By Daniel Kruger
July 14 (Bloomberg) -- Petroleum exporting nations from Saudi Arabia to Russia are not only charging Americans record high prices for fuel, they are also poised to become the biggest creditor to the U.S. government.
Holdings of Treasuries by oil producers and institutions such as U.K. banks that are proxies for Middle East nations rose 44 percent this year to $510.8 billion through April, four times faster than the rest of the world, according to the Treasury Department's most recent data. At the current pace, they'll surpass Japan, which holds $592.2 billion, as the largest owner this month.
While the investment of so-called petrodollars into government debt is helping to temper a rise in borrowing costs as the U.S. finances a record budget deficit, it highlights America's dependence on foreign money. New York's Chrysler Building was bought last week by Middle East investors.
``We should be very happy that they're buying U.S. Treasuries because they're keeping interest rates low, and that's a positive for bond investors,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York. ``Whether there's geopolitical risk is something else.''
The benchmark 10-year note's yield fell 2 basis points, or 0.02 percentage point, to 3.96 percent last week, according to BGCantor Market Data. It touched 3.78 percent on July 10, the lowest since May 21. The price of the 3.875 percent security due in May 2018 rose 5/32, or $1.56 per $1,000 face amount, to 99 10/32.
McKinsey Study
Yields on 10-year notes are 21 basis points lower because of the investment by oil-producing nations, New York-based consulting company McKinsey & Co. said in October, when oil was $86 a barrel. Prices touched a record $147.27 on July 11.
Assets held by oil exporters swelled to $4.6 trillion at the end of 2007, according to McKinsey. They're pouring that money into Treasuries as losses on alternatives such as equities and corporate debt mount amid the collapse of the U.S. subprime mortgage market. Merrill Lynch & Co. indexes show Treasuries have returned 2.5 percent this year, while major stock indexes in the U.S., Europe and Asia have tumbled at least 10 percent.
The Organization of Petroleum Exporting Countries held $153.9 billion in Treasuries at the end of April, Russia had $60.2 billion and Norway owned $45.3 billion, according to the Treasury Department. Combined, that represents a 113 percent increase from 12 months earlier.
Oil producers own a majority of the $251.4 billion in Treasuries held in the U.K., an 85 percent increase.
Surpassing China
Since the 1960s the U.K. has acted as a financial center where international investors purchase and hold securities, according to the Bank of International Settlements. Morgan Stanley's chief Treasury strategist, George Goncalves, estimates that only $50 billion of the U.K.'s Treasuries are owned by investors based in the country. The rest belong to investors primarily from OPEC and Russia, as well as China, he said.
The Treasury will release data on May holdings on July 16.
Oil-producing nations have surpassed China, which owns $502 billion of U.S. government debt, and are increasing their holdings as Japan cuts back. The nation reduced its stake in Treasuries by 3.6 percent the past 12 months.
The rise in oil-based economies is reminiscent of the 1980s, when Japan enjoyed an export-fueled boom.
Back to the '80s
Holdings of U.S. long-term securities by the Japanese surged almost sevenfold in the five years ended in 1989 to $180 billion as it reinvested its dollar-based reserves. Purchases of landmarks such as New York's Rockefeller Center and the Pebble Beach golf course in Pebble Beach, California, by the Japanese raised concern that the U.S.'s economic primacy was eroding.
Questions of whether purchases by foreigners are a threat to U.S. economic sovereignty are again being raised. The Chrysler Building was acquired last week by the Abu Dhabi Investment Council for an undisclosed price. Last month a Dubai fund was part of a group that paid $2.8 billion for the General Motors Building in Manhattan.
``It's a net transfer of wealth from the United States to the oil exporting economies on a very, very significant scale,'' said Brad Setser, an economist with the Council on Foreign Relations and former acting director of the Treasury's Office of International Monetary and Financial Policy. ``That is a reality. Anybody who is pursuing a policy with large deficits is implicitly planning on relying on demand from those countries.''
Transfer of Wealth
The United Arab Emirates had $964 billion in foreign assets at the end of 2007, followed by Russia with $811 billion, McKinsey said in a report last week. Soaring oil prices have also given Algeria, Iran, Libya, Nigeria and Venezuela more clout in foreign markets, McKinsey said.
Senators Barack Obama of Illinois and John McCain of Arizona, the presumptive presidential candidates for the Democratic and Republican parties, have taken positions on foreign oil wealth that may be difficult to reconcile with the U.S.'s need to attract $2 billion per day in foreign investment to fund its current account deficit. The shortfall in the broadest measure of trade totals $653 billion.
``I am concerned if these sovereign wealth funds are motivated by more than just market considerations,'' Obama said in February. ``We are over time transferring wealth to those countries, and that's something I intend to stop as president.''
`Way Of Life'
McCain told Germany's Sueddeutsche Zeitung newspaper the same month that Russia's membership in the Group of Eight leading industrial nations should be revoked and the G-8 should revert to a ``club of market-based democracies.'' In May he pledged to work in ``partnership'' with Russia to on weapons proliferation.
Compromises may have to be made when it comes to purchase of Treasuries by oil exporters, said Michael Cheah, who manages $2 billion in bonds at AIG SunAmerica Asset Management in Jersey City, New Jersey.
Goldman Sachs Group Inc., BNP Paribas and Societe Generale SA say oil prices are heading higher because of increasing fuel consumption in emerging markets, regardless of a U.S. downturn.
As long as the U.S. continues to borrow and oil exporters continue to lend, Cheah said, ``this is a vindication of the American way of life.''
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
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Monday, July 14, 2008
N.Z. Retail Sales Fall, Adding to Recession Signs
By Tracy Withers
July 14 (Bloomberg) -- New Zealand's retail sales fell by the most in more than four years in May as car sales slumped, adding to signs the economy has slipped into a recession.
Retail spending slumped 1.2 percent from April when it increased the same amount, Statistics New Zealand said today in Wellington. The median estimate in a Bloomberg News survey of 12 economists was for a 0.1 percent decline.Consumer confidence has fallen to a record low, crimping spending at retailers such as Hallenstein Glasson Holdings Ltd., as higher food, fuel and credit costs strain household budgets. The economy contracted in the first quarter, and eight of 13 economists expect it also shrank in second, pushing New Zealand into its first recession since 1998.
``Retailers should be budgeting on tough times continuing for a long time yet,'' said Jason Wong, director of economics and strategy at First NZ Capital Group in Wellington. ``The story is very familiar now, with higher interest rates, higher food petrol prices and the significant housing market downturn more than of robust growth in incomes.''
The New Zealand dollar bought 75.97 U.S. cents at 11:40 a.m. in Wellington trading from 75.99 cents immediately before the report.
Car sales plunged 15 percent from April, the biggest decline since March 1997, the statistics agency said. Excluding cars, spending would have been little changed. The unadjusted value of car sales was the lowest since May 2001.
Profit Declines
Core retail sales, which exclude cars, fuel and workshops, rose 0.7 percent from April, the first increase in three months,. Economists expected a 0.5 percent gain.
Hallenstein Glasson last week said full-year profit will fall at least 28 percent as sales at its clothing stores drop. The Auckland-based company joins larger rivals Warehouse Group Ltd. and Briscoe Group Ltd. in slashing earnings targets as slumping consumer confidence crimps winter sales.
A confidence measure compiled by research group Roy Morgan fell to a record low in the two weeks ended June 29. Forty nine percent of 1,119 people surveyed said it was a bad time to buy a major household item, up from 45 percent in a poll completed two weeks earlier, the company said on July 7.
Slowing consumer spending, which makes up 60 percent of the $104 billion economy, adds to signs Reserve Bank Governor Alan Bollard will cut interest rates from a record-high 8.25 percent this year.
Gasoline Costs
The central bank chief said on June 5 that cooling domestic demand will help curb inflation, making it ``likely'' he will cut borrowing costs. Twelve of 13 economists expect a reduction before Sept. 30 and one forecasts a cut in October.
New Zealanders paid 7 percent more for gasoline in the final week of May compared with a month earlier. Food prices rose 1 percent in May from April.
Retail sales fell in May at 12 of the 24 store categories measured in today's report. Purchases at furniture stores, bars and clubs declined. Sales from fuel outlets increased 3.2 percent.
Supermarket and grocery sales, which make up one-fifth of all retailing, rose 3 percent. Department store, hardware and accommodation sales also increased.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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New Zealand's May Retail Sales: Summary (Table)
By Daniel Petrie
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July 14 (Bloomberg) -- Following is a summary of New Zealand's May retail sales figures from Statistics New Zealand in Wellington.
============================================================================
May April March Feb. Jan. Dec. Nov.
2008 2008 2008 2008 2008 2007 2007
============================================================================
-------------------- MoM% ----------------------
[bn:WBTKR=NZRSSAM:IND] All industries [] -1.2% 1.2% -1.1% -0.6% 0.2% 0.1% 1.8%
[bn:WBTKR=NZRSSUBM:IND] ex motor vehicles [] 0.7% -0.3% -0.4% 0.2% 0.3% 0.3% 1.0%
By Industry
Supermarket 3.0% -3.5% -0.6% 1.6% 2.3% 0.3% 2.1%
Fresh produce 2.3% 1.1% 3.5% -2.7% 0.9% -0.6% 0.3%
Liquor 2.0% -2.1% 0.4% -0.3% -1.5% 2.7% -3.1%
Other food -0.1% 2.5% 0.0% -1.6% -0.6% -2.3% -1.9%
Takeaway food 0.6% 0.8% 2.2% 2.8% -6.8% 1.4% -0.6%
Department stores 3.0% 0.9% 0.7% 1.1% -1.7% 2.8% -1.5%
Furniture/Floor coverings -15.6% 8.4% -2.2% 0.7% -2.8% 0.3% -5.4%
Hardware 4.1% -1.0% 0.9% -1.2% -0.3% -3.9% 2.6%
============================================================================
May April March Feb. Jan. Dec. Nov.
2008 2008 2008 2008 2008 2007 2007
============================================================================
-------------------- MoM% ----------------------
Appliance retailing 1.5% -0.8% -2.0% -2.2% -3.6% 3.2% 1.9%
Recreational goods -5.4% 2.1% -2.8% -2.5% 1.3% 2.6% -0.3%
Clothing/softgoods -0.9% 3.6% -2.5% -1.2% -1.4% -0.7% 3.5%
Footwear -0.4% 6.4% -0.9% 1.4% -4.2% 4.5% 6.9%
Pharmacies 2.1% -0.9% 2.8% 0.0% 0.3% -2.0% -0.1%
Repairs -1.8% 9.7% 0.7% 1.1% 0.7% -5.3% 0.3%
Other retailing -1.4% 2.1% -0.3% 0.0% -1.0% -0.5% 2.0%
Accommodation 3.3% -0.6% 1.8% 0.3% -1.6% 0.9% 0.7%
Bars/Clubs -2.8% 1.7% 1.1% -5.6% 7.6% 3.8% 0.9%
Cafes/Restaurants -0.3% -0.7% -1.3% 1.0% 2.1% -2.8% 3.0%
Personal/goods hiring 1.0% -2.9% -4.3% 6.7% -6.6% 5.9% 0.3%
Other personal 0.6% 1.3% -1.1% -0.6% 3.0% -1.1% -1.0%
ex motor vehicles 0.7% -0.3% -0.4% 0.2% 0.3% 0.3% 1.0%
Motor vehicles -14.8% 8.5% -4.6% -4.6% -0.9% -2.9% 4.2%
Fuel retailing 3.2% -1.9% 0.7% -0.8% 0.6% 2.3% 6.4%
Smash repair/tires -7.0% 16.6% -8.7% 0.0% -0.2% -2.6% -3.2%
Other vehicle repairs -2.2% 9.0% -4.7% -2.8% 1.6% 1.5% -0.8%
============================================================================
Note: Figures are seasonally adjusted.
