By Ron Harui
July 3 (Bloomberg) -- Standard Chartered Plc, the U.K. bank that makes more than 90 percent of its profit in emerging markets, cut its forecasts for five Asian currencies saying growth in the region is slowing.
The London-based bank lowered its one-year predictions for the Indian rupee, Pakistan rupee, Philippine peso, South Korean won and Thai baht in a research note sent to clients yesterday. All of the currencies weakened against the U.S. dollar last quarter on concern quicker inflation and a global slowdown will cool their economies.
``This Asian currency correction will continue into the first half of next year,'' Thomas Harr, a senior currency strategist at Standard Chartered in Singapore, said in a telephone interview confirming the contents of yesterday's report. ``A lot of the focus now on current-account deficits and inflation will have a knock-on effect on slowing growth.''
Pakistan's rupee, the worst-performer of Asia's 17 most- traded currencies in the past three months, may weaken to 70 per dollar by the end of June 2009, on a wider current-account deficit and quicker inflation, the report said. That forecast compares with a previous estimate of 69. The Philippine peso may fall to 47 in 12 months, versus an earlier prediction of 43, Standard Chartered said.
The Pakistan currency traded at 69.65 per dollar as of 11:52 a.m. in Karachi, according to data compiled by Bloomberg. The peso was at 45.290 versus the dollar, according to Tullet Prebon Plc.
Rupee, Baht, Won
Standard Chartered also lowered its end of June forecasts for the Indian rupee to 44.50 from 41.80, the Thai baht to 35.50 from 33.50, and the Korean won to 1,030 from 960.
The won was at 1,038.10 per dollar today, according to Seoul Money Brokerage Services Ltd. India's rupee fetched 43.2850 per dollar and the Thai baht traded at 33.37, Bloomberg data show.
Pakistan's rupee has weakened 8.2 percent in the past three months as the nation's economy has slowed and inflation accelerated to the fastest in 30 years. Standard & Poor's and Moody's Investors Service cut the nation's foreign-currency debt ratings in May, citing rising prices, political instability and cooling growth.
The peso is the second-worst performer of the 17 Asian currencies against the dollar in the last three months, losing 8.1 percent, on concern record oil prices will stoke inflation and slowing U.S. economic growth will widen the Asian nation's trade deficit.
``Currencies which are hit now in Asia are the ones where you have a combination of a current-account deficit, inflation getting out of control and a central bank not being hawkish enough,'' Harr said.
Rising food and oil prices pushed the inflation rate in the Philippines to a nine-year high of 9.6 percent in May and spurred the central bank to raise interest rates for the first time since October 2005 last month. The trade deficit widened to $531 million in April from $219 million a year earlier, the National Statistics Office said in Manila on June 25.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.
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Thursday, July 3, 2008
Dow Average's 21% Drop Into Bear Market May Signal More Losses
By Elizabeth Stanton
July 3 (Bloomberg) -- The Dow Jones Industrial Average's 21 percent retreat from a record may foreshadow more losses for the 112-year-old stock gauge, based on its performance in previous bear markets.
``I don't expect this to be the end,'' said Dean Gulis, part of a group that manages about $3 billion in Bloomfield Hills, Michigan, for Loomis Sayles & Co. ``Stocks have been trending down now for basically a year. They're going to keep struggling for a while.''
The Dow slipped into a bear market for the 12th time since 1962 yesterday, according to Westport, Connecticut-based research firm Birinyi Associates Inc. Prior declines averaged 29 percent and lasted 322 days, Birinyi data show. The biggest was a 45 percent drop over 694 days starting in January 1973.
The longest profit slump in six years and the first nationwide decrease in home prices since the Great Depression pushed U.S. equities to a nine-month tumble. Growth in gross domestic product is forecast to slow to 1.4 percent over the next 12 months from 2.2 percent while inflation quickens, according to data compiled by Bloomberg.
The Dow slipped to 11,215.51, led by General Motors Corp. and Alcoa Inc. The 30-stock gauge closed at a high of 14,164.53 on Oct. 9. Its drop outpaced the 19.4 percent slump in the Standard & Poor's 500 Index, which is within 10 points of a bear market.
Growing bank losses and rising oil prices left U.S. companies poised for a fourth-straight quarterly retreat in profits, the longest streak since 2001, according to data compiled by Bloomberg.
GM, Citigroup Plunge
General Motors plunged 74 percent in the past nine months for the Dow's biggest decline as crude oil's 79 percent surge to $143.74 a barrel hurt sales of pickup trucks and sport utility vehicles. Citigroup Inc., American International Group Inc. and Bank of America Corp. each tumbled more than 50 percent as losses and writedowns at the world's biggest financial institutions topped $400 billion following the collapse of the U.S. subprime mortgage market.
Profits at S&P 500 companies decreased 10.5 percent during the second quarter, according to a Bloomberg survey of analysts compiled June 27. Earnings at financial firms and consumer companies reliant on Americans' discretionary income slumped 56.5 percent and 19.9 percent, respectively.
Dow Weighting
The Dow includes five financial firms: New York-based AIG, American Express Co., Citigroup and JPMorgan Chase & Co. and Charlotte, North Carolina-based Bank of America. While General Electric Co., based in Fairfield, Connecticut, is classified as an industrial company, its financial unit accounted for more than half of its profit from continuing operations last year.
General Motors fell to $9.98 yesterday, the lowest price since 1954, according to Global Financial Data, based in Los Angeles. The Detroit-based company, battered by the slowest U.S. automotive market in 15 years, faces the possibility of bankruptcy and may need to raise as much as $15 billion, according to Merrill Lynch & Co. analyst John Murphy.
The Dow average is a ``GDP play,'' said Mark Freeman, who helps manage $8 billion at Westwood Holdings Group in Dallas. ``To the extent the market is concerned about growth, and growth is going to be very tepid for the foreseeable future, it makes sense that the Dow is going to lag in that environment.''
The Dow, owned by Rupert Murdoch's News Corp., is intended as a measure of ``established U.S. companies that are leaders in their industries,'' according to a February statement in which Bank of America and Chevron Corp. were named as replacements for Honeywell International Inc. and Altria Group Inc. Companies in the Dow average have a median market value of $103.7 billion, almost eight times that of the S&P 500.
Less Energy
Although financial shares, the year's biggest decliners, make up less of the Dow than the S&P 500, the Dow has a smaller weighting of energy stocks. That's the only industry among 10 in the S&P 500 to gain since Oct. 9, driven higher by records for oil, natural gas and coal. Financials account for 10.2 percent of the Dow and 14.4 percent of the S&P 500. For energy, it's 13.4 percent compared with 16 percent.
Gains by another 19th century measure, the Dow Jones Transportation Average, signal the market may rebound. Dow Theory, created by Wall Street Journal co-founder Charles Dow, holds that advances or declines by the Dow industrials must be matched by similar moves in the transportation average to ``confirm'' the broader market's direction. Divergences aren't sustainable, the theory holds.
The transportation average rose to a record on June 5. Although it then fell 15 percent, it remains 12 percent higher than its 2008 low set in January.
No Recession
Dow Theory is ``telling you we're not having a recession,'' said Ken Fisher, Woodside, California-based chief executive officer of Fisher Investments Inc., which manages $47 billion. ``We could have a bear market without having a recession, but that's not what people talk about.''
Ralph Shive is betting that the U.S. economy will contract.
``We're due for a recession -- it'll go in the books as one -- and a bear market,'' said Shive, South Bend, Indiana-based chief investment officer of 1st Source Corp. Investment Advisors, which manages $3 billion. ``While they're never fun, the thing to remember is that markets will bottom well before the economic news gets better.''
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
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Icahn's Activist Funds' Slim Returns Supply Cause to Deactivate
By Katherine Burton
July 3 (Bloomberg) -- Carl Icahn has hit the roughest patch of his hedge-fund career.
His $7.9 billion in hedge funds fell 7 percent between October and April, the biggest peak-to-trough loss since the funds opened in November 2004, according to investors. That compares with an average annual return on his investments of 53 percent from 1996 to mid-2004.
Icahn has lost money on cellular-phone maker Motorola Inc., his biggest investment. The 72-year-old billionaire also failed to persuade executives at Yahoo! Inc. and Biogen Idec Inc. to take his advice for boosting their stock prices.
While falling equity markets and the slowing economy are beyond Icahn's command, the setbacks at Yahoo and Biogen don't bode well for his future as an activist shareholder, said Brett Barth, a partner at New York-based BBR Partners, which has invested $1 billion in hedge funds for clients.
``When you have been unsuccessful as an activist, it emboldens companies to be combative,'' Barth said.
Icahn has so far come up short in his efforts to force Sunnyvale, California-based Yahoo, owner of the second-most- popular online search engine, to sell itself to Microsoft Corp. He also lost a proxy battle this month to elect his candidates to the board of Cambridge, Massachusetts-based Biogen, making a sale of the world's biggest maker of multiple sclerosis drugs less likely.
Icahn declined to comment on his investments and performance. The funds rose 6.3 percent during the past 17 months, compared with a 1.5 percent increase in the Standard & Poor's 500 Index.
Trailing Rivals
His funds trail activist investor Daniel Loeb's New York- based Third Point Offshore Fund, which gained 17.4 percent during the same period. Chris Hohn's TCI Fund Management LLP, which staged a proxy fight at railroad CSX Corp., returned 37 percent in the same period.
The mediocre returns are a comedown for Icahn, who has earned billions as a corporate raider, including the 1985 takeover of Trans World Airlines Inc. He made $893 million trying to break up RJR Nabisco Holdings Corp. in the 1990s.
Icahn generated a 53 percent annual return on invested capital from January 1996 to May 2004, according to documents used in 2004 to market his New York-based hedge funds. In 2006, the Icahn Fund rose about 29 percent, while the U.S. benchmark Standard & Poor's 500 Index advanced 13.6 percent.
Since then, Icahn has struggled. He paid about $2.3 billion, or roughly $13 a share, for his 7.6 percent stake in Schaumburg, Illinois-based Motorola, according to a filing in May with the U.S. Securities and Exchange Commission.
Motorola Seat
Icahn made an unsuccessful bid for a board seat last year. Motorola Chief Executive Officer Gregory Brown has bowed to pressure to spin off the handset unit and focus on television set-top boxes, two-way radios and wireless networking equipment. Motorola shares closed yesterday at $7.15 in New York Stock Exchange composite trading.
Icahn paid an average price of $18.46 for shares of real- estate developer WCI Communities Inc. in Bonita Springs, Florida, and his offer to buy the rest at $22 was rejected last year by management. He did win three board seats last August and was named chairman. WCI Communities fell 18 cents yesterday to $1.31.
His biggest success was BEA Systems Inc. this year. Icahn bought shares of the San Jose, California-based software company for $12.81 a share, on average, and then pressed BEA and bigger rival Oracle Corp. to merge. Oracle bought BEA in April at $19.38 a share, producing a return for Icahn of about 50 percent in less than a year.
`Lumpy Returns'
``All these activists are going to have lumpy returns,'' said Brad Alford, head of Alpha Capital Management LLC in Atlanta, which farms out money to hedge funds. He considers Icahn ``one of the best activists out there.''
When Icahn said he was buying Yahoo shares with the goal of getting the company to agree to a purchase by Microsoft, John Paulson's Paulson & Co., Boone Pickens's BP Capital LLC and Loeb's Third Point purchased shares too. Icahn remains locked in a proxy fight with the company.
Icahn hasn't publicly disclosed his costs for buying Biogen or Yahoo. Biogen shares have climbed to $58. He bought them in the second quarter, when they closed as low as $43.68. His campaign to take control of the drugmaker collapsed last month when he failed to win enough shareholder votes.
Icahn said in a Bloomberg Television interview on June 5 that his Yahoo investment was profitable. Since then, the shares have dropped 20 percent. The shares gained 3.4 percent yesterday on optimism that Microsoft may revive attempts to take over the Internet company.
To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net
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Aracruz, Ecopetrol, Telecom Argentina: Latin Equity Preview
By Paulo Winterstein and James Attwood
July 3 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares fell 2.9 percent to 4,491.80 yesterday. In Brazil, preferred shares are the most commonly traded class of stock.
Argentina
Telecom Argentina SA (TECO2 AR): Argentina will prevent Telecom Italia SpA from exercising options to increase its stake in Sofora Comunicaciones SA, the holding company that controls Telecom Argentina, BAE newspaper said. The government also asked Telecom Italia to avoid ceding its stake in Sofora to a third company, the Buenos Aires-based newspaper reported yesterday, citing a resolution issued by Argentina's communication secretariat. Telecom Argentina, the nation's No. 2 telephone company, fell 0.7 percent to 9.14 pesos.
Brazil
Aracruz Celulose SA (ARCZ6 BS): The world's biggest maker of eucalyptus pulp was reiterated ``outperform'' by Fator Corretora analyst Lika Takahashi after it announced the purchase of Boise Cascade Ltda. assets, which includes 15,400 hectares (38,054 acres) of land in the south of Brazil. The acquisition, for $47.1 million, will help supply Aracruz's pulp mill in Guaiba at low transport cost because of the land's proximity to the mill, the analyst wrote. Aracruz advanced 1 centavo to 11.51 reais.
Porto Seguro SA (PSSA3 BS): Brazil's fourth-largest insurance company showed ``rebounding'' profit in May and is ``on track'' to report second-quarter net income of 100 million reais ($62 million), above Deutsche Bank AG analyst Mario Pierry's estimate of 86 million reais, according to a note e- mailed yesterday. Porto Seguro, rated ``hold'' at Deutsche Bank, fell 1.9 percent to 17.65 reais.
Colombia
Ecopetrol SA (ECOPETL CB): Colombia will impose a tax on oil production when prices exceed $90 a barrel, the country's oil minister said yesterday. The tax will apply only to new contracts, Hernan Martinez said in an interview with Bloomberg Television. The tax rate on additional income will rise to 50 percent when oil costs $180 a barrel, from 5 percent at $90 a barrel, Armando Zamora, executive director of the National Hydrocarbons Agency, told Bloomberg Television. Ecopetrol, the state oil company, rose 0.4 percent to 2,575 pesos.
Mexico
Desarrolladora Homex SAB (HOMEX* MM): Mexico's largest homebuilder took out a $200 million credit line with Grupo Financiero Inbursa SAB. The credit line will last five years and comes with an interest of the benchmark TIIE rate plus 1.35 percentage points, Homex said in a statement to the Mexico City stock exchange. Homex, which will use the funds to buy land and existing developments, added 0.7 percent to 101.30 pesos.
Peru
Southern Copper Corp. (PCU/C PE) and Cia. de Minas Buenaventura SA (BVN PE): Peru's government this week declared a national mine strike illegal, a Labor Ministry spokeswoman said. The ruling makes it possible for mining companies to fire employees who don't show up for work, ministry spokeswoman Rosa Arguedas said yesterday in a telephone interview. Southern Copper, the world's seventh-largest copper producer, fell 2.8 percent to $102.50. Buenaventura, the world's seventh-largest gold producer, lost 2.1 percent to $64.60.
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net.
