Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Jul 15 08 07:08 GMT |

Overview & economic commentary

The British Retail Consortium earlier this morning reported a 0.4% drop in annual like-for-like sales in June. This was down from a 1.9% rise in May and suggests we could see some decline in sales from last month's official 3.5% surge. Consumer prices are due at 9.30 and are forecast to have extended their uptrend in June. We have pencilled in a rise to 3.6% from 3.3% in May, but stronger than forecast PPI data yesterday suggest that an even loftier CPI number can't be ruled out. BoE governor King, in the margin of the Bank's annual report yesterday, warned that CPI will stay above 3.0% 'until well into next year'. This scenario does not in our view lend itself to a reduction in base rates. In the euro zone, the German ZEW survey is forecast to have dropped, possibly sharply, in July as survey respondents take into account weak German industry data, the inflation backdrop and the sell-off in equity markets.
We forecast a drop to -57.0. Producer prices and retail sales are due in the US, but it will be Fed chairman Bernanke's testimony on the economy that will take centre stage this afternoon as markets wonder whether the Fed believes the economy is on track to recover in the second half of the year. The unemployment rate was forecast back in April to peak at 5.7% this year, but unless the stronger gdp growth profile for Q2 is sustained in Q3 and Q4 and oil prices fall, the risk is that unemployment could peak closer to 6.0%. This could lead markets to completely abandon speculation of a first rate hike this year, a view we have held for quite a while.

Currency commentary

Volatile markets are expected today as participants prepare to digest a deluge of economic data and mull over Fed chairman Bernanke's testimony. Sterling had a good session yesterday, supported by stronger PPI data and could again draw some strength from CPI data this morning. Sterling took weak housing data from the RICS and a disappointing retail sales survey from the BRC in its stride o/n, with £/$ hovering above 1.9950 and €/£ steady around 0.7975. A UK CPI number stronger than the 3.6% consensus could bolster sterling momentum ahead of US retail sales and PPI. US retail sales are forecast to be positive for June and a stronger outcome, supported by the tax rebate, could briefly help the dollar to rally. €/$ in particular could be a mover depending on the German ZEW data at 10am. A rise to 1.60 is still on the cards after yesterday's close above 1.59. The A$ continues to be well bid this morning after Asian stocks shadowed US markets higher. The rate decision in Canada may impact C$ crosses at 2pm.

Major data and events today

• UK BRC retail sales monitor (Jun) (00:01)
• UK RICS house price survey (00:01)
  May -92.2
  Jun (actual) -88.0
• UK Consumer prices index (nsa)
  Ma y +0.6% Y-O-Y +3.3%
  Jun (f'cast) +0.4% Y-O-Y +3.6%
  Median +0.4% Range +0.1%+0.6%
• UK Retail prices index (nsa)
  Ma y +0.5% Y-O-Y +4.3%
  Jun (f'cast) +0.3% Y-O-Y +4.1%
  Median +0.5% Range +0.2%:+0.7%
• UK RPI ex-mortgage interest payments (nsa)
  Ma y +0.7% Y-O-Y +4.4%
  Jun (f'cast) +0.4% Y-O-Y +4.4%
  Median +0.4% Range +0.1%:+0.6%
• German ZEW survey (10:00)
  Jun -52.4
  Jul (f'cast) -57.0
  Median -55.0 Range -64.0:-48.0
• US Producer prices (sa, prov) (13:30)
  May +1.4% Y-O-Y +7.2%
  Jun (f'cast) +1.4% Y-O-Y +8.6%
  Median +1.3% Range +0.5%:+2.4%
• US PPI, core (sa, prov) (13:30)
  May +0.2% Y-O-Y +3.0%
  Jun (f'cast) +0.3% Y-O-Y +3.2%
  Median +0.3% Range +0.1%:+0.4%
• US Retail sales (advance) (13:30)
  May +1.0% Y-O-Y +3.0%
  Jun (f'cast) +0.4% Y-O-Y +3.9%
  Median +0.3% Range -0.4%:+1.1%
• US Retail sales, ex-autos (13:30)
  May +1.2% Y-O-Y +6.1%
  Jun (f'cast) +0.4% Y-O-Y +5.5%
  Median +0.9% Range zero:+1.6%
• US Empire manuf. survey (13:30)
  Jun -8.7%
  Jul (f'cast) -7.5%
  Median -7.3% Range -15.0%:-0.1%
• US Business inventories (15:00)
  Apr +0.5%
  May (f'cast) +0.5%
  Median +0.5% Range +0.3%:+0.6%
• Canada interest rate decision (14:00)
  Current: 3.00%
  Forecast: 3.00%
• US Fed Chairman Bernanke gives semi-annual Monetary Policy testimony to Congress (15:00)

Chart: UK data this morning may show a rise in annual CPI to about 3.6%. We expect a rise above 4.0% this summer

Lloyds TSB Bank
http://www.lloydstsbfinancialmarkets.com

Read more...

Thailand, Philippines May Raise Rates on Inflation

By Shamim Adam and Michael J. Munoz

July 15 (Bloomberg) -- Thailand and the Philippines are expected to raise interest rates this week, following other Asian countries in signaling their commitment to stem inflation that's sparked protests and threatened political stability.

Thailand's central bank will raise the benchmark interest rate for the first time in two years tomorrow, according to the 19 economists surveyed by Bloomberg News. The Philippines will follow suit, all 20 of the economists in a separate survey said.

``Asian central banks are shifting towards a more hawkish bias,'' said Vishnu Varathan, an economist at Forecast Singapore Pte. Those deemed not to be tackling inflation risk losing investor confidence, he said. ``We can expect higher interest rates in the weeks and months ahead.''

Surging oil and food costs are forcing central banks from Vietnam to Pakistan to raise borrowing costs and tame inflation, even at the cost of stifling growth, at a time when a U.S. slowdown is hurting demand for Asian exports. Thai stocks and bonds have fallen this year as investors flee emerging markets.

Thailand's SET Index has dropped 18 percent since Jan. 1, and the Philippine Stock Exchange Index is down 33 percent, the fourth-worst performer in Asia. Philippine bonds have lost 6.8 percent, the most among 10 Asian markets tracked by an HSBC Holdings Plc index. The returns on Thai bonds have fallen 1.6 percent, the fourth-worst in the gauge.

Fishermen in Japan, labor unions in Sri Lanka, truck drivers in India and students in Indonesia have held protests on surging fuel and food costs. Inflation in the region is expected to reach a decade-high this year, the Asian Development Bank said in April.

Indonesia, India

Indonesia raised its benchmark rate for a third straight month in July, and India boosted borrowing costs twice in June. In Vietnam, the central bank raised its base rate to 14 percent last month, the highest in Asia.

The Bank of Thailand, which has held the policy rate at 3.25 percent since August, last raised it in June 2006. The central bank may raise the one-day bond repurchase rate to 3.5 percent tomorrow, according to 16 of 19 economists surveyed by Bloomberg News. The remaining three expect a half-a-percentage- point increase.

Thai consumer prices gained 8.9 percent last month, the fastest in a decade. The Finance Ministry in June raised its inflation forecast for this year to 7.2 percent from an earlier prediction of 4.5 percent, and said inflation is ``a major threat to growth.''

Political Turmoil

Higher rates in Thailand would come at a time when consumer confidence is at the lowest level this year amid intensifying anti-government protests. Prime Minister Samak Sundaravej's ruling People Power Party faces legal challenges that may force it to disband, and the five-month old government has been the target of street protests since May 25.

``The hike probably will worsen the economic situation, but high and persistent inflation is worse,'' said Dwyfor Evans, a strategist at State Street Global Markets in Hong Kong. ``Allowing political volatility to overrule policy credibility sends a very poor signal to investors and they should avoid this at all costs.''

A quarter-point increase by the Bank of Thailand would be insufficient and wouldn't stem a decline in the currency, said Tim Condon, chief Asia economist at ING Groep NV in Singapore. The Thai baht is the worst-performing currency in Asia this year.

``I don't think a 25 basis-point rate hike is going to assuage the baht selling pressure,'' Condon said. ``To get inflation back under control, it will really require a tightening of policies. Much higher interest rates is what it will need.''

Baht, Peso

Thailand's baht rose 0.6 percent to 33.47 per dollar as of 11:17 a.m. in Bangkok, according to Bloomberg data. The Philippine peso advanced to as high as 45.08 per dollar in Manila today, according to Tullett Prebon Plc.

Bangko Sentral ng Pilipinas raised its key interest rate in June for the first time in more than two years. Deputy Governor Diwa Guinigundo said last week the bank's ``bias is towards tightening.''

The central bank will increase rate it pays banks for overnight deposits by a quarter percentage point to 5.5 percent, according to 16 of 20 economists surveyed. Four expect a 50 basis-point gain.

Bangko Sentral is considering increasing its 2008 inflation forecast for a second time after lifting the estimate last month to a range of 7 percent to 9 percent. Consumer prices rose 11.4 percent in June from a year earlier, the most in 14 years.