Source: Statistics New Zealand
To contact the reporter on this story: Daniel Petrie in Sydney at dpetrie5@bloomberg.net
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N.Z. Economy Faces Stagflation as Recession Looms
By Tracy Withers
July 14 (Bloomberg) -- New Zealand consumer-price increases probably accelerated in the second quarter, fanned by fuel and food costs, adding to signs the economy is facing stagflation as it slips into recession.
The consumer prices index rose 1.4 percent from the first quarter, according to the median estimate of 12 economists surveyed by Bloomberg News. Annual inflation was probably 3.8 percent, the fastest pace in two years. The report will be released tomorrow at 10:45 a.m. in Wellington.Central banks from Chile to Japan are grappling with slowing economic growth while surging fuel and food prices fan inflation. New Zealand retail sales fell by the most in four years in May, adding to signs the economy was probably in a recession in the first half of 2008, while inflation will likely reach an 18-year high by December, said economist Craig Ebert.
``We expect gross domestic product to go backward and inflation will go higher,'' said Ebert, senior markets economist at Bank of New Zealand Ltd. in Wellington. ``In a headline sense, there is no denying this is stagflation, although it's not an extreme example.''
The economy contracted 0.3 percent in the first quarter. Eight of 13 economists surveyed by Bloomberg expect it also shrank in the second quarter, putting the economy in its first recession since 1998.
Pricing Intentions
A net 23 percent of companies say sales will slow in the next three months, the most pessimistic outlook since 1990, suggesting the economy will also contract in the third quarter, according to a July 8 report from the New Zealand Institute of Economic Research.
Ebert expects inflation will accelerate to almost 5 percent this year, the highest since 1990, as fuel and food costs rise. A net 47 percent of firms surveyed by the New Zealand Institute plan to raise prices in the next three months.
Reserve Bank Governor Alan Bollard, who is required to keep annual inflation between 1 percent and 3 percent, has left the benchmark interest rate at a record-high 8.25 percent since July last year, betting the slowing economy will curb inflation.
The Bank of Japan will probably keep its overnight rate unchanged this week as high prices discourage spending and derail growth, according to all 39 economists surveyed by Bloomberg. Interest rates in Chile have tripled the past year even as economic growth slows.
Drought, Housing
Last month, Bollard said borrowing costs are likely to fall this year because annual inflation will slow to less than 3 percent within two years. Three of 13 economists surveyed by Bloomberg News expect he will cut the benchmark interest rate on July 24. Nine forecast a reduction in September and one a cut in October.
The chance of a quarter-point cut this month rose to 58 percent on July 11 from 32 percent a week earlier, according to an index calculated by Credit Suisse based on swaps prices.
Bollard ``will want to make monetary policy less restrictive, but he may wait until September,'' said Ebert.
Bollard is under pressure from companies and home-owners to cut interest rates as drought, international credit turmoil and a slump in the housing market weigh on consumer spending.
Hallenstein Glasson Holdings Ltd. last week said full-year profit will fall at least 28 percent as sales drop, the third New Zealand retailer to cut earnings forecasts in the past two weeks. In May, retail spending slumped 1.2 percent as car sales had their biggest slump since March 1997, Statistics New Zealand said in a report today.
House Prices
New Zealand's house prices posted their smallest annual gain in more than three years in June, Quotable Value New Zealand Ltd., the government valuation agency, said in a report today. A third report showed the nation's services industry contracted for a third month as falling business confidence damped demand.
Still, the central bank doesn't want to fan inflation pressures by cutting borrowing costs too early, said Doug Steel, senior economist at Westpac Banking Corp. in Wellington.
``Inflation expectations are already elevated and are likely to press higher,'' he said. ``The cumulative pressure built up in the economy will prevent an aggressive monetary easing despite a rather sharp softening in economic growth.''
Air New Zealand Ltd., the nation's biggest airline, raised fares by an average 10 percent between March and June, citing record-high jet fuel prices.
Electricity prices have increased as a drought depleted the levels of lakes and rivers that account for 60 percent of the nation's generation.
Bloomberg Survey
Bollard will focus on non-tradable inflation, a core measure of prices that are not influenced by currency fluctuations and fuel, said Bank of New Zealand's Ebert.
Non-tradable prices probably increased 0.9 percent from the first quarter, when they rose 1.1 percent, according to the median estimate of eight economists. Bollard is expecting a 1 percent gain.
Following is a table of economists' forecasts for the change in second-quarter consumer prices from the previous three months and from a year earlier, and changes in non-tradables prices from the first quarter.
Consumer Prices Non-Tradables
Qtr Year Qtr
--------------------------------------------------------------
Median 1.4% 3.8% 0.9%
High Forecast 1.6% 4.0% 1.0%
Low Forecast 1.2% 3.5% 0.8%
No. of replies 12 12 8
--------------------------------------------------------------
ANZ Bank 1.4% 3.8% 1.0%
ASB Bank 1.4% 3.8% 0.9%
Bank of New Zealand 1.4% 3.8% 1.0%
Barclays 1.1% 3.5% ---
Citibank 1.4% 3.8% ---
Deutsche Bank 1.4% 3.8% 0.8%
First N.Z. 1.5% 3.9% ---
Goldman Sachs JBWere 1.2% 3.6% 0.9%
ICAP 1.4% 3.9% ---
JP Morgan 1.4% 3.8% 0.9%
UBS 1.6% 4.0% 0.8%
Westpac Bank 1.6% 4.0% 1.0%
--------------------------------------------------------------
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Yen, Thailand's Baht, Singapore Dollar: Asia Currency Preview
By Yumi Teso
July 14 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Bank of Japan may keep its benchmark interest rate unchanged at 0.5 percent after a two-day meeting that starts today in Tokyo, according to a Bloomberg News survey.
Chief Cabinet Secretary Nobutaka Machimura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Vice Finance Minister Kazuyuki Sugimoto will talk to reporters at 5 p.m. local time.
The yen was at 106.40 a dollar at 8:11 a.m. in Tokyo.
Thai baht: A report on June consumer confidence is due today. The consumer confidence index was at 71.8 in May.
The baht was at 33.65.
Singapore's dollar: Retail sales increased 6.5 percent in May from the previous year, after rising 7.5 percent in April, economists said before a report tomorrow.
The Singapore dollar was at S$1.3588.
Philippine peso: A report on overseas workers remittances for May is due tomorrow. Money sent home by Filipinos working abroad increased 18.4 percent in April.
The peso was at 45.662.
To contact the reporter on this story: Yumi Teso in Singapore at yteso@bloomberg.net.
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July 14 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: The Bank of Japan may keep its benchmark interest rate unchanged at 0.5 percent after a two-day meeting that starts today in Tokyo, according to a Bloomberg News survey.
Chief Cabinet Secretary Nobutaka Machimura will hold briefings at 11 a.m. and 4 p.m. in Tokyo. Vice Finance Minister Kazuyuki Sugimoto will talk to reporters at 5 p.m. local time.
The yen was at 106.40 a dollar at 8:11 a.m. in Tokyo.
Thai baht: A report on June consumer confidence is due today. The consumer confidence index was at 71.8 in May.
The baht was at 33.65.
Singapore's dollar: Retail sales increased 6.5 percent in May from the previous year, after rising 7.5 percent in April, economists said before a report tomorrow.
The Singapore dollar was at S$1.3588.
Philippine peso: A report on overseas workers remittances for May is due tomorrow. Money sent home by Filipinos working abroad increased 18.4 percent in April.
The peso was at 45.662.
To contact the reporter on this story: Yumi Teso in Singapore at yteso@bloomberg.net.
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N.Z. Dollar Trades Near Two-Week High on U.S. Credit Concerns
By Tracy Withers
July 14 (Bloomberg) -- The New Zealand dollar traded near a two-week high as speculation that U.S. authorities will have to bail out mortgage companies Fannie Mae and Freddie Mac increased demand for the nation's higher-yielding assets.
The currency gained for a fourth day as people with knowledge of the discussions said the two largest buyers of U.S. home loans are in talks with Treasury, Federal Reserve and White House officials to come up with funding plans should they require financing.
``Escalating fears about the health of Freddie Mac and Fannie Mae saw the U.S. dollar fall heavily against all the major currencies,'' said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. ``The ongoing weakness in the U.S. dollar has seen the New Zealand dollar defy the steadily deteriorating domestic outlook.''
New Zealand's currency bought 76.23 U.S. cents at 9:51 a.m. in Wellington from 76.14 cents in late New York trading July 11. It bought 80.86 yen from 80.94 yen.
The U.S. dollar fell to $1.5965 per euro in Wellington from $1.5933 in New York. That's the weakest since April 23. The dollar reached the all-time low of $1.6019 the previous day.
Fannie and Freddie fell to the lowest level in more than 17 years in New York trading July 11 on concerns the companies don't have enough capital to survive the housing slump. They are critical for the housing market because they guarantee almost half the $12 trillion in outstanding U.S. mortgages.
Pledged Support
Treasury Secretary Henry Paulson has pledged support for the companies. Authorities may stand behind the companies if they cannot raise capital through bond sales, people said.
New Zealand's dollar gained even as investors have increased bets Reserve Bank Governor Alan Bollard will cut the benchmark interest rate of 8.25 percent in the third quarter, amid expectations economic growth has stalled.
Last month, the Governor said a rate cut is ``likely'' this year as economic growth slows.
The chance of a quarter-percentage point cut at the next review on July 24 is 58 percent from 32 percent a week earlier, according to an index calculated by Credit Suisse Group based on overnight swaps trading. Nine of 13 economists surveyed by Bloomberg expect a reduction in September. Three expect a July cut and one a move in October.
A government report today may show retail sales fell in May for the third month in four, adding to signs that the economy may have contracted in the second quarter, according to the median forecast of 12 economists surveyed by Bloomberg.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net
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July 14 (Bloomberg) -- The New Zealand dollar traded near a two-week high as speculation that U.S. authorities will have to bail out mortgage companies Fannie Mae and Freddie Mac increased demand for the nation's higher-yielding assets.
The currency gained for a fourth day as people with knowledge of the discussions said the two largest buyers of U.S. home loans are in talks with Treasury, Federal Reserve and White House officials to come up with funding plans should they require financing.
``Escalating fears about the health of Freddie Mac and Fannie Mae saw the U.S. dollar fall heavily against all the major currencies,'' said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. ``The ongoing weakness in the U.S. dollar has seen the New Zealand dollar defy the steadily deteriorating domestic outlook.''
New Zealand's currency bought 76.23 U.S. cents at 9:51 a.m. in Wellington from 76.14 cents in late New York trading July 11. It bought 80.86 yen from 80.94 yen.
The U.S. dollar fell to $1.5965 per euro in Wellington from $1.5933 in New York. That's the weakest since April 23. The dollar reached the all-time low of $1.6019 the previous day.
Fannie and Freddie fell to the lowest level in more than 17 years in New York trading July 11 on concerns the companies don't have enough capital to survive the housing slump. They are critical for the housing market because they guarantee almost half the $12 trillion in outstanding U.S. mortgages.
Pledged Support
Treasury Secretary Henry Paulson has pledged support for the companies. Authorities may stand behind the companies if they cannot raise capital through bond sales, people said.
New Zealand's dollar gained even as investors have increased bets Reserve Bank Governor Alan Bollard will cut the benchmark interest rate of 8.25 percent in the third quarter, amid expectations economic growth has stalled.
Last month, the Governor said a rate cut is ``likely'' this year as economic growth slows.
The chance of a quarter-percentage point cut at the next review on July 24 is 58 percent from 32 percent a week earlier, according to an index calculated by Credit Suisse Group based on overnight swaps trading. Nine of 13 economists surveyed by Bloomberg expect a reduction in September. Three expect a July cut and one a move in October.
