By William Freebairn and Paulo Winterstein
July 11 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.
The MSCI index of Latin American shares fell 0.4 percent to 4,341.77 yesterday. In Brazil, preferred shares are the most commonly traded class of stock.
Brazil
Cia. Brasileira de Distribuicao Grupo Pao de Acucar SA (PCAR4 BS): Brazil's biggest food retailer said sales at stores open for more than a year rose 9.8 percent in June on increased demand for electronics and home products. Total sales in all stores rose 23 percent in June to 1.39 billion reais ($863 million), the Sao Paulo-based company said yesterday in an e- mailed statement. Second-quarter same-store sales rose 7.3 percent. Grupo Pao de Acucar gained 4.4 percent to 35.50 reais.
Even Construtora e Incorporadora SA (EVEN3 BS): Brazil's fifth-largest real estate developer had 434 million reais of presales contracts at the end of the second quarter, compared with 179 million reais a year earlier. Even began work on 683 million reais of new projects, compared with 248 million reais in the second quarter of last year, the Sao Paulo-based builder said yesterday in a regulatory filing. Even fell 7.7 percent to 7.34 reais.
Gol Linhas Aereas Inteligentes SA (GOLL4 BS): The Varig unit of Brazil's second-biggest airline signed an agreement with American Airlines that allows the companies to sell tickets for each others' flights, Gol said in a regulatory filing yesterday. Sao Paulo-based Gol gained 3.2 percent to 14.63 reais.
Chile
La Polar SA (LAPOLAR CC), Cencosud SA (CENCOSUD CC) and Distribucion y Servicio D&S SA (DYS CC): Chile's central bank last night raised the benchmark lending rate to a nine-year high of 7.25 percent from the current 6.75 percent. The rate increase may worsen the outlook for retail sales as the Chilean economy slows, Mariana Larrain, a retail analyst at brokerage BCI Corredor de Bolsa SA, said in an interview yesterday. Department store operator La Polar fell 1.5 percent to 1,822.90 pesos. Cencosud, Chile's largest retailer, dropped 2.1 percent to 1,439.70 pesos. D&S, the country's largest grocer, slipped 1.6 percent to 184.74 pesos.
Mexico
Empresas ICA SAB (ICA* MM): Mexico's biggest construction company and two partners signed a previously announced 15.3 billion peso ($1.48 billion) contract to build a 21-station subway line in the nation's capital, ICA said yesterday in an e- mailed statement. Work will begin immediately and be completed by the end of 2011, the company said. ICA fell 1.3 percent to 63.55 pesos.
To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net
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Friday, July 11, 2008
Lehman Takes `Pounding' Again as Speculation Drags Down Shares
By Yalman Onaran
July 11 (Bloomberg) -- Lehman Brothers Holdings Inc., the securities firm that lost almost 75 percent of its market value this year, sank to the lowest since 2000 in New York trading as customers' votes of confidence failed to halt speculation that the stock may drop further.
Lehman, once the biggest U.S. underwriter of mortgage bonds, fell $2.44, or 12 percent, to $17.30 in New York Stock Exchange composite trading yesterday. Shares of the New York- based investment bank lost 22 percent in the last two days.
Yesterday's speculation centered on two clients backing away from the firm. Pacific Investment Management Co., manager of the world's biggest bond fund, and hedge fund SAC Capital Advisors LLC both said publicly that they continued to do business with the company. Pimco fund manager Bill Gross said in an interview with CNBC that there's ``no question'' about the firm's solvency.
Pimco and SAC's endorsements were overwhelmed as Lehman, led by Chief Executive Officer Richard Fuld, dropped alongside home-loan financing companies Fannie Mae and Freddie Mac. Both face pressure to raise more capital amid a credit contraction that has saddled banks with $408 billion of writedowns. Lehman has taken a ``pounding'' from traders betting the shares will drop since rival Bear Stearns Cos. collapsed in March, according to Richard Bove, an analyst at Ladenburg Thalmann & Co.
``People are worried about Fannie and Freddie, Lehman falls; people aren't worried about them, Lehman falls again,'' said Brad Hintz, an analyst at Sanford C. Bernstein & Co. ``This is one where you scratch your head and ask `what's going on?' It's fear and over-reaction.''
`Concentrated Effort'
Fuld, 62, declined to comment through a firm spokesman.
Short-sellers, who borrow shares betting that they'll decline, are spreading rumors about the bank in an organized attempt to depress the stock, according to Bove.
``There's a concentrated effort to break Lehman,'' Bove said. `` And I can't say it won't work because it worked with Bear.''
Similar speculation may have contributed to the demise of Bear Stearns when clients and creditors stopped doing business with the firm. The Federal Reserve has since allowed brokers to borrow from the central bank, as commercial lenders do. Since Bear Stearns's failure and takeover by JPMorgan Chase & Co. in March, Lehman has boosted its cash holdings and reduced dependence on short-term funding.
U.S. Representative Paul Kanjorski, a Democrat from Pennsylvania, said he wasn't convinced the sinking share prices resulted from wrongdoing.
`Disrupt the Balance'
``There are winners and losers in the market,'' said Kanjorski, chairman of the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. ``We've got to be very careful not to disrupt that balance because if we do we're effectively destroying the market.''
Freddie Mac shares dropped 22 percent yesterday to $8, extending its drop in two days to 41 percent. Fannie Mae has sunk 25 percent in the last two days.
The cost of protecting debt sold by Lehman Brothers from default rose to the highest in almost four months, according to traders of credit-default swaps.
Contracts on the New York-based broker jumped 40 basis points to 325 yesterday, according to Phoenix Partners Group in New York. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.
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Daily Financial Market Outlook
Daily Forex Fundamentals | Written by Lloyds TSB | Jul 11 08 06:52 GMT |
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Overview & economic commentary
Today sees the release of some important data out of North America. High oil and other commodity prices have already pushed up US import price inflation to decade highs, see chart below. The recent rise threatens to do more of the same. This will have a double whammy; widening the trade deficit and at the same time increasing inflation pressure in the US economy. We look for a 2% rise in May, to take the annual rate up to nearly 20%. As a result of higher oil prices, we expect the trade deficit to widen, to just over $62bn in May. Ex oil, the trade deficit is narrowing, but the recent rise in oil prices means that the overall deficit may widen further in the months ahead if oil prices remain at $140 a barrel. With higher prices, and rising unemployment, has come a sharp fall in consumer confidence, and we expect this to be reflected once again in the University of Michigan survey, for June. But this gloom, which has continued despite the arrival of tax rebates in the post, has not stopped consumer spending from being firm. However, the government fiscal deficit in May is likely to have been around $30bn. In Canada, the trade surplus should remain around $5bn, despite higher oil prices. Unemployment has been rising has the economy slowed, but the unemployment rate should remain steady in June as employment rises. Japanese industrial production is out and the data are likely to show that the annual rate of growth is being maintained at just over 1%, even as the developed economies see a slower pace of expansion
Currency commentary
General Electric is expected to report 0.54ct profit/share around midday and the company's guidance for Q3/Q4 is what may dictate price action in fx/ bonds and equities on the final trading day of the week. The dollar is a touch weaker this morning and, aside from the GE results, it may be influenced by US trade and consumer confidence data this afternoon. Record energy prices and oil imports are forecast to have pushed the deficit to $62bn in May, but markets will focus on the ex-oil number to gauge the strength of US exports and their contribution to Q2 gdp. Michigan confidence could be a market mover if it deviates significantly from the 56.0 forecast. Tax rebates may well have propped up morale and this could be a portent of strong retail numbers next week. €/£ trades at the upper end of the trading range this morning around 0.7980. Canadian employment data is also due and may move the C$ if the data sparks a reassessment of BoC interest rate expectations. £/C$ could break 1.9950 support in the event of a stronger set of numbers.
Major data and events today
- US Trade balance (sa) (13:30)
Apr -$60.9bn
May (f'cast) -$62.0bn
Median -$62.2bn Range-$64.6bn:-$58.4bn - US Import prices (13:30)
Apr +2.3% Y-O-Y +17.8%
May (f'cast) +2.0% Y-O-Y +18.7%
Median +1.9% Range +0.6%:+2.8% - University of Michigan confidence (prel) (15:00)
May 56.4
Jun (f'cast) 56.0
Median 55.8 Range 54.0:57.0 - US Treasury statement (sa) (19:00)
Apr +$27.5bn
May (f'cast) -$30.0bn
Median -$30.0bn Range -$20.0bn:-$50.0bn - Canada unemployment rate (12:00)
May 6.1%
Jun (f'cast) 6.1%
Median 6.1% Range 6.1%:6.2% - Canada employment change (12:00)
May +8.4K
Jun (f'cast) +10.0K
Median +10.0K Range 5.0K:+15.0K - Canada trade balance (sa) (13:30)
Apr +C$5.1bn
May (f'cast) +C$5.2bn
Median +C$5.0bn Range +C$4.5bn:+C$5.6bn - Canada new housing index (13:30)
Apr zero
May (f'cast) +0.1%
Median +0.1% Range -0.2%:+0.2% - Japan Industrial output (05:30) (final)
May (prel) Y-O-Y +1.2%
May (f'cast) Y-O-Y +1.2%
Median +1.2% Range +1.1%:+1.2%
Chart of the day: US import prices have risen dramatically since last year, adding upward pressure on overall inflation
Lloyds TSB Bank
http://www.lloydstsbfinancialmarkets.com
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European Stock Futures Rise; BP, Total, BHP Billiton May Gain
By Sarah Thompson
July 11 (Bloomberg) -- European stock-index futures rose, following gains in the U.S. and Asia, after a report suggested the U.S. government may take over Fannie Mae and Freddie Mac and higher oil and metals prices boosted commodity producers.
U.S.-traded securities of BP Plc, Europe's second-biggest oil company, and Total SA advanced after crude jumped more than $5 a barrel yesterday. BHP Billiton Ltd., the world's largest mining company, and Rio Tinto Group gained in Australia.
Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, added 23, or 0.7 percent, to 3,324 at 7:40 a.m. in London. The U.K.'s FTSE 100 Index may gain 30, according to CMC Markets.
U.S. officials are considering a plan to have the government take over one or both of Fannie Mae and Freddie Mac, the largest buyers of U.S. home loans, if they continue to deteriorate, The New York Times reported. The newspaper cited unidentified government officials briefed on the plan.
``News that Freddie Mac and Fannie Mae may be thrown a lifeboat will be very well-received by the markets,'' said David Buik, a London-based market analyst at BGC Partners. ``These companies have had investors asking some severe questions about their liquidity. Oil and mining stocks are also likely to rally.''
U.S. stocks rose yesterday, helping the Standard & Poor's 500 Index rebound from a two-year low, after Dow Chemical Co.'s agreed to buy Rohm & Haas Co. for $15.4 billion. Asian shares climbed today as commodity producers gained along with metals prices.
The cost of protecting Japanese and Australian bonds from default declined after the New York Times report.
BP, BHP
American depositary receipts of BP rose 1.3 percent from the close in London yesterday. ADRs of Total, Europe's third-largest oil company, ended 1.2 percent above the finish in Paris.
Oil for August delivery rose $5.60, or 4.1 percent, to $141.65 yesterday as Brazilian oil workers threatened a strike and on rising concern that supplies from the Middle East and Nigeria may be disrupted. It traded up 22 cents today.
Cadogan Petroleum Plc will probably gain. The oil and natural-gas producer operating in Ukraine said it found unexpected gas in its Borynya-3 well and reached its target depths in Pirkovskoe-1.
BHP jumped 3.4 percent in Australia, while Rio Tinto Group, the world's third-largest mining company, gained 2.7 percent.
Copper increased today in London while gold headed for a fourth weekly gain. Aluminum prices rallied as much as 6 percent to an all-time high of $3,380 a ton yesterday.
Nokia, Royal Bank
Nokia Oyj, the largest mobile phone maker, may gain. Nokia Siemens Networks won a contract valued at 550 million euros ($868 million) to expand the nationwide network belonging to China Mobile Communications Corp. Nokia Siemens, the world's second-biggest maker of wireless networks, is a joint venture between Nokia and Siemens AG.
Royal Bank of Scotland Group Plc might be active. The company, seeking to restore capital depleted by writedowns, is in talks to sell assets in Australia and New Zealand to National Australia Bank Ltd.
Mitchells & Butlers Plc may rise. UBS AG upgraded shares of the owner of O'Neill's pubs to ``buy'' from ``neutral.''
Zurich Financial Services AG might gain. Switzerland's biggest insurer pulled out of bidding for Royal Bank of Scotland's insurance unit and agreed to buy a 50 percent stake in Banco Sabadell SA's insurance units to become Spain's second- largest insurer.
Casino, Vodafone
Casino Guichard-Perrachon SA might advance. The biggest supermarket owner in Paris raised second-quarter sales by 15 percent after taking control of its Colombian and Dutch units and drawing French shoppers back to its discount stores.
Vodafone Group Plc is likely to fall. Thee world's biggest mobile-phone company may have to pay more than $4 billion in taxes if it loses a court case with the Indian government, the Financial Times reported.
Heineken NV will probably fall after the largest Dutch brewer was downgraded to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which cited the risk this year's acquisition of Scottish & Newcastle Plc assets may hurt earnings.
``Heineken offers half the medium-term growth rate of its brewing peers but is on a similar multiple and carries more forecast risk,'' JPMorgan analysts Mike Gibbs and Vanessa Lai Min wrote in a note dated today.
European Aeronautic, Defence & Space Co. might be active. The company doesn't rule out cutting the full-year earnings forecast when it releases six-month figures, Boersen-Zeitung reported, citing Chief Financial Officer Hans Peter Ring.
C&C Group Plc might slide. The Irish beverage maker whose shares plunged 70 percent in 2007 said sales continued to decline in the current fiscal year's first four months as Britons drank less Magners cider.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
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July 11 (Bloomberg) -- European stock-index futures rose, following gains in the U.S. and Asia, after a report suggested the U.S. government may take over Fannie Mae and Freddie Mac and higher oil and metals prices boosted commodity producers.
U.S.-traded securities of BP Plc, Europe's second-biggest oil company, and Total SA advanced after crude jumped more than $5 a barrel yesterday. BHP Billiton Ltd., the world's largest mining company, and Rio Tinto Group gained in Australia.
Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, added 23, or 0.7 percent, to 3,324 at 7:40 a.m. in London. The U.K.'s FTSE 100 Index may gain 30, according to CMC Markets.
U.S. officials are considering a plan to have the government take over one or both of Fannie Mae and Freddie Mac, the largest buyers of U.S. home loans, if they continue to deteriorate, The New York Times reported. The newspaper cited unidentified government officials briefed on the plan.
``News that Freddie Mac and Fannie Mae may be thrown a lifeboat will be very well-received by the markets,'' said David Buik, a London-based market analyst at BGC Partners. ``These companies have had investors asking some severe questions about their liquidity. Oil and mining stocks are also likely to rally.''
U.S. stocks rose yesterday, helping the Standard & Poor's 500 Index rebound from a two-year low, after Dow Chemical Co.'s agreed to buy Rohm & Haas Co. for $15.4 billion. Asian shares climbed today as commodity producers gained along with metals prices.
