By Masaki Kondo
June 26 (Bloomberg) -- Japan's commodities-related stocks fell after metals prices declined, while shipping lines gained on the first increase in cargo rates in four days.
Nippon Mining Holdings Inc., the nation's largest copper producer, and Sumitomo Metal Mining Co. slumped. Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron-ore ships, led shipping lines higher. Tiremaker Bridgestone Corp. extended its decline to a sixth day after Morgan Stanley slashed its price estimate. Nippon Telegraph & Telephone Corp. jumped after UBS AG raised its price target by 16 percent.
The Nikkei 225 Stock Average slid 12.36, or 0.1 percent, to 13,817.56 as of 9:47 a.m. in Tokyo. The broader Topix index sank 4.32, or 0.3 percent, to 1,341.76. Three stocks fell for every two that gained on the Topix.
The price of crude oil dropped for the first time in four sessions to $134.55 a barrel yesterday, while gold and copper also retreated. The Baltic Dry Index, a measure of commodity- shipping costs, leapt 1.2 percent, breaking a three-day losing streak. The gauge has declined by a fifth this month.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Thursday, June 26, 2008
Asian Stocks Rise for First Time in Six Days; Banks Lead Gains
By Chua Kong Ho and Shani Raja
June 26 (Bloomberg) -- Asian stocks rose for the first time in six days, led by financial stocks, after the Federal Reserve said risks to U.S. growth have diminished.
Commonwealth Bank of Australia, the country's second-biggest by assets, climbed the most in more than six weeks after saying it has no need to raise additional capital. St. George Bank Ltd., the fifth-largest, had its sharpest gain in a month after reiterating its goal for earnings per share. Sony Corp., which counts the U.S. as its biggest market, advanced in Tokyo after the Fed said the economy is still expanding.
Australia's biggest banks are ``in very solid shape,'' said Martin Lakos, division director at Macquarie Private Wealth in Sydney. ``From a balance sheet perspective they're still very profitable.''
The MSCI Asia Pacific Index gained 0.6 percent to 139.05 as of 10:48 a.m. in Tokyo. All 10 industry groups on the benchmark gained, led by a measure of financial shares. The index has fallen 12 percent this year.
Japan's Nikkei 225 Stock Average added 0.2 percent to 13,861.25, while Australia's S&P/ASX 200 Index gained 1.6 percent. All Asian benchmark indexes rose today apart from Malaysia, which was little changed.
U.S. stocks rose yesterday, sending the Standard & Poor's 500 Index to its best gain in two weeks, after the Federal Reserve gave no indication it will raise interest rates anytime soon.
Qantas Airways Ltd. and Korean Air Lines Co. advanced after oil fell more than $2 a barrel in New York. Mitsui O.S.K. Lines Ltd. led shipping companies higher after a measure of commodity shipping costs climbed the most in five weeks.
Centro Properties Group, the Australian-based mall owner that won a debt extension last month, surged after the Sydney Morning Herald said it will sell assets to pay off debt.
To contact the reporter for this story: Chua Kong Ho at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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U.S. Federal Open Market Committee June 25 Statement: Text
June 25 (Bloomberg) -- The following is the full text of the statement released today by the Federal Reserve:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.
The committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser, Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.
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The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.
The committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser, Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.
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Fed Keeps Rate at 2%, Cites `Upside' Inflation Risks (Update5)
By Craig Torres
June 25 (Bloomberg) -- The Federal Reserve kept its benchmark rate at 2 percent and warned that faster inflation may accompany some strengthening of the economy.
``Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased,'' the Federal Open Market Committee said in a statement in Washington after a two-day meeting.
Fed Chairman Ben S. Bernanke and his colleagues ended the most aggressive monetary easing in two decades, refreshed their forecasts and reported some improvement in consumer spending. At the same time, crude oil prices have almost doubled in the past year and the cost of commodities from wheat to tin jumped to unprecedented levels.
``The Fed is more balanced now in their assessment,'' James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, said in a Bloomberg Television interview. ``A rate hike is now back on the table. If it goes weak again, it can ease.''
Stocks rose after the decision, pushing the Standard & Poor's 500 Stock Index up 0.6 percent to 1,321.97. The yield on the benchmark 10-year Treasury note rose about 1 basis point to 4.09 percent. The dollar weakened against the euro.
``The Committee expects inflation to moderate later this year and next year,'' the Fed said. ``However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.''
Next Meeting
``It is more or less a neutral statement, which is consistent with policy on hold pending more clarity,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``They are not tipping their hand for the next meeting.''
As policy makers convened, reports showed U.S. home prices fell the most on record, consumer confidence touched a 16-year low, and durable goods orders were unchanged in May. Households are also falling further behind on their debt, eroding profits at lenders. Banks and securities firms have taken almost $400 billion in asset writedowns and credit losses.
``Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters,'' the Fed said.
Continued Expansion
At the same time, the statement contained no mention of the contraction in gross domestic product that many officials judged possible at their April meeting. A government report tomorrow will probably show the economy grew at a 1 percent annual pace in the first quarter, up from an initial estimate of 0.9 percent, according to a Bloomberg News survey of economists.
Dallas Fed President Richard Fisher dissented from today's decision, preferring an increase. He dissented against the rate cut at the April meeting.
Oil prices touched a record $139.89 June 16, extending a rally that helped push the consumer price index up 4.2 percent in May compared with an average rate of 2.7 percent over the past decade. Energy costs are hurting profits and household incomes, and raising expectations for future inflation.
Dow, UPS
Dow Chemical Co. said yesterday that higher raw materials costs will cause the company to raise prices by as much as 25 percent in July, following an increase of as much as 20 percent. United Parcel Service Inc. lowered its second-quarter profit forecast on June 23 because of rising fuel costs and slowing U.S. growth.
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey.
Policy makers are ``going to remain about where they are until the data come in and make a strong case to move one way or the other,'' William Poole, former president of the St. Louis Fed, said in a Bloomberg Television interview.
Home prices in 20 U.S. cities fell in April by the most on record, signaling the housing recession is far from over. The S&P/Case-Shiller home-price index dropped 15.3 percent from a year earlier. The gauge has fallen every month since January 2007. Employers have reduced payrolls for five consecutive months, helping push the unemployment rate to 5.5 percent.
Crisis Response
Central bankers reduced the target rate for overnight loans between banks by 2.25 percentage points in 2008 with a series of aggressive rate actions, including two three-quarter-point cuts. In addition, the Fed invoked emergency authority in March to start lending directly to investment banks. The central bank also provided $29 billion of financing to secure JPMorgan Chase & Co.'s takeover of Bear Stearns Cos.
The FOMC at 10:45 a.m. today held a special meeting with supervisors to discuss investment banks and their borrowing of securities and cash from the Federal Reserve, according to a notice on the central bank's website. Fed officials have given themselves until September to decide on the future of the direct loan facility.
The financial system remains under stress. The Standard and Poor's Financials Index, which includes 90 bank, brokerage and insurance stocks, fell 21 percent from May 2 to June 24.
``Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,'' American Express Co. Chief Executive Officer Kenneth Chenault said in a statement today.
Financing rates are also rising for consumers. The rate on a 30-year fixed-rate mortgage rose to 6.3 percent June 24 versus 5.79 percent at the start of the year, according to Bankrate.com.
New Projections
Fed officials discussed their new forecasts for 2008, 2009 and 2010 at the meeting. Bernanke will reveal the FOMC's new outlook for inflation, growth and employment in his semi-annual congressional testimony next month.
Wall Street analysts are divided on how higher energy costs may affect growth. The 38 percent rise in oil prices this year absorbs more consumer dollars, pulling spending away from other goods and services. If inflation is allowed to rise further, the purchasing power of incomes could fall. After tax incomes adjusted for inflation rose at a 1.8 percent rate for the 12 months ending April, versus 3.1 percent for the same period a year earlier.
The federal government has also injected $70.8 billion into the economy through tax rebates, which could lead to one or two quarters of stronger growth and add momentum to price increases.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
Read more...
June 25 (Bloomberg) -- The Federal Reserve kept its benchmark rate at 2 percent and warned that faster inflation may accompany some strengthening of the economy.
``Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased,'' the Federal Open Market Committee said in a statement in Washington after a two-day meeting.
Fed Chairman Ben S. Bernanke and his colleagues ended the most aggressive monetary easing in two decades, refreshed their forecasts and reported some improvement in consumer spending. At the same time, crude oil prices have almost doubled in the past year and the cost of commodities from wheat to tin jumped to unprecedented levels.
``The Fed is more balanced now in their assessment,'' James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, said in a Bloomberg Television interview. ``A rate hike is now back on the table. If it goes weak again, it can ease.''
Stocks rose after the decision, pushing the Standard & Poor's 500 Stock Index up 0.6 percent to 1,321.97. The yield on the benchmark 10-year Treasury note rose about 1 basis point to 4.09 percent. The dollar weakened against the euro.
``The Committee expects inflation to moderate later this year and next year,'' the Fed said. ``However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.''
Next Meeting
``It is more or less a neutral statement, which is consistent with policy on hold pending more clarity,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``They are not tipping their hand for the next meeting.''
As policy makers convened, reports showed U.S. home prices fell the most on record, consumer confidence touched a 16-year low, and durable goods orders were unchanged in May. Households are also falling further behind on their debt, eroding profits at lenders. Banks and securities firms have taken almost $400 billion in asset writedowns and credit losses.
``Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters,'' the Fed said.
Continued Expansion
At the same time, the statement contained no mention of the contraction in gross domestic product that many officials judged possible at their April meeting. A government report tomorrow will probably show the economy grew at a 1 percent annual pace in the first quarter, up from an initial estimate of 0.9 percent, according to a Bloomberg News survey of economists.
Dallas Fed President Richard Fisher dissented from today's decision, preferring an increase. He dissented against the rate cut at the April meeting.
Oil prices touched a record $139.89 June 16, extending a rally that helped push the consumer price index up 4.2 percent in May compared with an average rate of 2.7 percent over the past decade. Energy costs are hurting profits and household incomes, and raising expectations for future inflation.
Dow, UPS
Dow Chemical Co. said yesterday that higher raw materials costs will cause the company to raise prices by as much as 25 percent in July, following an increase of as much as 20 percent. United Parcel Service Inc. lowered its second-quarter profit forecast on June 23 because of rising fuel costs and slowing U.S. growth.
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey.
Policy makers are ``going to remain about where they are until the data come in and make a strong case to move one way or the other,'' William Poole, former president of the St. Louis Fed, said in a Bloomberg Television interview.
Home prices in 20 U.S. cities fell in April by the most on record, signaling the housing recession is far from over. The S&P/Case-Shiller home-price index dropped 15.3 percent from a year earlier. The gauge has fallen every month since January 2007. Employers have reduced payrolls for five consecutive months, helping push the unemployment rate to 5.5 percent.
Crisis Response
Central bankers reduced the target rate for overnight loans between banks by 2.25 percentage points in 2008 with a series of aggressive rate actions, including two three-quarter-point cuts. In addition, the Fed invoked emergency authority in March to start lending directly to investment banks. The central bank also provided $29 billion of financing to secure JPMorgan Chase & Co.'s takeover of Bear Stearns Cos.
The FOMC at 10:45 a.m. today held a special meeting with supervisors to discuss investment banks and their borrowing of securities and cash from the Federal Reserve, according to a notice on the central bank's website. Fed officials have given themselves until September to decide on the future of the direct loan facility.
The financial system remains under stress. The Standard and Poor's Financials Index, which includes 90 bank, brokerage and insurance stocks, fell 21 percent from May 2 to June 24.
``Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,'' American Express Co. Chief Executive Officer Kenneth Chenault said in a statement today.
Financing rates are also rising for consumers. The rate on a 30-year fixed-rate mortgage rose to 6.3 percent June 24 versus 5.79 percent at the start of the year, according to Bankrate.com.
New Projections
Fed officials discussed their new forecasts for 2008, 2009 and 2010 at the meeting. Bernanke will reveal the FOMC's new outlook for inflation, growth and employment in his semi-annual congressional testimony next month.
Wall Street analysts are divided on how higher energy costs may affect growth. The 38 percent rise in oil prices this year absorbs more consumer dollars, pulling spending away from other goods and services. If inflation is allowed to rise further, the purchasing power of incomes could fall. After tax incomes adjusted for inflation rose at a 1.8 percent rate for the 12 months ending April, versus 3.1 percent for the same period a year earlier.
The federal government has also injected $70.8 billion into the economy through tax rebates, which could lead to one or two quarters of stronger growth and add momentum to price increases.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
Read more...
