By Anoop Agrawal
July 21 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.
Exchange rates are from the previous session.
Japanese yen: Financial markets are closed today for a public holiday.
The yen was at 106.93 per dollar at 8:02 a.m. in Sydney.
South Korea's won: The inflation rate will remain high for a ``significant period of time'' even as economic growth slows, central bank Governor Lee Seong Tae said July 18. The nation's current account for June may have achieved its first surplus in seven months, of ``almost certainly'' $1 billion, before probably narrowing in July, Ahn Byung Chan, director-general of Bank of Korea's international bureau, said the same day.
The won was at 1,013.80.
Hong Kong dollar: The annual pace of inflation quickened to 5.8 percent in June from 5.7 percent the previous month, economists estimated before a government report today at 4:15 p.m.
The local dollar was at HK$7.7980.
Taiwan dollar: The seasonally adjusted jobless rate was 3.90 percent in June versus 3.89 percent in May, according to the median estimate of 10 economists in a Bloomberg survey before the statistics bureau report tomorrow.
The Taiwan dollar was at NT$30.36.
Indian rupee: Foreign-currency reserves increased by $123 million to $308.5 billion in the week ended July 11, the central bank said July 18.
Inflation will moderate by the end of the year and economic growth may exceed 8 percent in the 12 months through March, Finance Minister Palaniappan Chidambaram told the Press Trust of India news agency July 18. India's fundamentals are strong, and Fitch Ratings' decision last week to cut the local debt outlook to negative isn't a cause for worry, he said.
The rupee was at 42.785.
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
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Monday, July 21, 2008
Yen, South Korean Won, Taiwan's Dollar: Asia Currency Preview
By Tracy Withers
July 21 (Bloomberg) -- The New Zealand dollar may decline on speculation that Reserve Bank Governor Alan Bollard will cut the benchmark interest rate as early as this week.
The currency may fall for a fourth day as investors have increased bets for New Zealand's first rate cut since 2003 amid signs that the economy has stalled. The chance of a quarter- point rate cut on July 24 is 56 percent, according to an index calculated by Credit Suisse Group based on swaps trading.
``Expect positioning ahead of this week's rate review to cap the New Zealand dollar,'' said Khoon Goh, economist at ANZ National Bank Ltd. in Wellington. ``It will be a close call. The Reserve Bank may well choose to buy some time to evaluate a developing economic picture.''
New Zealand's currency bought 76.11 U.S. cents at 9:45 a.m. in Wellington from 76.12 cents in late New York trading July 18. It bought 81.39 yen from 81.40 yen.
On June 5, Bollard said it is likely he will cut the official cash rate from a record-high 8.25 percent this year as the economy slows.
Two of 13 economists surveyed by Bloomberg News expect Bollard will cut the benchmark rate this week. The other 11 expect a cut in September.
A report last week showed annual inflation accelerated faster than the Reserve Bank expected, which may prompt Bollard to delay any rate cut for another six weeks, economists say.
The economy contracted in the first three months of the year and at least 8 of 13 economists expect the economy also shrank in the second quarter, putting New Zealand in its first recession since 1998. A government report today may show a decline in spending on debit and credit cards in June, adding to signs that consumer spending has slowed.
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.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net
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July 21 (Bloomberg) -- The New Zealand dollar may decline on speculation that Reserve Bank Governor Alan Bollard will cut the benchmark interest rate as early as this week.
The currency may fall for a fourth day as investors have increased bets for New Zealand's first rate cut since 2003 amid signs that the economy has stalled. The chance of a quarter- point rate cut on July 24 is 56 percent, according to an index calculated by Credit Suisse Group based on swaps trading.
``Expect positioning ahead of this week's rate review to cap the New Zealand dollar,'' said Khoon Goh, economist at ANZ National Bank Ltd. in Wellington. ``It will be a close call. The Reserve Bank may well choose to buy some time to evaluate a developing economic picture.''
New Zealand's currency bought 76.11 U.S. cents at 9:45 a.m. in Wellington from 76.12 cents in late New York trading July 18. It bought 81.39 yen from 81.40 yen.
On June 5, Bollard said it is likely he will cut the official cash rate from a record-high 8.25 percent this year as the economy slows.
Two of 13 economists surveyed by Bloomberg News expect Bollard will cut the benchmark rate this week. The other 11 expect a cut in September.
A report last week showed annual inflation accelerated faster than the Reserve Bank expected, which may prompt Bollard to delay any rate cut for another six weeks, economists say.
The economy contracted in the first three months of the year and at least 8 of 13 economists expect the economy also shrank in the second quarter, putting New Zealand in its first recession since 1998. A government report today may show a decline in spending on debit and credit cards in June, adding to signs that consumer spending has slowed.
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.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net
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Australian Dollar Little Changed Before Producer Price Report
By Chris Young
July 21 (Bloomberg) -- The Australian dollar was little changed before a government report that economists forecast will show producer prices increased at a record annual pace in the second quarter.
The currency may gain against the U.S. dollar for the first time in four days on speculation signs of inflationary pressures will prompt traders to reduce bets the Reserve Bank of Australia will cut its benchmark interest rate from a 12-year high. Any gains in the Australian dollar may be limited after a drop in the prices of raw materials the nation exports, including gold.
``The market will take the Australian dollar higher on a high producer price number,'' said Jim Vrondas, manager of corporate business at online foreign-exchange dealer OzForex Ltd. in Sydney.
The Australian dollar gained to 97.08 U.S. cents as of 8:44 a.m. in Sydney, compared with 97.03 cents in late New York on July 18. The currency will be capped this week at 98.49 cents, Vrondas said. That would match the 25-year high reached July 16.
The producer price index advanced 5.3 percent from a year earlier, the most since the series began in 1998, after rising 4.8 percent in the first quarter, according to the median estimate from a Bloomberg News survey of 20 economists. The index climbed 1.6 percent in the second quarter, the survey shows.
The Bureau of Statistics releases the report at 11:30 a.m. in Sydney. A separate release on July 23 may show the consumer price index rose by the most in seven years, according to another survey of economists by Bloomberg.
Rates, Commodities, Bonds
Gains in the currency were limited last week as traders began betting the RBA will reduce its 7.25 percent benchmark borrowing cost after Governor Glenn Stevens said the chances of ``keeping inflation low over the medium term are good.''
The Australian dollar's strength may be limited after the UBS Bloomberg Constant Maturity Commodity Index dropped 7.3 percent last week, the most since the week ending March 21. Exports of raw materials contribute about 17 percent to the national economy.
Australian government bonds fell for a second day, pushing the yield on the 10-year bond up 8 basis points, or 0.08 percentage point, to a two-week high of 6.44 percent. The price of the 5.25 percent bond maturing in March 2019 declined 0.626, or A$6.26 per A$1,000 face amount, to 90.896. Bond yields move inversely to prices.
To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.
Read more...
July 21 (Bloomberg) -- The Australian dollar was little changed before a government report that economists forecast will show producer prices increased at a record annual pace in the second quarter.
The currency may gain against the U.S. dollar for the first time in four days on speculation signs of inflationary pressures will prompt traders to reduce bets the Reserve Bank of Australia will cut its benchmark interest rate from a 12-year high. Any gains in the Australian dollar may be limited after a drop in the prices of raw materials the nation exports, including gold.
``The market will take the Australian dollar higher on a high producer price number,'' said Jim Vrondas, manager of corporate business at online foreign-exchange dealer OzForex Ltd. in Sydney.
The Australian dollar gained to 97.08 U.S. cents as of 8:44 a.m. in Sydney, compared with 97.03 cents in late New York on July 18. The currency will be capped this week at 98.49 cents, Vrondas said. That would match the 25-year high reached July 16.
The producer price index advanced 5.3 percent from a year earlier, the most since the series began in 1998, after rising 4.8 percent in the first quarter, according to the median estimate from a Bloomberg News survey of 20 economists. The index climbed 1.6 percent in the second quarter, the survey shows.
The Bureau of Statistics releases the report at 11:30 a.m. in Sydney. A separate release on July 23 may show the consumer price index rose by the most in seven years, according to another survey of economists by Bloomberg.
Rates, Commodities, Bonds
Gains in the currency were limited last week as traders began betting the RBA will reduce its 7.25 percent benchmark borrowing cost after Governor Glenn Stevens said the chances of ``keeping inflation low over the medium term are good.''
The Australian dollar's strength may be limited after the UBS Bloomberg Constant Maturity Commodity Index dropped 7.3 percent last week, the most since the week ending March 21. Exports of raw materials contribute about 17 percent to the national economy.
Australian government bonds fell for a second day, pushing the yield on the 10-year bond up 8 basis points, or 0.08 percentage point, to a two-week high of 6.44 percent. The price of the 5.25 percent bond maturing in March 2019 declined 0.626, or A$6.26 per A$1,000 face amount, to 90.896. Bond yields move inversely to prices.
To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.
Read more...
Never Have So Many Short Sellers Made So Much Money With Stocks
By Alexis Xydias
July 21 (Bloomberg) -- Investors worldwide are betting more than $1 trillion on a collapse in stock prices.
Managers from William Ackman to Jim Rogers made a total of at least $1.4 billion in July with wagers against U.S. mortgage financiers Fannie Mae and Freddie Mac, according to data compiled by Bloomberg. Harbinger Capital Partners staked $665 million that U.K. mortgage lender HBOS Plc would drop and Sao Paulo-based hedge-fund manager Francisco Meirelles de Andrade's short selling of Cia. Vale do Rio Doce is also paying off.
More than $1.4 trillion of equities worldwide are now on loan, about a third higher than at the start of 2007, data compiled by Spitalfields Advisors, the London-based firm specializing in securities lending, show. Almost all of that is being used to speculate that shares will fall, according to James Angel, a finance professor at Georgetown University who studies short selling. The global economic slowdown, $447 billion in bank losses and an explosion of funds that can profit from stock declines spurred the increase in short selling, helping send 22 of 23 countries in the MSCI World Index into bear markets.
``It's a huge amount of money,'' said Peter Hahn, a London- based research fellow for Cass Business School and a former managing director at Citigroup Inc. ``Shorts have come a long way. They are getting into the mainstream, and long holders need to understand the shorts are not evil.''
$11 Trillion
While U.S. and U.K. regulators tighten rules on short sellers amid concern they're accelerating more than $11 trillion in global stock losses this year, countries from Indonesia to India are opening up to the practice, which involves borrowing stock to sell it on the expectation it can be purchased at a lower price before paying back the loan.
Assets at so-called 130/30 and 120/20 funds, or those that are allowed to both hold stocks and short them, may climb to $2 trillion by 2010 from $140 billion in 2007, according to a study last year by Westborough, Massachusetts-based Tabb Group. Spitalfields estimates these funds may borrow an additional $600 billion by 2010.
Spitalfields was founded by Mark Faulkner and Bill Cuthbert in 2004 after careers in securities lending and investment banking at firms including New York-based Goldman Sachs Group Inc. and Frankfurt-based Deutsche Bank AG, respectively.
Short selling on the New York Stock Exchange rose to 4.6 percent of total shares last month, the highest since at least 1931, according to data compiled by Bespoke Investment Group LLC, the Harrison, New York-based firm that manages money for wealthy investors and provides financial research to institutions.
Wipe Out Shareholders
Short selling of Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, which own or guarantee about half of the $12 trillion of U.S. mortgages, surged before the shares plunged this month on concern they will require a bailout that would wipe out shareholders.
Fannie Mae tumbled 64 percent from the end of June, when so- called short interest stood at 138.7 million shares, through July 15, according to data compiled by Bloomberg and the NYSE. Freddie Mac sank 68 percent from the end of June through July 15 after short interest reached almost 83 million on June 30, the highest since at least 1991.
Even after a 90 percent rebound by Fannie Mae and a 75 percent surge by Freddie Mac in the final three days of trading last week, that would have left the shorts with a combined profit, excluding costs, of at least $1.4 billion from June 30 through July 15, the data show.
Survival of the Fittest
Ackman, 42, who oversees $6 billion at Pershing Square Capital Management LP in New York, said on July 15 he had short positions in both Fannie Mae and Freddie Mac. Rogers, 65, said on July 14 that he hadn't covered his short positions in Fannie Mae and would increase his bet if the shares were to rally.
``Short sellers are a very important part of the ecosystem of our financial markets,'' said Angel, a professor at Georgetown's McDonough School of Business in Washington. ``The same way that lions go after a herd, they go after the weaker animals. The shorts will pick on a company where there's a legitimate controversy over its valuation.''
European short sellers have also profited during the sell- off. The Euro Stoxx 50 Short Index rose 29 percent in the first half of 2008, the best performance since at least 1992. The Euro Stoxx 50 tumbled 24 percent in the period, its worst ever start to a year.
`Market for Speculators'
A slump in British banks helped spur the U.K. Financial Services Authority to impose rules on June 20 requiring firms to disclose short positions in companies that sell shares in rights offerings, when those positions exceed 0.25 percent of the company's stock. The FSA cited short bets on June 13 for ``severe volatility in the shares of companies conducting rights issues.''
Harbinger Capital, the New York-based hedge fund run by Philip Falcone, the former head of high-yield trading at Barclays Capital, disclosed a short position of 3.29 percent in HBOS as of June 20. Edinburgh-based HBOS has slumped 62 percent this year.
``The market is becoming a market for speculators rather than a market for investors,'' said Roger Lawson, London-based director at the U.K. Shareholders' Association. ``These guys are making fat profits out of these market maneuvers. It should be restricted to a very limited level of market cap, otherwise it becomes market manipulation.''
The U.S. Securities and Exchange Commission last week limited so-called naked short sales of Fannie Mae, Freddie Mac and brokerages. In such a strategy, speculators sell shares they haven't secured first. The decision comes amid an investigation of whether trading abuses contributed to the collapse of Bear Stearns Cos. in March.
`Send a Message'
James Chanos, president of Kynikos Associates Ltd., says the new rules won't deter most short sellers from making legitimate bets against companies.
``The SEC is trying to send a message -- I am again not quite sure what the message is,'' Chanos, a short seller and one of the first investors to raise questions about Enron Corp.'s accounting, said on Bloomberg Television from London. ``I am just not sure that this was an issue at all for the equity prices of these companies.''