``While some key food sectors like rice seem to have stabilized, the risks that broad commodity prices, especially energy prices, would stay stubbornly high have increased,'' said Simon Wong, an economist at Standard Chartered Bank in Hong Kong. ``We now expect more aggressive tightening.''

The following tables show economists' estimates for Thai and Philippine interest rates:

Thailand Benchmark Interest Rate
------------------------------------------------------
                            July   Aug.   Oct. End of
Firm                           16     27      8   2008
------------------------------------------------------
Median                      3.50%  3.75%  4.00%  4.00%
% Estimates at Median         84%   100%    83%    67%
High                        3.75%  3.75%  4.00%  4.25%
Low                         3.50%  3.75%  3.75%  3.75%
Number of Estimates            19      7      6      6
------------------------------------------------------
Action Economics            3.50%     --     --     --
ATR-Kim Eng Capital         3.50%  3.75%  4.00%  4.00%
Brown Brothers Harriman     3.50%  3.75%  4.00%  4.00%
Capital Economics Ltd.      3.50%     --     --     --
Capital Nomura Securities   3.50%  3.75%  3.75%  3.75%
Citi                        3.75%     --     --     --
Credit Suisse               3.50%     --     --     --
HSBC                        3.50%  3.75%  4.00%  4.00%
Ideaglobal                  3.50%  3.75%     --     --
ING Groep NV                3.50%     --     --     --
JP Morgan Chase             3.50%     --     --     --
Lehman Brothers             3.75%     --     --     --
Moody's Economy.com         3.50%  3.75%  4.00%  4.25%
Morgan Stanley              3.50%     --     --     --
SCB Securities              3.50%     --     --     --
Standard Chartered Bank     3.50%     --     --     --
Tisco Securities            3.50%  3.75%  4.00%  4.00%
UBS                         3.75%     --     --     --
UOB Group                   3.50%     --     --     --
------------------------------------------------------

Philippines Overnight Borrowing Rate
-------------------------------------------
Policy Meeting           July   Aug.   Oct.
Dates                      17     28      9
-------------------------------------------
Median                  5.50%  5.75%  6.00%
% forecasts at Median     80%    69%    55%
High                    5.75%  6.25%  6.25%
Low                     5.50%  5.50%  5.50%
Number of Estimates        20     13     11
-------------------------------------------
Action Economics        5.50%  5.75%  6.00%
ANZ Banking Group       5.50%  5.75%  5.75%
ATR-Kim Eng Capital     5.50%  5.75%  5.75%
BDO Unibank             5.50%  5.75%  6.00%
[bn:PRSN=1] Brown Brothers Harrima []  5.50%  5.75%  6.00%
Capital Economics       5.50%     --     --
CIMB-GK Research        5.50%  5.75%     --
Citi                    5.75%     --     --
Credit Suisse           5.50%     --     --
DBS Group               5.50%  5.75%  6.00%
Forecast Singapore      5.75%     --     --
Fortis Bank             5.50%  5.75%  6.00%
HSBC                    5.50%  5.75%  6.00%
Ideaglobal              5.50%  5.50%  5.75%
ING Groep NV            5.50%     --     --
Lehman Brothers         5.50%     --     --
Moody's Economy.com     5.50%  5.50%  5.50%
Standard Chartered      5.75%  6.00%  6.25%
Thomson IFR             5.75%  6.25%     --
UBS                     5.50%     --     --
-------------------------------------------

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

Read more...

Today's Market Outlook

Daily Forex Technicals | Written by Windsor Brokers Ltd | Jul 15 08 07:44 GMT |

EURUSD

Has retreated to a potential corrective higher low at 1.5841 Monday before rebounding to maintain bullish posture off 1.5800/05. Further rise sets focus at 1.5972 Monday's high ahead of 1.6020 records high. A relapse back below 1.5800/05 and 1.5755/50 support zone however completes a suspected 5-wave structure from 1.5611, 07 July low.

Res: 1.5949, 1.5972, 1.6002, 1.6020
Sup: 1.5876, 1.5841, 1.5723, 1.5803

GBPUSD

Retreated to a low of 1.9814 Monday before returning to strength, extending current up move from 1.9649, 07 July low. Headway now above 1.9975, 02 July high, firms 2.0008, 01 July, and 2.0029, 21 Apr, resistance zone next as faint 60-hr/10-day MA bull crossover beckons. Losing 1.9814 low however marks a top instead.

Res: 2.0008, 2.0029, 2.0050, 2.0068
Sup: 1.9915, 1.9875, 1.9852, 1.9814

USDJPY

Undergone Monday's recovery for a potential lower top at 106.81, retracing 107.66/105.66, 3-legged swings. Upper rejection of 10-day MA at 106.60 possibly sets up downside return with break of 105.66 exposing risk towards 105.23/104.99 lows, 01 Jul/30 June. Above 106.81 and 107.30, 11 July high, zone however breaks sequence of lower highs to hint renewed strength

Res: 106.48, 106.66, 107.81, 107.01
Sup: 105.66, 105.45, 105.23, 104.99

USDCHF

Rejected Monday's push above 10-day MA to pullback sharply from 1.0251 high. Downside risk is set back at 1.0112 swing low, 03 July, approximately 50% of .9630/1.0625 up leg, with break extending bear phase off 1.0625 top, 08 May, to open 0.9997, 22 April, approximately 61.8% retrace. Regaining Monday's high however averts and firms next upswing instead.

Res: 1.0175, 1.0205, 1.0225, 1.0251
Sup: 1.0112, 1.0094, 1.0040, 1.0023

Windsor Brokers Ltd
http://www.windsorbrokers.biz

Read more...

Bank of France Confidence Index Slips to Lowest in Five Years

By Helene Fouquet

July 15 (Bloomberg) -- The Bank of France said its index of manufacturing confidence fell to the lowest in five years in June and reiterated that the economy will growth at the slowest pace in almost two years in the second quarter.

The confidence index for the month of June declined to 95, the lowest since July 2003, from a revised 96 in May, the Paris- based central bank said today in a statement. The bank reiterated its previous forecast of a 0.2 percent expansion in the three months through June, the slowest since the third quarter of 2006.

``Industrial activity remained stable,'' the central bank said. ``Growth carried over for 2008 at the end of the second quarter is expected to stand at 1.3 percent.''

Finance Minister Christine Lagarde said that French economic growth would be on the lower end of the government's current forecast. The economy will expand at least 1.7 percent this year, at the bottom of the government's predicted range of 1.7 percent to 2 percent.

``We'll be on the lower end of the scale because our economy is undergoing external shocks such as a massive increase of oil prices,'' Lagarde said on Europe1 radio today.

France is feeling the pinch from a U.S.-led slowdown in global growth. In March, Prime Minister Francois Fillon reduced his growth forecast for 2008 to between 1.7 percent and 2 percent from ``close to 2 percent.''

To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.ne.



Read more...

South Korea May Use Price Controls to Cool Inflation

By Seyoon Kim

July 15 (Bloomberg) -- South Korea's government indicated it may implement price controls to cool decade-high inflation, a day after the central bank warned wage demands could ignite a ``vicious cycle'' of spiraling prices.

Government ministries should ``restore'' departments that are in charge of controlling prices and devise ways to stabilize costs of products under their responsibility, Vice Finance Minister Kim Dong Soo said at the start of the first of a new weekly meeting of ministries to discuss fighting inflation.

``In order to minimize the effect on ordinary people's lives, we need to take micro-economic measures'' as well as macro measures such as monetary and liquidity controls to damp inflation, Kim said. If rising prices boost ``inflationary expectations, that can push up wages and add a significant burden on the economy,'' he said.

President Lee Myung Bak's administration said in March it would monitor the prices of 52 products including rice, pork, milk and shampoo. In the past month the government has turned its focus from sustaining growth to fighting inflation that has sent confidence among consumers to a seven-year low.

``There will be a limit to what the government can do in terms of prices,'' said Kwon Young Sun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, citing the risk that price controls could distort the market mechanism. ``Still, it's signaling constantly it's focused on stabilizing inflation.''

Bank of Korea Deputy Governor Kim Byung Hwa yesterday said wage demands could ignite a ``vicious cycle'' of spiraling prices.

Inflationary Expectations

``Policy makers want to prevent any inflationary expectations from spreading, even though I don't see a sign of those yet,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``If those expectations materialize, it could cause a spiral where people demand more wages because of rising prices and that pushes up consumer prices further.''

Record fuel costs and a weaker won drove consumer prices up 5.5 percent in June from a year earlier. In response, policy makers stepped up efforts to stem a drop in the South Korean won that has fanned price pressures by increasing the cost of imported goods including oil.

The won declined 0.2 percent to 1,006.30 per dollar as of 1:11 p.m. in Seoul. The currency last week advanced 4.8 percent as the finance ministry and central bank said they would use the nation's $258 billion of foreign reserves to support the won. For the year it is down 7 percent against the dollar.

