Bill Bonner
All bubbles end in busts...and the perp walk.
Two hedge fund managers were arrested yesterday. It was claimed that the two Bear Stearns boys deceived customers.
Oh stop it! We're going to break a rib laughing....
Deceived customers? What is a hedge fund anyway? It's a way for Wall Street to take money from investors who can't do math. There's no deception required. In fact, the funds' names – High Grade Structured Credit Strategies Fund and High Grade Structured Credit Strategies Enhanced Leverage Fund – told investors all they needed to know. They practically screamed out: 'SAY GOODBYE TO YOUR MONEY...IF NOT NOW, LATER.'
So, imagine that you have money invested in the fund that advertises itself as offering "enhanced leverage" from "structured credit strategies." Now, imagine that you read in the paper that houses are going down in price...and that subprime mortgages are going belly up. Couldn't you put two and two together? Well...duh... but that's just it, people who invest in hedge funds can't do math. The managers didn't have to deceive them. They just had to keep their mouths shut...which they did.
But this is the way bubbles end...in losses...in anger...and in jail. The losers always think someone else is to blame. It's not long before they have a CEO, a speculator, or a fund manager mounting the scaffold.
Let's leave that thought on the shelf and get on with our reckoning.
Oil lost $4 last Thursday. The Dow rose 34 points. The euro slipped a little. No biggie.
But look at this: "Inflation now enemy #1 for the Fed," says the Wall Street Journal. This sort of thinking sent the price of gold up $10 yesterday; it's now back over the $900 level. And one of the key fellows at Schroder Investment Management told a crowd in Hong Kong that he thought gold could go to $5,000 before this run of inflation is over.
$5,000? Who knows? But, the poor saps at the WSJ are missing the point. No central bank keeps rates 2.2% below the level of consumer price inflation if it is really fighting inflation. Enemy Numero Ono? What are they thinking? Why are all the Fed's guns facing deflation, not inflation? Sure, there's been some blabbing about turning around...about switching sides in the war between inflation and deflation. But so far, it's just talk.
Talk is cheap. It's action that is dear. And the action the Fed needs to take – raising rates – will be so potentially costly for the lame U.S. economy that Bernanke and Co. are afraid to do it. They're hoping inflation will go away so they can continue the battle against the slump, without having to worry about their unprotected flanks. Most likely, they will make a gesture towards raising rates – perhaps a quarter of a point. But then, when the mob starts howling for his head, Ben Bernanke will drop them again.
Henry Paulson has been gurgling about a strong dollar. Yesterday, he gave voice to a contradictory notion – that the Chinese should let their currency rise (and the dollar fall).
The problem for the Chinese is that they have too many dollars, furnished courtesy of the Fed, while Americans have too few. In the United States, the average household barely has enough dollars to fill its gas tank and pay its bills. But the Middle Kingdom is flooded with them.
If you don't watch out, you're going to drown in them, said Paulson – or words to that effect. China's economy continues floating higher and higher. But all these extra dollars are pushing up wages and prices as well as the economy.
And then, wouldn't you know it, Chinese export prices go up too. And pretty soon, prices are up all over the world.
Which is why the WSJ thinks it's the top problem for the Fed too. Of course, it is a problem. But with the official CPI at 4.2% it's not enemy number one. Maybe it's Enemy Number Two. Most likely, it will stay there for a while longer. We still haven't seen a big drop in commercial property...or in consumer spending. Those are probably still ahead...and will give the Fed a reason to continue blasting away at a deflationary slump. Consumer prices will continue to rise, too. Eventually, they will become so high that inflation really does become Enemy Number One.
By that time, the price of gold could be $500 higher.
Bill Bonner
The Daily Reckoning Australia
Read more...
All bubbles end in busts...and the perp walk.
Two hedge fund managers were arrested yesterday. It was claimed that the two Bear Stearns boys deceived customers.
Oh stop it! We're going to break a rib laughing....
Deceived customers? What is a hedge fund anyway? It's a way for Wall Street to take money from investors who can't do math. There's no deception required. In fact, the funds' names – High Grade Structured Credit Strategies Fund and High Grade Structured Credit Strategies Enhanced Leverage Fund – told investors all they needed to know. They practically screamed out: 'SAY GOODBYE TO YOUR MONEY...IF NOT NOW, LATER.'
So, imagine that you have money invested in the fund that advertises itself as offering "enhanced leverage" from "structured credit strategies." Now, imagine that you read in the paper that houses are going down in price...and that subprime mortgages are going belly up. Couldn't you put two and two together? Well...duh... but that's just it, people who invest in hedge funds can't do math. The managers didn't have to deceive them. They just had to keep their mouths shut...which they did.
But this is the way bubbles end...in losses...in anger...and in jail. The losers always think someone else is to blame. It's not long before they have a CEO, a speculator, or a fund manager mounting the scaffold.
Let's leave that thought on the shelf and get on with our reckoning.
Oil lost $4 last Thursday. The Dow rose 34 points. The euro slipped a little. No biggie.
But look at this: "Inflation now enemy #1 for the Fed," says the Wall Street Journal. This sort of thinking sent the price of gold up $10 yesterday; it's now back over the $900 level. And one of the key fellows at Schroder Investment Management told a crowd in Hong Kong that he thought gold could go to $5,000 before this run of inflation is over.