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July 3 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares fell 2.9 percent to 4,491.80 yesterday. In Brazil, preferred shares are the most commonly traded class of stock.
Argentina
Telecom Argentina SA (TECO2 AR): Argentina will prevent Telecom Italia SpA from exercising options to increase its stake in Sofora Comunicaciones SA, the holding company that controls Telecom Argentina, BAE newspaper said. The government also asked Telecom Italia to avoid ceding its stake in Sofora to a third company, the Buenos Aires-based newspaper reported yesterday, citing a resolution issued by Argentina's communication secretariat. Telecom Argentina, the nation's No. 2 telephone company, fell 0.7 percent to 9.14 pesos.
Brazil
Aracruz Celulose SA (ARCZ6 BS): The world's biggest maker of eucalyptus pulp was reiterated ``outperform'' by Fator Corretora analyst Lika Takahashi after it announced the purchase of Boise Cascade Ltda. assets, which includes 15,400 hectares (38,054 acres) of land in the south of Brazil. The acquisition, for $47.1 million, will help supply Aracruz's pulp mill in Guaiba at low transport cost because of the land's proximity to the mill, the analyst wrote. Aracruz advanced 1 centavo to 11.51 reais.
Porto Seguro SA (PSSA3 BS): Brazil's fourth-largest insurance company showed ``rebounding'' profit in May and is ``on track'' to report second-quarter net income of 100 million reais ($62 million), above Deutsche Bank AG analyst Mario Pierry's estimate of 86 million reais, according to a note e- mailed yesterday. Porto Seguro, rated ``hold'' at Deutsche Bank, fell 1.9 percent to 17.65 reais.
Colombia
Ecopetrol SA (ECOPETL CB): Colombia will impose a tax on oil production when prices exceed $90 a barrel, the country's oil minister said yesterday. The tax will apply only to new contracts, Hernan Martinez said in an interview with Bloomberg Television. The tax rate on additional income will rise to 50 percent when oil costs $180 a barrel, from 5 percent at $90 a barrel, Armando Zamora, executive director of the National Hydrocarbons Agency, told Bloomberg Television. Ecopetrol, the state oil company, rose 0.4 percent to 2,575 pesos.
Mexico
Desarrolladora Homex SAB (HOMEX* MM): Mexico's largest homebuilder took out a $200 million credit line with Grupo Financiero Inbursa SAB. The credit line will last five years and comes with an interest of the benchmark TIIE rate plus 1.35 percentage points, Homex said in a statement to the Mexico City stock exchange. Homex, which will use the funds to buy land and existing developments, added 0.7 percent to 101.30 pesos.
Peru
Southern Copper Corp. (PCU/C PE) and Cia. de Minas Buenaventura SA (BVN PE): Peru's government this week declared a national mine strike illegal, a Labor Ministry spokeswoman said. The ruling makes it possible for mining companies to fire employees who don't show up for work, ministry spokeswoman Rosa Arguedas said yesterday in a telephone interview. Southern Copper, the world's seventh-largest copper producer, fell 2.8 percent to $102.50. Buenaventura, the world's seventh-largest gold producer, lost 2.1 percent to $64.60.
To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net.
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Stocks Fall in Europe, Asia; U.K.'s FTSE 100 Enters Bear Market
By Sarah Jones
July 3 (Bloomberg) -- Stocks dropped in Europe and Asia as oil topped $144 a barrel, damping earnings prospects for carmakers and airlines and stoking concern the global economy will slow further. The U.K.'s FTSE 100 Index fell into a bear market, and U.S. index futures advanced.
Daimler AG, Toyota Motor Corp. and Air France-KLM Group declined after oil rose to a record. ArcelorMittal and BHP Billiton Ltd. led commodity producers lower. Nvidia Corp., a maker of computer-graphics chips, tumbled 23 percent in Germany after cutting its sales forecast.
The MSCI World Index lost 0.4 percent to 1,369.82 at 9:15 a.m. in London as nine of the 10 industry groups fell. The index has fallen 18.6 percent from a record in October. U.S. stocks sank yesterday, sending the Dow Jones Industrial Average into a bear market.
``I'm concerned about the prospects for an economic slowdown'' and the negative impact on earnings, said Mark Bon, a London-based fund manager at Canada Life, which oversees about $15 billion. ``Sentiment is so poor. There does not appear to be any obvious catalyst to change that.''
Futures on the Standard & Poor's 500 Index added 0.2 percent as did futures on the Dow average. Europe's Dow Jones Stoxx 600 Index declined 1 percent, while the MSCI Asia Pacific Index slipped 0.9 percent.
The U.K.'s FTSE 100 dropped as low as 5358.50, extending its decline from last year's high to 20.4 percent after credit losses and the worst housing slump in 30 years dimmed the earnings outlook for banks and retailers.
Stocks fell in Japan for the 11th straight day, the longest losing streak in 54 years.
$11 Trillion Lost
Financial stocks have led declines that erased almost $11 trillion from equity markets worldwide this year. Credit-related losses topping $400 billion, record oil prices and accelerating inflation have stoked concern policy makers will have to raise borrowing costs as the global economy slows.
European Central Bank President Jean-Claude Trichet is poised to increase interest rates today to stem, according to a survey of economists. Central banks in Sweden and Indonesia lifted rates today.
Daimler, the world's second-largest maker of luxury cars, fell 1.8 percent to 37.50 euros. Toyota, which gets about half of its profit from North America, lost 0.8 percent to 4,900 yen. Hyundai Motor Co., South Korea's largest automaker, declined 2.3 percent to 71,800 won.
Crude oil for August delivery climbed as much as 0.7 percent to $144.57 today in New York after U.S. stockpiles dropped unexpectedly and Russian President Dmitry Medvedev said prices will climb to $150.
Air France, Europe's biggest airline, dropped 3 percent to 14.29 euros.
Air France Downgrade
Deutsche Bank AG downgraded Air France to ``sell'' from ``hold,'' saying it expects further consensus downgrades to earnings forecasts.
``Premium growth could turn negative forcing caution on the revenue outlook,'' London-based analyst Chris Reid wrote in a note to clients dated yesterday.
ArcelorMittal, the world's largest steelmaker, dropped 4.7 percent to 53.30 euros. BHP Billiton, the world's biggest mining company, lost 3.4 percent to 1,700 pence.
``Commodity stocks have done very well and people are nervous they may have seen their best,'' said Bon at Canada Life.
Nvidia, the second-biggest maker of computer-graphics chips, sank $4.18 to $13.85 in Germany after cutting its second- quarter sales forecast because of a drop in demand and increased competition.
UBS
UBS AG fell 2.6 percent to 20.08 pence. Citigroup Inc. said the bank may post additional writedowns and raise more capital, a day after Chairman Peter Kurer told a newspaper UBS won't need more funds.
The Swiss bank, which wrote down $38 billion over the past three quarters, still carries $83 billion of ``risk exposures that are likely to require further markdowns,'' London-based Citigroup analyst Jeremy Sigee said in a note today.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
Read more...
July 3 (Bloomberg) -- Stocks dropped in Europe and Asia as oil topped $144 a barrel, damping earnings prospects for carmakers and airlines and stoking concern the global economy will slow further. The U.K.'s FTSE 100 Index fell into a bear market, and U.S. index futures advanced.
Daimler AG, Toyota Motor Corp. and Air France-KLM Group declined after oil rose to a record. ArcelorMittal and BHP Billiton Ltd. led commodity producers lower. Nvidia Corp., a maker of computer-graphics chips, tumbled 23 percent in Germany after cutting its sales forecast.
The MSCI World Index lost 0.4 percent to 1,369.82 at 9:15 a.m. in London as nine of the 10 industry groups fell. The index has fallen 18.6 percent from a record in October. U.S. stocks sank yesterday, sending the Dow Jones Industrial Average into a bear market.
``I'm concerned about the prospects for an economic slowdown'' and the negative impact on earnings, said Mark Bon, a London-based fund manager at Canada Life, which oversees about $15 billion. ``Sentiment is so poor. There does not appear to be any obvious catalyst to change that.''
Futures on the Standard & Poor's 500 Index added 0.2 percent as did futures on the Dow average. Europe's Dow Jones Stoxx 600 Index declined 1 percent, while the MSCI Asia Pacific Index slipped 0.9 percent.
The U.K.'s FTSE 100 dropped as low as 5358.50, extending its decline from last year's high to 20.4 percent after credit losses and the worst housing slump in 30 years dimmed the earnings outlook for banks and retailers.
Stocks fell in Japan for the 11th straight day, the longest losing streak in 54 years.
$11 Trillion Lost
Financial stocks have led declines that erased almost $11 trillion from equity markets worldwide this year. Credit-related losses topping $400 billion, record oil prices and accelerating inflation have stoked concern policy makers will have to raise borrowing costs as the global economy slows.
European Central Bank President Jean-Claude Trichet is poised to increase interest rates today to stem, according to a survey of economists. Central banks in Sweden and Indonesia lifted rates today.
Daimler, the world's second-largest maker of luxury cars, fell 1.8 percent to 37.50 euros. Toyota, which gets about half of its profit from North America, lost 0.8 percent to 4,900 yen. Hyundai Motor Co., South Korea's largest automaker, declined 2.3 percent to 71,800 won.
Crude oil for August delivery climbed as much as 0.7 percent to $144.57 today in New York after U.S. stockpiles dropped unexpectedly and Russian President Dmitry Medvedev said prices will climb to $150.
Air France, Europe's biggest airline, dropped 3 percent to 14.29 euros.
Air France Downgrade
Deutsche Bank AG downgraded Air France to ``sell'' from ``hold,'' saying it expects further consensus downgrades to earnings forecasts.
``Premium growth could turn negative forcing caution on the revenue outlook,'' London-based analyst Chris Reid wrote in a note to clients dated yesterday.
ArcelorMittal, the world's largest steelmaker, dropped 4.7 percent to 53.30 euros. BHP Billiton, the world's biggest mining company, lost 3.4 percent to 1,700 pence.
``Commodity stocks have done very well and people are nervous they may have seen their best,'' said Bon at Canada Life.
Nvidia, the second-biggest maker of computer-graphics chips, sank $4.18 to $13.85 in Germany after cutting its second- quarter sales forecast because of a drop in demand and increased competition.
UBS
UBS AG fell 2.6 percent to 20.08 pence. Citigroup Inc. said the bank may post additional writedowns and raise more capital, a day after Chairman Peter Kurer told a newspaper UBS won't need more funds.
The Swiss bank, which wrote down $38 billion over the past three quarters, still carries $83 billion of ``risk exposures that are likely to require further markdowns,'' London-based Citigroup analyst Jeremy Sigee said in a note today.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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U.K.'s FTSE 100 Index Falls, Extends Drop From 2007 High to 20%
By Adam Haigh
July 3 (Bloomberg) -- The U.K.'s FTSE 100 Index extended its decline from last year's high to 20 percent, the common definition of a bear market, after credit losses and the worst housing slump in 30 years dimmed the earnings outlook for banks and retailers.
The measure of companies from Barclays Plc and HBOS Plc to Marks & Spencer Group Plc slid 1 percent to 5,371.30 as of 8:01 a.m. in London, bringing its retreat since June 15, 2007, to 20.2 percent.
Barclays, Britain's fourth-biggest bank, tumbled to the lowest since 1998 this year as the collapse of the U.S. subprime mortgage market spurred lenders to sell shares to replenish capital. Marks & Spencer, the U.K.'s largest clothing retailer, slid 57 percent as sales dropped the most since 2005 and record oil prices pushed consumer confidence down to a level last seen during the London riots 18 years ago.
``Banks and financial stocks have taken hits and caution remains with regard to further credit writedowns,'' said Richard Hunter, London-based head of U.K. equities at Hargreaves Lansdown Stockbrokers, a unit of Hargreaves Lansdown Plc, which oversees $21.5 billion. ``The U.K. economy is in a fairly parlous state with the oil and food prices at their highs.''
For related news:
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Read more...
July 3 (Bloomberg) -- The U.K.'s FTSE 100 Index extended its decline from last year's high to 20 percent, the common definition of a bear market, after credit losses and the worst housing slump in 30 years dimmed the earnings outlook for banks and retailers.
The measure of companies from Barclays Plc and HBOS Plc to Marks & Spencer Group Plc slid 1 percent to 5,371.30 as of 8:01 a.m. in London, bringing its retreat since June 15, 2007, to 20.2 percent.
Barclays, Britain's fourth-biggest bank, tumbled to the lowest since 1998 this year as the collapse of the U.S. subprime mortgage market spurred lenders to sell shares to replenish capital. Marks & Spencer, the U.K.'s largest clothing retailer, slid 57 percent as sales dropped the most since 2005 and record oil prices pushed consumer confidence down to a level last seen during the London riots 18 years ago.
``Banks and financial stocks have taken hits and caution remains with regard to further credit writedowns,'' said Richard Hunter, London-based head of U.K. equities at Hargreaves Lansdown Stockbrokers, a unit of Hargreaves Lansdown Plc, which oversees $21.5 billion. ``The U.K. economy is in a fairly parlous state with the oil and food prices at their highs.''
For related news:
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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UBS May Post Writedowns, Raise Cash, Citigroup Says
By Stuart Kelly
July 3 (Bloomberg) -- UBS AG may post $6.9 billion of additional writedowns and seek to raise more capital, Citigroup Inc. said, a day after Chairman Peter Kurer told a newspaper the Swiss bank won't need more funds.
The Zurich-based company, which wrote down $38 billion over the past three quarters, still carries $83 billion of ``risk exposures that are likely to require further markdowns,'' London- based Citigroup analyst Jeremy Sigee said in a note today.
Sigee, who rates UBS a ``hold'' with a ``high risk'' caveat, estimates the company may post a loss of 4.5 billion Swiss francs ($4.4 billion), and announce writedowns of as much as 7 billion francs when it reports second-quarter earnings Aug. 12. JPMorgan Chase & Co. analysts yesterday said UBS may need to mark down its assets by a further 5.1 billion francs.
Sigee blamed a slump in financial markets for asset price declines, and said UBS may need to raise more capital, either from asset sales or from shareholders. Kurer, in remarks published by Swiss newspaper Finanz & Wirtschaft yesterday, said the bank won't need more funds.
UBS fell 62 centimes, or 3 percent, to 20 francs by 9:51 a.m. in Swiss trading, bringing declines this year to 57 percent.
Writedowns
Banks and securities firms have turned to investors for $322 billion to replenish reserves after $403 billion of writedowns and credit losses tied to the collapse of the U.S. subprime mortgage market. UBS trails only Citigroup in credit losses and capital raising after turning to investors for $29.5 billion since the credit crisis started a year ago.
Speculation financial firms would need more funds helped drive an index of European banking shares down 8.3 percent in the previous five days.
Kurer, who replaced Marcel Ospel as chairman in April, is leading a strategic review of all of the bank's businesses to make them better complement the wealth management unit, which he has called the ``core franchise.''
The bank plans to inform shareholders about results of the review at an extraordinary shareholders meeting on Oct. 2. The meeting was called to elect four new board members, as Kurer seeks to increase the level of financial expertise on the board after criticism from shareholders including former UBS President Luqman Arnold.