The SEC's move ``squeezed'' some short sellers, forcing them to close positions they shorted earlier by buying the shares, Bespoke data show. Among Standard & Poor's 1500 companies, those with the highest short interest gained the most, rising 15.1 percent on July 16 and July 17, according to the firm's data.
So-called short covering also helped financial stocks in the S&P 500 surge 12 percent on July 16, the biggest-ever gain.
While regulators in the U.K. and U.S. move to limit some types of shorting, the practice is increasing elsewhere. India's capital markets watchdog said in December it would lift a six- year ban on short selling. Indonesia followed last month, allowing the practice for the first time.
Shorting Brazil
In Brazil, equities on loan in June jumped 22 percent from a month earlier to a record $23.3 billion, according to the Brazilian Clearing and Depository Corp. Shorting increased after the Bovespa Index climbed to an all-time high on May 20.
Francisco Meirelles de Andrade, a hedge-fund manager at Nest Investimentos Ltda., is shorting Rio de Janeiro-based Vale, the world's biggest iron-ore producer, which tumbled 6.5 percent last week after its share sale raised less than some analysts expected. His Nest Fund Ltd. Class Long Short Equities fund returned 30 percent in the 12 months through April.
``Short selling helps markets become more efficient,'' said Dallas-based David Tice, 53, founder and manager of the Prudent Bear Fund. ``Short selling is here to stay.''
To contact the reporter on this story: Alexis Xydias in London at at axydias@bloomberg.net.
Read more...
July 21 (Bloomberg) -- Investors worldwide are betting more than $1 trillion on a collapse in stock prices.
Managers from William Ackman to Jim Rogers made a total of at least $1.4 billion in July with wagers against U.S. mortgage financiers Fannie Mae and Freddie Mac, according to data compiled by Bloomberg. Harbinger Capital Partners staked $665 million that U.K. mortgage lender HBOS Plc would drop and Sao Paulo-based hedge-fund manager Francisco Meirelles de Andrade's short selling of Cia. Vale do Rio Doce is also paying off.
More than $1.4 trillion of equities worldwide are now on loan, about a third higher than at the start of 2007, data compiled by Spitalfields Advisors, the London-based firm specializing in securities lending, show. Almost all of that is being used to speculate that shares will fall, according to James Angel, a finance professor at Georgetown University who studies short selling. The global economic slowdown, $447 billion in bank losses and an explosion of funds that can profit from stock declines spurred the increase in short selling, helping send 22 of 23 countries in the MSCI World Index into bear markets.
``It's a huge amount of money,'' said Peter Hahn, a London- based research fellow for Cass Business School and a former managing director at Citigroup Inc. ``Shorts have come a long way. They are getting into the mainstream, and long holders need to understand the shorts are not evil.''
$11 Trillion
While U.S. and U.K. regulators tighten rules on short sellers amid concern they're accelerating more than $11 trillion in global stock losses this year, countries from Indonesia to India are opening up to the practice, which involves borrowing stock to sell it on the expectation it can be purchased at a lower price before paying back the loan.
Assets at so-called 130/30 and 120/20 funds, or those that are allowed to both hold stocks and short them, may climb to $2 trillion by 2010 from $140 billion in 2007, according to a study last year by Westborough, Massachusetts-based Tabb Group. Spitalfields estimates these funds may borrow an additional $600 billion by 2010.
Spitalfields was founded by Mark Faulkner and Bill Cuthbert in 2004 after careers in securities lending and investment banking at firms including New York-based Goldman Sachs Group Inc. and Frankfurt-based Deutsche Bank AG, respectively.
Short selling on the New York Stock Exchange rose to 4.6 percent of total shares last month, the highest since at least 1931, according to data compiled by Bespoke Investment Group LLC, the Harrison, New York-based firm that manages money for wealthy investors and provides financial research to institutions.
Wipe Out Shareholders
Short selling of Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, which own or guarantee about half of the $12 trillion of U.S. mortgages, surged before the shares plunged this month on concern they will require a bailout that would wipe out shareholders.
Fannie Mae tumbled 64 percent from the end of June, when so- called short interest stood at 138.7 million shares, through July 15, according to data compiled by Bloomberg and the NYSE. Freddie Mac sank 68 percent from the end of June through July 15 after short interest reached almost 83 million on June 30, the highest since at least 1991.
Even after a 90 percent rebound by Fannie Mae and a 75 percent surge by Freddie Mac in the final three days of trading last week, that would have left the shorts with a combined profit, excluding costs, of at least $1.4 billion from June 30 through July 15, the data show.
Survival of the Fittest
Ackman, 42, who oversees $6 billion at Pershing Square Capital Management LP in New York, said on July 15 he had short positions in both Fannie Mae and Freddie Mac. Rogers, 65, said on July 14 that he hadn't covered his short positions in Fannie Mae and would increase his bet if the shares were to rally.
``Short sellers are a very important part of the ecosystem of our financial markets,'' said Angel, a professor at Georgetown's McDonough School of Business in Washington. ``The same way that lions go after a herd, they go after the weaker animals. The shorts will pick on a company where there's a legitimate controversy over its valuation.''
European short sellers have also profited during the sell- off. The Euro Stoxx 50 Short Index rose 29 percent in the first half of 2008, the best performance since at least 1992. The Euro Stoxx 50 tumbled 24 percent in the period, its worst ever start to a year.
`Market for Speculators'
A slump in British banks helped spur the U.K. Financial Services Authority to impose rules on June 20 requiring firms to disclose short positions in companies that sell shares in rights offerings, when those positions exceed 0.25 percent of the company's stock. The FSA cited short bets on June 13 for ``severe volatility in the shares of companies conducting rights issues.''
Harbinger Capital, the New York-based hedge fund run by Philip Falcone, the former head of high-yield trading at Barclays Capital, disclosed a short position of 3.29 percent in HBOS as of June 20. Edinburgh-based HBOS has slumped 62 percent this year.
``The market is becoming a market for speculators rather than a market for investors,'' said Roger Lawson, London-based director at the U.K. Shareholders' Association. ``These guys are making fat profits out of these market maneuvers. It should be restricted to a very limited level of market cap, otherwise it becomes market manipulation.''
The U.S. Securities and Exchange Commission last week limited so-called naked short sales of Fannie Mae, Freddie Mac and brokerages. In such a strategy, speculators sell shares they haven't secured first. The decision comes amid an investigation of whether trading abuses contributed to the collapse of Bear Stearns Cos. in March.
`Send a Message'
James Chanos, president of Kynikos Associates Ltd., says the new rules won't deter most short sellers from making legitimate bets against companies.
``The SEC is trying to send a message -- I am again not quite sure what the message is,'' Chanos, a short seller and one of the first investors to raise questions about Enron Corp.'s accounting, said on Bloomberg Television from London. ``I am just not sure that this was an issue at all for the equity prices of these companies.''
The SEC's move ``squeezed'' some short sellers, forcing them to close positions they shorted earlier by buying the shares, Bespoke data show. Among Standard & Poor's 1500 companies, those with the highest short interest gained the most, rising 15.1 percent on July 16 and July 17, according to the firm's data.
So-called short covering also helped financial stocks in the S&P 500 surge 12 percent on July 16, the biggest-ever gain.
While regulators in the U.K. and U.S. move to limit some types of shorting, the practice is increasing elsewhere. India's capital markets watchdog said in December it would lift a six- year ban on short selling. Indonesia followed last month, allowing the practice for the first time.
Shorting Brazil
In Brazil, equities on loan in June jumped 22 percent from a month earlier to a record $23.3 billion, according to the Brazilian Clearing and Depository Corp. Shorting increased after the Bovespa Index climbed to an all-time high on May 20.
Francisco Meirelles de Andrade, a hedge-fund manager at Nest Investimentos Ltda., is shorting Rio de Janeiro-based Vale, the world's biggest iron-ore producer, which tumbled 6.5 percent last week after its share sale raised less than some analysts expected. His Nest Fund Ltd. Class Long Short Equities fund returned 30 percent in the 12 months through April.
``Short selling helps markets become more efficient,'' said Dallas-based David Tice, 53, founder and manager of the Prudent Bear Fund. ``Short selling is here to stay.''
To contact the reporter on this story: Alexis Xydias in London at at axydias@bloomberg.net.
Read more...
Oil Rises From Six-Week Low as Iran Resists UN Nuclear Proposal
By Gavin Evans
July 21 (Bloomberg) -- Crude oil rose from a six-week low in New York on speculation diplomatic tensions with Iran may escalate after the world's fourth-largest oil producer resisted United Nations demands that it suspend nuclear research.
Iran risks ``further isolation'' if it doesn't respond in two weeks to the UN offer of economic aid in exchange for a temporary halt in uranium enrichment, U.S. officials said July 19. Oil also rose after U.S. forecasters said there is a 29 percent chance a storm approaching Mexico may strengthen to a hurricane after it enters the Gulf of Mexico.
The dispute with Iran ``has become a perpetual sticking point in the background of the crude market,'' said Gerard Burg, energy and minerals economist at National Australia Bank in Melbourne. ``What happens if Iran shuts the Straits of Hormuz?''
Crude oil for August delivery rose as much as $1.25, or 1 percent, to $130.13 a barrel on the New York Mercantile Exchange. It was at $129.78 at 7:50 a.m. in Singapore.
The contract fell 41 cents, or 0.3 percent, to settle at $128.88 on July 18, the lowest close since June 5. Prices fell 11 percent last week, the most in more than three years, on signs of slowing global economic growth and faltering U.S. fuel demand.
Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, borders the Straits of Hormuz and has in the past threatened to close the waterway carrying about a fifth of the world's oil deliveries.
Impasse
Four hours of talks between officials in Geneva on July 19 were a ``step forward'' in the dispute, Iranian President Mahmoud Ahmadinejad said yesterday. Negotiators ``did not get what we were looking for,'' European Union foreign policy chief Javier Solana said after the talks.
The UN has already imposed three sets of sanctions on Iran in an attempt to halt nuclear research the U.S. and Israel believe will be used to make weapons.
The dispute is like ``two rams butting up against each other,'' National Australia's Burg said. ``Neither one really wants to yield'' and there is no certainty of a resolution, or action from the UN, in two weeks time, he said.
New York oil prices have gained 35 percent this year as the dispute has added to concerns about supplies from the world's largest producing region. Prices also rose as the falling U.S. dollar, weak global equity markets and supply disruptions in the North Sea and Nigeria encouraged investors to buy the commodity.
Brent crude oil for September settlement rose 88 cents, or 0.7 percent, to $131.07 a barrel on London's ICE Futures Europe exchange. It was at $130.20 a barrel at 7:23 a.m. in Singapore.
Tropical Storm
The northern Gulf of Mexico accounts for about 25 percent of U.S. oil production. Tropical Storm Dolly's projected path over the tip of the Yucatan Peninsula takes it north of Campeche Bay, where Petroleos Mexicanos produces about 1.07 million barrels of oil a day.
Dolly will cross the peninsula today, and may strengthen again as it crosses the gulf on a path that may take it toward the Mexico-Texas border, the U.S. National Hurricane center said. There is a 43 percent chance it will remain a storm, with wind speeds between 39 and 73 miles an hour and a 12 percent chance it will dissipate before making land a second time around July 24.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
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Accenture, Brown Shoe, Lindsay, UAL Corp.: U.S. Equity Preview
By Lynn Thomasson
July 20 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:42 p.m. in New York on July 18, unless stated otherwise.
Accenture Ltd. (ACN US): The company may rise 20 percent to more than $45 on revenue from management consulting and technology outsourcing, Barron's said, citing Tim Fidler, a large-cap portfolio manager at Ariel Investments in Chicago. Accenture shares fell 13 cents to $39.39.
Brown Shoe Co. (BWS US): The maker of footwear brands such as Naturalizer and Via Spaga may rise to $20 a share in the next year, Barron's reported, without citing anyone. Brown Shoe rose 3 cents to $14.96.
Coca-Cola Bottling Co. Consolidated (COKE US): The second- biggest U.S. Coke bottler said it will eliminate 350 positions, about 5 percent of its workforce, to reduce costs because of higher prices for corn-based sweetener and diesel fuel for transportation. The stock slipped 0.8 percent to $33.89 in regular trading.
Lindsay Corp. (LNN US): The maker of GrowSmart irrigation equipment raised its quarterly dividend by 7.1 percent to 7.5 cents a share. The stock added 2.7 percent to $84.84 in regular trading.
T. Rowe Price Group Inc. (TROW US): The money manager with $380 billion in assets may rise at least 10 percent after a decline because of the credit crunch, Barron's said, citing analysts and money managers. The stock rose 11 cents to $54.74.
Time Warner Inc. (TWX US): The media company's movie, ``The Dark Knight,'' the sequel to 2005's ``Batman Begins,'' made a record $155.3 million in its opening weekend for Warner Bros., while setting at least five other box-office records. Those include the biggest single-day gross for a movie ($67.9 million), the largest midnight preview ($18.5 million) and the most opening theaters (4,366), box-office tracker Media By Numbers LLC said in a statement. Time Warner shares rose 5 cents to $14.70.
UAL Corp. (UAUA US): The parent of United Airlines may face decreased liquidity as job cuts reduce the company's cash, said analysts at Moody's Investors Service, who cut the company's corporate family rating to Caa1 from B2. Separately, London's Observer said the airline is planning to borrow at least $1 billion, which may be announced July 22. Shares gained 7.5 percent to $5.45 in regular trading.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Read more...
July 20 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:42 p.m. in New York on July 18, unless stated otherwise.
Accenture Ltd. (ACN US): The company may rise 20 percent to more than $45 on revenue from management consulting and technology outsourcing, Barron's said, citing Tim Fidler, a large-cap portfolio manager at Ariel Investments in Chicago. Accenture shares fell 13 cents to $39.39.
Brown Shoe Co. (BWS US): The maker of footwear brands such as Naturalizer and Via Spaga may rise to $20 a share in the next year, Barron's reported, without citing anyone. Brown Shoe rose 3 cents to $14.96.