A government report today may show retail sales fell in May for the third month in four, adding to signs that the economy may have contracted in the second quarter, according to the median forecast of 12 economists surveyed by Bloomberg.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net
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Australian Dollar Gains on Optimism Economy to Weather Crisis
By Chris Young
July 14 (Bloomberg) -- The Australian dollar gained for a fourth day on speculation the nation's economy will withstand widening losses among U.S. financial institutions.
The currency climbed toward its 25-year high of 97.16 U.S. cents reached July 11 after a slump in the shares of Fannie Mae and Freddie Mac, the two largest buyers of U.S. home loans. ``The main Australian institutions are generally well placed'' to prosper in the current environment, Reserve Bank of Australia Governor Glenn Stevens said July 9.``The high-yielding Australian dollar is benefiting from concerns in the U.S. credit markets,'' said Peter Pontikis, a treasury strategist at Suncorp-Metway Ltd. in Brisbane, Australia, in a note to clients. ``Its 2.5 cent rally of the past three trading days will be hard to sustain.''
The Australian dollar bought 96.82 U.S. cents at 9:43 a.m. in Sydney, compared with 96.62 in late New York on July 11, according to data compiled by Bloomberg. It earlier reached 97.11 cents, near the strongest level since February 1983 touched late last week.
The Australian dollar pared its advance after Treasury Secretary Henry Paulson sought authority from Congress to buy equity stakes in the two firms and lend to them.
Paulson proposed that Congress enact legislation giving the Treasury temporary authority to buy equity ``if needed'' in Fannie Mae and Freddie Mac, and to increase their lines of credit with the department from $2.25 billion each.
Australia's currency has risen almost 11 percent this year on speculation the nation's financial institutions have avoided the worst of the U.S. subprime crisis that's caused more than $400 billion in losses and writedowns due to a lack of confidence in credit markets.
To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.
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Dollar Gains as Paulson Seeks Equity Stakes in Freddie, Fannie
By Stanley White and Kosuke Goto
The currency also erased earlier losses after the Federal Reserve said it will offer direct loans to the two largest U.S. mortgage finance companies, easing concerns that confidence in housing and financial markets will worsen. The New Zealand dollar fell as a government report showed retail sales slid by the most in more than four years.
``This should prove to be dollar supportive,'' said Sean Callow, senior currency strategist in Sydney at Westpac Banking Corp., Australia's fourth-biggest bank. ``The notion of the Treasury buying stakes in Freddie Mac and Fannie Mae has got to be great for their share prices. That's a big step toward easing concern that these mortgage lenders can get access to funds.''
The dollar traded at $1.5896 per euro at 9:32 a.m. in Tokyo, from an earlier low of $1.5971 and $1.5938 late in New York on July 11. The U.S. currency reached a record low of $1.6019 on April 24. It bought 106.58 yen from 106.28 yen at the end of last week. The euro was little changed at 169.38 yen after earlier reaching 169.75, the strongest level since the single currency was introduced in 1999.
The dollar may rise to $1.5820 to $1.5830 today, Callow forecast.
The New Zealand dollar was the weakest among the 16 most- traded currencies. It traded at 75.91 U.S. cents from 76.14 on July 11 as retail spending slumped 1.2 percent in May after increasing the same amount in April, adding to signs the economy has slipped into a recession.
Paulson Plan
Paulson proposed that Congress enact legislation giving the Treasury temporary authority to buy equity ``if needed'' in Fannie and Freddie, and to increase their lines of credit with the department from $2.25 billion each. The Fed authorized the companies to borrow directly from the New York Fed, in a step that could provide funding before the bill is passed.
Today's announcement came after Fannie Mae and Freddie Mac lost about half their value last week. Global banks and securities firms have reported losses of about $400 billion as the subprime mortgage market collapsed.
The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, rose to 72.113 from 72.096 on July 11, its first gain in four days. Against the Australian dollar, the U.S. currency advanced from a 25-year low of 97.16 cents reached July 11 to trade at 96.73 cents.
Mortgage Support
``The markets' initial reaction to Paulson's remarks was to buy the dollar,'' said Motonari Ogawa, director of currency trading in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``This time he expressed some support for those two troubled mortgage firms, easing concerns about them.''
The dollar may move between 105.80 yen and 107 yen, and $1.5870 and $1.5970 a euro today, he said.
Futures traders decreased their bets that the euro will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 24,007 on July 8, compared with net longs of 27,683 a week earlier.
Bill Gross, manager of the world's biggest bond fund, turned bearish on the euro for the first time since the currency's inception in 1999.
Pimco and Euro
A growing number of the world's biggest investors say a slowdown in the region's economy may be more severe than in the U.S., forcing the European Central Bank to reverse this month's rate increase. By January, the euro will be lower against the dollar, yen and even the pound, according to the median estimate of strategists surveyed by Bloomberg.
``We might have hit a point where the euro doesn't have a lot to stand on,'' said Emanuele Ravano, co-head of European strategy in London for Gross's Pacific Investment Management Co., which runs the $129 billion Pimco Total Return Fund. ``The euro is ultimately very overvalued. It could be quite a bit lower at some point in time over the next couple of years.''
Gains in the dollar may be limited by speculation Fed Chairman Ben S. Bernanke will highlight risks to the economy in his semi-annual testimony on monetary policy before the Senate Banking Committee tomorrow.
``Bernanke will talk about inflation and the downside risk of the U.S economy,'' said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp. in Tokyo. ``With U.S. economic fundamentals deteriorating amid financial turmoil, the markets will be more fixated by his remarks on the slowing economy. This will lead to dollar-selling.''
The dollar may fall to $1.5990 a euro this week, she said.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net
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US moves to support lending firms
Page last updated at 00:18 GMT, Monday, 14 July 2008 01:18 UK
BBC News, The US government has announced sweeping measures to shore up the nation's two largest mortgage finance companies, Freddie Mac and Fannie Mae.
The plan calls on Congress to expand the companies' current line of credit and allow the Treasury to buy equity capital in the companies if needed.
Freddie Mac and Fannie Mae guarantee almost half of all US home loans.
Their share prices fell nearly 50% last week amid fears that they might have trouble raising funds.
The BBC's Greg Wood in New York says the emergency measures are meant to allay fears that the two companies are about to run out of money.
Key role
Announcing that new credit lines would be sought from Congress, Treasury Secretary Henry Paulson said: "Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies."
Fannie Mae and Freddie Mac play an important role in our housing finance system, and they should continue to play this role in their current forms
Dana Perino
White House spokeswoman
He added that their "support for the housing market is particularly important as we work through the current housing correction".
The Federal Reserve also said it would lend to Fannie Mae and Freddie Mac if they need additional funds.
The two firms play an important role in the financial markets in providing funding for home loans by buying up mortgages and packaging them as investments.
As mortgage backers, the companies have had to pay out when homeowners have defaulted on their loans.
Last week, investor concern that the government might have to bail out Fannie Mae and Freddie Mac because of the huge losses they have suffered in the US property crash sent their shares plummeting
If either firm were to fail, the consequences for the already fragile US financial system would be disastrous as mortgage lending could virtually dry up, our correspondent says.
Restore stability
Both firms have defended their finances, saying they had enough capital to weather the housing slump.
Freddie Mac is due to sell $3bn in short-term debt on Monday, which will be a critical test of confidence in the mortgage companies.
Freddie Mac and Fannie Mae are both privately-owned companies mandated by the US Congress to provide funding to the housing market.
As many private sector banks consider reducing their mortgage business, the US government has increasingly looked to Fannie Mae and Freddie Mac to help restore stability to the market.
"Fannie Mae and Freddie Mac play an important role in our housing finance system, and they should continue to play this role in their current forms," White House spokeswoman Dana Perino said in a statement on Sunday.
Fannie Mae was founded in 1938, during the depression, when millions of families could not become homeowners, or faced losing their homes, because of a lack of mortgage funds.
It was a government agency until 1968. Freddie Mac was created in 1970.
Read more...
BBC News, The US government has announced sweeping measures to shore up the nation's two largest mortgage finance companies, Freddie Mac and Fannie Mae.
The plan calls on Congress to expand the companies' current line of credit and allow the Treasury to buy equity capital in the companies if needed.
Freddie Mac and Fannie Mae guarantee almost half of all US home loans.
Their share prices fell nearly 50% last week amid fears that they might have trouble raising funds.
The BBC's Greg Wood in New York says the emergency measures are meant to allay fears that the two companies are about to run out of money.
Key role
Announcing that new credit lines would be sought from Congress, Treasury Secretary Henry Paulson said: "Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies."
Fannie Mae and Freddie Mac play an important role in our housing finance system, and they should continue to play this role in their current forms
Dana Perino
White House spokeswoman
He added that their "support for the housing market is particularly important as we work through the current housing correction".
The Federal Reserve also said it would lend to Fannie Mae and Freddie Mac if they need additional funds.
The two firms play an important role in the financial markets in providing funding for home loans by buying up mortgages and packaging them as investments.
As mortgage backers, the companies have had to pay out when homeowners have defaulted on their loans.
Last week, investor concern that the government might have to bail out Fannie Mae and Freddie Mac because of the huge losses they have suffered in the US property crash sent their shares plummeting
If either firm were to fail, the consequences for the already fragile US financial system would be disastrous as mortgage lending could virtually dry up, our correspondent says.
Restore stability
Both firms have defended their finances, saying they had enough capital to weather the housing slump.
Freddie Mac is due to sell $3bn in short-term debt on Monday, which will be a critical test of confidence in the mortgage companies.
Freddie Mac and Fannie Mae are both privately-owned companies mandated by the US Congress to provide funding to the housing market.
As many private sector banks consider reducing their mortgage business, the US government has increasingly looked to Fannie Mae and Freddie Mac to help restore stability to the market.
"Fannie Mae and Freddie Mac play an important role in our housing finance system, and they should continue to play this role in their current forms," White House spokeswoman Dana Perino said in a statement on Sunday.
Fannie Mae was founded in 1938, during the depression, when millions of families could not become homeowners, or faced losing their homes, because of a lack of mortgage funds.
It was a government agency until 1968. Freddie Mac was created in 1970.
Read more...
Economic Calendar Eco Data 7/14/08
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand Retail sales M/M May | -0.10% | 1.00% | | |
| 08:30 | GBP | U.K. PPI core M/M Jun | 0.80% | 1.20% | | |
| 08:30 | GBP | U.K. PPI core Y/Y Jun | 6.50% | 5.90% | | |
| 08:30 | GBP | U.K. PPI input M/M Jun | 2.50% | 3.80% | | |
| 08:30 | GBP | U.K. PPI input Y/Y Jun | 28.90% | 27.60% | | |
| 08:30 | GBP | U.K. PPI output M/M Jun | 1.20% | 1.60% | | |
| 08:30 | GBP | U.K. PPI output Y/Y Jun | 9.80% | 8.90% | | |
| 09:00 | EUR | Eurozone Industrial prod'n M/M May | -2.30% | 0.90% | | |
| 09:00 | EUR | Eurozone Industrial prod'n Y/Y May | 0.30% | 3.90% | | |
| 14:00 | USD | Fed Governors Vote on Mortgage Rules in Open Meeting |
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Australia Stocks Update: S&P/ASX 200 Falls 16.20 to 4,963.70
By Nicolas Johnson
July 14 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, fell 0.33 percent at 10:05 a.m.
The index of 200 companies traded on the Australian Stock Exchange fell 16.20 to 4,963.70. Among the stocks in the index, 34 rose, 84 fell and 82 were unchanged.
Declines in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Commonwealth Bank Of Australia and Csl Ltd/australia. About 83.29 million shares changed hands on the Australian Stock Exchange.
Bhp Billiton Ltd, which fell 32 cents to A$40.03, was the most active stock by value in Australia.
