Daily Forex Fundamentals | Written by Jyske Bank | Jul 04 08 04:44 GMT |
Financial News - US & Far East
* EUR fell on rate outlook
* Oil hits record above USD 145
* Nikkei edges lower
Today's Main Events
* EUR: German Industrial Orders for May
* EUR: ECB's Liebscher speaks
* USD: Closed for Independence Day Holiday
American Time Zone:
Stocks mostly higher
U.S. stocks on Thursday ended mostly higher in offering a benign reaction to the government's report on employment, which declined only a bit more than expected in June, offsetting worries that the ailing economy is getting worse.
EUR fell on rate outlook
The euro fell the most against the dollar in more than two months after European Central Bank President Jean-Claude Trichet signalled that he may not increase interest rates again. The 15-nation euro also dropped against the pound as Trichet said he has no bias or precommitment following the decision to raise the ECB's main refinancing rate by a quarterpercentage point to 4.25 %.
In mid-afternoon trading in New York, EUR/USD was 1.2 % lower on the day at 1.5694, its biggest one-day drop since April 24.
Oil hits record above USD 145
Oil rushed to record over USD 145 a barrel on Thursday ahead of the U.S. Independence Day holiday, extending a rally that has added 50 % to prices this year.
The U.S. oil settled up USD 1.72 at USD 145.29 a barrel, after earlier hitting an all-time intraday high of USD 145.85.
Far East Time Zone:
Dollar holds gains
The dollar edged up against the euro on Friday, extending sharp gains made the previous day after payroll data came in close to expectations and eased some fears about the health of the U.S. job market and economy.
The U.S. currency also climbed against the euro on Thursday as European Central Bank President Jean-Claude Trichet cooled speculation of more interest rate hikes.
After the ECB raised rates on Thursday to 4.25 % from 4 % in a widely expected move to get record euro zone inflation back under control, Trichet said he had 'no bias' on monetary policy.
EUR/USD edged down to as low as 1.5673 before recovering a tad to 1.5710. It had fallen on Thursday from a high above 1.5900. The dollar was little changed against the yen at 106.75 yen with many traders expecting a quiet Friday as U.S. markets are closed for the Independence Day holiday.
Nikkei edges lower
Japan's Nikkei stock average edged down 0.3 % on Friday, a day after hitting its longest losing streak in more than half a century, with Mitsui & Co and other trading houses making gains after oil hit a record high over USD 145 and exporters adding buoyancy.
Komatsu Ltd climbed after the Nikkei business daily said the earth-moving equipment maker's operating profit is likely to have risen 7 % to about 85 billion yen for the April-June quarter, a first-quarter record, thanks to strong demand for construction equipment in emerging economies.
But with a slew of big events over and U.S. markets closed on Friday for Independence Day, investors were searching for direction and the market was moving more according to share-specific factors than any comprehensive market factors.
Jyske Markets - FX Research
http://www.jyskebank.dk/finansnyt
The analysis is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the analysis. The estimates and recommendation of the analysis may be changed without notice. The analysis is for personal use of Jyske Bank's customers and may not be copied.
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Friday, July 4, 2008
China's Stocks Set for Seventh Weekly Decline as Oil Climbs
By Chua Kong Ho and Zhang Shidong
July 4 (Bloomberg) -- China's stocks declined, with the benchmark index headed for a seventh weekly drop, as concern record oil prices will hurt earnings countered higher profit forecasts by banks.
China Petroleum & Chemical Corp. and PetroChina Co., the country's two biggest refiners, dropped on concern production costs will increase. China Shenhua Energy Co. led coal producers lower after a newspaper reported China may increase a tax on the fuel's production. Industrial & Commercial Bank of China Ltd. and Shanghai Pudong Development Bank Co. climbed after predicting increased earnings.
``The record oil price is killing China's utilities, refiners and airlines,'' said Gabriel Gondard, Shanghai-based deputy chief investment officer at Fortune SGAM Fund Management, which oversees about $12 billion. ``Bank earnings are a major surprise to the market. They're resisting the domestic tightening and lending curbs.''
The CSI 300 Index, which tracks yuan-denominated stocks traded in Shanghai and Shenzhen, dropped 25.72, or 0.9 percent, to 2,734.89 at 1:28 p.m. local time. About nine stocks fell for every five that rose. The measure is down 2.9 percent this week.
China's CSI 300 Index has plunged 49 percent this year, the worst-performing among the world's 20 biggest equity markets. The measure more than doubled in both 2006 and 2007, reaching a record on Oct. 16 last year.
Higher Taxes?
China Petroleum, or Sinopec as the company is known, dropped 2.6 percent to 9.48 yuan. PetroChina Co., the nation's second- biggest refiner, sank 1.8 percent to 14.45 yuan.
Oil in New York was recently at $145.35 a barrel after climbing yesterday to a record $145.85. Crude has gained 51 percent this year.
Shenhua Energy, Asia's largest coal producer, slumped 8.9 percent to 31.70 yuan, the biggest drag on the CSI 300 Index. Hebei Jinniu Energy Resources Co. fell 9.6 percent to 37.70 yuan, Shanxi Xishan Coal & Electricity Power Co. tumbled 9.9 percent to 41.80 yuan. Six of the 10 biggest contributors to the index's decline today are coal producers.
China may increase the resource tax on coal production this weekend, the Shanghai-based National Business Daily reported, without saying where it got the information.
Industrial & Commercial Bank gained 1.1 percent to 4.70 yuan. The lender said it expects first-half profit to rise by more than 50 percent, as China's economic growth boosts demand for loans, according to a statement to the exchange.
Higher Profit
Pudong Bank added 2.6 percent to 20.95 yuan. Profit for the first six months probably rose by more than 140 percent from 2.55 billion yuan ($372 million) a year earlier, the Shanghai-based bank said in an exchange filing.
The Shanghai Composite Index, a measure of stocks on the larger of China's two exchanges, lost 0.7 percent to 2,683.88. The Shenzhen Composite Index slipped 0.3 percent.
Ping An Insurance (Group) Co., the nation's second-largest insurer, fell 1 percent to 40.16 yuan, a fourth consecutive drop, even after saying it doesn't need to make financial provisions for its investment in Fortis. Ping An has slumped 18 percent this week amid concern it's being investigated for tax irregularities.
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net; Zhang Shidong in Shanghai at szhang5@bloomberg.net.
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July 4 (Bloomberg) -- China's stocks declined, with the benchmark index headed for a seventh weekly drop, as concern record oil prices will hurt earnings countered higher profit forecasts by banks.
China Petroleum & Chemical Corp. and PetroChina Co., the country's two biggest refiners, dropped on concern production costs will increase. China Shenhua Energy Co. led coal producers lower after a newspaper reported China may increase a tax on the fuel's production. Industrial & Commercial Bank of China Ltd. and Shanghai Pudong Development Bank Co. climbed after predicting increased earnings.
``The record oil price is killing China's utilities, refiners and airlines,'' said Gabriel Gondard, Shanghai-based deputy chief investment officer at Fortune SGAM Fund Management, which oversees about $12 billion. ``Bank earnings are a major surprise to the market. They're resisting the domestic tightening and lending curbs.''
The CSI 300 Index, which tracks yuan-denominated stocks traded in Shanghai and Shenzhen, dropped 25.72, or 0.9 percent, to 2,734.89 at 1:28 p.m. local time. About nine stocks fell for every five that rose. The measure is down 2.9 percent this week.
China's CSI 300 Index has plunged 49 percent this year, the worst-performing among the world's 20 biggest equity markets. The measure more than doubled in both 2006 and 2007, reaching a record on Oct. 16 last year.
Higher Taxes?
China Petroleum, or Sinopec as the company is known, dropped 2.6 percent to 9.48 yuan. PetroChina Co., the nation's second- biggest refiner, sank 1.8 percent to 14.45 yuan.
Oil in New York was recently at $145.35 a barrel after climbing yesterday to a record $145.85. Crude has gained 51 percent this year.
Shenhua Energy, Asia's largest coal producer, slumped 8.9 percent to 31.70 yuan, the biggest drag on the CSI 300 Index. Hebei Jinniu Energy Resources Co. fell 9.6 percent to 37.70 yuan, Shanxi Xishan Coal & Electricity Power Co. tumbled 9.9 percent to 41.80 yuan. Six of the 10 biggest contributors to the index's decline today are coal producers.
China may increase the resource tax on coal production this weekend, the Shanghai-based National Business Daily reported, without saying where it got the information.
Industrial & Commercial Bank gained 1.1 percent to 4.70 yuan. The lender said it expects first-half profit to rise by more than 50 percent, as China's economic growth boosts demand for loans, according to a statement to the exchange.
Higher Profit
Pudong Bank added 2.6 percent to 20.95 yuan. Profit for the first six months probably rose by more than 140 percent from 2.55 billion yuan ($372 million) a year earlier, the Shanghai-based bank said in an exchange filing.
The Shanghai Composite Index, a measure of stocks on the larger of China's two exchanges, lost 0.7 percent to 2,683.88. The Shenzhen Composite Index slipped 0.3 percent.
Ping An Insurance (Group) Co., the nation's second-largest insurer, fell 1 percent to 40.16 yuan, a fourth consecutive drop, even after saying it doesn't need to make financial provisions for its investment in Fortis. Ping An has slumped 18 percent this week amid concern it's being investigated for tax irregularities.
To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net; Zhang Shidong in Shanghai at szhang5@bloomberg.net.
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Malaysia's Stocks Slump to One-Year Low on Political Tensions
By Chan Tien Hin
July 4 (Bloomberg) -- Malaysia's key stock index slumped, set for its lowest level in more than a year, on concern rising political tension will hurt investments and curb economic growth.
Banks dropped after UBS AG cut its earnings estimates in financials services companies, citing slower growth, higher inflation and rising interest rates. Bumiputra-Commerce Holdings Bhd. slid to its lowest since November 2006. Bursa Malaysia Bhd., the stock exchange manager, fell the most in almost four months.
``You have a difficult external environment and you have politics: not a very nice combination,'' said David Ng, who helps manage about $1 billion as a portfolio manager at Hwang-DBS Asset Management Sdn. in Kuala Lumpur. ``Foreigners have been the main sellers and locals have started to join in.''
The Kuala Lumpur Composite Index fell for a sixth day, losing 29.17, or 2.5 percent, to 1,124.53 at the 12:30 p.m. local time break, set for its lowest close since March 5, 2007, on course to become the worst performing benchmark index in Asia. It's the longest losing streak since March 2007.
The decline came after trading on the stock exchange's equities market was suspended yesterday due to a systems failure.
The measure has fallen 5.5 percent so far this week, headed for its biggest weekly decline since March 14. The index's July index futures contract dropped 0.5 percent to 1,111.00.
About 10,000 people rallied in a Kuala Lumpur suburb on July 1 to support Malaysian opposition leader Anwar Ibrahim, who is facing a new sodomy allegation. He has denied the claims and has accused the government of a conspiracy. Yesterday, Deputy Premier Najib Razak disputed allegations that he had an affair with a woman before she was killed two years ago, calling them a ``desperate attempt'' by Anwar to divert attention from charges he faces.
`Things Look Ugly'
Malaysian police in the past week confirmed investigations of Najib and Anwar. Both have called the claims against them fabrications intended to destroy their political careers.
``It's creating a lot of anxiety among investors,'' said Lye Thim Loong, who helps manage the equivalent of $593 million as portfolio manager at Avenue Invest Bhd. in Kuala Lumpur. ``People now perceive that Malaysian risk has gone up, so when you add the risk to their valuations, then things look ugly.''
The sodomy charge follows the ruling coalition's worst-ever election result in March that raised doubt over Abdullah's leadership. On March 10, a day after the polls result, the Composite Index plunged 9.5 percent, the steepest drop in a decade. The measure is down 13 percent since the elections.
``We see no quick resolution to the increasingly fragile political backdrop in the near term,'' Teoh Su-Yin, an analyst at Deutsche Bank AG, wrote in a report today. ``The market has yet to fully price in the negative impact of higher inflation on the economy and market earnings.''
Deutsche expects the Composite Index to fall to 1,060 by the end of the year, 5.9 percent below today's level.
Banks Decline
Bumiputra-Commerce Holdings Bhd., the second-largest Malaysian bank, lost 35 sen, or 4.6 percent, to 7.20 ringgit, its sixth day of declines, set for its lowest since November 2006. Malayan Banking Bhd., the No. 1 bank, dropped 15 sen, or 2.1 percent, to 6.90 ringgit. Public Bank fell 20 sen, or 2 percent, to 10.00 ringgit.
Bursa lost 40 sen, or 5.8 percent, to 6.45 ringgit, set for its biggest decline since March 10.
Builders such as IJM Corp. and property stocks including SP Setia Bhd. tumbled after Deutsche Bank AG said accelerating inflation will curb economic growth, eroding domestic consumption.
For now, ``avoid all sectors related to consumption, that is, property, autos, construction and banks,'' Deutsche's Teoh said in her report titled ``Summer of Discontent.''
IJM fell 34 sen, or 6.5 percent, to 4.86 ringgit, set for its worst decline since April 30. WCT Bhd. tumbled 20 sen, or 7.4 percent, to 2.50 ringgit, the second-worst performer on the benchmark Composite Index. MMC Corp. lost 14 sen, or 5.4 percent, to 2.46 ringgit. SP Setia sank 7 sen, or 2.5 percent, to 2.76 ringgit.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net;
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Beadell Scraps Plan to Buy Mine as Share Sale Fails
By Jesse Riseborough
July 4 (Bloomberg) -- Beadell Resources Ltd., an Australian gold explorer, pulled out of the proposed A$280 million ($269 million) acquisition of a mine from Newcrest Mining Ltd. and Lion Selection Ltd. after failing to complete a share sale.
``Prevailing market conditions prevented the completion of the equity raising required,'' Perth-based Beadell said today in a statement. Melbourne-based Newcrest, Australia's biggest gold producer, will refund a A$2 million deposit, Beadell said.
Beadell had planned to sell shares worth A$235 million, almost 10 times its market value, to help fund the purchase of the Cracow mine in Queensland state. Access to debt and equity funding for smaller mining companies is more difficult and costly following a global credit crunch this year, Goldman Sachs JBWere Pty said in an April report.
Beadell, backed by Oxiana Ltd., dropped as much as 15.5 cents, or 39 percent, to 24.5 cents. It traded at 25 cents at 12:01 p.m. Sydney time on the Australian Stock Exchange. Newcrest gained 0.7 percent to A$30.20 and Lion fell 6 percent to A$1.72.
Beadell had planned to sell shares at 40 cents apiece in a sale managed by Merrill Lynch & Co. and Morgan Stanley, according to a June presentation by Chief Executive Officer Peter Bowler. It also agreed to a A$50 million loan from Australia & New Zealand Banking Group Ltd.
Newcrest will retain its 70 percent stake and operational control of the mine, which produces more than 100,000 ounces of gold each year, it said in a separate statement. Melbourne-based Lion said it will also retain its 30 percent stake though partner Newcrest has an option to buy it for A$80 million.
The Cracow mine generates about A$50 million to A$60 million in earnings before interest, tax, depreciation and amortization annually, Beadell said.
To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net
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July 4 (Bloomberg) -- Beadell Resources Ltd., an Australian gold explorer, pulled out of the proposed A$280 million ($269 million) acquisition of a mine from Newcrest Mining Ltd. and Lion Selection Ltd. after failing to complete a share sale.
``Prevailing market conditions prevented the completion of the equity raising required,'' Perth-based Beadell said today in a statement. Melbourne-based Newcrest, Australia's biggest gold producer, will refund a A$2 million deposit, Beadell said.
Beadell had planned to sell shares worth A$235 million, almost 10 times its market value, to help fund the purchase of the Cracow mine in Queensland state. Access to debt and equity funding for smaller mining companies is more difficult and costly following a global credit crunch this year, Goldman Sachs JBWere Pty said in an April report.