Fed Today, but Keep Your Eye on July 3rd...
Daily Forex Fundamentals | Written by Black Swan Capital | Jun 25 08 16:43 GMT |
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Today is the big day. In a few hours everyone will be tuning in for a first-hand report on the latest Federal Open Market Committee rate decision. All the FOMC meetings seem increasingly important, but it's those similar to today's meeting, where officials could POTENTIALLY change policy direction, that really get the market riled up.
The last three FOMC decisions, albeit all decisions to cut rates, actually sent the dollar rallying in the trading sessions that followed. And even though a rate hike today is unlikely, this meeting has the potential to send the dollar rallying again.
It seems that the dollar could only suffer in the wake of today's meeting, and the several days that follow, if the FOMC statement severely disappoints. (Keep in mind the market has built up its expectations for hawkishness.)
But when all the dust has settled, we think the difference maker is going to be the European Central Bank. The dollar will likely bounce all over the place when the FOMC decision is released today, but not until the ECB's next rate decision (July 3rd) will the dollar be able to stick to a longer-term direction.
We grabbed the following chart from the European Central Bank website just to give you an idea what they're dealing with ...
Economic concerns continue to be to the downside for Europe. And the ECB President, Jean-Claude Trichet, continues to reiterate that fact. But in recent comments he also reiterated the ECB's commitment to stabilizing prices.
Let's just say this chart, which shows prices well above their average and well above ECB comfort levels, can't possibly leave a good feeling in Trichet's stomach.
We're leaning more towards a dollar-positive outcome this afternoon than dollar-negative. But even if we're right, there's still plenty of time for fortune's to reverse. The big money rides on the ECB.
Jack Crooks
Black Swan Capital
http://www.blackswantrading.com
Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html
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Durable Goods Orders Flat in May
Daily Forex Fundamentals | Written by Wachovia Corporation | Jun 25 08 17:49 GMT |
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Orders for durable goods were flat in May as businesses begin to anticipate softening demand. Stripping out the volatile transportation component, orders were down 0.9 percent, while last month’s numbers were revised lower. Non-defense orders ex-aircraft were down 0.8 percent, a sign that business spending could be weak Q2.
Orders Flat, Automotive Sector Continues to Struggle
- A flat number after two consecutive monthly declines is hardly a sign of vibrant growth. Businesses are scaling back.
- New automotive orders continue to trend lower. While production cuts at auto-makers earlier this year and the incentive package rolled out this week may help reduce high inventories. We’re not looking for a turnaround anytime soon.
Ex Aircraft Orders Weak, Inventories Still Climbing
- Non-defense capital goods orders ex-aircraft were down 0.8 percent in May, on the heels of a strong 3.1 percent gain the previous month. Business spending will likely be weaker in Q2.
- The climb in inventories, up 5.1 percent since last year, is concerning. This is especially true in transportation equipment where inventories increased 0.9 percent last month alone.
Wachovia Corporation
http://www.wachovia.com
Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.
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FOMC Meeting: Speak Loudly And Carry A Small Stick
Daily Forex Fundamentals | Written by Wachovia Corporation | Jun 25 08 20:30 GMT |
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As expected, the Federal Reserve left the federal funds rate unchanged at 2 percent at today's FOMC meeting. The wording in the Fed's statement is a touch more hawkish than in previous meetings and one member of the FOMC, Richard Fisher, president of the Dallas Fed, dissented in favor of raising interest rates.
The Fed is in a tough spot, with no clear good choices to make. Raising interest rates might help curb some of the fears about escalating inflation but would not likely have a material impact on actual inflation. Absent signs that a wage-price spiral has actually taken hold, a token quarter-point hike in the federal funds rate seems like a high risk/low return proposition.
Right now, the best option for the Fed is to speak loudly and carry a small stick. The text from today's FOMC meeting does just that. The statement starts with a clearly more positive assessment of the economy. Specifically, the Fed notes that "recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending." The statement is right on the money and largely reflects stronger retail sales, which rose solidly in May and were revised up for the two previous months. While the Fed did not say it in this statement, they are readily aware that part of the recent strength in household spending is temporary and linked to the tax rebates.
The remainder of the first paragraph is similar to the previous meeting's statement, noting that "labor markets have softened further" and that "financial markets remain under considerable stress." We doubt that the Fed will begin to raise interest rates until these two factors have at least moderated to a point where they are neutral variables in the near-term outlook. In addition, the Fed added the recent "rise in energy prices" to its list of factors weighing on economic growth, joining "tight credit conditions" and "the ongoing housing contraction."
One other change worth noting is that the Fed slightly softened the wording on the housing situation to "ongoing housing contraction" from "deepening housing contraction." We noted in our June 12 Housing Chartbook that we were beginning to see some tentative signs that the housing market was bottoming out. The housing market is still contracting but sales in some of the most troubled markets, including some hard hit parts of Florida and California, have stopped falling.
The wording on inflation is clearly more hawkish than what we have seen in recent statements but the Fed gives no indication that they feel the inflation horse is already out of the barn. The statement notes that "the committee expects inflation to moderate later this year and next year." Moreover, they note that much of the heightened concern about inflation comes from continued increases in energy prices and increases in the prices of some other commodities, factors that are not directly within the Fed's control. Remember, the Fed cannot print oil or make it stop raining in the Midwest.
Keeping inflation expectations contained is the number one job for the Fed. If inflation expectations increase too dramatically, then the recent spike in food and energy prices will spill over into the prices of other goods and services. The Fed acknowledges that "some indicators of inflation expectations" have increased and that "uncertainty about the inflation outlook remains high." Those kind of statements are meant to reassure the financial markets that the Fed is cognizant of the inflation risks.
To really drive home the point, however, the Fed included a sentence at the end of the statement that succinctly summarized how conditions have changed over the past two months. "Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased." In addition, Richard Fisher dissented from the rest of the group, favoring to raise the federal funds rate at this meeting.
Summary & Conclusion
Our read on the policy statement is that the Fed feels monetary policy is currently right where they want it to be. We expect the federal funds rate to remain right where it is through the end of this year, or until the housing market bottoms and the credit markets firm up. The Fed will continue to speak loudly about the threat of inflation but they will continue to carry a small stick.
Wachovia Corporation
http://www.wachovia.com
Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.
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Economic Calendar
| Eco Data 6/26/08 |  |  |
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand Current account (nzd) Q1 | -1.70B | -3.41B | | |
| 06:00 | EUR | Import price index M/M May | 1.50% | 0.90% | | |
| 06:00 | EUR | Import price index Y/Y May | 6.90% | 5.70% | | |
| 08:00 | EUR | Euro-Zone M3 s.a. Y/Y May | 10.40% | 10.60% | | |
| 08:00 | EUR | Euro-Zone M3 s.a. 3m May | 10.40% | 10.70% | | |
| 12:30 | USD | U.S. GDP annualised Q1 F | 1.00% | 0.90% | | |
| 12:30 | USD | U.S. GDP deflator Q1 F | 2.60% | 2.60% | | |
| 12:30 | USD | U.S. PCE core Q/Q Q1 F | 2.10% | 2.10% | | |
| 12:30 | USD | U.S. PCE Q1 F | 3.50% | 3.50% | | |
| 12:30 | USD | U.S. Jobless claims | 375K | 381K | | |
| 12:30 | USD | U.S. Personal consumption Q1 | 1.00% | 1.00% | | |
| 14:00 | USD | U.S. Existing home sales May | 4.95M | 4.89M | | |
| 14:00 | USD | U.S. Existing home sales M/M May | 1.20% | -1.00% |
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Daily Market Commentary - Fundamental & Technical Outlook
Daily Forex Fundamentals | Written by GCI Financial | Jun 25 08 16:38 GMT |
€
The euro came off vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.5535 level and was capped around the $1.5615 level. Most traders expect the Federal Open Market Committee will keep the overnight call rate unchanged at 2.00% today and signal that inflation poses more of a threat than a slowdown in economic growth. Some traders believe the FOMC will move rates higher this year while others believe the Fed will take a wait-and-see approach before adjusting borrowing costs. The Fed is also expected to acknowledge the beleaguered U.S. housing sector, ongoing credit market dislocations, and weakness in the employment sector. Data released in the U.S. today May durable goods orders unchanged m/m and off 0.1% y/y while the ex-transportation component was of 0.9% m/m. Also, May building permits were revised to -0.4% from -1.3% and May new home sales were off 2.5% to a 512,000 unit annualized pace. In eurozone news, the European Central Bank announced it will hold a press conference after its 7 August Governing Council meeting. The ECB traditionally holds a telephone conference after some summer rate-setting meetings and this has led to speculation that the presumed +25bps rate hike to 4.25% in July will not be a one-off move. ECB's Wellink reported Dutch inflation may top 3% in Q3 while ECB President Trichet reiterated he does not "envisage a series of increases (in official interest rates)." ECB's Noyer reported "Issuance of credit remains dynamic and there is no concrete threat of a (further) credit crunch." Data released in the eurozone today saw EMU-15 April factory orders up 2.5% m/m and 11.7% y/y, the fastest growth pace in six months. Euro bids are cited around the $1.5230 level.
¥/ CNY
The yen depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the ¥108.05 level and was supported around the ¥107.65 level. Traders continued to buy U.S. dollars ahead of today's interest rate decision from the Federal Open Market Committee. Technically, today's intraday low was right around the 38.2% retracement of the move from ¥108.55 to ¥107.10. Data released in Japan today saw the May merchandise trade surplus shrink for the third consecutive month, printing at ¥365.61 billion and off 7.6% y/y. Traders are curious to see how these data impact the April - June GDP data that are due in early August. Other data released last night saw the May corporate services price index climb +0.2% m/m and 0.6% y/y, the eighteenth consecutive monthly increase. The Nikkei 225 stock index lost 0.14% to close at ¥13,829.92. Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro moved higher vis-Ã -vis the yen as the single currency tested offers around the ¥168.45 level and was supported around the ¥167.60 level. The British pound and Swiss franc appreciated vis-Ã -vis the yen as the crosses tested offers around the ¥213.20 and ¥103.95 levels, respectively. The Chinese yuan appreciated vis-Ã -vis the U.S. dollar as the greenback closed at CNY 6.8653 in the over-the-counter market, down from CNY 6.8699 and the pair's lowest close since the yuan revaluation of July 2005. It was reported that China's foreign reserves totaled US$ 1.76 trillion at the end of April.
₤
The British pound came off vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.9660 level and was capped around the $1.9745 level. Sterling could not maintain intraday gains notched after it was reported that the CBI June retail sales survey found 39% of respondents said H1 June sales were lower than one year ago while 30% indicated they improved, for an ensuing net balance of -9% - up from -14% in May and better than expected. These data suggest retail sales remain relatively weak. Bank of England Deputy Governor Gieve reported he expects a "downturn in economic activity over the rest of the year." On the political front, London's High Court rejected a legal move to force the British government to hold a referendum on the European Union's Lisbon Treaty. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro moved higher vis-Ã -vis the British pound as the single currency tested offers around the ₤0.7920 level and was supported around the ₤0.7890 level.
CHF
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.0435 level and was supported around the CHF 1.0375 level. U.S. dollar bids are cited around the CHF 1.0250 level. The euro moved higher vis-Ã -vis the Swiss franc as the single currency tested offers around the CHF 1.6235 level while the British pound moved lower vis-Ã -vis the Swiss franc and tested bids around the CHF 2.0470 level.
GCI Financial
http://www.gcitrading.com
DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Daily Forex Technicals | Written by Global Forex Trading | Jun 25 08 01:42 GMT |
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€
The euro came off vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.5535 level and was capped around the $1.5615 level. Most traders expect the Federal Open Market Committee will keep the overnight call rate unchanged at 2.00% today and signal that inflation poses more of a threat than a slowdown in economic growth. Some traders believe the FOMC will move rates higher this year while others believe the Fed will take a wait-and-see approach before adjusting borrowing costs. The Fed is also expected to acknowledge the beleaguered U.S. housing sector, ongoing credit market dislocations, and weakness in the employment sector. Data released in the U.S. today May durable goods orders unchanged m/m and off 0.1% y/y while the ex-transportation component was of 0.9% m/m. Also, May building permits were revised to -0.4% from -1.3% and May new home sales were off 2.5% to a 512,000 unit annualized pace. In eurozone news, the European Central Bank announced it will hold a press conference after its 7 August Governing Council meeting. The ECB traditionally holds a telephone conference after some summer rate-setting meetings and this has led to speculation that the presumed +25bps rate hike to 4.25% in July will not be a one-off move. ECB's Wellink reported Dutch inflation may top 3% in Q3 while ECB President Trichet reiterated he does not "envisage a series of increases (in official interest rates)." ECB's Noyer reported "Issuance of credit remains dynamic and there is no concrete threat of a (further) credit crunch." Data released in the eurozone today saw EMU-15 April factory orders up 2.5% m/m and 11.7% y/y, the fastest growth pace in six months. Euro bids are cited around the $1.5230 level.