$5,000? Who knows? But, the poor saps at the WSJ are missing the point. No central bank keeps rates 2.2% below the level of consumer price inflation if it is really fighting inflation. Enemy Numero Ono? What are they thinking? Why are all the Fed's guns facing deflation, not inflation? Sure, there's been some blabbing about turning around...about switching sides in the war between inflation and deflation. But so far, it's just talk.
Talk is cheap. It's action that is dear. And the action the Fed needs to take – raising rates – will be so potentially costly for the lame U.S. economy that Bernanke and Co. are afraid to do it. They're hoping inflation will go away so they can continue the battle against the slump, without having to worry about their unprotected flanks. Most likely, they will make a gesture towards raising rates – perhaps a quarter of a point. But then, when the mob starts howling for his head, Ben Bernanke will drop them again.
Henry Paulson has been gurgling about a strong dollar. Yesterday, he gave voice to a contradictory notion – that the Chinese should let their currency rise (and the dollar fall).
The problem for the Chinese is that they have too many dollars, furnished courtesy of the Fed, while Americans have too few. In the United States, the average household barely has enough dollars to fill its gas tank and pay its bills. But the Middle Kingdom is flooded with them.
If you don't watch out, you're going to drown in them, said Paulson – or words to that effect. China's economy continues floating higher and higher. But all these extra dollars are pushing up wages and prices as well as the economy.
And then, wouldn't you know it, Chinese export prices go up too. And pretty soon, prices are up all over the world.
Which is why the WSJ thinks it's the top problem for the Fed too. Of course, it is a problem. But with the official CPI at 4.2% it's not enemy number one. Maybe it's Enemy Number Two. Most likely, it will stay there for a while longer. We still haven't seen a big drop in commercial property...or in consumer spending. Those are probably still ahead...and will give the Fed a reason to continue blasting away at a deflationary slump. Consumer prices will continue to rise, too. Eventually, they will become so high that inflation really does become Enemy Number One.
By that time, the price of gold could be $500 higher.
Bill Bonner
The Daily Reckoning Australia
Read more...
Argentina farmers lift roadblocks
Farmers in Argentina have lifted most of the roadblocks they put in place across the country during a three-month dispute with the government. The cause of the dispute - a sharp increase in taxes on soy and other agricultural exports - is now to be debated by the Argentine Congress. But farmers are poised to resume their protest if no progress is made. The protests caused widespread food shortages, travel chaos and hit the export of agricultural goods. The protesting farmers set up and manned more than 300 roadblocks across the country. Truck drivers, inconvenienced by the farmers' blockades, erected their own barricades. The protests made it impossible on some days to travel around Argentina, stopping materials from reaching factories and hitting tourism, with hotels reporting big losses. Sigh of relief The farmers' decision to end the protest came after President Cristina Fernandez said the contentious export tax increases would be sent to Congress for debate. The BBC's Daniel Schweimler, in Buenos Aires, says most Argentines will now be breathing a deep sigh of relief that the dispute, for now at least, is over. The government says it needs to raise taxes to tackle inflation and improve help for the poor. But some farmers fear Congress will merely rubber stamp the tax policy, and are prepared to resume their protest. | |
Taken From : http://news.bbc.co.uk
Read more...
Saturday, June 21, 2008
Gold Calls Bernanke's Bluff
By Dan Denning • June 20th, 2008 • Related Articles • Filed Under
About the Author
Dan DenningDan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). A specialist in small-cap stocks, Dan draws on his network of global contacts from his base in Melbourne, Australia and pens the small cap newsletter, The Australian Small Cap Investigator. He is also a contributing editor to the Australian resource investing publication Diggers & Drillers.
See All Articles by This Author
* Aquaculture: Soybeans and Corn Under Water
* Farmers Say ‘Rain, Rain Go Away’ Throughout the United States
* Farmers Feel Consumers Blame Them for High Food Costs
* Record Misery Index Sends People Scrambling for Gold
* Why Choose Gold When Real Interest Rates Sink?
Filed Under: The Americas
Tags: bernanke • Gold
Gold and silver are calling Ben Bernanke's bluff this week. Bernanke huffed and he puffed and he bluffed and he bluffed all month long about inflation. But the market realises that with America's housing market mired in the muck, the Fed won't be raising rates to defend the greenback this year.
In the futures market, the odds of a Fed rate rise dropped from 26% last week to 12% this week. The U.S. dollar continues to fall and gold was up US$6.60 in New York trading while silver hit US$17.34. Commodities have spoken. "Liar!"
Is there a big move coming in the precious metals? The Fed's open market committee meets next week to discuss and set the price for America's money. By then, we reckon traders will have a healthy scepticism that the Fed is willing or even able to defend the dollar with higher rates. Gold and silver have been treading water, technically speaking, for a while. Don't be surprised to see new investment demand for precious metals as an inflation hedge.
Once you get people expecting higher prices, it's hard to change their mind. Inflation is like a mental contagion. The Fed should know this. It started the epidemic with lower rates.
This isn't good: "Australia's mortgage arrears rate rose to a record in March as borrowers struggled to make repayments because of rising inflation and higher interest rates, according to Standard & Poor's."
