By Scott Lanman
July 24 (Bloomberg) -- The Federal Reserve said lending to commercial banks rose to an average daily record while loans to securities firms showed a zero balance for a fourth week.
Loans to commercial banks through the Fed's traditional discount window increased by $2.47 billion to an average $16.4 billion a day in the week ended yesterday, while lending to Wall Street bond dealers fell to zero from an average $9 million, the Fed reported today.
The subprime-mortgage collapse has taken a toll on banks and other financial companies, which have reported $468 billion of writedowns since the start of 2007. Fed officials have responded to the yearlong credit crisis by narrowing the gap between the discount rate and the benchmark rate and increasing the term of commercial-bank loans to 90 days from overnight.
``It reflects the growing use of the discount window as not just an overnight backstop but as a permanent source of funding,'' said Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm. The Fed report shows banks are taking advantage of the lengthened terms, he said.
The average daily total for the discount window surpassed the previous high of $16 billion in the week ended May 28. Commercial banks also have $150 billion in outstanding Fed loans from the central bank's Term Auction Facility, which conducts sales of 28-day funds every two weeks.
The Fed's single-day record for discount-window lending is $45.5 billion on Sept. 12, 2001, the day after the terrorist attacks on the World Trade Center and Pentagon. The reported daily average for that week was $11.7 billion.
Restore Stability
The central bank opened lending to investment banks in March to restore stability to financial markets. New York Fed President Timothy Geithner said today that even with borrowing under the so-called Primary Dealer Credit Facility in decline, the program is still needed as a source of investor confidence.
The loan balance fell to zero after the Fed took on a portfolio of Bear Stearns Cos. assets to ensure the firm's takeover by JPMorgan Chase & Co.
``I don't think you can really judge the value today to the firms themselves, or the people that fund them, from looking at use day-by-day,'' Geithner said at a House Financial Services Committee hearing in Washington.
As of yesterday, there were no loans outstanding in the primary-dealer program for a fourth straight week, while commercial banks had $17.7 billion of discount-window loans, the Fed reported.
Net Value
The central bank said the net value of the former Bear Stearns portfolio was valued at $29.059 billion as of yesterday, compared with $29.019 billion a week ago.
The Fed revalued the underlying assets of the portfolio as of June 30, compared with June 26, and will now assign a new ``fair value'' quarterly, next on Sept. 30. Weekly calculations of the net portfolio value are updated to reflect accrued earnings and expenses.
The Fed loaned $28.8 billion last month to a company it formed to purchase the Bear Stearns investments, which as of mid- March included debt backed by mortgages and other items JPMorgan deemed too risky to take on. JPMorgan is absorbing the first $1.15 billion of any losses realized on the holdings.
The average daily total of loans to dealers reached a record $38.1 billion the week ending April 2.
Fed holdings of U.S. Treasury securities rose by $85 million for a daily average of $479.1 billion. The central bank had about $740 billion of Treasuries at the start of 2008.
Aggressive Policy
Fed policy makers kept the benchmark rate at 2 percent at their last meeting June 25, ending the most aggressive monetary easing in two decades. The discount rate is now 2.25 percent, compared with the three-month London Interbank Offered Rate for the dollar of 2.80 percent.
The Fed reported no net misses in reserve projections. A net miss occurs when the actual reserve level in the banking system diverges from the Fed's projections for a day by $2 billion or more. If the level is outside expectations, the federal funds rate can deviate from target.
The Fed also reported that the M2 money supply rose by $300 million in the week ended July 14. That left M2 growing at an annual rate of 6.2 percent for the past 52 weeks, above the target of 5 percent the Fed once set for maximum growth. The Fed no longer has a formal target.
The Fed reports two measures of the money supply each week. M1 includes all currency held by consumers and companies for spending, money held in checking accounts and travelers checks. M2, the more widely followed, adds savings and private holdings in money market mutual funds.
During the latest reporting week, M1 fell by $10.1 billion. Over the past 52 weeks, M1 has increased 0.6 percent. The Fed no longer publishes figures for M3.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.
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Friday, July 25, 2008
Colombian Peso Falls as Traders Scale Back Rate-Increase Bets
By Drew Benson
July 24 (Bloomberg) -- Colombia's peso fell as some traders scaled back bets that the central bank will raise the benchmark lending rate for the first time in five months tomorrow.
The peso was slid 0.5 percent to 1,781 per dollar at 4:30 p.m. in New York, from 1,772.95 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. Today's decline came after a three-day, 1.7 percent rally fueled by speculation the bank will raise rates.
The decision ``is the driver in the market,'' said David Santos, a senior analyst with Bogota-based brokerage Serfinco SA. ``There is uncertainty'' because economists are divided on whether central bankers will increase rates, he said.
Banco de la Republica will boost the overnight lending rate a quarter-percentage point to 10 percent to curb inflation, according to 17 of 38 economists surveyed by Bloomberg News. The rest predict no change in rates.
The central bank is slated to announce its decision on rates after midday tomorrow.
Annual inflation climbed to a five-year high of 7.2 percent in June. The rate will rise further to 7.5 percent in July, according to the median forecast of 16 economists surveyed by Bloomberg. The National Statistics Agency is to release the data on Aug. 1.
The yield on Colombia's benchmark 11 percent bonds due July 2020 slid 2 basis points, or 0.02 percentage point, to 12.68 percent, according to Colombia's stock exchange. The bonds' price rose 0.13 centavo to 89.924 centavos per peso.
Deputy Finance Minister Juan Pablo Zarate said on July 21 that the government will cut spending and auction less peso debt than originally anticipated this year.
Chilean Rates
Officials plan to trim local debt auctions this year to 10.5 trillion pesos ($6 billion) from 12 trillion pesos while reducing the budget deficit target to 1 percent of gross domestic product from 1.4 percent of GDP.
Chile's peso strengthened as oil prices came off of a seven- week low that had damped expectations on central bank interest- rate increases.
Banco Central de Chile on July 10 raised its key rate a half-percentage point to 7.25 percent, a nine-year high. Policy makers next meet Aug. 14.
The central bank will likely lift the rate by another 25 basis points at that time, said Rodrigo Aravena, head of economic research at Banchile Inversiones in Santiago. Monthly inflation ``would have to be above 1 percent for it to raise it by 50 basis points,'' Aravena said. That's an unlikely scenario because inflation since the last central bank meeting ``has eased, basically on the decline in oil prices,'' he said.
Oil
The peso rose 0.5 percent to 492.84 per dollar, from 495.10 yesterday.
Crude oil for September delivery rose 0.8 percent to $125.25 a barrel on the New York Mercantile Exchange, from a low of $124.44 yesterday. Futures have tumbled from a record $147.27 on July 11.
The yield for a basket of Chile's five-year peso bonds in inflation-linked currency units, called unidades de fomento, rose 3 basis points to 2.92 percent, according to Bloomberg composite prices.
Banco Central de Chile will sell $1 billion worth of two-, five- and 10-year inflation-linked bonds between Aug. 9 and Oct. 8, the bank said in a statement last week. For the two-month period, the bank won't sell fixed-rate bonds, it said.
The central bank has bought $50 million daily in the currency market since April 14 and has said it will purchase as much as $8 billion this year in an effort to weaken the peso and bolster exports.
Peru, Argentina
In Peru, the sol advanced 0.04 percent to 2.8310 per dollar from 2.832 yesterday. The yield on the nation's 8.6 percent sol- denominated bonds due in August 2017 was unchanged at 7.7 percent, according to Citigroup Inc.'s unit in Peru.
Argentina's peso was little changed at 3.0165 per dollar from 3.017 yesterday. The yield on the country's inflation-linked peso bonds due in December 2033 rose 20 basis points to 9.72 percent, according to Citigroup's local unit.
Venezuelan markets were closed today for a national holiday.
To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net
Read more...
July 24 (Bloomberg) -- Colombia's peso fell as some traders scaled back bets that the central bank will raise the benchmark lending rate for the first time in five months tomorrow.
The peso was slid 0.5 percent to 1,781 per dollar at 4:30 p.m. in New York, from 1,772.95 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. Today's decline came after a three-day, 1.7 percent rally fueled by speculation the bank will raise rates.
The decision ``is the driver in the market,'' said David Santos, a senior analyst with Bogota-based brokerage Serfinco SA. ``There is uncertainty'' because economists are divided on whether central bankers will increase rates, he said.
Banco de la Republica will boost the overnight lending rate a quarter-percentage point to 10 percent to curb inflation, according to 17 of 38 economists surveyed by Bloomberg News. The rest predict no change in rates.
The central bank is slated to announce its decision on rates after midday tomorrow.
Annual inflation climbed to a five-year high of 7.2 percent in June. The rate will rise further to 7.5 percent in July, according to the median forecast of 16 economists surveyed by Bloomberg. The National Statistics Agency is to release the data on Aug. 1.
The yield on Colombia's benchmark 11 percent bonds due July 2020 slid 2 basis points, or 0.02 percentage point, to 12.68 percent, according to Colombia's stock exchange. The bonds' price rose 0.13 centavo to 89.924 centavos per peso.
Deputy Finance Minister Juan Pablo Zarate said on July 21 that the government will cut spending and auction less peso debt than originally anticipated this year.
Chilean Rates
Officials plan to trim local debt auctions this year to 10.5 trillion pesos ($6 billion) from 12 trillion pesos while reducing the budget deficit target to 1 percent of gross domestic product from 1.4 percent of GDP.
Chile's peso strengthened as oil prices came off of a seven- week low that had damped expectations on central bank interest- rate increases.
Banco Central de Chile on July 10 raised its key rate a half-percentage point to 7.25 percent, a nine-year high. Policy makers next meet Aug. 14.
The central bank will likely lift the rate by another 25 basis points at that time, said Rodrigo Aravena, head of economic research at Banchile Inversiones in Santiago. Monthly inflation ``would have to be above 1 percent for it to raise it by 50 basis points,'' Aravena said. That's an unlikely scenario because inflation since the last central bank meeting ``has eased, basically on the decline in oil prices,'' he said.
Oil
The peso rose 0.5 percent to 492.84 per dollar, from 495.10 yesterday.
Crude oil for September delivery rose 0.8 percent to $125.25 a barrel on the New York Mercantile Exchange, from a low of $124.44 yesterday. Futures have tumbled from a record $147.27 on July 11.
The yield for a basket of Chile's five-year peso bonds in inflation-linked currency units, called unidades de fomento, rose 3 basis points to 2.92 percent, according to Bloomberg composite prices.
Banco Central de Chile will sell $1 billion worth of two-, five- and 10-year inflation-linked bonds between Aug. 9 and Oct. 8, the bank said in a statement last week. For the two-month period, the bank won't sell fixed-rate bonds, it said.
The central bank has bought $50 million daily in the currency market since April 14 and has said it will purchase as much as $8 billion this year in an effort to weaken the peso and bolster exports.
Peru, Argentina
In Peru, the sol advanced 0.04 percent to 2.8310 per dollar from 2.832 yesterday. The yield on the nation's 8.6 percent sol- denominated bonds due in August 2017 was unchanged at 7.7 percent, according to Citigroup Inc.'s unit in Peru.
Argentina's peso was little changed at 3.0165 per dollar from 3.017 yesterday. The yield on the country's inflation-linked peso bonds due in December 2033 rose 20 basis points to 9.72 percent, according to Citigroup's local unit.
Venezuelan markets were closed today for a national holiday.
To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net
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Fed Weighs Plans to Spur Bank Investment by LBO Firms
By Jonathan Keehner and Jason Kelly
July 24 (Bloomberg) -- The Federal Reserve, looking to spur investment in lenders hit by credit-market losses, is weighing three measures to ease rules for private-equity funds that buy bank stakes, people with knowledge of the deliberations said.
One proposal would permit buyout firms to use ``silo'' funds walled off from their other investments to buy the stakes without subjecting the rest of their holdings to more federal oversight, said the people, who declined to be named because the talks aren't public. Under another scenario, the Fed would let private equity firms exercise more control of banks they invest in. A third plan would encourage firms to team up on bank deals.
Buyout firms are ``hesitant to invest in banks because of the various levels of regulation that would apply to them,'' said Thomas Vartanian, a partner at Fried Frank Harris Shriver & Jacobson LLP in Washington who advises buyout funds and lenders. ``The banks need capital, and private equity has it. Necessity is often the mother of invention.''
Treasury Secretary Henry Paulson has called on banks and brokerages to raise cash as their losses from the collapse of the mortgage market and the ensuing credit-contraction climb to more than $466 billion. Blackstone Group LP and Carlyle Group, the world's two biggest private-equity firms, discussed the topic when they met with Paulson this month, say people briefed on the talks.
Representatives for Paulson, the Fed, Carlyle and Blackstone declined to comment.
Bonderman, Paulson
Washington Mutual Inc., the biggest U.S. savings and loan, this week reported a $3.3 billion second-quarter loss, while Wachovia Corp. booked an $8.9 billion loss and slashed its dividend. Citigroup Inc., the biggest U.S. bank by assets, said it lost $2.5 billion; profits shrank at smaller rivals JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co.
A few private equity firms ventured into bank investments this year. David Bonderman's TPG Inc. led a group that injected $7 billion into Washington Mutual in April. National City Corp., Ohio's biggest bank, agreed the same month to sell a $7 billion stake to investors led by Corsair Capital LLC. Hedge fund manager John Paulson plans to start a fund this year to invest in banks and brokerages, people with knowledge of the matter said yesterday.
While lenders including Citigroup and UBS AG have raised capital from sovereign wealth funds controlled by overseas governments, buyout firms, which typically seek controlling stakes, remain leery of subjecting themselves to U.S. bank rules, Vartanian said. ``The regulations weren't written with an inherent bias against private equity firms, but that's how it has turned out.''
`Controlling Influence'
The Fed subjects private equity firms to more oversight when they exceed a 9.9 percent voting stake in a bank. If they buy more, they may be deemed to have a ``controlling influence'' and be classified as a bank holding company, which triggers restrictions on non-banking activities and the amount of debt they can take on. To avoid that classification, investors may agree to be passive, which can mean limits on board representation.
The Fed is considering liberalizing the control guidelines, the people with knowledge of the deliberations said. That may allow buyout funds to amass up to 24.9 percent of a bank while also taking a more active role and getting board seats.
Buyout funds typically rely on debt funding to make acquisitions and invest in multiple companies, often in a variety of industries. The firms typically hold numerous stakes in a single fund.
Clubs, Orphans
Under the proposed silo structure, the buyout firm would ``orphan'' the bank investment by limiting its ties to other investments or funds, the people said. This could be done by eliminating any lending or cross-investment among the funds and preventing asset transfers between them, they said.
Another proposed plan would make it easier for a group of private equity firms to invest together in a so-called club deal without triggering bank-holding rules. The firms would collectively buy stakes in a bank and the Fed would agree to treat each firm's investment independently instead of aggregating their holdings to calculate control.
The Service Employees International Union, a Washington- based labor group that led a protest this month calling for higher taxes on buyout firms, said the Fed shouldn't encourage them to invest in the banking industry.
``It would be absurd to ease regulations and make it easier for private equity to buy banks,'' said SEIU official Stephen Lerner. ``Their business model of running up huge amounts of debt jeopardizes the consumer.''
`On the Sidelines'
Douglas Lowenstein, president of the Private Equity Council, a Washington trade group whose members include Carlyle and Blackstone, said buyout firms are in a position to help struggling lenders that are short on options.
``We're not out of the woods in terms of the health of financial institutions,'' Lowenstein said. ``Sources of capital right now are very thin. Private equity has a substantial amount of money sitting on the sidelines.''
To contact the reporter on this story: Jonathan Keehner in New York jkeehner@bloomberg.net.
Read more...
July 24 (Bloomberg) -- The Federal Reserve, looking to spur investment in lenders hit by credit-market losses, is weighing three measures to ease rules for private-equity funds that buy bank stakes, people with knowledge of the deliberations said.
One proposal would permit buyout firms to use ``silo'' funds walled off from their other investments to buy the stakes without subjecting the rest of their holdings to more federal oversight, said the people, who declined to be named because the talks aren't public. Under another scenario, the Fed would let private equity firms exercise more control of banks they invest in. A third plan would encourage firms to team up on bank deals.
Buyout firms are ``hesitant to invest in banks because of the various levels of regulation that would apply to them,'' said Thomas Vartanian, a partner at Fried Frank Harris Shriver & Jacobson LLP in Washington who advises buyout funds and lenders. ``The banks need capital, and private equity has it. Necessity is often the mother of invention.''
Treasury Secretary Henry Paulson has called on banks and brokerages to raise cash as their losses from the collapse of the mortgage market and the ensuing credit-contraction climb to more than $466 billion. Blackstone Group LP and Carlyle Group, the world's two biggest private-equity firms, discussed the topic when they met with Paulson this month, say people briefed on the talks.
Representatives for Paulson, the Fed, Carlyle and Blackstone declined to comment.
Bonderman, Paulson
Washington Mutual Inc., the biggest U.S. savings and loan, this week reported a $3.3 billion second-quarter loss, while Wachovia Corp. booked an $8.9 billion loss and slashed its dividend. Citigroup Inc., the biggest U.S. bank by assets, said it lost $2.5 billion; profits shrank at smaller rivals JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co.