The cost of protecting Japanese and Australian bonds from default declined after the New York Times report.
BP, BHP
American depositary receipts of BP rose 1.3 percent from the close in London yesterday. ADRs of Total, Europe's third-largest oil company, ended 1.2 percent above the finish in Paris.
Oil for August delivery rose $5.60, or 4.1 percent, to $141.65 yesterday as Brazilian oil workers threatened a strike and on rising concern that supplies from the Middle East and Nigeria may be disrupted. It traded up 22 cents today.
Cadogan Petroleum Plc will probably gain. The oil and natural-gas producer operating in Ukraine said it found unexpected gas in its Borynya-3 well and reached its target depths in Pirkovskoe-1.
BHP jumped 3.4 percent in Australia, while Rio Tinto Group, the world's third-largest mining company, gained 2.7 percent.
Copper increased today in London while gold headed for a fourth weekly gain. Aluminum prices rallied as much as 6 percent to an all-time high of $3,380 a ton yesterday.
Nokia, Royal Bank
Nokia Oyj, the largest mobile phone maker, may gain. Nokia Siemens Networks won a contract valued at 550 million euros ($868 million) to expand the nationwide network belonging to China Mobile Communications Corp. Nokia Siemens, the world's second-biggest maker of wireless networks, is a joint venture between Nokia and Siemens AG.
Royal Bank of Scotland Group Plc might be active. The company, seeking to restore capital depleted by writedowns, is in talks to sell assets in Australia and New Zealand to National Australia Bank Ltd.
Mitchells & Butlers Plc may rise. UBS AG upgraded shares of the owner of O'Neill's pubs to ``buy'' from ``neutral.''
Zurich Financial Services AG might gain. Switzerland's biggest insurer pulled out of bidding for Royal Bank of Scotland's insurance unit and agreed to buy a 50 percent stake in Banco Sabadell SA's insurance units to become Spain's second- largest insurer.
Casino, Vodafone
Casino Guichard-Perrachon SA might advance. The biggest supermarket owner in Paris raised second-quarter sales by 15 percent after taking control of its Colombian and Dutch units and drawing French shoppers back to its discount stores.
Vodafone Group Plc is likely to fall. Thee world's biggest mobile-phone company may have to pay more than $4 billion in taxes if it loses a court case with the Indian government, the Financial Times reported.
Heineken NV will probably fall after the largest Dutch brewer was downgraded to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which cited the risk this year's acquisition of Scottish & Newcastle Plc assets may hurt earnings.
``Heineken offers half the medium-term growth rate of its brewing peers but is on a similar multiple and carries more forecast risk,'' JPMorgan analysts Mike Gibbs and Vanessa Lai Min wrote in a note dated today.
European Aeronautic, Defence & Space Co. might be active. The company doesn't rule out cutting the full-year earnings forecast when it releases six-month figures, Boersen-Zeitung reported, citing Chief Financial Officer Hans Peter Ring.
C&C Group Plc might slide. The Irish beverage maker whose shares plunged 70 percent in 2007 said sales continued to decline in the current fiscal year's first four months as Britons drank less Magners cider.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
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Forex Technical Analytics
Daily Forex Technicals | Written by FOREX Ltd | Jul 11 08 07:14 GMT |
CHF
The assumed test of the key supports has been confirmed with conditions for realization of buyers' positions. OsMA trend indicator following the results of previous trading day has not revealed the advantage of any party to make a choice of planning priorities for today. Hence because of chosen strategy based on presumptions about possible range movement of the rate as well as taking into account the ascending direction of indicator chart, we assume a possibility of another test of channel line '1' within the range 1.0310/30, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.0270/80, 1.0220/40 and/or further breakout variant below 1.0200 with the targets 1.0120/40, 1.0080/1.0100. An alternative for buyers will be above 1.0360 with the targets 1.0400/20, 1.0460/80, 1.0500/20.
GBP
The assumed test of the key supports has been confirmed but the progress of bearish activity revealed by OsMA indicator did not dispose to realization of the pre-planned buyers' positions. At present taking into account the general activity parity of both parties as well as the feature of incompletion of bearish development, we assume a possibility of short-term breakout of channel line '1' with pair return to resistance range 1.9790/1.9810, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.9720/40, 1.9660/80 and/or further breakout variant up to 1.9600/20, 1.9520/40, 1.9480/1.9500. An alternative for buyers will be above 1.9850 with the targets 1.9890/1.9910, 1.9960/80, 2.0000/20.
JPY
The pre-planned breakout variant for buyers has been realized but without attainment of minimal assumed target. OsMA trend indicator with preservation of pair movement within the version of ascending trading channel has not revealed the features of determinate advantage of any party. Hence because of chosen strategy with presumptions of possible range movement of the rate, we assume a possibility of another test of channel support '1' within the range 106.95/107.05, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 107.40/60, 107.90/108.10 and/or further breakout variant up to 108.50/70, 109.00/20. An alternative for sells will be below 106.70 with the targets 106.10/30, 105.70/90.
EUR
The pre-planned buyers' positions from the key supports have been realized with attainment of main assumed target. OsMA trend indicator having marked the preservation of parties' low activity gives grounds to further range movement of the rate of further existent tendency with a risk of sharp advantage change in favor of bearish party. Hence and because of descending direction of indicator chart we assume a possibility of pair return to supports 1.5740/60, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.5790/1.5800 and/or further breakout variant above 1.5820 with the targets 1.5860/80, 1.5900/20. An alternative for sells will be below 1.5680 with the targets 1.5620/40, 1.5580/1.5600, 1.5520/40, 1.5460/80.
FOREX Ltd
www.forexltd.co.uk
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CHF
The assumed test of the key supports has been confirmed with conditions for realization of buyers' positions. OsMA trend indicator following the results of previous trading day has not revealed the advantage of any party to make a choice of planning priorities for today. Hence because of chosen strategy based on presumptions about possible range movement of the rate as well as taking into account the ascending direction of indicator chart, we assume a possibility of another test of channel line '1' within the range 1.0310/30, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.0270/80, 1.0220/40 and/or further breakout variant below 1.0200 with the targets 1.0120/40, 1.0080/1.0100. An alternative for buyers will be above 1.0360 with the targets 1.0400/20, 1.0460/80, 1.0500/20.
GBP
The assumed test of the key supports has been confirmed but the progress of bearish activity revealed by OsMA indicator did not dispose to realization of the pre-planned buyers' positions. At present taking into account the general activity parity of both parties as well as the feature of incompletion of bearish development, we assume a possibility of short-term breakout of channel line '1' with pair return to resistance range 1.9790/1.9810, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.9720/40, 1.9660/80 and/or further breakout variant up to 1.9600/20, 1.9520/40, 1.9480/1.9500. An alternative for buyers will be above 1.9850 with the targets 1.9890/1.9910, 1.9960/80, 2.0000/20.
JPY
The pre-planned breakout variant for buyers has been realized but without attainment of minimal assumed target. OsMA trend indicator with preservation of pair movement within the version of ascending trading channel has not revealed the features of determinate advantage of any party. Hence because of chosen strategy with presumptions of possible range movement of the rate, we assume a possibility of another test of channel support '1' within the range 106.95/107.05, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 107.40/60, 107.90/108.10 and/or further breakout variant up to 108.50/70, 109.00/20. An alternative for sells will be below 106.70 with the targets 106.10/30, 105.70/90.
EUR
The pre-planned buyers' positions from the key supports have been realized with attainment of main assumed target. OsMA trend indicator having marked the preservation of parties' low activity gives grounds to further range movement of the rate of further existent tendency with a risk of sharp advantage change in favor of bearish party. Hence and because of descending direction of indicator chart we assume a possibility of pair return to supports 1.5740/60, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.5790/1.5800 and/or further breakout variant above 1.5820 with the targets 1.5860/80, 1.5900/20. An alternative for sells will be below 1.5680 with the targets 1.5620/40, 1.5580/1.5600, 1.5520/40, 1.5460/80.
FOREX Ltd
www.forexltd.co.uk
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Carbone Lorraine, Casino, Groupe SEB: French Stocks Preview
By Anne-Sylvaine Chassany
July 11 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.
France's CAC 40 Index tumbled 108.10, or 2.5 percent, to 4,231.56 in Paris for its biggest drop since March. The SBF 120 Index also lost 2.5 percent.
Carbone Lorraine SA (CRL FP): Axa Private Equity bought 10.5 percent of the world's second-biggest maker of industrial fuses and said it may raise its holding to as much as 22.5 percent. The shares lost 17 cents, or 0.5 percent, to 37.83 euros.
Casino Guichard-Perrachon SA (CO FP): The biggest supermarket owner in Paris reports second-quarter sales before the market opens in Paris. The company may say revenue rose 11 percent to 7.03 billion euros, according to the median of six analyst estimates, after it took control of operations in Colombia and the Netherlands. The shares fell 2.31 euros, or 3.3 percent, to 67.90 euros.
Esker SA (ESK FP): The supplier of fax software to Whirlpool Corp. and Adecco SA said second-quarter sales rose 10 percent to 6.97 million euros. The company also said it won a $1 million contract from an unidentified electronics group. The shares gained 1 cent, or 0.2 percent, to 4.21 euros.
Groupe SEB SA (SK FP): The world's largest maker of countertop kitchen appliances said first-half sales rose 15 percent, boosted by French demand for products such as the Actifry deep fryer and by market growth in central Europe. The shares rose 17 cents, or 0.5 percent, to 34.19 euros.
Jacquet Metals SA (JCQ FP): The metals producer said second-quarter revenue dropped to 62.8 million euros from 81.9 million euros last year and forecast profit margins will be hurt by a drop in European sales. The shares fell 3.80 euros, or 7.5 percent, to 47.21 euros.
Poncin Yachts (PONY FP): The sailboat maker that filed for creditor protection last month aims to reach an accord with banks over its 22 million euros of debt by the autumn, Chief Financial Officer David Etien said. The shares closed unchanged at 97 cents.
Radiall SA (RLL FP): The maker of electronics products and connectors said second-quarter sales increased 8.2 percent to 52.8 million euros. Full-year sales will be close to 2007 levels, the company said, citing an ``uncertain environment'' and currency movements. The shares gained 38 cents, or 0.5 percent, to 75.38 euros.
Stallergenes SA (GEN FP): Europe's second-largest maker of allergy drugs said sales advanced 18 percent to 38 million euros in the second quarter. The shares added 32 cents, or 0.6 percent, to 58.2 euros.
To contact the reporter on this story: Anne-Sylvaine Chassany in Paris at achassany@bloomberg.net.
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July 11 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.
France's CAC 40 Index tumbled 108.10, or 2.5 percent, to 4,231.56 in Paris for its biggest drop since March. The SBF 120 Index also lost 2.5 percent.
Carbone Lorraine SA (CRL FP): Axa Private Equity bought 10.5 percent of the world's second-biggest maker of industrial fuses and said it may raise its holding to as much as 22.5 percent. The shares lost 17 cents, or 0.5 percent, to 37.83 euros.
Casino Guichard-Perrachon SA (CO FP): The biggest supermarket owner in Paris reports second-quarter sales before the market opens in Paris. The company may say revenue rose 11 percent to 7.03 billion euros, according to the median of six analyst estimates, after it took control of operations in Colombia and the Netherlands. The shares fell 2.31 euros, or 3.3 percent, to 67.90 euros.
Esker SA (ESK FP): The supplier of fax software to Whirlpool Corp. and Adecco SA said second-quarter sales rose 10 percent to 6.97 million euros. The company also said it won a $1 million contract from an unidentified electronics group. The shares gained 1 cent, or 0.2 percent, to 4.21 euros.
Groupe SEB SA (SK FP): The world's largest maker of countertop kitchen appliances said first-half sales rose 15 percent, boosted by French demand for products such as the Actifry deep fryer and by market growth in central Europe. The shares rose 17 cents, or 0.5 percent, to 34.19 euros.
Jacquet Metals SA (JCQ FP): The metals producer said second-quarter revenue dropped to 62.8 million euros from 81.9 million euros last year and forecast profit margins will be hurt by a drop in European sales. The shares fell 3.80 euros, or 7.5 percent, to 47.21 euros.
Poncin Yachts (PONY FP): The sailboat maker that filed for creditor protection last month aims to reach an accord with banks over its 22 million euros of debt by the autumn, Chief Financial Officer David Etien said. The shares closed unchanged at 97 cents.
Radiall SA (RLL FP): The maker of electronics products and connectors said second-quarter sales increased 8.2 percent to 52.8 million euros. Full-year sales will be close to 2007 levels, the company said, citing an ``uncertain environment'' and currency movements. The shares gained 38 cents, or 0.5 percent, to 75.38 euros.
Stallergenes SA (GEN FP): Europe's second-largest maker of allergy drugs said sales advanced 18 percent to 38 million euros in the second quarter. The shares added 32 cents, or 0.6 percent, to 58.2 euros.
To contact the reporter on this story: Anne-Sylvaine Chassany in Paris at achassany@bloomberg.net.
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EURUSD, AUDUSD, EURCHF Daily Outlook
Daily Forex Technicals | Written by E-Forex | Jul 11 08 07:07 GMT |
EURUSD
The upside is on focus once again due to recent rally to 1.5800. Strong resistance is formed into the 1.5795/00 region by an upward trendline and also by the 62% retracement of the 1.5909-1.5611 move. A potential break will confirm the uptrend. On the downside, interim support starts at 1.5760 formed by a previous resistance backed by an upward trendline support around 1.5715 then 1.5680 lower. While maintaining the bid tone, the Euro may advance higher past the 1.5795 resistance and aim towards next barrier at 1.5890/00. Current quote is 1.5771 @06:30 GMT
Support levels: 1.5760, 1.5715 and 1.5680
Resistance levels: 1.5795/00, 1.5835 and 1.5890.
Market sentiment: long-term : bullish, mid-term : bullish, short-term : slightly bullish
AUDUSD
Resistance into the .9625-.9650 zone remains intact and the Aussie is currently losing some ground against the buck, testing bids around the .9600 mark. Daily sentiment is slightly bullish but a break past .9625-.9665 resistance region is needed to confirm the uptrend. Support starts at .9550 backed by .9495. Current quote is .9600 @06:30 GMT
Support levels: .9550, .9535 and .9495
Resistance levels: .9620, .9640 and .9650/66
Market sentiment: long-term : bullish, mid-term : bullish, short-term : slightly bullish
EURCHF
Interim resistance is seen at 1.6245 and a potential break may encourage further gains towards next resistance levels at 1.6270 and 1.6295/00. Support is seen at 1.6213 backed by 1.6190 and 1.6170. Current quote is 1.6235 @06:30 GMT
Support levels: 1.6213, 1.6190 and 1.6170
Resistance levels: 1.6245, 1.6270 and 1.6295/00.
Market sentiment: long-term : bullish, mid-term : bullish, short-term : bullish
E-Forex
Read more...