That's from the Age. "Payments more than 30 days late on so-called prime loans increased to 1.45% of mortgages used to secure bonds, from 1.37% in January, S&P said in a report."
It's not a tsunami of defaults yet. But as far as we can tell, many Aussies remain convinced housing prices never go down. Most are unaware that a mortgage bubble is responsible for rising house prices, some the demographic flim-flammery you get from the housing industry.
Is protein about to get more expensive? We haven't covered the flooding in the mid-West of the US because it's in the US, not Australia. But everything affects everything in the globalised world. If US corn production craters because of a lost crop due to the massive spring floods in America's Corn Belt, there will be less corn. Less corn for ethanol. Less corn to feed animals like pigs and cows, which give us hungry humans are protein.
You can substitute wheat and rice for corn. But there's no replacing Iowa. Oil rigs can be rebuilt after cyclones. If you lose an entire year's crop or your farmland goes under water, it might be a good idea to stock up on staples. They're probably going up in price. It shows you just how valuable farmland is as capital.
Dan Denning
The Daily Reckoning Australia
Read more...
About the Author
Dan DenningDan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). A specialist in small-cap stocks, Dan draws on his network of global contacts from his base in Melbourne, Australia and pens the small cap newsletter, The Australian Small Cap Investigator. He is also a contributing editor to the Australian resource investing publication Diggers & Drillers.
See All Articles by This Author
* Aquaculture: Soybeans and Corn Under Water
* Farmers Say ‘Rain, Rain Go Away’ Throughout the United States
* Farmers Feel Consumers Blame Them for High Food Costs
* Record Misery Index Sends People Scrambling for Gold
* Why Choose Gold When Real Interest Rates Sink?
Filed Under: The Americas
Tags: bernanke • Gold
Gold and silver are calling Ben Bernanke's bluff this week. Bernanke huffed and he puffed and he bluffed and he bluffed all month long about inflation. But the market realises that with America's housing market mired in the muck, the Fed won't be raising rates to defend the greenback this year.
In the futures market, the odds of a Fed rate rise dropped from 26% last week to 12% this week. The U.S. dollar continues to fall and gold was up US$6.60 in New York trading while silver hit US$17.34. Commodities have spoken. "Liar!"
Is there a big move coming in the precious metals? The Fed's open market committee meets next week to discuss and set the price for America's money. By then, we reckon traders will have a healthy scepticism that the Fed is willing or even able to defend the dollar with higher rates. Gold and silver have been treading water, technically speaking, for a while. Don't be surprised to see new investment demand for precious metals as an inflation hedge.
Once you get people expecting higher prices, it's hard to change their mind. Inflation is like a mental contagion. The Fed should know this. It started the epidemic with lower rates.
This isn't good: "Australia's mortgage arrears rate rose to a record in March as borrowers struggled to make repayments because of rising inflation and higher interest rates, according to Standard & Poor's."
That's from the Age. "Payments more than 30 days late on so-called prime loans increased to 1.45% of mortgages used to secure bonds, from 1.37% in January, S&P said in a report."
It's not a tsunami of defaults yet. But as far as we can tell, many Aussies remain convinced housing prices never go down. Most are unaware that a mortgage bubble is responsible for rising house prices, some the demographic flim-flammery you get from the housing industry.
Is protein about to get more expensive? We haven't covered the flooding in the mid-West of the US because it's in the US, not Australia. But everything affects everything in the globalised world. If US corn production craters because of a lost crop due to the massive spring floods in America's Corn Belt, there will be less corn. Less corn for ethanol. Less corn to feed animals like pigs and cows, which give us hungry humans are protein.
You can substitute wheat and rice for corn. But there's no replacing Iowa. Oil rigs can be rebuilt after cyclones. If you lose an entire year's crop or your farmland goes under water, it might be a good idea to stock up on staples. They're probably going up in price. It shows you just how valuable farmland is as capital.
Dan Denning
The Daily Reckoning Australia
Read more...
October Surprise? In June?"
by Jon Nadler
Senior Metals Market Analyst
Friday's New York gold was once again range-bound and repeated yesterday's pattern of early gains followed by afternoon declines, although today's focus was a near $3 gain in crude oil following news of an ominous June 2nd Israeli military drill and current threats by Venezuela's Hugo Chavez to suspend oil shipments to the EU. The dollar traded lower most of the day amid newly scaled-back expectations of rate hike action by the Fed next week. It was last seen at 73.05 on the index but had fallen to 1.562 against the euro.
Stocks finished a week that is best forgotten, showing a 221 point loss (worst since March) and the Dow now finds itself flirting dangerously close with the pivotal 11,750 area. The "bright spot" for the day was a fairly decent estimate of US growth put forth by the IMF, which concluded that the U.S. economy has fared well "considering the severity of headwinds it has faced, and that its GDP should gradually improve" to around 2% in 2009 after being "roughly flat" in Q4 of 2008. The question, of course, is what Q2 and Q3 will be tallied up at; flat-to-negative, or starting to pick up?
At the root of such changing Fed punditry sentiment was the jittery week we saw in financials (worst showing in bank stocks in a decade) as well as the forecasts for bank earnings going forward. Merrill sees investors effectively throwing in the proverbial towel when it comes to bank stocks. With capitulation come buying opportunities - normally. A normal year, 2008 has not been thus far. The consensus among analysts therefore, calls for no Fed action next week. Perhaps more Fedspeak will be on tap. In the interim, showing that it is serious about inflation combat, the Mexican central bank sprang a surprise .25 bp rate hike on the markets instead of offering propagandistic jawboning.
