By Tara Patel
Aug. 4 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the Aug. 1 close.
The CAC 40 Index retreated 78.02, or 1.8 percent, to 4,314.34 on Aug. 1. The SBF 120 Index also dropped 1.7 percent.
Areva SA (CEI FP): The world's largest manufacturer of nuclear plants signed an agreement with the Central African Republic for uranium production at the country's Bakouma mine. The shares fell 7.20 euros, or 1 percent, to 732.50 euros.
Carrefour SA (CA FP): Europe's largest retailer has hired headhunters to seek a replacement for Chief Executive Officer Jose Luis Duran, citing a European businessman who was approached, the Financial Times reported. A Paris-based spokesman for Carrefour's board, who declined to be further identified, denied that a search firm had been engaged. The shares fell 56 cents, or 1.7 percent, to 32.37 euros.
Electricite de France SA (EDF FP): The world's largest owner of nuclear power stations backed away from a proposed bid for British Energy Group Plc, saying circumstances are not in place for expansion in the U.K.
Centrica may revive a 22.5 billion-pound all-stock merger plan with British Energy, the Sunday Telegraph reported, citing unidentified people close to the company. EDF shares lost 1.75 euros, or 3.1 percent, to 54.20 euros.
Vinci SA (DG FP): The world's biggest builder, Hochtief AG and partners will start work on a $3 billion bridge linking Bahrain and Qatar in January, Gulf Daily News reported, citing Cowi AS design consultant Mogens Hviid. The shares lost 41 cents, 1.1 percent, to 36.09 euros.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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Monday, August 4, 2008
Sponsor Forex Brokers Mixed US employment Report Does Little For The USD
| Daily Forex Fundamentals | Written by Saxo Bank | Aug 04 08 06:28 GMT | | |
Forex Market Update: Mixed US employment Report Does Little For The USD. This Week Is Central Bank Week As Market Looks For Guidance From The Fed, RBA, ECB And BOERBA set to prepare the market for rate cuts ahead at tonight's cash target announcement? MAJOR HEADLINES - PREVIOUS SESSION
THEMES TO WATCH - UPCOMING SESSIONKey event risks today (all times GMT):
Market Comments The US employment report was a mixed on Friday, with the nonfarm payrolls number a bit less bad than expected (slightly surprising considering the dire weekly initial jobless claims numbers that have been rolling in lately), but still negative and an unemployment rate that continues to grow. Judging from past employment cycles, we would expect the unemployment rate to peak well above 7.00% some time in late 2009. With the employment picture looking this grim and oil prices having eased so heavily in recent weeks, we have a tough time seeing the Fed coming out with its inflation fighting guns a blazing at tomorrow evening's rate announcement and monetary policy statement and would expect another wishy washy statement that tries to sound like the Fed is still serious about an inflation fighting mandate while obviously hoping that it can continue to keep rates unchanged. Looking at the technical side of things, EURUSD needs to break 1.5500 to keep the bearish momentum alive this week, with 1.5285 the next major obstacle to the downside. To the upside, a rise above 1.5700/1.5800 zone would set the USD rally on end for now. Besides the Fed this week, we will also have the RBA tonight (more on that one below) and the ECB and BOE out this week. None of the four is likely to move on interest rates, as the USD is too weak and inflation too high and the growth data for the latest quarter too resilient (but weakness still too evident on the flipside..) for the Fed to budge for now. The ECB will not move interest rates either as it will need to see more data and an even bigger drop in commodity prices before it begins to feel comfortable with relaxing its vigilance. The data is starting to look scary for the EuroZone, however, and it will be very interesting to see how the ECB discusses prospects for the economy this Thursday. The BoE almost never releases a statement and showed a split personality the last time around with a 3-way vote last time around (7 for unchanged, 1 for a HIKE (oh dear!) and 1 for a cut. It seems clear that the UK landing is already unfolding and feels very hard indeed as the BoE stands on the sidelines. As a reminder of how early we are in the ball game for the coming economic downturn in Australia, we note that the House Price Index only fell slightly for Q2 (this was the first drop since 2005) and that the year-on-year comparisons still show healthy growth in prices of around 8%. But if we look elsewhere at housing-related numbers in Australia, we see other signs of a slowdown in the pipeline, including a -8% drop in Building Approvals from last year, a construction industry survey that has fallen off a cliff in recent months. At least one article also reported that Australian private sector debt shows that consumers down under are nearly as overstretched as their UK counterparts, and more so than US consumers. Let's see what the RBA's read on the situation is at this evening's Cash Target announcement. The RBA is widely expected to leave rates unchanged, but Governor Stevens may take the opportunity to begin to prepare the market for interest rate cuts ahead. Our default view is that the great AUD bull market may largely be over with, especially if the commodity price rally continues its steep unwind in the months ahead. As all the major central banks move to a rate-cutting path, the trajectory of interest rate differentials will favor the low yielders over the high yielders. Our biggest question as we enter this week is what on earth is EURCHF doing up here? We feel that the risks to the global economy seem to be mounting every day, and that EURCHF - the classic risk barometer - seems to be have completely lost the plot. A significant fall may be in store soon for this pair if it ever decides to play catchup with reality...
Analysis Disclosure & Disclaimer SaxBank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by SaxBank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis dnot occur as anticipated. SaxBank utilizes financial information providers and information from such providers may form the basis for an analysis. SaxBank accepts nresponsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in SaxBanks analysis derive from objective fundamental macreconomical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations tbuy or sell a specific financial instrument, such recommendation should be seen as SaxBanks opinion that the specific instrument will respectively outperform the relevant market or underperform compared tthe market. SaxBanks recommendations should statistically correspond tan even distribution between buy and sell recommendations. | |
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FX & Money Markets Daily: CFTC - Speculators Long The USD
| Daily Forex Fundamentals | Written by Jyske Bank | Aug 04 08 06:13 GMT | | |
Today's CommentMajors & Scandies Speculators cut their combined net short dollar position against the eight major currencies (EUR, JPY, GBP, CHF, CAD, AUD, NZD, and MXN) from -14.5 billon to -2.3 billion according to the CFTC Commitments of traders data through July 29. If you remove the speculative positions in MXN and NZD, the speculative investors have actually gone long the USD. Most notably, speculators reversed their net short position in USD versus EUR from -0.8 billion to a net long position of +3.2 billion. Speculators also reversed their net short position in JPY versus USD to a net long position. Overall, speculators closed short positions in USD against virtually all the eight major currencies according to CFTC Commitments of traders. The developments are overall in line with the rebound in the dollar we have seen in the FX market. Data releases from the US have generally been better than expected and data releases from the Eurozone worse than expected. We are currently long USD versus AUD and NZD in two tactical positions. We were quite close to our take profit in the NZDUSD position and decided to conduct a trailing stop by moving the stop closer to the current market price. Hence, our new stop loss will be at 74.00. Today offers relatively few data releases with producer prices from the Eurozone and PCE Index from the US as the most important. The Fed is announcing the future fed funds rate at the FOMC meeting tomorrow and the market will most likely await this and the rate announcement from the ECB Thursday. This means that today will most likely be a relatively quiet day. Emerging Markets Friday started out very quiet with only little movement in EM currencies as markets awaited NFP from the US. The number came out better than expected and this provided immediate support for high yielders TRY and ZAR. Political risks in Turkey were reduced significantly last week as the case against the governing AK Party was dismissed, and focus can now return back to inflation, interest rates, and growth. And very appropriately this week starts off with July CPI from Turkey. Last month the number surprised on the downside and came out at 10.6 % y/y but consensus is that the number will increase again in July to 11.7 %. Following the decline in political risks, consequent TRY appreciation, and the new relatively low level of the oil price, markets now seem to be pricing rates on hold for the rest of the year. At the same time markets agree that inflation is yet to peak later this year, but if July inflation surprises on the upside markets could review their call of rates on hold for the rest of the year and further support for the currency will be seen. We still see room for one more hike of 25 bps. Today's key events
Jyske Core Positions - Recommendations
Jyske Markets - FX Research | |
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S. Korea Stocks Drop by Most in 3 Weeks; Shipyards Lead Retreat
By Kyung Bok Cho
Aug. 4 (Bloomberg) -- South Korean stocks fell by the most in three weeks, led by shipbuilders and automakers, on concern a global economic slowdown is hurting earnings.
Daewoo Shipbuilding & Marine Engineering Co. plunged the most in a year after order cancellations at shipyards raised concern more clients will fail to make payments. Hyundai Motor Co. slid after sales declined in South Korea and the U.S.
``The shipbuilding industry had been turning down so the news of the cancellation triggered a lot of selling, maybe too much,'' said Kwak Tai Ho, who helps manage the equivalent of $1.5 billion at Kyobo Investment Trust Management Co. in Seoul. ``The high oil prices of late are deflating demand for cars.''
The Kospi lost 31.20, or 2 percent, to 1,542.57 as of 1:28 p.m. in Seoul, heading for its biggest decline since July 15. Transport-related stocks accounted for a third of the decline. More than four stocks fell for each that rose.
The benchmark index has lost 19 percent this year on concern a cooling global economy will damp demand for South Korean exports as domestic inflation accelerated to the fastest pace in almost 10 years. South Korea is expected to enter stagflation in the second half of 2008, the Federation of Korean Industries, which represents the nation's industrial companies, said in July.
Daewoo Shipbuilding, the world's third-largest maker of ships, tumbled 13 percent to 35,700 won, the most since Aug. 16. The company said Aug. 1 that it canceled a 619 billion won ($609 million) order after the client failed to pay. Hyundai Mipo Dockyard Co., which said on the same day it nullified a 197 billion won contract, fell 7.9 percent to 182,000 won, the most since March 10.