A few private equity firms ventured into bank investments this year. David Bonderman's TPG Inc. led a group that injected $7 billion into Washington Mutual in April. National City Corp., Ohio's biggest bank, agreed the same month to sell a $7 billion stake to investors led by Corsair Capital LLC. Hedge fund manager John Paulson plans to start a fund this year to invest in banks and brokerages, people with knowledge of the matter said yesterday.
While lenders including Citigroup and UBS AG have raised capital from sovereign wealth funds controlled by overseas governments, buyout firms, which typically seek controlling stakes, remain leery of subjecting themselves to U.S. bank rules, Vartanian said. ``The regulations weren't written with an inherent bias against private equity firms, but that's how it has turned out.''
`Controlling Influence'
The Fed subjects private equity firms to more oversight when they exceed a 9.9 percent voting stake in a bank. If they buy more, they may be deemed to have a ``controlling influence'' and be classified as a bank holding company, which triggers restrictions on non-banking activities and the amount of debt they can take on. To avoid that classification, investors may agree to be passive, which can mean limits on board representation.
The Fed is considering liberalizing the control guidelines, the people with knowledge of the deliberations said. That may allow buyout funds to amass up to 24.9 percent of a bank while also taking a more active role and getting board seats.
Buyout funds typically rely on debt funding to make acquisitions and invest in multiple companies, often in a variety of industries. The firms typically hold numerous stakes in a single fund.
Clubs, Orphans
Under the proposed silo structure, the buyout firm would ``orphan'' the bank investment by limiting its ties to other investments or funds, the people said. This could be done by eliminating any lending or cross-investment among the funds and preventing asset transfers between them, they said.
Another proposed plan would make it easier for a group of private equity firms to invest together in a so-called club deal without triggering bank-holding rules. The firms would collectively buy stakes in a bank and the Fed would agree to treat each firm's investment independently instead of aggregating their holdings to calculate control.
The Service Employees International Union, a Washington- based labor group that led a protest this month calling for higher taxes on buyout firms, said the Fed shouldn't encourage them to invest in the banking industry.
``It would be absurd to ease regulations and make it easier for private equity to buy banks,'' said SEIU official Stephen Lerner. ``Their business model of running up huge amounts of debt jeopardizes the consumer.''
`On the Sidelines'
Douglas Lowenstein, president of the Private Equity Council, a Washington trade group whose members include Carlyle and Blackstone, said buyout firms are in a position to help struggling lenders that are short on options.
``We're not out of the woods in terms of the health of financial institutions,'' Lowenstein said. ``Sources of capital right now are very thin. Private equity has a substantial amount of money sitting on the sidelines.''
To contact the reporter on this story: Jonathan Keehner in New York jkeehner@bloomberg.net.
Read more...
Wheat Rises as Weaker Dollar, Reduced Price May Boost Demand
By Tony C. Dreibus
July 24 (Bloomberg) -- Wheat rose, rebounding from a seven- week low, on speculation that a weaker dollar and lower prices for the commodity will boost overseas demand for U.S. grain.
The price has plunged 42 percent from a record in February as U.S. farmers harvest what the Department of Agriculture expects to be the biggest winter-wheat crop in a decade. The value of the dollar against a basket of six major currencies, including the euro and yen, has dropped 8.9 percent in the past year.
``Lower prices and a lower dollar make wheat an attractive buy,'' said Jon Marcus, president of Lakefront Futures and Options LLC in Chicago. ``Wheat is attractive for exports. I don't think anybody is jumping out of their skin to buy in over here in the U.S.''
Wheat for September delivery rose 4.5 cents, or 0.6 percent, to $7.8775 a bushel on the Chicago Board of Trade, after yesterday reaching $7.75, the lowest for a most-active contract since June 5. The grain still is up 23 percent in the past year, touching a record $13.495 on Feb. 27, after adverse weather curbed production in 2007.
The price also may have risen on speculation that livestock producers will step up purchases of the grain as a feed alternative to corn.
The price of corn rose 1.5 cents to $5.92, the first gain in six sessions in Chicago. A narrowing of the gap between the grains may prompt some cattle producers to add wheat to feed rations. Wheat futures are down 11 percent this year, while corn has gained 30 percent.
``The job of the market is to push wheat into the feed market, which it has done some,'' said Jerod Leman, a broker at Wellington Commodities in Carmel, Indiana. ``Wheat is a follower of corn. We're a little oversold in corn and wheat, and this bounce is technical in general.''
Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.
To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.
Read more...
July 24 (Bloomberg) -- Wheat rose, rebounding from a seven- week low, on speculation that a weaker dollar and lower prices for the commodity will boost overseas demand for U.S. grain.
The price has plunged 42 percent from a record in February as U.S. farmers harvest what the Department of Agriculture expects to be the biggest winter-wheat crop in a decade. The value of the dollar against a basket of six major currencies, including the euro and yen, has dropped 8.9 percent in the past year.
``Lower prices and a lower dollar make wheat an attractive buy,'' said Jon Marcus, president of Lakefront Futures and Options LLC in Chicago. ``Wheat is attractive for exports. I don't think anybody is jumping out of their skin to buy in over here in the U.S.''
Wheat for September delivery rose 4.5 cents, or 0.6 percent, to $7.8775 a bushel on the Chicago Board of Trade, after yesterday reaching $7.75, the lowest for a most-active contract since June 5. The grain still is up 23 percent in the past year, touching a record $13.495 on Feb. 27, after adverse weather curbed production in 2007.
The price also may have risen on speculation that livestock producers will step up purchases of the grain as a feed alternative to corn.
The price of corn rose 1.5 cents to $5.92, the first gain in six sessions in Chicago. A narrowing of the gap between the grains may prompt some cattle producers to add wheat to feed rations. Wheat futures are down 11 percent this year, while corn has gained 30 percent.
``The job of the market is to push wheat into the feed market, which it has done some,'' said Jerod Leman, a broker at Wellington Commodities in Carmel, Indiana. ``Wheat is a follower of corn. We're a little oversold in corn and wheat, and this bounce is technical in general.''
Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.
To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.
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Mexico's Bonds Increase as Rate Outlook Eases Inflation Concern
By Andrea Jaramillo
July 24 (Bloomberg) -- Mexico's benchmark peso bonds rose to a five-week high amid speculation the central bank will contain inflation by raising borrowing costs in August.
Bonds rallied after the central bank said consumer prices rose 0.38 percent in the first half of July, above the 0.25 percent median forecast in a Bloomberg survey. Higher-than- expected inflation increases the chances the central bank will lift its key rate, according to Alberto Bernal, head of emerging-market fixed-income research at Bulltick Capital Markets in Miami.
``The long end of the bond curve is flattening as expectations Banco de Mexico will move boost credibility that it will contain inflation down the road,'' Bernal said.
Yields on Mexico's 10 percent bond due December 2024, the country's most-traded security, fell 8 basis points, or 0.08 percentage point, to 8.95 percent at 5:27 p.m. New York time. The bond's price jumped to its highest since June 18, rising 0.71 centavo to 108.98 centavos per peso, according to Banco Santander SA.
Mexico's central bank raised the benchmark interest rate on July 18 to 8 percent, its highest since December 2005. Policy makers next meet on Aug. 15. Bernal forecasts policy makers will lift the rate for a third straight month to 8.25 percent.
Annual inflation rose to 5.26 percent in June from 4.95 percent in May. The central bank targets inflation of 3 percent, plus or minus 1 percentage point.
The peso fell 0.3 percent to 10.0335 per dollar, compared with 10.0084 yesterday.
``If tightening expectations rise while the Mexican economy holds up well, the peso is likely to break the important 10 level soon,'' Win Thin, a New York-based currency strategist at Brown Brothers Harriman & Co., wrote in a report to clients today.
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
Read more...
July 24 (Bloomberg) -- Mexico's benchmark peso bonds rose to a five-week high amid speculation the central bank will contain inflation by raising borrowing costs in August.
Bonds rallied after the central bank said consumer prices rose 0.38 percent in the first half of July, above the 0.25 percent median forecast in a Bloomberg survey. Higher-than- expected inflation increases the chances the central bank will lift its key rate, according to Alberto Bernal, head of emerging-market fixed-income research at Bulltick Capital Markets in Miami.
``The long end of the bond curve is flattening as expectations Banco de Mexico will move boost credibility that it will contain inflation down the road,'' Bernal said.
Yields on Mexico's 10 percent bond due December 2024, the country's most-traded security, fell 8 basis points, or 0.08 percentage point, to 8.95 percent at 5:27 p.m. New York time. The bond's price jumped to its highest since June 18, rising 0.71 centavo to 108.98 centavos per peso, according to Banco Santander SA.
Mexico's central bank raised the benchmark interest rate on July 18 to 8 percent, its highest since December 2005. Policy makers next meet on Aug. 15. Bernal forecasts policy makers will lift the rate for a third straight month to 8.25 percent.
Annual inflation rose to 5.26 percent in June from 4.95 percent in May. The central bank targets inflation of 3 percent, plus or minus 1 percentage point.
The peso fell 0.3 percent to 10.0335 per dollar, compared with 10.0084 yesterday.
``If tightening expectations rise while the Mexican economy holds up well, the peso is likely to break the important 10 level soon,'' Win Thin, a New York-based currency strategist at Brown Brothers Harriman & Co., wrote in a report to clients today.
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
Read more...
Gold, Silver Fall as Dollar Gain Erodes Appeal of Metals Hedge
By Pham-Duy Nguyen
July 24 (Bloomberg) -- Gold fell for a third straight day as the dollar rose to a two-week high against the euro, eroding the appeal of the precious metal as an alternative investment. Silver also fell.
The dollar rose as much as 0.5 percent against the euro today, extending a 1.4 percent gain in the previous two sessions. Gold, priced in dollars, generally moves in the opposite direction of the currency. The metal reached a record $1,033.90 an ounce on March 17.
``The dollar did have a solid bounce,'' said Ralph Preston, a commodity analyst at Heritage West Futures Inc. in San Diego. ``The buck is holding the line. The gold market is catching its breath at the moment.''
Gold futures for August delivery fell 50 cents to $922.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal lost 4.2 percent in the previous two sessions and traded as low as $915.90 earlier today.
Silver futures for September delivery slid 16 cents, or 0.9 percent, to $17.298 an ounce. Silver still has risen 16 percent this year, while gold advanced 10 percent.
The dollar rallied after a report showed a drop in business confidence in Germany, paring expectations that the European Central Bank will raise rates again this year.
The ECB raised its main refinancing rate to 4.25 percent on July 3. The Federal Reserve reduced the U.S. benchmark borrowing cost seven times since September from 5.25 percent to 2 percent in April. The euro reached a record $1.6038 on July 15 and has gained 7.3 percent this year.
Oil Rebound
Gold's losses were limited as crude-oil futures rebounded late in the session. The metal has tracked wide swings in energy costs this week, declining as oil sank 5 percent in the previous two sessions.
``The fundamentals haven't changed for oil and gold,'' Preston said. ``The washout in the metals has, for the most part, run its course. I'm comfortable wading back in.''
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has fallen 4.6 percent to 673.4 metric tons in the past two days. The fund reached a record 705.9 tons on July 11.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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July 24 (Bloomberg) -- Gold fell for a third straight day as the dollar rose to a two-week high against the euro, eroding the appeal of the precious metal as an alternative investment. Silver also fell.
The dollar rose as much as 0.5 percent against the euro today, extending a 1.4 percent gain in the previous two sessions. Gold, priced in dollars, generally moves in the opposite direction of the currency. The metal reached a record $1,033.90 an ounce on March 17.
``The dollar did have a solid bounce,'' said Ralph Preston, a commodity analyst at Heritage West Futures Inc. in San Diego. ``The buck is holding the line. The gold market is catching its breath at the moment.''
Gold futures for August delivery fell 50 cents to $922.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal lost 4.2 percent in the previous two sessions and traded as low as $915.90 earlier today.
Silver futures for September delivery slid 16 cents, or 0.9 percent, to $17.298 an ounce. Silver still has risen 16 percent this year, while gold advanced 10 percent.
The dollar rallied after a report showed a drop in business confidence in Germany, paring expectations that the European Central Bank will raise rates again this year.
The ECB raised its main refinancing rate to 4.25 percent on July 3. The Federal Reserve reduced the U.S. benchmark borrowing cost seven times since September from 5.25 percent to 2 percent in April. The euro reached a record $1.6038 on July 15 and has gained 7.3 percent this year.
Oil Rebound
Gold's losses were limited as crude-oil futures rebounded late in the session. The metal has tracked wide swings in energy costs this week, declining as oil sank 5 percent in the previous two sessions.
``The fundamentals haven't changed for oil and gold,'' Preston said. ``The washout in the metals has, for the most part, run its course. I'm comfortable wading back in.''
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has fallen 4.6 percent to 673.4 metric tons in the past two days. The fund reached a record 705.9 tons on July 11.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
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Copper Drops to 6-Week Low as Stronger Dollar Reduces Demand
By Millie Munshi
July 24 (Bloomberg) -- Copper fell to a six-week low as a stronger dollar reduced demand from investors seeking a hedge against inflation.
The U.S. Dollar Index, which values the currency against a basket of six major counterparts including the euro and yen, gained as much as 0.3 percent today, reaching a two-week high. Copper has gained 18 percent this year, partly as a slump in the U.S. currency increased the appeal of metals as a store of value.
``A stronger dollar is holding back base-metals prices this morning,'' Alex Heath, the head of industrial metals trading at RBC Capital Markets in London, said in a report.
Copper futures for September delivery fell 8.05 cents, or 2.2 percent, to $3.577 a pound on the Comex division of the New York Mercantile Exchange. The price earlier dropped to $3.555, the lowest since June 13. The metal declined 0.9 percent yesterday.
Futures also fell after a gain in inventories increased concern demand is waning for the metal, used in pipes and wires. Stockpiles monitored by the London Metal Exchange added 1.1 percent to 130,875 metric tons, the highest since March 10.
Slower global growth may reduce copper demand by up to 10 percent this year, Donald Selkin, the chief market strategist at National Securities Corp. in New York, said this week.
Sales of previously owned U.S. homes fell in June to the lowest level in a decade, deepening the housing recession now in its third year, the National Association of Realtors said today.
`Taking A Hit'
``The market is taking a hit today because of the home- sales report,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. ``Economic data is still coming in lousy and demand is projected to fall.''
Codelco, the world's largest copper producer, said output may decline for a fourth year because of labor unrest and aging mines. Freeport-McMoRan Copper & Gold Inc., the second-biggest miner of the metal, this week cut its forecast for production this year.
Traders are ``shrugging off'' news of declining mine output because of ``the outlook for a global slowdown and the anticipation of falling demand,'' Zeman said.
``People are thinking, 'What difference does it make anyway,' since demand is going down,'' he said.
On the LME, copper for delivery in three months lost $140, or 1.7 percent, to $7,940 a metric ton ($3.6016 a pound). The price reached a record $8,940 on July 2.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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July 24 (Bloomberg) -- Copper fell to a six-week low as a stronger dollar reduced demand from investors seeking a hedge against inflation.
The U.S. Dollar Index, which values the currency against a basket of six major counterparts including the euro and yen, gained as much as 0.3 percent today, reaching a two-week high. Copper has gained 18 percent this year, partly as a slump in the U.S. currency increased the appeal of metals as a store of value.
``A stronger dollar is holding back base-metals prices this morning,'' Alex Heath, the head of industrial metals trading at RBC Capital Markets in London, said in a report.
Copper futures for September delivery fell 8.05 cents, or 2.2 percent, to $3.577 a pound on the Comex division of the New York Mercantile Exchange. The price earlier dropped to $3.555, the lowest since June 13. The metal declined 0.9 percent yesterday.
Futures also fell after a gain in inventories increased concern demand is waning for the metal, used in pipes and wires. Stockpiles monitored by the London Metal Exchange added 1.1 percent to 130,875 metric tons, the highest since March 10.
Slower global growth may reduce copper demand by up to 10 percent this year, Donald Selkin, the chief market strategist at National Securities Corp. in New York, said this week.
Sales of previously owned U.S. homes fell in June to the lowest level in a decade, deepening the housing recession now in its third year, the National Association of Realtors said today.
`Taking A Hit'
``The market is taking a hit today because of the home- sales report,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. ``Economic data is still coming in lousy and demand is projected to fall.''
Codelco, the world's largest copper producer, said output may decline for a fourth year because of labor unrest and aging mines. Freeport-McMoRan Copper & Gold Inc., the second-biggest miner of the metal, this week cut its forecast for production this year.
Traders are ``shrugging off'' news of declining mine output because of ``the outlook for a global slowdown and the anticipation of falling demand,'' Zeman said.
``People are thinking, 'What difference does it make anyway,' since demand is going down,'' he said.
On the LME, copper for delivery in three months lost $140, or 1.7 percent, to $7,940 a metric ton ($3.6016 a pound). The price reached a record $8,940 on July 2.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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Cotton Rises as Low Price May Spur Demand, Dry Spell Hurts Crop
By Yi Tian
July 24 (Bloomberg) -- Cotton rose on speculation that the lowest price in eight weeks helped spur demand from mills and on concern dry weather may limit production in India, the world's second-largest producer of the fiber.