The final trading session of the week had gold easing off its intra-day highs in the afternoon hours, and the metal once again came closer to the $900 area after a duo of attempts to take out overhead resistance at $910 on both Thursday and Friday. The precious metal might manage an above $900 close today (it did not achieve it on Thursday afternoon) but is still needs to vault above $945 to regain its stride. Participants focused mainly on crude oil and on geopolitical developments in the absence of data from the economic calendar. OPEC gets to together this weekend and will likely have participants pulling out some large wrenches with which to turn up the flow of crude oil to the world. (The price of black gold was -at last check - up $2.6 at $134.80 per barrel.) This, after weeks or protests, frustration, pleas, and - the latest - a major hike in domestic price by China.
Predictably, Iran's response to the de facto early June Israeli rehearsal of an air attack on its nuclear installations was stern, swift, and laden with a threatening retaliatory tone that included words such as 'heavy blow' to describe its potential actions. Our good friend, Roger Wiegand, sums up the tense situation as follows:
" What lies ahead in this radically changing environment? In our view, the primary news changing event is the forthcoming attack by Israel on Iran. Our European friends have been predicting this for months and we chose to think it might not happen. Now we are about 80-90% certain it will. This event, if it becomes true, will drive energy and precious metals prices to the moon. On the other hand, stock markets could severely crash. The disruptions in global banking and credit markets might receive immeasurable damage; perhaps some of it un-repairable. One analyst says its a partial ploy to keep [President] Bush in office after January based upon the War Powers Emergency Act."
Recall that we alluded to an 'outside' and 'outsized' event as the best (perhaps only) possible driver of another rally by gold to four digits in our last Marketwatch TV interview in May. This is one of those potential events, although we are still nowhere near as confident as Roger is about the percentage of its occurrence probability.
Silver also gave up most of its Friday gains late in the day, and was last seen up 1 cent at $17.33 while platinum recouped some of Thursday's losses with a $10 gain to $2051 and palladium climbed $1 to $470 per ounce. Poor US auto sales estimates drove the noble metals to lower levels during the week. Gold futures closed the week out with a 3.5% gain after losing about 2% last week.
Also from the world of platinum, Johnson Matthey's Platinum Today reports that:
"The Tokyo Commodity Exchange will cooperate with the Tokyo Stock Exchange to develop exchange traded funds (ETFs) and Multi Commodity Exchange will now commence future trading in platinum. Platinum is now actively traded at Tokyo Community Exchange in Japan and New York Commodity Exchange as the metal is increasingly used as a catalytic converter in Japan.
According to reports from Reuters, TOCOM Chairman Masaaki Nangaku believes that the launch of commodities ETFs will have a good impact on developing the sector. Further reports from the Economic Times revealed that Joseph Messey, Chief Executive Officer of the Multi Commodity Exchange MS, said that platinum needed to be added to the offering.
"We were missing the presence of an important metal like platinum and now, since we have received approval, we are looking to start future trading activity soon," he explained.
"With the presence of a precious metal like platinum, investors will now have more opportunities for investment and the industry can hedge their requirements," he added."
Pre-Fed meeting trading floor chatter has begun in earnest and it points to rising expectations that the central bank will leave rates as they are (currently at an 88% probability level) and that it will also push potential rate hikes back a few months as the economic picture sorts itself out in the US. Marketwatch echoes the speculative crowd's latest sentiments and cites a few contrarian factor as well:
"Surging commodity prices and strident warnings from Federal Reserve officials about inflation have some in the market betting that the central bank will increase interest rates as early as this fall, according to closely watched federal funds futures contracts. Yet, five other indicators flatly contradict that outlook, suggesting that the central bank will instead opt to keep borrowing at currently low levels to prevent the ailing U.S. economy from experiencing even more pain.
Analysts point to at least five reasons the Fed won't rush to raise rates: 1) lending rates show the credit crunch continues; 2) the banking system is still fragile; 3) rates hikes in election years are rare; 4) the economy, especially housing, still poses a threat; and 5) flattening the yield curve could pressure bank profits.
Falling home prices and continuing bank losses, along with market rates for short-term loans, are likely to hold back the Fed. That's despite the message telegraphed by the bond market's favorite interest-rate indicator: fed funds futures, which are used to determine market odds of a move in interest rates by the Federal Reserve."
The first three days of next week will provide enough fuel for trading action of all kinds. Aside from the Fed meeting, we expect position statements from OPEC and from the ECB. Geopolitics -largely absent from the scene since December- are back on the stage. Summer begins tonight. Will it be a long, hot summer?
Taken From : http://www.ibtimes.com
Read more...
Senior Metals Market Analyst
Friday's New York gold was once again range-bound and repeated yesterday's pattern of early gains followed by afternoon declines, although today's focus was a near $3 gain in crude oil following news of an ominous June 2nd Israeli military drill and current threats by Venezuela's Hugo Chavez to suspend oil shipments to the EU. The dollar traded lower most of the day amid newly scaled-back expectations of rate hike action by the Fed next week. It was last seen at 73.05 on the index but had fallen to 1.562 against the euro.