¥/ CNY
The yen depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the ¥108.05 level and was supported around the ¥107.65 level. Traders continued to buy U.S. dollars ahead of today's interest rate decision from the Federal Open Market Committee. Technically, today's intraday low was right around the 38.2% retracement of the move from ¥108.55 to ¥107.10. Data released in Japan today saw the May merchandise trade surplus shrink for the third consecutive month, printing at ¥365.61 billion and off 7.6% y/y. Traders are curious to see how these data impact the April - June GDP data that are due in early August. Other data released last night saw the May corporate services price index climb +0.2% m/m and 0.6% y/y, the eighteenth consecutive monthly increase. The Nikkei 225 stock index lost 0.14% to close at ¥13,829.92. Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro moved higher vis-Ã -vis the yen as the single currency tested offers around the ¥168.45 level and was supported around the ¥167.60 level. The British pound and Swiss franc appreciated vis-Ã -vis the yen as the crosses tested offers around the ¥213.20 and ¥103.95 levels, respectively. The Chinese yuan appreciated vis-Ã -vis the U.S. dollar as the greenback closed at CNY 6.8653 in the over-the-counter market, down from CNY 6.8699 and the pair's lowest close since the yuan revaluation of July 2005. It was reported that China's foreign reserves totaled US$ 1.76 trillion at the end of April.
₤
The British pound came off vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.9660 level and was capped around the $1.9745 level. Sterling could not maintain intraday gains notched after it was reported that the CBI June retail sales survey found 39% of respondents said H1 June sales were lower than one year ago while 30% indicated they improved, for an ensuing net balance of -9% - up from -14% in May and better than expected. These data suggest retail sales remain relatively weak. Bank of England Deputy Governor Gieve reported he expects a "downturn in economic activity over the rest of the year." On the political front, London's High Court rejected a legal move to force the British government to hold a referendum on the European Union's Lisbon Treaty. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro moved higher vis-Ã -vis the British pound as the single currency tested offers around the ₤0.7920 level and was supported around the ₤0.7890 level.
CHF
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.0435 level and was supported around the CHF 1.0375 level. U.S. dollar bids are cited around the CHF 1.0250 level. The euro moved higher vis-Ã -vis the Swiss franc as the single currency tested offers around the CHF 1.6235 level while the British pound moved lower vis-Ã -vis the Swiss franc and tested bids around the CHF 2.0470 level.
GCI Financial
http://www.gcitrading.com
DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Daily Forex Technicals | Written by Global Forex Trading | Jun 25 08 01:42 GMT |
The dollar plummeted on Tuesday on news the Conference Board's consumer confidence index collapsed to a 16-year low in June, but it reduced losses on the day. The FOMC will leave rates unchanged on Wednesday, and probably for the rest of the year, but look for what they have to say. Keep an eye on the volatile durable goods orders and the new homes sales; the data should be bad but it’s probably discounted and the dollar should attempt to bounce.
Euro/dollar
The euro/dollar has been alternating up and down days, and Tuesday should be the down day. My model went long and the pair must break out of an inside range before the direction becomes clearer.
Good support is seen at 1.5510. Below 1.5470, the next levels are 1.5430,1.5380 and 1.5305.
Strong resistance is at 1.5620. Above 1.5650, euro/dollar sees additional resistance at 1.5727.
Oscillators are rising.
NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen attempted breaks both ways on Tuesday, but when the dust settled, it remained around the 107.95 50-point pivot, which targets 107.45 and 108.45. My model remains short, but sideways trading is likely
Initial support is at 107.45. Strong support is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. Distant support is at 105.60.
Above 108.45, further resistance is pegged at 109.15 from a 50-point pivot, which targets 109.65 and 108.65.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Mixed
Sterling/dollar
Sterling/dollar made a mild recovery on Tuesday, but got stuck in an inside range. I expect only choppy trading on Wednesday with a bias on the downside.
Immediate support is now seen at 1.9650. Below 1.9605, the next level is 1.9560. This is followed by 1.9500.
Initial resistance now comes at 1.9720. Above 1.9760, further resistance comes at 1.9800, 1.9890 and 1.9940.
Oscillators are mixed.
NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Dollar/Swiss franc
Dollar/Swiss is still alternating up and down days, and Wednesday should be an up day, if this silly pattern continues. My model remains long.
Initial resistance remains at 1.0490. Above 1.0540, resistance is at 1.0622.
Immediate support is still seen at 1.0400. Below 1.0336, further support comes at 1.0290.
Oscillators are mixed.
NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Mixed
LONG-TERM: Bullish
Cornelius Luca
Global Forex Trading
http://www.gftforex.com
DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.
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Wednesday, June 25, 2008
China yuan ends at new high of 6.8653 to US dollar vs 6.8699 in OTC trade
BEIJING (XFN-ASIA) - The yuan finished at a fresh high of 6.8653 against the US dollar on the over-the-counter (OTC) market, up from 6.8699 yesterday.
On the exchange-traded market, the yuan also ended at a new record of 6.8648, up from 6.8711 in the previous session, a Guangzhou-based trader with a foreign bank said.
The yuan traded between 6.8695 and 6.8620 on the OTC market and between 6.8670 and 6.8648 on the exchange-traded market.
The central bank set the yuan central parity rate at 6.8684 to the dollar this morning, compared with 6.8736 in the previous session.
The yuan's daily trading band is currently set at 0.5 pct.
derek.jiang@xfn.com
Taken From : Thomson Financial News
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On the exchange-traded market, the yuan also ended at a new record of 6.8648, up from 6.8711 in the previous session, a Guangzhou-based trader with a foreign bank said.
The yuan traded between 6.8695 and 6.8620 on the OTC market and between 6.8670 and 6.8648 on the exchange-traded market.
The central bank set the yuan central parity rate at 6.8684 to the dollar this morning, compared with 6.8736 in the previous session.
The yuan's daily trading band is currently set at 0.5 pct.
derek.jiang@xfn.com
Taken From : Thomson Financial News
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Platinum Futures Extend Decline on Equities Slump, U.S Slowdown
By Dave McCombs
June 25 (Bloomberg) -- Platinum futures in Tokyo headed for their longest losing streak in 10 months as declining equity markets and a U.S. sales warning from Toyota Motor Corp. prompted investors to quit the metal used for making auto catalysts.
Platinum fell for a fifth day, tracking a five-day slide in Japan's benchmark Nikkei 225 Stock Average and the MSCI Asia Pacific Index. A decline in U.S. consumer confidence to a 16-year low and a record drop in housing prices there also prompted some investors to shift from commodities to cash, said Kazuhiko Saito, a commodity strategist at Interes Capital Management.
``The economic data is bad and that's putting pressure on the platinum market,'' Saito said by phone today in Tokyo. ``Investors are going into cash from commodities.''
Platinum for April delivery in Tokyo plunged 166 yen, or 2.4 percent, to 6,806 yen a gram ($1,964 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most- active contract has declined 3.8 percent in the past five days.
Metal for immediate delivery fell $10 to $2,011 an ounce the same time, a 0.5 percent drop from late yesterday in New York.
The Nikkei 225 Stock Average dropped 1.5 percent, to 13,644.97 as of 11 a.m., taking its five-day decline, the longest this year, to 5.6 percent.
Toyota may cut its 2008 sales target after rising gasoline prices and the slowing U.S. economy slashed demand for large cars and pickups, the company said yesterday.
The New York-based Conference Board's confidence index for June yesterday dropped to 50.4, lower than expected and a 16-year low. Home prices in 20 U.S. cities dropped 15.3 percent in April from a year earlier, according to S&P/Case-Shiller, the most since the group began collecting data.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net.
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June 25 (Bloomberg) -- Platinum futures in Tokyo headed for their longest losing streak in 10 months as declining equity markets and a U.S. sales warning from Toyota Motor Corp. prompted investors to quit the metal used for making auto catalysts.
Platinum fell for a fifth day, tracking a five-day slide in Japan's benchmark Nikkei 225 Stock Average and the MSCI Asia Pacific Index. A decline in U.S. consumer confidence to a 16-year low and a record drop in housing prices there also prompted some investors to shift from commodities to cash, said Kazuhiko Saito, a commodity strategist at Interes Capital Management.
``The economic data is bad and that's putting pressure on the platinum market,'' Saito said by phone today in Tokyo. ``Investors are going into cash from commodities.''
Platinum for April delivery in Tokyo plunged 166 yen, or 2.4 percent, to 6,806 yen a gram ($1,964 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most- active contract has declined 3.8 percent in the past five days.
Metal for immediate delivery fell $10 to $2,011 an ounce the same time, a 0.5 percent drop from late yesterday in New York.
The Nikkei 225 Stock Average dropped 1.5 percent, to 13,644.97 as of 11 a.m., taking its five-day decline, the longest this year, to 5.6 percent.
Toyota may cut its 2008 sales target after rising gasoline prices and the slowing U.S. economy slashed demand for large cars and pickups, the company said yesterday.
The New York-based Conference Board's confidence index for June yesterday dropped to 50.4, lower than expected and a 16-year low. Home prices in 20 U.S. cities dropped 15.3 percent in April from a year earlier, according to S&P/Case-Shiller, the most since the group began collecting data.
To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net.
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Gold Declines in Asia Before Fed's Decision on Interest Rates
By Feiwen Rong
June 25 (Bloomberg) -- Gold fell in Asia amid investor concerns that the dollar may gain as the U.S. Federal Reserve is forecast to keep borrowing costs unchanged later today, ending a run of seven interest-rate cuts.
Gold has gained 6.5 percent this year while the dollar has fallen 6.3 percent against the euro as investors usually buy gold as an alternative investment when the dollar is weakening. The dollar traded at $1.5562 per euro at 2:43 p.m. in Singapore from $1.5568 in late New York yesterday. It touched a record low at $1.6019 on April 22.
Traders ``will be closely watching the committee's accompanying statement for clues as to their future bias towards rates,'' Darren Heathcote, head of trading at Investec Bank Ltd., wrote in a report today.
Bullion for immediate delivery fell 0.2 percent to $887.90 an ounce at 3 p.m. in Singapore, from $889.60 yesterday in New York. Silver was little changed at $16.685 an ounce.
Futures contracts on the Chicago Board of Trade show a 35 percent chance the Fed will increase the target rate for overnight lending between banks by at least a quarter-percentage point at its August meeting, down from 47 percent odds a week ago after reports yesterday showed consumer confidence dropped to a 16-year low and house prices plunged in April.
Gold Holdings
``The market is wanting to get clues as to which way the Fed believes the economic winds are blowing,'' David Thurtell, metals analyst at BNP Paribas in London, said in a report yesterday.
Assets in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, advanced for a fourth consecutive day on June 23 to 628.21 tons, the highest since April 22, according to the SPDR Goldshares Web site. Holdings reached 663.83 tons on March 17, as bullion prices rose to a record $1,032.70 an ounce.
There is ``a large possibility'' gold prices could retest the all-time high, if the holdings continued to gain toward the March level, Adrian Koh, analyst at Phillip Futures Pte in Singapore, said in a report today.
Gold for August delivery was little changed at $889.90 an ounce in after-hours electronic trading on Comex at 2:46 p.m. Singapore time.
Gold for April 2009 delivery fell 12 yen, or 0.4 percent, to 3,104 yen a gram ($896 an ounce) on the Tokyo Commodity Exchange at 4:02 p.m. local time. Gold for December traded in Shanghai was little changed at 196.98 yuan a gram ($892 an ounce).
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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June 25 (Bloomberg) -- Gold fell in Asia amid investor concerns that the dollar may gain as the U.S. Federal Reserve is forecast to keep borrowing costs unchanged later today, ending a run of seven interest-rate cuts.
Gold has gained 6.5 percent this year while the dollar has fallen 6.3 percent against the euro as investors usually buy gold as an alternative investment when the dollar is weakening. The dollar traded at $1.5562 per euro at 2:43 p.m. in Singapore from $1.5568 in late New York yesterday. It touched a record low at $1.6019 on April 22.