Coca-Cola Bottling Co. Consolidated (COKE US): The second- biggest U.S. Coke bottler said it will eliminate 350 positions, about 5 percent of its workforce, to reduce costs because of higher prices for corn-based sweetener and diesel fuel for transportation. The stock slipped 0.8 percent to $33.89 in regular trading.
Lindsay Corp. (LNN US): The maker of GrowSmart irrigation equipment raised its quarterly dividend by 7.1 percent to 7.5 cents a share. The stock added 2.7 percent to $84.84 in regular trading.
T. Rowe Price Group Inc. (TROW US): The money manager with $380 billion in assets may rise at least 10 percent after a decline because of the credit crunch, Barron's said, citing analysts and money managers. The stock rose 11 cents to $54.74.
Time Warner Inc. (TWX US): The media company's movie, ``The Dark Knight,'' the sequel to 2005's ``Batman Begins,'' made a record $155.3 million in its opening weekend for Warner Bros., while setting at least five other box-office records. Those include the biggest single-day gross for a movie ($67.9 million), the largest midnight preview ($18.5 million) and the most opening theaters (4,366), box-office tracker Media By Numbers LLC said in a statement. Time Warner shares rose 5 cents to $14.70.
UAL Corp. (UAUA US): The parent of United Airlines may face decreased liquidity as job cuts reduce the company's cash, said analysts at Moody's Investors Service, who cut the company's corporate family rating to Caa1 from B2. Separately, London's Observer said the airline is planning to borrow at least $1 billion, which may be announced July 22. Shares gained 7.5 percent to $5.45 in regular trading.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
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Israel Key Index Fell 0.3% in June, Central Bank Says
By Alisa Odenheimer
July 20 (Bloomberg) -- Israel's index of leading economic indicators fell 0.3 percent in June, the first decline in more than three years, because of weaker industrial production, retail sales and exports of services, the Bank of Israel said.
The index fell a revised 0.1 percent in May and gained a revised 0.4 percent in April, the Jerusalem-based central bank said in an e-mail today. The bank previously reported that the indicator remained unchanged in May and rose 0.2 percent in April.
``The decline in the past two months in the index testifies to the slowing in the pace of expansion of the economy,'' the Bank of Israel said.
Israel's economy, which expanded 5.3 percent last year, will grow 4.2 percent in 2008, the central bank said on June 18, citing the impact of the global slowdown. Growth has exceeded 5 percent annually in the previous four years.
``We are definitely seeing the beginning of a slowing in growth,'' Ori Greenfeld, chief economist at Clal Finance Ltd. said by telephone.
To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net.
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July 20 (Bloomberg) -- Israel's index of leading economic indicators fell 0.3 percent in June, the first decline in more than three years, because of weaker industrial production, retail sales and exports of services, the Bank of Israel said.
The index fell a revised 0.1 percent in May and gained a revised 0.4 percent in April, the Jerusalem-based central bank said in an e-mail today. The bank previously reported that the indicator remained unchanged in May and rose 0.2 percent in April.
``The decline in the past two months in the index testifies to the slowing in the pace of expansion of the economy,'' the Bank of Israel said.
Israel's economy, which expanded 5.3 percent last year, will grow 4.2 percent in 2008, the central bank said on June 18, citing the impact of the global slowdown. Growth has exceeded 5 percent annually in the previous four years.
``We are definitely seeing the beginning of a slowing in growth,'' Ori Greenfeld, chief economist at Clal Finance Ltd. said by telephone.
To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net.
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New Zealand's First-Quarter House Prices Decline 0.6%
By Tracy Withers
July 21 (Bloomberg) -- New Zealand's house prices fell 0.6 percent in the first quarter, according to an index prepared by Quotable Value New Zealand Ltd., the government valuation agency.
The national house price index declined for the first time since 2001 after gaining 0.4 percent in the fourth quarter, the Wellington-based agency said in a report mailed to Bloomberg News. From a year earlier, prices rose 2.8 percent.
Prices in main urban areas fell 1.2 percent. Prices in Auckland, the most populous city, declined 2.1 percent.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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July 21 (Bloomberg) -- New Zealand's house prices fell 0.6 percent in the first quarter, according to an index prepared by Quotable Value New Zealand Ltd., the government valuation agency.
The national house price index declined for the first time since 2001 after gaining 0.4 percent in the fourth quarter, the Wellington-based agency said in a report mailed to Bloomberg News. From a year earlier, prices rose 2.8 percent.
Prices in main urban areas fell 1.2 percent. Prices in Auckland, the most populous city, declined 2.1 percent.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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U.K. Economy Will Come Close to Recession, Ernst & Young to Say
By Jennifer Ryan
July 20 (Bloomberg) -- The U.K. economy will come close to a recession as tightening credit markets and faster inflation squeeze consumer spending, the Ernst & Young Item Club will say.
Growth will slow to 1 percent in 2009, down from an April forecast of 1.5 percent, the London-based research group, which uses the same economic model as the Treasury, will say in a report tomorrow. The U.K. will ``struggle to avoid a recession'' as expansion cools to 1.5 percent this year from 3 percent in 2007.
As the expansion cools and the housing market deteriorates, the inflation rate will hold above the government's 3 percent upper limit for the next 12 months, the group will say. The Bank of England will hold interest rates at 5 percent until slower growth eases price pressures.
``On the high street and in the housing market it is going to get a great deal worse before it gets better,'' Peter Spencer, economic adviser to Ernst & Young and a former Treasury official, says in the report, according to an e-mailed statement. ``The weakening economy should allow'' interest-rate cuts ``this winter.''
The group will say that house prices will fall 10 percent this year and a further 6 percent next year. Regions outside of London will bear the brunt of the deterioration.
The central bank's benchmark interest rate will fall to 4 percent by the end of next year, the group will say.
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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July 20 (Bloomberg) -- The U.K. economy will come close to a recession as tightening credit markets and faster inflation squeeze consumer spending, the Ernst & Young Item Club will say.
Growth will slow to 1 percent in 2009, down from an April forecast of 1.5 percent, the London-based research group, which uses the same economic model as the Treasury, will say in a report tomorrow. The U.K. will ``struggle to avoid a recession'' as expansion cools to 1.5 percent this year from 3 percent in 2007.
As the expansion cools and the housing market deteriorates, the inflation rate will hold above the government's 3 percent upper limit for the next 12 months, the group will say. The Bank of England will hold interest rates at 5 percent until slower growth eases price pressures.
``On the high street and in the housing market it is going to get a great deal worse before it gets better,'' Peter Spencer, economic adviser to Ernst & Young and a former Treasury official, says in the report, according to an e-mailed statement. ``The weakening economy should allow'' interest-rate cuts ``this winter.''
The group will say that house prices will fall 10 percent this year and a further 6 percent next year. Regions outside of London will bear the brunt of the deterioration.
The central bank's benchmark interest rate will fall to 4 percent by the end of next year, the group will say.
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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New Zealand Debit, Credit Card Spending Fell in June
By Tracy Withers
July 21 (Bloomberg) -- New Zealand consumer spending on debit, credit and store cards fell in June, adding to signs record-high interest rates and a slumping housing market may have pushed the economy into a recession.
The value of transactions on electronic cards at retailers declined 0.4 percent from May, Statistics New Zealand said in a statement released in Wellington today. Transactions excluding fuel and vehicle sales fell 1.2 percent.
Retail sales also posted the biggest fall in more than four years in May, a report last week showed, as households outlaid more on fuel and food. Falling spending, consumer confidence and immigration add to signs the economy was in a recession in the first half of 2008, which may prompt the central bank to cut interest rates.
``This is confirmation if we needed any that gross domestic product fell again in the second quarter,'' said Doug Steel, senior economist at Westpac Banking Corp. in Wellington. ``There are still a lot of headwinds around and we don't see any real recovery until the fourth quarter.''
The New Zealand dollar bought 75.97 U.S. cents at 11:40 a.m. in Wellington from 76.03 cents before the report.
Consumer confidence fell in July, according to a Colmar Brunton poll for Television New Zealand published today. Fifty five percent of 1,000 people polled last week said the economy will worsen in the next year.
Recession Risk
The economy contracted 0.3 percent in the first quarter and eight of 13 economists say it shrank in the three months ended June 30, putting New Zealand in its first recession since 1998. Reserve Bank Governor Alan Bollard said on June 5 he is likely to cut interest rates this year as the economy slows.
Two of 13 economists surveyed by Bloomberg News say Bollard will lower the official cash rate from 8.25 percent at his July 24 review. Eleven expect a cut in September.
Warehouse Group Ltd., the nation's biggest discount retailer, last month cut its profit forecast by 10 percent, citing slowing sales and margins.
``I don't think there's a household in the country that's not under pressure financially from the burden of these higher food and petrol costs,'' Warehouse Chief Executive Officer Ian Morrice said on June 27.
Adding to the decline in demand, annual immigration growth was near a seven-year low in June, according to a second government report today.
The number of permanent migrant arrivals exceeded departures by 4,732 in the 12 months ended June 30, Statistics New Zealand said. Net arrivals were little changed from a seven- year low of 4,643 in February.
Annual immigration has fallen in 16 of the past 18 months as departures outpaced arrivals, curbing the housing market.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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July 21 (Bloomberg) -- New Zealand consumer spending on debit, credit and store cards fell in June, adding to signs record-high interest rates and a slumping housing market may have pushed the economy into a recession.
The value of transactions on electronic cards at retailers declined 0.4 percent from May, Statistics New Zealand said in a statement released in Wellington today. Transactions excluding fuel and vehicle sales fell 1.2 percent.
Retail sales also posted the biggest fall in more than four years in May, a report last week showed, as households outlaid more on fuel and food. Falling spending, consumer confidence and immigration add to signs the economy was in a recession in the first half of 2008, which may prompt the central bank to cut interest rates.
``This is confirmation if we needed any that gross domestic product fell again in the second quarter,'' said Doug Steel, senior economist at Westpac Banking Corp. in Wellington. ``There are still a lot of headwinds around and we don't see any real recovery until the fourth quarter.''
The New Zealand dollar bought 75.97 U.S. cents at 11:40 a.m. in Wellington from 76.03 cents before the report.
Consumer confidence fell in July, according to a Colmar Brunton poll for Television New Zealand published today. Fifty five percent of 1,000 people polled last week said the economy will worsen in the next year.
Recession Risk
The economy contracted 0.3 percent in the first quarter and eight of 13 economists say it shrank in the three months ended June 30, putting New Zealand in its first recession since 1998. Reserve Bank Governor Alan Bollard said on June 5 he is likely to cut interest rates this year as the economy slows.
Two of 13 economists surveyed by Bloomberg News say Bollard will lower the official cash rate from 8.25 percent at his July 24 review. Eleven expect a cut in September.
Warehouse Group Ltd., the nation's biggest discount retailer, last month cut its profit forecast by 10 percent, citing slowing sales and margins.
``I don't think there's a household in the country that's not under pressure financially from the burden of these higher food and petrol costs,'' Warehouse Chief Executive Officer Ian Morrice said on June 27.
Adding to the decline in demand, annual immigration growth was near a seven-year low in June, according to a second government report today.
The number of permanent migrant arrivals exceeded departures by 4,732 in the 12 months ended June 30, Statistics New Zealand said. Net arrivals were little changed from a seven- year low of 4,643 in February.
Annual immigration has fallen in 16 of the past 18 months as departures outpaced arrivals, curbing the housing market.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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U.K. July House Prices Drop the Most Since 2002, Rightmove Says
By Svenja O'Donnell
July 21 (Bloomberg) -- U.K. house prices dropped in July from a year earlier for the first time since Rightmove Plc started measuring them in 2002, as the squeeze on lending pushed up the number of unsold properties to a record.
The average asking price for a home fell an annual 2 percent to 235,219 pounds ($469,544), Britain's most-used property Web site said in a statement today. On the month, prices declined 1.8 percent, the biggest drop since December. Prices increased in London by 0.3 percent from June.
House prices will fall about 10 percent this year and 6 percent in 2009, the Ernst & Young Item Club, a forecasting group which uses the same model as the Treasury, said today. Britons, laden with a record 1.4 trillion pounds of debt, are struggling to afford homes as banks curb lending and credit costs increase.
``Banks need to be careful they do not get blamed for a second crash in 20 years'' by curbing lending, Miles Shipside, commercial director of Rightmove, said in the statement. ``The `doom and gloom' attitude should be about the drastically low levels of sales which affect the wider economy.''
The stock of unsold property per real estate agent rose for a sixth month to 77, the highest ever measured by Rightmove, from 74 in June. Prices for properties in the West Midlands fell the most on the month, declining 3.7 percent. London was the only region to show an increase in prices.
Sales Drop
Property sales dropped to the lowest in at least 30 years, the Royal Institution of Chartered Surveyors said July 15. The Item Club forecast today that housing transactions will drop 35 percent this year.
Mortgage approvals fell to their lowest level in at least nine years in May, the Bank of England said on June 30. Banks are curbing lending following the collapse of the U.S. subprime mortgage market, which so far has cost financial institutions worldwide $423 billion in losses and writedowns.
HBOS Plc, the U.K.'s biggest mortgage lender, said last week that house prices, which tripled in the past decade, dropped in June from a year earlier by the most since 1992. Bank of England policy maker Andrew Sentance said in an interview last week that there is ``clearly a risk'' that house prices will fall further.
Consumer-price increases and the worst housing-market slump since the last recession have eroded living standards and helped push the support for Prime Minister Gordon Brown's ruling Labour Party close to the lowest level since World War II.
The Bank of England's Monetary Policy Committee has kept the benchmark interest-rate unchanged at 5 percent for the past three months as it tries to curb consumer spending while keeping the economy from falling into a recession. Inflation accelerated to 3.8 percent in June, the fastest pace in 11 years.
The economy will grow 1.5 percent this year and then 1 percent in 2009, the weakest pace since 1992, the Item Club said in a statement today. The group predicted that slowing expansion will allow the Bank of England to cut the benchmark interest rate to 4 percent by the end of 2009.
``This will help to put a cushion under the level of demand in the economy and set the scene for a recovery in 2010,'' said Peter Spencer, economic adviser to the Item Club and a former U.K. Treasury official.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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July 21 (Bloomberg) -- U.K. house prices dropped in July from a year earlier for the first time since Rightmove Plc started measuring them in 2002, as the squeeze on lending pushed up the number of unsold properties to a record.