The next most-active issues were Australia & New Zealand Banking Group Ltd, which fell 3 cents to A$17.92, and Commonwealth Bank Of Australia, which fell 31 cents to A$40.01.
Read more...
July 14 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, fell 0.33 percent at 10:05 a.m.
The index of 200 companies traded on the Australian Stock Exchange fell 16.20 to 4,963.70. Among the stocks in the index, 34 rose, 84 fell and 82 were unchanged.
Declines in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Commonwealth Bank Of Australia and Csl Ltd/australia. About 83.29 million shares changed hands on the Australian Stock Exchange.
Bhp Billiton Ltd, which fell 32 cents to A$40.03, was the most active stock by value in Australia.
The next most-active issues were Australia & New Zealand Banking Group Ltd, which fell 3 cents to A$17.92, and Commonwealth Bank Of Australia, which fell 31 cents to A$40.01.
Read more...
Most Japan Stocks Fall on U.S. Slowdown Concern; Promise Gains
By Makiko Kitamura and Satoshi Kawano
July 14 (Bloomberg) -- Most Japanese stocks fell on concern surging energy prices will dent earnings for the nation's auto and electronics makers. Consumer lenders surged after Shinsei Bank Ltd. agreed to buy General Electric Co.'s local finance business.
Toyota Motor Corp., Japan's largest carmaker, dropped 0.2 percent, and Honda Motor Co. declined 0.6 percent. Canon Inc., the world's biggest maker of digital cameras, fell 0.8 percent. Promise Co., Japan's second-largest consumer lender by market value, climbed 3.3 percent.
The Nikkei 225 Stock Average declined 17.40, or 0.1 percent, to 13,022.29 as of 9:02 a.m. in Tokyo. The broader Topix index fell 0.2, or less than 0.1 percent, to 1,285.71.
U.S. Treasury Secretary Henry Paulson sought authority from Congress to buy stakes in and lend to Fannie Mae and Freddie Mac, aiming to stem the collapse of confidence in the largest sources of U.S. mortgage financing. Meanwhile, IndyMac Bancorp Inc. became the second-biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.
Goldman Sachs Group Inc. lowered its rating on Japan's megabank sector to ``neutral'' from ``attractive,'' cutting its rating on Mitsubishi UFJ Financial Group Inc. to ``neutral'' from ``buy.''
``The sector has deteriorated more than we expected,'' Goldman analyst Toyoki Sameshima wrote in a report dated July 12. ``We see few price drivers that could shake off the macroeconomic deterioration.''
Shinsei will buy GE's Tokyo-based Lake unit and its mortgage-loan and credit-card businesses, the bank said in a statement on July 11. The deal will add 779 billion yen to Shinsei's balance of outstanding loans to individuals in Japan, which stood at 1.2 trillion yen as of March 31, the company said.
Crude oil for August delivery fell for the first time in four days to $142.49 a barrel.
To contact the reporters for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
Read more...
July 14 (Bloomberg) -- Most Japanese stocks fell on concern surging energy prices will dent earnings for the nation's auto and electronics makers. Consumer lenders surged after Shinsei Bank Ltd. agreed to buy General Electric Co.'s local finance business.
Toyota Motor Corp., Japan's largest carmaker, dropped 0.2 percent, and Honda Motor Co. declined 0.6 percent. Canon Inc., the world's biggest maker of digital cameras, fell 0.8 percent. Promise Co., Japan's second-largest consumer lender by market value, climbed 3.3 percent.
The Nikkei 225 Stock Average declined 17.40, or 0.1 percent, to 13,022.29 as of 9:02 a.m. in Tokyo. The broader Topix index fell 0.2, or less than 0.1 percent, to 1,285.71.
U.S. Treasury Secretary Henry Paulson sought authority from Congress to buy stakes in and lend to Fannie Mae and Freddie Mac, aiming to stem the collapse of confidence in the largest sources of U.S. mortgage financing. Meanwhile, IndyMac Bancorp Inc. became the second-biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.
Goldman Sachs Group Inc. lowered its rating on Japan's megabank sector to ``neutral'' from ``attractive,'' cutting its rating on Mitsubishi UFJ Financial Group Inc. to ``neutral'' from ``buy.''
``The sector has deteriorated more than we expected,'' Goldman analyst Toyoki Sameshima wrote in a report dated July 12. ``We see few price drivers that could shake off the macroeconomic deterioration.''
Shinsei will buy GE's Tokyo-based Lake unit and its mortgage-loan and credit-card businesses, the bank said in a statement on July 11. The deal will add 779 billion yen to Shinsei's balance of outstanding loans to individuals in Japan, which stood at 1.2 trillion yen as of March 31, the company said.
Crude oil for August delivery fell for the first time in four days to $142.49 a barrel.
To contact the reporters for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
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Asian Stocks Retreat on U.S. Bank Concerns, Record Oil Prices
By Chen Shiyin
July 14 (Bloomberg) -- Asian stocks fell for the first time in four days as U.S. regulators seized mortgage lender IndyMac Bancorp Inc. and crude oil prices climbed to a record.
Macquarie Group Ltd. and Kookmin Bank led declines among banks. Canon Inc. and Samsung Electronics Co. dropped after crude oil prices rose above $147 a barrel on July 11, renewing speculation higher fuel costs will dent consumer spending. Posco advanced in Seoul after the steelmaker reported a 34 percent increase in profit.
The MSCI Asia-Pacific Index lost 0.4 percent to 133.02 at 9:20 a.m. Tokyo time, halting a three-day, 2.4 percent rally. About five stocks retreated for every four that rose on the index, which has dropped 16 percent this year.
Japan's Nikkei 225 Stock Average slipped 0.1 percent to 13,023.48. Benchmark indexes also retreated in Australia, New Zealand and South Korea.
U.S. markets fell on July 11, extending the longest stretch of weekly losses for the Standard & Poor's 500 Index since 2004, as growing concern about the health of Fannie Mae and Freddie Mac sent bank shares to an 11-year low.
Crude oil for August delivery jumped as much as 4 percent to a record $147.27 a barrel on July 11 after the dollar fell and the Jerusalem Post said Israeli war planes practiced over Iraq for an attack on Iran's nuclear research facility. Futures were at $143.36 today.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
Read more...
July 14 (Bloomberg) -- Asian stocks fell for the first time in four days as U.S. regulators seized mortgage lender IndyMac Bancorp Inc. and crude oil prices climbed to a record.
Macquarie Group Ltd. and Kookmin Bank led declines among banks. Canon Inc. and Samsung Electronics Co. dropped after crude oil prices rose above $147 a barrel on July 11, renewing speculation higher fuel costs will dent consumer spending. Posco advanced in Seoul after the steelmaker reported a 34 percent increase in profit.
The MSCI Asia-Pacific Index lost 0.4 percent to 133.02 at 9:20 a.m. Tokyo time, halting a three-day, 2.4 percent rally. About five stocks retreated for every four that rose on the index, which has dropped 16 percent this year.
Japan's Nikkei 225 Stock Average slipped 0.1 percent to 13,023.48. Benchmark indexes also retreated in Australia, New Zealand and South Korea.
U.S. markets fell on July 11, extending the longest stretch of weekly losses for the Standard & Poor's 500 Index since 2004, as growing concern about the health of Fannie Mae and Freddie Mac sent bank shares to an 11-year low.
Crude oil for August delivery jumped as much as 4 percent to a record $147.27 a barrel on July 11 after the dollar fell and the Jerusalem Post said Israeli war planes practiced over Iraq for an attack on Iran's nuclear research facility. Futures were at $143.36 today.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net.
Read more...
Persian Gulf Shares Retreat, Led by Dubai Investments, Taqa
By Zainab Fattah
July 13 (Bloomberg) -- Persian Gulf shares declined, tracking global markets as foreign investors moved away from riskier assets.
Dubai Investments PJSC fell to its lowest in more than three months. Abu Dhabi National Energy Co., known as Taqa, also declined. Commercial Bank of Qatar QSC lost for a third day.
``Foreign investors, especially hedge funds, are moving away from risky assets by reducing their exposure to equity markets globally,'' Kamran Butt, head of Middle East equity research at Credit Suisse Group AG, said in a telephone interview from Dubai. ``Combine that with geopolitical risk and the fact that Gulf markets are not the most cheaply valued right now and you can see why markets are falling.''
Stocks last week fell around the globe, giving the MSCI World Index a 20 percent bear-market decline from its October record, as oil reached $147 a barrel and concern deepened that Fannie Mae and Freddie Mac are short of capital.
The Dubai Financial Market General Index dropped 1.1 percent to 5,287.63, its lowest since March 30. The Abu Dhabi Securities Exchange General Index lost 1.4 percent, while Qatar's Doha Securities Market Index slid 1.8 percent.
Multiples
The MSCI GCC Countries Index, a measure of 115 companies in six Gulf states, trades at an average of 17 times estimated earnings, according to data compiled by Bloomberg. That compares with a multiple of 11 for the MSCI Emerging Markets Index.
The U.S. has intensified its push for tougher sanctions on Iran in a dispute over the country's nuclear program. Last week, the Iranian military test-fired a long-range Shahab-3 missile, with a 2,000-kilometer (1,240-mile) range and a 1-ton weight capable of reaching Israel, to demonstrate its power.
Dubai Investments, which owns stakes in more than 40 companies, declined 3.7 percent to 3.62 dirhams. The stock closed at its lowest since March 30.
Taqa, the state-controlled investment company, lost 4.5 percent to 2.79 dirhams. Commercial Bank of Qatar, the Persian Gulf country's second-biggest bank by assets, retreated 3.4 percent to 137.8 riyals.
Gulf Pharmaceutical Industries PJSC slid 5.3 percent to 2.32 dirhams. The U.A.E.-based medical supplies-maker known as Julphar said Chief Executive Officer Abdul-Razzak Yousef resigned for personal reasons, according to a statement posted on the Web site of Abu Dhabi's bourse today.
Saudi Shares Gain
Saudi Arabia's Tadawul All Share Index advanced 1.7 percent, gaining for the first time in four days.
Saudi Basic Industries Corp. rose 2.6 percent to 136.25 riyals. The world's biggest chemicals maker by market value agreed to market through its Chinese unit polyolefin products produced by a Saudi Aramco venture in China.
Bank Albilad surged 6.7 percent to 40 riyals. The second- smallest Saudi Arabian bank by market value said second-quarter net income advanced 64 percent to 57 million riyals ($15.5 million) on income from investments and commissions.
National Metal Manufacturing & Casting Co. jumped 9.8 percent, the biggest surge in three months, to 67 riyals. The Saudi maker of industrial wires and steel products said net income more than tripled to 28.6 million riyals, according to a statement posted on the Web site of the Saudi bourse.
Oman Cables Climbs
The Kuwait Stock Exchange Index increased 0.5 percent, while the Bahrain All Share Index lost 0.1 percent. The Muscat Securities Market 30 Index gained 0.3 percent.
Oman Cables Industry SAOG jumped 6.1 percent to 4.191 rials, its biggest one-day gain since Feb. 26. The maker of wires and cables said first-half net income more than doubled to 11.5 million rials ($29.9 million), according to a statement posted on the Web site of the Omani bourse today.
United Development Co. gained 1.3 percent to 62.7 riyals. The Qatari developer building man-made islands off the emirate's coast said first-half net income almost doubled to 241 million riyals ($66.2 million).
InvestBank PSC rose 1.5 percent to 3.5 dirhams. The lender based in Sharjah, the U.A.E., said second-quarter net income jumped 57 percent to 78.2 million dirhams ($21.3 million) on higher interest and fee income.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
Read more...
July 13 (Bloomberg) -- Persian Gulf shares declined, tracking global markets as foreign investors moved away from riskier assets.
Dubai Investments PJSC fell to its lowest in more than three months. Abu Dhabi National Energy Co., known as Taqa, also declined. Commercial Bank of Qatar QSC lost for a third day.