Cotton tumbled yesterday to 70.78 cents a pound, the lowest since May 28, and has dropped 6 percent this month. Demand from mills revived when futures fell below 72 cents, said Mike Stevens, a Swiss Financial Services analyst. Delayed planting in India buoyed concern that world output will suffer, said John Flanagan, president of Flanagan Trading Corp. in Fuquay-Varina, North Carolina.
``Cotton is building a base from which prices can move higher,'' Flanagan said. ``Prices are low enough to attract commercial buying and to discourage selling from speculative funds.''
Cotton futures for December delivery rose 0.94 cent, or 1.3 percent, to 73.86 cents a pound on ICE Futures U.S., the former New York Board of Trade. The most-active contract is up 16 percent from a year ago.
So far, dry weather has delayed cotton planting in India's Maharashtra and Gujarat states, the largest cotton producers. Farmers sowed cotton on 5.8 million hectares (14.3 million acres) as of July 18, 17 percent less than a year earlier, according to the latest data from the farm ministry.
``Cotton planting in India is down,'' Flanagan said. ``That's huge.''
India Monsoon
The June-September monsoon, which accounts for four-fifths of the nation's annual rainfall, was 33 percent below average in the week ended July 23. Showers in July account for a third of the rainy season and are crucial for sowing crops.
Overnight rains in Maharashtra and Gujarat were not enough to ease concern that the crop will be hurt, said Sharon Johnson, a senior analyst at First Capitol Group in Atlanta.
``You cannot put on a bandage when you get your arm cut off,'' Johnson said. ``We need a lot of rain and we need it now.''
Tropical storm Dolly, which made landfall as a hurricane in southern Texas yesterday, had only a ``slight'' effect on prices today, Flanagan said. Texas is the biggest U.S. cotton-growing state.
``Not a lot of cotton is exposed to Dolly, 250,000 acres at most,'' he said. ``We won't lose that much.''
Texas Crop
Growers in Texas planted 4.7 million acres of cotton this year, according to the U.S. Department of Agriculture. West Texas is the largest cotton producing-region in the state.
No figures will be available on damage to the crop ``until the fields have dried out and cotton has regained its stature after being blown over,'' First Capitol's Johnson said. The damage would be ``insignificant,'' even if a majority of the crop was lost in the southern tip of Texas in the Rio Grande Valley, she said.
Flanagan expects cotton to trade between 71 cents and 74 cents a pound until Aug. 12, when the USDA releases a monthly cotton report. Johnson predicted the market will stay in its ``comfort zone of 72 cents to 74 cents, a penny above and below.''
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
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July 24 (Bloomberg) -- Cotton rose on speculation that the lowest price in eight weeks helped spur demand from mills and on concern dry weather may limit production in India, the world's second-largest producer of the fiber.
Cotton tumbled yesterday to 70.78 cents a pound, the lowest since May 28, and has dropped 6 percent this month. Demand from mills revived when futures fell below 72 cents, said Mike Stevens, a Swiss Financial Services analyst. Delayed planting in India buoyed concern that world output will suffer, said John Flanagan, president of Flanagan Trading Corp. in Fuquay-Varina, North Carolina.
``Cotton is building a base from which prices can move higher,'' Flanagan said. ``Prices are low enough to attract commercial buying and to discourage selling from speculative funds.''
Cotton futures for December delivery rose 0.94 cent, or 1.3 percent, to 73.86 cents a pound on ICE Futures U.S., the former New York Board of Trade. The most-active contract is up 16 percent from a year ago.
So far, dry weather has delayed cotton planting in India's Maharashtra and Gujarat states, the largest cotton producers. Farmers sowed cotton on 5.8 million hectares (14.3 million acres) as of July 18, 17 percent less than a year earlier, according to the latest data from the farm ministry.
``Cotton planting in India is down,'' Flanagan said. ``That's huge.''
India Monsoon
The June-September monsoon, which accounts for four-fifths of the nation's annual rainfall, was 33 percent below average in the week ended July 23. Showers in July account for a third of the rainy season and are crucial for sowing crops.
Overnight rains in Maharashtra and Gujarat were not enough to ease concern that the crop will be hurt, said Sharon Johnson, a senior analyst at First Capitol Group in Atlanta.
``You cannot put on a bandage when you get your arm cut off,'' Johnson said. ``We need a lot of rain and we need it now.''
Tropical storm Dolly, which made landfall as a hurricane in southern Texas yesterday, had only a ``slight'' effect on prices today, Flanagan said. Texas is the biggest U.S. cotton-growing state.
``Not a lot of cotton is exposed to Dolly, 250,000 acres at most,'' he said. ``We won't lose that much.''
Texas Crop
Growers in Texas planted 4.7 million acres of cotton this year, according to the U.S. Department of Agriculture. West Texas is the largest cotton producing-region in the state.
No figures will be available on damage to the crop ``until the fields have dried out and cotton has regained its stature after being blown over,'' First Capitol's Johnson said. The damage would be ``insignificant,'' even if a majority of the crop was lost in the southern tip of Texas in the Rio Grande Valley, she said.
Flanagan expects cotton to trade between 71 cents and 74 cents a pound until Aug. 12, when the USDA releases a monthly cotton report. Johnson predicted the market will stay in its ``comfort zone of 72 cents to 74 cents, a penny above and below.''
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
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U.K. Economy Faces Worst Performance Since 1990s, Niesr Says
By Brian Swint
July 25 (Bloomberg) -- The U.K. economy faces its worst performance since the 1990s recession in the years before the next election, which Prime Minister Gordon Brown must call by 2010, forecasts by the National Institute for Economic and Social Research showed.
Britain's gross domestic product will rise 1.5 percent this year, 1.4 percent in 2009 and 1.9 percent in 2010, said the London-based group, whose clients include the Treasury and the Bank of England. That would be the worst spell since the three years through 1992.
``GDP growth is expected to be relatively anemic over the next three years,'' Niesr economist Simon Kirby wrote in a report published today. ``We see a modest slowdown rather than any recession,'' he told reporters yesterday.
The economy's performance may weigh on the fortunes of Brown's ruling Labour Party, whose support in opinion polls is close to the lowest since World War II and must call a general election by 2010. Higher credit costs and the housing-market slump have choked economic growth as accelerating inflation prevents the central bank from cutting interest rates.
Data today will probably show that the U.K. economy grew at the slowest pace in three years in the second quarter. GDP increased 0.2 percent, according to the median of 33 economists' forecasts in a Bloomberg survey. The statistics office publishes the initial estimate at 9:30 a.m. in London.
Bank of England Deputy Governor Charles Bean said yesterday that there is a risk of a ``prolonged'' slowdown in the economy, while the bank must also guard against faster inflation.
1990s Situation
``In 1990, the economic and fiscal situation was undoubtedly a lot worse than it is now,'' Martin Weale, director of Niesr, told reporters. ``Precedent by no means implies that Labour is doomed to lose the next election.''
John Major, the prime minister in 1992, led the Conservative Party to a fourth consecutive term that year as Britain emerged from its last recession. Brown will try to repeat the feat for his party after he succeeded Tony Blair last year.
Record oil prices are both damping growth and fanning inflation, which will stay at around twice the central bank's 2 percent target through the first half of next year, Niesr said. The group predicted it won't return to the goal until 2011.
The central bank, which cut the benchmark rate three times since December to cushion the economic slowdown, has now started considering increases from the current 5 percent.
``The Bank of England needs to send a strong signal that it is still focused on its remit,'' Kirby said yesterday. ``A quarter-point rise would be a useful sign.''
Pay Demands
Prospects for slower growth may be preventing workers from bidding up their pay to compensate for faster inflation. Annual wage gains slowed to 3.2 percent in the second quarter, creating the biggest gap between pay gains and retail-price inflation in 20 years, Industrial Relations Services said today.
Falling house prices may also add to consumers' woes. Property values fell the most in 15 years last month, HBOS Plc said July 10.
Brown has few prospects to spend more to bolster growth. Government borrowing will increase to 45 billion pounds ($90 billion) a year through 2010, Niesr forecast, and will break Brown's decade-old borrowing rule that debt should stay below 40% of GDP. The budget deficit ballooned to the widest since records started in 1946 in the second quarter.
``Any revisions of the rules now that the economic outlook has turned, such as those currently debated in the U.K., are harmful to their credibility in ensuring compliance with budgetary targets,'' ratings agency Standard & Poor's wrote in a note yesterday.
Brown should change the rules so that they can be relaxed in a recession and so that there is a penalty if the rules are broken. If the government loses credibility, investors may demand higher interest rates, Niesr said.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
Read more...
July 25 (Bloomberg) -- The U.K. economy faces its worst performance since the 1990s recession in the years before the next election, which Prime Minister Gordon Brown must call by 2010, forecasts by the National Institute for Economic and Social Research showed.
Britain's gross domestic product will rise 1.5 percent this year, 1.4 percent in 2009 and 1.9 percent in 2010, said the London-based group, whose clients include the Treasury and the Bank of England. That would be the worst spell since the three years through 1992.
``GDP growth is expected to be relatively anemic over the next three years,'' Niesr economist Simon Kirby wrote in a report published today. ``We see a modest slowdown rather than any recession,'' he told reporters yesterday.
The economy's performance may weigh on the fortunes of Brown's ruling Labour Party, whose support in opinion polls is close to the lowest since World War II and must call a general election by 2010. Higher credit costs and the housing-market slump have choked economic growth as accelerating inflation prevents the central bank from cutting interest rates.
Data today will probably show that the U.K. economy grew at the slowest pace in three years in the second quarter. GDP increased 0.2 percent, according to the median of 33 economists' forecasts in a Bloomberg survey. The statistics office publishes the initial estimate at 9:30 a.m. in London.
Bank of England Deputy Governor Charles Bean said yesterday that there is a risk of a ``prolonged'' slowdown in the economy, while the bank must also guard against faster inflation.
1990s Situation
``In 1990, the economic and fiscal situation was undoubtedly a lot worse than it is now,'' Martin Weale, director of Niesr, told reporters. ``Precedent by no means implies that Labour is doomed to lose the next election.''
John Major, the prime minister in 1992, led the Conservative Party to a fourth consecutive term that year as Britain emerged from its last recession. Brown will try to repeat the feat for his party after he succeeded Tony Blair last year.
Record oil prices are both damping growth and fanning inflation, which will stay at around twice the central bank's 2 percent target through the first half of next year, Niesr said. The group predicted it won't return to the goal until 2011.
The central bank, which cut the benchmark rate three times since December to cushion the economic slowdown, has now started considering increases from the current 5 percent.
``The Bank of England needs to send a strong signal that it is still focused on its remit,'' Kirby said yesterday. ``A quarter-point rise would be a useful sign.''
Pay Demands
Prospects for slower growth may be preventing workers from bidding up their pay to compensate for faster inflation. Annual wage gains slowed to 3.2 percent in the second quarter, creating the biggest gap between pay gains and retail-price inflation in 20 years, Industrial Relations Services said today.
Falling house prices may also add to consumers' woes. Property values fell the most in 15 years last month, HBOS Plc said July 10.
Brown has few prospects to spend more to bolster growth. Government borrowing will increase to 45 billion pounds ($90 billion) a year through 2010, Niesr forecast, and will break Brown's decade-old borrowing rule that debt should stay below 40% of GDP. The budget deficit ballooned to the widest since records started in 1946 in the second quarter.
``Any revisions of the rules now that the economic outlook has turned, such as those currently debated in the U.K., are harmful to their credibility in ensuring compliance with budgetary targets,'' ratings agency Standard & Poor's wrote in a note yesterday.
Brown should change the rules so that they can be relaxed in a recession and so that there is a penalty if the rules are broken. If the government loses credibility, investors may demand higher interest rates, Niesr said.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.
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Canon, Hino, JFE, Kokuyo, Nidec, Toyota: Japan Equity Preview
By Norie Kuboyama
July 25 (Bloomberg) -- The following companies may have unusual price changes in Japanese trading today. Stock symbols are in parentheses, and share prices are from the previous close. The information in each item was released after markets shut, unless stated otherwise.
Canon Inc. (7751 JT): Japan's largest office-equipment maker said net income fell 13 percent to 107.8 billion yen ($999 million) in the second quarter because of a stronger yen against the dollar and slower sales of machines such as printers and copiers. Sales dropped 1.9 percent to 1.1 trillion yen. Canon gained 190 yen, or 3.7 percent, to 5,360.
Daiki Aluminium Industry Co. (5702 JO): The aluminum maker slashed its full-year net income outlook 64 percent to 1.02 billion yen, as it failed to pass on raw materials costs. The stock rose 8 yen, or 2 percent, 410.
FCC Co. (7296 JT): The clutch maker said it had first- quarter net income of 1.79 billion yen, compared with a 1.45 billion yen loss a year earlier due to lower corporate taxes. Current profit, or pretax profit from operations, in the quarter ended June 30 fell 11 percent to 3.67 billion yen, with a 1 percent slip in sales, the company said in a release. The stock advanced 42 yen, or 2.4 percent, to 1,784.
Fanuc Ltd. (6954 JT): Japan's largest maker of industrial robots said first-quarter net income rose 9.9 percent to 33.4 billion yen, with a 4.5 percent advance in sales. The company will pay a dividend of 172.79 yen for this business year. Fanuc added 90 yen, or 0.9 percent, to 10,070.
Hino Motors Ltd. (7205 JT): Japan's largest maker of heavy- duty trucks posted a 25 percent drop in first-quarter operating profit, or sales minus the cost of goods sold and administrative expenses, to 7.36 billion yen because of lower domestic sales and a stronger yen. Net income last quarter rose 3.5 percent to 6.89 billion yen because of a one-time gain from selling securities. The stock slipped 2 yen, or 0.3 percent, to 640.
Hitachi Chemical Co. (4217 JT): The maker of industrial materials and chemicals said first-quarter net income rose 28 percent to 8.68 billion yen, citing sales growth in its electronics-related products. The stock climbed 85 yen, or 4.1 percent, to 2,180.
Hitachi Kokusai Electric Inc. (6756 JT): The mobile phone maker affiliated with Hitachi Ltd. (6501 JT) halved its full-year net income forecast to 3.3 billion yen, citing delays in capital investment by makers of computer memory. Hitachi Kokusai gained 37 yen, or 4.2 percent, to 929. Hitachi added 12 yen, or 1.5 percent, to 791.
JFE Holdings Inc. (5411 JT): The world's third-biggest steelmaker will spend 20 billion yen to build a new coke oven at one of the company's steel mills under plans to expand production of the alloy to 33 million metric tons. The facility will begin operating in June 2010 in Kurashiki, western Japan, with annual capacity of 440,000 tons, the steelmaking unit said in a statement through an industry press club. JFE fell 10 yen, 0.2 percent, to 5,640.
JS Group Corp. (5938 JT): The maker of doors and partitions may report a 34 percent decline in first quarter operating profit to about 7 billion yen as a decline in housing starts cuts demand for building materials, the Nikkei newspaper said. The stock added 16 yen, or 1.1 percent, to 1,522.
Jafco Co. (8595 JT): The venture-capital company said first- quarter net income dropped 12 percent to 2.28 billion yen on a 43 percent plunge in revenue. Jafco rose 120 yen, or 3.2 percent, to 3,860.
Kabu.com Securities Co. (8703 JT): The online brokerage said first-quarter net income slipped 18 percent to 1.26 billion yen, with a 14 percent fall in revenue. The stock increased 3,800 yen, or 3.3 percent, to 118,600.
Kibun Food Chemifa Co. (4065 JT): The maker of food additives and soy bean products said first-quarter net income plunged to 78 million yen from 315 million yen a year earlier, with an 8.3 percent drop in sales. The stock increased 28 yen, or 2.5 percent, to 1,155.
Kokuyo Co. (7984 JT): The stationary maker's first-half net income amounted to 1.5 billion yen, beating its estimate by 67 percent, citing lower administration costs and gains from the sale of stockholdings, according to a preliminary earnings statement. Kokuyo advanced 26 yen, or 2.9 percent, to 917.
Mirai Industry Co. (7931 JN): The electrical materials maker said first-quarter net income slumped 73 percent to 221 million yen, with a 9.2 percent drop in sales. The stock lost 3 yen, or 0.3 percent, to 947.
Mitsubishi Estate Co. (8802 JT): The developer said the average vacancy rate for its commercial buildings and warehouses increased to 2.11 percent at the end of June from 2.06 percent in March. New condominiums added to the market fell 42 percent for the three months ended June to 147 units from 255 a year earlier. The stock gained 80 yen, or 3.1 percent, to 2,645.
Nidec Corp. (6594 JO): The company may post a 35 percent increase in first-quarter net income to about 15 billion yen helped by sales of motors used in home appliances, the Nikkei newspaper reported. Nidec rose 190 yen, or 2.7 percent, to 7,180.
Pacific Metals Co. (5541 JT): The maker of stainless steel shut a plant with annual production capacity of 40,000 tons of ferronickel after an earthquake hit northern Japan. Pacific Metals expected no major damage to the plant and hasn't decided when it will resume operation, a spokesman said. The shares fell 1.3 percent to 706 yen.