Stocks finished a week that is best forgotten, showing a 221 point loss (worst since March) and the Dow now finds itself flirting dangerously close with the pivotal 11,750 area. The "bright spot" for the day was a fairly decent estimate of US growth put forth by the IMF, which concluded that the U.S. economy has fared well "considering the severity of headwinds it has faced, and that its GDP should gradually improve" to around 2% in 2009 after being "roughly flat" in Q4 of 2008. The question, of course, is what Q2 and Q3 will be tallied up at; flat-to-negative, or starting to pick up?
At the root of such changing Fed punditry sentiment was the jittery week we saw in financials (worst showing in bank stocks in a decade) as well as the forecasts for bank earnings going forward. Merrill sees investors effectively throwing in the proverbial towel when it comes to bank stocks. With capitulation come buying opportunities - normally. A normal year, 2008 has not been thus far. The consensus among analysts therefore, calls for no Fed action next week. Perhaps more Fedspeak will be on tap. In the interim, showing that it is serious about inflation combat, the Mexican central bank sprang a surprise .25 bp rate hike on the markets instead of offering propagandistic jawboning.
The final trading session of the week had gold easing off its intra-day highs in the afternoon hours, and the metal once again came closer to the $900 area after a duo of attempts to take out overhead resistance at $910 on both Thursday and Friday. The precious metal might manage an above $900 close today (it did not achieve it on Thursday afternoon) but is still needs to vault above $945 to regain its stride. Participants focused mainly on crude oil and on geopolitical developments in the absence of data from the economic calendar. OPEC gets to together this weekend and will likely have participants pulling out some large wrenches with which to turn up the flow of crude oil to the world. (The price of black gold was -at last check - up $2.6 at $134.80 per barrel.) This, after weeks or protests, frustration, pleas, and - the latest - a major hike in domestic price by China.
Predictably, Iran's response to the de facto early June Israeli rehearsal of an air attack on its nuclear installations was stern, swift, and laden with a threatening retaliatory tone that included words such as 'heavy blow' to describe its potential actions. Our good friend, Roger Wiegand, sums up the tense situation as follows:
" What lies ahead in this radically changing environment? In our view, the primary news changing event is the forthcoming attack by Israel on Iran. Our European friends have been predicting this for months and we chose to think it might not happen. Now we are about 80-90% certain it will. This event, if it becomes true, will drive energy and precious metals prices to the moon. On the other hand, stock markets could severely crash. The disruptions in global banking and credit markets might receive immeasurable damage; perhaps some of it un-repairable. One analyst says its a partial ploy to keep [President] Bush in office after January based upon the War Powers Emergency Act."
Recall that we alluded to an 'outside' and 'outsized' event as the best (perhaps only) possible driver of another rally by gold to four digits in our last Marketwatch TV interview in May. This is one of those potential events, although we are still nowhere near as confident as Roger is about the percentage of its occurrence probability.
Silver also gave up most of its Friday gains late in the day, and was last seen up 1 cent at $17.33 while platinum recouped some of Thursday's losses with a $10 gain to $2051 and palladium climbed $1 to $470 per ounce. Poor US auto sales estimates drove the noble metals to lower levels during the week. Gold futures closed the week out with a 3.5% gain after losing about 2% last week.
Also from the world of platinum, Johnson Matthey's Platinum Today reports that:
"The Tokyo Commodity Exchange will cooperate with the Tokyo Stock Exchange to develop exchange traded funds (ETFs) and Multi Commodity Exchange will now commence future trading in platinum. Platinum is now actively traded at Tokyo Community Exchange in Japan and New York Commodity Exchange as the metal is increasingly used as a catalytic converter in Japan.
According to reports from Reuters, TOCOM Chairman Masaaki Nangaku believes that the launch of commodities ETFs will have a good impact on developing the sector. Further reports from the Economic Times revealed that Joseph Messey, Chief Executive Officer of the Multi Commodity Exchange MS, said that platinum needed to be added to the offering.
"We were missing the presence of an important metal like platinum and now, since we have received approval, we are looking to start future trading activity soon," he explained.
"With the presence of a precious metal like platinum, investors will now have more opportunities for investment and the industry can hedge their requirements," he added."
Pre-Fed meeting trading floor chatter has begun in earnest and it points to rising expectations that the central bank will leave rates as they are (currently at an 88% probability level) and that it will also push potential rate hikes back a few months as the economic picture sorts itself out in the US. Marketwatch echoes the speculative crowd's latest sentiments and cites a few contrarian factor as well:
"Surging commodity prices and strident warnings from Federal Reserve officials about inflation have some in the market betting that the central bank will increase interest rates as early as this fall, according to closely watched federal funds futures contracts. Yet, five other indicators flatly contradict that outlook, suggesting that the central bank will instead opt to keep borrowing at currently low levels to prevent the ailing U.S. economy from experiencing even more pain.
Analysts point to at least five reasons the Fed won't rush to raise rates: 1) lending rates show the credit crunch continues; 2) the banking system is still fragile; 3) rates hikes in election years are rare; 4) the economy, especially housing, still poses a threat; and 5) flattening the yield curve could pressure bank profits.