Beadell, backed by Oxiana Ltd., dropped as much as 15.5 cents, or 39 percent, to 24.5 cents. It traded at 25 cents at 12:01 p.m. Sydney time on the Australian Stock Exchange. Newcrest gained 0.7 percent to A$30.20 and Lion fell 6 percent to A$1.72.
Beadell had planned to sell shares at 40 cents apiece in a sale managed by Merrill Lynch & Co. and Morgan Stanley, according to a June presentation by Chief Executive Officer Peter Bowler. It also agreed to a A$50 million loan from Australia & New Zealand Banking Group Ltd.
Newcrest will retain its 70 percent stake and operational control of the mine, which produces more than 100,000 ounces of gold each year, it said in a separate statement. Melbourne-based Lion said it will also retain its 30 percent stake though partner Newcrest has an option to buy it for A$80 million.
The Cracow mine generates about A$50 million to A$60 million in earnings before interest, tax, depreciation and amortization annually, Beadell said.
To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net
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Origin Energy Rejects BG A$13.8 Billion Takeover Bid
By Jason Scott
July 4 (Bloomberg) -- Origin Energy Ltd., Australia's biggest producer of gas from coal seams, told shareholders to reject BG Group Plc's A$13.8 billion ($13.3 billion) hostile takeover bid.
The A$15.50 a share all-cash offer announced June 24 doesn't reflect the true value of its gas reserves, Origin said in a statement to the Australian stock exchange today.
BG, the U.K.'s third-largest oil and gas producer, took its offer direct to shareholders after Sydney-based Origin rejected the bid in May. Reading, England-based BG wants Origin's gas resources in east Australia, which may feed a proposed liquefied natural gas project supplying utilities in northern Asia.
Origin's board spurned the previously agreed approach after doubling its coal-seam gas reserves. It said the decision by Petroliam Nasional Bhd., Malaysia's national oil company, to pay $2.51 billion for a stake in a rival LNG project being developed by Santos Ltd. showed its resources were worth more.
``We have by far the largest reserves in the industry,'' Managing Director Grant King said on a conference call from Sydney today. ``BG's rejection of the Santos deal as a benchmark is entirely self-serving.''
Origin has risen above the offer price as investors bet the bid may be increased to win shareholder support, and touched a record A$16.49 in Sydney on June 25. Origin fell 8 cents, or 0.5 percent, to A$16.20 at 11:41 a.m. in Sydney trading.
Higher Offer
BG's offer values Origin 48 percent higher than when it first bid April 30. The U.K. company may have to increase its offer, Merrill Lynch & Co., Credit Suisse Group, ABN Amro Inc. and JPMorgan Chase & Co. said last week.
Should the acquisition go through, it would be the second- largest foreign takeover of an Australian company after the $14.2 billion purchase last year of Rinker Group Ltd. by Cemex AB, North America's largest cement producer.
BG, the largest supplier of LNG from the Atlantic Basin into Asia, in February formed a venture with smaller coal-seam gas producer Queensland Gas Co. to build an A$8 billion LNG export project in Gladstone. The venture is one of five rival projects in the northeastern Australian city based on coal-seam gas, which hasn't previously been used as a fuel for LNG.
Fuel Demand
Demand for the fuel is set to increase by 10 percent a year through 2015, more than five times the estimated gains in crude oil, as power producers switch to cleaner fuels, according to Citigroup.
LNG is gas chilled to liquid form for transportation by tanker. Chinese oil companies plan to build more than 10 LNG terminals along the coast to meet a government target of doubling gas use by 2010.
Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed.
Origin today said it bought the 640 megawatt gas-fired Uranquinty Power Station for A$700 million from Babcock and Brown Power, and committed to proceed with the 550 megawatt Mortlake Power Station, estimated to cost A$640 million.
To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net.
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July 4 (Bloomberg) -- Origin Energy Ltd., Australia's biggest producer of gas from coal seams, told shareholders to reject BG Group Plc's A$13.8 billion ($13.3 billion) hostile takeover bid.
The A$15.50 a share all-cash offer announced June 24 doesn't reflect the true value of its gas reserves, Origin said in a statement to the Australian stock exchange today.
BG, the U.K.'s third-largest oil and gas producer, took its offer direct to shareholders after Sydney-based Origin rejected the bid in May. Reading, England-based BG wants Origin's gas resources in east Australia, which may feed a proposed liquefied natural gas project supplying utilities in northern Asia.
Origin's board spurned the previously agreed approach after doubling its coal-seam gas reserves. It said the decision by Petroliam Nasional Bhd., Malaysia's national oil company, to pay $2.51 billion for a stake in a rival LNG project being developed by Santos Ltd. showed its resources were worth more.
``We have by far the largest reserves in the industry,'' Managing Director Grant King said on a conference call from Sydney today. ``BG's rejection of the Santos deal as a benchmark is entirely self-serving.''
Origin has risen above the offer price as investors bet the bid may be increased to win shareholder support, and touched a record A$16.49 in Sydney on June 25. Origin fell 8 cents, or 0.5 percent, to A$16.20 at 11:41 a.m. in Sydney trading.
Higher Offer
BG's offer values Origin 48 percent higher than when it first bid April 30. The U.K. company may have to increase its offer, Merrill Lynch & Co., Credit Suisse Group, ABN Amro Inc. and JPMorgan Chase & Co. said last week.
Should the acquisition go through, it would be the second- largest foreign takeover of an Australian company after the $14.2 billion purchase last year of Rinker Group Ltd. by Cemex AB, North America's largest cement producer.
BG, the largest supplier of LNG from the Atlantic Basin into Asia, in February formed a venture with smaller coal-seam gas producer Queensland Gas Co. to build an A$8 billion LNG export project in Gladstone. The venture is one of five rival projects in the northeastern Australian city based on coal-seam gas, which hasn't previously been used as a fuel for LNG.
Fuel Demand
Demand for the fuel is set to increase by 10 percent a year through 2015, more than five times the estimated gains in crude oil, as power producers switch to cleaner fuels, according to Citigroup.
LNG is gas chilled to liquid form for transportation by tanker. Chinese oil companies plan to build more than 10 LNG terminals along the coast to meet a government target of doubling gas use by 2010.
Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed.
Origin today said it bought the 640 megawatt gas-fired Uranquinty Power Station for A$700 million from Babcock and Brown Power, and committed to proceed with the 550 megawatt Mortlake Power Station, estimated to cost A$640 million.
To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net.
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Daewoo Ship Receives Record 2.44 Trillion Won Order
By Kyunghee Park
July 4 (Bloomberg) -- Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, received a contract for 16 container vessels from A.P. Moeller-Maersk A/S for a record 2.44 trillion won ($2.3 billion).
The ships, which can each carry 7,450 20-foot standard containers, will be delivered by June 29, 2012, the Seoul-based company said in a regulatory filing today. Copenhagen-based Maersk announced the order yesterday, without giving the value.
South Korean shipyards are expected to win record orders for a sixth year as buyers turn to the world's biggest shipbuilding nation amid delivery delays by Chinese yards. Growing global demand for shipping cheaper consumer goods from Asia and commodities to the continent increased the need for more ships.
``Shipbuilders in South Korea are winning more orders at higher prices because of the delays'' with Chinese shipbuilders, said Lee Bong Jin, an analyst at Eugene Investment & Securities Co. in Seoul. ``More orders for container vessels are expected in the second half as more commodities are transported by containers.'' He rates Daewoo Shipbuilding a ``buy.''
Daewoo Shipbuilding rose 0.8 percent to 36,900 won as of 11:37 a.m. in Seoul, after gaining as much as 3.7 percent. The stock has dropped 28 percent this year, compared with a 16 percent decline in South Korea's Kospi index.
Higher Rates
Daewoo Shipbuilding is charging about $153 million per ship, higher than shipbroker Clarkson Plc's average price of $137 million for a vessel that can carry 8,000 containers, Lee said. Including the latest order, the shipyard has received $9.83 billion worth of contracts, achieving more than half of this year's $17.5 billion target.
Maersk, the world's biggest shipping line, will deploy the vessels between the east coast of South America and Asia and Europe. In the last five years, trade between Asia and South America rose more than 20 percent a year on average, and will remain in the double digits in the next five years, Maersk said.
Hyundai Heavy Industries Co., the world's largest shipbuilder, in June won a $1.2 billion contract from Maersk to supply 18 ships that can each carry 4,500 containers. South Korean shipyards accounted for more than half of the world's ship orders by tonnage in the first five months of this year.
China Delays
Chinese shipbuilders probably delayed about 45 percent of their deliveries at the end of last month, due partly to a shortage of components, according to Lee Jae Kyu, an analyst at Mirae Asset Securities Co. in Seoul. That compares with the 25 percent delay rate in 2007, he said.
``There weren't a lot of orders for container vessels in the first half because shipping lines were trying to lower prices,'' said Lee Jae Won, an analyst at Tong Yang Investment Bank in Seoul. ``They now realize they can't wait too long because dock spaces are being filled up and they will have to wait longer to get the ships delivered.''
A crane accident at Hudong-Zhonghua Shipbuilding (Group) Co., a unit of China's biggest shipyard, on May 30 may cause further delays to Chinese deliveries, Eugene Investment's Lee said.
``Hudong is one of the two shipyards in China that can build these big container vessels and the crane accident means there are fewer yards the shipping lines can go to for these type of ships to be built,'' he said.
Two 600-ton cranes at Shanghai-based Hudong-Zhonghua collapsed in May, killing three people and injuring two. Hudong- Zhonghua hasn't given details on lost production time or costs.
Cranes are used to move blocks, or steel structures that make the hulls of vessels, to docks. They are also used to load heavy parts onto ships under construction.
To contact the reporters on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net
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July 4 (Bloomberg) -- Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, received a contract for 16 container vessels from A.P. Moeller-Maersk A/S for a record 2.44 trillion won ($2.3 billion).
The ships, which can each carry 7,450 20-foot standard containers, will be delivered by June 29, 2012, the Seoul-based company said in a regulatory filing today. Copenhagen-based Maersk announced the order yesterday, without giving the value.
South Korean shipyards are expected to win record orders for a sixth year as buyers turn to the world's biggest shipbuilding nation amid delivery delays by Chinese yards. Growing global demand for shipping cheaper consumer goods from Asia and commodities to the continent increased the need for more ships.
``Shipbuilders in South Korea are winning more orders at higher prices because of the delays'' with Chinese shipbuilders, said Lee Bong Jin, an analyst at Eugene Investment & Securities Co. in Seoul. ``More orders for container vessels are expected in the second half as more commodities are transported by containers.'' He rates Daewoo Shipbuilding a ``buy.''
Daewoo Shipbuilding rose 0.8 percent to 36,900 won as of 11:37 a.m. in Seoul, after gaining as much as 3.7 percent. The stock has dropped 28 percent this year, compared with a 16 percent decline in South Korea's Kospi index.
Higher Rates
Daewoo Shipbuilding is charging about $153 million per ship, higher than shipbroker Clarkson Plc's average price of $137 million for a vessel that can carry 8,000 containers, Lee said. Including the latest order, the shipyard has received $9.83 billion worth of contracts, achieving more than half of this year's $17.5 billion target.
Maersk, the world's biggest shipping line, will deploy the vessels between the east coast of South America and Asia and Europe. In the last five years, trade between Asia and South America rose more than 20 percent a year on average, and will remain in the double digits in the next five years, Maersk said.
Hyundai Heavy Industries Co., the world's largest shipbuilder, in June won a $1.2 billion contract from Maersk to supply 18 ships that can each carry 4,500 containers. South Korean shipyards accounted for more than half of the world's ship orders by tonnage in the first five months of this year.
China Delays
Chinese shipbuilders probably delayed about 45 percent of their deliveries at the end of last month, due partly to a shortage of components, according to Lee Jae Kyu, an analyst at Mirae Asset Securities Co. in Seoul. That compares with the 25 percent delay rate in 2007, he said.
``There weren't a lot of orders for container vessels in the first half because shipping lines were trying to lower prices,'' said Lee Jae Won, an analyst at Tong Yang Investment Bank in Seoul. ``They now realize they can't wait too long because dock spaces are being filled up and they will have to wait longer to get the ships delivered.''
A crane accident at Hudong-Zhonghua Shipbuilding (Group) Co., a unit of China's biggest shipyard, on May 30 may cause further delays to Chinese deliveries, Eugene Investment's Lee said.
``Hudong is one of the two shipyards in China that can build these big container vessels and the crane accident means there are fewer yards the shipping lines can go to for these type of ships to be built,'' he said.
Two 600-ton cranes at Shanghai-based Hudong-Zhonghua collapsed in May, killing three people and injuring two. Hudong- Zhonghua hasn't given details on lost production time or costs.
Cranes are used to move blocks, or steel structures that make the hulls of vessels, to docks. They are also used to load heavy parts onto ships under construction.
To contact the reporters on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net
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China Southern Flight Lands in Taipei, Ending Tourist Ban
By Eugene Tang and Tim Culpan
July 4 (Bloomberg) -- Liu Shaoyong, chairman of China Southern Airlines Co., piloted a Chinese tourist flight to Taiwan, ending a six-decade ban that deprived the island of visitors from its closest neighbor.
Passengers applauded when the Airbus SAS A330 landed in Taipei at 8:05 a.m. after the 95-minute flight from China's southern Guangzhou Baiyun airport. Liu, 49, took the controls for take-off and landing, underscoring the trip's significance to the nation and its largest airline.
China and Taiwan agreed in June to start direct flights for tourists for the first time, signaling a rapprochement between governments estranged since their civil war ended in 1949. Allowing visitors from the world's most populous nation may boost Taiwan's economy, forecast to grow at less than half the pace of its larger neighbor this year.
``This was a small step across the strait but a giant stride for relations between China and Taiwan,'' said Liu, a trained commercial pilot and former vice minister of the Civil Aviation Administration of China. ``Taiwan and China has been one family, but we'd been split by history, so it feels great to come home.''
The flight, greeted by a traditional Chinese ``lion dance'' and sprays of water from fire trucks, followed the March election in Taiwan of President Ma Ying-jeou on a pledge to improve ties. Predecessor Chen Shui-bian had kept travel and trade restrictions to limit China's sway over the island that it claims as its own and vows to take by force if necessary.
Ambition for Generations
``For generations, mainland residents have wanted to visit Taiwan because we've read so much and heard so much about the island,'' said Zhang Yu, a Shenzhen resident on the flight to Taipei.
Taipei-based China Airlines took off this morning for Shanghai, the first weekly flight for tour groups by a Taiwan carrier to the mainland. Six China-based airlines and five from Taiwan will make 36 round trips each week, operating Friday through Monday.
``This non-stop flight saves me a lot of time because normally I would travel from early morning for a whole day,'' said Michael Yin, a passenger.
Direct flights shave as much as six hours off the journey across the 100-mile (161-kilometer) Taiwan Strait. Until now, the estimated 1 million Taiwanese living in China have changed planes in Hong Kong or Macau.
Chinese airlines will transport 662 tourists to Taiwan today and 3,000 in the first week, Taiwan's Minister of Transportation and Communications Mao Chi-kuo said yesterday.
Red-Carpet Welcome
Taiwan's rolling out the red carpet. The tourism board is hosting a reception tonight at the Taipei Grand Hotel, where Nationalist leader Chiang Kai-shek and his wife Madam Chiang once held state banquets.
``The charter flights and new tourism arrangements are very important for us,'' said Anthony Liao, president of Phoenix Tours International Inc., Taiwan's third-largest travel operator. ``At 10,000 mainland tourists per year, I can almost double my profits.''
Taiwan's tourism literature will add simplified Chinese script used on the mainland, while tour guides have been tutored on mainland idioms, according to a June 30 report by the Taipei- based United Daily News.