The average asking price for a home fell an annual 2 percent to 235,219 pounds ($469,544), Britain's most-used property Web site said in a statement today. On the month, prices declined 1.8 percent, the biggest drop since December. Prices increased in London by 0.3 percent from June.
House prices will fall about 10 percent this year and 6 percent in 2009, the Ernst & Young Item Club, a forecasting group which uses the same model as the Treasury, said today. Britons, laden with a record 1.4 trillion pounds of debt, are struggling to afford homes as banks curb lending and credit costs increase.
``Banks need to be careful they do not get blamed for a second crash in 20 years'' by curbing lending, Miles Shipside, commercial director of Rightmove, said in the statement. ``The `doom and gloom' attitude should be about the drastically low levels of sales which affect the wider economy.''
The stock of unsold property per real estate agent rose for a sixth month to 77, the highest ever measured by Rightmove, from 74 in June. Prices for properties in the West Midlands fell the most on the month, declining 3.7 percent. London was the only region to show an increase in prices.
Sales Drop
Property sales dropped to the lowest in at least 30 years, the Royal Institution of Chartered Surveyors said July 15. The Item Club forecast today that housing transactions will drop 35 percent this year.
Mortgage approvals fell to their lowest level in at least nine years in May, the Bank of England said on June 30. Banks are curbing lending following the collapse of the U.S. subprime mortgage market, which so far has cost financial institutions worldwide $423 billion in losses and writedowns.
HBOS Plc, the U.K.'s biggest mortgage lender, said last week that house prices, which tripled in the past decade, dropped in June from a year earlier by the most since 1992. Bank of England policy maker Andrew Sentance said in an interview last week that there is ``clearly a risk'' that house prices will fall further.
Consumer-price increases and the worst housing-market slump since the last recession have eroded living standards and helped push the support for Prime Minister Gordon Brown's ruling Labour Party close to the lowest level since World War II.
The Bank of England's Monetary Policy Committee has kept the benchmark interest-rate unchanged at 5 percent for the past three months as it tries to curb consumer spending while keeping the economy from falling into a recession. Inflation accelerated to 3.8 percent in June, the fastest pace in 11 years.
The economy will grow 1.5 percent this year and then 1 percent in 2009, the weakest pace since 1992, the Item Club said in a statement today. The group predicted that slowing expansion will allow the Bank of England to cut the benchmark interest rate to 4 percent by the end of 2009.
``This will help to put a cushion under the level of demand in the economy and set the scene for a recovery in 2010,'' said Peter Spencer, economic adviser to the Item Club and a former U.K. Treasury official.
To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.
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Paulson `Very Optimistic' on Freddie, Fannie Rescue
By John Brinsley
July 20 (Bloomberg) -- Treasury Secretary Henry Paulson predicted the Bush administration will prevail in its effort to convince Congress to pass legislation that would allow the government to rescue Fannie Mae and Freddie Mac.
``I'm very optimistic that we're going to get what we need from Congress,'' Paulson said on the CBS News ``Face the Nation'' program. ``Congress understands how important these institutions are.''
Paulson is pushing Congress to authorize the Treasury to purchase equity stakes in Fannie Mae and Freddie Mac, which account for about half of the $12 trillion mortgage market, and expand government-backed credit lines to them. He also said he wants the legislation to include a measure that gives ``real teeth'' to the companies' regulator, the Office of Federal Housing Enterprise Oversight.
``We're very close to getting reform,'' he said in a separate interview on CNN's ``Late Edition'' program. ``These are very important organizations -- they have a very important role to play -- and we need to make sure that they have access to adequate capital to get through this period.''
The economy is in a ``challenging time'' and probably will have ``slow growth'' for ``months'' as higher oil prices prolong the slowdown, Paulson said on CBS. The banking system is ``sound'' and regulators are being ``vigilant,'' though some banks are starting to struggle, he said.
Speech on U.S. Economy
The Treasury secretary is scheduled to spend the next two days in New York for meetings with executives from financial services companies and to give a speech July 22 on the condition of the U.S. economy and capital markets.
Regulators are aiming to resuscitate investor confidence in the firms after their shares this month fell to the lowest in more than 17 years on concern they may have insufficient capital to survive the collapse of the housing market.
``Their regulator has said they have adequate capital,'' Paulson told CNN. ``There's some worry, some concern in the capital markets, and that is why we came in with a plan to assure the markets that there will be adequate capital for them to meet all their needs.''
Under Paulson's proposal, Treasury would increase Fannie Mae's and Freddie Mac's credit lines from $2.25 billion each, buy shares in them if needed and give the Federal Reserve a role in setting their capital requirements.
`Central Role'
President George W. Bush, in his weekly radio address, yesterday said the two play a ``central role'' in the housing system and are needed to continue providing credit ``during this time of stress in the financial markets.''
Lawmakers from both parties have sought to put constraints on the plan on concerns it may put American taxpayers at risk while giving Treasury unprecedented authority.
House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, last week said he intends to tie the Treasury plan to the federal debt limit, capping the amount of taxpayer funding officials could use to help finance the mortgage firms.
Senate Banking Committee member Charles Hagel, a Nebraska Republican, sent a letter to Paulson last week asking why taxpayers should extend ``an unlimited line of credit'' to the companies while their chief executives ``continue to make multimillion dollar salaries and bonuses?''
Fannie Mae CEO Daniel Mudd, 49, was paid $11.6 million in salary, stock awards and other compensation last year. Freddie Mac Chief Richard Syron, 64, received $18.3 million in total pay last year.
House Democrats plan to include in their bill a measure that would grant almost $4 billion to communities to purchase foreclosed homes, a measure Bush has threatened to veto.
To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net
Read more...
July 20 (Bloomberg) -- Treasury Secretary Henry Paulson predicted the Bush administration will prevail in its effort to convince Congress to pass legislation that would allow the government to rescue Fannie Mae and Freddie Mac.
``I'm very optimistic that we're going to get what we need from Congress,'' Paulson said on the CBS News ``Face the Nation'' program. ``Congress understands how important these institutions are.''
Paulson is pushing Congress to authorize the Treasury to purchase equity stakes in Fannie Mae and Freddie Mac, which account for about half of the $12 trillion mortgage market, and expand government-backed credit lines to them. He also said he wants the legislation to include a measure that gives ``real teeth'' to the companies' regulator, the Office of Federal Housing Enterprise Oversight.
``We're very close to getting reform,'' he said in a separate interview on CNN's ``Late Edition'' program. ``These are very important organizations -- they have a very important role to play -- and we need to make sure that they have access to adequate capital to get through this period.''
The economy is in a ``challenging time'' and probably will have ``slow growth'' for ``months'' as higher oil prices prolong the slowdown, Paulson said on CBS. The banking system is ``sound'' and regulators are being ``vigilant,'' though some banks are starting to struggle, he said.
Speech on U.S. Economy
The Treasury secretary is scheduled to spend the next two days in New York for meetings with executives from financial services companies and to give a speech July 22 on the condition of the U.S. economy and capital markets.
Regulators are aiming to resuscitate investor confidence in the firms after their shares this month fell to the lowest in more than 17 years on concern they may have insufficient capital to survive the collapse of the housing market.
``Their regulator has said they have adequate capital,'' Paulson told CNN. ``There's some worry, some concern in the capital markets, and that is why we came in with a plan to assure the markets that there will be adequate capital for them to meet all their needs.''
Under Paulson's proposal, Treasury would increase Fannie Mae's and Freddie Mac's credit lines from $2.25 billion each, buy shares in them if needed and give the Federal Reserve a role in setting their capital requirements.
`Central Role'
President George W. Bush, in his weekly radio address, yesterday said the two play a ``central role'' in the housing system and are needed to continue providing credit ``during this time of stress in the financial markets.''
Lawmakers from both parties have sought to put constraints on the plan on concerns it may put American taxpayers at risk while giving Treasury unprecedented authority.
House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, last week said he intends to tie the Treasury plan to the federal debt limit, capping the amount of taxpayer funding officials could use to help finance the mortgage firms.
Senate Banking Committee member Charles Hagel, a Nebraska Republican, sent a letter to Paulson last week asking why taxpayers should extend ``an unlimited line of credit'' to the companies while their chief executives ``continue to make multimillion dollar salaries and bonuses?''
Fannie Mae CEO Daniel Mudd, 49, was paid $11.6 million in salary, stock awards and other compensation last year. Freddie Mac Chief Richard Syron, 64, received $18.3 million in total pay last year.
House Democrats plan to include in their bill a measure that would grant almost $4 billion to communities to purchase foreclosed homes, a measure Bush has threatened to veto.
To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net
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Economic Calendar Eco Data 7/21/08
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British M&A Will Fall for a Further 15 Months, Report Predicts
By Ambereen Choudhury
July 21 (Bloomberg) -- Mergers and acquisitions among U.K. companies will go on declining for the next 12 to 15 months as the credit crunch slows Britain's economy, advisory firm Grant Thornton LLP said.
``If present economic conditions continue, it could take some years to climb back to the M&A peaks we saw midway through last year,'' said London-based David Brooks, head of M&A at Grant Thornton, in an e-mailed statement today. Deal values and volumes will fall for another five quarters, the report predicted.
The British pound has dropped 12.5 percent in the past 12 months on a trade-weighted basis, as the run on Northern Rock Plc and a housing-market slump eroded confidence in Europe's second- largest economy. British M&A has almost halved to $372 billion this year after a record 2007, according to data compiled by Bloomberg.
Emerging market countries and foreign acquirers may continue to cushion the fall, as they snap up assets in the U.K., Brooks said. ``The developing world is cash-rich and looking to spend, and the U.K. is putting a `For sale' sign up in the window.''
Banco Santander SA, Spain's biggest bank, agreed to acquire Alliance & Leicester Plc for 1.26 billion pounds ($2.6 billion) on July 14, less than half the U.K. mortgage lender's market value at the end of last year.
To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net
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July 21 (Bloomberg) -- Mergers and acquisitions among U.K. companies will go on declining for the next 12 to 15 months as the credit crunch slows Britain's economy, advisory firm Grant Thornton LLP said.
``If present economic conditions continue, it could take some years to climb back to the M&A peaks we saw midway through last year,'' said London-based David Brooks, head of M&A at Grant Thornton, in an e-mailed statement today. Deal values and volumes will fall for another five quarters, the report predicted.
The British pound has dropped 12.5 percent in the past 12 months on a trade-weighted basis, as the run on Northern Rock Plc and a housing-market slump eroded confidence in Europe's second- largest economy. British M&A has almost halved to $372 billion this year after a record 2007, according to data compiled by Bloomberg.
Emerging market countries and foreign acquirers may continue to cushion the fall, as they snap up assets in the U.K., Brooks said. ``The developing world is cash-rich and looking to spend, and the U.K. is putting a `For sale' sign up in the window.''
Banco Santander SA, Spain's biggest bank, agreed to acquire Alliance & Leicester Plc for 1.26 billion pounds ($2.6 billion) on July 14, less than half the U.K. mortgage lender's market value at the end of last year.
To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net
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Home Sales, Durables Orders Probably Fell: U.S. Economy Preview
By Bob Willis
July 20 (Bloomberg) -- Home sales in the U.S. probably declined in June as the housing slump headed for a third year, undermining the economy and prompting businesses and consumers to trim spending, economists said before reports this week.
Combined sales of new and existing homes dropped 1.3 percent last month, according to the median estimate of economists surveyed by Bloomberg News. Orders for durable goods, products meant to last several years, probably fell 0.3 percent.
The biggest housing recession in a generation, now being exacerbated by a tightening in credit as financial losses spread, threatens to stall economic growth. The surge in raw-material costs and slowing demand will likely prompt companies to keep reducing investment in a bid to protect profits.
``Stress in financial markets and curtailment in lending are going to make it more difficult to buy homes,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``Manufacturers that produce for homebuilders or homeowners are being hurt by the slump in housing.''
The National Association of Realtors' report on sales of existing homes is due July 24. Purchases declined to a 4.93 million annual pace from 4.99 million in May, according to the survey median. Sales reached a 4.89 million pace in April, the fewest since comparable records began in 1999.
A day later, the Commerce Department is forecast to report that sales of new houses dropped to an annual pace of 503,000 from 512,000 in May, according to survey estimates. Sales of existing and new homes are down 35 percent from their July 2005 peak.
Construction Drops
Reacting to the weak sales, builders in June began work on the fewest single-family homes since 1991, the Commerce Department reported last week. That signals that home construction will continue to weigh on the economy after subtracting from growth since the first quarter of 2006.
More Americans are walking away from their homes as property values tumble and borrowing costs on adjustable-rate mortgages reset higher. Bank seizures increased a record 171 percent from a year ago and foreclosure filings rose 53 percent in June, RealtyTrac Inc., a seller of default data, said July 10.
Stricter lending regulations and the drop in home prices make it harder for Americans to tap home equity for extra cash. Consumer spending in the first quarter grew at the slowest pace since the 2001 recession and is likely to keep slowing later this year, according to economists surveyed this month by Bloomberg.
Bernanke's View
Federal Reserve Chairman Ben S. Bernanke last week abandoned his June assessment that the threat of an economic downturn had diminished, telling lawmakers in semiannual testimony in Washington that there were ``significant downside risks to the outlook for growth.''
The index of leading economic indicators may have fallen in June for the first time in four months, economists forecast a report tomorrow will show. The Conference Board's gauge dropped 0.1 percent after increasing by the same amount in May, signaling growth is likely to slow over the next three to six months.
The report on durable goods, due from the Commerce Department on July 25, is also projected to show that orders excluding transportation equipment fell 0.2 percent in June, according to the Bloomberg survey.
Carmakers in particular have been battered. Sales of cars and light trucks fell to an annual pace of 13.6 million units in June, the lowest since 1993, according to industry figures.
General Motors Corp., buffeted by three years of losses, will hasten reductions in truck production and planned closings of four truck plants, Chief Operating Officer Fritz Henderson said on July 15.
``Lack of demand warrants'' accelerating the cutbacks, he said in a press conference in Detroit. ``The market is even softer'' than GM projected in June, when the reductions were first announced. ``We need to act now.''