`Weak Economy'
Hyundai Heavy Industries Co., the world's biggest shipbuilder, lost 9.3 percent to 279,000 won, the lowest since May 16, 2007. Samsung Heavy Industries Co., the second largest, declined 8.5 percent to 35,250 won, the most since Jan. 30.
Shipping lines also fell on concern financing for vessel purchases will become more difficult amid a global credit contraction. Hanjin Shipping Co., the nation's biggest shipping line, retreated 7.9 percent to 30,400 won, the most since Oct. 22. Hyundai Merchant Marine Co., the second largest, lost 4.1 percent to 39,450 won.
``The order cancellations show a growing number of ship owners are getting pessimistic on the shipping market,'' said Han Byung Hwa, an analyst at Hyundai Securities Co. in Seoul. ``The weak economy is making financing for new shipbuilding harder.''
Hyundai Motor, South Korea's largest automaker, retreated 2,600 won, or 3.7 percent, to 68,100, the most since July 15. The company said on Aug. 1 that July sales in the domestic market dropped 3.6 percent after labor strikes disrupted production. U.S. sales fell 6.5 percent in the same period.
Ssangyong Motor Co., the South Korean unit of China's biggest automaker, declined 140 won, or 4.6 percent, to 2,925.
The following are among the most-active stocks in South Korean markets.
Daewoo Securities Co. (006800 KS), which said on Aug. 1 that fiscal first-quarter net income slumped 63 percent, fell 750 won, or 4.2 percent, to 17,050, the most since July 15. Merrill Lynch & Co. cut its price estimate by 14 percent to 16,800 won, in a report. The company's fundamentals will be ``weak'' in the near term as competition intensifies and capital markets remain volatile, the brokerage said.
Hana Tour Service Inc. (039130 KS), South Korea's biggest travel agency, fell 950 won, or 3.1 percent, to 29,800, the lowest since July 16. Goldman, Sachs & Co. cut its recommendation to ``sell'' from ``neutral,'' in a report. July earnings were ``significantly weaker than expected'' while gains in market share are slowing down, the brokerage said.
Hanjin Heavy Industries & Construction Co. (097230 KS), South Korea's first exporter of ships, dropped 4,700 won, or 11 percent, to 38,150, the most since March 10. BNP Paribas SA cut its price estimate by 19 percent to 70,000 won, in a report, citing a ``more conservative valuation'' of the company's core businesses and its yard in the Philippines.
Hankook Tire Co. (000240 KS), which said on Aug. 1 that second-quarter profit fell 13 percent after oil and rubber prices rose, slipped 400 won, or 2.8 percent, to 14,150. The company will face increased pressure from rising raw-material costs in the third quarter, Good Morning Shinhan Securities Co. said in a report.
Hynix Semiconductor Inc. (000660 KS), the world's second- largest computer-memory maker, lost 550 won, or 2.6 percent, to 20,500, the lowest since Nov. 3, 2005. The likelihood has risen that memory prices will decline in the third or fourth quarters, Lehman Brothers Holdings Inc. said in a report.
Kangwon Land Inc. (035250 KS), which operates the only casino in South Korea open to locals, gained 500 won, or 2.1 percent, to 24,550, the highest since Jan. 9. Mirae Asset Securities Co. raised its price estimate by 15 percent to 31,000 won, in a report. Second-quarter operating results beat estimates, the brokerage said.
Korea Exchange Bank (004940 KS), the Korean lender HSBC Holdings Plc seeks to acquire, lost 350 won, or 2.7 percent, to 12,700, the lowest since July 17. HSBC is trying to negotiate a lower price for the bank from Lone Star Funds, two people familiar with the matter said.
Michael Breen, president of Insight Communications Consultants, which represents Lone Star in Seoul, said he had no immediate comment.
Korea Fine Chemical Co. (025850 KS) dropped 2,400 won, or 3.5 percent, to 66,100, the lowest since April 10. The company said on Aug. 1 that it booked 12.3 billion won in losses from derivatives in the second quarter.
LG Telecom Ltd. (032640 KS), South Korea's smallest mobile- phone operator, gained 250 won, or 3 percent, to 8,730. It was the only one of the nation's wireless-service providers to advance. The company said on Aug. 1 that it signed up a net 20,404 subscribers in July, or 20 percent more than in the previous month.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Aug. 4 (Bloomberg) -- South Korean stocks fell by the most in three weeks, led by shipbuilders and automakers, on concern a global economic slowdown is hurting earnings.
Daewoo Shipbuilding & Marine Engineering Co. plunged the most in a year after order cancellations at shipyards raised concern more clients will fail to make payments. Hyundai Motor Co. slid after sales declined in South Korea and the U.S.
``The shipbuilding industry had been turning down so the news of the cancellation triggered a lot of selling, maybe too much,'' said Kwak Tai Ho, who helps manage the equivalent of $1.5 billion at Kyobo Investment Trust Management Co. in Seoul. ``The high oil prices of late are deflating demand for cars.''
The Kospi lost 31.20, or 2 percent, to 1,542.57 as of 1:28 p.m. in Seoul, heading for its biggest decline since July 15. Transport-related stocks accounted for a third of the decline. More than four stocks fell for each that rose.
The benchmark index has lost 19 percent this year on concern a cooling global economy will damp demand for South Korean exports as domestic inflation accelerated to the fastest pace in almost 10 years. South Korea is expected to enter stagflation in the second half of 2008, the Federation of Korean Industries, which represents the nation's industrial companies, said in July.
Daewoo Shipbuilding, the world's third-largest maker of ships, tumbled 13 percent to 35,700 won, the most since Aug. 16. The company said Aug. 1 that it canceled a 619 billion won ($609 million) order after the client failed to pay. Hyundai Mipo Dockyard Co., which said on the same day it nullified a 197 billion won contract, fell 7.9 percent to 182,000 won, the most since March 10.
`Weak Economy'
Hyundai Heavy Industries Co., the world's biggest shipbuilder, lost 9.3 percent to 279,000 won, the lowest since May 16, 2007. Samsung Heavy Industries Co., the second largest, declined 8.5 percent to 35,250 won, the most since Jan. 30.
Shipping lines also fell on concern financing for vessel purchases will become more difficult amid a global credit contraction. Hanjin Shipping Co., the nation's biggest shipping line, retreated 7.9 percent to 30,400 won, the most since Oct. 22. Hyundai Merchant Marine Co., the second largest, lost 4.1 percent to 39,450 won.
``The order cancellations show a growing number of ship owners are getting pessimistic on the shipping market,'' said Han Byung Hwa, an analyst at Hyundai Securities Co. in Seoul. ``The weak economy is making financing for new shipbuilding harder.''
Hyundai Motor, South Korea's largest automaker, retreated 2,600 won, or 3.7 percent, to 68,100, the most since July 15. The company said on Aug. 1 that July sales in the domestic market dropped 3.6 percent after labor strikes disrupted production. U.S. sales fell 6.5 percent in the same period.
Ssangyong Motor Co., the South Korean unit of China's biggest automaker, declined 140 won, or 4.6 percent, to 2,925.
The following are among the most-active stocks in South Korean markets.
Daewoo Securities Co. (006800 KS), which said on Aug. 1 that fiscal first-quarter net income slumped 63 percent, fell 750 won, or 4.2 percent, to 17,050, the most since July 15. Merrill Lynch & Co. cut its price estimate by 14 percent to 16,800 won, in a report. The company's fundamentals will be ``weak'' in the near term as competition intensifies and capital markets remain volatile, the brokerage said.
Hana Tour Service Inc. (039130 KS), South Korea's biggest travel agency, fell 950 won, or 3.1 percent, to 29,800, the lowest since July 16. Goldman, Sachs & Co. cut its recommendation to ``sell'' from ``neutral,'' in a report. July earnings were ``significantly weaker than expected'' while gains in market share are slowing down, the brokerage said.
Hanjin Heavy Industries & Construction Co. (097230 KS), South Korea's first exporter of ships, dropped 4,700 won, or 11 percent, to 38,150, the most since March 10. BNP Paribas SA cut its price estimate by 19 percent to 70,000 won, in a report, citing a ``more conservative valuation'' of the company's core businesses and its yard in the Philippines.
Hankook Tire Co. (000240 KS), which said on Aug. 1 that second-quarter profit fell 13 percent after oil and rubber prices rose, slipped 400 won, or 2.8 percent, to 14,150. The company will face increased pressure from rising raw-material costs in the third quarter, Good Morning Shinhan Securities Co. said in a report.
Hynix Semiconductor Inc. (000660 KS), the world's second- largest computer-memory maker, lost 550 won, or 2.6 percent, to 20,500, the lowest since Nov. 3, 2005. The likelihood has risen that memory prices will decline in the third or fourth quarters, Lehman Brothers Holdings Inc. said in a report.
Kangwon Land Inc. (035250 KS), which operates the only casino in South Korea open to locals, gained 500 won, or 2.1 percent, to 24,550, the highest since Jan. 9. Mirae Asset Securities Co. raised its price estimate by 15 percent to 31,000 won, in a report. Second-quarter operating results beat estimates, the brokerage said.
Korea Exchange Bank (004940 KS), the Korean lender HSBC Holdings Plc seeks to acquire, lost 350 won, or 2.7 percent, to 12,700, the lowest since July 17. HSBC is trying to negotiate a lower price for the bank from Lone Star Funds, two people familiar with the matter said.
Michael Breen, president of Insight Communications Consultants, which represents Lone Star in Seoul, said he had no immediate comment.
Korea Fine Chemical Co. (025850 KS) dropped 2,400 won, or 3.5 percent, to 66,100, the lowest since April 10. The company said on Aug. 1 that it booked 12.3 billion won in losses from derivatives in the second quarter.