UBS is also facing a U.S. probe into whether the Swiss bank helped affluent customers evade American taxes. A federal judge this week granted a request from prosecutors to let the Internal Revenue Service issue a summons to UBS for information about clients with secret accounts at the bank.
Kurer, in remarks made to Finanz & Wirtschaft that were confirmed by spokeswoman Sabine Woessner, said the bank takes the situation at its U.S. business ``most seriously.''
To contact the reporter for this story: Stuart Kelly in Sydney skelly22@bloomberg.net
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July 3 (Bloomberg) -- UBS AG may post $6.9 billion of additional writedowns and seek to raise more capital, Citigroup Inc. said, a day after Chairman Peter Kurer told a newspaper the Swiss bank won't need more funds.
The Zurich-based company, which wrote down $38 billion over the past three quarters, still carries $83 billion of ``risk exposures that are likely to require further markdowns,'' London- based Citigroup analyst Jeremy Sigee said in a note today.
Sigee, who rates UBS a ``hold'' with a ``high risk'' caveat, estimates the company may post a loss of 4.5 billion Swiss francs ($4.4 billion), and announce writedowns of as much as 7 billion francs when it reports second-quarter earnings Aug. 12. JPMorgan Chase & Co. analysts yesterday said UBS may need to mark down its assets by a further 5.1 billion francs.
Sigee blamed a slump in financial markets for asset price declines, and said UBS may need to raise more capital, either from asset sales or from shareholders. Kurer, in remarks published by Swiss newspaper Finanz & Wirtschaft yesterday, said the bank won't need more funds.
UBS fell 62 centimes, or 3 percent, to 20 francs by 9:51 a.m. in Swiss trading, bringing declines this year to 57 percent.
Writedowns
Banks and securities firms have turned to investors for $322 billion to replenish reserves after $403 billion of writedowns and credit losses tied to the collapse of the U.S. subprime mortgage market. UBS trails only Citigroup in credit losses and capital raising after turning to investors for $29.5 billion since the credit crisis started a year ago.
Speculation financial firms would need more funds helped drive an index of European banking shares down 8.3 percent in the previous five days.
Kurer, who replaced Marcel Ospel as chairman in April, is leading a strategic review of all of the bank's businesses to make them better complement the wealth management unit, which he has called the ``core franchise.''
The bank plans to inform shareholders about results of the review at an extraordinary shareholders meeting on Oct. 2. The meeting was called to elect four new board members, as Kurer seeks to increase the level of financial expertise on the board after criticism from shareholders including former UBS President Luqman Arnold.
UBS is also facing a U.S. probe into whether the Swiss bank helped affluent customers evade American taxes. A federal judge this week granted a request from prosecutors to let the Internal Revenue Service issue a summons to UBS for information about clients with secret accounts at the bank.
Kurer, in remarks made to Finanz & Wirtschaft that were confirmed by spokeswoman Sabine Woessner, said the bank takes the situation at its U.S. business ``most seriously.''
To contact the reporter for this story: Stuart Kelly in Sydney skelly22@bloomberg.net
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Citigroup Says Buy Volkswagen Puts Ahead of Carmaker Share Drop
By Gareth Gore
July 3 (Bloomberg) -- Citigroup Inc. told clients to buy put options in Volkswagen AG on speculation a ``massive change'' in demand as a result of the record oil price will lead to further declines in shares of Europe's biggest carmaker.
The brokerage advised buying put options expiring in December at a strike price of 160 euros, saying the price of the contracts is low compared with the carmaker's main rivals. That is 10 percent lower than yesterday's closing price.
``Faith in auto earnings numbers has collapsed over fears of a consumer recession'' and high fuel costs, London-based analyst John Lawson wrote in a note to clients. ``Volkswagen options are lower priced, which favors buying puts to express our negative stance.''
Clients will realize returns of as much as 550 percent if shares fall to the brokerage's 122 euro target price, the analyst wrote. The shares have gained 13 percent this year even as the benchmark DAX Index has lost 23 percent.
Put options give buyers the right -- but not the obligation -- to sell shares at a set price on an agreed date.
Volkswagen shares lost 1.09 euros, or 0.6 percent, to 177.29 at 9:30 a.m. today in Frankfurt.
To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net.
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July 3 (Bloomberg) -- Citigroup Inc. told clients to buy put options in Volkswagen AG on speculation a ``massive change'' in demand as a result of the record oil price will lead to further declines in shares of Europe's biggest carmaker.
The brokerage advised buying put options expiring in December at a strike price of 160 euros, saying the price of the contracts is low compared with the carmaker's main rivals. That is 10 percent lower than yesterday's closing price.
``Faith in auto earnings numbers has collapsed over fears of a consumer recession'' and high fuel costs, London-based analyst John Lawson wrote in a note to clients. ``Volkswagen options are lower priced, which favors buying puts to express our negative stance.''
Clients will realize returns of as much as 550 percent if shares fall to the brokerage's 122 euro target price, the analyst wrote. The shares have gained 13 percent this year even as the benchmark DAX Index has lost 23 percent.
Put options give buyers the right -- but not the obligation -- to sell shares at a set price on an agreed date.
Volkswagen shares lost 1.09 euros, or 0.6 percent, to 177.29 at 9:30 a.m. today in Frankfurt.
To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net.
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Nikkei Tops China, India After Longest Rout Since '65
By Masaki Kondo and Makiko Kitamura
July 3 (Bloomberg) -- The Nikkei 225 Stock Average's longest losing streak in 43 years belies its top performance among Asia's biggest equity markets as investors bet the end of deflation will lift the economy and spur demand for equities.
The Nikkei fell yesterday for the 10th straight day, the longest stretch since March 1965, according to the Nikkei Inc. Web site. The index's 8.1 percent drop since June 18 pushed losses to 13 percent this year, less than the 22 percent slump in Hong Kong's Hang Seng Index, 33 percent drop in India's Sensitive Index and 49 percent plunge in China's CSI 300 Index.
Japanese stocks avoided the region's biggest losses as investors betconsumers in the world's second-largest economy will spend more of their $7 trillion in savings accounts before price increases accelerate. Japan's inflation rate is less than a fifth of China and India, where record commodity costs may force central banks to raise interest rates and slow economic growth.
``Inflation would be good because it would drive institutions and individuals that are very heavily weighted to cash and bonds back into the equities and properties,'' said Marc Faber, founder and managing director of Marc Faber Ltd. in Hong Kong and publisher of the Gloom, Boom & Doom Report.
The Nikkei's longest losing streak was a 15-day stretch in 1954, according to Nikkei, which compiles the index. It would have had a 10-day drop in September-October 1974 if not for a gain during Saturday trading, which has since been discontinued.
The Nikkei opened lower today, and was down 9.19, or 0.1 percent, to 13,277.18 as of the midday trading break.
Growth Outlook
Japanese companies that rely on emerging markets have posted some of the biggest declines in the past 10 days, said Mitsushige Akino, who manages $557 million at Ichiyoshi Investment Management Co. in Tokyo.
Suzuki Motor Corp., which counts India as its biggest market, dropped 20 percent on increasing concern inflation will curb spending. Komatsu Ltd., which increased sales to China by 62 percent last year, plummeted 15 percent. Suzuki is located in Hamamatsu, Japan, while Komatsu is based in Tokyo.
Wholesale prices in India accelerated to 11.42 percent in the week to June 14, the fastest pace in 13 years, which may prompt the Reserve Bank of India to raise the benchmark interest rate, already at a six-year high.
China's inflation surged to an 8.7 percent rate in February, the highest since 1996 and may prompt the central bank to raise its key interest rates this week for the first time in 2008, according to economists surveyed by Bloomberg News.
2008 Gainers
Mitsubishi UFJ Nicos Co., a credit card unit of Japan's biggest bank by market value, and Fast Retailing Co., the operator of Japan's Uniqlo casual clothing store chain, were among the best stocks to own this year in the Nikkei. Mitsubishi UFJ Nicos, located in Tokyo, rose 37 percent to yesterday, while Yamaguchi City, Japan-based Fast Retailing added 23 percent.
Japanese stocks may rally as consumers spend more and shift money into higher-yielding assets, according to Faber.
``Japan in particular is well-placed as a safe-harbor investment destination,'' said Ed Rogers, chief executive officer of Tokyo-based Rogers Investment Advisors Y.K., which manages about $12 million. ``Japan is far less volatile than China and India.''
Core consumer prices, which exclude fresh food, rose for an eighth straight month in May, climbing to a decade-high of 1.5 percent. In the previous 10 years, prices in Japan fell at least one month in every year, according to data compiled by Bloomberg. The rate of inflation is still the lowest of any country in the world, the data show.
Inflation Concern
The Nikkei may rise to 14,050 by the end of the year, according to the median forecast of economists surveyed by Bloomberg between June 16 and June 20. That would be a gain of 5.7 percent from yesterday's closing price.
The 50 percent jump in crude oil prices to a record this year has helped GS Yuasa Corp. and Sanyo Electric Co., which make batteries for hybrid and electric cars. GS Yuasa, located in Kyoto, rose 85 percent, while Osaka-based Sanyo Electric gained 52 percent.
``Inflation is a major topic globally and environmental issues are directly related,'' said Hiroshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo. ``Japan will demonstrate its new weapon, environmental technology. We could see money rush into Japan.''
To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
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Asia stocks sink
Thu Jul 3, 2008 4:13am BST
By Kevin Plumberg
HONG KONG (Reuters) - Asian stocks slumped on Thursday on signs of further deterioration in the U.S. economy, fresh record highs for oil prices and fears that stagflation will continue to damage company earnings and consumer spending.
Japan's Nikkei share index fell for the 11th consecutive day, on track for the longest losing streak in a half century, after the Dow Jones industrial average sank into bear market overnight, closing more than 20 percent below its October peak.
The dollar fell to a two-month low against the euro after a report on Wednesday showed U.S. private employers cut the most jobs in nearly six years.
The euro, by contrast, was supported by expectations that the European Central Bank will later in the day raise its benchmark interest rate for the first time in a year.
Investors will focus on whether ECB policymakers there will drop any hints that more borrowing costs will have to rise further to fight inflation despite a global economy that is growing below its long-term trend.
Markets are also awaiting U.S. non-farm payroll data later in the day.
"Sentiment is simply very bad. There's just way too much uncertainty about where things go from here," said Yutaka Miura, senior technical analyst at Shinko Securities in Tokyo.
Weakness was by no means unique to Japanese stocks in the midst of a toxic mix of rising inflation and slowing growth known as stagflation.
The MSCI index of Asia-Pacific shares traded outside of Japan fell 1.2 percent to the lowest since a blowup in the U.S. subprime mortgage sector turned into a global credit crisis 10 months ago.
Australia's S&P/ASX 200 index fell more than 2 percent to a 21-month low, weighed down by the mining sector on concerns that slowing global economic growth will hurt demand for commodities and following a slump in coal prices.
BHP Billiton Ltd , the world's top miner, dropped 5.8 percent to A$40.42, while its main rival and takeover target, Rio Tinto Ltd , shed 5.4 percent to A$125.17.
Seoul shares >KS11> fell 1.8 percent and Hong Kong's Hang Seng Index was set to open down 1.5 percent.
"Foreigners are continuing to offload shares, and local institutions and retail investors have joined the selling spree as panic spreads in the market," said Juhn Chong-kyu, a market analyst at Samsung Securities in Seoul.
The euro rose as high as $1.5893, the highest since late April and edging closer to an all-time peak of $1.6020 that was also hit in April.
The dollar stood at 105.86 yen, little changed from late New York.
"Reasons to sell the dollar are lined up," said a trader for a Japanese trust bank.
U.S. crude prices continued their relentless rise, climbing to a record $144.44 a barrel in early Asian trade, up 50 percent this year as tensions grew between Israel and the world's fourth largest oil exporter Iran and supply fears boiled over.
Gold, often used by investors as a hedge against rising inflation, was relatively steady at $942.85 an ounce after hitting a two-month high of $944.35 on Wednesday.
Japanese government bonds edged lower as caution prevailed before a key auction.
Bond dealers are bracing for a 1.9 trillion yen ($17.95 billion) auction of 10-year paper, with results due at 0345 GMT.
September 10-year futures slipped 0.01 point to 134.67 after rising earlier to 134.87 in response to the overnight gains in U.S. Treasuries.
The benchmark 10-year yield rose 1.5 basis points to 1.670 percent.
(Editing by Kim Coghill)
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By Kevin Plumberg
HONG KONG (Reuters) - Asian stocks slumped on Thursday on signs of further deterioration in the U.S. economy, fresh record highs for oil prices and fears that stagflation will continue to damage company earnings and consumer spending.
Japan's Nikkei share index fell for the 11th consecutive day, on track for the longest losing streak in a half century, after the Dow Jones industrial average sank into bear market overnight, closing more than 20 percent below its October peak.
The dollar fell to a two-month low against the euro after a report on Wednesday showed U.S. private employers cut the most jobs in nearly six years.
The euro, by contrast, was supported by expectations that the European Central Bank will later in the day raise its benchmark interest rate for the first time in a year.
Investors will focus on whether ECB policymakers there will drop any hints that more borrowing costs will have to rise further to fight inflation despite a global economy that is growing below its long-term trend.
Markets are also awaiting U.S. non-farm payroll data later in the day.
"Sentiment is simply very bad. There's just way too much uncertainty about where things go from here," said Yutaka Miura, senior technical analyst at Shinko Securities in Tokyo.
Weakness was by no means unique to Japanese stocks in the midst of a toxic mix of rising inflation and slowing growth known as stagflation.
The MSCI index of Asia-Pacific shares traded outside of Japan fell 1.2 percent to the lowest since a blowup in the U.S. subprime mortgage sector turned into a global credit crisis 10 months ago.
Australia's S&P/ASX 200 index fell more than 2 percent to a 21-month low, weighed down by the mining sector on concerns that slowing global economic growth will hurt demand for commodities and following a slump in coal prices.
BHP Billiton Ltd , the world's top miner, dropped 5.8 percent to A$40.42, while its main rival and takeover target, Rio Tinto Ltd , shed 5.4 percent to A$125.17.
Seoul shares >KS11> fell 1.8 percent and Hong Kong's Hang Seng Index was set to open down 1.5 percent.
"Foreigners are continuing to offload shares, and local institutions and retail investors have joined the selling spree as panic spreads in the market," said Juhn Chong-kyu, a market analyst at Samsung Securities in Seoul.
The euro rose as high as $1.5893, the highest since late April and edging closer to an all-time peak of $1.6020 that was also hit in April.
The dollar stood at 105.86 yen, little changed from late New York.
"Reasons to sell the dollar are lined up," said a trader for a Japanese trust bank.
U.S. crude prices continued their relentless rise, climbing to a record $144.44 a barrel in early Asian trade, up 50 percent this year as tensions grew between Israel and the world's fourth largest oil exporter Iran and supply fears boiled over.
Gold, often used by investors as a hedge against rising inflation, was relatively steady at $942.85 an ounce after hitting a two-month high of $944.35 on Wednesday.
Japanese government bonds edged lower as caution prevailed before a key auction.