Taiwan companies have pressed their government for closer ties to benefit from the expansion of the world's fastest-growing major economy. The island's businessmen have invested as much as $100 billion in China since 1990, CLSA Ltd. estimates.
China's Growth
China's economic output of $3.6 trillion last year was more than nine times Taiwan's and the mainland's 9.8 percent expansion in 2008 will outpace the island's 4.3 percent growth, the World Bank forecasts.
``Taiwan's economy and consumption should indirectly benefit in the long run,'' said Nick Lai, a Taipei-based analyst at JPMorgan Chase & Co. ``A more open economic policy and a better relationship with China will help boost domestic consumption.''
Spending by Chinese tourists overseas rose 11.8 percent to $24.3 billion in 2006, the fastest-growing of the top 10 nations apart from South Korea, according to the World Tourism Organization.
A measure of Taiwan tourism stocks has risen 44 percent this year, the best performer of 28 industry groups in Taiwan's TWSE Index, which has declined 13 percent, signaling investors' expectations that improved ties will translate into profits.
Besides China Southern, Air China Ltd., China Eastern Airlines Corp., Xiamen Airlines Co., Hainan Airlines Co. and Shanghai Airlines Co. will operate weekly nonstop flights. The Taiwan carriers include EVA Airways Corp., Mandarin Airlines, Uni Airways Corp. and TransAsia Airways Corp.
Shortest Flight
China Southern beat Air China to fly the first service because the flying distance from its Guangzhou base was the shortest of Chinese cities, Liu said. Flights from Guangzhou needed only a 12-minute detour into Hong Kong air space, versus more than an hour from Shanghai or Beijing, Liu said.
``We hope to eventually see direct flights that do away with the detour, which is a waste of time and fuel for the airlines concerned,'' Liu said. ``It doesn't bode well at a time when we're supposed to be cutting emissions and saving fuel.''
Phoenix Tours' Liao estimates the Taipei-based company will bring 5,000 Chinese tourists to Taiwan in the second half and predicts it will handle 20,000 annually by 2010. The company's stock has climbed 51 percent this year.
To contact the reporter on this story: Eugene Tang in Beijing on eugenetang@bloomberg.net
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July 4 (Bloomberg) -- Liu Shaoyong, chairman of China Southern Airlines Co., piloted a Chinese tourist flight to Taiwan, ending a six-decade ban that deprived the island of visitors from its closest neighbor.
Passengers applauded when the Airbus SAS A330 landed in Taipei at 8:05 a.m. after the 95-minute flight from China's southern Guangzhou Baiyun airport. Liu, 49, took the controls for take-off and landing, underscoring the trip's significance to the nation and its largest airline.
China and Taiwan agreed in June to start direct flights for tourists for the first time, signaling a rapprochement between governments estranged since their civil war ended in 1949. Allowing visitors from the world's most populous nation may boost Taiwan's economy, forecast to grow at less than half the pace of its larger neighbor this year.
``This was a small step across the strait but a giant stride for relations between China and Taiwan,'' said Liu, a trained commercial pilot and former vice minister of the Civil Aviation Administration of China. ``Taiwan and China has been one family, but we'd been split by history, so it feels great to come home.''
The flight, greeted by a traditional Chinese ``lion dance'' and sprays of water from fire trucks, followed the March election in Taiwan of President Ma Ying-jeou on a pledge to improve ties. Predecessor Chen Shui-bian had kept travel and trade restrictions to limit China's sway over the island that it claims as its own and vows to take by force if necessary.
Ambition for Generations
``For generations, mainland residents have wanted to visit Taiwan because we've read so much and heard so much about the island,'' said Zhang Yu, a Shenzhen resident on the flight to Taipei.
Taipei-based China Airlines took off this morning for Shanghai, the first weekly flight for tour groups by a Taiwan carrier to the mainland. Six China-based airlines and five from Taiwan will make 36 round trips each week, operating Friday through Monday.
``This non-stop flight saves me a lot of time because normally I would travel from early morning for a whole day,'' said Michael Yin, a passenger.
Direct flights shave as much as six hours off the journey across the 100-mile (161-kilometer) Taiwan Strait. Until now, the estimated 1 million Taiwanese living in China have changed planes in Hong Kong or Macau.
Chinese airlines will transport 662 tourists to Taiwan today and 3,000 in the first week, Taiwan's Minister of Transportation and Communications Mao Chi-kuo said yesterday.
Red-Carpet Welcome
Taiwan's rolling out the red carpet. The tourism board is hosting a reception tonight at the Taipei Grand Hotel, where Nationalist leader Chiang Kai-shek and his wife Madam Chiang once held state banquets.
``The charter flights and new tourism arrangements are very important for us,'' said Anthony Liao, president of Phoenix Tours International Inc., Taiwan's third-largest travel operator. ``At 10,000 mainland tourists per year, I can almost double my profits.''
Taiwan's tourism literature will add simplified Chinese script used on the mainland, while tour guides have been tutored on mainland idioms, according to a June 30 report by the Taipei- based United Daily News.
Taiwan companies have pressed their government for closer ties to benefit from the expansion of the world's fastest-growing major economy. The island's businessmen have invested as much as $100 billion in China since 1990, CLSA Ltd. estimates.
China's Growth
China's economic output of $3.6 trillion last year was more than nine times Taiwan's and the mainland's 9.8 percent expansion in 2008 will outpace the island's 4.3 percent growth, the World Bank forecasts.
``Taiwan's economy and consumption should indirectly benefit in the long run,'' said Nick Lai, a Taipei-based analyst at JPMorgan Chase & Co. ``A more open economic policy and a better relationship with China will help boost domestic consumption.''
Spending by Chinese tourists overseas rose 11.8 percent to $24.3 billion in 2006, the fastest-growing of the top 10 nations apart from South Korea, according to the World Tourism Organization.
A measure of Taiwan tourism stocks has risen 44 percent this year, the best performer of 28 industry groups in Taiwan's TWSE Index, which has declined 13 percent, signaling investors' expectations that improved ties will translate into profits.
Besides China Southern, Air China Ltd., China Eastern Airlines Corp., Xiamen Airlines Co., Hainan Airlines Co. and Shanghai Airlines Co. will operate weekly nonstop flights. The Taiwan carriers include EVA Airways Corp., Mandarin Airlines, Uni Airways Corp. and TransAsia Airways Corp.
Shortest Flight
China Southern beat Air China to fly the first service because the flying distance from its Guangzhou base was the shortest of Chinese cities, Liu said. Flights from Guangzhou needed only a 12-minute detour into Hong Kong air space, versus more than an hour from Shanghai or Beijing, Liu said.
``We hope to eventually see direct flights that do away with the detour, which is a waste of time and fuel for the airlines concerned,'' Liu said. ``It doesn't bode well at a time when we're supposed to be cutting emissions and saving fuel.''
Phoenix Tours' Liao estimates the Taipei-based company will bring 5,000 Chinese tourists to Taiwan in the second half and predicts it will handle 20,000 annually by 2010. The company's stock has climbed 51 percent this year.
To contact the reporter on this story: Eugene Tang in Beijing on eugenetang@bloomberg.net
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Spain, Ireland `Thrown to Wolves' as ECB Clamps Down on Prices
By Ben Sills and Fergal O'Brien
July 4 (Bloomberg) -- Jose Mauricio Rodriguez Montalvo rents a room from his sister to help her afford her basement flat in Madrid as mortgage costs soar.
``She's crying over the Euribor,'' the 12-month money-market rate used to set Spanish mortgages, Montalvo, 28, said in an interview. ``We're just praying it won't keep going up.''
For homeowners in Spain and in Ireland, struggling to stay afloat amid the wreckage of a decade-long real-estate boom, those prayers are going unanswered. The European Central Bank yesterday increased its benchmark rate to 4.25 percent to fight inflation, pushing both economies a step closer to recession.
The two countries are particularly vulnerable to higher lending costs because their housing industries account for about 10 percent of their economies, twice the EU average. Montalvo's family has seen its monthly mortgage payment leap 50 percent to 2,080 euros since the ECB began raising rates in December 2005.
``They have been thrown to the wolves,'' said Stuart Thomson, who helps manage $46 billion in bonds at Resolution Investment Management Ltd. in Glasgow, Scotland. `It's much easier to bring inflation lower if you're willing to have a recession in economies like Spain, Italy and Ireland.''
The Irish economy contracted for the first time in more than a decade in the first quarter. Growth in Spain was the slowest in 13 years in the period, and economists surveyed by Bloomberg News see a 45 percent probability of a recession, or two consecutive quarterly contractions, within the next year.
Balancing Act
The ECB has more than doubled its key rate in less than two years under its mandate to control prices. Euro-region inflation accelerated to 4 percent last month, the fastest in 16 years, on soaring food and oil costs, even with growth slowing.
Trichet yesterday signaled further rate increases weren't imminent as he strikes a balance between taming inflation and not choking economic growth. Still, while he acknowledged some countries will be harder hit than others by the rate increase, he said the bank must serve the entire euro region just as the Federal Reserve sets policy for all 50 U.S. states.
``If you concentrate on California or Florida, it is not at all like Massachusetts or Alaska,'' he said in an interview with Ireland's RTE radio. ``It is the same in our case and we have to make a judgment what is good for the full body of the 320 million people'' in the euro area.
Fraction of Germany
Spain and Ireland make up less than 15 percent of the region's economy and their economies together are about half the size of Germany's. Growth in Europe's biggest economy accelerated in the first quarter to the fastest pace in 12 years and manufacturing was still expanding in June. Spanish industry contracted by the most on record.
Spanish Prime Minister Jose Luis Rodriguez Zapatero has called on the ECB to be ``flexible'' in setting monetary policy.
The Euribor has risen almost 30 basis points since June 5 when Trichet first signaled higher rates. That made new mortgages more expensive and will make existing ones costlier as 98 percent of Spanish home loans are on a variable rate. The jump in costs has sapped demand for housing.
Home starts in Spain plunged 70 percent in March from a year ago and dropped around 60 percent in Ireland. The slowdown prompted Dublin-based realtor Lisney to lower salaries by 10 percent for its 170 workers. The Irish unit of CB Richard Ellis plans to cut around a 10th of its workforce.
``Transactions have dried up,'' said Guy Hollis, managing director of CBRE in Ireland. ``It's not going to last forever, but we have to be prudent.''
Job Creation
The building boom going bust is tarnishing a decade of gains. Ireland's economy has grown the most in the euro area since monetary union in 1999, while Spain created more than a third of new jobs in the region.
After years of ``inappropriately low'' interest rates, Spain and Ireland are now feeling the ``hangover,'' said Alan Ahearne, a lecturer at Ireland's National University and a former economist at the Fed.
The decade-long expansion does leave Spain and Ireland with resources to ease the pain of the slowdown. Zapatero's government will use a budget surplus of 2.2 percent of gross domestic product to finance 18 billion euros of measures to prevent defaults and aid unemployed construction workers.
Ireland, with the second-lowest government debt in the euro area after Luxembourg, will maintain a 184 billion-euro infrastructure investment plan.
That may not be enough to buffer the hard landing. The Spanish downturn destroyed 75,000 jobs in the first quarter when the unemployment rate jumped the most in three years to almost 10 percent. Ireland's jobless rate has risen to a nine-year high of 5.4 percent.
``Central banks are paid to cause a recession now and then,'' said Fortis Investments Chief Investment Officer William De Vijlder. ``Maybe it's a shock to put it like that, but that's reality.''
To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net; Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
July 4 (Bloomberg) -- Jose Mauricio Rodriguez Montalvo rents a room from his sister to help her afford her basement flat in Madrid as mortgage costs soar.
``She's crying over the Euribor,'' the 12-month money-market rate used to set Spanish mortgages, Montalvo, 28, said in an interview. ``We're just praying it won't keep going up.''
For homeowners in Spain and in Ireland, struggling to stay afloat amid the wreckage of a decade-long real-estate boom, those prayers are going unanswered. The European Central Bank yesterday increased its benchmark rate to 4.25 percent to fight inflation, pushing both economies a step closer to recession.
The two countries are particularly vulnerable to higher lending costs because their housing industries account for about 10 percent of their economies, twice the EU average. Montalvo's family has seen its monthly mortgage payment leap 50 percent to 2,080 euros since the ECB began raising rates in December 2005.
``They have been thrown to the wolves,'' said Stuart Thomson, who helps manage $46 billion in bonds at Resolution Investment Management Ltd. in Glasgow, Scotland. `It's much easier to bring inflation lower if you're willing to have a recession in economies like Spain, Italy and Ireland.''
The Irish economy contracted for the first time in more than a decade in the first quarter. Growth in Spain was the slowest in 13 years in the period, and economists surveyed by Bloomberg News see a 45 percent probability of a recession, or two consecutive quarterly contractions, within the next year.
Balancing Act
The ECB has more than doubled its key rate in less than two years under its mandate to control prices. Euro-region inflation accelerated to 4 percent last month, the fastest in 16 years, on soaring food and oil costs, even with growth slowing.
Trichet yesterday signaled further rate increases weren't imminent as he strikes a balance between taming inflation and not choking economic growth. Still, while he acknowledged some countries will be harder hit than others by the rate increase, he said the bank must serve the entire euro region just as the Federal Reserve sets policy for all 50 U.S. states.
``If you concentrate on California or Florida, it is not at all like Massachusetts or Alaska,'' he said in an interview with Ireland's RTE radio. ``It is the same in our case and we have to make a judgment what is good for the full body of the 320 million people'' in the euro area.
Fraction of Germany
Spain and Ireland make up less than 15 percent of the region's economy and their economies together are about half the size of Germany's. Growth in Europe's biggest economy accelerated in the first quarter to the fastest pace in 12 years and manufacturing was still expanding in June. Spanish industry contracted by the most on record.
Spanish Prime Minister Jose Luis Rodriguez Zapatero has called on the ECB to be ``flexible'' in setting monetary policy.
The Euribor has risen almost 30 basis points since June 5 when Trichet first signaled higher rates. That made new mortgages more expensive and will make existing ones costlier as 98 percent of Spanish home loans are on a variable rate. The jump in costs has sapped demand for housing.
Home starts in Spain plunged 70 percent in March from a year ago and dropped around 60 percent in Ireland. The slowdown prompted Dublin-based realtor Lisney to lower salaries by 10 percent for its 170 workers. The Irish unit of CB Richard Ellis plans to cut around a 10th of its workforce.
``Transactions have dried up,'' said Guy Hollis, managing director of CBRE in Ireland. ``It's not going to last forever, but we have to be prudent.''
Job Creation
The building boom going bust is tarnishing a decade of gains. Ireland's economy has grown the most in the euro area since monetary union in 1999, while Spain created more than a third of new jobs in the region.
After years of ``inappropriately low'' interest rates, Spain and Ireland are now feeling the ``hangover,'' said Alan Ahearne, a lecturer at Ireland's National University and a former economist at the Fed.
The decade-long expansion does leave Spain and Ireland with resources to ease the pain of the slowdown. Zapatero's government will use a budget surplus of 2.2 percent of gross domestic product to finance 18 billion euros of measures to prevent defaults and aid unemployed construction workers.
Ireland, with the second-lowest government debt in the euro area after Luxembourg, will maintain a 184 billion-euro infrastructure investment plan.
That may not be enough to buffer the hard landing. The Spanish downturn destroyed 75,000 jobs in the first quarter when the unemployment rate jumped the most in three years to almost 10 percent. Ireland's jobless rate has risen to a nine-year high of 5.4 percent.
``Central banks are paid to cause a recession now and then,'' said Fortis Investments Chief Investment Officer William De Vijlder. ``Maybe it's a shock to put it like that, but that's reality.''
To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net; Fergal O'Brien in Dublin at fobrien@bloomberg.net.
Read more...