EURUSD
The upside is on focus once again due to recent rally to 1.5800. Strong resistance is formed into the 1.5795/00 region by an upward trendline and also by the 62% retracement of the 1.5909-1.5611 move. A potential break will confirm the uptrend. On the downside, interim support starts at 1.5760 formed by a previous resistance backed by an upward trendline support around 1.5715 then 1.5680 lower. While maintaining the bid tone, the Euro may advance higher past the 1.5795 resistance and aim towards next barrier at 1.5890/00. Current quote is 1.5771 @06:30 GMT
Support levels: 1.5760, 1.5715 and 1.5680
Resistance levels: 1.5795/00, 1.5835 and 1.5890.
Market sentiment: long-term : bullish, mid-term : bullish, short-term : slightly bullish
AUDUSD
Resistance into the .9625-.9650 zone remains intact and the Aussie is currently losing some ground against the buck, testing bids around the .9600 mark. Daily sentiment is slightly bullish but a break past .9625-.9665 resistance region is needed to confirm the uptrend. Support starts at .9550 backed by .9495. Current quote is .9600 @06:30 GMT
Support levels: .9550, .9535 and .9495
Resistance levels: .9620, .9640 and .9650/66
Market sentiment: long-term : bullish, mid-term : bullish, short-term : slightly bullish
EURCHF
Interim resistance is seen at 1.6245 and a potential break may encourage further gains towards next resistance levels at 1.6270 and 1.6295/00. Support is seen at 1.6213 backed by 1.6190 and 1.6170. Current quote is 1.6235 @06:30 GMT
Support levels: 1.6213, 1.6190 and 1.6170
Resistance levels: 1.6245, 1.6270 and 1.6295/00.
Market sentiment: long-term : bullish, mid-term : bullish, short-term : bullish
E-Forex
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Asian Stocks Advance, Led by BHP on Higher Oil; Banks Rebound
By Chua Kong Ho and Shani Raja
July 11 (Bloomberg) -- Asian stocks rose, snapping a four- week loss, as commodity producers climbed along with metals prices and the New York Times reported the U.S. government may act to prevent defaults by Fannie Mae and Freddie Mac.
BHP Billiton Ltd. and Mitsubishi Corp. climbed after oil jumped more than $5 a barrel yesterday and zinc advanced the most since February. Mizuho Financial Group Inc. led banks higher after the New York Times said the government may take over the two largest buyers of U.S. home loans and guarantee their debt, reducing the risk of further credit-market losses.
``People are comforted to see that some action is being taken,'' said Angus Gluskie, who helps oversee the equivalent of $500 million at White Funds Management in Sydney. ``It eliminates one of the risks that they're concerned about: the risk that we'll get a breakdown of a big player in the marketplace.''
The MSCI Asia-Pacific Index rose 0.5 percent to 132.94 at 2:45 p.m. Tokyo time, reversing a drop of 0.7 percent.
Japan's Nikkei 225 Stock Average gained 0.1 percent to 13,081.50. Most Asian benchmark indexes rallied after the New York Times report.
The MSCI Asian gauge slumped 12 percent in the past four weeks as oil climbed to a record, eroding earnings and deterring consumer spending, and as concerns over subprime losses rekindled. The world's largest banks and securities firms have posted writedowns and credit losses of more than $400 billion as the U.S. housing market collapsed, sparking turmoil in financial markets.
U.S. stocks rose yesterday, helping the Standard & Poor's 500 index rebound from a two-year low. Futures for the index declined 0.1 percent today.
Commodities Rally
BHP rose 3.3 percent to A$40.07 in Sydney, while rival Rio Tinto Group climbed 2.7 percent. Woodside Petroleum Ltd., Australia's second-biggest oil and gas producer, gained 4 percent to A$60.20, the most since May 29.
Newcrest Mining Ltd., the largest Australian gold mining company, jumped 4.1 percent to A$31.05, as the price of the precious metal climbed in Shanghai and Tokyo. Jiangxi Copper Co., China's second-biggest producer of the metal, advanced 1.4 percent to HK$15.60 in Hong Kong.
Mitsubishi Corp., which gets half of its profit from commodities, advanced 2.2 percent to 3,250 yen. Mitsui & Co., for which energy trading is the second-biggest contributor to profit, rose 1.2 percent to 2,120 yen.
Oil climbed $5.60 a barrel to $141.65 in New York yesterday, the biggest one-day increase since June 6, and was at $141.92 at 2:45 p.m. in Tokyo. A measure of six metals traded on the London Metal Exchange advanced 1.7 percent. Zinc rose 6.7 percent, copper 0.2 percent and nickel 2.1 percent.
Alumina Jumps
Alumina Ltd., a partner in the world's largest producer of the material used to make aluminum, surged 7.6 percent to A$4.55, the most in five months and the third-biggest percentage gain on MSCI's Asian gauge. Chinese smelters agreed to cut output of the metal by as much as 10 percent, sending prices to a record.
Aluminum Corp. of China Ltd., the nation's biggest producer of the metal, gained 7.4 percent to HK$9.46. Midwest Corp., a Perth-based iron ore mining company, added 0.9 percent to A$6.46, after Sinosteel Corp. won control in the biggest overseas mining takeover by a Chinese company.
Kenmec Mechanical Engineering Co. climbed 7 percent to NT$42.10, the daily limit, in Taipei trading after its solar-cell unit agreed to a 10-year supply of raw materials and said it may sell shares to MEMC Electronic Materials Inc.
`Toxic Waste'
``Equity owners are asking, `What do I need to hold?' and the answer is, `More hard commodities, less financials,''' said Hans Kunnen, head of investment market research in Sydney at Colonial First State Global Management, which manages about $128 billion. ``The banks are suffering from America's toxic waste.''
Mizuho Financial climbed 2.7 percent to 540,000 yen, reversing a 1.7 percent loss. Mitsubishi UFJ Financial Group Inc., the largest Japanese bank by value, gained 1.3 percent to 1,001 yen, rebounding from a 3.3 percent decline. National Australia Bank Ltd., which today said it may have to increase provisions for credit-related investments, pared its decline to 0.7 percent.
Financial stocks as a group surged after the New York Times report, which cited unidentified U.S. government officials briefed on the plan to place Fannie Mae and Freddie Mac under conservatorship.
``It goes to show how fragile the financial world is at the moment,'' said Stewart Paterson, joint managing director at Singapore-based hedge fund Riley Paterson Investment Management. ``Nationalization of the financial system is not a good thing.''
To contact the reporter for this story: Chua Kong Ho at in Shanghai or kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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Japan Stocks Decline, Cap 5th Weekly Drop, on Surge in Crude
By Makiko Kitamura and Masaki Kondo
July 11 (Bloomberg) -- Japan's stocks fell, capping a fifth- straight weekly decline, after the steepest jump in crude prices in a month raised concern earnings at automakers will fall.
Toyota Motor Corp., Japan's largest automaker, and Nissan Motor Co. fell to the lowest in almost three months. Inpex Holdings Inc., Japan's biggest oil explorer, gained for the first time in four days, while Mizuho Financial Group Inc. rallied on a newspaper report regulators may take over the biggest U.S. mortgage lenders.
The Nikkei 225 Stock Average sank 27.52, or 0.2 percent, to close at 13,039.69, capping a 1.5 percent drop this week. The broader Topix index dropped 4.85, or 0.4 percent, to 1,285.91, falling 0.9 percent in the past five days.
``Auto sales are plummeting in the U.S. and in Japan because of rising oil prices,'' said Yoku Ihara, head of equity research at Tokyo-based Retela Crea Securities Co. ``Trains are packed, and bicycle sales seem to be rising.''
Crude oil for August delivery rose 4.1 percent yesterday, the most since June 6, as Brazilian oil workers threatened a strike and on rising concern supplies from the Middle East and Nigeria may be disrupted.
To contact the reporter for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Last Updated: July 11, 2008 02:18 EDT
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July 11 (Bloomberg) -- Japan's stocks fell, capping a fifth- straight weekly decline, after the steepest jump in crude prices in a month raised concern earnings at automakers will fall.
Toyota Motor Corp., Japan's largest automaker, and Nissan Motor Co. fell to the lowest in almost three months. Inpex Holdings Inc., Japan's biggest oil explorer, gained for the first time in four days, while Mizuho Financial Group Inc. rallied on a newspaper report regulators may take over the biggest U.S. mortgage lenders.
The Nikkei 225 Stock Average sank 27.52, or 0.2 percent, to close at 13,039.69, capping a 1.5 percent drop this week. The broader Topix index dropped 4.85, or 0.4 percent, to 1,285.91, falling 0.9 percent in the past five days.
``Auto sales are plummeting in the U.S. and in Japan because of rising oil prices,'' said Yoku Ihara, head of equity research at Tokyo-based Retela Crea Securities Co. ``Trains are packed, and bicycle sales seem to be rising.''
Crude oil for August delivery rose 4.1 percent yesterday, the most since June 6, as Brazilian oil workers threatened a strike and on rising concern supplies from the Middle East and Nigeria may be disrupted.
To contact the reporter for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
Last Updated: July 11, 2008 02:18 EDT
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China's Stocks Drop for Second Day; Air China, Angang Decline
By Zhang Shidong
July 11 (Bloomberg) -- China's stocks fell for a second day after oil prices jumped and Angang Steel Co. said an accounting rule change may cut earnings, renewing concern that corporate profit growth may slow.
Air China Ltd. led carriers lower on concern jet fuel costs will rise. Aluminum Corp. of China Ltd., known as Chalco, climbed on speculation prices of the metal will rise after the country's producers agreed to reduce output.
``Rising fuel costs and some bad corporate news have put pressure on the market,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. ``The restricted aluminum supply will be an incentive for the industry.''
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 23.72, or 0.8 percent, to 2,950.01 at 1:14 p.m. local time. Two stocks dropped for each one that advanced.
The measure has gained 7.6 percent the past five days, on course for the first winning week in eight, as forecasts of higher profits at companies including China Merchants Bank Co. and Poly Real Estate Co. eased concern that government measures to curb inflation will hurt earnings.
The central bank this year ordered banks to set aside a record amount in reserve after raising interest rates six times last year. The CSI 300 is down 45 percent this year, the world's second-worst performing major benchmark index tracked by Bloomberg.
Air China, Angang
Air China, the world's biggest airline by market value, fell 2.9 percent to 9.67 yuan. China Southern Airlines Co., the nation's largest carrier by fleet size, dropped 1.7 percent to 7.74 yuan. Jet fuel accounted for about 40 percent of Chinese airlines' costs in 2007, according to their annual reports.
Crude oil yesterday soared 4.1 percent to settle at $141.65 a barrel in New York, the biggest one-day increase since June 6. It was little changed at 141.73 a barrel in after-hours trading.
Angang Steel, China's second-biggest steelmaker by value, retreated 3.2 percent to 13.60 yuan, the biggest drop since July 1. Angang said its 2008 profit will be cut by 126 million yuan ($18 million) because of changes in the rules for asset depreciation.
Chalco, the nation's biggest aluminum maker, gained 3.6 percent to 14.52 yuan. Yunnan Aluminium Co., China's fourth- largest producer, added 3 percent to 9.28 yuan.
Chalco and 19 of its peers signed the accord yesterday to curb supply by 5 percent to 10 percent, the China Nonferrous Metals Industry Association said in a statement. The agreement will cut output by a maximum 400,000 metric tons in the second half, the group said. Aluminum gained as much as 6 percent to $3,380 a ton on the London Metal Exchange.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, retreated 0.8 percent to 2,852.40. The Shenzhen Composite Index lost 1.3 percent to 858.93.
The following stocks rose or fell. Stock symbols are in brackets after company names.
Shanxi Xinghuacun Fen Wine Factory Co. (600809 CH), a wine maker, fell 0.56 yuan, or 4 percent, to 13.40, a second day of declines. The company said first-half profit probably fell more than 50 percent because of lower sales. The company is due to report earnings on Aug. 20.
Western Mining Co. (601168 CH), China's second-largest maker of lead concentrate, slipped 0.41 yuan, or 2.6 percent, to 15.60. The company said 1.2 billion shares will become tradable July 15 as a lock-up period expires for investors who bought stock before the company's initial share sale.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
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July 11 (Bloomberg) -- China's stocks fell for a second day after oil prices jumped and Angang Steel Co. said an accounting rule change may cut earnings, renewing concern that corporate profit growth may slow.
Air China Ltd. led carriers lower on concern jet fuel costs will rise. Aluminum Corp. of China Ltd., known as Chalco, climbed on speculation prices of the metal will rise after the country's producers agreed to reduce output.
``Rising fuel costs and some bad corporate news have put pressure on the market,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. ``The restricted aluminum supply will be an incentive for the industry.''
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 23.72, or 0.8 percent, to 2,950.01 at 1:14 p.m. local time. Two stocks dropped for each one that advanced.
The measure has gained 7.6 percent the past five days, on course for the first winning week in eight, as forecasts of higher profits at companies including China Merchants Bank Co. and Poly Real Estate Co. eased concern that government measures to curb inflation will hurt earnings.
The central bank this year ordered banks to set aside a record amount in reserve after raising interest rates six times last year. The CSI 300 is down 45 percent this year, the world's second-worst performing major benchmark index tracked by Bloomberg.
Air China, Angang
Air China, the world's biggest airline by market value, fell 2.9 percent to 9.67 yuan. China Southern Airlines Co., the nation's largest carrier by fleet size, dropped 1.7 percent to 7.74 yuan. Jet fuel accounted for about 40 percent of Chinese airlines' costs in 2007, according to their annual reports.
Crude oil yesterday soared 4.1 percent to settle at $141.65 a barrel in New York, the biggest one-day increase since June 6. It was little changed at 141.73 a barrel in after-hours trading.
Angang Steel, China's second-biggest steelmaker by value, retreated 3.2 percent to 13.60 yuan, the biggest drop since July 1. Angang said its 2008 profit will be cut by 126 million yuan ($18 million) because of changes in the rules for asset depreciation.
Chalco, the nation's biggest aluminum maker, gained 3.6 percent to 14.52 yuan. Yunnan Aluminium Co., China's fourth- largest producer, added 3 percent to 9.28 yuan.
Chalco and 19 of its peers signed the accord yesterday to curb supply by 5 percent to 10 percent, the China Nonferrous Metals Industry Association said in a statement. The agreement will cut output by a maximum 400,000 metric tons in the second half, the group said. Aluminum gained as much as 6 percent to $3,380 a ton on the London Metal Exchange.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, retreated 0.8 percent to 2,852.40. The Shenzhen Composite Index lost 1.3 percent to 858.93.
The following stocks rose or fell. Stock symbols are in brackets after company names.
Shanxi Xinghuacun Fen Wine Factory Co. (600809 CH), a wine maker, fell 0.56 yuan, or 4 percent, to 13.40, a second day of declines. The company said first-half profit probably fell more than 50 percent because of lower sales. The company is due to report earnings on Aug. 20.
Western Mining Co. (601168 CH), China's second-largest maker of lead concentrate, slipped 0.41 yuan, or 2.6 percent, to 15.60. The company said 1.2 billion shares will become tradable July 15 as a lock-up period expires for investors who bought stock before the company's initial share sale.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
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Australia Stocks: Alumina, Anvil, BHP, CSR, Equinox, Queensland
By Shani Raja
July 11 (Bloomberg) -- The S&P/ASX 200 Index rose 10, or 0.2 percent, to 4,947.40 at 1:45 p.m. in Sydney. The broader All Ordinaries Index gained 12.80, or 0.3 percent, to 5,033.30, while the futures index expiring in September lost 2 points to 4,944.
Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced A$1.13 cents, or 2.9 percent, to A$39.93, the most since June 17. Rio Tinto Group (RIO AU) gained A$2.52, or 2.1 percent, to A$124.12, the most in a week.
A measure of six metals traded on the London Metal Exchange advanced 1.7 percent. Zinc rose 6.7 percent, copper 0.2 percent and nickel 2.1 percent.
Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, rose A$2.06, or 3.6 percent, to A$59.96, the most since May 29. Santos Ltd. (STO AU) jumped 45 cents, or 2.4 percent, to A$18.91, the most in two weeks.
Crude oil for August delivery rose $5.60, or 4.1 percent, to settle at $141.65 a barrel at 2:53 p.m. on the New York Mercantile Exchange, the biggest one-day increase since June 6.
Alumina Ltd. (AWC AU), partner in the world's biggest producer of the material used to make aluminum, rallied 33 cents, or 7.8 percent, to A$4.56, the most since Feb. 15 and the index's third-biggest gainer. China's biggest aluminum producers, the largest in the world, agreed yesterday to cut output by as much as 10 percent to ease a power shortage, sending metal prices to their highest ever.
Anvil Mining Ltd. (AVM AU), an Australian producer of copper in the Democratic Republic of Congo, advanced A$2.02, or a record 22 percent, to A$11.02, after saying it raised C$296.7 million ($293.7 million) in a private placement of shares to fund development of its African projects.
CSR Ltd. (CSR AU), Australia's third-largest maker of building products, rose 14 cents, or 7.1 percent, to A$2.11, the most since July 2004. The company's rating was raised to ``overweight'' from ``neutral'' by JPMorgan Chase& Co., and to ``outperform'' from ``neutral'' by Credit Suisse Group AG. CSR was the index's biggest gainer.
Equinox Minerals Ltd. (EQN AU), developing Africa's largest copper mine, added 21 cents, or 5.1 percent, to A$4.31, the most in almost a month. The company may start production at the Lumwana project in Zambia within five weeks, after a fire gutted a processing plant's substation and transformer two days ago.
National Australia Bank Ltd. (NAB AU), the countries biggest by assets, declined 57 cents, or 2.1 percent, to A$27.04, reversing two days of gains. The lender said it's in talks to buy ABN Amro Holding NV's investment banking businesses in Australia and New Zealand from Royal Bank of Scotland Group Plc, and separately that it may have to increase provisions for $1.1 billion of investments in collateralized debt obligations as the global economy weakens.
Queensland Gas Co. (QGC AU), BG Group Plc's partner in a proposed Australian liquefied natural gas plant, advanced 27 cents, or 6 percent, to A$4.79, the most since June 24 and the eighth-biggest gainer. Queensland said it will increase the cash component of its offer for Roma Petroleum NL to 11 cents from 10 cents.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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July 11 (Bloomberg) -- The S&P/ASX 200 Index rose 10, or 0.2 percent, to 4,947.40 at 1:45 p.m. in Sydney. The broader All Ordinaries Index gained 12.80, or 0.3 percent, to 5,033.30, while the futures index expiring in September lost 2 points to 4,944.
Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced A$1.13 cents, or 2.9 percent, to A$39.93, the most since June 17. Rio Tinto Group (RIO AU) gained A$2.52, or 2.1 percent, to A$124.12, the most in a week.
A measure of six metals traded on the London Metal Exchange advanced 1.7 percent. Zinc rose 6.7 percent, copper 0.2 percent and nickel 2.1 percent.
Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, rose A$2.06, or 3.6 percent, to A$59.96, the most since May 29. Santos Ltd. (STO AU) jumped 45 cents, or 2.4 percent, to A$18.91, the most in two weeks.
Crude oil for August delivery rose $5.60, or 4.1 percent, to settle at $141.65 a barrel at 2:53 p.m. on the New York Mercantile Exchange, the biggest one-day increase since June 6.
Alumina Ltd. (AWC AU), partner in the world's biggest producer of the material used to make aluminum, rallied 33 cents, or 7.8 percent, to A$4.56, the most since Feb. 15 and the index's third-biggest gainer. China's biggest aluminum producers, the largest in the world, agreed yesterday to cut output by as much as 10 percent to ease a power shortage, sending metal prices to their highest ever.
Anvil Mining Ltd. (AVM AU), an Australian producer of copper in the Democratic Republic of Congo, advanced A$2.02, or a record 22 percent, to A$11.02, after saying it raised C$296.7 million ($293.7 million) in a private placement of shares to fund development of its African projects.
CSR Ltd. (CSR AU), Australia's third-largest maker of building products, rose 14 cents, or 7.1 percent, to A$2.11, the most since July 2004. The company's rating was raised to ``overweight'' from ``neutral'' by JPMorgan Chase& Co., and to ``outperform'' from ``neutral'' by Credit Suisse Group AG. CSR was the index's biggest gainer.
Equinox Minerals Ltd. (EQN AU), developing Africa's largest copper mine, added 21 cents, or 5.1 percent, to A$4.31, the most in almost a month. The company may start production at the Lumwana project in Zambia within five weeks, after a fire gutted a processing plant's substation and transformer two days ago.
National Australia Bank Ltd. (NAB AU), the countries biggest by assets, declined 57 cents, or 2.1 percent, to A$27.04, reversing two days of gains. The lender said it's in talks to buy ABN Amro Holding NV's investment banking businesses in Australia and New Zealand from Royal Bank of Scotland Group Plc, and separately that it may have to increase provisions for $1.1 billion of investments in collateralized debt obligations as the global economy weakens.
Queensland Gas Co. (QGC AU), BG Group Plc's partner in a proposed Australian liquefied natural gas plant, advanced 27 cents, or 6 percent, to A$4.79, the most since June 24 and the eighth-biggest gainer. Queensland said it will increase the cash component of its offer for Roma Petroleum NL to 11 cents from 10 cents.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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U.S. stocks gain on Fed talk, M&A news
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) - U.S. stocks on Thursday tried and mostly succeeded in bouncing back from the prior day's credit crisis-fueled losses, with concerns about the viability of government-sponsored mortgage buyers Fannie Mae and Freddie Mac offset by a large takeout bid in the chemical sector and a 10% rise in shares of Alcoa Inc.
"Freddie Mac is already insolvent and Fannie Mae is running on fumes," said Len Blum, managing director of Westwood Capital.
But in testimony to Congress, Treasury Secretary Henry Paulson assured that the two entities remain well capitalized. See full story.
Up and down throughout the session, the major indexes found firmer footing late in the day, with the Dow Jones Industrial Average churning higher in the final hour of trade, rising 81.58 points, or 0.7%, to 11,229.02.
Of the blue-chip index's 30 components, 19 closed with gains, led by aluminum producer Alcoa Inc. , which ended with a 9.7% gain as aluminum prices hit their highest level on record after China said it would cut its production of the metal by up to 10% to save energy. See full story.
The S&P 500 climbed 8.71 points, or 0.7%, to 1,253.39, with materials leading sector gains, up 3.5%, supported in part by Dow Chemical Co.'s agreement to buy Rohm & Haas Co. for $15 billion.
Shares of Dow lost 4.2%, while Rohm & Haas rallied 64.2%. Read full story.
The energy sector was the second best performing sector on the S&P, up 2.9%, as crude oil prices jumped over $5 to end above $141 a barrel, as geopolitical tensions in oil-rich countries such as Nigeria and Iran intensified. See Futures Movers.
Consumer discretionary fronted declines among the S&P's 10 industry groups, down 2.3%. J.C. Penney Co. Inc. led the declines among retailers, down 10.1%.
Wal-Mart Stores Inc. tilted lower despite exceeding expectations in offering sales results for June. See full story.
Chart of FRE
Weighing on financials, shares of large mortgage buyers Fannie and Freddie fell for a third time in four days, raising worries about the viability of the publicly traded government-sponsored mortgage buyers.
"It's getting to the point where the U.S. government is going to have to explicitly back these two companies or let them fend for themselves," said Peter Boockvar, equity strategist at Miller Tabak.
"I don't think financials can recover until we know what real estate is worth. Right now, if you buy a financial institution stock, you're buying a black box."
Shares of Fannie fell 13.8% while shares of Freddie declined 22%. Read full story.
Investment banks were also hit, with Lehman Brothers Holdings Inc. advanced 22.96 points, or 1%, to 2,257.85.
Volume on the New York Stock Exchange came to 1.5 billion, with decliners just ahead of advancers. On the Nasdaq, 973.7 million shares traded, and advancers outran declining issues 5 to 4.
Hill talk
In testimony before the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke and Paulson called for regulatory revamping and legislation to strengthen oversight of investment banks. See full story.
Earlier Thursday, stock futures were little changed after the government said weekly jobless claims fell to the lowest level since April. Read Economic report.
While "Fannie and Freddie, Paulson and Bernanke [were] the big story all day long," jobless claims are reflective of important, underlying themes "that consumers are hurting and companies aren't hiring," said Terrin Griffiths, economist and industry analyst at the California Credit Union League.
With continuing claims at their highest level since December 2003, the 5.5% unemployment rate is unlikely to recede in July, said Griffiths. "If anything it will start edging up," she added.
U.S. foreclosures slipped 3% from May levels but are up 53% from the previous year, RealtyTrac reported. Listen to report on foreclosures.
U.S. stocks stumbled on Wednesday, with financials pacing the retreat as worries grow about the financial health of Fannie and Freddie. And, worries about tech bellwether Cisco Systems ahead of next week's earnings also weighed. End of Story
Kate Gibson is a reporter for MarketWatch, based in New York.
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NEW YORK (MarketWatch) - U.S. stocks on Thursday tried and mostly succeeded in bouncing back from the prior day's credit crisis-fueled losses, with concerns about the viability of government-sponsored mortgage buyers Fannie Mae and Freddie Mac offset by a large takeout bid in the chemical sector and a 10% rise in shares of Alcoa Inc.
"Freddie Mac is already insolvent and Fannie Mae is running on fumes," said Len Blum, managing director of Westwood Capital.
But in testimony to Congress, Treasury Secretary Henry Paulson assured that the two entities remain well capitalized. See full story.
Up and down throughout the session, the major indexes found firmer footing late in the day, with the Dow Jones Industrial Average churning higher in the final hour of trade, rising 81.58 points, or 0.7%, to 11,229.02.
Of the blue-chip index's 30 components, 19 closed with gains, led by aluminum producer Alcoa Inc. , which ended with a 9.7% gain as aluminum prices hit their highest level on record after China said it would cut its production of the metal by up to 10% to save energy. See full story.
The S&P 500 climbed 8.71 points, or 0.7%, to 1,253.39, with materials leading sector gains, up 3.5%, supported in part by Dow Chemical Co.'s agreement to buy Rohm & Haas Co. for $15 billion.
Shares of Dow lost 4.2%, while Rohm & Haas rallied 64.2%. Read full story.
The energy sector was the second best performing sector on the S&P, up 2.9%, as crude oil prices jumped over $5 to end above $141 a barrel, as geopolitical tensions in oil-rich countries such as Nigeria and Iran intensified. See Futures Movers.
Consumer discretionary fronted declines among the S&P's 10 industry groups, down 2.3%. J.C. Penney Co. Inc. led the declines among retailers, down 10.1%.
Wal-Mart Stores Inc. tilted lower despite exceeding expectations in offering sales results for June. See full story.
Chart of FRE
Weighing on financials, shares of large mortgage buyers Fannie and Freddie fell for a third time in four days, raising worries about the viability of the publicly traded government-sponsored mortgage buyers.
"It's getting to the point where the U.S. government is going to have to explicitly back these two companies or let them fend for themselves," said Peter Boockvar, equity strategist at Miller Tabak.
"I don't think financials can recover until we know what real estate is worth. Right now, if you buy a financial institution stock, you're buying a black box."
Shares of Fannie fell 13.8% while shares of Freddie declined 22%. Read full story.
Investment banks were also hit, with Lehman Brothers Holdings Inc. advanced 22.96 points, or 1%, to 2,257.85.
Volume on the New York Stock Exchange came to 1.5 billion, with decliners just ahead of advancers. On the Nasdaq, 973.7 million shares traded, and advancers outran declining issues 5 to 4.
Hill talk
In testimony before the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke and Paulson called for regulatory revamping and legislation to strengthen oversight of investment banks. See full story.
Earlier Thursday, stock futures were little changed after the government said weekly jobless claims fell to the lowest level since April. Read Economic report.
While "Fannie and Freddie, Paulson and Bernanke [were] the big story all day long," jobless claims are reflective of important, underlying themes "that consumers are hurting and companies aren't hiring," said Terrin Griffiths, economist and industry analyst at the California Credit Union League.
With continuing claims at their highest level since December 2003, the 5.5% unemployment rate is unlikely to recede in July, said Griffiths. "If anything it will start edging up," she added.
U.S. foreclosures slipped 3% from May levels but are up 53% from the previous year, RealtyTrac reported. Listen to report on foreclosures.
U.S. stocks stumbled on Wednesday, with financials pacing the retreat as worries grow about the financial health of Fannie and Freddie. And, worries about tech bellwether Cisco Systems ahead of next week's earnings also weighed. End of Story
Kate Gibson is a reporter for MarketWatch, based in New York.
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New Zealand House Sales Fall 42% From Year Ago, Prices Decline
By Tracy Withers
July 11 (Bloomberg) -- Sales of New Zealand houses slumped for a fourth straight month in June as record-high interest rates curtailed demand for property.
The number of homes sold dropped 42.4 percent to 4,305 from 7,474 a year earlier, according to a report from the Real Estate Institute of New Zealand Inc. e-mailed to Bloomberg News today. Sales were at the lowest level since December 1991.
A cooling real estate market supports Reserve Bank Governor Alan Bollard's view that house prices will fall for the next three years as economic growth slows. Bollard said last month he may cut the benchmark interest rates from a record-high 8.25 percent later this year as inflation pressures ease.
``There isn't a lot of confidence in the residential property market,'' Murray Cleland, the institute's national president, said in a statement. Still, ``the market is finding its own level and there is certainly no indication of any significant slump in values.''
The median house price fell 2.2 percent from a year earlier to NZ$340,000 ($258,000). Prices declined NZ$5,000 from May.
Investors are deferring decisions on buying or selling until a clearer trend emerges, Cleland said. Lower prices are being accepted to complete faster sales.
The median time it took to sell a house increased to 53 days, the highest since January 2002, from 49 days in May.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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July 11 (Bloomberg) -- Sales of New Zealand houses slumped for a fourth straight month in June as record-high interest rates curtailed demand for property.
The number of homes sold dropped 42.4 percent to 4,305 from 7,474 a year earlier, according to a report from the Real Estate Institute of New Zealand Inc. e-mailed to Bloomberg News today. Sales were at the lowest level since December 1991.
A cooling real estate market supports Reserve Bank Governor Alan Bollard's view that house prices will fall for the next three years as economic growth slows. Bollard said last month he may cut the benchmark interest rates from a record-high 8.25 percent later this year as inflation pressures ease.