Also on July 25, the University of Michigan/Reuters final survey of consumer sentiment for July may show confidence dropped to a 28-year low.
Bloomberg Survey
=================================================================
Release Period Prior Median
Indicator Date Value Forecast
=================================================================
LEI MOM% 7/21 June 0.1% -0.1%
Initial Claims ,000's 7/24 20-Jul 366 380
Cont. Claims ,000's 7/24 13-Jul 3122 3190
Exist Homes Mlns 7/24 June 4.99 4.93
Exist Homes MOM% 7/24 May 2.0% -1.2%
Durables Orders MOM% 7/25 June 0.0% -0.3%
Durables Ex-Trans MOM% 7/25 June -0.8% -0.2%
U of Mich Conf. Index 7/25 July F 56.6 56.3
New Home Sales ,000's 7/25 June 512 503
New Home Sales MOM% 7/25 June -2.5% -1.8%
=================================================================
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
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Sunday, July 20, 2008
Forex Brokers Weekly Review and Outlook: Sharp Reversal in Yen as Investors' Sentiment Improved
Market Overview | Written by ActionForex.com | Jul 19 08 10:37 GMT |
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Investors' sentiments had a drastic turn last week, trigging much volatility in the financial markets. Markets were still pessimistic even after Fed and Treasury's plan to rescue Fannie Mae and Freddie Mac. But a couple of factors boosted the confidence later on in the week, including better than expected financial results in the banking sector. Citgroup, JPMorgan Chase and Wells Fargo reported better than expected quarterly results, raising the hope that the worst in credit market crisis is coming to an end. In addition, oil retreated sharply during the week, giving another boost to dollar and the stock markets. Indeed, crude oil had the biggest weekly decline in more then three years and fell 11% to below $129 a barrel
A few things to note. Firstly, while dollar recovered after making a new record low against Euro and 25 year low against Aussie, the down trend against both currencies are still intact. Secondly, though, note that strength in the greenback is much more apparent against Swissy and yen. Thirdly, note that sterling performed best in carry trade pairs as seen in GBP/JPY and GBP/CHF topping the top movers chart.
More importantly, the impact of such switch in investors sentiments were indeed most seen in the Japanese yen which had a strong rally early last week but then gave up all the gains by the equally sharp selloff afterwards. The corrective nature of GBP/JPY and USD/JPY's prior fall is taken as a signal that prior rebound in yen was just a correction. In other words, such development argues that more upside downside should be seen in the Japanese yen, at least in the near term.
| USD | EUR | JPY | GBP | CHF | CAD | AUD | |
|---|---|---|---|---|---|---|---|
| USD | |||||||
| EUR | |||||||
| JPY | |||||||
| GBP |
Bernanke's semiannual testimony on monetary policy was one of the highlights of the week. Bernanke gave Capitol Hill an assessment of the dual threat of recession and inflation during the testimony noting that "upside risks to the inflation outlook have intensified lately". On the other hand, there is still "significant downside risks to the outlook for growth". The minutes of June 24-25 FOMC meeting were also released last week. The information in the minutes were largely redundant to those from Bernanke's testimony btu one interesting point to note was the committee member's growing discomfort on inflation as "members believed that the next change in the stance of policy could well be an increase in the funds rate,": even though "the timing and magnitude of future policy actions was quite unclear."
Revised economic projections from Fed were also published last week. 2008 Q4 real GDP forecasts was revised up from 0.3-1.2% to 1.0-1.6%. projection for unemployment was left unchanged at 5.5-5.7% The headline PCE inflation forecast for 2008 was revised up from 3.1-3.4% to 3.8-4.2%. Core PCE inflation projection for 2008 was left unchanged at 2.2-2.4%.
On the data front, it was an extremely busy week in the US. Inflation data released reaffirmed Bernanke's comment that inflation risks has 'intensified'. Headline CPI surged by 1.1% mom in Jun, stronger rise since 1982, pushing yoy rate sharply higher from 4.2% to 5%, highest since 1991 and way above expectation of 4.5%. Core CPI was also up from 2.3% yoy to 2.4% yoy. Real earnings, on the other hand, dropped -0.9% in Jun, the biggest monthly decline since 1984. Headline PPI surged much more than expected from 7.2% yoy to 9.2% yoy versus consensus of 8.5% while core PPI was unchanged at 3.0% versus expectation of 3.2%.
Housing data provided some good news the the markets. Housing starts jumped sharply by 9.1% to 1.066M while building permits jumped 11.6% to 1.091m. Though, the National Association of Home Builders (NAHB) housing market index showed homebuilders confidence dropped to a new record low of 16 in Jul.
Retail sales was a disappointment with headline sale growing a mere 0.1% comparing to expectation of 0.5% in Jun. Ex-auto sales rose 0.8% mom, also missed expectation of 1.0%. Manufacturing data were mixed. Empire state manufacturing index is considerably better than expectation and improved to -4.9 in Jul even though it's still negative. Philly Fed index improved less than expected to -16.3 in Jul. Industrial production climbed 0.5% mom in Jun with capacity utilization up to 79.9%. Jobless claims climbed to 366k but was below expectation of 380k. TIC capita flow which dropped from 115b to 67b in May.
From Eurozone, German ZEW economic sentiments deteriorated much more than expected from -52.4 to lowest readings in 16 years at -63.9 in Jul versus expectation of a modest fall to -55. Current situation gauge also dropped sharply by -20.6 points from 37.6 to 17. Eurozone ZEW economic sentiment also dropped sharply from -52.7 to -63.7 with current situation indicator turned negative from 7.9 to -3.3. Surging energy and food driven inflation and high interests rates are dragging down the Eurozone economy. ZEW respondents expect inflation to persist, and that short-term and long-term interest rates will rise.
Eurozone HICP in Jun confirmed to be 0.4% mom, 4.0% yoy. German PPI climbed to 26 year high of 6.7% yoy in Jun. Eurozone industrial production dropped -1.9% mom, -0.6% yoy. Eurozone trade balance showed wider than expected deficit of -4.6b in Jun.
UK headline CPI surged from 3.3% yoy to 3.8% yoy in Jun, even stronger than expectation of 3.6%, far above BoE's target of 2-3%. Core CPI was up from 1.5% yoy to 1.6%. RPI was also uncomfortably high at 4.6% yoy with RPI-X at 4.8% yoy. PPI beat expectation again. Jun output prices accelerated to 10.0% yoy, highest reading in 22 years. Input price surged to 30.3% yoy. Core PPI accelerated to 6.4% yoy but was below expectation of 6.5%.
BRC retail sales dropped -0.4% in Jun. RICS house price balance showed 88% of respondents saw housing market declined in June. Claimant count in Jun jumped 15.5k, above expectation of 10k. Unemployment rate was mildly down from 5.3% to 5.2% in May.
BoJ left rates unchanged at 0.5% as widely expected on unanimous 7-0 vote. In an unexpected move, BoJ released the monthly statement together with the announcement. BoJ acknowledged that economic growth is slowing, trimming GDP forecasts from 1.5% to 1.2% yoy. Domestic CGPI forecasts was up sharply from 2.5% yoy to 4.8% yoy while CPI excluding food was also up from 1.1% yoy to 1.8% yoy. The Bank of Japan also noted global financial markets remain unstable and downside risks to the U.S. economy and the world economy remain.
BoJ minutes released revealed that members are divided on the future course of monetary policy. Some members are still alerted about inflationary pressures. On the other hand, some members emphasized that the focus on slowing economic growth.
Swissy ZEW index fell more than expected to -76.9 in Jul.
BoC left rates unchanged at 3.00% as widely expected. The monetary policy report released was a bit more upbeat than expected with the bank noting that "although economic growth in Canada in the first quarter of 2008 was weaker than expected, final domestic demand -- supported by strong terms of trade -- continued to expand at a solid pace." Data from Canada saw wholesale sales jumped 1.6% mom in May, beating expectation of 0.5%. Leading indicator, on the other hand, was flat in Jun, below expectation of 0.1% rise.
RBA released minutes of Jul policy meeting. Even though inflation remains high, RBA decided to left rates unchanged at 7.25% based on signs that domestic economy is cooling. The minutes basically affirmed RBA's believe that prior rate hikes are going to deal with inflation adequately even though risks of inflation expectations are still on the upside.
New Zealand retail sales released overnight dropped -1.2% mom in May, below expectation of -0.1%. Q2 CPI climbed from 3.8% to 4.0% yoy in Q2 but did little to alter the expectation that RBNZ may cut rates later this year on slowing economy.
The Week ahead
The coming week will feature a number of market moving economic data around the world.
From US, Fed's Beige Book will give some information on how regional economies are performing. Existing home sales and new home sales data will provide the hints on whether the housing bottoming as suggested by last week's new residential construction data is a false dawn or not. Durable goods orders will also be featured.
From Eurozone, main focus will be on Germany Ifo in particular after ZEW hit a 16 year low last week. Jul PMI will also be released and is expected to stay contrationary, adding further evidence to slowdown in the Eurozone economy.
It's a big week for UK too, with BoE minutes, retail sales and more importantly, Q2 GDP which is expected to show growth slowed rom 2.3% yoy to 1.6% yoy.
From Japan, main focus is on Jun CPI which is expected to climb sharply from 1.5% yoy to 1.9% yoy.
Canadian retail sales & CPI will be watched.
Australia Q2 PPI and CPI are expected to show further acceleration of inflation and will probably provide the needed fuel for further rally in Aussie.
RBNZ is widely expected to keep rates unchanged at 8.25%.
GBP/JPY Weekly Outlook
GBP/JPY had an extremely volatile week just like other yen crosses, first dived to as low as 207.98, then rebounded strongly to as high as 213.82, back pressing prior high of 213.91. Break of 212.43 resistance left fall from 213.91 to 207.98 in three wave corrective structure , suggesting medium term rebound from 192.60 is still in progress. From a short term angle, initial bias remains on the upside as long as 211.53 minor support holds. Break of 213.91 will indicate that recent rally has resumed for 100% projection of 192.60 to 208.99 from 199.78 at 216.17 first. On the downside, below 211.53 will turn intraday outlook neutral. But further rise is still expected as long as pull back is contained above 207.98 support.
In the bigger picture, a medium term bottom is in place at 192.60. At this moment, there is no confirmation of completion of the rebound from there yet. Corrective nature of the fall from 213.91 to 207.98 even argues that more upside should be seen in the GBP/JPY. Break of 213.91 will revive confirm that medium term rebound is still in progress for 61.8% retracement of 241.35 to 192.60 at 222.75. On the downside, though, break of 207.98 will now be an important alert that rebound from 192.60 has completed and put focus back to 199.78 support in such case.
In the longer term picture, whole up trend from 148.19 have ended at 251.09 already. At the moment, the favored case is that price actions from 129.32 (95 low) has completed a three wave consolidation up to 251.09. Hence, the downtrend from 251.09 is in favor to extend further to long term rising trend line support (now at 174.66) even if the current rebound from 192.60 is much stronger than expected.
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Foreign Exchange Market Commentary
| Daily Forex Technicals | Written by HY Markets | Jul 19 08 09:41 GMT | | |
| EUR/USD closed higher due to profit taking on Thursday as it extends last week's decline. Stochastics and the RSI are bearish signalling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. If it renews last week's rally, April's high crossing is the next upside target.
USD/JPY closed higher on Thursday and above the 20-day moving average crossing. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. Thursday's close above the 20-day moving average opens the door for a possible test of June's high crossing later this month. If it renews the decline off June's low, May's high crossing is the next downside target
GBP/USD closed higher on Thursday and below the 20-day moving average crossing confirming that a short-term top has been posted. The mid-range close sets the stage for a steady opening on Friday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. If it extends this week's decline, the reaction low crossing is the next downside target. Closes above the 10-day moving average crossing are needed to confirm that a short-term low has been posted.
USD/CHF closed higher on Thursday and above the 20-day moving average crossing confirming that a short-term bottom has been posted. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near- term. Closes below today's low crossing are needed to confirm that a short-term high has been posted.