Import Prices

South Korea's import prices rose 49 percent in June from a year earlier, the most in more than 10 years, the central bank said today. That's hurting the terms of trade, a measure of export prices relative to import prices, and squeezing corporate profit and household income.

The Bank of Korea kept interest rates unchanged at the highest level in seven years at 5 percent last week, adding it expects inflation to accelerate and economic growth to slow.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net



Read more...

Bernanke Foiled as Fannie-Freddie Rescue Thwarts Forecasts

By Craig Torres and Steve Matthews

July 15 (Bloomberg) -- For Federal Reserve Chairman Ben S. Bernanke, events keep getting in the way.

The chairman is seeing his efforts at using forecasts to map an anti-inflation strategy shoved aside by the need to contain immediate damage to the economy, Fed watchers say. Bernanke today delivers his semiannual testimony on the economy to Congress, where he will release the projections officials discussed at their June 24-25 meeting.

``Things are out of his control,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina.

Silvia, who used to work as chief economist of the Senate Banking Committee, where Bernanke testifies today, predicted that lawmakers' questions will mostly focus on how the financial crisis that has now engulfed Fannie Mae and Freddie Mac will ``affect the downside for the economy.''

Traders, who last month foresaw an interest-rate increase as soon as August, now anticipate the Fed will hold off until October, with the chance of a move by year-end dropping to 67 percent from 100 percent, futures contracts show.

The hearing is scheduled for 10 a.m. in Washington.

Bernanke last month said that the risks of a ``substantial downturn'' had diminished, and committed to ``strongly resist'' any jump in inflation expectations. The remarks spurred traders to bet the Federal Open Market Committee would raise its benchmark rate by year-end.

Stocks Slide

Risks to that outlook have risen after the Standard and Poor's Financials Index dropped 17 percent and Fannie Mae and Freddie Mac, the largest sources of U.S. home financing, lost more than half their value since the June FOMC meeting.

The U.S. Treasury and Fed were forced to assemble a rescue plan for Fannie and Freddie July 13 in an effort to stem a collapse of confidence in the firms. Two days earlier, the Federal Deposit Insurance Corp. took over IndyMac Bancorp Inc. as the California lender collapsed under soaring losses.

``The Fed's messages, complicated by the interaction between the real economy and financial system, have been confusing,'' said Mark Spindel, who runs the Washington-based hedge fund Potomac River Capital LLC and used to manage a $15 billion portfolio at the World Bank's International Finance Corp. ``They were hoping financial turbulence would have subsided. It hasn't at all.''

Paulson, Cox

Bernanke's economic outlook may also be overshadowed by the crisis today because Senator Christopher Dodd, who chairs the banking committee, said it will be ``brief.'' That's to accommodate a separate hearing with Bernanke, Treasury Secretary Henry Paulson, and Securities and Exchange Commission Chairman Christopher Cox on financial markets.

Bernanke has pushed the FOMC to tie policy to an intermediate forecast. Under his guidance, Fed governors and district-bank presidents since October have published their projections four times a year, up from twice previously. The estimates are now for the coming three years, instead of two.

The strategy has been tested over the past year as bouts of financial turbulence clouded the economic outlook, forcing officials to alter their messages.

Policy makers on Aug. 7 kept their benchmark lending rate unchanged at 5.25 percent, and cited inflation as the ``predominant policy concern.'' Ten days later, a surge in funding costs prompted them to reverse course and lower the charge for direct loans to banks.

Changing Tack

Two months later, the FOMC said that growth and inflation risks ``roughly balance'' each other, before abandoning that assessment to lower rates again in December and execute an emergency reduction in January.

In June, Bernanke began highlighting a rising risk of inflation, presaging the June 24-25 FOMC meeting, where officials halted their series of seven rate cuts since September.

Consumer prices probably climbed 4.5 percent in June from a year earlier, close to the fastest pace since 1991, economists project a Labor Department report will show on July 16. Inflation has been stoked by soaring costs of fuel and food, with crude oil prices reaching a record $147.27 a barrel on July 11.

The Fed chairman's challenge today is to explain how the Fed will manage inflation risks without signaling that policy makers are preparing to raise rates, economists said.

``Financial developments have planted a few extra land mines'' for Bernanke, said Tom Gallagher, managing director in Washington for ISI Group, a money management and research firm. ``He will not want to unsettle markets, but he can't appear'' soft on inflation, Gallagher said.

Stock Slump

Fannie Mae has fallen 61 percent in the past month, and Freddie Mac has lost 69 percent. The declines in the companies that own or guarantee about half of the $12 trillion in U.S. home loans outstanding threaten to increase mortgage rates, deepening the worst housing recession in 25 years.

Paulson proposed two days ago legislation giving the Treasury the power to make unlimited purchases of equity in the firms, and to increase their credit lines. In the interim, the Fed agreed to let Fannie Mae and Freddie Mac borrow directly from the central bank.

``The Fed's message that substantial downside risks have diminished now just seems completely ill-timed,'' said Brian Sack, senior economist at Macroeconomic Advisers LLC. ``It is hard to see them tightening anytime this year.''

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Steve Matthews in Atlanta at smatthews@bloomberg.net.



Read more...

Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Jul 15 08 07:41 GMT |

CHF

The pre-planned short positions from the key resistance range have been realized with overlap of minimal assumed target. OsMA trend indicator having generally marked the close activity parity of both parties as well as the feature of oversold factor near channel line '2' gives grounds to presume a possibility of rate correction period within the version of ascending trading channel. Hence and to reduce trading risks we assume a possibility of pair return to resistance range 1.0180/1.0200, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.0120/40, 1.0090/1.0100 and/or further breakout variant up to 1.0020/40, 0.9980/1.0000. An alternative for buyers will be above 1.0240 with the targets 1.0280/1.0300, 1.0320/40

GBP

The pre-planned buyers' positions from the key supports have been realized with attainment of main assumed targets. OsMA trend indicator having marked the features of overbought factor without confirmative strengthening of bearish counteraction gives grounds to preserve buyers' planning priorities for today. Hence and to reduce trading risks we assume a possibility of pair return to supports 1.9880/1.9900, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.9950/70, 2.0000/20 and/or further breakout variant up to 2.0060/80, 2.0120/40, 2.0180/2.0200. An alternative for sells will be below 1.9840 with the targets 1.9780/1.9800, 1.9720/40, 1.9680/1.9700.

JPY

The pre-planned short positions from the key resistance range have been realized with attainment of main assumed targets. OsMA trend indicator having marked the activity fall of both parties with some advantage of bullish party gives grounds to presume pair return to the range of 106.20/40, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 105.60/80 and/or further breakout variant up to 105.00/20, 104.60/80. An alternative for buyers will be above 107.00 with the targets 107.40/60, 107.80/108.00.

EUR

The pre-planned buyers' positions from the key supports have been realized with attainment of minimal assumed target. OsMA trend indicator having marked the activity fall of both parties is not a confirmative feature for a choice of planning priorities for today. Hence because of chosen strategy based on presumption about possible range movement of the rate we assume a possibility of pair return to channel line '1' to support range 1.5850/70, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.5920/40, 1.5980/1.6000 and/or further breakout variant above 1.6020 with the targets 1.6060/80, 1.6100/20. As before an alternative for sells will be below 1.5800 with the targets 1.5740/60, 1.5700/20.

FOREX Ltd
www.forexltd.co.uk

Read more...

Retail Sales in U.S. Probably Rose as Americans Spent Rebates

By Shobhana Chandra

July 15 (Bloomberg) -- Retail sales in the U.S. probably rose in June as Americans spent tax rebates and record gasoline prices boosted receipts at service stations, economists said before a government report today.

Purchases increased 0.4 percent after a 1 percent gain the prior month, according to the median estimate of 81 economists surveyed by Bloomberg News. A separate report may show food and fuel pushed up wholesale prices.

Consumers flocked to discounters including Wal-Mart Stores Inc. and Costco Wholesale Corp. to stretch the buying power of the government's stimulus checks as home values fell, fuel prices surged and firings mounted. Federal Reserve Chairman Ben S. Bernanke, facing a pickup in inflation and slower growth, is also scheduled to testify before Congress today.

``The stimulus payments will boost spending again, as they did in May,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts. ``The worry for the future is that sales will fall back, in line with increasingly gloomy fundamentals.''

The Commerce Department's retail sales report is due at 8:30 a.m. in Washington. Forecasts ranged from a drop of 0.4 percent to a gain of 1.5 percent.

Also at 8:30 a.m., Labor Department figures may show prices paid to producers climbed 1.4 percent last month, matching May's gain, according to the survey median. Wholesale costs in the 12 months through June probably rose by the most since 1981.

Other reports today are forecast to show that inventories climbed in May and manufacturing in New York contracted this month for the fifth time since February.

Bernanke Testimony

Bernanke, who cut interest rates this year at the most aggressive pace in two decades, will testify before the Senate today as part of the central bank's semi-annual report on the economy.