Bond dealers are bracing for a 1.9 trillion yen ($17.95 billion) auction of 10-year paper, with results due at 0345 GMT.
September 10-year futures slipped 0.01 point to 134.67 after rising earlier to 134.87 in response to the overnight gains in U.S. Treasuries.
The benchmark 10-year yield rose 1.5 basis points to 1.670 percent.
(Editing by Kim Coghill)
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Trichet Adopts Greenspan Strategy as ECB Readies Price Attack
By Simon Kennedy
July 3 (Bloomberg) -- European Central Bank President Jean- Claude Trichet may be taking a leaf from former Federal Reserve Chairman Alan Greenspan's playbook.
Trichet is poised to raise interest rates today to stem inflation even as economic growth slows. Lehman Brothers Holdings Inc. and ING Bank say that in doing so, he would be adopting Greenspan's strategy of taking out insurance against events that have little chance of occurring, yet pose high risks if they do.
The ECB's worst-case scenario is that inflation concerns fail to dissipate and become embedded in the 15-nation economy, sparking a wage-price spiral that requires even higher rates later if not quashed now. The cost of ensuring that doesn't happen may be weaker growth.
``The ECB is pursuing a risk-management approach to monetary policy,'' said Martin van Vliet, an economist at ING in Amsterdam. ``They are determined to prevent higher inflation expectations from becoming self-fulfilling. Prevention is better than cure.''
The ECB announces its decision at 1:45 p.m. in Frankfurt and Trichet holds a press conference 45 minutes later. All but one of 58 economists surveyed by Bloomberg News predict a quarter-point increase in the benchmark rate to 4.25 percent.
Trichet took economists by surprise last month when he said the ECB may raise rates. Since then, inflation has accelerated to 4 percent -- the fastest in 16 years and double the bank's limit.
Oil Shock
As food and oil prices set records, policy makers have said they intend to restrain inflation expectations amid concern workers will demand more pay. Their nightmare is a repeat of the 1970s, when officials accommodated surging energy costs only to have to stomp harder on the economy to control prices later.
``We must avoid unanchoring inflation expectations,'' Trichet said on June 5. ``You can date from the first oil shock the start of much lower growth and mass unemployment.''
Expectations have already started to slip their moorings. The outlook, as measured by the break-even on French five-year inflation-indexed bonds, jumped to a record 2.78 percent this week from 2.12 percent in March.
While arguing expectations are still ``well anchored'' in the longer term, Michael Hume, chief European economist at Lehman Brothers, said there's enough motivation for the ECB to risk a sharper economic slowdown by raising rates.
``With inflation risks now rising, policy may need to be used to give it an extra nudge down,'' said Hume. ``Like the Fed, we expect them to succeed in managing risk, but in doing so, it seems likely they will ultimately cause growth to weaken by too much.''
Greenspan Legacy
Overshooting is one of the downsides to risk management, which was formulated by Greenspan when he ran the Fed for 18 years. ``A central bank needs to consider not only the most likely future path for the economy, but also the distribution of possible outcomes about that path,'' he said in a 2005 speech.
His successor, Ben S. Bernanke, adopted a similar strategy in chopping the Fed's main rate seven times since September in an effort to avoid a recession. The Fed, which unlike the ECB has the task of both controlling inflation and fostering growth, has sometimes paid for insuring against risks.
It cut its benchmark rate to a 45-year low of 1 percent in 2003 to fend off deflation, only to fuel a mortgage boom that turned to bust. Its 1998 bid to counter a credit-market collapse after Russia defaulted was followed by 4.5 percent growth and faster inflation in 1999.
`Amplify Cycles'
``Risk management policies are misguided in that they are an attempt to fine tune the economy, yet usually exacerbate problems and amplify cycles,'' said Bob Eisenbeis, former head of research at the Atlanta Fed and now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey.
Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York, said the ECB is making that mistake.
He estimates 88 percent of the increase in commodity prices isn't translated into broader inflation and blames Trichet for fanning price fears. ``Hiking rates now is a policy error,'' said Weinberg.
Hume predicts the ECB will start cutting rates in January. The economy is already stumbling. Confidence among businesses and households fell to a three-year low in June, retail sales plunged and manufacturing and service industries contracted.
Risk management ``implies plenty of policy flexibility and volatility, both in terms of heading off the risk and removing the insurance once the risk has passed,'' said Hume.
Investors disagree. They've priced in two rate increases to 4.5 percent by the end of the year and most are betting on a third by March, Eonia forward contracts show.
Rainer Guntermann, an economist at Dresdner Kleinwort in Frankfurt, said the ECB may be happy to pay the price of slower growth to tame inflation. Labor costs rose the most in five years in the first quarter and oil this week reached a record of more than $144 a barrel.
``It seems that a severe economic slowdown is not only tolerated, but possibly even needed to anchor inflation expectations,'' Guntermann said.
To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net
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Australian Exports Surge to Record in May on Iron Ore, Coal
By Jacob Greber
July 3 (Bloomberg) -- Australian exports rose to a record in May as prices for iron ore and coal surged, suggesting overseas shipments will underpin economic growth this year.
Exports climbed 1 percent to A$21.9 billion ($21.1 billion) in May, the statistics bureau said in Sydney today. The April trade balance was revised from a deficit to a A$12 million surplus, the first in six years, as mining companies led by Rio Tinto Group negotiated higher iron ore prices with China.
Rising sales abroad underscore central bank Governor Glenn Stevens' view that exports will buoy Australia's $1 trillion economy, even as 12-year high interest rates and record gasoline costs buffet domestic spending. Today's report showed the trade deficit was A$965 million in May, close to the A$900 million median estimate of 24 economists surveyed by Bloomberg News.
``The huge stimulus from booming iron ore and coal prices is finally showing up in the trade data,'' said Riki Polygenis, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne.
``There will be large upward revisions to export values in coming months'' as more contracts are negotiated, and ``we may find Australia achieved a trade surplus in May,'' she added.
The Australian dollar traded at 96.20 U.S. cents at 1:10 p.m. in Sydney from 96.29 cents before the report was released. The two-year government bond yield was little changed at 6.86 percent.
Prior to April, Australia's trade balance had been in deficit since March 2002, and widened to a record shortfall of A$3.22 billion in February as exporters battled bottlenecks at mines and congestion at ports and railways.
Iron Ore Revision
The April 2008 balance was revised in today's report to a surplus after having been previously reported as a deficit of A$957 million. The adjustment was made to reflect an increase in contract prices for iron ore that were backdated to April 1.
Rio Tinto, the world's third-largest miner, won a price increase of as much as 97 percent for Western Australian iron ore from Asian steelmaker customers. The agreements for the 12 months that began April 1 match prices agreed on June 23 with Baosteel Group Corp., China's biggest mill, London-based Rio said yesterday.
BHP Billiton Ltd., the third-largest exporter of the ore, hasn't concluded price talks.
Today's figures ``point to the underlying growth in the Australian economy,'' said Rob Henderson, a senior economist at National Australia Bank Ltd. in Sydney. ``The Reserve Bank has been expecting the strong terms of trade to push the economy, and we're seeing that in these numbers.''
Imports Rise
Export earnings will rise 20 percent this year, and ``add substantially to national income and ability to spend'' by households, Stevens said on July 1.
Prices of the 19 commodities in the Reuters/Jefferies CRB Index jumped 29 percent in the six months through June 30, the most since 1973 and more than any second-half gain in at least five years, data compiled by Bloomberg shows.
Today's report also showed that imports rose 6 percent to A$22.8 billion in May, driven higher by a 17 percent jump in the price of gasoline and consumer goods such as cars, which climbed 8 percent.
That adds to evidence Australian household are weathering the central bank's interest-rate increases. Policy makers boosted the cash target in March, February, November and August by 100 basis point to cool the fastest inflation in almost 17 years.
Retail Sales
Retail sales unexpectedly climbed in May at the fastest pace in six months amid a pickup in spending on food, recreational goods, cosmetics and jewelry, a report published yesterday shows.
The jump in imports ``suggests that consumer spending and domestic demand may not be as weak as suggested by the Reserve Bank when it left rates unchanged on Tuesday,'' ANZ's Polygenis said. Given the ``numerous inflation risks both globally and domestically, further monetary policy tightening this year cannot be ruled out,'' she added.
Stevens and his board left the overnight cash rate at 7.25 percent this week, saying ``demand growth will moderate this year.'' The economy expanded at the slowest pace in almost two years in the first quarter.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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U.K. Wage Bargainers Fail to Win Bigger Raises, Report Shows
By Jennifer Ryan
July 3 (Bloomberg) -- U.K. salary negotiators failed to clinch bigger pay increases than a year earlier in the three months through May to compensate for accelerating inflation, a report by Incomes Data Services showed.
The median salary increase was 3.5 percent in the period, matching the result for the same period in 2007, the London-based researcher said today. The result is based on 168 pay agreements covering 2.5 million workers.
Bank of England Deputy Governor for Monetary Policy Charles Bean told U.K. lawmakers yesterday that faster inflation won't stick provided pay doesn't increase to offset it. The consumer price index reached 3.3 percent in May and the retail price index, used in pay agreements, was 4.3 percent.
The lack of an acceleration in pay ``is mainly the result of a range of lower increases being awarded in the public sector, under the influence of the government's pay policy,'' the report said. ``Pay settlements in the private sector are holding up at relatively high levels.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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July 3 (Bloomberg) -- U.K. salary negotiators failed to clinch bigger pay increases than a year earlier in the three months through May to compensate for accelerating inflation, a report by Incomes Data Services showed.
The median salary increase was 3.5 percent in the period, matching the result for the same period in 2007, the London-based researcher said today. The result is based on 168 pay agreements covering 2.5 million workers.
Bank of England Deputy Governor for Monetary Policy Charles Bean told U.K. lawmakers yesterday that faster inflation won't stick provided pay doesn't increase to offset it. The consumer price index reached 3.3 percent in May and the retail price index, used in pay agreements, was 4.3 percent.
The lack of an acceleration in pay ``is mainly the result of a range of lower increases being awarded in the public sector, under the influence of the government's pay policy,'' the report said. ``Pay settlements in the private sector are holding up at relatively high levels.''
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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Sweden May Raise Key Rate as Prices Jump the Most in 14 Years
By Johan Carlstrom
July 3 (Bloomberg) -- Sweden's central bank may raise the benchmark interest rate today to the highest in more than a decade, risking deepening an economic slowdown in a bid to cap inflation.
The Riksbank will raise its benchmark seven-day repo rate to 4.5 percent, according to 14 of 22 economists surveyed by Bloomberg. The others forecast no change. The bank will announce its decision at 9:30 a.m. in Stockholm.
Rising energy and food prices are pushing up inflation worldwide, prompting Norway to raise its key rate last week and the European Central Bank to indicate it may follow suit today. Swedish policy makers are also prioritizing inflation, which accelerated to the fastest pace in 14 years in May, even after economic growth slowed in six of the past seven quarters.
``The Riksbank will raise rates to show that it's taking inflation seriously,'' said Elisabeth Kopelman, an economist at SEB Merchant Banking.
Consumer prices rose 4 percent in the year through May, the fastest pace since December 1993 and twice the central bank's target. The economy grew an annual 2.2 percent in the first quarter, the slowest pace in four years.
Inflation and economic growth have been worse than the central bank expected when it published its monetary policy update in April, First Deputy Governor Irma Rosenberg said on June 13.
Slowing Down
The ECB will raise its benchmark rate to 4.25 percent today, according to all but one of 58 economists surveyed by Bloomberg. Inflation in the euro area accelerated to 3.7 percent in May from 3.3 percent the month before.
The slowdown in growth globally and in Sweden means any rate increase by the Riksbank today may be the last in this cycle.
Ford Motor Co. decided to cut 2,000 jobs mainly at its Volvo car business in Sweden last week. It follows similar cutbacks at Ericsson AB, the world largest maker of wireless networks, and TeliaSonera AB, Sweden's biggest phone operator, this year.
Retail sales declined 1.7 percent in April, the most in three years, as rising prices curbed consumer spending. Annually, sales rose 0.4 percent, the slowest in 10 years, from a revised 3.7 percent in March.
The Riksbank has indicated it will keep the key rate on hold until 2011 based on its economic growth forecast of 2.4 percent this year and 1.9 percent in 2009. The bank will publish new forecasts today.
``Going into the autumn we thus see little need to brake an economy that is already slowing faster than most had assumed, just to make up for high import prices,'' Svenska Handelsbanken AB said in a client note. ``Our view is therefore that the Riksbank will stop at 4.5 percent.''
To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.
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July 3 (Bloomberg) -- Sweden's central bank may raise the benchmark interest rate today to the highest in more than a decade, risking deepening an economic slowdown in a bid to cap inflation.
The Riksbank will raise its benchmark seven-day repo rate to 4.5 percent, according to 14 of 22 economists surveyed by Bloomberg. The others forecast no change. The bank will announce its decision at 9:30 a.m. in Stockholm.
Rising energy and food prices are pushing up inflation worldwide, prompting Norway to raise its key rate last week and the European Central Bank to indicate it may follow suit today. Swedish policy makers are also prioritizing inflation, which accelerated to the fastest pace in 14 years in May, even after economic growth slowed in six of the past seven quarters.
``The Riksbank will raise rates to show that it's taking inflation seriously,'' said Elisabeth Kopelman, an economist at SEB Merchant Banking.
Consumer prices rose 4 percent in the year through May, the fastest pace since December 1993 and twice the central bank's target. The economy grew an annual 2.2 percent in the first quarter, the slowest pace in four years.
Inflation and economic growth have been worse than the central bank expected when it published its monetary policy update in April, First Deputy Governor Irma Rosenberg said on June 13.
Slowing Down
The ECB will raise its benchmark rate to 4.25 percent today, according to all but one of 58 economists surveyed by Bloomberg. Inflation in the euro area accelerated to 3.7 percent in May from 3.3 percent the month before.
The slowdown in growth globally and in Sweden means any rate increase by the Riksbank today may be the last in this cycle.
Ford Motor Co. decided to cut 2,000 jobs mainly at its Volvo car business in Sweden last week. It follows similar cutbacks at Ericsson AB, the world largest maker of wireless networks, and TeliaSonera AB, Sweden's biggest phone operator, this year.
Retail sales declined 1.7 percent in April, the most in three years, as rising prices curbed consumer spending. Annually, sales rose 0.4 percent, the slowest in 10 years, from a revised 3.7 percent in March.
The Riksbank has indicated it will keep the key rate on hold until 2011 based on its economic growth forecast of 2.4 percent this year and 1.9 percent in 2009. The bank will publish new forecasts today.
``Going into the autumn we thus see little need to brake an economy that is already slowing faster than most had assumed, just to make up for high import prices,'' Svenska Handelsbanken AB said in a client note. ``Our view is therefore that the Riksbank will stop at 4.5 percent.''
To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net.
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Japan Should Create 10 Trillion Yen Fund, LDP Says
By Keiko Ujikane and Komaki Ito
July 3 (Bloomberg) -- Japan should create a sovereign wealth fund with 10 trillion yen ($94 billion) in assets using money drawn from the nation's pension reserves to boost returns, a ruling Liberal Democratic Party panel said.