Ota Says Strong Corporate Sector Keeping Japan Economy Afloat
By Toru Fujioka
July 4 (Bloomberg) -- Japan has managed to avoid a recession because the health of the nation's companies has improved from the decade after the asset bubble burst in the early 1990s, Economic and Fiscal Policy Minister Hiroko Ota said.
``Increased strength in the corporate sector is helping Japan stay on the cliff when the economy is being jolted by big waves from overseas,'' Ota said in an interview in Tokyo yesterday. Companies have shed debt, cut bloated workforces and got rid of extra capacity, she said.
The Bank of Japan's Tankan survey this week showed confidence among the largest manufacturers fell to a four-year low. The survey also showed that the labor market remains close to the tightest it's been in 16 years and there are few signs of the idle production capacity that contributed to Japan's three recessions since 1990.
``The economy is in much better shape than at similar stages in previous downturns,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. There is ``little sign of the excess capacity or labor hoarding that might lead to a recession.''
Ota, 54, said her biggest concern for the economy is that manufacturers may be building up stock of technology-related products that may lead to a drop in production should global demand decline.
Inefficiency among service companies, which make up 70 percent of the economy, is preventing them from raising wages and that's weighing on consumer spending, Ota said.
Stalled Wage Growth
The stalled wage growth is a reason households aren't spending and ``that's why Japan doesn't have a risk of secondary inflation,'' Ota said. Japan's core consumer prices rose 1.5 percent in May from a year earlier, though mostly because of costlier imported oil and commodities.
Ota, who had been saying U.S. economy will recover in the second half of this year, said a pickup in the world's largest economy may be ``delayed'' because home prices are still falling.
Japan needs to maintain its pledge to balance the budget by 2011 and should only raise taxes if spending cuts and increases in revenue aren't enough to fund social welfare costs, she said.
After 2011, the government will need to commit to a numerical target to reduce the nation's ratio of debt to gross domestic product, the minister said. Prime Minister Yasuo Fukuda's economic advisory panel will start discussing the target from this autumn, she added.
The Organization for Economic Cooperation and Development estimates the ratio stands at 180 percent, making Japan the most indebted nation in the industrialized world.
To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
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July 4 (Bloomberg) -- Japan has managed to avoid a recession because the health of the nation's companies has improved from the decade after the asset bubble burst in the early 1990s, Economic and Fiscal Policy Minister Hiroko Ota said.
``Increased strength in the corporate sector is helping Japan stay on the cliff when the economy is being jolted by big waves from overseas,'' Ota said in an interview in Tokyo yesterday. Companies have shed debt, cut bloated workforces and got rid of extra capacity, she said.
The Bank of Japan's Tankan survey this week showed confidence among the largest manufacturers fell to a four-year low. The survey also showed that the labor market remains close to the tightest it's been in 16 years and there are few signs of the idle production capacity that contributed to Japan's three recessions since 1990.
``The economy is in much better shape than at similar stages in previous downturns,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. There is ``little sign of the excess capacity or labor hoarding that might lead to a recession.''
Ota, 54, said her biggest concern for the economy is that manufacturers may be building up stock of technology-related products that may lead to a drop in production should global demand decline.
Inefficiency among service companies, which make up 70 percent of the economy, is preventing them from raising wages and that's weighing on consumer spending, Ota said.
Stalled Wage Growth
The stalled wage growth is a reason households aren't spending and ``that's why Japan doesn't have a risk of secondary inflation,'' Ota said. Japan's core consumer prices rose 1.5 percent in May from a year earlier, though mostly because of costlier imported oil and commodities.
Ota, who had been saying U.S. economy will recover in the second half of this year, said a pickup in the world's largest economy may be ``delayed'' because home prices are still falling.
Japan needs to maintain its pledge to balance the budget by 2011 and should only raise taxes if spending cuts and increases in revenue aren't enough to fund social welfare costs, she said.
After 2011, the government will need to commit to a numerical target to reduce the nation's ratio of debt to gross domestic product, the minister said. Prime Minister Yasuo Fukuda's economic advisory panel will start discussing the target from this autumn, she added.
The Organization for Economic Cooperation and Development estimates the ratio stands at 180 percent, making Japan the most indebted nation in the industrialized world.
To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
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Philippine Inflation Jumps to 14-Year High on Food
By Clarissa Batino
July 4 (Bloomberg) -- Philippine inflation accelerated to the fastest pace in 14 years, exceeding the central bank's estimate and adding pressure on authorities to increase borrowing costs.
Consumer prices rose 11.4 percent in June from a year earlier, the National Statistics Office said in Manila today. That compares with the 10 percent median estimate in a Bloomberg News survey of 18 economists and the central bank's forecast of 10.4 percent to 11.2 percent.
Rising food and fuel prices, higher wages and a weaker peso are stoking inflation in the Philippines and prompted central bank Governor Amando Tetangco to raise interest rates last month. The bank has scope to increase borrowing costs further without endangering growth, Deputy Governor Diwa Guinigundo said June 27.
``Demand pressures will moderate as monetary policy is generally tightened,'' Tetangco said in a mobile-phone text message today. ``Current oil and food prices are hardly sustainable'' and the Philippines should be back ``to normal cycle'' next year.
Food, beverage and tobacco costs jumped 16.5 percent last month after gaining a revised 13.6 percent in May. Food accounts for half of the consumer price index.
Fuel, electricity and water inflation eased to 7.6 percent from 8.2 percent. ``Domestic pump-price increases triggered large price buildups across wide commodities and services groups,'' Tetangco said.
`Something Bolder'
Services costs climbed 9.9 percent last month. Clothing and housing prices also rose at a faster pace.
``Everything is still fluid and there's a need for the central bank to anchor inflation expectations,'' said Joey Cuyegkeng, an economist at ING Bank in Manila. ``Gradual tightening is the expected course but at some point, they may have to do something bolder.''
Bangko Sentral ng Pilipinas will meet on July 17 to decide on the benchmark interest rate. Policy makers raised the overnight borrowing rate by a quarter-point to 5.25 percent on June 5, the first increase since October 2005, after saying inflation may exceed its targets for this year and next.
``Inflation will probably accelerate this quarter and then by the fourth quarter it may reach a plateau,'' Economic Planning Secretary Augusto Santos said in a telephone interview.
Faster Borrowing
The Philippines may speed up borrowing as much as $900 million from the World Bank and the Asian Development Bank to strengthen the peso and damp inflation, Finance Secretary Gary Teves said late yesterday.
Borrowing the money earlier ``might help strengthen the peso because it would add more foreign exchange,'' Teves said. ``The likelihood is that we would borrow.''
The peso has dropped 10.2 percent against the dollar this year, based on Bankers Association of the Philippines data, fanning inflation by making imports more expensive.
Last month's gain in consumer prices was the fastest pace since May 1994.
To contact the reporters on this story: Clarissa Batino in Manila at cbatino@bloomberg.net
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July 4 (Bloomberg) -- Philippine inflation accelerated to the fastest pace in 14 years, exceeding the central bank's estimate and adding pressure on authorities to increase borrowing costs.
Consumer prices rose 11.4 percent in June from a year earlier, the National Statistics Office said in Manila today. That compares with the 10 percent median estimate in a Bloomberg News survey of 18 economists and the central bank's forecast of 10.4 percent to 11.2 percent.
Rising food and fuel prices, higher wages and a weaker peso are stoking inflation in the Philippines and prompted central bank Governor Amando Tetangco to raise interest rates last month. The bank has scope to increase borrowing costs further without endangering growth, Deputy Governor Diwa Guinigundo said June 27.
``Demand pressures will moderate as monetary policy is generally tightened,'' Tetangco said in a mobile-phone text message today. ``Current oil and food prices are hardly sustainable'' and the Philippines should be back ``to normal cycle'' next year.
Food, beverage and tobacco costs jumped 16.5 percent last month after gaining a revised 13.6 percent in May. Food accounts for half of the consumer price index.
Fuel, electricity and water inflation eased to 7.6 percent from 8.2 percent. ``Domestic pump-price increases triggered large price buildups across wide commodities and services groups,'' Tetangco said.
`Something Bolder'
Services costs climbed 9.9 percent last month. Clothing and housing prices also rose at a faster pace.
``Everything is still fluid and there's a need for the central bank to anchor inflation expectations,'' said Joey Cuyegkeng, an economist at ING Bank in Manila. ``Gradual tightening is the expected course but at some point, they may have to do something bolder.''
Bangko Sentral ng Pilipinas will meet on July 17 to decide on the benchmark interest rate. Policy makers raised the overnight borrowing rate by a quarter-point to 5.25 percent on June 5, the first increase since October 2005, after saying inflation may exceed its targets for this year and next.
``Inflation will probably accelerate this quarter and then by the fourth quarter it may reach a plateau,'' Economic Planning Secretary Augusto Santos said in a telephone interview.
Faster Borrowing
The Philippines may speed up borrowing as much as $900 million from the World Bank and the Asian Development Bank to strengthen the peso and damp inflation, Finance Secretary Gary Teves said late yesterday.
Borrowing the money earlier ``might help strengthen the peso because it would add more foreign exchange,'' Teves said. ``The likelihood is that we would borrow.''
The peso has dropped 10.2 percent against the dollar this year, based on Bankers Association of the Philippines data, fanning inflation by making imports more expensive.
Last month's gain in consumer prices was the fastest pace since May 1994.
To contact the reporters on this story: Clarissa Batino in Manila at cbatino@bloomberg.net
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Australian, N.Z. Dollars Rise as ECB Rate-Rise Prospects Abate
By Ron Harui and Candice Zachariahs
July 4 (Bloomberg) -- The Australian and New Zealand dollars rose against the euro on speculation the European Central Bank won't add to yesterday's interest-rate increase, bolstering demand for higher-yielding currencies.
The currencies climbed the most in seven weeks as ECB President Jean-Claude Trichet said he has ``no bias'' on further moves after raising the region's main refinancing rate to 4.25 percent. The Australian dollar headed for a weekly gain as the difference in yield between two-year Australian and European bonds widened to the most in a week.
``The Aussie has always been an attractive haven for the high-yield play,'' said Paul Milton, chief foreign-exchange dealer at Societe Generale SA in Sydney. ``That's going to remain.''
The Australian dollar strengthened 1.1 percent, the most since May 16, to 0.6119 euro at 10:32 a.m. in Sydney from 0.6050 euro late in Asia yesterday. The currency traded at 96.04 U.S. cents from 96.15 cents. It rose to 102.51 yen from 102.21 yen.
The New Zealand dollar appreciated 0.8 percent, the largest gain since May 16, to 0.4816 euro from 0.4776 late in Asia yesterday. The currency fell to 75.56 U.S. cents from 75.93 cents. It bought 80.67 yen from 80.69 yen.
Australia's currency extended the past week's gain versus the euro to 0.6 percent after a government report on July 2 showed retail sales rose more than economists forecast, backing the case for the Reserve Bank of Australia to increase borrowing costs from a 12-year high.
Yield Advantage
Traders pared wagers the ECB will lift rates this year. The implied rate on the December Euribor interest-rate futures contract fell to 5.12 percent yesterday, from 5.28 percent on July 2. The yield advantage of two-year Australian bonds over similar-maturity European bonds was at 2.38 percentage points, near yesterday's high of 2.43 points, the most since June 26.
Benchmark interest rates of 7.25 percent in Australia and 8.25 percent in New Zealand compare with 4.25 percent in the euro area, 2 percent in the U.S. and 0.5 percent in Japan, making them popular among investors seeking higher returns.
The New Zealand dollar, known as the kiwi, may advance against the euro this week as the yield premium on three-year New Zealand government bonds over like-dated European debt remained at 1.83 percentage points, the highest in a week.
``You have this adjustment as the euro starts to sell off against the high yields,'' said Boris Schlossberg, a senior currency strategist, with currency trader DailyFX.com in New York. ``That's why the euro-kiwi dropped like a stone.''
Australian government bonds headed for a third weekly advance. The yield on the 10-year bond fell to 6.43 percent from 6.46 percent on June 27. The price of the 5.25 percent bond maturing in March 2019 rose to 90.971 from 90.737 a week earlier.
New Zealand government debt was poised for a second weekly gain. The yield on the 10-year note declined to 6.34 percent from 6.35 percent on June 27. The price of the 6 percent bond maturing in December 2017 climbed to 97.622 from 97.527 a week earlier. Bond yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.
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July 4 (Bloomberg) -- The Australian and New Zealand dollars rose against the euro on speculation the European Central Bank won't add to yesterday's interest-rate increase, bolstering demand for higher-yielding currencies.
The currencies climbed the most in seven weeks as ECB President Jean-Claude Trichet said he has ``no bias'' on further moves after raising the region's main refinancing rate to 4.25 percent. The Australian dollar headed for a weekly gain as the difference in yield between two-year Australian and European bonds widened to the most in a week.
``The Aussie has always been an attractive haven for the high-yield play,'' said Paul Milton, chief foreign-exchange dealer at Societe Generale SA in Sydney. ``That's going to remain.''
The Australian dollar strengthened 1.1 percent, the most since May 16, to 0.6119 euro at 10:32 a.m. in Sydney from 0.6050 euro late in Asia yesterday. The currency traded at 96.04 U.S. cents from 96.15 cents. It rose to 102.51 yen from 102.21 yen.
The New Zealand dollar appreciated 0.8 percent, the largest gain since May 16, to 0.4816 euro from 0.4776 late in Asia yesterday. The currency fell to 75.56 U.S. cents from 75.93 cents. It bought 80.67 yen from 80.69 yen.
Australia's currency extended the past week's gain versus the euro to 0.6 percent after a government report on July 2 showed retail sales rose more than economists forecast, backing the case for the Reserve Bank of Australia to increase borrowing costs from a 12-year high.
Yield Advantage
Traders pared wagers the ECB will lift rates this year. The implied rate on the December Euribor interest-rate futures contract fell to 5.12 percent yesterday, from 5.28 percent on July 2. The yield advantage of two-year Australian bonds over similar-maturity European bonds was at 2.38 percentage points, near yesterday's high of 2.43 points, the most since June 26.
Benchmark interest rates of 7.25 percent in Australia and 8.25 percent in New Zealand compare with 4.25 percent in the euro area, 2 percent in the U.S. and 0.5 percent in Japan, making them popular among investors seeking higher returns.
The New Zealand dollar, known as the kiwi, may advance against the euro this week as the yield premium on three-year New Zealand government bonds over like-dated European debt remained at 1.83 percentage points, the highest in a week.
``You have this adjustment as the euro starts to sell off against the high yields,'' said Boris Schlossberg, a senior currency strategist, with currency trader DailyFX.com in New York. ``That's why the euro-kiwi dropped like a stone.''
Australian government bonds headed for a third weekly advance. The yield on the 10-year bond fell to 6.43 percent from 6.46 percent on June 27. The price of the 5.25 percent bond maturing in March 2019 rose to 90.971 from 90.737 a week earlier.
New Zealand government debt was poised for a second weekly gain. The yield on the 10-year note declined to 6.34 percent from 6.35 percent on June 27. The price of the 6 percent bond maturing in December 2017 climbed to 97.622 from 97.527 a week earlier. Bond yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.
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Korean Won to Gain on Exports, Samsung, SK Energy Say
By Kim Kyoungwha
July 4 (Bloomberg) -- South Korea's won may gain in the second half of the year, recovering from an 11 percent drop in the first, as rising exports narrow the trade deficit, Samsung Electronics Co., Korean Air Lines Co. and SK Energy Co. said.
Exports typically rise in the final six months of the year as demand increases before the Christmas and New Year holidays, said Chu Woo Sik, head of investor relations at Samsung, the nation's largest exporter. The won may gain 5 percent by the end of the 2008, said Bae Yong Chul, head of the foreign exchange department at SK Energy, South Korea's biggest oil refiner.