``There isn't a lot of confidence in the residential property market,'' Murray Cleland, the institute's national president, said in a statement. Still, ``the market is finding its own level and there is certainly no indication of any significant slump in values.''
The median house price fell 2.2 percent from a year earlier to NZ$340,000 ($258,000). Prices declined NZ$5,000 from May.
Investors are deferring decisions on buying or selling until a clearer trend emerges, Cleland said. Lower prices are being accepted to complete faster sales.
The median time it took to sell a house increased to 53 days, the highest since January 2002, from 49 days in May.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Japan Stocks Fall After Oil Jumps Most in a Month; Inpex Rises
By Makiko Kitamura and Masaki Kondo
July 11 (Bloomberg) -- Japanese stocks fell, headed for a fifth week of decline, on concern rising costs will crimp demand and earnings after crude prices rose the most in a month. Oil explorers gained for the first time in four days.
Toyota Motor Corp., Japan's largest carmaker, retreated 1.2 percent. Canon Inc., the world's biggest maker of digital cameras, declined 2.2 percent. Inpex Holdings Inc., Japan's biggest oil explorer, jumped 4.2 percent.
``Concern about corporate earnings and a slowing economy will weigh down stock prices,'' Soichiro Monji, chief strategist at Daiwa SB Investments Ltd., said in an interview with Bloomberg Television. ``In this situation, investors are reluctant to buy companies reliant on overseas demand.''
The Nikkei 225 Stock Average fell 29.41, or 0.2 percent, 13,037.80 as of 9:21 a.m. in Tokyo, set for a 1.5 percent drop this week, the fifth-straight decline. The broader Topix index sank 5.16, or 0.4 percent, to 1,285.60, headed for a 0.9 percent drop this week. About four stocks fell for every three that rose.
Crude oil for August delivery rose $5.60, or 4.1 percent, to settle at $141.65 a barrel at 2:53 p.m. on the New York Mercantile Exchange. Gold advanced to $942 an ounce, and copper gained to $3.755 a pound.
To contact the reporter for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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July 11 (Bloomberg) -- Japanese stocks fell, headed for a fifth week of decline, on concern rising costs will crimp demand and earnings after crude prices rose the most in a month. Oil explorers gained for the first time in four days.
Toyota Motor Corp., Japan's largest carmaker, retreated 1.2 percent. Canon Inc., the world's biggest maker of digital cameras, declined 2.2 percent. Inpex Holdings Inc., Japan's biggest oil explorer, jumped 4.2 percent.
``Concern about corporate earnings and a slowing economy will weigh down stock prices,'' Soichiro Monji, chief strategist at Daiwa SB Investments Ltd., said in an interview with Bloomberg Television. ``In this situation, investors are reluctant to buy companies reliant on overseas demand.''
The Nikkei 225 Stock Average fell 29.41, or 0.2 percent, 13,037.80 as of 9:21 a.m. in Tokyo, set for a 1.5 percent drop this week, the fifth-straight decline. The broader Topix index sank 5.16, or 0.4 percent, to 1,285.60, headed for a 0.9 percent drop this week. About four stocks fell for every three that rose.
Crude oil for August delivery rose $5.60, or 4.1 percent, to settle at $141.65 a barrel at 2:53 p.m. on the New York Mercantile Exchange. Gold advanced to $942 an ounce, and copper gained to $3.755 a pound.
To contact the reporter for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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BOJ May Keep Rate at 0.5% as Rising Costs Discourage Spending
By Mayumi Otsuma
July 11 (Bloomberg) -- The Bank of Japan will probably keep interest rates on hold next week as rising energy and commodity costs erode incomes and discourage spending by businesses and households in the world's second-largest economy.
Governor Masaaki Shirakawa and his six colleagues will leave the overnight lending rate at 0.5 percent at a two-day meeting ending July 15, according to all 39 economists surveyed by Bloomberg. The rate, doubled in February 2007, is the lowest among major economies.
Shirakawa says the risk that record commodity prices discourages spending and derails growth is more pressing than tackling inflation. Consumer sentiment is at a six-year low and companies predict profits will fall for the first time in seven years.
``The Bank of Japan is being forced to focus on the economy's downside risks,'' said Kazuhiko Sano, chief strategist at Nikko Citigroup in Tokyo. ``Still, a rate cut could fan inflationary expectations and is out of the question.''
Japan's economy probably shrank last quarter on slower exports and consumer spending, the drivers of the expansion in the first quarter, according to economists surveyed by Bloomberg last month. The central bank lowered its assessment of consumer spending in all of Japan's nine regions in its quarterly regional economic report this week.
`Risk Materializing'
``Growth probably won't make the Bank of Japan's prediction,'' for the year ending March 2009, said Mamoru Yamazaki, chief Japan economist at RBS Securities in Tokyo.
Large companies expect profits to decline 7 percent in fiscal 2008, the first drop since the 2001 recession, the bank's Tankan survey showed July 1.
``A drop in corporate profits, the source for the economy's positive cycle, will definitely discourage companies from making new investment, raising wages and hiring more workers,'' said Yasunari Ueno, chief market economist at Mizuho Securities in Tokyo. ``There's no way the bank will raise rates when incomes are being eroded and domestic demand is worsening.''
Only two of 33 economists who gave predictions through December expect a rate increase this year. The remaining 31 forecast no change. The central bank shelved in April its policy calling for higher interest rates.
April Prediction
The bank will probably say next week that the economy won't expand as much as it predicted in April while consumer inflation will be faster than projected, economists said. Policy makers will review its semi-annual outlook report published in April on July 15 at 3 p.m.
``The bank may have to push back its prediction for when the economy regains momentum,'' said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo.
In April, board members predicted the economy would expand 1.5 percent in the year ending March 2009 and consumer prices excluding fresh food would climb 1.1 percent. The bank doesn't typically release new forecasts in its mid-term review, only describing how the economy and prices have performed since its last semi-annual report.
Core consumer prices rose 1.5 percent in May from a year earlier. Inflation by that measure will surge to about 2.4 percent in the third quarter, said Ryutaro Kono chief economist at BNP Paribas in Tokyo. The central bank regards prices as stable when they are between zero and 2 percent.
``Even if core prices surpass the range, that would be temporary and wouldn't trigger rate action by the bank,'' Kono said.
Shirakawa will hold a news conference at 3:30 p.m.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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July 11 (Bloomberg) -- The Bank of Japan will probably keep interest rates on hold next week as rising energy and commodity costs erode incomes and discourage spending by businesses and households in the world's second-largest economy.
Governor Masaaki Shirakawa and his six colleagues will leave the overnight lending rate at 0.5 percent at a two-day meeting ending July 15, according to all 39 economists surveyed by Bloomberg. The rate, doubled in February 2007, is the lowest among major economies.
Shirakawa says the risk that record commodity prices discourages spending and derails growth is more pressing than tackling inflation. Consumer sentiment is at a six-year low and companies predict profits will fall for the first time in seven years.
``The Bank of Japan is being forced to focus on the economy's downside risks,'' said Kazuhiko Sano, chief strategist at Nikko Citigroup in Tokyo. ``Still, a rate cut could fan inflationary expectations and is out of the question.''
Japan's economy probably shrank last quarter on slower exports and consumer spending, the drivers of the expansion in the first quarter, according to economists surveyed by Bloomberg last month. The central bank lowered its assessment of consumer spending in all of Japan's nine regions in its quarterly regional economic report this week.
`Risk Materializing'
``Growth probably won't make the Bank of Japan's prediction,'' for the year ending March 2009, said Mamoru Yamazaki, chief Japan economist at RBS Securities in Tokyo.
Large companies expect profits to decline 7 percent in fiscal 2008, the first drop since the 2001 recession, the bank's Tankan survey showed July 1.
``A drop in corporate profits, the source for the economy's positive cycle, will definitely discourage companies from making new investment, raising wages and hiring more workers,'' said Yasunari Ueno, chief market economist at Mizuho Securities in Tokyo. ``There's no way the bank will raise rates when incomes are being eroded and domestic demand is worsening.''
Only two of 33 economists who gave predictions through December expect a rate increase this year. The remaining 31 forecast no change. The central bank shelved in April its policy calling for higher interest rates.
April Prediction
The bank will probably say next week that the economy won't expand as much as it predicted in April while consumer inflation will be faster than projected, economists said. Policy makers will review its semi-annual outlook report published in April on July 15 at 3 p.m.
``The bank may have to push back its prediction for when the economy regains momentum,'' said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo.
In April, board members predicted the economy would expand 1.5 percent in the year ending March 2009 and consumer prices excluding fresh food would climb 1.1 percent. The bank doesn't typically release new forecasts in its mid-term review, only describing how the economy and prices have performed since its last semi-annual report.
Core consumer prices rose 1.5 percent in May from a year earlier. Inflation by that measure will surge to about 2.4 percent in the third quarter, said Ryutaro Kono chief economist at BNP Paribas in Tokyo. The central bank regards prices as stable when they are between zero and 2 percent.
``Even if core prices surpass the range, that would be temporary and wouldn't trigger rate action by the bank,'' Kono said.
Shirakawa will hold a news conference at 3:30 p.m.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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Australian Dollar Rises For a Second Day as Commodities Gain
By Candice Zachariahs
July 11 (Bloomberg) -- The Australian dollar rose to near its highest this week as higher prices of commodities the nation exports boosted the outlook for the economy.
The Aussie, as the local currency is called, climbed for the second day after the UBS Bloomberg Constant Maturity Commodity Index advanced 2 percent, the most in nine days. Gold, Australia's third-most valuable raw material export, gained the most in a week as investors bought the metal as a safe haven.
``Oil, gold and aluminum prices moved sharply higher,'' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. ``That's a pretty positive story for the Aussie. It reflects U.S. dollar weakness as much as supply and demand dynamics.''
The currency traded at 96.17 U.S. cents at 8:40 a.m. in Sydney, from 96.03 cents in late Asian trading yesterday. It bought 102.94 yen, unchanged from yesterday.
Exports of raw materials contribute about 17 percent to Australia's economy. The Australian government last month forecast sales of coal, iron ore and other commodity exports will generate a record A$212 billion ($204 billion) windfall for the economy in the year ending June 30, 2009, compared with A$151 billion estimated sales in 2008.
Gold Gains
Gold futures for August delivery climbed 1.4 percent to $942 an ounce on the Comex division of the New York Mercantile Exchange yesterday, as mounting tensions over Iran's nuclear program spurred demand for the metal.
Australia's dollar climbed toward its 25-year high of 96.68 cents touched June 30 as the U.S. currency declined on concern losses related to the U.S. mortgage market are worsening.
U.S. Treasury Secretary Henry Paulson told lawmakers yesterday that markets will take ``additional time'' to stabilize Fannie Mae and Freddie Mac, the two biggest providers of financing for U.S. home loans.
Australian 10-year government bonds gained for a seventh day, pushing the yield 1 basis point lower to 6.29 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.038, or A$0.38 per A$1,000 face amount, to 92.034. Bond yields move inversely to prices and a basis point is 0.01 percentage point.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net.
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July 11 (Bloomberg) -- The Australian dollar rose to near its highest this week as higher prices of commodities the nation exports boosted the outlook for the economy.
The Aussie, as the local currency is called, climbed for the second day after the UBS Bloomberg Constant Maturity Commodity Index advanced 2 percent, the most in nine days. Gold, Australia's third-most valuable raw material export, gained the most in a week as investors bought the metal as a safe haven.
``Oil, gold and aluminum prices moved sharply higher,'' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. ``That's a pretty positive story for the Aussie. It reflects U.S. dollar weakness as much as supply and demand dynamics.''
The currency traded at 96.17 U.S. cents at 8:40 a.m. in Sydney, from 96.03 cents in late Asian trading yesterday. It bought 102.94 yen, unchanged from yesterday.
Exports of raw materials contribute about 17 percent to Australia's economy. The Australian government last month forecast sales of coal, iron ore and other commodity exports will generate a record A$212 billion ($204 billion) windfall for the economy in the year ending June 30, 2009, compared with A$151 billion estimated sales in 2008.
Gold Gains
Gold futures for August delivery climbed 1.4 percent to $942 an ounce on the Comex division of the New York Mercantile Exchange yesterday, as mounting tensions over Iran's nuclear program spurred demand for the metal.
Australia's dollar climbed toward its 25-year high of 96.68 cents touched June 30 as the U.S. currency declined on concern losses related to the U.S. mortgage market are worsening.
U.S. Treasury Secretary Henry Paulson told lawmakers yesterday that markets will take ``additional time'' to stabilize Fannie Mae and Freddie Mac, the two biggest providers of financing for U.S. home loans.
Australian 10-year government bonds gained for a seventh day, pushing the yield 1 basis point lower to 6.29 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.038, or A$0.38 per A$1,000 face amount, to 92.034. Bond yields move inversely to prices and a basis point is 0.01 percentage point.
To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net.
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South Korea Won Climbs 0.2 Percent to 1,000.75 Versus Dollar
By Kim Kyoungwha
July 11 (Bloomberg) -- The South Korean won rose for a fifth day against the U.S. dollar.
The won rose 0.2 percent to 1,000.75 as of 9:01 a.m. local time, according to Seoul Money Brokerage Services Ltd.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;
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July 11 (Bloomberg) -- The South Korean won rose for a fifth day against the U.S. dollar.
The won rose 0.2 percent to 1,000.75 as of 9:01 a.m. local time, according to Seoul Money Brokerage Services Ltd.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;
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Yen, India's Rupee, Malaysian Ringgit: Asia Currency Preview
By Yumi Teso
July 11 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Cabinet Office will release at 2 p.m. in Tokyo its consumer confidence index for June. Chief Cabinet Secretary Nobutaka Machimura will talk to reporters after a cabinet meeting in the morning and again at 4 p.m., as part of his regular press briefings.
Finance Minister Fukushiro Nukaga and Economic and Fiscal Policy Minister Hiroko Ota will hold news conferences after the cabinet meeting.
The yen was at 107.27 a dollar at 8:39 a.m. in New York.
Indian rupee: The wholesale price index rose 11.75 percent in the week ended June 28 from a year earlier, after an 11.63 percent increase the previous week, economists said in a Bloomberg survey before a report at noon.
Factory output expanded 6.5 percent in May from a year earlier, following a gain of 7 percent in April, economists said before a report today.
The rupee was at 42.9925.
Malaysia's ringgit: Industrial production increased 3.5 percent in May from a year earlier, compared with a 4.3 percent expansion the previous month, economists said before a report at 12:01 p.m.
The ringgit was at 3.2480.
China's yuan: A report on June wholesale prices is due as early as today. The wholesale price index jumped 9.6 percent in May from a year earlier.
The yuan was at 6.8428.
To contact the reporter on this story: Yumi Teso in Singapore at yteso@bloomberg.net.
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July 11 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Cabinet Office will release at 2 p.m. in Tokyo its consumer confidence index for June. Chief Cabinet Secretary Nobutaka Machimura will talk to reporters after a cabinet meeting in the morning and again at 4 p.m., as part of his regular press briefings.