The retail report may also show Americans are shunning big- ticket purchases. Sales excluding automobiles increased 1 percent in June, according to the survey median. Cars and light trucks sold in June at a 13.6 million annual pace, the weakest since 1993, according to industry data issued earlier this month.

Gasoline service-station receipts probably jumped. Regular unleaded fuel prices topped $4 a gallon for the first time in June and have continued climbing this month, according to AAA.

Rising energy costs erode households' purchasing power and add to the risk that companies will try to raise prices, triggering a broader pickup in inflation.

Growth Forecasts

The twin concerns may prompt Fed policy makers to keep interest rates unchanged this year, a Bloomberg survey last week showed. Economic growth will slow to a 0.5 percent annual rate in the fourth quarter, the weakest pace in six years, and consumer spending will post the smallest gain since 1991, according to the economists surveyed.

The government distributed $86.1 billion in stimulus checks through July 4, out of a total plan of about $110 billion. Rebate-linked promotions boosted sales at retail stores open at least a year to a better-than-forecast 4.3 percent gain in June, according to the International Council of Shopping Centers.

Wal-Mart's same-store sales jumped 5.8 percent, the most in four years. The Bentonville, Arkansas-based company's U.S. discount stores and its Sam's Club membership warehouses drew additional customers who spent more on average per visit 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.

                        Bloomberg Survey

================================================================
                              PPI     Core   Retail   Retail
                                       PPI    Sales ex-autos
                             MOM%     MOM%     MOM%     MOM%
================================================================

Date of Release              07/15    07/15    07/15    07/15
Observation Period            June     June     June     June
----------------------------------------------------------------
Median                        1.4%     0.3%     0.4%     1.0%
Average                       1.3%     0.3%     0.4%     1.0%
High Forecast                 2.9%     0.5%     1.5%     1.8%
Low Forecast                  0.5%     0.1%    -0.4%     0.4%
Number of Participants          77       74       81       75
Previous                      1.4%     0.2%     1.0%     1.2%
----------------------------------------------------------------
4CAST Ltd.                    1.8%     0.3%     0.8%     1.6%
Action Economics              1.5%     0.2%     1.0%     1.5%
AIG Investments               1.5%     0.5%     0.9%     1.5%
Aletti Gestielle SGR          1.1%     0.3%     0.3%     0.8%
Allianz Dresdner Economic     ---      ---      0.5%     ---
Argus Research Corp.          0.5%     0.4%     0.4%     0.6%
Banc of America Securitie     0.9%     0.2%     0.6%     0.8%
Bank of Tokyo- Mitsubishi     1.4%     0.3%     0.4%     0.8%
Bantleon Bank AG              1.5%     ---      0.4%     0.9%
Barclays Capital              1.5%     0.3%     0.6%     1.3%
BBVA                          0.9%     0.3%     0.2%     0.7%
BMO Capital Markets           1.4%     0.4%     0.8%     1.1%
BNP Paribas                   1.5%     0.3%     0.6%     1.0%
Briefing.com                  1.3%     0.3%     0.5%     1.0%
Calyon                        1.3%     0.2%     0.4%     1.0%
CFC Group                     ---      ---      0.3%     0.8%
CIBC World Markets            1.7%     0.3%     0.3%     1.1%
Citi                          1.0%     0.2%     0.5%     1.2%
ClearView Economics           0.8%     0.3%     0.5%     0.9%
Commerzbank AG                1.6%     0.3%     0.7%     1.2%
Credit Suisse                 1.1%     0.2%     0.5%     1.2%
Daiwa Securities America      0.8%     0.2%     0.6%     0.7%
Danske Bank                   1.1%     0.2%     0.4%     1.1%
DekaBank                      1.3%     0.3%     0.3%     0.8%
Desjardins Group              1.0%     0.2%     0.7%     1.2%
Deutsche Bank Securities      1.5%     0.3%     0.3%     0.7%
Deutsche Postbank AG          1.0%     0.3%     0.3%     0.9%
Dresdner Kleinwort            1.3%     0.2%     0.3%     1.0%
DZ Bank                       1.4%     0.3%     0.3%     0.7%
First Trust Advisors          1.8%     0.3%     0.1%     0.9%
Fortis                        0.7%     0.3%     0.2%     ---
FTN Financial                 1.0%     0.2%     0.9%     1.5%
GCI Capital                   1.3%     0.3%     0.5%     0.9%
Global Insight Inc.           1.8%     0.3%     0.8%     1.5%
Goldman, Sachs & Co.          1.1%     0.3%     0.1%     0.6%
H&R Block Financial Advis     1.2%     0.3%     0.3%     0.8%
Helaba                        1.2%     0.3%     0.2%     0.7%
High Frequency Economics      1.4%     0.3%     0.5%     1.5%
Horizon Investments           1.1%     0.3%     0.8%     1.3%
HSBC Markets                  1.3%     0.1%     0.0%     0.9%
IDEAglobal                    1.5%     0.3%     0.3%     1.0%
Informa Global Markets        1.1%     0.3%     0.1%     0.5%
ING Financial Markets         1.4%     0.2%     0.0%     1.2%
Insight Economics             1.4%     0.2%     0.4%     1.0%
Intesa-SanPaulo               1.5%     0.3%     1.0%     0.4%
J.P. Morgan Chase             1.4%     0.3%     0.1%     0.9%
Janney Montgomery Scott L     2.1%     0.4%     0.7%     1.3%
JPMorgan Private Client       1.4%     0.3%     0.6%     1.0%
Landesbank Berlin             1.2%     0.3%    -0.1%     0.5%
Lehman Brothers               1.3%     0.3%     0.6%     1.1%
Lloyds TSB                    1.4%     0.3%     0.4%     0.4%
Maria Fiorini Ramirez Inc     1.4%     0.3%     0.3%     1.1%
Merk Investments              1.5%     0.4%     0.7%     1.0%
Merrill Lynch                 2.9%     0.3%     1.1%     1.6%
Moody's Economy.com           1.4%     0.3%     0.2%     0.8%
Morgan Stanley & Co.          1.6%     0.2%     0.4%     0.9%
National Bank Financial       1.3%     0.3%     1.0%     1.2%
National City Corporation     0.7%     0.2%     0.2%     0.8%
Natixis                       1.6%     0.3%     0.7%     1.0%
Newedge                       1.4%     0.3%     0.8%     1.0%
Nomura Securities Intl.       0.8%     0.1%     0.3%     0.7%
Nord/LB                       1.4%     0.3%     0.0%     0.6%
Okasan Securities             ---      ---      0.4%     ---
PNC Bank                      1.5%     0.3%     0.5%     0.9%
RBS Greenwich Capital         1.3%     ---      0.3%     ---
Ried, Thunberg & Co.          1.6%     0.3%     0.3%     1.2%
Schneider Trading Associa     1.6%     0.2%     0.0%     0.6%
Scotia Capital                1.6%     0.4%     0.9%     1.5%
Societe Generale              1.4%     0.2%     0.2%     0.9%
Standard Chartered            1.3%     0.3%     0.4%     0.9%
Stone & McCarthy Research     0.6%     0.3%     1.5%     1.8%
TD Securities                 ---      ---      0.2%     0.8%
Thomson Financial/IFR         1.6%     0.2%     0.6%     1.1%
UBS Securities LLC            1.5%     0.2%     0.2%     0.9%
Unicredit MIB                 1.0%     0.2%     0.5%     ---
University of Maryland        1.0%     0.2%    -0.4%     0.4%
Wachovia Corp.                1.0%     0.1%     0.1%     1.1%
Wells Fargo & Co.             1.3%     ---      1.0%     ---
WestLB AG                     1.0%     0.2%     0.6%     1.0%
Westpac Banking Co.           1.8%     0.2%     0.1%     0.6%
Wrightson Associates          1.6%     0.3%     0.3%     1.2%
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

Read more...

Brazil, Chile, Peru: Latin America Bond, Currency Preview

By Jamie McGee

July 15 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from a previous session.

Brazil: Retail sales increased by 9.9 percent in May, compared to 8.7 percent growth in April, according to the median estimate of 25 economists in a Bloomberg survey.

The government is scheduled to release the data at 8 a.m. New York time.

The real rose 0.4 percent to 1.5948 per dollar.

The yield on the country's zero-coupon bonds due January 2010 rose 3 basis points, or 0.03 percentage point, to 15.13 percent, according to Bloomberg pricing.

Chile: The central bank can't afford to risk losing credibility by not acting against inflation, bank President Jose De Gregorio told lawmakers in Santiago.

``The loss of credibility, which happens when the right decisions are not taken at the right time, only leads to higher costs for controlling inflation,'' De Gregorio said before the Chamber of Deputies economics committee in Santiago. ``Containing inflation isn't free, but postponing that containment is even more expensive.''

The peso rose 1.07 percent to 496.71 per dollar.

The yield for a basket of five year peso bonds in inflation-linked currency units, called the unidades de fomento, rose 5 basis points or 0.05 percentage point, to 2.95 according to the Bloomberg composite prices.