LG Telecom Ltd. (032640 KS), South Korea's smallest mobile- phone operator, gained 250 won, or 3 percent, to 8,730. It was the only one of the nation's wireless-service providers to advance. The company said on Aug. 1 that it signed up a net 20,404 subscribers in July, or 20 percent more than in the previous month.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net
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Euro, Yeppy, Caddy - The Inside View
| Daily Forex Technicals | Written by The LFB-Forex.com | Aug 04 08 06:26 GMT | | |
| Eur/Usd:
With outright recessions now expected in Ireland, Spain, Portugal and Italy, along with the sharp growth decelerations now occurring in France and Germany, overall GDP for the euro area probably peaked in Q1 and the ECB is going to have a hard time maintaining an inflation bias. We have noticed a lack of hawkish sounds from ECB officials recently and no doubt that (along with the recent depreciation of oil) has helped the dollar's gain. As far as oil is concerned it seems to be trading on the fundamentals now i.e. when the data is weak, price declines--that's very different from what had been occurring over the past year when weaker economic data drove traders to sell stocks and buy oil. It does look that as long as EUR/USD maintains a daily closing price below 1.5311 (support on July 7, and the base from which the euro made its most recent run to 1.60) it's likely to see the Euro test the channel low in the 1.5290 area. Risks-Trichet signals a rate increase at Thursday's press conference. Geo-political tensions with regards to oil. Eur/Jpy:
The same basic idea is holding for EUR/JPY as well. Longer-term lines have been drawn from March 20 and May 12, both of which are connected to July 16. Because Friday's closing price has not broken either line, we're waiting to find an entry. As usual, there are 2 ways to trade a break of trend line support--go short on a daily close below the trendline, or wait until a daily close below there has been made and then trade on a test of the old support as the new resistance. Once that's been accomplished, the first objective is the support made at the July 16 low on 165.32.The same set of risks are in play for EUR/JPY as for EUR/USD. Cad/Jpy:
The Canadian economy has contracted in three out of the last four months and for the first quarter of 2008. May's contraction (latest data) was attributed to a decline in energy sector, which was dragged lower by decreases in natural gas and crude oil production. With commodities looking to weaken going forward due to the global economic slowdown, it's very possible to see Canadian GDP contract for a second quarter. Of note is the fact that in May, GDP contracted even as the GDP of Canada's biggest trading partner, the U.S., expanded. The bearish rising wedge, complete with a triple top, is a strong technical signal that suggests the CAD/JPY pair is ripe for a fall, but we can be content enough to wait for a close below trendline support before making a short entry. This last uptrend started in March, and there's no reason not to believe we can't see price return to those levels over the next few months. Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Asia-Pacific Market Recap: Bonds Gaining, Equities Lower
| Market Updates | Written by CEP News | Aug 04 08 06:19 GMT | | |
| (CEP News) - Asia-Pacific fixed income markets are gaining and equities closed lower with yields on Australian 10-year bonds down 2.4 bps to 6.10% and Japanese 10-year government bonds down 1.5 bps to 1.51%. Sydney's S&P ASX 200 closed down 16.30 points to 4887.699. The Japanese Nikkei closed down 161.41 points to 12933.18 and the Hang Seng down 202.97 points to 22659.63. Yields on three-year Australian bonds were down 6.1 bps to 6.99 and the Australian 90-day March 09 contract was up 1.0 tick to 92.85. The Euroyen March 09 contract was up 3.5 ticks to 99.14. The Australian dollar was up 0.16 cents to 0.9309 against the USD and up 0.14 cents to 0.9557 against the Canadian dollar. Against the yen, the U.S. dollar was down 0.06 points to 107.64 and the Canadian dollar was down 0.04 points to 104.82. The euro was up 0.20 cents to 1.5583 USD. All data taken at 2:15 a.m. EDT. Generated by CEP Newswires 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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The Yen Usd/Jpy
| Daily Forex Technicals | Written by The LFB-Forex.com | Aug 04 08 06:22 GMT | | |
| The Dollar Yen is sitting at pivotal times right now. Over the past several months we have seen it form an ascending triangle pattern. We know that these typically break to the upside. The pair is also trading above all of its daily SMAs and they could provide good support if the pair decides to break lower. The 108.50 area proves to be a very hard area for the pair to break above, though not for a lack of trying. A solid break of 108.50 could target the 109.80 area. But this is likely to only come once equities start running in the same direction for a few days.
Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources. | |
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Asia Session Recap
| Daily Forex Fundamentals | Written by Forex.com | Aug 04 08 05:45 GMT | | ||||||||||||||||||||||||||||||||||||||||||||||||||
| The Dollar traded mixed today for the start of the week in Asia, but nonetheless held its gains from last week in a painfully slow trading session. The EUR/USD opened the new week a bit higher and as the session progressed the pair made moderate moves to a high just above 1.5590. A quick pullback brought the pair to its current levels, (as of this writing) of right at 1.5580. 1.5553 was the low for the session. In the EUR/JPY, the Yen suffered from retail investor selling as the theme was risk reduction ahead of this weeks' decisions by the Fed, ECB, RBA, and BoE. Obviously as far as rate decisions go, this coming week is jam-packed, and the markets may be subdued in lieu of this. USD/JPY made a move north as again the Yen was victim, the pair was at the 107.50 level mid-session, but took off to levels near 107.80 as the session closed. After being battered all last week the AUD/USD actually bounced back a little for the start of this week. After touching a 0.9285 low, the pair looked rehabbed as it reached highs near 0.9330, but with the carry trades looking shaky and the market expecting dovish commentary from Tuesday's RBA meeting, expect this pair to make some moves. GBP/USD was choppy, but net for the night was down as rumors that a major bank was set to announce a loss that would be second to none. Cable ended the session near its lows at 1.9735. Obviously the main focus of the week will be all of the rate decisions due this week. Although no changes are expected by the Fed, ECB, BoE or RBA, the markets are always very sensitive to these announcements and the tone and language surrounding them Upcoming Economic Data Releases (London Session):
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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Australia Second Quarter House Price Index: Summary (Table)
By Daniel Petrie
Aug. 4 (Bloomberg) -- Following is a table of Australia's house price index figures for second quarter released by the Australian Bureau of Statistics in Sydney.
==============================================================================
2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q
2008 2008 2007 2007 2007 2007 2006 2006
==============================================================================
------------------------ QoQ% ------------------------
Weighted Average of
[bn:WBTKR=AUEHQOQ:IND] Eight Capital Cities [] -0.3% 0.4% 4.2% 3.7% 4.2% 1.1% 1.9% 2.5%
[bn:WBTKR=AUEHSYD%:IND] Sydney [] 0.3% -0.9% 2.4% 2.5% 3.8% -0.2% 0.4% 0.1%
[bn:WBTKR=AUEHMEL%:IND] Melbourne [] -0.3% 1.3% 7.5% 5.1% 7.2% 1.7% 2.5% 1.8%
[bn:WBTKR=AUEHBRI%:IND] Brisbane [] 0.6% 2.7% 5.2% 4.8% 6.4% 4.2% 2.6% 1.6%
[bn:WBTKR=AUEHADE%:IND] Adelaide [] 0.4% 2.2% 6.8% 6.1% 6.0% 1.8% 2.7% 0.6%
[bn:WBTKR=AUEHPER%:IND] Perth [] -2.4% -1.3% 1.1% 1.8% -1.9% 0.5% 3.4% 11.1%
[bn:WBTKR=AUEHHOB%:IND] Hobart [] -2.0% -1.8% 4.2% 2.7% 2.0% 2.8% 1.7% 2.0%
[bn:WBTKR=AUEHDAR%:IND] Darwin [] 1.9% -1.5% 3.8% 2.7% 1.1% 3.0% 4.9% 1.3%
[bn:WBTKR=AUEHCAN%:IND] Canberra [] -1.4% 0.5% 3.0% 5.1% 4.4% 1.5% 1.6% 2.8%
==============================================================================
2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q
2008 2008 2007 2007 2007 2007 2006 2006
==============================================================================
------------------------ YoY% ------------------------
Weighted Average of
Eight Capital Cities 8.2% 13.2% 14.0% 11.4% 10.1% 9.6% 9.7% 10.1%
Sydney 4.4% 8.0% 8.8% 6.7% 4.1% 2.3% 1.4% 1.8%
Melbourne 14.1% 22.6% 23.1% 17.4% 13.7% 9.2% 8.9% 8.3%
Brisbane 14.0% 20.5% 22.2% 19.2% 15.5% 10.9% 7.2% 6.7%
Adelaide 16.2% 22.7% 22.2% 17.6% 11.5% 6.7% 6.2% 5.8%
Perth -0.9% -0.4% 1.4% 3.8% 13.3% 32.1% 41.9% 47.5%
Hobart 3.0% 7.1% 12.1% 9.4% 8.7% 9.9% 9.0% 10.7%
Darwin 7.0% 6.1% 11.0% 12.1% 10.6% 16.6% 18.0% 18.5%
Canberra 7.2% 13.5% 14.7% 13.2% 10.7% 9.1% 8.8% 9.8%
-------------------- Index Levels --------------------
Weighted Average of
Eight Capital Cities 130.2 130.6 130.1 124.8 120.3 115.4 114.1 112.0
Sydney 102.5 102.2 103.1 100.7 98.2 94.6 94.8 94.4
Melbourne 142.7 143.1 141.3 131.5 125.1 116.7 114.8 112.0
Brisbane 146.0 145.1 141.3 134.3 128.1 120.4 115.6 112.7
==============================================================================
2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q
2008 2008 2007 2007 2007 2007 2006 2006
==============================================================================
-------------------- Index Levels --------------------
Adelaide 147.5 146.9 143.7 134.6 126.9 119.7 117.6 114.5
Perth 190.3 195.0 197.6 195.5 192.1 195.8 194.8 188.4
Hobart 139.4 142.2 144.8 139.0 135.4 132.8 129.2 127.1
Darwin 177.9 174.6 177.3 170.8 166.3 164.5 159.7 152.3
Canberra 127.0 128.8 128.2 124.5 118.5 113.5 111.8 110.0
==============================================================================
Note: Index measures a weighted average of prices for established houses
in the nation's eight capital cities.