Finance Minister Fukushiro Nukaga and Economic and Fiscal Policy Minister Hiroko Ota will hold news conferences after the cabinet meeting.
The yen was at 107.27 a dollar at 8:39 a.m. in New York.
Indian rupee: The wholesale price index rose 11.75 percent in the week ended June 28 from a year earlier, after an 11.63 percent increase the previous week, economists said in a Bloomberg survey before a report at noon.
Factory output expanded 6.5 percent in May from a year earlier, following a gain of 7 percent in April, economists said before a report today.
The rupee was at 42.9925.
Malaysia's ringgit: Industrial production increased 3.5 percent in May from a year earlier, compared with a 4.3 percent expansion the previous month, economists said before a report at 12:01 p.m.
The ringgit was at 3.2480.
China's yuan: A report on June wholesale prices is due as early as today. The wholesale price index jumped 9.6 percent in May from a year earlier.
The yuan was at 6.8428.
To contact the reporter on this story: Yumi Teso in Singapore at yteso@bloomberg.net.
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Dollar Heads for Weekly Loss Versus Euro Before Confidence Data
By Kosuke Goto and Ye Xie
July 11 (Bloomberg) -- The dollar headed for a weekly decline against the euro on speculation a report today will show U.S. consumer confidence fell to the lowest level in 28 years, adding to concern the economic slowdown will be prolonged.
Signs of a weakening economy may deter the Federal Reserve from increasing borrowing costs this year. The currency traded near a 25-year low versus the Australian dollar after Treasury Secretary Henry Paulson told lawmakers markets will take ``additional time'' to stabilize Fannie Mae and Freddie Mac, the two biggest providers of financing for U.S. home loans.
``The dollar is vulnerable,'' said Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``The markets cannot dispel concerns over the U.S. financial sector and its negative impact on the economy.''
The dollar traded at $1.5784 per euro at 8:03 a.m. in Tokyo from $1.5788 in New York yesterday, when it fell to $1.5801, the weakest since July 3. It was at $1.5706 on July 4. The U.S. currency was at 107.08 yen from 107.07 yen yesterday and 106.80 yen a week ago. The euro traded at 169.02 yen from 169.05 yen yesterday and 167.73 yen a week earlier.
The U.S. currency may fall to $1.60 per euro in one month, Umemoto forecast.
Futures on the Chicago Board of Trade show 86 percent odds policy makers will keep borrowing costs unchanged at 2 percent at an Aug. 5 meeting, compared with 34 percent odds a month ago.
The dollar has fallen 11 percent against the euro since September, when the Fed made the first of seven reductions in its target rate for overnight lending between banks to avert a recession. The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, fell to 72.493 and approached the lowest level since July 2.
Bernanke on Turmoil
Fed Chairman Ben S. Bernanke said in testimony before the House Financial Services Committee yesterday that more regulation over securities firms is needed now that ``financial turmoil is ongoing.'' Paulson reiterated a desire for a ``strong dollar,'' saying the currency should reflect the U.S. economy's ``long-term'' fundamentals.
``The general tenor and tone of comments from Bernanke and particularly Paulson have been sober,'' said Alan Ruskin, head of international currency strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut.
Fannie Mae fell 14 percent and Freddie Mac slumped 22 percent in New York trading yesterday after former St. Louis Fed President William Poole said in an interview the government may need to bail out the companies. Paulson said the regulator for Fannie and Freddie told him they have enough capital.
Crude Oil
Crude oil rose more than $5 a barrel to $141.69 a barrel at the close of floor trading on the New York Mercantile Exchange yesterday after Iran test-fired more missiles in the Persian Gulf. Prices are up 94 percent from a year ago, raising concern energy costs will reduce consumer spending.
The Reuters/University of Michigan preliminary index of consumer sentiment probably dropped to a 28-year low of 55.5 in July, from 56.4 the previous month, according to the median forecast of 60 economists surveyed by Bloomberg News. The report is due at 10 a.m. New York time.
``The U.S. dollar will come under pressure again,'' said Sophia Drossos, a currency strategist at Morgan Stanley in New York, in an interview on Bloomberg Radio. She expects the credit crisis to have ``an adverse feedback loop'' on the U.S. economy.
Intervention Risk
The risk of intervention in the foreign exchange markets by central banks in the U.S., Europe and Japan has increased to 30 percent, according to a probability model developed by Morgan Stanley.
The model quantifies an ``intervention checklist'' using data including five-year interest rate differentials, the deviation of real exchange rates from their five-year moving average, total dollar positioning and the four-week moving average of price changes in the euro versus the dollar and yen.
Aerospace executives told European Central Bank President Jean-Claude Trichet yesterday that the dollar's drop is of ``deep concern.''
European Aeronautic, Defence and Space Co. Chief Executive Officer Louis Gallois was among business leaders who met with Trichet in Frankfurt, according to a statement released by the Aerospace and Defense Industries Association of Europe. The dollar is the currency for airplane industry contracts worldwide.
European Weakness
The euro weakened against the dollar earlier yesterday after reports showed French and Italian industrial production dropped in May by more than analysts had forecast, raising concern European economic growth is slowing.
Output at French factories and utilities fell 2.6 percent from the previous month, the biggest decline since October 2005, the Paris-based statistics office said. Italian production declined 1.4 percent from April, almost three times the drop forecast by economists in a Bloomberg News survey.
``It's a consistent theme that globally industrial production has been weakening,'' said Andrew Busch, a currency strategist in Chicago at BMO Capital Markets, a unit of Bank of Montreal. ``It's really a race to the bottom. The U.S. is the first to get in trouble and may be the first to turn around.''
To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net
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July 11 (Bloomberg) -- The dollar headed for a weekly decline against the euro on speculation a report today will show U.S. consumer confidence fell to the lowest level in 28 years, adding to concern the economic slowdown will be prolonged.
Signs of a weakening economy may deter the Federal Reserve from increasing borrowing costs this year. The currency traded near a 25-year low versus the Australian dollar after Treasury Secretary Henry Paulson told lawmakers markets will take ``additional time'' to stabilize Fannie Mae and Freddie Mac, the two biggest providers of financing for U.S. home loans.
``The dollar is vulnerable,'' said Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``The markets cannot dispel concerns over the U.S. financial sector and its negative impact on the economy.''
The dollar traded at $1.5784 per euro at 8:03 a.m. in Tokyo from $1.5788 in New York yesterday, when it fell to $1.5801, the weakest since July 3. It was at $1.5706 on July 4. The U.S. currency was at 107.08 yen from 107.07 yen yesterday and 106.80 yen a week ago. The euro traded at 169.02 yen from 169.05 yen yesterday and 167.73 yen a week earlier.
The U.S. currency may fall to $1.60 per euro in one month, Umemoto forecast.
Futures on the Chicago Board of Trade show 86 percent odds policy makers will keep borrowing costs unchanged at 2 percent at an Aug. 5 meeting, compared with 34 percent odds a month ago.
The dollar has fallen 11 percent against the euro since September, when the Fed made the first of seven reductions in its target rate for overnight lending between banks to avert a recession. The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, fell to 72.493 and approached the lowest level since July 2.
Bernanke on Turmoil
Fed Chairman Ben S. Bernanke said in testimony before the House Financial Services Committee yesterday that more regulation over securities firms is needed now that ``financial turmoil is ongoing.'' Paulson reiterated a desire for a ``strong dollar,'' saying the currency should reflect the U.S. economy's ``long-term'' fundamentals.
``The general tenor and tone of comments from Bernanke and particularly Paulson have been sober,'' said Alan Ruskin, head of international currency strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut.
Fannie Mae fell 14 percent and Freddie Mac slumped 22 percent in New York trading yesterday after former St. Louis Fed President William Poole said in an interview the government may need to bail out the companies. Paulson said the regulator for Fannie and Freddie told him they have enough capital.
Crude Oil
Crude oil rose more than $5 a barrel to $141.69 a barrel at the close of floor trading on the New York Mercantile Exchange yesterday after Iran test-fired more missiles in the Persian Gulf. Prices are up 94 percent from a year ago, raising concern energy costs will reduce consumer spending.
The Reuters/University of Michigan preliminary index of consumer sentiment probably dropped to a 28-year low of 55.5 in July, from 56.4 the previous month, according to the median forecast of 60 economists surveyed by Bloomberg News. The report is due at 10 a.m. New York time.
``The U.S. dollar will come under pressure again,'' said Sophia Drossos, a currency strategist at Morgan Stanley in New York, in an interview on Bloomberg Radio. She expects the credit crisis to have ``an adverse feedback loop'' on the U.S. economy.
Intervention Risk
The risk of intervention in the foreign exchange markets by central banks in the U.S., Europe and Japan has increased to 30 percent, according to a probability model developed by Morgan Stanley.
The model quantifies an ``intervention checklist'' using data including five-year interest rate differentials, the deviation of real exchange rates from their five-year moving average, total dollar positioning and the four-week moving average of price changes in the euro versus the dollar and yen.
Aerospace executives told European Central Bank President Jean-Claude Trichet yesterday that the dollar's drop is of ``deep concern.''
European Aeronautic, Defence and Space Co. Chief Executive Officer Louis Gallois was among business leaders who met with Trichet in Frankfurt, according to a statement released by the Aerospace and Defense Industries Association of Europe. The dollar is the currency for airplane industry contracts worldwide.
European Weakness
The euro weakened against the dollar earlier yesterday after reports showed French and Italian industrial production dropped in May by more than analysts had forecast, raising concern European economic growth is slowing.
Output at French factories and utilities fell 2.6 percent from the previous month, the biggest decline since October 2005, the Paris-based statistics office said. Italian production declined 1.4 percent from April, almost three times the drop forecast by economists in a Bloomberg News survey.
``It's a consistent theme that globally industrial production has been weakening,'' said Andrew Busch, a currency strategist in Chicago at BMO Capital Markets, a unit of Bank of Montreal. ``It's really a race to the bottom. The U.S. is the first to get in trouble and may be the first to turn around.''
To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net
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Oil Steady After Jumping $5 as Trading Programs Trigger Buying
By Mark Shenk
July 11 (Bloomberg) -- Crude oil traded near $142 a barrel after rising more than $5 in the last hour of New York floor trading yesterday as prices breached a level that triggered computer-generated buying programs.
Prices rose earlier yesterday because Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire this week. The increase accelerated after futures broke through the July 9 high of $138.28 at 2:09 p.m. after approaching it at least five times.
``The market was set to rally,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``We kept approaching the $138.20 area and when prices finally made it through'' the high, ``length came into the market.'' Length refers to bets that prices will rise.
Crude oil for August delivery gained 20 cents to $141.85 a barrel on the New York Mercantile Exchange at 8:33 a.m. in Sydney. Yesterday, it soared $5.60, or 4.1 percent, to settle at $141.65 a barrel, the biggest one-day increase since June 6. Prices rose as much as $6.05 to $142.10 a barrel. Oil touched a record $145.85 on July 3. Futures are up 96 percent from a year ago.
``The market is very volatile,'' said Adam Sieminski, Deutsche Bank's chief energy economist, in Washington.
Iran, holder of the second-biggest oil reserves, tested missiles capable of reaching Israel, increasing concern that a conflict may cut supply. The Movement for the Emancipation of the Niger Delta said attacks will resume attacks on oil facilities.
``Eventually we will see new records, probably because of a geopolitical headline,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``A renewal of attacks in Nigeria or fireworks on the Iranian front could be the spark that sends us there.''
Iranian Tests
Iran's military yesterday fired the missiles during a third day of war games, Agence France-Presse reported, citing the Web site of Iranian state-run television. Missiles were also launched yesterday.
Iran has ignored United Nations efforts to halt its uranium- enrichment program and says further sanctions won't affect its plans to develop nuclear energy. The U.S. has led international efforts to force Iran to give up enrichment because of concern the technology may be used to develop nuclear weapons.
OPEC Secretary-General Abdalla El-Badri said at a press conference in Vienna yesterday that he hoped there would be no military conflict between Israel and Iran, adding that ``if something were to happen, it is impossible to replace the production of Iran.''
Cease-fire
The Nigerian militant group known as MEND will call off its unilateral cease-fire beginning midnight on July 12, the group's spokesman, Jomo Gbomo, said yesterday. MEND has helped cut more than 20 percent of Nigeria's crude oil exports since 2006 by attacking pipelines and other installations.
MEND says it is fighting for a greater share of oil wealth for the impoverished inhabitants of the Niger Delta and accuses successive Nigerian governments of decades of oppression.
The group declared a unilateral cease-fire after a June 19 attack against Royal Dutch Shell Plc's Bonga deep-water oilfield, located 120 kilometers (75 miles) offshore, that cut 190,000 barrels a day of oil output.
``The missile tests and the end of the cease-fire are going to put a higher and higher floor under prices,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York.
Demand Forecast
The International Energy Agency increased its 2008 demand forecast for the first time in six months yesterday, because of rising consumption in developing countries.
The Paris-based agency increased its outlook by about 0.1 percent, or 80,000 barrels a day, to 86.85 million barrels a day in its monthly report, leaving demand growth at 1 percent for this year. The IEA forecasts the same pace of growth for 2009.
The Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world's oil, cut its forecast of demand for its own crude oil through 2030, as record prices and environmental considerations encourage consumers to conserve fuel and rely more on biofuels.
OPEC lowered demand forecasts by 4.4 percent to 32.3 million barrels a day in 2015, and by 12 percent to 43.6 million a day in 2030, the group's secretariat said yesterday in its World Oil Outlook report. This means OPEC may unnecessarily commit $300 billion to new fields over the next 12 years, it said.
``OPEC doesn't like the fact that we are turning more and more to biofuels,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``There's an implicit threat that OPEC will cut investment in new production because of their unhappiness.''
Brent crude oil for August settlement rose $5.45, or 4 percent, to settle at $142.03 a barrel on London's ICE Futures Europe exchange. Prices climbed to a record $146.69 on July 3.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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Australia Stocks Preview: Alumina, BHP, Herald, Just, Origin
By Shani Raja
July 11 (Bloomberg) -- The following is a list of companies whose shares may rise or fall in Australia. This preview includes news announced after markets closed yesterday. Prices are from yesterday's close unless otherwise stated.
The S&P/ASX 200 Index futures contract due in September rose 0.8 percent to 4,985 at 6:59 a.m. in Sydney. The Bank of New York Australia ADR Index gained 2.4 percent in New York.
The S&P/ASX 200 Index lost 74.50 points, or 1.5 percent, to 4,937.40.
Mining shares: A measure of six metals traded on the London Metal Exchange advanced 1.7 percent. Zinc rose 6.7 percent, copper 0.2 percent and nickel 2.1 percent.
American depositary receipts of BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced 2.5 percent to the equivalent of A$39.83 a share in New York, A$1.03 higher than the A$38.80 close in Sydney.
Rio Tinto Group (RIO AU) declined A$1.55, or 1.3 percent, to A$121.60.
Oil companies: Crude oil rose more than $5 a barrel in the last hour of New York floor trading as prices breached a level that triggered computer-generated buying programs. Prices rose earlier because Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire. Crude oil for August delivery rose $5.60, or 4.1 percent, to settle at $141.65 a barrel at 2:53 p.m. on the New York Mercantile Exchange, the biggest one-day increase since June 6.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, lost A$1.32, or 2.2 percent, to A$57.90.