PanaHome Corp. (1924 JT): The homebuilder said its first- quarter operating loss narrowed to 3.57 billion yen from 4.62 billion yen a year earlier due to restructuring efficiencies. Its net loss in the quarter widened to 3.17 billion yen from 3.15 billion yen a year ago, citing charges on inventory after the adoption of a new accounting standard. PanaHome added 12 yen, or 2.1 percent, to 580.
Toyobo Co. (3101 JT): The fibermaker expects to take a 4 billion yen charge in the first quarter, reflecting the devaluation of inventory from the adoption of a new accounting standard. Toyobo is assessing the impact from the charge as well as other factors on its earnings forecast for this business year ending March. Toyobo advanced 5 yen, or 2.4 percent, to 212.
Toyota Motor Corp. (7203 JT): The automaker may increase the price of some models it sells in Japan by as much as 3 percent to cover higher raw material costs, the Asahi newspaper reported. The increase, which won't apply to compacts, would be the first since 1992 that didn't accompany the release of new models, the report said. The stock rallied 250 yen, or 5.1 percent, to 5,120.
To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.
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July 25 (Bloomberg) -- The following companies may have unusual price changes in Japanese trading today. Stock symbols are in parentheses, and share prices are from the previous close. The information in each item was released after markets shut, unless stated otherwise.
Canon Inc. (7751 JT): Japan's largest office-equipment maker said net income fell 13 percent to 107.8 billion yen ($999 million) in the second quarter because of a stronger yen against the dollar and slower sales of machines such as printers and copiers. Sales dropped 1.9 percent to 1.1 trillion yen. Canon gained 190 yen, or 3.7 percent, to 5,360.
Daiki Aluminium Industry Co. (5702 JO): The aluminum maker slashed its full-year net income outlook 64 percent to 1.02 billion yen, as it failed to pass on raw materials costs. The stock rose 8 yen, or 2 percent, 410.
FCC Co. (7296 JT): The clutch maker said it had first- quarter net income of 1.79 billion yen, compared with a 1.45 billion yen loss a year earlier due to lower corporate taxes. Current profit, or pretax profit from operations, in the quarter ended June 30 fell 11 percent to 3.67 billion yen, with a 1 percent slip in sales, the company said in a release. The stock advanced 42 yen, or 2.4 percent, to 1,784.
Fanuc Ltd. (6954 JT): Japan's largest maker of industrial robots said first-quarter net income rose 9.9 percent to 33.4 billion yen, with a 4.5 percent advance in sales. The company will pay a dividend of 172.79 yen for this business year. Fanuc added 90 yen, or 0.9 percent, to 10,070.
Hino Motors Ltd. (7205 JT): Japan's largest maker of heavy- duty trucks posted a 25 percent drop in first-quarter operating profit, or sales minus the cost of goods sold and administrative expenses, to 7.36 billion yen because of lower domestic sales and a stronger yen. Net income last quarter rose 3.5 percent to 6.89 billion yen because of a one-time gain from selling securities. The stock slipped 2 yen, or 0.3 percent, to 640.
Hitachi Chemical Co. (4217 JT): The maker of industrial materials and chemicals said first-quarter net income rose 28 percent to 8.68 billion yen, citing sales growth in its electronics-related products. The stock climbed 85 yen, or 4.1 percent, to 2,180.
Hitachi Kokusai Electric Inc. (6756 JT): The mobile phone maker affiliated with Hitachi Ltd. (6501 JT) halved its full-year net income forecast to 3.3 billion yen, citing delays in capital investment by makers of computer memory. Hitachi Kokusai gained 37 yen, or 4.2 percent, to 929. Hitachi added 12 yen, or 1.5 percent, to 791.
JFE Holdings Inc. (5411 JT): The world's third-biggest steelmaker will spend 20 billion yen to build a new coke oven at one of the company's steel mills under plans to expand production of the alloy to 33 million metric tons. The facility will begin operating in June 2010 in Kurashiki, western Japan, with annual capacity of 440,000 tons, the steelmaking unit said in a statement through an industry press club. JFE fell 10 yen, 0.2 percent, to 5,640.
JS Group Corp. (5938 JT): The maker of doors and partitions may report a 34 percent decline in first quarter operating profit to about 7 billion yen as a decline in housing starts cuts demand for building materials, the Nikkei newspaper said. The stock added 16 yen, or 1.1 percent, to 1,522.
Jafco Co. (8595 JT): The venture-capital company said first- quarter net income dropped 12 percent to 2.28 billion yen on a 43 percent plunge in revenue. Jafco rose 120 yen, or 3.2 percent, to 3,860.
Kabu.com Securities Co. (8703 JT): The online brokerage said first-quarter net income slipped 18 percent to 1.26 billion yen, with a 14 percent fall in revenue. The stock increased 3,800 yen, or 3.3 percent, to 118,600.
Kibun Food Chemifa Co. (4065 JT): The maker of food additives and soy bean products said first-quarter net income plunged to 78 million yen from 315 million yen a year earlier, with an 8.3 percent drop in sales. The stock increased 28 yen, or 2.5 percent, to 1,155.
Kokuyo Co. (7984 JT): The stationary maker's first-half net income amounted to 1.5 billion yen, beating its estimate by 67 percent, citing lower administration costs and gains from the sale of stockholdings, according to a preliminary earnings statement. Kokuyo advanced 26 yen, or 2.9 percent, to 917.
Mirai Industry Co. (7931 JN): The electrical materials maker said first-quarter net income slumped 73 percent to 221 million yen, with a 9.2 percent drop in sales. The stock lost 3 yen, or 0.3 percent, to 947.
Mitsubishi Estate Co. (8802 JT): The developer said the average vacancy rate for its commercial buildings and warehouses increased to 2.11 percent at the end of June from 2.06 percent in March. New condominiums added to the market fell 42 percent for the three months ended June to 147 units from 255 a year earlier. The stock gained 80 yen, or 3.1 percent, to 2,645.
Nidec Corp. (6594 JO): The company may post a 35 percent increase in first-quarter net income to about 15 billion yen helped by sales of motors used in home appliances, the Nikkei newspaper reported. Nidec rose 190 yen, or 2.7 percent, to 7,180.
Pacific Metals Co. (5541 JT): The maker of stainless steel shut a plant with annual production capacity of 40,000 tons of ferronickel after an earthquake hit northern Japan. Pacific Metals expected no major damage to the plant and hasn't decided when it will resume operation, a spokesman said. The shares fell 1.3 percent to 706 yen.
PanaHome Corp. (1924 JT): The homebuilder said its first- quarter operating loss narrowed to 3.57 billion yen from 4.62 billion yen a year earlier due to restructuring efficiencies. Its net loss in the quarter widened to 3.17 billion yen from 3.15 billion yen a year ago, citing charges on inventory after the adoption of a new accounting standard. PanaHome added 12 yen, or 2.1 percent, to 580.
Toyobo Co. (3101 JT): The fibermaker expects to take a 4 billion yen charge in the first quarter, reflecting the devaluation of inventory from the adoption of a new accounting standard. Toyobo is assessing the impact from the charge as well as other factors on its earnings forecast for this business year ending March. Toyobo advanced 5 yen, or 2.4 percent, to 212.
Toyota Motor Corp. (7203 JT): The automaker may increase the price of some models it sells in Japan by as much as 3 percent to cover higher raw material costs, the Asahi newspaper reported. The increase, which won't apply to compacts, would be the first since 1992 that didn't accompany the release of new models, the report said. The stock rallied 250 yen, or 5.1 percent, to 5,120.
To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.
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Brazil Stocks Tumble Into Bear Market as Mining Companies Drop
By Alexander Ragir
July 24 (Bloomberg) -- Brazilian stocks plunged, pushing the Bovespa index down more than 20 percent from its May record, as higher interest rates and a decline in metal prices sent banks and mining companies lower.
Gerdau SA and Usinas Siderurgicas de Minas Gerais SA led a drop in steelmakers on concern demand for metals is slowing as copper, nickel and aluminum futures retreated. Mining and chemical companies, which together with energy producers make up 57 percent of Brazil's market, slid 4.6 percent to a four-month low. Uniao de Bancos Brasileiros SA paced a decline in financial companies after the central bank raised its benchmark lending rate to 13 percent, higher than economists' forecast.
The Bovespa, until June the best-performing index among the world's 20 biggest markets, retreated 1,986.49, or 3.3 percent, to 57,434.37, leaving it 22 percent below its May 20 peak. A 20 percent drop is the common definition of a bear market.
``The world economy may be entering a substantial slowdown and the market is trying to price that in,'' said Keith Wirtz, chief investment officer at Fifth Third Asset Management in Cincinnati, which oversees $23 billion including Brazilian equity. ``Brazil is following the U.S. and the other markets down. No one wants to take on risk right now.''
Gerdau dropped 6.1 percent to 30.85 reais. Copper fell to a six-week low in New York as a stronger dollar reduced demand from investors seeking a hedge against inflation. Nickel fell the most in two months in London.
Usiminas, as the steelmaker is known, fell 6.7 percent to 65.05 reais.
``There's fear that global steel prices will fall, with inflation becoming such a big problem along with worries that the global economy is slowing,'' said Bernardo Lobao, an analyst with BNY Mellon Arx, which manages $5.66 billion in Rio de Janeiro.
Banks Fall
Unibanco, as the third-biggest non-state bank is known, fell 4.8 percent to 20.20 reais. Banco Itau Holding Financeira SA, Brazil's second-biggest non-state bank, dropped 4.1 percent to 33.90 reais.
Policy makers led by central bank President Henrique Meirelles raised the overnight rate by three quarters of a percentage point to 13 percent last night to bring inflation back to their target in a ``timely fashion.'' Thirty-one of 45 economists surveyed by Bloomberg News predicted a half-point increase as in the two previous meetings.
Mexico's Bolsa index fell 766.56 to 26,878.19, the lowest in more than six months, on earnings reports that missed forecasts.
Telmex Internacional SAB declined for a fourth day, dropping 2.4 percent to 7.02 pesos. The cable-TV and long- distance phone company controlled by billionaire Carlos Slim said second-quarter net income fell 24 percent to 1.19 billion pesos, falling short of the 1.86 billion pesos in profit expected by Morgan Stanley Group.
Alsea SAB dropped 3.7 percent to 10.67 pesos after Banco Santander SA called the Domino's Pizza franchise operator's second quarter results ``deeply disappointing.'' Consorcio Ara SAB, the country's fourth largest homebuilder, fell 7.7 percent after it was downgraded to ``underperform'' from ``neutral'' at Merrill Lynch & Co.
Elsewhere in Latin America, the main stock indexes in Argentina, Chile and Peru fell, while Colombia's IGBC index rose. The MSCI EM Latin America index fell 2.5 percent to 4,182.61.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
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July 24 (Bloomberg) -- Brazilian stocks plunged, pushing the Bovespa index down more than 20 percent from its May record, as higher interest rates and a decline in metal prices sent banks and mining companies lower.
Gerdau SA and Usinas Siderurgicas de Minas Gerais SA led a drop in steelmakers on concern demand for metals is slowing as copper, nickel and aluminum futures retreated. Mining and chemical companies, which together with energy producers make up 57 percent of Brazil's market, slid 4.6 percent to a four-month low. Uniao de Bancos Brasileiros SA paced a decline in financial companies after the central bank raised its benchmark lending rate to 13 percent, higher than economists' forecast.
The Bovespa, until June the best-performing index among the world's 20 biggest markets, retreated 1,986.49, or 3.3 percent, to 57,434.37, leaving it 22 percent below its May 20 peak. A 20 percent drop is the common definition of a bear market.
``The world economy may be entering a substantial slowdown and the market is trying to price that in,'' said Keith Wirtz, chief investment officer at Fifth Third Asset Management in Cincinnati, which oversees $23 billion including Brazilian equity. ``Brazil is following the U.S. and the other markets down. No one wants to take on risk right now.''
Gerdau dropped 6.1 percent to 30.85 reais. Copper fell to a six-week low in New York as a stronger dollar reduced demand from investors seeking a hedge against inflation. Nickel fell the most in two months in London.
Usiminas, as the steelmaker is known, fell 6.7 percent to 65.05 reais.
``There's fear that global steel prices will fall, with inflation becoming such a big problem along with worries that the global economy is slowing,'' said Bernardo Lobao, an analyst with BNY Mellon Arx, which manages $5.66 billion in Rio de Janeiro.
Banks Fall
Unibanco, as the third-biggest non-state bank is known, fell 4.8 percent to 20.20 reais. Banco Itau Holding Financeira SA, Brazil's second-biggest non-state bank, dropped 4.1 percent to 33.90 reais.
Policy makers led by central bank President Henrique Meirelles raised the overnight rate by three quarters of a percentage point to 13 percent last night to bring inflation back to their target in a ``timely fashion.'' Thirty-one of 45 economists surveyed by Bloomberg News predicted a half-point increase as in the two previous meetings.
Mexico's Bolsa index fell 766.56 to 26,878.19, the lowest in more than six months, on earnings reports that missed forecasts.
Telmex Internacional SAB declined for a fourth day, dropping 2.4 percent to 7.02 pesos. The cable-TV and long- distance phone company controlled by billionaire Carlos Slim said second-quarter net income fell 24 percent to 1.19 billion pesos, falling short of the 1.86 billion pesos in profit expected by Morgan Stanley Group.
Alsea SAB dropped 3.7 percent to 10.67 pesos after Banco Santander SA called the Domino's Pizza franchise operator's second quarter results ``deeply disappointing.'' Consorcio Ara SAB, the country's fourth largest homebuilder, fell 7.7 percent after it was downgraded to ``underperform'' from ``neutral'' at Merrill Lynch & Co.
Elsewhere in Latin America, the main stock indexes in Argentina, Chile and Peru fell, while Colombia's IGBC index rose. The MSCI EM Latin America index fell 2.5 percent to 4,182.61.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
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Chile, Brazil Weigh Capital Market Integration Rules
By James Attwood
July 24 (Bloomberg) -- Chile and Brazil started talks to coordinate stock market regulation and tighten insider trading rules, in a step toward allowing cross-border trading.
``We are discussing a memorandum of understanding with Brazilian authorities so we can foster integration between the two markets,'' Guillermo Larrain, Chile's chief regulator, said in an interview in Santiago yesterday.
Larrain and other Chilean regulators and exchange officials plan to discuss corporate governance, self-regulation and developing derivatives markets with their Brazilian counterparts in Sao Paulo today and tomorrow. Chile may cut bureaucracy and remove foreign investment restrictions such as taxes on asset management fees to make its market more appealing to Brazilian and other foreign investors, Larrain said.
The Chilean, Mexican and Brazilian stock markets signed framework agreements last year to allow cross-border trading and company stock listings among Latin America's three biggest markets. In April Chile, seeking to help pension funds diversify holdings, lifted the foreign investment limit to 45 percent from 40 percent.
``We've also had discussions with Peruvian and Colombian authorities and at some point these things will start moving,'' Larrain said.
Maturing Markets
Efforts to open capital markets to cross-border trading reflect the maturity of Latin American exchanges, said Greg Lesko, the head of equity at Deltec Asset Management in New York, which oversees $600 million in emerging market stocks.
``It's a sign that there's much more stability in the region,'' Lesko said by phone today.
The Chilean delegation to Brazil will discuss ways to stop insider trading to boost foreign investor confidence. Net foreign investment in Chilean stocks for the year through May was $1.13 billion, according to Banco Santander estimates. Foreigners bought $262 million directly on the Chilean exchange in May compared with $118 million in April, according to Santander.
Since taking his post in May last year, Larrain, 43, has created rules to improve disclosure and divisions to help police bad practices. The regulator fined eight people a total of $4.9 million last week in a probe into insider trading in last year's proposed merger of retailers SACI Falabella SA and Distribucion y Servicio D&S. It may hand down similar sanctions for trading before two other deal announcements last year.
Enforcement Division
Brazil, where regulators had said insider information is leaked before almost every takeover, said in February it would create an enforcement division including 30 investigators, to control insider trading on the Sao Paulo exchange.
Fines leveled since last year for inappropriate trading practices in Chile against high-profile company directors -- including Hans Eben, a D&S vice president, and Sebastian Pinera, a former presidential candidate -- are likely to help reduce trading risks and boost foreign investment, Larrain said.
``The fact we are enforcing insider trading activity now gives more confidence to foreign investors, most of whom are outside the networks where privileged information flows.'' he said. ``I would expect some premium for that for the market.
To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net
Read more...
July 24 (Bloomberg) -- Chile and Brazil started talks to coordinate stock market regulation and tighten insider trading rules, in a step toward allowing cross-border trading.
``We are discussing a memorandum of understanding with Brazilian authorities so we can foster integration between the two markets,'' Guillermo Larrain, Chile's chief regulator, said in an interview in Santiago yesterday.
Larrain and other Chilean regulators and exchange officials plan to discuss corporate governance, self-regulation and developing derivatives markets with their Brazilian counterparts in Sao Paulo today and tomorrow. Chile may cut bureaucracy and remove foreign investment restrictions such as taxes on asset management fees to make its market more appealing to Brazilian and other foreign investors, Larrain said.