Peru: The economy expanded by 8 percent for the year ending in May, compared to 13.3 percent growth in the 12 months through April, according to the median estimate of 9 economists in a Bloomberg survey. The central bank is slated to release the data at 11:30 a.m. New York time.

The sol rose 0.32 percent to 2.8235 per U.S. dollar.

The yield on the nation's 8.6 percent sol-denominated bonds due in August 2017 was unchanged at 7.63 percent according to Citigroup Inc.'s unit in Peru.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net



Read more...

German Investor Confidence Probably Decreased in July

By Christian Vits

July 15 (Bloomberg) -- German investor confidence probably dropped to the lowest level in almost 16 years in July as faster inflation and higher interest rates dimmed the outlook for growth in Europe's largest economy, a survey of economists shows.

The ZEW Center for European Economic Research will say its index of investor and analyst expectations fell to minus 55 from minus 52.4 in June, according to the median of 37 forecasts in a Bloomberg News survey. That would be the lowest reading since December 1992. ZEW issues the report at 11 a.m. in Mannheim today.

Record oil and food prices prompted the European Central Bank to raise its key rate by a quarter point to 4.25 percent this month, further squeezing purchasing power. With a stronger euro weighing on exports and the deepening U.S. housing slump damping confidence worldwide, Germany's benchmark DAX share index has dropped 7 percent in the past month and 23 percent this year.

``Higher inflation, the slump in equity markets and the ECB's interest-rate hike are all weighing on sentiment,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``Freddie Mac and Fannie Mae may add to this trend.''

Treasury Secretary Henry Paulson has asked Congress for authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, which buy or finance almost half the $12 trillion of U.S. mortgages. The companies' shares lost about half their value last week on concern they will run short of capital.

About 50 percent of the responses to the ZEW survey came in after July 9, when news broke that Freddie Mac and Fannie Mae may be in trouble, said Sandra Schmidt, an economist at the institute.

`Any Kind of Crisis'

``The markets are currently focusing on any kind of crisis,'' said Gertrud Traud, chief economist at Landesbank Hessen- Thueringen in Frankfurt. ``However, we should be quite close to the low point, as everything negative is priced in already.''

Germany's economy probably shrank in the three months through June, Deputy Economy Minister Walther Otremba said last month.

Economic growth may slow to 1 percent in 2009 from 2.4 percent this year, the Munich-based Ifo institute said June 24, a day after reporting its gauge of business confidence dropped to a two-year low.

``The cooling of world economic activity will damp foreign sales and the stronger euro is an additional restricting factor,'' Ifo said.

Financial Turmoil

Europe's single currency has gained 15 percent against the dollar over the past year, while the collapse of the U.S. subprime mortgage market has roiled financial markets and damped the outlook for global growth.

The world's biggest financial companies have posted more than $400 billion in writedowns and credit losses since the start of last year.

ECB policy makers say Europe's economic fundamentals are sound and they're more concerned about inflation, which accelerated to 4 percent last month, the fastest in more than 16 years.

Oil prices have almost doubled in the past year and reached a record $147.27 a barrel last week. Maize prices have almost tripled since the beginning of 2006 and wheat prices have risen by more than 80 percent, the ECB said in its June monthly report.

The gloomy growth outlook may prevent the central bank from raising interest rates further. Eonia forward contracts show investors have scaled back bets on higher rates. The March contract was at 4.38 percent yesterday, down from 4.74 percent a month ago.

Still, Germany's gross domestic product, which accounts for about a third of the euro-region economy, rose 1.5 percent in the first quarter from the previous three-month period as companies stepped up spending on machinery and construction.

Economic growth is likely to be ``more subdued'' in the second and third quarters before picking up again at the end of the year, Germany's Bundesbank said last month.

To contact the reporter on this story: Christian Vits in Frankfurt cvits@bloomberg.net.



Read more...

U.K. House-Price Drops Stay Close to Most Widespread Since 1978

By Svenja O'Donnell

July 15 (Bloomberg) -- U.K. house-price declines in June stayed close to the most widespread since the Royal Institution of Chartered Surveyors started measuring the property market in 1978, pushing the country closer to a recession.

The number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 88 percentage points, the London-based group said today. That compares with 92.2 percent the previous month, and 94.2 in April, the worst since the series began. The reading for London prices was minus 80.

U.K. mortgage approvals fell to the lowest in at least nine years in May, and the nation faces a house-price drop which is ``probably very sharp,'' Bank of England policy maker Kate Barker said in a newspaper interview published yesterday. Accelerating inflation has prevented the central bank from cutting interest rates from the current 5 percent to avoid a recession.

``With demand so low, would-be buyers are negotiating from a position of strength,'' Jeremy Leaf, a spokesman for RICS, said in a statement. ``However, transaction levels remain incredibly low, with many buyers cut out of the process by tight lending conditions.''

Banks are curbing lending following the collapse of the U.S. subprime mortgage market, which so far has cost financial institutions worldwide $410 billion in losses and writedowns. They granted 42,000 loans for house purchase in May, the least since the Bank of England's series began in 1999.

Price Declines

The ratio of completed sales compared to the stock of unsold properties fell to 18.2 percent in June, the least since October 1995, RICS said. House prices in East Anglia and the East and West Midlands had the most widespread declines, the survey showed. Home values in Scotland were the least affected.

``The difficulty of obtaining finance and the cost, combined with a lack of confidence and negative news, has created a stagnant market with very little activity and very few buyers,'' said Richard Cotton, an estate agent at Cluttons in London's Kensington and Chelsea district.

HBOS Plc, the U.K.'s biggest mortgage lender, said last week that house prices fell in June from a year earlier by the most in 15 years. Homebuilders Redrow Plc and Bovis Homes Group Plc said on July 9 they will each cut their workforce by 40 percent after the housing slump wiped out sales.

Consumer spending is also showing signs of weakening. Retail sales in shops open at least a year fell 0.4 percent in June compared with a year ago, the British Retail Consortium said today. The BRC's director general, Stephen Robertson, said in a Bloomberg Television interview that the current environment was ``perhaps even as tough a market as the 1970s.''

The downturn comes as the Bank of England faces the worst inflation threat in a generation. Consumer prices probably rose 3.6 percent in June from a year earlier, according to the median forecast of 36 economists surveyed by Bloomberg. The Office for National Statistics will release the figures at 9:30 a.m. today.

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.



Read more...

Alliance & Leicester Shareholders Seek Rival Bid, FT Reports

By Lenka Ponikelska

July 15 (Bloomberg) -- Alliance & Leicester Plc shareholders sought a rival bid after the lender agreed to be bought by Banco Santander SA for 1.26 billion pounds ($2.6 billion), seven months after it gave up a deal with the Spanish bank that valued it at more than twice as much, the Financial Times reported.

Alliance & Leicester jumped to 335 pence yesterday, 17 pence more the per-share price implied by Santander's all-share offer, as investors speculated other lenders may bid, the newspaper said. Only few banks, including Lloyds TSB Group Plc and National Australia Bank Ltd., which owns Yorkshire Bank and Clydesdale Bank, would be able to challenge Santander, the FT said. It was questionable whether they would bid, the newspaper said, citing unidentified banking sources.

The Financial Service Authority monitored the talks but has not pressed the lender to accept the bid, the newspaper said.

To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net



Read more...

Asian Currencies Rise: Baht Gains on Rate Outlook, U.S. Concern

By Aaron Pan and Shanthy Nambiar

July 15 (Bloomberg) -- Asian currencies rose, led by the Thai baht on speculation the central bank will raise interest rates tomorrow to damp inflation.

The baht rose the most in a week against the dollar, which fell against seven out of the 10 most-traded Asian currencies outside of Japan on concern U.S. credit-market losses will worsen. The Bank of Thailand will increase the one-day bond repurchase rate for the first time in two years tomorrow, economists predict.

The local currency ``is taking its cues from the dollar, and there is a bit of consolidating,'' said Carl Rajoo, a regional Asian economist at Forecast Singapore Pte. ``The Bank of Thailand is hawkish on inflation. If the rate hike is in line with expectations, the baht will continue to consolidate.''

The Thai currency gained 0.6 percent to 33.47 per dollar as of 11:17 a.m. in Bangkok, according to data compiled by Bloomberg.

The Bank of Thailand has held its benchmark interest rate at 3.25 percent since August and last increased it in June 2006. Policy makers are expected to raise the rate by a quarter- percentage point tomorrow to 3.5 percent, according to 16 of 19 economists surveyed by Bloomberg News. The remaining three predict a half-point increase.

Expectations of higher interest rates also helped support Indonesia's rupiah, which reached 9,099 per dollar, its strongest since March 10. The local currency traded at 9,123 per dollar, compared with 9,156 yesterday, according to data compiled by Bloomberg.

Stronger Rupiah

``We could see the currency continuing to strengthen gradually,'' said Christy Tan, a senior currency strategist at Bank of America Corp. in Singapore. ``The central bank's monetary tightening efforts started ahead of the others and there's prospects of them staying on this path longer than others in the region.''