Alumina Ltd. (AWC AU), partner in the world's biggest producer of the material used to make aluminum, said the after- tax effect from a gas supply outage in Western Australia was less than previously estimated in June. Alumina slipped 13 cents, or 3 percent, to A$4.23.
Anvil Mining Ltd. (AVM AU), an Australian producer of copper in the Democratic Republic of Congo, said it raised C$296.7 million ($293.7 million) in a private placement of shares to fund development of its African projects. Anvil jumped 50 cents, or 5.9 percent, to A$9.
Herald Resources Ltd. (HER AU), an Australian zinc and lead explorer, increased the resource estimate at its Dairi project in Indonesia by six percent. The Lae Jehe deposit at the project is estimated to contain a resource of 11.3 million metric tons at 10.5 percent zinc and 5.7 percent lead, Perth-based Herald said yesterday in a statement to the Australian stock exchange. Herald rose 4 cents, or 1.4 percent, to A$2.93.
Origin Energy Ltd. (ORG AU): BG Group Plc, the U.K.'s third- largest oil and gas company, said some resources held by Origin Energy Ltd., Australia's biggest producer of gas from coal seams, aren't viable for development and can't be booked as reserves. Origin, the target of a takeover bid by BG, slipped 30 cents, or 1.8 percent, to A$16.
Just Group Ltd. (JST AU): Premier Investments Ltd., an Australian investor controlled by billionaire Solomon Lew, extended its bid for Just Group Ltd. by four weeks. The offer, which had been scheduled to close on July 18, was extended until Aug. 15, Melbourne-based Premier said in a statement to the Australian stock exchange. Just fell 7 cents, or 2.4 percent, to A$2.82.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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July 11 (Bloomberg) -- The following is a list of companies whose shares may rise or fall in Australia. This preview includes news announced after markets closed yesterday. Prices are from yesterday's close unless otherwise stated.
The S&P/ASX 200 Index futures contract due in September rose 0.8 percent to 4,985 at 6:59 a.m. in Sydney. The Bank of New York Australia ADR Index gained 2.4 percent in New York.
The S&P/ASX 200 Index lost 74.50 points, or 1.5 percent, to 4,937.40.
Mining shares: A measure of six metals traded on the London Metal Exchange advanced 1.7 percent. Zinc rose 6.7 percent, copper 0.2 percent and nickel 2.1 percent.
American depositary receipts of BHP Billiton Ltd. (BHP AU), the world's largest mining company, advanced 2.5 percent to the equivalent of A$39.83 a share in New York, A$1.03 higher than the A$38.80 close in Sydney.
Rio Tinto Group (RIO AU) declined A$1.55, or 1.3 percent, to A$121.60.
Oil companies: Crude oil rose more than $5 a barrel in the last hour of New York floor trading as prices breached a level that triggered computer-generated buying programs. Prices rose earlier because Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire. Crude oil for August delivery rose $5.60, or 4.1 percent, to settle at $141.65 a barrel at 2:53 p.m. on the New York Mercantile Exchange, the biggest one-day increase since June 6.
Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, lost A$1.32, or 2.2 percent, to A$57.90.
Alumina Ltd. (AWC AU), partner in the world's biggest producer of the material used to make aluminum, said the after- tax effect from a gas supply outage in Western Australia was less than previously estimated in June. Alumina slipped 13 cents, or 3 percent, to A$4.23.
Anvil Mining Ltd. (AVM AU), an Australian producer of copper in the Democratic Republic of Congo, said it raised C$296.7 million ($293.7 million) in a private placement of shares to fund development of its African projects. Anvil jumped 50 cents, or 5.9 percent, to A$9.
Herald Resources Ltd. (HER AU), an Australian zinc and lead explorer, increased the resource estimate at its Dairi project in Indonesia by six percent. The Lae Jehe deposit at the project is estimated to contain a resource of 11.3 million metric tons at 10.5 percent zinc and 5.7 percent lead, Perth-based Herald said yesterday in a statement to the Australian stock exchange. Herald rose 4 cents, or 1.4 percent, to A$2.93.
Origin Energy Ltd. (ORG AU): BG Group Plc, the U.K.'s third- largest oil and gas company, said some resources held by Origin Energy Ltd., Australia's biggest producer of gas from coal seams, aren't viable for development and can't be booked as reserves. Origin, the target of a takeover bid by BG, slipped 30 cents, or 1.8 percent, to A$16.
Just Group Ltd. (JST AU): Premier Investments Ltd., an Australian investor controlled by billionaire Solomon Lew, extended its bid for Just Group Ltd. by four weeks. The offer, which had been scheduled to close on July 18, was extended until Aug. 15, Melbourne-based Premier said in a statement to the Australian stock exchange. Just fell 7 cents, or 2.4 percent, to A$2.82.
To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.
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Dollar Sheds Overnight Gains on Paulson Comments; BoE Holds Rates, London Stocks Slide
Daily Forex Fundamentals | Written by CMS Forex | Jul 10 08 20:44 GMT |
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JPN Corporate Goods Price Index Up 5.6% on the Year
In Japan, the Corporate Goods Price Index, a measure of producer prices, rose 5.6% in June compared to a year ago. It's the fastest annual rate in 27 years. On the month, prices were up 0.8%, as they are being pushed up by record oil and higher commodity prices.
JPN Current Account Up on Month, Shrinks 5.9% on Year
The current account surplus for Japan shrank 5.9% on the year to 2 trillion yen. Export growth slowed while record high oil prices increased the amount spent on imports, lowering the trade balance. Due to better numbers services though, the current account figure did increase from April's levels.
NZ Manufacturing PMI Slides to 45.7
The New Zealand manufacturing sector continues to show signs of contraction, coming under serious strain in June. The PMI, which fell from 49.3 in May to 45.7 in June, was the second weakest since the survey started in 2002.
AUS Employment Jumps 29.8K as Mining Companies Increase Jobs
In Australia, employment increased by 29,800 jobs in June, almost tripling expectations. The unemployment rate fell to 4.2% as a result. The job gains came on the back of Australia's 2 large mining companies which have seen business go up as a result of exports to the Chinese market. Other sectors however may have to cut jobs if consumer spending falters in the face of higher borrowing costs and inflation. May's fall in employment was the first drop in nearly a year and half.
AUD/JPY - Aussie Strengthens Following Jobs Report
The Aussie-Yen pair jumped about 100 pips overnight following the Australian jobs data reaching the 102.90 level, before consolidating during the New York session. The Aussie has managed to pare all of its losses from the first half of the week, and tested its resistance from Monday.
UK Housing Prices Fal 6.1% on the Year, According to HBOS
UK housing prices continue to tumble, falling at an annual rate of 6.1% in June, according to the Halifax bank of Scotland, the biggest fall since 1993. Prices fell 2% on the month to an average of £180,000. Declining housing prices are damaging the economy by weakening consumer confidence and limiting residential investment.
UK BOE Hold Rates at 5%, Weighing Weak Growth vs High Inflation
The Bank of England kept its benchmark interest rate unchanged at 5%. Policy makers are caught in a tough dilemma, as the UK economy teeters towards recession, but high inflation continues to be a major risk. Policy members seem preparted to weather a period of recession in the economy if it means lowering inflation, which in May reached an annual pace of 3.3%.
GBP/USD - Pound Falls 100 Pips Overnight on Housing, Rate Outlook
With UK housing prices continued to plummet, the Pound-Dollar fell 100 pips overnight. It did however find support above yesterday's low. The Bank's decision did not have a significant impact on the markets, and the Pound started a slight rally vs. the Dollar in NY trading.
GBP/CHF - Pound Falls to Franc as UK Stocks Slide Following BOE
Stocks on the London exchange stumbled with the main index falling more than 2% in reaction to the bank's outlook. The Pound-Swiss Franc pair, which is sensitive to stocks and risk appetite, slid more than 100 pips from its level prior to the bank's decision, ending a 2-session rally. The Pound found support at the 2.03 level.
US Jobless Claims Shows Surprising Drop, But Seasonal Factors May Be Culprit
In the US, jobless claims fell by 58K, the largest decline in nearly 3 years. The figure was influenced by seasonal factors, where a typical increase in jobless claims around this time of the year did not materialize. Those continuing to receive benefits rose by 91K to 3.2 million.
EUR/USD - Euro Rises on Bernanke and Paulson Comments
The Euro-Dollar pair was quiet overnight, gaining slightly in favor of the greenback as European stocks fell. However, in early NY trading the greenback weakened as Treasury Secretary Henry Paulson and Bernanke said financial market turmoil is "ongoing." The comments did not soothe jittery credit markets and the pair rose about 90 pips from its session low, testing 1.58, a new high for the week.
Upcoming Releases:
Overnight, Japan releases data on industrial production and consumer confidence.
Tomorrow, Canada unveils its employment change for June. Both the US and Canada post their trade balance figures. The US ends the week with import prices and the preliminary release of the UMich consumer sentiment for July.
Capital Market Services, L.L.C.
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Economic Calendar Eco Data 7/11/08
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 04:30 | JPY | Japan Industrial prod'n M/M May | 2.90% | 2.90% | | |
| 04:30 | JPY | Japan Industrial prod'n Y/Y May | N/A | 1.20% | | |
| 04:30 | JPY | Japan Capacity utilisation May | N/A | -0.70% | | |
| 05:00 | JPY | Japan Consumer confidence Jun | 31.5 | 34.1 | | |
| 06:00 | EUR | Germany WPI M/M Jun | 0.90% | 1.40% | | |
| 06:00 | EUR | Germany WPI Y/Y Jun | 8.90% | 8.10% | | |
| 11:00 | CAD | Canada Unemployment rate Jun | 6.10% | 6.10% | | |
| 11:00 | CAD | Canada Employment change Jun | 10k | 8.4k | | |
| 12:30 | CAD | Canada New housing price index May | 0.10% | 0.00% | | |
| 12:30 | CAD | Canada Trade balance (cad) May | 5.2B | 5.11B | | |
| 12:30 | USD | U.S. Trade balance (usd) May | -62.1B | -60.9B | | |
| 12:30 | USD | U.S. Import price index M/M Jun | 2.00% | 2.30% | | |
| 12:30 | USD | U.S. Import price index Y/Y Jun | 18.60% | 17.80% | | |
| 14:00 | USD | U.S. U. Michigan survey Prel. Jul | 55.5 | 56.4 | | |
| 18:00 | USD | U.S. Fed budget | 33.0B | 27.48B | |
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New York Session Recap
Daily Forex Fundamentals | Written by Forex.com | Jul 10 08 20:41 GMT |
The buck was sold in the NY session as a shaky stock market and a renewed pop in oil prices pushed the greenback lower. US stocks saw a rollercoaster of a day as financial market fears took hold once again. This was fueled by comments from former St Louis Fed President Poole who said that he believes the two major US mortgage GSEs are virtually insolvent and further by comments from Fed Chairman Bernanke and Treasury Secretary Paulson who pretty much said that a bailout of another major financial institution is unlikely. Despite this, one last push towards the close of trading helped the S&P 500 close up about 0.7%, but the USD was rattled nonetheless.
Higher oil prices didn't help, with oil shooting up more than $3 in a manner of minutes as NY floor trading came to a close. News of yet another Iranian missile launch and the end to a Nigerian cease-fire but a major bid on the commodity, which would close the session near $141.50/bbl.
Moreover, musings out of the Fed and ECB did not help the buck even though the comments seemed USD positive on the face of it. San Francisco Fed President Yellen repeated what she said a few days ago that the Fed will not allow a wage-price spiral and that inflation remains above her comfort zone. These hawkish comments from a typically dovish member suggest the Fed is ready to act if inflation gets more than uncomfortably high, and likely takes rate cuts out of the picture.
ECB President Trichet for his part reiterated that there was nothing to add to the ECB statement from last week, thus keeping the “no bias” reference in tact. He also noted that inflation expectations are well anchored, which is a prerequisite for an ECB on hold.
EUR/USD was higher, closing the session near 1.5780 after an open around the 1.5710 mark. The pair once again tried above 1.5800 but did not hold. USD/JPY was lower on the stock market turmoil, closing near 107.05 after opening near the 107.20 area. The pair once again failed to close above the 200 day moving average (which was 107.53 today) and thus suggests any material move higher is not likely at this point.
Upcoming Economic Data Releases (Asia Session) Prior Estimate
* 7/11 4:30 JN Industrial Production (MoM) MAY F 2.9% - -
* 7/11 4:30 JN Industrial Production (YoY) MAY F 1.2% - -
* 7/11 4:30 JN Capacity Utilization (MoM) MAY F -0.7% - -
* 7/11 5:00 JN Consumer Confidence JUN 34.1 - -
* 7/11 5:00 JN Consumer Confidence Households JUN 33.9 - -
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The buck was sold in the NY session as a shaky stock market and a renewed pop in oil prices pushed the greenback lower. US stocks saw a rollercoaster of a day as financial market fears took hold once again. This was fueled by comments from former St Louis Fed President Poole who said that he believes the two major US mortgage GSEs are virtually insolvent and further by comments from Fed Chairman Bernanke and Treasury Secretary Paulson who pretty much said that a bailout of another major financial institution is unlikely. Despite this, one last push towards the close of trading helped the S&P 500 close up about 0.7%, but the USD was rattled nonetheless.
Higher oil prices didn't help, with oil shooting up more than $3 in a manner of minutes as NY floor trading came to a close. News of yet another Iranian missile launch and the end to a Nigerian cease-fire but a major bid on the commodity, which would close the session near $141.50/bbl.
Moreover, musings out of the Fed and ECB did not help the buck even though the comments seemed USD positive on the face of it. San Francisco Fed President Yellen repeated what she said a few days ago that the Fed will not allow a wage-price spiral and that inflation remains above her comfort zone. These hawkish comments from a typically dovish member suggest the Fed is ready to act if inflation gets more than uncomfortably high, and likely takes rate cuts out of the picture.
ECB President Trichet for his part reiterated that there was nothing to add to the ECB statement from last week, thus keeping the “no bias” reference in tact. He also noted that inflation expectations are well anchored, which is a prerequisite for an ECB on hold.
EUR/USD was higher, closing the session near 1.5780 after an open around the 1.5710 mark. The pair once again tried above 1.5800 but did not hold. USD/JPY was lower on the stock market turmoil, closing near 107.05 after opening near the 107.20 area. The pair once again failed to close above the 200 day moving average (which was 107.53 today) and thus suggests any material move higher is not likely at this point.
Upcoming Economic Data Releases (Asia Session) Prior Estimate
* 7/11 4:30 JN Industrial Production (MoM) MAY F 2.9% - -
* 7/11 4:30 JN Industrial Production (YoY) MAY F 1.2% - -
* 7/11 4:30 JN Capacity Utilization (MoM) MAY F -0.7% - -
* 7/11 5:00 JN Consumer Confidence JUN 34.1 - -
* 7/11 5:00 JN Consumer Confidence Households JUN 33.9 - -
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(FED) Ben S. Bernanke - Regulatory Restructuring
FED | Written by Federal Reserve | Jul 10 08 14:12 GMT |
(FED) Ben S. Bernanke - Regulatory Restructuring
Before the Committee on Financial Services, U.S. House of Representatives
July 10, 2008
Chairman Frank, Ranking Member Bachus, and other members of the Committee, I am pleased to be here today to discuss financial regulation and financial stability.