``Foreign investors, especially hedge funds, are moving away from risky assets by reducing their exposure to equity markets globally,'' Kamran Butt, head of Middle East equity research at Credit Suisse Group AG, said in a telephone interview from Dubai. ``Combine that with geopolitical risk and the fact that Gulf markets are not the most cheaply valued right now and you can see why markets are falling.''
Stocks last week fell around the globe, giving the MSCI World Index a 20 percent bear-market decline from its October record, as oil reached $147 a barrel and concern deepened that Fannie Mae and Freddie Mac are short of capital.
The Dubai Financial Market General Index dropped 1.1 percent to 5,287.63, its lowest since March 30. The Abu Dhabi Securities Exchange General Index lost 1.4 percent, while Qatar's Doha Securities Market Index slid 1.8 percent.
Multiples
The MSCI GCC Countries Index, a measure of 115 companies in six Gulf states, trades at an average of 17 times estimated earnings, according to data compiled by Bloomberg. That compares with a multiple of 11 for the MSCI Emerging Markets Index.
The U.S. has intensified its push for tougher sanctions on Iran in a dispute over the country's nuclear program. Last week, the Iranian military test-fired a long-range Shahab-3 missile, with a 2,000-kilometer (1,240-mile) range and a 1-ton weight capable of reaching Israel, to demonstrate its power.
Dubai Investments, which owns stakes in more than 40 companies, declined 3.7 percent to 3.62 dirhams. The stock closed at its lowest since March 30.
Taqa, the state-controlled investment company, lost 4.5 percent to 2.79 dirhams. Commercial Bank of Qatar, the Persian Gulf country's second-biggest bank by assets, retreated 3.4 percent to 137.8 riyals.
Gulf Pharmaceutical Industries PJSC slid 5.3 percent to 2.32 dirhams. The U.A.E.-based medical supplies-maker known as Julphar said Chief Executive Officer Abdul-Razzak Yousef resigned for personal reasons, according to a statement posted on the Web site of Abu Dhabi's bourse today.
Saudi Shares Gain
Saudi Arabia's Tadawul All Share Index advanced 1.7 percent, gaining for the first time in four days.
Saudi Basic Industries Corp. rose 2.6 percent to 136.25 riyals. The world's biggest chemicals maker by market value agreed to market through its Chinese unit polyolefin products produced by a Saudi Aramco venture in China.
Bank Albilad surged 6.7 percent to 40 riyals. The second- smallest Saudi Arabian bank by market value said second-quarter net income advanced 64 percent to 57 million riyals ($15.5 million) on income from investments and commissions.
National Metal Manufacturing & Casting Co. jumped 9.8 percent, the biggest surge in three months, to 67 riyals. The Saudi maker of industrial wires and steel products said net income more than tripled to 28.6 million riyals, according to a statement posted on the Web site of the Saudi bourse.
Oman Cables Climbs
The Kuwait Stock Exchange Index increased 0.5 percent, while the Bahrain All Share Index lost 0.1 percent. The Muscat Securities Market 30 Index gained 0.3 percent.
Oman Cables Industry SAOG jumped 6.1 percent to 4.191 rials, its biggest one-day gain since Feb. 26. The maker of wires and cables said first-half net income more than doubled to 11.5 million rials ($29.9 million), according to a statement posted on the Web site of the Omani bourse today.
United Development Co. gained 1.3 percent to 62.7 riyals. The Qatari developer building man-made islands off the emirate's coast said first-half net income almost doubled to 241 million riyals ($66.2 million).
InvestBank PSC rose 1.5 percent to 3.5 dirhams. The lender based in Sharjah, the U.A.E., said second-quarter net income jumped 57 percent to 78.2 million dirhams ($21.3 million) on higher interest and fee income.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.
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Apple, Crocs, Fannie Mae, Republic Airways: U.S. Equity Preview
By Lynn Thomasson
July 13 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets tomorrow. Stock symbols are in parentheses after company names, and prices are as of 5:45 p.m. in New York on July 11, unless stated otherwise.
Apple Inc. (AAPL US): The maker of iPod media players and Macintosh computers still had models of the new iPhone for sale in its own shops today after most AT&T Inc. stores ran out of inventory. Apple shares fell $4.05, or 2.3 percent, to $172.58.
Crocs Inc. (CROX US): The maker of colorful plastic clogs with holes sued Skechers USA Inc. (SKX US), accusing it of selling footwear that copies patented and trademarked designs. A Skechers spokeswoman couldn't immediately be reached for comment. Crocs fell 2.9 percent to $7.79 in regular trading.
Diageo Plc (DEO US): The maker of Johnnie Walker scotch and Guinness stout may rise more than 30 percent in a year as the distiller withstands concerns about slowing sales, Barron's reported, citing an analyst. The company's American depositary receipts, each of which represent four ordinary shares, fell $1.71 to $69.02.
Fannie Mae (FNM US): The largest providers of U.S. mortgage financing are in a ``sound situation,'' said Senator Christopher Dodd. Separately, the Times of London said U.S. Treasury Secretary Henry Paulson is planning a $15 billion injection of capital into Fannie Mae and Freddie Mac (FRE US), without citing anyone. Fannie Mae fell $2.95, or 22 percent, to $10.25 on July 11. Freddie Mac shares dropped 3.1 percent to $7.75.
Microsoft Corp. (MSFT US): The world's largest software developer will triple the storage capacity of its Xbox 360 video-game console without raising the price to compete with market leaders Nintendo Co. and Sony Corp. Microsoft fell 20 cents to $25.25.
Nasdaq OMX Group Inc. (NDAQ US): The stock exchange operator, which has fallen by almost half since last year's 52- week high, may climb by 50 percent during the next two to three years as the world's securities exchanges consolidate, Barron's reported, citing Mark Boyar, adviser to the Boyar Value Fund. Nasdaq OMX gained 63 cents to $24.33 on July 11.
Republic Airways Holdings Inc. (RJET US): The operator of regional flights for bigger airlines said it would cut 500 jobs amid record fuel prices and ``expected reductions'' in its contracts with larger carriers. The company's shares fell 31 cents, or 3.8 percent, to $7.78.
Steak n Shake Co. (SNS US): The restaurant chain said Chief Financial Officer Jeffrey Blade resigned to ``pursue other interests.'' The stock retreated 0.2 percent to $5.80 in regular trading.
UAL Corp. (UAUA US): The parent of United Airlines, the world's second-largest carrier, said it will offer as many as 400 employees voluntary buyouts as it cuts seating capacity because of record fuel costs. UAL shares tumbled 13 percent to $3.63 in regular trading.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
July 13 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets tomorrow. Stock symbols are in parentheses after company names, and prices are as of 5:45 p.m. in New York on July 11, unless stated otherwise.
Apple Inc. (AAPL US): The maker of iPod media players and Macintosh computers still had models of the new iPhone for sale in its own shops today after most AT&T Inc. stores ran out of inventory. Apple shares fell $4.05, or 2.3 percent, to $172.58.
Crocs Inc. (CROX US): The maker of colorful plastic clogs with holes sued Skechers USA Inc. (SKX US), accusing it of selling footwear that copies patented and trademarked designs. A Skechers spokeswoman couldn't immediately be reached for comment. Crocs fell 2.9 percent to $7.79 in regular trading.
Diageo Plc (DEO US): The maker of Johnnie Walker scotch and Guinness stout may rise more than 30 percent in a year as the distiller withstands concerns about slowing sales, Barron's reported, citing an analyst. The company's American depositary receipts, each of which represent four ordinary shares, fell $1.71 to $69.02.
Fannie Mae (FNM US): The largest providers of U.S. mortgage financing are in a ``sound situation,'' said Senator Christopher Dodd. Separately, the Times of London said U.S. Treasury Secretary Henry Paulson is planning a $15 billion injection of capital into Fannie Mae and Freddie Mac (FRE US), without citing anyone. Fannie Mae fell $2.95, or 22 percent, to $10.25 on July 11. Freddie Mac shares dropped 3.1 percent to $7.75.
Microsoft Corp. (MSFT US): The world's largest software developer will triple the storage capacity of its Xbox 360 video-game console without raising the price to compete with market leaders Nintendo Co. and Sony Corp. Microsoft fell 20 cents to $25.25.
Nasdaq OMX Group Inc. (NDAQ US): The stock exchange operator, which has fallen by almost half since last year's 52- week high, may climb by 50 percent during the next two to three years as the world's securities exchanges consolidate, Barron's reported, citing Mark Boyar, adviser to the Boyar Value Fund. Nasdaq OMX gained 63 cents to $24.33 on July 11.
Republic Airways Holdings Inc. (RJET US): The operator of regional flights for bigger airlines said it would cut 500 jobs amid record fuel prices and ``expected reductions'' in its contracts with larger carriers. The company's shares fell 31 cents, or 3.8 percent, to $7.78.
Steak n Shake Co. (SNS US): The restaurant chain said Chief Financial Officer Jeffrey Blade resigned to ``pursue other interests.'' The stock retreated 0.2 percent to $5.80 in regular trading.
UAL Corp. (UAUA US): The parent of United Airlines, the world's second-largest carrier, said it will offer as many as 400 employees voluntary buyouts as it cuts seating capacity because of record fuel costs. UAL shares tumbled 13 percent to $3.63 in regular trading.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
Sunday, July 13, 2008
Retail Sales Probably Rose on Tax Rebates: U.S. Economy Preview
By Shobhana Chandra
July 13 (Bloomberg) -- Sales at U.S. retailers probably increased in June as Americans spent tax-rebate checks and record gasoline prices boosted receipts at service stations, economists said before reports this week.
Purchases rose 0.4 percent after a 1 percent gain the prior month, according to the median estimate in a Bloomberg News survey ahead of a Commerce Department report on July 15. Rising fuel and food costs also pushed up a cost-of-living index and a wholesale price gauge in June, other figures may show.
Consumers used the extra cash from the government's stimulus plan to buy discounted groceries and gasoline, lifting sales at stores including Wal-Mart Stores Inc. and Costco Wholesale Corp. The gains may dissipate after the checks are spent and households have to face plunging home values, less credit and costlier fuel.
``The stimulus checks are providing a fairly potent environment for retail sales,'' said Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California. ``That is masking the real condition of the consumer, who is flat on his or her back. Once the impact of the stimulus fades, we're going to have a massive payback.''
Retail sales excluding automobiles probably rose 0.9 percent last month, the median forecast in the Bloomberg survey shows. The figure will include more spending at gasoline service-stations.
Regular unleaded fuel prices topped $4 a gallon in June and touched a record $4.11 last week, according to AAA.
Inflation Signs
Rising energy costs raise the risk of a broader pickup in inflation. The consumer price index rose 0.7 percent in June, the most since November, according to the Bloomberg survey median. Excluding food and energy, prices likely rose 0.2 percent for a second month. The Labor Department's report is due on July 16.
On July 15, another report from Labor may show prices paid to producers climbed for a sixth month in June, reflecting surging fuel and food expenses.
The threat of accelerating inflation is one reason Federal Reserve policy makers may forgo raising interest rates this year, even as the economy looks likely to stall following the temporary boost from the stimulus plan.
Economic growth will slow to a 0.5 percent annual rate in the fourth quarter, the weakest pace in six years, according to the median forecast in a monthly Bloomberg survey. Fourth- quarter consumer spending will post the smallest gain since 1991, the survey showed.
Consumers are holding back on big-ticket purchases such as automobiles. Cars and light trucks sold at a 13.6 million annual pace last month, the fewest since 1998, industry data showed.
Rebate Checks
The government had distributed $86.1 billion in rebate checks through July 4, out of a total plan of about $110 billion. Rebate-linked promotions helped sales at stores open at least a year to rise a better-than-forecast 4.3 percent in June, according to the International Council of Shopping Centers.