Bank Indonesia raised its benchmark interest rate for the third straight month on July 3 to slow inflation, which is at a 21-month high of 11 percent. The central bank said last week it will use ``all instruments'' to slow price gains. The rupiah also gained today as Bisnis Indonesia reported foreign direct investment in the six months to June more than doubled from the same period last year.

U.S. Credit Crisis

Malaysia's ringgit reached a six-week high and Singapore's dollar advanced on speculation investors will steer more funds into Asian assets as U.S. credit-market losses swell. U.S. stocks slumped yesterday, led by financial shares, on concern the nation's regional banks are short of capital.

``What's happening in the U.S. could sway more funds into the Asian markets and that's good for regional currencies,'' said Awaluddin Shariff, a foreign-exchange trader at EON Bank Bhd. in Kuala Lumpur. ``There are concerns about U.S. banks and stock market.''

The ringgit traded at 3.2148 per dollar versus 3.2300 late yesterday, according to data compiled by Bloomberg. The intra- day high of 3.2130 per dollar is the ringgit's highest level since June 2. The currency may reach as high as 3.21 today, Awaluddin said.

Singapore's dollar added 0.6 percent to S$1.3483, Vietnam's dong was little changed at 16,834 per dollar and Taiwan's dollar was also little changed, trading at NT$30.412. The South Korean won fell 0.1 percent to 1,005.90.

The U.S. Treasury and the Federal Reserve on July 13 announced a rescue plan for Fannie Mae and Freddie Mac, the two- largest buyers of home loans, to help restore confidence after their share prices tumbled almost 50 percent last week. The stocks extended their slide yesterday. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson will later today address U.S. lawmakers on their response to the credit crisis.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net.



Read more...

Australian, N.Z. Dollars Gain as U.S. Financial Markets Worsen

By Ron Harui and Candice Zachariahs

July 15 (Bloomberg) -- The Australian dollar rose to a 25- year high and the New Zealand dollar advanced to the strongest in five weeks on speculation investors will be attracted to the nations' assets as losses at U.S. financial companies deepen.

Australia's currency, known as the Aussie, climbed for a fourth day and New Zealand's gained for a fifth after a stock index of U.S. financial firms slumped on speculation regional banks are short of capital. The New Zealand dollar was supported after a government report showed consumer prices rose at the fastest pace in 18 years.

``The Aussie is showing itself to be resilient in the face of financial turmoil in the U.S.,'' said Sean Callow, senior currency strategist in Sydney at Westpac Banking Corp., Australia's fourth-biggest bank. ``The grave concerns over the U.S. financial sector are playing out as a net negative for the dollar.''

Australia's dollar rose 0.9 percent to 97.72 U.S. cents as of 4:48 p.m. in Sydney, compared with 96.85 cents late in Asian trading yesterday. It earlier touched 97.77 cents, the strongest level since 1983. The currency bought 103.29 yen from 103.31.

New Zealand's currency strengthened 0.8 percent, the most since June 16, to 76.78 U.S. cents. It touched 76.79 cents, the strongest level since June 9. The currency fetched 81.19 yen from 81.21 yen.

The Australian dollar maintained its gains after the central bank said in minutes of its July 1 meeting released today that ``there had been no material change in the inflation outlook'' and its 12-year-high benchmark interest rate is restraining the economy.

`Well Placed'

The Australian dollar extended the past five days of gains to 2.6 percent, the best performance among the 16 most-active currencies, before Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson address U.S. lawmakers on their response to widening credit-market losses.

Global banks and securities firms have reported losses of about $400 billion as the subprime-mortgage market collapsed. Australia's five largest lenders shunned investments linked to the subprime market, helping them avoid the losses reported by firms on Wall Street and in Europe.

Reserve Bank of Australia Governor Glenn Stevens said on July 9 that Australia's main institutions were ``well placed'' to withstand the current environment.

The New Zealand dollar advanced after a government report showed inflation quickened at the fastest pace in 18 years last quarter, prompting traders to pare bets the central bank will lower interest rates.

`Attractive' Yield

``The yield is still very attractive in New Zealand,'' said Boris Schlossberg, a senior currency strategist at currency trader DailyFX.com in New York. ``We're seeing a broad anti- dollar move and the kiwi is benefiting as being part of the group of high-yielders.''

New Zealand's benchmark interest rate of 8.25 percent is the highest of any AAA rated nation. Reserve Bank of New Zealand Governor Alan Bollard has left borrowing costs at a record high since July last year, betting the slowing economy will curb inflation.

The consumer prices index rose 1.6 percent from the first quarter, Statistics New Zealand said in Wellington today. The median estimate of economists surveyed by Bloomberg was for inflation of 1.4 percent.

Traders see a 50 percent chance the RBNZ will cut its benchmark rate by a quarter-percentage point at its next meeting on July 24, compared with 59 percent odds yesterday, according to a Credit Suisse Group index based on interest-rate swaps.

Australian government bonds gained, pushing the yield on the 10-year security down 11 basis points to 6.31 percent. The price of the 5.25 percent bond due March 2019 rose 0.778, or A$7.78 per A$1,000 face amount, to 91.893.

New Zealand's bonds also advanced, with the 10-year yield declining 6 basis points to 6.03 percent. A basis point is 0.01 percentage point.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.



Read more...

Japan's Investors May Buy Australian, N.Z. Dollars, RBS Says

By Ron Harui

July 15 (Bloomberg) -- Japanese individual investors may keep buying the Australian and New Zealand dollars because of the South Pacific nations' interest-rate advantage over Japan, according to Royal Bank of Scotland Group Plc.

Housewives, pensioners, and businessmen boosted purchases of New Zealand's dollar, known as the kiwi, to a record last week as gains in Japan's currency provided them with an opportunity to buy higher-yielding assets at cheaper levels, according to data from the Tokyo Financial Exchange. The yen sales came even as concerns increased that New Zealand's economy may have slipped into a recession.

``Mrs. Watanabe likes kiwi,'' said Masafumi Yamamoto, head of foreign-exchange strategy in Tokyo at Royal Bank of Scotland, the fourth-largest currency trader, in a research note dated yesterday. ``Japanese retail investors don't care yet about the economic slowdown becoming evident in Australia and New Zealand and are likely to continue buying the high-yielding currencies as long as the yield gap remains.''

Investors increased net long positions on New Zealand's currency against the yen to an all-time high of 150,829 contracts on July 8 and on Australia's dollar to a record 79,920 on July 1, according to Tokyo Financial Exchange data. A long position is a bet on an asset price's gain.

The New Zealand dollar traded at 81.09 yen as of 3 p.m. in Tokyo from 81.21 yen late in Asia yesterday. The Australian dollar bought 103.18 yen, compared with 103.31 yen.

The Australian and New Zealand dollars are the best and third-best performers respectively, among the 16 most-active currencies versus the yen the past five days.

Rate Difference

The Bank of Japan kept its benchmark interest rate at 0.5 percent today while cutting its economic growth forecast. Benchmark interest rates are 8.25 percent in New Zealand and 7.25 percent in Australia, making the currencies of the nations favorites for so-called carry trades.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.

`Significant Headwind'

``The behavior of such investors, given the size of their asset holdings, is a potential significant headwind against Australian and New Zealand dollar weakness,'' said Yamamoto, who confirmed the details of the report.

So-called margin trading of currencies in Japan using borrowed funds rose 86 percent in the first quarter to a record 213 trillion yen ($2 billion), figures from the Financial Futures Association of Japan showed in May.

Japanese households have 1,490 trillion yen in financial assets, according to the Bank of Japan.

Australia's dollar, know as the Aussie, has climbed 10.6 percent and New Zealand's dollar advanced 2.3 percent the past three months on prospects that both countries will maintain their interest-rate advantage over Japan.

``Japanese households believe large yield gaps versus Japan will be maintained for the foreseeable future, despite monetary policy easing in Australia and New Zealand that we think is likely next year,'' Yamamoto said. ``They remain buyers on dips of Aussie-yen and kiwi-yen.''

Australian Finance Minister Lindsay Tanner said in a speech today at the Royal Melbourne Hospital that the economy faces ``uncertain times' because of the global credit slump, high inflation and record oil prices.

Heading for Recession

New Zealand's economy contracted 0.3 percent in the first quarter from the previous three months, a government report showed on June 27. Eight of 13 economists surveyed by Bloomberg say it also shrank in the second quarter, putting the economy in its first recession since 1998.

Traders are betting the Reserve Bank of Australia will cut its benchmark rate by 2 basis points, or 0.02 percentage point, in the next 12 months, according to a Credit Suisse Group index based on interest rate swaps. A similar index shows the Reserve Bank of New Zealand will lower its benchmark rate by 136 basis points, or 1.36 percentage points, in the next year.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net



Read more...

Dollar Falls on Concern Credit-Market Losses Will Damp Growth

By Kosuke Goto and Stanley White

July 15 (Bloomberg) -- The dollar fell against the yen and euro on speculation Federal Reserve Chairman Ben S. Bernanke and U.S. Treasury Secretary Henry Paulson will tell lawmakers credit-market losses will weigh on U.S. economic growth.