Traders ``will be closely watching the committee's accompanying statement for clues as to their future bias towards rates,'' Darren Heathcote, head of trading at Investec Bank Ltd., wrote in a report today.
Bullion for immediate delivery fell 0.2 percent to $887.90 an ounce at 3 p.m. in Singapore, from $889.60 yesterday in New York. Silver was little changed at $16.685 an ounce.
Futures contracts on the Chicago Board of Trade show a 35 percent chance the Fed will increase the target rate for overnight lending between banks by at least a quarter-percentage point at its August meeting, down from 47 percent odds a week ago after reports yesterday showed consumer confidence dropped to a 16-year low and house prices plunged in April.
Gold Holdings
``The market is wanting to get clues as to which way the Fed believes the economic winds are blowing,'' David Thurtell, metals analyst at BNP Paribas in London, said in a report yesterday.
Assets in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, advanced for a fourth consecutive day on June 23 to 628.21 tons, the highest since April 22, according to the SPDR Goldshares Web site. Holdings reached 663.83 tons on March 17, as bullion prices rose to a record $1,032.70 an ounce.
There is ``a large possibility'' gold prices could retest the all-time high, if the holdings continued to gain toward the March level, Adrian Koh, analyst at Phillip Futures Pte in Singapore, said in a report today.
Gold for August delivery was little changed at $889.90 an ounce in after-hours electronic trading on Comex at 2:46 p.m. Singapore time.
Gold for April 2009 delivery fell 12 yen, or 0.4 percent, to 3,104 yen a gram ($896 an ounce) on the Tokyo Commodity Exchange at 4:02 p.m. local time. Gold for December traded in Shanghai was little changed at 196.98 yuan a gram ($892 an ounce).
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Asian Currencies: Ringgit, Baht Drop on Policy; Rupiah Advances
By David Yong and Shanthy Nambiar
June 25 (Bloomberg) -- Malaysia's ringgit fell, leading declines in Asian currencies, on concern investors will sell local assets as the region's central banks delay raising interest rates.
The currency headed for a loss this quarter as Bank Negara Malaysia said this month that altering its interest-rate policy for the first time since April 2006 may not address higher prices even as this month's fuel-price increase threatens to push inflation to a nine-year high. South Korea's won dropped after consumer confidence slumped to the lowest since the end of 2000 as higher food and energy bills eroded household incomes.
Malaysia's central bank ``will have to come in and hike or risk being behind the curve,'' said Chia Woon Khien, a Singapore-based strategist at Royal Bank of Scotland Plc. ``In some cases like Malaysia, the bond market has sold off,'' weakening the currency, she said.
The ringgit slid 0.3 percent to 3.2635 per dollar as of 11:39 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency has declined 2 percent this quarter, the first such drop since September 2006. The won fell 0.2 percent to 1,035.25, down 4.2 percent this quarter.
Bank Negara has kept its overnight policy rate unchanged at 3.5 percent in 16 straight meetings since April 2006. Governor Zeti Akhtar Aziz said on June 16 it doesn't plan to review its interest rates until policy makers next meet on July 25.
Malaysia's 10-year bonds fell yesterday, extending a six- week slump that pushed yields to 4.95 percent, the highest since July 2006, according to Bloomberg data. The Kuala Lumpur Composite Index of shares has lost 17 percent this year.
Confidence Slump
Elsewhere, Taiwan's dollar gained 0.1 percent to NT$30.397 against the U.S. currency, the Singapore dollar weakened 0.1 percent to S$1.3684 and the Philippine peso was little changed at 44.56.
The won extended this year's loss to 10 percent, making it the second-worst performer among Asia's 10 most-traded currencies outside Japan. The consumer sentiment index dropped to 86 in the second quarter, from 105 in the previous three months, the Bank of Korea said today in Seoul. A reading of less than 100 indicates pessimists outnumber optimists.
``The near-term risk is skewed to the upside for the dollar given won-bearish factors such as rising oil prices and monetary policy uncertainties,'' said Oh Suk Tae, an economist with Citigroup Inc. in Seoul.
The Bank of Korea Governor kept its benchmark repurchase rate at a seven-year high of 5 percent on June 12. Price gains will exceed the seven-year high of 4.9 percent recorded in May, Finance Minister Kang Man Soo said today.
India yesterday raised interest rates for the second time in two weeks to slow inflation from a 13-year high. Policy makers in Indonesia, the Philippines and Pakistan have lifted borrowing costs in the past month as oil prices almost doubled to $137 per barrel in the past year.
Thai Delay
Thailand's baht fell for a third day to 33.55 per dollar, taking this quarter's decline to 6.1 percent, on concern the Bank of Thailand's delay in raising borrowing costs will add to currency losses and import costs.
The currency is the worst performer in the region this year as the central bank held its one-day bond repurchase rate at 3.25 percent since August. Inflation more than doubled this year to 7.6 percent in May while the nation's current account slipped in May into the first deficit in 21 months.
`Preemptively Hiking Rates'
``The central bank should be preemptively hiking rates to anchor inflationary expectations,'' Sin Beng Ong, JPMorgan Chase & Co.'s Singapore-based economist, wrote in a client note yesterday. ``The risk is that inflation expectations and the price setting mechanism could quickly become unseated in an environment where the weakening balance of payments will likely lead to a weakening currency.''
Indonesia's rupiah rose 0.1 percent to a six-week high of 9,250 on speculation the central bank will buy the currency to help lower the cost of oil imports. Central banks intervene in the market by arranging purchases or sales of foreign exchange.
Bank Indonesia is ``still cautious about the oil price movement,'' said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore. ``They're trying to get the rupiah stronger to bring it back to 9,250.''
A government report next week will show inflation in Southeast Asia's biggest economy accelerated in June at the fastest pace in 21 months, according to economists in a Bloomberg survey.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net
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June 25 (Bloomberg) -- Malaysia's ringgit fell, leading declines in Asian currencies, on concern investors will sell local assets as the region's central banks delay raising interest rates.
The currency headed for a loss this quarter as Bank Negara Malaysia said this month that altering its interest-rate policy for the first time since April 2006 may not address higher prices even as this month's fuel-price increase threatens to push inflation to a nine-year high. South Korea's won dropped after consumer confidence slumped to the lowest since the end of 2000 as higher food and energy bills eroded household incomes.
Malaysia's central bank ``will have to come in and hike or risk being behind the curve,'' said Chia Woon Khien, a Singapore-based strategist at Royal Bank of Scotland Plc. ``In some cases like Malaysia, the bond market has sold off,'' weakening the currency, she said.
The ringgit slid 0.3 percent to 3.2635 per dollar as of 11:39 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency has declined 2 percent this quarter, the first such drop since September 2006. The won fell 0.2 percent to 1,035.25, down 4.2 percent this quarter.
Bank Negara has kept its overnight policy rate unchanged at 3.5 percent in 16 straight meetings since April 2006. Governor Zeti Akhtar Aziz said on June 16 it doesn't plan to review its interest rates until policy makers next meet on July 25.
Malaysia's 10-year bonds fell yesterday, extending a six- week slump that pushed yields to 4.95 percent, the highest since July 2006, according to Bloomberg data. The Kuala Lumpur Composite Index of shares has lost 17 percent this year.
Confidence Slump
Elsewhere, Taiwan's dollar gained 0.1 percent to NT$30.397 against the U.S. currency, the Singapore dollar weakened 0.1 percent to S$1.3684 and the Philippine peso was little changed at 44.56.
The won extended this year's loss to 10 percent, making it the second-worst performer among Asia's 10 most-traded currencies outside Japan. The consumer sentiment index dropped to 86 in the second quarter, from 105 in the previous three months, the Bank of Korea said today in Seoul. A reading of less than 100 indicates pessimists outnumber optimists.
``The near-term risk is skewed to the upside for the dollar given won-bearish factors such as rising oil prices and monetary policy uncertainties,'' said Oh Suk Tae, an economist with Citigroup Inc. in Seoul.
The Bank of Korea Governor kept its benchmark repurchase rate at a seven-year high of 5 percent on June 12. Price gains will exceed the seven-year high of 4.9 percent recorded in May, Finance Minister Kang Man Soo said today.
India yesterday raised interest rates for the second time in two weeks to slow inflation from a 13-year high. Policy makers in Indonesia, the Philippines and Pakistan have lifted borrowing costs in the past month as oil prices almost doubled to $137 per barrel in the past year.
Thai Delay
Thailand's baht fell for a third day to 33.55 per dollar, taking this quarter's decline to 6.1 percent, on concern the Bank of Thailand's delay in raising borrowing costs will add to currency losses and import costs.
The currency is the worst performer in the region this year as the central bank held its one-day bond repurchase rate at 3.25 percent since August. Inflation more than doubled this year to 7.6 percent in May while the nation's current account slipped in May into the first deficit in 21 months.
`Preemptively Hiking Rates'
``The central bank should be preemptively hiking rates to anchor inflationary expectations,'' Sin Beng Ong, JPMorgan Chase & Co.'s Singapore-based economist, wrote in a client note yesterday. ``The risk is that inflation expectations and the price setting mechanism could quickly become unseated in an environment where the weakening balance of payments will likely lead to a weakening currency.''
Indonesia's rupiah rose 0.1 percent to a six-week high of 9,250 on speculation the central bank will buy the currency to help lower the cost of oil imports. Central banks intervene in the market by arranging purchases or sales of foreign exchange.
Bank Indonesia is ``still cautious about the oil price movement,'' said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore. ``They're trying to get the rupiah stronger to bring it back to 9,250.''
A government report next week will show inflation in Southeast Asia's biggest economy accelerated in June at the fastest pace in 21 months, according to economists in a Bloomberg survey.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net
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India Rate Action Won't Stem Rupee Fall, Goldman Says
By Patricia Lui
June 25 (Bloomberg) -- India's decision to raise interest rates by the most since 2000 will fail to reverse the rupee's slide as the nation's current-account deficit widens on oil import costs, according to Goldman Sachs Group Inc.
The Reserve Bank of India raised its key repurchase rate for the second time in two weeks yesterday and signaled more will follow as oil's rally to a record this month pushed the inflation rate to the highest in 13 years. The rupee's 6.3 percent decline this quarter made it the second-worst performer among Asia's 10 most-active currencies excluding the yen.
``Given India's increasing current account deficit, high dependence on oil imports and inflation concerns, we expect the rupee to continue to weaken,'' wrote Tushar Poddar and Pranjul Bhandari, Goldman's Mumbai-based analysts, in a note yesterday.
The rupee strengthened 0.4 percent to 42.7910 against the dollar as at 12:24 p.m. in Mumbai, according to data compiled by Bloomberg. Goldman retained its forecast for the rupee to fall 2.5 percent against the dollar to 43.9 in three months and to 44.1 in six months.
The Reserve Bank raised the repurchase rate by 0.5 percentage point late yesterday to 8.5 percent and increased the cash-reserve ratio by a similar amount to 8.75 percent. On June 11, the central bank had raised the repurchase rate by 0.25 percentage point for the first time in 15 months, as the wholesale price index jumped 11.05 percent in the first week of June, the most since May 1995.
Selling Equities
Global funds, spooked by accelerating inflation, have dumped $6.3 billion more Indian shares than they bought this year, compared with a record net purchase of $17.2 billion in 2007. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, has slumped 30 percent in 2008, following a 47 percent advance last year.
``We remain bearish on rupee's medium-term prospects, owing to the continued pressure on the current account and simultaneous slowdown in net capital flows,'' JPMorgan Chase & Co.'s analysts Vikas Agarwal and Siddharth Mathur wrote in a research report yesterday. ``Likely bearish equity market reaction to the central bank's strong-dosage prescription could trigger withdrawals by foreign investors.''
The central bank's actions are ``positive'' and ``welcome'' moves, Goldman and JPMorgan said.
``The rupee may gain a brief reprieve,'' Mumbai-based Agarwal and Singapore-based Mathur said, as the higher cost of funds and the central bank's intervention to support the currency will ``temporarily soften the upward pressure on the dollar against the rupee.''
The Reserve Bank will likely raise the repurchase rate and cash reserve ratio again this year to rein in price pressures, the analysts at both the banks predicted.
JPMorgan also kept its forecast for the rupee to weaken to 45 a dollar by the end of the third quarter and to stay there until year-end.
To contact the report on this story: Patricia Lui in Singapore at plui4@bloomberg.net.
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June 25 (Bloomberg) -- India's decision to raise interest rates by the most since 2000 will fail to reverse the rupee's slide as the nation's current-account deficit widens on oil import costs, according to Goldman Sachs Group Inc.