Source: Australian Bureau of Statistics
To contact the reporter on this story: Daniel Petrie in Sydney at dpetrie5@bloomberg.net
Read more...
Bush Burnishes China Card for Obama, McCain in Taiwan's Shadow
By Michael Forsythe and Dune Lawrence
Aug. 4 (Bloomberg) -- When Barack Obama or John McCain takes over the presidency in January, he will inherit a stable U.S.-China relationship. Part of the credit will belong to someone who gets few kudos for his foreign-policy initiatives: George W. Bush.
The president, who travels to China for the fourth and last time of his presidency this week to attend the Olympic Games in Beijing, ``leaves a relationship that is basically in good shape,'' says Kenneth Lieberthal, who was director for Asia on the White House National Security Council during Bill Clinton's presidency.
Since taking office 7 1/2 years ago, Bush has personally eased tensions over Taiwan. Henry Paulson, his Treasury secretary, stopped Congress from escalating trade disputes; Robert Zoellick, his former No. 2 diplomat, invited China to play a bigger role internationally. Meanwhile, the administration enlisted China's support to fight terrorism and persuade North Korea to begin dismantling its nuclear program.
China's leaders ``will miss him after he steps down,'' says Shen Dingli, director of the Center for American Studies at Fudan University in Shanghai.
Bush will bequeath his successor a base to work from in dealing with a country that owns more than $500 billion in Treasuries, is the top source of U.S. imports and is on track to become the world's second-biggest economy in a decade.
Explosive Issues
To be sure, Bush, 62, will hand some potentially explosive issues to the new president as well. Both Democrats and Republicans have criticized him for not putting enough pressure on China to improve its human-rights record. The U.S. trade deficit with China -- a record $256 billion last year -- may increase calls in Congress to impose tariffs. And the U.S. will have to goad China into doing more to combat global warming.
When he took office in 2001, Bush signaled he was ready to take a hard line, labeling China a ``strategic competitor'' in contrast to the Clinton presidency's description of a ``strategic partnership.'' He also vowed to defend Taiwan if it were threatened. In April that year, China held the crew of a U.S. spy plane for 11 days on its southern Hainan island after a midair collision with a Chinese fighter jet forced the aircraft to make an emergency landing.
The Sept. 11 terrorist attacks forced Bush to engage China more closely. The U.S. needed Chinese influence with Pakistan to help push that country to cooperate in rooting out al-Qaeda from Afghanistan and overthrowing the Taliban government there. In 2002 the U.S. declared a separatist group in China's Xinjiang region to be terrorists, a move China supported.
Minimizing Tensions
Once engaged in Afghanistan and then Iraq, the administration worked to minimize tensions elsewhere, including in the Taiwan Strait and North Korea.
Sept. 11 was ``a turning point,'' says Yan Xuetong, director of the Institute of International Studies at Tsinghua University in Beijing. Bush learned ``to deal with China.''
Bush brought then-Chinese President Jiang Zemin to his Texas ranch in October 2002, where they discussed Iraq and North Korea. He later called Jiang to request help in defusing the Korean crisis.
By April 2003, the U.S. and China were holding discussions with North Korea in Beijing, and China helped persuade Pyongyang to participate in the so-called six-party talks, also including Japan, Russia and South Korea. When Kim Jong Il's regime conducted a nuclear test in October 2006, China stepped up the pressure.
Personal Diplomacy
In December 2003 Bush altered U.S. policy toward Taiwan, telling Chinese Premier Wen Jiabao at an Oval Office meeting the U.S. was opposed to Taiwan's planned referendum on its independence and to ``any unilateral decision by either China or Taiwan to change the status quo.''
A president doesn't normally announce changes in Taiwan policy personally, ``and certainly doesn't articulate it with the Chinese premier sitting next to him in the Oval Office,'' Lieberthal says.
The policy change came over the opposition of some in the Bush administration. It was ``a policy based on fear,'' says John Bolton, who headed the State Department's arms-control efforts and later served as ambassador to the United Nations. ``It is a fear that if we upset China it will do bad things with respect to the six-party talks.''
Taiwan Arms Sales
The closer ties with China are coinciding with a slowdown in arms sales to Taiwan. In May, Deputy Secretary of State John Negroponte said the U.S. wouldn't sell new F-16 fighter jets to Taiwan, rejecting a request by newly elected President Ma Ying- jeou. Admiral Timothy Keating, head of the U.S. Pacific Command, told a forum in Taiwan last month there's ``no pressing, compelling need'' for arms sales to Taiwan.
That remark prompted speculation that the U.S. has frozen arms sales, something the Bush administration denies.
``I don't think the government has come out and said it is a freeze, but if it looks like a duck and walks like a duck,'' it may be one, says Taylor Fravel, a political science professor at the Massachusetts Institute of Technology.
The administration's engagement with China has had reverberations beyond Asia. In a September 2005 speech in New York, Zoellick urged China to be a ``responsible stakeholder'' globally. That challenged China and flattered its sense of stepping into the role of world power.
Zoellick's speech suggested that ``China is an insider now,'' says Huang Jing, a senior research fellow at the National University of Singapore's East Asian Institute.
Zoellick, who left the administration in 2006 and now heads the World Bank, and Treasury's Paulson expanded communication between the governments through initiatives such as the Strategic Economic Dialogue.
Damage Control
That can help limit the damage of gaffes, such as when a Falun Gong activist disrupted a welcoming ceremony during President Hu Jintao's April 2006 visit to Washington. At that ceremony, an announcer said the band would play the anthem of the Republic of China -- the official name of Taiwan.
The communication can also smooth over more serious incidents.
Bush invoked the increased exchanges and ``good personal relations'' with Chinese leaders as one of his main legacies, in a July 30 interview with Asian journalists in Washington. Regular talks have helped create mutual trust, in contrast to the tense standoff over the spy plane in 2001, Bush says.
``Frankly, it took a while to get phone calls returned and we were just trying to get information,'' Bush says of the incident. If ``that happened now, there would be a much more immediate response because there's more trust.''
Fending Off Tariffs
Paulson, who logged four trips a year to China as head of Goldman Sachs Group Inc., fended off congressional calls for punitive legislation against Chinese exports.
The Treasury also declined to label China a currency manipulator amid anger in Washington over Chinese reluctance to let the yuan rise faster. The currency has gained 21 percent against the dollar in three years.
Those actions leave some lawmakers arguing that Bush's policy is a failure.
``His corporate backers and interests, time and time again, trump our communities' interests, trump our workers' interests, trump our small manufacturers' interests,'' says Senator Sherrod Brown, an Ohio Democrat. ``Except for the Iraq War, there's no bigger failure of the Bush administration than his China policy.''
Dissidents
Senator Sam Brownback, a Kansas Republican, says Bush hasn't pressed China hard enough to improve its treatment of political dissidents and expand religious freedom.
``I don't think the president ought to go to the opening of the Olympics,'' Brownback says. ``I think we should push them more aggressively.''
Dennis Wilder, the senior director for Asian affairs on the White House National Security Council, says attending the Olympics will build goodwill and increase U.S. leverage.
``People want us to have influence on the Chinese government,'' Wilder told reporters at the White House. ``If you don't have a good working relationship with the Chinese government, how do you do that?''
To contact the reporters on this story: Mike Forsythe in Washington at mforsythe@bloomberg.net; Dune Lawrence in Beijing at dlawrence6@bloomberg.net
Read more...
Fewest Treasury Traders Since 1960 Hit Taxpayers
By Sandra Hernandez
Aug. 4 (Bloomberg) -- For the first time since 1960, when it created the network of securities firms obligated to buy and sell Treasury bonds, the U.S. government has the fewest bond traders making markets in its debt and a bigger burden for American taxpayers financing record federal deficits.
The number of so-called primary government securities dealers declined to 19 last month when Bank of America Corp., based in Charlotte, North Carolina, acquired the troubled Countrywide Financial Corp. The sale was the climax of dozens of bank failures, triggered by the biggest decline in residential real estate since the Great Depression and the seizing up of credit markets from New York to London. The Federal Reserve Bank of New York, the agent of the U.S. Treasury, plans to shrink the dealers again when JPMorgan Chase & Co. completes its takeover of Bear Stearns Cos.
Fewer firms bidding for U.S. bonds means ``you're going to have sloppier auctions,'' said Mark MacQueen, a money manager in Austin, Texas, at Sage Advisory Services, who traded Treasuries at dealer Merrill Lynch & Co. in the 1980s. ``The taxpayer and the government are paying more no matter what happens.''
The paucity of primary dealers coincides with the largest borrowing requirement in American history and the acknowledgment by the administration of President George W. Bush that the U.S. will finance a budget deficit totaling a record $482 billion next year. When the dealer system began 48 years ago with 18 firms, the U.S. had a $300 million surplus. The group has shrunk from a peak of 46 in 1988.
Auction Tail
While the interest rate on the benchmark 10-year Treasury note today is less than half the 9.14 percent yield of 20 years ago, the dwindling number of dealers and contraction of credit markets means that yields on 10-year notes sold this year have averaged 1 basis point higher than in pre-auction trading, compared with no difference in 2007, data from Stone & McCarthy Research Associates in Skillman, New Jersey, show. In the three years before 2007, such sales drew a yield just below the pre- auction rate. One basis point, or 0.01 percentage point, spread over $171 billion -- the amount of debt the Treasury said it may sell this quarter -- represents $17.1 million in interest.