The LDP group will submit its proposal to Prime Minister Yasuo Fukuda ``as soon as possible,'' panel head and former Financial Services Minister Yuji Yamamoto said in Tokyo today.
``It's necessary to seek higher returns as much as possible, given the aging population and the falling birthrate, along with the looming risk of inflation,'' the panel said in a statement.
Countries from Norway to China have set up state funds to help their national wealth expand. Assets managed by sovereign wealth funds will triple to more than $10 trillion by 2015, boosted by foreign-exchange reserves and rising commodity exports, International Financial Services London said in March.
The LDP panel was formed this year to discuss the feasibility of creating such a fund to manage about 4 trillion yen of interest and profits earned from Japan's foreign reserves, as well as pension reserves. The pension fund may have lost money for the first time in five years last fiscal year.
The state fund should seek higher returns than the 3.2 percent made by the Government Pension Investment Fund, which manages a majority of the nation's 150 trillion yen pension reserves, the panel said.
Professionals
The new company should start with about 30 staff members, including fund managers and financial market professionals, without restrictions on nationality, the panel said.
``We are seeking to create an organization of investment professionals,'' Yamamoto said.
The state fund should allocate 67 percent of its assets to Japanese bonds and the rest for riskier assets such as stocks, overseas securities, and other derivative instruments, the panel said.
The Government Pension Investment Fund had 92.8 trillion yen in assets under management as of the end of 2007. The investment posted a loss of 792.4 billion yen in the nine months ended Dec. 31, according to its Web site.
The LDP panel isn't the only group that's urging the nation to find a way to improve the returns on public pension money.
Japan should set up ``baby funds'' by splitting the pension reserves to boost returns and diversify the number of assets it invests in, private-sector members of a government advisory panel said in May.
Take Responsibility
Welfare Minister Yoichi Masuzoe in May said the government needs to consider who would take responsibility should the pension fund post losses, backing away from supporting the idea to invest in riskier assets. Masuzoe had said in March that investing a third of the pension reserves in higher-yielding assets could be one way to boost returns.
In June, Takahiro Kawase, president of the Government Pension Investment Fund, opposed the idea of using pension money to create a state fund, saying it would force risks upon the general public.
The government also should review ways to invest foreign- exchange reserves and have discussions with the U.S. Treasury as Japan's reserves are largely invested in U.S. government debt, the panel said. In the long-run, the nation should aim to create a fund using interest and profits earned from foreign reserves, Yamamoto said.
Foreign Reserves
Japan's Finance Ministry has rejected the idea of using the nation's foreign reserves to create a state fund on the grounds that the reserves must be preserved to buy or sell yen.
Japan holds $997 billion of foreign reserves, the world's largest after those of China, which set up a state fund last year to manage part of its record $1.7 trillion of reserves.
To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.netKomaki Ito in Tokyo at kito@bloomberg.net.
Read more...
July 3 (Bloomberg) -- Japan should create a sovereign wealth fund with 10 trillion yen ($94 billion) in assets using money drawn from the nation's pension reserves to boost returns, a ruling Liberal Democratic Party panel said.
The LDP group will submit its proposal to Prime Minister Yasuo Fukuda ``as soon as possible,'' panel head and former Financial Services Minister Yuji Yamamoto said in Tokyo today.
``It's necessary to seek higher returns as much as possible, given the aging population and the falling birthrate, along with the looming risk of inflation,'' the panel said in a statement.
Countries from Norway to China have set up state funds to help their national wealth expand. Assets managed by sovereign wealth funds will triple to more than $10 trillion by 2015, boosted by foreign-exchange reserves and rising commodity exports, International Financial Services London said in March.
The LDP panel was formed this year to discuss the feasibility of creating such a fund to manage about 4 trillion yen of interest and profits earned from Japan's foreign reserves, as well as pension reserves. The pension fund may have lost money for the first time in five years last fiscal year.
The state fund should seek higher returns than the 3.2 percent made by the Government Pension Investment Fund, which manages a majority of the nation's 150 trillion yen pension reserves, the panel said.
Professionals
The new company should start with about 30 staff members, including fund managers and financial market professionals, without restrictions on nationality, the panel said.
``We are seeking to create an organization of investment professionals,'' Yamamoto said.
The state fund should allocate 67 percent of its assets to Japanese bonds and the rest for riskier assets such as stocks, overseas securities, and other derivative instruments, the panel said.
The Government Pension Investment Fund had 92.8 trillion yen in assets under management as of the end of 2007. The investment posted a loss of 792.4 billion yen in the nine months ended Dec. 31, according to its Web site.
The LDP panel isn't the only group that's urging the nation to find a way to improve the returns on public pension money.
Japan should set up ``baby funds'' by splitting the pension reserves to boost returns and diversify the number of assets it invests in, private-sector members of a government advisory panel said in May.
Take Responsibility
Welfare Minister Yoichi Masuzoe in May said the government needs to consider who would take responsibility should the pension fund post losses, backing away from supporting the idea to invest in riskier assets. Masuzoe had said in March that investing a third of the pension reserves in higher-yielding assets could be one way to boost returns.
In June, Takahiro Kawase, president of the Government Pension Investment Fund, opposed the idea of using pension money to create a state fund, saying it would force risks upon the general public.
The government also should review ways to invest foreign- exchange reserves and have discussions with the U.S. Treasury as Japan's reserves are largely invested in U.S. government debt, the panel said. In the long-run, the nation should aim to create a fund using interest and profits earned from foreign reserves, Yamamoto said.
Foreign Reserves
Japan's Finance Ministry has rejected the idea of using the nation's foreign reserves to create a state fund on the grounds that the reserves must be preserved to buy or sell yen.
Japan holds $997 billion of foreign reserves, the world's largest after those of China, which set up a state fund last year to manage part of its record $1.7 trillion of reserves.
To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.netKomaki Ito in Tokyo at kito@bloomberg.net.
Read more...
Stay-at-Home Grillers on July 4th Still Pay More for Food, Gas
By Alan Bjerga and Shruti Date Singh
July 3 (Bloomberg) -- Rising costs for bread, cheese and propane will make tomorrow's Fourth of July holiday more expensive than last year, even for those Americans who decide to avoid higher gasoline prices by grilling at home.
Bread cost 16 percent more in May than last year, cheese jumped 14 percent, snack foods are up 7.4 percent, and ice cream gained 5.9 percent, Labor Department data show. While hamburger, hot-dog and pork-chop prices are about the same, that's only consolation for consumers who like their meat raw: propane used in grills costs 29 percent more, Energy Department data show.
.
``There's not a thing out there that has not gone up in price,'' said Mike Mills, a barbecue-restaurant owner in Murphysboro, Illinois, who is the past president of the National Barbecue Association and a former championship griller. ``It's kind of like you get nickel-and-dimed to death.''
More Americans may cook at home after gasoline rose to a record above $4 a gallon. The number of travelers over July Fourth holiday will drop for the first time this decade, AAA said. The savings on fuel are getting eaten up by the rising costs at the grocery store. Food inflation last year accelerated at the fastest pace in 17 years, and the government forecast a bigger increase in 2008, led by gains in dairy and grain prices.
Mills, who owns the 17th Street Bar & Grill restaurants in southern Illinois and the Memphis Championship Barbecue in Las Vegas, said he will turn the grill on 15 minutes before cooking to conserve propane and charcoal at home this weekend. In the past, he said he'd start an hour earlier.
Cheaper Meats
The price of propane for residential use is forecast to be $2.65 a gallon this month, up from $2.05 last July, according to data on the Energy Information Administration Web site.
Mills also said he will cook pork and chicken rather than the more-expensive beef steaks.
``I am a steak lover,'' Mills said in an interview yesterday. ``I am not going to be doing any steaks.''
Retailers are passing along higher prices to consumers as global demand for food boosts U.S. exports, production is disrupted by harsh weather and more crops are used to make fuel, the U.S. Department of Agriculture said.
The annual gain for cereals and baked goods will be 9 percent to 10 percent, up from 7.5 percent to 8.5 percent forecast in May and the most since 1980, the USDA said in a report June 27. Fats and oils may rise 11.5 percent to 12.5 percent, sugars and sweets may gain 4.5 percent to 5.5 percent, and poultry may jump 3 percent to 4 percent, the USDA said.
More for Ketchup
``It continues to put consumers in a difficult position as food prices rise, especially for low-income consumers,'' said Chris Waldrop, director of the food policy institute at the Consumer Federation of America in Washington. ``It makes it difficult for them to feed families. They have to prepare for the big holiday, whereas in the past they would go to the store without much concern.''
Rising costs for raw materials and energy are putting a crimp on companies as well as consumers. H.J. Heinz Co., the world's biggest ketchup maker, raised prices by 4.5 percent in the quarter ended April 30 to counter record commodity costs. Even beer and ale consumed at home was 2.4 percent more expensive in May than a year earlier, government data show.
Corn, wheat, soybeans and rice have reached records this year, while wholesale beef, pork and chicken rallied. Overall, U.S. food costs may rise as much as 5.5 percent this year, USDA food economist Ephraim Leibtag said in an interview yesterday.
``Food prices are definitely higher in 2008 vs. 2007,'' Leibtag said. ``Some meat-product prices have been pretty stable this year due to large short-term supplies, but that will change'' as higher feed and fuel costs cut production, he said.
To contact the reporters on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net; Alan Bjerga in Washington at abjerga@bloomberg.net
Read more...
July 3 (Bloomberg) -- Rising costs for bread, cheese and propane will make tomorrow's Fourth of July holiday more expensive than last year, even for those Americans who decide to avoid higher gasoline prices by grilling at home.
Bread cost 16 percent more in May than last year, cheese jumped 14 percent, snack foods are up 7.4 percent, and ice cream gained 5.9 percent, Labor Department data show. While hamburger, hot-dog and pork-chop prices are about the same, that's only consolation for consumers who like their meat raw: propane used in grills costs 29 percent more, Energy Department data show.
.
``There's not a thing out there that has not gone up in price,'' said Mike Mills, a barbecue-restaurant owner in Murphysboro, Illinois, who is the past president of the National Barbecue Association and a former championship griller. ``It's kind of like you get nickel-and-dimed to death.''
More Americans may cook at home after gasoline rose to a record above $4 a gallon. The number of travelers over July Fourth holiday will drop for the first time this decade, AAA said. The savings on fuel are getting eaten up by the rising costs at the grocery store. Food inflation last year accelerated at the fastest pace in 17 years, and the government forecast a bigger increase in 2008, led by gains in dairy and grain prices.
Mills, who owns the 17th Street Bar & Grill restaurants in southern Illinois and the Memphis Championship Barbecue in Las Vegas, said he will turn the grill on 15 minutes before cooking to conserve propane and charcoal at home this weekend. In the past, he said he'd start an hour earlier.
Cheaper Meats
The price of propane for residential use is forecast to be $2.65 a gallon this month, up from $2.05 last July, according to data on the Energy Information Administration Web site.
Mills also said he will cook pork and chicken rather than the more-expensive beef steaks.
``I am a steak lover,'' Mills said in an interview yesterday. ``I am not going to be doing any steaks.''
Retailers are passing along higher prices to consumers as global demand for food boosts U.S. exports, production is disrupted by harsh weather and more crops are used to make fuel, the U.S. Department of Agriculture said.
The annual gain for cereals and baked goods will be 9 percent to 10 percent, up from 7.5 percent to 8.5 percent forecast in May and the most since 1980, the USDA said in a report June 27. Fats and oils may rise 11.5 percent to 12.5 percent, sugars and sweets may gain 4.5 percent to 5.5 percent, and poultry may jump 3 percent to 4 percent, the USDA said.
More for Ketchup
``It continues to put consumers in a difficult position as food prices rise, especially for low-income consumers,'' said Chris Waldrop, director of the food policy institute at the Consumer Federation of America in Washington. ``It makes it difficult for them to feed families. They have to prepare for the big holiday, whereas in the past they would go to the store without much concern.''
Rising costs for raw materials and energy are putting a crimp on companies as well as consumers. H.J. Heinz Co., the world's biggest ketchup maker, raised prices by 4.5 percent in the quarter ended April 30 to counter record commodity costs. Even beer and ale consumed at home was 2.4 percent more expensive in May than a year earlier, government data show.
Corn, wheat, soybeans and rice have reached records this year, while wholesale beef, pork and chicken rallied. Overall, U.S. food costs may rise as much as 5.5 percent this year, USDA food economist Ephraim Leibtag said in an interview yesterday.
``Food prices are definitely higher in 2008 vs. 2007,'' Leibtag said. ``Some meat-product prices have been pretty stable this year due to large short-term supplies, but that will change'' as higher feed and fuel costs cut production, he said.
To contact the reporters on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net; Alan Bjerga in Washington at abjerga@bloomberg.net
Read more...
Australian, N.Z. Dollars Rise as Fed May Delay Raising Rates
By Ron Harui and Candice Zachariahs
July 3 (Bloomberg) -- The Australian and New Zealand dollars rose on speculation the Federal Reserve will delay raising interest rates, maintaining the yield advantage of the South Pacific nations over the U.S.
Australia's dollar gained for a second day and New Zealand's dollar ended two days of losses before a U.S. report today that may show payrolls dropped for a sixth month, prompting traders to add to bets the Fed will keep borrowing costs unchanged. The difference in yield between two-year Australian and U.S. bonds widened to 4.27 percentage points, near the most since June 11.
``There's still good investor appetite for the Australian and New Zealand currencies,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``Some people are talking about interest-rate differentials. We are looking for the Fed to be unchanged in August and September.''
Australia's dollar rose to 96.18 U.S. cents as of 1:51 p.m. in Sydney from 95.91 cents late in Asia yesterday, nearing the 25-year high of 96.68 cents touched June 30. The currency bought 101.98 yen from 102.37 yen.
New Zealand's dollar strengthened to 75.98 U.S. cents from 75.72 cents late in Asia yesterday. The currency traded at 80.57 yen from 80.82 yen.
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, making them popular among investors seeking higher returns. The yield spread between 10-year New Zealand and U.S. debt was little changed at 2.37 percentage points, close to the widest since June 11.
Commodities Advance
Futures on the Chicago Board of Trade showed a 25 percent chance the Fed will raise its target rate for overnight lending between banks by a quarter-percentage point to 2.25 percent at its meeting on Aug. 5, compared with 36 percent odds a week ago.
The Labor Department will probably report today that U.S. employers eliminated 60,000 jobs including government positions last month, according to the median forecast of 79 economists surveyed by Bloomberg.
The Australian and New Zealand dollars were also bolstered as the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities climbed to a record, boosting speculation the two countries will weather a global economic slowdown.
Raw materials account for 60 percent of Australia's exports and sales of commodities including lumber make up 70 percent of New Zealand's overseas shipments.
``We're positive on the Aussie, we generally regard it as a buy,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney, referring to the currency by its nickname. ``Commodities are overall supportive.''