Falling home prices and continuing bank losses, along with market rates for short-term loans, are likely to hold back the Fed. That's despite the message telegraphed by the bond market's favorite interest-rate indicator: fed funds futures, which are used to determine market odds of a move in interest rates by the Federal Reserve."
The first three days of next week will provide enough fuel for trading action of all kinds. Aside from the Fed meeting, we expect position statements from OPEC and from the ECB. Geopolitics -largely absent from the scene since December- are back on the stage. Summer begins tonight. Will it be a long, hot summer?
Taken From : http://www.ibtimes.com
Read more...
Stocks drop as credit woes continue, oil rises
By TIM PARADIS
20 June 2008 @ 06:48 pm EST
NEW YORK (AP) - Stocks capped a difficult week with steep losses Friday amid escalating worries about the financial and automotive sectors and a rebound in oil prices. The major indexes fell by more than 1 1/2 percent on the day, and the Dow Jones industrial average gave up more than 200 points to end at its lowest level in three months.
While investors have seen other triple-digit days in the past year since concerns about the economy began emerging, the Dow's first finish under 12,000 since mid-March could deal Wall Street a psychological blow.
An afternoon downgrade of automakers helped draw out sellers in the stock market while Treasury prices rose as investors sought the safety of government debt.
A Merrill Lynch downgrade of regional banks added to the market's initial anxiety, which ballooned Thursday when Citigroup Inc. warned of significant debt markdowns for the second quarter, Washington Mutual Inc. announced 1,200 job cuts and Moody's Investors Service decided late in the day to downgrade the two biggest bond insurers.
Troubling news about the financial sector piled up all week, sending stocks to steep losses. Early on, the investment banks posted profit declines, Fifth Third Bancorp said it need to raise $2 billion in capital and two Bear Stearns hedge fund managers were charged with lying to investors--causing many investors to flee from stocks.
Quincy Krosby, chief investment strategist at The Hartford, said Friday's session saw a confluence of the worries that investors have been grappling with as they try to determine where the economy is headed.
"I liken it to the GPS system saying 'recalculating,'" she said, referring to the market's uncertainty. "There's no clarity, there's no confidence."
Krosby added: "The crosscurrents are coming at a time when the backdrop for the economy appears to be stabilizing. And yet the headline risk is unrelenting."
The headlines Friday helped send the Dow down 220.40, or 1.83 percent, to 11,842.69. The blue chips haven't closed below 12,000 since March 17, when the market was worried about Bear Stearns Cos. collapsing. Friday's pullback left Coca Cola Co. as the only advancer among the 30 stocks that comprise the Dow.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 24.90, or 1.85 percent, to 1,317.93, and the Nasdaq composite index fell 55.97, or 2.27 percent, to 2,406.09.
Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.15 billion shares compared with 4.44 billion shares traded Thursday. Volume was heavy in part because of "quadruple witching"--the simultaneous expiration of four types of options contracts.
For the week, the Dow fell 3.78 percent, the S&P 500 lost 3.1 percent and the Nasdaq declined 1.97 percent.
Bond prices rose Friday as stocks sank. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.17 percent from 4.21 percent late Thursday.
Concerns over further tensions between Israel and Iran added to investors' worries and pushed oil prices higher.
"That introduces dramatic uncertainty," Krosby said of the investors' reaction to unease in the Middle East.
Crude oil futures jumped $2.69 to settle at $134.62 a barrel on the New York Mercantile Exchange, recovering some of Thursday's drop of nearly $5 per barrel on news of a fuel price hike in China.
Investors are awaiting the weekend's meeting in Saudi Arabia of oil producers and consumer nations, which could bring some relief to the problem of soaring oil prices. But many analysts believe the gathering might end up being a mere finger-pointing session.
The concerns made for a difficult market.
"There has to be reticence about getting back in," said Stephen Carl, principal and head of equity trading at The Williams Capital Group. "It's definitely an ugly end to the week."
Bond insurer MBIA Inc. fell 86 cents, or 13 percent, to $5.59, while competitor Ambac Financial Group Inc. edged up 2 cents to $2.05, after losing their "AAA" rating from Moody's.
Another ratings move hit stocks of automakers. Standard & Poor's Ratings Services placed the corporate credit ratings of General Motors Corp., Ford Motor Co. and Chrysler LLC on watch with negative implications. The classification means ratings have a one-in-two chance of being downgraded in the next three months. S&P believes high fuel costs will hurt the U.S. auto market through 2009.
GM fell $1, or 6.7 percent, to $13.79, while Ford lost 51 cents, or 8.1 percent, to $5.81.
The dollar fell against most other major currencies, while gold prices rose.
The Russell 2000 index of smaller companies fell 12.10, or 1.64, to 725.73.
Overseas, Japan's Nikkei stock average dropped 1.33 percent. Britain's FTSE 100 fell 1.53 percent, Germany's DAX index declined 2.12 percent, and France's CAC-40 fell 1.79 percent.
___
The Dow Jones industrial average ended the week down 464.66, or 3.78 percent, at 11,842.69. The Standard & Poor's 500 index finished down 42.10, or 3.10 percent, at 1,317.93. The Nasdaq composite index ended the week down 48.41, or 1.97 percent, at 2,406.09.