HY Markets | |
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Saturday, July 19, 2008
Economic Calendar Summary 7/20 - 7/25
Sunday, Jul 20, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 22:45 | NZD | Visitor Arrivals (JUN) | -- | 9.4% |
| 23:01 | GBP | Rightmove House Prices (MoM) (JUL) | -- | -1.2% |
| 23:01 | GBP | Rightmove House Prices (YoY) (JUL) | -- | 0.1% |
Monday, Jul 21, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 1:30 | AUD | Producer Price Index (QoQ) (2Q) | 1.6% | 1.9% |
| 1:30 | AUD | Producer Price Index (YoY) (2Q) | 5.3% | 4.8% |
| 1:30 | AUD | New Motor Vehicle Sales (MoM) (JUN) | -- | -1.6% |
| 1:30 | AUD | New Motor Vehicle Sales (YoY) (JUN) | -- | 2.6% |
| 3:00 | NZD | Credit Card Spending (YoY) (JUN) | -- | 5.9% |
| 7:00 | CHF | Money Supply M3 (YoY) (JUN) | -- | 2.6% |
| 7:00 | CHF | Real Estate Index Family Homes (2Q) | -- | 340.4 |
| 7:15 | CHF | Producer & Import Prices (MoM) (JUN) | 0.5% | 1.2% |
| 7:15 | CHF | Producer & Import Prices (YoY) (JUN) | 4.4% | 3.9% |
| 14:00 | USD | Leading Indicators (JUN) | -0.1% | 0.1% |
| 23:50 | JPY | All Industry Activity Index (MoM) (MAY) | 0.4% | 0.8% |
Tuesday, Jul 22, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
Wednesday, Jul 23, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 1:00 | AUD | DEWR Skilled Vacancies (MoM) (JUL) | -- | -0.1% |
| 1:30 | AUD | Consumer Prices (QoQ) (2Q) | 1.3% | 1.3% |
| 1:30 | AUD | Consumer Prices (YoY) (2Q) | 4.3% | 4.2% |
| 1:30 | AUD | Reserve Bank of Australia Trimmed Mean (QoQ) (2Q) | 1.1% | 1.2% |
| 1:30 | AUD | Reserve Bank of Australia Trimmed Mean (YoY) (2Q) | 4.2% | 4.1% |
| 1:30 | AUD | Reserve Bank of Australia Weighted Median (QoQ) (2Q) | 1.1% | 1.3% |
| 1:30 | AUD | Reserve Bank of Australia Weighted Median (YoY) (2Q) | 4.4% | 4.4% |
| 6:45 | EUR | French Consumer Spending (MoM) (JUN) | -0.6% | 2.0% |
| 6:45 | EUR | French Consumer Spending (YoY) (JUN) | 1.4% | 3.1% |
| 8:00 | EUR | Italian Retail Sales s.a. (MoM) (MAY) | 0.0% | 0.0% |
| 8:00 | EUR | Italian Retail Sales (YoY) (MAY) | -0.4% | -2.3% |
| 8:30 | GBP | Bank of England Minutes | -- | -- |
| 8:30 | GBP | BBA Loans for House Purchase (JUN) | -- | 27968 |
| 9:00 | EUR | Euro-Zone Industrial New Orders s.a. (MoM) (MAY) | -1.0% | 2.5% |
| 9:00 | EUR | Euro-Zone Industrial New Orders (YoY) (MAY) | 3.2% | 11.7% |
| 10:00 | GBP | U.K. CBI Quarterly Industrial Trends (JUL) | -- | -- |
| 11:00 | CAD | Consumer Price Index (MoM) (JUN) | 0.5% | 1.0% |
| 11:00 | CAD | Consumer Price Index (YoY) (JUN) | 2.9% | 2.2% |
| 11:00 | CAD | Bank of Canada Consumer Price Index Core (MoM) (JUN) | 0.1% | 0.3% |
| 11:00 | CAD | Bank of Canada Consumer Price Index Core (YoY) (JUN) | 1.6% | 1.5% |
| 11:00 | USD | MBA Mortgage Applications (JUL 18) | -- | 1.7% |
| 13:00 | USD | Fed's Mishkin Speaks at Bank of Canada Conference | -- | -- |
| 15:15 | USD | Fed's Kohn Speaks on Transparency at Bank of Canada Conference | -- | -- |
| 18:00 | USD | Fed's Beige Book | -- | -- |
| 21:00 | NZD | Reserve Bank of New Zealand Rate Decision | 8.25% | 8.25% |
| 23:50 | JPY | Merchandise Trade Balance Total (yen) (JUN) | 506.0B | 365.6B |
| 23:50 | JPY | Adjusted Merchandise Trade Balance (yen) (JUN) | 270.0B | 642.3B |
Thursday, Jul 24, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 01:00 | JPY | BOJ Board Member Atsushi Mizuno to Speak in Aomori City | -- | -- |
| 06:45 | EUR | French Business Confidence Indicator (JUL) | 100 | 102 |
| 06:45 | EUR | French Production Outlook Indicator (JUL) | -17 | -15 |
| 06:45 | EUR | French Own-Company Production Outlook (JUL) | 4 | 7 |
| 07:00 | EUR | French Purchasing Manager Index Manufacturing (JUL P) | 48.8 | 49.2 |
| 07:00 | EUR | French Purchasing Manager Index Services (JUL P) | 49.5 | 50.1 |
| 07:30 | EUR | German Purchasing Manager Index Manufacturing (JUL A) | 52 | 52.6 |
| 07:30 | EUR | German Purchasing Manager Index Services (JUL A) | 51.5 | 52.1 |
| 07:30 | EUR | Italian Business Confidence (JUL) | 86.5 | 87.1 |
| 08:00 | EUR | German IFO - Expectations (JUL) | 93.2 | 94.7 |
| 08:00 | EUR | German IFO - Business Climate (JUL) | 100.2 | 101.3 |
| 08:00 | EUR | German IFO - Current Assessment (JUL) | 106.5 | 108.3 |
| 08:00 | EUR | Euro-Zone Current Account s.a. (euros) (MAY) | -- | -0.3B |
| 08:00 | EUR | Euro-Zone Current Account n.s.a. (euros) (MAY) | -- | -9.2B |
| 08:00 | EUR | Euro-Zone Purchasing Manager Index Manufacturing (JUL A) | 48.7 | 49.2 |
| 08:00 | EUR | Euro-Zone Purchasing Manager Index Services (JUL A) | 48.8 | 49.1 |
| 08:00 | EUR | Euro-Zone Purchasing Manager Index Composite (JUL A) | 49 | 49.3 |
| 08:30 | GBP | Retail Sales (MoM) (JUN) | -2.60% | 3.50% |
| 08:30 | GBP | Retail Sales (YoY) (JUN) | 4.40% | 8.10% |
| 12:30 | USD | Initial Jobless Claims (JUL 19) | 380K | 366K |
| 12:30 | USD | Continuing Claims (JUL 12) | 3200K | 3122K |
| 14:00 | USD | Existing Home Sales (MoM) (JUN) | -1.00% | 2.00% |
| 14:00 | USD | Existing Home Sales (JUN) | 4.94M | 4.99M |
| 14:00 | USD | NY Fed's Geithner; SEC's Cox to Testify Before House Committee | -- | -- |
| 23:30 | JPY | Tokyo Consumer Price Index (YoY) (JUL) | 1.80% | 1.50% |
| 23:30 | JPY | Tokyo Consumer Price Index Ex-Fresh Food (YoY) (JUL) | 1.60% | 1.30% |
| 23:30 | JPY | Tokyo Consumer Price Index Ex Food; Energy (YoY) (JUL) | 0.40% | 0.30% |
| 23:30 | JPY | National Consumer Price Index (YoY) (JUN) | 1.90% | 1.30% |
| 23:30 | JPY | National Consumer Price Index Ex-Fresh Food (YoY) (JUN) | 1.90% | 1.50% |
| 23:30 | JPY | National Consumer Price Index Ex Food; Energy (YoY) (JUN) | 0.00% | -0.10% |
| 23:50 | JPY | Foreign Buying Japan Stocks (yen) (JUL 18) | -- | -242.4B |
| 23:50 | JPY | Foreign Buying Japan Bonds (yen) (JUL 18) | -- | 528.2B |
| 23:50 | JPY | Japan Buying Foreign Stocks (yen) (JUL 18) | -- | 12.9B |
| 23:50 | JPY | Japan Buying Foreign Bonds (yen) (JUL 18) | -- | -58.4B |
| 23:50 | JPY | Corporate Service Price (YoY) (JUN) | 0.60% | 0.60% |
Friday, Jul 25, 2008
| GMT | Ccy | Events | Consensus | Previous |
|---|---|---|---|---|
| 7:30 | EUR | Italian Retailers' Confidence General (JUL) | -- | 107.3 |
| 7:30 | EUR | Italian Services Survey (JUL) | -- | 14 |
| 8:00 | EUR | Euro-Zone M3 s.a. (3M) (JUN) | 10.4% | 10.4% |
| 8:00 | EUR | Euro-Zone M3 s.a. (YoY) (JUN) | 10.3% | 10.5% |
| 8:30 | GBP | Gross Domestic Product (QoQ) (2Q A) | 0.2% | 0.3% |
| 8:30 | GBP | Gross Domestic Product (YoY) (2Q A) | 1.6% | 2.3% |
| 8:30 | GBP | Index of Services (3Mo3M) (MAY) | 0.4% | 0.3% |
| 12:30 | USD | Durable Goods Orders (JUN) | -0.3% | 0.0% |
| 12:30 | USD | Durables Ex Transportation (JUN) | -0.2% | -0.9% |
| 14:00 | USD | U. of Michigan Confidence (JUL F) | 56.3 | 56.6 |
| 14:00 | USD | New Home Sales (MoM) (JUN) | -1.8% | -2.5% |
| 14:00 | USD | New Home Sales (JUN) | 503K | 512K |
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Asia Stocks Fall for Fifth Week in Six on Global Growth Concern
By Hanny Wan and Chua Kong Ho
July 19 (Bloomberg) -- Asian stocks declined for the fifth week in six, driving the benchmark index to the lowest level since October 2006, on concern the weakening global economy will erode profits.
Cnooc Ltd., China's largest offshore oil producer, tumbled after crude headed for its worst week in three years. Wipro Ltd., India's third-largest software-services provider, slumped after saying customers cut spending. Mitsubishi UFJ Financial Group Inc. fell in Tokyo and Cathay Financial Holding Co. dropped in Taipei after they disclosed holdings of debt at embattled U.S. mortgage lenders Fannie Mae and Freddie Mac.
``Growth is slowing and not just in the U.S.,'' said Daphne Roth, Singapore-based vice president of equity research at ABN Amro Private Bank, which oversees about $20 billion in Asian assets. ``A lot of money has been put into the commodities space and with the underlying demand slowing, it makes sense to exit.''
The MSCI Asia-Pacific Index lost 3.3 percent to 129.16 as all 10 of its industry groups declined. The benchmark gauge has retreated 18 percent this year as more than $435 billion in credit-related losses prolong the global economy's slump and rising commodity prices stoke inflation.
Japan's Nikkei 225 Stock Average declined 1.8 percent to 12,803.70, falling for a sixth week. South Korea's Kospi index lost 3.7 percent in its seventh weekly decline. That's the longest losing streak since June 1996. Fifteen days of declines on Pakistan's Karachi Stock Exchange 100 Index led to hundreds of investors stoning the building on July 17 and shouting anti- government slogans.
Oil Producers
Cnooc plunged 9.6 percent to HK$11.88 this week. Inpex Holdings Inc., Japan's biggest oil explorer, slumped 8.9 percent to 1.13 million yen.
Crude oil futures dropped 11.2 percent to $128.88 a barrel in New York in the biggest weekly decline since December 2004, after Federal Reserve Chairman Ben S. Bernanke said risks to growth and inflation have risen in the U.S. and a report showed China's economy grew at the slowest pace since 2005 last quarter.
BHP Billiton Ltd., the world's largest mining company, dropped 9.2 percent to A$36.65 this week. Rio Tinto Group, the third largest, retreated 8.3 percent to A$115.50.
Strategists at Merrill Lynch & Co. and Morgan Stanley said investors should sell commodities stocks because a slowing global economy will cut demand for raw materials such as copper, nickel and corn.
Wipro, Satyam
Wipro tumbled 12 percent to 363 rupees. The company predicted demand in the fiscal first half would remain weak as some telecom customers cut spending. Wipro manages computer networks, offers engineering services and operates call centers for clients including Cisco Systems Inc. and Boeing Co.
Satyam Computer Services Ltd., India's fourth-largest computer-services provider, slumped 14 percent to 383 rupees, after leaving its forecast unchanged for the 12 months to March 31, 2009.
The two companies join Infosys Technologies Ltd. in signaling an uncertain sales outlook for the fiscal year as banks and financial-services companies cope with the collapse of the U.S. subprime mortgage market.
Mitsubishi UFJ, Japan's largest bank by market value, lost 4.1 percent to 951 yen. Sumitomo Mitsui Financial Group Inc. fell 1.4 percent to 824,000 yen.
Agency Debt
Mitsubishi UFJ held 3.3 trillion yen ($31 billion) in bonds issued by U.S. government-backed companies including Fannie Mae and Freddie Mac as of March 31, the company said July 15. Sumitomo Mitsui said it owned 219.8 billion yen in such bonds.
Cathay Financial, Taiwan's biggest publicly traded financial services firm, declined 9.1 percent to NT$60. The Taipei-based company revealed July 15 it has NT$200 billion ($6.6 billion) in debt linked to the U.S. mortgage lenders.
The U.S. Treasury and Federal Reserve were forced to assemble a rescue plan for Fannie and Freddie on July 13 to stem a collapse of confidence in the two companies, which own or guarantee about half of the $12 trillion in U.S. home loans during the country's worst housing recession in 25 years.
``The stocks were beaten down in the week due to worries about the stability of the large U.S. government-sponsored mortgage companies,'' said Brett Hemsley, an analyst at HSBC Holdings Plc in Tokyo.
To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net
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July 19 (Bloomberg) -- Asian stocks declined for the fifth week in six, driving the benchmark index to the lowest level since October 2006, on concern the weakening global economy will erode profits.
Cnooc Ltd., China's largest offshore oil producer, tumbled after crude headed for its worst week in three years. Wipro Ltd., India's third-largest software-services provider, slumped after saying customers cut spending. Mitsubishi UFJ Financial Group Inc. fell in Tokyo and Cathay Financial Holding Co. dropped in Taipei after they disclosed holdings of debt at embattled U.S. mortgage lenders Fannie Mae and Freddie Mac.
``Growth is slowing and not just in the U.S.,'' said Daphne Roth, Singapore-based vice president of equity research at ABN Amro Private Bank, which oversees about $20 billion in Asian assets. ``A lot of money has been put into the commodities space and with the underlying demand slowing, it makes sense to exit.''
The MSCI Asia-Pacific Index lost 3.3 percent to 129.16 as all 10 of its industry groups declined. The benchmark gauge has retreated 18 percent this year as more than $435 billion in credit-related losses prolong the global economy's slump and rising commodity prices stoke inflation.
Japan's Nikkei 225 Stock Average declined 1.8 percent to 12,803.70, falling for a sixth week. South Korea's Kospi index lost 3.7 percent in its seventh weekly decline. That's the longest losing streak since June 1996. Fifteen days of declines on Pakistan's Karachi Stock Exchange 100 Index led to hundreds of investors stoning the building on July 17 and shouting anti- government slogans.
Oil Producers
Cnooc plunged 9.6 percent to HK$11.88 this week. Inpex Holdings Inc., Japan's biggest oil explorer, slumped 8.9 percent to 1.13 million yen.
Crude oil futures dropped 11.2 percent to $128.88 a barrel in New York in the biggest weekly decline since December 2004, after Federal Reserve Chairman Ben S. Bernanke said risks to growth and inflation have risen in the U.S. and a report showed China's economy grew at the slowest pace since 2005 last quarter.
BHP Billiton Ltd., the world's largest mining company, dropped 9.2 percent to A$36.65 this week. Rio Tinto Group, the third largest, retreated 8.3 percent to A$115.50.
Strategists at Merrill Lynch & Co. and Morgan Stanley said investors should sell commodities stocks because a slowing global economy will cut demand for raw materials such as copper, nickel and corn.