Trade Deficit
The Australian currency was little changed after the Statistics Bureau said in Sydney today the trade deficit was at A$965 million ($928 million) in May from a revised A$12 million surplus in April. The median estimate of 24 economists surveyed by Bloomberg News was for a deficit of A$900 million.
The New Zealand dollar rose against the U.S. currency after the Dow Jones Industrial Average fell 1.5 percent yesterday, sending the stock index into a bear market.
``The recovery is against a much weaker U.S. dollar and not so much against the other currencies,'' RBC's Strauss said. ``The New Zealand dollar is still taking its guidance from what's happening in the rest of the world, especially on the equity side.''
Australian government bonds gained for the first day in three. The yield on the 10-year note fell 9 basis points to 6.48 percent, according to data compiled by Bloomberg. The price of the 5.25 percent bond due March 2019 rose 0.635, or A$6.35 per A$1,000 face amount, to 90.602.
New Zealand government debt was little changed with the 10- year yield holding at 6.34 percent. A basis point equals 0.01 percentage point.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomerg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.
Read more...
Bush's Dollar Drop Maps Loss of U.S. Clout at Final G-8 Summit
By James G. Neuger
July 3 (Bloomberg) -- When President George W. Bush went to his first Group of Eight summit in 2001, a dominant issue was the dollar -- the strong dollar, that is. The U.S. currency was on a record-setting streak, and the free-marketeering president wasn't going to stand in the way.
On the eve of Bush's last G-8 appearance, the dollar's gyrations are again in the crossfire. This time, it is a weak currency, upended by slumping growth, a housing recession and record gas prices, that is gnawing away at the world economy.
The dollar's 41 percent drop against the euro during Bush's term writes the economic epitaph of an administration that set out to restore American preeminence. Instead, Bush heads to Japan next week for his final international summit with diminished leverage as Russian and Chinese influence grows.
``Between the economic duress facing the United States and the global community at large and the fact that the clock is running out on the Bush administration, Bush does not hold a good hand,'' said Charles Kupchan, an international-relations professor at Georgetown University in Washington. He called the summit a ``damage-limitation'' exercise to show the world that governments are trying to contain food and oil prices.
Global economic-confidence building crowds the agenda at the three-day summit starting July 7 in Toyako, on the northern Japanese island of Hokkaido, that was meant to tackle climate change, recommit the rich world to development aid for Africa and strengthen nuclear non-proliferation controls.
Growth Lags
Bush represents the worst-performing economy in the G-8 after Italy, with growth of 0.5 percent this year set to lag behind 1.6 percent in the U.K., 1.4 percent in the euro area, 1.4 percent in Japan and 1.3 percent in Canada, according to International Monetary Fund forecasts.
Russia, brought into the G-8 by Bill Clinton in 1998, will eclipse the rest of the club with growth of 6.8 percent this year, the IMF says. Russia's oil and commodity wealth puts it at odds with the western goal of cutting reliance on fossil fuels. China, seen expanding 9.3 percent, has also frustrated the fight against global warming by locking up energy deals in Africa to slake its economic thirst. China will be among eight non-G-8 members that take part on the summit's last day.
America's economic woes with $4-a-gallon gasoline prices will stiffen Bush's opposition to European and Japanese calls for binding, quantifiable targets for cutting greenhouse-gas emissions, blamed by scientists for pushing up global temperatures.
Global Warming
Bush took a baby step at last year's G-8 by acknowledging the need to do something about global warming, edging the U.S. away from the laissez-faire approach that he championed after pulling the U.S. out of the Kyoto climate-protection protocol in a move that met international condemnation in 2001.
With the countdown under way to the presidency of Barack Obama or John McCain, the most the summit can do is set up a framework for pollution-cutting agreements that replace Kyoto when it expires in 2012, said Reginald Dale, a senior fellow at the Center for Strategic and International Studies in Washington.
``Most of Bush's partners are looking to the next president,'' Dale said. European leaders will ``be trying to pin Bush further down on the nature of commitments that the United States might undertake to reduce emissions in the shorter term.''
Europe's Bind
Europe is caught in a bind of its own. Soaring fuel prices and a chorus of protests put pressure on leaders to offer relief instead of weaning consumers away from fossil fuels. French President Nicolas Sarkozy, holder of the 27-nation European Union's six-month presidency, is pressing for fuel-tax cuts.
Oil prices continued climbing after pressure by European leaders including Britain's Gordon Brown led Saudi Arabia, the world's biggest oil exporter, to announce for July the third straight monthly increase in production.
``There's no hope for new achievements or concrete results regarding crude-oil prices or the shortage of food or global warming,'' said Koichi Kato, a senior member of Japan's ruling Liberal Democratic Party.
Spiraling food and fuel costs are hitting poorer countries the hardest, increasing the pressure on the G-8 to make good on a 2005 pledge to double development aid to Africa to $50 billion annually by 2010 and to implement last year's promise to invest $60 billion worldwide to combat deadly diseases.
Price Surge
G-8 finance ministers last month identified surging commodities prices as a bigger threat than the credit squeeze to the world economy. Prices for 19 commodities in the Reuters/Jefferies CRB Index rose 29 percent in the first half, the most since 1973. Rice, corn and wheat futures have all touched records this year.
Sagging faith in the dollar -- it now makes up 63 percent of global currency reserves, down from 71 percent when Bush took office -- complicates efforts to tame commodity prices because they are primarily denominated in the U.S. currency.
America's dependence on imported capital to finance a $9.5 trillion debt -- up from $5.7 trillion when Bush took office -- has driven down the currency. The decline was accelerated by the subprime crisis that plunged the U.S. into an economic tailspin.
``If Bush could get others at the G-8 summit to demand a stronger dollar he'd have done a final good after a lot of negatives over the years,'' said Uwe von Parpart, chief Asia strategist at Cantor Fitzgerald LP in Hong Kong. ``Dollar strengthening appears to be the only thing capable of containing or pushing back oil prices.''
Speaking at the White House yesterday, Bush tried to give the markets a nudge: ``We're strong dollar people in this administration and have always been for the strong dollar.''
To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net
Read more...
July 3 (Bloomberg) -- When President George W. Bush went to his first Group of Eight summit in 2001, a dominant issue was the dollar -- the strong dollar, that is. The U.S. currency was on a record-setting streak, and the free-marketeering president wasn't going to stand in the way.
On the eve of Bush's last G-8 appearance, the dollar's gyrations are again in the crossfire. This time, it is a weak currency, upended by slumping growth, a housing recession and record gas prices, that is gnawing away at the world economy.
The dollar's 41 percent drop against the euro during Bush's term writes the economic epitaph of an administration that set out to restore American preeminence. Instead, Bush heads to Japan next week for his final international summit with diminished leverage as Russian and Chinese influence grows.
``Between the economic duress facing the United States and the global community at large and the fact that the clock is running out on the Bush administration, Bush does not hold a good hand,'' said Charles Kupchan, an international-relations professor at Georgetown University in Washington. He called the summit a ``damage-limitation'' exercise to show the world that governments are trying to contain food and oil prices.
Global economic-confidence building crowds the agenda at the three-day summit starting July 7 in Toyako, on the northern Japanese island of Hokkaido, that was meant to tackle climate change, recommit the rich world to development aid for Africa and strengthen nuclear non-proliferation controls.
Growth Lags
Bush represents the worst-performing economy in the G-8 after Italy, with growth of 0.5 percent this year set to lag behind 1.6 percent in the U.K., 1.4 percent in the euro area, 1.4 percent in Japan and 1.3 percent in Canada, according to International Monetary Fund forecasts.
Russia, brought into the G-8 by Bill Clinton in 1998, will eclipse the rest of the club with growth of 6.8 percent this year, the IMF says. Russia's oil and commodity wealth puts it at odds with the western goal of cutting reliance on fossil fuels. China, seen expanding 9.3 percent, has also frustrated the fight against global warming by locking up energy deals in Africa to slake its economic thirst. China will be among eight non-G-8 members that take part on the summit's last day.
America's economic woes with $4-a-gallon gasoline prices will stiffen Bush's opposition to European and Japanese calls for binding, quantifiable targets for cutting greenhouse-gas emissions, blamed by scientists for pushing up global temperatures.
Global Warming
Bush took a baby step at last year's G-8 by acknowledging the need to do something about global warming, edging the U.S. away from the laissez-faire approach that he championed after pulling the U.S. out of the Kyoto climate-protection protocol in a move that met international condemnation in 2001.
With the countdown under way to the presidency of Barack Obama or John McCain, the most the summit can do is set up a framework for pollution-cutting agreements that replace Kyoto when it expires in 2012, said Reginald Dale, a senior fellow at the Center for Strategic and International Studies in Washington.
``Most of Bush's partners are looking to the next president,'' Dale said. European leaders will ``be trying to pin Bush further down on the nature of commitments that the United States might undertake to reduce emissions in the shorter term.''
Europe's Bind
Europe is caught in a bind of its own. Soaring fuel prices and a chorus of protests put pressure on leaders to offer relief instead of weaning consumers away from fossil fuels. French President Nicolas Sarkozy, holder of the 27-nation European Union's six-month presidency, is pressing for fuel-tax cuts.
Oil prices continued climbing after pressure by European leaders including Britain's Gordon Brown led Saudi Arabia, the world's biggest oil exporter, to announce for July the third straight monthly increase in production.
``There's no hope for new achievements or concrete results regarding crude-oil prices or the shortage of food or global warming,'' said Koichi Kato, a senior member of Japan's ruling Liberal Democratic Party.
Spiraling food and fuel costs are hitting poorer countries the hardest, increasing the pressure on the G-8 to make good on a 2005 pledge to double development aid to Africa to $50 billion annually by 2010 and to implement last year's promise to invest $60 billion worldwide to combat deadly diseases.
Price Surge
G-8 finance ministers last month identified surging commodities prices as a bigger threat than the credit squeeze to the world economy. Prices for 19 commodities in the Reuters/Jefferies CRB Index rose 29 percent in the first half, the most since 1973. Rice, corn and wheat futures have all touched records this year.
Sagging faith in the dollar -- it now makes up 63 percent of global currency reserves, down from 71 percent when Bush took office -- complicates efforts to tame commodity prices because they are primarily denominated in the U.S. currency.
America's dependence on imported capital to finance a $9.5 trillion debt -- up from $5.7 trillion when Bush took office -- has driven down the currency. The decline was accelerated by the subprime crisis that plunged the U.S. into an economic tailspin.
``If Bush could get others at the G-8 summit to demand a stronger dollar he'd have done a final good after a lot of negatives over the years,'' said Uwe von Parpart, chief Asia strategist at Cantor Fitzgerald LP in Hong Kong. ``Dollar strengthening appears to be the only thing capable of containing or pushing back oil prices.''
Speaking at the White House yesterday, Bush tried to give the markets a nudge: ``We're strong dollar people in this administration and have always been for the strong dollar.''
To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net
Read more...
Dollar May Advance to 107.73 Yen Next Week, Bank of Tokyo Says
By Stanley White
July 3 (Bloomberg) -- The dollar may rise to 107.73 yen next week provided it stays above 106 yen today, said Masashi Hashimoto, currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.
The U.S. currency is poised to gain as it has held above the so-called support level of its 65-day moving average since April 24, Hashimoto said. First resistance at 106 yen is the dollar's five-day moving average and second resistance at 107.73 yen is near the 200-day moving average, he said. Resistance is a level where sell orders may be clustered, while support is where traders may buy.
``The 65-day moving average has been quite firm, which suggests the dollar has formed a base from which it can push higher,'' Tokyo-based Hashimoto said. ``We're sitting right on top of the five-day moving average, which could pave the way to further gains.''
The dollar traded at 106.06 yen as of 11:57 a.m. in Tokyo from 105.91 yen late yesterday. The U.S. currency rose 0.7 percent versus the yen last month.
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: Stanley White in Tokyo at swhite28@bloomberg.net.
Read more...
July 3 (Bloomberg) -- The dollar may rise to 107.73 yen next week provided it stays above 106 yen today, said Masashi Hashimoto, currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.
The U.S. currency is poised to gain as it has held above the so-called support level of its 65-day moving average since April 24, Hashimoto said. First resistance at 106 yen is the dollar's five-day moving average and second resistance at 107.73 yen is near the 200-day moving average, he said. Resistance is a level where sell orders may be clustered, while support is where traders may buy.
``The 65-day moving average has been quite firm, which suggests the dollar has formed a base from which it can push higher,'' Tokyo-based Hashimoto said. ``We're sitting right on top of the five-day moving average, which could pave the way to further gains.''
The dollar traded at 106.06 yen as of 11:57 a.m. in Tokyo from 105.91 yen late yesterday. The U.S. currency rose 0.7 percent versus the yen last month.
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: Stanley White in Tokyo at swhite28@bloomberg.net.
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China's Yuan Trades Near Highest Since Peg on Inflation Concern
July 3 (Bloomberg) -- The yuan traded near the highest level since a dollar peg was scrapped in July 2005 on speculation China will quicken the currency's appreciation to lower import costs and curb inflation.
China's currency has gained 10.8 percent versus the dollar in the past 12 months, the second-best performer of the 10 most- active currencies in Asia outside Japan, as crude oil prices have more than doubled. China, the world's second-biggest oil consumer, raised gasoline and diesel prices by at least 17 percent from June 20 to help curb energy consumption.
``Soaring oil prices will add further pressure on inflation in China,'' said Shi Lei, a Beijing-based currency analyst at Bank of China Ltd., the country's biggest foreign-exchange trader. ``The central bank has to accelerate yuan gains to slow imported inflation.''
The currency traded at 6.8528 per dollar as of 9:57 a.m. in Shanghai, compared with 6.8530 late yesterday, according to the China Foreign Exchange Trade System.
The People's Bank of China fixed the reference rate for yuan trading at the highest since the peg for a second time this week. It was set at 6.8529 per dollar today. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the so-called central parity rate.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net.
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China Should Extend Crackdown on `Hot Money,' Researcher Says
By Belinda Cao
July 3 (Bloomberg) -- China's should extend its crackdown on so-called ``hot money'' speculating on yuan gains to include the services industry, a government researcher said.
Speculators have shifted channels of sending funds into China this year to trade in services, said Li Youhuan, a researcher at the Chinese Academy of Social Sciences in Guangdong Province. China's currency regulator yesterday tightened controls on exporters of goods by requiring them to register foreign-currency income on a centralized database.
``The monitoring measures need to be more specific and detailed,'' said Li, who wrote an investigative report last year on how hot-money came into China through underground dealers. ``Otherwise, speculative-money can always find loopholes to go around the supervision.''
Since China scrapped a decade-long link of about 8.3 to the dollar almost three years ago, the currency has risen 21 percent as increased exports drive the nation's trade surplus to a record and overseas investors buy Chinese stocks and property.
China's yuan accelerated the pace of appreciation this year, gaining 6.6 percent versus the dollar in the first half, nearly matching that for the full year of 2007.
Foreign-exchange reserves surged 40 percent to $1.68 trillion in March from a year earlier, flooding the economy with cash and fueling inflation.
There's about $500 billion of ``hot money'' invested in China, Li said.