Wal-Mart's same-store sales jumped 5.8 percent in June, the biggest gain in four years. The Bentonville, Arkansas-based company's U.S. discount stores and Sam's Club membership warehouses drew additional consumers who spent more on the average visit in June than in prior months.
``We continue to see a shift in the overall mix toward fuel, food and consumables, as our members manage through the current environment,'' Doug McMillon, Sam's Club president and chief executive officer, said in a statement on July 10.
Two reports will reflect the prolonged housing slump. Commerce Department figures to be released July 17 may show that builders broke ground in June on the fewest homes in 17 years, according to the Bloomberg survey. The National Association of Home Builders/Wells Fargo sentiment index, scheduled for release July 16, may show builder confidence was at a record low for the second month in July, according to the survey median.
Bloomberg Survey
================================================================
=
Release Period Prior Median
Indicator Date Value Forecast
================================================================
=
PPI MOM% 7/15 June 1.4% 1.3%
Core PPI MOM% 7/15 June 0.2% 0.3%
PPI YOY% 7/15 June 7.2% 8.6%
Core PPI YOY% 7/15 June 3.0% 3.2%
Empire Manu. Index 7/15 July -8.7 -7.8
Retail Sales MOM% 7/15 June 1.0% 0.4%
Retail ex-autos MOM% 7/15 June 1.2% 1.0%
Business Inv. MOM% 7/15 May 0.5% 0.5%
IBD/TIPP Conf. Index 7/15 Dec. 37.4 36.8
ABC Conf Index 7/15 14-Jul -41 -42
Mortgage Apps. WOW% 7/16 12-Jul 7.5% n/a
CPI MOM% 7/16 June 0.6% 0.7%
Core CPI MOM% 7/16 June 0.2% 0.2%
CPI YOY% 7/16 June 4.2% 4.5%
Core CPI YOY% 7/16 June 2.3% 2.3%
Core CPI SA Index 7/16 June 214.832 n/a
CPI NSA Index 7/16 June 216.632 217.907
Net Long Term TICS $ Bl 7/16 May 115.1 67.5
Total TICS $ Blns 7/16 May 60.6 57.5
Ind. Prod. MOM% 7/16 June -0.2% 0.0%
Cap. Util. % 7/16 June 79.4% 79.4%
NAHB Housing Index 7/16 July 18 18
Housing Starts ,000's 7/17 June 975 960
Building Permits ,000's 7/17 June 978 965
Initial Claims ,000's 7/17 13-Jul 346 380
Cont. Claims ,000's 7/17 6-Jul 3202 3180
Philly Fed Index 7/17 July -17.1 -15.0
================================================================
=
To contact the reporter on this story:
[bn:PRSN=1] Shobhana Chandra [] in Washington at
schandra1@bloomberg.net
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Yahoo Rejects Joint Proposal From Microsoft, Icahn
By Kyung Bok Cho
July 13 (Bloomberg) -- Yahoo! Inc., owner of the second-most popular search engine, rejected a restructuring proposal by Microsoft Corp. and billionaire investor Carl Icahn that would have included the sale of Yahoo's search business to Microsoft.
Yahoo's advertising agreement with Google Inc. offers ``superior financial value'' to the proposal from Microsoft and Icahn, the Sunnyvale, California-based company said in a Business Wire statement today.
Icahn has criticized Yahoo Chief Executive Officer Jerry Yang for failing to close a deal with Microsoft, the world's biggest software maker. Microsoft, which on May 3 withdrew an offer to buy Yahoo, said on July 7 it may renew talks for a deal if Icahn, who controls about 69 million Yahoo shares, succeeds in ousting Yang and his board.
``Carl Icahn and Microsoft presented us with a `take it or leave it' proposal,'' Chairman Roy Bostock said in the statement. ``It is ludicrous to think that our board could accept such a proposal. We will not be bludgeoned into a transaction that is not in the best interests of our stockholders.''
An outright acquisition of Yahoo would be much more ``straightforward,'' according to Yahoo's statement. The company's board ``believes a whole company transaction could be negotiated and executed'' before Aug. 1, it said.
`Odd and Opportunistic'
Yahoo shares closed at $23.57 on July 11 in Nasdaq Stock Market trading. The shares have climbed 1.3 percent this year. Microsoft, which fell 20 cents to $25.25 on Friday, has slipped 29 percent this year.
Yahoo said the proposal from Microsoft and Icahn was made on Friday evening and the company was given less than 24 hours to accept. Bostock called the alliance between Microsoft and the billionaire activist ``odd and opportunistic.''
His comment followed an interview in the Wall Street Journal last week in which CEO Yang accused Microsoft of wanting to disrupt the Web search company. He also told the newspaper that for Yahoo shareholders to trust Icahn would be ``a bad choice.''
Yahoo, which was co-founded more than a decade ago by Yang and David Filo, had reported eight straight quarters of profit declines before Microsoft's bid and is now relying on its biggest rival for growth.
Microsoft Chief Executive Officer Steve Ballmer initially offered about $44.6 billion for Yahoo. The Redmond, Washington- based company later raised that to $47.5 billion, only to walk away when Yahoo demanded more.
Icahn seeks to build momentum ahead of a Yahoo shareholder meeting that's scheduled for next month. The billionaire aims to replace Yahoo's board with nine nominees that include himself.
Yahoo-Google Pact
Yahoo ``is now moving toward a precipice,'' Icahn said in a July 8 statement. ``It is time for a change.''
Yahoo agreed last month to let Google, the owner of the most popular search engine, sell some of the advertisements it runs alongside Internet search results. The deal was struck after Yahoo's talks with Microsoft fell apart.
Federal regulators are expected to begin hearings next week on whether the ad accord between the two dominant Internet search companies is anti-competitive, Google Chief Executive Officer Eric Schmidt said on July 10.
Yahoo is trying to lure users at the expense of Google, which fields about three times the number of queries in the U.S. Yahoo said last week it is inviting outside developers to tinker with its Internet search software to lure more users.
Google, Yahoo and Microsoft all offer software that allows users to tweak their search engines.
Yahoo handled about 20.6 percent of U.S. Internet searches in May, more than twice Microsoft's search traffic, according to researcher ComScore Inc. Google, based in Mountain View, California, dominates searches, accounting for almost two-thirds.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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July 13 (Bloomberg) -- Yahoo! Inc., owner of the second-most popular search engine, rejected a restructuring proposal by Microsoft Corp. and billionaire investor Carl Icahn that would have included the sale of Yahoo's search business to Microsoft.
Yahoo's advertising agreement with Google Inc. offers ``superior financial value'' to the proposal from Microsoft and Icahn, the Sunnyvale, California-based company said in a Business Wire statement today.
Icahn has criticized Yahoo Chief Executive Officer Jerry Yang for failing to close a deal with Microsoft, the world's biggest software maker. Microsoft, which on May 3 withdrew an offer to buy Yahoo, said on July 7 it may renew talks for a deal if Icahn, who controls about 69 million Yahoo shares, succeeds in ousting Yang and his board.
``Carl Icahn and Microsoft presented us with a `take it or leave it' proposal,'' Chairman Roy Bostock said in the statement. ``It is ludicrous to think that our board could accept such a proposal. We will not be bludgeoned into a transaction that is not in the best interests of our stockholders.''
An outright acquisition of Yahoo would be much more ``straightforward,'' according to Yahoo's statement. The company's board ``believes a whole company transaction could be negotiated and executed'' before Aug. 1, it said.
`Odd and Opportunistic'
Yahoo shares closed at $23.57 on July 11 in Nasdaq Stock Market trading. The shares have climbed 1.3 percent this year. Microsoft, which fell 20 cents to $25.25 on Friday, has slipped 29 percent this year.
Yahoo said the proposal from Microsoft and Icahn was made on Friday evening and the company was given less than 24 hours to accept. Bostock called the alliance between Microsoft and the billionaire activist ``odd and opportunistic.''
His comment followed an interview in the Wall Street Journal last week in which CEO Yang accused Microsoft of wanting to disrupt the Web search company. He also told the newspaper that for Yahoo shareholders to trust Icahn would be ``a bad choice.''
Yahoo, which was co-founded more than a decade ago by Yang and David Filo, had reported eight straight quarters of profit declines before Microsoft's bid and is now relying on its biggest rival for growth.
Microsoft Chief Executive Officer Steve Ballmer initially offered about $44.6 billion for Yahoo. The Redmond, Washington- based company later raised that to $47.5 billion, only to walk away when Yahoo demanded more.
Icahn seeks to build momentum ahead of a Yahoo shareholder meeting that's scheduled for next month. The billionaire aims to replace Yahoo's board with nine nominees that include himself.
Yahoo-Google Pact
Yahoo ``is now moving toward a precipice,'' Icahn said in a July 8 statement. ``It is time for a change.''
Yahoo agreed last month to let Google, the owner of the most popular search engine, sell some of the advertisements it runs alongside Internet search results. The deal was struck after Yahoo's talks with Microsoft fell apart.
Federal regulators are expected to begin hearings next week on whether the ad accord between the two dominant Internet search companies is anti-competitive, Google Chief Executive Officer Eric Schmidt said on July 10.
Yahoo is trying to lure users at the expense of Google, which fields about three times the number of queries in the U.S. Yahoo said last week it is inviting outside developers to tinker with its Internet search software to lure more users.
Google, Yahoo and Microsoft all offer software that allows users to tweak their search engines.
Yahoo handled about 20.6 percent of U.S. Internet searches in May, more than twice Microsoft's search traffic, according to researcher ComScore Inc. Google, based in Mountain View, California, dominates searches, accounting for almost two-thirds.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Weekly Review and Outlook: Dollar Sold off on GSE Worries, Euro the New Safe Haven?
Market Overview | Written by ActionForex.com | Jul 12 08 14:10 GMT |
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It was a rather quiet weak until volatility in the financial markets soared on Friday on concern losses at mortgage lenders Fannie Mae and Freddie Mac may deepen and eventually have them nationalized. Markets are dissatisfied with Treasury Paulson's said the government is supporting the two largest buyers of U.S. home loans in "their current form," hinting that there will be no bailout. Dow was once down as much as 251 points while dollar was sold off across the board, hitting new 25 years low against Aussie. The Japanese and Swiss Franc were also sharply higher on risk aversion. Though, the stock markets and dollar recovered some ground after news that Fed Bernanke will allow the two Government Sponsored Enterprise (GSE) to access the discount window.
In additional, the greenback was additionally pressured by persistent strength in oil prices that made another record high above $147 a barrel on speculation that Israel may attack Iran. Dollar was sharply lower across the board. Meanwhile firstly, note the broad based strength in Euro even against the Japanese yen and Swissy Franc. There could be an outflow of capital from US GSEs and such trend could continue towards the new safe haven Euro. Secondly, note the persistent strength in Aussie which was supported by solid fundamentals as well as strength in commodity prices. Thirdly, Canadian dollar also shrugged off a weak employment report and strengthened in general.
The coming week is extremely busy and based on current sentiments, high volatility is anticipated.
| USD | EUR | JPY | GBP | CHF | CAD | AUD | |
|---|---|---|---|---|---|---|---|
| USD | |||||||
| EUR | |||||||
| JPY | |||||||
| GBP |
The economic calendar of US was rather light last week. Pending home sales dropped more than expected by -4.7% mom in May. Wholesale inventories rose 0.8%. Jobless claims dropped sharply to 346k. Trade deficit in Jun narrower than expected at -59.8b. Import price index rose 2.0% mom, while export price index rose 1.0% mom in May. U of Michigan consumer sentiments unexpectedly improved to 56.6 in Jul. Bernanke offered nothing new in his testimony. Bernanke urged consolidated supervision of investment banks. On the other hand, Treasury Paulson said financial firms must be allowed to fail.