``The trade deficit will get better toward the end of the year,'' Bae said in an interview. ``Soaring crude prices are taking a toll on the exchange rate'' at the moment, he said.
Corporate treasurers join Bank of Korea Deputy Governor Rhee Gwang-Ju, who said this week the currency will stop falling as the balance of payments improves. The three companies, with a combined market value of $102 billion, said their forecasts may be threatened if oil prices continue to climb beyond $145 a barrel, cooling global demand for Korea's exports and making fuel imports more expensive.
The won fell 0.4 percent to 1,048.90 versus the dollar as of 10:51 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The Korean currency was Asia's second-biggest loser in the first half, lagging behind the Thai baht's 12 percent slide. SK Energy and Korean Air, the nation's biggest airline, forecast the won will climb beyond 1,000 per dollar by year-end, similar to the 995 median estimate of 24 strategists surveyed by Bloomberg News.
`Seasonal Impact'
The current-account deficit, the broadest measure of trade, will shrink to $2.5 billion in the second half from $6.5 billion in the first, the central bank's Rhee said.
``Obviously there's a seasonal impact kicking in, but that's being greatly offset this year by the slowdowns in demand especially from markets in the U.S. and Europe,'' Samsung's Chu said. ``We envisage the seasonal pickup in the second half to be not as conspicuous. We are bracing for difficult times.''
A weaker won boosts the local currency value of Samsung Electronics' overseas sales of flat-screen televisions and mobile phones.
`A Lot Weaker'
``We should find the won stabilizing,'' Chu said, unless oil prices climb further. ``We were bracing for an exchange rate of 900. It turned out a lot weaker. In the short term, it helps our bottom line.''
The won won't rise until the final three months when the world's largest economy recovers, the U.S. presidential election ends and oil prices stabilize, said Korean Air's senior manager of investor relations' Lee Sung Jae.
The won's loss has been curbed on speculation the government, in a fight against the fastest inflation in a decade, is buying the currency. The won gained 1.2 percent on July 2 after earlier falling as much as 1 percent.
The nation's top policy makers including Bank of Korea Governor Lee Seong Tae held a meeting yesterday to discuss how to curb the won's decline, MoneyToday reported.
South Korea bought about $7 billion worth of won since the end of May to boost the value of the currency and slow inflation, JoongAng Ilbo newspaper reported this week.
Increased Hedging
Korean Air's 2008 business plans were based on an average exchange rate of 920 won and the company now expects operating profits to decline because of a weaker currency and soaring crude prices. The company increased hedging to protect against foreign-exchange losses to 20 percent of foreign currency transactions from 15 percent in 2007, Lee said.
Companies' use of derivatives to lock in exchange rates fueled an 8 percent rise in forward transactions in the first quarter after a 50 percent jump in 2007, central bank data shows.
``We have around $2.2 billion worth of foreign currency transactions every year,'' Lee said. ``We are increasingly using various hedging techniques and products.''
SK Energy also increased hedging this year, Bae said. He declined to disclose the amount.
South Korean corporate transactions in currency forwards jumped to $1.9 billion a day in the first quarter from $1.7 billion in the final three months of 2007, Bank of Korea data showed. Such deals rose to $1.4 billion a day in 2007 from $940 million in 2006.
Forwards are agreements in which assets are bought and sold at current prices for future delivery.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;
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July 4 (Bloomberg) -- South Korea's won may gain in the second half of the year, recovering from an 11 percent drop in the first, as rising exports narrow the trade deficit, Samsung Electronics Co., Korean Air Lines Co. and SK Energy Co. said.
Exports typically rise in the final six months of the year as demand increases before the Christmas and New Year holidays, said Chu Woo Sik, head of investor relations at Samsung, the nation's largest exporter. The won may gain 5 percent by the end of the 2008, said Bae Yong Chul, head of the foreign exchange department at SK Energy, South Korea's biggest oil refiner.
``The trade deficit will get better toward the end of the year,'' Bae said in an interview. ``Soaring crude prices are taking a toll on the exchange rate'' at the moment, he said.
Corporate treasurers join Bank of Korea Deputy Governor Rhee Gwang-Ju, who said this week the currency will stop falling as the balance of payments improves. The three companies, with a combined market value of $102 billion, said their forecasts may be threatened if oil prices continue to climb beyond $145 a barrel, cooling global demand for Korea's exports and making fuel imports more expensive.
The won fell 0.4 percent to 1,048.90 versus the dollar as of 10:51 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The Korean currency was Asia's second-biggest loser in the first half, lagging behind the Thai baht's 12 percent slide. SK Energy and Korean Air, the nation's biggest airline, forecast the won will climb beyond 1,000 per dollar by year-end, similar to the 995 median estimate of 24 strategists surveyed by Bloomberg News.
`Seasonal Impact'
The current-account deficit, the broadest measure of trade, will shrink to $2.5 billion in the second half from $6.5 billion in the first, the central bank's Rhee said.
``Obviously there's a seasonal impact kicking in, but that's being greatly offset this year by the slowdowns in demand especially from markets in the U.S. and Europe,'' Samsung's Chu said. ``We envisage the seasonal pickup in the second half to be not as conspicuous. We are bracing for difficult times.''
A weaker won boosts the local currency value of Samsung Electronics' overseas sales of flat-screen televisions and mobile phones.
`A Lot Weaker'
``We should find the won stabilizing,'' Chu said, unless oil prices climb further. ``We were bracing for an exchange rate of 900. It turned out a lot weaker. In the short term, it helps our bottom line.''
The won won't rise until the final three months when the world's largest economy recovers, the U.S. presidential election ends and oil prices stabilize, said Korean Air's senior manager of investor relations' Lee Sung Jae.
The won's loss has been curbed on speculation the government, in a fight against the fastest inflation in a decade, is buying the currency. The won gained 1.2 percent on July 2 after earlier falling as much as 1 percent.
The nation's top policy makers including Bank of Korea Governor Lee Seong Tae held a meeting yesterday to discuss how to curb the won's decline, MoneyToday reported.
South Korea bought about $7 billion worth of won since the end of May to boost the value of the currency and slow inflation, JoongAng Ilbo newspaper reported this week.
Increased Hedging
Korean Air's 2008 business plans were based on an average exchange rate of 920 won and the company now expects operating profits to decline because of a weaker currency and soaring crude prices. The company increased hedging to protect against foreign-exchange losses to 20 percent of foreign currency transactions from 15 percent in 2007, Lee said.
Companies' use of derivatives to lock in exchange rates fueled an 8 percent rise in forward transactions in the first quarter after a 50 percent jump in 2007, central bank data shows.
``We have around $2.2 billion worth of foreign currency transactions every year,'' Lee said. ``We are increasingly using various hedging techniques and products.''
SK Energy also increased hedging this year, Bae said. He declined to disclose the amount.
South Korean corporate transactions in currency forwards jumped to $1.9 billion a day in the first quarter from $1.7 billion in the final three months of 2007, Bank of Korea data showed. Such deals rose to $1.4 billion a day in 2007 from $940 million in 2006.
Forwards are agreements in which assets are bought and sold at current prices for future delivery.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;
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Vietnam Dong Investors Use Black Market; Traders See 18% Drop
By Patricia Lui and Wes Goodman
July 4 (Bloomberg) -- Vietnam's currency controls are forcing foreign investors into the black market to obtain dollars, aggravating declines in the world's worst-performing stock market and pushing benchmark bond yields above 20 percent.
Businesses that aren't controlled by the government pay about 7 percent more than the official rate when using the dong to buy dollars because the state gives its trading companies priority access to the U.S. currency, the World Bank said. The premium is reducing demand for the nation's stocks and bonds, according to PXP Vietnam Asset Management.
``There is clearly a shortage of dollars,'' said Kevin Snowball, a money manager at PXP Vietnam in Ho Chi Minh City, which oversees $117 million. ``If you have dollars and you want to buy dong, you will get the official rate, but if you have dong and you want to buy dollars it's a completely different story.''
Vietnam's financial markets are tumbling after the central bank raised interest rates three times this year to 14 percent to tame inflation that accelerated to a 16-year high of 26.8 percent in June. The economy expanded 6.5 percent in the first half, the slowest in at least seven years, while the trade deficit more than doubled to $14.8 billion.
The Vietnam Stock Index, which climbed 168 percent in the past two years as Prime Minister Dung Nguyen Tan Dung encouraged state companies to raise cash and finance expansion, slumped 54 percent since December. Yields on five-year government bonds jumped to 20.53 percent on June 13, the highest since at least July 2006, from 8.71 percent on Jan. 3.
`Currency Crisis'
The dong dropped 5 percent to 16,846 per dollar, its biggest decline since 1998. Traders are pricing in an 18 percent drop in the coming year to 20,600, according to offshore 12- month non-deliverable forwards. The contract was at 16,080 on Dec. 31. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars.
The official rate will fall 6.4 percent to 18,000 by the end of the year, according to Calyon, the investment banking arm of Credit Agricole SA.
Vietnam may suffer a ``currency crisis'' similar to the slump in the Thai baht that triggered the regional collapse in 1997, Morgan Stanley analysts said in a report last month.
``The central bank is not providing dollars, except to some importers and some working capital for exporters,'' said Noritaka Akamatsu, a Hanoi-based economist for the World Bank. ``That's why there is some depreciation pressure.''
The State Bank of Vietnam allows the currency to trade 2 percent either side of its daily reference rate. Gold shops and street money changers offer a black market rate of about 18,000, said Akamatsu. Banks offer a similar rate by adding fees to sell dollars, he said. The rate was as high as 19,500, he said.
Market Freeze
The dong slumped in the forwards market in May as foreign investors trapped in the bond market bet against the currency to hedge against losses, Akamatsu said.
Rajeev De Mello, who helps oversee about $600 billion as head of Asian bonds at Western Asset Management Co.'s Singapore office, sold Vietnamese bonds in April and says the market has frozen. Western Asset, part of Baltimore-based Legg Mason Inc., also couldn't get a price for dong forwards, he said.
``Even when things were good, it was difficult to buy bonds in any size,'' said De Mello. ``Now when things are bad, it's impossible to either buy or sell.''
Union Investment in Frankfurt, Germany's third-biggest fund manager, forecasts a smaller decline in the dong than the forward market and is buying contracts, said Sergey Dergachev, the firm's emerging-market investor, who helps oversee the equivalent of $285 billion. Union Investment expects an 11 percent drop to 19,000 by Dec. 31.
Risk of `Overkill'
The risk is Vietnam exhausts its currency reserves of $22 billion supplying dollars or that ``overkill'' in cooling growth causes losses at state banks, said the World Bank's Akamatsu.
Pramerica Fixed Income Asia, a unit of Prudential Financial Inc., the second-biggest U.S. life insurer, is staying away.
``It's a shocking and timely reminder of problems that developing countries face,'' said Clifford Lau, a Singapore- based portfolio manager at Pramerica that oversees $7.6 billion in emerging-market debt. ``Everyone is taking a step back.''
To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.netWes Goodman in Singapore at wgoodman@bloomberg.net
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July 4 (Bloomberg) -- Vietnam's currency controls are forcing foreign investors into the black market to obtain dollars, aggravating declines in the world's worst-performing stock market and pushing benchmark bond yields above 20 percent.
Businesses that aren't controlled by the government pay about 7 percent more than the official rate when using the dong to buy dollars because the state gives its trading companies priority access to the U.S. currency, the World Bank said. The premium is reducing demand for the nation's stocks and bonds, according to PXP Vietnam Asset Management.
``There is clearly a shortage of dollars,'' said Kevin Snowball, a money manager at PXP Vietnam in Ho Chi Minh City, which oversees $117 million. ``If you have dollars and you want to buy dong, you will get the official rate, but if you have dong and you want to buy dollars it's a completely different story.''
Vietnam's financial markets are tumbling after the central bank raised interest rates three times this year to 14 percent to tame inflation that accelerated to a 16-year high of 26.8 percent in June. The economy expanded 6.5 percent in the first half, the slowest in at least seven years, while the trade deficit more than doubled to $14.8 billion.
The Vietnam Stock Index, which climbed 168 percent in the past two years as Prime Minister Dung Nguyen Tan Dung encouraged state companies to raise cash and finance expansion, slumped 54 percent since December. Yields on five-year government bonds jumped to 20.53 percent on June 13, the highest since at least July 2006, from 8.71 percent on Jan. 3.
`Currency Crisis'
The dong dropped 5 percent to 16,846 per dollar, its biggest decline since 1998. Traders are pricing in an 18 percent drop in the coming year to 20,600, according to offshore 12- month non-deliverable forwards. The contract was at 16,080 on Dec. 31. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars.
The official rate will fall 6.4 percent to 18,000 by the end of the year, according to Calyon, the investment banking arm of Credit Agricole SA.
Vietnam may suffer a ``currency crisis'' similar to the slump in the Thai baht that triggered the regional collapse in 1997, Morgan Stanley analysts said in a report last month.
``The central bank is not providing dollars, except to some importers and some working capital for exporters,'' said Noritaka Akamatsu, a Hanoi-based economist for the World Bank. ``That's why there is some depreciation pressure.''
The State Bank of Vietnam allows the currency to trade 2 percent either side of its daily reference rate. Gold shops and street money changers offer a black market rate of about 18,000, said Akamatsu. Banks offer a similar rate by adding fees to sell dollars, he said. The rate was as high as 19,500, he said.
Market Freeze
The dong slumped in the forwards market in May as foreign investors trapped in the bond market bet against the currency to hedge against losses, Akamatsu said.
Rajeev De Mello, who helps oversee about $600 billion as head of Asian bonds at Western Asset Management Co.'s Singapore office, sold Vietnamese bonds in April and says the market has frozen. Western Asset, part of Baltimore-based Legg Mason Inc., also couldn't get a price for dong forwards, he said.
``Even when things were good, it was difficult to buy bonds in any size,'' said De Mello. ``Now when things are bad, it's impossible to either buy or sell.''
Union Investment in Frankfurt, Germany's third-biggest fund manager, forecasts a smaller decline in the dong than the forward market and is buying contracts, said Sergey Dergachev, the firm's emerging-market investor, who helps oversee the equivalent of $285 billion. Union Investment expects an 11 percent drop to 19,000 by Dec. 31.
Risk of `Overkill'
The risk is Vietnam exhausts its currency reserves of $22 billion supplying dollars or that ``overkill'' in cooling growth causes losses at state banks, said the World Bank's Akamatsu.
Pramerica Fixed Income Asia, a unit of Prudential Financial Inc., the second-biggest U.S. life insurer, is staying away.
``It's a shocking and timely reminder of problems that developing countries face,'' said Clifford Lau, a Singapore- based portfolio manager at Pramerica that oversees $7.6 billion in emerging-market debt. ``Everyone is taking a step back.''
To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.netWes Goodman in Singapore at wgoodman@bloomberg.net
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Euro Falls to 1-Week Low After Trichet Says `No Bias' on Rates
By Stanley White and Kosuke Goto
July 4 (Bloomberg) -- The euro declined to a one-week low against the dollar after European Central Bank President Jean- Claude Trichet signaled he may stop lifting the benchmark interest rate again.
The 15-nation euro headed for a weekly decline against the dollar after Trichet said he has ``no bias'' or ``pre- commitment'' following the ECB's decision to raise its main refinancing rate by a quarter-percentage point to 4.25 percent. The Swedish krona traded near a one-week high against the euro after the Riksbank raised its benchmark interest rate to 4.5 percent and said it may increase borrowing costs again.
``The euro will face a little more selling pressure,'' said Akio Shimizu, chief manager of foreign exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's largest publicly traded company. ``Trichet stuck to his message that he wouldn't raise rates successively. Traders will price expectations for additional rate hikes out of the euro.''