The State Administration of Foreign Exchange is requiring banks to verify the authenticity of trade with related agencies via a shared database before money conversions and transfers, according to a notice it posted on its Web site yesterday.
``A lot of extra foreign funds have made their way into the Chinese system to gain form yuan appreciation and SAFE has decided to stop this, as it increases liquidity and inflation,'' Dwyfor Evans, a currency strategist at State Street Global Markets in Hong Kong, wrote in a note to clients.
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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July 3 (Bloomberg) -- China's should extend its crackdown on so-called ``hot money'' speculating on yuan gains to include the services industry, a government researcher said.
Speculators have shifted channels of sending funds into China this year to trade in services, said Li Youhuan, a researcher at the Chinese Academy of Social Sciences in Guangdong Province. China's currency regulator yesterday tightened controls on exporters of goods by requiring them to register foreign-currency income on a centralized database.
``The monitoring measures need to be more specific and detailed,'' said Li, who wrote an investigative report last year on how hot-money came into China through underground dealers. ``Otherwise, speculative-money can always find loopholes to go around the supervision.''
Since China scrapped a decade-long link of about 8.3 to the dollar almost three years ago, the currency has risen 21 percent as increased exports drive the nation's trade surplus to a record and overseas investors buy Chinese stocks and property.
China's yuan accelerated the pace of appreciation this year, gaining 6.6 percent versus the dollar in the first half, nearly matching that for the full year of 2007.
Foreign-exchange reserves surged 40 percent to $1.68 trillion in March from a year earlier, flooding the economy with cash and fueling inflation.
There's about $500 billion of ``hot money'' invested in China, Li said.
The State Administration of Foreign Exchange is requiring banks to verify the authenticity of trade with related agencies via a shared database before money conversions and transfers, according to a notice it posted on its Web site yesterday.
``A lot of extra foreign funds have made their way into the Chinese system to gain form yuan appreciation and SAFE has decided to stop this, as it increases liquidity and inflation,'' Dwyfor Evans, a currency strategist at State Street Global Markets in Hong Kong, wrote in a note to clients.
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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Asian Currencies: Ringgit Advances on Intervention Speculation
By Lilian Karunungan and David Yong
July 3 (Bloomberg) -- Asian currencies advanced, led by Malaysia's ringgit and Singapore's dollar, on speculation central banks will buy their own currencies to help lower import costs and stem inflation.
Five of the 10 most-active Asian currencies outside of Japan rose against the dollar after the U.S. currency traded near a two-month low against the euro. The dollar weakened as economists forecast the European Central Bank will raise its main refinancing rate by a quarter-percentage point and U.S. payrolls will drop for a sixth month. Crude oil's advance to a record today stoked concern fuel prices will add to inflation.
``It's a combination of central bank intervention threat and broad dollar weakness that is helping to take a bit off the pressure'' on Asian currencies, said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
The ringgit traded at 3.2660 per dollar as of 12:34 p.m. in Kuala Lumpur versus 3.2730 late yesterday, according to data compiled by Bloomberg. The Singapore dollar rose as much as 0.1 percent to S$1.3573.
The Malaysian currency yesterday slipped to a five-month low on concern inflation approaching the fastest in nine years will curb consumer spending and crimp economic growth.
Bolstering Currencies
Higher oil prices and heightened risk aversion may lead regional central banks to bolster their currencies, Singapore's Oversea-Chinese Banking Corp. said in a report today.
``There isn't a lot of room for Malaysia's central bank to raise interest rates, so there's some need for a stronger currency,'' said Gundy Cahyadi, an economist at Ideaglobal in Singapore. ``They may not want to allow the ringgit to weaken excessively, especially if it's only driven by bad sentiment.''
The ringgit slumped 2.1 percent in the three months through June, snapping a six-quarter winning streak. Consumer prices may rise 5 percent in June, after gaining 3.8 percent in May, Bank Negara Malaysia said on June 5, when the government raised gasoline prices by 41 percent. That was the steepest of seven fuel-price increases since May 2004.
Bank Negara has kept its overnight policy rate at 3.5 percent since April 2006. Policy makers next meet on July 25.
Raising Rates
Indonesia's rupiah traded near a two-month high on speculation the central bank wants a stronger currency to lower import costs as crude oil rose to a record.
The currency is the biggest gainer in the region over the past month as the central bank pledged to use all monetary tools, including the exchange rate, to temper prices. Economists forecast Bank Indonesia will raise its benchmark interest rate today for the third time this year after inflation accelerated to a 21-month high.
``The downside in the rupiah is being capped by agent banks'' representing the central bank, said Joanna Tan, an economist and foreign-exchange strategist at Forecast Singapore Pte Ltd. ``Oil prices are still a factor to consider.''
The currency traded unchanged at 9,215 per dollar in Jakarta, according to data compiled by Bloomberg. The rupiah may trade between 9,200 and 9,240 for the rest of this week, Tan said.
The central bank will raise its overnight rate by a quarter-percentage point to 8.75 percent today, according to the median estimate of economists in a Bloomberg News survey.
Consumer-price gains quickened to 11 percent in June, from 10.4 percent the previous month, after the government reduced fuel subsidies in May.
Outflows
The Philippine peso fell for a fifth day on concern record oil prices will stoke inflation and keep it above 10 percent for the rest of the year.
The currency traded near a nine-month low against the dollar after the central bank yesterday said inflation will peak in the third quarter before easing to single-digit levels next year. ``There are already indications that supply driven pressures are beginning to feed into demand,'' Governor Amando Tetangco said.
``The underlying support for the peso has weakened substantially as the country pays more for its imports and stocks are seeing a lot of outflows,'' said Irene Cheung, a strategist at ABN Amro Bank NV in Singapore. ``Inflation will potentially go up and chances are, the central bank won't tighten as much.''
The peso weakened 0.2 percent to 45.29 per dollar in Manila, according to Tullett Prebon Plc. The currency may fall to 46.50 this quarter, Cheung said.
Rice, Oil, Inflation
Record rice and oil prices pushed the inflation rate to a nine-year high in May and prompted the central bank to raise interest rates for the first time since October 2005 last month. Inflation quickened to 10 percent in June, according to a Bloomberg News survey of economists before the government report tomorrow. The forecast is slower than the central bank's estimate of as high as 11.2 percent.
``The peso's weakening isn't helping'' to tame inflation Cheung said. The central bank next meets to review interest rates on July 17.
Elsewhere, the Thai baht declined 0.1 percent to 33.36 against the dollar and South Korea's won dropped 0.2 percent to 1,037.85. Taiwan's dollar traded little changed at NT$30.40 versus NT$30.372 yesterday, while Vietnam's dong traded at 16,846 compared with 16,846.50 yesterday.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.
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July 3 (Bloomberg) -- Asian currencies advanced, led by Malaysia's ringgit and Singapore's dollar, on speculation central banks will buy their own currencies to help lower import costs and stem inflation.
Five of the 10 most-active Asian currencies outside of Japan rose against the dollar after the U.S. currency traded near a two-month low against the euro. The dollar weakened as economists forecast the European Central Bank will raise its main refinancing rate by a quarter-percentage point and U.S. payrolls will drop for a sixth month. Crude oil's advance to a record today stoked concern fuel prices will add to inflation.
``It's a combination of central bank intervention threat and broad dollar weakness that is helping to take a bit off the pressure'' on Asian currencies, said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
The ringgit traded at 3.2660 per dollar as of 12:34 p.m. in Kuala Lumpur versus 3.2730 late yesterday, according to data compiled by Bloomberg. The Singapore dollar rose as much as 0.1 percent to S$1.3573.
The Malaysian currency yesterday slipped to a five-month low on concern inflation approaching the fastest in nine years will curb consumer spending and crimp economic growth.
Bolstering Currencies
Higher oil prices and heightened risk aversion may lead regional central banks to bolster their currencies, Singapore's Oversea-Chinese Banking Corp. said in a report today.
``There isn't a lot of room for Malaysia's central bank to raise interest rates, so there's some need for a stronger currency,'' said Gundy Cahyadi, an economist at Ideaglobal in Singapore. ``They may not want to allow the ringgit to weaken excessively, especially if it's only driven by bad sentiment.''
The ringgit slumped 2.1 percent in the three months through June, snapping a six-quarter winning streak. Consumer prices may rise 5 percent in June, after gaining 3.8 percent in May, Bank Negara Malaysia said on June 5, when the government raised gasoline prices by 41 percent. That was the steepest of seven fuel-price increases since May 2004.
Bank Negara has kept its overnight policy rate at 3.5 percent since April 2006. Policy makers next meet on July 25.
Raising Rates
Indonesia's rupiah traded near a two-month high on speculation the central bank wants a stronger currency to lower import costs as crude oil rose to a record.
The currency is the biggest gainer in the region over the past month as the central bank pledged to use all monetary tools, including the exchange rate, to temper prices. Economists forecast Bank Indonesia will raise its benchmark interest rate today for the third time this year after inflation accelerated to a 21-month high.
``The downside in the rupiah is being capped by agent banks'' representing the central bank, said Joanna Tan, an economist and foreign-exchange strategist at Forecast Singapore Pte Ltd. ``Oil prices are still a factor to consider.''
The currency traded unchanged at 9,215 per dollar in Jakarta, according to data compiled by Bloomberg. The rupiah may trade between 9,200 and 9,240 for the rest of this week, Tan said.
The central bank will raise its overnight rate by a quarter-percentage point to 8.75 percent today, according to the median estimate of economists in a Bloomberg News survey.
Consumer-price gains quickened to 11 percent in June, from 10.4 percent the previous month, after the government reduced fuel subsidies in May.
Outflows
The Philippine peso fell for a fifth day on concern record oil prices will stoke inflation and keep it above 10 percent for the rest of the year.
The currency traded near a nine-month low against the dollar after the central bank yesterday said inflation will peak in the third quarter before easing to single-digit levels next year. ``There are already indications that supply driven pressures are beginning to feed into demand,'' Governor Amando Tetangco said.
``The underlying support for the peso has weakened substantially as the country pays more for its imports and stocks are seeing a lot of outflows,'' said Irene Cheung, a strategist at ABN Amro Bank NV in Singapore. ``Inflation will potentially go up and chances are, the central bank won't tighten as much.''
The peso weakened 0.2 percent to 45.29 per dollar in Manila, according to Tullett Prebon Plc. The currency may fall to 46.50 this quarter, Cheung said.
Rice, Oil, Inflation
Record rice and oil prices pushed the inflation rate to a nine-year high in May and prompted the central bank to raise interest rates for the first time since October 2005 last month. Inflation quickened to 10 percent in June, according to a Bloomberg News survey of economists before the government report tomorrow. The forecast is slower than the central bank's estimate of as high as 11.2 percent.
``The peso's weakening isn't helping'' to tame inflation Cheung said. The central bank next meets to review interest rates on July 17.
Elsewhere, the Thai baht declined 0.1 percent to 33.36 against the dollar and South Korea's won dropped 0.2 percent to 1,037.85. Taiwan's dollar traded little changed at NT$30.40 versus NT$30.372 yesterday, while Vietnam's dong traded at 16,846 compared with 16,846.50 yesterday.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.
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Soybeans Fall After Touching Record on U.S. Production Concern
By Jae Hur
July 3 (Bloomberg) -- Soybeans declined after reaching a record for a third day on concern the worst Midwest flooding in 15 years may pare production and inventories in the U.S., the largest producer and exporter. Corn also fell.
Soybeans gained 15 percent in June, the biggest monthly advance since February, amid concern flood damage to fields may curb output increases the U.S. government predicted after farmers planted more acres this year. U.S. farmers may harvest 96.8 percent of this year's planted acreage, down from 98.7 percent last year, the U.S. Department of Agriculture said June 30.
The oilseed, used for cooking oil and biofuel, advanced 89 percent in the past year, as crude oil, wheat and corn prices also reached records fueling inflation. Gaining prices have spurred riots from Egypt to Haiti, increased costs at Nestle SA and Kraft Foods Inc., the world's largest food companies and boosted profits of grain traders such as Archer Daniels Midland Co. and Cargill Inc.
``It's getting worse with surging inflation,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul. ``Soybeans are not the only commodity reaching a record.''
Soybeans for November delivery dropped 28.5 cents, or 1.8 percent, to $16.015 a bushel at 12:23 p.m. Singapore time after reaching a record $16.3675 a bushel in after-hours trading on the Chicago Board of Trade. Soybean's 14-day relative strength index, a gauge of momentum, held above 70 yesterday, signaling prices may decline.
Planting Progress
U.S. farmers intended to sow 74.533 million acres of soybeans, and about 95 percent of the crop was planted on June 29, leaving 3.7 million acres yet to be planted, USDA data show. The USDA said earlier this week that harvested acreage would have been 1.3 million acres larger without the flooding.
Soybeans have been supported by speculation U.S. inventories before the harvest will be smaller than the 125 million bushels the USDA forecast June 10 and a three-month old farmers' strike in Argentina may boost demand for U.S. supplies. U.S. inventories are forecast to fall to just 15 days of use.
Argentina's farmers may resume protests and halt grain sales if Congress passes a law on export taxes as proposed by the government, said Miguel Calvo, vice president of the Argentine Soy Chain Association.
President Cristina Fernandez de Kirchner has asked Congress to pass as law a variable-rate tax increase, imposed in March, that boosted levies on soybeans and sunflower seeds to more than 40 percent from a fixed 35 percent.
Corn Declines
Corn for December delivery fell 9.5 cents, or 1.2 percent, at $7.71 a bushel at 12:23 p.m. Singapore time after gaining 3.8 percent yesterday on speculation that hot, dry weather will threaten U.S. crops that already have smaller root systems than normal after flooding.
Corn futures, which rose to a record $7.9925 on June 27, have more than doubled in the past year as global reserves are forecast to fall to a 24-year low by the end of August.
Wheat for September delivery was down 6.75 cents, or 0.8 percent, at $8.735 a bushel at 12:24 p.m. Singapore time. Prices fell 35 percent from a record $13.495 set on February 27 on speculation that global production will increase.
Wheat prices gained 1.8 percent yesterday on speculation that producers of hog, cattle and poultry will seek the grain as an alternative to high-cost corn, analysts said.
Inflation in Korea will accelerate to the fastest pace in a decade this year, the nation's central bank said in its semi- annual statement on July 1.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
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July 3 (Bloomberg) -- Soybeans declined after reaching a record for a third day on concern the worst Midwest flooding in 15 years may pare production and inventories in the U.S., the largest producer and exporter. Corn also fell.
Soybeans gained 15 percent in June, the biggest monthly advance since February, amid concern flood damage to fields may curb output increases the U.S. government predicted after farmers planted more acres this year. U.S. farmers may harvest 96.8 percent of this year's planted acreage, down from 98.7 percent last year, the U.S. Department of Agriculture said June 30.
The oilseed, used for cooking oil and biofuel, advanced 89 percent in the past year, as crude oil, wheat and corn prices also reached records fueling inflation. Gaining prices have spurred riots from Egypt to Haiti, increased costs at Nestle SA and Kraft Foods Inc., the world's largest food companies and boosted profits of grain traders such as Archer Daniels Midland Co. and Cargill Inc.