ECB Trichet said in his testimony before European Parliament that "The annual HICP inflation rate is likely to remain well above the level consistent with price stability for some times, moderating only gradually in 2009," and "risks to price stability remain clearly on the upside and have intensified over recent months." Eurozone Q1 GDP was unexpectedly revised down from 0.7% qoq, 2.1% yoy. Lots of data were released from Germany. Industrial production fell sharply by -2.4% mom in May, with yoy growth slowed to 0.8%, much worse than expectation of 0.4% mom, 3.2% yoy. Trade surplus was at 14.6B in May, lower than expectation of 16.5B on sharper than expected drop in exports by -3.2% mom. Import rose 0.7% mom. Wholesale price index climbed 0.9% mom, 8.9% in June, inline with consensus
BoE left interest rates unchanged at 5.00% as widely expected. No statement was issued and focus will turn to minutes to be released on Jul 23. Halifax house prices dropped more than expected by -2.0% mom, -6.1% in Jul. DCLG house price released earlier slowed from 4.9 to 3.7% yoy growth, but was above expectation of 3.3%. Nationwide consumer confidence tumbled further from 69 to 63 in Jun, missing consensus of 65. Industrial production dropped sharply by -0.8% mom, -1.6% in May. Manufacturing production dropped -0.5% mom, -0.8% yoy in May. Both are first negative annualized growth since last Sep. Trade deficit was wider thane expected in May at -0.7494b.
Swiss unemployment rate dropped slightly to 2.3% in June.
Japanese economic watch DI dropped to 29.5 in Jun, above expectation of 31. Machine orders rose 10.4% mom, 5.1% yoy in May. Domestic CGPI accelerated more than expected from 4.7% yoy to 5.6% yoy in Jun, hitting a 27 year high, driven by surging commodity prices. Trade surplus shrank from 634.7b to 529.4b. Industrial production rose 2.8% mom, 1.1% yoy. capacity utilization rose 2.2% in May. Consumer confidence dropped less than expected to 32.9 in Jun.
It was a busy week in Canada. Employment report disappointed, showing the job markets shrank by -5k in Jun versus expectation of 10k growth. Unemployment rate also unexpectedly climbed from 6.1% to 6.2%. Housing starts dropped from upwardly revised 227.7K to 217.8k, slightly above consensus of 217k. Building permits in Canada showed second months of growth by 1.1% in May. Housing price index was flat in May. Trade surplus came in wider than expected at 5.54b in May.
Aussie was firmly supported after stronger than expected job report. Unemployment rate dropped from 4.3% to 4.2% in Jun. Also, the job market rebounded and showed 29.8k expansion, above consensus of 10k and cancelled out May's unexpected contraction of -25.6k. The job data, which expanded for 19 out of the past 20 months, and last week's strong gain in retail sales, were both showing the underlying robustness in the Aussie economy, particularly so in a climate of significant global uncertainty. The National Australia Bank's index of overall business conditions shed 7 points in June to 0, the worst reading since late 2001. Business confidence dropped further from -4 to -9. Westpac consumer confidence dropped -6.7% in Jul.
The Week Ahead
It's an extremely busy week in the US with highlights on Bernanke's Semiannual Monetary Policy Testimony and FOMC meeting minutes and forecasts. Retail sales is expected to maintain momentum by growing 0.5% mom in June, with ex-auto sales climbing 1.0%. Inflation data will be another focus in early part of the week with PPI featured on Tuesday. CPI will follow on Wednesday, and is expected to show acceleration to 4.5% yoy, with ore CPI unchanged at 2.3% yoy. Empire state index and Philly Fed index are both expected to improve mildly in July. More housing data will be released, including NAHB housing market index and new residential construction which are expected to show further deterioration in the housing markets.
From Eurozone, main focus is on Germany ZEW which is expected to deteriorate further to -55 in Jul. Jun HICP final is expected to be at 4.0% yoy.
Inflation is a main focus in UK, in particular, headline CPI is expected to be unchanged at 3.6% yoy in Jun. PPI will also be featured. Other important focus in UK include Jun employment report.
BoJ is expected to leave rates unchanged at 0.5%. BoC is expected to be on hold at 3.00%. From Australian, main focus will be on RBA minuets to be released on Tuesday. New Zealand Q2 CPI, May retail sales.
EUR/JPY Weekly Outlook
EUR/JPY breaks out of consolidation last week and resumed rise from 151.71 to new record high of 169.62. Initial bias remains on the upside as long as 168.12 minor support holds and further rally should be seen to test 170 psychological resistance first. Break will bring rally to next near term target of 100% projection of 151.71 to 164.97 from 158.60 at 171.86 first. On the downside, below 168.12 will turn intraday outlook neutral.
In the bigger picture, EUR/JPY's break of 168.93 key medium term resistance indicates multi month consolidation that started at 168.93 should have completed. Further rally should now be seen to 61.8% projection of 130.60 to 168.93 from 151.71 at 175.40 first. However, On the downside, however, note that bearish divergence conditions remains in daily MACD, arguing that upside momentum is still not convincing. Break of 166.08 support will argue that EUR/JPY has failed 170 psychological resistance and made a short term top. Deeper decline could the been seen towards 158.60 support or lower.
In the longer term picture, EUR/JPY's long term up trend from 88.97 (00 low) is still in progress and should be targeting next important cluster resistance at 188.22 (50% retracement of 285.56 (79 high) to 88.97 (00 low) at 187.26). Medium term outlook will remain neutral at worst as long as 149.27 medium term support holds.
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Economic Calendar Summary 7/13 - 7/18
Sunday, Jul 13, 2008
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| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| -- | NZD | QV House Prices (YoY) (JUN) | -- | 2.4% |
| 22:45 | NZD | Retail Sales (MoM) (MAY) | -0.1% | 1.0% |
| 22:45 | NZD | Retail Sales Ex-Auto (MoM) (MAY) | 0.5% | -0.5% |
Monday, Jul 14, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| -- | JPY | Cabinet Office Monthly Economic Report (JUL) | -- | -- |
| 0:00 | NZD | Performance of Services Index (JUN) | -- | -- |
| 3:00 | NZD | Non-Resident Bond Holdings (JUN) | -- | 77.3% |
| 4:00 | JPY | Bank of Japan Monetary Policy Meeting | -- | -- |
| 8:30 | GBP | Producer Price Index Input s.a. (MoM) (JUN) | 2.6% | 3.8% |
| 8:30 | GBP | Producer Price Index Input n.s.a (YoY) (JUN) | 29.0% | 27.9% |
| 8:30 | GBP | Producer Price Index Output n.s.a. (MoM) (JUN) | 1.2% | 1.6% |
| 8:30 | GBP | Producer Price Index Output n.s.a. (YoY) (JUN) | 9.9% | 8.9% |
| 8:30 | GBP | Producer Price Index Output Core s.a. (MoM) (JUN) | 0.8% | 1.2% |
| 8:30 | GBP | Producer Price Index Output Core n.s.a. (YoY) (JUN) | 6.5% | 5.9% |
| 9:00 | EUR | Euro-Zone Industrial Production s.a. (MoM) (MAY) | -2.3% | 0.9% |
| 9:00 | EUR | Euro-Zone Industrial Production w.d.a. (YoY) (MAY) | 0.3% | 3.9% |
| 14:00 | USD | Fed Governors Vote on Mortgage Rules in Open Meeting | -- | -- |
| 22:45 | NZD | Food Prices (MoM) (JUN) | 0.3% | 1.0% |
| 22:45 | NZD | Consumer Prices (QoQ) (2Q) | 1.4% | 0.7% |
| 22:45 | NZD | Consumer Prices (YoY) (2Q) | 3.8% | 3.4% |
| 23:01 | GBP | BRC Retail Sales Monitor (JUN) | -- | -- |
| 23:01 | GBP | RICS House Price Balance (JUN) | -94.0% | -92.9% |
Tuesday, Jul 15, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| -- | JPY | Bank of Japan Rate Decision | 0.50% | 0.50% |
| -- | EUR | Bank of Italy Releases Quarterly Economic Bulletin | -- | -- |
| 1:30 | AUD | Reserve Bank of Australia's Board Meeting Minutes (JUL) | -- | -- |
| 4:00 | JPY | Tokyo Condominium Sales (YoY) (JUN) | -- | -17.7% |
| 6:00 | JPY | Bank of Japan Monthly Report | -- | -- |
| 6:30 | EUR | Bank of France Business Sentiment (JUN) | 96 | 97 |
| 6:45 | EUR | French Current Account (euros) (MAY) | -- | -3.0B |
| 8:00 | EUR | Italian Consumer Price Index (NIC incl. tobacco) (MoM) (JUN F) | 0.4% | 0.4% |
| 8:00 | EUR | Italian Consumer Price Index (NIC incl. tobacco) (YoY) (JUN F) | 3.8% | 3.8% |
| 8:00 | EUR | Italian Consumer Price Index - EU Harmonized (MoM) (JUN F) | 0.5% | 0.5% |
| 8:00 | EUR | Italian Consumer Price Index - EU Harmonized (YoY) (JUN F) | 4.0% | 4.0% |
| 8:00 | EUR | Germany's Glos Meets Russia's Medvedev; Putin in Moscow | -- | -- |
| 8:30 | GBP | Consumer Price Index (MoM) (JUN) | 0.4% | 0.6% |
| 8:30 | GBP | Consumer Price Index (YoY) (JUN) | 3.6% | 3.3% |
| 8:30 | GBP | Core Consumer Price Index (YoY) (JUN) | 1.5% | 1.5% |
| 8:30 | GBP | Retail Price Index (JUN) | 216.0 | 215.1 |
| 8:30 | GBP | Retail Price Index (MoM) (JUN) | 0.5% | 0.5% |
| 8:30 | GBP | Retail Price Index (YoY) (JUN) | 4.3% | 4.3% |
| 8:30 | GBP | Retail Price Index Ex Mort Int.Payments (YoY) (JUN) | 4.4% | 4.4% |
| 9:00 | EUR | German ZEW Survey (Current Situation) (JUL) | 32.9 | 37.6 |
| 9:00 | EUR | German ZEW Survey (Economic Sentiment) (JUL) | -55.0 | -52.4 |
| 9:00 | EUR | Euro-Zone ZEW Survey (Economic Sentiment) (JUL) | -56.0 | -52.7 |
| 12:30 | CAD | New Motor Vehicle Sales (MoM) (MAY) | 0.0% | -2.6% |
| 12:30 | USD | Producer Price Index (MoM) (JUN) | 1.3% | 1.4% |
| 12:30 | USD | Advance Retail Sales (JUN) | 0.3% | 1.0% |
| 12:30 | USD | Retail Sales Less Autos (JUN) | 1.0% | 1.2% |
| 12:30 | USD | Producer Price Index (YoY) (JUN) | 8.7% | 7.2% |
| 12:30 | USD | Producer Price Index Ex Food & Energy (MoM) (JUN) | 0.3% | 0.2% |
| 12:30 | USD | Producer Price Index Ex Food & Energy (YoY) (JUN) | 3.2% | 3.0% |
| 12:30 | USD | Empire Manufacturing (JUL) | -7.3 | -8.7 |
| 13:00 | CAD | Bank of Canada Rate Decision | 3.00% | 3.00% |
| 14:00 | USD | IBD/TIPP Economic Optimism (JUL) | 36.3 | 37.4 |
| 14:00 | USD | Business Inventories (MAY) | 0.5% | 0.5% |