The Russell 2000 index finished the week down 7.88, or 1.07 percent, at 725.73.
The Dow Jones Wilshire 5000 Composite Index--a free-float weighted index that measures 5,000 U.S. based companies--ended Friday at 13,415.89, down 374.77 points, or 2.70 percent, for the week. A year ago, the index was at 15,291.15.
Taken From : http://www.ibtimes.com
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20 June 2008 @ 06:48 pm EST
NEW YORK (AP) - Stocks capped a difficult week with steep losses Friday amid escalating worries about the financial and automotive sectors and a rebound in oil prices. The major indexes fell by more than 1 1/2 percent on the day, and the Dow Jones industrial average gave up more than 200 points to end at its lowest level in three months.
While investors have seen other triple-digit days in the past year since concerns about the economy began emerging, the Dow's first finish under 12,000 since mid-March could deal Wall Street a psychological blow.
An afternoon downgrade of automakers helped draw out sellers in the stock market while Treasury prices rose as investors sought the safety of government debt.
A Merrill Lynch downgrade of regional banks added to the market's initial anxiety, which ballooned Thursday when Citigroup Inc. warned of significant debt markdowns for the second quarter, Washington Mutual Inc. announced 1,200 job cuts and Moody's Investors Service decided late in the day to downgrade the two biggest bond insurers.
Troubling news about the financial sector piled up all week, sending stocks to steep losses. Early on, the investment banks posted profit declines, Fifth Third Bancorp said it need to raise $2 billion in capital and two Bear Stearns hedge fund managers were charged with lying to investors--causing many investors to flee from stocks.
Quincy Krosby, chief investment strategist at The Hartford, said Friday's session saw a confluence of the worries that investors have been grappling with as they try to determine where the economy is headed.
"I liken it to the GPS system saying 'recalculating,'" she said, referring to the market's uncertainty. "There's no clarity, there's no confidence."
Krosby added: "The crosscurrents are coming at a time when the backdrop for the economy appears to be stabilizing. And yet the headline risk is unrelenting."
The headlines Friday helped send the Dow down 220.40, or 1.83 percent, to 11,842.69. The blue chips haven't closed below 12,000 since March 17, when the market was worried about Bear Stearns Cos. collapsing. Friday's pullback left Coca Cola Co. as the only advancer among the 30 stocks that comprise the Dow.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 24.90, or 1.85 percent, to 1,317.93, and the Nasdaq composite index fell 55.97, or 2.27 percent, to 2,406.09.
Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.15 billion shares compared with 4.44 billion shares traded Thursday. Volume was heavy in part because of "quadruple witching"--the simultaneous expiration of four types of options contracts.
For the week, the Dow fell 3.78 percent, the S&P 500 lost 3.1 percent and the Nasdaq declined 1.97 percent.
Bond prices rose Friday as stocks sank. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.17 percent from 4.21 percent late Thursday.
Concerns over further tensions between Israel and Iran added to investors' worries and pushed oil prices higher.
"That introduces dramatic uncertainty," Krosby said of the investors' reaction to unease in the Middle East.
Crude oil futures jumped $2.69 to settle at $134.62 a barrel on the New York Mercantile Exchange, recovering some of Thursday's drop of nearly $5 per barrel on news of a fuel price hike in China.
Investors are awaiting the weekend's meeting in Saudi Arabia of oil producers and consumer nations, which could bring some relief to the problem of soaring oil prices. But many analysts believe the gathering might end up being a mere finger-pointing session.
The concerns made for a difficult market.
"There has to be reticence about getting back in," said Stephen Carl, principal and head of equity trading at The Williams Capital Group. "It's definitely an ugly end to the week."
Bond insurer MBIA Inc. fell 86 cents, or 13 percent, to $5.59, while competitor Ambac Financial Group Inc. edged up 2 cents to $2.05, after losing their "AAA" rating from Moody's.
Another ratings move hit stocks of automakers. Standard & Poor's Ratings Services placed the corporate credit ratings of General Motors Corp., Ford Motor Co. and Chrysler LLC on watch with negative implications. The classification means ratings have a one-in-two chance of being downgraded in the next three months. S&P believes high fuel costs will hurt the U.S. auto market through 2009.
GM fell $1, or 6.7 percent, to $13.79, while Ford lost 51 cents, or 8.1 percent, to $5.81.
The dollar fell against most other major currencies, while gold prices rose.
The Russell 2000 index of smaller companies fell 12.10, or 1.64, to 725.73.
Overseas, Japan's Nikkei stock average dropped 1.33 percent. Britain's FTSE 100 fell 1.53 percent, Germany's DAX index declined 2.12 percent, and France's CAC-40 fell 1.79 percent.
___
The Dow Jones industrial average ended the week down 464.66, or 3.78 percent, at 11,842.69. The Standard & Poor's 500 index finished down 42.10, or 3.10 percent, at 1,317.93. The Nasdaq composite index ended the week down 48.41, or 1.97 percent, at 2,406.09.
The Russell 2000 index finished the week down 7.88, or 1.07 percent, at 725.73.
The Dow Jones Wilshire 5000 Composite Index--a free-float weighted index that measures 5,000 U.S. based companies--ended Friday at 13,415.89, down 374.77 points, or 2.70 percent, for the week. A year ago, the index was at 15,291.15.