The Reserve Bank of India raised its key repurchase rate for the second time in two weeks yesterday and signaled more will follow as oil's rally to a record this month pushed the inflation rate to the highest in 13 years. The rupee's 6.3 percent decline this quarter made it the second-worst performer among Asia's 10 most-active currencies excluding the yen.
``Given India's increasing current account deficit, high dependence on oil imports and inflation concerns, we expect the rupee to continue to weaken,'' wrote Tushar Poddar and Pranjul Bhandari, Goldman's Mumbai-based analysts, in a note yesterday.
The rupee strengthened 0.4 percent to 42.7910 against the dollar as at 12:24 p.m. in Mumbai, according to data compiled by Bloomberg. Goldman retained its forecast for the rupee to fall 2.5 percent against the dollar to 43.9 in three months and to 44.1 in six months.
The Reserve Bank raised the repurchase rate by 0.5 percentage point late yesterday to 8.5 percent and increased the cash-reserve ratio by a similar amount to 8.75 percent. On June 11, the central bank had raised the repurchase rate by 0.25 percentage point for the first time in 15 months, as the wholesale price index jumped 11.05 percent in the first week of June, the most since May 1995.
Selling Equities
Global funds, spooked by accelerating inflation, have dumped $6.3 billion more Indian shares than they bought this year, compared with a record net purchase of $17.2 billion in 2007. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, has slumped 30 percent in 2008, following a 47 percent advance last year.
``We remain bearish on rupee's medium-term prospects, owing to the continued pressure on the current account and simultaneous slowdown in net capital flows,'' JPMorgan Chase & Co.'s analysts Vikas Agarwal and Siddharth Mathur wrote in a research report yesterday. ``Likely bearish equity market reaction to the central bank's strong-dosage prescription could trigger withdrawals by foreign investors.''
The central bank's actions are ``positive'' and ``welcome'' moves, Goldman and JPMorgan said.
``The rupee may gain a brief reprieve,'' Mumbai-based Agarwal and Singapore-based Mathur said, as the higher cost of funds and the central bank's intervention to support the currency will ``temporarily soften the upward pressure on the dollar against the rupee.''
The Reserve Bank will likely raise the repurchase rate and cash reserve ratio again this year to rein in price pressures, the analysts at both the banks predicted.
JPMorgan also kept its forecast for the rupee to weaken to 45 a dollar by the end of the third quarter and to stay there until year-end.
To contact the report on this story: Patricia Lui in Singapore at plui4@bloomberg.net.
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Australian, N.Z. Dollars Rise as Fed May Delay Raising Rates
By Lilian Karunungan and Ron Harui
June 25 (Bloomberg) -- The Australian and New Zealand dollars climbed on speculation the Federal Reserve will delay raising interest rates, maintaining the yield advantage offered by the two South Pacific nations.
Australia's dollar, known as the Aussie, rose to a two-week high as traders pared bets the Fed will increase borrowing costs after U.S. reports yesterday showed consumer confidence fell to a 16-year low and housing prices slumped. New Zealand's dollar, nicknamed the kiwi, ended two days of losses as investors were attracted to the nation's 8.25 percent benchmark interest rate, the highest of any country with an Aaa credit rating.
``We still expect the Fed to hold steady,'' said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. ``The yield advantage will be there. That continues to underpin the other dollars like the Aussie and the kiwi.''
Australia's dollar rose to 95.60 U.S. cents as of 4:39 p.m. in Sydney from 95.36 cents late in Asia yesterday. It has risen 4.6 percent this quarter and 8.9 percent this year. The currency advanced to 103.35 yen, the strongest since Nov. 9, before trading at 103.12 yen from 102.97 yen. It has climbed 13.3 percent versus the yen this quarter.
New Zealand's dollar strengthened to 75.65 U.S. cents from 75.56 cents yesterday. It has fallen 4.2 percent this quarter and 2.2 percent this year. The currency, which has gained 3.7 percent this quarter, was unchanged at 81.60 yen.
Rate Futures
Futures contracts on the Chicago Board of Trade show a 35 percent chance the Fed will increase its target rate for overnight lending between banks by at least a quarter-point at its August meeting, down from 47 percent odds a week ago. There is a 10 percent chance the Fed will raise borrowing costs at its two-day meeting ending today, the contracts show.
Benchmark interest rates are 7.25 percent in Australia and 8.25 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan.
``The scaling back of Fed tightening expectations saw U.S. yields fall, increasing the interest-rate support for the New Zealand dollar,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. Still, ``worries about the sharp slowdown in the New Zealand economy should continue to temper gains.''
New Zealand's economy may have contracted 0.3 percent in the first three months of the year, according to the median forecast of 13 economists surveyed by Bloomberg News before the government reports the figure on June 27. Seven said the economy may also shrink in the second quarter, pushing New Zealand into its first recession since 1998.
There's a 28 percent chance the Reserve Bank of New Zealand will cut its 8.25 percent benchmark rate by a quarter-percentage point at next month's meeting, according to a Credit Suisse Group index based on trading in interest-rate swaps.
Bonds Gain
Australian government bonds gained, pushing the yield of the 10-year security down 7 basis points to 6.49 percent, according to data compiled by Bloomberg. The price of the 5.25 percent note due March 2019 rose 0.525, or A$5.25 per A$1,000 face amount, to 90.561.
New Zealand's government bonds rose with the yield on the benchmark 10-year note dropping 2 basis points to 6.42 percent. A basis point is 0.01 percentage point.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
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Euro May Reach 169 Yen If It Stays Over 167.59, Mitsubishi Says
By Kosuke Goto
June 25 (Bloomberg) -- The euro may rise to a record 169 Japanese yen should it stay above its five-day moving average, said Masashi Hashimoto, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.
The current five-day moving average is 167.59 and represents a level of so-called support, Tokyo-based Hashimoto said, citing technical charts traders use to predict price movements. The euro reached a record high of 168.99 yen on July 23. Support is an area where buy orders may be clustered.
``Should the euro stay beyond its five-day moving average, and should the average show the upward trend, the euro will have a high chance to reach its record high set on July 23,'' said Hashimoto at the unit of Japan's largest publicly traded financial group.
Europe's single currency traded at 167.82 yen at 11:58 a.m. in Tokyo, from 167.85 in New York yesterday, when it touched 168.38, the weakest since July 23.
If the euro rises beyond 169 yen, it may climb to 173.60, which is a 123.6 percent reversal of its decline to 149.27 on August 17 from a high of 168.99 on July 23, based on a series of numbers known as the Fibonacci sequence, Hashimoto said.
Other Fibonacci points are 38.2 percent, 50 percent and 61.8 percent. A break of one indicates a currency may move to the next, and a failure suggests a decline or a gain may stall.
Traders typically look for evidence of a currency's short- term trend by using the five-day moving average, and seek to predict two- to three-week trends with the 21-day moving average. They use moving averages to identify levels of support, where they expect buying, or resistance, where they expect selling.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast 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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June 25 (Bloomberg) -- The euro may rise to a record 169 Japanese yen should it stay above its five-day moving average, said Masashi Hashimoto, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.
The current five-day moving average is 167.59 and represents a level of so-called support, Tokyo-based Hashimoto said, citing technical charts traders use to predict price movements. The euro reached a record high of 168.99 yen on July 23. Support is an area where buy orders may be clustered.
``Should the euro stay beyond its five-day moving average, and should the average show the upward trend, the euro will have a high chance to reach its record high set on July 23,'' said Hashimoto at the unit of Japan's largest publicly traded financial group.
Europe's single currency traded at 167.82 yen at 11:58 a.m. in Tokyo, from 167.85 in New York yesterday, when it touched 168.38, the weakest since July 23.
If the euro rises beyond 169 yen, it may climb to 173.60, which is a 123.6 percent reversal of its decline to 149.27 on August 17 from a high of 168.99 on July 23, based on a series of numbers known as the Fibonacci sequence, Hashimoto said.
Other Fibonacci points are 38.2 percent, 50 percent and 61.8 percent. A break of one indicates a currency may move to the next, and a failure suggests a decline or a gain may stall.
Traders typically look for evidence of a currency's short- term trend by using the five-day moving average, and seek to predict two- to three-week trends with the 21-day moving average. They use moving averages to identify levels of support, where they expect buying, or resistance, where they expect selling.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast 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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Japan Stocks Fall as Developer Default Sparks Financial Concern
By Masaki Kondo
June 25 (Bloomberg) -- Japan's stocks fell, sending the benchmark index to its longest losing streak this year, on mounting doubts about the financial health of developers and consumer-finance companies.
Mitsui Fudosan Co. sent real-estate companies lower after a smaller rival filed for bankruptcy, while consumer lender Aiful Corp. tumbled to the lowest in a decade. Mazda Motor Corp., which exports 80 percent of domestic production, dropped on signs the U.S. economy is slowing.
``We may see more condominium developers go under as falling wages reduce demand, forcing builders to cut prices,'' said Naoki Fujiwara, who oversees the equivalent of $720 million as chief fund manager at Shinkin Asset Management Co. ``Non-performing loans are certainly on the rise among consumer lenders.''
The Nikkei 225 Stock Average sank 19.64, or 0.1 percent, to close at 13,829.92 in Tokyo, extending its drop to a fifth day. The broader Topix index fell 3.11, or 0.2 percent, to 1,346.08.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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European Stock-Index Futures Are Little Changed; BHP May Slip
By Adria Cimino
June 25 (Bloomberg) -- European stock-index futures were little changed before the Federal Reserve ends a two-day meeting at which policy makers are expected to halt a run of seven interest-rate cuts.
BHP Billiton Ltd, the world's biggest mining company, and Rio Tinto Group dropped in Australia as metals prices retreated. Scor SE may gain after UBS AG recommended shares of France's biggest reinsurer.
Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, fell 2, or less than 0.1 percent, to 3,432 at 7:05 a.m. in London. The U.K.'s FTSE 100 Index may decrease 9, according to Cantor Index, a betting firm.
Fed Chairman Ben S. Bernanke may signal today that inflation is now the biggest risk facing the economy as the central bank holds the benchmark rate at 2 percent today, stopping the fastest series of reductions in two decades, according to economists surveyed by Bloomberg News.
The Stoxx 600 has tumbled 19 percent this year on concern accelerating inflation, record oil prices and credit-related losses approaching $400 billion will erode economic and profit growth.
U.S. stocks retreated to a three-month low yesterday after consumer confidence weakened and United Parcel Service Inc. said rising fuel costs will reduce profit. Asian stocks today fell for a fifth day.
BHP, Rio Tinto
BHP Billiton sank 4.1 percent in Australia, while Rio Tinto, the world's third-largest mining company, lost 3.7 percent.
Platinum futures in Tokyo headed for their longest losing streak in 10 months. Gold also slid.
Scor was upgraded to ``buy'' from ``neutral'' at UBS, which cited low exposure to U.S. windstorms and an ``attractive'' earnings profile.
Swiss Reinsurance Co., the world's largest reinsurer, was raised to ``neutral'' from ``sell'' at UBS.
J.D. Wetherspoon Plc, the owner of almost 700 U.K. pubs, and Mitchells & Butlers Plc may climb after Goldman Sachs Group Inc. raised its recommendation on the shares.
J.D. Wetherspoon and Mitchells & Butlers, the owner of O'Neill's pubs and Browns restaurants, were lifted to ``neutral'' from ``sell'' at Goldman.
Escada AG may be active. Tchibo owners Wolfgang and Michael Herz are buying a ``significant minority interest'' in Escada, a German luxury fashion brand. Escada also named former Hugo Boss AG Chief Executive Officer Bruno Saelzer as CEO.
Swatch Group AG, the world's biggest watchmaker, may gain after Dresdner Kleinwort raised its recommendation on the stock to ``buy'' from ``add.''
Bradford & Bingley Plc, a U.K. mortgage lender, and Alliance & Leicester Plc, the British bank that gets a quarter of revenue from mortgages and savings, were both raised to ``equal-weight'' from ``underweight'' at Morgan Stanley.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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June 25 (Bloomberg) -- European stock-index futures were little changed before the Federal Reserve ends a two-day meeting at which policy makers are expected to halt a run of seven interest-rate cuts.
BHP Billiton Ltd, the world's biggest mining company, and Rio Tinto Group dropped in Australia as metals prices retreated. Scor SE may gain after UBS AG recommended shares of France's biggest reinsurer.
Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, fell 2, or less than 0.1 percent, to 3,432 at 7:05 a.m. in London. The U.K.'s FTSE 100 Index may decrease 9, according to Cantor Index, a betting firm.
Fed Chairman Ben S. Bernanke may signal today that inflation is now the biggest risk facing the economy as the central bank holds the benchmark rate at 2 percent today, stopping the fastest series of reductions in two decades, according to economists surveyed by Bloomberg News.
The Stoxx 600 has tumbled 19 percent this year on concern accelerating inflation, record oil prices and credit-related losses approaching $400 billion will erode economic and profit growth.
U.S. stocks retreated to a three-month low yesterday after consumer confidence weakened and United Parcel Service Inc. said rising fuel costs will reduce profit. Asian stocks today fell for a fifth day.
BHP, Rio Tinto
BHP Billiton sank 4.1 percent in Australia, while Rio Tinto, the world's third-largest mining company, lost 3.7 percent.
Platinum futures in Tokyo headed for their longest losing streak in 10 months. Gold also slid.
Scor was upgraded to ``buy'' from ``neutral'' at UBS, which cited low exposure to U.S. windstorms and an ``attractive'' earnings profile.
Swiss Reinsurance Co., the world's largest reinsurer, was raised to ``neutral'' from ``sell'' at UBS.
J.D. Wetherspoon Plc, the owner of almost 700 U.K. pubs, and Mitchells & Butlers Plc may climb after Goldman Sachs Group Inc. raised its recommendation on the shares.
J.D. Wetherspoon and Mitchells & Butlers, the owner of O'Neill's pubs and Browns restaurants, were lifted to ``neutral'' from ``sell'' at Goldman.
Escada AG may be active. Tchibo owners Wolfgang and Michael Herz are buying a ``significant minority interest'' in Escada, a German luxury fashion brand. Escada also named former Hugo Boss AG Chief Executive Officer Bruno Saelzer as CEO.
Swatch Group AG, the world's biggest watchmaker, may gain after Dresdner Kleinwort raised its recommendation on the stock to ``buy'' from ``add.''
Bradford & Bingley Plc, a U.K. mortgage lender, and Alliance & Leicester Plc, the British bank that gets a quarter of revenue from mortgages and savings, were both raised to ``equal-weight'' from ``underweight'' at Morgan Stanley.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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Bernanke May Halt Rate Cuts, Shift Focus to Inflation Concern
By Steve Matthews
June 25 (Bloomberg) -- The Federal Reserve may signal today that inflation is starting to replace a recession and the credit crunch as the biggest risk facing the economy.
Chairman Ben S. Bernanke and his colleagues are laying the groundwork for a policy shift after oil prices doubled in the past year and inflation exceeded 4 percent. At the same time, they may be reluctant to go too far because the economy has yet to shake off the credit crunch and bank losses are deepening.
The Federal Open Market Committee will leave the benchmark interest rate at 2 percent today, ending the fastest series of reductions in two decades, according to all 102 economists surveyed by Bloomberg News.
``They are going to lean a bit more to inflation risks than growth risks, and may provide a hint they could hike rates down the road,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. ``They will signal their concern in a subtle way, not explicitly. They don't want to have a statement that would tie their hands.''
Today's statement is scheduled for about 2:15 p.m. in Washington. Officials may say their past actions are helping sustain growth, while price increases might take time to moderate, Fed watchers said.
Fed governors and district-bank presidents are bringing new quarterly forecasts to the meeting, which began yesterday in Washington. As recently as April, ``many'' of them foresaw an economic contraction in the first half. That's now unlikely after more than $70 billion of tax rebates helped keep Americans spending and record exports eased the slump in manufacturing.
Bernanke's Assessment
Bernanke in a June 9 speech said that risks of a ``substantial downturn'' in the economy had diminished. He also flagged concerns about consumer prices, and warned that the Fed will ``strongly resist'' a leap in inflation expectations.
In the statement after their April 29-30 meeting, policy makers predicted inflation would ``moderate in coming quarters'' with a ``leveling out'' of commodity prices. Since then, gasoline prices have surged 13 percent to a record, and consumer expectations for average inflation over the next five years reached the highest since 1995.
Bernanke's warning this month spurred traders to bet on a rate rise. There are 33 percent odds of a boost in August and 88 percent in September, according to contracts quoted on the Chicago Board of Trade.
Emergency Measures
One impediment to an early increase may be the Fed's emergency programs providing funds for investment banks. Officials introduced them in March to alleviate the credit crisis that pushed Bear Stearns Cos. close to bankruptcy.
It may be difficult for the Fed to justify raising the cost of credit while at the same time lending to nonbanks, something it's only supposed to do under ``unusual and exigent circumstances'' when no other ``adequate'' credit is available.
The Primary Dealer Credit Facility allows securities firms to borrow from the Fed overnight at the same so-called discount rate available to commercial banks. The Fed said in March the program would be in place ``for at least six months.''
``The withdrawing of facilities creates some risk'' for the credit-market outlook, said Brian Sack, senior economist at Macroeconomic Advisers LLC in Washington and a former research manager at the Fed board. ``They may want to withdraw the facilities and see how credit conditions respond before'' lifting rates, he said.
Policy Priority
In its April 30 statement, the FOMC avoided specifying whether weaker growth or faster inflation was the greater concern. In their paragraph telegraphing policy priorities, officials may reiterate they will ``act as needed'' to promote both economic expansion and stable prices, Fed watchers said.
That would afford policy makers some flexibility. Higher borrowing costs now would hurt banks grappling with mounting losses. Commercial bank loans written off as unrecoverable climbed to 0.97 percent of the total in the first quarter, the highest since 2002, Fed data showed last month.
``It's a delicate balancing act -- don't look for a signal of a strong inclination for raising rates,'' said Michael Feroli, a former Fed researcher who is now an economist at JPMorgan Chase & Co. in New York.
One way of strengthening the message on inflation would be to echo the emphasis that Bernanke, Vice Chairman Donald Kohn and other officials have placed this month on keeping inflation expectations in check. In its last statement, the FOMC said it was important to monitor price developments ``carefully.''
Inflation Expectations
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to a Reuters/University of Michigan survey. The five-year outlook among investors has been more stable, at 2.41 percent, up from 2.31 percent in January, according to a measure derived from inflation-linked Treasuries.
Consumer prices rose 4.2 percent in the 12 months to May, government figures show.
``They might emphasize their concern with inflation expectations, saying that it will be necessary to continue to monitor inflation developments, and particularly inflation expectations, carefully,'' said former Fed governor Lyle Gramley, who is now senior economic adviser Washington for Stanford Group Co., a wealth-management firm.
To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net.
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India Signals Further Rate Moves to Fight Inflation
By Cherian Thomas and Anil Varma 
Governor Yaga Venugopal Reddy has been caught wrong-footed in setting policy by the surge in crude-oil prices that pushed inflation to a 13-year high. Higher rates are needed to convince investors that officials won't let inflation erode returns on stocks and the currency, which have suffered their worst start to the year in at least a quarter-century.
``The RBI is trying to catch up with the curve finally,'' said Edwin Gutierrez, who manages $5.5 billion in emerging- market debt in London at Aberdeen Asset Management. ``The move underscores the fact that they blew their opportunity to do this earlier.''
Yesterday's decision came a month before the next monetary policy meeting, scheduled for July 29, as the impact of the first increase in gasoline prices in more than a year pushed inflation to double Reddy's target. Higher fuel prices accounted for most of the 11.05 percent wholesale rate of inflation during the first week of June.
First Step
The central bank may raise interest rates by another 25 basis points in the July 29 policy meeting, economists at JPMorgan Chase & Co. said, while analysts at Citigroup Inc. expect borrowing costs to be increased by as much as 50 basis points without giving a time frame.
``If inflation indicators don't start to come down in the next two or three months, the RBI has more tricks up its sleeve,'' said Jyoti Narasimhan, research director for India at Global Insight Inc. in Lexington, Massachusetts. ``This is more of a first step than a last step.''
The government needs a stronger rupee to lower import costs and aid in curbing prices. The rupee has fallen 8.2 percent this year, making India the only one of the so-called BRIC nations including Brazil, China and Russia that has a weaker currency. The rupee gained 0.2 percent to 42.87 per dollar at 10:55 a.m.
``The policy stance adopted by the RBI should boost the confidence of investors, both domestic and foreign, and augur well for economic growth,'' the finance ministry said in a statement in New Delhi today. ``The objective of the RBI is to moderate and manage aggregate demand.''
Spooked Investors
Overseas investors, spooked by accelerating inflation, have dumped $6.2 billion more of Indian shares than they bought this year, causing a 30 percent decline in the Sensitive index.
India's 10-year bond yields climbed to as much as 8.86 percent, the highest since October 2001 in Mumbai. The benchmark Sensitive stock index fell 1 percent to 13,967.8, after earlier declining to the lowest in 13 months.
Last week's spurt in inflation in India was driven by the first increase in retail prices of gasoline and diesel this year. India joined China, Indonesia, Malaysia and Sri Lanka as a near doubling of oil prices pushed up costs and eroded profits of refiners such as Indian Oil Corp.
`Inflation Shocker'
``The latest inflation reading was a shocker because of the nature of the oil prices passthrough,'' said S. Ananthanarayan, chief bond trader at Kotak Mahindra Bank Ltd., a Mumbai-based primary dealer that underwrites government debt sales. ``They probably felt all the measures they've taken so far have been inadequate, and now they're playing catch-up.''
Higher inflation may further hurt consumer demand and threatens to derail India's record 8.8 percent annual economic growth since 2003, the fastest after China among the world's major economies.
The inflation rate has almost tripled this year, eroding the popularity of Prime Minister Manmohan Singh's ruling Congress Party, which lost ground in nine of 11 state elections since January 2007. Congress will also face criticism from its communist allies today over a nuclear accord with the U.S. that threatens its four-year hold on power.
``The Manmohan Singh government is squarely responsible for this dismal situation,'' the Communist Party of India (Marxist), the biggest ally of the government, said on June 20. ``It cannot escape by blaming global inflation.''
`Line of Defense'
Finance Secretary D. Subbarao said June 21 that monetary policy is the ``first line of defense'' as the government tries to keep food and fuel affordable before elections. More than half of India's 1.1 billion people live on less than $2 a day.
Before yesterday's move, Reddy had raised the repurchase rate eight times in the past 2 1/2 years and increased the cash reserve ratio seven times since December 2006 to slow money supply and cool inflation.
The central bank's reserve ratio will be increased to 8.5 percent from the fortnight commencing July 5 and raised to 8.75 percent in the two weeks starting July 19, according to yesterday's statement.
India has supported monetary policy steps with tax cuts to ease prices. On June 4 the government scrapped taxes on imports of crude oil and reduced duties on other fuel products, forgoing $5.3 billion of revenue to cushion consumers from high fuel costs.
``It'll be difficult for them to hike just once or twice and then step back,'' said Paresh Upadhyaya, who helps oversee about $50 billion in currency assets, including in emerging markets, at Putnam Investments in Boston. ``This is going to be a clear tightening cycle, and I expect more to come in the next 12 months.''
To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net
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June 25 (Bloomberg) -- India's central bank signaled it will keep raising borrowing costs after unexpectedly lifting interest rates for the second time in two weeks and telling lenders to keep more cash in reserve. Bonds and stocks tumbled.
The Reserve Bank of India increased the repurchase rate by 0.5 percentage point late yesterday to 8.5 percent, the biggest move since 2000, and adjusted the cash-reserve ratio by a similar margin to 8.75 percent. A ``heightened vigil'' was needed to anchor inflation expectations, the central bank said in a faxed statement.Governor Yaga Venugopal Reddy has been caught wrong-footed in setting policy by the surge in crude-oil prices that pushed inflation to a 13-year high. Higher rates are needed to convince investors that officials won't let inflation erode returns on stocks and the currency, which have suffered their worst start to the year in at least a quarter-century.
``The RBI is trying to catch up with the curve finally,'' said Edwin Gutierrez, who manages $5.5 billion in emerging- market debt in London at Aberdeen Asset Management. ``The move underscores the fact that they blew their opportunity to do this earlier.''
Yesterday's decision came a month before the next monetary policy meeting, scheduled for July 29, as the impact of the first increase in gasoline prices in more than a year pushed inflation to double Reddy's target. Higher fuel prices accounted for most of the 11.05 percent wholesale rate of inflation during the first week of June.
First Step
The central bank may raise interest rates by another 25 basis points in the July 29 policy meeting, economists at JPMorgan Chase & Co. said, while analysts at Citigroup Inc. expect borrowing costs to be increased by as much as 50 basis points without giving a time frame.