The Chilean, Mexican and Brazilian stock markets signed framework agreements last year to allow cross-border trading and company stock listings among Latin America's three biggest markets. In April Chile, seeking to help pension funds diversify holdings, lifted the foreign investment limit to 45 percent from 40 percent.
``We've also had discussions with Peruvian and Colombian authorities and at some point these things will start moving,'' Larrain said.
Maturing Markets
Efforts to open capital markets to cross-border trading reflect the maturity of Latin American exchanges, said Greg Lesko, the head of equity at Deltec Asset Management in New York, which oversees $600 million in emerging market stocks.
``It's a sign that there's much more stability in the region,'' Lesko said by phone today.
The Chilean delegation to Brazil will discuss ways to stop insider trading to boost foreign investor confidence. Net foreign investment in Chilean stocks for the year through May was $1.13 billion, according to Banco Santander estimates. Foreigners bought $262 million directly on the Chilean exchange in May compared with $118 million in April, according to Santander.
Since taking his post in May last year, Larrain, 43, has created rules to improve disclosure and divisions to help police bad practices. The regulator fined eight people a total of $4.9 million last week in a probe into insider trading in last year's proposed merger of retailers SACI Falabella SA and Distribucion y Servicio D&S. It may hand down similar sanctions for trading before two other deal announcements last year.
Enforcement Division
Brazil, where regulators had said insider information is leaked before almost every takeover, said in February it would create an enforcement division including 30 investigators, to control insider trading on the Sao Paulo exchange.
Fines leveled since last year for inappropriate trading practices in Chile against high-profile company directors -- including Hans Eben, a D&S vice president, and Sebastian Pinera, a former presidential candidate -- are likely to help reduce trading risks and boost foreign investment, Larrain said.
``The fact we are enforcing insider trading activity now gives more confidence to foreign investors, most of whom are outside the networks where privileged information flows.'' he said. ``I would expect some premium for that for the market.
To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net
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Canadian Stocks Slide to Four-Month Low as Financials Retreat
By Katherine Greene and Jeff Kearns
July 24 (Bloomberg) -- Canadian stocks dropped, pushing the main stock index to a four-month low, as concerns that the U.S. housing slump will worsen sent bank shares to their steepest slide in almost seven years.
Royal Bank of Canada and Toronto-Dominion Bank led declines in financial stocks after investor Bill Gross said housing losses will total $1 trillion. Bank of Nova Scotia and Canadian Imperial Bank of Commerce also tumbled. Kinross Gold Corp. fell the most in six years after agreeing to buy Aurelian Resources Inc. for C$1.2 billion ($1.18 billion) in stock.
``The housing crisis continues,'' said Doug Davis, president of Davis-Rea Ltd., which manages C$475 million in Toronto. ``There's no short-term solution here. The momentum in the market is still generally down.''
The Standard & Poor's/TSX Composite Index fell 2.3 percent to 13,206.14 in Toronto, extending its loss for this year to 4.5 percent. All 10 industry groups declined.
Canada is the only one of 23 developed nations in the MSCI World Index that hasn't fallen into a bear market, or drop of more than 20 percent, according to data compiled by Bloomberg. Canada's main stock index has lost 12 percent since reaching a record 15,073.13 on June 18 as energy and materials producers that had led the rally retreated.
A measure of financial stocks in the index lost 4 percent today, the biggest drop since September 2001, as all but three of 43 members fell. Gross, manager of the world's largest bond fund at Pacific Investment Management Co., said $5 trillion of mortgage loans belong to ``risky asset categories.'' Banks and brokerages worldwide have recorded $468 billion in losses and writedowns tied to the mortgage market since the start of last year, Bloomberg data show.
Royal Bank, Toronto-Dominion
Royal Bank of Canada, the country's largest lender, fell 4.6 percent to C$44.23. Toronto-Dominion, the second-biggest, dropped 5 percent to C$60.04.
Bank of Nova Scotia retreated 4.3 percent, the most since Jan. 21, to C$48.16. CIBC lost the most since August 2005, sliding 5.9 percent to C$59.58.
The S&P/TSX Materials Index dropped 2.1 percent to the lowest since May 1. Kinross, Canada's third-largest gold producer, led a decline in mining companies after announcing the Aurelian acquisition, which gives it control of Ecuador's largest gold deposit.
Kinross lost 10 percent to C$18.70. Aurelian rose 42 percent, the most in two years, to C$6.31.
Potash Profit
Potash Corp. of Saskatchewan Inc., the world's largest producer of crop nutrients by market value, fell 2.7 percent to C$196.85 even after it said second-quarter profit more than tripled to a record as rising global demand for crops lifted fertilizer prices. The shares, which have more than doubled in the past year, were reduced to ``sector perform'' from ``sector outperform'' by analyst Sam Kanes at Scotia Capital Inc. Agrium Inc., North America's third-largest fertilizer maker, also was cut to ``sector perform.'' The shares slipped 8.2 percent at $83.75, the most since Jan. 17.
Energy stocks, the biggest among 10 industry groups, fell 1 percent. Canadian Natural Resources Ltd. contributed the most to the group's drop, losing 2.7 percent to C$78.10.
Suncor Energy Inc. was the second-biggest contributor to the decline. The world's second-largest oil-sands producer cut its output forecast, sending the shares down 1.4 percent to C$52.91.
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net. Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
July 24 (Bloomberg) -- Canadian stocks dropped, pushing the main stock index to a four-month low, as concerns that the U.S. housing slump will worsen sent bank shares to their steepest slide in almost seven years.
Royal Bank of Canada and Toronto-Dominion Bank led declines in financial stocks after investor Bill Gross said housing losses will total $1 trillion. Bank of Nova Scotia and Canadian Imperial Bank of Commerce also tumbled. Kinross Gold Corp. fell the most in six years after agreeing to buy Aurelian Resources Inc. for C$1.2 billion ($1.18 billion) in stock.
``The housing crisis continues,'' said Doug Davis, president of Davis-Rea Ltd., which manages C$475 million in Toronto. ``There's no short-term solution here. The momentum in the market is still generally down.''
The Standard & Poor's/TSX Composite Index fell 2.3 percent to 13,206.14 in Toronto, extending its loss for this year to 4.5 percent. All 10 industry groups declined.
Canada is the only one of 23 developed nations in the MSCI World Index that hasn't fallen into a bear market, or drop of more than 20 percent, according to data compiled by Bloomberg. Canada's main stock index has lost 12 percent since reaching a record 15,073.13 on June 18 as energy and materials producers that had led the rally retreated.
A measure of financial stocks in the index lost 4 percent today, the biggest drop since September 2001, as all but three of 43 members fell. Gross, manager of the world's largest bond fund at Pacific Investment Management Co., said $5 trillion of mortgage loans belong to ``risky asset categories.'' Banks and brokerages worldwide have recorded $468 billion in losses and writedowns tied to the mortgage market since the start of last year, Bloomberg data show.
Royal Bank, Toronto-Dominion
Royal Bank of Canada, the country's largest lender, fell 4.6 percent to C$44.23. Toronto-Dominion, the second-biggest, dropped 5 percent to C$60.04.
Bank of Nova Scotia retreated 4.3 percent, the most since Jan. 21, to C$48.16. CIBC lost the most since August 2005, sliding 5.9 percent to C$59.58.
The S&P/TSX Materials Index dropped 2.1 percent to the lowest since May 1. Kinross, Canada's third-largest gold producer, led a decline in mining companies after announcing the Aurelian acquisition, which gives it control of Ecuador's largest gold deposit.
Kinross lost 10 percent to C$18.70. Aurelian rose 42 percent, the most in two years, to C$6.31.
Potash Profit
Potash Corp. of Saskatchewan Inc., the world's largest producer of crop nutrients by market value, fell 2.7 percent to C$196.85 even after it said second-quarter profit more than tripled to a record as rising global demand for crops lifted fertilizer prices. The shares, which have more than doubled in the past year, were reduced to ``sector perform'' from ``sector outperform'' by analyst Sam Kanes at Scotia Capital Inc. Agrium Inc., North America's third-largest fertilizer maker, also was cut to ``sector perform.'' The shares slipped 8.2 percent at $83.75, the most since Jan. 17.
Energy stocks, the biggest among 10 industry groups, fell 1 percent. Canadian Natural Resources Ltd. contributed the most to the group's drop, losing 2.7 percent to C$78.10.
Suncor Energy Inc. was the second-biggest contributor to the decline. The world's second-largest oil-sands producer cut its output forecast, sending the shares down 1.4 percent to C$52.91.
To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net. Jeff Kearns in New York at jkearns3@bloomberg.net.
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Amazon, Boeing, Qualcomm, Starwood Hotels: U.S. Equity Movers
By Fabio Alves and Jeff Kearns
July 24 (Bloomberg) -- The following companies had unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 4 p.m. in New York.
Amazon.com Inc. (AMZN US) rose the most since July 2007, gaining 12 percent to $78.72. The world's largest Internet retailer reported second-quarter profit that rose more than analysts estimated as customers bought flat-panel TVs and jewelry and the dollar's decline boosted overseas sales.
Amdocs Ltd. (DOX US) gained the most since April 18, advancing 5.5 percent to $30.39. The world's largest maker of billing and customer-service software said third-quarter profit climbed 14 percent and forecast higher earnings this quarter.
AmerisourceBergen Corp. (ABC US) advanced the most since January 2007, gaining 7.8 percent to $43.15. The third-biggest U.S. drug distributor agreed to sell its workers' compensation business and said revenue increased.
AutoNation Inc. (AN US) rallied 11 percent, the most since Jan. 23, to $10.43. The largest publicly traded U.S. car dealer reported profit that topped analysts' estimates and said it would eliminate 1,300 jobs to shave expenses.
Baidu.com Inc. American depositary receipts (BIDU US) climbed the most since May 2006, advancing 16 percent to $335.08. China's most-used Internet search engine posted an 87 percent jump in second-quarter profit, beating analysts' estimates.
Boeing Co. (BA US) dropped 6.3 percent to $62.53, the lowest price since September 2005. The No. 2 commercial planemaker and defense contractor was downgraded to ``neutral'' from ``outperform'' by Cowen & Co. analyst Cai Von Rumohr.
Cadence Design Systems Inc. (CDNS US) fell 31 percent, the most since Jan. 31, to $7.11. The world's largest maker of programs for creating semiconductors forecast 2008 profit and sales that trailed analysts' estimates.
Chipotle Mexican Grill Inc. (CMG US) fell the most since McDonald's Corp. (MCD US) sold the company to the public in January 2006, losing 17 percent to $67.30. The fast-food chain reported 0.9 percent less second-quarter profit than analysts estimated, according to Bloomberg data, amid higher costs for beef and cheese.
Daimler AG American depositary receipts (DAI US) fell the most since September 2001, losing 12 percent to $58.54. The world's second-biggest luxury carmaker said lower U.S. sales dragged down profit and the company cut its earnings forecast.
Downey Financial Corp. (DSL US) plunged the most since at least July 1980, losing 34 percent to $1.80. The California savings and loan replaced Chief Executive Officer Daniel Rosenthal and it's exploring ``strategic alternatives.'' Friedman, Billings, Ramsey Group Inc. raised doubt about the company's survival.
Ford Motor Co. (F US) retreated the most since August 2000, slumping 15 percent to $5.11. The world's third-largest automaker posted a second-quarter loss of $8.7 billion and accelerated a conversion to fuel-efficient vehicles to wean itself from money- losing trucks.
Gardner Denver Inc. (GDI US) dropped the most since at least April 1994, losing 18 percent to $45.90. The maker of Oberdorfer pumps and Champion air compressors said demand for some products is slowing in the U.S. and U.K. Chief Executive Officer Barry Pennypacker said the outlook remains ``cautious'' for the second half.
GT Solar International Inc. (SOLR US) slumped 12 percent to $14.59 in its first day of trading. The equipment supplier to solar power-panel manufacturers raised about $500 million by selling 30.3 million shares at $16.50 each in an initial public offering yesterday.
MEMC Electronic Materials Inc. (WFR US) fell the most since September 2001, losing 22 percent to $42.23. The maker of silicon wafers estimated as little as $4 a share in profit this year. Analysts expect $4.28, the average forecast in a Bloomberg survey.
Omniture Inc. (OMTR US) fell the most since February 2007, losing 12 percent to $18.55. The maker of business software used by Wal-Mart Stores Inc. and Vodafone Group Plc predicted full- year sales that trailed analysts' estimates.
Qualcomm Inc. (QCOM US) surged the most since May 2002, jumping 17 percent to $52.43. The world's biggest maker of mobile-phone chips increased its 2008 sales and profit targets and settled a patent dispute with handset maker Nokia Oyj (NOK US). Nokia American depositary receipts added 4.5 percent to $27.89, the highest price since June 2.
RadioShack Corp. (RSH US) rose the most since Feb. 26, adding 14 percent to $15.95. The third-largest U.S. electronics retailer reported second-quarter profit that fell less than analysts estimated after sales of digital-television converters drove the chain's first revenue increase in two years.
Starwood Hotels & Resorts Worldwide Inc. (HOT US) tumbled the most since July 2002, losing 11 percent to $35.26. The third- largest U.S. lodging company said full-year profit may drop more than analysts estimated as U.S. corporations and consumers cut spending.
Marriott International Inc. (MAR US), the world's largest hotel chain, plunged the most since September 2001, falling 8.7 percent to $26.06.
Teradyne Inc. (TER US) slumped the most since January 2003, losing 13 percent to $9.17. The chip-testing equipment maker forecast third-quarter profit of 10 cents to 15 cents a share. Analysts estimated 18 cents on average in a Bloomberg survey.
Varian Medical Systems Inc. (VAR US) added the most since Oct. 25, gaining 9.9 percent to $58.53. The maker of radiation treatment systems reported 25 percent more fiscal third-quarter profit than analysts estimated, according to Bloomberg data.
Vital Signs Inc. (VITL US) gained the most ever, adding 26 percent to $73.11. General Electric Co. (GE US), the world's biggest maker of medical-imaging equipment, agreed to buy Vital Signs for about $860 million to add anesthesia masks, temperature probes and products that treat sleep apnea.
Washington Mutual Inc. (WM US) plunged for a second day, dropping 13 percent to $4.03. Gimme Credit LLC said unsecured creditors were ``pulling funds'' from the biggest U.S. savings and loan.
To contact the reporter on this story: Fabio Alves in New York at falves3@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.
Read more...
July 24 (Bloomberg) -- The following companies had unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 4 p.m. in New York.
Amazon.com Inc. (AMZN US) rose the most since July 2007, gaining 12 percent to $78.72. The world's largest Internet retailer reported second-quarter profit that rose more than analysts estimated as customers bought flat-panel TVs and jewelry and the dollar's decline boosted overseas sales.
Amdocs Ltd. (DOX US) gained the most since April 18, advancing 5.5 percent to $30.39. The world's largest maker of billing and customer-service software said third-quarter profit climbed 14 percent and forecast higher earnings this quarter.
AmerisourceBergen Corp. (ABC US) advanced the most since January 2007, gaining 7.8 percent to $43.15. The third-biggest U.S. drug distributor agreed to sell its workers' compensation business and said revenue increased.
AutoNation Inc. (AN US) rallied 11 percent, the most since Jan. 23, to $10.43. The largest publicly traded U.S. car dealer reported profit that topped analysts' estimates and said it would eliminate 1,300 jobs to shave expenses.
Baidu.com Inc. American depositary receipts (BIDU US) climbed the most since May 2006, advancing 16 percent to $335.08. China's most-used Internet search engine posted an 87 percent jump in second-quarter profit, beating analysts' estimates.
Boeing Co. (BA US) dropped 6.3 percent to $62.53, the lowest price since September 2005. The No. 2 commercial planemaker and defense contractor was downgraded to ``neutral'' from ``outperform'' by Cowen & Co. analyst Cai Von Rumohr.
Cadence Design Systems Inc. (CDNS US) fell 31 percent, the most since Jan. 31, to $7.11. The world's largest maker of programs for creating semiconductors forecast 2008 profit and sales that trailed analysts' estimates.
Chipotle Mexican Grill Inc. (CMG US) fell the most since McDonald's Corp. (MCD US) sold the company to the public in January 2006, losing 17 percent to $67.30. The fast-food chain reported 0.9 percent less second-quarter profit than analysts estimated, according to Bloomberg data, amid higher costs for beef and cheese.
Daimler AG American depositary receipts (DAI US) fell the most since September 2001, losing 12 percent to $58.54. The world's second-biggest luxury carmaker said lower U.S. sales dragged down profit and the company cut its earnings forecast.
Downey Financial Corp. (DSL US) plunged the most since at least July 1980, losing 34 percent to $1.80. The California savings and loan replaced Chief Executive Officer Daniel Rosenthal and it's exploring ``strategic alternatives.'' Friedman, Billings, Ramsey Group Inc. raised doubt about the company's survival.
Ford Motor Co. (F US) retreated the most since August 2000, slumping 15 percent to $5.11. The world's third-largest automaker posted a second-quarter loss of $8.7 billion and accelerated a conversion to fuel-efficient vehicles to wean itself from money- losing trucks.