Traders refer to yields that are higher at auction than typically forecast as a tail. The Treasury's July 22 sale of 20- year Treasury Inflation Protected Securities, for example, drew a tail of 5 basis points, or 0.05 percentage point, according to RBS Greenwich Capital in Greenwich, Connecticut.
Credit Market Losses
Taxpayers already are reeling from the highest unemployment rate since 2004 and the worst economy since 2001, a slump that was caused partly by the collapse of confidence in the fixed- income market. Bond investors who readily provided financing for everything from subprime mortgages to high-yield, high-risk companies 18 months ago, cut their credit lines last summer in a relentless reduction of money lending.
Four of the five firms reporting the biggest credit-market losses since the start of 2007 -- Citigroup Inc., Merrill Lynch, UBS AG, and Bank of America -- are dealers. Sixteen have lost a total of $266.9 billion as the U.S. housing slump roiled financial markets, according to data compiled by Bloomberg.
Yields on the current benchmark 10-year note fell 17 basis points last week to 3.93 percent, the most since the week ended June 27, according to New York-based BGCantor Market Data. The 3.875 percent security due in May 2018 gained 1 10/32, or $13.13 per $1,000 face amount, to 99 17/32.
Almost all of the firms that were dealers when the Fed formalized rules in 1960 have changed their names, been acquired by other securities companies or gone out of business. First Boston is now part of Zurich-based Credit Suisse Group; Salomon Brothers is now owned by Citigroup in New York; and PaineWebber Inc. is owned by UBS AG, also in Zurich.
Opportunity or Headache
A common way for traders to profit is to sell the securities before the auction -- a strategy made possible by the government, which allows trading of bonds as if they were already sold. If the auction draws a yield higher than in the so-called when- issued market, traders can buy the new debt at a lower price, pocketing the difference as profit. Bond prices move inversely to yields.
``Larger auctions simply mean that each primary dealer probably has to buy and distribute more,'' said Raymond Remy, 48, the head of fixed income in New York at Daiwa Securities America Inc., one of the dealers. ``And that could be an opportunity or that could be a giant, giant headache.''
The Treasury this week will sell $17 billion of 10-year notes in its quarterly sale of the securities, the most since 2003. It will also auction $10 billion of 30-year bonds, the most in two years. The government said July 30 that it's considering more frequent auctions of both securities, and will announce a decision in November.
Indirect Bidders
Dealers are just one category of participants at auction and a smaller number doesn't automatically doom the government to higher rates or guarantee profits for firms.
Indirect bidders, a class of investors that includes foreign central banks, bought 27 percent of the two-year notes that sold in the past year. That compares with an average of 34 percent in the preceding 12 months.
Indicators of economic growth and world events have a bigger impact on demand at auctions than the number of dealers, said Craig Coats Jr., who co-headed Salomon's fixed-income desk during the 1980s, when it was the world's biggest bond trader.
``The auction process is really going to be dependent upon what is going on in the market at the time,'' said Coats, who began trading bonds in 1969.
So far this year, four dealers traded at least 41 percent of Treasury bills and notes, while the least active four traded as little as 0.8 percent, according to Fed data.
Good For Dealers
While more than 800 financial institutions were set up to bid directly in Treasury auctions, dealers bought 71 percent of the bonds in the 576 sales between May 2003 and December 2005, according to a 2007 paper by Michael Fleming, a researcher at the Federal Reserve Bank of New York.
``The Fed and the Treasury will be nervous if the dealer community fell to too-low of a number because somebody's got to underwrite more of this debt,'' said Charles Comiskey, the head of Treasury trading in New York at dealer HSBC Securities USA Inc. ``It's pretty obvious it would be good for the dealers. If there's less competitors, it's more of a share of the pie for less people.''
To contact the reporters on this story: Sandra Hernandez in New York at Shernandez4@bloomberg.net.
Read more...
Aug. 4 (Bloomberg) -- For the first time since 1960, when it created the network of securities firms obligated to buy and sell Treasury bonds, the U.S. government has the fewest bond traders making markets in its debt and a bigger burden for American taxpayers financing record federal deficits.
The number of so-called primary government securities dealers declined to 19 last month when Bank of America Corp., based in Charlotte, North Carolina, acquired the troubled Countrywide Financial Corp. The sale was the climax of dozens of bank failures, triggered by the biggest decline in residential real estate since the Great Depression and the seizing up of credit markets from New York to London. The Federal Reserve Bank of New York, the agent of the U.S. Treasury, plans to shrink the dealers again when JPMorgan Chase & Co. completes its takeover of Bear Stearns Cos.
Fewer firms bidding for U.S. bonds means ``you're going to have sloppier auctions,'' said Mark MacQueen, a money manager in Austin, Texas, at Sage Advisory Services, who traded Treasuries at dealer Merrill Lynch & Co. in the 1980s. ``The taxpayer and the government are paying more no matter what happens.''
The paucity of primary dealers coincides with the largest borrowing requirement in American history and the acknowledgment by the administration of President George W. Bush that the U.S. will finance a budget deficit totaling a record $482 billion next year. When the dealer system began 48 years ago with 18 firms, the U.S. had a $300 million surplus. The group has shrunk from a peak of 46 in 1988.
Auction Tail
While the interest rate on the benchmark 10-year Treasury note today is less than half the 9.14 percent yield of 20 years ago, the dwindling number of dealers and contraction of credit markets means that yields on 10-year notes sold this year have averaged 1 basis point higher than in pre-auction trading, compared with no difference in 2007, data from Stone & McCarthy Research Associates in Skillman, New Jersey, show. In the three years before 2007, such sales drew a yield just below the pre- auction rate. One basis point, or 0.01 percentage point, spread over $171 billion -- the amount of debt the Treasury said it may sell this quarter -- represents $17.1 million in interest.
Traders refer to yields that are higher at auction than typically forecast as a tail. The Treasury's July 22 sale of 20- year Treasury Inflation Protected Securities, for example, drew a tail of 5 basis points, or 0.05 percentage point, according to RBS Greenwich Capital in Greenwich, Connecticut.
Credit Market Losses
Taxpayers already are reeling from the highest unemployment rate since 2004 and the worst economy since 2001, a slump that was caused partly by the collapse of confidence in the fixed- income market. Bond investors who readily provided financing for everything from subprime mortgages to high-yield, high-risk companies 18 months ago, cut their credit lines last summer in a relentless reduction of money lending.
Four of the five firms reporting the biggest credit-market losses since the start of 2007 -- Citigroup Inc., Merrill Lynch, UBS AG, and Bank of America -- are dealers. Sixteen have lost a total of $266.9 billion as the U.S. housing slump roiled financial markets, according to data compiled by Bloomberg.
Yields on the current benchmark 10-year note fell 17 basis points last week to 3.93 percent, the most since the week ended June 27, according to New York-based BGCantor Market Data. The 3.875 percent security due in May 2018 gained 1 10/32, or $13.13 per $1,000 face amount, to 99 17/32.
Almost all of the firms that were dealers when the Fed formalized rules in 1960 have changed their names, been acquired by other securities companies or gone out of business. First Boston is now part of Zurich-based Credit Suisse Group; Salomon Brothers is now owned by Citigroup in New York; and PaineWebber Inc. is owned by UBS AG, also in Zurich.
Opportunity or Headache
A common way for traders to profit is to sell the securities before the auction -- a strategy made possible by the government, which allows trading of bonds as if they were already sold. If the auction draws a yield higher than in the so-called when- issued market, traders can buy the new debt at a lower price, pocketing the difference as profit. Bond prices move inversely to yields.
``Larger auctions simply mean that each primary dealer probably has to buy and distribute more,'' said Raymond Remy, 48, the head of fixed income in New York at Daiwa Securities America Inc., one of the dealers. ``And that could be an opportunity or that could be a giant, giant headache.''
The Treasury this week will sell $17 billion of 10-year notes in its quarterly sale of the securities, the most since 2003. It will also auction $10 billion of 30-year bonds, the most in two years. The government said July 30 that it's considering more frequent auctions of both securities, and will announce a decision in November.
Indirect Bidders
Dealers are just one category of participants at auction and a smaller number doesn't automatically doom the government to higher rates or guarantee profits for firms.
Indirect bidders, a class of investors that includes foreign central banks, bought 27 percent of the two-year notes that sold in the past year. That compares with an average of 34 percent in the preceding 12 months.
Indicators of economic growth and world events have a bigger impact on demand at auctions than the number of dealers, said Craig Coats Jr., who co-headed Salomon's fixed-income desk during the 1980s, when it was the world's biggest bond trader.
``The auction process is really going to be dependent upon what is going on in the market at the time,'' said Coats, who began trading bonds in 1969.
So far this year, four dealers traded at least 41 percent of Treasury bills and notes, while the least active four traded as little as 0.8 percent, according to Fed data.
Good For Dealers
While more than 800 financial institutions were set up to bid directly in Treasury auctions, dealers bought 71 percent of the bonds in the 576 sales between May 2003 and December 2005, according to a 2007 paper by Michael Fleming, a researcher at the Federal Reserve Bank of New York.
``The Fed and the Treasury will be nervous if the dealer community fell to too-low of a number because somebody's got to underwrite more of this debt,'' said Charles Comiskey, the head of Treasury trading in New York at dealer HSBC Securities USA Inc. ``It's pretty obvious it would be good for the dealers. If there's less competitors, it's more of a share of the pie for less people.''
To contact the reporters on this story: Sandra Hernandez in New York at Shernandez4@bloomberg.net.
Read more...