``If inflation indicators don't start to come down in the next two or three months, the RBI has more tricks up its sleeve,'' said Jyoti Narasimhan, research director for India at Global Insight Inc. in Lexington, Massachusetts. ``This is more of a first step than a last step.''
The government needs a stronger rupee to lower import costs and aid in curbing prices. The rupee has fallen 8.2 percent this year, making India the only one of the so-called BRIC nations including Brazil, China and Russia that has a weaker currency. The rupee gained 0.2 percent to 42.87 per dollar at 10:55 a.m.
``The policy stance adopted by the RBI should boost the confidence of investors, both domestic and foreign, and augur well for economic growth,'' the finance ministry said in a statement in New Delhi today. ``The objective of the RBI is to moderate and manage aggregate demand.''
Spooked Investors
Overseas investors, spooked by accelerating inflation, have dumped $6.2 billion more of Indian shares than they bought this year, causing a 30 percent decline in the Sensitive index.
India's 10-year bond yields climbed to as much as 8.86 percent, the highest since October 2001 in Mumbai. The benchmark Sensitive stock index fell 1 percent to 13,967.8, after earlier declining to the lowest in 13 months.
Last week's spurt in inflation in India was driven by the first increase in retail prices of gasoline and diesel this year. India joined China, Indonesia, Malaysia and Sri Lanka as a near doubling of oil prices pushed up costs and eroded profits of refiners such as Indian Oil Corp.
`Inflation Shocker'
``The latest inflation reading was a shocker because of the nature of the oil prices passthrough,'' said S. Ananthanarayan, chief bond trader at Kotak Mahindra Bank Ltd., a Mumbai-based primary dealer that underwrites government debt sales. ``They probably felt all the measures they've taken so far have been inadequate, and now they're playing catch-up.''
Higher inflation may further hurt consumer demand and threatens to derail India's record 8.8 percent annual economic growth since 2003, the fastest after China among the world's major economies.
The inflation rate has almost tripled this year, eroding the popularity of Prime Minister Manmohan Singh's ruling Congress Party, which lost ground in nine of 11 state elections since January 2007. Congress will also face criticism from its communist allies today over a nuclear accord with the U.S. that threatens its four-year hold on power.
``The Manmohan Singh government is squarely responsible for this dismal situation,'' the Communist Party of India (Marxist), the biggest ally of the government, said on June 20. ``It cannot escape by blaming global inflation.''
`Line of Defense'
Finance Secretary D. Subbarao said June 21 that monetary policy is the ``first line of defense'' as the government tries to keep food and fuel affordable before elections. More than half of India's 1.1 billion people live on less than $2 a day.
Before yesterday's move, Reddy had raised the repurchase rate eight times in the past 2 1/2 years and increased the cash reserve ratio seven times since December 2006 to slow money supply and cool inflation.
The central bank's reserve ratio will be increased to 8.5 percent from the fortnight commencing July 5 and raised to 8.75 percent in the two weeks starting July 19, according to yesterday's statement.
India has supported monetary policy steps with tax cuts to ease prices. On June 4 the government scrapped taxes on imports of crude oil and reduced duties on other fuel products, forgoing $5.3 billion of revenue to cushion consumers from high fuel costs.
``It'll be difficult for them to hike just once or twice and then step back,'' said Paresh Upadhyaya, who helps oversee about $50 billion in currency assets, including in emerging markets, at Putnam Investments in Boston. ``This is going to be a clear tightening cycle, and I expect more to come in the next 12 months.''
To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net
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Japan's Exports Grow 3.7% as Asian Shipments Offset U.S. Slump
By Jason Clenfield and Lily Nonomiya
June 25 (Bloomberg) -- Japan's exports grew at twice the pace economists estimated in May, as accelerating shipments to Asia helped the economy withstand a slump caused by falling demand from the U.S. and Europe.
Exports, which contributed at least half of Japan's growth in the past three quarters, rose 3.7 percent from a year earlier after climbing 3.9 percent in April, the Finance Ministry said today in Tokyo. The gain was faster than the 1.9 percent median prediction of 18 economists surveyed by Bloomberg News.
Asia, the destination of half of Japan's goods sent abroad, supported exporters including Idemitsu Kosan Co. even as the yen gained 14 percent and shipments to Europe fell for the first time in more than two years. Exports to the U.S. declined for a ninth month, and sales may worsen after consumer confidence in Japan's biggest overseas market dropped to a 16-year low.
``We expect exports to slow from here. In trend terms, it's already happening,'' said Hiroshi Shiraishi, an economist at Lehman Brothers Holdings Inc. in Tokyo. ``Looking ahead, we think Asian economies will slow because of inflation, and in the U.S., the fundamentals of the consumer economy are pretty bad.''
The Nikkei 225 Stock Average slipped 1 percent as of 1:06 p.m. in Tokyo on concern that the drop in U.S. household confidence will reduce demand for the nation's cars and electronics. The yen was little changed at 107.76 per dollar.
Exports to Asia climbed 8.1 percent from a year earlier, and those to China gained 12.3 percent, led by shipments of steel, automobiles and oil products. Japan's refiners sent extra fuel to China as part of relief efforts following the May 12 earthquake that killed more than 69,000 people.
Idemitsu's Expansion
Idemitsu Kosan, Japan's second-biggest refiner, said this month that may double its storage and pipe capacity within the next three years to tap Asia's rising demand.
``The strength of exports to China and other Asian countries became more prominent,'' said Junko Nishioka, a senior economist at ABN Amro Securities Japan Ltd. in Tokyo. ``Japan's economic growth will keep slowing, but it can probably avoid a contraction.''
Imports advanced 4.4 percent from a year earlier as oil prices surged to a record, narrowing the trade surplus by 7.6 percent to 365.6 billion yen ($3.4 billion), the ministry said. Economists expected a surplus of 30 billion yen.
While eroding profits, the commodity price shock is also increasing sales of Japanese cars and construction equipment to resource-rich markets. Shipments to Russia, the world's biggest exporter of oil and gas, soared 58.8 percent last month.
Exports to the U.S. fell 9.5 percent and shipments to Europe slid 1.1 percent, the first drop since October 2005.
Slowdown Spreading
``With the U.S. and European economies slowing, we're going to see that start to spread to the global economy,'' said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo. ``Given the ongoing slump in the U.S. economy, the question is whether U.S.-bound exports will get even worse or will just be unimpressive.''
The World Bank said this month it expects global growth to slow to 2.7 percent this year from 3.7 percent in 2007 because of surging prices and the subprime credit crisis.
Japan may lose the boost that sales overseas have been providing throughout its longest postwar expansion. Exports have grown less than 4 percent on average in April and May, slowing from 6.2 percent in the first quarter. Economists predict net exports won't contribute to economic growth this quarter.
Businesses are paring production and spending on concern that demand will weaken and record oil prices will further crimp profits. Sentiment at large manufacturers marked the biggest drop in four years this quarter and companies said they plan to cut spending by 0.9 percent this year, a report this week showed.
``Eventually we're going to see more signs of an export slowdown,'' Lehman's Shiraishi said. ``But I admit, we've been saying that for a long time.''
To contact the reporters on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net.
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Asian Stocks Drop for a Fifth Day as U.S. Confidence Declines
By Chua Kong Ho and Katherine Espina
June 25 (Bloomberg) -- Asian stocks fell for a fifth day, led by carmakers and electronics manufacturers as a drop in U.S. consumer confidence and home prices added to concern demand for exports will wane in their biggest overseas market.
Toyota Motor Corp., Japan's largest automaker, and Matsushita Electric Industrial Co. led declines after the U.S. Conference Board's confidence index tumbled to a 16-year low. BHP Billiton Ltd., the world's biggest mining company, dropped the most in two weeks after metals prices fell.``As long as U.S. data continues to look bad, it will definitely create fear and uncertainty in Asia,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets worldwide.
The MSCI Asia Pacific Index dropped 1 percent to 137.22 as of 11 a.m. in Tokyo, extending a four-day, 4.1 percent decline. About five stocks fell for each two that rose today, with nine of the benchmark's 10 industry groups retreating.
The Asian benchmark has lost 13 percent this year as credit- related losses among financial institutions and a 43 percent jump in oil raised concern the global economy will slow. More than $8 trillion in global stock market value has been wiped out in 2008.
Japan's Nikkei 225 Stock Average slipped 1.5 percent to 13,644.97. Shimamura Co., an operator of clothing stores, tumbled the most in almost nine months after UBS AG cut its rating.
Australia's S&P/ASX 200 Index lost 0.7 percent as Macarthur Coal Ltd., the world's largest exporter of pulverized coal, plunged after ending takeover talks with ArcelorMittal yesterday.
Tumbling Confidence
Hong Kong's stock market will be closed this morning because of Typhoon Fensheng and may resume trading in the afternoon, the exchange said. All markets open for trading in Asia declined apart from Malaysia.
U.S. stocks retreated to a three-month low yesterday after the Conference Board's confidence index slumped more than forecast and the S&P/Case-Shiller home-price index fell the most on record. Consumer spending accounts for more than two thirds of the U.S. economy.
Toyota, which derives about half of its profit from North America, declined 1.7 percent to 5,140 yen. Matsushita Electric, the world's largest maker of consumer electronics, fell 1 percent to 2,380 yen.
BHP dropped 2.5 percent to A$44.75, while rival Rio Tinto Group retreated 1.6 percent to A$139.50. BHP said higher iron-ore prices agreed to by Rio from Chinese steelmakers are too low to cover extra shipping costs.
BHP and Toyota were the biggest contributors to the MSCI Asian index's decline.
Metals Prices
A measure of six metals traded on the London Metal Exchange dropped 1.1 percent yesterday. Zinc declined 1.4 percent, copper 0.6 percent and nickel 1.6 percent. Raw-materials producers had the biggest decline among the MSCI Asian gauge's 10 groups today.
Shimamura fell 8 percent to 6,720 yen, after UBS cut its rating on the clothing retailer to ``neutral'' from ``buy,'' citing slower spending.
Macarthur Coal tumbled 9.5 percent to A$18.77, after Chairman Keith De Lacy said yesterday no agreement with ArcelorMittal, the world's largest steelmaker, has been reached in its takeover discussions.
Woodside Petroleum Ltd. led oil and gas producers higher after oil rose to $138.75 a barrel in New York, the highest since reaching a record $139.89 on June 16. Woodside, Australia's second-largest oil and gas producer, climbed 2.1 percent to A$67.54, while rival Santos Ltd. gained 1.5 percent to A$21.73.
Energy stocks had the biggest gain among the 10 industry groups on MSCI's Asian benchmark today.
To contact the reporter for this story: Chua Kong Ho at kchua6@bloomberg.net; Katherine Espina at kespina@bloomberg.net
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US rates expected to stay at 2%
US interest rates are expected to remain at 2% amid further signs of problems in the housing market and falling consumer confidence.
Analysts suggest the Federal Reserve faces a difficult balancing act as it tries to cope with rising prices and a slowing economy.
US consumer confidence is reportedly at its lowest level in 16 years.
Meanwhile, a survey suggested house prices were substantially lower in April compared with a year earlier.
Higher oil prices, high commodity prices and higher fuel prices are causing an inflation headache for the Central Bank, according to the BBC's Michelle Fleury in New York.
Analysts suggest the next move in rates could be upwards in an attempt to tackle inflation.
But that could worsen the economic slowdown caused by crises in the credit and housing markets, economists suggest.
It is a situation that the head of the IMF recently described as being caught between "fire and ice".
Although no change in rates is expected on Wednesday, investors will watch closely for any accompanying statements from the Fed for an indication of what its future interest rate policy might be, our correspondent says.
Housing slump
In the housing market, property prices fell by their fastest rate since 2000, according to the Case-Schiller home price index released on Tuesday.
Prices in the 20 cities it monitors were 15.3% lower in April compared to the year before.
The narrower 10-city index was 16.3% down, its biggest decline in its more than two-decade history.
Las Vegas and Miami experienced falls of more than 25%, while the declines in Denver, Chicago and Cleveland were less severe than in the previous month.
Economic gloom
The latest reading of US consumer sentiment also showed a worsening situation.
Higher food and fuel prices and fears over the economy, jobs and wages mean that US consumers' expectations for the next six months are at an all-time low, according to the Conference Board which polls 5000 households monthly.
The percentage of consumers expecting business conditions to get worse over the next six months jumped to 33.9% in June from 32.9% the previous month.