Gardner Denver Inc. (GDI US) dropped the most since at least April 1994, losing 18 percent to $45.90. The maker of Oberdorfer pumps and Champion air compressors said demand for some products is slowing in the U.S. and U.K. Chief Executive Officer Barry Pennypacker said the outlook remains ``cautious'' for the second half.
GT Solar International Inc. (SOLR US) slumped 12 percent to $14.59 in its first day of trading. The equipment supplier to solar power-panel manufacturers raised about $500 million by selling 30.3 million shares at $16.50 each in an initial public offering yesterday.
MEMC Electronic Materials Inc. (WFR US) fell the most since September 2001, losing 22 percent to $42.23. The maker of silicon wafers estimated as little as $4 a share in profit this year. Analysts expect $4.28, the average forecast in a Bloomberg survey.
Omniture Inc. (OMTR US) fell the most since February 2007, losing 12 percent to $18.55. The maker of business software used by Wal-Mart Stores Inc. and Vodafone Group Plc predicted full- year sales that trailed analysts' estimates.
Qualcomm Inc. (QCOM US) surged the most since May 2002, jumping 17 percent to $52.43. The world's biggest maker of mobile-phone chips increased its 2008 sales and profit targets and settled a patent dispute with handset maker Nokia Oyj (NOK US). Nokia American depositary receipts added 4.5 percent to $27.89, the highest price since June 2.
RadioShack Corp. (RSH US) rose the most since Feb. 26, adding 14 percent to $15.95. The third-largest U.S. electronics retailer reported second-quarter profit that fell less than analysts estimated after sales of digital-television converters drove the chain's first revenue increase in two years.
Starwood Hotels & Resorts Worldwide Inc. (HOT US) tumbled the most since July 2002, losing 11 percent to $35.26. The third- largest U.S. lodging company said full-year profit may drop more than analysts estimated as U.S. corporations and consumers cut spending.
Marriott International Inc. (MAR US), the world's largest hotel chain, plunged the most since September 2001, falling 8.7 percent to $26.06.
Teradyne Inc. (TER US) slumped the most since January 2003, losing 13 percent to $9.17. The chip-testing equipment maker forecast third-quarter profit of 10 cents to 15 cents a share. Analysts estimated 18 cents on average in a Bloomberg survey.
Varian Medical Systems Inc. (VAR US) added the most since Oct. 25, gaining 9.9 percent to $58.53. The maker of radiation treatment systems reported 25 percent more fiscal third-quarter profit than analysts estimated, according to Bloomberg data.
Vital Signs Inc. (VITL US) gained the most ever, adding 26 percent to $73.11. General Electric Co. (GE US), the world's biggest maker of medical-imaging equipment, agreed to buy Vital Signs for about $860 million to add anesthesia masks, temperature probes and products that treat sleep apnea.
Washington Mutual Inc. (WM US) plunged for a second day, dropping 13 percent to $4.03. Gimme Credit LLC said unsecured creditors were ``pulling funds'' from the biggest U.S. savings and loan.
To contact the reporter on this story: Fabio Alves in New York at falves3@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.
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U.S. Stocks Drop as Financials Have Biggest Decline in 8 Years
By Lynn Thomasson
July 24 (Bloomberg) -- U.S. stocks tumbled, sending financial shares to their worst drop in eight years, after home sales slid more than forecast and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion.
Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. retreated and shares of builders posted their biggest decline ever as a report showed sales of previously owned homes fell to the lowest level in a decade. Ford Motor Co., the world's third-largest carmaker, plunged the most since August 2000 after reporting a loss twice as big as analysts estimated.
``I would feel very uncomfortable for the average investor to get too aggressive in financials,'' said Stephen Wood, who helps manage $213 billion as a senior portfolio strategist at Russell Investments in New York. The recovery in the housing market ``isn't going to be coming any time soon.''
The Standard & Poor's 500 Index dropped the most since June 26, losing 29.65 points, or 2.3 percent, to 1,252.54. The Dow Jones Industrial Average slid 283.1, or 2.4 percent, to 11,349.28. The Nasdaq Composite Index tumbled 45.77, or 2 percent, to 2,280.11. Five stocks retreated for each that gained on the New York Stock Exchange. European shares declined as German business confidence sank, while Asian shares advanced.
Banks Tumble
Financial stocks in the S&P 500 fell 6.7 percent as a group, the third drop in the past three weeks greater than 5 percent. Today's slump follows a six-day, 30 percent rally spurred by better-than-estimated earnings reports from Citigroup, JPMorgan and Wells Fargo and legislation to rescue Fannie Mae and Freddie Mac.
The S&P 500 pared its rebound from an almost three-year low on July 15 to 3.1 percent.
Citigroup, the largest U.S. bank by assets, lost 9.8 percent to $19.06. Bank of America, the second-biggest, sank 8.4 percent to $30.64. JPMorgan, the No. 3, retreated 6.7 percent to $39.14. Goldman, the biggest securities firm, slid 4.1 percent to $180.26.
The slump in sales of previously owned U.S. homes signaled weakening consumer confidence is hurting demand. Resales dropped 2.6 percent to a lower-than-forecast 4.86 million annual rate from a 4.99 million pace the prior month, the National Association of Realtors said. The median home price dropped 6.1 percent from June last year.
Washington Mutual Slides
Washington Mutual Inc. dropped 13 percent to $4.03, bringing the stock's two-day decline to 31 percent. Gimme Credit LLC said unsecured creditors were ``pulling funds'' from the biggest U.S. savings and loan, citing a decline in federal funds purchased and commercial paper. The company fell yesterday after Piper Jaffray Cos. advised investors to sell the stock and Merrill Lynch & Co. and Friedman Billings Ramsey Group Inc. analysts said the bank may need more capital.
Washington Mutual said in an e-mailed statement that it does all of its business through banking operations and ``does not rely on commercial paper.''
The 28 percent jump in the S&P 500 Financials Index during the five trading days ended July 22 was the biggest one-week advance for any of the S&P 500's 10 industry groups since daily calculations on the indexes began in 1989, according to Harrison, New York-based research firm Bespoke Investment Group LLC.
An S&P index of 15 homebuilders slumped 12 percent, its biggest drop ever, as 13 of its companies retreated.
Ryland Group Inc., the U.S. homebuilder for first-time buyers, tumbled 19 percent to $21.43 and led the group's decline after reporting a second-quarter loss that exceeded analysts' estimates.
A total of $5 trillion of mortgage loans belong to ``risky asset categories,'' Gross, manager of the world's largest bond fund at Pacific Investment Management Co., said in commentary posted on the firm's Web site today.
$1 Trillion Forecast
His $1 trillion forecast implies that credit-market losses are less than halfway over. Since the start of 2007, global financial firms have reported $468.1 billion in losses and writedowns, according to data compiled by Bloomberg News. Firms worldwide have raised $344.6 billion of capital since the third quarter of 2007.
``As long as housing prices go down, no one can say how much the banks are going to lose and how long it will last,'' said Charles Knott, who oversees $800 million as chief investment officer at Knott Capital Management in Exton, Pennsylvania.
The number of vacant houses hit an all-time high in the second quarter as the U.S. real estate recession pushed homeowners into foreclosure and lenders seized properties. A total of 18.6 million U.S. homes stood empty, more than at any time in history and 6.9 percent higher than a year earlier, the U.S. Census Bureau said.
Consumer Shares Slide
Homebuilders, automakers and hotel owners dragged a group of consumer stocks down 2.8 percent as oil rose from a seven-week low on speculation crude's retreat during past two weeks has been too much. Crude for September delivery added $1.05, or 0.8 percent, to $125.49 a barrel.
Ford tumbled 15 percent to $5.11. Excluding costs the company considers one-time expenses, the loss was $1.38 billion, or 62 cents a share. On that basis, Ford was expected to report a loss of 28 cents a share, the average estimate of 12 analysts surveyed by Bloomberg.
Starwood Hotels & Resorts Worldwide Inc. fell the most since July 2002, tumbling 11 percent to $35.26. The third-largest U.S. lodging company said full-year profit may drop more than analysts estimated as consumers and businesses trim travel spending to cope with a weakened economy and higher gasoline prices.
Marriott International Inc., the biggest hotel chain, slumped 8.7 percent to $26.06.
McDonald's, AT&T
McDonald's Corp., the biggest restaurant company, lost 2.2 percent to $58.37. Deutsche Bank analysts led by Jason West cut their recommendation on the shares to ``hold'' from ``buy,'' writing that higher beef costs and fewer customer visits may reduce profitability.
AT&T Inc. led phone companies in the S&P 500 to a 3.1 percent drop after JPMorgan Chase & Co. cut the largest U.S. telephone carrier to ``neutral'' from ``outperform'' on concern the company's wireline business will deteriorate. AT&T fell 4.1 percent to $31.70 for the steepest drop since February.
Amazon.com Inc. added the most since in a year, gaining 12 percent to $78.72. Second-quarter profit topped analysts' estimates after Chief Executive Officer Jeff Bezos promoted free shipping and lower prices to entice U.S. customers. Full-year sales may rise to as much as $20.1 billion, compared with an earlier forecast of as much as $20 billion, the company said.
A bigger-than-forecast increase in jobless claims also weighed on stocks. A government report showed the number of Americans filing first-time claims for unemployment benefits rose last week to 406,000, the highest in almost four months, signaling the slowing economy is weakening the labor market.
`Drifting Over'
``You are starting to see a lot of the problems in the financial area drifting over into more of the real economy,'' Tobias Levkovich, the chief U.S. equity strategist at Citigroup Inc. in New York, said in an interview on Bloomberg Television.
Except for Canada, all of the 23 developed nations in the MSCI World Index experienced bear-market plunges of 20 percent or more since September as credit losses increase and record commodity prices stoke inflation. Brazil today became the 23nd out of 25 developing countries in the MSCI Emerging Markets Index to enter a bear market.
Chipotle Mexican Grill Inc. fell the most since McDonald's sold the company to the public in January 2006, losing 20 percent to $67.30. The fast-food chain reported 0.9 percent less second- quarter profit than analysts estimated, according to Bloomberg data, amid higher costs for beef and cheese.
Qualcomm Inc. surged the most since May 2002, jumping 17 percent to $52.43. The world's biggest maker of mobile-phone chips increased its 2008 sales and profit targets and settled a patent dispute with handset maker Nokia Oyj.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
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July 24 (Bloomberg) -- U.S. stocks tumbled, sending financial shares to their worst drop in eight years, after home sales slid more than forecast and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion.
Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. retreated and shares of builders posted their biggest decline ever as a report showed sales of previously owned homes fell to the lowest level in a decade. Ford Motor Co., the world's third-largest carmaker, plunged the most since August 2000 after reporting a loss twice as big as analysts estimated.
``I would feel very uncomfortable for the average investor to get too aggressive in financials,'' said Stephen Wood, who helps manage $213 billion as a senior portfolio strategist at Russell Investments in New York. The recovery in the housing market ``isn't going to be coming any time soon.''
The Standard & Poor's 500 Index dropped the most since June 26, losing 29.65 points, or 2.3 percent, to 1,252.54. The Dow Jones Industrial Average slid 283.1, or 2.4 percent, to 11,349.28. The Nasdaq Composite Index tumbled 45.77, or 2 percent, to 2,280.11. Five stocks retreated for each that gained on the New York Stock Exchange. European shares declined as German business confidence sank, while Asian shares advanced.
Banks Tumble
Financial stocks in the S&P 500 fell 6.7 percent as a group, the third drop in the past three weeks greater than 5 percent. Today's slump follows a six-day, 30 percent rally spurred by better-than-estimated earnings reports from Citigroup, JPMorgan and Wells Fargo and legislation to rescue Fannie Mae and Freddie Mac.
The S&P 500 pared its rebound from an almost three-year low on July 15 to 3.1 percent.
Citigroup, the largest U.S. bank by assets, lost 9.8 percent to $19.06. Bank of America, the second-biggest, sank 8.4 percent to $30.64. JPMorgan, the No. 3, retreated 6.7 percent to $39.14. Goldman, the biggest securities firm, slid 4.1 percent to $180.26.
The slump in sales of previously owned U.S. homes signaled weakening consumer confidence is hurting demand. Resales dropped 2.6 percent to a lower-than-forecast 4.86 million annual rate from a 4.99 million pace the prior month, the National Association of Realtors said. The median home price dropped 6.1 percent from June last year.
Washington Mutual Slides
Washington Mutual Inc. dropped 13 percent to $4.03, bringing the stock's two-day decline to 31 percent. Gimme Credit LLC said unsecured creditors were ``pulling funds'' from the biggest U.S. savings and loan, citing a decline in federal funds purchased and commercial paper. The company fell yesterday after Piper Jaffray Cos. advised investors to sell the stock and Merrill Lynch & Co. and Friedman Billings Ramsey Group Inc. analysts said the bank may need more capital.
Washington Mutual said in an e-mailed statement that it does all of its business through banking operations and ``does not rely on commercial paper.''
The 28 percent jump in the S&P 500 Financials Index during the five trading days ended July 22 was the biggest one-week advance for any of the S&P 500's 10 industry groups since daily calculations on the indexes began in 1989, according to Harrison, New York-based research firm Bespoke Investment Group LLC.
An S&P index of 15 homebuilders slumped 12 percent, its biggest drop ever, as 13 of its companies retreated.
Ryland Group Inc., the U.S. homebuilder for first-time buyers, tumbled 19 percent to $21.43 and led the group's decline after reporting a second-quarter loss that exceeded analysts' estimates.
A total of $5 trillion of mortgage loans belong to ``risky asset categories,'' Gross, manager of the world's largest bond fund at Pacific Investment Management Co., said in commentary posted on the firm's Web site today.
$1 Trillion Forecast
His $1 trillion forecast implies that credit-market losses are less than halfway over. Since the start of 2007, global financial firms have reported $468.1 billion in losses and writedowns, according to data compiled by Bloomberg News. Firms worldwide have raised $344.6 billion of capital since the third quarter of 2007.
``As long as housing prices go down, no one can say how much the banks are going to lose and how long it will last,'' said Charles Knott, who oversees $800 million as chief investment officer at Knott Capital Management in Exton, Pennsylvania.
The number of vacant houses hit an all-time high in the second quarter as the U.S. real estate recession pushed homeowners into foreclosure and lenders seized properties. A total of 18.6 million U.S. homes stood empty, more than at any time in history and 6.9 percent higher than a year earlier, the U.S. Census Bureau said.
Consumer Shares Slide
Homebuilders, automakers and hotel owners dragged a group of consumer stocks down 2.8 percent as oil rose from a seven-week low on speculation crude's retreat during past two weeks has been too much. Crude for September delivery added $1.05, or 0.8 percent, to $125.49 a barrel.
Ford tumbled 15 percent to $5.11. Excluding costs the company considers one-time expenses, the loss was $1.38 billion, or 62 cents a share. On that basis, Ford was expected to report a loss of 28 cents a share, the average estimate of 12 analysts surveyed by Bloomberg.
Starwood Hotels & Resorts Worldwide Inc. fell the most since July 2002, tumbling 11 percent to $35.26. The third-largest U.S. lodging company said full-year profit may drop more than analysts estimated as consumers and businesses trim travel spending to cope with a weakened economy and higher gasoline prices.
Marriott International Inc., the biggest hotel chain, slumped 8.7 percent to $26.06.
McDonald's, AT&T
McDonald's Corp., the biggest restaurant company, lost 2.2 percent to $58.37. Deutsche Bank analysts led by Jason West cut their recommendation on the shares to ``hold'' from ``buy,'' writing that higher beef costs and fewer customer visits may reduce profitability.
AT&T Inc. led phone companies in the S&P 500 to a 3.1 percent drop after JPMorgan Chase & Co. cut the largest U.S. telephone carrier to ``neutral'' from ``outperform'' on concern the company's wireline business will deteriorate. AT&T fell 4.1 percent to $31.70 for the steepest drop since February.
Amazon.com Inc. added the most since in a year, gaining 12 percent to $78.72. Second-quarter profit topped analysts' estimates after Chief Executive Officer Jeff Bezos promoted free shipping and lower prices to entice U.S. customers. Full-year sales may rise to as much as $20.1 billion, compared with an earlier forecast of as much as $20 billion, the company said.
A bigger-than-forecast increase in jobless claims also weighed on stocks. A government report showed the number of Americans filing first-time claims for unemployment benefits rose last week to 406,000, the highest in almost four months, signaling the slowing economy is weakening the labor market.
`Drifting Over'
``You are starting to see a lot of the problems in the financial area drifting over into more of the real economy,'' Tobias Levkovich, the chief U.S. equity strategist at Citigroup Inc. in New York, said in an interview on Bloomberg Television.
Except for Canada, all of the 23 developed nations in the MSCI World Index experienced bear-market plunges of 20 percent or more since September as credit losses increase and record commodity prices stoke inflation. Brazil today became the 23nd out of 25 developing countries in the MSCI Emerging Markets Index to enter a bear market.