Australian House Prices Fall for First Time in Three Years
By Jacob Greber
Aug. 4 (Bloomberg) -- Australian house prices fell in the second quarter for the first time in almost three years as the highest borrowing costs since 1996 deterred home buyers.
An index measuring the weighted average of prices for established houses in the nation's eight capital cities fell 0.3 percent from the March quarter, when it rose a revised 0.4 percent, the Australian Bureau of Statistics said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg News was for a 1.3 percent drop.
Falling house prices support central bank Governor Glenn Steven's view that Australia's $1 trillion economy will slow enough to cool inflation that has accelerated above his target range of 2 percent to 3 percent. Stevens raised the benchmark borrowing cost to 7.25 percent in March, the fourth increase since August last year.
``House prices have hit a wall since the start of 2008,'' Bill Evans, Westpac Banking Corp.'s chief economist in Sydney, said ahead of today's report. ``Interest rates are now the dominant force for housing markets.''
While ``strong population growth and housing shortages will give some base support to demand and firm job markets mean there is less risk of significant forced selling affecting prices, there is more weakness ahead,'' Evans said.
Annual Gain
Second-quarter house prices rose 8.2 percent from a year earlier, after climbing a revised 13.2 percent in the first quarter, today's report showed. Economists forecast an 8 percent increase.
The nation's five largest lenders, including Commonwealth Bank of Australia Ltd., have added an average 105 basis points to mortgage rates in 2008 as the global credit squeeze drove up funding costs. The central bank has added a total of 50 basis points this year.
The increases have added A$250 to monthly payments on an average A$250,000 ($232,563) home loan, according to the Real Estate Institute. Households spent 38 percent of their incomes on mortgage payments in the March quarter, the most in the 22 years the institute has measured affordability.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Australian Job Advertisements Declined for Third Month in July
By Jacob Greber
Aug. 4 (Bloomberg) -- Australian job-vacancy advertisements fell for a third month in July, adding to signs employers will pare hiring as economic growth slows.
Jobs advertised in newspapers and on the Internet dropped 0.3 percent from June to an average of 261,936 a week, following a 3 percent decline in June, which was the biggest fall since November 2006, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.
Central bank Governor Glenn Stevens will probably leave the benchmark interest rate at a 12-year-high 7.25 percent tomorrow amid signs rising unemployment will cool inflation that has surged above the bank's target range. Employment growth probably slowed to 5,000 jobs in July from 29,800 in June, according to the median estimate of economists surveyed by Bloomberg News.
``The overall trend in job advertisements continues to weaken, indicative of a softening in hiring intentions across Australia,'' said Warren Hogan, head of economics at ANZ Bank in Sydney.
Today's report suggest ``that we will see an easing of employment growth in coming quarters, consistent with the slowing in domestic economic conditions in Australia over the first half of 2008,'' he said.
The jobless rate, which fell to a 34-year low of 3.9 percent in February, probably rose to 4.3 percent last month from 4.2 percent in June, according to the median estimate of 24 economists surveyed by Bloomberg News. The government will publish the jobs report at 11:30 a.m. in Sydney on Aug. 7.
Qantas Firing
Qantas Airways Ltd., Australia's largest airline, said last month it will sack 1,500 workers, and meat processing company Don Smallgoods will cut 640 at factories in Perth and Melbourne.
Starbucks Corp., the world's largest chain of coffee shops, said July 29 it will close three-quarters of its 84 Australian stores, part of a plan to cut at least 12,000 jobs globally.
``The job advertisements series provides further evidence that the current level of interest rates is achieving the Reserve Bank's desired slowing in domestic economic growth,'' said Hogan. ``We expect the central bank to maintain a steady monetary policy in the short-term, monitoring the extent of the slowing in economic activity versus the risks of on-going inflation pressure.''
All 24 economists surveyed by Bloomberg last week predict Stevens and his board will leave the benchmark rate at 7.25 percent tomorrow. Policy makers last raised borrowing costs in March, the fourth increase since August, 2007. Their decision will be announced at 2:30 p.m. in Sydney tomorrow.
The number of jobs advertised in newspapers fell 5.1 percent in July, today's report showed. Vacancies on the Internet were unchanged.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Aug. 4 (Bloomberg) -- Australian job-vacancy advertisements fell for a third month in July, adding to signs employers will pare hiring as economic growth slows.
Jobs advertised in newspapers and on the Internet dropped 0.3 percent from June to an average of 261,936 a week, following a 3 percent decline in June, which was the biggest fall since November 2006, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.
Central bank Governor Glenn Stevens will probably leave the benchmark interest rate at a 12-year-high 7.25 percent tomorrow amid signs rising unemployment will cool inflation that has surged above the bank's target range. Employment growth probably slowed to 5,000 jobs in July from 29,800 in June, according to the median estimate of economists surveyed by Bloomberg News.
``The overall trend in job advertisements continues to weaken, indicative of a softening in hiring intentions across Australia,'' said Warren Hogan, head of economics at ANZ Bank in Sydney.
Today's report suggest ``that we will see an easing of employment growth in coming quarters, consistent with the slowing in domestic economic conditions in Australia over the first half of 2008,'' he said.
The jobless rate, which fell to a 34-year low of 3.9 percent in February, probably rose to 4.3 percent last month from 4.2 percent in June, according to the median estimate of 24 economists surveyed by Bloomberg News. The government will publish the jobs report at 11:30 a.m. in Sydney on Aug. 7.
Qantas Firing
Qantas Airways Ltd., Australia's largest airline, said last month it will sack 1,500 workers, and meat processing company Don Smallgoods will cut 640 at factories in Perth and Melbourne.
Starbucks Corp., the world's largest chain of coffee shops, said July 29 it will close three-quarters of its 84 Australian stores, part of a plan to cut at least 12,000 jobs globally.
``The job advertisements series provides further evidence that the current level of interest rates is achieving the Reserve Bank's desired slowing in domestic economic growth,'' said Hogan. ``We expect the central bank to maintain a steady monetary policy in the short-term, monitoring the extent of the slowing in economic activity versus the risks of on-going inflation pressure.''
All 24 economists surveyed by Bloomberg last week predict Stevens and his board will leave the benchmark rate at 7.25 percent tomorrow. Policy makers last raised borrowing costs in March, the fourth increase since August, 2007. Their decision will be announced at 2:30 p.m. in Sydney tomorrow.
The number of jobs advertised in newspapers fell 5.1 percent in July, today's report showed. Vacancies on the Internet were unchanged.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
New Zealand Annual Wages Rise Less-Than-Expected 3.5%
By Tracy Withers
Aug. 4 (Bloomberg) -- New Zealand wages rose less than economists forecast in the year ended June 30, adding to signs that companies are resisting union demands for pay increases.
Wages for non-government workers, excluding overtime, increased 3.5 percent in the 12 months to June, according to Statistics New Zealand's labor cost index released in Wellington today. Wages rose 0.8 percent from the first quarter.
New Zealand's economy stalled in the first half of 2008, reducing profits and making companies less willing to meet wage demands from workers who face soaring food and fuel costs. Reserve Bank Governor Alan Bollard said last month he expects wage growth will slow from next year, combating inflation.
``Firms are struggling to deal with rising costs and slowing demand, with falling profitability likely to keep a cap on wage growth,'' said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. ``The Reserve Bank is betting on lower demand keeping wage pressures in check.''
Annual wage inflation matched the previous two quarters, which is the fastest pace since the series began in the fourth quarter of 1992. Economists expected 3.6 percent, according to the median estimate of 11 economists surveyed by Bloomberg News.
New Zealand's dollar bought 72.83 U.S. cents at 12:05 p.m. in Wellington from 72.79 cents before the report.
Union Demands
The economy contracted in the first quarter and eight of 13 economists forecast it also shrank in the three months to June, putting New Zealand in its first recession since 1998.
Bollard cut the benchmark interest rate a quarter point to 8 percent on July 24, the first reduction in five years, saying slowing economic growth will ease inflation to less than 3 percent by mid-2010.
New Zealand's biggest union said this month it will seek higher wages for its 50,000 members after a report showed gasoline prices rose 13 percent in the second quarter.
``Every time our members fill up their cars or fill their supermarket trolleys, they're feeling the pinch and the only answer to that is to ensure that they're getting high enough wages to keep ahead of the game,'' said Andrew Little, national secretary of the Engineering, Printing and Manufacturing Union.
Forty three percent of employers cited the need to match increases in the cost of living as reasons to increase wages, the statistics agency said today. Thirty percent cited the need to match market rates.
Overtime Rates
Including overtime, wages for non-government workers rose 0.8 percent from the first quarter, for an annual increase of 3.4 percent, today's report showed.
A separate series based on reported salary and ordinary- time wage rates of non-government workers rose 1.2 percent in the second quarter and 5.5 percent from a year earlier, Statistics New Zealand said.
A separate report today showed average hourly ordinary time wages of non-government workers climbed 2 percent in the second quarter for an annual gain of 5.4 percent.
Statistics New Zealand also released indicators showing the demand for labor rose in the second quarter after an unexpected slump in the first three months of the year.
The number of full-time equivalent employees gained 0.8 percent from the first quarter when it fell 1 percent. The number of total filled jobs increased 1.7 percent after dropping g 2.3 percent in the first quarter.
Total paid hours rose 0.5 percent, seasonally adjusted, from the first quarter, the statistics agency said.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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Australia to Leave Benchmark Rate at 7.25 Percent
By Jacob Greber
Aug. 4 (Bloomberg) -- Australia's central bank will probably leave its benchmark interest rate at a 12-year high amid signs rising unemployment will cool inflation that has surged above its target range.
Governor Glenn Stevens will keep the overnight cash rate target at 7.25 percent tomorrow in Sydney, according to all 24 economists surveyed by Bloomberg News. A separate survey shows employment growth probably slowed to 5,000 extra jobs in July from 29,800 in June.