The financial turmoil that began last summer has impeded the ability of the financial system to perform its normal functions and adversely affected the broader economy. This experience indicates a clear need for careful attention to financial regulation and financial stability by the Congress and other policymakers.
Regulatory authorities have been actively considering the implications of the turmoil for regulatory policy and for private-sector practices. In March, the President's Working Group on Financial Markets (PWG) issued a report and recommendations for addressing the weaknesses revealed by recent events. At the international level, the Financial Stability Forum has also issued a report and recommendations. Between them, the two reports focused on a number of specific problem areas, including mortgage lending practices and their oversight, risk measurement and management at large financial institutions, the performance of credit rating agencies, accounting and valuation issues, and issues relating to the clearing and settlement of financial transactions. Many of the recommendations of these reports were directed at regulators and the private sector and are already being implemented. These reports complement the blueprint for regulatory reform issued by the Treasury in March, which focused on broader questions of regulatory architecture.
Work is also ongoing to strengthen the framework for prudential oversight of financial institutions. Notably, recent events have led the Basel Committee on Banking Supervision to consider higher capital charges for such items as certain complex structured credit products, assets in banks' trading books, and liquidity guarantees provided to off-balance sheet vehicles. New guidelines for banks' liquidity management are also being issued. Regarding implementation, the recent reports have stressed the need for supervisors to insist on strong risk-measurement and risk-management practices that allow managers to assess the risks they face on a firmwide basis.
In the remainder of my remarks I will comment briefly on three issues: the supervisory oversight of primary dealers, including the major investment banks; the need to strengthen the financial infrastructure; and the possible need for new tools for facilitating the orderly liquidation of a systemically important securities firm.
Prudential Supervision of Investment Banks
Since the near-collapse of The Bear Stearns Companies, Inc., in March, the Federal Reserve has been working closely with the Securities and Exchange Commission (SEC), which is the functional supervisor of each of the primary dealers and the consolidated supervisor of the four large investment banks, to help ensure that those firms have the financial strength needed to withstand conditions of extreme market stress. To formalize our effective working relationship, the SEC and the Federal Reserve this week agreed to a memorandum of understanding.
Cooperation between the Fed and the SEC is taking place within the existing statutory framework with the objective of addressing the near-term situation. In the longer term, however, legislation may be needed to provide a more robust framework for the prudential supervision of investment banks and other large securities dealers. In particular, under current arrangements, the SEC's oversight of the holding companies of the major investment banks is based on a voluntary agreement between the SEC and those firms. Strong holding company oversight is essential, and thus, in my view, the Congress should consider requiring consolidated supervision of those firms and providing the regulator the authority to set standards for capital, liquidity holdings, and risk management. At the same time, reforms in the oversight of these firms must recognize the distinctive features of investment banking and take care neither to unduly inhibit innovation nor to induce a migration of risk-taking activities to less-regulated or offshore institutions.
Strengthening the Financial Infrastructure
The potential vulnerability of the financial system to the collapse of Bear Stearns was exacerbated by weaknesses in the infrastructure of financial markets, notably in the markets for over-the-counter (OTC) derivatives and in short-term funding markets.
The Federal Reserve, together with other regulators and the private sector, is engaged in a broad effort to strengthen the financial infrastructure. For example, since September 2005, the Federal Reserve Bank of New York has been leading a major joint initiative by both the public and private sectors to improve arrangements for clearing and settling credit default swaps and other OTC derivatives. The Federal Reserve and other authorities also are focusing on enhancing the resilience of the markets for tri-party repurchase agreements, in which the primary dealers and other large banks and broker-dealers obtain very large amounts of secured financing from money funds and other short-term, risk-averse investors. In these efforts, we aim not only to make the financial system better able to withstand future shocks but also to mitigate moral hazard and the problem of "too big to fail," by reducing the range of circumstances in which systemic stability concerns might prompt government intervention.
More generally, the stability of the broader financial system requires key payment and settlement systems to operate smoothly under stress and to effectively manage counterparty risk. Currently, the Federal Reserve relies on a patchwork of authorities, largely derived from our role as a banking supervisor, as well as on moral suasion to help ensure that the various payment and settlement systems have the necessary procedures and controls in place to manage the risks they face. By contrast, many major central banks around the world have an explicit statutory basis for their oversight of payment and settlement systems. Because robust payment and settlement systems are vital for financial stability, the Congress should consider granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems.
Preventing or Mitigating Future Crises
The financial turmoil is ongoing, and our efforts today are concentrated on helping the financial system return to more normal functioning. It is not too soon, however, to think about steps that might be taken to reduce the incidence and severity of future crises.
In particular, in light of the Bear Stearns episode, the Congress may wish to consider whether new tools are needed for ensuring an orderly liquidation of a systemically important securities firm that is on the verge of bankruptcy, together with a more formal process for deciding when to use those tools. Because the resolution of a failing securities firm might have fiscal implications, it would be appropriate for the Treasury to take a leading role in any such process, in consultation with the firm's regulator and other authorities.
The details of any such tools and of the associated decisionmaking process require more study. One possible model is the process currently in place under the Federal Deposit Insurance Corporation Improvement Act (FDICIA) for dealing with insolvent commercial banks. The FDICIA procedures give the Federal Deposit Insurance Corporation the authority to act as a receiver for an insolvent bank and to set up a bridge bank to facilitate an orderly liquidation of the firm. The FDICIA law also requires that failing banks be resolved in a way that imposes the least cost to the government, except when the authorities, through a well-defined procedure, determine that following the least-cost route would entail significant systemic risk. To be sure, securities firms differ significantly from commercial banks in their financing, business models, and in other ways, so the FDICIA rules are not directly applicable to these firms. Although designing a resolution regime appropriate for securities firms would be a complex undertaking, I believe it would be worth the effort. In particular, by setting a high bar for such actions, the adverse effects on market discipline could be minimized.
Thank you. I would be pleased to take your questions.
Footnotes
1. President's Working Group on Financial Markets (2008), "Policy Statement on Financial Market Developments," March 13.
2. The membership of the Financial Stability Forum consists of central bankers, regulators, and finance ministers from many countries, including the United States. Their report is available at: Financial Stability Forum (2008), "Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience (400 KB PDF)," April 7.
3. The Treasury blueprint is available at: U.S. Department of the Treasury (2008), "Blueprint for a Modernized Financial Regulatory Structure," March 31.
4. Primary dealers are banks and securities broker-dealers that trade in U.S. government securities with the Federal Reserve Bank of New York. On behalf of the Federal Reserve System, the New York Fed's Open Market Desk engages in the trades to implement monetary policy.
5. Under the memorandum of understanding, the SEC and the Fed will freely share information and analyses pertaining to the financial conditions of primary dealers. The two agencies have also agreed to work jointly with the firms to support their continued efforts to strengthen their balance sheets, their liquidity, and their risk-management practices. See: Board of Governors of the Federal Reserve System and Securities and Exchange Commission (2008), "Federal Reserve and SEC Issue Memorandum of Understanding to Deepen Information Sharing and Cooperation," press release, July 7.
6. Bank-affiliated primary dealers are already subject to mandatory consolidated supervision, but the focus of that supervision has been on limiting risks to the banks and other insured depository institutions within the holding company. Existing provisions may need to be modified to provide regulatory authority to assess and limit risks to all functionally regulated entities, including securities subsidiaries.
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(FED) Ben S. Bernanke - Regulatory Restructuring
Before the Committee on Financial Services, U.S. House of Representatives
July 10, 2008
Chairman Frank, Ranking Member Bachus, and other members of the Committee, I am pleased to be here today to discuss financial regulation and financial stability.
The financial turmoil that began last summer has impeded the ability of the financial system to perform its normal functions and adversely affected the broader economy. This experience indicates a clear need for careful attention to financial regulation and financial stability by the Congress and other policymakers.
Regulatory authorities have been actively considering the implications of the turmoil for regulatory policy and for private-sector practices. In March, the President's Working Group on Financial Markets (PWG) issued a report and recommendations for addressing the weaknesses revealed by recent events. At the international level, the Financial Stability Forum has also issued a report and recommendations. Between them, the two reports focused on a number of specific problem areas, including mortgage lending practices and their oversight, risk measurement and management at large financial institutions, the performance of credit rating agencies, accounting and valuation issues, and issues relating to the clearing and settlement of financial transactions. Many of the recommendations of these reports were directed at regulators and the private sector and are already being implemented. These reports complement the blueprint for regulatory reform issued by the Treasury in March, which focused on broader questions of regulatory architecture.
Work is also ongoing to strengthen the framework for prudential oversight of financial institutions. Notably, recent events have led the Basel Committee on Banking Supervision to consider higher capital charges for such items as certain complex structured credit products, assets in banks' trading books, and liquidity guarantees provided to off-balance sheet vehicles. New guidelines for banks' liquidity management are also being issued. Regarding implementation, the recent reports have stressed the need for supervisors to insist on strong risk-measurement and risk-management practices that allow managers to assess the risks they face on a firmwide basis.
In the remainder of my remarks I will comment briefly on three issues: the supervisory oversight of primary dealers, including the major investment banks; the need to strengthen the financial infrastructure; and the possible need for new tools for facilitating the orderly liquidation of a systemically important securities firm.
Prudential Supervision of Investment Banks
Since the near-collapse of The Bear Stearns Companies, Inc., in March, the Federal Reserve has been working closely with the Securities and Exchange Commission (SEC), which is the functional supervisor of each of the primary dealers and the consolidated supervisor of the four large investment banks, to help ensure that those firms have the financial strength needed to withstand conditions of extreme market stress. To formalize our effective working relationship, the SEC and the Federal Reserve this week agreed to a memorandum of understanding.
Cooperation between the Fed and the SEC is taking place within the existing statutory framework with the objective of addressing the near-term situation. In the longer term, however, legislation may be needed to provide a more robust framework for the prudential supervision of investment banks and other large securities dealers. In particular, under current arrangements, the SEC's oversight of the holding companies of the major investment banks is based on a voluntary agreement between the SEC and those firms. Strong holding company oversight is essential, and thus, in my view, the Congress should consider requiring consolidated supervision of those firms and providing the regulator the authority to set standards for capital, liquidity holdings, and risk management. At the same time, reforms in the oversight of these firms must recognize the distinctive features of investment banking and take care neither to unduly inhibit innovation nor to induce a migration of risk-taking activities to less-regulated or offshore institutions.
Strengthening the Financial Infrastructure
The potential vulnerability of the financial system to the collapse of Bear Stearns was exacerbated by weaknesses in the infrastructure of financial markets, notably in the markets for over-the-counter (OTC) derivatives and in short-term funding markets.
The Federal Reserve, together with other regulators and the private sector, is engaged in a broad effort to strengthen the financial infrastructure. For example, since September 2005, the Federal Reserve Bank of New York has been leading a major joint initiative by both the public and private sectors to improve arrangements for clearing and settling credit default swaps and other OTC derivatives. The Federal Reserve and other authorities also are focusing on enhancing the resilience of the markets for tri-party repurchase agreements, in which the primary dealers and other large banks and broker-dealers obtain very large amounts of secured financing from money funds and other short-term, risk-averse investors. In these efforts, we aim not only to make the financial system better able to withstand future shocks but also to mitigate moral hazard and the problem of "too big to fail," by reducing the range of circumstances in which systemic stability concerns might prompt government intervention.
More generally, the stability of the broader financial system requires key payment and settlement systems to operate smoothly under stress and to effectively manage counterparty risk. Currently, the Federal Reserve relies on a patchwork of authorities, largely derived from our role as a banking supervisor, as well as on moral suasion to help ensure that the various payment and settlement systems have the necessary procedures and controls in place to manage the risks they face. By contrast, many major central banks around the world have an explicit statutory basis for their oversight of payment and settlement systems. Because robust payment and settlement systems are vital for financial stability, the Congress should consider granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems.
Preventing or Mitigating Future Crises
The financial turmoil is ongoing, and our efforts today are concentrated on helping the financial system return to more normal functioning. It is not too soon, however, to think about steps that might be taken to reduce the incidence and severity of future crises.
In particular, in light of the Bear Stearns episode, the Congress may wish to consider whether new tools are needed for ensuring an orderly liquidation of a systemically important securities firm that is on the verge of bankruptcy, together with a more formal process for deciding when to use those tools. Because the resolution of a failing securities firm might have fiscal implications, it would be appropriate for the Treasury to take a leading role in any such process, in consultation with the firm's regulator and other authorities.
The details of any such tools and of the associated decisionmaking process require more study. One possible model is the process currently in place under the Federal Deposit Insurance Corporation Improvement Act (FDICIA) for dealing with insolvent commercial banks. The FDICIA procedures give the Federal Deposit Insurance Corporation the authority to act as a receiver for an insolvent bank and to set up a bridge bank to facilitate an orderly liquidation of the firm. The FDICIA law also requires that failing banks be resolved in a way that imposes the least cost to the government, except when the authorities, through a well-defined procedure, determine that following the least-cost route would entail significant systemic risk. To be sure, securities firms differ significantly from commercial banks in their financing, business models, and in other ways, so the FDICIA rules are not directly applicable to these firms. Although designing a resolution regime appropriate for securities firms would be a complex undertaking, I believe it would be worth the effort. In particular, by setting a high bar for such actions, the adverse effects on market discipline could be minimized.
Thank you. I would be pleased to take your questions.
Footnotes
1. President's Working Group on Financial Markets (2008), "Policy Statement on Financial Market Developments," March 13.
2. The membership of the Financial Stability Forum consists of central bankers, regulators, and finance ministers from many countries, including the United States. Their report is available at: Financial Stability Forum (2008), "Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience (400 KB PDF)," April 7.
3. The Treasury blueprint is available at: U.S. Department of the Treasury (2008), "Blueprint for a Modernized Financial Regulatory Structure," March 31.
4. Primary dealers are banks and securities broker-dealers that trade in U.S. government securities with the Federal Reserve Bank of New York. On behalf of the Federal Reserve System, the New York Fed's Open Market Desk engages in the trades to implement monetary policy.
5. Under the memorandum of understanding, the SEC and the Fed will freely share information and analyses pertaining to the financial conditions of primary dealers. The two agencies have also agreed to work jointly with the firms to support their continued efforts to strengthen their balance sheets, their liquidity, and their risk-management practices. See: Board of Governors of the Federal Reserve System and Securities and Exchange Commission (2008), "Federal Reserve and SEC Issue Memorandum of Understanding to Deepen Information Sharing and Cooperation," press release, July 7.
6. Bank-affiliated primary dealers are already subject to mandatory consolidated supervision, but the focus of that supervision has been on limiting risks to the banks and other insured depository institutions within the holding company. Existing provisions may need to be modified to provide regulatory authority to assess and limit risks to all functionally regulated entities, including securities subsidiaries.
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