Wipro, Satyam
Wipro tumbled 12 percent to 363 rupees. The company predicted demand in the fiscal first half would remain weak as some telecom customers cut spending. Wipro manages computer networks, offers engineering services and operates call centers for clients including Cisco Systems Inc. and Boeing Co.
Satyam Computer Services Ltd., India's fourth-largest computer-services provider, slumped 14 percent to 383 rupees, after leaving its forecast unchanged for the 12 months to March 31, 2009.
The two companies join Infosys Technologies Ltd. in signaling an uncertain sales outlook for the fiscal year as banks and financial-services companies cope with the collapse of the U.S. subprime mortgage market.
Mitsubishi UFJ, Japan's largest bank by market value, lost 4.1 percent to 951 yen. Sumitomo Mitsui Financial Group Inc. fell 1.4 percent to 824,000 yen.
Agency Debt
Mitsubishi UFJ held 3.3 trillion yen ($31 billion) in bonds issued by U.S. government-backed companies including Fannie Mae and Freddie Mac as of March 31, the company said July 15. Sumitomo Mitsui said it owned 219.8 billion yen in such bonds.
Cathay Financial, Taiwan's biggest publicly traded financial services firm, declined 9.1 percent to NT$60. The Taipei-based company revealed July 15 it has NT$200 billion ($6.6 billion) in debt linked to the U.S. mortgage lenders.
The U.S. Treasury and Federal Reserve were forced to assemble a rescue plan for Fannie and Freddie on July 13 to stem a collapse of confidence in the two companies, which own or guarantee about half of the $12 trillion in U.S. home loans during the country's worst housing recession in 25 years.
``The stocks were beaten down in the week due to worries about the stability of the large U.S. government-sponsored mortgage companies,'' said Brett Hemsley, an analyst at HSBC Holdings Plc in Tokyo.
To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net
Read more...
Stern Says Fed Shouldn't Wait for End of Crisis to Raise Rates
By Vivien Lou Chen
July 19 (Bloomberg) -- The Federal Reserve shouldn't wait for housing and financial markets to stabilize before it begins raising interest rates, central bank policy maker Gary Stern said.
``We're pretty well-positioned for the downside risks we might encounter from here,'' Stern, president of the Federal Reserve Bank of Minneapolis, said in an interview yesterday. ``I worry a little bit more about the prospects for inflation.''
The comments by Stern, a voter on the rate-setting Federal Open Market Committee this year, reinforced traders' forecasts for a rate increase by year-end. Stern indicated that Treasury Secretary Henry Paulson's rescue plan for Fannie Mae and Freddie Mac will help prevent a deeper housing and economic slump.
``We can't wait until we clearly observe the financial markets at normal, the economy growing robustly, and so on and so forth, before we reverse course,'' said Stern, 63, the Fed's longest-serving policy maker. ``Our actions will affect the economy in the future, not at the moment.''
The bank president compared the credit crunch to the one in the early 1990s, which restrained economic growth for almost three years. That's a more sanguine assessment than others have. The International Monetary Fund has said it's the worst financial shock since the Great Depression. Former Fed Chairman Alan Greenspan said it's the most intense in more than half a century.
Rate Outlook
Traders' estimates of a rate increase in October rose to 64 percent yesterday after Stern's remarks were published, from 58 percent earlier in the day.
Stern dissented three times in favor of raising rates in 1996. He is the only FOMC member who's served with three chairmen: Paul Volcker, Greenspan and Ben S. Bernanke. He became the Minneapolis Fed president in 1985.
His comments yesterday underscore that ``the Fed has grown more uncomfortable with the inflation situation,'' Tony Crescenzi, chief bond strategist at Miller Tabak & Co. in New York, wrote in a note to clients.
Stern spoke two days after government figures showed consumer prices surged 5 percent over the past year, the biggest jump since 1991. Excluding food and fuel, so-called core prices rose 2.4 percent, higher than the 2.1 percent average over the last five years.
`Too High'
``Headline inflation is clearly too high,'' Stern said. He added that he's concerned that will feed through to core prices and public expectations for inflation.
As long as energy and food costs level off, core inflation ought to slow over the next year, Stern said.
Crude oil has surged 73 percent in the past 12 months, and rose to a record of $147.27 a barrel on July 11. Worldwide, prices for food commodities such as wheat and rice were 43 percent higher in April than a year earlier, according to the United Nations Food and Agriculture Organization.
Stern declined to say when policy makers may shift toward raising rates.
``We're going to want to, in my opinion, reverse some of those interest-rate reductions,'' he said. ``I don't think there's any question about that. But exactly when depends on how things evolve from here.''
The FOMC halted its series of seven reductions last month, after reducing the benchmark rate to 2 percent, from 5.25 percent last September.
Traders anticipate the Fed will boost its main rate at least a quarter point from 2 percent in October, after keeping borrowing costs unchanged in August and September. There's a 79 percent probability of a move by year-end, futures prices show.
Bernanke's View
Minutes of the Fed's June 24-25 gathering, released July 15, showed that some Fed officials favored an increase in rates ``very soon.'' Bernanke this week said there are risks to both inflation and growth, abandoning the FOMC's June assessment that the threat of a ``substantial'' downturn had receded.
``This is a very challenging policy environment,'' Stern said yesterday. ``I don't think we ought to pretend that'' an end to the credit crisis ``won't take some time,'' he said.
The Fed on July 13 offered Fannie Mae and Freddie Mac access to direct loans from the central bank in case the firms needed the financing before Congress acts on Paulson's rescue plan. The Treasury chief is seeking power to make unlimited loans to and purchase equity in the companies if needed.
Stern said the Treasury proposals are ``clearly designed to bolster Fannie and Freddie, and to address'' risks the firms' troubles pose to the credit crisis and housing slump.
To contact the reporter on this story: Vivien Lou Chen in Minneapolis at vchen1@bloomberg.net
Read more...
July 19 (Bloomberg) -- The Federal Reserve shouldn't wait for housing and financial markets to stabilize before it begins raising interest rates, central bank policy maker Gary Stern said.
``We're pretty well-positioned for the downside risks we might encounter from here,'' Stern, president of the Federal Reserve Bank of Minneapolis, said in an interview yesterday. ``I worry a little bit more about the prospects for inflation.''
The comments by Stern, a voter on the rate-setting Federal Open Market Committee this year, reinforced traders' forecasts for a rate increase by year-end. Stern indicated that Treasury Secretary Henry Paulson's rescue plan for Fannie Mae and Freddie Mac will help prevent a deeper housing and economic slump.
``We can't wait until we clearly observe the financial markets at normal, the economy growing robustly, and so on and so forth, before we reverse course,'' said Stern, 63, the Fed's longest-serving policy maker. ``Our actions will affect the economy in the future, not at the moment.''
The bank president compared the credit crunch to the one in the early 1990s, which restrained economic growth for almost three years. That's a more sanguine assessment than others have. The International Monetary Fund has said it's the worst financial shock since the Great Depression. Former Fed Chairman Alan Greenspan said it's the most intense in more than half a century.
Rate Outlook
Traders' estimates of a rate increase in October rose to 64 percent yesterday after Stern's remarks were published, from 58 percent earlier in the day.
Stern dissented three times in favor of raising rates in 1996. He is the only FOMC member who's served with three chairmen: Paul Volcker, Greenspan and Ben S. Bernanke. He became the Minneapolis Fed president in 1985.
His comments yesterday underscore that ``the Fed has grown more uncomfortable with the inflation situation,'' Tony Crescenzi, chief bond strategist at Miller Tabak & Co. in New York, wrote in a note to clients.
Stern spoke two days after government figures showed consumer prices surged 5 percent over the past year, the biggest jump since 1991. Excluding food and fuel, so-called core prices rose 2.4 percent, higher than the 2.1 percent average over the last five years.
`Too High'
``Headline inflation is clearly too high,'' Stern said. He added that he's concerned that will feed through to core prices and public expectations for inflation.
As long as energy and food costs level off, core inflation ought to slow over the next year, Stern said.
Crude oil has surged 73 percent in the past 12 months, and rose to a record of $147.27 a barrel on July 11. Worldwide, prices for food commodities such as wheat and rice were 43 percent higher in April than a year earlier, according to the United Nations Food and Agriculture Organization.
Stern declined to say when policy makers may shift toward raising rates.
``We're going to want to, in my opinion, reverse some of those interest-rate reductions,'' he said. ``I don't think there's any question about that. But exactly when depends on how things evolve from here.''
The FOMC halted its series of seven reductions last month, after reducing the benchmark rate to 2 percent, from 5.25 percent last September.
Traders anticipate the Fed will boost its main rate at least a quarter point from 2 percent in October, after keeping borrowing costs unchanged in August and September. There's a 79 percent probability of a move by year-end, futures prices show.
Bernanke's View
Minutes of the Fed's June 24-25 gathering, released July 15, showed that some Fed officials favored an increase in rates ``very soon.'' Bernanke this week said there are risks to both inflation and growth, abandoning the FOMC's June assessment that the threat of a ``substantial'' downturn had receded.
``This is a very challenging policy environment,'' Stern said yesterday. ``I don't think we ought to pretend that'' an end to the credit crisis ``won't take some time,'' he said.
The Fed on July 13 offered Fannie Mae and Freddie Mac access to direct loans from the central bank in case the firms needed the financing before Congress acts on Paulson's rescue plan. The Treasury chief is seeking power to make unlimited loans to and purchase equity in the companies if needed.
Stern said the Treasury proposals are ``clearly designed to bolster Fannie and Freddie, and to address'' risks the firms' troubles pose to the credit crisis and housing slump.
To contact the reporter on this story: Vivien Lou Chen in Minneapolis at vchen1@bloomberg.net
Read more...
Friday's News Recap: Canadian Wholesale Trade Up, Consumer Spending Still Strong
News Recap | Written by CEP News | Jul 18 08 20:39 GMT |
(CEP News) - It was a quiet day for releases in North America, with wholesale trade and leading indicators released in Canada. In the U.S, markets received state and regional employment data and heard some comments about inflation from Minneapolis Fed president Gary Stern.
Canada's wholesale sales posted a larger-than-expected 1.6% rise in May, driven predominantly by rising fertilizer sales, Statistics Canada reported Friday. Wholesale sales hit $44.2 billion in the month, up from $43.5 billion in April. This marks the fourth gain in the last five months. Analysts had expected to see a 0.5% increase in the monthly figure. Fertilizer exports soared 57.7% compared with the same month last year.
"Since the volume of wholesale trade was only robust in May (in real terms) this report will likely have a sizable impact on May GDP," noted Charmaine Buskas, senior economics strategist from TD Securities. "The next piece of the puzzle is the retail sales numbers which come out next week, but there is already good momentum for May GDP."
Canada's composite leading index was unchanged in June as consumer spending remained strong but housing and manufacturing showed signs of weakness, Statistics Canada reported Friday. The flat reading in the index followed gains of 0.2% in May and 0.1% in April. Analysts had expected to see the composite index rise by another 0.1% in June. New orders from manufacturers plunged 3.5% to $25.4 billion in June from $26.3 billion the month prior.
In the U.S., regional and state unemployment rates were generally little changed in June, as 24 states recorded month-to-month unemployment rate increases, 16 states and the District of Columbia registered decreases and 10 states had no change, according to data released by the Bureau of Labor Statistics.
On a year-to-year basis, the unemployment rate was up in 45 states (and D.C.), down in four states and unchanged in one state. The national unemployment rate was unchanged in June at 5.5%, but was up from 4.6% a year earlier.
Speaking in an interview with Bloomberg on Friday, Minneapolis Federal Reserve President Gary Stern (voter) said that the Federal Reserve can't wait for the end of the crisis to raise rates. "I worry about the prospects for inflation. The headline inflation rate is clearly too high," said Stern. He also noted that the Fed is well-positioned for a downside risk to growth. He commented that the current credit crisis was reminiscent of the early 1990s.
In overnight news, Germany's Federal Statistics Office (Destatis), reported that German producer price inflation accelerated to 6.7% year-over-year in June, up from both the 6.5% growth rate expected and the 6.0% rate recorded in May. June's annualized increase is the largest recorded since March 1982. In monthly terms, the producer price index rose 0.9%. Economists had expected a more severe slowdown to 0.7% after prices increased 1.0% in the previous month.
Eurostat reported that the euro zone trade balance fell to a deficit of €4.6 billion in May. Economists had expected a smaller deficit reading of €1.0 billion following the previous month's €2.5 billion surplus. April's figure was revised up from a surplus of €2.3 billion. Adjusting for calendar effects, the trade deficit was only €1.5 billion, down from a surplus of €1.4 billion recorded in April. Economists had expected a surplus reading of €800 million. Meanwhile, April's figure was revised down from a surplus level of €2.2 billion.
The Bank of Japan released the minutes of its June 12 and 13 monetary policy meeting, where it was unanimously agreed that the current money market operation guidelines would be maintained and that the uncollateralized overnight call rate would remain unchanged at 0.50%.
In a joint interview with the Irish Times, France's Le Figaro, Germany's Frankfurter Allgemeine Zeitung and Portugal's Jornal de Negocios published on Friday, European Central Bank President Jean-Claude Trichet reiterated that the mandate of the ECB was to ensure price stability in the medium term and suggested that would be achieved "in line with our definition" over 18 months.
"We are not pursuing two goals; we are pursuing one goal, which is price stability in the medium term," Trichet said.
Speaking to the Irish Times, Trichet said that policy-makers would not modify monetary policy to help individual euro zone states that are seeing notable economic slowdowns, such as Ireland, Spain or Portugal, and emphasized that the interest of the entire monetary zone was the focus of the ECB. "Our monetary policy must be optimal at the level of the whole euro area," Trichet said.
Speaking at the London Stock Exchange on Friday, Bank of England Deputy Governor John Gieve said he expects inflation to rise to "well over" 4% in 2008 while economic growth should slow sharply. "We are expecting inflation to be well over 4 percent for much of the rest of the year," Gieve said in a prepared statement, adding that "timely sources of data suggest the economy is already slowing fast."
By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
Read more...