| 14:00 | USD | Bernanke Gives Semiannual Monetary Policy Testimony at Senate | -- | -- |
| 19:30 | USD | Fed's Yellen Speaks in Los Angeles at Conference | -- | -- |
| 21:00 | USD | ABC Consumer Confidence (JUL 13) | -- | -41 |
| 23:50 | JPY | Tertiary Industry Index (MoM) (MAY) | 0.0% | 1.8% |
Wednesday, Jul 16, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 0:30 | AUD | Westpac Leading Index (MoM) (MAY) | -- | 0.4% |
| 3:05 | AUD | Reserve Bank Governor Stevens Speaks in Sydney | -- | -- |
| 6:00 | JPY | Machine Tool Orders (YoY) (JUN F) | -- | -2.7% |
| 6:00 | EUR | EU 25 New Car Registrations (JUN) | -- | -7.8% |
| 6:00 | EUR | German Consumer Price Index (MoM) (JUN F) | 0.3% | 0.3% |
| 6:00 | EUR | German Consumer Price Index (YoY) (JUN F) | 3.3% | 3.3% |
| 6:00 | EUR | German Consumer Price Index - EU Harmonised (MoM) (JUN F) | 0.4% | 0.4% |
| 6:00 | EUR | German Consumer Price Index - EU Harmonised (YoY) (JUN F) | 3.4% | 3.4% |
| 6:45 | EUR | French Consumer Price Index (MoM) (JUN) | 0.4% | 0.5% |
| 6:45 | EUR | French Consumer Price Index (YoY) (JUN) | 3.6% | 3.3% |
| 6:45 | EUR | French Consumer Price Index - EU Harmonised (MoM) (JUN) | 0.4% | 0.6% |
| 6:45 | EUR | French Consumer Price Index - EU Harmonised (YoY) (JUN) | 4.0% | 3.7% |
| 7:15 | CHF | Adjusted Real Retail Sales (YoY) (MAY) | 3.8% | -9.4% |
| 8:30 | GBP | Jobless Claims Change (JUN) | 10.0K | 9.0K |
| 8:30 | GBP | Claimant Count Rate (JUN) | 2.6% | 2.5% |
| 8:30 | GBP | ILO Unemployment Rate (3M) (MAY) | 5.3% | 5.3% |
| 8:30 | GBP | Average Earnings inc Bonus (3MoY) (MAY) | 3.7% | 3.8% |
| 8:30 | GBP | Average Earnings ex Bonus (3MoY) (MAY) | 3.9% | 3.9% |
| 8:30 | GBP | Manufacturing Unit Wage Cost (3MoY) (MAY) | -- | 0.8% |
| 9:00 | EUR | Euro-Zone Consumer Price Index (MoM) (JUN) | 0.4% | 0.6% |
| 9:00 | EUR | Euro-Zone Consumer Price Index (YoY) (JUN) | 4.0% | 4.0% |
| 9:00 | EUR | Euro-Zone Consumer Price Index - Core (YoY) (JUN) | 1.8% | 1.7% |
| 11:00 | USD | MBA Mortgage Applications (JUL 11) | -- | 7.5% |
| 11:00 | USD | Bloomberg Global Confidence (JUL) | -- | 21.01 |
| 12:30 | CAD | Manufacturing Shipments (MoM) (MAY) | 0.5% | 2.0% |
| 12:30 | USD | Consumer Price Index (MoM) (JUN) | 0.7% | 0.6% |
| 12:30 | USD | Consumer Price Index (YoY) (JUN) | 4.5% | 4.2% |
| 12:30 | USD | Consumer Price Index Ex Food & Energy (MoM) (JUN) | 0.2% | 0.2% |
| 12:30 | USD | Consumer Price Index Ex Food & Energy (YoY) (JUN) | 2.3% | 2.3% |
| 12:30 | USD | Consumer Price Index Core Index s.a. (JUN) | -- | 214.832 |
| 12:30 | USD | Consumer Price Index n.s.a. (JUN) | 217.900 | 216.632 |
| 13:00 | USD | Net Long-term TIC Flows (MAY) | -- | $115.1B |
| 13:00 | USD | Total Net TIC Flows (MAY) | -- | $60.6B |
| 13:15 | USD | Industrial Production (JUN) | 0.0% | -0.2% |
| 13:15 | USD | Capacity Utilization (JUN) | 79.4% | 79.4% |
| 14:00 | USD | Bernanke Gives Semiannual Monetary Policy Testimony at House | -- | -- |
| 17:00 | USD | NAHB Housing Market Index (JUL) | 18 | 18 |
| 18:00 | USD | Fed Releases Minutes; Forecasts from Meeting (JUN 24-25) | -- | -- |
| 18:00 | USD | Fed's Hoenig Speaks in Colorado on U.S. Economy | -- | -- |
| 23:50 | JPY | Foreign Buying Japan Stocks (Yen) (JUL 11) | 192.5B | |
| 23:50 | JPY | Foreign Buying Japan Bonds (Yen) (JUL 11) | -- | 515.1B |
| 23:50 | JPY | Japan Buying Foreign Stocks (Yen) (JUL 11) | -- | 123.3B |
| 23:50 | JPY | Japan Buying Foreign Bonds (Yen) (JUL 11) | -- | 97.0B |
Thursday, Jul 17, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 1:30 | AUD | Preliminary BoP Imports s.a. (MoM) (JUN) | -- | 7.0% |
| 1:30 | AUD | RBA Foreign Exchange Transaction (Australian dollar) (JUN) | -- | 336M |
| 5:00 | JPY | Leading Index (MAY F) | -- | 92.6% |
| 5:00 | JPY | Coincident Index (MAY F) | -- | 103.0% |
| 8:00 | EUR | Italian Trade Balance (Total) (euros) (MAY) | -- | -1004 |
| 8:00 | EUR | Italian Trade Balance-EU (euros) (MAY) | -- | 770.0M |
| 8:30 | EUR | Italian Current Account (euros) (MAY) | -- | -4.129B |
| 9:00 | EUR | Euro-Zone Construction Output s.a. (MoM) (MAY) | -- | -0.8% |
| 9:00 | EUR | Euro-Zone Construction Output w.d.a. (YoY) (MAY) | -- | -2.4% |
| 9:00 | CHF | ZEW Survey (Expectations) (JUL) | -67.0 | -63.8 |
| 12:30 | CAD | International Securities Transactions (Canadian dollar) (MAY) | -- | 9.751 |
| 12:30 | USD | Housing Starts (JUN) | 965K | 975K |
| 12:30 | USD | Building Permits (JUN) | 970K | 969K |
| 12:30 | USD | Initial Jobless Claims (JUL 12) | -- | 346K |
| 12:30 | USD | Continuing Claims (JUL5) | -- | 3202K |
| 14:00 | USD | Philadelphia Fed. (JUL) | -15.0 | -17.1 |
| 14:30 | CAD | Bank of Canada Monetary Policy Report | -- | -- |
| 23:50 | JPY | Bank of Japan to Publish Minutes of Board Meeting (JUN 12-13) | -- | -- |
Friday, Jul 18, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 1:30 | AUD | Import Price Index (QoQ) (2Q) | 2.2% | 2.7% |
| 1:30 | AUD | Export Price Index (QoQ) (2Q) | 10.0% | 3.5% |
| 3:30 | JPY | BOJ Governor Shirakawa to Give Speech in Tokyo | -- | -- |
| 5:30 | JPY | Tokyo Department Store Sales (YoY) (JUN) | -- | -2.3% |
| 5:30 | JPY | Nationwide Department Sales (YoY) (JUN) | -- | -2.7% |
| 6:00 | EUR | German Producer Prices (MoM) (JUN) | 0.7% | 1.0% |
| 6:00 | EUR | German Producer Prices (YoY) (JUN) | 6.5% | 6.0% |
| 8:00 | EUR | Italian Industrial Orders s.a. (MoM) (MAY) | -1.5% | 1.2% |
| 8:00 | EUR | Italian Industrial Orders n.s.a. (YoY) (MAY) | 0.1% | 12.8% |
| 8:00 | EUR | Italian Industrial Sales s.a. (MoM) (MAY) | -0.6% | 2.2% |
| 8:00 | EUR | Italian Industrial Sales n.s.a. (YoY) (MAY) | -- | 13.9% |
| 8:30 | GBP | M4 Money Supply (MoM) (JUN P) | 0.4% | 0.4% |
| 8:30 | GBP | M4 Money Supply (YoY) (JUN P) | 9.7% | 10.0% |
| 8:30 | GBP | M4 Sterling Lending (pound) (JUN P) | 10.0B | 4.8B |
| 8:30 | GBP | Public Finances (PSNCR) (pound) (JUN) | 12.6B | 11.0B |
| 8:30 | GBP | Public Sector Net Borrowing (pound) (JUN) | 7.4B | 11.0B |
| 9:00 | EUR | Euro-Zone Trade Balance (euros) (MAY) | -1.0B | 2.3B |
| 9:00 | EUR | Euro-Zone Trade Balance s.a. (euros) (MAY) | 0.8B | 2.2B |
| 12:30 | CAD | Leading Indicators (MoM) (JUN) | 0.1% | 0.2% |
| 12:30 | CAD | Wholesale Sales (MoM) (MAY) | 0.5% | 1.4% |
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NZD/USD: Will Lackluster New Zealand Retail Sales Weigh On Kiwi?
Daily Forex Fundamentals | Written by DailyFX | Jul 12 08 06:35 GMT |
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What Are The Markets Facing?
Retail sales in New Zealand are expected to have eased back slightly in May, weighed down by autos as rocketing gasoline prices deter buyers. Excluding this factor, however, retail sales are anticipated to rebound 0.5 percent, as higher energy and food prices boost the index reading. However, spending on discretionary items like clothing and furniture could be weak, as credit card spending in the country - which has served as a good leading indicator of retail sales over the past few months - slowed to an annual rate of 5.9 percent from 8.2 percent. If retail spending in New Zealand slows, the move will be in line with the Reserve Bank of New Zealand's plans, as they have left rates steady at a record high of 8.25 percent despite the fact the economy contracted during the first quarter. While the RBNZ undoubtedly remains concerned about inflation pressures, the monetary policy statement from their June meeting said that they were “likely to be in a position to lower the OCR later this year, which is sooner than previously envisaged.” As a result, it would take an extremely strong retail sales report to shift expectations that the RBNZ will cut rates this year, and given the softer credit card spending figures, there is downside risk for this upcoming report.
Bonds - 10-Year New Zealand Government Bond Yields
New Zealand's government bond yields have steadily tumbled since breaking below support at 6.3 percent, and looking ahead, the release of retail sales could shake up bonds, especially if the data reflects surprising results. A disappointing spending number will raise the risk that the RBNZ will consider rate cuts this year and lead yields toward 6.0 percent, while a better-than-expected figure could help propel yields toward 6.2 percent once again.
FX - NZD/USD
The NZD/USD has come under pressure after peaking to a multi-decade high of 0.8200 in March, and has been range-trading between 0.7500 and 0.7650 since mid June. Market participants anticipate economic activity to slow further as the RBNZ continues to hold the benchmark interest at the record high of 8.25 percent, which could renew bearish sentiment among traders once again. The retail sales release has been known to be a market-mover for the NZD/USD when the data is surprising, and may push the currency pair higher towards the upper bound if the release comes out as expected. However, a fall in retail sales could heighten selling pressures for the New Zealand dollar, and may lead the pair back down toward near-term support of 0.7500.
Equities - NZX 50 FF Gross Index
Growth concerns for the New Zealand economy paired with record high commodity prices has triggered a major downfall in the NZX 50 since June, but has held within the 3,200 to 3,000 range in July. Rising unemployment paired with rising living costs poses to be an ongoing threat for consumers, and may heighten downside pressures for the retail sector. The NZX 50 could face heavy volatility following the retail sales release as economist forecast the headline figure to fall to -0.1%, while retail sales less autos is expected to improve to 0.5% from -0.5%. If the release falls in line with expectations, the index could rise towards the upper tail of the range to test the near-term resistance at 3,175. On the other hand, a bigger-than-expected fall in the sales data could spur additional losses in the index toward the psychologically important 3,000 level.
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