Taken From : http://www.ibtimes.com
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Friday, June 20, 2008
China hikes fuel prices
Beijing raises prices for gasoline by as much as 18% in bid to cool demand.
BEIJING (AP) -- China raised prices for fuel by as much as 18% on Friday in a move that could cool the nation's surging energy consumption.
International oil prices dropped sharply Thursday after China said it will raise fuel prices, with U.S. crude for July delivery falling $4.75 to settle at $131.93 a barrel on the New York Mercantile Exchange. In Asian trading, oil was up slightly at $132.01 a barrel.
Growing Chinese demand for oil has underpinned the multiyear rally in oil prices, but higher prices could help crimp that demand. Concerns about spiking Chinese demand for diesel due to cleanup operations in the aftermath of last month's earthquake contributed to oil's recent run-up.
Lower demand in China "would be a major factor in driving prices down," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
The China Daily newspaper reported Friday that the increase was "because of the soaring price of crude in the international market." It said areas in Sichuan province, hit by a massive earthquake last month, were exempt from the increase.
The price increase was announced issued late Thursday after China's financial markets were disclosed by the National Development and Reform Commission, the government's main economic planning agency announced.
Prices of gasoline and diesel rose by $145 per ton to $1,015 and $949, respectively.
Aviation kerosene rose by $218 per ton to $1,084, the commission said on its Web site.
Electricity prices will also rise for most businesses by 36 cents per kilowatt, although residential housing and the farming and fertilizer industries would be exempt, the planning agency said.
Natural gas and liquefied petroleum gas prices will remain unchanged, it said.
The government last hiked fuel prices by about 11% in November but had kept them frozen since, seeking to avoid fanning inflation, which has touched 12-year highs since the beginning of the year.
That policy, however, has led to shortages at the pump as refiners find themselves squeezed by rising world oil and gas prices.
To help counter such shortages, China's largest city, Shanghai, on Monday announced an increase in prices for liquefied petroleum gas used by scooters.
Earlier this week, the economic planning agency said it would look for an opportunity to adjust oil product prices, prompting a rally in shares of major refiners that have been swallowing huge losses due to soaring crude oil prices.
In an explanatory note accompanying its announcement, the commission said high world oil prices had created "contradictions in the purchasing price of oil being higher than the selling price of refined products that were becoming more glaring by the day."
That had led some refiners to halt or suspend production, creating supply interruptions and long lines at some filling stations, it said.
Coal prices that have risen $12 in the past two years have created massive losses for four of the country's five major power producers, it said.
Along with the electricity price rise, the government will also continue to provide subsidies to the industry to guarantee supplies, the commission said. To top of page
Saudi summit aims at oil prices
Taken From : http://money.cnn.com
Read more...
BEIJING (AP) -- China raised prices for fuel by as much as 18% on Friday in a move that could cool the nation's surging energy consumption.
International oil prices dropped sharply Thursday after China said it will raise fuel prices, with U.S. crude for July delivery falling $4.75 to settle at $131.93 a barrel on the New York Mercantile Exchange. In Asian trading, oil was up slightly at $132.01 a barrel.
Growing Chinese demand for oil has underpinned the multiyear rally in oil prices, but higher prices could help crimp that demand. Concerns about spiking Chinese demand for diesel due to cleanup operations in the aftermath of last month's earthquake contributed to oil's recent run-up.
Lower demand in China "would be a major factor in driving prices down," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
The China Daily newspaper reported Friday that the increase was "because of the soaring price of crude in the international market." It said areas in Sichuan province, hit by a massive earthquake last month, were exempt from the increase.
The price increase was announced issued late Thursday after China's financial markets were disclosed by the National Development and Reform Commission, the government's main economic planning agency announced.
Prices of gasoline and diesel rose by $145 per ton to $1,015 and $949, respectively.
Aviation kerosene rose by $218 per ton to $1,084, the commission said on its Web site.
Electricity prices will also rise for most businesses by 36 cents per kilowatt, although residential housing and the farming and fertilizer industries would be exempt, the planning agency said.
Natural gas and liquefied petroleum gas prices will remain unchanged, it said.
The government last hiked fuel prices by about 11% in November but had kept them frozen since, seeking to avoid fanning inflation, which has touched 12-year highs since the beginning of the year.
That policy, however, has led to shortages at the pump as refiners find themselves squeezed by rising world oil and gas prices.
To help counter such shortages, China's largest city, Shanghai, on Monday announced an increase in prices for liquefied petroleum gas used by scooters.
Earlier this week, the economic planning agency said it would look for an opportunity to adjust oil product prices, prompting a rally in shares of major refiners that have been swallowing huge losses due to soaring crude oil prices.
In an explanatory note accompanying its announcement, the commission said high world oil prices had created "contradictions in the purchasing price of oil being higher than the selling price of refined products that were becoming more glaring by the day."
That had led some refiners to halt or suspend production, creating supply interruptions and long lines at some filling stations, it said.
Coal prices that have risen $12 in the past two years have created massive losses for four of the country's five major power producers, it said.
Along with the electricity price rise, the government will also continue to provide subsidies to the industry to guarantee supplies, the commission said. To top of page
Saudi summit aims at oil prices
Taken From : http://money.cnn.com
Read more...
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