Chipotle Mexican Grill Inc. fell the most since McDonald's sold the company to the public in January 2006, losing 20 percent to $67.30. The fast-food chain reported 0.9 percent less second- quarter profit than analysts estimated, according to Bloomberg data, amid higher costs for beef and cheese.
Qualcomm Inc. surged the most since May 2002, jumping 17 percent to $52.43. The world's biggest maker of mobile-phone chips increased its 2008 sales and profit targets and settled a patent dispute with handset maker Nokia Oyj.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
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Daily Market Commentary - Fundamental Outlook
| Daily Forex Fundamentals | Written by GCI Financial | Jul 24 08 20:49 GMT | | |
| € The euro came off vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.5625 level and was capped around the $1.5715 level. The common currency came off despite a significant drop in U.S. June existing home sales of 2.6% to 4.86 million annualized units, a ten-year low. Other data released today saw weekly initial jobless claims rise 34,000 to 406,000 while continuing jobless claims were off 9,000 to 3.107 million. Yesterday's Federal Reserve Beige Book reported "the pace of economic activity has slowed somewhat since the last report." Fed policymakers continue to be relatively hawkish in their statements. In eurozone news, the EMU-15 purchasing managers' index contracted for the second consecutive month – dropping to 47.8 - while the German Ifo business climate index declined for the fourth consecutive month, off to 97.5 from 101.2 in June. Other data saw the EMU-15 May current account balance print at -€7.3 billion. Euro bids are cited around the $1.5230 level. ¥/ CNY The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the ¥107.25 level and was capped around the ¥107.95 level. Bank of Japan Policy Board member Mizuno noted "I think there is a possibility that it will take more time than the BOJ officially says before the Japanese economy will recover." Data released in Japan today saw Japanese exports fall for the first time in nearly five years, off 88.9% y/y to ¥138.6 billion. The Nikkei 225 stock index gained 2.18% to close at ¥13,603.31. Dollar bids are cited around the ¥103.65 level. The euro came off vis-Ã -vis the yen as the single currency tested bids around the ¥167.90 level and was capped around the ¥169.45 level. The British pound and Swiss franc slumped vis-Ã -vis the yen as the crosses tested bids around the ¥212.75 and ¥103.35 levels, respectively. The Chinese yuan appreciated vis-Ã -vis the U.S. dollar as the greenback closed at CNY 6.8289 in the over-the-counter market, down from CNY 6.8297. A Chinese government report was issued and concluded consumer prices increases are likely to moderate. ₤ The British pound fell sharply vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.9815 level and was capped around the $1.9990 level. Data released in the U.K. today saw June retail sales fall 3.9%, its largest fall since at least 1986 but inflationary pressures moved higher. Cable bids are cited around the $1.9360 level. The euro moved higher vis-Ã -vis the British pound as the single currency tested offers around the ₤0.7905 level and was supported around the ₤0.7845 level. CHF The Swiss franc appreciated vis-Ã -vis the U.S. dollar today as the greenback closed at CHF 1.0350 level and was capped around the CHF 1.0405 level. Most traders expect Swiss National Bank to keep interest rates unchanged for the foreseeable future. U.S. dollar offers are cited around the CHF 1.0515 level. The euro and British pound came off vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6225 and CHF 2.0560 levels, respectively. GCI Financial DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained. | |
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Economic Calendar Eco Data 7/25/08
Economic Calendar |
GMT Ccy Events Actual Consensus Previous Revised
23:30 JPY Japan National CPI Y/Y Jun 1.90% 1.50%
23:30 JPY Japan Tokyo CPI Y/Y Jul 1.60% 1.30%
23:50 JPY Japan CSPI Jun 0.60% 0.50%
08:00 EUR Eurozone M3 Y/Y Jun 10.30% 10.50%
08:00 EUR Eurozone M3 3mth Jun 10.40% 10.40%
08:30 GBP U.K. GDP Q/Q Q2 0.20% 0.30%
08:30 GBP U.K. GDP Y/Y Q2 1.60% 2.30%
12:30 USD U.S. Durable goods Jun 0.20% 0.00%
12:30 USD ex. Transport Jun -0.20% -0.80%
12:30 USD ex. Defense Jun -0.40% -0.60%
13:55 USD U.S. U. Michigan survey Final Jul 56.4 56.4
14:00 USD U.S. New home sales Jun 503K 512K
14:00 USD U.S. New home sales M/M Jun -1.80% -2.00%
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GMT Ccy Events Actual Consensus Previous Revised
23:30 JPY Japan National CPI Y/Y Jun 1.90% 1.50%
23:30 JPY Japan Tokyo CPI Y/Y Jul 1.60% 1.30%
23:50 JPY Japan CSPI Jun 0.60% 0.50%
08:00 EUR Eurozone M3 Y/Y Jun 10.30% 10.50%
08:00 EUR Eurozone M3 3mth Jun 10.40% 10.40%
08:30 GBP U.K. GDP Q/Q Q2 0.20% 0.30%
08:30 GBP U.K. GDP Y/Y Q2 1.60% 2.30%
12:30 USD U.S. Durable goods Jun 0.20% 0.00%
12:30 USD ex. Transport Jun -0.20% -0.80%
12:30 USD ex. Defense Jun -0.40% -0.60%
13:55 USD U.S. U. Michigan survey Final Jul 56.4 56.4
14:00 USD U.S. New home sales Jun 503K 512K
14:00 USD U.S. New home sales M/M Jun -1.80% -2.00%
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Forex Brokers Weak Data Emanates from Germany, Euro-zone, and UK Boosting Greenback
| Daily Forex Fundamentals | Written by CMS Forex | Jul 24 08 21:41 GMT | | |
Weak Data Emanates from Germany, Euro-zone, and UK Boosting GreenbackNZ Reserve Bank Surprisingly Cuts Benchmark Interest Rate to 8% The Reserve Bank of New Zealand surprised economists and traders yesterday afternoon and lowered rates by a quarter point, causing a quick knee-jerk reaction of Kiwi selling. Reserve Bank Governor Bollard said, with the economy weakening, and borrowing costs levied by banks rising as a result of turmoil in financial markets, the rate cut should help alleviate some of those rising costs to firms and consumers. NZD/USD - Kiwi Falters As a Result of Surprise Cut
The Kiwi-US Dollar pair was already falling yesterday prior to the decision, and the surprise cut caused the quick slide in the pair. By NY trading the pair was trading near 0.74, a 200 pip slide from Wednesday's session open. JPN Trade Shows Exports Declining, Surplus at Scant 140 Billion Yen The Japanese trade surplus shrank to 140 billion yen in June. For the first time in 4 years, the pace of exports was slower compared to a year ago, falling 1.7% on the year. Exports have been slowing to the US and Europe, but they have now been joined by emerging economies as interest rates go up around the world to combat inflation. GER IFO Business Climate Index Slides to Lowest Level in 3 Years in July In Germany, the IFO business climate index took a plunge in July with the overall index declined almost 4 points to 97.5 from June's 101.3. Current conditions and future expectations both deteriorated and the overall reading was the lowest in 3 years. GER Services Resilient, but Manufacturing Weakens Preliminary data showed activity in the German manufacturing and services sector expanding, as the PMI's for both sectors was above the 50 level. The manufacturing sector saw a decline from June as global demand for German exports weakens. Services expanded, bucking the trend in other parts of Europe. EUR Manufacturing and Services PMIs Continue to Contract Looking at the Euro-zone as a whole, conditions are worse, as both sectors were in contraction. The manufacturing PMI slid to 47.5, and services fell to 48.3. Both were below forecasts, and show the Euro-zone struggling the second half of the second quarter. EUR Current Account Falls into Deficit in May The Euro-zone current account turned into a deficit of 7.3 billion euros, seasonally adjusted. The unadjusted figure was -21.4 billion Euros. The data reflects a worsening trade position. The deficit in goods was 3.3 billion in May, after a surplus of 7.1 billion in April. The services surplus also declined, but was still positive. EUR/JPY - Euro Hits Resistance and Retreats vs Yen
The gloomy reports was reflected in weaker European stocks, and a decline in risk appetite for the Euro-Yen pair. From its highs this weak near 169.70, the pair has declined 130 pips testing 168.30. The pair has stalled after a strong rally last week, and with weaker data from the Euro-zone, and its declines versus the Dollar the Euro seems less strong than it did just last week. UK Ratail Sales Down 3.9%, Sharpest Decline Since at Least 1986 In the UK, retail sales were down 3.9% in June, according to the government, a sharp decline and the biggest monthly drop since records began in 1986. It reverses all the gains seen last month. Consumers, faced with a weakening economy, a recession in housing, and high inflation, are cutting back on spending. GBP/USD - Pound Falls on Retail Sales Data
The Pound fell sharply vs. the Dollar following the release giving up the 2 to 1 level it reclaimed yesterday. The Pound-Dollar pair traded near 1.9840, a 160-pip slide from the session open, and below short term resistance at 1.99. US Jobless Claims Rise Above 400K, Highest Number in 4 Months In the US, weekly jobless claims jumped back above 400K, an increase of 34K compared to the previous week. The increase was the highest in 4 months, and was above expectations. A weakening job market will add more pressure on the US economy, which is already reeling from a housing recession and surging inflation as a result of higher oil prices. US Existing Home Sales Fall 2.6%, But Doesn't Weaken Dollar Existing home sales fell 2.6% in June, to an annual pace of 4.83 million units, which was lower than forecasts. Tighter lending standards continue to keep inventories high and prices falling, as there is a smaller pool of potential home purchasers. With Congress passing a massive housing bailout package it remains to be seen if the situation improves going forward and the news had only a slight impact on the Dollar's value. USD/CAD - Loonie Weakens on Bank of Canada Action
One more piece of news to note is the jump in the US Dollar-Canadian Dollar around noontime after it was reported that the Bank of Canada injected $830 million of overnight liquidity, the largest injection since April 30th. The news caused a 50 pip jump to 1.0150. Upcoming Releases Tonight Japan release data on consumer and corporate price inflation. Overnight, the UK posts GDP data for the 2nd quarter, and a measure of services activity. Tomorrow, the US releases information of durable goods orders, new home sales, and consumer sentiment. Capital Market Services, L.L.C. ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C. | |
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Thursday's News Recap: Existing U.S. Home Sales & Jobless Claims Dampen Markets
| News Recap | Written by CEP News | Jul 24 08 20:43 GMT | | |
| (CEP News) - Markets received some downbeat U.S. releases Thursday morning in the form of soaring weekly jobless claims and a continued fall in existing home sales for June. The U.S. Department of Labor reported that initial claims for unemployment benefits in the United States soared to 406k in the week ending July 19, the highest level since March. Economists said July data has been volatile, but that the latest data is a reliable indicator of weakness in the jobs market. The 34k rise in initial claims follows two weeks of lower-than-expected figures and is well above the 380k expected by economists. Prior to that, claims had been above 380k for four consecutive weeks. Continuing claims fell back 9k to 3.107 million for the week ending July 12. "The spike in [initial] claims appears due less to seasonal volatility and more to economic slowdown," said RBC strategist T.J. Marta. He suggested the trend will continue as the bonus spending from the tax rebates continues to wear off. Meanwhile, the National Association of Realtors (NAR) reported today that U.S. existing home sales fell 2.6% to 4.86 million units in June following May's unrevised sales figure of 4.99 million. Economists were expecting the June data to fall to 4.94 million. Since June 2007, existing home sales have declined by 15.5%. Single-family unit sales fell 3.2% to 4.27 million, down from a rate of 4.41 million in the previous month. Total housing inventories came in at an 11.1-month supply in June, up from the 10.8-month supply in May. The NAR said foreclosures represent one-third to 40% of all sales and cause a downward distortion to the price data. "This was the biggest decline since Sep last year but is an echo of the early Easter, which meant more people were active in the market in April, boosting May closings and hence setting a tough hurdle for June," noted Ian Shepherdson, chief U.S. economist from HFE. "We still think home sales have some way yet to fall but they are not going to keep dropping at the June pace." The U.S national homeowner housing vacancy rate slipped to 2.8% in the second quarter, a 0.1% decline from the previous quarter's 2.9% rate, according to the U.S. Census Bureau report released Thursday. National vacancy rates for rental housing rates dipped slightly to 10.0% from 10.1% in the first quarter of 2008. The homeownership rate of 68.1% for the current quarter was lower than the Q1 2007 rate of 68.2% and lower than the previous quarter 67.8% result. After the U.S. House of Representatives passed a housing bill including provisions for the creation of a new GSE regulator and a liquidity backstop to help the beleaguered Fannie Mae and Freddie Mac, U.S. Treasury Secretary Henry Paulson expressed his gratitude for the bill having passed quickly. "As I have said before, the GSE portions of this bill are orders of magnitude more important to turning the corner on the housing correction and supporting our markets and our economy," Paulson said. However, he also said he was not completely satisfied with some parts of the bill which include "extraneous provisions that we have opposed as detrimental to our efforts to get through the housing correction quickly." Testifying before the House Finance Committee, New York Federal Reserve President Tim Geithner said final judgments on regulatory reform should be reserved until the housing crisis ends. "The U.S. and global financial systems are going through a very challenging period of adjustment. The critical imperative today is to help facilitate that adjustment and to cushion its impact on the broader economy." Geithner commented that the financial system will take time to recover and that the current regulatory system is no longer appropriate. Also testifying, SEC Chairman Christopher Cox said he needs more authority to have mandatory supervision of investment banks. "Legislative improvements are necessary," Cox said in his opening remarks. "The Commission should be given a statutory mandate to perform this function at the holding company level, along with the authority to require compliance." He added that investment firms and banks should have common methods for reporting results. Underground natural gas storage in the United States increased 84 billion cubic feet in the week ending July 18, the Energy Information Administration (EIA) said Thursday. The weekly increase was above the +80 Bcf Bloomberg estimate. In the previous week, the EIA reported a supply increase of 104 Bcf. Moments after the report, natural gas was down 0.40 to 9.388 mmbtu. An auction of $21 billion five-year treasury notes drew a high yield of 3.44% allotted to 36.65% of bidders. The high yield was above the 'when issued' yield of 3.438% prior to the announcement. The median discount rate was 2.46% and the low yield was 2.35%. The bid-to-cover ratio was 2.64. There were no scheduled economic releases in Canada, although Export Development Canada released a quarterly report in which it said the country's exports are expected to rise 4.2% as a result of elevated energy prices. The gain of 4% in exports in 2008 is actually an energy price story, but when all price effects are removed, Canadian exports are actually on track to tumble by 4 per cent this year," said Peter Hall, vice-president and chief economist for EDC. EDC is also forecasting a large price correction for crude as global supply and demand is expected to tighten, which should see the price of crude oil return to less than $100 a barrel. In overnight news, Germany's Ifo Institute for Economic Research reported that its business climate indicator fell to 97.5 in July, down from both the 100.1 level expected and the 101.2 figure recorded in the previous month. June's reading was revised down from an initial figure of 101.3. Looking at the sub-components of the indicator, the current assessment slid down to 105.7 from 108.3. Economists had expected a more moderate fall to 106.5 for the month. According to advanced estimates from Markit Economics, the German purchasing managers' index for manufacturing fell more than expected to 50.9 in July. Economists had expected a fall only to 52.0 from June's 52.6 level. The manufacturing PMI level is the lowest since August 2005. Conversely, the German services PMI surprised to the upside, rising to 53.3 after slipping to 52.1 in June. The consensus had called for a further decline in the services indicator to 51.5 for the month. The European Central Bank reported that the euro zone current account deficit rose to €21.4 billion in May, up from both the €6.0 billion deficit expected and the €7.4 billion deficit figure recorded in the previous month. April's reading was revised down from an initial deficit level of €9.2 billion. By Stephen Huebl, shuebl@economicnews.ca, with contributions from Patrick McGee, pmcgee@economicnews.ca, Steve Stecyk, sstecyk@economicnews.ca, Todd Wailoo, twailoo@economicnews.ca, edited by Cristina Markham, cmarkham@economicnews.ca 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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New York Session Recap
Daily Forex Fundamentals | Written by Forex.com | Jul 24 08 21:37 GMT |
New York Session Recap
The buck was lower in the NY session as the US stock market rout, led by a reversal in financials, put pressure on the greenback. Stocks overall plunged 2.4% as bank stocks plummeted 7.3% on the day. So the all clear sign will have to wait for another day it seems.
Providing another headwind, albeit a minor one, oil prices rose about $1 in the session to close near $125.65/bbl. With nothing fundamental to focus on, oil traders will be looking at the technicals over the next few trading sessions. The level we would highlight as a key trigger for further losses is $122/bbl, which is near the bottom of the Ichimoku cloud and the 100-day MA.
EUR/USD opened the session near 1.5675 and was sitting right around there at the close. We would expect firm resistance near the 1.5610 area on a move lower, which is the hourly trough from a few weeks ago. We are still buyers of USD on dips as the deterioration in Eurozone economic fundamentals continues unabated, while US fundamentals are just treading water.