Slower jobs growth adds to signs four interest-rate increases in 12 months are cooling Australia's $1 trillion economy. Record gasoline prices and declining stock values also are prompting consumers and companies to slash spending, offsetting a surge in income from iron ore and coal exports.
``Reserve Bank policy makers aren't ready to cut yet, but when they do, it's likely to be 50 basis points,'' said Rory Robertson, an economist at Macquarie Group Ltd. in Sydney. ``The economy is seriously slowing.''
The Reserve Bank of Australia will announce its decision at 2:30 p.m. tomorrow in Sydney.
Policy makers have left borrowing costs unchanged since March, when they raised the benchmark rate for a second straight month to curb inflation.
Consumer prices jumped 4.5 percent in the second quarter from a year earlier as gasoline costs rose, a report showed last month. The central bank aims to keep annual inflation between 2 percent and 3 percent on average.
Consumer Confidence
Stevens said last month that the chances of keeping inflation ``low over the medium term are good.'' There is ``pretty clear evidence'' consumers and businesses are cutting expenditure, the governor said on July 16.
Since the bank's last meeting on July 1, reports show consumer confidence slumped in July to the lowest level in 16 years, retail sales fell in June by the most in six years, and lending to consumers and businesses rose at the slowest annual pace since 2002.
Home-loan approvals, which fell 7.9 percent in May, the most in eight years, probably dropped 2 percent in June, according to the median estimate of 21 economists surveyed by Bloomberg News. The government publishes its home-loan report at 11:30 a.m. on Aug. 6 in Sydney.
Rate Outlook
``It looks more likely now than it did a couple of months ago that this more moderate track for demand will continue,'' Stevens said on July 16. That will ``in due course begin to exert downward'' pressure on inflation, he said.
Investors have increased bets that the central bank will cut interest rates, according to a Credit Suisse Group index based on trading in interest-rate swaps.
Stevens will lower the benchmark rate by 68 basis points, or 0.68 percentage point, in the next 12 months, the index showed at 8:02 a.m. in Sydney. At the start of July, traders forecast 19 basis points of gains.
The Reserve Bank may cut its benchmark by as much as 3 percentage points by the end of 2009, said Stephen Koukoulas, a senior economist at TD Securities Ltd. in London.
``The collapse in the domestic economy appears to have gained breadth and momentum in recent months,'' Koukoulas said.
Job Losses
Qantas Airways Ltd., Australia's largest airline, said last month it will sack 1,500 workers, and meat processing company Don Smallgoods will cut 640 at factories in Perth and Melbourne.
Starbucks Corp., the world's largest chain of coffee shops, said July 29 it will close three-quarters of its 84 Australian stores, part of a plan to cut at least 12,000 jobs globally.
The jobless rate, which fell to a 34-year low of 3.9 percent in February, probably rose to 4.3 percent last month from 4.2 percent in June, according to the median estimate of 24 economists surveyed by Bloomberg News.
The government will publish the jobs report at 11:30 a.m. in Sydney on Aug. 7.
``The risk of recession is now very high,'' said Shane Oliver, senior economist at AMP Capital Investors in Sydney. ``The Reserve Bank should be cutting rates.''
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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China Wins Financial Olympics as Credit Losses Hit U.S., Europe
By Cathy Chan
Enlarge Image/Details
Aug. 4 (Bloomberg) -- China already has won most of the medals in the financial Olympics by avoiding the toxic debt investments that devastated banks in the U.S. and Europe.
Chinese banks hold three of top six spots among the world's largest financial companies based on market value, even though their shares fell more than 20 percent in Hong Kong trading since October. London-based HSBC Holdings Plc, the biggest non-Chinese bank, is No. 3, trailing Beijing-based Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp.
The Chinese banks owe their rankings in part to having avoided almost all of the $480 billion in writedowns and credit- market losses that have sent bank stocks tumbling worldwide, data compiled by Bloomberg show. Only two years ago, the world's biggest banks were led by Citigroup Inc. and Bank of America Corp. of the U.S. and UBS AG in Europe.
``Compared with the continuing writedowns at Citigroup and Merrill Lynch, Chinese banks are definitely winning the financial medals,'' said Shao Chingxiao, managing partner of SMC China Fund in Shanghai, which owns shares of China Construction Bank and Bank of China Ltd., the world's fifth-largest bank.
ICBC's unaudited figures released July 3 show first-half profit rose more than 50 percent. Three days later, Beijing-based China Citic Bank Co. said earnings jumped more than 150 percent in the same period. China Construction Bank followed, saying net income may have advanced more than 50 percent.
ICBC and China Construction Bank are the most expensive among the 15 largest global banks by market value, trading at 3.2 times and 3.4 times book value, respectively, according to data compiled by Bloomberg. That compares with New York-based Citigroup, which trades at less than 1 times book value. Bank of America in Charlotte, North Carolina, the world's fourth-biggest bank by market value, is at 1.07 times book value.
Morgan Stanley
China's success in growing its state-owned domestic banks hasn't been matched by its investments in overseas financial firms. Chinese funds and companies spent $19.3 billion buying stakes in Blackstone Group LP, Morgan Stanley, Barclays Plc, Fortis and Johannesburg-based Standard Bank Group Ltd. since May 2007 that are now worth $7 billion less on paper.
The sprint into overseas financial stocks culminated Dec. 19 with Beijing-based China Investment Corp.'s $5 billion purchase of a 9 percent stake in New York-based Morgan Stanley, the second-biggest U.S. securities firm.
Morgan Stanley has declined 18 percent in New York trading since then. The $200 billion sovereign wealth fund also invested $3 billion in shares of New York-based Blackstone, manager of the world's largest buyout fund, only to see their value decline 41 percent since the firm's initial public offering in June 2007.
Paper Profits
The losses may have deterred China from making further investments in overseas banks rocked by credit-market turmoil, said Howard Wang, who oversees $10 billion at JF Asset Management in Hong Kong.
``The whole world is so uncertain right now,'' Wang said. ``And the Chinese government is so afraid of a misstep that will draw criticism that it doesn't want to play.''
By contrast, foreign banks' investments in Chinese financial firms have fared much better, showing $50 billion of paper profits, according to Bloomberg data.
The biggest winner is HSBC, which traces its origins to 1865, when it was incorporated in Hong Kong as Hong Kong & Shanghai Banking Co. It bought 19.9 percent of Shanghai-based Bank of Communications Co. in 2004, the country's fifth-largest lender, and 10 percent of Shenzhen-based Ping An Insurance (Group) Co., China's second-largest insurer, in 2002, later increasing that stake to 17 percent. HSBC is sitting on a $16 billion gain from those investments.
`A Marathon'
Bank of America, which bought 9 percent of China Construction Bank for $3 billion in 2005, has a $14 billion paper profit, Bloomberg data show.
For both China and non-Chinese banks, the value of their investments isn't measured only by stock price. Foreign banks are positioning themselves to sell services into the world's most populous country, where economic growth is above 10 percent.
Chinese banks and sovereign wealth funds, flush with cash, are eager to build their portfolios overseas and prove that China can compete on a global stage, said Richard Gibb, Asia head of financial-service investment banking at Merrill Lynch & Co. in Hong Kong.
``This is a marathon, not a 20-yard dash,'' Gibb said. ``The trend of Chinese institutions investing overseas will continue.''
Charles-Everard de T'Serclaes, who heads New York-based JPMorgan Chase & Co.'s insurance business in Asia, also said China has a long investment horizon.
Merrill's Slump
``They are now significant strategic investors in global financial institutions,'' de T'Serclaes said. ``This is a major shift from four to five years ago, when they were mostly recipients of international capital.''
While the Hang Seng China Enterprise Index, comprising 42 Chinese companies traded in Hong Kong, fell 22 percent this year, bank stocks outperformed. Of the four companies on the index that gained since Dec. 31, three are banks. ICBC climbed 5.4 percent, China Construction Bank rose 5.6 percent and China Citic Bank advanced 2.3 percent.
By contrast, Merrill Lynch, the third-biggest U.S. securities firm by market value, has slumped 50 percent in 2008 in New York Stock Exchange composite trading. Merrill raised $8.5 billion on July 29 by selling shares to investors including Temasek Holdings Pte., following almost $19 billion of losses in the past 12 months.
Temasek, Singapore's sovereign wealth fund, agreed to buy an additional $3.4 billion of Merrill shares, cementing its status as the firm's biggest stockholder. It also received a $2.5 billion payment from New York-based Merrill to offset losses on an earlier investment.
Slowdown in Investing
China, unlike Singapore, has slowed its investments in overseas financial companies. China Development Bank's and Ping An's purchases of additional shares in London-based Barclays and Fortis, Belgium's biggest financial-services company, were the only such investments this year.
The government blocked plans by Beijing-based China Development Bank to invest in Citigroup because of the U.S. bank's mortgage-related losses, a person with knowledge of the decision said in January. At almost $103 billion, Citigroup's market value is less than half of China Construction Bank's.
``They, like anyone else, are scared,'' said Glenn Henricksen, chief financial officer of Vestasia Ltd., a financial advisory firm in Shenzhen, China. ``Look at what's going on with financial institutions around the globe.''
Olympic Moves
Chinese banks may not be as well off as they seem, according to Henricksen. A drop in real estate prices in Shenzhen and other cities, along with the government's decision to raise reserve ratios, don't bode well, he said.
``I expect the credit quality of the banks' portfolios to deteriorate significantly,'' he said. ``They're going to find they have a lot of questionable assets on the balance sheet.''
Henricksen said he doesn't expect Chinese banks to announce any bad news until after the Olympics.