And the percentage of those expecting fewer jobs to be created in the months ahead rose to 35.5% from 32.3%.
"They feel purchasing power is diminishing. They've got rising gas and food prices and they don't feel wages are keeping pace with it and that is really taking a bite out of consumer confidence," Lynn Franco from the Conference Board told BBC News.
Taken From : http://news.bbc.co.uk
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Platinum Falls on Concern Auto Sales Weaken; Palladium Declines
By Halia Pavliva
June 24 (Bloomberg) -- Platinum fell to the lowest in more than a week on concern that demand will weaken for the metal used in engine exhaust filters as U.S. vehicle sales may touch a 15-year low this month. Palladium also declined.
Vehicle sales may drop to an annual rate of 12.5 million to 13 million units this month, according to Citigroup Inc. and Deutsche Bank AG analysts. That would be the lowest U.S. auto sales rate since March 1993 and down as much as 20 percent from a year earlier. Platinum mine output trailed demand in eight of the past nine years, metal trader Johnson Matthey Plc has said.
``Supply fundamentals in the complex are being offset by worries that auto sales could fall through the floor in the wake of current gas prices,'' Jon Nadler, a senior analyst at Kitco Minerals & Metals Inc. in Montreal, said in an e-mailed note. Gas prices at U.S. pumps are hovering around $4 a gallon.
Platinum futures for July delivery fell $14.20, or 0.7 percent, to $2,031.50 an ounce on the New York Mercantile Exchange, after touching $2,026 earlier, the lowest since June 16.
Most-active futures dropped 1.7 percent in the past five sessions, while they are still up 33 percent this year. That compares with a 33 percent gain in all of last year. Platinum reached a record $2,308.80 on March 4.
Palladium futures for September delivery slipped $2.30, or 0.5 percent, to $471.95 an ounce. Most-active futures have gained 25 percent this year, including a 1.7 percent rise in the past five sessions.
Platinum output this year is expected to trail demand by 260,000 ounces, London-based Blue Oar Securities Plc said in a report last month.
Slump in Car Buying
U.S. auto sales have averaged 16.8 million units a year this decade, and are now at ``surprisingly low levels,'' Deutsche Bank analyst Rod Lache said in a report.
Confidence among U.S. consumers fell to the lowest in 16 years and house prices in major cities slid the most on record, raising the risk that consumers will cut back on purchases, according to reports released today.
The Conference Board's consumer confidence index fell to 50.4 in June from 57.2 in May. Home prices in 20 cities dropped about 15 percent in April from a year earlier, S&P/Case-Shiller said, the most since the group began collecting data.
Sales of cars and trucks by U.S. automakers may drop to 14.5 million this year, Lache said. That would be the fewest since 1993, when 13.9 million were sold. From January through May, U.S. light vehicle sales fell 8.4 percent to 6.2 million, according to Autodata Corp. of Woodcliff Lake, New Jersey.
June sales may fall as low as 12.5 million, on an annual basis, according to Citigroup analyst Itay Michaeli.
Dollar Effect
Still, platinum may rise as the weaker dollar and higher crude-oil prices enhance the appeal of the precious metal as a hedge against inflation, said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.
Some investors buy platinum, which is priced in dollars and used in jewelry as well as car and truck parts, to preserve value when the U.S. currency weakens. The U.S. Dollar Index, a gauge that includes the euro and yen among six major currencies, fell as much as 0.5 percent.
``The dollar has a lot to do with it, as well as other factors, such as oil,'' Kaplan said. ``If crude goes up, platinum goes up as well.''
Crude-oil futures rose as much as 1.5 percent in New York.
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net
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June 24 (Bloomberg) -- Platinum fell to the lowest in more than a week on concern that demand will weaken for the metal used in engine exhaust filters as U.S. vehicle sales may touch a 15-year low this month. Palladium also declined.
Vehicle sales may drop to an annual rate of 12.5 million to 13 million units this month, according to Citigroup Inc. and Deutsche Bank AG analysts. That would be the lowest U.S. auto sales rate since March 1993 and down as much as 20 percent from a year earlier. Platinum mine output trailed demand in eight of the past nine years, metal trader Johnson Matthey Plc has said.
``Supply fundamentals in the complex are being offset by worries that auto sales could fall through the floor in the wake of current gas prices,'' Jon Nadler, a senior analyst at Kitco Minerals & Metals Inc. in Montreal, said in an e-mailed note. Gas prices at U.S. pumps are hovering around $4 a gallon.
Platinum futures for July delivery fell $14.20, or 0.7 percent, to $2,031.50 an ounce on the New York Mercantile Exchange, after touching $2,026 earlier, the lowest since June 16.
Most-active futures dropped 1.7 percent in the past five sessions, while they are still up 33 percent this year. That compares with a 33 percent gain in all of last year. Platinum reached a record $2,308.80 on March 4.
Palladium futures for September delivery slipped $2.30, or 0.5 percent, to $471.95 an ounce. Most-active futures have gained 25 percent this year, including a 1.7 percent rise in the past five sessions.
Platinum output this year is expected to trail demand by 260,000 ounces, London-based Blue Oar Securities Plc said in a report last month.
Slump in Car Buying
U.S. auto sales have averaged 16.8 million units a year this decade, and are now at ``surprisingly low levels,'' Deutsche Bank analyst Rod Lache said in a report.
Confidence among U.S. consumers fell to the lowest in 16 years and house prices in major cities slid the most on record, raising the risk that consumers will cut back on purchases, according to reports released today.
The Conference Board's consumer confidence index fell to 50.4 in June from 57.2 in May. Home prices in 20 cities dropped about 15 percent in April from a year earlier, S&P/Case-Shiller said, the most since the group began collecting data.
Sales of cars and trucks by U.S. automakers may drop to 14.5 million this year, Lache said. That would be the fewest since 1993, when 13.9 million were sold. From January through May, U.S. light vehicle sales fell 8.4 percent to 6.2 million, according to Autodata Corp. of Woodcliff Lake, New Jersey.
June sales may fall as low as 12.5 million, on an annual basis, according to Citigroup analyst Itay Michaeli.
Dollar Effect
Still, platinum may rise as the weaker dollar and higher crude-oil prices enhance the appeal of the precious metal as a hedge against inflation, said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.
Some investors buy platinum, which is priced in dollars and used in jewelry as well as car and truck parts, to preserve value when the U.S. currency weakens. The U.S. Dollar Index, a gauge that includes the euro and yen among six major currencies, fell as much as 0.5 percent.
``The dollar has a lot to do with it, as well as other factors, such as oil,'' Kaplan said. ``If crude goes up, platinum goes up as well.''
Crude-oil futures rose as much as 1.5 percent in New York.
To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net
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Gold: Don't count on $1,000
With oil prices rising and the dollar weakening, gold has climbed back above $900. But there's not much more headroom.
By Paul R. La Monica, CNNMoney.com editor at large
NEW YORK (CNNMoney.com) -- Don't look now but the price of gold is back above $900 an ounce.
Gold, which typically rises during times of economic uncertainty and inflation, hit an all-time high of more than $1,030 an ounce back in mid-March.
The price started to slip soon after that as credit crunch fears subsided. But it has been back on the rise this week partly due to the dollar's weakness and stubbornly high oil prices.
Talkback: Will gold hit a new record anytime soon?
A week ago, gold futures were trading at $866 an ounce. Today, they hit nearly $909 in mid-morning trading. That's a 5% jump in just a couple of days.
So will gold prices keep rising? And what should investors do about it?
There is a case to be made that gold prices will continue to rise modestly. Demand for gold is still strong in many emerging markets. As such, profits for many gold miners are expected to double this year.
Still, most financial planners and market strategists say that people should only have a very small percentage of their portfolio dedicated to gold. It is, after all, an incredibly volatile investment. And betting on gold often means that you're taking a leap of faith about currency and interest-rate fluctuations as opposed to looking at fundamentals like sales and earnings growth.
But based on how well the gold market is doing this year, it's not a bad idea to have some exposure to gold given how it is typically a hedge against inflation.
Gold prices are up nearly 9% year-to-date. Not surprisingly then, gold stocks, mutual funds and ETFs have been some of the market's better performers during this tumultuous year on Wall Street.
According to fund tracker Morningstar, precious metals funds are up 1% year-to-date compared to a 8.5% loss for the S&P 500. And top mining stocks such as Goldcorp (GG), Agnico-Eagle Mines (AEM) and Yamana Gold (AUY) have each gained more than 10% in 2008.
Nonetheless, investors probably shouldn't expect a return to $1000 in the near future.
Keep in mind, when gold hit its all-time high, the overall market was in a panic about whether Bear Stearns would collapse.
Barring another major scare to the market like that, it's hard to imagine that gold will shoot up to a new record, especially if the Fed does actually raise rates later this year, a move that could help strengthen the dollar and lead to a pullback in commodity prices.
"I don't think we're going back to $1,000 levels," said Keith Walter, co-manager with the Julius Baer Global Equity fund. "There is a wide pricing disparity between gold and oil but I think that will narrow with crude coming down, not gold catching up."
In addition, Walter said that although global demand is still strong for gold, there are concerns that China's economy may be starting to slow a bit. That could dampen gold prices.
"We've been pleased with our investments in metals and mining but we're cutting back though because we're starting to see cracks in the Chinese economy," Walter said. As such, he said his fund has reduced its exposure to mining stocks. It still owns several though, including Newmont Mining (NEM, Fortune 500) and Freeport McMoRan Copper & Gold (FCX, Fortune 500).
So even though investing in gold and gold mining stocks may be a good idea for a long-term portfolio, now's not the time to go overboard and make too a big bet on all that glitters.
Taken From : http://money.cnn.com
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By Paul R. La Monica, CNNMoney.com editor at large
NEW YORK (CNNMoney.com) -- Don't look now but the price of gold is back above $900 an ounce.
Gold, which typically rises during times of economic uncertainty and inflation, hit an all-time high of more than $1,030 an ounce back in mid-March.
The price started to slip soon after that as credit crunch fears subsided. But it has been back on the rise this week partly due to the dollar's weakness and stubbornly high oil prices.
Talkback: Will gold hit a new record anytime soon?
A week ago, gold futures were trading at $866 an ounce. Today, they hit nearly $909 in mid-morning trading. That's a 5% jump in just a couple of days.
So will gold prices keep rising? And what should investors do about it?
There is a case to be made that gold prices will continue to rise modestly. Demand for gold is still strong in many emerging markets. As such, profits for many gold miners are expected to double this year.
Still, most financial planners and market strategists say that people should only have a very small percentage of their portfolio dedicated to gold. It is, after all, an incredibly volatile investment. And betting on gold often means that you're taking a leap of faith about currency and interest-rate fluctuations as opposed to looking at fundamentals like sales and earnings growth.
But based on how well the gold market is doing this year, it's not a bad idea to have some exposure to gold given how it is typically a hedge against inflation.
Gold prices are up nearly 9% year-to-date. Not surprisingly then, gold stocks, mutual funds and ETFs have been some of the market's better performers during this tumultuous year on Wall Street.
According to fund tracker Morningstar, precious metals funds are up 1% year-to-date compared to a 8.5% loss for the S&P 500. And top mining stocks such as Goldcorp (GG), Agnico-Eagle Mines (AEM) and Yamana Gold (AUY) have each gained more than 10% in 2008.
Nonetheless, investors probably shouldn't expect a return to $1000 in the near future.
Keep in mind, when gold hit its all-time high, the overall market was in a panic about whether Bear Stearns would collapse.
Barring another major scare to the market like that, it's hard to imagine that gold will shoot up to a new record, especially if the Fed does actually raise rates later this year, a move that could help strengthen the dollar and lead to a pullback in commodity prices.
"I don't think we're going back to $1,000 levels," said Keith Walter, co-manager with the Julius Baer Global Equity fund. "There is a wide pricing disparity between gold and oil but I think that will narrow with crude coming down, not gold catching up."
In addition, Walter said that although global demand is still strong for gold, there are concerns that China's economy may be starting to slow a bit. That could dampen gold prices.
"We've been pleased with our investments in metals and mining but we're cutting back though because we're starting to see cracks in the Chinese economy," Walter said. As such, he said his fund has reduced its exposure to mining stocks. It still owns several though, including Newmont Mining (NEM, Fortune 500) and Freeport McMoRan Copper & Gold (FCX, Fortune 500).
So even though investing in gold and gold mining stocks may be a good idea for a long-term portfolio, now's not the time to go overboard and make too a big bet on all that glitters.
Taken From : http://money.cnn.com
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