The euro touched a one-week low of $1.5675 and traded at $1.5706 at 9:50 a.m. in Tokyo, from $1.5703 yesterday. The euro has fallen 0.6 percent this week. The dollar was at 106.69 yen, unchanged from yesterday and up 0.5 percent from a week earlier. The euro bought 167.52 yen, little changed from last week.
Sweden's krona traded at 9.4176 per euro, near a one-week high of 9.3986, after the Riksbank said it may boost interest rates ``a couple'' more times this year to curb inflation.
The ECB's interest-rate increase will help the central bank bring the inflation rate back below 2 percent, Trichet said at a press conference in Frankfurt yesterday. Economic growth may weaken to 1.5 percent next year from 1.8 percent this year and 2.6 percent in 2007, according to ECB staff.
`To the Sidelines'
``The ECB is moving to the sidelines,'' said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``It does not mark a sharp turnaround for the euro-dollar. But it took some steam out of the euro's rally.''
Traders reduced bets the ECB will increase rates further this year. The implied rate on the December Euribor futures contract fell 0.13 percentage point to 5.15 percent yesterday.
The yield advantage of two-year German bunds over comparable-maturity Treasury notes decreased to 1.92 percentage points yesterday, making the European securities less attractive to investors. The difference was 2.05 percentage points on July 2, the widest since June 6.
Redemption
The euro also weakened on speculation investors will repatriate earnings from European government debt payments.
The euro-zone region will pay 43 billion euros ($67.4 billion) in coupon and principal on government debt today, including Finland's bond redemption totaling 7 billion euros, said Yuji Saito at Societe Generale SA in Tokyo.
``Euro bond redemption and coupon payments are weighing on the euro,'' said Saito, head of foreign-exchange sales at the Tokyo unit of France's second-largest by market value. ``More than a few investors are trying to repatriate redemption payments on euro-zone bonds this week, taking advantage any rally of the euro.''
U.S. Payrolls
Trichet's comments helped counter a Labor Department report showing U.S. employers eliminated jobs in June for a sixth consecutive month.
U.S. payrolls fell by 62,000 last month, following a revised decline of 62,000 in May, the Labor Department said yesterday in Washington. The median forecast of 81 economists surveyed by Bloomberg News was for a reduction of 60,000. The jobless rate remained at 5.5 percent after jumping in May by the most in two decades.
``Soft employment will have an impact on consumers,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``There's still a good chance we're going to test the old highs,'' he said of the euro.
Futures on the Chicago Board of Trade yesterday showed an 18 percent chance the Fed will increase its target rate for overnight lending between banks by a quarter-percentage point at its Aug. 5 meeting, compared with 25 percent odds on June 2.
The greenback dropped 1.2 percent against the euro last week in its second consecutive weekly loss after the Fed gave no indication in its June 25 statement that it will start reversing the most aggressive series of cuts in two decades.
Crude Oil
Declines in the euro may be limited by speculation its positive correlation with oil prices will lure investors into buying the currency.
Crude oil for August delivery touched $145.85 yesterday, the highest since trading began in 1983. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.
``With oil continuing its way to $150 a barrel, it's hard for the euro to drop,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``The outlook for the dollar is hardly bullish.''
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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July 4 (Bloomberg) -- The euro declined to a one-week low against the dollar after European Central Bank President Jean- Claude Trichet signaled he may stop lifting the benchmark interest rate again.
The 15-nation euro headed for a weekly decline against the dollar after Trichet said he has ``no bias'' or ``pre- commitment'' following the ECB's decision to raise its main refinancing rate by a quarter-percentage point to 4.25 percent. The Swedish krona traded near a one-week high against the euro after the Riksbank raised its benchmark interest rate to 4.5 percent and said it may increase borrowing costs again.
``The euro will face a little more selling pressure,'' said Akio Shimizu, chief manager of foreign exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's largest publicly traded company. ``Trichet stuck to his message that he wouldn't raise rates successively. Traders will price expectations for additional rate hikes out of the euro.''
The euro touched a one-week low of $1.5675 and traded at $1.5706 at 9:50 a.m. in Tokyo, from $1.5703 yesterday. The euro has fallen 0.6 percent this week. The dollar was at 106.69 yen, unchanged from yesterday and up 0.5 percent from a week earlier. The euro bought 167.52 yen, little changed from last week.
Sweden's krona traded at 9.4176 per euro, near a one-week high of 9.3986, after the Riksbank said it may boost interest rates ``a couple'' more times this year to curb inflation.
The ECB's interest-rate increase will help the central bank bring the inflation rate back below 2 percent, Trichet said at a press conference in Frankfurt yesterday. Economic growth may weaken to 1.5 percent next year from 1.8 percent this year and 2.6 percent in 2007, according to ECB staff.
`To the Sidelines'
``The ECB is moving to the sidelines,'' said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``It does not mark a sharp turnaround for the euro-dollar. But it took some steam out of the euro's rally.''
Traders reduced bets the ECB will increase rates further this year. The implied rate on the December Euribor futures contract fell 0.13 percentage point to 5.15 percent yesterday.
The yield advantage of two-year German bunds over comparable-maturity Treasury notes decreased to 1.92 percentage points yesterday, making the European securities less attractive to investors. The difference was 2.05 percentage points on July 2, the widest since June 6.
Redemption
The euro also weakened on speculation investors will repatriate earnings from European government debt payments.
The euro-zone region will pay 43 billion euros ($67.4 billion) in coupon and principal on government debt today, including Finland's bond redemption totaling 7 billion euros, said Yuji Saito at Societe Generale SA in Tokyo.
``Euro bond redemption and coupon payments are weighing on the euro,'' said Saito, head of foreign-exchange sales at the Tokyo unit of France's second-largest by market value. ``More than a few investors are trying to repatriate redemption payments on euro-zone bonds this week, taking advantage any rally of the euro.''
U.S. Payrolls
Trichet's comments helped counter a Labor Department report showing U.S. employers eliminated jobs in June for a sixth consecutive month.
U.S. payrolls fell by 62,000 last month, following a revised decline of 62,000 in May, the Labor Department said yesterday in Washington. The median forecast of 81 economists surveyed by Bloomberg News was for a reduction of 60,000. The jobless rate remained at 5.5 percent after jumping in May by the most in two decades.
``Soft employment will have an impact on consumers,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``There's still a good chance we're going to test the old highs,'' he said of the euro.
Futures on the Chicago Board of Trade yesterday showed an 18 percent chance the Fed will increase its target rate for overnight lending between banks by a quarter-percentage point at its Aug. 5 meeting, compared with 25 percent odds on June 2.
The greenback dropped 1.2 percent against the euro last week in its second consecutive weekly loss after the Fed gave no indication in its June 25 statement that it will start reversing the most aggressive series of cuts in two decades.
Crude Oil
Declines in the euro may be limited by speculation its positive correlation with oil prices will lure investors into buying the currency.
Crude oil for August delivery touched $145.85 yesterday, the highest since trading began in 1983. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.
``With oil continuing its way to $150 a barrel, it's hard for the euro to drop,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``The outlook for the dollar is hardly bullish.''
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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Dollar to Rise Against Emerging Markets, Morgan Stanley Says
By Jamie McGee
July 4 (Bloomberg) -- The U.S. dollar will appreciate against most emerging market currencies as their economies are hurt by rising energy prices, according to a Morgan Stanley.
The dollar will also strengthen to $1.53 against the euro by year-end and $1.40 by the end of 2009, Morgan Stanley's chief currency strategist Stephen Jen wrote. The research note was released yesterday after the European Central Bank's quarter- percentage point increase in its benchmark loan rate to 4.25 percent. Jen also forecast the dollar will trade at 97 yen by January and at 110 by the end of 2009.
``While the dollar may remain somewhat vulnerable against the euro in the near term, we continue to believe that the dollar is grossly under-valued and should perform better over the longer term against the majors,'' London-based Jen said. ``It is the oil price issue that will likely cause the emerging- market dominos to topple over. Euroland will likely follow.''
Crude oil rose above $145 a barrel yesterday to a record amid signs global demand for fuels, particularly from China, may strain supplies.
The euro fell the most against the dollar in more than two months after Trichet signaled that he may not increase interest rates again. The euro dropped 1.1 percent to $1.5703 yesterday in New York, from $1.5882 on July 2. The dollar appreciated 0.8 percent to 106.73 yen, from 105.91.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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July 4 (Bloomberg) -- The U.S. dollar will appreciate against most emerging market currencies as their economies are hurt by rising energy prices, according to a Morgan Stanley.
The dollar will also strengthen to $1.53 against the euro by year-end and $1.40 by the end of 2009, Morgan Stanley's chief currency strategist Stephen Jen wrote. The research note was released yesterday after the European Central Bank's quarter- percentage point increase in its benchmark loan rate to 4.25 percent. Jen also forecast the dollar will trade at 97 yen by January and at 110 by the end of 2009.
``While the dollar may remain somewhat vulnerable against the euro in the near term, we continue to believe that the dollar is grossly under-valued and should perform better over the longer term against the majors,'' London-based Jen said. ``It is the oil price issue that will likely cause the emerging- market dominos to topple over. Euroland will likely follow.''
Crude oil rose above $145 a barrel yesterday to a record amid signs global demand for fuels, particularly from China, may strain supplies.
The euro fell the most against the dollar in more than two months after Trichet signaled that he may not increase interest rates again. The euro dropped 1.1 percent to $1.5703 yesterday in New York, from $1.5882 on July 2. The dollar appreciated 0.8 percent to 106.73 yen, from 105.91.
To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net
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Oil Is Little Changed Above $145 on Concerns Over Fuel Supplies
By Margot Habiby and Robert Tuttle
July 4 (Bloomberg) -- Crude oil was little changed above $145 a barrel after reaching a record yesterday amid signs demand for fuels, particularly from China, may strain supplies.
PetroChina Co. may import record volumes of petroleum products this year to meet demand needed for reconstruction after May's earthquake, China National Petroleum Corp. said June 28, and before the Olympics next month. Heating oil futures, a proxy for distillate fuels including diesel, reached an all-time high yesterday.
``There's a kind of expectation in the market that there will be strong ongoing demand for distillate fuel,'' said Tim Evans, an energy analyst for Citi Futures Perspective in New York. ``We had the Chinese earthquake, and we've got the Olympics coming up.''
Crude oil for August delivery rose 15 cents to $145.44 a barrel at 8:55 a.m. in Sydney in after-hours electronic trading on the New York Mercantile Exchange. Yesterday, oil rose $1.72, or 1.2 percent, to settle at $145.29 a barrel. Futures earlier touched $145.85, the highest since trading began in 1983.
While U.S. financial markets are closed today for the Independence Day holiday, Nymex electronic trading continues.
The May 12 earthquake in China's Sichuan Province, the country's most powerful in 58 years, killed more than 69,000 people. The Olympic Games will be held Aug. 8-24 in Beijing.
Heating oil for August delivery rose 3.45 cents, or 0.9 percent, to $4.106 a gallon on the exchange yesterday. Earlier, it climbed 1.6 percent to a record $4.135 a gallon.
Job Cuts
Concern that economic growth may be slowing damped crude oil's gain earlier.
U.S. employers cut jobs for a sixth straight month and service industries shrank in June, signaling that the slowdown may deepen as the impact of federal tax rebates fades.
``You've got the economic reality that the U.S. economy stinks, demand for oil stinks,'' said David Pursell, managing partner at Tudor Pickering Hold Co. in Houston.
The euro fell the most against the dollar in more than two months after European Central Bank President Jean-Claude Trichet indicated he may not boost interest rates again. The ECB raised its benchmark lending rate to 4.25 percent yesterday.
The euro dropped 1.1 percent to $1.5703 yesterday in New York, from $1.5882 on July 2. The dollar appreciated 0.8 percent to 106.73 yen, from 105.91.
Declines in the dollar were one of the factors responsible for a 48 percent increase in oil futures prices in the first half of the year.
Stock Markets
Earlier yesterday, oil reached a record because of buying from investors seeking an alternative to tumbling stock markets and amid concern a conflict with Iran over its nuclear program would cut Persian Gulf supplies.
Ali Akbar Velayati, adviser to Iran's supreme leader, said his comments earlier this week that Iran must consider talks over its nuclear program didn't mean his country would accept Western incentives to abandon uranium enrichment, Agence France- Presse said. Iran is the Organization of Petroleum Exporting Countries' second-largest oil producer.
Nearly all of oil's ``last $10 move is based on the potential for an Israeli-Iranian conflict,'' said Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based in Houston.
Oil prices are being led higher by factors including geopolitics, the weakening dollar and concern about future supplies, Saudi Arabia's Oil Minister Ali al-Naimi said in Madrid yesterday, where he is attending the World Petroleum Congress.
Brent crude oil for August settlement rose $1.82, or 1.3 percent, to $146.08 a barrel on London's ICE Futures Europe exchange yesterday. Futures earlier climbed to $146.69, the highest intraday price since trading began in 1988.
Tropical Storm Bertha, the second named storm of the Atlantic hurricane season, has formed in the far eastern Atlantic Ocean, near the Cape Verde Islands, according to the U.S. National Hurricane Center. The storm, with maximum sustained winds of near 40 miles (65 kilometers) an hour, was moving to the west-northwest at about 14 mph.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Robert Tuttle in New York at rtuttle@bloomberg.net
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July 4 (Bloomberg) -- Crude oil was little changed above $145 a barrel after reaching a record yesterday amid signs demand for fuels, particularly from China, may strain supplies.
PetroChina Co. may import record volumes of petroleum products this year to meet demand needed for reconstruction after May's earthquake, China National Petroleum Corp. said June 28, and before the Olympics next month. Heating oil futures, a proxy for distillate fuels including diesel, reached an all-time high yesterday.
``There's a kind of expectation in the market that there will be strong ongoing demand for distillate fuel,'' said Tim Evans, an energy analyst for Citi Futures Perspective in New York. ``We had the Chinese earthquake, and we've got the Olympics coming up.''
Crude oil for August delivery rose 15 cents to $145.44 a barrel at 8:55 a.m. in Sydney in after-hours electronic trading on the New York Mercantile Exchange. Yesterday, oil rose $1.72, or 1.2 percent, to settle at $145.29 a barrel. Futures earlier touched $145.85, the highest since trading began in 1983.
While U.S. financial markets are closed today for the Independence Day holiday, Nymex electronic trading continues.
The May 12 earthquake in China's Sichuan Province, the country's most powerful in 58 years, killed more than 69,000 people. The Olympic Games will be held Aug. 8-24 in Beijing.
Heating oil for August delivery rose 3.45 cents, or 0.9 percent, to $4.106 a gallon on the exchange yesterday. Earlier, it climbed 1.6 percent to a record $4.135 a gallon.
Job Cuts
Concern that economic growth may be slowing damped crude oil's gain earlier.
U.S. employers cut jobs for a sixth straight month and service industries shrank in June, signaling that the slowdown may deepen as the impact of federal tax rebates fades.
``You've got the economic reality that the U.S. economy stinks, demand for oil stinks,'' said David Pursell, managing partner at Tudor Pickering Hold Co. in Houston.
The euro fell the most against the dollar in more than two months after European Central Bank President Jean-Claude Trichet indicated he may not boost interest rates again. The ECB raised its benchmark lending rate to 4.25 percent yesterday.
The euro dropped 1.1 percent to $1.5703 yesterday in New York, from $1.5882 on July 2. The dollar appreciated 0.8 percent to 106.73 yen, from 105.91.
Declines in the dollar were one of the factors responsible for a 48 percent increase in oil futures prices in the first half of the year.
Stock Markets
Earlier yesterday, oil reached a record because of buying from investors seeking an alternative to tumbling stock markets and amid concern a conflict with Iran over its nuclear program would cut Persian Gulf supplies.