``It's getting worse with surging inflation,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul. ``Soybeans are not the only commodity reaching a record.''
Soybeans for November delivery dropped 28.5 cents, or 1.8 percent, to $16.015 a bushel at 12:23 p.m. Singapore time after reaching a record $16.3675 a bushel in after-hours trading on the Chicago Board of Trade. Soybean's 14-day relative strength index, a gauge of momentum, held above 70 yesterday, signaling prices may decline.
Planting Progress
U.S. farmers intended to sow 74.533 million acres of soybeans, and about 95 percent of the crop was planted on June 29, leaving 3.7 million acres yet to be planted, USDA data show. The USDA said earlier this week that harvested acreage would have been 1.3 million acres larger without the flooding.
Soybeans have been supported by speculation U.S. inventories before the harvest will be smaller than the 125 million bushels the USDA forecast June 10 and a three-month old farmers' strike in Argentina may boost demand for U.S. supplies. U.S. inventories are forecast to fall to just 15 days of use.
Argentina's farmers may resume protests and halt grain sales if Congress passes a law on export taxes as proposed by the government, said Miguel Calvo, vice president of the Argentine Soy Chain Association.
President Cristina Fernandez de Kirchner has asked Congress to pass as law a variable-rate tax increase, imposed in March, that boosted levies on soybeans and sunflower seeds to more than 40 percent from a fixed 35 percent.
Corn Declines
Corn for December delivery fell 9.5 cents, or 1.2 percent, at $7.71 a bushel at 12:23 p.m. Singapore time after gaining 3.8 percent yesterday on speculation that hot, dry weather will threaten U.S. crops that already have smaller root systems than normal after flooding.
Corn futures, which rose to a record $7.9925 on June 27, have more than doubled in the past year as global reserves are forecast to fall to a 24-year low by the end of August.
Wheat for September delivery was down 6.75 cents, or 0.8 percent, at $8.735 a bushel at 12:24 p.m. Singapore time. Prices fell 35 percent from a record $13.495 set on February 27 on speculation that global production will increase.
Wheat prices gained 1.8 percent yesterday on speculation that producers of hog, cattle and poultry will seek the grain as an alternative to high-cost corn, analysts said.
Inflation in Korea will accelerate to the fastest pace in a decade this year, the nation's central bank said in its semi- annual statement on July 1.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
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Crude Oil Rises to Record Above $144 After U.S. Stockpile Drop
By Christian Schmollinger
July 3 (Bloomberg) -- Crude oil rose to a record above $144 a barrel in New York after U.S. stockpiles dropped unexpectedly and Russian President Dmitry Medvedev said prices will climb to $150.
Medvedev, whose country is the world's second-largest oil producer, said in Moscow that the high price may slow global economic growth. U.S. oil stockpiles dropped to the lowest since January, according to the Energy Department. A forecast increase in interest rates by the European Central Bank may spur commodity purchases, especially as the Dow Jones Industrial Average fell into a bear market.
``In this market, breaking the $145 level will be important and we should be reaching $150 within two days,'' said Tetsu Emori, a fund manager with Astmax Ltd. in Tokyo. ``The current market is being driven by the weaker dollar and with the equity markets a disaster, investment money is looking for a more- profitable market.''
Crude oil for August delivery climbed as much as 87 cents, or 0.6 percent, to $144.44 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It was at $144.25 at 10:43 a.m. in Singapore. Futures have more than doubled in the past year.
Surging oil prices are starting to slow growth in some emerging economies. The Philippine central bank may say tomorrow that inflation jumped to an annual pace of 10 percent in June because of higher food and fuel. Indonesia plans to raise interest rates after costs gained 11 percent last month.
U.S. oil supplies dropped 1.98 million barrels to 299.8 million last week, the Energy Department said yesterday. Analysts assumed a gain of 500,000 barrels. The European Central bank may boost interest rates today, further weakening the dollar and causing investors to buy oil contracts as a hedge against inflation.
European Rates
``The combination of the weaker U.S. dollar along with the bullish inventory data, that's what spurred prices to the highs,'' said Toby Hassall, a research analyst at Commodity Warrants Australia in Sydney. ``If the ECB raises rates, we'll see more weakness in the dollar and upward pressure on U.S. denominated commodities such as crude.''
The European Central Bank will today lift its 4 percent benchmark main refinancing rate by a quarter-percentage point, according to 57 of 58 economists surveyed by Bloomberg News.
The dollar traded near a two-month low against the euro, dropping to $1.5891 per euro, the weakest level since April 24, before trading at $1.5878 at 10:34 a.m. in Tokyo, compared with $1.5882 yesterday.
Russian Forecasts
Russia's Medvedev said that high oil prices are a ``reality that everyone has to take into account.'' He called OPEC's influence ``exaggerated,'' saying that the group's decisions don't always have a ``long-term impact on oil prices.''
``I have said that oil prices will reach $150 a barrel,'' Medvedev said in a meeting with reporters late yesterday in Moscow ahead of his participation in a summit of the Group of Eight industrial countries in Japan next week. ``Unfortunately, rising oil prices create problems for the world's economy.''
The Standard & Poor's 500 Index slid yesterday to its lowest since July 2006.
The surge in prices of diesel, jet fuel and gasoline has cut profits at airlines and caused car sales to drop. Southeast Asian nations including India, Malaysia and Indonesia raised fuel prices in the past two months to cap government subsidies as oil costs jumped.
Planes, Cars
Cathay Pacific Airways Ltd., Hong Kong's largest airline, may post a loss this year because of soaring jet-fuel prices, according to a report by Cazenove Asia Ltd. Cathay yesterday warned that earnings this year would be ``disappointing.''
General Motors Corp. shares fell yesterday to their lowest level since 1954 after a Merrill Lynch & Co. analyst said the automaker may need to raise as much as $15 billion and faces the possibility of bankruptcy. The company's June U.S. auto sales fell 18 percent, as rising gasoline prices damped demand for pickups and sport-utility vehicles.
Sales at Ssangyong Motor Co., the South Korean unit of China's biggest automaker, sank 32 percent last month as domestic customers shunned its sport-utility vehicles.
Brent crude for August delivery climbed as much as 85 cents, or 0.6 percent, to a record $145.11 a barrel on London's ICE Futures Europe exchange. It was at $144.83 at 10:38 a.m. Singapore time.
U.S. Stockpiles
U.S. gasoline inventories rose 2.1 million barrels to 210.9 million and supplies of distillate fuel, including heating oil and diesel, increased 1.3 million barrels to 120.7 million barrels, the Energy Department said in its report today.
The margin for turning three barrels of crude into two of gasoline and one of heating oil rose 6.4 cents to $12.678 a barrel, based on futures prices. That's 38 percent lower than $20.5140 reached on June 3.
Refineries operated at 89.2 percent of their capacity, the department reported, 0.6 percentage point higher than the week before. Refiners operated at 90 percent of capacity a year earlier.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net
Read more...
July 3 (Bloomberg) -- Crude oil rose to a record above $144 a barrel in New York after U.S. stockpiles dropped unexpectedly and Russian President Dmitry Medvedev said prices will climb to $150.
Medvedev, whose country is the world's second-largest oil producer, said in Moscow that the high price may slow global economic growth. U.S. oil stockpiles dropped to the lowest since January, according to the Energy Department. A forecast increase in interest rates by the European Central Bank may spur commodity purchases, especially as the Dow Jones Industrial Average fell into a bear market.
``In this market, breaking the $145 level will be important and we should be reaching $150 within two days,'' said Tetsu Emori, a fund manager with Astmax Ltd. in Tokyo. ``The current market is being driven by the weaker dollar and with the equity markets a disaster, investment money is looking for a more- profitable market.''
Crude oil for August delivery climbed as much as 87 cents, or 0.6 percent, to $144.44 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It was at $144.25 at 10:43 a.m. in Singapore. Futures have more than doubled in the past year.
Surging oil prices are starting to slow growth in some emerging economies. The Philippine central bank may say tomorrow that inflation jumped to an annual pace of 10 percent in June because of higher food and fuel. Indonesia plans to raise interest rates after costs gained 11 percent last month.
U.S. oil supplies dropped 1.98 million barrels to 299.8 million last week, the Energy Department said yesterday. Analysts assumed a gain of 500,000 barrels. The European Central bank may boost interest rates today, further weakening the dollar and causing investors to buy oil contracts as a hedge against inflation.
European Rates
``The combination of the weaker U.S. dollar along with the bullish inventory data, that's what spurred prices to the highs,'' said Toby Hassall, a research analyst at Commodity Warrants Australia in Sydney. ``If the ECB raises rates, we'll see more weakness in the dollar and upward pressure on U.S. denominated commodities such as crude.''
The European Central Bank will today lift its 4 percent benchmark main refinancing rate by a quarter-percentage point, according to 57 of 58 economists surveyed by Bloomberg News.
The dollar traded near a two-month low against the euro, dropping to $1.5891 per euro, the weakest level since April 24, before trading at $1.5878 at 10:34 a.m. in Tokyo, compared with $1.5882 yesterday.
Russian Forecasts
Russia's Medvedev said that high oil prices are a ``reality that everyone has to take into account.'' He called OPEC's influence ``exaggerated,'' saying that the group's decisions don't always have a ``long-term impact on oil prices.''
``I have said that oil prices will reach $150 a barrel,'' Medvedev said in a meeting with reporters late yesterday in Moscow ahead of his participation in a summit of the Group of Eight industrial countries in Japan next week. ``Unfortunately, rising oil prices create problems for the world's economy.''
The Standard & Poor's 500 Index slid yesterday to its lowest since July 2006.
The surge in prices of diesel, jet fuel and gasoline has cut profits at airlines and caused car sales to drop. Southeast Asian nations including India, Malaysia and Indonesia raised fuel prices in the past two months to cap government subsidies as oil costs jumped.
Planes, Cars
Cathay Pacific Airways Ltd., Hong Kong's largest airline, may post a loss this year because of soaring jet-fuel prices, according to a report by Cazenove Asia Ltd. Cathay yesterday warned that earnings this year would be ``disappointing.''
General Motors Corp. shares fell yesterday to their lowest level since 1954 after a Merrill Lynch & Co. analyst said the automaker may need to raise as much as $15 billion and faces the possibility of bankruptcy. The company's June U.S. auto sales fell 18 percent, as rising gasoline prices damped demand for pickups and sport-utility vehicles.
Sales at Ssangyong Motor Co., the South Korean unit of China's biggest automaker, sank 32 percent last month as domestic customers shunned its sport-utility vehicles.
Brent crude for August delivery climbed as much as 85 cents, or 0.6 percent, to a record $145.11 a barrel on London's ICE Futures Europe exchange. It was at $144.83 at 10:38 a.m. Singapore time.
U.S. Stockpiles
U.S. gasoline inventories rose 2.1 million barrels to 210.9 million and supplies of distillate fuel, including heating oil and diesel, increased 1.3 million barrels to 120.7 million barrels, the Energy Department said in its report today.
The margin for turning three barrels of crude into two of gasoline and one of heating oil rose 6.4 cents to $12.678 a barrel, based on futures prices. That's 38 percent lower than $20.5140 reached on June 3.
Refineries operated at 89.2 percent of their capacity, the department reported, 0.6 percentage point higher than the week before. Refiners operated at 90 percent of capacity a year earlier.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net
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Copper Trades Near Record on Peru Protest, Crude Oil, Dollar
By Glenys Sim
July 3 (Bloomberg) -- Copper rose for a third day in Asia, trading near the highest ever, as an ongoing strike in Peru raised concerns that supplies may be cut.
Copper also climbed as a slumping dollar, record oil prices and falling equities boosted demand for alternative investments. The metal has advanced 32 percent this year partly on output disruptions at mines in Latin America.
`Strike action has affected most of the base metals, but it is copper that is understandably wielding the most support given the extreme tightness mine supply is facing this year,'' analysts at Barclays Capital Inc. said in a report yesterday.
Copper for delivery in three months rose as much as $160, or 1.8 percent, to $8,880 a metric ton on the London Metal Exchange, and traded at $8,810 at 9:28 a.m. Singapore time. The contract reached a record of $8,940 yesterday.
Copper for September delivery on the Shanghai Futures Exchange added as much as 1.8 percent to 64,830 yuan ($9,282), the highest for a most-active contract since May 7. It stood at 64,740 yuan at 9:33 a.m. local time.
Peruvian workers are on strike at mines run by Barrick Gold Corp., Southern Copper Corp., Renco Group Inc.'s Doe Run Peru unit, Shougang Corp.'s Hierroperu iron unit, Cia. Minera Antamina and Volcan Cia. Minera SA, according to the country's Mining Federation.
Copper is also being ``dragged higher'' by crude oil prices and the soft U.S. dollar, said Darren Gibbs, chief economist at Deutsche Bank AG in Auckland.
Oil gained to a record $144.44 a barrel after a U.S. government report showed an unexpected decline in inventories, while the dollar traded near a two-month low against the euro ahead of the European Central Bank interest rate decision and U.S. jobs report.
Among other LME-traded metals, aluminum was up 0.6 percent at $3,218 a ton, zinc gained 1.8 percent to $1,898, lead rose 0.9 percent to $1,720, and nickel added 1 percent to trade at $21,350. Tin had not traded as of 9:36 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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July 3 (Bloomberg) -- Copper rose for a third day in Asia, trading near the highest ever, as an ongoing strike in Peru raised concerns that supplies may be cut.
Copper also climbed as a slumping dollar, record oil prices and falling equities boosted demand for alternative investments. The metal has advanced 32 percent this year partly on output disruptions at mines in Latin America.
`Strike action has affected most of the base metals, but it is copper that is understandably wielding the most support given the extreme tightness mine supply is facing this year,'' analysts at Barclays Capital Inc. said in a report yesterday.
Copper for delivery in three months rose as much as $160, or 1.8 percent, to $8,880 a metric ton on the London Metal Exchange, and traded at $8,810 at 9:28 a.m. Singapore time. The contract reached a record of $8,940 yesterday.
Copper for September delivery on the Shanghai Futures Exchange added as much as 1.8 percent to 64,830 yuan ($9,282), the highest for a most-active contract since May 7. It stood at 64,740 yuan at 9:33 a.m. local time.
Peruvian workers are on strike at mines run by Barrick Gold Corp., Southern Copper Corp., Renco Group Inc.'s Doe Run Peru unit, Shougang Corp.'s Hierroperu iron unit, Cia. Minera Antamina and Volcan Cia. Minera SA, according to the country's Mining Federation.
Copper is also being ``dragged higher'' by crude oil prices and the soft U.S. dollar, said Darren Gibbs, chief economist at Deutsche Bank AG in Auckland.
Oil gained to a record $144.44 a barrel after a U.S. government report showed an unexpected decline in inventories, while the dollar traded near a two-month low against the euro ahead of the European Central Bank interest rate decision and U.S. jobs report.
Among other LME-traded metals, aluminum was up 0.6 percent at $3,218 a ton, zinc gained 1.8 percent to $1,898, lead rose 0.9 percent to $1,720, and nickel added 1 percent to trade at $21,350. Tin had not traded as of 9:36 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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