Sterling (GBP/USD) was also broadly unchanged, closing about 10 pips higher after opening near the 1.9855 mark. The BOE's deputy governor Bean spoke during NY trading and said that the credit market turmoil could lead to a deeper and more prolonged slowdown -- clearly hinting at the deteriorating UK economy. On inflation, he basically said there is nothing much we can do near-term. Thus the prospect of a recession is likely to keep the central bank on hold for the foreseeable future. Our outlook for Sterling remains for further losses ahead and we would be sellers of the pair on rallies, especially into the 2.00 area.
Last but not least, USD/JPY gave back some of the overnight gains as the flight to safety in US markets led to a sharp pullback in yields. The pair opened near 107.80 and would close around the 107.30 area. Yields in the US fell about 12 bps, on the stock market tumult, and put pressure on the pair all session.
Upcoming Economic Data Releases (Asia Session) Prior Estimate
* 7/24 23:30 GMT JN Tokyo CPI YoY JUL 1.50% 1.80%
* 7/24 23:30 GMT JN Tokyo CPI Ex-Fresh Food YoY JUL 1.30% 1.60%
* 7/24 23:30 GMT JN Natl CPI YoY JUN 1.30% 1.90%
* 7/24 23:30 GMT JN Natl CPI Ex-Fresh Food YoY JUN 1.50% 1.90%
Forex.com
http://www.forex.com
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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New York Session Recap
The buck was lower in the NY session as the US stock market rout, led by a reversal in financials, put pressure on the greenback. Stocks overall plunged 2.4% as bank stocks plummeted 7.3% on the day. So the all clear sign will have to wait for another day it seems.
Providing another headwind, albeit a minor one, oil prices rose about $1 in the session to close near $125.65/bbl. With nothing fundamental to focus on, oil traders will be looking at the technicals over the next few trading sessions. The level we would highlight as a key trigger for further losses is $122/bbl, which is near the bottom of the Ichimoku cloud and the 100-day MA.
EUR/USD opened the session near 1.5675 and was sitting right around there at the close. We would expect firm resistance near the 1.5610 area on a move lower, which is the hourly trough from a few weeks ago. We are still buyers of USD on dips as the deterioration in Eurozone economic fundamentals continues unabated, while US fundamentals are just treading water.
Sterling (GBP/USD) was also broadly unchanged, closing about 10 pips higher after opening near the 1.9855 mark. The BOE's deputy governor Bean spoke during NY trading and said that the credit market turmoil could lead to a deeper and more prolonged slowdown -- clearly hinting at the deteriorating UK economy. On inflation, he basically said there is nothing much we can do near-term. Thus the prospect of a recession is likely to keep the central bank on hold for the foreseeable future. Our outlook for Sterling remains for further losses ahead and we would be sellers of the pair on rallies, especially into the 2.00 area.
Last but not least, USD/JPY gave back some of the overnight gains as the flight to safety in US markets led to a sharp pullback in yields. The pair opened near 107.80 and would close around the 107.30 area. Yields in the US fell about 12 bps, on the stock market tumult, and put pressure on the pair all session.
Upcoming Economic Data Releases (Asia Session) Prior Estimate
* 7/24 23:30 GMT JN Tokyo CPI YoY JUL 1.50% 1.80%
* 7/24 23:30 GMT JN Tokyo CPI Ex-Fresh Food YoY JUL 1.30% 1.60%
* 7/24 23:30 GMT JN Natl CPI YoY JUN 1.30% 1.90%
* 7/24 23:30 GMT JN Natl CPI Ex-Fresh Food YoY JUN 1.50% 1.90%
Forex.com
http://www.forex.com
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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Closing Market Recap: Equity Markets Close in Dangerously Negative Territory
Market Updates | Written by CEP News | Jul 24 08 20:31 GMT |
(CEP News) - Equities in the U.S. were down at the close due to weak data reports earlier in the day, and Toronto's S&P TSX composite index was selling off by huge amounts in its own right, despite crude oil being up during the session.
Initial claims for unemployment benefits in the United States rose more than expected to 406k in the week ending July 19, surpassing expectations for a climb to 380k. The Dow Jones industrial average was subsequently down 283.10 points to 11,349.28, the S&P 500 down 29.64 points to 1,252.55 and the Nasdaq down 45.77 points to 2,280.11.
Negative equity market sentiment easily caught on overseas as European stock markets closed in negative territory with the Eurostoxx down 30.80 points to 2,859.88, the UK FTSE 100 down 87.60 points to 5,362.30 and the German DAX down 95.39 points to 6,440.70.
Canada's commodity-heavy TSX closed down 299.48 points to 13,213.18, even though futures on WTI crude oil were up $0.90 to $125.34 while gold futures at the Chicago Board of Trade were up $4.20 to $927.40.
"Although Canadian markets have been able to shrug off the US market malaise with commodity prices stabilizing, the two largest moves today have been related to takeover announcements. Despite significant rallies, both Aurelian and Synenco have been trading below the implied bid prices," wrote CMC Markets analyst Colin Cieszynski.
"Note that Kinross (K), as is normal for purchasers, has declined 5.8% suggesting that investors appear to be concerned that this deal may adversely affect its integration, development and political risk profiles. Agnico-Eagle (AEM) has fallen 7.9% after reporting EPS of $0.06 for last quarter, well below the $0.17 markets had been expecting."
Also on Thursday, underground natural gas storage in the United States increased 84 billion cubic feet in the week ending July 18, according to the Energy Information Administration. The weekly increase was above the +80 Bcf Bloomberg estimate. Natural gas was nonetheless down during the session, its session low of $8.8883 mmbtu marking the future's lowest price since April. Most recently it was down $0.487 to $9.301.
Cieszynski noted the decrease in natural gas later on in his e-mail to clients.
"Generally speaking, commodities appear to be stabilizing, which suggests that some of the recent selling pressure may be easing a bit. The one notable exception, however, has been natural gas which has dropped another 2.2% and appears to be trending toward a retest of possible support levels near $9.50/mcf or $9.00/mcf," he said.
At 10 a.m. EDT, U.S. existing home sales were reported to have fallen 2.6% to 4.86 million units in June following May's unrevised sales figure of 4.99 million. Economists were expecting the June data to fall to 4.94 million.
"Fundamentals in the housing market remain weak as oversupply, falling prices, and tighter lending standards continue to weigh on home sales," wrote Calyon's Sireen Hajj in reaction to the data. "We do not expect to see stabilization in housing until 2009. The decline in existing home sales was larger than consensus expectations -which centered on a 1.0% decrease- and bonds traded higher on the release."
The U.S. Treasury also sold $21 billion in five-year notes, with the auction's results being released at 1 p.m. EDT. A high yield of 3.44% was drawn. RBS Greenwich Capital U.S. government bond strategist David Ader noted the market activity before and after the results hit.
"The market was trading higher ahead of the auction building in no meaningful consession, and has since made some marginal improvement," he wrote.
"Overall volumes on the day have been near norms, with cash trading at 108% of the 10-day moving-average. Prices are edging higher on the back of stocks and some auction relief -- note the decent indirect bidding in both 2s and 5s. We take the auctions, now hurdles out of the way for this sector, as positive and have felt that supply has been the main thrust to the price action leaving the market in a decent position for a move back into the range. The closes will be constructive."
U.S. two-year yields were down 12.8 bps to 2.60%, five-year yields down 15.6 bps to 3.34%, 10-year yields down 10.6 bps to 4.01% and 30-year yields down 5.7 bps to 4.62%.
The Eurodollar September 08 contract was up 7.5 ticks to 97.11. The 10/2 year spread widened 7.24 bps to 145.21.
The yield curve was steeper with the difference in yield between the U.S. two-year and 10-year notes up 7.2 bps to 145.21 bps.
Yields on two-year Canadian government bonds were down 9.7 bps to 3.14%, five-year yields down 9.1 bps to 3.38%, 10-year yields down 7.3 bps to 3.79% and 30-year yields down 3.4 bps to 4.13%.
The Canadian 10-year note is yielding 22.04 bps less than the U.S. 10-year note.
In Germany, returns on two-year German bonds were down 15.3 bps to 4.43%, five-year yields down 14.8 bps to 4.51%, 10-year yields down 9.6 bps to 4.57% and 30-year yields down 5.5 bps to 4.83%.
Yields on UK two-year bonds were down 13.5 bps to 4.96%, five-year yields down 11.9 bps to 4.94%, 10-year yields down 7.0 bps to 4.98% and 30-year yields down 4.2 bps to 4.61%.
The Canadian dollar was down 0.0036 to 0.9861 against the USD (1.014 USD/CAD) and down 0.0020 cents to 1.5906 (0.6288 CAD/EUR) against the euro.
The U.S. dollar was down 0.67 to 107.23 against the yen and the euro down 0.0010 to 1.5684 against the U.S. dollar.
The pound sterling was down 1.40 cents to 1.9862 USD and the Australian dollar was lower by 0.30 cents to 0.9591 USD.
The U.S. Dollar Index was up 0.057 points to 72.868.
All data taken at 4:07 p.m. EDT.
By Ryan Szporer, rszporer@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and 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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(CEP News) - Equities in the U.S. were down at the close due to weak data reports earlier in the day, and Toronto's S&P TSX composite index was selling off by huge amounts in its own right, despite crude oil being up during the session.
Initial claims for unemployment benefits in the United States rose more than expected to 406k in the week ending July 19, surpassing expectations for a climb to 380k. The Dow Jones industrial average was subsequently down 283.10 points to 11,349.28, the S&P 500 down 29.64 points to 1,252.55 and the Nasdaq down 45.77 points to 2,280.11.
Negative equity market sentiment easily caught on overseas as European stock markets closed in negative territory with the Eurostoxx down 30.80 points to 2,859.88, the UK FTSE 100 down 87.60 points to 5,362.30 and the German DAX down 95.39 points to 6,440.70.
Canada's commodity-heavy TSX closed down 299.48 points to 13,213.18, even though futures on WTI crude oil were up $0.90 to $125.34 while gold futures at the Chicago Board of Trade were up $4.20 to $927.40.
"Although Canadian markets have been able to shrug off the US market malaise with commodity prices stabilizing, the two largest moves today have been related to takeover announcements. Despite significant rallies, both Aurelian and Synenco have been trading below the implied bid prices," wrote CMC Markets analyst Colin Cieszynski.
"Note that Kinross (K), as is normal for purchasers, has declined 5.8% suggesting that investors appear to be concerned that this deal may adversely affect its integration, development and political risk profiles. Agnico-Eagle (AEM) has fallen 7.9% after reporting EPS of $0.06 for last quarter, well below the $0.17 markets had been expecting."
Also on Thursday, underground natural gas storage in the United States increased 84 billion cubic feet in the week ending July 18, according to the Energy Information Administration. The weekly increase was above the +80 Bcf Bloomberg estimate. Natural gas was nonetheless down during the session, its session low of $8.8883 mmbtu marking the future's lowest price since April. Most recently it was down $0.487 to $9.301.
Cieszynski noted the decrease in natural gas later on in his e-mail to clients.
"Generally speaking, commodities appear to be stabilizing, which suggests that some of the recent selling pressure may be easing a bit. The one notable exception, however, has been natural gas which has dropped another 2.2% and appears to be trending toward a retest of possible support levels near $9.50/mcf or $9.00/mcf," he said.
At 10 a.m. EDT, U.S. existing home sales were reported to have fallen 2.6% to 4.86 million units in June following May's unrevised sales figure of 4.99 million. Economists were expecting the June data to fall to 4.94 million.
"Fundamentals in the housing market remain weak as oversupply, falling prices, and tighter lending standards continue to weigh on home sales," wrote Calyon's Sireen Hajj in reaction to the data. "We do not expect to see stabilization in housing until 2009. The decline in existing home sales was larger than consensus expectations -which centered on a 1.0% decrease- and bonds traded higher on the release."
The U.S. Treasury also sold $21 billion in five-year notes, with the auction's results being released at 1 p.m. EDT. A high yield of 3.44% was drawn. RBS Greenwich Capital U.S. government bond strategist David Ader noted the market activity before and after the results hit.
"The market was trading higher ahead of the auction building in no meaningful consession, and has since made some marginal improvement," he wrote.
"Overall volumes on the day have been near norms, with cash trading at 108% of the 10-day moving-average. Prices are edging higher on the back of stocks and some auction relief -- note the decent indirect bidding in both 2s and 5s. We take the auctions, now hurdles out of the way for this sector, as positive and have felt that supply has been the main thrust to the price action leaving the market in a decent position for a move back into the range. The closes will be constructive."
U.S. two-year yields were down 12.8 bps to 2.60%, five-year yields down 15.6 bps to 3.34%, 10-year yields down 10.6 bps to 4.01% and 30-year yields down 5.7 bps to 4.62%.
The Eurodollar September 08 contract was up 7.5 ticks to 97.11. The 10/2 year spread widened 7.24 bps to 145.21.
The yield curve was steeper with the difference in yield between the U.S. two-year and 10-year notes up 7.2 bps to 145.21 bps.
Yields on two-year Canadian government bonds were down 9.7 bps to 3.14%, five-year yields down 9.1 bps to 3.38%, 10-year yields down 7.3 bps to 3.79% and 30-year yields down 3.4 bps to 4.13%.
The Canadian 10-year note is yielding 22.04 bps less than the U.S. 10-year note.
In Germany, returns on two-year German bonds were down 15.3 bps to 4.43%, five-year yields down 14.8 bps to 4.51%, 10-year yields down 9.6 bps to 4.57% and 30-year yields down 5.5 bps to 4.83%.
Yields on UK two-year bonds were down 13.5 bps to 4.96%, five-year yields down 11.9 bps to 4.94%, 10-year yields down 7.0 bps to 4.98% and 30-year yields down 4.2 bps to 4.61%.
The Canadian dollar was down 0.0036 to 0.9861 against the USD (1.014 USD/CAD) and down 0.0020 cents to 1.5906 (0.6288 CAD/EUR) against the euro.
The U.S. dollar was down 0.67 to 107.23 against the yen and the euro down 0.0010 to 1.5684 against the U.S. dollar.
The pound sterling was down 1.40 cents to 1.9862 USD and the Australian dollar was lower by 0.30 cents to 0.9591 USD.
The U.S. Dollar Index was up 0.057 points to 72.868.
All data taken at 4:07 p.m. EDT.
By Ryan Szporer, rszporer@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and 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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Thursday, July 24, 2008
Weak US Data Moves Tight Markets
Daily Forex Fundamentals | Written by Crown Forex | Jul 24 08 14:34 GMT |
The markets were rather steady since the morning as the dollar was able to retain its gains since yesterday and managed to take down the pound that was resilient yesterday supported by steady rates as the BoE minutes showed. Nonetheless as the famous data from the housing sector showing more than expected declines in the housing sector spreading again woes over the economy especially they followed weekly claims that shot 400 red danger zones.
The euro started to recuperate especially as its generally trading in oversold areas on various time scales. It was capable to hit the high for the day at 1.5713 as now the strong resistance that might face the euro is at 1.5756, while if it does not manage to close positive and fall again to its low set at 1.5637 especially if trading was seen solid with closings below 1.5670 the downside will extend to the following correction level which is 61.8% at 1.5584 yet the mentioned level before the 50.0% is actually solid and trading was around it with not much closing below it.
Sterling was mainly weakened by its data as the euro as it was a bad day for Europe today; sterling breached a number of strong levels ending with the 1.9820s which held the pair now aiming above trading at the strong resistance of 1.9870 to head then to 1.99 levels once more. Sterling needs upside correction now to provide further downside momentum as it's heavily saturated with selling orders.
The heavily overbought USDJPY pair defied momentum to continue aiming at 108 levels which neared as the high was set at 107.97 yet with the weak US data the pair was able to once more head lower to set its low for the day at 107.41 as the 107.30-10 are also strong support for the pair yet breaching them opens the way till 106.80 which is so might provide momentum for the pair to attempts 108 once more.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
Read more...
The markets were rather steady since the morning as the dollar was able to retain its gains since yesterday and managed to take down the pound that was resilient yesterday supported by steady rates as the BoE minutes showed. Nonetheless as the famous data from the housing sector showing more than expected declines in the housing sector spreading again woes over the economy especially they followed weekly claims that shot 400 red danger zones.
The euro started to recuperate especially as its generally trading in oversold areas on various time scales. It was capable to hit the high for the day at 1.5713 as now the strong resistance that might face the euro is at 1.5756, while if it does not manage to close positive and fall again to its low set at 1.5637 especially if trading was seen solid with closings below 1.5670 the downside will extend to the following correction level which is 61.8% at 1.5584 yet the mentioned level before the 50.0% is actually solid and trading was around it with not much closing below it.
Sterling was mainly weakened by its data as the euro as it was a bad day for Europe today; sterling breached a number of strong levels ending with the 1.9820s which held the pair now aiming above trading at the strong resistance of 1.9870 to head then to 1.99 levels once more. Sterling needs upside correction now to provide further downside momentum as it's heavily saturated with selling orders.
The heavily overbought USDJPY pair defied momentum to continue aiming at 108 levels which neared as the high was set at 107.97 yet with the weak US data the pair was able to once more head lower to set its low for the day at 107.41 as the 107.30-10 are also strong support for the pair yet breaching them opens the way till 106.80 which is so might provide momentum for the pair to attempts 108 once more.
Crown Forex
disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.
Read more...
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