Ali Akbar Velayati, adviser to Iran's supreme leader, said his comments earlier this week that Iran must consider talks over its nuclear program didn't mean his country would accept Western incentives to abandon uranium enrichment, Agence France- Presse said. Iran is the Organization of Petroleum Exporting Countries' second-largest oil producer.
Nearly all of oil's ``last $10 move is based on the potential for an Israeli-Iranian conflict,'' said Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based in Houston.
Oil prices are being led higher by factors including geopolitics, the weakening dollar and concern about future supplies, Saudi Arabia's Oil Minister Ali al-Naimi said in Madrid yesterday, where he is attending the World Petroleum Congress.
Brent crude oil for August settlement rose $1.82, or 1.3 percent, to $146.08 a barrel on London's ICE Futures Europe exchange yesterday. Futures earlier climbed to $146.69, the highest intraday price since trading began in 1988.
Tropical Storm Bertha, the second named storm of the Atlantic hurricane season, has formed in the far eastern Atlantic Ocean, near the Cape Verde Islands, according to the U.S. National Hurricane Center. The storm, with maximum sustained winds of near 40 miles (65 kilometers) an hour, was moving to the west-northwest at about 14 mph.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Robert Tuttle in New York at rtuttle@bloomberg.net
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Coffee Delines as Brazil May Speed Up Shipments, Dollar Gains
By Yi Tian
July 3 (Bloomberg) -- Coffee fell the most in almost four weeks on speculation drier weather will speed up shipments from Brazil, the biggest grower, and a rising dollar will cool demand for raw materials as a hedge against inflation.
Brazil's main growing regions will have ``mostly dry conditions'' during the next seven days, Meteorlogix LLC said today. That will allow farmers to collect beans after rain last month pushed back the start of the harvest, said Marcio Bernardo, a broker at Newedge USA LLC in New York.
``The weather in Brazil is favorable for the harvest in Sao Paulo and Minas Gerais'' states, said Bernardo. ``And there's no risk of frost until the middle of July.''
Coffee futures for September delivery fell 4.1 cents, or 2.6 percent, to $1.519 a pound on ICE Futures U.S., the former New York Board of Trade, the biggest decline for a most-active contract since June 9.
Coffee jumped 12 percent in the first half of this year, partly because harvest delays in Brazil tightened global supplies. The commodity fell 0.4 percent this week. Trading is closed tomorrow for the Independence Day holiday.
Stronger Dollar
A stronger dollar also put downward pressure on coffee futures, Ryan Bennett, a London-based commodities analyst at brokerage Sucden (U.K.) Ltd., said today in a report.
The dollar index, which values the U.S. currency against six major counterparts including the euro and U.K. pound, rose as much as 1.1 percent after European Central Bank President Jean-Claude Trichet signaled the ECB may keep interest rates on hold after today's quarter-point increase. A stronger dollar makes contracts more expensive for holders of other currencies.
The U.S. Department of Agriculture forecasts Brazil's harvest at 51.1 million bags, 36 percent more than last year, because trees are in the higher-yielding part of a two-year cycle. So far, shipments from Brazil have been trailing last year's pace because of the delayed harvest, which usually runs through October.
Exports from Brazil dropped 13 percent to 1.45 million bags in June from a month earlier, the country's Coffee Exporters Council said July 1 on its Web site. A growers' group said last week that no more than 8 percent of the country's beans were harvested through June 24, down from as much as 18 percent a year earlier. A bag of coffee beans weighs 60 kilograms (132 pounds).
Futures also dropped today on speculation prices had risen too high, given the increase in supply expected from Brazil this year, according to Bernardo and Jack Scoville, vice president for Price Futures Group in Chicago.
Allegations that several German coffee companies illegally fixed prices weighed on the market, too, Scoville said.
``If these companies have legal problems, we'll have issues with demand,'' Scoville said. ``This may not be a primary factor, but it certainly adds in.''
Germany is the biggest importer of Brazilian coffee.
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
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July 3 (Bloomberg) -- Coffee fell the most in almost four weeks on speculation drier weather will speed up shipments from Brazil, the biggest grower, and a rising dollar will cool demand for raw materials as a hedge against inflation.
Brazil's main growing regions will have ``mostly dry conditions'' during the next seven days, Meteorlogix LLC said today. That will allow farmers to collect beans after rain last month pushed back the start of the harvest, said Marcio Bernardo, a broker at Newedge USA LLC in New York.
``The weather in Brazil is favorable for the harvest in Sao Paulo and Minas Gerais'' states, said Bernardo. ``And there's no risk of frost until the middle of July.''
Coffee futures for September delivery fell 4.1 cents, or 2.6 percent, to $1.519 a pound on ICE Futures U.S., the former New York Board of Trade, the biggest decline for a most-active contract since June 9.
Coffee jumped 12 percent in the first half of this year, partly because harvest delays in Brazil tightened global supplies. The commodity fell 0.4 percent this week. Trading is closed tomorrow for the Independence Day holiday.
Stronger Dollar
A stronger dollar also put downward pressure on coffee futures, Ryan Bennett, a London-based commodities analyst at brokerage Sucden (U.K.) Ltd., said today in a report.
The dollar index, which values the U.S. currency against six major counterparts including the euro and U.K. pound, rose as much as 1.1 percent after European Central Bank President Jean-Claude Trichet signaled the ECB may keep interest rates on hold after today's quarter-point increase. A stronger dollar makes contracts more expensive for holders of other currencies.
The U.S. Department of Agriculture forecasts Brazil's harvest at 51.1 million bags, 36 percent more than last year, because trees are in the higher-yielding part of a two-year cycle. So far, shipments from Brazil have been trailing last year's pace because of the delayed harvest, which usually runs through October.
Exports from Brazil dropped 13 percent to 1.45 million bags in June from a month earlier, the country's Coffee Exporters Council said July 1 on its Web site. A growers' group said last week that no more than 8 percent of the country's beans were harvested through June 24, down from as much as 18 percent a year earlier. A bag of coffee beans weighs 60 kilograms (132 pounds).
Futures also dropped today on speculation prices had risen too high, given the increase in supply expected from Brazil this year, according to Bernardo and Jack Scoville, vice president for Price Futures Group in Chicago.
Allegations that several German coffee companies illegally fixed prices weighed on the market, too, Scoville said.
``If these companies have legal problems, we'll have issues with demand,'' Scoville said. ``This may not be a primary factor, but it certainly adds in.''
Germany is the biggest importer of Brazilian coffee.
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
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Copper Drops Most in Five Weeks in New York as Dollar Rebounds
By Millie Munshi
July 3 (Bloomberg) -- Copper fell the most in five weeks as a rebound in the dollar curbed demand for commodities as a hedge against inflation.
The dollar gained as much as 1.1 percent against a basket of the euro, yen and four other major currencies, halting a two- day slide. Yesterday, copper reached a record-high closing price in New York as the dollar dropped to a two-month low against the euro, spurring demand for commodities as a store of value.
``Copper is reacting to the dollar,'' said Ron Goodis, the futures-trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``Metals and commodities have been strongly correlated to movements in the dollar and the idea of inflation'' this year, he said.
Copper futures for September delivery fell 11.45 cents, or 2.8 percent, to $3.949 a pound on the Comex division of the New York Mercantile Exchange. That marked the biggest drop for a most-active contract since May 29.
Copper closed at $4.0635 yesterday on rising demand for raw materials as a hedge against inflation. The highest price ever was $4.2605 on May 5. Crude oil and soybeans also jumped to all- time highs yesterday, driving commodity indexes to records.
``Yesterday was pretty remarkable for copper,'' Goodis said. ``It's not surprising to see the price fall today after moving so fast yesterday.''
The dollar has dropped 5.2 percent against the basket of currencies this year, helping to spur a 30 percent jump in copper. The Reuters/Jefferies CRB Index of 19 raw materials is up 32 percent in 2008.
The dollar will drive copper ``for a little while longer,'' Edward Meir, a Stamford, Connecticut-based analyst at MF Global Ltd., said in a report.
Peru Strike
The market also will be ``heavily influenced'' by labor unrest by miners in Peru, Michael Widmer, a London-based analyst at Lehman Brothers Holdings Inc., said in an e-mail.
Peruvian mine workers began a national strike on June 30 to pressure Congress to pass laws mandating greater profit sharing and better pensions, Cirilo Yarihuaman, a spokesman for the Mining Federation, said yesterday. The group represents about 28,000 mine workers and 70 unions in Peru, the world's third- biggest copper producer.
Copper ``is in a very tight supply situation,'' Goodis of Equidex said. ``Any drop in supply would be reason for higher prices.''
On the London Metal Exchange, copper for delivery in three months fell $75, or 0.9 percent, to $8,645 a metric ton ($3.92 a pound). The price jumped to a record $8,940 yesterday.
To contact the reporter on the story: Millie Munshi in New York at mmunshi@bloomberg.net.
Read more...
July 3 (Bloomberg) -- Copper fell the most in five weeks as a rebound in the dollar curbed demand for commodities as a hedge against inflation.
The dollar gained as much as 1.1 percent against a basket of the euro, yen and four other major currencies, halting a two- day slide. Yesterday, copper reached a record-high closing price in New York as the dollar dropped to a two-month low against the euro, spurring demand for commodities as a store of value.
``Copper is reacting to the dollar,'' said Ron Goodis, the futures-trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``Metals and commodities have been strongly correlated to movements in the dollar and the idea of inflation'' this year, he said.
Copper futures for September delivery fell 11.45 cents, or 2.8 percent, to $3.949 a pound on the Comex division of the New York Mercantile Exchange. That marked the biggest drop for a most-active contract since May 29.
Copper closed at $4.0635 yesterday on rising demand for raw materials as a hedge against inflation. The highest price ever was $4.2605 on May 5. Crude oil and soybeans also jumped to all- time highs yesterday, driving commodity indexes to records.
``Yesterday was pretty remarkable for copper,'' Goodis said. ``It's not surprising to see the price fall today after moving so fast yesterday.''
The dollar has dropped 5.2 percent against the basket of currencies this year, helping to spur a 30 percent jump in copper. The Reuters/Jefferies CRB Index of 19 raw materials is up 32 percent in 2008.
The dollar will drive copper ``for a little while longer,'' Edward Meir, a Stamford, Connecticut-based analyst at MF Global Ltd., said in a report.
Peru Strike
The market also will be ``heavily influenced'' by labor unrest by miners in Peru, Michael Widmer, a London-based analyst at Lehman Brothers Holdings Inc., said in an e-mail.
Peruvian mine workers began a national strike on June 30 to pressure Congress to pass laws mandating greater profit sharing and better pensions, Cirilo Yarihuaman, a spokesman for the Mining Federation, said yesterday. The group represents about 28,000 mine workers and 70 unions in Peru, the world's third- biggest copper producer.
Copper ``is in a very tight supply situation,'' Goodis of Equidex said. ``Any drop in supply would be reason for higher prices.''
On the London Metal Exchange, copper for delivery in three months fell $75, or 0.9 percent, to $8,645 a metric ton ($3.92 a pound). The price jumped to a record $8,940 yesterday.
To contact the reporter on the story: Millie Munshi in New York at mmunshi@bloomberg.net.
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Most Asian Stocks Decline on Record Oil Prices; Kansai Falls
By Chen Shiyin and Chua Kong Ho
July 4 (Bloomberg) -- Most Asian stocks fell, sending the region's benchmark index to its fourth weekly decline in a row, on speculation record crude-oil prices will dent profits.
Kansai Electric Power Co. led power producers lower after oil rose above $145 a barrel. Shanghai Airlines Co. paced declines among carriers after saying it may miss a profit target. Japan's Nikkei 225 Stock Average fell for a 12th day, its longest losing streak in 54 years.
The MSCI Asia-Pacific Index was little changed at 132.45 at 10:43 a.m. Tokyo time, after dropping to its lowest since March 17 yesterday. Six of the 10 industry groups on the gauge fell today, with about four stocks retreating for every three that rose.
The index's four-week, 12 percent slump will be its longest losing streak since the period ended Feb. 8. The measure fell 13 percent in the first half, the worst start since 1992. All Asian benchmark indexes declined this week, except Vietnam.
Japan's Nikkei 225 slid 0.3 percent to 13,232.13, capping a 12-day, 8.4 percent slump. The decline is the longest since 1954. The Kuala Lumpur Composite Index dropped 1.9 percent, Asia's largest decline, after trading resumed in Malaysia following a one-day suspension because of a systems failure.
Most U.S. stocks fell yesterday, completing the longest streak of weekly declines in four years, after Nvidia Corp. reduced its sales forecast. Markets are closed today for the Independence Day holiday.
Kansai, Tenaga
Kansai, Japan's second-largest power producer by market value, lost 1.4 percent to 2,465 yen. Rival Chubu Electric Power Co. fell 1.4 percent to 2,545 yen. Tenaga Nasional Bhd., a Malaysian state-controlled power producer, dropped 3.8 percent to 7.70 ringgit.
Crude oil rose 1.2 percent to $145.29 a barrel yesterday in New York and touched a record high of $145.85 during the day. Futures have more than doubled from a year earlier.
Shanghai Airlines fell 1.5 percent to 5.45 yuan after President Fan Hongxi said the carrier will find it ``very difficult'' to meet its profit target after jet fuel prices rose to a record.
AirAsia Bhd., Southeast Asia's biggest discount carrier, dropped 3.8 percent to 89.5 sen in Malaysia. Korean Air Lines Co., South Korea's largest airline, lost 1.4 percent to 42,600 won.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net.
Read more...
July 4 (Bloomberg) -- Most Asian stocks fell, sending the region's benchmark index to its fourth weekly decline in a row, on speculation record crude-oil prices will dent profits.
Kansai Electric Power Co. led power producers lower after oil rose above $145 a barrel. Shanghai Airlines Co. paced declines among carriers after saying it may miss a profit target. Japan's Nikkei 225 Stock Average fell for a 12th day, its longest losing streak in 54 years.
The MSCI Asia-Pacific Index was little changed at 132.45 at 10:43 a.m. Tokyo time, after dropping to its lowest since March 17 yesterday. Six of the 10 industry groups on the gauge fell today, with about four stocks retreating for every three that rose.
The index's four-week, 12 percent slump will be its longest losing streak since the period ended Feb. 8. The measure fell 13 percent in the first half, the worst start since 1992. All Asian benchmark indexes declined this week, except Vietnam.
Japan's Nikkei 225 slid 0.3 percent to 13,232.13, capping a 12-day, 8.4 percent slump. The decline is the longest since 1954. The Kuala Lumpur Composite Index dropped 1.9 percent, Asia's largest decline, after trading resumed in Malaysia following a one-day suspension because of a systems failure.
Most U.S. stocks fell yesterday, completing the longest streak of weekly declines in four years, after Nvidia Corp. reduced its sales forecast. Markets are closed today for the Independence Day holiday.
Kansai, Tenaga
Kansai, Japan's second-largest power producer by market value, lost 1.4 percent to 2,465 yen. Rival Chubu Electric Power Co. fell 1.4 percent to 2,545 yen. Tenaga Nasional Bhd., a Malaysian state-controlled power producer, dropped 3.8 percent to 7.70 ringgit.
Crude oil rose 1.2 percent to $145.29 a barrel yesterday in New York and touched a record high of $145.85 during the day. Futures have more than doubled from a year earlier.
Shanghai Airlines fell 1.5 percent to 5.45 yuan after President Fan Hongxi said the carrier will find it ``very difficult'' to meet its profit target after jet fuel prices rose to a record.
AirAsia Bhd., Southeast Asia's biggest discount carrier, dropped 3.8 percent to 89.5 sen in Malaysia. Korean Air Lines Co., South Korea's largest airline, lost 1.4 percent to 42,600 won.
To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net.
Read more...
Most Japan Stocks Rise After ECB Signals End of Rate Increases
By Makiko Kitamura and Masako Kondo
July 4 (Bloomberg) -- Most Japanese stocks rose after the European Central Bank suggested it may not raise interest rates further, easing concern Japanese exports will slow.