(CEP News) - It was a quiet day for releases in North America, with wholesale trade and leading indicators released in Canada. In the U.S, markets received state and regional employment data and heard some comments about inflation from Minneapolis Fed president Gary Stern.
Canada's wholesale sales posted a larger-than-expected 1.6% rise in May, driven predominantly by rising fertilizer sales, Statistics Canada reported Friday. Wholesale sales hit $44.2 billion in the month, up from $43.5 billion in April. This marks the fourth gain in the last five months. Analysts had expected to see a 0.5% increase in the monthly figure. Fertilizer exports soared 57.7% compared with the same month last year.
"Since the volume of wholesale trade was only robust in May (in real terms) this report will likely have a sizable impact on May GDP," noted Charmaine Buskas, senior economics strategist from TD Securities. "The next piece of the puzzle is the retail sales numbers which come out next week, but there is already good momentum for May GDP."
Canada's composite leading index was unchanged in June as consumer spending remained strong but housing and manufacturing showed signs of weakness, Statistics Canada reported Friday. The flat reading in the index followed gains of 0.2% in May and 0.1% in April. Analysts had expected to see the composite index rise by another 0.1% in June. New orders from manufacturers plunged 3.5% to $25.4 billion in June from $26.3 billion the month prior.
In the U.S., regional and state unemployment rates were generally little changed in June, as 24 states recorded month-to-month unemployment rate increases, 16 states and the District of Columbia registered decreases and 10 states had no change, according to data released by the Bureau of Labor Statistics.
On a year-to-year basis, the unemployment rate was up in 45 states (and D.C.), down in four states and unchanged in one state. The national unemployment rate was unchanged in June at 5.5%, but was up from 4.6% a year earlier.
Speaking in an interview with Bloomberg on Friday, Minneapolis Federal Reserve President Gary Stern (voter) said that the Federal Reserve can't wait for the end of the crisis to raise rates. "I worry about the prospects for inflation. The headline inflation rate is clearly too high," said Stern. He also noted that the Fed is well-positioned for a downside risk to growth. He commented that the current credit crisis was reminiscent of the early 1990s.
In overnight news, Germany's Federal Statistics Office (Destatis), reported that German producer price inflation accelerated to 6.7% year-over-year in June, up from both the 6.5% growth rate expected and the 6.0% rate recorded in May. June's annualized increase is the largest recorded since March 1982. In monthly terms, the producer price index rose 0.9%. Economists had expected a more severe slowdown to 0.7% after prices increased 1.0% in the previous month.
Eurostat reported that the euro zone trade balance fell to a deficit of €4.6 billion in May. Economists had expected a smaller deficit reading of €1.0 billion following the previous month's €2.5 billion surplus. April's figure was revised up from a surplus of €2.3 billion. Adjusting for calendar effects, the trade deficit was only €1.5 billion, down from a surplus of €1.4 billion recorded in April. Economists had expected a surplus reading of €800 million. Meanwhile, April's figure was revised down from a surplus level of €2.2 billion.
The Bank of Japan released the minutes of its June 12 and 13 monetary policy meeting, where it was unanimously agreed that the current money market operation guidelines would be maintained and that the uncollateralized overnight call rate would remain unchanged at 0.50%.
In a joint interview with the Irish Times, France's Le Figaro, Germany's Frankfurter Allgemeine Zeitung and Portugal's Jornal de Negocios published on Friday, European Central Bank President Jean-Claude Trichet reiterated that the mandate of the ECB was to ensure price stability in the medium term and suggested that would be achieved "in line with our definition" over 18 months.
"We are not pursuing two goals; we are pursuing one goal, which is price stability in the medium term," Trichet said.
Speaking to the Irish Times, Trichet said that policy-makers would not modify monetary policy to help individual euro zone states that are seeing notable economic slowdowns, such as Ireland, Spain or Portugal, and emphasized that the interest of the entire monetary zone was the focus of the ECB. "Our monetary policy must be optimal at the level of the whole euro area," Trichet said.
Speaking at the London Stock Exchange on Friday, Bank of England Deputy Governor John Gieve said he expects inflation to rise to "well over" 4% in 2008 while economic growth should slow sharply. "We are expecting inflation to be well over 4 percent for much of the rest of the year," Gieve said in a prepared statement, adding that "timely sources of data suggest the economy is already slowing fast."
By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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Closing Market Recap: Fixed Income Tumbles After Financials Rebound
Market Updates | Written by CEP News | Jul 18 08 21:40 GMT |
(CEP News) - Renewed confidence in the U.S. economy and financial sector sparked a modest rally in U.S. stocks and a Treasury selloff on Friday. Meanwhile, Canadian equities closed the week on a positive note and the loonie flirted with parity.
For the most part, markets were relatively unchanged on Friday after a tumultuous week. The exception was in fixed income where prices fell and yields shot higher.
U.S. two-year yields were up 14.7 bps to 2.63%, with five-year yields up 14.1 bps to 3.41%, 10-year yields up 9.2 bps to 4.08% and 30-year yields up 4.0 bps to 4.65%. The Eurodollar September 08 contract was down 4.0 ticks to 97.08. The yield curve was flatter, with the 10/2-year spread down 5.9 bps to 144.49 bps.
William O'Donnell, fixed income strategist at UBS, said better-than-expected earnings from Citigroup and momentum selling were hurting the bond market.
"One of the problems we have is that technical conditions are pretty poor," O'Donnell said. "We had a rally since the middle of June and we're seeing a bit of a giveback after a bounce in some of the financials."
Citigroup reported a second-quarter net loss of $2.5 billion, or 54 cents a share. But analysts had expected a loss of about $3.7 billion.
Shares of Citigroup closed 7.4% higher while the ETF that tracks the U.S. financial sector was up 1.6%. Further support came from the embattled shares of U.S. mortgage guarantors Fannie Mae and Freddie Mac, which gained 22.6% and 10.5% respectively.
The rally in financials offset a technology selloff, pushing stocks into positive territory. Toronto's S&P/TSX composite index closed up 56 points to 13,516, the Dow Jones industrial average up 50 points to 11,497, the S&P 500 unchanged at 1,261 and the Nasdaq down 30 points to 2,283.
European stock markets closed in positive territory with the Eurostoxx up 49 points to 2,836, the UK FTSE 100 up 90 points to 5,376 and the German DAX up 111 points to 6,383.
Crude oil prices were relatively stable on Friday but on the week were down $18 at $128.88 per barrel.
Commodity trader Dennis Gartman pointed to changes in consumer and corporate habits as the reasons for the commodity decline. He said prices could fall to $100 "rather easily."
"What has taken place to send crude so violently lower over the course of the past week: demand destruction plainly and simply," Gartman wrote in his newsletter.
On Friday, WTI crude oil was down $0.41 to $128.88.
The fall in energy prices had little effect on the Canadian dollar. It outperformed every G10 currency except the Australian dollar and pound sterling in the past week.
"The fact that CAD outperformed as crude oil headed to its largest one-week decline in three-and-a-half years would appear to underscore that this correlation remains broken for now," wrote Scotia Capital currency strategists Steve Malyon and Sacha Tihanyi in a note to clients.
On Friday, the Canadian dollar was unchanged 0.9943 against the U.S. dollar (1.0058 USD/CAD) and up 0.70 to 106.35 against the yen.
The U.S. dollar was up 0.69 to 106.96 against the yen and the Dollar Index was down 0.069 to 72.173.
The euro was down 0.0016 to 1.5848 against the U.S. dollar, down 0.0016 to 1.5938 against the Canadian dollar, up 0.0012 to 0.7928 against the pound sterling and was higher by 0.92 to 169.48 against the yen.
The pound sterling was down 0.0050 to 1.9990 against the U.S. dollar and down 0.0052 to 2.0104 against the Canadian dollar.
Elsewhere in fixed income, yields on two-year Canadian government bonds were up 7.0 bps to 3.19%, with five-year yields up 4.5 bps to 3.41%, 10-year yields up 2.8 bps to 3.81% and 30-year yields up 0.6 bps to 4.15%. The Canadian 10-year note was yielding 27.78 bps less than the U.S. 10-year note.
In Germany, returns on two-year German bonds were up 16.0 bps to 4.54%, with five-year yields up 15.8 bps to 4.60%, 10-year yields up 12.8 bps to 4.57% and 30-year yields up 9.6 bps to 4.86%.
Yields on UK two-year bonds were up 13.9 bps to 5.11%, with five-year yields up 14.4 bps to 5.06%, 10-year yields up 14.0 bps to 5.04% and 30-year yields up 9.8 bps to 4.68%.
Looking to the week ahead, the health of the Canadian consumer and rising inflation will be in focus.
On Tuesday, Statistics Canada will release the May retail sales report. Economists believe the domestic economy continues to chug along and spending will rise 0.5% from April.
On Wednesday, inflation will be the focus with the June report on the Consumer Price Index. Over the past year, inflation has become a global problem that Canada has dodged mostly because of the rapid rise of the loonie. Canada has had some of the lowest inflation rates in the world, but that could be changing. In the previous report on CPI, prices rose from 1.7% to 2.2%. Economists expect the trend to continue and the year-over-year CPI to hit 2.9%, marking the highest level since 2005.
Still, Canada remains a relatively low inflation country. Euro zone inflation is at 4.0% while U.S. consumer prices have increased 5% in the past year.
All data taken at 4:58 p.m. EDT.
By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) - Renewed confidence in the U.S. economy and financial sector sparked a modest rally in U.S. stocks and a Treasury selloff on Friday. Meanwhile, Canadian equities closed the week on a positive note and the loonie flirted with parity.
For the most part, markets were relatively unchanged on Friday after a tumultuous week. The exception was in fixed income where prices fell and yields shot higher.
U.S. two-year yields were up 14.7 bps to 2.63%, with five-year yields up 14.1 bps to 3.41%, 10-year yields up 9.2 bps to 4.08% and 30-year yields up 4.0 bps to 4.65%. The Eurodollar September 08 contract was down 4.0 ticks to 97.08. The yield curve was flatter, with the 10/2-year spread down 5.9 bps to 144.49 bps.
William O'Donnell, fixed income strategist at UBS, said better-than-expected earnings from Citigroup and momentum selling were hurting the bond market.
"One of the problems we have is that technical conditions are pretty poor," O'Donnell said. "We had a rally since the middle of June and we're seeing a bit of a giveback after a bounce in some of the financials."
Citigroup reported a second-quarter net loss of $2.5 billion, or 54 cents a share. But analysts had expected a loss of about $3.7 billion.
Shares of Citigroup closed 7.4% higher while the ETF that tracks the U.S. financial sector was up 1.6%. Further support came from the embattled shares of U.S. mortgage guarantors Fannie Mae and Freddie Mac, which gained 22.6% and 10.5% respectively.
The rally in financials offset a technology selloff, pushing stocks into positive territory. Toronto's S&P/TSX composite index closed up 56 points to 13,516, the Dow Jones industrial average up 50 points to 11,497, the S&P 500 unchanged at 1,261 and the Nasdaq down 30 points to 2,283.
European stock markets closed in positive territory with the Eurostoxx up 49 points to 2,836, the UK FTSE 100 up 90 points to 5,376 and the German DAX up 111 points to 6,383.
Crude oil prices were relatively stable on Friday but on the week were down $18 at $128.88 per barrel.
Commodity trader Dennis Gartman pointed to changes in consumer and corporate habits as the reasons for the commodity decline. He said prices could fall to $100 "rather easily."
"What has taken place to send crude so violently lower over the course of the past week: demand destruction plainly and simply," Gartman wrote in his newsletter.
On Friday, WTI crude oil was down $0.41 to $128.88.
The fall in energy prices had little effect on the Canadian dollar. It outperformed every G10 currency except the Australian dollar and pound sterling in the past week.
"The fact that CAD outperformed as crude oil headed to its largest one-week decline in three-and-a-half years would appear to underscore that this correlation remains broken for now," wrote Scotia Capital currency strategists Steve Malyon and Sacha Tihanyi in a note to clients.
On Friday, the Canadian dollar was unchanged 0.9943 against the U.S. dollar (1.0058 USD/CAD) and up 0.70 to 106.35 against the yen.
The U.S. dollar was up 0.69 to 106.96 against the yen and the Dollar Index was down 0.069 to 72.173.
The euro was down 0.0016 to 1.5848 against the U.S. dollar, down 0.0016 to 1.5938 against the Canadian dollar, up 0.0012 to 0.7928 against the pound sterling and was higher by 0.92 to 169.48 against the yen.
The pound sterling was down 0.0050 to 1.9990 against the U.S. dollar and down 0.0052 to 2.0104 against the Canadian dollar.
Elsewhere in fixed income, yields on two-year Canadian government bonds were up 7.0 bps to 3.19%, with five-year yields up 4.5 bps to 3.41%, 10-year yields up 2.8 bps to 3.81% and 30-year yields up 0.6 bps to 4.15%. The Canadian 10-year note was yielding 27.78 bps less than the U.S. 10-year note.
In Germany, returns on two-year German bonds were up 16.0 bps to 4.54%, with five-year yields up 15.8 bps to 4.60%, 10-year yields up 12.8 bps to 4.57% and 30-year yields up 9.6 bps to 4.86%.
Yields on UK two-year bonds were up 13.9 bps to 5.11%, with five-year yields up 14.4 bps to 5.06%, 10-year yields up 14.0 bps to 5.04% and 30-year yields up 9.8 bps to 4.68%.
Looking to the week ahead, the health of the Canadian consumer and rising inflation will be in focus.
On Tuesday, Statistics Canada will release the May retail sales report. Economists believe the domestic economy continues to chug along and spending will rise 0.5% from April.
On Wednesday, inflation will be the focus with the June report on the Consumer Price Index. Over the past year, inflation has become a global problem that Canada has dodged mostly because of the rapid rise of the loonie. Canada has had some of the lowest inflation rates in the world, but that could be changing. In the previous report on CPI, prices rose from 1.7% to 2.2%. Economists expect the trend to continue and the year-over-year CPI to hit 2.9%, marking the highest level since 2005.
Still, Canada remains a relatively low inflation country. Euro zone inflation is at 4.0% while U.S. consumer prices have increased 5% in the past year.
All data taken at 4:58 p.m. EDT.
By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
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