The currency declined to a 25-year low versus the Australian dollar on concern confidence in the debt of Fannie Mae and Freddie Mac will deteriorate even after the U.S. government pledged support for the two-largest buyers of home loans. The yen remained higher after the Bank of Japan kept interest rates unchanged at 0.5 percent today, the lowest among major economies.


``The situation in the U.S. financial sector has become very serious,'' said Yuji Saito, head of foreign-exchange sales n Tokyo at Societe Generale SA, France's second-largest bank by market value. ``Even if Bernanke and Paulson announce possible support measures, it's not easy to buoy the dollar.''

The dollar declined to 105.90 yen as of 7:02 a.m. in London from 106.14 yen in New York yesterday. It weakened to $1.5935 per euro from $1.5908. It fell to within a cent of the record low of $1.6019 reached April 22. The yen traded at 168.73 per euro from 168.89 yesterday, when it fell to 169.75, the lowest since the 15-nation currency debuted in 1999.

The U.S. currency may decline to 105 yen and $1.5950 a euro today, Saito forecast.

Lowest Since 1983

Against Australia's currency, the U.S. currency weaken to 97.57 cents, the lowest level since 1983, before trading at 97.48 cents, from 96.85 cents in late Asian trading yesterday.

The Bank of Japan kept the benchmark overnight lending rate unchanged today, as expected by all 39 economists surveyed by Bloomberg News. Governor Masaaki Shirakawa will hold a press conference at 3:30 p.m. in Tokyo.

The yen may rise as high as 100 per dollar this year as the Bank of Japan is more likely to raise interest rates than the Federal Reserve, said Toyoo Gyohten, former currency-policy chief at Japan's Ministry of Finance.

Japan's central bank may increase borrowing costs should inflation accelerate and the economy sustain growth of at least 1 percent, Gyohten said.

``The Fed is most likely to maintain its current level of interest rates,'' Gyohten, president for the Institute of International Monetary Affairs in Tokyo, said in an interview yesterday. ``The BOJ is more likely to raise rates. The medium- term trend is for a weaker dollar and a stronger yen.''

U.S. stocks fell yesterday, led by financial shares, after the government's seizure of Pasadena, California-based IndyMac Bancorp Inc. and predictions of wider credit losses overshadowed Paulson's pledge to shore up Fannie and Freddie. The Standard & Poor's 500 Index declined 0.9 percent.

`Bottom Yet'

Bernanke will give his semiannual testimony on monetary policy and the economy before the Senate Banking Committee at 10 a.m. Washington time.

``Bernanke will avoid saying anything that could potentially weaken confidence in the dollar,'' said Takuma Kurosawa, global markets treasurer in Tokyo at HSBC Bank, a unit of Europe's biggest lender. ``But the reality is the U.S. housing market and credit squeeze haven't hit bottom yet. That's discouraging investors from holding dollar assets.''

The U.S. currency may fall to 105.50 yen today, he said.

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, fell for a fifth day to 71.801 today from 71.915 yesterday.

Investor Confidence

The dollar may extend its decline on concern Fannie Mae and Freddie Mac will get the majority of funds they need by borrowing from the Fed rather than an investment from the government, increasing supply of the U.S. currency, said Ashley Davies, a currency strategist in Singapore at UBS AG, the world's second-biggest currency trader.

``Any whiff that the authorities will adopt steps to monetize the problems facing the U.S. housing market would be the trigger to drive the euro-dollar through the $1.60 mark,'' Davies wrote in a report today.

Gains in the euro may be limited on speculation investor confidence in Germany, Europe's largest economy, fell to an almost 16-year low, weakening the case for higher rates.

The ZEW Center for European Economic Research in Mannheim will say its index of investor and analyst expectations fell to minus 55 in July from minus 52.4 the previous month, according to a Bloomberg News survey. The ZEW will release the data today.

`A Sell'

``We're seeing the euro zone economy beginning to slow,'' Greg Salvaggio, vice president of capital markets at Tempus Consulting Inc. in Washington, said in a Bloomberg Television interview. ``Longer run, the euro is a sell. We remain bullish on the dollar and we're looking for levels year-end close to $1.35 to $1.40.''

Losses in the dollar may be limited by speculation reports will show inflation accelerated, spurring traders to add to bets the Fed will raise its benchmark interest rate from 2 percent.

U.S. producer prices increased 8.7 percent from a year earlier in June, the most since 1981, according to a Bloomberg News survey of economists before a Labor Department report today. A report tomorrow will show consumer prices rose 4.5 percent in June, the most since September 2005, according to a separate Bloomberg survey.

To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net.



Read more...

Incitec Says Fertilizer Plant Resumes Operations

By Madelene Pearson

July 15 (Bloomberg) -- Incitec Pivot Ltd., Australia's largest fertilizer maker, said its ammonium phosphate plant in Queensland state returned to operations after repairs that cost less than forecast and were completed ahead of schedule.

Loss of production and the cost of repairs is estimated to cut net income by about A$49 million ($48 million), Melbourne- based Incitec said today in a statement. The company said June 19 repairs may take a month and cut profit as much as A$58 million.

Incitec has more than doubled in the past year as soaring global demand for crop nutrients driven by China pushed fertilizer prices to records, boosting profits for producers. The company was forced to close its Phosphate Hill plant to repair an acid reaction tank, a key part of the production process.

``It's positive coming in A$9 million less than they advised and a week or so early,'' said Hugh Dive, who helps manage $5 billion at Investors Mutual Ltd. in Sydney, including Incitec shares. ``These tons are export tons, because of the time of the year, that are being sold up into Asia when the market is looking tighter.''

Incitec rose as much as A$6.21, or 3.5 percent, to A$184.21 on the exchange and traded at A$181.44 at 12:33 p.m. Sydney time. The stock closed at a record A$199.70 on June 19.

The company may have net income of A$559 million in the year ending Sept. 30, according to the median estimate of seven analysts complied by Bloomberg.

``Working around the clock, Incitec staff and contractors had the plant restored to full operation sooner than anticipated,'' Julian Segal, chief executive officer, said in the statement to the Australian stock exchange.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net



Read more...

Rio to Spend $500 Million on New Power at Ore Mines

By Rebecca Keenan

July 15 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, will spend $500 million upgrading power generation at its iron ore operations in Western Australia, reducing carbon emissions by 25 percent.

Two steam power stations will be shut down and replaced with natural gas turbines, supporting Rio's expansion of production, the London-based company said today in a statement.

Australia is set to release a carbon emissions trading proposal tomorrow as part of a government plan to help reduce greenhouse gases 60 percent by 2050. Western Australia has been battling a natural gas shortage after a plant explosion last month cut supplies by a third.

``At an annual production rate of 220 million tons of iron ore, a rate we expect to reach in the fourth quarter of 2008, we will be saving 200,000 tons a year of greenhouse gas emissions,'' Rio Iron Ore Group Chief Executive Sam Walsh said in the statement to the Australian stock exchange.

Rio fell as much as 1.9 percent, or 1.6 percent, to A$121.62 and was A$122.11 at 2:04 p.m. Sydney time on the exchange.

The turbines will use gas from existing supply agreements with Apache Corp. and the North West Shelf LNG venture, operated by Woodside Petroleum Ltd., Rio spokeswoman Amanda Buckley said from Melbourne. The new power stations will be commissioned in 2010, Rio said.

Rio will also build a power line from the new power station, adjacent to the 7 Mile Rail operations site, to the export ports at Cape Lambert and Dampier.

About 57 percent of gas supply from the damaged Apache plant is expected to resume by mid-August with full capacity expected in December. Rio Tinto said last month iron ore production, the company's biggest source of earnings, won't be affected by the explosion.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net



Read more...

Gold Trades Little Changed on Weak Dollar, Near Record Oil

By Iris Leung and Feiwen Rong

July 15 (Bloomberg) -- Gold was little changed after reaching its highest in almost four months, on near record oil prices and as deepening losses at U.S. financial institutions caused the dollar to weaken against the yen.

Gold climbed to as high as $975.32 an ounce yesterday, the highest since March 19, on concerns that Israel may be preparing to attack Iran. Crude oil was steady as employees of Petroleo Brasileiro SA, Brazil's state oil company, began a strike in an area, home to more than 80 percent of the country's output.

``Gold prices are still much supported by three factors: the weak dollar, regional instability in the Middle East and the high oil prices,'' said Ellison Chu, manager of precious metals at Standard Bank Asia Ltd. ``It will be testing $995 an ounce in the short term.''

Bullion for immediate delivery traded 0.2 percent lower at $970.25 an ounce at 10:40 a.m. in Hong Kong. Silver lost 0.1 percent to $19.07 an ounce.

The dollar also traded near a two-week low against the yen on speculation losses at Fannie Mae and Freddie Mac will deepen. The currency fell to a 25-year low versus the Australian dollar.