Toyota Motor Corp., Japan's largest carmaker, rose 0.4 percent, and Sony Corp. rose 0.4 percent. Nippon Yusen KK, the nation's biggest shipping line, fell a third day after cargo rates for commodities declined.
The Nikkei 225 Stock Average rose 20.28, or 0.2 percent, to 13,285.68, and the broader Topix index gained 2.16, or 0.2 percent, to 1,300.18 as of 9:03 a.m.
ECB President Jean-Claude Trichet played down prospects of interest-rate increases, saying the quarter-point boost yesterday will help bring inflation back below 2 percent. Meanwhile, U.S. employers cut jobs for a sixth-straight month in June, and service industries shrank to a five-month low.
``Trichet's comments relieved concern in the market,'' Soichiro Monji, chief strategist at Daiwa SB Investments Ltd., which manages about $62 billion, said in an interview with Bloomberg Television. ``A rally may be weak and short-lived, considering the rather bad economic statistics in the U.S. and surging oil prices.''
The ECB's comments pushed the euro to a one-week low against the dollar, curbing demand for metals as a hedge against inflation. Gold dropped 1.4 percent, and copper fell the most in five weeks. Crude oil rose to $145.29 after touching a record at $145.85.
To contact the reporters for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
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July 4 (Bloomberg) -- Most Japanese stocks rose after the European Central Bank suggested it may not raise interest rates further, easing concern Japanese exports will slow.
Toyota Motor Corp., Japan's largest carmaker, rose 0.4 percent, and Sony Corp. rose 0.4 percent. Nippon Yusen KK, the nation's biggest shipping line, fell a third day after cargo rates for commodities declined.
The Nikkei 225 Stock Average rose 20.28, or 0.2 percent, to 13,285.68, and the broader Topix index gained 2.16, or 0.2 percent, to 1,300.18 as of 9:03 a.m.
ECB President Jean-Claude Trichet played down prospects of interest-rate increases, saying the quarter-point boost yesterday will help bring inflation back below 2 percent. Meanwhile, U.S. employers cut jobs for a sixth-straight month in June, and service industries shrank to a five-month low.
``Trichet's comments relieved concern in the market,'' Soichiro Monji, chief strategist at Daiwa SB Investments Ltd., which manages about $62 billion, said in an interview with Bloomberg Television. ``A rally may be weak and short-lived, considering the rather bad economic statistics in the U.S. and surging oil prices.''
The ECB's comments pushed the euro to a one-week low against the dollar, curbing demand for metals as a hedge against inflation. Gold dropped 1.4 percent, and copper fell the most in five weeks. Crude oil rose to $145.29 after touching a record at $145.85.
To contact the reporters for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
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Australia Stocks Update: S&P/ASX 200 Rises 18.00 to 5,016.30
By Nicolas Johnson
July 4 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, rose 0.36 percent at 10:05 a.m.
The index of 200 companies traded on the Australian Stock Exchange rose 18.00 to 5,016.30. Among the stocks in the index, 64 rose, 47 fell and 89 were unchanged.
Gains in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Fortescue Metals Group Ltd and Australia & New Zealand Banking Group Ltd. About 55.82 million shares changed hands on the Australian Stock Exchange.
Bhp Billiton Ltd, which rose 40 cents to A$40.22, was the most active stock by value in Australia.
The next most-active issues were Brambles Ltd, which fell 41 cents to A$7.70, and Australia & New Zealand Banking Group Ltd, which rose 38 cents to A$19.09.
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July 4 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, rose 0.36 percent at 10:05 a.m.
The index of 200 companies traded on the Australian Stock Exchange rose 18.00 to 5,016.30. Among the stocks in the index, 64 rose, 47 fell and 89 were unchanged.
Gains in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Fortescue Metals Group Ltd and Australia & New Zealand Banking Group Ltd. About 55.82 million shares changed hands on the Australian Stock Exchange.
Bhp Billiton Ltd, which rose 40 cents to A$40.22, was the most active stock by value in Australia.
The next most-active issues were Brambles Ltd, which fell 41 cents to A$7.70, and Australia & New Zealand Banking Group Ltd, which rose 38 cents to A$19.09.
Read more...
ECB Pres. Trichet's Comments Sink Euro, As ECB Hints At 'One-and-Done' Move
Daily Forex Fundamentals | Written by CMS Forex | Jul 04 08 01:09 GMT |
EUR Retail Sales Surprise in June, Climb 1.2% in May
In the Euro-zone, retail sales surprised forecasts on the upside in May, increasing 1.2% on the month and turning positive in annual terms at 0.2%. With the Euro-zone economy losing its momentum however, the good result may prove temporary.
EUR Services PMI Contracts in June, Final Version Revised Lower to 49.1
Activity in the euro-zone sector contracted in June, falling to 49.1 from May's 50.6. The final version was lower than the preliminary release from last Monday.
UK Services Falls to Lowest Level Since October 2001
In the UK, the services sector also contracted, for the second straight month, posting a 47.1 for its PMI, the weakest level since October 2001. The UK economy has hit the skids as a collapse in housing lending, stemming from the US sub-prime mortgage, has turned into a full blown slowdown and possible recession.
ECB Raises Rates to 4.25%, First Move in 13 Months
In the late part of the European session, the ECB delivered its announcement on interest rates raising the rate to a seven-year high of 4.25% in order to combat red-hot inflation. It's the first move by policy members in 13 months. It comes despite signs, such as today's services data, that the economy is cooling. The increase was signaled far in advance, and was not a surprise to the markets as annual consumer inflation hit 4% in the June preliminary release.
The surprise to the markets came in ECB President Trichet's comments following the announcement. He signaled that the bank may have taken a one-and-done approach, and are not likely to start a series of increases. Those traders expecting a more hawkish stance on inflation were disappointed and the Euro-Dollar pair slid close to 200 pips prior to tomorrow's 4th of July holiday.
European stocks were negative to start their sessions but climbed into positive territory as anxiety about more ECB rate increases receded. The Euro-Yen pair succumbed to the Euro weakness however, stalling its recent rally, which was a recovery from its slide last week. From its intra-day high today, prior to Trichet's conference, the pair fell around 150 pips by 2:30 PM EST.
The Pound-Dollar slid 120 pips from its open as the Pound was pressured by its services report. At the NY open, the US release of nonfarm payroll data did not stop the Dollar's momentum. The Pound is now 200 pips lower than its high for the week at the 2 to 1 level seen on Tuesday.
US Sheds Jobs for 6th Month, Payroll Change at -62K
In the US, the nonfarm payroll report showed the economy shedding 62K jobs, the 6th straight month of job losses. The fall was very close to the forecast perhaps a relief after a weak ADP jobs report earlier in the week. May's figure, though, was revised down 13K. The unemployment rate remained at 5.5%. The job market seems poised to remain weak, which can lead to lower consumer spending and may keep the Fed from raising rates, despite higher inflation.
US stocks digested the job news and turned slightly positive by the middle of NY trading. With Dollar strength dictating the market today, the Dollar-Yen pair rose to a new weekly high of 106.90, recovering some of its losses from the end of last week.
The Dollar also managed to pare yesterday's losses against the Canadian Dollar. The US Dollar-Loonie pair had tested 1.01 yesterday, but jumped back above 1.02 today. The pair got caught up in general greenback strength, as some had feared a worse jobs report and a more hawkish ECB, which did not materialize. The gains also came despite a jump again by oil prices, which pulled back from a record near $146 per barrel.
Upcoming Releases
In upcoming releases, Germany will post its factory orders overnight, and the UK will release data on housing prices. Tomorrow, the US will be celebrating Independence Day, with national banks and stock markets closed for action. Canada ends the week with its Ivey PMI.
Hans Nilsson
Capital Market Services, L.L.C.
www.cmsfx.com
Read more...
EUR Retail Sales Surprise in June, Climb 1.2% in May
In the Euro-zone, retail sales surprised forecasts on the upside in May, increasing 1.2% on the month and turning positive in annual terms at 0.2%. With the Euro-zone economy losing its momentum however, the good result may prove temporary.
EUR Services PMI Contracts in June, Final Version Revised Lower to 49.1
Activity in the euro-zone sector contracted in June, falling to 49.1 from May's 50.6. The final version was lower than the preliminary release from last Monday.
UK Services Falls to Lowest Level Since October 2001
In the UK, the services sector also contracted, for the second straight month, posting a 47.1 for its PMI, the weakest level since October 2001. The UK economy has hit the skids as a collapse in housing lending, stemming from the US sub-prime mortgage, has turned into a full blown slowdown and possible recession.
ECB Raises Rates to 4.25%, First Move in 13 Months
In the late part of the European session, the ECB delivered its announcement on interest rates raising the rate to a seven-year high of 4.25% in order to combat red-hot inflation. It's the first move by policy members in 13 months. It comes despite signs, such as today's services data, that the economy is cooling. The increase was signaled far in advance, and was not a surprise to the markets as annual consumer inflation hit 4% in the June preliminary release.
The surprise to the markets came in ECB President Trichet's comments following the announcement. He signaled that the bank may have taken a one-and-done approach, and are not likely to start a series of increases. Those traders expecting a more hawkish stance on inflation were disappointed and the Euro-Dollar pair slid close to 200 pips prior to tomorrow's 4th of July holiday.
European stocks were negative to start their sessions but climbed into positive territory as anxiety about more ECB rate increases receded. The Euro-Yen pair succumbed to the Euro weakness however, stalling its recent rally, which was a recovery from its slide last week. From its intra-day high today, prior to Trichet's conference, the pair fell around 150 pips by 2:30 PM EST.
The Pound-Dollar slid 120 pips from its open as the Pound was pressured by its services report. At the NY open, the US release of nonfarm payroll data did not stop the Dollar's momentum. The Pound is now 200 pips lower than its high for the week at the 2 to 1 level seen on Tuesday.
US Sheds Jobs for 6th Month, Payroll Change at -62K
In the US, the nonfarm payroll report showed the economy shedding 62K jobs, the 6th straight month of job losses. The fall was very close to the forecast perhaps a relief after a weak ADP jobs report earlier in the week. May's figure, though, was revised down 13K. The unemployment rate remained at 5.5%. The job market seems poised to remain weak, which can lead to lower consumer spending and may keep the Fed from raising rates, despite higher inflation.
US stocks digested the job news and turned slightly positive by the middle of NY trading. With Dollar strength dictating the market today, the Dollar-Yen pair rose to a new weekly high of 106.90, recovering some of its losses from the end of last week.
The Dollar also managed to pare yesterday's losses against the Canadian Dollar. The US Dollar-Loonie pair had tested 1.01 yesterday, but jumped back above 1.02 today. The pair got caught up in general greenback strength, as some had feared a worse jobs report and a more hawkish ECB, which did not materialize. The gains also came despite a jump again by oil prices, which pulled back from a record near $146 per barrel.
Upcoming Releases
In upcoming releases, Germany will post its factory orders overnight, and the UK will release data on housing prices. Tomorrow, the US will be celebrating Independence Day, with national banks and stock markets closed for action. Canada ends the week with its Ivey PMI.
Hans Nilsson
Capital Market Services, L.L.C.
www.cmsfx.com
Read more...
New York Session Recap
Daily Forex Fundamentals | Written by Forex.com | Jul 04 08 01:02 GMT |
What started as a potential continuation lower in the USD, ended with a rally against most major currencies. The European Central Bank raised rates as expected but played down further rate increases. The US employment data came in worse than expected at -62,000 in May but US stocks rallied. The resiliency in US stocks further helped to give the USD a bid. EUR/USD sold off by nearly 200 points to below 1.5700 while USD/JPY rallied to settle below 107.00. JPY crosses were sharply lower as well and the relationship between those pairs and risk aversion seems to have disconnected for now.
Commodities were mixed today as oil traded higher but gold was sharply lower. The link between commodities and the USD is typically negative and it seems for now the market is more closely following the gold market.
Looking forward, today's data should have been broadly USD negative but it looks like the market has already discounted the news. If we see continued consolidation in the USD, look for another follow through move higher. Tomorrow is a holiday in the US but currency markets remain open until 5pm ET. Happy Holidays for those celebrating Independence Day.
Forex.com
http://www.forex.com
Read more...
What started as a potential continuation lower in the USD, ended with a rally against most major currencies. The European Central Bank raised rates as expected but played down further rate increases. The US employment data came in worse than expected at -62,000 in May but US stocks rallied. The resiliency in US stocks further helped to give the USD a bid. EUR/USD sold off by nearly 200 points to below 1.5700 while USD/JPY rallied to settle below 107.00. JPY crosses were sharply lower as well and the relationship between those pairs and risk aversion seems to have disconnected for now.
Commodities were mixed today as oil traded higher but gold was sharply lower. The link between commodities and the USD is typically negative and it seems for now the market is more closely following the gold market.
Looking forward, today's data should have been broadly USD negative but it looks like the market has already discounted the news. If we see continued consolidation in the USD, look for another follow through move higher. Tomorrow is a holiday in the US but currency markets remain open until 5pm ET. Happy Holidays for those celebrating Independence Day.
Forex.com
http://www.forex.com
Read more...
Economic Calendar Eco Data 7/4/08
Friday, Jul 4, 2008
GMT Ccy Events Consensus Previous
5:00 JPY Leading Index (MAY P) 93.0% 92.8%
5:00 JPY Coincident Index (MAY P) 103.4% 101.7%
6:45 EUR French Central Government Balance (euros) (MAY) -- -45.0B
10:00 EUR German Factory Orders s.a. (MoM) (MAY) 0.8% -1.8%
10:00 EUR German Factory Orders n.s.a. (YoY) (MAY) 2.0% 15.0%
14:00 CAD Ivey Purchasing Managers Index (JUN) 62.0 62.5
Read more...
GMT Ccy Events Consensus Previous
5:00 JPY Leading Index (MAY P) 93.0% 92.8%
5:00 JPY Coincident Index (MAY P) 103.4% 101.7%
6:45 EUR French Central Government Balance (euros) (MAY) -- -45.0B
10:00 EUR German Factory Orders s.a. (MoM) (MAY) 0.8% -1.8%
10:00 EUR German Factory Orders n.s.a. (YoY) (MAY) 2.0% 15.0%
14:00 CAD Ivey Purchasing Managers Index (JUN) 62.0 62.5
Read more...
Thursday, July 3, 2008
ECB's Trichet Notes Downside Risks to Growth
European Economy | Written by CEP News | Jul 03 08 13:51 GMT |
(CEP News) Frankfurt - During the question and answer period following European Central Bank President Jean-Claude Trichet's monthly press conference, he acknowledged that economic growth in the second quarter of 2008 will likely not be as strong as the previous quarter. He also suggested that Q3 would not be very flattering as well.
Growth risks are on the downside, Trichet said.
However, Trichet also emphasized that the central bank's assessment of GDP growth is appropriate and that GDP growth remains dynamic over the medium term.
He also said the ECB has only one needle in its compass and that higher inflation expectations translate into higher interest rates.
Nevertheless, Trichet said there is no contradiction between the goals of price stability and economic growth.
By Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
Read more...
(CEP News) Frankfurt - During the question and answer period following European Central Bank President Jean-Claude Trichet's monthly press conference, he acknowledged that economic growth in the second quarter of 2008 will likely not be as strong as the previous quarter. He also suggested that Q3 would not be very flattering as well.
Growth risks are on the downside, Trichet said.
However, Trichet also emphasized that the central bank's assessment of GDP growth is appropriate and that GDP growth remains dynamic over the medium term.
He also said the ECB has only one needle in its compass and that higher inflation expectations translate into higher interest rates.
Nevertheless, Trichet said there is no contradiction between the goals of price stability and economic growth.
By Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
Read more...
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