Bank of China, the only lender that's an official sponsor of the Summer Games, which begin Aug. 8, has set up five temporary outlets in Beijing, four in Qingdao and one in Hong Kong. It installed 2,500 point-of-sales terminals in Olympic venues, hotels and athletes' residential areas, and its outlets can now handle conversions for 14 foreign currencies, compared with the usual eight.
ICBC, which has a market value of almost $250 billion, has 4,613 automatic teller machines in the six co-host cities and has set up a task force of 60 managers to handle calls from customers in six foreign languages.
The Olympics aren't ``just a strict test to the quality of Chinese banks' internationalized services,'' ICBC said in a July 28 statement, ``but a stage to project their brand images.''
To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net
Read more...
Enlarge Image/Details
Aug. 4 (Bloomberg) -- China already has won most of the medals in the financial Olympics by avoiding the toxic debt investments that devastated banks in the U.S. and Europe.
Chinese banks hold three of top six spots among the world's largest financial companies based on market value, even though their shares fell more than 20 percent in Hong Kong trading since October. London-based HSBC Holdings Plc, the biggest non-Chinese bank, is No. 3, trailing Beijing-based Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp.
The Chinese banks owe their rankings in part to having avoided almost all of the $480 billion in writedowns and credit- market losses that have sent bank stocks tumbling worldwide, data compiled by Bloomberg show. Only two years ago, the world's biggest banks were led by Citigroup Inc. and Bank of America Corp. of the U.S. and UBS AG in Europe.
``Compared with the continuing writedowns at Citigroup and Merrill Lynch, Chinese banks are definitely winning the financial medals,'' said Shao Chingxiao, managing partner of SMC China Fund in Shanghai, which owns shares of China Construction Bank and Bank of China Ltd., the world's fifth-largest bank.
ICBC's unaudited figures released July 3 show first-half profit rose more than 50 percent. Three days later, Beijing-based China Citic Bank Co. said earnings jumped more than 150 percent in the same period. China Construction Bank followed, saying net income may have advanced more than 50 percent.
ICBC and China Construction Bank are the most expensive among the 15 largest global banks by market value, trading at 3.2 times and 3.4 times book value, respectively, according to data compiled by Bloomberg. That compares with New York-based Citigroup, which trades at less than 1 times book value. Bank of America in Charlotte, North Carolina, the world's fourth-biggest bank by market value, is at 1.07 times book value.
Morgan Stanley
China's success in growing its state-owned domestic banks hasn't been matched by its investments in overseas financial firms. Chinese funds and companies spent $19.3 billion buying stakes in Blackstone Group LP, Morgan Stanley, Barclays Plc, Fortis and Johannesburg-based Standard Bank Group Ltd. since May 2007 that are now worth $7 billion less on paper.
The sprint into overseas financial stocks culminated Dec. 19 with Beijing-based China Investment Corp.'s $5 billion purchase of a 9 percent stake in New York-based Morgan Stanley, the second-biggest U.S. securities firm.
Morgan Stanley has declined 18 percent in New York trading since then. The $200 billion sovereign wealth fund also invested $3 billion in shares of New York-based Blackstone, manager of the world's largest buyout fund, only to see their value decline 41 percent since the firm's initial public offering in June 2007.
Paper Profits
The losses may have deterred China from making further investments in overseas banks rocked by credit-market turmoil, said Howard Wang, who oversees $10 billion at JF Asset Management in Hong Kong.
``The whole world is so uncertain right now,'' Wang said. ``And the Chinese government is so afraid of a misstep that will draw criticism that it doesn't want to play.''
By contrast, foreign banks' investments in Chinese financial firms have fared much better, showing $50 billion of paper profits, according to Bloomberg data.
The biggest winner is HSBC, which traces its origins to 1865, when it was incorporated in Hong Kong as Hong Kong & Shanghai Banking Co. It bought 19.9 percent of Shanghai-based Bank of Communications Co. in 2004, the country's fifth-largest lender, and 10 percent of Shenzhen-based Ping An Insurance (Group) Co., China's second-largest insurer, in 2002, later increasing that stake to 17 percent. HSBC is sitting on a $16 billion gain from those investments.
`A Marathon'
Bank of America, which bought 9 percent of China Construction Bank for $3 billion in 2005, has a $14 billion paper profit, Bloomberg data show.
For both China and non-Chinese banks, the value of their investments isn't measured only by stock price. Foreign banks are positioning themselves to sell services into the world's most populous country, where economic growth is above 10 percent.
Chinese banks and sovereign wealth funds, flush with cash, are eager to build their portfolios overseas and prove that China can compete on a global stage, said Richard Gibb, Asia head of financial-service investment banking at Merrill Lynch & Co. in Hong Kong.
``This is a marathon, not a 20-yard dash,'' Gibb said. ``The trend of Chinese institutions investing overseas will continue.''
Charles-Everard de T'Serclaes, who heads New York-based JPMorgan Chase & Co.'s insurance business in Asia, also said China has a long investment horizon.
Merrill's Slump
``They are now significant strategic investors in global financial institutions,'' de T'Serclaes said. ``This is a major shift from four to five years ago, when they were mostly recipients of international capital.''
While the Hang Seng China Enterprise Index, comprising 42 Chinese companies traded in Hong Kong, fell 22 percent this year, bank stocks outperformed. Of the four companies on the index that gained since Dec. 31, three are banks. ICBC climbed 5.4 percent, China Construction Bank rose 5.6 percent and China Citic Bank advanced 2.3 percent.
By contrast, Merrill Lynch, the third-biggest U.S. securities firm by market value, has slumped 50 percent in 2008 in New York Stock Exchange composite trading. Merrill raised $8.5 billion on July 29 by selling shares to investors including Temasek Holdings Pte., following almost $19 billion of losses in the past 12 months.
Temasek, Singapore's sovereign wealth fund, agreed to buy an additional $3.4 billion of Merrill shares, cementing its status as the firm's biggest stockholder. It also received a $2.5 billion payment from New York-based Merrill to offset losses on an earlier investment.
Slowdown in Investing
China, unlike Singapore, has slowed its investments in overseas financial companies. China Development Bank's and Ping An's purchases of additional shares in London-based Barclays and Fortis, Belgium's biggest financial-services company, were the only such investments this year.
The government blocked plans by Beijing-based China Development Bank to invest in Citigroup because of the U.S. bank's mortgage-related losses, a person with knowledge of the decision said in January. At almost $103 billion, Citigroup's market value is less than half of China Construction Bank's.
``They, like anyone else, are scared,'' said Glenn Henricksen, chief financial officer of Vestasia Ltd., a financial advisory firm in Shenzhen, China. ``Look at what's going on with financial institutions around the globe.''
Olympic Moves
Chinese banks may not be as well off as they seem, according to Henricksen. A drop in real estate prices in Shenzhen and other cities, along with the government's decision to raise reserve ratios, don't bode well, he said.
``I expect the credit quality of the banks' portfolios to deteriorate significantly,'' he said. ``They're going to find they have a lot of questionable assets on the balance sheet.''
Henricksen said he doesn't expect Chinese banks to announce any bad news until after the Olympics.
Bank of China, the only lender that's an official sponsor of the Summer Games, which begin Aug. 8, has set up five temporary outlets in Beijing, four in Qingdao and one in Hong Kong. It installed 2,500 point-of-sales terminals in Olympic venues, hotels and athletes' residential areas, and its outlets can now handle conversions for 14 foreign currencies, compared with the usual eight.
ICBC, which has a market value of almost $250 billion, has 4,613 automatic teller machines in the six co-host cities and has set up a task force of 60 managers to handle calls from customers in six foreign languages.
The Olympics aren't ``just a strict test to the quality of Chinese banks' internationalized services,'' ICBC said in a July 28 statement, ``but a stage to project their brand images.''
To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net
Read more...
Daily Technical Analysis
| Daily Forex Technicals | Written by FX Instructor | Aug 04 08 02:05 GMT | | |
EURUSD OutlookFriday the EURUSD attempted to continued it's bearish momentum on a better than expected US NFP. The pair bottomed at 1.5515 but the bearish momentum seems limited as the pair made an upside correction and closed at 1.5564. Although I believe the US Dollar positive view is going to continue in days ahead, we might see another upside correctional movement today as the pair already oversold. Immediate resistance is seen at 1.5610 followed by 1.5690. Initial support seen at 1.5515 (Friday's low). CCI in oversold area on daily chart. EURUSD Daily Supports and Resistances: S1= 1.5520 GBPUSD OutlookThe Sterling suffered losses against Greenback on a better than expected US NFP. The pair bottomed at 1.9726 and closed at 1.9751. I am expecting this bearish momentum continue today. My model goes short targeting 1.9665. Immediate resistance is seen at 1.9790 followed by 1.9820. CCI just cross -100 line on daily chart, suggesting a potential bearish view. GBPUSD Daily Supports and Resistances: S1= 1.9704 USDJPY OutlookThe bearish momentum of USDJPY continued on Friday although the bearish power was less than I had expected. The pair only moved 62 pips, bottomed at 107.27 and closed at 107.67. My model remains mixed with downside bias. Immediate resistance is seen at 107.75. Initial support is seen at 107.27 (Friday's low) followed by 106.50. CCI in neutral area on daily chart. USDJPY Daily Supports and Resistances: S1= 107.33 USDCHF OutlookFriday, The Swiss Franc was traded lower against Greenback on a better than expected US NFP. The pair topped at 1.0516 and closed at 1.0495, but this bullish momentum also seems limited right now. My model is mixed with neutral bias. Immediate resistance is seen at 1.0516 (Friday's low). Initial support at 1.0440. CCI in overbought area on daily chart. USDCHF Daily Supports and Resistances: S1= 1.0464 FX Instructor LLC The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results | |
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