New York crude oil futures traded at $144.78 a barrel in Hong Kong at 10:41 a.m., just below the record $147.27 reached on July 11. The dollar traded at 105.90 yen, down from 106.14 yesterday.

Wealth Creation

``Gold's drivers remain: falling mine production, competitive currency devaluations, wealth creation in India and China, and petrodollars,'' John Hill, analyst at Citigroup Global Markets Inc., said yesterday in a report. ``Gold has reasserted safe-haven status above $950 an ounce as the dollar dithers and oil retakes records near $150.''

Gold for August delivery lost 0.3 percent to $970.90 an ounce in after-hours electronic trading on Comex at 10:45 a.m. in Hong Kong. Gold for December delivery traded in Shanghai advanced for a fourth day, gaining 0.3 percent to 212.93 yuan a gram ($966 an ounce) at the same time.

Gold for June 2009 delivery rose 0.6 percent to 3,335 yen a gram ($979 an ounce) on the Tokyo Commodity Exchange.

To contact the reporters for this story: Iris Leung in Hong Kong at ileung7@bloomberg.net; Feiwen Rong in Singapore at frong2@bloomberg.net



Read more...

Corn, Soybeans Rally on Concern Midwest Flooding May Cut Yields

By Jae Hur

July 15 (Bloomberg) -- Corn rose after touching a one-month low and soybeans gained after a U.S. government report showed planting delays and Midwest floods in June slowed pollination and blooming, potentially reducing yields for the crops.

About 13 percent of the corn crop was pollinating as of July 13, down from 50 percent a year earlier and below the five-year average of 36 percent, the U.S. Department of Agriculture said yesterday. An estimated 26 percent of the soybeans were making flower blooms that will develop pods, down from 54 percent a year earlier and below the five-year average of 45 percent, it said.

``There's growing concern that yields of the two crops may decline further following the significantly lower ratings of corn pollination and soybean blooming,'' said Takaki Shigemoto, an analyst at Tokyo-based broker Okachi & Co.

Corn for December delivery was up 2.5 cents, or 0.4 percent, at $6.8475 a bushel at 1:28 p.m. Singapore time after falling to $6.7825 a bushel, the lowest since June 11, in after-hours trading on the Chicago Board of Trade. The contract lost 3.8 percent yesterday as a favorable mix of sunshine and rain may boost crop conditions in the U.S. Midwest.

Most-active futures still have gained 96 percent in the past year, reaching a record $7.9925 on June 27.

About 64 percent of the corn was in good or excellent condition as of July 13, compared with 62 percent a week ago and 64 percent a year earlier, the USDA said yesterday in a report. Some 59 percent of the soybeans got the top ratings, unchanged from a week ago and down from 62 percent a year earlier, it said.

Output Forecast

The corn crop will be 11.715 billion bushels, down 0.2 percent from last month's estimate of 11.735 billion and down 10 percent from a record 13.074 billion harvested last year, the USDA said July 11. The agency cut its forecast for this year's yield to 148.4 bushels an acre from 148.9 bushels a month ago.

This year's soybean crop will total 3 billion bushels, down 3.4 percent from 3.105 billion forecast in June, the USDA said. Yields are projected to fall to 41.6 bushels an acre from 42.1 bushels estimated in June. Inventories before next year's harvest will total 140 million bushels, down 20 percent the June forecast.

Soybeans for November delivery rose 8.5 cents, or 0.6 percent, to $15.675 a bushel at 1:30 p.m. Singapore time after trading between $15.5225 and $15.70. The contract fell 2.3 percent yesterday. Most-active futures have risen 80 percent in the past year, reaching a record $16.3675 on July 3.

``Although soybeans prices have been pressured lower by the improvement in Midwest weather, we believe there is less downside risk to soybean prices given the underlying supply-demand fundamentals,'' Toby Hassall, an analyst at Commodity Warrants Australia in Sydney, said in an e-mail.

Wheat Gains

Wheat for September delivery was up 5 cents, or 0.6 percent, at $8.23 a bushel at 1:14 p.m. Singapore time after declining 1.5 percent yesterday. Prices have slumped 39 percent from a record $13.495 set on Feb. 27 as higher prices spurred farmers to boost planting.

Some 61 percent of the U.S. spring-wheat crop was rated good or excellent as of July 13, down from 69 percent a week earlier, the USDA said. Temperatures were as much as 4 degrees Fahrenheit warmer than normal in parts of North Dakota and Minnesota, hurting plants that were sown late because of wet weather.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
Last Updated: July 15, 2008 02:15 EDT



Read more...

Crude Oil Is Steady Near $145 as Brazil's Supply Is Disrupted

By Nesa Subrahmaniyan

July 15 (Bloomberg) -- Crude oil traded little changed near $145 a barrel in New York as production in Brazil was disrupted after a strike by employees of state oil company Petroleo Brasileiro SA.

Oil rose as high as $146.37 a barrel yesterday as employees of Petrobras began a five-day strike in an area home to more than 80 percent of the country's output. At 5 a.m. Singapore time output was 63,000 barrels a day below full capacity, Petrobras said in an e-mailed statement.

``It's just another supply problem the world doesn't need now,'' said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. ``Supply issues are keeping the market buoyant.''

Crude oil for August delivery fell 25 cents to $144.93 a barrel at 1:47 p.m. Singapore time in electronic trading on the New York Mercantile Exchange. Yesterday, it rose 10 cents to settle at $145.18 a barrel. Futures reached a record $147.27 a barrel on July 11 and have risen 96 percent in the past year.

Petrobras has lost about 400,000 barrels a day of output because of the strike in the Campos Basin, the source of about 82 percent of Brazil's production of 1.8 million barrels a day, the country's main oil union said yesterday. The company said it is pumping crude from all but two of 38 offshore platforms affected by the strike.

Petrobras exports some of the heavy crude oil from Campos because its refineries aren't fully equipped to handle these grades. It uses the proceeds to buy lighter oil from abroad.

Iran Standoff

Crude oil may trade above $140 a barrel amid ``ongoing tensions in the Middle East'' as Iran defies United Nations efforts to halt its nuclear program, said David Moore, commodity strategist at Commonwealth Bank Australia in Sydney.

Israeli war planes have practiced over Iraq for an attack on Iran's nuclear research facility, according to the Jerusalem Post. Iran as part of war games test-fired missiles capable of reaching Israel, according to state media reports.

Iran, the Middle East's second-biggest producer, said yesterday it will reject any proposal to halt its nuclear program that might be offered at a weekend European Union summit, the Associated Press reported.

The meeting in Geneva will instead focus on ``common'' points, Iranian President Mahmoud Ahmadinejad said on state television, according to AP.

Saeed Jalili, Iran's top nuclear negotiator, will meet with EU foreign policy chief Javier Solana on July 19 in the Swiss city, AP said.

Dollar Weakens

The dollar fell against the yen and euro on speculation Federal Reserve Chairman Ben S. Bernanke and U.S. Treasury Secretary Henry Paulson will tell lawmakers credit-market losses will weigh on U.S. economic growth.

The dollar declined to 105.86 yen as of 12:37 p.m. in Singapore from 106.14 yen in New York yesterday. It weakened to $1.5942 per euro from $1.5908. It fell to within a cent of the record low of $1.6019 reached April 22.

U.S. crude-oil supplies probably fell as record prices discouraged buying by refiners, according to a Bloomberg News survey of analysts.

Supplies of crude declined 2 million barrels in the week ended July 11 from 293.9 million, according to the median of responses by six analysts before an Energy Department report July 16. Four forecast a drop, and two expected a gain. Supplies fell 5.84 million barrels in last week's report, double the forecast.

Gasoline stockpiles probably gained 500,000 barrels from 211.8 million barrels the week before, the survey showed. Four analysts predicted a rise and two a decline.

Inventories of distillate fuel, including heating oil and diesel, probably rose 2 million barrels from 122.5 million barrels the week before. All the analysts predicted an increase.

Refineries probably operated at 89.3 percent of capacity, up 0.1 percentage point from the week before, the survey showed.

Atlantic Storm

Tropical Storm Bertha lashed Bermuda with rain and threatened to strengthen into a hurricane as it moved away from the islands. In the Pacific, Hurricane Elida was forecast to weaken off Mexico's west coast.

Bertha, with maximum sustained winds of almost 70 miles (110 kilometers) per hour, was about 120 miles north-northeast of Bermuda, the National Hurricane Center said in an advisory issued at 11 p.m. New York time yesterday. As much as 2 inches of rain may fall on the islands in coming days, while ``large swells and high surf'' are forecast to decrease.

Bertha may strengthen into a hurricane today as it moves north-northeast at almost 9 miles per hour, the Miami-based center said. A storm becomes a hurricane when winds reach 74 miles per hour.

Brent crude oil for August settlement fell 1 cent to $143.91 a barrel at 1:37 p.m. Singapore time on London's ICE Futures Europe exchange. The August contract, which expires tomorrow, reached a record $147.50 on July 11. The more-widely held September contract fell 8 cents to $145.25 a barrel.

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net



Read more...